Patents

I Think, Therefore I Am: The Battle for Intellectual Property Rights with Artificial Intelligence

March 17, 2022
Artificial Intelligence, Intellectual Property, New Technology, Patents

Sara Pistilli, MJLST Staffer

Artificial intelligence (AI) is a computer or robot that is able to perform tasks that are usually done by humans because they require human judgement and intellect. Some AI can be self-learning, allowing them to learn and progress beyond their initial programming. This creates an issue of inventorship when AI creates patentable subject matter without any contribution from the original inventor of the AI system. This technological advancement has posed the larger question of whether AI qualifies as an “individual” under the United States Patent Act and whether people who create AI machines are able to claim the patent rights when the AI has created the patentable subject matter.

Artificial Intelligence “Inventors”

Patent law is continuously changing as technology expands and advances. While the law has advanced to accommodate innovative technology in the past, the introduction of AI has not been fully articulated. The United States Patent and Trademark Office (USPTO) opened up for comment on patenting AI inventions in 2019, however, it does not appear they asked for any further purpose other than to gather information from the public. The USPTO again asked for comment about patent eligibility jurisprudence as it related to specific technological areas, including AI in 2021. They gathered this information as a “study” and did not pursue any official action. The first official push to recognize AI as an inventor was by Dr. Stephen Thaler. Thaler built an AI machine called “DABUS,” and sought patent rights for the machine’s inventions. Thaler did not argue for DABUS to be the patent right holder, but rather the machine to be named the inventor with Thaler as the patent owner. Thaler’s insistence to name DABUS as the inventor complies with USPTO’s rulesregarding an inventor’s oath or declaration that accompanies a patent application.

United States’ Rulings

Thaler applied for patent rights over a food container and devices and methods for attracting enhanced attention. Both of these products were invented by his AI machine, DABUS. After applying for a U.S. patent, the USPTO rejected his application stating that U.S. law does not allow for artificial intelligence to be listed as an inventor on a patent application or patent. USPTO cited the Patent Act, stating an inventor must be a person, not a machine. USPTO stated that to allow “inventor” to include machines was too broad. Thaler requested reconsideration from the USPTO which was later denied. In 2021, Thaler appealed his rejection in the Eastern District of Virginia. Thaler failed to obtain patent rights with Judge Brinkema ruling only a human can be an inventor. Judge Brinkema relied heavily on statutory interpretation of the word “individual” which was performed by the Supreme Court in a 2012 case on the Torture Victim Protection Act. The Supreme Court had concluded that an “individual” referred to a “natural person.” Judge Brinkema further stated, that it will be up to Congress’ discretion on how they would like to alter patent law to accommodate for AI in the future. Thaler now has a pending appeal to the Court of Appeals.

International Rulings

While countries’ patent systems are independent of one another, they can be influenced based on technological and regulatory advancement happening in another country. Thaler has sought patent rights for DABUS’ two inventions discussed above in several countries including, but not limited to, the United Kingdom, Australia, and South Africa. Thaler obtained patent rights in South Africa, constituting a first in intellectual property history. Of note, however, is that South Africa’s patent system does not have a substantive patent examination system like other countries, nor do their patent laws define “inventor.” Thaler received a more persuasive ruling in Australia that may be able to effectuate change in other countries.  In 2021, Thaler’s patent application was denied in Australia. The Australian Patent Office (APO) stated that the language of the Patents Act was inconsistent with AI being treated as an inventor. Thaler appealed this decision to the Federal Court of Australia. Justice Beach ordered that this case must be remitted based on his ruling that AI can be a recognized inventor under the Australian Patents Act. Judge Beach further stated that AI cannot, however, be an applicant for a patent or an owner of a patent. It is with these reasons that Judge Beach requested reconsideration and remitted this case back to the Deputy Commissioner of the APO. The APO is now appealing this decision. Similar to the APO, the United Kingdom Intellectual Property Office (UKIPO) also pushed back against Thaler’s application for patent rights. In 2019, the UKIPO rejected Thaler’s application stating that the listing of DABUS as an inventor did not meet the requirements of the United Kingdom’s Patent Act. They stated a person must be identified as the inventor. Thaler appealed this rejection and was again denied by the UKIPO, who stated that a machine as an inventor does not allow for the innovation desired by patent rights. Thaler appealed again, to the England and Wales Patents Court, and was again denied patent rights. The judge stated that Thaler was using the Patent Act text out of context for his argument, ruling that the Patent Act cannot be construed to allow non-human inventors. In 2021, Thaler appealed this decision in the England and Wales Court of Appeals. He was again denied patent rights with all three judges agreeing that a patent is a right that can only be granted to a person and, that an inventor must be a person.

Future Prospects

Thaler currently has pending applications in several countries including Brazil, Canada, China, and Japan. The outcome of the appeal against the Federal Court of Australia’s decision on whether AI can be an inventor may prove crucial in helping to amend U.S. patent laws. Similarly, if more countries, in addition to South Africa, outright grant Thaler his patent rights, the U.S. may be forced to re-think their policies on AI-invented patentable subject matter.

Quantum Computing: Ready To Be Patented!

November 12, 2021
Intellectual Property, Patents, Uncategorized

Shuang Liu, MJLST Staffer

In June 2021, IBM presented its newest and most powerful quantum computer—Q System One. This news highlighted people’s continuing confidence and resolution in the research and development of quantum computing. As a matter of fact, several countries and leading high-tech corporations are investing from millions to billions in various aspects of quantum computing technology, and filing patent applications to protect their research achievement.

(Q System One at Fraunhofer-Gesellschaft, Germany)

This article attempts to provide a brief introduction of quantum computing technology (Part I), a potentiometric analysis of the high-tech corporations in quantum computing industry (Part II), and a discussion of potential legal challenges in obtaining patents related to quantum software (Part III).

I. The Quantum Computing Technology and Its Potential Applications

The world’s most famous cat, Schrödinger’s cat, is both alive and dead until it is observed. A quantum bit (“qubit”) behaves similarly—it is both 0 and 1 until it is measured. A classical computer transmits and processes n-bit information with n bits. In contrast, since a qubit represents 0 and 1 at the same time (that is, a superposition of 0 and 1), a quantum computer transmits and processes 2n-bit information with n qubits. Therefore, if a good algorithm is found and the superposition property is utilized properly, a quantum computer can compute exponentially faster than a classical computer.

