Posts Tagged ‘Cahoy’
Wednesday, April 27th, 2011
Last week, the Supreme Court heard oral arguments in the case of Microsoft v. i4i. The Court’s eventual decision has the potential to substantially alter the patent property right by relaxing the presumption of validity and making it easier for defendants to mount challenges in court. Although the outcome of most future litigations may not be significantly impacted – the presumption only plays a role in close cases – the dispute is an interesting battle in a broader war. The rhetoric between those satisfied with the status quo in patent law and those who believe the system is fundamentally broken has been heating up for some time, and the i4i case is but one part of the debate. As patent rights play an ever more important role in fields like communications, health care and sustainability, it’s important to consider how patent reform efforts can impact the future value of this critical asset.
The i4i case involves a patent on a software editor for XML, which is a computer language. According to i4i, Microsoft’s Word program contained an XML editor that infringed i4i’s patent. In defense, Microsoft argued that i4i’s patent was invalid due to an early sale by i4i that placed the invention into the public domain. However, Microsoft’s evidence of the early sale depended on witness testimony that was not originally available to the patent office, and was rebutted by i4i’s witnesses. In the end, the jury found the patent not invalid and held Microsoft liable for $240 million in damages.
Despite the somewhat mundane facts of the case, the issue on appeal to the Supreme Court is central to patent law. It concerns the statutory presumption that an issued patent is valid. The courts have traditionally interpreted the presumption to require “clear and convincing” evidence to overturn a patent, which is an advantage for the patentee. Such an evidentiary burden is higher than the standard “preponderance of the evidence” that exists in most civil cases. Microsoft argues that this evidentiary burden is too high, giving too much credit to an overworked patent office and permitting the enforcement of invalid patents. It is particularly inappropriate when the Patent Office had not considered the evidence in question during the original examination. According to Microsoft, if the jury had been able to equally weigh the witness testimony on both sides, it might have found the patent invalid.
From i4i’s point of view, the expert examination rendered by the Patent Office — a process that can take years — is due substantial weight. The resulting patent deserves more than the toss-up evidentiary contest of a typical civil case. In addition, it can be argued that the greater certainty that comes with a higher evidentiary burden is an important aspect of the value of patents. Easier challenges may result in an increase in infringement and reluctance on the part of prospective users to license.
Rather than dividing politically, the battle lines in the i4i case are drawn roughly along industry boundaries. Many in the high-tech, consumer electronics sector, including companies like Apple, Google and Dell, have sided with Microsoft. Companies in the pharmaceutical and biotechnology sectors, like Bayer and Genentech, as well as intellectual property owner organizations, support i4i. To be sure, there are many crossovers and the industry delineation is not perfect (for example, IBM supports i4i’s position). But one has the sense of a technology bias in the various positions on the case.
Not surprisingly, one can see many of the same alliances in other patent reform contexts. In general, firms in crowded, fast-moving technology fields are more likely to see patents as a hindrance to innovation and support stronger limits. Firms that depend on patents for long-term profits and have a more silo-like innovation environments tend to prefer stronger rights, or at least favor the status quo. As it stands now, it seems that there is no obvious direction for comprehensive patent reform that is capable of garnering across-the-board support. For that reason, Congress has struggled to make changes in recent years. Current pending legislation (the America Invents Act) makes more modest revisions than some would prefer, yet it still faces opposition.
Change does happen, though. Lately, the courts have taken the lead, making piecemeal revision in individual cases that slowly reforms the law. Is this enough? Some have argued that a more comprehensive approach is necessary to provide America with a 21st century innovation environment. But because satisfying all of the interested parties will continue to pose a political challenge, cases like i4i play an important role.
Wednesday, March 31st, 2010
U.S. District Court ruled this week that seven patents related to two genes linked to breast and ovarian cancer held by Myriad Genetics are invalid. The court sided with the ACLU and the Public Patent Foundation in ruling that the patents were “improperly granted” because they involved a “law of nature.”
What is dramatic about this decision (a copy of which can be downloaded from the ACLU Web site) is that U.S. District Court Judge Robert Sweet based his determination on a finding that claims drawn to purified DNA are mere products of nature that are not patentable. If it were to stand on appeal, the decision would have a significant impact on the biotechnology industry, which has invested much in DNA patents.
