Patently-O Bits and Bytes by Juvan Bonni

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36 thoughts on “Patently-O Bits and Bytes by Juvan Bonni”

  1. 7

    Great reporting by Joe Mullin. But why doesn’t Google endemnify their customers/users? This is the same fact pattern as the X-Plane app developer who was sued for using the Android app store, and many other horror stories used to justify broad ant-patent policies. It truly is an injustice, but big tech is responsible and more than capable of dealing with this category of abuse.

    But if they dealt with it, they wouldn’t be able to use these stories to justify rigging the patent system against legitimate inventors.

    1. 7.1

      “But if they dealt with it, they wouldn’t be able to use these stories to justify rigging the patent system against legitimate inventors.”

      Yup. Again.

    2. 7.2

      Maybe we should make an exception with use where if the infringement is solely based on the use of a product or service that is commercially available through the normal channels of commerce that the end user cannot be sued.

  2. 6

    Speaking of Pharma, what is the current drop-out percentage of items that start the FDA process but fail to show the actual purported utility?

    Anyone?

    Bueller?

    1. 6.1

      Anon, I assume you are commenting on the WaPo opinion piece. She certainly has parts of the patent equation backwards. IMHO, she should be critical of the billion dollar FDA approval process (safe AND effective – more effective than stuff already in the market). Inventing and then taking the option to attempt patent protection, in this case the patent owner holding limited time exclusive rights – is what justifies pumping another billion in seeking FDA approval for a treatment. To be sure, FDA orange book, the new biologics exclusivity protection (no patent needed at all for the exclusive market rights) and patents have some overlapping policy considerations, but IMHO, she is misapprehending what is a ‘failed’ invention. The invention didn’t fail, it failed to get FDA approval. Apples and oranges.

      1. 6.1.1

        Hmm, not sure I would agree with you: failed to have the asserted utility is NOT an apples and oranges thing.

        Failed is failed.

  3. 5

    Re: “Joe Mullin: This Captcha Patent Is An All-American Nightmare (Source: EFF)”
    This is another example of allegedly mass-mailed form letter infringement threats on a relatively recent patent to large numbers of business that are using standard commercial software, offering a license with terms and fees set to discourage any individual defense. [The sort of alleged conduct that had previously set members of Congress, the FTC and state legislators on the patent troll warpath to the detriment of the patent system.] [Query, why don’t software providers defend their customers, and/or they or EFF file an IPR?]

  4. 4

    The EDTX decision reported in the above “Susan Decker and Matthew Bultman: Apple Sinks ‘Submarine Patent,’ Escapes $308.5 Million Verdict (Source: Bloomberg)” is of interest as the only patent infringement suit I can recall, since Lemelson’s loss of one, lost on the grounds of “prosecution laches” against a “submarine patent.” Very long pendency submarine patents accomplished by multiple serial continuations were predominantly his, as demonstrated in my paper “Continuations Abuse – Excessive U.S. Pendencies and Suggested Treatments” The John Marshall Law School Center for Intellectual Property 35 Annual Conference on Developments in Intellectual Property Law, February 21-22, 1991. [24 pages conference paper distributed to all participants, reported in the April 11, 1991 BNA PTCJ, Vol. 41, pp. 512-513, and of record in some Lemelson patent litigations.] Most of the still pending “submarine applications” are Gilbert Hyatts, the subject of his latest suit against the PTO and its recent Fed. Cir. decision on prosecution laches that is cited in this Apple decision.

      1. 4.1.1

        A “link” from 1991? Not unless the law school has digitized it since. In any case, since applications filed OR refiled as continuations or divisionals since the current patent term law started all run out after 20 years from their earliest claimed filing date [plus some extensions] there should be few “submarine” patents left that were obtained like Lemelson with serial continuations.

  5. 3

    Incidentally, every company (not just pharma companies) need for their successful products to pay for the company’s unsuccessful efforts. That is just basic business reality. Profits must exceed losses over the long term or the company will go out of business.

    1. 3.1

      Greg “Big Pharma Shill” DeLassus is sure piling on the sheep dip as to the issue of subsidizing losses.

    2. 3.2

      Greg, covering overall R&D costs is a standard pharma industry defense of high prices, but critics of high drug prices insist that the industry spends more on public advertising for expensive new drugs [so that patients will demand them from doctors who don’t care since they don’t pay for them] than the industry spends on all R&D. Is that true? Is it also true that this kind of public drug advertising is not allowed is not allowed in other countries?
      I also wonder if anyone has done a valid study to show that U.S. FDA polices on listing new, and delisting older, drugs and medical devices has had far more effect on drug prices than patents? Patents clearly do not have anything to do with companies which greatly raise prices on very old drugs or medical devices for which they happen to be sole sources.

