MUNICH – Whether strengthening patent protection and extending data exclusivity is the way to more innovation in the pharmaceutical and diagnostic sector was the subject of a recent conference here.

The third annual trilateral patent conference of the Munich Intellectual Property Law Center (MIPLC) on 14 May heard contradictory answers. US judge Randall Rader recommended longer data exclusivity, US professor Rochelle Dreyfuss preferred exemptions for doctors using gene diagnostic and a look into how copyright draws the line between protecting form and expression while giving access to the facts or ideas contained.

Dreyfuss, a professor at New York University School of Law and member of the “Secretary of Health and Human Services’ Advisory Committee on Genetics, Health and Society” (SACGHS) participated in preparing a report on “Gene Patents and Licensing Practices and Their Impact on Patient Access to Genetic Tests.” Patents on genetic materials or tests are considered special because contrary to other areas working around patents is not possible. “These are the rules how the body works,” said Dreyfuss.

Case studies in the report found worrisome effects of gene patents. According to Dreyfuss, results showed, for example, “very definite effects on costs for patients” where patent owners “refused to licence anyone and offered diagnostic services as a sole source provider.” Lack of agreement with insurers, not the least US Medicaid, could make specific tests unavailable to patients, despite special programmes of the patentee for self-pay patients. And even wealthier patients might find the arrangement difficult in one respect. “Sometimes patients also want a second opinion,” Dreyfuss said, but as there is only one provider “too bad, that is not possible.”

Also new mutations found during patent-protected testing sometimes are not published, said Dreyfuss. This is seen as a strategic move, because “after a patent expires only they know about these mutations,” she said. On the patents held and exploited by Myriad Genetics as sole source diagnostic provider, the Southern District Court of New York recently held that the originally patented breast cancer mutations (BRCA1, BRCA2) were not patentable, and neither were BRCA-based diagnostic tests. Further direction on the future handling of the patentability of diagnostics is expected from the US Supreme Court on a case that addresses the patentability of a method of hedging risks in commodity trading and business methods more generally.

Dreyfuss said in Munich to exclude genetic testing completely as a matter for patenting seemed to be “a really blunt instrument.” Dreyfuss said she also would not go as far as the SACGHS report, which recommended “the creation of an exemption from liability for infringement of patent claims on genes for anyone making, using, ordering, offering for sale or selling a test developed under the patent for patient care purposes.”

Furthermore, a research exemption is recommended. The social harm is real and would require immediate action, Dreyfuss said, but she would rather opt for focusing the liability exemption on doctors who treat patients. Compulsory licensing, while another option, is viscerally disliked by the US Congress, and patent pools that might allow better for multi-genetic testing in the past had not overcome refusals of patentees to licence their IP.

Patenting strategies by drug originator firms vis a vis generic drug companies, as well as other originator companies was the focus of a sector inquiry of the European Commission, reported Hanns Ullrich, former head of department at the Max Planck Institute for IP, Competition and Tax law. The EU Competition Directorate’s sector inquiry “raised an uproar” in the pharmaceutical industry, according to Ullrich. While it has not yet ruled any observed strategies as anti-competitive, but it has opened two official procedures, he said. The first procedure concerns Les Laboratoires Servier and a number of generic companies including Krka d.d., Lupin Limited, Matrix Laboratories Limited, Niche Generics Limited and Teva UK Limited / Teva Pharmaceutical Industries Limited and looks into so-called pay-for-delay-agreements between Servier and the generic companies. By paying for delays to bring generic versions to market of perindopril, a cardiovascular medicine originally developed by Les Laboratoires Servier, competition might be distorted.

A second case announced by the Commission in January targets possible “unilateral behaviour and agreements by Lundbeck which might hinder the entry of generic citalopram into the market.” More companies were requested to send in their patent settlement agreements from recent years for a check in anti-competitive behaviour.

Besides the “pay-for-delay” settlements, the EU in the sector inquiry also found “cluster building,” meaning applications for patents not only on the basic compound of a new drug, but also file applications for all kind of aspects, different dosages or manufacturing process included. Ullrich said: “What they achieve in the end is a thicket around their own technology which makes it impenetrable for others.”