However, algorithms for quantum computers (hereinafter “quantum algorithms”) are not easy to find and algorithms for classical computers (hereinafter “classical algorithms”) cannot be readily applied on quantum computers. After all, classical algorithms solve problems in a deterministic way (where bits are either 0 or 1), while a quantum computer by its nature processes probabilistic information (where bits are superpositions of 0 and 1). It took people decades to develop the first quantum algorithm that showed capability of solving real-life problems. To date, although quantum algorithms are still far from enough, the available ones do show a great potential of applications.

The first, surest application is cryptanalysis. Integer factorization plays a key role in cryptanalysis. The Shor’s algorithm, one of the most famous quantum algorithms, is able to factor all integers in polynomial time, which has not been made possible by classical algorithms so far.

Another promising application is predicting new chemicals and materials having certain properties. Properties of chemicals and materials usually depend on a variety of factors and can be too complicated for a classical computer to make simulations. A quantum computer, with a stronger computation power, is expected to be able to make such simulations. To be noted, researchers are hopeful to use a quantum computer to find a way to build materials that can be superconducting at room temperature.

Complex processes, such as biological processes, economic development modelling, energy allocation optimization, and big data processing, are also good candidates for which a quantum computer can use its exceptional computation power.

II. Patent Landscape of Leading Corporations

People’s confidence in the potential of quantum computing leads to a race in patents. In the last five years, nearly a thousand patent applications related to quantum computing have been filed in the US, and a little bit fewer before the WIPO.

The figures below show the number of applications filed by leading corporations related to quantum computing and the number of applications related to specific areas. Among them, IBM is the first active patent applicant, leading other corporations by big margins and showing interest in almost every aspect of quantum computing. Other leading applicants are interested in different aspects of quantum computing. For example, Microsoft is mainly working on the software side (machine learning and optimization), while Intel devotes its most energy on the hardware side (quantum circuits). It is also worth noting that Bank of America has filed many applications in the cryptology aspect of quantum computing—it is endeavoring to be the first to use quantum security keys to protect its data.

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Figure 1

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Figure 2

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Figure 3

Turning our eyes to the world, we can see that Huawei, a Chinese telecommunication company, has filed a large number of quantum computing related applications before the World Intellectual Property Office (WIPO). Its major interests reside in quantum communication and securing such communication with cryptographs. NEC, a Japanese electronics corporation is also an active global patent applicant. It mainly focuses on building a quantum computer itself.

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Figure 4

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Figure 5

III. Potential Legal Issues

In the process of obtaining a patent, the most common substantive rejections are novelty and obviousness rejections. For a quantum software application, a patent-eligibility rejection is also likely. The subsections below discuss patent-eligibility and obviousness challenges especially for quantum software applications.

A. Patent Eligibility

The case law on patent eligibility of software has been unclear and inconsistent. This subsection does not attempt to, nor can it, predict the patent eligibility of quantum software. But at least there are more arguments available for patent eligibility of quantum software than those of classical software.

Courts tend to find a software claim ineligible if it is “not tied to any particular novel machine or apparatus, only a general-purpose computer.” From a policy perspective, such claims are disfavored by courts because “[they] would risk disproportionately tying up the use of the underlying ideas and . . . pose . . . risk of pre-emption.”

To facilitate discussion and avoid confusion, the remainder of this and next subsection will discuss with claim 1 ofU.S. Pat. No. US10990677B2 (hereinafter “‘677 claim 1”):

“A method, comprising:

programming a quantum computing device to implement quantum circuits that perform a machine learning technique using one or more qubits of the quantum computing device, wherein the machine learning technique employs principal component analysis based on at least one median estimate stored as a quantum bit string . . . .”

In a nutshell, ‘677 claim 1 recites a machine learning technique implemented by a quantum computing device. It was drafted in a way that it is closely tied to the quantum computing device, in contrast to “a general-purpose computer.” Therefore, if challenged, the patentee can always argue that this method is closely tied to “a particular novel machine,” and can’t possibly preempt all use of the underlying concept in the claim.

It is worth noting that, instead of simply claiming a machine learning method implemented by a quantum computer, the claim ties the implementation with “quantum circuits” and “one or more qubits.” When drafted this way, the patentee has a strong argument that this claim is not an abstract idea under the commonly used pen and paper test,because a human cannot implement quantum circuits and/or use qubits either mentally or by a pen and a piece of paper.

Other quantum software or algorithm patents might have other arguments available. For example, the patent eligibility of an error correction algorithm patent can be supported by the fact that it greatly improved the performance of a quantum computer, which is a common theme of the current case law of patent eligibility.

B. Obviousness

As can be expected, ‘677 claim 1 has been challenged under 35 U.S.C. §103. In the Non-Final Office Action, the Examiner asserted Mork et al. in view of Kappor et al. in further view of Kerner et al. renders the claim obvious, wherein Mork discloses a classical computer implementing a similar machine learning technique, Kerner discloses a quantum computing device, and Kappor recites that “[t]he machine learning acceleration hardware . . . may comprise . . . a quantum computing device” without providing any details. Such a combination of references can be a recipe for obviousness rejections against quantum software claims.

The key for this rejection to stand is the “connecting” reference (in this example, Kappor), that is, how the classical algorithm can be connected to a quantum computing device. As discussed in Section I of this article, it’s not just that the computation powers of a classical computer and a quantum computer are different; the ways they compute are not at all the same.

Accordingly, for this specific example, the rejection is erroneous because Kappor does not provide any details of how to apply its machine learning process to a quantum computing device, let alone providing teachings of how to apply the machine learning technique disclosed by Mork to a quantum computer. In general, a reference that motivates and teaches to apply a classical algorithm on a quantum computer can be extremely difficult to find. That is because, there is few, if any, classical algorithm can be readily applied on a quantum computer!

Therefore, it is fair to say that a reference in the classical software domain is almost never effective to defeat the patentability of a quantum software.

