Category: Patents

Reply and Response to C-IP2’s March 4, 2021, Blogpost on UC Hastings’ Evergreen Drug Patent Search Database

Post author By Joshua Grove
Post date September 14, 2021

C-IP²’s original post on the UC Hastings’ Evergreen Drug Patent Search Database can be read here.

Reply to Blog Post on UC Hastings’ Evergreen Drug Patent Search Database

Robin Feldman
Arthur J. Goldberg Distinguished Professor of Law
Albert Abramson ’54 Distinguished Professor of Law Chair
Director of the Center for Innovation at University of California Hastings

We would like to thank the author of the blog post for taking the time to look at our work for the Evergreen Drug Patent Database. It is always appreciated when others explore and examine our data. In addition, the benefit of a website is that helpful feedback from visitors can be used to make the information more accessible and easier to navigate.

We would also like to point out that the blog post misunderstands the nature of the project. The project begins with the initial patent protection on the chemical formulation of a drug and then tracks additional protections. Some of these protections increase the amount of time that the drug is protected. Others increase the number of protections that a challenger would have to overcome, without extending the length of time.

One can think of the difference in terms of building a wall of protection. Some protections make the wall higher by extending the total time period. Other protections make the wall thicker, so it is tougher for a competitor to break through.

We do have a separate tab that allows one to calculate only the months of added protection, for those who wish to view the data in that manner. We also offer tabs to view the number of unique patents and the number of patent extensions. Our goal is to allow the user to examine the information through different lenses, so that one can understand the many ways a patent holder can extend or toughen protection. If we like certain aspects, we should keep them; if we don’t like certain aspects, we should amend them. Either way, it is important to understand the system in which we live.

In addition, the blog post also may have misunderstood the database’s starting point. Specifically, the post asks why the database “allot[s] ranolazine less than four months of ‘earliest’ protection time” and suggests that such a short period of protection “seems suspect.” The answer is simple. The Evergreen Drug Patent Database begins in 2005. Thus, drugs whose original patents were around a long time have little protection left when the database begins. (The blog post itself notes this history of the drug.)

Finally, the blog post questions the database’s treatment of different strengths of the drug, questioning the fact that when patents and exclusivities apply to multiple strengths of a drug, they are counted once for each instance. We chose this approach because the law prevents automatic substitution at the pharmacy counter among different strengths. In fact, shifting the market to a new strength can create a powerful method of product-hopping by blocking generic substitution. Try asking your pharmacist the cost to fill your prescription with two 25 mg tablets rather than one 50 mg tablet. The cost variations can be odd and economically irrational. In short, creating multiple strengths of a drug can provide a form of protection in and of itself. Our goal is to report as many of these aspects as possible.

In the same vein, if the brand company has shifted the market to a different strength or formulation of the original drug, delisting the original drug can be used as an evergreening technique. It can prevent generic hopefuls from obtaining samples of a brand drug, when having samples is essential for FDA approval. It also can lead health plans to reimburse the generic at the disfavored rate of brand drugs, because the generic is now the only drug on the market at that precise dosage and formulation. One could argue that a delisting request should be characterized as something other than a protection; the argument would not be unreasonable. Nevertheless, the database chronicles the Orange Book history of each drug, based on all changes recorded. We consider any delisting information to be part of a complete picture of that history.

In closing, we note that it is highly unusual for legal academics to publicly release their data, let alone at this level of excruciating detail. We do so in the spirit of academic exchange and full disclosure, and we hope that those who write for this blog, as well as those who read it, will be motivated to follow suit.

Response to Professor Feldman’s “Reply to Blog Post on UC Hastings’ Evergreen Drug Patent Search Database”

C-IP² appreciates Professor Feldman taking time to respond to our March 4, 2021, blogpost describing some of the problems we have identified with the UC Hastings’ Evergreen Drug Patent Search Database. We have posted her response in full, in the spirit of academic inquiry and collegiality that C-IP² strives to foster. At the same time, we want to emphasize that we do not believe that her response in fact undercuts the observations in our original post. While we agree with Professor Feldman that legal academics should release for public scrutiny the data upon which they have based their conclusions—particularly when those conclusions are intended to have some bearing on important public policy considerations—we stand by our original statement “that—because of limitations in the methodology used and given the inadequate transparency with respect to the underlying data—policymakers and others who consult the Database [could] be misled by the statistics.”

C-IP² disagrees with Professor Feldman’s suggestion that our post “misunderstands” Hasting’s database and its starting point. The post’s description of the database as a resource that UC Hastings had created “to address the perceived problem of ‘evergreening’” reflects UC Hasting’s own description of the database. See, for example, statements on the database’s “About” page.[1] Indeed, the database is explicitly referred to on that page as “Evergreen Drug Patent Search.” One might easily be confused into thinking that the database provides information reflecting the actual period of exclusivity experienced by FDA-approved drugs, which it clearly does not.

With all due respect, Professor Feldman seems to misunderstand some aspects of the original post. For example, at one point she states that the reason the database “allot[s] ranolazine less than four months of ‘earliest’ protection time” is because the database “begins in 2005.” But the starting point of the database is irrelevant. The database reports the drug’s “Approval Date” as January 27, 2006, and the “Earliest Prot[ection] Date” as May 18, 2006, which is a little less than four months. The database goes on to report that May 27, 2019, is the drug’s “Latest Prot[ection] Date,” leading the database to conclude that the drug had received 156 “Months Add[itional] Prot[ection] Time.” C-IP² continues to find “suspect” the database’s implied assertion that a drug that has been on the market less than four months is already benefitting from “additional protection time,” particularly when the context of the database might lead one to believe that “additional protection time” equates with “evergreening.”

[1] https://sites.uchastings.edu/evergreensearch/about/#.YS_g6o5KhM1

Tags biopharmaceutical, data, drug, drugs, evergreen, Evergreen Drug Patent Search Database, evergreening, patent, Robin Feldman, UC Hastings

Biotech C-IP2 News International Law Patents

Panel Discussion: Vaccines, Intellectual Property, and Global Equity

Post author By Joshua Grove
Post date July 6, 2021

The following post comes from Colin Kreutzer, a 2E at Scalia Law and a Research Assistant at C-IP².

The COVID-19 pandemic has shined a spotlight on the role of intellectual property in modern medicine and on the complex social questions surrounding a system that grants exclusive rights over life-or-death products. On the one hand, there is clearly a difference between public access to lifesaving medicines and other patented goods, such as consumer electronics. However, creating these drugs required billion-dollar investments and enormous risk, made feasible only by that promise of IP rights. Wouldn’t taking that promise away harm future development of new medicines? As the world considers a waiver of IP rights over COVID-19 vaccines and other technologies, experts are analyzing not only what’s right and what’s wrong, but also what works and what doesn’t.

On June 10, 2021, C-IP² and the Smithsonian’s Lemelson Center for the Study of Invention and Innovation held a panel discussion on vaccines, intellectual property, and global equity. With opening remarks by Lemelson Director Arthur Daemmrich, and moderated by C-IP² Faculty Director Professor Sean O’Connor, the panel featured Dan Laster, Director of the Washington State COVID-19 Vaccine Action Command and Coordination System (VACCS) Center; Professor Arti K. Rai, Elvin R. Latty Professor of Law and Co-Director of the Duke Law Center for Innovation Policy; and Eric Aaronson, Senior Vice President and Chief Counsel, Corporate Affairs, Intellectual Property and Intellectual Property Enforcement, Pfizer Inc.

Opening Remarks

Mr. Daemmrich began with a historical perspective of medical developments in this country, as well as the social, economic, and regulatory issues that would invariably be tangled up within them. His tale foretold many of the conflicts we see today—going from a time when most modern medicines didn’t exist, and high mortality was a fact of life, to a time when vaccines and other treatments existed, but access depended partly on wealth. In between those two periods, we saw rapid growth in IP protection that helped move society from one to the other. But whether in the form of religious opposition to smallpox inoculation, regulatory reforms after tragedies from bad medicine, or protests from a marginalized community during the AIDS crisis, legal and social issues have always played a prominent role in the story of medical science.

Building on this historical base, Mr. Daemmrich posed the problem now facing us: compared to other medicines, there are relatively few vaccines. On a grand scale, the entire field of vaccination is still in a stage of early development, and there exists great potential for growth in the future. The question is how to best stimulate that growth, or rather, how to ensure the greatest access to already-developed vaccines without stifling the creation of new ones?

Prof. O’Connor then led the panel with a series of questions. He began by asking about the difference between two classes of medicine. Vaccines are generally thought of as biologics—treatments that are derived from live cells—whereas pharmaceuticals belong to the class of “small-molecule” drugs. They are primarily chemical compounds rather than a biological product.

Q: From an IP perspective, are vaccines different from small molecule pharmaceuticals? What role does IP play in making vaccines available?

Prof. Rai responded that vaccines are indeed very different from small molecule drugs. From an IP perspective, the two classes derive their greatest protection from different sources.

Small molecule drugs can be produced without the need for company trade secrets. All the most critical information can be found within the text of the patent. So, the greatest protection comes from the patent itself, which grants its owner the right to exclude others from making or using the drug, and from data exclusivity, which prevents other companies from using the original developer’s clinical data to obtain regulatory approval of its own product.

