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Enclosed please find a copy of Al Engelberg's constitutional law memo on $202 of H.R. 3605. I suggest that it be used as an insert to Bill Haddad's testimony at the appropriate point with an introduction that "we will provide for the record a response to Professor Dorsen's testimony."

Sincerely,

James F. Flug

Enclosure

AMSTER, ROTHSTEIN & ENGELBERG

COUNSELORS AT LAW
PAILNISTRADCMARAS.COPYRIGNT.

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Honorable Robert W. Kastenmeier
Chairman, Subcommittee on Courts, Civil Liberties

and the Administration of Justice
Comunittee on the Judiciary
House of Representatives
Washington, D.C. 20515

Re:

H.R. 3605 Drug Price Competition and
Patent Term Restoration Act of 1984

Dear Mr. Chairman:

I am patent counsel to the Generic Pharmeceutical Industry Association (GPIA) and am submitting this letter in response to the June 27, 1984 testimony of Gerald J. Mossinghoff, Assistant Secretary and Commissioner of Patents and Trademarks, on HR 3605.

In his testimony, the Commissioner suggested sweeping changes in the patent term extension provisions of the bill which would clearly upset the delicate balance on which the compromise embodied in H.R. 3605 is based. The Commissioner claims that these changes are necessary because HR 3605, is too complicated and would create an undue administrative burden on the Patent Office; and that the eligibility requirements for patent extension are too arbitrary and undermine principles of patent law which have existed for over 200 years.

None
of these arguments can withstand scrutiny.

At the hearing, the Comissioner used a chart of
frightening dimensions to illustrate his allegation that
HR 3605 would impose an inordinate administrative burden on
the Patent Office. The appearance of this chart was so
intimidating that it seemed on its face to prove the Comunis-
sioner's point and there was no opportunity at the hearing
to examine its actual content. In fact, the chart is nothing
more than a piece of advocacy which contains an overly
complicated "computer age" breakdown of the provisions of
HR 3605. It is not representative of the manner in which

applications for extensions would actually be processed despite its title. In actual practice, the Patent Office would most certainly require the use of a standardized form of Application for Extension. Similar forms are a normal part of current Patent Office practice. Such a form would obligate the patent holder to provide the necessary information to establish both the eligibility for and duration of a patent extension. I have prepared a model for such a form and it is attached to this letter. This simple, one page fon contains the essence of the Commissioner's useless chart in a practical and usable manner and demonstrates that the "adninistrative burden" amounts to a few minutes of clerical time for each extension application.

HR 3605, expressly permits the Commissioner to rel; upon representations made by the applicant for extension in determining whether or not the applicant meets the eligibility regairements for an extension. The proposed form takes advantage of that provision in a manner which is analogous to the manner in which the Commissioner now relies upon representations of an applicant for an original patent with respect to such matters as prior public use, prior publication or prior sale of an invention. Full disclosure by the applicant for an extension is assured by criminal penalties (18 U.S.c. Section 1001) as well as the possible loss of any patent extension.. In addition, HR 3605 provides that the validity of an extension can be challenged in any patent infringement litigation just as the validity of an issued patent may now be challenged.

In view of the foregoing, it is hard to escape the conclusion that the Commissioner has unfairly characterized the administrative burden actually imposed by HR 3605.

HR 3605 would not make every patent eligible for extension and would limit the length of extensions. The Commissioner claims that these limitations are arbitrary, unduly restrictive and violate principles of patent law which are as old as the patent system. This is a meaningless and unfair criticism since the idea of patent extension itself is a radical departure from the basic principles of the patent system. As the Commissioner certainly knows, the issuance of a patent carries with it only the right to exclude others from the practice of an invention and was never intended to provide any guaranteed period of commercial exploitation to the patent owner. In fact, the patent owner's ability to derive profit from a patented invention has always depended on a variety of factors which are not relevant to the date on which a patent is granted. These include federal and state laws which might restrict or prohibit the use of a patented invention on safety, moral or

other grounds; the existence of an earlier-issued blocking patent; the time and money needed to commercialize an invention; the existence of a market; etc.