Conclusion

Although quantum computing technology is still in its infancy, people are very confident in its potential. Corporations in the industries of communication, computing, electronics, and even finance have joined the patent race of quantum computing related technologies. The patent space of quantum computing technology is still quite sparce, and a patent on quantum computing can be obtained much more easily now than later.

Intellectual Property in Crisis: Does SARS-CoV-2 Warrant Waiving TRIPS?

February 21, 2021
Bioethics, Biotechnology, COVID-19, Food and Drug Law, Health, Healthcare, Intellectual Property, Patents, Regulatory

Daniel Walsh, MJLST Staffer

The SARS-CoV-2 virus (which causes the disease COVID-19) has been a massive challenge to public health causing untold human suffering. Multiple vaccines and biotechnologies have been developed to combat the virus at a record pace, enabled by innovations in biotechnology. These technologies, vaccines in particular, represent the clearest path towards ending the pandemic. Governments have invested heavily in vaccine development. In May 2020 the United States made commitments to purchase, at the time, untested vaccines. These commitments were intended to indemnify the manufacture of vaccines allowing manufacturing to begin before regulatory approval was received from the Food and Drug Administration. The United States was not alone. China and Germany, just to name two, contributed heavily to funding the development of biotechnology in response to the pandemic. It is clear that both private and public institutions contributed heavily to the speed with which biotechnology has been developed in the context of the SARS-CoV-2 pandemic. However, there are criticisms that the public-private partnerships underlying vaccine manufacturing and distribution have been opaque. The contracts between governments and manufacturers are highly secretive, and contain clauses that disadvantage the developing world, for example forbidding the donation of extra vaccine doses.

Advanced biotechnology necessarily implicates intellectual property (IP) protections. Patents are the clearest example of this. Patents protect what is colloquially thought of as inventions or technological innovations. However, other forms of IP also have their place. Computer code, for example, can be subject to copyright protection. A therapy’s brand name might be subject to a trademark. Trade secrets can be used to protect things like clinical trial data needed for regulatory approval. IP involved in the pandemic is not limited to technologies developed directly in response to the emergence of SARS-CoV-2. Moderna, for example, has a variety of patents filed prior to the pandemic that protect its SARS-CoV-2 vaccine. IP necessarily restricts access, however, and in the context of the pandemic this has garnered significant criticism. Critics have argued that IP protections should be suspended or relaxed to expand access to lifesaving biotechnology. The current iteration of this debate is not unique; there is a perennial debate about whether it should be possible to obtain IP which could restrict access to medical therapies. Many nations have exceptions that limit IP rights for things like medical procedures. See, e.g., 35 U.S.C. 287(c).

In response to these concerns the waiver of a variety of IP protections has been proposed at the World Trade Organization (WTO). In October 2020 India and South Africa filed a communication proposing “a waiver from the implementation, application and enforcement of Sections 1, 4, 5, and 7 of Part II of the TRIPS Agreement in relation to prevention, containment or treatment of COVID-19.” The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) sets minimum standards for IP standards, acquisition, and enforcement and creates an intergovernmental dispute resolution process for member states. Charles R. McManis, Intellectual Property and International Mergers and Acquisitions, 66 U. Cin. L. Rev. 1283, 1288 (1998). It is necessary to accede to TRIPS in order to join the WTO, but membership in the WTO has significant benefits, especially for developing nations. “Sections 1, 4, 5, and 7 . . .” relate to the protection of copyrights, industrial designs, patents, and trade secrets respectively. Waiver would permit nation states to provide intellectual property protections “in relation to prevention, containment or treatment of COVID-19” that fall below the minimum standard set by the TRIPs Agreement. At time of writing, 10 nations have cosponsored this proposal.

This proposal has been criticized as unnecessary. There is an argument that patents will not enter effect until after the current crisis is resolved, implying they will have no preclusive effect. However, as previously mentioned, it is a matter of fact that preexisting patents apply to therapies that are being used to treat SARS-CoV-2. Repurposing is common in the field of biotechnology where existing therapies are often repurposed or used as platforms, as is the case with mRNA vaccines. However, it is true that therapies directly developed in response to the pandemic are unlikely to be under patent protection in the near future given lag between filing for and receiving a patent. Others argue that if investors perceive biotech as an area where IP rights are likely to be undermined in the event of an emergency, it will reduce marginal investment in vaccine and biotech therapies. Finally, critics argue that the proposal ignores the existing mechanisms in the TRIPS Agreement that would allow compulsory licensing of therapies that nations feel are unavailable. Supporters of the status quo argue that voluntary licensing agreements can serve the needs of developing nations while preserving the investments in innovation made by larger economies.

The waiver sponsors respond that a wholesale waiver would permit greater flexibility in the face of the crisis, and be a more proportionate response to the scale of the emergency. They also assert that the preexisting compulsory licensing provisions are undermined by lobbying against compulsory licensing by opponents of the waiver, though it is unlikely that this lobbying would cease even if a waiver were passed. The sponsors also argue that the public investment implies that any research products are a public good and should therefore be free to the public.

It is unclear how the current debate on TRIPS will be resolved. The voluntary licensing agreements might end up abrogating the need for a wholesale waiver of IP protections in practice rendering the debate moot. However, the WTO should consider taking up the issue of IP protections in a crisis after the current emergency is over. The current debate is a reflection of a larger underlying disagreement about the terms of the TRIPS Agreement. Further, uncertainty about the status of IP rights in emergencies can dissuade investment in the same way as erosion of IP rights, implying that society may pay the costs of decreased investment without reaping any of the benefits.

 

When is an invention disclosure or patent application a trade secret?

May 26, 2020
Intellectual Property, New Technology, Patents

Philip Alford, MJLST Staffer

Patents and trade secrets are often presented as a dichotomy of legal protections, distinguished by disclosure versus secrecy. Under the patent bargain, the government offers patent protections in exchange for the public disclosure of new and useful inventions. 35 U.S.C. §101. Various trade secret protections, on the other hand, are available when a party has suffered harm from the misappropriation of secret information. See, e.g., 18 U.S.C. §1863 and Minn. Stat. § 325C et seq. While the two areas of law are complementary, they do not perfectly align. Although trade secrets generally refer to information, this information can be embodied by a patented article, a method, or in one case, a pineapple. See Del Monte Fresh Produce Co. v. Dole Food Co., 136 F. Supp. 2d 1271 (S.D. Fla. 2001).

