PERA expands patent eligibility that increases patent-thickets, evergreening and product hopping.

[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.

Providing new guidelines: The PERA would also expand patent eligibility by eliminating existing judicial exceptions to patentability and replacing them with a narrow list of inventions that cannot be patented. These new exceptions include:

A mathematical formula that is not part of a claimed invention;

A process that is substantially economic, financial, business, social, cultural, or artistic, unless it cannot be performed without a machine or manufacture;

A process that occurs in the mind or in nature, wholly independent of human activity;

An unmodified gene, as it exists in the human body; and

An unmodified natural material, as it exists in nature.

While one of the PERA’s goals is to provide greater certainty with respect to patent eligibility, these exceptions are sure to pose legal questions. What, for example, is a process that is substantially economic, or business, or cultural that cannot be performed without a machine?

Expanding patent eligibility: Importantly, the legislation states that claimed patents in areas like biotechnology, diagnostic testing, and artificial intelligence (AI) are eligible if they are incorporated into a “useful process, machine, manufacture, or composition of matter, or any useful improvement thereof.” Supporters seek to clarify that inventions involving natural phenomena, laws of nature, and abstract ideas are only eligible for patent protection if they are practically applied or integrated into a practical application.

Expanding Patent Eligibility Limits Innovation and Competition

Supporters claim that patent eligibility practices in the wake of the aforementioned Supreme Court decisions hinder innovation and investment in critical technologies like AI, personalized medicine, and diagnostic testing. On the other hand, critics assert that the PERA would restore an earlier patent regime that granted patent protections too broadly, making it difficult for true innovators to navigate complex and far-reaching patents that limit entry into the market.

“Patent thickets” became prevalent in the late 1990s and early 2000s, particularly among pharmaceutical companies seeking to extend their exclusivity over blockbuster drugs in order to keep generic competitors at bay. This term refers to the practice of creating impenetrable walls of patents on different aspects of the same drug—from the primary patent covering the compound itself to secondary patents on characteristics like method of use, formulation, and other aspects of drug delivery—thereby creating a dense web, or “thicket,” of patents surrounding a single product. For example, I-MAK found that America’s top 10 best-selling drugs possess an average of 74 granted patents. These patent thickets extend the monopoly protection enjoyed by drug manufacturers well beyond the original patent while keeping low-cost generics out of the market.

Another tactic for extending monopoly protection of brand-name drugs is “evergreening,” or adding new patents to a drug as existing ones expire. By pursuing patents on different aspects of a drug, such as packaging, dosage, or other properties, it is possible to extend its dominance in the marketplace. While some changes may be warranted, others may simply protect exclusivity. This makes it important to evaluate a patent’s validity—something proposed changes within the PERA would make more difficult.

“Product hopping” is yet another way to game the patent system. Here, a company produces a reformulated version of a drug—by changing the dosage or introducing an extended-release version, for instance—and markets the new product heavily while urging prescribers to switch. They may even take the old product off the market. In one example, as the patent on its popular anti-ulcer drug Prilosec expired, AstraZeneca switched to Nexium, a drug with minimal modifications and an additional 13-year patent life. This product hop was estimated to cost the U.S. health care system over $2 billion annually.

Expanding patent eligibility to allow companies to obtain patents on abstract ideas, natural phenomena, or even basic computing functions would significantly extend the monopolies of patent owners, stifling innovation and competition by giving patent holders greater authority to challenge new entrants for infringement as they try to access the market. It would abuse the tools of government to slow down competition and stifle innovation.