TCS Daily


Your Blackberry Is Safe Now ... But Is Your Medicine?

By Mario Villarreal, PhD, MA - March 22, 2006 12:00 AM

According to Abraham Lincoln "the patent system added the fuel of interest to the fire of genius." And although the U.S. Patent Law continues to serve this purpose, it is now showing its age and is in need of reform.

The Blackberry patent litigation process has received considerable attention, but the negative consequences of an outdated patent system go beyond technology. U.S. patent law's principle of inequitable conduct is being exploited in unintended ways with unforeseeable consequences, threatening the viability of pharmaceutical development.

Patent applicants are required to pursue applications "with candor, good faith, and honesty." The violation of this duty, along with intent to mislead the U.S. Patent and Trademark Office (PTO), may constitute inequitable conduct and may render a granted patent unenforceable.

Declaring a patent unenforceable on the grounds of inequitable conduct requires clear evidence that the applicant committed any of the following three actions:

(1) affirmative misrepresentation of a material fact,

(2) failure to disclose material information, or

(3) submission of false material information.

The courts weigh the materiality of the information provided (or withheld) against the evidence of intent to mislead the PTO in order to obtain the patent. Weighed against high materiality, a lower threshold of intent can be found to constitute inequitable conduct.

The ongoing litigation regarding the painkiller OxyContin® illustrates the dangers of a too-liberal application of inequitable conduct. Purdue Pharma L.P., the patent holder, sued generic manufacturer Endo Pharmaceuticals Inc. for patent infringement. The U.S. District Court of the Southern District of New York ruled that, although Endo infringed Purdue's patent, the patent was unenforceable on the grounds of inequitable conduct.

The inequitable conduct ruling was based upon a particular assertion that Purdue made during the prosecution of the patent application. Purdue claimed that their researchers had "surprisingly discovered" that a four-fold range of dosages of the drug would treat "about 90%" of patients. When this statement was made, the company did not have empirical evidence to support it; rather it was based on the knowledge and insight of the scientists.

The district court determined that the context of Purdue's claim suggested the existence of clinical data and that the lack of such data constituted the withholding of material information. It found the withholding of that information to be of a high enough level of materiality and of deceptive intent to declare the patent unenforceable.

This ruling shows a fundamental misunderstanding of how the medical discovery process works. Medical scientists publish and share potentially ground-breaking elements of their research (a surprising discovery, if you will) with the international scientific community. Disclosure is a fundamental part of the peer-review scientific process. Under these circumstances, a property right over a potentially valuable medical invention or discovery is needed before moving forward on the research project.

The Court of Appeals upheld the finding that Purdue withheld material information but determined the materiality did not meet the threshold necessary to invalidate a patent. It recommended the trial court "reweigh its materiality and intent findings to determine whether the sanction of unenforceability due to inequitable conduct is warranted." Though far from resolution, the appeals court has sent the right message to the trial court: a high level of materiality is crucial to invalidate a patent. Nevertheless, the damage is already done.

Once generic drugs enter the market, price structure is affected in a permanent way and damages include both past and future lost profits. The consequences for Purdue have been devastating. Prior to Endo's patent infringement, OxyContin® represented 90 percent of sales in 2003. Research projects were abandoned or put on hold, the company's value was harmed, and almost 2,000 jobs were lost. If the trial court finds that Purdue's patents are indeed valid, the potential monetary cost for Endo and Teva (another OxyContin® infringer) would be measured in billions of dollars. The awarded damages could be the largest in the history of patent litigation.

Above all, the ruling dangerously threatens the patents of numerous medical inventions and drugs, and thereby future medical innovation. Whether an invention is based on insight or clinical data "does not by itself affect patentability." Therefore, a precedent of patent unenforceability based on the Purdue litigation casts inventions based on experience and judgment in an unfavorable light.

The certainty of patentability for an invention based on insight has been shaken, and future biomedical innovation will suffer. The case highlights a system that offers exploitable loopholes to patent infringers and shows just how badly reform is needed. A legal system that is hard to understand and whose interpretations are unpredictable hinders productive endeavors.

The Patent Reform Act 2005 introduced by Representative Lamar Smith (R-Tex.), which is currently on hold in Congress, should be revived. This legislation incorporates several recommendations made in a 2004 report published by the National Academies of Science: "A Patent System for the 21st Century." The report concluded that "in view of its cost and limited deterrent value," inequitable conduct doctrine should be eliminated or radically reformed.

An erratic application of the inequitable conduct precept has potential for great economic damage and may hinder innovation. An opinion of the United States Circuit Court of Appeals for the Federal Circuit in a separate case (Burlington Industries v. Dayco Corporation) states that "the habit of charging inequitable conduct in almost every major patent case has become an absolute plague." A plague that needs to be eradicated.

Mario Villarreal is a Research Fellow and Jonathan Stricks is a Research Assistant at the American Enterprise Institute.

2 Comments

No patients for Software.
I am NOT one of those freedom of information hacks. But when I person can sit on a patient for the 1st person shooter game and pretend they invented it first SOMETHING IS WRONG.

Good article, but there needs a whole new way to protect software.

Medicine for Bad Patents
An EFF Initiative To Protect Innovation and Free Expression
Electronic Frontier Foundation

Every year numerous illegitimate patent applications make their way through the United States patent examination process without adequate review. The problem is particularly acute in the software and Internet fields where the history of prior inventions (often called "prior art") is widely distributed and poorly documented. As a result, we have seen patents asserted on such simple technologies as:

One-click online shopping (US Patent #5,960,411)

Online shopping carts (US Patent #5,715,314)

The hyperlink (US Patent #4,873,662)

Video streaming (US Patent #5,132,992)

Internationalizing domain names (US Patent #6,182,148)

Pop-up windows (US Patent #6,389,458)

Targeted banner ads (US Patent #6,026,368)

Paying with a credit card online (US Patent #6,289,319)

Framed browsing (US Patent #5,933,841 & #6,442,574)

Affiliate linking (US Patent #6,029,141)

http://www.eff.org/patent/wp.php

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