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Kappos Talks Patent Reform and Gene Patents at BIO Convention


Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog, Inc.
Principal Lecturer, PLI Patent Bar Review Course
Posted: May 4, 2010 @ 12:46 am

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L to R: Armitage, Kappos and Gurry chat on
stage before Super Session at BIO

This week I am attending the BIO International Convention in Chicago, IL. This is my first trip to a BIO Convention and I have to say it is a sight to behold. Those running the event expect approximately 15,000 people this year, and the number of buses and cabs lined up outside McCormick Place in a steady and revolving stream suggests that the many attendees are coming and going in great order.

Inside the Convention Center the programs have started in earnest, and the first program I attended today was the first so-called “Super Session” of the Convention, staring David Kappos, the Director of the United States Patent and Trademark Office, and Francis Gurry, the Director General of WIPO, who I interviewed earlier in the day. The conversation was facilitated by Bob Armitage, the Senior Vice President and General Counsel of Lily, who himself would be a headliner on most other occasions. The session title was “Leveraging IP to Spur Global Biotechnology Innovation, Investment and Jobs,” which largely was preaching to the choir. You would be hard pressed to find a more patent dependent industry in the US and worldwide than the biotech industry, particularly when you realize that as BIO defines the biotech industry it not only includes those companies with a clear biotech research and development focus, but also includes pharmaceutical development.

Without strong patent protection the entire industry would not exist, and neither would the countless thousands of companies and the hundreds of thousands of jobs. While it may be in vogue in some circles to beat up on those innovating on new frontiers the reality is that without such innovation real people would not have paying jobs, and life saving innovations would not occur. So for those paying attention the greater good is clearly on the side of the industry and not on the side of those who vilify the industry to forward an agenda. But there I go again.  It seems even when I try and play it straight I just cant help but weave my 2 cents in!

What follows are pieces of Director Kappos’ remarks at the session prior to taking questions and answers.  While it is probably unfair to call these remarks prepared remarks, it was clear that he referred to his notes as he provided detailed information and statistics.  He also seemed to be reading what he said when he spoke about the ACLU case against Myriad Genetics, but who can blame him given the USPTO was a nominal party to the case and it will be appealed to the Federal Circuit.  Discretion is the better part of valor, and while I was somewhat surprised he addressed the case so directly, I was glad he did.  After all, how could he present at a BIO Convention and not discuss the 800 pound gorilla in the room?

Before proceeding, it is probably worth mentioning that during the Q&A there were a few interesting things that came up, chief among them was Kappos’ explanation of the long odds facing a small entity claiming to be the first to invent but who filed the patent application second.  Kappos likened the odds of such a Junior Party prevailing to the odds of being bitten by a Grizzly Bear and a Polar Bear on the same day.  He then went on to say that you have to go back to FY 2007 to find a prevailing small entity Junior Party in an interference.  As Kappos explained, those who think first to invent is a benefit for small entities are living a lie, which is certainly true, but many will not like to hear that truth.

Without further ado, here are some of Kappos remarks on a variety of issues.

Kappos on innovation as the new capital asset in the economy:

The world has become very technologically dependent and increasingly intellectual property dependent, and the way I put this is to say that as we move deeper into the second decade of the 21st century we truly have moved into an environment and probably in an irreversible environment in which innovation is the only remaining source of value capture. It is the only source of sustainable competitive advantage to our world economy, to the U.S. economy and I would submit to the bio industry. In that context, furthermore, the distance between innovation and the marketplace has been shrinking and continues to shrink… The time between when an idea is created, or an invention is conceived if you will, and when an affiliated product or service, test, therapeutic or diagnostic test goes on to the marketplace is shrinking. That means that the source of capturing value is becoming more critical and the only source that is left is intellectual property. Another way that I put this point is that intellectual property is truly becoming our world’s currency of innovation. It is the capture mechanism, the container that carries innovation.

