Mayer Brown Cybersecurity and Data Privacy Report

The law firm of Mayer Brown has published its 2019 Outlook: Cybersecurity and Data Privacy Report.  The 20 page Report warns that cybersecurity breaches are likely to increase in 2019.  Helpfully, the Report provides an overview of numerous new and potentially forthcoming regulatory changes in the United States and other countries.  For example, the Report covers U.S. Department of Transportation and Federal Drug Administration regulation.  The Report also raises the National Association of Insurance Commissioners model data security law that was adopted by the state of South Carolina, Ohio and Michigan.  The Report also covers some potential differences in law across countries such as maintaining privilege and preserving documents in anticipation of litigation.  On trade secrets, the Report notes:

Trade Secret Theft. Companies should expect the current Administration to remain focused on the threat to American economic prosperity and national security posed by economic espionage in 2019. In 2015, China and the United States publicly committed to not engage in the cyber-enabled theft of intellectual property for commercial gain. Recent statements from senior administration officials and high-profile indictments brought by the Department of Justice indicate the view of some leading government officials that China has failed to adhere to that commitment. For example, the Department of Justice indicted two Chinese nationals associated with the Chinese Ministry of State Security of numerous hacking offensives associated with a global campaign to steal sensitive business information. Congress is also likely to consider legislative responses to trade secret theft and economic espionage. These actions suggest that 2019 is likely to see further disputes with China over cyber theft of trade secrets. Companies—especially those in industries that have previously been targeted by espionage campaigns— are likely to benefit from tracking developments in this space.

President Trump noted that he is continuing to push China on cybersecurity issues concerning trade secret theft in his recent State of the Union address:

We are now making it clear to China that after years of targeting our industries, and stealing our intellectual property, the theft of American jobs and wealth has come to an end.

Therefore, we recently imposed tariffs on $250 billion of Chinese goods -- and now our Treasury is receiving billions of dollars a month from a country that never gave us a dime. But I don't blame China for taking advantage of us -- I blame our leaders and representatives for allowing this travesty to happen. I have great respect for President Xi, and we are now working on a new trade deal with China. But it must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.

Mayer Brown has also issued a discussion of the European Union Agency for Network and Information Security ("ENISA") 2018 Threat Landscape Report. 

U.S. State Wants to Adopt "Netflix" Model for Paying for Pharmaceuticals

The state of Louisiana is attempting to adopt the Netflix model of paying for pharmaceuticals as a way to tackle the high cost of pharmaceuticals and public health issues.  The Netflix model was proposed in a recent article.  Basically, the state pays a set price for an unlimited number of drugs for its citizens.  This has the benefit of providing certainty as to price as well as opens up access to the drugs to more people than previously treated.  The Washington Post discusses Louisiana and the Netflix model, here.  The abstract of the article titled, Alternative State-Level Financing for Hepatitis C Treatment—The “Netflix Model”, authored by Mark R. Trusheim, MS; William M. Cassidy, MD; Peter B. Bach, MD is in the November issue of the Journal of the American Medical Association states:

Drug prices in the United States remain the highest in the world. New payment approaches are needed, a point illustrated by the new treatments for hepatitis C virus (HCV) infection that are highly effective but also very expensive, at least from the view of many payers, physicians, and patients. Five years after the introduction of these drugs, and due in many cases to budgetary constraints of state Medicaid programs and prisons, only 15% of the estimated population of more than 3 million individuals with HCV infection in the United States have been treated. Yet the optimal way to treat HCV is at the population level, that is, by treating every patient possible, with as much speed as is possible. Doing so would reduce the health consequences for those infected, generate the most future savings from improved health, and help decrease future transmission of HCV from person to person.

