Patent Reform

Innovation Requires Strong Patents

America's biopharmaceutical industry relies on dedicated researchers and workers to produce lifesaving treatments. The industry also relies on strong intellectual property laws, like patents.

Patents grant inventors exclusive rights over their inventions for a set number of years. During that time, nobody else is allowed to copy or sell the inventions.

It takes an average of over 10 years of research and $2.6 billion - including the cost of failures - to create a new treatment. Patents help biopharmaceutical companies try to recoup this massive investment. Without patents, medical progress would grind to a halt, since no company would invest in research if a rival firm could simply swoop in, copy a medicine's formula, and then sell knockoffs.

Patents are, quite literally, the foundation of the biopharmaceutical industry.

Congress Wants to Reform Patent Laws

Congress is debating a number of changes to the patent system. Lawmakers want to target "patent trolls." These businesses and individuals don't actually invent anything. They simply acquire patents - often for obvious ideas - to collect licensing fees or extort settlement money from companies by filing frivolous patent infringement lawsuits.

The House of Representatives is considering the "Innovation Act" (H.R. 9), which would increase the difficulty and cost of filing a patent infringement lawsuit. While the goal is to stop trolls, the Innovation Act is so broad that it would make it harder for legitimate patent holders, like biopharmaceutical companies, to protect their patents in court.

The Senate is considering its own patent bill, the "PATENT Act" (S. 1137). The PATENT Act does a better job of balancing the need to crack down on trolls while ensuring patent owners can still protect their inventions from copycats.

However, the PATENT Act lacks provisions to protect medicines from unfair patent challenges. To encourage continued investment in biopharmaceutical research and development (R&D), senators must exempt patents on FDA-approved medicines from challenges before a biased review panel at the Patent and Trademark Office (PTO) known as the Patent Trial and Appeal Board (PTAB).

Unfair Patent Challenges Would Undermine Medical Innovation

Since 2012, parties looking to challenge the validity of a patent have been able to petition PTAB to overturn the patent. Congress created PTAB to reduce the need for lawsuits by providing a way to resolve some patent disputes outside of court.

Unfortunately, PTAB rules in favor of those seeking to overturn patents so often that it has become known as a patent "death squad." Operating under different standards than a federal court, PTAB has invalidated some or all of the reviewed claims in more than 80 percent of its final decisions.  

This well-known anti-patent bias has allowed hedge funds to manipulate a biopharmaceutical company's stock value. The hedge fund bets that the company's share price will fall, and then challenges the company's patent before PTAB. The stock price decline becomes self-fulfilling as investors, fearing the patent will be invalidated, sell off the stock. This tactic can earn millions for the hedge fund but harms shareholders and decreases the company's ability to attract new funding for biopharmaceutical R&D.

The possibility of PTAB challenges could discourage biopharmaceutical companies from investing in costly and uncertain R&D. To encourage such research, Congress should protect the current process for challenging medicine patents found in the Drug Price Competition and Patent Term Restoration Act (Hatch-Waxman) and the Biologics Price Competition and Innovation Act (BPCIA).

Medicines already have their own patent challenge and review process under these two current laws. To encourage R&D efforts, both laws provide for a "data protection" period during which  competitors are prohibited from using the innovator biopharmaceutical company’s valuable clinical data to seek approval from Food and Drug Administration (FDA) for their copycat versions.

After this period, generic and biosimilar manufacturers can use such data to seek FDA approval for their knockoff treatments. They can also challenge the innovator’s patents through the Hatch-Waxman and BPCIA systems that already allow challenges to be brought under them against patents that are potentially too broad.

There's no need for PTAB challenges to disrupt this system, which is vital to the R&D process that led to 41 new FDA-approved medicines in 2014. Congress must prevent PTAB challenges on medicines and preserve the delicate balance struck under the Hatch-Waxman and BPCIA patent challenge processes.

How to Improve Patent Legislation

Any patent reform law should target patent trolls with scalpel-like precision, while ensuring that legitimate patent holders can still enforce their patents. To protect biopharmaceutical innovation and prevent abusive patent challenges by hedge funds and others, the "Innovation Act" (H.R. 9) and the "PATENT Act" (S. 1137) should exempt patents for FDA-approved medicines from PTAB challenges.