Patent Baristas

Senators Kennedy, Hatch, Clinton, and Enzi announced legislation authorizing the FDA to approve a follow-on version of biologic therapies. The legislation, the Biologics Price Competition and Innovation Act of 2007, includes standards for the FDA to approve follow-on biologics as well as a period of exclusivity for the brand name drug company.

The draft compromise bill tries to resolve some of the sticky issues surrounding the extent of trials a follow-on biologic would need prior to approval, whether a biosimilar could be deemed an interchangeable alternative to a brandname biologic, and the length of time an innovator biologic would be protected from competition.

A biologic is manufactured in a living system such as a microorganism, or plant or animal cells. Most biologics are very large, complex molecules or mixtures of molecules while a small molecule drug is typically manufactured through chemical synthesis. It is difficult to characterize a complex biologic by testing methods available in the laboratory. Therefore, for biologics, the product may be too closely tied to the process to separate the two.

Unlike small molecule drugs, which are approved under the FDCA, most biologics are approved under the Public Health Service Act (PHSA). The FDCA provides a framework for approving generic copies of small molecule drugs, but no commensurate legal framework is currently in place for approving follow-on biologics either under the FDCA or under the PHSA. The complexity of biologics makes it impossible to analyze them in a laboratory to the degree possible with chemical drugs, and to show without clinical trials that one biologic has the same safety and effectiveness profile as another.

To be approved as a generic, a drug must have the same active ingredient, strength, dosage form, and route of administration as the reference drug, and it must also be “bioequivalent.” This means that generic drugs are the same chemically as their innovator counterparts and that they act the same way in the body. The bioequivalence of the generic drug is demonstrated through relatively simple analyses such as blood level testing, without the need for human clinical trials. In approving a generic drug under 505(j) of the FDCA, FDA determines that the generic is “therapeutically equivalent” to the innovator drug, and is interchangeable with it.

FDA has stated that it has not determined how interchangeability can be established for complex proteins. Historically, FDA has permitted interchangeability only when two products are “therapeutic equivalents.” However, when the follow-on manufacturer establishes a new manufacturing process, beginning with new starting materials, it will produce a product that is different from and not therapeutically equivalent with that of the innovator. Because of the complexity of biologics, the only way to establish whether there are differences that affect the safety and effectiveness of the follow-on product is to conduct clinical trials.

Recent approvals of follow-on biologics by the FDA have been limited to those few biotechnologically derived products such as human growth hormone and certain insulin products approved under the New Drug Approval provisions of the Food, Drug, and Cosmetic Act, such as Novartis’ Sandoz approval of a 505(b)(2) NDA for its Omnitrope® version of Pfizer’s Genotropin® human growth hormone. While not a true generic application, a 505(b)(2) NDA allowed Sandoz to submit less than a full NDA. The FDA has previously taken the position that it lacks the authority to approve generic biologics under the PHSA.

The Act amends section 351 of the Public Health Service Act to provide for an approval pathway for safe biosimilar and interchangeable biological products (relying in part on the previous approval of a brand product) while preserving the incentives that have fueled the development of these life-saving medicines.

Approval Process

A biosimilar applicant is required to demonstrate that there are no clinically meaningful differences in safety, purity and potency between its product and the brand product. A demonstration of biosimilarity includes analytical data, animal testing and one or more clinical studies, unless such a requirement is determined by the FDA to be unnecessary.

FDA may approve a biosimilar product as interchangeable, meaning it can be substituted for the brand product without the intervention of the health care provider who prescribed it. Showing interchangeability requires evidence that the biosimilar product will produce the same clinical result as the brand product in any given patient and that it presents no additional risk in terms of safety or diminished efficacy if a patient alternates or is switched between products.

The legislation allows, but does not require the FDA to issue guidance documents to inform with the public of the standards and criteria the agency will use in approving biosimilar and interchangeable products. Development of these guidance documents will require public input. Applications can be filed in the absence of guidance documents.

Exclusivities

The Act provides incentives for the development of both new life-saving biological products and interchangeable biosimilar products: 12 years of data exclusivity for the brand company during which a biosimilar product may not be approved, and 1 year of exclusivity for the first interchangeable biological product.

