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  • PTAB Grants First Motion for Leave to Amend in Inter Partes Review

    By Kevin E. Noonan —

    USPTO SealRepresentatives from the U.S. Patent and Trademark Office, led by Janet Gongola, Senior Advisor to the Deputy Director of the PTO, spent the better part of last month traversing the U.S. presenting a Roundtable on the activities and preferred modes of practice before the Patent Trial and Appeal Board, the successor under the Leahy-Smith America Invents Act for the Board of Patent Appeals and Interferences.  The presentation included a talk by Chief Judge James Smith on the state of practice before the Board (including a wealth of statistics and goals) and panel discussion between members of the local bar and members of the Board (see "PTAB AIA Trial Roundtables" webpage).

    While concerned generally with the Board's activities, a substantial portion of the program related to inter partes review (IPR), the successor under the AIA of inter partes reexamination.  35 U.S.C. §§ 311-319.  The Board members discussed with members of the local bar best practices and the bar's experiences with IPR, and included one or more role-playing sessions.  One of these, on how a patentee party can best present a motion to amend the claims incited insightful comment from the audience wherever the Roundtables were held.  In Chicago, the issue was presented to the Board members by Edward Manzo, a partner at Husch Blackwell (and editor of Claim Construction and the Federal Circuit, a yearly tome on how the Court has decided claim construction issues).  Mr. Manzo presented his question thusly (paraphrased here):

    Because the PTAB has determined that it will apply the broadest reasonable interpretation (BRI) to the claims under inter partes review, and further has decided that it will not make an independent determination of patentability (unlike in the former inter partes reexamination); and further because the patentee does not have the right to amend the claims but must get leave to amend from the Board by motion, doesn't this refusal to freely permit amendment abolish the justification usually proffered for applying BRI, specifically, that the Office uses this standard because the applicant/patentee has the ability to amend to overcome rejection based on BRI?

    (The question is particularly germane because at the time Mr. Manzo asked it the Board had not granted a single motion for leave to amend.)  The answer given by the Board had much to do with the statutory time limitation for bringing IPR to a conclusion (one year from granting the petition for IPR, with an ability to extend that time for an additional six months "for good cause," a provision the Board clearly does not want to invoke routinely); and the burden on PTAB resources if the Board decided patentability issues; and the ability of the patentee to respond to the petition with counter-arguments; and the ability of the parties to settle (while conceding that once the Board established that the public interest was implicated it might decide, and had the statutory capacity to decide, the substantive patentability questions raised by the IPR even if the parties decided to settle).

    One intriguing aspect of the Board's response to Mr. Manzo was a comment by the Chief Judge, to the effect that we should all "stay tuned."  The basis for this comment became evident on Tuesday, May 20th when the Board issued its first grant of a motion for leave to amend, in International Flavors and Fragrances v. U.S. (Final Written Decision).  The patent at issue, U.S. Patent No. 7,579,016, is entitled "Methods for repelling arthropods using isolongifolenone analogs."  The PTAB granted the petition for inter partes review on June 27, 2013 as to claims 1, 4, 5, 7, 8, and 14-26; independent claim 1 reads as follows:

    1.  A method for repelling arthropods, said method comprising treating an object or area with an arthropod repelling effective amount of at least one isolongifolenone analog and optionally a carrier or carrier material; wherein said at least one isolongifolenone analog has the following formula:

    Formula_claim 1
    wherein R1 is hydrogen, an oxygen, a C1-10 alcohol, aldehyde, alkyl, ether, or esters of said alcohol with a C1-10 saturated or unsaturated, straight or branched acid and R2 is hydrogen, an oxygen, a C1-10 alcohol, aldehyde, alkyl, ether, or esters of said alcohol with a C1-10 saturated or unsaturated, straight or branched acid; optionally there is a double bond between carbons 5 and 6 and R2.

    The Motion to Amend cancelled all claims in the patent (claims 1-26) and to substitute new claims 27-45.  The Petitioner, International Flavors and Fragrances, did not oppose, and the Board granted the motion in part and issued its final decision in the opinion handed down on May 20th.

    The Board granted the Petition based on the Behan reference, PCT International Publication Number WO 00/19822, published April 13, 2000, which despite failing to demonstrate operability disclosed the use of isolongifolanone (a compound related to the claimed isolongifolenone) to repel arthropods and thus anticipated claims 1, 4, 5, 7, 8, 14, 19-21, and 23.  The Board also granted the Petition with regard to claims 1, 4, 5, 7, 8, 14-21, and 23 as being obvious over the combination of the Behan reference and the Grieco reference (A Novel High-Throughput Screening System to Evaluate the Behavioral Response of Adult Mosquitoes to Chemicals, 21 J. AM. MOSQUITO CONTROL ASS'N 404-411 (2005)), which provided disclosure relating to the expressly recited amounts and concentrations of isolongifolenone, and for obviousness as to claims 1, 4, 5, 7, 8, 14, and 19-26 over the combination of the Behan reference and the Carroll reference (Repellency of Deet and SS220 applied to skin involves olfactory sensing by two species of ticks, 19 MEDICAL AND VETERINARY ENTOMOLOGY 101-106 (2006)), which supplies disclosure regarding the expectation that compounds effective against mosquitoes would be effective against other arthropods, such as ticks.

    The substitute claims proposed by patentee limited independent claim 27 (corresponding to original claim 1) to five of the compounds recited in the Markush group found in original claim 8 of the '016 patent, and proposed claim 45 to be limited to mites and ticks but otherwise identical to original claim 1.  These amendments and differences are set forth below:

    27.  A method for repelling arthropods, said method comprising treating an object or area with an arthropod repelling effective amount of at least one isolongifolenone analog and optionally a carrier or carrier material; wherein said at least one isolongifolenone analog has the following formula:

    Formula_claim 27
    wherein R1 is hydrogen, an oxygen, a C1-10 alcohol, aldehyde, alkyl, ether, or esters of said alcohol with a C1-10 saturated or unsaturated, straight or branched acid and R2 is hydrogen, an oxygen, a C1-10 alcohol, aldehyde, alkyl, ether, or esters of said alcohol with a C1-10 saturated or unsaturated, straight or branched acid; optionally there is a double bond between carbons 5 and 6 and R2; wherein said at least one isolongifolenone analog is selected from the group consisting of

    Formulae
    45.  A method for repelling arthropods, said method comprising treating an object or area with an arthropod repelling effective amount of at least one isolongifolenone analog and optionally a carrier or carrier material; wherein said at least one isolongifolenone analog has the following formula:

    Formula_claim 45
    wherein R1 is hydrogen, an oxygen, a C1-10 alcohol, aldehyde, alkyl, ether, or esters of said alcohol with a C1-10 saturated or unsaturated, straight or branched acid and R2 is hydrogen, an oxygen, a C1-10 alcohol, aldehyde, alkyl, ether, or esters of said alcohol with a C1-10 saturated or unsaturated, straight or branched acid; optionally there is a double bond between carbons 5 and 6 and R2; wherein said arthropods are ticks or mites.

    The Board set forth the standards it applies to Motions for Leave to Amend during inter partes review:

    As the moving party, Patent Owner bears the burden of proof to establish that it is entitled to the relief requested.  37 C.F.R. § 42.20(c).  The proposed amendment is not entered automatically, but only upon Patent Owner having demonstrated, by a preponderance of the evidence, the patentability of the proposed claims.  See, e.g., 37 C.F.R. § 42.1(d) (noting that the "default evidentiary standard [in proceedings before the Board] is a preponderance of the evidence.").

    In addition, the Decision notes that any amendment cannot enlarge or broaden the scope of the patented claims, citing 35 U.S.C. § 316(d)(3); 37 C.F.R. § 42.121(a)(2)(ii).  The proposed amendments do not run afoul of this proscription, because they limit the scope of patented claim 1.

    The Board also noted that each proposed amended or substitute claims must have support under 35 U.S.C. § 112 throughout its scope.  37 C.F.R. § 42.121(b)(1).  The proposed substitute claims satisfy this requirement, the Board concluded, based on citation to express disclosure in the specification.

    Finally, the Board addressed the patentability of the proposed substitute claims over the cited art.  However:

    Distinguishing the proposed claims only from the prior art references applied to the original patent claims is insufficient to demonstrate patentability over prior art.  As the moving party, a patent owner bears the burden to show entitlement to the relief requested. 37 C.F.R. § 42.20(c).

    Support for this proposition is drawn from the Board's earlier decision in Free Sys., Inc. v. Bergstrom, Inc., IPR2012-00027, slip op. at 33 (PTAB January 7, 2014 (Paper 66)), which specified that "the patent owner bears the burden of proof to demonstrate patentability of the proposed claims over the prior art in general, and thus entitlement to the proposed claims."  In practice, this imposes the burden that "the patent owner should discuss, as well as present evidence, if appropriate, as to the level of ordinary skill in the art, and what was known regarding the features being relied upon to demonstrate patentability of the proposed claims."

