Patent Docs

Forbes Calculates Average Drug Development Cost at $4-$11 Billion

By Donald Zuhn --

Last week, Forbes reported that the development costs for an average drug (produced by a major pharmaceutical company) are at least $4 billion, and as much as $11 billion ("The Truly Staggering Cost Of Inventing New Drugs").  The article, by Forbes science and medicine writer Matthew Herper, notes that the drug industry pegs average drug development costs at $1 billion, and that Bernard Munos of the InnoThink Center for Research In Biomedical Innovation, adjusting for current failure rates, arrives at an estimate of $4 billion.  Seeking a more rigorous estimate, Mr. Herper and Forbes writer Scott DeCarlo combined Mr. Munos’ drug approval counts with the research and development spending for a dozen major pharmaceutical companies, as reported in annual earnings filings over the past fifteen years (pulled from a Thomson Reuters database using FactSet), and adjusted the resulting figures for inflation.  Their calculations showed that of the twelve pharma companies, AstraZeneca spent the most R&D money per approved drug (nearly $11.8 billion) and Amgen spent the least (almost $3.7 billion).  The other companies on Forbes' list were Novartis, Bristol-Myers Squibb, Merck, Abbott Laboratories, Eli Lilly, Johnson & Johnson, Pfizer, Roche, Sanofi, and GlaxoSmithKline.  The number of drug approvals, R&D spending per drug approval, and total R&D spending for each of the above companies can be found in the Forbes article.

Pfizer's Lipitor: A New Model for Delaying the Effects of Patent Expiration

By James DeGiulio --

Pfizer's exclusive right to sell atorvastatin, the active pharmaceutical ingredient in the blockbuster cholesterol drug Lipitor, ended yesterday, November 30, the day generic competitors are licensed to enter the market as agreed upon during settlement of past patent litigations.  It was a day the pharma giant has been dreading for quite some time.  This dread is well founded:  on average, once a drug goes off patent, the patent holder's market share typically falls by a staggering 89% in the first 6 months.  However, thanks to several innovative strategies, Pfizer's Lipitor, which has enjoyed a commanding 40% share in the cholesterol drug market, stands a good chance of being the exception to this trend, according to a recent article in The New York Times ("Facing Generic Lipitor Rivals, Pfizer Battles to Protect Its Cash Cow").  The sector outlook appears to be optimistic -- investor studies have upgraded Pfizer's rating, and expect the company to retain much of its market share even now that the patent has expired.  The strategies implemented by Pfizer, assuming they survive governmental scrutiny, may provide a model for brand companies facing blockbuster drugs going off-patent.

Pfizer has employed a multi-pronged approach to retain its position in the cholesterol market for these next critical 180 days.  First, Pfizer has several authorized generics deals in place.  For example, an authorized generic from Watson Pharmaceuticals went on sale yesterday.  However, Watson's drug is manufactured by Pfizer, and Watson has to give about 70 percent of its profits to Pfizer.

Perhaps more importantly, Pfizer has dropped the price of Lipitor considerably, and continues to aggressively discount the drug to match any price and maintain brand loyalty.  Pfizer's prices are currently undercutting most of the imminent generic competition on price.  Pfizer has also made it known that its new discounts can easily be adjusted to beat any responsive reduction in the expected generic pricing.  Pfizer has a huge margin because of the relatively low cost of materials for Lipitor.  And with their manufacturing and volume advantage over generic competitors who are just getting off the ground, Pfizer can afford to drop the price considerably and continue to profit off of Lipitor.

Pfizer is also providing incentives to customers to stay on the brand drug.  They have offered a reduced co-payment of $4 a month versus the $10 customers would pay for many generic prescriptions.  Pfizer's program, called "Lipitor for You," offers a $4 co-payment card and direct delivery of Lipitor.  The program is limited to privately insured customers.  However, the discounts can also be applied to many Medicare prescription drug plans, which have agreed to dispense Lipitor even if patients ask for generics.  Pharmacy benefit management company CVS/Caremark has notified pharmacies that the generic form of Lipitor would not be covered for 29 prescription drug plans it manages for Medicare Part D.  Instead, brand Lipitor will be filled, but only a generic co-pay will be applied.  Any prescription claims for generic atorvastatin will be rejected.  Pfizer, the benefit managers and some insurers insist all of the new discount will be passed along to consumers, companies and other payers.  While this remains to be seen, CVS/Caremark has already lowered its premiums for the government and Lipitor users.

Pfizer's tactics to protect its market share have naturally drawn scrutiny.  Many of these strategies may call into question the incentive system created to foster the development of generic drugs, as they arguably extend Pfizer's patent monopoly beyond its expiration.  The Federal Trade Commission and several Senators are investigating Pfizer's agreements with pharmaceutical benefit manager and generics companies.  Senators Max Baucus (D-MT), Chuck Grassley (R-IA) and Herb Kohl (D-WI) have written letters to Pfizer and those who have aligned with Pfizer, asking for information about agreements aimed at limiting the sale of generic atorvastatin.  According to these letters, the Senators believe that "just about everyone wins except consumers and taxpayers."

Not all companies have aligned with Pfizer -- some companies have rejected their advances.  Express Scripts and Medco Health Solutions, both large pharmacy benefit managers, are recommending that its clients not accept Pfizer's deals under the reasoning that it could cost them more in the long run.  However, these companies will still use Lipitor as a "house generic" because Pfizer has guaranteed to match the price and assured a supply.

Late yesterday, Ranbaxy Laboratories, the first filer against several patents covering Lipitor, was granted FDA approval for its avorstatin calcium, despite a federal investigation into falsifying records resulting in the production and sale of medications that failed to meet FDA standards.  Ranbaxy has a deal with Teva Pharmaceuticals, which already sells a generic Lipitor in Canada, to help supply the drug.  Once Ranbaxy's 180-day initial generic exclusivity has expired and all generics can produce avorstatin calcium, it may be inevitable that Pfizer finally loses its considerable market share.  Pfizer expects up to eight generics to compete for market share after the 180-day exclusivity period expires.

WFU Law Professor Says Federal Circuit Failed as "Keeper of the Constitution" in AMP v. USPTO

By Donald Zuhn --

In an article published in The Huffington Post on Sunday, Wake Forest University Law Professor Simone Rose accuses the Federal Circuit of failing in its duty as "keeper of the Constitution" with respect to the Court's July 29 decision in Association for Molecular Pathology v. U.S. Patent and Trademark Office.  Noting her background as a former registered patent attorney, Professor Rose writes that one question came to mind as she read the majority and concurring opinions, namely "[h]ow can the court allow chemical differences to supersede biological equivalence when the specific utility of the invention, namely detecting mutations linked to breast and ovarian cancer, depends on biological identity?"  She argues that "[c]hemically modifying an isolated gene [i.e., "breaking . . . chemical bonds during the isolation process"] does not alter its biological heart (nucleotide sequence)," and that "[a]ccurately detecting BRCA mutations would be impossible without this biological identity."

As for the focus by the majority and concurring opinions on long-standing USPTO practice in issuing gene patents and on the impact an affirmance would have had on the biotech industry, Professor Rose (at left) contends that while "promoting innovation is a laudable goal, the Federal Circuit's broadening of what constitutes patent-eligible subject matter missed the bigger Constitutional target."  According to the Professor, the Constitution's Patent Clause requires that the granting of exclusive rights under the patent system be balanced against providing access to basic knowledge.  She therefore concludes that "[p]atenting products of nature such as isolated genes and gene sequences prevents access to these basic research tools during the term of the patent," and "[t]his impedes rather than promotes progress and is therefore in direct violation of the IP clause."

Professor Rose argues that federal courts have an obligation, as "keepers of the Constitution," to ensure that their analysis of 35 U.S.C. § 101 and controlling case law is "in harmony with the Constitutional mandate to promote progress of the useful arts."  She contends that in AMP v. USPTO, "[t]he Federal Circuit should have taken this role seriously and upheld the lower court's invalidation of the BRCA isolated genes and gene sequence patents as patent-ineligible subject matter."

Interestingly, for Professor Rose, the end result of the invalidation of Myriad's patents would be Congress weighing in on the issue of gene patenting.  Unlike the majority and concurring opinions, which state that if the law is to be changed, it is up to Congress and not the courts to change it, Professor Rose believes that a finding by the Federal Circuit of invalidity would have permitted (or encouraged) Congress to step in and "legislate a new 'Constitutional' framework of exclusive rights for this subject matter."  Looking forward, the Professor says that she remains "hopeful" that the Federal Circuit sitting en banc or the Supreme Court "will be mindful of its role as the keeper of the Constitution and interpret the Patent Act's subject matter limitation to exclude the BRCA genes as patent-ineligible products of nature."  She argues that an "appropriate legislative dialogue" on a solution that balances access and innovation can only begin after the courts determine that gene patents should be excluded as patent-eligible subject matter.

Securing Customer Loyalty Recommended to Avoid Patent Cliff

By James DeGiulio --

Brand pharmaceutical companies are expecting a serious financial fallout sometime over the next few years, when several blockbuster drugs lose patent protection, commonly known as a "patent cliff."  The loss in revenue could be substantial.  From 2010 to 2013, brand pharmaceutical companies are projected to lose a total of $137 billion to patent expiration and generic competition.  Brand pharmaceuticals are bracing for decreased profits, and always working toward preventing patent cliffs from occurring again in the future.  While patent expiration is of course a primary cause, it is not the only cause, at least according to a recent Bloomberg Businessweek article ("Pharma Needs an Innovation Intervention").  Brand pharmaceutical companies can also place blame on not developing a customer loyalty base and not fully addressing customer needs.

In the article by G. Michael Maddock and Raphael Louis Vitón, the authors recommend that brand pharma revise its current business model to mitigate the dramatic financial effects of patent expiration.  The authors note that it takes around 8 years to get regulatory approval for a new drug, and the patent covering the drug lasts only 17 years at maximum, resulting in only 9 years of exclusivity.  While these 9 years can be extremely profitable, once the drug goes off patent, the patent holder's market share typically falls by a staggering 89 percent in the first 6 months.  The authors point to the well-publicized situation with Lipitor, an $11 billion-a-year cholesterol drug over which Pfizer will lose patent protection early next year.  It remains extremely difficult to make the research and development process move much faster, so limited patent protection and patent expiration will always be problematic.  Indeed, despite having spent a total of $64 billion in 2010, the industry received approval to market only 21 new drugs.

To try and mitigate the loss in market share to generic versions of the brand drugs, the authors suggest that the pharmaceutical industry take a new approach that shifts focus away from viewing its customers as mere "druggable targets."  Instead, there should be more emphasis placed on better understanding customers' needs, locating target insights, and building brand loyalty.  In the article, the industry is accused of merely "inventing" thus far, when it really needs to be innovating.  Consumer-driven companies like Starbucks, Apple, and Southwest Airlines are presented as examples of what pharma companies should strive to be, pointing out that none of these companies truly sell a superior product over its competitors.  Instead, these companies focus on understanding their customers and their needs better than their competitors, and thus enjoy the maintenance of market share in the absence of a substantially better product.

For brand pharmaceuticals, if customer loyalty could be cultivated to the level of Starbucks and Apple, the expiration of a patent would not be the inevitable end of profitability it is to most brand drugs.  Admittedly, it is impossible not to lose some market share to generics once brand drug patents expire, particularly due to the involvement of third-party insurance restrictions.  However, the authors note that the loss of 89 percent of the market share is far too large to sustain pharma's current business model.  The authors propose that if Pfizer could keep even 50 percent of the revenue that Lipitor currently generates by establishing some level of customer loyalty, the upcoming patent cliff would not loom nearly as large.

