PATENT FILING
The startup scene
Patents are a key asset for pharmaceutical startups, but where are they choosing to file? Jian Siang Poh and Angus Fairbairn of Marks & Clerk report.
The development of any new drug requires considerable investment of time and resources into extensive research and development (R&D), even in the hit to lead and pre-clinical stages. While larger pharmaceutical companies with deep pockets are used to managing the costs associated with drug development, pharmaceutical startups and small and medium-sized enterprises (SMEs) may encounter more difficulty in balancing their budgets, particularly when it comes to allocating funds for generating patent portfolios.
In this article, we provide an insight into the patent filing trends of pharmaceutical startups and SMEs, in terms of the jurisdictions that are prioritised when seeking patent protection.
Patents play a crucial role in establishing rights that pharmaceutical startups and SMEs need to reap the reward of their R&D and to secure further investment. As a result, patent protection is typically considered and applied for at a very early stage in the drug development process.
In a global marketplace, it will be tempting to file patent applications in as many countries as possible. However, since patents are prosecuted and granted on a national or regional basis, the costs associated with obtaining granted patents and their maintenance post-grant will be substantial if broad territorial protection is to be pursued in multiple jurisdictions.
This presents a particular dilemma for pharmaceutical startups and SMEs focused on R&D and early stage drug development. Such companies may have limited budgets to allocate to obtaining and maintaining patents, but still wish to secure geographically broad patent protection for their products or processes. In these circumstances, compromises may need to be made in terms of the countries to be selected for obtaining patent protection.
What does the filing data show?
We explored the international (Patent Cooperation Treaty) patent filing trends of pharmaceutical startups based in the US, Europe (Germany, France, and the UK), China and Japan, by analysing their patent families by jurisdictional coverage.
The proportions of patent family members across specific jurisdictions were assessed to extrapolate general trends for obtaining patent protection in those jurisdictions, with high proportions being indicative of commercially relevant jurisdictions. Lower proportions (25% or less) were disregarded, these being taken to indicate niche filing strategies that may be specific to a particular applicant and therefore less relevant for consideration (see Note on methodology below).
These data are summarised in Figures 1 to 4, categorised into US, European, Chinese and Japanese applicants.
”A simplified representation of the general trends can be provided by categorising the jurisdictions into three tiers.”
Jian Siang Poh
Angus Fairbairn
Europe a close second to the home market in the US
For pharmaceutical startups based in the US (Figure 1), the European patent (EP) appears to be the most popular choice when considering expansion of a patent portfolio overseas. Subject to validation requirements, the EP offers a cost-effective way to obtain patent coverage in 38 European countries, including Germany, France, and the UK, as well as the possibility to extend coverage to other extension/validation states (see map).
Next, Japan (JP), Canada (CA), China (CN) and Australia (AU) are relatively common choices for US startups and appear to be similar in terms of percentage popularity, forming a plateau region. South Korea (KR) is a slightly less popular choice, while Mexico (MX), Brazil (BR) and Israel (IL) make up another plateau region as the remaining less popular choices. These plateaus might be suggestive of a tiered approach to obtaining patent protection by US pharmaceutical startups.
In terms of the relative popularities of each jurisdiction for US startups, the size of the population—and, therefore, the potential market—may be a factor. However, China, despite having a very large population, is an outlier in this respect. This could suggest that the population size of China does not fully translate to the perception of a corresponding commercial opportunity or, perhaps, that language barriers such as greater translation costs present a disincentive to filing in China.
Figure 1: Patent filing trends of pharmaceutical startups based in the US
Source: Derwent Innovation
European applicants also favour the EP, followed by the US and Japan
As compared to the US data, there is no pronounced plateau in the filings in the leading jurisdictions by European pharmaceutical startups (Figure 2). This may indicate that each of the top few jurisdictions is considered on its own merits by European startups, rather than being grouped into common tiers. There appears to be, however, a plateau region for Brazil, Singapore (SG) and Mexico, possibly suggesting a tiered approach for these less commonly chosen jurisdictions.
With the exception of China being a more popular choice for European compared to US pharmaceutical startups, the overall filing trend for the European startups is similar to the US data, again suggesting that the relative popularity of each jurisdiction may be influenced by their respective population sizes. The relative popularities of the US, Japan, and China compared to Australia and Canada appear to support this conclusion.
Figure 2: Patent filing trends of pharmaceutical startups based in Europe
Source: Derwent Innovation
Overseas filing numbers lower for Chinese applicants
Overall, pharmaceutical startups based in China (Figure 3) appear to be slightly more conservative in terms of extending patent protection overseas, as can be seen from the overall popularity percentages, as compared with US pharmaceutical startups. Possibly, translation costs play a more significant role for Chinese pharmaceutical startups, given that a common language is not shared with the top jurisdictions.
