Sub Navigation
Engineering low-cost protection strategies
Philippe Gabant, Delphi Genetics: "If it’s not a good technology, it won’t be copied!“
It’s hard to imagine how a tiny company with just nine employees and half a million euros in sales survives in a massive global market. The answer for Delphi Genetics, a Walloon, Belgium-based maker of kits for DNA engineering used by pharmaceutical and university research labs, has been to rely on support from its parent university; to keep close ties to its global distributors and licensees; and to maintain a strong patent position that supports its core technological invention.
Delphi’s story
It began in 1993, when Philippe Gabant, a PhD candidate in molecular biology, and Dr Philippe Bernard of the Université Libre de Bruxelles, came up with a new technology that simplified DNA fragment cloning. The University filed a patent to protect the invention and licensed the technology to a California-based company. In early 1995, this licensee launched a product using the technology. In November 2001, together with their University, Philippe Gabant, along with Cédric Y. Szpirer, a researcher at the National Fund for Scientific Research, and Michel C. Milinkovitch, a professor at the Université Libre de Bruxelles, created a business to manage a growing number of patents and continue research in the field of molecular cloning.
With just €200,000 in start-up capital (and only €80,000 of that in cash), acquiring the patents wasn’t an option, so the founders decided to continue working with theUniversity. The college currently owns nine patents and Delphi holds the exclusive rights to license and sub-license them.
Delphi’s customers are distributors who buy and sell its kits (i.e. development tools for DNA engineering) worldwide to large pharmaceutical companies such as GlaxoSmithKline and Sanofi-Aventis, as well as to university laboratories around Europe. Key distributors include Takara Bio in Japan and Eurogentec in Europe. In its specialized niche, there are few competitors and most of them are US-based, including the licensee of the initial patent.
Although the main market for molecular cloning and DNA engineering products is in the US, 70% of Delphi’s sales are European. Another 15% of sales come from Asia, while the remaining 15% are from America.
Secrecy, patents and trademarks
Managing intellectual property is Delphi’s primary business, and the protection of these assets couldn’t be more crucial. Mr Gabant explains: “These products contain water, salt, and a bit of intelligence. They can be reproduced. It’s essential to have a strong patent position to make sure that no other companies will copy the technology.”
Despite the importance of IP, however, Delphi Genetics is a small player and only limited company resources are devoted to the task. The annual budget for IP is 5% to 10% of the cost of R&D. Fortunately, a strong relationship with the University helps. Not only does R&D take place there, but the University covers patent filing costs.
Here’s how the patent filing process works: patents are filed during the R&D phase, while trademarks are filed during the building of the product and the marketing stage. Secrecy is used as well. Patents are first filed in the US for reasons of cost and ease and importance of the US market. The initial filing costs are relatively low in America and the filing process is less formal. Another key benefit of the US system is that companies such as Delphi Genetics, which work in an academic environment, are granted a grace period of a year to follow up the publication of novel scientific research with a patent filing. In Europe, patents must be filed first, followed by publication of the academic work, otherwise the application is not considered novel. Delphi’s scientific research is typically the basis for its patent applications. After editing and before publication of an academic paper, it is turned over to a patent attorney who uses the information to create a patent application in collaboration with the scientific authors of the manuscript. Within the priority year, the company also applies via the international PCT route. Again to save money, the company only continues to reinforce those patents in markets where there is significant competition, such as the US, Asia and European countries including Germany, France and the UK.
Working closely with customers
Mr Gabant manages IP, and his strategy is more about investing time than money. He devotes roughly 10% of his time to answering examiner questions from around the world and working with patent attorneys. One external patent attorney is employed in Belgium, while another is on a retainer in the US. The task of keeping tabs on new filings and possible infringements is also his job, although it’s made somewhat simpler by the fact that Delphi’s patents are from the same family, and Delphi scientists are in constant contact with university labs. A nominal fee is also paid to use a database managed by the Economic Ministry in Belgium, which screens by inventors and new patent filings.
In addition, Mr Gabant stays on top of developments in his market by reading scientific papers and spending time on the road with distributors, along with another colleague, where they get to know salespeople and end customers. This strategy of working more closely with distributors and their customers helps keep the distributors’ salespeople better informed about the products and gives Delphi’s managers new ideas about their products by seeing how they are used.