Since customer loyalty may not be readily obtained for pharmaceutical companies, partnerships with companies that already have a strong customer base may help facilitate its building.  The authors present a hypothetical example of a "Readi-Clinic at Wal-Mart, Powered by Pfizer," where Pfizer would provide the drugs that the patients at the Wal-Mart clinic would be prescribed.  In addition, Pfizer also could devise a service model that would help customers change their behavior and habits with the goal of achieving better health results than could be obtained by relying only on pills.  In this hypothetical example, Pfizer and Wal-Mart could brand the combined service and product offering, which would maintain value even after the patent on a drug expires and the generic comes to market.  Thus, the value of the drug would not depend completely on patent exclusivity for value, as nearly all of the brand drugs do under the current system.  There is no doubting the maximum value that patent protection provides brand drugs, and patent protection will always be a key component of drug discovery and commercialization.  But as long as brand pharmaceutical companies depend wholly on patent protection for drug value, there will always be the threat of patent cliffs in the future.

The More the Merrier: The Journal Joins the Times in Complaining about Patents

By Kevin E. Noonan --

The anti-patent virus seems to have moved across town in Manhattan, from the 8th Avenue editorial offices of The New York Times to 6th Avenue, from the aristocratic edifice ruled by the Sulzberger family to the business environs of the hardscrabble upstart Aussie, Rupert Murdoch at The Wall Street Journal.  The theme (and even some of the rhetoric) are the same, but instead of an erudite academic, we have Peter Huber (below), senior partner of Kellogg, Huber, Hansen, Todd, Evans & Figel and fellow of the Manhattan Institute, giving us his views on what is wrong with the U.S. patent system.

The piece, entitled "Digital Innovators vs. Patent Trolls" and published on Monday, concerns the Supreme Court's consideration of the Microsoft v. i4i appeal, and as has been done elsewhere, attempts to create a dichotomy between productive, innovative companies and non-practicing entities, using the pejorative term "patent troll" to describe them.  The dichotomy is false as a general rule (although there are certainly NPEs that aggregate patents from failed companies and assert them; what the piece does not address is the reluctance of some established companies to honor patent rights and license innovation rather than expropriating it, and the extent to which this behavior contributes to the difficulties that cause innovative companies to fail).

Mr. Huber finds significance in the Supreme Court's interest over the past ten years in patent law, after a hiatus that permitted the Court of Appeals for the Federal Circuit (created by Congress to harmonize U.S. patent law) to get its institutional legs under it.  What is unmentioned and perhaps forgotten is the motivation for the creation of the Federal Circuit:  the difficulties U.S. inventors and companies had at a time when foreign competition was threatening the U.S. economy and preeminence in the world.  While one of the two cases Mr. Huber mentions (KSR Int'l Co. v. Teleflex Inc.) involved a perception (created by the lawyers who crafted the certiorari petition) that patents on "obvious" inventions were being improvidently granted, most of the cases under Supreme Court review have involved harmonizing Federal Circuit precedent with other regional courts of appeal on standards for declaratory judgment actions (MedImmune, Inc. v. Genentech, Inc.) and injunctions (eBay Inc. v. MercExchange, L.L.C.), as well as the scope of the appellate court's supervisory role over the U.S. Patent and Trademark Office (Dickenson v. Zurko), and in patent matters having little to do with patent quality, such as the extraterritorial extent of U.S. patents (Microsoft Corp. v. AT&T Corp.), patent exhaustion (Quanta Computer, Inc. v. LG Electronics, Inc.) and how far the statutory safe harbor for preclinical activities protect potential infringers (Merck KGaA v. Integra Lifesciences I, Inc.).  Indeed, two cases most clearly exemplifying the differences between the Supreme Court and the Federal Circuit (Warner-Jenkinson Co. v. Hilton Davis Chemical Co. and Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co.) had to do with the doctrine of equivalents, which actually extends the scope of the patent right beyond the literal meaning of the claims and in which, surprise!, the Supreme Court reversed efforts by the Federal Circuit to limit application of the doctrine in favor of narrower patents.

So while there is the perception that "poor quality" patents are being granted, fueled in large part by big companies who would rather not be bothered respecting the patent rights of small ones, Supreme Court decisions are not the cause of it.  Indeed (although Mr. Huber could not have anticipated it), the Supreme Court appeared unimpressed by the idea, advanced by Microsoft, that lay juries should be permitted to overrule the considered opinion of the Patent Office using a preponderance of the evidence standard for invalidity.  Although the Court seemed more receptive to the idea in cases where the Office did not consider the art, the Justices also seemed less concerned than Microsoft that juries could understand that the quantum of evidence needed to constitute "clear and convincing" evidence could be less for invalidity arguments based on such unconsidered art.

In places Mr. Huber sings from the same hymnbook used across town at the Times, that examiners are overwhelmed and cannot properly do their jobs, and that it is only in the fire of litigation that the validity of patents can be properly assessed.  The force of this argument is blunted, however, by the fact that "only 2% of patents end up in court," and while some of this is due to licensing and settlement rather than litigation, the statistic certainly implies that patents are not clogging court calendars.  Mr. Huber seems to think that patent examiners are less skeptical of patentability than judges or juries; in reality, examiners in the Office operate under no presumption of validity, and construe claims as broadly as they can reasonably be construed, which tends to expand the scope of relevant prior art and make it less likely that a patent will be granted.

Ironically, in view of recent charges of ad homimen argument raised by a suggestion that actual experience could be useful in making and assessing arguments about patent quality, Mr. Huber's article advances the argument that one reason patent quality is stifling innovation is that the percentage of patent cases being heard by juries has increased from one in seven in the 1980's to seven in ten today, and in particular that many of those juries sit in the Eastern District of Texas (where "[a] patent is property, good Texans believe in property rights, and that pretty much settles it").  "Masterminds" behind these lawsuits hire lawyers who are "happy to switch from PI to IP," these attorneys being "local" counsel who "supply the neighborly face in the courtroom."  Ad hominem, indeed.

Mr. Huber also believes that the fact that the Office is issuing 4,000 patents a week is another indication of poor quality.  An alternative explanation is that we live in the most technological age since the Industrial Revolution, that emerging economies in China and India are beginning to seek U.S. patent protection for their inventions, that the Office has hired almost 6,000 examiners in the past 5 years and that the Office spent about 4 years denying patents (the allowance rate shrank from about 60% to about 42%), and that those applicants who weathered that storm are now getting patents allowed; the "bubble" is much more likely to be the result of these forces than that the entire examining corps has decided to "allow, allow, allow" instead of performing their duties substantially as they always have.

The end of Mr. Huber's piece invokes the specter of contingency fee cases, which are relatively rare in patent infringement litigation, and chides "members of the business community" who support patents and has even harsher words for "some conservative pundits [who] applaud the trolls, believing that this is how the market moves private property into the hands of the people who value it the most."  The piece ends predictably:

The issue isn't whether intellectual property rights should be enforced, it's whether we have a reliable process for working out who really supplied the intellect.  We don't.  A system that issues and upholds junk patents will devalue intellectual property much faster than one that scrutinizes patents more carefully and enforces only the good ones.

But the issue is precisely whether intellectual property rights should be enforced or ignored, because there will always be a sector of the business community (although recently it always seems to be the same sector) that will believe (and try to get others to believe) that they are the only repositories of "innovation" and that anyone (especially anyone without their economic resources) who asserts rights in their own inventions is a troll.  Once again, it ain't necessarily so.

More Patent Nonsense from the New York Times

By Kevin E. Noonan --

The New York Times is at it again, proselytizing on its OpEd page about patents and how bad they are.  This time the topic is the Supreme Court's upcoming argument in the Microsoft v. i4i case, involving the standard for determining whether the U.S. Patent and Trademark Office should be second-guessed by a lay jury.

Under current law, the standard for assessing whether the USPTO has improvidently granted a patent is by "clear and convincing evidence," which is higher than the "preponderance of the evidence" standard typically employed in civil trials.  The rationale for the higher standard is that the USPTO is entitled to deference in its area of expertise.  The question in the i4i case is whether that deference is appropriate under circumstances where the Patent Office has not considered art raised by a defendant in asserting invalidity.  It is a provocative argument, and one that the Supreme Court has indicated an inclination to approve, for example in KSR Int'l Co. v. Teleflex Inc.

In the article, entitled "Patently Obvious" the author, Professor Douglas Lichtman (at left) from the UCLA Law School, evinces no appreciation for the subtleties of the issues, involving as it must patent law, administrative law, and the burdens on a private defendant in establishing that an executive agency has erred in the performance of its duties.  All of these issues and others will no doubt inform the Court's opinion, but Prof. Lichtman would have us believe this is just another example of defects in a U.S. patent system that routinely grants "bad patents."  In his analysis, juries are "discouraged" from questioning a patent's validity, meaning that "all too often . . . dubious patents are nevertheless enforced."  This, of course, "inhibits innovation," he says, neglecting to mention that frequently it is the accused infringer who "inhibits innovation" by attempting to expropriate truly innovative technology from those who actually invent it.

Keeping with the theme of "bad patents," Prof. Lichtman asserts that the USPTO cannot possibly perform its duties, due to the number of new patent filings each year and the lack to time patent examiners have to perform their duties.  The cogency of the first argument is diminished by the fact that the same argument has been made for at least ten years, well before the recent backlog of pending applications became an administrative nightmare.  The second argument has more heft, but Prof. Lichtman operates under the mistaken impression that patent examiners have a total of 17 hours to perform their examination, "typically spread over two or three years . . . interspersed with work on hundreds of other open files."  The 17-hour figure is accurate, but only for shorter and less complex applications.  So while it is true that more examiners are needed to devote sufficient time to the examination process (a fact well-appreciated by the Office, which has hired thousands of new examiners over the past six years), the idea that the Office is a "rubber stamp" for patent applicants is ludicrous.  "[I]n practice, even the best examiners are so overwhelmed and so poorly informed that the benefits of their expertise are fully dissipated," according to Prof. Lichtman.  But in situations when that is the case, examiners refuse to grant patents, because the burden is always on the applicant to convince the examiner that her patent application should be granted under the appropriate statutory requirements.

This is something Prof. Lichtman might appreciate if he had any experience with the patent system outside opining on it from academe.  According to his biography, he graduated from Yale Law School in 1997, spent 10 years at the University of Chicago Law School, and since 2007 has been at UCLA.  No matter how intelligent Prof. Lichtman may be, there are some things that require actual experience to understand, and on that score the Professor is woefully lacking.

This is further illustrated by allegations in the piece regarding the ex parte nature of patent examination.  "The only parties" involved in prosecution are "the patent applicant and the applicant's lawyers," Prof. Lichtman notes, contrasting the situation with litigation where a patentee is faced with a motivated adversary.  What he neglects to mention in the equation are examiners on the one hand, who do not want to grant patents improperly, and the strictures of the rules of practice before the Office on the other hand, which require good faith and candor in an applicant's dealings with the Office, with the threat of an inequitable conduct finding if such candor is not maintained (a finding that renders the entire patent unenforceable against any infringer should it be made).

The philosophical basis of Prof. Lichtman's views are set forth in his penultimate paragraph:

If the current approach were abandoned and juries were instead given real freedom to review patent validity, not much would change at the Patent Office.  Examiners would still evaluate the validity of patent applications and document their views.  And, in the event of litigation, those views would still be admissible in court.  The key difference would be that the examiner's view would then rise or fall on the merits, rather than enjoying substantial deference from the jury.

