THE POISON PILL LURKING IN SEN. COON S S. 1390, STRONGER Patents Act *. Harold C. Wegner I. INTRODUCTION 2 II. COONS POISON PILL LEGISLATION 6

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1 THE POISON PILL LURKING IN SEN. COON S S. 1390, STRONGER Patents Act *. Harold C. Wegner I. INTRODUCTION 2 II. COONS POISON PILL LEGISLATION 6 A. The Good, Bad and the Ugly 6 B. The Hidden Destruction of the PGR System 6 C. Differences between the PGR and IPR Regimes 7 III. GENEVA ORIGINS OF THE PGR SYSTEM 8 IV. THE POISON PILL OF THE COONS LEGISLATION 9 V. RESULTS FLOWING FROM THE GENEVA DISCUSSIONS 11 VI. GOING FORWARD 12 A. Clearing out the Effective Use of the PGR System 12 B. Statistical Review of the Patents of the Boards of Directors 13 VI. CONCLUSION 13 About the Author 14 * This paper was authored pro bono without assistance from any other person or any organization. This draft dated July 1, 2017.

2 I. INTRODUCTION The United States since the Leahy Smith America Invents Act of 2011 has had a robust Post Grant Review (PGR) which has permitted the public to pare down the overbroad scope of claims to new innovations, to the great benefit of a competitive marketplace by opening the doors to competitive products just outside the scope of the thus pared down claims. The patent examination system has greatly benefited from the PGR system because careful patent applicants sometimes do (and always should) draft patent claims that are clear and properly define their inventions, all due to the in terrorem threat that if they brought forward too broad or indefinite claims they would face a PGR. The patent examination system is also aided by the PGR as many patent applicants are (and aloo should) be drafting more precise claims and claims fewer in number. Now, a poison pill has been dropped into the legislative hopper: Coons, S. 1390, the STRONGER Patents Act, represents an omnibus set of patent reforms which include some positive measures but, above all, include a poison pill that would serious set the patent system back in a way to damage competition and the efficiency of the patent examination process. In a nutshell, Sec. 103 of the legislation would destroy the right to a Post Grant Review (PGR) unless the proceeding were brought by the real party in interest and there is a justiciable controversy akin to that in a District Court proceeding. In the most extreme situation of patented pharmaceuticals that undergo a regulatory approval process that will normally take at least three years, all possibility for a PGR proceeding disappear as there is not yet a justiciable controversy in that period, given that the patentee has no approved product he can market. 2

3 On a more routine basis in all fields of technology, the unfortunate practice of too many companies that involves filing overly broad or indefinite claims, and often in too great a number, is being and will be further curtailed under the present threat of a PGR proceeding focused upon the claims of undue breadth or great ambiguity. As patent applicants more and more realize the need to file fewer and more focused and clear claims, all to avoid a PGR proceeding, the patent examination task of the average examiner will provide effectively more time for examination of each application (or examination of a greater number of applications to help cut the backlog of pending applications). One may ask: Is overly broad protection an important policy topic? To the extent that overly broad protection denies competition against the patentee s specific product, the answer is clear and consistent with the Supreme Court concern as to the exclusionary power of patent protection to deny competition. That overly broad patent coverage is a problem has been dramatically emphasized by the Supreme Court. In Alice, the Court expressed its concern over the grant of overly broad claims: [T]he grant of a patent might tend to impede innovation more than it would tend to promote it[.] 1 Later, in Metabolite, Justice Breyer 1 Alice Corp. v. CLS Bank International, 134 S. Ct. 2347, 2354 (2014)( We have long held that [35 USC 101] contains an important implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable. Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107, 2116 (2013) (internal quotation marks and brackets omitted). * * *. We have described the concern that drives this exclusionary principle as one of pre-emption. * * * Laws of nature, natural phenomena, and abstract ideas are the basic tools of scientific and technological work. Myriad, supra, 133 S.Ct., at [M]onopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote it, thereby thwarting the primary object of the patent laws. Mayo [Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289; 1923 (2012)]; see U.S. Const., Art. I, 8, cl. 8 (Congress shall have Power... To promote the Progress of Science and useful Arts ). We have repeatedly emphasized this... concern that patent law not inhibit further discovery by improperly tying up the future use of these building blocks of human ingenuity. Mayo, supra, 3

