Electronics vs. Biotech – Two Perspectives on “Patent Reform”

The most interesting session I attended today at the AUTM Annual Meeting was one on patent reform. What was most interesting was not a recap of the aspects of S.515, which is the most up-to-date reform bill pending, but the summaries of the considerable differences between what the IT Industry and the biotech/pharma industry (and most universities) would like to see or not see in a final bill (if there ever is one).

David E Huizenga of Arnall Gordon Gregory LLP noted that all of the Supreme Court’s IP decisions over the last three years have weakened patents. The “biotech model” is roughly¬†one product=one drug=one patent. Most pharmaceuticals are protected by a relatively small number of patents, and those patents are protecting the big returns needed to support development, often of a single compound, over several years. Therefore, certainty becomes important, and this leads to opposition to post-grant attacks on patents, or at least a desire to have a high evidentiary threshold for their initiation. At least the most recent versions of the Senate and House bills have relatively short time periods after issuance within which such “oppositions” can be initiated.

It is relatively easy for pharma to show big damages in terms of lost profits, so a move toward reasonable royalties as a preferred remedy is a no-go. On the other hand, biotech/pharma want a repeal of the inequitable conduct defense, which can gut a small patent portfolio on subjective evidence and would also support proceedings in the PTO designed to permit submitting art to moot a later charge of inequitable conduct. Biotech supports the repeal of the best mode defense. No surprise there.

Charley F. Brown of Ballard Spar presented the IT industry perspective and it couldn’t have been more different. The IT industry is focused on the threat of litigation by NPEs or “trolls.” He hastened to add that universities¬†are not trolls since they contribute much more to society than bothersome patents. One electronic product may be covered by more than 1000 patents, giving NPEs lots of targets. Because the industry is standardized, there are also lots of defendants and they can be sued anywhere they have sales (like in the E.D. Tex.). The NPE can argue for a “reasonable royalty” on the entire device. This has led to at least five verdicts of over $500M each in the last seven years.

So the IT industry supports vigorous post-grant opposition proceedings and wants to be able to present evidence of public use and sale of the product in question. IT would support limits on forum-shopping and preliminary injunctions. Damages reform is also a big plus for any reform bill.

So this is a real yin/yang situation. University advocates like COGR generally support the current Senate bill, but I wonder if they are giving in too easily on first-to-file. Remember, the EP does not have ss.102(e)/103 “prior art” rejections. More on that later.

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