Tag: Erika Lietzan

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Biotech Healthcare Patents Pharma

Professors Erika Lietzan and Kristina Acri Argue That Current Data Do Not Support Evergreening Allegations

By Jack Ring

Overlaid images of pills, a gloved hand of someone expecting a pill, and an eyedropperIn their forthcoming paper, Solutions Still Searching for a Problem: A Call for Relevant Data to Support “Evergreening” Allegations,[1] C-IP2 Senior Scholars Erika Lietzan of Mizzou Law and Kristina Acri of Colorado College call for relevant data to support evergreening allegations and accompanying policy proposals. “Evergreening” is often described as brand drug companies securing additional patents and FDA exclusivities, which grant greater market exclusivity than the initial exclusivities.[2] Evergreening has long been the subject of criticism and policy reform.

The article evaluates empirical data commonly offered to substantiate evergreening and explains that the data, while largely accurate, does not support proposed policy changes. The authors argue that the most relevant data points for policymakers are (1) when brands face competition and (2) what drives the timing of that competition. The authors indicate that no empirical studies answer these questions, so this article concludes by proposing a study designed to properly consider these factors.

I.              Background

Evergreening allegations stem from protections on brand drugs that advocates view as too many patents or FDA exclusivities, which, they claim, improperly extend the drug’s exclusivity.[3] FDA exclusivities include exclusive periods of approval or markets as well as processes for bringing generic drugs to market. Under the Federal Food, Drug, and Cosmetic Act (FDCA), the FDA approves all new drugs before they are sold.[4] However, the FDCA does not define “drug” or “new drug,” which may refer to an active ingredient, a finished product, or both.[5] While the FDCA does not specify, the FDA in practice approves products (finished medicines as they are sold in the market), not active ingredients (active molecules and components of finished products).[6]

The FDCA controls the processes of bringing a generic drug to market.[7] As critics point out, some statutory processes bar generic drugs from entering the market until the patents expire. However, this is not always the true.[8] Moreover, the FDCA provides different forms and lengths of exclusive approval as a reward for drug makers performing the preclinical and clinical research needed to bring a drug to market. These range from six months for performing pediatric studies[9] to seven years for “orphan” drugs intended to treat a rare disease or condition.[10]

Much of the evergreening allegations and outcry focus on exclusivities stemming from continuing innovation. Continuing innovation is common because developing new molecular entities is time- and cash-consuming. Therefore, brand companies benefit from identifying new uses for new molecular entities. Moreover, those new medical uses (indications) may be eligible for new patents and statutory exclusivities. Protections for continuing innovation, however, are narrow and only prevent the approval of generic drugs for that new, specific use.[11]

II.            The Hastings Project and Current Data for Policymakers

The University of California Hastings College of Law hosts a database that (1) identifies the earliest and latest expiring patent or exclusivity for new drugs and (2) calculates the number of months between those dates.[12] The authors undertook a large audit of the Hastings Database. Like the Hastings Database, major empirical studies offered to support the allegation of “evergreening” focused on counting patents and exclusivities.[13] The Hastings Database utilizes three counting metrics: earliest protection end date, latest protection end date, and delta between the two called “months added.” The authors’ audit raised questions regarding the inferences drawn about competition from patent and exclusivity counts generally.

The authors argue that the Hastings Database is insufficient to inform policy debate because it does not provide the most relevant piece of information for policymakers: when new drugs face competition and why. The Hastings Database estimates new drug entry and competition based on the latest protection date for a drug’s applicable exclusivities. However, the exclusivities used to calculate that date do not prohibit all new drug entry. Therefore, because new drugs could enter the market before the latest protection date, that data point does not serve as a relevant data point for policymakers seeking to drive timely generic competition. In the authors’ own data review, every new chemical examined had a generic drug available before the latest expiry date listed in the Hastings Database. The authors’ audit confirmed their skepticism of the “latest protection end date” as a proxy for the likely generic entry date. Actual generic competition date will likely launch at least five years earlier, with nearly 18% launching more than ten years sooner.[14]

III.          Takeaways and the Call for Relevant Data

While the authors audited the Hastings Database and analyzed their own dataset, they recognized their research still did not provide the answers to the most important questions: (1) when do generic drugs reach the market and (2) what drives that timing? A study designed to consider the market entry date of the first generic drug based on any brand product containing a particular new active ingredient would determine the factors driving that market entry date.

The publication closes by describing this better study and calling for this data. At a high level, the study would focus on each new molecular entity approved since 1983 with the relevant dates being the “Initial Protection End Date” and the “NCE Competition Date.” Initial Protection End Date would start with the first approved brand product containing the NCE. NCE Competition Date would be the commercial launch date for the first product, approved on the basis of an abbreviated application (relying on the brand company’s research), to contain that same NCE for the same indication(s). They recommend a database covering all new molecular entities since 1984 to allow policymakers to study these trends. The database would allow policymakers to see exactly how long brand companies with new chemical entities enjoy a market without competition from another company marketing the same chemical entity for the same use on the basis of the brand company’s own research. Where the Generic Competition Date (actual commercial launch date) is later than the Initial Protection End Date, one would need to investigate the reason for its timing. Perhaps the generic company had difficulty making a bioequivalent, the market is too small, or the generic company faced manufacturing issues.

IV.          Policy Implications

As the authors make clear, policymaking based on latest expiration date (the Hastings Database approach) before consideration of actual market entry (the authors’ proposed study) would be premature. The number of patents and exclusivities, and the difference between the earliest and latest expiration date of patents and exclusivities, do not illustrate evergreening. Yet, current policy proposals rely on this counting method used by the Hastings Database to support reforms. This is reliance on data to with no correlation to the purported issue. This article, rather, provides a sketch of how a proper database could be built and a study could be conducted to measure evergreening. Evergreening claims can only be substantiated with proper empirical data. Unless empirical data shows that evergreening is a problem, policy solutions are unnecessary.

[1] Erika Lietzan and Kristina Acri née Lybecker, Solutions Still Searching for a Problem: a Call for Relevant Data to Support “Evergreening” Allegations, 33 Fordham Intell. Prop., Medifa & Ent. L.J. (forthcoming 2023), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4230310#.

[2] For an overview of arguments that drug companies obtain too many patents and too much exclusivity, which raises prices, see Erika Lietzan, The “Evergreening” Metaphor in Intellectual Property Scholarship, 53 Akron L. Rev. 805, 848-851 (2020); see also Erika Lietzan, The Evergreening Myth, Regulation 24, 25 (Fall 2020).

[3] E.g., Robin Feldman & Evan Frondorf, Drug Wars: A New Generation of Generic Pharmaceutical Delay, 53 Harv. J. on Legis. 499, 510 (2016); Michael A. Carrier, A Real-World Analysis of Pharmaceutical Settlements: The Missing Dimension of Product Hopping, 62 Fla. L. Rev. 1009, 1016 (2010).

[4] 21 U.S.C. § 355(a).

[5] The term “drug” is ambiguous at FDA. The FDA approves brand products, not active ingredients, and those products are copied by generic companies. As a result, a brand’s active ingredient may be spread over multiple products. 21 U.S.C. § 321(g).