Kappos on USPTO dissemination of data:

As many of you know, the USPTO houses a veritable treasure trove of intellectual property related information. Data records of 8,000,000 patents and patent applications and associated file histories, which may be the second largest data store in the world. This data store goes all the way back to 1871, I believe, so it is incredible in terms of its width and its breath. But it is clear to me, having spent some time at the agency now, that we are not doing a nearly good enough job at making our nation’s innovation information available to the citizens of our country, and by extension to the entire world. So we are trying to turn a new page in this regard. We are trying to end the firewall if you will and break down barriers and move to a new era of openness as part of the Obama Administrations view on transparency and openness.

Kappos talking about recent USPTO White Paper titled Patent Reform: Unleashing Innovation, Promoting Economic Growth & Producing High-Paying Jobs:

Fully three-quarters of our nation’s post World War II growth rate are attributable to technological innovation. Two innovation linked factors are capital investment and increased efficiency account for 2.5 percentage points of our 3.4 % annual growth rate achieved since the 1940s, so that is pretty impressive.

Second point, innovation produces high paying jobs, again not a surprise probably to anyone here. The average compensation per employee in innovation intensive sectors increased 50% between 1990 and 2010. That is nearly two-and-a-half times the national average in our country, and that is a pretty impressive statistic.

Then a third one, highly innovative firms rely heavily on timely patents to attract venture capital. Again, I’m sure not a surprise to anyone here in this room. 76% of start-up managers report that VC investors consider patents when making funding decisions. When you talk to people in the bio industry even stronger statements are made about that… So clearly there is a strong link between intellectual property, innovation, bio industry and things that everybody cares about like jobs and life saving medicines…

Kappos on the importance of patents and on patent reform:

It is clear that patents play a critical role and what’s more, patent reform, if we can return to that topic for just a minute, will clearly enhance our countries ability to innovate and secure high quality patents with greater speed and certainty. So right now as I think Bob mentioned and many of you know, we have a terrific backlog at the USPTO. We contribute at least our fair share, and probably more than our fair share, to the global patent backlog that Francis mentioned. Over 700,000 unexamined patent applications in our agency, which by the way is too many by at least a factor of two and a little bit more than that.

Hundreds of thousands of ground-breaking innovations are sitting on the shelves, literally waiting to be examined, jobs not being created , life saving drugs not going into the marketplace, companies not being funded, businesses not being formed, there really is no good news in any of that.

The patent reform bill will give the USPTO the tools it needs to reduce that delay while also ensuring the highest possible quality. As an example, fee setting authority, which is contained in the legislation, will contribute significantly to our agency’s ability to implement a planned 40% reduction in pendency over the next several years.

Consistent funding, which is a by-product of fee setting authority, will allow the USPTO to do a much better job of planning effectively for the future, of implementing key programs that will help us to improve quality and cut down on our backlog, and in directing resources to doing the critical infrastructural improvements that our agency has needed and has lacked for a decade or more at this point.

Kappos on harmonization and work-sharing initiatives:

To give another example that links some of these topics at the intersection of between economics and global issues with the currently pending patent reform legislation: harmonization and work sharing. Patent reform will return the US to the position of being the world’s leader in patent law harmonization. Harmonization is really important.  Harmonization allows us to maximize the vital tool Francis mentioned for reducing pendency and improving quality, and that is with work sharing. Major patent granting authorities do virtually the same work day after day after day on literally hundreds of thousands of patent applications a year. Work sharing, through really critical and successful vehicles like the PCT, are more important now than ever, and I am absolutely sure that it is only through work sharing that the global patent system will be able to get on top of the pendency problem.

To give a few statistics in that regard, the number of applications filed at two or more of the IP5 offices, that is the top 5 offices, the JPO, EPO, KIPO, SIPO and USPTO, currently stands at 250,000 per year. If we can reuse work from those offices regarding these duplicate applications we can increase efficiency in the patent system and minimize cost for applications very, very substantially. To have a worthwhile discussion on work sharing we have to start at the beginning, which is harmonization, and that is where patent reform comes in.

Worldwide there is broad agreement that the public gains when the world’s experts in areas of science and technology are able to disclose their advances and new ideas that forces new approaches, teaches the public with clarity exactly what came before. This is an important function of any patent system, an important contributor to the success of the bio industry.

