As the congressional session resumes next week, the debate over legislative patent reform is expected to return to Washington.
Shortly before adjourning for its summer recess, the House of Representatives postponed a vote on the Innovation Act, its signature patent reform legislative package, following opposition from the biotechnology industry, academic and research institutions, and venture capital investors. A companion measure in the Senate, known as the PATENT Act, also failed to advance after winning passage by the chamber’s Judiciary Committee.
But as members return to the Capitol, the debate is likely to resume and is already intensifying among various interest groups.
The National Retail Federation, which supports the various reform measures, has set September 10 as a “day of Capitol Hill meetings to demand that Congress try again to pass litigation reform.”
Meanwhile, the life sciences industry, which largely opposes both the Innovation Act and the PATENT Act, has instead sought relief from new Patent Office proceedings, such as inter partes review (IPR), inaugurated by the last round of patent legislation in 2011.
Under these proceedings, a patent’s validity can more easily be challenged under a lower burden of proof, through a broader reading of the patent’s language, and via a cheaper, faster review.
As previously explained, the advent of these proceedings—which have shown more than 200% growth year-over-year—has reduced the number of patent cases filed in court. Pharmaceutical companies have grown wary of IPR and its sister proceedings, especially as hedge funds have gotten involved.
Specifically, in April, the Wall Street Journal reported that one hedge fund manager had filed IPRs against patents held by Jazz Pharmaceuticals, Acorda Therapeutics, and Shire, soon thereafter supposedly shorting their stock and taking positions in rival generic drugmakers. The hedge fund group has since added Celgene and Biogen to its target list, and other hedge funds have followed suit.
But the biotech industry has fought back. The STRONG Patents Act, introduced in the Senate in March, would, among other things, raise the burden of proof and tighten the standard for interpreting claims in IPR and other proceedings in order to level the playing field. Some, but not all, of those provisions found their way into the Senate’s PATENT Act; none has yet been assimilated into the Innovation Act.
Pharma companies have also turned to a second strategy: securing an exemption for biotech patents from IPR. They contend that Congress intended these new Patent Office proceedings primarily to eliminate invalid software and business method patents, not biotech inventions.
But in July, according to the Journal, the Congressional Budget Office scored this proposal and preliminarily found it would increase federal spending by $1.3 billion over the course of 10 years by delaying the emergence of cheaper generic drugs. Tom DiLenge, general counsel of the Biotechnology Industry Organization, responded that the CBO’s premises were flawed, as “IPR is not designed to speed generic entry,” and that, even if true, $130 million per year represents a fairly small impact.