BIO CEO: IPR System Threatens Medical Innovation

    By Donald Zuhn --

In an article published earlier this fall on Medium, Biotechnology Industry Organization (BIO) President and CEO Jim Greenwood urges Congress to modify the inter partes review (IPR) system, which he argues has "turn[ed] the serious business of medical innovation and entrepreneurial risk-taking into a casino."  Noting that IPRs were designed by Congress to offer a quicker alternative to the district court system in resolving patent disputes and as a way to curb the growing number of frivolous lawsuits filed by so-called "patent trolls" in the tech sector, Mr. Greenwood contends that "this attempted solution for one sector's problem has created dangerous, unintended consequences in other sectors, by undermining valid patents that support innovation in diverse industries–from manufacturing, to consumer products, to biotechnology."  He asserts that Congress needs to act to address this serious issue "for the sake of biomedical innovation and the need that all of us have for the vital medical advances it provides."

To support his argument, Mr. Greenwood first compares the IPR system with the Hatch-Waxman regulatory scheme, "a thoughtfully conceived process instituted by Congress over thirty years ago" that "strikes an effective balance" by allowing generic companies to deliver lower cost drugs to patients and still incentivizing innovator companies to invest in new medications.  He notes that as a result of the Hatch-Waxman scheme, patients have access to generic versions of about 90% of all prescription medicines on the market.  Mr. Greenwood suggests, however, that "the IPR system has inadvertently created a parallel track to challenge biopharmaceutical patents, but one with lower standards that conflict with those of Hatch-Waxman."  In particular, while patents are presumed valid when challenged via the Hatch-Waxman process, Mr. Greenwood indicates that "there is no presumption at all" when patents are challenged via the IPR system.

Mr. Greenwood also points to an unintended consequence of the IPR system: the use of IPRs by hedge funds "to manipulate the shares of public biotechnology companies, which the hedge funds sell short in advance of filing IPRs against their patents, hoping to profit by damaging these businesses and driving their share prices down."  He notes that more than thirty such IPRs have been filed by hedge funds since the IPR system was implemented.  Given the cost of new drug development, and the importance of patents to the biotech industry, Mr. Greenwood asks:  "Who will invest in the treatments of tomorrow with the specter of IPRs looming, magnifying the uncertainty of any potential return on investment?  . . .  What investor would put hundreds of millions of dollars at risk in such a situation?"

Mr. Greenwood concludes his article by noting that twenty major life science venture capital firms, representing over $60 billion in investments, have asked Congress to exempt biopharma patents from the unintended consequences of the IPR system, and that over 100 patient advocacy groups wrote Congress requesting the same (see "101 Patient Organizations Ask Congress to Curb IPR Abuse").  Given Congress' consideration of patent reform legislation, Mr. Greenwood suggests that Congress take the opportunity to modify the IPR system.

Comments

[skeptical]

I reject the "divide and conquer" aspect that gives "credence" to the view that the "troll" problem is in but one art field.

[paytoplay]

Without the presumption it does seem like the world's most expensive registration system.

[skeptical]

paytoplay,

Interesting observation - and to that let me add that THAT expense is in the several BILLION dollar range.

Innovator money in the Billions is what supports the Office and the patent prosecution paradigm.

If in fact we have devolved into nothing more than EFFECTIVELY a registration system and a chance at "proving" real validity at some second stage of enforcing a patent, perhaps it is high time to revisit the model that we have.

If we just want registration and notice without presumption of validity, I could help you set up a system for a ONE TIME (not annual) cost in the low tens of million dollars range, staff that system on an ongoing basis for less than a million a year, and let the ANNUAL Billions be retained by innovators.

The chances of this option being seriously considered? Well, let's just say that I remain skeptical that THAT number will climb over the current rate of actual patent claims seeing lawsuits as a percentage of all possible claims being enforced in a court of law (that would be far less than 2%, by the way).

[The Memory Motel]

"I reject the "divide and conquer" aspect that gives "credence" to the view that the "troll" problem is in but one art field."

Too bad reality indicates that "the troll problem" is mostly in "one art field". The reason that patent trolling occasionally leaks into other art fields is, of course, due to the same fundamental issues that claims in that "one art field" frequently present to the system.

But go ahead and "reject" all this! People really care what you think.

As for Jim Greenwood and his complaint about "thirty IPRs filed by hedge funds" (wow! thirty! it takes three four-year-olds to count that high!), let's wait and see how those IPRs turn out. There's plenty of garbage patents out there in biotech. Heck, there was this one filed by Prometheus that was so obvious that Kevin and Don refused to talk about it ...

[skeptical]

MM, aka Malcolm, I invite you to give me a legal or factual basis for your reply.

Of course, you have nothing but your "feelings," and we both know that.

[The Memory Motel]

"I invite you to give me a legal or factual basis for your reply."

You need a "factual basis" for the statement that patent tr0lling is almost solely a feature of the computer-implemented arts?

First I want to hear you come out and say that you don't believe it. Then I want you to tell everyone what country you live in and how many years you've been following the patent system. That way when I provide you with the answer we can all see what an incredibly dishonest human being you are.

[skeptical]

Malcolm,

I will take your non-answer as your typical nonsense.

Once again, I invite you to provide a legal or factual basis for your comment, instead of one based on your feelings.