Appendixes



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The Children's Vaccine Initiative: Achieving the Vision Appendixes

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The Children's Vaccine Initiative: Achieving the Vision This page in the original is blank.

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The Children's Vaccine Initiative: Achieving the Vision A Relevant Intellectual Property Rights Law PATENTS The primary goal of the U.S. patent system is to advance technological and economic development by stimulating innovation and investment. Patents serve two policy objectives: (1) By requiring disclosure of the manner and process of manufacturing an invention, the system encourages public disclosure of otherwise confidential information so that others are able to utilize it; and (2) by rewarding successful endeavors, patents provide inventors and their patrons with incentives to invest time and resources in research and development (Office of Technology Assessment, 1991). Rights and Limitations The protection granted under patent laws is a 17-year "right to exclude others from making, using, or selling the invention throughout the United States" (35 USC § 154 (Supp. 1982)). In return for that right, the patentee is required to disclose, in detail, the subject matter of the invention. Disclosure not only promotes additional research and development but also discourages unnecessary duplication of research. Disclosure is made in one's application for a patent, which contains a description of the invention and the specific inventive 'claims' that one is seeking to patent. The level of detail disclosed in a patent application must be sufficient to allow one skilled in the art to make and use the invention. The patentee is not

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The Children's Vaccine Initiative: Achieving the Vision granted the right to exclude others from using the information disclosed in the patent application to produce and patent a noninfringing, new, different, and better product or process, as long as the new product or process meets the standard patent requirements. It is important to note that the patent owner receives no affirmative right to make, use, or sell the claimed invention. In fact, a patent owner may find that practicing the invention infringes upon another party's previously issued patent. In that case, a patent owner must be authorized by the holder of the previously issued patent to use the owner's invention. For example, if a patentable improvement were made on a patented vaccine, the inventor of the improvement would need permission from the first-generation patent holder of the vaccine to make, use, or sell the improved vaccine. There is no requirement that one use or license a patented invention, nor would one lose a U.S. patent for failing to use it. In contrast, most other countries impose a requirement that a patent owner must use or license a patented invention within a defined period of time. If patent protection is desired in a country other than the United States, one must apply for a patent in that country. There is an exception to the general term of 17 years that is relevant to vaccines: When a patent claims that a human drug product, medical device, or food additive has undergone regulatory review for the product, device, or additive to be commercialized or marketed, the patent may be eligible for an extension of up to 5 years, if certain conditions are satisfied (Office of Technology Assessment, 1991). This exception is applied regularly to pharmaceutical products. Infringement One who violates the patent owner's rights is liable for patent infringement. If patent rights have indeed been violated, the owner is entitled to an injunction—a court order that prohibits an infringer from continuing to make, use, or sell the invention. The issuance of injunctive relief is within the discretion of the court. The Patent Act also authorizes an award of 'damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer" (USC 35 § 284). The method of calculating the damages award is within the discretion of the trial court. The court may increase the damages awarded by as much as threefold and may award interest and costs. This is usually done when the infringement was willful. The monetary loss suffered is assessed by comparing the patent owner's financial condition after the

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The Children's Vaccine Initiative: Achieving the Vision infringement occurs with what the condition would have been had the infringement not occurred. Actual damages should represent the monetary loss resulting from the infringement. If the patentee is unable to establish actual financial loss, damages are measured either by the gains/profits made by the infringer or by the "reasonable royalty" standard, which is the amount that one would have paid the patent owner for a license to use the invention. Potential Barriers and Incentives First-to-File Versus First-to-Invent In the United States, when more than one patent application claiming the same invention is filed, the patent is awarded to the applicant who is able to establish that he/she was the first to conceive the invention and reduce it to practice. Applicants can submit a date of invention that is before the filing date. In contrast, nearly all other countries have laws whereby patent rights are awarded according to the earliest effective filing date of a patent application. The question of whether the United States should change its patent laws to conform to those of the rest of world has been a long-standing issue in discussions on patent law reform. An Advisory Commission of Patent Law Reform was established in 1990 to advise the Secretary of Commerce on the need for reforms in the U.S. patent system. In August 1992, the commission put forth several recommendations, one of which was to convert the system in the United States from a first-to-invent to a first-to-file patent system. Among the points that the commission raised in citing the potential disadvantages of a first-to-file system were that (1) smaller companies might be at a disadvantage because of limited legal and financial resources and, therefore, would likely lose the "race to the Patent and Trademark Office" (PTO); (2) the PTO could be burdened with an increased volume of applications filed simply for defensive reasons; and (3) the exploration of commercialization opportunities prior to filing might be reduced because of the importance of early filing. However, the commission felt that the advantages in changing to a first-to-file system would outweigh any negative effects and that first-to-file is a necessary component of any global intellectual property rights harmonization package (many other nations will not consider an intellectual property rights treaty unless the United States agrees to a first-to-file system). The benefits of a first-to-file system that the commission saw include the following: (1) it would encourage early filing, thereby promoting earlier disclosure of inventions and commercialization of products; (2) an agreement by the

