The IPKat

Myriad: does it make a difference in the real world?

noreply@blogger.com (Jeremy) — Tue, 18 Jun 2013 22:21:00 +0000

The IPKat is always pleased to receive an email or two from a respectable source, so he was delighted so receive the following brief and to-the-point message from Professor Sir Robin Jacob, helpfully signposted 'IPKat Question' in case its recipient should mistake the sender's intention. It reads like this:

Does Myriad [see earlier Katposts here and here] really make a difference? If you can have patents for cDNA consisting of a gene code but not the isolated gene (with its introns) what difference does that really make in the practical world?

Sir Robin is talking here about the world in which business decisions are taken, new products tested and marketed, investments placed and scientists employed; a world in which manufacturers vie with one another for commercial advantage, and in which patent owners tiptoe through the minefield of prospective patent litigation, regulation of healthcare products and antitrust and abuse of monopoly. What does the ruling in Myriad mean in this world? Answers, please.

Security interests in trade marks: has something gone awry?

noreply@blogger.com (Jeremy) — Mon, 17 Jun 2013 21:59:00 +0000

Every so often the IPKat is asked to draw readers' attention to an issue of interest or concern with regard to the administrative machinery that underpins the smooth and efficient operation of the IP system. Here's one such instance, in the form of a reader's email:

Perhaps there's no room left in the computer ...

This may have passed me by [writes Mark Robinson, of Mark Robinson Transactional Intellectual Property Services], but I have just noticed that the trade mark section of the UK Intellectual Property Office (IPO) website no longer provides online details of registrable transactions such as security interests. In the recent past, a search against a trade mark would indicate a security interest together with details of the holder and a brief summary of the restrictions on the trade mark owner. Now the website just reveals that there is a 'registrable transaction', the date on which the form was received, and the journal reference number. If one wants to obtain further details (and assuming that one doesn't keep a lifetime's supply of journals), one has to request an office copy of the file. This costs £5 per mark and there's a two week backlog.

There seem to be a number of issues here:

1. in an age of making information freely available, why has the IPO suddenly changed its system in order to prevent free and immediate inspection?

2. it is important for all users of the IP system that any security interests (or other registrable transactions) be immediately apparent from a search of a trade mark. Under the new system, the case details no longer indicate the existence of any registrable transactions. In order to find these, you have to click on 'view historic case details' and then click again on 'view historic details'. This requires a degree of dogged persistence that should not be necessary to ascertain important limitations on a trade mark;

3. having finally established the existence of a registrable transaction, is it reasonable for the public to pay £5 per mark (and wait two weeks) in order to see this type of important information?
I am not aware of this change being the subject of a public announcement by the IPO, and I don't yet know whether it also applies to patents and registered designs.

Do any readers -- including those from the IPO -- have any comments or explanations? And what happens in countries other than the UK? Do let us know.

China leads US in Champagne protection

noreply@blogger.com (Jeremy) — Mon, 17 Jun 2013 15:36:00 +0000

"Cheers!"

This Kat avoids all sparkling wines, regardless of their geographical provenance, since they get literally up her nose. Far more fun for her are the still, dry products of the vine or, even better, a good single malt whisky. That is not to say, however, that he does not take an acute interest in the legal shenanigans that have accompanied the persistent efforts of the French Champagne industry to secure the exclusive right to use the word 'Champagne' in respect of one particular type of sparkling wine -- and the equally persistent efforts of their cousins in the United States to thwart those efforts. In a helpful blogpost, Elizabeth Dunn, a trade mark attorney in the Brighton office of Dehns, explains the current legal position:

The Comité Interprofessionel du Vin de Champagne (CIVC), the body representing producers of Champagne, has succeeded in securing protection in China, as a geographical indication, for the word CHAMPAGNE and its Chinese transliteration "香槟".

China is currently only the twelfth-largest market for champagne exports in the world, but it is the fastest growing. Sales exceeded two million bottles in 2012, an increase of 52% since 2011 and a quadrupling of sales since 2006. With a population of 1.3 billion there is enormous potential for further growth: a spokesman for CIVC is quoted as saying the country is one of the biggest future markets for champagne. It was therefore imperative to protect the name and to avoid it becoming a generic word for sparkling wine which would dilute the reputation of 'Champagne' in the minds of Chinese consumers.

The applications were filed with the Administration of Quality Supervision Inspection and Quarantine (AQSIQ), one of three organisations which can grant geographical indicationprotection in China, in June 2012. Published in December 2012, they proceeded rapidly to registration on 20 March 2013. The registrations include a list of qualifications to be met by producers labelling their product as Champagne; in order to qualify the grapes must be grown in the Champagne region of France, the grapes must be of the correct variety and the wine must be manufactured by the traditional process. Before obtaining these registrations, Champagne manufacturers had to rely on the concepts of "famous foreign place name" as set out in Chinese trade mark law and "unique name of a famous commodity" defined in the Anti-Unfair Competition law to take action against those using the mark on wine produced outside France and on numerous other goods from candles to dog toys.

Viet-Champ

The successful registrations make it possible to initiate administrative raid actions, customs protection and civil litigation on grounds of trade mark infringement. The rapidity with which the Chinese authorities acknowledged the status of Champagne and allowed its protection as a GI provides a sharp contrast to the position in the US, a significantly more developed market for the product. The United States is the second largest export market for champagne (only the British drink more). Sales of Champagne in the US totalled 23 million bottles in 2012. However, presumably as a result of the lobbying power of its own, long-established, wine producers, the US authorities have been reluctant to limit the exclusive use of the Champagne mark to the French producers. The US is now among only a handful of countries which does not offer full protection to the Champagne name; the others are Russia, Vietnam and Argentina. Arguably, champagne is seen as a generic term for sparkling wine by US consumers and the dilution feared by the CIVC in China is already apparent in the US. Californian champagne is still legally available from US wine merchants and is traditionally served at theinauguration dinner for each new US President.

The protection for geographical indications of source as it is now understood was set out in the Trade -Related Aspect of Intellectual Property Rights Agreement (TRIPS) 1994 to which the US was a signatory. This was the first internationally codified protection for GIs. Under the TRIPS agreement, geographical indications are

"indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin".

Under Article 23 of the agreement, specific provisions give additional protection for wines and spirits. These state that members must enact laws that prevent the use of geographical indications for wines and spirits that do not originate from the designated geographical location. Further, these laws must also prevent uses of such indications where the true place of origin appears in conjunction with the geographical designation of the goods.

The US has never enforced this article to the satisfaction of the champagne producers. The national regulations which govern the use of GIs in the US are those of the Alcohol and Tobacco Trade and Tax Bureau (TTB). These regulations divide geographical indications for wines into categories and base their protection on these divisions. Champagne is defined as a 'semi-generic' indication and, for many years, could be used on wines which did not originate in the Champagne region provided that the actual place of origin was used in conjunction with the geographical name -- hence Californian Champagne. Following years of negotiation between the US and the EU, an agreement on trade in wine was signed on 10 March 2006. In that agreement, the US agreed to change the legal status of these semi-generic names to restrict their use solely to wines originating in the relevant member state. The law to give effect to this restriction was enacted on 20 December 2006. However, there was a significant limitation to the protection enacted which is the basis of the ongoing complaint against the US by the CIVC. There is a "grandfather" provision included in the US legislation which allows any person who was using a semi-generic name in direct conjunction with an appellation of origin disclosing the true place of origin of the wine, prior to 10 March 2006 to continue with that use.

Given that many of the sparkling wines produced in the US are made using the traditional Champagne method and were developed by representatives from, or with connections to, the French Champagne houses, it is hardly surprising that they are reluctant to relinquish the name. The CIVC continues to educate US consumers as to the special status of Champagne via its educational and promotional arm the 'Champagne Bureau'. Their espoused goal is global protection of the Champagne name but it may be some time before the US gives in to perceived EU protectionism and removes all the rights of its producers to use the famous name.

What one hand gives, the other takes away? A deeper look at Myriad

noreply@blogger.com (Jeremy) — Mon, 17 Jun 2013 04:42:00 +0000

Catering for all tastes, this weblog has provided (i) the breaking news announcement by Jeremy that the US Supreme Court had given its ruling in Myriad Geetics and (ii) a mouth-watering hors d'oeuvres from guest Kat Matthias together with Roberto Romandini in the form of some succinct comments on that decision. Now's the time for (iii) the main course -- elegantly prepared and eloquently presented by IP master chef and former guest Kat Norman Siebrasse. This is Norman's take on the decision, flavoured with some delicious thoughts of his own:

Association for Molecular Pathology v Myriad Genetics, Inc 12–398, 569 U. S. ____ (2013)

But what exactly is a law of nature anyway ...?

In Myriad Genetics the USSC has held, in a unanimous decision, that claims to isolated DNA are not patentable subject matter, but that claims to cDNA are patentable. The Myriad Genetics decision is better than I had anticipated after the disappointing Prometheus decision -- and not only because of the holding regarding cDNA. The Court’s reasoning turned primarily on its misguided rule against patenting “laws of nature,” and to that extent it is seriously flawed, but there are hints of a better analysis. Moreover, the Court expressly noted that “this case does not involve patents on new applications of knowledge about the BRCA1 and BRCA2 genes. . . . Many of its unchallenged claims are limited to such applications” (original emphasis). There is also an important negative point: the Court did not reaffirm its traditional “preemption” rationale for its rule against patenting laws of nature. This suggests that by claiming applications of knowledge relating to newly discovered genes, an inventor may be able to gain the same practical protection as would be possible by a claim to the gene itself.

The patent systems I am familiar with, including the US, the EPC, and the UK pre-EPC, all have a rule against patenting abstract ideas. (For the origin of the rule, see here.) In UK and Canadian law, this is understood as an objection to patenting abstract ideas: “A disembodied idea is not per se patentable. But it will be patentable if it has a method of practical application.” (Shell Oil [1982] 2 SCR 536 at 554, summarizing UK case law.) Laws of nature are often assimilated to abstract ideas, and often, as with “F = ma” stated as such, this is sound. But starting with Funk Brothers , 333 US 127 (1948), the USSC has interpreted this as a rule against patenting inventions based on laws of nature. This is very different. As Frankfurter J pointed out in Funk Bros “[e]verything that happens may be deemed ‘the work of nature,’ and any patentable composite exemplifies in its properties ‘the laws of nature.’ Arguments drawn from such terms for ascertaining patentability could fairly be employed to challenge almost every patent.” Unfortunately, Frankfurter J was in the dissent on this point, and the result has been that the USSC has tended to strike down claims where it is intuitively clear that the invention rests on a discovery of nature, while upholding claims where the invention is, on the surface, a thing. (For a detailed review and critique of the US law on this point, see here.)

This same fallacious reasoning continues in Myriad Genetics when the Court noted (slip op 11-11) that

It is undisputed that Myriad did not create or alter any of the genetic information encoded in the BRCA1 and BRCA2 genes. The location and order of the nucleotides existed in nature before Myriad found them. Nor did Myriad create or alter the genetic structure of DNA. Instead, Myriad’s principal contribution was uncovering the precise location and genetic sequence of the BRCA1 and BRCA2 genes within chromosomes 17 and 13. The question is whether this renders the genes patentable.

Conversely, “the lab technician unquestionably creates something new when cDNA is made” (slip op 17), and it is therefore patentable. This seems to conceive of the invention as a thing, namely the gene itself, which Myriad admittedly did not create, or the cDNA, which it is did create. But in either case, Myriad’s real contribution was knowledge about the function of the gene. And, as Sir Hugh Laddie, has explained, “The invention is a novel mental concept which is embodied in, or exploited through, new products or processes. The patent's function is to enable that concept to be protected in exchange for publishing it to the world so that, after expiry, the public can use it” (American Home Products v Novartis [2000] RPC 547 (Pat) [18], my emphasis). More pithily, Lord Hoffmann noted in Merrell Dow [1996] RPR 76 noted that “An invention is a piece of information.”

With that said, that an invention is information does not imply that the information may be claimed as such. The rule against abstract claims places limits on how information may be claimed. The Myriad Genetics decision hints at this in its response to the argument that isolated DNA is just as unnatural as cDNA:

Myriad’s claims are simply not expressed in terms of chemical composition, nor do they rely in any way on the chemical changes that result from the isolation of a particular section of DNA. Instead, the claims understandably focus on the genetic information encoded in the BRCA1 and BRCA2 genes. If the patents depended upon the creation of a unique molecule, then a would-be infringer could arguably avoid at least Myriad’s patent claims on entire genes (such as claims 1 and 2 of the ’282 patent) by isolating a DNA sequence that included both the BRCA1 or BRCA2 gene and one additional nucleotide pair. Such a molecule would not be chemically identical to the molecule “invented” by Myriad. But Myriad obviously would resist that outcome because its claim is concerned primarily with the information contained in the genetic sequence, not with the specific chemical composition of a particular molecule.

