Why Patent Trolls Threaten Biotech

In the last few months, much has been written about a patent dispute that threatened to terminate Blackberry service. In the end, a shutdown was averted because Research In Motion (RIM), the company that manufactures Blackberry, paid $612 million to NTP to settle the dispute. The case, however, has triggered a dangerous call for patent reform that could hurt the life sciences industry.

Some of the news accounts of the patent battle sounded almost like a fairy tale. There was poor RIM under assault by "patent trolls" - the definition of which varies, from someone who opportunistically buys some unused patent and then enforces it vigorously against the industry, to anybody enforcing a patent that it does not intend to commercialize. NTP, one of the trolls, was accused of unfairly attacking RIM in a way that would prevent the Blackberry manufacturer from having its day in court. In fact, RIM had already been in court, having been sued by NTP in 2001 and losing to a jury decision that went against RIM. Subsequently, a federal judge upheld the decision, and for the most part, the US Court of Appeals for the Federal Circuit upheld the lower court's decision. Ultimately, the US Supreme Court declined to review the case.

RIM then initiated a reexamination before the US Patent and Trademark Office (PTO). In the reexamination, the PTO initially found NTP's patents invalid. However, people familiar with the patent system know that the PTO ultimately approves many cases in which patents are initially found invalid. Thus, it was a prudent business decision for RIM to reach a settlement with NTP.

RIM is now waging a public war against the system that allowed NTP patents to issue. Others have joined RIM's call for reform, and the PTO and Congress are considering changes that would include: determining who can bring a patent suit, instituting third-party oppositions, limiting the applicant to one continuation, and examining representative claims first. These are all geared toward preventing patent trolls from bringing lawsuits. According to its argument, patent trolls are terrible people. The problem, of course, is that in some proposed legislation such trolls would include all universities, nonprofits, and many small biotech companies that need the help of a larger company to bring a product through the FDA process. Thus, what may or may not be rational patent policy for the technology sector would be clearly harmful for the life sciences.

Given the regulatory hurdles that a party must go through to bring a product to the market, the research cost involved, and the number of misses, patents play a significant role in the life sciences by their ability to exclude other parties from entering the marketplace. Each day that a patent is extended on a blockbuster drug can result in millions of dollars in additional revenue that fuels both R&D and the financial gamble inherent in drug development. The patent process as it is now written also protects small biotechs as well as the academic institutions where many breakthroughs begin. One size does not fit all in terms of approaching patents, and the life sciences industry needs to be proactive in influencing the patent system so that another sector does not sweep in changes that would be detrimental to drug discovery.

Ronald I. Eisenstein is a partner engaged in biotechnology-related IP in the technology and intellectual property group at Nixon Peabody, a law firm in Boston. The views expressed in this column represent only those of the author and not of Nixon Peabody or its clients.