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Attorneys May Benefit From Proposition 71’s Approval

The passage of Proposition 71, which is expected to make San Diego a hub of embryonic stem cell research, also should have a substantial impact on its legal community.

A few local law firms are anticipating new business spurred by the $3 billion bond measure approved by voters statewide Nov. 2 to pioneer the controversial science.

“The state is stepping into an area where the federal government usually is the only active participant,” said Douglas Olson, a partner in the San Diego office of Paul, Hastings, Janofsky & Walker LLP, and a 40-year-plus veteran of the intellectual property law field. “I think there will be a lot of IP issues.”

They can range from an increase in lawsuits over patent infringement to new startup companies seeking legal counsel to helping them attract venture capital.

“Every step of the process, from gathering cells to doing research to determine how they can be used to cure a disease runs the risk of being subject to somebody else’s patent,” said Olson.

But, he added, “The proposition doesn’t cause problems, it just probably facilitates more potential for problems to happen.”

On the upside, said Olson, “There should be a lot of work for lawyers writing new patent applications, and a lot of licensing activities.

“I think that inventions that result from this work will attract venture capitalists needed to put incredible amounts of money to get FDA approval and successful products, and there will be lawyers involved in mergers and acquisitions. There will be a need for lawyers who know their way around Sacramento and regulatory procedures.”

Carolyn A. Favorito, a senior associate with Morrison & Foerster in San Diego, anticipates that Proposition 71 will “prime the pump,” eventually attracting “a lot of venture capital money to seed a whole bunch of technology that comes out of this research.”

At the moment, Favorito, an expert on nano-technology, said she doesn’t think there will be “a huge impact on the patent office.” But companies without money to invest in legal counsel at the beginning could end up with problems down the road, she said.

“When something goes gangbusters, that’s when the infringements will happen,” said Favorito.

Stephanie L. Seidman, a principal of Fish & Richardson P.C. in San Diego, specializes in U.S. and foreign patent prosecution in the areas of biotech and chemistry.

While some lawyers talk about the potential for patent infringement in stem cell research, Seidman considers the hard part getting a patent in the first place.

“The patent office is reluctant to issue patents in gene therapy,” said Seidman, a former patent examiner. “It’s very difficult, because the patent office is very conservative. They set the standards. They say, ‘No one knows if this will work,’ and our rebuttal has to be that it will work. But they will make you prove it.

“It was the same with cancer cures and baldness at one time,” Seidman added. “There is a point at which you don’t have to prove something. The bar gets lowered.”

But when it comes to “something incredible, like a time machine or a perpetual-motion machine, you have to prove it.”

“Certainly the first people who develop methods of growing new hearts or new organs will have to prove it,” she said. “I think that’s reasonable. They have to show it’s effective.”


Patent’s Own Little World

Lisa Haile, a partner in the San Diego office of Gray Cary, and chairwoman of the firm’s biotech and chemical patent practice, had a slightly different opinion.

“The patent office tends to operate in their own little world,” she said. “They don’t have the same responsibility as the FDA has. It’s not their job to determine if there is a market for the invention or there is safety or efficacy.

You have to say that it works, but it doesn’t have to be the best. The patent office is concerned with utility , it doesn’t have to be the best use, just a use , it has to be novel and it can’t be obvious. If you meet those criteria, you can obtain a patent.”

Haile said that she hasn’t noticed any slowdown among her clients in pursuing stem cell research, regardless of the current strictures on the science.

“I haven’t found that people were as concerned previously that, ‘We’re not going to apply for patent approval because of (President) Bush’s moratorium on stem cell research.’ Nobody has said, ‘I think we won’t go forward because he’s trying to quash research.’ The research has continued to a certain extent and the patenting has continued.”


Boost In Business

But the passage of Proposition 71, Haile added, undoubtedly will spur business in the legal community.

“There is going to be more money put in research, new inventions, new companies,” she said, with legal counsel needed on the corporate and IP sides, as well as the transactional side, with transfers of technology between companies and universities.

“They will need legal counsel for licensing and collaborative agreements,” Haile said. “Overall, there will be more and more collaboration between people, which will require protection of parties on work they are doing.”

While Haile said she doesn’t think this boom will be sudden, she believes researchers “won’t have to be as conservative or worried.”

“I have a client who left the country to do some of the research. Hopefully, we won’t see that need to be leaving the U.S., which is ridiculous,” she said.

Another upside of Proposition 71, she added, is that investors will be more comfortable in starting up companies.

Dr. Richard Warburg is a partner in the intellectual property department and a member of the IP practice group and the food industry team of Foley & Lardner’s Del Mar office.

“I hope this doesn’t mean more litigation,” he said, referring to the possibility of increased patent infringement cases. “I’d rather see money meant for developing a cure for Alzheimer’s and diabetes used to that end than who should get top dollar for it.

“I do a lot of patent litigation and I love doing what I do,” he said. “I also recognize that some people litigate not necessarily for the right reasons.”

Warburg said he’d prefer to see dominant patent holders issue licenses to other researchers.

“They can say, ‘I’ll do diabetes, you do Alzheimer’s. Some will say, ‘I want all the stem cell technology for myself.’ I’m an advocate of cooperating rather than fighting.

“There is a ton of money to be made here and shared,” Warburg said. “People who get greedy and say, ‘I’m going to make as much money as possible for the shareholders and keep everyone else out’ are being short-sighted.”

Haile, who also is a scientist, agreed.

“There is too much pressure on people owning dominant patents,” she said. “They are going to have to be cooperative and give licenses for research.

I can’t imagine how they will be treated in the scientific community if they say, ‘I have the patents and won’t let anybody use them.’

“There would be no point in having the patent. I think a lot of these folks will be cooperative. They need the people and they need the funding.”

Warburg, who holds a Ph.D. in molecular biology, also believes that the boom in stem cell and other research will encourage lawyers to jump on the IP bandwagon, and attract scientists , such as himself , into the fold.

“It’s extremely attractive,” he said. “You get to do your science and do law at a very high level. We are able to govern how a company is going to succeed or not succeed, responsibility for developing strategy, how it does acquisitions and mergers. It’s not a boring area by any means. A lot of lawyers don’t like what they do, but a lot of IP lawyers love what they do. They do something different every day and it really matters.”

The ideal IP lawyer, said Warburg, not only understands science, but has good business sense.

“You need to be proactive in telling clients what they should be doing and understanding how business fits with the science. Stem cell research has a huge number of hurdles and a lot of prejudice, and there are lots of regulatory hurdles.”

And, Warburg said, the IP area is “very high risk,” so lawyers had better know what they’re doing.

“If you make a mistake, you are liable for large penalties,” he said.

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