We also agree that basic standards like novelty, inventive step, like clarity, like usefulness are all requirements that are fundamental to ensuring public benefit from any patent system. We agree that innovators deserve the rights to profit from their innovations. We agree that IP rights must be granted timely and in a quality manner; we agree to all those aspirations. So we agree on all the basics. The issues that separate our various systems relative to harmonization turn on the details, and those disagreements are unfortunately costing us, the global innovation community, and especially parts of it that are heavily patent dependent like the bio community, quite dearly because they are preventing progress on issues that really matter to advancing the currency of innovation.

So the patent reform bill will move the US to a first inventor to file system, harmonize us in that regard. It will for all practical purposes remove issues involving best mode, it will substantially improve other aspects of the US system for all users, both international and domestic. It will restore the US to the pinnacle of IP systems, what I refer to as the gold standard of patent protection and it will put us in a position to work with our overseas counterparts to help them move their systems forward to a much greater level of harmonization and better protection for IP worldwide, so there is only upside in getting patent reform completed. Whether you care about it from a domestic US perspective, whether you care about it from an international perspective, it’s all upside.

Kappos on Myriad Genetics gene patenting case:

Starting with a patient blood sample, what Myriad does is they create hundreds of copies of the protein coding portion of the patient’s BRCA genes and then use these lab made copies of the DNA to determine whether the patient has any mutations associated with breast or ovarian cancer. The District Court held that the product claims were invalid under Section 101 of the Patent Act because according to the Court they covered a product of nature. This has a potentially very significant impact on the bio industry.

The USPTO has issued more than 20,000 patents claiming isolated DNA molecules, almost 4,000 of those which directly claim isolated human DNA encoding of protein. So there is a lot of intellectual property, probably much of it owned by companies represented in this room and probably most of it owned by companies represented at this conference that is already out there. The USPTO has also issued tens of thousands of patents on other types of isolated and purified chemicals all of which could be put at risk by the District Court’s decision.

We have for decades issued patents covering isolated and purified DNA on the scientific basis that an isolated snippet of DNA does not exist in nature in the way it is claimed in patents because naturally occurring DNA must be isolated, that is separated, from surrounding biological materials and purified. So your body simply does not contain isolated DNA; it’s not found in nature. By way of analogy, to say that an isolated, purified DNA sequence is a product of nature is like saying a silicon wafer of 99.9999% purity used in the microelectronics industry, which I am very familiar with, is a product of nature because, of course, silicon is found in the Earth’s crust. Of course, wafer grade silicon is not found in nature, we all know that. It requires an extremely intricate and extremely laborious purification process.

It has been the view of the USPTO and our reviewing courts that the purified version of a naturally occurring compound where the purified version does not exist in nature in a pure form is indeed eligible for patent protection. The USPTO’s guidelines in this area and the thousands of patents that we have issued in this area indeed foster a climate of great investment and innovation in the biotech industry for many years.

Regardless of the outcome of the pending Federal Circuit appeal, we will continue to engage with the bio industry and to ensure the consistent and appropriate protection of bio innovations under the law.

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Posted in: Biotechnology, Gene Quinn, IP News, IPWatchdog.com Articles

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

16 comments
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  1. USPTO White Paper titled Patent Reform: Unleashing Innovation, Promoting Economic Growth & Producing High-Paying Jobs:…

    Rai and Kappos both backed prior rules changes which would have killed small entities who account for 70+% of new jobs. It appears they play for pay.

    Patent reform is a fraud on America. It is patently un-American.

  2. Gene,

    You and Kappos continue to push the theory that it is only practical to convert to a first to file system.

    “Kappos’ explanation of the long odds facing a small entity claiming to be the first to invent but who filed the patent application second. Kappos likened the odds of such a Junior Party prevailing to the odds of being bitten by a Grizzly Bear and a Polar Bear on the same day. He then went on to say that you have to go back to FY 2007 to find a prevailing small entity Junior Party in an interference. As Kappos explained, those who think first to invent is a benefit for small entities are living a lie, which is certainly true, but many will not like to hear that truth.”

