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MIP US Patent Forum 2018

March 13, Convene 810 Seventh Ave, New York

Key Takeaways

International Trade Commission: effective or cumbersome

  • Despite its cumbersome processes, the panel agreed that pursuing an ITC investigation is generally worth it, chiefly because of its ability to grant broad exclusion orders that US Customs will enforce.
  • Mark Began, VP of IP at Boehringer Ingelheim, called prescribed and inflexible deadlines the ITC’s “biggest problem”, but noted that the ITC’s transparency can motivate parties to mediate, particularly in the pharma industry. Began said that “one area where the ITC is more cumbersome than effective is hearings are time constrained.”
  • Douglas Sharrott, partner at Fitzpatrick, said that while some have argued that ITC decisions should be retried in district court because they are not binding, they can still have important consequences. For example, in Delorme v ITC, the Federal Circuit upheld the ITC’s imposition of a $6.2 million fee for violating a consent order, even though the patent in question had been invalidated after the ITC’s investigation. 
  • The ITC’s second-greatest advantage, after its enforcement mechanism through Customs, is its speed, taking fewer than 18 months from filing to a final decision. Sharrott also discussed the ITC 100 day pilot program, saying that only six investigations have been accepted so far. "And just because it is faster does not make them cheaper in any way," he said. 
  • Seth Boeshore, associate at Fitzpatrick, identified the agents in Customs’ IP branch as the most important group to communicate with. From a patent holder’s perspective, it’s important to ensure Customs is on board with exactly what the patent covers and how they can be most effective. On the other side, Boeshore encourages importers to approach Customs agents for approval of redesigned products. 
  • Customs agents are important once exclusion orders have been granted, but Andrew Beverina, investigative attorney at the ITC, says working with someone on his team can help before it gets to that point. As staff that represent the public interest, they can counsel both parties in a case and even review complaints to get them in better shape for the Commission. “Reach out to us,” Beverina said, “because all we do is the ITC, so we have a lot of insight.”

Is the America Invents Act weakening licensing?

  • This panel agreed that while the America Invents Act (AIA) has succeeded in its goal to disrupt patent trolls’ activity, it has also lowered the value of patents across the board because of its high rate of invalidation.
  • Scott McKeown, partner at Ropes & Gray, said this has prompted a reconsideration of the Act, and there are efforts that “aim to make the institution rate less lethal.” 
  • The “lethal” institution and invalidation rate affects the pharmaceutical industry in particular, which counts on patent-holding brand-name companies to spend heavily on R&D. The average $300 million to $1 billion investment is now harder for brands to secure because of the higher risk of patent invalidation post-AIA. Brands argue it runs counter to the Hatch-Waxman Act, which aimed to balance brands’ ability to innovate with generics’ ability to participate in the market.
  • On the other hand, generic drug companies tend to support the inter-partes review (IPR) process – which came out of the AIA – as a low-cost replacement for Hatch-Waxman litigation, as “the Hatch-Waxman system has been gamed,” said Serge Ilin-Schneider, director or IP at Par Pharmaceutical. 
  • Separately, Ilin-Schneider noted that while the value of individual patents may have decreased as a result of the AIA, there are now more patents that exist, and can overlap to form baskets of patents that protect a single product. Therefore, he argues, the level of protection ends up about the same. 
  • The panel agreed that even if the AIA succeeds in improving patents’ quality and limiting troll activity, the PTAB still has a place in terms of its speed of processing and the expertise of its judges, and should not be eliminated. 
  • Scott McKeown mentioned new USPTO director Andrei Iancu's potential for PTAB changes. "The new director mentioned in his confirmation hearings that he is interested in changing to the Phillips standard. I think that is likely to happen this year,” said McKeown.

