Changes In Patent Law Research Articles

When stronger patent law reduces patenting: Empirical evidence

AbstractResearch SummaryTheoretically, stronger legal protection affects strategic portfolios in two ways. As each patent becomes more effective, the gain from multiple patents would be less, reducing the demand for patents (negative inframarginal effect). With the effective price of patent protection being lower, the demand for protection and patents would increase (positive marginal effect). The net effect is more likely to be negative in complex technology industries, and magnified by patent ownership fragmentation, manufacturing assets, technological competition, and size. Exploiting variation in the shift in patent law due to the Federal Circuit Appeals Court (CAFC), we find that the average increase in patent protection due to the CAFC led businesses to reduce strategic patenting by 23.3%, and the contingent effects accorded with the hypotheses.Managerial SummaryHow should businesses adjust patent portfolios to changes in the legal protection of patents? As each patent becomes more effective, the gain from multiple patents would be less, reducing the demand for patents. With the effective price of patent protection being lower, the demand for protection and patents would increase. The net effect is more likely to be negative where the stakes (costs of holdup or gain from exclusivity) are larger. Empirical evidence from strategic patenting by U.S. manufacturing businesses between 1986 and 1992 before and after changes in patent law due to the U.S. Court of Appeals for the Federal Circuit supports our propositions.

Flowers of Invention: Patent Protection and Productivity Growth in US Agriculture

Patent protection was introduced for plant biotechnology in the United States in 1985, and it affected crops differentially depending on their reproductive structures. Exploiting this unique feature of plant physiology and a new dataset of crop-specific technology development, I find that the introduction of patent rights increased the development of novel plant varieties in affected crops. Technology development was driven by a rapid increase in private sector investment, was accompanied by positive spillover effects on innovation in certain non-biological agricultural technologies, and led to an increase in crop yields. Patent rights, however, could come with potentially significant costs to the consumers of technology and distortions to downstream production. Nevertheless, I document that in US counties that were more exposed to the change in patent law because of their crop composition, land values and profits increased. Taken together, the results suggest that the prospect of patent protection spurred technological progress and increased downstream productivity and profits.

Strategic Patenting: Evidence from the U.S. Court of Appeals for the Federal Circuit

How should businesses adjust strategic patenting to changes in patent law? Theoretically, under particular conditions, if the legal protection of patents is stronger, incumbent businesses would reduce patenting. When the Court of Appeals for the Federal Circuit assumed jurisdiction over patent appeals, it strengthened the legal protection of patents. Importantly, the strengthening varied geographically by judicial circuit. Exploiting these changes as a natural experiment, we find that post-CAFC, patents were more valuable commercially but not technologically superior, businesses reduced patenting, and new entry fell. The reduction in patenting was more pronounced among continuations, larger businesses, and in less concentrated industries.

Optimal Patent Policy for Pharmaceutical Industry

We show how characterizing optimal patent policy for the pharmaceutical industry only requires information about generic producers' responses to changes in the effective duration and scope of new drug patents. To estimate these responses, we use data on Paragraph IV patent challenges, and two quasi-experimental approaches: one based on changes in patent laws and another on the allocation of patent applications to examiners. We find that extending effective patent duration increases generic entry via Paragraph IV patent challenges whereas broadening protection reduces it. Our results imply that pharmaceutical patents should be made shorter but broader.

Current Policy Challenges in Genomic Medicine.

Molecular genetic testing has raised a variety of policy issues, ranging from privacy to reimbursement. Recently, payment policies have become of paramount importance as Medicare implemented the first significant change to test pricing since 1984 and announced a broad national coverage policy for the use of next-generation sequencing (NGS) in cancer patients that contains significant restrictions. Regulatory and oversight concerns have been important topics for discussion as the US Food and Drug Administration (FDA), Congress, and stakeholders have focused on new approaches to regulation of laboratory-developed tests (LDTs). Patents on gene sequences and relationships between genetic variants and clinical phenotypes have been points of contention since the field's inception. Two Supreme Court cases invalidated patents on gene sequences and biological relationships, ushering in the era of NGS and precision medicine. However, a recent legislative proposal threatens to reverse these gains and restore gene patents as barriers to progress in genetic and genomic testing and the implementation of genomic medicine. This review discusses current issues in payment policy, laboratory oversight, and gene patenting and their potential impacts on genetic and genomic testing. Coverage and reimbursement policies present serious challenges to genetic and genomic testing. The potential for FDA regulation of LDTs looms as a significant threat to diagnostic innovation, patient access, and the viability of molecular genetic testing laboratories. Changes in patent law could cause gene patents to reemerge as barriers to the advancement of genomic medicine.

