Patents and Patent Licenses

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Patents and Patent Licenses Bruce Goldstein Office of Technology Transfer, National Institutes of Health, Rockville, Maryland

Chapter Outline Introduction Part One: Patents Generally Background: Patents Defined Historical Overview First Steps: Before the American Revolution United States Constitution United States, 1789e1951: Systemic Adjustments United States: The Modern Framework International: Patent Treaties Modern Philosophy of Patent Law Fairness and the “Quid Pro Quo” Incentives for Product Development Economic Engine Core Concepts of us Patent Law What is a Patent? Patents Internationally Utility, Plant, Design Specific Rights Conveyed by Patents Substantive Criteria for Patentability Patentable Subject Matter “Utility” (“Industrial Applicability”) “Novelty” “Non-Obviousness” Written Description, Enablement, and Best Mode Other Key Terms Defined “Prior Art” “Conception” vs. “Reduction to Practice” “Prophetic Conception” vs. “Simultaneous Conception and Reduction to Practice” “Inventorship” and “Joint Inventorship” Transfers of Ownership: “Assignment” vs. “License” Patent Infringement (United States) Civil Liability: In General Civil Liability: Contributory and Induced Infringement Major Defenses Specific Exemptions and Immunities Remedies: Types and Measure “Declaratory Judgment” Actions Importation and the International Trade Commission Practical Issues of Litigation “Other IP” Distinguished from Patents Patents vs. Trade Secrets

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Principles and Practice of Clinical Research. DOI: 10.1016/B978-0-12-382167-6.00031-X 2012 Published by Elsevier Inc.

Patents vs. Copyrights Patents vs. Trademarks Basic Elements of the Patent Application Process Content of a Patent Application Specification Claims Technical Items One Invention per Application (“Unity”) The Duty of Disclosure and “Inequitable Conduct” U.S. Applications: Types and Filing Procedures Basic Types of Applications Timing Considerations “Prosecution” of a Patent Application Options “After Issuance” International Applications and Filing Procedures Patent Cooperation Treaty (“PCT”) Applications Regional Patent Offices Combining U.S. and PCT filings General Strategy Notes Current Major Efforts to Alter U.S. Patent Laws International Harmonization Patents on Genes and “Mere Associations” Abusive Tactics: “Patent Trolls” and “Inequitable Conduct” Compulsory Licensing and Breaking Patents Part Two: Patents And Technology Transfer Critical Laws Concerning Patents and Federally Supported Research Federal Funding of Private “Extramural” Research: The Bayh-Dole Act History and Philosophy Organization of Clauses Key Conceptsdxx 200 and 201 Core Terms Required in Bayh-Dole Funding Agreementsdx 202 x 202dReporting Obligations (iEdison and RePORT) x 202dDetermination of Exceptional Circumstances “March-in”dx 203 Duty of U.S. Manufacturedx 204 Funding Agreements outside the Bayh-Dole Act Federal “Intramural” Research: The Stevenson-Wydler Act and the Federal Technology Transfer Act

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History and Philosophy of Stevenson-Wydler and FTTA Key Concepts and Major Clauses Subsequent Supporting Acts Patenting and Licensing by Federal Agencies Patenting and Licensing by Agency Various Agency Missions Scope of Licensing Authority Exclusive and Co-Exclusive LicensingdAdditional Considerations Results Inventions by the NIH Patent and Patent-related Policies

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INTRODUCTION Scientific research, ranging from the most basic to the most applied, is no longer (if it ever was) a loose enterprise of individuals conducting research as solitary islands, selfsufficient and independent. More and more, research requires substantial interaction and interconnection with various colleaguesdcolleagues at universities, at nonprofit organizations, at government labs, and at companies. Many of these organizations care about patent rights in some way, whether acquiring or avoiding them. Thus, the pool of researchers whose careers remain untouched by patents has been shrinking for decades, and the trend is not slowing. One consequence of this trend is that patent rights have a larger impact on how research is conducted and a researcher’s ignorance of patents can be costly. Patents play several roles. For many scientists, being listed as inventors on patents represents a means besides publication in peer-reviewed journals to advance in their careers. Some scientists get involved in the patenting process when the lawyers handling a patent need technical advice or information about an invention. For those managing lab budgets, controlling patent costs without sacrificing valuable properties requires at least a modest understanding of patent principles and rules. Patents affect many scientists (albeit indirectly) when their colleagues are reluctant to collaborate or share materials unless invention rights are protected. Other scientists investigate patents so as not to waste effort researching a topic in which so many patents exist that the fruits of their labors are likely to be blocked. Finally, for those who want to see their ideas and discoveries become something more than just an item of academic interest, patents are a critical tool for enticing companies to invest in developing their discoveries into new products. As important as knowledge of patents may be, however, the goal of this chapter is limited to covering only the very basics, for several reasons. The laws on patents are complex and shift rapidly, and they carry enough specialized rules

NIH Portfolio Size and Scope The NIH Licensing Program NIH Licensing Policies Scope of Licensing Authority Types and Structure of NIH Licenses NIH Licensing ProcessdOverview After SignaturedRoyalty Management, Monitoring, and Enforcement Success Conclusion Brief Glossary of Critical Terms in Patenting Summary Questions References and Notes

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and nuanced interpretations that expert help from a qualified patent attorney should always be sought to address specific situations. Moreover, an in-depth knowledge of patent law and procedure is not necessary to conduct research. Nonetheless, scientists should have a functional understanding of how patents work, in order to recognize problems and to be ready and able to help the experts address the issues. This chapter is divided into two major parts. Part One discusses patents in general terms. This part will define patents (e.g., history, philosophy), explain core concepts (e.g., substantive criteria, infringement), and briefly describe the process of acquiring patents (e.g., content, sequence of events, international elements). Part Two discusses patents in the specific context of technology transferdwhich will address in particular inventions created by or with support from the federal government.

PART ONE: PATENTS GENERALLY BACKGROUND: PATENTS DEFINED Historical Overview First Steps: Before the American Revolution Patenting is not a new development, nor even an American ideadthe concept first arose hundreds of years ago. To be sure, legal scholars have long argued over the “true” beginning of patent law. Some cite Greek writings 2,500 years old describing certain exclusive rights that vaguely resemble something analogous to modern patents; other scholars set a much higher bar, accepting only those statutes that clearly resemble the current patent system. The majority of scholars, however, appear to agree that the Venetian Senate enacted the first formal statute on patents in 1474. That law protected any “new and ingenious

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contrivance” for up to 10 years, and it allowed the creator to sue for money and to have the infringing work destroyed. The rights provided by this statute were very similar to those given to book authors (printers being one of the industrial guilds the Venetian Senate wanted to foster). Beginning at least as early as King Henry VI in 1449, the English Crown began granting “Letters Patent,” which granted a favored person, guild, or company a commercial monopoly on certain products or services (usually, the Crown received a stream of income in exchange). Unhappy with perceived abuses of this practice, as well as with the pernicious effects monopolies had on commerce, the Parliament enacted the Statute of Monopolies in 1623. This statute prohibited further grants of monopolies, except for those granted on new inventions and for a limited term of years. Over the next 150 years, subsequent acts and court cases eventually evolved these original Letters Patent on inventions to a system recognizable under modern patent standards.

United States Constitution Before the American Revolution, the economies of the colonies were centered on the export of raw materials and agriculture, with little labor or capital to spare. Nonetheless, as early as 1641, some colonies created patent systems as a means to foster particular industries locally, which the Crown tolerated as long as Britain’s centralized manufacturing control was not threatened. With the start of the American Revolutionary War, imports of manufactured goods from England ceased, spurring the States1 in the newly created United States to develop homegrown manufacturing capabilities. As the Revolutionary War progressed and chances of success improved, the States began issuing patents in earnest. Unfortunately, by the time the Second Constitutional Congress met in 1787, the problems of State-specific patent systems had become obvious: getting patents in all States was difficult, patents were unenforceable outside the issuing State, and the scope of protection, rights, conditions, and duration varied. The most prominent example of the problems of Statespecific patent systems was the fight over the steamboat patents. Though Robert Fulton is widely credited with developing the first commercially successful steamboat design, his was not the first steam-powered boat invented in America. John Fitch and James Rumsey each claimed he was the first to invent the application of steam power (previously and unquestionably invented by James Watt) to navigating boats. Each sought patents in several States, sometimes the same State, and each spent years trying to disprove the other’s claims. As the steamboat represented a crucial means for opening up trade between the newly settled interior territories and the coastal ports, members of the Constitutional Congress, including George Washington, personally followed the fight closely.

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Another issue noted at the time was the dominance of British manufacturing. American inventors feared that manufacturers in England, who could overwhelm American capacity and underprice American manufacturers, would appropriate their discoveries. Fostering and protecting domestic manufacturing industries was increasingly recognized as another means to support independence. Moreover, with the growth of lucrative interstate tradedand the taxes on that tradedStates recognized that local patent systems posed a barrier. As a direct result of these experiences, the framers of the Federal Constitution included a specific enumerated power for the Congress in Article I, Section 8: Congress shall have the Power.To promote the Progress of Science and the useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

This clause simultaneously reserves the patenting power exclusively to Congress, rather than the States, while it limits Congress’ authority to grant exclusive rights to: (1) a limited scope (writings and discoveries only); (2) a limited duration; and (3) for a limited purpose (to the extent doing so promotes the progress of science and the useful arts).

United States, 1789e1951: Systemic Adjustments One of the first laws passed by the first Congress after adoption of the Federal Constitution was the United States Patent Act of 1790. It authorized any two of the Secretary of State, Secretary of War, and the Attorney General to grant patents if they found the invention to be “sufficiently useful and important.” The patents could be up to 14 years in duration, provided that the inventor offered a specification describing the invention to the Secretary of State at the time the patent was granted. The first U.S. patent granted went to Samuel Hopkins for a new apparatus and process for making potash and pearl ash. It was approved by Secretary of State Thomas Jefferson and Attorney General Edmund Randolph, and then signed by President George Washington. As the rate of filings rapidly outpaced expectations, the United States Patent Act of 1793 quickly replaced the original system. This act authorized the creation of a formal patent office within the Department of State where it remained until 1925, when it was moved to the Department of Commerce.2 The act provided the first formal definition of patentable subject matter, close to the one currently in use: “any new and useful art, machine, manufacture or composition of matter and any new and useful improvement on any art, machine, manufacture or composition of matter.” Also, the act clarified that the inventor’s specification must be “in such full, clear, and exact terms, as to

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distinguish the same from all other things before known and to enable any person skilled in the art or science of which it is a part, or with which it is most nearly connected, to make, compound and use the same.” The law changed the review by the patent office from a substantive examination to the formality of mere registration. Because many of the newly issued patents concerned “inventions” that were not new at all, Congress overhauled the patent system in 1836 to provide for substantive review of all patent applications. This act imposed on inventors a duty to distinguish the claimed invention from that which came before. It also established the concept of a statutory bar for failing to file the application timely. The act included means for an applicant to amend the application if the patent office raised any objections to the application as initially filed. Additionally, it clarified that patents are to be awarded to whomever actually invented first, not merely to whoever filed the patent application first. Finally, it allowed for an extension of term of up to seven years in certain circumstances (the standard term of new patents was formally extended in 1861 to 17 years from the date of issuance, with no extensions available). A late addition to the 1836 patent overhaul, arising after a fire destroyed the official record of patents (many of which were never recovered), initiated the current patentnumbering system and authorized the creation of several patent depository libraries around the country. These depository libraries served to increase public access to patents, as well as to prevent obliteration of the patent record should a disaster strike again. Several disparate efforts to reform the patent system brewing in the late 1860s were consolidated into a single overhaul in 1870, accomplishing several structural changes. First, it codified the judicial doctrine of “best mode,” created a mechanism for figuring out which competing application claiming the same invention should prevail, clarified that any public use or salednot just use or sale by the inventordwould trigger the statutory bar, and authorized the patent office to issue regulations establishing processes for the orderly prosecution of patent applications.

United States: The Modern Framework The 1952 Patent Act The Patent Act of 1952 fundamentally changed the structure of U.S. patent law in three key ways. The first way changed the standard for patentability. The new law codified the judicial doctrine that inventions must be “not obvious,” which was in addition to the requirement for “novelty.” Second, the law changed the enforcement of patents. Before 1952, the courts were left to decide for themselves whether someone had infringed a patent; the new law crafted a formal definition for “infringement,” which raised the significance of the “claims” of a patent. Third, the law made

Principles and Practice of Clinical Research

a series of structural changes, the most significant of which was to clarify that patents still can contain enforceable claims even after some of its other claims have been held invalid. The concepts of “novelty,” “non-obviousness,” and “claims” are all discussed later in more detail. The “Federal Circuit” In 1982, Congress created a special court to consolidate and resolve questions on patent law. To explain its significance, a brief background on litigation generally under United States federalism principles is required. Most legal cases, such as contract disputes, divorces, and crimes, are tried in State courts; federal courts generally only hear cases if the dispute arose under federal law, though they also may hear cases arising between citizens of different States. Under the Constitution, Congress has exclusive power to make patent law; the States are thus forbidden to pass any patent laws of their own. Moreover, State courts are likewise forbidden from deciding any issue of substantive patent lawdall such cases must be brought in a federal district court. Since the 1890s, all appeals from the federal district courts, including patent cases, have been heard by regional “Circuit Courts of Appeals”; requests for further appeals go to the United States Supreme Court, which has discretion whether or not to hear any given case. In 1909, Congress created the first Court of Appeals with a fixed subjectmatter jurisdiction (as opposed to territorial jurisdiction). This court originally only had authority to hear appeals from the Customs Office. This jurisdiction expanded in 1929 to include appeals from the U.S. Patent Office, becoming the U.S. Court of Customs and Patent Appeals (“CCPA”).3 As is true for many areas of law, the various Circuit Courts of Appeals did not agree with each other on major tenets of patent law. Compounding the problem was the fact that the regional circuits, which heard patent cases in the context of infringement litigation, often disagreed with the CCPA, which heard patent cases in the context of the application proceedings before the U.S. Patent Office. To clarify patent law, in 1982 Congress created the Court of Appeals for the Federal Circuit (“CAFC”), abolishing the CCPA in the process.4 While it is still possible for a substantive patent-related issue to be heard in one of the regional circuits, that event is rare, and when any regional circuit court considers such an issue, that circuit court will rely on and defer to decisions of the CAFC on all substantive principles of patent law. U.S. Patent Reform of 2011 On November 16, 2011, the Leahy-Smith America Invents Act,5 sometimes informally called the Patent Reform Act, became effective. To those whose professions are deeply

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enmeshed in patent lawdwhether through applying for, licensing of, or litigating patentsdthe Patent Reform Act was certainly the most significant overhaul of United States patent law since 1952, perhaps since 1836. To everyone else, the changes were more subtle. The goals of the new law included making patent law more consistent with international standards, making the process of acquiring a patent more coherent and more predictable, and making the value and validity of patents more secure by making the processes for eliminating or fixing poor patents easier. The most high-profile part changed who has the right to receive a patent: from the first person to invent to the first inventor to file a patent application. Other major components of the law included changing the standard of what constitutes “prior art,” simplified formalities in filing, reforming the mechanisms through which others can challenge patents and patent applications before the USPTO, and removing the “best mode” standard as a basis for invalidating a patent. These changes will be discussed below in more detail. How well the law will serve its goals will not be known for a long time. Some of the terms of the Patent Reform Act operate immediately, but most of its terms start to operate during an 18-month transition period. Consequently, as of the writing of this chapter, the USPTO is still drafting rules to implement many of its key provisions, many of which will not be tested for months or years after they are finalized. Also, patents filed before March 16, 2013 (and a small set of those filed later) will continue to be governed by the patent laws and procedures in effect before the Patent Reform Act, so the old rules will remain relevant for another 20 years.

International: Patent Treaties Patents have substantial international significance, so the fact that several major treaties address patents should surprise no one. The following discussion summarizes some of the most important treaties and conventions applicable to modern patent practice, arranged in chronological order of signature. The Paris Convention for the Protection of Industrial Property (1883) The first treaty governing intellectual property rights was the Paris Convention.6 Essentially, it specified that the filing date for a patent application in one country would be recognized in every other member’s patent office, provided the applicant files parallel applications in those other members’ patent offices within 12 months. As of December 2011, the Paris Convention has 174 members. Thailand was the latest to join, in 2008. Currently, Kuwait is the only nation with a stable, internationally recognized government

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that is not a member; Taiwan is also not a member, but its status as a nation is not universally accepted. The Strasbourg Patent Convention (signed 1963, effective 1980) To harmonize substantive standards for granting patents, the European Union negotiated a treaty called the “Convention on the Unification of Certain Points of Substantive Law on Patents for Invention,” commonly called the Strasbourg Patent Convention. The treaty became effective in 1980, once eight nations’ legislatures had ratified it (including France and Germany). Currently, 13 countries are members.7 While the treaty harmonized substantive patent law, procedural laws remained outside its scope. The World Intellectual Property Organization (WIPO) Convention (signed 1967, effective 1970) In 1967, the “Convention Establishing the World Intellectual Property Organization” was signed in Stockholm, Sweden. WIPO, operating under the auspices of the United Nations and headquartered in Geneva, Switzerland, currently has 184 contracting members (each member has one vote). WIPO administers 24 multinational treaties, proposes various international initiatives, holds various events discussing emerging intellectual property (IP) issues, and provides a number of IP-related services. The Patent Cooperation Treaty (signed 1970, effective 1978) The Patent Cooperation Treaty (PCT), administered by WIPO, was designed to streamline international filing of patents on a single invention by crafting a common application design and common filing procedure. Any signatory to the Paris Convention is automatically eligible to join the PCT. Initially adopted by 18 contracting countries, as of December 2011 the treaty has 144 members. Non-members include Paraguay, Uruguay, Saudi Arabia, Iraq, Jordan, and Taiwan; Argentina and Iran both signed the treaty in 1970 but never implemented its terms. Regional Patenting Systems Upon liberation from French colonial rule in the early 1960s, 12 newly founded African nations banded together to harmonize several legal institutions, including their patenting systems. They created the first regional patenting authority, the African and Malagasy Patent Rights Authority (OAMPI), born on September 13, 1962 upon the adoption of the Libreville Agreement. That treaty required member nations to conform their laws such that the issuance of a patent by a centralized authority would have uniform legal status as a patent in all member nations. In 1977, this organization became the Organisation Africaine de la Proprie´te´ Intellectuelle (OAPI).8

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Europe soon decided to follow OAMPI’s example, to minimize the burden of having to file separate patent applications in every European nationdbut Europe’s challenge was larger because each patent application had to be translated into the official national language, had to be filed by local counsel on exactly the same day, and otherwise had to follow all nation-specific laws and procedures. In 1973, the European Union adopted the “Convention on the Grant of European Patents,” commonly called the “European Patent Convention” or simply the EPC. The EPC required member nations to harmonize their patent laws and authorized creation of a single, regional patent office that would handle intake and initial processing of patents, which later would be transferred to national patent offices in those European nations selected by the applicant. While the European Patent Office (EPO) does grant a “patent,” which in theory is directly enforceable throughout all member nations, each member retains the independent authority to require that every patent must be filed in the national patent office translated into the local language (“validated”) before its owner can enforce the patent in that nation. Three other regional systems have been founded since the EPO. The first is the African Regional Intellectual Property Organization (ARIPO),9 which was founded in 1976 and uses English as the common official language. The second, the Eurasian Patent Organization (EAPO), was founded in 1994 and uses Russian as the common official language.10 Finally, the Gulf Cooperation Council (GCC) operates a regional patent registration office for six Arab states, which became operational in 1998.11 Unlike the other regional offices, however, the GCC office does not participate in the PCT system. Updates to the GATT of 1947dUruguay Revisions and TRIPS (signed 1994, effective June 5, 1995); Doha Declaration (signed 2001) In 1947, the United Nations negotiated the General Agreement on Tariffs and Trade. This treaty created a body to review and resolve trade disputes among its members. The members continue to update the underlying treaty through a series of “Rounds” of negotiations. The Uruguay Round, held from 1986 to 1993, which culminated in the formation of the World Trade Organization (WTO), also expanded topics eligible for discussion, including intellectual property. At the end of the Uruguay Round, the members signed the “Agreement on TradeRelated Aspects of Intellectual Property Rights,” commonly known as “TRIPS”. TRIPS required its members to harmonize certain major elements of their patent, copyright, and trademark laws. In the United States, Congress had to change patent laws (as applied only to those applications filed after June 5, 1995, when the treaty

Principles and Practice of Clinical Research

entered effect) in several key ways, the most important of which were: (a) calculation of patent term; and (b) publication of pending patent applications. The TRIPS treaty quickly became controversial because of the perception that emerging-economy countries would be dis-empowered to protect the health and welfare of their citizens merely to preserve the patent rights (i.e., profits) of multinational pharmaceutical companies. Accordingly, the members of the WTO Ministerial Conference of 2001, meeting in Doha, Qatar, adopted the “Doha Declaration on the TRIPS Agreement and Public Health.” This declaration asserted that TRIPS includes flexibility among member states to circumvent patent rights to protect public health in the event of national emergencies or other circumstances of extreme urgency (each member state may determine what qualifies based on its own criteria).

Modern Philosophy of Patent Law As a general proposition, free-market economies thrive best when every participant has an equal ability to compete. Nothing is wrong with people trying to earn the position as the sole provider of a good or service through low pricing, superior quality, or other characteristic, as long as others can try to match or beat them. So why would any freemarket country go out of its way to create a legal mechanism that allows someone to suppress other people’s ability to enter the market?

Fairness and the “Quid Pro Quo” An old adage states, “build a better mousetrap and the world will beat a path to your door.” That adage is generally respectable, but standing alone, it has a flaw: How can a person or a small business hope to compete with a large corporation that already has established manufacturing facilities in countries with cheap labor and economies of scale, already has well-organized transportation logistics, and already has marketing units and dozens of distribution centers primed to sell the product? Copiers are merely freeriding on others’ creativity; by definition, they do not add to the body of knowledge or otherwise create anything new, so their contribution to society (lower pricing) is less valuable than the innovators’ invention. As such, basic fairness suggests that the innovator should have the first opportunity to reap profits. Far worse to society: without a patent, innovators have an incentive to keep their inventions secret for as long as possible to prepare for the competition. The patent systemdand any market distortion resulting from a given patent12dactually serves the public good. First, it provides the innovator with an incentive to try to innovate, by shielding the innovator against the copier for a limited time. Collaterally, this benefit provides an incentive to those with spare capital to invest in research

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and development, hoping a valuable invention will arise. Second, patents expire on a fixed date, meaning that the public (particularly copiers) know when they can start competing. Third, patents are public documents, meaning that the public can begin to learn from a patent the moment it is published, even if no one may compete yet. Fourth, patents provide the public with an incentive to design something new that is not blocked by the patent. At the same time, the patent system imposes a specific “price” to the innovator: the innovator must disclose everything. As discussed in more detail below, the innovator must tell the public how to practice the invention in such clear and detailed terms that someone having ordinary skills in the field of the invention could practice it. Additionally, the inventor must alert the USPTO about any prior publications or other public disclosures related to the invention (to the extent the inventor is aware of them), in order to help the USPTO narrow the scope of the patent appropriately. In essence, both the inventor and the public gain from the patent system: by conceding something valuable, each gains something else valuable. This critical concept in patent law is generally called the “quid pro quo,” a Latin phrase meaning “this for that.” Those who object to the benefits conferred on patent owners should bear in mind the benefits that the public enjoys.

Incentives for Product Development For many products, once they are invented, they are ready for marketdbut not all. Sometimes, a prototype or discovery works in the lab, but requires substantial experimentation and modification to be turned into a marketready product. No one will invest the resources to convert that good idea into an actual productdunless they can be assured that, once the product reaches the market, they will have the opportunity to earn back the original investment plus a profit. Patents provide that assured opportunity (though only the market will determine if the inventor actually will see any financial return). While some economic studies have shown this prediction of behavior is indeed a general trend,13 a case in point is a new pharmaceutical product. A researcher might discover today that a class of molecules having a common chemical backbone all appear to treat a specific bacterial infection in a Petri dish, but that does not mean that that researcher can start selling the chemical as a drug. The researcher must first discover, among other things, all of the following: (1) which chemical subtype has the optimal therapeutic benefit with lowest toxicity; (2) how to get the drug into the body so enough of it will reach the bacteria; (3) how the drug moves through the body, and what side effects it causes; (4) what the minimum, optimal, and maximum effective doses are, and how long the drug stays

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effective in the body; and (5) whether there are any hidden risks that only will become apparent after wide-scale testing. Moreover, the researcher needs enough data on each of these points to convince the U.S. Food and Drug Administration (FDA) that the drug is safe and effective. Pharmaceutical testing requires years and hundreds of millions of dollars, and, for most candidate drugs, likely will never earn back what was spent developing it. Drugdevelopment companies rely on one success to pay for many failures. If a drug that reaches the market can be manufactured at pennies a pill, copiers will get a free ride on the inventor’s hard work and investment. Without a patent, no one will invest in developing the inventor’s molecule into a drug, the drug will never reach the market, and the public health will not improve. To be sure, the facts that make the “incentive to develop” rationale for the patent system so compelling for FDA-regulated biomedical products are not present in other fields; even where the critical facts are present, they are not necessarily as persuasive. Nonetheless, this rationale remains relevant in any field requiring a significant translational step between inventing a technology and marketing a product that embodies that technology.

Economic Engine A hotly debated economic theory supporting a strong patent system argues that nations with stronger patent systems have more robust economies than nations with weaker patent systems. The idea is that nations become committed to strong protection of intellectual property when they are already investing a substantial fraction of their disposable wealth or GDP on research and development, and on infrastructuredin other words, nations that decide to rely on innovation as a source of prosperity (as opposed, say, to relying on raw resources or cheap labor) will grow faster than those that do not. The data on this point are not uniform, but the majority of empirical studies show a positive correlation between strengthening patent systems and economic growth.14 While none of these studies proves that strong patent systems cause growth, the weight of the data does suggest some relationship exists.

CORE CONCEPTS OF US PATENT LAW What is a Patent? Patents Internationally Patents are national documents. For example, a patent issued by the USPTO has legal effect only within the borders of the United States; a patent issued by the French Patent Office is effective only within the borders of France; etc. Each nation decides what subject matter can be patented within its borders, and what the applicant must do

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before that nation’s patent office will issue a patent. The exact scope of rights granted by each nation also varies. Additionally, enforcement of patents can require navigating administrative offices, specialized courts, and other elements unique to each nation. Some nations will respect patents issued by other nations,15 but this is the exception rather than the norm.

Utility, Plant, Design The United States offers three categories of patents. The first and by far most common is the “utility” patent. “Utility” patents, the type of patent with which most people are familiar, cover new and useful embodiments of ideas and innovations. According to the USPTO’s data for 2000e2008, about 95% of all patent applications filed in the United States are utility patents. As a result, most unspecified references to “patents” actually refer to utility patents. Another type of patent is the “plant” patent. These protect strains of plants that the inventor both (1) invented or discovered, and (2) propagated asexually.16 Examples of invention or discovery of plants include cultivated sports, mutants, hybrids, and newly found seedlings (other than a tuber propagated plant or a plant found in an uncultivated state). Asexual propagation techniques include rooting of cuttings, layering, budding, grafting, and inarching. Between 0.2 and 0.3% of all patent applications are plant patents. The final type of patent is the “design” patent. Design patents protect novel, nonfunctional, ornamental elements.17 For example, in a newly designed bicycle rack, improvements in the way it allows bicycles to be stacked and locked (a function) would be protected by a utility patent, while a design patent might protect its unique appearance. On sneakers, stitching having no structural function often is the subject of a design patent.18 Just over 5% of all patent applications in the United States are design patents.

Specific Rights Conveyed by Patents The USPTO publishes formal notice to the public each time the USPTO issues a patent, proclaiming that the government has granted certain rights to the invention described in the patent, which will persist through a specific end date. The powers attached to a patent are the right to exclude others from making, using, selling, and importing the claimed invention in the United States. The recipient of the newly issued patent, called the “patentee,”19 may ask the government to enforce those rights, may enter contracts with others in which the patentee agrees not to enforce the patent (a “license”), may sell the patent, or may simply do nothing.

Principles and Practice of Clinical Research

A question commonly arises at this point. “So, can the patentee practice the invention described in the patent?” The answer is, “not always.” Consider a hypothetical case, ignoring history. Inventor A patents the first aircraft, which uses a powered propeller attached to a fixed wing. The following year, Inventor B patents the first jet-powered engine. For as long as these patents remain active, no one may combine these two technologies to make a fixed-wing aircraft powered by jet engines, because Inventor B’s efforts would be blocked by Inventor A’s patent, and A’s efforts would be blocked by B’s patent. Inventor B could, however, try to sell a jetpowered car without worrying about Inventor A’s aircraft patent. To sell a product covered by multiple patents, someone must secure permissions from all patent owners in order to make it, either by licensing or by acquiring ownership of the relevant patents. Alternatively, someone can design a new version of the product that is not blocked (in the hypothetical, perhaps by inventing a helicopter). Indeed, this incentive to “design around” others’ patents is a critical feature of patent law.

Substantive Criteria for Patentability Having now described the broadest outlines of patents, the next step is to focus on the core criteria for acquiring patents. In other words, this section will try to address the circumstances under which a discovery qualifies as “patentable.” Under United States law, an inventor is presumptively entitled to a patent on appropriate “subject matter,” unless the invention lacks “utility,” is not “novel,” is “obvious,” or is not adequately “described in writing.” Each of these quoted words and phrases carries special meaning in patent law, as elaborated below.

Patentable Subject Matter General Principles Under U.S. law, specifically 35 U.S.C. x 101, an inventor may apply for a patent claiming new or improved versions of: (1) compositions of matter; (2) machines; (3) articles of manufacture; and (4) processes. “Compositions of matter” generally include chemicals (including biological products), alloys, and other mixtures. “Articles of manufacture” include all objects that are not machines or compositions of matter; an easy example is a golf ball with a unique pattern of dimples. “Processes” refers to activitiesdmainly methods of making or using a thing. Also, an inventor may claim a combination of these elements. As the Supreme Court made clear, these categories cover “anything under the sun that is made by man.”20 Over several cases, however, the Court has observed that not

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everything under the sun is, in fact, made by man; therefore, not everything can be patented. First, mathematical formulas, abstract ideas, and properties of physics cannot be patented because humans merely observe or discover them, we do not make them.21 So, Einstein could not have patented his famous equation “E ¼ mc2” but if someone built a fusion-powered electric generator that relies on that formula, that machine clearly could be patented.22 Likewise, mere strategies and vague concepts are not patentable standing alone; rather, they must be embodied actually in a prototype or practical process. Second, items as they occur in nature cannot be patented; again because humans did not make them, we just found them. So, if someone walks through a forest, chews on a leaf from a tree, and notices his headache has disappeared, he would not be able to patent the leaf or the tree, as these existed in their current form before any human realized their health effects. If, however, he took some of those leaves back to a laboratory, and there extracted an active chemical from those leaves, he could patent the isolated biochemically active ingredient. Third, patents are inappropriate for works of authorship such as text and visual arts, which are the domain of copyright law, and for product-identifying logos, slogans, and monikers, which are the domain of trademark law. To be sure, some items overlap, and so can be protected simultaneously by more than one form of IP. For example, computer software can incorporate a new method of processing data (patentable) as well as the text of the software coding (copyright). Likewise, a sneaker’s stitching can include both novel ornamentation (design patent) and marketing logos (trademark). These instances of overlap, however, are the exception rather than the rule. These general rules may appear straightforward, but applying them to specific situations has proven difficult, particularly in the last few decades. Three areas in particular have generated considerable debate, all of which have the potential to impact biomedical research: “mere associations”; living organisms and DNA, and software and algorithms. Each of these deserves a brief discussion to show how the concept of statutory subject matter has evolved recently. “Mere Associations”: LabCorp vs. Metabolite After much painstaking research, a scientist notices that a change in a blood-borne biomarker correlates with a medical condition or disease. In that situation, where is the line between a new diagnostic tool (patentable) and the mere recognition of a natural phenomenon (unpatentable)? Trying to draw that line has triggered a substantial debate, especially after the lightning-rod case known as LabCorp vs. Metabolite.23

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Deficiencies in folic acid and vitamin B12 are known to cause several diseases, but detecting the precise level of each of these vitamins in the body is difficult. In 1986, researchers at the University of Colorado and at Columbia University recognized that, because these vitamins are critical to the metabolism of homocysteine (an amino acid), elevated homocysteine levels in a person’s blood would reveal a deficiency in one or both vitamins. Additionally, they discovered that simply measuring the amount of homocysteine circulating freely in the blood was not an accurate indicator; rather, they figured out how to measure total homocysteine in the body based on a blood sample. A patent application was filed, assigned to University Patents Inc. (a for-profit company established to market universities’ patents), then assigned to Competitive Technologies (UPI’s successor), then licensed exclusively to Metabolite Laboratories, Inc. (“Metabolite”), and finally sublicensed to Roche Biomedical Laboratories (which was later spun off to become Laboratory Corporation of America (“LabCorp”)). The patent had 34 claims, two of which are critical. Claim 1 describes in detail a new method for measuring total homocysteine, and it was not controversial. Claim 13, however, reads as follows: A method for detecting a deficiency of cobalamin or folate in warm-blooded animals comprising the steps of: assaying a body fluid for an elevated level of total homocysteine; and correlating an elevated level of total homocysteine in said body fluid with a deficiency of cobalamin or folate.