Vaccines, on the other hand, cannot be quickly copied solely by reading the patent. There is a great deal of “know-how” involved in the manufacturing process. Because of this, trade secrets can be just as important to vaccine protection as the patent.

The role of IP in vaccine access, she said, is an interesting question. While public funding exists in the world of small molecule drugs, it has a “heavier footprint” in vaccine development, which then has some impact on the incentive model as it applies to vaccines.

Mr. Laster said the role of public funding was critical to his prior work at PATH, an organization devoted advancing global healthcare equity through public-private partnerships and other initiatives. Public funding has a “de-risking” effect in that the high costs and uncertainty of clinical trials are not borne entirely by the private sector. And because vaccine development typically requires cooperation among many parties, it is valuable to have different types of incentives in play (i.e., “pull”-type incentives, such as patent grants, as well as “push”-types, such as public funding). But from an IP perspective, exclusivity can pose a challenge to those cooperative efforts.

Additionally, he said that the detailed know-how involved with vaccines makes technology transfer incredibly difficult. If the intended receiver in a developing nation lacks the capacity to utilize the technology, how can effective tech transfer work in real-world practice? The question is less about whether we should be transferring vaccine technology to developing nations than it is about whether we can.

Mr. Aaronson said that a key piece of our IP system is that it does allow for greater cooperation by providing a means of transferring technology among partners while preventing that technology from being used for unauthorized purposes. He credits that cooperative system for enabling Pfizer to partner with BioNTech, producing a vaccine in record time. He added that this vaccine is currently supplied in 116 countries and counting, that they have committed to supplying at least 2.5 billion doses, and that they have just struck a purchase agreement with the United States for 500 million doses to supply lower-middle income nations. The required research, discovery, and development would not have been possible without a strong IP system that provides the right incentives and enables secure technology sharing among a large host of players.

Q: While we don’t know what final form the waiver might take, do you see it playing a necessary role in actually increasing vaccine supply and access in the coming year or two? Are there potential downsides to an IP waiver that should be considered?

Prof. Rai said that the biggest effect of a waiver would likely be its “symbolic” value, as other factors will have a much greater impact on vaccine access. But even if there were no substantive effect, it would be good for high-income nations to demonstrate an interest in global health issues. However, she considered the waiver issue “a little bit of a sideshow,” saying it likely would be “neither as bad as opponents fear nor as good as proponents hope.”

Prof. O’Connor noted that this is a particularly difficult question to answer when nobody knows what form any potential waiver would eventually take.

Mr. Laster based his perspective on his ten years of negotiating vaccine development and distribution efforts with PATH, saying he is “not sure [the waiver] aligns well” with what’s needed. Recognizing the importance of trade secrets and the complexity of the partnerships involved, he says a successful system must encourage willing cooperation. Simply waiving IP rights won’t necessarily do that. He also cautioned against taking a “static view” of the problem by taking for granted that the vaccine already exists rather than considering the IP system that helped create it, and failing to ensure that the same system is incentivizing new vaccines in the future. That said, the threat of a waiver might provide enough encouragement to bring about voluntary participation before an actual waiver becomes a reality. He credits this threat with already having a noticeable effect on pricing and other strategies.

Mr. Aaronson added that we are dealing with multiple vaccines based on very different technologies. Concentrating “a little more on the practical versus the theoretical,” he noted that the impacts of an IP waiver can vary greatly from one technology to another. The mRNA vaccine is the first drug of its type to ever receive approval. Much of the necessary tech transfer would not be limited to COVID-19, but could apply to the entire mRNA technology platform, drastically impacting its value. Waiving the rights to a groundbreaking technology could reduce the incentive to explore uncharted technological fields.

He also said it’s not certain that waiving IP rights would yield a net increase in the number of doses produced. The existing developers are producing large amounts of the vaccine. Opening the supply chain up to new entrants who may not be able to effectively utilize those supplies could yield a net decrease in production.

Prof. O’Connor also took audience questions for the panel. Some are listed below, starting with a “great foundational question.”

Q: How would it be ethical to allow lifesaving medicines and vaccines to be patented?

Prof. O’Connor began by addressing the purely legal perspective—that such patents are allowed under U.S. law, although there have been exceptions in some other countries at certain times because of this complex ethical question.

Mr. Aaronson said it’s important to think about patents as a part of a broader incentive structure. Are we putting the incentives in place to get someone to get up every morning and put in the work, money, and risk to create a product? We need an incentive structure, or there won’t be anyone making those lifesaving medicines. A patent system is one way to achieve this.

Q: If patent disclosures cannot teach producers how to make a vaccine without also getting corresponding know-how, how can they satisfy the disclosure requirement for patentability?

Prof. Rai has written multiple articles about this question (see one here) and offered several reasons. Some of the know-how is not easily written down. The need for shared know-how could possibly be satisfied by depositing biological materials with the Patent Office, but this is unlikely to happen. Another reason is that the final product that emerges from a years-long regulatory approval process is not always identical to the product described in the patent. There is also a mistaken view that patents and trade secrets cannot protect the same product. It is true that a singular feature cannot be both patented and kept as a trade secret, but a single product may have different features that are protected under one regime or the other.

Mr. Aaronson also pointed out that a single drug may be protected by many patents. Some of the know-how simply involves knowing how to properly combine the patented technologies.

Q: If most of the medical innovations occur in wealthy nations, IP laws will lock developing nations out, at least initially. Is there a way to include developing nations earlier in the innovation process?

All panelists agreed on the importance of this issue, as well as on the fact that it’s much easier said than done. Prof. Rai said that every nation must begin to create its own manufacturing capacity to avoid reliance on others, but this requires large amounts of human capital and infrastructure. The problem really goes beyond medicine to the balance of rich and poor nations generally. Mr. Laster said this is the sort of thing he was working on with PATH, which has created some networks, but there is a long way to go. Building the required skillsets and infrastructure locally takes time, but public-private partnerships can help. Mr. Aaronson said that it’s essentially like asking a nation to stop being a low-income country. It’s a somewhat circular issue, in which money is required to build infrastructure, but infrastructure is required to make money. However, this is where IP is not the problem; it is the solution. A strong IP system can create the necessary investment incentives to begin building a better future in any nation.

Closing Remarks

In closing, Prof. Rai said that “regrettably, the public debate on the . . . waiver has been very simplistic.” She hoped that the panel had “shed some light” on the issue and thanked her fellow panelists for a respectful and productive dialogue. Mr. Last er agreed that “it is a complex topic” but said that “it’s not about the waiver; I do think there are mechanisms that can lead more likely to the outcomes we want.” Mr. Aaronson finished by saying that “we all have the same goal, to figure out ways to bring medicines and vaccines to patients, no matter where they are in the world. We’re fortunate and thrilled that our vaccine has had that potential to change lives, and our goal is to continue . . . to ensure access” to both this and to future vaccines.

A recording of the panel is available here.

Healthcare Patents

WTO IP Waiver Too Simplistic: Global Vaccine Tech-Transfer Needs Other Strategies

Post author By Joshua Grove
Post date April 29, 2021

By Yogesh Pai

Since October 2020, India and South Africa, joined by two-thirds of the WTO Members (African Group, LDCs and most of developing world) have been actively pursuing other developed country Members to agree to their request to waive global intellectual property (IP) rules. The waiver asserts that by suspending IP protection for COVID-19 technologies, countries will be able to quickly augment production and foster equitable access for COVID-19 related products.

The push for the IP waiver proposal rests on an often simplistic textbook assumption that IP controls exercised through legal rights allow IP owning firms exclusive control on production by reducing output (by restricting competitive copycat entry) and thus increasing prices. Of course, this is something no country wants during a pandemic where equitable access is paramount.

However, truth be told, the IP waiver proposal, even if passed by approval of three-fourths of current WTO Members (a minimum requirement under WTO Rules) or with a consensus, will not enable India or any other country (even with decent production capabilities) to quickly access complex technologies and augment production, particularly in the context of COVID-19 vaccines.

The critical issue surrounding access to COVID-19 vaccine technologies involves an active technology licensing component, which the waiver/suspension of IP laws cannot achieve (e.g. by suspending patents or trade secret protection).

Most complex technologies such as vaccines and other biological products contain two major knowledge components. One component is the knowledge that can be copied by competitors and hence patented to legally prevent copying for at least 20 years in India. Another component involves any undisclosed information such as a trade secret or know-how, including hard tacit knowledge of manufacturing/quality control measures for production and clinical data required for regulatory clearances.

IP waiver simply can’t achieve access to tacit knowledge components which are in the exclusive possession of a firm in the form of trade secrets or any other undisclosed information. Any IP lawyer with an understanding of IP intensive industries would confirm that trade secrets do not require any ‘exclusivity’ type of legal protection (e.g. like patents). Trade secret laws provide defensive protection to a firm that already has exclusive possession of some undisclosed information against industrial espionage, breach of confidence/contracts by its employees or by connected parties who benefit from such misappropriation. Of course, unconnected parties (i.e. competitors) are always free to come out with their own products/processes through capital intensive and time consuming (months/years) reverse-engineering or independent innovation, which the law on trade secrets does not prohibit.

