California Companies Urge Congress to Approach Patent Reform Cautiously

On Friday, CHI organized a letter with more than 100 California-based companies and organizations to Senator Dianne Feinstein, expressing important concerns about recently reintroduced patent reform legislation. CHI represents more than 250 life sciences companies and academic research organizations whose inventions are the basis of California’s global leadership in the life sciences industry, representing more than 270,000 jobs across our state and improving the lives of millions around the world.

California’s innovative high-tech industries lead the world in biotechnology, electronics, green technology, medical technology, information technology and telecommunications, and more. The biomedical industry’s advanced research and development is extremely risky and expensive in nature, with the average biotech drug, for example, taking almost 15 years and a billion dollars to reach the market. Strong patent protections enable companies to attract the risk capital they need in order to continue to innovate new technologies that save lives. The hundreds of smaller, venture capital-backed firms in the state, many spun out of California’s world-class research universities and private research institutes, could not attract funding without strong intellectual property protection.

CHI supports balanced and reasonable efforts to improve the U.S. patent system, particularly measures that would improve patent quality by adequately funding and modernizing operations at the U.S. Patent and Trademark Office. Unfortunately, the recently introduced Patent Reform Act of 2009 includes provisions that would undermine patent certainty, encourage infringement, and weaken the enforceability of patent rights and intellectual property protections upon which our industry depends. Reducing the value of patents will shrink investment, ultimately diminishing the flow of new medicines and treatments available to patients.

The letter submitted to Feinstein describes how these same provisions raised concerns and objections in the last Congress. In the current economic crisis, CHI believes the enactment of this legislation would cause even greater harm today—delaying promising research and development, reducing investment, diminishing innovation and slowing job growth.

CHI believes the proposed legislation fails to account for recent court decisions that have transformed the patent law landscape and corrected certain alleged failings of the current system in terms of excessive damages awards. While the full effects remain to be seen, decisions such as Ebay v. MercExchange (limiting the availability of injunctive relief), Seagate (limiting treble damages), KSR v. Teleflex (reinforcing the non-obviousness standard), and Microsoft v. AT&T (limiting offshore infringement liability) have clearly limited the legal options of patent holders. As for damage awards, the premier example of excessive damages raised in the past—the Alcatel-Lucent v. Microsoft decision—was overturned on the basis that the damages awarded were indeed excessive under the existing law. This suggests that the present system works and is not in need of fundamental overhaul in the form of mandatory apportionment.

California is at the epicenter of this debate, so we are hopeful that Senator Feinstein's thoughtful views will be reflected in the legislation. We appreciated her efforts during last year’s debates on patent reform and we stand ready to work with her to ensure that reform of the patent system maintains and strengthens protections for innovations across all sectors of the economy.

CHI-Advancing California biomedical research and innovation.