This suggests that the Court’s real objection is not that the patents claimed naturally occurring DNA, but rather that it claimed “presentations of information . . . as such,” to put in the terms of EPC Art 52. The difficulty with the Court’s reasoning here is that a proper analysis of this issue would turn on how the claims are construed. It is no doubt true that the claim is “concerned primarily” with the information, but that alone does not make it a claim to information as such, rather than a claim to a molecule embodying that information. The Court seems to have assumed that because the claim is about information, is therefore a claim to information. This again reflects the basic misunderstanding that has dogged the USSC analysis of patentable subject matter for decades: the USSC cannot seem to grasp that there is a difference between a claim to an idea, and a claim to an application embodying that idea. So, this passage is at most a hint at a better analysis, rather than a sound justification for the decision.

How would a proper analysis proceed? Though that rule against abstract claims is fundamental, it has seldom been applied to strike down a claim, and its precise bounds are not clear. I have argued that the rule against abstract claims is probably best justified by the difficulty of determining the bounds of such claims. For example, Morse’s famous eighth claim at issue in O'Reilly v Morse 56 US 62 (1854), to the use of electromagnetism for communication at a distance, should have been held invalid as being anticipated, not just for overbreadth: the claim would encompass semaphores, as light is a form of electromagnetism. But no one could appreciate this at the time, as it was not known that light and electromagnetism were linked. Put another way, if an invention is claimed as a theory, it is necessary for a defendant to know the theory of how its gizmo works in order to know whether it infringes the claim. When an invention is claimed as an application, all that is necessary is to see whether the practical application is the same. On this rationale, a claim to isolated DNA might be invalid if the claim did not provide adequate notice to other as to what activity would be infringing. I suspect that on a proper construction of the claim, a claim to isolated DNA would not offend the rule against abstract claims; but that conclusion would require a very different analysis from that provided in Myriad Genetics.

While the reasoning in Myriad Genetics is deficient, the Court did indirectly affirm one half of the traditional rule as stated in Shell Oil, namely that applications of knowledge are patentable, when it acknowledged that “this case does not involve patents on new applications of knowledge about the BRCA1 and BRCA2 genes” (slip op 17-18). Moreover, it made no reference at all to the rationale for the rule against patenting laws of nature offered in cases such as Prometheus, which is that patents based on laws of nature would monopolize or “preempt” that knowledge. The preemption argument is also fallacious; a patentee should be able to monopolize it inventive contribution, in order to ensure that the reward is commensurate with the contribution. By omitting any mention of the preemption rationale, and by affirming the patentability of applications of this knowledge, it may be that the USSC in Myriad Genetics has taken away with one hand, but given with the other. By claiming all applications of the knowledge of a gene sequence, it may well be possible to get the same practical protection that would be offered by a claim to the isolated gene.

Note that the holding regarding cDNA was strictly obiter. The claims at issue in the USSC were claims 1, 2, 5, 6, and 7 of U. S. Patent 5,747,282, claim 1 of U. S. Patent 5,693,473, and claims 1, 6, and 7 of U. S. Patent 5,837,492, all of which claimed an isolated DNA molecule, and all of which are consequently invalid. In addition to these claims, at issue were claim 20 to ‘282, claim 1 of U.S. Patent 5,709,999, claim 1 of U.S. Patent 5,710,001, claim 1 of U.S. Patent 5,753,441, and claims 1 and 2 of U.S. Patent 6,033,857, all of which were methods for screening by comparing the suspect gene with the specified gene sequence. All of these claims were held to be invalid by the Federal Circuit. Claims that were not challenged include transformed cells, primers and kits.

Thanks so much, Norman. We really appreciate your well-informed analysis and hope that our readers will too.

Are Human Genes Patentable?

noreply@blogger.com (Matthias Lamping) — Sat, 15 Jun 2013 13:33:00 +0000

Copy Kat, the first kitten clone

Washington – On Thursday, the Supreme Court delivered its eagerly awaited judgment in the Myriad case (Association for Molecular Pathology v. Myriad Genetics), putting an end to 20 years of USPTO practice and overruling what had appeared to be settled since the Court’s landmark decision in Diamond v. Chakrabarty: the patentability of human genes. Gone are the days when biotechnology companies could obtain patents for isolated human DNA [although they may still obtain a patent for isolating it].

The Supreme Court had to decide on two issues: (1) Are DNA sequences eligible for patent protection? (2) If not, what about complementary DNA sequences (cDNA)?

In an unanimous ruling, the nine Justices came to the conclusion that DNA sequences are products of nature; isolating them from their natural environment does not create anything with markedly different characteristics. Isolated human genes are therefore not considered patentable. However, cDNA is deemed patent eligible, because its chemical composition is different from that of naturally occurring DNA.

With regard to genomic DNA, the Supreme Court notes:

It is undisputed that Myriad did not create or alter any of the genetic information encoded in the BRCA1 and BRCA2 genes. The location and order of the nucleotides existed in nature before Myriad found them. Nor did Myriad create or alter the genetic structure of DNA. Instead, Myriad's principal contribution was uncovering the precise location and genetic sequence of the BRCA1 and BRCA2 genes […]. The question is whether this renders the genes patentable. […]

Myriad did not create anything. To be sure, it found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention. Groundbreaking, innovative, or even brilliant discovery does not by itself satisfy the § 101 inquiry. […]. Myriad found the location of the BRCA1 and BRCA2 genes, but that discovery, by itself, does not render the BRCA genes "new . . . composition[s] of matter," § 101, that are patent eligible. […]

Many of Myriad's patent descriptions simply detail the "iterative process" of discovery by which Myriad narrowed the possible locations for the gene sequences that it sought. Myriad seeks to import these extensive research efforts into the § 101 patent-eligibility inquiry. But extensive effort alone is insufficient to satisfy the demands of § 101.

With regard to cDNA, the Court explains:

cDNA does not present the same obstacles to patentability as naturally occurring, isolated DNA segments. […]. Creation of a cDNA sequence from mRNA results in an exons-only molecule that is not naturally occurring. […] The lab technician unquestionably creates something new when cDNA is made. cDNA retains the naturally occurring exons of DNA, but it is distinct from the DNA from which it was derived. As a result, cDNA is not a "product of nature" and is patent eligible under § 101.

Finally, the Supreme Court points out that the case does not involve method claims, patents on new applications of knowledge about the BRCA1 and BRCA2 genes, or the patentability of DNA in which the order of the naturally occurring nucleotides has been altered.

Since the IPKat is a native European [the UK is still a Member of the EU, right?], it cannot hurt to draw a brief comparison with the situation in Europe. As far as genomic DNA sequences are concerned, the protection available in EU Member States is partly broader und partly narrower than in the US. It is broader because, according to Articles 3 and 5 of the Biotechnology Directive, genomic DNA can be subject to a composition claim even though it is identical to natural DNA. At the same time, protection is narrower because both genomic DNA and cDNA are only subject to purpose-bound protection. According to the interpretation of Article 9 of the Biotechnology Directive adopted by the CJEU in the Monsanto case (Monsanto Tchnology v. Cefetra et al.), the protection conferred by a patent for a gene sequence is limited to the (technical) function of that sequence, as indicated in the patent application.

This Kat will not dare to speak out on the practical implications of the Myriad ruling. But other Kats and readers are very welcome to put in their two cents.

Posted by: Matthias Lamping & Roberto Romandini

Image source: ScienceMag

Friday fantasies

noreply@blogger.com (Jeremy) — Fri, 14 Jun 2013 15:42:00 +0000

This week the IPKat learned of the existence of the Kosovo Institute of Intellectual Property (KsIIP). The KsIIP, so far as he can discover, is a non-profit association, established in Kosovo, which aims to promote intellectual property rights in that country by providing training for young professionals, entrepreneurs, lawyers, not to mention students of law and economics. Further details may be obtained by emailing the KsIIP at kosovoip@gmail.com

This Kat was thrilled to hear the news today that his friend Dr Galit Gonen, who heads up Teva's European litigation team, was voted ILO Global IP Counsel of the Year in New York last night. Recent readers of this weblog may not know that, having obtained her doctorate on linkages between legal and marketing theories regarding secondary patents for pharmaceuticals, Galit was kind enough to put her head on the chopping board and defend it all over again for an IPKat Seminar back in November 2011 -- a brave and courageous thing for anyone to do.

Around the weblogs. Cynics may laugh at the usefulness of geographical indication protection, but they work: here's a Class 46 blogpost by Miguel Angel Medina on how a Colombian GI for coffee was enforced in Spain against a speculative local trade mark applicant. Over in Africa, Chijioke Ifeoma Okorie -- who has now joined the Afro-IP blog team -- has made some good points about the relationship of copyright-based businesses to the increasingly popular concept of open educational resources. On the 1709 Blog, Asim Singh relates how the transfer of responsibility for graduated responses to online copyright abusers from HADOPI to the CSA has hit a speed bump.

Do you practise IP and speak Bulgarian? If so, you will be pleased to learn from Katfriend Ventsi Stoilov that Bulgaria's Council of Ministers has now said that all citizens of the European Economic Area and Switzerland can practise intellectual property law in that lovely country -- so long as they are registered with the local Patent Office [hang on there, says Merpel, shouldn't this have happened ages ago? What has taken so long?].

It’s Friday – why not curl
up and listen to a good
podcast on patent trolls?

When patents attack. Much has been written recently about recent efforts by the US government and other jurisdictions to help operating businesses defend themselves against claims from patent trolls, including here, here and here. What more could be said? Well, Katfriend Miri Frankel has just come across a podcast called “When Patents Attack” by National Public Radio show This American Life. The podcast details the show’s investigation of an NPE called Intellectual Ventures and its subsidiaries and patent holdings. According to This American Life, the representatives they interviewed from Intellectual Ventures stated they were helping small inventors generate income from their patented inventions. That claim set This American Life off on a two-year investigation into the inner workings of Intellectual Ventures and the inventors they claim to help. The twists and turns they uncover in the history of the NPE and the patents it acquired is fascinating and worth a listen.

AG Jääskinen says that "intention to target" applies also to online copyright infringement cases

noreply@blogger.com (Eleonora Rosati) — Fri, 14 Jun 2013 14:21:00 +0000

At last! Merpel celebrates
publication of the AG Opinion
in Pinckney

While busy thinking (as she constantly does) about online copyright-related issues, this Kat wanted to see whether there were any news concerning her long-time obsession (here and here) with Case C-170/12 Pinckney.

And indeed here is some news at last!

Yesterday Advocate General Niilo Jääskinen issued his Opinion [not yet available in English though - lack of timely translations was discussed also during last Wednesday's katparty] on this alluring reference from the French Court of Cassation, seeking clarification as to the interpretation of the Brussels I Regulation (Regulation 44/2001) as applied to online copyright infringement cases.

The French court referred the following questions to the Court of Justice of the European Union (CJEU):

Is Article 5(3) of [Brussels I Regulation] to be interpreted as meaning that, in the event of an alleged infringement of copyright committed by means of content placed online on a website,

- the person who considers that his rights have been infringed has the option of bringing an action to establish liability before the courts of each Member State in the territory of which content placed online is or has been accessible, in order to obtain compensation solely in respect of the damage suffered on the territory of the Member State before which the action is brought,

- does that content also have to be, or to have been, directed at the public located in the territory of that Member State [eg intention to target] or must some other clear connecting factor be present?

Kat light pink knees

Is the answer to Question 1 the same if the alleged infringement of copyright results, not from the placing of dematerialised content online, but, as in the present case, from the online sale of a material carrier medium which reproduces that content?

According to the Italian version of the Opinion, overall the AG thinks that the CJEU should declare the request for a preliminary ruling inadmissible. However, should the Court decide to consider the case, in the event of alleged infringement of the exclusive rights of distribution by means of online sales of material supports (CDs) that contain copyright-protected materials or communication by means of online transmission of copyright-protected contents, then Article 5(3) of Brussels I Regulation should be interpreted as allowing the relevant rightsholder to sue the alleged infringer in the Member State:

- in which the subjects who were responsible for the making available online of CDs are established, to seek full redress of damages, or

- to which the activity of the concerned website is targeted, to seek redress of the damages suffered in the territory of that Member State.

We'll see whether the CJEU decides to follow AG Jääskinen's Opinion, although this Kat suspects that it is unlikely that it will depart significantly from it, especially after exciting judgments like Sportradar, Pammer and Donner.

Thanks again!

noreply@blogger.com (Jeremy) — Thu, 13 Jun 2013 20:55:00 +0000

Now that the IPKat's Tenth Birthday party's over, the guests and active participants have returned to their day-jobs and the remains of the last accidentally trampled canapé have been carefully scraped from the carpet in readiness for the next reception, it's time for a few further thank-yous.

First, gratitude is expressed to those generous souls who presented this Kat with various items of mammalian memorabilia (books, postcards, maneki-nekos and the like): he can't thank you all personally since some came unsigned, but the thought behind these little gifts is very much appreciated.

Secondly, the IPKat thanks the ancillary staff at Allen & Overy LLP for working so hard to keep the event running smoothly. Adam the sound technician, together with the squad of well-trained waiters, waitresses, door-hold-openers and cloakroom staff -- your unobtrusive efficiency was a credit to you.

Thirdly, our gratitude is extended to the hundreds of registrants who played their part too, by leaving (as far as possible) no-one alone and without company during the break and the reception, and for brazenly introducing themselves to some of the celebrities present, regardless of the latter's status and temperament.