Actually, in that event, real chaos would ensue, as we effectively substituted a layman's views for expert ones, and the value of patents and innovation would suffer.  That would be good for companies who could benefit from the inventions of others without having to compensate them.  (Similar arguments are raised by those who would rather exploit university research without the bother of complying with the Bayh-Dole Act.)  But it would not be good for "genuine innovation," which Prof. Lichtman professes to value.

In the i4i case, the Supreme Court may very well decide that patentees and the Patent Office do not deserve the higher level of deference for art not considered by the Office during patent examination.  Or it may recognize that such a decision would implicate all other administrative agencies, and permit disgruntled citizens to challenge every agency action based on "evidence" not considered during agency review (and the costs that may ensue in encouraging manipulation of when such "evidence" is or is not presented during initial agency review).  In any case, Prof. Lichtman's article becomes just another example of how certain academics and their industry supporters are ready, willing, and able to take any opportunity to tell the public that the American patent system is broken.  It ain't necessarily so.

George Will on Innovation

By Kevin E. Noonan --

George Will, conservative icon, wrote an Op-Ed piece in The Washington Post last week extolling the virtues (and the necessities) of innovation and government support for it ("Rev the scientific engine").

He takes issue with some of his conservative brethren that, in view of what he terms the "excesses" of the various economic stimulus packages of the past few years, now oppose government expenditures that would support "innovation."  What America needs is "internal improvements," he says, in the form of support for scientific and engineering research and education.  He notes the decline in such support in the form of declining federal government support for research in engineering and the physical sciences, which dropped by more than 50% between 1970-1995 (which he characterizes as "America has been consuming its seed corn") and state support for science education, which was at its lowest levels since before Ronald Reagan was President before the economic meltdown at the end of the Bush administration.  (Curiously he fails to mention that the American technological Renaissance occurred during the Clinton administration.)  He also notes that countries like South Korea (38%) and China (47%) award a far higher percentage of their undergraduate degrees in science than does the U.S. (16%).

He argues that "[t]he prerequisites for economic dynamism are ideas" in this century, as much as roads and canals were necessities earlier in our history.  However, he sees a risk in an era of ("curdled") populism, that there will be political resistance to supporting the "elites" (at least scientific ones) that are responsible for the breakthrough discoveries that must be made for research to translate to economic benefits.  This is because "[n]inety-nine percent of the discoveries are made by 1 percent of the scientists," he says, citing Nobel Laureate Julius Axelrod.  As a consequence, as part of making intelligent, pro-prosperity choices, Mr. Will argues that Congressional Republicans should be "defending research spending that sustains collaboration among complex institutions -- corporations' research entities and research universities."  This is because "[r]esearch, including in the biological sciences, that yields epoch-making advances requires time horizons that often are impossible for businesses, with their inescapable attention to quarterly results."

Along the way he cites Margaret Thatcher and Abraham Lincoln (who was, after all, a Republican), but most tellingly he cites Richard Levin from Yale for an important economic point:  "Would Japan's growth have lagged since 1990 'if Microsoft, Netscape, Apple and Google had been Japanese companies'"?  Culturally, the last twenty years have seen the world change from one in which everyone had a Walkman® to one where everyone has an iPod®, and where Amgen, Genentech, Biogen-Idec, and dozens of other U.S. companies drove the biotechnology revolution.  Mr. Will credits investment for driving this prosperity, and in citing Lincoln he acknowledges (however tacitly) the importance of patents in supporting such investment.  His point is not to defend the patent system but to support government support for research; unstated but nonetheless true is that one cannot thrive without the other.

The Financial Times' Take on Gene Patenting

By Kevin E. Noonan --

The staid Financial Times (London) has an article today on the gene patenting debate, and while there are things to criticize in it, the article (perhaps predictably) takes a carefully measured, dispassionate (and welcome) tone ("Who steals the gene from off the common"; free registration required).

The paper's conservative bona fides are established on its website:

First published in 1888 as a four-page newspaper, the Financial Times' initial readership was the financial community of the City of London.  The Financial Times soon established itself as the sober but reliable "stockbroker's Bible", with its only rival being the slightly older and more daring Financial News.  In 1893, the FT turned salmon pink -- a masterstroke that made it immediately distinguishable from its competitor.  From their initial rivalry, the two papers merged in 1945 to form a single six-page newspaper.  The Financial Times brought with it a higher circulation, while the Financial News provided enormous editorial talent.

And it is with a "sober" voice that the article by James Boyle, William Neal Reynolds Professor at Law, Duke Law School addresses a frequently emotional subject.  He cites critics of gene patenting as describing a "'genetic land grab' that promised to privatize the common heritage of mankind," and characterizes their arguments as "frankly moral, protesting the hubris and in some eyes, heresy, of claiming to own the human genome."  He contrasts this with arguments that "patents over genes [are] necessary to spur investment and jump start biotech innovation."  And he includes the third part of the debate, whether gene patents "spur innovation" or slow it, by "introducing a tangle of property rights into the most fundamental building blocks of research science."

Although evenhanded, the piece suffers from the common misconception that genetic information is patented (Judge Sweet's view), rather than isolated nucleic acids themselves as chemical compounds (which, despite Judge Dyks' recent pronouncements, has been the Federal Circuit's view).  This deficiency also informs the article's discussion of what the author calls a "new consensus," patterned on the recent publicity regarding the Alzheimer's Disease Initiative.  As previously reported in The New York Times, this is an effort by the National Institutes of Health joined with academic and "commercial" researchers "to unlock the secrets of that debilitating disease."  The key development, cited in this article as well as the original Times piece, was that the data from the collaboration would be made public "immediately," and that "no one would own the data" (and no one would file any patent applications, although "private companies would ultimately profit from any drugs or imaging tests developed as a result of the effort").  Professor Boyle hails this development as one where "all parties . . . are better off."  He attributes (without attribution) to private companies "who had watched their drug pipelines dry up" the fear that "the old model of in-house development and jealous guarding of data" would not be able to "unlock such complex biological mysteries" as the motivation for joining the initiative.

Perhaps.  It is also good to remember that a great deal of the initial research from the Initiative (like much initial research) was unlikely to lead to any patentable subject matter in the first place.  Patents protect inventions, not data.  As the Federal Circuit said in Ariad v. Eli Lilly:

Ariad complains that the doctrine disadvantages universities to the extent that basic research cannot be patented.  But the patent law has always been directed to the "useful Arts," U.S. Const. art. I, § 8, cl. 8, meaning inventions with a practical use, see Brenner v. Manson, 383 U.S. 519, 532-36 (1966).  Much university research relates to basic research, including research into scientific principles and mechanisms of action, see, e.g., Rochester, 358 F.3d 916, and universities may not have the resources or inclination to work out the practical implications of all such research, i.e., finding and identifying compounds able to affect the mechanism discovered.  That is no failure of the law's interpretation, but its intention.  Patents are not awarded for academic theories, no matter how groundbreaking or necessary to the later patentable inventions of others.  "[A] patent is not a hunting license.  It is not a reward for the search, but compensation for its successful conclusion."  Id. at 930 n.10 (quoting Brenner, 383 U.S. at 536).  Requiring a written description of the invention limits patent protection to those who actually perform the difficult work of "invention" -- that is, conceive of the complete and final invention with all its claimed limitations -- and disclose the fruits of that effort to the public.

That research hypotheses do not qualify for patent protection possibly results in some loss of incentive, although Ariad presents no evidence of any discernable impact on the pace of innovation or the number of patents obtained by universities.  But claims to research plans also impose costs on downstream research, discouraging later invention.  The goal is to get the right balance, and the written description doctrine does so by giving the incentive to actual invention and not "attempt[s] to preempt the future before it has arrived."  Fiers, 984 F.2d at 1171.  As this court has repeatedly stated, the purpose of the written description requirement is to "ensure that the scope of the right to exclude, as set forth in the claims, does not overreach the scope of the inventor's contribution to the field of art as described in the patent specification."  Rochester, 358 F.3d at 920 (quoting Reiffin v. Microsoft Corp., 214 F.3d 1342, 1345 (Fed. Cir. 2000)).  It is part of the quid pro quo of the patent grant and ensures that the public receives a meaningful disclosure in exchange for being excluded from practicing an invention for a period of time.  Enzo, 323 F.3d at 970.

And it is also well to remember that the reason for the extensive collaboration between scientists (who heretofore guarded their pre-publication Alzheimer's disease research results just as jealously as any commercial enterprise) is precisely because Alzheimer's disease has proven so intractable.  In today's New York Times is an article bemoaning the lack of progress at developing an effective treatment for the disease, in the face of 30 years effort (and 10 years of that same Alzheimer's Disease Initiative so praised by Professor Boyle).  So while it is evident that at least some of the participants were happy (and self-satisfied) to paraphrase Quincy Jones by proclaiming that they "left their intellectual property at the door," it is less evident that anything of commercial value (or any intellectual property) was put at risk by what was publicly disclosed by the Initiative.  (Recognition of this reality explains as well as the Professor's speculation does why commercial entities were willing to participate in the Initiative.)

Being the Financial Times, the article is quick to point out that "[t]he idea is not to give up property rights," because "these will be essential in the development of therapies down the line."  Rather, Professor Boyle contends that "science -- and commerce -- will benefit from the establishment of a pre-competitive commons, a pool of information from which all can draw," using the NIH as an "honest broker."  As evidence of a trend, he cites the Bermuda Accords guiding the public prong of the Human Genome Project, the Sage Bionetworks project, as well as the Science Commons (which organization had Professor Boyle as one of its founders).  He suggests that the economic tools exist to ascertain the best ways to "jump-start commercial innovation" while at the same time recognizing that the task of deciding where sharing should end and privatization and property rights begin is complex.  Refreshingly, he says that this enterprise "is not an ideological war but a pragmatic process of design."

The article charmingly analogizes the gene patenting debate to enclosure of the English commons over 500 years ago, and in doing so returns the analogy from the "anticommons" rhetoric that usually accompanies discussions of this debate.  The article begins and ends with part of a poem regarding this ancient argument:

The law locks up the man or woman
Who steals the goose from off the common
But leaves the greater villain loose
Who steals the common from off the goose
And geese will still a common lack,
Til' they go and steal it back.

However the gene patenting debate is resolved, it would be well if the same benefits garnered from enclosing the common -- providing the greatest benefits to the greatest number -- are the result.

National Law Journal Editorial Questions USPTO Three-Track Examination Proposal

By James DeGiulio --

Earlier this summer, U.S. Patent and Trademark Office Director David Kappos announced a proposal for a three-tiered patent prosecution regime that could be instituted in the Office (see "USPTO Director Announces New Examination Options").  The new regime will provide for an accelerated examination track, a standard (status quo) track, and a delayed examination track.  Of course, there will be appropriate fees depending on the examination track selected.  For more information on the three-track proposal, see "USPTO Publishes Notice Regarding Enhanced Examination Timing Control Initiative."

The three-tiered examination proposal is intended to address the application backlog at the USPTO and its alleged negative impact on innovation.  However, according to an August 16 editorial published in the National Law Journal ("New patent regime won't help"), this proposal is vastly insufficient to remedy the application backlog and will merely let richer customers get faster patent reviews by paying more for the privilege.

