Posts Tagged: "Congress"

USPTO Director and Under Secretary of Commerce for Intellectual Property Andrei Iancu believes that “to a large extent … if they want to, the Federal Circuit can fix the problem” with patentable subject matter under Section 101. Speaking at the 27th Intellectual Property Law & Policy Conference at Fordham Law School on April 25, Mr. Iancu said the interpretation of Section 101 is “the most important issue of substantive patent law currently.” He added: “This issue must be addressed now in the United States.” The USPTO Director said there is consensus that the state of the law is unworkable: “Recent case law has created significant confusion in this regard.” But he added: “If you look at the Supreme Court cases by themselves, those cases are not the ones necessarily that have caused the problem. In the way those cases have been interpreted in the lower courts or at the USPTO itself, we have deviated from the core message of the Supreme Court to some extent.”

This week on Capitol Hill, both the House of Representatives and Senate are back in full action after the conclusion of two weeks of work periods. Tuesday is an especially busy day for technology and innovation hearings at both houses of Congress. Hearings at the House that day will focus on stopping robocalls, carbon reduction technologies and 2020 fiscal year funding for a couple of government research and development agencies. Tuesday hearings in the Senate will look at American leadership in nuclear energy, cybersecurity concerns related to the Internet of Things and the Senate IP Subcommittee observes World Intellectual Property Day, with a look at IP in sports. The Information Technology and Innovation Foundation will also host an event on Capitol Hill this week to look at the prospects of blockchain technology adoption in various industries.

High prescription drug prices and their impact on costs borne by the government in Medicaid, Medicare Part D and other federal programs, is a front burner topic in Washington. The President has committed to reducing the price of prescription drugs, and pressured drug companies to hold the line. The Department of Health and Human Services (HHS) has proposed two regulatory initiatives—price disclosure in drug advertising and foreclosing rebates from manufacturers to pharmacy benefits managers (PBMs)—aimed at pushing prices down. Some Democrats have urged more sweeping actions, such as having the government negotiate Medicare drug pricing as a single buyer or regulating drug prices by reference to an international index based on government-negotiated drug prices abroad. These proposals cannot solve the drug pricing problem. The Administration’s proposals merely tweak the status quo and put no effective restraint on new drug prices. Jawboning by the Executive has had a minimal impact. Disclosure of manufacturers’ list prices, unless accompanied by numerous and inherently confusing caveats highlighting the difference between those prices and the co-pay an insured consumer must bear at retail, is potentially misleading and, in any event, has no direct impact on prices. Eliminating rebates, as HHS’s rulemaking acknowledged, will inevitably raise health insurance costs now partly paid for by rebates while manufacturers’ pricing power remains unabated. The Democrats’ call for government power buying or price regulation would impact drug prices but also require politically sensitive government determinations about the “worth” of prescription drugs to patients—a significant step on the road to government-allocated health care. 

The Framework rolled out by Congress last week to fix Section 101 law in the United States will not improve the current 101 disaster. It codifies current exceptions and even adds an entirely new exception specifically intended to protect big tech monopolies. Congress is pitifully unserious about restoring our innovation engine. For more than 200 years, the U.S. patent system was the primary engine propelling the United States to lead the world in virtually every new technology. But over the last 15 years, activists in Congress, the courts and the administration pulverized this engine to benefit a few huge multinationals in exchange for political donations and favors. Today, the patent system is a complete failure causing technologies critical to our economy, job creation, global technological lead, and national security to flee the U.S. and go to China. In a brutal political irony, the Communist Chinese have a better property rights system than we do here in the U.S.

The National Institute of Standards and Technology recently indicated in its “Return on Investment Initiative draft green paper” that it would issue regulations effectively ending attempts to misuse march-in rights to assert government price controls over successfully commercialized federally-funded inventions. Such an announcement was bound to elicit a reaction. That it came in The Washington Post shouldn’t be a surprise. The paper’s April 18 article, “A rare deterrent to limitless drug price increases may die under Trump” gives coverage to both sides, but the takeaway is that something nefarious is underway: “As drug prices have soared, lawmakers and patient advocates have pushed the federal government to deploy for the first time a powerful deterrent: a legal provision that allows it to suspend a drugmaker’s patent and license someone else to produce the drug. Now, responding to industry alarm over those demands, the Trump administration is proposing to strictly limit the little-known power,” said the article. There’s a reason why this “little-known power” has never been used—it doesn’t exist.

Capitol Hill remains quiet this week as both the U.S. House of Representatives and Senate enter a second straight week of work periods. Technology and innovation events continue, however, at the many policy think tanks residing in Washington, D.C. Monday starts with a discussion on U.S.-China relations at the Brookings Institution, while a pair of events at the Cato Institute look at whether human ingenuity can improve resource availability in the face of a growing world population and the effects of artificial intelligence (AI) on the future of work. In the middle of the week, the Center for Strategic and International Studies hosts two events exploring threats to the government’s software supply chain, as well as counterspace threats faced by the U.S. The week wraps up on Friday with a Consortium for Science, Policy and Outcomes event that explores the positive effect that creative play can have on business innovation.