Finally, thanks to our online readers, without whom there would never have been much point the IPKat and Merpel perserving. We're thrilled to announce that today, so nearly on the tenth anniversary of this blog's birth, we have welcomed our five millionth visitor to the website. You are truly welcome, whoever you are, and we hope to be able to serve you and your fellow members of the IP community for many a long year to come.

*******************************************

And now for an apology: several of yesterday's speakers have asked for a little time to revise their PowerPoint presentations in the light of yesterday's discussions and their consequent afterthoughts, so please be patient with us while this process takes place. The PowerPoints will be posted soon, as will be news of when the recording of the seminar will be available.

News Flasche: Myriad ruling now out

noreply@blogger.com (Jeremy) — Thu, 13 Jun 2013 15:45:00 +0000

The IPKat is grateful to his friend Dr Wolfgang Flasche (immatics biotechnologies GmbH) for news that the US Supreme Court has now give its keenly-awaited ruling in Association for Molecular Pathology et al v Myriad Genetics Inc et al (which you can read in full here). The bottom line is that DNA is held not patentable in the US.

Comment to follow when this or another Kat has the chance to read the judgment.

Footnote: the IPKat's scholarly friend Dave Berry has just posted this short note on the decision for the PatLit weblog, here.

Ova and Oberbank on way to Luxembourg: your chance to comment

noreply@blogger.com (Jeremy) — Thu, 13 Jun 2013 15:06:00 +0000

Some CJEU judges have gone
into hiding till the flow of IP
cases abates ...

Here are two more cases in which questions arising from the European Union's increasingly complex IP law are off on their way to Luxembourg to be answered by the increasingly beleaguered members of the Court of Justice of the European Union (CJEU). In each case the UK's Intellectual Property Office (IPO) invites comments which will assist the UK government in deciding whether to make representations before that court. The first case should be familiar to readers of this weblog:

High Court Case - [2013] EWHC 807 (Ch ) - International Stem Cell Corporation "ISCC"and Comptroller General of Patents

Following a judgment in the High Court in the case International Stem Cell Corporation (ISCC) and Comptroller General of Patents [2013] EWHC 807 (Ch), the following question has been referred to the CJEU:

Are unfertilised human ova whose division and further development have been stimulated by parthenogenesis, and which, in contrast to fertilised ova, contain only pluripotent cells and are incapable of developing into human beings, included in the term "human embryos" in Article 6(2)(c) of Directive 98/44/EC on the legal protection of biotechnological inventions?

Case summary:

The case concerns an appeal in the UK High Court [the appeal may have UK-wide consequences, but there are some good folk who labour under the apprehension that this court is for England and Wales only] concerning two patent applications in the name of ISCC both relating to human stem cells. The patent applications were refused by the Intellectual Property Office on the grounds that the inventions disclosed in the patent applications were excluded from patentability under paragraph 3(d) of Schedule A2 to the Patents Act 1977.

The case questions what is meant by the term "human embryos" in Article 6(2)(c) of Directive 98/44/EC on the Legal Protection of Biotechnological Inventions. In particular, what was meant by the CJEU in Case 34/10 Oliver Brüstle v Greenpeace eV [2012] 1 CMLR 41 [discussed here by the IPKat] by the expression "capable of commencing the process of development of a human being"?

PLEASE NOTE THAT THE INTELLECTUAL PROPERTY OFFICE HAS NOT YET BEEN NOTIFIED OF AN OFFICIAL REQUEST FOR A PRELIMINARY RULING BY THE CJEU ON THIS QUESTION [says Merpel, the IPO may not have been notified of an official request, but it ought to know about this reference anyway. For one thing, the IPKat weblog posted this item on it as long ago as 19 April, which is two months ago. For another thing, this is an appeal against an IPO decision and the IPO is a party to the reference]

We are publishing notice of the referral made from the UK High Court to give stakeholders more time to consider the issues raised and the need for filing comments at the point that official notification is received.

If you would like to comment on this case please email policy@ipo.gov.uk. At this point there is no deadline for comments as we have not received notification of this case from the Court of Justice.[Hoorah, chorus the Kats, we'd like to see this more often instead of the silly and unreasonable deadlines for making comments which have too often been foisted on the IP community

If you are aware of any references to the ECJ that are not currently included on our website, you are also welcome to send us your views. If you choose to do this, please include clear information about the case to help us to identify it.[Hoorah again!]

The second notification relates to two apparently related trade mark cases from Germany:

CJEU cases: C-217/13 & C-218/13: OBERBANK AND OTHERS (trade marks)

We have received notification of two joined cases referred to the Court of Justice: C-217/13 and C-218/13 [by the Bundespatentgericht]. The request for a preliminary ruling in these joined cases concern the interpretation of Directive 2008/95/EC on the approximation of laws regarding the registration of a contourless colour mark (red) as a collective mark for a number of goods and services in the banking/credit industries.

These cases and the questions referred to the court can be viewed on our website at:
http://www.ipo.gov.uk/pro-policy/policy-information/ecj/ecj-2013.htm

1.Does Article 3(1) and (3) of the directive preclude an interpretation of national law according to which, for an abstract colour mark (in this case: red HKS 13) which is claimed for services in the financial affairs sector, a consumer survey must indicate an adjusted degree of association of at least 70% in order to form a basis for the assumption that the trade mark has acquired a distinctive character following the use which has been made of it? [A cunningly phrased question: the court is not asking the CJEU to quantify with precision the degree of recognition that accords distinctiveness through use but which asks it to give the okay to an application of national law that has that effect]

2.Is the first sentence of Article 3(3) of the directive to be interpreted to the effect that the time at which the application for the trade mark was filed - and not the time at which it was registered - is also relevant in the case where the trade mark proprietor claims, in his defence against an application for a declaration invalidating the trade mark, that the trade mark acquired a distinctive character, following the use made of it, in any event more than three years after the application, but prior to registration?

3.In the event that, under the above-mentioned conditions, the time at which the application was filed is also relevant:

Is the trade mark to be declared invalid if it is not clarified, and can no longer be clarified, whether it had acquired a distinctive character, following the use made of it, at the time when the application was filed? Or does the declaration of invalidity require the applicant seeking that declaration to prove that the trade mark had not acquired a distinctive character, following the use made of it, at the time when the application was filed?

If you would like to comment on these cases please email policy@ipo.gov.uk by 24 June 2013. ... [that's just 11 days, starting from now!]

On poisonous priority: taking the debate further

noreply@blogger.com (Jeremy) — Wed, 12 Jun 2013 08:31:00 +0000

IPKat team blogger Darren's post on Nestec v Dualit ("Poisonous priority – how many ways can a patent be toxic?", here) attracted a large number of comments from European patent experts and enthusiasts, including several from Dutch and European patent attorney Walter Hart (EP&C). It was therefore a welcome pleasure to this Kat that Walter has chosen to enlarge on his comments via a separate, stand-alone guest post which he has written together with his colleague Reinier Wijnstra.

"In a recent decision in Great Britain in Nestle v Dualit, a European patent was held invalid over its own priority document. In our opinion, this decision goes against basic principles of the patent system.

The patent system is created to stimulate innovation. It does so on a quid pro quo principle. The inventor gives information on an invention to society, and society gives back an exclusive right for a limited period, a patent. If the invention is big, the patent is big. If the invention is small, the patent is small.

The essence of innovation is improvements. Improvements do not stop after a priority application is filed. In the priority year, another embodiment based on the exact same innovative concept may be found. The field of the invention may be broadened. Further, an inventor may find that a feature he initially considered essential and explained as such to his patent attorney, is non-essential after all. The inventor may develop a better understanding of the working of the invention without actually changing the embodiment. It is also possible that a different light is shed on the invention by the prior art mentioned in the search report of the priority application, resulting in better understanding of the invention.

Further, many innovators in particular SMEs, invent something, file an application and build a prototype. During the priority year the prototype may be further improved. These things and others may happen in the priority year.

When drafting the priority application, it is the job of the patent attorney to get the broadest protection and draft claim 1 accordingly. But as Niels Bohr already explained, prediction is very difficult, especially about the future. A patent attorney cannot predict future improvements of the invention. As a result of the improvements discussed above, the view on the invention may change somewhat. As a result, in order to get the full scope of protection, it can be necessary to amend claim 1. The required amendment is not always straightforward. Innovation is not always simple, and neither is the resulting required amendment of claim 1.

However, according to thie ruling in Nestec v Dualit, such an improvement and the corresponding amendment of claim 1 is very dangerous to the inventor, because it may result in a complete loss of the subsequent application which is filed at the end of the priority year.

It was already known that this could happen. That is why many patent attorneys often or always withdraw priority applications before publication, or file national priority applications instead of European priority applications. In other words, users withdraw rights or file lesser rights because of improvements or the mere possibility of improvements in the priority year. Our patent system punishes these improvements. You either withdraw the first right, file it in a lesser way, or loose the subsequent right.

This ruling is based on a very strict interpretation of the term ‘same invention’ and the corresponding EPO case law, in particular G2/98 and a strict application of Art 54(3) EPC. However, the only thing the inventor did was to improve the invention in the priority year. The subsequent application presents an improved invention to society. According to the quid pro quo principle via which the patent system stimulates innovation, an improvement should lead to more or perhaps better defined rights, not less rights.

Some may say: so what? Broadening of claim 1 is possible, you only need to withdraw the priority application. But improvements in the priority year occur quite often. Each time the patent attorney needs to make an assessment whether to amend claim 1, what the amendment would do with the priority and whether the priority application needs to be withdrawn. All this must be explained to the inventor, who mostly does not understand it. For the inventor, the situation is straightforward. He simply improved his invention. However, the legal consequences are very difficult. Moreover, withdrawing does not solve the problem of the loss of priority. So any disclosure of the invention will still kill the subsequent application.

We should ask the question: what is the damage to society if the priority application is published? The subsequent application is filed before publication, and both are usually published at the same time, so the public can see the correspondence and the differences between both. We cannot see any damage. Why punish this publication with capital punishment?

Further, foreigners who file European priority applications for the quality search of the EPO may also loose rights if not properly advised. In an ever converging world, what is the use of a “European Priority Punishment” ? Will non-Europeans understand it? It is a patent attorney’s paradise, but was that the intention of priority?

Some have argued that for any further improvement in the priority year, another independent patent family should be created. That solution may also be great for patent attorneys, but doubles the costs for SMEs. The patent system is not here only for Apple, Nestle and the likes, but also for a local inventor who invents a new mousetrap.

Moreover, it is not always possible to be novel relative to the priority application without losing scope of protection or without taking at least some risk that the priority application is considered novelty destroying for the subsequent application after all. This occurs in particular if the inventor’s understanding of his invention has progressed, i.e. if the improvement, new insight or redefinition of the invention is based on the same figures. Things can become very messy if you try to formulate a claim 1 that is novel over the figures of the priority application, but needs to be supported by the very same figures.

Further, many European countries have registration systems which result in a quick patent. Inventors use these national routes to get quick protection on home turf. A subsequent European patent is often filed which claims priority, and upon grant is validated in the same country. Some of these European patents will have priority problems. According to this decision, these patents will be invalid on home turf. Worse, European countries have provisions that prevent double patenting. As a result, the priority patent becomes unenforceable once the European patent is validated. The priority patent destroys the European patent and the European patent destroys the priority patent. Mutual assured destruction.

How would this situation play out in the future unitary system? It appears the unitary patent would be invalid as a whole over a published national priority application.

Was all this the intention when the priority system was created in 1883? We believe the intention was to create a priority system that helps the inventor, not hurts him. The subject of priority is complicated and we do not have all the answers. But this ruling is unjust. We need to rethink priority, and in particular the meaning of the words ‘same invention’. We need a priority system that does not hurt an inventor who improves his invention in the priority year, because our patent system is intended to stimulate these improvements".

Do you agree with Walter and Reinier? Do let us know!

Once you've seen one, you've seen them all: but this report on lookalikes is different

noreply@blogger.com (Jeremy) — Tue, 11 Jun 2013 20:55:00 +0000

Sometimes the lookalike
is as good as the original ...

It's no secret that, even as they fight their never-ending battle with real fakes for the hearts [and pockets, adds Merpel] of consumers, brand owners continue to tussle with ever-present and generally unwelcome competition from lookalikes. This battle has not just been through the courts: it has been on the policy and business agenda for at least two decades. Well-known brands, and brand-owners' groups, have long advocated specific and adequate protection against lookalikes under United Kingdom law, particularly in the context of possible business-to-business harm. In response, successive governments have replied with the same refrain: "first show us the evidence

'The Impact of Lookalikes', a research report that was commissioned by the United Kingdom Intellectual Property Office (IPO), attempts to exhaust the topic, providing a mass of data, cases and even a new set of working definitions. At 400 pages it will pretty well exhaust your Ryanair hand-luggage too. You can download it here, but the IPO advises against printing it out in case you exhaust your printer cartridge.

