Patent Reform Act of 2008: News, Commentary, and Analysis

     Seven weeks after Senator Jon Kyl (R-AZ) introduced S.3600, the Patent Reform Act of 2008, on September 25, 2008 (source: GovTracks), the reaction has been predictable, with stakeholders on the pro- and anti-reform sides making their views known. The Advanced Medical Technology Association (AdvaMed) said “improving and modernizing the patent system is clearly important to all sectors of the U.S. economy and we applaud Sen. Kyl and his staff for their leadership and inclusive approach to developing this legislation.” The Biotechnology Industry Organization’s (BIO) President and CEO Jim Greenwood immediately praised Kyl’s legislation, stating that "BIO appreciates the efforts of Senator Kyl and his staff to address the concerns of many stakeholders with the patent reform legislation currently pending in the Senate, and commends him for introducing the Patent Reform Act of 2008 (source: IPWatchdog).

     How will other stakeholders react? If past efforts are any indication, technology companies like Blackberry-maker RIM, which reportedly spent hundreds of thousands of dollars lobbying Congress on legislation including patent reform in 2007, may take the same stance with the 2008 legislation, as will Microsoft, Google, and other tech companies, which formed the Coalition for Patent Fairness and fought big pharmaceutical companies to keep portions of the existing patent system in tact during the battle over the 2007 patent reform effort.

     Bloggers have weighed in on the new legislation, too. “There is practically zero chance that this bill will pass in the current [110th Congress] session” (source: Peter Zura at the 271blog). Ex-AIPLA executive director Michael Kirk agrees. "Even if the Democrats get to 60 seats in the Senate, I would not count on the legislation being passed,” Kirk said in an exclusive interview with IAM (source: IAM Blog).

To the Blogosphere, And Beyond

New PTO Rules

Patent practitioners and others are keenly aware of the looming effective date for the new "claims and continuation" practice rules (November 1st, in case you forgot). Here are what people are saying about the pending rules.

    • Peter Weissman at Blank Rome suggests that "[i]t may be prudent to describe patentably “distinct” subject matter in separate applications rather than combining common subject matter in a single application. This could support an argument that the claims are truly patentably distinct"

    • Dr. Charles F. Louis, Vice Chancellor for Research, University of California, Riverside said in testimony before the Senate Judiciary Committe "any rules promulgated by the U.S. Patent and Trademark Office that make it more burdensome and expensive for universities to obtain patents on their inventions, such as the new claims and continuation rules, would be detrimental to university technology transfer." (Source: IPWatchdog)

    • Hal Wegman at Foley notes that "[i]f cloture is voted by the Senate on patent reform and ultimately patent reform includes the House-passed version on delegation of rulemaking authority, whatever happens in the near term on Continuation Rules will be superseded by the new law. Yet, the great bulk of the focus of the patent community is on the sideshow in Alexandria." (Source: PatentHawk)

    • That "sideshow" includes GlaxoSmithKline's Motion for Temporary Restraining Order and Preliminary Injunction to halt implementation of the new PTO rules. A hearing on GSK's motion is set for October 31, 2007.

Favorable Patent Lawsuit Forums

Move over Eastern District of Texas, more and more other districts are being eyed as the place to file patent lawsuits, especially since patent reform will make it harder to go forum shopping. Take the Western District of Wisconsin, for example, mention of which continues to be linked with terms like "speedy justice."  The Wisconsin court boasts a filing-to-trial time of 11.3 months, which compares to a pokey 12 months at the Eastern District of Virginia (the average, in case you're wondering, is about 22 months, so says Dewey Ballentine co-authors last year in an IPToday article).

Patent Reform

It's no secret that the bio industry is against patent reform. At last week's 2007 Mid-Atlantic Bio Conference, held in Bethesda, MD, a representative from the Biotechnology Industry Organization (BIO) made the organization's views plainly clear in a presentation about patent reform legislation. Saying that bio was being thrown in front of the bus to save the IT industry, BIO urged member organizations to call their Senators to fight passage of the legislation.

Tired of Trademark Oppositions? Call Your Senator

In an opinion issued last week relating to a lawsuit against the PTO, the Fourth Circuit Court of Appeals overturned an Eastern District of Virginia decision, effectively sanctioning the practice used by Montana Congressmen of using the political appropriations process to halt the registration of the trademark THE LAST BEST PLACE, which was being sought by a Nevada company. Hopefully, I'll have more on this later (here's a preview: "Senate approves ‘Last Best' measure").

 

Biotechnology and Pharmaceutical Associations Thwart DC's Drug Price Control Law

Summary:  Federal Circuit affirms judgment declaring D.C.'s Prescription Drug Excessive Pricing Act of 2005 preempted by federal patent laws and enjoining its enforcement.


In Biotechnology Industry Organization v. District of Columbia, No. 2006 Civ. 1593 (Fed. Cir. 2007), the Federal Circuit affirmed the District Court for the District of Columbia's judgment in favor of the Plaintiffs declaring the District’s Prescription Drug Excessive Pricing Act of 2005 preempted by the federal patent laws and enjoining its enforcement.  The Plaintiffs' complaint centered on the following provision of DC's law:

"It shall be unlawful for any drug manufacturer or licensee thereof, excluding a point of sale retail seller, to sell or supply for sale or impose minimum resale requirements for a patented prescription drug that results in the prescription drug being sold in the District for an excessive price. *** A prima facie case of excessive pricing shall be established where the wholesale price of a patented prescription drug in the District is over 30% higher than the comparable price in any high income country in which the product is protected by patents or other exclusive marketing rights."

Plaintiff Pharmaceutical Research and Manufacturers of America ("PhRMA") filed suit in the District Court for the District of Columbia, alleging that the Act was invalid in light of the Commerce Clause of the Constitution and it was preempted by the federal patent laws. Plaintiff Biotechnology Industry Organization ("BIO"), which includes as its members nearly 60 Maryland biotechnology companies, filed a similar suit, which was consolidated with PhRMA's.

On appeal, the Federal Circuit stated:

"There is no express provision in the patent statute that prohibits states from regulating the price of patented goods; indeed, 'the federal patent laws do not create any affirmative right to make, use, or sell anything.'  Nevertheless, state law must yield to congressional enactments if it 'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'"

The court then noted that "the value of patents lies in the patentees right to foreclose competitors from making, using, and selling the invention," which may allow them an opportunity to obtain above-market profits during the patent’s term.  As stated in the legislative history of the Drug Price Competition and Patent Term Restoration Act of 1984 (popularly known as the "Hatch-Waxman Act"), "patents enable innovators to obtain greater profits than could have been obtained if direct competition existed. These profits act as incentives for innovative activities.  The court found that DC's Act stands exclusively within the scope of the patent laws, and its effect is to shift the profit incentive benefits of a patented invention from inventors to consumers:

"By penalizing high prices—and thus limiting the full exercise of the market power that derives from a patent—the District has chosen to re-balance the statutory framework of rewards and incentives insofar as it relates to inventive new drugs. *** The fact that the Act is targeted at the patent right is apparent on its face. It applies only to patented drugs."

Comments:

  • According to PhRMA's web site, "Winning approval [to market a new drug], on average, takes 15 years of research and development and costs over $800 million dollars."  Any effort that stands in the way of recouping that investment will likely have a target on its back from its inception.

  • Would the result of this case have been different had DC's Act not been directed "only to patented drugs"?

  • See Maryland Representative Chris Van Hollen's (D-MD) proposal for the states: Voluntary State Discount Prescription Drug Plan Act of 2007

  • Carol Leonnig's article in the Washington Post