Patent Baristas

As if you didn’t know already, the H5N1 strain of avian flu has been sweeping through poultry populations in Asia since 2003, infecting humans and killing at least 65 people, mostly poultry workers. The virus does not pass from person to person easily, but experts fear the virus could mutate. The 1918 influenza pandemic killed more than 40 million people. Subsequent pandemics in 1957 and 1968 had lower death rates, but caused extreme disruption.

Now, some health experts believe governments should consider forcing compulsory licensing. That is, to ignore Roche’s patent protection on the drug to make up for the Swiss company’s inability to cope with demand during a pandemic. The drug is already in short supply following fears of a possible epidemic. But the Swiss pharmaceutical company Roche Holding AG, which makes Tamiflu, has refused to license generic versions of the drug despite pressure from several countries and United Nations Secretary General Kofi Annan.

Cipla Ltd., the third-largest drug company in India, said it plans to bring a generic version of the anti-influenza drug Tamiflu into the market early next year, filling any potential shortages in event of a bird flu epidemic. Cipla Chairman, Y.K. Hamied, told Reuters: “We have finalized a process a few weeks ago, and now we are starting manufacture.” However Roche has said the 10-step year-long production method of Tamiflu was too complex to be outsourced to other companies to boost supplies, and it would take other companies up to three years to be ready to produce the drug.

Roche will not be able to meet demand for its antiviral drug Tamiflu if an avian flu pandemic breaks out. Although Roche is well aware of the likelihood that demand for Tamiflu would surge during a bird flu pandemic, not just in Hong Kong, but worldwide, the company insists there is no shortage at present. But for the past few years, it has been advising health administrations around the world to stock up on this antiviral neuraminidase inhibitor. Few governments have been heeding Roche’s advice.

Roche claims it takes about 12 months to produce Tamiflu, which is one of the company’s more complex drugs. At present, the company requires 12-18 months to supply new orders and the supply of the drug worldwide is enough to treat only about 40 million people. Industry analysts expect the sudden demand for Tamiflu to generate windfall profits for Roche, although the company is also donating three million packs of Tamiflu to the WHO for use anywhere in the world. David Salisbury, head of immunization for the Department of Health in England, said: “We are getting 800,000 more doses of Tamiflu every month, so we will have the level we believe appropriate if we have a pandemic in this country. “The US will have something like one twenty-fifth of what we’re building up in our stockpile.”

Roche has quadrupled production capacity since 2003, and it plans to double capacity again by next summer. Roche produces Tamiflu at three sites in Europe and one in the U.S.

Gilead Sciences, the U.S. company that invented Tamiflu and licensed the drug to Roche in 1996, is unimpressed by the Swiss firm’s supply efforts. In June, Gilead sent to Roche a request to end the licensing agreement and recover its rights to the drug. These is a possible alternative to Tamiflu in Relenza (zanamivir), another neuraminidase inhibitor that GlaxoSmithKline produces under license from Biota, an Australian antiviral drug discovery company. Like Gilead, which licensed Tamiflu to Roche, Biota is not happy with the way the larger company is promoting the drug.

So far no one seems ready to step over the line and trigger a patent lawsuit but if a pandemic begins (or even appears to be beginning), I think all bets will be off regarding patent protection.

As many of us have discovered, who you know is often more important than what you know. So important that networking is nearly a full-time job on its own, according to the book, “Never Eat Alone: And Other Secrets to Success, One Relationship at a Time,” by Keith Ferrazzi. Yes, it’s filled with much wisdom and he reveals his “secrets to success“! Below is my review of the book:

First, Ferrazzi was the son of a working class dad (like mine) only his dad (unlike mine) went to the CEO of the steel company he worked for and asked the CEO to please help his son. The CEO, on the board of the local private school, immediately got Ferrazzi into a prestigious school where all the wealthy kids were driven in chauffeured limos. This school got him into Yale, which got him into Harvard Business School. When he needed to get connected to anyone, say in DC, his teachers at the private school would get him connected to other alum (like the Asst. Secretary of Commerce) who then would seemingly do anything for him. Yes, he went to a prestigious school and he repeats this over and over again from beginning to end.

When Ferrazzi took his first job at Deloitte, he sucked so bad at his job that, instead of firing him, his boss gave him a $150,000 budget to just go around and schmooze and market Deloitte services without (apparently) having to do any actual work.

