The Patent Story

The patent by Elin Östman and Inger Björk relating to the use of proteins and amino acids for improved glucose regulation was published under the international publication number WO 2007/084059 A1. The patent describes specific amino acids and the ratios of those acids by which insulin secretion is enhanced in individuals with a lowered ability to secrete insulin. This provided a new gateway for the treatment of Type 2 diabetes. As a potential tool for the preventive aspects of diabetes, this is in line with the development of specific foods based on the low glycaemic index concept. The existing patent is described as a “food additive” that can be added to all types of food, including addition to different protein bases, with the target groups being primarily persons with impaired glucose tolerance, metabolic syndrome, and type 2 diabetes. Their patented recipe of proteins and amino acids can be added to virtually all types of products, such as drinks, soups, powder-based foods,

“bars,” and composite meals.

Which we now know there were things (regarding the patent) we should have been more careful at that time but we couldn’t see them at the time because we didn’t know. But now we, there were things happening that could have been dealt with in a better way, in the future.

Elin Östman, personal communication, December 2013

With the invention, the two founders took steps to patent it during the period of 2006-2010. Swedish law exemption—lärarundantaget, or professor’s privilege—meant that researchers and academics working for Swedish universities automatically own the right to inventions and copyright works that they produce. They first sought assistance from the university where they

worked. Östman shared that the process with filing the first patent by approaching the university for assistance was not always clear; the experience was not a totally smooth one. At that time of application in 2006, the innovation support from the university was assigned among various partners to help researchers who were interested to commercialize their findings. There were various stages to the filing and ownership of patents. The ownership of the patents was first maintained by the university for two years while the researchers retained the right to continue their research around the patent.

For Östman and Björk, they were interested in licensing their patents, and Forskarpatent I Syd AB, which was contracted by the university, helped them in filing and maintaining the patent for two years at that time. This was their first patent and they were unfamiliar with the procedures. They encountered various roadblocks along the way. They relied on the advice provided by the patent office in the beginning, but the patent application process did not progress as they had hoped. Each time they tried to speak with someone at the patent and innovation offices, there was always someone new, which meant that they had to reiterate what was communicated before. There was also a misalignment in the expectations between the two researchers and the patent office. There was an expectation from the patent office that they themselves should perform market research on their invention. As the researchers did not possess the competence, they had expected that assistance would be provided by the patent officer. At one point the patent officers did not fully understand what their innovation was about, as they wanted to take their findings and show it to a competitor. The evaluation of their invention was also not encouraging from the patent officers; contrary to what the researchers believed, the patent officer did not think the patent could lead to something.

This stage of maintaining their first patent lasted for two years before there were changes in the organization of patents filing and ownership at the university. The patent, which had originated from Östman and Björk, had belonged to the university during this first two-year period. To continue maintaining the patent meant further investments; however, both the university and Forskarpatent I Syd AB were not prepared to retain the patent in their portfolio. This implied that the patent would no longer be valid if it was not “owned” by anyone. These circumstances prompted Östman and Björk to “buy back” their own patent and set up InnovaFood AB in 2010 to house it. They now each own an equal percentage in the company.

The fact that InnovaFood have had a commercial partner (DoubleGood AB bought the licensing rights from InnovaFood AB to be used in table water products—natural mineral water or spring water that contains one or more

supplements) aided them when they were seeking further funding, for example from ALMI, a state-owned company that provides financing and counseling to businesses in Sweden. InnovaFood AB and DoubleGood subsequently collaborated on another follow-up patent with Rikard Öste as a coinventor.¹² Öste is the founder of Aventure AB (a research company in the field of food, nutrition, and biotechnology). As part of the licensing agreement, InnovaFood AB have also assisted DoubleGood to file the application on the health claim from EFSA in the functional drink product.

Jörgen Holm, then CEO of DoubleGood AB, was working with InnovaFood AB for about a year (he moved to head another Aventure AB subsidiary, Gluconova, in 2014). He shared that there was an interdependence of relationships between InnovaFood AB and Double Good. Öste, Östman, and Björk have been within the same network at the Chemical Centre at Lund University. The idea for the venture was to develop new ideas and to create new intellectual properties. With InnovaFood AB, although the patent was not developed at Aventure AB, Öste regarded it as a good idea. The initial idea was to incorporate the innovation into beer and it subsequently evolved to be some kind of functional drink. The subsequent idea was to apply it to table water, the most common drink with a meal. This product is seen as having a good market potential as it can be used as an ingredient in a drink that can control blood sugar level when consumed together with a meal. InnovaFood AB is not the right company to commercialize it, because they do not have the experience of Aventure AB. That was when the discussion began and Aventure AB bought the right to license the use of the patent in 2011. InnovaFood already had the first patent, which is licensed to Aventure AB. Together with Öste as the coinventor for the improved second patent, DoubleGood AB has used it as the basis for the product’s health claim. Within the agreement, InnovaFood AB has assisted DoubleGood AB in the EFSA (European Food Safety Authority) application to market the product. There is thus very close collaboration between the two companies. They have also been conducting clinical studies at AFC.

