Senate IP Subcommittee Hears Testimony from Iancu, Debates Hot-Button IP Issues

“Iancu said that, while it was important to prevent abuse in the system, he took issue with the use of pejorative terms like ‘patent troll’ that fail to identify specific issues that could be solved.” the afternoon of Wednesday, March 13, the Senate Judiciary Committee’s Subcommittee on Intellectual Property held an oversight hearing of the U.S. Patent and Trademark Office featuring testimony from and questioning of USPTO Director Andrei Iancu. While this hearing was relatively short by Congressional standards, the Senate IP Subcommittee explored recent changes instituted during Iancu’s tenure as USPTO Director and also got into the debate on pharmaceutical patents—a topic that has been front and center for both houses of Congress in recent weeks.

Chairman Tillis, Ranking Member Coons Encouraged by Subject Matter Eligibility Guidance

In his opening statement, Senate IP Subcommittee Chairman Sen. Thom Tillis (R-NC) expressed his support of Director Iancu’s efforts to harmonize the clam construction standard utilized in America Invents Act (AIA) trials occurring at the Patent Trial and Appeal Board (PTAB) with the Phillips construction standard used in Article III federal courts, adding that this helped to ensure that patent owners were being treated fairly regardless of the forum where validity was being challenged. Tillis also said he was “glad to see” the USPTO issue revised guidance on subject matter eligibility under the Alice/Mayo framework, a framework that Tillis noted had created massive uncertainty for every industry that relies on patents. Although Tillis expressed concerns about the legacy tech systems still being used at the USPTO, he added that he was encouraged by Iancu’s efforts to make modernization at the agency a priority.

Ranking Member Sen. Chris Coons (D-DE) was also supportive of changes made by Iancu since he became the USPTO Director, noting that those changes helped the U.S. patent system rise to tie for 2nd place in the 2019 version of the U.S. Chamber of Commerce’s International IP Index up from its previous position of 12th place. However, Coons expressed his concern that current case law on patent eligibility disincentivizes research into critical areas of innovation, such as personalized medicine. Coons acknowledged that the USPTO couldn’t solve this problem on its own and said that efforts were being made to work towards a legislative solution to what he called this “thorny challenge.”

Iancu Highlights Recent Agency Actions in His Testimony

Director Iancu began his statement by highlighting some of the changes implemented at the USPTO, which were covered in more detail in his written testimony, including the change to the Phillips claim construction standard and the recently revised subject matter eligibility guidelines. He expressed his satisfaction with the recent passage of the SUCCESS Act, which extended the fee setting authority of the USPTO for an additional eight years when it was passed into law last October. Under the terms of that law, the USPTO was directed to study and report on the number of patents obtained by women, minorities and veterans, and Iancu pointed to a USPTO report released last month which showed that the number of women named as inventors had not been increasing at the same rate as the number of women who were now in STEM professions. Iancu also discussed a recent notice of proposed rulemaking that would require foreign domiciled trademark applicants to use U.S. licensed counsel—a measure to reduce the number of trademark applications from overseas that are filed in bad faith.

Senator Cornyn Leads With Questions on Drug Patents and “Patent Trolls”

Kicking off the questioning period was Sen. John Cornyn (R-TX), who brought up the debate on rising drug prices that is presently roiling through both houses of Congress. While he said that he was in favor of letting inventors reap benefits as a reward for risk-taking, he was worried about situations like one he had recently learned about during a Senate Finance Committee hearing in which a single drug was allegedly covered by more than 130 patents. “What does concern me is if possibly somebody is gaming the system in order to ‘evergreen,’ for example, I believe the term is, by making small changes in a drug and then getting a new patent, stretching out the time before competitors can enter the market,” Cornyn said. Iancu responded by noting that, while the USPTO wanted to avoid gamesmanship and make sure that patents are only issued for meritorious inventions, the U.S. patent system was one component of a complex system of drug pricing. While he couldn’t speak to the specific situation Cornyn referenced of the single drug protected by more than 130 patents, Iancu said that the complexity of drugs was such that patents would be issued covering the molecule itself, covering the method of manufacturing, covering the delivery mechanism and any other of a number of aspects about the drug that forms an inventive concept.