Another point that “makes me nervous,” said the competition law expert, was the sharp rise in applications related to a patent close to the end of the patent protection term. Another breach of competition law could be the placement of defensive patents around a technology of a competitor in the research drug company market, said Ullrich. The question was not, he said, “are the originator companies nasty people, but is this welfare-reducing for the economy or the people.”

Ullrich argued that he sees a competition case there. “These are cases for the Commission to bring up,” he said. “I wish they would bring one so we could better know how far we could go.”

But a representative of Böhringer-Ingelheim said, “There is no proof that there is late filing.” He also rejected the claims that market entrance for generics was obstructed, saying that generics were in the market immediately after patent expiry. The Commission “did not look into the facts and took the wrong figures,” the company representative asserted.

Judge Randall Rader from the US Court of Appeals for the Federal Circuit, Washington, DC, who oversaw the passage of the Hatch-Waxman Act in 1984 as staff counsel to Utah Republican Senator Orrin Hatch, said with regard to the strategic use of patents: “The one thing we did not anticipate at the time was how the act would become a target of strategic planning. This has become a chess game with moves and counter moves,” he said.

Rader pointed predominantly to the attempt by generic drug companies to file for invalidation of the originator company in order to be granted the 18 month sole generic drug provider position that comes with it. The Hatch-Waxman Act had been seen as pro-generic because it allowed the generic drug companies “to sue at any time, to challenge the validity of the patent” without big risk.

Under the current system, research drug companies sometimes have about five years to recover an investment that can be as much as a billion dollars, with so-called patent restoration times included. “I want to see stronger protection,” said Rader.

Most importantly, he said, longer data protection times would help research drug companies. In the new US healthcare legislation, data protection terms have been set to 12 years from the original marketing approval. Data protection – or data exclusivity – means that generic drug companies cannot use it before the end of the term. President Obama and key members of Congress had recommended a maximum of seven years of data exclusivity, the compromise in the final deal was 12 years.

Former US Patent and Trademark Office Director Jon Dudas said the answer to the question of whether stronger protection is needed is “yes and no.” Some electronic innovations might only need five years, while for the pharmaceutical industry 25 years might be right. “From a philosophical point of view it would be best to come up with a term adapted to every product,” Dudas told Intellectual Property Watch. Yet as this is not realistic, he still hopes international harmonisation would help.

“If we would see very practical steps to harmonisation, for example when offices trust each other, we’d see a lot of these problems go away,” Dudas said in Munich. By exchanging information about patent searches, patent applications would take much less time. Dudas said if the biggest patent offices internationally, not only the United States, Europe and Japan, but also China, Korea and Brazil work together, much of the patents around the world could be covered. Yet he said he was not optimistic after having discussed very small steps for years and not even having been able to agree on a first-to-file system for granting patent.

Ryoko Iseki, a law professor at Doshisha University in Kyoto, questioned whether a uniform system for all countries was preferable. Taking patent term extension in the US, the EU and Japan as an example, she said, it would be meaningless to demand ‘consistency’ where the different underlying systems are fundamentally different. Even the underlying concepts of why patent term extensions are necessary are different in the three jurisdictions.

In Europe the patent term extension, laid down in the Supplementary Protection Certificate System (SPC), was motivated by the idea to compensate for high cost of research time, in Japan the motive was more a right to additionally work the patent (contrary to the negative right to restrict competitors), and in the US restoration of time lost due to patent application administration was the main focus. As a result there are a number of differences between the systems, like the possibility for Japanese patent owners to file several extension claims. Considering these differences, Iseki said, “Consistency would only be superficial.”

Josef Drexl, director at the Max Planck Institute for Intellectual Property, Competition and Tax Law and Chairman of the MIPLC Board, said while harmonisation seems necessary for companies that try to recover their investment costs on a global market, the effects so far have not supported this goal. He also said he is sceptical about further extensions of patenting rights: “Certainly the strongest patent right is the patent right that does not expire,” he said, “but you want to have new research and development. So the expiry of patents is pro-innovative.”