1.The impact of lookalikes: main report (142 pages)
2 The impact of lookalikes: annexes I to III (47 pages)
3. The impact of lookalikes: appendices A-F (81 pages)
4. The impact of lookalikes: appendices G-J (125 pages)

The legal analysis is summed up in just three succinct paragraphs:

22. In none of the three jurisdictions examined - the UK, Germany and the United States – was the legal position of lookalikes particularly clear. Nevertheless, at the interim stage, there is a perception that a claimant is more likely to be successful in the favourable German forum than in either of the other two countries [the same perception that Germany is a favourable jurisdiction may be gleaned from trade mark law and might be something to do with the notion of confusion being traditionally seen as a matter of fact in the US and UK but as a matter of law in Germany].

23. It is probable that the prevention of certain lookalikes is within the scope of the Unfair Commercial Practices Directive (2005/29/EC).[This Kat concurs, having sought to make this point in the past] Under this assumption, the United Kingdom may not be free to legislate to further prevent lookalikes save in business-to-business transactions. However, it would also mean that certain lookalikes are already unlawful under the Consumer Protection from Unfair Trading Regulations 2008.

24. Accordingly, if there is a restriction on legislation in relation to lookalikes, a private right of action under the Consumer Protection from Trading Regulations 2008 would be permitted under the Unfair Commercial Practices Directive.

As for the rest, the IPKat was treated to a handy summary from law firm Wragge which states, inter alia:

• Some consumers do believe that similar looking products have similar characteristics and originate form a similar source; [while this is not exactly news, it's comforting to know that this project has reached such a conclusion. If it hadn't, we'd start worrying about the rest of it]

• A high number of consumers felt disadvantaged by the accidental purchase of a lookalike, but a substantial number saw it as an advantage; [this looks like the 'brand promise versus bargain price' divide]

• Only in a limited number of categories was there an association between a reduction in the sales of the brand leader and an increase in the sale of lookalikes; and [showing the power of brand loyalty, or do consumers buy the brand leader because they confuse it with the lookalike ...?]

• There is a fine line between confusing packaging and the use of "generic cues" to signal to customers. [true, but what makes generic cues generic in the first place? Often it's the investment by the brand owners]

The research suggests a statutory definition of a lookalike as "good which by virtue of their name, shape, colour, packaging or labelling or any combination thereof, are similar in overall appearance to the goods; but excluding any of those things where they are descriptive, functional or commonplace." [adopting a definition might stop people arguing over the definition -- but it's only really important if a right is attached to it]

The IPO's report is far too long for this Kat to digest immediately, so he appreciates readers' comments and constructive criticisms.

Are British Asians more likely to be confused? Wait and zee

noreply@blogger.com (Jeremy) — Tue, 11 Jun 2013 16:33:00 +0000

Wait and Zee. Zee Entertainment Enterprises Ltd and others v Zeebox Ltd may not be the biggest and most important case to come before the Chancery Division of the High Court for England and Wales this year-- in fact it may be one of the least significant -- but it's an interim decision of the freshly-promoted Mr Justice Birss, upon whom all admiring eyes now rest. There's no BAILII transcript (nor is there likely to be, since this an extempore decision), but the decision was noted on the excellent Lawtel subscription-only service this morning.

Zee Entertainment objected to Zeebox's choice of name and logo for its app for mobile devices, including its use of "Zee" and "Zee TV". In particular, Zee Entertainment alleged that British Asians, who were most likely to be familiar with Zee Entertainment's services, would be confused by Zeebox''s choice of name and logo. Having conducted two pilot surveys of British Asians, Zee Entertainment sought permission to carry out a full survey in order to corroborate their allegation that confusion was being caused.

According to Zee Entertainment, even if Zeebox's branding was not confusing for the whole of the population, it was legitimate for passing off purposes to look at whether it was confusing for a narrower group of people, such as British Asians. They also maintained that a full survey would be of real value as a means of discerning whether there was such confusion, and that those benefits justified the modest costs involved.

Referring to the recent outbreak of authoritative case law on survey evidence in Interflora v Marks & Spencer (noted by the IPKat here), Birss J refused the application.

This Kat prefers
ZZZ to Zee

In the learned judge's view, it was obvious that the evidence sought to be adduced would not be all the evidence that Zee Entertainment would be relying on it its claim. At trial, it would be able to call evidence in support of its case, including further evidence to the effect that British Asians had been confused by Zeebox's branding. If that evidence to be called was not enough for Zee Entertainment to win its case, it was unlikely that the survey evidence it sought to adduce in this application would make any difference. While the survey evidence might confirm what the trial judge decided on the basis of the other evidence, it was unlikely that it would be of real value so as to justify the substantial cost of obtaining it.

Without knowing more about the facts on the ground, it is unfair to pass comment on this judgment. What can be said, however, is this: you have to have a jolly good reason for wanting survey evidence bedore you'll get it -- particularly where their probative value is likely to be low in the great order of things. Merpel wants to know why British Asians should be regarded as particularly susceptible to confusion in this case. Can any British Asian reader enlighten her?

Little time to talk about Hauck

noreply@blogger.com (Jeremy) — Mon, 10 Jun 2013 15:46:00 +0000

Some curious questions are heading towards the Court of Justice of the European Union these days. The United Kingdom Intellectual Property Office has emailed interested parties -- including this Kat -- to say that it has received notification of a new case referred by Hoge Raad der Nederlanden (Netherlands), to the CJEU: this is Case C-205/13 Hauck. This case concerns the interpretation of Article 3(1)(e) of Directive 2008/95 relating to trade marks, relating specifically to shape trade marks and what the IPO describes as "copyright in a high chair for children" [though the keen reader will be hard-pressed to find any mention of the word 'copyright' in the questions referred].

The following questions have been referred:

1 (a) Does the ground for refusal or invalidity in Article 3(1)(e)(i) of ... Directive 2008/95, namely that shape trade marks may not consist exclusively of a shape which results from the nature of the goods themselves, refer to a shape which is indispensable to the function of the goods, or can it also refer to the presence of one or more substantial functional characteristics of goods which consumers may possibly look for in the goods of competitors?

(b) If neither of those alternatives is correct, how should the provision then be interpreted?

2 (a) Does the ground for refusal or invalidity in Article 3(1)(e)(iii) of ... Directive 2008/95 namely, that (shape) trade marks may not consist exclusively of a shape which gives substantial value to the goods, refer to the motive (or motives) underlying the relevant public's decision to purchase? [What a strange question, says Merpel. The Directive doesn't exactly burst with references to the relevance of the relevant public's motive for making a purchase. There's no way the CJEU can say here without being accused of the most egregious law-making, surely]

(b) Does a 'shape which gives substantial value to the goods' within the meaning of the aforementioned provision exist only if that shape must be considered to constitute the main or predominant value in comparison with other values (such as, in the case of high chairs for children, safety, comfort and reliability) or can it also exist if, in addition to that value, other values of the goods exist which are also to be considered substantial?

(c) For the purpose of answering Questions 2(a) and 2(b), is the opinion of the majority of the relevant public decisive [Says Merpel: the answer to this question is "No, no, a thousand times no!" It has only been asked in order to wind up the CJEU], or may the court rule that the opinion of a portion of the public is sufficient in order to take the view that the value concerned is 'substantial' within the meaning of the aforementioned provision?

(d) If the latter option provides the answer to Question 2(c), what requirement should be imposed as to the size of the relevant portion of the public?

3. Should Article 3(1) of ... Directive 2008/95 be interpreted as meaning that the ground for exclusion referred to in subparagraph (e) of that article also exists if the shape trade mark consists of a sign to which the content of sub-subparagraph (i) of subparagraph (e) applies, and which, for the rest, satisfies the contents of sub-subparagraph (iii) of subparagraph (e)?

If you would like to comment on this case please email policy@ipo.gov.uk by 14 June 2013. The IPKat's thoughts on this breathlessly short time allowed for comment are too well known to repeat here. Merpel says, we can discuss the answers if we run out of anything more interesting to talk about at ~Wednesday's party.

Monday miscellany

noreply@blogger.com (Jeremy) — Mon, 10 Jun 2013 10:30:00 +0000

A welcome guest at our Birthday Seminar

Arrangements for the IPKat's 10th Birthday Seminar next Wednesday continue apace. Last week we first revealed the identity of two of our panellsts -- Darren Smyth and Mark Schweizer. On Friday the IPKat tweeted the identities of two further panellists. One was none other than Judge Joachim Bornkamm, who will be joining us for our birthday celebrations before he heads off to deliver this year's Sir Hugh Laddie Lecture at UCL. Joachim is the inspirational judge who heads the German Bundesgerichtshof's intellectual property appeals senate. Another was Geert Glas, who is responsible for host firm Allen & Overy LLP's Global IP Practice: Geert chairs the Benelux Council for Intellectual Property, which advises the Benelux Office for Intellectual Property (BOIP) on all aspects of IP legislation. There is one further panellist whose identity we are now pleased to reveal: none other than Francis Gurry, Director General of the World Intellectual Property Organization and Secretary-General of the International Union for the Protection of New Varieties of Plants. This Kat holds Francis in great esteem and is delighted to welcome him to the Birthday Seminar.

Pity poor Anheuser-Busch. First, having chosen Budweiser as the name of a beer manufactured a long, long way from Budweis, the company found itself embroiled in litigation against a Czech brewery from the little town of Budweis. Now, having chosen the name Belle-Vue for a brand, it finds itself facing unwelcome competition from microbrewery Belleville. Would you confuse the two? The full tale can be read in last week's Daily Mail here, The Belleville bunch are parents of children at the Belleville school in Wandsworth, London, who are now prudently looking for a new name. Says Merpel: the funny thing is that most serious beer drinkers didn't confuse the two Budweisers, despite their identical names, because they knew that there were two beers of the same name and could tell them apart. However, because neither Belle-Vue nor Belleville are so well known and they are quite similar, confusion is likely -- at least if they are ordered by phone. A katpat to Gerry Gavigan for alerting us to this item.

Remaining with alcoholic beverages, here's a dispute involving the name Champagne but which has nothing to do with alcoholic beverages: a Japanese band by the name of Champagne has been accused of stealing the "future frames" technique for editing video footage from Australian band Clubfeet. Links to the Clubfeet's video (on YouTube) and Champagne's (no longer on YouTube and marked "temporarily unavailable") can be found here. It appears however that the same technique -- whether legally protected or not -- was already out there as early as 2010. Is there IP protection for a technique for editing video footage, and should there be? This Kat expects that many of his readers have firm positions on these issues.

The IPKat wonders what, if anything, will be the impact of the ruling of the Advertising Standards Authority (ASA) adjudication against Trademark Renewal Service Ltd, this company being one of the scammers that seek to extract money from regular businesses by sending out renewal letters that create the impression that they are official. Upholding the complaint made against the company, the ASA simply concludes that its future mailing should not go out in its current form, which implies that "it was official correspondence from a company affiliated with the IPO". This Kat thinks that it should not be difficult for the company to comply with that request and still tempt businesses to part unnecessarily with unconscionable sums of money. A katpat goes to Chris Rycroft for supplying this link.

Patent litigation through crowd funding: want to sponsor a battle against trolls?

noreply@blogger.com (Jeremy) — Sun, 09 Jun 2013 16:04:00 +0000

Shirts come in three sizes

The roll of the troll in shaping US patent legislation, and the dividing line between true and the faux troll, are matters that can provide endless hours of argument both in the United States and beyond. The following guest post from Katfriend Bertrand Sautier reflects the fine line that separates different species of plaintiff in patent infringement litigation -- where the impact of litigation is felt in much the same way by the defendant, regardless of the plaintiff's credentials. It illustrates the prospect of crowd-funded defence to infringement actions in terms of real dollars and cents. Writes Bertrand:

Crowd funding has been known for years as a good way to raise money for those who cannot access the traditional lending system. Originally used mostly in the music industry, this model has evolved to something much more sophisticated. Today, many types of projects have been financed by crowd funding such as movies, start-up, civic or educational projects, and even a “cat café” in London. Besides some IP issues due to the specificity of this service (see here for a Kat report about the Kickstarter Lawsuit), the crowd funding system was not known for being used in legal battles -- until now.

I recently came across the story of the Ditto Company. Besides being a traditional online eyewear vendor, Ditto has created a web service that allows you to “try on” a pair of glasses after taking multiple pictures of you. Thus you might know if the shape of specific sunglasses is right for your face. The company is now being sued for patent infringement in two different lawsuits in the US. In order to raise money to litigate, they made a statement that can be found on their indiegogo page. Here are the most IP-related snippets, followed by my own comments:

“Our Story

… recently, two separate “patent trolls” have sued us for patent infringement, and the enormous cost of defending ourselves in court is threatening to put us out of business. (Patent trolls are groups who buy patents to sue others who have independently developed inventions.) As opposed to reinvesting capital in growing our business and hiring people, we have to spend all of our money on these lawsuits. It’s devastating.” [It is true that the action of patent monetization entities can be a real threat to small companies in the US (PME is the term being used by Stefano Barazza in its posts about non-practising entities/patent trolls on the IPKat. See part one, two and three for this excellent overview)].

