Transcripts of the Public Hearings on Biotechnology





The Copper Room 

San Diego Concourse 

202 C Street 

San Diego, California    

Monday, October 17, 1994,9:00 a.m.   

Panel Members From the United States Patent and Trademark Office:


Assistant Secretary of Commerce and Commissioner of Patents and 


Deputy Assistant Commissioner for Patent Policy




Attorney Advisor 

Office of Legislative and International Affairs


Director, Group 1800 


Deputy Director, Group 1800 


Congressman Dana Rohrabacher, 45th District, California

Ken Widder, Molecular Biosystems, Inc.

William Rastetter, Idec Pharmaceuticals

Congressman Bob Filner, San Diego, California

Jerry D. Caulder, Mycogen Corporation

Dave Gollaher, California Health Care Institute

Bernie Rhinerson, Biomedical Industry Council of California

Bill Otterson, National Cancer Patients Association

Eugene Schonfeld, National Kidney Cancer Association

Martin Simpson, Office of Technology Transfer University of California

William Beers, The Scripps Research Institute

Kathy Behrens, Robertson, Coleman and Stephens

Douglas Obenshain, Ernst and Young

William N. Epstein, Hoffman-La Roche, Inc.

Laura Handley, Weil, Gotshal and Manges

Timothy Gens, Fenwick and West

William Kennedy, Morrison and Foerster

Elizabeth Enayati, Weil, Gotshal and Manges

William J. Scanlon, Foley and Lardner, Biotechnology Industry 

Stanley Crooke, Isis Pharmaceuticals

Vincent Gioia, Christie, Parker and Hale

Mark G. Toohey, Spencer, Frank and Schneider

Allen E. Dow, Klarquist, Sparkman, Campbell, Leigh and Whinston

Ned A. Israelsen, Knobbe, Martens, Olson and Bear and Vical, Inc., 
Alliance Pharmaceutical

Barbara Rae-Venter, Weil, Gotshal and Manges

Timothy Gens, Fenwick and West

Elizabeth Lassen, Calgene, Inc.

Daniel N. Chambers, Viagene, Inc.

Thomas G. Wiseman, Cushman, Darby and Cushman

George Johnston, Law Department, Hoffman-La Roche

Richard C. Peet, Foley and Lardner

John Sanders, Mycogen Corporation

Micheal B. Farber, Merchant and Gould

Michael J. Roth, Pioneer Hi-Bred International

Margaret Connor, Office of Technology Transfer,Agricultural Research 
Service, USDA

Steven Brostoff, The Immune Response Corporation

Robert Schaffer, Darby and Darby

Bertram I. Rowland, Flehr, Hohbach, Test, Albritton and Herbert

John W. Schlicher, Crosby, Heafey, Roach and May

Alain Schreiber, Vical Corporation

Eric C. Woglom, The Association of the Bar of the City of New York

Ronald Tuttle, Houghton Pharmaceuticals, Inc.

Jeffrey Miller, IXSYS Corporation

Gail M. Kempler, Regeneron Pharmaceuticals, Inc.

Andrew D. Fortney, Oblon, Spivak, McClelland, Maier and Nestadt

Robert Benson, Genelabs, Incorporated

Lynne Parshall, Isis Pharmaceuticals

Susan Perkins, Cambell and Flores

Robert Sobol, San Diego Regional Cancer Center

David A. Lowin, Syntex, Inc.

Jeffrey G. Sheldon, Sheldon and Mak

Ted Green, Amylin Pharmaceuticals

William J. Scanlon, Foley and Lardner, Wisconsin Biotechnology 

P R O C E E D I N G S  (9:00 a.m.) COMMISSIONER LEHMAN:  I'm going to 
start the hearing right now.  We're expecting Congressman Filner, San 
Diego, to welcome us and introduce us, and when he comes we will 
interrupt for him so that he can do that officially.  But I'd like to 
begin with my opening remarks so that we can get the hearing underway and 
try to keep on our schedule as much as possible; otherwise, we'll be here 
until midnight tonight.  

First of all I'd like to introduce who we are.  I'm Bruce Lehman the 
Commissioner of Patents and Trademarks and with me here are Chuck Warren, 
Deputy Group Director of Group 1800, our biotechnology examining group; 
Barry Richman, Group Director, Group 1800; Charles Van Horn, Deputy 
Assistant Commissioner for Patent Policy;  Nancy Linck, the solicitor, 
our head lawyer in the Patent and Trademark Office; and Jeff Kushan of 
the Office of Legislative and International Affairs, and Jeff organized 
this hearing and has been dealing with quite a few of you.Now, Mike 
O'Neil is here someplace.  He's there at the door.  If you have any 
administrative problems or questions or anything like that, please, ask 
Mike O'Neil about it, and Jeff Kushan also would be sort of a second 
backup on substantive matters.

Also here we have Esther Kepplinger and Dave Lacey of Group 1800 who are 
in the audience.

Since I was appointed the Commissioner of Patents and Trademarks by 
President Clinton, we've worked hard to make this office responsive to 
our customers, and our customers are the users of the patent system and 
this hearing is an example.  In fact, this is our fourth round of public 
hearings on patent issues and our second round on patent issues in 
California.  I think it's appropriate that we come out here to California 
because, really, more than any other state, the center of creativity and 
probably where we get most of our business and the largest single 
concentration of our customers for the Patent and Trademark Office are in 
this particular state.

Last January we were in Silicon Valley and at that time we held hearings 
about problems in the -- patent problems in the software industry.  Last 
July we held hearings in Washington, D. C. on the obviousness standard, 
and just about a year ago we held hearings on patent law harmonization 
and those were really our first hearings in this area.

We've used these public hearings to identify the needs and concerns of 
our customers -- the patent applicants -- as well as their goals for the 
patent system.  For example, we use the public record from our patent law 
harmonization hearings when we decided to suspend negotiations on the 
patent law harmonization treaty.  We relied on comments made during our 
harmonization and software hearings, both of them, to shape the 
legislation to implement the Uruguay round agreement which is now pending 
before Congress.

By the way, I note that nearly every witness in our harmonization and in 
our software hearings that addressed the question of patent terms 
supported a patent term of 20 years from filing.

We also listened carefully to what the software industry said to us 
during our public hearings in Silicon Valley.  Their comments were very 
important, if not the deciding factor, in our decision to forward 
legislation to Congress to reform re-examination procedures and then our 
decision to support prior user rights legislation.  That's why these 
hearings are very important because they can help us identify problems, 
provide us with useful solutions and create an important public record of 
where our customers stand on the important issues in the patent system.  
This is particularly true for the biotechnology industry which is 
particularly dependent on effective and meaningful patent protection.

The availability of patent protection has made it possible for 
biotechnology companies to attract investments, undertake risky product 
development and ultimately put products on the market.  And because 
patents play such an important role in this industry, we have a special 
obligation to ensure that the patent system is serving its needs.

We cannot grant patents that can be taken to the bank -- literally -- or 
impose requirements that are so strict the patents cannot be obtained.  
We can't do that, we will undercut a primary purpose of the patent system 
which is not only to promote innovation but also commercialization, and 
this is very important.  That's really what the patent system does, it 
promotes the commercialization of the remarkable advances in 
biotechnology that we are witnessing today.

Before we began to hear from our witnesses, I'd like to give you some 
feeling for where the office stands with respect to its biotechnology 
examining operation.

During the mid-1980s, we began to feel the strain of an explosion of 
activity in the biotechnology industry.  Applications were being filed at 
a rate that exceeded our capacity to examine.  This created a backlog of 
cases waiting resolution and led to increasingly long patent pendency; a 
pendency on a per application basis that reached nearly 27 months in 
1987.  This prompted us to make a serious commitment to improving the 
examining operation in this particular area and we started by creating a 
special biotechnology examining group, which is now Group 1800, in 1988.  
It then recruited highly-skilled examiners, invested in advanced computer 
systems, to support searching DNA and protein sequences, and increased 
its collections of non- patent literature and expanded its access to 
on-line information resources.

The office also reached out to industry, academia, the bar, and 
government organizations by establishing the Biotechnology Institute to 
assist in scientific and legal training of examiners.  These efforts have 
all paid off and pendency has decreased from nearly 27 months, in this 
particular area in 1987, to a current average of 20.8 months,  despite 
the fact that filings have nearly doubled during that period.  And we 
have cut the time that we take to issue a first office action from 14 
months, in 1988, to less than eight months today.  I think this shows 
that we can keep patent pendency down, if we simply keep on top of the 

I'm particularly proud of our success in recruiting extremely qualified 
examiners in Group 1800.  Currently there are 165 examiners in this 
group, up from 67 in 1988.  Seventy percent of these individuals hold 
advanced degrees in biotech-related disciplines.  In fact, over half of 
our biotechnology examiners have Ph.D. degrees.

With regard to our efforts to automate, the biotech group has spent over 
$2 million so far on advance computing equipment related to sequence 
searching.  This is addition to our larger capital project to automate 
the entire search system which is pretty much complete now in the Patent 
and Trademark Office.

We have also increased our holdings of specific non-patent literature 
such that we now have over 1,700 periodicals in our library holdings and 
through the National Library of Medicine, the National Agricultural 
Library, and the Library of Congress we have ready access to over 8,000 

We currently use 12 sequence information databases and we have access to 
over 30 more through commercial on- line services, and we're studying 
more solutions to getting usable information on prior art.

All of these steps represent a serious commitment by the Patent and 
Trademark Office to provide an effective, efficient examining operation 
for biotechnology applications.

The Clinton administration has also supported the biotechnology industry 
in other ways.  When we heard that the biotechnology industry had 
concerns with the Uruguay round implementing legislation -- and I should 
note that the Uruguay round itself will provide protection for 
biotechnology inventions in many, many markets and countries in the world 
where there currently are no such protections, such as Brazil, for 
example, which provide no protection whatsoever for most pharmaceutical 
inventions.  And when you think that the pharmaceutical industry alone in 
the United States is a $100 billion a year industry and that we're 
receiving less than $1 billion in revenues from a country of 120 million 
people, you can imagine what the impact of the Uruguay round is going to 
mean; it's going to mean billions more dollars flowing into the United 
States economy because we recognize protection for intellectual property 
in this area.  But we also recognize that it's very important to fine 
tune the implementing legislation and so when we talked to the industry 
and knew that they had concerns we listened very carefully.  And I would 
note that Senator Dianne Feinstein was very instrumental in bringing 
these concerns to our attention and worked closely with us to amend the 
legislation before it was introduced so that these concerns could be 

We have also supported legislation that would change how determinations 
are made with regard to obviousness of biotechnology process inventions.  
For example, we testified in support of legislation in both the House and 
the Senate that would have addressed problems that were identified with 
the biotechnology industry.

Our hearings today represent another example of our commitment to 
serving customer needs.  We will take your input today and we will use it 
to refine our examining operations and to make policy decisions that will 
ensure that our biotechnology group not only produces a high quality 
patent but is also responsible to the biotechnology industry's needs.

Now, before we begin the hearings, I'd like to briefly review the ground 
rules for the witnesses.  We have 57 people today and so these turned out 
to be the most popular, probably, set of hearings that we've had.  We 
keep getting more and more people and we should have arranged for two 
days but we didn't expect this large number and so we'll just stay here 
until the end of the evening, as long as necessary, to make certain 
everybody does get to speak.  It does limit us a little bit in that it 
makes it a little harder for us to have a dialogue and answer and ask, 
you know, questions with witnesses, which is what we ideally like to do.

Each witness will have approximately nine minutes to present their 
remarks, and to the extent that you can do it in less than that, we would 
really appreciate it, and I think Jeff has talked to some of you about 
special needs that individual people have and so we have that taken into 
consideration.  But, again, to the extent that we wish to have anybody in 
the panel -- any dialogue, if you can keep your remarks limited it would 
be very helpful.  Also, to the extent that the points have already been 
made by other people, especially as we go through the day with 57 
witnesses, it may not be necessary to repeat all those points.  You can 
just say, "I agreed with Mary Smith or Joe Small," and we'll write that 
down and make certain that we have that -- that we can consult their 

Now, to help you out keeping on time, we're going to have a monitor.  
Apparently we've have had some technical problems for the first time 
during these hearings.  We're going to have a monitor but for right now 
we'll have to do it manually, and Jeff will be responsible for timing 
people and he'll signal you when you're two minutes away from your nine 
minutes being up.  In other words, at the seventh minute.  And, 
hopefully, a little later we'll have a computer monitor here that will 
help you on that, and when we have that set up the screen will turn red 
when your time is up and it will turn yellow when you have two minutes to 

We have, as I mentioned, Jeff Kushan has consulted with just -- or Mike 
O'Neil, at least one of the two of them, with all of the witnesses and we 
know that some of them have asked for additional time to address 
particular issues where they represented more than one group or had more 
than one set of issues and we have tried to accommodate those requests.  
And, as we go through the hearing, if you feel there are problems, that 
you need additional time, you can try to contact Jeff or get a message 
into Mike O'Neil who is back here and we'll try to see if we can provide 
the time that everyone needs, but keeping in mind that we have 57 people.

Has Congressman Filner arrived yet?  If he has not, then we will recess 
for him, but I do see that our distinguished representative, Mr. 
Rohrabacher, has come all the way down.  Got up early in the morning, I 
presume, and drove down here from Orange County, a neighboring county to 
San Diego, and so we've had lots of dialogue with Congressman Rohrabacher 
over the last few months.  We have a few disagreements but I know that we 
share a common goal and that is a dynamite intellectual property system 
that's second to none in the world.  So I'd like to start out -- our 
protocol in Washington is that we let the members of Congress go first so 
I'd like to start out with Congressman Rohrabacher and invite him to be 
our first witness.


CONGRESSMAN ROHRABACHER:  Thank you very much, and I appreciate the fact 
that we do have disagreements and that I am given this forum to express 
my opinions on the things that are happening in terms of biotech but also 
in terms as it relates to the overall patent situation.  I will try to 
keep my remarks to ten minutes, and I appreciate that, and I will refer 
to you as Mr. Chairman whereas you are the chairman today of this 

Mr. Chairman, America is in the forefront of the biotech revolution and 
that we can all be proud of.  Biotech is an American creation financed by 
private American capital and brought to market by Americans.  The German 
government tried to develop the biotech industry but it failed, turning 
instead to American technology.  Given the German experience and the 
similar experiences in the rest of Europe and in Japan, government 
subsidization of industry start-ups has certainly had a dubious success 
and I would say it's cast a pall on that concept.  But our foreign 
competitors in the biotech arena are not giving up, they are watching the 
American biotech industry and are waiting for the technology and markets 
to fully develop and then the copying will begin.

Our patent system acts as a strong shield protecting America's 
innovators from this theft, thus maintaining the incentive for the 
investment of future venture capital in R&D.  So it should be no surprise 
to any of those here today that our competitors are working at this 
moment to weaken our patent system.  The evidence of a wide- ranging and 
heretofore low-key assault on patent rights -- on the patent rights -- 
enjoyed by Americans is now beginning to surface and that is why I am 
here today.

The Clinton administration, the Japanese and multinational interests are 
the aggressors and they are justifying their aggression by waving a 
banner of patent harmonization.  If this is successful, U.S. patent 
holders or technology creators will be robbed of billions of dollars in 
royalties by those who will use their technology; people such as huge 
foreign corporations who will be let off the hook for the licensing 
revenue they would otherwise owe to Americans under current law.  This, 
Mr. Chairman, is what I consider to be a crime in progress.  That is why 
I am so upset and that's why I have been so vocal on this issue.  If the 
perpetrators are not stopped, American technology will be stolen and used 
against us just as the incentives for future investment in technology 
creation evaporates.

The growth in our biotech industry, in particular, would be severely 
stunted.  This insidious reduction of patent rights is being, as we have 
discussed before, Mr. Chairman, done under the cover of GATT, the General 
Agreement on Tariffs and Trade.  The questionable intent of this 
administration is apparent when one considers that the most egregious 
threat to the patent term -- and there's the change that is being 
proposed by this administration -- is not, and I repeat -- is not -- 
mandated by the Uruguay round agreements.

According to Article 33 of GATT, a patent must have a minimum -- the 
operative phrase "minimum" -- of 20- years protection from the filing 
date.  Therefore, we would be in full compliance with GATT by changing 
the patent term to 17 years from grant or 20 years from filing, whichever 
is longer.  Our historic patent term of 17 years from grant has 
guaranteed U.S. investors and inventors a fixed period of protection 
regardless of delays in the issuing of the patent.

Conversely, starting the patent clock running at filing leaves little 
incentive for the Patent Office to be diligent in issuing the patents and 
being diligent in the reforms that you have outlined today, seeing that 
they are implemented.  Any delays will detract from the patent life and, 
therefore, its economic value and, therefore, lessen the incentive.  For 
example, a biotechnology patent on average takes 10 years to issue.  
Under the present system the inventor still receives 17 years worth of 
protection; however, under the proposed change, with the term measured 
from filing date, the inventor would only get 10 years worth of 

The U.S. patent commissioner, yourself Mr. Lehman, suggests that 20 
years from filing that date term will actually give inventors a longer 
period of protection.  That's something you've said over and over again, 
and I'm here today to testify that I believe that is a falsehood and 
every inventor's group in this country recognizes it as a falsehood.  If 
what is being said is true, the administration should have no problem 
whatsoever, and should have had no problem, with the compromise that we 
proposed.  Those of us who were vocal in Congress, we proposed a 20 year 
from filing or 17 years from grant, whichever is longer.  That compromise 
would have guaranteed a minimum of 17 years of patent protection and be 
fully compliant with GATT.  This administration rejected that language 
because I believe the intent of this administration is to cut the time of 
patent protection, not to improve the system.

I believed, Mr. Lehman, that the -- that it is a misleading statement 
also to say that the patent pendency average is 19 months, which is 
something else that you've stated.  The 19 month figure treats totally 
inconsequential matters, like the stripe on the bottom of a toothpaste 
tube, to be on par with world-changing inventions like the ones we are 
seeing in biotech and other such inventions.  This figure also treats 
incremental and revolutionary patents on an equal footing.  The claim 
that a patent term of 20 years from filing would produce longer patent 
terms is, I believe, disingenuous at best.  I think the American people 
deserve to be leveled with.

Under this change that is being proposed, valuable patents whose 
revolutionary products keep America competitive will receive shorter 
terms and less protection.  It will mean billions of dollars in royalties 
that should be going to American inventors will now be in the bank 
accounts of huge Japanese companies and multinational corporations.  It 
has been stated that the U.S. must change to the filing date term because 
of mischievous and avaricious inventors who distort the system with 
submarine patents.  Well, that, reducing patent protection for 99.5 
percent of all inventors who do not practice submarine patents in order 
get at that one-half of one percent is ridiculous, but also we actually 
proposed a change -- those of us in Congress proposed a change that would 
have dealt with the submarine issue but, again -- and that was basically 
if the inventor delays the time of grant then it will be published with 
the -- the patent would be published immediately.  But this was also 
rejected what again demonstrates that the purpose of this administration 
is to reduce the time of patent protection for American inventors, not 
make the system better.

And if anyone has any doubts as to who officials are looking out for, 
there is an agreement that was signed with a Japanese patent office on 
August 16th which basically will require a change in U. S. patent law so 
that all of our patent applications will be published after 18 months.  
Yes, you've got it, this is premature publication mandated by an 
agreement by our own government.  This blanket publication provision will 
open U.S. patents to scrutiny to foreign competitors in most instances 
even before the patent is issued and our technology protected; it will 
invite foreign competition to steal American technology and to use it 
against us when our own corporations have exhausted the revenue in the 
development of that technology.

In Japan, which has both a 20 year from filing term and 18-month 
publication, the competition can use the published patent application to 
practice patent flooding, and that is basically surrounding the original 
invention with patents of their own with unfair cross-licensing.  
Basically, premature publication would also allow the competition to 
challenge the issuance of American patents.  Patent applicants should 
only be published -- it should only be published after -- after -- a 
patent is issued.  The U.S. patent system has served our country well.  
This is no time to delude its protections.