Trade secret protections are lost as soon as the material is disclosed to the public, including the publication of patent applications by patent offices occurring 18 months after first filing. This is the case even if the patent application never matures into a patent. Inventors should be aware that giving up secrecy in exchange for pursuing a patent is not a guaranteed exchange. To obtain a patent, inventors need to convince the Patent Office that their invention is (1) new, (2) a useful and non-obvious contribution to the art, and (3) described in sufficient detail so that others would be able to make and use the invention. 35 U.S.C. §§101, 102, 103, 112. For this reason, inventors should undertake at least a preliminary analysis to determine whether the requirements for a patent are reasonable satisfied before making any decision to give up potential trade secrets. This analysis would typically involve finding a patent attorney, who can together with the inventors to conduct a search, review for potentially relevant art, and best understand the advantages of the invention before drafting the patent application.

Trade secret protection cannot be assumed as a default. Not all secret inventions are eligible for trade secret protections—even inventions that would otherwise satisfy the requirements for a patent. A secret invention is only eligible for trade secret protection if (1) it is secret, i.e., not generally known or readily ascertainable;  (2) it confers an economic or competitive advantage; and (3) it is subject to reasonable efforts to maintain secrecy. See 18 U.S.C. §1863 and Minn. Stat. § 325C et seq. If inventors are considering whether to forgo filing a patent application, or abandon an unpublished application in favor of maintaining secrecy, the inventors must consider whether the resulting secrecy will, in fact, afford any trade secret protections at all. On one hand, a patentable but unpublished disclosure will typically satisfy the secrecy requirement if it also satisfies the novelty and non-obviousness elements of patentability. Similarly, the type of subject matter for which a patent is pursued is typically of the type that would confer an economic or competitive advantage if withheld from competitors. On the other hand, trade secret protections require reasonable efforts to maintain trade secrecy. No part of patentability imposes a similar requirement.

The reasonable effort requirement for trade secret protection is not as likely to be satisfied in the normal course of invention. What exactly is meant by “reasonable efforts” in a trade secret context? Reasonable efforts differ based on the nature of the information, the field of endeavor, and the risks to secrecy. Generally, to show reasonable efforts, parties should plan in advance to protect their secrets, for example, by using confidentiality agreements, internal employee policies, vendor policies, and electronic information policies. Such policies should be monitor compliance, remind employees that information is secret, and limit access to the secret information, e.g., via locks, passwords, and security. The extent of effort deemed reasonable will be based on the value of the information, the cost of precautions, and the likelihood that secrecy will be lost. Maintenance of absolute secrecy is not required, nor is it necessary to take steps that will be ineffective to protect the secret. See E. I. du Pont de Nemours & Co. v. Christopher, 431 F.2d 1012 (5th Cir. 1970).

Inventors may intend to forgo patent or trade secret protection in favor of the other, only to subsequently learn that they lack the protection of either. Inventors and patent practitioners should be mindful that coverage gaps can arise due to the differing requirements for patent and trade secret protections.

Orange Book, Purple Book, Complex Products, and Process Patents

December 23, 2019
Biotechnology, Intellectual Property, Patents

Philip E. Alford, Ph.D., MJLST Staffer

Complex Products and Process Claims

The most economically important pharmaceutical innovations of the past decade have centered around biologics and complex non-biologic products. Biologics are a diverse class of therapeutic products, typically produced via biotechnology or obtained from biological sources. Biologics often contain complex mixtures or large, elaborate molecules that are intricately folded into a specific desired conformation. In many respects, we do not yet have the technology to characterize all the functional elements of these products fully, and sometimes it is not possible to make the products synthetically or according to alternative processes. Even minor variations in biologic manufacturing can result in a product having different properties. Since the manufacturing process may be one of the most accurate ways to describe a biologic, patent strategies for biologics typically give extra emphasis around process patents. Indeed, biologic process claims have proven to be a powerful tool, and process patents have been at the core of the first waves of biosimilar litigation.

Non-biologic drugs can also be so complex as to defy characterization and reproduction. Such products are now referred to as complex products or non-biological complex drugs (NBCDs), as well as “nanomedicine” or “synthetic biologics.” Like biologics, many complex products have the challenge that different manufacturing processes can result in the product having divergent properties. Thus, manufacturing aspects are uniquely important to both complex products and biologics. Where the patent system is involved in the regulatory framework, process patents should play a central role in protecting complex products from generic entry. Yet for complex drug products, FDA does not integrate process patents into the generic entry process.

Despite being difficult to truly reproduce, complex products are nonetheless susceptible to market pressure under Hatch-Waxman-type generic entry 21 USC 355(b)(2) and 355(j), i.e., via Food Drug & Cosmetic Act 505(b)(2) and 505(j) applications. The Hatch-Waxman Act, discussed in more detail below, ingeniously incorporated the patent system as a secondary gatekeeper in FDA’s generic drug approval process. The so-called Orange Book is the nexus uniting two separate regulatory regimes. However, FDA has interpreted that the Orange Book and Hatch-Waxman provisions invoke only on the types of patents that were important for determining infringement of traditional, small molecule drugs, namely, drug and therapeutic use claims. The Orange Book expressly excludes process patents. 21 C.F.R. §314.53.

Although product-by-process claims can be permitted, the resulting product must be novel, and product-by-process claims are not interchangeable with process claims. (For example, see, MPEP 2113 and Judge Newman’s dissent in Abbott Labs. v. Sandoz, Inc, suggesting that process claims and product-by-process claims are held to different validity standards.)

Hatch-Waxman as a political bargain.

When Congress passed the Hatch-Waxman Act was passed in 1984, the Act represented a classic political bargain. The hope was to strike a balance between innovation and competition by strengthening the golden years of brand drugs while facilitating subsequent generic entry. Pioneers of approved new drugs were given up to 5 years of data exclusivity during which FDA would not approve a generic of the drug. Additionally, one of the pioneer’s patents could be extended up to 5 additional years to compensate for lost patent term consumed while seeking FDA approval. In turn, the Act provided a new, streamlined process for drug makers to obtain approval of generic drugs.