Ways to protect patents from litigation

  • Changes in venue law since TC Heartland mean that “venue is no longer a slam dunk”, said Dan Stringfield, partner at Steptoe & Johnson. The change serves as an impediment to non-practicing entities (NPEs), and therefore protects certain patents from NPEs’ profit-seeking oppositions indirectly.
  • “NPEs are very gun shy, so you might be able to clean up 50% of them under section 101 or bringing IPRs”, said Gary Lipson, former IP licensing manager at IBM. 
  • Joining Unified Patents or RPX is an active step patent holders can take to deter litigation, and lower their own liability if it does come to that. 
  • The Alice decision, which defined subject matter eligibility, prompted a wave of patent invalidations, particularly around software innovations. The Federal Circuit’s decision in Enfish v Microsoft in 2016 helped balance the reaction to Alice by clarifying that not all software is necessarily abstract, and may be patentable. This and other decisions have served to shore up patents’ defenses when it comes to litigation. 
  • “Section 101 is no longer a silver bullet … the Federal Circuit is recognising that there are factual issues that preclude summary judgement; it’s not just a matter of law”, said Stringfield. Vishal Gupta, partner at Steptoe & Johnson, discussed the Federal Circuit’s evolving approach on patent eligibility including March’s Exergen v Kaz decision. He described the court's approach now as a "touch and feel analysis” about whether something feels new.
  • The consideration of factual arguments opens up further opportunities to defend patents. As long as they are not dismissed out of hand on 101 grounds, cases can get to trial. As a result, Gupta said that “storytelling is going to be a more important part of litigation.” Patent holders will be able to frame their arguments with relevant facts such as emphasising their R&D costs, or precisely how the invention is unique.

Trade secrets

  • This panel agreed – and a show of hands from the audience backed it up – that when all else is equal, in most cases they would prefer to have a patent over a trade secret. However, all is not equal, and time and money are the biggest variables that could make keeping a trade secret a good idea.
  • In terms of time, innovations become obsolete in consumer markets in increasingly short amounts of time. A trade secret may be a good idea for a short-term project that would not be relevant by the time a patent were to be obtained. 
  • Patent applications cost money, while trade secrets are technically free, although there can be some costs associated with keeping the secret such as investing in a file cabinet that locks or another safety mechanism. 
  • Companies may even lose money they didn’t have yet if they decline to apply for patents; investors often look at a startups’ patents or patent applications as indicators of potential. Trade secrets are much harder to evaluate, and may cause some investors to be wary of the venture. 
  • Regarding the recent Defend Trade Secrets Act, the panel agreed that it did not initiate a sea change in the space. Antony Pfeffer, partner at Orrick, said: “It’s a federalisation of something that was already being handled at the state level.”

Latin America patent issues and concerns

  • Otto Licks revealed Brazil and Mexico grant almost 80% of all patents in Latin America every year. According to 2016 WIPO’s Statistical Country Profiles, Brazil ranked #16 in applications filed by residents (China #1) and #9
    in applications filed by non-residents (US #1). Mexico ranked #30
    and #16, while Argentina ranked #38 and #23 and Colombia #46 and #30.
  • There is a wide range of patent pendency in the region, with Brazil the worst – taking eight to 14 years.

Patent pendency

  • Some tips were given on avoiding pitfalls at the BRPTO, Brazil’s patent and trademark office: amendments are only allowed if limited to the subject matter initially disclosed in the application; modifications filed after the request for examination will only be accepted if they narrow the claimed scope of protection; adapt claims to the Brazilian “Jepson” format.; ensure that all claims are supported by the specification; and amend the claim chart to one allowed by a foreign office with similar examination standards (e.g., EPO) to avoid objections by the BRPTO.

Patents and Global Strategy: Competition, Confrontation or Collaboration

  • The panel discussed some practical consideration for SEPs under FRAND. These included appreciating that all SEPs are not created equal, a SEPs portfolio may not be diverse such that a single feature is at issue, all products operating according to a particular standard do not use all the mandatory features, and some products that indicate standard compliance do not fully comply with the standard indicated.
  • There are different royalties for different geographies, as seen in the Unwired Planet v Huawei case in the UK last year and the TCL v Ericsson case in the Northern District of California, with higher rates for US.
  • Marc Sandy Block, counsel, IBM Corporation, discussed the raft of standard essential patent cases between competitors. “What is interesting is that some of these companies are also collaborators with each other but at the same time they are going hammer and tongs over SEPs,” said Block. “We are seeing some very big cases from some very big companies.”
  • Block mentioned the recent FRAND decisions in TCL v Ericsson and Unwired Planet in the UK. He also referenced that some companies have as many as 40 cases in China for their patents. “These are very fundamental cases that talk about how you determine royalties, how you determine what is reasonable, how you determine what the parties can accept and how the industry can live with these different paradigms we are putting forth.”
  • Andrew Hirsch, president, Aligned Business and IP Strategies, stressed that people can rely on the USPTO being a competent office despite the turmoil in Washington DC. “The problem in our country is the US Trade Representative Office has a stick to go beat up countries and we have a White House Office of Intellectual Property Enforcement, a tsar. So we have a very big stick and we have no carrot. The only carrot we have is we have an IP attaché, it is an anemic programme.”




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