Article by Kelli N. Watson Francuzenko, Judith Toffenetti and Jennifer S. Gee

Start-up biotech companies should address these key legal issues with the aid of legal counsel.

Biotechnology start-ups face a dizzying array of business and legal requirements and a limited budget that forces them to prioritize where they expend valuable compliance funds on outside legal counsel. In the rush to stay cash-flow positive, attract investors and expand the platform while feeding as much capital as possible into research and development efforts to accelerate the maturity of the product line and its commercialization, start-up biotechs must make tough choices about the legal issues that require a share of the capital as well.

Although each business is unique, there are certain common experiences that lend themselves to generalization. The following is a top 10 list of critical legal issues that start-up biotech companies should make an effort to address with the aid of legal counsel, even when the capital squeeze is intense. An investment up front can secure long-term dividends for the financial stability and profitability of the venture.

Know Thy IP

It is an article of faith that, for biotech start-up companies, their intellectual property (IP) is their most valuable asset. The success of the biotech start-up rests on the value of its IP, which determines whether the company will be able to attract investors and strategic partners. Clearly, the IP assets of a biotech start-up are key to its survival and long-term success. The IP is not only the product line, but also the data, ideas, trademarks, trade secrets, know how and copyrights that accompany it. Companies should undertake basic IP due diligence to confirm the legal status of key IP components. The start-up biotech company must keep abreast of the competition. It is essential to know who the competition is and what the competition is doing. It is recommended that before any major research or development endeavors are begun, a patent landscape search be conducted in the field of related research, products and services in order to gain an accurate assessment of what IP protection might be obtained by the company and the potential market value of such IP. Information concerning competitors' IP should be updated on a regular basis and the information disseminated to the business people and researcher so that informed decisions concerning IP and products can be made. Obtaining and maintaining patents involves risk management as well as asset protection, which can take up a significant portion of the company's IP budget. Consequently, the start-up biotech company must choose wisely which innovations to protect and must put in place internal mechanisms for ensuring ownership of its IP and protecting the confidentiality of its business.