[6] FDA defines “active ingredient” as “any component that is intended to furnish pharmacological activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease, or to affect the structure or any function of the body of man or other animals.” 21 C.F.R. § 314.3(b). The active ingredient includes the ester, salt, or other noncovalent derivative of the molecule responsible for the physiological or pharmacological action of the drug substance. 21 C.F.R. § 314.3(b). That molecule, in turn, is the “active moiety.”

[7] See 21 U.S.C. §§ 355(j)(2)(A)(vii)–(viii), 355(j)(2)(B)(i).

[8] These circumstances include when (1) the patent claims a method of use for which the generic company does not seek approval, or (2) the brand company does not sue for patent infringement after a paragraph IV certification. 21 U.S.C. §§ 355(j)(2)(A)(vii)(IV); id. § 355(j)(2)(B)(i).

[9] 21 U.S.C. § 355a. Pediatric exclusivity is awarded after the research is complete, when the brand company submits a report to the agency that “fairly” responds to the written request. Id. § 355a(d)(4).

[10] Id. § 360bb(a)(2).

[11] Moreover, generic companies seeking to enter the market can choose not to seek approval for the new indication. 21 C.F.R. § 314.127(a)(7). For example, if a brand drug treats conditions A, B, and C and condition C is still subject to a patent or statutory exclusivity, a generic drug company could still receive approval to sell their drug to treat condition A and B.

[12] See Evergreen Drug Patent Search, https://sites.uchastings.edu/evergreensearch.

[13] This includes pieces by Robin Feldman, a Hastings professor. Robin Feldman, May Your Drug Price be Evergreen, 5 J.L. & Biosci. 590, 590 (2018); Amy Kapczynski et al., Polymorphs and Prodrugs and Salts (Oh My!): An Empirical Analysis of “Secondary” Pharmaceutical Patents, 7 PLOS Online 12 (2012).

[14] Lietzan & Acri, supra note 1, at 44–46.

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Patent Law Patents Pharma

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

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

pharmaceuticalsBy 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.

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CPIP Roundup

CPIP Roundup – October 30, 2020

Greetings from CPIP Executive Director Sean O’Connor

Sean O'Connor

With the end of the crazy year of 2020 coming into view, we here at CPIP are striving for a strong finish and already looking forward to meeting 2021 as prepared as anyone can be. Our thoughts are with all of CPIP’s friends, and I’m glad to pass along yet another Roundup full of positive news.

CPIP’s Eighth Annual Fall Conference, 5G at the Nexus of IP, Antitrust, and Technology Leadership, took place via Zoom on October 7-8. Thanks to everyone who made the event such a huge success! If you weren’t able to join us, you can find videos of the sessions here on CPIP’s website, and you can read our blog posts here and here.

In other event-related news, we have posts covering our recent conference, The Evolving Music Ecosystem, now available on both CPIP’s blog and IP Osgoode’s blog, hosted by our friends at York University’s Osgoode Hall Law School in Toronto. Bradfield Biggers, recent Boston College Law School graduate and music fintech entrepreneur at Timshel, and Meghan Carlin, Osgoode Hall law student and Co-President of the Osgoode Entertainment & Sports Law Association. You can check out the CPIP posts, here, here, here, and here, and the IP Osgoode posts here, here, here, and here.

CPIP would like to congratulate Thomas Edison Innovation Fellow Christa Laser on her professorship at Cleveland-Marshall College of Law! We’re excited about this opportunity for Christa to move into the world of academia, and we eagerly look forward to seeing all she has to offer in this space.

Congratulations also to Terrica Carrington of the Copyright Alliance for testifying at the “Copyright and the Internet in 2020” hearing before the House Judiciary Committee on September 30! You can find the written testimony, as well as a video of the hearing, on the Committee’s website. Terrica blogged about the oral argument in Google v. Oracle as well, and she joined the Committee for Justice on October 9 for a virtual panel discussion about the oral argument.

In other notable new from CPIP affiliates, CPIP Senior Scholar Mark Schultz and other experts have participated in a video for the Geneva Network on how IP helps in the battle against COVID-19. CPIP Affiliate Scholar Hina Mehta is speaking on October 30 at a session titled “Intellectual Property and its Commercialization” during Industry Day, an event hosted by George Mason University’s Department of Mechanical Engineering. Also this month, I spoke at the Law & Economics Center’s virtual Symposium on the Economics and Law of Cannabis Markets on October 12, as well as on the “Machine Learning in the Lab and in the Marketplace” panel at the LES 2020 Annual Meeting on October 16.

I’m grateful to the indefatigable CPIP staff for another productive month—especially in these crazy times—and I hope the coming months will allow us to catch our collective breath to prepare for the new year. Please read on for more October news from CPIP, and I wish you an early, happy—and especially safe—Thanksgiving!

CPIP Hosts Eighth Annual Fall Conference on 5G and the Internet of Things

Eighth Annual Fall Conference flyer

On October 7-8, 2020, CPIP hosted its Eighth Annual Fall Conference, 5G at the Nexus of IP, Antitrust, and Technology Leadership, online from Scalia Law in Arlington, Virginia. The conference featured a keynote address by the Honorable Andrei Iancu, Under Secretary of Commerce for Intellectual Property and Director of the USPTO, and it was co-hosted by Scalia Law’s National Security Institute (NSI).

This conference addressed fast-emerging intellectual property (IP), antitrust, and technology leadership issues in the 5G and “Internet of Things” innovation ecosystem. Coverage included standard-essential patents (SEPs) along with established and emerging markets on a regional and global basis. Speakers were 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.

Our blog posts summarizing the conference are available here and here, and you can watch the conference videos here.

CPIP Welcomes Ken Randall as Next Dean of Scalia Law School

the words "Mason" set up outside on campus with people walking behindGeorge Mason University has announced that Ken Randall will be the next Dean of Antonin Scalia Law School, beginning on December 1, 2020.

CPIP Executive Director Sean O’Connor welcomed the news: “We couldn’t be happier with the selection of Ken Randall as Dean-Elect. He cares deeply about the continued success of CPIP and is no stranger to innovation and commercialization. He and I have already developed a great working relationship, and CPIP endeavors to support his Deanship in any way we can. We also thank Dean Henry Butler for his outstanding leadership and look forward to working with him as a faculty colleague and Executive Director of the Law & Economics Center.”

The Center for the Protection of Intellectual Property congratulates Dean Randall on his appointment and welcomes him to the Scalia Law family. His rigorous academic mind, strong leadership skills, and expertise in online learning bring together the ideal skill set to take our law school to new heights. We very much look forward to working with him in the near future.

To read our announcement, please click here.

Spotlight on Scholarship

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

Deepak Hegde, Joan Farre-Mensa, & Alexander Ljungqvist, What Is a Patent Worth? Evidence from the U.S. Patent “Lottery”, 75 J. Finance 639 (2020)

Deepak Hegde of New York University and co-authors Joan Farre-Mensa and Alexander Ljungqvist have published a new paper from our Edison Fellowship program entitled What Is a Patent Worth? Evidence from the U.S. Patent “Lottery” in the Journal of Finance. The paper provides empirical evidence that startups that obtain their first patent have, on average, 55% higher employment growth and 80% higher sales growth five years later. Utilizing a unique dataset drawn on unprecedented access to USPTO internal databases, the study also shows with causal evidence that these startups pursue more—and higher quality—follow-on innovation as the first patent boosts innovation by facilitating their access to funding.

