10 Points on US Patent Litigation

These points are based on the article ‘Understanding the Realities of Modern Patent Litigation’ by Allison, Lemley and Schwartz.

1. The article is based on 949 merits decisions based on infringement suits decided in 2009 to 2013 from every case filed in 2008 and 2009. The decisions come from 462 different cases involving 777 different patents. Of the 949 merits decisions 636 were definitive wins for one side or the other. The remainder were interim wins, usually denial of a summary judgment motion.

2. The most common source of merits rulings were summary judgments of invalidity (430) and non-infringement (473). In contrast patentees were less likely to seek or obtain a summary judgment in their favour. Patentees brought and received rulings on 125 summary judgments on validity and 128 summary judgements on infringement.

3. Of the 949 merits decisions 290 patents went to trial. 273 merits decisions reached a Federal Circuit decision on appeal and another 126 were appealed but settled before decision. 82 of the merits decisions are pending before the Federal Circuit.

4. Less than 10% of the patent lawsuits filed in 2008 and 2009 resulted in a merits decision, i.e. more than 90% of lawsuits were settled before summary judgment or trial.

5. In a study in 1998 it was found that validity challenges were overwhelmingly based on obviousness. In the present study it was found that whilst obviousness was still important, there were fewer summary judgements based on it than anticipation. There are also a growing number of decisions based on patentable subject matter and the largest category of validity decisions was indefiniteness which barely registered in the 1998 study. This is due to indefiniteness being applied on software means-plus-function cases and also the rise of claim construction.

6. Only 31% of invalidity challenges succeeded at summary judgment, overall in 42.4% of cases. However patentees won only 26% of the definitive merits rulings as they do badly on infringement. Accused infringers win 57% of judgements on infringement.

7. Patentees do badly because of ‘fractioning’ of patent law. They have to win every issue of validity and also infringement to win overall. A patentee’s burden for summary judgement for infringement is higher than the accused infringer because they need to show lack of disputed issues for ‘all’ elements of the invention whilst the accused infringers need to show it for ‘any’ element of the invention. Also the patentee must survive at summary judgment and trial, whilst a win at either is sufficient for the accused infringer.

8. Patentees fared better on validity issues in multi-patent decisions.

9. Foreign patents were more likely to prevail in merits decisions, suggesting that foreign plaintiffs were only asserting their best patents.

10. Patent characteristics, such as number of prior art references, seem to have no correlation with overall win rates, validity or infringement outcomes.

The article can be downloaded here.

You may also be interested in related articles 10 Observations on Patent Litigation and Top 8 Disadvantages of a Specialist Patent Court.

10 Points on Ernst & Young’s Biotechnology Industry Report 2014 ‘Unlocking Value’

1. R&D remains the central point of value leakage. Failure for drugs in phase III remains very high at 40%. This represents very inefficient use of capital as pursuing a drug candidate to this point is very expensive.

2. Value can be unlocked by biotech companies by the following 3 approaches:

- precision medicine, i.e. targeted therapies tailored to the patient’s individual condition

- adaptive clinical trials, i.e. modifying a clinical trial based on early patient reactions

- precompetitive consortia, i.e. using open learning frameworks.

3. Biomarkers can be used to mitigate drug development risk. They are a tool for managing biological complexity and can also make it easier to deal with regulatory complexity. Payers increasingly want confidence that the drug works in the population it is being used in.

4. Biotech companies need to acquire the following new capabilities:

- partnering early and often to gain missing skills

- empowering senior R&D leadership to allow them freedom to take the appropriate risks

- participate in precompetitive consortia to gain access to data from diverse sources and build relationships with other stakeholders

- prioritise evidence collection early on during the drug discovery process.

5. The biotech industry performed strongly in 2013 with revenues of the publically traded companies in US, Europe, Canada and Australia increasing by 10%. However a small group of US companies drove a lot of this this growth. R&D spending increased by 14% overall, a 20% rise in the US and a 4% drop in Europe.

6. The biggest drivers of growth were Biogen Idec, Celgene and Gilead Sciences. The US IPO class of 2013 added $662 million to the biotech industry’s revenues. The 17 largest US biotech companies accounted for $7.9 billion of the $8.2 billion increase in revenues, whilst the other 322 companies accounted for the remaining 4% in revenue growth.

