Proposed Patent Reforms Worry Device Industry

Industry groups say the Patent Reform Act of 2007 threatens to “devastate life sciences investment” by weakening the patent system for medical devicemakers. Provisions regarding apportionment of damages in lawsuits, rulemaking authority for the Patent and Trademark Office (PTO) and post-grant patent oppositions will “create a chilling effect on the industry,” according to the Medical Device Manufacturers Association (MDMA).

The legislation passed the House Subcommittee on Courts, the Internet and Intellectual Property last month and is now pending markup by the full House Judiciary Committee. The Senate Judiciary Committee held a markup on its version of the legislation June 21.
Under the apportionment provision, damages for patent infringement would never be more than the economic value attributable to the innovation, AdvaMed said.

In the medical field, many “critically important” advances are incremental and build upon prior technology. By apportioning damages to the economic value attributable to the specific contributions over the prior art, the act would severely diminish the value of medical device patents, AdvaMed added.

MDMA agreed, saying, “Even if the patented invention is truly the reason for the sale of an entire product, but … is virtually costless to add to the product, the patentee would obtain virtually no royalty.”

Industry Opposes ‘Second Window’

The industry groups also oppose the “second window” in the post-grant opposition provision. This is a second chance to challenge a patent after the first year if the petitioner receives a notice of infringement or can prove the patent causes significant economic harm.

The Senate Judiciary Committee passed an amendment June 21 revising the post-grant opposition provision so that a petitioner must have both a notice of infringement and proof of significant economic harm, instead of one or the other.

Unlike many other industries, the life cycle of medical devices is relatively short — often no longer than seven to 10 years. The ability to quickly capture, and then maintain, market share over this short period is crucial, AdvaMed said.
If a competitor were allowed, at any time, to commence a post-grant opposition proceeding, it could continue to infringe on the patent during the proceedings, which can be lengthy. This would “significantly limit” the already short exclusivity period for medical devices, AdvaMed said.

AdvaMed said it is particularly concerned that the combination of limiting damages and allowing a second window of post-grant oppositions could encourage “patent pirates,” including foreign companies, to copy the inventions of U.S. medical device companies. After an infringement action is brought, an opposition proceeding could delay any litigation, AdvaMed said, adding that following a finding of infringement, it is possible that only minimal compensation would be paid. “This perverse outcome must be avoided.”

AdvaMed said that recently proposed changes to the bill by Rep. Howard Berman (D-Calif.) and several other lawmakers do not resolve its concerns. “The very limited proposed bases under which a company could not utilize the ‘second window’ will not lessen the impact this portion of the act would have on medical device companies.”

PTO Authority

In addition, substantive rulemaking should not be delegated to the PTO, the groups said. MDMA said the PTO has “made it clear” it wants to limit continuation filings to reduce backlog, despite opposition.

The enhanced rulemaking authority in the House version would permit these limits, significantly reducing the ability of smaller life sciences companies to secure coverage for their inventions, it added.

In early stages, companies do not have the resources to file claims for every invention disclosed in patent applications and they use continuations to overcome this limitation. Also, because there is usually a “critical time window” for the applicant to demonstrate value to prospective investors, there is great pressure to accept quick issuance of narrower claims, MDMA said. The applicant uses the continuation process to then pursue broader protection.

The committee is scheduled to continue working on the legislation June 28. — April Astor, Breda Lund