The Senate introduced their counterpart to the House Patent Reform Act this month (Patent Reform Act of 2006; S. 3818). Senator Orrin Hatch declared from the start that the pending bill represents a bipartisan compromise but acknowledges that both sides are in favor of a post-grant review process for patents and moving to a first-to-file system. Senator Hatch also acknowledged the need to reform the patent system (including granting the USPTO more authority with regard to rule-making) to deal with patents such as the one for the crustless peanut butter and jelly sandwich.

The two most substantial changes to the Patent Act involve limitations on the availability of enhanced damages upon a showing of "willful" infringement by a plaintiff and a parallel limitation on the availability of unenforceability under the doctrine of "inequitable conduct." Like its House counterpart, the bill proposes these changes in an effort to streamline and reduce the cost of litigation. The bill, however, was not able to reach an agreement regarding the continued efficacy of the best mode requirement - elimination of this requirement would also serve to streamline litigation.

The bill makes further efforts to reduce the costs or, at least, improve the ability of litigants to predict those costs. For instance, the bill provides a broader safe harbor for prior users of patented technology. Senator Hatch stated "prior user rights are, in reality, a defense to infringement liability for those making or preparing to make commercial use of an invention prior to a patent being issued. Prior to a patent’s issuance, such a user often has no way of knowing that he is – or will be – infringing a patent. In some cases, the user has independently invented the subject matter in question, in which case it would be inequitable to subject him or her to infringement liability. Currently, the prior user defense is available only with respect to method patents. The bill expands the prior user defense to all categories of patents and makes related changes to this defense." The bill also proposes a codified "apportionment" rule for calculation of damages. Finally, the bill requires courts to award attorneys’ fees to a prevailing party in cases where the non-prevailing party’s legal position was not substantially justified.

Finally, this section also addresses Section 271(f) of Title 35. Under current law, either a foreign or domestic patent holder may be able to obtain damages based on foreign uses of domestically-manufactured components of an infringing article. The House bill only sought to curtail the effect of this provision (entered by Congress in 1984) by applying it to tangible items (as opposed to software inventions per the 2005 Federal Circuit appeal of Eolas Techs. v. Microsoft Corp. The Senate bill goes a step further an repeals the 1984 provision in its entirety. This may be a case of throwing the baby out with the bath water as it will open the field for everyone to partially develop inventions in the United States, ship the components abroad, assemble them, and sell them in foreign countries without fear of infringement suits in those countries.

Conclusion

While much of patent reform still remains an open debate, it is clear that Congress is making progress toward reaching a resolution on many of the points discussed herein. Stay tuned for a deeper analysis of the actual language of the proposed bill when I actually have time to write one!

Today's post comes from Guest Barista Ria Schalnat, a registered patent attorney in Frost Brown Todd's Cincinnati office.

Sen. Charles E. Schumer (D-N.Y.) introduced a bill (S. 3695) to amend the Federal Food, Drug, and Cosmetic Act to prohibit the marketing of authorized generic drugs. The bill was cosponsored by Sens. John D. Rockefeller IV (D-W.V.) and Patrick J. Leahy (D-Vt.). The effort is an attempt to ban a practice that they say undermines competition in the country's $250-billion pharmaceutical market.

Authorized generics are brand pharmaceutical products re-branded as generics and aimed at discouraging generic companies from challenging questionable brand patents. Under federal law, the generic company that is first to successfully challenge a questionable brand patent, file an abbreviated new drug application (ANDA) with FDA and receive approval to market that drug product is awarded 180 days of marketing exclusivity. During the 180-day period, that generic company alone is permitted to compete with the brand company, allowing the generic to recoup costs incurred for undertaking a patent challenge.

Brand drug makers have figured out that by re-labeling their own product, they can compete directly against the generic during the 180-period. Authorized generics are considered brand products by the FDA, so the authorized generic does not have to go through the abbreviated approval process required by a true generic. Brand companies argue that authorized generics increase competition and lower prices, but the Federal Trade Commission (FTC) thinks differently.

The bill would amend Section 505 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355) by adding at the end the following:

Notwithstanding any other provision of this Act, no holder of a new drug application approved under subsection (c) shall manufacture, market, sell, or distribute an authorized generic drug, direct or indirectly, or authorize any other person to manufacture, market, sell, or distribute an authorized generic drug.

For purposes of this subsection, the term 'authorized generic drug' --

(A) means any version of a listed drug (as such term is used in subsection (j)) that the holder of the new drug application approved under subsection (c) for that listed drug seeks to commence marketing, selling, or distributing, directly or indirectly, after receipt of a notice sent pursuant to subsection (j)(2)(B) with respect to that listed drug; and

(B) does not include any drug to be marketed, sold, or distributed (i) by an entity eligible for exclusivity with respect to such drug under subsection (j)(5)(B)(iv); or (ii) after expiration or forfeiture of any exclusivity with respect to such drug under such subsection (j)(5)(B)(iv).

Expect to see more back-and-forth action in this high stakes game.

Commissioner Jon Leibowitz of the Federal Trade Commission testified before the U.S. Senate’s Special Committee on Aging about branded and generic pharmaceutical competition and the barriers that can lead to the delay of generic entry into the U.S. marketplace.

Clearly, this comes down to money, not saving lives. Generic drugs play an important role in containing rising prescription drug costs not just comsumers but also the federal government since a large part of the budget goes towards paying for prescriptions drugs. For the past two decades, spending for prescription drugs has been the fastest growing component of the national healthcare spending. For consumers, the Congressional Budget Office estimated that consumers saved between $8 billion and $10 billion on retail drug purchases in 1994 alone.

The Commissioner addressed how patent litigation settlements can delay generic drug entry. It discussed the types of patent settlements that the Commission believes are anticompetitive – presenting possible legislative solutions to this problem – as well as how brand-name pharmaceutical manufacturers have used the 180-day marketing exclusivity period granted by Hatch-Waxman for generic first-filers to block generic entry. It also discussed how recent Court of Appeals rulings may have led to companies entering into more of such settlements.

The FTC believes that settlements of patent litigation are a significant threat to competition in the pharmaceutical industry when they include so-called “exclusion payments.” These settlements, which appear to be unique to the pharmaceutical industry, occur when a branded company shares a portion of its future profits with a potential generic entrant in exchange for the generic’s agreement not to market its product. Although both the brand company and the generic company are better off financially, these settlements restrict competition at the expense of consumers, whose access to lower-priced generic drugs may be deferred for years. The FTC now reviews all agreements between drug companies settling patent infringement disputes to ensure they are not illegally anticompetitive.

The FTC had filed a series of lawsuits challenging patent settlement agreements between major drugmakers and their generic rivals. The agency contends that in some cases those settlements stifle competition because drugmakers are paying generics to stay out of the market. The FTC issued a finding that the settlement illegally kept cheaper versions of Schering-Plough's blood pressure drug K-Dur off the market but the appeals court said the companies were within their rights to use their patents to lock competitors out of the market.

In the Schering case, the Eleventh Circuit vacated a decision by the Commission finding two patent settlements to be anticompetitive. Schering-Plough Corporation (“Schering”), the manufacturer of a brand-name drug called “K-Dur 20,” settled patent litigation with two manufacturers of generic counterparts, Upsher-Smith Laboratories, Inc. (“Upsher”) and American Home Products Corporation (“AHP”). The two generic manufacturers agreed to not marketing their generic drugs until specified dates in exchange for guaranteed cash payments totaling $60 million to Upsher and $15 million to AHP. The Commission concluded that in each settlement, Schering had paid its generic competitors to accept the settlement and that the settlements provided Schering with more protection from competition than a settlement without a payment or simply proceeding with litigation.

The U.S. Court of Appeals for the 11th Circuit concluded that the FTC had overstepped its authority when it blocked an agreement between Schering-Plough Corp. and Upsher-Smith Laboratories Inc., and set aside the Commission’s decision stating that “neither the rule of reason nor the per se analysis is appropriate” in an antitrust case involving patents. The Supreme Court denied cert.

Under the rulings in the Second Circuit’s Tamoxifen decision and the Eleventh Circuit’s Schering decision, exclusion payment settlements are legal unless the patent was obtained by fraud or the suit is a sham. These decisions make it very difficult (if not impossible) for parties challenging patent settlements to do so based on the terms of the settlement itself (i.e., the inclusion of a reverse payment). Plaintiffs will need to show that the generic company’s product did not infringe on a valid patent – a high hurdle to get over.

The Commissioned reiterated the recommendation of the Generic Drug Study: Congress should clarify that dismissal of an action brought by a generic applicant seeking a declaratory judgment constitutes a forfeiture event for the 180-day exclusivity period.

The Commissioner also discussed the new strategy in the pharmaceutical industry, the brand-name company’s marketing of a so-called “authorized generic” during the 180-day exclusivity period. An authorized generic is chemically identical to a particular brand-name drug, which the brand-name manufacturer authorizes to be marketed as a generic version under the approval that the FDA granted for the brand-name drug. The brand-name manufacturer either sells the authorized generic itself through a subsidiary or licenses a generic firm to sell the authorized generic. The label typically differs for the brand-name drug and its authorized generic equivalent, but the drug product is exactly the same.

Heather Bresch, senior vice president of corporate strategy at Mylan Laboratories Inc., also testified concerning potential solutions for authorized generics, citizen petitions and other issues that delay generic pharmaceutical approvals and put at risk billions of dollars of consumer healthcare savings.

Ms. Bresch testified that brand companies are using a variety of tactics to extend their monopolies including: (1) authorized generics, which are simply branded products relabeled as generics and then systematically dumped into the generic marketplace during the 180-day exclusivity period; (2) use of frivolous citizen petitions raising unfounded safety-issues that are strategically filed with the FDA to delay generic entry; (3) legal maneuvering around Congress's attempt to allow for a declaratory judgment trigger can create a bottle-neck of generic drug approvals; and (4) exploitation of pediatric exclusivity rules to gain extended monopoly for drugs that should not be used in the pediatric population.

Bresch did make it clear that "the generic industry is not opposed to authorize generics per se. Our issue lies only in the marketing of authorized generics during the 180-days of exclusivity as provided under Hatch-Waxman." The Pharmaceutical Research and Manufacturers of America (PhRMA) , which represents brand drugmakers, defended authorized generics as a way to boost competition.

A copy of the Commissioner’s testimony is available here.

A complete version of Mylan's written testimony for the Special Committee on Aging's is here.

More here and here.

At a recent European Commission hearing on Future Patent Policy In Europe, stakeholders' views on the patent system in Europe were examined. Participants called for more centralization in terms of a single patent system or a common litigation system but there was plenty of dissent.

This was the second step of the public consultation with the aim of collecting stakeholders' views on the patent system in Europe and seeking views on what measures could be taken in the near future to improve this system. The consultation had focused on three major issues: the Community patent; how the current patent system in Europe could be improved; and possible areas for harmonization.

The following items were brought up in the report:

• The European Small to Medium Enterprises (SME) community underlined the following issues: costs (where easy access to technical information must be balanced with cost of translation - English only) and licensing of patents (defensive patenting must be prevented).
• The patent attorney community, while divided by nationality in some respects, was largely united on basic principles. Some FICPI members
• underlined that the dispute resolution system should be "cost-effective" rather than inexpensive in order not to compromise quality patent searches and rigorous examination.
• German patent attorneys insisted in their collective institutional reply that there is no reason for a political debate on principles concerning patent protection in view of ethical behavior, protection of the environment, health protection, or freedom of information. According to the Institute, this also holds with regard to software and biotechnology.
• Industry (big and small), as well as other interest groups, generally support the Community Patent as a way of addressing problems of the patent system.
• A limited number of stakeholders reject the Community Patent outright and in whatever form, giving preference to the EPLA as a response to patent problems in Europe. The most radical approach was shown by the German Patent Attorneys who dismiss the EU Community Patent as proposed with the common political approach, and ask the Commission to withdraw that proposal.
• Industry on the other hand agrees that the Community Patent is the right way forward. However, stakeholders unequivocally reject the deal currently on the table - the 2003 Common Political Approach. The rejection is caused by mainly two aspects: an unsatisfactory language regime and inadequate jurisdictional arrangements.
• There are two extremes in the language regime preferences: those who unequivocally support a single language patent and those who want full translations into all official EU languages immediately upon grant.
• Both industry and patent attorneys seem to favor the Community's involvement in the European Patent Litigation Agreement (EPLA). This preference flows from the general opinion that the existing patent system based on the EPO and the EPC works well and outstanding problems relate to the lack of unitary jurisdiction.
• There is very little support for harmonization. Stakeholders are of the opinion that the patentability criteria are de facto harmonized by a number of international instruments, the most important of them being the European Patent Convention (EPC) .