7. Whilst Europe saw weak increase in revenues (3%) there was a strong growth income.

8. Of the 49 companies that went to IPO in 2013, 42 were therapeutics companies, 3 were diagnostics. Circassia’s debut on the London Stock Exchange have given hope to VC’s that markets in France and Switzerland may open up too.

9. Big pharma bolt-on acquisitions of biotech continues in 2013 though total deal value fell to $12.5 billion.

10. Only 27 new products were approved by the FDA. However both the FDA and EMA have launched programs making the regulatory process more responsive and user-friendly.

The report can be found here.

You may also be interested in related articles 10 Points on Open Innovation and 10 Points from Burrill’s Biotech Predictions for 2014.

5 Points on Incremental Innovation

These points are based on a report from the Fraser Institute entitled ‘The Benefits of Incremental Innovation’.

1. The economist Robert Gordon is of the view that western societies have reached a scientific plateau and now there will be a decline in the usefulness of future inventions compared to past inventions. Other academics believe that there is presently too much ‘imitative’ incremental innovation and too little ‘breakthrough’ innovation, and the pharmaceutical sector is pinpointed as a particular area for this concern.

2. Innovation can be classified into incremental (improving existing products), breakthrough (providing more substantial changes to technologies) and radical (creating drastic changes to the competitive environment and perhaps even creating entirely new businesses).

3. There is a feeling that managers of companies are more risk averse to innovation than shareholders would prefer.

4. In the pharmaceutical field incremental innovation does provide benefits to patients and helps cost-cutting. Incremental innovation will often be based on improving the ways of delivering known drugs, making them more effective or reducing side-effects.

5. There is controversy as to whether patents that protect incremental innovations in the field of medicine are ‘legitimate’ or whether this is simply an attempt to extend patent protection on the drug itself (so called ‘evergreening’). India has specific legislation designed to stop evergreening of drugs.

6. The report ultimately concludes that incremental innovation is beneficial. However we believe that this is a very complex topic where the discussion is ongoing.

The report can be found here.

Our IPKat article on IP and medicines can be found here.

Our PatLit article on innovation and the IP system can be found here.

You may also wish to see related articles 10 Observations on Different Types of Research and 10 Points About the State of the Pharma/Biotech Sector.

5 Recent Interesting Decisions of the EPO Boards of Appeal

The following recent decisions caught our eye as being interesting or illustrating policy points at the EPO.

1. T1142/12 concerns denial of the applicant’s request by the Examining Division to have oral proceedings in Munich rather than in The Hague. The Board found that this was not part of the Examining Division’s decision and could therefore not be subject to appeal, and nor could it be referred to the Enlarged Board. The outcome is as expected and is a reminder that what is appealable is tied to whether the issue is, or can be, the subject of a decision

2. T2599/11 concerns whether the patent proprietor can file a broader request in appeal than was decided upon by the Opposition. The Board decided that in this case the broader request could be filed. The fact that such an outcome is possible shows there is some flexibility in the Boards’ increasingly strict approach on accepting claim requests.

3. T67/11 concerns inventive step of a new antibody. The applicant limited the claims to antibodies with specific sequence changes. These were found to be inventive because the skilled person would not know which changes in sequence would be disruptive and which would be beneficial. Unpredictability can be the basis of inventive step, but then it usually requires the claims to be narrow.

4. T1293/11 has some interesting comments on the language used to claim a transgenic plant. The Examining Division had not accepted ‘…transformed with vector X…wherein expression of X gives activity Y’, arguing that it covered transformation of non-functional sequences and also covered plants where the activity was gained by other means. However the Board disagreed and allowed the applicant’s definition of the transgenic plant.

5. In T1100/10 an appellant (rather ambitiously) challenged the Board’s actions in not accepting claim requests by arguing that the Rules of Procedure of the Boards of Appeal did not have legal basis because they had been drafted by the Presidium rather than the Administrative Council. However the Board did not accept the argument because they said it was sufficient that the Administrative Council had approved the Rules.

