San Diego Metropolitan - IP Lawyers Thrive In Field Of Dreamers

You’ve heard it said: Build a better mousetrap and the world will beat a path to your door. Nothing is more powerful than an idea whose time has come. If you build it, they will come.

More than likely though, the inventor will want to beat a path to a lawyer who specializes in the protection and development of ideas. Once committed to paper, blabbed to brothers-in-law and presented for venture funding, ideas take on a legal and commercial life of their own. Although these days ideas may stay on the launching pad for a longer time, traffickers in 21st century intellectual property find themselves open to larger markets in a shrinking world.

“For example, you’re searching for lobster on the Internet,” says Bob Gerber, trial lawyer with the San Diego office of Sheppard, Mullin, Richter & Hampton. “Now you’re looking at Bob’s Lobster Shack in Maine, which has a Web site and which you never would have known about sitting in San Diego. Come to find out there’s a Bob’s Lobster Shack in San Diego, and now the two are in competition on the Internet and they have a trademark dispute.”

In one Internet case, Gerber represented search engine Excite against techno pirates who were able to place porno and gambling ads in the results for searches on commonplace words.

“E-commerce has generated a lot of litigation” involving businesses with patented business methods, Gerber says. One-click shopping and virtual shopping carts have been the subjects of suits. So have retail brokers who draw shoppers to their site and point them in the direction of other retailers. Copyrights and trademarks can be infringed while floating around in cyberspace.

The increasing likelihood that ideas, copyrights, trademarks and patents will bump into each other in a universe of millions of communications channels is allowing IP attorneys to prosper in the midst of a tech downturn. Gerber’s litigation practice already was thriving with clients ranging from music (“Sister Christian” by Night Ranger) to the producers of the indie film “The Other Side of Heaven.”

While representing creative types brings rewards, there are caveats. “Many times creative people are very poor business people and they’ve made decisions that have affected other IP rights,” Gerber says. “Or they’ll have related problems that they haven’t thought of yet.” Such as the publisher who seeks protection of copyrights, but has done nothing to protect valuable trademarks.

IP attorneys who traffic in ideas become quick studies in a variety of industries. From the construction of golf balls to a pregnancy test kit “where I had to learn everything I wanted to about the biochemical analysis of urine,” Gerber says. Like journalists, IP attorneys find the education “invigorating. You get to sample these many areas and become a mini-expert in them.”

Despite the vast potential for lawsuits in a digital world, the incentive to settle is great, Gerber says. The cost and complexity of proceedings is a damper, along with having to resort to expensive experts and protective orders against public disclosures. Gerber says it’s a special breed of attorney that not only understands the science, but can effectively explain it to a judge or jury.

In the life sciences, however, a science degree can come in handy when determining the very threshold question of whether the next big idea is really worth protecting at all. Morrison & Foerster partner Karen Dow, for example, earned a bachelor of science in chemistry from Bowling Green University before earning her JD at Indiana University. At Morrison, she obtains biotech patents for clients in the areas of immunology, molecular biology, microbiology, pharmaceuticals, diagnostics and organic chemistry. She joined Morrison in San Diego last year from the Palo Alto office of Townsend and Townsend and Crew. She’s also worked as a patent attorney for Eli Lilly.

Working on the front end of the intellectual property process, Dow says she’s seen that limited funding by venture capitalists is forcing startups to be “more selective” in their filing of patent applications. In fact, in markets where opportunity seems to be shrinking, companies can use litigation as a weapon to limit competition. “Litigation is always a possibility in good or bad economic times because of the importance of market share,” she says. Because the potential for conflict rises in down markets, though, Dow says the costs of bringing a product to market through the FDA is so substantial that a company needs to be aggressive with its patent and intellectual property.

The collaborative nature of research, especially in the life sciences, is another area of potential conflict. “It’s a very common scenario, because a great many (life sciences) companies are started by academics,” Dow says, and they frequently are working on federal projects awarded to groups.

Since patents can only be awarded to new science, Dow must first determine whether the big idea is sufficiently different from prior work, or what’s already known. To be worthy of protection, the idea must have 1) novelty, 2) usefulness and 3) must not be obvious to people in the field.

