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[Ryan Cooper, 6-6-23, Prospect managing editor and The Week national correspondent, The American Prospect, “How Big Pharma Rigged the Patent System,” , accessed: 07-07-24, ES]

Another strategy is to “make slight modifications to the drug,” Robin Feldman, a professor at UC College of the Law, San Francisco, who studies patent abuses, told the Prospect in an interview. By making small changes to dosages, formulation, method of administration, and so forth, drug companies can then apply for a new patent or a patent extension and extend their monopoly. According to her research, “more than 78 percent of new patents are not new drugs,” she said. One common tactic is to strategically produce an extended-release form of the drug right before the original patent is about to expire, because the companies can then receive an additional three-year exclusivity right under “new clinical investigation” rules.

[Ryan Cooper, 6-6-23, Prospect managing editor and The Week national correspondent, The American Prospect, “How Big Pharma Rigged the Patent System,” , accessed: 07-07-24, ES]

One legal strategy Big Pharma uses is filing dozens or even hundreds of patents on the same drug. An Initiative for Medicines, Access, and Knowledge (I-MAK) report from September last year investigated these “patent thickets” on America’s ten best-selling drugs, and the revelations were staggering. The companies have obtained an average of 74 patents apiece on each of those drugs. More tellingly still, of the 140 patent applications on these drugs (on average), two-thirds of them happened after the drug was approved by the FDA.

[Brooke, 12-11-23, The American Journal of Managed, “Biden Administration Proposes Using March-In Rights on Taxpayer-Funded Drugs”, , accessed: 7-10-24, AngH]

New research released by HHS correlated the lack of competition in drug markets with higher prices, with the 25 largest pharmaceutical companies controlling around 70% of industry revenues. Consequently, nearly 3 in 10 individuals struggle to pay for the drugs they need.

[Christopher & Samuel N., Georgia Law Review, vol 58, no 2, "Antisocial Innovation," , accessed 6-30-24]

When innovation scholars think about the means that governments use to encourage R&D, patents are probably the first tool that come to mind. The standard account of patents as innovation incentives is well known.78 Inventions are public goods that are both expensive to develop and difficult to prevent others from copying.79 Like other public goods, these features suggest that the market will not optimally supply desired inventions. If an innovator would have to spend a million dollars to develop an invention that could easily be copied by its rivals, the innovator simply won’t bother to invest its money in the first place. Patents solve the public goods problem by giving inventors exclusive rights to their inventions for a limited period of time.80 This period of exclusivity may enable inventors to charge supra-competitive prices for products that embody their inventions, thus allowing them to recoup their R&D costs and make a profit.81 Unlike some of the incentives described above, the government only issues patent rights to people who actually produce an invention. In order to obtain patents, inventors must demonstrate that they have generated something that is both novel and nonobvious to other skilled inventors.82 And, in theory at least, their inventions are required to be “useful.”83

[Eduardo Porter, 4-12-16, NYT economics reporter, NYT, “Lifting the Patent Barrier to New Drugs and Energy Sources,” , accessed: 7-9-24, ES]

Another study of Trips, however, concluded that while patent protection did increase research and development in high-income countries, it did nothing to foster more investment for treatments that combat diseases like malaria that affect the world’s poor but have no market in the rich world.

[Nat Watkins, 3-15-22, Designer Researcher at Nava / advocate for transparency for consumers / patent holder / AI enthusiast, Wired, “Inside Big Tech’s Race to Patent Everything,” , accessed: 07-08-24, ES]

Around the same time, tech giants became increasingly interested in patents. As Steve Jobs reportedly said at the invention of the first iPhone, “we’re going to patent it all.” And patent it all Apple did—right down to the slide-to-unlock feature and beveled edges. In 2011, Google’s top lawyer, David Drummond, claimed that the average smartphone might be protected by up to 250,000 patent claims. Today, no one seems able to get an accurate count, but last month’s sale of all “legacy patents” from Blackberry’s terminated smartphone business fetched $600 million. Perhaps this explains why the patent office has been swamped by a two- to three- year backlog of applications since 2012. Carbon footprint tracker was published 18 months after we applied, as most patent applications are, but it could be years before I know whether I’ve been formally granted a patent. The USPTO receives about 650,000 patent applications annually and issues grants to about 350,000, according to recent numbers, so my odds are only a little better than half.

