IP Policy Issues May See Progress In A Changed US Landscape This Year

As the United States battles an economic meltdown, items like economic stimulus and home foreclosure relief are taking centre stage. Congress also is still working to confirm President Obama’s nominees. But once those items are dealt with, issues such as patent reform and intellectual property enforcement are expected to be hot-button items once again.

Patent Reform

Staffers to Senate Judiciary Committee Chairman Patrick Leahy, a Vermont Democrat, and Utah Sen. Orrin Hatch, who is now the Ranking Republican on the Antitrust, Competition Policy and Consumer Rights Subcommittee, were said to have resumed talks over their patent reform bill they could not bring to the Senate floor for a vote last year. Sen. Arlen Specter of Pennsylvania, the ranking Republican on the judiciary panel, opposed the damages provision of that bill.

A Senate source told Intellectual Property Watch in February that Leahy’s interest in patent reform has not diminished, and that he remains committed to working with all parties to move forward. Leahy told reporters on 10 February that he planned to introduce a bill soon, and that it would be “quite similar” in places to his bill in the last Congress.

In Congress, it is widely expected the Senate will take up patent reform before the House of Representatives, and stakeholders are not wasting any time gearing up for battle.

On one side of the debate are large high-tech companies like Microsoft, banks, local technology councils, and media companies. Many of these are members of the Coalition for Patent Fairness. They generally support stronger reform and protection against litigation, particularly against so-called “patent trolls,” or non-practicing entities who often have no plans to market a patented invention, but just to enforce the patent. This group also favours a post-grant review process.

On the other side are many pharmaceutical and biotechnology companies, large manufacturers like General Electric and Caterpillar, inventors and technology firms like Texas Instruments and 3M. The Coalition for 21st Century Reform and the Innovation Alliance include many of these firms. This side generally is more resistant to sweeping reform, opposes limiting damage awards, and favours a more limited post-grant review process.

The Manufacturing Alliance on Patent Policy – a coalition of firms like DuPont, Milliken, Monsanto, PepsiCo and Texas Instruments – has also joined the patent fight. MAPP is opposed to an apportionment-system of awarding infringement damages – which bases awards on the specific invention, not the overall product to which the invention may add value – and is more on the latter side of the debate.

“Two-thirds of the value of the modern manufacturer lies in its intangible assets,” MAPP said. “Dramatic changes to patent policy will have a major impact on the manufacturing sector. Moreover, such changes will affect manufacturing jobs and investment.”

Patent reform passed the House but not the Senate last autumn because of strong opposition from drug companies, manufacturers, and some tech firms who feared the bill would weaken their patent protections. They think the courts have recently resolved many of the larger issues and warn against passing anything too sweeping. Policy sticking points include calculating damages for infringement, allowing post-grant reviews and defining “inequitable conduct.”

Those supporting Leahy’s bill last session, “want to make it easier to challenge patents at the PTO and they want to make it less costly to infringe on patents. That may or may not work in their world but it doesn’t work in ours,” charged Biotechnology Industry Association (BIO) President Jim Greenwood. “Anything that weakens that IP is very threatening to our ability to attract capital.”

The Business Software Alliance, which says its members are subject to a huge amount of infringement litigation, is keeping close tabs on the damages provisions, in particular.

“Paying $5 million on litigation and rolling the dice on damages … or settling – it’s a pretty Hobbesian choice,” said Emery Simon, counsellor at BSA. “One of the things that would substantially mitigate this is clarity in how damages are calculated.”

Some observers say a “critical unknown” thus far is who will be the next USPTO director – certain to have a large role in either furthering or blocking patent reform. A Commerce secretary needs to be put into place first, and so far, no one has made it through the confirmation process. Patent Commissioner John Doll is the acting USPTO director.

Copyright Reform

There are two major copyright issues on the agenda so far – the Satellite Home Viewer Extension Reauthorization Act and music performance rights.

The original 1988 satellite act essentially created a satellite carrier compulsory licence and a statutory copyright licensing plan for satellite carriers that retransmit local TV broadcasts to dish owners. It also allowed satellite companies to provide “distant” TV stations outside the local market to eligible subscribers. Congress reauthorised it in 2004 (called SHVERA), and extended the satellite licence through 31 December 2009. SHVERA also allowed satellite carriers to expand programming offers of “significantly viewed” distance stations into local markets.