    There are two problems with this “practical” answer: 1) the first person to file is not the inventor logically or morally, and 2) the unintended consequences of a first to file system. A system that is supposedly practical but is not just will not succeed in spurring innovation. The real answer is to reduce the burdens associated with interferences, not to trash the morally and logically correct answer – first to invent.

    A first to file system will result in many poorly thought out patent applications increasing the PTO’s workload and increasing the number of Continuations-In-Part (CIPs). The confusion created by this system of filing early and then following up with corrected applications will result in litigation being more expensive and less certain. In addition, this system will further bias the patent system in favor of large entities. Large entities will use a first to file system to flood the PTO with patents to overwhelm small entities and individual inventors in the race to the patent office. Small entities and individual inventors will never be able to compete financially in this race to the PTO. According to the SBA, most emerging technologies are created by small entities not large entities. As a result, we need to make sure that our patent system is friendly for small entities if we want it to encourage innovation.

    The result of the first to file system along with the publication system in the rest of the world has been to create a patent system for large entities. The number of filings by small entities in these countries is trivial compared to the number of patent filings by small entities and individual inventor in the U.S. There is no evidence that first to file system has spurred innovation in those countries that have this system. So the “truth” here is that the first to file system is not designed to spur innovation – it is a further attempt to bias the patent system in favor of large corporations.

  3. “1) the first person to file is not the inventor logically or morally, ”

    If there is an interference-type situation at all, there is no “the inventor”. There are two inventors. It’s not at all clear that either of two inventors has the logical or moral high ground in the patent office simply because he invented the subject matter at an earlier date. Each of them arrived at the idea independently, and the idea was at the time novel and inventive over all the art they had before them. Take for example calculus, “invented” (ignoring 101, of course) independently by Newton and Leibniz. And some time earlier, arguably by Archimedes. None of them had access to the “art” produced by the others. Was the contribution of Leibniz diminished in any way by that of Newton, who scrupulously avoided giving his invention to the public?

    If anything, the person who logically and morally deserves to be rewarded with a patent is the one who gives the invention to the public, i.e. the first to file. The patent system is designed to promote disclosure to the public. If you invent something and give it to the public in exchange for a patent, what business have I to later run to the patent office and claim your patent as my own because I invented it too?

    In answer to your claim that “Small entities and individual inventors will never be able to compete financially in this race to the PTO”, I ask you how small entities are expected to fund an interference when they lose the race. Which should be happening most of the time anyway, since large entities that file internationally are racing but small entities are encouraged to complacently rest on their dates of invention. That is, in the remarkably rare (as in fact it is) cases where a small entity and a large entity invent the same thing at around the same time. In the vast majority of cases where there is no contemporaneous invention, this really isn’t a big deal at all, other than to encourage inventors to promptly disclose their inventions.

  4. IANAE

    1) The inventor is the first to create an invention: If I recreate Calculus today without any knowledge of Calculus that just makes me clever it does not make me the discover of Calculus. If I “invent” the incandescent light bulb today without any knowledge of the incandescent light bulb that does not make me the inventor of the incandescent light bulb. Your statement that the first one to disclose an invention to the public is the first true inventor perverts the definition of an inventor. Invention is about creation not disclosure.

    2) If interferences are so rare then there is no reason to eliminate them.

    3) World patent system: Just because the rest of the world has adopted a system that is unfair to small inventors and individual inventors is no justification to follow in their footsteps. Their system has not been nearly as effective at producing technological advances as our system. Instead of giving in to the poor system practiced around the world, we should demand that they adopt the morally and logically correct rule – first to invent.

  5. Staff-

    I agree with your assessment about Rai, she did back patent rule changes that would have damaged independent inventors, biotech and pharma as well. Kappos, on the other hand, opposed those rule changes and did so by submitting an affidavit in support of striking the rules at the Eastern District of VA.

    Can you elaborate on what rules you think Kappos backed that would have injured independent inventors? Is this just more of “he is an IBM guy, IBM is big, therefore he wanted to injure independent inventors”?

    For the record, my opinion is Kappos is not attempting to injure independent inventors. Quite the opposite. His changes in the Office and changes he is supporting in Congress would significantly assist independent inventors. The incentive independent inventors will have under patent reform is to do what they should have been doing all along, which is apply as early as possible and not act as if there is a grace period.