Let me say in summary, American biotech companies are at this moment in 
a very dangerous position.  They need large capital infusions which will 
not and cannot come from government.  So far the private sector has 
financed tens of billions of dollars worth of research and development.  
Tens of billions of dollars more will be needed to protect and perfect 
this technology, but the private sector will not fund this great 
scientific advance if their work can be copied and if royalties are 
diminished by a weakened patent system.  Trying to muffle the cries of 
pain from industry, the administration has offered a small, small 
compromise of relief, and I would say that is a scrap of relief based on 
a horrible proposal.  This scrap of relief will provide a windfall to 
lawyers but will not protect this industry from its foreign competition, 
and it's sad to see that the industry has knuckled under to this 
intimidation.  And my recommendation, in closing, to the biotech industry 
is that they should fight this because it's not good for your industry 
and it's not good for America.  We've got to stay in the technological 
forefront and this change that's being done in a very disingenuous way 
will reduce the patent protection and hurt all Americans and American 
competitiveness in the future. Thank you very much.

COMMISSIONER LEHMAN:  Mr. Rohrabacher, could I ask you just one 


COMMISSIONER LEHMAN:  You know, you referred to the Japanese agreement 
which was basically designed to open up the Japanese patent system so it 
would be more effective for U.S. applicants and obviously you disagree 
with some of the modifications that are proposed in U.S. laws as part of 
that agreement.  What would be your recommendation as to how to get 
effective patent protection in Japan?

CONGRESSMAN ROHRABACHER:  Well, it certainly wouldn't be to try to 
harmonize our patent system with what the Japanese do, which seems to be 
the Japanese have a very -- I know, you know, they are very notorious for 
their ability to negotiate but the last thing we should be doing is 
trying to harmonize our patent system by basically making our system more 
like theirs.  Our system is based on individual creativity; it's based on 
our culture.  The Japanese don't have that same cultural appreciation for 
the individual.  And, in terms of publication, the specific question that 
you're asking, I don't think that should have been a compromise at all.  
We should never have reached that agreement with the Japanese.

COMMISSIONER LEHMAN:  So your answer is that you have no recommendation 
for how you would open up --

CONGRESSMAN ROHRABACHER:  We have a market -- We have a market in the 
United States that the Japanese depend on in order to have any type of a 
thriving economy.  The economic well being of their people is totally 
tied to our market.  Now, if we can't use this incredible leverage that 
we have in order to prevent the Japanese from forcing publication of our 
inventors' inventions so they can steal them, well, then, we -- whoever 
is handling the negotiations on our side is incompetent,because it's not 
just a matter of an issue of patent negotiations, this is a matter of 
relationships between the United States and Japan.  And, in that 
relationship, we have tremendous leverage which should have been brought 
to bear so we wouldn't have had to give up this sacred right which I 
consider the property rights of inventors to be on the same par as the 
property rights of homeowners, of farmers, and the rights of freedom of 
speech and every other right that we hold dear in the United States.

COMMISSIONER LEHMAN:  Thank you very much.

I think our monitor is set up now that I described so we'll -- you're 
bringing it up now? -- get it set up and then Mr. Widder can come 
forward.  If Ken Widder could come forward, please.  And I think what 
we'll do is we'll do you manually and then we'll have the monitor for 
everybody else.


MR. WIDDER:  I'm Ken Widder, Chairman and Chief Executive Officer, 
Molecular Biosystems, a biomedical company here in San Diego.  I 
appreciate the opportunity speaking with you and also I wish to thank you 
for coming to San Diego.  We're honored to have you here.

Aside from being chairman and CEO of MBI, I'm also chairman of the San 
Diego Technology Council, a member of the Governor's Advisory Council on 
Biotechnology here in California, and president of the San Diego 
Biomedical Industry Council, a consortium of CEOs -- local CEOs -- of 65 
of the local biotech companies.  I'm also representing BIO here for the 
purposes of this hearing.

For your information the biotech industry here in California represents 
over 50-percent of the companies total in the country and here in San 
Diego we have about 120 biotech companies spanning pharmaceutical 
development, device development, and agriculture.  San Diego itself is 
really the fourth largest conglomeration, if you will of biotech 
companies in the country.   

From our standpoint in the biotech are, the work of the Patent and 
Trademark Office is absolutely critical to the biotechnology industry.  
Without strong intellectual property laws we, as an industry, would cease 
to exist.  I think it's safe to say that patents represent almost a 
cornerstone of our industry.

Mark Twain called inventors "the creators of the world after God."  That 
may have been stretching it a little bit but the bottom line is that the 
technology laws that govern this country are critical to us as an 
industry to raise money.  Without it, we would not be able to raise one 

A little bit about my company just to give you a sense of where I'm 
coming from.  Our company started in 1980.  We originally were involved 
with the development Antisense and DNA probes.  Both of those patents, 
incidentally, took about 10 years to issue and still are in some form of 
prosecution.  So we have had some excellent experience in the Patent 
Office with patents issuing very early or much sooner, but some key,  
very generic patents that we were involved did take a very long time to 
get through the system.

We are now are involved, though, since about 1986, in developing 
contrast imaging agents for ultrasound, MR, and CT.  Our first product 
has just been approved by the FDA which has been heavily patented, 
without which we would never have been able to raise the money it would 
have taken to get through the FDA process.

Throughout your history we've raise a little over $150 million.  That's 
since 1980, and that's really been based on two factors:    

One, the quality of our technology and, secondly, the strength of our 
patent positions.  And virtually no money would have been raised if the 
latter hadn't been in place because the first question anybody asks is:  
"What patents do you have and what protections do you have?"

Biotechnology companies, in general, are constantly raising money.  
That's an activity as a CEO that you are constantly involved in.  You 
never rest because there's never enough money.  One could look at biotech 
companies virtually as money machines, we just constantly are consuming 
it.  Very few companies are profitable.  Only a handful are really making 
significant revenues.  In fact, I think someone was asked what's the 
definition of a -- "What is a biotech company?" and the answer was that a 
biotech company is very similar to a pharmaceutical company but 
unincumbered by revenues.  And I think that's a fair analogy of what the 
situation is even today.  It's a very competitive field.  It burns a lot 
of money to get product through the pipeline, roughly $100 million to 
$150 million depending on the type of product you have, and it's a long 
time coming through.

Not only do we have to wait for patents to issue in  the length of time 
as the Congressman described, but, additionally, the extra burden of FDA 
approval can take anywhere from five to eight years so I think there will 
be a number of comments about GATT and the 20-year proposal.  I won't get 
into that but I just ask you to consider the fact that it's not just the 
patent review time that's of question, it's also the development time for 
a product and the FDA approval time that a company could easily burn up a 
significant amount at 20 years just getting the product out and maybe 
have two or three years of patent exclusivity at the back end.

COMMISSIONER LEHMAN:  Can I ask a question?


COMMISSIONER LEHMAN:  Do you favor a revision of the patent term 
extension legislation that was enacted I think in 1984?

MR. WIDDER:  I think that's very helpful.  I know it's a very 
complicated formula in terms of -- getting an additional patent extension 
is based on a variety of factors, and I'm sure there will be some 
discussion of that later and I think that's very --

COMMISSIONER LEHMAN:  If we just did away with the formula and said 
however many years of FDA delay there is you get --

MR. WIDDER:  You would add on?

COMMISSIONER LEHMAN:   -- an extension of patent term?

MR. WIDDER:  Well, we're just in the process of extending one patent and 
I think we have -- you know, we have gone back and utilized that formula 
to try to figure out which patent would be the best to extend, so I'm not 
familiar with if the laws have changed on that.

COMMISSIONER LEHMAN:  Well, the laws haven't changed but what I'm saying 
is if that's a problem, if what you're saying is that FDA approval is a 
serious problem so that in any event you end up losing patent term, then, 
you know, shouldn't we change that law?

MR. WIDDER:  I guess that's one reasonable suggestion, yes, because -- I 
think some of the other CEOs will discuss this, but it is a long, long 
process and we are constantly looking at -- I mean, you're penalized 
basically for having a patent issue early.  If you start from the 
creative process, go through the product development cycle into clinical 
trials and then --
COMMISSIONER LEHMAN:  I understand that, and the difficulty is that, 
generally speaking, in most technologies you want the patent to issue 
early because most technologies, if you're in the electronic business, 
for example, which is a very rapidly moving business you -- as a matter 
of public policy I think you want to encourage the innovator to get in 
there, make the innovation quickly and get into the marketplace quickly, 
compete, because you've got global competition, and you're in an unusual 
circumstance so --

MR. WIDDER:  That's correct.  We are in a different --

COMMISSIONER LEHMAN:  So probably the best way to deal with that, since 
you have the problems of regulatory delay, is to -- and which Congress 
has already recognized -- is to go back and look at the solution that 
they have devised for that and make that work better.

MR. WIDDER:  I would endorse that.  I think extending -- instead of some 
formula over a percentage of the time that the product is being put 
through the FDA, I think giving full credit for that would certainly be a 
benefit.  I think -- How am I doing on time here?  Yellow.  One minute, 

I'd just like to say two more things:  One, I think the retention of 
patent examiners is a very important item, from our perspective, having 
people there that have some perspective on the other types of patents 
that are going through that have a decreasing turnover I think is 
critical from our point of view.  And one other item:  We found it very 
useful and I would certainly endorse to continue the policy of the 
interview process.  I think it's been very helpful when very tricky 
patents or ones that are tough to describe in writing, to be able to go 
in and interview has been a very positive experience for us and would 
hope that that process would continue within certain bounds so the 
examiners aren't overburdened, but it really has been a very good type of 
activity for us.  And we're committed as an industry to work with the 
Patent Office and try to make recommendations that hopefully with 
streamline the process.  With that, I think I'll stop and turn it over to 
Bill Rastetter.

COMMISSIONER LEHMAN:  Thank you very much.  I'd just like to say that 
retention of patent examiners is very important.  It's extremely 
important that we have the resources that we need to do our job in the 
Patent Office that has been provided for us in legislation and that we 
are fully fee-funded agency.  However, Congressman Rohrabacher and other 
critics of the system have voted consistently to take fee money from the 
Patent and Trademark Office and divert it and use it as tax revenues.  
This year some $30 million is being diverted, so you might want to bring 
that to their attention and others.

MR. WIDDER:  I appreciate that, yeah.  I think we'd clearly like to keep 
the money in the Patent Office where it can do the most good.


Mr. Rastetter?


MR. RASTETTER:  Mr. Lehman and colleagues, thank you for coming to San 
Diego this morning.  My name is Bill Rastetter.  I'm the president and 
chief executive officer of IDEC Pharmaceuticals.  I also serve on the 
board of directors of two trade groups in town:  BIC, the Biomedical 
Industrial Council, and BIOCOM, the Biocommerce Association.  I also 
serve on the Governor's Council on Biotechnology.  I Should also mention 
that IDEC is a member of BIO and the opinions I'll express today are mine 
and those of IDEC Pharmaceuticals.

We are one of about 150 biotech or biomed companies here in San Diego 
which collectively employ about 14,000 individuals.  The biomedical 
community here in San Diego is certainly ia very active and cohesive one 
and we work very closely with the city.  The city, in fact, has embraced 
us as part of its economic future and I think, in no small part, the 
issues which we will discuss today will certainly impact our companies' 
ability to timely secure and build patent portfolios which will 
ultimately drive the growth of our companies.  And that growth, I think 
it's important to point out, will entail a transition from our status as 
R&D organizations which, as Doctor Widder pointed out, consume copious 
amounts of capital to companies that are driven by cash flow from product 
sales.  And certainly that transition will ultimately truly drive 
economic growth in this region, so patents are a critical part of our 

I'd like to place the comments I'll make this morning in the larger 
context of strangely enough health care reform.  It has been said 
recently by many that health care reform is dead, and I'd like to point 
out that nothing could be further from the truth.  In fact, health care 
reform is occurring and is occurring rapidly through private sector 
market forces without legislation and without direct government 
intervention.  And certainly those forces are changing the way that every 
company or every practitioner in health care does business.  

And to continue to place my comments in context, the largest 
pharmaceutical companies seem to be gaining ground on the mid-sized 
companies.  I would not include the biotech companies in the mid-size -- 
we're certainly much smaller than that -- companies like Merck and 
SmithKline who have moved aggressively to acquire pharmacy benefit 
managers as their paradigm for doing business changes.  The analogy might 
be that the hardware makers (read the drug developers) will now also be 
in the business of software (read pharmacy benefits management and 
outcomes research.)  In doing so, they will optimize the way their drugs 
are used and they will capture further economic benefit.

But I think they're doing this because the pipelines of the large 
pharmaceutical companies are not as full as they might be and revenue 
growth is eroding with blockbuster drugs coming off patent, and with 
generic substitution, and the broad pricing pressures that we're seeing 
from the private-sector- driven health care reform.  Well, to finish that 
context, all of this is actually good news for the biotech company if we 
can continue to innovate, and provided that we can timely secure and 
build intellectual property positions.    

Now, the revenue erosion and pressure on the bottom line for large 
pharma is leading to internal R&D budget cutbacks at large pharma, if you 
will.  So they will be looking increasingly to small companies, such as 
IDEC or Molecular BioSystems for late-stage, development products where 
the risks, both technical or clinical risks and the intellectual property 
risk, has been largely removed from the product development process.  So, 
small may be beautiful, speaking of companies, provided we can continue 
to discover and efficiently develop protectable, proprietary products.  

The small company in the era of health care reform may well emerge as 
the predominant engine of innovation in partnership with large companies.  
The large companies will consolidate their power as the worldwide 
marketing partners. Clearly, patent protection is paramount to the health 
of such partnerships.

We have all heard that the era of health care reform has damaged the 
ability to raise capital from the public markets for biotech.  It is, 
indeed, impossible today for small companies to rely routinely on the 
public equity markets as a source of capital.  We look increasingly then 
to a large pharmaceutical company to fund research and development and to 
sustain us as viable R&D organizations until our products are launched 
and royalties and/or profit sharing arrangements begin to pay the bills.  
And that may take 10 to 12 years after a company hires its first 
scientist to reach that position of cash flow sufficiency.

Let me make two points from the perspective of a small company:

First, the trend at the Patent Office towards requiring human clinical 
data to demonstrate utility hurts the small company.  Generally, we need 
to find corporate partners in order to fund clinical development because 
clinical development is extraordinarily expensive.  But without clear 
patent position it can be hard to get a partner.  Catch 22.

The second point, the "first to invent" system in the U.S. certainly 
helps the small company.  I am certainly glad we have not changed this 
element of our patent system.  We, as small companies, just cannot file 
patent applications as efficiently or as early as the large companies.  
We just don't have the resources.  We need to spend as much as we can on 
discovery and on development of product leads.  A "first-to-file" system 
would divert dollars away from R&D, curtail innovation, and weaken the 
small company.  You know as well as I do that a "first-to-file" system, 
rather than the "first-to-invent" would also burden the Patent Office 
with premature applications on incompletely conceived inventions.

We had the pleasure of hosting a group of patent examiners at IDEC to 
talk about our technology.  We talked about our products which are 
antibodies to treat cancer and autoimmune disease.  We talked about our 
innovative, we hope, proprietary system for making antibodies in Macque 
monkeys for treatment of chronic diseases.  We talked about or 
host/vectors' system.  It was a very productive interaction with the 

We also would urge that the system of interviews with the Patent Office 
be continued.  We think it's mutually beneficial, and especially for very 
complex systems tends to expedite the process.

I see that my time has expired.

COMMISSIONER LEHMAN:  I would like to ask a lot of questions.  I'll try 
to be brief.  You know, we're setting up in Sunnyvale a -- it's really 
inexpensive to do this when you think of the benefits.  We're setting up 
a video conferencing facility so that people can go there, you know, up 
in Silicon Valley, and interview.  You know, conduct face-to-face 
interviews with the examiners.  Would something like that be helpful down 
here in San Diego?

MR. RASTETTER:  Yes.  Absolutely.  We at the company have used that 
quite extensively.  We had two locations:  One in the Bay area and one 
down here and were connected by 24-hour -- just walk into a conference 
room and your colleagues 500 miles away were there.  Very, very useful 

COMMISSIONER LEHMAN:  Also, we have included in the legislation that is 
now pending in Congress, it's part of the 20-year fast-tract legislation, 
but it's a provision for provisional applications so that -- which you 
can file for $75; it's very inexpensive, and then have a full year for 
the full application.  I assume that will help you when you say that, you 
know, it's hard for you to get into the system.  At least that will put 
your marker down and help you out a lot.

MR. RASTETTER:  Certainly.  The first I've heard of this but it sounds 

COMMISSIONER LEHMAN:  Well, we have done that.  I just also would like 
to say that changing our system from a "first to invent" to a "first to 
file" system, the Bush administration had proposed to do exactly that, 
along with all of the other horribles that Congressman Rohrabacher 
outlined.  So I would just point out this is not exactly a Clinton 
administration plot.  In fact, we pulled back from those efforts because 
we're not going to -- we're trying to develop a world patent system that 
will favor U.S. inventors.  That is our primary purpose, and that means 
your company, too.  We  really appreciate your input here and thank you 
very much.

MR. RASTETTER:  Thank you for coming today.   

COMMISSIONER LEHMAN:  Next I'd like to ask Jerry Caulder to come forward 
from Mycogen Corporation.

Oh, he is here.  I'm sorry -- Mr. Filner, we have 57 witnesses so we 
wanted to get started right away but we'd be happy to have you welcome us 
right now to San Diego.


CONGRESSMAN FILNER:  Thank you very much.  I apologize for being late.  
My name is Bob Filner and I represent the 50th Congressional District in 
the United States Congress, and we certainly do welcome you here in San 
Diego today.  It's important.  It's timely.  Certainly the issues around 
the intellectual property protection apported to biotechnology inventions 
is one that's critical to San Diego.  Not only San Diego, to California 
and the nation and we are very concerned, obviously about the local 
development of our biotech industry.  It's a growing source of investment 
and employment, and with its solid base of academic institutions, 
non-profit research institutions, and innovative companies San Diego is 
surely on the cutting edge of this whole movement.

You all know the policy issues involved.  I would like to take a few 
minutes, if it's appropriate, to talk about some of the intellectual 
property issues, the way I see it as a member of Congress.  I'll try to 
do it very, very briefly.  It's certainly well known but I want to make 
sure that everybody knows that the Congress also knows it; that valid and 
enforceable patent rights are a prerequisite for success in this 

I think it's essential that the Patent and Trademark Office be provided 
the funding and resources it needs to properly examine patent 
applications and I support full appropriation of fees collected by the 
PTO and oppose measures that would diminish the PTOs ability to handle 
the volume of application that it presently receives.  In particular, I 
opposed the version of withholding appropriations of fees collected from 
patent applicants for any purpose other than PTO operations.  

I think you'll hear from the industry its serious objections to the 
practice of PTO examiners and others regarding standards set for 
determination of the utility of an invention.  These objections undermine 
the competitiveness of the biotech industry and it will make it much more 
difficult to become profitable.  The patent protection afforded in the 
United States is in many cases less than that afforded to the same 
inventions abroad and we cannot put ourselves at a competitive 
disadvantage in this highly competitive international marketplace.

The issue is not about the patent laws.  What the industry needs is a 
non-discriminatory application of those laws to biotech inventions.  And 
I urge the PTO to review those issues carefully and forcefully instruct 
its staff to apply a standard for biotech that is consistent with the 
standard applied to other industries.

I think you're well aware of the Biotechnology Protection Act that the 
industry has championed, HR-760 in the House.  Those bills did not go 
through the present session.  I hope that you will continue your support 
of those.  They are absolutely necessary for competitiveness.

With regard to international trade.  I have concerns, like many in this 
room, with the 20-year patent term requirement in the GATT-implementing 
legislation.  I urge the PTO to look very carefully at this issue to 
ensure that the 20-year term does not apply to any biotechnology patent 
applications pending at the PTO and that biotech firms do not lose patent 
term with the shift of the 20-year term.  And I think implementation of 
the PTO of the recommendations on the utility and other issues that you 
will hear about will go a long way to ensure that the patent term is not 
in fact lost.

Those are the issues that I have -- at least want to highlight for you.  
Obviously, the PTO can play a major role in providing the protection in 
which this industry is entitled to under current patent laws.  We really 
welcome your visit here to San Diego.  We thank you for your openness to 
the initiatives that will be talked about today.  Thank you so much for 
getting me on.

