Patent Docs

Manager's Amendment (and Others) to H.R. 1249 -- Second Opinions in Genetic Diagnostic Testing

By Kevin E. Noonan --

The question of when H.R. 1249 (formerly the "America Invents Act," now the "Leahy-Smith America Invents Act") will get to a floor vote in the House apparently depends on whether Rep. Lamar Smith (R-TX) can convince his brethren on the Appropriations Committee that the provisions that would put an end to patent fee diversion do not offend the Separation of Powers clause or the appropriators prerogatives.  In the meantime, Rep. Smith has released another Manager's Amendment to the bill; in addition, there are almost 40 other amendments to the bill that have been submitted for consideration.  This post focuses on one of two new provisions contained in the Manager's Amendment that have particular relevance to biotech and pharma patenting.

This provision relates to a statutory guarantee that recipients of a patented diagnostic method are entitled to a "second opinion."  These provisions are contained in new section 27 of the bill, which reads as follows:

Sec. 27.  PERMITTING SECOND OPINIONS IN CERTAIN GENETIC DIAGNOSTIC TESTING

(a)  IN GENERAL. – Section 287 of title 35, United States Code, is amended by adding at the end the following:

(d)(1)  With respect to a genetic diagnostic test provider's performance of, or offering to perform, a confirming genetic diagnostic test activity that constitutes infringement of a patent under section 271(a) or (b) of this title, the provisions of section 281, 283, 284 and 285 of this title shall not apply against the genetic diagnostic test provider with respect to such confirming genetic diagnostic test activity.

    (2)  For the purposes of this subsection:

(A)  The term "confirming genetic diagnostic test activity" –

(i)  means the performance of a patented genetic diagnostic test, by a genetic diagnostic test provider, on an individual solely for the purpose of providing the individual with an independent confirmation of results obtained from another test provider's prior performance of the test on the individual, where such prior test was performed by, or under license from, the owner of the patent that is infringed by the acts specified in paragraph (1), and where independent confirmation of the prior test is not available from another test provider under a license from the patent owner; but

(ii)  does not include –

(I)  the performance of a patented genetic diagnostic test on an individual for the purpose of monitoring or reconfirming the individual's medical or genetic status over time, for therapeutic treatment selection or determining responsiveness to treatment, and for other purposes that require repeated genetic diagnostic testing of the individual;

(II)  the use of a patented machine or article of manufacture in violation of such patent;

(III)  the use of a patented composition of matter that is commercially available to the genetic diagnostic test provider; and

(IV)  the practice of a patented process other than the process of testing claimed in the patent owner's patent referred to in paragraph (I).

(B)  The term "genetic diagnostic test provider" means any person or entity that performs a confirming genetic diagnostic test activity, and includes a clinical laboratory or other health care entity at which, on behalf of which, or in association with which the confirming genetic diagnostic test activity is conducted, such as a nursing home, hospital, university, medical school, health maintenance organization, group medical practice, or medical clinic.

(C)  The term "patented genetic diagnostic test" means a patented diagnostic method that is specific to the detection of a mutation or a pattern of mutations of one or more particular genes in an individual, as well as the use of a patented composition of matter, or the practice of a patented use of a composition of matter, where such composition of matter is specific to and necessary for the practice of the diagnostic method and is not commercially available to the genetic diagnostic test provider.  When performed in the course of a confirming genetic diagnostic test activity, such term is not limited to the particular embodiments of the patented diagnostic method or composition of matter that were practiced by or under the authority of the patent owner in providing the prior generic diagnostic test.

(D)  The term "independent confirmation" is not limited to the replication of the results of a prior genetic diagnostic test, and includes providing the individual with information that is not otherwise available from the provider of such prior test and that affirms, clarifies, disproves, corroborates, or otherwise aids the individual in interpreting the results of such prior test, including in instance where such results were inconclusive.

    (3)  The infringer shall have the burden of establishing the limitation on remedies under paragraph (1), including the production of contemporaneous documentary evidence proving, or tending to prove, that the diagnostic test activity meets the definition of a confirming diagnostic test activity under paragraph (2)(A) at the time the confirming diagnostic test activity was performed.

(b)  EFFECTIVE DATE. – The amendment made by subsection (a) shall take effect on the date of the enactment of this Act and shall apply to confirming diagnostic test activity performed on or after such date.

It will be recalled that Rep. Debbie Wasserman Schultz (D-FL) delivered an impassioned and emotional call for these provisions during debate in April in the Judiciary Committee when the bill was passed out of committee and readied for a vote of the entire House (see "House Judiciary Committee Approves H.R. 1249").  Then, Rep. Wasserman Schultz tearfully withdrew her amendment that would have exempted from infringement a "genetic diagnostic tester's performance of a confirming generic diagnostic test activity" that would otherwise constitute infringement under §§ 271(a) or (b).  Now the amendment is back, and it presents a host of interesting possibilities.

For example, amended § 287(d)(2)(A)(i) provides the exemption from patent infringement liability for confirming genetic diagnostic test activity where "independent confirmation of the prior test is not available from another test provider under a license from the patent owner."  Thus, this provision and the exemption provided can be defeated merely by the patent owner licensing at least one other laboratory to perform "confirming genetic diagnostic tests"; there is no provision that such a "second opinion" test must be at a cost less than the cost of the patentee's test.  Similarly, amended § 287(d)(2)(A)(ii)(II) and (III) provides that the exemption does not apply to "the use of a patented machine or article of manufacture in violation of such patent"; "the use of a patented composition of matter that is commercially available to the genetic diagnostic test provider"; or "the practice of a patented process other than the process of testing claimed in the patent owner's patent referred to in paragraph (I)."  It is not difficult to envision patented articles of manufacture used in diagnostic testing, or "commercially available" compositions that fall under a "label license" from the provider or other restriction, or that use an independently patented process.  The limitation of a "patented genetic diagnostic test" to "a patented diagnostic method that is specific to the detection of a mutation or a pattern of mutations of one or more particular genes in an individual" under amended § 287(d)(2)(C) does not encompass changes in gene expression, rather than mutation, that can be used for diagnostic purposes.  And inclusion of  results other than "the replication of the results of a prior genetic diagnostic test" in the definition of "independent confirmation" in amended § 287(d)(2)(D), and particularly "information that is not otherwise available from the provider of such prior test" suggests that performance of a second, independently developed (and perhaps patented) test might be exempted under these provisions.