    Here, the Board set forth in its decision a synopsis of the evidence presented by the patent owner regarding the unpredictable effects in function that even small changes in chemical structure can have, and concluded that '"[b]ecause the prior art does not provide a reason to modify isolongifolanone to arrive at the modified isolongifolanone compounds of proposed claim 27, nor does it provide a reasonable expectation that such modifications would result in a compound having the desired insect repellent activity, we conclude that the preponderance of the evidence supports the patentability of claim 27.  As to dependent claims 28-44, because those claims incorporate all of the limitations of claim 27, they would be patentable for the same reasons."

    The Board did not reach the same conclusion of patentability of proposed claim 45 over the prior art.  For this claim, the recited structure encompasses the structure disclosed in the Behan reference, which teaches the use of isolongifolanone against mosquitoes.  Illustrating the burden the Board imposes on patent owners, the decision states that "Patent Owner provides no evidence that ticks and mites would not be present on the same objects or areas where mosquitoes and cockroaches are found, which are the insects addressed by Behan.  Thus, by applying the isolongifolanone taught by Behan to an object or airspace for the purpose of repelling mosquitoes or cockroaches, one would also inherently repel ticks and mites."  From this, the Board applies the black-letter principle of the law that "'[i]t is a general rule that merely discovering and claiming a new benefit of an old process cannot render the process again patentable," citing In re Woodruff, 919 F.2d 1575, 1578 (Fed. Cir. 1990); Perricone v. Medicis Pharm. Corp., 432 F.3d 1368, 1377-78 (Fed. Cir. 2005) and Bristol-Myers Squibb Co. v. Ben Venue Laboratories, Inc., 246 F.3d 1368, 1376 (Fed. Cir. 2001) in support.  Accordingly, the Board "conclude[d] that the preponderance of the evidence does not support the patentability of proposed claim 45."

    Because grant of the Motion, and the reasons therefore were dispositive of all issues before the Board, the decision was made final and the Board cited 37 C.F.R. § 90.2 for the parties' responsibilities for notice and service of judicial review.

    A few rubrics can be drawn from this decision.  The substitute claims were not challenged by the Petitioner (no doubt because the Petitioner was not at risk of being sued for infringement of the proposed substitute claims); this situation is not likely to be the norm.  In addition, the patentee was the U.S. government, which may take a different view of how best to protect its intellectual property than commercial concerns.  Petitioner supported its petition using a prior art reference that anticipated the claims, which may or may not be or become routine but certainly provides strong support for satisfying Petitioner's burden of making a showing that at least one claim is unpatentable.  Finally it cannot escape the patent community's notice that the Office is exquisitely sensitive to criticism (for example, from the Supreme Court as evidenced by the recently issued subject matter eligibility Guidelines); the Board has been roundly criticized, by the bar and influential members of the judiciary including recent Chief Judge Rader (who called the PTAB a "death squad" for patent claims) as being inimical to patents and patentees based on its high rate of granting IPR petitions and the percentage of those claims that survived (indeed, the Office recently trumpeted the statistic that 41% of patents in IPR survived with the patentability of at least "some" claims being affirmed).  Grant of patent owner's Motion for Leave to Amend proves that the Board can permit a patentee under appropriate circumstances to propose claim-saving amendments; the question remaining is whether this becomes routine or remains the black swan of PTAB proceedings.

  • Court Report

            By Sherri Oslick —

    Gavel About Court Report:  Each week we will report briefly on recently filed biotech and pharma cases.

    Otsuka Pharmaceutical Co. v. Aurobindo Pharma Ltd. et al.
    1:14-cv-03306; filed May 23, 2014 in the District Court of New Jersey

    • Plaintiff:  Otsuka Pharmaceutical Co.
    • Defendants:  Aurobindo Pharma Ltd.; Aurobindo Pharma USA, Inc.; Aurolife Pharma LLC

    Infringement of U.S. Patent Nos. 8,017,615 ("Low Hygroscopic Aripiprazole Drug Substance and Process for the Preparation Thereof," issued September 13, 2011), 8,580,796 (same title, issued November 12, 2013), and 8,642,760 (same title, issued February 4, 2014) following a Paragraph IV certification as part of Aurobindo's filing of an ANDA to manufacture a generic version of Otsuka's Abilify® (aripiprazole, used to treat bipolar disorder and schizophrenia).  View the complaint here.

    Allergan, Inc. v. Actavis plc et al.
    2:14-cv-00638; filed May 22, 2014 in the Eastern District of Texas

    • Plaintiff:  Allergan, Inc.
    • Defendants:  Actavis plc; Actavis, Inc.; Watson Laboratories, Inc.; Actavis Pharma, Inc.

    Declaratory judgment of false Paragraph IV notification (because Actavis did not have an accepted ANDA application) or in the alternative infringement of U.S Patent Nos. 8,633,162 ("Methods of Providing Therapeutic Effects Using Cyclosporine Components," issued January 21, 2014), 8,642,556 (same title, issued February 4, 2014), 8,648,048 (same title, issued February 11, 2014), and 8,685,930 (same title, issued April 1, 2014) following a Paragraph IV certification as part of Actavis' filing of an ANDA to manufacture a generic version of Allergan's Restasis® (cyclosporine ophthalmic emulsion, 0.05%, used to treat dry eye).  View the complaint here.

    Amarin Pharma, Inc. et al. v. Watson Laboratories, Inc. et al.
    3:14-cv-03259; filed May 21, 2014 in the District Court of New Jersey

    • Plaintiffs:  Amarin Pharma, Inc.; Amarin Pharmaceuticals Ireland Ltd.
    • Defendants:  Watson Laboratories, Inc.; Actavis, Inc.

    Infringement of U.S. Patent Nos. 8,293,728 ("Methods of Treating Hypertriglyceridemia," issued October 23, 2012), 8,318,715 (same title, issued November 27, 2012), 8,357,677 (same title, issued January 22, 2013), 8,367,652 (same title, issued February 5, 2013), 8,377,920 (same title, issued February 19, 2013), 8,399,446 (same title, issued March 19, 2013), 8,415,335 (same title, issued April 9, 2013), 8,426,399 (same title, issued April 23, 2013), 8,431,560 (same title, issued April 30, 2013), 8,440,650 (same title, issued May 14, 2013), 8,501,225 ("Stable Pharmaceutical Composition and Methods of Using Same," issued August 6, 2013), 8,518,929 ("Methods of Treating Hypertriglyceridemia," issued August 27, 2013), 8,524,698 (same title, issued September 3, 2013), 8,546,372 (same title, issued October 1, 2013), 8,551,521 ("Stable Pharmaceutical Composition and Methods of Using Same," issued October 8, 2013), and 8,617,594 (same title, issued December 31, 2013) following a Paragraph IV certification as part of Watson's filing of an ANDA to manufacture a generic version of Amarin's Vascepa® (icosapent ethyl, used as an adjunct to diet to reduce triglyceride levels in adult patients with severe hypertriglyceridemia).  View the complaint here.

    Alcon Research Ltd. v. Watson Laboratories Inc. et al.
    1:14-cv-00647; filed May 20, 2014 in the District Court of Delaware

    • Plaintiff:  Alcon Research Ltd.
    • Defendants:  Watson Laboratories Inc.; Actavis Inc.; Actavis Pharma Inc.

    Infringement of U.S. Patent Nos. 8,268,299 ("Self Preserved Aqueous Pharmaceutical Compositions," issued September 18, 2012), 8,323,630 (same title, issued December 4, 2012), and 8,388,941 (same title, issued March 5, 2013) following a Paragraph IV certification as part of Watson's filing of an ANDA to manufacture a generic version of Alcon's Travatan Z® (travoprost ophthalmic solution, used to reduce elevated intraocular pressure in patients with open-angle glaucoma or ocular hypertention).  View the complaint here.

    Jazz Pharmaceuticals, Inc. v. Amneal Pharmaceuticals, LLC
    2:14-cv-03235; filed May 20, 2014 in the District Court of New Jersey

    Infringement of U.S. Patent No. 8,589,182 (same title, issued November 19, 2013) following a Paragraph IV certification as part of Amneal's filing of an ANDA to manufacture a generic version of Jazz's Xyrem® (sodium oxybate, used to treat narcolepsy).  View the complaint here.

