You’re not alone in your suffering.  The recession has even hit the U.S. Patent and Trademark Office, which is funded by fees from patent applications and other services.  John Doll, acting director of the U.S. Patent and Trademark Office, said the patent office is projecting a 2 percent drop in applications, if trends continue.

What’s more, some are indicating that applications could end up being down 10 percent for the year:

“I talked to a large corporation today and they’re going through their patent portfolio to see what’s core,” said Doll, adding that the company could decide to abandon much of its portfolio.

jdoll-allowance-thumb.jpgSo, what does that mean for the patent office?  In the short run, the office has stopped recruiting examiners, which it had been doing in an effort to clear the backlog of patent applications.   After remaining fairly steady over decades, allowance rates have now plummeted from over 70% in 2000 to an allowance rate of 44.3 % in 2007 (Note, the allowance rate hadn’t dropped below 50% in the prior 30 years).

Earlier, the Patent Office claimed that it would hire additional examiners to deal with the backlog.  Doll now contends that that “If we closed our doors today, it would take us almost two years to clear out our backlog.”  It’s not clear how a hiring freeze will make things better other than frustrated applicants will give up and abandon their applications.  Or, stop filing applications in the first place!

So what do we do?  Gene Quinn of IP Watchdog has proposed that if we really want to get out of this economic downturn we need a Patent Stimulus Plan.  This would require President Obama to issue an Executive Order directing the Patent Office to start allowing patents.  According to Gene:

A backlog of 800,000 patent applications that are pending and have not even been considered on any level by a patent examiner is unacceptable.  Why would anyone want to get a patent when you apply today and if it is a real invention where there is a lot of innovative activity you have to wait 8 to 11 years to get a patent, which are the current estimates used by experts familiar with the likely time applications filed today will have to wait in high-tech areas.  So while you are at it President Obama, order the Patent Office to issue a patent UNLESS there is a reason to deny it.

Don’t look for the current budget problem to solve itself.  All the many patents that have not been allowed will not issue as patents.  The Office will not pass go and collect the issue fees on all these applications.  This is further perpetuated downstream as the Office will not collect the large maintenance fees that would have been due at are 3 ½ years, 7 ½ years and 11 ½ years after the date of issuance.  The low patent allowance rate will set in motion a budget shortfall that will play out over decades.

Update:  

The European Patent Office (EPO)  and Japanese Patent Office (JPO) announced that their allowance rate is also below 50% — with the EPO at 49.5% and the JPO at 48.9% (via the 271 Patent Blog).

See also Gene Quinn’s post “Perspective of an Anonymous Patent Examiner,” where a PTO examiner comments:

This “reject, reject, reject now” policy is encouraged by management’s policy of issuing a written warning on an examiner’s permanent file for allowance error percentage above 10%. While this may seem high, if you only allow 20 cases a year it is no problem for quality to find some kind of error in your cases, especially when they aren’t experts in your art. Additionally, there is a lack of motivation to get cases allowed, because there is no incentive for the examiner to do the extra work required to arrive at claim language which can be allowed.

Nice.

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Vaya con dios, Genentech

Swiss pharmaceutical company Roche is going to pay $46.8 billion in cash to buy the 44 percent of biotech leader Genentech that it doesn’t already own.  The deal values Genentech at more than $100 billion.  Fortunately, one of Roche’s big products is the tranquilizer Valium.  Genentech’s Avastin, a treatment for various types of breast, lung and colon cancers, is one of the best-selling biotechnology drugs in the world.  The combined company will be the seventh-largest U.S. pharmaceutical company in terms of market share.  It remains to be seen what effect thishas on the culture of Genentech, which is known for innovative research and one of the best places to work.  See Roche Press Release.

Lions, Tigers and Frankencows.  Oh, My.

