Patent Due Diligence A Good Business Practice

Patent Due Diligence – A Good Business Practice Chad A. Landmon cal@avhlaw. com 90 State House Square Hartford, CT 06103 (860) 275 -8170 September 14, 2011 AXINN, VELTROP & HARKRIDER LLP © 2007 | www. avhlaw. com 1330 Connecticut Ave, N. W. Washington, D. C. 20036 (202) 721 -5415

Overview • Freedom to Operate: Will Your Product/Method/Process Infringe Another’s Patent? • Patentability: Is Your Product/Method/Process Patent-Eligible? • Regulatory Oversight: Does Your Activity Comply with FDA’s Regulations? • Recent Issues Every Stem Cell or Regenerative Therapy Company Must Know About AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 2

Patent Due Diligence Freedom to Operate: ability to pursue, manufacture and market the product free from interference by third parties Patentability: ability to exclude competition • When to conduct these analyses: – Prior to developing a new product or product line – When evaluating overall business plans – Prior to mergers/acquisitions/licensing and other related intercompany transactions AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 3

Freedom to Operate (FTO) 1. Determine the patent landscape. U. S. patents, U. S. patent applications, WO publications Identify key inventors, assignees, etc. Consider both literal infringement and infringement under the Do. E 2. Identify the most relevant and/or problematic patents. 3. Address any potentially problematic patents. Assess strength of patents Design arounds Consider seeking license AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 4

FTO – Assessing Strength of Patents • 35 U. S. C. § 102: Anticipation – Each limitation of the claim is present in a single prior art reference • 35 U. S. C. § 103: Obviousness – All of the claim limitations are present in more than one prior art reference and there is sufficient motivation to combine the teachings of the references to arrive at the claimed invention – Consider ordinary skill in the art • 35 U. S. C. § 112: Enablement, Written Description AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 5

Patentability 1. Determine desired scope of protection. 2. Determine whether invention satisfies the requirements for patentability. Evaluate all types of prior art Focus on statutory bar prior art 3. Adjust scope of claimed invention accordingly. Ensure compliance with Section 112 requirements AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 6

Patentability – Defining the Invention • The claims of a patent define the metes and bounds of the invention. • Claim as broadly as possible while steering clear of prior art Narrow claim 1. An immortalized bone marrow mesenchymal stem cell line deposited as FERM BP-8197. (See U. S. Patent No. 6, 645, 763. ) AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com versus Broad claim 1. An isolated, homogeneous population of human mesenchymal stem cells which can differentiate into cells of more than one connective tissue type. (See U. S. Patent No. 5, 486, 359. ) 7

Requirements for Patentability • Useful (35 U. S. C. § 101) • Directed to patentable subject matter (35 U. S. C. § 101) • Novel (35 U. S. C. § 102) • Nonobvious (35 U. S. C. § 103) • Sufficiently enabled (35 U. S. C. § 112) • Adequately described (35 U. S. C. § 112) AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 8

Recent Case Law Regarding Patentable Subject Matter • Association for Molecular Pathology v. U. S. PTO (Fed. Cir. 2011) • Myriad Genetics owned patents related to Breast Cancer Susceptibility Genes (BRCA 1 and BRCA 2) • Claims directed to isolated DNA for these genes • Claims directed to methods for analyzing these gene sequences for mutations associated with a propensity for breast cancer • Issue: Are these claims directed to patentable subject matter under 35 U. S. C. § 101? AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 9

Recent Case Law Regarding Patentable Subject Matter • Association for Molecular Pathology v. U. S. PTO (Fed. Cir. 2011) • Federal Circuit: – The isolated DNA molecules are patent eligible • The genes “in their isolated state are not the same molecules as DNA as it exists in the body; human intervention in cleaving or synthesizing a portion of a native chromosomal DNA imparts on that isolated DNA a distinctive chemical identity from that possessed by native DNA. ” – The claimed methods of “comparing” or “analyzing” two gene sequences are not patentable • They claim only abstract mental processes • No transformative step AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 10

Patenting Strategies • Strategic Research and Development • Patent Portfolio as a Shield • Patent Portfolio as a Sword – Enforce patents against infringing competitors – Persuade infringers into licensing the patents AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 11

Searching: FTO vs. Patentability • Search Strategy for Determining FTO – Broad concepts in a narrow universe – Focus on issued patent claims • Search Strategy for Determining Patentability – Narrow concepts in a broad universe – Search all patents, applications, publications, etc. as well as other types of prior art – Consider the complete disclosure of each prior art reference AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 12

Analysis of Search Results Review requires scientific or technical knowledge Review requires an eye toward the law Advanced scientific or technical degree Laboratory, research or industry experience Claim construction Infringement (literal and under the Do. E) Patentability or patent validity Scientists AXINN │ VELTROP │ HARKRIDER │ LLP Patent attorneys with scientific backgrounds © 2011 | www. avhlaw. com Lawyers 13