So even if the WTO IP waiver will allow countries like India to suspend legal protection for trade secrets/undisclosed information, it means nothing in the real-world unless the law (and often a draconian criminal measure) is used against a firm and its employees physically located in its territory to engage in forced technology transfer (FTT). Such FTT requirements have never worked in practice without other social and economic costs. India has already had a taste of it in its unsuccessful bid to get Coca-Cola to reveal its know-how under foreign exchange laws in the late 1970s. It led to Coke’s exit from India and return in the post-liberalisation era in the early 1990s.

Realising such complexities and the potential futility of blunt legal instruments early on, the Serum Institute of India (SII) actively collaborated with AstraZeneca/Oxford for obtaining a technology licence involving a reported fee of Rs. 75/- per jab. This allowed SII access to AstraZeneca’s tacit knowledge (trade secrets/other undisclosed information) and clinical trial data to engage in quality-controlled production. Scaling-up is a different challenge altogether as it requires both time and investment in heavily quality-controlled production facilities.

Similarly, India’s Council of Scientific & Industrial Research (CSIR) – Centre for Cellular and Molecular Biology (CCMB), which already has certain expertise in mRNA technologies, is pursuing Moderna to engage in vaccine technology licensing. Although Moderna has allowed free access to its mRNA patents for COVID-19 vaccine production, the crux lies in active technology licensing.

In fact, even in case of an indigenously developed vaccine technology by Bharat Biotech with an early-stage lab support from the publicly-funded Indian Council of Medical Research (ICMR) – National Institute of Virology (NIV), the Department of Biotechnology had to recently nudge Bharat Biotech to engage in talks with Panacea Biotech (the only other company in India which is currently equipped to produce Covaxin) to scale-up production.

So, a WTO IP Waiver to suspend IP obligations domestically will not help unless India engages in FTT – a recipe for complete disaster, particularly when we have finally decided to open-up to more foreign players. The Government of India must not waste its valuable energy in pursuing the waiver proposal in trying to look for solutions that are far removed from the real-world complexities and constraints posed by economics of vaccine technologies and production, and an equally complex IP ecosystem in the context of global tech-transfers. Where blunt legal instruments don’t work, using track-1 and track-2 diplomacy to place moral coercion on western governments to nudge firms to actively engage in technology licensing may still work wonders.

Allowing manufacturers to strike early deals with tech players to facilitate risk-sharing and exploration of synergies driven by a predictable and transparent entry-enabled regulatory environment is a pre-requisite for sustainable vaccine production. Securing cheap upfront volume discounts for state-sponsored distribution and allowing private players to cross-subsidise through differential pricing in private sales will help in meeting the demand. This will facilitate scaling-up of production and pave the way towards healthy competition by driving down vaccine prices in order to attain vaccine equity.

Dr. Yogesh Pai is an assistant professor and the DPIIT, Ministry of Commerce and Industry IPR Chair at National Law University Delhi. He has served as a legal member of the Ministry of Health and Family Welfare’s Committee on Invoking Provisions of Compulsory Licensing under the Patents Act, 1970 in the Context of Affordable Healthcare (2013). Views are personal.

This piece first appeared on April 28, 2021, in the Express Pharma edition of the Indian Express.

Tags COVID-19, exclusive possession, forced technology transfer, India, IP waiver, patent, tech transfer, technology, vaccine, WTO, Yogesh Pai

Innovation Patents

Professor Tabrez Ebrahim on Clean and Sustainable Technological Innovation

Post author By Joshua Grove
Post date March 25, 2021

The following post comes from Associate Professor of Law Tabrez Ebrahim of California Western School of Law in San Diego, California.

By Tabrez Ebrahim

What role should patent law have in promoting environmentally friendly, clean, and sustainable technology innovation? Does patent law provide adequate incentives for inventions and innovation that address environmental problems?

Clean technology refers to measures, products, or services that reduce or eliminate pollution or waste. Sustainable technology refers to the design of products that offer environmentally friendly alternatives that prevent waste, are less toxic, use renewable feedstock, use safer solvents and reaction conditions, or increase energy efficiency. In my new paper, Clean and Sustainable Technology Innovation, I provide a narrative review of various environmental innovation approaches and incentives for technology development and diffusion. Scholars and commentators have analyzed the role of patents in facilitating technological development to mitigate climate change, including an eco-patent commons, a fast track program, a patent rewards system, and a collaborative and cooperative platform.

I analyze the literature to show that patent law offers certain underutilized opportunities to promote technological innovation that has environmental benefits. I conducted a semi-systematic review on academic papers concerning clean and sustainable technologies and various patent law-related innovation proposals. In so doing, I provide a synthesis of law and policy papers to identify and understand scholarly views of patents in inducing environmental innovation.

The importance of developing clean and sustainable technologies has included government-driven initiatives to accelerate patenting procedures and expediting of patent application examination of such technologies. The United States Patent & Trademark Office (USPTO) had a fast-track program, the Green Technology Pilot Program, which had reduced the time to attaining a patent for environmental innovations, but this program ended in 2012. Other proposals have included international initiatives that foster a collaborative and cooperative platform to make clean and sustainable technologies more freely available through the sharing of patents that were involved or created during the cooperation and through mechanism to promote mutually agreeable terms. The deployment of clean and sustainable technologies could depend on whether these technologies are patented, licensed, or shared in a pool, and on what technological substitutes are available.

The theoretical underpinning of clean and sustainable inventions is their ability to produce positive externalities, a term which refers to the producing of environmental benefits beyond the implementing firm. Environmental-centric inventions and innovations could generate salutary effects for members of society far beyond the inventor or firm that implements the invention. As a result, more investors may be interested in startups that develop environmental solutions, and business activity in this sector should multiply. While the time and cost of clean and sustainable deployment and climate change mitigation can be an important consideration, the opportunities to provide environmental benefits should be of greater importance. There are a number of innovation policy issues for incentivizing inventors, innovators, and businesses to continue to develop environmental solutions.

I discuss more about these issues in my paper, which was selected by a faculty editorial board and was part of a faculty-edited blind peer review process. This paper is published in Current Opinion in Environmental Sustainability and can be downloaded here.

Tags environment, Green Technology Pilot Program, innovation, patent law, patents, scholarship, sustainability, sustainable technology, Tabrez Ebrahim, USPTO

High Tech Industry Patents

Accenture Report Outlines How 5G Technology Accelerates Economic Growth

Post author By Joshua Grove
Post date March 8, 2021

The following post comes from Wade Cribbs, a 2L at Scalia Law and a Research Assistant at CPIP.

By Wade Cribbs

Everyone in the technology industry knows that 5G is posed to revolutionize the world, but the finer points of 5G’s impact on the U.S. economy are detailed in a new report by Accenture entitled The Impact of 5G on the United States Economy. In the report, Accenture explains how 5G stands to add up to $1.5 trillion to the U.S. GDP and create or transform up to 16 million jobs from 2021 to 2025.

5G’s benefits include enabling the development of new industries, improving current industries, and accommodating the current, rapid growth of interconnected technologies. Autonomous vehicles are only achievable through 5G’s increased broadband, which can handle the large amount of data transferred to and from the sensors on vehicles on the road as they are operating. Furthermore, 5G is necessary to support the expected growth to 29.3 billion devices and 14.7 billion machine-to-machine connections by 2023. To get a better look at the specific impact 5G will have on the coming business and consumer landscape, Accenture focuses on five key business sectors: manufacturing, retail, healthcare, automotive and transportation, and utilities.

As 10,000 baby boomers retire a day, the manufacturing industry is in dire need of some way to meet its labor shortage. Due in part to a lack of interest from the younger generations, manufacturers are increasingly looking to automation. 5G will allow for an unprecedented level of control and synchronization across the warehouse floor. Examples of manufacturing improvements implementable with 5G include: AI assisted asset management utilizing video analytics and attached sensors; connected worker experiences implementing augmented reality to provide workers with a safer work experience and reduced training times; and enhanced quality monitoring through a combination of AI inspection and UHD video streaming monitoring. Accenture estimates that 5G will provide a $349.9 billion increase in sales for manufacturing of the equipment and products necessary to implement 5G in other business sectors.

In the retail sector, 5G can provide the data needed to support frictionless checkout experiences. AI used in combination with UHD video monitoring will allow for customers to be charged when putting items in their basket, eliminating the long lines that 86% of customers say have caused them to leave a store, which in turns leads to $37.7 billion in missed sales annually. Furthermore, this same AI monitoring system can be used to personalize a shopping experience through monitoring customers and alerting sales associates to a customer with a problem without the customer having to find and flag down an associate; the system can also monitor for theft, which costs the retail industry $25 million daily. Overall, Accenture estimates that the retail industry stands to see a $269.5 billion increase in sales due to 5G sales and cost savings.

