Patent Docs Makes List for Third Year in a Row
The ABA Journal, the American Bar Association's flagship magazine, has announced its annual list of the 100 best legal blogs -- or blawgs -- following a nomination process that began over the summer (see "ABA Journal Accepting Nominations for 8th Annual Blawg 100"). The 100 blogs selected by the ABA Journal were chosen from a list of more than 4,000 law blogs. The 100 honorees on the 2014 list have been divided into thirteen categories: Criminal Justice, Tort/Consumer, Law Practice Management, Legal Research/Legal Writing, Litigation, Niche, News/Analysis, Labor & Employment, For Fun, Profs, Intellectual Property, Careers/Law Schools, News/Courts, and Legal Tech. Seven honorees of the 2014 Blawg 100 were selected in the Intellectual Property category, including Patent Docs, which was selected to the Blawg 100 for the third year in a row. The other blogs selected to the IP Law category were Biederman Blog; Trademark & Copyright Law; Rebecca Tushnet's 43(B)log; Hollywood, Esq.; DuetsBlog; and Trademarkology. Biederman Blog, Rebecca Tushnet's 43(B)log, and Hollywood, Esq., like Patent Docs, were all repeat nominees.
An alphabetical list of the 2014 Blawg 100 can be found here and a list of the top blawgs sorted by category can be found here. In announcing the 2014 Blawg 100, ABA Journal Editor and Publisher Allen Pusey noted that law blogs are "[n]o longer to be confused as a fad or the realm of the tech-savvy," but rather are "rooted in the legal media landscape." He observed that "[w]hile traditional media sources often break news, law blogs dive deeper to offer insight into what the news means for clients, the legal profession and the public," and indicated that the blogs making the 2014 Blawg 100 "are well-written and, more often than not, entertaining."
Now that the ABA Journal has selected its Blawg 100 for 2014, it is asking readers to choose their favorites from among the top 100. In order to vote for your favorites, you will first have to register here (registration is free). Readers can then vote for their favorite blogs here. According to the ABA Journal, each person gets a total of 13 votes, to distribute as they see fit among the blogs they like, with a limit of one vote per person, per blog. Voting will conclude on December 19, 2014, and the winners will be announced in January.
In addition to releasing its 8th annual Blawg 100, the ABA Journal added ten new inductees to the Blawg 100 Hall of Fame, featuring law blogs that have "consistently been outstanding throughout multiple Blawg 100 lists." The Blawg 100 Hall of Fame currently includes Patently-O (2012 Hall inductee) and IPWatchdog (2013 Hall inductee). A list of the thirty Blawg 100 Hall of Fame inductees can be found here.
We would like to thank our readers for nominating Patent Docs for the Blawg 100, and we would like to thank the ABA Journal for making Patent Docs a 2014 Blawg 100 honoree.
By Kevin E. Noonan --
To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.
This coincidence of these Powers has raised questions of whether development of the law in one area can affect the law in the other, for example, with regard to concepts such as exhaustion and extraterritoriality (see "Microsoft Corp. v. AT&T Corp. (2007)"). Both of these issues arose in the copyright case of Kirtsaeng v John Wiley & Sons case decided by the Supreme Court last term; while the immediate effect of this decision on patent law was unclear, recent developments may make the case very relevant and very dangerous for continued pharmaceutical innovation.
Briefly, the case involved a copyright infringement action brought by Wiley against a Thailand national, Supap Kirtsaeng, who was studying in the U.S. and arranged to have copies of textbooks sold in Thailand sent to him by his relatives for resale in the U.S. Because Wiley (like many U.S. publishers) sells the same textbook at a much lower price in countries like Thailand than they cost in the U.S., Mr. Kirtsaeng was able to sell the books sent to him from abroad on eBay, ultimately making $1.2 million in revenues (there was a dispute, not relevant to the Court's decision, about the amount of this total that was profit, but presumably it was worth Mr. Kirtsaeng's while to continue his business while studying in the U.S.). Although Wiley prevailed in the district court and before the Second Circuit, the Supreme Court reversed, on the grounds that the "first sale doctrine" permitted resale of legally obtained copyrighted works without obtaining the copyright owner's permission, and that U.S. copyright law, and the notice on the textbooks purchased in Thailand that they were only authorized for sale outside the U.S., did not mandate a different outcome or trump the first sale doctrine. As a result, Wiley increased the cost of its textbooks sold abroad.
This case has clear implications for branded drugs, which are often sold ex-U.S. for less than the same drugs costs at home; at least some of these cost differences are the result of foreign governments regulating the cost of branded drugs. This is not a phenomenon limited to developing or Third World countries: European countries having a nationalized health care system (i.e., all of them) also have varying levels of cost controls for branded drugs, along with regimes for generic versions of these drugs after expiration of some term of exclusivity for the branded versions. And many countries such as Brazil, China, India, Russia, and Thailand have relied upon international treaty provisions (such as the Doha Declaration under the auspices of the World Trade Organization) to provide government-subsidized generic versions of branded drugs at prices much lower than the prevailing price in Western countries. These differences in costs have not affected U.S. prices because, unlike textbooks, branded drugs cannot be reimported into the U.S. under FDA regulations and U.S. law.
That may be changing, however, in view of a N.Y. Times report yesterday on bipartisan efforts to reduce drug prices by permitting reimportation. The Times reports, in an article by Elisabeth Rosenthal, that Senator Amy Klobuchar (D-MN) is planning to revive a prior bill that would permit reimportation from Canada, a country whose national health service regulates the price of branded and generic drugs. She is supported in these efforts by Senator John McCain (R-AZ) and undoubtedly other Senators will join in the effort. The impetus for action now, according to Ms. Rosenthal, is not that branded drug prices are high (although there is certainly concern about the price of some drugs, particularly biologic drugs directed towards intractable diseases like cancer); rather, it is the rising price of generic drugs that has raised concerns. Last Thursday, a Senate panel of the Senate Subcommittee on Primary Health and Aging, chaired by Sen. Bernie Sanders (I-VT) investigated the issue, hearing from Professor Stephen Schondelmeyer, University of Minnesota; Dr. Aaron Kesselheim of the Harvard Medical School; and Mr. Rob Frankil, who testified on behalf of the National Community Pharmacists Association who had requested Congressional action. (Three generic drug company executives declined the panel's invitation to testify, according to the Times report.) The testimony included reports of generic drug costs increasing by ~8,000 percent (i.e., 80-fold, for doxyxycline) and over 300 percent for ten other generic drugs. These increases are recent (over the past few months), and the causes attributed to the increases range from shortages in active pharmaceutical ingredient supplies, manufacturing problems, and consolidation of drug companies by mergers and acquisitions. As can be expected, the Senate panel heard calls for greater government regulation and application of drug rebate requirements to Medicare and Medicaid to apply to generic drugs, just as they now apply to branded drugs.
More troubling long-term is the solution proposed by Senator Klobuchar, allowing importation from Canada; Maine is already permitting its residents to purchase some drugs from Canada, Great Britain, Australia, and New Zealand in contravention of U.S. law. The crisis in the cost of generic drugs has made this solution particularly attractive, because paradoxically the cost of a generic version of a drug in the U.S. can be higher than the cost of the branded drug in Canada. The Times article illustrates this situation for digoxin, where a 90-day supply of the generic drug costs $187 in New York while the same amount of the branded version, sold as Lanoxin, costs $24.30 in Canada. The comparisons are similar for an inflammatory bowel disease drug ($1,625 for the generic in the U.S., $155.70 for the branded version in Canada) and the cholesterol drug Pravachol ($230 U.S. generic/$31.50 branded Canadian). With these differential costs plans permitting branded drug reimportation begin to have political force, as does the aging of the population where more people will be covered by Medicare and costs to the government will rise accordingly.
If successful, these efforts will create a situation akin to the consequences of the Kirtsaeng case in the copyright arena. Here, however, innovator drug companies will not have the option, exercised by Wiley, of increasing prices abroad to make reimportation less economically attractive. The prevalence of ANDA litigation in the U.S. over the past thirty years is one indication of the importance of exclusivity, and the attendant profits that result from exclusivity, to pharmaceutical innovation. Should those profits decrease significantly, the return on investment for innovator drugs will fall, and the calculus of investment that supports new drug development will be affected unpredictably (but not positively; the unpredictability resides in how much the ROI will change and how that will affect investment decisions). A common criticism aimed at branded drugmakers is the frequency with which they develop "me too" and next generation versions of already marketed drugs rather than create innovative new treatments and therapies. The same uncertainties in drug development that make such behavior sound economically also impact the decision to develop new drugs, and policies that reduce ROI for such new drugs (which bear the greatest economic risk) are unlikely to promote innovation.
It is ironic that the U.S. Supreme Court has based many of its recent decisions limiting patent eligibility on a purported concern that patents can inhibit innovation. They do not, of course, but policies that make it economically unsound to invest in drug development may certainly do so. Such policies are likely to be just as welcome by the general public as such Supreme Court decisions, and just as likely to have exactly the opposite effect (here, on affordable drugs) than their supporters envision.
For additional information on this and other related topics, please see:
• "Ironically, It Seems Big Pharma Is Preferred by Venezuelan People," July 20, 2009
• "Will GSK Break the Doha Impasse in the Global Drug Pricing Crisis?" February 19, 2009
• "Neocolonialism in the Current Global Drug Pricing Regime?" August 19, 2007
• "More on the Global Drug Patenting Crisis," August 14, 2007
• "The Effect of Foreign Generics on the U.S. Drug Supply - Part III," July 17, 2007
• "Brasil Prevails in Dispute with Abbott over AIDS Drug Pricing," July 9, 2007
• "The Effect of Foreign Generics on the U.S. Drug Supply - Part II," June 20, 2007
• "The Effect of Foreign Generics on the U.S. Drug Supply - Part I," June 19, 2007
• "Africa (Still) Depending on the Kindness of Strangers in Anti-AIDS Drug Pricing," May 29, 2007
• "The Law of Unintended Consequences Arises in Applying TRIPS to Patented Drug Protection in Developing Countries," May 1, 2007
Naturally abundant, stable isotopes have already protected the identity and origin of $1.5 billion in pharmaceutical materials against Intellectual property infringers
By Anthony D. Sabatelli* --
The pharmaceutical industry is an important segment of the world economy. In 2013, worldwide sales of prescription drugs were over $830 billion. If one adds in over-the-counter medicines and other health-related products such as vitamins and nutritional supplements, that market approaches nearly $1 trillion dollars annually. With such huge markets at stake, there is the continuous threat of unauthorized sales of competing counterfeit and patent-infringing pharmaceutical products.
In an effort to find a simple, accurate way to unequivocally identify and secure the origins of drugs and other compounds, a Niantic, Connecticut-area scientist developed an alternative, finding a way to use the naturally occurring molecular fingerprint of drug products, active pharmaceutical ingredients and their synthetic pathways to help biotech and pharmaceutical companies enforce their hard-won patent rights against counterfeiters and other bad actors looking to profit by stealing intellectual property.
According to Dr. John Jasper, chief scientific officer for Nature's Fingerprint, a division of Molecular Isotope Technologies LLC (MIT LLC), this fingerprinting technology has real, practical, application potential. "What we are doing is measuring chemical tracers, also known as stable isotopes, to determine the origins of drug products and pathways to help pharmaceutical companies and law enforcement authorities combat Intellectual property infringement," says Jasper. "The distribution of natural-abundance stable isotopes in a drug product is analogous to the highly specific pattern of a human fingerprint. It is this 'fingerprint' of nature that can be used to highly specifically identify the source or process for a given drug product."