The USDA Animal and Plant Health Inspection Service (APHIS) plans to hold public meetings in April to address issues raised by its proposal to revise its regulations on the importation, interstate movement, and environmental release of genetically engineered organisms.  The APHIS has requested comment on the following four issues:

(1) Scope of the regulation and which Genetically Engineered  organisms should be regulated;
(2) Incorporation into APHIS regulations of the Plant Protection Act’s noxious weed authority;
(3) Elimination of notification procedure and revision of the permit procedure;
(4) Environmental release permit categories and regulation of GE crops that produce pharmaceutical and industrial compounds.

APHIS is extending the comment period for the proposed rule until 60 days after the April meetings. (via FDA Law Blog)

What’s a Federal Circuit Good For?

The Court of Appeals for the Federal Circuit, in In re Ferguson, shot down the claims of U.S. Serial No. 09/387,823, which claimed a “paradigm for marketing software” — whatever that is —  the “machine-or-transformation” test from the Court’s In re Bilski decision.  Noteworthy is the underlying debate on whether the Bilski decision overturned not only State Street but other precedent (including the Freeman-Walter-Abele test, the “technological arts” test and the “physical steps” test), constituting a “sweeping rejection of precedent [that] simply enlarges the taint on the thousands of patents that were granted in application of these tests.”   (via Patent Docs)

More Stem Cells, Still No Human Clones

President Obama on Monday lifted the Bush administration’s limits on human embryonic stem cell research.  He did take time to note that this still means no human cloning so forget about a bunch of mini-me’s.  The Bush administration had only allowed tax dollars to support studies on a small number of existing lines, or colonies, of stem cells that had already been derived from embryos, but not on creating new lines. Because embryonic stem cells are capable of developing into any type of cell or tissue in the body, many scientists believe they hold the possibility for treatments and cures for ailments as varied as diabetes, Parkinson’s and heart disease.

Et cetera

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31lbnoi3i8l_sl160_.jpgThe Apple iPhone has really converted me to a podcast listener.  While I had an iPod and listened to a few podcasts before, I rarely had it with me.  Now, with the iPhone as my podcast player, I always have it with me.  This past week, I got an up-close encounter with a new podcast, the IP Think Tank podcast.

The IP ThinkTank podcast with Duncan Bucknell is exceptionally well done and makes for an enjoyable way to get caught up on the week’s IP events.  This past week’s episode featured Andrew Watson and myself as guest panelists to discuss:

  • Director’s liability for mismanagement of IP assets;
  • Strategic IP Management in Business School Curricula; and
  • Patent Reform in the United States.

We hope you enjoy this week’s podcast and look forward to your comments and feedback.  Listen or subscribe at the IP ThinkTank Podcast page.

Guests:

Andrew Watson,  ipVA: Intellectual Property strategy and advisory consultants
Stephen Albainy-Jenei, Patent Baristas: Freshly brewed Bio/Pharma chat.

More:  MBAs and IP: Survey of course offerings

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The U.S. Department of Health & Human Services is looking for input on a report looking at the effects of gene patents on patient access to genetic tests.  The Advisory Committee on Genetics, Health, and Society (SACGHS) is requesting public comments on a draft report to the Secretary of Health and Human Services, “Public Consultation Draft Report on Gene Patents and Licensing Practices and Their Impact on Patient Access to Genetic Tests.”

The review was limited to those genetic tests, whether used for diagnostic, predictive, or other clinical purposes, that rely on analysis of nucleic acid molecules to determine human genotype. As such, the kinds of patent claims evaluated were nucleic acid-related patent claims associated with genetic tests for human genotype. The report does not address protein-based genetic tests or protein-related patent claims associated with tests designed to infer genotype.

Now, the Committee is looking for public input on several issues, including whether changes are needed in patenting and licensing practices that affect genetic testing, and the appropriateness, feasibility, and implications of the report’s policy options.

The report showed:

Based on its review of the literature, case studies, and review of international policies regarding gene patents, SACGHS found little in the way of broad or consistent evidence that indicates either positive or negative effects of gene patents on patient access to diagnostic tests.

