Patent Docs: Media Commentary

Media Commentary

January 15, 2024

July 18, 2023

Drugs May Cost Too Much, But Patents Are Not the Cause

For at least a decade, Congress has been concerned (not to say obsessed) with drug costs (understandably so, no matter how ineffectively; see "FTC to the Rescue Regarding High Drug Prices and Patents"; "Even More Ill-Conceived Remedies from Congress Regarding Prescription Drug Costs"; "More Ill-conceived Remedies from Congress Regarding Prescription Drug Costs"; "A Solution in Search of a Problem"; Senate Once Again Tries to Address Drug Pricing). A consequence has been a focus on patents and their contribution to the crisis. Recently, David Gaugh, Interim CEO of the Association for Accessible Medicines (formerly the Generic Pharmaceutical Association) wrote an article entitled "Congress is Ignoring the Best Solution to Reducing Drug Prices" on realclearpolicy.com challenging if not rebutting much of this rhetoric by identifying more relevant sources for increases in drug pricing.

Mr. Gaugh not surprisingly asserts that the only way to reliably reduce drug prices is generic and biosimilar competition. This case can certainly be made for generic drugs, which have an almost 40-year track record leading to the statistic that "generics and biosimilars account for 91% of prescriptions filled in the U.S. but only 18% of prescription spending." But Mr. Gaugh argues that these gains are at risk from problems with sustainability of the generic (and biosimilar) drug industries. As Mr. Gaugh explains, often "the price of generic medicines has fallen to an unsustainably low level, resulting in market exits and creating the optimal conditions for shortages," which shortages are appearing in the aftermath of the economic and supply chain disjunctions caused by the pandemic. (This statement is ironic albeit truthful, because Mr. Gaugh also quotes FDA statistics that generic competition results in "an astounding 95% price drop on a mature market." This suggests that the meme that high prices for branded drugs were solely caused by pharmaceutical company greed was incorrect.)

Even the newer generic and biosimilar drugs are "being squeezed" by "historically slow adoption," Mr. Gaugh writes (although the reasons for this between these classes of drugs are likely not to be the same). With regard to biosimilars, the financial benefits are patent, being "on average more than 50% less than the brand price was when the biosimilar launched" (for drugs that although representing only a fraction of prescriptions, drive almost half of all drug spending) and yet are "woefully underutilized." Mr. Gaugh uses Humira® as an example, which starting July 1st of this year is subject to competition by several biosimilars (see "The New York Times Is at It Again Regarding Patents"). But who will benefit may not be patients; Mr. Gaugh identifies "middlemen" as being able to exact greater rebates from Humira® sales while formularies are expected (by Mr. Gaugh) to "sideline" these biosimilar equivalents.

Mr. Gaugh uses Semglee, the first interchangeable insulin biosimilar, to illustrate the effect of the market and its participants on this failure of biosimilar substitution to reap the benefits promised by passage of the Biologics Price Competition and Innovation Act (BPCIA) as part of Obamacare. According to the article:

Semglee has two different prices, one with a slight decrease in price compared to the brand and a high rebate, and another with a major (65%) decrease in price. Although the lower list price would have translated into lower costs to patients, PBMs have largely stuck with the higher priced brand insulin rather than encouraging use of the lowest list price.

In addition to these economic consequences, Mr. Gaugh also argues that "manufacturing and regulatory challenges, runaway price deflation driven by middlemen market consolidation, and government policies in Medicaid, Medicare and 340B that reduce the financial viability of generic manufacturing."

While conceding that there is no "magic bullet" for correcting (or at least improving) these circumstances, Mr. Gaugh argues that adoption of the following options could provide some solutions:

• Improving FDA internal collaboration between inspectors and its drug shortage staff (DSS) and between the agency and manufacturers working to avoid a shortage,

• Creating a reserve capacity supply of key medicines as well as creating incentives for hospitals to purchase reserve supply at sustainable, long-term fixed price and volume contracts,

• Improving Medicare drug formulary coverage of new generics and biosimilars, and

• Removing financial burdens such as the Medicaid inflation penalty and 340B that make continued production of low-margin generics unsustainable.

Mr. Gaugh concludes his article that both the branded and generic/biosimilar drugs industries are businesses driven by investment and "if government policies continue to penalize low-cost generic medicines and block adoption of new generics and biosimilars" decreased investment may follow. Which of course will just exacerbate high drug prices and increased shortages that burden the health care system.

While the message of Mr. Gaugh's article are anything but hopeful, it was refreshing for a change to have problems with drug pricing in the U.S. not to focus on (or even mention) patents as being the cause. That may be a popular refrain from the media and some politicians (see, e.g., "The New York Times Is at It Again Regarding Patents"; "Faux-Populist Patent Fantasies from The New York Times"; "The More the Merrier: The Journal Joins the Times in Complaining about Patents"; "New York Times to Innovation: Drop Dead"; "Science Fiction in The New York Times") but Mr. Gaugh's assessment provides a welcome, informed alternative to what people think "everybody knows."

Posted at 10:36 PM in Media Commentary | Permalink | Comments (8)

April 09, 2023

Will Artificial Intelligence Force Us to be Less Dumb about How We Evaluate Humans?

By Michael Borella --

Years ago, I was a proud parent when my children were invited to participate in an honors math program at their grade school. But this initial delight turned to confusion, and eventually frustration.

As just one example of why I was less than pleased with our school's pedagogy, one very highly emphasized part of the curriculum required that the kids memorize as many digits of pi as they could, with the minimum being 25. Sure, they also learned how pi defined the ratio of a circle's circumference to its diameter and how to use it in simple algebra, but this memorization task was the focus of the unit, with the child who memorized the most digits (130 one year) winning special accolades.

To me, this assignment missed the point. Pi is a critical value in many aspects of science and engineering, and can be taught directly or indirectly in a number of compelling and fun ways involving wheels, pizza, spirographs, and so on. And its importance in aviation and communications can at least be mentioned.

But the focus was on committing those 25-plus digits to memory and being able to recite them on demand. When I pointed out to the teachers that maybe -- just maybe -- this was not the best way to prepare children to have an appreciation for STEM fields, they looked at me like I was from another planet. The curriculum was designed around what was easy to test (can the kid produce the 25 digits when asked?) rather than the harder-to-evaluate skills (does the kid know how and when to use pi to solve problems?) that are actually important when using math in the real world.[1]

Thus, when the news broke that OpenAI's GPT-4 large language model passed the uniform bar exam at the 90th percentile, I was less than impressed. In fact, this outcome is completely unremarkable given that it was trained on billions of units of human text.

The bar exam is a memorization exam. Aspiring lawyers typically spend 10-12 weeks taking a bar exam review course, which involves committing massive amounts of legal rules and principles to memory, as well as learning how to write essays in a formulaic fashion (IRAC). Then you sit for two days of testing in which you regurgitate as much as you can. If you manage to score highly enough, you pass and become a licensed attorney.

During the summer that I spent preparing, I remember at one point mentioning in frustration to my study partner that what the bar exam is actually testing is how much pain one is willing to accept to be a lawyer, and that rapping us across the knuckles a few times with a ruler would probably have the same effect. Indeed, I know of individuals who graduated law school in the top ten percent of their class (in terms of GPA), failed the exam on their first try, later passed, and went on to be excellent attorneys. Clearly, these folks were bright, but when speaking to them they attributed their failure (which was quite the source of shame) on not studying hard enough during bar review. Let that sink in -- top law students can fail to be licensed because they do not learn the mechanical proclivities of one specific exam.

A recent paper from Professor Daniel Katz evaluates GPT-4's bar exam performance and states that "These findings document not just the rapid and remarkable advance of large language model performance generally, but also the potential for such models to support the delivery of legal services in society."[2] The key word in this sentence is "potential" but even so this statement is misleading.

GPT-4 scoring well on the bar exam is not because AI is achieving human levels of intelligence. It is because the bar exam tests a human's ability to perform like a robot. Missing from the bar exam are tests of executive function (e.g., staying organized, keeping to deadlines), soft skills (e.g., client interaction and counseling, interpersonal competencies), and law firm operation (e.g., finance, marketing, managing groups, how to be a good employer), all of which are more relevant to a lawyer's success than their ability to stuff facts into their brains.

Indeed, it is now widely accepted that GPA is much more predictive of a student's ultimate success than standardized test scores. This is because maintaining a high GPA requires more than the raw cognitive ability to do well on memorization-based exams -- the aforementioned executive functioning and soft skills play a significant role. Intellectual ability is important, but so is emotional intelligence.

Turning to patent law, there might be one multiple choice question out of 200 addressing intellectual property on the typical year's bar exam. So for us patent attorneys, the bar exam is measuring our ability to regurgitate law that we are unlikely to ever apply in practice. To that point, the USPTO requires that we pass a separate patent bar exam. Admittedly, it is also memorization-based, but at least it is open book.

So, to the extent that Professor Katz is implying that GPT-4 or any other of the current generation of large language models can perform significant legal tasks, I have to disagree. Large language models are tools that lawyers can employ, not unlike search engines or Wikipedia. They may be able to carry out certain first-level research functions in place of a junior associate. But when it comes to crafting creative legal strategies that guide clients through complex transactions, they are still far from the mark.

Nonetheless, the strong performance of GPT-4 on memorization-based exams provides us with a golden opportunity to re-evaluate how we teach both children and law students. If the goal is to turn out humans with skills that can be easily replaced by automation, then maintaining the status quo will get us there. But we would be much better off by recognizing and embracing large language models, while remaining cognizant of their strengths and weaknesses. Integrating these tools into a broad-spectrum education system with a flexible curriculum is much more likely to produce graduates who can adapt to the changing needs of the legal profession, or any other field for that matter.

The modern education system is still based too much on a paradigm established in the 1800s, one in which an instructor lectures and the students passively receive their lessons. Given that large language models can outperform most humans in these scenarios, we need to seriously consider changing the system to meet the demands of 21st century life.

And for anyone who absolutely needs to know the first 25 digits of pi, don't worry because GPT has you covered: "The first 25 digits of pi (π) are: 3.14159265358979323846264. Note that pi is an irrational number, meaning that its decimal representation goes on infinitely without repeating." Or, it almost has you covered, as the 25th digit is missing from its output.

