The Touchstone Effect The Impact of Pre-grant Opposition on Patents by Feroz Ali Khader, Advocate firstname.lastname@example.org
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.
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.
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.
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.
Part 2: ‘Black Swan’ Innovation • Innovation is an effort to create purposeful focused change in an enterprise’s 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
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 • Pfizer’s Lipitor, Novartis’ Gleevec etc
Serendipitous Discoveries • Every serendipitous discovery qualifies for a radical or Black Swan Innovation. • Penicillin was discovered serendipitously. • The same is true about Pfizer’s anti-impotence drug, Viagra (sildenafil citrate), which was initially used for treating hypertension and angina pectoris. • Minoxidil’s 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.
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 – P&G can be called the 3(d) Company. • And Section 3(d) regulates the patenting of incremental innovations
“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.
Looking out for ‘blockbusters’ • Blockbusters means easy profit – the lure of huge pay offs • Lipitor earns Pfizer an annual revenue of $13 Billion. • AstraZeneca’s Prilosec (for heartburn) earned a revenue of $6 billion in 2001.
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
How innovative is the industry? • Taxol (paclitaxel), leading cancer drug, developed by National Cancer Institute and Florida State University licensed to Bristol-Myers Squibb • Amgen’s Epogen was developed by University of Chicago and Columbia. • Gleevec benefitted from NIH funded university researcher
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
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
When Blockbusters go off-patent… • Pharmaceutical companies lose huge part of the market share when their patents expire. • Eli Lilly’s patent on Prozac expired in 2001. • AstraZeneca’s 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.
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
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.
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.
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.
It’s 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.
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.
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.
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.
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 Bajaj’s patent and yet did not oppose. • Opposition doesn’t cost much. But not initiating one does.
Bajaj Auto Ltd • Bajaj’s 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)
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.
P&G • Unilever’s global rival appears to be taking Unilever to the task • Patent No. 174429 (100/BOM/92) of HLL opposed by P&G 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.
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
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 R&D efforts – Where you put your money
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 Googlethe words “Touchstone Effect” for more info