The Medical Device Tax Lives On
For opponents of the 2.3 percent medical device tax, it looked like the repeal/replacement of the Affordable Care Act would alleviate their concerns. However, following the failure of repeal legislation that would have killed off, or delayed, the tax, the tax is on pace to be reinstated on January 1st, 2018 after a two-year gap.
Regardless of the status of the Affordable Care Act, news articles have indicated that companies and lawmakers opposed to the tax are considering pursuing a number of different options, such as adding tax delay language into other bills. Accordingly, a group of conservative action groups are pushing Congressional leaders to pursue a repeal of the tax, including preparing a letter to House speaker Paul Ryan and Senate majority leader Mitch McConnell. Further, the Advanced Medical Technology Association will be running digital and social media ads throughout this month in a number of states, hoping for tax repeal once lawmakers are back in session in September.
While it can be difficult to truly define a correlation between job performance and the medical device tax, a member survey performed by the Medical Device Manufacturers Association found that 70% of companies added jobs in 2016-2017 and R&D increased by 19% on average. On the other hand, in 2015 the Congressional Research Service found that there were no significant losses due to the tax.
According to news sources, the tax applies to hospital and physician medical equipment, but excludes many consumer medical items (eyeglasses, hearing aids, etc.).
Changes to PTAB Practice Proposed by STRONGER Patents Act of 2017
The STRONGER (Support Technology & Research for Our Nation’s Growth and Economic Resilience) Patents Act of 2017 was recently introduced in the Senate by a bipartisan group led by Senator Chris Coons (D-Del.) and co-sponsored by Senators Tom Cotton (R-Ark.), Dick Durbin (D-Ill.), and Mazie Hirono (D-Haw.). According to a press release by Senator Coons, “[t]he STRONGER Patents Act seeks to strengthen the U.S. Patent system through implementing measures to make it easier and less costly for patent holders to enforce their patents.” The “Act is based on legislation that Senator Coons introduced last year with the goal of making the post-issuance proceedings before the Patent Trial and Appeal Board (PTAB) more fair and efficient.” The bill asserts that “unintended consequences of the [AIA] are continuing to become evident, including the strategic filing of post-grant review proceedings to depress stock prices and extort settlements, the filing of repetitive petitions for inter partes and post-grant reviews that have the effect of harassing patent owners, and the unnecessary duplication of work by the district courts of the United States and the Patent Trial and Appeal Board.”
The following table illustrates several key changes proposed by the STRONGER Patents Act compared to the current PTAB practice under the AIA.
| Proposed Changes in STRONGER Patents Act | Current Practice Under AIA | |
| Claim Construction | Same standard as that used in district court litigation (Phillips) | Broadest reasonable interpretation |
| Burden of Proof | Presumption of validity | No presumption of validity |
| Standing | IPR Petitioner must have been sued for infringement or have standing to bring declaratory judgment action in Federal Court
|
IPR Petitioner may be any third party who is not time-barred or estopped |
| Limitation on Reviews | Review initiated only once per claim of a patent | There is no formal limit, but the PTAB has discretion to deny multiple or follow-on petitions under §§ 314(a), 324(a) or 325(d). |
| Interlocutory Appeals from Institution Decisions | A determination by the Director to institute an IPR may be appealed to the United States Court of Appeals for the Federal Circuit. Patent owners may not appeal the PTAB’s determination in the institution decision that a challenged claim is likely unpatentable. | Institution decisions are not appealable. |
| Eliminating Repetitive Proceedings | Petitioners can only challenge a patent once, unless they are later charged with infringement of additional claims. If an IPR is instituted, the petitioner cannot bring challenges of the same type in district court to eliminate duplicative proceedings. | A petitioner who, in a final written decision, is unsuccessful challenging a claim in an IPR or PGR is estopped from raising or maintaining any ground of challenge for that claim that the petitioner raised or reasonably could have raised during the concluded IPR or PGR proceeding. |
| Real-Party-In-Interest | Defines Real-Party-in-Interest as an entity making financial contributions to the challenge. | A Real-Party-in-Interest is typically considered any party who exercises or could exercise control in the proceeding. |
| Priority of Federal Court Validity Determinations | If a district court reviews the validity of a patent before the PTAB, the post-issuance proceeding should not start, or should be paused pending appeal. |
Medical Device Manufacturer’s Association Comments on Senate Hearing
The Senate Committee on Small Business and Entrepreneurship held a meeting titled “An Examination of Changes to the U.S. Patent System and Impacts on America’s Small Businesses” on February 25, 2016. The archived webcast of the hearing can be viewed here.
