Washington Editor

WASHINGTON - House members on Thursday heard multiple viewpoints on newly introduced patent reform legislation, key components of which are opposed by the Biotechnology Industry Organization, opening the door for potential upgrades as the matter moves forward.

"I'm not wedded to every word of my proposal," said Rep. Howard Berman (D-Calif.), a co-sponsor of the bill and chairman of the subcommittee on courts, the internet and intellectual property of the Judiciary Committee. Noting that he expects "numerous changes" to be incorporated to the measure, which he called "our starting point," Berman promised that the hearing would inform lawmakers on where to go.

That would seem to placate those concerned about the bill, at least to some degree. The biotech industry generally falls into that camp, because the legislation's unintended consequences could "strike at the heart of the business model of our small companies," for which their patents are "a very large part of their capital," BIO's Associate General Counsel Hans Sauer told BioWorld Today ahead of the hearing. In addition, he said, biotech companies "use the patent system to commoditize the only things they really have: their inventiveness, their platform technology and their quick, smart ideas."

The "Patent Reform Act of 2007," a bipartisan and bicameral bill labeled S. 1145 in the Senate and H.R. 1908 in the House, is written to make some fundamental changes to the patent system, not unlike other efforts already afoot to modify intellectual property rights. In the past couple of years, the Supreme Court has taken on more and more patent cases, with rulings that invariably affect various business matters around patents, and the U.S. Patent and Trademark Office has begun administratively changing rules.

The bill proposes changes to redefine whether or not something is patentable, would reform patent litigation to put boundaries on infringement damages and venues for bringing suit, and would promote patent quality by changing patent office proceedings. It "arguably" represents the biggest change to the U.S. patent system in more than 50 years, said co-sponsor Rep. Lamar Smith (R-Texas).

BIO favors some of the reforms to modernize intellectual property rights, such as harmonizing American laws with those of other countries. That would entail awarding first-to-file patent applicants, not those claiming first-to-invent status, which the U.S. system has long recognized in contrast to the rest of the world. The organization also supports changing lawsuit venue rules to restrict litigation to district courts where companies are doing business instead of locations with speedy dockets, which favor plaintiffs.

But BIO is troubled with other parts of the bill, and said certain changes would make it harder to get patents and easier to challenge them. In short, the bill could devalue intellectual property and therefore hinder investments in the biotech industry, 90 percent of which is based in the U.S. in part because of the patent system here, Amgen Inc.'s Chairman and CEO Kevin Sharer testified at the hearing.

He seconded BIO's primary points of contention with the bill: a post-grant opposition system that would allow broad and open-ended patent challenges for the full life of a patent, and language to change judges' damage calculations for infringing on patents.

The post-grant opposition system would permit a challenges to be brought against a patent's validity any number of years after it was first issued, a so-called "second window." Under such a scheme, a patent would seem to be given no presumption of validity, hence Sharer's warning against the consequences of losing "confidence" that a patent would persist. At present, validity challenges are raised in the context of litigation or a threatened suit.

"The more we invest in our technology to bring it to market, the more valuable these patents become to us," Sauer said. "Our member companies tell us that they find it intolerable to think that after this investment, eight years [or more], as we're approaching the marketplace, that somebody can come into the patent office and bring that challenge in a simple and quick proceeding."

The proposed calculus to change patent infringement remedies would lead to lower damages "in many, many cases," Sauer said, and would open the door for willful infringement because it could be less expensive than a license. As a result, smaller companies and research centers fear that their out-licensing fees could get driven downward.

In terms of missing elements, BIO would like to see lawmakers add language that addresses inequitable conduct, a defense tactic used to exonerate infringement by claiming that patentees acted dishonestly when applying for intellectual property coverage. "Not only would challengers have the opportunity to just knock out a patent in the patent office, but they could also use such a proceeding to gather ammo for later litigation," said Sauer. He noted his surprise that no such provision is in either version of the bill, given that such language had been part of previously introduced iterations.

BIO also would like a bill that repeals the best-mode requirement, which requires patentees to fully disclose how to make and use an invention, and describe its mode of action. At present, neither S. 1145 nor H.R. 1908 has such a provision.

The companion bill is backed by Sens. Patrick Leahy (D-Ver.) and Orrin Hatch (R-Utah).