Tag: patents

New CPIP Policy Brief: Barnett on the End of Patent Groupthink

Post author By Joshua Grove
Post date April 6, 2020

a hand reaching for a shining key hanging among dull keys 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.

Prof. Barnett first looks at how, for the past decade or so, the groupthink about “royalty stacking” and “patent holdup” has led to efforts by the FTC and DOJ Antitrust to limit the enforceability and licensing of standard-essential patents (SEPs) that underlie the global smartphone market. However, this past December, the DOJ and USPTO changed course, saying now that SEP owners should be treated just like any other patent owner and instead expressing concerns about the possibility of “patent holdout” by well-resourced infringers. As Prof. Barnett explains, the theories and stylized models that influenced these federal agencies are now being displaced by empirical data and real-world models that better reflect how the smartphone market actually operates.

Turning to the Supreme Court, Prof. Barnett discusses the overlooked dissent in Oil States by Justice Gorsuch, which was joined by Chief Justice Roberts, in 2018. On the one hand, the Oil States majority continued the Court’s recent spate of cases reflecting the groupthink skepticism towards patents. Justice Gorsuch’s dissent, on the other hand, perhaps reflects a nascent movement among some members of the Court to revisit this conventional wisdom. Prof. Barnett points out other underdiscussed examples of this growing phenomenon within the Court, from cabining the powers of the PTAB in SAS Institute, to questioning the PTAB’s immunization from judicial review in Cuozzo, to finding that federal agencies lack standing to invoke AIA challenges in Return Mail.

Finally, Prof. Barnett addresses the current move away from the old groupthink at the USPTO, where the current leadership has expressed its support of robust patent protection. For starters, empirical evidence has discredited the widely-repeated view that the USPTO is a “rubber stamp” that approves almost all patent applications. As to inter partes reviews (IPRs), Prof. Barnett notes that, early on, institutions and invalidations were the common outcome. While this could support the conclusion that “bad” patents were being struck down, the data is also consistent with the conclusion that the process is sometimes being used opportunistically to invalidate “good” patents. Responding to this concern, recent changes in the examination process, such as the narrower claim construction standard and broader claim amendment opportunities, may enable patentees to survive unjustified validity challenges at the PTAB.

Moving forward, Prof. Barnett suggests that the tide may be turning in the patent policy world as widely shared assumptions behind patent-skeptical groupthink are subjected to rigorous empirical scrutiny. The inescapable truth is that the U.S. innovation economy has flourished while commentators have suggested it should have languished under the supposed burdens of strong patent protection. Prof. Barnett points out that skeptics may have failed to appreciate how robust patents support private incentives to bear the high costs and risks of innovation and commercialization. Current signs of a “redirect” from the old groupthink are a welcome change for preserving the intricate infrastructure that supports a vigorous innovation ecosystem.

To read the policy brief, please click here.

Tags AIA, Cuozzo, DOJ, FTC, groupthink, IPR, Jonathan Barnett, Justice Gorsuch, patent holdout, patent holdup, patents, PTAB, Return Mail, SAS Institute, Supreme Court, USPTO

Economic Study Patents

Empirical Study Confirms Positive Relationship Among Patents, Technological Progress, and Societal Benefit

Post author By Joshua Grove
Post date April 16, 2019

dictionary entry for the word "innovate" We “stand on the shoulder of giants,” goes the famous adage. In a groundbreaking new law review article, Does Patented Information Promote the Progress of Technology?, Cardozo Law’s Jonathan H. Ashtor examines the relationship among patents, information theory, and their corresponding benefits to society and technology. His study applies economic theory to empirical patent data, concluding that a patent’s disclosure, and hence its informational content, has a positive technological impact on society beyond any limited private monopoly bestowed on the inventor. The paper was supported with a research grant from CPIP’s Leonardo da Vinci Fellowship Research Program.

Today’s populist, conventional wisdom is that patents are monopolies that block public benefits and restrict innovative behavior. Ashtor’s research reveals the opposite. He explains that “this study finds that the greater the information content of a patent’s disclosure, the higher the probability it will be held valid, and in turn, the larger its expected positive impact on the development of future technologies.” Combining an in-depth review of the underlying economic theories around the role of the patent system’s information dissemination function with a rigorous empirical study methodology, Ashtor confirms that valid patents have a greater positive impact on future technologies.

Economic Theory Validates Patent System’s Ultimate Societal Benefits

Academics often cite a variety of theories underlying the fundamental benefits of the patent system. But, at its core, the patent system is a quid pro quo between the private benefit of the grant of a limited monopoly in exchange for the public dissemination of the knowledge of a discovery, in turn, allowing others to build upon this information. While the U.S. Constitution enshrines this concept for promoting the “useful Arts,” (Art. 1, sec. 8, cl. 8), the theory around this bargain dates back thousands of years.

Modern economic patent theories are rooted in classics such as Aristotle’s Politics, in which the ancient Greeks advocated for recognition, awards, and honors for the achievements of discoverers. The “storehouse of knowledge” theory states that patent activity contributes to expanding public storehouse of knowledge. Relatedly, the “prospect theory” advances an understanding that the opportunity to obtain a patent monopoly creates the incentive for investment in research for new inventions. Finally, the “innovation theory” infers that patents are necessary to induce people to put existing inventions to practical use. Together, these theories speak to how patents on discoveries ultimately contribute to the public’s benefit.

Moving beyond these traditional concepts, Ashtor’s paper explores the economic “tradeoff theory” of patents. First appearing in Nobel Laureate William Nordhaus’ famous 1969 article regarding the technological development process, tradeoff theory states that when the patent disclosure function works properly, patents tend to promote technological progress notwithstanding the exclusive monopoly rights. Ashtor explains that tradeoff theory supports the idea that more robust patents have the greatest positive impact on technological development. He observes that “[p]atent law provides a convenient lens through which to observe the impact of a patent on future technology.” Conversely, invalid patents, such as those lacking novelty, are found to have the weakest impact on future technologies. (Ashtor notes that even an invalidated patent is useful; it is prior art and can also guide future technological development.) While this causal relationship may be intuitive for some, Ashtor uses empirical evidence to back it up.

Empirical Analysis Verifies Positive Impact of Patents

Employing a solid empirical research methodology, the study examines patents and data obtained from federal court patent litigation records, along with input from the USPTO’s Office of Economic Analysis. In essence, the study charts the impact of future patented technological progress as a product of the resulting new patents filed (noted through the use of forward citations). Forward citations are widely used as a measure of innovation, particularly when comparing patented technology in a broad range of fields. Ashtor’s study relies on a dataset of approximately 1,000 U.S. patents. A multitude of variables are considered in determining whether the patents are demonstrating this positive effect, including the number patent claims, the length of the respective patent claims, the size of the patent family, the number of inventors, the written description’s length, the vintage of the patents, and the adjudicated validity or invalidity.

The study incorporates data modeling and log-linear regression analysis. It then measures future technological innovation through indicia such as future additional patents or other cumulative innovation. For example, by counting the number of additional citations each patent generates, one can assess the impact, including the follow-on technological advancement regardless whether they are subsequently validated or invalidated patents. Ashtor’s models are designed to consider, and overcome, various systemic challenges, such as biases in the dataset or other idiosyncrasies.

Information Theory Supports the Value of Patents

At the heart of Ashtor’s paper is a discussion about how the information contained in a patent disclosure has real value not only for the inventor, but also for the public at large. The debate around intellectual property often conjures fear that it “locks up” public knowledge or somehow “holds up” progress. But Professor Nordhaus’ tradeoff theory demonstrates that “patents do not provide permanent or very powerful exclusive rights over information.” In fact, the very dissemination of information arising from the patent system leads to real public benefits. It’s critical to understand that a patent protects the disclosed inventions, not the underlying ideas. Ashtor demonstrates that the patent system is critical to the dissemination of knowledge.

Ashtor’s study validates the tradeoff theory of patents. Namely, the tradeoff arising from the societal benefit of a valid patent’s information disclosure is generally greater than the restrictions from the private right of exclusivity due to any patent monopoly. Hence, valid patents promote more technological progress than invalid patents. The way in which patents are invalidated corresponds to varying impacts on technology, and Ashtor’s empirical data demonstrates a direct relationship between a patent’s technological impact and certain intrinsic characteristics of its disclosure. Generally, valid patents tend to have greater information content than invalid ones.

Human Genome Project Provides Perspective

The importance of Ashtor’s research is highlighted through the additional context of a case study. He considers how patent activity impacts cutting-edge fields like health care and molecular biology. While prior studies have looked at gene patenting activity surrounding the Human Genome Project (HGP), they’ve largely been limited to examinations of follow-on activity arising from both the publicly available patented information and the gene patenting activity by private firms. Ashtor is quick to note that past studies around the Human Genome Project do not “directly address cumulative innovation of patented technologies,” the focus of his exploration. Ashtor argues that all of the gene-related patents flowing from the HGP illustrate the positive impact of future patented technological progress. He concludes that his case study hence shows that the resulting gene patenting activity from the HGP supports the tradeoff theory of patents.

Ashtor’s study is groundbreaking, empirically rigorous, and provides much for future researchers to consider. As skeptics of intellectual property continue to voice their doubts, it’s critical to understand the societal benefits that patents confer. Ashtor’s work takes a step in the right direction, and we can expect other researchers will stand on his shoulders as they build upon his work.

