International IP and Small Businesses: Novavax CEO Testifies on BIO's Behalf

Stanley C. Erck, President and CEO of&nbsp;Novavax testified at the USPTO on behalf of BIO to discuss the importance of IP protection internationally for small biotechnology companies.</p>

By electronic submission

Saurabh Vishnubhakat

Attorney Advisor,

Office of Chief Economist

United States Patent and Trademark Office

Washington, D.C.


Name of Person Testifying:

Stanley C. Erck, President and CEO, Novavax




Biotechnology Industry Organization



My name is Stanley C. Erck, President and CEO of Novavax, Inc. and I am testifying today on behalf of the Biotechnology Industry Organization (BIO). Novavaxis a clinical-stage biopharmaceutical company focused on developing highly potent recombinant vaccines. We have a novel and innovative technology platform based on our proprietary, genetically-engineered three-dimensional nanostructures that we call virus-like particles or VLPs. Importantly, our VLPS, and in some cases, smaller portions of the virus called micelles, have the capability of being genetically adapted to a variety of infectious dieseases.  Right now, Novavax is focused on our lead vaccine product candidates in seasonal and pandemic influenza (H5N1), however we recently announced the results from our first Phase 1 clinical trial in our vaccine against Respiratory Syncytial Virus, known as RSV.  In addition, we have a portfolio of additional vaccine candidates against a number of important health concerns that are in various stages of preclinical study.  As you might expect given our robust portfolio of vaccine candidates, we have a similarly robust portfolio of patents and patent applications.  In an industry that traditionally utilizes chicken egg-based vaccine technology, well-known for half a century or more, protecting our proprietary, cutting-edge, recombinant vaccine technology is a paramount.  As a result we have structured a portfolio of international patents and applications that we believe is both diverse and healthy.

The Biotechnology Industry Organization (BIO) is a non-profit organization with a membership of more than 1,100 biotechnology companies, academic institutions, state biotechnology centers, and related organizations in all 50 States and a number of foreign countries. BIO’s members are involved in the research and development of health care, agricultural, industrial, and environmental biotechnology products.  The U.S. life sciences industry, fueled by the strength of the U.S. patent system, supports more than 7.5 million jobs in the United States, and has generated hundreds of drug products, medical diagnostic tests, biotech crops, and other environmentally-beneficial products such as renewable fuels and bio-based plastics.

The majority of BIO’s members are small companies that currently do not have products on the market. As such, BIO’s members rely heavily on the strength and scope of their patents, both domestically and internationally to generate the investment necessary to sustain their long product development cycle.  On average, it takes more than 10 years to develop a biotechnology invention from its inception to regulatory approval and market launch. The average, fully capitalized cost of developing a biologic medicine has been estimated at USD 1.2 billion.

For BIO’s small companies, pursuing international patent protection generally occurs early in the company’s life cycle.  All biotechnology companies understand that the products they hope to develop require robust patent protection abroad.  This is because when small biotechnology companies seek access to capital to sustain their existence, a central factor for valuation is the strength of their IP portfolio, which must include, in almost every instance, patents or patent applications in at least the markets of the United States’ major foreign trading partners.

In fact, empirically we know that U.S. biotechnology companies are a large exporter of IP.  The United States is, by a wide margin, the largest originator of international biotechnology patents in all major markets. [1]Small biotechnology companies, which together hold approximately 80% of the development pipeline for new medicines, diagnostics and other bio-based products, play a significant part in this patenting activity.

As products advance through development, small biotech companies often need larger partners in the United States and abroad to develop their experimental products to a market-ready, approvable stage. And even for market-ready products, U.S.-based biotech companies often find it easier to partner with a foreign affiliate who will secure foreign regulatory approval and market the invention in a foreign market, rather than establishing their own overseas sales force.  In each case, such partnering depends on robust patent rights that will secure all partners a return on investment.

Small biotechs often bear the initial burden of procuring international patent protection, since patent rights must typically be sought early, and near-simultaneously in the U.S. and in foreign jurisdictions.  Early international filing enables these small companies to partner with larger companies later in their product life cycle to export their products internationally.  It is generally not an option for small biotech companies to wait to secure foreign patent protection until after such partnerships, as possible forfeiture of patent rights is too great a risk in foreign “absolute novelty” jurisdictions.  It is imperative that small biotechnology companies plan ahead, even at their inception, to ensure that over the ensuing 10 to 15 years they have the opportunity to partner with larger companies to export their products internationally.  

What then are the challenges small biotechnology companies face when filing for patents internationally?  First and foremost, international patent procurement is expensive.  Small biotechnology companies face unique challenges as foreign biotechnology patent prosecution can be complicated and are subject to greater non-uniformity of the law than in many other technologies.  Patent claim scope and what is permitted can differ significantly from country to country, which complicates and increases the cost of international patent filing for biotech inventions.  Without procedural or substantive harmonization, these problems are likely to increase costs for small biotechnology companies. 