The editorial, written by David Feigenbaum (at left), a principal at Fish & Richardson in Boston, vigorously rejects the proposal as any type of solution to the USPTO's application backlog.  Mr. Feigenbaum argues that while the three-track proposal may result in greater fee collections from some applicants, a complete overhaul of the patent system from Congress is the only way to truly address the backlog.  The source of the backlog, according to the author, is the interaction with patent examiners under the current system, calling the exchange "overly iterative, done on paper, gated by arcane time periods for action and delayed by almost endless deadline extensions."

Mr. Feigenbaum places the responsibility for reform squarely on Congress, charging them with the task of changing a system that is "tailored to be unresponsive to modern technology and work styles."  None of the current proposals go nearly far enough, according to the author of the op-ed piece.  The three-tiered proposal, as well as other so-called patent reform proposals, are described as merely "tinkering with where money and rights will land post-issuance and in litigation," accusing Congress of refusing to legislate at the USPTO, where it is most needed.  Mr. Feigenbaum challenges Congress to write into the law proper funding for the Patent Office, combined with "clear instructions to dump the 19th century nonsense (quaint though it may be) and operate like a 21st century business."  His suggestions include increasing phone interviews, encouraging interaction with applicants over very short periods of prosecution, and yielding quicker decisions.

James DeGiulio has a doctorate in molecular biology and genetics from Northwestern University and is a graduate of Northwestern University School of Law.  Dr. DeGiulio is a member of MBHB's 2010 associate class and he can be contacted at degiulio@mbhb.com.

Facts, Perhaps the Antidote to the Anti-gene Patenting Plague

    By Kevin E. Noonan --

It is apparent that the facts are often at risk or ignored by opponents of gene patenting.  Indeed, the various forms of fact-twisting or outright falsehood ("corporations own your genes") suggests that it isn't facts that are at issue but opinions, and how the public's opinion on gene patenting is to be best manipulated to oppose the practice.

One example (of the very many) of this phenomenon came to us in a reader comment to our post, "Huffington Post Provides Latest Ant-gene Patenting Soapbox" last week.  Our commenter writes:

While the errors throughout her "editorial" are too numerous to recount, her discussion of African sleeping sickness deserves special recognition.  She writes "In 1990 Sanofi-Aventis developed the drug Ornidyl (eflornithine) which is safe and effective against trypanosomiasis but it was withdrawn from the market in 1995 because few poor subSaharan sufferers could afford it.  Ornidyl can no longer be bought for love or money but Aventis, and later, Bristol-Myers Squibb, began to market eflornithine to the West as Vaniqa, a prescription-only facial depilatory."

First, Orindyl for sleeping sickness she mentions above is eflornithine via intravenous injection, while the eflornithine currently marketed as Vaniqua is formulated as a topical creme.  This is a major difference she conveniently overlooks.  And much more importantly, her claim that the drug is unavailable is completely false.  "In 2001, Aventis (now Sanofi-Aventis) and the WHO formed a five-year partnership, during which more than 320,000 vials of pentamidine, over 420,000 vials of melarsoprol, and over 200,000 bottles of eflornithine were produced by Sanofi-Aventis, to be given to the WHO and distributed by the association Médecins sans Frontières (also known as Doctors Without Borders) in countries where the sleeping sickness is endemic ... From 2001 (when production was restarted) through 2006, 14 million diagnoses were made.  This greatly contributed to stemming the spread of sleeping sickness, and to saving nearly 110,000 lives.  This changed the epidemiological profile of the disease, meaning that eliminating it altogether can now be envisaged.[9]  . . .  The positive results of the 2001-2006 partnership between Sanofi-Aventis and the WHO in the fight against sleeping sickness motivated and justified the decision taken by the Sanofi-Aventis Group's senior management to continue supporting the WHO at the same level for another five years, 2006-2011," citing "IFPMA Health Initiatives: Sleeping Sickness."

I guess I must concede that Ms. Washington's point may actually have been accurate, as eflornithine really is not avialable for "love or money" since Sanofi, WHO and MSF have collaborated to make it available for free.  All this information is available at Wikipedia or the Sanofi website http://en.sanofi-aventis.com/binaries/brochure_aam_en_tcm28-18133.pdf.

(Quoted citations from Wikipedia, see, http://en.wikipedia.org/wiki/Eflornithine).

In addition, our commenter states Ms. Washington "is wrong that there is only [one] drug for HCV, with a 20% cure rate (she is off on both points)."  Again quoting from Wikipedia (with references to supporting scientific journal articles; http://en.wikipedia.org/wiki/Hepatitis_C#Treatment):

Current treatment is a combination of Pegylated interferon-alpha-2a or Pegylated interferon-alpha-2b (brand names Pegasys or PEG-Intron) and the antiviral drug ribavirin for a period of 24 or 48 weeks, depending on hepatitis C virus genotype.

Pegylated interferon-alpha-2a plus ribavirin may increase sustained virological response among patients with chronic hepatitis C as compared to pegylated interferon-alpha-2b plus ribavirin according to a systematic review of randomized controlled trials.  (Awad et al., (2009). "Peginterferon alpha-2a is associated with higher sustained virological response than peginterferon alfa-2b in chronic hepatitis C: Systematic review of randomized trials.".  Hepatology (Baltimore, Md.) 51 (4): 1176–84. doi:20187106. PMID 20187106).  The relative benefit increase was 14.6%.  For patients at similar risk to those in this study (41.0% had sustained virological response when not treated with pegylated interferon alpha 2a plus ribavirin), this leads to an absolute benefit increase of 6%. 16.7 patients must be treated for one to benefit ( number needed to treat = 16.7. click here to adjust these results for patients at higher or lower risk of sustained virological response).  However, this study's results may be biased due to uncertain temporality of association, selective dose response.

Treatment is generally recommended for patients with proven hepatitis C virus infection and persistently abnormal liver function tests.

Treatment during the acute infection phase has much higher success rates (greater than 90%) with a shorter duration of treatment; however, this must be balanced against the 15-40% chance of spontaneous clearance without treatment (see Acute Hepatitis C section above).

Those with low initial viral loads respond much better to treatment than those with higher viral loads (greater than 400,000 IU/mL).  Current combination therapy is usually supervised by physicians in the fields of gastroenterology, hepatology or infectious disease.

The treatment may be physically demanding, particularly for those with a prior history of drug or alcohol abuse.  It can qualify for temporary disability in some cases.  A substantial proportion of patients will experience a panoply of side effects ranging from a 'flu-like' syndrome (the most common, experienced for a few days after the weekly injection of interferon) to severe adverse events including anemia, cardiovascular events and psychiatric problems such as suicide or suicidal ideation.  The latter are exacerbated by the general physiological stress experienced by the patient.

Responses can vary by genotype.  (Approximately 80% of hepatitis C patients in the United States have genotype 1.  Genotype 4 is more common in the Middle East and Africa.)

Early virological response is typically not tested in non-genotype 1 patients, as the chances of attaining it are greater than 90%.  The mechanism of cure is not entirely clear, because even patients who appear to have a sustained virological response still have actively replicating virus in their liver and peripheral blood mononuclear cells.  (Castillo et al., (2006). "Hepatitis C virus replicates in the liver of patients who have a sustained response to antiviral treatment". Clin Infect Dis 43 (10): 1277–83. doi:10.1086/508198. PMID 17051492)

In the face of such consistent disinformation, it can be difficult to decide the most effective course for combating it.  However, some suggestions come to mine:

First, don't challenge the morality issue component, since it is generally hard if not impossible to change deeply-held moral beliefs (no matter how out of touch with reality).

Second, however, do challenge the flawed logic.  For example, using claims made in Ms. Washington's article, just because the National Health Service in Britain or a private insurance company in the U.S. won't pay for a test or a treatment doesn't mean the test is too expensive.  It means the payor has decided it can wait until the cost of the test goes down when the patent expires, and the patients denied the test be damned -- the bottom line is more important.

Third, while not necessarily convincing those whose minds are closed to information (aka, the facts), it is also good to use actual data, such as the limited numbers of patents granted to U.S. universities before enactment of the Bayh-Dole Act and the veritable flood of university patents thereafter.  The point is that the amount of basic research isn't what's different (after all, President Nixon started the "War on Cancer" in 1971 with increased funding for the NIH and NCI), but that universities now have ways to prevent predation from private businesses that would otherwise turn publicly-funded research into private investment without many of the advantages of the Bayh-Dole Act, including preference for U.S.-based licensees (i.e., jobs); royalty revenue to the universities to be used for teaching and further research; "march-in" rights in a case of a private licensee enacting a public harm by failing to commercialize an important invention (such as a cure or treatment of a disease, something that has never happened in the 30 years since the Act was passed); and the many milestones and other positive incentives on the patent right incorporated into licenses from universities because of the university's unique public service mission.  These facts turn the anti-corporate argument on its head, since by being able to protect its intellectual property, universities have real leverage for deciding how and by whom their technology is commercialize.  Coupled with the fact that, prior to Bayh-Dole, many of the predating companies were overseas or large international conglomerates, and that such technology piracy cost American jobs, there is a good argument that university patenting is good for society.

Finally, it is good to paint the picture of what would happen if these inventions could not be protected.  As has been argued here in the past, the patent system promotes disclosure and the advancement of the useful arts, i.e., technology.  Patents require disclosure to a degree not required by scientific journal articles and other sources, with "a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention."  35 U.S.C. §112, first paragraph.  Since patents expire, this information can be used by anyone thereafter, and importantly, can be used as information even during the lifetime of the patent.  Thus, arguments that basic (as opposed to clinical for profit) genetic research is impeded by patenting is wrong, since the information (whether of a genetic sequence or the existence of a mutation) is not patented.  The public availability of this information, and the requirements as to its completeness, fulfill the Constitutional mandate that patenting "promote the progress" of the useful arts.

The alternative would be the antithesis of this reality, where there would be significant incentive not to disclose genetic and other information.  In situations where an invention is easy to "reverse engineer" (as for many mechanical inventions), this would not be a fruitful path to protect intellectual property.  For something as complicated as human genetics, the possibilities for being able to "hide" basic discoveries are greater and the consequences much more dire.  Ironically, universities would be the victims of this alternative, since the university's mission would not permit it to use trade secrets and other forms of undisclosed intellectual property protection.  The predictable result of this alternative would be to inhibit if not destroy the university-company partnership that has promoted the biotechnology industry for a generation, to society's benefit.  Perhaps new diagnostics and treatments would arise "eventually" under such an alternative reality, but not as rapidly as in the past.  Thus, the counter-argument for the "anti" groups is that they are (in philosophy or as a consequence of their vision of morality) anti-science, anti-progress, anti-better diagnostics, and anti-treatment.  If this argument is effectively made, it's hard to see how the public would prefer the "eventually" world their position would produce.

Huffington Post Provides Latest Anti-gene Patenting Soapbox

    By Kevin E. Noonan --

The Internet over the past decade has given rise to a wide variety of "alternative media" outlets, including for example Slate, The Drudge Report, The Huffington Post, and arguably blogs like this one.  Even conventional news outlets like The New York Times, The Washington Post, and The Wall Street Journal have exclusively on-line content.  Despite the differences between these disparate sources, including writing by some non-traditional "journalists," news outlets of all stripes have many things in common.  Unfortunately one of these is an uninformed antipathy to biotechnology, particularly with regard to gene patenting.