The Median Salaries of Bay Area Technology Companies

Have you ever wondered what are the median salaries at Silicon Valley/Bay Area technology companies?  It must be very high given the astronomical cost of living there, right?  The Silicon Valley Business Journal has collected the median salaries of the following companies:

Advanced Micro Devices, Inc.; Apple Inc. Arista Networks, Inc.; Autodesk, Inc.; BioMarin Pharmaceutical Inc.; Bio-Rad Laboratories, Inc.; Cadence Design Systems, Inc.; Cisco Systems, Inc.; Citrix Systems, Inc.; Dell Technologies; Dolby Laboratories Inc.; eBay Inc.; Equinix, Inc.; Electronic Arts Inc.; Facebook, Inc.; FireEye, Inc.; Fortinet, Inc.; GoPro, Inc.; Guidewire Software, Inc.; Illumina, Inc.; Intel Corporation; Intuit Inc.; Intuitive Surgical, Inc.; Marvell Technology Group Ltd.; Micron Technology, Inc.; Microsoft Corporation; Nektar Therapeutics; NetApp, Inc.; Netgear, Inc.; Nvidia Corporation; Oracle Corporation; Palo Alto Networks, Inc.; PayPal Holdings, Inc.; Raytheon Co.; Salesforce.com; ServiceNow, Inc.; Square, Inc.; Splunk, Inc; Symantec Corporation; Tesla Inc.; Twitter, Inc.; Varian Medical Systems, Inc.; Veeva Systems Inc.; Visa, Inc.; VMware, Inc.; Xilinx, Inc.; Yelp Inc.; Zynga Inc.

Here is a link.  Enjoy! 

Patent Eligible Subject Matter: Bait and Switch Works Well?

The United States Patent and Trademark Office (USPTO) has released guidelines on patent eligible subject matter as well as section 112 issues concerning computer implemented inventions.  Once again, some believe there’s arguably a shift on the treatment of patent eligible subject matter at the USPTO.  It’s hard to imagine that patents may draw investment if there is a lack of certainty and stability with respect to patent rights.  On the other hand, the biotechnology industry arguably developed around many patents that were eventually invalidated—it doesn’t get much more uncertain than arguably changing the rules of the game later.  Does that mean we should look toward broader subject matter or narrow subject matter—both of which could be more certain and stable?  On the broad side, I suppose we can always dump patents later—the U.S. Supreme Court has nicely rejected reliance arguments.  If we experience problems with patents and innovation in the future, then we invalidate the patents.  As long as the capital is drawn forth for productive use based in part from the original patents, then from society’s perspective maybe all is good and the problem is avoided—as long as the industry develops and some investors receive some return (at least enough to keep playing).  Who knows what is lost from broad subject matter--particularly with new, developing technology.  Here is an excerpt from the press release:  

“These guidance documents aim to improve the clarity, consistency, and predictability of actions across the USPTO,” said Under Secretary of Commerce for Intellectual Property and Director of the USPTO Andrei Iancu. “The USPTO will provide training to examiners and administrative patent judges on both documents to ensure that guidance is being properly administered.”

The “2019 Revised Patent Subject Matter Eligibility Guidance” makes two primary changes to how patent examiners apply the first step of the U.S. Supreme Court’s Alice/Mayo test, which determines whether a claim is “directed to” a judicial exception.

• First, in accordance with judicial precedent and in an effort to improve certainty and reliability, the revised guidance extracts and synthesizes key concepts identified by the courts as abstract ideas to explain that the abstract idea exception includes certain groupings of subject matter: mathematical concepts, certain methods of organizing human activity, and mental processes.
   
• Second, the revised guidance includes a two-prong inquiry for whether a claim is “directed to” a judicial exception. In the first prong, examiners will evaluate whether the claim recites a judicial exception and if so, proceed to the second prong. In the second prong, examiners evaluate whether the claim recites additional elements that integrate the identified judicial exception into a practical application. If a claim both recites a judicial exception and fails to integrate that exception into a practical application, then the claim is “directed to” a judicial exception. In such a case, further analysis pursuant to the second step of the Alice/Mayo test is required.

The “Examining Computer-Implemented Functional Claim Limitations for Compliance with 35 U.S.C. § 112” guidance emphasizes various issues with regard to § 112 analysis, specifically as it relates to computer-implemented inventions. The guidance describes proper application of means-plus-function principles under § 112(f), definiteness under § 112(b), and written description and enablement under § 112(a).

These guidance documents have been issued concurrently to ensure consistent, predictable, and correct application of these principles across the agency. 

The USPTO is seeking public comments on the new guidance. 