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The Children's Vaccine Initiative: Achieving the Vision United States to a global harmonization treaty could bring improvements in the patent protections offered by foreign countries for U.S. applicants seeking patents abroad; and (3) there would be a decrease in the complexities, time frame, and resources now associated with procedures devoted purely to determining who invented the product first. To offset the potential disadvantages of a first-to-file system, the commission endorsed the change with three conditions: (1) the establishment of a provisional application procedure to expedite early filing at a reduced cost; (2) a grace period during which public disclosure of an invention would not affect patentability if an application is filed within 12 months of disclosure; and (3) "a third party who uses or makes substantial preparation for the use of invention before the filing date of an application on which patent is granted to another, has a right to continue to use the product under certain conditions" (Advisory Commission on Patent Law Reform, 1992, p. 21). Other commission recommendations included extending the general patent term from 17 to 20 years (from the filing date) and that PTO funding should be maintained at a level that equips it to generally support an 18-month pendency period (Advisory Commission on Patent Law Reform, 1992). Backlog in the Patent and Trademark Office Over the past decade, the PTO has had to face sharply increasing numbers of biotechnology patent applications. From 1983 to 1988, the number of biotechnology applications rose 20 percent (applications in all other areas rose an average of 2.9 percent). To deal with this major influx, the PTO established an examining unit specifically for biotechnology in 1989. However, recent congressional reports reveal that the pendency period for biotechnology patent applications remains longer than that for any other technology (average pendency is 36.1 months for biotechnology patents compared with an average of 21 months for all other patents issued). Applications specifically related to immunology have an average pendency period of 44.1 months (Office of Technology Assessment, 1991). Nevertheless, it is important to note that patents (even those relating to biotechnology) are granted faster in the United States than in any major examining office in world, and by a significant amount of time (Office of Technology Assessment, 1991). The reasons behind the backlog include the fact that the level of scientific scrutiny required to process an application for a biotechnology patent far exceeds that required for patents in most other areas. In addition,

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The Children's Vaccine Initiative: Achieving the Vision although the PTO has increased the number of biotechnology examiners (from 43 in 1986 to 140 in 1991) (Marshall, 1991), there has been a lack of success in retaining staff that are well-trained in biotechnology, because they are often successfully lured to private industry. Recently, the Industrial Biotechnology Association helped set up a Biotechnology Institute to educate PTO staff and improve the quality of their patent examinations. The backlog has both positive and negative implications for industry. Long delays increase the uncertainty factor for potential patent holders because they are not privy to the contents of their competitors' applications, and the backlog of knowledge creates large volumes of "hidden knowledge" that may later become prior art. As a result, an inventor may file an application and discover much later that the application will be rejected because a previously filed application made the same claims. Despite this problem, the backlog does present a potential advantage for products that require prolonged regulatory approval time. In these cases, a delay in obtaining a patent would extend the period of patent protection, since the 17-year term does not commence until the patent is actually issued (Office of Technology Assessment, 1991). Lengthy approval times are common in the vaccine industry. Costs One of the most serious problems facing patent seekers is the financial clout necessary to obtain and retain patents. The financial strain includes the legal, user, and maintenance fees paid to receive and keep a patent; however, the main monetary threat comes from the costs of litigation in cases of patent infringement. This threat presents a formidable budget item for smaller companies and universities, which often have limited resources. In most fields, the cost of obtaining a U.S. patent runs between $3,000 and $6,000. Biotechnology patents generally cost between $8,000 and $15,000 (the difference is a result of the extra time and examiners required) (Office of Technology Assessment, 1991). Disclosure to Government Agencies Several governmental or quasigovernmental entities regulate biotechnology research (most of these agencies are on the federal level). They require advance notice of all research proposed to be performed within their jurisdiction and assert the right to approve such research. This process typically requires the applicant to disclose with specificity the nature, scope,