COMMISSIONER LEHMAN:  Thank you very much, Congressman Filner, and I 
really appreciate your looking into these issues and we will work closely 
with you to make certain that the interests of the biotechnology industry 
are taken care of in the Patent and Trademark Office in all the policy 
decision.  And anyone that represents a constituency where there are 
14,000 jobs in biotech certainly has a strong incentive to work with us 
and I'm really looking forward to having a friend in Congress next year.

CONGRESSMAN FILNER:  Thank you so much.


Next, Jerry Caulder.

MR. CAULDER:  I assume since I've been introduced I get twice as much 
time; right?  Wrong.

Good morning.  I'm Jerry Caulder, Chairman and President and CEO, of 
Mycogen Corporation.  We certainly appreciate this opportunity, as Bill 
and Ken, to have you come to California and let us talk to you about what 
we're trying to do in this industry to turn our products into jobs.

By way of background, I grew up on a cotton farm in Missouri and I've 
been involved in agriculture all my life, and we're the only agriculture 
biotechnology firm here in California.  I also served as chairman of bio 
trade organization, Industrial Biotechnology, for three years, so I 
worked early on in getting the Patent Office and the trade association 
working together about eight or nine years ago in the problems that we 
were having.  So this is certainly not new to me and I certainly 
appreciate the opportunity to see that we're continuing to do this.  I 
know I worked with Charles Van Horn quite a bit when Don Peterson was 

I've been CEO of Mycogen since 1984.  That's almost as long as some of 
our patents pending, so I do know that we have some and this 19-month 
thing is kind of interesting to me.  We're a diversified agriculture 
company.  We're basically in the business of developing alternatives to 
chemical pesticides using recombinant DNA and using biotechnology.

We're building our business around these genetically engineer microbes 
so that we can have substitutes for chemical pesticides, and we're 
commercializing these things through two basic delivery systems that we 
consider breakthroughs:  One is Mycogen's proprietary cell cap system 
which is a delivery system that allows us to efficiently produce these 
insecticidal proteins that we then put in microbes and then we put these 
on plants to keep the plants from being harmed by particular insects that 
are present there.

We are the first company to receive EPA registration for products that 
are genetically engineered as alternatives to chemical pesticides.  And I 
would say that the question that you asked Doctor Widder about the length 
-- it is not just the FDA, we also have delays in EPA, and USDA.  So, I 
would suggest to you and submit to you that anything that -- and we don't 
want to delay the patent situation, we want to speed up the regulatory 
situation, so don't confuse those two.  We would certainly like to get 
our patents as quickly as possible because it does allow us to establish 
our property rights.  And I would suggest that the patent starts when you 
get regulations, if you're delayed in any of the regulatory arenas.  
Because this does put us behind the eight ball when you get a patent and 
then you spend 10 more years getting it through the EPA, so you've used 
up most of your patent life.

I think the spirit is you have 17 years of monopoly for marketing your 
product so I think the regulatory delay was totally unanticipated.

COMMISSIONER LEHMAN:  I should point out that's one of the weakness of 
the existing patent term extension legislation.  It's called "the drug 
price competition," a patent term extension legislation and it doesn't 
deal with EPA delay, and this might be something that we would want to 
look into to see that we deal with that problem as well.

MR. CAULDER:  Well, agriculture, as you know, is the Rodney Dangerfield 
of biotech.  Drugs get all of the play and we are not unincumbered by 
revenues.  We are making money.  We are one of the profitable companies 
so we feel that agriculture should be specifically addressed because our 
needs are different.

COMMISSIONER LEHMAN:  Having grown up in Wisconsin, I'm very sensitive 
to agriculture.

MR. CAULDER:  Good.  Good.

The second thing we're doing is transforming plants, particularly cotton 
and corn.  We're putting genes in these plants that protect them against 
insects and we're using these as alternatives.  Two weeks ago we filed 
for an experimental use permit that would allow us to test our first 
genetically engineered corn plant that's resistent to European corn bore, 
and we hope to receive that registration pretty sure so we can get into 
field tests.  We do not have our patents covering that yet.

We spent over 12 years and tens of millions of dollars developing our 
technology and we recognize that the Patent Office is faced with an 
unprecedented number of broad, fundamental biotechnology patent 
applications representing inventions that we think have truly opened up 
many new fields in agriculture, pharmaceuticals, medical devices, and 
other industries.  These inventions and their related patent applications 
represent pioneering, next generation technology.  They are not 
incremental improvements to old technology but rather whole new fields.

Many of these patent applications have been under examination for five, 
ten, even more years.  We ask they question, why is it taking so long?  I 
think there are fundamentally two reasons:  One is a reluctance now to 
grant broad applications in this area.  This is influenced primarily by 
the fact that the fundamental nature of many of the biotechnology 
inventions are being evaluated in hindsight.  You mentioned you have a 
lot of new patent examiners with advanced degrees.  Many of them were 
still in high school when we applied for some of these patents and we are 
very biased by this area in which we live.  So the things that we are 
doing today may look obvious but 10, 12 years ago they were not quite as 
obvious.  Some of the things it took a post-doc to do 10 years ago high 
school kids can do today.

Second, the Patent Office is not consistent in applying the fundamental 
standard of patentability.  Patent law requires that to have a patentable 
invention you need to satisfy two things:

One, the claimed discovery must be unobvious to a person of ordinary 
skills, and I emphasize "ordinary skills," in the art.  In other words, 
the discovery can't be easy and it can't be obvious to figure it out.  

The second is the description of the invention in the patent must be 
sufficiently detailed to teach a person of ordinary skills the claims of 
the invention.  This is where we think a problem comes in.  On the front 
end of the invention, of determining whether the invention was easy or 
obvious to figure out by a person of ordinary skills, that mythical 
person of ordinary skills is presumed to be damn near a genius.  On the 
back end, however, once we have convinced you after four or five years 
that there is truly an invention, this person is viewed as nearly 
incompetent.  So, in order to get a biotechnology breakthrough recognized 
as an invention, you have to have a real stroke of genius, argue the 
point for five or ten years, after you have convinced the examiner that 
you have an invention the scope of your claimed invention is then 
narrowed because some mythical person of ordinary skill is not viewed as 
being competent to apply it, this breakthrough, across the board.

The benefits of the true pioneering nature of these biotechnology 
inventions are being lost by the companies, and these are the small 
companies, not the large ones, I think, and I'm biased toward that, who 
are responsible for these inventions.  The patent process is biased 
against us.  Consistency by the patent office in applying this standard 
of ordinary skill I think is the single most import element to patenting 
biotechnology innovations and inventions.  Consistency on this issue 
would help the ability of our industry to attract the financial and 
people resources that you've heard both Ken and Bill talk about earlier.

Thank you very much.

COMMISSIONER LEHMAN:  I take it that the problem here, from your point 
of view, is that you get some -- when you say "consistency" is really the 
issue, you get some examiners who have a unrealistic view of what is 
ordinary skill in the art, and so it's a little bit Russian roulette, is 
that the problem?

MR. CAULDER:  It comes from this hindsight thing.  If you have someone 
who has recently gotten a Ph.D or a postdoc in biotech, or a master's 
degree, they view biotech -- and they're 22, 23 years old, maybe 25, they 
view it very differently than the pioneering people who made the 
invention in 1980.


MR. CAULDER:  So to get them to look at the context of the invention as 
it existed in 1980, rather than 1994, is a big problem.

COMMISSIONER LEHMAN:  I understand that.  And you find that with the 
younger examiners who come right out of --  

MR. CAULDER:  Well, I don't want to categorize it.  My personal opinion 
is all of us have that problem, that when you are totally emersed in 
something you tend to judge it the way it is today rather than the way it 
was submitted to you 12 years ago.    

COMMISSIONER LEHMAN:  Okay.  Thank you very much.

MR. CAULDER:  Thank you.

COMMISSIONER LEHMAN:  Our next witness is Dave Gollaher from California 
Health Care Institute.    


MR. GOLLAHER:  Thank you, Commissioner Lehman, for presenting us with 
this opportunity to give you the perspective of our industry.  What I'd 
like to do this morning is open up the lens and talk about the 
perspective of California as a whole when it comes to biotechnology and 
what we see as the broader collection of health care technology 
industries that are becoming so important to the state's economy.  

I'm David Gollaher.  I'm the director of the California Health Care 
Institute which is an organization of some 80 research universities, 
private research institutes, like Scripps, and La Jolla Cancer, 
biotechnology companies like many of the ones that will testify today, as 
well as pharmaceutical and medical device firms who have a significant 
stake in the State of California. 

The State of California is interesting economically in the sense that if 
California were a separate nation it would be the sixth largest economy 
in the world.  It would be the seventh largest trade export economy in 
the world, so its magnitude makes it virtually a nation state, and yet 
the interest of the emerging biotechnology and health care technology 
companies in California have, it seems to many of us, received less 
attention than their economic scale merits.

What I would like to do is briefly review a couple of statistics from a 
report that we're in the process of preparing to be released next month 
on the current state of the industry with respect to jobs, employment 
growth and it's overall scope and scale in the California economy.

To begin with, in 1993 alone California companies in the broader area of 
biotechnology invested more than $2 billion seeking solutions to diseases 
like AIDS, cancer, heart disease, genetic disorders like cystic fibrosis, 
and multiple sclerosis, Alzheimer's, et cetera.   

By and large, biotech -- let me just skip ahead because I realize in 
summarizing this report that I'm not going to be able to make my time.  
I'd like to start with our estimate of current jobs in California this 
year.  We have estimated in our report that approximately 111,000 
Californians are directly employed by organizations developing 
diagnostics and therapeutics using recombinant DNA technology as well as 
other technologies that are largely labeled biotech.

In addition, there are 33,000 Californians who work in health care 
research in the life sciences at major universities and federal 
facilities within the state.  In fact, the University of California alone 
accounts for nearly 22,000 jobs in biomedical research and an additional 
8,500 people are employed at the California Institute of Technology, 
Stanford, and the University of Southern California.

If you look at direct employment in the health care technology industry 
in the state, you see that already in 1994 health care technology jobs -- 
111,000 jobs -- place the industry ahead of aerospace, ahead of 
computers, and not far behind electronic components.  In other words, 
this industry which is growing quickly will soon overtake aircraft with 
its 150,000 jobs as a major backbone of the California economy.

What makes the industry all the more attractive is its annual average 
salaries.  Currently, pharmaceutical manufacturing and biotechnology 
salaries in the State of California average over $43,000 a year which 
puts them far in advance of average manufacturing salaries at $33,500 a 
year in the State of California.  Because it's based on information and 
knowledge, biotechnology and health care technology is exactly the kind 
of industry that the administration has pointed to as an industry of the 
future; high tech, high growth, information-based jobs.

Manufacturing employment for pharmaceuticals and medical devices is up 
45-percent since 1984, up 45-percent, in other words, during the past 
decade with direct employment in those sectors at 70,000 plus jobs.  In 
fact, by itself the manufacturing segment of the health care technology 
industry will likely employ more than 100,000 Californians by the turn of 
the century.

If we look not only at the direct jobs, though, but look in the spinoff 
jobs, the spinoff technology that sort of ripples around the center in 
areas like construction, we can see that the health care technology 
industry accounted for $2.4 billion in new construction in the period 
from 1987 through 1992, and over the next four years that amount is 
expected to increase to $3.7 billion.  Again, this is in marked contrast 
to California's overall construction picture which has reflected the 
downturn in the aerospace and defense-based industries that sustained 
California after World War II.

In terms of revenue growth, revenues for the 142 largest California 
health care technology companies increased by nearly $2 billion to $13 
billion for 1993 despite a general decline for many high technology 
industries.  Much of the gain can be attributed to new products in the 
biopharmaceutical sector.  In fact, 47 biopharmaceutical companies 
reported revenues of $3.57 billion in 1993.  This is up almost $800 
million, even though we've read many reports that the biotech sector is 
having trouble attracting new capital and has been having trouble meeting 
its cash flow needs.  Nonetheless, even in the overall context of a down 
economy, it has managed not only to hold its own but to grow in 
California during the past year.

Finally, health care technology companies spend more of their revenues 
on research and development than virtually any other industry.  So the 
industry is a very good investment with respect to its spinoff revenue.  
In fact, biotechnology spends three times more than any other high tech 
industry and five times as much as the U. S. average on R&D as a 
percentage of its revenues.

How am I doing on time?  I have two minutes.

I guess I would like to close in saying that we had a board meeting a 
couple of days ago, a roundup, a biotech meeting that happens once a year 
in Laguna Niguel, and it was the strong consensus of our board of 
directors and most of the chief executive officers I talked to there to 
support the GATT treaty in its current form and to -- in fact, we wrote a 
letter to all members of the California delegation urging them to support 
it in the lame duck session which is coming up.  Our attitude was that 
the treaty is far from perfect but that we should not let the perfect 
become the enemy of the good, and that the potential for 
biopharmaceutical companies to realize gains with the lowering of tariff 
barriers represented by GATT far outweighed some of the intellectual 
property and patent term concerns that many companies had.  As Doctor 
Widder said, most biotech companies are not embarrassed by revenues but 
they all hope to be soon.

Thank you.

COMMISSIONER LEHMAN:  Thank you very much.  That was really helpful 
testimony and I'd really like to have a copy of those statistics that you 
gave us.

MR. GOLLAHER:  We'll provide a copy of the report.  It will be published 
within the next 30 days.

COMMISSIONER LEHMAN:  Great.  Because that really -- you know, in going 
around the country, Secretary of Commerce Ron Brown and myself and others 
have been making exactly those points that you've been making; that this 
is where the jobs are; this is where the growth in the American economy 
is and we really have to fine tune that economy to support everything 
that you're -- that industries like the ones you've described are doing.  
That's why we're here in San Diego, to listen and see what we can do to 
adjust public policy to give you all the support that you need.  So 
thanks very much.

MR. GOLLAHER:  Just a follow-up comment.  We found in talking with 
members of the congressional delegation that over time there's been a 
kind of automatic response on the part of every member of the delegation 
to classical California industries -- defense, movies -- so that when 
issues about those industries come up they're automatically interested.  
That hasn't been true up to now with biotechnology but it should be, and 
we're working hard to make that the case.

COMMISSIONER LEHMAN:  Thank you very much.

Next I like to call on Bernie Rhinerson of the Biomedical Industry 
Council of San Diego.


MR. RHINERSON:  Thank you very much.  I'm also going to give you a 
little bit of background about the industry here in San Diego.  Much of 
what I was going to say has already been mentioned by previous speakers, 
so I can be brief.

I want to thank you for coming to San Diego on behalf of the Biomedical 
Industry Council.  We're a local trade organization that's associated 
with BIO at the national level.  We work closely with Mr. Gollaher and 
the California Health Care Institute, and other trade associations.  We 
represent about 60 local San Diego biotechnology and medical device 
companies.  We range in size from very small companies urgently in need 
of patent protection with employees of less than 20, somewhere 10 to 20 
employees, very small start-up firms, to companies that have 
manufacturing operations and sales with 500 to 1,000 employees.

Biotechnology is very important to this local area, to San Diego.  
You've heard that mentioned.  We have over 100 companies here and we 
estimate, as you heard earlier, about 14,000 employees, and we expect 
that that could grow to 30,000 to 40,000 employees here locally by the 
turn of the century.  

Nationally, according to the Ernst and Young report, Biotech '94, San 
Diego ranks fourth in the nation as a concentration of publicly held 
biotechnology companies.  In 1993 alone approximately $223 million was 
spent in our local economy on research and development, and that was just 
by the publicly held companies alone.  To that number you have to add 
tens of millions of dollars that were spent by companies that have not 
yet gone public that are working with venture capital, and moneys spent 
by our public and private research institutions.

San Diego is a hotbed for biotechnology research, specifically because 
we are graced with excellent research and university institutions in this 
area:  The University of California at San Diego; UCSD; the Salk 
Institute; the Scripps Research Foundation; La Jolla Cancer Research, 
just to name a few.  These institutions are the principal sources of the 
ideas that come out into commercial biotechnology ventures and become 
start-up companies here in San Diego and elsewhere in the nation.

Protecting those innovations as they move from those initial stages into 
the commercial ventures is very critical, and that's of vital interest to 
us here in San Diego.  We're working very hard here at the local level to 
continue to help these companies grow and to take these ideas into 
research and into manufacturing.  You've heard one of the concerns here 
about the waits that these companies experience with FDA approvals and 
that has been a concern that they're not penalized for that wait for 
patent protection.  The Patent Term Registration Act is a partial remedy 
to that problem.

We're also working hard with local companies to help them to be in 
manufacturing here locally so that they don't have to move that 
manufacturing process offshore and into other companies; they have to 
compete in a global marketplace and it's very important that patent 
protections be applied to manufacturing processes also.

Here locally, over the last three years, many companies have began to 
move into that manufacturing process.  Several companies have built major 
manufacturing facilities here in San Diego:  IDEC who you heard from 
earlier, Telios, Tenomi Research have all built facilities that represent 
millions of dollars of investment in research and manufacturing.

Basically I'd like to just end with those remarks and thank you for 
being here, and we appreciate your interest.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Rhinerson.

Next I'd like to call on Bill Otterson from the National Cancer Patients 


MR. OTTERSON:  Good morning and thank you very much.  I am Bill Otterson 
and I'm a spokesperson for the National Association of Cancer Patients.  
We were asked by BIO to speak to you today from the standpoint of cancer 
patients, not from the companies but from the ultimate beneficiary of 
patents.  I'm certainly not an expert in the arcane rules of the Patent 
Office but you might be surprised to learn that patients support patents.  
Perhaps we have a broader view of patents as benefitting us.  Without 
patent protection, we cannot expect biotech companies and medical 
research institutions to put in the enormous amounts of money that they 
must do after the research is done at a SCSD or UCSF or whatever, so we 
do understand the need for patents.

I take alpha interferon and, as you all know, the alpha interferon -- I 
take it three times a week.  I am a cancer patient myself.  I've been 
taking it for three years.  This is an outgrowth of the recombinant DNA 
patent initially issued I believe to UCSF and to Stanford which then 
became the basis for Genetech's work in recombinant interferon that was 
then passed on to Hoffman-La Roche.  My bottle was produced in 
Switzerland at Hoffman-La Roche.

What I would like to say is that these companies are permitted extended 
timed to enjoy the benefits of their research, an extension for 
regulatory delays through the FDA, which I understand you are looking at, 
and perhaps extending to 20 years the time that the companies will have 
protection.  You might say but that's going to cost you more as a cancer 
patient.  I think we all understand that the free market -- you may give 
20-years protection but just at this time other people are working very 
hard to develop alternative interferons and the free market will surely 
chase Hoffman-La Roche to produce better and faster interferons.  Thank 
you very much.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Otterson.  You're sort of 
speaking to the converted on this point about the importance of patent 
protection, but I think one of the things we will consider very seriously 
as a result of this hearing, assuming some of our other legislative 
reforms passes, is a revisitation of the patent term extension 
legislation.  But I can tell you right now that there are going to be 
people on the other side that are going to say, no, you know, we need 
more generic drugs, and they're going to be representing themselves as 
being from consumers, just like you.  So I think people just like you are 
a very important linchpin of this, and there undoubtedly will be a big 
fight over that.  But already I think we're starting to hear that the 
existing drug price competition and patent term registration legislation 
is not adequate to deal with the problem so we'll be wanting to work with 
you and others as we move on studying that issue.  Thanks.

MR. OTTERSON:  I am available to testify whereas and if you would like 
me.  Thank you.  


Next I like to ask Eugene P. Schonfeld from the National Kidney Cancer 
Association to come forward.    


MR. SCHONFELD:  By way of introduction, I am a cancer patient.  I've 
also founded five high tech companies, although not in the biotech or 
health care area.

Patent policy in biotechnology is extremely relevant to the well-being 
of patients with cancer, Alzheimers, AIDS, and other life-threatening 
illnesses.  Patent policy can speed scientific progress or retard it, 
accelerate products to patients or delay cures.  Therefore, as health 
care consumers, patients cannot be indifferent to the work of the Patent 
and Trademark Office. If these folks are your customers and users, I'm 
your shareholders; you work for me.

