Patent Law Practice Center

Hatch files Amendment to Fix IPRs for Pharma

Senator Orrin Hatch (R-UT), co-author of the Hatch-Waxman Act, filed an amendment in the Senate Judiciary Committee to address what many characterize as abusive inter partes review (IPR) filings relating to brand name pharmaceuticals. According to Senator Hatch, his amendment is intended to fix IPRs and restore the careful balance the Hatch-Waxman Act struck to incentivize generic drug development. The Hatch-Waxman Act encourages generic drug manufacturers to challenge patents of brand name drugs by filing Abbreviated New Drug Applications with the Food and Drug Administration, which can and typically does result in patent infringement litigation in federal district court.

“As the coauthor and namesake of Hatch-Waxman, I have a keen interest in ensuring we have a well-functioning generic drug industry,” said Senator Hatch in a press release published last night. “My amendment will ensure that Hatch-Waxman continues to operate as originally intended by protecting the ability of generic drug companies to develop low-cost drugs while at the same time ensuring brand-name companies have sufficient protections in place to recoup their investments.”

In recent years inter partes review (IPR) at the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO) has created an alternative path to challenge the patents of brand name drugs; a path alternative to the path envisioned in Hatch-Waxman. Those who support the Hatch-Waxman regime view IPRs as upending the careful Hatch-Waxman balance.

Senator Hatch’s amendment, the Hatch-Waxman Integrity Act of 2018, would require a generic manufacturer wishing to challenge a brand-name drug patent to choose between Hatch-Waxman litigation, which affords certain advantages such as being able to rely on the drug innovator’s safety and efficacy studies for FDA approval, and IPR, which is cheaper and faster than Hatch-Waxman litigation but does not provide the advantages of a streamlined generic approval process. Parties would not be able to use both. In this way, the amendment aims to fix the misuse of IPRs by generics as parallel and duplicate proceedings to disputes already in place under Hatch-Waxman.

Politically, this Hatch “pick a path“ amendment is going to be paired with S. 974, The CREATES Act of 2017 (H.R. 2212).  This legislation aims to enable the sharing of samples so that generics can compete more effectively.  You can learn more about the substance of the CREATES Act by reading Senator Leahy’s summary here. The Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act enjoys broad, bipartisan support from Senators Leahy, Grassley, Feinstein, Graham, Durbin, Lee, Whitehouse, Cruz, Klobuchar, Kennedy, and Blumenthal.  Generics want the CREATES Act, and there are 28 co-sponsors.  The bill was voted out of the Judiciary Committee favorably, but Hatch voted against it.

Raising and connecting the Hatch-Waxman IPR fix to the CREATES Act balances two major interests of both the brand and generic industries.  Brand needs this Hatch-Waxman IPR fix and generics want CREATES.  Like Hatch’s original objective with Hatch-Waxman, each side gains something…resolving a major problem for them…and neither loses anything that they had any reasonable expectation that they would, or should, be able to maintain.

Another patent reform advocate to retire from House of Representatives

Congressman Darrell Issa (R-CA), has announced that he will not seek re-election in 2018 and will retire from Congress. Issa, who currently chairs the House’s Judiciary Committee’s Subcommittee on Courts, Intellectual Property and the Internet, has been an outspoken advocate for the need for more patent reform.

Issa’s decision not to seek re-election means that the three most ardent Republican supporters of patent reform in the House will not return for the 116th Congress in January 2019. House Judiciary Chairman Bob Goodlatte (R-VA) announced his retirement in November 2017. Former House Judiciary Chairman and co-sponsor of the America Invents Act (AIA) Congressman Lamar Smith similarly announced his retirement in November 2017.

If Republicans hold on to a majority in the House, it seems likely that Congressman Doug Collins (R-GA) will take over as Chair of the House IP Subcommittee. Collins, an ally to inventors and creators, is currently Vice-Chair of the House IP Subcommittee.

While many patent owners and independent inventors will celebrate Issa’s decision to retire, his legacy on patent issues is a complicated one.

“As a patent owner himself, Chairman Issa understood the importance of a strong IP system,” said Todd Dickinson, former Director of the United States Patent and Trademark Office and current partner at Polsinelli.  “While some differed with him on his approach to specific reforms, his heart was always with the system, so losing someone who knew the patent system personally will be a loss.”

Whether Issa was a hero or villain on matters of patent reform will largely be in the eye of the beholder. Many large corporations — such as Google, Cisco and J.C. Penney — have continued to seek additional patent reform ever since the AIA was signed by President Obama in September 2011, and have found Issa to be a strong ally.

What is not open for debate, however, is Issa’s influence in a positive way on how the federal courts structurally handle and assign patent lawsuits. “He should specifically be remembered for initiating the legislation that ultimately lead to the judicial Patent Pilot Program, which has been a successful attempt to create focus and training among District Courts and their judges having a particular interest in patent cases,” Dickinson said.

Should the Democrats take the House of Representatives in the next election cycle probably either Congressman Jerrold Nadler (D-NY), who is the Ranking Member on the House Judiciary Committee, or perhaps Congresswoman Zoe Lofgren (D-CA), would become the new Chair of the House Judiciary Committee. Both Nadler and Lofgren have been supporters of patent reform efforts in the past. Congressman Hank Johnson (D-GA) is currently the Ranking Member on the Subcommittee on Courts, Intellectual Property and the Internet, and could perhaps ascend to Chair the House IP Subcommittee. Johnson has taken positions in the past favorable to patent owners, such as his Amendment that would have substantially changed the fee-shifting provisions of the Innovation Act.