Ashtor’s article was recently published in the Northwestern University Law Review, and the full text can be downloaded here: https://scholarlycommons.law.northwestern.edu/nulr/vol113/iss5/2/

Tags empirical study, follow-on innovation, human genome project, Jonathan Ashtor, patents, promoting progress, public interest, tradeoff theory, William Nordhaus

Innovation Patent Law Pharma

A Cure Worse Than the Disease? Proposed Changes to European Patent Law are Threatening Pharmaceutical Innovation

Post author By Joshua Grove
Post date November 16, 2018

a hand reaching for a hanging, shining key Innovation is all around us. We love and appreciate the latest video games, software apps, and smartphones. We await the integration of self-driving cars and other forms of artificial intelligence. Beyond the gadgets and luxuries we think we can’t live without, there are even more essential products that affect the lives of millions around the world on a daily basis. Patented medicines are at the top of the list of innovations that save lives and preserve the quality of life. Unfortunately, some proposed changes to European patent law are jeopardizing the development and delivery of safe and effective drugs, threatening jobs and innovation, and putting global public health at risk.

Policy-makers and the public acknowledge that balance is critical in the legal regimes governing essential medicines. Our generation is the beneficiary of patent protections which strike a balance. European regulators have long acknowledged that the benefits of new cures (e.g., arising from the research and development of therapies) require a societal investment in the form of intensive capital resources and strong intellectual property protection. In turn, a balanced system includes a reasonable patent term as a quid pro quo for the public disclosure of knowledge and the follow-on generic industry.

The medicines sector highlights the need for that careful balance, as well as the success of the current legal regime. New drug research and the development of new cures is extremely capital intensive. Legions of European scientists, engineers, and clinicians can work for years on a new drug’s development and regulatory review. A recent Tufts University center study reports that, on average, more than $2.6 billion is spent on R&D for a new prescription drug that gains market approval; the life-cycle cost rises to $2.9 billion when other post-approval development costs are included.[1] This is a 145% increase, correcting for inflation, over the estimate the center made in 2003.

In practice, for every drug that is successfully developed, reviewed, and made available to patients, many dozens more fail. CPIP Senior Scholar Erika Lietzan has observed:

The overall attrition rate for new drugs remains high—‘horrendously high’ according to [U.S.] NIH Director Francis Collins—and may be increasing. Recent estimates place the phase 2 failure rate at sixty-five to seventy percent and even higher for drugs with new mechanisms of action.[2]

Due to this high failure rate and costly investment in R&D, well-balanced intellectual property rights are essential for innovators to commercialize the products that do make it to market and improve—or even save—consumers’ lives.

Medicines must be safe and effective, and while regulatory review is essential, it is a time-consuming and highly expensive process. The reality is that the essential patent term is eaten away by years of regulatory review delay.[3] This extra review process is what makes the investment and research questions in the bio-pharmaceutical space so different from a smartphone or the latest virtual reality entertainment software. Professor Lietzan christened this the “innovation paradox.” She explains:

In medicine today, we face an innovation paradox. Companies that develop new medicines depend on a period of exclusive marketing after approval, to fund their research and development programs. This period is made possible by patent protection and regulatory data exclusivity.[4]

Likewise, it is the reason that there needs to be some supplementary legal protection to raise new capital and investments for cures and therapies.

The practical effect is that the necessary regulatory review results in the loss of years of effective patent term protection, warranting special treatment for innovative pharmaceutical products that come to market with little time to realize the benefits of exclusivity. In the 1990s, European policy-makers successfully restored the balance between innovation and the public interest by establishing the Supplementary Protection Certificate (SPC), which provides limited exclusive legal protection after a patent’s expiry.

Supplemental Protection Certificates Ensure a Necessary Balance

Supplementary Protection Certificates (SPCs) reinforce the balance between the rights of innovators and the public by extending the exclusive term for a variety of compounds, e.g., human and veterinary medicines and plant products. SPCs provide a limited extension of legal protections (e.g., exclusivity capped at five-and-one-half years) to compensate for the patent term effectively lost during the regulatory review process to ensure safety and efficacy.

Since SPCs were established, it is estimated that more than 20,000 SPCs for patented products have been filed in Europe during the period 1991–2016.[5] Despite the SPC’s twenty-plus-year track record of success, it, and the balance it preserves, is coming under pressure due to special interest lobbying by the generic drug industry.

The European Commission (EC) recently proposed waiving the SPC for pharmaceuticals and biosimilars[6] and permitting limited generic drug protection via the following two provisions prior to the SPC’s expiration:

(1) The “Manufacturing Provision.” This proposal would “allow EU generic or biosimilar manufacturers to develop and store generic or biosimilar manufacturers in Europe . . . with the goal of enabling immediate generic or biosimilar market entry following the expiration of intellectual property protections . . . .”

(2) The “Export Provision.” This proposal would “allow generic or biosimilar manufacturers to export products to countries where no intellectual property protection for the products is in place.”

While these two proposals are touted as limited in scope, their impact would be significant and detrimental on many fronts across Europe, including for the public health, innovation, jobs, and trade.

The Dangerous Impact of SPC Waiver

The overall impact of the SPC waiver threatens the balance that has worked so well for twenty-plus years, plain and simple. Specifically, the negative impact and risks are evidenced through the inherent complexity of a medicine’s regulatory review process, undermining the public health via counterfeit medicines, and harming Europe’s economy and jobs.

a. Risks of Limiting Innovation for a Variety of Important New Compounds and Cures

The most important reason to preserve the current balance is that it is a proven path to develop new medicines for the public’s health. Recently, a commentator highlighted two critical medicines that would not be available to patients, but for the opportunity afforded by the SPC process: (1) Fingolimod (a drug to treat renal failure after a kidney transplant that was subsequently brought to the market for the treatment of multiple sclerosis (MS)); and, (2) Secukinumab (a treatment of psoriasis, psoriatic arthritis, and ankylosing spondylitis (a type of spinal arthritis) that required an extended, more complicated clinical trial review period).[7] In both cases, the benefits of the additional period of exclusivity under the SPC provided the necessary time and resources for the follow-on clinical trials and research for the medicine’s safety and efficacy review.

Ultimately, SPCs benefit capital intensive pursuits, such as new drug discovery and development, by yielding new drugs or new applications for such drugs. More importantly, the patients who need these drugs clearly benefit. As Europe looks to an aging population and increasing health care costs, there is an ever growing need for effective cures for diseases such as HIV/AIDS, Alzheimer’s, multiple sclerosis (MS), cancers, and others requiring orphan drugs.[8] The SPC system is an important part of how the next generation of pioneering life-saving medicines will come into being.

b. Risk to the Public Health and Safety Through Counterfeit Medicines

Another key concern for stakeholders and the public at-large resulting from the current proposals is the inevitable increase of piracy and counterfeiting of these medicines. Global piracy and counterfeiting of medicines is big business. A 2016 study estimated that drug piracy costs Europe more than €10 billion each year, may result in the loss of up to 40,000 direct jobs, and may have a total direct and indirect negative impact of over €17 billion and 90,000 job losses.[9]

In addition to the significant financial impact, piracy and counterfeiting is a matter of public health and safety. It is often the case that the counterfeit medicines are manufactured without sufficient quality controls, or worse, with unsafe or dangerous substitute ingredients. The SPC Export Provision waiver heightens the risk that poor quality or unsafe counterfeits will be diverted across borders. Counterfeit drugs are a massive public health risk throughout Europe and big business for criminal enterprises that either ship fake, unsafe medicine or divert counterfeits across borders trying to profit on the product demand and price differentials among nations.

The SPC Export Provision waiver will ultimately increase medicines piracy and counterfeiting on many grounds, including making it difficult to distinguish between medicines produced legally in one country and other jurisdictions without adequate IP protection, making it difficult to prevent product diversion, and diminishing quality control due to infringement.

c. The European Economic Case: Jobs and Trade

Europe boasts a first-class research-based pharmaceutical industry which is estimated to have invested €31.5 billion in R&D in 2015 alone.[10] The leading European countries which contribute to this annual R&D investment include Germany, France, Italy, Spain, and the U.K. The research industry trade association, EFPIA, explains some of the economic benefits of the SPC regime:

The SPC is part of an incentives framework that helps to generate the 35 billion in investment in R&D in Europe by the research-based industry. . . . It helps to safeguard over 750,000 jobs directly employed by biopharmaceutical companies and critically facilitates, research into unmet medical needs, finding treatments and cures for patients across Europe and beyond.[11]

R&D Investment in Europe (2016). Germany, 19%. France, 15%. Italy, 4%. Spain, 3%. U.K., 16%. Rest of Europe, 43%.

European Pharmaceutical Industry: Recent Trends and Statistics[12]

Evaluating the economic factors around an industrial policy proposal—new manufactured units, SMEs, direct and indirect jobs—is a legitimate part of the policy debate. In the public health context, it is one of several factors for policy-makers. Both sides of the debate have offered competing economic analyses of the impact of the waiver.[13] However, the past is prologue, and Europe has 20-plus years of a positive economic experience with the SPC regime.

