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The Touchstone Effect

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Title: The Touchstone Effect


1
The Touchstone Effect
  • The Impact of Pre-grant Opposition on Patents

by Feroz Ali Khader, Advocate feroz.ali.k_at_gmail.c
om 9444217156
2
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.

3
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.

4
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.

5
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.

6
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

7
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

8
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.

9
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

10
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.

11
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.

12
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

13
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

14
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

15
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

16
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.

17
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

18
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.

19
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.

20
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.

21
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.

22
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.

23
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.

24
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.

25
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.

26
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)

27
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.

28
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.

29
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

30
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

31
Please visit
  • The web page of my forthcoming book
  • The Touchstone Effect The Impact of Pre-grant
    Opposition on Patents
  • by LexisNexis Butterworths
  • www.thetouchstoneeffect.blogspot.com
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