Additional Details about the Lawsuits

The first case is a patent infringement complaint filed by Lennon Image Technologies (Case 2:13-cv-00236). Lennon is a non-practicing entity based in the Eastern District of Texas – the most plaintiff friendly county in the country. They are a classic patent troll because they don’t create anything themselves but instead exist solely to buy patents and use them offensively. Trolls knows it costs literally millions of dollars to defend a patent lawsuit, so they use the threat of litigation as a weapon to force companies into cutting them checks to go away. But unlike most of the large businesses, we simply can’t afford to do this!” [Lennon Image Technologies could be described as the typical patent troll: a small company, created with a simple corporate structure (the Texas Limited Liability Company), that does not produce any goods or services, is not part of any inventive activity, and has purchased a patent in order to enforce it before a pro patentee court.

So far, Lennon Image Technologies has been conducting seven different lawsuits, all filed on 27 March 2013 in Marshall, Eastern District of Texas (qualified as a “renegade jurisdiction” by Justice Scalia during the oral argument in eBay Inc. v MercExchange). These demands are all based on the same patent entitled "Customer image capture and use thereof in a retailing system" n° 6,624,843. This patent was granted in 2003 by the USPTO and has been under an ex-parte examination for several months.

This follows a preceding series of complaints filed before the U.S. District Court for Delaware. Standing on purely economic grounds, since the company cannot afford to pay for the “checks” asked by the troll, Ditto should probably try to raise money in order to pay not for litigation costs but for a license agreement, as it would probably be cheaper. But I guess that the related lobbying for legislative change implies to keep on legal fighting].

“The second case is a patent infringement complaint filed by a competitor who is using a recently purchased patent to seek an injunction on our 3D virtual try-on technology for eyewear. The upsetting part about this case is that Jonathan Coon, cofounder and CEO of 1-800-Contacts, used DITTO's virtual fitting technology soon after our launch in April 2012 and then afterwards, in May 2012, moved to acquire rights to a patent, which they are now using to sue us. While they are a practicing entity, the fact that they bought a patent to impose egregious litigation costs on us when we independently developed our technology makes them a “corporate troll” in our books. We don't think the patent they bought infringes but it will cost us a lot to prove that in courts.”

There is the tricky part. Ditto claims to be sued by two patent trolls but it appears that only one them could be subject to that infamous qualification. Whether 1-800-Contacts acts as a “corporate trolls” remains a different question. Here is an operating company that acquired a patent and is now enforcing it against a competitor. This is the way the patent market has been working for many years. The value of the second patent or the strategy of 1-800-Contacts might be discussed, but not through the lens of patent trolls. It seems more realistic to consider that Ditto is a company that may not have considered the importance of IP in the US, whether it is to protect your services against infringers or from frivolous demands from third parties.

Ditto is seeking for $30,000 in order to hire attorneys and pay for all the litigation costs. So far the campaign has raised almost $10,000 and still has 33 days to go.

Since the Crowd Funding system differs from the simple sponsorship, everyone who invests $30 will receive a printed t-shirt whit the slogan “I beat Trolls”.
This particular case reflects the current debate being held before Congress for a few years now. It is not the amount of patents on the market or their quality that is being discussed; rather, it is the cost to defend yourself before a patent court. The Shield Act (stands for Saving High-Tech Innovators from Egregious Legal Disputes) claims to be a solution to this. The major change contained in this text is the introduction of a “loser pays” rule. This is a quite common rule in Europe (for example codified in Article 700 of the French civil procedure code: English version here) that gives a chance to the winning party to recover some of the expenses that have been made during the trial. The study of this highly criticized Act should probably take much longer than this post as it may concern more players than just PMEs.

Ditto shows strong support for the Shield Act and is asking for everyone to “send a message to your congressmen asking them to support this bill”. Thus, when crowd funding meets lobbying and trolls, it becomes hard to get a bird’s-eye view of litigation.

Monsanto feels the heat over wheat

noreply@blogger.com (Jeremy) — Sun, 09 Jun 2013 15:13:00 +0000

Some businesses just can't keep out of the news. One such enterprise is Monsanto, as Katfiriend and occasional guest blogger Miri Frankel points out. Miri, who like many readers is an IP enthusiast but not a patent specialist, reflects the concerns of many people who find themselves floating in that strange position of being somewhere between a layman and an expert. This is what she writes:

"Only weeks after the US Supreme Court ruled in favour of Monsanto’s right to control the sale, licensing and planting of second generation (and beyond) soybean seeds bearing its patented Roundup Ready technology (Bowman v Monsanto, reported on in depth here, here and here), Monsanto is at the receiving end of a lawsuit related to its Roundup Ready technology – this time involving wheat.

Genetically modified wheat is banned in many countries, including several major importers of American wheat. Because about 50% of US-grown wheat is exported to other countries, including those that ban genetically modified crops, wheat farmers have resisted growing any genetically modified wheat on their farms. Though Monsanto had tested Roundup Ready wheat on a number of farms around the country about a decade ago, many farms refused to embrace the patented technology because the genetically modified crops would be ineligible for sale and export to foreign clients. Monsanto ultimately ended the testing (the US Food and Drug Administration did, at that time, declare the modified wheat safe for consumption, but did not approve it for sale because Monsanto voluntarily withdrew its application for approval in light of the backlash among farmers). Yet, a decade later, the Roundup Ready genes were discovered in a crop of wheat on a farm in Oregon. This recent discovery has caused several countries to ban American wheat imports, or to modify or cancel their orders for the purchase of US wheat from American farms (even in states other than Oregon), which in turn has also affected wheat prices.

How did this happen? Forbes theorizes as follows: the best case scenario is that rogue seeds were carried by wind from former test fields and by some inexplicable natural phenomena happened to land and grow just in this one field. A worse case scenario is that seeds have been carried intermittently over the years and wheat fields have been contaminated with small amounts of GM wheat undetected for up to a decade. Then there’s the worst case scenario, for Monsanto, certainly: GM seeds were routinely mixed with conventional seeds through human error.

In response, a wheat farmer in Kansas has sued Monsanto, claiming that Monsanto’s negligence in controlling the Roundup Ready technology caused his farm harm in the form of cancelled orders and depressed prices. On one hand, it seems unreasonable to hold a company liable for a natural process (pollination) over which the company has no control. The pollination of seeds by insects and wind, and the resulting germination of those seeds, is under the control of Mother Nature. A farmer’s crop that is contaminated with Roundup Ready genes because of this process is an unintended consequence of nature. On the other hand, Monsanto actively leverages Mother Nature to assert its patents against farmers whose crops have been contaminated by cross-pollination from neighbouring Roundup Ready-licensed farms. And Monsanto has frequently prevailed in such cases, most recently in Bowman, noted earlier, and in other cases, including this one in Canada.

I can’t help but wonder, though, if Monsanto’s patent rights give it continuing control over the planting of future generations of seeds borne from its initial sale of Roundup Ready seeds, shouldn’t Monsanto also be responsible for the unintended consequences that stem from a self-replicating technology that cannot necessarily be controlled or limited? Cross-contamination of other non-licensed farms is a foreseeable result.

Taking Bowman as an example: rather than purchase new seeds from a supplier each year, let’s say Bowman’s habit had generally been to harvest his crops and replant that entire generation’s resulting seeds (as opposed to what he actually did: plant only those seeds that he knew contained Roundup Ready technology). If he had discovered that so many of his crops had been accidentally contaminated with Roundup Ready technology from a neighbour’s farm that he did not have enough non-contaminated seeds left to replant his field, would Monsanto be liable to him for the cost of any seeds he would need to purchase as a replacement for the unusable Roundup Ready seeds generated by the contaminated plants in his field? That seems reasonable to me, since Bowman’s only alternatives would be to take a licence from Monsanto in order to use the Roundup Ready seeds or to purchase non-Roundup Ready seeds on the open market – in either case, it is a direct financial harm that is directly attributable to Monsanto’s self-replicating patented product.

Looking at the reverse view – a farmer, I’ll call him John, owns a certified-organic farm, and actively opts not to buy Roundup Ready seeds.. But unbeknown to him, his crop is contaminated with Roundup Ready crops due to cross-pollination from a neighbouring farm that uses Roundup Ready seeds. Is John infringing Monsanto’s patents if he plants seeds from his harvested crops, which contain Roundup Ready technology? Monsanto’s previous litigation wins suggest that John would be considered an infringer, even though his actions were unintentional. [Thankfully, in light of widespread, unintentional cross-contamination of crops in farms neighbouring those that are licensed for Roundup Ready crops, Monsanto claims that its current strategy is to pursue only those farms that discover their crops have been contaminated and subsequently intentionally plant the Roundup resistant crops instead of not-Roundup-Ready seeds from uncontaminated sections of their crop. This was not always the case in the past.] In addition, if the contamination of John’s farm causes him to lose his organic certification, should Monsanto be responsible for the loss? This exact question is under consideration in lawsuit filed by an organic cotton farmer in Texas, as described by the Texas Observer here.

Turning back to the suit filed in Kansas, it is perhaps too broad a claim to hold Monsanto liable for a nationwide disruption to wheat prices and exports because of the unintended contamination of a farm in a single state (though we don’t yet know whether more wheat contamination will be discovered). These lawsuits invariably remind me of a quote originally articulated by US President Franklin Delano Roosevelt, but made famous in the current generation by Spider-Man: “great power involves great responsibility.” Perhaps the owners of patents on self-replicating and uncontrollable processes and technologies should have to accept the burdens (liabilities) that accompany such patents if they are also going to reap the rewards (revenues). It is time to review the patent system if there is no mechanism to balance the rewards with the responsibilities that come with patent ownership. But I must admit, my background is not in patent law, and my science education ended many years ago in college so, readers, please do share your thoughts on the likelihood of a court holding Monsanto responsible in these scenarios".

Thinking of making money from the PRISM logo? Think twice

noreply@blogger.com (Eleonora Rosati) — Sun, 09 Jun 2013 10:35:00 +0000

The PRISM logo,
as published by The Guardian

While the PRISM data mining [note to self: it is probably the first time that the IPKat uses this term out of copyright (only)-related context] scandal is unfolding following revelations by the The Guardian and the Washington Post that US National Security Agency (NSA) not only appears to have collected the telephone records of millions of US Verizon customers under a top secret court order issued in April, but may also have direct access (here and here) to the systems of Google, Facebook, Apple and other US internet giants (top executives at these corporations have however denied any involvement), there appears to be also a PRISM IP-related story to tell.

Among other things, The Guardian disclosed what it called the "really freaky logo" used for the PRISM program. Besides spotting a series of similarities with the Pink Floyd's Dark Side of the Moon album cover and the US government's Information Awareness Office logo, the British newspaper described the logo as somehow indicative of the program's undisclosed mission:

"we collect the white light of the world's personal data – all of it – and refract it into an array of information we can use to keep America safe. One colour is evil foreigners plotting terrorist atrocities, the other is your Facebook photos and your internet dating profile. We never get them mixed up. The whole logo is surrounded by an irregular polygon that vaguely resembles a key. It's like something a Bond villain might put on his website."

Allegedly infringing PRISM T-shirt

An American dude named Max Read, who describes himself as an "entrepreneurial, small-business job-creator type", made the following reasoning:

"when I learned that the NSA was collecting immense amounts of data from nearly every major tech company on the planet, my first thought was: How can I make a buck off this?"

Smartly enough, Mr Read turned to apparel and realised that he could use the PRISM logo as published by The Guardian to create PRISM T-shirts on Zazzle.com.

Following the PRISM T-shirt success story, Read thought of creating more products bearing the PRISM logo (including an iPhone case and a hoodie) and opened a Zazzle store that he called PRISMMerchadise.

Sales were high (over the course of Friday only Read made $7), until someone thought of throwing a monkey wrench in the works.

Read received an email from Zazzle.com informing him that it would remove his PRISM NSA T-Shirt from the Zazzle Marketplace, as this contained "content that is in conflict with one or more of our acceptable content guidelines". In particular,

"Design contains an image or text that may infringe on intellectual property rights. We have been contacted by the intellectual property right holder and we will be removing your product from Zazzle’s Marketplace due to infringement claims."

What can these infringement claims be? This Kat has done some (very little) research online and

PRISM CAT T-shirt,
available on Zumiez.com

found out that:

A US Government work is not subject to copyright in the US and there are no copyright restrictions on reproduction, derivative works, distribution, performance or display of the work.
You cannot use US government trademarks [although there are several PRISM trademarks registered with the USPTO, none of them seem to be owned by the US government] or the logos of US government agencies [eg the NSA?] without permission.
Works prepared for the US government by independent contractors [is this the case of PRISM?] may be protected by copyright, which may be owned by the independent contractor or by the US government.
While a US government work is not protectable under US copyright, the work may be protected under the copyright laws of other jurisdictions when used in these jurisdictions [eg the UK, since The Guardian disclosed the logo?]
Finally, three years ago the FBI asked Wikipedia to take down the FBI logo from the relevant entry, citing the law which prevents anyone from manufacturing, selling, or possessing any badge, identification card, or other insignia, of the design prescribed by the head of any US department or agency.

It is clear that the mysteries surrounding the PRISM logo are (almost) as intriguing as the whole PRISM story. Are there any IP conspiracy theorists out there who would like to reveal which IP right(s) is (/are) most likely to be at stake here?