Patent Resolution

The legislation includes a multi-step process to identify and resolve patents that the biosimilar product may infringe. The biosimilar applicant must provide its application and information about its manufacturing process to the brand company. A series of informational exchanges then occur in which the biosimilar applicant and the brand company identify patents in question and explain their views as to their validity or infringement.

The two parties then either agree to a list of these patents to be litigated first or exchange lists when they can’t, and the brand company must then sue the biosimilar applicant within 30 days to defend them. If the brand company wins a final court decision that a patent is valid and infringed by the biosimilar product before the 12 year data exclusivity has run, the court must enjoin infringement of the patent until it expires. For identified patents not included in this initial litigation, the biosimilar applicant must give the brand company notice 180 days before it intends to launch its product, and the brand company may then seek a preliminary injunction to block the launch.

If the brand company fails to identify a patent, it can’t later enforce it against the biosimilar product. If it fails to defend a patent identified for initial litigation, the brand company may only later receive a reasonable royalty. If the biosimilar applicant fails at any step to do what it is required to do, the brand company may immediately defend its patents.

Legal Issues

The FDA has taken the position that each biologic is unique and inexorably linked to and inseparable from the manufacturing processes used in its creation. Complex operational and proprietary details of the manufacturing processes are central to and define the identity and unique molecular safety and effectiveness attributes of each biologic. Even if it were possible to establish “sameness” of biologics without clinical trials, it might be necessary for agency reviewers to examine trade secret data concerning the manufacturing processes of the innovator to perform a comparative assessment about “sameness.”

The bill is likely to be approved by the Senate Health, Education, Labor and Pensions Committee when it meets on June 27th.

Press statement: http://help.senate.gov/Maj_press/2007_06_22_a.pdf

Read the draft legislation here: Biologics Price Competition and Innovation Act

In a sign of “piling on”, more than 200 organizations and businesses have signed on to a letter to Chairman Leahy, Chairman Conyers, Chairman Berman, Senator Specter, Representative Smith, and Representative Coble of the Committee on the Judiciary regarding patent reform bill.

The group voiced serious concerns with certain provisions of The Patent Reform Act of 2007, S. 1145 and H.R. 1908 stating that “While we share the goal of making America more innovative and competitive, we find that certain aspects of the legislation will inadvertently accomplish the exact opposite by undermining the value of patents.”

Re-stating concerns with the patent bill, the group urged:

1. Removal of language pertaining to the apportionment of damages;
2. Removal of the open-ended post-grant review process;
3. Removal of rulemaking authority for the Patent and Trademark Office; and
4. The inclusion of a more flexible grace period.

Of particular note are signers:

– Association of University Technology Managers

– Biotechnology Industry Organization

– CropLife America

– Institute of Electrical and Electronics Engineers (IEEE-USA)

– Medical Device Manufacturers Association

– NanoBusiness Alliance

– Small Business Exporters Association of the United States

– Small Business Technology Council

– Center for Small Business and the Environment

– Multiple small and large businesses, universities and venture capital funds.

See the full letter here:  200 Letter on Patent Reform

The U.S. Court of Appeals for the Federal Circuit held that claims with a means plus function limitation – here a “control means” — where there is no corresponding structure described in the specification, are invalid. See, Biomedino, LLC v. Waters Technologies Corporation (2006-1350).

Biomedino, LLC had appealed from a lower court decision that claims 13-17 and 40 of U.S. Pat. No. 6,602,502 are invalid for indefiniteness under 35 U.S.C. § 112 para. 2.

Essentially this case asks the question: for purposes of § 112 para 6, is sufficient corresponding structure disclosed when the specification simply recites that a claimed function can be performed by known methods or using known equipment where prior art of record and the testimony of experts suggest that known methods and equipment exist?

The court concluded that the inquiry is whether one of skill in the art would understand the specification itself to disclose a structure, not simply whether that person would be capable of implementing a structure.

Section 112, 6 of Title 35 of the United States Code permits an applicant to express a claim limitation as a means or step for performing a specified function without claiming the structure that performs the function:

An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.

In Valmont Industries, Inc. v. Reinke Manufacturing Co., the Federal Circuit held that § 112, 6 permitted “broad means-plus-function language, but provided a standard to make the broad claim language more definite[: ] . . . [t]he applicant must describe in the patent specification some structure which performs the specified function.” 983 F.2d 1039, 1543 (Fed. Cir. 1993).

