SAN DIEGO - Southern California is poised to generate a whole new area of intellectual properties - spurred by stem-cell research and personalized medicine.

Add to that an array of advanced tools creating a more "targeted and efficient drug development process," said Joe Panetta, president and chief executive officer of Biocom, an association that represents 550 regional life science companies in Southern California.

"I think that San Diego will become a focal point for investment from all over the country and the world," he said. "We are seeing some movement of venture capital in San Diego, and we have been actively working on that. We are seeing a great turnout for our investor conferences."

Panetta is focusing these days on bringing together the life sciences industry within Southern California, similar to what has developed in Northern California and in the Northeast. This will include the addition of 10 new members from Orange County to the Biocom board, as well as the opening of a new office, complete with an executive director, in Orange County, possibly by June.

"San Diego is working to paint a true picture that we can show to investors outside of California, instead of the old way of looking at ourselves," Panetta said. "We finally woke up and realized that clusters are defined by a much larger geography."

According to Biocom's latest figures, San Diego County's life sciences community employs about 40,000 people working at more than 700 companies, including biotech, medical device, diagnostic and technology companies and institutes; with the direct and indirect annual economic impact to San Diego of about $8.5 billion.

Venture capital investment has been on the rise in San Diego, increasing from $1.1 billion in 2005 to $2 billion in 2007, for a variety of innovative companies, according to Connect, a nonprofit that helps foster the growth of emerging technology and life sciences companies in the region.

But to keep growing, San Diego needs a new business model, Duane J. Roth, Connect's chief executive officer, said.

Instead of the traditional company and management team, the new model would spread the risk of new product development among research institutions and companies focused on different aspects of a discovery.

Then, he said, the next step is to sell it to either a pharmaceutical or biotech company or traditional venture capitalist that wants to take it through the next phase.

"Then, maybe you form a company around it," Roth said.

The advantage to the new approach is that the "risk profile" has changed, Roth said.

"With the old model, you had to get a homerun. With the new model, everybody takes an appropriate risk," he said.

The approach helps avoid the dreaded "Valley of Death" - that time when research money runs out before a venture capitalist will invest in the idea, he said.

"San Diego has a lot of stuff on shelves sitting in the Valley of Death," Roth said.

Meanwhile, San Diego stands to get a mountain of attention when it plays host to the Bio International Convention scheduled from June 17-20 at the San Diego Convention Center. Featuring 2,200 exhibiting companies, with 65 countries represented, the event will showcase biotech's achievements, trends and goals.

"I think that it's a tough time for everyone," Stephen C. Ferruolo, a partner in the San Diego law firm of Goodwin Procter, and an event coordinator, said. "There is a lot of uncertainty and volatility. Public markets are very difficult. But there is a lot of money out there."

Ferruolo hopes that events, such as Bio, will turn a spotlight on what's happening in San Diego - "an extremely vibrant place" for new scientific breakthroughs, due to such research institutions as Burnham, Scripps, Salk and the University of California, San Diego, he said.

"They will continue to generate great breakthroughs in science - not only stem cells - but all kinds of new targets and receptors, and personalized medicine," Ferruolo said. "It's our key strength."

Consider the recent announcement by the San Diego Consortium for Regenerative Medicine, which is proposing a $115 million stem cell research center on North Torrey Pines Road in La Jolla that would bring together researchers from the UCSD, Scripps, Salk and Burnham.

"You'd have new researchers and world-renowned researchers, all working together, and training the next generation," said Tracey Milani, assistant vice president of Russo Partners, a coalition spokesperson.

All very promising. Meanwhile, a key question is: Which of the emerging-growth companies in San Diego are likely to break out big time, Ferruolo asked.

"Drug development is a crap shoot," he said. "You can build major biotech companies on one or two successes and become a multibillion-dollar company. Then the issue is, when you do that, do you continue to build and remain independent? When companies acquire San Diego companies, how much work will they continue to do in San Diego?"