Healthcare costs are expected to rise from $3.4 trillion to $6 trillion by 2027. As the need for healthcare professionals is expected to outstrip the labor supply, increases to technology and treatment efficiency are essential to address the problems presented by an aging population. The good news is that 5G is suited to address just these issues by eliminating waste, which is estimated to make up as much as 30% of spending. 5G will expand medical professionals’ ability to monitor patients, giving the option for at-home care to a wider range of patients as well as lowering the number of doctors required to monitor intensive care patients. Doctors will also be able to access previously unreachable patients for virtual consultations. No longer will rural Americans have to travel long distances to visit their doctor in the city. 5G will allow online consultants rapid access to vast amounts of data, such as MRI images, CAT scans, ultrasounds, ECGs, and stethoscope data. Accenture estimates that the healthcare industry stands to gain $192.3 billion in economic output and up to 1.7 million jobs.

As vehicles become smarter, safer, and more connected, 5G will enable automobiles to exchange data with other vehicles, the automotive infrastructure, and pedestrians. This will enhance vehicle safety, fleet management, and smart traffic management. The U.S. National Highway Traffic Safety Administration (NHTSA) estimates that the combined impact of vehicle-to-everything communication technology could reduce the severity of 80% of sober multi-vehicle crashes and 70% of crashes involving trucks. 5G video-based telematics will allow for automated vehicle fleets and fleet management capability, such as improved logistics security and goods-condition diagnostics to eliminate the up to 20% of empty cargo space in U.S. trucks. Through smart traffic managing by vehicle-to-vehicle communication and vehicle-to-infrastructure communication, traffic congestion, traffic accidents, and smog due to idling can all be reduced by an expected 15 to 30%. On the whole, Accenture estimates that $217.1 billion in revenue will be generated in the automotive and transportation industry by 5G.

5G will address multiple problems facing the utility industry, including vegetation and asset management, energy supply and resiliency, and next-generation workforces. 5G will allow smart grid technology to be implemented that can track and adapt to real-time disruptions to the power grid. In combination with smart grid technology, smart power plant technology will be able to map out peak power use and wear on equipment to determine optimal times for taking a machine offline for maintenance. Safer work environments can be created for the next generation workforce using augmented and virtual reality to train and eliminate manual methods with digital tools. Accenture estimates that the utility industry stands to grow by $36.9 billion in total sales from the implementation of 5G.

Accenture concludes that 5G is the necessary step towards achieving a new normal through AI, mass machine communications, and digital cloud technology. Every aspect of American life will be affected, and an unprecedented boost will be given to the economy.

To read the report, please click here.

Tags 5G, Accenture, AI, automotive, communications, devices, economy, GDP, healthcare, high technology, manufacturing, patents, retail, technology, transportation, UHD video, utilities, Wade Cribbs

Patents Pharma

UC Hastings’ Evergreen Drug Patent Search Database: A Look Behind the Statistics Reveals Problems with this Approach to Identifying and Quantifying So-Called “Evergreening”

Post author By Joshua Grove
Post date March 4, 2021

Professor Robin Feldman’s reply to this post, and our response, can be read read here.

The Center for Innovation, housed at the University of California Hastings College of the Law, has created an Evergreen Drug Patent Search Database (the “Evergreening Database,” or “Database”).[1] The Database was created to address the perceived problem of “evergreening,” which the Database defines as “pharmaceutical company actions that artificially extend the protection horizon, or cliff, of their patents.”[2] Its data include patent and non-patent exclusivity information from out-of-date versions of the FDA’s Orange Book.[3] The implication seems to be that these statistics, which include things like the number of “protections” and “extensions” associated with a drug, and the amount of “additional protection time” resulting from these protections and extensions, serve as indicia of evergreening, which the Center for Innovation characterizes as a “problem [that] is growing across time.” The Database’s homepage explains that “[t]he Center for Innovation hopes that policymakers and other stakeholders use this information to identify potential problems with evergreening and develop new solutions so that anyone and everyone can access the life-saving medication that they need.”

Based on our preliminary exploration of the Evergreening Database, we are concerned that—because of limitations in the methodology used and given the inadequate transparency with respect to the underlying data—policymakers and others who consult the Database will be misled by the statistics. While the Database allows the public to access the underlying data, the format in which the data are provided makes the process of accessing and understanding them relatively burdensome.

The problems we have identified with the statistics provided by the Evergreening Database are numerous and multifaceted, and it would be beyond the scope of a single blog post to try to address them all. Instead, we have decided to focus on a single drug, ranolazine, which is used to treat angina and marketed by Gilead under the tradename Ranexa. There is nothing particularly unique about ranolazine—the problems with its statistics are representative of what we have generally observed to be pervasive throughout the Database. The ranolazine entry caught our attention because it purports to show that the drug was a subject of a relatively large number of “protections” (24 of them) and 13 years of “additional protection time,” even though the total time between the approval of the drug and expiration of all associated patents and exclusivities was only a little more than 13 years—about five years less than the average term of a U.S. patent.

We will start with an initial explanation of the methodology underlying the Evergreening Database. As mentioned above, the statistics are derived from out-of-date versions of the FDA’s Orange Book, which is published on the FDA’s website and provides information on patents and “exclusivities” associated with FDA-approved drugs. The exclusivities can be any of a variety of non-patent regulatory exclusivities that Congress created to reward innovators that have achieved certain outcomes that Congress sought to incentivize. Examples include the “NCE exclusivity”—five years of data exclusivity awarded for the initial approval of a new active ingredient, i.e., a “new chemical entity”—and the seven years of orphan drug exclusivity awarded to an innovator that develops a drug for a rare disease or condition. The Orange Book provides a listing of these exclusivities, as well as a list of patents relating to the approved drug (i.e., patents claiming the drug’s active ingredient, formulations of the drug, and methods of using the drug). It also provides expiration dates for the patent and exclusivities. The FDA periodically revises the Orange Book, and when it does, it removes from the lists any patents and exclusivities that have expired.

The creators of the Evergreening Database compiled this historical data in a Comma Separated Values file (“the CSV file”). The Database uses the patents and exclusivities derived from the CSV file to generate various statistics for each drug, including a total number of “protections” and “extensions,” as well as the “earliest protection date,” “latest protection date,” and the number of “months of additional protection” (which is the time between the earliest protection date and the latest protection date). Presumably, these statistics are intended to shed some light on the purported evergreening practices of pharmaceutical companies.

Now let us turn to ranolazine. The Evergreening Database entry for ranolazine provides the New Drug Application (“NDA”) number for the drug (21526), the branded product name (Ranexa), the name of the innovator company associated with the branded drug (Gilead), and the date of FDA approval (January 27, 2006). The ranolazine entry also provides various statistics derived from the raw data, including the number of “protections” (26) and the amount of “additional protection time” (156 months, i.e., 13 years). This seems to provide an example of evergreening. The statistics appear to show that Gilead gamed the system to “artificially extend the protection horizon of its patents” by 13 years. However, a closer examination of the raw data tells a quite different story.

First, what are the 26 purported “protections” that Gilead has apparently secured with respect to Ranexa? Eleven of them are patents that were once listed in the Orange Book for the drug. All the listed patents have expired, so none appear in the current Orange Book. While the Database lists the patents, it does not include expiration dates, which are necessary to understand the “protection time” statistics. Worse, the Database provides no information with respect to the other 15 “protections,” i.e., non-patent exclusivities.

With some effort, the missing information can be found in the CSV file. The following step-by-step instructions will hopefully make it easier for others interested in following this path.

Beginning on the homepage for the Evergreening Database, click on the “About the Data” hyperlink, which will take you to another page which states:

To download the original dataset, that was used to develop the results for the article May Your Drug Price Be Evergreen, along with information about researching the FDA’s Orange Book, please see:

Robin Feldman, Identifying Extensions of Protection in Prescription Drugs: Navigating the Data Landscape for Large-Scale Analysis, ANN ARBOR, MI: INTER-UNIVERSITY CONSORTIUM FOR POLITICAL AND SOCIAL RESEARCH (2018), https://doi.org/10.3886/E104781V2.

Clicking on the “doi.org” link leads to a webpage of “openICPSR,” which describes itself as “a self-publishing repository for social, behavioral, and health sciences research data” and a “service of the Inter-university Consortium for Political and Social Research (ICPSR).”

There are several files posted on this webpage, including one entitled Orange_Book.csv. Users can download this file after registering with openICPSR.

The CSV file includes 26 entries for ranolazine that presumably correspond to the 26 “protections” reported in the Database. All 26 protections were based either on the eleven patents or on the NCE exclusivity granted by FDA for the first approval of a new active ingredient. How does that add to 26 protections? Each of the 11 patents was counted twice, once for each approved strength of the drug (which comes in dosages of 500 mg and 1 g). However, marketing approval for two strengths of a drug does not extend the duration of the patents, and it is problematic that the methodology underlying the database results in a doubling of the number of “protections,” with the implication that this constitutes evidence of possible evergreening.

