October Highlights: Spotlighting New Insights on Patent Quality
On September 30, the nonprofit, nonpartisan Sunwater Institute released a policy report, “Patent Quality in the United States: Findings and Suggestions for Policymakers.” The report reviewed the U.S. patent system, analyzing the quality of patents granted compared to those rejected. It found that valid patents are denied at over twice the rate that invalid patents are granted. Additionally, the study determined that — contrary to popular narratives — the USPTO grants invalid patents at a relatively low rate, performing favorably compared to other nations’ patent offices, and that invalidation rates do not accurately reflect overall patent quality.
The study’s insights have an important role to play in reshaping public perceptions of patent quality, as well as encouraging policymakers to focus reform efforts on rejecting fewer valid patent claims. C4IP led several activities during the month of October to educate the public about the study’s critical findings:
- C4IP published a press release celebrating the Sunwater Institute’s groundbreaking analysis and underscoring how the study’s findings should put a definitive end to misinformation about a patent quality crisis within the U.S. innovation ecosystem.
- C4IP hosted a congressional briefing to discuss the study’s insights and policy implications alongside authors and contributors Matthew Chervenak, Ani Harutyunyan, Mark Schankerman, and William Matcham.
- C4IP released an issue brief detailing the study’s three key findings: that the USPTO grants invalid patents at a low rate, that it rejects valid patents at a much higher rate, and that patent invalidation rates must not be used to draw conclusions about overall patent quality.
Read it Now: “Issue Brief: Patent Quality in the United States”
- The Sunwater Institute’s findings were highlighted by articles in Law360 and IPWatchdog.
- To read the complete policy report from the Sunwater Institute, click here.
Additional Coalition Updates
- On October 29, C4IP Chief Policy Officer and Counsel Jamie Simpson discussed the key intellectual property issues surrounding artificial intelligence during a panel at the Wilson Center’s 2024 Canada-US Legal Symposium.
- On October 29, C4IP Board Member Judge Paul Michel (ret.) addressed the current administration’s stance on patents – and the importance of patents to biopharmaceutical innovation – during a panel discussion at IPWatchdog’s Life Sciences Masters 2024 program.
- On October 23 and 24, leading IP advocates discussed how to promote venture capital investment in innovative sectors during panel discussions at the 2024 Accelerate Investor Conference held in Arlington, VA.
- On October 20, C4IP’s public comment on the USPTO’s recent guidance on patent subject matter eligibility and artificial intelligence — which discounted the revolutionary potential of AI tools and failed to address the systemic issues surrounding patent eligibility — was quoted in an IPWatchdog article detailing criticisms of the guidance.
- On October 18, C4IP Co-Chair David Kappos spoke about the impacts of current and proposed standard-essential patent (SEP) regulations on innovation during a panel discussion hosted by the George Mason University Center for Intellectual Property and Innovation Policy (C-IP2).
- On October 17, C4IP’s public comment on the USPTO’s recent AI patent eligibility guidance was quoted in a Law360 article highlighting other groups’ and companies’ calls for greater clarity on AI patenting rules.
- On October 9, C4IP Chief Policy Officer and Counsel Jamie Simpson participated in a panel discussion on the state of U.S. IP policy, including guidance for AI-assisted inventorship and PTAB reform efforts, as part of IAM Live: IP and Emerging Technology USA 2024.
- On October 4, C4IP Co-Chairs Andrei Iancu and David Kappos published an opinion essay in RealClearHealth underlining how the proposed Medication Affordability and Patent Integrity Act would cause unnecessary government waste, make intellectual property vulnerable to theft, and fail to benefit patients.
“Blurring the lines of authority around the comprehensive processes already in place at USPTO and the FDA won’t make patients better off. It’ll only jeopardize American companies’ competitive edge, squander government resources, and help foreign competitors and copycats.”
- On October 2, C4IP Co-Chair Andrei Iancu published an opinion essay in Law360 highlighting how the RESTORE Patent Rights Act would protect American businesses from Chinese patent thieves and promote U.S. economic competitiveness.
“[A]s long as major powers at home and abroad can skirt patent protections with impunity, U.S. innovation will suffer, and our rivals around the world will feel emboldened… [P]assing the RESTORE Patent Rights Act would help ensure inventors get the justice they deserve.”
- On September 27, C4IP Co-Chair David Kappos participated in a panel hosted by New York University, where he spoke out against harmful proposals to control drug prices by using march-in rights and Section 1498 to weaken patents.
