Tag: Chris Holman

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Patents Pharma

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

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

dictionary entry for the word "innovate"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.

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CPIP Roundup

CPIP Roundup – December 2, 2020

Greetings from CPIP Executive Director Sean O’Connor

Sean O'Connor

I hope you had an enjoyable, restful Thanksgiving. At CPIP, we’re winding down 2020 while planning our spring and summer events—including biopharma and copyright roundtables, the 2021 WIPO-CPIP Summer School on Intellectual Property, and more.

As usual, our team has been up to many great things. Director of Copyright Research and Policy Sandra Aistars’ Arts & Entertainment Advocacy Clinic co-hosted a virtual clinic with Washington Area Lawyers for the Arts (WALA). The event was a huge success. You can read our write-up here, and a recording of the Rock Creek Kings’ featured performance is available here. Sandra also participated in a November 12 panel hosted by the Law of Intellectual Property (LIP) student organization at the University of Oregon School of Law (home to CPIP Senior Scholar Eric Priest).

I taught my annual workshop on “Public-Private Partnerships–Innovation and Technology Transfer” in the CEIPI-WIPO-INPI Advanced Training Course on Intellectual Property, Technology Transfer and Licensing. I also published an op-ed at The Hill on price controls, explaining why the government cannot seize or bypass pharmaceutical patents.

Our affiliates have also been doing great things as well. Scalia Law Alumna and Arts & Entertainment Advocacy Clinic Adjunct Professor Terrica Carrington and Lateef Mtima of Howard University School of Law and IIPSJ have great quotes in this Billboard article on choreography, copyright, and social justice. CPIP Senior Fellow for Innovation Policy Jonathan Barnett continues to blog at Truth on the Market; you can catch his latest piece here and read his take on how antitrust law can be abused to promote unproductive rent-seeking. Meanwhile Chris Holman, CPIP Senior Fellow for Life Sciences, continues writing for the Biotechnology Law Report, where he serves as Executive Director; his latest article is available here.

Below we highlight new papers from CPIP Edison Fellows Christa Laser (Equitable Defenses in Patent Law), Talha Syed (Owning Knowledge: A Unified Theory of Patent Eligibility), and Tabrez Ebrahim (Artificial Intelligence Inventions & Patent Disclosure).

While 2020’s end-of-year holiday season may well be challenging, I hope you and yours will find a way to share the spirit and renewal of this coming season while looking forward to a successful new year!

Spotlight on Scholarship

a pair of glasses, an apple, and a stack of books

The scholars from our Thomas Edison Innovation Fellowship program continue to publish high quality scholarship and cutting-edge research that promotes the value of intellectual property. Here are some recent publications:

Tabrez Y. Ebrahim, Artificial Intelligence Inventions & Patent Disclosure, 125 Penn. St. L. Rev. 147 (2020)

In his new paper at Penn State Law Review, Artificial Intelligence Inventions & Patent Disclosure, Professor Tabrez Ebrahim of California Western School of Law claims that AI fundamentally challenges disclosure in patent law, which has not kept up with rapid advancements in AI, and seeks to invigorate the goals that patent law’s disclosure function is thought to serve for society. In so doing, Prof. Ebrahim assesses the role that AI plays in the inventive process, how AI can produce AI-generated output (that can be claimed in a patent application), and why it should matter for patent policy and for society. He also introduces a taxonomy comprising AI-based tools and AI-generated output that he maps with social-policy-related considerations, theoretical justifications and normative reasoning concerning disclosure for the use of AI in the inventive process, and proposals for enhancing disclosure and the impact on patent protection and trade secrecy.

To read our blog post summarizing the paper, please click here.

Christa J. Laser, Equitable Defenses in Patent Law, 75 U. Miami L. Rev. 1 (2020)

In patent law, equitable defenses can play an essential role in multi-million-dollar patent infringement cases. Unclean hands, misuse, or estoppel can render a potential verdict unenforceable. Professor Christa Laser of Cleveland-Marshall College of Law dives into the unique and unsettled role of equity in her new paper, Equitable Defenses in Patent Law, which is forthcoming at the University of Miami Law Review. Prof. Laser compares two theories to determine how courts might interpret undefined language governing equitable defenses in patent statutes, and she analyzes whether Congress codified preexisting decisional law or expanded it with the 1952 Patent Act. Finally, Prof. Laser suggests that Congress could delegate its authority to an agency to handle the ever-changing patent landscape.

To read our blog post summarizing the paper, please click here.

Talha Syed, Owning Knowledge: A Unified Theory of Patent Eligibility (forthcoming)

In his new draft paper, Owning Knowledge: A Unified Theory of Patent Eligibility, Professor Talha Syed of Berkeley Law argues that the confusion surrounding patentable subject matter under Section 101 is two-fold. First, it results from our failure to develop a functionality doctrine that can clearly distinguish technological applications of knowledge from other forms of knowledge. Second, he offers a root cause of this failure. There is a distracting preoccupation in patent law with “physicalism,” that is, the notion that a patent is awarded for a thing (tangible or not) rather than for knowledge of that thing. In order to move forward, Prof. Syed states that we must first unwind the physicalist assumptions that are tangled up in our Section 101 analyses. Only then can we develop a functionality doctrine free of those encumbrances.

To read our blog post summarizing the paper, please click here.

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CPIP Roundup

CPIP Roundup – September 30, 2020

 

Greetings from CPIP Executive Director Sean O’ConnorSean O'Connor

As we move through our busy fall season here at CPIP, we are grateful for the efforts of everyone in the George Mason University community keeping us safe and healthy. We are fortunate that in these highly uncertain times, we are still able to focus on what we do best: bringing you the research, impact policy pieces, and programming that you have come to expect.

In the copyright sphere, we were gratified by the success of our postponed—and ultimately virtual—conference, The Evolving Music Ecosystem. Highlighted by an informative and moving fireside chat between singer, songwriter, and author Rosanne Cash and CPIP’s Sandra Aistars, the conference also featured seven panels of academics, industry specialists, and artists who provided invaluable insight into copyright law and the music business, especially in light of 2020’s challenges to the industry. Thank you to all who participated and attended! Videos of the keynote address and panel presentations can be watched here.

CPIP also congratulates Shira Perlmutter on her appointment to Register of Copyrights and Director of the U.S. Copyright Office by Librarian of Congress Carla Hayden. We very much look forward to Ms. Perlmutter’s continued positive impact on the copyright community in her new role.

In the patent sphere, CPIP Senior Fellow for Innovation Policy Jonathan Barnett led our roundtable, Measuring the Value of Patent Licensing. Leading legal scholars, economists, and industry representatives focused on the data collection and methodological approaches to quantifying the full economic benefits of commercializing new innovation through patent licensing models.

Congratulations to CPIP Senior Scholar Erika Lietzan on becoming the William H. Pittman Professor of Law & Timothy J. Heinsz Professor of Law at University of Missouri School of Law and for being named a “Best Lawyer in America” for 2020! We are proud of the many accomplishments of our Scholars!

In the coming month, we are excited to host our Eighth Annual Fall Conference on October 7-8. We are partnering with the National Security Institute (NSI) at Scalia Law School to focus on 5G at the Nexus of IP, Antitrust, and Technology Leadership. We hope you’ll be able to join us! You can see the conference program, confirmed speakers, and register for the virtual event here.