One of the patents (U.S. patent number 4,567,264) was counted as three protections, because the duration of that patent was extended by patent term extension (PTE) pursuant to Section 156 of the Patent Act. Congress enacted Section 156 in 1984 as part of the Hatch-Waxman Act for the express purpose of addressing the “distortion” of the patent term experienced by pharmaceutical innovators owing to the lengthy process of achieving FDA marketing approval. Often, by the time a drug has been approved, much (if not all) of the patent term will have elapsed. To compensate for this distortion, Section 156 allows pharmaceutical innovators to extend the duration of one patent covering the drug by a length of time equal to one half of the time between the filing of the Investigational New Drug (IND) application and the submission of an NDA, plus all the time between the submission of the New Drug Application (NDA) and approval of the drug. Pursuant to statute, the maximum amount of PTE that can be awarded under Section 156 is five years, and the amount of PTE awarded can extend the duration of the patent for no longer than 14 years after the drug’s approval date.

Five years of PTE was added to U.S. patent number 4,567,264, which claims ranolazine as a composition of matter. Notably, the original expiration date of this patent was in 2003, three years prior to the drug’s initial approval. With the addition of five years of PTE, the patent term was extended to 2008, a little more than two years after the drug was approved for marketing. But since the patent term (including PTE) runs concurrently with the five-year NCE data exclusivity (discussed below), the patent provided no additional exclusivity beyond that already provided by NCE exclusivity. The Database is misleading to the extent that it implies that the award of PTE constitutes an “artificial” extension exclusivity for ranolazine—PTE was created by Congress for this express purpose, and it is available to all innovators who make a new drug available to patients.

One of the 26 “protections” was simply a request to delist a patent from the Orange Book. It makes no sense to consider a request to delist a patent as an additional “protection” for the drug, but for some reason that is how it is tallied in the CSV file and Database.

To summarize, 24 of the 26 “protections” are accounted for by the 11 patents, including the award of PTE and the request to delist a patent. The remaining two “protections” result from the fact that Gilead received five years of NCE data exclusivity. Like the patents, the NCE exclusivity period was counted twice, once for each approved strength of the drug. Congress created NCE exclusivity as an incentive for pharmaceutical companies to engage in the costly and beneficial activity of securing FDA approval for new pharmaceutical active ingredients, thereby ensuring that innovators receive a minimum of at least five years of exclusivity before any generic company can file an abbreviated NDA (ANDA) seeking approval to market a generic version of the drug. All innovators who succeed in providing a new active ingredient to patients are awarded five years of NCE exclusivity, which runs concurrently with patents. Again, it is misleading for the Database to tally the NCE exclusivity as two additional “protections” for the drug. NCE exclusivity provides a minimum floor of protection for innovators.

Now, what about the 11 patents? Are they evidence of evergreening, i.e., artificial extensions of patent protection? In assessing these patents, it is useful to consider the context from which they arose. Ranolazine was initially identified as a drug target by Syntex in the 1980s, and throughout much of the 1980s and 1990s that company conducted extensive studies of the compound for a variety of indications, including Phase II clinical trials testing its safety and efficacy in humans. Unfortunately, these studies failed to result in an approved drug, due at least in part to the fact that ranolazine is rapidly metabolized once ingested, which resulted in inadequate plasma concentrations of the drug in human subjects. Syntex filed a patent application disclosing ranolazine in 1983 that resulted in the issuance of a patent in 1986 claiming the molecule. This is the composition of matter patent mentioned above, the original term of which expired in 2003 but was extended by PTE to 2008.

In 1996, Syntex (then a subsidiary of Roche) licensed its rights in ranolazine to another drug company, CV Therapeutics. Researchers at CV Therapeutics succeeded in overcoming the problem of rapid metabolism by developing a sustained-released version of the drug. In 1999, the company filed a patent application disclosing sustained-release ranolazine formulations and methods of using them to treat patients. This application resulted in the issuance of a patent in 2001 claiming methods of using the sustained-release formulation of ranolazine to treat patients suffering from angina (U.S. patent number 6,306,607, the “method of treatment patent.”, which expired in 2019). Note that the method of treatment patent was issued years before the initial FDA approval of ranolazine in 2006, and the initial approval was for the sustained-release ranolazine. Generic versions of ranolazine began entering the market in 2019, shortly before the expiration of the method of treatment patent.

What about the other nine? All nine of these patents arose out of continuation applications claiming priority to the original 1999 application and therefore expired on the same day as the method of treatment patent, i.e., 20 years after the filing date of the original parent application. The nine additional patents reflect the fact that the 1999 patent application filed by CV Therapeutics disclosed multiple inventions, addressing different aspects of the company’s discovery of sustained-release ranolazine formulations and their use as therapeutic agents. Patent law’s prohibition against “double patenting” required CV Therapeutics to divide the inventions up into multiple patents, and the PTO examined the various inventions and determined that each merited its own patent. Significantly, because the patents all ran concurrently, and all expired on the same day, they did not extend the period of exclusivity beyond that provided by the initial method of treatment patent.

Finally, what of the Database’s assertion that Gilead benefited from 13 years of “additional” protection time for Ranexa? Presumably, this is time gained from “evergreening”; however, the statistics provided by the Database seem suspect, because they report that Ranexa was approved on January 27, 2006 (which is correct), that its “earliest protection date” was May 18, 2006 (less than four months later), and that its “latest protection date” was May 27, 2019 (which is the expiration date for the method of treatment patent). In other words, the total period of exclusivity reported by the Database was a little less than 13 years and four months, almost all of which the Database characterized as “additional protection time.”

Why did the Evergreening Database allot ranolazine less than four months of “earliest” protection time? There is no explanation in the Database itself, but the CSV file provides the answer. As mentioned earlier, the CSV file includes three entries for the composition of matter patent, accounting for three of the 26 “protections.” One of those entries lists the “expiration date” for the patent as May 18, 2006. It is this entry in the CSV file that resulted in the Database reporting an “earliest protection date” of May 18, 2006, less than four months after the drug was approved. The latest protection date of May 27, 2019 is the expiration date for the method of treatment patent. The 13 years of “additional protection time” is simply the amount of time between these two dates.

There are numerous problems with the methodology used to calculate “additional protection time.” For one thing, the May 18, 2006, expiration date for the composition of matter patent reported in the CSV file is incorrect. The expiration date for the patent was May 18, 2003, and the term was extended by five years of PTE to May 18, 2008 (see the PTO’s Patent Terms Extended Under 35 USC §156, available at https://www.uspto.gov/patent/laws-and-regulations/patent-term-extension/patent-terms-extended-under-35-usc-156, last visited Nov. 29, 2020). The two other entries in the CSV file for the composition of matter patent provide expiration dates of May 18, 2007. We assume that the creators of the Database intended to populate the CSV file with the original expiration date of the patent and the PTE-extended expiration date, but for some reason they got the years wrong—i.e., the actual years were 2003 and 2008, and the creators of the Database erroneously reported them as 2006 and 2007.

However, because they used the erroneous May 18, 2006 expiration date as the “earliest protection date” for ranolazine, the Database allows for less than four months of “earliest” protection time and counted the remaining 13 years of protection provided by the method of treatment patent as “additional.” In fact, if they had used the correct original expiration date for the composition of matter patent, the result would have been an “earliest protection date” that preceded the approval date of the drug, resulting in zero days of initial protection. This illustrates how misleading it would be to assume there is any connection between the “additional protection time” reported in the Database and evergreening activity.

In short, when we look at the raw data underlying the misleading statistics presented by the Database, we see that the innovator enjoyed a little over 13 years of patent protection, based on patents that arose out of the critical inventive activity that enabled CV Therapeutics to transform a failed drug candidate into a successful human therapeutic. Is 13 years of patent protection excessive for ranolazine? We would argue that it is not, particularly when one considers the huge investment and risk that was involved in bringing the drug to market. And Congress did not think so when it enacted Section 156, explicitly allowing pharmaceutical companies to extend the expiration date of their patents up to a maximum of 14 years after initial approval of the drug. The patent system appears to have worked exactly as Congress intended, with all patents and exclusivities expiring and generic versions of the drug entering the market approximately 13 years after the initial approval of Ranexa.

There may be real value in the underlying data that were used to generate the database; however, as it stands, the underlying data are both difficult to access and incomplete. As Ranolazine shows, there are serious flaws in the database and its interpretation of the underlying data that create unwarranted implications of improper evergreening activity.

[1] https://sites.uchastings.edu/evergreensearch/#.X6qg-mhKhM0

[2] https://sites.uchastings.edu/evergreensearch/about/#.X8UdwmhKhM0

[3] In proper context, use of these data from old Orange Book editions is of course fine. But care must be taken to not create misleading implications.

Tags biopharmaceutical, data, drug, Evergreen Drug Patent Search Database, evergreening, FDA, patent life, patent term extension, patents, PTE, UC Hastings

Antitrust Patents

Jonathan Barnett on Competition Regulators and Standard-Essential Patents

Post author By Joshua Grove
Post date February 17, 2021

The following post comes from Connor Sherman, a 2L at Scalia Law and a Research Assistant at CPIP.

By Connor Sherman

The field of intellectual property (IP) can sometimes be wrong in its approach towards promoting economic health, especially when that approach overlaps with antitrust law. An example of this is laid out in a new article by CPIP Senior Fellow for Innovation Policy Jonathan Barnett at Competition Policy International’s Antitrust Chronical entitled How and Why Almost Every Competition Regulator Was Wrong About Standard-Essential Patents. In the article, Prof. Barnett explains how antitrust regulators discourage investment and limit innovation when they take enforcement actions without first gathering rigorous evidence of market harm.