[1] To get a sense of how prevalent issues like this are in education, 60 years ago Nobel laureate physicist Richard Feynman was asked to help the state of California select math textbooks for its schools. He wrote about the process, which is both humorous and disheartening. From what I have seen, today’s textbooks are better than they were back then but still leave plenty of room for improvement . . . such as justifying why one needs a textbook, period.

[2] Katz, Daniel Martin and Bommarito, Michael James and Gao, Shang and Arredondo, Pablo, GPT-4 Passes the Bar Exam (March 15, 2023). Available at SSRN: https://ssrn.com/abstract=4389233 or http://dx.doi.org/10.2139/ssrn.4389233.

Posted at 09:22 PM in Media Commentary | Permalink | Comments (9)

February 27, 2023

The AI-Assisted Patent Attorney

By Michael Borella --

When boiled down to a fundamental level, all technologies are double-edged swords. A spear can be used to hunt game or to wage war. A hammer can be used to build a shelter or to murder fellow humans. Social media can be used to connect lonely and geographically-distanced affinity groups in an emotionally meaningful way or to foster misinformation and possibly even genocide.

Artificial intelligence (AI) is no different.

We are largely unaware of the prevalence of AI. From content recommendation, to detection of financial fraud, to drug discovery, to spam filters, these computational models exist in the background of everyday life. AI mostly hangs out behind the scenes impacting our lives in invisible ways. But the slow rollout of autonomous vehicles and the significantly faster adoption of personal digital assistants are more overt examples.

In science fiction, there is no shortage of utopian stories in which menial tasks carried out by humans are performed by various types of robots, ostensibly leaving humans with more time to think, create, relax, and enjoy life. In reality, replacement of human labor with non-intelligent automations has so far proven to be disruptive to many societies. For the most, part knowledge workers such as lawyers have escaped this disruption. We believe, perhaps arrogantly, that the value we provide to our clients requires a generalized intelligence and a sense of empathy that is missing from modern AI. Thus, we may look down our noses at the thought of incorporating AI into our workflows.

It is time to reassess that viewpoint.

All lawyers, especially those of us in patent law, employ various types of technological assists. We draft, edit, and review on computers. We look things up in search engines and Wikipedia. We use docketing software and reminders to stay on top of our schedules and deadlines. The technology-assisted lawyer is already here, and those who eschew these technologies are hard-pressed to keep up.

But let's not forget the aforementioned dual nature of these technologies. The same tools that help us do our jobs can also distract us with non-stop notifications. Moreover, search engine results can be misleading, and Wikipedia can contain mistakes. But we've adapted to use these tools by applying the same skeptical and inquisitive frame of mind that makes us suited for the profession. We take non-verified information for what it is -- information. When in doubt, we double and triple source it. Indeed, being a patent attorney who needs to understand new and complex science and engineering inventions would be frustrating and hard if not for our technological assists even accepting that they are not 100% reliable.

Generative AI is yet another assistive tool, though with bigger caveats.

The latest large language models, such as ChatGPT, are remarkably good at producing human-like text focused on a particular topic. While ChatGPT output generally falls far short of a well-trained and experienced human author, it can often exceed the quality of writing of an average human. Thus, it is premature to state that patent lawyers (or other types of lawyers) are going to be replaced anytime soon. However, ignoring the trends in large language models may cause some of us to be gradually obsoleted.

Currently, these models are useful yet unreliable. They frequently produce insightful results, but also can "hallucinate" pure nonsense, falsehoods, and fabrications. This is because they are little more than sophisticated sentence autocompleters, with arguably no understanding of what they write. Still their output can be cogent and detailed, in the form of a paragraph or essay.

Thus, one might be tempted to cut and paste these results into a legal document. Of course, that would be a mistake at least due to said hallucinations. Instead, large language model output, when relevant, should be edited and/or recrafted. In a sense, this is not that different from what one might do when paraphrasing or otherwise incorporating information found in a web search, in case law, or from Wikipedia. But large language models put you closer to the finish line by writing a first draft for you.

For example, when writing a patent application, one might describe how an invention can be used. It could make a handful of existing technologies more efficient -- faster, better, etc. We can spend an hour or two writing descriptions of each of these technologies from scratch, or we can farm that task out to ChatGPT. Within minutes it will provide workmanlike descriptions that can be edited for stylistic consistency and accuracy,[1] and then we can explain how the invention improves each.

Not unlike junior associates or talented paralegals, today's large language models can help us shave off a couple of hours of time per application by helping us write the background section and describe the prior art. Beyond that, current technology is hit or miss. For example, ChatGPT can draft patent claims but there are numerous reasons not to use it for this purpose.

Like their predecessors, these tools can be used for various purposes, some constructive and other destructive.[2] The key is to use them for what they are good at doing, and not for tasks at which they are likely to fail. Over time, ChatGPT may evolve to a point where it can automate even more of the drafting process, perhaps even taking a first pass at office action responses, as well as validity or invalidity arguments. This may be as little as five to ten years out, though no one knows for sure whether these models will continue to improve at their current pace or hit some unforeseen plateau.

Regardless, the AI-assisted patent attorney is just the latest iteration of the technology-assisted patent attorney. As the world changes, we need to be flexible and adapt to new professional and business realities. ChatGPT and its many rival models that are in the process of development and launch represent just one of these realities.

[1] In this scenario, ChatGPT is likely to provide a reasonably on-point result because it is describing something well-known.

[2] One of the more troubling abilities of ChatGPT is that it can reduce the marginal cost of generating massive amounts of disinformation to nearly zero. In the wrong hands and without safeguards built into the model, it may not be long before our social media and news channels are overflowing with nonsense at a level well beyond what we already see. This is not quite what Orwell predicted, but likely just as bad.

Posted at 10:10 PM in Media Commentary | Permalink | Comments (5)

January 29, 2023

The New York Times Is at It Again Regarding Patents

By Kevin E. Noonan --

It's always good to have a villain, a "Snidely Whiplash" or other cartoon caricature to support an argument, especially if the issue is complex and fails the cocktail party test.* The New York Times is (in)famous for these types of intellectually lazy arguments when it comes to patents (see "Top Stories of 2022: #8 to #10"; #9. New York Times Reopens Attack on U.S. Patent System), and they were at it again on Sunday in a front page piece on Humira, a drug used for a variety of ailments that has brought relief to millions of patients who otherwise suffered with earlier, less effective drugs. (At least in the past the Times has had the good sense to relegate such articles to the Op-Ed pages.)

The problem seems to be that Humira has made a pharma company a lot of money (purportedly $116 billion), that the drug is expensive (said to cost upwards of $50,000/year) and that the drug company has amassed a large number of patents to protect its intellectual property. The bigger problem is that the article fails to recognize several important facts relating to the circumstances under which Humira's makers made this money and amassed its patent estate (or "thicket" as the anti-patent crowd likes to call it).

The first of these is that until 2010 there was no pathway for "generic" (accurately, "biosimilar") competition for innovator biologic drugs (the class of drugs including Humira). This has nothing to do with patents; the FDA could not approve a biosimilar competitor by law until the Biologic Price Competition and Innovation Act (BPCIA) was passed as part of Obamacare (see "Follow-on Biologics News Briefs - No. 11"; "House Passes Health Care Reform Bill -- Biosimilar Regulatory Pathway Makes Cut, Pay-for-Delay Ban Does Not"). Thereafter, the FDA needed to develop guidelines (see "FDA Looks to Multiple Sources, Including EMA Guidelines, in Developing Biosimilar Approval Standards") and Guidances (see "FDA Publishes Draft Guidelines for Biosimilar Product Development"; "FDA Releases "Final" Guidances for Industry regarding the Biosimilar Approval Pathway") establishing the standards under which biosimilar drugs could be approved; while still on-going for certain types of biosimilars these efforts took about 5 years to be promulgated (the FDA engaging with stakeholders to ensure the efforts were fair and robust enough to minimize the possibility of approving drugs that were not "similar enough" to avoid safety, potency, or efficacy issues).

The first approved biosimilar was Zarxio from Sandoz, which competes with Amgen's Neupogen, an adjuvant for cancer patients for treating side effects of chemotherapy (see "FDA Approves Sandoz Filgrastim Biosimilar"). Humira biosimilars have been pursued by several companies and FDA has approved seven (see, e.g., "FDA Approves Amjevita -- Amgen's HUMIRA® Biosimilar") and this table:

(With one of them, Cyltezo, being designated as an interchangeable biosimilar, see "FDA Approves Another Interchangeable Biosimilar Drug", which is highly sought after because it has advantages, see "FDA Issues Final Guidance Regarding Biosimilar Interchangeability", similar to what can be achieved for a small molecule drug.)

Immediately it will be clear that a great deal of the $116 billion cited to raise the temperature of the debate (and the purported perfidy of Humira's producer) was made during the time that it was impossible to compete, and that once a pathway had been opened several companies took the steps to do so. But although there was this large patent estate accumulated when litigation ensued, the number of patents asserted and claimed was but a minuscule portion of the estate. As for types of patents accumulated, much is made in the article about the patent on the active pharmaceutical product (the drug) expired in 2016, as if that was the only patent upon which Humira was entitled to rely. The first source of error in this assertion is that most of the current biologic drugs were approved so long ago that they similarly no longer have patent protection on the drug molecule itself. But due to the complexity of producing these drugs commercially, they all have protection on those methods (without which the drugs could not be produced and regarding which each sponsor company invested money, time, and effort to develop). Humira is not alone nor an outlier on such protection and these patents protecting how the drugs are made are no less worthy than the drug patent itself.

The irony of ironies in this story printed this Sunday is that this Tuesday, January 31st, those seven Humira biosimilar-approved companies will be able to sell their biosimilar Humira free of all the patents in the patent estate, pursuant to a settlement agreement (see, e.g., "HUMIRA® Biosimilar Update -- Settlement in AbbVie v. Amgen Case Announced and AbbVie v. Boehringer Ingelheim Litigation Begins"; "AbbVie Announces Global Resolution of HUMIRA® (adalimumab) Patent Disputes with Sandoz"), with others as yet not approved being licensed to go on the market on July 1st and September 30th of this year. As mentioned above, the overwhelming number of the Humira patents were not asserted but could have been asserted to prevent these Humira biosimilars from being marketed for many more years. Inconsistent with the bad guy caricature promulgated by the Times, the cases were settled, benefiting the public at the real-world expense of Humira's drug maker.

