The Touchstone Effect
description
Transcript of The Touchstone Effect
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The Touchstone Effect
The Impact of Pre-grant Opposition on Patents
by
Feroz Ali Khader, Advocate
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(three parts begin) 2
A story in three parts…
• Long ago, before the continent of Australia was discovered, the old world knew and believed that all swans were white.
• It was in Australia that the first black swan was sighted.
• The single sighting invalidated a general statement derived from millennia of confirmatory sightings of millions of white swans.
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Part 1: “Black Swan”
What is a Black Swan?• Nassim Taleb in his book “The Black Swan:
The Impact of the Highly Improbable” stretches the idea of ‘Black Swan’ to define events that share the following three characteristics:
• It is an outlier – an event that lies outside the realm of regular expectations.
• It carries an extreme impact.• It can be predicted only after it happens.
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Part 1: “Black Swan”
In other words, a Black Swan
Is a rarityHas extreme impact; andHas retrospective predictability
• Everything of importance around you will qualify for a Black Swan
• 9/11 is a Black Swan – So is Google – same can be said about the end of Soviet Union – and the spread of Internet.
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(end of part 1) 5
Part 1: “Black Swan”
• This combination of low predictability and large impact makes the Black Swan a great puzzle.
• Black Swan logic makes what you don't know far more relevant than what you do know.
• Black Swans exist in all businesses.
• It is the ‘next BIG thing’, ‘the Killer Innovation’ ‘the wonder drug’ which is new, non-obvious and cannot be conceived by others.
• More importantly, Black Swans dominate the pharmaceutical industry.
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Part 2: ‘Black Swan’ Innovation
• Innovation is an effort to create purposeful focused change in an enterprise’s economic or social potential – Peter F. Drucker
• Innovations could lead to patentable inventions and vice-versa.
• Innovation refers the process of bringing out patentable inventions.
• Technological Innovation can be:• Radical innovation – Eg. Post-it• Incremental innovation – Eg Colour, Shapes
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Radical Innovation
• Very rare and by nature unpredictable – true Black Swans
• Radical innovation in pharmaceuticals have low predictability but high impact – they become blockbusters.
• Blockbusters are drugs with sales of over a billion dollars a year
• Pfizer’s Lipitor, Novartis’ Gleevec etc
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Serendipitous Discoveries
• Every serendipitous discovery qualifies for a radical or Black Swan Innovation.
• Penicillin was discovered serendipitously.
• The same is true about Pfizer’s anti-impotence drug, Viagra (sildenafil citrate), which was initially used for treating hypertension and angina pectoris.
• Minoxidil’s hair growing properties were noticed fortuitously while treating some bald patients for hypertension.
• The anaesthetic use of nitrous oxide (laughing gas) and ether were discovered accidentally.
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Incremental innovation
• Are the minor changes and developments made to a radical innovation
• Common industrial practice – to invent a radical innovation and to develop it further incrementally. Eg Detergents, Dentifrices and Diapers – P&G can be called the 3(d) Company.
• And Section 3(d) regulates the patenting of incremental innovations
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“Me too”
• “Me too” drugs are the incarnations of incremental innovation.
• High-priced editions of existing drugs – variations of older drugs already in market
• Nexium (www.purplepill.com)
• Six best-selling statins – Mevacor, Lipitor, Zocor, Pravachol, Lescol and Crestor.
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Looking out for ‘blockbusters’
• Blockbusters means easy profit – the lure of huge pay offs
• Lipitor earns Pfizer an annual revenue of $13 Billion.
• AstraZeneca’s Prilosec (for heartburn) earned a revenue of $6 billion in 2001.
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How innovative is the industry?
• The output of innovative drugs have been far and few
• The real source of innovation are the academic institutions, small biotech companies and public funded research organisation.
• AZT, the first AIDS drug was developed by National Cancer Institute and Duke University later licensed to GSK
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How innovative is the industry?
• Taxol (paclitaxel), leading cancer drug, developed by National Cancer Institute and Florida State University licensed to Bristol-Myers Squibb
• Amgen’s Epogen was developed by University of Chicago and Columbia.
• Gleevec benefitted from NIH funded university researcher
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Part 3: Painting the Swan Black
• The pharmaceutical industry has a tendency to paint a white swan black – or to repaint a faded old Black Swan
• Opposition acts as a check on this phenomenon
• With the pipeline of new drugs dwindling, the industry now focuses on packaging what is known as Black Swans
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When pipelines dwindle…
• New Drugs Approved by the US FDA between 1996 and 2004
• Painting Swans Black is a consequence of the industry reality of fewer new drugs
Year NDA NME2004 25 172003 14 92002 11 72001 10 72000 20 9
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When Blockbusters go off-patent…
• Pharmaceutical companies lose huge part of the market share when their patents expire.
• Eli Lilly’s patent on Prozac expired in 2001.
• AstraZeneca’s patent for Prilosec (the original purple pill) expired in 2001 when the drug had a revenue of $6 billion in annual sales. Replaced by Nexium
• Bristol-Myers Squibb lost its best seller Glucophage.
• Schering-Plough lost Claritin and tried to replace it unsuccessfully with Clarinex.
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Opposition as a ‘touchstone’
• Opposition acts as a touchstone for checking the quality of patents – or as sandpaper to check the plumage of Swans
• It helps in the development of a strong patent system where only the right inventions get rewarded and the wayward gets rejected
• Helps the Patent Office to take informed decisions on grant
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What is Pre-grant Opposition?
