The San Jose Business Journal will be hosting the Venture & Technology Conference 2005 on Friday, December 2, 2005 from 8 a.m. to 1 p.m. The conference will include 2 keynote speakers, a panel discussion, and the opportunity for companies to give a five minute pitch to venture capitalists in a breakout room.

The San Jose Business Journal will be hosting the Venture & Technology Conference 2005 on Friday, December 2, 2005 from 8 a.m. to 1 p.m. The conference will include 2 keynote speakers, a panel discussion, and the opportunity for companies to give a five minute pitch to venture capitalists in a breakout room.

The U.S. Patent and Trade Office has issued a preliminary ruling against a Genentech patent, which brings in an estimated $300 million in patent royalties each year from companies such as Johnson & Johnson, MedImmune, and Amgen. Examiners have said that the Genentech patent, which expires in 2018, covers the same inventions as another Genentech patent which expires in early 2006.

The Genentech patent at issue, known as the Cabilly patent (named by its inventor Shmuel Cabilly), covers a method of making antibodies and has been the subject of extensive litigation, including dispute with the European biotech company Celltech, as is summarized by Stephen Albainy-Jenei in his Patent Baristas blog:

[O]n March 25, 1983, Celltech filed in the United Kingdom a patent application directed to the methods of making recombinant antibodies and antibody fragments, together with vectors and host cells useful in these processes. Celltech filed a related patent application in the United States, which issued as U.S. Patent No. 4,816,397 (“the Boss Patent”). On April 8, 1983, about two weeks after Celltech’s original U.K. filing, Genentech filed a United States patent application directed to similar technology, which issued as U.S. Patent No. 4,816,567 (“the Cabilly Patent”). The Boss Patent and the Cabilly Patent issued on the same day, and both were scheduled to expire on March 28, 2006.

After Celltech’s Boss Patent issued, Genentech copied the Boss Patent claims into a previously-filed Cabilly Patent continuation application. As a result, the United States Patent and Trademark Office declared an interference between Celltech’s issued Boss Patent and Genentech’s Cabilly Patent continuation application to determine who was the first to invent, and therefore which company would be entitled to a patent on, the claimed invention. Seven years after the Genentech-Celltech interference began, the Patent Office determined that Celltech’s inventors, and thus Celltech, were entitled to the patent. . . . Genentech appealed. . . .Following two years of discovery, i.e. more than nine years into the dispute, the District Court denied Genentech’s motions that it was entitled to a patent on the disputed technology. . . . Shortly after the District Court ruled on those motions, Genentech and Celltech settled their dispute [in 2001]. . . .

In addition, one of Genentech’s Cabilly patent licensees, MedImmune, filed a lawsuit against Genentech and Celltech claiming violations for antitrust, patent,and unfair competition laws, and asking for a finding of invalidity of the Cabilly patent. The MedImmune case has not yet been resolved.

According to Red Herring, the Cabilly patent covers only 3-4% of Genentech’s antibody product sales; however, the ruling may still raise reporting questions for Genentech. CNN Money reports that a loss of this matter could curtail a significant portion of Genentech’s $641 million in annual royalty income.

Genentech will now have the opportunity to respond to the ruling, which the company is anticipated to do within the next sixty days. Forbes reports that it is expected that all of the licensees will continue to pay royalties until such time as a final adverse ruling is made.

The Silicon Valley Chapter of Licensing Executives Society and the Women in Licensing will be holding their annual holiday party on Thursday, December 1, 2005 at 6 PM at Stanford University’s Schwab Center in Palo Alto, California.

BIOCOM will be holding its Monthly Legislative Roundtable Series on Thursday, December 1st, 2005 at the BIOCOM Boardroom from 8:30-9:30 a.m. Breakfast will be served. Assemblywoman Lori Salda

WorkIt.com will be holding its Annual Silicon Valley Mixer on Wednesday, November 30, 2005 from 6:00 p.m. to 9 p.m. at the Fenwick & West Silicon Valley Center at 801 California Street, Mountain View, CA. The event will celebrate the people involved in Silicon Valley startups, including the entrepreneurs and investors.