On Thursday, February 25th the Medical Device Manufacturers Association (MDMA) issued the following statement regarding the hearing:
“MDMA thanks Chairman Vitter and the committee Members for examining the unintended consequences that some proposed changes to the patent system would have on small businesses. MDMA continues to support balanced efforts to curb abusive patent practices, but not in a manner that would be overly broad and would harm medical technology innovation and stifle the development of cures for patients who need them the most.
“MDMA remains committed to working with Congress on targeted efforts to improve the patent system, but we must not do so at the expense of innovators and inventors who are revolutionizing patient care and saving lives.”
House Committee Passes Innovation Act – Medical Device Group Expresses Opposition
The Innovation Act (H.R. 9), a patent reform bill introduced this congressional session, received bipartisan support in a 24-8 positive vote by the House Judiciary Committee on June 11, 2015. The bill is now scheduled to proceed to the full House of Representatives for consideration. A press release announcing the vote stated that a goal of the Innovation Act is to address, for example, the following:
- Targets Abusive Patent Litigation;
- Protects the Patent System;
- Increases Transparency;
- Prevents Extortion;
- Provides Greater Clarity;
- Provides Small Business Education;
- Places Reasonable Limits on Venue in Patent Cases; and
- Reduces Unnecessary, Expensive Discovery.
A related bill, the Protecting American Talent and Entrepreneurship (PATENT) Act (S. 1137), was also recently approved by the Senate Judiciary Committee for consideration by the Senate.
Prior to the vote in the House Judiciary Committee, the Medical Device Manufacturers Association (MDMA) issued a statement opposing the Innovation Act. The statement, made by MDMA President and CEO Mark Leahey, asserts that the Innovation Act “remains overly broad and would harm medical technology innovation and stifle the development of cures for patients who need them most.” Specifically, Leahey’s statement claims the Innovation Act “would severely weaken the ability of small companies and the innovators behind them to attract early stage investment for their inventions and defend them against infringement.”
The MDMA has been critical of the Innovation Act in the past, including sending a letter addressing its concerns in April. The group has also supported another patent reform bill, the Support Technology and Research for Our Nation’s Growth (STRONG) Patents Act of 2015 (S. 632), in the Senate.
Medical Device Industry Organizations Support STRONG Patents Act
(March 3, 2015) Mark Leahey, President and CEO of the Medical Device Manufacturers Association (MDMA), issued a statement regarding the Support Technology and Research for Our Nation’s Growth (STRONG) Patents Act of 2015. According to the bill, the STRONG Patents Act aims to “strengthen the position of the United States as the world’s leading innovator by amending title 35, United States Code, to protect property rights of the inventors that grow the country’s economy.” The STRONG Patents Act was introduced by U.S. Senators Chris Coons (D-Del.) and Dick Durbin (D-Ill.), members of the Senate Judiciary Committee, and Mazie Hirono (D-Hawaii), member of the Senate Committee on Small Business and Entrepreneurship. According to a press release by Senator Coons:
The STRONG Patents Act would strengthen and combat abuse by:
- Cracking down on abusive demand letters by empowering the Federal Trade Commission to target firms that abuse startups rather than invent anything;
- Ensuring that pleading standards for patent-infringement cases match the standards used for all other forms of civil actions, creating a significant barrier to frivolous lawsuits before any funds are spent on discovery;
- Eliminating fee diversion from the U.S. Patent and Trademark Office (PTO) so we can ensure that those who examine patents have adequate training and dependable funding;
- Ensuring balance in post-grant proceedings at the PTO, so that this expedited form of patent litigation is both fast and fair; and
- Analyzing the impact that our patent system has on small businesses, both from the perspective of startups reliant on patents and those small businesses facing allegations of infringement.
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