A key provision of the Act directs the drug pioneer to identify its patents in the Orange Book. The listed patents must (1) claim the new drug, or (2) claim a method of using the drug, in so far as a claim of infringement could reasonably be asserted if another engaged in the manufacture, use, or sale of the drug. 21 U.S.C. §355(b)(1)(G). The Orange Book thus represents an essential part of the Hatch-Waxman political bargain. Process (manufacturing) patents are expressly excluded from the Orange Book, as are patents relating to packaging, metabolites, or intermediates. 21 C.F.R. §314.53.

The Orange Book lists these patents alongside each FDA approved drug. Before obtaining approval of a generic, the generic drug maker must certify to FDA that the patents listed in the Orange Book are expired, invalid, or will not be infringed by its generic. 21 U.S.C. §355(b)(2)(A) and 21 U.S.C. 355(j)(2)(vii). Under 35 U.S.C. § 271(e)(2), such certifications of invalidity or non-infringement constitutes an act of infringement permitting the pioneer to sue the generic drug maker before the generic ever reaches the market. Prompt litigation can trigger a stay on the generic’s approval. In this manner, the Orange Book serves not only as a mechanism for transparency (informing the public of patent and regulatory exclusivities), but also as a mechanism for litigation. The Orange Book has served both causes well.

As blockbuster biologics began to approach the end of the foreseeable patent life, FDA created a compendium of BLA-approved biological products loosely mirroring the Orange Book, but for biologics instead of drugs. Reverently, FDA named this volume the Purple Book. Unlike the Orange Book, the Purple Book has had no reason to list patents because the generic drug provisions of the Hatch–Waxman Act apply only to drug approvals under 21 U.S.C. §355(b) and 21 U.S.C §355(j). The Biologics Price Competition and Innovation Act of 2009 (BPCIA) provides a framework for approving biosimilars and resolving patent disputes. Instead of referring to a book of approvals and patents, the BPCIA invokes a so-called patent dance exchange of patent information. 42 USC § 262 (l). This patent information includes not only composition and use claims, but also process of manufacture claims. Conceptually, the dance was expected to lead the parties to agree on an initial set of patents to litigate and thus control the tempo and scope of litigation. However, the parties soon recognized that dancing is optional. Sandoz Inc. v. Amgen Inc., 137 S. Ct. 1664. Dance or no dance, the parties ultimately litigate their patent disputes, which often center the methods of manufacturing the biologic product.

As new biologics and complex drug products come to market, process claims are likely to be increasingly important.

Possible Legislation to the Orange Book and Purple Book

This year, Congress considered legislation sponsored by members of the House Committee on Energy and Commerce proposing changes to the way the Purple Book and Orange Book function.

The Purple Book Continuity Act of 2019 proposes that the purple book be updated to list patents generated during the ‘patent dance’ of 42 USC § 262 (l), which would include process patents or any other patent likely to be important in an infringement claim. Any such patents listed in the Purple Book would not function as a regulatory gatekeeper for generics since no mechanism yet exists for the Purple Book to do so. Still, from a transparency point-of-view, it seems like a reasonable choice to have the Purple Book act at least as a compendium of relevant patents. The Orange Book Transparency Act of 2019 proposes a requirement to list the drug substance, drug product, and method of use patents, while also requiring removal of any patents that are improperly listed (presumably including process patents absent any change to 21 C.F.R. §314.53). Although the House Committee on Energy and Commerce sponsored both acts, each take differing approaches to process patents. It seems illogical to insert process patents into the Purple Book, while more tightly excluding process patents from the Orange Book at a time when process claims are increasingly more important to modern therapeutics.

Indeed, FDA has expressly focused on the manufacturing process when trying to understand how a generic relates to a reference complex product. For example, FDA explained that a central part of their inquiry was whether the generic is made according to the same process as the original®, a non-biologic complex product, FDA explained that a central part of their inquiry was whether the generic is made according to the same process as the original. See, also, Bell et al., which discusses FDA’s criteria for approving a generic even when there is no physicochemical or biological characterization technique to establish active ingredient sameness. If such an inquiry is part of FDA’s analysis for permitting the sale of a generic drug, then it should be more than enough to justify listing process patents in the orange book.

If Congress revisits either of these matters, it should adjust the code to include process patents in both the Orange Book and the Purple Book. Listing process patents in the Orange Book would serve a public good, namely, that of transparency, but also would notify competitors of the manufacturing space the pioneer drug company intends to protect. Delaying such litigation until after a possible generic approval is messy for all parties involved. As more medications become too complex to manufacture by alternative routes, the importance of process patents in complex biologic and nonbiologic drugs will only increase.

 

Information Sharing: Tesla and the Open Patent Framework

November 23, 2019
Intellectual Property, New Technology, Patents

Bernard Cryan, MJLST Staffer

Information Sharing: Tesla and the Open Patent Framework

By Bernard Cryan

Patents offer powerful protection of intellectual property, i.e., inventions. Patents confer the patent owner the right to exclude others from making, using, or selling the patented invention for a limited time. In return for a limited monopoly, the inventor must disclose the invention. This is the classic quid pro quo of the patent system—a limited monopoly granted by the government to an inventor in exchange for revealing helpful information to society. Tesla owns many patents on its electric vehicle technology. Under Elon Musk’s direction, Tesla has decided to allow others to use its patented technologies to “accelerate sustainable transport.”

The Patent System

The patent system often works as expected—the patent owner practices the patented invention and prevents others from doing so. Sometimes, however, the patent system can behave oddly. For example, contrary to popular belief, patents do not grant the patent owner automatic permission to practice the invention. This situation can occur in the pharmaceutical industry. For instance, a drug maker can acquire a patent on a pharmaceutical not yet approved by the Food and Drug Administration (FDA). As a result, the drug company cannot itself make, use, or sell the drug—even though it owns a patent on the drug. Therefore, a patent alone is insufficient to practice the invention. An additional inquiry is required, i.e., is the patent owner allowed to make, use, or sell the patented invention?