THE HISTORY OF ISOTOPES
Jasper explains that large-scale scientific research involving both radioactive and non-radioactive (i.e., stable) isotopes goes back to the time of the Manhattan Project, which produced the first atomic bombs during World War II. Isotopes -- whether stable or radioactive -- are forms of the same chemical element having different atomic masses. For example, uranium has an isotopic form with a mass of 235 and also an isotopic form with a mass of 238. By 1942, isotopes had only been known for about 30 years. Most of the research involving isotopes had been theoretical, relating to determining atomic structures and studying the then-mysterious properties of radioactivity. The Manhattan Project changed all that. The dire urgency of the war effort led to the development of sophisticated techniques for separating and identifying isotopes. One of these techniques, Isotope Ratio Mass Spectrometry (or IRMS for short), which is used to measure the relative abundance of isotopes in a sample, is now an important methodology in the field of those studying and using isotopes.
HIGHLY SPECIFIC FINGERPRINT
In 1999, Jasper began developing the technology around the premise that naturally abundant, stable isotopes might be used to identify individual batches of pharmaceutical materials. According to Jasper, "we had shown that every batch of pharmaceutical products had its own highly specific 'isotopic fingerprint.' We subsequently realized the potential applications of our technology to provide evidentiary support for patent infringement and enforcement efforts had just opened up immensely."
TWO U.S. PATENTS
The technology is sufficiently unique that it was awarded two U.S. patents, the most recent being issued in 2013. The latest patent relates to methods and systems to correlate a product such as a pharmaceutical to the synthetic process by which it was made. In other words, the method is a means of finding the "smoking gun" of the patent infringer. Even the FBI has recognized the value of this unique technology, calling upon Jasper for advice during the anthrax scare post 9/11.
It is well recognized that pharmaceutical research is a high-risk and expensive undertaking. It takes many years and huge investments to bring a new drug product to the marketplace. This is not surprising considering that a single human Phase III clinical trial can easily top $50 million dollars to run. Phase III is the last stage of clinical testing before a pharmaceutical developer submits an application for drug approval to the FDA. The FDA typically requires two such "well-controlled" studies for drug approval. According to the Tufts Center for the Study of Drug Development, which has been tracking the cost of prescription drug development for over 30 years, the cost of developing a single new drug today is estimated to cost as much as $1.2 billion. On top of this immense cost, the average time for bringing a new drug to market from its original inception in the lab is now over 10 years. Finally, the success rate for prescription drug development is quite low -- by some estimates, only about one in 20 drugs make it all the way from initial Phase I human clinical trials to the marketplace. Going back even further to inception at the lab bench, the success rate might be just one in several thousand.
The main way to secure protection for new pharmaceutical products is through sound patent protection. However, the cost of patent protection is high and time consuming. The "gold standard" in patent protection for a new, small organic molecule drug product is a composition of matter patent. Such patents specifically describe or "claim" the drug compound, and preferably a broader genus of chemical structures surrounding that compound. Furthermore, the cost for filing, obtaining and maintaining a single patent across a broad range of countries can cost tens of thousands of dollars, and in many instances can easily top a half a million dollars.
However, it is not always possible to obtain a "composition of matter" patent. In other instances, because of long drug development timelines and stringent regulatory requirements and review, a significant amount of the patent term (typically 20 years) of the composition of matter patent has already ticked away by the time the product has been approved for marketing. Even though the U.S. Patent Office, in conjunction with the FDA, provides for up to five years of patent term restoration, the restored patent term can still be relatively short. In many cases, composition of matter patents may have expired or may not otherwise be available for reasons having nothing to do with the soundness, value or utility of the underlying drug product.
Whether or not there is a composition of matter patent, pharmaceutical companies often supplement their patent portfolios with patents covering manufacturing processes and improvements (i.e., process patents). These patents are sometimes referred to as secondary patents. These patents can relate to more efficient processes or products with improved purity profiles or properties. However, these secondary patents can be more difficult to monitor and subsequently enforce. The reason for this is that the evidence necessary to substantiate a claim of infringement is not as easy to obtain or demonstrate as in the case of a composition of matter patent.
Counterfeiting of pharma products and infringement of patent processes are multi-billion-dollar problems for the pharmaceutical industry. Here is where the technology developed by Dr. Jasper can potentially be successful. Figure 1 graphically illustrates the period of additional patent protection potentially afforded by the use of MIT LLC's stable-isotopic approach to process patent protection.
IDENTIFYING DRUG SOURCES
How can isotopic fingerprinting technology differentiate the source of a drug and/or the process by which it is made? "All chemical compounds have highly specific ratios of natural stable isotopes," explains Jasper. Thus every batch of a pharmaceutical material has its own highly specific isotopic fingerprint. The method can be used to identify, track and classify batches of products. The technology can identify not only the type of chemical processes used in making a drug, but also the identifying information of the specific manufacturing site as well."
This fingerprinting technology provides a means to investigate and determine facts, facts that can prove provenance and process. Many times it is difficult to monitor and enforce process patents because of the difficulty of finding persuasive evidence of infringement. The reason isotopic evidence can be so persuasive is because it is so sensitive. The technology can measure very small differences in natural isotopic ratios between samples. Because of this sensitivity the method can, with a very high degree of certainty, determine whether two or more samples or processes are the same or different. According to Jasper, "we can perform very highly precise analyses on samples that are only a fraction of a milligram." (To put this in perspective, a typical grain of salt weighs less than a milligram.)
In 2005, in a blind study commissioned by the FDA, MIT LLC characterized 26 batches of the pain reliever, naproxen, to determine the product fingerprint or source characteristics for the batches. The FDA wanted to assess the robustness of the fingerprinting method for determining the manufacturing sites for pharmaceutical products. If the method could provide this source information, it would be an important investigative and forensic tool for drug enforcement authorities trying to determine the provenance of a product. For this study, Jasper and his team determined the ratios of the naturally occurring carbon and oxygen isotopes for each of the naproxen batches. It turns out Jasper and his team had correctly determined that the batches had come from six different manufacturing sites from around the world (See Figure 2).
To date, Jasper's technology has been employed in three lawsuits, with two lawsuits being decided in favor of plaintiffs claiming patent infringement against counterfeiters. Further, his technology also helped another defendant ward off an unfounded patent infringement claim. MIT LLC conducted a study for this defendant comparing the naturally occurring carbon-isotope ratios for the defendant's products versus the ratios for a product made by the plaintiff's patented process. The data unequivocally showed that the defendant's product could not have been made by the patented process as alleged by the plaintiff. Based on the data, the defendant was found not guilty of patent infringement and they were free to bring their product into a major, new international market (See Figure 3).
These results highlight the potential impact of this fingerprinting technology, particularly to adding value to a company's patent estate. A conservative estimate puts the value of the products protected by the technology at more than $1.5 billion in total sales over the time the settlements were in effect.
MORE INNOVATION COMING
What's next for Jasper's innovative identity tool? Jasper says MIT LLC continues to expand its business development outreach while working to develop new isotope analysis tools. For example, Nature's Fingerprint has developed new technology to evaluate naturally occurring isotopes in high molecular weight molecules and complex biological systems. Recent studies, says Jasper, have demonstrated the successful application of the technology to biologic compounds in the 8,000 to 15,000 dalton molecular-weight range (Jasper, et al., J. Pharm. Sci. 2014, in press). Such high molecular-weight compounds can be more than two orders of magnitude larger than the typical low-molecular weight drug compounds. For comparison, naproxen has a molecular weight of 230. Jasper pointed out that in principle, there is really no upper limit to the size molecules or systems to which his technique can be applied, but rather it is ancillary issues such as sample preparation and purification that may present some challenge.
Additionally, the company has developed technology for continuously monitoring the progress of chemical and biological reaction processes. This technology is based on the partitioning of natural-abundance stable isotopes between the reactants and products of a chemical or biological process through the course of a reaction. The technique can have a wide range of applications from monitoring the progress of a chemical reaction in a pilot plant to the large-scale production of commodity chemicals. In theory, the isotopic composition of a reaction product can be plotted as a function of reaction yield. For example, there is good reason to believe that the stable-isotopic composition of reaction products should be proportional to the instantaneous yield of the reaction. That is, the isotopic composition (δ) should increase as the reaction yield for the process approaches completion (i.e., 1.0). The symbol, ‰, designates per mil (a/k/a parts per thousand). Jasper says he is positive about this development because it applies the isotope technology to solving real-time monitoring problems for process chemistry and other manufacturing processes (See Figure 4).
Things have come a long way from the early 1900s when researchers first postulated the existence of different isotopic forms of the chemical elements. Nature's Fingerprint has found a unique application of this isotope technology. It is a company to watch, particularly as it continues to add value to and protect the pharma industry's intellectual property.
* Dr. Sabatelli is a Partner with Dilworth IP.
This article was originally published on September 3, 2014 on PharmaManufacturing.com.
The ABA Journal has begun work on its 8th annual list of the 100 best legal blogs (or blawgs) and has announced that it is seeking the advice of its readers, via the ABAJournal.com website, on which blogs to include on this year's Blawg 100. For the past two years, Patent Docs has been honored to be included among the five blogs selected in the IP Law category of the Blawg 100 (see "ABA Journal Announces 2012 Blawg 100" and "ABA Journal Announces 2013 Blawg 100").
Readers interested in nominating a particular blog for the 8th annual Blawg 100 should use the ABA Journal's blawg 100 amici form. Additional information about the Blawg 100 can also be found on the blawg 100 amici form. The form requires that anyone making a nomination provide a name, employer or law school, city, and e-mail address. The ABA Journal requires this information in order to discourage:
• Bloggers who nominate their own blogs or nominate blogs to which they have previously contributed posts.
• Employees of law firms who nominate blogs written by their co-workers.
• Public relations professionals in the employ of lawyers or law firms who nominate their clients' blogs.
• Pairs of bloggers who have clearly entered into a quid pro quo agreement to nominate each other.
The ABA Journal, however, welcomes comments (up to 500 words in length) from readers who do not fall into the above categories.
• The ABA Journal is primarily interested in blogs in which the author is recognizable as someone working in a legal field or studying law in the vast majority of his or her posts.
• The blog should offer insights into the practice of law and be of interest to legal professionals or law students.
• The majority of the blog's content should be unique to the blog and not cross-posted or cut and pasted from other publications.
• The ABA Journal is not interested in blogs that more or less exist to promote the author's products and services.
Nominations must be submitted no later than 5:00 pm (EST) on Friday, August 8, 2014.
By Michael Borella --
On June 12, Tesla CEO Elon Musk announced that the company "will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology." This move was hailed by some as a win for those who support reform of an allegedly broken patent system.
But the truth is more complicated.
Tesla is not dedicating its patents to the public. Instead, Tesla appears to be promising not to sue potential infringers of its patents so long as those parties maintain "good faith." Tesla's press release does not define what Mr. Musk means by good faith, nor does it set forth any licensing procedures for a party wanting to use Tesla's patented technology. Consequently, should a competitor sue Tesla for infringement, Tesla has probably maintained the ability to assert its patents in a countersuit. Perhaps of more concern is what happens if Tesla sells its patents. Are good faith users then subject to lawsuits?
Further, Mr. Musk announced on a later conference call that the company will continue to pursue patents and put them "into what is essentially an open source category." So Tesla is not exiting the patent game, just employing a different strategy.
It is not uncommon for holders of a proprietary technology to share it with competitors in order to grow a market. Many standards bodies exist for such a purpose, and require that participants license their standards-essential patents on a fair and non-discriminatory basis.
Tesla has found itself in a difficult situation. While it holds about 42% of the electric car market, that segment is less than 1% of the overall vehicle market. In order for Tesla to grow and become more successful, the adoption of electric cars needs to be more widespread. For instance, if Tesla ends up holding 20% of an electric car market that is 10% of the overall vehicle market, its effective market share will have roughly quintupled.
And Tesla does need electric car technology to become mainstream in order to succeed. Its flagship Model S starts at $69,900, well above what the vast majority of car owners worldwide can afford. One of Tesla's stated goals is to sell a $30,000 electric car. But to do so it requires a worldwide ecosystem of parts suppliers, mechanics, charging stations, and other partners. Tesla needs economies of scale, especially for its battery technology, which is a significant portion of the cost of a Model S. Allowing others a limited dip into its patent portfolio will help make this a reality.
