VC Buying a Technology ---Hypothelical Patent Question
Hi Forum, I am a venture capitalist and research scientist with a background in molecular biology and pharmacology. For the last two years, I have worked with several wealthy investors to launch several biotechs. I have vetted the technology of these companies and we have been quite successful; selling one company to a large Pharma company for 6-8B. Right now I am middle of studying for the patent bar and a hypothetical question has come up about the patents of a potential investment. Without any specifics, can you get a patent on a compound that consists of three patented molecules (and the linker has been patented) without significant objections by the USPTO (35 USC 102 and 35 USC 103). I have already identified significant prior art including patents that raise questions about the obviousness of this macromolecule. In the end, the macromolecule has only one N to O change in the molecule of ~800 daltons. Suppose hypothetically the investors don't agree with your analysis and they invested several millions in this company; in part because the small patent law firm (with no pharmaceutical patent experience and no life sciences expertise) told them that they could win a patent (in part because they are in dire need of billable hours). Further, now after showing the investors the structures, the agree that they have a problem now; they may not even own the technology. Which probably belongs to the big Pharma that patented the 2 major molecules in this structure. However, the investors want to continue with this law firm and try to get a patent on this macromolecule. Also, the investors have asked to present my analysis to them again. I have heard of rare cases whereby a drug company gets structural claims on a patent despite prior patents where only one atom was changed. For example, two prostaglandin structures (Alcon/Pharmacia ---Travatan) used to treat a buildup of pressure in the eye. But it was very expensive to win the patent infringement case that ensued. I would like to get a scientific opinion about whether it is possible to get a patent on a macromolecule that consists of three patented molecules (including the linkers) without an significant challenge from the USPTO (102 and 103). Plus, if the "real" inventor gets word of this and sues, how protracted and expensive would a patent infringement case be. Could a "third party" buy the patent from the real inventors (bigPharma) if they have a solution to this problem and does bigPharma sell technology to private parties, especially if they don't have a use for this molecule(s)? Please address scientific questions of linking three patented molecules together. Obvious or Novel----Why? Examples would be helpful.
Let ask me it like this: How do I convince my investors to get a second opinion? Remember these are financiers. Could I ask them to talk with a board member who is an industry chemist with 40 years experience?
I have experience with patents (w/o a JD) and I am confident that this is not novel and there is prior art. This is a more scientific question than a legal question. Thus, I am asking a gut hypothesis if someone has the expertise in medicinal chemistry. I am just trying to confirm my hypothesis; it is a simple concept.
PS: Few firms will offer an opinion on a question like this unless you hire them for a significant about prosecution work.
Dick and others, feel free to address this offline by sending me a message. I am not asking a legal question only a scientific perspective on this concept of obtaining a patent on a molecule containing three patented molecules.
PS: Yes, I am NOT going to hold anybody responsible if they are wrong; there are many opinions to this question. As a consultant, sometimes you get stuck and people question your opinions and you need to know how to handle disagreements diplomatically; so maybe a management career development question. Appreciate the help.
Actually, you can hire patent firms to do a patentability analysis. This is not inexpensive, but it is better than throwing millions at something that may not be patentable. In my experience, VC firms will have a patent firm that they trust review a company's IP before investing. If they then decide to invest, the company gets billed for the attorney costs; if they don't invest, they put it down to a cost of doing business.
It seems that your group has initially decided that they trust the firm that they are working with, despite your concerns. You have presented your concerns to them - have you also discussed this with the patent counsel? If not, why not? Now that they appear to agree that you may have a point, it is worth suggesting that they have a patentability analysis performed by a firm with a somewhat stronger pharma/life science/chemical background than the one that they are currently using. If they refuse to do so, you have done your best.
Incidentally, unless you are investing your own funds, it is somewhat misleading to be calling yourself a VC; it seems that you are really a consultant (especially given your other post). As redundant as it seems, a consultant consults; a consultant does not make decisions. All you can do is to provide your principals with the information needed to make a decision.
I'll address some of the issues relevant to being a consultant in my response to your other post.
Yes, I have asked around. You see I am also interested in this as a potential investor. I don't expect a definitive answer just some confirmation that I am on the right track and if it has any possibility of a patent, how expense would it cost. It is a question of whether juice is worth the squeeze. Normally, I would go to this medicinal chemist who is a board director at a firm company; who the principals would trust. But I don't want to appear that I am jumping over the head of my supervisor. In this case, I know this guy and we have worked together. Further, this board director says call me anytime. We have a good rapport as scientists. However, (explain this behavior of my supervisor) when I talk with this board director about science and ask scientific questions about technology in a group meeting; my supervisor frowns and gives me this disapproval look. Of note, the only way I can to the bottom of scientific issues is to ask the inventor scientist questions directly and I know the follow-up questions depending on the answer (that's my job). My supervisor does not have that expertise but I do. So, why hire a consultant if you are not going listen to him. Because of this, we have this problem with this company. They would only be aware of the problem if it wasn't for my analysis. The supervisor is using this firm because his family knows the senior partner quite well; but they have no expertise in biotech or pharmaceuticals. I have told my supervisor this that they are good attorneys but have no subject matter expertise or experience with biotech patents.
