As IBM has consecutively generated the most US patents per year since 1992, it wasn’t much of a shocker last week when the company announced that it had once again topped the US Patent Office’s list with a total of 3,288 patents granted in 2002.
But this output included a surprise for companies in the life science IT market: IBM says that life sciences is the fastest growing segment in its patent portfolio. This bloom in Big Blue’s bio-patents, according to IP experts, signals a reversal in the trend not to patent bioinformatics inventions — as well as a potential wave of related litigation.
According to Joe Jasinski, manager of worldwide operations for IBM Life Sciences, “The overall strategy is not significantly different from IBM’s general patenting strategy. As we build our business in life sciences, we will also build a patent portfolio in that area.” If the company’s patenting activity in life sciences is anywhere near its track record in other technology areas, that portfolio could be pretty hefty in a few years’ time: In the past decade, the company has raked in a total of 22,357 patents, more than 10 of the largest US IT companies combined, and has leveraged this portfolio to bring in approximately $10 billion in IP royalties over that time.
Jasinski estimated that IBM currently holds only “a few dozen” patents that are specific to the life sciences, but was quick to point out that the business unit is still only two years old — on the short end of the amount of time it takes for an application to work its way through the patent office. In terms of general IT patents that are applicable to the life sciences, “it’s probably thousands, if not more,” Jasinski said.
The company is focusing its patenting activity on “algorithms, methods, and database methods that might be specific to handling life sciences data,” Jasinski said, as well as “IT architectural methods that we think may be particularly valuable for the life sciences, although they might have applications in other areas.” These more general technology areas include database technology, methods for storing, retrieving, and analyzing large image data sets, and technology for security and privacy, he said.
Jasinski noted that the abundance of patent-protected technology provides three key advantages for IBM: “It demonstrates thought leadership, it provides some freedom of action across the IT industry, and, thirdly, it has real financial value.”
The Patent Landscape
IBM’s aggressive IP strategy will likely give it a key advantage over other IT players in the life science market, where bioinformatics-specific patents are relatively few and far between. Most pure-play bioinformatics businesses are not built around IP holdings — on the contrary, several factors contribute to a downright passive attitude toward patenting in the sector. For one thing, many commercial bioinformatics offerings rely on public domain tools and data, which can’t be patented. Additionally, the services-oriented structure of many bioinformatics firms, which derive their revenue from expertise and know-how rather than proprietary technology, also contributes to the dearth of patenting activity. And those software companies that do sell proprietary technology often opt for alternative — and less costly — strategies to protect their IP, such as copyright or trade secret protection. “It’s always in the back of everybody’s mind, traditionally from a software point of view, whether to patent or not,” said Teresa Welch, a patent attorney with law firm Michael Best & Friedrich. “When you look at how long it takes for something to get through the patent office, which is traditionally two to three years, unless you have something that is really cutting-edge and you can get broad claims for it, people are reluctant to put the money into it.”
In addition, many biotech and pharmaceutical companies fail to patent in-house informatics tools developed to conduct their research, opting instead to spend their IP budgets on genes, proteins, and other biological products that can eventually bring in drug- or therapeutic-based revenues. Aside from a few notable exceptions, including Affymetrix, Incyte, Rosetta Inpharmatics, and Curagen (see table below), very few companies — whether they are software firms, biotechs, or pharmas — are building out substantial bioinformatics patent portfolios, leaving the field wide open for IBM to dominate.
That’s not to say that IBM isn’t facing competition in the field. As a relatively new IP area, many bioinformatics patents simply haven’t issued yet. The US Patent Office created a bioinformatics art division in 2000 to review patents in the field, and there is a bit of a backlog. As of last week, there were a total of 589 applications awaiting issue in two primary patent classes relevant to bioinformatics: 368 under class/subclass 702/19 (data processing: measuring, calibrating, or testing/biological or biochemical), and 221 under 702/20 (data processing: measuring, calibrating, or testing/gene sequence determination). There are at least 15 other class/subclasses that include bioinformatics-related patents.
Does this impending spurt of issued patents mean that bioinformatics will soon be embroiled in the type of legal action that has become commonplace in the biochip and instrumentation sectors? Probably. “I think there will be more litigation in the software patent realm in the bioinformatics field as time goes on,” said James Gatto, a patent attorney at law firm Mintz Levin Cohn Ferris Glovsky and Popeo in Reston, Va. Gatto noted that he represents a company that is already involved in a bioinformatics software-related lawsuit, but was unable to disclose further details about the case.
Stephen Lesavich, the founder of Lesavich High-Tech Law Group in Chicago, pointed out that the presence of a player like IBM in the bioinformatics IP space could really shake the sector up, particularly for biotech and pharma firms using in-house tools that potentially infringe upon IBM patents. “IBM has a big portfolio and they have a lot of money to spend on it…What I see them doing is eventually going to ask some of these biotech companies for a license. And some of these companies are going to be sorry that they haven’t tried to patent some of these things themselves.”
Gatto, however, held up IBM not so much as a threat, but as an example for some of the smaller guys in the life science IT market: “If a company is serious about protecting intellectual property and creating value from it, then there’s a lesson to be learned from what IBM has successfully done over the last decade or so.” Big Blue serves as a great example of what Gatto called a defensive patenting strategy: Building a large patent portfolio “can often act as a deterrent for other people to sue you, even if you never go out and enforce your patent,” he said. In IBM’s case, “it’s not just how much money IBM generates from licensing their IP, but if you go back and look at how many times IBM has been sued by a competitor for patent infringement, you won’t find very many times.”
And there’s hope even for smaller life science IT firms who haven’t been patenting or who don’t have the jump that IBM does on their patent portfolio, according to Welch: “Smaller companies can look for some kind of partnership or joint venture [with IBM]. It’s similar to small pharmaceutical research companies that are looking to partner with big pharma companies. A lot of the very innovative stuff does come from some of the smaller companies,” she said. “How they look to compete is by partnering with a big behemoth like IBM.”
This strategy is in line with IBM’s stated mission to partner with smaller bioinformatics companies rather than compete directly with them. In addition, the company has no desire to encroach on its customers’ IP turf. Said Jasinski, “We’re an IT company, so we’re not patenting genes, we’re not patenting drugs, we’re not patenting a lot of things that our customers are patenting. What we are patenting are things we think are applicable to our business, which is providing IT solutions to the marketplace.”
Moving forward, Jasinski said, look for more life science patents from IBM in the areas of data management and data structures, especially in the area of systems biology, as well as continued algorithm development in various areas. One thing is for sure: Don’t expect the company’s patenting activity to level off any time soon, especially as it expands its reach into the life science market.