Patent Baristas

While not invited to the party in person, the Biotechnology Industry Organization (BIO) provided its written testimony on patent reform to the U.S. House of Representatives’ Committee on the Judiciary hearing on H.R. 1260, the “Patent Reform Act of 2009.”

The breakdown for the biotechnology industry looks like this: more than 7.5 million people employed; more than 300 biotechnology drugs and diagnostics created; another 400 or so biotechnology products in the pipeline.

All of this innovation is possible because of the strength and predictability provided by the U.S. patent system. Therefore, when considering changes to this system, we urge the Committee to consider carefully the cautionary language embraced by the Hippocratic Oath – first, do no harm.

BIO’s Views on Patent Reform

• BIO supports full funding for the agency responsible for granting patents – the United States Patent and Trademark Office (PTO).
• BIO supports expanded opportunities for members of the public to submit prior art during patent examination, and repeal of the judicially-created inequitable conduct doctrine.
• BIO supports a transition to a first inventor-to-file system that incorporates an appropriate “grace period.”
• BIO supports willful infringement reforms that would specify that the litigants must first resolve the validity and infringement of the patent before turning to willfulness.
• BIO supports, in principle, venue reforms that would discourage forum-shopping.
• BIO supports repeal of the Best Mode description requirement, which has no counterpart in foreign patent laws.
• BIO supports restoring a rebuttable presumption of irreparable harm and inadequacy of remedies at law when evaluating a request for a permanent injunction.

BIO’s Position on the Patent Reform Act of 2009

Expanded Post-Grant Reexamination: BIO opposes provisions in the bill that would broaden the grounds upon which a patent can be administratively challenged at any time during the life of the patent. If a patent can be easily challenged at any time under a low standard of proof – even years after the patentee and the public have come to rely on it, and years after biotech companies have invested hundreds of millions of dollars to bring a patented invention through clinical trials and regulatory approval – patents will have much less value, and investment predicated upon them will inevitably be diminished.

(The Senate Committee on the Judiciary recently amended S. 515, the Senate counterpart to the Patent Reform Act of 2009, to no longer include provisions allowing for ex parte or inter partes reexamination on the basis of “on sale” or “public use” prior art.

Apportionment of Damages: BIO also opposes the provision in the bill that would dramatically expand the situations in which a court would be forced into an “apportionment” process to determine what damages a patent owner should be awarded once a patent is found to be valid and infringed. Under current law, a guilty infringer of a patent has to pay the patentee damages adequate to compensate for the infringement, which may be the patentee’s “lost profits,” but are often limited to a “reasonable royalty.” In determining a reasonable royalty, courts follow a flexible set of factors, including the 15 outlined in the landmark Georgia Pacific case.

The Patent Reform Act of 2009 would introduce a new default rule for determining and applying reasonable royalty damages, forcing the courts to use an entirely new and uncertain standard that would directs courts to “ensure that a reasonable royalty is applied only to that economic value properly attributable to the patent’s specific contribution over the prior art.” Such an approach ignores the fundamental fact that virtually all inventions are, to some degree, premised on prior art, and that many patented components are essential to the intended functionality of the overall infringing product – two facts that are particularly applicable to biotech patents.

See the entire written testimony here.