A standard-essential patent (SEP) is a core innovation that entire industries build upon—in other words, an innovation that is necessary to include in a product in order to comply with an industry specific standard. A business cannot just slap Wi-Fi or Bluetooth onto its new smart lightbulb without including the functions associated with those standards. This protects consumers from false advertising, but it also protects the goodwill or quality assured by those standards.

For many years, the consensus among academics, courts, and general opinion has been that the owners of these SEPs will, if given the chance, engage in a form of economic harm called a “patent holdup.” As used in the article, a holdup can be understood as raising the cost of using a patent once it has been identified as a standard innovation. In response to this consensus, regulators have attempted to use antitrust law to prevent patent holdup from occurring.

However, Prof. Barnett encourages skepticism of this premise for several reasons. Most prominently, claims of patent holdup often will fail to meet the basic antitrust injury standard of causing competitive harm. In fact, more often than not, legal issues relating to the licensing of SEPs are resolved under exactly the fields of law one would expect—that is, under patent law with regard to the validity of the patent and under contract law with regard to the validity of the licensing agreement. Another reason presented by Prof. Barnett is the lack of empirical evidence of the expected harm to justify the intervention. Without sound evidence of anticompetitive harm, it makes little sense to employ policies aimed at preventing the nonexistent harm from occurring.

Both the 1995 and 2017 Antitrust Guidelines, issued by the Department of Justice and the Federal Trade Commission, view IP licensing as having procompetitive effects, yet the actions of regulatory agencies have been inconsistent with that understanding. Prof. Barnett states that the rush to include antitrust considerations may reflect an ongoing failure to appreciate the functionality of patent licensing agreements. After all, if a patented innovation demonstrably harms competition in an already established industry, one can presume that the innovation was either so obvious as to be improperly issued or so revolutionary as to deserve the benefits provided by the patent. In the former situation, that patent will likely be invalidated, and in the latter, the patent owner deserves the reward for creating a useful innovation.

Prof. Barnett states that a strong indictment of the current policy is reflected in the Ninth Circuit’s opinion in FTC v. Qualcomm, which overturned the lower court’s imposition of an antitrust penalty based on an erroneous view of SEPs. The lower court’s position was that Qualcomm would continue to invest in innovation under the same licensing-based business model while receiving lower rewards. Prof. Barnett argues that the more likely outcome would have been for Qualcomm to begin vertical integration, freeing it from the duty to deal with obligations of antitrust law. He then explains that the hypothetical harm of patent holdup would be minor compared to the harm that would occur from encouraging the consolidation of businesses around closely guarded, industry-changing innovations.

Prof. Barnett reasons that where patents are weak and antitrust laws are strict, the monetization structure of firms will be internal—even if funding for innovations remains robust. In the inverse situation, however, the range of feasible monetization structures are expanded to include third party firms. Thus, Prof. Barnett argues that in such a situation, an IP owner will be encouraged to license out its patents to all interested users at a modest rate in order to encourage widespread adoption of the invention.

It remains to be settled whether the long-held skepticism of SEP licensing is counterproductive, as Prof. Barnett claims. However, if Prof. Barnett is correct, this period of SEP uncertainty will perhaps provide an excellent lesson about enacting antitrust policy without the empirical evidence to back it up.

Tags Antitrust, Antitrust Guidelines, Connor Sherman, Department of Justice, Federal Trade Commission, innovation, Jonathan Barnett, patent, patent holdup, SEP, standard essential patent

Patent Law Patents Pharma

Professors Erika Lietzan and Kristina Acri on “Distorted Drug Patents”

Post author By Joshua Grove
Post date February 12, 2021

The following post comes from Austin Shaffer, a 2L at Scalia Law and a Research Assistant at CPIP.

By Austin Shaffer

In their new paper, Distorted Drug Patents, CPIP Senior Scholar Erika Lietzan of Mizzou Law and Kristina Acri of Colorado College explore a paradox in our patent system: Innovators are less motivated to work on drugs that take more time to develop as drug research incentives are being skewed away from the harder problems (e.g., Alzheimer’s disease and interventions at the early stages of cancer). The paper, which was published in the Washington Law Review in late 2020, was supported in part by a CPIP Leonardo da Vinci Fellowship Research Grant.

Although many condemn later-issued drug patents as “insidious,” Profs. Lietzan and Acri argue that those conceptions should be recalibrated, since the use of such patents is fully consistent with the intent of Congress when the Patent Act was amended in 1984 to restore some of the patent term lost to premarket R&D and FDA review. While a few scholars have considered the implications of patent term restoration from an empirical perspective, none have done so to the same extent as Profs. Lietzan and Acri. By using an expansive dataset and including a temporal dimension in the analysis, the scholars offer a fresh assessment of patent restoration and its implications.

How Can Drug Patents be “Distorted”?

Drug research is notoriously risky—investors allocate massive amounts of time and money to a project without knowing whether the drug will succeed in trials or how long the trials could last. Even if trials are successful, the Public Health Service Act and the Federal Food, Drug, and Cosmetic Act require premarket approval of new drugs before they can be commercialized. Starting in the 1960s, federal regulatory requirements grew more demanding, and the FDA’s expectations became more rigorous to obtain premarket approval. Given that the FDA approves only finished products, not mere active moieties, drug research is not only expensive but also uncertain. While this process drags out, the clock on the patent continues to run. By the time all is said and done, the effective life of the patent is distorted, an unfortunate reality that further disincentivizes complex drug research. By the 1980s, Congress had addressed this problem by amending the Patent Act to allow entities to apply for patent term restoration.

35 U.S.C. § 156 authorizes the PTO to restore the life of a patent lost to clinical trials and FDA review. However, the PTO has restricted the practicality of these restorations, making them subject to stringent limitations. It restores only half of the testing period after patent issuance and caps restoration at five years, and the effective patent life post-restoration cannot exceed fourteen years. Additionally, the PTO must deny restoration if the FDA has already approved the active ingredient. Only one patent can be extended per regulatory review period, and patents can only be extended under Section 156 once. After a certain point, premarket R&D simply and unavoidably equates to lost patent life. But despite the limitations and restraints on this process, it is widely agreed that the 1984 amendment was a step in the right direction.

The value of patent restoration was complicated, however, by the Uruguay Round Agreements Act (URAA), which revised Section 154 of the Patent Act and altered the length of patent terms. To say the least, the relationship between the URAA extension and patent term restoration was initially muddled, particularly in the context of parent/child applications. Ultimately, it played out that drugs approved since the enactment of Section 156 have been protected by patents subject to three different regimes: (1) the pre-URAA regime, in which patents lasted for seventeen years from issuance; (2) the post-URAA regime, in which patents lasted for twenty years from application or parent application; and (3) the transition regime, in which patents lasted for twenty years post-application or seventeen years post-issuance, whichever came first.

Profs. Lietzan and Acri were motivated to delve deeper into the data behind patent restorations, operating under the hypotheses that longer R&D programs should distort drug patents (even after term restoration), and that restoring a child patent should be associated with longer final effective life if the patent is subject to the seventeen-year term (pre-URAA regime).

Testing the Hypotheses

Profs. Lietzan and Acri generated an unprecedented dataset containing information on 642 approved drugs for which part of the patent life was restored—every instance between the enactment of Section 156 and April 1, 2017. Regulatory information—such as the start of clinical trials, FDA approval date, the length of testing, and the length of the FDA review period—was collected for each drug. On the patent side, the dataset included, among other data points, the following information: (1) the date on which the inventor filed the patent application that led to issuance of the patent; (2) the date that would control calculation of a twenty-year patent term under current law; (3) the date on which the patent issued (or the date on which the original patent issued, in the case of a reissued patent); (4) the type of term the patent enjoyed (seventeen-year, twenty-year, or transitional); (5) the number of days restored by the PTO; and (6) the final patent expiry date after restoration.

The data analysis produced some interesting findings. The average effective patent life without restoration—meaning the time from FDA approval to the original expiration date of the patent—was 8.71 years (median 9.49 years). And while the average clinical development program was 6.04 years, the average amount of patent life restored was only 2.87 years. Seeking to dig deeper into the findings, Profs. Lietzan and Acri performed various regression analyses to assess which variables explain effective patent life before the award of patent term restoration. Thought-provoking graphs and tables are included in the Appendix of the paper for those interested in the data science aspect of the research.

Policy Implications

As expected, Profs. Lietzan and Acri found that our legal system not only distorts drug patents but also provides less effective patent life for drugs that take longer to develop. The current scheme further disincentivizes investors and inventors from undertaking critical drug research because of the associated costs and risks of doing so. By the time our government allows the patent owner to commercialize, much of the patent term has already lapsed. And while the 1984 amendment made positive progress to combat this issue by authorizing patent restoration, that power has not been used to its fullest extent. This means that cures and treatments for a wide range of diseases and illnesses are largely under-researched and under-developed.