In addition to filing and prosecution costs, uncertainty limits the ability of small biotechnology companies to limit patenting costs.  Small biotechnology companies must patent early in their development life while simultaneously trying to predict which patents will be valuable in 10 years and which patents will not.  As such, biotechnology companies deal with slowly-developing technology that does not allow them to decide to abandon or maintain a family of applications before the real prosecution costs kick in. For example, a biotech company that files a U.S. patent application today (and a PCT application one year from now) has only 30 months to decide whether to abandon the application if it wants to avoid the cost of entering the national stage in a number of foreign countries. Thirty months may be enough in some other industries, but in biotech that’s too soon for an informed decision.  Including translation costs, the aggregate expense of entering the national stage in Japan, Korea, Europe, Australia, and the NAFTA countries can easily exceed $100,000; if the BRIC countries are added, costs can double. Likewise, even if the company defers foreign examination where that’s an option, annuities can accumulate to more than negligible amounts. Foreign attorney fees, once prosecution begins, add another layer of cost. Many such costs must be incurred before a biotech company is able to decide whether to maintain or abandon the application. We have small member companies with 30 or 40 employees who are many years from the market, who must every year reserve for patent prosecution several hundred thousand of their sorely-needed dollars.

All of these challenges for small biotechnology companies result in patent filing and prosecution costs that are often far from negligible relative to their R&D budgets. Uniformly, such companies would prefer to spend their money to advance their science.  This USPTO study, and other initiatives like it, has the opportunity to provide solutions that would save small biotechnology companies significant money - money that could be spent on researching life-saving products, hiring technicians, engineers and scientists, and accelerating the pace of biotechnology innovation. 

We are aware of grant or loan programs in various foreign countries aimed at helping small businesses defray costs for both domestic and international applications.  China is one such example where the Ministry of Finance in 2009 started subsidizing patent filings for foreign patent applications made by small and medium-sized domestic enterprises, and public and scientific research institutions.[2]  WIPO’s Small and Medium Sized Enterprises program white paper on “Managing Patent Costs: An Overview”[3], reports that “in an increasing number of countries, worldwide, governments and other funding agencies that provide grants or subsidies for R & D/Innovation activities to research institutes, universities, and enterprises have begun to allow a portion of the funds to be utilized for meeting patenting costs. In a few of such support schemes, the costs also cover enforcement costs and international filing costs.” Munari and Xu, in a recent white paper on the effectiveness of patent subsidies on small and mid-sized enterprises, provide a number of examples of foreign financial assistance programs aimed at facilitating international patent procurement by small businesses.[4]

For our small businesses, securing IP protection is as important as obtaining laboratory equipment, leasing space, or hiring creative, dedicated employees.  And because IP business assets are at least as important as other, more tangible business assets, there is no reason to exempt patent rights from publicly-funded small business assistance programs that are available for more tangible assets such as capital equipment, hiring, or leasing space. Extending the range of public assistance programs to patent rights for small businesses would help small biotechs spend money normally allocated to patent filing and prosecution elsewhere.[5]

The particular mechanism for helping small businesses file patent applications internationally requires additional thought, and BIO’s members have no final view on the matter. Generally, it would seem important that any programs, in order to be effective, would have to be adequately funded so as to result in awards that make a meaningful difference to beneficiary businesses.  Implementing policies should also place an emphasis on coordination and transparency to avoid fragmentation across grantor government agencies. Financial assistance could be in the form of a grant, refundable tax credit, or matching program. Recognizing that most small biotech companies do not have tax liability, such mechanisms would have to be structured in a way to make them just as usable as for tax-paying companies  A matching program, where, for example, every two dollars of the company’s money would be matched by eight dollars of grant funding, has the advantage of providing assistance while keeping the small biotech’s ‘skin in the game,’  thereby ensuring that the company would still have to make a careful business decision where they file internationally.  Further thought on these mechanisms, and how they would affect small biotechnology companies, is necessary. 

On behalf of BIO, I would like to thank the United States Patent Office for the opportunity to testify.  BIO hopes that the USPTO finds a way to defray the hundreds of thousands of dollars it costs small biotechnology companies to file and prosecute patents internationally so that our small companies can spend more money on research, job creation, and product commercialization for the benefit of American workers, patients, farmers and consumers.




[1]It appears that U.S. dominance as an originator of international patent applications is nowhere as pronounced as in the biomedical arts. For example, for the 2001-2005 timeframe, the 2008 WIPO World Patent Report lists the following numbers of foreign-filed patent families, by country of origin (top 2 countries):

Technology / Originating country

United States








Instruments – Medical Technology









Instruments - Optics



Machine tools





[5]Of course, small biotechnology businesses face cost-related challenges with respect to their international patenting efforts that go beyond patent procurement. The enforcement of foreign patents and the defense of patents in opposition proceedings, for example, can add additional unanticipated layers of costs that small businesses are ill-equipped to bear. For purposes of these comments, however, BIO confines itself to issues of international patent procurement.