In addition to the poor policy practice of picking out specific patents for preferential (mis)treatment, these provisions and their effective date raise takings issues, since they permit patent infringement to go uncompensated.  In view of the widespread predictions of the economic importance of genetic diagnostic testing over the next 20 years, compensation for this taking could be significant.

Analysis of additional portions of the Manager's Amendment, as well as other amendments, will be provided in future posts.

Court Report - Part II

By Sherri Oslick --

About Court Report:  Each week we will report briefly on recently filed biotech and pharma cases.

Hoffmann-La Roche Inc. v. Mylan Inc. et al.
2:11-cv-03276; filed June 7, 2011 in the District Court of New Jersey

• Plaintiff:  Hoffmann-La Roche Inc.
• Defendants:  Mylan Inc.; Mylan Pharmaceuticals, Inc.

Infringement of U.S. Patent No. 5,472,949 ("N4-(Substituted-Oxycarbonyl)-5'-Deoxy-5-Fluorocytidine Compounds, Compositions and Methods of Using Same," issued December 5, 1995) following a Paragraph IV certification as part of Mylan's filing of an ANDA to manufacture a generic version of Roche's Xeloda® (capecitabine, used to treat breast and colorectal cancer and Dukes' C Stage III colon cancer).  View the complaint here.

Cardiovascular Biotherapeutics, Inc v. Phage Biotechnology Corp. et al.
3:11-cv-01215; filed June 3, 2011 in the Southern District of California

• Plaintiff:  Cardiovascular Biotherapeutics, Inc.
• Defendants:  Phage Biotechnology Corp.; Phage Pharmaceuticals, Inc; Thomas J. Stegmann; Frederick M. Chanson; New Technologies Holding PTE

Infringement of U.S. Patent No. 7,252,818 ("Method of Producing Biologically Active Human Fibroblast Growth Factor and Its Use in Promoting Angiogenesis," issued August 7, 2007) based on defendants developing and seeking FDA approval of a wound healing application of FGF-1.  Also, various other claims, including breach of contract, breach of fiduciary duty, and misappropriation of trade secrets.  View the complaint here.

Eli Lilly & Co. v. Hetero Drugs Ltd. et al.
2:11-cv-03192; filed June 2, 2011 in the District Court of New Jersey

• Plaintiff:  Eli Lilly & Co.
• Defendants:  Hetero Drugs Ltd.; Hetero Drugs Ltd., Unit V

Infringement of U.S. Patent No. 5,658,590 ("Treatment of Attention-Deficit/Hyperactivity Disorder," issued August 19, 1997) following a Paragraph IV certification as part of Hetero's filing of an ANDA to manufacture a generic version of Lilly's Strattera® (atomoxetine hydrochloride, used to treat attention-deficit/hyperactivity disorder).  View the complaint here.

Warner Chilcott Co. v. Mylan, Inc. et al.
3:11-cv-03262; filed June 2, 2011 in the District Court of New Jersey

• Plaintiff:  Warner Chilcott Co.
• Defendants:  Mylan, Inc.; Mylan Phamaceuticals Inc.; Famy Care Ltd.

Infringement of U.S. Patent No. 5,552,394 ("Low Dose Oral Contraceptives with Less Breakthrough Bleeding and Sustained Efficacy," issued September 3, 1996) following a Paragraph IV certification as part of Mylan's filing of an ANDA to manufacture a generic version of Warner Chilcott's Loestrin® 24 Fe (norethindrone acetate and ethinyl estradiol tablets, and ferrous fumarate tablets, used for oral contraception).  View the complaint here.

Pfizer Inc. et al. v. Watson Pharmaceuticals, Inc. et al.
1:11-cv-03721; filed June 1, 2011 in the Southern District of New York

• Plaintiffs:  Pfizer Inc.; Pfizer Ltd.; Pfizer Ireland Pharmaceuticals
• Defendants:  Watson Pharmaceuticals, Inc.; Watson Laboratories, Inc.

Infringement of U.S. Patent No. 6,469,012 ("Pyrazolopyrimidinones for the Treatment of Impotence," issued October 22, 2002) following a Paragraph IV certification as part of Watson's filing of an ANDA to manufacture a generic version of Pfizer's Viagra® (sildenafil citrate, used to treat erectile dysfunction).  View the complaint here.

Pfizer, Inc. et al. v. Impax Laboratories, Inc.
2:11-cv-03130; filed May 31, 2011 in the District Court of New Jersey

• Plaintiffs:  Pfizer, Inc.; Pharmacia & Upjohn Co.; Pfizer Health AB
• Defendant:  Impax Laboratories, Inc.

Infringement of U.S. Patent No. 5,382,600 ("3,3-Diphenylpropylamines and Pharmaceutical Compositions Thereof, issued January 17, 1995) following a Paragraph IV certification as part of Impax's filing of an ANDA to manufacture a generic version of Pfizer's Detrol LA® (extended release tolterodine tartrate, used to treat overactive bladder).  View the complaint here.

Patent Reform News Briefs

By Donald Zuhn --

H.R. 1249 Could Reach House Floor This Week

In today's IPO Daily News, the Intellectual Property Owners Association (IPO) reported that House members are preparing for possible debate and a vote on H.R. 1249 "as early as this week."  According to the IPO report, the House has scheduled H.R. 1249 for possible consideration on Wednesday or Thursday, and the House Rules Committee will be meeting on Tuesday to determine how the floor debate on the bill will be conducted.  The IPO also reported that any amendments to the bill had to be offered by 7:00 pm today, and that possible amendments included amendments to remove the first-to-file provision from the bill, delete or modify the special procedure for challenging business method patents, and delete everything except the USPTO funding provision.