Last, but certainly not least, we are proud of the academic and policy publications of our Scholars, Fellows, and other affiliates. Keep reading to learn about work by Sandra Aistars, Jonathan Barnett, Stuart N. Brotman, Ross E. Davies, H. Tomás Gómez-Arostegui, Devlin Hartline, Chris Holman, Erika Lietzan, and Kristen Osenga.

CPIP Eighth Annual Fall Conference with USPTO Director Andrei Iancu on October 7-8

2021 5G Conference image

CPIP’s Eighth Annual Fall Conference will be hosted virtually from George Mason University Antonin Scalia Law School in Arlington, Virginia, on October 7-8, 2020. The theme this year is 5G at the Nexus of IP, Antitrust, and Technology Leadership. The conference is being co-hosted by the National Security Institute (NSI), and it features a keynote address by USPTO Director Andrei Iancu.

This conference addresses fast-emerging intellectual property (IP), antitrust, and technology leadership issues in the 5G and “Internet of Things” innovation ecosystem. Coverage includes standard-essential patents (SEPs) along with established and emerging markets on a regional and global basis. Speakers are drawn from the academic, industry, and policymaking communities, with an emphasis on using objective fact-based analysis to explore points of convergence among legal, economic, and geopolitical perspectives on the IP and regulatory infrastructures that underlie these critical industries.

Registration closes on Monday, October 5, 2020, at Noon ET, so please register soon! We have 4 hours of Virginia CLE credit pending!

To visit our conference website and to register, please click here.

CPIP Hosts Academic Roundtable on Patent Licensing Valuation

hand under lightbulbs drawn on a blackboard

On September 17, 2020, CPIP hosted an academic roundtable entitled Measuring the Value of Patent Licensing online from George Mason University Antonin Scalia Law School in Arlington, Virginia. The roundtable, which was moderated by CPIP Senior Fellow for Innovation Policy Jonathan Barnett, included leading scholars, economists, and industry representatives.

The sessions focused on the existing methodologies developed to measure IP transactions, the insights achieved so far using those methodologies, and the possibilities for developing more precise methodologies to measure licensing and related transactional activities in the IP marketplace. They also examined the mechanics of IP licensing and transactional markets, how IP transactions generate social value, and the extent to which existing IP legal regimes may impede IP markets.

The Evolving Music Ecosystem Conference with Rosanne Cash

Rosanne Cash

On September 9-11, 2020, CPIP hosted The Evolving Music Ecosystem conference online from George Mason University Antonin Scalia Law School in Arlington, Virginia. The conference featured a keynote address by singer, songwriter, and author Rosanne Cash, and coverage included news articles at Billboard and Mason News. CPIP Senior Scholars Sandra Aistars, Sean O’Connor, and Mark Schultz also participated in the event. We’ve posted a synopsis of each day of the conference here, here, and here.

This unique conference continued a dialogue on the music ecosystem begun by CPIP Executive Director Sean O’Connor while at the University of Washington School of Law in Seattle. In its inaugural year in the D.C. area, the conference aimed to bring together musicians, music fans, lawyers, artist advocates, business leaders, government policymakers, and anyone interested in supporting thriving music ecosystems in the U.S. and beyond.

To visit our conference website and to watch the videos, please click here.

Spotlight on Scholarship

a pair of glasses, an apple, and a stack of books

Tomás Gómez-Arostegui & Sean Bottomley, The Traditional Burdens for Final Injunctions in Patent Cases C.1789 and Some Modern Implications, 71 Case W. Res. L. Rev. ___ (forthcoming 2020)

CPIP Edison Fellow Tomás Gómez-Arostegui of Lewis & Clark Law School and co-author Sean Bottomley have published a draft of their law review article that will be published in the Case Western Reserve Law Review. The article takes an historical look at the first two permanent injunction factors from eBay v. MercExchange, namely, irreparable injury and inadequate legal remedies. The article concludes that equitable principles dictate that the Federal Circuit should recognize that: “(1) an injury it seeks to redress with a final injunction is future infringement itself, not just follow-on harms caused by future infringement; (2) it can presume future infringement from past infringement; (3) it can presume that legal remedies are inadequate to remedy future infringement; and (4) it need not require a plaintiff to show that alternative equitable remedies, like ongoing royalties, would inadequately redress future infringement.”

To read the article, please click here.

Stuart N. Brotman, Intersecting Points in Parallel Lines: Toward Better Harmonization of Copyright Law and Communications Law Through Statutory and Institutional Balance, 26 Rich. J.L. & Tech., no. 3, 1 (2020)

The Richmond Journal of Law and Technology (JOLT) has just published a new article by Professor Stuart Brotman, the inaugural Howard Distinguished Endowed Professor of Media Management and Law and Beaman Professor of Journalism and Electronic Media at the University of Tennessee, Knoxville. The article was supported by a Leonardo da Vinci Fellowship Research Grant from CPIP and the research assistance of recent Scalia Law graduate Samantha Levin. The article traverses the history and development of copyright and communications law, which have historically followed separate paths, and offers potential ways that they can be harmonized to match the current realities of the media marketplace.

To read the article, please click here.

Activities, News, & Events

a lit lightbulb hanging next to unlit bulbs

CPIP Director of Copyright Research and Policy Sandra Aistars has written an article at Law360 (also available on the CPIP blog) about Justice Ginsburg’s copyright legacy, especially as it will affect the impending Google v. Oracle decision. Prof. Aistars has also published her latest Copyright Notebook series post, The Importance of Artists’ Agency, on the CPIP blog. Additionally, the Arts & Entertainment Law Clinic—directed by Prof. Aistars—has continued its academic partnership with the U.S. Copyright Office for the fifth year. This semester, they are supporting the Office’s public meetings to investigate standard technical measures (STMs) that could be adopted to aid and identify copyrighted works and to potentially reduce infringement on digital platforms as envisioned in Section 512(i) of the DMCA. Prof. Aistars and the Clinic students will also co-host an online copyright clinic with WALA and the Copyright Alliance that will feature a live performance by the Rock Creek Kings.

CPIP has published a new policy brief by Professor Ross E. Davies entitled Ebb and Flow in Safe Harbors: Some Exemplary Experiences Under One Old Statute and One New. Prof. Davies teaches administrative law, civil procedure, comparative criminal law, contracts, employment discrimination, legal history, legal profession, and torts at George Mason University Antonin Scalia Law School in Arlington, Virginia, and the policy brief is the product of our two Safe Harbors and Private Ordering in the Creative Industries research symposia that were held in 2019. In the policy brief, Prof. Davies compares and contrasts two seemingly unrelated statutory provisions that are often referred to as “safe harbors”—despite that term not appearing in either statute: the National Labor Relations Act (NLRA) as codified in Title 29, and the Online Copyright Infringement Liability Limitation Act (OCILLA)—otherwise known as Title II of the Digital Millennium Copyright Act (DMCA)—as codified in Title 17.

CPIP Scholars have participated in several speaking engagements this past month. CPIP Senior Fellow of Innovation Policy Jonathan Barnett spoke at the Innovation Alliance’s Recognizing the Growing Economic Impact of Patent Licensing webinar. CPIP Senior Fellow for Life Sciences Chris Holman participated in the Regnier Institute for Entrepreneurship and Innovation Kansas City Region’s Bio-Medical and Healthcare Technology Entrepreneurship Certificate Program. CPIP Senior Scholar Erika Lietzan spoke at IPWatchdog’s The Race for a Coronavirus Vaccine: The Intersection of Science and IP Policy webinar. CPIP Senior Scholar Kristen Osenga presented a draft paper at the Gray Center’s Public Health: Regulation, Innovation, and Preparation research roundtable. And CPIP Director of Communications Devlin Hartline participated in the Music Biz Entertainment & Technology Law Conference.

