For over an hour yesterday, as the Senate Judiciary Committee hearing on the recently introduced PATENT Act unfolded, it seemed like we were in patent fantasyland. Except for some predictable comments from the deputy general counsel of pharma giant Bristol-Myers Squibb that any legislation should address the issue of hedge fund investors challenging drug patents through inter partes review, it was one long patent reform love-in. Is the PATENT Act perfect? No, came the response, but it sure does represent a very good compromise. Outside of Congress, even the New York Times Editoral Board got in on the act earlier this week, adding its voice to the chorus of approval for the piece of legislation.
In the Senate hearing, the veil was ultimately pierced by Senator Durbin who called out the panel of witnesses as being split between “those who love” the PATENT Act and “those who really love it”. He pointed out that a number of key constituents, like the venture capital and inventor communities, were missing.
After Durbin’s comments the cracks started to appear. Perhaps most memorably Senator Whitehouse, who admitted that he was in “undecided mode” over the Senate bill, asked the five witnesses if any of them could define a patent troll. All said they couldn’t and that they preferred to focus on troll-like behaviours. So yet again we’re confronted by a piece of legislation designed to target something that no one can define; while claims reform is about abusive behaviours surely ring hollow when none of the legislation so far tabled deals in any depth at all with the very real issue of bad faith defendants.
Whitehouse also made some interesting comments around systemic problems in the US litigation system, which he pointed out tend to favour larger, richer parties. The provisions in the PATENT bill, he claimed, seemed to move in the direction of the big actors at the expense of the smallest players.
But perhaps the biggest crack in the debate, which yesterday’s hearing highlighted, is the growing split over reform of re-exam procedures which have proved wildly popular with the tech community, but are increasingly criticised by big pharma. As this blog pointed out last week, pharma has become something of a one-issue group when it comes to patent reform, lobbying legislators to stop the likes of Kyle Bass and Kevin Barnes from bringing re-exams against drug-related patents.
Both the Innovation Act in the House of Representatives and the STRONG Patents Act in the Senate contain provisions to address pharma’s concerns, such as changing the standard for interpreting patent claims in IPRs. It would appear inevitable that, if a compromise bill is going to make it out of committee and reach the Senate floor, it will include some provisions which address the issue. But yesterday’s hearing showed that it’s not just the drugmakers that want changes.
In response to a question from Senator Cornyn, Cisco’s GC Mark Chandler and 3M’s Kevin Rhodes highlighted the split between two key constituencies in the reform debate.
In his comments Chandler insisted that securities law, not patent legislation, is the most appropriate way of addressing pharma’s concerns. He added that despite the popularity of IPR proceedings, the number of patents being challenged was a tiny proportion of the number of US patents in circulation. Here’s what he then went on to say:
Reforms being proposed to the IPR process would basically force the patent office to use standards that were set for the district court rather than taking a fair look at whether a patent was granted in the first place. And the type of standards that the PTO uses, where they use broadest reasonable interpretation to figure out what the scope of a patent should be; where they don’t apply a clear and convincing evidence standard that we put in the district courts because they’re not the experts the way that the patent office is, all that does roll back the ability of the PTO which is a fundamental part of the process that was introduced by the America Invents Act to take a fair look – should this patent have been granted, using the same standards as were used in the first place. If a mistake was made lets fix it. There’s no excuse for a mistake in a patent grant resulting in a 20-year monopoly. Rolling back the standards the PTO uses is not the right answer.
Chandler doesn’t speak for all of tech but as Cisco is a member of United for Patent Reform, the broad coalition of tech and Main Street businesses that is pushing hard for reform, you can be sure that his views are shared by a large and powerful interest group.
In response Rhodes, who is both chief IP counsel of 3M and chair of the steering committee for the 21st Century Coalition for Patent Reform, laid out the opposing view insisting that it is not a simple tech v pharma debate. This is what Rhodes had to say:
What patents do you think are being challenged right now? The most important ones, the most valuable ones, the ones that are either in litigation or ones that others would like to be able to practice. There in lies the problem. There’s less confidence than there has ever been – and this goes beyond the life sciences sector – when I am talking to business decision makers about whether we can safely put investments in commercializing patented tech and building products based on that tech. Can we ensure investments by knowing we have patent rights to protect them? That’s a less certain question than it’s ever been – it’s because of the uncertainty, the perception of unfairness, the reality of unfairness that I mentioned in several respects this morning and directly drives business decisions and it’s beyond the life sciences sector. So we’ve proposed a series of reforms, we hope our ask is listened to in the same way as those who said there was imbalance in the litigation system that needed to be addressed.
That’s quite a divide on a very hot topic. This doesn’t mean legislation is not going to be passed – yesterday’s hearing certainly underlined that there’s strong political will to get something done (in his opening comments Senator Schumer, who is one of the co-sponsors of the PATENT Act declared; “There will be patent legislation along the lines of what we’ve proposed on the President’s desk this year – I truly believe that.”) - but it does mean that how Schumer and his colleagues resolve the growing dispute may determine patent reform’s immediate fortunes.