The time spent by Mr Gabant absorbed in his milieu has led to some enlightening discoveries. There are companies, he says, which have yet to bring products to market, but that appear to be using Delphi’s patented technology. Once the products come to market, he says he’ll do something about it. If he acts prematurely, he reasons, the product may never come to market and the company will have wasted money on legal fees. “We’re watching,” he says. “We’re waiting until they put the product on the market. At that time, we will say,‘ stop making that product or you have to talk to us.’”
Reminding the licensee whose technology it is
Mr Gabant learned the hard way about the high costs of fighting infringement. In the late 1990s, a US competitor developed a product that used Delphi’s patented technology. Mr Gabant looked to the University for help but soon learned that like many European universities willing to invest millions in R&D, the idea of combating patent infringement proved alien. It lacked the culture to do so, says Mr Gabant. The battle was left up to Delphi. The story continued when Delphi bought the licensee of the University violating the term of the contract. Perhaps not surprisingly, the company’s executives said they didn’t see a conflict. The case ended up in arbitration, and fortunately for Delphi, there were a few points in its favour, i.e. that the licensing agreement was subject to Belgian law and that any disputes would take place in Belgium. It also helped that the company had been selling the product in its catalogue for more than ten years and planned to continue doing so. While Delphi won the dispute and recouped some money for itself and the University, it still cost around 11 million in fees related to the arbitration (including lawyers and experts), and six months of management’s time – something that no amount of patent insurance would have covered. Mr Gabant remains sanguine.“ We generally don’t have money to fight infringement,” he says. “If you have good technology you have to think that some day it will be copied. You have to live with that. If it’s not a good technology, it won’t be copied.”
The experience taught the team some valuable lessons too. The licensing contract had been set for ten years, during which seven years had passed without visits by either company. Mr Gabant says that a little interpersonal contact would have gone a long way. Licensing agreements should include demands such as stipulating that a meeting should take place every six months. This reminds the licensee whose technology it really is, even if the main contact person changes over the years. It's an inexpensive strategy involving just airline tickets and time, says Mr Gabant, and there’s an additional bonus too: it’s also good for product development to be closer to the companies using the technology. If it’s about an exclusive license agreement, a company should also limit the amount of time it offers exclusive rights.
Yet other challenges have included working with European universities to use their patented technologies. Negotiating some kind of technology transfer can take months and amount to nothing, says Mr Gabant. He prefers to work with American universities, he says, which have a process in place for handling such requests and creating agreements. Deals can be made within a few weeks.
Ensuring concepts translated accurately
Mr Gabant says that filing patents in Europe is too expensive in part because of the cost of translations. In fact, the reason Delphi doesn’t file in Belgium first, where filing costs are relatively low, is because the patent application has to be written in French, Dutch or Flemish, while the company works in English. He explains that it’s also difficult for scientists, who are exacting about their inventions, to be sure that concepts are still explained accurately after being further translated for filings on the European level. “English is the scientific language,” he says.
Product facts
The core business of Delphi Genetics focuses on managing patents belonging to the Université Libre de Bruxelles , e.g. positive selection of clones using the ccdB poison gene protocol. In addition, it concentrates on services in molecular cloning and DNA engineering, from E.coli to the mouse, and carries out research and development of new molecular cloning solutions, creating kits for applying them
in the lab.
Company profile
Delphi Genetics is a spin-off company founded in November 2001 by Philippe Gabant (CEO), Cédric Y. Szpirer (Head of Product Development), Michel C. Milinkovitch (Head of Research) and the Université Libre de Bruxelles.
Staff: 9, including two of the founders.
Sales 2005: around €500,000
Key product: Development of tools for molecular cloning and DNA engineering.
Customers: Global distributors that sell to universities and to large pharmaceutical company laboratories.
Delphi Genetics
Rue Clément Ader, 16
B-6041 Charleroi
Belgium
www.delphigenetics.com
IP background
Patent protection: 2 patent families.
Patent filing order: US first, then PCT.
Department: Founder manages IP himself with the help of two external patent attorneys and the their University partner.
IP Budget: 5% to 10% of R&D
Challenges: Cost and time to fight infringement, cost of translations.
Recommendations: Companies should write into licensing contracts that they are subject to their own country’s laws and demand that the two parties meet regularly.
Contact
European Patent Office
Erhardtstr. 27, 80469 Munich, Germany
Tel.: +49 89 2399 4636
e-mail: sme@epo.org
www.epo.org