New York Times to Innovation: Drop Dead

    By Kevin E. Noonan --

The penchant for The New York Times' anti-innovation editorial policies to seamlessly blend into its "news" coverage (particularly on the Business page) has been noted by Patent Docs before.  Whether the latest example is more egregious than in the past is a matter of debate, but with apologies to President Reagan, "There they go again" in a piece published today under Robert Pear's byline on page 1 of the Business section (see "Patent Law Battle a Boon to Lobbyists").

The article goes wrong from the first sentence.  In writing about the fate of S. 1145, a bill with seventeen sections that proposes to modify U.S. patent law extensively (as previously reported by Patent Docs), Mr. Pear chose to bias the piece against patent stakeholders objecting to the bill:

A fight has erupted in Congress over whether drug makers and other companies should be allowed to keep patents they obtained by misrepresentation or cheating.

As Patent Docs readers know, this is not the issue, and "drug makers and other companies" are not trying to keep patents "obtained by misrepresentation or cheating."  Even ignoring that the issues with S. 1145 are more complicated than Mr. Pear recognizes, a fair statement of the inequitable conduct provisions of the bill is that they address the way courts determine if a patent was "obtained by misrepresentation or cheating."

Later in the piece, Mr. Pear acknowledges that the problem the bill proposes to address, inequitable conduct, has become "a plague on the patent system," pled in almost every patent case and arguably subject to abuse through ex post facto argument and occasional fanciful reconstruction of events.  Mr. Pear cited Robert Armitage (at left) of Eli Lilly and Company, that a finding of inequitable conduct is "like imposing the death penalty for relatively minor acts of misconduct."  He then misstates the position of innovator companies by asserting that "[b]rand-name drug companies are urging Congress to eliminate the penalty," which is not the case at all.

Of course, generics companies are more than happy to put their own spin, unquestioned, into the article.  Debra S. Barrett, a vice president of Teva Pharmaceuticals USA, is quoted as saying the changes supported by U.S. innovator companies "would make it easier for them to cheat and get away with it, easier for them to defend their patents and more difficult for us to get generic products onto the market in a timely way."  And the economics of the current drug regime are invoked, Mr. Pear citing the desire of AARP and other "consumer groups" to obtain generic drugs at prices "30 percent to 80 percent less than the equivalent brand-name drugs."  (There is nothing in the piece, of course, regarding the relative development costs between innovator and generic drug companies.)

Even then, Mr. Pear misses the point.  He states that "[i]n the last 15 years, the United States Court of Appeals for the Federal Circuit, which handles patent cases, has affirmed findings of inequitable conduct in at least 40 cases, including 14 that involved pharmaceutical or health care products."  But in view of the frequency with which inequitable conduct is alleged, the real story here is how infrequently inequitable conduct is found.  Showing an inability or unwillingness to do the necessary research (or, to be fair, the limitations of tight deadlines), Mr. Pear gins up his numbers by stating "[s]imilar findings have been issued by federal district judges in an unknown number of cases that were not appealed."

Unknown to Mr. Pear, perhaps, but not unknowable.  (A review of the Times list of Mr. Pear's recent articles reveals he is a reporter on general subjects, without any particular slant to business or technology stories.)  A Lexis search reveals that while inequitable conduct was alleged in over 2,100 patent cases between 1993 and 2008, accused infringers asserting inequitable conduct rarely prevailed.  And to complete the picture, while the Federal Circuit has affirmed inequitable conduct in 40 cases since 1993, it has not upheld inequitable conduct findings in 379 other cases.  These statistics bear our Judge Nichols' admonition twenty years ago in Burlington Indus., Inc. v. Dayco Corp., 849 F.2d 1418, 1422 (Fed. Cir. 1988), and recounted in the article as Congressional testimony from the Biotechnology Industry Organization, that the charge of inequitable conduct is a "plague on the patent system" that needs rectifying.  And ironically, the position advocated in the article is contrary to the results of a study done by Robert Shapiro, who concluded that the inequitable conduct provisions of S. 1145 would increase the frequency of inequitable conduct challenges (see "BIO CEO Provides Update on Patent Reform and Follow-on Biologics Legislation - Part I").

Balance, to the extent there is any, can be found in the middle of the article, where James C. Greenwood (at left) from the Biotechnology Industry Organization; Robert Armitage; and Harry F. Manbeck Jr., Commissioner of Patents and Trademarks under President George H.W. Bush explain the competing influences between disclosing relevant information and trying to avoid inequitable conduct allegations by submitting to the Patent Office all the information that might be considered relevant to patentability.  Quoting Mr. Greenwood, "[t]he poor patent examiner gets a dump truck full of information that he has to pore over without any assistance from the applicant" under the current scheme, which would be modified under S. 1145 to try to avoid this situation.