US telecommunications carrier Verizon thinks this year’s bill may be used as a vehicle to pass other video programming-related items, such as reform of broadcast retransmission consent and direct broadcast satellite carriage of multicast digital broadcast signals.

On 4 February, House Judiciary Committee Chairman John Conyers, a Michigan Democrat, and Rep. Darrell Issa, a California Republican, introduced the Performance Rights Act aimed at ensuring that all radio platforms are treated the same. Webcasters, satellite radio providers and cable companies currently have to pay for music they broadcast but current US copyright law makes an exception for AM/FM radio broadcasters. Leahy helped introduce the companion Senate bill, which also provides non-commercial radio stations, including educational, public and religious stations, with the option of a nominal, annual flat fee.

“All those in the creative chain of musical production – the artists, musicians, and others who enrich us culturally – deserve to be justly compensated for their work,” said Conyers.

Bill advocates say that outside of the United States, only a few countries – including Iran, China and North Korea – do not provide a performance right on broadcast radio. MusicFirst, a coalition of performers lobbying for the legislation, said the bills mark “the beginning of the end for corporate radio’s loophole,” but the National Association of Broadcasters argues that it amounts to a “performance tax” for the 14,000 local radio stations in the US that will threaten new artists and most benefit big record labels.

“I think that’s an issue that possibly could be a front burner issues in both the House and Senate Judiciary committees,” said Foley & Lardner counsel and former congressional staffer Philip G. Kiko.

The Fair Copyright in Research Works Act, HR 801, also has piqued interest. It would essentially ban federal agencies from requiring the transfer of copyright, whole or in part, as a condition for receiving public funding. Advocates say the bill, being pushed by the publishing industry as a way to protect copyrighted research journal articles, will help undo harmful mandates that undermine US copyright law.

“The mere fact that a scientist accepts as part of her funding a federal grant should not enable the federal government to commandeer the resulting peer-reviewed research paper and treat it as a public domain work,” said Copyright Alliance Executive Director Patrick Ross.

But public-access advocates like the American Library Association are encouraging supporters to urge their respective congressmen to vote “no” on it. The ALA says the public should be able to access taxpayer-funded research and restricting access would impede the ability of researchers, health care professionals, faculty, and others to obtain critical information.

There also is hope for passage this session of an orphan works (creative works without a known copyright holder) bill, which made it about halfway through the legislative process last year. “With any luck we can get it all the way there this year,” said Public Knowledge spokesman Art Brodsky. In general, “obviously, we’d like to see a balanced view of copyrights and not following the dictates of content companies.”

Access to Medicine/ Follow-on Biologics

The 1984 Hatch-Waxman bill outlined how generic chemical drugs could be brought to market. But the federal government is still trying to create a regulatory pathway that gives consumers greater access to cheaper, generic biological drugs, yet still spurs innovation and protects innovator patent claims. Traditional, small molecule chemical drugs that always have the same material makeup are easy to copy for generic companies, but biologics – complex, expensive protein-based medicines manufactured with living organisms – are much harder, if not impossible, to replicate. The attempted copycats are called “follow-on biologics,” (FOBs) or “biogenerics.”

FOB legislation stalled last year over a number of issues, not least of which was the data exclusivity period – the duration of time in which innovator companies can corner the market before generics step in. Brand-name firms want a 14-year window, and they cringe at the idea that generic companies could use their research and years spent creating the drug, without conducting many clinical trials of their own.

“We believe fervently that if we do not have a sufficient period of data exclusivity …that the financial incentives to innovate these products in the first place will dry up,” explained BIO’s Greenwood.

But groups like the Generic Pharmaceutical Association (GpHA) and Essential Action say there is no need for such a long window. A recent paper by Boston University professor Lawrence Kotlikoff, funded by Teva Pharmaceuticals, argued that a five-year exclusivity period was sufficient. (http://www.tevadc.com/Kotlikoff_Innovation_in_Biologics.pdf)

GpHA President Kathleen Jaeger said data exclusivity provisions sought by BIO would lose “tens if not hundreds of billions of dollars in savings for consumers and the government within the first 10 years,” from biogeneric competition.