IPO Sends Letter to House Leadership in Support of USPTO Funding Provision

Last week, the Intellectual Property Owners Association (IPO) sent a letter to Speaker of the House John Boehner (R-OH) and House Minority Leader Nancy Pelosi (D-CA) noting that the group "strongly supports Section 22 of H.R. 1249, the America Invents Act, which would fully fund the U.S. Patent and Trademark Office (USPTO)."  The letter, which was signed by IPO Executive Director Herbert Wamsley (at right), argues that "[f]unding the USPTO at a level equal to fee collections, as would be required by Section 22 of H.R. 1249, is critically important to innovation, job creation, and the health of the U.S. economy."  The letter notes that the IPO has "carefully documented" the amount of user fees that the USPTO has collected over the past 20 years, but has not been allowed to use, and has determined that "[s]ince 1991, taking into account the latest estimated revenues for FY 2011, the USPTO will have collected but not been able to use nearly $900 million in user fees."  The IPO letter argues that the diverted user fees are "a tax on innovation," and concludes that "retention of Section 22 is essential."  The group notes, in fact, that it "would support a new amendment to increase user fees by 15 percent."

House Judiciary Chair Responds to Rogers-Ryan Letter

In a letter sent on June 6 to Rep. Lamar Smith (R-TX), the Chairman of the House Committee on the Judiciary, Rep. Harold Rogers (R-KY), the Chairman of the House Committee on Appropriations, and Rep. Paul Ryan (R-WI), the Chairman of the House Committee on the Budget, raised concerns regarding the USPTO funding provision of the legislation (see "Patent Reform News Briefs," June 7, 2011).  Rep. Smith (at right) wasted little time in responding to the letter from his fellow Republicans, sending a response the next day.  In that response, Rep. Smith asserted that "[s]ection 22 of H.R. 1249 is an important component of the bill and should be preserved," and provided several reasons for retaining the provision.

First, he notes that the user fees collected by the USPTO do not constitute "true tax revenues derived from the General Treasury."  Instead, "[t]he USPTO is completely funded by user fees imposed on inventors and trademark filers -- not the taxpayers," and "[i]t's entirely reasonable for these men and women to expect that the fees they pay should remain within the agency to recover the costs of its operations."  Rep. Smith also notes that "an estimated $874 million [has been] 'diverted' from agency coffers since 1991."

The letter next indicates that the USPTO funding provision "will not put the USPTO on auto-pilot," but rather, "would actually promote accountability and transparency, creating more channels for oversight than currently exist."  Rep. Smith explains that the funding provision requires the Office to submit an annual "look-back" report to Congress and a "forward-looking annual spending plan" to the House and Senate Committees on Appropriations.

Rep. Smith concludes the letter by declaring that "[a]t a time of economic stress and high unemployment, the USPTO is an untapped resource for job creation," adding that "a well-functioning and -resourced USPTO that reviews applications in a timely manner and issues quality patents can only lead to greater innovation and higher-paying jobs."

Senator Coburn Responds to Rogers-Ryan Letter

Senator Tom Coburn (R-OK) (at right) also sent a letter to Representatives Rogers and Ryan, urging them to reconsider their position on Section 22, which Sen. Coburn contends "does not conflict with the ability to remain committed to restraining spending, improving accountability, and reducing the debt."  Sen. Coburn explains that under this provision of the bill "Congress would not have the ability to divert user fees to other general revenue purposes, and the PTO would remain accountable to Congress."  The letter argues that "[s]ection 22 would not hand the 'power of the purse' to the Obama Administration, put the PTO on 'auto-pilot,' or eliminate the ability of Congress to perform oversight of the PTO," as Rep. Rogers and Ryan contended in their own letter (see "Patent Reform News Briefs," June 7, 2011).  Sen. Coburn concludes by stating that "[w]e cannot have true patent reform without ending fee diversion and providing the PTO with a permanent, consistent source of funding."

Letter from Four Representatives Seeks "No" Vote on H.R. 1249

In a letter sent out earlier today, Representatives John Conyers, Jr. (D-MI), Donald Manzullo (R-IL), F. James Sensenbrenner, Jr. (R-WI), and Marcy Kaptur (D-OH) asked other members of the House to join them "in opposing H.R. 1249, patent legislation that would favor large multinational corporations over U.S. inventors."  Although the four legislators indicated that they had "different concerns with the legislation," they "agree[d] that this special interest bill will cost jobs and harm small start-up inventors."

The letter discusses five issues that have been raised by various groups about the bill, including that: (1) "it provides large banks a special, new bailout at the expense of inventors and the American taxpayer, and even worse, does so on a retroactive basis" by establishing "an unprecedented review procedure which would provide a 'third bite at the apple' to attack a targeted group of financially-related business method patents that previously have been upheld through multiple examination, re-examination, and trial proceedings"; (2) it contains a first-to-file provision that several groups view as "a dangerous and unconstitutional effort to overturn over 220 years of patent practice"; (3) it "undermines the false marking statute by retroactively changing the law applicable to pending enforcement actions"; (4) it "would allow patent owners to provide corrected or new information to the Patent Office that was not presented or not accurately presented during the application process"; and (5) it expands the "prior user rights" defense, thereby "creat[ing] more uncertainty for small innovators and university-related start-up ventures which would have no way of knowing whether an invention might be subject to a manufacturer's prior user rights."

The letter concludes by listing 55 groups that "have serious concerns about H.R. 1249 or specific sections of the reported bill."

Court Report

By Sherri Oslick --

About Court Report:  Each week we will report briefly on recently filed biotech and pharma cases.

Elan Corp. et al. v. IntelliPharmaCeutics Corp. et al.
1:11-cv-00480; filed May 27, 2011 in the District Court of Delaware

• Plaintiffs:  Elan Corp. PLC; Elan Pharma International Ltd.
• Defendants:  IntelliPharmaCeutics Corp.; IntelliPharmaCeutics Ltd.; Par Pharmaceutical Inc.

Infringement of U.S. Patent Nos. 6,228,398 ("Multiparticulate Modified Release Composition," issued May 8, 2001) and 6,730,325 (same title, issued May 4, 2004), licensed to Novartis, following a Paragraph IV certification as part of IntelliPharmaceutics filing of an ANDA to manufacture a generic version of Novartis' Focalin® XR (extended release dexmethylphenidate hydrochloride, used to treat attention deficit hyperactivity disorder).  View the complaint here.

Teva Neuroscience, Inc. et al. v. Apotex Inc. et al.
2:11-cv-03076; filed May 27, 2011 in the District Court of New Jersey

• Plaintiffs:  Teva Neuroscience, Inc.; Teva Pharmaceuticals USA, Inc.; Teva Pharmaceutical Industries Ltd.
• Defendants:  Apotex Inc.; Apotex Corp.