CPIP Scholars have also written op-eds defending the importance of robust patent protection, particularly for biopharmaceutical inventions in light of the COVID-19 pandemic. At the Huntsville Item, CPIP Senior Fellow for Life Sciences Chris Holman argues that the seizure of patents will only hamper the development of a vaccine to combat the coronavirus: “Eliminating intellectual property protections would not only reduce incentives to develop coronavirus treatments as quickly as possible; they will also destroy the domestic industrial base that could be the key to stopping the next pandemic.” Likewise, CPIP Senior Scholar Kristen Osenga argues at the Nashua Telegraph that taxpayers are getting a great deal with biomedical research: “When new treatments are successful, drug companies make money because we, through insurance, buy those drugs to keep us, or make us, healthy. The government then taxes those profits and invests some of that tax money into new research. Far from ‘paying twice,’ we are getting a great bargain from government spending on basic research.”

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CPIP Roundup

CPIP Roundup – August 31, 2020

Greetings from CPIP Executive Director Sean O’Connor

Sean O'Connor

August has seen the beginning of a highly unusual school year, but I hope everyone is continuing to stay safe. And, since even a pandemic can’t keep the world from having a busy back-to-school month, I’ll keep this month’s note short.

First, we’re gearing up for The Evolving Music Ecosystem conference on September 9-11, 2020. The conference will be held via Zoom and feature a keynote address by singer, songwriter, and author Rosanne Cash. Registration is still open, and we hope you’ll join us!

Second, I’d like to welcome University of Missouri-Kansas City School of Law Professor Chris Holman as CPIP’s new Senior Fellow for Life Sciences. He will be taking over the role from Professor Erika Lietzan of University of Missouri School of Law, who has been supporting CPIP in that capacity for the past year. (Clearly, we have an affinity for the Show-Me State!) We’re excited to have him join us, and by way of an introduction, we encourage you to check out his recent guest column for The Phoenix advocating for protection of new uses for old medicines.

Third, we are finalizing the schedule for our Eighth Annual Fall Conference, to be held via Zoom on October 7-8, 2020. This year’s theme is 5G at the Nexus of IP, Antitrust, and Technology Leadership.

In other news, CPIP Senior Fellow for Innovation Policy Jonathan Barnett is now blogging at Truth on the Market, a platform for academics and economists to discuss various aspects of business law. You can read his inaugural post here. CPIP Senior Scholar Erika Lietzan has been appointed a Public Member at the Administrative Conference of the United States (ACUS), which focuses on improving the administrative process. CPIP Director of Copyright Research and Policy Sandra Aistars spoke this past month on a copyright licensing panel hosted by Artomatic with the goal of informing visual artists about essential aspects of copyright law. It has also been a busy month for CPIP Senior Scholars Kristen Osenga and Mark Schultz—I encourage you to keep reading below to keep up with their recent news!

Registration Closing Soon for Evolving Music Ecosystem Conference with Rosanne Cash on September 9-11

Rosanne Cash

Please join us for The Evolving Music Ecosystem conference, which will be held online from Antonin Scalia Law School in Arlington, Virginia, on September 9-11, 2020. The event features three days of panel presentations by leading experts and a keynote address by Grammy-winning singer, songwriter, and author Rosanne Cash.

This unique conference continues a dialogue on the music ecosystem begun by CPIP Executive Director Sean O’Connor while at the University of Washington School of Law in Seattle. In its inaugural year in the D.C. area, the conference aims to bring together musicians, music fans, lawyers, artist advocates, business leaders, government policymakers, and anyone interested in supporting thriving music ecosystems in the U.S. and beyond.

For more information, and to register, please click here.

Spotlight on Scholarship

a pair of glasses, an apple, and a stack of books

Kristen Osenga, Patent-Eligible Subject Matter… Still Wielding the Wrong Weapon–12 Years Later, 60 IDEA: L. Rev. Franklin Pierce Center for Intell. Prop. 104 (2020)

CPIP Senior Scholar Kristen Osenga has published a new paper on patent-eligible subject matter at IDEA entitled Patent-Eligible Subject Matter… Still Wielding the Wrong Weapon–12 Years Later. The paper looks at changes to patent eligibility that have developed since Prof. Osenga published an article on the same subject in 2007. At the time, she concluded that the Patent Office was using the “elephant gun” of new guidelines on the “ants” of patent eligibility. In the new paper, Prof. Osenga traverses the Supreme Court’s subsequent Section 101 decisions that drove the courts and Patent Office to continue wielding an “outsized elephant gun” when it comes to patent eligibility. However, she does note that recent activities at the Patent Office and Congress offer some hope that things may be changing for the better.

Mark F. Schultz, The Importance of an Effective and Reliable Patent System to Investment in Critical Technologies (USIJ July 2020)

Venture capitalists pouring money into a small startup has become a sort of new American Dream for many innovators. The success stories of big American companies starting with nothing more than an idea have pervaded their way into pop culture, inspiring TV shows, movies, and the like. However, CPIP Senior Scholar Mark Schultz has released a new report for USIJ entitled The Importance of an Effective and Reliable Patent System to Investment in Critical Technologies showing that this dream may be harder to attain today due to recent shifts that have weakened the patent system and driven away venture capital investment. Our blog post summarizing the report is available here, and you can read the summary at IPWatchdog here.

Activities, News, & Events

a lit lightbulb hanging next to unlit bulbs

On August 5, 2020, CPIP Director of Copyright Research and Policy Sandra Aistars joined Jaylen Johnson, Attorney Advisor at the U.S. Copyright Office, and Kim Tignor, Executive Director at the Institute for Intellectual Property & Social Justice (IIPSJ), for a virtual panel presentation on copyright protection for visual artists that was hosted by Artomatic. The panel focused on explaining key concepts of copyright law pertinent to visual artists and sharing resources that they can use to learn more about the basics of copyright protection. It also touched on common pitfalls among visual artists when it comes to protecting their creative works, including those that befall joint authors, and common misconceptions about fair use. Our blog post summarizing the event is available here.

On August 25, 2020, CPIP Senior Fellow for Innovation Policy Jonathan Barnett published a new essay at Truth on the Market entitled Will Montesquieu Rescue Antitrust? In the post, Prof. Barnett examines recent pressure on state and federal regulators to use antitrust laws against firms that have established market dominance, and he praises the genius of the eighteenth-century philosopher Montesquieu for developing the theory of separation of powers that allows the judiciary to police overly zealous antitrust prosecutors today. Traversing recent—and failed—antitrust enforcement actions, including AT&T’s acquisition of Time-Warner, Sabre’s acquisition of Farelogix, and FTC v. Qualcomm, Prof. Barnett explains how the judicial branch has become an important counterbalance to prosecutorial antitrust overreach that betrays the fundamental objective of promoting the public interest in deterring anticompetitive business practices.