Today’s debate over the SPC waiver is reminiscent to biotechnology patentability debates in the 1980s that weakened intellectual property rights and drove innovative activity out of Europe. As a recent article explains, the legal choices made by Europe during that crucial era led to an irreparable loss of its technological global leadership in the biotech and health care arena:

Europe lost the competitive and commercial edge in biotechnology to the U.S., which had the foresight to protect a new and innovative industry. This new industry both revolutionized modern medical research and healthcare treatments and brought economic growth to the many U.S. cities in which these new companies sprouted and flourished.[14]

Likewise, additional commentators warn that an SPC waiver poses a threat to Europe’s global competiveness: “Europe is becoming an innovation backwater, easily outspent on R&D by peer nations such as the United States, Japan, South Korea and Australia, according to the 2017 European Innovation Scorecard.”[15] While there are allegations that the SPC waiver would be beneficial for European jobs and its economy, this has been debunked for their flawed methodology or extreme overstatement of the facts.[16]

Conclusion

The EC’s proposed SPC waiver provisions are a cure far worse than the disease. The policy debate around this subject boils down to whether Europe wants a strong or a weak health care system for its citizens. The purported goals advanced by special interest tactics certainly sound noble: more competition, lower prices. In fact, the opposite ignoble result is an inevitable undermining of the incentives for the discovery and development new medicines.

The EC should reconsider the proposed waiver for many reasons. The current SPC system offers a successful twenty-year-plus track record. It respects the balance between patients and the medicines innovation ecosystem. The waiver will directly stifle innovation in the guise of fostering competition, as well as dampen the future of innovative medicines and harm the European economy. One must conclude that the SPC waiver should be reconsidered for the sake of the public health and future well-being of the European citizenry.

[1] https://www.scientificamerican.com/article/cost-to-develop-new-pharmaceutical-drug-now-exceeds-2-5b/.

[2] Erika Lietzan, The Drug Innovation Paradox, 83 Missouri Law Review 39 at 78-79 (2018) (describing the U.S. regime), available at https://ssrn.com/abstract=2948604.

[3] Id. at 59 (“Through the 1970s, as the modern new drug premarket paradigm took shape, scholars and policymakers became aware of diminishing effective patent life. Because inventors typically file active ingredient patent applications before clinical testing starts, these patents tend to issue before or during the trials. At the time, a patent lasted for seventeen years from issuance. Today, it generally lasts for twenty years from the filing of the patent application. In either case, a significant portion of the term of an active ingredient patent may lapse before FDA approves the marketing application. This shortens the period of time that the drug sponsor may exploit the invention in the market while enjoying patent rights.”).

[4] Id.

[5] Malwina Mejer, 25 years of SPC protection for medicinal products in Europe: Insights and challenges (May 2017), available at https://ec.europa.eu/info/publications/25-years-spc-protection-medicinal-products-europe-insights-and-challenges_en.

[6] The European Medicines Agency (EMA) explains that “[a] biosimilar is a biological medicine highly similar to another already approved biological medicine (the ‘reference medicine’). Biosimilars are approved according to the same standards of pharmaceutical quality, safety and efficacy that apply to all biological medicines. The European Medicines Agency (EMA) is responsible for evaluating the majority of applications to market biosimilars in the European Union (EU). Biological medicines offer treatment options for patients with chronic and often disabling conditions such as diabetes, autoimmune disease and cancers.” Available at https://www.ema.europa.eu/en/human-regulatory/overview/biosimilar-medicines-overview.

[7] Nathalie Moll, Betting on innovation, the case for the SPC, available at https://www.efpia.eu/news-events/the-efpia-view/blog-articles/betting-on-innovation-the-case-for-the-spc/.

[8] The European Medicines Agency (EMA) notes that “[a]bout 30 million people living in the European Union (EU) suffer from a rare disease. The [EMA] plays a central role in facilitating the development and authorization of medicines for rare diseases, which are termed ‘orphan medicines’ in the medical world.” Available at https://www.ema.europa.eu/en/human-regulatory/overview/orphan-designation.

[9] http://www.pharmexec.com/counterfeit-drugs-cost-europe-more-10-billion-year.

[10] https://www.ihealthcareanalyst.com/european-pharmaceutical-industry-recent-trends-statistics/.

[11] https://efpia.eu/news-events/the-efpia-view/statements-press-releases/efpia-statement-on-the-implementation-of-the-spc-manufacturing-waiver/.

[12] https://www.ihealthcareanalyst.com/european-pharmaceutical-industry-recent-trends-statistics/.

[13] http://ecipe.org/blog/ec-spc/; https://www.medicinesforeurope.com/newsroom/.

[14] Kevin Madigan & Adam Mossoff, Turning Gold Into Lead: How Patent Eligibility Doctrine is Undermining U.S. Leadership in Innovation, 24 Geo. Mason L. Rev. 939 (2017) (“We believe these are sensible provisions to avoid weakening Europe’s IP framework further, particularly in today’s context of intense global competition for pharmaceutical research and development investment.”), available https://ssrn.com/abstract=2943431.

[15] See, e.g., Philip Stevens, The European Commission’s pharmaceutical innovation incentives review is at risk of serious overreach, available at http://ecipe.org/blog/ec-spc/.

[16] Sussell et al, Reconsidering the economic impact of the EU manufacturing and export provisions, J. of Generic Medicines, 1-17. (citing arithmetic error and providing a counter factual analysis of the unit, job, SME, and economic benefits in a recent generic industry study praising the SPC waiver proposal).

Tags Chris Katopis, counterfeit drugs, essential medicines, European Commission, global health, health, healthcare, new drugs, patents, pharma, pharmaceutical patents, public health, R&D, research and development, Supplementary Protection Certificate

Patent Law Patent Theory

Proposed Misuse of Section 1498 Relies on the False Claim that Patents Are Not Property

Post author By Joshua Grove
Post date November 14, 2018

hand under a lightbulb drawn on a chalkboard By Kathleen Wills*

The question whether patents are property rights is a continuing and hotly debated topic in IP law. Despite an abundance of scholarship (see here, here, here, here, and here) detailing how intellectual property (“IP”) rights have long been equated with property rights in land and other tangible assets, critics often claim that this “propertarian” view of IP is a recent development. Misconceptions and false claims about patents as property rights have been perpetuated in an echo chamber of recent scholarship, despite a lack of evidentiary support.

Unfortunately, these misleading arguments are now influencing important pharmaceutical patent debates. Specifically, a new push to devalue patent rights through the misapplication of an allegedly obscure and misunderstood statute, Section 1498 in Title 28 of the U.S. Code (“Section 1498”), is now being used to promote price controls. Arguments for this push have gained traction through a recent article whose flawed analysis has subsequently been promoted by popular media outposts. A better understanding of the nature of patents as property reveals the problems in this argument.

The history of Section 1498 clearly contemplates that patents are property subject to the Takings Clause, which reflects a long-standing foundation of patent law as a whole: Patents are private property. In an influential paper, Professor Adam Mossoff established that from the founding of the United States, patents have been grounded in property law theories. While some scholars today argue that the perception of patents began as monopoly privileges, this is only partially correct.

The arguments usually revolve around certain stated views of Thomas Jefferson, but they ignore that his position was actually a minority view at the time. Even when the term “privilege” was used, it reflected the natural rights theory of property that a person owns those things in which he invests labor to create, including labors of the mind. The term did not reflect a discretionary grant revocable at the will of the government. Thus, an issued patent was a person’s property, as good against the government as against anyone else.

To understand the majority perspective of courts in the nineteenth century, it is important to note that James Madison, the author of the Takings Clause, wrote that the “[g]overnment is instituted to protect property of every sort.” What types of property? Courts often used real property rhetoric in patent infringement cases, as seen in Gray v. James. By 1831, the Supreme Court believed that patent rights were protected just like real property in land was protected. In Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., the Court established that patent rights represent legitimate expectations similar to property rights in land, which, in turn, are rights secured under the Takings Clause of the Constitution.

This understanding of patents reflected a stark break from the traditions in English law from which American law developed. In England, the “crown-right” granted the government the right to practice a patented invention wherever and however it pleased. In 1843, the Supreme Court in McClurg v. Kingsland explained that while England viewed a patent as “a grant” issued as a “royal favor,” which could not be excluded from the Crown’s use, the American system was intentionally different and patent rights were good against the government. This meant that Congress had to treat patents as vested property rights in the patent owner.

Justice Bradley enumerated this difference between the United States and England in James v. Campbell:

The United States has no such prerogative as that which is claimed by the sovereigns of England, by which it can reserve to itself, either expressly or by implication, a superior dominion and use in that which it grants by letters-patent to those who entitle themselves to such grants. The government of the United States, as well as the citizen, is subject to the Constitution; and when it grants a patent the grantee is entitled to it as a matter of right, and does not receive it, as was originally supposed to be the case in England, as a matter of grace and favor.

As an article by Professor Sean O’Connor explains, this change occasionally caused confusion in American courts when it came to patent owners seeking redress against unauthorized government use. The problem was that there was no single clear mechanism for suing the federal government for injunctive or monetary relief—in fact under sovereign immunity principles, in many cases the plaintiff could not sue the government. Various mechanisms such as implied or quasi contracts were used, but the varying nature of patentees—had they received some government funding leading to their invention or developed it purely outside of government support—complicated things further.

To provide a venue where citizens could sue the government for patent infringement and other claims, Congress created the Court of Claims in 1855. In 1878, the Court of Claims in McKeever v. United States explained that in the United States, patent rights secured the “mind-work which we term inventions,” authorized under the Copyright and Patent Clause in the Constitution. By explaining that patent rights derived from Article I in the Constitution, the Court of Claims suggested that patents were as important as other property rights and thus different from grants. Prof. O’Connor shows that the status of patents as property, and the recognition of this fact by the courts, solved much of the confusion over the history of American patent law.

