Life sciences companies operate around long development timelines, high regulatory hurdles, and enormous capital requirements. For many, intellectual property (IP) is their lifeblood with valuation being tied closely to the strength of their IP portfolio. Investors know this. Strategic partners know this. Acquirers certainly know this. This reality makes IP and IP strategy a core component of any successful business strategy.

Understanding the IP Toolkit

Life sciences companies rely on several forms of IP protection, but not all are created equal.

Patents

The three primary categories of patents are:

1. Utility Patents: For new and useful processes, machines, manufactures, or compositions of matter.
2. Design Patents: Protects new, original, and ornamental designs for manufactured articles.
3. Plant Patents: Granted for the invention or discovery of a distinct and new variety of plant that is asexually reproduced.

Gillian Fenton of LST Strategies notes that utility patents in particular are a key part of the business strategy for biotechnology and biopharma companies.

Patent Eligibility

Before launching a product, companies often conduct freedom-to-operate (FTO) searches to identify relevant third-party patents. These searches are imperfect by nature, but they help quantify risk and inform design-around strategies prior to investing in product development and commercialization.

In cases like Association for Molecular Pathology v. Myriad Genetics that turned on patent eligibility, the Supreme Court created doctrines excluding ‘products of nature,’ ‘abstract ideas,’ and ‘natural laws’ from patentability. However, lower courts and attorneys have struggled to apply these doctrines and to understand their boundaries. More recently, and in response to eligibility uncertainty, lawmakers have proposed the Patent Eligibility Restoration Act. The goal is to re-center patent eligibility on practical applications and reduce judicially created exceptions.

Patent Publication and ‘Prior Art’ Traps

Patent applications typically publish 18 months after the earliest filing date. At that point, the contents become public and qualify as ‘prior art,’ which the United States Patent and Trademark Office(USPTO) defines as “those references or documents which may be used to determine novelty and/or non-obviousness of claimed subject matter in a patent application.”

During this 18-month window companies may file follow-on applications that extend protections. Coordination between IP counsel and scientific teams is critical during this period. Uncoordinated disclosures remain one of the fastest ways to destroy patent rights, especially outside the United States where grace periods may not exist.

[Editor’s Note: For a detailed overview of the patent process see “Safeguarding Your Intellectual Property With a US Patent.”]

Trade Secrets

Trade secrets are an alternative that can protect commercially valuable information that is not generally known including manufacturing know-how, formulations, or processes. Trade secrets can last indefinitely, but only if confidentiality is maintained. That means non-disclosure agreements (NDAs), access controls, employee training, and disciplined information sharing.

In the end, there is no single ‘right’ IP strategy for every company. Some businesses benefit from broad patent coverage, while others are better served by a carefully curated mix of patents and trade secrets.

The Risk Within Contracts

Some of the most serious risks in intellectual property arise from contractual arrangements. Poorly drafted agreements including ambiguous ownership clauses, overly broad licenses, and weak confidentiality terms can undo years of careful patent planning.

US law generally says that the party who creates IP owns it, unless a contract clearly says otherwise. Paying a consultant, engineer, or research partner does not automatically transfer ownership. However, if the contract is not drafted correctly a company could fund research, development, or software creation and still walk away owning none of the resulting IP. To avoid this outcome, contracts must include clear, precise language.

Life sciences agreements often involve licenses for manufacturing, clinical trials, development, or distribution. Each of these licenses should be narrowly tailored. Field of use, territory, duration, and sublicensing rights all matter. A broadly drafted license can limit a company’s ability to pivot, partner with others, or even raise capital later.

NDAs are critical to preserving both patent rights and trade secrets. In situations where  physical materials like biological samples, compounds, reagents, and cell lines are transferred between parties going one step further and executing a specific Material Transfer Agreement (MTA) is advisable. MTAs should limit use to a specific research purpose, prohibit commercial use, restrict redistribution, and clearly address ownership of results and any new IP that arises. Failure to control materials can lead to downstream IP claims, disputes over inventorship, or loss of exclusivity.

Keeping IP ‘Top of Mind’

From early research through commercialization and eventual exit, IP decisions can shape valuation, influence partnerships, and determine how much leverage a company ultimately has in the marketplace. Disciplined contracting and thoughtful use of patents and trade secrets can both preserve and add critical value and viability. At the same time, a strong portfolio can lose much of its value if confidentiality is mishandled, ownership is unclear, or licensing terms are overly broad. Companies that treat IP as part of their core business strategy are best positioned to attract investment, navigate regulatory complexity, and compete over the long term.

To learn more about this topic, view IP Strategies for Life Sciences Companies. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested in reading other articles about intellectual property.

This article was originally published here.

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