June 20, 2011 - IMM@BUCT

NEWS OF THE WEEKPatents lie at theheart of the biotechbusiness.SUPREME COURTAFFIRMS PATENTSTHE SUPREME COURT has rejected a bid by Microsoftto make it easier to challenge the validityof patents in litigation. The ruling is a victoryfor drugmakers and other businesses that rely on thestrength of their patent portfolios.The justices unanimously upheld a record$290 million verdict against the software giantfor infringing a small Canadian company’s patentand affirmed a long-standing requirement that adefendant in an infringement case prove by clearand convincing evidence that a plaintiff ’s patentis invalid (C&EN, June 13, page 27) .Microsoft had argued that a judge or juryshould be able to overturn a patent if only a preponderanceof the evidence indicates it is invalid,a lesser standard of proof.The biotech sector “felt that this was maybeSHUTTERSTOCKINTELLECTUAL PROPERTY:Justices uphold high hurdle forproving a patent is invalidthe most important patent case to go to the SupremeCourt in a decade,” says Hans Sauer, associate generalcounsel for intellectual property at the BiotechnologyIndustry Organization (BIO), a trade association.BIO saw the case as “a great threat because biotech,more than most industries, depends on patents asstrong and enduring legal instruments that cannot beoverturned on a mere coin toss,” Sauer tells C&EN.“You can’t have a sustainable biotech business withoutbeing able to rely on your patents to a stronger degreethan just that for product development, investment,and partnering decisions,” he says.The legal fight began in 2007 when Toronto-basedi4i sued Microsoft. A district court jury found that Microsofthad infringed i4i’s patent relating to text manipulationsoftware. After a federal appeals court upheldthe award, Microsoft turned to the Supreme Court.“Microsoft tried to gut the value of patents. It is now100% clear that you can only invalidate a patent basedon clear and convincing evidence,” says i4i ChairmanLoudon Owen.Justice Sonia Sotomayor wrote that any change inthe standard of proof for patent invalidity would haveto be made by Congress. She noted in the court’s opinionthat the standard of clear and convincing evidenceis nearly 30 years old and has been left untouched bylawmakers. —GLENN HESSU.S. BIOTECH FUNDINGGrowth in 2010 is due mostlyto debt offerings.Corporate funding, $ billions25 ■ Debt & other ■ Stock sale■ Venture capital ■ IPO201510502004 0506070809IPO = initial public offering of stock.SOURCE: Ernst & YoungBIOTECH SECTORREBOUNDSPHARMACEUTICALS: Recovery isoccurring but growth is slow, doggedby a widening gap in access to capital10MAJOR INDICATORS point to aturnaround for the global biotechnologyindustry, accordingto the annual industry report from theconsulting firm Ernst & Young. Totalrevenues for 622 public companiesreached $84.6 billion last year, an 8%gain over 2009. Combined net incomejumped 30% to hit an all-time recordlevel of $4.7 billion.Although 2010 was its second profitableyear in a row, the industry hasn’t returnedto prerecession rates of growth.And while the aggregate performancehas improved, “there is now a wideninggap between large, established companiesand those at earlier stages forwhom access to capital continues to bedifficult,” says Glen Giovannetti, Ernst& Young’s global biotechnology leader.In 2010, companies worldwide raised a total of $25billion in funding, but the influx was skewed. In theU.S., large debt financings by mature, profitable companiesgrew by 150% and accounted for nearly half the2010 total. Meanwhile, funding for emerging firmsdeclined by 20%.Most revenues also came from bigger companiesthat were equipped to weather the recession. Smallerfirms contributed to overall better net income in 2010,but at the price of drastic cost-cutting moves, many ofwhich were in R&D. Many small firms didn’t survive therecession. The number of public companies fell by 11%in 2009, then held steady in 2010.For the vast majority of firms, funding for R&D hasgrown increasingly scarce, the report’s authors observe:“This has placed new pressure on the traditionalbiotech business model, and may reshape how companiespursue R&D in the future.” For the first timein the industry’s history, R&D spending fell in 2009,by 21%. A modest 2% increase brought spending up to$22.8 billion in 2010.Ernst & Young analysts don’t foresee any majorreversals of these trends in the near future. “As long astight funding remains an inescapable part of the newnormal for emerging companies, R&D spending willremain under pressure,” they conclude. “Numberssuch as the ones we have seen in 2010—steady, solidlyprofitable, but slow-growing—may indeed be theshape of things to come over the next few years.” —ANN THAYERWWW.CEN-ONLINE.ORG 12 JUNE 20, 2011