Thursday, February 09, 2006
Copyright (And Patent) Abuse Is Hurting Women (And Men and Children As Well)
Atrios has been talking about the insanity of the US' current copyright law setup, and how the laws are being applied in ways that make a mockery of their original intent. One thing I don't think he's brought up yet is how the abuse of the copyright law system [UPDATE: Make that "patent law system"; serves me right for posting with a hellacious cold] by avaricious persons actually can pose a threat to our lives. [UPDATE: Copyrights are equally ridiculous -- note the efforts of the Disney corporation to destroy the concept of the public domain -- but they're not life-threatening, as far as I know. Yet.] Here's how:
In 1993, Purdue Pharmaceuticals of Stamford, Conn. applied for the first in a series of patents on a drug it called Oxycontin—a painkiller to which Rush Limbaugh would later become addicted. The U.S. Patent and Trademark Office (PTO) granted those patents based on the manufacturer's contention that the drug contained a novel innovation: It had been engineered so that only a very small dose—between 10 and 40 milligrams—was required for the drug to be effective for 90 percent of patients. On the strength of those patents, which in essence granted the company a monopoly license, Purdue went on to reap over $1 billion in annual revenue from sales of Oxycontin. Seven years later, a generic drug maker, Endo Pharmaceuticals, applied to the FDA for permission to sell its own, lower-priced version of Oxycontin. Purdue sued Endo, claiming patent infringement. During the trial, Endo's attorneys argued that Purdue had conducted no clinical studies, and in fact had no evidence whatsoever to support the claim that the drug worked in small doses for 90 percent of patients, an assertion which had been crucial to its patent application. The judge agreed, and invalidated Purdue's patent, allowing Endo to introduce its own version of Oxycontin in January 2004. By law, however, Purdue was allowed to keep the billions of dollars in monopoly profits it had garnered with patents it should never have won. How did the patent office wind up agreeing to give Purdue the patent in the first place? It simply took Purdue's word for it that the assertions it made about its drug were accurate. As Purdue noted archly in its press release about the court decision, “Purdue never made the claim in the patent application that it had done experiments to establish this property and the patent examiner never asked for such information.” The Oxycontin patent was just one of thousands of instances of lax scrutiny at the patent office in recent years. Paxil and Prozac are two other multibillion dollar drugs that earned monopoly profits for their makers before their patents were struck down.It gets worse:
No one knows how many mistaken patents the office issues each year. But the results of one patent office experiment suggest that, in some areas, the error rate may be as many as half of those issued may be faulty. Faulty patents may be doing immense damage to the economy. They not only allow patent-holding firms to gouge consumers with exorbitant prices, but they also inhibit innovation and research, put a drag on economic growth, and may even create an investment bubble. (See sidebar.) The cause of the problem is easy to pinpoint. Over the last decade and a half, the patent office has been set up in such a way that it's an easy mark. The system overwhelms many patent examiners, operates under laws and bureaucratic incentives that favor applicants, and can potentially be hoodwinked by the unscrupulous. A recent Federal Trade Commission report, which laid out these criticisms, concluded that in key industries such as pharmaceuticals, software, biotechnology, and the Internet, the office now “hamper[s] competition that would otherwise stimulate innovation.” For some companies, armed only with dubious claims, the patent office has become not something to fear but a patsy, as easy to fool as those elderly couples who send cash to the Nigerian prime minister's wife.And even worse:
The countless faulty patents that are pumped out through this process can be extremely damaging to the American economy. They force consumers to pay more than they otherwise should. They make the patent office an easy mark for those who would manipulate the system—and indeed have given rise to a whole new category of scammers: “patent trolls.” (See sidebar.) Some economists think that all the extra patents in corporate portfolios have artificially enhanced the value of those stocks, creating what they call a “patent bubble,” with potentially devastating results for many investors. Worst of all for the economy and for society as a whole, a faulty patent system can create substantial obstacles to basic, critical scientific and technical innovation. Consider, for instance, the area of breast cancer research. In the early 1990s, a group of American and European genetic scientists, who had been working together to identify and sequence the genes whose mutations had been linked to breast cancer, began to believe they were on the verge of a collective breakthrough. By 1990, the group had significantly narrowed down the location of one of the key genes, BRCA1. The consortium reported that it was “very close” to finding BRCA1, with one researcher declaring that “it will probably be luck, whoever finds it.” One member of the consortium, University of Utah geneticist Mark Skolnick, was not inclined to wait on luck or collaboration. Skolnick founded a private company, Myriad Genetics, based in Salt Lake City. It was Myriad that took the final step to sequence BRCA1, using detailed genealogical tables kept by local Mormon families. The company designed a test for mutations, then quickly applied for, and was granted, patents covering how the gene could be used. The broad language of these patents gave Myriad almost total control over how—and whether—researchers and clinical practitioners could study, and test patients for, the gene associated with a disease that affects around one in eight American women. In 1996, one researcher, the University of Pennsylvania's Arupa Ganguly, who had developed a test for breast cancer sanctioned by the National Cancer Institute (NCI) got a cease-and-desist letter from Myriad informing her that her work fell under their patents. Worried about the high cost of bringing the case to court, the university's lawyers decided not to challenge the claims—even though Myriad's patents have been overturned in Europe, and even though several leading experts have argued that they wouldn't stand up on appeal. After Ganguly had moved on to other projects, the National Institutes of Health signed a licensing agreement with Myriad, allowing NCI to continue testing, but requiring it to send all test samples to Myriad's Utah lab for analysis. With no competition to control costs, Myriad can effectively set the price for its test. Women who would have been charged $1,600 by Ganguly's lab were immediately forced by Myriad to pay around $2,400. “If someone else develops a test that costs $50, that test won't come to market,” notes Dr. Steven Narod, a leading breast cancer researcher at the University of Toronto. But higher prices aren't the only problem. Myriad's broad patent has effectively kept any other researchers from trying to make the test more accurate at catching cancers. Debra Leonard, a professor of pathology and laboratory medicine at Cornell, has been the target of numerous gene patent infringement claims by Myriad and others for her work on genes linked to Canavans, a rare disorder that causes severe neurological dysfunction in infants, and other diseases. “If you had a disease, would you want one company—with a commercial profit orientation—making all the observations about your disease in the testing diagnostic arena?” she asks. “I wouldn't.”