How Reliable Is the Market for Technology?

Abstract Research has focused on why and when firms access external technology markets. Less is known about the reliability of patents attached to licensed technologies during litigation. Unreliable patents expose a firm to loss of downstream revenues. We address this by constructing a data set of patent litigation in the pharmaceutical industry and exploit a change in patent law that exogenously increased the probability of litigation. We find that licensed patents are more likely to fall during litigation. This effect is isolated to firms with fewer intellectual property capabilities and less patenting experience, suggesting that benefits from external technology are not shared equally.

An Empirical Study of University Patent Activity

Since 1980, a series of legislative acts and judicial decisions have affected the ownership, scope, and duration of patents. These include: the Bayh-Dole Act in 1980; the extension of the maximum patent term in 1994; and the shift from a first to invent standard to a first to file system in 2011. These changes impacted academic institutions, both directly and indirectly, and have coincided with historic increases in patent activity among academic institutions. This article presents an empirical study of how those three changes to the patent system precipitated responses by academic institutions, using spline regression functions to model their patent activity. We find that academic institutions typically reduced patent activity immediately before changes to the patent system, and increased patent activity immediately afterward, with an especially notable effect among research universities. In other words, academic institutions responded to patent incentives in a manner consistent with firm behavior, by reacting to the preferences of internal coalitions to capture unrealized economic value in intellectual property. The response of academic institutions to patent law changes has profound implications for economic efficiency. Academic institutions are typically charitable organizations, with the charitable purpose of promoting innovation, among other things. Yet, academic institutions have responded to patent incentives by limiting access to innovation, in order to internalize economic value. Specifically, academic institutions typically transfer their patents to patent assertion entities or “patent trolls,” rather than practicing entities, producing externalities and inefficiency in the patent system. This concern is highlighted by the Supreme Court’s recent grant of certiorari in TC Heartland v. Kraft Foods, in order to determine the scope of patent venue. The Court’s decision was motivated by flagrant “forum selling” in the Eastern District of Texas, which currently hears about 50% of the patent infringement actions filed in the United States, few of which have any connection to the district and most of which are filed by patent assertion entities that choose the forum based on its pro-plaintiff bias. Many observers are concerned that the concentration of patent assertion activity in the Eastern District of Texas has increased the cost of innovation. This study suggests that educational institutions may have exacerbated that problem by engaging more boldly in patent activity and ultimately transferring their patents to patent assertion entities.

Harnessing Polypharmacology with Computer-Aided Drug Design and Systems Biology.

The ascent of polypharmacology in drug development has many implications for disease therapy, most notably in the efforts of drug discovery, drug repositioning, precision medicine and combination therapy. The single- target approach to drug development has encountered difficulties in predicting drugs that are both clinically efficacious and avoid toxicity. By contrast, polypharmacology offers the possibility of a controlled distribution of effects on a biological system. This review addresses possibilities and bottlenecks in the efficient computational application of polypharmacology. The two major areas we address are the discovery and prediction of multiple protein targets using the tools of computer-aided drug design, and the use of these protein targets in predicting therapeutic potential in the context of biological networks. The successful application of polypharmacology to systems biology and pharmacology has the potential to markedly accelerate the pace of development of novel therapies for multiple diseases, and has implications for the intellectual property landscape, likely requiring targeted changes in patent law.