4 explained that sometimes too much patent protection can impede rather than `promote the Progress of Science and useful Arts,' the constitutional objective of patent and copyright protection. 2 In Bilski four members of the Court quoted Metabolite. 3 Earlier in Bilski at the Federal Circuit Judge Mayer had a similar approach. 4 To be sure, factually the Supreme Court was off the mark. 5 The Coons legislation appears to have been principally pushed by larger corporate entities that are stuck in a mode of filing too many applications and too many claims to provide a patent thicket around their commercial embodiments 132 S.Ct. at 1301 (citing [O Reilly v. Morse, 56 U.S. (15 How.) 62, 113 (1854))]. [emphasis added]. 2 Lab. Corp. of Am. Holdings v. Metabolite Labs., Inc., 548 U.S. 124, 126 (2006) (Breyer, J., joined by Stevens, Souter, JJ., dissenting from dismissal of writ of certiorari). 3 Bilski v. Kappos, 561 U. S. 593 (2010)(Stevens, J., joined by Ginsburg, Breyer, Sotomayor, concurring in the judgement)(quoting Metabolite). 4 In re Bilski, 545 F.3d 943, 1006 (Fed. Cir. 2008)(en banc)(mayer, J., dissenting). 5 The correct distinction between experimentation on and experimentation with a patented invention was not appreciated in the several Supreme Court cases in failing to distinguish between these two categories of experiments. Professor Mueller correctly distinguishes such noninfringing experimentation on from infringing experimentation with a patented invention. See Janice M. Mueller, No Dilettante Affair : Rethinking the Experimental Use Exception to Patent Infringement for Biomedical Research Tools, 76 Wash. L. Rev. 1, (2001). Thus, for example, in the case of a hypothetical patented microscope it is a noninfringing experimentation on such a patented microscope to see how the microscope works versus an infringing experimentation with a patented microscope to use the microscope for its intended purpose of studying slide samples. Unfortunately, several Federal Circuit cases from former Chief Judge Rader and Circuit Judge Lourie have failed to honor this distinction, and created a muddled Federal Circuit case law yet to be clarified through a necessary en banc decision. 4

5 . It should be an interesting exercise to identify which corporate groups are behind the Coons legislation and which corporate groups have had PGR proceedings brought precisely to attack overly broad or indefinite claims. The starting point for this discussion is the set of relevant features of the Coons proposal which buries a poison pill section within the midst of other, noteworthy provisions. See II, Coon s Poison Pill Legislation. It is useful to place the current PGR proposal in the context of the international discussions where serious consideration of a PGR system was considered. See III, Geneva Origins of the PGR System. Buried in the midst of the Coons legislation, however, is a provision that would emasculate PGR proceedings, a requirement for standing unnecessary for the purpose of the legislation. See IV, The Poison Pill of the Coons Legislation. As a result of the Geneva WIPO discussions, the world essentially harmonized patent systems around a post-grant opposition system. See V, Results Flowing from the Geneva Discussions. Now, decades removed from the Geneva discussions, we are moving forward with the present proposal for various reforms, one of which would gut the PGR system. See VI, Going Forward. 5

6 II. COONS POISON PILL LEGISLATION D. The Good, Bad and the Ugly Senator Coons touts his legislation by stating that as to the Leahy Smith America Invents Act of 2011 it has become clear that further changes are needed to limit repetitive and harassing challenges against patent owners and to ensure that proceedings are fair to all parties, including solo inventors and small businesses. 6 Amen! The tout also notes that the legislation provides a presumption of infringement. 7 Other changes are proposed as well. 8 What Senator Coons does not say is anything about Sec. 103 which would gut the PGR system. E. The Hidden Destruction of the PGR System What the Coons tout does not mention is anything related to Sec. 103(d) of his legislation dealing with the condition precedent for a PGR that focuses on the requirement that the patentee has charged [petitioner] with infringement. In that provision the term charged with infringement means a real and substantial controversy regarding infringement of a patent exists such that the petitioner would have standing to bring a declaratory judgment action in Federal Court. 6 %20One%20Pager.pdf. 7 Id. 8 Id. The Coons tout also focuses on [c]hanges to ensure that the Federal Trade Commission and state attornesy general have the tools they need to protect consumers***. The tout also calls for fully funding the PTO/. 6