LabCorp changed its testing methods, and decided not to continue paying royalties to Metabolite, and Metabolite sued LabCorp for patent infringement. A jury found willful infringement, the CAFC affirmed, and LabCorp appealed to the Supreme Court. Initially, the Supreme Court agreed to hear the case, but on different grounds than had been discussed by any of the parties in any of the prior proceedings: whether a claim directed merely to “correlating” test results with a condition is patentable (such that a doctor necessarily infringes the patent merely by thinking about the relationship after looking at a test result). Although the Court ultimately dismissed the appeal as “improvidently granted,” leaving the lower decision intact, three justices dissented, arguing that the Court should have decided this issuedpresumably by striking down the patent.24 Living organisms and DNA: From Chakrabarty to Mayo to Myriad Following the discovery of the helical structure of DNA, a question has repeatedly arisen, albeit in different forms. Under what circumstances can one patent DNAdthe stuff of life? On the one hand, DNA is a chemical, subject to all

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the same principles and dynamics of any other chemical. Patent law, in general, is carefully constructed to avoid creating classes of patents with different rules for different technologies. On the other hand, DNA is something more than just any chemical, inextricably tied at some level to an organism’s very identity. Moreover, besides the purely logical positions, the mere notion of tinkering with DNA triggers powerful fears and other emotional reactions. Drawing a suitable line between patentable and unpatentable, therefore, remains a difficult and controversial exercise. The first major foray began with the 1980 Supreme Court case of Diamond vs. Chakrabarty.25 Dr. Chakrabarty genetically engineered a bacterium capable of breaking down crude oil, to be used to clean up oil spills. The USPTO rejected his patent application, asserting that living organisms could not be patented even if they were engineered. The CCPA reversed this decision, and the Supreme Court agreed with the CCPA in a 5e4 decision. The majority concluded that it is up to Congress to set the bar for what is patentable, and Congress did not limit “compositions” and “articles of manufacture” to non-living ones. As this organism was clearly created by a human through engineering, rather than either found in nature or bred using natural evolution, it qualifies for patent protection. While the Chakrabarty decision has been criticized on policy grounds (i.e., that living organisms should not be patentable), the decision remained legally unchallenged for 30 years. In substantial reliance on that decision,26 hundreds of biotechnology companies have been formed,27 many of which rely on patents claiming genetic elements in one way or another. Also, the USPTO has issued tens of thousands of patents claiming DNA or RNA, including patents on nonhuman genetic elements. Finally, by some estimates, U.S. patents claim as much as 20% of the human genome.28 In this context, two court cases still working their way through the appeals process in early February 2012 represent a potentially major shift: Mayo Collaborative Svcs. v. Prometheus Labs., Inc.29 and Association for Molecular Pathologists vs. USPTO and Myriad Genetics.30 Each case’s complex facts are worth examining in some detail as they highlight several intertwined policy issues. The Mayo case concerned two thiopurine drugs used for years to treat certain inflammatory bowel diseases: 6-MP and AZA (AZA is a precursor that converts to 6-MP in the body). The body eventually metabolizes the drugs into toxic products, such that the doctor must give enough of a dose to be therapeutically effective without causing too much toxicity. Unfortunately, each person metabolizes thiopurines differently. In the late 1990s, the Hopital-SainteJustine (Montreal, Canada) discovered that metabolite levels correlated to therapeutic dosing, patented the method, and exclusively licensed rights to Prometheus Labs.

Principles and Practice of Clinical Research

Initially, the Mayo Clinic purchased Prometheus’s test, but in 2004 Mayo ceased purchasing the test, announcing its intent to begin using its own test and to begin selling that test to others. Prometheus sued for patent infringement. The district court found that Mayo’s test infringed the patents, but ruled that the patents were invalid because they essentially claimed correlations involving natural phenomena. On appeal, the CAFC reversed, holding that the claims as a whole included “administering” the drug and “determining” metabolite levels, both of which were specific, physically transformative acts. The Supreme Court initially vacated this decision for reconsideration in light of a recently issued patent decision on the subject,31 but the CAFC decided that its prior holding should not be changed. Mayo again appealed to the Supreme Court, which heard oral arguments on December 7, 2011. A decision is expected in the first half of 2012. The Myriad case concerns gene mutations associated with susceptibility to breast cancer. In the early 1990s, scientists at a company called Myriad Genetics, working with a variety of colleagues,32 sequenced two genes critically important to a large fraction of breast cancers, dubbed BRCA1 and BRCA2. Those people who inherit a deleterious mutation in either gene have a dramatically higher likelihood of developing cancer, particularly breast, ovarian, and prostate cancers. Currently, the medical community has not agreed upon a single set of criteria for when to get tested. The NIH National Cancer Institute suggests that, when someone is diagnosed with breast or ovarian cancer, the patient should be tested for the BRCA genes, and if the test is positive, their family should be screened as well.33 Those with the gene can better select the best therapies for current cancer, know to increase their vigilance for future cancer, and can better gauge whether or not removing tissue preemptively is wise. Myriad filed for and received several patents claiming specific genetic sequences and methods of diagnosing cancer using these sequences. Myriad immediately began offering testing services, at a cost on the order of about US$3,000 per test; unfortunately, the cost of the test was not covered by insurance and Medicaid for many years.34 Other labs, however, ignored the patents and began offering the test. The regional public health plan of Ontario, Canada, offered the same test for about a third the price; also, several pathologists and other clinicians offered the test out of their own labs. Myriad sent “cease & desist” letters to them, offering license terms that these other testers say were offensive. Myriad sued the University of Pennsylvania, after which most testers stopped offering BRCA tests, albeit under protest. In May 2009, a large and diverse group filed suit against Myriad, the University of Utah, and the USPTO. The plaintiffs included the American Civil Liberties Union (ACLU), several medical groups,35 several clinicians,36

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genetic counselors,37 patient advocacy groups,38 and individual patients claiming injury based on Myriad’s testing policies.39 The case drew considerable national attention, with over 30 “friend of the court” briefs filed by interested third parties urging various outcomes. On March 30, 2010, the federal district court held in favor of the plaintiffs against Myriad and the University of Utah (claims against the USPTO were dismissed). The court first looked at the “composition” claims, which were directed to “isolated DNA.” After looking at the legal history of patents on genes, the court ruled that claims to isolated DNA (including RNA and cDNA) and methods of diagnosing diseases using isolated DNA are products of nature, and thus not within the acceptable range of statutory subject matter for patenting. The court recognized that isolated DNA does not exist in its isolated form without physical intervention by a human. Nonetheless, the court reasoned that the sole commercial utility of these isolated fragments is to compare them with genomic DNA, therefore the isolated fragments are “equivalent” to genomic DNA.40 Turning to “method of diagnosing” claims, the court held that there was no new machine or physical act involved, that the methods were at their heart purely the mental inference doctors make when confronted with data.41 On appeal, the CAFC reversed in part and affirmed in part. Favoring the views of Myriad, the Court ruled that isolated DNA can be patentable subject matter, precisely because these molecules are different from those that occur in nature directly because a human changed the molecule. More specifically, one must consider whether human intervention has given “markedly different,” or “distinctive,” characteristics. In doing so, the court suggested that limiting the analysis to the “informational content” of the molecule is not appropriate. Favoring the views of the plaintiffs, the Court held that the “comparing” and “analyzing” claims are ineligible for patent protection. Looking at the language of Myriad’s claims, the Court focused on the fact that they entirely relied on mental processes occurring independent of the physical steps taken to gather the data. The plaintiffs have petitioned the Supreme Court to hear an appeal, and a decision on whether to hear the appeal is expected in the first quater of 2012. The direct legal impact of the Myriad case is not clear. On its face, the district and circuit courts’ opinion disposed of only 13 specific claims scattered across seven patentsdtheoretically, the remaining claims in these patents are still valid. Furthermore, if the Supreme Court agrees to hear an appeal of the decision, almost any outcome is possible. Even if the Supreme Court agrees to hear the appeal, it easily could decide the case solely on the issue of “standing” (i.e., who is entitled to sue), rather than on patent subject-matter eligibility, in which case the patent issue will remain somewhat unsettled. Moreover, other

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patent cases recently decided by (or are now pending before) the CAFC and U.S. Supreme Court stand to change the legal landscape on which the Myriad decision was based. Regardless of all of these variables, however, the case likely will continue to serve as a legal watershed and policy lightning rod for these issues. Algorithms and Software: Benson-Flook-Diehr, State Street, and Bilski Algorithms put the patent system in a quandary: at what point is a mathematical formula transformed from merely being the description of a natural phenomenon to something “made by man?” That proposition, while easy to pose, has repeatedly proven difficult to answer, as shown by a series of court cases. Following the 1908 court case of Hotel Security Checking Co. vs. Lorraine Co.,42 the Circuit Courts of Appeals ruled consistently that methods of doing business, even if truly new, are unpatentable subject matter. For decades, the Supreme Court declined to take any case on the issue, so commentators generally believed the issue was settled. Then, a triad of Supreme Court cases in the 1970s changed the landscape. The first in the triad was Gottschalk vs. Benson.43 Mr. Benson filed a patent application on a method of using a general-purpose computer to convert “binary-coded decimals” into pure binary numbers. The Patent Office rejected the application, but this was reversed by the CCPA. The Supreme Court, however, agreed with the Patent Office that the invention was not patentable because it claimed a pure mathematical operation. “Transformation and reduction of an article ‘to a different state or thing’ is the clue to the patentability of a process claim that does not include particular machines.”44 The Court carefully chose not to hold that a process patent must either be tied to a particular machine or apparatus, or must operate to change articles or materials to a different state, and explicitly indicated that the decision did not preclude patents on software. Nonetheless, the Court clarified that the software in question was unpatentable because the software was not limited to a particular computer, such that a patent would preclude anyone from using any computer to calculate that mathematical formula. Four years later, the Supreme Court faced the case of Parker vs. Flook.45 Mr. Flook filed an application claiming an improved catalytic converter, in which the improvement was that the computer monitoring conditions in the catalytic chamber used a new algorithm to update the “alarm limits” (the designated normal operating range) for the converter. As in Benson, the USPTO rejected the application and the CCPA reversed. Citing Benson, the Supreme Court again reversed. While this time the algorithm was tied to a specific piece of hardware, the Court indicated that

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the mere fact that some incidental physical event happens after a computer has used the algorithm does not necessarily make the algorithm itself patentable.46 Three years later, the Supreme Court heard the case of Diamond vs. Diehr.47 This time, the invention was directed to a machine for molding uncured synthetic rubber, using a computer with software that used a new algorithm to determine when the rubber was cured.48 The USPTO rejected the patent application, and again, the CCPA reversed. This time, the Supreme Court affirmed the CCPA’s decision, indicating that the invention was patentable. While acknowledging that an algorithm by itself is not patentable, a machine or process that uses an algorithm can be. Here, the process of curing rubber was itself new; the fact that it depended on a mathematical formula did not make the process as a whole unpatentable.49 The Benson-Flook-Diehr triad laid a framework for analyzing process claims that relied on math. Unfortunately, that framework was difficult to interpret; indeed, many commentators said that these three cases were splitting hairs very finely, and others said they were irreconcilable altogether.50 Moreover, the cutting edge of technology had begun moving inexorably away from the macro-mechanical devices towards computers and other micro-electronic arts. Accordingly, the questions of patentability raised by software-dependent inventions continued to crop up. In 1998, the CAFC, in the case of State Street Bank & Trust Co. vs. Signature Financial Group,51 apparently relaxed the standards for software patenting, and in so doing opened the floodgates to a new group of patent applications. Signature Financial Group received a patent for a “hub and spoke” system of financial services, where various funds (spokes) pooled their assets in a central computer system (hub) that tracked and allocated shares and profits according to rules established by the Internal Revenue Service (IRS) for how to avoid taxes on a partnership. While the claim was carefully limited to a machine, the only novel element was the method of arranging finances. Signature then sued State Street Bank for infringement and won at trial. On appeal, State Street argued that the invention should not have been patented because software is, in essence, a “business method.” In a surprising move, rather than decide whether or not software was a “business method,” the CAFC took the opportunity to disagree with the underlying logic of Hotel Security, and concluded there is no “business methods exception” to the Supreme Court’s blanket statement in Chakrabarty that “anything under the sun made by man is patentable.” Rather, the CAFC concluded, any novel, nonobvious method of doing anything that produces a “useful, concrete, and tangible result” is patentable. That conclusion necessarily includes methods of doing business and software.

Principles and Practice of Clinical Research

The State Street case opened the way for patent applications unabashedly claiming business methods. From 2002 to 2009, filings rose from 7,400 to over 15,000 per year, with issued patents rising from about 500 to over 1,700 per year.52 This influx of newly issued patents naturally led to several high-profile efforts to enforce them. One of these efforts involved a lawsuit by Amazon.com against Barnes and Noble over the “1-click” online-shopping patent.53 Another case involved a lawsuit between RTP, which owned a portfolio of patents on methods relating to wireless email and RF antennas, and a company called RIM, which owns and operates the then-wildly popular BlackBerryÒ smart phone. Although that case settled, an injunction issued in the lawsuit threatened to shut down BlackBerry services nationwide.54 While representing a tiny fraction of all patents, business-method and software patents had grabbed national attention. Then came the Bilski case. In 1997, Mr. Bilski and Mr. Warsaw filed a patent application claiming a method for managing risks associated with commodity trading. The application merely disclosed the mathematical and theoretical means for addressing the problem, without any associated machine or tangible transformation of any physical item. Accordingly, the USPTO rejected the application as not drawn to statutory subject matter. The inventors appealed to the CAFC.55 In a complex decision,56 the CAFC, looking at the prior Supreme Court cases, held that to be patentable subject matter, a process must pass the so-called “machine or transformation” test: a claimed process is patent-eligible if “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.”57 The CAFC carefully did not overrule State Street,58 indicating that there is no “business method exception” and no broad exclusion of software from patent eligibility. Nonetheless, the CAFC indicated that any such invention would face the method-or-transformation test as the sole test for eligibility. On appeal, the Supreme Court unanimously affirmed the conclusion of the CAFC’s opinion, but rejected the logic.59 Indeed, the Supreme Court disagreed with the CAFC’s assertion that prior Supreme Court cases required that the machine-or-transformation test be the only test. While that test might be a useful construct in many cases, and while only rarely will a patent-eligible invention fail that test, the Supreme Court explicitly repudiated the idea that the test should not be the sole means for deciding. The Supreme Court also took the opportunity to reject the State Street standard of “useful, concrete, and tangible result” test as overbroad (though the Supreme Court did not overrule the case altogether). Rather, the Supreme Court elected to decide the Bilski case narrowly, on its facts, without setting forth a new test or other bright-line rule. Since then, the USPTO has issued guidance suggesting that

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while the legal foundation of any rejection of businessmethod and software patents must rest on the BensonFlook-Diehr triad, any invention that clearly passes the “machine or transformation” test will be patentable.60 To sum up this line of cases, the range of patentable subject matter remains broadly open: any method can be patentable subject matter, regardless of the field in which it arises, and regardless of whether it is tied to a tangible object, as long as the method as a whole is something “made by man,” and also provided it otherwise meets the criteria of patentability. Unfortunately, presently no brightline rule or clear test exists to determine whether or not a given process fits this description. For the present, the Benson-Flook-Diehr triad continues to be the core framework for analysis, though the “machine-or-transformation” test from Bilski may be used as a preliminary means for evaluation. Apparently, the Supreme Court anticipates continued evolution of this area of law, so more cases are likely in the near future.

“Utility” (“Industrial Applicability”) An often overlooked requirement for obtaining a utility patent is that the invention must have a use. This “utility” requirement, derived directly from the Patent and Copyright clause of the U.S. Constitution (“to promote the progress of science and the useful arts”), is embodied in the patent statute at 35 U.S.C. x 101. Abroad, other nations have a similar requirement, which is usually called “industrial applicability.” The utility requirement often is overlooked because it is so easy to overcome. The Supreme Court has described the utility requirement as including “anything under the sun that is made by man.”61 At the same time, a minimum threshold does exist. To pass muster, an invention must have a “specific and substantial” use that is “credible” to a person having ordinary skill in the field of the invention. “Specific and substantial” means that the invention must be usable in a particular, “real world” way, other than in a way that just about anything also could serve regardless of its real properties.62 For example, any heavy object can serve as a “doorstop” or “landfill,” regardless of its shape or structural engineering, but not every object can be an efficient, comfortable, and affordable modular desk. Likewise, any manufactured edible ingredient can be a “food additive” regardless of what it does once eaten, but not every such ingredient can abate a vitamin-E deficiency, or reduce uptake of dietary cholesterol. A pet rock, regardless how much a person might enjoy having one, does nothing. “Credible” basically means that the invention is capable of doing what is promised.63 For example, a perpetualmotion machine cannot function as promised, because doing so would violate a fundamental law of thermodynamics. Likewise, no drug can be a “cure for cancer,”

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because “cure” entails a range, permanence, and completeness that is impossible given the very nature and variations of cancer. At the same time, because inventions inherently push the boundaries of what society believes is possible, patent applications are rarely rejected on this basis unless the inherent impossibility of the use is readily apparent. Indeed, even if the invention only works crudely or in part, that is enough.64 Note, however, that the “utility” standard is not meant to stand in for other issues, particularly market-based ones. For example, an invention that serves an immoral or even illegal purpose is still “useful” as far as patent law is concerned (the law and social norms restricting the use may change).65 Also, an invention may have suitable utility even if it is unsafe: as an example, many patents have been issued for explosives and firearms. Moreover, other agencies are responsible for ensuring safety of products on the marketdfor instance, the FDA must approve a new drug before it may be marketed. Finally, in contrast to scientific publications, the utility of an invention need not offer any improvement at all over existing products, or otherwise provide a public benefitdlet alone represent a breakthrough. Markets will decide whether an invention is worthy of being purchased. To show this, consider two patents granted since 2000: the first is U.S. Patent 6,321,753, issued November 27, 2001, which covers a “tanning restraint apparatus,” an adjustable tube designed to orient the feet of a sunbather properly by holding the big toes together. The second is U.S. Patent 6,905,430, issued June 14, 2005, which covers an engineered “water skipping” stone, designed to skip along a curved path when thrown across a body of water. No inventor won a scientific prize for either invention, and neither product became a market sensation, but these facts have no bearing on utility.

“Novelty” General Principles “Novelty” in patent law is at once both a simple, bright-line test and a highly abstract concept. In essence, “novelty” is about whether an invention in its entirety was previously made available to the public in a single disclosure. While that concept may appear simple, the actual rules for conducting the test are far from it. Under the 1952 patent law, the test for novelty compares two dates, one relating to the invention and the other to the reference date of the prior disclosure; if the reference date is earlier than the invention date, the invention is not patentable. The tougher question is figuring out what the dates are. Under the Patent Reform Act, the test is, essentially, whether the inventor filed a patent application before anyone else disclosed the invention. All of the standards may be found in 35 U.S.C. x 102.

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The first test of novelty is known generally as “anticipation,” and it looks to the date on which the inventor conceived of the invention. In essence, the idea here is that you may not claim to be an inventor if someone else disclosed the invention before you thought of it. The fact that you never actually saw that prior disclosure does not matter, as long as you could have found it had you tried harder. Under the 1952 patent law, two types of prior disclosures apply here: (1) the invention is described in a patent or other printed publication anywhere in the world; or (2) the invention was “known or used by others” in the United States. To be “known or used” basically means any non-secret application of the invention that can be readily found by members of the public, should they try to do so.66 Most of the time, “anticipation” arguments arise in a straightforward manner: an applicant files a patent application, and the USPTO rejects it on the basis of an earlier publication or U.S. patent. This situation is typically labeled by its statutory source: a “x 102(a)” anticipation. The 1952 statute has two other, relatively minor forms of anticipation. The first is if the applicant is not the true inventor (x 102(f)). The USPTO has no way to know an applicant is not the true inventor unless the applicant says so, but infringers often find out when sued, leading to embarrassing (and often costly) developments for the shamed patentee. The other form of anticipation arises when someone else has filed a patent applicationdwhich is initially secretdbefore an applicant invented, and the earlier patent application is discovered later (x 102(e)). Despite complexity, this pattern of events happens, though infrequently. The second test of novelty is known generally as “statutory bar.” The idea here is that inventors may lose their rights to a patent if they do not move fast enough to file the patent application. For most of the world, the moment an invention has been publicly disclosed by anyone anywhere, patent rights are lost. Nations that use this standard are called “absolute novelty” jurisdictions. In the United States, patent law is more forgiving: an inventor has a one-year grace period after a public disclosure in which to file a patent application. A few other nations also provide a limited grace period, though the exact term and rules vary.67 Like anticipation, statutory bar under the 1952 law includes two types of disclosures that matter, but their description is subtly different from anticipation-based disclosures: (1) the invention is described in a patent or other printed publication anywhere in the world; or (2) the invention was “in public use or on sale” in the United States. The “in public use” prong requires two factual sub-elementsdthe invention was accessible or discernible by the public, and the use must have had a commercial character, even if technically not a “sale.”68 The existence or absence of a confidentiality agreement is evidence, but not dispositive proof, of whether a use was a public use.69 The “on sale” prong can be satisfied,

Principles and Practice of Clinical Research

based on specific facts, by any bona fide sale, offer to sell, license, or offer to license (even if done in secret), provided the technology is sufficiently developed that it is ready for patenting at the time.70 Assignment of the invention rights, however, does not trigger the “on sale” bar.71 Also like anticipation, statutory bar under the 1952 law has some less common forms. The first, and most straightforward, is that the inventor may not secure a patent if the inventor has already abandoned the technology (x 102(c)). As far as the USPTO is concerned, “abandonment” means intentional abandonment; while it is not necessary for the inventor to explicitly state an intention, delay alone is not sufficient to infer abandonment.72 The other form of statutory bar is where the applicant first files an application in a patent office outside the United States, and waits more than 12 months to convert the application to a U.S. application (x 102(d)). Under the Patent Reform Act, the concepts of anticipation and bar continue, but under a new standard called “first inventor to file.” Essentially, for any patent application filed on or after March 16, 2013, no patent may issue if anyone publicly discloses the invention before the inventor files the application. The only exceptions are if the inventor personally disclosed the invention, or if the non-inventor who disclosed the invention had received the information, directly or indirectly, from the inventor; in either situation, the inventor has a one-year grace period in which to file. The Patent Reform Act substantially simplifies the standards for determining novelty. No longer can an inventor get around a prior disclosure by swearing that the invention was conceived before that disclosure. Also, the standard eliminates a measure of uncertainty surrounding the validity of issued patents by removing so-called “secret prior art” (i.e., documents not available to the applicant or USPTO during the application phase) as a means for defeating a patent. Experimental uses that do not Defeat Novelty Suppose you invent a method of repairing large, highpressure pipes for distributing natural gas, but before you file your patent application (and publicly market your invention), you want to demonstrate to your biggest customer that the repair will last under real-world conditions. Assume further that the gas company is willing to let you try out your repairs on some mains, while the utility executives and government regulators watch. Eighteen months later, everyone returns to see what happened to the pipe. Under the 1952 law, would that experiment be a “public use?” According to the CAFC, it can be, depending on why and how you conducted the experiment. A company called Clock Spring sued Wrapmaster for patent infringement on facts similar to those just described,

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and Wrapmaster argued the patent should be invalid because of Clock Spring’s experiments conducted more than a year before the patent application was filed.73 The CAFC recognized that an experiment might not be a “public use” under x 102(b) even if conducted in view of the public, but clarified that the touchstone is whether the experiment is directed towards getting the patent. Here, Clock Spring ran their test merely to convince clients and regulators (rather than the USPTO) that the repair was durableddemonstrated by the fact that Clock Spring had filed its patent application before digging up the pipe, and never amended its patent application to reflect test data.74 Because the results of the test were neither collected nor submitted to the USPTO to demonstrate patentability, the “experiment” did indeed trigger the statutory bar. The Patent Reform Act is silent on whether and to what extent this rule still applies after implementation of the new standards, but the rule clearly will continue to apply to all patents issued on applications filed before March 16, 2013. Competing Claims of First-to-Invent: the “Interference” Scientists race against each other all the time to be the first to discover things. Sooner or later, cases are bound to arise where two (or more) people claim to have the right to own the patent on an invention because each thinks s/he invented it first. In most of the world, this argument is settled by looking at whose patent application was received by the patent office firstdknown as a “first-to-file” system. The United States, however, uses a “first-to-invent” system (under the 1952 law): in theory, whoever can prove the earlier date of invention wins the patent. This concept is captured in 35 U.S.C. x 102(g). The USPTO approaches contests by initiating a specialized and exceptionally complex procedure, called an “interference.” An interference can be declared between two pending applications, or between an application and an issued patent.75 Normally, either the applicant or the USPTO’s patent examiner notices overlap with some other inventor’s case, but in theory the USPTO could declare an interference based on information provided by a third party (no third party may participate after an interference has been declared). Procedurally, interferences progress through several stages. First, the USPTO decides the essence of the invention(s) being contested, and identifies which inventor is the “senior” party, who enjoys the presumption of having invented first (the other is the “junior” party); next, the parties engage in litigation-style discovery of each other’s documents, conduct depositions, and so forth; then the parties file and argue various motions to try to shape the actual interference hearing (exact description of the invention, scope of evidence permitted, etc.). A panel of

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administrative patent judges then holds a formal interference hearing; their decision may be appealed to the USPTO Board of Patent Appeals, then to the CAFC, and perhaps the Supreme Court. Instead of appealing to the CAFC, however, the losing party may alternatively file a complaint in the federal district court against the USPTO, asking the court to order the USPTO to issue the patent according to the complaint.76 At each stage, a ruling could reset the procedural clock, perhaps all the way to the beginning. Interferences are complicated and expensive undertakingsdand, fortunately, rare. The USPTO declared 66 in FY2008 and 55 in FY2009, or about 0.02% of the nearly 400,000 applications that the USPTO disposed of in that time.77 Most resolve within two years, but complex cases concerning valuable technology can last up to a decade, or sometimes even longer.78 Companies keep their exact costs confidential, but very rough and anecdotal estimates suggest that interferences can easily run several hundred thousand dollars, perhaps into the millions of dollars for the worst cases. One of the major reforms of the Patent Reform Act was to eradicate interferences. For applications filed on or after March 16, 2013, the only basis for a late-comer to challenge an already-filed application is to assert that the applicant merely “derived” (i.e., learned of) the invention from the true inventor. Interferences will not disappear quickly, however, because any issued patent or pending application containing even one claim that was originally in an application filed before March 16, 2013 is still subject to the interference procedures.

“Non-Obviousness” General Principles While “novelty” looked at whether the entire invention is described in a single reference, what about inventions that are not entirely described in a single reference? This is where the concept of “obviousness” comes to play, which appears in 35 U.S.C. x 103. For neophytes to patent law, the word “obviousness” may be the term of art most likely to generate confusion because its legal meaning is substantially different from what appears in non-legal dictionaries. The core concept that the word “obvious”79 tries to capture is the minimum quantum of innovation necessary to justify granting a patent. That minimum quantum cannot be rigidly defined in advance of the creation of an invention; it must be analyzed fresh, case by case, in the context of the specific field of the invention, and at the field’s level of scientific maturity on the date of the invention. The formal test for “obviousness” reads in a simple, formulaic way, but is tricky to apply. Essentially, an invention is “obvious” if a person having “ordinary skill” in the field of the invention, looking at all of the pertinent prior references, would find the claimed improvement to be

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insufficiently different. Generally, obviousness involves combining two or more references, though in some cases, a single reference may be enough, if the difference is still trivial. The obviousness test gives rise to two concepts: the hypothetical colleague and the hypothetical room. The colleague is an imaginary “average” person, having normal, ordinary skill in the “art” (the field relating to the invention)dnot the genius, not the novice. This imaginary colleague stands in an imaginary room of potentially infinite space, containing every patent, publication, item on the market, and so forth. The colleague may look at any item, and may combine them as needed. Back in the real world, the USPTO and the applicant (or applicant’s attorney) then argue over what this hypothetical colleague would think. Later, judges and juries may weigh in too. The following are common examples of ways the USPTO may find an invention “obvious”; combining previously disclosed elements according to known methods to yield predictable results; simple substitution of one known element for another to obtain predictable results; use of known techniques to improve similar devices (methods, or products) in the same way; and applying a known technique to a known device (method, or product) ready for improvement to yield predictable results.80 Note that the determination of obviousness should not be mere hindsight, as every invention seems both apparent and understandable (“obvious” in the non-patent sense) in hindsight. Rather, one must engage in a mental exercise of looking at the prior references while pretending that the invention has not yet been made. Likewise, one must resist the temptation to be swayed by the manner in which the inventor came to recognize the invention (painstaking drudgery of data collection, flash of genius, blow to the head, etc.). Also, the range of prior references available for selection and combination is not infinite. Rather, one must have a reason to select a given reference and combine it with another. For example, in trying to figure out how to get fatsoluble drugs to be absorbed by the body, one might look at references that talk about salad dressings made with edible emulsifiers selected to improve the uptake of vitamins, but one would probably not look at references concerning the likely-inedible (and possibly toxic) emulsifiers used in the manufacture of plastics. “Secondary Considerations” Even if the USPTO finds two or more references that, when combined, completely disclose the entire invention, that situation does not automatically kill the invention, provided the applicant can provide additional facts to rebut the inference of obviousness. These facts are collectively called “secondary considerations.”

Principles and Practice of Clinical Research

Basically, a secondary consideration is any fact that would not be true if the prior references actually made the invention obvious.81 For example, events such as commercial success, efforts by competitors to design around the invention, infringement by competitors, and strong interest shown by others to license the invention all suggest the invention is not obviousdbecause, if the invention were really as obvious as the USPTO claims, greed would have long ago pushed these others to get their own versions of the invention on the market. The fact that they had not done so means the invention was harder to discover or make than it looks. One major secondary consideration is the “unexpected result.” Evidence that the invention has some superior or unexpected quality that transcends the mere combination of prior references is usually sufficient to overcome an obviousness rejection.82 For instance, the combination of two drugs might have a synergistic effect not otherwise suggested in prior trials of each drug alone. That said, someone who merely recognizes a hidden property that always has been present will not be allowed to claim that property as an “unexpected result.”83 Finally, an uncommon but potent secondary consideration is a “negative” reference, i.e., one suggesting that the invention is impractical. The most powerful form of negative reference is where an authority figure in the field asserts that the essence of the invention will not work (this type of reference is said to “teach away” from the invention). The other, more typical form of negative reference is one describing repeated failures to achieve the invention. In both types, the persuasive weight of the negative reference is potent evidence that the invention is truly not obvious. “Obvious to Try” A frequent trap in an obviousness analysis is the question of “obvious to try.” For any given invention, is the “next logical step” patentable? The proposition that obviousness should not be analyzed merely in hindsight bears repeating, as every invention is inherently the next step from that which came before it (and success makes the invention appear part of a logical progression in hindsight). Even so, sometimes a given improvement truly is obvious precisely because it is indeed the logical progression.84 Consider, for example, a hypothetical new drug, to be taken orally. As is true for many new drugs, this one is hydrophobic, and so it is not absorbed well by the body. Currently, there are two main ways of packaging hydrophobic drugs to improve absorption: applying a coating to the drug that acts as a carrier, or reducing particle diameter to a few microns so the body can more readily absorb it. Successfully doing either of these strategies would be “obvious to try” because the available choices are so severely constrained. In contrast, redesigning the chemical structure

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of the drug molecule itself to make it less hydrophobic would not be “obvious to try,” because the range of ways in which a molecule can be modified has no clear limitdand the inventor has no assurance that any other formulation will retain the functional profile of the original molecule.

Written Description, Enablement, and Best Mode The cornerstone of the quid pro quo is full disclosure: in exchange for exclusivity rights, the inventor must divulge everything known about the invention at the time of the application. The statutory source of this requirement can be found in 35 U.S.C. x 112, first paragraph. More specifically, the patent application must include three elements: a description of the invention, the manner of making and using it, and the “best mode” contemplated by the inventor.85 Written Description The CAFC recently confirmed that the simple description of the invention itself is a separate requirement from the more difficult description of how to make and use it.86 The applicant may satisfy this obligation by terms showing a prototype was built or a process was actually practiced, by terms indicating that a sample of a biological invention has been deposited in a repository, or by terms that show that the invention was ready to be made or practiced exactly as described. The “description of the invention” obligation may seem trivial, and in most cases it should be, but sometimes it can trip up an unwary applicant, particularly for complex and cutting-edge technologies. For example, consider a hypothetical invention of a chemical extract from a plant that suppresses human cell growthdpotentially very useful in treating cancer. If the inventor cannot identify what the extract is, others likely will be unable to tell whether their extracts from other plants are actually the same as the inventor’s. To patent the chemical composition successfully, the inventor must be able to describe it in detaildcomplete or partial structure, other physical/chemical properties (e.g., gas chromatography, spectral characteristics, binding affinity/specificity, molecular weight/length), functional aspects coupled with known functionestructure correlations (function alone is not enough),87 or some combination of these.88 Enablement Judging by the volume of litigated cases, the task of crafting the text of how to make and use the invention is the most difficult part of satisfying the written description requirement. Specifically, the application must describe the invention in detail, with methods, examples, drawings, and other elements that together demonstrate how to practice

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the invention. This text must be clear enough that a colleague of ordinary skill could, in fact, get the invention to work without undue experimentation. A patent application with that level of detail is said to be “enabled.” Note that the “enablement” rule does not require that the application’s description be so precise and thorough to guarantee that the invention will work, just that it will work without “undue experimentation.” Exactly how much experimentation is “undue” depends on the circumstances. Factors include the range and content of prior references, the level of “ordinary skill” in the field of the invention, the level of predictability in the field, the amount of direction provided by the inventor, and the examples provided.89 Also, as long as the invention as described works at all, the fact that the quality of the final product as described in the patent is so bad that it is not commercially viable does not defeat patentability.90 In the biomedical arena, enablement plays a key role when an invention concerns a new drug or other therapeutic to treat humans. For example, consider a pharmaceutical candidate that has been successful in both in vitro and in vivo (animal) testsdif the candidate has not yet been tested in humans, does the inventor have enough information to know how to use it to treat a disease? The answer is, sometimes. For some diseases, like bacterial infections, in vitro data may be sufficient: chances are high it will work on or in a human, such that no further showing is needed for patenting purposes (FDA approval is another matter). For drugs alleviating symptoms, perhaps in vivo data might be necessary. For some psychoactive drugs and for preventive vaccines for certain diseases such as HIV, however, successful tests in animal models have proven a poor predictor of success in humans; the USPTO may reject patents relating to such diseases until the inventor demonstrates the composition actually works in humans. Best Mode The “best mode” requirement of the 1952 patent law was crafted to be a safeguard against an applicant’s desire to obtain patent protection without making a full disclosure as required by the statute. Specifically, the requirement forbids inventors from solely disclosing what they know to be their inferior embodiments, while retaining the best for themselves.91 In prosecuting a patent application, the best mode requirement is an easy threshold: simply say which of the various ways of practicing the invention is the “preferred embodiment,” or similar phrasing. As long as the application clearly indicates which of the several modes the applicant says is best, the USPTO will assume the applicant is telling the truth. If only one means of practicing the invention is included in the application, the USPTO will presume it to be

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the best mode.92 The mere failure to include a method that happens to be better than those in the application is not grounds to invalidate a patentdas long as the inventor, at the time of filing the application, either did not know about the better method or did not recognize it as the best.93 Where the best mode requirement comes into play is in litigation. Those accused of infringing a patent, as part of a broader effort to invalidate a patent, often try to convince the judge and/or jury that the patent’s assertion of best mode was false, and that the applicant made that assertion of best mode with the intent to mislead the USPTO and the public. Because of perceived abuses of this doctrine in litigation, a major aspect of patent reform has focused on changing how the best mode requirement can be used in litigation, if not eliminating it entirely. The Patent Reform Act has removed the Best Mode requirement in all but name. Effective immediately, no patent can be found invalid for failure to satisfy the Best Mode requirement. Oddly, despite removing all enforcement mechanisms, Congress left in the requirement that the applicant must include the best mode in the application. Perhaps Congress will revisit the matter in a technical correction to the statutory language, or the USPTO will issue clarifying rules, but in the meantime, patent applicants likely will continue the practice of specifically identifying which of the several embodiments listed in any given application is believed to be the best.