    -Gene

  6. In a round about way, while at IBM Kappos then backed the patent bill as it stood which would have given the PTO extended powers to make rules in which case the proposed new rules would have in fact been the new rules -crippling small entities. If Kappos is going to win over small entities, he will have to earn it. Stop backing patent bills (they are not reform) which will kill us. Things are bad enough as it is with the PTO forcing us to fight to get our patents which cripples our ability to get funding and even forces us to lose foreign rights. Then when they finally give us our patents through years of appeal or litigation against them they grant re-exam the moment we begin to assert them against large infringers (95% of requests are granted even though the law requires “a substantial new question”). The patent system teeters on becoming a sham for small entities -a shell game. Like Confucius, we will believe Kappos based on what he does, not what he says.

  7. “If I recreate Calculus today without any knowledge of Calculus that just makes me clever it does not make me the discover of Calculus.”

    It makes you “a” discoverer of calculus. There is no “the” because the act of invention or discovery is not unique. Look how many people independently discovered the Americas, or that the earth is round. Anyone who invents is an inventor, and the constitution doesn’t say anything about the first inventor in time being special. All it says is that the exclusive right is given in exchange for the invention, to promote the useful arts.

    Suppose you file a patent application for an invention. Later, maybe even after it is published, I decide that I invented that invention first. So what? I’m no more an inventor than you, I didn’t do anything more novel or inventive than you, and I didn’t even give the PTO/public anything it didn’t already have. What logic entitles me to any rights at all, other than the curious language of the statute that wasn’t important enough for any other country in the world to adopt or maintain?

    If getting a patent is important to you, go to the patent office and ask for it. What could be simpler?

    “Your statement that the first one to disclose an invention to the public is the first true inventor”

    I never said that. I said the first one to disclose an invention to the public should be the one who gets paid for advancing the public knowledge of the useful arts.

    “2) If interferences are so rare then there is no reason to eliminate them. ”

    No reason to keep them, you mean. If interferences are rare, and junior parties winning them are even rarer, let’s call the system what it is. A de facto first-to-file system.

    “Their system has not been nearly as effective at producing technological advances as our system.”

    People keep saying this, but nobody ever backs it up. Why assume that the insatiable curiosity and industriousness of the American people credits its entire existence to the patent system? The US is a culture of exploration, innovation, competition, and one-upmanship with or without the patent system, and has been since the continent was first colonized. Such a minor tweak as going from a first-to-invent-with-almost-no-interferences system to a first-to-file system is not going to kill that.

    Besides which, in the vast majority of cases there isn’t even a second-to-file on the same invention. This change affects pretty much nobody. People just need it explained to them that way, instead of being frightened that Obama is once again destroying America with his wacky socialist policies.

    “the morally and logically correct rule – first to invent.”

    [citation needed]

  8. Wow, “95% of (reexamination) requests are granted even though the law requires “a substantial new question” – that is damning.

  9. Agree. 95% is shocking . . . and atrocious.

  10. Why is 95% shocking? All you have to do is raise a question, not even prove it or show it on balance of probabilities, and if you didn’t have a question you wouldn’t have filed the re-exam in the first place.

    When was the last time you saw a patent litigated where the defendant couldn’t come up with a substantial new question of patentability?

  11. Raising a question is easy, isn’t it?

    Done.

    However, let’s not be disingenuous.

    Raising a substantial new question of patentability. That’s something else.

    First, the question is directed to patentability. Second the question must be a substantially new question of patentability. This means that the question must rely on some prior art that exceeds the standard already met by the Office in granting the patent. Now I am not saying that the question must overcome a clear and convincing hurdle, but it must be a different question, and not just different, but substantially different.

    The guidelines call for a request that “clearly sets forth in detail what the requester considers the “substantial new question of patentability” to be in view of prior patents and printed publications. The request *>must< point out how any questions of patentability raised are substantially different from those raised in the previous examination of the patent before the Office."

    Of course, it does matter what the definition of "is" is, and the definition of "substantial" begs to be provided.

    The word is undefined in patent law.

