Bayer:Research & Innovation Decides IP Protection Strategy

Issue 30 By Doris Li, China IP,[Patent]

Bayer was created in 1863 by Friedrich Bayer in Germany. For Bayer, March 6 is a memorable day, for on that day in 1899, Bayer obtained a registration for the trademark Aspirin, which later became the world’s most widely used and best known pharmaceutical brand known as the “drug of the century” and supported strongly the commercial success of the company.

Today, most of Bayer’s businesses are derived from recent innovations, generating about 40% of annual sales revenue from patent protected products developed in Bayer labs during the past two decades. Bayer’s R&D centers are currently mainly located in Europe, the US and Japan, but small scale, specialized R&D centers also exist for instance in Shanghai.

On February 12 of this year, Bayer Schering Pharma, the pharmaceutical division of Bayer HealthCare further announced an investment of EUR 100 million in Beijing over the coming five years to build an R&D center and a world-class team for R&D cooperation and development of innovative therapies, so as to expand Bayer’s global R&D center knowledge and capability. Beijing would thus become the fourth global R&D of Bayer Schering Pharma following two centers in Germany and one in the US.

Financial crisis strengthens belief in innovation

The 2008 financial crisis swept multinational and national companies with a chill, and even some multinational giants are on the brink of being wiped out of business. This, however, might be an excellent opportunity for a corporation that lives on innovation.

Dr. Oliver Lutze, head of the Bayer Group’s intellectual property function for Greater China, put it this way: “The financial crisis does have some impact on Bayer’s business. But while taking sensible measures to cut expenses, Bayer pays great attention to long-term competitiveness and sustainability, for it focuses on future market trends and develops itself by innovation. This is and has always been the basis of Bayer’s business model. Complying with that model, Bayer plans to increase its 2009 global R&D budget to EUR 2.9 billion, a record despite the gloomy economy.”

From EUR 2.6 billion in 2007 to EUR 2.9 billion in 2009, Bayer has always been generous in R&D spending. This is derived from its corporate commitment: Science for a better life.

“Recently, I read an article on the relationship between intellectual property and the financial crisis,” said Dr. Oliver Lutze, ‘“Only innovation can help a company survive in a worsening financial crisis, and even return to its previous conditions.’ For Bayer, R&D spending is a powerful support for to its business belief and investment will continue in this regard. Our goal is to lead the market by using innovative products protected by patents. The significant R&D budget must rely on effective intellectual property protection of the research results and the future sales of innovative products. The protection of IP rights already obtained is important. The company is determined to protect its IP rights, including patent, trademark and copyright. Any illegal production and trade of our innovative products will hurt our business model and should be stopped. Fake drugs and agrochemicals, in particular, will harm consumers and the environment greatly.”

Building corporate awareness of IP value

Many companies rely on criminal enforcement as the most effective way to safeguard the value of the companies’ IP, for it can bring deterrence and play the biggest role when a company’s intellectual property is infringed. But when a company’s IP is infringed, this can only be the last step in a chain of actions.

In order to create IP value, Bayer believes that building the awareness of intellectual property value within a company is an important measure to achieve best IP protection.

Dr. Oliver Lutze explains: “Building the awareness of intellectual property value within a company is the core to achieve best protection, which begins from staff wide understanding of intellectual property. We must inform every R&D employee on the patentability of different types of inventions and encourage the employee to report his invention to in-house patent department. In China, we conducted staff trainings on basic knowledge of intellectual property and set up an award and remuneration policy within the company for inventions. It is important that our workers know the value of their inventions. For example, a staff member must realize that a new formulation increasing the insecticidal activity of a known insecticide is not only good for the environment, because it reduces the use of insecticide, but is also a valuable invention. The leading position of a company depends on continuous innovations, even innovations on mature products.”

Research & innovation decide IP protection strategy

Presently Bayer has three main subgroups: Bayer MaterialScience, Bayer CropScience and Bayer HealthCare. They cover more than 10,000 different products including polymers, drugs and crop protection agents. For a 146-year-old international group of significant size, research and innovation have become indispensable nourishment for corporate growth. 

For a company, successful brands will not only win consumers, but attract imposters. For Bayer, Dr. Oliver Lutze explains that more infringements are trademark-related to confuse consumers, especially on the internet, while Bayer’s technologies are often more difficult to be copied.

As to how Bayer protects the rights of its more than 10,000 kinds of products, Dr. Oliver Lutze said: “The company doesn’t have a one-size-fits-all patent strategy. Strategy usually is based on product-related invention categories and the nature of the inventions themselves. Patents are different in certain technological fields, because the optimal patent protection must be in line with different patent law requirements. For a certain technological field, such as drugs, compound patents are the most valuable. For other technological fields, process patents might be the most valuable, such as major improvements in the making of basic polymers. Therefore, strategy for a particular product is derived automatically from the wide scientific knowledge behind inventions and the corresponding IP laws.”

Bayer’s “China special strategy”

Besides Bayer’s polymer R&D center in Shanghai, the starting global R&D center for Bayer Schering Pharma in Beijing further testifies to Bayer’s attention to the Chinese market.

The core of Bayer’s China strategy is to keep pace with the country’s economic and social development. With the start of its investment in the 1990s, Greater China has now become the largest single market for Bayer in Asia. Dr. Oliver Lutze said, “During the past three decades, China has set up a complete and modern intellectual property law system, and affirmed the important position of intellectual property in its national intellectual property strategy. Intellectual property has received close attention from governments at all levels. Court rulings have sent strong warning signals to potential infringers, which have impressed us deeply.”

Bayer follows a global intellectual property strategy jointly formulated by its global R&D functions and specialized IP departments in the headquarter, which features decisions on seeking adequate IPR protection in selected countries by involving IP experts, R&D managers and, managers of other relevant departments from a global point of view.

Dr. Oliver Lutze said: “On top of IP departments at the headquarter, Bayer also set up an IP function in China to support the headquarter. The department further safeguards Bayer’s business interest in China and gives full consideration to the importance of China business. The local department informs the headquarter functions on latest law developments and supports local IPR enforcement. It also serves as the first liaison contact in China for our R&D and business colleagues concerning patent, trademark and copyright affairs. The localized legal support and special attention can be called Bayer’s ‘China special strategy’”.

Talking about the development of intellectual property in China, Dr. Lutze particularly mentioned the amendment to the Patent Law by saying, “The amendment will come into effect on October 1, 2009. Considering the changes to the new law, the drafting and filing of a patent application by all Bayer patent professionals in line with the law will be an important part of Bayer’s intellectual property strategy. The government has incorporated suggestions from the business sectors into the amendment, for which we are very thankful.  Meanwhile, we also hope for improvements in facilitating procedures in IPR enforcement, e.g. reducing legalization requirements.”

In the area of pharmaceutical research Bayer faces a global issue. Drug approval by the regulatory authorities in the respective countries is a long lasting process. Usually, several years are needed from application to approval for a new drug.

“Currently, the development of a new drug from first discovery of an activity to market introduction costs is about EUR 800 million and lasts ten years. To get a return on investment, innovative R&D companies need strong and effective IP rights, especially patents. To make up for the time loss during pending new drug approvals, many countries grant an extension of patent protection period to the basic patent right holders. For example, the patent term restorations in the US and Supplementary Protection Certificates in Europe provide for up to additional 5 years of patent protection for the new drugs. We do hope the Chinese government will in the future also consider introducing such patent term extensions in the patent law,” said Dr. Oliver Lutze. 

(Translated by Li Heng)

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