An opposite oddity can also occur. One can practice an invention that is patented by another. This occurs through either a formal license agreement or an open patent framework. A license, in the patent context, is simply an agreement between the patent owner and another party granting legal permission to use the patented invention. The more interesting framework, however, is the use of an open patent system. An open patent is a patent that is intentionally not enforced. In other words, the owner of the patent allows others to use the invention and actively avoids filing an infringement lawsuit—which is the main platform to enforce patent rights.

Tesla’s Pledge

Elon Musk believes the carbon crisis calls for joint efforts amongst all automakers to build electric vehicles. In 2014, Tesla pledged that it would not file patent infringement lawsuits against companies that use, in good faith, Tesla’s electric vehicle patented technology. In Tesla’s words:

“What this pledge means is that as long as someone uses our patents for electric vehicles and doesn’t do bad things, such as knocking off our products or using our patents and then suing us for intellectual property infringement, they should have no fear of Tesla asserting its patents against them.”

The Good

Another car company can use Tesla’s patented technology instead of spending resources developing similar electric vehicle technology. Tesla is the leading seller of electric vehicles and has sold more than 380,000 electric vehicles (as of April 2019). There is still opportunity for electric vehicle development as the electric vehicle market share is small (1.8% as of March 2019). As a result, Tesla’s pledge is significant because it encourages the sharing and use of powerful information in the auto industry, which should accelerate society’s move toward electric vehicles. The use of proven technology can facilitate a start-up company’s path to success or focus an established automaker’s efforts to develop electric vehicles. Further, Toyota has followed Tesla’s approach with respect to its hydrogen fuel cell technology. This open patent framework is not limited to only the auto industry. Google, for example, has pledged to open some of its patents directed at encryption technologies.

The Bad

While Tesla’s pledge may appear revolutionary, it has drawbacks. Some companies may fear the legal tools to enforce Tesla’s pledge are insufficient. As a result, automakers may be reluctant to use the patented technology out of fear that Tesla will not follow through on its promise. While a formal license agreement to use patented technology is enforceable through reliable legal tools, an informal pledge posted in blog format by a CEO on the company website may not carry the force of law. Is Tesla required to follow through with its pledge? Maybe, under the legal doctrine of estoppel. Will Tesla withdraw its pledge? It is unlikely as Elon Musk recently reminded the world of Tesla’s pledge. Nevertheless, Tesla’s pledge may have only limited impact if other automakers lack confidence to legally enforce the pledge.

The Takeaway

This open patent framework has enormous potential to facilitate innovation by concentrating companies’ efforts to build on each other’s prior work, rather than around it. Time will reveal the true impact of open patent pledges like Tesla’s. Most recently, XPeng, a Chinese automaker inspired by Tesla, has secured a $400M investment.

Perhaps the biggest impact of Tesla’s pledge is not the acceleration of the electric vehicle use, but rather teaching the world that openly sharing valuable information is priceless. This reminder may encourage other industries to adopt similar pledges, thereby accelerating all kinds of innovation.

TERMINAL DISCLAIMERS: QUICK FIX OR SIMPLE RUIN?

November 12, 2019
Intellectual Property, Patents

Amanda Jackson, MJLST Staffer

Terminal disclaimers, a limit on patent term of a patent that is substantially similar to another co-owned patent, are often thought of as a quick and easy way for a patent applicant to overcome a non-statutory double patenting rejection.  Non-statutory double patenting rejections arise when the claimed subject matter is not patentably distinct from the subject matter claimed in a commonly owned patent.  This judicially created doctrine arose to prevent extension of a patent term by filing subsequent patent applications claiming substantially similar subject matter as earlier applications.  In addition, non-statutory double patenting rejections seek to prevent multiple lawsuits against an alleged infringer by multiple assignees of the patentably indistinct patents (e.g., in the case where the patentably indistinct patents were assigned to different entities).

To overcome a non-statutory double patenting rejection, patent applicants can cancel the rejected claims, amend the claims to be patentably distinct, argue against the rejection, or file a terminal disclaimer.  By filing a terminal disclaimer, the patent applicant agrees that the later-filed patent (if granted) expires when the first patent does (the patent that resulted in the double patenting rejection).  Moreover, in order to alleviate the concerns of harassment by multiple assignees, 37 C.F.R. § 1.321 requires that a terminal disclaimer, to obviate a non-statutory double patenting rejection, must “[i]nclude a provision that any patent granted on that application . . . shall be enforceable only for and during such period that said patent is commonly owned with the application or patent which formed the basis for the judicially created double patenting.”  The patent office makes fulfilling that requirement easy by providing applicants with a standard terminal disclaimer form that states, “[t]he owner hereby agrees that any patent so granted on the instant application shall be enforceable only for and during such period that it and the prior patent are commonly owned.”  The terminal disclaimer runs with any patent granted from the application.

Seems harmless, right?  As long as the applicant does not have a problem with a reduced patent term, including any patent term adjustment, terminal disclaimers seem like a relatively painless fix to a non-statutory double patenting rejection.  Terminal disclaimers might also be appealing to avoid characterizing prior work by the applicant (e.g., putting statements on the record construing aspects of the prior work that could be limiting in litigation).  It may also be difficult to overcome non-statutory double patenting rejections by arguments alone.  However, terminal disclaimers can render patents invalid or unenforceable, many times without the patent owner realizing it.

As a first example, when less than all of the patents attached to a terminal disclaimer are owned by one entity, the patent may be rendered unenforceable.  In Voda v. Medtronic, Inc., Voda had filed a terminal disclaimer linking three patents together.  At the time of filing the terminal disclaimer, Voda owned all three patents.  Voda later assigned two of the patents to another entity.  One of those patents was reassigned to Voda, but the other remained owned by the third party.  Medtronic asserted that the patent at issue was unenforceable because Voda did not own one of the patents included in the terminal disclaimer.  Dismissing Voda’s argument that the patents only had to be commonly owned during the period of infringement, the court stated,

Terminal [d]isclaimers, however, do not speak in terms of ownership during times of infringement; rather, they require common ownership for enforceability. . . . To enforce the ‘195 patent, plaintiff must not only own all three patents for the period he seeks enforcement of the ‘195 patent he must also own all three patents during the period he files suit to do so. As it is undisputed that plaintiff does not own the ‘625 patent, the ‘195 patent is unenforceable as a matter of law under the plain language of the [t]erminal [d]isclaimers.