See the Report here. More here.

After the Medicines Company, based in Massachusetts, missed a non-extendable deadline for filing for a patent term extension by a single day, Rep William Jenkins [TN] introduced H.R. 5120 in the U.S. House of Representatives to amend 35 U.S.C. 156, the statute governing patent term extensions based on regulatory review delay.

Known as the "Dog Ate My Homework Act", the Act would allow the Director of the United States Patent and Trademark Office (USPTO) to accept an application for an extension of the term of a patent which claims a product, a method of using a product, or a method of manufacturing a product if: (1) such application is filed no more than 5 days late; and (2) the applicant files a petition showing that the delay in filing the application was unintentional. The Act also deems such petition to be denied if no determination has been made on the petition within 30 days of filing.

The Act applies to any application for patent term extension which: (1) is pending on the date of enactment; (2) is the subject of a request for reconsideration of a denial of a patent term extension; or (3) has been denied a patent term extension in a case in which the period for seeking reconsideration of such denial has not yet expired. Currently, a patent applicant has to file no later than 60 days after the Food and Drug Administration approves the drug for commercial use and sale. There are no exceptions to that window, so patent officials rejected the application.

The Medicines Co. filed for a patent extension on its drug Angiomax (an anticoagulant that prevents clot formation during angioplasty) on Feb. 14, 2001, one day later than the application deadline. The company wants its patent to be extended 1,773 days, giving it exclusive rights to the drug until Dec. 15, 2014. This is a high-stakes game of chance as the Medicines Co. expects Angiomax to generate more than $500 million in sales in the United States by 2010. To show how much it cares, the company spent $440,000 on lobbying last year - all in the name of progress.

While some would say that "deadlines are deadlines" and it's just tough luck for those who miss them, it doesn't make sense to deny any kind of equity. It also doesn't make sense to extend the deadline for 5 days. Where did that number come from? I think the standard should be the same reviving an application that becomes abandoned because of failure to timely pay the issue fee or respond to a Patent Office deadline, that is, when the abandonment was unavoidable and unintentional. Both require a fee where the fee for unintentional is a huge fee compared with unavoidable since fault is admitted on the part of the applicant.

For both unavoidable and unintentional revival there is no time limit, but the applicant must state that the entire delay between abandonment and the filing of the revival petition was unavoidable or unintentional. For equity's sake, a terminal disclaimer would then be filed equal to the time that the application was abandoned. Why should extensions receive different treatment than other types of "oops"?

What a Diff'rence a Day Makes!

After the Supreme Court refused to hear the Federal Trade Commission v. Schering-Plough case, Senators Herb Kohl (D-WI), Patrick Leahy (D-VT), Chuck Grassley (R-IA) and Charles Schumer (D-NY) have introduced legislation to explicitly prohibit brand-name drug manufacturers from using pay-off agreements to keep cheaper generic equivalents off the market.

In 2005, two appellate court decisions overturned FTC’s long-standing position against this practice and upheld settlements that include such pay-offs. The current decision in Schering-Plough makes it very difficult (if not impossible) for parties challenging patent settlements to do so based on the terms of the settlement itself (i.e., the inclusion of a reverse payment). Plaintiffs will need to show that the generic company’s product did not infringe on a valid patent – a very difficult path to go.

The Supreme Court dismissal of the FTC’s latest appeal spurred the introduction of the "Preserve Access to Affordable Generics Act" (S. 3582) in which Section 5 of the Federal Trade Commission Act (15 U.S.C. 45) would be amended to include:

It shall be considered an unfair method of competition affecting commerce under subsection (a)(1) for a person, in connection with the sale of a drug product, to directly or indirectly be a party to any agreement resolving or settling a patent infringement claim in which (a) an ANDA filer receives anything of value; and (b) the ANDA filer agrees not to research, develop, manufacture, market, or sell the ANDA product for any period of time.

Nothing in this subsection shall prohibit a resolution or settlement of patent infringement claim in which the value paid by the NDA holder to the ANDA filer as a part of the resolution or settlement of the patent infringement claim includes no more than the right to market the ANDA product prior to the expiration of the patent that is the basis for the patent infringement claim.

A recent FTC report found that in the six months following the 2005 court decisions, there were three settlement agreements in which the generic company received compensation and agreed to a restriction on its ability to market the product. Additionally, the FTC found that at least seven settlement agreements made in 2006 included a pay-off from the brand manufacturer in exchange for a promise by the generic company to delay entry into the market. According to a study released by Pharmaceutical Care Management Association (PCMA), health plans and consumers could save $26.4 billion over the next five years by using the generic versions of 14 popular drugs that are scheduled to lose their patent protections before 2010.

But is a restraint on settlements really in anyone's best interest? Our legal system likes settlement. It even encourages it. Do we want companies to instead be forced to fight legal battles to the death?

The question comes down to whether an agreement between a pharmaceutical patent holder and a would-be generic competitor, in which the patent holder makes a substantial payment to the challenger for the purpose of delaying the challenger’s entry into the market, is an unreasonable restraint of trade. Unfortunately, things are never so simple. What really constitutes an unreasonable restraint of trade?

Generic-drug companies regularly make legal challenges to brand-name companies’ patents in the hopes of getting their generic versions on the market more quickly. They have little to lose. For the cost of a lawsuit, the generic company gets a shot at millions (perhaps billions) of dollars in revenue. The threat of a lawsuit claiming that the brand-name drug companies patent is invalid is close to being held at gunpoint since a jury may find the patent invalid and the drug company will be left twisting in the wind.

The Act as introduced does not take into account the fact that often the issues are muddy waters without a clear right or wrong answer. Patent invalidity suits often come down to a nuanced, battle of experts trying to decide what some hypothetical person skilled in the art would or would not have found obvious a decade or two ago. Having these matters put in front of a jury can feel a lot like a game of Russian roulette. Therefore, the drug company will often decide to resolve the dispute out of court, with the generic companies agreeing to give up their claims in exchange for cash settlements. The generic versions of the drugs then enter the market when the patents expire. But, the alternative would be for the companies to continue legal battles through endless appeals.

The Preserve Access to Affordable Generics Act would seem to remove incentives to settle disputes and cause more resources to be devoted to litigation.

See the text of S. 3582 here.

I have written extensively about the ethical issues that can arise during patent prosecution and litigation. This summer, I'm tackling two topics which, stated simply, are: what patent agents can and can't do, and subject matter conflicts during patent prosecution. This post relates to one issue concerning the former.

First, some definitions: nonlawyers are people who are neither patent agents, patent lawyers, or lawyers; lawyers are people who are licensed by a state, but not registered with the PTO; patent agents are not lawyers, but are registered with the PTO; and patent lawyers are both licensed with a state and registered with the PTO.

It is clear that a nonlawyer cannot provide, say, an opinion as to whether a party is likely to infringe an issued patent. At the outset, that's clearly the practice of law, and so you'd have an unauthorized practice issue. In addition, the cases suggest that only attorneys can provide such opinions in a way that reasonable reliance can take place. So, forget about nonlawyers.

Can patent agents provide opinions of counsel? It's an interesting question. The cases I've seen suggest not: that it must be from a lawyer, and best if from a patent lawyer. I find this quite interesting, though, as from a functional perspective it doesn't make a lot of sense. Here's why.

It is appropriate for a patent agent to advise a client as to whether proposed claims are patentable. That's what registration authorizes them to do, and obviously they must do this in order to competently prosecute applications.

In making a patentability determination, the patent agent obviously must rely on patent law principles concerning anticipation and nonobviousness. Anticipation, of course, is the mirror image of infringement. "That which infringes if later anticipates if earlier" is close to some quote I've read too many times. So, the patent agent is deemed qualified to advise clients on whether proposed claims are patentable.

Yet, he can't advise a client as to whether a proposed product infringes a patent, or whether an issued patent is invalid. The law seems settled, in part because the PTO only has authority to authorize patent agents to conduct activities that are reasonably related to prosecution: advising clients whether their products infringe valid patents certainly isn't necessary for prosecution, at least in the abstract.

But from a functional standpoint, this dichotomy doesn't make a whole lot of sense. Why shouldn't a client be allowed to receive and rely upon an opinion of invalidity due to nonobviousness, say, from a highly experienced patent agent? The patent agent is required, for example, to know the law of obviousness and to be able to make judgments on behalf of clients in that regard during prosecution. From the perspective of protection of clients, it doesn't make a whole lot of sense to deny them this choice.

From a legal perspective, again, though, it does, though. The short answer is that it's the unauthorized practice of law, and allowing this to happen would encourage UPL. (Indeed, if a lawyer was involved, you could have the lawyer get hit for assisting with UPL; however, obviously, UPL would not be a problem if the patent agent was assisting the lawyer to write an opinion.)

So, where we end up is this interesting odd thing: the purpose for which the advice (obvious, or not, for example) is going to be used determines whether it's appropriate to have a patent agent do it. If the purpose is patentability, it's fine; if it's invalidity, it's not.

I would love your thoughts and comments. hricik_d@mercer.edu

David Hricik
Mercer Law School

The San Francisco Business Times ran an article reiterating what patent practitioners already know. That is, the increasing backlog at the U.S. Patent & Trademark Office is bad, it's getting worse and the new set of proposals meant to reduce the waiting time will not provide relief.

The backlogs are an increasingly serious issue for biotechs. It can take patent examiners up to 15 months to begin reviewing an organic chemistry patent application. It can take more than three years to get a drug application to a patent examiner. Once a review has begun, the USPTO can take several more years to grant a patent.

As we've discussed, the new rules under consideration would allow just one follow-on to a pending application. A subsequent application would have to include an explanation as why it was not submitted previously. A second, related proposal would limit an application to 10 claims, which are statements describing the heart of the invention. The USPTO is currently reviewing comment on the proposed rules and will issue final regulations in the fall or winter.

Admittedly, almost one-third of new applications in 2004 were for follow-on applications but that's not necessarily a bad thing. Part of the reason for continuations is to allow an applicant the opportunity to carve our the proper claim scope. That is, coverage that would not be too overbroad or too narrow but just right.

Many industries besides biotech rely on obtaining adequate patent protection in a timely fashion. However, biotech companies are particularly affected by both the backlog and the proposed rule changes. And, perhaps no other industry is as dependent upon patents as is the biotechnology industry. A biotechnology company can spend hundreds of millions of dollars over more than a decade before seeing any revenue. The long development time and intensive capital needs make the early stages of development critical in terms of patent protection in order to entice investors to get involved in what is already an incredibly risky venture. Thus, a flexible patenting system that allows companies to protect the full scope of their inventions through the filing of continuations is critical.

The Biotech Industry Organization believes that the USPTO should consider a "deferred-accelerated" system since not all applications require immediate examination. Under such a deferred examination system, an applicant may file an application with little cost and then decide whether to request examination at a later date by paying an examination fee. The marketplace would then dictate when -- or if -- the application would get examined. BIO also recommended changes in the PTO examiner production system, increased examiner education, and improved cooperation with other patent offices.

The bottom line is that the proposed rules will NOT achieve the stated goals of reducing patent application pendency nor will it expedite public notice as the USPTO claims. The practice would, instead, increase the cost of obtaining patent protection as well as increase uncertainty as to whether or not proper claim scope may be obtained.

Read BIO’s comments here.

Rep. Jenkins introduced a bill, H.R. 5120, to amend title 35, United States Code, to change the provisions for patent term extensions for drup patents. Specifically, the bill would amend 35 USC 156, which extends the term for a patent where the product has been subject to a regulatory review period before its commercial marketing or use (i.e., pharmaceuticals), to allow for an unintentional delay in filing for the extension.

The Drug Price Competition and Patent Term Restoration Act of 1984 amended 35 USC § 156 to provide for the extension of the normal 20 years from filing patent term of a product, use or process patent if the product which is the subject of the patent is required by Federal law to be approved before it is commercially marketed [PL No 98-417, (1984)]. The Act was passed in recognition of the fact that both the U.S. Food and Drug Administration (FDA) and the US Department of Agriculture (USDA) conduct extensive reviews of human and animal drug applications to determine the safety and efficacy of the drugs or products, including the submission of several years of test data prior to approving a drug for sale and use in the US.

Prior to the enactment of the Drug Price-Patent Term Act, surveys demonstrated that from 1966 to 1979, the effective life of a patent which required regulatory review fell from 13.6 years to 9.5 years. Later studies indicate that the mean effective life fell further until less than one-half of the original patent term remained after regulatory approval. The Act amended 35 USC § 156 with the underlying purpose to recover the time lost to the regulatory approval process.

