HEALTH INDUSTRY ONLINE - Surviving The Perfect Storm Brewing Over Patent Law In The Healthcare Industry

In late October of 1991, three unique storm fronts converged off the coast of Nova Scotia creating a ferocious hurricane that would cost the lives of six men on the ANDREA GAIL. Similar to the convergence of these three storm fronts is the convergence by the three branches of our government toward making it harder to obtain and enforce patents. The healthcare industry has detected this storm brewing and is now taking steps to try to reduce any further weakening of the patent laws that would discourage expensive research into next generation systems and processes, which arguably make up the bulk of its real assets.

THE JUDICIARY FRONT

In KSR International v. Teleflex Inc., decided on April 30, 2007, Justice Kennedy delivered the opinion of the U.S. Supreme Court reversing the U.S. Court of Appeals for the Federal Circuit's rigid application of its guidelines developed over the last twenty five years for determining when a patent, that combines two or more previously known features, is invalid as "obvious." In this unanimous decision, the Supreme Court effectively called on the district courts to become more actively involved in striking down weak combination patents resulting from nothing more than what the Court called "ordinary innovation."

KSR is one of three recent opinions (eBay v. MercExchange and MedImmune v. Genetech being the other two) reversing Federal Circuit decisions that had held in favor of patent owners - a trend that may indicate the Court's sympathy with those (including agencies such as the Federal Trade Commission) who contend that the patent system grants and then enforces too many questionable patents.

While the KSR decision is being applauded by technological companies such as Cisco Systems, Inc. and Microsoft Corp., and financial service companies, such as Goldman Sachs Group, Inc., the healthcare industry, including pharmaceutical companies like Eli Lilly & Co. and Pfizer, Inc., along with healthcare product makers such as Johnson & Johnson, view this decision as cutting into the business model of the healthcare industry which uses the twenty (20) years of patent exclusivity to recover its research and development costs.

THE LEGISLATIVE FRONT

While the judiciary front is apparent, the congressional front is rapidly forming. Just this month, legislation, backed by Democratic and Republican leaders, that would make patents harder to obtain and enforce is moving on a fast track. While the larger, more established technology companies have been working the legislation aggressively on Capitol Hill, the healthcare industry is gaining force. Lawmakers have introduced identical bills in the House and Senate in an effort to push legislation through before the 2008 presidential campaign draws nearer. The House bipartisan legislative initiatives have already cleared the House Judiciary Committee on Intellectual Property, are expected to go to the full House Judiciary Committee this month, and could be ready for floor action in July. The Senate bill was also considered earlier this month. Among other patent changes, the legislation promotes a new three-judge tribunal that would consider the validity of patents. This tribunal would be in addition to special administrative proceedings within the U.S. Patent & Trademark Office and litigation where patents can presently be challenged. This new tribunal could be viewed as a means for subjecting patents to open-ended challenges after hundreds of millions of dollars have been spent to develop these new products.

THE EXECUTIVE FRONT

While agencies such as the FTC have made their position clear, the Bush administration front is still cloudy by commending the "bicameral and bipartisan" legislative effort on one hand, while expressing concerns about the detail of the bipartisan bill on the other hand. This cloudy position may clear as the 2008 presidential campaign approaches.

SURVIVING THE PERFECT STORM

To survive the brewing storm, the healthcare industry is now engaging experienced patent counsel who can draft the strongest patent protection possible for their invention. In view of the raised bar on obviousness and possible third venue for attack on the validity of any issued patents, the healthcare industry, rightfully eager for its return on investment, is making its investment up front to make sure their patents are strong enough to pass through the Patent Office and any validity challenges. These engaged patent counsel, particularly those experienced in litigation, will better be able to tell a story to the Patent Office, on summary judgment and at trial, showing that the inventor was more than the KSR "automaton," and that the invention cannot be explained simply as "ordinary innovation."

The ANDREA GAIL, a longliner belonging to a fishing fleet out of Gloucester, Massachusetts, didn't make it home. Hopefully, skilled patent counsel can help your company to survive the perfect storm brewing over patent law.