I don't want to pay personally a firm thousands of dollars to confirm my hypothesis. It would be helpful before the meeting with the principals to have confirmation of this (nothing definitive). The other part of this is that I have a potential solution to this problem and I am willing to buy this technology using some other investors. Essentially, buy them out because I think I can solve the problem and they can't. What I am proposing is a merger of two technologies where it would be mutually beneficial to both companies. I know the CEO at the other company and she will support my efforts; only doing business with me. So, this is why I am pushing for a cogent opinion to my hypothesis before the meeting and they (VC and supervisor) are not going to pay for it.
With this in mind, I prefer to work out a contract with the VC firm whereby I am employee of the firm like an employee of their companies (or an associate at a large VC firm) plus he credit or ownership in these companies I vet versus taking on the risk of going it alone. But I am willing to do this.
Dick, you have to consider the people that I am dealing with. I live in a bubble community where there is so much excess money and successful businessmen forming and investing in any type of company (often done to just write off their losses from other main businesses that made them millions). Disposable cash for ventures is abundant but listening to reason is in short supply. I didn't spend my many years getting degrees and training to become a scientist to just give up my expertise cheaply w/o some reciprocation. Suppose I provide an pivotal scientific idea to a rich investor and the idea is key to a cancer therapeutic being sold to Novartis for 9B. Shouldn't I be equally rewarded as the same as the guy who initially put up the money (or some magnitude close)? Any Joe rich guy can put up millions. A problem that I noticed in the VC and private equity business is that some investors can be greedy and try to pick winners w/o good (scientific) reasons or even consulting with (or listening) to their own advisors with the expertise. I know many failures in biotech because of this.
Another dynamic is that my supervisor grew up in this environment and his family was quite rich. However, his divorce has hit him hard and he is living on the ranch of one of the principals. I think his desperation has made him greedy and that is why behaves this way. He sees the opportunity for a huge payday but doesn't understand the expertise it takes and sweat equity it takes to acquire that scientific expertise. He doesn't listen to me ideas and yet the magically appear in the business plan. If anyone has a chance to shape these deals and build rapport with the scientists, it is me because I have been in the trenches and understand the details and experimental skills of research; he doesn't. That's what it is going to take to form a good company with scientifically valid ideas which ultimately have profitable exits. This is why it is hard for me to respect his contribution because he takes this (my expertise) for granted and that he can just buy it for his own use.
Some friends here say I should be more respectful to the man's wealth and the power that it gives him. I just don't think this way since I grew up in a middleclass family and worked my way through college and graduate school. Of note, I have arranged corroborations with senior scientists at major universities and he has ignore this and I have to apologize to prominent faculty. It is also about my reputation with other respected scientists who I know.
If the principals play hard ball after I propose a solution to this problem, I might offer to buy the problematic company and merge the technology with another company where I know the CEO quite well. I would rather do a deal with the VC firm. Wished my supervisor would have told the principals my findings and my recommendation not to buy this company; they wouldn't be in this situation.
Dick, I am dumbfounded as to why my supervisor failed to tell his partners that he hired me and why he filters information and analysis that I prepare and selectively reveals it to his partners. This is why his partner has a problem with this company. He has put me in a awkward position. Can explain this behavior and why do I owe him this loyalty to him to not talk with others (w/o his permission) and try to resolve the problem? I can't be effective to him or the firm if he doesn't listen to me and respond with completely transparency.
I can help with providing an opinion outside the forum. Note that this should not be considered legal advice since it depends on a lot of specific factors. In theory it is possible to patent the use of an already patented substance or combination of substances if your use isnt obvious from the already public information or already filed patents. You will however probably still be dependent on a license for the actual substances to be able to use your patent. It may come to a situation in which the different companies are blocking each other unless an agreement can be made. Its not an ideal situation and you are probably at a disadvantage when going into negotiations.
As the moderator, I'd like to request that we avoid lengthy, highly technical or highly legal posts and stick with subjects related to the scientific career.
Thanks to all who participated in this one, and I am locking it but will leave it online,
Dave Jensen, Founder and Moderator
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