IP Global View

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On a vote of 15 t0 4, a Senate panel today approved changes to the Patent Reform Act of 2009 that was introduced in the Committee last month.  Senator Patrick Leahy (D-Vt), the panel Chairman,  announced that the amendments made to the legislation will clear the way for debate by the full Senate.  Senator Leahy added that he expects further changes to be introduced while it is debated on the Senate floor, but did not specify when this might take place.

Among the members opposing the passage of the Act was the primary Republican sponsor of the legislation, Utah Senator Orrin Hatch. “My primary purpose for doing this bill was to improve patent quality and limit unnecessary and counterproductive litigation costs. I do not believe the bill, in its current form, accomplishes these goals,” Hatch said.  Senator Hatch would like to see the legislation include measures that make it more difficult to invalidate patents based on mistakes made during prosecution.  The current legislation is silent as to these issues.

Senator Jon Kyl (R-Az) joined Hatch in objecting to the lack of any measure strengthening the validity of a patent over prosecution errors.  Senator Tom Coburn (R-Ok) objected to the measures because it doesn’t include adequate funding increases for the U.S. Patent and Trademark Office.

The changes approved by the Senate panel include casting the judge as a “gatekeeper” who identifies the relevant issues that should be decided by a jury.

Technorati Tags: act, bill, hatch, invalidate, legislation, patent, reform

On March 25, 2009, Bobby Rush (D-Ill) of the House of Representatives introduced legislation (H.R. 1706) that would prohibit brand-name drug companies from compensating generic drug companies to delay the entry of a generic drug into the market.  The Protecting Consumer Access to Generic Drugs Act of 2009 seeks to limit the widely adopted practice of reverse payment settlements in the pharmaceutical drug industry.  The full text of the Act can be found here.

Reverse payment settlements occur when a patent on a name-brand drug expires, effectively ending the brand-name’s exclusive right to make, use, and sell a patented drug.  Once the patent expires, generic drug makers are allowed to sell the same drug without paying any royalties to the patent owner, resulting in a lower-priced generic drug compared to the price of the name-brand drug.  The lower-priced generic drug typically outsells the name-brand drug digging into the profits of the name-brand drug companies. 

In order to prevent the sudden loss of profits resulting from the expiration of a drug patent, name-brand drug companies enter into agreements in which the generics receive large payments in return for a delaying the entry of the drug into the market.  Critics of these agreements argue that it delays cheaper drugs from entering the market, resulting in a gain for both the generic and name-brand drug companies at the expense of the public.

The Federal Circuit, which is the appeals court for all patent-related cases, has found nothing legally inappropriate about these agreements.  The controlling law is currently the Hatch-Waxman Act, rewards the first generic drug company to surmount a successful patent infringement suit against a name-brand drug company with 180 days of exclusive marketing rights.  In order to avoid costly and lengthy patent litigation, name-brand drug companies often pay the generic companies to settle the litigation in what has become known as reverse settlement agreements.

A carefully crafted agreement can camouflage the payments made to the generic drug companies, making it seem as if the payment is not for a delayed entry to market.  For example, a study published last May by the FTC indicates that in several agreements struck in 2007, the brand-name drug maker agreed not to sponsor its own cheaper “authorized generic” during the exclusivity period once the generic maker did launch the drug.  Other forms of compensation include royalties through licensing agreements, or an agreement by the generic drug maker to withdraw the patent challenge and wait until the name-brand company’s patent expires.

In an attempt to fill this apparent gap in enforcement, the FTC has filed anti-trust suits against a number of drug companies (both name-brand and generic), including Bayer AG, Cephalon Inc., Watson Pharmaceuticals Inc., Par Pharmaceutical Cos. Inc., and Paddock Laboratories to name only a few.  But these lawsuits have largely been unsuccessful since the agreements apparently do not run afoul of any antitrust laws either.  The newly-elected Obama administration has appointed Jon Leibowitz as the FTC commissioner, a strong opponent of reverse payment agreements.  However, it seems that legislation is needed to fill in the gaps of both patent and antitrust laws.

The Protecting Consumer Access to Generic Drugs Act of 2009 is the latest attempt to fill this legal void.  This current bill would make reverse payment an unfair and deceptive act or practice and an unfair method of competition under the Federal Trade Commission Act.  It would also give the FTC the power to make rules enforcing the law as it develops.  The bill is likely to face heavy, and I mean heavy, opposition from the pharmaceutical drug industry.  In fact, there have been several attempts to pass legislation regarding reverse payments but all have failed due mostly to successful lobbying by the pharmaceutical industry.

