The American patent system is being slowly, dramatically reshaped by a three-pronged
assault from the Legislature, the courts and the patent office.
And the results aren't looking good for the biotech community and other industries that
rely on strong patent protection, according to a recent roundtable hosted by The
San Diego, which boasts a thriving biotech industry, isn't the only region that could be
negatively affected in the long term.
"This is a national phenomenon that's going to have a significant impact on industry,
and we have to do everything we can to address these concerns," said Harry Leonhardt,
chief intellectual property counsel for Amylin Pharmaceuticals (Nasdaq: AMLN).
"I'm all for the normal ebb and flow (of patent law), but these kinds of drastic changes
are unnecessary. They're applying a standard in one industry that is completely wrong
for another industry."
Most of the changes, according to the four panelists, are being driven by the high-tech
and software industries, which are being hit with multimillion-dollar infringement
lawsuits by so-called "patent trolls." Patent trolls build a portfolio of intellectual
property, not with the intention of bringing a product to market, but to make a profit
from licensing fees.
"The high-tech industry was getting hammered with these huge verdicts," said Eric Acker,
a patent attorney with Morrison & Foerster, which sponsored the roundtable.
Additionally, the technology behind most high-tech and software companies almost becomes
outdated before a filed patent application becomes issued.
Drug development for biotech and pharmaceutical companies, by contrast, takes time and
requires intellectual property rights to be guaranteed throughout the process.
"Given the incredible capital requirements for drug development and the really long
timelines, it's very difficult for us to make these investments when the rules keep
changing by who happens to be on the Supreme Court," said David Urso, a venture
capitalist and chief business officer for Tioga Pharmaceuticals Inc.
Urso would like to see companies given at least a 10-year window of market exclusivity,
with the option to apply for additional time if they meet certain guidelines.
"If you take that risk on and you provide that benefit to society, I don't think you
should be rolling the dice on whether you're going to have market exclusivity," he said.
"I think you're entitled to a period of recouping your costs and making a profit.
"And if we had that guarantee -- and it exists in other jurisdictions -- I think it
would really spur innovation and take a lot of uncertainty out of the equation for
investors and drug developers."
The U.S. Supreme Court has ruled on at least four major patent-related cases in the past
two years, a marked increase from its previous activity on the subject.
"It's an excellent example of how important intellectual property has become to business
in the United States," said David Doyle, an intellectual property attorney for Morrison
& Foerster. "This is an area, intellectual property, that has been incredibly sleepy up
until the last 10 years. Today it's a front-page story. That is really a dramatic
Most of the Supreme Court's decisions have hampered the ability of patent holders to
protect their intellectual property.
In one case, the high court lowered the standard for obviousness, making it easier for
accused infringers to prove the patent is invalid.
The courts also have made it more difficult for patent holders to acquire a permanent
injunction or prove willful infringement.
"The pendulum is swinging back, and swinging back pretty dramatically from a
pro-patentee, pro-patent perspective to more of a hostile attitude towards patents and
the patentee," Doyle said.
The U.S. Patent & Trademark Office recently adopted a series of new rules that would
limit the number of claims for each patent application and limit the number of
continuations that can be filed per case. A court has enjoined the PTO from enforcing
the rules until litigation surrounding the rules is resolved.
In Congress, lawmakers have been proposing sweeping changes to the patent system for
several years, which would switch the United States from a "first to invent" system to a
"first to file" system, among other changes.
Doyle said the high-tech industry has "won the battle of public perception and, to some
extent, judicial perception that the danger of patent abuse outweighs the value being
generated from broader patent protection and greater innovation."
Part of the change also is driven by policy, Leonhardt said, and the desire for the
patent office to limit the number of applications it's receiving. Last year, more than a
quarter of a million patent applications were filed. The patent office's resources
aren't growing as fast, however.
"We need, in the San Diego community, to enhance our lobbying efforts," Leonhardt said.
"Certainly high-tech is doing it. We need to get back out there and address these major
issues. It's in everybody's best interest in this community to do that."
The changes make it difficult for venture capitalists to invest in early stage
development, Urso said. Normally investors wouldn't have a problem with financing
companies that have a patent pending. Not anymore, Urso said.
"If you invest in technology and someone will be able to use that technology without
paying you while developing a drug, it becomes more risky for an investor," Urso said.
Harry Leonhardt, Vice President/Chief IP Counsel, Amylin Pharmaceuticals
David Urso, Chief Business Officer, Tioga Pharmaceuticals Inc.
David Doyle, Morrison Foerster LLP
Eric Acker, Morrison Foerster LLP