The event International Licensing, sponsored jointly by the Silicon Valley Chapter of the Licensing Executives Society and the IP Society, will be held on Wednesday, November 30, 2005 between 11:30 and 1:30 PM at The Eagle Room, Bldg. 943, at NASA Ames Research Center in Moffett Field, CA. The speakers will be Emily O’Conner of USCIB and Richard Horton, attorney at Minter Ellison.

The next meeting of the San Diego Biotech Discussion Group will be held on November 30, 2005 at 5:30 pm at

David Marston and Eric Stein of PricewaterhouseCoopers LLP presented yesterday, September 28, 2005, at the event “Designing and Implementing an Effective License Compliance Program,” sponsored by the Silicon Valley Chapter of the Licensing Executives Society (“LES”), and provided some alarming insights into problems that exist with the enforcement of royalty terms in licensing agreements.

According to Marston and Stein, many companies have no one in charge of the royalty compliance process. Instead, it is common for compliance oversight to get pushed to the legal or accounting departments, which have other duties that get higher priority than royalty enforcement. As a result, Marston and Stein often find that no one is really monitoring the royalty payment process at all.

To enact an effective compliance program, Marston and Stein recommended that companies first establish a separate compliance group within the company whose only job is to monitor the royalty collection process, and that this group should conduct a handful of audits each year as a matter of course on some of the agreements. They also recommended sending out a general letter to all customers before commencing an audit program just to advise customers that the company was enacting a better compliance program and that they might receive an audit letter in the next few months. By taking these intial steps, they advised, customers will be reassured that they are not being singled out. Several months after the receipt of the general letter, Marston and Stein say that companies should then send out their first audit letters to select licensee customers. Interestingly enough, the speakers indicated that receipt of a general letter alone will often prompt companies to go back and take a look at old agreements and even to make a restatement of the royalties, particularly if the licensor company initiating the process has offered forgiveness of late charges for a period of time after receipt of the general letter. In the end, Marston and Stein suggested that this process can produce millions of dollars in unpaid royalties that were just slipping through the cracks.

As a lawyer who has drafted numerous royalty clauses, I was really taken back to hear how these royalty clauses were operating in practice. Clearly, it was a bit of a reality check on my practice and the gaps that can exist between what I draft and how it is enforced. Also, the presentation really brought to light how companies that are strapped for cash should look to an effective compliance program to finance some of the operating expenses necessary to run the company.

We should all ask ourselves what our companies or, in the case of outside service providers, what our clients are doing right now in the licensing compliance area. If licensing compliance efforts are generally as ineffective as Marston and Stein believe them to be, then we may be horrified to discover that our companies or our clients’ companies are losing millions of dollars each year in uncollected royalties.

At the San Francisco Business Times event that was held this past Friday in San Francisco, CA, “The Art of the Deal: Dealmakers who are reshaping Bay Area Biotechnology,” panelists Mark McDade, CEO of Protein Design Labs, George Scangos, CEO of Exelixis, Joe McCracken, Vice President of Development at Genentech, and Nick Simon, Managing Director of Clarus Ventures shared their insights on modern biotech dealmaking.

The speakers indicated that as the industry matures, deals are becoming increasingly complex, so the parties no longer look to get mere cash from the party across the table, but instead are looking to secure valuable partnerships and to tap into new resources and compatible goals. In addition, the speakers indicated that modern dealmaking is heavily influenced by the prevalence of underlying relationships in the industry, since the biotech indusry is a relatively small world where many of the players have a previous history of working with other players at prior companies.

Another trend in modern dealmaking is that biotech companies are increasingly looking to do deals with large biotech companies, instead of limiting deals to just large pharmaceutical companies, since they perceive the big biotech world to have a better understanding of the issues facing smaller biotech companies. Also, there is more of a perception that the biotech company can better preserve its independence and continue to pursue its long-term goals by entering into deals with large biotech companies, as opposed to a deal with a large pharmaceutical company.

The presentation struck a chord with the audience by conveying just how complex modern dealmaking has become, and for the service providers in the audience, it conveyed the importance of understanding everything that the parties will be bringing to the table, including the parties’ underlying relationships and their long-term goals for the company. We as service providers need to listen to our clients and push the deals forward that best advance their plans for the company, and to recognize when underlying issues are affecting the negotiations.