Other Key Terms Defined One of the major reasons many people find patent law arcane and tedious is that patent laws (and lawyers) rely heavily on terms of art, odd jargon, stilted phrasing, and other terms having meanings that are several degrees off the way the rest of society uses those same terms. This section of the chapter will examine some of the most significant terms widely used in patent law.

“Prior Art” Previous sections of this chapter have included mention of “references” and “disclosures” that can be used by the USPTO to reject a patent application. Patent law has a formal term to capture all of these references and disclosures: “prior art.” Exactly what qualifies as prior art, however, depends on the circumstancedspecifically, the particular subsection of 35 U.S.C. x 102 and x 103. For the rest of this section, only United States law will be considereddfirst looking at the 1952 law’s version, then at how the Patent Reform Act changed matters. x 102(a)d“Anticipation” For classic “anticipation” under the 1952 version of x 102(a), prior art includes: (1) all issued patents, all

Principles and Practice of Clinical Research

published patent applications, and all other “printed publications” in any language anywhere in the world; and (2) all instances where the invention was publicly known or used in the United States. These references will defeat patentability if they were made public before the date that the inventor invented. The logic of this is easy to see: they demonstrate that the inventor was not the first to think of the idea. How does this work? If a hypothetical inventor Sally conceived of an invention on Thursday January 1, 2011, a scholarly article published by David in a Brazilian journal (in Portuguese) disclosing the same invention would not anticipate Sally’s patent application if published on Wednesday January 7, 2011, but would anticipate it if published on Wednesday December 14, 2010. Also, if George had independently made the same invention in November 2010 and incorporated it into his farm equipment, which all the neighbors could borrow, George’s use would not anticipate if his equipment were located in New Zealand, but would anticipate if it were in Montana. Note that this rule applies even though Sallydor even the U.S. public generallydnever knew the prior art in question existed.94 Two items should be noted concerning a “printed publication.” First, the phrase does not necessarily require paper to be involved. Since the 1952 Patent Act, court decisions have clarified that the point of the phrase is to capture any material reasonably accessible by interested members of the public, regardless of the medium of expression. Thus, television broadcasts and electronic publications available online qualify.95 As for the “date” of a publication, the key is when a member of the public could have found it through a reasonably diligent search.96 Note also that “publication” does not require distribution; depositing a single copy of a graduate thesis in a university’s library is enough, as long as the public reasonably could find it.97 Under the Patent Reform Act, any disclosure of the invention anywhere countsdincluding a description in a patent or printed publication, a public use of the invention anywhere, a product or service embodying the invention that is on sale anywhere, or any other disclosure that is “otherwise available to the public.” If a disclosure of the invention became publicly available before the application was filed, the disclosure qualifies as anticipatory prior art. x 102(b)d“Bar” Under the 1952 law, the rules for prior art under the “statutory bar” provision of x 102(b) are, with certain exceptions, comparable to those under x 102(a). Prior art under x 102(b) includes: (1) all issued patents, all published patent applications, and all other “printed publications” in any language anywhere in the world; and (2) all instances where the invention was “in public use or on sale” in the United States. These references will defeat patentability if

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they were made public more than one year before the date that the inventor filed the patent application. The big difference between the scope of prior art under x 102(a) and x 102(b) is that the former involves “known or used” while the latter involves “in public use or on sale.” “Public use” refers to commercial exploitation, even though no actual sale takes place, or even though the event does not occur in full view of the publiceprivate product demonstrations, for example to prospective investors or customers, are common triggers of the bar, along with allowing third parties to test-run the product in the absence of a duty of confidentiality.98 “On sale” includes bona fide offers to sell, current sales for future delivery, and certain licenses of the patent rightsdthough not assignment of the patent rights.99 Finally, as discussed above, experimental uses do not qualify as prior art under x 102(b). As for timing, the statutory bar provision affords a oneyear grace period in which to file a patent application. So, consider again the hypothetical timeline used in the discussion on anticipation: if Sally waits 13 months to file her patent application (say, Thursday February 14, 2012), David’s article would bar Sally’s patent application if published on Wednesday January 7, 2011, even though it did not anticipate her invention. If Sally were to stumble on David’s article in June 2011, she would immediately know she has until January 7, 2012, to file her patent application in the United States. Likewise, if George started selling his equipment in New Zealand on January 7, 2011, Sally’s patent is safe, but if George were to sell his equipment in Montana, that sale would bar her February 2012 application. Under the Patent Reform Act, as mentioned above, the one-year grace period is specifically limited to the inventor’s own disclosures, along with disclosures by those who received the invention from the inventor. The new law essentially eliminated the distinction between x 102(a) and x 102(b) (as well as certain rules that created a class of art called “secret prior art”), in favor of any disclosure that is “otherwise available to the public.” A few commentators have wondered whether the new law creates an incentive for the inventor to publish before filing the patent application, because the inventor’s own disclosure bars competitors from filing patent applications, but will not serve as a bar against the inventor’s own application. Such a strategy is likely unwise, however, given that the pre-application disclosure would likely destroy patent rights in most other nations besides the United States. Collaborationsdx 102(e, f, & g)/x 103 Consider a hypothetical case involving three toy companies, A Corp., B Inc., and C, L.L.C. Two of them, A and B, collaborate to design a new toy under a detailed research agreement. A shows B an unfiled patent application for their

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latest idea. B realizes that a substantial revision would make the toy much better, so B files a new patent application, naming B as sole inventor (A agrees, and decides not to file its own application). B makes the toy, and A and B share royalties. C decides to make a cheap knock-off of B’s toy, and B sues C for patent infringement. C argues that B’s patent should be voided as punishment for B’s having violated the duty to disclose everything to the USPTOd namely, A’s draft patent application. B contends that there was no duty to disclose the application, as it was never available to the public in any form, so it does not fit the definition of “prior art” under either x 102(a) or x 102(b). Roughly, this hypothetical tracks the key facts from the case of OddzOn Products, Inc. vs. Just Toys, Inc.100 The trial court held that the patent owned by OddzOn was valid and enforceable, but Just Toys did not infringe it. Both parties appealed, and the CAFC affirmed the district court’s decision on all issues. The CAFC concluded that any failure by OddzOn to supply documents to the USPTO was harmless, because the differences between the two versions of the toy were so substantial that the OddzOn application was patentable nonetheless. That result is not what makes this case significant; rather, a small side discussion in the court’s opinion made the case much more important than its holding would have suggested.101 The court began its analysis by noting that the doctrine behind anticipation relies on the premise that the inventor may only get a patent for things the inventor actually made, rather than for things previously made by others. So, hypothetically, if the patent application filed by OddzOn had been identical to the drafts OddzOn says “inspired” the invention, then x 102(f), which bars granting a patent if the applicant did not invent, clearly would have pertained to the OddzOn patent application. Moreover, an applicant has a duty to disclose information to the USPTO that bears on whether or not the applicant is entitled to a patent, which includes x 102(f) references. Likewise (reasoned the CAFC), if the OddzOn application were insubstantially different from the “inspiring” references, then the OddzOn application should have been denied because it would be “obvious” under x 103 in light of those references (continuing the logical theme that OddzOn did not actually “invent” anything). Thus, for purposes of the inventor’s duty to provide information to the USPTO, references the inventor saw before conceiving of the claimed invention that would be relevant under x 102(f) (or, for similar reasons, relevant under x 102(e and/or g)) were “prior art” for x 103 analyses. As a last-nail-in-the-coffin point, the CAFC observed that Congress had explicitly noted that communications between two co-inventors are not to be considered “prior art” under x 103 if all co-inventors shared a duty to assign their rights in inventions to a common employer. Because the statute did not extend to employees working for two

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different employers, OddzOn would not have been able to claim the benefit of that exemption. As a direct result of the OddzOn decision, Congress responded to the concerns of nonprofit research organizations, universities, and companies that depended on interinstitutional collaborations to develop their technologies. So, in 2004, Congress passed the CREATE Act. This law explicitly amended 35 U.S.C. x 103 by adding a subsection to exempt x 102(f) art from considerations of obviousness, provided two conditions are met. First, the invention had to have been made during and within the scope of a “joint research agreement,” and, second, the patent application includes the names of the parties to that joint research agreement.102 The Patent Reform Act explicitly makes the rules of the CREATE Act applicable to all future patent applications. Looking to the future, the bottom line is that researchers involved in a patent application must think broadly when asked to collect and report on all prior communications and references. Most researchers will think only about public communications, such as talks, posters, and the like; few naturally think about casual exchanges with colleagues that, based on friendship, honor, courtesy, or other unwritten understanding, are believed to be confidential. Indeed, some might even overlook exchanges made under a formal nondisclosure agreement. Theoretically, all of these might qualify as “prior art” that must be reported to the USPTO, because the failure to do so can risk jeopardizing the validity of the patent.

“Conception” vs. “Reduction to Practice” One of the most critical principles in patent law is “conception,” from which several important related terms arise. Unfortunately, “conception” is a metaphysical construct, and as such difficult to prove or disprove whether and when it occurred. Even so, it can easily make or break a multimillion dollar lawsuit. “Conception” is defined as “the formation in the mind of the inventor of a definite and permanent idea of the complete and operative invention as it is thereafter to be applied in practice.”103 This idea must include both a present recognition of its inventive features and an appreciation that the idea represents something different from that which came beforehand.104 To be sure, however, “conception” does not require that the inventor realize that the invention is, in fact, patentable.105 Closely related to “conception” is the term “reduction to practice.” Reduction to practice is the direct implementation of the invention: for example, building a working prototype, synthesizing a chemical, or physically carrying out a method. The inventor does not have to reduce the invention to practice personally; instructing someone else do it on behalf of the inventor is

Principles and Practice of Clinical Research

sufficient.106 Also, whether or not the invention is commercially viable does not matter. The legal significance of these closely related terms lies mainly in their implications. “Conception” is critical because “inventorship” (discussed below) turns on conception, and ownership turns on inventorship. “Reduction to practice” is critical because it provides a factual basis for enablement; thus, reduction to practice is a nominal prerequisite to filing a patent application under x 112(a). Also, reduction to practice often has a major impact on the outcome of interferences. So what happens if someone conceived of an invention, but neither physically built a prototype nor otherwise actually reduced the invention to practice? There is another, intangible way to get to the same point: the inventor can describe how to make and use the invention in such precise detail that one of ordinary skill in the art can do it (without “undue experimentation” to get it to work, of course). Imagine the first person to conceive of a clock. If that person put on paper instructions and drawings so clear that someone could manufacture the right gears and other components to build one, and has step-by-step procedures for putting it together, then whether or not the inventor ever built one personally does not matter. This sort of description is called “constructive reduction to practice.” Indeed, the patent application itself, assuming it includes enough instructions and data, constitutes constructive reduction to practice.107 Note that “constructive reduction to practice” satisfies the quid pro quo of patent philosophy: the inventor has fully taught the public how to make and use the invention, even if the inventor never made or used the invention personally. The public can learn from any patent, design around it, and when the patent expires, freely practice the invention. What if the description turns out to be faulty? The risk is mostly carried by the patentee. If the invention works but the description is substantially incomplete or flawed, that fact is relatively easy to prove at trial, so the patent is vulnerable to being declared void. If the description fails to work because the invention itself does not function, the patentee is the only one who suffers for it, not the public, because the patentee spent a lot of money on a worthless patent. Who could possibly infringe an invention that does not work?

“Prophetic Conception” vs. “Simultaneous Conception and Reduction to Practice” When someone envisions a potential invention but does not yet have experimental data, at what point has that person “conceived” for purposes of patenting? Answering this question requires exploring a complex nook of the law, bracketed by two concepts: on one side, “prophetic conception” is enough, while on the other, “simultaneous

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conception and reduction to practice” is the minimum requirement. Drawing the line between them is extraordinarily difficult, as the following discussion shows. “Prophetic conception” was the subject of a court case concerning the anti-HIV drug, AZT. Upon the discovery of the HIV virus in the mid-1980s, the National Cancer Institute (NCI) called on pharmaceutical companies to look through their inventory for candidate drugs, which the NCI would screen for possible anti-HIV activity. BurroughsWellcome (BW) joined those that answered the call, providing 11 compounds to NCI, one of which was AZT. Originally, AZT had been made in the 1960s, tested first as an anti-cancer agent, and then in the 1970s as a broadspectrum antiviral, but the drug was unsuccessful at both. When NCI’s preliminary screens showed positive results, NCI jump-started the clinical research; by 1987, the compound was ready for the market. Meanwhile, BW applied for and received a patent on the use of AZT to treat HIV. BW initially offered to sell the drug at prices up to $10,000 per patient per year, so two generic drug makers raced to make cheaper versions, which prompted a patent infringement suit. In the courts, the generics argued that BW’s patents were invalid because BW was not the true inventor; NCI at least was a joint inventor. After all, they argued, BW never tested the drug on live HIV virus in any form, and without that data, BW could not know whether the invention would work. The CAFC, however, sided with BW.108 Although actual reduction is sometimes the only way to be sure that an invention will work in fact, in this case, BW had shown it had a clear idea of the invention, with “reasonable expectation of success.” This conclusion was based mainly on the fact that BW, before sending samples of AZT to NCI, had drafted a patent application with detailed instructions on how to make and use AZT to treat HIV, which turned out to be correct. The accurate detail in the draft patent application reflected the fact that BW had more than a mere hope of success; NCI’s contribution in this instance was simply the actual reduction to practice that inured to the benefit of BW.109 The other concept, “simultaneous conception and reduction to practice,” is highlighted by the race to perfect a prospective vaccine against Hepatitis B. In the following summary, some of the facts are disputed and others omitted for brevity, but it is close enough to elucidate the concept. In the late 1970s, scientists still were trying to coax bacteria to generate human proteins by introducing DNA. At the time, no one really understood why the process sometimes worked but usually failed. Shortly after Dr. Heitzmann induced a yeast cell to make the human Interferon protein in 1979, he decided to turn his attention to making vaccines. In particular, he wanted to find a way to produce a protein that normally sits attached to the surface

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of the Hepatitis B virus. He described his detailed plans in his lab notebook in February 1981, but he was delayed in showing they worked until July. Meanwhile, starting in March, his competitor, Dr. Rutter, planned very similar experiments, but was able to complete the experiments in June. The USPTO declared an interference on the ensuing patent applications, which finally reached the CAFC in 2001. On appeal, the CAFC decided that Dr. Rutter had won the race to conceive, not Dr. Heitzmann.110 In contrast to the Burroughs-Wellcome case, Dr. Heitzmann indeed merely hoped his experiments would work, despite all the prophetic detail in his lab notebooks. The CAFC carefully pointed out that conception must be viewed from the perspective of the day. Back in 1981, the post-translational modification machinery of eukaryotic cells had not yet been discovered, so no one knew why yeasts worked and bacteria did not. For all Dr. Heitzmann knew, yeast could have been equally as frustrating a system as bacteria. In this instance, conception (the moment of a reasonable expectation of success) did not occur until the moment of actual reduction to practice.111

“Inventorship” and “Joint Inventorship” In the United States, determining who invented an invention is critical, because the inventor owns the invention (at least initially). The 1952 patent law stated that, with very limited exceptions, only the inventor may apply for a patent.112 The inventor may, of course, transfer ownership of the invention to anotherdfor example, the inventor’s employerdexactly like any other property, but this extra step is cumbersome, particularly for large research organizations. Also, other nations do not necessarily follow this pattern, leading to inconsistent practices and confusion. The Patent Reform Act simplified the process by which a party other than the inventor can apply for a patent simply by demonstrating that the inventor has a duty to assign the invention to the applicant. Even so, inventorship remains the determining factor of initial ownership of the invention. Joint inventorship is well described as “one of muddiest concepts in the muddy metaphysics of patent law.”113 For two or more individuals to be joint inventors, each must have contributed to the inventive concept. The patent statute does not require that the inventors physically worked together or at the same time, that each contributed in the same way or amount, or that each contributed to every element of the invention.114 Rather, to be a co-inventor, each must contribute in some manner to the conception or reduction to practice of the invention, and that contribution is not trivial when measured against the full invention.115 Some situations are clearly not enough to support “joint inventorship.” First, one who merely supervises work or

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suggests an idea of a result to be accomplished, rather than a specific means of accomplishing it, is not a joint inventor.116 Likewise, someone who merely suggests adding something that was entirely already in the prior art does not gain joint inventor status.117 Also, one who mechanically transfers key research materials to the inventor or who simply carries out the instructions of the inventor does not become a joint inventor despite the person’s substantial physical contribution to the research.118 All of these rules apply even where these colleagues of the inventor have duly earned co-authorship on the scientific paper disclosing the invention. In short, co-authorship is not co-inventorship. Under the 1952 law, incorrect naming of inventors is easy to fix at any time, as long as the error was not made with deceptive intent. If a patentee, however, knowingly and with the intent to deceive, incorrectly identified the inventorsdwhether by adding someone who should not be included or omitting someone who shouldda court can rule that the patent is unenforceable by the patentee, or even invalid altogether. The Patent Reform Act removed the “deceptive intent” standard from the statute, though it kept in the obligation to name the inventors. The significance of this change is that a patent can no longer be held void merely for an incorrect listing of inventors, even with clear intent to deceive (other remedies, however, may still apply). Inventorship status is a legal determination. Consequently, when a dispute arises concerning whether or not someone qualifies as a joint inventor, it must be resolved with the help of qualified patent attorney (or, at worst, by a court). It cannot be “settled” through quiet compromise; patent law has no sympathy for bruised egos. Of course, any court will be reluctant to take any drastic actions over an easily corrected error, but especially under the law before the Patent Reform Act, a defendant could easily raise a large cloud of smoke at trial when a patentee was less than diligent during the application phase. One of the typical ways this situation plays out will be discussed in more detail below, in the context of litigation.

the perpetual right to reenter that house at any time. Unfortunately, some scientists unfamiliar with U.S. patent laws carry the belief that they can continue to have a say in developing “their” invention even after assigning away their rights. Even among those scientists who know what “assignment” means, too many do not bother to read the documents others give them to sign, and end up inadvertently giving away their rights. A “license” is, at its heart, simply an agreement not to sue for infringement. Patent licensing is a complex field deserving its own textbook,119 but as a general statement, a patentee has broad latitude in how to structure licenses. Licenses come in all levels of complexity: they can be formal or informal, written or implied, contingent or immediate, optioned, exclusive or co-exclusive or nonexclusive, royalty-bearing or royalty-free, limited in scope, limited in time, or limited by a vast range of terms and conditions. Complex licenses can subdivide technologies by field of use, such that one field (say, therapeutic applications) has exclusive rights while another (say, diagnostics) will be nonexclusive. As a general proposition, however, while a license does confer certain rights, it does not transfer direct ownership.120

Transfers of Ownership: “Assignment” vs. “License”

The owner of a United States patent has the right to enforce the patent against any party that makes, uses, sells, or imports the claimed invention in the United States. This is called “direct” liability, and it is a “civil” wrong, which means it is purely a matter between private parties (in contrast, “criminal” wrongs are those that carry the possibility of incarceration and/or fines, which are enforced exclusively by the government). To enforce a patent, the patentee (“plaintiff”) must file a lawsuit in a federal district court, and prove that the accused (“defendant”) actually made, actually used, actually sold, or actually imported the invention somewhere within the country. The patentee does not have to prove that the defendant was even aware the patent existed, let alone intended to infringe it, though such evidence can lead to enhanced damages.

Two additional terms should be briefly mentioned here, mainly because they are often confused and misused by those not familiar with U.S. property law principles. They are “assignment” and “license.” An “assignment” is a transfer of title to a property, whether or not in exchange for value. Once title is transferred, the recipient (“assignee”) becomes sole owner. Assignments should never be treated lightly because the assignee can even enforce the patent against an inventor. This principle, on reflection, should come as no surprise to those familiar with U.S. principles of property ownership: few would think that after they sell their house they retain

Patent Infringement (United States) By itself, a patent is little more than a document with a pretty ribbon on it. What makes a patent worth the time, expense, and trouble to obtain it is the fact that a patent offers its owner the opportunity to stop others from practicing the invention claimed in the patent in the country that issued the patent. Often, to realize this opportunity, a patentee simply needs to bring the patent to the attention of an alleged infringer, who then either signs a license or stops infringing. Sometimes, however, the alleged infringer does not cooperate, so the patentee must ask a court to enforce the patent.

Civil Liability: In General

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A product or service can only infringe an issued patent, not a pending application (while pending, no one knows the exact scope of rights). For pending applications that already have been published a patentee has the right to receive a reasonable royalty from infringers after the infringers have actual knowledge of the pending applications but only to the extent the infringer’s product or service is “substantially identical” to the invention described in the application.121 Owners of pending and issued patents are not under a formal duty to mark their products with notice of pending or issued patents, but failure to mark may result in a substantial reduction of the damages the patentee can collect.122 Co-ownership presents a major complication in this neat picture. Not surprisingly, each co-owner of a patent cannot be held liable for infringing the patent, and each coowner can license that freedom from infringement to others. Less intuitively, co-owners do not owe each other any duty to account for profits or royalties they collect by virtue of their share of ownership (unless they negotiate an agreement otherwise). This twist means that it is effectively meaningless for a co-owner to say, “I co-own 50% of a patent”dor 1% or 99% for that matterdbecause the coowner has the exact same right to be free from infringing the patent regardless of the percentage. Because co-ownership is directly tied to joint inventorship, poorly confirming who the inventors are can easily ruin a major business strategy. In 1985, the USPTO issued a patent with 55 claims to Dr. Yoon on a surgical device. Dr. Yoon granted an exclusive license to Ethicon, Inc., which in turn sued its competitor, U.S. Surgical Corp., for infringement. In preparing for trial, U.S. Surgical discovered that Dr. Yoon had collaborated with Dr. Choi in developing the device, and arranged for Dr. Choi to grant U.S. Surgical a retroactive license. At trial, the court concluded that Dr. Choi indeed contributed to two of the 55 claims, and so should have been named as a joint inventor. Once Dr. Choi became recognized as a co-inventor, Ethicon’s litigation had to be dismissed.123

Civil Liability: Contributory and Induced Infringement Even if someone does not directly infringe a patent, there are two other ways that person can be found liable. These ways are “induced infringement” and “contributory infringement.” In both types, the defendant will be equally liable for damages as if the defendant were the party that directly infringed the patent. These types of lawsuits are particularly useful when the direct infringers are the consumers of the plaintiff’s patented product. Induced infringement occurs where one party takes a “positive act” to spur another to infringe a patent.124 A positive act could be teaching others how to infringe,

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directing or commanding someone to infringe, or advising someone to do something that infringes a patent.125 Also, exporting all of the components of a kit (which, if assembled in the United States, would infringe a patent) constitutes induced infringement.126 Contributory infringement (sometimes inaccurately called “indirect infringement”) occurs where someone sells, offers for sale, or imports a component of a larger patented product, such that even though the component itself does not infringe, it is specifically designed or adapted for use in the infringing product and has no other substantial noninfringing use.127 By necessary implication of the adaptation requirement, “contributory infringement” requires a showing that the contributory infringer actually knew of the patent.128

Major Defenses When hit with a lawsuit claiming patent infringement, the first line of defense always is that the accused product or service does not infringe the patent. In essence, the defendant only needs to prove that the accused product or service lacks at least one limitation in each of the claims of the patent. This process often requires the court to interpret the meaning of words and phrases appearing in the claims. The second major defense is to assert that the patent should not have issued because the USPTO’s Examiner failed to find a key piece of prior art, erred, or similar reasoning.129 The patent carries a presumption that it is valid, which the defendant must overcome with clear and convincing evidence.130 Where the nature of the defense is that the USPTO’s substantive interpretation of the prior art was flawed, courts are reluctant to substitute their judgment for the USPTO,131 but sometimes this approach is successful. The third major defense is a series of “equitable” argumentsdi.e., those appealing to a sense of general fair play. These include “inequitable conduct” before the USPTO (discussed below), “laches” (the plaintiff, who could have sued anytime, waited years until the defendant had racked up extra damages),132 and “estoppel” (the patent applicant made certain statements to the USPTO about the limits on the scope of the claims in this patent, so the patentee should be bound by those limits). One other important equitable defense is “patent misuse”: the patentee has tried to use the patent as a lever to gain exclusive control over more than the patent actually covers. For example, the patentee might require customers to buy unpatented Product Y as a condition to getting patented Product X, where Product Y is a staple good that has nothing to do with Product X. Alternatively, the patentee might require its prospective licensees to sign a contract extending royalty payments and/or forbidding competition beyond the expiration date of the patent.

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Where any of the equitable defenses succeed, courts have great latitude in fashioning a remedy to fix the problem.

Specific Exemptions and Immunities Research-Use Exemption: Madey vs. Duke University Since at least 1861,133 and certainly since 1935,134 courts have declined to find that universities infringe patents when the universities’ activities are confined to research. This exception to infringement is not explicitly in the U.S. patent statute; rather, judges inferred its existence based on the underlying philosophy of the patent system itself. Research on a patented technology is critical to verify that it works, to learn how to design around the claims, and to enhance the body of public knowledge. By this logic, only uses by which the alleged infringer sought to profit or to harm the patentee should be deemed “infringement.”135 In the late 1980s, Dr. John Madey left Stanford University to join Duke University, bringing with him a laser-based machine on which Madey personally owned a patent. Later, Madey had a falling-out with Duke; when Madey left, however, he did not take his device with him. Madey sued Duke for several reasons, one of which concerned Duke’s continued use of Madey’s patented device. The trial court dismissed that claim, but the CAFC reversed the dismissal,136 ruling (among other things) that: [U]niversities, despite their non-profit tax status, can and do operate in a for-profit manner, for example in competing for endowments/grants and in licensing future inventions; and the historic, common-law “research” exemption from infringement is limited to acts done for pure idle curiosity.137

The Madey decision, and this quoted passage in particular, served to call into question the generally held view that a “university infringement shield” existed,138 and gave impetus to an effort calling on Congress to pass a statutory research-use exemption. While the CAFC made clear that activities by universities could constitute patent infringement, the court did not provide clear guidance on what might be acceptable, noninfringing activities. This uncertainty and ambiguity as to what constitutes patent infringement may have caused researchers greater apprehension when practicing their craft. Therefore, rather than stimulating the innovative activities that the patent system is intended to foster, this decision may have had the opposite effect. Although as a practical matter the Madey case may be more an exception than a rule (infringement suits against universities are extremely rare), the loss of the common perception of academic insulation from patent infringement has alarmed many in the academic and public sectors. In addition, many fear that even truly noncommercial research now will require “due diligence”139 to avoid patent infringement, or at least enhanced damages.

Principles and Practice of Clinical Research

Generic Drugs: The “Bolar Amendment” and Merck vs. Integra Developing a new drug from a mere test molecule into a dose-controlled pill or injection that a doctor may lawfully prescribe requires the investment of years of work and hundreds of millions of dollars. Pioneer drug developers, therefore, have a powerful incentive to maximize their exclusive position against later copiers. What rights does a patentee have against a prospective competitor who is merely preparing to sell copies? In the early 1980s, Roche was nearing the end of its patent on valium, and a competitor, Bolar Pharmaceuticals, started work developing a generic copy using some of Roche’s drug to verify bioequivalence. Even though Bolar did not try to sell anything before Roche’s patent expired, Roche sued for patent infringement anyway. The Federal Circuit held that Bolar’s research on making a generic version was not an “experimental use” because Bolar intended to sell the copy thus made.140 Congress, which had already been working on an overhaul of the process by which the FDA approved drugs (both pioneer and generic), took the opportunity to restructure the corner of the patent system that overlapped with the FDA’s jurisdiction. This new statute, called the Hatch-Waxman Act, facilitated entry of generic versions of patented drugs into the marketplace as soon as possible after patent expiration through the use of the Abbreviated New Drug Application. The law included a limited exemption to patent infringement for certain uses of the invention as long as the activity is “reasonably related” to, among other things, an FDA submission.141 This limited exception is known as the “Bolar Amendment.” The phrase “reasonably related” came into sharper focus in the mid-2000s with the Supreme Court case of Merck KGaA vs. Integra Life Sciences, Inc.142 Integra co-owned five patents concerning a peptide that promotes cell adhesion by attaching to certain receptors on the outside of specific endothelial cells. Merck used these peptides in its research on angiogenesis inhibitors, and with it discovered a drug that blocks the peptide. As Merck’s drug reached the market, Integra sued for infringement. The Supreme Court unanimously decided that Merck’s use of the patented peptide could be covered by the Bolar Amendment, even though Merck’s use of the peptide was not intended to develop a generic version of the peptide. The Court reasoned that the potentially infringing use was “reasonably related” to an FDA submission because the resulting data might eventually be part of a later IND, NDA, or BLA. The Medical Practitioner Exemption (“Frist-Ganske Amendment”) One specific defense available in the medical field is the “medical practitioner” exemption.143 If a medical

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practitioner infringes a patent by performing a medical or surgical procedure on a body,144 neither the practitioner nor any “related health care entity” (e.g., hospital, clinic) can be held liable for that infringement. This exemption does not, however, protect medical practitioners to the extent they work for an organization (including a nonprofit one) that designs, develops, manufactures, and sells products intended for the practice of medicine by the medical community.145 U.S. Government as Infringer The United States government has its own special defense against patent infringement liability.146 A patentee’s only recourse is to sue the government in the U.S. Court of Claims in Washington D.C., and the patentee’s remedy is limited to a “reasonable royalty.” The patentee cannot, under any circumstances, be awarded “actual” damages, augmentation of damages, injunctions, costs, or attorneys’ fees. This defense extends to infringement by contractors and agents acting on behalf of the government. While a few suits are filed every year against the government, this exemption presumably dissuades many others from bothering, though it is impossible to gage how many.

Remedies: Types and Measure If the patentee wins on liability, the patentee has the right to receive money (“damages”), which may be increased by up to a factor of three as punishment for intentional infringement.147 In exceptional cases, the court may require the loser to pay the winner’s attorney’s fees.148 Also, for extraordinary cases, the patentee may ask the court to issue an order (an “injunction”) forbidding the defendant from further infringement, and perhaps ordering the destruction of any existing infringing inventory.149 Calculating damages is a complex topic. Briefly, the least a successful patentee can expect to receive is an amount “adequate to compensate for the infringement, but in no event less than a reasonable royalty.” A “reasonable” royalty is what the court thinks would have been accepted in an unemotional negotiation between independent parties on equal footing (known as an “arm’s length” transaction).150 If the invention conveniently arose in an industry where such licenses are common, the court can use the industry average as a benchmark; otherwise, each party will bring in experts to offer opinions as to the technology’s commercial value. Alternatively, a patentee can try to prove actual injury, such as lost profits, lost sales, lost market opportunity, and/or disgorgement of the defendant’s profits.151

“Declaratory Judgment” Actions Under the Constitution, courts have power to decide “cases and controversies,” which means they avoid issuing any

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decision on hypothetical questions and on disputes that have not yet matured into a present, bona fide controversy. Consequently, parties who wanted to challenge the validity of a patent had to wait until the patentee sued for infringement, and then was stuck litigating wherever the patentee chose to file suit.152 Since the 1920s, Congress has authorized courts in limited circumstances to grant “declaratory judgments” on issues that are on the cusp of being ripe controversies.153 One of the circumstances that permit someone to file a Declaratory Judgment (“DJ”) suit is potential patent infringement. Anyone who faces the reasonable apprehension of being sued for infringement may file a request for a declaration as to whether or notd(1) the patent is valid, and if so, (2) the plaintiff’s good/service infringes the defendant’s patent.154 Notice that in a DJ lawsuit, the plaintiff is the alleged infringer; the defendant is the patentee. This means the alleged infringer has an opportunity to select a venue before the patentee does so. Of course, this strategy is not risk free: once someone files a DJ lawsuit, the patentee may be forced to counter-sue for patent infringement, even where the patentee might not have bothered to do so otherwise.

Importation and the International Trade Commission One of the four basic rights of a patent is to exclude others from importing goods into the United States that infringe a U.S. patent. Obviously, a patentee may try to sue an infringer in the U.S. district court for importation in the same way as for making, using, and selling, but the power of U.S. courts ends at the border; so as long as foreign infringers do not come to the United States or otherwise maintain assets there, the courts are effectively not available. Fortunately for patentees, another venue is available to enforce their patents: the U.S. International Trade Commission (“ITC”). In parallel to U.S. patent law, section 337 of the Tariff Act of 1930155 makes illegal the importation of any article that infringes a patent, including items made abroad using a process patented in the U.S., and authorizes the ITC to investigate allegations, provide a patentee temporary relief while the case is under way, determine whether or not infringement has occurred, and if so order that the U.S. Customs Office exclude the offending goods from entering any U.S. port. The ITC has certain major advantages over the U.S. courts. First, while the courts require the effective presence of the defendant before liability can be found (called “jurisdiction over the person”), the ITC merely requires that the goods in question have arrived in a U.S. port (called “in rem jurisdiction”).156 That difference in jurisdiction is critical where the alleged infringer never sets foot here and

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has no other assets here to seize. Second, as an arm of the Executive Branch, the ITC has nationwide subpoena power (courts are local by nature, so nationwide subpoenas are extremely limited). Third, the ITC has the power to issue a “temporary exclusion order” while the case is under way, which requires far less proof of harm than a temporary injunction from a court.157 Fourth, the patentee does not need to have suffered any injury to be entitled to a permanent exclusion order, unlike in the courts.158 Finally, because the evidence needed to receive relief is lower, ITC cases are often faster than courts. Courts do have one huge advantage over the ITC: they are the only mechanism for recovering money damages.

Practical Issues of Litigation Just because someone can sue does not necessarily mean doing so is a good idea. A very old adage says that anyone who goes into court a pig comes out a sausage. This saying wryly and accurately captures the overall practical reality of litigation. First and foremost, litigants in almost every lawsuit must pay their own costs. Litigation generally is expensive, but patent litigation is extraordinarily so. A 2009 study found that the average cost to litigate a patent infringement case ranged from $650,000 for a small case (damages under $1 million), to $2.5 million for a medium case (damages under $25 million), to over $5 million for a large case (damages over $25 million).159 Another study suggests that the average (mean) cost is about $3 million.160 These figures do not include loss of opportunity to use those resources in the litigants’ businesses, any loss of market opportunities, or the mental toll litigation exacts from the participants. Second, while an issued patent carries a legal presumption that it is valid, having an issued patent does not assure automatic victory in court. On the contrary, every year a large fraction of cases end with a ruling that the litigated patents are void (the actual fraction varies dramatically by year and by technology). In addition, a court might find that the patent applicant secured issuance through inequitable conduct, which comes with its own severe penalties (not to mention paying the other side’s litigation costs and attorneys’ fees). Finally, a court might issue a ruling on a major question of patent law, which casts serious doubt on the validity of many other patents owned by the plaintiff. Third, litigation takes time to resolve. One study of lawsuits filed between 1995 and 2008 found that the time between the initiation of a lawsuit and the first day of trial ranged from about one to three years, with a median of two years.161 If the case is completely resolved before trial (for instance, on a motion for summary judgment that is not appealed), resolution is typical in one to two years, and

Principles and Practice of Clinical Research

rarely more than three years; however, if the case goes to trial or on appeal, three to four years is more typical, with complex cases lasting a decade or more.162 Finally, even a successful outcome in the court is not necessarily a victory in the end. For instance, many infringers are “judgment proof,” meaning that they lack the resources to pay any damages, let alone the full amount awarded by the court. Second, a court might rule that the defendant infringed, but the plaintiff suffered little damage (the cost of litigating was higher than the reward). Third, public relations costs must be factored in: a company might lose more business from sour press coverage than it recovers from the litigation. These three reasons are often major factors why companies rarely enforce their patents against individuals (particularly researchers at universities).