On August 25, 2020, CPIP Senior Scholar Kristen Osenga published an op-ed in the Washington Times entitled If We Want Innovation, Companies Must Be Able To Rely on Patent Law To Protect Their Investments. The op-ed explains the importance of effective patent protection for innovative companies to develop and commercialize their new technologies. In particular, Prof. Osenga praises the recent antitrust victory of Qualcomm over the FTC in the Ninth Circuit, noting that a “race that results in innovation that other companies, and the public, dearly desires is exactly the point of competition.” Prof. Osenga also authored a recent op-ed for the Richmond Times-Dispatch, With Biomedical Research, Taxpayers Are Getting a Great Deal, explaining how the critics are wrong to argue that the government should take control of important biomedical inventions like remdesivir. She was also quoted in a recent article at Bloomberg Law entitled Court Split Over Driveshaft Patent Muddies Eligibility Question about the Federal Circuit’s recent 6-6 split on whether to review an important patent-eligibility case en banc.

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CPIP Roundup

CPIP Roundup – July 31, 2020

Greetings from CPIP Executive Director Sean O’Connor

Sean O'Connor

I hope summer is seeing you healthy and safe. Over four months have passed since the Washington, D.C., area began to feel the impact of COVID-19. Now, as summer progresses and we start anticipating and planning for fall, we’re looking to navigate the new normal in the classroom, workplace, and of course in the virtual space.

In June, CPIP hosted the WIPO-CPIP Summer School on Intellectual Property for the third year running. Usually the program is held at Antonin Scalia Law School in Arlington, Virginia, and both U.S. and international attendees gather to study and network for two weeks in June. This year, however, we opted to move the entire program online, streaming it via Webex. Nearly one hundred attendees from all over the world were able to attend live virtual lectures and panels by a great lineup of experts, both in IP and related fields. We’re grateful to the CPIP staff, our IT support at Scalia Law, and to all our speakers and students for helping make this year’s Summer School successful and memorable in many ways.

As part of the Summer School, CPIP co-hosted a public panel, Patents on Life: Diamond v. Chakrabarty at 40, with the Smithsonian Institution’s Lemelson Center on June 17. We’re grateful to all the speakers who lent their expertise to this interesting and timely discussion, and most especially Dr. Ananda Chakrabarty, the inventor at the heart of the Diamond v. Chakrabarty case. Sadly, less than a month after the panel, we received the news that Dr. Chakrabarty had passed away. Our deepest condolences go out to his family and friends as we also remember his personal and professional legacy.

COVID-19 has complicated plans for many upcoming events, including ours. While we had hoped to hold our much-anticipated The Evolving Music Ecosystem conference in person by moving it from this past spring until the fall, best guidance now dictates that we move it online. We still look forward to a stellar event running from September 9-11, including a keynote address from Rosanne Cash. We will also move our Annual Fall Conference on October 8 to a fully online format. This year’s theme will focus on the IP issues surrounding the rollout of 5G wireless technology. Thank you for your patience as we pursue dual priorities: continuing to support the dialogue surrounding IP and keeping everyone involved safe and well.

I would like to congratulate and welcome Dr. Hina Mehta, Director of Mason’s Office of Technology Transfer, as an Affiliate Scholar with CPIP. Dr. Mehta has taught during the WIPO-CPIP Summer School these past two years, and we’re happy to have her join us and work with us on a more official basis.

I also want to thank those IP scholars who signed our May response to the Office of Science and Technology Policy’s call for comments on the possible effects of free, public access to scholarly research.

On a personal note, I have become a regular contributor to The Hill with a mix of IP and other opinion topics based on my broader historical research. Articles to date include: Avoiding Another Great Depression Through a Developmentally Layered Reopening of the Economy, Cancel Culture, Copyright, and the Harper’s Letter, and How We Finally Tip Into “Bread and Circuses’ Authoritarianism.

In May, I participated as a panelist for the COVID-19 CHHS Webinar Series with Mason’s College of Health and Human Services in the episode Weighing the Decision to Safely ‘Reopen’ Northern Virginia; the episode was also noted by DCist and Fairfax County Economic Development Authority. COVID-19 has not completely taken over all events and conversations, though. I spoke in April at a virtual session on copyright and social justice hosted by the University of Akron School of Law’s Intellectual Property & Technology Law Association, and in June at the NVTC Impact AI Conference on the panel Protecting AI Inventions: Current Issues and Best Practices.

I’d like to thank Akron’s Professor Camilla Hrdy for providing her comments on my paper Distinguishing Different Kinds of Property in Patents and Copyright, which was also shared on the Private Law Theory blog.

In conclusion, the past few months have been full and productive, and I look forward to seeing CPIP and our friends and supporters successfully navigate the remainder of 2020. I wish you the best over the coming months as we hope and cooperate to put COVID-19 behind us. Until then, we continue to be in this together.

Online Music Law Conference with Rosanne Cash on September 9-11

Rosanne Cash

We are excited to announce that the music law conference, The Evolving Music Ecosystem, which will be held online from Antonin Scalia Law School in Arlington, Virginia, has now been extended to a three-day event on September 9-11, 2020. The keynote address will be given by Rosanne Cash, and it features panel presentations from leading experts.

This unique conference continues a dialogue on the music ecosystem begun by CPIP Executive Director Sean O’Connor while at the University of Washington School of Law in Seattle. In its inaugural year in the D.C. area, the conference aims to bring together musicians, music fans, lawyers, artist advocates, business leaders, government policymakers, and anyone interested in supporting thriving music ecosystems in the U.S. and beyond.

For more information, and to register, please click here.

“Patents on Life” Panel Discussion Video Now Available

the U.S. Capitol

On June 17, 2020, CPIP and the Smithsonian Institution’s Lemelson Center for the Study of Invention and Innovation co-hosted a virtual panel discussion entitled Patents on Life: Diamond v. Chakrabarty at 40. CPIP Executive Director Sean O’Connor delivered closing remarks after a panel presentation that included the late inventor and distinguished professor of microbiology and immunology Dr. Ananda Chakrabarty.

The panelists discussed the 1980 Supreme Court ruling in Diamond v. Chakrabarty that authorized the first patent on an intentionally genetically modified organism and that contributed to the rise of the modern biotechnology industry and reshaped the agriculture industry. Video from the panel discussion is available here, and our blog post summarizing it is available here.

Spotlight on Scholarship

a pair of glasses, an apple, and a stack of books

Christopher M. Holman, Congress Should Decline Ill-Advised Legislative Proposals Aimed at Evergreening of Pharmaceutical Patent Protection, 51 U. Pac. L. Rev. 493 (2020)

Many believe that drug prices in the U.S. are unnecessarily high because the pharmaceutical industry is exploiting legal loopholes and acquiring dubious patents to extend protection and delay generics from entering the market (so-called “evergreening” behavior by drug innovators). However, CPIP Senior Scholar Chris Holman of the University of Missouri-Kansas City School of Law has published a new paper arguing that these recent concerns regarding patents and drug prices are unfounded. The paper, entitled Congress Should Decline Ill-Advised Legislative Proposals Aimed at Evergreening of Pharmaceutical Patent Protection and published in the University of the Pacific Law Review, further challenges recent legislative proposals aimed at pharmaceutical evergreening, finding that they “are largely misguided, and, if enacted, would be likely to cause more harm than good by discouraging innovation in pharmaceuticals without effectively addressing the core concern.” Our blog post summarizing the paper is available here.