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The Children's Vaccine Initiative: Achieving the Vision and purpose of the research. Often, however, this is precisely the information that the company performing the research wishes not to disclose and would rather maintain as a trade secret (Epstein, 1991). Relevant Legislation and Terminology Drug Price Competition and Patent Term Restoration Act of 1984 (P.L. 98-417) One of the main purposes of this act was to restore part of the patent life lost during the regulatory approval process. It allows extension of the patent term, but not beyond 14 years of effective patent life. The actual extension granted is equal to the total time taken by the U.S. Food and Drug Administration (FDA) to review the new drug application plus one-half of the clinical testing time. Also, the act modified the abbreviated new drug application (ANDA) process to make FDA approval possible for marketing drugs that are equivalent to those approved by the FDA since 1962. Prior to the act, no drug approved after 1962 was available to a generic drug company for production, because the data provided to the FDA were treated as proprietary information. The new procedure permitted drug companies to submit bioequivalency data rather than repeating the safety and efficacy testing performed in connection with a manufacturer's prior new drug application (Miller and D'Angelo, 1989). Vaccines, however, are currently excluded from the ANDA process. Omnibus Trade and Competitiveness Act (P.L. 100-418) This act states that if anyone imports into, sells, or uses within the United States a product made using a U.S.-patented process, he/she is liable as an infringer (if the activity occurs during the patent term). Prior to this act, no monetary damages could be obtained as a result of the action described above, and the U.S. manufacturer had to show injury to an established domestic industry to get an injunction. The act also provides the U.S. patent holder with access to federal courts, in addition to the International Trade Commission, as a means of enforcement action (Office of Technology Assessment, 1991).

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The Children's Vaccine Initiative: Achieving the Vision Grace Period Currently, the United States gives the inventor who publishes patentable information, or who uses the invention commercially before filing a patent application, a 1-year grace period to file the patent application. This is especially advantageous for smaller companies and individual scientists who might feel the need to publish research findings as soon as possible (Office of Technology Assessment, 1991). Orphan Drug Act of 1983 (P.L. 99-91) The Orphan Drug Act offers incentives to invest in products that, because of a smaller market for the products, are not likely to offer an adequate return on investment to the company. The government offers grants, tax breaks, and most importantly, 7 years of market exclusivity to the first manufacturer to gain the FDA's approval for a product designated as an orphan drug. Patent and Trademark Amendments of 1980 (P.L 96-517) The U.S. Congress passed these amendments in order to promote a uniform patent policy that would foster cooperative agreements and commercialize government-funded inventions. The law permits nonprofit entities (including universities) and small businesses to retain the titles to patents resulting from federally funded research, with the federal agency retaining a worldwide, nonexclusive license. The law, which gave statutory preferences to small businesses and nonprofit organizations, was extended to larger companies in 1983 (Office of Technology Assessment, 1991). Experimental Use Exception Added as an amendment to the Drug Price Competition and Patent Term Restoration Act of 1984, this clause provides an exception to infringement on patent rights, whereby it is not an act of infringement to "make, use or sell a patented invention solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use or sale of drugs" (Epstein, 1991, p. 452.14). For example, it would not be an infringement to use another party's patented vaccine to collect data that may be required in order to obtain FDA approval for one's own vaccine.

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The Children's Vaccine Initiative: Achieving the Vision TRADE SECRETS (KNOW-HOW) Trade secrets make up an area of intellectual property law that provides an effective and efficient method of protecting commercially sensitive and important business information. For vaccines, issues relating to ''know-how" are equally important as the patent concerns discussed above. Definition A trade secret consists of any type of material or information that is valuable, not generally known publicly, and kept secret. There are no subject matter limitations on what can constitute a trade secret; therefore, a broad array of information can be protected as such, including scientific processes such as the know-how to make vaccines, other biologics, and pharmaceuticals. Secrecy is the most important criterion that the information must meet to be a trade secret. However, the law recognizes that for a trade secret to be commercially utilized, it must often be disclosed to other parties, including customers, employees, licensees, coventurers, and suppliers. Consequently, only relative secrecy, or a reasonable element of secrecy, must exist. Confidentiality A trade secret cannot be known by the public or widely known by other companies. In addition, even if the information is not actually known by others, trade secret status is lost if the information is available for others to obtain and learn. Thus, the information cannot be published or distributed in any manner. If the trade secret is disclosed by the product itself, the product must remain confidential. If a company believes that it has a trade secret, the company is required by law to protect the information's confidentiality. In the context of licensing, this means that any exchange of trade secret information must be protected by a nondisclosure agreement that rigorously protects the confidentiality of the trade secret, not only during the term of the license but also after expiration or termination of the license agreement.