Everywhere Ferrazzi went, no matter who he met — e.g., Michael Milken, Phil Knight, various other CEO’s, politicians, movie studio big-wigs, etc. — that person would immediately take him under their wing and show him the ropes. Apparently, name-dropping is one of the keys to success. I don’t think Ferrazzi ever met a name he hasn’t dropped from Rob Reiner, Howard Dean, Arnold Palmer and William F. Buckley to Michael Ovitz, Hillary Clinton, and Jack Valenti.

The other important lesson, it seems, is to never actually do your present job. While Ferrazzi was a Chief Marketing Officer, he spent all his time getting a CEO position at an internet start-up. While a CEO, he spent all of his time trying to get a better position. For example, while CEO, any time Michael Milken would fly anywhere for a cancer cause or business, he would fly along “just to watch him and learn” — all the while (we assume) on the clock at the company he was supposed to be running?

Basically, no matter what job he held, he had an almost endless supply of time, money and resources to do nothing but non-stop marketing of himself. Never, at any time, did he hold a position that he actually had to be accountable for his work, say, by billing 1800+ hours a year. The main point that struck me is that Ferrazzi apparently has no family obligations whatsoever (no spousal commitments, no attending school functions or children’s sporting events, no parents to visit or take care of) and he behaves as if every other person is in the same care-free state of living as he. He defends his way of living by saying that being balanced is B.S. — I guess it is if you don’t have a life.

Among the many useful tips for professionals include “always learn” where he recommends that you attend 3-5 conferences per year and “stay healthy” where he details how he takes a weeks vacation every other month plus takes a one day “spirituality retreat” at least once every month.

You also need to spend lots and lots of time at fancy events (including the Democratic National Convention, the Yale CEO convention, the Vanity Fair party at the old Russian Embassy, and White House dinners) and belong to lots of foundations and exclusive clubs. You also need to host at least 3 to 10 political fundraisers at your house each year for regional and national candidates. This is all besides the weekly dinner parties you throw for all the celebrities you don’t even know but whom attend because your dinner parties are just so fabulous. Oh, and you need to golf. Again, actual work is not important here.

Lots of good tips here. I can’t wait to put them into action — just as soon as my Dad can get me into that prestigious grade school.

Never Eat Alone: And Other Secrets to Success, One Relationship at a Time is available at Amazon.

A British court handed down a mixed verdict for Pfizer in a patent dispute, upholding one of the company’s British patents on Lipitor, the cholesterol-lowering medicine, but invalidating a second patent. The ruling will have no practical effect on Pfizer’s control over Lipitor, because the patent upheld by the court expires in November 2011, while the patent that was invalided expires in July 2010.

Lipitor is the world’s top-selling drug, with sales expected to top $12 billion this year, producing almost half of Pfizer’s profits. Next up is a decision in the similar patent suit in the U.S., closely watched since more than 60 percent of Pfizer’s worldwide Lipitor sales come in the United States.

Ranbaxy is arguing in the Delaware case that Pfizer’s basic patents on the active ingredient atorvastatin are invalid claiming that one of the two Lipitor patents does not cover the exact molecular form of atorvastatin that Pfizer sells as Lipitor. Ranbaxy then claims that the second patent, which does cover the exact molecular form, should be invalidated because it does not represent a real advance over the first patent.

Atorvastatin has two key patents that protect its market exclusivity. The composition patent, U.S. Pat. No. 4,681,893, discloses NCE atorvastatin, while U.S. Pat. No. 5,273,995, discloses the enantiomer having the R form of the ring-opened acid of trans-atorvastatin. The basic composition patent covers the racemic mixtures (including Lipitor, which is one of the stereoisomer). The second patent covers the pure isomer (Lipitor, or R-Trans-isomer). The original basic NCE patent expires on May 30, 2006. Pfizer received a Hatch-Waxman patent term extension, to the original patent, which along with a 6-month pediatric extension protects the exclusivity to March 2010. The racemic patent, including a six-month pediatric extension, expires on June 2011.

The patent examiner in the USPTO initially considered the enantiomer patent invalid because the pure enantiomer was found within the basic NCE patent. Pfizer argued that although the pure enantiomer was mentioned in the ’893 patent, the ’893 patent did not teach how to make the pure enantiomer.

Under patent law, one can obtain a patent on a racemic mixture and then later obtain a patent on a pure enantiomer of the compound disclosed in the racemic mixture. The Patent Board of Appeals of USPTO then agreed with Pfizer that the pure enantiomer claimed in the ’995 patent was not anticipated by the ’893 patent but it suggested to the examiner that he might want to consider an obviousness rejection. The same examiner issued the ‘995 patent.

Since the patent on atorvastatin in the U.S. expires in March 2010, patent protection could end a year earlier than expected if the U.S. District Court follows the British court’s ruling.