Infringement of U.S. Patent No. 5,453,446 ("Use of the R-Enantiomers of N-Propargyl 1-Aminoindan Compounds for Treating Parkinson's Disease," issued September 26, 1995) following a Paragraph IV certification as part of Apotex's filing of an ANDA to manufacture a generic version of Teva's Azilect® (rasagiline mesylate, used to treat idiopathic Parkinson's disease).  View the complaint here.

Celgene Corp. et al. v. Par Pharmaceutical, Inc.
2:11-cv-03094; filed May 27, 2011 in the District Court of New Jersey

• Plaintiffs:  Celgene Corp.; Novartis Pharmaceuticals Corp.; Novartis Pharma AG
• Defendant:  Par Pharmaceutical, Inc.

Infringement of U.S. Patent Nos. 5,908,850 ("Method of Treating Attention Deficit Disorders with d-Threo Methylphenidate," issued June 1, 1999), 6,355,656 ("Phenidate Drug Formulations Having Diminished Abuse Potential," issued March 12, 2002, with a reexamination certificate issued March 27, 2007), 6,528,530 ("Phenidate Drug Formulations Having Diminished Abuse Potential," issued March 4, 2003), 5,837,284 ("Delivery of Multiple Doses of Medications," issued November 17, 1998), 6,635,284 (same title, issued October 21, 2003), and 7,431,944 ("Delivery of Multiple Doses of Medications," issued October 7, 2008) all licensed exclusively to Novartis in certain fields of use, following a Paragraph IV certification as part of Par's filing of an ANDA to manufacture a generic version of Novartis' Focalin XR® (extended release dexmethylphenidate hydrochloride, used to treat attention deficit hyperactivity disorder).  View the complaint here.

Abbott Laboratories et al. v. Ben Venue Laboratories Inc.
1:11-cv-00474; filed May 26, 2011 in the District Court of Delaware

• Plaintiffs:  Abbott Laboratories; Wisconsin Alumni Research Foundation
• Defendant:  Ben Venue Laboratories Inc.

Infringement of U.S. Patent Nos. 5,587,497 ("19-nor-Vitamin D Compounds," issued December 24, 1996), 6,136,799 ("Cosolvent Formulations," issued October 24, 2000), and 6,361,758 (same title, issued March 26, 2002,) following a Paragraph IV certification as part of Ben Venue's filing of an ANDA to manufacture a generic version of Abbott's Zemplar® (paricalcitol, used to treat secondary hyperparathyroidism in patients with kidney failure).  View the complaint here.

Somaxon Pharmaceuticals Inc. v. Par Pharmaceutical Inc. et al.
1:11-cv-00476; filed May 26, 2011 in the District Court of Delaware

• Plaintiff:  Somaxon Pharmaceuticals Inc.
• Defendants:  Par Pharmaceutical Inc.; Par Pharmaceutical Companies Inc.

Infringement of U.S. Patent No. 6,211,229 ("Treatment of Transient and Short Term Insomnia," issued April 3, 2001) following Par's filing of an ANDA to manufacture a generic version of Somaxon's Silenor® (doxepin, used to treat insomnia).  View the complaint here.

Galderma Laboratories Inc. et al. v. Impax Laboratories Inc.
1:11-cv-00477; filed May 26, 2011 in the District Court of Delaware

• Plaintiffs:  Galderma Laboratories Inc.; Galderma Laboratories LP; Supernus Pharmaceuticals Inc.
• Defendant:  Impax Laboratories Inc.

Infringement of U.S. Patent No. 7,749,532 ("Once Daily Formulation of Tetracyclines," issued July 6, 2010), licensed to Galderma, following a Paragraph IV certification as part of Impax's filing of an ANDA to manufacture a generic version of Galderma's Oracea® (doxycyline delayed release capsules, used to treat inflammatory lesions of rosacea).  View the complaint here.

InSite Vision Inc. et al. v. Sandoz Inc. et al.
3:11-cv-03080; filed May 26, 2011 in the District Court of New Jersey

• Plaintiffs:  InSite Vision Inc.; Inspire Pharmaceuticals, Inc.; Pfizer Inc.
• Defendants:  Sandoz Inc.; Sandoz GmbH; Sandoz Industrial Products S.A.

Infringement of U.S. Patent Nos. 6,861,411 ("Method of Treating Eye Infections with Azithromycin," issued March 1, 2001), 6,159,458 ("Sustained Release Ophthalmic Compositions Containing Water Soluble Medicaments," issued December 12, 2000), 6,239,113 ("Topical Treatment or Prevention of Ocular Infections," issued May 29, 2001), 6,569,443 (same title, issued May 27, 2003), and 7,056,893 (same title, issued June 6, 2006), licensed to Inspire, following a Paragraph IV certification as part of Sandoz's filing of an ANDA to manufacture a generic version of Inspire's AzaSite® (azithromycin, used to treat bacterial conjunctivitis).  View the complaint here.

Lupin Atlantis Holdings S.A. et al. v. Paddock Laboratories, Inc.
1:11-cv-03628; filed May 26, 2011 in the Southern District of New York

• Plaintiffs:  Lupin Atlantis Holdings S.A.; Ethypharm S.A.
• Defendant:  Paddock Laboratories, Inc.

Infringement of U.S. Patent No. 7,863,331 ("Pharmaceutical Composition Containing Fenofibrate and Method for the Preparation Thereof," issued January 4, 2011) following a Paragraph IV certification as part of Paddock's filing of an ANDA to manufacture a generic version of Lupin's Antara® (fenofibrate, used to treat hypercholesterolemia and hypertriglyceridemia).  View the complaint here.

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.

ABA Webinar on Therasense v. Becton, Dickinson

The American Bar Association (ABA) Section of Intellectual Property Law and Center for Continuing Legal Education will be offering a live webinar entitled "Therasense, Inc. v. Becton, Dickinson and Company: The Federal Circuit's New Standard for Materiality" on June 15, 2011 from 2:00 - 3:30 PM (Eastern).  Retired Federal Circuit Chief Judge Paul Michel will moderate a panel consisting of Rohit K. Singla of Munger Tolles & Olson, Bradford J. Badke of Ropes & Gray LLP, and Rachel Krevans of Morrison & Foerster LLP, who will discuss the new standard for proving materiality when inequitable conduct is alleged and the impact of the en banc Therasense decision on the parties, the U.S. Patent and Trademark Office, and the future of patent litigation.

