Intellectual Property Rights and Free Enterprise

The Fall 2008 edition of Washington Legal Foundation's CONVERSATIONS WITH examines the ongoing evolution of intellectual property rights in America's free enterprise system. Former Attorney General of the United States and Pennsylvania Governor Dick Thornburgh leads an informative discussion with Senior Vice President and General Counsel of Eli Lilly and Company, Robert A. Armitage; Executive Vice President, General Counsel, and Secretary of Viacom Inc. Michael D. Fricklas; and Brad Smith, Senior Vice President, General Counsel, Corporate Secretary, Legal & Corporate Affairs for Microsoft. The participants explain why copyrights, patents, trademarks, and other forms of intellectual property merit the same respect under the U.S. Constitution as real property, and what can be done to foster further public respect for IP rights. They also comment on several key issues and debates involving IP rights such as online copyright protection; the patent system in the U.S. and abroad; and efforts to prevent overseas counterfeiting of technology.

Here is an excerpt:

Governor Thornburgh: Bob, it seems that every patent held by a pharmaceutical company is eventually subject to legal challenge. However, when a "branded" company settles litigation with a generic company, the terms are increasingly challenged as anticompetitive. Could you comment on this?

Mr. Armitage: It is a dynamic that is unhealthy for the pharmaceutical industry and over the long-term, patients, who look to and expect the industry to discover and develop new life-saving medicines. Currently, the generic company challenges the patent as early as possible, generally four years in the U.S. The cost, burden, and risk this presents to the pharmaceutical industry as it makes decisions for research and other investment is significant. It creates substantial uncertainty. If you then allege that any settlement of the litigation is anti-competitive, you exacerbate the problem. A company cannot manage the uncertainty by settlement and is forced to go to the expense and risk of litigating every issue through to a decision by the court.

The policy questions raised by this prolitigation dynamic should also be viewed in context. The investment to discover and develop a new medicine is nearly $1 billion dollars. The number of new medicines being approved by the U.S. FDA is alarmingly low — less than 30 new chemical entities were approved in 2007. In context, it becomes clear that an industry that invests over $90 billion dollars in research and development cannot be sustained if the intellectual property protecting the few medicines that are discovered and approved are attacked after four years.

For this reason, Lilly and others in the industry have opened the dialog to extend data package protection to 14 years. The assurance of a 14-year period for data package protection would provide business certainty for investment and extend the period to recoup research and
development expenses. The period of exclusivity and product liability tort reform, which is a topic worthy of additional discussion, are two of the pressing needs for legal reform for the pharmaceutical industry.

See the full discussion here.