Two other points bear mentioning. First, the 7th Circuit Court of Appeals decided last year that the Humira patent estate was not an antitrust violation and thus fear of antitrust liability is not a factor in these settlements (see "Mayor and City Council of Baltimore v. AbbVie Inc. (7th Cir. 2022)"). The second point is that the FTC in a 2009 white paper (see "No One Seems Happy with Follow-on Biologics According to the FTC") predicted that the price reduction benefit of biosimilars would be about 30%, that is that the cost of a biosimilar equivalent to a patented biologic drug would be about 70% of the reference biologic drug price. With admittedly few data points, that prediction has been borne out so far, meaning that instead of $116 billion the cost for an equivalent period of time an amount of Humira biosimilar sales can be expected to be $82 billion. As Sen. Dirksen would say that is real money but hardly the type of windfall public benefit that small molecule drug generics represent (which sell for about 10% of the innovator price).

The real issue is that the development cost of biologic drugs is much higher than traditional small molecule drugs as is the cost of producing them. Everyone thinks "drugs cost too much" and want them to be cheaper but the reality (in a capitalist society) is that there needs to be sufficient prospect of return on investment to justify development. The entire economic argument is TLDR (which is why articles like the one in Sunday's Times is both easy and incomplete); for a good and accurate explication of the patent side of this issue, Professor Adam Mossoff at George Mason University has published a report for the Hudson Institute (see "Unreliable Data Have Infected the Policy Debates Over Drug Patents"), which, while generating less heat than the Times article, does shed enormously more light (see "Faux-Populist Patent Fantasies from The New York Times"). Suffice it to say that while it may make the medically self-righteous feel better, it does little to advance the real debate about how to ensure that people who need drugs (and medical care generally) can get them. That's too complicated for a lazy winter Sunday afternoon reading the Times, but the issue deserves more than this shallow level of analysis and rhetoric.

* Where you are likely to be talking to yourself in under five minutes if you bring up the subject.

Posted at 11:47 PM in Media Commentary | Permalink | Comments (8)

January 16, 2023

December 13, 2022

A Better, CRISPR World Assayed in The New York Times

By Kevin E. Noonan --

Idealism is a wonderful and at the same time frustrating character trait, because the world is not ideal as it is and is unlikely to ever be, but the motivation to achieve a more ideal world (or at least a more equitable one) is universal in human cultures (if only as a hope for a better world for our descendants). A professor at the University of California/Berkeley, Fyodor Urnov (at right), recently expounded on the dream of using CRISPR gene editing to cure disease in a New York Times article and addressed the real-world challenges and obstacles faced in trying to use this breakthrough technology broadly enough for that ideal world to come a bit closer to reality (and for a change the NYT did not invoke patent protection as the all-purpose bogeyman thwarting such more idealistic outcome).

Dr. Urnov begins his essay with real-life examples of the types of genetic diseases faced by many (albeit a minority) of Americans (that statistical demographic playing a significant role in the story he is telling), in children and young adults, either from birth or in sudden onset or as a ticking timebomb of consequences determined by their faulty genes. The initial promise of "DNA fixes" was gene therapy beginning in the 1980's, as the fruits of the revolution in molecular biology and the identity of genes responsible for these diseased began to be elucidated. While there have been some successes in these efforts, the mechanisms for achieving them (usually involving virus-mediated gene insertion into an affected cell or tissue) have been both uncertain and "jaw-droppingly expensive" as Dr. Urnov relates (citing the $3.5 million price tag for Hemgenix, CSL Behring's cure for Hemophilia B).

An improvement with tremendous promise is CRISPR (which stands for "clustered regularly interspaced short palindromic repeats" in homage to how it was initially found in bacteria). As Dr. Urnov explains, CRISPR technology can specify repair of a genetic mutation "right where the 'typo' occurs" in an affected gene. He recites the recent uses of CRISPR technology for providing treatment for congenital blindness, sickle-cell disease, certain heart diseases, nerve disease, cancer, and HIV. These successes engender in Dr. Urnov the hopeful prospect that CRISPR-based genetic medicine could be achieved in future for a variety of ailments, wherein its genetic specificity could provide directed and tailored cures for many diseases. His vision for a future child afflicted with genetic disease is that:

A dedicated CRISPR ‌cures ‌‌center at a university-affiliated hospital . . . takes the diagnosis [of a genetic disease] and morphs it into an order form for a manufacturing facility to create the medication that will repair the faulty gene. After a month of testing and data review by hospital clinicians and university scientists, the physician does a simple IV injection of the resulting CRISPR medicine, and after a three-day stay at the hospital to confirm‌ the gene editing went according to plan, the child is sent home.

He cites several examples, in the U.S. and abroad, of CRISPR successes and companies like CRISPR Therapeutics, Vertex, Intellia Therapeutics, and Regeneron who have achieved them in recent years, with other examples of on-going work by other companies.

But then Dr. Urnov explains the realities that create real impediments to this genetic utopia. There are 7,000 known genetic diseases (caused by a defect in a single gene) and 400 million people worldwide affected by them. While he posits a simple experimental path from diagnosis to treatment, he also acknowledges that this would be "only the first step in a four-year journey likely to cost at least $8 million to $10 million." The first reason for this situation is the regulatory requirements in the U.S. and Europe aimed at "ensur[ing] safety and efficacy of the experimental medicine," Dr. Urnov laying out the time- and money-consuming path from beginning preclinical studies to actually producing the "CRISPR medicine," which itself is subject to well-deserved demanding specifications. These efforts can cost more than $1 million and take years when animal testing is included in the calculus. As a result, the hypothetical child having a genetic disease amenable to CRISPR treatment "stands little chance of timely treatment," he writes. Added to the complexities of bringing the CRISPR drug to market, Dr. Urnov recognizes that the investment can easily be over $10 million and could (in some instances) be capable of treating only a single patient (for idiosyncratic mutations not shared by a class of patients such as with sickle cell disease where a particular shared mutation converts a glutamic acid residue to valine in the hemoglobin protein). And the doctor notes that many patients do not have the luxury of time for all these processes to play out, making the theoretical possibility of the CRISPR magic bullet even more frustrating and tragic.

There also have been examples of actual therapies (in "conventional" gene therapy) that have hit the roadblock of investment failure by private companies trying to commercialize university-created inventions (one involving UCLA being mentioned specifically in Dr. Urnov's article). But while there is an economic justification for the cost of these drugs (cited here, that "a one-time cure saves the health care system years of costly supportive care"), "[f]or diseases with fewer than 100 patients, such prices [$2-3 million per patient] are still not enough for these efforts to make commercial sense." The doctor cites cases where companies have discontinued clinical studies due to the cost of bringing the drug to market, and the dim or at least insufficient prospects of a return on investment, that have made the economic proposition untenable.

Dr. Urnov proposes that as a first step towards improving this situation is for the regulatory regime to be revised; while it makes sense for diseases having tens of thousands of patients for a proposed treatment, for "one-of-a-kind genetic typo" cases there should be a "streamlined" process (akin to what was employed for CAR-T therapies in their infancy). As for the role of who develops and pays for the treatments, he recognizes that private biotechnology companies cannot bear the burden. "Tapping into federal and state funding could provide a path forward," Dr. Urnov posits, citing recent clinical trial collaborations between UCLA, UCSF, and UC/Berkeley for a gene-editing approach to curing sickle cell disease.

But recognizing the zeitgeist he asks: "Why should the average taxpayer contribute to building medicines for rare diseases? Would the money be better spent on finding treatments for common ailments?" His answer is that helping people with rare diseases will foster development of CRISPR-based treatments for more common ones. He acknowledges that, for now, ethical considerations will limit CRISPR therapies to those patients with diseases like cancer and "devastating genetic ailments." He expresses hope that development of these treatments will eventually produce in genetic medicine the types of advances that have been achieved in other industries. And he advocates that while "[u]nless things change dramatically, the millions of people CRISPR could save will never benefit from it," "[w]e must, and we can, build a world with CRISPR for all."

This essay raises a fundamental ethical question, should we and must we do what we can to achieve CRISPR-based and other revolutionary treatments in the face of the economic realities that there is no short-term economic justification for them? History is replete with examples of seemingly fruitless efforts (Columbus, the space program) that turned out to have unappreciated (or at least unexpected) benefits, economic and otherwise. The long-term view is that developing CRISPR and other medical technologies will produce a more robust, more productive populace, which will inure to our benefit and well-being. The question Dr. Urnov raises is whether we will have the vision to leave behind the short-term view of present-day dollars and cents and see and act upon that possibility for a better, healthier world.

Posted at 09:28 PM in Biotech/Pharma News, Media Commentary | Permalink | Comments (0)

August 24, 2022

The EFF is Patently Wrong

By Michael Borella --

The Electronic Frontier Foundation (EFF) is at it again, gaslighting the public in its ongoing crusade against patents. While the EFF does perform some commendable work, mostly in the areas of individual privacy rights, its track record on patents amounts to little more than a hit job. In particular, the EFF has few qualms with providing heavily slanted opinion pieces on patent policy and making statements that are misleading or outright wrong. This is nothing new, unfortunately.

The EFF's latest screed covers Senator Tillis' recent proposed legislation to reform 35 U.S.C. § 101, but is full of falsehoods, deceptiveness, and bias. It was written by Joe Mullin, a former journalist and current policy analyst for the EFF. As far as I can tell, Mr. Mullin is not a patent attorney and has never practiced patent law. His EFF job title is "Mark Cuban Chair to Eliminate Stupid Patents" (you can't make this stuff up), which pretty much says all you need to know about his positions.

So let's go through Mr. Mullin's article, line-by-line, categorizing each based on where it falls on a spectrum ranging from mostly true to deceptive to false. Hint: very little he writes comes close to being mostly true.

"A recently introduced patent bill would authorize patents on abstract ideas just for including computer jargon . . ."

False. Frankly, this statement is almost too vague to be meaningful. But if Mr. Mullin is referring to just adding processors, memory, and the like to claims otherwise involving a business, mathematical, or mental process, the Tillis bill would still result in such inventions being unpatentable.

". . . and would even legalize the patenting of human genes."

Deceptive. The Tillis bill would make unmodified human genes (e.g., those appearing naturally in the human body) unpatentable, but would allow patenting of genes that are "isolated, purified, enriched, or otherwise altered by human activity." In other words, if you do something new and inventive with a human gene, then the result of labor by human hands might be patentable.