- On September 26, C4IP Executive Director Frank Cullen submitted a public comment to the USPTO explaining that the implementation of an explicit exception for patent infringement in cases of experimental use may not be necessary, and urging a cautious approach should the USPTO decide to codify such an exception.
Government Rundown
USPTO Webinar: Learn About New Final Rules Announced for AIA Proceedings:
On October 17, the USPTO hosted a webinar with a panel of administrative patent judges in order to explain several recent rule changes to America Invents Act trial proceedings. Among the rule changes discussed were those regarding director review of PTAB decisions and those governing motion to amend procedures. (USPTO, 10/17)
USPTO Webinar: China IP Legislation and Case Law Update:
On October 3, the USPTO hosted a webinar to inform inventors and others in the IP community about recent developments in Chinese intellectual property law, such as new regulations and court decisions. Senior USPTO attorneys with firsthand experience in China led the discussion. (USPTO, 10/3)
Fact Check
Throughout October, activists affiliated with the Initiative for Medicines, Access & Knowledge (I-MAK) and R Street Institute propagated false narratives about how patents stifle competition in the drug industry and keep generic drugs from coming to market. These erroneous arguments include the ideas that drug developers ‘game’ the FDA’s Orange Book, that they file unnecessary patents to extend their market exclusivity, and that these practices deprive U.S. patients of accessible generic medicines. The allegations being made by I-MAK and R Street Institute reflect commonly cited myths that do not stand up to scrutiny.
A close examination of the arguments made by these organizations reveals that they fundamentally misrepresent the vital role patents play in promoting drug innovation without inhibiting generic entry:
| Claim: Drugmakers prevent competitors from entering the market by creating “thickets” of numerous patents. |
| In reality: There are several reasons that the alleged phenomenon of “patent thickets” is a myth. First, the number of patents on a product by itself is not indicative of the length of market exclusivity. As the USPTO’s recent study states, “simple counts of patents can be misleading when every patent is counted equally” because the actual claims in each patent will vary. The patent counts published by I-MAK are especially misleading because they include abandoned and pending patent applications as well as non-Orange Book patents, which do not affect the timeline of generic drug approval. The USPTO’s own data, which focuses on only patents listed in the Orange Book, shows no correlation between the total number of patents and the length of exclusivity. Second, the practice of filing multiple patents to protect a product is not nefarious — or unique to the drug industry. Complex technologies like drugs and electronics work by combining multiple inventions, which must each be patented in order to prevent illicit copying. In fact, tech companies regularly file far more patents than drug companies. According to the Intellectual Property Owners’ Association’s 2023 report of top U.S. patentees, nearly a third of the largest patent-owning companies belong to the tech sector, while just 2% are in the biopharma sector. |
| Claim: By filing extraneous “junk patents” on a drug, drugmakers extend their period of exclusivity and delay the arrival of generic competition. |
| In reality: There are several inaccurate components to this claim. First, as explained above, all granted patents have been examined by the USPTO and found to satisfy all legal requirements, such as being novel and non-obvious. Therefore, these patents are not “junk” patents, but represent legitimate innovations. Second, the idea that companies can extend one patent by filing additional patents — also known as “evergreening” — is false. When additional patents are filed, they only protect the specific improvement being made. The original patents on the drug will still expire on schedule, making anything covered only by the original version of the product fair game for generic manufacturers. Lastly, there is no evidence that patent protections are delaying the market entry of generic drugs. A recent USPTO study found that the average exclusivity period for 13 recently approved drugs was just 11.4 years, significantly less than the 20-year duration of a patent. This is largely consistent with prior research demonstrating that the median exclusivity period lasts about 12.5 years. The study also found that there was no correlation between the number of patents on a drug and the length of exclusivity — exposing flaws in the research published by I-MAK, which claimed to have found such a correlation. |
| Claim: Abuses of the patent system by drugmakers are restricting patients’ access to generic medicines. |
| In reality: The practices that I-MAK and R Street cite as abuses, which include “patent thickets” and “product hopping,” have previously been debunked as myths by C4IP. But beyond that, the claim that U.S. patients lack access to generic drugs is not based in reality. 90% of all U.S. prescriptions are currently filled with generic drugs. Our use of generic medicines dwarfs that of other developed nations, which prescribe generic drugs only 41% of the time on average. Because of our strong patent system, the United States experiences the best of both worlds: we get innovative new medicines first, and we also have a plethora of generic options available for most conditions. If lawmakers respond to activist pressure by weakening our patent system in order to address these fictitious “abuses,” they will upset the competition that makes America’s pharmaceutical market the most robust and innovative in the world. |
Celebrating American Innovation
Inventor Spotlight
This month, C4IP is recognizing William Shockley, John Bardeen, and Walter Brattain, whose invention of the transistor made modern electronics possible.
