Medical Device Trade Group Pens Letter in Opposition to Innovation Act

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The Medical Device Manufacturers Association (“MDMA”) has been vocal in lobbying Capitol Hill for what they consider “necessary changes” to patent law for continuing medical device innovation.  Part of that lobbying has included opposition to recently proposed patent reform legislation, the so-called Innovation Act., or H.R. 9.

As reported by other publications including Medical Device and Diagnostic Industry (MD+DI), the trade group has now taken to writing a letter to the lead legislators of the Innovation Act, expressing the group’s concerns with the proposed law. The letter was sent by the president and chief executive officer of MDMA, Mark Leahey, on April 14, 2015, to legislators Bob Goodlatte (R–VA), chairman of the House Committee on the Judiciary and introducer of the legislation, and John Conyers (D–MI), ranking member of the Committee.

MDMA sees the law as weakening intellectual property rights and creating a potential “chilling effect” on medical device innovation.  “It takes years, sometimes a decade or more, and tens of millions of dollars to secure regulatory approval and reimbursement for new medical devices,” the letter states. “Because the industry is so highly regulated, investment in early-stage medical device companies is a very risky proposition.”

The letter further states that “[t]he patent is the lifeblood of the medical technology industry and serves as the bedrock on which risk-taking entrepreneurs are able to create new markets and new jobs, and most importantly, deliver break-through technologies to patients who need them.”

According to articles, the Innovation Act was drafted largely in response to a perceived “patent troll” problem, or those who own and assert patents against others –  including against medical device companies – but who don’t practice the patented invention themselves.  Some of these “non-practicing entities” have been accused of making frivolous legal threats against small businesses, or gaming the system for quick six-figure settlements from large corporations with deep pockets.   Mr. Leahey contends in the letter that “the provisions in H.R. 9 that purport to target only abusive patent practices are so broadly drafted that they would make the defense of legitimate intellectual property from infringement more costly and burdensome, and discriminate against innovation models such as those who develop technologies and license them to larger players for distribution purposes.”

The letter generally alleges five areas of concern: 1) unfair fee shifting; 2) broadly-drafted customer stay provisions; 3) increased pleading requirements and potentially burdensome discovery limits; 4) providing patent challengers too many bites at the apple; and 5) no provisions preventing diversion of Patent Office fees to other government entities.

As an example, on the fee shifting issue, MDMA argues that the “loser pays” provision of the Innovation Act would severely harm solo inventors and start-ups. “Faced with the prospect of having to cover the legal expenses of large companies, start-up companies with limited capital either will not bring otherwise meritorious cases against infringers of their patents or will be forced into early settlements when defending against alleged infringement,” Leahey wrote. MDMA does acknowledge that such “fee shifting” should be done if “a party acted in bad faith or was unreasonable.”

Another concern is the joinder provision of the Innovation Act.  In addition to the regulatory-intensive environment of the medical device industry, the letter explains, “[e]xposing investors to the significant financial liabilities created by the joinder provision would further discourage investment in the breakthrough medical technologies of tomorrow.”  MDMA argues that the joinder provision would discourage venture capital investment because it exposes the investors to liability for fees if the companies they invest in are found liable for patent infringement.

MDMA also calls for halting the diversion of fees from the USPTO. The letter claims that the over $1 billion in fee diversions over the last 20 years have resulted in more than 600,000 unexamined patent applications. “The most effective action that can be taken to improve patent quality is to allow the USPTO to retain its revenues to allow it to improve the examination process, hire more and better-qualified examiners, increase examiner training, and upgrade the USPTO’s IT infrastructure,” Leahey wrote.

MDMA earlier this year came out in support of The Support Technology and Research for Our Nation’s Growth (STRONG) Patents Act of 2015. The STRONG Act aims to target patent abuse in the form of demand letters and pleading standards, as well as to curb fee diversion from the USPTO.

The MDMA letter is available here.  The text of the Innovation Act can be found here.

Tom Cowan
Tom Cowan is an associate in the San Diego office of Knobbe Martens. His practice focuses on patent prosecuting and counseling in the mechanical and medical device spaces; trademark registration; licensing; handling cease and desist disputes for patents and trademarks; and analyzing patent portfolios including performing due diligence for patent portfolio acquisitions. Sample medical device technologies include auto-injector devices and systems, prostheses, tissue regeneration scaffolds, bone and tissue anchors, lateral flow assays, photoacoustic systems, raman spectroscopy techniques, intragastric devices, remote healthcare systems, thermoformable composites for immobilizing body parts, personal movement assistance devices, and more. While in law school, Mr. Cowan also received a Master of Science Degree in Biomedical Engineering. Prior to attending law school, Mr. Cowan interned at NASA and was a mechanical engineer at Northrop Grumman where he designed and tested spacecraft structures and mechanisms. Mr. Cowan was a summer associate at Knobbe Martens in 2012 and joined the firm in 2013.
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