Effects of Globalization

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Effects of Globalization Upon the Accessing of
Intellectual Property by Raymond S. Fersko, Esq.
Drug Information Association 10th Annual
Workshop Biotechnology- Electronic IND
Submissions and Global Issues March 25-28,
2002 Irvine, California
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Special Thanks to my colleagues at Mintz Levin,
Ebun Garner, Esq. and Elizabeth Naiman for
their invaluable assistance in preparation of
these slides and to Robert Barry, Esq. of Allen
Overy (London) for providing information
relative to this presentation.
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Introduction

• International Context
• Global Marketplace
• Globalization of IP through International
  Treaties
• Patenting the Human DNA Sequence in USA and
  Europe
• Licensing of Research Patents Bane or
  Opportunity?
• Research and Public Policy
• The IP Watch List
• Final Rules

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I. The International Context

• Biotech is not regional its global
• Advances are fruits of international
  collaboration
• Major Markets - North America, Europe, Japan
• Markets are different and inconsistent.
• Patent, regulatory, medical, pricing (Europe and
  Japan), healthcare reimbursement, country-wide
  and local nuances

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I. The International Context

• Governments Hotly Debated Issues
• Cloning Stem Cells Funding of Research and
  Development Availability of Research Tools
• Deals are bigger, more complex and different
• Convergence of cross-disciplinary technology
  platforms, business models and marketing
  strategies
• Not just Big Pharma Biotech developing new
  products
• Biotech Biotech, Genomics, Bioinformatics,and
  E-Health companies

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I. The International Context

• Advances in IT enable scientists and managers to
  work on worldwide scale
• Platform technologies make the drug discovery
  process more efficient
• Eliminating failure saving
• But need pipeline
• License access to databases elite seek
  downstream product rights or royalties (reach
  through)

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I. The International Context

• Exploitation of genomic knowledge has changed the
  economies of pharmaceutical RD
• High Throughputs Surge in data
• Informatics Computerized technologies for
  managing and analyzing the data

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The Current CTO
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The Survivor CTO
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II. The Global Marketplace
.

• Economic Interdependence
• GATT and free trade
• Multinationals
• Technology
• Internet

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III. Globalization and IP

• IP is a truly international area of law
• International treaties
• GATT (General Agreements on Tariffs and Trades)-
• TRIPS (Agreement on Trade-Related Aspects of
  Intellectual Property)
• B. European Patent Convention
• C. Community Patent Convention
• D. Patent Cooperation Treaty

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III. Globalization and IP TRIPS

• TRIPS evidences the success of a coalition of
  private, American high technology firms in
  linking intellectual property to trade and to
  GATT/WTO
• Coalition formed early 1990s
• Two major aims
• Make IP protection central part of United States
  foreign
• trade policy
• Improve international IP protection

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III. Globalization and IP TRIPS

• Prior to TRIPS, many countries had only limited
  or non-existent laws to protect IP rights, and a
  countrys laws were not necessarily honored in
  another country.
• India did not grant patents for pharmaceutical
  products, nor did Brazil for pharmaceutical
  products or processes.

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III. Globalization and IP TRIPS

• TRIPS addresses differences between developing
  and developed by giving developing countries 10
  year window to become TRIPS compliant.
• TRIPS is to ensure that developing countries have
  access to technologies-- imperative to
  development.
• Patent rights protections such as TRIPS should
  work to protect individuals, not allow a more
  powerful individual to exploit a less powerful
  individual

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III. Globalization and IP TRIPS

• IP and trade were formally linked global basis
  as a result of TRIPS conducted under GATT.
• WTO, succeeded GATT, now oversees TRIPS and
  dispute resolution (including settlement) between
  member states.
• Under TRIPS, Patent term is minimum of 20 years
  from filing date.
• In implementing TRIPS, US revised patent term to
  conform to single TRIPS standard.

