Patently-O Bits and Bytes No. 119

  • The AP on Hugo Chavez: Venezuelan officials plan to invalidate some pharmaceutical patents and allow domestic manufacturers to produce licensed medicines, an action that could cause shortages and scare off foreign investment, industry leaders said Sunday. [AP][via PatentHawk]
  • BPAI Data: An updated version of yesterday’s paper on BPAI decision data is available online here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1423922. Comments are welcome.
  • New Blog: Rocket Docket IP Litigation (E.D. Va. Patent Focus). The blog is edited by the folks at Williams Mullen. Their latest post is an update on the false marking litigation against Solo Cup.
  • National Patent Jury Instructions: A comittee assembled by Chief Judge Michel has released its set of model jury instructions. Although Judge Michel assembled the committee, the introduction makes clear that the instructions “have not been endorsed by the Federal Circuit Court of Appeals, and are not “official” jury instructions.” However, the instructions are likely to serve as the ongoing model. http://www.nationaljuryinstructions.org/.

49 thoughts on “Patently-O Bits and Bytes No. 119

  1. 49

    “the lunacy of allowing capitalism to dictate whether a needed drug is developed or not”

    Let’s let our hearts decide. Spoken like a true Marxist.

    If one person has a disease and there is absolutely no commercial reason to develop a drug, someone may decide to research it. Heck, they may even file for patent protection. Then, when millions of people get the disease and there is a commercial reason to develop the drug, in theory, the patentee/researcher should be rewarded – except in Mooney’s world.

    Mooney – Hugo Chavez’s biggest fan.

    Mooney never cured anything.

  2. 47

    Correct, as long as Chavez allows pills to be sold above marginal cost (or provides a subsidy), they will be easier to import than to make in Venezuela.

    Still, pharma may not want to sell to Venezuela for fear of setting precedent for every tin-pot Marxist dictator to start killing patents they don’t like.

    I doubt any foreign company will be building plants for production in Venezuela. Chavez’s anti-entrepreneur record and habit of nationalizing private enterprises are powerful deterrent to investment in Venezuela.

    Chavez could have probably utilized his government health system to provide a secure distribution channel for pharmaceuticals and prevent concerns of international arbitrage, then gone to the pharma giants and offered to purchase massive quantities of popular on-patent drugs at a steep discount.

  3. 45

    6, you are missing the point and demonstrating a startling lack of common sense.

    Generic mfrs. will not build a plant in Venezuela for the same reasons that the patentees won’t build a plant in Venezuela.

    The existing plants in the US or Germany or whereever can crank out patented pills for export to the Venezuela market at a marginal cost of pennies.

    They recoup their capital cost by sales in Germany, US, etc. Any $$ they make in Vz. is gravy.

    If any mfr. built a plant in Vz., they would be undercut in price by the patentee.

    Now remove your palm from your face.

  4. 43

    “No one will build a pill-factory in Venezuela to make “pennies on the dollar” pills. That’s the decrease in capital investment. ”

    Of course they wouldn’t, generic manufacturers don’t exist! I’m just making them up to support my position. Nobody would ever make drugs that there is a demand for, and take the money which supply and demand will provide them. Never. Not in our wildest dreams.

    /facepalm

  5. 41

    “As the economy has worsened, fewer people have applied for patents or paid to maintain the ones they have.”

    Fewer people are paying issues fees and maintenance fees … because fewer applications are getting allowed.

  6. 40

    Erez Gur,

    See 35 USC 271(a).

    Importing of a patented invention into the US is a violation of US laws.

  7. 39

    Even if you go with a worst case scenario and the removal of patent protection produces massive (mostly temporary) shortages of previously patented drugs, I don’t think Chavez will see that as such a bad thing.

    The national health care system will save money because it will no longer have to pay for expensive medicines, he can blame the drug shortages on his “greedy” capitolist enimies and eventually local industry will gain by being the manufacturing source of the previously patented drugs. Hell, he can even stick it to America by making sure the Venezuelan drugs end up on the grey market, undercutting American business interests.

    It’s not like he is going to further hurt his reputation, or that he would care if he did. I’m actually surprised Chavez didn’t do this years ago.