Technorati Tags: agreement, generic, hatch-waxman, patent, payment, reverse

Earlier this week the Patent Reform Act of 2009 was introduced in both the House of Representatives (co-sponsored by Representative John Conyers (D-Mich) and Representative Lamar Smith (R-Texas)), as well as in the Senate (co-sponsored by Senator Orrin Hatch (R-Utah) and Senator Patrick Leahy (D-Vt)).  Many of the most controversial provisions from the Patent Reform Act of2007, e.g., limitations on damages for patent infringement are included in the legislation introduced this week.  Other significant provisions included in the new legislation:

• In order to determine patent damages, must determine the invention’s “specific contribution over the prior art.”
• Treble damages are limited to circumstances where the infringer continued to recklessly infringer after receiving written notice (sufficient to create declaratory judgement jurisdiction) and without relying on the reasonable advice of counsel.
• The person that files a patent application first is the inventor, regardless of any other prior inventors that did not file for patent protection. This provision adopts the policy known as “first-to-file,” which is the current policy in the vast majority of the international community.
• The reexamination proceedings are expanded to include requests based on published prior art, or even evidence of prior public use or sale in the United States.
• A provision providing for a third party to file a cancellation petition within 12 months after a patent issues.
• Third parties can submit prior art during the prosecution of the original patent application.

Technorati Tags: act, damages, hatch, inequitable conduct, leahy, patent, prosecution, re-examination, reform, representatives, senate

The World Intellectual Property Organization  (WIPO) recently issued a statistical review of patents called the “World Patent Report.”

One of the most surprising statistic is that between 2005 and 2006, the number of patent filings worldwide by China increased by 32.1 percent.  Other interesting statistics include:

• Approximately 727,000 patents were granted globally in 2006.

• Approximately 6.1 million patents were in force in 2006.

• The United States had the largest number of patents in force in 2006.

• 76 percent of all patent filings in 2006 were in a small number of countries: United States, Japan, South Korea, Germany and China.

• 73 percent of all patent grants in 2006 were in a small number of countries: United States, Japan, South Korea and Germany.

• The USPTO had 1,051,502 patents undergoing examination in 2006.

• The JPO had 836,801 patents undergoing examination in 2006.

• The EPO had 247,165 patents undergoing examination in 2006.

Technorati Tags: EPO, JPO, patent, USPTO, WIPO, world patent report

In today’s tough economic times, large international companies holding patent rights in several countries are having to make tough decisions about which countries to actually enforce their patent rights.  In order to maximize a company’s capital, it pays for in-house counsel to know which countries offer the biggest returns on its IP enforcement investment.

For example, corporations may choose to enforce its patent rights in Canada instead of (or at least prior to) enforcing its patents in the United States for several reasons.  For one, IP litigation in Canada averages around $500,000 – $1 million, while IP litigation in America typically runs between $2-3 million. Why the big difference in costs?  There are several reasons.

Unlike American law, Canada has no doctrine of patent abuse or inequitable conduct, so there is simply less issues to argue in Canadian courts.  Also, there are no jury trials or Markman hearings in Canada, which tend to be a huge monetary drain for U.S. patent litigants.  Instead, Canadian patent cases are tried by judges, which tend to award remarkably higher damages than United States patent juries.

Another major cost-saving factor of a Canadian patent trial is that under Canadian law, parties are typically allowed to depose only one witness each.  These depositions are generally much longer than American depositions (2 weeks as opposed to 1-3 days) because the deponent may not have enough personal knowledge to answer a question.  In American depositions, a deponent not designated as a 30(b)(6) witness for the corporation is not obligated to answer questions for which they have no personal knowledge.  Often, this means that large amounts of time used to prepare questions and documents for a deposition are all but wasted when the deponent simply states they have no personal knowledge of subject matter essential to the case.  This leaves the deposing party scrambling to serve subpoena’s to other individuals within the defendant’s corporation who may (or may not) have the vital information needed.  In Canada, however, the deponent is obligated to find the person with the necessary information and report this information to the deposing party before the deposition is over, saving everyone time and money.

Similar to American patent litigation, each party is allowed to submit expert reports in order to support their arguments.  But unlike in American patent litigation, Canadian experts are not deposed regarding their expert reports, saving even more time and money for both sides.

Of course, there are several aspects of Canadian patent litigation that could lead to disparate results than the American system.  For example, the USPTO allows for a plethora of petitions to correct various mistakes during the prosecution of the patent, whether the mistake was the USPTO’s or the patent applicant’s.  However, mistakes made in the prosecution of a Canadian patent are often unfixable if they are not rectified during the prosecution of the patent, leaving many patents invalid and unenforceable.  Because of this difference, patent litigation in Canada often focuses on the prosecution of the patent in the Canadian patent office.  In American patent litigation, the prosecution of an application is focused on either to establish what subject matter is not covered in the patent, or to establish inequitable conduct (a topic that is non-existent in Canadian patent law).