The year 2017 proved to be a difficult one for the territory of Puerto Rico. Even before Hurricane Maria hit in September of that year, the island was in trouble. By the end of year, the economy was predicted to shrink back to levels not seen since 2000, the average household income was a mere $19,350, one-half that of Mississippi, the poorest state in the nation. Meanwhile, the cost of living in San Juan, Puerto Rico’s capital, was 11.6% higher than in an average U.S. metropolitan area. The government was already dealing with $74 billion in bond debt and another $49 billion in unfunded pension obligations, with U.S. banks taking at least $1 billion to manage its bond sales. In the fall of 2017, after Maria hit head on as a Category 4 hurricane that caused catastrophic damage, the second blow to Puerto Rico was brewing—this time in Washington. The Republicans, being in control of the House, Senate, and the White House, drafted a tax reform bill that proposed the biggest change to the tax code in 30 years. Within that tax bill was a provision that was predicted to decimate what is left of Puerto Rico’s remaining economy. The tax bill proposed, and ultimately the President signed into law, a provision that levies a 12.5% tax on profits derived from foreign-owned intellectual property. This hits Puerto Rico in two ways. First, Puerto Rico has a complicated taxation relationship with the United States. Its citizens do not pay federal income taxes, although they do pay into Social Security. However, when it comes to taxation, the IRS considers Puerto Rico to be a foreign country. Thus, any profits derived from intellectual property in Puerto Rico would be considered foreign profits subject to the excise tax. The second problem is that Puerto Rico derives a great deal of its revenue from the manufacturing of prescription drugs, representing the very profits from intellectual property contemplated in the law. According to the U.S. Bureau of Labor Statistics, pharmaceuticals account for 72% of Puerto Rico’s 2017 exports, which was valued at $11.5 billion.

Yesterday, members of congress announced in a press release a proposed framework to fix patent eligibility law in the United States.Reactions to the framework were mixed. While many are delighted that the issue seems to be getting real attention on Capitol Hill, others are skeptical of some of the proposals. For example, Russ Slifer, former Deputy Director of the United States Patent and Trademark Office (USPTO), described the framework as “a big swing and a miss.” Having attended the meeting on the Hill yesterday in which the framework was released and discussed prior to being circulated to the public, Todd Dickinson of Polsinelli, and the former USPTO Director, said that he can understand how those seeing the proposal without having taken part in the dialogue might be alarmed. “There are still some big questions to answer, but I left the meeting encouraged by the momentum,” Dickinson told IPWatchdog. The discussion, which he described as decidedly “more lawyerly” than previous meetings on the topic, included staffers for both the House and Senate, and from both political parties, which “is a good sign that there is a continued intention to do something,” he said.

Earlier this week we reported on Lori Cheek, an independent inventor who is defending herself for the second time against accusations brought by Alfred Pirri, Jr. of fraud and misappropriation of trade secrets, among other claims, and who feels like the U.S. patent and legal systems have done her few favors thus far. Following publication of the article, Pirri’s lawyer, Steven Fairchild, sent a letter to IPWatchdog claiming that, since the previous suit was thrown out in pre-trial conference, before discovery or a decision on the merits, the “present suit will uncover the truth of what happened with Mr. Pirri’s invention.” Fairchild specifically points to notarized documents from 2006 that he claims prove Pirri invented the dating cards and their spin-off use for business, which Fairchild says Cheek copied in her other company, Networkd. As mentioned in the previous article, Cheek denies she has ever met Pirri’s therapist, Joanne Richards, whom Pirri claims told Cheek about his idea. She and Richards have signed sworn affidavits attesting to as much, and Cheek insists there is simply no way she could have come in contact with Richards.“Discovery will reveal the truth of the relationship between Ms. Richards and Ms. Cheek,” wrote Fairchild in his letter to IPWatchdog.

This week on Capitol Hill, both the U.S. House of Representatives and the U.S. Senate are quiet for the next two weeks as the House enters district work periods and the Senate holds state work periods. However, various policy institutes around the nation’s capital continue to host events related to technology and innovation, and the Supreme Court will hear oral arguments in Andrei Iancu, Under Secretary of Commerce for Intellectual Property and Director, Patent and Trademark Offce v. Erik Brunetti. The week kicks off early on Monday with an all-day event at the Internet Society looking at the prospects of federal legislation to improve consumer data privacy from various angles and the Brunetti oral argument. The Cato Institute will host events related to government regulation of social media, as well as the section of U.S. Internet law which largely eliminates legal liability for online service providers based on user-generated content. The week wraps up with an event at the Center for Strategic and International Studies, which will look at U.S.-Australia cooperation in the digital economy, among other sectors. 

