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IP Watch: Innovation Industries Slam Patent Reform Measures

In spite of a groundswell of industry opposition—with medical device organizations prominently in the forefront—the patent reform juggernaut is continuing to progress through Congress. Earlier this month, the House and Senate judiciary committees voted to advance their respective versions of the Patent Reform Act of 2007 (HR 1908 and S 1145), each of which includes provisions considered harmful to medical technology companies.

MDMA's Leahey:
Undermining innovation.

The provisions of the proposed reform legislation had already caught the attention of industry associations and companies whose business relies heavily on patent-protected intellectual properties. In June, a group of more than 200 companies and industry organizations sent a letter to key members of the House and Senate judiciary committees to express their concern with the proposed legislation. Signatories on the letter included the Medical Device Manufacturers Association (MDMA), MassMedic, and the Biotechnology Industry Organization, as well as many other regional associations and life sciences companies.

Commenting on the industry letter, MDMA executive director Mark Leahey said, "The diverse nature of signatories demonstrates the far-reaching implications this legislation will have on the patent system, and we urge Congress to make the recommended changes to ensure America's innovation economy continues to flourish.

"The current bill would severely undermine investment and innovation in every industry, including medical technology," Leahey added.

In their letter to Congress, the organizations argued that the proposed legislation would "hinder innovation across the diverse sectors of the American economy we represent, including academia, agriculture, alternative energy, biotechnology, chemical, electronics, environmental technology, financial services, information technology, life sciences, manufacturing, nanotechnology, and telecommunications."

To make the legislation "effective and balanced," the petitioners recommended four significant changes, as summarized below.

  • The section on the apportionment of damages should be deleted from the legislation. The language is unclear, will increase litigation, and will force judges and juries to make complex calculations for which they are ill equipped.
  • The proposal of a new, open-ended, administrative postgrant review mechanism is unreasonable and should be deleted. The postgrant review system as written in the bill could be used by virtually any third party that seeks to harass the patent holder.
  • The Patent and Trademark Office (PTO) should not be granted overbroad and unprecedented substantive rulemaking authority. Such unfettered rulemaking authority would create instability in the patent system because, over the 20-year term of a patent, PTO could effect multiple changes to substantive patent law through rulemaking. This could significantly alter the value of existing patents.
  • The legislation must provide adequate grace periods to enable patent holders to adjust to changes in patent laws and rules, such as filing requirements.

For its part, MDMA went a step further, recommending that Congress forego patent reform for a time. In a position paper, the association noted that patent protections are likely to be significantly altered by three Supreme Court rulings issued over the past year: Ebay v. MercExchange, MedImmune v. Genentech, and KSR International v. Teleflex.

"These decisions have already reduced the strength of patents significantly, and should deal with the perceived abuses," says the position paper. "MDMA believes it is prudent to pause and see what effect these decisions have on controlling patent abuses as well as innovation before any new legislation is passed."

If patent reform legislation were to move forward, the association recommends that it discontinue the inequitable conduct defense and replace it with a system of incentives for full disclosure. "Although we believe that pausing to see the effect of the Supreme Court decisions is the more prudent approach, if there is going to be legislation, then MDMA would like to see reform on inequitable conduct included in such legislation," says the position paper.

Noting that inequitable conduct has become "an over-used and too easily applied defense," MDMA says that it has become commonplace for courts to grant summary judgment on this defense, even without the required finding of intent to mislead.

"MDMA believes that the inequitable defense should be discontinued entirely, replaced with a provision that naturally encourages disclosure," the association writes. "We propose that the best way to encourage disclosure is to reduce the burden of proof on invalidity to a preponderance of the evidence with respect to any material prior art not before the U.S. PTO. Thus, if an applicant does not disclose information before the examiner, it becomes much easier for the defendant to prove invalidity over that information."

Although approval by the House and Senate judiciary committees was seen as a setback for the coalition of organizations seeking to amend the proposed legislation, efforts to sway Congress continued.

"While the House judiciary committee worked to address a number of important issues of concern to California's biomedical research and development community, such as postgrant review, we believe the bill falls far short of providing the patent protections needed to ensure continued life sciences innovation," said David L. Gollaher, PhD, president and CEO of the California Healthcare Institute (CHI), after the vote of the house committee.