Many companies that have both a Canadian patent and an American patent covering the same subject matter choose to litigate the Canadian patent first in Canada.  This often gives the patent holder an inexpensive route to uncovering a potential infringer’s best argument(s) before litigating in American courts.  However, as discussed before, a Canadian patent trial will give a patent holder no clue regarding the patent’s unenforceability as to inequitable conduct; any patent holder’s worst nightmare.  Great care must be taken before choosing Canada as a proving ground for subsequent patent litigation in America.

Technorati Tags: America, Canada, costs, inequitable conduct, IP, jury, litigation, markman, patent, trial

On November 25, 2008, the Board of Appeals of the European Patent Office (EPO) affirmed the EPO’s previous rejection of a patent covering the manipulation of embryonic stem cells of a primate. The patent was filed by the Wisconsin Alumni Research Foundation (WARF), an American institution.

Although American patent laws do not per se prohibit the manipulation of animal stem cells, WARF decided to file a patent application with the EPO in response to the Bush administration’s hard-line against such research methods in the United States.  However, WARF seems to have hit a brick wall with the EPO’s guidelines prohibiting individuals from profiting from the use of animal stem cells that are not therapeutic in nature.

Rule 28 of the European Patent Convention (EPC) prohibits the granting of a patent relating to: “(a) processes for cloning human beings; (b) processes for modifying the germ line genetic identity of human beings; (c) uses of human embryos for industrial or commercial purposes; and (d) processes for modifying the genetic identity of animals which are likely to cause them suffering without any substantial medical benefit to man or animal, and also animals resulting from such processes.”  The EPO cites Rule 28(d) in rejecting WARF’s patent, since the primate embryonic stem cells cited in the patent claim are receiving no positive therapeutic benefit from the manipulation.  The EPO has long since held that methods concerning the destruction of living cells are against public morale and are thus unpatentable.  For example, methods of euthanizing animals or humans have been rejected as being unpatentable.  In fact, surgical methods involving the cutting of human or animal tissues are likely to be unpatentable as against public morale, even though the overall end result may be favorable to the patient.

Claim 1 of WARF’s patent reads:
A cell culture comprising primate embryonic stem cells which
(i) are capable of proliferation in vitro culture for over one year,
(ii) maintain a karyotype in which all chromosomes normally characteristic of the primate species are present and are not noticeably altered through culture for over one year,
(iii) maintain the potential to differentiate to derivatives of endoderm, mesoderm, and ectoderm tissues throughout the culture, and
(iv) are prevented from differentiating when cultured on a fibroblast feeder layer.

In rejecting the claim, the EPC stated that this ruling does not relate to the patentability in general of inventions relating to human stem embryos or stem cells cultures. Instead this decision relates only to methods concerning the destruction of animal embryos.   In other words, this ruling does not deal with hESC technology and the manipulation of human embryos.  The decision is Case Number: G 0002/06. 

As mentioned before, America has no similar law prohibiting such surgical procedures and allows such mehtods to be patentable.  However, in accordance with the GATT agreements passed in 1996, any patent relating to medical procedures are unenforceable against surgeons in American courts.  Hence, even though WARF’s US patents have been upheld in the USPTO under reexamination, such patents in are unenforceable.

Technorati Tags: animal, Bush, embro, EPO, human, patent, stem cell, WARF

The International Trade Commission (ITC) is an independent federal agency whose purpose is to protect American companies from foreign companies that attempt to import goods in an anti-competitive manner. For example, an American company can file a complaint with the ITC if a foreign company is importing goods that might violate its patents. Pursuant to Section 337 of the Traffic Act of 1930, once a complaint is filed the ITC has 30 days to decide whether an investigation (a.k.a. “337 investigation”) should be instituted. More than likely, the ITC will decide to investigate in order to protect the American company.

Vested with authority from 35 U.S.C. 1337(d), the ITC can issue two types of exclusionary orders prohibiting the importation of goods if the foreign company is found to be culpable: general exclusionary orders (GEO), and limited exclusion orders (LEO). An LEO prohibits only the parties involved in the investigation from importing infringing goods. By contrast, a GEO prohibits the goods from being imported from any party, even parties that are not included in the investigation. However, two exceptional circumstances must apply for the ITC to issue a GEO. The first circumstance is when a previously issued LEO is being circumvented (e.g., a named party simply pays a third party to import the goods). The second circumstance is when several complaints are filed regarding the same imported product, but the source is difficult to identify. Since it is much harder to show these two circumstances, most of the orders issued are LEOs.

Previously, the ITC has issued LEOs where the respondent manufactures an infringing component that is made and sold abroad and then assembled into a downstream product before finally being imported to America. Recently, the ITC has been issuing LEOs that not only exclude the component from importation, but also excludes the downstream product containing the component from importation. This allowed US patent holders to file a complaint against component manufacturers, even if they themselves didn’t import the component. Such was the case in Kyocera Wireless Corp v ITC.