Although it is difficult to document measurable and systematic impacts, either positive or negative, of gene patents on patient access to tests, SACGHS did identify several issues of concern that, if not addressed, might result in future barriers to patient access as the number and complexity of gene tests increases.

Finally, in the case of patents, perceptions can have important impacts on behavior and can affect the willingness of researchers to investigate a particular problem, the willingness of companies to operate in a particular region, the willingness of academic laboratories to develop a given test, and the actions of clinicians who order and utilize genetic tests.

SACGHS identified key findings for the following issues:

Did the prospect of a patent encourage researchers to search for gene-disease associations that could be developed into a genetic test? 

In general, the prospect of receiving a patent was not the major force motivating scientists to search for gene-disease associations that could be used to develop a genetic test. However, it also appears that the prospect of a patent for a therapeutic attracted investment …

Based on the above, it seems to reasonable to conclude that if patent protection for genetic tests did not exist, scientists likely would continue to pursue research into gene-disease associations with equal fervor, motivated by various factors, including the desire to advance the understanding of a disease, earn the esteem of their colleagues and advance their individual careers. Whether companies would continue to pursue this research if patents did not exist is unclear and would be a difficult hypothesis to test.

What role did patents play in the commercialization of the genetic tests? 

The case studies suggest that for those who secured a patent on a gene-disease association, there was an incentive to commercially develop a genetic test. [A] patent apparently is not uniformly a necessary incentive to develop or commercialize a genetic test. Patents, however, may be necessary to stimulate commercial development of genetic tests for rare alleles.

How did patents and licensing practices affect price? 

The case studies attempted to evaluate how patents and licensing practices affected the price of genetic tests, but could not always reach definite conclusions because of difficulties in obtaining relevant data and challenges in determining the relative contribution of various factors, including overhead costs, to price.

Thus, there is at least the risk that a patent-protected genetic test will have an inflated price; this inflated price, in turn, may reduce how many patients use the test. Licensing many providers may mitigate price inflation. However, various factors other than patenting and licensing affect the price of genetic tests, including ordinary market forces, such as demand and market size (where there is a large market and high demand, the company stands to make considerable revenue even at a lower price). Many of these factors exert a downward pressure on price.

How did patents and licensing practices affect availability? 

The case studies generally found that for patented tests that were licensed to many providers, there was no evidence of any limitations on availability. Where there is a sole provider, due to the patent holder practicing the patent exclusively or licensing exclusively to a single entity, the effects on availability can be positive or negative.

What is the potential that the patent may cause some future harm? 

The case studies note that patents relating to genetic tests could hinder the anticipated increase in multiplex genetic testing and the foreseeable clinical use of whole genome analysis/sequencing.

Preliminary Conclusions

Patents and Pricing — Evidence from the case studies did not reveal widespread overpricing for genetic diagnostic tests that were patented and exclusively licensed relative to tests that were either unpatented or non-exclusively licensed. In addition, SACGHS did not find quantitative information in the general literature on this issue nor has it been addressed in international policies.

Effects of Patents on Access — Thus far, patents covering genetic tests and related licensing practices do not appear to be causing wide or lasting barriers to patient or clinical access.

Effects of Patents on Innovation and Development — Two principal ways patents are supposed to promote science is through stimulating research and inventive activity and through stimulating investment to commercially develop promising inventions. While there is a longstanding consensus that patents function this way in many arenas, the findings from the Committee’s work thus far suggest that they do not serve as powerful incentives for either genetics research in the diagnostic arena or development of genetic tests.

—————-

Members of the public are invited to provide any additional information and data regarding the positive or negative effects gene patenting or licensing practices have had, are having, or may have on patient and clinical access to genetic tests.

To submit comments to SACGHS, please e-mail them to Darren Greninger, at greningerd@od.nih.gov, by May 15, 2009. Alternatively, comments can be mailed to Mr. Greninger at the National Institutes of Health (NIH) Office of Biotechnology Activities, 6705 Rockledge Drive, Suite 700, Bethesda, MD 20892 (20817 for non-U.S. Postal Service mail), or faxed to 301-496-9839.