The Supreme Court went on to affirm the Court of Claims’ decision to award damages to a patentee for an unauthorized governmental use of his patented invention. In United States v. Burns, the Court said that “[t]he government cannot, after the patent is issued, make use of the improvement any more than a private individual, without license of the inventor or making compensation to him.” In James v. Campbell, the Supreme Court echoed this idea when it held that patents confer owners an exclusive property in their invention, and that the government cannot use such an invention without just compensation any more than the government could appropriate land without compensation.

By 1881, it was clear that the courts recognized patents as property rights under constitutional protection from government takings, just like real property. With a strong historical record showing that the Supreme Court equated patents as protected property rights, a question remains: Where does the confusion today stem from?

As Prof. Mossoff explains, the confusion could come from misconstrued inferences of legislative intent regarding the Tucker Act (“Act”). The 1887 version of the Act did not address patents when giving the Court of Claims jurisdiction to hear claims arising from Constitution. This was used by the Federal Circuit in Zoltek Corp. v. United States to deny patents security under the Takings Clause. The Federal Circuit reasoned that patents weren’t constitutional private property. Judge Newman, however, dissented from the petition for rehearing en banc. She highlighted that “[a]lmost a century of precedent has implemented the right of patentees to the remedies afforded to private property taken for public use. There is no basis today to reject this principle.” (The Takings Clause analysis was subsequently vacated when the Federal Circuit eventually took the case en banc.)

An investigation of the Act’s legislative history also leads to a 1910 committee report (H.R. Rep. No. 61-1288), stating that the government’s unauthorized use of patents qualified as a taking. A few years after, the 1918 amendment adjusted the Act’s language to specifically allow patentees to sue the government for unauthorized uses of their property. Thus, the Tucker Act included patent claims in the kind of suits where the government’s unauthorized use was a constitutional issue, appropriately within the Court of Claims’ jurisdiction. Towards the end of the twentieth century, courts continued to hold that patents were constitutionally protected private property.

Modern cases have also confirmed that patents are property protected by the Takings Clause. Chief Justice Roberts, in Horne v. Department of Agriculture, used a patent case for the proposition that the Takings Clause extends to all forms of property, not just real property. Even in Oil States v Greene’s Energy, Justice Thomas went out of his way to assert that the Takings Clause still applies to patents, citing the same case cited by the Chief Justice in Horne.

There has always been a continuous understanding that patents are property, and thus, that Section 1498 is the eminent domain mechanism for the use of patents for the government’s own purposes. Popular media has recently misunderstood Section 1498, but the statute is not a price control statute as detailed in a previous post in this series. Additionally, forthcoming posts in this series will address other such misconceptions surrounding Section 1498.

*Kathleen Wills is a 2L at Antonin Scalia Law School, and she works as a Research Assistant at CPIP

Tags Adam Mossoff, Fifth Amendment, James Madison, Kathleen Wills, patents, propertarian, property, Sean O'Connor, Section 1498, taking, Takings Clause

Antitrust Patent Licensing

Department of Justice Recognizes Importance of Reliable Patent Rights in Innovation Economy

Post author By Joshua Grove
Post date April 23, 2018

dictionary entry for the word "innovate" It is undeniable that the patent system has been under stress for the past decade, as courts, regulators, and even the Patent Office itself (as the newly confirmed Director Andrei Iancu has acknowledged) have sowed legal uncertainty, weakened patent rights, and even outright eliminated patent rights. This is why a series of recent speeches by Assistant Attorney General Makan Delrahim—head of the Antitrust Division at the Department of Justice—have signaled an important and welcome policy change from the past decade. It’s just one step, but it’s an important first step to restoring reliability and predictability to property rights in patents, which, as Director Iancu has also been saying in recent speeches, drives innovation and economic growth by promoting investments by inventors, venture capitalists, and companies in the new inventions that make modern life a veritable miracle today.

Delrahim’s speeches are important because one significant point of stress for the patent system and the innovation economy over the past decade has occurred at the intersection of antitrust law and the licensing of patents in standard setting organizations (SSOs). Many people are unaware of this particular issue, and it’s understandable why it flies under the radar screen. The technical standards set by SSOs are the things that make everything work, such as electrical plugs, toasters, and pencils, among millions of other products and services, but they are not obvious to everyday consumers who use these products. Also, antitrust law is a complex domain of lawyers, policy-makers and economists. Still, the patented innovation that comprises technical standards, such as 4G, WiFi, USB, memory storage chips, and other key features of our smart phones and computers, have been essential drivers of innovation in the telecommunications revolution of the past several decades.

In a series of recent speeches, Delrahim has signaled an important and welcome change from his predecessors in how antitrust law will be applied to patented technology that is contributed to the standards that drive innovation in the high-tech industry. Delrahim’s predecessors at the DOJ gave many speeches criticizing (and instigating investigations of) alleged “anti-competitive behavior” by patent owners on technical standards. The DOJ’s approach was one-sided, unbalanced, and lacked evidence confirming the allegations of anti-competitive behavior. Instead, Delrahim is emphasizing the key importance of promoting and properly securing to innovators the technology they create through their long-term, risky, and multi-billion-dollar R&D investments (as succinctly described in two paragraphs here about Qualcomm’s R&D in 5G by an official at the Department of Treasury).

Delrahim has announced that he will return to an evidence-based, balanced antitrust policy at the DOJ. He will not take action against innovators unless there is real-world evidence of consumer harm or proven harm to the development of innovation. The absence of such evidence is well known among scholars and policy-makers. In February 2018, for instance, a group of scholars, former government officials, and judges wrote that “no empirical study has demonstrated that a patent-owner’s request for injunctive relief after a finding of a defendant’s infringement of its property rights has ever resulted either in consumer harm or in slowing down the pace of technological innovation.” It’s significant that Delrahim has announced that the DOJ will constrain its enforcement actions with basic procedural and substantive safeguards long provided to citizens in courts, such as requiring actual evidence to prove assertions of harm. This guards against unfettered and arbitrary regulatory overreach against innocent owners of private property rights. This self-restraint is even more important when overreach negatively impacts innovation, which portends badly for economic growth and the flourishing lives we have all come to expect with our high-tech products and services.

For example, Delrahim has rightly recognized that “patent holdup” theory is just that—a theory about systemic market failure that remains unproven by extensive empirical studies. Even more concerning, “patent holdup” theory—the theory that patent owners will exploit their ability to seek injunctions to protect their property rights and thus “holdup” commercial implementers by demanding exorbitantly high royalties for the use of their technology—is directly contradicted by the economic evidence of the smart phone industry itself. The smart phone industry is one of the most patent-intensive industries in the U.S. innovation economy; thus, “patent holdup” theory hypothesizes that there will be higher prices, slower technological development, and less and less new development of products and services. Instead, as everyone knows, smart phones—such as the Apple iPhone and the Samsung Galaxy, among many others—are defined by rapidly dropping quality-controlled prices, explosive growth in products and services, and incredibly fast technological innovation. The 5G revolution is right around the corner, which will finally make real the promise of the Internet of Things.

In sum, Delrahim has repeatedly stated that antitrust officials must respect the equal rights of all stakeholders in the innovation industries—the inventors creating fundamental technological innovation, the rights of the companies who implement this innovation, and the consumers who purchase these products and services. This requires restraining investigations and enforcement actions to evidence, and not acting solely on the basis of unproven theories, colorful anecdotes, or rhetorical narratives developed inside D.C. by lobbyists and activists (such as “patent trolls”). This is good governance, which is what fosters ongoing investments in the R&D that makes possible the inventions that drives new technological innovation in smart phones and in the innovation economy more generally.

We will delve more deeply into the substantive issues and implications of Delrahim’s recent speeches in follow-on essays. Since his speeches have been delivered over the course of the past six months, we have aggregated them here in one source. Read them and come back for further analyses of these important speeches (and more speeches that will likely come, which we will keep adding to the list below):

November 10, 2017. In a speech at the University of Southern California, Gould School of Law, Assistant Attorney General Delrahim discussed why patent holdout is a bigger problem than patent hold-up. “[T]he hold-up and hold-out problems are not symmetric. What do I mean by that? It is important to recognize that innovators make an investment before they know whether that investment will ever pay off. If the implementers hold out, the innovator has no recourse, even if the innovation is successful.” He further noted that antitrust law has a role to play in preventing the concerted anticompetitive actions that occur during holdout.

February 1, 2018. In a speech at the U.S. Embassy in Beijing, Delrahim noted that the proper antitrust focus should be on protecting the innovative process, not “short-term pricing” considerations. With this focus, using antitrust remedies should be approached with “caution.”

February 21, 2018. In a speech at the College of Europe, in Brussels Belgium, Delrahim observed that antitrust enforcers have aggressively tried to police patent license terms deemed excessive, and “have strayed too far in the direction of accommodating the concerns of technology licensees who participate in standard setting bodies, very likely at the risk of undermining incentives for the creation of new and innovative technologies.” The real problem and solution he noted is that the “dueling interests of innovators and implementers always are in tension, but the tension is best resolved through free market competition and bargaining.”

March 16, 2018. In a speech at the University of Pennsylvania Law School, Delrahim expanded on his detailed remarks from his talk at USC by adding some historical context from the founding fathers. He also made the core point that “patent hold-up is not an antitrust problem,” noting that FRAND commitments from patent owners are part of the normal competitive process and are therefore appropriately policed by contract and common law remedies. He further describes the necessary impacts of having a right to exclude in the patent right, including that the “unilateral and unconditional refusal to license a patent should be considered per se”

April 10, 2018. In a keynote address at the LeadershIP Conference on IP, Antitrust, and Innovation Policy in Washington, D.C., Delrahim emphasized the harm that can occur when “advocacy positions lead to unsupportable or even detrimental legal theories when taken out of context.” He specifically noted that some advocacy about patent hold-up could undermine standard setting as “putative licensees have been emboldened to stretch antitrust theories beyond their rightful application, and that courts have indulged these theories at the risk of undermining patent holders’ incentives to participate in standard setting at all.”

