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Pharmaceutical Patent
Policy Options For Brazil
Kevin [email protected]
Associate Professor of Law
Boston University School of Law
1
Topics
• Patent Failure
• Pharmaceuticals
• ACTA
2
Topics
• Patent Failure
• Pharmaceuticals
• ACTA
3
Why don’t patents work like
property?
Land
• Registry, third party verification, deference to fact-finders
• Physical possession
• Low risk of invalidity, title insurance
Patents
• Hidden claims, low quality opinion letters, little deference
• Scope broader than embodiments; patents and claims are cheap
• No insurance, relatively high risk of invalidity
Bessen & Meurer, BU Law: Patent Failure
5
?
An expensive mistake!
The Notice Function of Property Law
Notice Function of Patent LawKodak v. Polaroid
• Failed attempt to invent around
• Patent review started seven years before product launched
• 250 patents reviewed, “67 written and countless oral opinions”
• 50 potential imaging chemistries reviewed
• $900 million damages and interest (1980s)
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Evidence Suggests Much
Infringement Is Inadvertent
• Defendants are large, spend a lot on R&D, and
obtain a lot of patents (not classic pirates or free
riders) – only 4% are found to be copyists
• Increasing R&D increases hazard of lawsuit
7
E-Data Lawsuits
• Freeny invented retail kiosk that would produce music recorded on cassette tapes
• Patent claim language was abstract, possibly covered all sales over the internet
• E-Data got the Freeny patent and asserted it against 75,000 e-commerce sites, licensed 139 companies, and filed 43 lawsuits
• Poor notice because meaning of claim language was unstable
• “Material object” (1980: cassette tape, 2000: hard drive?)
• “Point-of-sale location” (1980: store, 2000: home?)
8
Search Cost
• Patent flood
– E-commerce firm faces b/w 4000 – 11,000 patents
– Semiconductor firm faces hundreds of patents
– 3G standard 7600 patents
• Perverse willfulness doctrine
• “Distant” plaintiffs
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Patent Failure 10
No industry overlap28%
Weakly overlapping industries
43%
Same primary industry29%
Parties to Lawsuit
Evidence on search
• Cockburn & Henderson survey:
– 65% of firms do not conduct a patent search before
initiating product development
• 39% of applicants disclose zero prior art patents
(research personnel told not to read patents)
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12
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Patent Lawsuits Filed in U.S. District
Courts
Suits/R&D ($b):
1987: 1.7
1999: 2.9
Patent Failure 13
Litigation Growth
Pharma Offers Clearer Notice
• Lipitor: Trans-6-[2-(3- or 4-carboxamido-
substituted pyrrol-1-yl)alkyl]-4-hydroxypyran-2-
ones
• Olanzapine:
Patent Failure 14
Technology Differences Suggest
Notice Problems
Probability
suit/patent
Claim Con-
struction
Value
($1,000)
All 2.0% 1.00 78
Chemical 1.1% 0.84 333
Biotech 3.2% 2.37 NA
SW 4.6% 2.18 55
BM 13.7% 6.67 NA
Patent Reform to Improve Notice
• Make patents more transparent
– continuation reform
– better disclosure
• Better claim interpretation
– Specialized trial courts
– Expand PTO claim construction activity
– More deference to PTO and trial courts
• Robust definiteness requirement
• Limit remedies against innocent infringers
Helpful Steps by Courts
• eBay -- increases bargaining power of defendants and reduces “patent tax”
• Seagate -- decreases deterrent to patent clearance
• Festo -- improves scope clarity
• KSR, In re Fisher -- stem patent flood
• In re Bilski -- decreases abstract claiming 17
Implications for Brazil
• Don’t accept US IP law as the gold
standard
• Don’t accept standards tougher
than US law
• Look for local allies – industries
that might not be IP maximalists
Pharmaceuticals
• Patent Failure
• Pharmaceuticals
• ACTA
19
Static v. Dynamic Effects
• Static losses from higher prices
• Dynamic gains from sales incentivizing
R&D
• US deploys many balancing features
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Static v. Dynamic: Global
• Static losses are higher and dynamic
losses are lower in poorer countries (FM
Scherer & others)
• Welfare losses from differential pricing
failures are greater in countries with
higher Gini coefficients (Flynn, Hollis,
Palmedo, JLME 2009)
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Bottom Line:
Countries should exercise
significant flexibilities
in Rx patents based on
wealth & inequality
22
US Rx Policy Debates
• Hatch-Waxman generic entry &
regulatory linkage in FTAs
• Biosimilar legislative debate in US
Congress: 5 v. 12 years of DE
• Ebay = liability rule = CL
• KSR & progeny = nonobviousness
• Reimbursement
23
Bottom Line:
• Don’t accept anything
stronger than current US law
• Evaluate US IP flexibilities
24
Post-TRIPS Rx Options 1
• Pipeline patents (Cendrowski, 2009)
• Article 31 CL (scope) (Outterson, 2009)
• Parallel importation/global exhaustion
rule (Outterson, 2005)
• Functional Article 31bis (Abbott &
Reichman JEL 2007; Goodwin AJLM 2008)
• Prizes (Love & Hubbard; Hollis & Pogge)25
Post-TRIPS Rx Options 2
• Promote generics
–Reduce evergreening
–Improve generic quality
–Automatic substitution
–Insurance reimbursement rules
–Collusive settlements
26
Post-TRIPS Rx Options 3
• Reverse linkage
• Global Orange Book
• Regional drug registration
• Liability rules (Ebay)
• Scope & obviousness
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Post-TRIPS Rx Options 4
• Reimbursement (Outterson & Kesselheim 2009;
Frank & Newhouse 2008)
• Conditions on clinical trials (HPV)
• Conflicts of interest in medicine &
research
• Conditions on university licenses
(UAEM)
Regime Shifting II
• Patent Failure
• Pharmaceuticals
• ACTA
29
ACTA
• Supplements WTO judicial model
with private enforcement
• Drive for substantive
harmonization
• Secret negotiations – 18th Century
diplomatic model
30
ACTA
• Improperly conflates trademark,
pharmaceutical safety, patent
disputes (Outterson & Smith 2006; Outterson
2009)
• Dutch seizures of losartan & AIDS
medicines
• Goal is to hinder legal parallel trade
& CL in pharmaceuticals
Bottom Line:
• No assurance that global public
health is a priority in ACTA
• Transparency
• Carve out pharmaceuticals &
patents
• Sean Flynn @ American
University - Law
Papers at ssrn.com
Kevin Outterson
[email protected] Professor of Law
Boston University School of Law
33