HR 5120 would now provide for acceptance of an extension request that is filed late were the delay is unintentional. Under this provision:

...the Director may accept an application under this section that is filed not later than 5 days after the expiration of the 60-day period provided in subsection (d)(1) if the applicant files a petition showing, to the satisfaction of the Director, that the delay in filing the application was unintentional. Such petition must be filed with the application in the case of an application filed on or after the date of the enactment of this subsection and must be filed not later than 5 days after such date of enactment in the case of an application which, on such date of enactment, is pending, is the subject of a request for reconsideration of a denial of a patent term extension under this section, or has been denied a patent term extension under this section in a case in which the period for seeking reconsideration of such denial has not yet expired. The Director shall make a determination on a petition under this subsection not later than 30 days after the date on which the petition is received. If no determination has been made on the petition within that 30-day period, the petition shall be deemed to be denied.

The amendments made by this section shall take effect on the date of the enactment of this Act, and shall apply to any application for patent term extension under section 156 of title 35, United States Code, which (1) is filed on or after the date of the enactment of this Act; or (2) on such date of enactment (A) is pending; (B) is the subject of a request for reconsideration of a denial of a patent term extension under section 156; or (C) has been denied a patent term extension under such section 156 in a case in which the period for seeking reconsideration of such denial has not yet expired.

In case you haven't guessed, patent term extensions or restorations are critical to the research-based pharmaceutical industry. With drugs, a missed filing for an extension of time can mean the loss of hundreds of millions of dollars in revenue.

Promote the Progress asks: Makes you wonder who missed a filing....

The Federal Trade Commission (FTC) is considering conducting a study to analyze the use and likely short- and long-run competitive effects of authorized generic drugs in the prescription drug marketplace. An authorized generic is chemically identical to a particular brand-name drug, but the brand-name manufacturer authorizes it to be marketed in a generic version.

In the United States, the Food and Drug Administration (FDA) must approve the marketing of any pharmaceutical drug, whether brand-name or generic. The Hatch-Waxman Act establishes the regulatory framework under which the FDA may approve a generic drug to be marketed. Typically, a brand-name drug obtains FDA approval through a New Drug Application (NDA), and a generic drug manufacturer obtains FDA approval through an Abbreviated New Drug Application (ANDA) in which it may be allowed to rely on the clinical data first submitted by the brand-name drug manufacturer.

To encourage generic entry as soon as is warranted, the Hatch-Waxman Act allows generic drug manufacturers, in certain circumstances, to market a generic drug prior to the expiration of claimed patent protection for the corresponding brand-name drug. To be permitted to do so, a generic drug manufacturer must first submit a paragraph IV ANDA in which it certifies that (a) its generic drug will not infringe patents listed in the FDA’s Orange Book, as claiming the relevant brand-name drug product, and/or (b) the relevant Orange Book patents are invalid.

If the paragraph IV ANDA leads to litigation, then 30 months after the litigation was filed (or after final decision in the litigation, if earlier), the FDA may authorize the marketing of the generic drug under the ANDA application. At that point, the first-filed paragraph IV ANDA applicant becomes entitled to a 180-day marketing exclusivity period, during which the FDA cannot approve any other, later-filed paragraph IV ANDA for a generic drug corresponding to the same brand-name drug product. This protects the first FDA-approved paragraph IV ANDA applicant from competition with other generic ANDA applicants during this time.

The 180-day marketing exclusivity period does not preclude competition from NDA-approved “authorized generics,” however. An authorized generic is chemically identical to a particular brand-name drug, which the brand-name manufacturer authorizes to be marketed in a generic version under the NDA-approval that the FDA granted for the brand-name drug. The brand-name manufacturer either sells the authorized generic itself through a subsidiary or licenses a generic firm to sell the authorized generic.

In recent years and with increasing frequency, brand-name drug manufacturers have begun to market authorized generic drugs at precisely the same time that a paragraph IV generic is beginning its period of 180-day marketing exclusivity. In the short run, the entry of an authorized generic drug may benefit consumers by creating additional competition that lowers generic prices further than if only the paragraph IV generic were marketed. Many generic manufacturers assert, however, that in the long run, consumers will be harmed because an expectation of competition from authorized generics will significantly decrease the incentives of generic manufacturers to pursue entry prior to patent expiration.

The FTC now proposes to undertake a study to examine both the likely short-term competitive effects of authorized generic drug entry and, to the extent possible, the likely long-term impact of entry by authorized generic drugs on competition by generic manufacturers.

Comments on the FTC’s "Authorized Generic Drug Study" will be accepted until June 5, 2006.

See additional information in the Federal Register Notice.

The U.S. Court of Appeals for the DC Circuit, in Teva Pharmaceuticals v. FDA and Apotex (05-5401 & 05-5460), held that in a suit challenging agency action, the courts are not to choose between competing meanings of an ambiguous statute when the agency hasn’t weighed in first.

The Food, Drug, and Cosmetic Act grants a 180-day exclusive marketing period to the first generic drug manufacturer to file an Abbreviated New Drug Application (“ANDA”) that contains a challenge to the patents protecting a brand name drug. This exclusivity period begins to run either upon “notice [to the FDA] of the first commercial marketing of the drug” or on “the date of a decision of a court . . . holding the patent [to the branded drug] to be invalid or not infringed, whichever is earlier.” [Note: Congress eliminated the court decision trigger in 2003 but the application was filed before the amendment entered into force.]

Bristol-Myers Squibb Co. manufactures and sells Pravachol (pravastatin sodium), a cholesterol-reducing medication and owns or holds licenses to four patents covering Pravachol. The patent on the molecule itself (the “product patent”) expires on April 20, 2006. Teva Pharmaceuticals filed the first application to market generic pravastatin sodium and certified that it would not market its generic version of Pravachol until after the product patent expired.

Teva challenged the remaining patents by filing a certification that they are “invalid or will not be infringed” by the generic product. This paragraph IV certification is a form of patent infringement and triggers statutory notice requirements to allow the patentholder to bring suit. But, Bristol-Myers did not sue Teva or any of the other seven generic drug manufacturers that filed applications containing the identical patent certifications.4

Apotex then sued Bristol-Myers seeking a declaratory judgment that Bristol-Myers’s three patents covering Pravachol’s formulation and method of use were invalid or not infringed by Apotex’s generic pravastatin sodium product. Bristol-Myers did not answer the complaint; it instead moved to dismiss the complaint for lack of subject matter jurisdiction.

The parties then entered stipulation and order stated that because “[Bristol-Myers] repeatedly represented and assured Apotex that, notwithstanding any disagreement on the scope or interpretation [of the disputed patents], it had no intention to bring suit against Apotex for infringement,” Apotex stipulated that its complaint be dismissed “for lack of subject matter jurisdiction.”

Apotex then asked the Food and Drug Administration to rule that Apotex’s litigation produced a “decision of a court” that triggered Teva’s exclusivity period for generic pravastatin sodium. The FDA concluded that the Apotex “stipulation and order” qualified as a “decision of a court” and that Teva’s period of exclusivity therefore began to run on the date the stipulation and order became final.

Teva challenged the FDA’s decision and the district court granted Teva’s requests for a declaration that the FDA’s conclusions were contrary to law and for injunctive relief preventing the FDA from approving any other generic pravastatin sodium application sooner than 180 days after Teva begins marketing its product. The district court concluded that the voluntary dismissal of Apotex’s declaratory judgment action did not meet the statutory definition of a “decision of a court.”

The Court of Appeals held that although the court stated that the statute could be interpreted to include dismissals of declaratory judgment actions as triggering events, it left the final decision to the FDA:

In a suit challenging agency action, “it is not for the court ‘to choose between competing meanings’” of an ambiguous statute when the agency charged with its administration has not weighed in first. PDK Labs., Inc. v. DEA, 362 F.3d 786, 798 (D.C. Cir. 2004) (quoting Alarm Indus. Commc’ns Comm. v. FCC, 131 F.3d 1066, 1072 (D.C. Cir. 1997)). When a statute is ambiguous, Congress has left a gap for the agency to fill. See Chevron USA Inc. v. Natural Res. Def. Council, 467 U.S 837, 843-44 (1984). A court’s interpretation prevails only if it “follows from the unambiguous terms of the statute and thus leaves no room for agency discretion.” Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 125 S. Ct. 2688, 2700 (2005). We therefore generally remand for an agency to make the first interpretation of an ambiguous statutory term when it has failed to do so previously.

In an Op-Ed piece in the New York Times entitled "Patently Ridiculous," the editors state that "something has gone very wrong with the United States patent system.

That's not really "new" as far as patent reform claims of this sort go but the editors do finally concede that the problem lies "not just with the short-staffed patent office, but also with the courts." The article attempts to draw blame away from patent holders themselves and to shine light on the ease with which patent holders can get an injunction to shut down a competing business. Since injunctions are such a heavy hammer, many companies settle rather than fight it out à la RIM v. NTP.

The article provokes one to contemplate the questions raised by new technological advances. It also gives a nod to the fact that not everyone is effected equally -- high-tech and pharmaceutical industries are at odds on reform since patents affect their businesses so differently. The bottom line is that an understaffed Patent and Trademark Office needs to work cooperatively with inventors to carve out their inventions' proper niche.

Congress is currently looking at draft patent reform legislation to deal with the issue of patent infringement injunctions. Companies like eBay, which have to contend with the possibility that one device might be infringing hundreds of patents, want Congress to clarify existing rules that give district court judges discretion in deciding whether to issue injunctions while patent cases make their way through the appeals process.

The pharmaceuticals industry, by contrast, wants the legislation to reflect recent federal circuit court decisions - particularly the one eBay is appealing - which say injunctions against patent infringers should be standard during appeal except in extraordinary circumstances. Pharmaceutical and biotech companies tend to face fewer numbers of patents in developing a particular product and so immediate injunctions are more critical.

Meanwhile, in the eBay v. MercExchange case, the Court of Appeals for the Federal Circuit felt that eBay should be subject to an injunction in holding that a permanent injunction must follow all judgments of infringement unless such a decision would "frustrate an important public need," such as protecting public health. Note that RIM made this argument against an injunction on testimonials that its Blackberry e-mail device, used by doctors and emergency workers, fit that description.

When deciding whether to grant injunctions, the other federal appellate courts use a four-part test where the courts consider whether the plaintiff will be irreparably harmed if an injunction is not issued, whether the plaintiff has some other adequate legal remedy, whether an injunction is in the public interest, and whether an injunction (or lack of one) would pose an undue hardship to the plaintiff or defendant. A much less hardline approach.

Counterbalancing all this is the importance of an injunction for the "little guy" in all this. The power of an injunction can be the only weapon that a small start-up has to combat it's larger foes seeking to cruch it out of the marketplace using its vast cash resources. It's all a matter of balance and, hopefully, the Supreme Court will provide some guidance. The U.S. Supreme Court has agreed to review the ruling in the eBay v. MercExchange case will begin taking up the general merits of that case on March 29, when it is scheduled to hear oral arguments.

The U.S. government filed its own brief in the case arguing that the court handling eBay's appeal did not stick to a "general rule" but instead used ample "discretion" in issuing an injunction. The government said no special exemptions should be made in cases involving companies like MercExchange that do not make products using their patents but instead simply licence them. A 1908 Supreme Court decision established that injunctions can occur even if the patent holder itself has "'unreasonably' failed to practice its own invention."

For a round-up of amici briefs in the eBay v. MercExchange case, see Dennis Crouch's Review: EBay v. MercExchange Amici Briefs, Patently-O, March 13, 2006.

[This is the tenth and final post in a series of postings regarding the various proposals in the Patent Act of 2005.]

Post Grant Opposition Proceeding in the USPTO

On the third Tuesday of the month, if the moon is full, you may file an opposition to a patent grant. The actual provision is not quite so convoluted, thanks to a recent amendment, but there are definitely some timing issues that must be given their due! The Act proposes that a person may request that the grant or reissue of a patent be reconsidered by the USPTO by identifying the claims that are considered unpatentable and citing support thereof. The request must be made within 9 months of the grant of patent unless the patentee agrees otherwise (not too likely!). (See, Section 323 of the Act). The time limit parallels European patent practice and goes toward giving the patent holder some certainty, after the proscribed period, that their patent is no longer in danger of this type of challenge.

Aside from re-examination and interference proceedings, a third party’s ability, to challenge a patent grant, without resorting to litigation, is limited. The proposed procedure would allow the use of depositions and discovery to fully explore the validity of an issued patent; (See, Section 328 of the Act.) but, the failure of the non-patentee to prove their case carries estoppel issues similar to those under reexamination. (See, Section 336 of the Act.) Basically, the requestor is trading off his right to a jury trial on the factual issues of the case.