As an ostensible reason for Tesla's move, Musk claimed that patents "serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors." He did not address, however, why the technology industry as a whole continues to grow, as evidenced by recent record-breaking stock values, billion-dollar acquisitions, and successful initial public offerings, despite this purported stifling of progress.
There is no doubting the brilliance and leadership of Mr. Musk, who is also the founder of Paypal and Space X. Casting the policy change as an indictment of the patent system has been lauded by the technology industry media and their mainstream counterparts. But Musk's proclamation is also a savvy business move, well-calculated to help Tesla grow its business. Any benefit to other companies is a side-effect.
By Gautham Bodepudi* --
There are those very vocal about proposing legislative amendments to the patent statutes, in an attempt to curb litigation abuse and thereby promote innovation.
The latest round of proposed amendments would allow the government to create a class protected from corporate veil piercing -- holding investors and those outside of a protected class with interest in patent assets personally liable, where their infringement accusations in litigation fail to meet the "objectively reasonable" test. But protected from veil piercing would be inventors, law firms, universities, and companies with a track record of commercial activity.
The thinking here: threatening personal liability against investors will disincentivize those outside of the protected class from purchasing patents and filing lawsuits that may fail to meet the objectively-reasonable test. This in turn will reduce frivolous lawsuits, thereby reducing wasteful litigation and promoting innovation.
Seems simple enough, but will it work? Will the creation of a protected class of patent holders reduce the potential for litigation abuse and thereby promote innovation?
Unfortunately no -- the protected-class approach will not only (1) fall short of reducing the potential for litigation abuse, but will also (2) threaten the capitalistic underpinnings of our Patent Clause, so much so Adam Smith, respectfully referred to as capitalism's "Founding Father," would turn in his grave.
(1) Why will the proposed protected-class legislation fall short of reducing the potential for litigation?
The proposed legislative amendments will not reduce litigation -- they will simply shift the class of entities asserting patent lawsuits. Instead of traditional patent financers, patent monetization knowledge will shift to those in the protected class and to those that are well funded enough to move into a protected class.
As an example, well-funded patent financers will continue to operate by purchasing low-value operating companies and having them hold patent assets to litigate. By owning an operating company, even well-funded "trolls" can fall within a protected class.
Hence, the latest proposed legislative amendments will not eliminate litigation or its potential for abuse -- they will only serve to shift the class of entities asserting patent lawsuits to those within the protected class.
(2) Perhaps most importantly, the proposed legislative amendments will be wholly and absolutely detrimental to America's innovation market.
To understand this, we must understand how capitalistic economies promote innovation -- Adam Smith clearly laid out the framework in the well-known An Inquiry into the Nature and Cause of the Wealth of Nations.
Put simply, division of labor produces the greatest improvement of society's productive powers, including innovation. See Wealth of Nations, Book 1, Chapter 1, "Of the Division of Labor," I.1.1 ("The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is any where directed, or applied, seem to have been the effects of the division of labour.") (emphasis added).
This division-of-labor principle is reflected in our innovation industry -- some specialize at inventing and creating patented discoveries, others are better suited at financing, others yet are inclined towards manufacturing, and yet others are more skilled at marketing and distribution.
To maximize the power of the division-of-labor principle to our innovation industry, Smith explained that we need to do two things: (1) increase the innovation market size and (2) maximize exchangeability in the innovation market.
(1) Regarding the market size, this sets the upper bound of the division-of-labor principle. The larger the market, the greater potential for the division-of-labor principle to take foothold in the market place. See Wealth of Nations, Book I, Chapter III, "That the Division of Labour is Limited by the Extent of the Market," I.3.1 ("As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market. When the market is very small, no person can have any encouragement to dedicate himself entirely to one employment, . . .") (emphasis added).
(2) Regarding exchangeability, Smith explained that the power of exchange is the driving force behind the division-of-labor principle -- one man's surplus is exchanged for another's surplus. See Wealth of Nations, Book I, Chapter III, "That the Division of Labour is Limited by the Extent of the Market," I.3.1 ("As it is the power of exchanging that gives occasion to the division of labour . . . .").
And this power of exchange is the catalyst behind commercial growth and activity in any capitalistic society, including one that aims to promote innovation. See Wealth of Nations, Book I, Chapter IV, "Of the Origin and Use of Money," I.4.1. ("Every man thus lives by exchanging, or becomes in some measure a merchant, and the society itself grows to be what is properly a commercial society.").
So we can learn two things from Adam Smith. To promote innovation we must, one, increase the market size for innovation -- we need more people specializing as inventors, financiers, manufacturers, distributors, and marketing specialists. And two, we need to maximize exchangeability -- not only maximize exchangeability of the above skill sets, but also maximize exchangeability of patent assets -- the asset class of innovation.
By maximizing the market and increasing exchangeability in the innovation market, Adam Smith instructs that this will promote the division-of-labor principle, which will in-and-of-itself propel innovation.
So if that's the goal, then why is the proposed protected-class legislation so contrary to these tenants of capitalism?
How is it so contrary?
1. By limiting the innovation market to just those that fit within a protected class, this reduces the overall market for innovation. Notably, those outside the protected class will be removed from the innovation market.
And who are those outside the protected class? Patent financiers -- investors, fund raisers, brokers, valuators, monetization specialists.
Alarmingly, the protected-class legislation is attempting to remove this specialization -- patent financing -- from the innovation market.
But if we strip patent financing from the innovation market, then the successful inventors will be the ones blessed with financial means or an innate ability to fund raise. The successful start-up companies will be the ones with a bankroll or that can raise money on a competitive edge other than their IP. The successful law firms will be the ones that have monetization expertise and a large war chest to fund multi-front enforcement campaigns.
Removing the patent-financing specialization from the innovation market will force others in the protected class to adopt this specialization, on top of their native specialization.
But this contravenes the division-of-labor principle. If we want to promote innovation, we want more specializations, we want more people specializing in each segment, and we want them exchanging knowledge and expertise. We don't want to artificially strip specializations from the market, but this is exactly what the protected-class legislation is attempting to achieve.
As such, the protected-class legislation contravenes the division-of-labor principle and will hurt our innovation market -- we don't want this.
2. The proposed protected-class legislation will artificially and significantly reduce the alienability, or exchangeability, of patent assets.
Unlike currency, gold, or real estate, a patent's value will be determined by those wielding it, rather than the intrinsic worth of the patented discovery itself. Why would we possibly want to limit patent exchangeability in such a manner?
Because the protected-class legislation artificially removes specializations from the market to the detriment of the division-of-labor principle, and reduces alienability of patent assets, it is entirely contrary to the tenants of capitalism and will therefore fail to promote innovation in our capitalistic economy.
Put simply, the proposed legislative amendments of forming a protected class will not promote innovation -- it will be detrimental and damaging to it.
So, what's the solution?
Instead of trying to regulate litigation abuse through legislation aimed at attacking one group (patent financiers), why not let the courts regulate it? Aren't judges in the best position to determine if litigation abuse exists in a given case, and aren't they equipped with the authority to regulate it?
But isn't that how we got into our present state to begin with, by solely relying on the court system?
Perhaps, but perhaps that's why we're also seeing the Supreme Court make a strong statement of its intent to curb litigation abuse in Octane Fitness. In it, they lowered the bar and gave district courts more discretion to award attorney fees and award sanctions where it sees fit.
As represented by Octane Fitness, we are seeing the courts take an activist role to curb litigation abuse.
Instead of proposing short-sighted legislation that is entirely contrary to the capitalistic underpinnings of our economy and future, why not let the courts do their job?
* Mr. Bodepudi serves as a Managing Member for IP EDGE, which specializes in uncovering hidden value in IP assets and monetizing or acquiring such assets at a price point that maximizes value. Mr. Bodepudi negotiates and executes monetization strategies, directs marketing and lead-generation efforts, and provides client-service delivery.
By Andrew Williams --
We know that the nation that goes all-in on innovation today will own the global economy tomorrow. This is an edge America cannot surrender. Federally-funded research helped lead to the ideas and inventions behind Google and smartphones. That's why Congress should undo the damage done by last year's cuts to basic research so we can unleash the next great American discovery -- whether it's vaccines that stay ahead of drug-resistant bacteria, or paper-thin material that's stronger than steel. And let's pass a patent reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation.
President Obama ("Full Text: President Obama's 2014 State of the Union Address").
This is not surprising, considering it was the President's Patent Assertion and U.S. Innovation Report (with accompanying Legislative Priorities and Executive Actions) last June that seemed to kick-start Congress into high gear on patent reform legislation (see "'When the Patent System is Attacked!' -- The White House Task Force on High-Tech Patent Issues"). It is unfortunate, however, that the President chose to speak of the patent system in these terms. Despite his suggestion, it was the patent system that helped spur the innovation that has given America its edge. It may be true that there is a vexatious litigation problem, but the entire patent system should not be thrown out with the proverbal bathwater. The House has already passed a bill that could lead to unintended consequences. We can only hope that the Senate will take a more reasoned approach to the problem. Ideally, it will craft a more narrowly-tailored bill to serve as a counter-point to the Innovation Act. Unfortunately, none of the Senate bills currently pending look like they will serve this function. We don't need a patent reform bill that will have a chilling effect on legitimate patent claims. If this happens, it could have the opposite effect desired by the President -- it could result in a decrease in America's innovation.
On Tuesday, we presented a live webinar on the "Top Patent Law Stories of 2013." The webinar covered ten of the fourteen stories that made it onto Patent Docs seventh annual list of top biotech/pharma patent stories. Posts on our top fourteen stories can be found here (stories #11 to #14), here (stories #7 to #10), here (stories #4 to #6), and here (stories #1 to #3). The ten stories that we addressed during the webinar were:
➤ Supreme Court Decides AMP v. Myriad
➤ Myriad Unbowed, Asserts Patents Broadly Against Competitors
➤ Supreme Court Decides Monsanto v. Bowman
➤ Supreme Court Decides FTC v. Actavis
➤ First-Inventor-to-File Provisions of Leahy-Smith America Invents Act Take Effect
➤ Rules of Practice Revised to Implement Patent Law Treaty
➤ EPO Removes Time Limit for Filing Divisional Applications
➤ Media and Congress Combat Patent Trolls
➤ District Court Finds Prenatal Diagnostic Method Not Patent Eligible
➤ 23andMe Patent and Diagnostic Test Create Controversy
While we tried to answer several questions before the presentation was concluded, we ran out of time to answer every question posed by attendees, and wanted to provide answers to some of the questions we could not get to.
Q: Why don't plaintiffs ever attack Myriad's patents on 103 obviousness grounds?
Kevin: This question has at least two answers:
First, the AMP plaintiffs didn't want to use Section 103 as a basis, because they were trying to obtain a categorical exclusion of DNA patenting (which could only be done under Section 101). Using Section 103, the ACLU would have had to try to invalidate gene patents one at a time.
Second, the defendants in several of the pending Myriad patent infringement suits have asserted invalidity under Section 103; the problem is that applying old methods to new compounds is not generally obvious per se (although in some instances it might be).
Q: Does the Myriad decision mean that naturally occurring cDNA, such as those derived from retroviruses, are not patent-eligible?
Kevin: Probably. The rationale is that what is patented has to be different and different by human agency; I don't think obtaining retroviral cDNA is enough.
Q: Could 35 U.S.C. § 101 be amended to re-define or clarify "Law of Nature"?
Kevin: I think it unlikely (mostly because it is impossible for Congress today to craft language that would cover natural laws discovered in future). In addition, the Supreme Court has a habit of taking Congressional actions to overturn its decisions and coopting them; for example, Graham v. Deere has a statement that Congress "merely included in the statute the limitations on patentability drawn by the Court in its jurisprudence," when the reality was that Giles Rich and P.J. Federico included Section 103 to strip from the Court its ability to judge patentability by the Justices' subjective opinion of whether a claimed invention was sufficiently "inventive." Similar to the standard Justice Breyer resurrected in Mayo v. Prometheus.