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Reps. Henry A. Waxman, Frank Pallone, Nathan Deal, and Jo Ann Emerson are giving another try at getting a pathway set for follow-on biologics.  They have introduced H.R. 1427, the “Promoting Innovation and Access to Life-Saving Medicine Act,” a bipartisan bill to allow the Food and Drug Administration to approve generic copies of biotech drugs.  The bill is similar to H.R. 1038, the Access to Life-Saving Medicine Act, that was introduced last year and failed.

Unlike traditional chemical drug approval, the Food and Drug Administration currently has no process for approving biogenerics, also called “follow-on biologics” and “biosimilars.” Generally, biotech drugs are more complicated than regular drugs because they are made from living cells or bacteria.

For a generic drug manufacturer to win approval of a generic version of a traditional prescription drug, the product must have the same active ingredient, strength, dosage form and route of administration as the original drug. This means that generic drugs are the exact same chemically as their brand name counterparts and they act the same way in the body.

According to a press release:

“While biologics are highly effective medications in the treatment of a host of debilitating and life-threatening medical conditions, biologic drugs often cost on average 22 times more per daily dose than chemical medications, the most expensive of which costs well over $100,000 per year,” said Rep. Deal. “It is expected approximately 50% of all drugs approved in 2010 will be a biopharmaceutical.”

Highlights of H.R. 1427:

FDA authority.  The bill authorizes the Food and Drug Administration to approve abbreviated applications for “biosimilar” and “biogeneric” (interchangeable) biological products.

Approval of “biosimilars.”  An application for a biosimilar version of a biological drug must demonstrate to FDA that there are no clinically meaningful differences between the two products.  The application must also show that the two products are highly similar in molecular structure and share the same mechanism(s) of action, if known.

Approval of “biogeneric” or “interchangeable” products.  An applicant for a biosimilar may also try to establish that the product is “biogeneric,” i.e., “interchangeable” with the original product.  A product found by FDA to be interchangeable can be safely substituted for the original product, if state law permits.  The bill grants 6 months of exclusive marketing to the first applicant to demonstrate interchangeability to FDA.

Clinical studies.  The FDA has full scientific discretion to determine what studies are necessary to establish that (a) a biosimilar is as safe and effective as the original product, and (b) a biogeneric is interchangeable with the original product.  FDA can require the applicant to conduct clinical studies in both instances.

Modified products.  An applicant may submit an abbreviated application for a product that differs from, or incorporates a change to, the original product, if the application contains sufficient information to show that the new product is safe, pure, and potent (safe and effective).

Post-market studies.  The FDA has full discretion to require post-market safety studies for biosimilars and biogenerics.

User fees.  A company that files an application for a biosimilar biological product must pay a user fee to FDA just as companies for innovative products do.

Initial exclusivity.  Consistent with Hatch-Waxman exclusivity periods, an original product with a novel molecular structure is entitled to only 5 years of exclusive marketing.  A modification of a previously approved product is entitled to just 3 years of exclusive marketing in some instances.

Exclusivity Extensions.  These periods can be extended by up to 1 year if the applicant establishes that the product can be used for a new disease indication or conducts pediatric studies.

Patent Disputes.  The bill establishes a procedure for resolution of patent disputes before a biosimilar is approved, and establishes penalties for failure to litigate patents in a timely fashion.

See reactions:

GPhA Statement on the Introduction of the Bipartisan Biogenerics Consensus Bill:

As our nation acts to strengthen our health care system, our priority must be to reduce costs while increasing access to quality care. Studies continue to show that creating a workable biogenerics approval pathway will not only bring life-saving medicines to patients in need, it will also save our health care system billions of dollars.