Blawg Review #27 is up at Legal Blog Watch – hosted by Lisa Stone, originator of BlogHer. Although not an attorney, it is said that she has “as much judicial experience as Harriet Miers.” Stone is a journalist who covers legal blogging with pluck.

In this week’s Blawg Review, Stone presents a nice update on Blawghers – women and legal blogging. Earlier this week on Coast to Coast, a legal audiocast by Bob Ambrogi and J. Craig Williams, Stone joined Monica Bay of the Common Scold and Attorney Sean Carter, who blogs Lawpsided, in a discussion of diversity in the blawgosphere. With the increasing amount of women attorneys and female law students, we are hoping women in the blawgs can mirror this trend as we all gain valuable insight from our female colleagues (like our own Karlyn).

We recommend that you check out the Legal Blog Watch and Blawg Review #27.

The Baristas are now offering a cool new subscription service from FeedBlitz. Just add your e-mail address in the subscription box below or on the right sidebar to receive the latest freshly brewed patent chat served up daily.

FeedBlitz enables users to get RSS content delivered directly to their email in-box. You get our content without having to remember to check our site daily — and with no annoying ads!. Just our chat content, delivered daily, in an easy to read Email (text or HTML format – your choice).

More info on FeedBlitz subscriber services here.

There was another article in the Washington Times about law firms outsourcing some of the work on their cases to other countries. One firm, Venable LLP, was quoted as saying “Clients are entitled to get these things done in an efficient way.” *

This is a phenomenon that needs to be seriously considered. More than 3 million U.S. jobs have been outsourced to other countries in the past four years with a projected 13 million forecast to move offshore in the next 10 years. However, for patent legal work, the potential cost savings are more than a little murky. One article states that legal work that is done in the U.S. only costs one-tenth or one-twelfth the amount in India. I think they need to do their homework.

Offshore, we are told, you can get highly qualified people for a fraction of the cost in the U.S. Of course, for those of you who slept through math class, 99/100ths is a “fraction of the cost”. In my own research, I have found that getting qualified people to help with some of the patent work takes an hourly rate of at least $60 and as much as $100. This does sound good initially compared with the $350 hourly rate charged by some large firms for even low-level associates – although hardly one-twelfth.

In a typical arrangement, the specification and drawings are prepared offshore and the application is then sent to a U.S. patent attorney to edit the specification, prepare the claims of the application and submit the patent application to the U.S. Patent and Trademark Office (USPTO). The U.S. patent attorney is also usually responsible for prosecuting the application in the USPTO until the patent issues.

The problem here is that the U.S. attorney must still get up to speed on the invention and review all the work product. This leads to quite a bit of duplication of work (all at the standard rates) and that “cheap” application ends up coming in closer and closer to the amount one would have paid anyway. One report showed that the “final” draft of the patent application has to be reviewed, modified and filed by an appropriate US patent attorney or agent, who usually ends up spending 10 to 20 hours or more (per application). This effectively “takes back” most or all of the supposed savings.

Moreover, the cost savings may be illusory. A recent study by the Gartner Group, a consulting firm, indicates that outsourced operations are on average 30 percent more expensive than in-house customer service operations. Gartner also reported that 80 percent of organizations that outsource customer management operations purely to cut costs will fail to do so, while 60 percent of those who outsource parts of the customer service process will have to deal with customer defections and hidden costs that outweigh any potential savings offered by outsourcing.

Additionally, the cost for qualified people in developing countries is rising rapidly. Earlier, one could hire five engineers in India for the cost of on engineer in the U.S. That number is now less that three and is continuing to drop as costs increase in due to higher demands and standards of living.

There are other problems that arise if the outsourced patent is the subject of litigation. For example, the attorney-client privilege only protects “legal work” from discovery. Opponents could argue that the attorney-client privilege does not apply based on waiver through disclosure to the overseas drafter. In addition, the negative public perception of outsourcing could adversely affect patent litigation in front of a jury. Litigating will also be expensive given that discovery on the patent’s history will lead overseas, resulting in increased costs logistical problems. There could also be challenges to the patent’s validity based on allegations of inequitable conduct. How will the U.S. attorney ensure that that any prior art considered overseas is brought to the attention of the USPTO?

One particular concern that must be addressed with outsourcing is that any information sent abroad must comply with U.S. Export laws and violating these can result in unenforceability of the patent, denial of future export licenses, fines and even imprisonment. One would need to comply with the Arms Export Control Act and the International Traffic in Arms Regulations in addition to the U.S. Department of Commerce restrictions on certain exports to certain countries through the Bureau of Industry and Security (BIS). Regulated items include software encryption technology**, certain lasers, computers, and nuclear technology related items.