  8. 38

    From Tuesday’s Washington Post:
    “The patent office is contacting the congressional committees with authorizing and appropriating power over it to solicit ideas for a fix and ask for the right to temporarily tap at least part of a $60 million projected surplus held by the trademark side of the office and to put about $10 million earmarked for special projects into the general operating fund”

    Anyone remember the fable of the ant and the grasshopper?

  9. 37

    curious said in reply to an examiner…

    >In other words, when times were good for the PTO (huge volume of incoming applications which they just added to the backlog) the application fees were all spent and are not now available to examine the applications?

    Yes.

    Isn’t that what Bernie Madoff did?

  10. 36

    I still don’t get what people are suggesting about drug patents.

    Like 6 said, all countries get the invention disclosure for free through the PCT. The innovator chooses whether or not to file for patent in a given country based on economic considerations.

    For instance, drug companies file in “3d-world” countries like Canada, India, Israel and Singapore because if not, companies in these countries would manufacture innovative drugs and sell them to other “3d-world” countries, taking income from the innovators.

    Considering the potential profits, if Venezuela (which is not a member of the PCT but has signed TRIPS) disregards patents, what is to prevent Ranbaxy or Dr. Reddy from setting-up pharma manufacturing in Venezuela and selling the products elsewhere?

  11. 35

    Is there any reason the US couldn’t simply say in return to Chavez “Fine then, patents with Venezuelan inventors or assignees filed after 24 June 2009 are no longer enforceable in the US?” Venezuela is not exactly a R&D powerhouse, but inability to patent in the US would accelerate the Maracaibo brain drain.

    If producers of patented pharmaceuticals could effectively price discriminate (charge different prices for different consumer groups), they would almost certainly sell patented drugs at lower prices in poor nations. However, re-importation means that selling drugs cheap in, for example, Mexico leads to demand hits in the US. Perhaps a good solution would be to place pharmaceutical-sniffing dogs at customs checkpoints and enforce criminal penalties for those smuggling. Pfizer, GSK and company would almost certainly be willing to fund dog training.

  12. 34

    6 and others: You guys are hopelessly lost in this argument.

    The statement was that capital investment in Venezuela will go down. Then you come up with some crazy “it costs pennies on the dollar to make the patented drug” argument.

    Capital investment in Venzuela will go down, and patented drugs will enter Venezuela on the legal and/or gray or black market.

    No one will build a pill-factory in Venezuela to make “pennies on the dollar” pills. That’s the decrease in capital investment.

    Any new pill-factories will be built in countries with strong patent laws. Those factories might make pills for export to and sale in Venezuela — as long (1) as the marginal cost for making another pill (after satisfying world demand minus Vz) is less than the market price for the pill in Venezuela and (2) as gray market re-imports won’t cannibalize sales in the rest of the world.

  13. 32

    Argue all you want about theoreticals, the best pharmaceuticals you can get are produced by countries with strong Patent systems, the US, Canada, Europe and Japan. Leaving it up to the government to fund doesn’t work – the government funds basic research, and that does work. Private enterprise is what has works for useful pharmacueticals.

    It is amazing we have to re-hash this decade after decade, social theory versus empirical results.

  14. 31

    “6, I understand that you are suggesting we go to a non-capitalist system for drug-development.”

    No, what I would suggest is that the 2nd and 3rd world countries “should” take away patent protection for everyone who is not domestic to their country in the sciences that pertain to drugs and health therapies etc. They already get all of our cutting edge disclosures for free via the interweb, why give our companies patent rights in their nation? To do so is absurd on their part.

    As for our own drug patenting in our country, idk, I have no feelings about it, the whole system is so complex.

  15. 30

    “Venezuelan officials plan to invalidate some pharmaceutical patents and allow domestic manufacturers to produce licensed medicines, an action that could cause shortages and scare off foreign investment…”

    Replace “Venezualen officials” aka “representatives of a communist dictator” with “patent reformers” and the rest sounds eerily familiar…

  16. 29

    6, I understand that you are suggesting we go to a non-capitalist system for drug-development.

    Such a system existed, but I do not know much about its success.

