U.S. Policy and the Threat to Innovation

This week on IPWatchdog Unleashed, we turn our attention to patent policy and the Biden Administration, particularly the Adminstration’s efforts to make it more difficult for pharmaceutical companies to obtain and keep patent rights.

For this episode, I spoke with Brad Watts, who is Vice President for Patents and Innovation Policy at the Global Innovation Policy Center at the U.S. Chamber of Commerce. Prior to joining the Chamber, Brad spent eight years working in the U.S. Senate, his last several years as Republican Chief Counsel on the Senate Judiciary Subcommittee on Intellectual property, where he was responsible for planning and implementing Senator Thom Tillis’ (R-NC) and the Republican party’s legislative agenda on all aspects of intellectual property.

Lately, Brad has written a number of articles posted to the GIPC blog (July 1, June 19, June 7, May 22) which focus on various aspects of different Biden Administration proposals relating to patents and federal funding for early stage innovation. The topic this most directly raises,  relates to so-called march-in rights, which is allowed for in the Bayh-Dole Act. The idea behind march-in rights is simple— if the federal government provided seed funding for a particular innovation and a university has licensed out the resulting innovation, the federal government maintains the right to “march-in” and reclaim the rights in the event the innovation is shelved or otherwise not making its way into the marketplace for the benefit of consumers.

Over the years, however, there have been repeated, unsuccessful attempts to stretch march-in rights to recapture innovation that was in the marketplace but which the government thought was too expensive, such as brand name, blockbuster pharmaceuticals. Repeatedly over the years the National Institutes of Health (NIH) rebuked the never-ending attempts to use march-in rights as a price control mechanism. But everything has changed once the National Institute of Standards and Technology (NIST) proposed a rule that would specifically allow government bureaucrats to march-in and confiscate patent rights for any product that received any federal funding when the government determines the price of the product is too high.

“Only 8 % of the pharmaceutical products that made it through Food and Drug Administration (FDA) approval received any level of federal funding,” Watts said during our conversation. “[F]ree enterprise is not a dirty word. Free enterprise is a good thing. And… part of what made Bayh -Dole so successful, that framework is it encouraged public -private partnership, each party doing what they do best.” Watts went on to say:

“A lot of these federal funds go to a two or three researcher lab in a university in any community in this country where they do some of that base foundational research. But then what these labs have to… go out and get funding from venture capitalists, from angel investors, from financial institutions. And that funding is 10, 20, 30, 40 times what the federal funding is. And again, Xtandi is a great example. I did the back of the hand math before this podcast. I think Xtandi was developed like 98 .75 % with private funds. Minuscule investment from the feds. And that’s actually the benefit of the Bayh-Dole Act and this public private framework… We are ignoring the fact that the private sector invests significantly more. Not only are we ignoring the fact that they’re taking a huge risk, we’re also essentially, if this [terminal disclaimer rule] were to be finalized, saying to them, and after all of that, and after all that money you’ve spent, all those start and stops, those failures, if we don’t like the price of your product, we’re just gonna take it from you. As you can imagine, that’s gonna make a lot of people very, very skeptical about investing their hard-earned dollars into a potentially revolutionary or innovative product. And it’s not just medicines.”

During our conversation we also talk about the recently released joint report from the FDA and U.S. Patent and Trademark Office (USPTO) relating to the numerous inaccuracies contained in I-MAK data, which has often been used by opponents of pharmaceutical patents in policy debates on Capitol Hill. And while Watts agreed with me that the report does not specifically come out and categorically say that I-MAK data is wrong and/or inherently unreliable and not trustworthy, the report does go drug by drug setting forth the claims that are made, often by I-MAK, and then setting the record straight with respect to what is real. So, while it would have been helpful to have the FDA and USPTO reach the conclusion, among other things the report did find “that generics routinely come to market while patents are still in force before the expiration of the base product’s patents,” Watts explained.

We also discuss the need to properly incentivize innovation, particularly pharmaceutical innovation, as well as the necessity of a strong patent system to encourage risk-taking and innovation. We also tackle international policies and issues that could undermine U.S. innovation leadership, and discuss the importance of free enterprise and an increased awareness among lawmakers about the importance of IP and the role intellectual property plays in fostering American innovation leadership.

Are there any rays of sunshine or reasons for optimism? We end our conversation with Watts finding that silver lining—many incoming lawmakers are interested in intellectual property and actually desire to take on these issues as a part of their legislative agenda. Watts explained:

“Before ending, I’d say to just look at the number of lawmakers who’ve been elected in recent years, who are honed in on intellectual property as a key part of their legacy and legislative agenda. You have Ms. Ross from North Carolina, you know, who as a freshman, became a leader on intellectual property. You have Mr. Kiley from California… When I started on the Hill, it was rare for a lawmaker to come in and want to take up something as wonky and weighty and as difficult as intellectual property. And for me, seeing these members come in and saying from day one, no, this is a priority for me, that is an encouraging sign.”

To hear my entire conversation with Brad Watts, listen wherever you get your podcasts (links here). Or visit IPWatchdog Unleashed on Buzzsprout.

Gene Quinn
Gene Quinn is a patent attorney and a leading commentator on patent law and innovation policy. Mr. Quinn has twice been named one of the top 50 most influential people […see more]

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