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The Children's Vaccine Initiative: Achieving the Vision Rights of the Trade Secret Owner The owner of a trade secret possesses legal rights that prevent the unauthorized disclosure and/or use of the trade secret by other parties. In certain circumstances, these rights can be asserted absent a contractual agreement with the individual or corporation whose unauthorized disclosure and/or use is sought to be prevented. Rights Against Individuals in Privity In order to exploit trade secrets commercially, the secrets will probably be disclosed by the trade secret owner. In making this disclosure, however, the trade secret owner will want to preserve any rights arising by virtue of trade secret ownership—in particular, the right to prevent subsequent unauthorized disclosure and/or use of the information. The two methods by which the owner can maintain this right are protection by contract and protection by an implied contract/special relationship. Protection by Contract The owner may protect the trade secret information from unauthorized disclosure and/or use by entering into a contract—termed a nondisclosure or confidentiality agreement—with all licensees or other individuals to whom the owner discloses the trade secret. In the event of an unauthorized disclosure and/or use, the trade secret owner can sue for breach of contract and seek an injunction to prevent future unauthorized disclosure and/or use, as well as monetary damages for past unauthorized disclosure and/or use. Implied Contract/Special Relationships In certain circumstances, a trade secret owner has the right to prevent the unauthorized disclosure and/or use of trade secrets because of an implied contract or special relationship with the person to whom the owner disclosed trade secrets. A licensor—licensee relationship, along with certain other relationships between the trade secret owner and another party, is deemed by the law as a "special relationship." When a trade secret is disclosed by its owners pursuant to a special relationship, the individual to whom the trade secret is disclosed has the duty to maintain the confidentiality of the trade secret and not to use it to the detriment of its owner. A trade secret owner can sue when this duty is breached, and as described above, the trade secret owner can seek an injunction and/or damages.

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The Children's Vaccine Initiative: Achieving the Vision Rights Against Third Parties A trade secret owner also wants to protect his/her trade secrets from the unauthorized disclosure and/or use by a third party—that is, a party to whom the trade secret owner did not directly disclose the information. This situation most frequently arises when an employee of the trade secret owner changes jobs and the former employer/trade secret owner wishes to prevent the new employer from disclosing and/or using the trade secrets that the employee learned during his/her prior employment. A trade secret owner may assert a misappropriation claim against a third party to prevent or remedy unauthorized disclosure and/or use by a third party when the third party knows that the information is considered to be a trade secret and the information was disclosed to the third party through a breach of duty (either by virtue of a contract or by a special relationship/implied contract owed to the trade secret owner). Additional Rights of a Trade Secret Owner The owner of a trade secret also possesses the right to prevent individuals who learn the trade secret through improper means from disclosure and/or use of the information. According to the law, "improper means" includes obtaining another's trade secrets through (1) illegal activities, (2) fraud and misrepresentation, and (3) legal but improper means, such as industrial espionage or other extraordinary measures. Rights to Use Another's Trade Secrets A party can learn, obtain, and use another's trade secret in three lawful ways. First, a party may independently discover another's trade secret; trade secret law does not give a trade secret owner rights against one who learns the secret through independent invention. Second, a party may properly "reverse engineer" a trade secret in order to learn it. Finally, a party can learn and use another's trade secret through a disclosure to it which is not in breach of a contract or special relationship or with knowledge of such a breach. REFERENCES Advisory Commission on Patent Law Reform. 1992. A Report to the Secretary of Commerce. August. Washington, D.C.

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The Children's Vaccine Initiative: Achieving the Vision Epstein MA. 1991. Modern Intellectual Property. Englewood Cliffs, New Jersey: Prentice-Hall Law and Business. Marshall E. 1991. The patent game: Raising the ante. Science 253:20–24. Miller CE, D'Anlgelo M. 1989. Patents, price and patient interest. Chemtech. March. Pp. 156–159. Office of Technology Assessment. 1991. Biotechnology in a Global Economy. Washington, D.C.