When a patent owner fails to have common ownership of terminally disclaimed patents, some courts have held that the plaintiff lacks Article III standing.  However, other courts have held the opposite, namely that “enforceable title” is required to have standing to bring a patent infringement suit, but that “enforceable title” is not the same as “enforceability” (e.g., with respect to lack of common ownership of terminally disclaimed patents).

As another example, terminal disclaimers involving patents (or applications) that are not commonly owned at the time of filing the terminal disclaimer may be invalid due to non-statutory double patenting.  For example, in In re Fallaux, the court asserted that “[i]f the Fallaux application and the Vogels patents were commonly owned, the terminal disclaimer filed in this case would have been effective to overcome the double patenting rejection. We note that this defect was of the applicant’s creation as through assignment it allowed ownership of the applications to be divided among different entities.”  Joint ownership and ownership by subsidies may also present enforceability issues with respect to terminal disclaimed patents.

Thus, patent owners and practitioners should be a little more weary in filing terminal disclaimers to overcome non-statutory double patenting rejections.  And if a terminal disclaimer is filed, patent owners should pay close attention to patents that have a terminal disclaimer, as well as to the patents to which the patent is terminally disclaimed.  This is especially important in licensing agreements and assignments, when patents—even in different patent families—may be unknowingly linked by terminal disclaimers.

New Year, New Chinese Intellectual Property System

March 31, 2019
Administrative Law, Intellectual Property, Patents

Sherrie Holdman, MJLST Staffer 

Since the beginning of the new year, China has implemented various new Intellectual Property (“IP”) changes. Three major changes are particularly critical for promoting an enhanced IP system in China.

The first change is the establishment of a new IP appellate court. On October 26, 2018, China’s National People’s Congress (NPC) Standing Committee issued the Decision on Several Issues Concerning the Litigation Procedures in Patent and Other Intellectual Property Cases. On December 3, 2018, in a plenary session of the Judicial Committee of the Supreme Court chaired by Chief Justice Zhou Qiang, the Committee passed the Supreme Court Guidance Re Intellectual Property Tribunal. The official IP court was finally launched in January 2019. The new body is expected to hear appeals from both civil and administrative matters. According to Chief Justice Zhou Qiang, handing civil and administrative patent appeals to the new IP court will help unify adjudications related to patent validity and infringement, improve the efficiency and quality of court proceedings, and thus improve judicial protection of IP rights. The protection of IP rights has been a key issue of the trade war between the United States and China. China has been criticized for its lax IP protection for many years. The new IP court seems to come as a trade negotiation of the two countries.

Another change is China’s new policy on IP enforcement. On December 4, 2018, the National Development and Reform Commission, along with 37 government departments, released a Chinese interagency Cooperation Memorandum of Understanding. The goal of the Memorandum was to punish entities who seriously violate the patent law, including acts such as repeated patent infringement, non-compliance with the patent law, and serious illegal patent agency conduct. Like the new IP court, this policy seems to be another negotiation between the United States and China. Indeed, the policy was released days after the meeting of United States President Donald Trump and Chinese leader Xi Jinping at a summit in Argentina. The policy took a further step to enhance the IP protection in China.

The third change is the Fourth Amendment of the Chinese Patent Law. On December 5, 2018, the latest Draft of the Chinese Patent Law was presented to China’s State Council in a meeting chaired by Premier Li Keqiang. The new Amendment aimed to strengthen the protection of patent rights holder’s legitimate rights and interests, stimulate innovations, and promulgate legislations to effectively protect patent rights. Specifically, the Draft aimed to increase the penalties for IP infringement, to increase the amount of compensation and fines for willful infringement and counterfeiting patents, and thus increase the infringement cost in order to deter illegal acts. Particularly, the Draft proposed to raise the minimum fine to 100,000 RMB and the maximum fine to 5 million RMB. The Draft also stated that an infringer shall be cooperative in an infringement lawsuit. The Draft further set forth that network service providers shall bear joint liability for not stopping infringement in a timely manner. The Draft provided an incentive mechanism for employee inventors so that they could equitably share profits from inventions invented by the employees in the course of their employment.. Further, the Draft introduced a patent term extension system for innovative drugs, strengthened public information systems, and proposed to make basic patent data available in the China National Intellectual Property Administration (“CNIPA”) website. In order to foster patent dissemination and utilization, the Draft provided national and local authorities to increase public patent services and introduced an open patent license system. In addition, the Draft introduced a domestic priority of six months for design applications, extended patent term for design patents to fifteen years, and extended the time period for priority document submission for patents/utility models applications. The Draft Amendments were released for public comment from January 4, 2019 to February 3, 2019. The final rule is expected to come out soon this year.

It remains to be seen how these changes would improve China’s IP system. Nevertheless, the impact of these changes should not be underestimated. China is known as a big market for technology and business. However, foreign investors have been hesitate to invest in China due to China’s lax patent protection. With these changes aiming to establish an enhanced IP system, China is expected to build a friendly commercial environment to foreign inventors and investors, continue to improve domestic innovations, and encourage collaborations between foreign corporations with local companies. For instance, it has been said that these changes would attract global pharmaceuticals and tech companies to China because an enhanced IP system would enable foreign companies to uphold their IP in specialist courts, which is a great reassurance for foreign investors and inventors.

Artificial Intelligence as Inventors: Who or What Should Get the Patent?

November 5, 2018
Artificial Intelligence, Patents

Kelly Brandenburg, MJLST Staffer

Ever since the introduction of electronic computers, innovators across the world have focused on the development of artificial intelligence (“AI”), the goal being to enable machines to act like humans by making decisions and responding to situations. Generally considered to be the first artificial intelligence program, the Logic Theorist was designed in 1955 and enabled a machine to prove mathematical theorems. Since then, people have developed machines that have beat humans in some of the most strategic and intuitive games, such as Chess, Scrabble, Othello, Jeopardy, and Go.

As new innovations are developed, whether in AI or other areas of technology, patents are a common means for the inventors to protect their ideas. However, what happens when the AI technology advances to the point where the machines are making the innovations? Does the protection afforded to human inventions by Article I, Section 8 of the Constitution apply to new AI inventions? While this capability is still to be developed, the questions of patentability and patent ownership have been brought up previously, and will potentially need to be addressed by the United States Patent and Trademark Office (“USPTO”) in the future.