The Professional Inventors Alliance has expressed concern that this procedure might be misused to shift additional costs onto the patentee. They have also criticized the provision for its standard of proof, (See, Section 332 of the Act, which sets the standard at preponderance of the evidence rather than the clear and convincing standard offered in court which gives the patent holder an edge on the finding of validity.)ability to hide the real party in interest, (See, Section 322(a-b) of the Act: [T]he opposition shall proceed in the name of the real party in interest. [I]f requested by the opposer, the identity of a real party in interest shall be kept separate from the file of the opposition and made available only to Government agencies upon written request, or to any person upon a showing of good cause.) and the availability of the procedure to accused infringers after a patent lawsuit has been filed.

While their concerns are valid, it is clear that some alternative to the extreme costs of litigation is in order. The average cost of patent litigation ranges between $500,000 and $4,000,000 per party. (Statement of Michael K. Kirk, Executive Director American Intellectual Property Law Association, before the Subcommittee on Courts, the Internet, and Intellectual Property Committee of the Judiciary U.S. House of Representatives on the Patent Quality Improvement: Post-Grant Opposition (June 24, 2004)).

In addition, if it is only possible to test a patent's validity through litigation if the patentee brings an infringement action against a competitor or provides the competitor with standing to bring a declaratory judgment action based on threats by the patentee .... a competitor cannot challenge a patent in litigation before the competitor incurs the costs and risks of developing and marketing a product. (Statement of Michael K. Kirk, Executive Director American Intellectual Property Law Association, before the Subcommittee on Courts, the Internet, and Intellectual Property Committee of the Judiciary U.S. House of Representatives on the Patent Quality Improvement: Post-Grant Opposition (June 24, 2004)). This means of limiting the inquiry to just the validity of the patent offers a compromise that will likely benefit everyone involved.

Submissions by Third Parties

35 U.S.C. §122(c) currently prohibits any protest or other form of pre-issuance opposition after publication without consent of the applicant although MPEP 1134.01 provides for a limited two-month window, following publication of a pending application, under which submissions may be made without comment. This proposal expands the window for submitting prior art against pending applications to six months after publication. It would also allow the third party to make arguments regarding such prior art in relation to the pending application. Yes, it does put a burden on non-patentees to keep an eye on their competitors’ patent doings but, if used, gives them a fairly cheap way to knock out rival patents and strengthen the patent system. It also benefits the patentee because they gain early knowledge of (and an opportunity to argue against) probative prior art. If the patent issues in spite of the submission, the patent holder has the security of knowing they have already survived a challenge to their patent from a competitor.

Venue

The original wording for this section raised a hue and cry because it clearly shifted the balance of power toward the defendant in litigation. It would only allow a lawsuit to commence in the district where the defendant resides or is located. Resource limited companies may be forced to file lawsuits far outside of their normal jurisdiction where they may find it difficult/expensive to assert their patent rights. (Robert B. Chess, on behalf of the Biotechnology Industry Organization, before the United States House of Representatives Committee on the Judiciary Subcommittee on Courts, the Internet, and Intellectual Property Hearing on: An Amendment in the Nature of a Substitute to H.R. 2795 the Patent Reform Act of 2005 (September 15, 2005)).

The amendment provides a facially more even-handed approach to venue. It directs the court to grant a motion for transfer to a more appropriate venue where a party to the action has substantial evidence or witnesses if the action was not brought in a district in which the patentee resides or maintains its principal place of business and, at the time the action was brought, neither the patentee nor the infringer had substantial evidence or witnesses in that judicial district.

Did you actually read all of that? The upshot is that most of the evidence regarding infringement will probably be in the judicial district associated with the defendant so the amendment is simply a more loquacious way of assigning venue to the defendant. Lucky for the patentee, there is always the Court of Appeals for the Federal Circuit.

Previous: Part 9. Prior User Rights.

Today's post comes from Guest Barista Ria Schalnat, a registered patent attorney in Frost Brown Todd's Cincinnati office.

[This is the ninth in a series of postings regarding the various proposals in the Patent Act of 2005.]

Prior User Rights

The proposed legislation expands the prior user rights defense. Currently, 35 U.S.C. 273(b) provides that it shall be a defense to infringement if the accused, acting in good faith, had actually reduced the subject matter of the patent being asserted to practice at least 1 year before the effective filing date of that patent AND commercially used the subject matter of the patent before the effective filing date of the patent - the sale or other disposition of a useful end product produced by a patented method qualifies as a commercial use. The proposed bill would expand this by striking the requirement that the infringement involve a "useful end product".

This change would have the effect of extending the defense to methods of doing business. It also enhances the safe harbor for non-patentees in that they only have to beat the filing date of the patent application, through commercial use, rather than that date plus one year to qualify for the defense. The benefit of this provision is clearly directed toward the non-patentee but seems reasonable in our ultra-competitive country as it goes to the balance between trade secret protection versus patent protection.

Previous: Part 8. Inter Partes Reexamination.
Next Up: Part 10. Post Grant Oppositions, etc.

Today's post comes from Guest Barista Ria Schalnat, a registered patent attorney in Frost Brown Todd's Cincinnati office.

[This is the eighth in a series of postings regarding the various proposals in the Patent Act of 2005.]

Inter Partes Reexamination

The American Inventor's Protection Act (The American Inventors Protection Act was enacted November 29, 1999, as Public Law 106-113 (AIPA) introduced the concept of inter partes reexamination prospectively (post-1999). (35 U.S.C. 314). This proposal would expand the availability of this procedure to all patents. It favors both the patentee and the non-patentee in different respects.

This form of reexamination is intended to be an alternative/improvement to the pre-existing ex parte reexamination. Inter partes reexamination may be requested by any third party and they are permitted to present prior art (comprising prior patents and printed publications) for review by a patent examiner. The requestor may also file comments on the patentee's response to the prior art presented.

BUT, if the requestor fails, they have sealed their own coffin. The requestor is estopped from challenging any fact, in court, that was established during the inter partes reexamination procedure, unless that fact is later found to be erroneous based on information that was unavailable at the time of the inter partes reexamination.

Inter partes reexamination may lessen the volume of patent litigation but it is unlikely that this method will be utilized by potential defendants unless they have an airtight argument. When such arguments exist, however, this proposal offers a significantly less expensive alternative to infringement.

Previous: Part 7. Continuation Applications.
Next Up: Part 9. Prior User Rights.

Today's post comes from Guest Barista Ria Schalnat, a registered patent attorney in Frost Brown Todd's Cincinnati office.

[This is the seventh in a series of postings regarding the various proposals in the Patent Act of 2005.]

Continuation Applications

Ah, the ghost of Jerome Lemelson lives and continues to rattle his chains. (Even though his patents were adjudged invalid in Symbol Technologies Inc. et al. v. Lemelson Medical, Education & Research Foundation LP et al., No. 04-1451, 2005 WL 2173572 (Fed. Cir. Sept. 9, 2005)). Lemelson was a prolific inventor and obtained more than 500 patents in his lifetime. He is famous for the patents covering the use of bar code readers. In patent circles, however, he is even more famous for his method of submarine patenting. Lemelson kept patent applications alive in the U.S. Patent and Trademark Office for years, through a multitude of continuation applications, and then secured patent grants and attacked infringers for technology disclosed within the applications after widespread commercial use of the technologies had evolved.

Congress addressed this practice when they changed the patent term from seventeen (17) years from the date of issue to twenty (20) years from the date of filing. These changes arise from the GATT Uruguay Round implementing legislation (P.L. 103-465). The provisions relating to patent term went into effect on June 8, 1995. But in rapidly moving industries, particularly software, even twenty years has generated outcry that the monopoly granted by law is overly stifling to innovation.

So the proposed legislation allows the USPTO to issue regulations limiting continuation applications to address supposed continuing abuses. This is a dangerous idea that seems to be mainly directed at reducing workload in the patent office. (See also, the proposed Changes to Practice for the Examination of Claims in Patent Applications (DEPARTMENT OF COMMERCE Patent and Trademark Office, 37 CFR Part 1 [Docket No.: 2005P067] RIN 0651AB94) which were filed on December 30, 2005.) Intervening rights allow competitors to practice material that is claimed in a reissued or reexamined patent application.

This protects investment and limits the effect of submarine patents even within the twenty year patent term. (35 U.S.C. 252). Otherwise, inventors should be able to pursue patents on anything in an active application that meets the requirements of patentability.

Previous: Part 6. Injunctions.
Next Up: Part 8. Inter Partes Reexamination.

Today's post comes from Guest Barista Ria Schalnat, a registered patent attorney in Frost Brown Todd's Cincinnati office.

[This is the sixth in a series of postings regarding the various proposals in the Patent Act of 2005.]

Injunctions

And we're back to the original law in this match of patent reform ping-pong. (35 U.S.C. § 283 mandates that the courts may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent on such terms as the court deems reasonable). The pro-defendant proposal, which was removed in the latest round of amendments, would have required a court to consider the fairness of an injunction in light of all the facts and the relevant interest of the parties by codifying that "an injunction may be stayed pending appeal upon … showing that the stay would not result in irreparable harm to the patent owner." It sought to overturn a recent ruling by the Court of Appeals for the Federal Circuit (CAFC). (MercExchange, L.L.C. v. eBay, Inc. et al., (CAFC - Docket No. 03-1600, March 16, 2005)).

In that case, MercExchange challenged the district court's refusal to enter an injunction against the defendant. Courts may decline to enter an injunction when such a refusal may serve the public interest, such as the need to use an invention to protect the public health. But the CAFC did not feel that sufficient public interest was served by the "growing concern over the issuance of business method patents." Neither was the CAFC persuaded by the District Court's fear that an injunction would result in continuing disputes over whether the defendants' subsequent actions would also violate MercExchange's rights - that is, create more work for them.

Injunctions are further not reserved for patentees who intend to practice their patents, as opposed to those who choose to license (not so affectionately called patent trolls). The statutory right to exclude is equally available to both groups. The CAFC ruled that courts should issue permanent injunctions against patent infringement absent exceptional circumstances.

Stay tuned, the Supreme Court may beat the legislature to a decision on this issue as they just granted cert for this case. (MercExchange, L.L.C. v. eBay, Inc. et al., (CAFC - Docket No. 03-1600, March 16, 2005), cert granted, (No. 05-130), November 28, 2005.)

Previous: Part 5. Apportionment of Damages for Infringement in the Case of a Combination.
Next Up: Part 7. Continuation Applications.

Today's post comes from Guest Barista Ria Schalnat, a registered patent attorney in Frost Brown Todd's Cincinnati office.

[This is the fifth in a series of postings regarding the various proposals in the Patent Act of 2005.]

Apportionment of Damages for Infringement in the Case of a Combination

If 35 U.S.C. 271(f) remains unchanged, there may be some relief offered to defendants by the proposal that damages should be assessed according to the inventive contribution of the patent rather than the product taken as a whole. In determining a reasonable royalty, the court shall consider the portion of the realizable profit or value that should be credited to the inventive contributions arising from the claimed invention as distinguished from contributions arising from features, manufacturing processes or improvements added by the infringer and from the business risks the infringer undertook in commercialization.

Emery Simon, giving testimony for the Business Software Alliance, (Before the United States House of Representatives Committee on the Judiciary Subcommittee on Courts, the Internet, and Intellectual Property Hearing on: An Amendment in the Nature of a Substitute to H.R. 2795 the "Patent Reform Act of 2005" (September 15, 2005)) objects to codifying a modified version of factor #13 of the Georgia Pacific case.

That case actually directs the court to look at the contribution from the "claimed invention" instead of the "inventive contribution." Georgia-Pacific Corp. v. United States Plywood Corp., 318 F.Supp 1116, 1120 (SDNY 1970), modified and aff'd sub nom., Georgia-Pacific Corp. v. United States Plywood-Champion Papers, 446 F2d 295 (2d Cir. 1971), cert. denied, 404 US 870 (1971). Mr. Simon is concerned that "the damage claim often seeks some portion of the product as a whole, … such as a computer, rather than being limited to only the value of the infringing feature. This often leads to unduly inflated verdicts or settlement demands, and is unworkable when thousands of patents can apply to a single product." (Before the United States House of Representatives Committee on the Judiciary Subcommittee on Courts, the Internet, and Intellectual Property Hearing on: An Amendment in the Nature of a Substitute to H.R. 2795 the "Patent Reform Act of 2005" (September 15, 2005).

But Philip S. Johnson, on behalf of the Pharmaceutical Research and Manufacturers of America (PhRMA), (Before the United States House of Representatives Committee on the Judiciary Subcommittee on Courts, the Internet, and Intellectual Property Hearing on: An Amendment in the Nature of a Substitute to H.R. 2795 the "Patent Reform Act of 2005" (September 15, 2005)) offers the counterpoint that this kind of analysis would undermine the reasonable royalty determination because "A patented invention should not be dissected into its subparts … and then evaluated piecemeal … the true value of the invention will likely be lost."