Tags "patent trolls", Antitrust, Department of Justice, DOJ, innovation, licensing, Makan Delrahim, patent holdup, patent licensing, Patent Office, patents, SSO, USPTO

Innovate4Health Innovation

Innovate4Health: SaTo Pan Delivers a Sustainable Solution to the Sanitation Crisis in Developing Nations

Post author By Joshua Grove
Post date March 13, 2018

This post is one of a series in the #Innovate4Health policy research initiative.

Innovate4Health By Michael O’Keefe

Poor sanitation poses an ongoing threat to the health and well-being of people in the developing world. Severe health problems, death, and disease can be directly linked to unsafe hygiene practices that continue to plague many countries. A UN Fact Sheet notes that 2.3 billion people lack access to improved sanitation. Open-air defecation in particular is a widespread concern, as it leads to the spread of communicable diseases. According to the WHO: “Poor sanitation is linked to transmission of diseases such as cholera, diarrhoea, dysentery, hepatitis A, typhoid and polio.”

One way in which these diseases spread is through the lack of proper toilet or latrine facilities. The WHO claims that 2.4 billion people do not have access to such facilities, with 946 million instead practicing open-air defecation.

In 2012, with support from the Bill and Melinda Gates Foundation’s Water, Sanitation and Hygiene Strategy, and International Development Enterprises (iDE), American Standard Brands developed a potential solution to the hygiene problems stemming from the lack of proper toilet facilities. The SaTo pan – deriving its name from “Safe Toilet” – is an attempt to limit the transmission of disease by ensuring that the toilets being used are closed off from the open air, thus preventing insects or other vectors from communicating those diseases. The basic design is a plastic mold that fits into a concrete base over a pit, which means it can be used even when basic plumbing or sewer infrastructure is absent.

Smell-free, eliminates flies, easy clean Access to proper sanitation and clean water is vital for the health and safety of growing populations in both urban and rural areas. When human feces are not disposed of effectively, it can cause a number of health problems. Chronic illnesses spread by feces, such as enteropathy, encephalitis, and diarrhea, can weaken adults as well as children and prevent them from retaining nutrients, potentially causing health problems for their offspring as well. Even when human waste is disposed of in a pit, rather than left out in the open, disease vectors such as flies can potentially still access it, turning latrines into persistent sources of disease for whole communities.

Patent diagrams for SaTo pan Invented by Jim McHale, Daigo Ishiyama and Greg Gatarz, the SaTo pan operates much like a trap door, using a counterweight to stay closed except for allowing the passage of waste. The plastic design is cheap and acts as an effective seal over the toilet. In addition to the sanitary benefits, the SaTo pan also acts as a basic safety measure. Because of the nature of some open-pit latrines, young children face the risk of falling inside. When installing SaTo pans in Uganda, one organization reported this as a notable benefit to the communities due to the particular design of latrines in the areas they worked in.

The research team at American Standard settled on the SaTo pan concept after observing the open-pit style latrines commonly used in Bangladesh. Before the pans were installed, such latrines remained open to the air at all times, which meant that not only was the smell free to travel, but flies and other insects could enter and exit the pit, carrying a host of diseases with them. As demonstrated in this video, the pan can be “flushed” after use with a pot of water, but otherwise blocks any unwanted traffic such as insects.

Diagram of SaTo pan (Self-sealing trap door; seal shuts out flies, other insects, and odors) Crucially, the design of the pan allows for potential variations according to local customs and demands, such as using the facilities by squatting or sitting or adapting to the shape of the pit for the latrine. The core concept around which the pan is based is the counterweighted “flapper” itself. The counterweight is specifically set so that the flap remains closed until the additional force of water – not just the waste itself – is poured into the pan. The pour-flush mechanic also creates a liquid seal, with a minimal amount of water remaining on top of the flap after use to help ensure prevention of transmission of insects or gases. This approach, utilizing a basic mechanism while leaving room for responsive adjustments in design, allows the SaTo pan to be adapted globally while maintaining a simple but effective means of providing basic health benefits.

In 2015, American Standard received the Patents for Humanity award from the USPTO for its design of the (then-pending patent application) SaTo pan toilet. The counterweighted trapdoor is significantly more effective than standard squat-hole covers and avoids the risk of blockage that comes with more complex, alternative designs. Utilizing the patented design also allows American Standard to fully gauge the needs of the market, providing the basis for ongoing production and development.

Although American Standard is more generally known as a plumbing manufacturer, the SaTo pan has become a key part of their business structure. American Standard was purchased by the LIXIL Corporation in 2013, and brought within the LIXIL Water Technology (LWT) business unit in 2015. In 2016, LIXIL announced that it was establishing a special unit within LWT devoted to supporting continued development of the SaTo. Currently, three new alternative models of the SaTo pan are in development to meet the varying need of different regions. Although the initial design functions well in areas such as Bangladesh, bringing it to Sub-Saharan Africa presents new challenges, primarily that there is significantly less access to water. As the counterweight system relies on water for its operation, this poses a hurdle to its effectiveness in such regions.

American Standard has been able to use the SaTo pan design as the basis for a broad-ranging business strategy. From 2013-2014, American Standard implemented a donation program, Flush for Good, with each sale of one of its Champion toilets funding the donation of a SaTo pan. 500,000 have been donated to Bangladesh alone. Other donation programs include sending SaTo pans to Nepal after the recent earthquakes and partnerships with NGOs such as UNICEF and Save the Children. By the middle of 2016, SaTo pans had been installed in 14 countries, including Uganda, Haiti, Malawi, Nigeria and the Philippines.

#Innovate4Health is a joint research project by the Center for the Protection of Intellectual Property (CPIP) and the Information Technology & Innovation Foundation (ITIF). This project highlights how intellectual property-driven innovation can address global health challenges. If you have questions, comments, or a suggestion for a story we should highlight, we’d love to hear from you. Please contact Devlin Hartline at jhartli2@gmu.edu.

Tags healt, healthcare, Innovate4Health, innovation, Michael O'Keefe, patents, SaTo

Innovate4Health Innovation

Innovate4Health: Daktari Diagnostics Takes on Africa’s Healthcare Challenges One Diagnostic Device at a Time

Post author By Joshua Grove
Post date March 6, 2018

This post is one of a series in the #Innovate4Health policy research initiative.

Innovate4Health By Alex Summerton & Nick Churchill

Africa’s predominantly rural characteristic and limited medical infrastructure are among the region’s greatest challenges to implementing effective healthcare programs and policies for its residents. The high costs for patients associated with diagnosis and treatment in terms of money, time, and travel, along with cultural barriers, often result in individuals failing to seek treatment or only making initial consultations before abandoning the matter. Coupled with poor infrastructure, inadequate facilities, substandard equipment, and insufficient personnel, it is not difficult to see why Africa is still recognized as the setting for the world’s most difficult health crises by the World Health Organization (WHO).

hands taking a blood test One solution to these problems is to effectively move clinics to the patients through point-of-care technologies. Daktari Diagnostics, located in Cambridge, Massachusetts, is an innovator in this field focusing on microfluidic techniques. These techniques allow the company to develop products that do not require large scale manipulation of high volumes of blood or other biological products. Thus, diagnostic technologies can be made smaller and used anywhere they are needed. Its slogan “Anywhere. Care.” underscores its commitment to developing a cheap, and lightweight, portable diagnostic device to detect HIV, Hepatitis C Virus (HCV), and sickle cell disease.

Efforts eradicating disease are two-part, regardless of where it occurs: diagnosis and treatment. No matter how much time, effort, money, and technology are spent on improving the treatment phase, failures to accurately and affordably diagnose can undermine even the greatest plans. For a rural populace, diagnosis can be frustrated by a number of factors. Many rural clinics do not have the facilities and equipment to conduct diagnostic tests. Reaching a medical clinic with laboratory services may require hours of travel by foot, and many patients fail to return for their results.

Africa is particularly susceptible to these problems. There exists a need for low cost, portable, and durable systems that can be used to facilitate immediate and accurate diagnosis of diseases that commonly affect the population. Lightweight point-of-care diagnostic platforms aim to meet WHO’s “ASSURED” criteria, a set of aspirational guidelines for creating diagnostics tools to meet the socioeconomic challenges of developing regions such as Africa.

However, developing point-of-care technology is costly, and attracting investors requires a reasonable expectation of return on their investments. The developing world is not often considered a lucrative market for the development of medical products. Developing technology that can meet the need of an effective point-of-care testing system and securing funding for the endeavor is a significant challenge.

Daktari Diagnostics machine Daktari (Swahili for “Doctor”) Diagnostics is working on the development of a point-of-care testing platform that meets the ASSURED standards. Daktari’s portable point-of-care platform, Daktari Virology, uses microfluidic techniques to test for both HIV and HCV. Microfluidic devices offer a number of advantages that directly address Africa’s challenges, including small sample sizes, low production costs, fast sampling and processing, and low power consumption. Using a single drop of blood, a microfluidic testing chip prepares the raw sample and performs the tests in one compact system.