"The 'Patent Eligibility Restoration Act,' sponsored by Sen. Thom Tillis (R-NC), explicitly overrides some of the most important Supreme Court decisions of the past 15 years, and would tear down some of the public's only protections from the worst patent abuses."

False. The public has many protections from those trying to unethically exploit the patent system that the Tillis bill would not touch. Like the other parts of the patent statute that define additional requirements for patentability.

"Pro-patent maximalists are trying to label the Tillis bill as a 'consensus,' but it's nothing of the sort."

Deceptive. And likely a straw man argument. "Pro-patent maximalist" is a made up term that remains undefined and meaningless. Therefore, it is irrelevant to attribute any particular viewpoint to this hypothetical group of people.

"We need EFF supporters to send a message to Congress that it isn't acceptable to allow patent trolls, or large patent-holders, to hold our technology hostage."

Deceptive. Non-practicing entities (let's call them that rather than the pejorative term "trolls") and large patent holders do not hold technology hostage. Anyone is permitted to file patent applications on inventions they wish to protect. If granted, they have approximately 20 years to exclude others from practicing the invention in return for publicly disclosing the fruits of their labors. This is a carefully-designed quid-pro-quo, not a hostage negotiation.

"Starting in the late 1990s, the U.S. Court of Appeals for the Federal Circuit essentially did away with any serious limits on what could be patented. This court, the top patent appeals court in the U.S., allowed patents on anything that produced a 'useful result,' even when that result was just a number."

False. Claims that are not directed to novel, non-obvious, and properly described inventions have been unpatentable since at least 1952 if not the earliest days of our republic. In the 1990s, the Federal Circuit clarified that the broadly-drafted § 101 included certain types of business methods, thereby making such business methods patent-eligible. But these inventions still needed to satisfy the other statutory requirements of patentability, which are indeed "serious limits" that prevent the patenting of just any useful result.

"This allowed for a period of more than a decade during which the U.S. Patent Office issued, and the courts enforced, all kinds of ridiculous patents."

Deceptive. Again, a vacuous statement. The USPTO has always issued patents that it should not and still does. The USPTO also makes it unduly hard to obtain patents on legitimate inventions. There is no such thing as a ridiculous patent, only patents that are valid and those that are invalid. And making this determination requires more work than just reading the title or abstract.

"Several Supreme Court decisions eventually limited the power of bad patents."

Deceptive. Another ill-defined characterization. Yes, the Alice Corp. v. CLS Bank case, among others, made it harder to obtain certain types of patents, including vaguely-claimed business methods as well as many that represent legitimate technical inventions.

"Most importantly, the Supreme Court's 2014 Alice Corp. v. CLS Bank decision made a clear rule—just adding 'on a computer' to an abstract idea isn't enough to make it patentable."

False. First of all, this is a poor characterization of Alice, as the rule is much more nuanced than that. But the larger issue is that the Alice decision is notoriously vague, confusing and unworkable in practice. Eight years later, the Federal Circuit judges still argue about what it means and how to interpret it -- and these are not minor disputes. The distance between their positions on Alice can be measured in astronomical units.

"The Alice Corp. decision was not a panacea. It did not eliminate the serious problem of patent trolls—that is, companies that have no products or services, but simply sue and threaten others over patents. But it did put a big dent in the patent trolling business. Vaguely worded software patents can still be used to extort money from software developers and small businesses. But when those patents can be challenged in court, they now rarely survive."

Mostly True. Well, finally something that Mr. Mullin and I almost agree about. But why the negative view of software patents? The modern economy is largely driven by software, so protecting the rights of innovators from copyists and efficient infringers should be important to a policy analyst. Besides, is software inherently horrible? Why not pick on inventions using plastic instead?

"That's been a huge benefit for individuals and small businesses. Our 'Saved by Alice' project details the stories of several small businesses that managed to overcome unjustified patent troll demands because of the Alice Corp. precedent."

False. A recent paper by Mark Lemley and Samantha Zyontz concludes that "[once in court] the entities most likely to lose their patents at this stage are not patent trolls but individual inventors and inventor-started companies." Oops. Further, the Saved by Alice project currently lists just nine stories -- this is anecdotal evidence at best and is not statistically significant.

"It's now been eight years since the Alice Corp. decision, and judges have thrown out hundreds of bad patents that couldn't stand up to this test. It's likely that many more bad patents have been abandoned because their owners know they can't keep using them to threaten people. The patents knocked down by Alice Corp. include [list]"

Deceptive. Once more, whether a patent should be considered "bad" is subjective. Further, Mr. Mullin complains about aggressive litigation tactics, which is a separate issue from whether a patent should or should not have been granted.

"Ten years ago, there weren't effective legal mechanisms to throw out the worst types of patents. If someone targeted by a patent troll felt the patent was wrongly granted, they'd likely have to pay millions of dollars in patent litigation costs just to take their chances in front of a jury."

False. Even ten years ago, few patent cases made it to jury trial. Many cases were effectively decided by a judge's Markman ruling or on summary judgment. And cases with poorly-drafted complaints could be dismissed on the pleadings. Further, we are less than one month away from the ten-year anniversary of when the USPTO's inter partes review (IPR) proceedings began, a process that can be used to pause litigation while the USPTO reevaluates the validity of a patent.

"The Tillis bill will make it easier to use exactly the types of weak, overbroad patents that often threaten startups and small businesses."

False. The bill's text is vague enough that it could end up being a codification of some of the worst aspects of Alice (the ones that Mr. Mullin probably likes), such as the USPTO refusing to grant patents on innovative technologies and courts invalidating patents based on nonsensical reasoning.

"Since the Alice Corp. decision, it's much harder to demand money using questionable patents. That's why patent trolls, among others, don't like the decision, and would like to see a bill like this pass to override it. But the Senate should not grant this wish."

Deceptive. It is harder to stop infringement of any patent thanks to Alice, because that case and the Federal Circuit's expansion of the exclusions to eligibility made it easier to invalidate patents, period. Overruling Alice would be a step in the right direction but the Tillis bill falls short.

"The Tillis bill encodes a version of the old rule that virtually any kind of 'business method' is worthy of a patent. It explicitly allows for patents on 'non-technological economic, financial, business, social, cultural, or artistic process,' as long as those are embodied in a 'machine or manufacture.' In other words, you can take basic human 'methods' of doing business, or even socializing, and just add a generic purpose computer (or another machine). The Tillis bill does specify that the machine must do more than 'merely storing or executing,' but that's an unclear if not meaningless narrowing. That will merely allow patent lawyers to avoid using those exact verbs—'storing' and 'executing'—when they're writing patents.

Deceptive. If it were only that easy. This provision of the bill is unclear and if passed as is, the courts (especially the Supreme Court) are likely to call upon stare decisis to keep things as they are under Alice. In fact, I have yet to hear from a patent attorney who can describe what is or is not patentable based on the proposed language.

"Software patents are drafted by patent lawyers, who have come up with a lot more ways to describe manipulating data than just 'storing' and 'executing.' To take just one of the stupid patents above, the first claim in the Ultramercial ad-watching patent described an Internet-based process of 'receiving' media products, 'selecting' a sponsor message, 'providing' the media to the public for sale, 'restricting' general access, 'facilitating' display of the ad, 'recording the transaction,' and also 'receiving payment.'"

Deceptive. The term "stupid patent" is just as vacuous and overused as the term "bad patent". If you don't like it, just say so. There is much more to the Ultramercial claims, which should have been deemed patent-eligible as they materially change a technological process. Also, all of the verbs that Mr. Mullin lists are not magic words that suddenly make unpatentable claims eligible for patenting. If there is anything that we have learned over the eight years since Alice, it is that there is no rote procedure for drafting successful software claims when the evaluation of said claims is largely subjective.

"The Tillis bill even implicitly authorizes patents on a 'mental process,' saying the only kind that wouldn't be eligible is one that takes place 'solely in the human mind.' That would seem to imply that even adding trivial steps like writing things down or communicating information could make a 'mental process' patentable."

Deceptive. The problem with the current mental process exclusion to patentability is that literally everything that a computer does boils down to a handful of calculations performed by a microprocessor. Theoretically, a human could perform these operations in their mind, though too slowly to be practically useful. Nonetheless, mental process doctrine has been used to refuse applicants patents on otherwise innovative and complex software inventions. Machine learning, a particularly critical competitive technology for the U.S., is often targeted in this fashion.

"If Congress passes the Patent Eligibility Restoration Act, it will destroy one of our best safeguards against abusive patents. The Tillis bill will give an explicit green light to the most aggressive patent trolls, the funders of their litigation, and the attorneys who work for them. They'll get more outrageous business method patents, and use them to demand payments from working software developers."

Deceptive. As noted above, it is quite unclear whether the Tillis bill would have this impact, and aggressive litigation is an orthogonal issue with respect to patent eligibility. Limiting the scope of what is patentable would make it harder for bad faith actors to disrupt software companies, but it would also prevent small companies from stopping the giants from stealing inventions. The sword is double-edged, so let's be honest about how it cuts both ways.

Mr. Mullin goes on to criticize the bill's partial codification of Association for Molecular Pathology v. Myriad Genetics, in that it prevents unmodified natural DNA from being patented but allows the patenting of certain modifications. I'll leave rebuttal of his claims in this area to my learned colleagues with advanced life sciences degrees (something that neither I nor Mr. Mullin have).

While everyone is entitled to their opinions and adversarial debate can be a healthy predecessor of progress, Mr. Mullin's unsupported claims, playing loose with the facts, and outright falsehoods are dangerous. A layperson reading Mr. Mullin's article might assume that it is easy to get a broad patent granted on something that you did not invent. This is not the case.

In the patent community, we have a duty to accurately represent the current state of the law, as well as the potential unintended consequences of proposed litigation. In this way, policymakers can reach informed conclusions based on rational debate rather than sky-is-falling histrionics. Taking advice from someone who touts being the "Chair to Eliminate Stupid Patents" is ill-advised if the goal is to avoid glaring bias.

Posted at 10:40 PM in Media Commentary, Patent Legislation | Permalink | Comments (3)

April 17, 2022

Faux-Populist Patent Fantasies from The New York Times

By Kevin E. Noonan --

On a spring Saturday in a year when three major holidays -- Easter, Passover, and Ramadan -- coincided or overlapped, The New York Times Editorial Board decided it was time to announce that the "United States Patent and Trademark Office is in dire need of reform" ("Save America's Patent System," The New York Times, April 16, 2022). Were that the case, the Times' rhetoric would deserve serious consideration; as it is, the Times continues a history of wrongheaded, faux populist rhetoric that comes to the entirely wrong conclusion.