About 20 years ago, when the safety and efficacy requirements of the current food and drug law were first enacted, the Commissioner of Patents took the position that a patent covering a drug should not be granted unless and until the FDA had ruled that the drug was safe and efficacious. At that time, the highest patent court ruled to the contrary based, in part, on the argument made by research intensive drug companies that the issuance of patents for non-commercialized products would spur the investment necessary to develop these products. See Application of Anthony 414 F.2d 1383 (CCPA 1969). The issuance of a patent on a drug product at an embryonic stage of its development, is inconsistent with the argument that a patent should guarantee its owner 17 years of commercial exploitation. Yet, that has been the practice in recent years and it accounts for far more of the loss in comercial patent life than regulatory delay.

It is well-known that the impetus for patent term extension legislation came from the research intensive drug companies through the lobbying activities of the Pharmaceutical Manufacturers Association. PMA produced a mass of questionable statistics which were designed to support a claim that commercial patent life had shrunk to as low as 7 or 8 years. It heavily relied on that data to argue for legislation which would have extended the life of every patent for up to 7 years. In the course of legislative hearings on earlier versions of patent extension, it became apparent that the PMA statistics were misleading and that pre-marketing regulatory review was only one of many factors which had an effect on the length of a comunerical monopoly. A large number of other significant factors, all of which are largely under the discretion and control of the patent owner, were identified. These factors include when a patent application is filed in relation to the actual state of development of the invention; how long the patent application remains pending in the Patent Office; the scope of the patent in relation to the commercial product which it seeks to dominate; the number and type of patents which may ultimately be granted to cover different aspects of the cornercial development; the time at which clinical investigations are commenced in relation to the patent application and issue date; and the pace of development.

At the time HR 6444 was under active consideration by the House, PMA was still managing to successfully resist Congressman Gore's demand for the production of sufficient information with respect to NDA application and approval dates and the identification of all relevant patents so that an independent determination could be made with respect to the extent of the alleged problem of shrinking patent life.

Congressman Synar was finally able to pry that data loose from PMA in the latter part of 1983. It revealed that the arguments for shrinking patent life were based on the first patent to issue which covered a new chemical entity that had never before been used as a drug. When full consideration was given to the existence of other (later) patents and to the regulatory delays encountered by generic drug makers in bringing products to the market, the effective commercial monopoly life for the 50 top selling drugs turned out to be 15.5 years and for the 100 top selling drugs it was almost 14 years.

Although the Commissioner continues to deny the existence of "evergreening", the data presented to Congressman Synar and analyzed by Congressman Waxman's staff established that there are numerous instances in which more than one patent must expire before there can be any competition. The most typical situation involves an early issued product patent followed by a later issued therapeutic use patent claiming the only FDA approved use.

HR 3605, incorporates the knowledge gleaned from the foregoing data and is therefore more restrictive than earlier versions of patent term extension legislation such as s. 255 and H.R. 6444. More specifically, the bill is based on the simple principle that only the earliest issued patent which either claims or fully discloses an approved drug product can be extended one time. That extension is for a maximum period of five years or for 14 years following the drug approval date whichever is shorter. These rules do not, prevent the research-intensive drug companies from continuing to apply for large numbers of related patents or to control the filing or issue dates of those patents in relation to the commercial development. Rather, they provide a reasonable period of extension for the only problem which the PMA companies have even alleged to exist shortened patent life for the first patent covering a new chemical entity while discouraging the use of patent extensions to slow down new developments or as a new tool for manipulating the patent system so as to unfairly lengthen patent monopolies.

The ultimate test of the fairness of the patent term extension provisions of HR 3605 is the endorsement of the bill by a 2 to 1 majority of PMA members. If PMA did not believe that the bill fairly addresses and solves the problem of shortened patent life it would not have endorsed this compromise. In view of that fact, it simply makes no sense for the Commissioner to attack those provisions as being too arbitrary or restrictive or to argue in favor of a more liberal patent extension policy.

The Commissioner's lack of appreciation for the problem which HR 3605 addresses and equitably solves is highlighted by his testimony with respect to the Bolar decision. GPIA and PMA were able to reach a compromise only because patent owners were assured of a longer comercial

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