Panel 2 kevin outterson

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  • 1. Pharmaceutical Patent Policy Options For Brazil Kevin Outterson mko@bu.edu Associate Professor of Law Boston University School of Law 1
  • 2. Topics • Patent Failure • Pharmaceuticals • ACTA 2
  • 3. Topics • Patent Failure • Pharmaceuticals • ACTA 3
  • 4. Why don’t patents work like property? Land Patents • Registry, third party • Hidden claims, low quality verification, deference to opinion letters, little fact-finders deference • Physical possession • Scope broader than • Low risk of invalidity, title embodiments; patents and insurance claims are cheap • No insurance, relatively high risk of invalidity Bessen & Meurer, BU Law: Patent Failure
  • 5. The Notice Function of Property Law ? An expensive mistake! 5
  • 6. Notice Function of Patent Law Kodak v. Polaroid • Failed attempt to invent around • Patent review started seven years before product launched • 250 patents reviewed, “67 written and countless oral opinions” • 50 potential imaging chemistries reviewed • $900 million damages and interest (1980s) 6
  • 7. Evidence Suggests Much Infringement Is Inadvertent • Defendants are large, spend a lot on R&D, and obtain a lot of patents (not classic pirates or free riders) – only 4% are found to be copyists • Increasing R&D increases hazard of lawsuit 7
  • 8. E-Data Lawsuits • Freeny invented retail kiosk that would produce music recorded on cassette tapes • Patent claim language was abstract, possibly covered all sales over the internet • E-Data got the Freeny patent and asserted it against 75,000 e-commerce sites, licensed 139 companies, and filed 43 lawsuits • Poor notice because meaning of claim language was unstable • “Material object” (1980: cassette tape, 2000: hard drive?) • “Point-of-sale location” (1980: store, 2000: home?) 8
  • 9. Search Cost • Patent flood – E-commerce firm faces b/w 4000 – 11,000 patents – Semiconductor firm faces hundreds of patents – 3G standard 7600 patents • Perverse willfulness doctrine • “Distant” plaintiffs 9
  • 10. Parties to Lawsuit Same primary industry No industry overlap 29% 28% Weakly overlapping industries 43% Patent Failure 10
  • 11. Evidence on search • Cockburn & Henderson survey: – 65% of firms do not conduct a patent search before initiating product development • 39% of applicants disclose zero prior art patents (research personnel told not to read patents) 11
  • 12. Patent Lawsuits Filed in U.S. District Courts 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 1970 1972 1974 1976 1978 2004 2006 12
  • 13. Litigation Growth Suits/R&D ($b): 1987: 1.7 1999: 2.9 Patent Failure 13
  • 14. Pharma Offers Clearer Notice • Lipitor: Trans-6-[2-(3- or 4-carboxamido- substituted pyrrol-1-yl)alkyl]-4-hydroxypyran-2- ones • Olanzapine: Patent Failure 14
  • 15. Technology Differences Suggest Notice Problems Probability Claim Con- Value suit/patent struction ($1,000) All 2.0% 1.00 78 Chemical 1.1% 0.84 333 Biotech 3.2% 2.37 NA SW 4.6% 2.18 55 BM 13.7% 6.67 NA
  • 16. Patent Reform to Improve Notice • Make patents more transparent – continuation reform – better disclosure • Better claim interpretation – Specialized trial courts – Expand PTO claim construction activity – More deference to PTO and trial courts • Robust definiteness requirement • Limit remedies against innocent infringers
  • 17. Helpful Steps by Courts • eBay -- increases bargaining power of defendants and reduces “patent tax” • Seagate -- decreases deterrent to patent clearance • Festo -- improves scope clarity • KSR, In re Fisher -- stem patent flood • In re Bilski -- decreases abstract claiming 17
  • 18. Implications for Brazil • Don’t accept US IP law as the gold standard • Don’t accept standards tougher than US law • Look for local allies – industries that might not be IP maximalists
  • 19. Pharmaceuticals • Patent Failure • Pharmaceuticals • ACTA 19
  • 20. Static v. Dynamic Effects • Static losses from higher prices • Dynamic gains from sales incentivizing R&D • US deploys many balancing features 20
  • 21. Static v. Dynamic: Global • Static losses are higher and dynamic losses are lower in poorer countries (FM Scherer & others) • Welfare losses from differential pricing failures are greater in countries with higher Gini coefficients (Flynn, Hollis, Palmedo, JLME 2009) 21
  • 22. Bottom Line: Countries should exercise significant flexibilities in Rx patents based on wealth & inequality 22
  • 23. US Rx Policy Debates • Hatch-Waxman generic entry & regulatory linkage in FTAs • Biosimilar legislative debate in US Congress: 5 v. 12 years of DE • Ebay = liability rule = CL • KSR & progeny = nonobviousness • Reimbursement 23
  • 24. Bottom Line: • Don’t accept anything stronger than current US law • Evaluate US IP flexibilities 24
  • 25. Post-TRIPS Rx Options 1 • Pipeline patents (Cendrowski, 2009) • Article 31 CL (scope) (Outterson, 2009) • Parallel importation/global exhaustion rule (Outterson, 2005) • Functional Article 31bis (Abbott & Reichman JEL 2007; Goodwin AJLM 2008) • Prizes (Love & Hubbard; Hollis & Pogge) 25
  • 26. Post-TRIPS Rx Options 2 • Promote generics –Reduce evergreening –Improve generic quality –Automatic substitution –Insurance reimbursement rules –Collusive settlements 26
  • 27. Post-TRIPS Rx Options 3 • Reverse linkage • Global Orange Book • Regional drug registration • Liability rules (Ebay) • Scope & obviousness 27
  • 28. Post-TRIPS Rx Options 4 • Reimbursement (Outterson & Kesselheim 2009; Frank & Newhouse 2008) • Conditions on clinical trials (HPV) • Conflicts of interest in medicine & research • Conditions on university licenses (UAEM)
  • 29. Regime Shifting II • Patent Failure • Pharmaceuticals • ACTA 29
  • 30. ACTA • Supplements WTO judicial model with private enforcement • Drive for substantive harmonization • Secret negotiations – 18th Century diplomatic model 30
  • 31. ACTA • Improperly conflates trademark, pharmaceutical safety, patent disputes (Outterson & Smith 2006; Outterson 2009) • Dutch seizures of losartan & AIDS medicines • Goal is to hinder legal parallel trade & CL in pharmaceuticals
  • 32. Bottom Line: • No assurance that global public health is a priority in ACTA • Transparency • Carve out pharmaceuticals & patents • Sean Flynn @ American University - Law
  • 33. Papers at ssrn.com Kevin Outterson mko@bu.edu Associate Professor of Law Boston University School of Law 33