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III. Globalization and IP TRIPS

• No express prohibition on use of parallel imports
  or price controls-- a common practice in
  developed countries.
• US is exception.
• Despite unprecedented level of positive
  rulemaking, IP provisions of TRIPS leave
  substantial room for countries to exercise
  regulatory control over pharmaceutical pricing.
• TRIPS explicitly acknowledges necessity of
  considering public interest- specifically health
  policy- in formulating domestic intellectual
  property regulations.

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III. Globalization and IP The Paris Convention

• The Paris Convention is a treaty by which most
  nations give limited recognition to each other's
  patent application filing dates.
• For one year after the filing date of U.S. patent
  application, Foreign Counterpart Application may
  be filed in any or all other countries that
  subscribe to Paris Convention.

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III. Globalization and IP
The Paris Convention

• Any Foreign Counterpart Application has
  benefit of the actual U.S. priority date as
  opposed to date of filing in the foreign country.

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III. Globalization and IP European Patent
Convention

•   The European Patent Convention (the "EPC")
• granting European patent protection signed
• in Munich (1973).  
• EPC was to make the protection of inventions
  in
• the member states easier, cheaper and more
• reliable by creating a single European
  procedure for
• grant of patent on the basis of a uniform body
  of
• substantive patent law. 
• Obtaining a European patent has the same legal
  effect as
• obtaining separate "national" patents in the
  various member
• states.

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III. Globalization and IP European Patent
Convention

• If the subject-matter of the European
• patent is a process, the protection
• conferred by it extends to the products
• directly obtained by that process.
• Infringement of European patent
• dealt with by national law.
• Term of the European patent--
• twenty years from the filing date of
• application.

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III. Globalization and IP Community Patent
Convention

• The effort to harmonize patent laws in Europe was
  recognized by the founders of the European
  Economic Community (the "E.E.C.").

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III. Globalization and IP Community Patent
Convention

• The E.E.C. had two goals
• (1) Create a patent designed to suit the common
  market and possibly incorporate the association
  of non-members.
• (2) Create an international patent system for a
  number of countries that allowed parties to file
  one application for all contracting states and,
  thus, subject parties to a single procedure of
  grant.

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III. Globalization and IP Community Patent
Convention

• The European Patent Convention addressed the
  first goal.
• The proposed Community Patent Convention
  addressed the second goal and would have provided
  for the issue of patents that cover the territory
  of the entire E.E.C.

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III. Globalization and IP Community Patent
Convention

• The community patent would be as indivisible as a
  U.S. patent covering the United States.
• Neither the 1975 Community Patent Convention nor
  the amended Convention of 1989 ever came into
  force.
• The main obstacle to the community patent is the
  language. Several member states of the European
  Union insist that patents shall be translated
  into all national languages within the territory.
  Translation costs prohibitive.

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III. Globalization and IP Patent Cooperation
Treaty

• In late 1960's, the U.S. took the lead in
• creating a multilateral patent treaty to
• minimize duplicative patent applications and
• examinations worldwide.   
• This eventually resulted in the creation of the
  
• Patent Cooperation Treaty (the "PCT").

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III. Globalization and IP Patent Cooperation
Treaty

• When IP owner files PCT application, 
• designate every country in which there is
• potentially filing interest. 
• IP owner also designate one or more of a list
  of
• regional patent organizations which cover a
• number of countries, such as the European
• Patent Office (for the E.C. countries),
  Eurasian
• Patent (covering Russia and a number of
  former
• USSR republics), or ARIPO and OAPI in
  Africa.

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III. Globalization and IP Patent Cooperation
Treaty

• The PCT then allows filing delay in these
  countries even further - up to 30 months from
  your U.S. filing date in most countries. 
• After 30 month period, still need to file
  national applications in each country in which a
  patent is desired.  Thus, the ultimate goal of
  the treaty was never achieved.