Another concern is protecting confidential information. Many countries have less stringent laws for protecting intellectual property rights than the United States and often do not have any criminal trade theft laws. There could also be problems where the same outsourcing company is handling applications for competitors with similar technology since they would not be bound to avoid conflicts of interest.

Bottom Line

I fear that this may often be another example of corporations treating patent applications as a commodity when the reality is that patents can make-or-break the entire company. A patent is often the most important link in the corporate organization. A penny-wise, pound-foolish approach is seen over and over with companies that try to squeeze the patent drafting and prosecution costs down and then can’t seem to see the connection whenever they spend $2 million on litigation over a poorly drafted patent.

If you are at corporation interested is reducing your patent expenses, then you should call me to discuss strategies for reducing your costs. What we’ve found is that similar or better cost savings can be achieved by outsourcing patent work not offshore but away from the high-priced coasts. We work with many companies that have found the same work can be performed in the Midwest (we’re in Cincinnati) — but at far lower billing rates. When I had some work done at a Boston firm a few years ago, I was shocked to discover that a third-year associate was billing at a higher rate than our top partners. And he wasn’t even knowledgeable!

Outsourcing to the Midwest may just be the answer to your needs.

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*Correction: September 30, 2005. The Washington Times in Monday’s editions mischaracterized the type of patent work Washington law firm Venable outsources to Indian companies. The firm has outsourced document coding work for patent litigation cases.

**Update: Scott Gearity over at the Export Control Blog brought to light an earlier error in my post. I incorrectly indicated that encruption software is classified as a munition. While this was true at one time, the rule has changed — although, as Gearity points out, “the ‘ITAR makes crypto a munition’ meme is utterly unkillable.”

On December 30, 1996, the Bureau of Export Administration of the Department of Commerce (“BEA”) published an interim rule that reflects the transfer of dual-use encryption items from the United States Munitions List (“Munitions List”) to the Commerce Control List (“CCL”). See, 61 FR 68572. Among other significant changes, the interim rule provided for a relaxation of export controls on 56-bit key length digital encryption standard (“DES”) or equivalent non-recovery encryption products where the manufacturer makes certain commitments to developing and/or marketing key recovery and key escrow encryption items. Prior to the issuance of BEA’s interim rule, strong dual-use encryption products had been included on the Munitions List, subject to strict scrutiny by the Department of State’s Office of Defense Trade Controls (“ODTC”), and were rarely accorded an export license for use abroad other than in the financial industry or by U.S.-owned subsidiaries.

More here.

In a move of shameless self-promotion, we simply must announce that the Patent Baristas were ranked in the 2005 Edition of Chambers USA, a publication that ranks attorneys and their practices based upon peer and client review.

Chambers USA touts the ranked Intellectual Property Department as known for their “exceptional” attention to detail and impeccable biomedical knowledge. Frost Brown Todd LLC is said to boast one of the top Intellectual Property practices in the region. Clients use adjectives such as “impeccable”, “genius”, “simply superb”, and “quite excellent” in describing Stephen Albainy-Jenei, Karlyn Schnapp, Steven Goldstein, and David Schmit.

From Chambers:

This firm is said to boast one of the top IP practices in the region; in the biopharm arena there are no other major players with such a large market share, and in terms of dedicated specialists the firm has about 32 practitioners in Ohio alone. Known for their “exceptional” attention to detail and impeccable biomedical knowledge, attorneys have made a name for their diligence and efficiency. Said one client: “They can handle our discoveries and turn them into something really profitable.” Successfully maintaining a balance between quality and value, the top trial lawyers are supported by an “exceptional” team that is “very helpful and business-oriented.” Market commentators also enthuse about the “extremely good working environment,” which facilitates the fostering of close client relationships. The firm is presently injecting further resources into another related growth area – advertising law. In this regard, a team of attorneys has been established to look after a growing number of consumer product clients.

The qualities on which rankings are assessed include technical legal ability, professional conduct, client service, commercial awareness/astuteness, diligence, commitment, and other qualities most valued by the client. The rankings and editorial comment about attorneys are independent and objective. Inclusion in this section of the guide is based solely on the research team’s findings. No-one can ‘buy their way in’.

For the current US directory, over 10,000 interviews were conducted covering the USA. The interviews were carried out by a team of 40 full-time researchers over a period of 8 months.

