Patent Baristas

The Antitrust Division must step forward and take a leading role in the development of the Government’s multi-faceted response to the current market conditions. Vigorous antitrust enforcement action under Section 2 of the Sherman Act will be part of the Division’s critical contribution to this response.  ~Christine A. Varney

It looks like the U.S. Department of Justice (DOJ) has repealed a policy seen as being lax on antitrust violations thus opening the possibility of a more aggressive approach toward antitrust enforcement under the Obama administration.

The DOJ’s Antitrust Division has withdrawn a September report that “raised too many hurdles to government antitrust enforcement and favored extreme caution” toward antitrust enforcement action, the DOJ said. The change in policy could mean that the department looks harder at the actions of technology vendors such as Google, Oracle and IBM, as detractors have raised antitrust concerns about all three in recent months.

An Executive Summary of the Department’s report is attached. The full report can be found on the Department of Justice’s web site.

Christine A. Varney, Assistant Attorney General of the Antitrust Division, indicated that the DOJ should take close looks at the high-tech and Internet industries and new ways of measuring antitrust activity there. Varney also said the DOJ would look hard at mergers and their impact on competition.

In the speech, Vigorous Antitrust Enforcement in this Challenging Era (available here), Varney declared:

In withdrawing the Section 2 Report, I made specific reference to the Report’s conclusions. In particular, Chapter 3 of the Section 2 Report concluded that where conduct-specific tests are not applicable, “the disproportionality test is likely to be the most appropriate test[.]”(7) With this baseline, conduct is only considered anticompetitive where it results in harm to competition that is disproportionate to consumer benefits and to the economic benefits to the defendant. In other words, the anticompetitive harm must substantially outweigh procompetitive benefits to be actionable. The Report’s adoption of the disproportionality test reflected an excessive concern with the risks of over-deterrence and a resulting preference for an overly lenient approach to enforcement. The failing of this approach is that it effectively straightjacketed antitrust enforcers and courts from redressing monopolistic abuses, thereby allowing all but the most bold and predatory conduct to go unpunished and undeterred.

This may mean trouble for not just the tech giants — Microsoft, Intel, Google — but could also signal a shift in the direction for pharmaceutical “reverse payments” — settlements in the pharmaceutical industry that embody payments made by the patent-holder/brand manufacturer to the alleged patent infringer/generic manufacturer.

The FTC and Justice in the Bush Administration had been split on reverse payments.  In general, the brand-name and generic manufacturers agree to a future date at which the generic would enter the market. The allegation is that the brand manufacturer protects its monopoly position by paying off potential competitors to delay entering the market.

Earlier, the U.S. Court of Appeals for the Federal Circuit gave a high-five to settlement agreements between a patent holder and a generic manufacturer saying it doesn’t violate antitrust laws under the Hatch-Waxman Act.  In re Ciprofloxacin Hydrochloride Antitrust Litigation (08-1097).

Now at the Supreme Court is a case being heard on certiorari, Arkansas Carpenters Health and Welfare Fund, A.F. of L., et al. v. Bayer AG and Bayer Corp., et al., No. 08-1194; cert. petition filed on Mar. 23, 2009, 2009 WL 797579.

QUESTION PRESENTED
Whether an agreement by a patent owner to pay a potential competitor not to enter the market is illegal per se, as the Sixth Circuit has held, is legal per se, as the Second and Federal Circuits have held, or should be judged under the antitrust rule of reason, as the Eleventh Circuit has held.

The Court of Appeals for the Federal Circuit held that in cases such as this, where all anti-competitive effects of the settlement agreement are within the exclusionary power of the patent, the outcome is the same whether the court begins its analysis under antitrust law by applying a rule of reason approach to evaluate the anti-competitive effects, or under patent law by analyzing the right to exclude afforded by the patent.  The essence of the inquiry is whether the agreements restrict competition beyond the exclusionary zone of the patent.

It’s possible that Varney’s pronouncement could mostly just signal a shift in antitrust enforcement back to standards that are reasonable. What’s troubling is anytime the government decides to make sweeping policy changes based on current economic indicators instead of solid policy theory.  Ms. Varney’s remarks signaled that the decision could be driven quite a bit by voter anxiety:

The question on every American’s mind is: “What can the Government do to help ease consumers’ burden in these troubled economic times?” This question is particularly pressing for the Antitrust Division, which in the past has come forward to play a significant role in response to economic crises. It is time for the Antitrust Division to step forward again. I believe this country’s prior experience in responding to economic crises must be considered in evaluating our response to current market conditions. As Shakespeare once put it – “what’s past is prologue.” In particular, I have considered the Government’s response to the market conditions that followed the Great Depression, and I believe there are important lessons we can learn from that era.

