Anavex Life Sciences Corp (AVXL)

[orveko_inc]

Here's my current take:

On January 29, 2007, the following agreement between Dr. Vamvakides and Anavex was established: "CONTRACT FOR THE TRANSFER OF A PATENT INVENTION AND SCIENTIFIC COLLABORATION" (the agreement says 1/31/07, but this was later amended to 1/29/07).

https://www.sec.gov/Archives/edgar/data/1314052/000108503707000289/super8k-exh10_1.htm

The agreement serves two primary purposes: 1) to transfer patent rights from Dr. Vamvakides to Anavex (established in Article I, paragraph 1.1), and 2) for Anavex and Dr. Vamvakides to collaborate to develop and improve the patents.

After the agreement was established, Dr. Vamvakides went about improving his inventions and Anavex went about developing them. On February 26, 2009, Dr. Vamvakides filed a new Greek patent, and dutifully assigned rights over to Anavex: www.obi.gr/obi/?tabid=127&idappli=X379254 (note: this is the Greek patent application that ultimately led to U.S. patent 9180106, granted last year.).

On January 11, 2013, the following addendum was established: "2012 ADDENDUM TO THE CONTRACT FOR THE TRANSFER OF A PATENT INVENTION AND SCIENTIFIC COLLABORATION"

http://www.sec.gov/Archives/edgar/data/1314052/000106299313006497/exhibit10-81.htm

I believe this addendum served to clear up certain things ... certain loopholes that put Anavex in a dangerous position. Here are the obligations that were set forth in paragraph 2.1 of the original agreement:

To fulfill its obligation to participate in the aforesaid general project of scientific researches and experiments, the Assignee undertakes to supply all necessary materials, facilities and required duly qualified personnel to conduct such researches and experiments.
In particular it undertakes to invest every fiscal year at minimum 200,000 US dollars for the related scientific researches.

"Every fiscal year" is a long time when the agreement "shall remain in force during all the period of legal validity of the initial Patents and of their modifications, improvements, enhancements and international extensions."

The penalty for failing to comply with these obligations was explained in paragraph 2.2 of the original agreement:

It is clearly understood that in case the Assignee fails to supply the aforesaid materials, facilities and personnel and/or fails to provide on time the said amount, whatever the reason could be, the Assignor will recover immediately the full ownership of the Patents and the exclusive rights of use as it wishes, without any obligation towards the Assignee. All related costs and expenses would be borne by the sole Assignee.

Anavex (like most cash-strapped early-stage biotech companies) was not in good financial shape following the 2008 recession and may have been on the verge of failing to meet the obligations set forth in their agreement - and therefore on the verge of loosing all rights related to the patents. In the 2012 addendum, paragraph 2.1 is replaced with:

Assignee shall have invested, by December 31, 2017, at least $1,000,000 in the development and patenting of the subject matter of Article I, paragraph 1.1. For clarity the "development and patenting of the subject matter of Article I, paragraph 1.1" shall be termed the "Project"

In the addendum, paragraph 2.2 is deleted.

This provides Anavex more room to maneuver and financially fulfill their obligations and also eliminates the risk of Anavex loosing rights to the patents. However, this move did not come without concessions. Here's 2.5 from the original agreement:

All and any such improvements – modifications and/or enhancements and international extensions, from one or the other of the parties, will be the object of one or more Patent applications in the name of the “Assignee”, as it bears the costs of research and enhancement in its capacity of applicant and full owner of the property rights on and from the Patent and as well in the name of the Assignor in his capacity of inventor; however the Assignor does hereby waive any interest in the improvements so long the Assignee has complied with its obligations set out in this Agreement.

In the addendum, paragraph 2.5 is deleted, but sub-paragraph "e" is added to Article I, paragraph 1.1 ("By the present contract the Assignor, unreservedly and without any exception, concedes and transfers to the Assignee, which accepts, all the rights of property and use of the following"):

(e) Inventions made during the term of the CONTRACT filed on or after 29, 2007 and not falling under 1.1 (a)-(d) wherein Dr. Vamvakides in an inventor."

In other words, Anavex owns any and all patent applications filed by Dr. Vamvakides as long as the agreement is in effect. However, Dr. Vamvakides is not required to assign any of these applications over to Anavex unless they were funded by Anavex. Here is paragraph 2.6 (bold text was added to this paragraph in the 2012 addendum):

For his part, the Assignor undertakes that, on request from Assignee or its representatives, he will, without delay or additional compensation, provide any signatures and supply any documents which may be necessary for the submission and/or the delivery of Patent applications, or patent applications arising from the Project, either in Greece or abroad funded by the Assignee.

So, this creates the landscape we are in today. Anavex owns all of Dr. Vamvakides' patent applications as long as the agreement remains in effect, but Dr. Vamvakides is not required to assign these applications to Anavex. This allows Vamvakides to retain ownership of any patent or application not assigned to Anavex should the agreement be terminated. Edit for clarity: all of the patents that were the subject of the original agreement were assigned to Anavex.

As it relates to ANAVEX PLUS, Vamvakides' U.S. PLUS application is a national stage entry of the original Greek PLUS app (which was not part of the original agreement because it was invented later). Anavex's PLUS application is a version that includes some additional claims (aka "improvements"), which therefore allowed Anavex to throw it into the USPTO queue ahead of Vamvakides. I do not believe that Anavex intends to actively pursue any of their additional claims and are simply using these "improvements" as a way to patent some of the important claims related to the composition of PLUS ahead of Vamvakides (thus owning those claims regardless of what happens with the agreement). Either way, Anavex owns everything as long as the agreement remains in place, which at this point will be the early to mid 2030's (the agreement is in effect as long as any related patent remains legally valid). What I once perceived as a "patent dispute" seems to be nothing more than Anavex attempting to strengthen their IP beyond the scope of their agreement with Vamvakides.