Well, technically, that’s true but the real issue is: Are we obsessed with cataclysmic threats? Flu experts, including the World Health Organization, are warning that avian flu could be the Big One, an apocalyptic nightmare from a Hollywood script with each report giving more dire predictions. On Thursday, Dr. David Nabarro — the new U.N. coordinator for avian and human influenza — had warned that the “range of deaths could be anything between 5 and 150 million” from a new pandemic. Dr. Michael Osterholm, director for the Center of Infectious Disease Research and Policy at the University of Minnesota, who prophesies a death toll upwards of 360 million(!) Whoa, this wild-guessing fear-mongering arms race has really gotten out of hand.

The WHO has now backed away from these “flu tsunami” death toll estimates saying pandemic toll predictions are “guesswork” and that Nabarro was just suggesting the range of expert opinion on the subject. The WHO believes the estimate of 2 million to 7.4 million deaths, based on a study by the US Centers for Disease Control and Prevention, “is the most reasoned position,” according to a Reuters report. Some reports estimate less than 50,000 deaths – a few orders of magnitude different from 360 million.

It seems like we’re always bracing for the next imminent disaster-of-the-month — fueled by the news organizations that tend to play off each other hyping the latest doomsday scenario: tsunamis, hurricanes, apocalyptic plagues, terrorism, earthquakes, killer bees, the Macarena, etc.

Not that there isn’t a threat, mind you. H5N1, the deadly strain of avian influenza that has been spreading fear throughout Southeast Asia since late 2003, and may be heading west. The virus has already infected 115 humans, killing 59 — with 16 more people under observation in a Jakarta hospital — and commercial poultry flocks in China, Vietnam, Cambodia, Indonesia, Laos, Thailand, Hong Kong and Russia. Most human cases have been linked to contact with sick birds. The WHO has warned that the virus could mutate into a form that spreads easily among humans — possibly triggering a global pandemic that could kill millions.

There have been three flu pandemics in the last century: the Spanish flu of 1918-19, the Asian flu of 1957-58 and the Hong-Kong flu of 1968-69 which resulted in tens of millions of deaths worldwide. Experts have identified specific criteria that preclude and predict the outbreak of a pandemic and all but one have been met in regard to the H5N1 strain of bird flu – an efficient human-to-human transmission mechanism.

“Spanish flu,” involving influenza A (H1N1), was the largest rapidly fatal pandemic in human history. The virus traversed the world in less than 1 year, causing at least 40 million deaths. Many people died within a few days of the onset of symptoms. Autopsies often showed a characteristic hemorrhagic, necrotizing viral pneumonia—not a bacterial superinfection that might now respond to antibacterial agents. The average time to death in 1918 was about 7 to 9 days after the onset of illness, an interval that might allow for intervention with specific antiviral therapy, if available. Subsequent studies of the 1918 strain showed that it had a constellation of genes that account for this unique virulence, although recent studies have pointed to a unique virulence related to the hemagglutinin of the 1918 strain.

But not everything is a disaster in the making. Generally, people don’t tend to look at the probabilities – like when the Alar scare made people stop eating apples. How concerned should we be? The fact of the matter is, we’ve been awaiting an imminent H5N1 outbreak for several years, and even in China, a country of 1.3 billion people, an epidemic has not materialized. We have no way of knowing whether the virus will mutate into a form that will spread easily among humans. And even if it does — unlike the 1918 situation when Spanish flu spread quickly and quietly in the disease-infested trenches of the First World War — today we have means to anticipate, plan for and contain viruses.

Worried that avian flu could spur an influenza pandemic in the United States, the U.S. Department of Health and Human Services has awarded $100 million to France’s Sanofi Pasteur of Sanofi-Aventis to manufacture a vaccine and another $2.8 million to the United Kingdom’s GlaxoSmithKline for its antiviral drug Relenza. Now, the US Senate voted yesterday to provide $4 billion for antiviral drugs and other measures to prepare for a feared influenza pandemic. Almost $3.1 billion of the money would be used to stockpile the antiviral drug oseltamivir (Tamiflu), and the rest would go for global flu surveillance, development of vaccines, and state and local preparedness, according to a Reuters report. The government currently has enough oseltamivir to treat a few million people, with a goal of acquiring enough to treat 20 million.

Tamiflu is produced by the Swiss pharmaceutical firm Hoffmann-La Roche Ltd. and belongs to a group of medicines called neuraminidase inhibitors, which attack the flu virus and prevent it from spreading inside the body. The problem is, it’s a complex drug and a single dose takes 12 months to produce. Currently, it’s only manufactured in a single plant in Switzerland, but the company has plans to expand its facilities.

Relax, try to get outside and get some fresh air today. You’ll be OK – as long as you don’t drive on the highway while all the road rage maniacs are out there…