    Dr. Reddy's Laboratories, Inc. et al. v. Purdue Pharmaceutical Products L.P. et al.
    2:14-cv-03230; filed May 20, 2014 in the District Court of New Jersey

    • Plaintiffs:  Dr. Reddy's Laboratories, Inc.; Dr. Reddy's Laboratories, Ltd.
    • Defendants:  Purdue Pharmaceutical Products L.P.; Purdue Pharma L.P.; Transcept Pharmaceuticals, Inc.

    Declaratory judgment of non-infringement of U.S. Patent No. 7,658,945 ("Compositions for Delivering Hypnotic Agents Across the Oral Mucosa and Methods of Use Thereof," issued February 9, 2010) in conjunction with Dr. Reddy's Paragraph IV certification as part of its filing of an ANDA to manufacture a generic version of Purdue's Intermezzo® (sublingual zolpidem tartrate, used to treat insomnia when middle-of-the-night awakening is followed by difficulty returning to sleep).  View the complaint here.


    Otsuka Pharmaceutical Co. v. Zydus Pharmaceuticals USA Inc. et al.
    1:14-cv-03168; filed May 16, 2014 in the District Court of New Jersey

    • Plaintiff:  Otsuka Pharmaceutical Co.
    • Defendants:  Zydus Pharmaceuticals USA Inc.; Cadila Healthcare Ltd.

    Infringement of U.S. Patent Nos. 8,017,615 ("Low Hygroscopic Aripiprazole Drug Substance and Process for the Preparation Thereof," issued September 13, 2011), 8,580,796 (same title, issued November 12, 2013), 8,642,760 (same title, issued February 4, 2014), and 8,518,421 ("Flashmelt Oral Dosage Formulation," issued August 27, 2013) following a Paragraph IV certification as part of Zydus' filing of an ANDA to manufacture a generic version of Otsuka's Abilify® (aripiprazole, used to treat bipolar disorder and schizophrenia).  View the complaint here.

    Celgene Corp. v. Natco Pharma Ltd. et al.
    2:14-cv-03126; filed May 14, 2015 in the District Court of New Jersey

    • Plaintiff:  Celgene Corp.
    • Defendants:  Natco Pharma Ltd.; Arrow International Ltd.; Actavis, Inc.; Watson Laboratories, Inc.; Watson Pharma, Inc.; Anda, Inc.

    Infringement of U.S. Patent Nos. 8,530,498 ("Methods For Treating Multiple Myeloma With 3-(4-amino-1-oxo-1,3-dihydroisoindol-2-yl) Piperidine-2,6-Dione," issued September 10, 2013), 8,589,188 ("Methods for Delivering a Drug to a Patient While Preventing the Exposure of a Foetus or Other Contraindicated Individual to the Drug," issued November 19, 2013), 8,626,531 ("Methods for Delivering a Drug to a Patient While Restricting Access to the Drug By Patients For Whom the Drug May Be Contraindicated," issued January 7, 2014), and 8,648,095 ("Methods For Treating Multiple Myeloma Using 3-(4-amino-1-oxo-1,3-dihydroisoindol-2-yl) piperidine-2,6-Dione In Combination With Proteasome Inhibitor," issued February 11, 2014) following a Paragraph IV certification as part of Natco's filing of an ANDA to manufacture a generic version of Celgene's Revlimid® (lenalidomide, used in the treatment of multiple myeloma patients who have received at least one prior therapy, and in the treatment of patients with transfusion-dependent anemia due to Low- or Intermediate-1–risk myelodysplastic syndromes (MDS) associated with a deletion 5q cytogenetic abnormality).  View the complaint here.

  • Conference & CLE Calendar

    CalendarMay 28, 2014 – "Double Patenting After Gilead: Prosecution and Litigation" (Intellectual Property Owners Association) – 2:00 to 3:00 pm (ET)

    June 4, 2014 – "Patent Due Diligence Post-AIA: Avoiding Dangers of Inadequate Investigation — Evaluating Validity of Key Patents, Identifying Enforceability Issues, Addressing New Considerations Under the AIA" (Strafford) – 1:00 to 2:30 pm (EDT)

    June 4-6, 2014 – Biosimilars*** (American Conference Institute) – New York, NY

    June 5, 2014 – "Secondary Use Pharmaceutical Patents: Litigation and Trade Policy Briefing" (Public Citizen and the American University Washington College of Law) – Washington, DC

    June 9-10, 2014 – Hatch-Waxman Boot Camp*** (American Conference Institute) – Chicago, IL

    June 10, 2014 – "'Standing Out' — The Supreme Court's Redefined Standard for Fee Shifting in Patent Litigation, and How It Might Impact 'Patent Troll' Litigation" (McDonnell Boehnen Hulbert & Berghoff LLP) – 10:00 am to 11:15 am (CT)

    June 10, 2014 – "Patent Dispute Resolution at the ITC and PTAB: Alternatives to District Court Litigation" (American Bar Association (ABA) Center for Professional Development, Section of Intellectual Property Law, and Young Lawyers Division) – 1:00 to 2:30 pm (ET)

    June 11-13, 2014 – Fundamentals of Patent Prosecution 2014: A Boot Camp for Claim Drafting & Amendment Writing (Practising Law Institute) – New York, NY

    June 19, 2014 – "Double Patenting: Defeating Double Patenting Rejections and Avoiding Terminal Disclaimer" (Strafford) – 1:00 to 2:30 pm (EDT)

    June 23-26, 2014 – BIO International Convention (Biotechnology Industry Organization) – San Diego, CA

    June 25-26, 2014 – International Forum on Pharma Patent Extensions*** (C5) – London, England

    June 30, 2014 – "Drafting Patent Claims After In re Packard: Navigating the New PTO Regime for Evaluating Indefiniteness" (Strafford) – 1:00 to 2:30 pm (EDT)

    July 9-11, 2014 – Fundamentals of Patent Prosecution 2014: A Boot Camp for Claim Drafting & Amendment Writing (Practising Law Institute) – San Francisco, CA

    July 20-22, 2014 – 2014 Annual Meeting & Conference (National Association of Patent Practitioners) – Alexandria, Virginia.

    August 13-15, 2014 – Advanced Patent Law Seminars (Chisum Patent Academy) - Seattle, WA

    August 18-20, 2014 – Advanced Patent Law Seminars (Chisum Patent Academy) - Seattle, WA

    ***Patent Docs is a media partner of this conference or CLE

  • Program on Secondary Use Pharmaceutical Patents

    Public CitizenPublic Citizen and the American University Washington College of Law are sponsoring a program entitled "Secondary Use Pharmaceutical Patents: Litigation and Trade Policy Briefing" from 9:00 am to 1:30 pm (Eastern) on June 5, 2014 at the offices of Sterne, Kessler, Goldstein & Fox, 1100 New York Avenue, NW, Washington, DC.  The program will consist of two panels:

    • Panel 1:  Eli Lilly and the Canadian NAFTA Challenge — panel includes Patent Docs author Andrew Williams of McDonnell Boehnen Hulbert & Berghoff LLP

    • Panel 2:  Secondary Use Patents: A Comparative View

    American University Washington College of Law #1Additional information about the program, including registration/CLE information and a complete list of the panelists, can be found here.

  • IPO Webinar on Double Patenting after Gilead

    IPO #2The Intellectual Property Owners Association (IPO) will offer a one-hour webinar on "Double Patenting After Gilead: Prosecution and Litigation" on May 28, 2014 beginning at 2:00 pm (ET).  A panel consisting of Robert Armitage, Eli Lilly and Co. (retired); Annemarie Hassett of Goodwin Procter, LLP; and Jane Love of Wilmer Cutler Pickering Hale and Dorr, LLP will discuss the implications of Gilead for patent litigation, including the battleground of just how similar subject matter has to be to serve as a double patenting reference; provide practice tips for innovator companies regarding issued patents, pending applications, and the ongoing prosecution of new inventions; and discuss Chief Judge Rader's dissent and its impact on policy; In re Hubbell; and what issues in double patenting remain unresolved.

    The registration fee for the webinar is $130 (government and academic rates are available upon request).  Those interested in registering for the webinar can do so here.

  • Webinar on Drafting Patent Claims after In re Packard

    Strafford #1Strafford will be offering a webinar/teleconference entitled "Drafting Patent Claims After In re Packard: Navigating the New PTO Regime for Evaluating Indefiniteness" on June 30, 2014 from 1:00 to 2:30 pm (EDT).  Erika H. Arner of Finnegan Henderson Farabow Garrett & Dunner; John J. Cheek, Senior Corporate Counsel for Caterpillar; and Thomas L. Irving, Partner of Finnegan Henderson Farabow Garrett & Dunner will provide patent counsel with an examination of the In re Packard majority decision, which concluded that the standard for indefiniteness in pre-issuance claims at the PTO does not have to be as stringent as that for issued patents; discuss the decision, the concurrence, and the new regime for evaluating indefiniteness; and analyze the impact of the decision on patent claim drafting and challenging claims, and offer best practices for patent counsel going forward.  The webinar will review the following questions:

    • How does the Federal Circuit distinguish the USPTO's standard and the court's standard for indefiniteness?
    • What are the implications of the Packard ruling for patent counsel in drafting applications?
    • What is the proper 112 analysis in PTAB patent challenges?