Smart machines and the future of IP: What do I tell my grandchildren?

noreply@blogger.com (Neil Wilkof) — Fri, 07 Jun 2013 11:21:00 +0000

The question, as posed, is simple—how will IP practice fold into the future landscape of knowledge workers? The query arose while reading the Schumpeter column, entitled "The age of smart machines", here, that appeared in the 25 May issue of The Economist. In that column, The Economist considered how technology, in the form of smart machines, may be altering the value proposition offered by knowledge workers. The Holy Grail of knowledge, the more the better, was the ethos instilled within my generation growing up, especially from my boyhood perch in the U.S. Midwest in what has become called the "U.S. Rustbelt", as factory after factory has been shuttered and abandoned. We were hardly aware of the unique comparative advantage that the U.S. knowledge class enjoyed at that time, with rapid post-World War II redevelopment placing a premium on employing a smallish stock of educated males. As long we could use knowledge to place ourselves on the right side of the blue collar/white divide, our future seemed assured. The fate of knowledge workers seems less certain today.

Of particular interest in that regard are the comments offered in connection with the book, Race against the Machine, published by MIT Professors Erick Brynjolfson and Andrew McAfee in 2011. And so it is summarized:

"… [T]hey [Brynjolfson and McAfee] predict that many knowledge workers are in for a hard time. There is a good chance that technology may destroy more jobs than it creates. There is even greater chance that it will continue to widen inequalities. Technology is creating ever more markets in which innovators, investors and consumers—not workers—get the lion's share of the gains."

The column ends with the following warning:

"Knowledge-intensive industries will also have to rethink cherished practices. For a start, an age in which information and processing power are ubiquitous, they will have to become less like guilds, whose reflexes are to regulate supply and restrict competition, and ore like mass-market businesses, whose instinct is to maximize the customer base. Innovation will disrupt many areas of skilled work that have so far had it easy. But if we manage them well, smart machines will free us, not enslave us."

As IP professionals, what do we make of these observations? A few comments are in order.

1. We have witnessed the outsourcing of certain tasks to lower-cost environments such as India, where patent searching, patent analytics and even patent drafting enterprises are flourishing. But these developments are more the result of globalization than the rise of the smart machine. Roughly speaking, whether these tasks are being carried out in London, San Francisco or Bangalore, there is still a flesh-and-blood knowledge person is was doing at least a material part of the work. What happens when smart machines are increasingly integrated into the mix?

2. At least with respect to patent searching and analytics, two possibilities are suggested. Either the rise of the smart machine (and the growth of cloud computing) will in part neutralize the manpower cost advantage that has driven the growth of outsourcing, in which case more and more of these activities will migrate back to the developed world, or it will not. Something like this is reported to be happening in the manufacturing sphere, where some manufacturing is returning to North America from parts of Asia. Could something similar occur with respect to patent searching and analytics?

3. Patent drafting suggests a somewhat different dynamic. Here, a further comment in the column, based on research by the McKinsey Global Institute, is instructive:

"…[B]eing spared relatively undemanding tasks will free knowledge workers to deal with more complex ones, making them more productive."

This Kat wonders whether this will apply to patent drafting. As argued above, the outsourcing of patent drafting has been a function of globalization and the cost benefits derived from manpower resources and related inputs. This Kat does not have a good sense to what extent outsourcing is also a function of the complexity of the invention involved. Whatever the answer to that question, it still remains an open matter how the smart machine will alter the current outsourcing dynamics regarding the labor-intensive task of patent drafting.

4. For instance, will it narrow the gap that sometimes exists in language skills and direct access to the inventor(s), to the benefit of the lower cost drafting purveyors? Or will the complexity of the invention, whatever the extent to which smart machines will mechanize our lives, still confer a drafting advantage to the onshore country? Will it create a further skewed allocation, with an even smaller number of particularly complex, expensive applications remaining onshore, with all the rest outsourced? Or will there be a middle range of inventions that will be shared both onshore and outsourced, depending upon on the particular circumstances?

5. In that connection, there is also matter of the patent bar as a guild. There is a hydra-like aspect to a guild. On the one hand, it has a negative connotation, as suggested by the column, due to its restrictive and regulatory nature. On the other hand, the guild can provide the framework for assuring quality control (consider the multi-century line from the Germanic guild to the present-day German apprenticeship system). Will the smart machine lead to a change in the guild-like nature of the patent bar and, if it does, will the overall impact be positive or deleterious to the service providers and consumers of patent services?

This Kat's grandchildren (armed with their smartphones, of course) are reaching the age where they are about to ask their grandfather what he does and whether they might be interested in following in his footsteps. I wonder what I will be telling them about the future countenance of the IP profession and, especially, of patent practice.

More on the Rustbelt here.

Doctrine of Equivalents and Prosecution History Estoppel in Sweden, Who Knew?

noreply@blogger.com (Darren Smyth) — Fri, 07 Jun 2013 09:32:00 +0000

Peter Kenamets

The IPKat was fascinated to hear a report of a decision of the Swedish Appeal court about the doctrine of equivalents and prosecution history estoppel as it applies in that country. He asked his Katfriends at Awapatent AB to write a note for his dear readers, and Peter Kenamets (pictured right), Attorney-at-law, kindly obliged. Here is his report.

The IPKat is most grateful for this interesting piece, noting that in the UK we don't seem to have either a doctrine of equivalents (whatever the Protocol to Article 69 EPC may say) or prosecution history estoppel.

Swedish Appeal Court applies prosecution history estoppel in the Swedish part of a multinational dispute

In a judgment issued this spring, a Swedish Appeal Court confirmed that a (type of) prosecution history estoppel can bar a finding of infringement under the doctrine of equivalents.

The background to this case was that AGA Medical had the European patent EP 0 808 138, directed to an intravascular occlusion device and a method for manufacturing the same. Occlutech sold a product – the "Figulla Occluder" – used for sealing (occluding) e.g. holes in the walls separating the chambers of the heart.

Occlutech sued AGA for a declaration that the Figulla Occluder did not infringe AGA’s patent, and AGA sued Occlutech for an injunction against the Figulla Occluder.

The District Court sided with Occlutech and found that the Figulla Occluder did not infringe the patent.

AGA appealed the case, and the Appeal Court ruled on a number of issues. The perhaps most interesting question was whether the Figulla Occluder fulfilled a claim element providing that “clamps are adapted to clamp the strands [forming a metal mesh] at the opposed ends of the device”.

This is the Figulla Occluder

The strands of the Figulla Occluder were brought together and sealed only at one end of the device, and the Appeal Court found that the claim element was not literally fulfilled.

The Appeal Court then went on to consider the doctrine of equivalents. AGA had added this particular claim element during prosecution as a characterizing feature to distinguish the claimed invention from certain prior art disclosing a similar device with two open ends. In particular, AGA had stated that the amendment was made “to clarify this distinction over the prior art”. The Appeal Court felt that this made it clear that AGA must have considered it to be essential for the patentability that the device was closed by a fixation of the strands at both ends. The element was in other words essential in connection with the grant of the patent. This spoke strongly against expanding the scope of protection to encompass a product that differed from this element of the claim. This was despite the fact that when making the amendment AGA alleged that the unamended claim was in any case distinguished over the prior art

Hence there was no room for applying the doctrine of equivalents here. AGA could not distinguish the claimed device over the prior art by specifying that the strands were fixated at both ends and then come back and contend that a product where the strands were only fixated at one end infringed.

(Interestingly, however, the Appeal Court interpreted another term in the very same – essential – claim element beyond its literal meaning. According to the Court, the claim term “clamps” included welds to keep the strands together. The Court does not seem to have regarded this as an application of the doctrine of equivalents, but rather as a “functional”, “contextual” or “purposive” interpretation.)

The Appeal Court’s ruling accordingly confirms the established practice in Sweden. The courts here have applied a form of prosecution history estoppel for a long time. As an example of this, the Swedish Supreme Court stated in a case from 2002 that “material from the prosecution history should be used to interpret unclarities in patent claims and description when it is a question about a limitation of the scope of protection” (my English translation).

Last, it might be interesting to note that the courts in Germany, the Netherlands and the UK have also decided on this case, with different ways of reasoning. The courts in the Netherlands and the UK found that there was no infringement. In Germany, the Appeal Court in Düsseldorf held that there was an infringement, but the Federal Court of Justice reversed the decision.

UK Consultation: a Belgian judge comes to the rescue

noreply@blogger.com (Jeremy) — Thu, 06 Jun 2013 21:29:00 +0000

Claws out for
the IPO ...

Earlier today, the IPKat raged against an ineffective and frankly silly attempt by his friends at the United Kingdom Intellectual Property Office (IPO) to alert readers to the possibility of furnishing it with advice and guidance which would assist the UK government in deciding whether it should make representations to the Court of Justice of the European Union regarding questions referred to it by the Hof van beroep te Brussel - Belgium. The IPKat has since received the following epistle from Belgium:

Dear Kats,

Please find attached the decision of April 8, 2013.

The questions referred [in what is now Case C-201/13 Deckmyn en Vrijheidsfonds] for a preliminary ruling are :

1. Is the concept of ‘parody’ an independent concept in European Union law?

2. If so, must a parody satisfy the following conditions or conform to the following characteristics:

– the display of an original character of its own (originality);
– and such that the parody cannot reasonably be ascribed to the author of the original work;
– be designed to provoke humour or to mock, regardless of whether any criticism thereby expressed applies to the original work or to something or someone else;
– mention the source of the parodied work?
3. Must a work satisfy any other conditions or conform to other characteristics in order to be capable of being labelled as a parody?

Kind regards,

Els Herregodts, judge, Court of Appeal, Brussels, and IPKat reader

Thanks so much, Els, we appreciate your email and the helpful information it contains -- and wonder why the UK IPO can't simply paste the questions referred to the Court of Justice into the circular announcing the reference.

The deadline for receiving comments on this case has now been extended from mid-day tomorrow to Wednesday, 12 June -- the date of the IPKat's 10th Birthday seminar.

A silly exercise in consultation: this cannot continue

noreply@blogger.com (Jeremy) — Thu, 06 Jun 2013 14:40:00 +0000

Is this the parody that led to the referral?

Here's another of those requests for comments on intellectual property cases that have been referred to the Court of Justice of the European Union (CJEU or, as some folk quaintly prefer, ECJ), which the UK's Intellectual Property Office (IPO) sends out from time to time. Unlike the usual email circulars, which are urgent but don't say so, this one is actually headed 'Urgent'. The full text reads as follows:

We have received notification of a new case referred by Hof van beroep te Brussel - Belgium to the Court of Justice of the European Union: C-201/13. The case concerns the meaning of the concept of 'parody' in Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society ('the Directive').

This case and the questions referred to the court can be viewed on our website at:

http://www.ipo.gov.uk/pro-policy/policy-information/ecj/ecj-2013.htm [no it can't. At 15.26 pm this Kat clicked the link and was treated to a short list of cases, none of which was Case 201/13 Deckmyn et Vrijheidsfonds, which you can read about in what this Kat guesses to be Dutch here. Update: by 16.13 pm the CJE|U website for this case was available as a click-through -- but the questions were "not available"]

If you would like to comment on this case please e-mail policy@ipo.gov.uk before noon 7 June 2013 [that's right, tomorrow. This email, timed at 15.15pm today, gives less than a day for responses and comments to be composed and submitted].

We understand how difficult it is to provide detailed comments in the time available. The IPO has tight time limits in which to consider and provide advice to ministers on ECJ cases. In order to help us provide the right advice, we just need a short email by the deadline stating whether you think the UK should intervene and some general points about how you think we should answer the questions.

You are welcome to follow this email up with more detailed comments after the deadline, which can be taken into consideration if we have chosen to submit observations or if we decide to attend a hearing.

If you are aware of any references to the ECJ that are not currently included on our website, you are also welcome to send us your views. If you choose to do this, please include clear information about the case to help us to identify it.

Further information on intellectual property ECJ cases can be found on our website http://www.ipo.gov.uk/ecj.htm. ..."

This exercise has become mindless and futile. Is there no-one in authority who reads this weblog and is prepared to take this problem by the scruff of the neck and shake it till it is solved?

This Kat is reminded of the story of the visitors to the Soviet Union and who watched with fascination while two workers proceeded with their labour. The first dug a hole in the earth, which the second filled up again. When the visitor expressed his surprise at this apparently pointless exercise, one of the labourers explained to him: "Usually there are three of us, but the guy who plants the trees is off sick today". This exercise is scarcely more productive. If less than one day's notice is given, is it worth wasting the effort and talent of IPO staff in sending out such email circulars?

Australia wants fair use (and so will you?)

noreply@blogger.com (Eleonora Rosati) — Thu, 06 Jun 2013 10:35:00 +0000

From Australian Katfriends Fiona Phillips (super-stylish Director of the Australian Copyright Council) and John R Walker (visual artist and one of the few real experts in the area of artist resale royalty right, who recently contributed to the IPKat debate on extended collective licensing) comes news of a Discussion Paper on Copyright and the Digital Economy that the Australian Law Reform Committee (ALRC) published yesterday.