7 In other words, using the example of a challenge to a New Chemical Entity (NCE) that can be marketed only with regulatory approval by the Food and Drug Administration, which generally takes more than three years, there is never an open window for a patent challenger to use the PGR proceeding to seek review, for example, of the overly broad and thus possibly invalid claims that provide a penumbra of protection blocking competitors from competition with the NCE drug. F. Differences between the PGR and IPR Regimes One may fairly ask: Why should there be a distinction between the requirements for filing a PGR proceeding as opposed to an Inter Partes Review (IPR), where the latter can be filed at any time during the effective life of the patent? The answer is that the patent system should encourage any administrative patent review as early as possible in the term of the patent so that all competitors are freed from the scope of invalid patent claims. The nine month limitation for filing a PGR proceeding forces competitors to file early in the term of the patent, as opposed to a sand bagging tactic to benefit from what is in effect the improper shared monopoly with the patentee. Thus, by having a strict requirement of an actual controversy for filing a PGR, this encouarges the early filing of an administrative patent challenge. 7

8 III. GENEVA ORIGINS OF THE PGR SYSTEM The post grant patent challenge was one of the major issues that were subject to debate in the five years gestation of a WIPO patent reform treaty. 9 Out of that multi-year experience it became clear that what became the Post Grant Review (PGR) of the Leahy Smith America Invents Act of 2011 was an important feature for a modern patent system. While one at first blush may think of a PGR proceeding as challenging a commercial product, one of the major reasons for a PGR opportunity is to scale back overly broad or indefinite claims that have slipped through the examination cracks at a Patent Office. Thus, a patent may have a valuable species invention protected by a species claim, but also have broad and nebulous claims, as well as too many claims, so that the patent as granted has both specific (and valid) coverage for a commercialized embodiment; but also a group of claims of undue breadth and sometimes indefinite scope, all present to present a ring of protection for embodiments outside the realistic bounds of protection to which the inventor was entitled. 9 See Wegner, PATENT REFORM, 1900, Post-Grant Changes, pp (London: Sweet & Maxwell 1993). 8

9 IV. THE POISON PILL OF THE COONS LEGISLATION It is to permit a post-grant challenge against this ring of broad and nebulous coverage that is one of the central features of a PGR system. Of course, a PGR should not be of unlimited time duration to file: The nine month period suggested in the WIPO discussions was indeed a part of the Leahy Smith America Invents Act of It was also extremely important that an attorney without naming his principal could be the petitioner so that the broad and nebulous claims of the patent could be challenged. (If the real party in interest had to be named, a competitor to the patentee considering which compound to propose for regulatory approval would be reluctant to challenge the patent, and instead abandon a wide swath of potential compounds for its own development to avoid a patent controversy with the first patentee.) Of course, one of the side benefits of a PGR system is that patent applicants would or should be more careful, and, particularly, avoid the gamesmanship of presenting unduly broad or indefinite generic coverage or too many claims in their patent applications. The hammer to mitigate such an excessive practice is the opportunity for a PGR to attack the patent once it is granted. Indeed, it was an expectation of proponents of the PGR system that, in fact, a patent applicant in the wake of the new PGR system would craft claims that prevent a defense line around the commercial embodiment, but without massively broad and indefinite claims that would open the door to a PGR challenge. To some extent, this feature of the PGR system has worked very well, with some applicants adapting to the new practice by crafting claims focused on protecting their commercial embodiment without a maize of too many claims with indefinite or unduly broad scope or even worse a plethora of patents of such nature. 9

10 How many of the PGR challenges have been filed by the corporate representatives on the various Boards of Directors of the organizations that have supported the Coons bill? Where their corporate interests dictated support for such legislation, did they recuse themselves from voting on support for the Coons bill (or earlier, what later became the Coons bill)? The answer is not clear without a detailed study which Congress or scholars should make. How many PGR proceedings have the various corporate members of the various Boards of Directors of the various groups supporting PGR been filed? How many of them have resulted in the invalidity of generic, indefinite or overly broad claims? A study to determine the frequency of such proceedings amongst those in decision-making roles concerning the Coons legislation should be an important fact for Congressional consideration of the Coons legislation. One may also ask: Is there not an administrative remedy to challenge a patent other than the PGR proceeding? Let us remember first of all that the current Coons legislation provides that there must be an actual controversy for a patent challenger to bring a PGR proceeding, and that after nine months from grant the possibility to bring such a PGR proceeding vanishes. Are there not alternative administrative revocation proceedings available after nine months from grant? With the exception of challenges keyed to a prior patent or printed publication 10 under an Inter Partes Review, the answer is: There is none. 10 Under 35 USC 311(b)(An IPR proceeding may be brought only on a ground that could be raised under section 102 or 103 and only on the basis of prior art consisting of patents or printed publications. )(emphasis added). 10