Sometimes we find people in government get confused about that, as to 
who they are supposed to be working for, so I just want to take a moment 
to remind you.  When patent policy is either too restrictive or too lax, 
corporate managers and outside investors would be less willing to commit 
capital to research and to research intensive ventures.  At the same 
time, if it's -- well, too restrictive or too lax, either way it's no 

What we're looking for is a patent policy that maximizes the value of 
invention and stimulates the process of innovation.

The second thing I would like to recommend to you, from a patient's 
point of view, is that you should make all patents for life -- or patent 
applications for life saving inventions special and treat them as a 
special class of patents.  The public has a unique and special interest 
in such inventions as opposed to inventions which are purely, shall we 
say, commercial.  There is a significant precedent for doing this.  
During the Carter administration, at the time of the energy crisis, 
certain patents for energy conservation inventions were treated as 
special patent applications, and I think the public deserves no less 
today when it comes to life saving innovations.  We must remember that 
moving these things to the public faster will help reduce our health care 
costs.  President Clinton tapped into the latent discontent of many 
Americans when he proposed health care reform and he's expressed his 
concern about health care costs.  I believe the Patent and Trademark 
Office can help address this issue by moving life saving inventions 
through the system faster.
The second thing I'd like to comment on is the whole question of 
practical utility and clinical trial data.  It's very nice for a patent 
examiner to have before him extensive clinical trial data.  
Unfortunately, he usually doesn't have it.  In fact, there is the whole 
question of whether clinical trial data should be the basis for approving 
a biotechnology patent.

In recent times, the FDA itself has moved away from using clinical trial 
information as the gold standard for FDA approval of drugs.  In fact, the 
FDA in the case of AIDS has moved to surrogate markers, surrogate end 
points and other ways of looking at application for marketing drugs.

I believe the patent office itself needs to also think along similar 
lines as to what end points and markers might be an adequate substitute 
for clinical trial information.  The reason it should do this is that 
clinical trials, as we know them today, are, frankly, becoming obsolete.  
The National Kidney Cancer Association started a research project three 
years ago to try to develop technology which would allow physicians to 
better match specific therapy to a specific patient, rather than simply 
saying the average response rate for a drug is, you know, 20-percent.  
What you really care about is whether you are one of the 20 or one of the 
80, if you're a patient.

What we need to develop is patient specific therapies and techniques and 
technologies which will allow us to move away from the time-worn clinical 
trial paradigm which only deals with average response rates.  In doing 
these things, the Patent Office should accelerate the approval of patent 
applications for life saving inventions.

Let me sum up by saying that we really think of a number of different 
goals for the Patent and Trademark Office.  First, the development of a 
patent policy which maximizes the value of patented inventions, a policy 
which is neither too restrictive nor too lax.

The second is to adopt a policy of making special all patent 
applications which involve life saving inventions and, in so doing, 
accelerate the patent process for these inventions.

Operationally, the Patent Office needs to beef up the corps of 
biotechnology examiners, particularly retain them.  As I understand it, 
there's a significant employee retention problem within PTO in this area.  

Also it needs to develop, as I say, a system of standards moving away 
from clinical trials, making clinical trial data less important in the 
approval process.  It needs to develop surrogates perhaps to do this, and 
perhaps it needs to even reach outside and build an advisory board which 
would advise the Patent and Trademark Office on the use of surrogate end 
points and surrogate markers.  There is I believe expertise in the 
outside world related to this and it may be beneficial if the examiners 
had an external group to go to in developing a comprehensive system of 
surrogate end points and markers.  Thank you.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Schonfeld.  I would like 
to just point out that we do actually at the present time have a system 
whereby biotech applicants can make their cases a special case.  If 
they're a small business, which is still a pretty big sized business, 
it's up to I think $5 million in revenue and 500 employees, just for a 
$65 fee you can expedite your case.  And we're finding that only one and 
a half of one percent of the applicants are doing this, even for big 
companies.  It's only --   

MR. SCHONFELD:  Well, I should tell you something.  As a manager, you 
know, I believe that the specialness of something should not be related 
to the size of the company.

COMMISSIONER LEHMAN:  I said for a big company it's $135.


COMMISSIONER LEHMAN:  So, in other words, everybody, every patent 
applicant can make their case special.  It's just we have a two-tiered 
fee system.  You know, we have a -- for all the fees.  It's half for a 
small company.  In effect, the big companies help to subsidize the small 
companies, but for $135, even if you're Hoffman-La Roche, you can get 
your application special.

MR. SCHONFELD:  Can you tell us what the time length is for those 
patents to move through the system?   


MR. SCHONFELD:  As I say, we judge by results, not effort.

COMMISSIONER LEHMAN:  As I indicated, you know, the average is 20.7 
months for all biotech patents, so presumably, if you've made yours 
special, it's even less.  But, you know, I didn't want to have an 
argument about it.  I just wanted to point out that we've already done 
that.  But I would point out that you're absolutely on target in that we 
have to have the resources necessary to do this job, and that's why I 
mentioned -- everybody wants to criticize us and so on and so forth but 
there are things that we can do and will do as a result of this hearing.

Internally, we will make changes in our internal policies but there are 
some things that we cannot do without help or without permission from our 
board of directors, and, in effect, our board of directors is Congress.  
And you've already heard it said that $30 million a year are being 
siphoned off of our fee revenues -- $30 million a year that could go to 
providing better biotech patent examiners in this area.

In addition to that, we have had imposed upon us a reduction in the 
number of employees.  We're one of the few growing businesses in America 
probably that's fully supported by revenues.  Every time you file a 
patent applicant a check comes along -- a patent application -- a check 
comes right along with the patent application to sustain doing the 
business and yet we find that we have some arbitrary limitations being 
put on us in the number of examiners that we can hire simply because of 
government bureaucracy.  So I think organizations like yourself need to 
work with us so that we can go to these outsiders that have some impact 
on us and -- to enable us to do our job better.  So hopefully we can work 
with you on not only making these changes, which will be made, we're 
going to make some changes as a result of these hearings.  We're going to 
propose legislation probably as a result of these hearings, but there are 
things that we are going to need help from the outside and what we'll 
need are customers like --    

MR. SCHONFELD:  I've twisted a few arms on Capital Hill.  I'll be happy 
to twist a few for you.

COMMISSIONER LEHMAN:  Great.  Thank you very much.

Next I'd like to call on Martin Simpson from the Office of Technology 
Transfer, University of California.


MR. SIMPSON:  Thank you for coming to listen.  Universities license 
their patents in order to get them commercialized so a strong patent 
system is essential to having technology transfer work properly from a 
university.  In addition, when we're talking about resources, over 80- 
percent of our licenses are to small businesses so resources are a 
problem for our licensees as well.

When you're talking about the first topic of your Notice about practical 
utility of biotechnology inventions, you have Brenner v Manson stating 
that any substantial or practical utility is enough.  And that 
traditional chemical standard we would urge would be something that is 
predictable and it will permit people to make investment decisions on 
pending cases.

University inventions are frequently at an early stage.  When you're 
talking about utility, you can have utility in the research market; you 
can have utility in a diagnostic market; in a vaccine market or in a 
therapeutic market.  But when you're talking about university inventions 
that are early stage, you're talking about things such as assays that may 
be detectors; you're talking about things that may be screening tools; 
you're talking about things that may be probes with  fluorescent markers 
on them.  If they're being used as a tool and actually showing that 
something is happening, that's not simply research.  When you're talking 
about early commercialization, one of those characteristics is no or 
minimal FDA approval; one of them is much less investment for a return 
and you see, from a university point of view, our commercialization is 
through finding licensees, that's why this is important; therefore, it's 
a lower barrier to finding licensees.   

If you have early commercialization, you have an early utility 
supporting work on a later utility, thus the adverse effect on university 
licensing by demanding what one could call the highest utility is you 
decrease the number of licensees we can find because of lack of available 
patent protection and you also mean that our programs will have fewer big 
hits, which help pay for the programs.

One of the things that happens is that if -- Licensing of patents is a 
very empirical process so you get them out there, you license them and 
some of them work and some of them don't when people start trying to 
develop the technology from the early stage, typically at a university.

When you talk about the topic of "Proof of Operability for Human 
Therapeutic Inventions," I come back to the theme you'll see running 
through it about the chemical art as being your guide, but the key is 
predictability.  And if you have in vitro data that is predictive, why 
isn't that sufficient for a minimal standard?  If you have animal data 
that is predictive, why isn't that sufficient?  If you have human data 
short of an FDA efficacy showing, why isn't that predictive?  It is in 
the chemical arts.  And when you're talking about FDA showings of 
efficacy you have to remember those are very highly stylized:  they have 
a certain dosage given certain lengths of time and they can't vary it in 
the middle of the proceedings.  It may be also that they show growing 
hair on bald men in the middle of the process that may be another 
utility.  So, again, you just have these adverse effects if you decrease 
the available patent protection by how the system is operated.

With respect to the next topic of "Nonobviousness and Enablement," I 
have to agree with the chairman/CEO of Mycogen that we're seeing that 
instead of treating these as straight chemical art, you're seeing that 
there's increasingly narrow room between enablement and utility.  And if 
you get it so narrow that you have virtually no protection available then 
that means that you either get a narrow patent through the system or no 
patent through the system and, again, that doesn't call forth the venture 
capital needed to fund a new invention through development.

With respect to pending legislative patent reform, the 20-year term is a 
disproportionate disadvantage in biotechnology.  There is frequently 
lengthy prosecution and, as in the Mycogen case, we are seeing very 
lengthy prosecutions, far beyond the 20 months you're talking about.  We 
see frequently interferences.  We've been in multiple- party 
interferences.  We see also -- frequently on appeal in this area of 
developing law -- and you also run into a disincentive in pioneering 
cases if the patent examiners are, in essence, nervous about issuing 
broad claims.

With respect to prior users rights.  They are really the antithesis of 
the patent system.  You've got somebody who decided to keep something 
secret instead of doing what the Supreme Court termed in Brenner v 
Manson, that it's the incentive to disclose, not the other way around.  
That's, in essence, a royalty free compulsory license.    

With respect to restriction practice.  One of the things that's 
happening there is that by saying you get a 12-way restriction and when 
you try to talk to the examiner about, well, can't you group these 
together and can't you group these together, and they say, no, what 
you're doing for either a university, such as we are, or for -- with our 
over 80-percent licensees who are small businesses, you're telling them 
that you've going to have to spend a lot more money for that patent 
application to get that coverage that you tried to file for.  And if you 
go to a 20-year term, you're also saying you have to spend it 
simultaneously instead of stretching it out if you really want that 

With respect to broadening patent term extension.  We would suggest that 
with respect to these things like lengthy prosecution, interferences, 
appeals, and so forth, so that when somebody runs into a longer process 
than is normal that there is some provision for patent term extension.  
Also, the patent is the right to exclude others.  If you effectively 
don't have the right to exclude then the question becomes: What right do 
you have?  So some thought, we would suggest, would be given to some form 
of patent trial court or something that would be speedy and inexpensive, 
moreso than the current process.  Also, I want to say thank you for 
keeping "first to invent."

With respect to the experimental use defense. Basically the comment is, 
please keep 271(e) narrow.

With respect to plant patent issues.  Recently plant variety protection 
was amended to include the harvest products, such as fruit as well as 
parts of the plant down to cell lines.  We would ask that that be done 
for plant patents asexually reproduced as well.  Also add import and 
export as they are for plant variety protection and for asexually 
reproduced plants.

The University of California is into about every kind of technology you 
can think of so whether it's agriculturally related or it's straight 
biotechnology into pharmaceuticals for humans, we're into all of it, so 
we're interested in a very strong patent system, and we very much 
appreciate your coming to listen.  Thank you.

COMMISSIONER LEHMAN:  Thank you very much.  First, I'd note that the 
University of California has a very effective Washington operation and, 
you know, you might want to work with them a little bit and work with the 
California delegation on  perfecting some of these ideas that require 
statutory approval.  You know, we can do that, the administration can 
submit legislation but obviously you are another venue there, I just 
point out, to work with.

I had a question about -- getting back to this utility issue, really, 
which I could have asked other witnesses too, but assume hypothetically 
that we adopted a presumption that the utility standard had been met with 
some very low threshold.    

One of the problems that I feel that we have is  that we could, in 
effect, almost do away with it, I mean, internally in terms of our 
examining procedures.  But then the problem is we issue the patents; they 
get out to the court of appeals for the Federal Circuit and the court of 
appeals for the Federal Circuit overturns one of our patents that we 
issued because we haven't met the utility standard.  That's where we're 
really getting this from, we're getting it from the courts.  That tends 
to run a little counter to the notion that what you really need is a 
patient that you can take into the marketplace, that you can take to the 
bank.  So I'm wondering what kind of thoughts you have in dealing with 
that.  If you could ask us to do anything -- I mean, would you be 
satisfied if we simply -- if we administratively in the Patent and 
Trademark Office established a presumption of utility and then we I guess 
would fight it out in the courts.

MR. SIMPSON:  I think we would because right now what's happening is 
that we're spending a lot of time on the subject and that takes away from 
the resources up front where you have nothing on the market with your 
licensee, and what you're doing is spending a lot of time worrying about 
the topic when you would rather have the time spent later on where there 
are a lot of resources if it's successful.

COMMISSIONER LEHMAN:  Thank you very much.

MR. SIMPSON:  Thank you.

COMMISSIONER LEHMAN:  Next I'd like to ask William Beers from Scripps 
Research Institute to come forward, please.


MR. BEERS:   Mr. Lehman, members of the panel, I'd like to thank you for 
this opportunity to come here this morning.

I'm the senior vice president and chief operating officer at the Scripps 
Research Institute.  The Research Institute is a non-profit biomedical 
research operation.  We have over 200 individuals that if we were a 
university you would consider faculty.  We have in total about 2,000 
employees and of those more than 700 are at the Ph.D. or M.D. level.

We get a lot of government support for our research and most of that 
comes from the National Institute of Health.  What that means is that our 
technology transfer, which we very aggressively pursue, is governed by 
the Bayh- Dole Act which was passed in 1980.  And, under Bahy-Dole, an 
institution such as ours, which is in receipt of federal funds, may elect 
to retain title to discoveries made with those federal dollars.  If a 
decision is made to retain title, the institution must be able to 
demonstrate that it is duly attempting to convert the discovery into a 
product.  And at the Scripps Research Institute that conversion is 
accomplished by licensing discoveries to for profit entities for further 

Now, in order to be licensable, the discovery must be protected by a 
patent.  Without that protection no company will try to develop it.  Now, 
with that as a background, I would just like to comment on a couple of 
issues that are being raised here this morning.  The first has to do with 
what should a patentable invention be in biotechnology.  My research 
institute is in the business of basic research, we are not in the 
business of developing technology.  And, as I indicated, a strong patent 
system is what makes our technology transfer system work.  That is, if we 
are able to license our technology it must be covered by a well defined 
patent.  As I said, the ability to license provides us with our means to 
comply with Bayh-Dole.

We believe that this means that patents should not be issued for ideas 
or for discoveries before use is known.  If ideas become patentable a 
restrictive and counterproductive research environment will result.  
Consequently, we strongly endorse and support a historically consistent 
view that the utility requirement should remain for biotechnological 

The second issue I'd like to touch on is that of proof of operability 
for human therapeutic inventions.  In an academic research environment 
such as ours, timely publication of results is terribly important.  
Consequently, it is also important if technology transfer is going to 
occur that patents be issued relatively early on, that is once the 
plausibility of operability has been demonstrated in vitro or in vivo but 
non-human models' systems.  In essence, that is to say when it's fairly 
clear that there is good predictive data available.

If proof of operability would have to wait for complete or advanced 
human trials, the pressure the academy puts on rapid publishing would 
likely put the information in the public domain and thereby deny 
exclusivity which is an important engine driving technology transfer.  
Indeed, it's next to impossible to license technology that is not 
protected by a patent.  We have been in that position a few times and 
it's terribly, terribly hard.  It simply isn't worth the risk to 
industry.  Consequently, this situation would terminate the development 
of promising but not necessarily fully proven therapeutics when the 
original findings emerge from an academic research environment.

Thank you very much.

COMMISSIONER LEHMAN:  Thank you very much for those statements, Mr. 
Beers.  I'm glad you brought out the connection between NIH funding, 
Bayh-Dole Act, an institution like yours and the commercialization of the 
technology.  I think it does point out that we are capable from time to 
time of making adjustments in the system that works, and that's one that 
has worked pretty well.  And actually I was involved in that myself back 
when it was enacted in I think it was 1978.  I think roughly 1978.

MR. BEERS:  That sounds about right.

COMMISSIONER LEHMAN:  That's when I was counsel on Capital Hill.  Thank 
you very much.

Next I'd like to ask Douglas Obenshain of Ernst and Young to come 
forward, please.

I really want to thank our witnesses for being cooperative and moving 
right along because we're on schedule.  We're actually a little bit ahead 
of schedule so it will help us get through our 57 appearances that we 
have today.

I guess Mr. Obenshain isn't here.  How about Kathy Behrens?


MS. BEHRENS:  Thank you.  You've heard a lot of numbers, you're going to 
hear a few more, unfortunately.

I'm Kathy Behrens.  I'm a managing director with Robertson and Stephens 
and Company.  Robertson and Stephens is an investment banking firm 
focused on providing investment banking, brokerage, money management 
services and venture capital to emerging growth companies and investors.  
The company manages approximately $1.2 billion in public and private 
equity funds.  And I would add that my comments reflect both the views of 
the venture group at Robertson and Stephens as well as the investment 
banking group.    

By way of introduction, as everybody in this room knows, patents play a 
fundamental and a critical role in the availability of capital and 
willingness of institutions and individuals to invest in biotechnology.  
They are as important as any factor in the decision to invest in any 
idea, entrepreneur or company in this field.  The reason for such 
dependency upon patents is that the provide the favorable economics 
required to justify substantial capital investment for successful product 

Historically, biotechnology companies with successful proprietary 
products have generated significant products' sales levels during periods 
of market exclusivity yielding considerable profit margins and high 
returns on investment.  These returns have been necessary given the 
significant level of risk associated with technology development, 
regulatory hurdles, clinical testing demands, limited availability of 
capital and prolonged product development cycles.  

While most of the historical information accumulated for this industry 
has been generated by human pharmaceutical and diagnostic products sold 
both by biotechnology and pharmaceutical companies, there remains a 
tremendous commercial opportunity in other areas such as animal and plant 
of schedule so it will help us get tagriculture.  The substantial level 
of private and public investment in biotechnology made over the last 15 
years has accelerated technology development and enhanced U.S. 

Over the last two years, considerable new pressures have been exerted 
upon young emerging biotechnology companies.  Enormous uncertainties 
associated with health care reform and unrealistic performance goals 
related to quickly moving products to market have contributed to 
disappointments with this industry by the private and public markets.  As 
a result, capital investment is down from prior years.  Additional 
uncertainty is now being generated by the proposed patent changes 
included in the general agreement on tariffs and trade.  Any alteration 
of patent practice that might shorten the current period of exclusivity 
or increase the magnitude of capital required to develop or protect 
products will have a negative impact on the availability of capital for 
biotechnology.  The cumulative effect of such proposed changes and 
preexisting market uncertainty could be devastating.

Let me get to a couple of numbers now.  Patents have made a significant 
contribution to the emergence of multiple successful, vertically 
integrated biotechnology companies.  The most mature of these include 
Amgen, Chiron, Genetech, Byogen, Genzyme, and Immunex which generated 
combined 1993 product-associated revenues of $3.1 billion.

Sales of the biotechnology industry exceeds $7 billion a year, with 12 
biotechnology products contributing estimated 1994 worldwide sales booked 
by biotechnology and pharmaceutical companies in excess of $4.5 billion.

Since 1980, over $4 billion in private equity has been raised for more 
than a thousand privately held companies.  However, in the first nine 
months of 1994 the investment rate has been down considerable compared 
with 1993, and the year will probably close with the lowest amount of 
private capital invested in biotechnology since 1985.

I have included in the text of my comments a summary of every year since 
1980: the individual year, the amount of dollars invested by the private 
industry, and the number of companies that have been financed in that 
time period.  And what I, unfortunately, do not have a slide for and that 
I was making reference to is that through the 5th of October, 1994, the 
invested dollars by the private sector has been about $168 million 
compared with close to $494 million for the full year 1993.  While there 
is a considerable lag in generating those numbers in the private 
industry, it's pretty clear we're going to be at half and perhaps lower 
than half of the prior year.