Banking Issues for the Marijuana Industry in California: Unlikely to be Solved Any Time Soon

The state legalization of marijuana in many states, including California, has spurred the development of a relatively new multi-billion dollar business sector.  One of the issues arguably holding back the speed of development of the market is the illegality of marijuana sale, distribution and possession at the federal level.  And, one of the problems arising from that illegality is the lack of the availability of banking services for many marijuana businesses.  Because many banks will not deal with marijuana businesses, it remains a mostly cash business.  Former California Treasurer John Chiang created a working group to analyze and propose potential solutions to the banking issue and also commissioned an external expert report.  The expert report was recently released and basically recommends that California not adopt a state-backed bank for marijuana businesses.  The risk of either federal prosecution or the federal government making marijuana sale, distribution and possession (including aiding and abetting) legal and regulatory issues, in part, makes it unlikely to be successful and financially feasible.  The expert report states:

For each of the three options the state can expect to spend $35 million on start-up costs incurred over a six year start-up period.  There is a high probability that federal regulators will not issue a master account to the bank, which is necessary for the bank to open and conduct basic banking functions such as wiring funds. In that eventuality any start-up funds expended to that point and during the subsequent wind-down would be wasted. If approved to open, the bank will then require just under $1 billion in capital, will lose money for 12 years before the bank is able to pay dividends sufficient to fully provide a return on the invested capital and begin repaying that capital, and the state of California will not begin receiving net dividends until 25 to 30 years after the bank opens, or sometime between 2050 and 2055.  If federal regulations change during this time and cannabis banking becomes legal, the bank would most likely be closed at that point due to a decreased business demand for the bank and thereby incur a significant loss. If federal regulators begin to aggressively enforce federal laws the bank would be closed and deposits subject to confiscation. Under this scenario the losses would be substantial and liabilities impossible to determine. Even if federal regulators maintain the current ambiguous situation, commercial banks will offer competing services to the industry by the time a public bank could open. Our conclusion is that no option for a public bank focused on the cannabis industry is feasible.

Other solutions examined include a public credit union, the state purchase of an existing private bank, and various FinTech (financial technology) solutions that attempt to solve the problem using payment technology such as cryptocurrency. Each of these options is ultimately dependent on access to national banking and payment processing networks, so each encounters the same difficulties overcoming the federal laws that are holding back access to banking now. We conclude that none of these alternate solutions is feasible. 

The expert report does propose that a state agency take up continued work on a strategy to address the issues related to marijuana banking.  BNA has a nice overview of problems with IP and marijuana business in the United States, here.  
Happy New Year!  

Hatch-Waxman Integrity Act is Introduced in U.S. House of Representatives

U.S. Representative Tom Flores has introduced the Hatch Waxman Integrity Act in the House of Representatives.  The Act has also been introduced in the Senate.  The Act is designed to curb the use of some methods to challenge patents at the United States Patent and Trademark Office.  A Press Release from Representative Flores’ Office states:

The Hatch-Waxman Integrity Act of 2018 would require a generic manufacturer wishing to challenge a brand-name drug patent to choose between the Hatch-Waxman framework, which affords certain advantages such as being able to rely on the drug innovator’s safety and efficacy studies for FDA approval, and inter partes review, or IPR, which is cheaper and faster than Hatch-Waxman litigation but does not provide the advantages of a streamlined generic approval process. The bill would apply similarly to patents on biologics.

The bill would preserve Hatch-Waxman as the standard path for generic manufacturers to challenge brand patents, while keeping IPR as an option where other interests come into play. It would not have any impact on the use of IPR by the tech community.

Senators Thom Tillis and Orin Hatch have released statements concerning the bills along with Representative Flores:

The Hatch-Waxman Integrity Act ensures that America remains a leader in developing life-saving and accessible therapies, cures and treatments for patients," said Flores. "It restores an effective balance between the interests of brand-name and generic drug manufacturers so that innovation and competition will continue to flourish.  It is fulfilling to work with Senator Hatch to modernize the Hatch-Waxman Act so that hardworking American families continue to benefit from health care innovation."

"As the coauthor and namesake of Hatch-Waxman, I have a keen interest in ensuring we have a well-functioning generic drug industry," said Hatch. "This means making sure that generic companies are able to develop drugs while also ensuring that brand companies have sufficient protections in place to recoup their investments. Hatch-Waxman struck a careful balance that achieved these goals and in doing so helped to create the modern generic drug industry. The Hatch-Waxman Integrity Act, which I’m pleased to be introducing today with Senator Tillis and Representative Flores, will help preserve that careful balance going by ensuring that newer, alternative procedures for challenging drug patents do not give one side an unintended advantage."

