Pharmaceutical Patent Policy Options For Brazil Kevin Outterson mko@bu.edu Associate Professor of Law Boston University School of Law

1. Pharmaceutical Patent
Policy Options For Brazil
Kevin Outterson
mko@bu.edu
Associate Professor of Law
Boston University School of Law
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2. Topics
• Patent Failure
• Pharmaceuticals
• ACTA
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3. Topics
• Patent Failure
• Pharmaceuticals
• ACTA
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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

5. The Notice Function of Property Law
?
An expensive mistake!
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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)
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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
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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?)
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9. Search Cost
• Patent flood
– E-commerce firm faces b/w 4000 – 11,000 patents
– Semiconductor firm faces hundreds of patents
– 3G standard 7600 patents
• Perverse willfulness doctrine
• “Distant” plaintiffs
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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)
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12. Patent Lawsuits Filed in U.S. District
Courts
3,500
3,000
2,500
2,000
1,500
1,000
500
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
1970
1972
1974
1976
1978
2004
2006
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13. Litigation Growth
Suits/R&D ($b):
1987: 1.7
1999: 2.9
Patent Failure 13

14. Pharma Offers Clearer Notice
• Lipitor: Trans-6-[2-(3- or 4-carboxamido-
substituted pyrrol-1-yl)alkyl]-4-hydroxypyran-2-
ones
• Olanzapine:
Patent Failure 14

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

19. Pharmaceuticals
• Patent Failure
• Pharmaceuticals
• ACTA
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20. Static v. Dynamic Effects
• Static losses from higher prices
• Dynamic gains from sales incentivizing
R&D
• US deploys many balancing features
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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)
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22. Bottom Line:
Countries should exercise
significant flexibilities
in Rx patents based on
wealth & inequality
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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
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24. Bottom Line:
• Don’t accept anything
stronger than current US law
• Evaluate US IP flexibilities
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25. Post-TRIPS Rx Options 1
• Pipeline patents (Cendrowski, 2009)
• Article 31 CL (scope) (Outterson, 2009)
• Parallel importation/global exhaustion
rule (Outterson, 2005)
• Functional Article 31bis (Abbott &
Reichman JEL 2007; Goodwin AJLM 2008)
• Prizes (Love & Hubbard; Hollis & Pogge)
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26. Post-TRIPS Rx Options 2
• Promote generics
–Reduce evergreening
–Improve generic quality
–Automatic substitution
–Insurance reimbursement rules
–Collusive settlements
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27. Post-TRIPS Rx Options 3
• Reverse linkage
• Global Orange Book
• Regional drug registration
• Liability rules (Ebay)
• Scope & obviousness
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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)

29. Regime Shifting II
• Patent Failure
• Pharmaceuticals
• ACTA
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30. ACTA
• Supplements WTO judicial model
with private enforcement
• Drive for substantive
harmonization
• Secret negotiations – 18th Century
diplomatic model
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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
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