You may also wish to see related articles 10 Points on the Ethics and Morality of Patents in Europe and Top 10 Tips For Success In EPO Appeals on Biotech Cases.

8 Points on the US Supreme Court Decision Alice v CLS Bank

1. This decision was seen as the Supreme Court’s opportunity to comment on whether software is patentable. However that does not seem to have happened and the word ‘software’ is not mentioned in the decision at all.

2. The patent at issue concerned a computer-implemented scheme for mitigating ‘settlement risk’ (the risk that only one party in financial transaction will pay what it owes) by using a third-party intermediary. The claims are directed to a method carried out on a computer, a computer system configured to carry out the method and a computer-readable medium. The Supreme Court decided all the claims were to an abstract idea and merely requiring generic computer implementation was not enough to make them patent eligible.

3. The history of the case is that the District Court found all the claims to be patent ineligible as they were directed to the abstract idea of ‘employing a neutral intermediary to facilitate simultaneous exchange of obligations in order to minimize risk’. A Federal Circuit Court reversed the ruling. An en banc Federal Circuit hearing affirmed the District Court’s view, but seven different opinions were given. Dissenting opinions were of the view that only the system claims were patent eligible or all the claims were patent eligible.

4. The Supreme Court relies heavily on the Bilski, Mayo and Myriad cases. Quoting Mayo they state that patent law cannot be used to tie up the ‘building blocks of human ingenuity’.

5. The Court refers to the framework provided in Mayo which first determines whether the claims are directed to a patent ineligible concept and then asks ‘what else is there in the claims before us?’. This second step is the search for an inventive concept, something that ensures the patent amounts to ‘significantly’ more than the ineligible concept.

6. In the Court’s analysis the claims are directed to the abstract idea of intermediated settlement which is a known economic practice. The Court took the view this is as much an abstract idea as was the method in Bilski (for hedging against the financial risk of price fluctuations). The Court decided it did not need to go further to set out the ‘contours’ of the abstract ideas category.

7. The Court went on to conclude that the additional elements of implementation on a generic computer system do not transform the abstract idea into a patent eligible one. At this point the Court quoted Mayo saying that the method of determining metabolite levels was well known in the art, seeing the use of a computer in the present case as similarly insufficient to give patent eligibility. Benson and Flook were also quoted to support the conclusion that eligibility cannot be gained simply by limiting use to a ‘particular technological environment’. A contrast was made to Diehr where the specific method of recording the temperature made the claim eligible, not the computer implementation. The claims in Diehr were seen to improve on ‘an existing technological process’.

8. The Court’s analysis found each step of the computer-implemented method claim to be conventional, and no ‘improvement’ of the computer or a technology occurs. That was insufficient to give patent eligibility and the same applied to the computer system and computer-readable medium claims, with the Court quoting from Mayo which warned against making patent eligibility ‘depend simply on the draftsman’s art’.

The decision is available here.

Commentary on the decision is available at: Patently-O (see here), IPWatchdog (see here) and Patent Docs (see here). IPWatchdog has criticised the decision most stating that it has rendered most software patents invalid. It takes the view that patent applications will now need to be drafted to include much more details of the computer device used to implement the invention. Patent Docs takes the view that bad cases make bad law and this was an ‘extreme’ case which led to the wrong approach being used, i.e. eligibility rather than novelty and non-obviousness.

In our view the decision continues the Supreme Court’s blurring of eligibility with novelty and non-obviousness, the word ‘conventional’ being used often in the Court’s reasoning . In addition the decision needs to be seen in the context of perceptions that too many invalid patents are being granted to computer-implemented inventions and the problem of patent trolls.

You may also wish to see related articles 10 Points on the New USPTO Myriad/Mayo Guidelines on Patent Eligible Matter and 10 Points on What Patent Judgments Achieve.

Patent Blogs

We are based in the UK and use blogs to keep informed about patent developments.  This post is based on our experience of reading patent blogs over the last 2 years.  Inevitably there is a UK, European and US bias reflecting our work needs.

Our favourite blogs are IPKat and Patently-O which we look at on a daily basis. Both blogs post frequently covering all major developments in a timely fashion. The writing is of high quality and objective. Diverse topics are covered with plenty of informed interesting analysis. IPKat has a UK and European focus, though also covering stories from other territories.  Patently-O is very US based.