Q: Is there any discussion regarding modifying the "directed to or encompassing a human organism" bar enacted as part of the Leahy-Smith AIA?
Kevin: Not that I know of. That provision seems to incorporate the 13th Amendment prohibition on having an ownership interest in a human being and little else.
Q: The patent on Monsanto's Roundup-Ready soybean expired in 2010 but the company seems to have gotten a patent term extension -- how did they do that?
Kevin: The patent (U.S. Patent No. 5,352,605) was granted under the old regime where a patent received a 17-year term from its grant date. This patent was granted October 4, 1994, which suggests that it should have expired on October 4, 2011. The PTO website does not show this patent as having expired.
The only provisions I can think of for this application having a longer term is that some patentees complained to Congress that they would be harmed by the change in patent term provisions under the law and Congress enacted a bill that set the term as either 17 or 20 years, depending on which was longer. 20 years from 10/4/1994 would be 10/4/2014. If that's when it expires we will know I am right.
Q: Is prior case law regarding secret commercial use for more than one year working a forfeiture on the trade secret user's right to patent still good law?
Kevin: Regarding whether the trade secret user will be precluded from patenting by their own commercial use, the answer is in flux. On a policy level the answer should be yes, but it could be that the Federal Circuit could decide that the risk of losing to another under first to file has eliminated the policy basis for the rule (I don't think so, but I am not the CAFC).
And defensively, I think that the prior user rights provisions reduce the need to patent, because the prior user has a defense against a later patentee.
Q: How can one reconcile holding methods as trade secret with FDA disclosure requirements?
Kevin: I have two scenarios; the first is less secure, and the second is more speculative.
In the first possibility, you take all reference to the genes and redact them in any public version of your documents, or perhaps encode them (DNA1, DNA2, etc.) and provide the FDA with a key that is not publicly disclosed. This alternative has the risk that, under FOIA, lawsuit, or Congressional mandate, the Agency will disgorge the information at some point.
The second possibility is that you refuse to disclose the identity of the genes to the FDA, and if they do not grant regulatory approval you take the method abroad and find somewhere that will permit you to market it without disclosure. Once you have a track record (3-5 years) you write to the heads of the relevant disease Patients' Rights Group (PRG) and tell them that people in (country where you are marketing) can predict whether they will get (relevant disease) but the FDA doesn't permit Americans to have access to it. Under some circumstances you could run your business offshore, but in others you could encourage the PRG to write their Congressional representative and tell the FDA to let Americans have the benefits of your method. The distinction between this scenario and scenarios regarding drugs is that for drugs people might believe there is a safety risk, but here disclosure is merely a matter of public policy that the individual is unlikely to care more about than their own health. I have no idea whether this will work; the point is that court decisions and patent "reform" laws have unintended consequences and where we place the incentives often direct the outcome we get.
Q: Under the Patent Law Treaty, does the 2-month grace period relate to the failure to claim priority or the failure to file an application within one year?
Don: The Patent Law Treaty (PLT) and Patent Law Treaty Implementation Act of 2012 (PLTIA) provide for "the restoration of the right of priority to a foreign application or the benefit of a provisional application in a subsequent application filed within two months of the expiration of the twelve-month period (six-month period for design applications) for filing such a subsequent application" (78 Fed. Reg. 62368, emphasis added). The final rule issued by the Patent Office also states that:
[W]ith respect to the right of priority to a prior-filed foreign application that if the subsequent application is filed after the expiration of the twelve-month period (six-month period in the case of a design application) set forth in 35 U.S.C. 119(a), but within two months from the expiration of the twelve-month period (six-month period in the case of a design application), the right of priority in the subsequent application may be restored upon petition and payment of the applicable fee if the delay in filing the subsequent application within the twelve- or six-month period was unintentional. The Office is providing with respect to benefit of a prior-filed provisional application that if the subsequent application is filed after the expiration of the twelve-month period set forth in 35 U.S.C. 119(e), but within two months from the expiration of the twelve-month period, the benefit of the provisional application may be restored upon petition and payment of the applicable fee if the delay in filing the subsequent application within the twelve-month period was unintentional.
(id.; emphasis added). The rules specifying the time for filing a priority claim (37 C.F.R. § 1.55(d)) and making a delayed priority claim (37 C.F.R. § 1.55(e)) remain unchanged under the PLT and PLTIA. In particular, a "claim for priority must be filed within the later of four months from the actual filing date of the application or sixteen months from the filing date of the prior foreign application in an original application filed under 35 U.S.C. 111(a)," and if the claim for priority is not filed within this time frame, "the claim may be accepted if the priority claim was unintentionally delayed," and the applicant submits the required petition, Application Data Sheet, and petition fee (along with a certified copy of the foreign application, if necessary).
Q: When does the revised rule that removes the time limit for filing EP divisional applications come into force?
Don: Amended Rule 36 EPC, in which the 24-month time limits within which divisional applications must be filed, takes effect on April 1, 2014.
Q: Regarding the new claim interpretation standard under the Innovation Act, how is the "ordinary and customary meaning" standard different from the "broadest reasonable interpretation" standard?
Don: The Innovation Act would require that the Patent Trial and Appeal Board construe claims in Post-Grant and Inter Partes Reviews using the same standard as the district courts. In particular, the Act specifies that "each claim of a patent shall be construed as such claim would be in a civil action to invalidate a patent under section 282(b), including construing each claim of the patent in accordance with ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent." In Phillips v. AWH Corp., the Federal Circuit noted that "the ordinary and customary meaning of a claim term is the meaning that the term would have to a person of ordinary skill in the art in question at the time of the invention, i.e., as of the effective filing date of the patent application." The Court also noted that:
In many cases that give rise to litigation, . . . determining the ordinary and customary meaning of the claim requires examination of terms that have a particular meaning in a field of art. Because the meaning of a claim term as understood by persons of skill in the art is often not immediately apparent, and because patentees frequently use terms idiosyncratically, the court looks to "those sources available to the public that show what a person of skill in the art would have understood disputed claim language to mean." Those sources include "the words of the claims themselves, the remainder of the specification, the prosecution history, and extrinsic evidence concerning relevant scientific principles, the meaning of technical terms, and the state of the art."
(citations omitted). Section 2111 of the MPEP notes that "[t]he Federal Circuit's en banc decision in Phillips v. AWH Corp., 415 F.3d 1303, 75 USPQ2d 1321 (Fed. Cir. 2005) expressly recognized that the USPTO employs the 'broadest reasonable interpretation' standard," and cites In re Morris, 127 F.3d 1048, 1054-55, 44 USPQ2d 1023, 1027-28 (Fed. Cir. 1997), for the proposition that:
[T]he PTO is not required, in the course of prosecution, to interpret claims in applications in the same manner as a court would interpret claims in an infringement suit. Rather, the "PTO applies to verbiage of the proposed claims the broadest reasonable meaning of the words in their ordinary usage as they would be understood by one of ordinary skill in the art, taking into account whatever enlightenment by way of definitions or otherwise that may be afforded by the written description contained in applicant's specification."
Section 2111 also notes that during patent examination "the focus of the inquiry regarding the meaning of a claim should be what would be reasonable from the perspective of one of ordinary skill in the art."
By Kevin E. Noonan --
Fritz Machlup (at right), an economist, once said that if we didn't have a patent system it would be irresponsible to recommend one, but since we have one, it would be irresponsible to abolish it. An Economic Review of the Patent System (Subcomm. on Patents, Trademarks, and Copyrights of the S. Comm. on the Judiciary, Study No. 15, 85th Cong., 2d Sess. (Comm. Print 1958)). Today, we are in the interesting position of having many groups, from high tech companies and industry to non-governmental organizations, both foreign and domestic arguing for policies that would diminish if not abolish the patent system. This is ironic, because the U.S. over the past thirty years has made the patent system more transparent, uniform and in harmony with other nations' patent systems, and both the economy and society have benefited.
Which is not to say that the system is perfect -- far from it. As a human institution perfection is impossible. But the motivations of many challenging the patent system should also be open to critical review, if only to establish that the alternatives, and the presumptions upon which they are built are in fact legitimate and entitled to the deference they frequently demand.
These questions are important because we live in a deeply technological age. The amount of innovation, in biology, chemistry, telecommunications, computing, and many other fields is unprecedented. Innovation does not depend on patenting per se; particularly in the life sciences, people will innovate, and discover, and invent, regardless of what Lincoln called the "fuel of interest," because researchers (and, indeed, human beings generally) have a deep desire to understand how the world works, particularly our corner of it, and to alleviate disease when we can. Where patenting comes in has been in commercialization, getting products to market, and doing so in a way that they are safe, effective, and with a minimum of significant side effects.
We have achieved these societal benefits and safeguards by increasing the regulatory environment from the days when Jonas Salk (at left) developed his polio vaccine. Salk famously did not patent his vaccine (not necessarily from altruism, there being serious doubts about whether prior art prevented patenting). But Salk also did not need to endure the extensive regulatory burden required today (and, according to the book Patenting the Sun availed himself of test populations that would not be permitted today). That is true in large part because Salk worked before the thalidomide disaster, which caused reform in how drugs were tested and increased their costs by requiring more extensive pre-market testing to ensure safety as well as efficacy. In addition, as Richard Epstein has written, most of the low hanging fruit of pharmaceutical research has been plucked and drug development has increased in cost. And these features of the current innovation landscape include not only the drugs themselves but the diseases they treat; we have moved from a past where simple bacterial infections were treated to developing drugs for the diseases of aging (cancer, diabetes, and Alzheimer's, and Parkinson's diseases) that are treated by drugs (biologic drugs) vastly more complex in structure and more difficult to produce. All this has led to increased costs that invoke an increased need for patent exclusivity to ensure sufficient return on investment to justify those costs.
In addition, our age is characterized by innovation being harnessed not just by companies but by universities, whereby scientific discoveries are protected by patents and licensed to industry under the auspices of the Bayh-Dole Act rather than being expropriated by companies, foreign, or domestic. This also increases costs and can result in reduced efficiency (economic and industrial), but also results in significant benefits to universities and the return on public investment. For example, Myriad Genetics has paid $57 million in royalties to the University of Utah and other research institutions for licensing the patents on the BRCA breast and ovarian cancer tests, and those monies in large part have been reinvested by the universities to fund further research and the capital investment (in laboratory facilities, instruments as well as manpower) needed for that research.
Part of the backlash against patents comes from political disagreements over the role of universities in this process. Another part stems from high tech companies who view patents as tools that are used against them in litigation, either by smaller companies or companies that have licensed these patents from such small companies. These companies generally do not use patents the way life sciences companies do, to protect their investment, bur rather as negotiating tools for obtaining cross licenses from competitors. And some of that has to do with the differences in development costs and obsolescence timelines. A drug can cost $1 billion to bring to market but has a long time to obsolescence; indeed, drug and other life sciences patents are frequently most valuable in the last few years of their term (which is one reason Myriad continues to sue alleged infringers of their cancer testing patents). Computer and other high tech inventions have much shorter timelines (would you want to use a phone from 1995?) and lower development costs (perhaps as little as a bright 17 year old working on a computer in his garage). These differences have been translated into political differences between life sciences companies that need patents for investment, and high tech companies that fight "patent wars" over cell phone technology on the business pages of the Wall Street Journal. One size does not fit all.
Another aspect of the patent challenge is internationally, particularly in developing countries. In the mid-1990's, a part of the GATT treaty termed TRIPS was ratified by most countries around the world, mostly for the benefit of joining the World Trade Organization with concomitant reductions in tariffs between countries. As part of these agreements, signatory countries had to agree to respect intellectual property rights, primarily as a way for pharmaceutical and biotech patenting to be available in countries like Brazil and India that had traditionally nor permitted such subject matter to be patented. Unfortunately, these agreements did not take into account the justifiable concerns of developing countries over the cost of patented drugs, and the agreements began to have reduced effectiveness almost immediately. First, while membership in the WTO was immediate, requirements to change an individual country's patent laws were delayed up to six years after signing. Next, the Doha declaration was enacted by the WTO, which permitted member countries to impose compulsory licenses or otherwise ignore pharmaceutical patent rights for medical emergencies and other reasons, which reasons have expanded to include almost anything since the declaration's enactment. This resulted in a trend in Brazil, India, South Africa, and other countries to impose such licenses, or to demand local "working" of patents, or otherwise reduce patent protection in these countries, until today the situation is pretty much the same as it was before TRIPS was enacted.
