Powerful committees in the US Congress have moved ahead with

bipartisan reform proposals that, the pharmaceutical industry

believes, include elements which will weaken US patents.

Key elements of the Patent Reform Act of 2007 would change the US

system from “first-to-invent” to “first-to-file,” putting it

in line with most other nations. It would also create a review

process to enable patents to be re-evaluated after issue, and grant

more powers to the US Patent and Trademark Office, which

currently has a backlog of more than 735,000 patents.

The bill’s supporters say both these moves would improve patent

quality, with the re-evaluation process enabling companies to

challenge “bad” patents without having to go through costly and

time-consuming legislation. However, pharmaceutical manufacturers are

reliant on just a few patents for big-earning drugs, and the process

would weaken these products’ protection, thus jeopardizing R&D

investments in future innovations, according to the industry.

The House version of the Act, HR 1908, sponsored by Democrat Howard

Berman and Republican Lamar Smith, was approved by the Judiciary

Committee on July 18, with amendments to which the Coalition for 21st

Patent Reform, a lobbying group whose members include a number of

drug majors, gave a cautious welcome. “Constructive improvements”

had been made to the bill in key areas, they said, including dropping

a provision which would have allowed open-ended challenges during the

post-grant review and changes to how courts could assess damaged in

patent suits. Nevertheless, the Coalition members said they continue

to have serious concerns regarding the overall impact which the bill

will have on US patents and the inventions they protect.

BIO concerned over PTO rule-making authority

The Biotechnology Industry Organization also welcomed some

improvements to the bill but remains concerned at its proposals to

give the PTO broad new rule-making authority and change how damages

against patent infringers are calculated, in a way which, says BIO,

would often make infringement cheaper.

“We also believe changes are required to the provision that would

require that courts peel away from the patented and infringed

invention the value of all previously-known elements and award

damages based solely on the remaining elements. This provision

severely devalues all underlying patent rights and could seriously

undermine the incentive to develop novel new forms of medicines and

other biotechnologies,” said BIO chief executive Jim Greenwood.

The reform process is being backed by the high-tech industry through

lobbying body the Coalition for Patent Fairness, whose members,

including Microsoft, believe the current system stifles innovation by

encouraging litigation. They welcome its plans to balance the

apportionment of damages, establish fair standards for punitive

damages, restrict forum shopping and improve patent quality. However,

yet another group, The Innovation Alliance, which also represents

high-tech companies - many of which are reliant on licensing

patents - but also small biotechnology firms and universities, is

expressing similar concerns as the pharmaceutical majors over

intellectual property licensing.

In a letter to S 1145’s sponsors, who include high-profile Senators

including Democrats Patrick Leahy and Chuck Schumer and Republican

Orrin Hatch, The Innovation Alliance warned that the bill would d

undermine patents and call ed for: the deletion of: the sections on

apportionment of damages and the new, open-ended administrative post-

grant review mechanism; the PTO not be granted “overbroad and

unprecedented substantive rulemaking authority; and for “adequate

grace periods to allow patent holders to adjust to changes to

aspects in patent laws and rules.”

Bill condemned as 'unsupportable' by Coalition

However, the version of S 1145 marked up by the Senate panel on July

19 was condemned by the Coalition for 21st Patent Reform (whose

members include drugmakers) as “unsupportable” on key issues like

damages, venue, post-grant review and inequitable conduct. The group

did welcome the panel mark-up’s decision to permanently end the PTO

fee diversion and eliminate substantive rulemaking and added: “it is

obvious that many members of the Committee remain concerned with the

bill and that much more work will be needed before the bill moves to

the Senate floor.”