An initial question is whether the invention can even be patented. There are a variety of terms in patent statutes that indicate that the inventor has to be a human in order to get a patent, including “whoever,” “person,” and “inventor.” Therefore, if the invention is developed by a non-human entity, the same patent protection may not be applicable. However, assuming the inventions are patentable, then the next question is who should have the ownership rights to the patent. Should the AI itself get the patent, or should it instead go to the owner of the machine, or maybe to the inventor/programmer of the AI program?

The main purpose of providing patents to inventors is to “promote the progress of science and useful arts” by allowing the inventors to exclusively benefit from their efforts; it is an incentive-based program. From the AI perspective, there would not be much benefit in providing the AI with the exclusive rights of a patent, assuming the AI does not desire the money, recognition, or any other benefit that might come with it. Its innovation is more likely to be due to the natural development of its programming over time, rather than the incentivization of any reward it might get. However, since this technology is still being developed, maybe AI will learn to act similar to humans when it comes to incentives, which would then mean that giving it a patent could induce more innovative efforts.

For owners, depending on how the owner uses and interacts with the AI, the ownership rights of a patent may or may not have its desired effect. If the owner has the desire to use the AI to potentially invent something and exposes it to unique environments or equipment, then perhaps they deserve the exclusive rights to the AI’s patent. However, if the AI just happens to invent something with no direction or intent of the owner, it would not make much sense to reward the owner for exerting no effort.

Lastly, the patent could also go to the initial programmers of the AI. This would also likely depend on whether or not enough effort was put into the development of the AI after its initial programming. When the owner puts in the effort, then the owner might get the patent over the programmer, but if the AI just happens to invent something regardless of what the owner does, then the programmer could have rights to the patent. Again, if programmers would benefit from the AI’s invention, that would incentivize the programmers to further enhance their programs.

Since these specific capabilities are mostly hypothetical at this point, it is impossible to predict exactly how the AI technology is going to advance, and actually work, in the future. However, the technology is definitely changing and getting closer to making AI innovation a reality, and patent law will have to adapt to however it unfolds.

Tribal Sovereign Immunity May Shield Pharmaceutical Patent Owner from PTAB Inter Partes Review

October 15, 2017
Intellectual Property, Patents, Pharmaceuticals

Brenden Hoffman, MJLST Staffer

 

The Eleventh Amendment to the United States Constitution provides for State Sovereign Immunity, stating: “The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”   Earlier this year, the Patent Trial and Appeals Board dismissed three Inter Partes Review proceedings against the University of Florida, based on their claim of State Sovereign Immunity. See Covidien LP v. University of Florida Research Foundation Inc., Case Nos. IPR 2016-01274; -01275, and -01276 (PTAB January 25, 2017).

Early last month, the pharmaceutical company Allergan announced that it had transferred its patent rights for the blockbuster drug Restasis to the Saint Regis Mohawk Tribe. Restasis is Allergan’s second most profitable drug (Botox is the first), netting $336.4 million in the second quarter of 2017.  Under this agreement, this tribe was paid $13.75 Million initially and will receive $15 Million in annual royalties for every year that the patents remain valid. Bob Bailey, Allergan’s Executive VP and Chief Legal Officer, indicated that they were approached by the St. Regis tribe and believe that tribal sovereign immunity should shield the patents from pending IPRs, stating “The Saint Regis Mohawk Tribe and its counsel approached Allergan with a sophisticated opportunity to strengthen the defense of our RESTASIS® intellectual property in the upcoming inter partes review proceedings before the Patent Trial and Appeal Board… Allergan evaluated this approach closely, with expert counsel in patent and sovereign immunity law. This included a thorough review of recent case law such as Covidien LP v. University of Florida Research Foundation Inc. and Neochord, Inc. v. University of Maryland, in which the PTAB dismissed IPR proceedings against the universities based upon their claims of sovereign immunity.”

IPRs are highly controversial.  The United States Supreme Court recently granted cert. in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC  to determine “whether inter partes review, an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents, violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.” Until this issue is resolved, IPRs will continue to be by companies such as Allergan seeking to protect their patent rights.  Over the past few years, hedge fund manager Kyle Bass made headlines as a “reverse troll,” by filing IPRs against pharmaceutical companies while simultaneously shorting their stocks. Bailey has stated that “the IPR process has been a thorn in our side…We get a call from reverse trolls on a regular basis. Now we have an alternative.” This move has been well regarded by many critical of IPRs, including an October 9, 2017 post on ipwatchdog.com titled “Native Americans Set to Save the Patent System.”  In addition, the St. Regis Mohawk tribe has indicated that these types of arrangements can help the tribe generate much-needed capital for housing, education, healthcare and welfare, without requiring the tribe to give up any land or money.

However, this arrangement between Allergan and the St. Regis Mohawk tribe has attracted strong criticism from others.  Mylan Pharmaceuticals, a party in the IPR proceedings challenging multiple Allergan patents on Restasis, has called this transfer a “sham” and made comparisons to racketeering cases with lending fraud.  “Allergan Pulls a Fast One” on the Science Translational Medicine Blog states, “‘The validity of your patents is subject to review, unless you pay off some Indian tribe’ does not seem like a good way to run an intellectual property system,” this is a “slimy legal trick,” and “this deal smells.” He suggests that “legal loopholes” like this sully the whole pharmaceutical industry look bad and that this will force Congress to take action.  

In fact, U.S. Senator Claire McCaskill, the top-ranking Democrat on the Homeland Security and Governmental Affairs Committee, has already written a letter to the Pharmaceutical Research and Manufacturers of America urging  them to review “whether the recent actions Allergan has taken are consistent with the mission of your organization.”  She believes that “This is one of the most brazen and absurd loopholes I’ve ever seen, and it should be illegal…PhRMA can and should play a role in telling its members that this action isn’t appropriate, and I hope they do that.”  On October 5, 2017, McCaskill introduced a bill to the Senate “To abrogate the sovereign immunity of Indian tribes as a defense in inter partes review of patents.”

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