To add to the quandary, the changes made in 1994 by the URAA mean that a drug company may need to select a later-issued original patent to achieve fourteen full years of effective patent life. These patents are arguably less valuable to the drug’s inventor because it may be possible for generic and biosimilar applicants to develop versions that satisfy regulatory requirements and yet do not infringe the patent. Policymakers have essentially nullified the original purpose of the 1984 amendment to the Patent Act without meaningful discussion of the implications for drug innovation.

In a society begging for more involved research into complex diseases that affect millions of people, such as Alzheimer’s and various cancers, the current setup of our patent system operates as a hindrance and a deterrent against innovation. The argument can be made that drugs requiring more premarket research and investment should receive longer effective patent lives, but at the very least, they should not receive less because of a burdensome regulatory scheme.

Patent life is essential to innovation in the pharmaceutical industry, perhaps more so than any other industry, and Congress recognized that notion by adopting Section 156 to the Patent Act. The fact that the PTO uses its promulgated authority so selectively, combined with further complications stemming from Congress’s changes to the way patent terms are calculated in 1994, leaves drug companies in a predicament. While some policymakers and scholars complain when those companies secure later-expiring patents, the extensive research and analysis by Profs. Lietzan and Acri suggest that those patents may be necessary to accomplish the intentions of the Congress with the 1984 amendment.

Tags Austin Shaffer, drug patents, drug research, Erika Lietzan, FDA, incentives, Kristina Acri, patent life, patent system, patent term, patents, PTO, research and development, URAA, Uruguay Round Agreements Act

Patentability Requirements Patents Supreme Court

Professor David Taylor on Patent Eligibility and Investment

Post author By Joshua Grove
Post date February 4, 2021

The following post comes from Terence Yen, a 4E at Scalia Law and a Research Assistant at CPIP.

By Terence Yen

In his new paper, Patent Eligibility and Investment, Professor David Taylor of the SMU Dedman School of Law explores whether the Supreme Court’s recent patent eligibility cases have changed the behavior of venture capital and private equity investment firms. The paper comes from CPIP’s Thomas Edison Innovation Fellowship program, and it was published in the Cardozo Law Review. The tables referenced in this summary should be credited to his paper, and readers are encouraged to read the original publication for a deeper understanding of his survey results.

Prof. Taylor explains that, since 2010, the Supreme Court has come out with several decisions that have shaken up our understanding of patent eligibility. Not only do the new standards set forth by the Court lack administrability, but they have also created confusion and have far reaching consequences that have drawn concern and criticism from inventors, scientists, lawyers, judges, and industry groups. In fact, these new standards have required lower courts to make determinations of eligibility that the judges themselves recognize as flawed.

As Prof. Taylor explains, the crux of the issue lies in the Supreme Court’s new patentability standard, which requires an inventive application of a newly discovered law of nature, a natural phenomenon, or an abstract idea beyond the mere practical application of such a discovery, as had been previously required. The result is that a scientist cannot obtain a patent for merely making a new discovery (e.g., the cure to cancer) and disclosing how to apply that discovery to advance the state of the world (e.g., treating a patient using the cure). The inventor must additionally include a disclosure of how to apply the new discovery in a new way, creating a double novelty requirement.

Prof. Taylor points to Ariosa Diagnostics v. Sequenom to illustrate some of the issues with this new standard. In Ariosa, scientists discovered that a pregnant woman’s bloodstream included genetic material from her unborn baby. Upon making this discovery, they used known techniques to create methods to use the material to identify fetal characteristics. These new methods were a significant improvement on prior ones, which required the invasive and risky process of taking samples from the fetus or placenta.

The inventors obtained a patent, but the Federal Circuit was forced to invalidate it because the claimed method did not include any inventive concept transforming this natural phenomenon into a patent-eligible invention. In his concurring opinion, Judge Linn condemned the Supreme Court standard, as it required the court to find that an otherwise meritorious invention was ineligible to obtain the protection it deserved. He particularly criticized the second part of the standard, the requirement of an “inventive concept”, which discounts “seemingly without qualification” any conventional or obvious steps in the process.

Many people have criticized this new two-part test and the additional requirement of an “inventive concept.” Indeed, Prof. Taylor previously condemned this standard as reflecting “a lack of understanding of the relevant statutory provisions, precedent, and policies already undergirding the patent statute.” In this new paper, Prof. Taylor seeks to understand how this has impacted investment decisions, and he begins to compile the data largely missing from the existing literature that would start to shed light on the matter.

To gather the relevant data, Prof. Taylor conducted a survey of 475 venture capital and private equity investors from at least 422 different firms representing the various early stages of venture capital funding: early, seed, middle, growth, expansion, and late investors. In general, he asked two types of questions:

1. Whether the Supreme Court’s rulings on patent eligibility have impacted their decisions to invest in companies developing technology, and if so, how

Indirect questions related to the same issue, such as asking about any changes to decisions to invest in companies over the relevant time period, and whether those changes relate to any decreased availability of patent protection

The tables below indicate the different stages of venture capital funding represented by the surveyed firms, as well as the variety of represented industries. The total percentages come out to over 100%, because most firms focused on multiple investment stages and industry areas. It should be noted that the survey questions related only to U.S. patents and only to financing activities in the United States.

Table 1: Investment Stages of Respondents' Firms. Early stage, 59%. Seed stage, 45%. Middle Stage, 27%. Growth Stage, 22%. Expansion stage, 15%. Lat stage, 1%.

Table 2: Investment Industries of Respondents' Firms. Industry to percent. Software and the Internet, 70%. Medical Devices, 63%. Computer Electronics/Hardware, 61%. Biotechnology, 55%. Pharmaceutical, 54%. Communications, 53%. Energy, 49%. Semiconductors, 48%. Transportation, 47%. Construction, 42%.

The Findings

Overwhelmingly, investors reported that patent eligibility is an important consideration for their firms when deciding whether to invest in companies that are developing technology. In total, 74% agreed with this idea, while only 13% disagreed.

Table 7: Patent Eligibility Is an Important Consideration in Firm Decisions Whether to Invest in Companies Developing Technology. Response to percent. Strongly agree, 43%. Somewhat agree, 31%. Neither agree nor disagree, 13%. Somewhat disagree, 9%. Strongly disagree, 5%.

This led to the natural follow-up question: If the laws of patent eligibility make a patent unavailable for a certain technology, would the firm be less likely to invest in companies developing that technology? In response, 62% agreed that their firms would be less likely to invest given the unavailability of patents.

Table 8: Less Likely to Invest if Patent Eligibility Makes Patents Unavailable. Response to percent. Strongly agree, 23%. Somewhat agree, 39%. Neither agree nor disagree, 19%. Somewhat disagree, 13%. Strongly disagree, 7%.

The response changed slightly when the scenario was changed to one where the patent was merely more difficult to obtain. However, there was not a significant change from the response to the previous question, and respondents weighed in at 59% agreement.

Table 9: Less Likely to Invest if Patent Eligibility Makes Patents More Difficult to Obtain. Response to percent. Strongly agree, 19%. Somewhat agree, 40%. Neither agree nor disagree, 18%. Somewhat disagree, 17%. Strongly disagree, 5%.

From the data collected, it appears that investors in the medical device, biotechnology, and pharmaceutical industries tend to value patentability slightly more than investors in the software space. Additionally, early-stage investors seemed to value patent eligibility slightly more than their late-stage counterparts, though there was not a statistically significant difference reported between the different stages of investment. Prof. Taylor theorizes here that a larger sample size might indicate a more obvious trend.

Prof. Taylor notes one interesting statistic: those who were familiar with the Supreme Court’s recent eligibility decisions tended to value patent eligibility higher than those who were not familiar with the cases. This may indicate that the more aware an investor is of the recent opinions, the more they value the impact of those opinions. Prof. Taylor makes sure to note, however, that the data do not preclude the possibility that the more one knows about a subject, the more importance one places on one’s own knowledge of the subject. Additionally, patent eligibility did not appear to be the primary focus for investors. When compared with various other factors typically considered by investment firms, patent eligibility was consistently relegated to a lesser role. It is significant to note that the present survey focused on the availability of patents based only on patent eligibility.

In general, investors indicated that the loss of patent protection would cause them to decrease their investments, though Prof. Taylor finds that this decreased investment would be more pronounced in some industries than others. As shown using weighted averages, the three industries with the greatest reported decrease would be the pharmaceutical, biotechnology, and medical device industries.

Next, Prof. Taylor explores the impact that the Supreme Court’s decisions have had on investment behaviors. The survey showed that 38% of investors were familiar with at least one of the patent-eligibility cases. About 40% of those knowledgeable investors indicated that the decisions had a negative effect on their firms’ existing investments, compared with 14% who indicated positive effects.

Table 21: Impact of Supreme Court's Eligibility Cases on Existing Investments. Response to percent. Very positive, 1%. Somewhat positive, 13%. No Impact, 46%. Somewhat negative, 33%. Very negative, 7%.

However, Prof. Taylor notes that these numbers represent only the static impact of the Supreme Court cases. Dynamic impact—meaning, the impact on future decision making—is likely the more important statistic. Interestingly, only one-third of investors indicated that the cases would impact their decisions on whether to invest in companies going forward, with no statistically significant difference based on industry or stage of funding.