Michael S. Greve, Exceptional, After All and After Oil States: Judicial Review and the Patent System, 26 B.U. J. Sci. & Tech. L. 1 (2020)

What if there is a way for a patent applicant to obtain a “gold-plated patent” that is immune to administrative cancellation before the Patent Trial and Appeal Board (PTAB) at the U.S. Patent and Trademark Office (PTO)? This intriguing notion is the subject of a recent paper by Professor Mike Greve of Scalia Law, titled Exceptional, After All and After Oil States: Judicial Review and the Patent System and published in the Winter 2020 edition of the Boston University Journal of Science and Technology Law. Prof. Greve presented an early draft of this paper at the “Perspectives on the PTAB: The New Role of the Administrative State in the Innovation Economy” conference that was co-hosted by CPIP and the Gray Center at Scalia Law. Our blog post summarizing the paper is available here.

Activities, News, & Events

a lit lightbulb hanging next to unlit bulbs

CPIP Executive Director Sean O’Connor continues to lead the law school’s new Innovation Law Clinic. The Clinic teams law students (IP, corporate, tax) to analyze and counsel entrepreneurs, creators, and inventors from the University’s internal and external communities. The course teaches students about entrepreneurship and commercializing innovation and creativity, as well as how to craft an overall legal strategy in the context of a client’s business, technology, and/or artistic vision. A core deliverable is the Innovator’s Roadmap, which provides a comprehensive, client eyes-only analysis of the venture and legal issues it needs to address in the near and mid-term. Anticipated projects include hydrogen fuel cell refilling technology venture; edutainment and fundraising franchise system for community building; emerging fashion designer; online platform for fictional world-building authors; and an innovative medical device venture spinning out of the University. Specific legal services to be delivered can include entity formation; securing or licensing IP; drafting employment agreements; and advice on tax filings.

CPIP Director of Copyright Research & Policy Sandra Aistars will lead the law school’s Arts & Entertainment Advocacy Clinic again this fall. The Clinic teaches students the legal and policy skills required for engaging with Congress, agencies, and courts on behalf of copyright owners. Students will develop substantive legal knowledge in copyright and related areas of law as well as practical skills in research, writing, and advocacy by counseling clients and preparing legal and policy documents. Anticipated projects this fall include identifying ownership and clearing rights for illustration created in the 1960s, conducting an online legal clinic for members of Washington Area Lawyers for the Arts (WALA), contract drafting and strategic planning for a musician-owned music licensing service, and continued collaboration and special projects for the U.S. Copyright Office.

CPIP has published a new policy brief by CPIP Senior Fellow for Innovation Policy Jonathan Barnett entitled The Long Shadow of the Blackberry Shutdown That Wasn’t. The policy brief looks at how the Blackberry litigation and the “patent troll” narrative ultimately contributed to the Supreme Court’s 2006 decision in eBay v. MercExchange that limited the availability of injunctive relief for successful patentees. Prof. Barnett then examines the problematic legacy of the post-eBay case law, which significantly shifted the legal infrastructure supporting the U.S. innovation markets. In particular, he explains how this shift has led to opportunistic infringement that favors downstream incumbents with the resources to fund extensive litigation at the expense of upstream innovators—a dynamic that is exemplified in the recent litigation between Sonos and Google.

Categories
Legislation Patent Law

New Paper Looks at “Ill-Advised Legislative Proposals” to Address Pharmaceutical “Evergreening”

The following post comes from Yumi Oda, an LLM Candidate at Scalia Law and a Research Assistant at CPIP.

dictionary entry for the word "innovate"By Yumi Oda

Many believe that drug prices in the U.S. are unnecessarily high because the pharmaceutical industry is exploiting legal loopholes and acquiring dubious patents to extend protection and delay generics from entering the market (so-called “evergreening” behavior by drug innovators). However, CPIP Senior Scholar Chris Holman of the University of Missouri-Kansas City School of Law has published a new paper arguing that these recent concerns regarding patents and drug prices are unfounded. The paper, entitled Congress Should Decline Ill-Advised Legislative Proposals Aimed at Evergreening of Pharmaceutical Patent Protection and published in the University of the Pacific Law Review, further challenges recent legislative proposals aimed at pharmaceutical evergreening, finding that they “are largely misguided, and, if enacted, would be likely to cause more harm than good by discouraging innovation in pharmaceuticals without effectively addressing the core concern.”

Concepts and Doctrines in the Evergreening Debate

Prof. Holman starts by reviewing the academic literature and other commentaries relevant to the current evergreening debate. He divides his discussion into five concepts and doctrines that have come under scrutiny as purportedly facilitating evergreening: product hopping, product thicketing, secondary patents (or follow-on patents), double patenting, and continuation practice.

1. Product Hopping. Prof. Holman explains that the pejorative term “product hopping” is aimed at “pharmaceutical companies’ efforts to develop follow-on products and to switch patients to these products from an earlier version of the drug.” Critics, who now acknowledge “the fact that literal evergreening generally does not occur,” have shifted the argument to blame product hopping for forcing a market shift by making only a small change to an existing patented drug, such as with a new form, formulation, or dosage, and convincing doctors to prescribe it. Of course, while no patent directed to an earlier composition or biologic is permissible, a new patent on a new formulation, manufacturing process, or use of a previous drug is allowed in our patent system. While some may attack these new patents as a type of evergreening, Prof. Holman points out that these are the very types of innovations the patent system is meant to encourage.

2. Patent Thicketing. Prof. Holman describes another pejorative term, “patent thickets,” which refers to pharmaceutical “companies obtaining multiple patents covering a single pharmaceutical product.” Popularized in the early 2000s and dating back to the term “patent anticommons” that was coined in the late 1990s, patent thickets originally raised concerns that when “too many patents” around the same product are held by different owners, transactional licensing costs could increase substantially. Prof. Holman points to a recent review of patent thicket literature demonstrating that the term is not used coherently. In fact, patent thickets today are sometimes claimed to exist even when the patents are held by the same owner, where potential transaction cost issues would not apply.

3. Secondary or Follow-On Patents. So-called “secondary patents” are those that claim something other than the active ingredients in drugs, such as new formulations or dosages. Prof. Holman dislikes the term “secondary patents” since it suggests they are somehow less meritorious and less worthy of patent protection, and he instead chooses to call them “follow-on patents” since they generally follow the invention of the active ingredient. Critics often target follow-on patents based on the belief that “a drug is a single product and thus should only be subject to the protection of a single patent.” However, Prof. Holman explains that this view oversimplifies how pharmaceutical inventions come about and underappreciates their true value for patients. For example, his earlier article illustrates how Burroughs-Wellcome obtained a follow-on patent for AZT, a failed cancer drug that was ultimately used to treat AIDS.

4. Double Patenting. Some critics complain that pharmaceutical companies are engaged in “double patenting,” where they obtain multiple patents on the same invention or obvious variations of a patented invention. Prof. Holman explains that double patenting rejections—especially nonstatutory, “obviousness-type” rejections—prevent a patent applicant from extending the patent term by filing a second patent “on a non-identical but still merely obvious variant of a patented invention.” Nevertheless, some critics argue that companies are avoiding such rejections by “dressing up part” of their original invention “as a new one,” and they claim that prohibitions on double patenting should be strengthened. Prof. Holman notes that these arguments typically focus particularly on pharmaceutical products, and they fail to consider the effect such changes would have on inventions more generally.

5. Continuation Practice. Prof. Holman explains that some commentators argue that pharmaceutical companies are using continuation practice to engage in evergreening. Continuations entitle patent applications to benefit from the filing date of an earlier-filed patent application, and the patent applicant can amend claims or even add new ones so long as they are supported by the parent application. Some critics claim that this practice allows pharmaceutical companies to “obtain multiple patents covering obvious variants of the same drug” and to extend effective patent terms. However, Prof. Holman notes that these concerns have already been successfully addressed by Congress in statutory amendments.