“There’s a lot of discussion about what’s obvious and what’s not obvious,” Dow says.

Then there is the matter of actual ownership, or whose business is this? “Initially, we do not make a lot of inquiries if we’re being asked to write and file the patent applications,” Dow says. “If we’re asked to put an agreement in place, that’s a different set of questions.”

Since venture capitalists have less to dispense, it’s not surprising that they hire lawyers like Dow to perform due diligence. “Because the investment is so high, you don’t want another company to come along after you have made a $100 million investment to market the same drug.”

Venture backers want to know the likelihood the company they’re backing will be sued by someone who holds the patents in the area. If it’s not likely, there is “freedom to operate.” They also want to know what kind of IP protection is necessary to exclude competition.

“There are a lot of situations in which multiple groups are trying to develop the same technology,” Dow says. “In some cases they’re collaborators, and in some they’re not.” Another complicating factor, Dow explains, is under U.S. laws, patents are granted to those who can prove inventorship, rather than who filed first in a race to the courthouse door.

“People have very strong feelings about their contribution,” Dow says. “Five people may work very hard, but not all five can be the inventor.”

Compared to the Bay Area, Dow sees San Diego as a developing locale. “It reminds me of the Bay Area 10 to 15 years ago,” she says. “There’s a lot of opportunity for expansion.”

In the meantime, tough times for startups mean innovators have less clout when they turn to big pharma for funding. “The large company has certain advantages, that’s reality,” she says. “They can go elsewhere.”

Cancer is still a lot of the biotech focus, but Dow notes market opportunities in areas such as cardiovascular (heart disease), aging (dementia and Alzheimer’s) and diabetes.

Although a downturn may be when a startup needs intellectual property protection most, it also is the time when clients can least afford it, says Ned Israelsen, managing partner of Knobbe, Martens, Olsen & Bear in San Diego and director of the firm’s biotech and life sciences group that includes 40 attorneys and 25 Ph.Ds. “Post-1999, biotech companies seemed to be pretty stable up until sometime this year; since the second quarter, we’ve seen several of our clients start to run out of money,” Israelsen says. “And the money doesn’t seem to be forthcoming.”

Even for companies conserving cash, intellectual property protections remains job one. Aside from lab equipment and office space, the main assets of a biotech company are their people and their technology.

Israelsen agrees with Dow that downturns coincide with increased litigation.

“When there’s more than enough market share and money to go around, people are more tolerant of competition,” Israelsen says, “but when they’re tightening their belts, they tend to assert their patents more.”

During the current downturn in venture capital investment, Israelsen says he senses San Diego is hurting “more than the Bay Area, because in San Diego we’re further from the funding sources. A good share of our VC money comes from the Bay Area, and they don’t have to look far to find places to put their money.”

Legal difficulties rising over collaborations are becoming more common, Israelsen says, because fewer important inventions are coming out of an individual’s garage, and more from group activity. Collaborations can mean major complications in determining who benefits and how much. “Ownership follows inventorship,” Israelsen explains. “To alter that requires a contractual arrangement.”

Long ago, back in the ’80s, when the Internet was just a glint in Al Gore’s eye, Mitchell Brook represented Polaroid in a decade-long patent infringement suit against Eastman Kodak. The latter woke up one day to realize that instant photography was an attractive market. Brook helped land a $900 million verdict for Kodak’s infringement of Polaroid’s patents. Now, he’s a partner in Luce Forward Hamilton & Scripps’ Carmel Valley/Del Mar office.

His San Diego practice involves developing patent strategies, preparing applications, working with the U.S. Patent Office and with companies that want to get an IP handle on what the competition is up to.

Brook has two opinions on whether an IP attorney needs a technical degree in addition to a JD. “In terms of patent applications and prosecution, a technical degree is required,” he says. “If you’re in a transactional area, like licensing, a tech background is not required.”

Ten years on one lawsuit?

“The actual trial lasted about 10 months,” says Brook.

Was that stressful?

He laughs. “If you consider 3,000 hours a year to be, then yes.”

Brook says intellectual property work has been on the upswing since the mid-’80s, and while the recession has slowed the pace, there’s reason to believe the field will rebound.