Maybe, the government should stop trying to ease everyone’s burden.

[The Purposes of the United Nations are:] To achieve international cooperation in solving international problems of an economic, social, cultural, or humanitarian character, and in promoting and encouraging respect for human rights and for fundamental freedoms for all (…).

The General Agreement on Tariffs and Trade (GATT) provides the framework for the World Trade Organization as a driver for freer trade. However, critics of the organization have complained that free trade had become inconsistent with human rights obligations. There are often suggestions that various international laws covering trade and intellectual property is in conflict with human rights law. Others defend the system as contributing more to the fulfillment of human rights than many other areas of international law.

The general provisions of GATT’s Agreement on Trade Related Intellectual Property Issues (TRIPS) include that patents shall be available without discrimination. Now, there is a study that looks at the relationship between WTO law with international human rights law, using one of the most prominent examples of such a conflict: the one that exists between international patent law, and access to medication as guaranteed by the International Covenant on Economic, Social and Cultural Rights.

“Human Rights and the WTO: The Case of Patents and Access to Medicines,” by Holger P. Hestermeyer (Oxford Press; 300 pp.) provides a background of international human rights law and the right to health. It then looks at the right to intellectual property

It is therefore a question as to how to guarantee a application of WTO law, in a manner consistent with WTO members’ human rights obligation in health. The major tenets of these arguments are that there is the existence of a legal right to access to medicine, although not explicitly mentioned in any agreement. Further, that the adoption of patent legislation under TRIPS leads to higher drug prices, rendering certain drugs unavailable to portions of the population. And finally, that this price effect can infringe the right of access to medicine, even though the prices are set by private individuals.

This has become a major issue as developing countries try to use of international law to gain access to life saving medicines in light of the price of AIDS medicine, as well as medicines for bird flu and for anthrax.

Human Rights and the WTO discusses the conflict between legal regimes and why patent law and human rights law are in conflict. The current state of international law on the conflict between legal regimes and the origin of such conflicts is analyzed, covering such issues as hierarchy in international law and introducing the concept of ‘factual hierarchy’. The book then turns to the role of human rights law in the WTO system, concluding that such law currently is limited to aiding the interpreting of the WTO agreements. It shows how a further integration of human rights law could be achieved and describes the progress made towards accommodating human rights concerns within the TRIPS Agreement.

One question that book explores is “who is bound by international human rights laws? For even if member countries are bound by such laws, are pharmaceutical companies — those responsible for setting drug prices — also bound by the same obligations? The WTO Declaration explicitly states that “intellectual property protection is important for the development of new medicines” and member countries made an unequivocal point of “reiterating our commitment to the TRIPS Agreement.” Furthermore, the WTO members agreed to address the HIV/AIDS pandemic while “maintaining our commitments in the TRIPS Agreement.”

What’s not so clear, however, is who should shoulder the burden of the healthcare costs? Should it be the drug companies themselves? But, if we allow countries to break patents in order to reduce costs and, concurrently, increase access and treatment of patients, then we are putting 100% of the extra burden on the very company that developed the drug. Meanwhile, multi-billion dollar multi-national corporations are able to maintain their profits because they sell more mundane products like plasma TVs.

This is certainly a topic worthy of further discussion.

“Human Rights and the WTO: The Case of Patents and Access to Medicines” is available on Amazon.

About the Author:  Dr. Hestermeyer is admitted to the New York State Bar, he is a former Fulbright Fellow, German National Merit Foundation Fellow and German National Merit Foundation Doctoral Fellow.

According to the Congressional Budget Office, the increase in direct spending under Patent Reform Act of 2009 (S.515) would total $3 million over the 2010-2019 period.

The report was ordered by the Senate Judiciary Committee:

SUMMARY

Under current law, PTO is authorized to collect a variety of fees for the services it performs. The fee rates are set in statute, and the amounts collected are available to offset the cost of PTO’s operations. The bill would permanently set higher fee rates for certain actions and authorize PTO to set or adjust fees periodically. S. 515 also would authorize PTO to establish fees to offset most of the costs associated with new procedures it must follow when presented with a challenge to the validity of a patent.

Subject to appropriation of the necessary amounts, CBO estimates that implementing S. 515 would have a net discretionary cost of $3 million in 2010, and would reduce discretionary spending by $173 million over the 2010-2014 period. CBO estimates that enacting S. 515 also would increase direct spending by about $3 million over the 2010-2019 period; the bill would have no effect on revenues.

