Richard Lloyd

Like its Senate counterpart last week, the Innovation Act comfortably passed out of committee yesterday after mark-up by the House Judiciary Committee. It did so, however, with notable concerns yet to be resolved. In separate statements the Biotechnology Industry Organization (BIO), the Pharmaceutical Research and Manufacturers of America (PhRMA) and the National Venture Capital Association (NVCA) all made plain their opposition to the amended bill. That means that neither bill has won the kind of broad industry support that is normally vital in moving legislation to a vote in both chambers of Congress.

Crucially, however, it has retained the support of United for Patent Reform, the broad-based coalition of tech companies and Main Street businesses that has been most active in lobbying for change. That came after there were some suggestions from DC insiders that tech might be concerned with attempts to water down the legislation too far. Reform of the inter partes review (IPR) process – which has become a key issue for biotech and pharma but which is opposed by many tech companies that have been among the most frequent filers of IPRs – remains a major stumbling block which mark-up in both the House and the Senate has now failed to address.

With both bills out of committee but with considerable work still to be done before we can start to think about patent reform making it to President Obama’s desk, this seemed like a good time to review how reform has progressed in this Congress. In many ways, the challenges that legislation still faces, were clear before the current Congress started.

Last October, for instance, this blog pointed out that pharma could become a far more aggressive player in the reform debate because of the threat drug companies faced from IPRs. At that point we didn’t know about the band of investors, led by Kyle Bass, who were getting ready to challenge pharmaceutical patents at the Patent Trial and Appeal Board (PTAB) but it was clear that as re-exams became more popular they could pose more of a challenge to pharma companies who typically attach huge value to a single patent.

It was also clear through the end of last year that the opposition to broad-based reform from the likes of the Innovation Alliance, was going to be far better organised in this Congress. Of course, knowing the legislative obstacles and navigating them are two very different things, but it’s significant that legislators have still failed to significantly broaden out reform’s support base in a number of key sectors. That will need to change if a final bill is going to be signed into law.

The path of reform in this Congress

6th January – the 114th Congress convenes with patent reform firmly on the agenda after Congressman Goodlatte, Chairman of the House Judiciary Committee, declared in September that a new patent bill would be one of his top legislative priorities. With bipartisan support and the Republican-controlled Senate eager to prove more effective than its predecessor, the expectation in DC is that legislators will move quickly to try to pass reform.

21st January – the second confirmation hearing is held for Michelle Lee to become Director of the US Patent and Trademark Office (USPTO). Along with a first hearing held in December, when the Senate was controlled by the Democrats, the hearings provide the first clear indication that the opposition to the kind of broad-based reform proposed by the Innovation Act is now far better organised. In the second hearing Senator Coons declares: “Proposals to dramatically constrain the rights of patentees to enforce their patents also ignore the fact that the patent system is already greatly changed from just four years ago.”

2nd February – the new version of the Innovation Act is introduced in the House of Representatives. It is largely the same as the legislation that was passed in the House in December 2013.

10th February – Kyle Bass and Erich Spangenberg file their first IPR challenge of a pharmaceutical patent targeting an MS drug made by Acorda Therapeutics. The Biotechnology Industry Organization releases a statement criticizing Bass’s “cynical short-selling strategy.” The statement then adds: “Patents are the lifeblood of innovative lifesaving biotech companies. Congress and the USPTO should act promptly to prevent abuse of the patent system in this manner.” The issue of IPR reform is now firmly on the legislative agenda.   

12th February – the first House hearing since the Innovation Act was reintroduced is held. A lawyer representing the National Venture Capital Association (NVCA) makes clear its opposition to the bill. Goodlatte argues that there is no presumption of fee-shifting in his proposed legislation.

2nd March – the STRONG Patents Act is introduced by Senators Coons, Durbin and Hirono. It includes a number of changes to the IPR process which win the support of the biotech and pharma community.

14th April – Michelle Lee, recently installed as the head of the USPTO, appears before the House Judiciary Committee in a hearing on the Innovation Act. Lee makes clear that patent reform is needed but falls short of supporting the House bill in its entirety.

29th April – the PATENT Act is introduced in the Senate by a bipartisan group of senior legislators including Senators Grassley, Leahy, Cornyn and Schumer. The bill receives broader support than the more controversial Innovation Act but it lacks reforms of the IPR process prompting the pharma community to raise concerns. 

7th May –Senate Judiciary holds its first hearing following the introduction of the PATENT Act. The five witnesses hold broadly uniform views except over the issue of IPR reforms. Kevin Rhodes, the chief IP counsel for 3M appearing on behalf of the Coalition for 21st Century Patent Reform, makes it clear that it’s not just big pharma that objects to the re-exam procedures. That is clearly at odds with the testimony of the Cisco GC Mark Chandler who insists that preventing challenges filed by the likes of Bass and Spangenberg is best left to securities law.  

4th June – the PATENT Act is marked-up by Senate Judiciary and passes out of committee with a 16-4 vote. In a clear attempt to assuage the fears of pharma and biotech, Senator Schumer insists that the package of reforms of the IPR process will continue to be worked on. Having initially supported the bill, the NVCA claims that its concerns over fee-shifting, joinder, the discovery process and pleading standards have not been listened to.

11th June – House Judiciary marks-up the Innovation Act and the bill then moves out of committee with a 24-8 vote.