Olena Ivus, Edwin L.-C. Lai, & Ted M. Sichelman, An Economic Model of Patent Exhaustion, 29 J. Econ. & Manag. Strategy 816 (2020)

CPIP Senior Scholar Ted Sichelman of the University of San Diego, along with Olena Ivus and Edwin Lai, have published a new paper in the Journal of Economics & Management Strategy entitled An Economic Model of Patent Exhaustion. The paper, which comes from our Edison Fellowship program, uses a sophisticated economic model to show that, contrary to the Supreme Court’s opinion in Impression Products v. Lexmark, mandatory patent exhaustion can be highly inefficient, particularly when transaction costs are low. The authors show that it is socially optimal for patent owners to be able to opt-out of exhaustion via contract when the social benefits from buyer-specific pricing outweigh the social costs from transaction cost frictions in individualized licensing.

Lauma Muizniece, University Autonomy and Commercialization of Publicly Funded Research: The Case of Latvia, ___ J. Knowl. Econ. ___ (2020)

In this paper from our Edison Fellowship program, Lauma Muizniece of the Investment and Development Agency of Latvia focuses on university autonomy as one of the key variables in commercializing publicly funded research in Latvia. The paper presents a case study using secondary data and interviews to demonstrate that, with greater funding flexibility and experimentation, universities could develop better ways to commercialize their research that are currently hindered by systemic bottlenecks. By taking a more nuanced approach at the research organization level that aligns incentives with opportunities, the paper argues that researchers and those who pursue commercialization of that research would be more successful in their endeavors.

Activities, News, & Events

a lit lightbulb hanging next to unlit bulbs

CPIP Director of Copyright Research and Policy Sandra Aistars and the students in her Arts & Entertainment Advocacy Clinic joined the Washington Area Lawyers for the Arts (WALA) and the Copyright Alliance to co-host a virtual event entitled Arts and the Pandemic to discuss how local venues and artists are affected by the pandemic and to offer legal assistance to individual artists and small businesses. Prof. Aistars has written two recent articles at Law360 about the Google v. Oracle case. The first, RBG’s Legacy Can Guide High Court In Oracle Copyright Case, traverses the late Justice Ginsburg’s love of the arts and copyright legacy and runs through the various legal issues to explain why Google’s position is wrong on the merits. The second, High Court Oracle-Google Copyright War May Benefit Artists, examines how a case that is ostensibly about computer code could have a significant impact on the livelihoods of all artists and authors. Finally, Prof. Aistars spoke at the 2020 National Volunteer Lawyers for the Arts (NVLA) conference, discussing how to protect the arts and the importance of reversing anti-IP biases in academia.

CPIP Senior Fellow for Innovation Policy Jonathan Barnett published an op-ed at The Hill entitled “Unfair Use,” Democracy and the Supreme Court about the imbalance created by the expansion of copyright law’s fair use doctrine in recent years. Prof. Barnett explains how and why the Court can rein in the fair use doctrine in Google v. Oracle, noting that the current fair use “groupthink” dogmatism fails to recognize that platform aggregators improperly rely on the exception to generate billions of dollars annually despite having borne neither the costs nor risks of developing the content. Prof. Barnett also published an essay at Truth on the Market entitled Antitrustifying Contract: Thoughts on Epic Games v. Apple and Apple v. Qualcomm. The essay explains how the Epic v. Apple and Apple v. Qualcomm cases demonstrate “the unproductive rent-seeking outcomes to which antitrust law will inevitably be led if, as is being widely advocated, it is decoupled from its well-established foundation in promoting consumer welfare—and not competitor welfare.”

CPIP Senior Scholar Erika Lietzan has published a new article in the Cato Institute’s Regulation entitled The Evergreening Myth that discusses recent efforts by U.S. policymakers to reduce so-called pharmaceutical “evergreening” by changing the antitrust, intellectual property, and regulatory landscape. Prof. Lietzan explains that claims of evergreening, where drug companies supposedly block competition by improper means, are revealed to be myths upon closer inspection. Indeed, its proponents are making unstated normative claims that blind policymakers from making informed decisions based on rigorous evidence. As Prof. Lietzan concludes, the “term’s meaninglessness makes it impossible for audiences to distinguish among situations that may be different, as a legal, theoretical, or normative matter, and that may call for differing policy solutions,” and this “does a disservice to policymakers and the public.”

CPIP Senior Scholar Kristen Osenga has published a pair of op-eds on how policymakers and regulators are threatening innovation. In an op-ed entitled Price Controls Are Intellectual Property Theft by a Different Name at Townhall, Prof. Osenga discusses a recent executive order that would decrease Medicare payments for many prescription medications to match the lowest price paid in other developed countries. This policy, which she describes as “myopic at best and downright reckless at worst,” fails to consider the devastating impact it would have on medical innovation in the United States—and how it would ultimately hurt patients in the long run. At RealClearMarkets, Prof. Osenga published an op-ed entitled Today’s Federal Trade Commission Is Taking One Giant Leap Backwards that discusses the FTC’s misguided efforts to pit antitrust and patents against each other. As she explains, patent and antitrust law share the same goal of increasing innovation. Prof. Osenga concludes: “Rather than tilting at windmills already lost, it is time for the FTC to move forward and set their focus on real impediments to innovation and competition.”

Categories
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.

Categories
Antitrust Biotech Patents Pharma

Recent Developments in the Life Sciences: The Continuing Assault on Innovation by Antitrust Plaintiffs in Lantus

By Erika Lietzan

dictionary entry for the word "innovate"In February, the U.S. Court of Appeals for the First Circuit held, in a direct purchaser antitrust action, that an innovative pharmaceutical company marketing an injectable drug product had “improperly listed” in FDA’s Orange Book a patent claiming a mechanism used in the drug’s delivery device. As I explain below, the ruling creates the specter of antitrust liability for steps taken in good faith to comply with a complex regulatory framework that overlaps in part with patent law. I explain below how the ruling puts biopharmaceutical innovators in a tough spot.

First, the legal framework.

Federal law requires each company that submits a new drug application to identify the patents that claim the drug or a method of using the drug (if a claim of patent infringement could reasonably be asserted against someone who made, used, or sold the drug without a license). The application cannot be approved, if the company fails to submit the required information on a patent that satisfies the listing standard. (See section 505(d)(6) of the drug statute, here.) FDA publishes the patent numbers and expiration dates in the “Orange Book,” which takes the form of a PDF and electronic database.

Federal law also requires a generic drug applicant to take a position with respect to every patent that claims the drug or a method of using the drug — effectively, every patent listed in the Orange Book. For every unexpired patent, the generic applicant has two choices, which dictate when its application can be approved. (There’s a third option for a patent claiming a method of using the drug, which isn’t relevant here.)

It can choose to wait for patent expiry, which means filing a “paragraph 3 certification.” In this scenario, FDA cannot approve its generic drug for market entry until expiry of the patent.

Or it can say that it plans to market right away, because its product doesn’t infringe the patent or because it thinks the patent invalid, which means filing a “paragraph 4 certification.” In this scenario, it must notify the innovator (and patent owner, if different). (I’ll just say “innovator,” going forward.) As far as this patent is concerned, FDA can approve the generic drug for market entry as soon as its review is complete and assuming the generic drug is otherwise approvable with one important exception. If the patent was listed before the generic drug company submitted its application, and if the innovator files a patent infringement suit within 45 days of receiving notice, then final approval of the generic application is stayed for 30 months or until a district court ruling in the generic company’s favor (whichever happens first). The paragraph 4 certification is considered an act of infringement, which creates federal court jurisdiction.