The claim at issue is:

13. A device comprising a passage; binding means in said device for binding a species substantially specifically, said binding means being in fluid communication with said passage; exposure means in said device for exposing said species to said binding means and for preventing said binding means from leaving said device; closed regeneration means for separating said species from said binding means for reuse of said binding means in said device; valving for selectively connecting said closed regeneration means in fluid communication with said binding means, and control means for automatically operating said valving.

The district court held that if a claim element contains the term “means” and recites a function, there is a presumption that § 112, 6 applies. After deciding that the word “control” did not identify any structure in particular, the district court looked to the specification. However, the only references in the specification to the “control means” are a box labeled “Control” in Figure 6 and a statement that the regeneration process of the invention “may be controlled automatically by known differential pressure, valving and control equipment.”

From this, the district court concluded:

The specification says nothing more than that unspecified equipment may be used to control the regeneration process. The fact that one skilled in the art could envision various types of equipment capable of automatically operating valves does not change the fact that no structure capable of performing that function was disclosed by the inventor.

Therefore, the court held that “[t]he failure to disclose a structure corresponding to the ‘control means’ function makes claims 13-17 and claim 40 of indefinite scope in violation of § 112, 2 of the Patent Act.”

Biomedino argued that use of the term “control” to describe “means” takes the phrase “control means” outside of § 112, 6 asserting that “control means” recites sufficient structure on its own such that it obviates the need for § 112, 6. Basically, Biomedino argued that a “control” is a precise structure well understood by those of skill in the art, and thus, the word “means” in claims 13 and 40 can be ignored. Additionally, Biomedino tried to argue that “control” is analogous to the term “controller” and conveys, to one skilled in the art, structure for controlling the valves and other equipment.

Unfortunately, the Federal Circuit just wasn’t buying their revisionist history. The Court went against the patentee stating that:

When a claim uses the term “means” to describe a limitation, a presumption inheres that the inventor used the term to invoke § 112, 6. Altiris, Inc. v. Symantec Corp., 318 F.3d 1367, 1375 (Fed. Cir. 2003). “This presumption can be rebutted when the claim, in addition to the functional language, recites structure sufficient to perform the claimed function in its entirety.” Id. Claims 13 and 40 recite no such structure. As the district court noted, the “reference to ‘control’ is simply an adjective describing ‘means:’ [sic] it is not a structure or material capable of performing the identified function.” Biomedino, slip op. at 12. We agree with the district court and hold that Biomedino has not rebutted the presumption that § 112, 6 applies to “control means.”

Once a court concludes that a claim limitation is a means-plus-function limitation, two steps of claim construction remain: 1) the court must first identify the function of the limitation; and 2) the court must then look to the specification and identify the corresponding structure for that function. Med. Instrumentation, 344 F.3d 1205 at 1210. If there is no structure in the specification corresponding to the means-plus-function limitation in the claims, the claim will be found invalid as indefinite. See Atmel, 198 F.3d at 1378-79 (citing In re Donaldson, 16 F.3d at 1195).

The court did throw patentees a bone stating that:

While the specification must contain structure linked to claimed means, this is not a high bar: “[a]ll one needs to do in order to obtain the benefit of [§ 112, 6] is to recite some structure corresponding to the means in the specification, as the statute states, so that one can readily ascertain what the claim means and comply with the particularity requirement of [§ 112,] 2.” Atmel, 198 F.3d at 1382. Additionally, interpretation of what is disclosed in the specification must be made in light of the knowledge of one skilled in the art. Id. at 1380.

See the entire opinion here: Biomedino CAFC Opinion

Jim Harlan, Patent Counsel at Siemens Automation and Drives, UGS PLM Software (and former Blawger Bowl III competitor), has gone wild and started a new patent blog, Patents Gone Wild. The site features Jim’s thoughts/musings on the business impact patents play as an intangible asset.

One recent post asks about the ramifications of the Indian Patent Act, which requires that anyone (including corporations) resident in India who wish to file a patent abroad, say the US, must first obtain a foreign filing license from the Indian Government.

