Once again, a plethora of interesting events has occurred since the last time we stopped by. What was the biggest headline? That decision may be up for grabs, but certainly, the $500 million penalty paid by Ranbaxy Laboratories is high on the list. The generic drug maker ponied up to settle criminal and civil charges stemming from a long-running manufacturing failure and cover-up scheme.
The US Justice Department called this the largest “financial” penalty paid by a generic drugmaker for violating the Food, Drug & Cosmetic Act. Ranbaxy pleaded guilty to seven felony counts, including three for making false statements to the FDA; paid a $120 million criminal fine and forfeited $20 million. Another $350 million was paid for causing federal healthcare programs to overpay for various drugs.
For those who may not recall, Ranbaxy used raw chemicals from unapproved sources, fabricated in-house test data to meet FDA standards and concealed these activities from FDA inspectors by falsifying records. These infractions went on for several years, mostly at two plants in India, but also involved senior management there and in the US.
Earlier this week word came from the Intellectual Property Exchange International Inc. (IPXI) that the U.S. Department of Justice Antitrust Division issued its Business Review Letter (BRL) upon the culmination of its eight-month review. The DOJ believes that the IP Exchange business model proposed by IPXI is capable of producing market efficiencies in the patent licensing arena and is likely to be pro-innovation. Although no permission is required of the DOJ before IPXI opens its exchange, having this review of the DOJ Antitrust Division complete has to make IPXI and Exchange participants much more at ease as the move closer toward their attempt to revolutionize IP licensing.
But who is IPXI and what are they trying to accomplish?
IPXI is the first financial exchange that facilitates non-exclusive licensing and trading of intellectual property rights with market-based pricing and standardized terms. At its core is what IPXI calls a “Unit License Right” or ULR. According to IPXI, “ULR contracts transform private licensing of technology into consumable and tradable products, allowing for improved market transparency, smooth technology transfers, and increased efficiencies.” Indeed, Marshall Phelps, an IPXI Board Member who is widely known as a pioneer in the field of IP licensing, including implementing groundbreaking initiatives for both Microsoft and IBM, says: “the new model that IPXI offers is a major breakthrough in the way that IP will be licensed on a non-exclusive basis.”
A rather astonishing thing is happening currently in the United States Court of Appeals for the Fourth Circuit. The United States federal government, by and through the Department of Justice, is actually arguing in favor of stripping licenses to U.S. patents away from seven companies so that they can be shaken down by a subsequent acquirer of those patents. Yes, the United States government in its infinite wisdom believes that a negotiated patent license ought to be stripped away from companies who have detrimentally relied on the licenses in making business decisions, advancing their own research and development, and with respect to manufacturing and distributing products.
Collectively you rise as one and say — “that can’t be!” What nonsense are you trying to spew? Sadly, it is true and if you keep reading you will soon understand all the sordid details. But suffice it to say that to call this position of the government anti-patent would be unfair to thoughtfully taken positions that call into question one or more patent rights. Indeed, this position can only be properly characterized as ridiculous, garbage, inane and/or idiotic.
The case is In re Qimonda AG, which arises from the insolvency of Qimonda AG, which is a German semiconductor manufacturer headquartered in Munich.
The Federal Trade Commission (FTC) and Department of Justice (DOJ) announced today that they will hold a joint public workshop on December 10, 2012, to explore the impact of patent assertion entity (PAE) activities on innovation and competition and the implications for antitrust enforcement and policy.
This workshop will examine the economic and legal implications of PAE activity, as distinct from prototypical “non-practicing entity” (NPE) activity, such as developing and transferring technology. By contrast, PAE activities often include purchasing patents from existing owners and seeking to maximize revenues by licensing the intellectual property to (or litigating against) manufacturers who are already using the patented technology.
Supporters of the PAE business model say that it facilitates the transfer of patent rights, rewards inventors and funds ongoing research and development efforts. Critics describe adverse effects on competition and innovation, including increased costs and a lack of technology transfer, ultimately taxing consumers and industry.
Yesterday, Kolon Industries Inc. and several of its executives and employees were indicted for allegedly engaging in a multi-year campaign to steal trade secrets related to DuPont’s Kevlar para-aramid fiber and Teijin Limited’s Twaron para-aramid fiber. The charges were announced today by U.S. Attorney for the Eastern District of Virginia Neil H. MacBride; Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; and Jeffrey C. Mazanec, Special Agent in Charge of the FBI’s Richmond Field Office.
Headquartered in Seoul, South Korea, Kolon was indicted by a grand jury in Richmond, Virginia. The indictment charges Kolon with one count of conspiring to convert trade secrets, four counts of theft of trade secrets, and one count of obstruction of justice. The indictment further seeks forfeiture of at least $225 million in proceeds from the alleged theft of trade secrets.
With the advent of new digital items and applications that did not exist even five years ago, it is not surprising that the FTC and DOJ are eyeing the handful of large companies that dominate the marketplace for them with a watchful eye (anybody else picturing Sauron right now?) It is even less surprising that Apple, Inc. has been pinched by the Justice Department with claims that it violated the Sherman Act with its anticompetitive behavior. This is not to say that Apple actually did anything illegal – but something about having more cash than your government makes such a suit inevitable. (Ask Google how its $500 million settlement for online advertising felt.) This leads us to today’s topic: the DOJ’s antitrust suit against Apple and six other book publishers alleging e-book price-fixing.