The patent listing mechanism is intended to facilitate litigation of patent issues before market entry, which both industries wanted. The generic companies wanted a way to litigate these issues before launching, for example, because doing so avoids the risk of damages (for more information, see my article on the history and political economy of the legislation). The scheme encourages generic companies to participate by offering 180-day exclusivity in the market for the first to file a (true) generic application with paragraph 4 certification, and it encourages innovators to participate by offering the 30-month stay that makes it possible for the patent to be litigated before the generic drug launches.

These rules apply to companies that file true generic applications, for exact copies of the innovator’s drug. And with one exception they also apply to companies that file a different type kind of abbreviated application known as a 505(b)(2) application. The distinction between the types of application isn’t critical here. The one exception is that companies filing 505(b)(2) applications with paragraph 4 certifications aren’t eligible for 180-day exclusivity.

Second, applying the framework to combination products in particular.

The listing standard — “any patent which claims the drug for which the applicant submitted the application or which claims a method of using such” — has proved vexing to interpret.

In 1994, FDA published its first regulation interpreting this provision, stating that it meant “drug substance (ingredient) patents, drug product (formulation and composition) patents, and method of use patents,” but not “process patents.” But there have been questions about a variety of patent types over the years, and in 2003 — responding in part to requests for elaboration — the agency revised its regulations to provide more details about what it required to be listed and what was not to be listed.

At issue here: what to do with combination products. These products combine two regulated components, such as a device and a drug. Two discrete products packaged together for use together are, together, considered a “combination product.” But the phrase also means a single finished product that comprises two regulated components — thus a drug and device produced as a single entity. Combination products thus include prefilled drug delivery devices — such as a prefilled drug syringe, an auto-injector, or an metered dose inhaler (see here).

The question is whether the statute requires companies to list patents associated with the device component of these products.

FDA considered this in the 2003 rulemaking. The final regulation is 21 C.F.R. § 314.53, but the agency’s explanation of the regulation in the Federal Register — which has the formal status of an “advisory opinion” — is just as important.

The agency decided that “patents claiming a package or container must not be submitted.” Packaging and containers are “distinct from the drug product.”

Several commenters also argued that patents claiming devices that are “integral” to the drug product or require approval should be listed. FDA offered what it labeled as a “response.” The agency didn’t write that these patents “should” be listed, or that they “should not” be listed. Instead it said that a “drug product” is the drug in its “finished dosage form” — meaning the form administered to patients. And, it added, the current list of “dosage forms for approved products” — which appears in an appendix to the Orange Book — includes “aerosols, capsules, metered sprays, gels, and pre-filled drug delivery systems.” Elsewhere it wrote that a patent claiming the finished dosage form “must be submitted for listing.”

Now, the litigation and First Circuit ruling.

Sanofi-Aventis holds the approved marketing application for Lantus (insulin glargine recombinant), a long-acting human insulin analog used in treating diabetes. At first the company sold Lantus in multiple dose vials and in cartridges for use with a (separate) insulin delivery device. In 2007, however, FDA approved a supplemental application for sale of Lantus in a single-patient-use prefilled injector pen.

Sanofi has listed several patents in connection with Lantus. In connection with the prefilled pen, the company listed U.S. Patent No. 8,556,864 (drive mechanisms suitable for use in drug delivery devices), which issued in October 2013 and expires in March 2024. The parties agree that the ’864 patent claims the drive mechanism used in the Lantus pens, and FDA would not have approved the prefilled pens without a showing that the pen (including the drive mechanism) ensures patients safely receive accurate doses. But — and this turned out to be critical in the end — the patent doesn’t mention insulin glargine. Nevertheless, according to the agency, an insulin injector pen is a prefilled drug delivery system. And this makes it a dosage form. And patents claiming dosage forms must be listed.

In 2013, Eli Lilly submitted a 505(b)(2) application for a copy of Lantus, which it planned to market as Basaglar. It included a paragraph 4 certification to the ’864 patent and to various other patents as well. Sanofi brought suit. The case settled on the morning trial was scheduled to begin, with Lilly agreeing to pay for a license to launch in December 2016, seven years before patent expiry.

The plaintiffs in this antitrust litigation are drug wholesalers. They claim, among other things, that Sanofi improperly listed the ’864 patent. (As far as I can tell, Lilly didn’t raise the issue.) The district court dismissed their first amended complaint, pointing out that FDA has interpreted “drug products” to include “prefilled drug delivery systems” and that patents claiming drug products must be listed. The plaintiffs amended their complaint, but the district court dismissed again on largely the same grounds. Under a “reasonable interpretation” of the agency’s regulations, Sanofi had to submit the patent for listing. So, it couldn’t have been improper conduct to list the patent.

The First Circuit’s ruling came as a shock. In a unanimous decision, Judge Kayatta wrote that Sanofi had improperly listed the patent. He reasoned as follows. First, the statute and regulations call for listing of patents that claim the drug, and the patent doesn’t even mention the drug. Second, in 2003 FDA didn’t adopt the proposal that devices “integral” to the product should be listed. Instead, the agency said that companies should list patents that claim the finished dosage form. And this patent doesn’t, the court wrote; it claims a device that can be combined with other components to produce the finished dosage form.

Finally, the implications.

The innovative pharmaceutical industry has asked FDA repeatedly since 2003 — at least four times, including in citizen petitions — to clarify whether patents directed to drug delivery systems are supposed to be listed, if they don’t recite the drug’s active ingredient or formulation. The agency never answered these requests.

Although FDA’s failure to respond has been frustrating, it is my understanding that most companies — consulting with patent and regulatory counsel — have concluded these patents should be listed and that, in fact, they list them, and FDA publishes them. I have always thought this was the best reading of what FDA wrote in 2003. At the very least, it is a reasonable reading of what FDA wrote. It is deeply concerning that the First Circuit now purports to answer this question for the agency — no, these patents do not satisfy the listing standard — in litigation to which FDA was not a party and could not explain its interpretation of the statute or its expectations.

The decision is also fundamentally hostile to pharmaceutical innovators. The Hatch-Waxman scheme — statute, regulations, guidance, and precedent — is complex, and figuring out how it applies in any particular situation can be tricky. There are other unresolved listing issues, which companies and their counsel work through in good faith. The lesson here seems to be that an innovator trying to navigate uncertainty about the listing requirements does so at its peril.

On the one hand, failing to list a patent that satisfies the criteria has serious consequences. Listing is not voluntary; the statute requires it. The company must declare (“under penalty of perjury”) that its patent submission is “accurate and complete.” The patent submission form reminds the company that “a willfully and knowingly false statement is a criminal offense” under 18 U.S.C. § 1001. (And at least in theory, FDA would reject an application that lacked the required patent information, though I don’t know if this has ever happened or if it would happen.) Most importantly, failing to list a patent means there is no paragraph 4 certification, and thus no artificial act of infringement, and no opportunity to enforce the patent before generic market launch. Failing to list also passes up the benefit of the 30-month stay. And there may be concern that failure to list a patent is some sort of admission against the innovator’s interests in litigation.