"The biotechnology and life sciences industry undertakes tremendous risk and costs to develop new, life-saving drugs, with the vast majority of products never making it to the market at great expense to the manufacturer. These drugs save millions of lives every year and are a critical component of our nation’s healthcare system. While it is important to call out bad actors who price gouge, we must allow sufficient time and balance so companies can continue to develop life-saving drugs and help people with the countless illnesses and diseases that affect millions of Americans," said Tillis. "The Hatch-Waxman Integrity Act of 2018 will restore a proper balance in the market so that companies will continue to spend billions of dollars to develop life-saving and life-altering treatments. I want to thank Senator Hatch for his leadership on this issue and I look forward to building support for this bill within the Senate."

A copy of the bill is here, and a summary analysis of the bill is here. 

WIPO Intellectual Property Indicators Released

The World Intellectual Property Organization (WIPO) recently released its World Intellectual Property Indicators information for 2017.  Global intellectual property filings are at an all-time high with patent filings up 5.8% from the prior year.  Notably, patent filings in China have increased substantially both by Chinese citizens and foreign residents.  U.S. patent filers continue to lead globally.  Concerning patents, WIPO notes:

China’s IP office received the highest number of patent applications in 2017, a record total of 1.38 million. China in 2017 refined its method for compiling statistics for patents and industrial designs applications, counting only those for which application fees have been paid. China’s IP office was followed by the offices of the United States of America (U.S.; 606,956), Japan (318,479), the Republic of Korea (204,775) and the European Patent Office (EPO; 166,585).

The top five offices accounted for 84.5% of the world total. Among these offices, China (+14.2%) and the EPO (+4.5%) saw strong growth in filings, while Japan (+0.03%) and the U.S. (+0.2%) saw negligible growth. The Republic of Korea (-1.9%) received fewer applications in 2017 than in 2016.

Germany (67,712), India (46,582), the Russian Federation (36,883), Canada (35,022) and Australia (28,906) also featured among the top 10 offices. Australia (+1.8%), Canada (+0.8%) and India (+3.4%) saw growth in filings, while Germany (-0.3%) and the Russian Federation (-11.3%) experienced a decline in filings.

. . .

Asia going strong

Asia has strengthened its position as the region with the greatest activity in patent filings. Offices located in Asia received 65.1% of all applications filed worldwide in 2017 – a considerable increase from 49.7% in 2007 - primarily driven by growth in China.

Offices located in North America accounted for 20.3% of the 2017 world total – six percentage points below its 2007 share. Europe’s share declined from 18.1% in 2007 to 11.2% in 2017. The combined share of Africa, Latin America and the Caribbean, and Oceania was 3.4% in 2017.

Patenting activity beyond borders

In filing abroad, which is an indication of a desire to expand in new markets, U.S. residents continue to lead with 230,931 equivalent patent applications filed abroad in 2017. The U.S. was followed by Japan (200,370), Germany (102,890), the Republic of Korea (67,484) and China (60,310).

Among these five origins, China reported a 15% growth in filings abroad, which is far above that of Japan (+2.1%) and the U.S. (+2%). Both Germany (-0.6%) and the Republic of Korea (-4.1%) had fewer filings abroad in 2017 than in 2016.

Patents in force worldwide grew by 5.7% to reach 13.7 million in 2017. Around 2.98 million patents were in force in the U.S., while China (2.09 million) and Japan (2.01 million) each had around 2 million.

WIPO has also released data concerning trademarks, plant variety applications, industrial design and geographical indications, available here.  For the first time, WIPO has collected and released data on the creative economy:

Revenue generated by the three sectors (trade, educational and scientific, technical and medical) of the publishing industry of 11 countries amounted to USD 248 billion. China reported the largest net revenue (USD 202.4 billion), followed by the U.S. (USD 25.9 billion), Germany (USD 5.8 billion) and the U.K. (USD 4.7 billion)[3].

Digital editions generated 28.3% of the total trade sector revenue in China, 23.5% in Japan, 18.4% in Sweden, 13.2% in Finland and 12.9% in the U.S.

The U.S. sold 2,693 million copies of published titles in 2017, followed by the U.K. (647 million), Brazil (617 million) and France (430 million).