“Other IP” Distinguished from Patents Patents are only one form of IP. Several other forms exist, the most important of which tend to be trade secrets, copyrights, and trademarks. All forms of intellectual property share a single common concept; the act of extracting value from the IP does not reduce the original supply. (Other intangible property, such as a bank account, diminishes with use.) Otherwise, each type of IP is unique.

Patents vs. Trade Secrets General Principles In a limited sense, the philosophy behind trade secret law is the reverse of patents. A critical part of the “quid pro quo” of the patent system is that the applicant must disclose everything about the invention known to the inventor. If, however, an inventor were willing to give up the potential for court-enforced market exclusivity afforded by a patent, the inventor remains free to keep the invention secret. To a limited extent, the law recognizes such secrets as valuable intellectual property, albeit a disfavored form of property given that society gains almost no benefit from protecting it. In the United States, trade secret law is set by each State, so exact details and nuances vary.163 For present purposes, a simple general definition of a trade secret is any information that: (1) is actually a secret, or at least not readily available to someone motivated to find the secret; (2) carries some commercial value, whether through reducing costs, through increasing in profits, or through the fact that the secret would be difficult and expensive to reverse-engineer; and (3) the owner takes steps reasonable under the circumstances to keep it secret (usually through efforts like marking of key documents as “confidential,” segregating them from other commercial papers with highly limited access, and alerting and/or training staff about how to handle it).

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There are two big problems with trade secrets. The first is value: the state of the art technology in any given field changes rapidly, so every technology becomes obsolete sooner or later. Keeping a technology secret sometimes can accelerate its obsolescence if the rest of the field adopts another solution as the industry standard. The second is secrecy itself: successfully preserving a secret is difficult, and few companies take the time and trouble to actually put any meaningful measures in place. The law has little sympathy, however, for those who cannot be bothered to take reasonable measures to protect their secrets; if a secret were truly valuable, the owner would take those steps. For new inventions, companies face an immediate choice: whether to seek a patent on it or keep it as a trade secret. U.S. patent applications remain confidential for the first 18 months, after which the U.S. Patent Office publishes them, even if no patent ever issues.164 If the applicant withdraws the application before it is published, the information can be kept secret, assuming it remains secret otherwise. Assuming a technology is a bona fide trade secret, the owner can stop others from misappropriating the secret technology (if the owner moves quickly enough), or can try to recover the value of the lost secrecy in the form of money damages. Relying on this strategy comes with substantial risks, however, because the courts will not allow the owner to stop others from reverse-engineering the invention (as long as they do not have unfair access to the secret). Also, assuming the technology has not been publicly disclosed through the sale of a product, someone who successfully reverse-engineers a technology potentially could then proceed to patent it!165 Key Federal Statutes Relating to Trade Secrets As a general statement, governments and academic organizations do not generate any trade secrets of their own (they do not sell anything, after all), but they routinely possess trade secrets owned by others. For agencies of the U.S. government, three major statutes known as the Freedom of Information Act, the Federal Trade Secrets Act, and the Economic Espionage Act are particularly relevant in the handling of trade secrets. Following the Watergate scandal, Congress passed a series of laws designed to change how the government handles its own records. This law is the “Freedom of Information Act,” or simply “FOIA.”166 Basically, any record in the possession of the government must be produced upon request, unless there is some exemption in the law. One major exemption is for trade secrets.167 As a practical matter, agencies are sensitive about releasing trade secrets and strive not to do so, but if the private party that gave the secret to the agency failed to indicate whether or not the information is a trade secret, and the status is not

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otherwise obvious, chances are much higher that the agency will release the information. Another exemption to FOIA is for inventions in which the government owns an interest.168 Unlike other FOIA exemptions, however, this particular exemption only lasts for “a reasonable time in order for a patent application to be filed.” The exemption does extend to “copies of any document which is part of an application for patent,” but given that the USPTO publishes patent applications 18 months after filing (and makes them available for free online), there is rarely any need for an FOIA request for such documents. The second major law applicable to federal employees is the “Federal Trade Secrets Act.”169 This law bars any employee of the U.S. government from disclosing any information acquired through the employee’s official duties that qualifies as a trade secret,170 except to the extent the employee is required to do so by law or court order. Violators are subject to a fine and/or up to one year in prisondnot to mention discharge from employment. The third law is the Economic Espionage Act (EEA) of 1996.171 Unlike laws governing other forms of espionage, which turn on classified or national defense information, this law is focused on commercially valuable secrets. The EEA creates two classes of crimes, summarized as follows: misappropriation to benefit a foreign power172 and misappropriation intended to cause the original owner injury.173 Penalties for the former class include fines of up to $500,000 and 15 years’ imprisonment for individuals, and fines of up to $10 million for organizations. Penalties for the latter class are limited to imprisonment up to five years for individuals, and fines of up to $5 million for organizations. In addition, for both classes, those convicted must forfeit any proceeds from the crime and all property used to commit the crime. The law does not, however, authorize a private citizen to bring a federal civil lawsuit. Prosecutions under the EEA are exceptionally rare. Based on data from the Department of Justice, prosecutors brought about 34 cases under x 1832 (causing the original owner injury) the EEA from 2000 through the end of 2005,174 and just five cases under x 1831 (benefiting a foreign power).175 Given the low fanfare, most of these cases apparently resolved without a conviction. Indeed, the U.S. Department of Justice announced its very first conviction under x 1831 (benefiting a foreign power) in 2006, when two California residents pleaded guilty to trying to steal microprocessor designs from Sun Microsystems and Transmeta Corp., specifically to create a competing company in China, where the Chinese government would contribute seed capital and share in the profits. More common are prosecutions of scientists changing jobs who take their research materials with them, knowing that the former employer had intended to develop that work into a product. Two high-profile examples occurred in

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2001e2002. In one, the FBI dropped charges against two former Harvard post-docs when they arranged for the return of the materials;176 in the other, arising from the Cleveland Clinic, the ex-employee had already reached Japan, and the FBI charged a colleague only with lying to law enforcement about the arrangement (the Japanese courts refused to extradite the ex-employee).177 While cases are rare, they can have a devastating effect on a researcher’s career. To sum up, researchers working in federal laboratories should be at least minimally aware of trade secrets and their obligations to protect them. While the federal researchers do not generate trade secrets, they may come to possess the trade secrets of others. When that happens, the consequences for mishandling those trade secrets can be substantial.

Patents vs. Copyrights As discussed above, patents protect new and useful embodiments of discoveries and innovations; copyrights protect original works of authorship. Copyrights are intended mainly to protect new items that are creative in nature, rather than useful. Inventing something truly new and useful on demand is extremely difficult, but there are an infinite number of ways of creating an original work of authorship around a given idea. Because of this divergence, the laws of patent and copyright are fundamentally different. As the following summary will make clearer, carelessly lumping copyrights together with patents can lead to problems; each type of property deserves independent thought and handling. To be entitled to a copyright, the author must create an “original” work. “Originality” for copyright is substantially different than the “novelty” standard for inventions. An “invention” is not novel if it was ever disclosed, even if the inventor never saw the disclosure. To be “original,” in contrast, the new work merely must be “not copied.” So, in theory, two people who independently create identical works get independent copyrights in what appears to be the exact same thingdas long as neither one copied from the other. Also, the work must be “fixed in a tangible medium of expression.” Copyright exists the moment the author lifts pen from page, or hits “save” on the computer (magnetic media counts), or shoots a picture (chemical film or digital memory). Thus, a person standing at a podium making a speech gets no copyright in the speaker’s own ephemeral performance, yet anyone in the audience using a video camera owns a copyright in that person’s particular recording. Note that copyright exists automatically upon fixation; no later act of registration is required for copyright to exist (though it is a good idea). Certain items cannot be copyrighted. Raw facts and raw data cannot be copyrighted, as they were not works of “authorship.” Just because a person is the first to write a fact

Principles and Practice of Clinical Research

down on paper does not mean the person authored the fact itselfdthe author must add some element of creativity, such as a unique selection, arrangement or coordination of data.178 Also, mere names, slogans, or phrases cannot be copyrighted, as they fall under the domain of trademark law (and, in addition, they are too small to be deemed “works of authorship”). Finally, functional aspects of an artistic work are protected by patents, while the artistic elements are protected by copyright. In the case of software, a point worth noting is that both copyright and patent may apply. The particular code that a programmer types into a computer (“source code”) and compiles into binary (“object code”) can be copyrighted, just like a literary work. Simultaneously, it can be patented, if the architecture of the software presents a novel and nonobvious method of processing data. The owner of a copyright has several specific rights. Among other things, the owner has the affirmative, exclusive right to do and authorize others to do the following: (1) to reproduce, including into another medium of expression; (2) to prepare new, “derivative works” based on the original; (3) to distribute copies to the public, including lending and at no charge; and (4) for certain types of works, to perform or to display the work publicly.179 Copyright ownership generally follows authorship, but not always. In the employment context, the employee normally owns works made while working unless one of three major situations applies. First, if the employee is specifically hired to write, such as a newspaper reporter, or if the employee is hired under a contract containing a “work for hire” clause, the employer is the owner and the author (despite doing all the creative work, the employee is deemed not the author).180 Second, if a contractor creates a work under a contract that requires assignment of copyrights to the employer, the employer owns the copyright, though the contractor continues to be the author. Third, if the author is an employee of the U.S. government and wrote the work as part of the author’s official duties, the work is not eligible for copyright protection in the United States.181 “Joint authorship” is unlike joint inventorship in that the co-authors must create their respective parts of the joint work with the conscious intent of creating a unitary final product. Also, joint ownership of copyright is different from joint ownership of a patent in that copyright coowners owe each other a duty to share the net royalties they collect from licensing, litigating, or using the copyright, whereas patent co-owners may use the jointly owned patent independently, without any accounting to the co-owners. Distinct from copyright in a “joint work,” one can copyright a “compilation.”182 A compilation copyright arises where a new work is created by collecting and recasting other, prior works. The compilation copyright only extends to whatever the compiler’s contribution to the work might bede.g., layout and editing. So, two scientists

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collaborating to write a singular manuscript would jointly own the copyright in their joint work; meanwhile, the scientific journal in which the manuscript is published would acquire an independent copyright in the compilation of all of the articles in it, but would not own the copyright to any particular article unless the manuscript authors assign their rights to the journal. While registration of a copyright is not required, doing so is a good idea. A copyright cannot be enforced in court until it has been registered in the U.S. Copyright Office.183 Also, for acts of infringement that occur before registration, the copyright owner must prove actual economic harm to be entitled to receive any money, but for acts occurring after registration, the copyright owner is entitled to receive between $750 and $30,000 per infringing act, regardless of the economic impact (if the owner prefers, the court may award actual damages). If the infringer can prove he had a genuine and good faith (if ultimately false) belief that the copying did not infringe the copyright, the court can lower this threshold to $200 per act of infringement, but not lower.184 Placing notice of copyright185 on the work is not required, but is also a good idea. If the author has duly placed a visible copyright notice on the work, chances are much better that a court will decide later acts of infringement were willful, the maximum damages can rise to $150,000 per act of infringement.186 Unlike in patents, copyright infringement is a felony if done willfully and for purposes of commercial advantage or personal financial gain. Punishments can run as high as ten years’ imprisonment and fines up to $250,000 per incidence of criminal copying. The law does place limits on copyright owners’ ability to enforce against copying by others, and of these, three are particularly important to most people. The first is the concept of “first sale”donce a customer buys a copy of a work, the copyright owner’s rights in that particular copy are extinguished; that customer may resell that copy of the work without infringing the copyright.187 The second is that certain works come with automatic “compulsory” licenses;188 arguably, the most important of these for research is the compulsory license on software, which allows consumers to make a backup archival copy.189 The third and most famous limitation on copyright infringement is the defense of “fair use.” By law, an act of copying that might technically infringe a copyright is not infringing if the use is “fair”dfor example, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research.190 That judgment, however, is not based on the perspective and opinion of the copier, but of the jury at trial, and only after the copier has been found to be guilty of infrigement.191 As a result, relying on “fair use” as a shield against liability is risky.

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Patents vs. Trademarks Trademarks serve a fundamentally different function from the other major forms of intellectual property: namely, trademarks function to protect the market, not the owner of the intellectual property. As a result, trademarks have radically different aspects, rights, and rules. Trademark law in the United States derives from the government’s basic duty and power to regulate commerce. Each State has its own trademark law for intra-State commerce, while the federal government has a national trademark law to regulate inter-State and international commerce. These laws are intended to complement each other, operating simultaneously and in harmony (although any conflicts are resolved in favor of federal law). A mark192 is any word, phrase, logo, symbol, shape, number, letter(s), color, sound, scent, or other device (or combination of these) that serves to identify the source of specific goods or services in commerce, and to distinguish them from similar goods or services sold by others. A mark serves this function whether or not the consumer knows the name of either the maker of the good or the provider of the service, as long as the consumer knows that any two items bearing the same mark come from the same source. Thus, consumers know that the mark PringlesÒ identifies the source of all cans of potato-based snacks bearing that same logo, even though most consumers have no idea that Procter & Gamble is that source. If, hypothetically, a new can of anchovy-flavored potato snacks bears the “Pringles” mark, consumers will assume it was made by whoever made the original version. The primary function of a mark is to make shopping easier. Consider how easy it is to find a soap that has specific characteristics in every bar, based on the marks (e.g., a mild soap from IvoryÒ, a skin-softening soap from DoveÒ , and a deodorant bar from Irish SpringÒ ). Consider also how much more likely a person is to buy new products from the same company that makes that person’s current favorites. Now: imagine buying soap in the manner most people buy bulk tomatoesdtesting each bar for scent and washing characteristics, rather than simply by looking at the label. The mark makes the whole process much more efficient. Alongside this primary function is the incentive effect a mark has on the manufacturer to ensure consistent quality. A consumer who has a bad experience in a restaurant is not likely to return to that restaurant, and if the restaurant is a franchised chain, the consumer will be turned off from ever returning to any store in that chain. Whether one loves or hates the fast food served at McDonald’sÒ restaurants, everyone who has eaten at any branch at least once knows what to expect each time after, at any other branch. That effect is a direct consequence of the power of a mark to influence purchasing.

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Unlike with patents, copyrights, and trade secrets, a mark-owner does not acquire ownership as a result of creating the mark, or for any quid pro quo. Rather, ownership is the result of the recognition conferred by the purchasing public. If the consumers recognize and use the mark to identify and differentiate goods and services, then the vendor owns the mark. If the consumers cease using the mark to identify the source of goods and services, and start using the mark to identify the products themselves, the identifier ceases to be a mark, and becomes a generic word. Examples of this include aspirin, cellophane, escalator, and trampolinedall of which used to be registered trademarks. Ownership of a mark begins with actual use in commerce, not with registration.193 Before registration, the owner may use the symbol “Ô” on its goods (or “SM” in ads for its services) as a placeholder to indicate that the user claims ownership of the mark; once the mark has been registered in the USPTO, the owner may use the symbol “Ò ”. State registration requires use in commerce in that State; federal registration requires commercial use in more than one State. As between two parties claiming the same mark, ownership of a mark goes to the senior user, not necessarily to the creator of the mark (in other words, if you abandon your mark, someone can step in and claim it).

BASIC ELEMENTS OF THE PATENT APPLICATION PROCESS For the purposes of this section, all discussions relate to United States laws and procedures except as specifically noted. Due to harmonization efforts, many of these topics have close analogs in other nations’ patent systems, but the variations are numerous and substantial enough that a useful examination of other systems is beyond the scope of this chapter.

Principles and Practice of Clinical Research

technology, showing how the existing tools do not address a specific problemdwhich, of course, the invention solves. It usually includes several examples of how to make and use the invention, such as assorted ways to put the pieces together, or different synthesis protocols, or alternative options if one or another component is unavailable; the application then must identify which example the inventor believes is the best mode. It must include diagrams or drawings whenever they would be necessary to understand the invention, along with a description of each drawing.194 Finally, it must include a formal title, a list of cross-references to other pending applications, and an abstract of the invention. Each word in an application is normally accorded its ordinary, dictionary definition, and technical jargon that is truly standard in a field will be given its field-specific meaning, but the applicant is encouraged nonetheless to define specialized terminology as needed for clarity. Indeed, an axiom of patent law is that the applicant has the right to be his or her own lexicographer.195 Of course, an applicant (and, later, patentee) will be held to whatever definition is used. One critical point about the specification: once the application has been filed, while the text may be (and often is) altered or amended, no new substantive material may be added. An improvement, a newly crafted embodiment, or a new field of use necessarily broadens the scope of the original filing. As these new developments clearly arose after the date of conception for the original invention, including them would muddy the question of patentability in light of intervening disclosures. Instead, these additional elements must be captured by an entirely new patent application. The mechanisms for doing so are discussed below.

Claims

Content of a Patent Application As a general proposition, a patent application includes three major elements, known as the “specification,” the “claims,” and assorted technical items. Each application may contain only one invention. The applicant owes the USPTO (and the public) a duty to disclose everything material to patentability, and efforts to hide information or otherwise deceive the USPTO is known as “inequitable conduct,” which can lead to an unenforceable and/or void patent. The following discussion elaborates on each of these points.

Specification The specification is the narrative describing the invention, how to make it, and how to use it. Normally, the application includes a section describing the background of the

Every patent must include at least one “claim.” The importance of the claims to a patent cannot be overstated. Like a deed to land, the claim articulates the legal boundaries of the “property” from which the public is excluded. This function is critical, as it notifies the public of what may and may not be done without infringing the patent. A patent therefore lives and dies by the exact wording of its claims: phrasing that is too broad will capture technologies already public (and thus renders the claim invalid), while phrasing that is too narrow may miss the most commercially valuable form (which might not be apparent before the product reaches the marketplace). In terms of format, a claim is a single sentence that describes the subject matter of the invention together with all necessary elements. Typically, a patent contains multiple claims (each of which must have some substantive variation from all of the others). Each claim must be

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numbered separately. So, a hypothetical patent on a chair might include the following three claims: I claim: 1. An object-supporting device, comprising a surface in a horizontal orientation relative to the floor, and at least one vertical support member depending from the horizontal surface and attached thereto. 2. The object-supporting device of claim 1, wherein the number of vertical depending support members is at least three. 3. The object-supporting device of claim 1, and further comprising a second surface connected to the first surface, wherein the edge of the second surface is situated near the edge of the first surface and aligned substantially at a right angle to the first surface.

Notice that claim 1 includes just two elements: a surface for supporting (presumably a person, but perhaps books, laundry, or anything else one might put on the seat of a chair), and at least one supporting leg (some stools use only a center post). Likewise, claim 2 adds a minimum number of legs, and claim 3 adds a backrest. These minimum requirements are referred to as “limitations.” The more limitations a claim includes, the fewer variations will fall within the scope of the claim. Claims with more limitations are said to be “narrow,” and claims with few limitations are “broad.” Claims 2 and 3, each of which adds limitations to a prior claim, are “dependent” claims; claim 1, naturally, is an “independent” claim. Claim 1 in any patent should be the broadest claim196dbut it is possible for another, later claim to end up being the broadest. Each claim in an application is reviewed by the USPTO separately. If claims 1 and 2 are found invalid (say, for instance, because one-legged stools and tables with four legs were well known), then claim 3 might still be valid if no one had ever attached a backrest. Later, when the patent issues, a court may be asked to review the patent to determine whether it is valid; at that point, the court also will do a claim-by-claim analysis. As long as one claim remains valid, the patent as a whole is valid, though the patentee will not be permitted to enforce those particular claims that a court has found to be invalid. Inventorship (and co-inventorship) is determined on a claim-by-claim basis. Therefore, once the USPTO and applicant agree on a final version of the claims but before the patent issues, the applicant must re-evaluate the final claims to ensure that inventorship has not changed (or must amend the application accordingly). Infringement also is determined on a claim-by-claim basis. Specifically, the court197 will compare the allegedly infringing article to the words in the claim. If all of the limitations in a claim are present in the article, then even if the article also includes additional elements (e.g., the “seat” and “backrest” surfaces each includes a cushion), the article

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infringes the claim. On the other hand, if even one element in the claim is missing from the article (e.g., a “chair” having a seat and backrest but lacking legs, for picnics), the article does not infringe the claim.

Technical Items In addition to the items above, the application must include several technical and administrative items. These include: an oath/declaration by the applicant(s) concerning inventorship of the claimed invention; evidence of assignment, if the applicant is not also an inventor; an Invention Disclosure Statement (discussed below); certain forms; and, of course, the filing fee. With the Patent Reform Act, the inventor’s oath/declaration is now far less critical. For inventions involving nucleotide or protein sequences, the application must include a sequence listing.198 This now is accomplished by including a separate electronic file along with the application, rather than directly in the text of the specification. Likewise, for inventions comprising software, the code may be submitted in a separate file. Finally, for biological materials capable of self-replication (whether directly, like cell lines, or indirectly, like viruses), the applicant may deposit a sample in an approved repository, and then rely on that deposit in crafting the language of the application.199 Normally, models and other physical exemplars are not required for issuance of a patent, but an applicant may submit one if it will help the USPTO understand the invention better; in unusual cases, the USPTO may require that the applicant submit a physical exemplar, but generally the USPTO only requires drawings or electronic images.200 If a patent claims a biological material that cannot be made or isolated without substantial experimentation, deposit of a sample in a repository is required.

One Invention per Application (“Unity”) Each patent application must contain exactly one invention.201 If the various claims in an application actually cover two or more independent and distinct inventions, the USPTO may divide the claims into two or more groups (each representing a single invention), and require the applicant to pick which group to pursue first. This process is discussed in greater depth below. Also, if an applicant files two independent applications both claiming the same invention, the USPTO will reject the later-filed application on the grounds of “double patenting.” The applicant can overcome this rejection by ceding any patent life beyond the earliest-to-expire patent (known as a “terminal disclaimer”). This ensures that the applicant will not arrange to extend the effective life of the invention beyond the term to which the applicant would be entitled from the first-filed application.

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The Duty of Disclosure and “Inequitable Conduct” As mentioned, the applicant has the duty of disclosure to the USPTO.202 A willful failure to comply with this duty can result in a court finding that the applicant (and, if complicit, the applicant’s attorney) engaged in “inequitable conduct.” As a result of the Patent Reform Act, coupled with recent court cases, the standard for inequitable conduct has been tightened substantially, but it has not been eliminated. The court’s remedy for inequitable conduct is either to rule that the patentee will not be allowed to enforce the patent, or else rule that the patent is void altogether. Accordingly, the application must include all information material to patentability. The scope of information obviously includes all prior art related to the invention of which the inventor is aware (including, as discussed above, certain secret art). In addition, the applicant must disclose the “best mode,”203 other patents and pending applications related to the invention,204 and anything else “material,” i.e., that reasonably might influence the USPTO’s decision.205 Note that the duty of disclosure is a continuing one; therefore, if the applicant discovers material information during the life of the patent application (or patent), the applicant may submit it at any time. Typically, the applicant reports prior art using an “Information Disclosure Statement,” or IDS. The IDS includes patents, published patent applications, journal articles, slides from presentations, posters, abstracts, and other items that might qualify as prior art (merely including something in an IDS does not constitute an admission that the listing is relevant prior art). Any item not in English must be translated, or must provide an English-language summary. During prosecution, the applicant may submit supplemental IDSs to report newly discovered prior art.

U.S. Applications: Types and Filing Procedures Those who have never participated in the patenting process often wonder why “the system” takes so long to produce just one patent. First-time inventors, in turn, wonder why the patent attorneys seem to want to speak with the inventors often and spend lots of time talking about the invention; why were the lawyers unable to write up a decent patent application the first time? And everyone wonders why patents cost so much. Understanding what goes into getting a patent can alleviate these concerns.

Basic Types of Applications The USPTO offers applicants four types of patent applications that will eventually lead to an issued patent, plus two additional types that do not. The four are the original

Principles and Practice of Clinical Research

utility (often called the “parent”) application, the Continuation, the Continuation-In-Part, and the Divisional. The two additional types are the Provisional application and the Statutory Invention Registration. The following discussion simply identifies each type briefly; a more detailed discussion for most types appears later in this chapter. The original utility application is the classic start of patent prosecution; it fixes the substantive benchmark for the scope of patent rights that the applicant might receive, assuming all other criteria for patentability are met. Subsequent (sometimes called “daughter”) applications rely heavily on the exact content of the original (“parent”) application. The USPTO has two ways to file a parent application: the U.S.-primacy version, under 35 U.S.C. x 111 (known as the “111” application), and the international-primacy version, under 35 U.S.C. x 371 (known as the “371” application). The 371 application generally is used in the context of a set of international patent applications filed under the Patent Cooperation Treaty (“PCT”), while the 111 typically is used when the applicant only intends to pursue U.S. rights. While formats, forms, procedures, and timing dates differ, both versions accomplish the same goal and must contain the same core information. A Continuation application (sometimes indicated as “CON”) is used during the prosecution of a patent application. Its main function is to “reset” the patent-prosecution clock, which will be discussed below. An applicant may use a CON to rewrite the claims, but may not add any new substantive content or otherwise expand the scope beyond what was in the parent. In theory, both the parent and CON could issue as separate patents, but given the expense and the double-patenting problems, generally the parent is abandoned once the CON has been filed. A Continuation-In-Part (normally called a “CIP”) is the primary means of capturing improvements and other additions to an invention after a parent has been filed. For purposes of defeating potential prior artdincluding, in particular, the inventor’s own disclosuresdthe CIP claims “priority” to the filing date of a still-pending parent application, and then adds whatever expansion the inventor discovered later. To the extent the CIP overlaps with the parent, the CIP cannot be defeated by art arising after the filing date of the parent. The fourth substantive patent application is a Divisional (normally called a “DIV”) application. This type is used when the USPTO recognizes that the original application contains multiple inventions. If, for example, the USPTO says that the original application contains three distinct inventions, the applicant would narrow the parent to cover one invention, and then later (while the parent application was still pending) file one or two DIVs, each capturing one of the two remaining inventions. A “Provisional” (sometimes indicated as a “PRV”) application is not a true application because the USPTO

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will not examine it substantively. It is used as a placeholder to defer the filing of the parent. The applicant has up to one year to file a fully enabled utility application based on the PRV; the parent application then gains the benefit of the earlier filing date (called the “priority date”) of the PRV against prior art covered by the PRV. A PRV does not need to contain claims, and many of the formalities of filing are waived until the filing of the parent. The PRV application has another benefit, though it carries a risk. Because many formalities are waived, an inventor may simply select raw items like manuscripts and slides, attach some basic USPTO forms, and submit it, as is, to the USPTO. This approach is known among the patent community as a “coversheet Provisional,” and it is mainly used in emergency-filing situations, such as when the manuscript will be published or the slides will be presented within a few days. The primary risk is that the coversheet Provisionaldand, in the worst case, the patent relying on itdwill prove to be worthless because it lacks key information or uses ill-considered phrasing. Finally, under the 1952 law, the Statutory Invention Registration (generally called the “SIR”) mechanism can be used to report an invention to the USPTO without claiming ownership of it. In essence, it is used to make it easy for the USPTO’s examining corps to find the invention when looking at later-filed applications. The SIR system was designed to encourage disclosure in cases where a company merely needed access to a technology with no need for exclusivity, but feared the possibility that a competitor would seek a patent on that exact technology and the USPTO would not find out about the earlier company’s discovery. SIRs look like regular utility applications without claims; they are reviewed by the USPTO only to see if it meets the written description requirement.206 The Patent Reform Act abolished the SIR process going forward.

Timing Considerations Export Control Under U.S. law, the mere act of filing a patent application outside the U.S. on an invention made here constitutes an “export,” and as such it is subject to certain controls.207 The applicant must wait six months after filing a U.S.-based application (including a PRV) before filing in any other country. The USPTO reviews all applications to see if they contain information critical to national security. If so, the USPTO will refer the case to the federal agency having an interest in the technology for review. For those few applications covering inventions having national-security implications, the USPTO will issue a “secrecy order,” which will block publication and issuance until the concerned agency allows the USPTO to lift the order. If the USPTO does not issue a secrecy order within six months of

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the applicant’s initial filing, the applicant has an automatic license to file internationally. Publication With two major exceptions, the USPTO will publish all applications in its Official Gazette 18 months after the applications are filed. This means the USPTO will publish 18 months after the filing date of a PRV, not from the subsequently filed utility application, though the content will be the utility application, not the PRV. Furthermore, the official file associated with the earliest application (called the “file wrapper”)dwhich includes, among other things, all written communications to and from the USPTO, and written summaries of telephone conversations and in-person interviewsdare made available online for free by the USPTO.208 The first exception to the publication rule is where the applicant: (1) indicates in the original application that the parent application is a U.S.-only filing; (2) promises not to file anywhere else; and (3) explicitly requests that the USPTO not publish the application and file wrapper.209 Second, the USPTO will not publish an application that an applicant has expressly abandoned before the 18-month deadline (i.e., to keep the invention as a trade secret). Patent Life Upon issuance, patents expire 20 years from the filing date of the parent application. That means all daughter applications (CONs, CIPs, and DIVs) all expire on the same date that the parent willdthis is the price for gaining the benefit of the parent’s filing date against later-arising prior art. Note that expiration is calculated from the filing date of the parent, such that a PRV has the effect of extending the term by up to one year. While most patents do indeed expire on the twentieth anniversary of the parent application, many patents actually have their terms adjusted. First, the USPTO may require that an applicant agree to a “terminal disclaimer” to avoid effectively extending the life of an identical, earlier-filed application. A terminal disclaimer means the later-filed patent will expire the same day as the earlier-filed patent. Second, unreasonable delay by the USPTO in prosecuting a patent application is grounds for extending the life of the patent; this extension, however, will be reduced, day for day, to the extent delay was the fault of the applicant.210 Third, for certain biomedical products requiring approval by the Food and Drug Administration, the patentee may petition the USPTO to extend the patent life up to 14 years; again, the extension will be reduced by the patentee’s own tardiness.211

“Prosecution” of a Patent Application While the statute is written as though the applicant has an affirmative right to a patent unless the USPTO proves

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otherwise, the process of getting a patent is not as simple as sending in a form with a check and then waiting around for the certificate to arrive in the mail. Instead, the USPTO will examine applications critically, challenge any and all flaws seen, and essentially force the applicant to demonstrate why the applicant is entitled to a patent. This involved, back-and-forth process is called “prosecution” of the patent application. Here is the rough sequence of a typical prosecution: l l

l l

l l

l

l

l

l

The applicant files an application (parent, CIP, or DIV); If applicable, the USPTO notes missing parts and/or identifies multiple inventions, and the applicant responds accordingly; The USPTO publishes the application; The USPTO issues a “first office action on the merits” (abbreviated “FAOM”), typically noting informalities and other matters of form that must be fixed, “rejecting” certain claims as substantively unpatentable, and “allowing” any claims that are patentable as is; The applicant responds to the office action; The USPTO issues a second office action, which may include a “final rejection” of some or all of the previously rejected claims, or may “allow” some or all of the still-pending claims; The applicant responds to the second office action, assuming some claims were rejected in it; Assuming the USPTO agrees that all pending claims are patentable, the USPTO “allows” the application to proceed towards issuance; The applicant addresses any remaining informalities, rechecks inventorship, and corrects other non-substantive flaws; and The USPTO “issues” the patent.

The typical reason why the USPTO rejects a claim212 is that the prior art suggests that the invention is not novel, is obvious, or both. Sometimes, the USPTO will reject a claim because it fails to meet the threshold test of enablement. Enablement rejections are more common in technological niches where finding a viable solution to a particular problem has proven especially difficultdlike finding an effective prophylactic vaccine against HIV. In rare cases (perhaps when applicants are unrepresented by patent counsel), the rejection is based on the fact that the applicant has tried to claim unpatentable subject matter.213 Upon receiving an office action containing objections to technical matters and rejection of some or all claims, the applicant has three tasks in crafting the response. First, the applicant addresses technical flaws and informalities (though some of these may or must be deferred to the end of prosecution). Second, the applicant addresses any rejections that are not based on prior art. This can be handled by, for example, providing additional data, testimony from

witnesses and experts, additional images, or sometimes a sample or prototype. Also, the applicant can try to amend the specification to clarify the language (though may not add new matter that expands the scope). Third, the applicant addresses all art-based rejections. Here, the applicant presents any arguments against the USPTO’s logic, cites favorable authoritative references, and for rejections based on obviousness, submits evidence of secondary factors. Also, the applicant may (often must) amend the claims to include additional limitations. As is apparent, a “final rejection” by the USPTO is not truly a death sentencedrather, it means is that all rejections have been identified, and at least one has not (yet) been fixed.214 The USPTO cannot issue a final rejection in the FAOM of a parent, CIP, or DIV, but may do so on the FAOM of a CON. A final rejection will close the prosecution if the applicant has nothing more to say or add to the record. When the USPTO issues an office action containing a final rejection, the applicant has five choices. First, the applicant may amend the application as required by the USPTO. Second, the applicant may file a “Request for Continued Examination” (called an “RCE”), which permits the applicant to note mistakes made by the USPTO or raise additional arguments, though the claims may not be amended in an RCE. Third, the applicant may file a CON, which removes the finality of the “final rejection,” permits the applicant to add or amend claims, and also includes any further arguments the applicant wants to include. Fourth, the applicant may appeal the case.215 Finally, the applicant may abandon the application. As mentioned above, CONs, CIPs, and DIVs must be filed while the parent is still pending. Thus, after the application issues as a patent, the applicant may no longer file any CONs, CIPs, or DIVs, and the parent applicationdwhich was published by the USPTO 18 months after the earliest filingdbecomes prior art against any subsequent applications that the applicant might file. Note that filing a CIP and/ or DIV has no impact on the prosecution of the parent. Also note that delays in filing CIPs and DIVs reduce the life of any patents that issue from them, as their life is calculated from the filing of the parent.

