Emerging Patent Law Policy Issues for in 2013

2013 is going to be an exciting year for patent law and the policies which govern it. From implementation of sections of the Leahy-Smith America Invents Act to anticipated decisions from the Supreme Court, we can expect changes to the patent system that will affect the high tech and biotechnology industries, start up companies and established businesses of all sizes. Just some of the developments we can expect to see include a determination of whether genes are patentable, proposed legislation addressing the litigation strategies of non practicing entities, and harmonization of the US with much of the world through the implementation of the first-to-file patent application system and the introduction of an international design patent application process.

The Patentability of Human Genes

Isolated genes and DNA sequences are claimed in numerous patents and patent applications and are extremely important to the biotechnology industry. Myriad Genetics was granted patents for BRCA1 and BRCA2, two genes linked to breast and ovarian cancer, and is the sole provider in the US of tests for cancers involving the BRCA genes.

In 2009, Association for Molecular Pathology (“AMP”) sued Myriad Genetics in an attempt to invalidate Myriad’s patents covering the isolated BRCA genes in hopes of lowering the cost of testing and improving access. In March 2010, the U.S. District Court for the Southern District of New York ruled in AMP’s favor and held that,among other things, gene patents are invalid. Myriad appealed and the U.S. Court of Appeals for the Federal Circuit reversed the ruling agreeing with Myriad on the issue that isolated DNA can be patented.The Supreme Court granted certiorari after the Federal Circuit’s first decision and remanded for reconsideration in light of the March 2012 decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., holding that methods for optimizing drug efficacy are laws of nature and, therefore, are not patentable. On remand, the Federal Circuit reaffirmed its earlier holding stating that isolated genes are the products of man, even though they follow the laws of?nature. AMP and the ACLU appealed to the Supreme Court on October 1,2012.

The Supreme Court granted certiorari on November 30, 2012 in the case, Association for Molecular Pathology v. Myriad Genetics, to decide the sole question of whether human genes are patentable and choosing not to address other issues in the case including standing and the patentability of gene screening methods. Oral arguments are not yet scheduled but a decision is expected in June 2013. Regardless of how the Supreme Court decides, the implications will effect the future of gene based testing and medicines, as well as the future of the biotechnology industry as a whole. The ACLU hopes the outcome will ensure the provision of medicines and research allowing patients to access their own genetic information, but Myriad is afraid an adverse?decision denying patent protection would stifle innovation ultimately slowing advances in personalized medicine.

[Bio-Pharma]

New Legislation Governing NPEs and Patent Pools

Non practicing entities (“NPEs”), frequently referred to as “patent trolls,” profit off of the patent system without ever developing or manufacturing a product. Through the acquisition of patents, the person or entity then enforces these patents against?alleged infringers. Due to the high cost of litigation, which can be in the millions of dollars, companies will often settle or agree to take a license resulting in income to the NPE.

Patent pools, on the other hand, are designed to more efficiently manage groups of patents deemed essential for a particular technology. Two or more companies join together and agree to cross-license patents to each other. Pools are particularly important in the high tech industry, where inventors frequently develop products based off of or incorporating existing technologies.

MPEG 2, one of the larger and more well-known patent pools, is managed by MPEG LA, a private patent licensing organization. The pool is comprised of patents deemed essential to the MPEG 2 video format used in many consumer technology products such as cell phones and tablets. MPEG LA has been widely criticized for engaging in unfair business practices. Specifically, MPEG LA charges unusually high licensing fees for patents that either have already expired, or will soon expire.?Licensees are locked in to terms that extend beyond the life of many of the patents. The President of MPEG LA, Larry Horn, is also?President of MobileMedia Ideas, a very well-known NPE or ‘patent troll.’ MobileMedia Ideas owns hundreds of patents covering technologies incorporated in cell phones, computers, tablets, cameras and video game players and frequently enforces its patent rights aggressively which frequently gets notice in the technology media.

Recently, regulators have begun to pay more attention to the practices of patent pools and NPEs. Congressman Peter DeFazio (D-Ore.) introduced HR 6245 (co-sponsored by Congressman Jason Chaffetz (R-Utah)), the Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act. The bipartisan Act is designed to protect companies from frivolous patent lawsuits initiated by NPEs. The SHIELD Act will put the financial burden on the NPE rather than the innovator by allowing defendants to recoup money spent to successfully defend themselves. The bill did not make it to the floor for a vote, but likely will be reintroduced in the 113th Congress. If not, with recent attention given to the issue, hopefully other legislative efforts?targeting NPEs will gain support in Congress this year.

First-Inventor-To-File System

Beginning on March 16, 2013, the First-Inventor-To-File provisions of the Leahy-Smith America Invents Act take effect. Previously, the US followed a first-to-invent system. In that system, the filing date of a patent application filed with the U.S. Patent and Trademark Office (“USPTO”) was presumed to be the priority date. To overcome this presumption, inventors could claim they invented first by swearing behind a prior art reference or through interference practice to challenge an earlier filed patent or application claiming the same subject matter. The revised law provides for the grant of a patent on the first filed application, rather than the first real inventor, except where there is derivation from an inventor who also filed an application. This eliminates the ability to swear behind a reference and the chance to predate an earlier filed patent or application using the interference procedure. The law, however, does provide an exception for those inventions that are derived from another. The provisions now establish derivation practice for attacking earlier filed applications by non-inventors. Ultimately, this creates a race to the patent office, potentially favoring larger well-funded companies over start-ups and small inventors. Regardless of the outcome, these changes will harmonize the US with most of the rest of the world, currently operating under a first-to-file system.

Implementation of the Patent Law Treaties Implementation Act of 2012

On December 18, 2013, the USPTO will implement the Patent Law Treaties Implementation Act of 2012, which harmonizes US patent law with international intellectual property treaties. One part of the Act, the Hague Agreement Concerning International Registration of Industrial Designs, creates a design application and procedure whereby an applicant in the US can file a single international design application in the USPTO, instead of applications in multiple countries. Similar to the Patent Cooperation Treaty (“PCT”) process, the applicant can designate treaty countries where it wishes to receive protection claiming priority back to the international design application. The law reduces costs, while at the same time, increases the term of protection from 14 years to 15 years. Companies previously precluded from obtaining foreign design protection may now be able to do so given the cost saving measures and application efficiency. Some, however, worry the law will lead to frivolous patent suits and provide another tool in the NPE’s arsenal.

Stay tuned for what is shaping up to be a dynamic year in patent law.