Sen. Cornyn next moved to the topic of “patent trolls,” telling Iancu he wanted to make sure that he correctly understood the Director’s position based on recent comments he had made. Cornyn referenced Apple’s recent decision to close two stores in the Plano, Texas area in order to escape litigation filed in the Eastern District of Texas, arguing that the litigation was so burdensome to Apple that it was willing to walk away from more than $70 million in sales generated by just one of those stores. Iancu said that, while it was important to prevent abuse in the system, he took issue with the use of pejorative terms like “patent troll” that fail to identify specific issues that could be solved. “If in fact there is a concern about blunderbuss demand letters sent out without a reasonable basis to many entities, well let’s identify that problem and let’s look at a solution to that problem and try to eliminate that issue,” Iancu said.

Senators Coons, Tillis Attempt to Untangle the Drug Patent Boondoggle

Sen. Coons followed up on Sen. Cornyn’s point about drugs that were protected by large patent portfolios, noting that many of his colleagues are often astounded or surprised that a pharmaceutical could be protected by dozens of patents. Coons noted that a drug already approved for treating one disease or condition might show efficacy against a different disease at a different dosing level, thus making the different dosage of that drug for treating a different disease an invention that could receive a new patent.

Sen. Tillis expanded on this issue, noting his work experience as a research and development manager in the 1980s and the importance that patents played in the decision to continue research of any technology.

“The expanded uses of an existing drug… it’s not like you go, ‘Hey, this drug that works for one illness seems to have efficacy in another one,’ we know it’s not just a matter of letting them use it, then you have to go through the clinical trial process, the FDA approval process, to actually allow that to happen, and that costs money, money that has to be recouped, and if there’s no guarantee that you would then there may be treatments that will simply not get to the market because there’s no business basis for being able to move forward.” – Sen. Thom Tillis

Sen. Tillis also asked Iancu if he would be able to do a study looking back on patent grants over time to see if there was any way to quantify the “evergreening” issue that was raised by Sen. Cornyn. Iancu said that he could look into doing such a study at the Office. He also added that a patent’s exclusivity period traditionally lasts about 20 years and, even when a continuation application is filed after a parent patent application and a patent is issued based on the continuation, that continuation is usually coterminous with the parent application, so even that continuation wasn’t necessarily extending the term of the patent.

Iancu Discusses Telework, Bad Faith Trademark Applications and Serial PTAB Challenges

Sen. Mazie Hirono questioned Iancu about the USPTO’s Telework Enhancement Act Pilot Program (TEAPP), which in general is very beneficial to the Office but requires teleworking employees stationed in Hawaii to make a monthly trip back to the agency’s headquarters in Alexandria, Virginia. Although the agency was still assessing the technology needed to facilitate teleworkers in Hawaii and Alaska without such commuting requirements, Iancu said that he was hoping to be able to make those changes soon. Hirono also asked about the report on women inventors and asked what steps were being taken to close the gaps shown in that study. Iancu cited a roundtable discussion in Silicon Valley with companies and academics that occurred soon after the report came out to discuss actions that can be taken. Iancu said that he thought one of the most important factors to encourage inventions from women and minority groups was to have appropriate role models and mentors so they can see people like themselves participating in the U.S. patent system. Sen. Tillis followed by noting that the Senate IP Subcommittee would be holding a hearing in April on this particular issue.

Other issues discussed during the hearing included problems with an influx of trademark applications from China, many of which are questionable in nature. Iancu discussed a pilot program recently put in place to expedite trademark cancellations but added that this program was fairly new. He also discussed new software developed for the agency that can help trademark examiners determine whether any specimens of use provided as part of the application have been Photoshopped in any way.

Asked about issues surrounding the current state of Section 101 patent eligibility, which Sen. Coons said continued to preclude significant advances in medical diagnostics, Iancu said that the recently revised subject matter eligibility guidance was well received by examiners, but it remained to see how the courts would interpret it. He cited the Federal Circuit’s recent decision in Athena Diagnostics v. Mayo Collaborative Services where the panel majority felt its hands were tied by Supreme Court precedent despite their belief regarding the importance of the technology. Iancu also answered concerns from Sen. Hirono about serial challenges at the PTAB filed by major firms like Apple or Google, which present a particular hardship for small patent owners. Iancu noted positive results from a revised trial practice guide issued by the USPTO a few months ago and said that the agency would continue to take a further look at situations where multiple petitions challenging the same claims would be inappropriate.

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