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III. Globalization and IP Patent Cooperation
Treaty
Advantages of the PCT for an IP owner 1.  The
delay of national filing costs. 2.  Novelty
searches and examinations are conducted at
an international level. 3.  A PCT application
can keep ones' options open in many
countries for a relatively low cost.  With
any luck a  potential licensee will pay the
costs of prosecution in countries in which
licensee is interested.
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IV. Patenting the Human DNA Sequence in the USA
and Europe

• Patenting of human DNA sequence
  generates intense international
  debate particularly in the technologically
  advanced US and European Union.
• Tension heightened as US biotechs increasingly
  seek patent protection in Europe in order to
  recoup considerable costs of research and
  development

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IV. Patenting the Human DNA Sequence in the USA
and Europe

• In order to obtain patent protection under
• U.S. Patent Act, a claimed invention must be
• Directed to statutory subject matter
• Novel
• Useful
• Non-obvious to a person of ordinary
• skill in the art at time invention was made

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IV. Patenting the Human DNA Sequence in the USA
and Europe

• In recent years, hundreds of thousands
• of patent applications have been filed
• by early-stage genomic companies.
• Many of these applications cover gene
• fragments, SNPs or protein structures
• of unknown functions.

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IV. Patenting the Human DNA Sequence in the
USA and Europe

• The USPTO has narrowed the amount of patent
  protection it will grant to genomic sequences.
• USPTO guidelines issues in January 2001 provide
  that gene fragments, SNPs, genes and protein
  structures of unknown function lack utility, and
  thus are not patentable. 

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IV. Patenting the Human DNA Sequence in the
USA and Europe

• The requirements of E.U. biotechnology patents
  are set forth in the European Patent Convention
  (EPC) and a 1998 E.U.  Biotechnology directive
  (The Biotechnology Directive)
• An invention must
• Comprise patentable subject matter.
• Be new.
• Be susceptible of industrial application.
• Involve an inventive step.

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IV. Patenting the Human DNA Sequencein the USA
and Europe

• Europe, like the U.S., recently has strengthened
  its utility standard (susceptible of industrial
  application) with respect to biotech patents.
• Article 57 of the EPC states, an invention shall
  be considered as susceptible of industrial
  application if it can be made or used in any kind
  of industry, including agriculture.

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IV. Patenting the Human DNA Sequencein the USA
and Europe

• Ethical objections to patents on human DNA
  sequences are more robust in the E.U. than in the
  U.S.
• The EPC states that, European patents shall not
  be granted in respect of inventions the
  publication or exploitation of which would be
  contrary to ordre public or morality, provided
  that the exploitation shall not be deemed to be
  so contrary merely because it is prohibited by
  law or regulation in some or all of the
  Contracting States.

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IV. Patenting the Human DNA Sequencein the USA
and Europe

• Ordre public
• Gives automatic standing to its citizens,
  allowing them to challenge individual patents, on
  the ground that issuance would be morally
  offensive.

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IV. Patenting the Human DNA Sequencein the USA
and Europe

• Notwithstanding the infrequent use of the
  morality provision under European law, the
  Biotechnology Directive faces attack on grounds
  that patenting human DNA sequences is inherently
  unethical.
• Netherlands has commenced legal action against
  European Parliament demanding annulment of the
  directive.
• French officials are especially vigorous in their
  efforts to circumscribe patenting.
• French President Jacques Chirac stressed need to
  prevent any possibility of patenting the
  discovery of a gene except for therapeutic or
  diagnostic applications

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IV. Patenting the Human DNA Sequencein the USA
and Europe

• The E.U. faces vigorous public dissent with
  respect to patents on life forms, including DNA
  sequence patents.
• This dissent derives in part from the
  distinctively European perspective that morality
  ought not to be compromised for purposes of
  making a profit.

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IV. Patenting the Human DNA Sequencein the USA
and Europe

• While opposition remains strongly committed to
  its cause, it is unlikely to succeed in bringing
  about complete ban for two reasons
• Anti-patenting forces are under-funded and poorly
  organized as compared to biotech lobby.
• Courts and patent offices in US and EU are under
  pressure to adopt liberal attitude toward IP
  protection in order to attract foreign direct
  investment.
• Failure to do so leads domestic biotech firms to
  depart to other locales.

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V. Licensing of Research Patents
Bane or
Opportunity?

