Year Ahead: Range Of IP Policy Issues May See Action In United States In 2010

With the United States Congress attempting to wrap up healthcare – a move made more difficult after a Republican won a traditionally Democratic US Senate seat in January – issues such as tax increases for the nation’s largest financial institutions, energy reform and others may take centre stage. But that’s not to say there is not some room for intellectual property issues to be considered.

Upcoming issues may include patent reform, biologic drugs, internet neutrality, enforcement, and performance rights.

A key provision of interest to the intellectual property, medical and biotechnology communities, among others, in the healthcare bills is that which provides brand-name drug companies with 12 years of data exclusivity for their potentially life-saving biologic drugs. This is the amount of market exclusivity brand-name firms can enjoy before generic companies can offer their own versions of the drugs, known as biosimilars, or follow-on biologics, using brand firms’ data.

Forty-five members of the House of Representatives this month sent a letter [pdf] to House Speaker Nancy Pelosi, a California Democrat, and Majority Leader Steny Hoyer, a Maryland Democrat, and eight senators sent a letter [pdf] to Senate Majority Leader Harry Reid of Nevada, asking them to preserve the provisions for the sake of the 630 biotechnology medicines currently in development, and patients that could benefit from them.

On the other side of the debate, consumer and patient advocate groups like Essential Action have argued this timeframe is too long and patients’ health and wallets will suffer. The Obama administration has said seven years’ exclusivity is long enough and the president is pushing for a smaller window. Advocacy groups also oppose the “evergreening” provision that would extend exclusivity for 12 more years to brand-name biologics in which even minor tweaks to old versions were made to, say, reduce the number of doses required each day. Six governors sent a letter to President Obama [pdf] on 19 January, opposing any changes to the current exclusivity and evergreening language.

Patent Reform

The Senate Judiciary Committee reported its patent reform bill, S. 515, out of committee last April; the main hurdle holding up the bill seems to be the Senate schedule. When senators return on 20 January, they will focus on a resolution on the national debt limit. Sen. Patrick Leahy, the Vermont Democrat who heads the Judiciary Committee, is expected to continue to request floor time for patent reform but it is up to Reid as to when to schedule a time to consider it.

“We’re sort of stuck right now,” said Foley & Lardner LLP Of Counsel Philip Kiko, a former congressional staffer. But “I still think there’s a possibility of a negotiated agreement on patent reform.”

Q. Todd Dickinson, executive director of the American Intellectual Property Law Association (AIPLA) and former director of the US Patent and Trademark Office (USPTO) under President Clinton, said any deals that would be struck on patent reform to resolve remaining issues are available to be struck, so if floor time in the Senate opens up, “who knows, we might see an opportunity there.”

“With a few little tweaks available, we’d like to see that move forward,” he added during an interview with Intellectual Property Watch.

Sticking points have included the damages and post-grant review provisions, among others. Most parties agree that it is imperative any reform give new USPTO Director David Kappos the resources he needs to make the patent application and approval process more efficient and to hire more examiners, among other priorities. That includes the possibility of levying a type of emergency surcharge to make up for lost revenue to get agency operations moving. The Obama administration said the USPTO needs the ability to impose a 15 percent surcharge on all USPTO fees for 2010. Some believe that this may provide some impetus for patent reform.

Kappos sent a letter to Congress [pdf] in early January, saying his agency has been operating on a “bare-bones budget” since fiscal year 2009 due to “substantial declines in our revenues from user fee collections.” Kappos will only be able to replace a small percentage of the almost 500 patent examiners he expects to lose in FY2010; the agency is losing 30-40 per month.

At the end of FY2009, the USPTO was composed of 9,716 federal employees, including 6,243 patent examiners and 388 trademark examining attorneys. The USPTO implemented a hiring freeze for months last year and just recently began limited and targeted hiring of former examiners and other experienced IP professionals who require little to no training.

