When it comes to product development, the management of third-party intellectual property (IP) to ensure freedom to operate is of paramount importance. Drug development is no different. Imagine investing years of research, substantial resources, and unwavering dedication into creating an FDA-approved drug, only to have a third party’s patent prevent you from entering the market. Thus, successfully navigating the intricate landscape of third party IP is crucial to the commercial viability of drug development efforts.

Let’s begin by understanding what a patent provides and what it does not. A patent grants the owner the right to exclude others from making, using, offering for sale, or selling the claimed invention within the United States or importing it into the country. However, obtaining a patent does not guarantee the right to practice the claimed invention. That’s because a third party may possess a broader patent with claims that encompass your narrower patented novel product or process, ultimately obstructing your freedom to operate.

To comprehend the risks involved with third party IP and freedom to operate, let’s consider how the approved drug Mircera® was excluded from the market for seven years after being approved by the U.S. Food and Drug Administration (FDA). In the late 1990s, Roche initiated research and development on Mircera®, a drug made by covalently linking Amgen’s Epogen with another compound. Roche obtained a U.S. Patent (6,340,702) covering Mircera® in January 2002. Subsequently, Roche conducted extensive clinical trials on over 4,000 patients, eventually obtaining FDA approval in November 2007.

However, in November 2005, Amgen asserted its patent estate covering the Epogen® franchise, and filed a lawsuit against Roche claiming that Mircera® infringed five U.S. patents. In October 2008, the District Court found in favor of Amgen, holding that Mircera® infringed its patents. The Court granted Amgen’s request for a permanent injunction, effectively preventing Roche from selling Mircera® in the $5 billion annual U.S. Market for the duration of Amgen’s patents. Although Roche had obtained FDA approval in 2007, it ultimately settled with Amgen in December 2009, agreeing not to sell Mircera® in the U.S. market until mid-2014. This scenario underscores the potential adverse consequences of encountering blocking third party IP during the drug development process.

Accordingly, effectively managing third party IP to facilitate freedom to operate requires a comprehensive understanding of the IP landscape and thorough due diligence. To this end, frequent monitoring and assessment of the strengths and weaknesses of third party IP is essential. When potential blocking IP is identified, several strategies can be employed to mitigate risks.

In cases where the third party IP holder does not have a competing program, the risk of being blocked from selling your drug diminishes significantly. In such instances, resolving the IP issue through a license agreement may be a viable solution. Timing can be a critical factor in licensing negotiations, as addressing the matter earlier is typically less expensive and may prevent a competitor from obtaining rights to the potentially blocking IP.

In situations where the third party IP holder does have a competing program, the likelihood of that IP impacting your commercialization efforts depends on several factors, including the competitor’s product development stage, available resources, and the likelihood of gaining FDA approval. Early-stage competitor programs generally provide lower risk, as the probability of FDA approval from this stage is often relatively low. However, as competitor programs progresses to later stages of clinical development with appropriate financial backing, the potential risk increases.

Consequently, it is imperative to effectively identify and develop strategies to resolve any relevant third party IP risks. Understanding the scope of the identified patent claims, expiration dates, and potential arguments related to invalidity or non-infringement are critical considerations that must be addressed. Exploring design-around alternatives that work outside the scope of existing IP can also prove advantageous and provide negotiating leverage. Careful evaluation of these factors will help inform decision-making and guide strategies to mitigate any risks. Equally important, conducting such analysis will facilitate communicating the strategy for addressing these risks with either internal management or potential investors, partners, or acquirers during the diligence process.

Staying informed and proactive regarding third party IP will better protect your drug development journey from unforeseen obstacles and help pave the way for a successful financing, deal, and/or market entry.