In Kyocera Wireless Corp. v. ITC, the ITC issued an LEO to all downstream cell phone manufacturers that contained the Qualcomm chip found to infringe. This angered cell phone manufacturers who joined in on the remedy phase of the suit. The Federal Circuit, which has appellate review of the ITC, held that the ITC did in fact overstep its authority by issuing an LEO that excluded the downstream cell phone manufacturers from importing cell phones. The statute only allows an LEO to be issued against named respondents, so the cell phone manufacturers could not be affected by the LEO.

The Federal Circuit’s decision currently affects several other cases where a downstream manufacturer has been included in an LEO. In light of Kyocera, these manufacturers will likely seek a modification of those orders. As for the US patent holders, it’s likely that more complaints filed with the ITC will have more named respondents. Of course, it‘s also possible that the current economic downturn can spark legislative reform which could institute protectionist measures and broaden the leverage once held by US patent holders.

Technorati Tags: exclusion order, import, international trade, ITC, kyocera, leo, patent

Japanese newspapers are reporting that the Japanese Patent Office (JPO) will begin a study in January of 2009 in an attempt to dramatically change the current patent laws there. Some of the possible areas of change include:

1. Changing the definition of “invention” to include business methods and software
2. Revising employee’s patent rights when working for an employer
3. Disallowing injunctions in order to promote innovation
4. Decrease the amount of time it takes to issue a patent

Currently, applicants must wait an average of 5-6 years after filing before the patent is issued in Japan. The costs associated with the maintenance fees in Japan, as well as the cost of patent prosecution, is the highest of any other country in the world. Also, the Japanese definition of what is obvious is much narrower than most other countries. For example, a patent may be deemed as non-obvious in the USPTO, but could still be rejected as obvious in the JPO.

Technorati Tags: embryo, japan, JPO, patent, stem cell

The new obviousness standard set forth in KSR v. Teleflex, 550 U.S. 398 (U.S. 2007), has put to rest yet another patent into the invalidity graveyard. After a district court found a Boston Scientific stent patent valid and infringed, the Federal Circuit applied the KSR standard and reversed the district court ruling, finding the patent invalid.

The reason for this is simple: after Boston Scientific won the jury trial, a new standard was put in place as to what renders a patent obvious. Before KSR, a patent was non-obvious if one reference contained some of the elements of a patent claim, and a second reference contained the remaining elements, but there was no explicit statement suggesting that the two references should be combined to result in the resulting patent claim. In other words, there must have been some motivation to combine the two references in order to render a patent claim obvious. Typically, rendering a patent obvious requires two references. After KSR, there is no longer a requirement of an explicit motivation to combine references. Now, two references may be combined if common sense would lead one skilled in the field of science in question to combine the references. The Federal Circuit has taken this rule one step further, and has found that a patent can be rendered invalid for obviousness with only one reference.

In Boston Scientific v. Cordis Corp. (Fed. Cir. 2009), the Federal Circuit applied the KSR standard to Boston Scientific’s patent, U.S. Patent 6,120,536 (“the ’536 patent”), using only one reference, namely U.S. Pat. No. 5,545,208 (“Wolff”). Wolff described every element of the ’536 patent, but they were described in separate embodiments within the patent. Figure 3B (along with its corresponding description in the specification in Wolff), described some of the elements, and Figure 4 (along with its corresponding description in the specification) described the remaining elements. It is common practice to insert a catch-all statement at the end of a specification stating that “each embodiment, or any combination of the embodiments, are contemplated in the invention.” This allows the patentee to later change the patent claims to include a mixture of the embodiments because there is an explicit reference that a combination of the embodiments were contemplated by the inventor.

Wolff, however, had no such catch-all statement. Thus, the district court rejected Cordis’ argument that the two embodiments described in Wolff render the ’536 patent obvious because there was no explicit motivation to combine them. Unfortunately for Boston Scientific, KSR was issued after the district court’s ruling, loosening the strict requirements for rendering a patent obvious.

The Federal Circuit explained that “all the limitations of claim 8 were found in two separate embodiments in Wolff pictured side by side… Combining two embodiments disclosed adjacent to each other in a prior art patent does not require a leap of inventiveness.” In so stating, the Federal Circuit has opened the door to holding patents invalid for obviousness using only one reference.

What about Anticipation?

It is unclear as to how this ruling with affect how a reference anticipates a patent. A reference anticipates a patent, and thus renders it invalid, when all of the elements of a patent are found in one reference. But even though all the elements of the patent claim were found in Wolff, the Federal Circuit found the patent obvious, not anticipated. Case law regarding this issue should be closely watched in order to further clarify the difference between anticipation and obviousness with regards to one prior art reference.

Technorati Tags: boston scientific, invalid, ksr, obvious, patent, stent