IP attorney Ned Israelsen, a partner in the San Diego office of Knobbe Martens, remains high on the region.

"San Diego is still the place to be for IP," he said. "Venture investment, new company formation, are all incredible. Even in an economic downturn, our business remains pretty strong. Once companies are funded, they continue to move along as they did when the economy was rosier. In a boom time, there is enough market share for everyone."

But during economic downturns, companies tend to be increasingly attentive to the value of their intellectual properties, Israelsen said.

"They start to worry about their competitors, and the first thing they think about is, 'What can we do with our patents to help retain our market share?'" he said. "For a year or so into an economic downturn, our business remains strong, and, in some areas, picks up."

IP litigator Lisa M. Martens, a partner in the San Diego office of Fish & Richardson, has noted that - in these trying economic times - clients are increasingly focusing on their brands.

"Ad disputes arise, competitors are getting too close," she said. "They want to get any competitive edge that they can, using other companies' trademarks. I don't want to say that desperate times call for desperate measures, but when you are feeling the economic pinch, competition gets a lot more fierce. I am seeing more litigation among companies that want to protect their brands."

IP litigator Alan H. Blankenheimer, a partner in the San Diego office of Heller Ehrman, also has noticed a shift in how clients are viewing their patents.

"I am seeing companies that typically would cross-license their IPs now are more aggressive in asserting their own IP," Blankenheimer said.

Companies, he said, were run by engineers who were uncomfortable with the legal system and wanted to tend to their businesses and invent things and commercialize them. Now, he said, companies realize that the legal system is a way to get a competitive advantage, and added that to their arsenal.

"They are increasingly sophisticated about the use of the legal system," he said.

Being on the border is helping, too, Mitchell P. Brook, a partner in the Del Mar office of Luce, Forward, Hamilton & Scripps, said. He has seen a lot of work being generated by clients trying to navigate the intricacies of Mexican IP law.

"They are a hybrid of copyright and trademark, so it's important to have some understanding, when you are doing transactions that have an IP component, in setting up companies in Mexico," Brook said.

But, while the San Diego region remains fertile ground for law firms hoping to tap into the IP market here, there also is the law of supply and demand.

"This market is not under-lawyered," said patent attorney David C. Doyle, a partner in the San Diego office of Morrison & Foerster. "It doesn't make a lot of sense to come here and set up practice unless you are going to be able to provide all of the core services that companies in your target market need. If you don't have them, it will be more difficult to make the business case for having another office."

San Diego, he added, is "a small, but highly desirable pond."

Lisa A. Haile, co-chair of the global life sciences sector in the San Diego office of DLA Piper, is spending a lot of her time soothing the frazzled nerves of clients, who are fretting over their intellectual property assets in the wake of so much regulatory upheaval.

"I have more therapy sessions lately with clients," she said.

Richard E. Campbell, a registered patent attorney in the San Diego office of Procopio, Cory, Hargreaves & Savitch, is just trying to come up for air.

"I cannot recall a year when there have been so many changes in the rules and laws relating to patents in the same time period," he said.

From current efforts of the U.S. Patent and Trademark Office to change its rules, limiting the number of patent claims and continuations that can be filed, to various patent reform measures pending in Congress, to the increasing activist role of the U.S. Supreme Court in IP matters, it's meant a lot of "head scratching" for IP attorneys, Campbell said.

Laurie Axford, a patent prosecutor and partner in the San Diego office of Gordon & Rees, believes that patent reform is necessary. The problem is, getting all of the players to agree on a solution.

"Those who represent small companies want reform in one way, and those who represent large companies want reform in another way," she said. "Eventually, this will so severely impact the patent bar and client base, that some compromise will have to be reached to resolve the bottleneck. We can't continue to tell clients that it will take years and years to get patent protection."

Why the increased scrutiny by the court?