The Surprising Resilience of the Patent System

The patent system seems in the midst of truly dramatic change. The last twenty years have seen the rise of a new business model – the patent troll – that grew to become a majority of all patent lawsuits. They have seen a significant expansion in the number of patents granted and a fundamental change in the industries in which those patents are filed. They have seen the passage of the most important legislative reform in the last sixty years, a law that reoriented legal challenges to patents away from courts and toward the Patent and Trademark Office (PTO). And they have seen remarkable changes in nearly every important legal doctrine, from patent eligibility to obviousness to infringement to remedies. These changes have prompted alarm in a number of quarters. From the 1990s to the 2000s, as the number of patents and patent troll suits skyrocketed, technology companies and academics worried about the “crisis” in the patent system – a crisis of overprotection that might interfere with rather than promote innovation. By 2015, as patent reform took effect and the Supreme Court undid many of the Federal Circuit’s expansions of patent rights, it was patent owners who were speaking of a crisis in the patent system – a crisis of underprotection that might leave innovators without adequate protection. Depending on one’s perspective, then, the sky seems to have been falling on the patent system for some time. Despite the undeniable significance of these changes in both directions, something curious has happened to the fundamental characteristics of the patent ecosystem during this period: very little. Whether we look at the number of patent applications filed, the number of patents issued, the number of lawsuits filed, the patentee win rate in those lawsuits, or the market for patent licenses, the data show very little evidence that patent owners and challengers are behaving differently because of changes in the law. The patent system, then, seems surprisingly resilient to changes in the law. This is a puzzle. In this article, I document this phenomenon and give some thought to why the fundamental characteristics of the patent system seem resistant to even major changes in patent law and procedure. The results pose some profound questions not only for efforts at patent reform but for the role of the patent system in society as a whole.

Mayo, Myriad, America Invents Act and BPCIA: how has the United States biopharmaceutical market been affected?

This paper discusses how the United States biopharmaceutical market has been affected by recent changes in patent law resulting from United States legislations (Biologics Price Competition and Innovation Act and the Leahy-Smith America Invents Act) and Supreme Court precedents (Mayo Collaborative Services v. Prometheus Laboratories, Inc. and Molecular Pathology v. Myriad Genetics). The authors interviewed eight key opinion leaders from the United States knowledgeable in biopharmaceuticals, including industry veterans, patent counsel, senior scientists and jurists. This paper summarizes the opinions of the key opinion leaders. This paper explains the impact of these Supreme Court decisions - i.e., broadening the exceptions to patent eligibility for law of nature and natural phenomenon - on biopharmaceutical innovations and provides future perspectives.

Yusuf Hamied: leader in the Indian generic drug industry

Yusuf Hamied: leader in the Indian generic drug industry

Navigating the Sea Changes in Patent Law to Successfully Build Value

Major changes in U.S. patent law are having an impact on the value of patents. The Leahy-Smith America Invents Act (AIA) introduced numerous changes to U.S. patent law including the switch to a first to file patent system from a first to invent patent system. New proceedings at the U.S. Patent and Trademark Office to challenge the grant of issued patents have produced quick results and emerging trends. Recent U.S. Supreme Court decisions have changed the threshold determination of patentability under 35 U.S.C. § 101, altering the patentability standards for biotech/pharma inventions, as well as computer/business method inventions. In Europe, the framework for an emerging unitary patent system, expected to be implemented by mid-2016, will add complexity to strategic patent planning for that region. This article will review these changes, discuss trends and provide strategies to build a patent portfolio with valid and enforceable patent claims as a foundation to withstand patentability and validity challenges. Keywords: America Invents Act (AIA), Biotech/pharma, European unitary patent, Intellectual property (IP), Inventions, patents, Patent trial and appeal board (PTAB), Patentability.

O'Reilly v. Morse

O’Reilly v. Morse (1854) is a famous patent case. It is relied on by Justices and judges, discussed by scholars, and taught to students. Everyone agrees it was correctly decided: Chief Justice Roger Taney’s majority opinion stopped Samuel Morse’s attempt to control all telecommunication technologies with a patent that went far beyond his invented telegraph and encompassed modern email, fax machines and text messages. This conventional wisdom, however, is profoundly mistaken. It fails to account for the historical context in which Morse invented, patented, commercialized and ultimately was swept up in massive litigation over his innovative telegraph. This paper corrects this anachronism by reinserting this full historical context back into our understanding of Morse. It details the invention and innovative commercial development of the telegraph, and it reveals that Chief Justice Taney’s opinion was not a sterling exemplar of patent law. Similar to his decisions in constitutional law and in other patent cases, Chief Justice Taney ignored established patent doctrines and instead decided the case on the basis of his own political biases. As a fervent Jacksonian Democrat, Chief Justice Taney viewed patents as state-granted monopolies, and not as property rights in technological innovation. It is only a happy accident for him that his judicial activism in O'Reilly v. Morse comported with much-later changes in patent law that made his opinion appear correct to our modern eyes — unlike Chief Justice Taney’s similar twisting of established law in Dred Scott to reach a result similarly dictated by his personal political preferences.