In the U.S., a rising chorus of members of the IT community, academics, NGOs, courts, and government officials concerned about the high cost of drugs and patent litigation has changed the zeitgeist, with the common perception being that the patent system is broken. The culprits are putatively the PTO and the Federal Circuit, where the PTO allegedly was granting too many "bad" patents and the Federal Circuit culpable for upholding them. This political climate resulted in a large-scale reduction in patents in the middle part of the past decade and increased Supreme Court review of Federal Circuit decisions. While the rate of patent grant has returned to its historical averages lately (about 60%) the refusal to grant patents created a balloon of pending applications, and the sequester and other budgetary limitations have blunted the Office's ability to address the backlog effectively.
There has also been a large amount of skepticism by the Supreme Court about both the Office and the Federal Circuit. Justice Kagan has termed the PTO "patent happy" and Justice Scalia has called the concept of obviousness "gobbledegook." Supreme Court review of Federal Circuit decisions has clarified the law in many respects, but recent decisions regarding diagnostic method patents and patents on natural products have the potential to reduce patenting in the life sciences for largely philosophical reasons not aligned with the practical realities of commercialization.
Concerns about cost and access motivate much of the debate. But it is important to recognize that some of this debate stems from a classic contest between producers and consumers of technology: consumers (physicians and patients, and increasingly payors like insurance companies and governments) always want technology quicker, cheaper, easier, and this can be and frequently is contrary to the reality of providing drugs and diagnostics that are efficacious and reliable.
The fact is that technology has three ways to be commercialized: supported by patenting, wherein investors produce new industries as the result in "creative destruction" of old paradigms. Or by corporate expropriation, where inventions are taken by large corporations and then brought to market under circumstances where creative destruction is prevented or retarded by established products. Or by trade secret protection, where efforts are made to increase the difficulty in reverse engineering a product and the inability to patent results in non-disclosure of the invention (with concomitant reduction in the public's body of knowledge).
We also need to be cognizant of myths that arise around efforts to disparage patents. Myriad again provides a good illustration. For example, the ACLU and their friends promulgated the myth that patents impede basic research. This is a myth started by speculation in an article by Rebecca Eisenberg and Mike Heller published in 1998 in Science and entitled "Can Patents Deter Innovation? The Anticommons in Biomedical Research" containing the concept that there could be a "tragedy of the anti-commons." As it has turned out, no tragedy has ariseng -- the overwhelming weight of the evidence is that patenting does not affect basic genetic research. In the case of the BRCA genes, for example, there have been more than 10,000 scientific journal articles published since the BRCA gene patents were granted. There is simply no empirical evidence of tragedy, from the BRCA gene patents or any others.
Another myth is that gene patents mean someone "owns" you. First, the 13th Amendment prevents a property ownership right in a human being, so that possibility is eliminated. But moreover, claims to genes are specific to sequence, and the chance that any individual's genes are identical to any other is very small, due to natural, neutral variation in the population. Gene patents don't impede anyone's right to their own genetic information, because the information isn't patented. Methods for determining that information may be, but the information itself is not.
There needs to be a recognition once again of some fundamental truths behind innovation and the role of the patent system in increasing innovation. First, patents are limited in term -- like a bottle of milk they have an expiration date and when they expire the invention is freely available to anyone. Second, patents require disclosure, in many cases greater disclosure than a scientific paper. Two examples illustrate this point. In the Nature paper disclosing the analytical technique of sodium dodecyl sulfate-polyacrylamide gel electrophoresis (SDS-PAGE), which illustrated the process by separating the dozen or so proteins that made up a bacterial virus, and in the legend of the figure showing this separation was the footnote that said that details of the SDS-PAGE technique were in a manuscript in preparation to be published later. Such a paper was never published; while there were later book chapters and other detailed descriptions of the technique they were by others who had adopted the technique, and in addition to being secondary from the scientist who "invented" it, these references were much later in time after the publication announcing the technique. In contrast, a patent on that method would have required a written description of how to practice the invention in such "full, clear, concise, and exact" terms that could be understood by the person skilled in the relevant art, as well as describing the usefulness of the technique.
As another example, when the results of the Human Genome Project were published, many in the scientific community were content with publication of a sequence and a description of how similar in sequence the "new" gene was to other known genes. That was not good enough to get a patent, however. The PTO required that an applicant disclose at least one specific, substantial, and credible utility for the protein encoded by the new gene, which resulted in immediate, practical disclosure. This meant that when those patents expired the public would be in possession not only of the gene but would know what the gene was useful for, and arguably accelerated the speed with which the fruits of the HGP were appreciated.
Third, the consequence of reducing the effectiveness of patents will be that innovation will not suffer but commercialization will. Myriad once again provides an example. Myriad has stated in court papers that it spent about $500 million to bring its BRCA tests to market, after it had identified the genes. These monies were needed to establish a laboratory with the proper controls that minimized false results, something no one has ever accused Myriad of producing. (For those who point to the absence of "second opinion" testing, there is no reason to think that false positives are more frequent than false negatives, which means an error-prone test would produce results indicating the absence of a BRCA mutation in women having it, and these women should have developed BRCA-specific breast or ovarian cancer. There are no reports that this has happened, suggesting that Myriad established sufficiently robust procedures, which we can expect were part of its investment costs.) Myriad also incurred the costs of informing ob/gyn physicians of the test and convincing them it was useful, at a time when genetic diagnostic testing was still considered experimental and where the type of genetic determinants for cancer like BRCA were considered extremely rare. In addition, Myriad needed to set up a network of genetic counselors, since the diagnosis that a woman carried a BRCA mutation, in a family context of breast cancer in mothers, grandmothers, aunts, etc. was understandably terrifying. Myriad also needed to convince public and private payors that its tests were reliable and effective and, most importantly, could justify the cost of the test by the savings resulting from reduction in breast cancer frequency.
Myriad did none of this solely from altruism, of course. But Iit is unlikely that the number of women receiving the test would have been significantly higher if the Utah researchers had made the test freely available, if only for reasons of demographics. If provided by university hospitals, for example, women in New York, or Chicago, or Boston, or San Francisco certainly would have been able to get the test. But it is much less likely that women in rural Appalachia, or the Four Corners region of the southwest, or in Idaho would have had access to the test. These are economic realities that have had no place in the public debate over gene patenting.
There is also a risk in giving courts the power to subjectively decide the proper "balance" between too much and too little patents, particularly on categorical grounds like subject matter eligibility. Courts are particularly unlikely to have the scientific understanding to apply the law to new technologies; that's the Patent Office's job, and the law gives the agency a broad scope ("anything under the sun made by man"). There is no way a priori to decide what "too much" patenting is, and the question is fraught with the politics of competition: of course a company might think that its competitor's patents are "bad" because they block the company from commercializing a product (disregarding the potential for licensing that the patent system intends to promote). The Supreme Court has recently given the impression that they have a Goldilocks role in deciding the proper balance of patent eligibility. This thinking is illustrated by the fact that, until now, there was not Supreme Court precedent supporting a "product of nature" ban on patent eligibility. One of the consequences of the Myriad decision is that it has put into question the patent eligibility of claims to natural products that are isolated and otherwise unchanged. The logical fallacy of this decision can be appreciated by this hypothetical: if a scientist discovered a protein produced in a human that regulated blood pressure, the closer the drug developed by the scientist was to the natural protein (and hence the more like the native molecule the drug was, in turn being closest to the protein's natural properties of half-life, potency, etc.) the less patent eligible the molecule would be. That can't be right.
Think about the following inventions and whether they should be patent eligible (and why):
• Isolated chemical compound from crude oil useful as a lubricant
• Isolated antibiotic produced by bacteria
• Isolated chemical compound from a plant useful as a drug
• Isolated protein from an animal useful to cure/ameliorate human disease
• Isolated cucumber gene that extends freshness
• Isolated Human gene (erythropoietin)
Deciding that some or none of these inventions deserve patent protection has consequences, and there is a need to balance any philosophical bases for excluding any of them from patent eligibility with the practical effects of doing so.
We live in a technological age, and part of the success of that age stems from the capacity of patent exclusivity to encourage investment and bring products to market. For the past thirty years this has created a society of economic growth and the capability to better diagnose and treat disease unknown in the past. Patents are not the only reason but they have played their part. In our efforts to address patenting's shortcomings, it is important that we do not overly diminish their proper role.
By Kevin E. Noonan --
Things are getting worse for genetic diagnostics company 23andMe. On the heels of receiving a Warning Letter from the FDA over its Personal Genomic Services (PGS) test (see "FDA Threatens Agency Action Against 23andMe Over Personal Genetic Testing"), on Wednesday the company was named in a class action lawsuit in the U.S. District Court for the Southern District of California (13-CV-2847H; complaint). The action was brought on behalf of Lisa Casey, "an individual" in the class, and on behalf of "tens or hundreds of thousands of women" who may have used the PGS testing service. Representing the class plaintiffs is Mark Ankcorn of the Ankcorn law firm, whose website characterizes the practice as "fighting for consumers since 1993" (when, apparently, Mr. Ankcorn passed the California bar).
The suit alleges that 23andMe "falsely and misleadingly advertises their Saliva Collection Kit/Personal Genome Service ("PGS") as providing "health reports on 240+ conditions and traits," "drug response," "carrier status," among other things, despite the fact that "there is no analytic or clinical validation of the PGS for its advertised uses." The asserted facts supporting these allegations are taken, frequently as direct quotes, from the FDA's Warning Letter. For example, the complaint cites the letter for alleging that:
• Beginning in July 2009, FDA worked diligently with Defendant to try to help Defendant comply with regulatory requirements regarding safety and effectiveness and to obtain marketing authorization for the PGS device.
• "To date, 23andMe has failed to provide adequate information to support a determination that the PGS is substantially equivalent to a legally marketed predicate for any of the uses for which you are marketing it; no other submission for the PGS device that you are marketing has been provided under section 510(k) of the [FDC] Act, 21 U.S.C. § 360(k)."
• After more than 14 face-to-face meetings, hundreds of email messages, and dozens of written communications between Defendant and FDA concerning the public health consequences of inaccurate results from the PGS device, FDA has concluded, "...even after these many interactions with 23andMe, we still do not have any assurance that the firm has analytically or clinically validated the PGS for its intended uses..."
• "The risk of serious injury or death is known to be high when patients are either non-complaint or not properly dosed; combined with the risk that a direct-to-consumer test result may be used by a patient to self-manage, serious concerns are raised if test results are not adequately understood by patients or if incorrect test results are reported."
The complaint recites 23andMe's advertising that it characterizes as "[material] representations" class action plaintiffs allege are fraudulent:
• "Learn hundreds of things about your health. Using your DNA information, 23andMe helps you know more about your health so you can take an active role in managing it. With reports on over 240+ health conditions and traits, here are a few of the things you'll learn about you."
• "Plan for the future. Find out if your children are at risk for inherited conditions, so you can plan for the health of your family."
• "Living well starts with knowing your DNA."
• "Health tools - Document your family health history, track inherited conditions, and share the knowledge."
• "Drug response - Arm your doctor with information on how you might respond to certain medications."
• "Below are a few examples [diabetes, arthritis, coronary heart disease, breast cancer, plavix, lactose intolerance] where we can help you learn more. And when you know more, you can make better lifestyle choices, look out for common conditions and take steps toward mitigating serious diseases."
(https://www.23andme.com/health/ Accessed 11/26/13)
In addition to fraudulently representing that its PGS tests can provide relevant health and genetic information to individuals, the complaint also alleges that "Defendant uses the information it collects from the DNA tests consumers pay to take to generate databases and statistical information that it then markets to other sources and the scientific community in general, even though the test results are meaningless."