    Can you tell us about the new drugs invented in the Soviet Union, China and Venezuela? Were these drugs developed more efficiently than in the capitalist countries?

  17. 28

    “It would seem that efficiency and/or quality might increase at the Patent Office if patent examiners (i.e., “6” or “6000”) weren’t ranting on this (and other) blogs all day…kind of ridiculous.”

    If I didn’t take a break to rant on this blog then my efficiency would go way down. Thinking about applications hurts the brain after awhile, you need something to take your mind off it. I’m so burned out that I can’t go for like an hour sometimes without just straight up not being able to concentrate on what I’m reading. Then again, other times I can go for longer, like 5-7 hours without much of a break at all. It all depends on the day.

  18. 27

    John Doll, can you hear that? It is the smallest violin in the world playing for you. I hope your PTO goes down. I hope many dishonest managers are thrown out, or better yet, are forced to examine at GS-15 production.

  19. 26

    It would seem that efficiency and/or quality might increase at the Patent Office if patent examiners (i.e., “6” or “6000”) weren’t ranting on this (and other) blogs all day…kind of ridiculous.

  20. 25

    In other words, when times were good for the PTO (huge volume of incoming applications which they just added to the backlog) the application fees were all spent and are not now available to examine the applications?

  21. 24

    Received this in my inbox…

    “Dear Colleagues:

    Back in March, I provided you an update on the budget challenges facing our agency. Today, I’d like to let you know where we stand and what steps we’re taking to address these challenges.

    As you know, the USPTO is funded solely by user fees. This process means the USPTO develops its budget based on projected fee collections. As the economy has worsened, fewer people have applied for patents or paid to maintain the ones they have. Declines in trademark filings continue to be experienced too. Thus, the agency has seen significant reductions in revenue. As a result, a serious budget situation has developed.

    Right now, we are operating at a “break even” level. This means, if the current pace of fee collection holds, the USPTO expects to finish FY09 without a budget shortfall.

    But just getting to “break even” in this climate has required sacrifices. In response to the decrease in fee collections, we have enacted a series of budget cuts and cost-savings measures, which have resulted in more than $120 million in savings. Thus far, we have instituted a hiring freeze, curtailed non-bargaining unit performance awards, stopped overtime, and significantly reduced contracts, travel, supplies and other non-essential overhead expenses. These cuts, while necessary, have been difficult, and I want to personally thank you for your understanding.

    With the support of Commerce Secretary Locke, we are also seeking further cost-saving measures, which will save an additional $20 million in FY09.

    All of this has been done with an eye toward avoiding furloughs.

    Yet we know that in the current economy, fee collection could continue to decline. The USPTO and the Department of Commerce are monitoring the situation on a daily basis, and out of an abundance of caution, we are asking Congress for its help. We’re now putting forward a number of different options to bridge any possible gaps, and we’ll also be soliciting ideas from members of Congress.

    We will continue to keep you apprised of any new developments, and I thank you again for your support during this challenging time.

    Regards-

    John Doll”

    Asking Congress for its help = USPTO bailout?

  22. 23

    You mean this shortage X?

    link to bja.oxfordjournals.org

    The one because of a shortage of raw materials to make the drug?

    re fentanyl

    You mean this shortage?

    link to cancerpage.com

    The one caused by “unexpected increase in demand”?

    Perhaps you could boil your examples down to the ones relevant to the discussion please.

    NAL, the man said respect and honor the treaties, not respect and honor in general. His actions appear to be fully compatible with the treaties he signed, and which he will respect and honor.

    And NAL, you know good and well that this isn’t piracy. If the Gov decides to not uphold patents, or certain patents, then it is not piracy in any sense of the word. First of all it did not transpire on the high seas. Second of all … lol.

  23. 22

    “…which should be compatible with the international treaties that we have signed and respect and honor.” – attributed to Hugo Chavez

    How is open piracy respect and honor? Is that like Malcolm’s honesty and integrity?

    Perhaps we should show the same respect and honor for the oil in Venezuela. It’s not as if we haven’t bent international policy in the past when oil’s involved.

