Liveblogging PatCon 3: A Conversation with Industry

By Jason Rantanen

Today I'll be liveblogging from PatCon 3.  For those who are interested, the substance will be after the break.  I'm told that video recordings will be available for the plenary presentations.

A conversation with industry

Jim Trusell – Chief IP counsel at BP
Karen Nelson – attorney at AbbVie 
Jon Wood – Chief IP Counsel at Bridgestone
Paul Rodriguez – Chief IP Counsel at RR Donnelly
Stephen Auten – Cozen O'Conner (moderator)

What's the biggest problem that we have in patent law today and how can we fix it?

Paul: In the patent litigation context, it's the high costs of identifying the patent infringement claims where one would be liable coupled with the high costs of defending patent litigation.  Very expensive to dismiss even frivolous cases.  Their industry doesn't have as much litigation activity as other industries.  Seeing an increased threat through patent assertions.

Karen (pharma) – Also have NPE suits, although not as big a concern as other industries.  Their primary concern is in recouping research and clinical development costs. For them, written description has become more of an issue and has made it more difficult for a R&D company to protect its investments.  This is a particularly significant issue given the AIA's shift to a first-to-file system, which creates a pressure toward early filing.  This is in tension with a need to meet the written description requirement.  There's a real tension here with the need for human testing to meet written description requirements.  Written description is going to be a major issue as biologics become the predominant new drugs. 

Thinks that there will be a lot of biosimilars developed in the next few years.  Legal issues to unravel here as well.

Jon – For his industry, litigation is the problem.  Not only do we have some nuisance litigation, but going into management and talking about the cost, time of resolving litigation to protect their own products is a concern. It's too expensive to file litigation given the amount of money that the product is bringing in.  The value of the individual products doesn't justify the cost.

Jim – Particular concern about NPEs. There's a terrible mismatch of risks.  With a competitor, they'd be looking at countersuits, inventors, etc. If you're a plaintiff in that industry, it helps to keep some of the risks balanced.  But when dealing with NPEs, the risks aren't balanced.  No way to bring a counterclaim, no way to really get discovery.  Discovery costs aren't even.  The solution is to make it easier to get fees for nonmeritorous cases. 

Stephen (mod): what you see here are an array of concerns that industry brings to bear.  NPEs in some industries, in pharmaceuticals, written description. 

Karen – we do get suits by NPEs, but not as many.  But want to be clear that we do get NPE suits, and we fight hard against them.  The kinds of NPE suits that we get are research tool based.  The claims are that because you used the research tool, you're liable for the entire drug that was developed. 

Stephen: What routes have you considered based on the AIA?

Paul – Both NPEs and operating companies are capable of exploiting the system.  Increasing the risk of litigation would be generally good because it would lead to fewer non-meritorious claims.

Stephen – should we have a different patent system depending on technology?

Jim – we should have a uniform system. I also agree with paul.  The NPE issue is a good one to talk about broader issues with the patent systems.  A meritorious claim is meritorious; a lacking claim is not, regardless of who is bringing it.

If we had a system that varies depending on technology, it becomes more of a patchwork.

Karen – I also agree that there shouldn't be a two-tiered system, or a five-tiered system.  They are experiencing this currently in Brazil that says that it's harder to get a pharma patent in Brazil because they've included a public interest component.  Pharmaceuticals are hard and expensive to develop.  Costs hundreds of millions to prove that drug is safe and effective. 

Stephen – have you encountered compulsory licensing?

Karen – yes, we have encountered this, particularly in the developing world where they feel that they don't have the resources to pay for what is a lifesaving drug.  They're essentially saying that we don't want to pay for the develop the drug.  That's forcing places like the United States and Europe to fund the development of the drug.  Maybe we want that. But we have to think about it.

Jon – also not in favor of industry-specific patent laws.  We've had the uniform system for a long time. 

[My comment – the irony is that we already do have at least some industry-specific variation in the patent system.  Hatch-Waxman, for example, makes pharma litigation different from other types of litigation.].