This is evinced immediately by the principle basis for the sentiment regarding the patent system -- "Drugs cost too much!" -- and the basis for this conclusion: the Initiative for Medicines, Access and Knowledge (I-MAK), a policy advocacy group dedicated to lowering drug prices by attacking the patent system. The Times' reliance on I-MAK is particularly inopportune in light of recent events. First, Professor Adam Mossoff of George Mason University's Antonin Scalia School of Law published a report for the Hudson Institute, entitled "Unreliable Data Have Infected the Policy Debates Over Drug Patents," that raised serious issues over the data I-MAK relies upon in making its policy arguments regarding the relationship between drug pricing and patents. Professor Mossoff's critique was sufficiently provocative that Senator Thom Tillis wrote to I-MAK asking them to explain themselves (see E. McDermott, Tillis Wants More Info on I-MAK and Other Data Driving Anti-Patent Narratives Around Drug Pricing). I-MAK responded, not with the information the Senator requested but with a reiteration of their rhetoric (see E. McDermott, I-MAK Defends Integrity of Its Patent Data in Response to Tillis Letter), prompting the Senator to ask for further clarification. Professor Mossoff's analysis suggests the Senator will have a long wait for a satisfactory answer.

The Times also wrongfoots its example of so-called "patent evergreening" -- insulin manufacturers providing devices for administering doses of the drug. The Times might have had a point if drug companies had taken off the market traditional insulin in vials and administered by patient injection with syringes -- but a simple search shows that this is not the case. What these devices supply are ways for a patient to readily inject the correct dose, therefore improving compliance and avoiding dosage mishaps, which improves clinical outcomes and so is desirable to physicians because it avoids complications, thus reducing costs to payors such as insurance companies. And it is the very "simplicity" of the technology that prevents any one company from dominating the injection device market -- after all, many different drugs besides insulin are delivered using such devices -- and that both warrant and require patent protection, lest knockoffs flood the marketplace. This protects both American industry -- from whence exactly does the Times Editorial Board suppose such cheap knockoffs would arise? -- as well as providing the return on investment that regulatory approval costs require to incentivize development of products having such benefits for patients, their doctors, the insurance industry, and (because the bulk of drug costs are borne by the U.S. government one way or the other) taxpayers. And should the Times Editorial Board wish to understand rather than grandstand about this issue, there is academic scholarship, such as Professor Erika Lietzen's work in "The 'Evergreening' Metaphor in Intellectual Property Scholarship" and "Distorted Drug Patents" that would provide much better information for their readers.

The editorial resurrects for a new age an idea current at the turn of the century -- that applicants could "wear down" examiners who would then grant patents "out of kindness, I suppose" -- which created the ill-considered Claims and Continuation rules changes promulgated by the Patent Office encouraged by scholarship untethered to the realities of the Office or patent prosecution (see "The 'Word' on the New Continuation Rules (from the USPTO Webcast)" -- Part I and Part II); they were enjoined by the District Court of East Virginia (see "Tafas v. Dudas; SmithKline Beecham Corp. v. Dudas (E.D. Va. 2007)") and invalidated six months later. These limitations on prosecuting patents were particularly deleterious for the type of complicated technology common in the biotechnology and pharmaceutical arts, where patent examiners, who are typically not lawyers and, while having degrees and perhaps experience in the relevant technologies are not "cutting edge," understandably require time to absorb and apply patent law to claims for such complex inventions. Ironically, it is the very diligent gatekeeping function that the Times Editorial Board alleges the examiners are not doing that causes the delays that require applicants to pursue lengthy prosecution efforts (all while the twenty years from filing term clock is ticking and applicants are losing time during which commercial products embodying their inventions have exclusivity).

Paradoxically, the very means by which Congress has provided a mechanism for eliminating "bad patents" (which frequently just means someone else's patent that prevents you from selling something you'd like to; see "The IPO's Marc Adler on Patent 'Quality'"), the Patent Trial and Appeal Board and the various flavors of post-grant review afforded challengers under the Leahy-Smith America Invents Act, come in for criticism, based on rules permitting the Board to refuse to institute a proceeding based on avoiding duplicate adjudications before the Office and in the courts (see M. Buttman, "Turning Away a Patent Challenge: The NHK-Fintiv Rule Explained," Bloomberg Law, March 3, 2021). In doing so, the Editorial Board comes perilously close to accusing the former Director of instituting the rules improperly, and in the process (again ironically) illustrating why Justice Thomas and others advocate overturning the protections from libel suits by public officials in N.Y. Times v. Sullivan.

Because no one can always be wrong -- including the Times Editorial Board -- there are a few, albeit precious few, reasonable ideas in the editorial. One is giving examiners more time for examination, which could "solve" the excess prosecution "problem" the editors perceive exists. Another is having increased public participation, although the means for achieving this goal smacks of the same motivation that has made virologists out of financial advisors during the pandemic -- the idea that people who actually understand the process and issues are somehow suspect. And the idea asserted by the Times Editorial Board that the PTO does not coordinate with other agencies like the FDA and FTC is just wrong and illustrated by an example not representative of the realities of patent prosecution, such as the duty of candor and the penalty for violating it called inequitable conduct.

Perhaps the editors will be motivated to look into some of the deficiencies of their reasoning and understanding of the real issues facing innovation that the patent system grapples with, like "efficient infringement" by large companies with the financial wherewithal to expropriate smaller companies' inventions (see "The Proper Role of the Federal Circuit" and "The ACLU, Working for the Man"). But this is unlikely because reality does not fit the editors preconceived notion of what "everybody knows" (see "The Road to Hell Is Paved with What Everybody Knows"). The editorial pages of the Times have a long history with this type of prejudice (see "Science Fiction in The New York Times"; "The Anti-Patent Beat Goes on at The New York Times"; "Anti-Patent ("Sullivan?") Malice by The New York Times"; "The Continuing Assault on Innovation at The New York Times"; "War is Peace, Freedom is Slavery, Ignorance is Strength"; "New York Times to Innovation: Drop Dead"; and "More Patent Nonsense from The New York Times") and frankly there is no reason to think it will change. There is nothing in this latest editorial to the contrary.

Posted at 11:53 PM in Media Commentary | Permalink | Comments (8)

Before You Complain About So-Called Bad Patents, Read This

By Michael Borella --

This weekend The New York Times published an editorial opinion entitled "Save America's Patent System." It bemoans the purported prevalence of "bad patents" -- including "uninspiring tweaks" to existing products -- that supposedly undermine innovation. This led the Times to call for radical patent reform.

The Times continues a trend that has been at play for well over a decade now. The "bad patents" narrative raises its misguided head from time to time and lodges complaints about the supposed inequities of the patent system. According to the Times, these include higher drug prices and extortion by patent assertion entities.

Perhaps ironically, the Times does not identify any of these "bad" patents. Every U.S. Patent has at least two unique numbers by which it can be differentiated from all others, but none of these are provided. Therefore, it is unclear which patents the Times believes to be "bad."

Further, the Times does not go into any detail regarding how it determined the "badness" of these unidentified patents. What part of the patents did the editorial board consider? Did they ask a patent attorney for help? Did they properly consider how the scope of the claimed invention might be construed?

If you think that you can just look at an issued patent and determine that it is "bad," think again. All patents are required to be novel and non-obvious (among other requirements). But the legal principles of novelty and non-obviousness are notoriously tricky, even for seasoned U.S. Patent and Trademark Office (USPTO) patent examiners, patent attorneys, and federal judges.

First of all, the claims of the patent define the invention. These numbered paragraphs at the end of each patent are where you start. All too often the popular press does little more than read the abstract of the patent and conclude that the patent is "bad." But the abstract is required by the USPTO to be no more than 150 words and thus is almost always a high-level summarization of what is claimed. Put another way, concluding that a patent is "bad" through a cursory reading of it is not unlike determining the guilt of a person accused of a crime by only considering their shoe size.

Instead, the claims must be construed. Claim terms are given their ordinary and customary meaning (e.g., based on dictionary definitions or how the term is used in the relevant field). Further, one must look to the specification of the patent to determine whether the inventors used any particular term in an unconventional fashion that would override its ordinary and customary meaning. Also, one must look to the file history of the patent (a written record of back-and-forth arguments made between the patentee and the USPTO that led to the granting of the patent) to determine whether the patentee made representations that would further color the definition of the terms. In some cases, testimony of the inventors or experts in the patent's field of technology may also be used to determine how the claims are to be interpreted.

As a consequence, rather than just glancing at the abstract, a drawing or two, or the claims themselves, the process for determining whether the claims are valid may require reviewing many hundreds of pages of documents. Further, much of the patent statute has been heavily interpreted by the courts. Thus, even after all of this material is reviewed, applying the law to the claims may involve additional review of a few dozen Supreme Court and Federal Circuit decisions. This is a process that can take weeks. And even after that, reasonable minds can differ. The legal notion of non-obviousness is still somewhat subjective.

Furthermore, some of the most innovative ideas and products are obvious only when 20-20 hindsight is applied. If you look at a patented invention and think "I could have done that!" slow down and think again about whether you could have come up with that idea only having the information available to the inventors at the time the application for this patent was filed.

Did the Times go through this process before complaining about "bad" patents? It seems unlikely.

Nonetheless, the Times did get some things right. It wrote that the USPTO has "devolved into a backwater office that large corporations game, politicians ignore and average citizens are wholly excluded from." This is mostly correct. The high cost of doing business with the USPTO (not to mention attorneys' fees) is prohibitive for most Americans. And the economics do favor the companies with deep pockets who can persist through multiple rounds of examination. And some patent assertion entities do act in bad faith, spamming lawsuits with the hope of recovering nuisance damages.

But this is not the whole story. To be fair, the USPTO regularly issues patents that it probably should not. But the USPTO also throws up arbitrary barriers to patenting solid inventions on the basis of dicey reasoning.

The quality of examination at the USPTO varies dramatically between art units and examiners. Not all examiners are equally well-trained on the technology or the law. Some seasoned examiners have 95% allowance rates and others allow less than 5% of their examined applications. If an individual inventor or small business patentee finds themselves with a difficult examiner, they may lack the resources to conduct an extended prosecution or to appeal. In some cases, the patentee will give up simply because it cannot afford to continue.