Jim asks:

What does that mean for a US Corp that utilizes developers in India, where those developers are potentially inventors?

Does this include Provisional Applications?

In the US, the inventors are the applicants, but in India the Corp is the applicant. What effect does that have on the process?

I would be interested in hearing the opinions of patent practitioners in India on these questions.

Update on 09/19/07:

Due to a cease and desist letter from a certain company using the words “Gone Wild” in their name, Jim has moved Patents Gone Wild to a new site:  Feral Patents 

After refusing to die easy on its bid to put out a generic version of Plavix, Apotex was handed its hat by the district court. Sanofi-Synthelabo v. Apotex Inc., 02cv2255, U.S. District Court, Southern District of New York.

Granting a permanent injunction, U.S. District Judge Sidney Stein held that Apotex failed to prove by clear and convincing evidence that the Sanofi-Synthelabo patent on Plavix — U.S. Pat. 4,847,265 — is invalid or unenforceable on any of the grounds asserted.

Plavix® (clopidogrel bisulfate) is a platelet aggregation inhibiting agent used to reduce thrombotic events such as heart attacks and strokes. The active ingredient in Plavix® is the bisulfate salt of the d-enantiomer of the free base methyl alpha-5-(4,5,6,7-tetrahydro(3,2-c)thienopyridyl)-(2-chlorophenyl) acetate (MATTPCA), which is specifically recited in claim 3 of the ’265 patent.

Apotex had filed an Abbreviated New Drug Application (“ANDA”) pursuant to the Hatch-Waxman Act seeking FDA approval to manufacture and sell a generic version of clopidogrel bisulfate. When Apotex filed a Paragraph IV certification with its ANDA asserting that the ‘265 patent is invalid, Sanofi sued Apotex on the ‘265 patent.

The parties had negotiated a settlement agreement that provided for actions in the event that the settlement failed to receive regulatory approval. But, after state attorneys general said they would not approve the settlement, litigation resumed.

Pursuant to the agreement, Apotex launched its generic clopidogrel bisulfate product on and Sanofi filed for a preliminary injunction and requested a recall of Apotex’s products that were already distributed. The district court granted the motion for injunctive relief but denied the request for recall even though Apotex had already shipped a six-month supply of its product to distributors in the US.

Apotex counterclaimed, asserting that the ‘265 patent was invalid for three separate reasons and unenforceable as well:

1. That the ‘265 patent is anticipated pursuant to 35 U.S.C. § 102(b) by an earlier patent held by Sanofi that covered a genus of chemical compounds called thienopyridines, within which clopidogrel bisulfate falls.
2. That pursuant to 35 U.S.C. § 103, the subject matter claimed in the ‘265 patent would have been obvious to a person of ordinary skill in the art at the time the invention was made.
3. That the patent is invalid under the judicial doctrine of obviousness-type double patenting.
4. That the ‘265 patent is unenforceable on the basis of Sanofi’s alleged inequitable conduct before the U.S. Patent and Trademark Office, i.e., failing to name Dr. Jean-Pierre Maffrand as an inventor, making false statements to the PTO regarding the unexpected pharmacological properties of clopidogrel bisulfate, failing to disclose relevant prior research that Sanofi had conducted on a similar chemical compound, and failing to disclose a journal article that Apotex alleges is a material prior art reference.

The court came down hard on Apotex and let them know that none of these assertions would fly. In its findings, the court stated:

Having conceded infringement, Apotex bears the burden of proof because “[a] patent shall be presumed valid,” and “[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” 35 U.S.C. § 282. To overcome this presumption of validity at trial, “the party challenging a patent must prove facts supporting a determination of invalidity by clear and convincing evidence.”

The court noted that this is a “heavy burden,” … because clear and convincing evidence “proves in the mind of the trier of fact ‘an abiding conviction that the truth of [the] factual contentions [is] highly probable.'” The burden of showing invalidity is “especially difficult” when “the infringer attempts to rely on prior art that was before the patent examiner during prosecution.” … Here, not only was the prior art patent – the ‘596 patent – before the patent examiner during the prosecution of the ‘265 patent, but also the very same patent examiner, Bernard Dentz, approved both the ‘596 patent and the ‘265 patent.