Although the USPTO is seeing a rebound in user fee collections in the first two months of FY2010, as of now, it will not able to use any money above the $1.8 billion it anticipated it would bring in. Congress late last year used September estimates to designate USPTO spending levels for 2010 and stripped out the usual language in the Commerce, Justice, Science appropriations bill that allowed the USPTO to spend fees up to $100 million above its designated spending level. This “cushion” gave the PTO some breathing room in case it anticipated lower fee collections than it actual took in. Now, any money taken in over the $1.8 billion can be diverted to other uses not related to the USPTO.

“Absent further Congressional action, the USPTO will not be able to benefit from the recent upswing in fee collections, and will not be able to expend this fee income to address its urgent fiscal needs,” Kappos wrote.

The administration would like Congress to ensure appropriation amounts provide for full access to fees collection and to grant the USPTO the authority to adjust the agency’s fee structure.

Fee diversion “breaks the sort of social contract we have that they won’t divert and it creates a huge problem for the PTO because they’re looking at a 15 percent surcharge this year to get them out of the hole they’re in,” Dickinson said. “Any money over and above that [$1.8 billion] is going to be diverted to other purposes … and I think that’s a scandal.”

Kiko of Foley & Lardner, who worked on bill language that would prevent fee diversion while he was on Capitol Hill, said “you’re sort of taxing inventors” if the USPTO does not provide a precise estimate in the first place and extra fees are diverted from the agency. “It’s never good to have something like this stripped out,” he added.

Sen. Tom Coburn, an Oklahoma Republican, has proposed an amendment to S. 515 to preclude diversion of PTO fee income, with a five-year sunset provision, which may be addressed during floor debate.

Other issues the USPTO is tackling this year include:

-Improving the process for obtaining the best prior art and the quality of the initial and entire patent examination process; the USPTO is seeking public comment on methods that could be used by applicants and the agency to increase patent quality.

-Working with other patent offices to increase the use of the Patent Prosecution Highway and plans to implement the Strategic Handling of Applications for Rapid Examination (SHARE), which enables the prioritisation of examination work at the office of first filing.

-Project Exchange, an application acceleration pilot project open only to small entities for now, which allows certain applicants having two or more pending patent applications to accelerate review for one by abandoning a second.

-Accelerated examination of inventions involving green technology.

-Improving its Patent Cooperation Treaty processing techniques.

IP Enforcement

Victoria Espinel, the new intellectual property enforcement coordinator (IPEC), started work in December. Expectations are high that she can bring together US anti-piracy and counterfeiting efforts into a single national strategy.

“We want to see a very robust comprehensive integrative national strategy to address counterfeiting and piracy in the US and abroad and promote IP rights here and abroad,” explained Mark Esper, executive vice president of the US Chamber of Commerce’s Global Intellectual Property Center (GIPC).

Seeing to it that Espinel has the resources to do that is a priority for his group, as is ensuring continued funding for the Department of Justice, FBI, state and local grants to combat piracy and counterfeiting. So far, Espinel has been holding a lot of meetings to get the lay of the land.

“Getting the priorities aligned is critical,” added Dickinson. “She’s got a very powerful constituency to deal with. As the new kid in town, she’s got to establish relationships with other agencies. …She’s got to come out strong, maybe knock a few heads together a little bit.”

The Customs Facilitation and Trade Enforcement Reauthorization Act of 2009 (S. 1631) would bolster IP border enforcement resources and tools for the Department of Homeland Security through its Customs and Border Protection (CBP) and Immigration and Customs Enforcement (ICE) agencies to stem the flow of counterfeit goods into the US. That bill would also establish within the ICE Agency a National Intellectual Property Rights Coordination Center to coordinate US activities to prevent the import and export of goods that infringe intellectual property rights.

“That will be critical in ensuring CBP has the resources, people, the authorities, the legislation it needs to stop counterfeiting at the border, to deter counterfeiting and take a bigger bite out of what’s happening now,” Esper explained.