    The registration fee for the webinar is $297 ($362 for registration and CLE processing).  Those registering by June 6, 2014 will receive a $50 discount.  Those interested in registering for the webinar, can do so here.

  • USPTO Holds Forum on Subject Matter Eligibility — Part IV

    By Donald Zuhn —

    USPTO Building FacadeOn May 9, the U.S. Patent and Trademark Office held a four-hour long forum to receive public feedback on the Myriad-Mayo Guidance, which was issued by the Office on March 4.  According to the Office's Guidance webpage, the forum was intended to provide an opportunity for stakeholders to present their interpretation of the impact of Supreme Court precedent on the complex legal and technical issues involved in subject matter eligibility analyses during patent examination.

    Last week, we reported on the opening remarks provided by Drew Hirshfeld, Deputy Commissioner for Patent Examination Policy, the overview of the Guidance provided by Raul Tamayo, Senior Legal Advisor for the Office of Patent Legal Administration (Part I), and the first two groups of public presentations (Part II and Part III).  Today, we conclude the series by reporting on the third group of public presenters as well as the open participation/question and answer session that concluded the forum.  The third group of presenters consisted of Barbara Fiacco of Foley Hoag, representing the American Intellectual Property Law Association (AIPLA); Duane C. Marks of Roche Diagnostics Operations, Inc.; and Gregory A. Cox of Eli Lilly and Company, representing the American Bar Association Section of Intellectual Property Law (ABA-IPL).

    FiaccoMs. Fiacco (at left) began her presentation by noting, as a number of presenters before her had, that the standard set forth in Chakrabarty was whether a naturally occurring product recited in a claim exhibits markedly different characteristics.  She also contended that the Guidance "ignored Chakrabarty" with respect to the analysis of combinations of naturally occurring products.  Ms. Fiacco further asserted that the Guidance conflicted with Diehr because it does not focus on the claim as a whole, and in support pointed to the Guidance's firework example.

    The second presenter, Mr. Marks used his allotted time to propose a framework for analyzing diagnostic method claims.  Before discussing that framework, however, he explained that the impact of the Guidance on diagnostic method claims was important because 70% of all medical decisions made by physicians rely on diagnostic assay results, and noted that the use of companion diagnostics leads to decreased health care spending by reducing the use of pharmaceuticals that might be ineffective.  With respect to his proposed framework, Mr. Marks contended that "[t]he Supreme Court's decision in Mayo [v. Prometheus] must be analyzed in view of the specific claims at issue" (emphasis in presentation), and cited the Mayo opinion in support of this assertion ("Our conclusion rests upon an examination of the particular claims before us in light of the Court's precedents [which] warn us against upholding patents that claim processes that too broadly preempt the use of a natural law.").

    MarksTurning to the claim at issue in that case, Mr. Marks (at right) reviewed the Court's statements regarding the administering and determining steps and the wherein clause, as well as the Court's comments regarding the claim as a whole.  He next discussed the "useful clues" that can be found in the Mayo decision, noting first that the Court's decision relies on "established general legal rules," and "[s]pecifically, the judicial rule that prevents too broadly preempting the use of a law of nature" (emphasis in presentation).  Mr. Marks emphasized that in Mayo, the Court "does not recite a new rule for biotech or diagnostic patents," and that changes to the MPEP were not needed to address diagnostic claims (emphasis in presentation).  He also noted that the Mayo Court did not change the machine or transformation test, but rather the Court pointed out that the Federal Circuit's analysis and application of the test was wrong.  In particular, Mr. Marks explained that neither the administering step nor the determining step requires a transformation.  According to Mr. Marks, Justice Breyer's "big, blinking roadmap" for understanding Mayo is his contrasting of Prometheus' claims with a new way of using an existing drug:

    Unlike, say, a typical patent on . . . a new way of using an existing drug, the patent claims [at issue in Mayo] do not confine their reach to particular applications of those laws [of nature].  . . .  [T]hese patents tie up too much future use of laws of nature.

    Mr. Marks next suggested ways in which the Prometheus claims could be fixed.  With respect to the administering step, the claim could be amended to recite the specific drug being administered (i.e., a specific compound and not just any 6-­thioguanine producing drug), the specific dosage of the drug (e.g., dosage range), the specific time points for administration (e.g., once daily for a full week), or the specific form of administration (e.g., I.V. or oral).  According to Mr. Marks, such amendments would "[i]mpose[] meaningful limits/actual boundaries" on the administering step, which would then "[c]ompl[y] with precedent which Mayo was based on that 'warns against too broadly preempting a use of a law of nature'!"

    With respect to the determining step, Mr. Marks suggested that the claim could be amended to recite specific analytic methods for "determining" (e.g., ELISA, PCR, HPLC, flow cytometry, Mass spectrometry), or specific compositions used in these analytic methods (e.g., antibodies or primers).  As with the proposed amendments to the administering step, Mr. Marks argued that such amendments would "[i]mpose[] meaningful limits on the execution of the claimed steps, and "[c]ompl[y] with precedent which Mayo was based on that 'warns against too broadly preempting a use of a law of nature'!"

    Finally, for the wherein clause, Mr. Marks suggested that the claim could be amended to introduce active steps such that the overall claim encompasses, for example, a method of treatment, in which the dosage of drug is actively altered based on the metabolite level, or a method of diagnosis, in which a diagnosis is provided based on the metabolite level.  He contended that by amending the wherein clause in such a way, "[c]laim scope is limited by altering dosage or by reciting positively [the] providing [of] a diagnosis," and that the claim would recite "steps that require steps to be performed."  Putting all of the proposed amendments together, Mr. Marks presented a version of the claim that he asserted was "fixed":

    Marks_slide 13
    After briefly touching on claim 20 from U.S. Patent No. 5,747,282 (a claim involved in AMP v. Myriad), Mr. Marks presented a table of areas in which he believed the Office got it right in the Guidance and areas in which he believed the Office got it wrong (at least with respect to diagnostic method claims):

    Marks_slide 16
    A copy of Mr. Marks' presentation can be found here.

    CoxThe final presenter of the group (and the forum), Mr. Cox (at left), indicated that "[t]he ABA‐IPL is reviewing the newly issued guidelines carefully and will provide written comments to the Office."  Despite the ABA-IPL's ongoing analysis of the Guidance, Mr. Cox did outline the ABA's current policy position on subject matter eligibility.  He noted first that the ABA "supports the principle that laws of nature, physical phenomena, and abstract ideas are not eligible for patenting under 35 U.S.C § 101, even if they had been previously unknown or unrecognized."  Next, he indicated that in analyzing process claims for subject matter eligibility, the claim must be read as a whole and be "limited to a specific application of a law of nature, natural phenomenon, or abstract idea" or "require[] or involve[] a transformation of matter."  Finally, Mr. Cox pointed out that the ABA opposed the importing of §§ 102, 103, or 112 criteria into a patent eligibility analysis, and instead:

    [S]upports the principle that the inquiry into subject matter eligibility for patenting under 35 U.S.C. § 101 is a separate and distinct requirement for patent eligibility which should be resolved independently from the conditions of patentability under Sections 102 and 103, and the requirements for obtaining a valid patent under Section 112.

    (emphasis in presentation).

    A copy of Mr. Cox's presentation can be found here.

    CohanThe forum concluded with an hour-long open participation/question and answer session.  In response to a question regarding the patent eligibility of fusion proteins, June Cohan (at right), a Legal Advisor with the USPTO's Office of Patent Legal Administration (who readers may recall presented on the Guidance at the most recent biotechnology/chemical/pharmaceutical (BCP) customer partnership meeting) indicated that fusion proteins were analogous to the cDNA molecules addressed in Myriad in that the former consists of separate proteins fused together and the latter consists of exons joined together.

    Another commenter argued that correlations should be patent eligible, asking "did nature create the correlation between a marker and a disease," and then responding "no."  Following up on that assertion, the next commenter asked the USPTO representatives how they would amend Prometheus' claim to make it patent eligible.  Ms. Cohan responded that the Office could not get into specifics because there were pending applications in the family.  However, she did suggest that the commenter "should come back with a claim that is more like [the claim in] Diehr."  When another commenter suggested that a diagnostic method claim could be fixed by adding a treatment step, Ms. Cohan stated that "I don't think you need to transform a diagnostic claim to a treatment claim" to make the claim patent eligible, and pointed to Examples F and G in the Guidance.  She did concede that the Office was "considering another example" as a way to clarify the issue.