As a consequence:
Plaintiff alleges that, in committing the wrongful acts alleged herein, Defendant, in concert with its subsidiaries, affiliates, and/or other related entities and their respective employees, planned, participated in and furthered a common scheme to induce members of the public to purchase the PGS by means of misleading, deceptive and unfair representations, and that Defendant participated in the making of such representations in that it disseminated those misrepresentations and/or caused them to be disseminated.
Defendant's misrepresentations and practices injured and caused Plaintiff and Class members to lose money or property in that they purchased an expensive product with the expectation that it was scientifically supported.
The class encompasses "[a]ll persons in any of the 50 United States and District of Columbia who purchased a 23andMe Saliva Collection Kit and Personal Genome Service within the Class Period." The complaint also alleges facts relating to numerosity of class members, typicality (of the named plaintiff), and commonality and predominance of "[w]ell-defined, common legal or factual questions [that] affect all class members." The complaint also asserts that acting as a class is superior to having the class members act individually.
The suit alleges liability under the California Business and Professional Code §§ 17200 as an "unlawful, unfair or deceptive business act or practice and unfair, deceptive, untrue or misleading advertising" (Count 1:" the "unfair" and "fraudulent" prongs; Count 2: the "unlawful" prong) and §§ 17500 ("false and misleading advertising"; Count 3); the California Civil Code §§ 1750 and 1770 (Count 4); breach of warranty of merchantability and fitness for a particular purpose (Count 5); unjust enrichment (Count 6);"deceit by concealment" under California Civil Code §§ 1709 and 1710 (Count 7); and negligent misrepresentation (Count 8). They ask the court to enjoin 23andMe's advertising, and to provide "full restitution" to class members (estimated as being at least five million dollars). Plaintiffs demand a jury trial, punitive damages, costs of suit and pre- and post-judgment interest.
Under plaintiffs' theory, even compliance with the FDA's requirements will not absolve 23andMe from the alleged liability; plaintiffs contend that their injury arose by 23andMe's representations made without FDA approval, and that these were fraudulent because the company did not have scientific evidence sufficient to satisfy the FDA that the tests were reliable and thus were not legally capable of making those representations. And of course if the company cannot satisfy the FDA, the court can impose an injunction against 23andMe continuing to make its claims for (or to provide) the PGS test.
It has been a bad few weeks for 23andMe. If their recent luck holds, next Myriad will sue them (since their tests include determinations of the risk of breast and ovarian cancer due to BRCA gene mutations).
Patent Docs Makes List for Second Year in a Row
The ABA Journal has announced its annual list of the 100 best legal blogs -- or blawgs -- following a nomination process that began in July. The 100 blogs selected for the 2013 list have been divided into thirteen categories: Criminal Justice, Torts, LPM, Legal Research/Legal Writing, Litigation, Niche, News/Analysis, Labor & Employment, IP, Careers/Law Schools, Courts, Legal Tech, and For Fun. Five honorees of the 2013 Blawg 100 were selected in the IP category, including Patent Docs, which was selected to the Blawg 100 for the second year in a row. The other blogs selected to the IP Law category were Biederman Blog; Hollywood, Esq.; IPWatchdog; and Rebecca Tushnet's 43(B)log.
An alphabetical list of the 2013 Blawg 100 can be found here and a list of the top blawgs sorted by category can be found here. In announcing the 2013 Blawg 100, ABA Journal Editor and Publisher Allen Pusey noted that "[i]n our 7th year selecting the Blawg 100, we recognize that it takes more than luck to make it onto our list. Bloggers with the creativity to attract readers to their blogs and keep them engaged continue to be a pleasure to celebrate each year."
Now that the ABA Journal has selected its Blawg 100 for 2013, it is asking readers to choose their favorites from among the top 100. In order to vote for your favorites, you will first have to register here (registration is free). Readers can then vote for their favorite blogs here. Voting will conclude on December 20, and the winners will be announced in January.
In addition to releasing its 7th annual Blawg 100, the ABA Journal added ten new inductees to the Blawg 100 Hall of Fame, featuring law blogs that have "consistently been outstanding throughout multiple Blawg 100 lists." Last year's inaugural list of ten blawgs included Patently-O, and this year, the ABA Journal inducted IPWatchdog to the Blawg 100 Hall of Fame. A list of the twenty Blawg 100 Hall of Fame inductees can be found here.
We would like to thank our readers for nominating Patent Docs for the Blawg 100, and we would like to thank the ABA Journal for making Patent Docs a 2013 Blawg 100 honoree.
By Kevin E. Noonan --
Last week, the National Institutes of Health denied a petition from a coalition of "public interest" groups who petitioned the agency to exercise so-called "march-in rights" under provisions of the Bayh-Dole Act against Abbott (now, AbbVie) over its antiretroviral drug ritonavir, exclusively sold by Abbott Laboratories under the name Norvir®. These rights, and the conditions triggering their exercise, are set forth in 35 U.S.C. § 203:
35 USC § 203 - March-in rights
(a) With respect to any subject invention in which a small business firm or nonprofit organization has acquired title under this chapter, the Federal agency under whose funding agreement the subject invention was made shall have the right, in accordance with such procedures as are provided in regulations promulgated hereunder to require the contractor, an assignee or exclusive licensee of a subject invention to grant a nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible applicant or applicants, upon terms that are reasonable under the circumstances, and if the contractor, assignee, or exclusive licensee refuses such request, to grant such a license itself, if the Federal agency determines that such—
(1) action is necessary because the contractor or assignee has not taken, or
is not expected to take within a reasonable time, effective steps to achieve
practical application of the subject invention in such field of use;
(2) action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees;
(3) action is necessary to meet requirements for public use specified by Federal regulations and such requirements are not reasonably satisfied by the contractor, assignee, or licensees; or
(4) action is necessary because the agreement required by section 204 has not been obtained or waived or because a licensee of the exclusive right to use or sell any subject invention in the United States is in breach of its agreement obtained pursuant to section 204.
(b) A determination pursuant to this section or section 202 (b)(4) shall not be subject to chapter 71 of title 41. An administrative appeals procedure shall be established by regulations promulgated in accordance with section 206. Additionally, any contractor, inventor, assignee, or exclusive licensee adversely affected by a determination under this section may, at any time within sixty days after the determination is issued, file a petition in the United States Court of Federal Claims, which shall have jurisdiction to determine the appeal on the record and to affirm, reverse, remand or modify, as appropriate, the determination of the Federal agency. In cases described in paragraphs (1) and (3) of subsection (a), the agency's determination shall be held in abeyance pending the exhaustion of appeals or petitions filed under the preceding sentence.
Regulations on how these rights can be petitioned for exercise by the relevant Federal agencies (such as the National Institutes of Health) have been promulgated:
37 C.F.R. § 401.6 Exercise of march-in rights.
(a) The following procedures shall govern the exercise of the march-in rights of the agencies set forth in 35 U.S.C. 203 and paragraph (j) of the clause at § 401.14.
(b) Whenever an agency receives information that it believes might warrant the exercise of march-in rights, before initiating any march-in proceeding, it shall notify the contractor in writing of the information and request informal written or oral comments from the contractor as well as information relevant to the matter. In the absence of any comments from the contractor within 30 days, the agency may, at its discretion, proceed with the procedures below. If a comment is received within 30 days, or later if the agency has not initiated the procedures below, then the agency shall, within 60 days after it receives the comment, either initiate the procedures below or notify the contractor, in writing, that it will not pursue march-in rights on the basis of the available information.
(c) A march-in proceeding shall be initiated by the issuance of a written notice by the agency to the contractor and its assignee or exclusive licensee, as applicable and if known to the agency, stating that the agency is considering the exercise of march-in rights. The notice shall state the reasons for the proposed march-in in terms sufficient to put the contractor on notice of the facts upon which the action would be based and shall specify the field or fields of use in which the agency is considering requiring licensing. The notice shall advise the contractor (assignee or exclusive licensee) of its rights, as set forth in this section and in any supplemental agency regulations. The determination to exercise march-in rights shall be made by the head of the agency or his or her designee.
(d) Within 30 days after the receipt of the written notice of march-in, the contractor (assignee or exclusive licensee) may submit in person, in writing, or through a representative, information or argument in opposition to the proposed march-in, including any additional specific information which raises a genuine dispute over the material facts upon which the march-in is based. If the information presented raises a genuine dispute over the material facts, the head of the agency or designee shall undertake or refer the matter to another official for fact-finding.
(e) Fact-finding shall be conducted in accordance with the procedures established by the agency. Such procedures shall be as informal as practicable and be consistent with principles of fundamental fairness. The procedures should afford the contractor the opportunity to appear with counsel, submit documentary evidence, present witnesses and confront such persons as the agency may present. A transcribed record shall be made and shall be available at cost to the contractor upon request. The requirement for a transcribed record may be waived by mutual agreement of the contractor and the agency. Any portion of the march-in proceeding, including a fact-finding hearing that involves testimony or evidence relating to the utilization or efforts at obtaining utilization that are being made by the contractor, its assignee, or licensees shall be closed to the public, including potential licensees. In accordance with 35 U.S.C. 202(c)(5), agencies shall not disclose any such information obtained during a march-in proceeding to persons outside the government except when such release is authorized by the contractor (assignee or licensee).
(f) The official conducting the fact-finding shall prepare or adopt written findings of fact and transmit them to the head of the agency or designee promptly after the conclusion of the fact-finding proceeding along with a recommended determination. A copy of the findings of fact shall be sent to the contractor (assignee or exclusive licensee) by registered or certified mail. The contractor (assignee or exclusive licensee) and agency representatives will be given 30 days to submit written arguments to the head of the agency or designee; and, upon request by the con- tractor oral arguments will be held before the agency head or designee that will make the final determination.
(g) In cases in which fact-finding has been conducted, the head of the agency or designee shall base his or her determination on the facts found, together with any other information and written or oral arguments submitted by the contractor (assignee or exclusive licensee) and agency representatives, and any other information in the administrative record. The consistency of the exercise of march-in rights with the policy and objectives of 35 U.S.C. 200 shall also be considered. In cases referred for fact-finding, the head of the agency or designee may reject only those facts that have been found to be clearly erroneous, but must explicitly state the rejection and indicate the basis for the contrary finding. Written notice of the determination whether march-in rights will be exercised shall be made by the head of the agency or designee and sent to the contractor (assignee of exclusive licensee) by certified or registered mail within 90 days after the completion of fact-finding or 90 days after oral arguments, whichever is later, or the proceedings will be deemed to have been terminated and thereafter no march-in based on the facts and reasons upon which the proceeding was initiated may be exercised.
(h) An agency may, at any time, terminate a march-in proceeding if it is satisfied that it does not wish to exercise march-in rights.
(i) The procedures of this part shall also apply to the exercise of march-in rights against inventors receiving title to subject inventions under 35 U.S.C. 202(d) and, for that purpose, the term ''contractor'' as used in this section shall be deemed to include the inventor.
(j) An agency determination unfavorable to the contractor (assignee or exclusive licensee) shall be held in abeyance pending the exhaustion of appeals or petitions filed under 35 U.S.C. 203(2).
(k) For purposes of this section the term exclusive licensee includes a partially exclusive licensee.
(l) Agencies are authorized to issue supplemental procedures not inconsistent with this part for the conduct of march-in proceedings.