In each of the recent Federal Circuit decisions on medical diagnostics inventions, Athena Diagnostics v. Mayo Collaborative Services, 2017-2508, (Fed. Cir. Feb. 6, 2019) (“Athena”) and Cleveland Clinic Found. v. True Health Diagnostics LLC, 2018-1218 (Fed. Cir. April 1, 2019; non-precedential) (“Cleveland Clinic II”), the court affirmed a district court ruling that found a medical diagnostic or a related patent invalid for being directed to ineligible subject matter. Athena and Cleveland Clinic II follow the hard stance taken by the Federal Circuit against medical diagnostics inventions, first in Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371, 1376 (Fed. Cir. 2015) (“Ariosa”) and next in Cleveland Clinic Found. v. True Health Diagnostics LLC, 859 F.3d 1352, 1361 (Fed. Cir. 2017) (“Cleveland Clinic I”). In Athena, the patent covered a method for diagnosing a disease in a subpopulation of affected individuals based on the discovery of a correlation between the disease and certain autoantibodies found only in that subpopulation. In Cleveland Clinic I, the patent claims were directed to diagnosing the risk of atherosclerotic cardiovascular disease (CVD) based on the correlation between elevated levels of a protein found in the blood and occurrence of atherosclerotic CVD. In Cleveland Clinic II, the claims were directed to methods of identifying elevated levels of the protein but did not include any recitation of the correlation…. The requirement for an improvement to the technology involved in carrying out the claimed method is a steep hurdle for the eligibility of most medical diagnosis inventions, since the essence of such inventions is applying a newly discovered correlation to deliver a practical benefit—not improving the technology used to provide the diagnosis. In this regard, medical diagnostic inventions are unique. This point was highlighted by the Athena dissent through reference to the amici curiae Five Life Sciences Patent Practitioners’ brief, which stated, “[medical] diagnostic methods . . . are so tightly bound to underlying natural laws and phenomen[a], they are especially susceptible to undue expansion of the eligibility standards…” Athena Dissenting opinion at 13.

Senators Thom Tillis (R-NC) and Chris Coons (D-DE) have written U.S. Patent and Trademark Office (USPTO) Director Andrei Iancu raising a concern about what can really only fairly be characterized as the weaponization of the Patent Trial and Appeal Board (PTAB). Although the USPTO has vehemently disagreed that there is a problem over the years, everyone in the industry familiar with post grant challenges knows there is a very serious problem with serial challenges. Indeed, there appears to be a concerted effort—perhaps even collusion—to challenge the patents of certain patent owners over, and over, and over, and over again.

In their latest letter weighing in on intellectual property issues, Senators Thom Tillis and Chris Coons have expressed their concerns about the effects of “serial” inter partes review (IPR) petitions on the U.S. patent system.In March, the senators sent a letter to Karyn Temple, Register of Copyrights, to ask a series of questions about the Copyright Office’s ability to handle the likely impact of Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC. Today’s letter was addressed to USPTO Director Andrei Iancu and similarly asked Iancu to respond to a list of five pointed questions about the Office’s willingness to take action on serial IP challenges.

On the afternoon of Wednesday, April 3, the Senate Committee on the Judiciary’s Subcommittee on Intellectual Property held a hearing titled Trailblazers and Lost Einsteins: Women Inventors and the Future of American Innovation. The day’s discussion on the U.S. Patent and Trademark’s recent report on gender disparity in patenting rates covered much of the same ground as the House Intellectual Property Subcommittee’s hearing on the same topic from the previous week, although a new witness panel was able to provide some fresh perspective on the issues. However, there were arguably some instances where the witnesses either supported or acquiesced to policies that damage the patenting prospects for at least some female inventors.

Patents are often referred to as monopolies. But that is a fundamental misunderstanding of how patents work to enhance competition. The truth is that a patent is a natural anti-monopoly. In a functioning patent system, inventions become investible assets when they are patented, and the value of the invention increases as market demand increases. Because of the direct relationship between market demand and patent value, a patented invention can attract enough investment to compete with entrenched incumbents in the market for the invention. This effect introduces new competitors into the market who are protected against incumbents for a long enough period that they can survive after the patent expires. Thus, patents act to increase competition by introducing new competitors into the market and thereby create competitive markets. But perhaps even more important, some inventions deliver a strong dose of creative destruction to monopolistic incumbents who did not innovate fast enough, causing those companies to fail and clearing the market of dead weight, thus opening the market to innovative new companies. Patents are the ultimate anti-monopoly in a free market. But for this to work, the market must function undisturbed by crony laws and regulations. A patent must be a presumed valid “exclusive Right.”