The registration fee for the webcast is $95 for Section of Intellectual Property Law members, $99 for government attorneys, $150 for ABA members, and $195 for the general public (for group fee options, please visit the event website).  Those interested in registering for the webinar, can do so here.

Conference & CLE Calendar

June 15, 2011 - Therasense, Inc. v. Becton, Dickinson and Company: The Federal Circuit's New Standard for Materiality (American Bar Association) - 2:00 - 3:30 PM (Eastern)

June 17, 2011 - The Implications of Stanford v. Roche (Intellectual Property Owners Association) - 2:00 PM (ET)

June 19-20, 2011 - IP Business Congress (Intellectual Asset Management magazine) - San Francisco, CA

June 21, 2011 - The Impact of Therasence v. Becton on the Doctrine of Inequitable Conduct (LexisNexis) - New York, NY

June 21-22, 2011 - 10th Annual Forum on Pharma Patent Lifecycles (C5) - London, England

June 23, 2011 - Chemical Patent Practice Road Show: Prosecution and Litigation Strategies (American Intellectual Property Law Association) - Chicago, IL

June 27-30, 2011 - BIO International Convention (Biotechnology Industry Organization) - Washington, DC

June 29-30, 2011 - Pharmaceutical Portfolio & Product Life Cycle Management (SMi Group) - London, UK

July 16-19, 2011 - 2011 Annual Meeting; The Nuts & Bolts of Patent Prosecution Practice; and 2011 Patent Practice Update (National Association of Patent Practitioners) - Las Vegas, NV

July 18-19, 2011 - Hatch-Waxman Boot Camp*** (American Conference Institute) - San Diego, CA

July 20-21, 2011 - Advanced Forum on Life Sciences Collaborative Agreements and Acquisitions*** (American Conference Institute) - San Francisco, CA

July 25-27, 2011 - Intensive Patent Law Seminar (Chisum Patent Academy) - Seattle, WA

August 4-7, 2011 - 2011 Annual Meeting (American Bar Association) - Toronto, Ontario

August 16-18, 2011 - The Bilski Impact: Procuring & Enforcing Software, Business Methods & Bioinformatics Patents (Patent Resources Group) - Alexandria, VA and Southfield, MI

September 18-20, 2011 - Accelerating Intellectual Property and Innovation in South Africa (South African Department of Science and Technology) - Cape Town, South Africa

***Patent Docs is a media partner of this conference or CLE

CLE on Stanford v. Roche

The Intellectual Property Owners Association (IPO) will offer a one-hour webinar on "The Implications of Stanford v. Roche" on Friday, June 17, 2011 beginning at 2:00 PM (ET).  The IPO webinar will consider the contract terms at issue in the case and examine the impact of the opinion on the patent reform debate, including the first-to-file provision.  The panel includes Ned Israelsen pf Knobbe Martens Olson & Bear, LLP; Patent Docs author Dr. Kevin Noonan of McDonnell Boehnen Hulbert & Berghoff LLP; and Jon Soderstrom, the Managing Director of the Office of Cooperative Research at Yale University.  The registration fee for the webinar is $120 (government and academic rates are available upon request).  Those interested in registering for the webinar can do so here.

CLE on Therasense, Inc. v. Becton, Dickinson & Co.

LexisNexis will be offering a luncheon and CLE presentation entitled: "The impact of Therasence v. Becton on the doctrine of inequitable conduct" on June 21, 2011 from 11:30-1:00 PM (EST) at the Midtown Executive Club in New York, NY.  The presentation will address the following topics:

• Evolution of the inequitable conduct doctrine from cases of egregious misconduct to liability for lesser offenses,
• Therasense holding and tightened standards, and
• Impact on patent prosecutors and litigators.

Those interested in registering for the CLE can do so here.

ABA 2011 Annual Meeting

The American Bar Association (ABA) will be holding its 2011 Annual Meeting from August 4-7, 2011 in Toronto, Ontario.  During the Annual Meeting, various ABA sections and divisions will be offering more than 250 CLE programs, including the following programs that will be offered by the Intellectual Property Law section:

• International Patent Litigation;
• The Demise of Junk Science in the Calculation of Reasonable Royalties;
• Is the World Ready for a New Form of IP Protection?
• FTC Enforcement in the Evolving IP Marketplace;
• Update from the USPTO; and
• Passing the Puck: The Future of International Patent Law Harmonization.

On Saturday, August 6th, Justice Marshall Rothstein of the Supreme Court of Canada will be the keynote speaker at the ABA IP Law section luncheon.  A schedule of programs and events being offered by the Section of Intellectual Property Law at the ABA Annual Meeting can be found here.  The registration fee for individual CLE programs ranges from $35 for government lawyers and judges to $90 for all other attendees.  An All-Access CLE Badge ranges from for $75 (law school member) to $950 (non-ABA members).  Additional information regarding registration fees can be found here.  Those interested in registering for the Annual Meeting can do so here.

CLE on Bilski v. Kappos

Patent Resources Group (PRG) will be holding three-day course entitled:  "The Bilski Impact: Procuring & Enforcing Software, Business Methods & Bioinformatics Patents" from August 16-18, 2011 in Alexandria, VA and Southfield, MI.  The course will address how best to claim, prosecute, and litigate software, business method, and bioinformatics inventions.  The course syllabus can be obtained here.  Claim styles and limitations designed to meet the somewhat unclear post-Bilski § 101 standards will be discussed.  Legal ethics in the context of duty of disclosure under 37 C.F.R. § 1.56 and USPTO conflict of interest issues will also be presented.  The registration fee for the course is $2,195.  Those interested in registering for the event can do so here.

Microsoft Corp. v. i4i Limited Partnership (2011)

Supreme Court Holds That Invalidity Must Be Proved by Clear and Convincing Evidence

    By Donald Zuhn --

In the third patent decision to be issued by the Supreme Court in little more than a week, the Court in Microsoft Corp. v. i4i Limited Partnership held today that 35 U.S.C. § 282 requires an invalidity defense to be proved by clear and convincing evidence.  Justice Sotomayor delivered the opinion of the Court, and was joined by all but Justice Thomas (who concurred in the judgment) and Chief Justice Roberts (who took no part in the decision).  Justice Breyer authored a concurring opinion, in which he was joined by Justices Scalia and Alito.