Summary: Business Strategies and Patent Realities • FTO → Blocked from using → – Licensing – Engineer around – Challenge patent(s) • Patentability → Blocked from patenting → – Engineer around in order to obtain patent – Improve on existing technology – Consider cross-licensing opportunities AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 14

Navigating FDA’s Regulations • 21 C. F. R. § 1271: Human cells, tissues, and cellular- and tissuebased products (HCT/Ps) • 21 C. F. R. § 1271. 3(d). HCT/Ps = articles containing or consisting of human cells or tissues that are intended for implantation, transplantation, infusion, or transfer into a human recipient. – HCT/Ps include: bone ligament, skin, heart valve, cornea, hematopoietic stem/progenitor cells derived from peripheral and cord blood, manipulated autologous chondrocytes, epithelial cells on a synthetic matrix, reproductive tissues – Not HCT/Ps: vascularized human organs for transplantation; secreted or extracted human products, such as milk, collagen, and cell factors; ancillary products used in the manufacture of an HCT/P; cells, tissues and organs derived from animals other than humans AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 15

Navigating FDA’s Regulations • HCT/Ps are not subject to pre-marketing approval requirements (NDA and BLA filings) if: (1) The HCT/P is minimally manipulated; (2) The HCT/P is intended for homologous use only, as reflected by the labeling, advertising, or other indications of the manufacturer's objective intent; (3) The manufacture of the HCT/P does not involve the combination of the cells or tissues with another article (except for water, crystalloids, or a sterilizing, preserving, or storage agent if such agent does not raise new clinical safety concerns with respect to the HCT/P); and AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 16

Navigating FDA’s Regulations • HCT/Ps are not subject to pre-marketing approval requirements (NDA and BLA filings) if: (1), (2), (3) and (4) Either: (i) The HCT/P does not have a systemic effect and is not dependent upon the metabolic activity of living cells for its primary function; or (ii) The HCT/P has a systemic effect or is dependent upon the metabolic activity of living cells for its primary function, and: (a) Is for autologous use; (b) Is for allogenic use in a first-degree or second-degree blood relative; or (c) Is for reproductive use. See 21 C. F. R. § 1271. 10(a). AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 17

Navigating FDA’s Regulations • Regenerative Sciences LLC’s Regenexx. TM Procedure Clinic Laboratory Physician takes bone barrow from patient’s hip or synovial fluid from patient’s knee Physician takes blood from patient Expanded MSC solution injected into patient AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com Mesenchymal stem cells (MSCs) are isolated from bone marrow or synovial fluid MSCs expanded in culture for 2 -3 weeks using growth factors from patient’s blood and other chemical reagents MSCs are combined with previously-approved drugs (e. g. , doxycycline) 18

Navigating FDA’s Regulations • U. S. v. Regenerative Sciences LLC (pending in the D. D. C. ) – FDA began evaluating the Regenexx Procedure in 2008 based on the information provided on Regenerative’s website – FDA: The Procedure constitutes the manufacture of a drug product and is therefore subject to current good manufacturing practices (CGMPs) and the pre-marketing approval requirements set forth in the FDCA • The Procedure involves more than the minimal manipulation of the HCT/P – Regenerative: the Procedure constitutes the practice of medicine, which is outside the scope of FDA’s regulatory authority AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 19

Navigating FDA’s Regulations • U. S. v. Regenerative Sciences LLC (cont. ) • Current Status – Judge Collyer asked the parties to brief an issue related to the definition of “drug” under the FDCA; briefing will be completed in late October – Regenerative agreed to cease performing the Procedure until the suit is resolved • Impact – Case of first impression – How will the term “drug” be defined under the FDCA? – How will the criteria of 21 C. F. R. § 1271. 10(a) be interpreted by the court? AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 20

Leahy-Smith America Invents Act • H. R. 1249 approved by the Senate on September 8, 2011 • Key features: – Patent priority will switch from a first-to-invent to a first-to-file system – Allows third parties to submit published prior art to the PTO at certain times before a patent issues – Post-patent grant review procedures within 9 months of grant based on any patentability issue • Inter partes review procedures thereafter • Special transitional post-grant review proceedings for business method patents AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 21

Leahy-Smith America Invents Act • Key features (cont. ): – Violation of best mode requirement no longer invalidates a patent – Changes to 35 U. S. C. § 102 • Catch-all “otherwise available to the public” category • Invalidating public use or sale can be anywhere, not just in the U. S. • Prior sale by others can invalidate a patent AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 22

Conclusions • Patent due diligence is an essential component of good business strategy • FTO: Ensure that others cannot prevent you from practicing your product/method/process • Patentability: Assess whether you can obtain patent rights and thereby exclude competitors • Stay current on case law related to both patent and FDA issues • Be aware of the potential impact of new patent legislation AXINN │ VELTROP │ HARKRIDER │ LLP © 2011 | www. avhlaw. com 23