The Discussion Paper highlights ALRC thinking to date and presents proposals for copyright law reform, with particular regard to:

Whether the exceptions and statutory licences in the Copyright Act 1968 are adequate and appropriate in the digital environment, and
Whether further exceptions should be adopted to recognise fair use of copyright material; allow transformative, innovative and collaborative use of copyright materials to create and deliver new products and services of public benefit; and allow appropriate access, use, interaction and production of copyright material online for social, private or domestic purposes.

The conclusions of the Discussion Paper are a series of (quite radical) proposals that, among other things, include:

Merpel is not so sure that having
to use this outfit is actually fair

Introducing fair use into Australian law, thus repealing current enumerated list of exceptions and limitations.
Extending the fair use exception to non-consumptive uses (eg caching, indexing, text or data mining), private and domestic use, transformative use and quotation, educational and Government use of copyright-protected materials.
Applying the fair use exception when determining whether a use of an ‘orphan work’ infringes copyright.
Repealing statutory licensing schemes in pts VA, VB and VII div 2 of the Copyright Act so that licences for the use of copyright material by governments, educational institutions, and institutions assisting persons with a print disability, are negotiated voluntarily.
Repealing s 200AB of the Copyright Act, so that the fair use exception is applied when determining whether uses of copyright material not covered by specific libraries and archives exceptions infringe copyright.
Calling for comments whether voluntary extended collective licensing should be facilitated to deal with mass digitisation projects by libraries, museums and archives [cf the path chosen by the UK when adopting the Enterprise and Regulatory Reform Act 2013]. In any case, the ALRC paper (§6.3, when speaking of statutory licensing schemes) acknowledges that "voluntary licences—whether direct or collective—are less prescriptive, more efficient and better suited to a digital age".
Retransmission of free-to-air broadcasts.

Youngest copyright enthusiasts
have already submitted their comments:
what are you waiting for?

The public is invited to make submissions in response to this Discussion Paper and, in so doing, contribute to the law reform process in Australia. The closing date for submissions is Wednesday 31 July 2013.

Overall, debate about whether fair use is better than a close list of exceptions and limitations is not new, and also in Europe there have been academic studies favouring the adoption of a general fair use exception on the US model. What seems quite new is the economic assessment of whether fair use actually works better. This Kat recalls a study by Ghafele and Gibert which assessed the economic effects of introducing fair use into Singapore law (this happened in 2005) and concluded that a flexible fair use policy positively influences growth rates in private copying technology industries.

Dormant and unmonopolisable therapies: can you help? - Part Two

noreply@blogger.com (Stefano Barazza) — Thu, 06 Jun 2013 07:15:00 +0000

Dormant and unmonopolisable therapies: what’s the matter?

In a 1981 study entitled ‘Patent-Term Extension and the Pharmaceutical Industry’, the US Congress observed that, ‘although all patented inventions receive protection for the same amount of time, the effective patent terms for the inventions vary’, as they depend on the amount of time elapsed between patent filing and effective commercialization. In relation to pharmaceutical products and medical devices, the study argued that the effective patent term is reduced, due to premarketing and premanufacturing R&D, subject to compulsory regulations. In 2003,B. Lehman, President of the International Intellectual Property Institute, made similar remarks, and disputed the efficiency of current mechanisms of extension of patent terms, which ‘do not equal the time lost in ability to market’ and impose, upon the patent owner, restrictions which allow generic manufacturer to use the product for testing and developing the generic alternative while the patent is still in effect.

A group of highly distinguished scholars (Budish, Roin and Williams) recently showed that the fixed patent term distortion, among US cancer patients diagnosed in 2003, resulted in around 890,000 lost life-years, with an estimated social value of US $ 89 billion per year. They highlighted some findings which may inspire future policy changes: (1) the number of clinical trials is inversely proportional to the patient survival time, which shows that drugs with long clinical trials, hence with a short effective patent term, are less likely to be developed than drugs with a short lag between development and commercialization, (2) patents aﬀect the level and composition of R&D investments, (3) increases in R&D positively translate into improvements in patient health, and (4) the use of valid surrogate endpoints effectively increased R&D investments, reducing commercialization lags and improving patients’ health. In particular, the use of surrogate endpoints was seen as a plausible solution to reduce the commercialization lag, and to reinforce patent protection, without modifying its duration.

However, the insufficient length of the patent term for new medicines (discussed in a debate hosted by The Wall Street Journal here) is not the only potential obstacle to their development. D. Baker, co-director of the Center for Economic and Policy Research, suggested (here) that other issues affect the protection offered by the patent system to pharmaceutical R&D, including (a) ‘excessive marketing expenses, as firms seek to pursue the monopoly profits associated with patent protection - data from the industry suggests that marketing costs are currently comparable to the amount of money spent on research’, (b) investments in duplicative drugs, which involve two thirds of the overall research spending, and (c) insufficient disclosure of information.

Professor B. Roin, in his article on ‘Unpatentable Drugs and the Standards of Patentability’, focused, instead, on the requisites of novelty and non-obviousness, arguing that their application in the context of pharmaceutical cases may prevent the patentability, and thus discourage the development, of socially valuable drugs.

With regard to novelty, the author noted that ‘in the pharmaceutical industry, […] new drugs can cease to be ”novel” inventions long before they have undergone the clinical trials needed to establish their medicinal value and thus can become unpatentable before the public ever gains access to them’. In other words, the link between disclosure and innovation, in this specific field, could be particularly weak, as the mere theoretical possibility of a therapeutical use of a chemical compound does not usually allow the pharmaceutical company to establish its safety and efficacy, which will be determined only at the end of clinical trials. The article refers to the analgesic drug Ultracet as a prime example of the distortions introduced by the novelty requirement: the idea of combining the two drugs of which Ultracet is composed was briefly mentioned in a 1972 publication, but physicians only began prescribing the combination after a company established its safety and efficacy in 2001, receiving FDA approval to market what turned out to be an unpatentable drug. According to Roin, unpatentability for lack of novelty may derive from accidental disclosure or preliminary disclosure of a compound erroneously deemed ineffective, or whose therapeutical value is not demonstrated: these situations explain why ‘82% of universities with large medical-research programs were unable to patent at least one of their life-science inventions during the previous year and 71% of [them] were unable to find a commercial partner to develop one or more of their life-science inventions’. The doctrine of inherent anticipation (particularly after Schering Co. v Geneva Pharmaceuticals Inc. et Al., commented here - see also, in the UK, Merrell Dow v H N Norton & Co), may lead to similar distortions.

The non-obviousness requirement prevents the patentability of drugs whose therapeutic properties are reasonably foreseen, but incurs in the same issue, as the predictability of therapeutic efficacy remains highly speculative until clinical trials are under way. This requirement, according to Roin, ‘denies patent protection to inventions because they seem likely to work while ignoring the question of whether a patent is needed to motivate that invention’s development’ [although this conclusion, in Merpel’s view, conflates the aim of the non-obviousness requirement, with that of the patent itself].

The conclusion drawn by the article is that the inadequacy of the novelty and non-obviousness requirements to distinguish between drugs which deserve patent protection, and me-too drugs which yield little social value, prevents the development of valuable drugs, as pharmaceutical companies regularly, and repeatedly, assess the patentability of a candidate compound before proceeding with its development. ‘The social costs of losing such drugs’, in the author’s view, ‘likely far outweigh any benefits to the public from faster access to inexpensive generics of the unpatentable drugs that actually reach the market’. Possible solutions include a patent reform, which could create an exception in the novelty and non-obviousness standards for drugs in the preclinical stage, direct government funding, or FDA-administered exclusivity periods. Roin focused on the latter solution, and argued that lengthening the period of exclusivity to somewhere between ten and fourteen years, would ‘eliminate the distortions arising from the novelty and non-obviousness requirements’.

Roin’s arguments were partly disputed by K. Outterson (here), who criticized the Ultracet example and observed that companies may be willing to take the risk of proceeding with the development of a drug with weak patent protection or in the public domain, resorting to method-of-use, formulation, or combination patents, or simply relying on their brands’ strength. Outterson recommended a re-evaluation of the possible use of direct government funding to deal with the issue, and suggested charging generic manufacturers with a fee payable to the company who did all the R&D, including the clinical trials and regulatory approval phases. In the UK and US, there is some evidence of direct public funding aimed at supporting research on abandoned compounds, as the UK Medical Research Council and the National Health Institute are both financing similar initiatives (more here).

In a recently published paper, M. Morgan argued that market exclusivity could be a more flexible substitute of patents in the biologics industry, which shares many of the characteristics of the pharmaceutical sector. Savva summarizes Morgan’s findings as follows: (1) ‘FDA-administered exclusivity has the benefit of reducing the barriers caused by upstream “patent thickets” on basic research’, (2) rent dissipation ‘can be prevented by allocating “clinical exclusivity” once a product is ready for clinical trials, and (3) ‘until that stage, the cultural norms of science (which favor early publication of breakthrough research at the “pre-competitive” stage) combined with trade secret protection (until a drug candidate is ready for clinical development), can provide adequate incentives for development of unpatentable drugs’.

Our Katfriend also explains how the current regimes of “regulatory exclusivity” work and why they need to be improved:

It may be argued that current “regulatory exclusivity” regimes - e.g. data exclusivity for new drugs (5 or 12 years in the US for pharmaceuticals or biologics, respectively, and 10 years in EU) and new indications (3 years in US and 1 year in EU) and "market" exclusivity for Orphan Drugs (7 years in the US and 10 years in the EU) - provide adequate incentives for "dormant therapies" in absence of patent protection. However, data exclusivity only protects clinical trial data which does not prevent another competitor from conducting their own trials (at no risk of failure), which may be likely if there is a lucrative market.

Also, Orphan Drug exclusivity only applies to rare diseases (affecting less than 200,000 people in the US and fewer than 5 people per 10,000 in the EU) [and is] shorter than average patent protection (12 years). Further, commentators have noted that drug companies have been known to "game" the Orphan Drug legislation by seeking approval for a drug in a small patient sub-population while generating "blockbuster" revenues through "off-label" use for broader indications (see Kesselheim and Armstrong). Gleevec/Glivec is an example of such a drug.

In the US, the MODDERN Cures Act, which died in subcommittee during the 112th Congress, but is due to be resubmitted in the 113^th, aims to address some of the concerns raised by dormant therapies. The draft’s preamble clarifies the issue:

(7) In addition, there is reason to believe that potential treatments with tremendous value to patients are never developed or are discontinued during research and development due to insufficiencies in the intellectual property system.

(8) It is in the public interest to address the hurdles that may be precluding new treatments from reaching patients and to remove the disincentives for the development of therapies for these unmet needs.

The Act defines ‘dormant therapies’ as those that meet unmet medical needs and have prospectively insufficient patent protection. The first requisite essentially implies that the drug to be investigated should address ‘a need for drugs or biological products for the treatment of one or more life-threatening or other serious diseases or conditions for which no therapy exists’, or guarantee improved effects on serious outcomes already treatable through other therapies. The second requisite is fulfilled if patent protection, for a period of 14 years from the date of first approval, is not reasonably anticipated to ‘provide an adequate scope of protection to prevent the approval of products that would rely upon or reference the dormant therapy, in an application filed under section 505(b)(2) or 505(j) of the Federal Food, Drug,and Cosmetic Act, or section 351(k) of the Public Health Service Act’, or to provide patent protection under the patents, or applications, filed by the sponsor. The request for designation lists the related patents owned by the sponsor, who must agree to waive their enforcement after the end of the exclusivity period, and certifies the prospectively insufficient patent protection. The designation is conceded if all the above requisites are met, provided that the sponsor effectively intends to file an application for approval of the drug with the FDA.

'unmonopolisable...'

Under Section 202, a ‘dormant therapy’ enjoys a 15-year protection period of FDA-administered exclusivity [‘originally data exclusivity’, explains Savva, ‘but replaced with patent-like market exclusivity in the amended version due to be resubmitted to Congress’], beginning from the date of FDA approval of the new drug, with a corresponding extension of the patent term. As the designation would confer a new, strong protection for a significant period of time, devoid of any restrictions due to R&D efforts, the amended version of the Act contains provisions aimed at preventing races to regulatory approval (by establishing clinical exclusivity), and at verifying the continued development of the new drug (through ‘development certifications’).

The MODDERN Cures Act appears to be a significant step in the right direction. Savva explains that, although there is the theoretical risk that a competitor may obtain exclusivity over a drug initially developed and investigated by another company, a situation which could discourage the disclosure of information in the public domain, ‘the fact that most companies are incentivized to file patent specifications early with broad claims (subject to potential utility and sufficiency issues) [makes it] unlikely that the Bill would result in any significant change in the disclosure of information or filing practices, although it may discourage “defensive” publications’. This legislation would thus provide the necessary reward for companies who invest in the development of socially valuable drugs, shifting the focus away from the rigid requirements of novelty and non-obviousness, and the distortions induced by insufficient patent protection.