The problem is that a reasonable royalty is a difficult thing to determine no matter how many factors you throw into the framework. Even if an inventive contribution is small, it may be the lynchpin which sells the entire product. On the other hand, the inventive contribution may be the thinnest differentiation against the known prior art.

The proposed legislation, however, overlooks some additional "wiggle" factors, cited in Georgia-Pacific, to consider in a damages assessment, including the opinion testimony of qualified experts and the nature of the patented invention, its character in the commercial embodiment owned and produced by the licensor, and the benefits to those who used it.

It may be better to rely on these as the means for assessing the inventive contribution rather than codifying a rigid formula.

Previous: Part 4. Willful Infringement and Repeal of §271(f) for Software.
Next Up: Part 6. Injunctions.

Today's post comes from Guest Barista Ria Schalnat, a registered patent attorney in Frost Brown Todd's Cincinnati office.

[This is the fourth in a series of postings regarding the various proposals in the Patent Act of 2005.]

Willful Infringement

The phrase treble damages strikes terror into the heart of all non-patentees. It further promotes a balancing act between maintaining an ostrich mentality and risking that curiosity will kill the cat. An individual who is about to invest in a new technology must choose between allocating resources to determine what is out there or putting on their darkest sunglasses for fear that they may come across a patent that may potentially cover what they are doing. Note that courts/juries decide whether or not a patent actually covers a given technology. A well-drafted freedom-to-practice opinion from a licensed patent attorney may protect one from a willful infringement claim but it will not necessarily protect one from a finding of infringement even when there is a good argument to the contrary.

One area that is still being considered is whether a court or a jury will be responsible for the willfulness determination. The changes proposed here seek to make sure that the infringer willfully infringed rather than fictionally assuming that they infringed because they (or more likely their attorneys) may have glanced at the patent at some point. The proposal would codify that a court may find an infringer guilty of willful infringementif the patentee presents clear and convincing evidence meaning that the fact-finder must be persuaded by the evidence that it is highly probable that the claim or affirmative defense is true - that:

1. the infringer received written notice from the patentee either alleging specific acts of infringement AND the infringer, after a reasonableopportunity to investigate, infringes anyway;
2. the infringer received written notice from the patentee educating the infringer with the specific claims of his patent and identifying the product/process which he believes infringes those claims AND the infringer, after a reasonable opportunity to investigate, infringes anyway;
3. the infringer intentionally copied the patented invention with knowledge that it was patented;
4. after being found guilty of infringement, the infringer CONTINUES to infringe;
5. after being found guilty of infringement, the infringer is, again, found guilty of infringement of the same patent for behavior that is not substantially different from the original finding of infringement.

A good faith belief that the patent was invalid or unenforceable, based upon advice from a licensed patent attorney, may serve as a defense to willful infringement.

These proposed changes are good for the progress of the arts and sciences because they allow individuals to make a reasonable assessment a technology area and then make an educated decision about whether or not to proceed without being crippled with fear from the specter of increased damages.

Repeal of §271(f) for Software

Section 271(f) reads:

(1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial non-infringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

Oh boy, is this a complicated one! Here’s the deal. United States Patent law allows the patentee to exclude others from making, using, selling, and exporting the patented invention. But, once upon a time, some clever people figured out that they could export the pieces that make up the patented invention (or a major component thereof) without running afoul of the patent holders exclusion rights (since exporting components was not part of the exclusionary rights granted by the law). They would assemble the patented invention abroad, outside of the jurisdiction of U.S. law, and then sell it abroad.

So, around 1984, Congress put a stop to this kind of thing by allowing patent holders to tag those clever people as infringers. The patent holders could then get damages on both the domestic and foreign sales of the finished product.

There was some doubt as to whether this would apply to software but the Court of Appeals for the Federal Circuit recently held (Eolas Techs. v. Microsoft Corp., 399 F.3d 1325, 1339 (Fed. Cir. 2005)) that these damages are not limited to physical machines. This proposal seeks to overturn that ruling by requiring that 35 U.S.C. 271(f) only apply to tangible items.

This is good for software developers who partially develop in the United States and then sell abroad. If the statute remains unchanged, it creates a potent argument for moving all development of software outside of the United States.

Previous: Part 3. Duty of Candor in Front of the USPTO.
Next Up: Part 5. Apportionment of Damages for Infringement.

Today's post comes from Guest Barista Ria Schalnat, a registered patent attorney in Frost Brown Todd's Cincinnati office.

[This is the third in a series of postings regarding the various proposals in the Patent Act of 2005.]

Duty of Candor in Front of the USPTO

The Code of Federal Regulations mandates that a patent is affected with a public interest and that this interest is best served when the USPTO is aware of and evaluates the teachings of all information material to patentability. Therefore, each individualassociated with the filing and prosecution of a patent application (including, but not limited to, the inventors and their attorneys) has a duty to disclose to the USPTO all information material to patentability. The penalty for failing to disclose a material reference is severe. No patent will be granted on an application where the duty of disclosure was violated through bad faith or intentional misconduct. Your attorney may also be subject to disciplinary proceedings. (Always a bad thing from our point of view!)

The proposed legislation is pro-patentee. Unless the withheld reference would result in a patent being unenforceable, then the patent remains valid. This should lessen the fear which results in patent prosecutors preparing kitchen sink disclosures which include lists of every patent they have ever laid eyes upon that might be deemed as possibly relevant to the application at hand. The whole process supports the legal fiction that the Patent Examiner has reviewed all the references cited in the disclosure and determined whether or not they affect patentability. This presumption then carries a higher burden to overturn during litigation.

But who really thinks that the Patent Examiners actually have time to review all those references and still get home before it is time to collect Social Security? Tailoring this duty will allow prosecutors the freedom to truly list those references that are actually relevant to the patent thus resulting in better communication between them and the USPTO and, hopefully, better examinations. If there is a downside to this proposal, it's certainly not apparent.

Previous: Part 2. Assignee Filing and Best Mode.
Next Up: Part 4. Willful Infringement and Repeal of §271(f) for Software.

Today's post comes from Guest Barista Ria Schalnat, a registered patent attorney in Frost Brown Todd's Cincinnati office.

[This is the second in a series of postings regarding the various proposals in the Patent Act of 2005.]

Assignee Filing

Currently, a patent application can only be filed in the United States in the name of the inventors. The Patent Act of 2005 would amend the law to allow the assignee of the invention to file as well. This proposal, one of the few non-controversial provisions of the Act, is clearly pro-business: Nobody seems to dispute the legality of filing a patent application in the corporations name rather than the inventors’ names. As far as it goes, this will reduce the time spent chasing down signatures from the various inventors. It will also reduce those pesky Missing Parts notices and the penalty fees associated therewith.

Best Mode Repeal and Publication of Applications after Eighteen (18) Months

Currently, a patent application requires a tangled WEB (Written description, Enablement, and Best mode). It is this disclosure of the invention which is the quid pro quo for the limited exclusivity provided by the patent. (The best mode requirement was codified around 1870 so it was not part of the original quid pro quo designed by the Founding Fathers).

This pro-patentee proposal seeks to remove the best mode requirement. Proponents of this change state that this will have the effect of eliminating a subjective element in patent litigation, thereby reducing litigation costs, and increasing the predictability of litigation. Others argue that this will allow patent holders to maintain trade secrets in addition to obtaining patent protection. The proposal is also directed toward greater international harmonization since few other countries require this type of disclosure.

Interestingly enough, the same groups against this change are also arguing against the publication of all patent applications after eighteen (18) months. But, when taken together, both of these provisions actually complement each other. Yes, one loses the possibility of trade secret protection after eighteen (18) months but they retain the ability to protect some trade secrets by not having to disclose their best mode anymore. Furthermore, publication of all patent applications will increase the availability of prior art to allow potential patent applicants more data from which to determine whether their current project may or may not be patentable.

Previous: Part 1. First-Inventor-to-File.
Next Up: Part 3. Duty of Candor in Front of the USPTO.

Today's post comes from Guest Barista Ria Schalnat, a registered patent attorney in Frost Brown Todd's Cincinnati office.

The lines have been drawn in the sand regarding the Patent Reform Act of 2005 (HR 2795). Most recently, testimony was given (Legislative Hearing on "The Amendment in the Nature of a Substitute to H.R. 2795, the 'Patent Act of 2005' " (September 15, 2005) before the Subcommittee on Courts, the Internet, and Intellectual Property representing widely divergent interests including, among others, the software industry, pharmaceutical companies, biotech start-ups, and independent inventors.

By and large, the provisions are directed toward three issues existing in patent law today: 1) patent quality; 2) international harmonization; and 3) unwarranted or abusive patent litigation. (Senator Orrin Hatch: Remarks to Generic Pharmaceutical Association (Sept. 20, 2005)). Some of the provisions benefit patent holders while others benefit those defending themselves from patent infringement lawsuits.

This series will include postings regarding the various proposals in the Patent Act of 2005 including the 1) First-Inventor-to-File; 2) Assignee Filing; 3) Best Mode Requirement Repeal & Publication of Applications after 18 Months; 4) Duty of Candor in Front of the USPTO; 5) Willful Infringement; 6) Repeal of §271(f) for Software; 7) Apportionment of Damages for Infringement in the Case of a Combination; 8) Injunctions; 9) Continuation Applications; 10) Inter Partes Reexamination; 11) Prior User Rights; 12) Post-Grant Opposition Proceeding in the USPTO; 13)Submissions by Third Parties; and 14) Venue.

Since the Patent Act of 2005 was not [a] front burner issue (Senator Orrin Hatch: Remarks to Generic Pharmaceutical Association (Sept. 20, 2005)) as the first session of the 109th Congress came to an end this fall, there is plenty of time to contact your representatives and let them know what you think of these provisions.

First-Inventor-to-File

The United States is currently a first-to-invent system but this legislation would change it to a first-to-file system. This proposal serves Senator Orrin Hatch's objective of international harmonization. If passed, the legislation would align the United States with the rest of the patent world by granting a patent to the first person to seal an application in an Express Mail envelope and have it stamped by a U.S. postal worker.

The current system allows a later filer to prove to the USPTO that they actually invented their claimed subject matter before the earlier filer. If they succeed, the later filer may receive the patent grant.

This change has those representing the independent inventors howling that this is clearly a pro-business stab into the heart and soul of United States patent law. No longer will the solitary inventor, toiling away in his garage lab by candlelight receive the recognition he so richly deserves! They fear that well-heeled businesses will too easily nab patent rights away from the true inventor. (35 U.S.C. 102(f) actually prevents the awarding of a patent to a quick filer that did not invent the subject matter so don't throw away those lab notebooks yet!) Their fears have served as a rallying point to amass support to defeat similar proposals in the past.

This rhetoric clouds the issue but there is an easy solution to their fears: the provisional patent application. For a nominal fee, this trick buys an inventor a place in line and an extra year to fully develop their patent application. No claims are required at this point - only a written, enabling description of the invention and the best mode known of practicing the invention (as of the provisional filing). (35 U.S.C. Section 112).

Many inventors delay filing their patent applications (both independent inventors and those who work for corporations) because of the misconception that the USPTO requires a perfected, working embodiment before they can file for a patent (provisional or non-provisional). Not so! It may require years to make a marketable product out of an invention. If you can describe what your invention is, how someone else can create it, and the best way known of practicing it (even if you have never actually created the final product), then a valid provisional patent application may be submitted. As inventors make further developments, additional provisional applications may be filed (up to the one year time limit).

The proposed legislation is not really against the independent inventor. (Besides, only 15-20% of the claims that an earlier inventor, who did not file their patent application first, should receive a patent succeed.) Mostly, it is aimed at encouraging early filing of patent applications (which merely comports with the spirit of United States patent law to encourage early disclosure in exchange for a short-term monopoly). As far as the United States is concerned, it gives a nod to the rest of the world that the United States doesn't always insist on things being done their way.

Next Up: Part 2. Assignee Filing and Best Mode.

Today's post comes from Guest Barista Ria Schalnat, a registered patent attorney in Frost Brown Todd's Cincinnati office.

The U.S. House of Representatives approved $3.78 billion prepare for a possible avian flu epidemic, including stockpiling potential vaccines, training emergency officials and increasing international surveillance. At the last minute, an unrelated provision (called the Public Readiness and Emergency Preparedness Act) to protect vaccine, drug and medical device makers against lawsuits in a public health or bioterror emergency. The avian flu funding was attached to an unrelated FY 2006 Defense appropriations bill (H.R. 2863 - H. Rept. 109-359), and passed by the House by a vote of 308-106.