For HIV testing, the technology uses a novel microfluidic technique to capture a key cellular indicator for the management of antiretroviral therapy in a patient’s blood. The device then uses nonoptical detection to count them. The effect is rapid testing that can give an accurate assessment of a patient’s HIV viral load in approximately half an hour.

To secure rights in its microfluidics technology, Daktari has been diligently working to assemble a patent portfolio around its innovations. Its website lists over 20 patents already granted internationally and even more applications pending. Leveraging these rights has helped Daktari overcome the challenges associated with conducting expensive R&D for the developing world by securing several rounds of funding. Daktari is using this capital to develop its microfluidics assaying technology for other diseases. In January, Daktari met a funding milestone in a partnership with Merck by completing the design of a prototype HCV point-of-care system suitable for commercial production. Recently, Daktari licensed its technology for integration into a connectivity platform that enables healthcare providers to assist global health officials by monitoring and reporting disease data in real time.

Point-of-care testing is a realistic approach to overcoming challenges in improving diagnostic and monitoring technologies in developing countries, where space, money, time, and training are often limited. Utilizing its intellectual property rights, Daktari continues to develop the technologies that can address some of the world’s most pressing health needs and connect its innovations with the communities that need them.

CPIP has previously discussed the benefits of point-of-care testing in its profile of Fydor Biotechnologies’ Urine Malaria Test, a device enabled by patented technology licensed from John Hopkins University, and ITIF has highlighted a public-private partnership that created the Visitect CD4 point-of-care HIV test.

Tags Alex Summerton, Daktari Diagnostics, diagnostics, Innovate4Health, innovation, Nick Churchill, patents, point-of-care testing

Intellectual Property Theory

In Defense of an Inclusive IP Conversation

Post author By Joshua Grove
Post date May 9, 2017

hand under a lightbulb drawn on a chalkboard In a recent essay responding to a divisive critique of his book, Justifying Intellectual Property, Robert Merges makes clear from the start that he won’t be pulling any punches. He explains that the purpose of his essay, Against Utilitarian Fundamentalism, is to address the misleading and polarizing conclusions of Mark Lemley’s 2015 article, Faith-Based Intellectual Property, recapitulate the arguments he makes in Justifying IP, and show that those who approach intellectual property theory through a nonstrict empirical lens can still make meaningful contributions to the debate.

Merges exposes the key hypocrisy of Lemely’s article: By flippantly dismissing theories that deviate from his own, Lemley ultimately champions the same inflexible exclusivity he purports to condemn.

The underlying dispute between Lemley and Merges turns on what place nonstrict empirical research has in theoretical IP debates. Philosophical empiricism is the idea that experiment-based evidence is the best path to knowledge. Strict empiricists, such as Lemley, argue that hard data-driven evidence is the only evidence capable of supporting reasonable theoretical conclusions. (As an aside, Lemley’s insistence that strict empirical data is the only evidence worthy of scholarly discussion is curious given his vigorous promotion of theories that lack any empirical support. I should also note that his conclusions regarding the current state of the empirical evidence are controversial in their own right, particularly when combined with a willingness to make broad policy recommendations that ignore important empirical criticisms of the data supporting those recommendations.)

While nonstrict empiricism recognizes the importance of data-driven evidence, it allows for the inclusion of evidence-based investigations into human nature and the way people distinguish right from wrong. This research into the nature of duty and obligation—also known as deontology—is seen by nonstrict empiricists in the IP field as a significant supplement to data-driven evidence in reaching meaningful conclusions on theories of ownership and property.

Strict versus nonstrict empiricism debates—sometimes referred to as utilitarian v. deontological—are not new and are not confined to discussions of ownership and intellectual property. What makes the dispute between Lemley and Merges notable is that Lemley, in disparaging Merges’ approach to research, adopts a rigid position on what evidence merits consideration by IP theorists, making the claim that only hard, data-driven empirical research should influence scholarship. It’s a bold assertion that has led many to offer critical responses to Lemley’s essay (see here, here, here, here, and here), especially considering that the exclusive and narrow-minded approach to IP theory he accuses Merges of supporting is exactly what his essay ultimately promotes.

Lemley Misrepresents Alternatives to Strict Empiricism

Merges first takes issue with Lemley’s critique of nonstrict empirical IP theories as inherently suspect due do their basis “on fundamental commitments that are resistant to counterarguments, particularly empirically-based counterarguments.” Lemley contends that these theories operate with a bias similar to blind religious faith, have an intrinsic disregard for reason, and have no place in scholarly discourse. According to Lemley, they are unscientific and unpersuasive views that cannot be seriously considered in discussions of IP law and policy. In his provocative essay, Lemley uses highly-charged rhetoric to associate nonstrict empirical theorists with religious fundamentalists, resorting to ad hominem attacks and scare tactics to argue that his foundational beliefs are the “one true path.”

Merges points out that by relegating all non-empirical theories into a single, derogatory category, and raising his preferred empirical/utilitarian theory to a “true path to enlightenment” status, Lemley commits the fatal error of promoting an exclusive approach to scholarly discourse. Lemley’s argument has roots in the works of Oliver Wendell Holmes and Richard Posner, who dismissed non-empirical foundations as incapable of being influenced by reason. But Merges repeats that he is “not rejecting empirical evidence of all kinds, but expressing honest doubts about the adequacy of the available evidence,” and that Lemley’s mischaracterization of this skepticism is “more in the way of propaganda than scholarship.”

Research on People’s Moral Intuitions Reveals Significant Shared Judgments About IP

Lemley conflates that which is empirical with that which is rational, assuming there is no empiricism in the study of people’s moral judgments. But Merges notes that deontologists, or those who study the nature of duty and moral obligation are “interested in shared judgments about right and wrong, rather than a strict and exclusive interest in empirical data about the consequences of different courses of action,” and that studies in this field can reveal important theoretical foundations to IP.

Discussing the importance of empirical evidence derived from studies on moral obligations, Merges presents a hypothetical ethical dilemma that has revealed “universal morals” shared across cultures, age groups, and other demographic categories. In the “trolley problem,” a person is presented with the scenario of an out of control trolley headed for a group of five bystanders, and the only way to avoid the trolley killing the entire group is to activate a switch that will divert the trolley to a path that will result in the death of one person. Another variation involves pushing one person in front of the train to save the group of five. Merges notes that researchers found widespread agreement across ethnicities, ages, and backgrounds about which actions were right and wrong, and that rather than based on “irrational institutions,” these judgments are based on a “universal moral grammar” hard-wired in all human beings.

These inherent principles have been directly tied to shared ideas regarding both tangible and intellectual property. Merges describes studies in which children are exposed to a person handling an object, then putting the object down, at which point someone else picks up the object. The children not only routinely infer ownership of tangible goods with first possession, but have also been found to associate creative labor with ownership. As Merges explains, “there are strong regularities in people’s thinking about ownership, fairness, and the importance of creative labor,” and these regularities are “less due to socialization in a particular culture and more due to a basic shared moral sense.”

Though strict empiricists criticize these findings as non-empirical forms of evidence, Merges rejects the idea that strictly empirical studies are the only form of rational and practical investigation. He confronts this argument by showing that empirical evidence focusing solely on consequentialism, or the final net consequence of an action, is not only largely impractical, but often leads to morally reprehensible outcomes.

Illustrating the impractical nature of strict consequentialism, Merges fills nearly an entire page with the myriad potential consequences of both strict and liberal liability standards for internet service providers in identifying copyright infringement. What’s clear is that the vast and complex consequences cannot warrant a “net grand total” conclusion of any kind, and that exercises in attempting to draw causal connections are hopeless. Merges also invokes a hypothetical example of enslaving writers and forcing them produce original content to show that, while it may be the most efficient way to deliver works into the market, it’s a utilitarian approach to IP that’s contrary to the shared moral ideas of right and wrong that societies invoke to reject such operations.

IP Theory Should be Inclusionary and Diverse

Merges dedicates the end of his essay to a summary and defense of his arguments in Justifying Intellectual Property, including the explicit assertions that his ideas do not “have any claim to exclusivity,” and that his book promotes a “public space” in which differing opinions are not only welcome, but essential to a meaningful debate. For Faith-Based Intellectual Property to insist otherwise leads Merges to question whether Lemley has any real awareness of the work he so vehemently criticizes.

Discussing his pluralistic approach, Merges identifies four “midlevel principles” that serve as a bridge between those with differing foundational commitments to IP. According to Merges, proportionality, efficiency, nonremoval or the public domain, and dignity make up these midlevel principles and create an “overlapping consensus” among scholars and theorists with otherwise conflicting views. Offering an example of this consensus, Merges discusses a recent amicus brief that both he and Mark Lemley cooperated and agreed on. Merges explains that the fact that the two authors could discuss and agree on case outcomes and underlying policy rationales directly refutes Lemley’s conclusion that the sides have “nothing to say to each other.”

Concluding his essay, Merges maintains that Justifying Intellectual Property seeks to formulate a liberal theory of IP while respecting all manners of approaches, and that the book “neither predicts nor expects universal agreement.” And while Merges accepts that some may accuse the book of being wrong, naïve, boring, or didactic, to accuse it of being resistant to inclusive discourse and reasoned arguments reveals an unawareness of its actual content. Lemley’s response is an unfortunate reaction to an open assessment of the ways those with differing views can come together. Ironically, Lemley promotes the very same exclusive approach to scholarly debate that he claims to reject.

