OPINION: The Wrong Direction on Patents

In the United States, protecting intellectual property is a bedrock principle. Without clear patent processes and strong enforcement rights, markets everywhere would be crippled by uncertainty. Investors could never be confident that companies actually own the innovations they are working to commercialize. Entrepreneurs would get mired in legal wrangling, investment would dry up and new products would be delayed, if they reached market at all.

For these and other reasons, proposals to change patent-litigation processes and mechanisms must be approached with serious caution. Poorly conceived and hastily written legislation can stunt innovation, harm the economy and even cost lives. Unfortunately, this is the case with the recently reintroduced Innovation Act (H.R. 9).

A carbon copy of legislation passed by the House during the last Congress, the measure has the admirable goal of restraining so-called patent trolls. Unfortunately, the bill features overzealous and short-sighted provisions that ignore recent changes in both IP law and U.S. Patent and Trademark Office regulations. As a result, the Innovation Act would make it more time-consuming and costly for legitimate patent holders to defend patents, generating confusion rather than clarity and harming rather than promoting innovation.

This legislation is especially problematic for small biomedical companies in California and elsewhere. In some cases, intellectual property may be these firms’ only major asset. Reducing the ability to capitalize on innovative technologies could delay critical therapies, tools and diagnostics for cancer, cardiovascular disease, Alzheimer’s and many other conditions. The Innovation Act also threatens an increasingly important sector of our economy. In California alone, the life sciences industry employs more than 270,000 people, generates more than $27 billion in wages, and pays over $3 billion in California state and local taxes.

One of the most troubling provisions in the Innovation Act creates mandatory stays of discovery in patent-infringement cases. Such mandatory stays would prolong litigation, increasing costs, while placing a company’s intellectual property in legal limbo. Equally frustrating, the provision is completely unnecessary, as the Judicial Conference, which makes policy for U.S. courts, is already requiring proportional discovery and additional discovery management by district court judges.

The bill also mandates enhanced pleading, requiring detailed information that may not be available to patent owners at the start of the case. This, too, would delay litigation, reducing each patent holder’s ability to protect their intellectual property. However, once again, the Judicial Conference has already addressed the need for greater specificity during pleading. The conference eliminated Form 18, which was often used to justify the most meager patent-infringement claims. These enhanced pleading standards alleviate the need for legislative action.

In addition, the bill could have even more far-reaching consequences. Organizations that would normally be outside the scope of legal action could be brought into litigation as unwilling co-plaintiffs, putting companies, universities, research institutes, venture capitalists and others at risk for paying a variety of legal expenses.

This provision is particularly egregious because it strikes at one of the core values driving biomedical-industry success in California and elsewhere — collaboration. Universities and research institutes license new technologies to companies, who then rely on investors to help them develop these innovations into marketable products. Such cooperation is the fuel that powers this life sciences machinery. We must guard against any measure that might disrupt these all-important synergistic partnerships.

While its stated intent of reining in patent trolls is a valuable goal, the Innovation Act would do much more harm than good, delaying patent-litigation decisions, vitiating business confidence and disrupting the collaborative environment that has made America’s biomedical industry so successful.

Ultimately, H.R. 9 could be extremely harmful for the life sciences sector — and many others — throughout the nation. By its very nature, biomedical research and development is an inherently risky, expensive and uncertain process. And by forcing through ill-conceived changes that would make it more difficult for innovators to protect their patents, Congress runs the risk of doing fundamental and lasting harm to a sector that not only helps drive our economy, but is the hope of millions around the world. Instead of rushing through with such a risky proposition, let’s take the time to get it done right.

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Todd E. Gillenwater is senior vice president of Public Policy at the California Healthcare Institute.

This article appeared in print in the March 11th, 2015 edition of Hamodia.