Intellectual Property (IP) is a valuable asset that is included in a company's "balance sheet" and provides additional valuation to a company. For early stage and small companies, IP may be the company's sole or primary asset base.

Intellectual Property includes patents, trademarks, service marks, copyrights, and trade secrets. This value-added asset can be sold, bought and traded as a part of everyday commerce.

It is important for a company to know what IP it has and how to enhance the company's IP position which, in turn, enhances the company's valuation.

Patents are often the most valuable IP asset for most companies. Strictly speaking there are three types of U.S. patents:

(1) Design Patents (for example, an ornamental design for an article of manufacture)
(2) Plant Patents (for example, an asexually produced flower or plant)
(3) Utility Patents

The most common patent for technology-based companies are utility patents. Utility patents are granted to inventors according to the Patent Act, which can be found at Title 35 of the United States Code (U.S.C.) and states as follows:

"Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title." (35 U.S.C., 101)

Equally as important as what is patentable is what is not patentable. What are not patentable are:

(1) Laws of nature
(2) Physical phenomena
(3) Abstract ideas
(4) Products of nature

However, what constitutes patentable subject matter has come under broad interpretation as a result of the U.S. Supreme Court decision in Diamond vs. Chakraborty (1980), which established that companies or individuals could receive utility patents for newly created organisms. Since then, the biotechnology industry has argued that patents should issue on genes, proteins and other natural materials which have commercial value.

Primarily as an effort to boost U.S. eminence and competitiveness to the then fledgling but growing biotech industry, shortly after the Diamond vs. Chakraborty decision the U.S. Patent Office (USPTO) began issuing patents on products of nature including genes (human or otherwise), gene fragments, cell lines, proteins and other naturally occurring substances.

As a result of increasingly growing criticism, the USPTO has recently issued utility patent guidelines and rules regarding a stricter definition of what is invented or patentable. These new guidelines and rules call for utility patents to have "specific and substantial utility that is credible."

No longer will it be sufficient to claim that a particular biological or molecular probe (DNA, protein, etc.) to be a useful probe, the new utility test calls for specific utility regarding that particular molecular probe (i.e., a probe for a particular gene, a probe for a specific disease state or a probe for a defined location on a chromosome).

In addition, it is no longer acceptable to make general claims regarding utility and usefulness. For example, it will not be acceptable to claim that a protein is a source of amino acids or a feed supplement or a dietary supplement, but real-world utility must be specified and demonstrated.

The new utility patent guidelines and rules will have a profound effect on the biotech and related industries.

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