• Peer-initiated challenge mechanism under the Patents Act.
• Challenge initiated before the grant at the Patent Office.
• Administrative in nature and not judicial. • Helps the patent office to overcome
information asymmetry• The purpose of opposition proceedings is to
give a competitor/interest groups the opportunity of opposing unjustified protective rights.
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Pre-grant Opposition is…
…risk avoidance.
• Helps you avoid the risk of facing an expensive infringement suit.
• In-house procedure keeps you in control • The most important part of patent
enforcement, ie filing suits for infringement is an activity that is outsourced and involves a gamut of different and highly unpredictable players. Opposition helps you to decide the course of action.
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Why Pre-grant Opposition is important.
• A patent application will disclose technical information about the area in which the invention is claimed.
• Patent Offices around the world have difficulties in keeping pace with the rapid advancement of technology in all areas of science.
• The knowledge about an earlier invention or a disclosure more likely to come from the competitors who have expertise in that particular field of technology in which the invention is claimed.
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It’s relevance from a systemic viewpoint
• The device of opposition by competitors is a means to equip the Patent Office with information that may not be available to it.
• Opposition proceedings will be significant in determining the grant of patents for the applications currently pending before the Patent Office.
• In the case of pharmaceutical patents, opposition proceedings will play an important role not only in the development of patent law but also in the future course of the pharmaceutical industry.
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Efficient Procedure
• Time-bound proceedings
• The Act and the Rules stipulate specific time-limits for completing the opposition process efficiently. (Rule 55)
• Summary proceedings
• The underlying principle the opposition procedure is of early and complete presentation of the parties’ cases as opposed to the piecemeal and tardy introduction of arguments and supporting evidence.
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Cost-Effective Procedure
• A comparatively straightforward procedure
• Results in quick disposal on merits thereby reducing the costs incurred in contesting the proceedings.
• Trial and appreciation of evidence in the traditional manner in which it happens in the courts of law do not occur in opposition proceedings.
• No fee stipulated for filing a pre-grant opposition.
• But, there could be costs when opposition fails.
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Time-bound Procedure
• Representation for opposition should be filed within six months from the date of publication of application (safe period)
• Publication of the application under section 11 A
• Applicant has three months time to file response.
• Hearing signifies the final step in a pre-grant opposition, after which the Controller gives his decision.
• Controller shall give the decision within one month after the completion of hearing.
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The Rs.120 Crore (or more) Question
• Do you need a strategy on opposing patents?
“the company lost about Rs 120 crore in sales because of the delay in launching the Flame”
- Mr Venu Srinivasan, MD, TVS
• TVS found out that it needed one after Bajaj sued it for patent infringement of its twin-spark plug technology.
• The experts at TVS knew about Bajaj’s patent and yet did not oppose.
• Opposition doesn’t cost much. But not initiating one does.
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Bajaj Auto Ltd
• Bajaj’s taking TVS to task over its spark plug patent.
• Bajaj seems to have a strategy on opposition – so far opposed applications:
• Patent No.176906 (223/BOM/ 1993) of Automotive Research Asso. of India, (Failed)
• Patent No. 176968 (419/BOM/ 1992) of Greaves Cotton Co Ltd (Succeeded)
• Patent No. 184001 of Piaggio (Failed)
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Hindustan Unilever
• HLL ( now HU) also seems to have a strategy on opposition• Patent No.190644 (102/BOM/1998) by
Alphacon Containers Pvt. Ltd (Failed)• Patent No.198399 (931/CHE/2003) –
Post-grant Opposition – (Failed) but patent amended.
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P&G
• Unilever’s global rival appears to be taking Unilever to the task
• Patent No. 174429 (100/BOM/92) of HLL opposed by P&G Far East Inc (US Company) – Succeeded
• Patent No. 174537 (237/BOM/1992) of HLL opposed – Succeeded
• Patent No.174044 (249/BOM/1991) of HLL – Failed
• Patent No. 176112 (303/BOM/92) of HLL – Succeeded
• Patent No.173958 (316/BOM/I99I) of HLL – Failed- Patent amended.
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Ranbaxy
• Ranbaxy (Soon Daiichi Sankyo) has an open strategy on challenging patents.
• Patent No. 85/DEL/1995 of Eli Lilly & Co - partially succeeded – only process patents granted
• Patent No. 190/MAS/1998 of Roche – Succeeded• Patent No. 1440/MAS/1998 of Novartis –
Succeeded• Patent No. 1602/MAS/1998 of Novartis – Gleevec
case – Succeeded• IN/PCT/2000/00084/CHE of Pfizer – Failed –
Patent amended.• IN/PCT/2001/00788/CHE of Pfizer – Failed
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The Role of Strategic Oppositions
• Helps you to keep track of competition
• Patents keeps you informed about how others are growing and a strategy will help you to find your place
• Increases your market share whenever a patented drug is kept out of market
• Gives reliable information on your R&D efforts – Where you put your money
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More details…
The web page of my new book –
“The Touchstone Effect: The Impact of Pre-grant Opposition on Patents”
by LexisNexis Butterworths Wadhwa Nagpur
www.thetouchstoneeffect.blogspot.com
or simply Google the words
“Touchstone Effect” for more info