Wednesday, September 16 2020

Life After Patent Expiration

Traskbritt

Why can’t patents be renewed once they’ve lived out their 20 years?

A patent becomes public domain (free for use by the public) upon its expiration, which is defined as 20 years from the patent’s earliest non-provisional filing date. MPEP §201.04. The 20-year patent term applies to utility and plant patents. MPEP § 2504. 

The 20-year window is meant to balance the interest of innovators with the public good. Under U.S. Intellectual Property (IP) laws, patents convey a right to exclude third parties from making, using, and selling patented technology as their own. In other words, patents confer to a degree of market exclusivity for the lifespan of the patent (i.e., 20 years). Embodied in this notion is quid pro quo in U.S. patent law: the U.S. government via the USPTO gives patent owners and inventors an exclusory right to their patented technologies such that the generated revenues should compensate for the initial investment in creating novel technologies and fund more research. In return, the patent owners and inventors are required to release the patented technology to the public domain at the end of the patent term, which should contribute to forwarding innovation.  At the heart of U.S. IP law is the notion that innovation will bring about a brighter future for everyone. Thus, to stimulate innovation, exclusory rights cannot be perpetual.

There are exceptions to the 20-year lifespan of a patent. For instance, a patent will terminate if the owner lapses on payment of the maintenance fees. However, the owner can pay the owed fees to revive the patent until the end of the 20-year period from the filing date. Additionally, a patent term adjustment (PTA) can extend the 20-year window under certain conditions. MPEP § 2734. For example, an Applicant can apply for an extension of the 20-year window if there are significant delays in prosecution. MPEP § 2734. On the other hand, if an Examiner finds that an Applicant has attempted to double-patent the same invention, the Examiner could potentially grant the patent, but the inventors must file a terminal disclaimer such that both patents expire on the same date (i.e., the earlier expiration date). MPEP § 804.02. Thus, one patent has a shortened 20-year window. Furthermore, a patent can have both a PTA and a terminal disclaimer (though PTA cannot extend the patent term beyond any portion of the patent term that is disclaimed by the terminal disclaimer). These are only illustrative examples of the flexibility of the statutory 20-year window for a patent.

For more information on patent prosecution, strategic planning, and assembling an IP portfolio, consider consulting an IP attorney at TraskBritt.

 

Patent Cliff

A patent’s twentieth anniversary thus marks a predictable decline in sales revenue over the patented subject. This phenomenon is known as the so-called patent cliff: profits that result from exclusive making, using and selling of a product via a patent sharply decline as a result of the patent becoming public domain. 

The patent cliff heavily impacts the pharmaceutical industry, particularly branded drugs. A notable instance of patent cliffs affecting revenue is Pfizer’s Lipitor, a medication used for treating elevated cholesterol and triglyceride levels. When Pfizer’s patent for Lipitor expired in 2012, Pfizer’s profits from Lipitor sharply decreased from $10bn in 2011 to $4bn in 2012. The active ingredient, atorvastatin, has since been repackaged and marketed by generic drug makers. The competitively and cheaply priced generics may drive down production and/or price of the branded drug. Cheaply priced drugs with the same formulation as the brand-name drugs ultimately benefits the public, tapping back to that notion of quid pro quo in US patent law. 

 

Pre-expiration Strategies

As the end of the patent term approaches, owners of pharmaceutical patents have several options when preparing for the patent cliff: (1) accelerate research and development of novel drugs that are patent-eligible, (2) expanding into fast-growing markets, or (3) development of companion diagnostic tests alongside novel drugs.

  1. Accelerated Research and Development – expanding your IP portfolio with novel and potentially lucrative products could offset the losses from a patent’s expiration. 
  2. Expanding into Fast-Growing Markets – strategically investing time, money, and effort could be streamlined by understanding what the market demands or where the market will go 
  3. Development of Diagnostic Tests – part of the issue with administering a particular drug may be that only some patients will respond as desired to the drug.  For example, for a particular drug perhaps roughly 3 out of 10 patients will respond (i.e., the drug is effective roughly 30% of the time it is administered). One way to invent effective drugs is to develop diagnostic tests that will ascertain whether a particular patient will see positive results with the drug.  Thus, even if a patent for the drug is expiring, it may be possible to obtain a patent for a new and useful diagnostic test that will ascertain whether a particular patient will see positive results with the drug.  The term of a patent for the diagnostic test may extend beyond the patent term of the patent for the drug itself, which may, in part, help to mitigate the effects of the patent cliff.

In short, with adequate preparation, the patent cliff may not sound a death knell. Strategic planning to balance the intricacies of acquiring patents and managing IP portfolios is an area that IP attorneys at TraskBritt have experience with. Consider consulting with an experienced attorney at TraskBritt.

Article written by Victoria Cheng, Ph.D.