Holm regarded the relationship between InnovaFood AB and Aventure AB not as a customer-supplier relationship, but more of a partnership. This is a closer form of collaboration, as each one of the people that participate from both companies experiences the same process but in different roles within the

12 Publication No. WO/2012/177215 filed June 2012, issued June 2014. Title of the invention:

"IMPROVED FOOD COMPOSITION."

https://patentscope.wipo.int/search/en/detail.jsf?docId=WO2012177215)

network. For example, Öste acted as the scientific leader within DoubleGood but he was also assistant professor at the university. Östman and Björk are founders of InnovaFood but they also held roles in the department and AFC.

So there are parallel roles held by each person. They walk between these different roles and it can be difficult to draw a line, especially for small companies like Aventure AB and InnovaFood AB. To someone from the outside looking at the organization structure, it seems that it is unclear and that each person has three or four different “homes.” Holm compared this structure to that of a large company that is very structured and hierarchical but that might find it difficult to achieve what InnovaFood AB and Aventure AB have done.

If I go to my former company, which is quite large, about 300,000 employees, this is very hierarchical, this is the guy who decides this and that in that department, it is a huge company. Those things we (InnovaFood AB and Aventure AB) are doing now, would be extremely difficult for a big company to achieve that. It’s much more facilitated to work in an entrepreneurial, innovative and creative way and faster way in a small dynamic entity like this network. It’s because it not just one or two companies but a network of people in different roles and they interact together and that creates a momentum. And that momentum, that facilitation you cannot find in a big company because you have a lot of roles and hierarchies that hinders the development of those ideas.

Jorgen Hölm, personal communication, March 2014

From the perspective of the customer-supplier relationship, there is a dependency from both parties. InnovaFood AB, for instance, depends on certain cash flows to keep and protect the patent, and to enter into different countries and markets with the patent. DoubleGood AB has an agreement to provide funding to InnovaFood AB once certain milestones are reached. They go beyond being just customers because they also collaborate on developing something together. Although it is a partnership, which depends on quite a large amount of informal relationships, it is also governed by a contract (the licensing agreement), which will cause upset in the relationship if it is not adhered to. All are important, especially in a small (4-5 member) network, as in a family. As a small company, there is a need to interact all the time to meet the needs of resources required.

DoubleGood AB have received acknowledgement from EFSA about the application and they are pending the decision. After DoubleGood AB gets the

approval from EFSA and gets a good cash flow from the launch of the product, they will consider reinvesting in InnovaFood to further strengthen the patent and concept. They foresee that they will be deeply involved in any new research in that area with InnovaFood. The joint application is a strong joint effort to make this EFSA (another milestone) happen.

Elin’s father, Ulf Östman, took over the business side of the company when it was setup in 2010. Ulf had experience working in both large and small companies. He has previously had a few companies of his own providing service management and has also worked for a large company before. He expressed concern when Östman and Björk started InnovaFood and wanted to help them to be independent scientists. When they first filed the patent in 2006, Ulf was not involved yet. He has been quite cautious when it comes to funding and ownership of the company and has been quite adamant that no investor owns something in the company, so they remained independent and Östman and Björk are the ones who own the company.

Ulf expressed his cautiousness when negotiating with big companies because there is some need to protect their own knowledge, but there is always a form of risk that is taken when trying to reach a deal or agreement with customers. For small companies, there are some disadvantages. For example, there are no insurances to help them if there is any disagreement about patent rights, while larger companies may be able to afford legal actions. Expenses such as travel costs need to be taken into consideration when they are in discussion with potential customers’ inquiries. Ulf felt that even small companies need to set the stage for potential collaboration, instead of just adopting a seller’s perspective and absorbing the traveling cost during the negotiation process.

Ulf negotiated and discussed with ALMI, together with Elin, to get some funding and loans in 2010. They obtained the money from ALMI and they got positive feedback from ALMI that they did a good job (in securing the customer). ALMI provided funding without a demand for an equity stake in the company. It was important that they had a free hand in research without worrying about business equity. There were some difficulties when they needed help with legal matters, as it involved quite a large sum of money, but with ALMI’s funding, they were able to move ahead in that area. Ulf sees having a proper fundamental licensing agreement to be very important. The most important stage was when they got the first licensing agreement because they got an injection of funds. While they started in 2010, they only started getting royalties in 2014. The agreement gave them the financial resources that they needed during these years. This also becomes a testimony for the basis for

further talks with other partners. Ulf mentioned they met with Rolf Bjerndall and Mats Lönne around 2011 when they were exploring opportunities, but they have recently also obtained a patent for use in children’s food. Ulf felt that the lawyer played an important part, as it was important to protect the patent.

He emphasized that it was important that they were “free” from demands from investors and that the researchers would be able to concentrate on what they do best.

4.1.4 Gaining independence and maintaining interdependence