Although many in the life sciences industry remain optimistic about future prospects, there is no doubt that a significant number of companies in the life sciences sector are affected by the current difficult trading and market conditions. Difficult conditions can, of course, create opportunities for businesses and, for that reason, a number of clients have elected to review their intellectual property portfolios with a view to leveraging or realising value from these assets or minimising costs associated with their upkeep. Other clients find themselves in the less fortunate position of facing an insolvent licensor of technology that is key to the business or deciding what action to take where they have granted licences to licensees who now find themselves in financial difficulties.
What types of intellectual property issues are coming to the fore in the current economic climate?
It can be very tempting to try to save money by delaying renewals of registered intellectual property such as patents. Renewal fees can be delayed in some circumstances but if they are not paid within six months of the due date the patent may lapse, removing protection for the invention. There are some circumstances in which patents can be restored but it is clear from case law that a failure to pay must be unintentional in order to benefit from the restoration procedures. A planned course of action may therefore be prudent but companies (and insolvency practitioners) should be aware that it is not always possible to have patents restored if renewals are delayed deliberately.
Life sciences companies are likely to have a range of intellectual property rights from registered rights such as patents and trade marks through to unregistered rights such as copyright, design rights, know-how and goodwill. Many companies choose to maximise returns from these intellectual property assets by granting licences while other companies may need to in-license key technologies in order to operate or grow their businesses. Insolvency can have a significant impact on the validity of a licence as many licences allow for termination in these circumstances and it may therefore be difficult to realise the value of these licences where a party is in a precarious financial situation. A licensee may wish to transfer a licence as part of an asset sale but could find that the licence does not allow transfer or that a transfer needs the consent of the licensor. A company seeking to buy assets (including key licences) out of insolvency may also encounter issues if it transpires that the licensor is entitled to terminate on insolvency.
Data can also be a very important asset of a life sciences company. Data protection legislation places restrictions on the transfer of personal data and, if personal data is key to an asset transfer (as it is likely to be in many cases), it will be essential to carry out due diligence to ascertain the purposes for which it was collected and the transferability of that data.
The current financial climate offers numerous opportunities for companies to review their intellectual property portfolios with a view to selling or purchasing intellectual property. Carrying out a legal assessment of these assets as part of the disposal or acquisition strategy can pay dividends by identifying issues early in the process and assisting with strategies to deal with those issues so as to minimise their effect.
Joanna Boag-Thomson is head of life sciences at leading UK law firm Shepherd and Wedderburn LLP.