China Bio Workshop Eye On China Series (Guangzhou 14 April 10) (2)

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Building Company Value Through Global Partnerships Executive WorkshopGuangzhou, China

April, 14, 2010


Building Intellectual Asset Value

Within CollaborationsStephen BentJames Ewing


Differences Between PRC and US Laws

Ownership of IP Assets Inventorship and Inventor Compensation Safeguarding Key Personnel and

Information Licensing and Other Tech Transfer Patent Office Requirements– US “duty of candor”– Elements of descriptive completeness

SIPO stance on working examples US PTO requirement for “best mode”


Capturing Value from Joint Innovation: Value Creation

Primary GoalTo fully integrate R&D goals and IP strategy to advance the common commercial objectives of the collaborators.


Capturing Value from Joint Innovation: Promoting Harmonious Relations (cont.)

Clearly defining the roles and obligations of the parties

Top-down understanding of objectives, milestones and obligations of each partner

Appropriate governance structure Leadership in key positions


Capturing Value from Joint Innovation: Promoting Harmonious Relations

Inclusive decision-making and teamwork Decision-making based on data Importance of Trust/Emphasis on

Relationships Recognize and celebrate successes Evaluate the partnership continually


Capturing Value from Joint Innovation Agreed upon procedures and formats

for documentation and invention disclosure

Education of “bench-level” team members of documentation procedures

Routine for reporting and evaluation of developments/invention disclosure

Verified and continuous documentation of project developments


Capturing Value from Joint Innovation

Procedures to: prioritize invention disclosures determine inventorship and ownership oversee patent preparation determine filing strategy oversee prosecution resolve disputes efficiently


Building an International Patent Portfolio Cost-Effectively: When and What to File

Central Inquiry Would the IPRs to a new technical

development add value to and advance the common commercial objectives of the collaborators?


Building an International Patent Portfolio Cost-Effectively: When and What to File Pioneering advance vs. incremental

improvement Alignment with business objectives


Building an International Patent Portfolio Cost-Effectively: When and What to File Patenting vs. trade secret vs. defensive

publication Status of invention development Provisional vs. nonprovisional vs. utility

model PCT application


Building an International Patent Portfolio Cost-Effectively: When and Where to File First to invent vs. first to file National laws regulating first filing Foreign filing license requirements Technology export licensing

requirements Commercial markets Economics of filing


Building And Managing an International Patent Portfolio Cost-Effectively: Claim Strategy

Diversified claiming strategy: who is your audience?

Types of claims (composition, methods of treatment; apparatus; etc.)

Independent versus dependent claims Economics of claims


Building And Managing an International Patent Portfolio Cost-Effectively: Use of the PCT System

Patent Cooperation Treaty (PCT) was signed in June 1970, in Washington, D.C., and became operational in June 1978 with 18 States

As of September 28, 2009, there were 142 contracting states to the PCT

PCT establishes a procedure for the filing and processing of a single application for a patent which has legal effect in the countries which are Treaty members


Building And Managing an International Patent Portfolio Cost-Effectively: Use of the PCT System

Advantages Postpones the major costs associated

with internationalizing a patent application (translations; official fees; service fees)

Provides a basis for patenting decisions Accepted and widely used system for

patent protection


Harmonizing the IP Strategy with its Business Plan Integrate R&D Goals with Business Plan– Identify commercialization target(s) and

time frame– Link market projections with IP potential

Crowded prior art? Timing/content of patent filings? Freedom to operate?


Case Studies – What Does and Doesn’t Work in Strategic Collaborations Roche - Genentech: Efficient

Sales/Management Combines With Innovation Culture

Amgen – Kirin: Early-Stage Research Transitions to Experienced Product Development

Fujisawa/Astellas – Sucampo: Misconceptions Over Roles and Capabilities Sinks Partnership


Case Study I – Roche-Genentech

March 2009 Roche Holding’s acquires full ownership of Genentech for $46.8 billion

Roche owned a majority of Genentech since 1990

Roche’s three best-selling drugs come from Genentech (Avastin®, Herceptin® and Rituxan®)


Case Study I – Roche-Genentech (cont.)

Cost savings of more than $750 million per year not the main goal of the deal

Goal was improved coordination on product development


Case Study I – Roche-Genentech (cont.)

Challenge is integrating Swiss business culture with Genentech’s free-wheeling and innovative culture

Genentech’s research and early clinical trial operations will retain autonomy to preserve culture

Combined commercial business based at Genentech’s headquarters in South San Francisco, Calif.


Case Study II – Amgen-Kirin

Amgen, Inc. is the largest US biotech company

Amgen transitioned from a drug development company to a pharmaceutical manufacturer while maintaining steady sales.

Amgen owes its transformation mostly to Neupogen® and Epogen®.


Case Study II – Amgen-Kirin (cont.)

1984 Kirin Brewery Co., Ltd. of Japan and Amgen, Inc of the United States launch joint venture company Kirin-Amgen, Inc. (Kirin-Amgen)

Epogen® and several other Amgen products were developed through Kirin-Amgen


Case Study II – Amgen-Kirin (cont.)

