Policy Levers Tailoring Patent Law to Biotechnology. Comparing US and European Approaches Geertrui Van Overwalle Professor of IP Law at the University of Leuven (Belgium) Professor of Patent Law and New Technologies at the University of Tilburg (the Netherlands) Working paper – April 2010 To be published in University of California Irvine Law Review (forthcoming) Table of content 1. Introduction 1.1. “The patent crisis” 1.2. Objective and scope of the present study 1.2.1. European patent law 1.2.2. Policy levers 1.2.3. Biotechnology 2. Biotech-specific policy levers in Europe 2.1. Patent acquisition 2.1.1. Patentable subject matter – inventions and discoveries 2.1.2. Patentable subject matter – morality 2.1.3. Patentable subject matter – medical methods 2.1.4. Novelty – first and second medical use 2.1.5. Novelty – selection invention 2.1.6. Novelty – testing exemption 2.1.7. Inventive step – expectation of success 2.1.8. Inventive step – secondary indicia – commercial success 2.1.9. Industrial applicability 2.1.10. Skilled person 2.1.11. Enabling disclosure 2.2. Patent scope 2.2.1. Scope of product claims – absolute vs. limited scope 2.2.2. Clarity of claims 2.2.3. Breadth of claims 2.3. Patent rights and limitations 2.3.1. Research exemption 2.3.2. Compulsory licensing 2.3.3. Patent term 3. Conclusions 3.1. European policy levers in biotechnology 3.1.1. Policy levers 3.1.2. Macro versus micro policy levers 3.1.3. Statutory versus jurisprudential policy levers 3.1.4. Pre-grant versus post-grant policy levers 3.1.5. European versus national policy levers 3.1.6. Private interest versus public interest levers 3.2. Comparing European and US policy levers 4. Critical assessment. “The patent crisis” revisited 4.1. Role and motivation for tailoring 4.2. Role of the courts 5. Final remarks 5.1. Future research 5.2. Concluding thoughts 1 Electronic copy available at: http://ssrn.com/abstract=1720875 Abstract In their animated book The Patent Crisis and How the Courts can Solve It, Dan Burk and Mark Lemley give an account of their quest into the judicial treatment of patents in different industry sectors. They present an in-depth commentary on industry specific differences in the patent system from both a legal and economic perspective. The present article attempts to enrich the conversation by sketching the situation in Europe and providing an interesting measure for comparison. In doing so, the paper mainly focuses on the legal situation, and does not enter into the economics discussion. The paper concludes that current European patent law holds substantial potential for technology-specific application. Even though the European Convention (EPC) may have been conceived at its inception as a nominally neutral patent statute, our study clearly reveals that substantial discretion to differ the patent system by industry, and in particular to tailor it to the specificities of the biotechnology sector, is built into the system over the years. Although the EPC was introduced as a unitary regulatory tool, intended to operate the same way across technologies, EPO case law has shown increased interest and ability in tailoring patent law to the needs of distinct technology sectors, and in particular the biotechnology sector. Given the civil law tradition in which European patent law operates, a prevalence of well articulated macro rules openly set forth by the legislature was anticipated. However, a clear predominance of jurisprudential micro policy levers has emerged. Not all European policy levers uncovered in the present study, come to the advantage of the biotechnology industry. Closer analysis of the various policy levers, reveals that rather than systematically expanding the patent system to accommodate biotechnology inventions and stimulating innovation in the biotechnology sector, some policy levers narrow down the patent potential for biotechnological inventions, in an attempt to give echo to concerns of public health and ethical conscience. 2 Electronic copy available at: http://ssrn.com/abstract=1720875 1. Introduction 1.1. “The patent crisis” In their book The Patent Crisis and How the Courts can Solve It,1 Burk and Lemley start from the observation that today’s technology world is characterized by differing innovation and patent patterns per sector. Innovation is not all of a piece and innovation patterns and R&D expenditures may differ from industry to industry in a variety of ways. 2Those differences extend to the way in which industry players experience the patent system and results in patent patterns which may vary from industry to industry as well. Firms’ propensity to obtain patents differs across sectors 3 and some industries rely more heavily on patents than others. Patent prosecution processes diverge according