[Nat Watkins, 3-15-22, Nava Designer Researcher/ advocate for transparency for consumers / patent holder / AI enthusiast, Wired, “Inside Big Tech’s Race to Patent Everything,” , accessed: 07-08-24, ES]

It’s typical for a company to assume ownership of the intellectual property developed by its employees. But, in my experience, proposed patents didn’t need to be groundbreaking or even relevant to the business to gain traction. Carbon footprint tracker had nothing to do with my job or any proprietary technology. Some of my coworkers had up to 100 patents under their names, covering everything from video games to finding better parking spots to coffee delivery via drone.

[Ling, Ph.D. candidate in Economics, IP Council, “Patents and Supracompetitive Prices: Evidence from Consumer Products” https://www.4ipcouncil.com/application/files/3416/1297/0095/Patents_and_Supra-competitive_Prices.pdf

This paper examines empirically the effect of patent protection on the price of an array of consumer products. We collect original data on patent-product associations and study the effect of an exogenous loss of patent protection on product prices. We have matched 2778 patents to 825 products available on the Amazon.com e-commerce website and have tracked the prices of these products for a period of up to eight years. We study the change in price around the time of patent expiry. Because patent protection is limited in time by law, patent expiry is exogenous to the quality of the underlying invention or to its commercial value. Furthermore, we are able to isolate the effect of patent expiry from the effect of product depreciation by controlling for product model displacement and product age. The empirical analysis then explores the heterogeneous effects of patent expiry across patent type and importance. It also portrays the price evolution around the time when patent terms expire. Finally, it considers how prices react to the intensity of the competition in the product market.

[David, 1-24-24, “Questions for the Record from Senator Alex Padilla Hearing on “The Patent Eligibility Restoration Act – Restoring Clarity, Certainty, and Predictability to the U.S. Patent System”, , accessed 6-28-24]

Regarding the impact on consumers, the whole purpose of the patent system is to provide inventors with exclusive rights that allow them to constrain competition and charge higher prices. The increased profit from these higher prices is the incentive to innovate that is provided by the patent system. In a well-functioning patent system, the hope is that consumers will benefit more from the increased pace of innovation than they will be harmed by increased prices. Unfortunately, PERA would substantially increase prices to consumers without producing any significant countervailing benefits from innovation. This is because PERA would expand patent eligibility to non-technological fields, such as business methods, where patent protection has been shown to reduce rather than increase R&D investment.2 Thus, the predictable impact of PERA on consumers would be to increase prices and reduce selection, while at the same time depriving them of the benefits they otherwise would have had from increased innovation.

[Small Business Technology Council (SBTC), January 2015, SBTC, “Patent Reform Threatens Small Business Innovation,” , accessed: 7-11-24, ES]

Disclosure of All Plaintiff Interested Parties requires both investors and licensors to be disclosed. This will discourage commerce in two ways. First, in the early stages of company formation, it will require Angel investors to break one of their major priorities: anonymity. This provision will discourage Angels from investing in the smallest companies, when outside funding is hardest to obtain. Secondly, it will dampen licensing activities. When a licensee needs time to incorporate the licensed invention into their product, they normally do not want to alert their competition as to where they are moving in the market. This will disclose the fact that the licensee is adding a new feature or an entirely new product line.

[Small Business Technology Council (SBTC), January 2015, SBTC, “Patent Reform Threatens Small Business Innovation,” , accessed: 7-11-24, ES]

Pay to Play provisions require the inventor plaintiff to post a bond or certify that they can pay the alleged infringers legal fees should they not prevail. This puts enforcing a patent beyond the financial capability of all but the largest and wealthiest of small businesses. Pay to Play would result in most of the over 5,000 active SBIR being unable to enforce their patents unless they give up the majority of their equity to a larger company (which would then put them out of the SBIR program).

[Small Business Technology Council (SBTC), January 2015, SBTC, “Patent Reform Threatens Small Business Innovation,” , accessed: 7-11-24, ES]

Loser Pays: American laws do not apply “loser pays” provisions to consumers, corporations, protected groups, or any other class of private litigants. This would induce these groups to tend to decline to enforce their legal rights. Why should inventors be singled out as the only class that should bear this burden? The result will be that small inventors will be deterred from exercising their rights and that invention and resulting jobs will dwindle. More perniciously, the smaller firms will be further deterred from investing to develop such rights, as they will need a $5‐10 million legal war‐ chest before they try to exercise any patents. The large multi‐national companies know that smaller companies cannot afford to pay the larger business’s legal costs if they lose, and so small businesses will not take the chance.