On the other hand, listing a patent that doesn’t satisfy the criteria attracts antitrust scrutiny, presumably because the listing places an administrative burden on generic applicants and might trigger a stay of approval. And this case shows that a hostile court may disagree with the company’s reading of the statute, regulations, Federal Register, and precedent. Even if a company adopts what appears to many to be a reasonable interpretation of the patent listing requirements, a court might interpret the listing requirements on its own — without the benefits of FDA’s views — and force the company into expensive and time-consuming antitrust litigation. Indeed, two bloggers recently praised the decision, recommending that generic companies “examine the Orange Book listings,” as they may contain a “rich vein” for antitrust claims.

To be sure, as the court wrote, Sanofi can try to show, on remand, that its submission was “the result of a reasonable, good-faith attempt to comply with the Hatch-Waxman scheme.” This would provide a defense to any liability under the Sherman Act for “antitrust injury caused by” the submission. But the burden has shifted to the company, and much of the language in the court’s opinion suggests that this will be an uphill battle. (E.g., “The statute and regulations clearly require that only patents that claim the drug for which the NDA is submitted should be listed in the Orange Book. The ’864 patent … does not fit the bill.”)

A postscript from the administrative law side of the table.

Consider a counterfactual.

As a preliminary matter, recall that FDA’s regulations require companies to list patents on drug products. These regulations also state that the phrase “drug product” refers to a drug in its “finished dosage form.” FDA has said, for years, that a patent claiming a finished dosage form “must be submitted for listing.” Finally, it has listed prefilled drug delivery systems as a type of “dosage form” in the Orange Book.

Now suppose that FDA had responded to the industry requests for clarification and stated definitively — given what I just wrote — that a patent claiming any component of a prefilled syringe must be listed? In my view, this would be a defensible position for the agency to have taken, given the statute, the regulations, and what it has written to date.

What would have happened if this hypothetical FDA decision had gone to the First Circuit for review, in a totally different kind of lawsuit? Would the First Circuit really conclude that the agency’s interpretation of the statute was unreasonable or impermissible (Chevron)? Would it really conclude that the agency’s interpretation of its regulation was “plainly erroneous or inconsistent with the regulation” (Auer)? And if we think that the courts would (or should) defer to FDA in this hypothetical case, how can Sanofi’s decision possibly have been unreasonable?

In the end, the First Circuit’s ruling contains a troubling lesson for pharmaceutical innovators. When navigating uncertainty about a patent’s status under the patent listing requirements, even if it seems reasonable to conclude that FDA would require listing and even if the agency won’t answer the question, listing the patent in good faith creates a serious risk of facing antitrust litigation. The alternative, equally unappealing, is to relinquish the opportunity to enforce the patent before generic market entry, which conflicts with the purpose and design of the Hatch-Waxman Amendments and undermines the value of the patent.

Categories
CPIP Roundup

CPIP Roundup – April 30, 2020

Greetings from CPIP Executive Director Sean O’Connor

Sean O'Connor

As we move into another month of stay-at-home here in the DMV—and perhaps some re-openings—we here at CPIP hope that you and yours are staying safe and healthy while we weather this crisis.

We continue to move forward, however. Our biggest news this month is the addition of Joshua Kresh as our new Deputy Director. Most recently an IP attorney at DLA Piper, he has worked at other major firms and is active in policy and new lawyer training with AIPLA and the Giles Rich Inn of Court. Joshua brings with him a patent-rich legal background, and he’ll be a valuable asset to the CPIP team and mission. We look forward to working with him and hope you wish him the best as he takes up this new role.

Like many other schools and organizations, Scalia Law School and CPIP have moved online for the time being—but that doesn’t mean we’ve stopped forging ahead and navigating new challenges. Because all George Mason University onsite events have been cancelled through August 8, we’ve moved our much-anticipated Music Law Conference back to September 10-11, 2020. We greatly appreciate the flexibility and understanding of every single person involved, not least our special guest and keynote speaker, Rosanne Cash. We hope you can still join us for the event in the fall—and, if you were unable to make the April dates, we hope this postponement works to your benefit!

CPIP’s main event this summer, the WIPO-CPIP Summer School on Intellectual Property for this coming June 8-19, 2020, has moved online as a virtual program via WebEx. CPIP primarily will serve participants in the Americas, although we’ll also be welcoming a number of attendees from other parts of the world who have opted to stay with the U.S.A. program.

As of March, I joined the Board of Directors for The Circle Foundation, an organization in the Republic of Korea that supports innovation and entrepreneurship to strengthen the start-up ecosystem. This new role brings CPIP and Scalia Law School into another level of connection with Mason Korea’s excellent in-country campus and activities.

In April, I was a virtual guest speaker for CPIP Co-Founder—and now University of Akron Goodyear Tire & Rubber Chair of Intellectual Property—Mark Schultz’s WebEx event, Copyright and Social Justice: How the “Blurred Lines” Case Brought Overdue Recognition for African American Artist. The talk was co-sponsored by the Black Law Students Association and the Intellectual Property and Technology Law Association. Also in April, I gave a virtual presentation to admitted Scalia Law prospective students on Cannabis: Creating a New Regulated Economy.

CPIP and our colleagues have remained productive over these past weeks, from rescheduling events to publishing timely pieces. My article Distinguishing Different Kinds of Property in Patents and Copyrights—based on an early presentation at CPIP’s Annual Fall Conference—was published in the George Mason Law Review, and my recent op-ed, Avoiding Another Great Depression Through a Developmentally Layered Reopening of the Economy, appeared in The Hill. I was interviewed on WBAL for this piece as well. Finally, CPIP along with many other organizations from around the world signed onto an open letter to WIPO’s Director-General for World IP Day.

This past month and a half have undoubtedly been difficult. At CPIP, our thoughts go out especially to all creators and innovators who are facing new challenges as they strive to protect their livelihoods and intellectual property in this difficult time. We truly hope this May brings improvements, both locally and globally. Stay well, safe, and sane.

CPIP Welcomes Joshua Kresh as Deputy Director

Joshua Kresh

CPIP is proud to welcome Joshua Kresh to our leadership team! As Deputy Director, Joshua will report to CPIP Executive Director Sean O’Connor while managing and participating in CPIP’s day-to-day operations. Joshua will oversee CPIP’s academic research, policy, and fundraising efforts, working as well on planning and executing CPIP events such as conferences, meetings, fellowships, and roundtables. Joshua will also consult with Professor O’Connor and the other faculty directors to develop CPIP’s long-term academic and policy plans.

Before joining CPIP as Deputy Director, Joshua was an Associate with DLA Piper in Washington, D.C., where he practiced patent litigation. He received his law degree with honors from The George Washington University Law School, and he holds master’s and bachelor’s degrees in computer science from Brandeis University. Joshua is the Chair of AIPLA’s New Lawyers Committee and Co-Mentoring Chair of the Giles Rich American Inn of Court, and he is a registered patent attorney with the U.S. Patent and Trademark Office.

To read the rest of our announcement, please click here.

Music Law Conference with Rosanne Cash Moved to September 10-11, 2020

Rosanne Cash

We are excited to announce that the music law conference, The Evolving Music Ecosystem, which will be held at Antonin Scalia Law School in Arlington, Virginia, has now been moved to September 10-11, 2020. The keynote address will be given by Rosanne Cash, and it features two days of 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.