Proposed Legislation Aimed at the Pharmaceutical Industry

Having identified and summarized the concepts and doctrines that arise in the evergreening debate, Prof. Holman then analyzes three proposed bills from 2019 that are specifically designed to rein in evergreening in the pharmaceutical industry: the Affordable Prescriptions for Patients Act of 2019, the No Combination Drug Patents Act, and the Terminating the Extension of Rights Misappropriated Act of 2019.

1. Affordable Prescriptions for Patients Act of 2019. The Affordable Prescriptions for Patients Act of 2019 attempts to tackle product hopping and patent thicketing. To combat product hopping, the bill would make it a prima facie antitrust violation for a drug manufacturer to (1) discontinue or withdraw the “reference drug’s” application (or announce discontinuance of or withdrawal of the application) once it receives notice of an application to market a generic version or (2) market or sell a follow-on product during a period of time referred to as the “competition window.” A drug manufacturer can rebut the presumption by showing that the drug was discontinued or withdrawn from the market for “significant and documented safety reasons.”

The bill would also make pharmaceutical patent thicketing a prima facie antitrust violation. The bill broadly defines “patent thicketing” as covering any action by a patentee to limit competition for an approved drug when certain conditions are met. A drug manufacturer can rebut the presumption by establishing that the pro-competitive effects of the action are not outweighed by its anti-competitive effects, which in turn can be rebutted by the FTC demonstrating that the harm to consumers outweighs the benefit from the action.

Prof. Holman warns that the effect of this bill “would be to discourage pharmaceutical innovators from improving existing products,” instead of encouraging further innovation and research to improve the first version of a drug. Prof. Holman cites testimony by Prof. David Olson before the Senate Judiciary Committee stating that, despite the common misconception that a large number of patents delays innovation, “there is no conclusive evidence that smartphone or other high-tech innovation is being retarded by the large numbers of patents that may cover these devices.” Prof. Olson explains that this is also true for pharmaceutical patents, where the number of patents covering one specific drug is relatively low—not enough “to constitute a substantial thicket that will deter innovation.”

2. No Combination Drug Patents Act. The No Combination Drug Patents Act would change the nonobviousness standard under Section 103 for follow-on pharmaceutical innovations. If enacted, it would create a presumption that any “covered claimed invention” is obvious if it “contains or uses a drug or biological product that is prior art” and differs from the prior art under one or more of four enumerated criteria. An applicant may rebut this presumption by showing that the invention is either a new treatment for a new indication or that it leads to a statistically significant increase in the drug’s efficacy.

Prof. Holman points out that the proposed “rule of construction” exempting certain claimed inventions “could largely eviscerate the bill’s effect,” depending on how it is interpreted. He presents three possible interpretations, two of which could be easily overcome by filing a divisional application. Under the third possible interpretation, which seems like the one the bill’s drafters intended, Prof. Holman predicts that pharmaceutical companies would be forced to significantly change their current patent filing strategy, which affords some time to figure out and secure claims directed to inventions that were unknown when the parent application was filed, by starting to file many patent applications at the outset.

Stepping back for a moment, Prof. Holman explains that the proposal to raise the nonobviousness bar especially for follow-on pharmaceutical patents is not new. However, he questions such a proposition because the “assumption that many types of pharmaceutical inventions are inherently obvious and undeserving of patent protection” does not withstand scrutiny. Prof. Holman notes that numerous follow-on inventions have been upheld by the courts and recognized for the positive impact they have on people’s lives. (For a CPIP policy brief by Prof. Holman responding to such a proposal by the United Nations, please see here.)

3. Terminating the Extension of Rights Misappropriated Act of 2019. Finally, Prof. Holman discusses the Terminating the Extension of Rights Misappropriated Act of 2019, which is designed to prevent double patenting in drug patents by presuming that the patentee has “disclaimed the patent term for each of the listed patents after the date on which the term the first patent expires.” Prof. Holman explains that the bill neither alters the standard for determining obviousness-type double patenting, nor the remedy, but it does shift the burden of proof from the PTO to the patent applicant to prove that the listed patents are patently distinct from one another. The bill would also require the PTO to conduct a comprehensive review of its examination procedures.

Conclusion

Prof. Holman echoes Senator Thom Tillis’ concern that “by just focusing on patent protections, and the number of patent protections available to a single product, [Congress] may be doing more harm than good to our nation’s innovation economy.” And he notes that it “is important to bear in mind that the reason there has been such an uproar over the price of drugs is that these drugs provide huge benefits for society, far exceeding most other patentable innovation.” Prof. Holman mentions that these drugs would probably not have been available in the first place without proper incentives, and he worries that the legislation aimed at preventing the perceived problems with evergreening “could discourage the investment necessary to bring the next generation of pharmaceutical innovation to patients.”

Further, Prof. Holman criticizes the current evergreening debate for failing to target the supposed misuse of patents by going after the patents and not that misuse. For example, if the claim of product hopping were true and patients were being prescribed much more expensive drugs with no additional benefit, that would be an issue with the market, not with the patent system. Similarly, if drug companies were using anti-competitive means in the same scenario, that would be an antitrust violation, not a patent issue. As such, instead of the current legislative proposals targeting the patents themselves, Prof. Holman concludes that any legislation should focus on the alleged bad actions of pharmaceutical companies, not on changing the patent incentives for pharmaceuticals inventions overall.

Categories
FTC Innovation

CPIP Scholars Join Comment Letter to FTC Supporting Evidence-Based Approach to IP Policymaking

a hand reaching for a hanging, shining keyOn December 21, 2018, CPIP Senior Scholars Jonathan Barnett, Chris Holman, Erika Lietzan, Adam Mossoff, Sean O’Connor, and Kristen Osenga joined a comment letter that was filed with the FTC as part of its ongoing hearings on Competition and Consumer Protection in the 21st Century. The comment letter was joined by 18 legal academics, economists, and former government officials—including former USPTO Director David Kappos and former Federal Circuit Chief Judge Paul Michel. The comment letter is copied below.

***

December 21, 2018

Via Electronic Submission

Mr. Donald S. Clark
Secretary of the Commission
Federal Trade Commission
600 Pennsylvania Avenue NW
Washington, DC 20580

Re: Competition and Consumer Protection in the 21st Century Hearings—
Public Comments Following Hearing #4 on Innovation and Intellectual Property Policy

Dear Secretary Clark,

As legal academics, economists, and former government officials who are experts in antitrust law and intellectual property law, we respectfully submit these comments and an Appendix in response to the request for public comments following the Federal Trade Commission’s Hearings on Innovation and Intellectual Property Policy held October 23-24, 2018, as part of the FTC’s Hearings on Competition and Consumer Protection in the 21st Century.

We support evidence-based policy-making by the FTC concerning all aspects of technological innovation, intellectual property (IP) rights, and the relationship between IP rights and innovation markets. It is imperative that the FTC ground any policy statements, investigations, or enforcement actions, not on academic theories about how IP rights might potentially be misused in stylized theoretical models, but on persuasive evidence of actual consumer harm from anti-competitive practices in real-world markets. Otherwise, regulatory overreach could undermine the economic incentives and resulting stream of innovative products and services that consumers enjoy in markets in which reliable and effective IP rights attract the private capital necessary to fund the high costs of R&D and the commercialization process.

