By Mead Treadwell
April 23, 2019 at 5:00 am ET
As a frequent visitor to Asia, I’ve witnessed the U.S. government, “trade war” or no “trade war,” stand up for U.S. inventors’ intellectual property. Even in current skirmishes with some Asian nations, we hear that, before tariffs on both sides of the Pacific will come down, respect for intellectual property needs to come up.
Here at home, though, our country looks slightly hypocritical. A little more respect for intellectual property is needed in our domestic laws, as well.
In 2011, Congress passed the Leahy-Smith America Invents Act, which instituted a new method to challenge patents. It was intended to streamline patent protection for tech firms but has been a favorite device of generic drug companies hoping to gain early access to markets by invalidating the legitimate intellectual property of drug inventors.
Patent challenges have skyrocketed since the passage of the law, clogging tribunals and taking years away from a patent protection process that was intended to give a leg up to an innovation. As a result, the number of lawsuits related to abbreviated new drug applications, applications for a U.S. generic drug approval for an existing brand name drug, jumped 60 percent from 2016 to 2017.
I’m not an investor in biotech startups, generally, but the battle here at home between inventors of new lifesaving drugs and those who copy drug formulas for the generic markets is painful to watch. The spillover from this battle challenges American competitiveness across the tech sector.
Remember, the whole purpose of a patent is to give an inventor limited time to recoup an investment. It’s vital to have a patent challenge process to ensure a patent itself is valid, new and not copying someone else. But that challenge process has itself become a disincentive to innovation.
One of the main ways that intellectual property rights are undermined is through a new pathway for patent challenges known as inter partes review. IPR creates a parallel track to the pathway for challenging patents that has existed for over 30 years.
Historically, these cases have been heard in federal district courts, but since the passage of AIA, even patents that had been upheld via the judicial process are now liable to a follow-on challenge through IPR. That’s double jeopardy.
Patents that have already been litigated and found valid in the courts could be thrown out via IPR regardless of the court’s findings. Equally concerning, IPR is an administrative process, where the burden is on the patent holder to prove the validity of the patent, the opposite of the existing Hatch-Waxman framework for patent challenges. This stacks the deck against legitimate patent holders and throws shade on a product just at the time it is trying to attract investment and gain market share.
Before this law stifles innovation and investment so broadly as to diminish innovation in the medical sector, Congress needs to do it over. North Carolina Sen. Thom Tillis (R) and Texas Rep. Bill Flores (R) have reintroduced a bill to take away the “double jeopardy” created by the new IPR process. The bill reduces the chance that a lawsuit will be a nuisance and protects a patent holder from real infringement.
Called the Hatch-Waxman Integrity Act, their bill is apt because the biggest industry affected by this failed legal experiment is pharmaceuticals. Imagine a system that promises an inventor protection for his or her innovation but has recently made it so much easier to challenge a patent that some competitors make it their business model to undermine your intellectual property.
Free from having to shoulder the cost of research and development, your competitor is able to turn a handsome profit by selling a similar product at a much-lower cost. That may be sport for the speculators, but it takes the incentive out of finding cures for ills that ail the rest of us.
I support the use of generic drugs and ask for them myself if they are going to work as well and save money. But one of the larger groups of patent challengers are generic drugmakers, itching to get into a market for a product before a granted patent is up.
The system today strikes a delicate balance between rewarding innovation by providing a specific period of exclusivity to sell a new drug and consumer choice by allowing companies to freely compete to sell the product once that time has expired. Our quest for lower-cost medicine shouldn’t mean lowering the incentives to produce better medicine.
I’ve followed intellectual property issues mostly as an investor in startups, including successful startups that created technologies to help creators protect their work. I want our patent process to encourage the inventor, help bring investment through the “valley of death” that often separates good ideas from going to market, and to keep our country in a technology leadership position.
Our founders enshrined patent protection in the Constitution, and before that, the Declaration of Independence made it clear that owning the fruit of one’s own labor is a basic human right. The temporary monopoly on an invention, or a piece of writing, or a work of art — all granted by U.S. patent, trademark and copyright laws — is intended to protect that human right.
While policymakers in Washington are looking at a variety of ways to increase the affordability of the medicines we take, they should beware of lowering intellectual property protections. It would be pennywise and pound foolish to take short-term price reductions today at the expense of the long-term development of new cures.
Mead Treadwell was a founding officer and seed investor in two publicly listed startups that helped protect copyrighted digital content, identification cards and currency from counterfeiting and pioneered 360-degree photo-mapping programs, including Google’s StreetView, and he served as the chair of the U.S. Arctic Research Commission under Presidents George W. Bush and Barack Obama before he was elected Lieutenant Governor of Alaska from 2010-2014.
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