Registration Open for WIPO-CPIP Summer School on IP on June 8-19, 2020

WIPO Summer School flyer

CPIP has again partnered with the World Intellectual Property Organization (WIPO) to host the third iteration of the WIPO-CPIP Summer School on Intellectual Property from Antonin Scalia Law School in Arlington, Virginia, on June 8-19, 2020. Registration is now open, and we recommend that participants apply early, as we expect the program to be full. In order to accommodate the global response to COVID-19, we have moved the course online this year.

The course provides a unique opportunity for students, professionals, and government officials to work with leading experts to gain a deeper knowledge of IP to advance their careers. The course consists of lectures, case studies, simulation exercises, group discussions, and panel discussions on selected IP topics, with an orientation towards the interface between IP and other disciplines. U.S. law students can receive 3 hours of academic credit from Scalia Law!

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

Spotlight on Scholarship

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

Sean M. O’Connor, Distinguishing Different Kinds of Property in Patents and Copyrights, 27 Geo. Mason L. Rev. 205 (2019)

In this paper from our Annual Fall Conference, CPIP Executive Director Sean O’Connor explores the different meanings of “property” with respect to patents and copyrights. Prof. O’Connor explains that, contrary to the current conventional wisdom, the purpose of protection in early modern Europe was to incentivize public disclosure and commercialization, not private creation. To demonstrate this, he traverses the evolution of different kinds of property, including private knowledge, ad hoc grants of rights, rights in goods that embody intellectual property, and contractual assignments or licenses. Prof. O’Connor then describes how confusion over these different kinds of property has lead people to talk past each other in intellectual property debates, and he argues that a more nuanced understanding of the various property interests at stake might enable more constructive engagements going forward.

Charles Delmotte, The Case Against Tax Subsidies in Innovation Policy, 48 Fla. St. U. L. Rev. ___ (forthcoming)

In this paper from our Thomas Edison Innovation Fellowship, Charles Delmotte of NYU Law assesses the proposal for replacing intellectual property rights with tax subsidies for research and development (R&D) firms. Dr. Delmotte explains that innovation scholarship neglects economic insights on efficiencies, such as how information problems prevent the efficient operationalization of tax subsidies since innovation outcomes turn on unpredictable market processes that cannot be steered in advance. Turning to public choice theory, Dr. Delmotte points out that tax subsidies are particularly susceptible to diversion by the rent-seeking behavior of the politically affluent, and relying on economic realism, he argues that the best way to promote innovation is by securing stable intellectual property rights that undergird the background institutions that facilitate competition and entrepreneurship.

Activities, News, & Events

a lit lightbulb hanging next to unlit bulbs

In a new CPIP policy brief entitled The End of Patent Groupthink, CPIP Senior Fellow for Innovation Policy Jonathan Barnett highlights some cracks that have emerged in the recent policy consensus that the U.S. patent system is “broken” and it is necessary to “fix” it. Policymakers have long operated on the basis of mostly unquestioned assumptions about the supposed explosion of low quality patents and the concomitant patent litigation that purportedly threaten the foundation of the innovation ecosystem. These assumptions have led to real-world policy actions that have weakened patent rights. But as Prof. Barnett discusses in the policy brief, that “groupthink” is now eroding as empirical evidence shows that the rhetoric doesn’t quite match up to the reality. This has translated into incremental but significant movements away from the patent-skeptical trajectory that has prevailed at the Supreme Court, the USPTO, and the federal antitrust agencies.

We have several new posts on the CPIP blog, including the first installment of our new series on recent copyright law developments. In a post entitled Copyright Notebook: Observations on Copyright in the Time of COVID-19, CPIP Director of Copyright Research and Policy Sandra Aistars discusses several current copyright cases and issues, including how artists, authors, and copyright industries have taken unprecedented steps to bring enjoyment to our circumscribed lives. We published a similarly hopeful piece entitled IP Industries Step Up in This Time of Crisis on how bio-pharma industries and scientific publishers have made crucial information and materials available when they are needed the most. CPIP Director of Communications Devlin Hartline published a piece entitled Supreme Court Paves Way for Revoking State Sovereign Immunity for Copyright Infringement that looks at the Supreme Court’s decision in Allen v. Cooper. And CPIP Senior Fellow for Life Sciences Erika Lietzan published a piece entitled The Tradeoffs Involved in New Drug Approval, Expanded Access, and Right to Try on the various issues with approving new medicines.

CPIP Senior Scholar Kristen Osenga joined Professors Greg Dolin and Irina Manta in filing an amicus brief urging the Supreme Court to grant certiorari in Celgene v. Peter. The issue on appeal is one that was left unresolved in Oil States v. Greene’s Energy, namely, whether retrospective applications of inter partes review (IPR) proceedings under the 2011 American Invents Act are unconstitutional takings. The brief argues that, for several reasons, the Federal Circuit below reached the wrong conclusion in holding that they are not unconstitutional. First, IPRs are significantly different than ex parte and inter partes reexaminations, since patentees are not free to amend claims in order to resolve claim scope ambiguities. Second, empirical research shows that the economic impact of such IPRs is to devalue patents and chill investment. Finally, the cases relied on by the Federal Circuit to support its conclusion are inapposite or outdated. The amicus brief was featured in a recent article at IPWatchdog entitled Amici Urge Supreme Court to Grant Celgene’s Petition on Constitutionality of Retroactive IPRs.

Categories
Healthcare Pharma

The Tradeoffs Involved in New Drug Approval, Expanded Access, and Right to Try

The following post comes from CPIP Senior Fellow for Life Sciences Erika Lietzan, and it is cross-posted here from the Objective Intent blog with permission.

enlarged picture of a moleculeThis note explains some of the concepts swirling around in the media right now, relating to medicine approval. Much of what follows appears (or will appear) in an article on the U.S. “right to try” law, which I recently wrote with a colleague at the University of Bourgogne in Dijon, France. Some of the background discussion will be useful here.

Premarket Approval

A new medicine must be approved by FDA before it can be shipped in interstate commerce (effectively, before it can be sold commercially for use by patients). There are two pathways to market in the United States: a biologics license application for a biological drug and a new drug application for any other type of drug. FDA requires proof of safety and effectiveness, which takes the form of data from laboratory and animal (“preclinical” or “nonclinical”) testing as well as human (“clinical”) trials.

A variety of legal, scientific, and ethical considerations mean that developing the safety and effectiveness data for premarket approval of a medicine is iterative. That is, after trials in relevant animals show that it would be safe to begin testing in humans, the applicant begins with small safety tests (often in healthy volunteers) and moves gradually to larger and larger trials. During this time the medicine is considered “investigational” or “experimental.” And it can’t be introduced into interstate commerce.

The traditional approach involves three phases of testing.

  • Phase 1 trials entail the initial introduction of the investigational medicine in humans and focus on how the body reacts to the medicine — questions of absorption, distribution, metabolism, excretion, and side effects of increasing dose. These trials sometimes also generate early evidence of effectiveness, if the subjects are patients rather than healthy volunteers.
  • Phase 2 trials are usually controlled and assess the effectiveness of the medicine in patients, as well as common short-term side effects and risks. In a “controlled” trial, each subject is randomly assigned to one of two groups — one group receives the experimental medicine, and the other receives a “control” (typically either a placebo or a medicine that treats the condition) for comparison.
  • The pivotal trials proving statistically robust proof of effectiveness — phase 3 trials — often involve thousands of patients and clinical trial sites around the country or world.