In its decision affirming this Court’s grant of a preliminary injunction in favor of Sanofi, the Federal Circuit found that “the plain language of claim 2 [of the ‘596 patent] only recites the free base, MATTPCA, and does not expressly describe the dextrorotatory or levorotatory enantiomers or any salt. Because claim 2 [of the ‘596 patent] fails to describe each and every limitation of claim 3 [of the ‘265 patent] on its face, claim 2 does not anticipate claim 3.” Sanofi-Synthelabo v. Apotex, Inc., 470 F.3d 1368, 1376 (Fed. Cir. 2006), reh’g denied, 2007 U.S. App. LEXIS 2807 (Fed. Cir. Jan. 19, 2007). Nothing in the trial record changes the plain language of the patents, and this Court therefore reaches the same conclusion on a complete record as this Court and the Federal Circuit reached on a more limited record: Claim 2 of the ‘596 patent does not expressly describe clopidogrel or its bisulfate salt. The Court also finds that Example 1 does not expressly describe clopidogrel bisulfate – there is no explicit reference to the enantiomers of PCR 4099 in that example and the particular salt described is the hydrocholoride, not the bisulfate.

The more difficult question is whether the additional limitations – namely the dextrorotatory enantiomer and its bisulfate salt – are inherently described elsewhere in the ‘596 patent. “Inherent anticipation requires that the ‘missing characteristic is necessarily present, or inherent, in the single anticipating reference.'”

Claim 1 of the ‘596 patent claims a general formula and specifies that the compounds covered by that formula include: their addition salts with pharmaceutically acceptable mineral or organic acids . . . including both enantiomeric forms or their mixture. ‘596 patent at col. 13, ll. 8-19. The parties have stipulated that clopidogrel bisulfate is a compound within the genus of Claim 1 of the ‘596 patent.

Claim 8, which is also relevant, reads as follows: A therapeutic composition having blood-platelet aggregation inhibiting activities and anti-thrombotic activities containing an effective amount of a compound of claim 1, or an addition salt thereof with a pharmaceutically acceptable mineral or organic acid or with mineral bases, or one of the two enantiomers or their mixture and a pharmaceutically acceptable carrier.

In the end, the court held that:

Apotex’s argument, however, is ultimately unpersuasive. First, it is undisputed that “[a] prior art reference that discloses a genus still does not inherently disclose all species within that broad category.” Metabolite Labs., Inc. v. Lab. Corp. of Am. Holdings, 370 F.3d 1354, 1367 (Fed. Cir. 2004); see also Atofina, 441 F.3d at 999. In essence, patentability is not precluded by the fact that an inventor has identified or selected a single compound with particularly desirable qualities from a large class of previously patented compounds.

Although clopidogrel bisulfate concededly falls into the broad genus disclosed by Claims 1 and 8 – a genus which includes millions of possible compounds – a person of ordinary skill in the art would need to engage in impermissible “mechanistic dissection and recombination” of those disparate elements to arrive at the particular combination that is clopidogrel bisulfate.

The Court also refused to buy Apotex’ argument that clopidogrel bisulfate was rendered obvious by the ‘596 patent because, after gaining familiarity with that patent, a person of ordinary skill in the art would have viewed as obvious the active enantiomer of PCR 4099 in the form of each of the three salts used for ester compounds in the examples of the ‘596 patent – namely, the hydrochloride, bisulfate and hydrobromide.

Apotex tried arguing that the results were not unexpected and urged that the recent decision of the Federal Circuit, Pfizer, Inc. v. Apotex, 480 F.3d 1348 (Fed. Cir. 2007), would yield a different conclusion in this case. The Court, however, distinguished the present case from Pfizer since after obtaining that patent, Pfizer discovered that the maleate salt, for unforeseen reasons, was not suitable for the commercial manufacture of tablets due to stickiness and tablet degradation. The chemists at Pfizer attributed those problems to the particular chemical structure of the maleate salt – a reactive double bond in the maleate anion – which made the salt susceptible to degradation. In this case, there were no structural features that would have guided selecting any specific acid.

While Apotex will surely file an appeal with the federal circuit, it doesn’t seem likely that the outcome will change. The federal circuit already found a “a reasonable likelihood of its success on the merits” in favoring issuance of a preliminary injunction.