Options “After Issuance” Once a patent has issued, the USPTO’s role in the process officially ends, after which any further official actions on patent validity take place exclusively in the courts. There are two major ways, however, that the patentee may ask the USPTO to reopen a patent for another look: Reissue and Reexamination. Whenever a patent is inoperative or invalid (in whole or in part) due to a defect in the specification or drawings, or because the patentee failed to claim as much as could be claimed under the specification, the patentee may surrender

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the patent and file a “Reissue” application, provided the problem was caused by an error introduced with no deceptive intent. (Minor clerical and typographical errors that do not render the patent inoperable or invalid are fixed by filing a petition for a Certificate of Correction.216) No new matter may be added, of course, and the claim scope only may be enlarged if the patentee files within two years of issuance.217 The other major way to reopen a case is through a process called “Reexamination,” in which someone asks the USPTO to take another look at the patent in light of prior art not previously considered.218 Anyone may request a Reexamination, though requests by the USPTO staff are considered inappropriate.219 Reexamination historically has been exclusively between the patentee and the USPTO, called an “Ex Parte” Reexamination. Members of the public may not participate beyond the initial submission of the additional prior art. On November 29, 1999, the law changed to allow the USPTO to offer a new type of Reexamination proceeding in which members of the public could participate, called an “Inter Partes” Reexamination. The goal was to find a mechanism that was less expensive and faster than litigation by which members of the public could actively challenge patents by means other than unadorned submission of additional prior art. For those interested in trying the Inter Partes mechanism, the law imposed some stiff restrictions. First, the petitioner must bring up all possible additional prior art in one proceeding; a petitioner may not file a second Inter Partes Reexamination request to challenge the issues that could have been raised in the first proceeding.220 Second, the petitioner must present all available prior art; if the patentee later sues the petitioner in court for infringement, the petitioner will be barred from presenting prior art that could have been raised in the Reexamination.221 While the number of people using the mechanism is slowly rising,222 the USPTO’s data reveals that the mechanism has not been utilized as much as hoped.223 The Patent Reform Act implemented some major changes to the Reexamination procedures. In particular, the law abolished the old Inter Partes Reexamination and replaced it with two new mechanisms: the “Post Grant Review” (PGR) and the “Inter Partes Review” (IPR). The law also created a third post-grant process, called “Supplemental Examination.” The old Ex Parte Reexam procedures remain essentially intact. For the Post Grant Review, any third party may, within nine months of the issuance of a patent, file a petition with the USPTO asserting that the patent is invalid. The PGR applies only to patent applications filed on or after March 16, 2013, and the third-party petitioner does not participate in the proceedings. Unlike an Ex Parte Reexam, where the only basis for challenging a patent is prior art not

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considered by the USPTO, the PGR petition may assert any grounds of invalidity except best mode and inequitable conduct. The Inter Partes Review may be filed against any issued patent, including patents already issued before the Patent Reform Act, though it must be filed at least nine months after the patent has issued, up to the expiration of the patent. Again, like the PGR and unlike an Ex Parte Reexam, the IPR petition may assert any grounds of invalidity except best mode and inequitable conduct. Finally, like its predecessor Inter Partes Reexam, the Inter Partes Review carries the consequences of estoppels for any issue that was or could have been handled in the IPR proceeding. The Supplemental Examination is a proceeding designed to allow a patentee (or, more frequently, a later assignee) to “clean up” a messy or inadequate prosecution, in order to strengthen a patent against later challenges to validity. Specifically, a patentee/assignee may submit prior art that the USPTO had not previously considered, and the USPTO has 90 days to determine whether or not that prior art matters enough to start a Reexamination. If the USPTO declines to do so, the patent is insulated against the charge that it was obtained through “inequitable conduct.”

International Applications and Filing Procedures The process for securing a patent in any one country is complex enough, but coordinating the simultaneous filing of patents in a score or two of countries is dauntingly difficult and expensive. Accordingly, countries have arranged several treaties to make international patenting simpler, less expensive, and less burdensome. The key treaties were mentioned previously; the following discussion represents current practice under them.

Patent Cooperation Treaty (“PCT”) Applications Under the PCT, an application filed in any member country that conforms to certain rules and conditions will be honored in all member countries. The PCT process does not eliminate the need for an applicant to prosecute nation-specific patent applications in each national or regional patent office, and the PCT application itself will never become an “international patent,” but it does facilitate the effort to acquire patents from multiple countries in a variety of ways. The PCT process consists of two main phases: the “international phase” and the “national phase.” Essentially, the international phase begins when an application is filed in one (member) patent office, called the “Receiving Office,” and the Receiving Office performs certain preliminary functions. The national phase begins up to 30 months after the priority date,224 by which point the

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applicant must convert the single international filing into regional or nation-specific applications. The applicant selects which national and/or regional offices to enter. The international phase consists of five specific actions by the Receiving Office,225 three of which are mandatory and two are optional at the election of the applicant. 226 The three mandatory actions are: (1) checking the application for completeness and matters of form, (2) performing a preliminary search of prior art, and then issuing an “International Search Report” (ISR), which contains a written opinion on patentability, and (3) publishing the application and the ISR. The optional actions are: (4) performing supplementary search report, and (5) writing an International Preliminary Examination Report (IPER). The optional actions are a mixed blessing for applicants. On the positive side, the IPER is not binding on the national patent offices, and the supplemental search easily may reveal useful prior art, thus suggesting which strategies are worthwhile and which are fruitless to pursuedextremely valuable information, given the costs of international patenting. On the negative side, any remarks by the Receiving Office questioning patentability will almost certainly be picked up by the national offices; if those remarks were poorly considered or mistaken, fixing the damage will cost resources and could complicate the prosecution needlessly. The key benefit of the PCT system is that an applicant starts by filing one applicationdin one language, with one patent officedand paying one set of initial filing fees and one set of legal bills, all in one currency. All of the remaining applications and fees can be deferred by months or even years, and in the meantime the applicant finds local counsel and translators, arranges for licensing, drums up investment, and perhaps conducts some further research and development into the product. All national patent offices enjoy the benefit of the uniform format, which leads to more efficient review. The applicant also gains the benefit of the ISR, which may reveal prior art that the applicant had not found prior to filing the PCT application, and this can help the applicant decide how best to proceed before making a large investment in national stage prosecutions. Finally, the IPER offers a window into a likely course for the prosecution; information that reduces risk and encourages investment.

For the EPO, the national phase application must be filed in English, French, or German. Upon allowance (called the “Grant”) of the EPO patent, the applicant must select the member countries in which the applicant wants to acquire patents (called the “Validation” stage). After Grant but before Validation, anyone may challenge the patent in an inter partes administrative proceeding. Assuming no one challenges the patent, or the challenger loses, the case proceeds to Validation, at which point the applicant must have the patent translated into the national language of each country and must hire local counsel to file the EPO patent in each local patent office. European patents are still national documents, however, and the EPO patent is not directly enforceable in any court. Each member of the EPO reserves the right to require that the EPO patent conform to local formatting. More importantly, patents are still enforced nationally; in other words, for allegedly infringing acts occurring in Greece, the patentee must sue in the Greek courts based on the Greek version of the patent, and so on. Inventorship, ownership, validity, renewal, revocation, and infringement are determined independently under each state’s laws. To simplify the process further, 15 member states of the EPO further agreed to limit the need for translations. Under the “London Agreement” of October 2000, seven agreed to accept applications written in English, French, or German with no translation into the local language, and eight agreed to accept them as long as the claims are translated.227 Of the eight requiring translation of the claims, five also require that the description be translated into English.228 Of the 17 remaining states, three accept applications written entirely in English, one accepts French, and one accepts German, without requiring translation into the national language. Only 12 states still require full translation, and some of them are likely to join the London Agreement eventually. Historically, an applicant could choose to ignore the EPO entirely and file national phase applications directly in the patent offices for specific member countries. Eleven members, however, have closed that route.229 For these countries, local patenting is only available following the Grant by the EPO.

Regional Patent Offices

There are three major paths for pursuing U.S. patents in the context of the PCT system. Each path has substantial consequences, and under the right circumstances, each has its own merits. Thus, having a basic understanding of their rough contours is a good idea. In the first strategy, the applicant ignores the PRV and files a PCT application in the USPTO. Thirty months later, at national stage, the applicant files a “371” application in the USPTO (along with the national applications in other countries). Recall that the 371 form of the parent

Regional patent offices (EPO, ARIPO, OAPI, and EAPO) centralize patent prosecution for their member states. At national phase, the applicant files a single application in the regional office, which then carries out a single prosecution on the substance of the application. When the regional office issues a patent, that patent is valid in all member states, though each member state may have certain prerogatives before the patent may be enforced there.

Combining U.S. and PCT filings

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application is used to “convert” the PCT into a nationalstage U.S. application. Thereafter, the applicant may later file CONs, CIPs, and/or DIVs just as with the standard “111” application. The patent(s) issuing from the 371 filing will expire 20 years after the earliest application was filed. This strategy maximizes the time between the PCT and national-phase applications, and it accelerates issuance of the U.S. patent by a year, but loses a year of patent life. If the technology is likely to be obsolete well before the patent expires, this strategy might save some upfront costs. In the second strategy, the applicant files a PRV, PCT, and 371 applications with the USPTO at the appropriate times. As with the first strategy, the applicant may file CONs, CIPs, and/or DIVs; these patents that result will expire 21 years from the filing of the PRV. This strategy maximizes the deferral of costs, except that for the minimal extra expense of filing the PRV, and the applicant gains a year of patent life, but results in lengthy prosecutions (during which time the applicant cannot sue infringers). This is critical for technologies that might be reaching full profitability just towards the end of the patent life, such as in the field of pharmaceuticals. In the third strategy, the applicant files a PRV, but instead of filing the PCT at 12 months and the 371 at 30 months, the applicant files the PCT application together with the 111 application. While the 111 application is normally used when the applicant does not file a PCT application, it may be used together with the PCT. The reason for filing the 111 is that the USPTO will begin substantive prosecution of the case years earlier than with the 371. The advantage is that the patents resulting from that 111 are likely to issue earlier, meaning that the patentee will have a larger window in which to enforce the U.S. patent(s). The main disadvantage is that costs are accelerated.

General Strategy Notes The first major strategy note concerns costs. Patenting is an extraordinarily expensive endeavor. Fees charged by the USPTO add up quickly; for example, before the Patent Reform Act, each original filing (including PCT, 111, 371, CON, CIP, DIV, and reissue) ran about $300, with a surcharge for “excess” claims ($50 per claim over 20, plus $250 per independent claim over the first three), the USPTO’s ISR/IPER fee was about $1,000, and miscellaneous prosecution fees cost between $100 and $2,000 per item. At issuance, the USPTO charged a $1,500 fee, and then charged “maintenance fees” after each of the third, seventh, and 11th anniversaries of the issuance date, which total another $8,000 or so.230 These and all other USPTO fees were increased by 15% in the Patent Reform Act, and the USPTO received authority to reset its fees in the future. Useful estimates are very hard to offer because each case is truly unique, but everyone seems to agree they are

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expensive.231 Webpages for several law firms suggest that they will charge in the range of $10,000 for an average U.S. case, plus $20,000 per foreign country, but the fine print always includes the warning that costs can go higher.232 One study in 1996 found that cradle-to-grave costs for a single patent ranged from $2,000 (South Africa) to $40,000 (Japan);233 costs have only risen since. Assuming a reasonable estimate is $15,000 per country, then filing national applications just in the U.S., Canada, Australia, and the EPO (selecting all 37 countries) would run $600,000. In the EPO, selecting just the London Agreement countries plus those that accept English applications would save about $250,000. Data collected by the American Intellectual Property Law Association suggests these figures are in the right order of magnitude, though the exact selection of countries and the technology in question make a substantial difference in price.234 The second major strategy note concerns timing. Accelerating the prosecution accelerates when fees are due, but it also hastens the point where the patentee can try to enforce the patent. Delaying prosecution also carries the potential harm of reducing the amount of patent term extension available. For some technologies, such as pharmaceuticals, loss of patent life might outstrip the upfront costs of acquiring the patent. The third major strategy note involves the dilemma over CIPs and DIVs. An applicant might be tempted to cram as many variations as possible into an original filing, and then piggyback with later CIPs, in order to take advantage of an earlier filing date. This strategy is particularly appealing where the field is full of fierce competitors publishing papers on very similar subjects. On the down side, the strategy results in a shorter life for the portfolio as a whole and a more complicated prosecution overall. Alternatively, an applicant might try to tease apart each unique embodiment, to file as many applications as possible, independently. This strategy is particularly appealing where the applicant wants each case to have a clean prosecution, or, perhaps, the applicant wants to create a “thicket” of patents to deter competitors from trying to invalidate any particular patent. On the down side, this strategy takes the substantial risk that intervening prior art may arise in between filings, and that the strategy will provoke the USPTO to issue a “double patenting” rejection in the later cases.

Current Major Efforts to Alter U.S. Patent Laws Public pressure to reform certain abuses (real and perceived), as well as to harmonize U.S. patent law with international standards, has been building for years. The Patent Reform Act of 2011 was the most recent move, but it surely will not be the last. Moreover, U.S. patent law

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continuously evolves through court cases. Chances are exceptionally high, therefore, that at least one major change to the patent law as described in this chapter will have occurred by the time this chapter has published. Bearing this situation in mind, the following represents a snapshot of efforts currently under way.

International Harmonization As stated above, patents are national documents, each valid only in the nation that issued it. Variations in national patent laws increase the cost of acquiring patents, and in some cases, the cost of doing business itself. In the bygone era where international trade was not as important as domestic, variations in patent law from nation to nation was a hindrance, but not a critical one. As international trade has grown from a minor to major to critical element in commerce among the United States and its principal trading partners, the added cost caused by variations in patent laws has grown alongside. Several major treaties have been signed to streamline and harmonize patent laws and practices. Additionally, the USPTO, the EPO, and the Japanese Patent Office have established a trilateral commission to examine ways of harmonizing the respective systems. Also, patents are a recurring topic for the regular international trade-treaty negotiations. One major, common discussion concerns eligibility to file applications. The United States’ 1952 law follows a first-to-invent system, with a complex mechanism for resolving disputes over who was first to invent, and the law is transitioning to a “first inventor to file” system; most other nations use a simple first-to-file system. Another major difference involves the “statutory bar.” The United States permits applicants to file patent applications for up to one year after a disclosure, while most other nations would bar patents immediately, with no grace period, even if the disclosure was made by the inventor.

Patents on Genes and “Mere Associations” Health care patents commonly inspire passionate views, but two areas are particularly intense at this time. Both were discussed in depth earlier in this chapter in the discussion of patent eligibility, but any review of major changes now under way requires at least a brief overview. The first issue is that patenting discoveries relating to genetics remains highly controversial despite (or because of) 30 years’ experience with such patents. Several times in the last two decades, members of Congress have submitted bills that would limit or prohibit patents on genes. The USPTO has issued guidelines specifically directed towards genebased patents, which were upheld by the CAFC.235 Recently, the American Civil Liberties Union and the Association for

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Molecular Pathology joined with several individuals to try to invalidate claims in patents concerning two genes critical for identifying who is at high risk of developing certain cancers. The district court’s decision in favor of the plaintiffs, however, arguably was not limited to the particular facts of the case, casting a shadow over the validity of many biotechnology patents.236 The second intensely discussed topic is in patents claiming rights to “mere associations.” Here the discovery in contention is the pure recognition that a certain naturally occurring circumstance has medical significancedfor example, noticing that an elevated level of a biomarker indicates a deficiency in a vitamindbut both the circumstance itself and the method of detecting the circumstance already are known. In that instance, all that remains to be patented is the mental step a doctor performs upon receiving test results: namely, associating the test results to the condition. In a nonbinding statement, three members of the U.S. Supreme Court signaled distaste for diagnostic patents generally because they relied on such associations.237

Abusive Tactics: “Patent Trolls” and “Inequitable Conduct” Every commercial venue and legal system has its abusers, and efforts to rectify abuses are always ongoing; patent law is no exception. Presently, two major areas are the focus for reform: overly aggressive use of patents by non-practicing entities (so-called “patent trolls”), and unreasonable allegations of “inequitable conduct.” By way of background, a basic tenet of property law in the United States (whether it is land, personal property, or intellectual property) is that the owner of property has the right to do with it as s/he pleases. With some noted exceptions, there is nothing illegal about the owner of property deciding not to develop or otherwise commercially exploit the property. Simultaneously, the owner has every right to stop others from taking (“trespassing” on) that property, or to demand royalties in exchange for others’ commercial use. This general philosophy has provoked a particular dispute in the patent community concerning “non-practicing entities” (“NPEs”). NPEs are businesses that are created around a patent portfolio but have no intention of making any product themselves. Exactly how an NPE chooses to use its portfolio can lead either to products or to problems for the marketplace. Most NPEs, for example, license their portfolios to larger companies as an incentive to develop and distribute new products. The success of that strategy may depend on aggressive enforcement of the patent portfolio, especially during development. Nonetheless, this strategy is consistent with the underlying social and economic purposes of the patent system. Alternatively, some NPEsdpejoratively called “patent trolls”duse their portfolios simply as

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a threat to extract money from others whose products only arguably infringe the patents. While such a strategy may be legal, it runs counter to the social and economic goals of the patent system. True “troll”-like practices clearly would put a drag on the marketplace, greatly adding business risk and wasting resources with no public benefit, but identifying theoretical culprits is far easier than accurately picking out the real ones. Moreover, targets of patent enforcement by either kind of NPE face a tough choice: fighting the accusation (which will cost millions of dollars and will consume years of staff time, with no guarantee of success), or paying a royalty despite the fact the target believes it is not owed. From this situation, two tough questions arise: What meaningful, objective test will distinguish the socially harmful NPEs? If none exists, which is better overall: to tolerate the harmful NPEs or to quash all NPEs? Often, for any given NPE, the label fits or fails based solely on one’s perspective.238 Without an objective test to distinguish market-harming NPEs from beneficial NPEs, any limits on patent enforcement risk crimping legitimate business activities. Unfortunately, there are no easy answers to those two tough questions. Another zone of contention surrounds allegations of “inequitable conduct.” As discussed below, patent applicants (and their attorneys) owe a duty of candor and disclosure to the USPTO while their applications wind their way through the system. At worst, violations of this duty can lead to the patent being held void/unenforceable, and the patent attorney handling the case faces disbarment and malpractice suits. When someone is sued for patent infringement, one possible defense is to assert that the defendant should not be held to have infringed a patent that issued because of a violation of this duty. Even though there is no evidence that the frequency of violations of this duty have increased, over the past 20 years or so, the level of evidence that the defendant must produce has been ratcheted down, and the penalties for raising this defense frivolously have not been vigorously imposed, such that these allegations are now approaching standard fare for infringement suits, rather than a rarity.239 Worse, they substantially raise the complexity, duration, uncertainty, and costs of litigating. Two major events have reduced the threat of inequitable conduct charges. First, the Patent Reform Act has limited the scope of this problem substantially by removing the phrase “without deceptive intent” from several places in the patent statute. Second, the CAFC issued a major decision in the case of Therasense, Inc. vs. Becton, Dickinson & Co.240 In the Therasense case, the CAFC clarified that a finding of inequitable conduct requires clear and convincing evidence of both that a piece of prior art omitted from prosecution was “material” to patent eligibility (i.e., the patent would not have issued but for the omission) and that the applicant

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had a specific “intent” to deceive through the omission (i.e., the deception was truly knowing and deliberate, rather than the applicant should have known better). These two developments have substantially limited the range of patents vulnerable to charges of inequitable conduct. Nonetheless, the doctrine survives.

Compulsory Licensing and Breaking Patents Several countries and nongovernmental organizations have long taken the stance that access to critical medicines is a basic human right, which should not be subordinated to the interests of corporations’ profits from selling those medicines. They blame patents as the key cause (if not the only cause) of the fact that certain medicines are too expensive for access by poorer nations. Consequently, they have spent years trying to convince the international community to accept the premise that each nation has the right to force patent owners to license their medical technologies nonexclusively. In a few high-profile instances, Brazil and Thailand have threatened to revoke (“break”) certain patents they had previously issued on valuable drugs. More controversially, Brazil also has threatened to break U.S. patents and copyrights wholesale if the United States does not change its stance on certain unrelated trade issues.241

PART TWO: PATENTS AND TECHNOLOGY TRANSFER CRITICAL LAWS CONCERNING PATENTS AND FEDERALLY SUPPORTED RESEARCH According to one study, about one third of the funds spent in the United States each year on research and development (R&D) comes from the U.S. government, the largest single source of R&D funds in the world.242 These funds are allocated primarily through the use of grants and contracts to a wide array of entities, ranging across academia, notfor-profit centers, other governments, and for-profits. Some funds are committed to in-house research facilities, such as the NIH’s Intramural Research Program. While the recipients of federal funds have relatively broad latitude in how they spend the money, the money comes with certain rules, rights, and restrictions. The following section of this chapter discusses the rules, rights, and restrictions specific to intellectual property and technology transfer.

Federal Funding of Private “Extramural” Research: The Bayh-Dole Act Researchers seeking funds from the U.S. government have three major mechanisms to do so: a contract, a grant, and

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a cooperative agreement.243 These funded researchers (collectively called “Contractors,” regardless of which funding mechanism was used) are bound by the “University and Small Business Patent Procedures Act of 1980,” better known as the “Bayh-Dole Act.” This relatively short law, spanning just 13 sections and about 30 pages of text, fundamentally changed the philosophical and operational effects of federal funds on innovation.

History and Philosophy By 1980, the U.S. government spending on R&D had reached about $7e8 billion per year, representing about 1% of the U.S. gross domestic product, and about half of all R&D funding in the U.S.244 As Congress had not restricted or directed the agencies to handle invention rights arising from the use of those funds, each agency set its own policies and procedures, and all agencies except the Department of Defense chose to require that Contractors assign their rights to the U.S. government (the taxpayer paid for it, after all).245 From 1950 to 1980, the government collected just under 30,000 patents from its Contractors. Lacking clear statutory authority to grant exclusive commercialization licenses, less than 4% were licensed in any fashion, and no products embodying these inventions had reached the market.246 Starting in the early 1970s, the Department of Health Education and Welfare (predecessor to the Department of Health and Human Services) and the National Science Foundation began allowing universities and nonprofits to enter “Institutional Patent Agreements.” These agreements, among other things, authorized those Contractors having pre-approved patent policies conforming to agency stipulations to retain title to any inventions funded by the agency. While highly controversial, these agreements, along with the patent policy of the Department of Defense’s policy, laid the key groundwork for Congressional hearings in the late 1970s. After much debate, Congress passed a bill sponsored by Senators Birch Bayh (Indiana) and Robert Dole (Kansas), which President Carter signed into law on December 12, 1980. This law allowed Contractors to keep their inventions, subject to certain conditions. Federal funding under the Bayh-Dole Act is a critical component of the U.S. research enterprise and economy. For FY2007eFY2009, the government spent $140 billion on research and development, of which over $100 billion was used to fund extramural research.247 In the 25 years following passage of Bayh-Dole, the rate of patents issued to Contractors per year grew from 250 in 1980 to over 3,200 in 2005, universities spun off more than 5,000 new companies based on federally funded inventions, and over 3,600 new products reached the market (527 in 2005 alone)dabout 1.25 new products per daydbased on federally funded inventions. About 70% of this growth took place in the biomedical arena.248

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By one estimate, Bayh-Dole research alone conservatively contributed $2.6 billion to the U.S. gross domestic product in 1996, and $16.8 billion in 2007, with a cumulative contribution of $82 billion.249 About 42% of all U.S. graduate students in scientific fields are supported by federal funds. While the Bayh-Dole Act cannot take full credit for all of this activity, it clearly played a major role. Despite objective measures of economic growth largely attributable to the Bayh-Dole Act, the law has faced continual criticism. The challenges typically fall into four categories. The first is that the Act mainly rewards highreturn research and does not adequately incentivize research into rare and neglected diseases. Second, other mechanisms to incentivize research exist, and some of these do not carry the deleterious effects blamed on patents (such as higher drug pricing). Third, the focus on patenting has shifted academic research away from “pure” research toward forprofit activities, leading to conflicts of interest, suppression of research data for commercial gain, and cumbersome restrictions on access to research tools. Fourth, the provisions designed to remedy abuses are too limited and too slow to deter anything. Unfortunately, a thorough discussion of the merits and weaknesses of the Bayh-Dole Act and the related criticisms is beyond the scope of this chapter.

Organization of Clauses The Bayh-Dole Act is codified at 35 U.S.C. xx 200e212, though some of the sections interspersed in it do not apply to Contractors. The critical operative sections cover the Congressional policy and objectives (x 200), defined terms (x 201), disposition of rights (x 202), “march in” (x 203), and preference for U.S. industry (x 204). Regulations implementing the Bayh-Dole Act may be found at 37 C.F.R. Part 401.

Key Conceptsdxx 200 and 201 In establishing the Bayh-Dole Act, Congress offered a laundry list of policy goals that the agencies must follow in issuing any funding agreement. Quoting directly from x 200, these goals are: to promote the utilization of inventions arising from federally supported research or development; to encourage maximum participation of small business firms in federally supported research and development efforts; to promote collaboration between commercial concerns and nonprofit organizations, including universities; to ensure that inventions made by nonprofit organizations and small business firms are used in a manner to promote free competition and enterprise without unduly encumbering future research and discovery; to promote the commercialization and public availability of inventions made in the United States by United States industry and labor; to ensure that the Government obtains sufficient rights in federally supported

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inventions to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions; and to minimize the costs of administering policies in this area.

The fulcrum of the Bayh-Dole Act is the defined term “Subject Invention,” as all operative terms only apply to Subject Inventions. A Subject Invention is “an invention of the contractor conceived or first actually reduced to practice” under a funding agreement for “experimental, developmental, or research work.” Two critical points should be noted from this definition: first, not all funding agreements are governed by the Bayh-Dole Act; and second, an invention is a Subject Invention if it was either conceived or first actually reduced to practice under the funding agreement. Under xx 202e204, all funding agreements for experimental, developmental, or research work must allow a Contractor to elect to retain title to any Subject Invention, with three sets of critical limitations. First, the funding agency may change or remove the core clauses in “exceptional circumstances.” Second, the Contractor must agree to several specific duties of reporting, development, and licensing of every Subject Invention. Third, the government has certain rights in any Subject Invention.

Core Terms Required in Bayh-Dole Funding Agreementsdx 202 Section 202(c) lists the major clauses that must appear in any funding agreement governed by the Bayh-Dole Act.250 Note that only some of these clauses apply to all Contractors in all circumstances; some are more limited in scope. The following discussion represents a brief summary of these terms; generally, only those people working directly on either inventions or the terms of funding agreements need greater detail. All Contractors are subject to eight major elements: 1. The Contractor must report all Subject Inventions within two months of when the Contractor learns of the invention. 2. The Contractor must make a written “election of title” within two years of notifying the funding agency of the existence of the Subject Invention (or less, if the invention has been publicly disclosed). 3. If the Contractor elects title, the Contractor must file and maintain patents. 4. The funding agency may require periodic reporting from the Contractor on efforts by the contractor or his licensees or assignees to use or to obtain utilization of the Subject Invention. 5. The Contractor must arrange for any patent on the Subject Invention to include a notice that the invention was made with government support. 6. The government has a nonexclusive, worldwide, royalty-free license in every Subject Invention.

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7. The obligations of x 203 (march-in) and x 204 (U.S. manufacturing) apply to all Subject Inventions. 8. If the Contractor fails to report the invention timely, rejects title, fails to elect timely, fails to file patent applications timely, or abandons any pending patent applications or issued patents, the government may take title. (If the Contractor abandons only selected international patents while retaining others, the government may only take title to those abandoned patents.) For nonprofit Contractors, funding agreements also must include four more restrictions:251 9. The Contractor may not assign Subject Inventions without permission of the funding agency (except to an organization primarily managing inventions); 10. The Contractor must share royalties with the inventor(s); 11. Income from the Subject Invention (after costs and the inventors’ share) must be used to support scientific research or education;252 and 12. Except where infeasible after reasonable inquiry, licenses shall go to small businesses. Where a joint invention arises with at least one inventor working for a Contractor and another working for the government, x 202(e) authorizes the funding agency and the Contractor to consolidate ownership either in the Contractor or in the government to expedite development, as long as the funding agreement does not require the Contractor to assign title to the government. Where a nonprofit Contractor either declines title or intends to abandon a case, sometimes another entity is interested in picking up the invention. If so, the Contractor may ask the funding agency for a waiver of the prohibition against assignment. Also, the Bayh-Dole Act explicitly allows the inventor(s) to ask the Contractor and funding agency to allow the inventor(s) to “retain title” to a Subject Invention. (This part of the law, x 202(d), is often invoked both before and after the Contractor has made an election of title, where the Contractor has indicated disinterest in the Subject Invention for some reason.) For either type of request, granting is discretionary, so the funding agency is free to impose any additional conditions on the assignee the funding agency deems fit. Typically, the assignee must assume all of the Bayh-Dole obligations that had applied to the Contractor.

x 202dReporting Obligations (iEdison and RePORT) Every recipient of federal funds to conduct research and development work must report every invention made using those funds, as well as patent filings, steps toward utilization of the invention, and other items. In 1999, the NIH led an inter-agency effort to create a streamlined system for

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reporting inventions: the Interagency Edison system, known as “iEdison.”253 The NIH continues to maintain and update iEdison on behalf of the participating agencies. The iEdison webpage starts with links to each participating technology transfer office. Current participants include components from the Departments of Defense, Health and Human Services, Agriculture, Commerce, Homeland Security, Energy, and Transportation, plus the Environmental Protection Agency and the National Science Foundation. Some participating agencies, including the NIH, require reporting to be done using the iEdison system, while the others merely use the iEdison as a portal to relay the user to the appropriate office. For NIH’s Contractors, the iEdison system includes a secure login that permits reporting of inventions, supplies a confirmatory government license, reports on patent filings and other steps toward utilization of subject inventions, requests that the government allows the Contractor to assign a subject invention, requests a waiver of the U.S. manufacturing obligation, queries the database to generate reports, and updates and edits the electronic file as needed. While reports on subject inventions through the iEdison system are confidential, the NIH has made some data public. The NIH maintains much of its funding data in a searchable system, called the Research Portfolio Online Reporting Tools, or RePORT.254 The RePORT system provides a central point of access to data, reports, and analyses of NIH expenditures, intramural research, and the results of all NIH-supported research. While the RePORT system is a powerful tool for examining many aspects of NIH’s funding patterns, users can search the system by an inventor’s name to see if the inventor ever received an NIH grant, and then find out what publications and issued patents the inventor reported as associated with each grant found.

a statement of facts supporting the conclusion, and an analysis justifying it. This analysis should address with specificity how the alternate provisions will better achieve the objectives in x 200. A copy of the determination must be promptly provided to the Contractor, along with information on how to appeal the DEC. Once the agency has approved a DEC, the agency then must write deviated clauses for the funding agreement. (For procurement contracts, which are governed by the Federal Acquisition Regulation, the head of the department or agency must approve the deviated clauses.)256 The NIH has used the DEC mechanism several times. The NCI, for example, has used the DEC to alter the contract of a company operating a facility in Frederick, Maryland, owned by the NCI. Under this altered contract, the NCI operates its highly successful “Rapid Access to Intervention Development” (RAID) program. There, NCI offers academia the opportunity to use the NCI’s contracted infrastructure to help them overcome a specific problem in the development of a new drug, such as through in vivo screening, initial production of cGMP materials, scale-up of synthesis, and the like. Without the DEC, no one would submit their materials to the NCI if the NCI’s commercial contractor would have rights in any subsequent invention. Despite having used DECs successfully, the NIH still treats them as the name suggests: truly exceptional. Congress clearly believed that Contractors should be entitled to these rights, even if that arrangement frustrates a government program’s ability to conduct its research, or otherwise offends anyone’s personal philosophy on whether Contractors should get those rights. The only justification for a DEC is that changing the rules better promotes the policy and objectives of the Bayh-Dole Act than not changing the rules.

x 202dDetermination of Exceptional Circumstances

“March-in”dx 203

Every federal funding agreement must include standard provisions allowing the Contractor to elect title to subject inventions, except that under certain circumstances the funding agency may change or remove these terms. In particular, the most controversial situation where this may arise255 is where the agency finds that, in light of exceptional circumstances, restricting or eliminating the Contractor’s rights in subject inventions “will better promote the policy and objectives” of the Bayh-Dole Act, which are articulated in 35 U.S.C. x 200. That finding is called a “Determination of Exceptional Circumstances,” or more frequently, a “DEC.” An agency invoking the DEC must comply with several important regulatory restrictions. First, the agency must prepare a written DEC that the conditions exist, including

The Bayh-Dole Act includes one major threat against Contractors who fail to ensure their patents on Subject Inventions are properly utilized: the government’s “marchin” rights. Under 35 U.S.C. x 203, the funding agency may either force the Contractor (or its assignee or exclusive licensee) to offer (sub)licenses in a Subject Invention to responsible applicants in any field of use, or the funding agency may grant those licenses directly, if the funding agency finds one of four conditions have been met. These conditions are: 1. the contractor “has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use”; 2. march-in is “necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor”;

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3. march-in is “necessary to meet requirements for public use specified by Federal regulations and such requirements are not reasonably satisfied by the contractor”; or 4. either an exclusive license does not contain the obligation for U.S. Manufacture (x 204), or the exclusive licensee has breached that obligation. The funding agency cannot simply invoke this clause and start issuing licenses; rather, 37 C.F.R. x 401.6 establishes detailed procedures that the agency must follow. These procedures include giving the Contractor time to comment on any proposed invocation of march-in, holding a formal fact-finding hearing, issuing a written agency opinion, and allowing the Contractor to appeal adverse decisions to the courts. From 1980 to 2009, formal petitions for an agency to exercise march-in rights have been filed only twice (the second instance involved a pair of related petitions). Both times the petitions were denied, and the reasons illustrate the difficulties petitioners face.257

Case Study: CellPro In the early 1980s, under a grant from the NIH, the Johns Hopkins University (JHU) invented (and later received patents on) an antibody-based stem-cell separator to process peripheral blood and bone marrow for diagnostic and therapeutic uses. JHU exclusively licensed the technology to Becton-Dickenson & Co., which exclusively sublicensed the therapeutic uses to Baxter Healthcare Corp. Baxter developed a prototype marrow reconstitutor in 1991, began clinical trials in 1993, and received regulatory approval in Europe in 1995. By 1997, when Baxter finally filed a PMA258 with the FDA, Baxter’s separator had been installed in numerous transplant centers across the U.S. for use in clinical studies. Shortly after JHU had received its patents, researchers at the Fred Hutchinson Cancer Center developed their own antibody-based stem-cell separator and formed a spin-off company (CellPro, Inc.) in 1989, which began selling a prototype device for marrow reconstitution for research purposes in 1991. CellPro sought and secured FDA approval to market its product in December 1996, less than three months before Baxter filed its NDA. News articles indicate that Baxter initially offered to sublicense to CellPro,259 but whatever may have happened in the negotiations, CellPro decided the company did not need a license from JHU. So, Baxter sued CellPro for patent infringement in 1995. In March 1997, a jury found CellPro had willfully infringed JHU’s patents; in a scathing ruling, the district court tripled the damages (more than enough to put CellPro out of business) and ordered CellPro to cease selling its units once Baxter’s

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units are approved by the FDA. The Court of Appeals later affirmed this decision. Days before the jury handed down its verdict, CellPro, working with former Senators Birch Bayh and Lloyd Cutler (a co-sponsor of the Bayh-Dole Act), filed a petition with the Department of Health and Human Services (HHS) invoking the March-In clause of the Bayh-Dole Act. The petition raised two grounds: (1) Baxter had failed to take reasonable steps to bring the technology to practical application; and (2) march-in is necessary to alleviate a health and safety need not reasonably satisfied by Baxter. In support of both arguments, CellPro relied heavily on the fact that Baxter had not yet received FDA approval to market, while CellPro had. What would happen, CellPro asked, to all the cancer patients in need of this technology if CellPro were shut down?260 The Secretary of HHS delegated the petition to the NIH, as the source of the original grant, to resolve. In addition to briefs and supporting documentation from the two parties, the NIH also received letters, briefs, and other items from others interested in the outcome. After considering all of this information, the NIH concluded that holding an evidentiary hearing to investigate invoking the March-In clause was not warranted. Regarding CellPro’s first argument, the NIH noted that the statute’s standard is that JHU, Becton-Dickinson, and Baxter “[have] not taken, or [are] not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention.” The law does not require success, merely “effective steps.” The NIH recited all of the actions taken by JHU, Becton-Dickinson, and Baxter since the invention was first discovered, culminating with the fact that Baxter’s prototype was already in use in numerous centers across the country, that Baxter was actively pursuing FDA approval, and that Baxter was already selling the product in Europe. Regarding CellPro’s second argument, the NIH noted the fact that the medical community had not yet settled the debate over whether this new technology produced substantially better clinical results than existing marrow transplantation techniques. As such, the NIH reasoned that imposing its judgment upon the medical community would be unwarranted and inappropriate. Observing that Baxter refrained from asking the court to order the immediate withdrawal of CellPro’s product before Baxter’s product received FDA approval, and that Baxter’s device would be available widely through the clinical trials, the NIH concluded that cancer patients truly needing this technology would have a viable product available to them continuously. Therefore, Baxter had reasonably met the health and safety need. In concluding the discussion on the second argument, the NIH sounded a clear, cautionary note to the general public that the March-In system is not a fallback

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mechanism for those who lose a patent infringement lawsuit. The NIH stated: We are wary, however, of forced attempts to influence the marketplace for the benefit of a single company, particularly when such actions may have far-reaching repercussions on many companies’ and investors’ future willingness to invest in federally funded medical technologies. The patent system, with its resultant predictability for investment and commercial development, is the means chosen by Congress for ensuring the development and dissemination of new and useful technologies. It has proven to be an effective means for the development of health care technologies. In exercising its authorities under the Bayh-Dole Act, NIH is mindful of the broader public health implications of a march-in proceeding, including the potential loss of new health care products yet to be developed from federally funded research.