to industry and getting a patent is quicker, cheaper and easier in some industries than in others.4 Distribution of value itself varies systematically by industry.5 Even the effective scope of granted patents is different by industry, and there is not always a one-to-one correspondence between a single patent and a single product.6 And, the construction of a patent portfolio is also industry specific.7 Focusing on the pharmaceutical industry, Burk and Lemley set forth that the pharmaceutical industry is characterized by non-cumulative innovation, where the need for further research on a particular drug after FDA approval is not high.8 As to patent protection, there seems to be a strong consensus that patent strategies are well established in the pharma industry, that this sector heavily relies on patent protection and that it is one of the key users of the patent system.9 In the biotechnology sector, patent protection is quite often also seen as critical to innovation 10, even though concerns have arisen about the many upstream patents that might 1 Burk, D.L. & Lemley, M.A., The Patent Crisis and How the Courts Can Solve It, Chicago-London, The University of Chicago Press, 2009 (further abbreviated as Burk & Lemley, The Patent Crisis, 2009). 2 See Burk & Lemley, The Patent Crisis, 2009, 5, 38, 39-41. A few other significant quotes in the same sense: “The evidence is overwhelming that, at virtually every stage of both the innovation and patent processes, different industries have different needs and experience the patent system differently” (Burk & Lemley, The Patent Crisis, 2009, 65); “It makes little sense to speak generally about innovation or about patents” (Burk & Lemley, The Patent Crisis, 2009, 65); “We do not have a unitary patent system today, if by unitary you mean one system that works the same way everywhere. We have one set of legal rules, but the industries affected by the rules operate in very different patent systems” (Burk & Lemley, The Patent Crisis, 2009, 65) 3 Burk & Lemley, The Patent Crisis, 2009, with reference to Brower, E., & Kleinknecht, A., Innovatie Output and a Firm’s Propensity to Patent: An Exploration of CIS Micro Data, 28 Res.Pol 615, 1999; Scherer, F.M., Herzstein, S.E. & Dreyfoos, A.W. et al., Patents and the Corporation, 1959, Harvard Business School, Boston, MA, 195p. 4 Burk & Lemley, The Patent Crisis, 2009, with reference to Allison, J.R. & Lemley, M.A., Who’s Patenting What?An Empirical Exploration of Patent Prosecution, 53 Vanderbilt Law Review, (2099), 2124-32 (2000). 5 Burk & Lemley, The Patent Crisis, 2009 with reference to Schankerman, M., How valuable is Patent Protection? Estimates by Technology Field, 29 RAND J. Econ. 77, 79 (1998). 6 Burk & Lemley, The Patent Crisis, 2009, 53. 7 Burk & Lemley, The Patent Crisis, 2009, with reference to Parchomovsky, G. & Wagner, R.P., Patent Portfolios, 154 U.Pa.L.Rev. 1 (2005). 8 Burk & Lemley, The Patent Crisis, 2009, 33. 9 Burk & Lemley, The Patent Crisis, 2009, with reference to Lanjouw, J.O. & Cockburn, I., Do Patents Matter? Empirical Evidence after GATT, National Bureau of Economic Research Working Paper No 7495, 2000. However, compared to other industries, pharma and biotech do not patent intensely, at least not in Europe. The EPO statistics of 2008 clearly show that the top of the leading 25 applicants were again Philips, Siemens (now up to second place) and Samsung. Not a single pharma or biotech company, apart from Bayer, was listed in the top 25 (See “Leading applicants and patentees in 2008”, in EPO Annual Report 2008, p. 21). 10 Burk & Lemley, The Patent Crisis, 2009, 4 3 hamper the development of final drugs and therapies.11 As to patent prosecution, chemical, pharmaceutical and biotechnological patents seem to spend much longer in prosecution, cite more prior art, and are abandoned and refiled more frequently.12 As to value distribution, the chemical and pharmaceutical industries hold patents with more consistent value.13 As to scope, the chemical and pharmaceutical sectors are characterized by a patent-to-product correspondence, where a single patent normally covers a single product, new chemical or a new use for that chemical.14 And in industries such as pharmaceuticals, characterized by patent-to-product correspondence, patent portfolios are rare: pharmaceutical companies may seek a few patents covering the same pharmaceutical product, thus patenting metabolites, extended release formulations, enantiomers, or processes of use.15 These patents are usually used to try to extend patent life: rather than creating a “thicket” of patents surrounding a complex of products 16, they create a “cluster” of patents surrounding one product or technology to prolong the protection (and related income) of a blockbuster.17 Based