  24. 21

    I don’t agree with Hawk (who was quoting an AP article), but drug shortages of generic drugs frequently occur when companies switch manufacturing capacity to patent-protected drugs that have a higher profit margin. This often happens following mergers.

    I wouldn’t be surprised to see temporary shortages in Venezuela following the patents being pulled because many international companies will redirect their drug shipments to countries where they will get a higher profit margin. In theory, local manufacture of generics would eventually fill in most of these gaps.

    Examples from recent history of generic drugs that people have needed for which there have been shortages because they were not made in sufficient quantities:

    isoproterenol, fentanyl, succinyl-choline chloride, naloxone, flumazenil, diphenhydramine, furosemide.

  25. 20

    “You forget the reason for the U.S. patent system is to financially reward the investment made by the inventor or the inventor’s company in advancing the sciences and useful arts with a monopoly.”

    I didn’t forget jack.

    “some inner anger. ”

    You mean outer anger. At this very moment I’m not qualified to be an altruistic attorney. For the time being, I’ll use prior art

    “Tough choice.”

    It’s not a tough choice if you don’t have any of the patents on the products you want to sell “on the world market”. We’re talking about the generic producers being allowed in to the production scene. They’re always going to get in on the action if they can.

    Oh, and broje, I agree with you on that. IMO it hardly even makes sense for countries like V to even allow foreign applicants. They get the disclosures for free from the US (or other country) filing. If I were a 2nd or 3rd world country the choice as to whether or not to have much patent protection for foreigners is clear. 100% no. If I were them, I’d allow in country innovators patents on drugs etc, but not people from other countries (especially if they already filed in another country which will be pubbing their app).

    And yes X, precisely. The foreign investment isn’t exactly huge in that country that I’m aware of, but either way that doesn’t make there be a shortage of the good that have already been patented, cleared, etc. in the US.

    And, even if it were the case that they’d get a bad rep for not protecting int property, that wouldn’t necessarily stop them from getting investments of money to their R&D. Their R&D can file in the US on the new drugs they produce and make $$$$ that way, while the people of V get the benefits for pennies.

    Btw, all you rtards out there who share Hawks opinion can seal the deal by naming one generic drug which is really needed by the public (heck, even one person in the public) which simply is not made in sufficient quantities. Go ahead. I’m listening.

  26. 19

    “Are you proposing that Venezuela is attempting to benefit / profit from providing a “grey market” for patented drugs?”

    Not really. I just think the Venezuelan governemnt wants to save money in providing its people with free healthcare, including cutting edge medications. Chavez is giving his people what they want, and thumbing his nose at the capitalist system at the same time. For him, that’s a “win win.” What he’s accomplishing is passing on some of Venezuela’s health care costs to other countries.

  27. 18

    Notwithstanding equations of words in the minds of CAFC panels, I wonder if an instruction of “PROVING that it is HIGHLY PROBABLE that the claims are invalid” will really be treated as identical by a JURY [or the Supremes] to “clear and convincing EVIDENCE”?
    This would make for an interesting reality test on real-world jury test panels [as contrasted to appellate conjecture by judges with little or no direct jury experience]. [This is one thing that legal academics with student labor can usefully provide.]
    [Both jury instructions remind me of the story of the lawyer who was bragging some years back about getting away with telling a jury in a patent case that “the test for invalidating a patent is so high that it is second only to the test for convicting for murder.”}
    To see some legal grounds now being used for at least formally challenging “clear and convincing evidence” jury instructions, in order to [wisely] preserve that issue for an en banc CAFC appeal or an appeal the Sup. Ct., see the lead article in the Fall AIPLA Quarterly Journal- Vol. 36 No. 4 p. 369. [Another ground is its expansion by the CAFC to far beyond its appropriate original application in its historial source in the old Sup. Ct. “Barbed Wire” case.]

  28. 17

    Broje,

    Are you proposing that Venezuela is attempting to benefit / profit from providing a “grey market” for patented drugs?

    I suppose making cheap drugs for the rest of the world to buy over the internet could bring some money into the country, provide employment, and give the government something to tax. I also imagine it would be hard to use the ITC to stop small shipments of patented drugs to individual consumers who purchased the drugs over the internet.