    HirshfeldWhen one commenter asked whether the Office had the "right or responsibility to harmonize conflicting Supreme Court jurisprudence on patent eligibility," Mr. Hirshfeld (at left) responded that "we have the responsibility."

    In response to another commenter's assertion that the Guidance lacked a clear test for assessing whether the claim as a whole recites something significantly different, Mr. Hirshfeld pointed out that the Office "realize[s] that we have said structural differences [can establish that something is significantly different], but you can also have functional differences."  Mr. Hirshfeld conceded, however, that "whether we have adequately conveyed this is another question."

    Stating that she was "not optimistic" that examiners could be convinced to withdraw rejections made under the Guidance, Ms. Brinckerhoff asked the Office representatives how applicants could respond to such rejections, especially for composition claims.  She noted that "we'll have to take that [rejection] to the Board," and argued that "clients are going to give up" and "investors are going to go elsewhere."  She asked the panel "what can we do in the short term, noting that "we can't wait this out."  One Office representative suggested that applicants seek telephonic or video interviews with examiners (with the latter apparently gaining popularity at the Office).

    Another commenter declared that the Guidance is "damaging to our clients," and implored the Office to withdraw the Guidance.  Mr. Hirshfeld responded that it was "highly unlikely" that the Guidance would be withdrawn, but indicated that "there may be iterative changes."  Mr. Hirshfeld concluded the forum by reminding attendees that "we very much value your feedback," and noting that the Office was seeking additional written comments from the public.  While no firm deadline has been set for submitting such comments, he asked attendees to try to submit their comments by the end of June.

    For additional information regarding this topic, please see:

    • "USPTO Holds Forum on Subject Matter Eligibility — Part III," May 15, 2014
    • "USPTO Holds Forum on Subject Matter Eligibility — Part II," May 14, 2014
    • "Guest Post: How to Patent Grapefruit Juice — The New USPTO Guidance for Patent Eligible Subject Matter Is Both Sticky and Sour," May 13, 2014
    • "USPTO Holds Forum on Subject Matter Eligibility — Part I," May 12, 2014
    • "USPTO Tries to Address Public Misunderstandings Regarding Myriad-Mayo Guidance," April 16, 2014
    • "USPTO Issues Guidance for Analyzing Subject Matter Eligibility of Claims Reciting Laws of Nature/Natural Principles, Natural Phenomena or Natural Products," March 4, 2014

  • Patent Reform Legislation Off The Table — For Now

    By Andrew Williams —

    Leahy, PatrickEarlier today, Senator Patrick Leahy (D-VT), Chairman of the Senate Committee on the Judiciary, announced that he was taking the Patent Transparency and Improvements Act of 2013 (S. 1720) off the Committee's agenda.  He cited as the reason a lack of "sufficient support behind any comprehensive deal" to address the problem of so-called patent trolls who are misusing the patent system.  He pointed to "repeated concerns" that the Innovation Act that passed the House "went beyond the scope of addressing patent trolls, and would have severe unintended consequences on legitimate patent holders who employ thousands of Americans."  Sen. Leahy (at right) indicated that "competing companies on both sides of this issue refused to come to an agreement" that would have provided the broad bipartisan support required to get a bill through Senate.  Nevertheless, he promised that if the stakeholders involved "are able to reach a more targeted agreement that focuses on the problem of patent trolls, there will be a path for passage this year and I will bring it immediately to the Committee."  A copy of Sen. Leahy's press release can be found here.

    We have not reported on the pending legislation before the Senate Judiciary Committee for several weeks, because even though it has appeared on the Committee's agenda every week, it has been repeatedly postponed.  Even so, reports have suggested that work on a compromise had been on-going, and that a bipartisan agreement was imminent.  In fact, before Sen. Leahy's announcement, it was suggested that a Manager's Amendment would be considered by the Committee as early as tomorrow.  In attempt to explain what happened, the National Journal reported that Henry Reid (D-NV), the majority leader, told Sen. Leahy that the patent reform bill would not even get to floor of the Senate, even if it passed out of Leahy's Committee.  The National Journal cited opposition from trial attorneys, the biotech industry, and pharmaceutical companies for the warning from Sen. Reid.  Sen. John Cornyn (R-TX) apparently agreed with the criticisms levied against Mr. Reid, complaining that "the demands of one special interest group" should not trump the patent reform desires of the White House, House Democrats, and the bipartisan agreement in the Senate.

    Biotechnology Industry Organization (BIO)In response to the then-imminent vote in of the Committee, several organizations including the Biotechnology Industry Organization (BIO), the Innovation Alliance, and several university organizations, such as the Association of University Technology Mangers (AUTM), sent a letter on May 20, 2014 to the members of the Senate Judiciary Committee.  This letter stated that the signatories could not support the proposed changes because they would substantially weaken the patent system.  The letter indicated that these organizations have been working with members of the Judiciary Committee to craft a bill that would target frivolous patent litigation.  Nevertheless, many of the current provisions would have had the effect of treating every patent holder as a patent troll.  The letter stated that a patent system that weakens the ability of every patent holder to enforce its own patents would discourage innovation.  The signatories concluded by opposing the legislation that the Judiciary Committee was considering, and asking that the members not support the proposed reforms.

    IPO #1Of course, not every organization was necessarily opposed to the pending Senate legislation.  The Intellectual Property Organization ("IPO"), a trade association for owners of patents, trademarks, copyrights, and trade secrets and serving all intellectual property owners in all industries and all fields of technology, had supported a balanced, non-discriminatory change in the law to stop frivolous litigation and bad faith demand letters.  IPO Executive Director Herb Wamsley released a statement today in which he indicated that "[w]hile IPO supported key parts of Leahy's bill, compromises that were being proposed by various Senators were inconsistent with IPO positions."  Mr. Wamsley concluded by noting that that Sen. Leahy's "announcement  will give us more time to work with Congress this year or next year to obtain the best legislation to address the abusive litigation problem."  The IPO position and Mr. Wamsley's comments can be found here.

    EFFLess measured in its response, the Electronic Frontier Foundation ("EFF") accused Sen. Leahy of killing patent reform, even if temporarily.  The EFF blamed the pharmaceutical, biotech, and university lobbies, complaining that these organizations "are hardly the victims of patent trolls anyway."  Of course, the legislation that the EFF has been pushing would impact these organizations just as much as the so-called patent trolls (except for some exceptions for Hatch-Waxman-type litigation).  To highlight its extreme position, the EFF went as far as to accuse universities of "sometimes fuel[ing] patent trolls."  The EFF also has comedian Adam Corolla on its side.  According to the Technocrat blog, Mr. Corolla was scheduled to be at an event today in the Russell Senate Office Building to support the proposed legislation.  As we have previously reported, Mr. Corolla has been sued by Personal Audio for infringing its patent related to podcasting.  Personal Audio has been labeled a troll by Mr. Corolla and others, even though it is a company owned by the inventor of the patent at issue.  Mr. Corolla was quoted on the blog as calling for rules that would protect inventors, but that would also prevent so-called patent trolls from picking apart companies.  Without commenting on the validity or scope of the patents owned by Personal Audio, Mr. Carolla's concerns highlight the problem with crafting well-tailored legislation.  Does Personal Audio represent an inventor trying to protect his patented ideas, or is he a troll because he does not practice the invention himself?  This exemplifies why it is so important to define the problem before attempting to legislate against it.  And this is perhaps another reason why the pending legislation has stalled in the Senate — it is impossible to narrowly tailor legislation against a vague notion that some entities are abusively asserting their patents.

    We will continue to monitor the situation and we will report any updates if and when the Senate Judiciary Committee places the pending legislation back on its agenda.  But as for now, it would appear that there will be no patent reform legislation this year.

  • Tobinick v. Olmarker (Fed. Cir. 2014)

    By Kevin E. Noonan —

    Federal Circuit SealInterferences are not yet dead, although their echo is expected to attenuate over the next decade or so as a result of the provisions of the Leahy-Smith America Invents Act that converted the U.S. from a first-to-invent country to a first-inventor-to-file country.  In Tobinick v. Olmarker, the Federal Circuit addressed one of the more arcane points of interference practice, relating to whether a claim in interference is supported by an adequate written description.

