“Danger!” — The Need for Active Watch of Patent Reform
“Danger, Will Robinson!” These immortal words uttered by the Robot in the 1960s television series “Lost in Space” are now part of our pop culture lexicon when warning of an impending, and sometimes unseen, threat. It’s too bad the Robot is just a fictional character, because as we’ve seen with recent economic and legislative happenings, there are times we could all use someone or something to give us an early warning.
Given the recent turbulence in the markets, imagine how prescient it would have been to have someone yell “Danger, Danger” last spring as you moved all your investment dollars, including the kids’ college money, from the relative safety of that conservative bond fund to the aggressive stock fund when it seemed like the right thing to do. After all, you were only following the advice of CNBC, the leaders in financial news. Oil stocks looked particularly good, and when the experts said stocks can only go up, who were you to second guess them. As you clicked to make that online trade, your warning Robot would have yelled “Danger, Danger! Stock Market Crash ahead!”
Similar warnings might also have been appreciated by many organizations as the Obama administration and a new Congress amends and creates new legislation and regulations. This “Danger” warning certainly would have been appreciated by those major biotechnology companies with local operations when the Patent Reform Act of 2009 was introduced in the Senate in March. The proposed bill provided a statutory methodology to be used in the calculation of damages in patent infringement suits. The methodology would limit damages valuation to the amount of value added by the invention’s improvements over the prior art. The invention’s entire market value would only be considered where the improvements alone constitute the “predominant basis” for market demand. This change, favored by large IT firms who rely on market dominance and not on patents, would severely diminish the value of patent protection. Limiting damages takes the teeth our of patent protection and, while it benefits a few select industries, industries that rely on strong patents to encourage innovation and investment, like the life sciences, would be severely impacted.
Two weeks ago the Senate Judiciary Committee’s approved a modified version of the reform bill that added a “gatekeeper” provision, giving judges more authority to determine how to assess damages. Unlike the original bill, the modified version included no mention of limiting or eliminating the “entire market value” rule or applying “prior art subtraction” before determining a royalty base. The bill, is now heading to a full Senate vote before the House takes up its version of the patent reform legislation.
The modified Senate bill is said to be good news for those who value patents as a means to encourage innovation, investment, and job creation. Indeed, the Biotechnology Industry Organization (BIO), which represents more than 1,200 biotechnology organizations worldwide, recently released a statement saying that “careful compromises on several key issues, including damages and post-grant review … [break] the logjam on the major issues that have held up patent reform for the past several Congresses and will clear the path for a bill to be completed without undue delay.”
If the news is so good, why the warning? It’s because proponents of more radical patent reform, like the supporters of the original bill are lurking, waiting to strike. The Coalition for Patent Fairness, a group representing those who want to weaken the patent system, including big IT and financial services, has been pushing patent reform for years, and it is not giving up. The Coalition is strongly advocating for the damages provision in the original version of the legislation, and it expects there will be a much stronger provision in the House version of the bill. If we could only hear the Robot now, its warning would be sounding for everyone in the Massachusetts life-sciences, cleantech, medical-device, university, and research-hospital communities. “Danger, Danger!” The Robot is right; trouble is ahead.
The danger is that of complacency. The danger is thinking the fight is over, and the fight is certainly not over. The House will be taking up its version of the patent reform bill, H.R. 1260, very soon. In a strange twist that can only happen in politics, Democrats, big banks, and IT giants like Microsoft and Google are on the side of “reform” or weakening the patent system, while opponents include Republicans and labor unions. Strange bedfellows, indeed!
This warning is something to be taken quite seriously. There are things that the Massachusetts innovation economy can and must do in order to see that H.R 1260 gets through the House in a form that helps, not hinders, the revitalization and growth of our economy. A first, and simple step, is contacting your representatives and business leaders. Recently, a contingent of Massachusetts biotech companies, along with MIT and the Massachusetts Biotech Council (MBC), met with Representative Bill Delahunt’s office to make their position clear. One of those in attendance, Donna T. Ward, vice president of , intellectual property at Alnylam Pharmaceuticals, told me afterwards via e-mail: “We were excited about the opportunity to discuss these very critical issues with Rep. Delahunt’s office and House staffers. It is a simple fact that without strong patents, the translation of fundamental knowledge toward innovative medicines will not occur. We hope that others who value strong patents will let their representatives know the importance of these issues.”
Donna is right. Such meetings are very important. As you can imagine, the patent system is typically not high on any congressman’s list, but community members can let their representatives know that it is of utmost importance to them. We need to let our representatives know that this is not an ideological issue between Democrats and Republicans, but rather a practical, business issue that transcends party lines.
In the past—recent years especially—a strong patent system has promoted the successful transfer of technology from our world class universities and hospitals to industries, leading to the treatment of diseases as well as the formation of new industries and jobs. This has been good news for research-rich Massachusetts, a state with many constituents who are employed in the biotech, cleantech, and medical device industries. We may not be as fortunate as Will Robinson to have our own Robot, but we can listen and pay attention to the early warning signs that are out there, and advocate for the right kind of patent reform. If the wrong kind of reform prevails, the strong patent system that is utilized for so much good in Cambridge, throughout Massachusetts, and elsewhere could be lost.