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Universities, Companies Debate Senate Patent Reform Bill

More than half of basic science research in the United States is done at universities

More than half of basic science research in the United States is done at universities, but academic leaders say a patent reform bill in Congress would cripple their ability to invest in new ideas.

The U.S. House of Representatives passed the Innovation Act on December 13, and it’s now making its way through the Senate. It’s a bill intended to target so-called “patent trolls,” people or companies who buy patents solely to sue other people for infringing on those patents.

How The Patent Process Works

To understand how this affects universities, you have to start at the ground level.

In this case, let’s say it’s Indiana University professor Richard DiMarchi’s lab. He has a long list of patents to his name. He develops drugs based on genes – drugs that can be patented.

“Universities play a seminal role in the inventive process of finding these new inventions because they’re the sorts of things that can’t be planned or mapped,” he says. “As a consequence, one needs the environment that university provides for doing this pure discovery that is unrestricted and allows one to see things simply unknown previously.”

After DiMarchi discovers a new compound, the university files a patent application.

Biotech companies can then license that application and continue to develop the drug. Sometimes more than one company gets involved: a smaller biotech firm does experiments to determine if the drug can be commercialized. Then a larger company like Eli Lilly steps in to do much larger, much more expensive mass trials and complete the commercialization process. The final patent then reflects the final compound.

At every step of the way, patents – and the security that comes with them – are what encourage investors and firms to put in their money.

“It is a very precarious relationship between the financial community and those that do the work that bring forward these inventions. And in the absence of a robust system that encourages people to take risk with their money and allow us to do the work that we do and find these new inventions, we may be doing ourselves great harm in the ability to find these new drugs that we all desire,” DiMarchi says.

Opposition And Support For The Innovation Act

Universities and some companies, including Eli Lilly, say the reforms in the Innovation Act are too broad. By making it more difficult for anyone to bring a suit, they say the bill paints all patent holders as patent trolls.

“If you think about the patent rights that a university gets as being the ground that somebody would buy or rent as they build their building,” says Brion St. Amour, head of Intellectual Property at IU Research and Technology Corp. “There’s so much work required after the transition from university to a commercial product, if you don’t have a stable foundation to build your building, it’s not likely you’re going to invest in terms of making as big of a product as it potentially could be.”

But tech companies including Microsoft and Google have come out in support of the Innovation Act and its companion bill in the Senate.

“Abusive patent lawsuits create a heavy burden on the U.S. economy — slowing innovation, undermining competitiveness and stunting economic growth,” Microsoft attorney Horacio Gutierrez said in a statement.

Pro-legislation voices such as the Internet Association have also expressed approval for two provisions of the Innovation Act in particular: fee shifting and heightened pleading provisions.

Fee shifting would move all the costs of legal proceedings to whoever loses the case. Heightened pleading provisions would require plaintiffs to find and state every product that infringes their patent, as well as prove their claim for every part of their patent before even bringing a suit.

Both provisions are meant to discourage patent trolls from bringing numerous nuisance suits.

However, St. Amour says both provisions would make small companies and universities hesitant to enforce their rights, even if they have a good case.

Patent suits average $1 to $2 million, and St. Amour says those provisions could increase costs to $4 or $5 million.

While the Innovation Act passed the House within three weeks, the companion Senate bill has encountered some debate.

“Now I don’t think congress or even the president are looking to do ill to universities,” St. Amour says. “I think going quickly with patent legislation that doesn’t consider the implications across the board can be very detrimental to universities – and small companies, because most small companies couldn’t afford to enforce their portfolios either.”

The Senate bill is still waiting in the Senate Judiciary Committee for lawmakers to return from recess next week. The fee-shifting provision of the bill appears to be the main area of contention.

However, bill sponsor Patrick Leahy says lawmakers have made “enormous progress.”

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