Patent Reform May Affect Pharma Industry More Than We Think

Washington, DC (Sept. 3)-Early this month, Congress is expected to debate what some companies are calling the most significant changes to the United States patent system in 50 years. Two bills, H.R. 1908 and S. 1145, would change how damages are calculated-in part by disregarding the full value of a product-and make it harder for inventors to prove willful infringement on patent claims, according to a Reuters article. The bills, officially known as the Patent Reform Act of 2007 and introduced last April, would also grant a patent to the “first to file,” rather than to the “first to invent,” which is more in tune with other countries’ patent laws.

Additional patent changes announced by the US Patent and Trademark Office (USPTO) on Aug. 21 will go into effect Nov. 1. The new rules limit the number of continuation applications and the number of claims an applicant can file in a single application. They also state that certain multiple applications may be treated as a single application. According to USPTO, the changes will provide for “better and more thorough and reliable examination of patent applications.”

Both the USPTO changes and the Patent Reform Act changes are particularly significant. According to the Pharmaceutical Research and Manufacturers of America (PhRMA), pharmaceutical member companies invested $43 billion to research and develop new medicines last year. And it’s no secret that Big Pharma depends on full patent periods (17 to 20 years) to make a profit on their drugs, considering that discovery and development can easily take 10 to 15 years and cost an average of $1 billion. In fact, according to an August report by World Growth, a nonprofit nongovernmental organization, two-thirds of the value of America’s large businesses resides in intellectual property, especially patents and trademarks.

Part of the reason for the proposed changes is to reduce the burden on USPTO, which reviews 450,000 national patent applications each year. The office hired an additional 1000 examiners during the past two years, according to Reuters, but patents can still take as long as six years to be processed.

Many technology and software companies support the changes, arguing that the patent system should be cleaned up. Microsoft and IBM, for example, feel the current system allows questionable patents to be approved too often, making it easy for damages to be collected and product lines to be shut down, according to a September PC World article. 

But pharmaceutical companies are in opposition. The Patent Reform Act of 2007, for example, would allow companies to challenge a patent within one year of it being granted. This would open the door to “an endless loop of legal challenges after patents are awarded,” according to the United Steelworkers. The union represents 15,000 pharmaceutical employees in the US.

The AFL–CIO union federation also sent a letter to Congressional representatives opposing the patent reform legislation as it is currently written, arguing that the reforms would damage the industry.

Reduced damages, for example, would weaken patents, Biotechnology Industry Organization Associate General Counsel Hans Sauer told Reuters. “Some people might ask themselves, “Well, is it going to be cheaper to infringe?” he said.