Justice Sotomayor begins by noting that Congress has charged the U.S. Patent and Trademark Office with the task of examining patent applications and issuing patents where "the applicant is entitled to a patent under the law" (35 U.S.C. § 131), and that Congress has set forth the prerequisites that the Office must evaluate in determining whether a patent should be issued.  The opinion also notes that a patent grants exclusive rights to the holder, including the exclusive right to use the claimed invention, which can be enforced by bringing a civil action for infringement.  An accused infringer may counter by asserting one of the defenses under 35 U.S.C. § 282, including that the patent is invalid (i.e., "never should have issued in the first place").  The opinion points out that in asserting an invalidity defense, the accused infringer "must contend with the first paragraph of §282, which provides that '[a] patent shall be presumed valid' and '[t]he burden of establishing invalidity . . . rest[s] on the party asserting such invalidity,'" and that under the Federal Circuit's reading of § 282, the presumption of validity can only be overcome by persuading the factfinder of the patent's invalidity by clear and convincing evidence.  Justice Sotomayor notes that in American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F. 2d 1350 (Fed. Cir. 1984), Judge Rich -- citing Radio Corp. of America v. Radio Engineering Laboratories, Inc. ("RCA"), 293 U. S. 1 (1934) -- concluded that:

[Section] 282 creates a presumption that a patent is valid and imposes the burden of proving invalidity on the attacker.  That burden is constant and never changes and is to convince the court of invalidity by clear evidence.

In the case before the Court, i4i brought suit against Microsoft in 2007, asserting that Microsoft's manufacture and sale of Microsoft Word infringed i4i's patent to an improved method of editing computer documents.  Microsoft denied infringement and counterclaimed for a declaration of invalidity and unenforceability.  With regard to its invalidity defense, Microsoft contended that i4i's sale of the S4 software program rendered the asserted patent invalid under 35 U.S.C. § 102(b).  At trial, Microsoft objected to i4i's proposed instruction that Microsoft was required to prove invalidity by clear and convincing evidence because the S4 program had never been presented to the USPTO during prosecution of the asserted patent, and requested the following instruction:

Microsoft's burden of proving invalidity and unenforceability is by clear and convincing evidence.  However, Microsoft's burden of proof with regard to its defense of invalidity based on prior art that the examiner did not review during the prosecution of the patent-in-suit is by preponderance of the evidence.

The District Court rejected Microsoft's hybrid standard of proof and instructed the jury that "Microsoft has the burden of proving invalidity by clear and convincing evidence."  The jury found that Microsoft failed to prove invalidity and that Microsoft had willfully infringed the i4i patent.  The Federal Circuit affirmed, saying that it could discern no error in the jury instruction requiring Microsoft to prove invalidity by clear and convincing evidence.  In response to this affirmance, Microsoft petitioned for certiorari, contending that the proper standard for proving invalidity is preponderance of the evidence, and at the very least, that the preponderance of the evidence standard should apply when an invalidity defense rests on evidence that was never considered by the USPTO during examination of the asserted patent.

Justice Sotomayor (at left) first notes that "by its express terms, §282 establishes a presumption of patent validity, and it provides that a challenger must overcome that presumption to prevail on an invalidity defense," adding that "while the statute explicitly specifies the burden of proof, it includes no express articulation of the standard of proof."  Turning to the issue of standard of proof, the opinion points to RCA (cited by Judge Rich in American Hoist & Derrick Co.), in which Justice Cardozo explained that "there is a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence," and added that "one otherwise an infringer who assails the validity of a patent fair upon its face bears a heavy burden of persuasion, and fails unless his evidence has more than a dubious preponderance."  Justice Sotomayor therefore concludes that:

The common-law presumption [i.e., the pre-1952 Act presumption] . . . reflected the universal understanding that a preponderance standard of proof was too 'dubious' a basis to deem a patent invalid.  . . .  Thus, by the time Congress enacted §282 and declared that a patent is "presumed valid," the presumption of patent validity had long been a fixture of the common law.  According to its settled meaning, a defendant raising an invalidity defense bore "a heavy burden of persuasion," requiring proof of the defense by clear and convincing evidence.

Although § 282 does not expressly specify a standard of proof, the opinion states that "[u]nder the general rule that a common-law term comes with its common-law meaning, we cannot conclude that Congress intended to 'drop' the heightened standard [of] proof from the presumption simply because §282 fails to reiterate it expressly."  Pointing again to RCA, Justice Sotomayor writes that the case "leaves no doubt that attached to the common-law presumption of patent validity was an expression as to its 'force,' that is, the standard of proof required to overcome it" (citation omitted).  Although Microsoft argued that the Court had applied a clear-and-convincing standard of proof in only two limited circumstances in its pre-1952 cases, Justice Sotomayor responds that:

Squint as we may, we fail to see the qualifications that Microsoft purports to identify in our cases.  They certainly make no appearance in RCA's explanation of the presumption of patent validity.  . . .  Nor do they appear in any of our cases as express limitations on the application of the heightened standard of proof.

As for Microsoft's argument that that a preponderance of the evidence standard should at least apply where the evidence before the factfinder was not before the USPTO during the examination process, the opinion states that "[t]he question remains, however, whether Congress has specified the applicable  standard of proof," and responds that "Congress did just that by codifying the common-law presumption of patent validity and, implicitly, the heightened standard of proof attached to it."  Justice Sotomayor notes that "[o]ur pre-1952 cases never adopted or endorsed the kind of fluctuating standard of proof that Microsoft envisions," adding that "the Court's statement [in RCA] that a 'dubious preponderance' will never suffice to sustain an invalidity defense, admitted of no apparent exceptions" (citation omitted).  In footnote 10, Justice Sotomayor points out the "impracticalities" of Microsoft's fluctuating standard of proof, observing that because an examiner has no duty to cite every reference considered, whether an examiner has considered a particular reference will often be "a question without a clear answer."