Last year on this blog, Cahoy, a patent lawyer and associate professor of business law, outlined the case, saying that it highlights “aspects of our innovation system that many believe should be reformed”:
In the end, it is possible that this case will spark a change in the law regarding human gene patents. In fact, it has gotten progressively harder to patent genes, but for reasons different than advanced in this case. … Whatever the outcome of this particular case, it’s yet another battle being fought over an innovation system that has been under attack for some time. Intellectual property legal reform is a notoriously slow process, but this case may have pressed the accelerator down just a little bit more.
Wednesday, March 24th, 2010
The Financial Times reports that “a proposal backed by President Barack Obama that would have banned multibillion-dollar deals between big pharmaceutical companies and their generic rivals was stripped out” of the health care legislation days before it was passed by the House. “The agreements have come under scrutiny from antitrust officials in the United States and Europe because they say the arrangements essentially allow branded drugmakers to pay off potential generic competitors, thereby keeping them out of the market,” according to FT.
Below, Smeal’s Daniel Cahoy, a patent lawyer and associate professor of business law, explains the special circumstances of these deals and why it was a good idea to remove this seemingly logical provision from the legislation:
Among the many provisions added to the health care reform bill was one that seemed eminently sensible and extremely popular: preventing branded pharmaceutical companies from paying generic companies to delay entry into the market. Yet this provision was excised before the House of Representatives’ historic vote on Sunday. What possible objection could anyone outside of the pharmaceutical industry have to precluding this behavior, known colloquially as “pay-for-delay”? In fact, the situation is a bit more nuanced than many news reports suggest. Even a skeptic of these arrangements might conclude that a total ban is a bad option.
The so-called “pay-for-delay” deals arise in the context of a very narrow and complex set of cases known as ANDA (Abbreviated New Drug Application) litigations. Essentially, generic companies file such cases to obtain the right to market their drugs early by establishing that a branded pharmaceutical company’s blocking patent (or patents) is invalid or not infringed. Commonly, the branded company vigorously opposes these assertions, as early generic entry can cause a significant reduction in expected profits. Unless there is a settlement, a court must sort it out. But this is where the confusion often begins, as ANDA settlements are different than those in most patent cases. Most importantly, the generic company has usually sold no product and would suffer no damages if it lost the case—it would simply be prevented from entering the market before the patent expires. To encourage settlement, the branded company may be compelled to offer the generic company something more than the option of simply walking away. So, reverse payments or some other kind of inverse incentive may be exchanged.
Monday, November 16th, 2009
The U.S. Supreme Court heard oral arguments last week in the case Bilski v. Kappos, in which Bernard Bilski and Rand Warsaw are appealing a decision by the U.S. Patent and Trademark Office to deny them a patent for a “business method.” Bilski and Warsaw applied to patent their method of hedging energy prices for weather-related risks, but the Patent Office denied the application by citing previous court rulings stating that patentable processes must involve “a particular machine or apparatus” or transform “a particular article into a different state or thing.”
Smeal’s Daniel Cahoy signed onto an amicus brief filed in the case, which calls upon the court to reject limiting patentable innovations to those involving machines or material transformation, but stops short of supporting Bilski and Warsaw.
From the brief:
This court should reaffirm its precedent allowing the patentability of “anything under the sun that is made by man,” subject to the well-established exceptions incorporated by the abstract idea, law of nature, and natural phenomenon doctrines. Where an idea is claimed as applied, it is eligible for patentability, but if it is claimed merely in the abstract, it is not.
This test provides ample basis to weed out those patents that attempt to mark not a practical application but instead a fundamental principle, such as the patent at issue in this case. Bilski and Warsaw claim a broad principle of doing business, without tying it to any specific application. For this reason, their claims are merely “abstract ideas” and should be unpatentable. But this court should take care not to sweep away protection for true innovations in an effort to prevent the grant of a patent in this case.
Wednesday, September 16th, 2009
In the cover story of September’s The Atlantic, David Goldhill, president and CEO of The Game Show Network, offers the story of his father’s death as a cautionary tale about what Goldhill believes is ailing the U.S. health care system. Smeal’s Dan Cahoy responds to the article on his personal blog, Incentivize!:
[Goldhill's article is] a discussion of the wildly misaligned incentives in the U.S. health care system. Essentially, the article asserts that a lack of transparency in costs and reimbursement have allowed costs to skyrocket while providing generally poor care.
