Dear fellow patent attorney:
I need your immediate assistance to help defeat a particularly bad patent bill now in its final stages of consideration by the U.S. Congress. Congress may well be on the verge of passing a great threat to our patent system. You have seen the blogs and emails explaining how the America Invents Act (formerly the Patent Reform Act of 2011) will dismantle our carefully-balanced patent system, the system that has made America the innovation engine for the world. Other countries innovate at half our rate. The multinationals want to "harmonize" our laws with those unsuccessful systems for their own convenience. This bill imposes about $1 billion in costs by taking away options that domestic American businesses use, to save a comparatively trivial amount for the Patent Office and a small number of multinational corporations.
The appendix to this letter outlines the proposed law and how it will significantly damage our clients, our profession, and our country.
Because this bill has passed the full Senate and the House Judiciary Committee, it could be enacted within weeks. The big multinational corporations have plowed untold sums of money into lobbying, and have the bill they want. It's essential that Congress hear from domestic American businesses and inventors, and hear from them now. Congress desperately needs to learn from small businesses and startups how they actually use the patent system to create new products, jobs, and wealth.
Congress is on recess during the next two weeks, April 18 to May 2, and your Representative will be in your district. This period is your best opportunity to inform your Representative that this bill will destroy American jobs by making it impossible for startups, small companies, and university spinoffs to protect the inventions they create, to obtain the funding they need to commercialize their inventions, and to earn the profits they need to grow new R&D-intensive businesses.
The "Asks"
Go to www.house.gov to find your Representative's contact info. To schedule a meeting, many offices will want you to FAX in a request letter. Second best is a phone call to your district office (not the D.C. office). Third best — and far less effective, but better than nothing — is an email. www.reformaia.org can help you with some of these contacts.
Ask your clients to join you at a meeting, or at a minimum, to call or write. This letter is accompanied by a "script" you can give to clients for them to make their calls.
• Your representatives should support an amendment to strike the "first-inventor-to-file" section. This section removes any practical grace period, and will destroy future jobs: Also, it is likely unconstitutional, and the legal uncertainty will be unacceptable to businesses.
• If the "first-inventor-to-file" provision is not struck, urge your representative to vote against the entire bill, regardless of any other changes that might be incorporated.
If you live in Ohio, call Governor Kasich's office, (614) 466-3555. Point out that the governor's $700 million Ohio Third Frontier jobs program cannot work, and that the Innovation Ohio Loan Fund will be not be repaid, if the federal Patent Act is changed to deter investment in university spin-offs and startups, and to make it harder for new businesses to succeed.
Please take the opportunity to meet or phone, or at least email your Representative. (A phone call has several times the weight of an email, and a meeting will have many times the impact of a phone call). You will be more likely to get a personal meeting, and you will have far more impact, if you as an attorney bring one or two of your clients with you. Stay away from patent jargon, because the person you talk to will almost certainly know nothing about patent law. It's crucial that you discuss the effects of the bill in terms of destruction of innovation, jobs, start-up businesses, and the like, issues that a Representative or staffer can relate to. Urge your clients to join you for a meeting.
It's crucial to act now. Please help preserve our gold standard patent system, one of the biggest engines of job growth in the U.S., and part of the reason U.S. attorneys can create so much more value for their clients than other attorneys.
David Boundy
Boston MA
(212) 294 7848, e-mail: PatentProcedure at gmail dot com
How the America Invents Act Changes Patent Law
The bill tilts the playing field in favor of multinational corporations and market incumbents. The bill shifts from today's emphasis on disclosure and disruptive innovation to favor trade secret and market incumbency, in the following ways:
• The § 102(a) grace period is totally repealed. Every inventor will be in a race against all other possible disclosures — no inventor will have the time to perfect and test an invention before filing. All companies will be forced to file before an invention is fully understood or tested. That will be expense for your clients and trouble for you as an attorney, and reduce patent quality.
• Inventors, entrepreneurs, and startups use the grace period of § 102(a) to meet with investors, do the trial-and-error of R&D, and test their inventions. Under today's law, the implied obligations of confidentiality in conversations with investors and early-stage partners give sufficient protection to permit these ordinary business activities. The bill repeals all these protections, and replaces them with a flimsy grace period that creates unacceptable risk of loss of patent rights, that no business can rely on — though adds strong protections for large companies that can raise all their financing, and do all their manufacturing and testing in-house. Inventors won't be able to talk to investors without a patent, and won't be able to file an application without an investor.
• The bill states that an inventor can recover patent rights if he can prove that all other disclosures originated with the inventor — but the bill neglects to create a procedural forum for showing derivation in cases where the leak is not embodied in a patent application, or where the leak neglects to attribute the original inventor. As a practical business matter, the bill leaves no commercially-feasible grace period, an integral part of U.S. patent law since 1839 — you will have to file every application as soon as possible, often long before the invention is ready.