Tags copyright, intellectual property, Kevin Madigan, patents

Biotech Innovation Patent Law Uncategorized

Proposed CREATES Act Threatens Patent Owners’ Rights

Post author By Joshua Grove
Post date July 5, 2016

By Erika Lietzan, Kevin Madigan, & Mark Schultz

Earlier this month, a bipartisan group of Senators introduced the Creating and Restoring Equal Access to Equivalent Samples Act (or CREATES Act). The proposed bill is aimed at deterring what the bill’s author, Sen. Patrick Leahy, claimed were “inappropriate delay tactics that are used by some brand-name drug manufacturers to block competition from more affordable generic drugs.” Whether the bill would produce the intended consequences is the subject of some debate, but we thought it important to point out some (hopefully) unintended consequences: The CREATES Act would impose vague standards and draconian remedy provisions to force innovators to surrender their intellectual property rights for the benefit of generic competitors.

The CREATES Act

It’s no surprise that the legislation might generate unintended consequences, as it would add further complexity to an already challenging regulatory scheme for approving drugs.

As a general rule, for a generic drug manufacturer to get permission to market a duplicate of an already approved drug, it usually[1] must have access to samples of the already approved drug. The generic drug company uses these samples in the bioequivalence studies required in its abbreviated new drug application. The same general principle applies to companies developing biosimilar versions of already approved biological medicines; they conduct comparative trials for approval of their abbreviated applications, and these trials generally require samples of the “reference” product. In addition, FDA sometimes[2] requires drug and biologic manufacturers to develop risk evaluation and mitigations strategies (REMS) if safety measures beyond standard labeling are needed to ensure that the product’s benefits outweigh its risks. These REMS can include elements to assure safe use (ETASU)—essentially, a system of use or distribution restrictions—if necessary to mitigate a specific serious risk. A generic or biosimilar manufacturer seeking to distribute its version of a product that is subject to a risk management distribution program must generally develop its own system or negotiate to share the existing system.

The CREATES Act is spurred by concerns that innovators are hampering competition by strategically exploiting these regulatory requirements imposed on their generic and biosimilar competitors. That is, critics contend that innovators are raising barriers that prevent their generic and biosimilar competitors from obtaining samples of the reference drug and from participating in existing distribution programs.

While the FTC and members of Congress have raised these concerns before, the concerns are particularly topical because of the controversy surrounding Turing Pharmaceuticals and its notorious former CEO Martin Shkreli (described by one publication as the most-hated man in America). Turing is a small company that acquired the only license to market the off-patent drug Daraprim and raised the price by over 5000%, meanwhile preventing potential competitors from obtaining samples for use in developing a competing supply. While Turing is a small company marketing an off-patent drug, its actions have been misattributed (through confusion or purposeful obfuscation) to mainstream, R&D-intensive innovative drug companies.

The CREATES Act proposes to prevent strategic exploitation of regulatory requirements by giving generic and biosimilar manufacturers their own strategic advantage in their negotiations with competitors – the threat of a lawsuit. The Act would give these follow–on developers the ability to sue their competitors to obtain samples of any drugs that they wish to use as references in testing for approval of generic and biosimilar versions. Follow–on drug developers could also sue their competitors to be allowed to share in existing distribution systems.

Although the Act contemplates that the parties will negotiate with respect to purchase of samples and sharing of any distribution system already in place, it would decisively shift bargaining power in favor of follow-on competitors. To begin with, it imposes unreasonable deadlines on innovators—for instance, one month to manufacture and provide samples, after which the follow–on applicant may sue. Also, it creates enormous liability exposure. If the plaintiff proves its case, the court will order the innovator to provide “sufficient” quantities of its product for testing and, if applicable, to share its REMS distribution system with its follow–on competitor. Further, the court must award not only reasonable attorney fees and costs, but also a “monetary amount sufficient to deter” the innovator from failing to provide other applicants with sufficient quantities, or failing to share its risk management system, as applicable. The “maximum” award—which will surely be taken as a suggestion at least of the magnitude envisioned—is the total revenue on the product for every day that the innovator failed to provide samples or to agree to share its developed risk management system. It bears no rational relationship to any harm suffered by the follow–on applicant and is functionally punitive.

The CREATES Act Creates Potential Intellectual Property Problems

The CREATES Act raises two significant intellectual property issues. Essentially, it would create a mechanism to force innovators and patent owners to supply their products and intellectual property to their competitors.

First, it would require an intellectual property owner to make its product for the benefit of a competitor. The Act allows a generic or biosimilar applicant to sue for drug samples to use in testing. In many instances, those drugs will still be under patent. While the so-called Bolar provision permits a generic or biosimilar applicant to conduct tests during the patent term, the CREATES Act turns the Bolar shield into a sword by empowering a court to order a company to provide its patented drug to a potential competitor. This, in turn, will require the company to manufacture the drug for that competitor. Whether it makes a small or large supply for the market, it will need to adjust its production to ensure supplies for its competitor as well, and indeed as many competitors as want samples. This conflicts directly with a basic and valued tenet of the patent system in the United States: we do not require a patent owner to practice his or her invention. In short, the CREATES Act directs courts to order patent owners to practice their patents for the benefit of others.

Second, it would require a drug company with intellectual property rights in a REMS distribution system to forego those rights for the benefit of a competitor. The Act allows a generic or biosimilar applicant to sue the innovator in order to use the specific risk management system that the innovator developed. Although current law creates a default rule that generic drug companies and drug innovators should use a single shared system, there is no such default rule for biosimilar companies and biologic innovators. And the default for generic drugs is simply a default; FDA may waive the default if, for instance, some aspect of the system is claimed by a patent or subject to trade secret protection. This bill would authorize the court to order the innovator to share its system, regardless of any unexpired patent or trade secret protection. It short, it permits courts to order intellectual property holders to surrender their intellectual property or face the threat of monetary penalties.

An innovator may have lawful and legitimate reasons for declining to manufacture its patented product for its competitors and for declining to share its patented risk management system with those competitors. Yet, the unreasonable deadlines and punitive liability provisions of the CREATES Act mean that it will have little scope to resist the demands of its competitors. This essentially nullifies the innovator’s intellectual property—which will discourage future investment and innovation in the pharmaceutical industry.

Important IP Rights in Safety Systems: The Example of Celgene

The IP problems unleashed by the CREATES Act are illustrated by their effect on the IP rights and incentives of a company such as the Celgene Corporation (which submitted a statement on the bill to the Senate Judiciary Committee). Celgene is an innovative biopharmaceutical company that focuses on treatments for cancer and immune–inflammatory related diseases in patients with limited treatment options. The company’s first approved drug was Thalomid, initially approved by FDA for leprosy and then approved for its primary indication—multiple myeloma, a particularly pernicious form of blood and bone marrow cancer. The active ingredient of Celgene’s product, thalidomide, is a powerful teratogen, causing severe disfiguring birth defects. It was marketed in other parts of the world in the late 1950s and early 1960s as a treatment for morning sickness in women, and FDA has estimated that more than 10,000 children in 46 countries were born with severe birth defects attributable to thalidomide. As a result of this history and the special risks associated with this life–saving medicine, Celgene developed an extremely detailed and meticulous protocol dedicated to ensure safe distribution, prescription, and use. Essentially, Celgene’s innovative contribution was inventing a safe way to use an otherwise dangerous drug to fight cancer. The company’s special system for managing the risk of thalidomide is formalized at FDA as the “elements to assure safe use” portion of a REMS. It is also subject to patent protection.

The CREATES Act would force companies such as Celgene to share the proprietary elements of their REMS programs. It would give the company the choice: share its patent system or face a lawsuit that might result in catastrophic damages and mandatory sharing anyway. This functionally nullifies the patent. This, in turn, would discourage innovation and investment in the programs. The essence of thalidomide, and other drugs subject to use and distribution restrictions, is that these drugs require special programs. Their benefits do not outweigh their risks, without these special programs in place. If functionally nullifying the innovator’s patent protection means the innovator will not invest in creative solutions to difficult safety risks, then the products that require these solutions cannot be approved—and will never reach patients.

Conclusion

The CREATES Act has been presented as a panacea for the suspect activity of a few bad actors. But while it might force those companies to share their products and safety systems, it would also affect—and penalize—the much larger group of innovators that have legitimate reasons for withholding the fruits of their labors. By imposing unreasonable deadlines for action, failing to consider legitimate explanations for the choices made by innovative drug manufacturers, and imposing draconian penalties, it tramples the intellectual property rights of drug innovators. Yet, this industry is deeply reliant on intellectual property rights; they provide the incentive for research into tomorrow’s cures. The CREATES Act should be laid aside, if Congress truly wants to promote innovation and investment in life-saving medicines for future generations of Americans.

Erika Lietzan is an Associate Professor at University of Missouri School of Law and is participating in CPIP’s 2016-2017 Thomas Edison Innovation Fellowship Program.

[1]In fact, the situation is more complicated than proponents of this bill have stated. In instances where samples of an already-approved drug are unavailable for any reason, FDA has several regulatory options at its disposal. After all, if a brand company withdraws its product from the market, that doesn’t preclude generic companies from seeking approval, even years later. So long as the Reference Listed Drug (RLD) was not withdrawn for safety or efficacy reasons, it can be cited in a generic application. In that situation, one thing FDA can do is designate another generic to be the RLD for bioequivalence testing. The statute says only that the ANDA must demonstrate bioequivalence; it does not expressly require that the generic applicant use the innovator’s product in the testing.