We also look at IPWatchdog on a daily basis. Again all major developments are covered in a timely and thoughtful manner. We don’t always agree with IPWatchdog’s politics, but we accept it makes an important contribution to patent debates. IPWatchdog is very US based.

We also follow IP Finance and PatLit which are essentially subsidiary blogs to IPKat. Posts on these blogs tend to be based on more technical issues, but we usually find them interesting.  They post articles less frequently.

We also look at Patent Docs less frequently. We find it is very good for following US biotech/pharma issues (of which there are many at the moment).

Our firm, Holly IP, is part of Keltie’s K2 Network. That means we follow, and occasionally contribute to, IPCopy, which is very UK and Europe based.

We have recently started following Written Description. We find it to be very readable offering an insight into the academic side of US patent matters.

On more specialist matters we would mention the following:

- Spicy IP. This is a very active blog covering all Indian IP matters. Lots of interesting opinions.

- K’s Law. This EPO case law blog became inactive in May 2014 but it remains a useful online resource.

- DeltaPatents, EQE Tools, EPLAW Patent Blog and  Le Blog du Droit Européean des Brevets are all good for EPO (and to an extent European) case law.

- The SPC Blog. Very specialist.

You may also wish to see related articles 10 Points on Using Online Patent Databases and 9 Points on What Makes a Commercial Biotech Blog a Good One.

9 Points on Differences Between Europe and the US Relevant to Patents and Biotech Innovation

These points are a collation of our thoughts on the differences between Europe and US relevant to innovation and patent law development. Some of the points are more relevant to biotech which is our specialist area. It is not the purpose of this post to list the specific differences in patent practice between the two territories.  We realise that some of the points listed below are speculative, coming from ‘anecdotal’ experience.  Partly this is because it is difficult to see what the situation is in Europe in particular areas due to lack of data collection and analysis.

1. Despite the European Union (EU), members of the EU remain very much individual economies, with national boundaries impacting on IP matters and potentially hindering innovation. In contrast the US is a single economy with central institutions for granting and enforcing patents. The sheer size of the US means that larger institutions, companies and ecosystems can come into existence.

2. The US is more developed in many economic areas. For biotech the venture capital system is much more developed. It is larger in terms of the amounts invested and also seems to have more expertise in dealing with the complexity of funding early stage biotech research.

3. It could be argued that the European patent system is not yet complete in that the Unitary Patent and the Unified Patent Court have not yet come into existence. Looking at the existing systems it is of course difficult to see how well the European and US patent systems are doing compared to each other. Given the impact of recent US Supreme Court decisions and the number of different bills that have been proposed to deal with the problem of patent trolls, the US system certainly seems to be changing rapidly and is arguably more responsive.

4. It seems to us that the US patent system is more open to different ideas and perspectives, including lobbying, at the level of law-making, USPTO practice and Court decisions.

5. The US in general is a place with a higher level of level of experimentalism.  There are more ideas and more organisations experimenting, including think tanks, companies and universities. The Federal System itself allows experimenting with democracy and law-making which central government can see the results of and learn from.

6. In our opinion the US remains more capable of developing innovation ecosystems. In addition we speculate that collaborations are much easier to set up without the complexity of national boundaries.  US research also tends to have a more ‘visionary’ approach which seems to focus it and give it momentum.

7. We would propose that in the US there is a higher level of ‘conversation’ happening in the areas of patent law development, funding of innovation and R&D strategies. Certainly there are more high quality blogs reporting and commenting on these areas. We would also propose that US institutions and corporations are more exposed to this ‘conversation’ allowing them to potentially be better decision-makers.

8. There seems to be a higher level of academic study of innovation and IP in the US, in terms of published articles and books. Academics also seem to participate more in policy arguments.

9. It must be pointed out that the economies of Germany, the UK and the US are comparable in productivity terms, and so the performance of the economies per se of these countries are not responsible for the differences we have mentioned.

You may also wish to see related articles How is Biotech Patenting Different? and 10 Patenting Scenarios.