    I would expect the overturn rate, based on a likelihood or preponderance standard to be well higher than the "substantial" standard for admitting patents into reexam. If 95% pass a Substantial questionability filter, how many should fail out at a preponderance filter? Nigh a 100%, no?

    It appears that the supposedly wide open welcome gate of inviting people to submit their applications for patent has found a home in the revoking patents area. How can this be when the Office proclaimed quality metrics have been at their highest? Doesn't this conversely mean that 95% of the time, the Office is admitting that it hasn't done its job right the first time, missing such substantial prior art? Either way, the statistic is damning.

    It is interesting to note:
    "Thus, a reexamination request relying on previously applied prior art that asks the Office to look at the art again based solely on the Supreme Court’s clarification of the legal standard for determining obviousness under 35 U.S.C. 103 in KSR, without presenting the art in new light or different way, will not raise a substantial new question of patentability as to the patent claims, and reexamination will not be ordered."

  12. Ah, the flat earth society discusses reexamination. Does it occur to anyone that the only patents being reexamined are those that matter and have, hence, been given far more scrutiny than what the paltry PTO examination fee can bring to bear. I would be shocked and dismayed if the acceptance rate would be any less than 95% for reexams. It ought to be 100%. But, once subject to reexam, then no more patent and printed publication based challenges. This is pretty much the outcome. The notion that 1st to file is detrimental to small entity or single inventors is idiotic. You should be grateful. If no one, but you, is ready to invest in your patent, that is a good market indicator of its worth. Move on.

  13. “Doesn’t this conversely mean that 95% of the time, the Office is admitting that it hasn’t done its job right the first time,”

    No, a 5% allowance rate on re-exams would prove that. This statistic just means the PTO is willing to take another look. That’s what reasonable people do when substantial new questions are raised. They reconsider their decisions.

    If you want to make the point that the PTO is admittedly not perfect, you’ll get no argument from me. But even the court system (also charged with determining the validity of patents) has multiple levels of appeal, because we know that not everybody gets everything right the first time. It’s not a design flaw of the system, it’s because the system is run by overworked people on budgets.

  14. Now I am not saying that the question must overcome a clear and convincing hurdle, but it must be a different question, and not just different, but substantially different.This means that the question must rely on some prior art that exceeds the standard already met by the Office in granting the patent.

    The guidelines call for a request that “clearly sets forth in detail what the requester considers the “substantial new question of patentability” to be in view of prior patents and printed publications.Second the question must be a substantially new question of patentability.

    The request *>must< point out how any questions of patentability raised are substantially different from those raised in the previous examination of the patent before the Office.First, the question is directed to patentability.

    Now I am not saying that the question must overcome a clear and convincing hurdle, but it must be a different question, and not just different, but substantially different.This means that the question must rely on some prior art that exceeds the standard already met by the Office in granting the patent.The guidelines call for a request that “clearly sets forth in detail what the requester considers the “substantial new question of patentability” to be in view of prior patents and printed publications.Second the question must be a substantially new question of patentability.The request *>must< point out how any questions of patentability raised are substantially different from those raised in the previous examination of the patent before the Office.First, the question is directed to patentability.

  15. “Now I am not saying that the question must overcome a clear and convincing hurdle, but it must be a different question, and not just different, but substantially different.”

    No, in fact it doesn’t even need to overcome a balance of probabilities hurdle. It just has to raise the question. That’s not entirely unlike a reasonable doubt standard.

    Substantially different is a pretty low bar, too. If there’s one claim limitation the examiner didn’t find in the prior art, and you found that limitation in prior art that’s not on the cover, surely that raises a question of patentability that is both substantial and new.

    If you (or others) want to make the case that re-exam is too easy, you should show that it’s being granted on “questions” that are actually insubstantial or otherwise defective. The 95% statistic alone won’t do it. It’s a perfectly reasonable number, considering how easy it is to meet the test. Just because 95% is a really good mark in school, that doesn’t mean something has gone wrong at the PTO.

  16. This is often a pretty decent blog page. I’ve been back many times over the past seven days and want to subscribe to your feed using Google but can not figure out the right way to do it accurately. Do you know of any guides?