Desperately Seeking Stacking: Guest Post by Jorge Contreras

In this Guest Post, Jorge Contreras, Associate Professor of Law at the University of Utah College of Law, discusses the lack of reliable sources of data regarding the existence of patent royalty stacking, and makes a public plea for firms to disclose more of their patent royalty data in order to permit the academic community to assess it.

Price and Rai on Biologic Secrecy

Nicholson Price and Arti Rai just posted Manufacturing Barriers to Biologics Competition and Innovation, which is forthcoming in the Iowa Law Review. Here is the abstract:

As finding breakthrough small-molecule drugs gets harder, drug companies are increasingly turning to “large molecule” biologics. Although biologics represent many of the most promising new therapies for previously intractable diseases, they are extremely expensive. Moreover, the pathway for generic-type competition set up by Congress in 2010 is unlikely to yield significant cost savings. 

In this Article, we provide a fresh diagnosis of, and prescription for, this major public policy problem. We argue that the key cause is pervasive trade secrecy in the complex area of biologics manufacturing. Under the current regime, this trade secrecy, combined with certain features of FDA regulation, not only creates high barriers to entry of indefinite duration but also undermines efforts to advance fundamental knowledge. 

In sharp contrast, offering incentives for information disclosure to originator manufacturers would leverage the existing interaction of trade secrecy and the regulatory state in a positive direction. Although trade secrecy, particularly in complex areas like biologics manufacturing, often involves tacit knowledge that is difficult to codify and thus transfer, in this case regulatory requirements that originator manufacturers submit manufacturing details have already codified the relevant tacit knowledge. Incentivizing disclosure of these regulatory submissions would not only spur competition but it would provide a rich source of information upon which additional research, including fundamental research into the science of manufacturing, could build. 

In addition to provide fresh diagnosis and prescription in the specific area of biologics, the Article contributes to more general scholarship on trade secrecy and tacit knowledge. Prior scholarship has neglected the extent to which regulation can turn tacit knowledge not only into codified knowledge but into precisely the type of codified knowledge that is most likely to be useful and accurate. The Article also draws a link to the literature on adaptive regulation, arguing that greater regulatory flexibility is necessary and that more fundamental knowledge should spur flexibility.

Small-molecule pharmaceutical drugs have long been the poster child for the patent system, but as Allison, Lemley & Schwartz have recently reminded us, pharma and biotech are not the same and may have very different patent ecosystems. For anyone interested in IP policy in the biologics space, this new piece by Price and Rai is highly recommended.

Do Biosimilar Manufacturers Have To Dance? A District Court Answers “No”

In 2010, Congress enacted the Biologics Price Competition and Innovation Act (BPCIA) as part of the Affordable Care Act. BPCIA is, in a broad sense, intended to be the analog of the Hatch-Waxman Act for biologic drugs. Hatch-Waxman provides a pathway for Food and Drug Administration (FDA) approval for small-molecule generic drugs. Vastly simplified, the Hatch-Waxman process comes down to this: if a follow-on (i.e., generic) manufacturer can make an identical copy of the branded drug molecule, it can obtain FDA approval to market the drug without the clinical trials that the drug’s originator had to go through to prove that the drug is safe and effective. This saves costs for the generic manufacturer and, once the generic goes on the market, lowers prices for consumers. Under Hatch-Waxman, a follow-on manufacturer’s act of filing a so-called Abbreviated New Drug Application is an act of patent infringement, and so the originator can try to keep generic drugs off the market using patent law. The Food, Drug, and Cosmetics Act also provides periods of market and data exclusivities even for originator drugs that are not covered by patents. But once those periods end and the generic manufacturer can prove chemical identity to the brand, the generic drug is good to go on the market as far as the FDA is concerned—and the only barrier left is the brand’s potential patent infringement claims.

Ryan Holte on the Impact of eBay v. MercExchange

For anyone looking for recent evidence and analysis of courts' application of ebay v. MercExchange (2006) in the last few years, Ryan Holte has a new article in the Chapman Law Review, which he discussed yesterday at PatCon 2015. In the article Holte addresses eBay's impact on patent remedies on the ground and data on district courts' injunction grant rates. Much of this data is being collected by Chris Seaman, who also presented on post-eBay injunction rates at PatCon. Holte and Seaman are currently working on a joint empirical study regarding all Federal Circuit permanent injunction decisions post-eBay – this will certainly be worth a look.

Patent Examiners with Three Arms Tied Behind Their Backs

In Patent Asymmetries (forthcoming UC Davis L. Rev.), Sean Seymore (Vanderbilt) explores some of the hurdles patent examiners face when considering patent applications:

Everyone knows that it is far too easy to get a (bad) patent. Fingers often point to the U.S. Patent and Trademark Office (PTO), which is often criticized for making awful patenting decisions. Legal scholars have offered several reasons for the quality problem, including low substantive standards for patentability and problems with the PTO’s inner workings, decision-making, and policy choices.