See the full opinion here:  Sanofi v. Apotex Opinion

Chief Justice Paul Michel of the U.S. Court of Appeals for the Federal Circuit wrote to Senator Patrick Leahy, Chairman of the Committee on the Judiciary regarding patent reform. He notes the differences between the Section 10 (b) Interlocutory Appeals of the bill and the appeals already authorized under section 1292(b) of title 28. The bill would add to section 1292(b) a discretionary, second avenue of appeal in cases where claim construction was not outcome-determinative.

While urging that some may believe that these two avenues of pre-trial appeals are sufficient, Michel urged the Committee that if it determines there is a need for a third such avenue, it might consider alternatives to the present provision in Section 10:

For example, the third avenue of appeal could be limited to cases in which, despite the absence of a grant of summary judgment, the trial court determines that claim construction will likely control the verdict on infringement. Under such a provision, the number of interlocutory appeals on this third avenue would, I expect, be far fewer than under the provision as currently drafted. The current language makes automatically appealable any order “determining the construction of claims.” The parties in typical patent infringement cases dispute several claim terms in many claims, often involving many different patents. Whatever the trial judge determines, one or both parties are nearly always unhappy with one or more terms as construed by the district court.

Michel notes that the CAFC currently receives about 500 infringement appeals per year and that number could double under the bill as currently drafted. Concurrently, the average patent infringement appeal takes 11 months to get an opinion, which could double.

With regard to Section 5 of the Patent Reform bill, on apportionment of damages when calculated as a reasonable royalty, the current language requires the court to conduct a tediuous macroeconomic analysis. Currently, damages in patent cases are governed by section 284, which states in relevant part:

Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.

The Patent Reform Act of 2007 (S. 1145) would add the following provisions to 35 U.S.C. §284:

(2) RELATIONSHIP OF DAMAGES TO CONTRIBUTIONS OVER PRIOR ART. -The court shall conduct an analysis to ensure that a reasonable royalty under paragraph (1) is applied only to that economic value properly attributable to the patent’s specific contribution over the prior art. … The court shall exclude from the analysis the economic value properly attributable to the prior art, and other features or improvements, whether or not themselves patented, that contribute economic value to the infringing product or process.

Michel writes:

The language of Section 5 seems drawn from a 30-year-old district court decision in George Pacific. That case is cited frequently, but simply because it comprehensively lists various factors that in different cases may be relevant to determining damages. Of 15 numbered factors, the bill contains only Factor 13, ignoring the rest. The caselaw, moreover, does not require application of that factor in every litigation, but Section 5 would.

The analysis requires determining the economic value of all prior art technology and the economic value of everything in the accused product or process not attributable to the asserted patent. The provision then appears to require that the base for calculating the reasonable royalty be determined by subtracting from sales figures both the value of the prior art and a portion of the value of the accused product or process in order to arrive at the “economic value property attributable to the patent’s specific contribution over the prior art.” The phrase “specific contribution” is not defined. Reading the phrase, I am very uncertain what it is intended to mean. The likelihood is that litigants would disagree as to its meaning and it might take the courts years to clarify it. Meanwhile, if settlements diminish, possible swamping the courts with increased cases, intolerable delay, and uncertainty may ensue. In addition, if interpreted to require the court to identify which limitation(s) among many in each claim embodied the “specific contribution” of the patented invention to the prior art, we would have to embark on an new and difficult task. Assigning a dollar value to the limitation(s) that made the claim allowable would likewise present new and difficult challenges

In addition, the bill requires this massive analysis in every case. Under current practice, apportionment of damages is infrequently invoked. Present law requires the accused infringer to establish a basis for such apportionment. It is attempted in only a limited number of cases and successful in still a smaller number of cases. By contrast, Section 5 requires such analysis in every case. Further, because it does not assign a burden of proof to either party, it is unclear who would call the witnesses and submit the documents needed. Since the provision begins with the phrase “the court shall conduct,” it may be that the trial judge would have to call the witnesses as his own, even though that would be totally out of keeping with his normal, neutral role. And, if the evidence is inconclusive, which party loses?