Also, once a patent is issued, the story is not over. Since the passing of the America Invents Act in 2011, patents can be pulled back into the USPTO for further review. Typically this occurs prior to or during litigation. Also, the 2014 Alice Corp. v. CLS Bank decision from the Supreme Court has made it significantly easier to invalidate software patents on completely sketchy grounds. As a result, litigation of even a patent reasonably believed to be valid is a very risky and expensive process.

The Times also fails to explain how small businesses can struggle to obtain a few (often just one or two) patents, and then have to spend millions over the course of years to shut down copyists and free-riders. In the last decade, the term "efficient infringer" has been used to describe how a large corporation can infringe its competitors' patents with little risk of consequence. Seeing a patent all the way from application to issuance to successfully winning an injunction, settlement, or damages award is not unlike trying to hop across a minefield on one leg.

Moreover, the strain on innovation goes both ways -- an overly permissive patent system would limit innovation, but so does an overly strict system. Not granting patents that should be granted disincentivizes innovators from publicly disclosing their inventions and motivates the use of trade secrets instead. And an economy based on trade secret limits our ability to share our advances in science and technology -- to stand on the shoulders of giants.

So determining whether a patent is "good" or "bad" is not at all analogous to sorting ripe fruit from rotten. It is a process that requires more than a glance and a roll of the eyes. You need to put in the work.

If the Times wants to improve the patent system, it needs to call for a higher quality of examination at the USPTO rather than a higher bar for non-obviousness. It needs to call for lower fees and a less onerous examination process for individual inventors and small companies. And it needs to stop its vigorous hand-waving away of the complexities of patent law in order to provide a more accurate and well-reasoned viewpoint.

Posted at 11:34 PM in Media Commentary | Permalink | Comments (3)

April 26, 2021

Suspending IP Protection: A Bad Idea (That Won't Achieve Its Desired Goals)

By Kevin E. Noonan --

Demagogy is never pretty. When coupled with a species-threatening pandemic, the propensity for the pundit class is to be susceptible to solutions that sound reasonable only to the uninformed. To make matters worse, some of those "solutions" are proposed by actors creative in using the crisis to advocate positions that benefit their constituencies under the cover of (and preying on) the humanitarian impulses of global elites comfortable in both their privilege and ignorance. This is particularly dangerous where positions promoted under the cover of beneficence mask long-felt and deep-seated resentments over encouraging, perhaps heavy-handedly, a global trade regime mandating recognition of intellectual property rights in countries adverse to them and that have been successful in chipping away at them for the past 20 years.

Thus we have calls, specifically by South Africa* and India**, for governments to suspend patent rights during the pandemic, ostensibly for vaccine-related IP but in fact having a much broader scope. Most in industrialized countries who understand the impact (essentially none) of patents on vaccine production and availability are easily dismissed as speaking from a vested interest (bringing to mind the biblical exhortation against the mote in one's neighbor's eye and the mean in one's own) (see "Sen. Tillis Asks Biden Administration to Oppose WTO Waiver Proposal"; "IP Organizations Support Continued Opposition to Waiver Proposal; Industry Coalition Supports Continued Efforts to Oppose Waiver Proposal"; "BIO and PhRMA Urge Biden Administration to Oppose Proposed WTO TRIPS Waiver"; and "IPO Sends Letter on IP Law and Policy to President-Elect and Vice President-Elect"). But should governments succumb to the siren call of purported humanitarianism to the detriment of a global innovation system that (ironically) provided the innovation ecosystem that produced no fewer than half-dozen effective vaccines against COVID-19 in less than a year, in the face of a threat that even its proponents characterize as "an impediment or the risk of an impediment" to vaccine development, it seems prudent to critically assess whether technology is available for which patents could have the putative preclusive effect procurement and distribution of effective vaccines.

Such an assessment is provided by Derek Lowe in an article published in February entitled "Myths of Vaccine Manufacturing" in Science Translational Medicine. He identified the following "steps" of the vaccine-making process (and remember, these steps occur only after the vaccine is developed, tested, and receives regulatory approval):

Step One: Produce the appropriate stretch of DNA, containing the sequence that you need to have transcribed into mRNA. This is generally done in bacterial culture.

Step Two: Produce that mRNA from your DNA template using enzymes in a bioreactor.

Step Three: Produce the lipids that you need for the formulation. Some of these are pretty common (such as cholesterol), but the key ones are very much not (more on this below).

Step Four: Take your mRNA and your lipids and combine these into lipid nanoparticles (LNPs). I have just breezed past the single biggest technological hurdle in the whole process, and below you will learn why it's such a beast.

Step Five: Combine the LNPs with the other components of the formulation (phosphate buffers, saline, sucrose and such) and fill those into vials.

Step Six: Get those vials into trays, into packages, into boxes, into crates, and out the door into trucks and airplanes.

The last step has been the subject of other analyses (see, e.g., "Latest COVID Conundrum: Accessibility of Vaccines (When They Are Available)") showing that logistics, having nothing to do with patent protection, is fraught with its own limitations, mostly political and financial.

Evaluating the potential for widespread vaccine production (which is the purported global societal benefit of suspending patent protection), Dr. Lowe moves stepwise (but focuses on Step 4 as the bottleneck step). For Step 1, he references "Exploring the Supply Chain of the Pfizer/BioNTech and Moderna COVID-19 Vaccines", a blog post by Jonas Neubart. This post details that "DNA plasmid production on an industrial scale is pretty well worked out" and thus is not a bottleneck in producing mRNA-based vaccines.

Step 2, transcription, is also not an impediment, albeit not as widely practiced as Step 1 ("RNA production is certainly closer to being rate-limiting than Step One, but it's nothing compared to the real bottlenecks that are coming").

Nor, according to the post is Step 3 regarding the lipids used to produce the nanoparticle carrier for viral (SPIKE protein) mRNA. "These are surely not trivial to make on scale, but they're still small molecules with relatively straightforward structures," he says, and "[i]f you had to, you could surely get some other manufacturers up to speed on the process."

And similarly Steps 5 and 6 are not an issue, because "[e]veryone in this part of the manufacturing business has known for months that a Big Vaccine Push has been coming, and has been cranking up vial manufacturing, bringing all available production lines up to speed, and signing deals all over the place with everyone who has any kind of advanced vaccine effort."

So far Dr. Lowe sets out conventional pharmaceutical manufacturing technology that is well-established enough that patents and technology are not an impediment. But as he quotes Neubart as saying, "Welcome to the bottleneck!" in Step 4. Why? Because this step involves "[t]urning a mixture of mRNA and a set of lipids into a well-defined mix of solid nanoparticles with consistent mRNA encapsulation." These methods are done in-house by Moderna and (less certainly) by Pfizer in Kalamazoo and BioNTech in Germany. Microfluidics are suspected to be the technology used, and these require control of a number of process parameters that, unlike patents, are not disclosed to the public. And as Dr. Lowe posits, these processes likely require "bespoke" machines made just for this purpose, which are not readily available.

Dr. Lowe's article was directed to (and frankly prompted by) assertions that there are "dozens" of pharmaceutical companies ready to produce these vaccines, and that this is not the case. The evidence evinced by Dr. Lowe is relevant to the question of whether patents create an impediment to COVID vaccine production. It is apparent that, even if there might be circumstances under which intellectual property negatively affects vaccine availability, suspending patent protection is not an effective answer because the rate-limiting step for COVID vaccine production (at least for the mRNA-based vaccines) involves proprietary machines and methods for making the vaccine that are, more than likely, not covered by patents and never will be.

And that raises the specter of an even more dangerous attack on intellectual property. Because the technological circumstances set out by Lowe and Neubert involve trade secrets regarding formulation of vaccines are what can be the bottleneck in the process. But trade secrets are the type of property the rights to which cannot be suspended; disclosure destroys the secret and thus the property. In the U.S., government seizure of trade secrets might be compensated as a taking (although how effective such compensation would be is in serious question). But is the U.S. government prepared to compensate not only its own trade secret misappropriation but global dispersion of the "secrets," and just how willing can we expect countries such as India and South Africa (the prime proponents of patent suspension) to provide any compensation whatsoever? When these facts are considered, the call by these governments (and others) should be understood for what it is: an attempt to use the pandemic to achieve a goal of status quo ante (prior to the establishment of the GATT/TRIPS/WTO global trade and patent regime), which was imposed upon these and other countries a generation ago. The COVID pandemic provides the humanitarian excuse for a solution that isn't a solution but that resonates with uninformed (albeit generally well-meaning) politicians, humanitarians, and religious and non-governmental organizations.

Which is not to say that there are no issues regarding availability of drugs in low- and middle-income countries that need to be addressed (see "The Law of Unintended Consequences Arises in Applying TRIPS to Patented Drug Protection in Developing Countries"; "A Modest Proposal Regarding Drug Pricing in Developing Countries"; "Trying to Find a Solution to the Global Drug Pricing Crisis"). But there are ways to achieve the lofty goals that are at the root of this message. As Merck as done with Johnson & Johnson, partnering between pharmaceutical companies can increase the number of doses of the vaccine necessary for global vaccination. Groups like Gavi ("a Geneva-based funder of vaccines for low-income countries"), the WHO, and the Coalition for Epidemic Preparedness Innovations (CEPI), "a fund based in Oslo that was created to finance and coordinate vaccines for outbreaks" can be involved in an concerted effort to obtain vaccine supplies for the rest of the world. Western governments with "excess" vaccine reserves can use the auspices of these groups to send doses to low- and middle-income countries and economies (LMICS) and even some "wealthier" countries having the economic capacity to defray some or all of the costs. Indeed, today the Biden Administration announced it would make available "excess" vaccine doses to countries in need.

And the motivations for such efforts need not rely exclusively on altruism; as has become evident recently the virus has the capacity to mutate in ways that variants of unknown resistance to current vaccines can arise. Vaccines, particularly the mRNA-base vaccines, may not be effective against these variants (see "Do mRNA-based COVID Vaccines Have an Achilles Heel?") and thus it is in everyone's interest to extend vaccination globally (regardless of how daunting that challenge may be) to reduce the probability of such variants arising.

SARS-CoV-2 and the COVID pandemic is the greatest global health threat caused by a virus since the influenza pandemic of 1918 (see "The Great Influenza: The Story of the Deadliest Pandemic in History") and, before that, enumerable smallpox outbreaks (see "The Fever of 1721: The Epidemic That Revolutionized Medicine and American Politics"). But the current outcry calls for governments and the rest of us to heed Kipling's admonition regarding the aspiration to "keep your head when all about you/Are losing theirs and blaming it on you." Let's hope they can do so.