A little over one year ago, four groups (the American Medical Students Association (AMSA), Knowledge Ecology International (KEI), U.S. Public Interest Research Group (PIRG), and the Universities Allied for Essential Medicines (UAEM)) filed a petition with the NIH requesting the agency to exercise these march-in rights over the anti-AIDS drug ritonavir, exclusively sold by Abbott Laboratories (see "Groups Petition for NIH Exercise of March-in Rights over Abbott Laboratories' Norvir®"). Significant to the NIH's latest decision, AbbVie's Norvir® product was the subject of a challenge by a group called Essential Inventions filed a petition, based not on private interests but on what it characterized as the "public interest" for lower prices on the HIV drugs. In this case, there was no university party involved; Abbott/AbbVie had been funded by research monies from the Reagan administration in an effort to develop more effective anti-AIDS drugs. The patents at issue (U.S. Patent Nos. 5,541,206; 5,635,523; 5,648,497; 5,674,882; 5,846,987; 5,886,036; the agency notes that not all of these patents were developed under government contract and thus the Bayh-Dole march-in provisions do not apply to these patents) were the same patents that were the subject of the current petition, as was the basis in the statute: that the requirement for licensing on "reasonable terms" ("upon terms that are reasonable under the circumstances") was violated by Abbott's pricing for Norvir®. The NIH held public hearings and received written and oral testimony from a "variety of groups and individuals representing universities, the AIDS community, pharmaceutical interests, drafters of the Bayh-Dole Act, and other interested parties." Despite these arguments (including arguments that Abbott's pricing was preventing state government agencies from providing Norvir® to patients), the NIH refused to exercise its march-in rights, saying:
[T]he issue of the cost or pricing of drugs that include inventive technologies made using Federal funds is one which has attracted the attention of Congress in several contexts that are much broader than the one at hand. In addition, because the market dynamics for all products developed pursuant to licensing rights under the Bayh-Dole Act could be altered if prices on such products were directed in any way by NIH, the NIH agrees with the public testimony that suggested that the extraordinary remedy of march-in is not an appropriate means of controlling prices. The issue of drug pricing has global implications and, thus, is appropriately left for Congress to address legislatively.
In the latest petition, the allegations again involved the cost of Abbott's Norvir® to U.S. patients. In view of the agreement following the 2004 petition that has Abbott selling the drug to state and Federal government agencies at reduced cost, the petition focused on the impact of these costs on private parties. In this regard the petitioners argued that, in view of the financial crisis, these high[er] drug costs were "undermining the international competitiveness of [U.S.] employers" and harming the economy (leaving unsaid the hope for a different outcome from a different administration).
The petition asked for two specific remedies to be imposed "without prejudice to" further march-in rights in response to "anticompetitive, abusive or unfair practices" by a licensee. These remedies are:
• A ceiling on prices for U.S. residents, to be imposed when US prices for a drug are higher than 7 of 10 comparison countries, among "high income" countries as determined by the World Bank, or prices for U.S. residents, when are 10% higher than the median price in those countries (these circumstances would be "presumptively not reasonable" under the statute); and
• Licenses specific for use of a patented invention in the development of a "dependent" technology, such as a co-formulation of a patented drug with another drug.
In addition, the petition requested imposition of "open" licensing for the drug under the agency's march-in rights provisions. Petitioners suggested two additional "legal mechanisms" for achieving these ends: royalty-free government licenses (involving participation by the government in drug distribution, etc.) and the grant of government licenses to third parties.
In addition to the public health and unreasonable licensing grounds asserted in the petition, petitioners further argued that the Americans with Disabilities Act (as it has been interpreted by the Equal Employment Opportunities Commission) and the PPACA (the "healthcare law") imposes requirements on employers that implicate the provisions of § 203(a)(3) that allow the agency to exercise march-in rights to permit compliance with Federal regulations. Finally, the petition asserted the policy rationale that "[t]he failure to grant a single march-in request in more than 30 years has sent a signal to the patent holder that the NIH will permit almost anything, no matter how abusive that action is to the public that paid for the research."
After setting forth the facts as alleged by petitioners (and otherwise) and controlling law, the agency cited the following grounds for denying the petition. First, the agency found that AbbVie had "achieved practical application of the Subject Patents" as required under § 203(a)(1) because "Norvir® has now been on the market as an FDA approved drug since 1995," primarily as a coadministered drug used to "booster the effectiveness of protease inhibitors." The agency further stated that "[t]he Requestors have provided no information, and no information was identified to suggest, that ritonavir is in short supply" either as a standalone drug or when co-formulated or co-administered. In addition, the agency noted that Matrix Laboratories and Gilead had both received FDA approval for combinations of ritonavir and other antiretroviral drugs. Accordingly, "AbbVie's record of manufacture and ritonavir's availability and use around the world demonstrate that" AbbVie has satisfied the requirements of § 203(a)(1).
Second, the agency rejected Petitioner's argument that AbbVie had failed to satisfy the requirements of § 203(a)(2) to alleviate health or safety needs of the public due, according to Petitioners, to its high price. The agency cited evidence that AbbVie had adopted a "Patient Assistance Program" for patients prescribed the drugs having no prescription drug insurance, and the company's testimony that it "provides access to Norvir® at no cost or at reduced prices for eligible patients." The agency also relied upon the previous denial of exercise of march-in rights for Norvir®, wherein the agency had determined that "Norvir® has been approved by the FDA as safe and effective and is being widely prescribed by physicians for its approved indications." And the changes that have occurred since this earlier agency determination involved "new formulations and combination therapies using ritonavir," developments that increased rather than decreased access. Accordingly the agency found "[n]o new information  to suggest [that] AbbVie failed to 'reasonably satisfy' the health and safety need standard of [§ 203(a)(2)] of the Bayh-Dole march-in statute."
Finally, the agency found that recently enacted provisions of the Americans with Disabilities Act (ADA) and the Patient Protection and Affordable Care Act (PPACA) do not constitute "Federal regulations" under § 203(a)(3) unsatisfied by AbbVie. That portion of the statute applies, according to the NIH, "when a statute or regulation, e.g., a safety or standards regulation, specifically requires the use of a patented technology, and the patent owner is not willing to grant licenses to third parties required to use it in their products. Finding that these circumstances do not apply in this instance, the NIH denied the petition because "these statutes do not apply as a basis for consideration of march-in rights." The NIH also rejected "additional government actions" including a request for use of the government's "use" license and a request that the NIH develop rules when there are price disparities between the U.S. and other developed countries. As to the former, the agency stated that while the NIH has the authority to grant a non-exclusive license under § 202(c)(4) the agency "is a research institution not a drug manufacturer" and that "[e]ven if the NIH were to exercise its Government license  it would not address the majority of the patients listed" in the Orange Book that were not government-owned. Further, the NIH noted that "there is already a statutory mechanism, the Hatch-Waxman Act, to address barriers to generic [drug] entry" and that, in fact, "Hatch-Waxman proceedings have been instituted for at least three generic companies" for ritonavir.
Regarding the request that the NIH issued rules for addressing price disparities, the agency rejected the scheme. As set forth in the petition decision, Petitioners had asked the NIH to establish two rules:
Rule 1: there will be a rebuttable presumption that the price of an NIH-supported drug is not "reasonable" when the price in the U.S. is higher than the price in "seven of the ten largest countries" (measured by Gross National Product) or when the U.S. price is 1at least 10% higher than in the reference countries. Under this Rule, the NIH would "award contracts or grant license to competitors" if the presumption was not rebutted. These countries include "high-income" countries such as Norway, Italy, France, Canada, Australia, the Netherlands, New Zealand, and the United Kingdom.
Rule 2 is a compulsory licensing provision, that requires the NIH Director to grant such a license "subject to the payment of a reasonable royalty and [be limited to an] appropriate field of use, for "a drug, drug formulation, delivery mechanism, medical device, diagnostic or similar invention" that "is used or is potentially useful to prevent, treat, or diagnose [human] medical conditions or diseases," where "co-formulation, co-administration, or concomitant use with a secondary product is necessary to effect significant health benefits from the second product" under circumstances where the patentee has "refused a reasonable offer for a license."
The agency rejected Rule 1 because "[i]t is not appropriate to assess the price of one drug out of the context of a country's entire health care delivery and drug pricing/reimbursement system" (particularly because "the United States does not have a delivery system like any of these other country comparators"). The NIH refused to consider Rule 2 because in its view the Bayh-Dole Act does not provide for the authority to grant such compulsory licenses when a Petitioner has not identified "any of the four Bayh-Dole march-in criteria."
The agency noted in its conclusion that it is "sensitive to the impact of the pricing of drugs and their availability to patients." However, the NIH also noted that its authority is limited to policing compliance with the Bayh-Dole Act, and that here as in 2004 "the extraordinary remedy of march-in is not an appropriate means of controlling prices of drugs broadly available to physicians and patients," suggesting petitioners pursue "legislative and other remedies.
There is one additional aspect of this decision that bears mentioning. Senator Patrick Leahy (D-VT) recently sent a letter to Francis Collins, NIH Director, asking that the agency exercise its march-in rights with respect to Myriad's BRCA gene testing patents (see "Senator Leahy Urges NIH to Use March-In Rights on Myriad BRCA Test"). While it is impossible to assess how the agency will react to a request from a Senator and politician rather than a groups such as Petitioners here, many of the factual considerations that mitigated against exercise of march-in rights here exist in the Myriad case. (Of course, in Myriad what is at issue is the availability of a test for a relatively rare genetic mutation, rather than price availability for a drug for patients with a life-threatening and incurable infection.) Thus, what might be truly extraordinary would be if the NIH came to a different decision in Myriad than it has here.
By Josh Rich --
The first United States Intellectual Enforcement Property Coordinator ("IPEC"), Victoria Espinel (at right), has stepped down after four years in the position. During her tenure, Ms. Espinel worked to strengthen enforcement of intellectual property rights in the United States, at its borders, and overseas. Howard Shelanski, the recently confirmed administrator of the Office of Information and Regulatory Affairs for the White House, will serve as the acting IPEC; IPEC chief of staff Alex Niejelow will help handle policy issues.
The position of IPEC was created by the Prioritizing Resources and Organization for Intellectual Property (PRO-IP) Act of 2008. Under the PRO-IP Act, the IPEC is charged with developing the Joint Strategic Plan on Intellectual Property Enforcement and serves as a principal advisor to, and spokesperson for, the President on intellectual property issues. The IPEC is also charged with assisting the US Trade Representative in intellectual property negotiations with other countries and enforcing foreign obligations under trade agreements. Finally, the IPEC coordinates the issuance of intellectual property policy guidance to various governmental authorities.
Ms. Espinel was the first person appointed to the position of IPEC. Prior to her appointment, she had worked in private law firms, governmental positions, and academia. After graduating from law school, she worked as an associate at the law firms of Covington & Burling and Sidley Austin and served as an advisor for an investment company. She then joined the Office of the US Trade Representative as the senior counsel for intellectual property issues in 2001. In 2005, she became the first Assistant US Trade Representative for Intellectual Property and Innovation at the Office of the U.S. Trade Representative and, in that position, created the office of Intellectual Property and Innovation at the Office of the US Trade Representative. Then, from 2007 to her appointment as IPEC in 2009, she was a visiting professor at the George Mason School of Law, specializing in intellectual property and international trade.
While serving as IPEC, Ms. Espinel oversaw the preparation and issuance of the first two Joint Strategic Plans on Intellectual Property Enforcement, the most recent one issued in June 2013. She coordinated the preparation and launch of the Administration's Strategy on Mitigating the Theft of U.S. Trade Secrets and has helped facilitate the implementation of the America Invents Act, including by facilitating intragovernmental policy advice (see "Obama Administration Solicits Public Help in Preventing Foreign Trade Secret Theft"). And as the controversy over the Stop Online Piracy Act grew, she helped defuse concerns by writing a blog post indicating that "[a]ny effort to combat online piracy must guard against the risk of online censorship of lawful activity and must not inhibit innovation by our dynamic businesses large and small." All in all, she will be credited for strengthening the enforcement of intellectual property rights over the past four years, especially through copyright, trade secret, and anti-counterfeiting laws and enforcement efforts.
Mr. Shelanski joined the White House last month from the Bureau of Economics at the Federal Trade Commission. In his primary position, he is charged with reviewing all of the Obama Administration's potential regulations. Like Ms. Espinel, he has also worked as a law professor (at the University of California, Berkeley and the Georgetown University Law Center). Unlike Ms. Espinel, his focus has been on antitrust, regulation, and telecommunications policy. Mr. Niejelow, who will be assisting him on policy issues, has been in the position of chief of staff for one year and was previously counselor and special assistant to the Commissioner of US Customs and Border Protection.