Now, getting the public market sector for a minute.  Nearly $10 billion 
in capital has been invested since 1980 by the public equity markets into 
more than 300 biotechnology companies.  The public market investment rate 
in biotechnology is also down in 1994, as is the number of companies 
financed and the average offering size.  The 1994 public investment rate 
will probably be the lowest in the last four years.  And, similar to my 
last comments, I've got text that includes a chart showing all of the 
dollars raised since 1980 in yearly aggregate and the number of companies 
and the average offering size for those companies.

To give you just 1994 compared with '93, through September of 1994 the 
public market equity invested in biotechnology is approximately $826 
million compared with the full year of 1993 of $1.5 billion.  The number 
of companies is 37 compared with 53 in 1993, and the average offering 
size in 1994 is $22 million versus $29 million in 1993.

As I mentioned earlier, several factors have contributed to the lower 
1994 public and private investment activity in biotechnology companies.  
In somewhat greater detail, these factors include investor uncertainty 
due to health care reform and the associated negative impact upon 
pharmaceutical products and companies; product development 
disappointments related to aggressive forecasting and the urgency to 
speed biotechnology products to market; and the large number of 
biotechnology companies formed between 1991 and 1993.

In addition, the declining availability of public market capital to an 
ever shortening list of biotechnology companies has had a significant 
cooling effect upon the private equity sector in 1994.  Furthermore, the 
complexity and cost of establishing and maintaining proprietary product 
positions is also taking a toll on the industry.  In the venture arena, 
the magnitude of investment -- capital investment -- is high and the 
duration of biotechnology is long due to both the technology development 
required and the high product fall-out rate prior to reaching market.  As 
an example, the average biotechnology venture investment runs at least 
five to seven years in duration.  As a result, investors will not finance 
a company or an entrepreneur idea unless the opportunity for financial 
return does not far exceed the risk of failure.

Within the venture industry, average annual returns are expected to 
exceed the Standard and Poors 500 index for the public market by at least 
five points.  The annual S&P returns for the last 25 years have ranged 
from 11 to 13 percent.  Therefore, venture investors are looking for 
annual returns of approximately 16 to 18 percent.  In other words, a 
venture investor must double the amount of capital under management or 
invested approximately every four years to remain competitive.

In addition, venture investors seek opportunities that individually far 
exceed those returns because when the individual failures have been 
included the average annual returns are considerably lower.  Even the 
public market investor is seeking to achieve or exceed the annual rate of 
return of the S&P and, given that the risks of biotechnology investing 
are substantially greater than with other stock sectors, the initial 
expectation for return must be higher than the S&P to even consider the 

Within the biotechnology sector patents are necessary to allow product 
pricing stability, generate attractive gross and net profit margins and 
allow a reasonable period of market exclusivity to overcome all of the 
risks associated with biotechnology investing.  While there agrees some 
disagreement regarding the ranges of costs associated with pharmaceutical 
product development, a recent OTA study estimates that the average pretax 
cost of developing a pharmaceutical product is $359 million.

In closing, patents have been and will continue to be one of the most 
critical components to investment decision making and access to capital 
for the biotechnology industry.  Furthermore, there is an inverse 
relationship between the size of the pools of public and private capital 
and uncertainty regarding the protection of proprietary technology in 
products within this sector.  In our view, the most constructive course 
would be to use legislation or regulation to cure some of the existing 
uncertainty and problems that are present in the patent process today.  
However, any legislative action that could negatively impact such a 
critical component of biotechnology and U.S. competitiveness must receive 
a high level of public attention and comment before alternative policy is 
established.  Thank you.  

COMMISSIONER LEHMAN:  Thank you very much.

Next I'd like to call Mr. Obenshain; is he here now?  From Ernst and 


MR. OBENSHAIN:  Thank you.  My name is Doug Obenshain and I'm an audit 
partner with the San Diego office of Ernst and Young, LLP.  I specialize 
in serving life sciences' companies and have clients from the conceptual 
stage of an entrepreneur with a business plan up through a number of 
public company clients.

E and Y, LLP is the leading professional services firm in the world at 
serving the biotechnology industry.  Each year we publish a national 
survey of the industry in which we request information from the CEOs of 
some 1,300 companies nationwide.  From this we compile a variety of 
statistical analyses in everything from financing transactions, strategic 
alliances, planned actions of the CEOs, executive compensation, and a 
variety of other matters pertinent to the industry.  This report has come 
to be regarded as the premiere state of the industry publication 
available.  We then present this annual report, which this year is titled 
"Biotech '95:  Reform, Restructure, and Renewal," at a series of 
approximately two dozen 30- to 45- minute roadshows all across the 

This morning I'm going to attempt to condense this information into a 
brief five to seven minute overview of the year in biotech and then I 
will briefly touch upon my perspectives of the importance of patent and 
patent protection to this industry.

Each year in our report we identify the defining events of the year and 
in 1995 there were, as always, both positive and negative defining 
events.  The biotechnology industry is one which requires a significant 
amount of cash, generally in the form of equity capital, in order to 
realize its long-term product potential.  And, as Kathy indicated, the 
industry's ability to raise cash has historically been very cyclical.  
It's been marked by boom periods, such as those experienced in the early 
1980s, the late 1980s, and the 1991 and '92 period, and early '93, 
followed by what are generally considered to be busts or famine periods, 
and a number of factors combined to make the year end of June 30th, 1994, 
generally a very difficult year to raise capital.

Certainly the industry was negatively impacted this year by the clinical 
setbacks of Antril, Thymosin, Respiver and other products.  These 
failures were much ballyhooed in the press and by the investor community 
and affected not just the valuation of the companies involved but truly 
the valuations of the industry as a whole.  Many companies who have 
continued to make strong clinical progress saw their valuations plummet 
due to someone elses travails.  However, it should be noted that the 
major pharmaceutical companies also experience mixed clinical trials all 
the time and product setbacks all the time.  But these, in fact, are 
expected, are accepted and are therefore not as highly publicized and do 
not have a significant impact upon the market valuations of either the 
drug companies individually or the pharmaceutical industry as a whole.

And I must point out that the biotech industry currently has over 50 
products in phase three clinical trials, which demonstrates the 
industries long-term ability to discover and develop products.  Will all 
50 of those products be approved? certainly not.  And will all of those 
approved end up being blockbuster drugs? certainly not.  But will they 
benefit worldwide health care? most certainly they should.  And that's 
the promise and the value of the biotechnology industry.  

Speaking of health care.  The other factor which significantly 
negatively impacted the industries' ability to raise cash this year has 
been concern over health care reform.  One need only look at prospectuses 
of companies issued before mid-1992 and compare them to those issued 
subsequent to 1992 and see that a very prominent and ominous risk factor 
appeared labeled "Health Care Reform."  Even though reform has now been 
delayed for at least a year and formal price controls appear to have been 
removed from most of the popular proposals, uncertainty over health care 
reform and the fear of price controls has caused the investment community 
to be extremely skiddish.  So the combination of primarily those two 
factors, as well as rising interest rates, have combined to create a very 
cautious investor mentality from late 1993 through 1994.

While our report indicates generally positive news on the year ended 
June 30, 1994, compared to the year ended June 30, 1993, I would tell you 
that the majority of 1994 has not been a favorable environment for 
raising cash.  The average market capitalization of the industry is down 
eight to nine percent over a year ago.  But for most companies, other 
than the top 10 or 15 companies in the industry, the drop has been much 
more precipitous.  And, through the first nine months of 1994, initial 
public offering activity, which is a company's first foray into the 
public equity markets, has been significantly reduced.  Most of the deals 
are much smaller than companies had envisioned when they originally 
drafted the prospectus and most deals are being priced at lower than the 
initial filing range.

Despite all of this, in the year ended June 30, '94, the industry did 
raise about $4.5 billion from all sources, which was about a 27-percent 
increase over the prior year.  So, contrary to certain media reports, the 
capital markets are not completely closed.  For a company that's been 
making good progress and has a good clinical story to tell, the markets 
are still there.  Unfortunately, however, as I mentioned, the average 
deal size has declined and executives therefore have to spend increasing 
amounts of their time strategizing about how to raise capital at the 
expense of spending that time focusing on product development.

Furthermore, the industry ended June 30, 1994, with about $9 billion in 
cash, which is $1 billion more than the year before.  The industry is not 
out of cash; however, much of that is concentrated at the 10 or 15 
so-called breakaway companies.  So there is some cause for concern; not 
panic but concern.  The industries' burn rate in R&D spending and net 
loss all continue to increase, and the medium survival index, which we 
calculate as cash and committed cash divided by their average monthly 
rate of spending, has dropped from 34 months to 25 months in the last 
year.  Twenty percent of all biotech companies have less than 12 months 
of cash in their coffers, and nearly 50- percent have two years or less.  
But these survival indices were comparable in 1990 and 1992, so hopefully 
the industry will be able to raise cash in '95 and it hopes to do so at 
higher valuations than currently exist for most companies.

Now, what will help these companies out?  One, a continued improvement 
in the public and political leaderships' awareness of and understanding 
of the industry and its issues resulting in a reasonable approach to 
health care reform.

Two.  More product successes, such as those seen this year in Palmazine, 
Riopro, the flavor saver tomato, and others.

Third.  A reasonable consolidation which would reduce the shear number 
of companies, and, fourth, a continued influx of funding from the major 
pharmaceutical companies.

Now let's talk for a moment about patents.  If you think about the 
balance sheet of a typical biotechnology company, the biggest numbers are 
cash and shareholders' equity.  I believe the equity number is simply a 
reflection of sophisticated investors' perceptions of the value of two 
things that are either not on the balance sheet or are undervalued: that 
is the company's people and their ideas.  And patents are the primary 
protection of those ideas; therefore, they're clearly one of the most 
critical elements of ensuring the future success of the industry.

Legislation was proposed this year, but not passed,  to extend patent 
terms from 17 to 20 years with a patent becoming effective at the 
application date rather than the issuance date.  Given the length of the 
product development time table in this industry, a sizeable portion of 
that 20-year period could be consumed by product development rather than 
product sales.  And remember that conventional wisdom suggests it takes 
10 to 15 years and as much as $300 to $400 million to bring a 
pharmaceutical to market.  If you had made such an investment you would 
hope to be able to reap the rewards from that effort for as long as a 
period of time as possible.  The shorter the period in which you have 
patent protection for your developed product, the more you will have to 
charge on a per dose basis for that therapeutic in order to recap your 

I appreciate the opportunity to have made these remarks to you today, 
and I have copies of our 1995 report available if you wish to see them.  
And now I'm prepared to respond to any questions that you may have.
in the public and political leaderships' awareness of and understan

COMMISSIONER LEHMAN:  I think I don't have any and thank you very much.


COMMISSIONER LEHMAN:  Next I'd like to ask William Epstein from 
Hoffman-La Roche, Incorporated, to come forward.


MR. EPSTEIN:  Thank you, Mr. Commissioner, and I wish to thank the 
members of the Patent Office for having me as a speaker at this meeting.  
I'm Bill Epstein, associate patent counsel, assistant secretary of 
Hoffman-La Roche, and I'm speaking today on behalf of BIO's Intellectual 
Property Committee.

I just want to point out that BIO has prepared a detailed book on --

COMMISSIONER LEHMAN:  You'll have to speak into the microphone because 
the court reporter needs to --

MR. EPSTEIN:  Okay.  Thank you. 

I wish to point out that BIO has prepared a detailed book outlining all 
of the issues raised at this hearing.  We have 55 individuals under the 
direction and help in editing of Chuck Ludlum, who without this his 
tireless efforts would not have made this book possible and the reports 
in this book possible.  I read it last night.  It was very interesting 
reading and I would like to present the Commissioner with a copy.  It 
sets out detailed positions on each of the issues raised at this hearing.

I'm here to speak on two issues:  One, the question to practical utility 
and, two, practical utility versus proof of operability.  I guess -- I've 
just been informed I'm the first patent attorney to speak on these 
subjects here so my remarks are purely that of a patent attorney.

Question two concerns the belief of whether the PTO is correctly 
applying the legal standards governing the question of practical utility 
requirements of 35 U.S.C 101.  I believe no.  I think the legal 
requirements are clear; however, I do not think the examiners know what 
the legal requirements are.  Today the patent office has a very effective 
staff of patent examiners.  Never before, since I have been practicing, 
has there been such highly trained, well-understanding patent examiners 
as for the science; however, for the legal problems that's to me a 
different story.

The legal standards are well settled as what is practical utility, and 
there is no distinction.  If you satisfy the requirements of practical 
utility, you don't need any proof of operability.  However, the question 
is:  Do the examiners understand what the legal requirements are? and 
since they do not, they are not applying them correctly.

A problem arises very quickly from the contrasting, what are the 
requirements of, let's say, public policy versus the courts?  This is 
where the problem arises.  I think public policy statement is very well 
put out in the Notice of this hearing which says:  "Important public 
policy justifications for the USPTO to review operability of inventions 
to treat human disorders."  A patent provides the public with a 
high-quality, technically accurate disclosure of new, useful and 
unobvious inventions -- nonobvious invention.  However, the imprimatur of 
the federal government, a patent can also affect the commercial prospects 
of the invention in question and can raise or lower expectations of those 
afflicted with illness the invention is designed to treat.  That 
contrasts very severely  with the decisions of the Court of Customs and 
Patent Appeals, and the CAFC with regard to this item.

One looks at the old case of In re Anthony, which is the standard case 
in this area, here the drug Monase was taken out of public -- off the 
market because it was toxic, it couldn't be used to treat humans.  Yet 
the court said that this was not sufficient for this drug to meet -- was 
sufficient for this drug to meet the requirements of U.S. patent law.  
The fact that the drug was toxic in no way stated that it would not meet 
the requirements of 31 U.S.C. 101 or 112, and that a practical utility 
had not been disclosed.  They define practical utility as not being a 
commercial utility.  They said that it's the FDA, not the PTO that is 
responsible for the question of whether a drug can be used in human 
therapy.  And this is what is the distinction; this is the dichotomy that 
exists between the law and public policy.  The Commissioner I think very 
well stated that the utility requirements is for the purpose of promoting 
commercialization.  I agree with that wholeheartedly, it is not for 
guaranteeing treatment.  That is what some of the examiners' standards in 
Group 180 are, that the applicant must guarantee treatment, and the 
patent laws are not to promote commercialization.

Let's look at what is considered practical utility.  Practical utility 
is disclosed in Nelson v Bowler as saying that the knowledge of the 
pharmacological activity of the compound is obviously beneficial to the 
public.  It is inherently faster and easier to combat illnesses and 
alleviate symptoms when the medical profession is armed with the arsenal 
of chemicals having known pharmacological activity.  Since it is crucial 
to provide researchers with an incentive to disclose pharmacological 
activity in as many compounds as possible, we conclude that any proof of 
any such activity constitutes a showing of practical utility.  Therefore, 
all of it is needed under Nelson v Bowler, and in a subsequent case of 
Cross v Iizuka is that it has pharmacological activity, not therapy.  
Therefore, it isn't -- Therefore, what it is, it does not guarantee 

The requirement of the statute is not -- and as interpreted by the 
court, is not to guarantee treatment but to promote commercialization.   
Clearly, this is taken in Cross v Iizuka, in another case, success in in 
vitro testing will marshal resources and direct the expenditures of 
efforts to further in vitro testing of most potent compounds, thereby 
providing an intermediate benefit to the public analogous to the benefit 
provided by the showing of the In Vivo Act utility. This standard doesn't 
exist for many examiners, and the question always comes, "What is a 
therapeutic utility?"  "What is pharmalogic activity?"  In order to have 
pharmalogic activity they have to have three things:

One.  The activity.

Two.  The nexus.

Three.  The disease state.  This is what the cases hold, you must have 
all three things.  The fact that something burns a hole, a compound or 
material burns a hole in a piece of paper, that's not utility.  What is 
utility?  If you can put what the pharmalogical activity is and relate it 
to the disease state.  There must be the nexus in between the 
pharmalogical activity that you're claiming what is your invention and 
what the -- and a disease state.  This I think is clear.  The question 
is, and it always gets to this point:  How can we better get the 
examiners to understand or not understand?  Educate the examiners in 
legal issues, because if we do not the problems are very clear.  
Basically these rejections will be overturned.  Basically all they will 
do will provide roadblocks.  They will not provide, promote 
commercialization.  You will get rejections that are to me are just 
beating dead horses, and eventually a lot of money is spent in beating 
the same dead horse, which I feel is wasted.

You take, for instance, typical example with an AIDS  drug.  Here AIDS 
is a tremendously important disease to cure and treat.  Well, we know 
that an enzyme -- by inhibiting an enzyme, or certain action of an enzyme 
we can inhibit the reproduction of the virus.  Now, based on that 
utility, suppose the utility is that, we get back the rejection that 
anything that inhibits this activity, that's the public policy we can 
accept as a utility statement.  Well, based upon this utility and the 
fact that the compound has been -- is not toxic millions of dollars have 
been invested in conducting clinical tests.  If this utility is 
sufficient for investors it should be sufficient for the Patent Office.

Now, the recommendation which I think is very important, to my mind, is 
that the patent office have a what you would call a control group that 
would pick up cases at random and act as the inventors advocate.

Today the Patent Office has a quality control but they're only, from 
what I understand, and I may be totally wrong, that they're only there to 
look at rejections, to make other rejections.  I once got a rejection at 
the end of the lot and I saw -- and went to the board of appeals, it was 
reversed.  So they put another barrier, but what about looking into 
seeing that the applicants, that the attorneys are really benefitting the 
system -- I mean, not the attorneys, the examiners are benefitting the 
system by looking at rejections and saying, "Are they being well based?"  
"Are they really applying the law?" and talking to the examiner, not as a 
harsh reprimand but as a teaching tool.  The teaching comes far better 
from the Patent Office than it comes from me, because when I tell an 
examiner something he says, "You're only saying that because you're an 
attorney.  Even the devil can cite our cases."  So it should come from 
the Patent Office and the Patent Office should look at these rejections 
and see are they really following the law.  And this way an examiner -- 
and I was an examiner -- gets an understanding of what the law is about 
and appreciates the thing.  And this way I think with the technical 
expertise that we have now in the patent office, and with a little 
understanding of the law, no system can touch it.

MS. LINCK:  Thank you, Mr. Epstein.  I'm Nancy Linck.  I'm the new 
solicitor of Patents and Trademarks and we are trying our best I think to 
follow the cases Nelson v Bowler and Cross v Iizuka.  The Deuel case you 
mentioned is on appeal right now and will be argued in about a week and I 
think one problem we have is this emerging technology and it's difficult 
to draw the line.  As one of the other speakers mentioned, you know, you 
don't want us issuing patents that should not issue and, therefore, you 
know, any help we can get, if you really think that the Board decision is 
inconsistent with earlier law I urge you to appeal to the Federal Circuit 
and provide us with additional guidance from the Federal Circuit.

MR. EPSTEIN:  I don't think the -- Honestly, I don't think the Deuel is 
inconsistent with law.  I don't think it is.  Again, there's the nexus.  
That's a very important thing.  I'll never forget a case that I was 
cited, that I argued, that was argued back to me -- I think it's Hoffman 
v Klaus.  I was Klaus, but there the nexus was missing.  You had the 
pharmalogical activity; you didn't have a nexus.  So what was this?  
There was no nexus involved and that I think is interesting and that's 
the question.  But let's say you cite these cases, whatever they be, you 
don't get any answer back.  There isn't the byplay as if there is to 
understanding these things.  So I think I'm not questioning the Deuel 
case but I am questioning whether the examiners understand the Deuel case 
and the other things.

COMMISSIONER LEHMAN:  Well, apparently, though, the very fine report 
that you suggest does question the Deuel case.  That's why Ms. Linck made 

MR. EPSTEIN:  I'm sorry, if I could just say one thing.

COMMISSIONER LEHMAN:  There are two cases that are given as an 
illustration of --

MR. EPSTEIN:  Right.