Justice Breyer, who joined the Court's opinion, writes separately to "emphasiz[e] that in this area of law as in others the evidentiary standard of proof applies to questions of fact and not to questions of law."  He adds that "[w]here the ultimate question of patent validity turns on the correct answer to legal questions -- what these subsidiary legal standards mean or how they apply to the facts as given -- today's strict standard of proof has no application."  Looking to lower courts for help, Justice Breyer writes that "[b]y preventing the 'clear and convincing' standard from roaming outside its fact-related reservation, courts can increase the likelihood that discoveries or inventions will not receive legal protection where none is due."  Justice Thomas, while concurring with the Court's judgment, differs with the Court as to whether Congress' use of the phrase "[a] patent shall be presumed valid" codified a standard of proof.  He reaches the same outcome as the Court, however, because § 282 is silent as to the standard of proof.  As a result, Justice Thomas writes that § 282 did not alter the common-law rule, which he characterizes as a "heightened standard of proof set forth in Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U. S. 1 (1934) -- which has never been overruled by this Court or modified by Congress."

Microsoft Corp. v. i4i Limited Partnership (2011)
Opinion of the Court by Justice Sotomayor, joined by Justices Scalia, Kennedy, Ginsburg, Breyer, Alito, and Kagan;
Concurring opinion by Justice Breyer, joined by Justices Scalia and Alito;
Opinion concurring in the judgment by Justice Thomas;
Chief Justice Roberts took no part in the consideration or decision of the case.

America Invents Act: Quo Vadis?

By Kevin E. Noonan --

An anonymous correspondent writes:

48 hours ago, it looked like the Patent Reform Act was a done deal.  Today, it's not at all that clear.

Tuesday afternoon, Harold Rogers (Chairman of the House Appropriations Committee) and Paul Ryan (Chairman of Budget) wrote a letter to Chairman Smith insisting on maintaining the power of these two committees to raid the Patent Office of its user fees.  [See "Patent Reform News Briefs," June 7, 2011.]  What isn't mentioned in the letter is that Chairman Rogers was one of the main architects of fee diversion in the early part of the decade.

Wednesday, four senior members of the Appropriations Committee reiterated their preference for fee diversion.

It can be expected that almost all stakeholders will come out in opposition to the bill if the appropriators get their way.

On Wednesday afternoon, in a debate between Robert Armitage (Eli Lilly) and Steven Miller (Proctor & Gamble) as proponents of the bill, against Pat Choate (an economist) and Jonathan S. Massey of Massey & Gail (a former Supreme Court clerk) in opposition to the bill, reports are that audience members came away with the realization that the bill raises real questions, that it may indeed be harmful to companies outside the Fortune 100, that the opponents of the bill have valid concerns, and that constitutionality of some provisions is certainly sufficiently questionable to create commercial uncertainty.

In a third letter, Rep. Adam Schiff [D-CA] joined other legislators that have expressed concerns with several provisions of the bill.

One knowledgeable source (who wished not to be identified) expressed the opinion at the end of the day Wednesday that the bill was no longer a "done deal," that its passage was truly an open question.

Phone calls that seemed hopeless a week ago could now be decisive -- the fate of the bill turns on about 5000 phone calls to representatives.

The letters in question raise legitimate questions.  As noted in an earlier Patent Docs post, Representatives Harold Rogers (R-KY) and Paul Ryan (R-WI) object to provisions of the House "patent reform" bill (H.R. 1249) by citing Constitutional concerns (transferring appropriation authority from Congress to the Executive) and partisanship (characterizing this change as being contrary to "the new Republican majority's commitment to restraining spending, improving accountability and transparency, and reducing the nation's unparalleled deficits and debt" and saying that "it would be both irresponsible and unwise to allow the PTO to operate solely under the authority of bureaucrats and White House political appointees," conveniently forgetting that the Bush White House ended fee diversion from 2004-2008).

These sentiments were echoed (almost word-for-word) in a second letter from Rep. Rogers, joined by Representatives Frank Wolf (R-VA), Norman Dicks (D-WA), and Chaka Fattah (D-PA).

On the other hand, Rep. Adam Schiff (R-CA) (at left) writes to oppose the "First to File" system set forth in Section 2 of the bill.  Rep. Schiff writes that this change will be "counterproductive" because it will hurt "the most creative inventors in our economy and lead to rushed patent filings."  In support of this proposition, he notes that "[t]he driving force of innovation comes from small, agile firms that marshal creative energies in exciting and productive ways" and that "[i]t is precisely these small firms" that will be hurt by this change, in his opinion.  Rep. Schiff cites the need for such small companies "to do additional market research, talk to venture capitalists or investors, develop their idea further and a myriad of other necessities" that the current system permits and a "first to file" regime will inhibit.  He also ties the need for outside patent counsel to prepare applications that will ultimately be discarded as a misuse of resources that would otherwise be used for "hiring and actual act[s] of invention."

Artful lobbying and crafty politics (as well as a genuine belief that "patent reform" is necessary to address the backlog and other perceived weaknesses in the patent system) have gotten us to this moment.  Whether sufficient political opposition can be mounted to prevent passage of H.R. 1249 is an open question, one that will only be answered if enough stakeholders who think the bill is fundamentally flawed exercise their franchise and let their Representative know.  The time (once again) is now.

Patent Reform News Briefs

By Donald Zuhn --

House Issues Report on America Invents Act

On June 1, the House Committee on the Judiciary issued its report on H.R. 1249, the America Invents Act.  The 165-page report indicates that following consideration of the bill, the Committee now "reports favorably thereon with an amendment and recommends that the bill as amended do pass."  The report is divided into sixteen sections, including discussions of the amendment to the bill, the bill's purpose and summary, background and need for the legislation, agency views, dissenting views, and additional views.  Patent Docs intends to provide a more comprehensive analysis of the report in future posts.