[Small Business Technology Council (SBTC), January 2015, SBTC, “Patent Reform Threatens Small Business Innovation,” , accessed: 7-11-24, ES]

Patent protections are particularly important for innovative small businesses, which operate on much smaller margins, and often rely much more heavily on their intellectual property for revenue than large firms. According to the SBA: “Of high patenting firms (15 or more in a four‐year period), small businesses produced 16 times more patents per employee than large patenting firms. Research also shows that increasing the number of employees correlates with increased innovation while increasing sales does not.”1

[Wayne, 4-3-24, R Street, “Congress Wants to Revive Patents but May Strangle Innovation and Damage Health Care Access Instead”, , accessed: 7-11-24, AngH]

Expanded Patents, Rising Health Care Costs

[Wayne, 4-3-24, R Street, “Congress Wants to Revive Patents but May Strangle Innovation and Damage Health Care Access Instead”, , accessed: 7-11-24, AngH]

Overriding recent court decisions: The bill seeks to revisit important Supreme Court decisions including Alice Corp. v. CLS Bank International (2014), Association for Medical Pathology v. Myriad Genetics (2013),and Mayo Collaborative Services v. Prometheus Laboratories, Inc. (2012). These decisions narrowed the scope of patent-eligible subject matter by declaring naturally occurring gene sequences ineligible. The PERA would make it easier for patents to be issued for inventions that may be ineligible under existing law for being too abstract or for incorporating natural phenomena.

[Dean, 3-20-24, Center for Economic and Policy Research, “Senators Push the Increase Inflation Act (A.K.A. “The Patent Eligibility Restoration Act”)”, , accessed: 7-9-24, AngH]

The basic idea behind the act is to increase the types of things for which people and corporations can get government-granted patent monopolies. These could raise the price of a wide range of items from prescription drugs and medical procedures to computer software and smartphones. It is also likely to mean billions of dollars more being wasted every year in patent suits and related litigation.

[Christopher, Samuel N, 1-31-2024, Georgia Law Review, “Antisocial Innovation,” Volume 58, No. 2, p. 592-3, https://digitalcommons.law.uga.edu/glr/vol58/iss2/4/, accessed 7-14-2024, CM]

Unlike some of the incentives described above, the government¶ only issues patent rights to people who actually produce an¶ invention. In order to obtain patents, inventors must demonstrate¶ that they have generated something that is both novel and nonobvious to other skilled inventors.82 And, in theory at least, their¶ inventions are required to be “useful.”83

Unfortunately, recent bills introduced in Congress have the potential to undo these efforts and revert to a more litigious patent system that is easier to exploit and less conducive to innovation. A previous R Street analysis explored issues with the Patent Eligibility Restoration Act, which was introduced by Sens. Chris Coons (D-Del.) and Thom Tillis (R-N.C.) and would expand the definition of what is patentable in ways that could deter invention and innovation.

This analysis looks at another bill introduced by Sens. Coons and Tillis, along with Sens. Dick Durbin (D-Il.) and Mazie Hirono (D-Hi.): the Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act. The PREVAIL Act narrows the patent review process, making it more difficult to eliminate invalid patents that should not have been granted in the first place. More specifically, provisions in this act would restrict the use of inter partes review (IPR) proceedings at the PTAB—a process designed to facilitate challenges of weak secondary or continuation patents like those commonly used in patent thickets in the pharmaceutical sector.

[Emily G. Blevins, 8-3-22, Congressional Research Service Science and Technology Policy Analyst, Congressional Research Service, “Patents and Innovation Policy,” , accessed: 7-9-24, ES]

If Congress chooses to enact patent reforms, it might consider the potential consequences, both intended and unintended, that such policies might have on the U.S. innovation ecosystem. For example, changes to patent subject matter eligibility standards might have an outsized effect on the patentability of emerging technologies. Additionally, changes to patent administration, especially administrative mechanisms used to challenge patent validity, might either strengthen or reduce the quality of patents issued by the USPTO. Any such changes to patent policy, for example, could impact the perceived certainty and enforceability of patent rights, which may increase the financial risk associated with investing in innovation. Additionally, the extent to which targeted reforms of the patent system might impact who participates in the U.S. innovation ecosystem as well as the quality of the inventions it produces.

[USDA, 3-23-23, U.S. Department of Agriculture, “USDA Launches Interagency Working Group on Competition and Intellectual Property in Seeds”, , accessed: 7-11-24, AngH]

WASHINGTON, March 23, 2023 — Today, the U.S. Department of Agriculture (USDA) announced the launch of an Interagency Working Group on Competition and Intellectual Property in Seeds and Other Agricultural Inputs as an immediate action following the recommendations of its recently published report “More and Better Choices for Farmers: Promoting Fair Competition and Innovation in Seeds and Other Agricultural Inputs.” This action is part of the Biden-Harris Administration’s whole of government efforts to promote fair competition, innovation, and resiliency in seed and other agricultural input sectors.