VOICES FROM THE INDUSTRY: Patent ruling a big victory for biotech, drug industries

Last Halloween a federal court in Virginia gave the biotech and pharmaceutical industries a big treat when it preliminarily halted the Patent and Trademark Office, or PTO, from implementing new rules governing certain aspects of patent prosecution. This ruling was significant
because it prevented the PTO from imple
menting new rules governing patent applications that many thought would weaken protection of important biological and chemical inventions. Several local life sciences businesses and entities with significant numbers of patent applications in these areas were likely overjoyed at the ruling.

The ruling came in a case brought by GlaxoSmithKline, or GSK. The PTO had scheduled to implement its new rules Nov. 1, 2007. Two new rules were of particular concern to the biotech and pharma industries, among others.

The first was a limitation on the number
of claims a patent application can contain. The claims of a patent contain a detailed legal description of an invention, like a real estate description in a deed. The PTO’s new rules limited the number of independent claims to five and the total number of claims to 25.

The second rule was a limitation on the number of “continuing applications” that can be filed. A continuing application is a second (or third, fourth, etc.) application based on the same invention disclosure as an original application.

An editorial in the November 2007 issue of Nature Biotechnology summarized the
objections of the biotech and pharma industries to these rules, saying 25 claims are considered far too few to adequately cover breakthrough biological inventions. Biotech and pharma companies rely on continuations to enhance their patents when preclinical and clinical development identify additional inventions to patent.

In its opinion halting implementation of the new rules, the court analyzed four factors governing the issuance of injunctive relief before a full trial can be held.

1. The first factor is the likelihood that the plaintiff (GSK here) will ultimately prevail. The court considered several arguments by GSK and, although it found the questions “difficult,” the court ultimately concluded that GSK had demonstrated sufficient likelihood of success to warrant the temporary injunction. GSK’s two arguments that carried the day were:

The PTO did not have the authority to implement the new rules. The court found that the rule limiting the number of continuing applications appeared to conflict with section 120 of the patent statute.

GSK argued that it had disclosed trade secrets (the inventions in some 2,000 pending patent applications) in reliance on the existing rules. It also argued that the new rules could not be applied retroactively and change the scope of protection on which GSK had relied when making those disclosures. The court found that “GSK has demonstrated a real likelihood of success on the issue.”

2. The second factor the court considered was whether GSK had shown that it would suffer “irreparable harm” if the new rules were adopted. The court concluded that the uncertainty caused by the new regulations would harm GSK’s investments and impair the incentive to file new patent applications and develop new pharmaceutical products.

3. Analyzing the third factor, the court concluded that this irreparable harm to GSK outweighed the harm to the PTO from expenses to train its personnel and revise its computer systems to implement the new rules.

4. The court found that the public interest favored the injunction because of the uncertainty that would arise if the new rules were implemented but remained under a threat of being invalidated.

Although GSK won the first round, the final outcome of the case-and ultimate validity of the new rules-awaits a full trial or other disposition. The court handling the case is known as a “rocket docket,” typically bringing cases to trial in six months.

Whatever the outcome of this case, biotech companies should expect that eventually the new rules, or some other measures to lessen the PTO’s workload, will be implemented. The PTO has a backlog of approximately 750,000 applications and it is growing. Something must be done or the backlog and corresponding delay in patent issuance will continue to increase.

In the meantime, companies should consider taking advantage of this win to the extent possible by filing applications under the existing rules, as well as other options.