Rep. Manzullo Urges House Leaders to Shelve "Patent Reform" Bill

On Monday, Rep. Don Manzullo (R-IL) (at left) issued a press release calling on House leadership to "shelve" H.R. 1249, the "controversial 'patent reform' bill" that could make it to the floor for a vote as early as next week.  The impetus for Rep. Manzullo's request was the Supreme Court's decision in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., which he says "upends the basic premise of the bill."  In particular, Rep. Manzullo points to the opinion's opening statement that "[s]ince 1790, the patent law has operated on the premise that rights in an invention belong to the inventor."  He also points to a subsequent statement by Chief Justice Roberts, the author of the opinion, that "[a]lthough much in intellectual property has changed in the 220 years since the first Patent Act, the basic idea that inventors have the right to patent their inventions has not."  Noting that the "main premise" of H.R. 1249 "is to switch America's patent system from a 'first to invent' system to a 'first to file' system," Rep. Manzullo contends that the "ruling by the Supreme Court affirms 'first to invent' and indicates HR 1249 would not pass constitutional muster."

52 Representatives Seek Debate on Constitutionality of H.R. 1249

In a letter to Rep. David Dreier (R-CA), the Chairman of the House Committee on Rules, and Rep. Louise Slaughter (D-NY), the Ranking Member of the House Committee on Rules, 52 members of the House have requested that "any resolution reported by the Committee on Rules . . . to provide for consideration of H.R. 1249 include provision for a separate period of at least 20 minutes for debate on constitutionality of H.R. 1249 under clause 8 of Section 8 of Article I."  As most patent practitioners are aware, the clause of the Constitution cited in the legislators' letter confers upon Congress the power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

In addition to Rep. Manzullo (R-IL), the other signatories to the letter include:  Representatives Michele Bachmann (R-MN), Tammy Baldwin (D-WI), Lou Barletta (R-PA), Roscoe Bartlett (R-MD), Dan Benishek (R-MI), Paul Broun (R-GA), Corinne Brown (D-FL), Mike Coffman (R-CO), Tom Cole (R-OK), John Conyers, Jr. (D-MI), Chip Cravaack (R-MN), Danny Davis (D-IL), Lloyd Doggett (D-TX), John Duncan, Jr. (R-TN), Donna Edwards (D-MD), Keith Ellison (D-MN), Marcia Fudge (D-OH), Charles Gonzales (D-TX), Walter Jones (R-NC), Marcy Kaptur (O-OH), Mike Kelly (R-PA), Steve King (R-IA), Dennis Kucinich (D-OH), John Lewis (O-GA), Daniel Lipinski (D-IL), Frank Lucas (R-OK), Jim McDermott (D-WA), Gregory Meeks (D-NY), Richard Neal (D-MA), Ed Pastor (D-AZ), Ron Paul (R-TX), Collin Peterson (D-MN), Thomas Petri (R-WI), Chellie Pingree (D-ME), Bill Posey (R-FL), Nick Rahall II (D-WV), Dana Rohrabacher (R-CA), Mike Ross (D-AR), Lucille Roybal-Allard (D-CA), Jon Runyan (R-NJ), Bobby Rush (D-IL), Robert Schilling (R-IL), Aaron Schock (R-IL), James F. Sensenbrenner, Jr. (R-WI), Brad Sherman (D-CA), Christopher Smith (R-NJ), Bennie Thompson (D-MS), Edolphus Towns (D-NY), Tim Walberg (R-MI), Allen West (R-FL), and Don Young (R-AK).  The letter was a bipartisan effort, with 26 Republicans and 26 Democrats requesting the period of debate.  Interestingly, two of the letter's signatories, Rep. Conyers and Rep. Sensenbrenner, Jr., are members of the House Judiciary Committee.

House Appropriations and Budget Chairs Seek Changes to USPTO Funding Provision

While some House members have begun to question the constitutionality of H.R. 1249 -- or at least have expressed a desire to debate the issue -- Rep. Harold Rogers (R-KY) (at right), the Chairman of the House Committee on Appropriations, and Rep. Paul Ryan (R-WI) (below), the Chairman of the House Committee on the Budget, have now raised concerns regarding the USPTO funding provision of the legislation.  In a letter sent on Monday to Rep. Lamar Smith (R-TX), the Chairman of the House Committee on the Judiciary, the two House Republicans state that H.R. 1249, which "is likely to be considered on the House floor in the upcoming weeks," would "permit the PTO to collect and spend authorized fees -- all without requiring action or approval from Congress."

Rep. Rogers and Ryan noted that they "strongly oppose this proposed shift of billions in discretionary funding and fee collections to mandatory spending," stating that "[p]utting PTO funding on auto-pilot is a move in exactly the wrong direction, given the new Republican majority's commitment to restraining spending, improving accountability and transparency, and reducing the nation's unparalleled deficits and debt."  The House Republicans add that "H.R. 1249 would also hand the Congressional 'power of the purse' -- bestowed in the Constitution -- to the Obama White House, and essentially eliminate the ability of Congress to perform substantive oversight of the PTO."  Asserting that "[o]versight of the PTO belongs with the Congress," the two legislators argue that "[i]t would be both irresponsible and unwise to allow the PTO to operate solely under the authority of bureaucrats and White House political appointees -- without being held accountable to the American public through their elected Representatives in Congress."  The letter concludes by requesting that section 22 of H.R. 1249, which would create the U.S. Patent and Trademark Office Public Enterprise Fund to cover all USPTO administrative and operating expenses, be deleted or modified prior to floor consideration of the bill.

Patent Reform Is Part of House Republican Jobs Plan

Last week, House Majority Leader Eric Cantor (R-VA) (at right) announced the House Republican plan for job creation and economic growth.  A one-page summary of the plan indicated that entrepreneurship and growth would be encouraged by "[m]oderniz[ing] our patent system to protect our nation's innovators, discourage frivolous lawsuits, and expedite patent reviews."  The full jobs plan provided a bit more detail regarding this goal, characterizing the patent-related problem and the House Republicans' solution to that problem as follows:

PROBLEM: PATENT BACKLOGS

Our patent system protects American ideas and products.  It has historically been the envy of the world, but today it is failing to meet the challenges of the 21st Century.  Under our current patent system there is a backlog of 700,000 patent applications.  The current system of filing, challenging, and litigating patents can also lead to costly and unnecessary delays.

REPUBLICAN SOLUTION

We will modernize and improve the patent system to discourage frivolous lawsuits, expedite reviews, and provide better protection for job creating entrepreneurs.  Streamlining the system will make it easier for existing businesses to grow and allow more start-up companies to flourish.  The House Judiciary Committee voted to approve a bipartisan patent reform bill to address these challenges.