* Ironically (or perhaps a basis for their position on the patent suppression suggestion), in South Africa "the existing patent system . . . plays a key role in stifling – rather than stimulating – innovation"; see "Do mRNA-based COVID Vaccines Have an Achilles Heel?"

** Pathetically, the Indian government has "come[] under fire for forcing states and private buyers to pay more for scarce vaccine even while France and Germany are preparing to send aid (in the form of vaccine doses), according to the Financial Times of London (see "US and Europe to send aid to fight India’s coronavirus surge" (subscription required)).

Posted at 11:11 PM in Media Commentary | Permalink | Comments (10)

October 17, 2017

Financial Times to "the Patent Troll Narrative" -- Much Ado About Nothing

By Kevin E. Noonan --

Yesterday, the Financial Times (London) published an article by Rana Foroohar entitled "Big Tech vs. Big Pharma: the battle over US patent protection." If the article can be encapsulated in a word, that word would be "debunked" for what the article calls the "patent troll narrative" that patent trolls are impeding innovation and costing U.S. jobs to go down and consumer costs to go up. As has been said in other contexts, "it ain't necessarily so" and, in fact, it isn't so at all.

The article starts with a testimonial from Sherry Knowles, former Chief Patent Counsel at GlaxoSmithKline and a breast cancer survivor, who acknowledges that the drug that "saved her life" -- Adriamycin -- would not have been able to be developed had it been discovered under the unfriendly conditions patentees face today. She recites an inconvenient truth sometimes ignored by policymakers unduly swayed by the desired outcome of cheaper drug prices: "[i]f companies can't defend their intellectual property, they won't invest. It's that simple."

While noting that Big Pharma is unlikely to garner much sympathy, the article properly notes that voices that have been raised against current trends in the USPTO, Congress, and the courts (particularly the Supreme Court) include start-up biotech companies, semiconductor and electronics firms, universities, and other innovators, precisely the sources of both innovation and job growth.

The article discusses the reasons for the complaints -- changes in patent laws including the America Invents Act and Supreme Court decisions like Mayo Collaborative Services v. Prometheus Laboratories and Alice Corp. v. CLS Bank and some of the negative consequences of these trends. For example, the article shows that the U.S. (which spends 2.79% of gross domestic product on research and development, a total of $518,077,890,000 in 2015 according to the World Bank) has gone from 1st to 10th in patent protection according to Chamber of Commerce, and is now tied with Hungary (which spends 1.38% of its GDP on R&D, a total of $1,715,933,400). As a consequence, the article says that some companies are encouraged to engage in "efficient infringement" defined in the article as companies that "simply copy or take the IP they want, then settle with aggrieved parties out of court for less than the full value of the IP."

The reason for the change: "the patent troll narrative," which the author says had reached a "fever pitch" by the time President Obama was inaugurated. This narrative was a large part of the impetus to change U.S. patent law that culminated in the America Invents Act. But even after passage of the AIA and institution of inter partes and covered business method reviews (which were intended to solve the problem of improvidently granted patents more cheaply and efficiently than through litigation), the article states that some high tech companies wanted even more patent-unfriendly "reform." According to David Kappos, former Director of the U.S. Patent and Trademark Office as quoted in the article, "[u]ltimately the read agenda sunk in. This second round of drastic cutbacks to the patent system was a commercial ploy designed not to stop abuse but to cut supply chain costs by devaluing others' innovation."

In 2013, according to the article, the White House issued a report that 2/3rds of patent litigation was provoked by patent trolls. This number was disputed by the nonpartisan Governmental Accounting Office (GAO), which estimated the number at about 20%.

The article quotes Randall Rader and Paul Michel, both former Chief Judge of the Court of Appeals for the Federal Circuit, as being against how the USPTO has administered the inter partes review process. On the other hand Mark Chandler, General Counsel at Cisco, is quoted as saying that the problem is patents that should not have been granted, which "put[] a deadweight burden on the economy by blocking innovation by others and unnecessarily driving up prices to consumers." But Gary Lauder, a venture capitalist from Silicon Valley, says that the patent system America needs is one where established companies pay innovator companies for their innovations rather than being able to expropriate them. "We need to protect the larger start-up ecosystem, which is where the majority of jobs are created," he says.

Also cited in the article is a recent study from the National Bureau of Economic Research which found that having a patent increases the likelihood of acquiring venture capital by 53%, of start-up job growth by 36% and start-up sales by 51%. And a paper by Stanford economist Stephen Haber is cited for finding that the patent troll narrative is inconsistent with the actual behavior of patentees and accused infringers.

The article closes with a view to what may happen next, which includes a bill by Senator Christopher Coons (D-DE) intended to shore up the U.S. patent system in the face of global competition particularly from China. The article notes that there may be some acquiescence to changing the patent system to accommodate the needs of biotech and pharma with the different needs of the high technology sector, perhaps with different rules for each.

The most cogent commentary in the article regards statistics generated by Lex Machina regarding the effect of trolls on the patent system: "There has been an abundance of data that both advocates and critics of the current patent system spin in all sorts of ways to make their case," according to the article. The USPTO estimate that 2/3rds of patent cases involved trolls did not take into account changes in how patent cases could be brought so that this number was somewhat artificially exaggerated. And the contemporaneous GAO study expressly refuted this number with an estimate of 20%.

Using "the best way to compare" patent lawsuit numbers pre- and post-AIA (using individual defendants as the metric), Lex Machina found that the number of patent lawsuits in fact didn't change with the change in the law, and that the brief spike in 2011 (which was the basis of much of the troll narrative) was accounted for by the law change occasioned by passage of the AIA. These data are illustrated by Lex Machina's graph, reproduced below:

In short, the article concludes, "[t]rolls have been overblown as a patent issue." But the consequences of this inaccurate narrative persist.

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.

Insofar as many of our elected leaders profess to be conservatives, perhaps it would behoove them to listen to an authentic conservative voice on these matters.

Posted at 11:36 PM in Media Commentary | Permalink | Comments (5)

May 29, 2017

Alternative Facts on Patent-Eligibility from the Electronic Frontier Foundation

By Michael Borella --

The textbook policy rationale for the existence of a patent system is a quid-pro-quo -- a tradeoff in which an inventor is granted a time-limited property right over his or her invention in return for disclosing it to the public. Such disclosure is expected to, over time, spur further innovation, and bolster research and development. But empirical measurements of the impact of the patent system on innovation and the economy have been difficult to come by. Patents are just one factor influencing ongoing scientific and engineering advances, and their impact is perhaps impossible to determine in an aggregate sense.

Heidi L. Williams of the National Bureau of Economic Research reviewed the available evidence of how patents on existing technologies might affect follow-on innovation and research investment. Her conclusion is that more evidence is needed: "[G]iven the limitations of the existing literature we still have essentially no credible empirical evidence on the seemingly simple question of whether stronger patent rights -- either longer patent terms or broader patent rights -- encourage research investments into developing new technologies."

Nonetheless, in a recent article, Vera Ranieri of the Electronic Frontier Foundation (EFF) has used this essentially neutral position to argue in favor of recent changes to U.S. patent law that arbitrarily and subjectively limit patentable subject matter. In doing so, Ms. Ranieri falls back on a number tired tropes and misconceptions about the workings of U.S. patent law, and fails to consider the damage done by these changes to the certainty function of the patent system.

The Alice Decision

In 2014, the Supreme Court handed down a highly controversial decision in Alice Corp. v. CLS Bank Int'l. In a nutshell, the Court ruled that patent claims should be analyzed to determine whether they are too "abstract," and if they are, these claims should be further analyzed to determine whether they incorporate "significantly more" than an abstraction. In doing so, the Court went well beyond the plain language that Congress set forth in 35 U.S.C. § 101, the section of the patent statute that defines subject-matter eligibility. Furthermore, the Court purposely declined to define what it meant by "abstract" and "significantly more," essentially leaving it up to the Federal Circuit, the district courts, and the USPTO to provide meaning for these ambiguous terms.

While not explicitly stating it, in Alice the Court effectively targeted software and business method inventions (and certain types of life science inventions, such as diagnostic methods) for an additional level of scrutiny. In fact, the EFF's own amicus brief in Alice encouraged the Court to use the case to "reign in overbroad software patents." Whether or not this argument ultimately swayed the Justices to rule as they did, the effect of Alice is clear -- over 15,000 patent claims have been invalidated under § 101 since this decision came down, the vast majority of these in the software and business method space. Additionally, some software and most business method claims are now harder to obtain from the USPTO, with rejection rates of over 90% in some business method art units.

In many cases, courts have invalidated patents under § 101 without undertaking claim construction. Let that sink in for a while -- courts are throwing out patents as allegedly being abstract without determining the actual scope of the claimed invention.

The Alice Decision Has Not Been, and Cannot Be, Applied Consistently or Objectively

The problem with Alice is not just that it limits the scope of patentable subject matter, but that it does so in an arbitrary and subjective fashion. Courts and the USPTO have struggled mightily with making sense of the decision. Judge Wu of the United States District Court for the Central District of California criticized Alice for setting forth an "I know it when I see it" test.[1] Judge Pfaelzer, a colleague of Judge Wu, wrote that the Supreme Court's patent-eligibility cases "often confuse more than they clarify [and] appear to contradict each other on important issues."[2] Former Chief Judge of the Federal Circuit Paul Michel stated that Alice "create[d] a standard that is too vague, too subjective, too unpredictable and impossible to administer in a coherent consistent way in the patent office or in the district courts or even in the federal circuit."

While the Federal Circuit has attempted to provide a consistent line of post-Alice case law, this has resulted in some very thin bacon slicing. For instance, in 2014 a panel in Ultramercial v. Hulu found a complex and narrow web-based transaction to be unpatentably abstract, while another panel in DDR v. Hotels.com found a web server that combines the look and feel of two different web sites meeting the requirements of § 101. Last year, in Synopsys v. Mentor Graphics, an invention automating circuit design procedures was found to be abstract because these procedures had been performed manually by humans. But in McRO v. Bandai Namco Games America, an invention automating lip-synchronization in animated characters was found not abstract even though the automated procedure could be performed by humans.