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documents for the NIH to consider. After reviewing all of this material, the NIH decided to deny both petitions. Regarding the first March-In basis, “effective steps to achieve practical application,” the NIH noted that Abbott and Pfizer each had indeed put their respective drugs on the market. Regardless of price, actual marketing is a “practical application.” Regarding the second basis, “necessary to alleviate health and safety needs,” the NIH noted that the drugs are available in sufficient quantity to meet demand, that it is being widely used, and that no evidence was presented that invoking March-In would in fact alleviate any unmet health or safety need. For either drug, the NIH was unwilling to use March-In merely as a tool for interfering in market dynamics and for controlling pricing.

Duty of U.S. Manufacturedx 204 Case Study: Abbott and Pfizer This case study actually involved two petitions, filed together but concerning two independent drugs, NorvirÒ and XalatanÒ . According to the petitioners, the two cases shared the common theme that they were too expensive. Between 1988 and 1996, Abbott Laboratories invented, patented, developed, and received FDA approval to sell a new anti-HIV protease inhibitor, NorvirÒ (ritonavir), partly using NIH funds to support the research. In December 2003, Abbott was nearing the point of seeking FDA approval for its new combination anti-HIV drug, KaletraÒ . In an apparent effort to boost sales of Kaletra, Abbott raised the wholesale price of Norvir from $1.71/day to $8.57/day, making Kaletra considerably less expensive by comparison. Meanwhile, in 1996, a scientist at Columbia University, working under a grant from the NIH and in collaboration with a scientist at Pharmacia, invented latanaprost, a topical treatment for glaucoma. Columbia licensed the invention to Pharmacia (later Pfizer), which then developed XalatanÒ . When Pfizer began selling Xalatan abroad, however, the price in Canada and Europe was substantially lower than the price in the United States. In 2004, an advocacy group called Essential Inventions submitted two petitions to the Secretary of HHS to invoke March-In, one for Norvir and one for Xalatan. These petitions both invoked the “effective steps to achieve practical application” and the “necessary to alleviate health and safety needs” bases for invoking March-In, and in both cases argued that pricing was the cause. As in the CellPro case, the secreting of HHS delegated the petitions to the NIH for determination. The NIH invited speakers from the petitioner, the companies, the public, and Congress to come to the NIH to discuss the two cases in a public forum. Also, as with the CellPro case, many parties submitted written testimony, letters, briefs, and other

Under 35 U.S.C. x 204, Congress imposed on every Contractor (and, if the subject invention is ever assigned, on any assignee) a “Preference for United States Industry.” Specifically, the Contractor may not grant anyone the exclusive right to use or sell a subject invention in the U.S. unless the licensee “agrees that any products embodying the subject invention or produced through the use of the subject invention will be manufactured substantially in the United States.” The phrasing of x 204 includes two major zones where the law does not have any effect. First, the law is limited to exclusive licensing: nonexclusive licensees of the Contractor, and the Contractor itself, may manufacture a product embodying or made using a subject invention anywhere, even if foreign-made products later will be used and sold in the United States. Second, the Contractor is free to grant exclusive rights to use and sell a subject invention without requiring that the product be made in the United States, as long as those products will never enter the United States, nor used to provide services in the United States. Where the U.S. manufacturing obligation does apply, the funding agency may, on a case-by-case basis, waive it if the Contractor demonstrates that either (or both) of two situations are true: 1. “reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States,” or 2. “that under the circumstances domestic manufacture is not commercially feasible.” The lone paragraph in the regulations implementing x 204 (37 C.F.R. x 401.14(i)) merely repeats the statutory phrasing; it does not shed any light on what efforts are “reasonable,” what percentage of total manufacturing represents “substantially in the United States,” or what circumstances demonstrate commercial infeasibility.

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Although such ambiguity makes the task of demonstrating either prong challenging, it nonetheless helps Contractors by allowing the agency to be flexible.

Funding Agreements outside the Bayh-Dole Act Two specific kinds of agreements for funding private R&D are not governed by the Bayh-Dole Act, based on specific statutory authorization. The first is the Space Act Agreement, which only NASA may utilize. The other is called the “Other Transactions” agreements, which only certain federal agencies may utilize. The terms of the Bayh-Dole Act do not apply to these two types of agreements, so in theory, an agency and its private-sector partner can dispose of patent rights however they please. Each agency has established its own rules governing the use of these agreements.

Federal “Intramural” Research: The Stevenson-Wydler Act and the Federal Technology Transfer Act By Executive Order261 and by regulation,262 every employee of the government must assign ownership of any invention made within the scope of employment.263 Also, as discussed above, the government may (depending on the decisions of the Contractor) receive title to inventions made under a funding agreement subject to the Bayh-Dole Act, and the government will take title if that funding agreement has been made subject to a DEC. As a result, the government over time has collected a portfolio of inventions.264 While the Bayh-Dole Act included sections that created the basic authority for federal agencies to patent and license their intramural inventions, federal technology transfer embraces a broader scope, reflected in two additional laws: the Stevenson-Wydler Technology Innovation Act of 1980 (better known simply as the “Stevenson-Wydler” Act) and the Federal Technology Transfer Act of 1986 (FTTA).265 They, together with the federal patenting and licensing clauses of the Bayh-Dole Act, form the core of the structure of technology transfer for federal agencies.

History and Philosophy of Stevenson-Wydler and FTTA Just two months before Congress passed the Bayh-Dole Act, Congress passed the Stevenson-Wydler Act.266 Almost exactly six years later, Congress passed a major amendment to the Stevenson Wydler Act, known as the FTTA. Even more directly than Bayh-Dole, Stevenson-Wydler and the FTTA were designed to unlock the commercial potential of federal research funding, but this time focusing more on tapping the informational, intellectual, and technical

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resources created by agencies from their in-house activities. These two acts, along with subsequent amendments, are together codified as Chapter 63, “Technology Innovation” (15 U.S.C. xx 3701e3718). As Stevenson-Wydler arose in an era where many senior federal employees believed the government should not participate in industrial development at all, it was designed to change the culture of the agencies by requiring agency staff to participate in technology transfer activities. Specifically, the following policy applies to all agencies: (1) It is the continuing responsibility of the Federal Government to ensure the full use of the results of the Nation’s Federal investment in research and development. To this end the Federal Government shall strive where appropriate to transfer federally owned or originated technology to State and local governments and to the private sector. (2) Technology transfer, consistent with mission responsibilities, is a responsibility of each laboratory science and engineering professional. (3) Each laboratory director shall ensure that efforts to transfer technology are considered positively in laboratory job descriptions, employee promotion policies, and evaluation of the job performance of scientists and engineers in the laboratory.267

The FTTA, in its turn, joined the effort of changing culture by explicitly requiring agencies to share their royalties with the inventors and by authorizing agencies to use royalty funds to grant cash awards to staff.

Key Concepts and Major Clauses Stevenson-Wydler accomplished several key tasks. First, it required each agency to establish Research and Technology Applications Offices (ORTAs), or the equivalent. ORTAs are tasked with, among other things, assessing the research portfolio of its agency, promoting dissemination of information about federally developed technologies that might be useful to industry, and cooperating with and providing technical assistance to state and local governments. Second, it established the Federal Laboratory Consortium to enable agencies with research labs to have a forum in which to work together. Third, it authorized the creation of the National Technical Information Service to disseminate technological, scientific, and engineering information created by federal laboratories to industry. Fourth, it authorized agencies to create Cooperative Research Centers in universities or nonprofits, which can combine federal funds with university funds to promote the development of a local infrastructure able to train a pool of talent, start companies, and engage in collaborative research. Unfortunately, government scientists still were either unable or unmotivated (often both) to collaborate with industry counterparts. In particular, inventors received no

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more than a token reward for reporting inventions (which consumed time from research), and industry would not touch a collaborative project without a binding promise that they would be able to license government inventions arising from the project. In light of these issues, Congress passed the FTTA. This law primarily created a new form of agreement, called the Cooperative Research And Development Agreement, or “CRADA,” discussed at great length in Chapter 30. In short, a CRADA allows an agency to promise a collaborator that the collaborator at a minimum will have the right to negotiate a license to any invention made under the CRADA that is owned in whole or in part by the government. Also, the FTTA allows the Contractor to contribute funds, personnel, services, and property to the agency, and allows the agency to contribute personnel, services, and property (but not funds) to the collaborator for use in fulfilling the CRADA research. The FTTA also required agencies to share their royalties with the inventor(s); currently, the inventors’ share of the royalties on any license (after patent expenses) is no less than the first $2,000 collected in a calendar year, plus 15% of everything above that, but no inventor may receive more than $150,000 in any calendar year, regardless of the number of inventions or licenses associated with that inventor. Finally, the agency is entitled to keep royalties for up to two full fiscal years, and to use its royalties to reward staff, and to support further research, scientific exchange, and educational activities.

Subsequent Supporting Acts Since 1986, Congress amended Stevenson-Wydler several more times, but two particularly stand out. These are the National Technology Transfer Advancement Act of 1995 (NTTAA)268 and the Technology Transfer Commercialization Act of 2000 (TTCA).269 The NTTAA, better known as the “Morella Bill,” accomplished several things, two of which had broad effect across agencies. The most important of these two changes was an overhaul of the terms governing CRADAs, expanding the scope of authority the federal laboratory has in contributing and accepting resources, and clarifying the rights a collaborator has in inventions made under the CRADA in whole or in part by federal employees. The other key change was to increase the inventors’ share of royalties collected by an agency, raising the cap to $150,000. The TTCA mainly changed how the federal government licenses its patents, but also included some small but important changes to CRADAs. On licensing, the TTCA added substantial detail to the obligations of an agency before it may grant a license. Mainly, these obligations include requiring a development plan (for both exclusive and nonexclusive licenses) and ensuring that every

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exclusive license meets the listed policy factors. Also, the TTCA subtly changed the scope of what the agencies may license, changing “patents and patent applications” to “inventions.” On CRADAs, the statute authorized an agency, if it chose to do so, to explicitly extend the collaborator’s license rights to capture patent applications filed before the CRADA was signed, as long as the invention is directly within the scope of work under that CRADA.

PATENTING AND LICENSING BY FEDERAL AGENCIES Patenting and Licensing by Agency Various Agency Missions Across the government, 25 agencies fund R&D; nine departments and two independent agencies conduct and support enough research to be required to report on their technology transfer activities. These are the Departments of Agriculture (USDA), Commerce (DoC), Defense (DoD), Energy (DoE), Health & Human Services (HHS), Homeland Security (DHS), Interior (DoI), Transportation (DoT), and Veterans Affairs (VA), plus the National Aeronautics and Space Administration (NASA) and the Environmental Protection Agency (EPA).270 Each is unique, with a specific mission assigned to it by Congress, and some have components with their own statutory mission. That mission, in turn, drives the research the agency conducts, as well as the products the agency deems suitable for patent protection. For example, the respective missions of the NIH,271 USDA,272 NASA,273 DoE,274 and EPA275 look nothing like each other. Differences in mission also change the patenting strategy by considering the sorts of inventions each agency makes available for licensing. For example, currently the NIH and USDA mostly offer very similar types of inventions, such as methods of diagnosing pathogens, vaccines, and recombinant genes and proteins. Yet, each of the two agencies has a segment that the other does not significantly pursue. For example, the USDA has some inventions directly aimed at increasing industrial output or efficiency, while the NIH has a portfolio of inventions on infectious diseases that have nothing to do with agricultural products. Naturally, the USDA’s focus is on livestock health and environmental technologies, but also aspects of human health to the extent it affected by agricultural products, while the NIH’s focus is on human health, but also aspects of animal biology and environmental technologies to the extent they relate to human health. Broadening the view to look at EPA, DoE, and NASA, the overlap becomes substantially narrower. EPA’s range of technologies, while strongly influenced by human health, concerns technologies directly focused on the environment

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itselfdair, water, and soil sampling techniques, for example. There is some overlap in that some of the techniques for testing the environment also are useful for diagnosing humans, and vice versa. DoE’s portfolio covers the entire span of physical sciences, from new materials to high-energy physics to environmental sciences. A substantial subset of DoE’s patented work includes life sciences (DoE was a founder of the Human Genome Project), but the focus tends to be on clean energy, effects of radiation, the environmental basis for biological functions, carbon sequestration, and environmental cleanup. NASA, in turn, mostly investigates materials and devices useful in space flight, tools for use in its various missions, and technologies relating to the environment and weather.

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Scope of Licensing Authority All federal agencies rely on the same core legal authority to license patentable inventions: 35 U.S.C. xx 207 and 209, along with the implementing regulations at 37 C.F.R. Part 404. Agencies may grant exclusive, co-exclusive, or nonexclusive licenses, which may be royalty free or royalty bearing. The agency may include any terms the agency determines are appropriate in the public interest, including granting the licensee the power to enforce the patent. Agencies normally must impose on its licensees a requirement that goods that are intended to be used or sold in the United States must be manufactured substantially in the United States. All agencies must include certain standard terms in every license. First and foremost, the license must include a retained nontransferable, irrevocable, paid-up license for any federal agency to practice the invention or have the invention practiced throughout the world by or on behalf of the government of the United States. In addition, every license must include a requirement of periodic reporting on utilization efforts, and rights of the agency to terminate the license.

Exclusive and Co-Exclusive LicensingdAdditional Considerations Before granting any exclusive or co-exclusive licenses (except for those that arise under a CRADA), an agency must notify the public of its intent to grant the license a minimum of 15 days before granting the license, and must consider all comments received before the comment period expires. Also, the applicant for such a license must submit a plan for developing and/or marketing the invention. This plan is kept confidential as a trade secret. An agency may grant exclusive or co-exclusive licenses to its inventions only if the following conditions are met: l

granting the license is a reasonable and necessary incentive to call forth the investment capital and

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expenditures needed to bring the invention to practical application, or otherwise promote the invention’s utilization by the public; the agency finds, based on the applicant’s plan for the technology, that the public will be served by the granting of the license; the proposed scope of exclusivity is not greater than reasonably necessary to provide the incentive for bringing the invention to practical application, as proposed by the applicant, or otherwise to promote the invention’s utilization by the public; the applicant makes a commitment to achieve practical application of the invention within a reasonable time; this time may be extended by the agency upon the applicant’s request and the applicant’s demonstration that the refusal of such extension would be unreasonable; granting the license will not tend substantially to lessen competition or create or maintain a violation of the federal antitrust laws; and in the case of an invention covered by a foreign patent application or patent, the interests of the federal government or United States industry in foreign commerce will be enhanced.

An agency deciding which company will receive an exclusive or co-exclusive license must give preference to small businesses that have equal or greater likelihood as other applicants to bring the invention to practical application within a reasonable time.

Results Every year, the 11 federal agencies (listed previously) provide data in a consolidated report to the President and Congress. The report includes both survey data and recent illustrative success stories. While the numbers in these reports should be viewed with caution, as the figures swing substantially from year to year, they do give a partial glimpse of the general level of activity. The agencies’ FY2008 Report,276 which covers 2003e2008 data, shows that the participating agencies collectively tallied an average of about 4,800 new invention reports per year, filing just over 1,700 U.S. patent applications, and receiving just under 1,300 issued patents (cumulatively from 1990 to 2005, the government received about 15,000 patents277). By volume of inventions, NASA, DoE, and DoD were the top three agencies, with HHS a distant fourth. Looking at the licensing of inventions,278 however, the overall average rate was just over 700 newly executed licenses per year, with HHS leading the others, followed by DoE, DoC, and NASA. For royalties on its inventions, the government received an average of over $131 million per year, with HHS collecting nearly $80 million per year, and DoE over $31 million per year.

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Of course, patents and royalties are both useless benchmarks of how the public has benefited from research by federal scientists. Unfortunately, no good metric has been developed to measure public benefit. So, agencies must rely on narratives of success stories. Examples of these in the FY2008 Report include the following: l

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The Agricultural Research Center (USDA) devised a method for evaluating how well clothing treated with mosquito repellant worked, enabling the U.S. Marine Corps and others to reduce medical costs of mosquitoborne diseases. The National Institute of Standards and Technology (DoC) developed a powerful technique for crunching complex scientific data to help select cost-effective, environmentally preferable building products, and crafted a WindowsÒ -based application for use by building designers, product manufacturers, and others. The Air Force Research Laboratory (DoD) invented an ultra-high-pressure water-based fire-fighting apparatus designed particularly to extinguish hydrocarbon fuel fires. The Lawrence Berkeley National Laboratory (DoE) invented a nanostructured-polymer solid electrolyte, which substantially improves the performance and safety of rechargeable lithium batteries. Discoveries at the Centers for Disease Control and Prevention (HHS) formed the basis for a new live attenuated vaccine against all four types of dengue fever. The Federal Aviation Administration (DoT) created “Concept Development and Design Description of Electronic Flight Data Interfaces for Airport Traffic Control Towers,” which promises to increase a controller’s ability to acquire, track and record information, as well as communicate and coordinate that information with others. Out of EPA research into byproducts of water disinfectants, agency scientists discovered that magnets can stimulate tissue growth in a manner that could improve bone density and help in wound healing. Researchers at the Kennedy Space Center (NASA) developed an electromigration technique that sends corrosion-inhibiting ions into rebar to prevent rust, corrosion, and separation from the surrounding concrete.

This excerpted list, obviously, represents only the smallest fraction of the results of technology-transfer work done at the agencies, but it offers a glimpse of the range and potential impact of that work.

Inventions by the NIH The primary mission of the NIH’s research laboratories is to seek fundamental knowledge about the nature and behavior

of living systems and the application of that knowledge to enhance health, lengthen life, and reduce the burdens of illness and disability. Among the NIH’s core goals that are most pertinent to technology transfer are the following: 1. to foster fundamental creative discoveries, innovative research strategies, and their applications as a basis for ultimately protecting and improving health; 2. to develop, maintain, and renew scientific human and physical resources that will ensure the nation’s capability to prevent disease; and 3. to expand the knowledge base in medical and associated sciences in order to enhance the nation’s economic well-being and ensure a continued high return on the public investment in research. The NIH views all of its patent-related decisions through this lens.

Patent and Patent-related Policies General Most technologies developed at the NIH are made available to the public without securing patent protection. This “transfer” is done mainly through publications in scientific journals, public presentations, online resources, and, for most tangibles like software and biological materials, through licenses for commercial development or research. In some cases, however, the NIH determines that seeking patent protection on its inventions is necessary to facilitate the commercial development of products or services that will benefit the public health. The most obvious instance is where no one will invest in developing the technology without the exclusivity of a patent. Primarily, this situation arises with candidate drugs and biologics, cutting-edge medical devices, and vaccines. Occasionally, other technologies (e.g., diagnostic kits) also require exclusive marketing rights as an incentive to invest in turning a discovery into a product. In deciding whether to pursue a patent, the NIH also typically looks at a variety of specific common factors. For example, even if the NIH determines that a technology is patentable, the NIH may decline to seek patent protection due to low public health or commercial priority; however, programmatic goals relating to small markets (for example, rare and neglected diseases) may suggest that patent protection is warranted. In other cases, a patentable technology might be sufficiently developed that it can be utilized immediately through publication alone, such that patents might actually impede broad dissemination or rapid utilization. The decision to file also is informed by other PHS policies, including, for example, the NIH policies on research tools and genomic inventions. Additionally, in accordance with longstanding traditions of scientific

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freedom, the NIH’s research results are to be published rapidly; publication will not be significantly delayed merely for the purpose of filing patent applications. Research Tools In December 1999, the NIH published its policy on “Research Tools.”279 While not the first statement describing the NIH’s views on the importance of disseminating the results of research supported by the NIH, the Research Tools policy represented the most specific statement to date, and it remains a benchmark for both the NIH and institutions funded by the NIH. The Research Tools policy is intentionally broad in scope,280 articulates four core principles, and urges widespread adoption of a onepage “Simple Letter Agreement” to authorize the transfers of research materials for non-clinical research. The first principle articulated by the Research Tools policy is to ensure academic freedom and publication. When the NIH supports a researcher’s work, the NIH expects that researcher to avoid imposing restrictions on others’ work, or even to avoid accepting such restrictions when imposed by others. Therefore, restrictions and prohibitions on when, where, and what research may be published are discouraged. Obviously, many collaborations, particularly those with industry, must be adjusted to accommodate specific needs, but these accommodations must be minimal and limited. For example, a term delaying publication long enough to file a patent application is fine, but a term delaying publication indefinitely is not. The second principle is to ensure appropriate implementation of the Bayh-Dole Act. While recognizing that the Bayh-Dole Act gives Contractors full discretion to use patents to develop their technologies as appropriate to the case, Contractors should recognize that patents and exclusive licensing are not the only, and in some cases not the most appropriate, means for using and disseminating research results. Indeed, Contractors must realize that these tools can sometimes thwart rather than promote utilization. For inventions comprising research tools in particular, exclusive licensing of patents (such as to a for-profit sponsor for exclusive internal use) can be antithetical to the goals of the Bayh-Dole Act. The third principle is to minimize administrative impediments to academic research. Contractors are urged to harmonize their practices as much as feasible, for example by adopting the Simple Letter Agreement or other standardized material transfer agreement. Also, Contractors should try to develop and implement clear policies to articulate acceptable conditions for acquiring resources, and refuse to yield on unacceptable conditions. For-profit companies,281 in turn, should minimize the encumbrances they seek to impose upon nonprofit

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organizations for the academic use of their tools. This means not imposing terms to control publication, not overvaluing (and, hence, overcharging for) a tool, and not demanding rights (even just a royalty stream) in the nonprofit’s future inventions. Companies may legitimately impose terms to avoid losing control of a proprietary tool to a competitor, but not much more. Finally, the fourth principle is to ensure dissemination of research resources developed with NIH funds. Progress in science depends upon prompt access to the unique research resources that arise from biomedical research laboratories throughout government, academia, and industry. Limiting the use of research tools to one or a small number of institutions creates a great risk that fruitful avenues of research will be neglected. Accordingly, Contractors are expected to share their tools, and to manage interactions with third parties that have the potential to restrict Contractors’ ability to disseminate research tools developed with NIH funds. When sharing with for-profits, Contractors may distinguish internal use from the right to commercial development and sale or provision of services. Sharing of Data and Model Organisms In the early 2000s, the NIH decided to issue more specific policies on the obligations of Contractors to share the results of their NIH-supported research. So, on February 26, 2003, the NIH issued its “Final Statement on Sharing Research Data,”282 which was followed on May 7, 2004 by the “Policy on Sharing of Model Organisms for Biomedical Research.”283 Both statements clearly indicated that they were consistent with all prior statements of NIH’s sharing policies, and merely provided certain specific extensions. The major extension in the Data Sharing policy was that Contractors asking for more than $500,000 of direct costs in any year must include a plan for sharing data, or else explain why sharing is not possible. The Data Sharing policy recognizes that data sharing may be complicated or limited in some cases by institutional policies, by local IRB rules, and by local, state, and federal laws and regulations. When the sharing of data will be limited, applicants should explain such limitations in their data sharing plans. The major extension in the Model Organisms policy is that those researchers submitting proposals that specifically anticipate the creation of an organism (whether it is a mammal, a fish, a fly, a fungus, or a bacterium) that will serve as a model of a human disease or condition, the researcher must include a plan for sharing the organism, or else explain why sharing is not possible. This policy carefully notes that it is not subject to the $500,000 threshold; all applications must comply. When the applicant submits a plan, it must address three topics: (1) will the terms of any material transfer agreement be no more restrictive than the Simple Letter Agreement? (2) How will terms that are

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inappropriate under the NIH’s Research Tools policy be addressed? (3) What will be done to ensure the model organism will remain widely available and accessible to the research community? For both policies, the NIH will evaluate and rank applications without regard to the particular content of the plans submitted, but if an applicant fails to submit a sharing plan, or if the applicant refuses to share without providing an explanation, the NIH may require one before awarding the funding agreement. To help applicants, the NIH developed some examples of sharing plans and made them available on the relevant webpages. While these policies and procedures only directly apply to Contractors funded by the NIH, the principles they embodydsharing of data and research resourcesdapply to intramural research equally. Consequently, the terms of any licenses to NIH-owned technologies will be influenced to the extent those principles apply.

NIH Portfolio Size and Scope The NIH directly employs roughly 18,000 people, plus over 3,000 non-employees (fellows, visiting scientists, and trainees) at any given timedany of whom might be an inventor of something, even if they are not normally engaged directly in research. Topics of scientific investigation cover the entire spectrum of biomedical study, including such topics as drug discovery, bioinformatics software, animal research, imaging devices, environmental issues, behavior, pain, and infectious diseases. These 21,000 people typically generate about 400 new invention disclosures every year, and many of these invention disclosures name more than one inventor (not all of whom work at the NIH). The responsibility for prosecuting patents and negotiating licenses on inventions owned by the NIH falls to the NIH Office of Technology Transfer (NIH OTT). The technology-transfer offices of each institute and center in the NIH also participate, to the extent that the institutes and centers pay the cost of the inventions arising from their programs. All told, the NIH has about 200 staff dedicated to technology-transfer activities, but fewer than 40 people are directly responsible for handling the patenting, licensing, monitoring, enforcement, and royalty-managing activities. From 2003 to 2008, the NIH annually filed about 200 original applications, including PRVs, PCTs/371s, 111s, and CIPs; adding DIVs, the annual total rises to about 350 applications. The NIH owned or co-owned on the order of 1,000 issued U.S. patents, and a worldwide total of about 4,700 patents. Each year, the NIH OTT negotiated and executed about 250 license agreements (including amendments that changed the substantive scope of the license), monitored about 1,500 active licenses, and collected over $80 million in royalties. While the exact figures fluctuate from year to year, the trends have remained relatively

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steady, with the main exception of royalties, which have increased over time.

The NIH Licensing Program NIH Licensing Policies General Just as in deciding whether or not to apply for patents, the NIH strives to license284 its intramural inventions in ways designed to facilitate further research and commercial development of the inventions. Having exclusive rights is clearly critical where pre-marketing regulatory burdens are substantial, and it also could be critical to encourage a company to keep important research materials available that would not be commercially viable through mere nonexclusive licensing. Where such facts are present, exclusivity could be best. At the same time, nonexclusive licensing has several advantages over exclusive in many cases. First, nonexclusive licensing often enhances public benefit by providing each licensee an incentive to develop its product expeditiously and to make better quality or lower cost versions. Second, nonexclusive licensing promotes the development of second generation products by multiple competitors. Third, in the biomedical arena, it may represent alternative products and services from which doctors and patients can select the optimal version for a given situation. Fourth, having multiple providers can increase consumer access to the product. Each case must be examined to see whether any of these advantages applies and, if so, whether it is outweighed by the licensee’s need for exclusive rights as an incentive. Where a patented technology requires investment of effort and money into further development, the question of whether exclusivity is necessary to encourage that investment becomes critical. For a disease clearly caused by a single mutated gene (e.g., cystic fibrosis), very little further development is needed, and broadest nonexclusivity is sufficient to encourage widespread commercial use. For a highly complex testdsuch as one involving many genes but not every mutation matters equally (e.g., hereditary hearing loss)dproving the clinical utility of any given gene or mutation might require a substantial investment. Also, where the FDA requires clinical studies before a genebased diagnostic test can be marketed, that cost increases dramatically. Finally, some genes are involved in multiple but unrelated disease states, such that many different diagnostic tests could require access to a single gene. Even where granting an exclusive license is appropriate, the logic supporting exclusivity rarely applies to all elements or uses of an invention. For example, a technology might need investment to develop an FDA-approved product, but once published, no investment is needed

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Patents and Patent Licenses

simply to encourage further research on or using the discovery. Accordingly, in granting any exclusive license, the NIH does so only after a critical analysis of the licensee’s application. Additionally, the NIH always reserves certain rights and imposes certain limitations. First, the NIH reserves the right to offer some aspects in a co-exclusive or nonexclusive manner, to ensure that each distinct embodiment has the best chance of being developed in a timely way. Also, the NIH includes “anti-shelving” terms in all exclusive licenses, such that if the licensee fails to diligently develop and widely distribute the NIH’s technology, the NIH can look for another licensee. Furthermore, a critical component of all of the NIH’s intramural licenses is the reservation of the right for the NIH to continue to engage in research on its technologies, and to license that right to anyone else who wants to conduct further research, including both for-profit and non-profit institutions. Reserving research rights is a bedrock NIH licensing policy, consonant with letter and spirit of the laws authorizing licensing,285 and rooted in fundamental principles of research freedom. Because a single invention often can be utilized in multiple ways, the NIH narrowly tailors its licenses (particularly exclusive licenses) by “field of use,” a phrase referring to a particular set of activities authorized under a license. For example, a drug that could treat a variety of solid tumors might be licensed only for use in treating breast cancer, reserving other fields of use for other licensees. The field of use in any given license is based first on the nature of the prospective licensee’s request, second on the justification for exclusivity, and third according to the ability of the prospective licensee to develop the invention as promised and within a reasonable period of time. If a prospective licensee can justify and develop more than one field of use, the NIH may include multiple fields in the license. Research-related uses and clinical uses are carefully segregated, such that each can be licensed using fundamentally different strategies suited to their respective needs. In deciding on an appropriate scope within a broad field of use, a crucial fact to bear in mind is that many companies will not be able to develop the full range of applications within that field. To find out, every company requesting a license from the NIH must submit a development plan, and the scope is then tailored to the licensee’s plans in light of its abilities. For example, a small company might want a license for all cancers, but realistically have resources to develop an FDA-approved diagnostic kit for only a few types (say, breast and ovarian cancers). If so, the field of use of the license will be limited to these types, leaving the NIH with the ability to license the invention to another company for other cancers (e.g., leukemia, brain, skin, liver, and bone). For “platform” technologies (i.e., technologies that can be integrated into many others), a common way of properly tailoring exclusivity is to offer a field of use limited to

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joining the NIH’s invention to the licensee’s own proprietary technology. An example of this is a vaccine that can be adapted to any number of delivery systems, where an exclusive license is limited to the licensee’s proprietary, disease-specific system. Finally, an exclusive license can be limited in time. A technology that has low-to-moderate risk and cost associated with its development might be licensed exclusively for a certain number of years after the effective date of the license or after-market launch. This strategy offers another way to calibrate the scope of exclusivity to the level necessary to encourage the investment needed to achieve practical application of the technology. Every commercial development license, including every nonexclusive commercialization license, includes a series of research and commercial stages that the NIH expects the licensee to meet. The exact details always turn on the particular development plan submitted by the applicant. These research and commercialization milestones are intended to be simultaneously challenging and achievable, in order to ensure the reasonable development of the NIH’s technologies. The negotiation of the scope of a license is linked to commercial development plans and appropriate milestones. If the licensee desires a broader scope to include multiple indications, the milestones and diligence requirements are tailored to address these as well. The NIH experience has been that tailoring these elements is considerably more complex than royalties, such that negotiations on development plans and milestones take more time than on the financial structure. Milestones in licenses can be tailored, depending mainly on the field of use and stage of development. For licenses having therapeutic fields of use, milestones typically cover preclinical/animal studies, filing with the FDA for regulatory permission (i.e., the IND or IDE), completing Phase I, Phase II, and/or Phase III clinical trials, and filing with the FDA for market approval (NDA, BLA, PMA, or 510(k), as appropriate). For diagnostic fields of use, milestones may address preclinical/animal studies (if any are needed), regulatory filings, clinical trials (if any are needed), availability of second opinions and confirmatory testing from sources other than the licensee, and ensuring reasonable insurance coverage. Even for well-developed technologies, milestones are included in the license, which may be as simple as starting to sell the product. Sometimes business facts underlying milestones that were true during the negotiation of a license change over time, and the license should include terms that anticipate changes. For example, what if, several years after executing the license, a larger company acquires the licensee, and the purchaser is not interested in continuing the development of the NIH’s invention? Even where corporate mergers are intended to stoke product pipelines, sometimes the

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acquiring company has to decide which of the licensee’s products to pursue first. Also, even in the absence of a merger, a licensee’s business model may change, such that they decide to readjust the priorities of its product development efforts. Whatever the reason, sometimes a licensee reduces its activity to a minimum, far from enough to succeed in a timely way. While the NIH expects that each licensee will reach each milestone in a timely way, the NIH is well aware that product development is rarely straightforward and problem free. Consequently, where a licensee reports its activities timely, allocates resources appropriate for the technology, and otherwise makes a commercially reasonable effort, the NIH endeavors to work with the licensee to adjust milestones as needed in order to facilitate getting the product to the market as expeditiously as possible. In case the licensee fails to demonstrate sufficient commitment to moving the technology to market, the NIH’s licenses include terms related to termination of the license, allowing the NIH to try to license the development of those indications to others. Finally, the NIH may include licensing terms designed to support its underlying mission. While companies develop products simply for profit, the NIH’s effort is aimed to improve public health. These goals are mostly consistent with each other, but to ensure the public reaps specific health benefits from a given technology, the NIH may add certain terms to some of its licenses, broadly known as “Public Return” clauses. Public Return clauses run from simple to complex, and can be tailored to achieve unique public benefits from the licensed invention. In the NIH’s first effort to craft a Public Return clause, the NIH’s licensee agreed to donate some of its product (gowns coated in an anti-viral barrier) to the Centers for Disease Control and Prevention for use overseas during an Ebola outbreak. In another example, a licensee’s scientific staff participated with Alaska Ride to raise money for HIV/AIDS research, raising U.S.$4.1 million in one year. Overall, the NIH’s experience with Public Return clauses has been highly successful, both for the NIH and for the licensees. Best Practices for Licensing Genomic Inventions In 2004, the NIH developed a guidance document concerning gene-based technologies. This document, titled the Best Practices for the Licensing of Genomic Inventions (or, more commonly, the Best Practices),286 is similar to guidance documents on the same topic issued later by other organizations;287 more importantly, however, it carries the same themes previously articulated by the NIH regarding other situations, applied in the particular context of genomic technologies. The Best Practices describes the NIH’s preferred approach to licensing gene-based inventions. The Best

Principles and Practice of Clinical Research

Practices recognizes that the range of inventions covered is broad,288 and that any given nucleotide-based invention may have a range of uses, including therapeutic, diagnostic, prognostic, and research uses. Acknowledging all of this, the Best Practices describes various considerations on whether or not to file for patents, on general licensing strategies, and on exclusivity. As a bottom line, the Best Practices encourages licensing policies and strategies that maximize access, as well as commercial and research utilization of the technology to benefit the public health.