COMMISSIONER LEHMAN:   -- we're not following the CAFC law or where the 
Board hasn't, are Ex Parte Maizel and Ex Parte Deuel.  And I'm not sure 
that Ex Parte Maizel was ever appealed to the CAFC.  So I think the point 
is we're -- The point of these hearings is obviously we're trying to do 
what we can do internally, but it also helps us to have the private 
sector work with the court of appeals for the Federal Circuit to define 
the law properly, too, or they think that we've made a mistake.    

MR. EPSTEIN:  Could I just say something about those two cases.  First 
of all I don't think the Maizel case, and maybe I'm wrong, was a 101 case 
-- a 101 case.  I don't think it was.  And, if I'm not mistaken, the 
Deuel case also, that was another rejection which they wanted to 
re-examine, so I don't -- so they really made an extra finding.  I don't 
think it's part of the holding, and I think the Board asked for the idea 
of the nexus or to investigate the nexus, so I'm not so sure I agree with 
the way those cases have been cited in the thing, and they weren't cited 
-- but I'm saying, look, the document is still a wonderful document.  It 
has certain things, and remember we had very little time to prepare it.

COMMISSIONER LEHMAN:  We'll study it very carefully.

MR. EPSTEIN:  I appreciate that.

COMMISSIONER LEHMAN:  We'll work our way through this.  Thank you very 

MR. EPSTEIN:  Thank you.

COMMISSIONER LEHMAN:  Next I'd like to call Laura Handley; Weil, Gotshal 
and Manges.


MS. HANDLEY:  Good morning, Commissioner Lehman and other distinguished 
panel members.  I'm Laura Handley.  I'm an attorney with Weil, Gotshal 
and Manages.  We represent a diverse group of biotechnology clients 
ranging from universities to agricultural companies to companies 
designing human therapeutics.  I recently completed a clerkship with 
Judge Plager of the Court of Appeals for the Federal Circuit and on 
behalf of the BIO Intellectual Property Committee I'll  be providing 
brief summary of the case law concerning the utility requirement.  A 
detailed version of the presentation has been submitted to the record by 

Nine minutes is really not enough time to do justice to over 30 years 
case law in the utility requirement.  Unfortunately, as you'll probably 
continue to hear today, many here feel that nine minutes is about seven 
minutes more than the examiners are currently giving the case law.

In any event, I'll now briefly summarize the legal standard for utility; 
list three common legal errors committed by many examiners, and then 
describe in detail the case law with regard to each area. 

COMMISSIONER LEHMAN:  Can I ask when you say that the examiners are 
spending about two minutes on this, are you talking about all examiners 
or are you talking about some examiners?  In other words, is the problem 
that we don't -- that we uniformly are misinterpreting the law or that 
some examiners are misinterpreting it, from your point of view?

MS. HANDLEY:  Well, my point of view is based primarily on anecdote from 
other people.  I just left the court about a year ago.  I get the 
impression from my colleagues that it's many, but by no means all 
examiners.  And it may actually be a function of the time constraints 
that they work under that they don't have time to think through the case 
law, and they don't have the legal training to think through the case 

In any event, as for the legal standard for utility.  As you know, 
Section 101 of the patent statute requires that an invention must be 
useful in order to receive a patent.  And that test has been phrased as 
inquiring whether a patent -- whether an invention has practical utility.  
What constitutes that practical utility is dictated by controlling case 
law of the Supreme Court, the Federal Circuit, and the CCPA, the 
predecessor of the Federal Circuit.  Of course all of these are binding 
precedent upon the PTO.

Brenner v Manson, the Supreme Court's 1966 case on the utility 
requirement, first set forth this practical utility test.  The patent 
application in Brenner fell far short as the applicants there had 
completed no testing whatsoever to support the claimed utility.  But 
patent attorneys learn fast.

Brenner v Manson was a 1966 case and today the examiners rarely, if ever 
see patent applications in which no utility testing whatsoever has been 
completed.  Thus the two cases which provide more helpful guidance on the 
utility standard rose in the early to mid-eighties and these cases are 
Nelson v Bowler, decided by the CCPA, and Cross v Iizuka, decided by the 
Federal Circuit.  Both Nelson and Cross apply Brenner to cases in which 
some testing had been completed and held that practical utility had been 
demonstrated when the patent applicant provided evidence of 
pharmacological activity.  In Nelson that pharmacological activity was 
established by an in vitro assay and also by an in vivo experiment in 
rats.   In Cross the pharmacological activity was established by simply 
the in vitro assay.

Notably, neither case required clinical data or proof of therapeutic 
utility.  In contrast, the position of the PTO on the utility requirement 
seems to have shifted dramatically over the last several years and 
utility has now become a significant procedural hurdle for biotechnology 
inventors.  Applications that do not contain human clinical data, or at 
the very least mammalian animal data frequently are rejected on utility 

We believe that such rejections deviate from the controlling case law in 
three respects:

First, the examiners err in shifting the utility inquiry from the 
claimed invention and instead in focusing on the ultimate therapeutic use 
which the examiner believes to be the inventor's goal.

Second, the examiners err in routinely rejecting in vitro data.

Third, the examiners err in refusing to accept data that would prove to 
unskilled in the art that a compound has pharmacological activity.  

As for the first error, the examiners cannot shift the focus of the 
utility inquiry to the product which the examiner surmises is the 
ultimate goal of the inventor.  Instead, the Federal Circuit stated in 
Raytheon v Roper Corporation that the claims of the patent determine the 
invention to be tested for utility.  As it is the claims which dictate 
the utility inquiry, each case will be fact specific and there can be no 
uniform utility requirement.  If the claims are phrased in terms of the 
method of treating a disease then the PTO properly requires data relating 
to treatment of that disease.  If one skilled in the art would accept 
nothing short of human therapeutic data as predictive of success then the 
PTO may require that that data be presented.  If one skilled in the art 
would accept one mammalian animal model, or even in vitro models as 
predictive, then the PTO must accept those showings.

However, when the claimed invention is a composition matter and not a 
method of treating a disease, the CCPA in In re Bundy and in Nelson v 
Bowler made quite clear that, quote:  "Evidence of any utility is 
sufficient."  Close quote.  That utility may relate to a variety of 
things short of human therapy.  For example, pharmacological effects, 
such as receiptor binding; stimulation of immunicological reaction; or 
growth of particular cells.   Again, as the court made clear in Nelson v 
Bowler, such showing of pharmacological activity suffice.

In contrast, examiners seem to read the claims that are drawn to 
compositions and matter as though the claim instead read, quote:  "A 
method for treating a human disease."  This is legal error as it is 
looking for therapeutic utility rather than pharmacological activity.

COMMISSIONER LEHMAN:  Can I ask as question?


COMMISSIONER LEHMAN:  If the claimed invention is for human therapy, 
though, will just mere evidence of pharmacological activity suffice?  I 
mean, doesn't this go partly to what the claimed utility is?

MS. HANDLEY:  Right.  I would say that the way the examiners approach 
this is first look at the call of the claim.  If the claim is drafted as 
a method for treating a disease then you look to see if there is evidence 
in this specification that supports treatment of that disease.

COMMISSIONER LEHMAN:  So it's evidence in the specification and then 
merely shown by, you know, in vitro pharmacological activity would 
satisfy the test then in that case, in your view?

MS. HANDLEY:  I think it all gets back to what would be persuasive to 
those skilled in the art, and if those skilled in the art would have 
sufficient confidence in the in vitro assays then that should meet the 
test.  If it's a composition and matter claim, I think the threshold is 
much lower.  I think traditionally in chemical practice composition and 
matter claims, if you showed any utility whatsoever, that was sufficient 
because the call of the claim is to the compound itself, and people can 
later come along and if they have a novel method of using that compound 
they can then get a method claim.  So there's always been a lower 
standard and broader protection for composition and matter claims.

COMMISSIONER LEHMAN:  But my impression, though, is that the problems 
haven't been with those composition and matter claims as much.

MS. HANDLEY:  Well --

COMMISSIONER LEHMAN:  Well, that's, you know --

MS. HANDLEY:  In my limited experience, I've had almost every one of my 
composition and matter claims rejected on utility grounds, and the 
examiners seem to be reading it as if it was a method claim, a method of 
treatment claim.

As for the second error, examiners frequently refuse to accept the 
probative value of in vitro or non- human in vivo data, and this, too, is 
directly contrary to the controlling precedent of Nelson v Bowler and 
Cross v Iizuka.  As the Federal Circuit specifically stated, in vitro 
testing is the accepted practice in the industry and is generally 
predictive of in vivo results.

For example, in Cross v Iizuka, the only data supporting the claimed 
utility was an in vitro assay showing the effect of the compound in 
platelets.  And I find the Cross case to be interesting because it 
highlights how dramatically the PTO position has changed in recent years.  
Cross was an interferons case which reached the Federal Circuit in 1985 
and the party Iizuka showing of utility was based on an in vitro assay 
alone and it was accepted by the PTO.  It was then challenged by a 
disgruntled party, Cross, and Cross's position on appeal was that, one, 
regardless of the claims the real utility was as a therapeutic medicine 
for treating disease and, two, that in vitro data was not sufficiently 
probative.  And, as I've argued above, these are precisely the arguments 
that the examiners are raising today.

On appeal, the Federal Circuit reject party Cross's attempt to shift the 
inquiry to therapeutic effect and strongly endorsed the probative value 
of in vitro data.  BIO's position then is that the examiners should be 
following the Federal Circuit and not be reiterating the argument 
unsuccessfully made by the party Cross.   

As for the third error, examiners frequently seem to forget that the 
evidence of utility, be it in vitro or in vivo data, must be persuasive 
to one skilled in the art and not to the examiner personally.  If the 
examiner raises and objection to a showing of utility, the inventor can 
overcome that rejection by offering evidence that the showing would be 
persuasive to one skilled in the art, and that was the case in In re 
Jolles which considered acceptance of animal data.

So to conclude then, nothing in Brenner v Manson, which is often the 
examiners' shibboleth for denying utility, requires submission of human 
clinical data.  The patent applicants in Brenner had conducted no testing 
whatsoever, and the scientific field is acknowledged by all to be 

In contrast to those facts, examiners today routinely reject 
applications that do disclose some testing.  The question then becomes 
one of how much testing and what kind of testing; questions that are 
answered by both Nelson v Bowler and Cross v Iizuka.  The examiners' 
conversion of the utility requirement from a minimal threshold into a 
major administrative hurdle, akin to the showing required by the FDA, is 
legal error.   

Unfortunately, though, many of these erroneous calls simply will not be 
challenged.  Every time the examiner issues a final rejection the 
inventor is put to the difficult choice of acquiescing or to pursuing 
costly appeals to the Board and to the Federal Circuit.  And, 
unfortunately, especially with the increasing tightness of the money 
market, many clients simply do not have the financial resources to pursue 
the legal battle.  Accordingly, BIO requests that the examiners change 
current examination practices, study the controlling case law in this 
utility area and conform with it.

If I may, I'd like to respond very quickly to your point about raising 
the presumption of utility.  I have three points -- three thoughts.  One 
is that a presumption of utility would be consistent with Federal Circuit 
case law, Tol-o-Matic, Carl Zeiss, and also the old Supreme Court case of 
Lowell v Lewis that really do seem to treat utility as a minimal 

My second thought on the issue is that it makes --

COMMISSIONER LEHMAN:  You mean, you think we don't have a presumption of 
utility now?

MS. HANDLEY:  Right.

COMMISSIONER LEHMAN:  We could create one?

MS. HANDLEY:  If a presumption of utility were created, it would also 
mesh very well with -- for human therapeutic inventions -- with Section 
271(e)(1) of the patent statute, which basically is a safe harbor 
provision against patent infringement suits until a company comes out of 
clinical trials.  And that really would allow a company to get its 
patent, get its ducks in order, get its drug into and out of clinicals 
and then it would be subject to suit.  And, by that point, you would have 
the clear clinical data to prove the issue one way or the other.  Thank 

MS. LINCK:  Ms. Handley, I'd like to ask you one question.  It sounds 
like you've done a fairly in depth review of the case law, and I think it 
would be helpful for us if you could identify for us any Board decisions 
or CCPA decisions, but primarily Board decisions, that you think are out 
of line with controlling case law.

MS. HANDLEY:  I am the culprit.  I am the author of the section of Deuel 
and Maizel.  My quibble with Deuel and Maizel is that in both cases the 
Board -- well, in both cases the Board raised the issue sua sponte, and 
in both cases I didn't think that the Board had focused enough on the 
claims because in both of those cases there were composition and matter 
claims, and in both cases all I was working from was the Board opinion 
itself, and it seemed that the Board in both cases admitted that there 
was evidence of some utility.

MS. LINCK:  Any others?

MS. HANDLEY:  Not that come to mind right now.

MS. LINCK:  Thank you very much.

MS. HANDLEY:  Thank you.

COMMISSIONER LEHMAN:  But if we had -- To get back to this presumption 
question in a situation where we have evidence of some utility then there 
would be -- if you had adopted some sort of a presumption then that would 
cross the threshold then?

MS. HANDLEY:  Well, as my colleague Elizabeth Enayati will be discussing 
in a few minutes, however, there is a presumption on the operability 
issue under Section 112, and the very fact that there's a presumption in 
place hasn't seemed to have made a practical difference in how these 
issues are treated by the examiners.  So I think better -- a presumption 
would be a good step but it's only as good as the legal training of the 

COMMISSIONER LEHMAN:  So you really think that our -- in many ways an 
administrative problem is at the core of a lot of this; it's simply the 
legal training?


COMMISSIONER LEHMAN:  I would point out that one of the reforms that our 
assistant commissioner for patents -- and I'm sorry he's not here today 
-- he had to be somewhere else now, but we all can't be at different 
places at the same time, but he's putting in to bring into place a new -- 
going to be putting into place a new law training program for the 
examiners so -- where we're bringing the law schools right on site and 
we're going to try to encourage them to -- but we're not going to give 
them law degrees because otherwise they'll all join you at Weil, Gotshal 
and Manges, so we're going to give them -- Larry's idea is we're going to 
give them a Master of Juridical Science, an MJ degree rather than a JD 
degree so they won't be able to fly the coop.  The only place they'll be 
able to us it is with us, but we are trying to --

MS. HANDLEY:  I think that's an excellent solution for the PTO.  As for 
Weil, Gotshal maybe it's not so good.  Thank you.

COMMISSIONER LEHMAN:  Our next witness is Timothy Gens from Fenwick and 


MR. GENS:  Good morning Commissioner and other panelists.  I am Timothy 
Gens.  I'm with the -- of counsel with the firm of Fenwick and West which 
has about 120 attorneys between its Palo Alto and Washington, D.C. 
offices.  Our firm focuses upon providing legal services to high 
technology companies of which include biotech companies, universities and 
other types of entities.  Personally I've had a little over 16 years of 
experience practicing before the Patent Office and also before the 
Federal Circuit Courts with regard to patent issues, and I present these 
remarks today on behalf of the Biotechnology Industry Organization.

In particular, I'm responding to the first question in the Notice under 
the issue of "Utility" with regard to whether or not the legal standards 
governing the requirement for identification of utility developed by the 
federal courts are clear and concise. 

We believe that the legal standards established by the federal courts 
governing the requirement for the identification of utility are 
sufficiently clear and appropriate for biotechnology inventions.

We submit that these legal standards are well defined and require a 
minimum of proof to establish practical utility.  The concern over 
utility requirement for patentability should not be directed to the 
clarity of the legal standards but rather to the implementation of the 
standards by the Patent Office.  Thus we view the utility issue as one of 
misapplication of the law rather than incorrect legal precedent.

To resolve the utility issue, we propose that the patent bar be offered 
the opportunity to understand the content of the examiners' education by 
the Patent Office on such legal standards and to positively contribute to 
the content of this legal education.  Accordingly, we offer a practical 
and effective approach to working with the Patent Office in achieving a 
principal goal of our nation's patent system, that is the promotion of 
science and innovation.

We commend the patent office for its recent efforts in increasing the 
number of qualified examiners in the biotechnology area.  Consequently, 
the examiners have evidenced a very positive trend in the technical 
understanding of the inventions that less than two decades ago were 
simply pipe dreams.

From the hand-out that was given to us as we came into the room today, 
with regard to the fact that in Group 1800 over half of the examiners 
have Ph.Ds, it has been well noted by the practitioners before the Patent 
Office and we are very thankful for that.  But now let's focus on the 
legal training because that's where we are still running into a major 

The misapplication of these legal standards governing practical utility 
is exemplified by the Notice itself.  The Notice prominently states that 
the Patent Office is interested in ensuring that the practical utility 
requirement is governed by standards that promote research, development 
and commercialization of technological advances in biotechnology.

It must be absolutely clear that this laudable interest is of secondary 
importance.  The desire does not grant the Patent Office the right to 
create policy.  Of primary importance to the Patent Office is fulfilling 
its constitutional obligation to promote science and the useful arts by 
following and implementing the law decided by the federal courts and 
legislature.  Only when an issue is one of first impression and no 
direction is otherwise provided by the courts does the Patent Office have 
the right to extrapolate from the decisions otherwise rendered by the 
courts.  By not adhering to the law, as observed by the inventors and the 
patent bar, the Patent Office creates confusion in the process of 
securing a patent which can lead to a variety of deleterious 
consequences:  Notably, the trust and security inherent in the patent 
system has weakened and our competitive opportunities as a nation are 

The Notice also raises an example of practical utility in the 
patentability of nucleotide sequences that are produced incident the 
expression of human gene.  There is a concern as to whether the sequence 
or the gene must be characterized as to its physical, biological or 
physiological significance in order to establish practical utility.  This 
statement misplaces the focus of the problem.  First, the Patent Office 
must implement the decisions by the federal courts and not respond to 
concerns by attempting to create policy.

Secondly, the test of utility --

COMMISSIONER LEHMAN:  Wait.  I completely disagree with you about that.  
I don't think the federal courts have the right to make policy at all.  
The federal courts interpret the law.  In fact, it's the responsibility 
of the Commissioner of the Patent and Trademark Office to make the policy 
regarding the operation of the office, and the responsibility of the 
Congress to establish statutory policies.  I think you've got it all the 
way around -- completely the other way around.  Otherwise, we wouldn't 
even be here if we didn't have any policy responsibility.

MR. GENS:  I don't think that we're necessarily out of sync, 
Commissioner.  The point is that the courts are trying to follow what 
legislature is giving them as the law.  My argument today is that the 
Patent Office does not have the right to create law.  It must follow the 
law that the court is trying to implement from the legislature that is 
passed on to them.  And from the way that the Notice is written up, it is 
clear that the focus of the Notice is in terms of what is wrong elsewhere 
but at the Patent Office.  And perhaps what we have to do is -- I'm 
advocating that we simply focus on trying to reach some common ground as 
for what is being decided by the Federal Circuit.

COMMISSIONER LEHMAN:  The reason I make that distinction is because I 
think the Court of Appeals from the Federal Circuit is hardly infallible, 
and it well may be that the Court of Appeals for the Federal Circuit will 
make decisions which this industry does not approve of.  It may be that 
we feel that we should even go further than what the Federal Court of 
Appeals of the Federal Circuit currently is authorizing with regard to 
the utility standard furthering the industry's direction and that, 
indeed, we might as a matter of policy decide to test that all the way up 
to filing a petition for certiorari before the Supreme Court.  So I'm 
just saying don't -- or go to Congress to seek legislative approval, if 
we feel that we can't, you know, get the court to agree with us.  So, I 
mean, don't -- I'm just saying, don't place too much emphasis on what the 
Court of Appeals for the Federal Circuit says.  That's why we're here.

MR. GENS:  I see that my time has expired, but if there's definitely one 
recommendation that I can make before stopping that is that the PTO 
concentrate on trying to implement those standards by the Federal Circuit 
and allow the patent bar access to the legal training that is being made 
to the examiners.  Open it up to the public.

The second point is in terms of opening up what the Patent Office is 
teaching to the examiners, give the patent bar a chance to influence 
that.  Let's have a two-way communication between us in trying to 
establish a common ground so that we can avoid unnecessary patent appeals 
and use as a starting point at least some basis in what we both think the 
Federal Circuits are trying to say.

COMMISSIONER LEHMAN:  Well, that's exactly what these hearings are all 
about, so thank you very much.

MR. GENS:  Thank you.