Few economists and policymakers would question that reliable and effective property rights are a necessary predicate for supporting investment in conventional physical-goods markets. Logic holds that this economic principle applies for the innovators, investors, and entrepreneurs in the information technology and life sciences markets at the core of the US innovation economy.

Given reliable and effective IP rights, multiple empirical studies support the proposition that firms are more willing to incur substantial costs and bear significant risks in undertaking long-term R&D. Two well-known examples are the approximately $2.6 billion dollars required to bring a new drug to market or the billions in dollars required to develop new communications technologies like 5G. These and other long-term R&D investments occur in commercial environments in which courts and administrative agencies secure reliable and effective IP rights.

In recent years, antitrust agencies have sometimes taken policy actions in IP-intensive markets that overlook this fundamental connection between secure property rights, investment incentives, R&D, and commercialization activities. These regulatory actions have been based on academic theories and anecdotal reports that have not been put to thoroughgoing, rigorous empirical tests.

To illustrate the risks of making policy without firm empirical support, consider the smartphone industry. For over a decade, theoretical predictions have been made that comparatively high numbers of patents covering technologies used in a single multi-component consumer product—a smartphone—would create “patent thickets,” “royalty stacking,” and “patent holdup” that would increase prices, constrain output, and stunt innovation. Based on these conjectures, antitrust agencies around the world have issued policy statements, undertaken enforcement actions, and imposed billions of dollars in fines—often directed at the firms that had pioneered the fundamental technologies behind wireless communications. Yet those proposing this testable hypothesis never actually tested it. Empirical researchers who subsequently did so found little to no evidence of “patent holdup.” Contrary to theory, real-world market conditions in the smartphone industry are characterized by constant lower quality-adjusted prices, robust market entry by new producers, and continuously increasing performance standards. Consumers in the US and around the globe have benefited from the virtuous feedback effect between secure property rights in new technologies, strong investment flows, and robust R&D output. The evidentiary burden surely rests on those who propose taking policy actions that would erode the property-rights foundation behind this technological and economic success story.

The smartphone industry is just one of multiple innovation markets that exhibit a positive relationship between reliable and effective patent rights, increased innovation, and economic growth. This evidence demonstrates a close relationship in the biopharmaceutical, medical device and certain information technology markets between patent protection and startups’ ability to secure financing for R&D and to undertake the costly commercial task of translating R&D into new products and services for consumers. This relationship is especially powerful in the case of startups that are often the source of breakthrough innovation. One empirical study shows that a startup with a patent more than doubles its chances of obtaining venture capital funding compared to a startup without a patent. Without a secure IP portfolio, venture capital and other investors will decline to support startups that often have few other legal or commercial mechanisms by which to secure their products and services against imitation by larger incumbents. For similar reasons, larger firms that specialize in R&D but do not have downstream production and distribution capacities require a secure IP portfolio to support a licensing infrastructure that generates the returns necessary to fund continued R&D that ultimately benefits downstream companies in the value chain and end-users in the marketplace.

Antitrust policy has long followed an error-cost approach that takes into account the relative costs associated with overenforcement (false positive errors) and underenforcement (false negative errors) of the antitrust laws. Consistent with this approach, the FTC’s policymaking and enforcement actions in innovation markets should be based on valid empirical evidence that makes it possible to weigh the likely costs and benefits of the agency’s actions.

This concern is especially relevant in evaluating the likelihood of consumer harm and the impact on innovation from patent infringement litigation. Like any form of civil litigation, patent litigation can be used for either legitimate or opportunistic purposes. Based on a limited body of evidence that suffers from substantial methodological shortcomings, antitrust agencies have issued statements and taken actions supporting blanket denials of the availability of injunctive relief for all patent owners who primarily license their technologies (“non-practicing entities”).

A broader empirical literature has looked more closely with rigorous analysis and uncovered a far more nuanced market and legal reality. First, no empirical study has demonstrated that patent owners’ requests for injunctive relief after findings of defendants’ infringement of their property rights have resulted systematically either in consumer harm or in slowing down the pace of technological innovation. Second, researchers have found that the “non-practicing entities” or “patent assertion entities” rubric encompasses a large number of business models that generate social gains by providing licensing and other mechanisms for undercapitalized individual inventors, startups, small firms, and universities. These innovators lack the commercial means to extract revenue from R&D that can generate valuable new products and services for consumers. Painting all of these entities with the same rhetorical broad brush threatens to unravel a rich ecosystem of inventors, startups, and entrepreneurs that rely on the legal backstop of injunctive relief to support markets in intellectual assets. Abusive litigation practices by a limited number of patent owners could and should be targeted surgically through fee-shifting and other standard tools available in all civil litigation. Again, regulatory intervention without a firm evidentiary basis runs the risk of harming consumer welfare by undermining the reliable and effective patent rights on which innovators, venture capitalists, startups, and other market participants rely in creating and expanding the innovation markets that benefit everyone.

In support, we attach an Appendix of articles that provide rigorous empirical studies and evidence-based analyses of IP-driven innovation markets, patent licensing, and patent litigation.

In conclusion, the FTC should continue to develop policies and undertake enforcement actions only with evidence of proven harms to consumers and with proper consideration of the costs in undermining reliable and effective IP rights that have consumer-welfare enhancing effects in the US innovation economy. A balanced consideration of the evidence on both harms and benefits is necessary to ensure balanced protection of innovators and consumers. We are confident that a commitment by the FTC to a program of evidence-based policy-making will lead to a vibrant, dynamic innovation economy supported by a secure foundation of IP rights that will continue to benefit consumers in the US and around the world.

Sincerely,

Kristina M. L. Acri
Associate Professor of Economics
The Colorado College

Jonathan Barnett
Professor of Law
USC Gould School of Law

Andrew Beckerman-Rodau
Professor of Law
Suffolk University Law School

Ronald A. Cass
Dean Emeritus,
Boston University School of Law
Former Vice-Chairman and Commissioner,
United States International Trade Commission

The Honorable Douglas H. Ginsburg
Senior Circuit Judge,
United States Court of Appeals for the District of Columbia Circuit, and
Professor of Law,
Antonin Scalia Law School
George Mason University

Stephen Haber
A.A. and Jeanne Welch Milligan Professor
Stanford University

Christopher M. Holman
Professor of Law
UKMC School of Law

Keith N. Hylton
William Fairfield Warren Distinguished Professor
Boston University School of Law

David J. Kappos
Former Under Secretary of Commerce and Director
United States Patent & Trademark Office

Erika Lietzan
Associate Professor of Law
University of Missouri School of Law

The Honorable Paul Michel
Chief Judge (Ret.),
United States Court of Appeals for the Federal Circuit

Damon C. Matteo
Course Professor
Tsinghua University in Beijing

Adam Mossoff
Professor of Law
Antonin Scalia Law School
George Mason University

Sean M. O’Connor
Boeing International Professor of Law
University of Washington School of Law

Kristen Osenga
Professor of Law
University of Richmond School of Law

Matthew L. Spitzer
Howard and Elizabeth Chapman Professor of Law
Northwestern University School of Law

Saurabh Vishnubhakat
Associate Professor of Law
Texas A&M University School of Law

Joshua D. Wright
University Professor,
Antonin Scalia Law School
George Mason University
Former Commissioner,
Federal Trade Commission