The gold standard for proof of effectiveness is a prospective, randomized, controlled, double-blinded trial. Although randomized, controlled trials aren’t perfect, the design minimizes the potential for bias (which might happen, for example, if the patient or doctor knows who is receiving the test drug and who is receiving the control) as well as the problem of confounding variables. This form of evidence is superior to real world evidence and superior to personal experience and anecdotal information.

It’s possible for a trial to combine elements of phase 1 and 2, or phase 2 and 3 … there’s no law requiring companies to proceed through three discrete and sequential sets of trials. But the basic principle applies: you start small, you generate an adequate database in humans to characterize the drug’s safety profile, and you complete trials designed to support a statistically robust conclusion that the drug is effective (causes the result you observe).

The Tradeoff Involved

In theory, a new medicine must be shown safe and effective before it may be marketed. In reality, no medicine is perfectly safe or always effective in the patients for whom it is labeled. Patients are heterogeneous, and clinical responses vary. Side effects are inevitable; medicines are biologically active, and the relationship between a patient’s body and the chemical can be complex. As a result, when approving a new medicine for the market, the most a regulator can ask for is proof that the medicine’s benefits outweigh its risks for most people most of the time.

The challenge is that it is impossible to be certain about this. No premarket research and development program can generate complete information about a medicine’s clinical profile. Approval really means only that the medicine’s benefits outweigh its risks based on the data generated to date. Requiring premarket approval therefore always entails deciding when to make the call on benefit and risk — how much data must be generated before FDA makes this call.

This creates a tradeoff. On the one hand, while it is impossible to eliminate all uncertainty about the clinical profile of a proposed new medicine, more testing will always provide more certainty. On the other hand, testing delays the regulatory decision (and thus market entry), and requiring more testing delays the decision even longer. If the regulator still approves the medicine, the testing delayed access to a medicine that had a positive benefit-risk ratio the whole time. Patients who could have benefitted from the medicine had to wait. And if the medicine treated a serious or life-threatening disease, some patients — hundreds, thousands, or more — may have never had the chance to use the medicine. They may have died waiting.

How much information is enough for a decision on the risk-benefit profile of a new medicine depends on the relative weight given to two values — earlier (rather than later) release of new medicines to patients, on the one hand, and reduction of uncertainty about the effects of those medicines, on the other hand. Doctors, patients, regulators, and policymakers may disagree about the relative importance of avoiding errors (rejecting good medicines and approving bad medicines) and the cost of delay, just as they may disagree about the weight to be placed on particular benefits and particular risks.

Our legal framework give these calls to a regulator. A medicine may not be sold for use by a patient — even if the benefits exceed the risks from the perspective of the patient, even if avoiding delay is more important to the patient than knowing more about the drug — until a regulator agrees, based on its own assessment of benefits and risks. And it considers these at the population level, not the individual level.

Evolution in the Gatekeeping Model

Over the last half century, however, the regulatory gatekeeping model has evolved, as the broader relationship between the individual and state on matters of personal health has evolved. Our article explores this evolution in France and the United States, considering scientific developments, sociocultural changes, and broader legal pressures that contributed to the evolution. And we describe two innovations in the gatekeeping model: early decision mechanisms and early access mechanisms.

Earlier Decisions … e.g., Fast Track and Accelerated Approval

An early decision mechanism shifts the timing of the regulator’s benefit-risk judgment call to an earlier moment in time (and possibly an earlier moment in the process of generating evidence). Some early decision mechanisms are designed to accelerate premarket research and development, or regulatory review, with no change in the standard for approval. For example, in the United States, “fast track” designation entitles a company to more frequent meetings with FDA to discuss trial design and data needed for approval. It is available for a drug intended to treat a serious or life-threatening disease or condition, if it demonstrates the potential to address unmet medical needs for that disease or condition. Other early decision mechanisms permit approval on a different evidentiary basis. For example, U.S. law permits accelerated approval of a medicine intended for treatment of serious or life-threatening illness, based on data that do not show clinical benefit but rather are thought to predict it.

Earlier Access … Expanded Access

Early access mechanisms emerged during the worst years of the AIDS crisis and responded to the fact that better informed and newly empowered patients were willing to take greater risks in exchange for earlier access to new medicines. (But, to be clear, even before the AIDS crisis, FDA had permitted seriously ill patients access to experimental drugs.) Our article explores this history — in France and the United States — but I am just going to summarize current law here. Current law is reflected in the statutory provisions and regulation governing expanded access to investigational drugs and devices.

With expanded access, FDA still plays a gatekeeping role. Expanded access requires a showing that (1) the patient has a serious or immediately life-threatening disease or condition for which there is no comparable or satisfactory alternative therapy, (2) the potential benefit for the patient or patients justifies the potential risks, and the potential risks are not unreasonable in the context of the disease being treated, and (3) providing the drug will not interfere with clinical trials that could support marketing approval.

FDA will permit expanded access for individual patients as well as for groups of patients.

For an individual patient, the general criteria for expanded access must be satisfied, and (1) the treating doctor must determine that the probable risk to the patient from the drug is not greater than the probable risk from the disease, and (2) FDA must determine that the patient cannot obtain the drug any other way (for instance, by enrolling in a clinical trial). The agency ordinarily looks for completed phase 1 trials at doses similar to those proposed for the patient, together with preliminary evidence suggesting effectiveness. In some cases, however, FDA will permit a single patient access based on preclinical (animal) data or even mechanism of action.

In addition, the U.S. permits expanded access for groups of patients.

First, it permits widespread use. The ordinary standards for expanded access apply. If the medicine is intended to treat a serious disease or condition, FDA will look for data from phase 3 trials showing safety and effectiveness, but in some cases it will accept compelling data from phase 2 trials. If the medicine is intended to treat an immediately life-threatening disease, FDA will consider whether “the available scientific evidence, taken as a whole, provides a reasonable basis to conclude that the investigational drug may be effective for the expanded access use and would not expose patients to an unreasonable and significant risk of illness or injury.” This will “ordinarily consist of clinical data from phase 3 or phase 2 trials,” but it could comprise “more preliminary clinical evidence.”

Second, it permits use by “intermediate-size” groups. This is appropriate if patients cannot participate in the ongoing trials — because they do not meet enrollment criteria, because enrollment has ended, or even because the trial site is not geographically accessible. The agency’s regulations also describe use of this arrangement when a drug is not under development at all — for instance, because it is so rare that the sponsor cannot recruit patients for trials. For intermediate-size groups to enjoy early access, the ordinary standards for expanded access must be met. In addition, there must be (1) enough evidence of safety to justify a clinical trial at the same dose and duration in the same number of people, and (2) preliminary clinical evidence of effectiveness, or of a plausible pharmacologic effect, sufficient to make use a reasonable therapeutic option for the patients in question.

Right to Try

In 2018, the U.S. Congress passed a law that takes a different approach to the challenge of balancing the desire for robust data about new medicines, on the one hand, and the desire to allow individual patients access to incompletely tested but potentially beneficial compounds at their own discretion, on the other.

