Senate Judiciary Committee Holds Hearing on Patent Reform

    By Donald Zuhn --

Last Wednesday, the Senate Judiciary Committee conducted a hearing on "Patent Reform: The Future of American Innovation."  Testifying at the hearing were Jon W. Dudas, Undersecretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office; Bruce G. Bernstein, Chief Intellectual Property and Licensing Officer of InterDigital Communications Corp.; Mary Doyle, Senior Vice President and General Counsel and Secretary of Palm, Inc.; John A. Squires, Chief Intellectual Property Counsel of Goldman, Sachs & Co.; and Kathryn L. Biberstein, Senior Vice President, General Counsel and Secretary, and Chief Compliance Officer of Alkermes, Inc.

Ms. Biberstein also gave testimony on behalf of the Biotechnology Industry Organization (BIO), of which Alkermes is a member.  During her testimony, Ms. Biberstein pointed to Alkermes as "exactly the sort of success story that the U.S patent system has fostered in this country," having leveraged its patent estate to develop Risperdal® Consta®, an antipsychotic medication for treating schizophrenia, and Vivitrol®, a once-monthly injectable medication for treating alcohol dependence.  Ms. Biberstein stated that it has primarily been through the strength of its patents that Alkermes has been able to obtain the financing necessary to develop its products.

Reflecting on her eight years in the European biotechnology industry, Ms. Biberstein noted that "[w]hile America has no monopoly on the generation of novel and inventive ideas for the treatment of serious disease, what it does have is a remarkable ability to fund the development of those ideas at early stages - frankly to the benefit of the entire world's population."  According to Ms. Biberstein, the biotechnology industry has developed and commercialized over 300 biotechnology drugs and diagnostics, which help more than 325 million people worldwide, with another 370 products in the pipeline.  She noted that all of this innovation had been made possible by the certainty and predictability provided by the U.S. patent system, and urged the Committee, when considering changes to this system, "to consider carefully the cautionary language embraced by the Hippocratic Oath - first, do no harm."

Observing that biotech products often require hundreds of millions of dollars of capital investment and decades to develop, and that the majority of candidates fail to ever reach the marketplace, Ms. Biberstein testified that investors would only invest in capital-intensive, long-term, and high-risk development if they believed that there would be a return on their investment, and that "[p]atents provide this assurance."  She continued that "[w]ithout strong and predictable patent protections, investors will shy away from investing in biotech innovation, and will simply put their money into projects or products that are less risky - without regard for whether they provide less societal value."  In view of the importance of patents to biotech R&D, Ms. Biberstein warned that "as Congress considers reforms to the patent system, it must be mindful of the critical role of patents in the growth and development of companies in the biotechnology sector."  While noting that other business models might not place as much value in patents, "[f]or the biotechnology industry, effective patent protection is a necessity, not simply a business advantage or a luxury."

With regard to the specific patent reforms being debated in Congress, Ms. Biberstein pointed out that BIO favored the enactment of a number of reforms to the U.S. patent system, including:

• Full funding of the U.S. Patent and Trademark Office through a permanent cessation of fee diversion.
• Expansion of opportunities for the public to submit prior art during patent examination.
• Repeal of the judicially-created inequitable conduct doctrine.
• Transition to a first-to-file system.
• Willful infringement reforms specifying that litigants must first resolve patent validity and infringement before turning to willfulness, and clarification of the conditions required for willful infringement.
• Venue reforms that would discourage forum-shopping in patent infringement actions.
• Expansion of the prior user defense beyond methods of doing business to all statutory subject matter.
• Repeal of the Best Mode requirement.
• BIO supports restoring a rebuttable presumption of irreparable harm and inadequacy of remedies at law when evaluating a request for a permanent injunction following a finding of patent infringement.

However, because the current Senate bill (S. 1145, the Patent Reform Act of 2007) contains some provisions that would "unintentionally promote uncertainty surrounding, and weaken the enforceability of, validly issued patents," Ms. Biberstein stated that BIO was opposing the bill in its current form.  Among the provisions of the bill to which BIO is opposed are:

• Open-ended post-grant opposition.
• Apportionment of damages through a new "prior art subtraction standard."
• Delegating substantive rulemaking authority to the PTO.

Ms. Biberstein noted that "America's universities and research institutions, the National Association of Manufacturers, the Innovation Alliance, the Coalition for 21st Century Patent Reform, medical device manufacturers, the American Bar Association, the American Intellectual Property Law Association, and the Intellectual Property Owners Association all are in general agreement that enactment of these three provisions as currently drafted would be detrimental to the future of American innovation," and that "[i]t is essential that the common interest prevail over the special interest of a highly-vocal but minority segment of American industry."