COMMISSIONER LEHMAN:  Next I'd like to ask Bill Kennedy of Morrison and 
Foerster to come forward, please.  


MR. KENNEDY:  Thank you Commissioner Lehman.  I'm Bill Kennedy an 
associate of Kate Murashige at Morrison and Foerster.  I'm in the Palo 
Alto office.

BIO had asked Doctor Murashige to respond narrowly to question three 
raised in the context of application of the utility requirement in the 
USPTO Notice.  Doctor Murashige is unable to attend today and asked me to 
stand in her stead, and I thank you for allowing me to speak today in her 

Question three asks the following:  "Do you believe legal standards and 
examining practices in foreign systems to assess the patent eligibility 
of biotechnological inventions, such as those governing industrial 
applicability and exclusions from patentability, provide a better 
framework than is available in the United States?  Please identify 
desirable and undesirable practices of foreign offices, particularly in 
the EPO and Japan."  And I will narrowly direct my answer in this limited 

The utility requirement in the United States is the sole requirement for 
patentability that addresses the contribution made by the patented 
subject matter to the well-being and progress to the society as a whole; 
that is the real world value of the invention.  This is addressed in 
Europe and Japan by requiring that the patented subject matter be 
susceptible to industrial application.  

Additionally, the European Patent Convention, in Article 53, accepts 
from patentability inventions, the publication, or exploitation of which 
would be contrary to public order or morality.  And also the European 
Patent Convention excepts from patentability plant or animal varieties or 
essentially biological processes for production of plants or animals.

Japanese patent law requires that inventions be usable in industry and 
additionally excludes patentability for inventions liable to be contrary 
to public order, health or morals.

In neither Japan nor Europe are methods for treating the human body 
considered to be an industrial application; however, patents may be 
obtained for the use of compositions whether those compositions be old or 
new in therapeutic regiments.

It is generally considered that the standard of industrial applicability 
is a much lower hurdle to overcome than the standard of utility as 
exercised in the United States Patent Office.  This can be particularly 
apparent where a patent application is being examined in the U.S. Patent 
and Trademark Office both as a domestic U.S. application and as an 
international application under Chapter 2 of the Patent Cooperation 
Treaty.  Indeed, it is common experience that claims are rejected in the 
domestic U.S. case for lack of utility.  This comes often, by the way, 
under the guise of an asserted failure to provide an enabling disclosure.  
And yet those same claims, on the same specification, are considered to 
meet the standard of being susceptible to industrial applicability in the 
international application by a U.S. examiner who, incidentally, is often 
the very same examiner who authored the utility enablement rejection in 
the domestic U.S. case.  Thus the kinds of data routinely rejected in the 
United States are routinely accepted in Europe and Japan.  This is a 
scenario but does not bode well for American inventors in a global 

Many problems in attempting to apply the standard of utility, as opposed 
to a standard of susceptibility to industrial application, are only 
exasperated by the dictum of the Supreme Court in Brenner v Manson to the 
effect that the invention must be developed to where specific benefit 
exists in currently available form, that benefit being one derived by the 
public.  The question is:  Who is the public?  Does the public include 
that subset of the population actively engaged in research?  And what is 
"currently available form?"  Eventually, every member of the public will 
potentially benefit from the efforts of those members who are engaged in 
research.  Is that benefit sufficiently direct that an immediate benefit 
to the research community can be considered to be a currently available 
benefit to the public?

There's no need to answer any of these questions where a standard of 
industrial application is applied.

The distinction can perhaps best be illustrated by an example.  Claims 
are directed to new and unobvious compounds which tightly bind a known 
receptor that is present on a particular subset of white blood cells.  
Because the cells on which the receptor appears are often useful in 
conducting research to investigate the nature of human disease, the 
compounds are clearly susceptible of industrial applicability inasmuch as 
they can be used to purify these cells for a researcher to study.  The 
applicant in this application further states that the compounds can be 
used to target these cells in therapeutic protocols.

There's no question that if sufficient proof were offered to show that 
the latter use had therapeutic value, the public would have a currently 
available benefit.  However, showing that this is the case is quite 
difficult, as others have pointed out earlier today, and the inventor of 
the claimed compounds in this instance may be a basic researcher employed 
by a research institution.  The inventor is not able personally nor 
through the research institution to do the necessary animal and clinical 
studies that would provide the therapeutic parameters and proofs that 
seem to be required.

On the other hand, of course, commercial entities that may have the 
capability to carry out such studies will not be interested in pursuing 
the matter unless they can be assured that the compounds themselves are 
protected.  If the standard of industrial applicability were applied the 
use of these compounds for purifying the relevant cells for research 
purposes would be adequate to support the patentability.

In the face of the utility requirement, the question is raised above now 
introduce a complication -- is the provision of compounds that are, at 
this moment, of interest only to the research community a currently 
available public benefit?

In short, the standard of industrial applicability removes the value 
judgment dimension of the utility requirement.  The standard is easy to 
apply.  The industrial applicability standard is easy to apply.  If the 
material can be used for something that someone is being paid to do it 
meets the standard.  Substitution of this standard for the utility 
standard would have the benefit of providing clarity in the law as well 
as removing an unnecessary barrier to the progress of research in 

On the other hand, a requirement that the claimed subject matter not be 
contrary to public morals can introduce its own complications.  The 
presence of this provision in the European patent law has already caused 
considerable mischief in the form of oppositions to patents granted on 
transgenic animals.  The multiple oppositions that have been filed with 
respect to these patents have come not from competing commercial 
interests but rather from animal rights groups and others having 
particular political agendas.  There is considerable concern in Europe 
that patent opposition provides an inappropriate platform for such 
agendas.  The recent formation by the European Patent Office of a special 
panel whose approval would be required in addition to the decision of the 
Examining Division for the grant of a patent on a transgenic animal may 
have been in response to such pressures.  It would clearly be undesirable 
to add such a provision to the statute in the United States.

A third clear difference between U.S. and Japanese or European law is 
the exclusion from patentability of methods for treating the human body.  
As a practical matter, the effects of this prohibition are minimized by 
the ability to obtain protection for medical use of compounds, and it 
will come into play only when the method of treatment involves 
manipulative steps only.

In summary, we feel it would be helpful to substitute for the utility 
requirement a standard of industrial applicability, but without excluding 
from patentability inventions that are supposedly contrary to the public 

COMMISSIONER LEHMAN:  Thank you.  Is that something that you think would 
require statutory change or could we do that just by changing our policy 
protocols in the office?

MR. KENNEDY:  Well, you raised earlier the difficulty that if you change 
your policy within the Patent Office you still may find yourself going up 
to the courts.  It's difficult to say.  A statutory change would 
effectuate it, if that were possible to bring about.

COMMISSIONER LEHMAN:  Thank you very much.

Next I'd like to ask Elizabeth Enayati, of Weil, Gotshal and Manges, to 
come forward, please.


MS. ENAYATI:  Well, I was going to say good afternoon.  I can't -- it's 
noon right now so I'll just say, hello, Commissioner Lehman and other 
distinguished panel members.  Welcome back to California.  My name is 
Elizabeth Enayati.  I'm a patent attorney at the Silicone Valley office 
of Weil, Gotshal and Manges.  As you may know, Weil, Gotshal is an 
international firm representing a broad base of both established and 
start-up technology companies, as well as universities.  Our 20-member 
Silicone Valley office focuses on technology issues including patent 
prosecution and litigation.  My practice includes biotechnology 
prosecution for universities and members of private industry.

I'm speaking this afternoon on behalf of the Biotechnology Industry 
Organization -- BIO -- the Intellectual Property Committee, of which my 
firm is a member.  A detailed version of this presentation is submitted 
for the record by BIO and you have a copy I believe.

I'll be summarizing two sections of that report regarding operability, 
the introduction, including case law, and question number three regarding 
the foreign versus U.S. Patent Office practices relating to operability.  
The next speaker, Bill Scanlon, will be addressing the other two 
operability questions raised in that formal Notice.  

I'll begin by summarizing the testimony you'll be hearing today from the 
BIO Intellectual Property Committee members on the issue of operability.  
Since the formation of the Food and Drug Administration, it's that agency 
and not the PTO that has the responsibility for ensuring that marketed 
therapeutics satisfy safety and efficacy criteria.

My personal experience, therapeutics and composition inventions that 
satisfy the statutory requirements for patentability are being rejected 
by examiners who cite a failure on the part of the inventor to prove 
operability, including the safety and efficacy of the claimed method and 
composition inventions.  Often the rejection is based on the examiner's 
disbelief as to operability without supporting evidence despite the 
inventor's statements and declarations to the contrary.  Such a practice 
is supported by neither the patent statute, nor the case law as I'll 
describe in a moment.

Operability of composition inventions should be satisfied by reasonable 
evidence of how to make the composition -- operability of method of using 
the composition should be satisfied by evidence of how to use the 
composition in a reasonably predictive model.  However, examiners 
presently are requiring proof of operability, including efficacy, of how 
to use a composition when only the composition is being claimed and no 
method of use is being claimed.  By improperly rejecting therapeutics and 
composition claims, based on unsupported inoperability allegations, the 
U.S. Patent Office participates both in avoiding the constitutional 
mandate to promote the arts and useful sciences, and in weakening the 
efforts of a growing U.S. industry that is important to the competitive 
efforts of our nation in the world marketplace.

In support of its operability rejections, the U.S. Patent Office relies 
on a series of cases that were cited in the " Federal Register" notice 
for this meeting.  A complete and accurate summary of those cases is 
found in the full BIO Intellectual Property Committee report made of 
record, and I won't be going through each of those cases in detail as I'm 
sure you're already familiar with them.  But as an initial observation, 
the case law clearly requires that only one object of the invention be 
shown to satisfy the operability requirement.  This could include in 
vitro or animal data.  The burden rests on the examiner to provide 
evidence inconsistent with the inventor's assertion of operability.  This 
is most clearly stated in In re Chilowsky, a 1956 case, and I'll quote:  
"Applicants for patents in this field --" referring to the biotechnology 
and human therapeutic arts, "as well as in all others are entitled to 
specific information as to the grounds on which their applications are 
rejected and should not be met with anything in the nature of a blanket 
rejection based on the comparatively recent development of the art and 
the difficulty which it has been experienced in producing commercial 
devices."  That applies with equal force today as it did in 1956; 
however, examiners are continuously asserting that the inventor bears the 
initial burden of showing operability.

Operability is also recognized as an element of the disclosure 
requirement under 35 U.S.C. Section 112, first paragraph.  Again, under 
that approach, the case law cited by the PTO in this Notice of this 
meeting supports the premise that the truth and accuracy of statements in 
a patent application are presumed unless the PTO can establish, using 
evidence provided to the applicant, that the statements are not true and 

It's become common practice -- and my personal experience from the 
Patent Office -- to require human clinical data in support of therapeutic 
claims even when in vitro or animal data is provided in a specification.   
This frustrates the public policy, often expressed by the courts, in 
early filing of patent applications.  For example, one population of 
inventors who are significantly impacted by this practice is the 
population of inventors practicing at universities.  If early stage 
research is not patentable, because they don't have human clinical data, 
then applications cannot be filed; papers cannot be published; or 
universities lose their rights.  The net effect is a distinctive 
disincentive to publish and exchange scientific ideas, which ultimately 
stifles the progress of useful science instead of promoting the progress 
of useful science.

In addition, these inventors and universities then cannot find 
commercial partners to take early stage research into commercial product 
if that commercial partner has uncertain or no possibility of a 
proprietary position.  Thus products are hindered from reaching the 
market by the Patent Office practice of requiring human clinical data.  
By maintaining its position requiring that such human clinical data in 
support of therapeutics' claims, the Patent Office flies in the face of 
case law precedents, such as In re Langer which held that clinical 
testing in humans is not required in view of in vitro data.  In In re 
Jolles, a 1980 case that was discussed earlier, specifically rejected the 
patent office position that animal data was not relevant to establishing 
utility, and in In re Hardtop the court rejected the Patent Office 
requirement for human data despite it presented animal data.  And In re 
Malachowski non-human data was found by the court to be sufficient to 
establish utility for use in humans.  Although the Board in Ex parte 
Balzarini affirmed the rejection of the claims presented in that case, 
the Board again stressed that human clinical data would not necessarily 
be required.  Clearly the courts and the Board have continuously stated 
that human clinical data is not a prerequisite to patenting therapeutic 

Finally, the Patent Office is rejecting claims based on the applicant's 
failure to present safety and efficacy data from human testing despite 
case law precedent to the contrary.  And In re Anthony the court clearly 
states, and I quote:  "Congress has given the responsibility to the FDA, 
not to the Patent Office, to determine in the first instance whether 
drugs are sufficiently safe for use that they can be introduced in the 
commercial marketplace."  This is further supported by several cases that 
due to the time limitations I won't recite.

We respectfully remind the patent office that it is an administrative 
body charged with issuing patents that satisfy the requirements set forth 
in the patent statutes.  If the patent statutes do not address certain 
concerns that the public believes are necessary to protect its interests 
then it's up to Congress to change the statutes which govern the actions 
of the Patent Office.

Turning now to question three of the public Notice: "Do you believe 
legal standards and --"

COMMISSIONER LEHMAN:  Can I just as a question to clarify something I 
think is important.


COMMISSIONER LEHMAN:  In other words, if we knew for a fact that a 
particular therapy for which a patent application had been made would 
have a very toxic effect on individuals and might kill them, that even if 
that were the case, as long as it otherwise operated against the 
particular virus or whatever it might be involved and did away with it 
even though it might kill the patient in the process, it would still meet 
the utility requirement?

MS. ENAYATI:  That's right, and I think that's consistent with what Bill 
Epstein said previously.  And also with the courts, with the case law, 
where it said if you show one object of the invention then you satisfy 
the utility requirements for patentability.  Now, whether it reaches 
market or not is a different issue.  It also -- Well, I'll leave it at 

MS. LINCK:  I also have a question for clarification.  It was my 
impression from what you said that you've had some experience with 
examiners requiring human test data but that the Board, in fact, has gone 
the other way.  Is that your experience?  Is my understanding --

MS. ENAYATI:  That is my experience.  I have had examiners say that they 
won't accept the animal data or they don't accept the animal model that 
we've presented as being a valid model that shows that this treatment 
would actually work in humans, and they've required human clinical data 
in view of a valid animal model data.

MS. LINCK:  But that's been reversed whenever you've taken it to the 

MS. ENAYATI:  I personally have not taken it to the Board, no.  So those 
decisions, we haven't got that far.  I haven't had a hearing date yet.

MS. LINCK:  All right.  Thank you. 

MS. ENAYATI:  But they are on appeal.

COMMISSIONER LEHMAN:  But to follow up on that.  What you would like us 
to do is make it clear to the examiners that animal data are acceptable.  
Period.  That they do not require the human data.

MS. ENAYATI:  That's right.

COMMISSIONER LEHMAN:  And also to make this other point clear, that it's 
not their -- that, you know, in effect, the marketplace, the FDA approval 
being part of the marketplace, will make a determination as to whether 
the patent is usable or not.  Their only purpose -- function -- is is 
this an invention that kills the particular virus or whatever it may be 
that's involved?

MS. ENAYATI:  Right.

COMMISSIONER LEHMAN:  If it kills that virus it, you know, might kill 
the person along with it.  Might even kill the animal along with it, I 
suppose.  But if it kills the virus then it's, you know --

MS. ENAYATI:  It's met the standards of patentability.  



Question three, the legal standards and examining practices in foreign 
systems, whether they provide a better framework than is available in the 
U.S. for assessing patentability questions related to operability of 
inventions for treating human disorders.  We believe the answer to that 
is, "Yes."  Both European and, in certain circumstances, Japanese patent 
laws are applied more favorably and highlight the unnecessarily strict 
standard of operability imposed by the U.S. Patent Office at this time.  
Although the laws do not differ significantly in this area, the 
application of those laws to the examination of biotech patent 
applications does differ dramatically.

As applied under European patent law, any reasonable statement regarding 
the operation of an invention is readily accepted.  In vitro data 
generally is sufficient to demonstrate operability of first or second 
medical uses of a therapeutic composition in human therapy.  In some 
cases a believable, enabling, but "prophetic" description, absent any in 
vitro or animal data, is acceptable to support claims to a first or 
second medical use of a therapeutic composition. 

Under Japanese patent law inventions to human therapeutics are separated 
into two classes:  Generally, new compounds and then pharmacal compounds 
with use limitations.

Under the first category, chemical compounds per se, a working example 
showing that the compound was prepared is required, but no experimental 
evidence of use is required.

Under the second class, the pharmaceutical compositions with a use 
limitation, for example, composition for treatment of cancer, in vitro 
data is acceptable if it's directly supportive of the claimed use.  So, 
for example, if the claim is to pharmaceutical compositions for treating 
cancer cells then in vitro data demonstrating that the composition kills 
cancer cells is sufficient.

To conclude, in foreign countries competitors and regulatory agents do 
not rely on the Patent Office to determine if an invention is operable.  
The U.S. Patent Office for human clinical data in support of therapeutic 
use claims prevents the flow of human therapy inventions to the next 
level of research and ultimately to the marketplace.  Consistent with 
both the European and Japanese patent system, once a threshold of 
operability has been demonstrated, which may be achieved using in vitro 
data, the other regulatory agencies charged with regulating the release 
of drugs and products to the market should make the next level 
determination of efficacy and safety in operability.  Thank you.

COMMISSIONER LEHMAN:  I don't want to drag this on, but, you know, all 
cases -- it seems to me that in all cases you would have in vitro data 
available, wouldn't you?  I mean, otherwise, you wouldn't know whether 
you had any invention or not.

MS. ENAYATI:  Right.

COMMISSIONER LEHMAN:  I mean, you wouldn't know whether you had anything 
that worked, you'd just have an idea.

MS. ENAYATI:  That's right.  And so what we end up engaging in is a 
discussion with the examiner whether this is sufficient in vitro data and 
whether they accept the results of the in vitro data, which is contrary 
to what the case law seems to be saying.

COMMISSIONER LEHMAN:  Thank you very much.

MS. ENAYATI:  Thank you.

COMMISSIONER LEHMAN:  Next I'd like to call on William Scanlon, from 
Foley and Lardner.

MR. SCANLON:  Thank you, Mr. Commissioner, for the opportunity to speak 
on this important issue today.

My name is William Scanlon.  I am a partner with the firm of Foley and 
Lardner in its Madison, Wisconsin office, and I'm a member of the firm's 
biotechnology practice group.  The firm represents organizations -- both 
business organizations and research organizations nationwide.

I've been practicing patent law for 14 years and for the last 12 and a 
half years the bulk of my practice has been biotechnology.  My 
presentation here is on behalf of the Intellectual Property Committee of 
BIO, the Biotechnology Industry Organization, not the Association as it 
says in the program.

I will address briefly questions one and two under part B of the 
Commissioner's Notice.  My presentation is detailed in much greater 
detail in the BIO paper, which is of record in the hearings here, at 
pages 61 to 72.  Part B of the Notice relates to proof of operability for 
inventions involving treatment of human disorders.

Question one.  Are the legal standards for proof of operability in those 
situations clear and appropriate?

Question two relates to PTO practices and asks whether the practices are 
consistent with the law, if not, what are the problems and, if there are 
problems, what solutions might there be.

As Ms. Enayati just described, the legal standards are clear and we 
believe appropriate with regard to proof of operability.  The problem is 
not in the legal standards.  The problem at present is in the PTO's 
implementation of the law relating to operability and the imposition of 
requirements that the courts have rejected long ago under the rubric of 

The Commissioner's Notice reflects the problem.  The Commissioner's 
Notice suggests some distinction between, quote, "utility," close quote, 
and "operability," close quote.  This is the distinction that the law 
does not recognize.

The Notice suggests then, under the rubric of operability, various 
requirements and policy concerns that are also not part of the law.  
Safety and clinical efficacy are not proper concerns of the Patent and 
Trademark Office.  Whether the grant of a patent would mislead patients 
or the public is not a proper concern of the Patent and Trademark Office.  
The law allocates these concerns to other agencies; the Food and Drug 
Administration, the Securities and Exchange Commission, the Environmental 
Protection Agency, the Department of Agriculture, and various state 
agencies with similar responsibilities, to mention a few.

