STATEMENT OF

THE HONORABLE BRUCE A. LEHMAN

BEFORE THE

SUBCOMMITTEE ON COURTS AND INTELLECTUAL PROPERTY

OF THE

COMMITTEE ON THE JUDICIARY

UNITED STATES HOUSE OF REPRESENTATIVES

ON

PATENT FAIRNESS ACT OF 1999 (H.R. 1598)

JULY 1, 1999

Mr. Chairman,

Thank you for asking me to appear before you as an expert witness this afternoon on the "Patent Fairness Act of 1999," legislation that would transfer to the Patent and Trademark Office the responsibility for holding hearings and making administrative determinations concerning certain "pipeline drugs" that currently receive only a two year extension (as opposed to a five year extension for similar drugs) under "The Drug Price Competition and Patent Term Restoration Act of 1984" (commonly known as the Hatch-Waxman Act).

For more than two decades, I have been keenly interested and actively engaged in the public policy aspects of patent-specific term restoration legislation. As you know, as counsel to the House Judiciary Committee and its subcommittee on intellectual property during the 1970s and early 1980s, I served as principal legal advisor in the early drafting stages of the Hatch-Waxman Act. Even after leaving the Committee in 1983, I remained very involved in these important legal and public policy issues, testifying on these matters before the Senate Subcommittee on Patents, Copyrights, and Trademarks in 1991.

During my recent term as Assistant Secretary of Commerce and Commissioner of Patents and Trademarks (July 1993 through December 1998) under the Clinton Administration, I continued to give considerable attention to the question of fairness or equity in drug patenting and the related policy issue of private patent legislation.

Most recently, as President and CEO of the International Intellectual Property Institute (IIPI), a nonprofit organization dedicated to improving intellectual property systems worldwide, I moderated an open public policy discussion, "Fairness in Drug Patenting: The Role of Congress," June 10, 1999. While the subject of this afternoon's hearing, H.R. 1598, is somewhat narrower in focus, the underlying public policy issues are of great importance to the scientific and pharmaceutical communities, courts, federal administrative agencies, Congress, and the American public.

As I understand these issues, the task currently facing Congress is to find a way to regularize the process of enacting patent-specific term restoration legislation. Central to this task is to develop a system that is fair to the public and patent holders. Certainly, to shorten arbitrarily effective patent term for one of the industries whose innovations have the greatest public benefits - the pharmaceutical industry - is unfair, and discourages investment in those industries.

A brief comparison of the ability of American innovation-based companies to attract funding in U.S. capital markets will underscore my point. At the present time, innovators in the computer components and software industries receive full twenty (20) year patent protection for inventions which require far less capital and involve far less risk than is the case in pharmaceutical innovation. Since most patents issue after about two years' examining time, these innovators are receiving 18 years of effective patent exclusivity. Is it no wonder that companies producing very important, but far from life saving or disease-curing products, attract market value and investment capital on a scale an order of magnitude beyond that of pharmaceutical and biotech companies?

Clearly, the current approach is not fair. Since the enactment of the Hatch-Waxman Act in 1984 -- which included a shorter, two-year restoration for certain drugs already in the FDA approval process based on the assumption that these drugs would be approved quickly -- Congress on seven occasions has enacted legislation to address particular FDA-regulated products where the application of the two-year restoration period would be unfair because of lengthy delays in the regulatory approval process that were unanticipated at the time the Hatch-Waxman was passed

As I testified before the Senate Subcommittee on Patents, Copyrights, and Trademarks in 1991, the root problem stems from basic weaknesses in the Hatch-Waxman Act, which was evident even at the time of enactment. For example, the two-year restoration period for certain pipeline drugs was itself arbitrary, apparently the result of political compromise rather than an informed understanding of the complexities of the FDA review and approval process and the lengthy delays that might arise as a drug works its way through that complex process. Similarly, the time limits on the FDA testing phase for certain pipeline drugs were arbitrary rather than reasoned.

Related to, but distinct from, the merits of specific claims for legislative term restoration for particular FDA-regulated products, is the larger public policy question of how Congress might go about regularizing the process of granting relief in cases where the application of the general two-year rule in the Hatch-Waxman Act would be unfair or inequitable. In 1991, I testified that a fair and impartial method of considering private claims for patent term extensions must be found to prevent the subcommittee from being overcome with a deluge of similar requests and to ensure that all who seek private relief are treated with uniform fairness. That need is as great today as it was when I last testified almost a decade ago.

What alternatives are available to Congress? In my 1991 testimony, I identified a number of approaches for obtaining independent review and fact determination in these cases, including referral of the bill to the Commissioner of Patents and Trademarks, the alternative adopted in H.R. 1598. After serving as Commissioner of Patents and Trademarks for almost five years, I remain convinced that such an approach constitutes sound public policy. For that reason alone, and without the time this afternoon to undertake a detailed discussion of this legislation, I can strongly endorse the "Patent Fairness Act of 1999." H.R. 1598 is a sound approach for achieving fairness and predictability in America's intellectual property system.