BASIS OF ESTIMATE

S. 515 would change the basis that PTO uses to award patents. Under current law, where two or more persons independently develop identical or similar patents at approximately the same time, the patent is awarded to the first inventor established through the examination process. S. 515 would direct PTO, under the same circumstances, to award the patent to the inventor whose application has the earliest filing date. The bill also would establish a new procedure (post-grant opposition) to challenge the validity of a patent and would authorize PTO to collect fees to offset much of the costs associated with that process.

Based on information from PTO, CBO expects that the volume of requests for reconsideration of patents already granted (inter partes reexaminations) would increase as a result of changes S. 515 would make to the reexamination process.

Inter Partes Reexaminations. Under current law, an individual may question the validity of an awarded patent through an inter partes reexamination, which allows both the challenger and the patent-holder to participate in the proceedings by submitting arguments and filing appeals.

There is no time limit on raising an inter partes challenge, however, such challenges may only be brought against patent applications filed after a certain date. S. 515 would expand the universe of awarded patents that could be challenged through this proceeding; as a result, CBO expects that the number of inter partes reexaminations would increase. Further, the bill would require the inter partes proceedings to be conducted by an  Based on information from PTO, CBO expects that around 80 additional employees would ultimately be necessary to handle an increase in patent challenges. We estimate that implementing the changes to the inter partes reexamination procedures would cost about $9 million in 2011 to hire and train additional staff and $68 million over the 2010-2014 period. PTO is authorized to collect fees that would offset a portion of the costs of conducting those examinations.

Post-grant Opposition Procedures. S. 515 would authorize PTO to create a new procedure to review the validity of patents already awarded. This opportunity for such a post-grant review generally would be available within 12 months of the date the patent was issued, and would take place in a court-like proceeding in which both the challenger and the owner of the patent would develop and present information regarding the validity of an awarded patent. The bill would authorize PTO to collect fees to offset the cost of this new process.

Based on information from PTO, CBO expects that the volume of requests for post-grant reviews would grow each year once regulations defining the process are complete. CBO estimates that implementing this new process would cost $2 million in 2011 and $24 million over the 2010-2014 period, which would be offset by fee collections starting in 2011. The cost would be higher in the early years because we expect that the agency would incur expenses to establish the system before cases would be presented for review.

See the entire CBO Report on s. 515 here.

“Eliminate the Patent Restrictions Standing in Your Company’s Way”

The Innovation Alliance, a coalition of companies with the stated goal to enhance America’s innovation environment by improving the quality of patents and protecting the integrity of the U.S. patent system, is worried that lawyers (the bad ones, not us) will be lining up to offer just this service to big companies to help them avoid paying for the use of legitimate, patent-protected technology.

The Alliance fears that such service will “creat[e] uncertainty about a problem patent by tying it up in a long reexamination process and effectively nullify the problem patent” to get lower rates during license negotiations “until the uncertainty ends.”  Obviously, this would not be the intended result.

The cause of this fear are provisions being considered in in both S. 515 and H.R. 1260, “The Patent Reform Act of 2009,” regarding post-grant review mechanisms that could allow repeated frivolous patent challenges, resulting in increased costs to patent holders, decreased certainty regarding validity and enforceability of patents, and lower-value patents for U.S. businesses and patent holders.

Both ex parte and inter partes reexamination would be retained, and cancellation proceedings would be before administrative law judges.  In addition, the grounds for both types of reexamination would still be limited to prior art but expanded to include prior use or sale and patentee statements.

The proposed post-grant review procedure can be instituted either within 12 months after the issuance of a patent or a reissue patent, or if the patent owner consents.  The post-grant review begins with a cancellation petition and moves forward only if the Director determines that there is a substantial new question of patentability.  The presumption of validity does not apply in this proceeding, but the burden of proof is on the party advancing a proposition.

Any ground of invalidity, other than failure to disclose the best mode, could be used in seeking cancellation and only limited discovery may be permitted in cancellation proceedings on order of the PTO Director.   The Director will prescribe rules governing the proceeding, including rules to sanction abuse.  This section prohibits successive filings or filings after a final decision in a civil action.

Challengers would be estopped from: (1) asserting invalidity of any claim determined to be valid in inter partes reexamination on any ground raised in the reexamination; and (2) instituting an inter partes reexamination proceeding after a district court judgment on patent validity.