While one could argue that there are at least tenuous distinctions between the claimed inventions that were found eligible and ineligible in these four cases, the recent Recognicorp v. Nintendo case clearly illustrates the Federal Circuit's inability to apply Alice consistently. In the decision, the panel characterized a 154-word claim as nothing more than "encoding and decoding image data," despite the panels in Enfish v. Microsoft and McRo explicitly forbidding such claim over-simplification.

At the USPTO, despite the administrators' admirable efforts to provide clear examination guidelines with respect to Alice, it is notoriously well known amongst practitioners that different art units and different examiners will apply the Alice test in radically different ways. Further, it is common for an applicant to receive an Alice rejection that is purely conclusory in nature -- the examiner essentially saying "Your claims are abstract, no patent for you!" without any rationale or reasoning to support the rejection. While the latter type of rejection can be rebutted, it imposes additional and unnecessary costs on the applicant to go through extra cycles of Office actions or appeals.

Ultimately, the problem does not lie with the Federal Circuit or the USPTO. The Alice test is inherently subjective, requiring one to look at a claim and imagine analogous "well-known, routine, and conventional" activities. In doing so, examiners and judges often ignore key claim elements, resulting in a 10,000-foot view of the claim being analyzed, rather than the actual claimed invention.

Due to this subjectivity, reasonable minds can differ regarding whether a claim is abstract and whether it contains something more. There is no way for thousands of examiners and hundreds of federal judges to reach the same conclusion on a consistent basis.

The Lack of Evidence Found in the Williams Paper Cuts Both Ways

For sake of argument, let's assume that Ms. Williams's analysis is correct, and that there is little or no evidence identified yet that establishes innovation is spurred on by a strong patent system.[3] Ms. Ranieri interprets this result as an invitation to slam the door on software patents, arguing that there is no need to change the law to fix problems introduced by Alice.

But the same argument could be used to establish that there was no need for the Supreme Court to change the law in Alice either. If the impact of patent system strength on innovation was unclear, the Court should not have instituted such a dramatic change. Besides, Congress is better equipped than the Court to derive policy from such studies. If anything, the dramatic growth of technology company profitability and market capitalization from the mid-1990s to the Alice decision in 2014 suggests that a strong patent system is not inconsistent with innovation and technological investment in the software market.

Ms. Ranieri also states that the Williams paper establishes that there is no evidence that the Alice decision has "done any harm to the innovation economy or innovation generally." But the paper does not address Alice at all, and most of its cited research was conducted prior to the 2014 date of Alice. Given the lengthy, multi-year time scales of patent lawsuits, patent prosecution, and research and development, the three years between then and now is way too short a time period to draw such broad conclusions.

Ms. Ranieri Mischaracterizes the Efforts to Overturn Alice

Throughout her article, Ms. Ranieri makes misleading statements about efforts to overturn Alice. Particularly, she focuses on proposals by the Intellectual Property Owners Association and the American Intellectual Property Law Association to rewrite § 101. A comparison of their efforts indicates that they would replace the Alice test with an analysis of whether the claimed invention as a whole (i) exists in nature independently of human activity, or (ii) solely in the human mind. Such a test would certainly result in fewer patents being invalidated under § 101, but would also go a long way toward clarifying the law.

Unlike Ms. Ranieri's contentions, this would not "return us to a world where 'do it on a computer' ideas are eligible for a patent." That world never existed. If a claimed invention's sole difference from prior art is to perform a known series of steps on a computer, the invention is probably obvious and can be invalidated on those grounds. In fact, the claims in Alice and many other so-called "overly broad" patents could be invalidated under the patent statute's existing novelty, non-obviousness, and written description provisions. Ms. Ranieri's further statement that the proposed changes to § 101 would mean that "anything is patentable" aside from the aforementioned exceptions ignores the fact that eligible subject matter is just one requirement of many for a patent to be granted.

Furthermore, Ms. Ranieri asserts that "the recent reform proposals seem like little more than a bid by lawyers to create work for themselves." If anything, the opposite will likely be the case. The uncertainty surrounding Alice has been a boon for § 101 focused practice, opening more patent prosecution and litigation opportunities. While some applicants are filing fewer patents as a result of Alice, many are filing more -- attempting to protect multiple narrow inventions rather than one or two broader ones. There are more appeals in the USPTO, as well as more covered business method review proceedings as well.

When there is a gray area in the law, lawyers are needed more than ever to help their clients navigate the ambiguities. If the Intellectual Property Owners Association and the American Intellectual Property Law Association succeed in their efforts, the patent law will be less ambiguous and there will be far fewer billable hours spent determining whether or not a claim is abstract. Even though such a change might have a negative impact on their bottom lines, many patent attorneys would welcome the change because the patent system is broken as long as Alice stands.

Conclusion

Opposition to the Alice test is not based on it making patents easier to invalidate, but that it does so in an unworkable and intellectually dishonest fashion. This has resulted in applicants with limited financial resources being unable to pursue patent protection for legitimate technical inventions. If such a trend is widespread and continuing, small U.S. companies will be reluctant to innovate in certain market segments because of the risk of their U.S.-based or foreign competitors getting a free ride to copying or cloning a product or service.

This is the area that merits academic study -- has Alice actually harmed innovation? As noted above, it may be a while before we can make that determination. But if it is the case, that would be just one more reason of many for discarding the test.

[1] Eclipse IP v. McKinley Equipment (C.D. Cal. 2014).

[2] Cal. Inst. of Tech. v. Hughes Commc’ns Inc. (C.D. Cal. 2014).

[3] As far as we know, the paper has not yet been subject to thorough peer review, and therefore its conclusions should be viewed as preliminary at best.

Posted at 10:30 PM in Media Commentary, Patentable Subject Matter | Permalink | Comments (10)

January 01, 2017

Addressing Increased Drug Costs -- A Proposal

By Kevin E. Noonan --

The New York Times in a recent video (see "'Could You Patent the Sun?'") has returned to its theme against patenting, particularly with regard to patents for life-saving drugs. This time the paper invokes the meme of Jonas Salk and his response to a question during an interview by Edward R. Murrow that patenting his polio vaccine would be like "patenting the sun." He certainly said that, and he certainly meant it, and the sentiment has a visceral appeal that echoes the success of the ACLU's anti-gene patenting campaign. But a closer look at the circumstances in which Dr. Salk could make this statement, and the realities facing drug development today, points out again how dangerous facile pronouncements made in the media (social or conventional) can inhibit rational debate by masking the real differences (and associated challenges) between those times and our own.

As set forth in Jane S. Smith's 1990 book "Patenting the Sun: Polio and the Salk Vaccine," Dr. Salk operated under conditions that gave him the luxury of not having to worry about patents. One was the famous "March of Dimes" campaign of the National Foundation for Infantile Paralysis, which was created specifically to address polio by President Roosevelt (himself a polio sufferer) in 1938. The disease, virtually unheard of before the turn of the last century, created a popular panic wherein tens of thousands of children were incapacitated annually, and the grassroots efforts of the March of Dimes generated more than $200 million for research and patient care. Salk's work (as well as that of Albert Sabin on what would become the preferred form of the vaccine) was funded by March of Dimes money, circumstances very different from how science is funded today.

Other differences involve the regulatory environment and the costs such regulations impose on drug development. Of course, these regulations are also responsible for protecting (albeit sometimes imperfectly) the American public from ineffective or dangerous drugs, and so the societal costs need to be balanced with increased barriers to new vaccines and other drugs. But as Ms. Smith sets out, Dr. Salk was able to test early prototypes of his vaccine on children in a nearby institution caring for mental retardation, and the force of the fear regarding polio was such that the propriety of this testing was not questioned. Moreover, Salk did his work prior to the thalidomide tragedy that led to changes in FDA laws and regulations that greatly increased the stringency (and thus the cost) of obtaining approval. While a great deal of the cost of drug development can be laid at the feet of other aspects of this endeavor (the cumulative costs of many failed drugs for each successful one, for example), much of the increased costs of bringing new drugs to market since Dr. Salk's day has to do with this increased (but societally desirable) regulatory burden.

But even in view of these realities, the basis for an increasing amount of political pressure on drug companies is higher drug costs, particularly (and ironically) for biologic drugs which have significant advantages in addressing otherwise intractable diseases and which can have a specificity unknown for conventional drugs. It is easy but incorrect to attribute these costs to patents, but it is equally unavailing to ignore the political power of the many memes relating to failures in American capitalism that permit these seeming cost imbalances to arise.

If the future appears to contain even more expensive drugs and a political backlash against them, then a clear-eyed assessment of that future can provide at least three alternatives. The first is that the drugs will exist but that their availability will be stratified, between those who will be able to afford them on their own (either out-of-pocket or through so-called "Cadillac" health insurance plans) or through government-sponsored programs for select groups (veterans, for example) and those (perhaps the majority of Americans) who will not. The second is that these drugs will not be developed in the U.S., due to changes in patent or regulatory law that provide disincentives to development (such as further erosion of patent eligibility by the Supreme Court or a reduction in market exclusivity for biologic drugs as sought after by the Obama Administration). Neither of these alternatives is palatable, socially or politically.

A third course that may have the ability to address the growing problem of unsustainable increases in drug pricing would be some sort of cost control (presumably by the Federal government, analogous to systems in place in Europe and elsewhere), but to be practical there would need to be an economic incentive for the biotech and pharmaceutical industry to acquiesce. One quid pro quo in this calculus would be a reversal in the current regime that the FDA imposes user fees on applicants for regulatory approval, and instead to have the government pay the costs of its regulatory requirements. There is precedent in the negotiations leading to passage of the "Obamacare" healthcare overhaul to have government and the pharmaceutical industry come to an agreement over new ways to reduce healthcare costs. Such a tradeoff could reduce a significant proportion of the costs of new drug development and thus eliminate the economic pressure for legitimate recompense that is likely not economically sustainable (see, e.g., Picchi, "The cost of Biogen's new drug: $750,000 per patient"). And it might also attenuate the FDA's requirements for approval, wherein the agency as a Federal bureaucracy might have incentives to balance its mandate to ensure safety and efficacy of approved drugs with the realities of drug development, to make both more realistic.

But it is clear that something must be done, if only to ensure that our ability to produce more effective drugs does not founder on soundbite-driven, simplistic solutions to the problems of providing efficient incentives for doing so.

Posted at 10:05 PM in Media Commentary | Permalink | Comments (15)

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