In response, a Duke University paper funded in part by the Pharmaceutical Research and Manufacturers of America and released in February says a much longer period is necessary. “Data exclusivity is an important form of intellectual property protection that is complementary to patent protection,” that paper says.

Access to Knowledge/Net Neutrality

The US Congress included about $7.2 billion for broadband grant and loan programs in the $787 billion economic stimulus package, signed into law on 17 February. Money will go toward providing high-speed internet networks to rural and otherwise underserved areas, and for tax incentives to encourage companies to invest in new or faster broadband networks. But in order for entities to receive the grants, they must roll out their services in a “technology neutral manner” and abide by “non-discrimination and network interconnection obligations” laid out by the FCC, such as not discriminating against content providers. In other words, to abide by some open-access and network neutrality (“net neutrality”) standards already established, and those forthcoming from the National Telecommunications and Information Administration.

“This is just a first step but it establishes the openness principles going forward,” Brodsky said. “For the first time we have openness principles enshrined in law. That’s a huge step.”

The Save the Internet Coalition is reenergising the 1.5 million people that, in 2006, helped it battle a draft congressional bill that contained no neutrality protections. The Bush administration’s Federal Communications Commission said no more laws were necessary. But with a new administration and Obama technology adviser Julius Genachowski expected to take the helm of the FCC, that perspective may change. Save the Internet Coalition’s campaign director, Timothy Karr, told Intellectual Property Watch that he expects some legislation putting net neutrality protections into law as soon as this spring.

While on the campaign trail, Obama “said he would ‘take a back seat to no one'” on net neutrality, Karr said. “We fully expect that President Obama now will hold to that pledge and support a legislative push in Congress this year.”

IP Enforcement

Whoever Obama taps as his new “IP enforcement czar,” will likely have a tough job in coordinating all the IP enforcement activities of various federal agencies. It is not expected this IP czar will be named anytime soon, however. Meanwhile, many business groups want to make sure the Pro-IP Act that established this position is fully funded, and that the Justice Department has all the resources it needs to properly enforce copyright and other IP-related laws. They also want IP to be protected in any forthcoming trade agreements.

Link to Pro-IP Act here [pdf].

But there remains concern among some that the Obama administration is too heavily tilted in favour of rights holders, particularly given Vice President Joe Biden’s strong past support of the content industry and the fact Obama has hired many people from that side.

The US Chamber of Commerce would like to see passage of a Customs and Border Protection reauthorisation bill that better addressed trafficking of pirated or counterfeit – often harmful – goods coming into the US, particularly from China, including increasing the number of border patrol officers authorised to conduct more inspections. Discussions have already begun with Capital Hill staffers.

The Chamber also is pushing for the completion of the Anti-Counterfeiting Trade Agreement, a negotiation being led by the United States. It remains to be seen whether it will be finished this year. Groups working in the public interest like Public Knowledge and Knowledge Ecology International have been concerned about possible negative impact of such as an agreement on the public, and critical of the fact that the ACTA text has been revealed only to a small group of industry advisers.

BSA is developing game plans for how to combat rampant IP theft with local governments in India and Brazil this year; the organisation recently became more active in Russia and China.

The Office of the US Trade Representative (USTR) continues to proceed with its annual Special 301 report on countries it says are not living up to IP enforcement expectations, and not providing fair and equitable market access to US companies that rely on IP protections for their copyrighted products. The International Intellectual Property Alliance – a group representing much of the US copyright industry – submitted its recommendations in February, naming China, Russia and Canada as key problem countries. The final USTR report typically closely resembles the IIPA submission.

Other bills of note:

-HR 628 and S 299 – create a pilot program in at least five courts to enhance the expertise of district court judges hearing patent cases.

– S 396, the Preserve Access to Affordable Generics Act – prohibits the practice of “reverse payments” – brand-name drug companies paying generics from putting their products on the shelves.

– HR 573 – prohibits the marketing of an authorized generic during the 180-day generic exclusivity period following a patent challenge.