    The circumstance arises when an applicant "provokes" an interference by copying a claim of third party application or patent.  In order to prevent a party from harassing a patentee with a frivolous interference, the rules provide that whether those claims are supported by an adequate written description is a threshold issue that can strip the provoking party from standing to be involved in an interference.  37 C.F.R. § 41.201(2)(ii).  As the Federal Circuit opinion explains:

    In interference proceedings, a disputed claim is construed in the context of its originating disclosure rather than the interfering application.  Robertson v. Timmermans, 603 F.3d 1309, 1312 (Fed. Cir. 2010) ("When a party challenges written description support for an interference count or the copied claim in an interference, the originating disclosure provides the meaning of the pertinent claim language.") [internal citations omitted].  Here, the claim limitation "wherein the antibody is administered locally" is construed in light of the '995 and '990 patent specifications, not the '205 application.

    The claims at issue in the interference (No. 105,866) are generally directed to methods for alleviating symptoms of a nerve disorder arising from injured spinal disks by administering inhibitors of tumor necrosis factor-α (TNF-α).  This invention was based on the finding that injured spinal disks leaked nucleus pulposus into the epidural space of the spine, and that nucleus pulposus contains TNF-α, which creates inflammation in the nervous tissues of the spine, including the peripheral nerve roots sprouting from the spine and traversing the epidural spaces.  Senior Party Olmarker had claims from five patents involved in the interference as follows:

    Table
    The interference counts were identical to claims from Junior Party Tobinick's patent application, U.S. Serial No. 12/714,205 ("the '205 application"):

    Claim 68: A method of treating or alleviating one or more symptoms of a nerve disorder mediated by nucleus pulposus in a mammal in need of such treatment comprising the step of administering a therapeutically effective amount of a TNF-α inhibitor to the mammal, wherein said TNF-α inhibitor is an antibody that blocks TNF-α activity, wherein the antibody is administered locally. (emphasis in opinion)

    Claim 69: The method of claim 68, wherein the antibody is administered epidurally to the mammal. (emphasis in opinion)

    The parties filed several motions before the Patent Trial and Appeal Board (the former Board of Patent Appeals and Interferences, which assumed jurisdiction over interferences under the AIA) (five motions by Tobinick, eleven by Olmarker).  Relevant to this opinion, Senior Party Olmarker filed a motion to dismiss the interference on the grounds that Junior Party Tobinick did not have standing to provoke the interference because the specification of the '205 application did not provide an adequate written description of the claim element that the antibody is administered locally.  Senior Party Olmarker argued that the '205 application described systemic but not local administration of a TNF-α inhibitor.  This argument was based on the PTAB's construction that the term "locally administered" meant "administering a TNF-α inhibitor 'directly to the site where [the TNF-α inhibitor] is intended to act, that is, to the location where the nucleus pulposus is causing the symptoms of the nerve disorder,'" based on the intrinsic evidence of Senior Party Olmarker's U.S. Patent No. 7,708,995 ("the '995 patent").  Using this construction, the PTAB found that the '205 application lacked a written description satisfying the statute because "it did not sufficiently delineate between local and non-local administration."  Specifically, the PTAB found that "local" administration as set forth in the ‘205 specification included administration of the medicament "near" the injury site, under circumstances where the medicament would diffuse to the region of injury.  Under this construction the PTAB granted Senior Party Olmaker's motion and dismissed the interference.

    The Federal Circuit affirmed the PTAB's claim construction but reversed its determination that the '205 application did not provide an adequate written description of the invention as recited in the counts.  In an opinion by Judge Reyna, joined by Judges Lourie and Wallach, the Court affirmed the PTAB's claim construction based on the intrinsic evidence found in Senior Party Olmarker's '995 patent.  The '995 patent sets forth explicitly the contrast between local and systemic administration, having an example where the TNF-α inhibitor is administered directly to the nucleus polposus from the injured spinal disk.  No other method of local administration is disclosed in the '995 specification.  In addition to this intrinsic evidence the PTAB also heard expert evidence from both parties, which included evidence from medical dictionaries as extrinsic evidence.  Both parties agreed on the meaning of the term "local" and despite additional distinctions from Tobinick's expert the PTAB adopted Senior Party Olmarker's definition that local administration meant administration at the site where the TNF-α inhibitor would act.  The Federal Circuit agreed that the term "administered locally" mean administration "directly to the site where it is intended to act, that is, to the location where the nucleus pulposus is causing the symptoms of the nerve disorder" and that this method of administration did not encompass "systemic administration away from the site where the TNF-α is intended to act."

    Nevertheless, the Federal Circuit reversed the PTAB's determination that Junior Party Tobinick did not have standing to provoke the interference.  According to the panel, disclosure in the '205 application of epidural TNF-α inhibitor administration provided the statutorily required adequate written description.  The basis for the Court's decision to reverse is that the '205 specification "describes administering an inhibitor to the epidural space adjacent to a herniated disc, which is the location where nucleus pulposus causes nerve injury."  The Court reversed, despite the nature of the question before it as a question of fact and as a consequence the deference the Court must grant factual decisions by the Patent and Trademark Office, pursuant to Dickerson v. Zurko and 5 U.S.C. § 706.  The Court supported its determination that an adequate written description is provided by the '205 specification with express disclosure of local administration in the specification and the benefits thereof.  According to the panel, "[t]he '205 application need only reasonably convey to one skilled in the art that Tobinick had possession of at least one embodiment that meets the Board's construction of local administration.  The epidural injection technique is such an embodiment."

    The case now returns to the PTAB for action on the parties other preliminary motions and a determination on the merits of which party was the first to invent methods for relieving nerve disorders associated with injury to spinal disks by local administration of a TNF-α inhibitor.

    Tobinick v. Olmarker (Fed. Cir. 2014)
    Panel: Circuit Judges Lourie, Reyna, and Wallach
    Opinion by Circuit Judge Reyna

  • U.S. Trade Representative Issues 2014 Special 301 Report

    By Kevin E. Noonan —

    U.S. Trade RepresentativeOn April 30th, Ambassador Michael B.G. Froman, U.S. Trade Representative (USTR) issued the 2014 Special 301 Report.  According to the USTR website, the "USTR is fully committed to unlocking opportunity for those Americans to share their inventions and creations with people all over the world without their work being infringed or misappropriated."  Further, "[t]he Obama Administration is committed to meaningful and sustained engagement with trading partners — from China to India to Canada — with the goal of resolving intellectual property-related concerns so that Americans and American firms can compete on a level playing field in those markets," according to USTR Froman.  The Report hails Italy, the Philippines, and Israel "on their removal from the Watch List."

    The Report notes that the USTR has been issuing Reports for 25 years, and that over this time there has been "significant progress in a variety of countries."  The Report highlights Korea as a country that went from the Watch List to being one with "a reputation for cutting-edge innovation as well as high-quality, high-tech manufacturing" having "state-of-the-art standards of intellectual property rights protection and enforcement."  Italy and the Philippines, newly off the Watch List are also mentioned for their improvements in IP protection over the past year, and the Report also calls out Australia, Israel, Japan, Qatar, Spain, Taiwan, the United Arab Emirates, and Uruguay as countries that have made "important advances in many other markets over the past 25 years."

    2014-05-19 2014 Special 301 ReportThe Report is promulgated pursuant to Section 182 of the Trade Act of 1974, as amended by the Omnibus Trade and Competitiveness Act of 1988 and the Uruguay Round Agreements Act (enacted in 1994).  The Trade Representative is required under the Act to "identify those countries that deny adequate and effective protection for IPR or deny fair and equitable market access for persons that rely on intellectual property protection."  The Trade Representative has implemented these provisions by creating a "Priority Watch List" and "Watch List."  Placing a country on the Priority Watch List or Watch List is used to indicate that the country exhibits "particular problems . . . with respect to IPR protection, enforcement, or market access for persons relying on intellectual property."  These watch lists are reserved for countries having "the most onerous or egregious acts, policies, or practices and whose acts, policies, or practices have the greatest adverse impact (actual or potential) on the relevant U.S. products."

    This Report, on the state of intellectual property rights worldwide, identifies ten countries on a "Priority Watch List" and another 26 countries on the "Watch List," all relating to deficiencies in intellectual property protection in these countries.  The Priority Watch List in the 2014 Report cites Algeria, Argentina, Chile, China, India, Indonesia, Pakistan, Russia, Thailand, and Venezuela, countries that were also on the list last year.  Countries on this list "do not provide an adequate level of IPR protection or enforcement, or market access to persons relying on intellectual property protection."  On the Watch List this year are Barbados, Bolivia, Brazil, Bulgaria, Canada, Columbia, Costa Rica, Dominican Republic, Ecuador, Egypt, Finland, Greece, Guatemala, Jamaica, Kuwait, Lebanon, Mexico, Paraguay, Peru, Romania, Tajikstan, Trinidad and Tobago, Turkey, Turkmenistan, Uzbekistan, and Vietnam; compared to last year, Belarus, Israel, Italy, and the Philippines have been removed from the list.  The Report lists a "wide range of concerns, including "(a) the deterioration in IPR protection, enforcement, and market access for persons relying on IPR in a number of trading partners; (b) reported inadequacies in trade secret protection in China, India, and elsewhere, as well as an increasing incidence of trade secret misappropriation; (c) troubling "indigenous innovation" policies that may unfairly disadvantage U.S. rights holders in China; (d) the continuing challenges of copyright piracy over the Internet in countries such as Brazil, China, India, and Russia; (e) market access barriers, including nontransparent, discriminatory or otherwise trade-restrictive measures, that appear to impede access to healthcare; and (f) other ongoing, systemic IPR enforcement issues in many trading partners around the world."