The language of Section 5 seems drawn from a 30-year-old district court decision in George Pacific. That case is cited frequently, but simply because it comprehensively lists various factors that in different cases may be relevant to determining damages. Of 15 numbered factors, the bill contains only Factor 13, ignoring the rest. The caselaw, moreover, does not require application of that factor in every litigation, but Section 5 would.

See the Michel Letter here: leahy-specter-ltr-6-13-07.pdf

Chief Justice Paul Michel of the U.S. Court of Appeals for the Federal Circuit wrote late last week to Shanna Winter, Howard Berman’s staff in charge of patent reform. Michel expressed concerns regarding determining damages in patent infringement cases under the reasonable royalty language of the Patent Act.

Michel references an article by patent litigator William Rooklidge regarding how such damage theories are actually litigated in court. Rooklidge argues that “the proposed legislation would not codify existing law, and in fact would make substantial changes destructive to the patent system.”

Currently, damages in patent cases are governed by section 284, which states in relevant part:

Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.

The law addresses calculating such royalty based on The “entire market value rule,” which recognizes that the economic value added to a product or process by a patented feature may be greater than the value of the feature alone.

The other method is by “apportionment” such that courts should consider “[t]he portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer” when apportioning damages. But, the burden is on the accused infringer to establish that damages should be apportioned.

The Patent Reform Act of 2007 (S. 1145) would add the following provisions to 35 U.S.C. §284:

(2) RELATIONSHIP OF DAMAGES TO CONTRIBUTIONS OVER PRIOR ART. -The court shall conduct an analysis to ensure that a reasonable royalty under paragraph (1) is applied only to that economic value properly attributable to the patent’s specific contribution over the prior art.  …  The court shall exclude from the analysis the economic value properly attributable to the prior art, and other features or improvements, whether or not themselves patented, that contribute economic value to the infringing product or process.

Michel writes:

If the House Judiciary Committee intends to continue the damages law as currently practiced, after decades of refinement in individual court decisions, it need do nothing. This body of law is highly stable and well understood by litigators as well as judges. If, on the other hand, the Congress wishes to radically change the law, I suggest that a far more carefully-crafted and lengthy provision would be required. Like the body of caselaw, such a provision would need to account for many different types of circumstances, which the present provision does not.

In my opinion, plucking limited language out of the long list of factors summarized in the Georgia Pacific case that may be relevant in various cases is unsatisfactory, particularly when cast as a rigid requirement imposed on the court, and required in every case, rather than an assignment of a burden of proof under a clear standard of proof imposed on the party that should bear that particular burden, and that would only arise in a rare case. As I said, under current caselaw, the burden of apportioning the base for reasonable royalties falls on the infringer, while the burden for application of the Entire Market Value Rule falls on the patentee. In most cases, apportionment is not an issue requiring analysis.

Further, as I also attempted to explain, the present bills require a new, kind of macroeconomic analysis that would be extremely costly and time consuming, far more so than current application of the well-settled apportionment law. Resulting additional court delays would be severe, as would additional attorneys’ fees and costs. Many view current delays and costs as intolerable.

See the Michel Letter here:  Michel Letter on Damages

See the Rooklidge report here:  Michel Letter on Damages

As the Patent Reform Bill of 2007 (S. 1145) makes it’s way through Congress, Senators Coburn, Grassley, Kyl, Sessions and Brownback letter to Senator Patrick Leahy, Chairman of the Committee on the Judiciary. Note that a majority of the a majority of the Senate Judiciary Committee Republicans co-signed the letter.

Basically, the group beleives that believe that recent testimony at the hearing reflected the need for further discussion among members, staff, the Patent and Trademark Office, the Department of Justice, and stakeholders. Therefore, they are asking that the Committee not move the patent reform bill until they have had time to work through certain issues.

The letter states:

We believe that more hearings are necessary to adequately address a number of important issues with broad implications for our economy. Specifically, we believe that the issue of mandatory apportionment of damages, post-grant opposition, and broad rulemaking authority for USPTO need to be more carefully examined to ensure that they do not undermine innovation, increase frivolous litigation, or undermine property rights. Many prominent American businesses on the cutting edge of innovation are expressing concerns about the impact of sweeping patent reform. These concerns merit thoughtful deliberation, and we believe that more hearings will help to inform the committee before we proceed to markup.

See the entire letter here:  Patent Reform Letter to Leahy