The Opportunity The Issue What is the present
value of the potential? (e.g. versatile tools,
not just applicable to a particular situation,
but have power to create new situations for their
use and new subjects to use them)
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V. Licensing of Research Patents
Bane or Opportunity?

• The Bane (or maybe still the opportunity?)
• The convergence of these opportunities
  bring together a distinct ever-emerging
  configuration of science, technology, cultural,
  social, economic, political and legal issues
  (e.g. Clinton and Blairs combined statements
  that raw fundamental data on the human genome
  should be made freely available to scientists
  everywhere and the corresponding drop in the
  stock market).

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V. Licensing of Research Patents
Bane or Opportunity?

• The Bane contd
• Todays platform technologies represent the
  future of the young biotechnology industry (30
  yrs) and a large part of big pharmas RD.
• The AIDS epidemic
• TRIPS and NAFTA doctrines role of the
  government and international organizations

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V. Licensing of Research Patents
Bane or Opportunity?

• The Bane contd
• Compulsory licensing
• Healthcare systems
• Pursuit of intellectual property in
  international trade negotiations
• Experimental use exceptions vs. applied use
• Reach-through royalties

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VI. Research and Public Policy

• Public Policy Issues in Light of the Current
  State of the Law
• Compulsory Licensing
• No compulsory licensing in the U.S. except
• march-in rights - never exercised since granted
  in Bayh-Dole act of 1980 (35 U.S.C. 203)
• Atomic Energy Act (42 U.S.C. 2183)

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VI. Research and Public Policy
Compulsory Licensing contd

• Clean Air Act (42 U.S.C. 7608)
• Remedy for antitrust/patent violation
• Compulsory licensing is violently opposed in the
  U.S. because it degrades the monopoly rights of
  patentee (opposition from patent bar, industrial
  groups).
• difficulty of royalty quantification

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VI. Research and Public Policy

• Compulsory Licensing contd
• Congress considered (but dropped) idea for
  compulsory licensing as part of 1952 Patent Act
• Modest number of official adjudications of a
  reasonable royalty in compulsory licensing
  countries (mere threat of royalty-rate
  determination by fact finder seems to spur on
  private voluntary transactions)

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VI. Research and Public Policy

• Compulsory Licensing contd
• Commission on European Communities, Proposal for
  a Council Regulation on the Community Patent
• If enacted, could be harmonization of laws
  relating to compulsory licenses through the
  community patent.
• Potential basis for compulsory licensing for
  research that is frustrated by blocking patents.

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VI. Research and Public Policy
Compulsory Licensing contd

• In determining public interest, courts elected
  representatives and patent offices must take into
  account negative impact of exclusionary patent
  system upon disadvantaged patients.
• AIDS pandemic-- catalyst for economic/political
  pressure upon internatl pharmaceutical companies
  to agree to compulsory licensing.

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VI. Research and Public Policy
Compulsory Licensing contd

• In 1997, based upon South Africas high
  percentage of HIV infection, South African
  government tried to institute compulsory
  licensing to make HIV therapeutics more freely
  available.
• South African governments decision met with
  considerable resistance from intl pharmaceutical
  community and the U.S. government.
• Lawsuit ensued, but parties eventually reached
  settlement

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VI. Research and Public Policy
Compulsory Licensing contd

• The worsening situation caused WTO to issue
  following declaration in November 2001
• Each member has the right to grant compulsory
  licenses and the freedom to determine grounds
  upon which such licenses are granted. Each
  member has the the right to determine what
  constitutes a national emergency or other
  circumstances of extreme urgency, it being
  understood that public health crises, including
  those relating to HIV/AIDS, tuberculosis, malaria
  and other epidemics, can represent a national
  emergency or other circumstances of extreme
  urgency.