Let's start from Zachary Roth's sidebar on Cor v. Millenium. The basic complaint is that the patents, as assets were worthless. But suppose a company listed as an asset a horse. Would you feel much sympathy for the buyer who accepted the book value without looking into the horse's mouth? The same principle applies to patents.
As for the Purdue case, Roth simply does not understand the business. When a new drug is developed, it is generally several years before it can be tested for efficacy in human beings. During that time, unless one creates a patent application, one has no protection against a competitor realizing that you have a valuable property and stealing it from you.
Suppose as a small business, you had a great idea for a multimillion dollar energy generator whose function was based simply on the existence of gravity. To raise the money to build a prototype, you need a patent. But if you have to test it before you get the patent, it's Catch-22. So, the immediate effect of forcing significant testing before patent application is to grant a pure monopoly to big corporations. As long as a patent is based on plausible science, inventors shouldn't be held to impossible standards.
Now, the Purdue case is a bit different. They made a claim essential to getting the patent granted for which they had no evidence, nor even a plausible basis to believe that it was true. Did they raise money from investors based on that claim? If so, then they engaged in fraud.
The characterization of the Patent Office as being as easy to fool as people who respond to Nigerian spammers will come as a surprise to inventors. While it's true that patent examiners often lack key technical knowledge of an area, the truth is that in some high-tech areas, there may be only a dozen or a few dozen people in the entire nation well-suited to do the examination. I admire the examiners for doing what they can. Ultimately, if a patent is defective, the courts can be used to rectify the situation.
The Myriad case would seem to be easy to rectify if court costs were reduced.
The real problems and solutions are these:
1. The costs of researching and filing patents need to be brought down.
2. The courts need to be overseen by a significant number of pro-consumer (rather than pro-corporate) judges.
3. The costs of accessing the courts need to be brought way down, and court proceedings need to be accelerated to give small inventors a level playing field.
4. Examiners need to have a smaller workload and receive better training. Academics could be brought in as consultants, although there are privacy concerns.
5. Predatory companies who encourage small inventors to file poorly-researched patents need to be chased out.
6. The fraud statutes need to be enforced for companies that raise money based on unsupportable claims.
"...patent system, the implied remedies could be worse than the ailment."
Nonsense. There are many simple improvements that could be made but are blocked by the main beneficiaries of the USPTO (US Patent and Trademark Office), who are mainly big corporations and the US Government which rakes in a fair bit of cash from the USPTO each and every year.
"The basic complaint is that the patents, as assets were worthless."
Something like 96% of all granted patents are allowed to lapse within 5 years of grant by the holder, demonstrating that they are indeed, worthless.
"Would you feel much sympathy for the buyer who accepted the book value without looking into the horse's mouth?"
The value of a Patent can only be determined apostiori, and probably only when it has been tested in the US courts. Looking into its mouth just isn't an option.
"Roth simply does not understand the business. When a new drug is developed, it is generally several years before it can be tested for efficacy in human beings. During that time, unless one creates a patent application, one has no protection against a competitor realizing that you have a valuable property and stealing it from you. "
Understanding the pharma business has nothing to do with it.
A patent can be granted on a number of things, such as a new compound,a new method of manufacturing a compound and/or a therapeutic effect of a compound. If you have a new compound, then you can apply for a patent on it at any time, if however you are trying to get a patent on a therapeutic effect THEN YOU NEED TO DEMONSTRATE THE EFFECT. Pudue claimed an effect that DID NOT EXIST. Ergo the patent application should have been rejected.
"...So, the immediate effect of forcing significant testing before patent application is to grant a pure monopoly to big corporations..."
US Patent law requires that the "best mode" of implementing the invention be described in the patent application, therefore, it is, in fact already the case that the patent system theoretically requires the testing rejected by our erstwhile commentator.
" I admire the examiners for doing what they can."
WHAT!!! So the system is in chaos, nothing works, but hey, admirable attempt by the examiners, lets hear it for the examiners YEAAHHH!
Now to the solutions...
"The costs of researching and filing patents need to be brought down"
Researching the USPTO web site or the European Patent Office web site already costs nothing on the internet, how it can get cheaper I don't know.
"Examiners need to have a smaller workload and receive better training."
I AGREE ! OK, so he admits that the system doesn't work as the examiners can't cope. Better training ad more examiners is a good start.
"Predatory companies who encourage small inventors to file poorly-researched patents need to be chased out.2
(sidebar: you can't file a patent, you file an application that becomes a patent once it has been granted) No, you need to prevent the "poorly researched applications" from being granted by the admirable USPTO examiners.
More blogs about politics.