- Shockley, Bardeen, and Brattain met in the 1940s at Bell Laboratories when they were hand-picked to work on developing a transistor, a device for generating and amplifying electrical signals.
- The trio succeeded after just two years, receiving a patent for their groundbreaking discovery in 1950.
- The three men were awarded the 1956 Nobel Prize in Physics for the invention, whose efficiency and small size allowed it to quickly supplant the vacuum tube as the preferred way to control electric currents.
- The transistor is regarded today as one of the most influential inventions of the 20th century and as the “Big Bang” that sparked the modern electronics industry.
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- Common devices that rely on transistors include computers, smartphones, car engines, and memory chips.
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- In our increasingly high-tech world, the value of transistors continues to grow rapidly: The global market for semiconductors, which consists mostly of transistors, was estimated to be worth nearly $550 billion in 2023.
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- With an estimated 13 sextillion transistors having been produced as of 2018, the transistor is the most-manufactured object in history.
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(Photo credit: El Mundo)
What’s Happening in Congress
As Democratic and Republican members of Congress continue to weigh legislative priorities during the 118th Congress, top of mind for those who follow intellectual property policy are:
The Patent Eligibility Restoration Act of 2023: In June 2023, Senators Thom Tillis (R-NC) and Chris Coons (D-DE) reintroduced legislation aimed at restoring patent eligibility for important categories of inventions – including life sciences diagnostics, gene therapies, and computer-implemented inventions – as well as resolving questions regarding the scope of patent eligibility. In so doing, the Patent Eligibility Restoration Act will foster the development of next-generation technologies across innovative industries. Representatives Kevin Kiley (R-CA) and Scott Peters (D-CA) introduced the House companion to this bill in September 2024.
The Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act: In July 2023, Senators Chris Coons (D-DE), Thom Tillis (R-NC), Dick Durbin (D-IL), and Mazie Hirono (D-HI) – joined by Deborah Ross (D-NC), and later cosponsored by Nathaniel Moran (R-TX), on the House side – introduced legislation that will eliminate redundant patent invalidity challenges and safeguard Americans’ right to participate in a fair and accessible patent system. The PREVAIL Act contains important reforms to the Patent Trial and Appeal Board, which will return the body to its original purpose of providing an efficient alternative to district court litigation, and will curtail the practice by patent infringers of forcing inventors to defend their patents repeatedly and in multiple fora.
The Inventor Diversity for Economic Advancement (IDEA) Act of 2024: In September 2024, Senators Mazie Hirono (D-HI) and Thom Tillis (R-NC), alongside Representatives Nydia Velázquez (D-NY) and Young Kim (R-CA), reintroduced legislation that would direct the U.S. Patent and Trademark Office to collect demographic information from patent applicants on a voluntary basis. This data would provide clarity on current demographic gaps in patenting and could inform future reforms intended to help currently underrepresented communities, such as women and racial minorities, participate fully in the patent system. By helping ensure equitable access to intellectual property protections, the IDEA Act would help America harness the innovative talents of all its citizens, spurring economic growth and technological advancement.
The Realizing Engineering, Science, and Technology Opportunities by Restoring Exclusive (RESTORE) Patent Rights Act: In July 2024, Senators Chris Coons (D-DE) and Tom Cotton (R-AR), and Representatives Nathaniel Moran (R-TX), Madeleine Dean (D-PA), and Hank Johnson (D-GA) introduced legislation that aims to realign patent law with the U.S. Constitution and the Patent Act’s promise of “exclusive rights” to inventors. This bipartisan bill seeks to restore injunctive relief – court orders that stop infringers from utilizing patented technology – in response to the Supreme Court’s 2006 eBay v. MercExchange. That ruling substantially curtailed the granting of such injunctions, undermining the exclusive rights set forth in the U.S. Constitution to many inventors. C4IP strongly supports this legislation, viewing it as a pivotal moment for American innovation.