    I am wondering if anybody more familiar with ITC proceedings could provide insight if it could stop such activity.

  29. 16

    I think drug companies will still go through the approval process and make and sell new drugs as long as they are protected by patent in lucrative markets like the U.S.

    And, of course, generic versions of the drugs will be made and sold in Venezuela, so they will be available.

    The real effect of Venezuela choosing to deny the original drug company the opportunity to recoup its investment in Venezuela is that those drugs will simply cost more in countries like the U.S.

    The drug companies have to recoup the investment from someone.

  30. 15

    “I will now instruct you on the invalidity issues you should consider. As you consider
    these issues, remember that [the alleged infringer] bears the *burden of proving that it is highly
    probable that the claims are invalid*.” page -33

    Although if I were a plaintiff I would prefer the court instructed the jury about the presumption of validity, I wouldn’t have an appealable issue if the court denied my instruction and gave instead the one excerpted above. “Clear and convincing” has been defined in case law and earlier in the jury instructions as “highly probable.” And the whole point of the presumption of validity (as well as its practical effect) is to shift the burden of persuasion to the defendant. Therefore the quoted instruction correctly states the law.

  31. 14

    It costs tens of millions of dollars to develop and test a new drug, but may only cost pennies a dose to manufacture the drug once it is tested.

    A lack of patent protection will not prevent a fully developed and tested compound from being manufactured and sold, but it will prevent the development of new compounds.

    This is why it makes sense for Venezuela to strip away drug patents. This way they can manufacture the drugs on the cheap once they are fully developed and tested in the US, Europe and Japan. They only will have to pay the minimal manufacturing cost without having to subsidize the high development cost.

    The price, of course, is that, once they establish a reputation for disregarding intellectual property they will (presumably) lose out on potential foreign investment. But, maybe that horse is already out of the barn.

  32. 13

    “7.curious said…
    The ridiculously LOADED wording of the jury instructions on invalidity:”

    Whoever you are, please do not use my moniker again.

  33. 12

    You forget the reason for the U.S. patent system is to financially reward the investment made by the inventor or the inventor’s company in advancing the sciences and useful arts with a monopoly. It is from that monopoly which the inventor or his company is to recoup the money spent developing the invention. With respect to discovering, designing and obtaining the associated FDA approval to market a drug the investment required is generally rather large.

    Regarding taking a hard look at myself, I am at peace with myself. Your posts, however, seem to indicate that you are dealing with some inner anger.

  34. 11

    The server for these model jury instructions must be temporarily overloaded with requests, because I could not download today.
    However, until I can, I find it hard to believe, as suggested above, that nowhere in these jury instructions is their any validity test other than [a new one?] that “the alleged infringer bears the burden of proving that it is highly probable that the claims are invalid” I.e., it would be very strange if there is no recital of the CAFC’s “black letter law” superimposed test [non-statutory and not yet challenged at the Sup. Ct.] of “clear and convincing evidence” as well as patents being “presumed valid” by statute?

  35. 10

    “But drugs! Oh, those are special! Can’t make a profit from them unless you have a patent!”

    I can use my capital to manufacture patented drugs on the world market or to sell generic drugs to Venezuela. Tough choice.

  36. 9

    “If no one wants to waste capital making drugs that won’t turn a profit, then yes.”

    If no one wants to waste capital making chairs then yes.

    If no one wants to waste capital making tvs then yes.

    If no one wants to waste capital making silverware then yes.

    Objects that “won’t turn a profit” seem to plague my everyday walmart.

    But drugs! Oh, those are special! Can’t make a profit from them unless you have a patent!

    Ridiculous.

    Zak, just because your professor can make up a story doesn’t mean that there is truth behind it. You either became an attorney because you were fooled, are just plain dumb (while at the same time being intelligent enough to be an attorney, ironic isn’t it?), or for the money. Take a hard look at yourself and be honest. The only truly altruistic reason to become a patent attorney at the current time is to become one so that you’re the one making the decision about what level of ludicrousness the over part of the overclaiming you’re going to do will be and to keep it low or take it out all together. In this manner you’ve helped, perhaps, to advance the useful arts, and prevented the public harm of some other attorney, which would have handled the case in your stead, from taking that which belongs to the public away from it.