      2. 3.2.2

        [C]ritics of high drug prices insist that the industry spends more on public advertising for expensive new drugs… than the industry spends on all R&D. Is that true?

        Thanks for the question, Paul. The short answer is that I do not know, and neither does anyone else. We really do not have that level of transparency into the expenditures of the whole industry. I suspect that it is not true, however.

        That is because people who make this claim treat “R&D” as a separate category from “M&A.” In the modern pharma industry, however, M&A spending really is R&D spending.

        That is to say, the way that R&D works any more is that large pharma companies do not do much R&D. Rather, almost of the R&D anymore is done by small pharma start-ups. Those start-ups are doing R&D because they hope to be acquired by larger pharma when-&-if the research pans out. Therefore, the money that large pharma spends on M&A is, in effect, R&D spending, because it pays off the up-front R&D costs of the small pharma start-ups.

        Incidentally, the complaint about advertising costs as a driver of pharma prices is just silly and peevish. Whatever pharma companies spend on advertising is a tiny fraction of the ad-spend by beer or snack-food companies. Obviously, their ad-spend does not make beer or snack-foods all that expensive.

        The reality, however, is that neither R&D costs nor advertising costs are the reason for high drug prices. After all, when Christie’s auction house charges $2 million for a painting, it is not because of the exorbitant costs of manufacturing that painting, or because of the extensive advertising budget that Christie’s laid out to promote the auction. The reason for the high price of the painting is because someone out there is willing to pay that high price, and any good is worth whatever the buyers are willing to pay.

        A rational company (pharma or otherwise) will always set prices to maximize revenue. The more you charge for a unit, the more revenue each sale brings in. On the other hand, the less you charge for a unit, the more sales you are likely to make. Economists model these countervailing forces as “supply curves” and “demand curves,” and the point on the chart where the two curves intersect is the revenue-maximizing price point.

        Notice that nothing about that analysis depends on the costs of manufacturing or product-development. That is because a rational company does not take such costs into account when setting prices.

        The only rational considerations for price-setting are the countervailing forces of supply and demand. If the revenues that can be generated from selling a product at the revenue-maximizing price point are not adequate to cover a company’s costs, then the company simply should not try to bring that product to market (which is why market research is a necessary preliminary to any product development process).

        It would be simply irrational to say, however, “we cannot cover our costs from the revenues that will be generated at the revenue-maximizing price point, so we will raise our prices.” Raising prices beyond the revenue-maximizing price point will bring revenues down, not up.

        Therefore, there is no reason for a rational firm to take product development costs into account when setting prices. Product development costs are an irrelevant and irrational consideration to bring into the price-setting analysis.

        1. 3.2.2.1

          “and neither does anyone else.”

          Let’s just call out the B$ and stop right there….

          The rest of what Greg the Shill says can be flushed.

  6. 2

    The Feldman polemic in the WP, that “our” patent system is”broken” seems to me to blame “the patent system” as such for high drug prices. But it’s not that simple, is it? The price of drugs in the USA is far higher than in all other countries, many of those other countries have a fully-functioning patent system, and it’s not as if all new drugs are invented by US drug companies, is it?

    There must be something particular to the US market which jacks its drug prices up so high. Perhaps not “the patent system”? Perhaps instead its specific insurance-based medical care system?

    Has Feldman a prejudice against “the patent system”? It would be a pity if “the patent system” takes the blame for this, that or the other problem that is not its fault.

    2. 2.2

      Agree 100%, Max. When you look at all the countries with patent systems basically like ours whose drug prices are so much lower, it is hard to conclude that the patent system is really the cost driver here.

      I was rather disappointed with Prof. Feldman’s WaPo piece, because I usually enjoy her work even when I disagree with her conclusions. This piece was beneath her usual standards.

      It betrays a complete lack of understanding of the theory behind a patent system. The point of a patent is that it allows a patentee to charge as much as the consumer is willing to pay (which is usually a price much higher than the price that will prevail in a competitive market).

      In other words, the patent price really has nothing to do with “paying for a company’s failures.” The patent price would be the same even if the company were to succeed with every research project it started. All that griping about paying for the companies’ failures is just irrelevant nonsense.