Patent Reform: Round Two

With the passage of what ended up as the America Invents Act in 2011, an extended, multi-year effort — often characterized as “patent reform” — reached something of a culmination. The Act outlined several significant changes in patent law, the first being a change in who was entitled to obtain a patent when two or more inventors were competing. The new “First inventor to file” (as compared to “First to Invent”) was seen as more equitable and consistent with worldwide patent practices. Other changes made patents more difficult to obtain by expanding what is considered to be the “prior art” that can show an invention is not unique. Other changes were intended to “streamline” the patent system for U.S. inventors, thus leading to the final name of the Act and the politicians’ advocacy that the new law “creates jobs.” What the America Invents Act did not do was close out the need for patent reform, particularly with the continuing challenge of so-called “patent trolls”.

The Impact of Patents on Innovation, Technology Transfer and Health: A Pre- and Post-TRIPs Analysis of India's Pharmaceutical Industry

The debate surrounding the World Trade Organization's Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement indicates that patents matter for development. Yet literature on the geography of knowledge transfer shows that knowledge is spatially sticky, suggesting that the impact of patents can be exaggerated. Using interview evidence, this paper explores how Indian pharmaceutical firms have responded to changes in patent law, including the introduction of more extensive patent protection in 2005 as a condition of TRIPs. A regime of limited patent protection for over three decades prior to TRIPs facilitated informal knowledge transfer and the emergence of a pharmaceutical industry with significant domestic capabilities. Contrary to some expectations, the Indian pharmaceutical industry has continued to grow post-TRIPs, with large domestic firms becoming involved in more formal technology transfer as part of an increasingly collaborative relationship with multinationals. This trend is also driven by a focus on the markets of developed countries, raising questions for the future sustainability of India's low-priced medicines. While changes in patent law can facilitate or inhibit a variety of aspects of development, the adaptation of the Indian pharmaceutical industry suggests that their impact must be related to the broader institutional setting, particularly the underlying domestic capabilities.

Missing the Forest for the Trolls

Trolls are a significant feature of the patent system. They account for a large number of suits, now a majority of all patent assertions in the country and an even higher percentage in the information technology (IT) industries. They win both larger judgments and larger settlements than do “practicing entities” (“PEs”) -- those that practice patents and are not principally in the business of collecting money from others that practice them. And they do so despite complaints that trolls assert weak patents and some evidence that troll patents are more likely to lose in court.Nonetheless, we think the focus on patent trolls obscures a more complex set of challenges confronting the patent system. In this paper, we make three points. First, patent trolls are not a unitary phenomenon. We see at least three different troll business models developing, and those models have different effects on the patent system. Second, patent assertions by practicing entities can create just as many problems as assertions by patent trolls. The nature of many industries obscures some of the costs of those assertions, but that does not mean they are cost-free. In addition, practicing entities are increasingly engaging in “patent privateering,” in which product-producing companies take on many of the attributes of trolls. Put differently, while trolls exploit problems with the patent system, they are not the only ones that do so. Third, many of the problems associated with trolls are in fact problems that stem from the disaggregation of complementary patents into too many different hands. That in turn suggests that groups like Intellectual Ventures might be reducing, not worsening, these problems (though, as we will see, the overall effects are ambiguous), while “patent privateers” that spin off patents in order for others to assert them might make things worse. For this reason, patent reformers and antitrust authorities should worry less about aggregation of patent rights and more about disaggregation of those rights, sometimes accomplished by spinning them out to others.Understanding the economics of patent assertions by both trolls and practicing entities allows us to move beyond labels and the search for “bad actors,” focusing instead on aspects of the patent system itself that give rise to the problems and on specific, objectionable conduct in which both trolls and practicing entities sometimes engage. Patent trolls alone are not the problem; they are a symptom of larger problems with the patent system. Treating the symptom will not solve the problems. In a very real sense, critics have been missing the forest for the trolls. Exposing the larger problems allows us to contemplate changes in patent law that will actually tackle the underlying pathologies of the patent system and the abusive conduct they enable.