Under the provisions of the bill, drug companies are given complete immunity from civil liability for all aspects of the development and production of drugs, vaccines or devices specified by the government. There is no limitation in scope to pandemic flu or even to major public health hazards. Instead, the immunity can apply to just about any product directed at an "epidemic" and includes any product that mitigates the side effects of a drug used to counteract an epidemic. So, in theory, if a medicine produces high blood pressure or pain, then any blood pressure or pain medication could also be covered.

Consumer and health groups opposed the vaccine liability provisions, which were sought by pharmaceuticals, saying it would protect companies from "gross negligence." Some said the measure could make medical personnel and other emergency workers reluctant to get vaccinated if there was a chance they could suffer negative reactions and not get compensated.

The current measure to shield drug manufacturers from lawsuits is an effort to encourage them to develop new vaccines. But, the bill would make it very difficult for people harmed by vaccines distributed during a national health emergency to pursue legal action against the manufacturer. An earlier bill by Sen. Richard Burr, would also establish a Biomedical Advanced Research and Development Agency (BARDA) that critics say would be exempted from public and congressional scrutiny.

Here, the liability shield proposed can be granted to any product used to prevent or treat an epidemic or a pandemic, and the Secretary of Health and Human Services decides what that means. It also provided a compensation program without any of funding. The legislation puts in place a compensation system modeled after what Congress approved for those who experience harmful side effects from the smallpox vaccine. Under the program, pandemic flu vaccine recipients or their families could apply for lost income, medical expenses and death benefits but the legislation appropriates no money for the compensation fund.

The possibility of an avian flu epidemic, as well as the use of biological weapons, has spurred interest in stepping up production of new vaccines. Proponents argue that big drugmakers would never take much interest in vaccines until they were given strong protections against lawsuits. Here, the bill requires plaintiffs to prove "willful misconduct" by drugmakers in order to seek redress for harm. That's a higher standard than negligence, which is the failure to exercise reasonable care.

Just what constitutes "willful misconduct"? The definition of "willful misconduct" depends in some measure on which court is deciding the issue but some common factors that courts will consider are: (1) knowledge that an action will probably result in injury or damage, (2) reckless disregard of the consequences of an action, or (3) deliberately failing to discharge a duty related to safety. Courts may also consider other factors.

Willful misconduct is the intentional doing of an act which one has a duty to refrain from doing or the intentional failure to do an act which one has the duty to do when he or she has actual knowledge of the peril that will be created and intentionally fails to avert injury. On the other hand, wanton misconduct is the intentional doing of an act which one has a duty to refrain from doing or the intentional failure to do an act which one has a duty to do, in reckless disregard of the consequences and under such surrounding circumstances and conditions that a reasonable person would know, or should know, that such conduct would, in a high degree of probability, result in substantial harm to another.

[update] The Senate passed the bill 93-0 and it was sent to the President on December 28, 2005.

The World Trade Organization (WTO) members approved measures to make it easier for developing countries to get cheaper generic versions of medicines for communicable diseases like AIDS. Changes to the WTO's intellectual property agreement would make permanent a waiver currently in place to allow poor countries without their own pharmaceutical manufacturing capacities to import cheaper copies of patented medicines for humanitarian purposes.

Its general council has agreed to make permanent a 2003 waiver that allows poorer nations to import generic drugs to treat serious diseases such as Aids. WTO members have set Dec. 1, 2007, as a deadline to ratify the amendment, the organization said. It would need to be approved by two-thirds of the 148 members. The waiver remains in force until then.

The World Trade Organization (WTO) is an international rules-based and member driven organization which oversees a large number of agreements defining the "rules of trade" between its member states and is the successor to the General Agreement on Tariffs and Trade (GATT) that was set up in 1947, and operates with the broad goal of reducing or abolishing international trade barriers. It ensures trade among nations operates smoothly, freely and orderly.

As of August 19, 2005, there are 148 members in which most of them are developing countries in the organization. All WTO members are required to grant one another most favored nation status, such that (with some exceptions) trade concessions granted by a WTO member to another country must be granted to all WTO members.

US Trade Representative Rob Portman said that the U.S. was fully behind the move. The European Union (EU) and the UK has also backed the change. Under the rule, poorer nations will be allowed to import the generic drugs for humanitarian reasons and not for commercial purposes. Some of the larger developing countries, like India, hope that they will be able to sell antiretroviral Aids drugs to Africa under the deal.

Flexibilities such as “compulsory licensing” are written into the TRIPS Agreement — governments can issue compulsory licenses to allow other companies to make a patented product or use a patented process under license without the consent of the patent owner, but only under certain conditions aimed at safeguarding the legitimate interests of the patent holder.

But some governments were unsure of how these flexibilities would be interpreted, and how far their right to use them would be respected. The African Group (all the African members of the WTO) was among the members pushing for clarification. A large part of this was settled at the Doha Ministerial Conference in November 2001.

In the main Doha Ministerial Declaration of November 2001, ministers stressed that it is important to implement and interpret the TRIPS Agreement in a way that supports public health — by promoting both access to existing medicines and the creation of new medicines.

"TRIPS" stands for Trade-Related aspects of Intellectual Property Rights. It is an Agreement drawn up by the World Trade Organization between 1986 and 1994 to ensure intellectual property rights are respected within international trade. It came into force on 1st January 1995, although implementation dates vary from country to country.

Governments can issue a compulsory license if a patent owner abuses their rights by, for example, failing to offer their product on the market, or offering it at a price that is too high for potential buyers to afford. Competitors can then produce the product or use the process under government license without fear of prosecution. In the case of generic drugs, compulsory licenses can be issued because of the high (and for developing nations, often unaffordable) prices charged by the major pharmaceutical companies for their products.

Article 31(f) of the TRIPS Agreement says that production under compulsory licensing must be predominantly for the domestic market. The concern was that this could limit the ability of countries that cannot make pharmaceutical products from importing cheaper generics from countries where pharmaceuticals are patented. As with the 2003 waiver, the permanent amendment will allow any member country to export pharmaceutical products made under a compulsory license for this purpose.

Now, the amendment itself is in three parts. Five paragraphs come under Article 31 "bis" (i.e., an additional article after Article 31). The first allows pharmaceutical products made under compulsory licenses to be exported to countries lacking production capacity. Other paragraphs deal with avoiding double remuneration to the patent-owner, regional trade agreements involving least-developed countries, "non-violation" and retaining all existing flexibilities under the TRIPS Agreement.

A further seven paragraphs are in a new annex to the TRIPS Agreement. These set out terms for using the system, and cover such issues as definitions, notification, avoiding the pharmaceuticals being diverted to the wrong markets, developing regional systems to allow economies of scale, and annual reviews in the TRIPS Council. An "appendix" to the annex deals with assessing lack of manufacturing capability in the importing country. This was originally an annex to the 2003 decision.

The new Article 31 "bis" and annex of the TRIPS Agreement are attached to a protocol of amendment. This in turn is attached to a General Council decision, which adopts the Protocol and opens it for members to accept it by 1 December 2007.

See a Draft Text of the Changes here.

Forbes recently ran an article showing that companies that generate revenue from products protected by copyrights or patents are vital to the U.S. economy. In a report, NBC Universal Chief Executive Bob Wright released the results of the study he commissioned, which shows that digital piracy, if not reined in, could cause the U.S. economy to stall.

The study, conducted by Washington, D.C.-based Economists Incorporated, found that U.S. intellectual property-oriented industries--from software firms to aerospace and pharmaceutical companies--are vital to the U.S. economy for the following five reasons:

• They contribute nearly 40% of the growth achieved by all U.S. private industry and nearly 60% of the growth of U.S. exportable products and services.
• Ten-year gross domestic product estimates would be about 30% lower than current projections without the contributions of these industries.
• These industries are responsible for 20% of the total U.S. private-industry contribution to gross domestic product, and 40% of the contribution of U.S. exportable products to gross domestic product.
• These industries are among the nation's highest-paying employers, with 18 million workers earning 40% more than all U.S. workers.
• The core copyright industries, such as music and filmed entertainment, in 2003 contributed $33 billion in net export revenue, while the patent-dependent aerospace industry reported another $32 billion in export revenue during the same period.

The report shows that the protection of intellectual property is critical to the economy and that it's not just these companies who are benefiting.

Note, however, that the profits on all that intellectual property may not be staying in the U.S. As reported this week in the Wall Street Journal, many high-tech, intellectual property-driven companies have set up tax-shielding subsidiaries in Ireland to get out of paying taxes here at home.

One such subsidiary of Microsoft Corp. helps cut at least $500 million off U.S. taxes. The subsidiary, called Round Island One, provides a structure for Microsoft to reduce its corporate taxes in the U.S. as well as much of Europe. U.S. companies whose products are heavily based on their innovations, such as technology and pharmaceutical firms, are setting up units in Ireland that route intellectual property and its financial gains to the low-tax location -- at the expense of the U.S. Treasury.

Much of the of the subsidiaries' income is licensing fees from intellectual property, e.g., copyrighted software code that originates in the U.S. Some of the rights to these lucrative assets end up in Ireland via complex accounting rules on intellectual property that the Treasury is now seeking to overhaul.

Microsoft's effective world-wide tax rate plunged to 26 percent in its last fiscal year from 33 percent the year before. Nearly half of the drop was due to "foreign earnings taxed at lower rates," Microsoft told the Securities and Exchange Commission in an August filing. Microsoft leaves much of its profit in Ireland, including $4.1 billion in cash, avoiding U.S. corporate income taxes.

A common device is to take successful, patented American ideas and then develop new generations of them -- with help from an offshore research division. The ownership of the new version (and profits on licensing it) can then legally be shared between the U.S. parent company and the offshore unit.

U.S. law explicitly permits this practice. The controversy comes in valuing the contribution made by the offshore unit. Did it pay a fair share of the development cost? And did it pay a reasonable price to the parent company to be able to share the rights to the original invention, i.e., a price an arm's-length party would pay?

The concern, of course, is that companies rely on the U.S. education system and other tax-supported infrastructure to produce a creative work force, and then move the fruits of that labor abroad without paying their dues.

More here.

The European Patent Office (EPO) issued a report that several groups in the European Parliament have expressed about the grant of European patent EP 1257168 B1.

In motions communicated to the EPO, Members of the European Parliament (MEPs) have stated that, in their view, the grant of this patent, which is entitled “Method of cryopreserving selected sperm cells”, constitutes a violation of the Directive on the legal protection of biotechnological inventions (98/44/EC).

The patent was granted to the US Company XY Inc. of Fort Collins, Colorado, in February 2005, although there is a nine-month period during which oppositions to the patent can be filed by third parties, which will terminate on 2 November 2005. The invention relates to a method for freezing sperm selected for a particular characteristic, as well as to a frozen selected sperm sample and methods of using such a sample. The invention is useful for preserving sex-selected sperm. Claim 1 is for:

1. A method for the cryopreservation of sperm comprising : (a) obtaining a selected sperm sample ; (b) cooling said selected sperm sample ; (c) isolating sperm from said selected sperm sample to produce isolated sperm ; (d) adding final extender to said isolated sperm to produce a suspension of sperm ; and (e) freezing said suspension of sperm.

The MEPs maintain that the patent also covers non-patentable human germ cells. They have therefore announced their intention to contest the grant of this patent by initiating an opposition procedure before the EPO. Other worries expressed in the motions concern the future development of the EPO’s practice in patenting human embryonic stem cells. Every year, around 5% of the patents granted by the EPO are contested in opposition proceedings. In two thirds of these cases, the patent is changed or even revoked in its entirety.

The EPO grants patents by applying the European Patent Convention (EPC). The EPC forms the legal basis for the Office's institutional structure and its activities and operations. The EPC expressly stipulates that the human body, at the various stages of its formation and development, and the simple discovery of one of its elements, including the sequence or partial sequence of a gene, cannot constitute patentable inventions.

However, an element isolated from the human body or otherwise produced by means of a technical process may constitute a patentable invention, even if the structure of that element is identical to a natural element. Recital 16 of the Directive and the Guidelines for examination in the EPO state that such stages in the formation or development of the human body include germ cells. In 2004, the EPO received 6,581 patent applications in biotechnology and granted over 4,000 patents.

See the memo here.

A Senate committee approved the Biodefense and Pandemic Vaccine and Drug Development Act, sponsored by Sen. Richard Burr, R-N.C. The Senate Health, Education, Labor and Pensions Committee approved the bill by a voice vote and now the bill goes before the full Senate.

Key components of the Biodefense and Pandemic Vaccine and Drug Development Act include:

Establish a single agency - the Biomedical Advanced Research and Development Agency (or BARDA) - as the lead federal agency for the development of countermeasures against bioterrorism. The new agency would report directly to the Secretary of Health and Human Services.

Provide incentives for domestic manufacturing of vaccines and countermeasures.