    The Report notes the USTR's continued efforts to enhance public engagement, "to facilitate sound, well-balanced assessments of IPR protection and enforcement efforts of particular trading partners, and to help ensure that the Special 301 review is based on a full understanding of the various IPR issues in trading partner markets."  In addition to written comments ("from over 100 interested parties, including 21 trading partner governments"), there was a public hearing on February 24, 2014 that heard testimony from "representatives of foreign governments, industry, and non-governmental organizations" (where the comments, video, and transcript of the hearing are available on the USTR website).

    The Report accentuates coordination between "all relevant agencies within the [Federal] government, informed by extensive consultation with" stakeholders, foreign governments, the Congress and "other interested parties."  The assessment of compliance from the countries listed in the Report were conducted on a "case-by-case" basis that "tak[es] into account diverse factors such as a trading partner's level of development, its international obligations and commitments, the concerns of rights holders and other interested parties, and the trade and investment policies of the United States."  The Special 301 Subcommittee received input from stakeholders and close to 100 trading partners, selecting the 10 Priority Watch List and 27 Watch List countries from this group.

    The Report contains two Sections (on "Developments in Intellectual Property Rights Protection and Enforcement" and "Country Reports") and several Annexes on particular issues (the statutory bases of the Report, government technical assistance an capacity building efforts and WIPO Internet treaties issues).  The Report notes some "positive developments" in the past year, including accession by Algeria to the WIPO Internet Treaties, amendments to China's trademark laws (the Report calling these "long-sought reforms"), enhancement of trade secret protection in the European Union, and the creation in Paraguay of the National Directorate of Intellectual Property, responsible for "the administration of copyrights, trademarks, patents, industrial designs, and geographic indications."  Other positive developments included actions by the governments of Israel, Italy, and the Philippines resulting in removal of these countries from the Watch List in 2014.

    The Report contains a subsection on "best practices" among U.S. trading partners, including "encourag[ing] trading partners to work with the United States to develop mutually agreed-upon action plans to advance the protection and enforcement of IPR," specifically noting the actions in Bulgaria and Pakistan.  Cooperation between governments is also mentioned, specifically with regard to Paraguay, Algeria, and the Philippines, as well as "innovative mechanisms that enable government and private sector rights holders to voluntarily donate or license IPR on mutually-agreed terms and conditions."  These include the use of existing IPR to advance policy goals and innovation, specific examples of which are the Medicines Patent Pool under the auspices of the World Health Organization and the WIPO Re:Search Consortium among the U.S., Brazil, and South Africa.

    Several initiatives were also mentioned.  As in the Reports from the last two years, these included the Trans-Pacific Partnership Agreement, between the U.S. and Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam, and in addition, Canada, Mexico, and Japan; the Transatlantic Trade and Investment Partnership between the U.S. and the EU; actions by the World Trade Organization in support of IP rights; the Anti-Counterfeiting Trade Agreement (ACTA) between the U.S. and Australia, Canada, Japan, South Korea, Mexico, Morocco, New Zealand, Singapore; that has been signed by Australia, Canada, Japan, South Korea, Mexico, Morocco, New Zealand, Singapore, and the United States (and was signed by the EU but not ratified by the European Parliament), with Japan becoming the first signatory to deposit its instrument of acceptance; bilateral and regional initiatives, including free trade agreements and Trade and Investment Framework Agreements; and the USTR Trade Preference Program Reviews such as the Generalized System of Preferences (GSP) program relating to Russia, Lebanon, and Uzbekistan, and regional programs including the Caribbean Basin Economic Recovery Act (CBERA).  Finally, the Representative "looks forward to continuing engagement with trading partners in bilateral, regional, and multilateral fora to improve the global IPR environment"; including the U.S.-EU Summit, and in the Asia Pacific Economic Cooperation (APEC) forum, and the Organization for Economic Cooperation and Development (OECD).

    Once again this year the Report contains a subsection on trade secrets and forced technology transfer identified as problems in "a wide variety of industry sectors" that include "information and communication technologies, services, biopharmaceuticals, manufacturing, and environmental technologies."  The threat of trade secret misappropriation is "escalating," and "imposes significant costs on U.S. companies and threatens the security of the United States," "threatens to diminish U.S. competitiveness around the globe, and puts American jobs at risk."  Particularly noted in the Report in this regard is China, with trade secret theft being reported by "various sources," including in a publication entitled Foreign Spies Stealing U.S. Economic Secrets in Cyberspace, by the Office of the National Counterintelligence Executive (ONCIX) which stated that "Chinese actors are the world's most active and persistent perpetrators of economic espionage."  Theft was cited as involving "departing employees, failed joint ventures, cyber intrusion and hacking, and misuse of information submitted to government entities for purposes of complying with regulatory obligations," with remedies in China being "difficult to obtain."  The Report cited a publication by the U.S. Intellectual Property Enforcement Coordinator on February 20, 2013 of "Administration Strategy on Mitigating the Theft of U.S. Trade Secrets," which "highlights U.S. efforts to combat the theft of trade secrets that could be used by foreign governments or companies to gain an unfair economic advantage by harming U.S. innovation and creativity."  These include:

    • "Focusing diplomatic efforts to protect trade secrets overseas;


    • Promoting voluntary best practices by private industry to protect trade secrets, including information security, physical security, and human resources policies;


    • Enhancing domestic law enforcement operations, especially through the activities of the Department of Justice, Federal Bureau of Investigations, Department of Defense, and the National IPR Coordination Center;

    • Improving domestic legislation to protect against trade secret theft, [and]


    • Conducting public awareness campaigns and stakeholder outreach to encourage all stakeholders to be aware of the dangers of trade secret theft."

    The Report also notes that "[t]rade secret theft can be viewed as a form of forced technology transfer that foreign actors may use to undermine U.S. competitive advantage."  Certain foreign governments, under the guise of promoting "indigenous innovation" can adopt "trade-distortive policies," citing as examples:

    • Requiring the transfer of technology as a condition for allowing access to a market, or for allowing a company to continue to do business in the market;

    • Directing state-owned enterprises in innovative sectors to seek non-commercial terms from their foreign business partners, including with respect to the acquisition and licensing of IPR;


    • Failing to effectively enforce IPR, including patents, trademarks, trade secrets, and copyrights, thereby allowing firms to gain competitive advantages from their misappropriation or infringement of another's IPR;


    • Failing to take meaningful measures to prevent or deter cyber intrusions;


    • Requiring use of, or providing preferences to, products or services in which IPR is either developed or owned locally, including with respect to government procurement;


    • Manipulating the standards development process to create unfair advantages for domestic firms, including with respect to the terms on which IPR is licensed;
 [and]

    • Requiring unnecessary disclosure of confidential business information for regulatory approval, or failing to protect such information.

    New this year is a subsection on IPR and the environment, the Report stating that "[s]trong IPR protection is vital for development, and is critical to responding to environmental challenges, including climate change."  Examples include generally promoting investment in "green" technologies and promoting jobs in the green sector, and that "businesses are reluctant to invest or enter into technology transfer arrangements in countries that lack effective IPR protection and enforcement."  Cited as examples of governmental actions and activities that "may have the unintended effect of undermining national and global efforts to address serious environmental challenges" are India's National Manufacturing Policy requiring compulsory licensing and its advocacy to "multilateralize" this approach through the UN Framework Convention on Climate Change which will "discourage rather than promote the investment in, and dissemination of, green technologies, including those technologies that contribute to climate change adaptation and mitigation."  The Report also reiterates the U.S. government's commitment to "ensure robust IP protection and enforcement [] as an environmental as well as economic imperative."

