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Focus on Life Sciences: Intellectual Property – Patent Demands, Venture Capital, and IP Legislation: Part 2

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Intellectual Property ("IP") and innovation is becoming increasingly important to the U.S. economy, a key reason why IP and IP litigation is getting significant attention recently.

Part 1 of this article highlighted two separate reports focusing on patent demands and the potential consequences. Key takeaways from these reports were that litigation by patent assertion entities ("PAEs" or "patent trolls") is not insignificant, has recently increased in frequency, and seems to be particularly concentrated within the technology and life sciences industries. Separate reports have found that abusive litigation by PAEs limits investment in start up companies and reduces innovation. If true, it is reasonable to infer that constraints on innovation have ripple effects throughout the broader economy.
November 18, 2013

Intellectual Property ("IP") and innovation is becoming increasingly important to the U.S. economy, a key reason why IP and IP litigation is getting significant attention recently.

Part 1 of this article highlighted two separate reports focusing on patent demands and the potential consequences. Key takeaways from these reports were that litigation by patent assertion entities ("PAEs" or "patent trolls") is not insignificant, has recently increased in frequency, and seems to be particularly concentrated within the technology and life sciences industries. Separate reports have found that abusive litigation by PAEs limits investment in start up companies and reduces innovation. If true, it is reasonable to infer that constraints on innovation have ripple effects throughout the broader economy.

The second part of this article focuses on patent legislation designed in part, to address these issues.

Patent Legislation

The Leahy-Smith America Invents Act was signed into law in September 2011 and was hailed as one of the most significant pieces of patent related legislation in more than half a century. Key items in that act include a switch from "first to invent" to a "first inventor to file" system for patent grants, the implementation of a business method patent review program, the limitation of the ability to sue multiple defendants in one suit, and the implementation of a post patent grant review process that offers additional forums to assess patent validity.

Following the America Invents Act, in June of 2013 the White House released patent initiatives as additional checks on PAEs and perceived abusive litigation. A variety of recommendations and initiatives were laid out designed to reduce PAE's incentive to litigate, reduce costs for potential defendants in infringement cases, and improve the quality of patents.

Most recently the Innovation Act (H.R. 3309) has been introduced for debate and continues the argument for reform against abusive patent litigation. Key elements within the legislation include a requirement for plaintiffs to provide more disclosure and transparency in their claims against defendants, fee shifting provisions (in which the losing side pays the bill), and small business education and outreach by the U.S. Patent and Trademark Office.

Concluding Thoughts

Recent legislative actions and proposals are designed to accomplish two broad objectives:

  1. Reduce innovation stifling litigation by reducing incentives to litigate and leveling the playing field
  2. Improve the quality of future patents by reducing the acceptance of patents with vague, ill-defined claims and overly broad scopes

On the surface, both of these seem like valid objectives – equalized playing fields and high quality patents are both factors that should work to improve economic outcomes by fostering increased innovation.

RubinBrown has a dedicated group focused on the Life Sciences Industry to provide assurance, tax, and business advisory services for entities participating in the Life Sciences industry or supporting those that do. Specialized segments include Animal Health, Plant Sciences, Human Health, and Renewable Energy.

 

Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.

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