The Innovation Alliance is now concerned that the expanded post-grant review and inter partes reexamination of U.S. patents will allow repeated frivolous challenges, resulting in increased costs to patent holders, decreased certainty regarding validity and enforceability of patents, and lower-value patents for U.S. businesses and patent holders.  They feel this could undermine legitimate patent rights and discourage investment in new technologies.

Click here to read more.

Earlier, Amgen tried to stop the importation of recombinant human erythropoietin and derivatives (EPO) by filing a complaint with the International Trade Commission that is was a violation of Section 337 of the Tariff Act of 1930. Amgen charged that the imported EPO and the process by which it is produced in Europe are covered by one or more claims of the following Amgen patents:  Pat. Nos. 5,411,868, 5,547,933, 5,618,698, 5,621,080, 5,756,349 and 5,955,422.

In related news, this new form of EPO, named MIRCERA, was just in the news after the International Olympic Committee (IOC) reported that three (3) athletes have returned positive tests for MIRCERA following re-analysis of samples taken by the IOC in Beijing.

Roche moved for summary judgment on the ground that the imported EPO is exempt from infringement by operation of 35 U.S.C. ‘271(e)(1), the “safe harbor” statute, because the imported EPO is used only for the statutorily exempt purpose of the development and submission of information under a federal law regulating the manufacture, sale, and use of drugs.

The Commission granted the motion for noninfringement, holding that all of Roche’s activities are within the safe harbor, including the foreign production of the imported product. Amgen appealed that the safe harbor statute does not apply to Tariff Act violations based on foreign practice of patented processes, and also on the ground that not all of the imported EPO was used for the statute’s exempt purposes.

The CAFC, however, affirmed the ruling that the safe harbor provided by ‘271(e)(1) applies in proceedings under the Tariff Act relating to process patents as well as product patents, for imported product that is used for exempt purposes.

After getting a petition for rehearing by the ITC and Roche, an en banc Federal Circuit authorized”the panel in the earlier Amgen v. ITC case to revise Part II of its opinion related to the jurisdictional question, vacate the previous judgment and opinion and remandedto the original panel for further review.  Amgen v. ITC and Roche (07-1014).

In part II, the court reversed the Commission’s ruling that Roche was entitled to summary determination, because there was a genuine dispute of material fact concerning whether all of Roche’s activities fell within this safe harbor.

Section 337 assigns the ITC the authority to investigate and block importation based on unfair competition derived from patent, trademark, and copyright infringement, not the Patent Act.  Section 337 prevents the importation, sale for importation, or the sale within the US after importation by the owner, importer, or consignee, of articles that–

(i) infringe a valid and enforceable United States patent or a valid and enforceable United States copyright under title 17, United States Code; or
(ii) are made, produced, processed, or mined under, or by means of, a process covered by the claims of a valid and enforceable United States patent. . . .

The issues on this appeal focused on the safe harbor statute for drug products, on application to the imported EPO:

It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention . . . solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.  35 U.S.C. ‘271(e)(1)

The Commission held that the safe harbor statute applies to products produced offshore by a process patented in the United States. Amgen argued that this statute does not bar the exclusion of such importation, reasoning that the ‘271(e)(1) reference to importing “a patented invention” is necessarily limited to importation of product, for a process can’t be imported.

Amgen argued that the 1988 enactment of 35 U.S.C. ‘271(g) limits the safe harbor to process patents that would be enforced under ‘271(g):

A product which is made by a patented process will, for purposes of this title, not be considered to be so made after–(1) it is materially changed by subsequent processes; or (2) it becomes a trivial and nonessential component of another product.

In Kinik v. ITC, the court held that the Tariff Act remedy of exclusion based on practice of a patented process was unchanged, and that the exceptions set forth in ‘271(g)(1) and (2), did not apply in Section 337 cases. So, Amgen argued that Kinik confirmed that no change whatsoever was made in the Commission’s authority under the Tariff Act to exclude products made offshore by an infringing process, and that this was not changed by the enactment of either ‘271(g) or ‘271(e)(1).

The ITC didn’t buy it and ruled that the safe harbor statute insulates the Roche EPO from Section 337 exclusion not only as to infringement of Amgen’s product patents but also as to Amgen’s process patents.

The CAFC concluded that the Commission’s ruling aligned with Congressional intent that it would not be an act of infringement to import a product which is made by a process patented in the United States “solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs.”

Amgen argued that even on the Commission’s interpretation of the safe harbor statute, at least some of the imported Roche EPO is not exempt because its actual use was not “reasonably related to the development and submission of information under [the FDCA],” §271(e)(1).