The Nurture Originals, Foster Art, and Keep Entertainment Safe (NO FAKES) Act of 2024: In August 2024, Senators Chris Coons (D-DE) and Thom Tillis (R-NC), along with Senators Amy Klobuchar (D-MN) and Marsha Blackburn (R-TN), introduced bipartisan legislation intended to protect all individuals from having their voice and visual likeness copied by generative AI without consent. The bill would ensure that entities that produce or share a non-consensual digital replica of another person’s image or voice, such as an AI-generated “deepfake,” can be held liable for damages. It also provides a mechanism to hold platforms hosting user-generated content liable for the same, if they do not remove such unauthorized material after receiving notice. By safeguarding all individuals from exploitation, this legislation would ensure that music, videos, and other forms of content feature only individuals who agree to it, strengthening the rights of artists and actors, and preventing the exploitation of them and everyone else.
The Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce (SHOP SAFE) Act: In September 2023, Senators Chris Coons (D-DE) and Thom Tillis (R-NC) introduced legislation designed to protect online consumers from harmful counterfeit products. By establishing trademark infringement liability for e-commerce platforms that allow the sale of dangerous counterfeit items, requiring brand owners to notify platforms of their mark(s) in advance, and providing safety from liability to platforms that appropriately vet and remove counterfeit sellers, the SHOP SAFE Act will protect American families as well as businesses and IP holders. Representatives Darrell Issa (R-CA), Jerry Nadler (D-NY), Ben Cline (R-VA), and Hank Johnson (D-GA) introduced the House companion to this bill in June 2024.
The Medication Affordability and Patent Integrity Act: In September 2023, Senators Maggie Hassan (D-NH) and Mike Braun (R-IN) introduced legislation that would require life sciences innovators to disclose vast amounts of confidential data to the USPTO. In addition, firms would also have to provide lengthy certifications stating that all information submitted to the FDA and USPTO is consistent. Proponents of the bill argue that such disclosures would help prevent drug companies from manipulating the patent system, keep weak patents from being issued, and lower drug costs for patients. However, there is no evidence that these problems exist. Rather than benefit patients, the requirements imposed by this bill would likely compromise the confidentiality of trade secrets and make it easier for companies to have their competitors’ patents invalidated. It would also drain USPTO resources and make the drug approval process even more burdensome for innovative companies. Due to these problems, as well as the lack of empirical support for the bill, C4IP opposes this legislation.
The Prohibiting Adversarial Patents (PAPA) Act: In September 2023, Representatives Scott Fitzgerald (R-WI), Mike Gallagher (R-WI), Darrell Issa (R-CA), and Blaine Luetkemeyer (R-MO) introduced legislation that raises a number of concerns. With the well-intended goal of protecting U.S. national security, the PAPA Act has the potential to trigger significant unintended consequences. These include potential retaliatory moves by China and other nations to suspend or render unenforceable patents owned by American companies, further enabling the theft of American IP overseas. The actions called for by the bill may well violate U.S. treaty obligations, which would, in turn, embolden other nations to violate IP-related treaties in various ways. In addition, confiscating patents, or rendering them unenforceable, violates basic principles of property and, therefore, could weaken the concept of patents as property rights. These and other considerations are of the utmost importance as U.S. lawmakers study the full scope of the PAPA Act. C4IP stands ready to work with Members of Congress to address the threat posed by foreign entities while maintaining the integrity of the U.S. patent system.
The Improving Efficiency to Increase Competition Act: In January 2024, Senators Thom Tillis (R-NC) and Chris Coons (D-DE) introduced legislation intended to reduce the administrative burden on universities and other institutions that receive federal research grants so that they can focus more intently on producing new innovations. Specifically, the legislation would direct the Government Accountability Office (GAO) to conduct a study on intellectual property reporting requirements under the Bayh-Dole Act, which vary between federal agencies. Such a study will offer important insights into how the government can make the reporting process more efficient and remove barriers that may have inhibited the development of new inventions.
The Interagency Patent Coordination and Improvement Act of 2023: In January 2023, Senators Dick Durbin (D-IL), Chris Coons (D-DE), Thom Tillis (R-NC), and Chuck Grassley (R-IA) introduced the Interagency Patent Coordination and Improvement Act of 2023. The bill would create an interagency task force to share patent filing information and technical assistance between USPTO and FDA officials. IP experts warn that interagency entanglement could weaken the patent system by inserting officials from multiple federal agencies – without patent law expertise – into the examination process. They submit that it is premature to implement such substantial changes without conducting a thorough evidence-based study.