It is noteworthy that the trend for Chinese pharmaceutical startups reveals similar plateau regions as seen in the US data, with the US, Japan, Australia and Canada forming a group of relatively common choices with similar popularities. A similar plateau region for less common jurisdictions such as Philippines (PH), Brazil, Singapore and Mexico can also be observed. Again, this might be suggestive of a tiered approach.
Figure 3: Patent filing trends of pharmaceutical startups based in China
Source: Derwent Innovation
A narrower territorial focus for Japanese applicants
Pharmaceutical startups based in Japan (Figure 4) appear to be the most conservative in terms of seeking overseas patent coverage, with only four key jurisdictions being represented outside Japan. These include China and South Korea, presumably reflecting their closer geographical proximity to the home nation than for US or European startups.
Japanese pharmaceutical startups which, as a whole, currently do not frequently seek patent protection in notable G20 countries such as Australia, Canada, Mexico, and Brazil might consider doing so in future if it would provide a competitive edge over their rivals. In this respect, Canada and Australia would seem to represent cost-effective choices if translation costs would already be incurred for US and/or EP applications.
Figure 4: Patent filing trends of pharmaceutical startups based in Japan
Source: Derwent Innovation
The big picture: what do the overall trends reveal?
While some evident geographical biases are specific to each of the four categories of applicants surveyed, it is also clear that some general trends can be drawn in terms of the relative popularities of jurisdictions selected by pharmaceutical startups.
A simplified representation of the general trends can be provided by categorising the jurisdictions into three tiers, based on their overall relative filing popularities, with Tier 1 constituting the four most popular jurisdictions for pharmaceutical startups:
- Tier 1: US, Europe, China, Japan
- Tier 2: Canada, Australia, South Korea
- Tier 3: Mexico, Brazil, Israel, Singapore, Philippines
Tier 1 equates to 75% or more of families containing an overseas patent member in said jurisdiction, for at least one of the US, EP, CN or JP applicant categories; Tier 2 to between 50 and 75%; and Tier 3 to between 25 and 50%. As previously covered, statistics less than 25% were excluded from this research.
Applying the findings
The tiered model and the associated data may be of interest to pharmaceutical startups and SMEs by providing insights into the general filing behaviour of competitors, and may help to inform their own decision-making as to where to expand patent coverage to foreign territories.
At a practical level, this model could serve as an initial guide for pharmaceutical startups and SMEs for deciding which jurisdictions might be appropriate for their own patent portfolios, while also taking account of any commercial factors relevant to their specific operations. For example, new pharmaceutical startups with limited financial resources could consider obtaining patent protection in some or all of the Tier 1 countries only, and later adjusting their filing strategies for subsequent patent applications to include Tier 2 and even Tier 3 countries, as and when their budgets allow.
Of course, for certain patents protecting highly valuable commercially promising products such as key drug candidates or processes, it will be desirable to seek extensive patent protection over all three tiers and potentially in additional jurisdictions. For other, less important patents, it may be cost-effective to limit the coverage to Tiers 1 and 2, or to Tier 1 countries only.
Our data analysis provides some striking insights into the patent filing trends of pharmaceutical startups based in the US, Europe, China, and Japan. Our proposed general three-tier model of prioritised patent jurisdictions based on their overall relative filing popularities may be useful to pharmaceutical startups and SMEs, to feed into their decision-making for a suitable filing strategy for their own patent portfolios.
Note on methodology
International (Patent Cooperation Treaty [PCT]) patent filing trends of pharmaceutical startups were explored by using filters on IPC codes C07 and A61K, to reflect “pharmaceutical” patents. “Startups” were selected from applicants with no more than five patent families, where each patent family contained at least one PCT application and had been cited five or more times.
These filters were chosen to focus on applicants which have a small patent portfolio, have an interest in expanding territorial coverage, and have patents that could generate a relatively large number of citations, indicative of working on a new technology. Results were further filtered to remove single inventor applicants.
The analysis covers patent families having a priority year of 2016, to provide recent filing data and to ensure that all PCT applications within the patent families had completed national/regional phase entry.
Geographically, the results were focused on applicants based in the US, Europe (Germany, France, and the UK), China and Japan, these territories representing the top four users of the PCT in 2019 in terms of the number of applications filed: China (58,990), US (57,840), Japan (52,660) and Europe (>33,073).
We thank Rebecca Davies and Paul Gilbert for collecting the raw data and for their insightful discussions on the research methodology.
Jian Siang Poh is a trainee patent attorney at Marks & Clerk. He can be contacted at: jpoh@marks-clerk.com
Angus Fairbairn is a partner at Marks & Clerk. He can be contacted at: afairbairn@marks-clerk.com
Images: Shutterstock / Dima Zel
