Merrill Matthews

Have you ever wondered why virtually no breakthrough drugs are invented in garages, as various Internet and software companies have done?

Maybe it's because the science of modern medicine is so complex that it requires a nano-molecular-bio-chemical laboratory to invent, say, a purple pill.

But there's a darker reason why new medicines aren't being developed in your neighbor's garage: It's simply too hard to enforce patents.

If your neighbor had invented Nexium, he'd need an army of lawyers to protect his patent — because it would come under attack the minute he filed it.

Today's patent protection process is fundamentally broken. And its weaknesses are being exploited by copycat artists looking to make a quick buck off someone else's hard work. Congress is hoping to fix the problem, but it will get a lot of resistance.

When even the big pharmaceutical companies are losing ground in court, the little guy doesn't stand much of a chance.

It's a shame. Inventors of drugs are responsible for literally thousands of life-saving treatments. Yet every time they invent a cure, they're forced to play Russian roulette in the courtroom defending their patents from constant lawsuits filed by generic companies.

Much of this problem stems from an area of patent law known as "inequitable conduct," which is grounds for invalidating a patent.

Here's how it works:

Let's say you invent a green pill that cures hangovers. So you immediately file a patent to protect it. When filing that patent, you must disclose a wide range of information to government authorities, including how the drug was invented, lab results about its effects, and profiles of similar drugs already on the market. Your application is reviewed, accepted, and you are issued a patent giving you exclusive rights to sell the green pill for 17 years.

But what if you stole part of your invention from someone else's existing patent but didn't mention it in your application? In that case, your green-pill patent could be challenged — even after it had been issued — on the grounds of "inequitable conduct."

If a court found that you deliberately withheld required information from your patent application in order to deceive regulators, your patent could be ruled unenforceable by a judge. In legal speak, you'd have been found guilty of "inequitable conduct."

Or at least, that's how the inequitable conduct rule is supposed to work.

In reality, this process is often abused — and has become backdoor for undermining even the most legitimate inventions.

The problem arises from the fact that the standards currently used to determine inequitable conduct are vague and inconsistent. On the issue of what information needs to be disclosed, the law says that an applicant needs to provide any information that would be expected by a "reasonable examiner." Needless to say, that leaves far too much for interpretation.

And what constitutes an indicator of "intent to deceive" varies from court to court — sometimes from judge to judge.

That vagueness is being exploited by generic drug manufacturers. Every so often, they hit a jackpot when a judge with an especially broad definition of "relevant material" decides to invalidate a patent.

The result is an epidemic of frivolous inequitable-conduct claims. In the words of one federal circuit court judge, "the habit of charging inequitable conduct in almost every major patent case has become an absolute plague."

That drives up the cost of patent litigation, wastes the scarce resources of government regulators, clogs up the courts, and destroys the incentive for people to invent new cures.

Jon Dudas, director of the U.S. Patent and Trademark Office, which oversees all patent applications, says that "inequitable conduct allegations are frequently made but not often found, and thus add substantially to litigation cost and duration."

Much like ambulance-chasing lawyers, patent-challengers don't need to win every lawsuit. If they win just one inequitable-conduct ruling, the original patent holder loses the right to exclusively sell a drug. And most drugs cost about $1 billion to develop these days.

Generic manufacturers can take the drug's billion-dollar formula, produce copycat pills on the cheap, flood the market, and siphon away a hefty chunk of the profits.

Even if an inventor is found innocent of an inequitable-conduct charge, the arbitration process itself is expensive and time-consuming.

Obviously, we should expect full disclosure from anyone trying to patent a product. But the patent-approval process is breathtakingly complex — an honest mistake shouldn't spell disaster. And the people filing frivolous charges need to be held accountable.

With Congress currently debating how to update our patents laws, policymakers should consider reforming the rules governing inequitable conduct. There would still be no guarantee that the ultimate cure for hangovers would be invented in your neighbor's garage, but stranger things have happened.


Merrill Matthews

Merrill Matthews, Ph.D., is a resident scholar with the Institute for Policy Innovation.

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