Patent Baristas

I received a note about a new patent auction site, FreePatentAuction. There’s something very democratic and marketplace efficient in such systems but patent auctions are the kind of thing that fuel a lot of angst in the patent community. Critics worry that this will only appeal to potential plaintiffs (read: patent trolls) or to companies that want to take technologies off of the market. Even supporters doubt that they can easily bring the rights buyers and sellers together since each patent or portfolio is, by definition, quite unique. These are also hampered by the fact that it is extremely difficult to value such assets given their lack of liquidity.

FreePatentAuction caught my eye because, as it states on its site, “It’s Free: we do not charge you or anybody else for the service. FreePatentAuction is not a commercial venture.” Well, I like free but I wonder how they are going to stay in business. This reminds me a little of the First Citiwide Change Bank, which specializes in making change:

Bank Representative: All the time, our customers ask us, “How do you make money doing this?” The answer is simple: Volume. That’s what we do.

In looking around the FreePatentAuction site, you see that the technologies are quite diverse. Some seem reasonable like the utility patent on snap-together socks offered at $29,000 (see U.S. Pat. No. 6,185,751). I think this would be good for my kids in putting their socks together but I wonder if the novelty would wear off quickly.

But other patents are not so grounded in reality, like one offer for a design patent (note, not only is this not a utility patent, it is only patent pending). This design is for a picture frame described as “pictures are arranged consecutively; in a loop” and the “unit displays up to 11 pictures that rotate via a series of internal rollers; pictures moves to each position along rail slots or pulleys.” And the best part is that this can all be yours for a mere $10,000,000. OK.

On the upside, FreePatentAuction.com is easy to use, nonexclusive and free to both sellers and buyers. In fact, the site doesn’t even have a mechanism for knowing is a sale has transpired. So, I guess there is little harm in using the service. At the very least, the site may provide your invention with some extra exposure needed to attract investors. I have to believe, though, that the value will only come with some better ability to separate the wheat from the chaff.

Other patent auction sites have shown some success. The Ocean Tomo patent consulting firm plans to hold auctions twice a year. At the last auction, 26 of the 78 patent portfolios put up for sale were sold off to buyers. The total amount was a little more than $3 million, and many of the patent portfolios sold for around $11,000. Bidding on 52 of the lots offered failed to meet the seller’s minimum and were withdrawn. However, five additional lots of patents sold after the auction for $5.4 million. They charge a set fee ranging from $1,000 per single patent listing without reserve to $6,000 per patent pool listing with reserve.

Note: If you’ve used these or any other patent auction service, please email us and let us know your opinions so we can report back on your stories.

David Fischer of the Antitrust Review brings in Blawg Review #67 with a review of the latest big topics including Ted Stevens’ internet sending, Reed Smith’s firing of Denise Howell of Bag and Baggage and the dangers of broadcasting a presidential slip.

We preferred learning about testing golfers for steroids. I guess some Schwartzengolfspieler could hit the ball farther but I don’t see how steroids would correct a slice. We would just add our own sweet nod to Floyd Landis’ historic comeback in claiming of the maillot jaune on a bum hip.

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!

As I was scrolling through i-Tunes looking for some summer music to download, I happened to come across the song “Buttons” at almost the same time the news reports had come on reporting that the Senate, in a 63-37 vote, gave final approval to expanding federal funding for embryonic stem-cell research, which many scientists believe offers the potential for finding cures for Parkinson’s, diabetes and other illnesses that afflict millions of Americans. While the strength of this vote in a Republican-based senate is rather amazing, this falls just 4 votes short the two-thirds majority that would be needed to override Bush’s veto. The President however, left little doubt he would reject the bill despite late appeals on its behalf from fellow Republicans Nancy Reagan and Arnold Schwarzenegger.

Embryonic stem cells are essentially master cells, able to morph into all the cell types found in the body. If scientists could learn to control these cells and coax them into becoming specific types on demand, they could grow replacements for damaged tissue. The idea is to use this process still theoretical to cure or treat a raft of diseases and injuries, from diabetes to Alzheimer’s and spinal cord damage.

Senate supporters of the bill likened that logic to opposition suffered by Galileo, Christopher Columbus and others who were rebuked in their time but vindicated later.

Schwarzenegger (governor, R-CA) wrote, “I urge you not to make the first veto of your presidency one that turns America backwards on the path of scientific progress and limits the promise of medical miracles for generations to come.”

House Majority Leader John Boehner, R-Ohio, disagreed, predicting that science soon would find a less controversial way to develop equally promising cell therapies. “I don’t think it will be an issue in the future,” he said. “I think science is moving way down the road in a big hurry where this will no longer be an issue.” I personally find such remarks to be disingenuous and naïve. You don’t just predict something in order to make it happen.

Rick Santorum R-Pa.,who voted against the bill, went so far as to say that he thought many scientists lack sufficient moral standards.

We all know that President Bush has said that he’ll veto this bill Wednesday (tomorrow). It will be his first veto since he took office in 2001. He opposes the research because it involves destroying human embryos, which he considers taking life, White House Press Secretary Tony Snow said Tuesday. This continues to be a very difficult question of politics, morality and science, which many, including the President struggle with. Within hours of Bush’s veto, the House of Representatives will vote to override it, but it’s certain to fall short of the two-thirds majority needed.

The president and his followers risk alienating many Americans — and a chunk of their rank-and-file — who support stem cell research using human embryos. Stem cell research funding is all but certain to be a political issue heading into the 2008 presidential campaign as many scientists continue to press the federal government to act because existing stem cell lines are unsuitable for clinical trials.

Polls show as much as 70 percent public support for embryonic stem cell research. Have the Republicans lost touch with the majority of the voting electorate that put them in majority positions in the Senate and House for so many years?

And, have the results of this Senate vote simply served to get the hopes up of the American stem cell researchers (again) into thinking that they might actually be able to finally obtain US Federal funding for their research rather than have to take this research to other countries?

“I’m tellin’ you loosen up my buttons babe
But you keep frontin’ me
Sayin’ what you gon’ do to me
But I ain’t seen nothin’

I’m tellin’ you loosen up my buttons babe
But you keep frontin’ me
Sayin’ what you gon’ do to me
But I ain’t seen nothin’ ”

Buttons (Pussycat Dolls)

The Federal Circuit has held that a licensee in good standing cannot bring suit in federal court seeking a declaration that the licensed patent is invalid or unenforceable. I think that’s right, and I’ve written an amicus brief that I am writing on behalf of law professors (mostly IP types) to file with the Supreme Court in favor of the respondents’ position. I’d love to have your feedback on the brief.

To me, it’s a simple lack of statutory basis for jurisdiction, but I also think that as a matter of policy — were this an issue for the courts — that allowing a licensee in good standing to sue for a declaration of invalidity without at the same time incurring liability as an infringer is a very bad idea. It will, I think, lead to less patenting and less licensing, at least at the margins.

Thoughts?

Today’s post comes from Guest Barista David Hricik, an Associate Professor of Law with the Walter F. George School of Law, Mercer University, in Macon, Georgia.