Sunday 23 December 2018

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).

Tuesday 11 December 2018

US Antitrust Chief Delrahim Announces Withdrawal from DOJ/USPTO Policy Statement on Remedies for SEPs subject to FRAND


On December 7, the chief of the Antitrust Division at the U.S. Department of Justice (DOJ), Makan Delrahim, announced that the DOJ will be withdrawing from the 2013 USPTO and DOJ joint statement, “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments.”  The announcement was part of his speech, titled “Telegraph Road: Incentivizing Innovation at the Intersection of Antitrust and Patent law.”  His speech provides, in part:

. . . In the more recent past, we have seen somewhat of a shift toward the view that patents might confer too much power, particularly if those patents are essential to a technical interoperability standard.  The fundamental right of the patent holder to exclude competitors has been questioned in this context.

In particular, I have criticized the argument that it ought to be a violation of antitrust law for a holder of a standard-essential patent, or SEP, to exclude competitors from using the technology, including by seeking an injunction against the sale of infringing goods—I think that argument is wrong as a matter of antitrust law and bad as a matter of innovation policy. 

. . . When it comes to the test for obtaining injunctive relief against infringement, patent law already strikes a careful balance that optimizes the incentive to innovate, for the benefit of the public.  The test was articulated by the Supreme Court in eBay v. MercExchange.  

. . . A court applying the eBay test is thus allowed to consider effects in the market, including (as Justice Kennedy noted in concurrence) how significant the patented invention is to the use of the product, and whether the patent holder can be properly rewarded for that contribution without the ability to exclude competitors. 

When this test is used to maintain appropriate incentives to innovate, it thus facilitates the goals of antitrust law and patent law alike. 

I fear that we at the Antitrust Division gave some observers the opposite impression, however, with the confusion created by the joint statement issued by the Department of Justice and the U.S. Patent & Trademark Office in early 2013, entitled “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments.” 

That Policy Statement purported to offer the agencies’ perspectives on the propriety of a federal court issuing an injunction, or the International Trade Commission’s issuing an exclusion order, “when a patent holder seeking such a remedy asserts standards-essential patents that are encumbered by a RAND or FRAND licensing commitment.”  In particular, the statement discusses what is in the “public interest” because the eBay test and the Tariff Act governing the ITC name the public interest as a relevant factor.

As I have said before, this joint statement should not be read as a limitation on the careful balance that patent law strikes to optimize the incentive to innovate.  There is no special set of rules for exclusion when patents are part of standards.  A FRAND commitment does not and should not create a compulsory licensing scheme.  

In those cases, as in all cases, the question is what result will optimize the incentives to innovate for the benefit of the public.  Since injunctions against infringement frequently do serve the public interest in maintaining a patent system that incentivizes and rewards successful inventors through the process of dynamic competition, enforcement agencies without clear direction otherwise from Congress should not place a thumb on the scale against an injunction in the case of FRAND-encumbered patents. 

Despite my clarification of the Antitrust Division’s position on the propriety of these types of injunctions, the potential for confusion remains high because the joint statement from 2013 indicates that an injunction or exclusion order “may harm competition and consumers,” seeming somehow to suggest an antitrust inquiry that is distinct from the goal of optimizing the incentives for innovation—namely, dynamic competition.  

This potential for confusion has lead me to a conclusion that I would like to announce here today, in the interest of clarity and predictability of the laws, and among the patent law community with whom we share the goal of incentivizing innovation: The Antitrust Division is hereby withdrawing its assent to the 2013 joint “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments.”

The 2013 statement has not accurately conveyed our position about when and how patent holders should be able to exclude competitors from practicing their technologies.  We will be engaging with the U.S.P.T.O. to draft a new joint statement that better provides clarity and predictability with respect to the balance of interests at stake when an SEP-holder seeks an injunctive order.

Any discussion regarding injunctive relief should include the recognition that in addition to patent holders being able to engage in patent “hold up,” patent implementers are also able to engage in “hold out” once the innovators have already sunk their investment into developing a valuable technology.  Additionally, a balanced discussion should recognize that some standard-setting organizations may make it too easy for patent implementers to bargain collectively and achieve sub-optimal concessions from patent holders that undermine the incentive to innovate.  That is the topic I want to turn to next.

Although standard-setting organizations can undoubtedly offer enormous benefits to consumers, there are antitrust risks associated with any activity that involves competitors making joint decisions.  When there is evidence that participants in a standard-setting organization have engaged in collusion, which is the “supreme evil” of antitrust law, according to the Supreme Court in Trinko, the Division will be inclined to investigate. 

For instance, there is a potential antitrust problem where a group of product manufacturers within a standard-setting organization come together to dictate licensing terms to a patent holder as a condition for inclusion in a standard because it may be a collective exertion of monopsony power over the patent holder.  . . . 

The Antitrust Division will therefore investigate and bring enforcement actions to end practices that eliminate the independent centers of decision-making and thereby harm competitive processes, including price competition and innovation competition.  Often a single maverick firm may be willing to take a chance on a new and innovative technology or business model that the rest of its competitors would rather see killed off in its incipiency.  Antitrust law recognizes the consumer benefit of those entrepreneurial and innovative tendencies and their vulnerability to collusion.

Although there are certain best practices for guarding the process of standard setting against such abuses, we are concerned that some standard-setting organizations may not even attempt to adopt these safeguards.  