This similarity is evidenced most recently in The Huffington Post, in a piece entitled "Gene Patenting Produces Profits, Not Cures."  The author, Harriet A. Washington (who also authored Deadly Monopolies; more on that later) writes that Myriad Genetics "predictably" appealed Judge Robert Sweet's decision invalidating fifteen claims in seven patents challenged by several breast cancer patients, medical associations, and researchers (and supported by the ACLU and the Public Patent Foundation).  The piece is replete with misstatements concerning the scope of rights conferred by gene patents, such as that Biogen controls "your kidney's essential KIM gene" as well as a list of other genes patented by the University of California and other patent holders.  Ms. Washington boldly asserts that the "coalition" challenging gene patents in the Myriad case may have too narrow an agenda, and proposes (conveniently, since her argument provides a précis of her "forthcoming book") that all "life patents" should be banned.  These include "the more than 500,000 genes that control the most basic processes of human life," a stunning statement in view of the reality that there are only about 30,000-40,000 genes in the human genome.  Setting her sights even higher than genes, she believes that patents on "bacteria, viruses, biologicals such as 'artificial blood', cell lines, tissues, pharmaceuticals, and even on medically important plants and animals such as Harvard's patented cancer-prone 'oncomouse'" should be banned.  Why?  Because "[t]he $60 billion pharmaceutical industry became the most profitable industry on the planet by exploiting its plethora of patents."

She sets forth a generally correct history of the development of the biotechnology industry.  She mentions the Diamond v. Chakrabarty decision, and passage of the Bayh-Dole Act that encouraged universities to protect their inventions (instead of letting them fall into the public domain where they could be exploited by corporations, including foreign corporations, with no compensation to the university or its researchers).  She also discusses the rise in university patenting, from about 260 patents/year prior to Bayh-Dole to more than 3,000 patents/year today.  She also notes that "by 1991 [universities] had gleaned $218 million in royalties" (an amount certainly much higher today).

Where she begins to show her naïveté about how technology its transferred between academia and pharmaceutical companies is when she says that "corporations receive valuable, ready-made patents on medications, biologicals, genes, devices, plants and animal hybrids," which suggests that the technology transferred is ready to be commercially exploited solely as the result of federal grant support and "university brainpower."  While necessary, these factors are woefully insufficient, at least because the FDA requires extensive safety and efficacy studies before any pharmaceutical comes on the market (protection it is unlikely Ms. Washington opposes).

Her argument seems to be that with all the patents and all the research, the public has received less than they were promised.  She cites in support of this proposition that "[b]y 2003, North American university researchers had started 374 companies and academic institutions had completed 4,516 licensing arrangements earning them more than $1.3 billion" and that "[b]y 2006, university technology transfer offices had generated at least $45 billion, largely from licensing fees."  The result, she maintains, is that universities have become research "satellites" rather than independent entities.  This charge is, ironically, belied by the statistics on licensing, which illustrate how universities, due to their patent rights, are in the position to grant licenses to those companies committed to commercializing their inventions.  Indeed, most such licenses have commercialization milestones and other provisions that, for example, change an exclusive license to a non-exclusive one (that can be licensed to another company) should the performance milestones not be met.

She repeats some oft-told tales, such as the purported pernicious effects of Chiron's hepatitis C virus test, and the company's failure to produce better treatment despite patents on isolated viral genes.  She uses Chiron's lawsuit against a commercial infringer to allege that there was a "chilling effect on researchers who wish to work on better HCV treatments," but provides no evidence that Chiron has sued any basic (non-commercial) researcher working on HCV biology.  This is similar to allegations in the Myriad suit that the company was inhibiting basic research, despite the >8,000 basic research papers easily found in PubMed and other databases.

Ms. Washington raises some real limitations to the Western medical research model, including that diseases prevalent in the undeveloped world (such as trypanosmiasis) have not been adequately addressed, and the inefficiencies in business models that require "blockbuster" drug status to support the incredible costs ($800 million - $1.2 billion) of bringing a drug to market.  And she mentions John Moore's hairy cell leukemia, Henrietta Lack's vulval adenocarcinoma (HeLa) cells, and Canavan's disease patient samples as examples of corporate exploitation.  On the contrary, all of these incidents occurred in a university setting, and the HeLa example occurred in the same time period that saw Jonas Salk perform experiments on his polio vaccine with retarded children from a nearby sanitorium, with precious little informed (or parental) consent.

What Ms. Washington refuses to acknowledge (because it doesn't support her argument) is the real benefits (or "cures") that biotechnology has provided over the past 30 years.  Nowhere in her piece is there anything about the thousands (millions?) of heart attack patients whose lives have been saved by recombinant tPA (Genentech), or the thousands (millions?) of kidney disease patients leading relatively normal lives due to recombinant EPO (Amgen), or the thousands (millions?) of breast cancer patients treated with Herceptin® (Genentech), or colon cancer patients treated with Avastin® (Genentech) or macular degeneration patients whose eyesight has improved using Lucentis® (Genentech), not to mention the hundreds of other biotechnological drugs on the market or in development.  No, these triumphs don't exist in the world Ms. Washington describes, which must make it easier for her to say:

Some argue that gene patents are necessary to generate the profits essential to funding the medical cures.  But as the cases of breast cancer, hepatitis C and hemochromatosis illustrate, genes are more commonly used for faster, easier routes to profit, such as marketing tests, selling licenses and suing those patent-infringers who step on the corporation's biomedical toes.

The biotechnology industry is not without its inefficiencies, but failing to acknowledge the benefits along with the deficiencies makes it easier to set forth the portrayal contained in Ms. Washington's article.  But doing so fails to describe "the rest of the story," and does a disservice to anyone wanting to understand the role of both universities and patenting in the biotechnology industry.

New York Times Provides Soapbox for Data Exclusivity Critics

    By Kevin E. Noonan --

Policy arguments based solely on outcome rather than process are rarely effective when put into practice.  This is because the desired benefits of the outcome blind the policymaker to the question of whether the desired outcome can be achieved without considering the effects (intended or otherwise) by the process.  This effect can be seen, for example, in the Federal Trade Commission's crusade to ban "reverse payment"-containing settlements of ANDA litigation.  The desired outcome is cheaper drug prices as soon as possible.  However, against the "per se" illegal stance of the FTC, several regional Courts of Appeal, as well as the Federal Circuit, have assessed the reasonableness of such settlements and found instances where such agreements are, and are not, anticompetitive -- something an outright ban cannot accommodate.  Indeed, according to some of these analyses, generic drug entry would be delayed, and unnecessary drug costs incurred, by the ban advocated by the FTC.

The same type of goal-oriented thinking is evidenced in an Op-Ed piece (where else?) in The New York Times ("Biologics Boondoggle").  (The Times has previously voiced its objections to the length of the data exclusivity period; see "Follow-on Biologics News Briefs - No. 11").  Today's piece was written by Anthony D. So, director of the Program on Global Health and Technology Access at Duke University, and Samuel L. Katz, a professor and chairman emeritus of Duke's Pediatrics department.  Their goal, like the FTC's, is to hasten the availability of generic drugs, in their case biologic drugs, to increase patient access and reduce costs.  And, like the FTC, they have a "simple" solution -- limit the data exclusivity period of biologic drugs to 5 years, the same period "enjoyed" by conventional, small molecule drugs.  But this position ignores most of the evidence that this is not a sufficient period to maintain innovation in biologic drug development, and reduces to greed (never expressly stated) the motivations of the biotechnology industry in advocating for the 12-year period contained in both the House and Senate versions of the healthcare reform bill.

The position also ignores the evidence, ironically in a peer-reviewed scientific paper (not an op-ed piece) by their colleague, Professor Henry Grabowski, that the "proper" data exclusivity term is between 14 and 17 years (see "Professor Grabowski's Economic Analysis of data Exclusivity for Follow-on Biologic Drugs"), and that the 12-year period is a compromise from the term that the data indicates is necessary.  It also ignores the current situation, where the data exclusivity period is unlimited since there are no follow-on biologic provisions under current U.S. law.  Also ignored is the reality that the data exclusivity period is one of the few provisions of the two versions of the healthcare bill that are in agreement (a fault shared with President Obama; see "Snatching Defeat from the Jaws of Victory?"), or that the term could be easily reduced if it turns out to be longer than necessary.

Further, unlike other entrants in this debate (even the FTC), the article contains no compelling economic arguments.  Besides bemoaning the high costs of biologic drugs, the only mention in the piece about the economics of biologic drugs, generic or otherwise, is the assertion that biologic drugs cost about the same to bring to market as conventional drugs (without any citation to the basis for this statement other than "according to studies cited by the pharmaceutical industry's own trade association").  There is also reference to the high prices of these drugs, such as Herceptin® for breast cancer, Humira® for Crohn's disease, and Cerezyme® for Gaucher's disease.  The prices are high, but these drugs are used to treat life-threatening illnesses (in the Gaucher's disease example, a lethal childhood disease); while there may be a debate to be had on whether our society can afford to treat these diseases (or ethically afford not to), their cost is not the best way to frame the debate (and, according to the FTC's report, the savings achieved by follow-on biologic drugs won't be that significant anyway, reducing the costs by no more than 30%, in contrast to the 80-90% reductions seen with conventional drugs; see "No One Seems Happy with Follow-on Biologics According to the FTC").

Also not ignored are allegations about excessive "monopoly protection" (using a buzzword that always signals an intent to inflame rather than illuminate), or that biologic drug makers can extend their "monopoly" by making minor changes in the drugs (which would not preclude the generic biologic drug maker from using the innovator's data to obtain approval for the original version of the drug), or that the 12-year data exclusivity period for biologics will be used to bootstrap a longer data exclusivity period for conventional drugs (again, with no attribution except a statement that "GlaxoSmithKline has already called for 14 years of exclusivity for conventional drugs"; regardless of anything GSK might wish, changing the data exclusivity period for conventional drugs is not part of any follow-on biologics legislation introduced either as stand-alone legislation (H.R. 1427 or 1548 or S. 726 ) or as part of the healthcare bill (H.R. 3590)).  As such, the suggestion is an irrelevancy, except to once again increase the sense of "urgency" the writers seem to want to engender to provoke the public to adopt their position.

That position is clearly expressed in the last paragraph of their piece:

Congress should allow biologics no more than five years of protection.  That would provide drug makers plenty of incentive for innovation, and still protect consumers from the high prices that extended monopolies allow.  Striking the right balance will ensure that Americans can afford the most effective medicines available.

Providing cheaper drugs is an admirable goal, for many reasons -- improved access to these drugs, sound economics, or just plain thrift.  But cheaper drugs come with a price in the real world, and part of that price is to make drug development less attractive for investment and investors.  That may sound cold-blooded, but anyone who has a 401k account wants her investments to be profitable, so the public should understand the need for some assurance of a return on investment.  The current economic downturn cannot blind us to the folly of killing the golden goose of biologic drug development, and nothing will cook that goose more quickly and more certainly than creating a climate inimical to investment in these drugs.  That isn't a goal anyone wants.

Newsweek = Newspeak on Gene Patenting

    By Kevin E. Noonan --

Newsweek has always been Avis to Time Magazine's Hertz -- evidenced by an increasing difference in subscriptions (3.3 million versus 1.97 million on 2009).  So it isn't surprising that the magazine needs to do something to tweak its readership, even if that something is to distort its reporting on an important issue.  Which is, of course, what Newsweek has done on its science news page in the February 15th issue, in an article cleverly entitled "Who Owns Your DNA?"

The article, by "Science Editor" Susan Begley (at left), is of course not a science story but a legal one.  This is something Ms. Begley expressly acknowledges ("I defer to others on the legal merits here").  But that, of course, doesn't stop her from repeating many of the most egregious falsehoods in the debate, starting with the first sentence:

Ever since the first human gene was patented in 1982, there's been a near-universal "What??!!" when people hear that it's legal for someone to own the rights to our DNA.