    A significant part of the Report focuses on "trends" in counterfeiting and copyright piracy, as it has in other years.  This area "continue[s] on a global scale," according to the Report, "involving the mass production and far-reaching sales of a vast array of fake goods, including counterfeit semiconductors, medicines, health care products, food and beverages, automobile parts, such as air bags, aircraft parts, apparel and footwear, toothpaste, shampoos, razors, electronics, batteries, chemicals, sporting goods, motion pictures, and music."  The Report asserts that "consumers, legitimate producers, and governments are harmed by rampant trademark counterfeiting and copyright piracy," accentuating harm to the public "by fraudulent and potentially dangerous counterfeit products, including medicines, auto and airplane parts, and semiconductors."  Used as an example is a report from the International Chamber of Commerce and the Federation of Indian Chambers of Commerce and Industry "analyzing seven key industry sectors vulnerable to counterfeiting, piracy, and smuggling, e.g., automotive parts, alcohol, computer hardware, mobile phones, packaged foods, personal goods, and tobacco products."  This study showed losses in India alone of $11.9 billion and a loss to the Indian government of $4.26 billion.  The Report also sets forth the following specific trends:

    • Sustained growth in the piracy of copyrighted products in virtually all formats as well as counterfeiting of trademarked goods.  The involvement of criminal enterprises continues to rise, often because piracy and counterfeiting offer enormous profits and little risk.  Such enterprises require little up-front capital investment, and even when they are detected and prosecuted, the penalties imposed on them in many countries are very low and therefore offer little or no deterrence against further infringements.  Instead, the penalties are viewed merely as a cost of doing business;

    • Continued growth in the online sale of pirated and counterfeit hard goods that will soon surpass the volume of such goods sold by street vendors and in other physical markets.  Enforcement authorities, unfortunately, face difficulties in responding to this trend.  Online advertisements for the sale of illicit physical goods that are delivered through express mail shipments or by small consignments are found in many places;

    • A continued increase in the use of legitimate services to deliver infringing goods, making it more difficult for enforcement officials to detect these goods;

    • An increase in the practice of shipping counterfeit products separately from labels and packaging in order to evade enforcement efforts; and

    • The emergence of Media Box piracy, whereby those boxes, often with capability to play high definition content, are loaded with large quantities of pirated works or are configured to facilitate the user's access to websites featuring unlicensed content.  This problem has been reported in China (including Hong Kong), Indonesia, Malaysia, Taiwan, Thailand, and Vietnam.

    The Report calls for "more effective criminal and border enforcement" to reverse these trends.  Another "growing" problem is counterfeit pharmaceuticals, either final drug product or active pharmaceutical ingredients (API); Brazil, China, India, Indonesia, Lebanon, Peru, and Russia are cited as countries where the former type of counterfeiting is a problem; from 10-40% of the drugs made in India are counterfeit and represent "a serious threat to patient health and safety."  China is cited as being a "major source" of counterfeit APIs.

    Another subsection of the Report is concerned with digital piracy, particularly over the Internet, which is "a significant concern in many U.S. trading partners."  The "increased availability of broadband Internet connections around the world . . . has [] made the Internet an extremely efficient vehicle for disseminating copyright-infringing products, replacing legitimate markets for rights holders," according to the Report.  "The U.S. Government's 2013 Notorious Markets List includes examples of online marketplaces reportedly engaging in commercial-scale IPR infringement, including sites hosted in or operated by parties located in Canada, China, the Netherlands, Russia, Sweden, Ukraine, and elsewhere," according to this subsection of the Report.

    Piracy is a "significant" concern, "using mobile telephones, tablets, flash drives, and other mobile technologies," including some countries where "these devices are pre-loaded with illegal content even before they are sold."  Specifically mentioned as an additional threat is "the emergence of pirate servers, or 'grey shards,'" unauthorized servers that enable access to copyrighted material from "the cloud."  Also mentioned is the development of software that enables technological protection measures to be circumvented, particularly as applied to games.  In this regard, the Report specifically calls out SlySoft, "a company headquartered and operating in Antigua, which developed and sells a program called 'Any DVD HD' enabling the user to defeat the encryption technology embedded in Blu-ray Discs that prevents unauthorized reproduction and distribution," operating despite an Antiguan law prohibiting "manufacture or import for sale or rental any such circumvention device."  As the result of cooperation between the Antiguan government and a "consortium of electronic manufacturers, software companies, and motion picture studios that developed these technological protection measures," the owner (and operator) of SlySoft was fined $30,000 after an April 2014 trial, but whether the Antiguan government shuts down the site now deemed illegal under their law is at present unclear according to the Report.

    Somewhat surprisingly, the "system of online copyright protection and enforcement in Switzerland" is also noted as an area of "serious concern."

    The Report asserts that the U.S. "encourages trading partners to adopt appropriate measures where needed to address the unauthorized camcording of motion pictures in theaters."  Losses of $1.1 billion are reported in India from such practices, and "[t]he effects of [such] conduct are not always limited to the market in which unauthorized recording occurs" due to distribution over the Internet.  Specific measures comprising the U.S. government's "encouragement" against this form of piracy include "establishing deterrent penalties against camcording; strengthening enforcement against major channels of piracy over the Internet, including with respect to notorious markets; and creating specialized, trained enforcement units and undertaking special initiatives against Internet piracy."  These new avenues for copyright infringement exist side-by-side with older forms, such as CD and optical disk piracy; government actions in Czech Republic, Poland, Romania, and Russia have "made progress" while China, India, Paraguay, and Vietnam are cited as countries still needing to improve their efforts with regard to "physical" piracy of copyrighted materials.  Finally, the Report contains a new subsection directed to copyright infringement in Caribbean countries (including Anguilla, Antigua and Barbuda, Barbados, Belize, the Cayman Islands, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, Saint Maarten, St. Vincent, Trinidad and Tobago, the Turks and Caicos Islands, and the Grenadines).

    As it has for the past few years, the Report contains a subsection on "Intellectual Property and Health Policy," again specifically mentioning the 2001 Doha Declaration on the TRIPS Agreement.  The Report states that the Declaration "recognized the gravity of the public health problems afflicting many developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria, and other epidemics," and that the U.S. "respects a trading partner's right to protect public health and, in particular, to promote access to medicines for all, and supports the vital role of the patent system in promoting the development and creation of new and innovative lifesaving medicines."  Accordingly, the Report states that the U.S. "respects our trading partners' rights to grant compulsory licenses in a manner consistent with the provisions of the TRIPS Agreement, and encourages its trading partners to consider ways to address their public health challenges while maintaining intellectual property systems that promote investment, research, and innovation."  The U.S. "strongly supports" the WTO General Council Decision on the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health.  The Report, in a subsection relating to "pharmaceutical and medical device innovation" cites "the policies of several developed trading partners, including Finland, Germany, Greece, Hungary, Italy, Korea, New Zealand, Poland, Portugal, Romania, Spain, Turkey, and Taiwan, on issues related to innovation in the pharmaceutical sector and other aspects of health care goods and services," specifically calling out "serious" (with respect to New Zealand's Pharmaceutical management agency) and "significant" (concerning Turkey's "lack of fairness and the slow pace of pharmaceutical manufacturing inspections") concerns.  The U.S. is "seeking to establish or continue dialogues with relevant trading partners to address these and other concerns, and encourage a common understanding on questions related to innovation in the pharmaceutical and medical device sectors," specifically regarding China and India in this regard.

    The Report contains additional subsections including a review of U.S. activities in the WTO to resolve disputes with countries such as China and the EU over trade issues and the establishment of the Interagency Trade Enforcement Center by Executive Order, to "take a whole-of-the-government approach to monitoring and enforcing Americans' trade rights around the world.

    Section II of the Report is a detailed, country-by-country discussion for each country on the Priority Watch List and the Watch List, relating to the activities (or lack thereof) of each country that results in placement of that country on these lists.

    As it has for the past several years (and across otherwise very different Administrations), the U.S. Trade Representative Report provides insights into both the concerns of U.S. IP rights holders and the Administration's intentions to work with, cajole, coerce, or threaten other countries to increase protection for IP rights of U.S. IP rights holders.  The Report seems to revert to earlier attempts, generally no more than partially successful, by the U.S. and other Western governments to implement international trade treaties designed to increase IP rights protection.  But by including subsections on the importance of IPR for the environment, and the negative effects of piracy in the pharmaceutical and other areas, the Report seems less focused on mere threats of enforcement and more on developing a global consensus that protection of IPR is an important component of world economic progress for all.

    For additional information regarding this and other related topics, please see:

    • "U.S. Trade Representative Issues 2013 Special 301 Report," May 30, 2013
    • "U.S. Trade Representative Issues 2012 Special 301 Report," May 1, 2012
    • "U.S. Trade Representative Releases Special 301 Report on Global IPR," May 4, 2011
    • "U.S. Trade Representative Releases Special 301 Report on Global IPR," May 19, 2010
    • "New Administration, Same Result: U.S. Trade Representative's Section 301 Report," May 6, 2009
    • "Congressmen Criticize U.S. Trade Representative over Special 301 Report," July 1, 2008
    • "U.S. Continues Efforts to Protect Patent Rights Abroad," April 29, 2008