The court felt likewise:

The Commission appears to have assumed that all otherwise infringing activities are exempt if conducted during the period before regulatory approval is granted. That assumption is incorrect, for the Court in Merck confirmed that “[e]ach of the accused activities must be evaluated separately to determine whether the exemption applies.” Id. at 200. The studies at issue in Merck were presented as scientific studies, and it is apparent that commercial and marketing studies are more clearly subject to separate evaluation for application of the exemption.

Applying the safe harbor exemption of 35 U.S.C. ‘271(e)(1), the imported EPO is not subject to exclusion based on infringement of either product or process patents, to the extent that the imported EPO is used to develop information that is reasonably related to the development and submission of information to the federal regulatory authority. The Commission’s holding to this effect is affirmed. However, Roche’s uses of imported EPO unrelated to obtaining FDA approval are not shielded by the exemption. We therefore reverse the Commission’s summary determination in favor of Roche and remand for further proceedings consistent with this opinion.

Forum on Commercializing and Funding Biotechnology Opportunities

Faculty, researchers, entrepreneurs and industry supporters are cordially invited to a special event.  A forum is being offered featuring presentations by BioEnterprise of Cleveland with panel discussions by regional venture capitalists and is sponsored by CincyTech in conjunction with BIOSTART.

Date:   Thursday, May 28

Time:   4–6:30 p.m.

Place:  The Phoenix, 812 Race St. Cincinnati, OH

Experts from BioEnterprise will provide an overview of funding trends, requirements and approaches for obtaining funding and what’s hot/what’s not in medical devices, biotechnology and health-care services.

The discussion will include the state of venture and angel funding, government sources and foundation opportunities. Then a panel of investors will provide their perspective as well as address audience questions on funding strategies in the area of biotechnology.

A reception with the experts will be held immediately afterward.

For additional information or to register, please contact:  Dorothy H. Air, Ph.D., (513) 558-7339 or dorothy.air@uc.edu.

Please RSVP by Monday, May 25.

To empower users to find the relevant patent and technology information and connect people they need to advance technology.

~Mission, Patents.com

Patents.com is looking to provide the most comprehensive worldwide source of patent data – to include 450 million searchable, indexed patent pages available in 15 native languages.  It’s a source for patent data and analytic tools and a hosted community platform enabling users to connect to generate business opportunities, including the licensing and sale of intellectual property.

Rob Monster, Chairman of Patents.com, noted they have ambitious plans for the site:

Overall, the company is executing well.  We have a very aggressive development plan ahead, and look forward to bringing some innovation to the patent community, including the forthcoming launch of a peer-to-peer marketplace for patent licensing.  Patents for license/sale will be closely linked with patent search results to enable more chance discovery of patents of interest.

While the really unique aspect of the site is the roll out of global language support for patent search, the site also offers other services including an intellectual property community platform and tool for connecting members with others in the patent ecosystem. A Profile Search allows users to find the people, companies, and technology they are interested in connecting with on the Patents Community.

The Patents.com site makes it easy to find patents linked by company name or by inventor.  A search of either brings up the relevant patents including patent number, title, issue date and a copy of the patent abstract.

There are a few minor quibbles.  Using the site reveals that the site is still in its early stages of development.   For example, the Patents Exchange is currently limited to just a handful of patents available for sale or licensing.  Also, the database of attorneys seems to be a bit out of date.

Overall, Patents.com offers plenty of tools that might be useful in your patent related activities. We recommend that you check out all the features yourself.

The Gowlings Life Sciences Industry Group is graciously hosting a WebEx webinar on protecting your intellectual property rights and extracting value from your IP.

What:

Protecting your Intellectual Property in Turbulent Times

When:

Thursday, May 14th
12:00p.m. -1:00 p.m. Pacific Time
3:00 p.m. – 4:00 pm. Eastern Time

Agenda:

Protecting your intellectual property is always important for a business, and this is also true in the current turbulent times. A patent is a tangible property that can be used to leverage funds via licensing or sale, as well as ensuring your place in the market. This webinar will review the basics of patent and trade secret protection, strategies for maximizing protection and minimizing costs, ensuring your patent portfolio is attractive to a potential licensee, or for acquisition, and review of recent trends in extracting value from your IP.

Who:

Konrad A. Sechley, PhD
Principal, Patent Agent
Vancouver

Clare Salisbury
Principal, Patent Agent
Vancouver

Space is limited – click here to RSVP and to receive WebEx log in and teleconference details.

For more on the Gowlings Life Sciences Industry Group, please visit here.