      1. 2.2.1

        The consumer has the option of practicing the prior art, at a presumably a cheaper price. Pay up if you want the latest and greatest. It is that way in most other product categories. Why should pharma be different?

        I am aware of the contention that there is a “human right” to the best health care available, but when did a majority vote that into law?

      2. 2.2.2

        Here in Germany I enjoy private medical insurance. I used to be in the UK, covered by the National Health Service. Both countries have creative pharma companies and functional patent systems and neither supports a C19 patent waiver. Neither has drug prices anything like as high as in the USA but that seems not to dampen drug innovation. Perhaps they are all relying on making most of their profits from the consumer in the USA? Is the US consumer, paying through the nose, financing drug development all over the world?

        I cannot imagine that there are no comparative studies that seek to explain the discrepancy. Given that life expectancy is rising in Europe but falling in the USA, the issue is interesting.

        1. 2.2.2.1

          Perhaps they are all relying on making most of their profits from the consumer in the USA?

          I can speak to that. Yes, all innovator pharma companies—those headquartered in the U.S., but also those headquartered in Japan, Europe, etc.—are working from a business model that expects to earn >50% of their profits (often >75%) from the U.S. market.

          Is the US consumer, paying through the nose, financing drug development all over the world?

          Yes.

          2. 2.2.2.1.2

            Agree. Patents are not the reason drug prices are so much higher in the U.S.

            Are. Not.

            p.s. No one’s forcing anyone to take any particular drug (though some of the existing and forthcoming Covid vaccine mandates (will) come pretty close).

        2. 2.2.2.2

          To be clear, however, very little of that paying through the nose is dependent on the U.S. patent system (which, after all, is scarcely different from the EP or CA patent systems for this industry). Almost all of the cost difference is driven by our healthcare funding model (private, tax-subsidized, employer-funded insurance), rather than anything specific to our patent laws.

          1. 2.2.2.2.1

            Fair (if not a bit smokey) point — and why the entirety of the end to end industry needs to be dragged into the spotlight.

            Once it is possible for the public to follow the money, then meaningful change — including not shielding the abhorrent development process — may ensue.

          2. 2.2.2.2.2

            It remains, to explain why drug prices paid under Germany’s (private, tax-subsidized, employer-funded insurance) healthcare funding model doesn’t deliver the same result as the US healthcare model. Could it be, that Americans value their health more than Germans? Here in Germany, I would say not.

            OK then, have more Americans more money (to pay their health insurance premiums) than people here in Germany do? That’s more like it. And if so, what’s not to like about that?

            1. 2.2.2.2.2.1

              The words “tax-subsidized” cover a lot of ground, but the details matter a lot in tax law. Nickel summary: German tax law on these points is not especially similar to U.S. tax law. The differences make a big difference.

      3. 2.2.3

        It’s amazing how incorrect/incomplete opinion articles can seem when they address a topic one knows something about. Is this just a universal experience for the reader? This one seemed especially off, based more on a rhetorical case (patents should finance success!) rather than solid analysis.

    3. 2.3

      What WOULD be beneficial — especially in Pharma would be end to end visibility.

      Put everything in the sunlight. Then you will see how the US citizen is forced to carry the world’s development load.

  7. 1

    Regarding the Feldman piece, do we need a system of prizes in certain sectors to complement our system of patents? A pre-determined prize for each rare disease cured? A panel could determine fair payout amongst professor(s), startup(s), commercial partner. Perhaps the prize amount could grow each year like Powerball? Just riffing here…

    1. 1.1

      It seems to me like it would be worth experimenting with prizes as patent alternatives. Pick two or three diseases, set aside funding for a prize for those and amend the patent statute to eliminate protection for therapies for those select few diseases. Then at the end of (e.g.) fifteen years, you can see whether progress was faster in the prize group or the control.

      1. 1.1.1

        This is a neat idea, but the idea of comparing the prize results to a control results seems like it could produce misleading conclusions. How does one know that Disease X is equivalently difficult to cure as Disease Y?

        It seems like you could have a system that offers prizes in exchange for the disclosure of cures and the relinquishing of patent rights. We’ll know the prizes have an effect when people start choosing to take the prizes.

        1. 1.1.1.1

          I take your point. It seems to me, however, that you could pick a set of six diseases of fairly comparable complexity, and call three of them the experimental group, and the other three the control. In any event, it scarcely matters, because while it would be a good idea to try the prize experiment, it would require fairly extensive amendment to Title 35 to make it work (whether we ran it my way or yours), and the Congress is not interested.

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