Gene Patent/Drug Pricing Concerns and Unintended Consequences Dominate Second Senate Hearing on 101

“Hans Sauer of BIO said that it is easy to argue—after the heavy lifting of discovery and development has been done and a product has made it to market—that it should not be patented in the public interest. ‘As if innovative products fell from the sky and ought to go directly into the public domain…. It is right to encourage complaints about problems, but we must do so with an appreciation of the system’s longer-term benefits for society.’”

Wednesday’s Senate hearing on patent eligibility reform, which began more than 30 minutes late due to votes on the floor, opened with Senator Thom Tillis (R-NC) reiterating that his goal in holding three hearings on this topic and receiving testimony from 45 witnesses, which is not common, is to address the concerns on all sides of the debate. Tillis noted that he and Coons had specifically invited many of the high-tech companies that do not appear on any of the rosters for the three hearings, but they chose not to participate and instead to be represented by David Jones, Executive Director of the High Tech Inventors Alliance (HTIA), who spoke today. While Tillis said, “that’s ok,” he noted that “silence is consent. What we want here is people working out of the shadows, collaboratively.” HTIA’s members include Amazon, Google, Adobe, Intel, Cisco, Oracle, Dell, and Salesforce.

Many of today’s panelists raised more substantive issues with the proposed section 100(k) and 112(f) than did yesterday’s speakers. Section 100(k)defines the term “useful” in the new section 101 and section 100(f) would eliminate functional claiming. Barbara Fiacco, representing AIPLA; Henry Hadad of Bristol-Myers Squibb and the Intellectual Property Owners Association (IPO) President; Paul Morinville of U.S. Inventor; and Phil Johnson, representing the Coalition for 21st Century Patent Reform, all raised various concerns about one or both of these sections. Notably, Hadad said that IPO has not yet taken an official position on the draft, although it meshes with its own 101 proposal, and Fiacco said that AIPLA feels 112(f) and 100(k) are areas for “further consideration.”

In addition to Senator Chris Coons (D-DE) and Tillis, Mazie Hirono (D-HI) and Richard Blumenthal (D-CT) asked several questions of the panelists today.

112(f): An Impossible Task

Morinville was the most vocal about the potential dangers of 112(f) and 100(k) for individual inventors. In his opening statement, Morinville noted that he may be the only patented inventor represented in all of the hearings—while William Jenks of the Internet Association and Jeffrey Birchak both later indicated that they were also patented inventors, Morinville is believed to be the only sole inventor who has testified before Congress in more than a decade, as Josh Malone pointed out on LinkedIn recently.

Morinville voiced his concerns that 100(k) would “create long term confusion” regarding the meaning of the language, “field of technology” and “human intervention,” and that 112(f) would force inventors to describe every single structure in a given invention, which “will prove disastrous to tech patents.”

He explained:

“We use the language of our industry to define our inventions to someone in our industry—not to lawyers intent on word gaming; this requires using functional terms, like “fastener” “amplifier” or “memory.” There are 571 coding languages, each with multiple ways of doing the same thing. [Under the proposed 112(f)], an inventor must list every imaginable way in order to avoid legal gamesmanship. It’s an impossible task.”

Back to Basics

Hans Sauer of the Biotechnology Industry Organization (BIO) pointed to the example of the Federal Circuit denying Roslin Institute of the University of Edinburgh a U.S. patent on a live cloned sheep on 101 grounds. “However you may feel about clones and patents, most people would agree that clones are just about the most unnaturally occurring thing under the sun,” Sauer said. He also noted that, in another case, a patented automotive drive shaft was struck down as an abstract idea “even though one can literally drop it on one’s foot.”

Both Sauer and Johnson attempted to dispel some of the more basic misconceptions currently muddying the waters in the eligibility debate. Sauer emphasized in his opening statement, and again later, that it is easy to argue—after the heavy lifting of discovery and development has been done and a product has made it to market—that it should not be patented in the public interest. “Yet this is what many arguments against section 101 reform boil down to, as if innovative products fell from the sky and ought to go directly into the public domain,” Sauer said. “Such facile arguments ignore that the patent system encourages risk taking and long-term investment in the biggest problems facing this nation and generations to come. It is right to encourage complaints about problems, but we must do so with an appreciation of the system’s longer-term benefits for society.”

Johnson wrapped up his opening statement with a reminder to the subcommittee that the draft bill as proposed would not, “in contrast to the assertions of the ACLU and others” allow laws of nature, abstract ideas or human genes to be patented. “These would remain ineligible because they are not inventions or discoveries, did not result from human intervention and do not have a specific and practical utility in any field of technology,” Johnson said, adding that “life sciences inventions in the diagnostics area should qualify as patent eligible because they are the result of human intervention and have a specific and practical utility in the field of medicine.” Johnson also implored the subcommittee to remember that “just because something is patent eligible, doesn’t mean it is patentable”—a basic but still widely misunderstood concept.