Scope of Licensing Authority As with all federal agencies, the NIH primarily relies on 35 U.S.C. xx 207 and 209, along with the implementing regulations at 37 C.F.R. Part 404, for the authority to license its inventions. The NIH, however, has another statutory source upon which it may draw authority. The Public Health Services Act authorizes the NIH to “license” certain materials, regardless of whether or not they are patentable inventions. Specifically, 42 U.S.C. x 282(c) authorizes the Director of the NIH (or a designee) to “make available to individuals and entities, for biomedical and behavioral research, substances and living organisms. Such substances and organisms shall be made available under such terms and conditions (including payment for them) as the Secretary determines appropriate.” This provision provides part of the basis for the “Biological Materials License.”

Types and Structure of NIH Licenses The NIH has crafted several categories of model licenses for general use: patent commercialization licenses (exclusive, co-exclusive, and nonexclusive); patent internal-use licenses (nonexclusive only); Biological Materials Licenses (nonexclusive; may be commercial or internal use); and Commercial Evaluation Licenses. Also, the NIH has several specialized forms of a license to handle other situations. The NIH mainly uses the Biological Materials License where the rights being granted to the licensee include access to a sample or supply of physical specimens, even if the materials are not “biological” in nature (e.g., software). A typical NIH license covers the same ground as other licenses, after the statutorily required terms are considered. Major elements include: the exact grant of rights, including sublicensing and enforcement; royalties; patent prosecution (if the case is still pending); record-keeping and reporting; progress and performance milestones; term and termination rights; restrictions (if any) on fields of use and territory; and auditing. The NIH attaches certain items to most of its licenses, including instructions on how to make royalty

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Patents and Patent Licenses

payments, the specific agreed benchmarks, and the licensee’s development plan.

NIH Licensing ProcessdOverview Generally, the NIH OTT announces an invention as soon as practical after a patent application has been filed (or immediately, if no patent application will be filed), and notifies the public that the invention is available for licensing. At a minimum, the NIH posts its marketing abstracts in the Federal Register, but the NIH OTT also uses a variety of other venues to get the word out, including public bulletin boards, the NIH OTT webpage, email distribution lists, RSS feeds, and others. When someone expresses interest in taking a license, the individual is directed to complete an application, which in turn helps guide the selection of the appropriate model license. Depending on what is in the application, the NIH OTT may insert tailored provisions into the first draft. For nonexclusive licenses, negotiations will continue until both parties are ready to sign; for exclusive and co-exclusive licenses, the NIH publishes its “Notice of Intent to Grant,” normally allowing comments to be submitted for 60 days, before engaging deeply in negotiations. Sometimes, the NIH receives competing applications for an exclusive license to the same technology. If so, the NIH has several options, based on what the applicants want, including the following: carve out unique fields of use for each licensee; divide exclusivity by different countries; accept co-exclusive rights; or grant exclusivity to one applicant while denying the other’s application (perhaps encourage the licensee to sublicense to the other). When an invention made in whole or in part by NIH staff occurs under a CRADA, the CRADA Collaborator has the first option to negotiate a license (exclusive, partially exclusive, or nonexclusive) in NIH’s rights, before NIH may announce the invention and seek licensing applicants. To be clear, exercising that option does not guarantee a license will be executed. Also, the NIH still requires CRADA Collaborators to submit development plans, and will tailor the license to the development plan. If the CRADA Collaborator declines to exercise that option, or if the license covers less than all fields of use, then the NIH will advertise the remaining rights in the invention.

After SignaturedRoyalty Management, Monitoring, and Enforcement As the technology-transfer community widely knows, execution of a license is not the end of the process, but the beginning of a long-term relationship with the licensee. Accordingly, every NIH licensedincluding every nonexclusive licensedhas terms requiring the licensee to report on progress developing the invention.

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Reports must be provided to the NIH OTT at regular intervals, at least annually. To the extent a license has milestones, the license terms also require reporting upon reaching each milestone, in addition to the standard periodic reporting. Also, the NIH reserves the right to audit its licensees, typically after first commercial sale. In addition to checking financial compliance, the audit may include examining other licensee records related to the technology, including those showing whether the licensee has met its other due diligence commitments. In the NIH’s view, the purpose of this oversight is to help keep the development of the technology on track. As the work progresses, the terms of a license may require adaptation to reflect events occurring after signature, and lessons learned from those events. While the NIH expects its licensees to fulfill all terms of the licenses, the NIH’s oversight is targeted towards getting the product to the market, rather than in punishing licensees for failing to meet strict timelines or royalty payments. In terms of enforcement, the NIH believes that ability to use its intellectual property portfolio as a tool to develop technology is diminished by infringement. First, infringement discourages the licensing and development of government technologies if non-licensees can practice the invention without cost. Second, competition by infringers reduces sales of licensed products and the consequent royalty income to the government. Third, infringement reduces the inventors’ incentive to report inventions. On the other hand, the high cost of litigation or the modest value of the technology can outweigh the value of vigorous enforcement of patent rights. Each case deserves careful thought and balanced actiondneither too passive nor too aggressive. Accordingly, the policy of the NIH is to enforce its patents in the manner that the NIH believes is best suited to advance the mission of the agency. Toward this end the NIH will, as appropriate, encourage alleged infringers to license or sublicense the technology, grant its licensees the right of enforcement as provided by 35 U.S.C. x 207(a)(2), or refer the matter to the Department of Justice for civil action.

Success The core purpose of the technology transfer enterprise is to get technologies out of the lab and into the marketplace. To support this, vast sums of money and millions of personhours of labor have been spent on the endeavor over the past two or three decades. What results? The Association of University Technology Managers, representing mainly the nonprofit and academic institutions whose research is supported by the U.S. government, reported in 2008 that from a total of $51.47 billion in sponsored research expenditures in the United States, 648 new commercial products were introduced to the market, 595 new companies were formed, and 3,381 startup

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companies from prior years were still operating as of the end of FY2008.289 Looking over the last 30 years, universities spun off more than 5,000 new companies based on federally funded inventions, and over 3,600 new products reached the market based on federally funded inventions.290 The NIH has played its part in this process proudly. From FY1995 to FY2009, the NIH collected nearly $900 million in royalties on over 500 different products on the market, which collectively represent nearly $50 billion of gross sales ($6 billion in FY2007 alone). While most of these products are research tools, 25 are FDA-approved products, 17 are veterinary vaccines, and one is a veterinary drug. Particular successes have included: l

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l

l

l

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SynagisÒ , a monoclonal antibody against respiratory syncytial virus based on a monoclonal developed by the NIH; HavrixÒ , the first vaccine against Hepatitis A, was based on a collaborative project involving SmithKline Beecham, the U.S. Army, the Centers for Disease Control and Prevention, and the NIH National Institute on Allergy and Infectious Diseases; VitraveneÒ , the first and currently only antisense drug approved by the FDA, which treats cytomegalovirus; ThyrogenÒ , the first recombinant thyroid stimulating hormone approved by the FDA, was discovered by the NIH National Institute of Diabetes & Digestive & Kidney Disorders; VelcadeÒ , a revolutionary drug invented by Millennium Pharmaceuticals, uses a method of freeze-dry packaging invented by the NIH National Cancer Institute as part of a collaborative clinical trial; and TaxusÒ , the drug-coated stents for use in coronary balloon angioplasty, were invented at the NIH National Institute on Aging (and later were adapted for non-coronary balloon angioplasty, made by another company).

The NIH also has taken a lead-by-example role in using its portfolio to ensure that the developing world has meaningful access to NIH’s inventions for diseases and conditions that strike them particularly hard. First, the NIH requires its exclusive licensees to provide in their development plans a description of how they will bring their products to these developing countries’ markets, and where appropriate, tailors the terms of the license to make that plan feasible. In addition, the NIH has directly licensed technologies to companies in the developing countries to enhance accessdtechnologies including ddI (an anti-HIV drug), and vaccines for rotavirus, dengue fever, meningococcus, typhoid fever, and varicellavirus. Also, the NIH has invited nonprofit institutions to list their inventions relating to neglected diseases alongside those owned by the NIH in a free, searchable database to facilitate licensing activities.

CONCLUSION Scientists who began their research careers 20 years ago or more may have expected never to become involved in the “filthy lucre” of business, preferring the oasis of the ivory tower. This is no longer the case. To survive, modern researchers, particularly in the biomedical arena, must be able to understand the fundamentals of product development, and in particular the role patents play. Worse, ignorance and naı¨vete´ about the rules of this new and undesired world, or mistakenly believing in popular myths about patents, all risk causing a researcher to fall into traps that could destroy a major project, and even a career. For those who might mourn the loss of their dream of what science should be, there is an equally bright side. Today’s savvy scientist will recognize that patentsdwhile expensive, complicated, arcane, and time-consumingd potentially can be a tremendous resource in the effort to turn basic discoveries and good ideas into tangible outcomes that actually benefit society. Not all discoveries require patents, and patents and patent licensing do not solve all problems, but where they do, they are extraordinarily useful tools. Therefore, even though some researchers will never invent anything, every researcher should know at least what patents are and how they work.

BRIEF GLOSSARY OF CRITICAL TERMS IN PATENTING Anticipation Novelty-defeating art disclosed before the date of invention Assignment A transfer (sale or otherwise) of ownership of property Conception Formulation in the mind of the inventor(s) of the complete, operative ideadincluding specific means, not just the desired end Continuation (CON) A daughter patent application that “resets” the prosecution clock and does not add new material Continuation-In-Part (CIP) A daughter patent application that adds new material Divisional (DIV) A daughter patent application filed later, where the original application contained more than one invention Enablement Sufficiently clear description of the invention so that others can make and use it without undue experimentation Interference An administrative proceeding before the USPTO to determine which inventor is entitled to receive a patent

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License An agreement not to sue another for infringement of intellectual property rights National Stage Application Nation-specific patent applications claiming priority to a single prior PCT filing Nonobviousness One of ordinary skill in the field of the invention would not find it insignificantly different from the collected prior art Novelty Bright-line test: was the entire invention described in a single prior art reference before the relevant critical date? Prior Art Any reference regardless of form (publication or prototype) available to the public if one were motivated to look for it Provisional (PRV) A “place-holder” application that allows up to a year’s delay in the filing of a full application Patent Cooperation Treaty (PCT) An international patent application filed in one patent office but claiming the right to file national applications later Reduction to Practice (Actual) Physical construction of a working prototype or successful performance of a process Reduction to Practice (Constructive) Written instructions and data showing how to make and use the invention so that one of ordinary skill can practice it without undue experimentation Statutory Bar Novelty-defeating prior art disclosed more than one year before the inventor’s earliest-filed patent application Statutory Subject Matter The invention is a machine, composition, article of manufacture, or process that was created by a human Utility The invention has a credible, substantial, and specific use Written Description The invention is described clearly enough for others to know what it is

SUMMARY QUESTIONS 1. A scientist discovers that three particular zinc-finger proteins work independently but synergistically in the function of neurons. The scientist recognizes that this relationship suggests a diagnostic panel for certain puzzling subtypes of brain pathologies: each mutation in one or more of the zinc-finger genes correlates to a specific subtype (or the likelihood of developing symptoms). Each mutation can be detected by any of

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a wide variety of known methods of detecting a DNA sequence. If any of the gene-therapy techniques now being studied is ever perfected, it can be adapted to treat these mutations. Should NIH file a patent? Pick the most accurate application of PHS Patent Policy from the following arguments. a. Yes: because the technology has a diagnostic utility, it is not a Research Tool b. Yes: gene therapy is a clinical application, which NIH routinely patents c. Yes: those therapeutic and diagnostic applications that require FDA approval will not be developed into commercial products unless NIH can offer exclusivity; PHS Licensing Policy can protect issues of access for any remaining uses d. No: NIH does not patent genes because they are primarily research tools; if a therapeutic method using these genes is ever perfected, NIH will patent that method e. No: the technology can be used immediately and requires no further incentive to develop 2. You, in your first week working in a technology-transfer office, have been assigned to handle an invention that your predecessor had started before he left. Reviewing the file, you notice that the inventor submitted her data to your predecessor well before publishing, and your predecessor had timely arranged to file a U.S. Provisional eight months ago. The invention has not yet been exclusively licensed, but likely will be someday, and the technology is important enough to your institution that funding the patent prosecution is not an issue here. Which of the following set of patent applications do you expect you will have to arrange? a. A PCT in four months and a U.S.-371 in 22 months b. A U.S.-111 in four months, and National Phase applications in major markets in 22 months c. A U.S.-Provisional and U.S.-111 to be filed in four months, and National Phase applications in major markets in 22 months d. A U.S.-371 to be filed in four months, and not to pursue any international filings unless in the next 22 months we find a licensee who agrees to pay for them e. A PCT in four months, and in 22 months, to file a U.S.-371 and National Phase applications in major markets 3. By statute, in deciding whether or not to grant any applicant’s request for an exclusive license, the government must consider each of the following except: a. Whether the technology is a CRADA “subject invention” b. Whether competition will be enhanced or reduced c. Whether exclusivity benefits the public interest

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d. The breadth of the proposed field(s) of use e. Whether nonexclusive licensing could achieve practical development

REFERENCES AND NOTES 1.

2. 3. 4.

5. 6.

7.

8.

9.

10.

11.

12.

For clarity through this chapter, the capitalized term “State” refers specifically to one of the fifty States of the United States, rather than a generic nation-state. Later, in 1975, the US Patent Office became the US Patent and Trademark Office (“USPTO”). Pub.L. No. 914, 70th Cong. (March 2, 1929). The CAFC was given jurisdiction over several topics: substantive patent law (whether arising in the district courts or the U.S. Patent and Trademark Office (the “USPTO”)), appeals from the U.S. Court of Claims, the U.S. Court of Veterans Claims, and the U.S. Court of International Trade. P.L. 112-29. Following closely in the footsteps of the Paris Convention, most of the world quickly adopted a sister treaty known as the Berne Convention on Artistic Works of 1886. Under it, each member nation agreed to confer to owners of copyrights granted by other member nations the same rights that the member grants under its own copyrights. The United States initially refused to join, but a century later became a member in 1988. Specifically, Belgium, Denmark, France, Germany, Ireland, Italy, Liechtenstein, Luxembourg, the Former Yugoslav Republic of Macedonia, Netherlands, Sweden, Switzerland, and United Kingdom have ratified or acceded to it. The official website is currently maintained by the WIPO, available at http://www.oapi.wipo.net/portal/index.html.en. The member states are: Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Congo, Coˆte d’Ivoire, Gabon, Guinea, Guinea-Bissau, Equatorial Guinea, Mali, Mauritania, Niger, Senegal, and Togo. Not all member states use French as an official national language. http://www.aripo.org/. The organization includes 16 member states and 14 observer states. Not all member states use English as an official national language. The official website is available at http://www.eapo.org/eng/ea/ documents/konvenci.html. The member states are: Turkmenistan, the Republic of Belarus, the Republic of Tajikistan, Russia, the Azerbaijan Republic, the Republic of Kazakhstan, Kyrgyzstan, the Republic of Armenia, and the Republic of Moldova. The official website is available at here. The member states are: United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar, and Kuwait. Note: A patent, by itself, is not a “monopoly,” though many people carelessly treat these two terms as synonyms. To have a monopoly, one must actually sell something. Patent owners need not sell anything for a patent to be enforceable; also, as is often the case, impractical products do not become worth buying just because they are patented. Consider, for example, the “Marshmallow System” (U.S. Patent No. 6,800,312), in which a marshmallow destined to become a s’more is manufactured with a hollow core shaped to hold a piece of chocolate, which hopefully will minimize the loss of melted chocolate once the combination has been cooked.

13. See, e.g., Mansfield E, Schwartz M, Wagner S. Imitation costs and patents: an empirical study. Economic J 1981;91(364): 907e918. 14. See, e.g., Park W, Ginarte J. Intellectual property rights and economic growth. Contemporary Economic Policy 2007;15(3):51e61 (published online: 29 June); Griliches Z. Patent statistics as economic indicators: a survey. J Econ Literature 1990;28(4):1661e1707; Ginarte J, Park W. Determinants of patent rights: a cross-national study. Research Policy 1997;26:283e230; Maskus K, Penubarti M. How trade-related are intellectual property rights? J Int Econ 1995;39:227e248. 15. For example, under the right circumstances, the Canadian and Israeli patent offices will issue a patent having the identical scope as a newly issued U.S. patent. 16. 35 U.S.C. x 161; 37 C.F.R. x 1.161. Newly bred varieties of plants can be legally protected through a system unrelated to patent law, called the “Plant Variety Protection Act,” which is administered by the U.S. Department of Agriculture. A discussion of this system is outside the scope of this chapter. 17. 35 U.S.C. x 171; 37 CFR xx 1.152e1.155. 18. Design patents have so much overlap with copyrights and trademarks that they are easily confused and difficult to clarify. As all three of these are not especially relevant to biomedical research activities, clarifying this topic is beyond the scope of this chapter. 19. Technically, the patent statute defines “patentee” to include both the initial owner and anyone who later becomes an owner of that patent. 35 U.S.C. x 100. 20. Diamond vs. Chakrabarty, 447 U.S. 303, 308 (1980). 21. Chakrabarty, 447 U.S. at 309. 22. Another example is the case of O’Reilly vs. Morse, 56 U.S. 62 (1853), over Samuel Morse’s telegraph patent application. Morse tried to claim “the use of the motive power of the electric or galvanic current, which I call electro-magnetism, however developed for marking or printing intelligible characters, signs, or letters, at any distances.” The Supreme Court held that this claim was overbroad, as it encompassed an entire force of nature. 23. The full name and citation is Laboratory Corporation of America Holdings vs. Metabolite Laboratories, Inc., et al., 370 F.3d 1354 (Fed. Cir. 2004), cert. granted in part, 546 U.S. 975 (2005), cert. dismissed, 548 U.S. 124 (2006). 24. LabCorp, 548 U.S. at 125 (Breyer, Stevens, & Souter, JJ., dissenting). Justice Stevens has since questioned his own dissent, in oral argument for the case of Mayo Collaborative Svces vs. Prometheus Lab., Inc. (No. 10-1150, oral argument 7 Dec 2011). 25. 447 U.S. 303 (1980). 26. To be sure, several other events occurred from 1980 to 1982, each of which arguably may have had a bigger impact on the growth of the U.S. biotechnology industry than the Chakrabarty decision would have had by itself. For example, from 1980 to 1982, groundbreaking patents were awarded for making proteins using recombinant DNA (the famous Cohen/Boyer patent), for the first automated DNA-synthesizing machine, for a gas-phase protein sequencer, and for the discovery of how to induce yeast (rather than E. coli) to synthesize a human protein, specifically interferondeach of which helped make biotechnology into a commercially feasible business. Also in 1980, Congress passed the Bayh-Dole Act and Stevenson-Wydler Act, which are both discussed below; these laws changed the rules on inventions made

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27.

28. 29. 30. 31. 32.

33. 34.

35.

36.

37. 38. 39. 40.

Patents and Patent Licenses

using federal funds. Additionally, the FDA approved recombinant human insulin in 1982, demonstrating a viable business model for a blockbuster biotech “drug.” Finally, the creation of the CAFC in 1982 gave the business community confidence that the legal status of patents would be more predictable. There is no way to know for certain which events had the bigger impacts. The Biotechnology Industry Organization reports that, as of December 31, 2006, nearly 1,500 biotech companies were operating in the United States, employing some 180,000; the stocks in 336 of these companies were publicly traded, with a combined market capitalization of U.S.$360 billion. That report is available online at http://bio.org/speeches/pubs/er/statistics.asp. Jensen K, Murray F. Policy forum: intellectual property landscape of the human genome. Science 2005;310:239e240. 628 F3d 1347 (Fed. Cir. 2010), cert. granted, No. 10-1150 (20 June 2011) (hereinafter, “Mayo”). 702 F.Supp.2d 181(S.D.N.Y. 2010), rev’d in part, 653 F.3d 1329 (Fed. Cir. 2011) (hereinafter, "Myriad"). 130 S. Ct. 3543 (2010) (citing Bilski vs. Kappos, 130 S. Ct. 3218 (2010)). Collaborators included scientists at the NIH National Institute of Environmental Health Sciences, the University of Utah, McGill University, Eli Lilli and Company, the University of Laval (Quebec), the Hospital for Sick Children in Toronto, the University of Pennsylvania, and the Institute for Cancer Research in London. NCI BRCA fact sheet (rev. May 29, 2009), available online at http://www.cancer.gov/cancertopics/factsheet/Risk/BRCA. According to the court’s opinion, as well as the 2010 Report of the HHS Secretary’s Advisory Committee on Genes, Health and Society (SACGHS Report), while the price of Myriad’s test seems expensive, the per-amplicon cost is comparable to genetic tests that are unpatented. The final version of the report is available online at http://oba.od.nih.gov/oba/SACGHS/SACGHS%20Patents% 20Report%20Approved%202-5-20010.pdf. Specifically, the Association for Molecular Pathology, American College of Medical Genetics, American Society for Clinical Pathology, and College of American Pathologists. Specifically, Drs. Haig Kazazian and Arupa Ganguly, both of the University of Pennsylvania; Dr. Wendy Chung, of Columbia University; Dr. Harry Ostrer, of New York University; and Drs. David Ledbetter and Stephen Warren, of Emory University. Specifically, Ms. Ellen Matloff, of Yale University; and Ms. Elisa Reich, of New York University. Specifically, Breast Cancer Action and Boston Women’s Health Book Collective. Specifically, Lisbeth Ceriani, Runi Limary, Genae Girard, Patrice Fortune, Vicki Thomason, and Kathleen Raker. As the court said:In light of DNA’s unique qualities as a physical embodiment of information, none of the structural and functional differences cited by Myriad between native BRCA1/2 DNA and the isolated BRCA1/2 DNA claimed in the patents-in-suit render the claimed DNA “markedly different.” This conclusion is driven by the overriding importance of DNA’s nucleotide sequence to both its natural biological function as well as the utility associated with DNA in its isolated form. The preservation of this defining characteristic of DNA in its native and isolated forms mandates the conclusion that the challenged composition claims are directed to unpatentable products of nature. AMP vs. USPTO, supra, at p. 125.

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41. See AMP vs. USPTO, supra, at pp. 147e148. 42. 160 F. 467 (2d Cir. 1908). To be sure, the USPTO and some district courts considered the issue before then, but the Circuit Court cases before Hotel Security are ambiguous on this particular topic. See, e.g., Ex parte Abraham, 1869 Dec. Comm’r Pat. 59 (1869), and United States Credit Sys. Co. vs. Am. Credit Indem. Co., 53 F. 818 (C.C.S.D.N.Y. 1893), aff’d on other grounds, 59 F. 139 (2d Cir. 1893); see Cincinnati Traction Co. vs. Pope, 210 F. 443, 444e446 (6th Cir. 1913), and Rand, McNally & Co. vs. Exchange ScripBook Co., 187 F. 984, 984e985 (7th Cir. 1911). The 1983 MPEP, x 706.03(a), codified the USPTO’s long-standing view that, “though seemingly within the category of process or method, a method of doing business can be rejected as not being within the statutory classes.” 43. 409 U.S. 63 (1972). 44. Id., at 70. 45. 437 U.S. 584 (1978). 46. Id., at 590e591. See also In re Grams, 888 F.2d 835, 839e841 (Fed. Cir. 1989) (simply including a general “data-gathering step,” without any critical limitation on how the data are collected, does not render an algorithm patentable subject matter under Flook because every algorithm requires gathering data as input). 47. 450 U.S. 175 (1981). 48. At the time the invention was made, no one knew how to obtain an accurate measure of the rubber’s current temperature without opening the press. The invention solved this problem by using embedded thermocouples to constantly check the temperature, and then fed the measured values into a computer. The computer then used the algorithm in an iterative way to calculate when the molding machine should open the press. 49. Id., at 184e185. 50. See, e.g., Chisum D. The patentability of algorithms. U Pitt L Rev 1986;47:959e1022; Bruzga C. Review of the Benson-Flook-Diehr trilogy: can the subject matter validity of patent claims reciting mathematical formulae be determined under 35 U.S.C. section 112? J Pat & Trademark Off Soc’y 1987;69:197e216; see also Risch M. Everything is patentable. Tenn L Rev 2008;75:591, at pp. 646e647 (discussing the Federal Circuit’s efforts to reconcile Benson, Flook, and Diehr in the case of in re Bilski). 51. 149 F.3d 1368 (Fed. Cir. 1998); confirmed by AT&T Corporation vs. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999). 52. USPTO detailed statistics are available at http://www.uspto.gov/ patents/resources/methods/applicationfiling.jsp. 53. Hall B. Business method patents, innovation, and policy. U.C. Berkeley Department of Economics Working Paper 2003;No. E03331, Table 2, p 24, available online at http://escholarship.org/uc/ item/2n24f63d#page-6. Amazon.com won a four-year long ex parte reexamination before the USPTO (story available at http:// www.techflash.com/seattle/2010/03/amazons_1-click_patent_ confirmed_following_re-exam.html). 54. McKenna B, et al. Patently absurd: the inside story of RIM’s wireless war. The Globe and Mail, February 21, 2006, available online at http://www.theglobeandmail.com/archives/article814090.ece. 55. Normally, the CAFC hears cases by a panel of three judges; here, on its own initiative, the CAFC elected to have the entire court hear the case (“en banc”). 56. While nine of 12 judges joined in the majority opinion, the case provoked one concurring opinion and three dissenting opinions. In

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60.

61.

62.

63. 64. 65. 66. 67.

68. 69. 70.

71. 72.

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a rare compliment, the Supreme Court later suggested that “[s] tudents of patent law would be well advised to study these scholarly opinions.” Bilski vs. Kappos, 561 U.S. ___, No. 08-964, Slip Op. at 3 (June 28, 2010), aff’g on other grounds, In re Bilski, 545 F.3d 943 (CAFC 2008). In re Bilski, 545 F.3d at 954 (relying primarily on Benson, 409 U.S. at 70). In re Bilski, 545 F.3d at 960 & n. 23; see also, In re Ferguson, 558 F.3d 1359, 1364 n. 3 (Fed. Cir. 2009). To be precise, the two concurring opinions each agreed with the result on the rejection of the CAFC’s tests, though each concurring opinion would have applied different logic than the majority. “Interim Guidance for Determining Subject Matter Eligibility for Process Claims in View of Bilski v. Kappos,” 75 Fed. Reg. 43922 (July 21, 2010). The Guidance clarifies that the “machine or transformation” test may not be the sole test for making these decisions. Diamond vs. Chakrabarty, 447 US 303, 309 (1980) (citing S. Rep. No. 1979, 82d Cong., 2d Sess., 5 (1952); H. R. Rep. No. 1923, 82d Cong., 2d Sess., 6 (1952)). U.S. Patent and Trademark Office Manual of Patent Examination Procedure, x 2107.01 (rev. December 18, 2008) (hereinafter, “MPEP”). Id. Id. MPEP, x 706.03(a) (citing Juicy Whip Inc. vs. Orange Bang Inc., 185 F.3d 1364, 1367e1368 (Fed. Cir. 1999)). Carella vs. Starlight Archery, 804 F.2d 135 (Fed. Cir. 1986). Examples of countries with grace periods include Australia (12 months), Canada (12 months), Japan (6 months), South Korea (6 months), Mexico (12 months), and Brazil (12 months). Of course, each country’s rules on when the grace period applies is unique; for instance, Japan only provides the protection of its grace period for the inventor’s own disclosures made through an experiment, publication, or presentation at a study meeting or exhibition, as well as for those disclosures that happen against the inventor’s will. See Japanese Patent Law (Law No. 121 of 1959, as amended), Section 30 (an English translation is maintained online by the WIPO at http://www.wipo.int/clea/docs_new/pdf/en/jp/jp006en. pdf). Invitrogen Corp. vs. Biocrest Manufacturing L.P., 424 F.3d 1374 (Fed. Cir. 2005). Bernhardt, L.L.C. vs. Collezione Europa USA, Inc., 386 F.3d 1371, 1380e1381 (Fed. Cir. 2004). See In re Kollar, 286 F.3d 1326, 1330 n. 3, 1330e1331 (Fed. Cir. 2002) (distinguishing licenses which trigger the on-sale bar (e.g., a standard computer software license wherein the product is just as immediately transferred to the licensee as if it were sold), from licenses that merely grant rights to an invention which does not per se trigger the on-sale bar (e.g., exclusive rights to market the invention or potential patent rights)). Moleculon Research Corp. vs. CBS, Inc., 793 F.2d 1261, 1267 (Fed. Cir. 1986). Moore vs. United States, 194 USPQ 423, 428 (Ct. Cl. 1977); Petersen vs. Fee Int’l, Ltd., 381 F. Supp. 1071, 182 USPQ 264 (W.D. Okla. 1974). Clock Spring, L.P. vs. Wrapmaster, Inc., 560 F.3d 1317 (Fed. Cir. 2009).

74. Id.; see also, Lough vs. Brunswick Corporation, 103 F.3d 1517 (Fed. Cir. 1997). 75. Interferences can be declared between more than two parties, but for purposes of this chapter, two is plenty. 76. 35 U.S.C. x 146. 77. Crouch D. Is novelty obsolete? Chronicling the irrelevance of the invention date in U.S. patent law. Mich Telecomm Tech L Rev 2010;16: __ . Data from 1980 to 1994 suggest that a little over 200 interferences were declared each year, of which about 5% proceed to a full hearing. Kingston W. Light on simultaneous invention from US Patent Office “Interference” records. World Patent Information 2004;26(3):209e220. 78. One study of interferences declared between 1988 and 1994 found that the mean time to resolution was about 21 months, with a range of 16 days to 10 years. Cohen L, Ishii J. An empirical investigation of patent races: evidence from patent priority disputes at the U.S. Patent and Trademark Office. 2005, working draft available online at http:// www.economics.uci.edu/docs/colloqpapers/s05/Cohen.pdf. 79. In the patent systems of other countries, the parallel concept is called “Inventive Step.” 80. MPEP, x 2141, “Examination Guidelines For Determining Obviousness Under 35 U.S.C. 103,” Part III. 81. Graham vs. John Deere Co., 383 U.S. 1 (1966). 82. In re Dillon, 919 F.2d 688, 692 (Fed. Cir. 1990). 83. 83. In re Baxter Travenol Labs., 952 F.2d 388 (Fed. Cir. 1991) (appellant argued that the presence of DEHP as the plasticizer in a blood collection bag unexpectedly suppressed hemolysis; however, the prior DEHP-plasticized bag achieved same result, though this property went undetected). 84. KSR Int’l Co. vs. Teleflex, Inc., 550 U.S. 398 (2007). 85. MPEP, x 2161. 86. Ariad Pharmaceuticals, Inc., vs. Eli Lilly & Co., ___ F.3d ___, No. 2008-1248 (Fed. Cir., March 22, 2010) (en banc). 87. Regents of the University of California vs. Eli Lilly, 119 F.3d 1559, 1566, (Fed. Cir. 1997), cert. denied, 523 U.S. 1089 (1998). 88. MPEP, x 2163(II)(A)(3). 89. In re Wands, 858 F.2d 731, 737 (Fed. Cir. 1988). 90. CFMT, Inc. vs. Yieldup Int’l Corp., 349 F.3d 1333, 1338 (Fed. Cir. 2003). 91. In re Nelson, 280 F.2d 172 (CCPA 1960). 92. MPEP, xx 706.03(c), 2165e2165.4. 93. Benger Labs. Ltd. vs. R.K. Laros Co., 209 F. Supp. 639 (E.D. Pa. 1962). 94. In re Hall, 781 F.2d 897 (Fed. Cir. 1986). 95. MPEP, x 2128; see, e.g., In re Epstein, 32 F.3d 1559 (Fed. Cir. 1994). 96. For example, a journal distributed to the public only in paper form and through the mail becomes prior art when the public first receives the journal through the mail, not the date on which the publishers deposit the journal in the mail. In re Schlittler, 234 F.2d 882 (CCPA 1956). 97. In re Hall, 781 F.2d at 900 (Fed. Cir. 1986); see also MPEP, x 2128.01. 98. TP Labs., Inc. vs. Professional Positioners, Inc., 724 F.2d 965, 972 (Fed. Cir. 1983) (commercial exploitation in secret was still a “public use”); In re Smith, 714 F.2d 1127, 1134 (Fed. Cir. 1983). 99. MPEP, x 2133.03(b). 100. 122 F.3d 1396 (Fed. Cir. 1997). The case also included other claims besides patent infringement.