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VI. Research and Public Policy
Compulsory Licensing contd

• This declaration strengthen the ability of WTO
  members to institute compulsory licensing as
  provided in TRIPS
• Public opinion has dictated that there must be
  economic assistance where there are large
  indigent infected populations without access to
  adequate healthcare and economic resources.
• In October 2001, GlaxoSmithKline plc announced
  that it had granted rights to its market-leading
  HIV medications to a South African generic drug
  company, Aspen Pharmacare, in order to enable
  Aspen to produce a cheaper alternative

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VI. Research and Public Policy
Compulsory Licensing contd

• The debate on compulsory licensing was renewed
  once again in fall 2001, following anthrax
  attacks in U.S.
• Following attacks, Canadian government (in an
  action renounced soon after it was taken) sought
  to require Bayer Corporation to license its
  patent rights to Ciprofloxacin to generic drug
  manufacturer
• Eventually Bayer entered into agreement with US
  Dept. of Health and Human Services to supply 100
  million tablets of Cipro at .95 per tablet, as
  opposed to previous 1.77.

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VI. Research and Public Policy
Compulsory Licensing contd

• At this time, not yet a public clamor to license
  research tools compulsorily, because tools are an
  issue more naturally taken up by researchers in
  government and academia.
• However, AIDS, Cipro, and Stem Cell Decisions
  examples serve as precedent for types of
  decisions that may force us to find appropriate
  balance between publics interest in encouraging
  wide availability of research tools for science
  and public health, and biotech and pharmaceutical
  companies interest in preserving a system that
  rewards innovation with capital investment.

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VI. Research and Public Policy

• Development Use (a new concept)
• Research tools could be used by scientists
  without prior authorization, but research tool
  patent owner would receive an ex-post royalty
  based on the ultimate commercial success
  resulting from use of tool.
• This practice is unlikely in the U.S. (narrow
  formulation of experimental use doctrine).

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VI. Research and Public Policy

• Development Use contd
• Possible in Europe under proposed community
  patent regulations
• Possible in Japan, which has a broad exemption
  for experimental use

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VII. The International IP Watch List

• The Office of the U.S. Trade Representative (the
  "USTR") asks U.S. industries and the
  Pharmaceutical Research and Manufacturing
  Association (PhRMA) to identify countries
  denying adequate protection of IP rights or fair
  market access to their products.
• The Executive Branch uses these reports to
  consider appropriate action under U.S. trade
  laws.

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VII. The International IP Watch List

• The deficiencies in some of these countries
  (e.g., Argentina, Brazil, and Israel) are
  tailored to those TRIPS obligations that are the
  most crucial to the research-based pharmaceutical
  industry (e.g., patents, trade secrets, data
  protection).
• Whereas other developing countries have simply
  refused to make some or all of the necessary
  legislative and procedural reforms to bring their
  regimes into compliance with TRIPS.

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VII. The International IP Watch List

• Several countries, including Argentina, Colombia,
  India, Turkey have
• failed to meet key obligations and instead have
  adopted policies that deny PhRMA members adequate
  and effective patent protection for
  pharmaceutical products. Statement of the
  Pharmaceutical Research and Manufacturers of
  America
• These countries are on a Priority Watch status
  with PhRMA.

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VII. The International IP Watch List

• In addition, the PhRMA has placed 18 countries,
  including Australia, Taiwan, Russia, Spain, Saudi
  Arabia, Costa Rica and Israel on its Watch List
  of countries that violate international IP
  agreements.

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VII. The International IP Watch List

• PhRMA has been urging the USTR to initiate WTO
  dispute settlement actions against the worst
  TRIPS offenders Argentina, Egypt and India.

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Ferskos Cardinal Rules
Wherever you are
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First Rule
Be respectful of other cultures and systems
nobody has a monopoly on how to solve problems,
but
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First Rule (II)
TRUST BUT VERIFY
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First Rule (III)
Trust, but leave nothing to chance
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Final Rule
In all agreements and negotiations (anywhere in
the world), the devil is in the details
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Final Final Rule
Get it in writing and make the writing clear
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For further information Raymond S. Fersko,
Esq. Email rsfersko_at_mintz.com Tel [phone]
Cell 917-692-9005 Address Mintz Levin 666
Third Avenue, 25th Floor New York, NY 10017