Stephen – too bad we don't have a telecomm participant on the panel.  Might get a different view then. 

• Stephen – Many Supreme Court and en banc Federal Circuit decisions recently.  Do they impact your industry and what are you planning in response?

Jim – most of these don't directly apply to our industry.  One of his biggest frustrations has been over the lack of permanent injunctions at the end of trial. The patent law says that the patent holder shall have the right to exclude others. 

Karen – what she finds most interesting is the reverse payment case.  She also finds the Myriad case to be the most interesting.  From a policy standpoint, this is very interesting.  Can you take a part of a naturally occurring substance and isolate it and claim that as a patentable claim.  This is a very interesting concept.  Isolating the gene sequence did result in coming up with something.  She thinks this was a novel, inventive thing.  Interesting policy question as to whether we want this to occur.  If we decide that we don't want this to be a patentable thing, we decrease the motivation for industry to discover these gene sequences.  Do we want to disincentive industry to research on the genome?

Stephen – [talked about the Androgel reverse payment case pending before the Supreme Court]. 

Jim – Very interested in the outcome of the Myriad case, due to their interest in polymers. 

Paul – Most interested in Bowman v. Monsanto.  In their industry there have been some patent exhaustion issues.  They also deal with the repair/reconstruction doctrine. 

Karen – I've also encountered patent exhaustion doctrine issues in our industry.  This was a licensing issue case where the prospective license was for non-profit licensing activities. 

Stephen – What's the dynamic between in-house and outside counsel over the last ten years?

Karen – hard for me to say.  When I was outside counsel, I had relatively little interaction with in-house counsel; whereas in our department, we are constantly in contact with our outside counsel.  From my perspective, since I've been at Abbott/AbbVie we spend a lot of time working closely on our cases. 

Jon – From an in-house perspective, things are so squeezed for cost right now that I'm very careful about how we spend our money and how we keep our costs low.

Paul – we're increasingly collaborative with our outside counsel; we also really try to bring things in-house.  For example, using in-house experts where possible.

Jim – The primary role of advising executives has always resided inside.  Maybe something that's changed over ten years is that he sees a need more in deep niche areas to rely on outside counsel until you decide that this is going to be an ongoing issue that you need to bring in-house. 

Audience question – do in-house counsel ever look at academic scholarship?

Jim – yes, we do, particularly when dealing with an appellate issue.  It's also important in trying to shape public and media perception.  He would like to see more articles that empirically revalidate the understanding that patents are necessary for inventors to recover their investment. 

Jon – He hopes that the academics want to make a difference with the intellectual property owners; they hope to capture the value of IP and use that value in their businesses to increase innovation.  He'd like to see more empirical work about the value of patents.  He doesn't find the discussions about whether the patent system incentivizes or doesn't incentivize innovation to be that helpful.  Would like to see the legal folks to get closer to the business or econ folks and exmaine how patents are actually working for business folks. He'd also like to see collaboration and education of business folks.  The IP knowledge of the folks graduating from business schools is low. He'd also like to see lawyers have a better understanding of how businesses operate.

[My comment: I agree with the education point, and one of the things I'll be doing with my Introduction to Intellectual Property class next year will be to open it up to all graduate students, including business and engineering students.]

Paul- There's a lot of potential for increased collaboration between scholars and industry.  Would like more research on the costs of identifying and disposing of non-meritorous claims. 

Audience question: Are you devoting your budget to more high quality work on NPE cases?

Paul – not all NPE cases can be treated equally.  Some are highly sophisticated litigants that need a high level response.  They've adapted a nuanced approach to consider cases filed against them.

Jon – rather than focus on NPE, we need to think in terms of whether the claim is meritorous or not, not on whether the asserter is a NPE or not.  The problem is not NPE's, its whether the patent is valid and enforceable.

Paul – the game is evolving.  WIth this sophisticated industry of NPEs that's emerged, you run a greater risk of missing things when doing clearance analyses.