The Touchstone Effect

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The Touchstone Effect

• The Impact of Pre-grant Opposition on Patents

by Feroz Ali Khader, Advocate feroz.ali.k_at_gmail.c
om
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A story in three parts

• Long ago, before the continent of Australia was
  discovered, the old world knew and believed that
  all swans were white.
• It was in Australia that the first black swan was
  sighted.
• The single sighting invalidated a general
  statement derived from millennia of confirmatory
  sightings of millions of white swans.

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Part 1 Black Swan

• What is a Black Swan?
• Nassim Taleb in his book The Black Swan The
  Impact of the Highly Improbable stretches the
  idea of Black Swan to define events that share
  the following three characteristics
• It is an outlier an event that lies outside the
  realm of regular expectations.
• It carries an extreme impact.
• It can be predicted only after it happens.

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Part 1 Black Swan

• In other words, a Black Swan
• Is a rarity
• Has extreme impact and
• Has retrospective predictability
• Everything of importance around you will qualify
  for a Black Swan
• 9/11 is a Black Swan So is Google same can be
  said about the end of Soviet Union and the
  spread of Internet.

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Part 1 Black Swan

• This combination of low predictability and large
  impact makes the Black Swan a great puzzle.
• Black Swan logic makes what you don't know far
  more relevant than what you do know.
• Black Swans exist in all businesses.
• It is the next BIG thing, the Killer
  Innovation the wonder drug which is new,
  non-obvious and cannot be conceived by others.
• More importantly, Black Swans dominate the
  pharmaceutical industry.

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Part 2 Black Swan Innovation

• Innovation is an effort to create purposeful
  focused change in an enterprises economic or
  social potential Peter F. Drucker
• Innovations could lead to patentable inventions
  and vice-versa.
• Innovation refers the process of bringing out
  patentable inventions.
• Technological Innovation can be
• Radical innovation Eg. Post-it
• Incremental innovation Eg Colour, Shapes

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Radical Innovation

• Very rare and by nature unpredictable true
  Black Swans
• Radical innovation in pharmaceuticals have low
  predictability but high impact they become
  blockbusters.
• Blockbusters are drugs with sales of over a
  billion dollars a year
• Pfizers Lipitor, Novartis Gleevec etc

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Serendipitous Discoveries

• Every serendipitous discovery qualifies for a
  radical or Black Swan Innovation.
• Penicillin was discovered serendipitously.
• The same is true about Pfizers anti-impotence
  drug, Viagra (sildenafil citrate), which was
  initially used for treating hypertension and
  angina pectoris.
• Minoxidils hair growing properties were noticed
  fortuitously while treating some bald patients
  for hypertension.
• The anaesthetic use of nitrous oxide (laughing
  gas) and ether were discovered accidentally.

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Incremental innovation

• Are the minor changes and developments made to a
  radical innovation
• Common industrial practice to invent a radical
  innovation and to develop it further
  incrementally. Eg Detergents, Dentifrices and
  Diapers PG can be called the 3(d) Company.
• And Section 3(d) regulates the patenting of
  incremental innovations

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Me too

• Me too drugs are the incarnations of
  incremental innovation.
• High-priced editions of existing drugs
  variations of older drugs already in market
• Nexium (www.purplepill.com)
• Six best-selling statins Mevacor, Lipitor,
  Zocor, Pravachol, Lescol and Crestor.

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Looking out for blockbusters

• Blockbusters means easy profit the lure of huge
  pay offs
• Lipitor earns Pfizer an annual revenue of 13
  Billion.
• AstraZenecas Prilosec (for heartburn) earned a
  revenue of 6 billion in 2001.

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How innovative is the industry?

• The output of innovative drugs have been far and
  few
• The real source of innovation are the academic
  institutions, small biotech companies and public
  funded research organisation.
• AZT, the first AIDS drug was developed by
  National Cancer Institute and Duke University
  later licensed to GSK

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How innovative is the industry?

• Taxol (paclitaxel), leading cancer drug,
  developed by National Cancer Institute and
  Florida State University licensed to
  Bristol-Myers Squibb
• Amgens Epogen was developed by University of
  Chicago and Columbia.
• Gleevec benefitted from NIH funded university
  researcher

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Part 3 Painting the Swan Black

• The pharmaceutical industry has a tendency to
  paint a white swan black or to repaint a faded
  old Black Swan
• Opposition acts as a check on this phenomenon
• With the pipeline of new drugs dwindling, the
  industry now focuses on packaging what is known
  as Black Swans

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When pipelines dwindle

• New Drugs Approved by the US FDA between 1996 and
  2004
• Painting Swans Black is a consequence of the
  industry reality of fewer new drugs

Year NDA NME
2004 25 17
2003 14 9
2002 11 7
2001 10 7
2000 20 9
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When Blockbusters go off-patent

• Pharmaceutical companies lose huge part of the
  market share when their patents expire.
• Eli Lillys patent on Prozac expired in 2001.
• AstraZenecas patent for Prilosec (the original
  purple pill) expired in 2001 when the drug had a
  revenue of 6 billion in annual sales. Replaced
  by Nexium
• Bristol-Myers Squibb lost its best seller
  Glucophage.
• Schering-Plough lost Claritin and tried to
  replace it unsuccessfully with Clarinex.

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Opposition as a touchstone

• Opposition acts as a touchstone for checking the
  quality of patents or as sandpaper to check the
  plumage of Swans
• It helps in the development of a strong patent
  system where only the right inventions get
  rewarded and the wayward gets rejected
• Helps the Patent Office to take informed
  decisions on grant

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What is Pre-grant Opposition?