APPENDIX

Kristina M. L. Acri, née Lybecker, Economic Growth and Prosperity Stem from Effective Intellectual Property Rights, 24 Geo. Mason L. Rev. 865 (2017), http://georgemasonlawreview.org/wp-content/uploads/2017/11/24_4_Lybecker.pdf

Ashish Arora & Robert P. Merges, Specialized Supply Firms, Property Rights and Firm Boundaries, 14 Ind. & Corp. Change 451 (2005)

Jonathan H. Ashtor, Does Patented Information Promote Progress? (June 22, 2017), https://ssrn.com/abstract=2857697

Jonathan H. Ashtor, Opening Pandora’s Box: Analyzing the Complexity of U.S. Patent Litigation, 18 Yale J. L. & Tech. 217 (2016), https://ssrn.com/abstract=2736556

Jonathan M. Barnett, Antitrust Overreach: Undoing Cooperative Standardization in the Digital Economy (Nov. 2018), https://ssrn.com/abstract=3277667

Jonathan M. Barnett, Has the Academy Led Patent Law Astray?, 32 Berk. Tech. L. J. 1313 (2017), http://btlj.org/data/articles2017/vol32/32_4/Barnett_web.pdf

Jonathan M. Barnett, From Patent Thickets to Patent Networks: The Legal Infrastructure of the Digital Economy, 55 Jurimetrics J. 1 (2014), https://ssrn.com/abstract=2431917

Jonathan M. Barnett, Three Quasi-Fallacies in the Conventional Understanding of Intellectual Property, 12 Journal of Law, Econ. and Pol. 1 (2016), https://ssrn.com/abstract=265636

Christopher A. Cotropia, Jay P. Kesan & David L. Schwartz, Unpacking Patent Assertion Entities (PAEs), 99 Minn. L. Rev. 649 (2014), https://ssrn.com/abstract=2346381

Richard Epstein, F. Scott Kieff & Daniel F. Spulber, The FTC, IP, and SSOs: Government Hold-Up Replacing Private Coordination, 8 J. Comp. L. & Econ. 1 (2012), https://ssrn.com/abstract=1907450

Richard A. Epstein & Kayvan Noroozi, Why Incentives for Patent Hold Out Threaten to Dismantle FRAND and Why It Matters, 32 Berkeley Tech. L. J. (2018), https://ssrn.com/abstract=2913105

Joan Farre-Mensa, Deepak Hegde, & Alexander Ljungqvist, What Is a Patent Worth? Evidence from the U.S. Patent ‘Lottery’ (USPTO Econ. Working Paper No. 2015-5, Mar. 2017), https://ssrn.com/abstract=2704028

Alexander Galetovic & Stephen Haber, The Fallacies of Patent Holdup Theory, 13 J. Comp. L. & Econ. 1 (2017), https://academic.oup.com/jcle/article/13/1/1/3060409

Alexander Galetovic, Stephen Haber, & Lew Zaretzki, An Estimate of the Average Cumulative Royalty Yield in the World Mobile Phone Industry: Theory, Measurement and Results (Feb. 7, 2018), https://hooverip2.org/working-paper/wp18005

Alexander Galetovic, Stephen Haber, & Ross Levine, An Empirical Examination of Patent Hold Up, 11 J. Comp. L. & Econ. 549 (2015), https://academic.oup.com/jcle/article/11/3/549/800066

Douglas H. Ginsburg, Koren W. Wong-Ervin, & Joshua Wright, The Troubling Use of Antitrust to Regulate FRAND Licensing, CPI Antitrust Chronicle (Oct. 2015), https://www.competitionpolicyinternational.com/assets/Uploads/GinsburgetalOct-151.pdf

Douglas H. Ginsburg, Taylor M. Ownings, & Joshua D. Wright, Enjoining Injunctions: The Case Against Antitrust Liability for Standard Essential Patent Holders Who Seek Injunctions, The Antitrust Source (Oct. 2014), https://ssrn.com/abstract=2515949

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Categories
Patent Law Pharma

New CPIP Policy Brief: An Unwise Move to Discriminate Against Pharmaceutical Patents

enlarged image of a moleculeCPIP has published a new policy brief entitled An Unwise Move to Discriminate Against Pharmaceutical Patents: Responding to the UN’s Guidelines for Pharmaceutical Patent Examination.

The brief, written by CPIP Senior Scholar and UMKC Professor of Law Chris Holman, analyzes the UN’s recent Guidelines for Pharmaceutical Patent Examination, which are influential in the policy debates regarding the role of patented pharmaceuticals in public health. Professor Holman critically examines the Guidelines, pointing out that they “put a thumb on the scale in favor of generic medications” while failing to adequately consider “the development and incremental improvement of innovative pharmaceutical products.”

The Executive Summary is copied below:

EXECUTIVE SUMMARY

Recently, United Nations agencies have encouraged countries to make it harder to get patents on pharmaceuticals. The primary vehicle for this policy has been the Guidelines for Pharmaceutical Patent Examination: Examining Pharmaceutical Patents from a Public Health Perspective (the “Guidelines”). The Guidelines advocate excluding entire categories of pharmaceutical inventions from patentability.

This new approach represents a departure from past patent policy. The patent system has long applied the same rules to everybody instead of discriminating against particular types of technologies or industries. Ordinarily, each invention is judged on its individual merits based on neutral and generally-applicable rules for patentability.

The aim of the Guidelines is to make medicines cheaper, which is a laudable goal, but the kind of goal that has long been kept out of patent examination for good reasons. If a government objects to the prices of a product or how a business behaves in the marketplace, it applies other laws after the patent is granted. But when governments interject politics and policy before a patent is granted, the patent system as a whole becomes unreliable and unpredictable. Businesses are reluctant to invest in unreliable property rights and in the markets that make them unreliable. They either stop investing in innovation or avoid the markets where their innovations are unprotected.

The Guidelines contend that many forms of pharmaceutical innovation are inherently routine and hence unpatentable by default. Consequently, they demand exceptional circumstances from pharmaceutical inventions not required in other fields. The Guidelines would also restrict patents on innovations that occur later during drug development, including after the initial launch of a product.

This Policy Brief provides an evidence-based review of the categories of pharmaceutical innovation addressed by the Guidelines and dismissed as undeserving of patents. These include “Markush claims,” selection patents, patents on different forms of the drug, prodrugs and metabolites, compositions, combinations, doses, and new medical uses. Many of these categories of inventions are rather technical, so the Policy Brief attempts to briefly illuminate what each is and why it matters to the process of discovering and bringing new drugs to patients.

Once each category is carefully explained and examined, one finds real innovations. As illustrated by the decisions surveyed in this Policy Brief, when courts delve deeply into the substance of these inventions, they are often struck by the unpredictability and difficulty inherent in pharmaceutical innovation. These innovations can provide new and beneficial ways to formulate, prepare, and deliver the drugs as well as different ways to use the drugs.

Considered in the abstract, it is easy to devalue the inventiveness of the categories of pharmaceutical innovation targeted by the Guidelines. However, it is hoped that this Policy Brief and the full-length version, In Defense of Secondary Pharmaceutical Patents: A Response to the UN’s Guidelines for Pharmaceutical Patent Examination, will provide some counterweight to balance some of the more radical, and in my view unwarranted, recommendations set forth in the Guidelines. The interested reader should consult the full-length article for an expanded explanation including examples and citations to primary sources.

To read the policy brief, please click here.