Kirin-Amgen grants exclusive manufacturing, patent and marketing rights to Amgen in the U.S.

Amgen pays Kirin-Amgen royalties on sales.

Kirin-Amgen reimburses Amgen for R&D expenses.


Case Study III – Fujisawa/Astellas – Sucampo 1998-- Sucampo enters into a

Development Agreement with Fugisawa/Astellas (“Astellas”) for Sucampo to develop tacrolimus eye drops containing Astellas's compound, FK506 ("FK506") for the treatment of dry eye syndrome.

Parties later contract for the exchange of safety information relating to FK506 (“Safety Agreement”).


Case Study III – Fujisawa/Astellas – Sucampo (cont.) February 2005-- United States Food

and Drug Administration ("FDA") issued two alerts regarding a link between cancer and the use of Protopic®

March 2005-- FDA requires that Protopic® carry a black box warning due to cancer risk.


Case Study III – Fujisawa/Astellas – Sucampo (cont.)

March 2005 Sucampo suspends its tacrolimus eye

drops development program Sucampo sues Astellas alleging breach

of a Safety Agreement by failing to disclose the FDA's concerns over Protopic®


Building Company Value Through Global Partnerships

Jim Chapman


Positioning Your Business and IP Portfolio with Potential Partners and Investors

The Company has a solution or potential solution to a big problem in the market– Unique Technology– Protectable

The Company has a management team uniquely gifted to solve the problem– Personnel with a strong track record of

success– Have key relationships necessary for success– Strong domain expertise


Positioning Your Business and IP Portfolio with Potential Partners and Investors (cont.) The Company has Customers that Buy

or are Committed to buy the Product– High quality customers that are reputable– Which will give references

The Company is Operating in a Large Market– Capable of supporting large companies– The market is rapidly growing or is ready to

take off


Positioning Your Business and IP Portfolio with Potential Partners and Investors (cont.) Clean Up the Company– Financial/Accounting Systems– Unorthodox Practices


Best Practices for Successful Joint Ventures and Strategic Partnerships Carefully Select the Partner– Experience– Integrity– Expertise– Strong track record of collaboration– A bad partner can make a good project

fail


Understand Each Party’s Interests and Work to Keep Them Aligned– Why is a Joint Venture or SP a preferred

option?– Short Term vs. Long Term– Profitability vs. Market Share– Tong Chuang Yi Meng

Best Practices for Successful Joint Ventures and Strategic Partnerships(cont.)


Best Practices for Successful Joint Ventures and Strategic Partnerships(cont.) Build and Maintain the Relationship– Communication– Face-to-face meetings– Honesty and integrity– Facing problems– Understand your partner


Make sure the Project is Economically Viable– Analysis should be based upon sound

economic criteria– Be able to reach profitability in the foreseeable

future Know and Follow the Rules– Obey all Chinese laws and regulations– Comply with the US Foreign Corrupt Practices

Act

Best Practices for Successful Joint Ventures and Strategic Partnerships(cont.)


Best Practices for Successful Joint Ventures and Strategic Partnerships(cont.) Create a Strategy to Deal with

Problems – Develop a government relations strategy– Milestones for projects– Escape strategies for different stages of a

project


Best Practices for Successful Joint Ventures and Strategic Partnerships(cont.) Other– Use a detailed contract– Expect tremendous competition– Protect intellectual property– Develop an efficient, workable

management and operational plan


Negotiating with AmericansChinese vs. American Negotiation Approaches

Cultural Values and Ways of ThinkingAmerican Chinese

Individualist Collectivist

Egalitarian Hierarchical

Information Oriented Relationship Oriented

Reductionist Holistic

Sequential Circular

Seeks Truth Seeks the Way

Argumentative Culture Haggling Culture


Negotiating with AmericansChinese vs. American Negotiation Approaches (cont.)

Negotiation ApproachesShort Meeting Long Courting Process

Informal Formal

Full Authority Limited Authority

Proposals First Explanations First

Aggressive Questioning

Impatient Enduring

Forging a Deal Forging a Relationship


Leveraging Private and Government Funding Sources Within and Outside of China

Sources– Chinese Government Agencies.– Chinese Government backed venture capital

funds.– Foreign Venture Capital Funds with Chinese

operations.– Foreign Venture Capital funds without Chinese

Operations.– Domestic Chinese Venture Capital Funds.– Angel investors.– Strategic investors.


Leveraging Private and Government Funding Sources Within and Outside of China (cont.) Approaching Funding Sources.– Use direct relationships.– Use intermediaries – “Zhongjian Ren”

Have someone with credibility or “Guanxi” make an introduction.

– The role of the Executive Summary. The Initial Meeting.– Company explains the problem to be

solved, the business, management team, technology, customs and risks.


Resolving Disagreements Between Partners Communication - The result of

building a strong relationship Negotiation - Mediation– Informal - Zhongjian Ren– Formal - Use of dispute resolution

mechanism

China Bio Workshop Eye On China Series (Guangzhou 14 April 10) (2)

Documents

patent preparation

patent protection

pct pct

ownership of genentech

filing strategy

company value

joint innovation procedures

commercial business