All evidence of balance rapidly disappears, however, when Mr. Pear reports the contribution of Jon Dudas (at right), Undersecretary of Commerce for Intellectual Property.  Ostensibly tying the propensity to overdisclose less-than-relevant information to the backlog of unexamined patents, Mr. Dudas ignores the inequitable conduct issue entirely, alleging instead that "[w]e [the Patent Office] are getting more and more unpatentable ideas, worse and worse quality applications."  His "evidence":  falling allowance rates, which the cognoscenti will recognize are the result of changing examination standards (i.e., recalcitrance to patent allowances under the Dudas administration compared with cooperation with patent applicants under the Lehman administration).  Even if Mr. Dudas were correct, his evidence is the solution:  don't grant patents to applicants submitting unpatentable ideas or poor quality applications.

Only towards the end of the article does Mr. Pear discuss the purported subject of the piece:  how interest groups have spent millions lobbying Congress for or against S. 1145 (and the companion House bill, H.R. 1908, which passed last September).  At least Mr. Pear properly identifies the players:  the so-called Coalition for Patent Fairness, comprised of "high technology" companies like Intel and Cisco (not mentioned are the activities of Cisco's own Patent Troll tracker blogger, who tried to influence the debate more cost-effectively), and on the other side, the Coalition for 21st Century Patent Reform, whose members include several pharmaceutical and biotechnology companies.  Even in identifying these groups, Mr. Pear (and the Times) bias shines through:  while the motivations of "Patent Fairness" group are said to be to avoid "disputes [that] drain resources that could be better spent on research and innovation," the pharmaceutical companies "zealously guard their intellectual property and are more likely to file suit to protect their patents."  Mr. Pear either doesn't understand, or won't admit, that the reasons for the groups' different positions on patents and their value are directly linked to differences in development costs and obsolescence horizons between "high" tech companies (who can be tripped up by a clever teenager with a computer, a modem, and a good idea for a new Internet applet for social networking) and biotech/pharma companies, who face development and regulatory costs in the several hundreds of millions of dollars to get a new drug to market.  These differences have real consequences to the companies on either side of the debate.

What the Times doesn't consider, or refuses to mention, is that there will be consequences for the rest of us as well.  Will the American public be happy with an outcome that increases the number and decreases the costs of the newest electronic gadget, while at the same time decreasing the number of new drugs, especially biologic drugs that promise to address, for the first time, heretofore untreatable diseases?  It would be refreshing if the Times honestly set out what's really at stake in the debate over S. 1145.

Comments

[Dan Feigelson]

Nice summary, Kevin. You ought to send a shorter version to the NYT.

[Glen Kelley]

I would like to take issue with a couple of the central tenets here...

First of all, rarely do patentable ideas represent the totality of drug development cost. As such linking drug development costs to patent reform is a bit of a red herring... Most of the patents covering biotech or pharma products arrive out of the lab - with either the bench chemist or biologist discovering a new compound, biologic, or target. This doesn't represent the huge total costs of drug development. It is akin to the kid with a modem taking on the electronics industry. As a case in point, many drugs are developed after licensing to a University or other 3rd party to secure necessary rights.

Secondly, any metric for litigation is mired by vagaries since most litigations are settled and thus are not played out through the courts or through appeal. As inequitable conduct has such a high burden of proof, it is almost certainly ripe for an appeal and thus a small finding is not evidence of it’s “plague on the system.” Given the huge dollars at stake in some industries, it is naiveté to think that abuse of a government run system does not occur with some frequency. To weaken the already difficult task of defending oneself by attacking the patent holder’s conduct will certainly invite further abuse of the system. While I think the NYT is being sensationalistic in their characterization, I also think BIO has advocated for a position that is equally disengenuous.

[Kevin E. Noonan]

Well, Gene, I doubt the Federal Circuit is guilty of naivete about inequitable conduct, since they see it so often and with so little evidence to support it. No one wants patents to be obtained through fraud, but the point is that thousands of cases allege fraud and so very few actually find it. It is good litigation strategy to do so, but poor use of the judiciary's time. Which is why several courts have used Fed R Civ Pro 9 to require the defense to be pled with particularity (something that rarely happens because the defendant cannot meet the evidentiary standard) and strike the pleading on that basis.

As for your first point, naivete is believing that the funding given to researchers at universities is comparable to the costs of bringing a drug to market. Besides the costs of obtaining FDA approval, there are the investment costs of taking a lab-scale preparation and translating it to a commercial scale. Patents are differentially important to the biotech/pharma industry (in ways they are not to IT, who have alternative ways of protecting their investment by copyright) and patent protection drives investment. University researchers will continue to research, discover and invent; the question is whether they, and their universities, benefit from commercial exploitation of those discoveries and inventions.

One thing not mentioned in the post was that while happily trying to destroy the patent system, the IT community is supporting draconian penalties for copyright infringement (see the post later today). Nothing like eating your cake and having it, too.

Thanks for the comment.

[Kevin E. Noonan]

Sorry, I meant to say Glen, of course. Great example of a Freudian typo.

[biotechexaminer]

A university research project is most certainly not the same thing as a biotech or pharma company bringing a drug to market.

How many great University ideas have completely bombed toxicity or pharmacokinetics b/c they were developed in small animal model systems rather than in large animals/the clinic?

Furthermore, an inbred small animal is a very gross approximation of the highly outbred genus of humans.

Someone in position to know better than myself (i.e. an actual practicing scientist) can probably come up with even more substantive differences.