Architect of America Invents Act announces retirement from House

Longtime Texas Representative Lamar Smith (R-TX), chairman of the House Committee on Science, Space, & Technology, will be retiring from his duties on Capitol Hill and will not seek reelection for another term of service. Smith, a former Chairman of the House Judiciary Committee and powerful member of the Republican leadership, will leave a void. His retirement marks the end of a 30-year tenure of public service and will immediately create a leadership void on the House committee responsible for overseeing our nation’s science and space policies.

Smith was first sworn into office at the U.S. House of Representatives in 1987 and has served the 21st congressional district of Texas, which includes areas of Austin and San Antonio and parts of the Texas Hill Country, since that time. During his time in Congress, Smith has been involved with the sponsorship of legislation related to technology including the Stop Online Piracy Act (SOPA) and the STEM Education Act of 2014. Many readers of this blog will recall that Smith was an original co-sponsor to the Leahy-Smith America Invents Act (AIA) of 2011, along with Democratic Representative Patrick Leahy (D-VT). That piece of legislation created the Patent Trial and Appeal Board (PTAB), an Article I executive branch tribunal which is being challenged on constitutional grounds before the U.S. Supreme Court in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC.

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USPTO Director Lee testifies before House Judiciary Committee

On the afternoon of Tuesday, September 13th, the intellectual property subcommittee of the U.S. House of Representatives Judiciary Committee convened for a hearing on oversight of practices and procedures at the U.S. Patent and Trademark Office. The day’s sole panelist was USPTO director Michelle K. Lee. The day’s discussion focused on recent reports from federal governmental agencies regarding issues at the USPTO surrounding patent litigation as well as time and attendance abuses among USPTO examiners.

A press release posted in advance of the hearing contained statements from both House Judiciary Committee chairman Bob Goodlatte (R-VA) and Courts, Intellectual Property, and the Internet subcommittee chairman Darrell Issa (R-CA) provided a good indication of the direction the hearing would take. Both statements reflected a wariness regarding timesheet abuses among USPTO employees. “The amount of wasted man-hours that could have been spent reducing the patent backlog is astounding, not to mention the millions of taxpayer dollars that were wasted paying USPTO employees for work they were not doing,” Goodlatte’s statement read. Issa added, “If the PTO can’t even guarantee sufficient oversight of its employees timecards, how can we be assured patent examiners aren’t just rubberstamping ideas without oversight as well?”

The concerns of both Congressmen stem from an examiner time and attendance report issued August 31st by the Office of the Inspector General (OIG) within the Department of Commerce. The Commerce Department’s OIG found 288,000 unsupported hours of work claimed by examiners over a 15-month period, which was equated to more than $18.3 million in potential waste. The OIG report also found multiple weak points in USPTO policy which limits the agency’s ability to detect fraud, including no requirement for teleworking examiners to log into computers during workdays as well as no requirement for workers with average or high performance ratings to provide supervisors with work schedules.

The methodology used during the OIG’s study on time and attendance abuse was also questioned by Congressman Jerrold Nadler (D-NY). Nadler’s prepared remarks noted that the unsupported work hours identified in the OIG’s report amounted to less than 2 percent of all hours worked by examiners during the 15-month period of the study. “In fact, the IG acknowledges that after the USPTO instituted certain reforms to its telework policy, six months into the study, the percentage of unsupported hours dropped to just 1.6%, an efficiency rate that most employers would boast about,” Nadler’s prepared remarks stated. “But, the IG buried this fact in a footnote deep in the report.”

“My team and I do not tolerate time and attendance abuse,” Lee told the subcommittee. While she did note that the USPTO had taken disciplinary actions against examiners that have abused time and attendance reports, such actions ranging from counseling to expulsion and repayment for hours not worked, she added that there was evidence that instances of time and attendance abuse were not widespread. She cited a report on the USPTO’s telework program issued by the National Academy of Public Administration (NAPA) in July 2015. The report found that “It would appear to be unlikely that [time and attendance] abuse is widespread or unique to teleworkers, and it does not appear to reflect the actions of the workforce as a whole.”

Congress passes Defend Trade Secrets Act by overwhelming margin

On April 27, 2016, the United States House of Representatives passed S. 1890, the Defend Trade Secrets Act of 2016 (DTSA), by a vote of 410-2. Only Congressman Thomas Massie (R-KY) and Congressman Justin Amash (R-MI) voted against the bill.

The  DTSA was authored by U.S. Senators Chris Coons (D-DE) (pictured left) and Orrin Hatch (R-UT) and cosponsored by nearly two-thirds of the Senate. The bill was previously passed by the Senate on April 4, 2016, by a vote of 87-0, and will now move on the White House. Even before the Senate passed the DTSA, the Obama Administration voiced strong support for the bill. President Obama is expected to quickly sign the bill into law, which will make it the the first-ever comprehensive federal trade secret law.

Once signed by President Obama, the DTSA will amend the Economic Espionage Act of 1996 to create a federal civil remedy for stealing trade secrets and give innovators another procedural avenue by which to protect their intellectual property from theft.

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