Of course, no one owns anyone's DNA (something even the most vociferous participants in the debate acknowledge except, of course, the ACLU who use the lie emblazoned on buttons to inflame the passions of their constituents).  And Ms. Begley is careful to acknowledge the source of the lie, the late author Michael Crichton who (in)famously expressed these views on the Op-Ed page of the New York Times at the same time he was selling a book about the evils of gene patenting (perhaps Ms. Begley was concerned about infringing Mr. Crichton's copyright).

But she is not done, however, next reporting that the "scientific issues . . . have become serious enough in the past few years to call into question whether gene patents, meant to promote research, instead impede it, with no offsetting benefits."  Ms. Begley, unlike the rest of the news industry, seems not to have lost the "Search" button on her computer -- she acknowledges that "[t]housands of BRCA papers have been published, and in surveys few scientists say patents are an obstacle to research."  But she has an answer for that:  "But few isn't none."  And who are those none that she quotes?  None other than the plaintiffs in the ACLU suit.  Now, since Ms. Begley isn't a lawyer she can't be held to legal standards, but even a reporter should realize that the plaintiffs are not particularly reliable for refuting the overwhelming evidence that scientific research has not been impeded, such as the hundreds of researchers who have published thousands of research papers on the BRCA1 and BRCA2 genes since the patents at issue in the ACLU suit were granted.

Being facially even-handed, Ms. Begley quotes Rick Marsh, Myriad's general counsel that "Myriad 'has never told someone they cannot do [noncommercial] research on BRCA,'" and that "'[t]he notion that Myriad has hindered research is incorrect.'"  But rather than exploring whether two of the plaintiffs, Arupa Ganguly and Haig Kazazian, may have been performing research directed towards commercial applications (thus explaining why they, and they alone, have received a "cease and desist" letter from Myriad, and what may make them different from those hundreds of other BRCA1 and BRCA2 researchers), she reports that Dr. Ganguly was "scared off" from doing research by the letter and that Dr. Kazazian thinks gene patents "inhibit biomedical research."  That's their position and they're sticking to it, of course, but while understandable in a brief, only a writer with an unstated bias would report these sentiments uncritically.

The same could be said for a quote from another plaintiff, Dr. Wendy Chung of Columbia University, who alleges that there has been no testing to study the "normal variation" of mutations in the population.  That would come as quite a surprise to the research group (Haffty et al.) at the Department of Radiation Oncology at the Cancer Institute of New Jersey, whose paper "Breast cancer in young women (YBC): prevalence of BRCA1/2 mutations and risk of secondary malignancies across diverse racial groups" reported (in the October 2009 issue of the Annals of Oncology):

BACKGROUND: Despite significant differences in age of onset and incidence of breast cancer between Caucasian (CA), African-American (AA) and Korean (KO) women, little is known about differences in BRCA1/2 mutations in these populations.  The purpose of this study is to evaluate the prevalence of BRCA1/2 mutations and the association between BRCA1/2 mutation status and secondary malignancies among young women with breast cancer in these three racially diverse groups.  METHODS:  Patients presenting to our breast cancer follow-up clinics selected solely on having a known breast cancer diagnosis at a young age (YBC defined as age <45 years at diagnosis) were invited to participate in this study.  A total of 333 eligible women, 166 CA, 66 AA and 101 KO underwent complete sequencing of BRCA1/2 genes.  Family history (FH) was classified as negative, moderate or strong.  BRCA1/2 status was classified as wild type (WT), variant of uncertain significance (VUS) or deleterious (DEL).  RESULTS:  DEL across these three racially diverse populations of YBC were nearly identical:  CA 17%, AA 14% and KO 14%. The type of DEL differed with AA having more frequent mutations in BRCA2, compared with CA and KO.  VUS were predominantly in BRCA2 and AA had markedly higher frequency of VUS (38%) compared with CA (10%) and KO (12%).  At 10-year follow-up from the time of initial diagnosis of breast cancer, the risk of secondary malignancies was similar among WT (14%) and VUS (16%), but markedly higher among DEL (39%).  CONCLUSIONS:  In these YBC, the frequency of DEL in BRCA1/2 is remarkably similar among the racially diverse groups at 14%-17%.  VUS is more common in AA, but aligns closely with WT in risk of second cancers, age of onset and FH.

Perhaps someone should explain the inhibitory effects on breast cancer research occasioned by the Myriad patents to these researchers.  Ms. Begley's bias is revealed at the end of the article:

The justification for patents is that they encourage innovation: make a discovery, reap the financial rewards.  But I have real doubts that this applies in genetics.  Discoveries, not dollars, are what motivate most geneticists.  (I have criticized that before: because scientists care so little about turning basic discoveries into useful treatments, they have dropped the ball when it comes to helping patients.)  If being first, not being rich, is what drives gene researchers, it is hard to see why society should tolerate patents on human genes that act as even the slightest brake on discovery.

Ms. Begley should realize that she, and society, can't have it both ways -- either we want treatments and diagnostic testing for diseases or we don't.  These treatments and tests are developed by companies, not universities, and companies require investment, if only to maximize the likelihood that the treatments will work and the diagnoses will be reliable.  While discoveries would still occur in the absence of patents, commercialization would not, and Ms. Begley should consider those realities if she thinks scientists have "dropped the ball" when it comes to helping patients.  She says her goal is for basic research to help patients; if so, Ms. Begley should think long and hard about whether that aim is consistent with stories like hers directed instead to selling more copies of Newsweek.

Everybody Knows -- The Boston Globe Weighs in on Gene Patenting

    By Kevin E. Noonan --

Fifteen hundred years ago everybody knew the Earth was the center of the universe.  Five hundred years ago, everybody knew the Earth was flat, and fifteen minutes ago, you knew that humans were alone on this planet.  Imagine what you'll know tomorrow.

Men in Black (1997)

And in 2010, everybody knows that gene patenting is a bad idea, at least if you define "everybody" as the editorial boards of major metropolitan newspapers (and, of course the ACLU).  Today, The Boston Globe took that brave stand in an editorial that proved they know much less than that.

The conclusion is familiar, but the level of either ignorance or misinformation is impressive.  Here is a smattering:

Under US patent law, no one can patent what occurs in nature.

Ah, no.  Possibly correct if the sentence read ". . . what occurs in nature as it occurs in nature," but certainly not correct as written.  And a good thing, too, since the natural world is full of chemical compounds (such as taxol) that are useful as medicines.  An absolute ban on patenting chemicals that occur in nature (in an purified state) would preclude protection for any such medicine -- a bad (and unnecessary) result, but one that would follow from the kind of absolute ban The Globe envisions.

And it isn't even good law.  The closest Supreme Court case on point, the Wood Paper Patent Cases from the 19th Century, says (with regard to a claim for purified cellulose):

Whether a slight difference in the degree of purity of an article produced by several processes justifies denominating the products different manufactures, so that different patents may be obtained for each, may well be doubted, and it is not necessary to decide.

Which says nothing about a purified chemical (and the patent rolls abound which such patents).  Providing a nice counterpoint is much more recent, binding Supreme Court precedent that "anything under the sun made by man" is patentable, for things that are "a product of human ingenuity 'having a distinctive name, character [and] use'" (Diamond v. Chakrabarty).  Isolated nucleic acid qualifies under this proper standard.

It is also sad (albeit not surprising) that the message that gene patents do not impede basic research hasn't penetrated -- the editorial states that "researchers who discover what a specific gene does can retain the exclusive right to study it."  Again, no, and that isn't even a matter of opinion.  Had the esteemed editorial writers at The Globe bothered to do their own basic research (something much less difficult than scientific research), they would have realized that thousands of papers written by hundreds of researchers other than the scientists who patented the BRCA1 and BRCA2 genes have been published since the late 1990's (the time when the patents at issue were granted).  So the inventors named on those patents (and their assignees and licensees, including Myriad Genetics) don't seem to have exercised any exclusive rights with regard to such basic research.  The Globe thinks that "[s]uch research should be an open avenue of scientific inquiry," and apparently it is.

Then the editorial strives for -- and attains -- complete unreality.  Addressing the argument that gene patenting is necessary for attracting investment and to insure a return on such investment, the writers assert:

Yet even without gene patents, it's hard to imagine that companies would not invest in the basic research that leads them to tests and treatments that can be patented -- and become highly profitable -- for devastating diseases.

It appears that no one told The Globe's editorial board that the ACLU has sued not only on claims to the genes, but to the genetic tests as well -- the very tests The Globe agrees should be patentable.  And insofar as those "treatments" The Globe endorses include the drugs -- in this case, biologic drugs -- used in those treatments, gene patents are an important component of protecting those drugs and making investment capital available for their commercialization.

Blissfully ignorant of these realities, The Globe concludes its editorial like this:

Eliminating these patents would attract new researchers and sources of capital that could lead to treatments for many diseases, including Alzheimer's and cancer.  It would also encourage market competition for tests and treatments based on gene sequences, saving money as well as lives.

On the contrary, without these patents there would be much less investment, and it is difficult to see how there could be more basic research than is already being done.  "Market competition" is fine, but the concept can't be cherry-picked -- the very market that promotes competition can completely stifle progress by precluding the conditions necessary to attract investment.  That is the future The Globe envisions, because its editorial writers blindly accept the wisdom of what everybody knows.

Like Peas in a Pod

Now, L.A. Times Gets It Wrong on Gene Patenting

    By Kevin E. Noonan --

Maybe it is just the state of newspapers in the 21st Century -- a 19th Century medium supplanted by technology that is more immediate, extensive, comprehensive, and relevant.  Or maybe it is the pressure of deadlines and "getting the story," although "getting" it correctly seems to be an anachronism.  Or finally, maybe it's just being named "The Times," whether on the right or left coasts, that makes it impossible to render a rational opinion on patenting.

But Sunday, in an editorial entitled "Genes and patents," the L.A. Times joined its East Coast cousin in taking an inaccurate and irrational position on an important question:  patents on diagnostic methods involving genetic information.

"According to the Patent Office," the editorial reads, "patents can be obtained for 'practically everything which is made by man and the processes for making the products,' but not naturally occurring substances."  Not exactly, of course.  It is the U.S. Supreme Court that determined that the patent statute (and the constitutional basis thereof) is to grant patents on "anything under the sun made by man," in Diamond v. Chakrabarty.  As the Court explained, quoting Kewanee Oil Co. v. Bicron Corp., "[t]he authority of Congress is exercised in the hope that '[the] productive effort thereby fostered will have a positive effect on society through the introduction of new products and processes of manufacture into the economy, and the emanations by way of increased employment and better lives for our citizens.'"  The Office has followed the Court's instructions with regard to isolated human DNA, as the editorial says by granting patents on "isolated [and] purified" DNA.

While acknowledging that the period of exclusivity is limited, the editorial cannot avoid the "m" (for monopoly) word, and then repeats the falsehood that patenting isolated human DNA for BRCA1 and BCRA2 stop researchers "not only from conducting the tests but from doing more research into the genes' links to breast cancer and other diseases."  This will come as a surprise, we expect, to the authors of the 7,200 peer-reviewed scientific journal articles listed on the PubMed database in response to the search term "brca1 or brca2" (you would think newspapermen would understand the value of such a simple check on such a serious claim).

On the subject of the importance of the exclusivity incentive for developing these tests, the editorial says that:

[I]t doesn't necessarily follow that barring patents for gene sequences would lead to fewer breakthroughs on genes and their correlations with disease.  There is a virtually insatiable demand for better diagnostic tools and more efficient and effective treatments.  The amount we know about health and disease pales in comparison to what we don't know.  This demand for advancement provides a powerful incentive for companies to seek their fortunes in discoveries.  Even if a gene can't be patented, its discovery can lead to diagnostic and treatment techniques that can be.