Give liability protections to companies that develop vaccines for biological weapons.

However, the bill is noteworthy for what is not included. Some expressed concern that the bill does not take up the threat of a pandemic sparked by the spread of avian flu. Others felt that it is the best solution at the moment because so many variables are involved.

The bill also extends some prescription drug patents. However, the extensions have been criticized by some organizations who fear that they would block more affordable generic drugs. For instance, the bill would allow Health and Human Services to sign exclusive sales contracts with particular manufacturers for a particular product. It would forbid government purchases of generic versions of such new drugs or vaccines as well as public sales of the products for use as countermeasures.

The bill is opposed by the Coalition for a Competitive Pharmaceutical Market, which believes that the market exclusivity provisions would unnecessarily drive up prescription drug costs for private and public payers without advancing our nation's bioterrorism preparedness.

The drug monopoly extensions included in S. 1873 would broaden the definition of products eligible to be used as countermeasures in a way that could grant existing everyday medicines - rather than novel products related to the fight against bioterrorism - multiple years of additional market exclusivity.

Liability protection was also a key concern in order to protect consumers from vaccines and countermeasures that proved harmful. The measure states that a manufacturer, distibutor, or administrator of a security countermeasure, or a qualified pandemic and epidemic product or a health care provider shall be immune from suit or liability caused by or arising out of the design, development, clinical testing and investigation, manufacture, labeling, distribution, sale, purchase, donation, dispensing, prescribing, administration, or use of a security countermeasure, or a qualified pandemic and epidemic product. The liability provision was added immediately before the bill was introduced, but does have a clause dealing with producers that knowingly manufacture a bad drug.

It does not contain the earlier provision for the wild card extension (transferable intellectual property rights) for drugs with qualifying biodefense capabilities. For example, if the wildcard is 2 years, and an antibiotic is approved for BioShield II purposes, then the drug company could transfer 24 additional months of patent protection to any drug in its portfolio (e.g., blockbuster drugs like Viagra or Lipitor).

If a drug company needs a reward for the bioterrorism innovation, the more direct way to do so would be to pay a premium when purchasing the drug. The wild card system is less efficient than a contractual premium because the incentive varies with the portfolio of the company: if you are Pfizer the wild card is worth more than it would be to a smaller pharma or biotech company. The wildcard would operate as a tax on a wide population who pays for (now extended patent coverd) treatment.

See the text of the S.1873 bill here.

Today's post comes from Guest Barista C. Lee Thomason, a registered patent attorney and IP litigator at Frost Brown Todd's Louisville office.

My interest in ads that compare the efficacy of a product to the competitors’ products was peaked by the FTC ruling in In the Matter of Telebrands Corp., TV Savings, LLC, and Ajit Khubani, FTC Docket No. 9313 (Sept. 19, 2005). We all have seen those ads on cable TV that tout some easy, fitness fix for "Only 4 Easy Payments of $ …but wait, if you call now, we double your order." The question always springs to mind – 'how can ingesting ground-up yard waste improve my…' well whatever part you hope to improve. In other words, how can that expressed product claim be supported by good science?

In the Telebrands case, it was conceded that the promoter had no scientific basis to advertise that the "Ab Force" belt was good for anything, except that its ab belt sent electric pulses to the muscles underneath it. Telebrands’ defense to the false advertising complaint was that the ads made no actual claims that the product provided any stated results. As close as the ads came to making a specific claim was that the belt was shown in the ads being worn by attractive models with fabulous abs, coupled with voiceovers that the "Ab Force is just as powerful and effective as those expensive ab belts sold by others." The implied conclusion was that claims about the other ab belts were unsupported, and Telebrands had advertised that the "Ab Force" was as "effective" as those (useless) "ab belts sold by others." Such comparisons resulted in a form of 'guilt by association’ being adjudged against Telebrands. The Commission concluded that "the product name, visual images, and statements in respondents’ advertising create the net impression that the Ab Force electronic muscle stimulation ("EMS") device provides health, fitness, weight loss, or exercise benefits" and liability was imposed because this "net impression" was unsubstantiated.

The facts of the case are surprising. Telebrands monitored "direct response" ads on TV, and identified ab belts as a 'hot' seller. It then engaged a company to replicate the product, set a lower price, and began an advertising campaign, which said that the "Ab Force" was cheaper and it emitted the same sort of electric simulation pulses as competing belts. It was just a copycat product with a copycat ad. Again, no finding was made that the "Ab Force" ads claimed that the belt did anything.

The FTC ruling notes that while "the ads did not expressly state the purpose for the Ab Force, respondents’ ads made statements about the purpose of competitors’ ab belts – in some cases, direct statements – and indicated that the Ab Force was equally effective, allowing consumers to make the obvious logical connection." I read that to imply that viewers who believe these ads engage in "logical" decision-making about fitness products. The imposition of liability for a "net impression" where no affirmative claim or representation is made in a TV ad, extends the authority of the FTC in its policing of ads.

Many nutraceuticals and health aids are advertised to provide results, but often those are stated in the negative, e.g., ‘no product on the market is more effective’ (meaning I suppose, that all of them are useless). Consider the more typical claims: "it won't give you X-ray vision or bionic strength. but [a Ramses’ condom] will make you a hero," In re London Int'l Group, Inc., 125 F.T.C. 726 (1998); "Too old to take up running? Maybe you should start . . . drinking 'Jogging in a Jug," In re Third Option Lab., 120 F.T.C. 973 (1995); the "Brain Tuner" will " produce 256 simultaneous frequencies all known to be beneficial for the natural stimulation of the brain's neurotransmitters ..[and it] simply coaxes the brain to restore it's [sic] own chemical balance," In re Lifestyle Fascination, 118 F.T.C. 171 (1994).

These type of ads do include express claims of results, albeit in some vague or obscure expressions. The Telebrands case extends false advertising liability beyond ads that expressly claim results, without a scientific basis, to ads that present a "net impression" about the usefulness of the product (images of belt-wearers with fab abs), or about its comparative utility (as good as competing junk). The finding of a bad, or unsubstantiated, net impression was based on the opinion of an expert using split sample surveys.

So, the next time you are up late, channel-surfing on cable TV, listen closely to the product quality claims in ads for nutraceuticals and health aids – because after the Telebrands decision, the ads may be crafted more around the impression than upon expressly claimed results.

Taiwan has come out saying it could produce up to a million doses of anti-influenza drug Tamiflu within months to counter a possible bird flu pandemic if it obtains a license from the drug's manufacturers. Roche has said it is willing to share production with governments or other companies as fears of a pandemic rise after bird flu, which has killed more than 60 people in Asia, was discovered in Romania, Turkey and Greece.

Taiwan officials claim to have successfully produced the drug in the lab. Roche Holding AG confirmed yesterday it is examining a request from Taiwan's Department Of Health (DOH) to discuss the manufacturing of Tamiflu by Taiwanese companies.

Also, the Korea Food and Drug Administration (KFDA) in South Korea announced that it is looking into the legality of producing a generic version of the patented antiviral drug Tamiflu to protect against an outbreak of the deadly bird flu.

[Note: The original report, from the Korean Overseas Information Service (KOIS), incorrectly calls the drug a vaccine. One site referred to overriding trademark regulations.]

The KFDA said it is hoping to produce a generic version of the drug Tamiflu that would not require approval from its patent holder, Swiss pharmaceutical company Roche , which has exclusive rights to produce the drug. Under international patent laws, the KFDA believes it is possible to make its own version of Tamiflu without prior consent from Roche. That is, there is an exception in which prior consent from a patent holder is not required when the patent is needed to prevent an extreme crisis.

This follows the earlier report that the Indian drug company Cipla Ltd., plans to bring a generic version of Tamiflu into the market early next year.

Meanwhile, Roche announced that it's willing to negotiate to permit drug makers in poorer countries to produce a generic version of Roche's Tamiflu, although some Asian governments say that if Roche demands too high a licensing fee, they'll disregard the patent on Tamiflu.

Today's post comes from Guest Barista C. Lee Thomason, a registered patent attorney and senior litigator at Frost Brown Todd LLC, in Louisville, who keeps track on developments in patent litigation.

New "Amendment" to Patent Reform Act of 2005 will makes Inequitable Conduct determinations as simple as a three-ring circus.

Rep. Lamar Smith has pared back his proposed Patent Reform Act of 2005, including the provisions that take inequitable conduct out of the federal courts and put patentees to in administrative fora, while the litigation proceeds on other related issues.

Before this "Amendment in the Nature of A Substitute to H.R. 2795", the proposed bill set some standards for an administrative investigation and determination to precede action in a court on the inequitable conduct defense. The amended bill deletes the timetables, the preliminary and final determinations, etc., and frees the Special Office to investigate however "the Director determines is appropriate." Deleting the details suggests a lack of consensus on most of the 'what and how' aspects of the proposed non-judicial investigation. More importantly, such an unguided mandate makes it hard to compare whether a "Special Office" investigation or determination can work better, cheaper, or be more prompt and predictable than the way the issues now are handled by U.S. District Courts. After all, was not the promise of reducing the cost to litigate "state of mind" issues in patent cases, as set out in the NAS and FTC studies, one provoking cause of the call for such "reform" bills?

My previous post, on 22 July, compared the Patent Reform bill timetables (now-deleted) with actual times from pleading to decision in some recent court cases. There, I suggested that the Special Office proceeding would take 15 months plus the time for the actual investigation, which was no more expeditious than the timeframe for decision in those recent cases.

With no administrative timetable now proposed in §136(d)(3)B) - whatever "is appropriate" - my next avenue of inquiry is: what is the worst havoc that the "Amendment" allows an infringer to craft around a colorable claim of inequitable conduct. I think that the grandest fracas would be (1) a suit pleading invalidity, unenforceability and attempted monopolization, and (2) a "referral" per §136(c) of the alleged inequitable conduct for a Special Office investigation, and (3) if you time it right, a post-grant opposition proceeding per §321 of the proposed Reform bill. That three-ring circus should keep the patentee occupied, whilst the infringement continues, for a good long while!

The suit, and related discovery, will proceed at least in regard to Markman and infringement issues, plus the validity and antitrust counterclaims, and any unclean hands or patent misuse claims. Those continue, because the proposed bill only takes the inequitable conduct issue from the court. Simultaneously, the patentee fights the suit, and also, must defend the Special Office investigation. However, the infringer sits freely in the balcony observing that administrative inquest. Then, just to complete the triple-threat, the infringer or "A person" can request that the "patent be reconsidered" under §321. This administrative procedure confines itself to limited issues of "patentability," and so, a well-advised infringer can have opposition and court proceedings going simultaneously. Who knows, whether the claims interpretation decision in the opposition, or that which comes after the Markman hearing, will best suit the infringer's plans? As stated in §325(d)(4), the court's claim interpretation is interlocutory and until that is "final and non-appealable" it cannot be binding in the opposition.

Double-teaming on "patentability" also provides a benefit, because that the opposition evaluates validity under a "preponderance of the evidence" standard, per §332(a). This provides a good dress-rehearsal, before the court requires the infringer/opposer to make a clear and convincing case of invalidity. Altogether, this lays the groundwork for the end-game of the Special Office proceeding, because unenforceability requires a finding that the uncited or misrepresented art "resulted in the issuance of, ...one or more invalid claims" per §136(d)(1)(A) & (3)(B)(1). Even a "substantial question" finding might shake the patentee's resolve to litigate. §325(a)1). If the infringer/opposer has art or a misrepresentation that may support invalidating a claim, then the circus could close with one grasping the ring of "unenforceability" back in court. Only a patent attorney, or Ph.D. in actuarial science, can enjoy calculating all of the risks, costs, and rewards involved in making this triple-play work to one's advantage.

The Reform bill does try mildly to curb having a parallel suit and opposition. The court's action on the validity issue can be stayed, if (and there are 4 ifs) the patentee requests a stay, if the infringement suit was filed "within" three months of issuance, if the "Director determines" the issues overlap, and determines a stay would not be "contrary to the interests of justice." §325(d)(3). The purpose behind the "three months" is unknown (Note to self: calendar ANDA generic filing 91 days after patent grant!). Separately, the opposer has to present its opposition request not "later than 9 months after the grant of the patent." §323.

To make maximum mischief for the patentee, in multiple fora, one needs to yank out the rug between 3 and 9 months after issuance. Then, the Reform bill enables the infringer/opposer to double-team on the validity issue with parallel discovery. In the opposition, depositions of those who gave affidavits accompanied the request are the only discovery allowed, as of right. §328. The determination made in the opposition can estop the opposer in the court case, subject to the big "Exception" in §336(a)(2) that "additional factual evidence ...could not reasonably have been discovered" in the opposition. That exception often could apply, due to the opposition discovery being limited to depositions of those "submitting an affidavit" and, with "such depositions limited to cross-examination on matters relevant to the affidavit." §328(a). "Gee, Judge (whine), all I got was 'limited' discovery over in that opposition."