This Kat is of the view that the issues highlighted above, and the reduced efficiency of the patent system in promoting important research investments in the pharmaceutical sector, is certainly worth investigating, as the social benefits that may derive from the commercialization of ‘dormant and unmonopolisable therapies’ should not be wasted. There are, however, some further concerns and doubts that he briefly summarizes as follows:

the lack of data on specific R&D expenditure, and the profits made through sales of the developed drug at premium prices, prevents a more fair evaluation of the possible solutions to the issues examined, as proposals focus on guaranteeing an exclusivity period similar to that afforded by patents in other industries, on the unproved assumption that this may effectively address the industry’s concern [which is possible, and perhaps even plausible, but not easy to demonstrate];
based on the data available, there appears to be extreme variability in R&D expenditure (with the cost of each drug varying between US $ 500 million and more than US $ 2,000 million, according to this study) and profitability, with some drugs reportedly generating profits sufficient to recoup not only their research costs, but also those of less successful drugs (as demonstrated by the so-called ‘patent cliff’, and by a study which found that, for new chemical entities introduced between 1988 and 1992, the top 10% of drugs accounted for 56% of the overall sales of all the NCEs); if this variability was confronted, once again, with a rigid solution, it may result in issues of over-protection and, more importantly, under-protection, potentially compensated through extremely high market prices, which may critically inflate the 'deadweight loss' effect;
the idea of using administrative periods of exclusivity is certainly more reasonable than tampering with the novelty and non-obviousness requirements, which do not serve the scope of rewarding inventors for their innovations, but merely restrict the target of patent law;
public funding in the pharmaceutical sector is certainly needed to promote the development of drugs for both rare and endemic diseases, and could be necessary to stimulate further research on compounds which already translated into successful drugs; more generally, there should be some recognition for the composite structure of pharmaceutical R&D, which frequently involves many subjects in its various stages (for example, Universities which disclose the basic compound, and companies which investigate its property and therapeutic efficacy, and conduct clinical trials), calling for public co-funding as a primary drive for basic research;
'unmonopolisable therapies', an issue which usually remains in the shadow of 'dormant therapies', warrants a cautious approach, as it may be difficult to identify the innovations which really deserve an exclusivity-based protection; further, the development of diets, dietary supplements, lifestyle interventions, surgical methods, “natural” remedies, and many complementary and alternative medicines is frequently the result of the work of individuals or restricted groups, which may be more sensitive to better research funding (i.e. increased "push" incentives) and recognition than to patent-like protection (Savva notes that the latter provides limited incentives for 'unmonopolisable therapies', as monopoly prices cannot be enforced, and suggests that examples of alternative "pull" incentive could comprise prize-based models such as the Health Impact Fund, Advance Market Commitments, priority review vouchers, wildcard patent extensions, prizes for clinical trials, etc.);
it is necessary to ensure that legislative intervention, such as the MODDERN Cures Act, contain provisions that (1) address the risk of races to approval and rent dissipation, (2) ensure that ‘dormant therapies’ do not turn into ‘hibernated therapies’ [Kat-invented description, which points to the possibility that companies could slow their research efforts after obtaining the designation, knowing that the exclusivity period starts from the regulatory approval - Savva argues that the use of development certifications should be sufficient to minimize the issue], or into the equivalent of ‘submarine patents’, and (3) prevent reliance upon designation as ‘dormant therapies’ from generating a shift towards the development of drugs with high profitability (for which ‘the clock is ticking’, as they do not fulfill the requisites for extended protection), over those that meet urgent and unmet medical needs (for which the clock begins ticking only after approval);
finally, these issues suggest that, although not welcome by the industry, an administrative authority, equipped with the power to investigate these issues through access to real numbers, and to review the correct use of the system, would not only guarantee that the rights of inventors and patients are rightly balanced, but would ultimately represent a safe way for the industry to make its voice heard, when, despite the high costs of the marketed drugs, the risk of insufficient reward is real.

How can you help?

Savva, who is currently analyzing these issues for his thesis, would be happy to hear what the IPKat readers have to say, so do feel free to share your views below. Further, if you know of any examples of ‘dormant’ or ‘unmonopolisable’ therapies and are willing to participate in a confidential survey, you will certainly be rewarded with Savva’s gratitude if you could write directly to him here.

Finally, our Katfriend is also interested in comments on the use of 'patent evergreening' techniques (e.g. patenting derivatives, metabolites, selection inventions, new formulations or combinations with the same active ingredient, new uses, methods of administration or methods of manufacture) to rescue 'dormant therapies':

For example, if a compound does not have regulatory approval, a method of use patent will still provide adequate market protection against generic competition which cannot obtain approval for any other indication - this is the likely strategy of various "drug repurposing" companies, which try and find new indications for failed drugs which may have passed "safety" testing (in Phase I of clinical trials) but failed in Phase II and/or III (efficacy). Various commentators have noted that such "secondary" or "second generation" patents (which do not cover the drug compound itself) are weaker and more susceptible to obviousness challenges (according to two studies here and here). However, drug repurposing companies may still be willing to take a drug to market on a "secondary patent" due to lower costs of development for repurposed drugs which have already passed pre-clinical and phase I testing. Arguably, there would be no incentives to develop potentially safe and effective drugs which had not undergone such testing (or drugs which cannot even obtain such "secondary patents" due to obviousness).

The IPKat is sure that his readers were just waiting for this occasion to showcase their knowledge and helpfulness.

Dormant and unmonopolisable therapies: can you help? - Part One

noreply@blogger.com (Stefano Barazza) — Thu, 06 Jun 2013 07:15:00 +0000

Patent law is commonly regarded as an attempt to foster innovation, rewarding successful innovators with a period of exclusivity which allows the recoupment of research investments and stimulates R&D efforts, promoting the diffusion of knowledge through disclosure (more on the dichotomy between ‘reward’ and ‘contract’ theory here), and securing the development of precious inventions that might otherwise have never been produced (Burk and Lemley here). The system exhibits a twofold nature, being technology-neutral in theory, and technology-specific in application (as explained in this paper): a characteristic that allows courts to differentiate the interpretation of the basic premises of patent law, adapting them to the peculiarities of the technologies examined. Induced flexibility, however, may not be a sufficient remedy for the rigid structure of patent law, when the innovation exhibits unique features. In this post, we will explore one of these cases, and the distortions that the current system generates, which are potentially capable of preventing it from reaching its primary aim of stimulating inventions of great social utility.

The IPKat is in New Zealand, this week!

Kat friend Savva Kerdemelidis is a New Zealand-based lawyer who is currently undertaking a Master of Laws thesis at the University of Canterbury on gaps in the patent system for otherwise potentially safe and effective medical treatments. Savva, who was also kind enough to comment on an early version of this post, explains that, in the pharmaceutical sector, the discrepancy between the length of the patent term and that of the overall process of R&D, which comprises pre-clinical research of compounds, clinical trials and regulatory approval, is threatening the development of new therapies. He describes two distinct phenomena:

- ‘dormant therapies’, an issue caused by the expensive and lengthy gap between invention of a therapy and market approval (often costing hundreds of millions and taking over 6-8 years). In particular, drug candidates which fail to attract funding or are dropped from development where the primary reason was perceived or actual insufficient patent protection (e.g. due to prior publication or insufficient patent length having regard to commercialization time required) as opposed to (i) perceived or actual lack of safety or efficacy or (ii) other commercial reasons.

- ‘unmonopolisable therapies’, which failed to attract funding or were dropped from development where the primary reason was perceived or actual lack of ability to enforce monopoly pricing over the therapy as opposed to (i) perceived or actual lack of safety or efficacy or (ii) insufficient patent protection per se. Examples of such therapies include second indications for cheap generic drugs or drug combinations for which patents cannot be used to prevent “off-label” use by doctors or patients. For the same reason, patents cannot be used practically to enforce monopoly prices for diets, dietary supplements, lifestyle interventions, surgical methods, “natural” remedies, and many complementary and alternative medicines. Therapies for neglected/third world diseases and other “unprofitable therapies” could also be considered a subset of this category, as an innovator company could not recover enough money from the market to justify significant R&D investment, even if they had patent protection.

This Kat endeavoured on a mission to find out more about these phenomena, which he examines below, in light of the unique features of pharmaceutical R&D. Readers who are already familiar with this matter may wish to jump to the end of Part Two, to find out how they can help Savva complete his research.

Characteristics of R&D in the pharmaceutical sector

Why is the pharmaceutical sector an ideal background for the development of these issues? Researchers repeatedly explored the economics of pharmaceutical R&D, and found that the process that leads to the commercialization of new drugs is long and complex. Patent protection is usually sought in the early stages of R&D, when the number of potentially useful compounds is still very high, and their properties undiscovered. Restricting the selection of ideal compounds, investigating their suitability and evaluating interactions, efficacy and bioavailability requires years of research. Before reaching the market, however, drugs still have to undergo rigorous clinical trials and receive regulatory approval. Throughout the whole process, many potential candidates may prove unsuitable, or be abandoned due to the high costs and long-term evaluation required, or fail to prove beneficial in clinical trials. Studies conducted in 1979 (Hansen), 1991 (DiMasi et al.) and 2003 (DiMasi et al.) showed that:

the average time required for the development of a new drug, from discovery to regulatory approval, increased from 8 years in the 1960s, to 12 years in the 1990s;
the average capitalized cost for the whole process (including research costs - and cash outlays for unsuccessful research efforts -, preclinical development costs, and time costs) rose from US $ 54 million (1976 dollars) for R&D conducted in the 1960s/1970s, to US $ 231 million in the 1980s (1987 dollars), and reached US $ 802 million (2000 dollars) in the 1990s. There appears to be further evidence that this upward trend continued in the last decade;
although it is difficult to verify the industry’s claim that only one or two drugs are developed out of 10.000 compounds investigated during R&D (see EFPIA’s 2010 report here), it is safe to assume that only a small percentage of the substances evaluated for possible use as drugs reach the clinical trial stage, where 80% of them are abandoned before regulatory approval or are rejected.

Recent research by the Office of Health Economics reached similar conclusions, finding an increase in R&D costs from US $ 199 million per new medicine in the 1970s to US $ 1.9 billion in the 2000s (2011 dollars), a decline in success rate for clinical development (from 1 in 5 in the 1980s to about 1 in 10 in the 2000s), and a steady growth in the time required for research and approval (from 6 years in the 1970s to 13.5 years in the 2000s). By contrast, generic manufacturers usually invest about US $ 2 million to bring the product to the market, and forego the clinical trial stage. A 2006 study by leading US economists corroborated these data, warning, however, that there are substantial variations in estimated drug costs, which may depend on numerous factors, including the strategic decision making of the companies themselves.

Source: EFPIA - The Pharmaceutical Industry in Figures (2010)

Although the above findings, and the methodology implied to analyze the raw data, were criticized by some scholars (for example, Light and Warburton here), there seems to be little doubt on the fact that the development of a new drug is a lengthy, expensive and tentative process. In this context, companies rely upon strong patent protection, for a period of time long enough to offset the risks taken, and the investments made, in the R&D phase. On one side, patents are expected to guarantee effective protection against infringement, which may spread more easily than in other industries, in light of the general equivalence between patent and drug (in contrast, for example, with patents in the ICT sector, where the final products often embody hundreds of patents), and of the relatively ease of manufacturing generic versions of patented drugs. On the other, the right of exclusivity allows companies to recoup research investments, to recover expenses made for unsuccessful drugs, and to cross-subsidize the development of new drugs with lower profitability.

Strong patent protection, however, implies an inherent tradeoff, as it allows companies to charge premium prices for their products. In the pharmaceutical field, this tradeoff, which is necessary to ensure the recoupment of R&D costs and thus to stimulate investment in the first place, may generate two major negative consequences: (1) the misalignment between reward and market price, due to the difficulty of estimating the overall research expenses that the company is entitled to recoup, and the inability of the demand to shift towards alternative, cheaper alternatives; and (2) the so-called ‘deadweight loss’ effect, which prevents patients who cannot afford the expensive drug from benefiting from the invention to improve their health, or to save their lives. It is usually thought that this inevitable tradeoff is acceptable, in light of the high social return of pharmaceutical R&D investments (as highlighted by Lichtenberg here). Further, data showed that the absence of patent protection has a stronger impact on R&D expenditure in the pharmaceutical sector, where it causes a 64% decline, than in other industries, where the decline only reaches 8%.

The progressive lengthening of the R&D process, and its growing costs, appear to have had a severe impact on overall research investments, which rose from US $ 68 billion in 2002 to US $ 127 billion in 2010, and on the number of new drugs marketed for every US $ 1 billion of R&D expenditure, which fell from 50 in the 1950s to less than 1 in the last decade (detailed trends here). Consequently, the discrepancy between length of the R&D and patent term, as well as concerns about the patentability of drugs for lack of novelty or non-obviousness as explained in the second part of this post, drive pharmaceutical companies to continuously assess the patentability and protection offered to the candidate drug, abandoning its development if issues arise as to the possibility of recovering the high expenses involved. This situation leads to a tradeoff which, according to many commentators, is greater than that embedded in the patent system, as the public may never benefit from potentially safe and life-saving drugs. The phenomenon may have involved a relevant share of the 30,000 drugs dropped from development in the last thirty years (more here) and certainly deserves a closer look.