• Peer-initiated challenge mechanism under the
  Patents Act.
• Challenge initiated before the grant at the
  Patent Office.
• Administrative in nature and not judicial.
• Helps the patent office to overcome information
  asymmetry
• The purpose of opposition proceedings is to give
  a competitor/interest groups the opportunity of
  opposing unjustified protective rights.

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Pre-grant Opposition is

• risk avoidance.
• Helps you avoid the risk of facing an expensive
  infringement suit.
• In-house procedure keeps you in control
• The most important part of patent enforcement, ie
  filing suits for infringement is an activity that
  is outsourced and involves a gamut of different
  and highly unpredictable players. Opposition
  helps you to decide the course of action.

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Why Pre-grant Opposition is important.

• A patent application will disclose technical
  information about the area in which the invention
  is claimed.
• Patent Offices around the world have difficulties
  in keeping pace with the rapid advancement of
  technology in all areas of science.
• The knowledge about an earlier invention or a
  disclosure more likely to come from the
  competitors who have expertise in that particular
  field of technology in which the invention is
  claimed.

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Its relevance from a systemic viewpoint

• The device of opposition by competitors is a
  means to equip the Patent Office with information
  that may not be available to it.
• Opposition proceedings will be significant in
  determining the grant of patents for the
  applications currently pending before the Patent
  Office.
• In the case of pharmaceutical patents, opposition
  proceedings will play an important role not only
  in the development of patent law but also in the
  future course of the pharmaceutical industry.

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Efficient Procedure

• Time-bound proceedings
• The Act and the Rules stipulate specific
  time-limits for completing the opposition process
  efficiently. (Rule 55)
• Summary proceedings
• The underlying principle the opposition procedure
  is of early and complete presentation of the
  parties cases as opposed to the piecemeal and
  tardy introduction of arguments and supporting
  evidence.

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Cost-Effective Procedure

• A comparatively straightforward procedure
• Results in quick disposal on merits thereby
  reducing the costs incurred in contesting the
  proceedings.
• Trial and appreciation of evidence in the
  traditional manner in which it happens in the
  courts of law do not occur in opposition
  proceedings.
• No fee stipulated for filing a pre-grant
  opposition.
• But, there could be costs when opposition fails.

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Time-bound Procedure

• Representation for opposition should be filed
  within six months from the date of publication of
  application (safe period)
• Publication of the application under section 11 A
• Applicant has three months time to file response.
• Hearing signifies the final step in a pre-grant
  opposition, after which the Controller gives his
  decision.
• Controller shall give the decision within one
  month after the completion of hearing.

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The Rs.120 Crore (or more) Question

• Do you need a strategy on opposing patents?
• the company lost about Rs 120 crore in sales
  because of the delay in launching the Flame
• - Mr Venu Srinivasan, MD, TVS
• TVS found out that it needed one after Bajaj sued
  it for patent infringement of its twin-spark plug
  technology.
• The experts at TVS knew about Bajajs patent and
  yet did not oppose.
• Opposition doesnt cost much. But not initiating
  one does.

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Bajaj Auto Ltd

• Bajajs taking TVS to task over its spark plug
  patent.
• Bajaj seems to have a strategy on opposition so
  far opposed applications
• Patent No.176906 (223/BOM/ 1993) of Automotive
  Research Asso. of India, (Failed)
• Patent No. 176968 (419/BOM/ 1992) of Greaves
  Cotton Co Ltd (Succeeded)
• Patent No. 184001 of Piaggio (Failed)

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Hindustan Unilever

• HLL ( now HU) also seems to have a strategy on
  opposition
• Patent No.190644 (102/BOM/1998) by Alphacon
  Containers Pvt. Ltd (Failed)
• Patent No.198399 (931/CHE/2003) Post-grant
  Opposition (Failed) but patent amended.

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PG

• Unilevers global rival appears to be taking
  Unilever to the task
• Patent No. 174429 (100/BOM/92) of HLL opposed by
  PG Far East Inc (US Company) Succeeded
• Patent No. 174537 (237/BOM/1992) of HLL opposed
  Succeeded
• Patent No.174044 (249/BOM/1991) of HLL Failed
• Patent No. 176112 (303/BOM/92) of HLL Succeeded
• Patent No.173958 (316/BOM/I99I) of HLL Failed-
  Patent amended.

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Ranbaxy

• Ranbaxy (Soon Daiichi Sankyo) has an open
  strategy on challenging patents.
• Patent No. 85/DEL/1995 of Eli Lilly Co -
  partially succeeded only process patents
  granted
• Patent No. 190/MAS/1998 of Roche Succeeded
• Patent No. 1440/MAS/1998 of Novartis Succeeded
• Patent No. 1602/MAS/1998 of Novartis Gleevec
  case Succeeded
• IN/PCT/2000/00084/CHE of Pfizer Failed Patent
  amended.
• IN/PCT/2001/00788/CHE of Pfizer Failed

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The Role of Strategic Oppositions

• Helps you to keep track of competition
• Patents keeps you informed about how others are
  growing and a strategy will help you to find your
  place
• Increases your market share whenever a patented
  drug is kept out of market
• Gives reliable information on your RD efforts
  Where you put your money

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More details

• The web page of my new book
• The Touchstone Effect The Impact of Pre-grant
  Opposition on Patents
• by LexisNexis Butterworths Wadhwa Nagpur
• www.thetouchstoneeffect.blogspot.com
• or simply Google the words
• Touchstone Effect for more info