Biotechnology Industry Organization (BIO):  New Proposed Biosimilars Pathway Filled With Potholes:

The Biotechnology Industry Organization (BIO) continues to support strongly the development of a pathway for the review and approval of biosimilars.  Unfortunately, the legislation introduced today would take patients and our industry down the wrong path – a path that jeopardizes the continued development of new breakthrough therapies and potential cures for debilitating diseases such as multiple sclerosis, HIV/AIDS and Alzheimer’s.   This legislation sets a path that jeopardizes our ability to help meet President Obama’s call for a cure to cancer ‘within our time’ and help realize the promise of stem cell research.

This bill seeks to cut prices but instead cuts corners.  This proposal leads us off the map as we seek an effective, fair and safe pathway to a biosimilars market.

The legislation introduced today does not strike the necessary balance for patients or the economy.   Any biosimilars legislation must ensure safe and effective biosimilars, promote the continued development of new therapies and cures, and ensure the benefits of additional competition among biologics through the entry of biosimilars.

The bill has been endorsed by, among others, the Consumers Union, AARP, the National Organization of Rare Disorders, the Coalition for a Competitive Pharmaceutical Market, General Motors, Express Scripts, Inc, the National Business Group on Health, the AFL-CIO, and the SEIU.

Sens. Schumer, Collins, Brown, and Vitter are expected to introduce a bipartisan companion bill in the Senate in the near future.

More here:  Rep. Waxman Introduces Follow-On Biologics Bill; Legislation Hews Closely to Hatch-Waxman Exclusivity Paradigm

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The USPTO published a notice in the Federal Register that extends the period for public comment on deferred examination until May 29, 2009.  You now have plenty of time to put together that pithy memorandum with your thoughts on why the Patent Office should or should not park patent applications on a shelf for years in order to reduce their workload (known as the sweeping it under the rug maneuver).

Earlier, the USPTO hosted a roundtable discussion on the subject of deferred examination to get public input on the practice from diverse sources and differing view points. Participants included representatives from the American Intellectual Property Law Association (AIPLA), the Intellectual Property Owners Association (IPO), the U.S. Chamber of Commerce, the American Bar Association (ABA) and the Biotechnology Industry Organization (BIO), as well as members of academia and numerous IP attorneys.

Whether you think that a a deferred examination system would actually provide relief to the patent application backlog or would give rise to even more work  — and whether you think comments submitted will have any effect or not — you can submit comments should by electronic mail message over the Internet addressed to AC6comments@uspto.gov.

For more information, click here to see the Federal Register notice.

You can now see a fun-filled video of the roundtable discussion here.

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The Senate Committee on the Judiciary has scheduled a full committee hearing on “Patent Reform in the 111th Congress: Legislation and Recent Court Decisions” for Tuesday, March 10, 2009 at 10:00 a.m. in Room 226 of the Senate Dirksen Office Building.

The Patent Reform Act of 2009 legislation (S.515 and H.R.1260) is set to pick up where patent-reform efforts left off last year.

Witness List

Steven R. Appleton
Chairman and CEO
Micron Technology, Inc.
Boise, ID
Appleton Statement

Philip S. Johnson
Chief Intellectual Property Counsel
Johnson & Johnson
New Brunswick, NJ
Johnson Statement

David J. Kappos
Vice President and Assistant General Counsel
Intellectual Property Law and Strategy
International Business Machines Corporation
Armonk, NY
Kappos Statement

Taraneh Maghame
Vice President
Tessera, Inc.
San Jose, CA
Maghame Statement

Herbert C. Wamsley
Executive Director
Intellectual Property Owners Association
Washington, DC
Wamsley Statement

Mark A. Lemley
William H. Neukom Professor of Law
Stanford Law School
Stanford, CA
Lemley Statement

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The Innovation Alliance, a coalition claiming to be committed to improving patent quality while protecting and promoting innovation, claims that the court system has taken up patent reform on its own making it more difficult for innovators to obtain and enforce patent rights and thus making patent reform moot.

The group claims that when patent legislation was first introduced in 2005, advocates argued that the patent system was out of balance, with lax standards that yielded weak or overly broad patents and harsh remedies that gave so-called patent speculators too much bargaining power.