Strategic uses of patents in markets for technology: A story of fabless firms, brokers and trolls

This paper analyses the strategic uses of patents in markets for technology. In particular, we study the behaviors of technological firms, patent brokers and patent trolls and explore their consequences on the amount of R&D investments of the economy. We show that patent brokers, in their pure form, are R&D increasing (i.e. they increase the R&D investments of both supplier and manufacturing firms) while patent trolls, in their pure form, are R&D decreasing. We also show that, paradoxically, an optimal positive level of trolling may exist if the probability to secure market transactions and the probability to encounter trolls are positively correlated. Then we discuss the normative implications of this research. Among others, we argue that changes in patent laws are needed in order to limit the possibility of trolling; however, the difficulty is that those changes might also affect the development of technological firms and brokers. Several possible evolutions of international patent laws are hence discussed.

Questioning the FTC's Incremental Value Test and Claims of Widespread Hold-up in Technology Standards

Many authors suggest that hold-up is a widespread problem in technology standard setting. The FTC appears to accept that view in its 2011 IP Report, and its incremental value test would attempt to mitigate such hold-up. We question the factual and logical foundations of the FTC's approach. By expanding the definition of hold-up beyond the context of deception, breach of FRAND commitments, or other patentee misconduct—for which remedies already exist—and by tying the incremental value test to an ex ante point that occurs after patent holders' investments have been sunk, the FTC risks tipping the balance too far in the direction of infringer-licensees, potentially damaging innovation incentives. The FTC's recommendations, which would effect a radical change in patent law and the incentives underlying it, may be subject to question, especially given that we are aware of no empirical study suggesting that hold-up is a serious impediment to standard setting, much less that it warrants fundamental changes to the patent laws.

The effects of patent-law changes on innovation: The case of India's pharmaceutical industry

Recent patent-law changes in India's pharmaceutical industry provide opportunities to study changes of institutional and regulatory environments on innovation and social welfare in low-income markets. From 1972 to 2004 under its process-patent regime, India's pharmaceutical industry grew to become the world's fourth largest. Indian companies were becoming globally competitive in generics and clinical testing, and moving into product R&D. Researchers have debated the effects of India's new product-patent laws' effects on these trends. The authors cover the domestic characteristics and global competitiveness of India's pharmaceutical industry. They contrast data (from 2001 to 2004) on patents in India's process-patent regime with preliminary data (from 2005 to 2008) on patents in the country's new product-patent regime. They argue that Indian pharmaceutical companies have changed their decision-making in response to changed patent laws by moving from process to product research. However, the preliminary results indicate that these changes may have hurt domestic innovation. They conclude with strategic implications for the Indian pharmaceutical industry and highlight the need for research and public policy to establish optimal social returns from product-patent regimes.

A Review of Patent Validity Jurisprudence

For over a century, the U.S. patent system has held a presumption of patent validity, based largely on the belief in the quality of the U.S. Patent Office examination system. There are several appellate processes to assert patent invalidity, including the patent reexam process, the federal district courts and the Court of Appeals for the Federal Circuit. Because of the presumption of validity in a patent, a standard that has been held since the time of the Civil War, and because of the adversarial nature of litigation, the bar for challenging patents in the courts has been to provide “clear and convincing” evidence. This standard has provided consistency in the U.S. patent system.A group of patent critics, however, has argued that the bar to show patent invalidity with the “clear and convincing” standard is too high. This group, led by technology industry incumbents, has argued that the “preponderance of evidence” standard should be applied in the courts to invalidate patents, particularly if evidence is introduced after the Patent Office examination process.The present essay critiques the view of the patent critics and argues that the “clear and convincing” standard evolved from a coherent and consistent patent jurisprudence that is important to maintain a healthy functioning patent system. The Patent Act of 1952 maintains that patents have a presumption of validity. The case law from 1874 to the present is consistent on this issue of requiring a higher bar to attack patents. Lowering the burden of proof to challenge patent validity would bias the patent system to the infringer and challenge the presumption of validity. This would have the effect of devaluing patents and harming incentives to innovate. The argument is made that the infringer should have a duty to obtain an “opinion of counsel” to justify an assertion of patent invalidity. In the absence of such a requirement, the infringer has no good faith belief that the patent is invalid and, in fact, no defense from the assertion that the patent is not willfully infringed.The adverse consequences of maintaining a lower standard of proof in patent validity cases are substantial, with infringers and Asian manufacturers as beneficiaries and pharmaceutical companies, universities, market entrants and innovators adversely affected. In combination with a set of recent judicial opinions unfavorable to patent holders, lowering the bar for asserting patent invalidity would provide a sea change in patent law that may hurt the U.S. economy.