"Part of it is political," IP attorney John R. Wetherell, a partner in the San Diego office of Pillsbury Wintrhop Shaw Pittman, said. "There is a lot of concern in society about the cost of drugs, and that people are getting patents they shouldn't be getting. Maybe the Supreme Court is reacting to that attitude."

Whatever the reason for all of this upheaval, Wetherell figures that the early inventors had it much easier.

"Even without case law, and the Supreme Court becoming more active, science by its nature creates a dynamic situation, where one criteria to be patentable is that an invention must not be obvious," he said. "As science advances, what wasn't obvious two years ago now is obvious. It's not like when Thomas Edison invented the light bulb. Nowadays, the field is so crowded."

Nan Wu, a partner in the San Diego and San Francisco offices of Cooley Godward Kronish, is concerned.

"Life science companies have a real dependency on their patent portfolio to raise money, get venture capital funding," said Wu, who works in the patent counseling and prosecution practice group. "There is a long process of discovery, and a patent needs to be more flexible to accommodate changes along with way. The new rules and changes put a lot of burden on the patentee."

When the smoke clears, some of the changes could drive up the price of prosecuting patent applications, said IP litigator Jessica R. Wolff, a partner in the San Diego office of Heller Ehrman.

"We just have to be ready for it," she said. "All of these rules are really focused, in some ways, on discouraging applicants from filing patent applications, and filing very broadly, which is discouraging to inventors in this country."

Haile remains philosophical.

"You can't anticipate what is going to happen," she said "It's a moving target. You would drive yourself crazy if you set up all the possible scenarios. You stick with the core of developing an IP strategy, which hasn't changed. Do you have a product and sufficient protection to cover it?"

But too many San Diego companies aren't being aggressive enough in making themselves known to the lawmakers and agencies that decide their fates, said Douglas B. Farry, managing director of the government affairs practice at McKenna Long & Aldridge, a law firm with offices in both San Diego and Washington, D.C.

Despite San Diego's accomplishments in the life sciences and technology, Silicon Valley, Austin, Texas, the research triangle park in North Carolina, Boston and the capital's metro area usually are thought of by the beltway brigade as the nation's innovative hubs, he said.

"No doubt, companies and research institutions in San Diego have a strong reputation and are well known and respected," said Farry, who served for five years as senior policy adviser to then House Majority Leader Dick Armey, R-Texas. "But companies that have a major presence in San Diego and Southern California, don't necessarily have much of a public policy or D.C. government footprint. So, their perspectives on policy changes often are overlooked and don't get included in the policy mix."

D.C. policymakers tend to listen to voices that reach out to them, Farry said.

"They are not necessarily spending the time, energy and effort reaching beyond those voices," Farry said. "So, it's definitely in the interest of companies in Southern California to make sure their perspective is being heard."

Politicians have always found their way to Southern California to raise money, he added.

"They come out to collect campaign dollars and leave," he said. "I try to focus on policymakers who are interested in spending time in Southern California to learn our views and perspectives, as opposed to just campaign dollars."

But some companies in the region don't seem to see the urgency, he said, believing that D.C. is too far removed from the focus of their businesses, and would take "too much time and energy to make a difference."

"I think exactly the opposite," Farry said. "The federal government is the largest single consumer of technology, and will spend over $60 billion on products and services this calendar year. To be in technology, and ignore your biggest market, is like being in the lumber business and ignoring what Home Depot is doing."

And, Farry said, decisions the government makes about what to buy often drives the commercial market as well.

Much is at stake. Cautions IP attorney James Y. C. Sze, a partner in the San Diego office of Duane Morris, "There is a lot of technology still being developed in the United States. But if we have a bad patent policy in the U.S., the technology will be developed elsewhere."

But Douglas E. Olson, another IP lawyer and partner at Duane Morris, is optimistic.

"Hopefully, there won't be a chilling effect on the number of patents issued," he said. "I don't think it will. There is a lot of room for granting more patents."