11 There is no way to challenge a patent in an IPR or any other administrative proceeding based upon overly broad or sloppy claims under 35 USC 112 nor any other proceeding. This is in contrast to the wide-open basis for challenge of a patent under a PGR proceeding. 11 Another great benefit of the PGR proceeding is that those organizations that had previously sought claims to cover both their commercial embodiment and then a wide swath of indeterminate, broad protection will focus more narrowly on the claims covering their commercial embodiment, sacrificing the broader or indefinite coverage sought heretofore. That there is now a Coons bill with seemingly broad support from the various Boards of Directors of patent owners in the patent organizations, it is clear that there remains a steadfast nucleus of those who are still practicing under the old system, and want legislation to return the clock back to the old way of doing business. V. RESULTS FLOWING FROM THE GENEVA DISCUSSIONS While the Geneva treaty discussions of the late 1980 s did not result in a final agreement amongst the several states, what did occur was a joint learning experience concerning post grant patent challenges which has resulted in a remarkably harmonized system. All of Europe under the umbrella of the European Patent Convention has such a system. Japan following the conclusion of the Geneva proceedings adopted a Post Grant Review. None of these major systems have denied the right of a member of the public to seek review U.S.C. 321(b)( A petitioner in a post-grant review may request to cancel as unpatentable 1 or more claims of a patent on any ground that could be raised under paragraph (2) or (3) of section 282(b) (relating to invalidity of the patent or any claim). ). 11

12 Does the United States wish to upset the applecart, and not only ruin a key element of its system, but also encourage parallel changes abroad, all to the detriment of major American industries which benefit more than any other country from the several patent systems? VI. GOING FORWARD A. Clearing out the Effective Use of the PGR System But, can the system afford the old way of doing business? Where the Examiner is swamped with applications with too many claims, many of which are nebulous or simply too broad in scope, can the examination corps efficiently weed out such patents? Can they do so without increasing the backlog of pending cases? One change that can and should be made to save the good features of the Coons legislation is a change as to who may bring a PGR proceeding and the conditions for doing so. An obvious solution would be to drop the standing requirement for a PGR. Keeping this nine month window of the PGR open to any party would stimulate challenges to overly broad and indefinite claims, so that once the deadwood was cleared out of the patent, competitors could more successfully design around the commercial heart of the patent. 12

13 G. Statistical Review of the Patents of the Boards of Directors It would be an interesting exercise for the various groups supporting the effective destruction of the PGR system to find out from the various groups lobbying for effective destruction of much of the PGR system to identify their Board members who were corporate Board members, and to see how their corporations have dealt with PGR: How many PGR proceedings have been brought against their corporate patents where a ground for the challenge was other than the a prior patent or printed publication? VI. CONCLUSION Much is right with the Coons legislation. But, to the extent that the poison pill of a statutory prophylactic to guard patentees from a robust Post Grant Proceeding remains in the legislation, it represents a poison pill which overwhelms all the positive features of this legislation. 13

14 About the Author Later, he was a Kenshuin at the Kyoto University Law Faculty in collaboration with the late Dr. Zentaro Kitagawa. Prof. Wegner s latest publication is the treatise: FIRST TO FILE PATENT DRAFTING: A PRACTITIONER S GUIDE (Thomson Reuters 2017) w-products/treatises/first-to-file-patent- Drafting-2017-ed/p/ Westlaw will also electronically publish the treatise this summer. Prof. Wegner s practice includes expert opinions; he develops strategies on complex claim drafting and prosecution matters at the Examiner level and at the Board; and he has been involved with appeals at the Federal Circuit. Prof. Wegner s patent career commenced with service at the U.S. Department of Commerce as a Patent Examiner. His academic involvement started with a three year period in Munich and Kyoto first as a Wissenschaftliche Mitarbeiter at what is today the Max Planck Institute for Innovation and Competition. Prof. Wegner is President Emeritus of The Naples Roundtable, Inc., a 501(c)3 nonprofit corporation dedicated to finding ways to strengthen and improve the patent system. thenaplesroundtable.org/ business address: Harold C. Wegner Suite Pennsylvania Ave N.W. Washington D.C (202) hwegner@gmail.com