Many months later, anyone "dissatisfied" with the ruling in the opposition can appeal, §334, while the court case and the Special Office proceeding continue. Once the Special Office determines if there was inequitable conduct, then that issue goes back to court, and once it rules, then the main case (infringement, validity, misuse & antitrust) can be appealed.

With good timing, a determined and well-budgeted infringer/opposer can make the patentee suffer through the panoply of proceedings that the Reform bill permits, and in some respects, requires. We are to be assured, though, that this proposed "Reform" legislation serves to "improve" the system, to "reduce" costs and inefficiencies of litigation, and to "modernize" the Patent Office, all of which is funded by fees charged to inventors.

President Bush has appointed Chris Israel as the new Coordinator of International Intellectual Property Enforcement, a position Congress created last year to coordinate law-enforcement efforts aimed at stopping international copyright infringement and to oversee a federal umbrella agency responsible for administering intellectual property law. Intellectual property law enforcement is divided among a range of agencies, including the Library of Congress, the Justice and State departments and the U.S. Trade Representative.

As the Coordinator for International Intellectual Property Enforcement, Israel will head the international work of the National Intellectual Property Law Enforcement Coordination Council (NIPLECC) and coordinate and supervise international intellectual property protection plans among other agencies. This is a part of the implementation of the Bush administration's "Strategy Targeting Organized Piracy (STOP)" initiative. The initiative protects American businesses and their products from counterfeiters and pirates.

Although NIPLECC has been around since the early 1990s, it has never actually done anything, and the hope is that giving the organization some money and a new charter will finally give the office some backbone.

Obviously, a large goal is to reduce counterfeits in China since the piracy levels there approach 90%. The Commerce Department estimates that nearly 7% of the products in the global market are counterfeit, costing U.S. companies up to $200 billion a year in lost sales.

More here.

AstraZeneca has been fined £60m (about $73 million) by the European Commission for illegally trying to prevent generic competition to its best-selling ulcer drug Losec. After a six-year investigation, the EC said the firm gave incorrect information about when the drug was first approved, enabling the firm to extend the patent's life.

Losec (omeprazole) is a proton-pump inhibitor for acid-related diseases, which is the world's largest-selling gastrointestinal product market. Losec was launched in its first markets in 1988. While still under patent protection in the 1990's, Losec was one of the biggest-selling prescription drugs in the world, with sales of around $6 billion a year.

In Europe especially, everyone feels a natural right to health and medicine, a sort of public good, naturally intended for the free circulation and use. In 1855, Carlo Farini, a philanthropic physician and scientist, investigator of tropical diseases, prevailed over the Piemontese patent law, which would become the Italian patent law, prohibiting the patentability of pharmaceutical inventions (which remained in force until 1978). This doesn't mesh well with the incentive-based patenting system designed to spur innovation in the first place.

I try to remind clients that a patent isn't a license to do anything you want in the marketplace. This was made clear by the U.S. Supreme Court long ago when it warned:

“…the possession of a valid patent or patents does not give the patentee any exemption from the provisions of the Sherman Act beyond the limits of the patent monopoly.”

U.S. v. Line Material Co., 333 US 287 (1948)

Some say AstraZeneca got off easy since the Commission has the ability to impose a fine equivalent to 10% of a company's annual sales if it is found guilty of anti-competitive actions. AstraZeneca said it had acted in good faith when it sought to extend the patent and would appeal against the verdict in the EU's Court of Justice.

More here.

The Washinton Times reported that a so-called wild-card patent provision, expected to be proposed to Congress as part of the Bioshield II bill (Senate Bill S.3, Protecting America in the War on Terror Act of 2005), has been modified to overcome objections from companies that manufacture generic drugs.

S.3 would make changes to the earlier Project Bioshield, which authorizes $5.6 billion over 10 years to encourage pharmaceutical and biotechnology companies to work with the NIH to develop antidotes, vaccines and other products to treat and protect against a number of potential biological weapons.

The wild card provision, if enacted, would add up to two years to the exclusive patent term for a patented drug. It's called a wild card because its designee would get to apply it to any drug for which it holds a patent. For a major pharmaceutical, those two extra years could be worth billions of dollar in revenue. Generic firms are worried that drug companies would wait to apply the wild card until the last minute - thus throwing a monkey wrench into their business plans.

The draft language in the new bill was changed to require the winner of a contract to name the designated drug within 180 days of receiving the contract. Since the wild card cannot be applied until after the company actually gains FDA approval for the new countermeasure, there is a risk that the wild card could be applied to a drug that would go off patent before it can be used, effectively nullifying the whole scheme for the pharmaceutical company.

However, even then not all would be lost. If the patent on the wild-card product does expire, there is still an option in the bill to extend the patent on the countermeasure to make up the time lost getting FDA approval. Under a provision in S.3, the firm with a winning countermeasure drug can choose to have the life of the patent on the new product extended to 17 years. Again, this can mean a massive windfall for the pharma.

The Generic Pharmaceutical Association opposes the changes on serveral grounds. See their position paper here. More info here.

In general, S.3 sets forth provisions concerning bioterrorism preparedness and defense, including provisions for: (1) extending the patent terms for certain countermeasure products; (2) exempting meetings between the Secretary of Health and Human Services and parties developing priority countermeasures from antitrust laws; (3) establishing the Commission on Countermeasure and Vaccine Regulation; (4) prohibiting a State from establishing requirements different from certain Federal food and drug laws; (5) allowing tax credits for vaccine and countermeasures manufacturing and research; and (6) requiring procedures for inspecting imported live animals.

In a bit of a gruesome political tie-in, it also increases the death gratuity payable to survivors upon the combat-related death of a member of the Armed Forces and increases the maximum life insurance payable for a member of the uniformed service or a veteran. This will put anyone opposed to the bill in a bind - they have to choose between allowing the controversial measures or looking like they are "against the fallen troops" - a no win situation.

Several groups, such as the National Vaccine Information Center (NVIC), are concerned about vaccine safety and have come out against the bill because of its provision that would preempt any state legislation regulating vaccines or vaccine components (read: Thimerosal or mercury) and it proposes to take away the rights of states to even warn citizens about potential injuries attributable to vaccines and drugs.

Other proposed provisions that raise eyebrows include the broadening of the definition of "countermeasure," which could make almost any medicine eligible for patent extensions. The definition could be applied to commonly prescribed drugs that treat secondary effects of a bioterrorist attack, such as migraines, anxiety and even erectile dysfunction.

"To retain respect for sausages and laws, one must not watch them in the making."

- Otto von Bismarck

The House Subcommittee on Intellectual Property circulated a discussion draft a Patent Reform Bill. Since it's just a draft, it's not worth over-analyzing at this point but it is interesting to get a glimpse at the topics that may be subject to amendment.

The proposed legislation includes changes to:

• Creating a post-grant opposition procedures
• Willfulness damages award not merely on the knowledge of a patent
• Remove right for an injunction for infringing activity
• First-to-file rights
• Expanded definitions of prior art (but see above)
• Assignee may file for the application
• Best mode requirement
• Duty of candor and unenforceability
• Limits on damages when invention is a portion of a larger product
• Publication of all patent applications after 18 months
• Prior user rights

I would like to see a first-to-file change to bring us into alignment with the rest of the world but I won't hold my breath. There is certainly going to be some arguments over these types of changes. A Senate Committee on the Judiciary, Subcommittee on Intellectual Property, will hold a hearing on "The Patent System Today and Tomorrow," Thursday, April 21, 2005 at 2:30 p.m. in Room 226 of the Dirksen Senate Office Building. Senator Hatch will preside.

Dennis Crouch has an excellent on-going discussion of the bill in a series of posts here, here and here. The Draft Patent Statute is posted here (182 KB).

The Baristas will need to mull over the details over a grande and a scone. We'll keep you posted on substantive changes.

Jon Gowshall of Forrester Ketley & Co. sent us a note on changes to UK patent law starting on 1 January 2005.  The changes are to bring UK law into line with the WIPO Patent Law Treaty (PLT) signed in Geneva in June 2000, and into line with the European Patent Convention as prospectively amended in 2000 (but not yet in force).  These changes make the UK patent system much more applicant friendly, allowing rights to be safeguarded in situations where, previously, they would have been lost.

Some changes include:

1. Restoration of priority - If the twelve-month Convention deadline is missed, the new law allows a late application claiming priority to be filed, providing that it is filed within 2 months of the Convention deadline, and provided that the Comptroller of Patents is satisfied that the applicant always intended to file the application within the 12 month period.

2. Rush filing - The date of filing an application for a patent shall be taken to be the earliest date on which documents filed at the Patent Office to initiate the application satisfy the following conditions -

(i) the documents indicate that a patent is sought;

(ii) the documents identify the person applying for a patent or contain information sufficient to enable that person to be contacted by the Patent Office; and

(iii) the documents contain either: (a) something which is or appears to be a description of the invention for which a patent is sought; or (b) a reference, complying with the relevant requirements, to an earlier relevant application made by the applicant or a predecessor in title of his.

3. Extensions of time for reinstatement - available once, by a period of two months as of right. Extension must be requested in writing within two months of the expiry of the period in question.

4. Restoration of Lapsed Patents - restoration will be granted if the applicant can simply prove that his failure to pay the fee was unintentional.

5. Medical Use Claims - can now claim "Swiss-style" claims as ?Substance Y for use in treatment of disease X?.

I will be interested in seeing how the rush filing provisions are handled in practice.  These type of provisions are already available in Scandinavia, for example.  I'm always in favor in having some leeway in terms of getting a filing date.  If only the Patent Office could just know what I meant to file...

Chandra Joshi, an Indian patent associate sent an announcement on the  amendments to Indian patent law that took effect on January 1, 2005.  The amendments brings Indian law into compliance with World Trade Organization TRIPs agreement and rationalizes the procedures for patent prosecution.

These changes (1) make the national law compliant with Art. 27 of the TRIPS agreement; (2) provide for product patent protection for all categories of inventions; (3) repeal the provisions concerning Exclusive Marketing Rights (EMRs); (4) provide for a transitional provision to protect EMRs already granted ; (5)  introduce provisions to give effect to the Doha Declaration on TRIPS and Public Health; and (6) empower the IP Appellate Tribunal to adjudicate upon revocation of patents.

India, as you know, had so far permitted Patents only for processes and not products. With the new amendment to the Patent Act, it would now be possible to obtain Patents for product patents in Pharmaceuticals and Agro Chemicals. Under the Product Patent regime no new-use Patents would be granted.

The ordinance seeks to strengthen opposition proceedings by allowing for both pre-grant and post-grant opposition. The ordinance also seeks to simplify and rationalize the time-frame for process of patents. The time limit for giving requests for examination has been reduced to 36 months from 48 months earlier. Security provisions will also be tightened particularly for dual-use patent applications. Such patents will now be scrutinized by the patent office.

Further, software would continue to be copyright protected, embedded software that has technical applications can now be patented.

The reforms are to end decades of policies that allowed Indian firms to make cheap versions of expensive Western products. This could mean enormous changes to India's pharmaceutical industry. The current revenues of the Indian pharmaceutical industry are estimated at US$5.5 billion and it is expected to grow at a compounded annual growth rate of 19% and reach US$25 billion in revenue by 2010 (The Economic Times, May 1, 2001).  The future of the Indian pharmaceutical industry will depend on strong patent protection.  See more info here.

The recently enacted Cooperative Research and Technology Enhancement (CREATE) Act of 2004, amends Federal patent law in an effort to promote collaborative research, particularly between scientists at separate universities and between industry and university scientists. This new law provides that sharing of confidential information under a joint research agreement that was in effect on or before the date the claimed invention was made will not be the basis of an obviousness determination under patent law. 

During the course of collaborative research, patent applications may be filed which arise from the research.  The filing of these patent applications can become unforeseen prior art when these patent applications or resulting patents become prior art against subsequent patent applications coming out of the collaborative research.

To take advantage of its provisions, you should take steps to: 

1. prior to entering into a collaborative agreement, consider whether you are willing to potentially give up the opportunity to separately enforce your patent;
2. review any pending patent applications which may have come out of a collaborative research agreement;
3. review all collaborative agreements to determine if the agreement will satisfy the criteria set forth in the Act;
4. amend any relevant pending patent applications or issued patents to include the names of the parties to the agreement;
5. consider filing a Certificate of Correction to amend patents that have issued as a result of collaborative works; and
6. record all collaborative research agreements with the United States Patent and Trademark Office.

More details can be found here.