    Oh and I really liked the jury instructions, except, maybe not as jury instructions, but more as a primer to patent trial concepts.

    “It also underscores the lunacy of allowing capitalism to dictate whether a needed drug is developed or not.

    How much money did we just dump into the hands of greedy bankers, so they could promptly flush it down the toilet and/or pay themselves more money?

    I wonder if we could have developed an anti-AIDS vaccine with that amount of money. Or a tiny tiny fraction of it.

    Patents never cured anything.”

    A fcking men.

    Edit: I see you “clarified” your example Zak. Good for you.

  37. 8

    GPope,

    As I recall (and my professors were never clear on the details) it was a promising agent that required a bit of investment to determine how to manufacture it on a commercial scale. The professor’s research, however, become the basis for several of the anti-viral drugs currently marketed and under development.

    But please, take this anecdote with a grain of salt. After all it was a story told by professors who were pure academics. They were neither patent attorneys nor corporate drug developers. So I doubt that they had more than a glib understanding of the underlying issues.

  38. 7

    The ridiculously LOADED wording of the jury instructions on invalidity:

    “I will now instruct you on the invalidity issues you should consider. As you consider
    these issues, remember that [the alleged infringer] bears the *burden of proving that it is highly
    probable that the claims are invalid*.” page -33

    And thats it.
    The pro-defense panel concocts language to brazenly turn around the the presumption of validity. Instead, of plainly, clearly stating that the law requires that patents be presumed valid (with all the hard work the folks at the PTO in, let alone case law), the pro-defense panel succeeds in misstating the burden (“highly probable the claims are invalid”).
    But against the readers better judgment, the pro-defense panel states the presumption of validity is should not be in the jury instruction because it is procedural and because its “traditional.” Yet, it procedurally states the false burden required to invalidate the patent: highly probable the claims are invalid. Their characterization of presumption as “traditional,” would more aptly be replaced with “what is not convenient help our clients invalidate patents, but makes us look unbiased.”
    Its easy for such language to abscond into the catacombs of a large legal document, and its also very scary how easy it may be capriciously adapted in the urgent push for standards.

    Disclaimer: Nearly every non-judge contributor works at a traditional law firm.

  39. 6

    Wow – don’t believe the hype.

    1. Invalidating patents MAY impact future investment, but it’s ridiculous to suggest that it will cause shortages beyond those required to crank up the Prozac synthesis process in some local plant.

    2. I’d like to learn all the details about “the pioneering anti-viral drug developed to treat AIDS patients was never fully produced.” – – If the drug was known to work, then somebody would have produced it. If it was not ready to go, but rather was just a promising agent that needed substantial testing, then the story isn’t nearly as sad.

  40. 5

    “It does, however, underscore the non-economic value of patents”

    It also underscores the lunacy of allowing capitalism to dictate whether a needed drug is developed or not.

    How much money did we just dump into the hands of greedy bankers, so they could promptly flush it down the toilet and/or pay themselves more money?

    I wonder if we could have developed an anti-AIDS vaccine with that amount of money. Or a tiny tiny fraction of it.

    Patents never cured anything.

  41. 4

    Might scare off foreign investment? Has there been any new foreign investment in Venezuela in recent years?

  42. 3

    When I was working towards a MS degree in Pharmacology my professors repeatedly told my class of the real world value of patents. They often reminded us of the fact that the pioneering anti-viral drug developed to treat AIDS patients was never fully produced because the professor who developed it failed to patent it. Apparently, the drug companies did not want to risk the costs associated with bringing the drug to market if their investments would not be guaranteed by a patent.

    Personally, I always thought this to be a rather sad and disturbing story. It does, however, underscore the non-economic value of patents and it did play a role in my decision to become a patent attorney. “Professor, please let me protect the world from your altruism!”

  43. 2

    “Allowing more people to produce a medicine = shortages?”

    If no one wants to waste capital making drugs that won’t turn a profit, then yes.

  44. 1

    Allowing more people to produce a medicine = shortages? Hmmmm. Funny logic you (ahem Hawk) have there.

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