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101. Legally speaking, only the formal holding, along with the portion of logic necessary to reach that holding, have the effect of “law.” When a court includes general commentary or a logical argument that is not necessary to support the holding of the case, such commentary is called “obiter dicta” (or, more simply, “dicta”). Courts offer dicta to give the legal community a clue as to how related cases might be decided. Dicta is not law, and so is technically not binding in future cases, but ignoring dicta is unwise. 102. A “joint research agreement” is defined as “a written contract, grant, or cooperative agreement entered into by two or more persons or entities for the performance of experimental, developmental, or research work in the field of the claimed invention.” x 103(c)(3). Congress made clear that it had no interest in being too specific, in order to give the people participating in a collaborative agreement the flexibility to decide whether or not it qualifies as a “joint research agreement.” 103. Townsend vs. Smith, 36 F.2d 292, 295 (CCPA 1930); see also Hitzeman vs. Rutter, 243 F.3d 1345 (Fed. Cir. 2001). 104. Silvestri vs. Grant, 496 F.2d 593, 596 (CCPA 1974) (“an accidental and unappreciated duplication of an invention does not defeat the patent right of one who, though later in time was the first to recognize that which constitutes the inventive subject matter”); Invitrogen, Corp. vs. Clontech Laboratories, Inc., 429 F.3d 1052, 1064 (Fed. Cir. 2005) (in situations where there is unrecognized accidental duplication, establishing conception requires evidence that the inventor actually made the invention and understood the invention to have the features that comprise the inventive subject matter at issue). 105. Dow Chem. Co. vs. Astro-Valcour, Inc., 267 F.3d 1334, 1341 (Fed. Cir. 2001). 106. De Solms vs. Schoenwald, 15 USPQ2d 1507, 1510 (Bd. Pat. App. & Inter. 1990). 107. MPEP, x 2138.05. 108. Burroughs Wellcome Co. vs. Barr Labs, Inc., 40 F.3d 1223 (Fed. Cir. 1994), cert. denied, 516 U.S. 1070 (1996). 109. Id., 40 F.3d at 1231. Interestingly, the Canadian Supreme Court reached the same conclusion. Apotex Inc. vs. Wellcome Foundation Ltd., [2002] 4 S.C.R. 153 (scientists do not become patentees of an invention merely by executing tests; to qualify as inventors, researchers must contribute to the discovery of the inventive concept, not just verify that another person’s idea works). 110. Hitzeman vs. Rutter, 243 F.3d 1345 (Fed. Cir. 2001). 111. Id. 243 F.3d at 1357e1359. 112. 35 U.S.C. x 102(f); see also MPEP, xx 2137 and 2137.01. This rule appears to derive directly from the U.S. Constitution, Art. I, Section 8 (“To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries” (emphasis added)). 113. Mueller Brass Co. vs. Reading Industries, Inc., 352 F.Supp. 1357, 1372 (E.D.Pa. 1972), aff’d, 487 F.2d 1395 (3d Cir. 1973). 114. 35 U.S.C. x 116. 115. Pannu vs. Iolab Corp., 155 F.3d 1344, 1351 (Fed. Cir. 1998). 116. Garrett Corp. vs. U.S., 422 F.2d 874, 881 (Ct. Cl. 1970). 117. Nartron Corp. vs. Schukra USA Inc., 558 F. 3d 1352 (Fed. Cir. 2009). 118. MPEP, x 2137.01. See also Burroughs Wellcome, 40 F.3d at 1230e1231 (discussing NCI’s possible status as co-inventor based on their work).

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119. See, e.g., Brunsvold B, et al. Drafting Patent License Agreements, 6th edn., BNA Books, 2008; Wright B. Drafting Patents for Litigation and Licensing. BNA Books, 2008. Licensing principles and procedures for federally owned inventions, particularly those of the NIH, are discussed in greater depth below. 120. A license could include terms under which the licensee has a right to receive assignment at a later date, and a very poorly written exclusive license can effectively transfer so much that a court will deem it to be an assignment despite designation as a “license.” Both of these situations, however, are uncommon. 121. 35 U.S.C. x 154(d). 122. 35 U.S.C. x 287. 123. Ethicon, Inc. vs. U.S. Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998). 124. 35 U.S.C. x 271(b), Met-Coil Sys Corp. vs. Korners Unlimited, 803 F.2d 684 (Fed. Cir. 1986). 125. Goodwall Construction vs. Beers Construction, 210 USPQ 272 (N.D. Ga. 1981). 126. 35 U.S.C. x 271(f)(1). 127. 35 U.S.C. x 271(c). 128. Amersham International PLC vs. Corning Glassworks, 618 F.Supp. 507 (D. Mich. 1985). 129. Patents are presumptively valid (see 35 U.S.C. x 282), but sometimes the USPTO never saw critical prior art, or perhaps the patentee failed to disclose some material information not otherwise publicly available. 130. 35 U.S.C. x 282. 131. In the case of Dickinson vs. Zurko, 119 S.Ct. 1816 (1999), the Supreme Court required all courts to review factual determinations by the USPTO using the standards set in the Administrative Procedures Act. Specifically, an appellate court may only set aside a finding of fact if the USPTO’s decision was “clearly erroneous,” i.e., the finding was “unsupported by substantial evidence” submitted to the USPTO. Id., citing 5 U.S.C. x 706. 132. The statute of limitations requires that any lawsuit be brought within six years (35 U.S.C. x 286); however, laches can apply even if this time has not yet run out. 133. Poppenhusen vs. Falke, 19 F. Cas. 1048 (No. 11279) (CCSDNY 1861). 134. Ruth vs. Stearns-Roger Mfg. Co., 13 F. Supp. 697 (D. Colo 1935), rev’d on other grounds, 87 F.2d 35 (10th Cir. 1936). 135. Id. 136. Madey vs. Duke University, 307 F.3d 1351 (Fed. Cir. 2002), cert. denied, 539 U.S. 958 (2003). 137. The court continued:Our precedent clearly does not immunize use that is in any way commercial in nature. Similarly, our precedent does not immunize any conduct that is in keeping with the alleged infringer’s legitimate business, regardless of commercial implications. For example, major research universities, such as Duke, often sanction and fund research projects with arguably no commercial application whatsoever. However, these projects unmistakably further the institution’s legitimate business objectives, including educating and enlightening students and faculty participating in these projects. These projects also serve, for example, to increase the status of the institution and lure lucrative research grants, students and faculty.307 F.3d at 1362. 138. Resnik DB. Patents and the research exemption. Science 2003;299(5608):821e822.

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139. “Due diligence” is a context-specific term of art, generally referring to the process of avoiding obvious risks associated with a particular endeavor by exercising the particular level of diligence that is reasonable and appropriate for the circumstances. For purposes of this chapter, “due diligence” refers to the process in which a patent attorney determines whether or not a particular line of research, development, or other activity would be covered by any patents (also called “freedom to operate” analyses). This task is often more difficult in basic-research settings than appliedresearch settings, because the activities performed by a basic researcher may implicate a more diverse range of patents. 140. Roche Products Inc. vs. Bolar Pharmaceutical Co., 733 F.2d 858 (Fed. Cir. 1984). 141. 35 U.S.C. x 271(e)(1) states that “[i]t shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention (other than a new animal drug or veterinary biological product (as those terms are used in the Federal Food, Drug, and Cosmetic Act and the Act of March 4, 1913) which is primarily manufactured using recombinant DNA, recombinant RNA, hybridoma technology, or other processes involving site specific genetic manipulation techniques) solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.” 142. 545 U.S. 193 (2005). 143. 35 U.S.C. x 287(c). 144. For this purpose, a “body” is defined in the statute to mean “a human body, organ or cadaver, or a nonhuman animal used in medical research or instruction directly relating to the treatment of humans.” Id., x 287(c)(2)(E). 145. Id., x 287(c)(3). 146. 28 U.S.C. x 1498. 147. 35 U.S.C. x 284. For design patents only, the patentee is entitled to receive the infringer’s profits on top of any other damages (such as a reasonable royalty). 35 U.S.C. x 289. 148. 35 U.S.C. x 285. 149. 35 U.S.C. x 283; eBay Inc. vs. MercExchange, L.L.C., 547 U.S. 388 (2006). 150. Georgia-Pacific Corp. vs. United States Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970), modified and aff’d, 446 F.2d 295 (2d Cir. 1971) (widely cited list of 15 nonexclusive factors for evaluating what royalty would be “reasonable”); J. Barnhardt, “Revisiting A Reasonable Royalty as a Measure of Damages for Patent Infringement,” 5 Wake Forest I.P.L.J. 1 (2005). 151. Pincus L. The computation of damages in patent infringement cases. Harvard J L & Tech 1991;5:95e143; Blair R, Cotter T. Working paper: rethinking patent damages, February 23, 2001, available online at http://papers.ssrn.com/sol3/papers.cfm? abstract_id¼261357. 152. While changing the venue has always been possible, courts have discretion whether or not to do so, and they typically defer to the plaintiff’s choice unless the reasons for changing clearly outweigh the reasons for leaving the case where it was filed. In re Volkswagen of America, Inc., 545 F.3d 304 (5th Cir. 2008) (en banc decision that the district court abused its discretion by not changing venue). 153. 28 U.S.C. xx 2201e2202; Maryland Casualty Co. vs. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941) (“Basically, the question in

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154. 155. 156.

157.

158.

159.

160.

161.

162. 163.

164.

165.

166

167.

each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”) MedImmune, Inc. vs. Genentech, Inc., 549 U.S. 118 (2007). 19 U.S.C. x 1337(a)(1)(B). Santos N, et al. What IP holders ought to know about the ITC and the District Courts. J High Tech L 2007;7:173e179, at p. 174 & nn. 10e11. Id. at 176. Exclusion orders are often “limited” to a set of respondents, but can block both infringing products and downstream products that contain an infringing component. Id. at 175. eBay vs. MercExchange, LLC., 547 U.S. 388 (2006) (injunctions should not be granted automatically upon finding of patent infringement; patentee still has to prove the same factual standards as anyone else seeking an injunction). “2009 Report of the Economic Survey,” American Intellectual Property Law Association, p. 29, 2009. The report is available online only to members of the AIPLA (contact information is available at http://www.aipla.org for requests for copies). “Cost and Duration of Patent Litigation,” Managing Intellectual Property, “Briefings” column (01 Feb 2009), available online at http://www.managingip.com/Article/2089405/Channel/194878/ Cost-and-duration-of-patent-litigation.html. Levko A, et al., “2009 Patent Litigation Study: A Closer Look,” PriceWaterhouseCoopers, LLC, available online at http://www. pwc.com/en_US/us/forensic-services/publications/assets/2009patent-litigation-study.pdf. Another study found similar results; see Zura P. Patent litigation statistics. The 271 Blog, May 30, 2007, available online at http://271patent.blogspot.com/2007/05/patentlitigation-statistics.html. Id. As of December 2011, 43 States and the District of Columbia have adopted some form of the Uniform Trade Secrets Act (UTSA), but the legislatures of some may have tweaked the language and courts in the States have interpreted its clauses in subtly different ways. The remainder use common-law principles that are largely consistent with the UTSA, but again have subtle differences. Currently, an inventor can ask the Patent Office to keep the application unpublished throughout the process, provided the inventor promises never to apply for patent protection on that invention in any other country. If a patent ever issues on that application, it is published upon issuance. Under the Patent Reform Act, the original inventor (and tradesecret owner) might not be liable for patent infringement, but will lose any battle over who is entitled to the patent. 5 U.S.C. x 552. Similar State laws are often called “open records” acts and, more colorfully, “sunshine” laws. Also, FOIA applies to records held by grantees and contractors to the extent those records were used by the funding agency to formulate policy. See 2 C.F.R Part 215; see also OMB Circular A-110, “Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations” (as amended 09/30/1999), available online athttp://www. whitehouse.gov/omb/circulars_a110/. x 552(b)(4). Specifically, it exempts “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”

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168. 35 U.S.C. x 205. 169. 18 U.S.C. x 1905. (Civil penalties are also possible under certain circumstances; see 12 U.S.C. x 417.) 170. More precisely, the relevant information includes “trade secrets, processes, operations, style of work, or apparatus, or to the identity, confidential statistical data, amount or source of any income, profits, losses, or expenditures of any person, firm, partnership, corporation, or association.” Id. 171. 18 U.S.C. xx 1831e1839. 172. 18 U.S.C. x 1831. 173. 18 U.S.C. x 1832. 174. Millen P. Commentary: the Economic Espionage Actdis it finally catching on? St. Louis Daily Record & St. Louis Countain, March 19, 2006, available online http://findarticles.com/p/articles/mi_ qn4185/is_20060319/ai_n16143091/?tag¼content;col1; see also generally, Danielson M. Economic espionage: a framework for a workable solution. 10 Minn JL Sci & Tech 2009;10:503e548, at pp. 516e518 (discussing why prosecutions are rarely brought). 175. Department of Justice Press Release (June 18, 2008), available online at http://www.justice.gov/criminal/cybercrime/mengSent. pdf. Exact and up-to-date figures for pure x 1832 prosecutions are hard to find because these cases are often consolidated with other IP crimes, such as criminal copyright infringement and violation of the Digital Millennium Copyright Act. 176. US vs. Zhu, discussed in “Biotech spies arrested in Harvard case.” Nature Biotech 2002;20:760e761. 177. US vs. Okamoto, discussed in “Espionage charges threaten to undermine research relations.” Nature 2001;411:225e226. 178. See Feist Publications, Inc. vs. Rural Telephone Service Co., 499 U.S. 340 (1991) (telephone “white pages” cannot be copyrighted, as it is merely a functional collection of data). 179. 17 U.S.C. x 106. The owner also has so-called “moral rights” in the work (17 U.S.C. x 106A), and may control importation (17 U.S.C. xx 601e603). 180. See 17 U.S.C. xx 101 (definition of “work for hire”) and 201(b) (ownership of works for hire). 181. 17 U.S.C. x 105. Note that the government may own a copyright if it was created privately and then assigned to the government. 182. 17 U.S.C. x 101. Note that a “collective work” and a “compilation” are effectively synonyms. 183. The Copyright Office is situated in the Library of Congress. Note that the Library of Congress is a part of the legislative branch, not the executive branch, of the U.S. government. 184. 17 U.S.C. x 504(c). 185. Copyright notice includes: (1) the “Ó” symbol or the word “copyright”; (2) the owner’s name; and (3) the year in which the copyright in the work was established. 17 U.S.C. x 401(b). 186. 17 U.S.C. x 504(c)(2). 187. 17 U.S.C. x 109. Patent law has a similar doctrinedcalled “exhaustion”dbut it appears in court cases, not the statute. See Bauer & Cie. vs. O’Donnell, 229 U.S. 1 (1913) (patents could not be used to control resale prices). The continued viability of this doctrine recently has been called into question; see, e.g., Mallinckrodt, Inc. vs. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992) (doctrine of exhaustion was only a unilaterally disclaimable “implied license”). 188. See 17 U.S.C. xx 109e122. Note that these compulsory licenses are not necessarily royalty free. 189. Id., x 117.

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190. 17 U.S.C. x 107. 191. Campbell vs. Acuff-Rose Music, 510 U.S. 569 (1994) (Court rejected conclusion that parody was presumptively unfair just because the work was being sold; remanded for further proceedings). In particular, the jury must consider, at least, the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes, the nature of the copyrighted work, the amount and substantiality of the portion used in relation to the copyrighted work as a whole, and the effect of the use upon the potential market for or value of the copyrighted work. 17 U.S.C. x 107. 192. There are four types of “marks”: trade marks, for goods (like LegoÒ toys); service marks, for services (like GreyhoundÒ bus lines); collective marks, for members of a group (like AAAÒ garages and other automotive service providers); and certification marks, for certifying that certain products meet certain standards (like the Florida Sunshine TreeÒ for juice made from oranges grown in the State of Florida). 193. One can file an “intent to use” application in the USPTO for registration of a mark that is not yet in use, but the applicant must prove the mark is actually in use before the USPTO will issue a registration. 194. 35 U.S.C. x 113; MPEP, x 601(f). 195. MPEP, x 2173.05(a) ; Process Control Corp. vs. HydReclaim Corp., 190 F.3d 1350, 1357 (Fed. Cir. 1999). 196. 37 C.F.R. x 1.75(g); MPEP x 608.01(j). 197. The meaning of claim phrasing is always determined by the judge; in most cases, the question of whether the defendant’s product is covered by a claim is decided by a jury, though sometimes it is done by the judge. 198. 37 C.F.R. x 1.821. 199. 37 C.F.R. x 1.802. 200. 35 U.S.C. x 114; 37 C.F.R. x 1.91; MPEP, x 608.03. 201. 35 U.S.C. x 121; 37 C.F.R. x 1.141; MPEP, xx 802e802.02. 202. 37 C.F.R. x 1.56 (broadly imposing a duty of candor and good faith). 203. Again, after the Patent Reform Act, failure to disclose the best mode can no longer be grounds for invalidating a patent. 204. McKesson Information Solutions, Inc. vs. Bridge Medical, Inc., 487 F.3d 897 (Fed. Cir. 2007). 205. Mammen C. Controlling the “plague”: reforming the doctrine of inequitable conduct. 24 Berkeley Tech LJ. 1329 (April 2010). One case even said that the false remark by patent counsel that his search of the prior art was “careful and thorough,” intended to speed review by the USPTO, was inequitable conduct. Gen. Electro Music Corp. vs. Samick Music Corp., 19 F.3d 1405, 1411e1412 (Fed. Cir. 1994). 206. 37 C.F.R. x 1.293; MPEP, x 1103. 207. See, e.g., 35 U.S.C. xx 184e187. 208. The Public PAIR system is available online at http://portal.uspto. gov/external/portal/pair. 209. 37 C.F.R. x 1.14, MPEP, xx 103e104. 210. 35 U.S.C. x 154; MPEP, x 2710. 211. 35 U.S.C. x 156; MPEP, x 2750. 212. By USPTO rule, a “rejection” is always “on the merits” of the patentability of a claim (i.e., the claim is unpatentable under xx 101, 102, 103, and/or 112). MPEP, xx 706 et seq. The USPTO might object to other flaws in the application, and these flaws might ultimately prove fatal to an application, but such concerns are not called “rejections.”

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213. As noted at various points above, several court cases are brewing in which some parties want to expand the range of rejections based on x 101 to include business methods, software, and processes involving only “mental steps” or “mere correlations” (mainly diagnostic inventions). If these parties are successful, the number of rejections under 35 U.S.C. x 101 likely will increase. 214. 37 C.F.R. x1.113; MPEP, x 706.07. 215. Procedurally, the appeal goes first to the USPTO’s Board of Patent Appeals and Interferences (“BPAI”), then generally to the CAFC, then the U.S. Supreme Court. Alternatively, after losing before the BPAI, the applicant may file suit in federal district court asking the court to order the USPTO to issue a patent (this case, in turn, gets appealed to the CAFC). 216. 35 U.S.C. xx 254e255; MPEP, xx 1480 et seq. 217. 35 U.S.C. x 251; MPEP, xx 1401 et seq. 218. 35 U.S.C. x 301; MPEP, xx 2205e2296. 219. MPEP, x 2203. In rare cases, the Commissioner of Patents may open a reexamination case on his own initiative. 220. 35 U.S.C. x 314(b)(2). 221. 35 U.S.C. x 315(c). If a prior art reference was truly unavailable at the time of an inter partes reexamination, it may be raised in a later infringement suit. 222. Baluch A, S. Maebius S. The surprising efficacy of inter partes reexaminations: an analysis of the factors responsible for its 73% patent kill rate and how to properly defend against it. Working Paper (2008), available online at http://www.patentlyo.com/patent/ law/baluchmaebius.pdf. 223. USPTO data on all reexaminations are available at http://www. uspto.gov/patents/stats/Reexamination_Information.jsp. Some commentators have suggested that these flaws are so bad that a patent attorney’s recommendation that a client use the inter partes reexamination would be tantamount to malpractice. See, e.g., Knowles S, et al. Inter partes reexamination in the United States. J Pat & Trademark Off Soc’y 2004;86:611, at p. 614; Kunin S, Fetting A. The metamorphosis of inter partes reexamination. Berkeley Tech LJ 2004;19:971e988, at pp. 978e979. 224. Note that in the United States, the priority date may be set by the Provision application, rather than the PCT application. Also, it is worth noting that member nations are free to allow national phase applications to be filed later than 30 months; the EPO, among several others, allows filing up to 31 months after the priority date, and Canada permits national filings as late as 42 months with payment of a late fee. 225. To be clear, only 14 patent offices, which include the USPTO and EPO, are certified to perform two of the five actions, namely the ISR and the IPER, discussed later in this paragraph. The full list of eligible patent offices is maintained by WIPO, and is available online at http://www.wipo.int/pct/en/access/isa_ipea_agreements. html. An applicant is allowed to designate any office on this list to perform the ISR and IPER, even if the applicant’s Receiving Office is among them. As such, an American filing a PCT application in the USPTO may designate the Korean Patent Office to conduct its ISR and IPER. 226. Before 2004, the three mandatory stages were called the “Chapter I” segment, and the optional stages were known as the “Chapter II” segment. This designation used to be more significant, because until deadlines for filing national phase depended on whether or not the applicant made a demand under Chapter II.

Principles and Practice of Clinical Research

227. No translations: UK, France, Germany, Luxembourg, Monaco, Liechtenstein, Switzerland. Claims-only: Croatia, Denmark, Iceland, Latvia, Lithuania, the Netherlands, Slovenia, Sweden. 228. Croatia, Denmark, Iceland, the Netherlands, Sweden. 229. These are Belgium, Cyprus, France, Greece, Ireland, Italy, Latvia, Malta, Monaco, the Netherlands and Slovenia. WIPO maintains the official list online at http://www.wipo.int/pct/en/texts/reg_des.html. 230. Small inventors get a 50% break on most of these fees. 231. See, e.g., Berrier E. Global patent costs must be reduced. Franklin Pierce Law Center IDEA: The Journal of Law and Technology 1996:473e511, available online at http://www.ipmall.org/hosted_ resources/IDEA/36_IDEA/36-2_IDEA_473_Berrier.pdf. 232. See, e.g., Oppedahl Patent Law Firm webpage (http://www. oppedahl.com/cost/), Law Office of Jerry R. Potts webpage (http://pw1.netcom.com/~patents2/What%20Does%20It%20Cost %20Patent.htm), and Neustel Law Firm webpage (http://www. patent-ideas.com/Patent-Costs-Fees/How-Much-Does-A-PatentCost.aspx). See also Quinn G. Cost of obtaining a patent. IP Watchdog, December 31, 2007, available online at http:// ipwatchdog.com/patent/patent-cost/. 233. Berrier, supra n. 212, at p. 474. 234. Slides of a presentation containing these data are available to AIPLA members online at http://www.aipla.org/Content/ Microsites119/International_and_Foreign_Law2/2004_ Committee_Documents/2%20004_Annual_Meeting/2-Pilarski.ppt. 235. In re Fisher, 421 F.3d 1365 (CAFC 2005). 236. Ass’n for Molecular Pathology vs. USPTO, Case 1:09-cv-04515RWS (S.D.N.Y. March 29, 2010). 237. Laboratory Corp. of Amer. Holding vs. Metabolite Laboratories, Inc., cert. dismissed, 548 U.S. 124, 125e139 (2006) (Breyer, Souter, & Stevens, JJ., dissenting) (hereinafter, LabCorp). 238. For example, in 2006, the company Research In Motion (RIM), maker of the famous BlackBerry phones, settled a patent infringement case filed by NTP, with RIM paying NTP over U.S.$612 million. Shortly before settlement, the case attracted international attention when RIM was temporarily forced to shut down all BlackBerry services. During the fight, RIM and others publicly accused NTP of being a “patent troll” because NTP never had any intention of developing its patented technologies. Others countered that RIM was free-riding on others’ discoveries. 239. See Crouch D. Measuring the plague of inequitable conduct. Patently-O Blog (June 2, 2010), available online at http://www. patentlyo.com/patent/2010/06/measuring-the-plague-ofinequitable-conduct.html. 240. 593 F.3d (Fed. Cir. No. 08-1511, May 25, 2010). The USPTO has issued draft rules for public comment in which the USPTO proposes to enshrine the Therasense standards in the rules for applying for patents. See Federal Register Vol. 76, No. 140, Page 43631 (Thursday, July 21, 2011). 241. Brazil to break patents on U.S. films, books, drugs (Update2). Bloomberg.com (first posted online March 15, 2010), available online at http://www.bloomberg.com/apps/news?pid¼20601087& sid¼a.VF70UEOmVM. 242. NSF. Science and engineering indicators. Chapter 4 (January 2008), available online at http://www.nsf.gov/statistics/seind08/c4/ c4h.htm. According to a 2009 commentary in the New England Journal of Medicine, the 20 most research-intensive medical schools receive 80e85% of their research revenues, and a third of

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243.

244.

245.

246.

247.

248.

249.

250.

251. 252. 253. 254. 255.

256.

Patents and Patent Licenses

total revenues, from federal research grants. Capmbell E. The future of research funding in academic medicine. NEJM 2009;360:1482e1483 (citing proprietary data from the Association of American Medical Colleges). For those unfamiliar with these terms, essentially speaking, a contract is used when the goal is to produce something for the benefit of the government, while a grant and cooperative agreement are used when the goal is for the benefit of the recipient; the difference between a grant and a cooperative agreement is that the latter anticipates substantial involvement of the funding agency. See 31 U.S.C. xx 6303e6305. For contrast, in 2008, the government spent $398 billion on R&D, which represented 0.73% of GDP and 26% of all domestic funding of R&D. National Science Foundation, Science and Engineering Indicators: 2010, available online at http://www.nsf.gov/statistics/ seind10/start.htm. “The Bayh-Dole Act at 25,” White Paper by BayhDole25, Inc., p. 14 (April 17, 2006), available online at http://www. bayhdolecentral.com/BayhDole25_WhitePaper.pdf. Id., at 16, see also “Technology Transfer, Administration of the Bayh-Dole Act by Research Universities” U.S. Government Accounting Office (GAO) Report, p. 3 (May 7, 1978). Removing military patents, where normal market forces are overridden by national security concerns, the GAO report notes that fewer than 10% of the 12,000 unexpired patents were licensed. The NIH by itself provides about $27 billion in grants, contracts, and cooperative agreements, supporting over 100,000 investigators (over 300,000 research staff) across 3,000 institutions. “The Role of Federally-Funded University Research in the Patent System,” Statement of the Association of University Technology Managers to the Senate Committee on the Judiciary (October 24, 2007), available online at http://www.autm.net/AM/Template.cfm? Section¼Bayh_Dole_Act&Template¼/CM/ContentDisplay.cfm& ContentID¼1372. Roessner D, et al. The Economic Impact of Licensed Commercial Inventions Originating in University Research, 1996e2007, Final Report to the Biotechnology Industry Organization, September 3, 2009, p. 33, available online at \\odhsrv02\home4$\goldsteb\- Goldsteb’s Documents\- TT Documents\Miscellaneous\Articles\PPCR\A. The implementing regulations, 37 C.F.R. x 401.14, contain greater detail, and the Federal Acquisition Regulation, 48 C.F.R. Part 1 x 52.227e11 contains the standard patent rights clauses that appear specifically in procurement contracts. Actually, a fifth clause must be added for funding agreements concerning government-owned, contractor-operated facilities. This clause does not apply to funding agreements concerning government-owned, contractor-operated facilities. The public access webpage can be found at https://s-edison.info. nih.gov/iEdison/. The RePORT system can be accessed at http://report.nih.gov/ index.aspx. In addition, the statute permits restricting or eliminating a Contractor’s rights if the Contractor is situated outside the United States, if necessary to conduct or protect foreign intelligence or counterintelligence, or where the funding agreement applies to certain government-owned, contractor-operated facilities of the Department of Energy. 35 U.S.C. x 202(a)(ieiv). 37 C.F.R. x 401.3(e,f).

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257. One article that nicely discusses the nuances of the issues is McGarey B, Levey A. Patents, products, and public health: an analysis of the CellPro March-In Petition. Berkeley Tech LJ 1999;14:1095. 258. A “PMA,” or “Pre-Market Approval” application, is a formal request to the FDA for permission to market a new or high-risk medical device. 259. See, e.g., “Baxter, Hopkins ask for rejection of CellPro Petition.” Biotechnology Law Report 1997;16(3):374e380. 260. In dramatic public testimony, the CEO of CellPro told how his own life had been saved using CellPro’s separator to treat his leukemia. 261. Executive Order 10096 (January 23, 1950). 262. 37 C.F.R. Part 501; for the Department of Health and Human Services in particular, see also 45 C.F.R. Part 7. 263. More precisely, EO 10096 and the implementing regulations apply to any invention “made by any Government employee (1) during working hours, or (2) with a contribution by the Government of facilities, equipment, materials, funds, or information, or of time or services of other Government employees on official duty, or (3) which bear a direct relation to or are made in consequence of the official duties of the inventor.” 264. Technically, all patents are owned by the government as a whole, regardless of the agency in which the inventor might have worked, but for administrative convenience in tracking responsibilities and spending royalties, the agency employing the inventor(s) is treated as the “owner” of the invention. Patent applications for government-owned inventions typically indicate that the patent assignee is “The United States Government, as represented by the Department of Health and Human Services,” or similar phrasing. 265. PL 99-502 (October 2, 1986). 266. Formally, the “Stevenson-Wydler Technology Innovation Act of 1980,” PL 96-480 (October 21, 1980). 267. 15 U.S.C. x 3710(a). 268. PL 104e113. 269. PL 106e404. 270. The top seven in FY2007, which accounted for 96% of all R&D funds spent that year, were DoD ($56 billion), HHS ($29 billion), NASA ($8 billion), DoE ($8 billion), NSF ($4 billion), USDA ($2 billion), and DHS ($1 billion). NSF. Science and engineering indicators, supra n. 237. 271. NIH’s mission is “to seek fundamental knowledge about the nature and behavior of living systems and the application of that knowledge to enhance health, lengthen life, and reduce the burdens of illness and disability”; a broader discussion of its goals can be found online at http://www.nih.gov/about/mission.htm. 272. USDA’s mission is to “provide leadership on food, agriculture, natural resources, and related issues based on sound public policy, the best available science, and efficient management”; a broader discussion of its goals can be found online at http://www.usda.gov/ wps/portal/usda/!ut/p/c5/04_SB8K8xLLM9MSSzPy8xBz9CP0os_ gAC9-wMJ8QY0MDpxBDA09nXw9DFxcXQ-cAA_1wkA5kFa GuQBXeASbmnu4uBgbe5hB5AxzA0UDfzyM_N1W_IDs7zd FRUREAZXAypA!!/dl3/d3/L0lDU0lKSWdra2trIS9JSFJBQUl pQ2dBek15cXhtLzRCRWo4bzBGbEdpdC1iWHV3RUEhLzd. 273. NASA’s mission is “to pioneer the future in space exploration, scientific discovery and aeronautics research”; a broader discussion of its goals can be found online at http://www.nasa.gov/about/ highlights/what_does_nasa_do.html.

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274. DOE’s mission is “to advance the national, economic, and energy security of the United States; to promote scientific and technological innovation in support of that mission; and to ensure the environmental cleanup of the national nuclear weapons complex”; a broader discussion of its goals can be found online at http://www. energy.gov/about/index.htm. 275. EPA’s mission may be found on its homepage at http://www.epa. gov/, and a further discussion can be found online at http://www. epa.gov/aboutepa/whatwedo.html. 276. “Federal Laboratory Technology Transfer Fiscal Year 2008: Summary Report to the President and Congress,” available online at http://www.nist.gov/ts/otp/publications/upload/Fed_Lab_Tech_ Transfer_Report_Congress_FY08_3-8-2010.pdf. 277. Congressional Budget Office Report, “Federal Support for Research and Development,” Figure 9 (June 2007), available online at http:// www.cbo.gov/doc.cfm?index¼8221&type¼0&sequence¼2. 278. To be sure, some agencies do not rely solely on “invention licenses,” and use in addition “other IP” licenses, which include copyright (mainly software), Plant Variety Protection Act, and other forms of intellectual property. 279. “Principles and Guidelines for Recipients of NIH Research Grants and Contracts on Obtaining and Disseminating Biomedical Research Resources: Final Notice,” 64 FR 72090 (December 23, 1999). 280. The term “research tool” (or “unique research resource”) “is used in its broadest sense to embrace the full range of tools that scientists use in the laboratory, including cell lines, monoclonal antibodies, reagents, animal models, growth factors, combinatorial chemistry and DNA libraries, clones and cloning tools (such as PCR), methods, laboratory equipment and machines.” 281. To be sure, the Research Tools policy does not directly apply to anyone whose work is not supported by the NIH, but the NIH hoped that others would heed the policy anyway. 282. Available online at http://grants.nih.gov/grants/guide/notice-files/ NOT-OD-03-032.html. 283. Available online at http://grants.nih.gov/grants/guide/notice-files/ NOT-OD-04-042.html. The NIH also issued a brochure, available online at http://grants.nih.gov/grants/policy/model_organism/ model_organism_brochure.pdf, and a webpage, available at http://www.nih.gov/science/models/.

Principles and Practice of Clinical Research

284. The NIH licenses, rather than assigns, its technologies, because licensing enables the NIH to have a continuous, meaningful role in the development of its technologies. 285. See, e.g., 35 U.S.C. x 209(d)(1), 37 C.F.R. xx 404.5(b) and 404.7(a)(2). 286. 70 Fed. Reg. 18413 (April 11, 2005), available online on the NIH OTT webpage at http://www.ott.nih.gov/policy/lic_gen.aspx. 287. See, e.g., OECD, “Guidelines for the Licensing of Genomic Inventions,” 2006, available online at http://www.oecd.org/ dataoecd/39/38/36198812.pdf; AUTM, “Nine Points to Consider in Licensing University Technology,” March 2007, available online at http://news.stanford.edu/news/2007/march7/ gifs/whitepaper.pdf; European Commission, “Report from the Commission to the Council and the European Parliamentddevelopment and implications of patent law in the field of biotechnology and genetic engineering,” July 2005, available online at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do? uri¼CELEX:52005DC0312:EN:NOT; National Academies of Science, “Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health,” December 2006, available for purchase online at http:// www.nap.edu/catalog.php?record_id¼11487. 288. Examples include: expressed sequence tags (ESTs); cDNAs; haplotypes; antisense RNAs; small interfering RNAs (siRNAs); full-length genes and their expression products; as well as methods and devices for the sequencing of genomes, quantification of nucleic acid molecules, detection of single nucleotide polymorphisms (SNPs), and genetic modifications. Since the publication of the Best Practices, the field has moved towards whole-genome sequencing and analysis. 289. Highlights from the “AUTM U.S. Licensing Activity Survey: FY2008,” available online at http://www.autm.net/AM/Template. cfm?Section¼FY_2008_Licensing_Activity_Survey&CONTENTID¼ 4513&TEMPLATE¼/CM/ContentDisplay.cfm. The full report is available for a fee. 290. “The Role of Federally-Funded University Research in the Patent System,” Statement of the Association of University Technology Managers to the Senate Committee on the Judiciary (October 24, 2007) (available online at http://www.autm.net/AM/Template.cfm? Section¼Bayh_Dole_Act&Template¼/CM/ContentDisplay.cfm& ContentID¼1372).