• The bill provides that all disclosures within and by a single company do not create bars. This is great for multinational companies, with large in-house staffs, but totally useless for a startup or small company that has to partner with outsiders. Startups use and need the options and protections of current law, but the new bill cuts them away.
• A single offer for sale or public demonstration one day before filing a patent application will irretrievably destroy patent rights, if the poorly-drafted language is interpreted literally.
• The § 102(b) grace period is cut back — it no longer protects against activities by third parties, but only the inventor's own activities.
• As a patent attorney, you will no longer have time to do a good job preparing a patent application, you'll be "forced to file" prematurely. This will expose you to risks and destroy your weekends. Poor initial applications will drive up post-filing prosecution costs. You will find yourself as the blocking point for many of your clients' business activities, harming your client relationships.
The bill also destroys commercial certainty and corrupts the incentives in the system:
• Various statutory requirements that an applicant act "without deceptive intention" are repealed — in the future, applicants will have incentive to act with deceptive intent.
• Key terms of art are redefined — you've spent a career learning the meaning of "on sale" and "public use," but the legislative history fundamentally redefines these terms. It will take decades for courts to establish new precedent to provide any meaningful commercial certainty.
• The Metallizing Engineering "secret commercial use" bar is repealed — a company will be able to use an invention as a trade secret, and then spring a patent on the public years later. That favors market incumbents, but makes innovation harder for everyone else.
• The "best mode" requirement is reduced to a sham: a patentee will be permitted to disclose only a fictitious embodiment, while holding the best as a trade secret.
• The bill gives companies the right to patent and repatent inventions for years, to keep them locked up, neither using them nor permitting them to be used, for far longer than 20 years.
• Several aspects of the "first-inventor-to-file" provision — the ones that give patents to second inventors, and to companies that kept inventions in secret for years before filing patent applications — violate constitutional limits on Congress' authority — years more litigation and commercial uncertainty.
• The Act allows Wall Street banks to attack "business method" patents that they are infringing. This doesn't extend to any other industry, only business methods — another Wall Street giveaway.
The bill is out of committee — further amendments are unlikely. It is literally impossible to alter the bill to meet the needs of startups through an amendment strategy at this late date. The multinationals and their congressional allies smell victory. They see no reason to allow any weakening of their preferred bill through amendments favoring small businesses. The only option at this point is to vote it down.
Typical inventor activities that no longer "work"
Most startups, and many inventions at established companies, go through at least one of two "stories." They're reasonable commercial practice under today's law, but not under the bill:
• An entrepreneur with nothing but an idea typically has to present his idea to dozens of venture capitalists and potential manufacturing or marketing partners, without formal confidentiality agreements, to get a company started. (VC's never sign confidentiality agreements for first meetings.) This works under today's law, because of the implied obligation of confidentiality and the protection of § 102(a), but under the bill, these conversations will create commercially-unacceptable risks to the investor and partner. U.S. inventors will be under the same "Catch-22" as European inventors — unable to talk to potential investors until a patent application is filed, but unable to file a patent application without an investor. Startups will die before being born.
• Companies that need a long "invention incubation" period — trial and error, conceive, test and discard, until finding the "magic combination" of techniques — use the § 102(a) grace period to do their R&D in confidence, and file patent applications only when it's clear which inventions are valuable, and how they work. Under the bill, a company will have to file a continuous stream of patent applications, many directed to inventions that are dumped under current law. This will increase patent costs remarkably.
Almost every startup goes through one of these two, many through both, as new companies create new wealth and new jobs under today's law. Inventors wait to file quality patent applications until they have quality inventions. America's unique and strong right to file in the future, after the inventor and investor know whether the invention is valuable, makes business easy, and prevents wasted costs for inventions that prove worthless.
The "America Invents Act" revokes this historic right. Property rights turn on non-business legal technicalities created to satisfy bureaucrats, technicalities that will cost $1 billion annually. The bill requires a company to file premature, hasty, and expensive patent applications on every baby-step idea to preserve rights against third parties who are dabbling in the field without intent to develop a commercial product. The America Invents Act makes these two stories nonviable for startups — because the authors "didn't think" about them, or didn't want to.
In 2010, the Kauffman Foundation and Census Bureau released two studies on job creation. Both found that "net job growth occurs in the U.S. economy only through start up firms." If creating new jobs is Congress's Job One, then killing the America Invents Act is a good place to start.
The proponents' arguments do not survive scrutiny
Proponents suggest that the bill does away with complex and costly interferences. That's true, but irrelevant. Under 100 applications per year end up in interferences. In contrast, the change to today's "§ 102(a)" grace period affects commercial decisions and raises costs for hundreds of thousands of inventions per year, during the time before filing, by giving inventors and patent attorneys time to get it right the first time. Because the Patent Office has no insight into the pre-filing process of invention, it simply hasn't taken into account the realities of invention incubation and the costs of its proposal. Further, the proposed replacement, "derivation proceedings," are the most costly disputes in patent law.