Even if there aren’t other generics, it might be possible to obtain ANDA approval based on a showing of bioavailability and the same therapeutic effect. FDA has repeatedly noted, when finding that a particular RLD was not withdrawn for safety or efficacy reasons, that the agency may approve an ANDA for a generic version of a withdrawn product even if the withdrawn product is not commercially available. These Federal Register notices state that if the RLD is not available for bioequivalence testing, the applicant should contact the FDA’s Office of Generic Drugs to determine what showing would be required to satisfy the approval requirements of the statute.

[2]Despite the controversy around this issue, there are relatively few REMS, and even fewer with ETASU. The FDA maintains a downloadable list on its website, with the ETASU marked. As of this writing (July 2016) there are 75 REMS listed, only 40 of which have ETASU. Of these, 6 already have approved generics that share in an approved risk management system. More than a dozen of the remaining products are still under regulatory exclusivity.

Tags biologics, biosimilars, Bolar provision, Celgene, CREATES Act, Erika Lietzan, FDA, FTC, generics, innovation, intellectual property, Martin Shkreli, medicine, patents, Patrick Leahy, R&D, REMS, Thalomid

Innovation Inventors Legislation Patent Law Patent Litigation Uncategorized

Changes to Patent Venue Rules Risk Collateral Damage to Innovators

Post author By Joshua Grove
Post date March 22, 2016

Advocates for changing the patent venue rules, which dictate where patent owners can sue alleged infringers, have been arguing that their remedy will cure the supposed disease of abusive “trolls” filing suit after suit in the Eastern District of Texas. This is certainly true, but it’s only true in the sense that cyanide cures the common cold. What these advocates don’t mention is that their proposed changes will weaken patent rights across the board by severely limiting where all patent owners—even honest patentees that no one thinks are “trolls”—can sue for infringement. Instead of acknowledging the broad collateral damage their changes would cause to all patent owners, venue revision advocates invoke the talismanic “troll” narrative and hope that nobody will look closely at the details. The problem with their take on venue revision is that it’s neither fair nor balanced, and it continues the disheartening trend of equating “reform” with taking more sticks out every patent owner’s bundle of rights.

Those pushing for venue revision are working on two fronts, one judicial and the other legislative. On the judicial side, advocates have injected themselves into the TC Heartland case currently before the Federal Circuit. Though it has no direct connection to the Eastern District of Texas, advocates see it as a chance to shut plaintiffs out of that venue. Their argument in that case is so broad that it would drastically restrict where all patentees can sue for infringement—even making it impossible to sue infringing foreign defendants. Yet they don’t mention this collateral damage as they sell the “troll” narrative. On the legislative side, advocates have gotten behind the VENUE Act (S.2733), introduced in the Senate last Thursday. This bill leaves open a few more venues than TC Heartland, though it still significantly limits where all patent owners can sue. Advocates here also repeat the “troll” mantra instead of offering a single reason why it’s fair to change the rules for everyone else.

With both TC Heartland and the VENUE Act, venue revision advocates want to change the meaning of one word: “resides.” The specific patent venue statute, found in Section 1400(b) of Title 28, provides that patent infringement suits may be brought either (1) “in the judicial district where the defendant resides” or (2) “where the defendant has committed acts of infringement and has a regular and established place of business.” On its face, this seems fairly limited, but the key is the definition of the word “resides.” The general venue statute, found in Section 1391(c)(2) of Title 28, defines residency broadly: Any juridical entity, such as a corporation, “shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.” Taken together, these venue statutes mean that patent owners can sue juridical entities for infringement anywhere the court has personal jurisdiction over the defendant.

The plaintiff in TC Heartland is Kraft Foods, a large manufacturer incorporated in Delaware and headquartered in Illinois that runs facilities and sells products in Delaware. The defendant is TC Heartland, a large manufacturer incorporated and headquartered in Indiana. TC Heartland manufactured the allegedly-infringing products in Indiana and then knowingly shipped a large number of them directly into Delaware. Kraft Foods sued TC Heartland in Delaware on the theory that these shipments established personal jurisdiction—and thus venue—in that district. TC Heartland argued that venue was improper in Delaware, but the district court rejected that argument (see here and here). TC Heartland has now petitioned the Federal Circuit for a writ of mandamus, arguing that the broad definition of “reside” in Section 1391(c)(2) does not apply to the word “resides” in Section 1400(b). On this reading, venue would not lie in Delaware simply because TC Heartland did business there.

TC Heartland mentions in passing that its narrow read of Section 1400(b) is favorable as a policy matter because it would prevent venue shopping “abuses,” such as those allegedly occurring in the Eastern District of Texas. Noticeably, TC Heartland doesn’t suggest any policy reasons why Kraft Foods should not be permitted to bring an infringement suit in Delaware, and neither do any of the amici supporting TC Heartland. The amicus brief by the Electronic Frontier Foundation (EFF) et al. argues that Congress could not have intended “to permit venue in just about any court of the patent owner’s choosing.” But why is this hard to believe? The rule generally for all juridical entities is that they can be sued in any district where they chose to do business over matters relating to that business. This rule has long been regarded as perfectly fair and reasonable since these entities get both the benefits and the burdens of the law wherever they do business.

The EFF brief goes on for pages bemoaning the perceived ills of forum shopping in the Eastern District of Texas without once explaining the relevancy to Kraft Foods. It asks the Federal Circuit to “restore balance in patent litigation,” but its vision of “balance” fails to account for the myriad honest patent owners like Kraft Foods that nobody considers to be “trolls.” The same holds true for the amicus brief filed by Google et al. that discusses the “harm forum shopping causes” without elucidating how it has anything to do with Kraft Foods. Worse still, the position being urged by these amici would leave no place for patent owners to sue foreign defendants. If the residency definitions in Section 1391(c) don’t apply to Section 1400(b), as they argue, then a foreign defendant that doesn’t reside or have a regular place of business in the United States can never be sued for patent infringement—an absurd result. But rather than acknowledge this collateral damage, the amici simply sweep it under the rug.

The simple fact is that there’s nothing untoward about Kraft Foods filing suit in Delaware. That’s where TC Heartland purposefully directed its conduct when it knowingly shipped the allegedly-infringing products there. It’s quite telling that venue revision advocates are using TC Heartland as a platform for changing the rules generally when they can’t even explain why the rules should be changed in that very case. And this is the problem: If there’s no good reason for keeping Kraft Foods out of Delaware, then they shouldn’t be advocating for changes that would do just that. Keeping patent owners from suing in the Eastern District of Texas is no reason to keep Kraft Foods out of Delaware, and it’s certainly no reason to make it impossible for all patent owners to sue foreign-based defendants that infringe in the United States. Advocates of venue revision tacitly admit as much when they say nothing about this collateral damage. This isn’t fair and balanced; it’s another huge turn of the anti-patent ratchet disguised as “reform.”

The same is true with the VENUE Act, which copies almost verbatim the venue provisions of the Innovation Act. This bill would also severely restrict where all patent owners can sue by making it so that a defendant doesn’t “reside” wherever a district court has personal jurisdiction arising from its allegedly-infringing conduct. To its credit, the VENUE Act does include new provisions allowing suit where an inventor conducted R&D that led to the application for the patent at issue. It also allows suit wherever either party “has a regular and established physical facility” and has engaged in R&D of the invention at issue, “manufactured a tangible product” that embodies that invention, or “implemented a manufacturing process for a tangible good” in which the claimed process is embodied. Furthermore, the bill makes the same venue rules applicable to patent owners suing for infringement and accused infringers filing for a declaratory judgment, and it solves the problem of foreign-based defendants by stating that the residency definition in Section 1391(c)(3) applies in that situation.

While the proposed changes in the VENUE Act aren’t as severe as those sought by venue revision advocates in TC Heartland, they nevertheless take numerous venues off of the table for patentees and accused infringers alike. But rather than acknowlede these wide-sweeping changes and offer reasons for implementing them, advocates of the VENUE Act simply harp on the narrative of “trolls” in Texas. For example, Julie Samuels at Engine argues that the “current situation in the Eastern District of Texas makes it exceedingly difficult for defendants” to enforce their rights and that we need to “level the playing field.” Likewise, Elliot Harmon at the EFF Blog suggests that the VENUE Act will “finally address the egregious forum shopping that dominates patent litigation” and “bring a modicum of fairness to a broken patent system.” Yet neither Samuels nor Harmon explains why we should change the rules for all patent owners and accused infringers—especially the ones that aren’t forum shopping in Texas.

The VENUE Act would simply take a system that is perceived to favor plaintiffs and replace it with one that definitely favors defendants. For instance, an alleged infringer with continuous and systematic contacts in the Eastern District of Virginia can currently be sued there, but the VENUE Act would take away this option since it’s based on mere general jurisdiction. Likewise, the current venue rules allow suits anywhere the court has specific jurisdiction over the defendant—potentially in every venue for a nationwide enterprise—yet the VENUE Act would make dozens of these venues improper. Furthermore, patentees can now bring suits against multiple defendants in a single forum, saving time and money for all involved, but the VENUE Act would make this possibility much less likely to occur.

The “troll” narrative employed by venue revision advocates may sound appealing on the surface, but it quickly becomes clear that they either haven’t considered or don’t care about how their proposed changes would affect everyone else. If we’re going to talk about abusive litigation practices in need of revision, we should talk about where they’re occurring across the entire patent system. This discussion should include the practices of both patent owners and alleged infringers, and we should directly confront the systemic collateral damage that any proposed changes would cause. As it stands, there’s little hope that the current myopic focus on “trolls” will lead to any true reform that’s fair and balanced for everyone.

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