Table 22: Have Any of the Supreme Court's Eligibility Cases Affected Firm Decisions Whether to Invest in Companies. Yes, 33%. No, 61%. Don't know, 6%.

With the numbers above representing investors with knowledge of the patent eligibility cases, it should be no surprise to learn that investors unfamiliar with the Supreme Court cases overwhelmingly responded that the decreased availability of patents had not impacted their firms’ changes in investment behavior.

Conclusion

While there were a wide variety of opinions from the many investors regarding the current state of patent eligibility, the general consensus was that the Supreme Court’s decisions have had a negative impact on patentability, leading to a potential decrease in a willingness to invest. This attitude was most prevalent in, but not limited to, the biotechnology and pharmaceutical industries.

As presented in his paper, Prof. Taylor’s survey provides the first empirical data on how the current state of patent eligibility has affected the attitude of investors. Like all surveys, however, it is susceptible to a certain degree of error caused by various unavoidable human characteristics. Even recognizing its limitations, this survey provides useful information that can be used to begin analyzing the question of whether the Supreme Court’s eligibility cases have impacted investment decision making, and it sheds light on an issue about which many experts in the field have become increasingly concerned.

Tags David Taylor, investment, patent eligibility, patentability, patents, Richard Linn, Supreme Court, technology, Terence Yen, Thomas Edison Innovation Fellowship

Patents Pharma

IP Scholars Question the Legality and Wisdom of Joint AG Proposal to Seize Remdesivir Patents

Post author By Joshua Grove
Post date December 16, 2020

The following post comes from Colin Kreutzer, a 2E at Scalia Law and a Research Assistant at CPIP.

By Colin Kreutzer

While the vaccines are starting to roll out in the fight against COVID-19, the precise timelines for when they will be widely available continue to be uncertain. But we do have treatments currently available under Emergency Use Authorization authority that have been shown to blunt the impact of the coronavirus and reduce the length of hospital stays. The first one these was Gilead Sciences’ antiviral drug, remdesivir. In July, after an initial period in which Gilead donated its production supply, the company announced a price of $390 per vial, or $2,340 for an estimated 5-day course. While the price is lower than what many analysts were expecting, not everyone was happy about it.

In an August joint letter to HHS Secretary Alex Azar, thirty-four state Attorneys General urged him to do what they contend would resolve a problem of access to the drug: use the “march-in rights” provision of the Bayh-Dole Act to seize Gilead’s patent and license it to generic manufacturers. The response to this proposal from many IP experts can be roughly divided into three main points: (1) it is not legal; (2) it is not effective; and (3) it is dangerously unwise.

What Is Bayh-Dole?

The Bayh-Dole Act of 1980 was a watershed event in the growth of the American pharmaceutical industry. It allowed companies and universities to retain the IP rights to inventions that were developed using government-funded research. The goal was to improve the efficiency with which innovations were brought to market and to encourage investment and collaboration between government, university, and private researchers. Previously, many research developments never saw the light of day due to lack of commercialization, and likely many other inventions were never born in the first place. Bayh-Dole is widely regarded as a success story on both sides of the aisle.

What Are March-In Rights?

Since the aim of the law is to spur innovation and development, the march-in rights provision was included to counteract patent owners who “hold out” or fail to commercialize their inventions. Under very limited circumstances, it allows the government to “march in” and force the owners to license their patent on reasonable terms to a third party. Just how limited are those circumstances? So far, the 40-year-old provision has been used exactly zero times. It stands to reason that valuable products don’t need to be forced into the market, and many modern treatments–for cancer, diabetes and hepatitis, among others–have been invented and commercialized under Bayh-Dole collaborations without any intervention.

It Is Not Legal

Notably absent from the list of Bayh-Dole creations is remdesivir. The law only applies to inventions that are “conceived or actually reduced to practice in the performance of work under a funding agreement,” i.e., things that were invented with government help. It does not apply to every case in which a drug maker has worked alongside a government agency at one stage or another. The AG letter cites $30 million in NIH-funded work on remdesivir. It claims that this funding exposes the drug to the march-in provision. The letter also makes a general appeal to our sense of fairness—the public paid for this, and so it rightly belongs to all of us.

As noted by Stephen Ezell of the Information Technology and Innovation Foundation (ITIF), the total government expenditure is actually closer to $70 million. That number includes additional work performed with USAMRIID, the U.S. Army Medical Research Institute of Infectious Diseases. Both projects took place in 2014. The Army study was investigating Gilead’s library of antiviral compounds for effective Ebola treatments. Remdesivir’s compound gave positive results, but other treatments proved better. The NIH project was a clinical trial to explore whether remdesivir could be used against coronaviruses as a general class. Again, it showed promise. But the relevant coronaviruses at the time (SARS and MERS) did not spread widely enough to make larger studies feasible. The NIH study might have enabled Gilead to home in so quickly on remdesivir as a COVID-19 treatment, and in that sense, it would have played a crucial role. But that is not the same thing as having a hand in the actual invention of the drug.

Critically, under both studies, the drug had already been invented by Gilead. Regarding the NIH work, a HHS spokeswoman told STAT that the department does not consider the march-in rights to apply. And as pointed out by Scalia Law Professor Adam Mossoff, Army lawyers have stated that their contributions did “not qualify USAMRIID as a joint inventor of the compound.” Even if they were joint inventors, the NIH has stated that “the extraordinary remedy of march-in is not an appropriate means of controlling prices.”

As CPIP Executive Director Sean O’Connor explains at The Hill, even if inventorship could be established, march-in rights would still not be legal in this case: “[m]arch-in rights under Bayh-Dole’s Section 203 only authorize the government to grant new licenses if the original funding recipient fails to take steps to bring the invention to the market (achieve ‘practical application’) or reasonably satisfy health or safety needs.”

And yet, while it pales in comparison to the over $1 billion that Gilead expects to spend this year on remdesivir, $70 million sounds like a lot of tax dollars. CPIP Senior Scholar Kristen Osenga argues that proponents of marching in “mislead the public, specifically regarding remdesivir and, more generally and dangerously, regarding government support of scientific research.” She urges people to understand that government collaborations are a great deal for the public, and among the most efficient ways that the government spends our money: “The Milken Institute estimates that the long-term boost to total economic output could be as high as $3.20 for every dollar the NIH invests in biopharmaceutical research. Even conservative estimates peg the value of the NIH at $1.70 of economic activity per dollar spent. If only all government spending were so productive.”

It Is Not Effective

The preceding section alone answers the question of whether Bayh-Dole is a legal means of seizing Gilead’s property rights. Clearly, though, it does not quiet the sentiment felt by many that something else needs to be done. In addition to the price tag, the AG letter speaks of a “dangerously low supply” of the drug. But the letter supports that claim with a dubious comparison of Gilead’s expected production output to every single confirmed case of COVID-19 in the country. It should be clear on its face that this is not a valid manner of determining how many patients would actually benefit from remdesivir. It would have been more appropriate to say that future demand is uncertain. Because of course, supply is only one half of the equation. Demand can vary greatly depending on whether we cooperate as a society to contain this virus.

Gilead has, in fact, licensed the drug to third parties in order to increase supply. Currently, its own production will remain domestic. But Joseph Allen at IPWatchdog notes that in addition to ramping up its own capacity, Gilead has deals with drug makers in Egypt, India, and Pakistan to provide supplies internationally. Mr. Allen is also is a former congressional staffer who worked on the Act with its namesake, Senator Birch Bayh (D-Ind.). He adds that, because march-in seizure is a hostile measure, it would involve a drawn-out legal battle. This would render the process far too slow to be effective in a pandemic.

It Is Dangerously Unwise

Far from being proof in support of the AGs’ position, Gilead’s work with NIH is a clear example of how damaging it would be to abuse the march-in rights provision. We desperately want these types of collaborations to continue. And if companies believe that doing so would expose them to the seizure of their IP, they will act accordingly.

Our intellectual property system provides the necessary incentives for companies to invest massive amounts of money and bring new lifesaving drugs to the world. We even allow patents for new uses of existing drugs. As CPIP Senior Fellow for Life Sciences Chris Holman points out, the next great cure might be hiding in your medicine cabinet. But without incentivizing the R&D expenditures that bring us these wonderful inventions, we may never realize it.

It is hard to worry about the future when the present appears so bleak, but it is critically important to understand why it is dangerous to weaken the incentives that have given us so many lifesaving developments. Even if exercising march-in rights were legal, and even if it could somehow increase production, it is necessary to consider the long-term implications. Taking away a company’s rights and forcing it to sell at close to the cost of production may help with the current situation, but it will likely decimate future research. Who would want to spend billions of dollars on R&D without the knowledge that they can obtain IP rights that will have a predictable value? We should ensure that companies remain strongly incentivized to research new treatments that benefit us all.

Tags Bayh-Dole, Chris Holman, Colin Kreutzer, Gilead, Joseph Allen, Kristen Osenga, march-in rights, NIH, patents, pharma, pharmaceutical patents, remdesivir, Sean O'Connor, Stephen Ezell

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