Ms. Espinel's departure leaves the office of the IPEC in need of both experience and focus. She recently solicited comments from the public on potential legislative improvements to the enforcement of trade secrets in the US; the IPEC's office is supposed to promptly propose steps to take in response to those comments. Further, Mr. Shelanski's divided attention will limit his ability to lead in facilitating intragovernmental cooperation in the enforcement of intellectual property rights. Accordingly, in order to maintain the Obama Administration's momentum in protecting and enforcing intellectual property rights, and to prevent the importation of counterfeit goods, it will be important for a permanent replacement to be nominated quickly.
Last month, the ABA Journal began work on its 7th annual list of the 100 best legal blogs (or blawgs) and announced that it is seeking the advice of its readers, via the ABAJournal.com website, on which blogs to include on this year's Blawg 100. Last year, Patent Docs was honored to be included among five blogs selected in the IP Law category of the Blawg 100 (see "ABA Journal Announces 2012 Blawg 100").
Readers interested in nominating a particular blog should use the blawg 100 amici form provided on the ABA Journal website. Additional information about the Blawg 100 can also be found on the blawg 100 amici form. The nomination period for the ABA Blawg 100 closes on Friday, August 9th.
By Donald Zuhn --
On Friday, Sen. Patrick Leahy (D-VT) sent a letter to Dr. Francis Collins, the Director of the National Institutes of Health (NIH), "to urge [the Director] to consider using march-in rights under the Bayh-Dole Act to ensure greater access to genetic testing for breast and ovarian cancer." The Bayh-Dole Act, which was enacted in 1980, created a uniform patent policy among the many federal agencies that fund research, enabling small business and non-profit organizations -- including universities -- to retain title to inventions made under federally funded research programs. In commemorating the Act's 30th anniversary in 2010, the U.S. Patent and Trademark Office noted that "[t]he legislation is credited with the creation of thousands of new companies and billions of dollars of direct benefits to the U.S. economy" (see "USPTO Recognizes 30th Anniversary of Bayh-Dole Act").
As a result of the concern that U.S. taxpayers should not have to pay businesses for inventions that the public has already paid for, legislators added a section to the Act that gave the government "march-in" rights. Recently, a handful of groups filed a petition with the NIH requesting the agency to exercise these march-in rights over the anti-AIDS drug ritonavir, exclusively sold by Abbott Laboratories (see "Groups Petition for NIH Exercise of March-in Rights over Abbott Laboratories' Norvir®," which includes a discussion of the statute and regulation governing the exercise of the government's march-in rights under the Bayh-Dole Act, as well as a recent history of requests that the government exercise such rights).
In encouraging the NIH to exercise its march-in rights with respect to the Myriad's BRCA test, Sen. Leahy (above right) indicates that:
Myriad's genetic test, which was developed with federally-funded research, is truly important for public health. Myriad is the only provider of this test because it is covered by patent protection. Unfortunately, testimony before the United States Patent and Trademark (USPTO) revealed that Myriad does all of this testing in-house, and charges between $3,000 and $4,000.
The letter notes that while the Supreme Court determined last month in Association for Molecular Pathology v. Myriad Genetics, Inc. that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, the Court also held that cDNA is patent eligible because it is not naturally occurring (albeit with the caveat, which the letter does not address, that a "very short series of DNA may have no intervening introns to remove when creating cDNA," and therefore, "a short strand of cDNA may be indistinguishable from natural DNA"). "As a result," Sen. Leahy suggests that "Myriad may continue to be the only company able to provide women with the genetic testing they need to make important health care decisions."
Sen. Leahy explains that because "the Bayh-Dole Act . . . gives the government tools, known as 'march-in rights,' to provide greater access to the subject invention in appropriate situations," "[t]he government can require the patent holder to grant a license to the patent on reasonable terms." He notes that "[i]f the patent owner refuses, the government can directly license the patent in limited circumstances, including if it 'is necessary to alleviate health or safety needs which are not reasonably satisfied' by the patentee." Indicating that "Myriad's patents were based in part on federally-funded research," and stating that the health benefits and healthcare cost savings of genetic testing for breast and ovarian cancer are clear, Sen. Leahy expresses "concern that the health needs of the public are not reasonably satisfied by the patentee in this situation because testimony presented to the USPTO made clear that many women are not able to afford the testing provided by Myriad." He therefore encourages the Director to consider using the government's march-in rights with respect to the Myriad's BRCA test.
Interestingly, of the ten patents that Myriad recently asserted against Ambry Genetics (see "Myriad Genetics Files Suit Against Ambry Genetics for Genetic Diagnostic Testing of BRCA Genes"), only two (U.S. Patent Nos. 5,747,282 and 5,753,441) are assigned (on their face) to the U.S. government (as well as to Myriad and the University of Utah Research Foundation). Of the remaining patents, one (U.S. Patent No. 5,709,999) is assigned to Myriad, the Centre de Recherche du Chul (Sainte-Foy, Canada), and the Cancer Institute (Tokyo, Japan); two (U.S. Patent Nos. 5,837,492 and 6,033,857) are assigned to Myriad, Endo Recherche, Inc. (Sainte-Foy, Canada), HSC Research & Development Ltd. (Toronto, Canada), and the Trustees of the University of Pennsylvania; three (U.S. Patent Nos. 5,654,155, 5,750,400, and 6,051,379) are assigned to OncorMed, Inc.; one (U.S. Patent No. 6,951,721) is assigned to Gene Logic Inc.; and one (U.S. Patent No. 7,250,497) is assigned to Myriad alone. A search of the USPTO's Assignments on the Web for Patents (AOTW-P) database indicates that Myriad assigned the '999, '492, and '857 patents to the University of Utah Research Foundation, and that the '155, '400, '379, and '721 patents are assigned to Gene Logic Inc. and Myriad.
Patent Docs thanks Hal Wegner for alerting the patent community to Sen. Leahy's letter.
The ABA Journal has begun work on its 7th annual list of the 100 best legal blogs (or blawgs) and has announced that it is seeking the advice of its readers, via the ABAJournal.com website, on which blogs to include on this year's Blawg 100. Last year, Patent Docs was honored to be included among five blogs selected in the IP Law category of the Blawg 100 (see "ABA Journal Announces 2012 Blawg 100").
Readers interested in nominating a particular blog for the 7th annual Blawg 100 should use the ABA Journal's blawg 100 amici form. Additional information about the Blawg 100 can also be found on the blawg 100 amici form. The form requires that anyone making a nomination provide a name, employer or law school, city, and e-mail address. The ABA Journal requires this information in order to discourage:
• Bloggers who nominate
their own blogs or nominate blogs to which they have previously contributed
• Wives and husbands who nominate their spouses' blogs.
• Employees of law firms who nominate blogs written by their co-workers.
• Public relations professionals in the employ of lawyers or law firms who nominate their clients' blogs.
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By Josh Rich --
On Tuesday, the U.S. Intellectual Property Enforcement Coordinator, Victoria Espinel, published a notice in the Federal Register "requesting any recommendations for legislative changes that would enhance enforcement against, or reduce the risk of, the misappropriation of trade secrets for the benefit of foreign competitors or foreign governments." 78 Fed. Reg. 16875 (Mar. 19, 2013). Submissions are due by April 22, 2013. The request for public submissions is one of the first steps in the implementation of the "Administration Strategy on Mitigating the Theft of U.S. Trade Secrets," issued on February 20, 2013 (see ""Obama Administration Reports on Efforts to Prevent Trade Secret Misappropriation").
The Administration Strategy is a five-pronged approach, coordinated by the U.S. IP Enforcement Coordinator and involving many of the executive branch departments.
First, the strategy calls for the White House to focus diplomatic efforts to protect trade secrets overseas. Although the Administration Strategy does not expressly identify any specific countries on which it is focused, the examples of misappropriation of trade secrets for the benefit of foreign companies and countries are almost exclusively Chinese. Consistent with this focus on China, National Security Advisor Tom Donilon later said that reports of cyber theft of confidential business information from entities in China were occurring "on a very large scale" and that the Chinese government "should take serious steps to investigate and put a stop to these activities" ("US calls for 'serious' action by China to stop cybertheft," The Washington Post, March 11, 2013). However, a private U.S.-based cybersecurity firm had previously issued a report identifying the Chinese government (specifically, a military unit based in Shanghai) as being one of the causes of Chinese cyberattacks (see Mandiant Intelligence Center Report). Thus, while the Strategy calls for sustained and coordinated international engagement with trading partners, such as China, it may be difficult for the Federal agencies charged with doing so (including the Departments of Commerce, Defense, Homeland Security, Justice, State, and Treasury, and the U.S. Trade Representative) to make much headway. The Administration may find more success in the Department and PTO working with other countries through Intellectual Property Rights (IPR) working groups to fashion rules and policies to discourage trade secret theft. The Strategy also calls for domestic law enforcement agencies to leverage international law enforcement cooperative agreements and arrangements to pursue investigations both in the U.S. and abroad.
Second, the Strategy calls for the U.S. IP Coordinator to promote voluntary best practices by private industry to protect trade secrets. While the IP Enforcement Coordinator will work with the Departments of Justice and State (among other agencies) to encourage companies and industry groups to develop and implement voluntary best practices, the Administration Strategy expressly indicates that those best practices must be consistent with antitrust laws. Among the areas in which the Strategy suggests focus are R&D compartmentalization, information security, physical security, and human resources policies. But the Strategy makes it clear that compliance with best practices must be voluntary, and any identified best practices may not be suitable for all companies.
Third, the Strategy calls for the enhancement of domestic law enforcement operations. Spearheaded by the Attorney General's Task Force on Intellectual Property and the FBI, the Department of Justice is making the investigation and prosecution of corporate and state-sponsored trade secret theft a higher priority. The Office of the Director of National Intelligence will also coordinate the sharing of intelligence among the intelligence and law enforcement communities in order to monitor foreign government activity and prevent international trade secret misappropriation, and will also work with the private sector to warn of potential threats.
Fourth, the Strategy calls for the Administration to improve domestic legislation. This is the prong to which the U.S. IP Coordinator's Federal Register notice is directed, and one area where there has been concrete (although incremental) progress in recent months. The Strategy highlighted two acts passed at the conclusion of the last Congress. First, the "Theft of Trade Secrets Clarification Act of 2012" was intended to reverse the outcome of cases like United States v. Aleynikov, 676 F.3d 71 (2d Cir. 2012), in which the defendant stole the source code for a proprietary high-frequency trading system from his former employer to provide it to a new employer, but was acquitted because the source code was intended to remain secret and therefore not "related to or included in a product that is produced for or placed in interstate or foreign commerce." That Act modified the Economic Espionage Act (EEA) to make it cover trade secrets "related to a product or service used in or intended for use in interstate or foreign commerce." Second, the "Foreign and Economic Espionage Penalty Act of 2012" did exactly that: increased potential sentences and fines for violations of the EEA. The U.S. IP Enforcement Coordinator is charged with coordinating an initial review of existing Federal laws within 120 days of the release of the Administration Strategy, by June 20, 2013.
Finally, the Strategy calls for various departments in the Administration to increase efforts to develop public awareness and engage in stakeholder outreach. For example, the FBI and Department of Commerce are to continue and expand their efforts to inform the public about the threat and cost of trade secret misappropriation, using existing public awareness programs. In addition, the PTO will include discussion of the economic implications of trade secret misappropriation in its "road show" events.
All in all, the Administration Strategy suggests a greater focus on protection of trade secrets against foreign misappropriation, as well as a more coordinated effort than in the past. But the next steps, both in discussions with China and shaping of Federal legislation, may be critical in determining whether that effort provides greater security for domestic companies. We will continue to monitor developments and will report back on suggested legislative changes.