As mentioned in previous Antitrust articles, American Antitrust law is a sprawling and complex body of law. Naturally, then, any article addressing an antitrust issue must stick to a very narrowly defined set of issues. For this article’s purposes, it will suffice to simply define price fixing and examine why the government frowns on it. To begin with a bit of background, American antitrust law (more appropriately called “competition law”) starts with the Sherman Act of 1890, which prohibits agreements or practices that restrict free trading and competition between businesses.
Last week at the 6th Annual Patent Law Institute presented by the Practising Law Institute last week in New York City I found myself a little star struck; or maybe “surprised” is the right way to characterize it. The term “All Star Panel” is thrown around too liberally in the CLE world and relative to programming at various annual meetings. Having said that, the panel titled “Dialogue Between the Bench and Bar” was comprised of some of the biggest names in the industry, and they didn’t seem interested in pulling punches. Nothing seemed sacred, at least in terms of topics, which lead to a lively and entertaining discussion that lasted 90 minutes without a single question from either the live audience or the webcast audience.
The panel that ended the first day of the program was moderated by Don Dunner of Finnegan, Henderson, who is the unofficial “Dean of Federal Circuit Advocates.” I had the pleasure of interviewing Dunner nearly a year ago and always enjoy listening to his thoughts and soaking in his wisdom. To his left was Chief Judge Randall Rader of the United States Court of Appeals for the Federal Circuit, and to Rader’s left was Seth Waxman former Solicitor General of the United States and now of Wilmer Hale. To Dunner’s right was Judge William Young of the United States Federal District Court for the District of Massachusetts, and to Young’s right was John Whealan, currently of George Washington Law School and former USPTO Solicitor.
The discussion was lively, perhaps even explosive. You could nearly see sparks fly when Chief Judge Rader continued to pepper Waxman with question after question about his opinion on the propriety of parties lobbying the White House in order to obtain a favorable amici brief from the Department of Justice. Rader zeroed in on the slippery slope and obviously is not pleased with the mixing of law and politics, saying: “this is a cause for concern… Politics and law have a divide.”
Congratulations are in order for the Google Legal Team! Yesterday Corporate Counsel announced that Google Inc. was selected as the winner of the 2011 Best Legal Department competition. United Parcel Service, Inc., and WellPoint, Inc., were also given honorable mention recognition. The detailed profiles of all three will be published in the magazine’s June issue and also available online.
This story caught my eye because Anthony Paonita, Editor in Chief of Corporate Counsel, cited the selection of Google as the winner due to the fact that the company “has had to deal with the sometimes messy consequences of its frequent marketplace disruptions.” Paonita went on to explain that the Google “win stems from these cases that “test the limits of laws perpetually lagging behind new technology. Can advertisers use trademarked terms in Google ads? Can Google scan and make available copyrighted but out-of-print books? Is the company liable if results of its search engine direct users to counterfeit or pirated products?” But wasn’t the resolution of the trademark terms a loss for Google at least indirectly? Isn’t the so-called Google Book Settlement on hold having been rejected by the district court? And didn’t Google just set aside $500 million to cover the cost of fines relating to an antitrust investigation initiated by the Department of Justice? See Google puts $500 million in antitrust pot.
At this time of the year all typically sit back and reflect on the year that has been, spend time with family and friends, watch some football and set a course to follow into the new year. It is also that time of the year where we are inundated with lists, top 10 this, top 10 that, it gets rather mind numbing after a while. So with that in mind — I have my own top 10 list. I know, I know, but they are so much fun to put together and there is something useful about looking back and reflecting that helps put things into perspective.
Without further ado, here are the top 10 events that shaped the patent, innovation and intellectual property industry during 2010 — at least according to me, and with a heavy patent emphasis. What did you expect?
PTO Director Kappos says the Patent Office will keep issuing gene patents.
On Monday evening, November 1, 2010, David Kappos, Undersecretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, told the Dow Jones news service: “The USPTO at the present time is maintaining the status quo. We’re continuing with current procedures as they are.” This could set up a contentious and public policy battle between the United States Department of Commerce and the United States Department of Justice. This battle of agency titans — DOJ v. DOC — comes as a result of the Department of Justice filing an amicus brief in The Association of Molecular Pathology v. The United States Patent and Trademark Office, which actually does not take the side of the USPTO, but rather says that what the USPTO is doing is wrong. Thus, in an extremely odd twist the DOJ is supporting the plaintiffs’ against the United States Patent Office.
On Friday, October 29, 2010, practically on the eve of a national election that will in all certainty be an enormous rebuke of the Obama Administration and the Democrats’ agenda in general, the Department of Justice filed an amicus brief at the United States Court of Appeals for the Federal Circuit that would destroy the U.S. biotechnology sector. In an astonishing and irresponsible policy shift that directly contradicts the long-standing policy of the United States federal government and a variety of agencies, the Department of Justice is promoting the dialing back of what is considered patentable subject matter and is urging the Federal Circuit to rule that “isolated but otherwise unaltered genomic DNA is not patent-eligible subject matter under 35 U.S.C. § 101.”
Sculpture: Man wrestle horse, outside FTC. Signifies taming of the markets.
The Federal Trade Commission and Department of Justice on Friday, August 19, 2010, issued revised Horizontal Merger Guidelines that outline how the federal antitrust agencies evaluate the likely competitive impact of mergers and whether those mergers comply with U.S. antitrust law. These changes to the Guidelines mark the first major revision of the merger guidelines in 18 years, and is intended to give businesses a better understanding of how the FTC and DOJ will evaluate proposed mergers moving forward. For example, the new Guidelines explain that the effect on innovation is something that will be considered when determining whether a horizontal merger is acceptable. The rationale is relatively straight forward: “Competition often spurs firms to innovate.”