Second, proponents argue that provisional applications will be a cheap way to preserve rights. But that isn't true under the new law. Under current law, a cheap provisional is useful to show conception and diligence. But under Patent Reform, a provisional application only provides legal benefit if prepared with full § 112 ¶ 1 care and completeness. For a typical startup invention, the cost in attorney fees and inventor time for a provisional application is $10,000 or more — a formidable barrier to an entrepreneur's first conversation with an investor.
Third, proponents argue, "The bill locks in rights if you publish a disclosure of the invention." But all companies rely on secrecy for their future plans. No company publishes its most sensitive and advanced technology years before introduction. This argument ignores business reality.
Earlier this month, Pozen obtained a preliminary injunction blocking Par Pharmaceutical from marketing a generic version of Pozen's migraine drug Treximet until an infringement suit over the drug is resolved. The dispute between the parties began in November 2008 when Pozen brought suit in the U.S. District Court for the Eastern District of Texas against Par and the generic drugmakers Alphapharm, Teva, and Dr. Reddy's (see "Court Report," November 23, 2008). All four defendants had submitted ANDAs seeking to market generic versions of Treximet. Pozen claimed that the generic drugmakers infringed U.S. Patent Nos. 6,060,499; 6,586,458; and 7,332,183. In April 2010, Teva was dismissed without prejudice from the consolidated litigation. The case against the other three defendants was tried on October 12-15, 2010, and a decision is still pending. However, in early 2011, Par received approval from the FDA to market its generic version of Treximet, allowing Par to launch its product once Pozen's three years of regulatory exclusivity expires on April 15. After Par refused to reveal whether it planned to launch at-risk, Pozen then asked the court for a preliminary injunction until the court issues a final decision.
In an April 14 opinion, Judge Leonard Davis granted a preliminary injunction ordering Par not to make, use, sell, offer to sell, or import into the United States a generic version of sumatriptan and naproxen sodium. Judge Davis focused his analysis on two asserted claims of the '458 patent, finding that Pozen had sufficiently shown that it was likely to succeed against Par on the merits of its infringement claim. The court also rejected Par's arguments that it raised a substantial question regarding the enforceability of the '458 patent. The injunction will remain in effect until a final decision is issued in the pending patent litigation.
Wyeth has entered into a licensing deal with Orchid Chemicals & Pharmaceuticals, thereby ending the parties' patent infringement litigation over Effexor XR. The dispute between Wyeth and Orchid began in July 2009, when Wyeth filed suit in the U.S. District Court for the District of New Jersey against Orchid after its submission of an ANDA for a generic extended release version of venlafaxine HCl (see "Court Report," July 12, 2009). Wyeth asked the court to declare that Orchid had infringed U.S. Patent Nos. 6,274,171; 6,403,120; and 6,419,958 and enjoin the generic drugmaker from making or selling its proposed generic. Orchid responded by asserting that that patents were invalid. In October, Wyeth was ordered to produce its prior Effexor patent settlement and licensing agreements after the court decided the agreements might be relevant to Orchid's patent misuse defense. Wyeth has filed at least sixteen suits over Effexor XR since the drug was approved, and has settled with eleven generic companies to date.
On April 14, Judge Freda L. Wolfson signed an order approving the settlement. Under the settlement, Orchid agreed not to manufacture its generic product until the expiration of the three patents at issue, except as permitted by a confidential licensing agreement. The settlement requires each party to bear its own court costs. Further details of the agreement were not revealed.
After filing its complaint just one month ago, Takeda Pharmaceutical has requested a voluntary dismissal of its patent infringement suit against Apotex, centered around Apotex's efforts to manufacture a generic version of the diabetes medication Actos. On March 22, Takeda brought suit against Apotex in the U.S. District Court for the Southern District of Florida, claiming that Apotex's ANDA infringed U.S. Patent Nos. 5,965,584; 6,329,404; 6,166,043; 6,172,090; 6,211,205; 6,271,243; and 6,303,640 (see "Court Report," March 27, 2011) Apotex sought approval for generic pioglitazone tablets to be used for both monotherapy and in combination with a diabetes drug. Takeda also alleged willfull infringement and inducing infringement, claiming Apotex was likely to advertise the Actos name on its website, thus inviting customers to follow the Actos treatment systems but substitute the Apotex version of the drug.
On April 13, Judge Ursula Ungaro entered an order dismissing the case without prejudice, based on Takeda's request and notice of voluntary dismissal. Takeda did not disclose its reasoning for requesting dismissal, but both parties are currently litigating a nearly identical infringement suit in the U.S. District Court for the Southern District of New York.