Insofar as these sentiments speak to the drive to innovate and develop diagnostic tests, they are correct.  What the editorial writers miss is that such tests will not necessarily have the other important (and typically neglected) feature of patented tests, i.e., that they are disclosed to the public and available to all once the patents expire.  Unlike other types of technology (who wants to practice a patent on a 1980's vintage answering machine?), the value of genetic diagnostic tests will not diminish with time, and they will be valuable far longer than the exclusivity term for patents protecting them.  This public benefit is not an inevitable consequence, however -- it is patenting that mandates disclosure as the quid pro quo of the exclusive grant.  In their absence, it won't be universities and other now-common sources of genetic information that are involved in discovering genetic information commercialized as diagnostic tests (since university professors will still need to publish their work).  It will be private companies, that will have no incentive to publish or disclose the genetic bases for their diagnostic tests.  In the world envisioned by the editorial writers at The Times, throwing off the yoke of patenting will lead to unfettered genetic diagnostic test development.  In the real world, no one will undertake the expense of perfecting such testing just to see larger or better-financed companies out-compete them.  (Have we learned nothing from the 1980's in this regard?)  Rather, it will be companies capable of developing tests for the kinds of multigenic diseases that are most prevalent (diabetes and most cancers, for example) and then keep the genetic information underlying these tests as their trade secret in perpetuity (or at least much longer than the 20 year maximum for patented technology).

The remainder of the editorial is full of similarly fantastical statements -- praise for Congressman Xavier Becerra's benighted attempt to ban "gene patenting" by statute (that, as the editorial states, never made it out of the Judiciary Committee), for example.  The editorial also states, without attribution or reasoning, that Congressman Becerra's bill would not "undermine the biotechnology or pharmaceutical industries -- in fact, it could help them do the research needed to develop their products," a stance opposed by, inter alia, the Biotechnology Industry Organization (which no doubt knows more about what would undermine their members' industry than does The Times).

The Times editorial writers clearly accept the allegations of the ACLU and others that patenting human DNA is "wrong," but like plaintiffs in the AMP v. USPTO lawsuit, they base their arguments on overstatements, misstatements, and downright falsifications.  It's unfortunate that such an important issue is being argued on this level.  With luck, Judge Sweet in New York will see past the posturing and understand where the public's true interests lie.

AIPLA Mid-Winter Institute

The American Intellectual Property Law Association (AIPLA) will be holding its 2010 Mid-Winter Institute on January 27-30, 2010 in La Quinta, CA.  The preliminary program for the Mid-Winter Institute includes presentations on the following topics:

• Building strong IP on a smaller budget;

• Business-based decision making and modeling for IP budgets;
• Aligning patent filing strategies to the technology development strategy;
• Top ten ideas for reducing IP costs at a global company;
• Strategic uses of patent prior art research in view of budget constraints;

• Peering into the 2010 crystal ball:  What awaits the IP practitioner?

• Reforming intellectual property law:  What's happening on Capitol Hill?
• The Supreme Court's reshaping of the IP landscape in recent years;
• The "other" Supreme Court of IP:  How recent Federal Circuit decisions affect IP and the practice of IP;
• Are alternative fee structures really an acceptable alternative?
• Bidding for IP work through requests for proposals:  An in-house perspective on reality;

• Fact or fiction?  How to really make patent prosecution more efficient;

• Tips from the USPTO for increasing efficiency of prosecution including reducing the number of Office actions and techniques for handling delays;
• What the applicant can do before the RCE/appeal decision point to increase efficiency of prosecution;
• RCE or appeal?
• The value of the pre-appeal brief;

• Reexamination - New ground rules in the new Administration.

Readers should consult the preliminary program for a complete listing of presentations being offered at the Mid-Winter Institute.  The preliminary program, which includes a complete agenda, list of speakers, and registration information, can be downloaded here.

The registration fee for the Mid-Winter Institute is $895 for AIPLA members, $1,205 for non-members, $55 for AIPLA student members, $70 for government employees or AIPLA academic/government members.  AIPLA members or non-members registering by January 13, 2010 will receive a $100 discount off the registration fee.  Those interested in registering for the conference can obtain a registration form here.

Interactive Graphic Illustrates How U.S. Patent System Has Driven American Economy

    By Donald Zuhn --

Last month, the Milwaukee Journal Sentinel published two articles documenting the current state of the U.S. patent system (see "The Milwaukee Journal Sentinel Gets It Right about Patents").  The authors of those pieces, John Schmid and Ben Poston, have now compiled an interactive graphic that shows how the U.S. patent system has shaped American history and innovation.  The graphic contains a number of elements, including a timeline of key patents and significant events in American history, a comparison of domestic and foreign patents issued between 1790 and 2009, and charts showing the top countries and states in which U.S. patents originated, the number of pending applications between 1981 and 2009 and average application pendency between 1983 and 2008, fee diversion between 1992 and 2004, and rapid growth of the Chinese patent system between 1999 and 2008.

Among the patents making the Journal Sentinel's timeline are the issuance in 1928 of U.S. Patent No. 1,680,818 to Harry Steenbock, the issuance in 1948 of U.S. Patent No. 2,442,141 to Andrew Moyer, and the issuance in 1998 of U.S. Patent No. 5,843,780 to James Thomson.  The '818 patent, which is directed to an antirachitic product and process (i.e., a process for enhancing Vitamin D in "organic substances of dietary value").  Dr. Steenbock secured a Nobel nomination in 1929 for the work leading to the '818 patent, and the success of the patent helped launch the Wisconsin Alumni Research Foundation (WARF).  The '141 patent is directed to a method a producing penicillin, and the '780 patent is the first embryonic stem cells patent.  The timeline also includes the Diamond v. Chakrabarty decision, which the authors state spurred an "unprecedented growth in biotechnology," among its significant events.

Cancer Drug Development in The New York Times

    By Kevin E. Noonan --

The fastest-growing part of the biotech/pharma industry is anticancer drugs, according to an article in The New York Times today ("For Profit, Industry Seeks Cancer Drugs").  Written by Andrew Pollack, one of the paper's senior business and technology writers, the article highlights the interplay between scientific interest and business opportunity driving this phenomenon.

The article supports its thesis on the recent rise in anticancer drugs with some telling statistics:  there are "more than twice the number of experimental drugs for heart disease and stroke combined, nearly twice as many as for AIDS and all other infectious diseases combined, and nearly twice as many as for Alzheimer's and all other neurological diseases combined."  This corresponds to 860 anticancer drugs currently in clinical trials.

The scientific reasons for these efforts stem from the nature of cancer as a disease.  Robert Weinberg (at left) from the Whitehead Institute at MIT is quoted in the article as saying "Cancer is not a single disease.  It's really dozens, arguable hundreds of diseases."  Bert Vogelstein (below right) from Johns Hopkins is quoted as saying that a typical tumor may have 50-100 genetic mutations, with any two patients having the same type of cancer having as few as five mutations in common.  Accordingly, there are many approaches and molecular targets for small molecule, immunological, and other avenues for attacking cancer cells in an effort to find a cure.  In addition, the situation is ripe for "personalized medicine," or efforts to tailor the treatment to the tumor based on the unique signature of genetic mutations and the corresponding phenotype of an individual's cancer and the targets for therapeutic intervention expressed by each individual's tumor.

But this very complexity is the main reason why cancer remains so daunting after 40 years of concerted efforts to find a cure.  On the one hand, individual cancers even of the same type or in the same tissue vary dramatically in changes in gene expression, chromosomal abnormalities, and cancer-associated phenotypes, so that treatments that are effective for some cancer patients are completely ineffective for others.  This has caused the "war on cancer" to resemble a "grinding war of the trenches," according to an uncredited quote by a cancer researcher.  And intractable clinical situations provide a correspondingly broader scope of opportunities for new drugs effective against cancer in some portion of the patient population.

However, on the other hand, the efficacy of many anticancer drugs is limited at best.  The article cites the instance of drugs like Erbitux® used as a "last ditch treatment for colorectal cancer" providing on average about 90 days of additional life to patients.  And Taceva®, used for treating pancreatic cancer (a cancer having a 3% 5-year survival rate that hasn't changed in the past 100 years), extends life for pancreatic cancer patients on average only 12 days (the basis for its approval by the FDA for this indication).

Since 1998, when there were twelve anticancer drugs in the world's 200 medicines having the greatest sales, the number of anticancer drugs has almost doubled (to 23), and 20 of the 126 drugs having revenues of $1 billion are anticancer drugs.  Despite these efforts, however, only a handful of new anticancer drugs are approved each year (two in 2008, one so far in 2009).  Nevertheless, the article cites studies by IMS Health, a pharmaceutical market research company, for evidence that "[c]ancer drugs have been the biggest category of drugs in terms of sales worldwide since 2006 and in the U.S. since 2008."

One factor driving anticancer drug development is the revenues that can be generated from their sales, which carry a hefty price tag.  Taceva® treatments cost about $3,500 a month, according to the article, and Erbitux® costs $10,000 per month (with an "extra" cost per patient averaging $50,000, based on the average length of treatment course).  These costs have resulted in ImClone having revenues of $1.6 billion in 2008 for Erbitux®, revenues that the article asserts motivated "Eli Lilly & Co. to outbid Bristol-Myers Squibb to acquire ImClone for $6.5 billion."

While these costs are exorbitantly high, the article notes that "[p]atients are often desperate, and insurers risk outrage by denying payments for a[n anti]cancer drug," even when there is little chance of benefit from the treatment.  "Cancer is such an emotional issue that the free market doesn't work like it does for bicycle wheels and umbrellas," according to Robert Erwin, head of the Marti Nelson Cancer Foundation.  Money will flow to anticancer drugs "[a]s long as the health care system will pay the price."  This situation raises special concerns for the healthcare system as a whole, particularly under the current economic climate, the pressures to reduce drug costs, and the amount of investment required to determine whether an anticancer drug lead compound will come to market.  These circumstances are characterized as "the biggest bubble you've ever seen," according to Dr. Mark Ratain (at right), a University of Chicago oncologist.

The confluence of the exponential increase in genetic information over the past decade and the technical ability to identify genetic polymorphism and outright mutation with different cancer phenotypes presents an unprecedented opportunity for developing new anticancer therapeutics.  Mr. Pollack's article is a reminder that the science is only part of the equation, and that the economic realities of drug development and the healthcare marketplace will also have a role in determining how many, and which, of these drugs will be available for the next generation of cancer patients.

The Milwaukee Journal Sentinel Gets It Right about Patents

    By Kevin E. Noonan --

Published articles in the popular press rarely report accurately about patents and the patent system.  That's why it is unexpected, remarkable, and incredibly timely that the Milwaukee Journal Sentinel published not one but two in-depth articles about patents and the U.S. Patent and Trademark Office this week.  Written by John Schmid and Ben Poston, the articles, "Patent backlog clogs recovery" and "Patent rejections soar as pressure on agency rises" document the current (parlous) conditions for patenting in the U.S.  Most importantly, the articles recognize the importance of innovation in pulling the country out of the current economic crisis.