Myriad Problems

The third panel of the day was balanced between Sauer; Natalie Derzko, Of Counsel at Covington & Burling, on behalf of the Pharmaceutical Research and Manufacturers of America (PhRMA); Rick Brandon, Associate General Counsel, The University of Michigan, on behalf of the Associations of American Universities and Council on Government Relations; and representatives of the Association for Accessible Medicines (AAM) and the American Civil Liberties Union (ACLU). The ACLU on Monday organized an urgent phone briefing for Congress and Staff to address its contention that the proposed language of the draft bill would “allow corporations to patent genes,” as one speaker asserted during the call. The ACLU was also quoted in an article published in The Washington Post on Monday in which Sandra Park, ACLU Senior Staff Attorney, said that the proposed legislation would “allow patents on basic things in nature.”

The ACLU’s main concern remains that genes would be patentable, despite much pushback from panelists and repeated assurances from Tillis and Coons that they have no such intentions. Kate Ruane, Senior Legislative Counsel for the ACLU, recounted the Myriad case and explained that “the same day the Supreme Court issued its decision in Myriad, five laboratories announced they would provide BRCA testing to patients, significantly reducing cost and providing more comprehensive testing.” Ruane maintained after being pressed by Coons that she believes the language of the current draft would allow for the patenting of genes with new utility, despite the human genome being mapped and known. Sauer dismissed this notion, saying that human genes were never patentable, although preparations of DNA molecules might be patentable, but “very unlikely human ones because those are well known, and there’s a mountain of readily searchable prior art that would be a huge obstacle to any form of patenting.”

Senator Blumenthal actively questioned this panel about his greatest concern, which is abuses of patents in the pharmaceutical industry. Blumenthal is co-sponsoring a bipartisan bill to curb the practice of “patent thicketing” and wanted to ensure that the draft bill would not encourage such abuses or raise drug prices. Jeff Francer, General Counsel of AAM, said that the bill, by expanding eligibility, “would take us backwards.” He pointed to an example of a drug with a contraindication in which the manufacturer patented the manner of diagnosing the contraindication, thereby forcing competitors to wait for the second patent to expire in order to market the drug. While the District of Delaware rejected the patent in question under the current law, Francer said he is concerned the expansion of eligibility law will make the problem worse. Derzko attempted to refocus the conversation, but Blumenthal seemed concerned when she would not agree with him outright that patent thicketing is a problem.

Fittingly, Blumenthal ended by saying that “this conversation has been conducted at a very high level of abstraction,” and that most average Americans would “have no idea what we’re talking about here today.”

“To the extent there is a disconnect between this conversation and the challenges faced by ordinary Americans, we need help doing our job. How to responsibly stop those abuses without stopping innovation—because we’re all in favor of innovation, but we’re also mindful of the affordability and access to those medicines, which is increasingly difficult.”

Blumenthal asked anyone with a position on patent thicketing, the effects of the 101 reforms on the practice, and real-world examples for consumers, to submit statements for the record.

Here’s the breakdown of who argued for and against the proposed reforms. Full written testimonies are now available here.

FOR

American Intellectual Property Law Association (AIPLA)American Bar Association (ABA)
Intellectual Property Owners Association (IPO)
Paul Morinville/U.S. Inventor: (AGAINST 100(k) and 112(f))
Coalition for 21st Century Patent Reform
Innovation Alliance
Biotechnology Innovation Organization (BIO)
Pharmaceutical Research and Manufacturers of America (PhRMA)
Associations of American Universities and Council on Government Relations

AGAINST

High Tech Inventors Alliance
United for Patent Reform
Internet Association
Software and Information Industry Association
Association for Accessible Medicines
American Civil Liberties Union

(1) Adding "on the internet" to an existing process very rarely makes something patentable - it would generally be considered unpatentably obvious to do so. (2) The terms of U.S. patents are currently 20 years from the earliest filing date of the patent application. That is not likely to change.

Article I, Section 8, Clause 8, of the United States Constitution grants Congress the power "To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." Congress enacted the patent system and copyright system pursuant to this clause.

The basic theory of patents is a bargain between you and the United States — If (a) you tell the world how to make and use your invention (in a patent application), and (b) you have contributed an invention that is useful, new, and not obvious without the benefit of hindsight, then the United states government will give you a limited monopoly on making, using, selling your invention until the end of the term.

That way, you have plenty of time to become fabulously wealthy off of your invention (this is in your private interest) or at least to get a head start on your competitors. Then, after the patent term runs out, the rest of the world can benefit from your invention freely (this is in the public interest).

Putting this into context, the chemistry of a patented drug may be simple to produce, once the procedures are known. However, the research into creating the chemical compound, and understanding its effects are not. Further, there are many research products which do not lead to any useful result. The developer of the drug uses the patent term to keep the price of the drug artificially high to cover the costs of all development projects - the ones that will succeed, and the ones that will fail. After the patent term, the drug becomes available to anybody to make, use, sell, and import.

While this may be frustrating for a person whose condition requires a patented drug now, at least the drug is available, where it might not have been if not for the ability to recoup the costs of research through a patent. And, it will be great for a person with the same condition after the patent term ends because the drug is now available to treat the condition, at generic prices, because of the public benefit side of the bargain.

That is how the patent system promotes the progress of science and the useful arts.

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