. . . Calling your meetings a standard-setting organization, or even in fact publishing some standards necessary for interoperability, is not a free pass for coordination designed to reduce common competitive threats or forestalling innovative developments in the industry that put a legacy business model at risk.

… Patent policies affect the incentives for innovation.  If an SSO’s policy is too restrictive for one side or the other, it also risks deterring participation in procompetitive standard setting. 

Just as competition in the marketplace results in better outcomes for the consumers of goods and services, competition among standard-setting organizations to adopt better patent policies can result in better outcomes for the consumers of standard-setting activities (that is, for the participants themselves). 

It is for this reason that we will take a dim view of any coordinated effort by competitors to stifle competition among standard-setting organizations, including competition to offer the patent policy that brings the most participants to the table.  For instance, competitors would come under scrutiny if they orchestrated a group boycott of an SSO with a patent policy that is unfavorable to their commercial interests. 

Tuesday 4 December 2018

The U.S. Industrial (Technology) Military Complex is Alive and Well: Microsoft and the Defense Innovation Unit


The LA Times recently published an article titled, “Microsoft will Give the U.S. Military Access to ‘All the Technology We Create'.”  The article discusses Microsoft’s recent announcement as well as the tension in some U.S. technology companies concerning working with the U.S. military.  For example, some Google employees have expressed displeasure with Google’s decision to work with the U.S. military.  The article notes that:

The Defense Department has established the Defense Innovation Unit, which is intended to provide capital — without taking an ownership stake — to companies that want to work on prototype projects that help address problems faced by the U.S. military.

The Defense Innovation Unit’s website is here.  The Defense Innovation Unit focuses on five areas: artificial intelligence, autonomous systems, human systems, information technology and space.  Their team includes: “about 75 military and civilian personnel. Prior to joining DIU, we’ve launched and sold companies backed by tier-1 VCs; led teams at the Joint Staff, the Office of the Secretary of Defense, and the White House; served with our military around the world; and helped build some of Silicon Valley's most iconic companies.”  Notably, the program is built around speed—a contractor will know if they have a “pilot” agreement within 30 days with a quick follow-through for a more involved contract.  The 2017 Annual Report states the mission of the Defense Innovation Unit:

The U.S. Department of Defense (DoD) established Defense Innovation Unit Experimental (DIUx) to accelerate commercial innovation to the warfighter in order to meet the changing demands of today’s strategic and technological environments. The Department’s 2018 National Defense Strategy (NDS) boldly acknowledges that our nation’s military-technical advantage is eroding as our competitors and adversaries have the same access to the global technology marketplace driving innovation. Without significant changes to DoD’s acquisition culture and processes, the U.S. military will continue to lose its long-held technological superiority.

Military-technical competition is dramatically different from past decades when key technologies were developed in government labs, often exclusively for military use. A technology first-mover up until the end of the Cold War, DoD must now adopt a fast follower posture to keep pace with commercial refresh cycles. The commercial sector leads the way in many cutting-edge areas from artificial intelligence to autonomous systems to space, the convergence of which generates the prospect of dramatic changes to the character of warfare. The implications of global access to advanced commercial technology are visible in today’s conflicts and the loss of exclusivity means the likelihood of technological surprise is far higher.

It is DIUx’s mission to lead DoD’s break with past paradigms of military-technical advantage to become fast adapters -- as opposed to sole developers -- of technology, integrating the advanced commercial capabilities necessary for strategic advantage. In this hyper-competitive environment, DoD needs to prioritize speed of delivery, rapid and modular upgrades, and quick operational adaptation on the battlefield. Success in this new era of military-technical competition no longer goes to those who seek the most exquisite systems, but rather to those who move fast and think creatively.

Headquartered in Mountain View, CA, with offices in Central Texas (Austin); Boston, MA; and in the Pentagon. . . . 

On intellectual property, the Frequently Asked Questions page states:

How is intellectual property treated and protected?

Prior to the start of a project, it is important that a company identify rights in pre-existing data. In general, companies retain ownership of IP assets created during the effort. DoD is usually licensed certain rights to use these assets in accordance with the agreed OT (i.e., pilot contract) terms and conditions. These rights control, inter alia, how DoD can use, disclose, or reproduce company-owned proprietary information.

What are the different ways IP is licensed under an OT agreement (i.e., pilot contract)?

Unlimited Rights. These give DoD the ability to use, disclose, reproduce, prepare derivative works, distribute copies, and perform publicly, in any manner and for any purpose, and to have or permit others to do so (absent any separate security classification or export control restriction). We usually don't need this and do not anticipate awarding any OT agreements (i.e., pilot contracts) with unlimited rights.

Government Purpose Rights. These give DoD the ability to use, modify, reproduce, release, perform, display, or disclose data only within the Government (including competitive re-procurement). However, DoD cannot release the data for any commercial purpose.

Limited Rights. DoD may use the company’s data, other than computer software, within DoD but not release the data outside of DoD except in limited circumstances. DoD may not use the data for manufacturing additional quantities of the item. Data may not be released without company permission/associated nondisclosure agreement.

Restricted Rights. These apply to noncommercial computer software only. DoD may only run the software on one computer at a time, and may make only the minimum copies needed for backup. The software may not be released outside of DoD except with company permission/associated nondisclosure agreement.