Essential Pro-Consumer Protection in Jeopardy
Inequitable Conduct = Honesty = Affordable Generics

THE ISSUE
From allergy relievers to cancer fighters, we can all appreciate the pharmaceutical industry’s efforts to help people live healthier, longer lives. Yet prescription drug prices are skyrocketing twice as fast as inflation and contributing to the overall rise in health care costs. Prices are particularly high during a period of market exclusivity that brand-name drug makers enjoy after receiving a patent. Once that exclusivity ends, generic competition typically lowers cost by up to 80 percent, saving consumers money and providing access to needed medications.

Pharmaceutical manufacturers deserve to be rewarded for their innovations, but should they receive a government-sanctioned monopoly when they make misleading statements or omit relevant information on their patent applications? Some brand-name pharmaceutical companies think so and are lobbying Congress to weaken or eliminate the fundamental protection ensuring honesty in the patent process – the inequitable conduct defense. While 85% of inequitable conduct cases do not involve pharmaceutical patents, the defense ensures an honest, more transparent, competitive marketplace for prescription drugs that ultimately benefits patients.

TEVA’S POSITION
Retaining the inequitable conduct defense is essential to both ensuring honesty and containing health care spending. At its core, inequitable conduct exposes dishonesty by allowing courts to render a patent unenforceable if the holder made intentional misrepresentations or intentionally hid relevant facts. Weakening inequitable conduct standards will provide more incentive to cheat on patent applications and will lead to more low-quality patents. When it comes to pharmaceuticals, these perverse incentives translate into higher drug costs and less patient access to affordable generic medicines.

BACKGROUND
Patents are issued in the United States by what is essentially an honor system that requires applicants to be truthful. Regretfully, patent examiners generally lack the time and expertise needed to investigate every statement on an application. Because of a patent’s tremendous economic value and the relative ease of withholding or misrepresenting information, some applicants succumb to temptation and cheat.

When these instances are uncovered, challengers can allege inequitable conduct. This defense – counter-intuitively, patent challengers are the defendants – is the key mechanism for ensuring honesty in the patent process. Without it, applicants have no incentive to act in good faith as there is no “check” on the system.

Brand-drug makers argue the inequitable conduct doctrine allows for baseless claims at a huge cost to the legal system. The facts, however, contradict this allegation as experience shows these attacks are unsubstantiated and unfounded. Courts have found that brand-drug companies submitted false statements to the patent office, inaccurately described experiments and concealed information that contradicted their applications. For example:

• Even though the inventor had authored an earlier article making contradictory claims about the drug’s effectiveness and previous applications had been repeatedly rejected, false declarations helped clinch the patent for a glaucoma medication (Pharmacia Corp. v. Par Pharm).
  
• When the patent office asked for objective, non-inventor testimony, the applicant instead provided affidavits from a former company employee and two paid consultants, without disclosing those affiliations (Ferring B.V. v. Barr Labs).
  
• A biologics manufacturer described an experiment to the patent office and received a patent for a process used to produce human growth hormone. One problem, the company never actually performed the experiment. (Novo Nordisk Pharms., Inc. v. Bio-technology General Corp.)

In each of these cases, inequitable conduct rendered bad patents unenforceable and allowed affordable, high-quality generics into the market sooner. Key stakeholders and experts agree.

AARP, which represents the interests of almost 40 million Americans:
“Retention of the inequitable conduct defense provisions is important for the promotion of generic drugs. Generic drugs offer consumers a lower cost alternative to brand name prescription drugs, many of whose prices continue to rise at more than twice the rate of inflation each year.”
AARP Letter to Senator Leahy
Feb. 25, 2008

Former U.S. Patent Commissioner Harry Manbeck:
“The purpose of the inequitable conduct doctrine is to sanction and thereby discourage cheating by patent applicants and their representatives, not to penalize them for honest mistakes.”
Letter to Senators Leahy and Specter from Commissioner Manbeck
March 7, 2008

Insurers, consumer advocates, and unions:
“While there is much Congress can do to reduce barriers to generic drugs, the first principle should be do no harm”

Letter cosigned by Aetna to Senators Reid and McConnell
Feb. 11, 2008
“As such, we urge…proposed changes to the bill (S1145) regarding inequitable conduct that would weaken generic access be rejected.”

Letter cosigned by consumer groups to Senators Leahy and Specter Feb. 8, 2008.

United States Patent Examiners also agree:
“[T]his legislation contains provisions that would hurt – not help – America’s economic well being by weakening the U.S. Patent System…The legislation would effectively remove inequitable conduct as a defense in infringement cases by first requiring a finding of prior art that invalidates the patent claim. If the claim is already invalid on the basis of the prior art, the issue of inequitable conduct becomes moot.”
Position Paper Issued by the Patent Office Professionals Association, September 2007