This Article offers a very different explanation for the patent quality problem. Drawing attention to what happens inside the PTO is clearly the correct locus; however, any serious headway toward improving patent quality must focus more directly on patent examination. My basic claim is that low-quality patents issue primarily because of a confluence of three asymmetries — proof, information, and legal — that exist in the current patent examination paradigm. I explain how these asymmetries tip the scales of patentability so far in the applicant’s favor that anyone who seeks a patent on anything usually gets one. I propose a new patent examination regime which would eliminate the three asymmetries, derail frivolous filings, and make a patent grant far from guaranteed. Rebalancing the scales of patentability would improve patent quality and promote broader goals of patent policy.

The three asymmetries are not so clear from the abstract. In short: 1) the default is that applicants get the patent, and the examiner must prove otherwise, 2) applicants surely know more about their inventions and the state of the art than the examiners, and not all of this knowledge makes it into the specification, and 3) while examiners may be technically competent, they are often outmatched by legal experts.

Lauren Henry: Privacy as "Quasi Property"

For those interested in the intersection of privacy, property theory, and intellectual property rights, Yale ISP Fellow Lauren Henry has a new article forthcoming in the Iowa Law Review in which she argues that privacy can and should be conceptualized as "quasi-property": a relational entitlement to exclude specific actors, a given type of behavior, and/or a given relationship between the actors. The quasi-property model is in contrast to the more complete exclusionary "rights against the world" afforded by, for instance, patents. Here is a quote from the abstract:

[Q]uasi-property provides the essential model for assessing the interest held by a privacy claimant against a defendant, and whether it has been infringed. The quasi-property model can account for the four privacy torts first advanced by William Prosser and adopted as law in the vast majority of states, and liberate them from the ossification that have stunted their development and ability to adapt to modern conditions. What’s more, the approach has implications for developing privacy rules for enforcement by other actors, such as administrative agencies, and even in conceptualizing other areas of privacy law outside of tort law, such as Fourth Amendment jurisprudence.

Henry's project is an explicit response to Pamela Samuelson's rejection of privacy as intellectual property. It reminds me of Mark Lemley's move in arguing that trade secrets should be treated as a form of intellectual property right rather than as subjects of contract and tort claims. But Henry's reliance on the quasi-property model, and her careful application of Shyam Balganesh's recent work revitalizing this paradigm, is more refined in its treatment of property theory. Recommend.

Lemley on Faith-Based IP

Yesterday Mark Lemley posted Faith-Based Intellectual Property (which was not an April Fool's joke). Here is the abstract:

The traditional justification for intellectual property (IP) rights has been utilitarian. We grant exclusive rights because we think the world will be a better place as a result. But what evidence we have doesn’t justify IP rights. Rather than following the evidence and questioning strong IP rights, more and more scholars have begun to retreat from evidence toward what I call faith-based IP, justifying IP as a moral end in itself rather than on the basis of how it affects the world. I argue that these moral claims are ultimately unpersuasive and a step backward in a rational society.

This short essay has already ignited quite a discussion in the blogosphere. Larry Solum argues that "[i]f consequentialism does not provide a true or correct moral theory, then it simply cannot be the case that the justification for intellectual property stands or falls solely on consequentialist grounds." In the comments on Amy Landers's post at PrawfsBlawg, James Grimmelmann writes that "there's something paradoxical about the argument that non-utilitarian theories are suspect because they don't depend on the kind of evidence that would satisfy a utilitarian," and he notes that "the legal system and legal theory trade off among morally incomparable claims all the time." In the same thread, Patrick Goold thinks we should distinguish between the IP "faithful" who "starts from the conclusion that IP rights are right or good and looks for reasons to support that" and the IP "philosopher" who "asks whether any norm justifies the conclusion that we ought to have IP rights." Jeremy Sheff argues that "we are dealing with two academic camps that simply value different things in different measure" but that the "apparent absence of a shared language between moral theorists and consequentialists" is the kind of problem we can solve.

Amy Landers on Patent Market Bubbles

Amy Landers has an original and provocative new piece in the Chapman Law Review in which she argues that patent markets may be vulnerable to "bubbles," as in other markets with uncertain asset valuations such as the housing market. Whether patents are subject to bubble behavior in fact remains to be seen, but if Landers is correct this challenges the view that patent monetization entities and other intermediaries that assist in creating a liquid market for patents perform a beneficial function by improving patent valuations and efficiently transferring patent rights among actors in the innovation ecosystem.