"In particular, the measure's damages provisions will substantially weaken the value of patents, and encourage infringement by making the practice considerably less risky and less expensive. This will inevitably discourage venture capitalists and life sciences companies from investing in the extremely expensive, high-risk research necessary to develop next-generation therapies, treatments, and technologies."

In a press release from the Massachusetts Biotechnology Council, chief operating officer Mark Robinson observed that "the upstream work that the innovation community does to transition basic science knowledge into a therapy is what needs to be protected.

"Without strong patent protections, we put at risk the biotech business model that is essential to producing new therapies," he added. "If the current bill language remains, investors will shy away, putting in jeopardy the development of new therapies."

According to Gollaher, the patent reform bill passed by the House judiciary committee would undermine the "strong, reliable patent protections" provided under current law. "We urge the House to make substantial changes before it comes to the floor for a final vote."

Passage by the judiciary committees permits the legislation to move to consideration by the full House and Senate, where additional amendments can be introduced.

Patent Disputes Engulf Hand-Carried Ultrasound

SonoSite's Goodwin:
Vigorous defense.

In other IP news, the hand-carried ultrasound market continues to see its share of intellectual property unrest. Early this month, SonoSite Inc. (Bothell, WA) filed a patent infringement lawsuit against General Electric Co. (GE; Fairfield, CT). The suit was filed as a counterclaim to a complaint GE filed against SonoSite in May, in which GE alleges that SonoSite's compact ultrasound technology infringes several patents held by GE.

"After conducting a review, we believe that GE's claims of patent infringement are without merit," said Kevin M. Goodwin, SonoSite president and CEO. "Further, we believe that GE's ultrasound systems, including its recently introduced compact products, are infringing SonoSite patents on key, fundamental ultrasound innovations. We intend to vigorously assert our rights."

SonoSite's complaint seeks unspecified monetary damages and a court injunction against future infringement by GE and its affiliates. In conjunction with the counterclaim, SonoSite is filing its answer to GE's complaint. Its response denies all of GE's claims and alleges that the asserted patents are either invalid, not infringed, or both.

SonoSite is also currently embroiled in a patent dispute with Zonare Medical Systems Inc. (Mountain View, CA) related to its portable ultrasound system. SonoSite filed an infringement lawsuit against Zonare earlier this year, and Zonare countersued. The case is pending.

Industry IP in Brief

In addition to continued movement of patent reform legislation and new developments in the hand-carried ultrasound IP landscape, the following medtech intellectual property news was announced this month.

  • On July 2, Diomed Holdings Inc. (Andover, MA) announced that a U.S. district judge had granted Diomed a permanent injunction against AngioDynamics (Queensbury, NY) and Vascular Solutions (Minneapolis) based on a Diomed patent related to the endovascular laser treatment of varicose veins. AngioDynamics, which stopped selling the technology in question in mid-April 2007, continues to dispute the infringement verdict on multiple grounds and has filed an appeal. If the company's appeal of the infringement verdict is not successful, it will be required to pay Diomed monetary damages in the amount of $9.7 million plus accrued interest from March 30, 2007, until the date of such payment.
  • In a regulatory filing on July 2, St. Jude Medical (St. Paul, MN) said that it will pay Mirowski Family Ventures LLC $35 million as part of a patent lawsuit settlement. The lawsuit was part of broader litigation between Guidant Corp. (now part of Boston Scientific Corp.) and St. Jude Medical. In July 2006, the companies settled several patent disputes over technology used in implantable defibrillators.
  • On July 10, SurModics Inc. (Eden Prairie, MN) and Paragon Intellectual Properties LLC (Charleston, WV) announced the signing of a license agreement under which the companies will collaborate on the development of a novel stent system for the treatment of coronary artery disease. The stent system, which incorporates SurModics' proprietary coating technology and Paragon's low-profile coronary stent system, is designed to address late stent thrombosis. In addition, SurModics has made a $3.5 million equity investment in Paragon and its newly formed subsidiary, Apollo Therapeutics LLC. SurModics has agreed to invest an additional $2.5 million upon successful completion of specified development milestones.

© 2007 Canon Communications LLC

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