Since that time, a series of U.S. Supreme Court and Federal Circuit decisions have shifted the balance of power between patent holders and users, changing standards of patentability and narrowing patent rights and remedies. The Innovation Alliance is now urging Congress and the current Administration to consider carefully the impact of these decisions before rushing to enact patent legislation that may further weaken our knowledge-based economy.

The Innovation Alliance has a fact sheet summing up the changing case law since 2006 as follows:

eBay Inc. v. MercExchange LLC, 547 U.S. 388 (2006) (reversing Federal Circuit)

Permanent injunctions: Rejected “categorical rules” favoring or disfavoring permanent injunctive relief following a nonappealable judgment of infringement. In all cases, courts must retain equitable discretion to consider the merits of a request for permanent injunctive relief based on the traditional “four factor” test.

KSR v. Teleflex, 550 U.S. 398 (2007) (reversing Federal Circuit)

Obviousness: Rejected, in part, the Federal Circuit’s “TSM test,” which conditioned obviousness on a specific finding of some motivation, teaching or suggestion to combine prior art teachings, in the particular manner claimed. The Supreme Court left intact the TSM test as a general standard for evaluating obviousness but held that TSM is not the exclusive test for establishing obviousness. Instead, the Court endorsed a flexible and expansive approach to the obviousness inquiry in lieu of any rigid or narrow formula.  By making it easier to establish obviousness, KSR makes it more difficult to obtain patent protection in the first instance, and tougher to defend against invalidity challenges post-issuance.

MedImmune v. Genentech, 549 U.S. 118 (2007) (reversing Federal Circuit)

Declaratory judgment suits by licensees: Held that a licensee need not terminate or breach a patent license agreement before it can bring suit to obtain a declaratory judgment that the patent is invalid, unenforceable or not infringed. The Court rejected Federal Circuit precedent that a patent licensee in good standing cannot seek a DJ without first repudiating its license agreement.

Microsoft v. AT&T, 550 U.S. 437 (2007) (reversing Federal Circuit)    

Extraterritorial enforcement of U.S. patents: Held that a master software disk that is exported and then used by foreign computer manufacturers to install software at the point of assembly is not a component within the meaning of Section 271(f) of the Patent Act. Section 271(f) allows the holder of a U.S. patent to block the export from the United States of components that can be assembled abroad to produce an infringing product, even though the patent is not enforceable in the place where that assembly takes place.

Quanta Computer v. LG Electronics (2008) (reversing Federal Circuit)    

Scope of patent exhaustion defense: Held that the patent exhaustion defense applies (i) to patented method claims, and (ii) when the authorized/licensed sale of a product substantially embodies a patented invention.

In re Seagate Technology, 497 F.3d 1360 (Fed. Cir. 2007)    

Willfulness standard: Abandoned long-standing Federal Circuit precedent imposing an affirmative duty of care on accused infringers, and held that willful infringement requires at least a showing of objective recklessness.

In re Bilski, 88 USPQ2d 1385 (Fed. Cir. 2008)    

Subject matter eligibility of software/business methods: Narrowed the scope of patent-eligible software/business method patents under Section 101 to methods that are either tied to a particular machine or apparatus or that transform a particular article into a different state or thing (the “machine or transformation test”).  Bilski will make it more difficult to obtain patents for such methods and tougher to defend method patents against invalidity challenges and, in the process, drag in non-software/business method inventions including pharmaceutical and biotechnology patents.

In re TS Tech, Misc. No. 888 (Fed. Cir. 2008)    

Venue: Ordered transfer of venue from the Eastern District of Texas to the Southern District of Ohio. The fact that vehicles containing the allegedly infringing article are sold in the Eastern District of Texas does not provide a meaningful connection with the venue since such vehicles are sold throughout the United States.    Product sales are often the sole basis for asserting venue in this district.

So, what does this mean?  Is patent reform already enacted?

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