… On the topic of health care markets, the underlying conclusion of the article is that many health care costs (at the very least, routine costs) should be paid directly by consumers who can exercise choice and encourage competition. According the the author, this would solve existing incentive misalignment through a traditional market approach. The market for LASIK surgery, which is generally not reimbursed by insurance, is used as an example, where costs have significantly decreased since the procedure was introduced.
Total consumer control may not be as attractive as it sounds, as basic health care is not like other markets. The most important difference is that in many cases we do not want people to choose to forgo treatment, and this may happen if they had to completely internalize the costs. LASIK is clearly an optional procedure, and people who could benefit from it (like me) lead perfectly happy and healthy lives without it (like me). But prenatal care, hypertension treatments, cancer screening and the like can be demonstrated to positively impact the quality of life and should not be promoted as optional. Many consumers may not be sophisticated enough to make decisions on heath care spending in every case (like me). In truth, we want a system that encourages people to attain some preventative care and treatments that they might not pay for themselves. A pure market approach in this context may lead to some undesirable outcomes.
Tuesday, July 21st, 2009
The Economist reports that drugmakers GlaxoSmithKline, Novartis, and Roche are relaxing patent restrictions on their pharmaceuticals to allow for greater access to the drugs in poorer countries. “Health care activists have long maintained that the system for granting patents on drugs denies the poor access to essential medicines and discourages pharmaceutical firms from collaborating to develop new ones for neglected diseases.”
According to Smeal’s Daniel Cahoy,the international rules outlining when and how governments may “break” pharmaceutical patents also reduce incentives for innovation, in addition to failing to increase access to medicines in poor nations. In his 2007 paper “Confronting Myths and Myopia on the Road from Doha,” Cahoy proposes a new, compensation-based approach to drug patent compulsory licenses, which force drug patent holders to relinquish their property rights during a time of crisis.
Cahoy’s proposed licensing regime keeps innovation incentives intact, but also ensures that developing countries have access to pharmaceuticals.
During public health crises, he argues for a three-tiered arrangement, in which remuneration is based on the economic status of the country issuing the compulsory license. Industrialized nations will be required to pay full market price, even during a pandemic. Developing countries would be allowed a limited free ride, with royalties based on the individual country’s ability pay. Finally, the world’s least developed countries would be granted the ability to issue royalty-free compulsory licenses during health emergencies.
More on Cahoy’s plan is online here.
Friday, May 22nd, 2009
More details are available here.
Thursday, May 21st, 2009
A patent lawsuit filed this month by the ACLU and the Public Patent Foundation at Benjamin N. Cardozo School of Law (PUBPAT) on behalf of scientific organizations, researchers, and individuals has garnered a great deal of attention due to its unusual approach and controversial subject matter. According to an ACLU news release, the lawsuit charges that “patents on two human genes associated with breast and ovarian cancer stifle research that could lead to cures and limit women’s options regarding their medical care.”
Smeal’s Dan Cahoy, a patent lawyer and associate professor of business law, says the case appears to be a long shot, legally speaking, but that it could accelerate reform in intellectual property law.
Below, Cahoy explains the case and the legal arguments in greater detail:
If successful, this lawsuit would alter the balance between intellectual property ownership and public access. At the very least, it serves to highlight aspects of our innovation system that many believe should be reformed.
The case involves patents owned or exclusively licensed by Myriad Genetics related to the gene fragments known as BRCA1 and BRCA2. Screening tests for mutations in these genes can identify an increased risk of breast and ovarian cancer. Because it is not possible to conduct the screening tests without infringing the patents, they have generated controversy since issuing. Adding fuel to the fire is the fact that Myriad does not license the technology, but rather offers its own screening test for what some consider a premium price. The ACLU/PUBPAT suit is merely the latest attempt to tame this limited monopoly.
One reason this dispute has evoked a strong emotional response outside of the intellectual property legal community is certainly the fact that some of the patent claims at issue cover fragments of human DNA. Casual observers wonder, “How can you patent existing human genes?” The legal explanation is that that DNA patents actually cover only the isolated, purified genetic material, which does not exist in nature. This is the same rationale for granting a patent on a chemical compound or enzyme isolated from a plant. But even with this explanation in mind, people are still skeptical; this case seeks to channel some of that discontent to foster a change in the rules permitting such patents. (more…)