The new right-to-try law permits early access without a regulator’s involvement. Congress added a new section to the U.S. drug statute, which — when its terms are met — exempts certain drugs provided to certain patients from the gatekeeping provisions of that statute and from FDA’s regulations implementing those gatekeeping provisions. The patient in question must be diagnosed with a life-threatening disease or condition — generally meaning the likelihood of death is high unless the course of disease is interrupted. And the patient must have exhausted approved treatment options and must be unable to participate in a clinical trial involving the drug. The drug itself must be the subject of a pending marketing application or a clinical trial intended to form the primary basis of a claim of effectiveness in support of marketing approval, and it must have completed phase 1 trials. If these things are true, the drug may be provided to the patient.

The federal government does not play a role in determining whether these things are true. Neither the company nor the doctor seeks permission from FDA. If anyone plays a gatekeeping role, it is state-licensed doctors. Before the drug can be provided to the patient, a physician in good standing with the appropriate licensing board must determine that the patient has exhausted approved treatment options and cannot participate in a clinical trial. The right-to-try law specifies no actor to enforce the other two threshold eligibility requirements — that the patient’s disease is life-threatening and that the patient provided informed consent.

FDA’s role here is, at best, after the fact. The agency would have to learn of the procedure in the first instance and then, believing that the patient had not provided informed consent or did not suffer from a life-threatening disease, claim that the patient had not been eligible for right-to-try access. If true, the drug was not exempt from FDA’s gatekeeping authorities, and FDA could take enforcement action. But the agency will not learn about right-to-try treatments until the company’s annual summary of right-to-try uses, and the statute does not require identification of the investigators or patients. So these limitations may turn out to be a sham. To be fair, though, state law will usually impose its own informed consent obligation on treating doctors. And it may require that access proceed through the same kind of ethics review as FDA would have required.

Although the primary feature of the right-to-try law is its removal of FDA as a gatekeeper, the law also addresses two grounds on which companies supposedly decline to provide their medicines before approval. First, the law limits their liability exposure. A company faces no liability arising out of any act or omission with respect to medicine provided to patients under right-to-try. Second, the law limits FDA’s use of the data arising out of the patient’s use of the medicine. The agency cannot use a clinical outcome from right-to-try to delay approval of the medicine unless the sponsor requests that use or the agency finds that using the clinical outcome is critical to determining the medicine’s safety. (But it is not clear these are the real reasons companies decline to provide expanded access. Recent scholarship suggests that concerns about adverse regulatory outcomes and liability exposure would not have been well-founded.)

Comparing Expanded Access and Right-To-Try

The essence of the right-to-try law is elimination of the regulator’s role. Compassionate use under the right-to-try law is a matter for the company, doctor, and patient. FDA receives no information, has no review authority, and as a practical matter has no role. The right-to-try law also strips the agency of the authority to impose conditions on access. Ordinarily, even in expanded access situations, the sponsor of the trial (usually the drug company) notifies FDA of any serious and unexpected adverse reaction within 15 days. It also notifies investigators working with the drug. These rules do not apply. Nor do FDA’s rules relating to maintaining control of the investigational medicine or recordkeeping. And the agency has no power to call a halt to the process when patients are subject to unreasonable risk of injury or when the doctors lack the training and experience necessary to administer the drug. Only three FDA regulations relating to investigational medicines will apply: a regulation governing labeling, a regulation prohibiting promotion, and the regulation limiting how much the company can charge (only the direct costs of making the medicine available). And the agency will have to enforce these rules after the fact, when it receives the company’s annual summary.

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

Stuart J.H. Graham & Ted Sichelman, Why Do Start-Ups Patent?, 23 Berk. Tech. L. J. 1063 (2008), https://ssrn.com/abstract=1121224

Stuart J.H. Graham & Saurabh Vishnubhakat, Of Smart Phone Wars and Software Patents, 27 J. Econ. Persp. 67 (2013), http://ssrn.com/abstract=2291603

Kirti Gupta, Technology Standards and Competition in the Mobile Wireless Industry, 22 Geo. Mason L. Rev. 865 (2015), http://www.georgemasonlawreview.org/wp-content/uploads/2015/06/GuptaTechStandards.pdf

Stephen Haber, Patents and the Wealth of Nations, 23 George Mason L. Rev. 811 (2016), https://ssrn.com/abstract=2776773

Christopher M. Holman, The Critical Role of Patents in the Development, Commercialization and Utilization of Innovative Genetic Diagnostic Tests and Personalized Medicine, 21 B.U. J. Sci. & Tech. L. 297 (2015), http://www.bu.edu/jostl/files/2015/12/HOLMAN_ART_FINALweb.pdf

Ryan T. Holte, Trolls or Great Inventors: Case Studies of Patent Assertion Entities, 59 St. Louis U. L.J. 1 (2014), https://ssrn.com/abstract=2426444

Albert G.Z. Hu and I.P.L. Png, Patent Rights and Economic Growth: Evidence from Cross-Country Panels of Manufacturing Industries, 65 Oxford Econ. Papers 675 (2013), https://academic.oup.com/oep/article-abstract/65/3/675/2362113

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Categories
Administrative Agency Innovation Patent Law

The PTAB’s Regulatory Overreach and How it Cripples the Innovation Economy

files labeled as "patents"On August 14, 2017, the Regulatory Transparency Project of the Federalist Society published a new white paper, Crippling the Innovation Economy: Regulatory Overreach at the Patent Office. This white paper examines how an administrative tribunal created in 2011—the Patent Trial and Appeal Board (PTAB)—has become “a prime example regulatory overreach.” Several CPIP scholars are members of the Intellectual Property Working Group in the Regulatory Transparency Project that produced the white paper, including Professors Adam Mossoff, Kristen Osenga, Erika Lietzan, and Mark Schultz, and several are listed as co-authors.

Among the sweeping changes to the U.S. patent system included in the America Invents Act (AIA) was the creation of the PTAB, a new administrative body within the U.S. Patent and Trademark Office (USPTO). The PTAB hears petitions challenging already-issued patents as defective. Anyone can file a petition to have a patent declared invalid. The original idea was that this would help to weed out “bad patents,” i.e., patents that should not have been issued in the first place.

In the past five years, however, it has become clear that the PTAB has become an example of an administrative tribunal that has gone too far. Lacking the proper procedural and substantive restraints that constrain courts and even other agencies in respecting the rights of citizens brought before them, the PTAB is now “killing large numbers of patents and casting a pall of uncertainty for inventors and investors.”

In just a few years, the laudable goal of the PTAB in providing a cheaper, faster way to invalidate “bad patents” has led to a situation in which all patents now have a shroud of doubt around them, undermining the stable and effective property rights that serve as the engine of the innovation economy. The former chief judge of the court that hears all patent appeals recently said that the PTAB is a “patent death squad,” and confirming that this is not extreme rhetoric, the first chief judge of the PTAB responded to this criticism by embracing it: “If we weren’t, in part, doing some ‘death squadding,’ we would not be doing what the [AIA] statute calls on us to do.”

The white paper briefly discusses the history and purpose of the U.S. patent system and describes the PTAB and how it operates. The substance of the white paper details extensively the procedural and substantive problems in how the PTAB has failed to respect both the basic requirements of the rule of law and the rights of patent owners. The concern is that this undermines the stable and effective platform that patent rights provide as the engine of the innovation economy.

To read the white paper, please click here.