4. Why don’t patents work like
property?
Land Patents
• Registry, third party • Hidden claims, low quality
verification, deference to opinion letters, little
fact-finders deference
• Physical possession • Scope broader than
• Low risk of invalidity, title embodiments; patents and
insurance claims are cheap
• No insurance, relatively high
risk of invalidity
Bessen & Meurer, BU Law: Patent Failure
6. Notice Function of Patent Law
Kodak v. Polaroid
• Failed attempt to invent around
• Patent review started seven years before
product launched
• 250 patents reviewed, “67 written and
countless oral opinions”
• 50 potential imaging chemistries reviewed
• $900 million damages and interest (1980s)
6
7. Evidence Suggests Much
Infringement Is Inadvertent
• Defendants are large, spend a lot on R&D, and
obtain a lot of patents (not classic pirates or free
riders) – only 4% are found to be copyists
• Increasing R&D increases hazard of lawsuit
7
8. E-Data Lawsuits
• Freeny invented retail kiosk that would produce music
recorded on cassette tapes
• Patent claim language was abstract, possibly covered all
sales over the internet
• E-Data got the Freeny patent and asserted it against 75,000
e-commerce sites, licensed 139 companies, and filed 43
lawsuits
• Poor notice because meaning of claim language was
unstable
• “Material object” (1980: cassette tape, 2000: hard drive?)
• “Point-of-sale location” (1980: store, 2000: home?)
8
10. Parties to Lawsuit
Same primary industry No industry overlap
29% 28%
Weakly overlapping
industries
43%
Patent Failure 10
11. Evidence on search
• Cockburn & Henderson survey:
– 65% of firms do not conduct a patent search before
initiating product development
• 39% of applicants disclose zero prior art patents
(research personnel told not to read patents)
11
15. Technology Differences Suggest
Notice Problems
Probability Claim Con- Value
suit/patent struction ($1,000)
All 2.0% 1.00 78
Chemical 1.1% 0.84 333
Biotech 3.2% 2.37 NA
SW 4.6% 2.18 55
BM 13.7% 6.67 NA
16. Patent Reform to Improve Notice
• Make patents more transparent
– continuation reform
– better disclosure
• Better claim interpretation
– Specialized trial courts
– Expand PTO claim construction activity
– More deference to PTO and trial courts
• Robust definiteness requirement
• Limit remedies against innocent infringers
17. Helpful Steps by Courts
• eBay -- increases bargaining power of
defendants and reduces “patent tax”
• Seagate -- decreases deterrent to patent
clearance
• Festo -- improves scope clarity
• KSR, In re Fisher -- stem patent flood
• In re Bilski -- decreases abstract
claiming 17
18. Implications for Brazil
• Don’t accept US IP law as the gold
standard
• Don’t accept standards tougher
than US law
• Look for local allies – industries
that might not be IP maximalists
20. Static v. Dynamic Effects
• Static losses from higher prices
• Dynamic gains from sales incentivizing
R&D
• US deploys many balancing features
20
21. Static v. Dynamic: Global
• Static losses are higher and dynamic
losses are lower in poorer countries (FM
Scherer & others)
• Welfare losses from differential pricing
failures are greater in countries with
higher Gini coefficients (Flynn, Hollis,
Palmedo, JLME 2009)
21
22. Bottom Line:
Countries should exercise
significant flexibilities
in Rx patents based on
wealth & inequality
22
23. US Rx Policy Debates
• Hatch-Waxman generic entry &
regulatory linkage in FTAs
• Biosimilar legislative debate in US
Congress: 5 v. 12 years of DE
• Ebay = liability rule = CL
• KSR & progeny = nonobviousness
• Reimbursement
23
24. Bottom Line:
• Don’t accept anything
stronger than current US law
• Evaluate US IP flexibilities
24
27. Post-TRIPS Rx Options 3
• Reverse linkage
• Global Orange Book
• Regional drug registration
• Liability rules (Ebay)
• Scope & obviousness
27
28. Post-TRIPS Rx Options 4
• Reimbursement (Outterson & Kesselheim 2009;
Frank & Newhouse 2008)
• Conditions on clinical trials (HPV)
• Conflicts of interest in medicine &
research
• Conditions on university licenses
(UAEM)
30. ACTA
• Supplements WTO judicial model
with private enforcement
• Drive for substantive
harmonization
• Secret negotiations – 18th Century
diplomatic model
30
31. ACTA
• Improperly conflates trademark,
pharmaceutical safety, patent
disputes (Outterson & Smith 2006; Outterson
2009)
• Dutch seizures of losartan & AIDS
medicines
• Goal is to hinder legal parallel trade
& CL in pharmaceuticals
32. Bottom Line:
• No assurance that global public
health is a priority in ACTA
• Transparency
• Carve out pharmaceuticals &
patents
• Sean Flynn @ American
University - Law
33. Papers at ssrn.com
Kevin Outterson
mko@bu.edu
Associate Professor of Law
Boston University School of Law
33