The GIPC also supports a Special 301 enforcement enhancement bill that can ensure that violator countries develop comprehensive, behaviour-changing plans, that the Office of the US Trade Representative (USTR) has what it needs to effectively deal with countries that do not live up to their international IP obligations, and that outlines benchmarks to measure performance of Priority Watch List countries. The Special 301 report of the adequacy and effectiveness of IP rights protection by US trading partners is issued annually by the USTR. The GIPC also wants to see passed IP attaché legislation to install more IP attaches in key countries and fora.

Net Neutrality

The Federal Communications Commission in October issued a notice of proposed rulemaking [pdf] seeking public input on draft rules to preserve “an open internet” in the internet (net) neutrality debate. All comments were due by midnight of 14 January; the FCC has until 5 March to respond. The FCC’s proposed rules address users’ ability to access the internet and, the agency stresses, “are not intended to regulate the internet itself or create a different internet experience from the one that users have come to expect.”

“We seek to create a balanced framework that gives consumers and providers of internet access, content, services, and applications the predictability and clarity they need going forward while retaining our ability to respond flexibly to new challenges,” the FCC continued in its notice.

The FCC received nearly 15,000 comments from groups including the National Organization for Women, Women Who Tech, the National Association of Latino Independent Producers, National Association of Hispanic Journalists, Electronic Frontier Foundation (EFF), and others calling on for a strong net neutrality rule that would not allow service providers to discriminate against those trying to access content.

“The importance of an open internet to the economic health and wellbeing of the United States” not only benefits broadband users and providers, but economies as a whole, Markham Erickson, executive director of the Open Internet Coalition, told reporters on 13 January. “The issue impacts the entire US community – wired or not – as every sector now depends on broadband.”

But other groups, like the Technology Policy Institute [pdf] and The Information Technology & Innovation Foundation, argue that the FCC has not shown that its proposal would address a significant problem or market failure and urge caution in enacting any new regulations.

Performance Rights, Copyright, SHVERA

The Senate Judiciary Committee passed S. 379, which would force AM and FM radio stations to compensate artist for use of their sound recordings, on 15 October 2009, and it was placed on the Senate calendar. There is a companion bill pending in the House.

Last fall, the MusicFIRST Coalition, which includes the Recording Industry Association of America, artist groups and SoundExchange, agreed to lawmaker-requested talks with the National Association of Broadcasters to hammer out some of the major differences, not least of which are whether there is in fact a performance right on radio, and if so, what the royalty rate should be. Those talks are still ongoing; legislation is being held pending the outcome of these discussions.

“We are optimistic – we’re hopeful that they’ll produce an agreement. We think that when people come together in good faith, they can find common ground,” MusicFIRST spokesman Marty Machowsky told Intellectual Property Watch. “I’m sure that both sides would work closely with members of Congress so the legislation going forward would reflect, as best it could, the agreement.”

Other legislation (still) on the table this year that could see action includes:

-Satellite Home Viewer Extension Reauthorization Act (SHVERA) – Congress passed a 60-day extension on 19 December 2009. The original act 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. The extension expires next month.

-H.R. 801, the Fair Copyright in Research Works Act – Prohibits any federal agency from requiring the transfer or licence to or for a federal agency, or abandonment of specified exclusive rights of a copyright owner in an extrinsic work in return for federal funding for a specific work or project. This bill was introduced last year by House Judiciary Committee Chairman John Conyers, a Michigan Democrat; it is expected to be seriously considered.

-H.R. 2196, the Design Piracy Prohibition Act – Extends copyright protection to fashion designs and includes as protected items clothing, duffel bags, tote bags and eyeglass frames. Excluded are designs embodied in a “useful article” made public by the designer more than six months before the registration of copyright application. The bill has 23 bipartisan cosponsors and talks have been ongoing as to how to move the bill forward.

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