The authors cite statistics familiar to anyone involved in the patent system:  that Congress spent almost two decades raiding Patent Office coffers to fund other programs, to the tune of $752 million during that time (accounting for about 7% of the Office's budget) and reducing its ability to hire new examiners.  That while that trend ended in 2005, and the Office added 1,200 new examiners per year from 2006-2008, attrition is a serious problem, with one examiner leaving the Office for every two that are hired.  And that the current budget crisis has frozen new hiring, exacerbating the problem of a 1.2 million application backlog facing the Office and an average pendency of 3.5 years.

But beyond the statistics, the articles outline how ill-considered (or at least ill-fated) policies have contributed to these problems.  One of these policies is the increased rates of rejection; the article states that "[a]fter consistently rejecting applications at a rate of about 35% since 1975, the Patent Office -- faced with a growing backlog -- underwent a convulsive shift around 2004 and now turns down well over half.  In the quarter that ended June 30, it denied more than 59%."  This is something that John Doll, who until last Thursday was the Acting USPTO Director, has been touting as a desirable result for the past few years:  "[i]f the allowance rate is falling because we are improving quality, then that's a good thing."  The article pointedly characterizes this as the "culture of rejection," which it attributes to the rise of business method patents in the late 1990's and some unfortunately trivial patent grants (including the laser cat exercising method patent (U.S. Patent No. 5,443,036) and the children's swing patent (U.S. Patent No. 6,368,227) that became lightening rods for those (like Josh Lerner) who argued that the patent system was "broken" (see "Once again, The New Yorker Gets It Wrong on Patents").

The response to these developments was that "[t]he Patent Office starting running scared," according to former USPTO Director Bruce Lehman (at right), by setting up a "second pair of eyes" review of a random sampling of newly issued (more accurately, allowed) patents to "double check that they have merit."  The article described the consequences for the examiner responsible for applications deemed to have been improvidently granted:

Those that turn out to have been strong candidates for rejection can count as errors in the performance reviews of the examiner.  Errors whittle down examiners' bonuses.  . . .  Close calls became rejections.  And rejections, according to critics, became the path of least resistance to meeting in-house work quotas, which also are used to grade examiners.

As a consequence, patent examiners exclaim that "We're the ones who put 'no' in 'innovation," according to a current PTO joke.  As the authors recognize, it's not funny.  As a further consequence, "a culture of fear" has taken hold, a feeling that, "If I make the wrong step, I could lose my job," according to Robert Budens, president of the examiners' trade union.

These developments have not gone unnoticed, most pointedly by Judge Paul Michel (at left), Chief Judge of the Court of Appeals for the Federal Circuit.  Judge Michel is quoted as characterizing the increased rejection rates as "suspicious" and as saying the agency is "practically dysfunctional."

The authors clearly believe that a dysfunctional Patent Office is not in the best interests of the country, particularly during times of economic crisis.  While conceding that most patents "have little or no economic impact," the articles cite a Research-Technology Management report from 1997 for the proposition that 5-10% have "potential market relevance."  But:

[T]hat includes those with the potency to build and help maintain the U.S. economy.  These represent advances in science, technology and human creativity, from Robert Fulton's steamboat to Orville and Wilbur Wright's flying machine to Google's search engine.

The articles also quote a 2005 Federal Reserve Bank study found that the largest factor in a state's income growth is the volume of patents each state generates.  (As a local newspaper, the article notes that Wisconsin is 12% above the national average and ranked 14th nationally with regard to patents per capita.)  Mr. Lehman is quoted as saying patents "are essential instruments for an innovation-based economy," and that neither Silicon Valley nor the Madison biotechnology industry would exist without patent protection.  "To advance science in a market economy, you have to have a system that permits you to capture property rights in inventions so investors will invest and the public gets the benefit," according to Mr. Lehman.

The article notes further consequences of a "dysfunctional" agency unable to meet its responsibilities.  "In many cases, applications languish so long that the technology they seek to protect becomes obsolete, or a product loses the interest of investors who could give it a chance at commercial success."  In addition:

Under a practice that Congress authorized a decade ago, the Patent Office publishes applications on its Web site 18 months after the inventor files them, outlining each innovation in detail regardless of whether an examiner has begun considering the application.  The system invites competitors anywhere in the world to steal ideas.

The authors also recognize that the significance of delay is particularly important for the U.S., and why:

Garage entrepreneurialism, the type that created Hewlett-Packard and Harley-Davidson, is more influential in the United States than in most other countries, said Lehman, the former Patent Office director.  "Investments in technology in the United States are to a much greater extent than elsewhere financed by venture capitalists, who require the certainty of patent protection as a precondition," he wrote this year in a policy paper.  "Companies like Google didn't exist 10 years ago."

Carl Gulbrandsen, the Wisconsin Alumni Research Foundation's managing director, is given the last word in the article (and we can't improve on them):

This [the application backlog] is a time bomb that will bring the whole system down," Gulbrandsen said.  "If we want to be a leader of innovation in this country and the world, we have to get patents issued.

A Response to Mr. Brill, and a Modest Proposal Regarding Inequitable Conduct

    By Kevin E. Noonan --

As reported today in a Patent Docs post, Economist Alex Brill (at right) has proposed that Congress include in patent reform legislation provisions "putting some teeth" into the penalties available for inequitable conduct, presumably as a way to discourage it.  These "teeth" include "criminal penalties, punitive damages and jail terms" to prevent "liars and cheaters" from abusing the patent system.

It is easy for the patent cognoscenti to dismiss Mr. Brill's proposals as being out of touch with the realities of the inequitable conduct defense.  He may not recognize that the Federal Circuit, a court with vastly more real-world experience in assessing whether inequitable conduct occurs at rate requiring Mr. Brill's proposed (draconian) measures, has long considered the inequitable conduct defense to be a "plague on the patent system."  Burlington Industries Inc. v. Dayco Corp., 849 F.2d 1418 (Fed. Cir. 1988):

Reputable lawyers seem to feel compelled to make the charge against other reputable lawyers on the slenderest grounds, to represent their client's interests adequately, perhaps.  They get anywhere with the accusation in but a small percentage of the cases, but such charges are not inconsequential on that account.  They destroy the respect for one another's integrity, for being fellow members of an honorable profession, that used to make the bar a valuable help to the courts in making a sound disposition of their cases, and to sustain the good name of the bar itself.  A patent litigant should be made to feel, therefore, that an unsupported charge of "inequitable conduct in the Patent Office" is a negative contribution to the rightful administration of justice.  The charge was formerly known as "fraud on the Patent Office," a more pejorative term, but the change of name does not make the thing itself smell any sweeter.  Even after complete testimony the court should find inequitable conduct only if shown by clear and convincing evidence.  A summary judgment that a reputable attorney has been guilty of inequitable conduct, over his denials, ought to be, and can properly be, rare indeed.

Nor may Mr. Brill realize that the standards for determining what is inequitable conduct have varied, both over time and in decisions from different Federal Circuit panels.  The ill-fated patent reform bill introduced in the Senate in the 110th Congress (S. 1145) contained a provision for "reforming" inequitable conduct.  In the Report of the Judiciary Committee on that bill were identified five different definitions used by the Federal Circuit in defining materiality, a required component of any inequitable conduct assessment:

(1) the objective "but for" standard, where the misrepresentation was so material that the patent should not have issued;

(2) the subjective "but for" test, where the misrepresentation actually caused the examiner to approve the patent application when he would not otherwise have done so;

(3) the "but it may have" standard, where the misrepresentation may have influenced the patent examiner in the course of prosecution;

(4) the old Rule 56 standard where it is likely a reasonable examiner would have considered the information important in deciding whether to issue of the patent; and

(5) the new Rule 56 standard where the information is not cumulative and (i) establishes a prima facie case of unpatentability (either alone or in combination with other references), or (ii) refutes or is inconsistent with a position the applicant has taken.

See Digital Control Inc. v. Charles Machine Works, 437 F.3d 1309, 1314-16 (Fed. Cir. 2006); see also American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1362 (Fed. Cir. 1984).  The Federal Circuit justifies these different tests on the grounds that there is "no reason to be bound by any single standard."

Given this backdrop, it is unclear why there is any reason to increase penalties, particularly because the current remedy, the "nuclear option" of unenforceability of the entire patent (and, perhaps, any related patents) would appear to be sufficient.  Indeed, the attractiveness of this remedy is surely one of the reasons the defense is plead in almost every patent case, being a "Get Out of Jail Free" card for an accused infringer.  It is difficult to believe that the "enhanced" punishments promoted by Mr. Brill would have any greater deterrent effect on a patentee than the prospective loss of patent protection and the exclusivity attendant on such loss.

There is a way to reform how the patent system deals with inequitable conduct, and it has its roots in how the Federal Circuit recently revised a parallel area of the law prone to abuse by patentees:  allegations of willful infringement.  Just as the inequitable conduct defense can be a fruitful way for an accused infringer to encourage settlement, a willful infringement charge can be used by a patentee to the same end, since the possible remedy (treble damages, attorneys' fees and costs) can be daunting to the accused infringer.  Since the conventional defense to a willfulness charge, a competent opinion of counsel, raised issues of attorney-client privilege and waiver, or in the alternative permitting a fact-finder to raise an adverse inference over failure to produce such an opinion, willfulness jurisprudence became another area of patent law fraught with uncertainties for all parties.  The Federal Circuit addressed, and perhaps overcame, these difficulties, by holding in In re Seagate Technology LLC that willfulness required a showing of "objective recklessness."  Applying this rationale to inequitable conduct, ordinary (or even severe) negligence would not be sufficient, and objective recklessness, if proven, would satisfy the standard.  There would also be no need to prove objective recklessness by clear and convincing evidence.

Incorporating this standard into inequitable conduct law would go a long way towards inhibiting the greatest abuses that have arisen in this area.  It would avoid ex post facto reasoning and witch-hunts over what persons with a Rule 56 obligation "should have known," and substitute instead an assessment of what they did know.  The objectiveness of the standard would not prevent true malfeasors from being found to have committed inequitable conduct, since instances where such a person knew of a reference, appreciated it was material to patentability, and did not submit it would be objectively reckless.

There are, of course, a number of other, perhaps better and certainly more direct ways to address the problem of inequitable conduct.  These include reducing (rather than increasing) the remedy, to destroy the presumption of validity or to be focused on particular claims related to (or invalid over) the undisclosed reference.  Inequitable conduct allegations could be postponed until after a defendant has procured a judgment that a claim or claims are invalid over an undisclosed reference, using the objective standard of invalidity as a gatekeeper.  Even absent this type of substantive reform, the defense can be curtailed in litigation by stringent application of Federal Rule of Civil Procedure 8(a).  This rule requires a pleading to contain assertions of fact supporting any allegations contained therein, including affirmative defenses.  Inequitable conduct allegations are usually contained in a defendant's answer to the patentee's complaint, at a time prior to discovery when the defendant has not yet obtained evidence to support the claim.  Preventing this automatic allegation of inequitable conduct, coupled with liberal application of the Rules regarding amended pleadings (Fed. R. Civ. Proc. 15), would at a minimum permit the inequitable conduct defense to be plead only after there was some evidence to support it.

Ironically, most commentators opine that inequitable conduct is an issue in dire need for resolution to promote efficiency in both patent prosecution and litigation because it is plead so often, so unsuccessfully, and with so little evidentiary support.  In other words, this reasoning is the exact opposite of the reasoning Mr. Brill employs in support of this proposal to increase penalties.  While the evils Mr. Brill addresses would certainly be serious if they existed, it should not be too much to hope that a proposal as serious as his would be supported by equally serious objective evidence that the purported problem demands the proposed solution.  That is not the case with Mr. Brill's proposal, and this by itself provides ample reason why it should be ignored.