In the context of inventions for treating human disorders, rejections 
for inoperability have become routine.  I believe it's fair to say that 
most of these rejections are improper.

Proof of operability is required only if the utility set forth in the 
application, as of the effective filing date of the application, is 
incredible or unbelievable to the person of skill in the art.  Examiners 
must be able to establish this credibility or unbelievability with 
reference to technical data that was available in the art on the date the 
-- the effective filing date of the application.

The assertions in an application regarding utility must be accepted as 
true by an examiner unless the examiner has some good reason, again, 
based in the technology available on the date -- the effective filing 
date of the application to prove otherwise.

Now, a claim to a method of curing -- emphasize curing -- a disease, 
which the art on the effective filing date recognizes as incurable, might 
well be properly rejected for inoperability, and the applicant in that 
situation might be put to the test with appropriate data, not necessarily 
clinical but appropriate data, to show that, in fact, you can cure the 
disease the art considered to be incurable.  But this is different from a 
method of treating a disease that is incurable.  Generally, such a claim 
would not be inoperable.  We treat many incurable diseases:  Grave's 
disease, diabetes, AIDS, to mention a few.

Now, even in cases where proof of operability may be required, human 
clinical data may not usually be required in accordance with the law, 
although the PTO itself recognized in the Balzarini case that is 
addressed in our paper here and that Ms. Enayati mentioned.  But now de 
facto human clinical data are being required in the human therapeutic 

In our text, at pages 69 to 71, several different practices now in the 
biotechnology group are described that establish de facto requirement for 
human clinical data.  The requirement for human clinical data is, in 
fact, wrong as a matter of law in most cases, and it's a travesty as a 
matter of policy for reasons that have been explained repeatedly here 
already today in terms of slowing the availability, even denying the 
availability of new therapeutic methods to the public.

Now, what might we do to correct the problem?  Well, we think to begin 
with PTO policy has to change.  The PTO, and Group 180 at least, must 
recognize its job is to grant patents; it's not to enforce FDA 
regulations or the SEC rules.  Also, we think that better training of the 
examining corps, particularly with respect to legal standards, would be 
appropriate.  And BIO does support providing to the Patent and Trademark 
Office the resources it needs to provide such training.

Thank you very much.

COMMISSIONER LEHMAN:  Than you very much.  I appreciate that.

Next I'd like to call on Stanley Crooke of Isis Pharmaceuticals to come 
forward, please.


DOCTOR CROOKE:  Good afternoon.  I am Stan Crooke.  I'm the founder and 
chief executive officer of Isis Pharmaceuticals, a development stage, 
technology based pharmaceutical company.  Prior to founding Isis, I was 
president of R&D for SmithKline Beecham, and before that a vice president 
of Mr. Myers.  I'm a physician and a scientist and in my career I've been 
involved in the development of more than 15 drugs that are currently 
marketed, and numerous other drugs in development.  I've published more 
than 300 scientific papers and 16 books on pharmacology and drug 
discovery and drug development. 

What I want to do today is address a single issue and that is the issue 
of therapeutic utility.  As a practitioner of the science, I'd like to 
address it from the scientists' perspective and conclude with what I 
think are some reasonably practical recommendations for what the patent 
office might do.

The issue reduces to one simple question:  What data are sufficient to 
support claims of potential therapeutic utility?  Although there is no 
universal or, in my view, no absolute right answer to this question, I 
believe there are precedents that have stood the test of time that can 
provide guidance and can serve as a basis for reaching agreement.  The 
problem and the reason that we're here on this issue is, of course, that 
the evaluation of the utility or potential utility of an innovation in 
the pharmaceutical industry is especially complex.

On average, more than 15 years elapse between the discovery of a new 
drug and its marketing and, depending on which numbers you accept, 
somewhere in the range of $150 to $350 million has to be invested in that 
drug before we know whether it works.  It would be impossible, and it is 
impossible, for a company to make this kind of investment without 
reasonable expectations of patentability, particularly in light of the 
risks of investments in this area.  We know that historically less than 
one in a thousand compounds synthesized and patented by the 
pharmaceutical industry has actually succeeded in becoming a drug.  

Well, of course, many factors contribute to the risks and uncertainty in 
drug discovery and development, but I want to focus on one particular 
problem that I think is particularly germane.  And that problem is I 
think the only way to determine the value of a new pharmaceutical 
technological innovation is to evaluate the fruits of that innovation.  
That is to evaluate the activity of drugs that come from that innovation 
in human beings in detailed clinical trials that require these many years 
and many millions of dollars.

As an example, let's consider the history of the treatment of ulcer 
disease.  It's been known for many decades that ulcer disease is 
correlated with stomach acid secretion, and a large number of 
physiological processes have been identified that influence stomach acid 
secretion.  Early on, the coallergic arm of the autonomic nervous system 
was shown to increase acid secretion so it was hypothesized that 
anticoallergic drugs would have therapeutic utility in this disease.  
Literally thousands of such compounds were made; they were tested and 
they were patented.  A few of them were even marketed, but the side 
effects of these drugs were very limiting and so the true therapeutic 
utility of anticoallergic drugs for ulcer disease was modest at best.

Of course research continued, other factors were identified that 
influence acid secretion, including histamine.  This led to the notion 
that blockade of a specific receptor for histamine, the H2 receptor, 
might have therapeutic value.  This was controversial.  It was hotly 
debated but research continued and, in fact, the first H2 antagonist that 
reached the clinic, the Thiamide, failed.  But the second succeeded, and 
that was Tagamet.  It revolutionized ulcer treatment.  It led to 
thousands of other H2 antagonist being created and a number of other 
products.  Then came the hypothesis that the inhibition of an enzyme, 
hydropotassium ATPaz might be beneficial because this enzyme is thought 
to actually secrete the acid into the stomach.  Again, a very 
controversial hypothesis.  Many compounds were tested, synthesized, 
patented.  All failed, essentially, except for one:  Amepresol.  
Amepresol ultimately was marketed and, again, has made a dramatic 
improvement in the treatment of ulcer disease.

Well, the points I want to make by reciting this well-known history are 
several and I think they are very important.

First of all, new concepts and approaches.  That is new technologies 
that might result in therapeutic innovations arise constantly.

Second.  Only after a drug, based on a particular mechanism or based on 
a new concept, has been shown to work in the clinic has the technology 
been validated.

Third.  It is a normal part of the process that some members of a 
particular class of drugs fail, yet the basic concepts that support the 
creation of these broad innovations have proven to be valid.

Fourth.  Innovations are by definition controversial.  And the 
controversies in this area are not resolved until clinical data -- until 
the compound is tested thoroughly in the clinic.

Fifth, and perhaps most importantly.  Despite these complexities, the 
traditional practices of the PTO result in effective stimulation of 
innovation and enormous public benefit.  Those traditional practices were 
to allow claims of reasonable scope long before definitive proof of 
utility was obtained.  This was done by accepting reasonable evidence of 
potential utility and by maintenance of an attitude that was biased 
toward rewarding and encouraging innovation by giving the benefit of the 
doubt to new concepts.

I think, as you've heard from several speakers very recently with regard 
in particular to patents in biotechnology, we feel there's been a 
substantial change in the practices of the PTO demands for definitive 
proof of therapeutic utility that resulted in many patent application 

Let's look at the potential impact of this change in the patent 
environment.  In other words, what will happen if the PTO were to 
continue to require definitive proof of utility before granting 
therapeutic use claims?  What will happen is absolutely simple and 
absolutely clear:  New drug innovation will be dramatically impeded.  So 
the risks of continuing this practice I believe are very large.  I 
believe the risks of relaxing the policy are really quite negligible.  
The drug discovery, development and commercialization processes have 
built-in self-regulating mechanisms that ensure the drugs that should 
fail do.

So, what harm is done if a patent with appropriate claims is granted to 
a drug candidate and the drug or the technological concept behind the 
drug fail?  Well, of course, the company that's invested in that drug or 
that technology loses its investment, but that's the risk it takes.  
Nothing has been lost by society.  In fact, the public actually gained 
from the exploration of the concept of the technology.

On the other hand, if companies stop investing in new compounds derived 
from novel concepts or technologies, because of patent uncertainty, 
everybody loses and I don't think the loss will be made up.  So what am I 
actually recommending?

First.  Return to traditional practices with regard to pharmaceutical 
patents.  They worked in the past; they'll work in the future; they will 
work now.

Second.  Return to a positive bias to innovation with an acceptance of 
reasonable proof of potential -- of potential -- utility.

Third.   I think you should treat patents from so- called biotechnology 
companies and pharmaceutical companies equally.  We're the same industry,  
with the same customers, practicing similar science.

The traditional approaches of the PTO were sufficient to stimulate 
investment in innovation in both sectors of the drug discovery and 
development-based industry and they would be going forward.

Fourth.  I think you should emphasize consistency across and within 
technological areas.  Just because one approach is labeled "new 
technology" and another is not, does not mean that the basic approaches 
or risks are necessarily different.  Even the most traditional of 
technologies, most of the compounds generated by those traditional 
technologies will fail.

Fifth.  When in doubt, grant therapeutic claims based on specific 
examples provided in the patent application with scope commensurate with 
reasonable extrapolation from the examples provided.

Finally, I would urge you to be equally or even more prudent in the 
allowance of broad concept patents.  Allowance of reasonable claims based 
on examples provided in patent applications is sufficient to stimulate 
innovation in this area.  Granting broad concept patents I think is very 
rarely justified in the pharmaceutical industry.

With that I'll stop and answer any questions that you have.

COMMISSIONER LEHMAN:  Your testimony was so clear that I don't think we 
have any questions.

DOCTOR CROOKE:  Good for you.

COMMISSIONER LEHMAN:  Thank you very much.

DOCTOR CROOKE:  Thank you.

COMMISSIONER LEHMAN:  Next I'd like to ask Vincent Gioia, from Christie, 
Parker and Hale, to come forward.    


MR. GIOIA:  Thank you for giving me the opportunity to make these 
remarks.  My name is Vincent Gioia.  I'm a partner with the law firm of 
Christie, Parker and Hale, in Pasadena, California.

I'm here to request the Patent and Trademark Office to consider 
recommending amendment to the plant Patent Act, to extent the grant to 
parts of plants.  Under 35 U.S.C. 161 and 163, inventors and discovers of 
new plant varieties are granted the right to exclude others from 
asexually reproducing plants of the new variety or selling or using 
plants so reproduced.

The law does not expressly apply to cut flowers and fruit of plants of 
patented varieties.  Consequently, fruit or cut flowers of a patented 
variety may be imported with impunity to the considerable economic 
disadvantage of plant patent owners, their licensees and the labor force 
of the industry adversely affected.

It is in the public interest to close this loophole so that owners of 
U.S. plant patents and those engaged in commerce in patented varieties 
will not suffer unfair competitive disadvantage.  Correction of this 
inequity only requires a modest amendment to 35 U.S.C. 163 to make it 
clear that in the case of a plant patent the grant shall be the right to 
exclude others from asexually reproducing plants of the patented variety 
or selling or using the plants so reproduced, or any part thereof.

There's presently very significant importation of parts of plants, such 
as fruit and cut flowers of plants of patented varieties, into the United 
States.  Illustrative of the extent and impact of importation of products 
produced by plants of U.S. patented varieties grown outside the United 
States is the situation with cut roses.

Cut roses was the subject of a report by the United States International 
Trade Commission in April 1989.  In this report -- summarizing the impact 
of the cut flower importation -- the Executive Summary of the report 
states:  "The U.S. fresh cut rose industry has steadily lost market share 
to imported roses over the last decade.  In 1985 imported roses accounted 
for 26.5-percent of the U.S. apparent consumption of roses.  By 1988 
imports had increased their share by over 40-percent accounting for 
37.9-percent of apparent consumption."

The Executive Summary goes on to state that, "Although sales of fresh 
cut roses increased by 10-percent, during 1985 to 1988, the total growing 
and operating expenses increased faster and, moreover, the number of 
firms reporting losses increased from 31 in 1985 and 1986 to 36 in 1988."  
Again, according to the Executive Summary, those firms reporting losses 
represented almost 38 percent of the growers.  It is logical that a 
similar impact on domestic industry has occurred with respect to other 
plant parts, such as berries and other fruit, nuts, and fiber.

A copy of the Executive Summary, which I've just referred to, is 
appendixed to the report which I submitted for these hearings.  A full 
copy of the ITC report is also available upon request from me or from the 

It is obvious that the impact on domestic industry and those employed by 
the industry is enormous.  Most people working in the agriculture 
industry are low wage earners without training and skills required for 
other employment.  The adverse impact of the expanding imports of flowers 
and fruit of U.S. patented varieties is measured by these people in loss 
of opportunity in jobs and a lower standard of living.

Although the U.S. Supreme Court and U.S. Patent and Trademark Office 
Board of Patent Appeals and Interferences have agreed that utility patent 
protection under 35 U.S.C. 101 should be available to plant inventions, 
in practice, asexually reproducible plants are not able to qualify for 
utility patents.  Even though it has become acceptable to satisfy 
enabling requirements of 35 U.S.C. 112 by providing a deposit of 
biological material in a suitable depository, the fact is that it is not 
feasible, practical or, indeed, technologically possible at the present 
time to provide a deposit of biological material of asexually reproduced 
plants in a manner which would satisfy present U.S. Patent and Trademark 
Office policies and practices.

Therefore, the Plant Patent Act remains the only viable means for 
protecting new varieties of plants -- of asexually reproduced plants.  
Failure to extend this protection to the parts of the plants is not only 
unjust but would result in a continuation of the severe damage to 
domestic industries as indicated in the ITC report.

In order to extend full protection of the patent law to inventors and 
discovers of new plant varieties, amendment of 35 U.S.C. 163 is required 
to extend the patent grant to parts of plants.  This may be done by a 
simple modification such as the following:

In the case of a plant patent, the grant shall be the right to exclude 
others from reproducing plants of the patented variety or selling or 
using the plants so reproduced, or any part thereof.  This suggested 
amendment no only clarifies that the protection extends to parts of 
plants but would also make 35 U.S.C. 163 consistent with 35 U.S.C. 161, 
which states that whoever invents or discovers and asexually reproduces 
any distinct and new variety of plant may obtain a patent there for.

Clarifying the rights granted the plant patent holders, as suggested, is 
necessary to avoid unfair competition from abroad and would place owners 
of plant patents in a position comparable to the holders of utility 

Thank you very much.

COMMISSIONER LEHMAN:  Thank you.  Is there a trade association that 
represents people that you're talking about?

MR. GIOIA:  I've been in the practice of plant variety protection for 
over 30 years and I've represented breeders of new varieties, almost all 
phases of the plant industry.  There are a couple of trade associations, 
most particularly the Roses Incorporated, which is a trade association of 
cut flower growers.  There's also a national association of Plant Patent 
Owners who is expressing a similar position as I've described in this 
issue, and one which I would also endorse and probably they would endorse 
my comments as well.

COMMISSIONER LEHMAN:  Well, the reason I asked that question is because 
to the extent that you're talking about statutory change, which you are, 
and we had recent change in the Plant Variety Protection Act to implement 
an international treaty just recently.  It really helps to have some 
group that represents, you know, sort of common interests.    

MR. GIOIA:  Yeah.  I would like to mention in that regard that the Plant 
Variety Protection Act is applicable to sexually reproducible varieties.  
Asexually reproducible varieties are protected under the Plant Patent Act 
so, therefore, the changes that you've mentioned that have been proposed 
for the Plant Variety Protection Act, primarily to bring us into 
compliance with the treaty, newly proposed convention of UPOV, won't have 
any effect at all on the Plant Patent Act.

COMMISSIONER LEHMAN:  But we could have used that vehicle, that's what 

MR. GIOIA:  Possibly we could have.  Your announcement of these 
hearings, however, raised the opportunity to present this issue to the 
Patent and Trademark Office along with this request for your assistance 
in making these recommended changes to the Plant Patent Act.

COMMISSIONER LEHMAN:  Is there any opposition that you know of to this?

MR. GIOIA:  I know of no opposition to this unless it may be from the 
importers of the pirated plant patented varieties who are exporting from 
countries in which no protection is available to breeders the cut flowers 
and other plant parts into the U.S. market for consumption here.

MS. LINCK:  Does the American Rose Society take a position on this 

MR. GIOIA:  The American Rose Society is an organization of amateur rose 
growers.  They're not typically representing the industry, although 
industry -- members of the industry are active in the American Rose 
Society.  I am a past president of the American Rose Society and also of 
the World Federation of Rose Societies, which is the international group  
composed of the national rose societies and they typically do not take 
political positions on legislature.  

MS. LINCK:  Thank you.

COMMISSIONER LEHMAN:  Thank you very much.

Next I'd like to ask Mark Toohey, from Spencer, Frank, and Schneider, to 
come forward, please.


MR. TOOHEY:  Thank you, Commissioner Lehman.

My name is Mark Toohey.  I work with Spencer, Frank, and Schneider.  I'm 
a registered agent at this point in time finishing up my law degree.  I 
have a doctorate in biochemistry and as part of my legal degree 
requirements I was studying the issue of practical utility so these 
hearings came at an opportune time for me.  I have extensively studies 
the case law with respect to both 101 and 112, and I have been 
particularly interested in the pharmaceutical inventions. 

I've come to the conclusion that the Patent and Trademark Office is 
wrong to maintain the policy they have in rejecting certain classes of 
biotech inventions on the basis of a lack of practical utility.  The 
Patent Office is wrong because it's narrowly reading the statute under 
Section 101.  The Patent Office is wrong because it's misinterpreting the 
decisional law and it's wrong because I don't feel it even has the 
jurisdiction to be in this question.

In misinterpreting the statute, the office is following the Brenner v 
Manson decision in 1966.  That decision is really directed toward a 
question that was first asked in In re Brenner and the question is 
whether or not someone must state a utility in their application.  The 
court and the office agreed that the utility must be stated.  The Manson 
applicant did not state the utility and so the invention was found not to 
be patentable to him.  It was unpatentable not because of the class of 
the invention, which is a pharmaceutical, and not for the use, which is 
in humans.  It was unpatentable because of a procedural error in not 
alleging utility.  Yet the office relies on Manson in its rejection of 
these biotech inventions.

The Manson majority also narrowly construed Section 101.  The court 
later corrected itself, Diamond v Chakrabarty.  In Diamond v Chakrabarty, 
Judge Rich's appellate decision was followed.  There Judge Rich tells us 
that the House Committee reports say that Section 101 is directed to 
anything under the sun made by man.  The PTO has never corrected itself.  
Biotech inventions are under the sun and they are made by man.  They are 

Judge Rich also tells us that Section 101 is the first door to 
patentability.  Section 102 is the second door, and it says the applicant 
is entitled to a patent unless certain statutorily defined criteria are 
not met.  There is a presumption of patentability.  There is a 
presumption of enablement under Langer.  There is a presumption, I 
believe, under Section 101 of utility also.

With regard to the question of statistically significant clinical 
trials.  That is not the law.  Case after case says that is not the law 
yet the Patent Office or the examiners in the office continue to assert 
that that is the law.  Since the 1961 Krimmel decision, it's consistently 
been held in the CCPA and also in the Federal Circuit that standard 
experimental animals and the usefulness there is sufficient proof of 
utility.  That should be so.  That is the industry standard.  And now 
more often in vitro tests is an industry standard.  Animal tests are 
sufficient in the EPO.  Animal tests are sufficient in the JPO.  I 
routinely run across the situation where I have applications, the claims 
of which are allowed in the EPO, allowed in the JPO and blocked in the 
USPTO.  I don't understand why we have this policy.

We would assume the Patent Office would try to promote the industry.  
We've heard this morning how it's not particularly helping in this 
utility issue.  We would think it would encourage the use of animal 
models because they're economical, they are reliable -- to an extent -- 
and they are less dangerous.  Why have human data necessary?  We think 
the Patent Office should -- or I think the Patent Office should also 
encourage in vitro tests.  There's a benefit to the public there that 
goes beyond the animal models.  That is there are some parts of the 
public who are concerned about the ethics of using animal 
experimentation.  In vitro tests would allay those concerns.

The Patent Office has also argued in the past and continues to argue 
that it must be extremely cautious in issuing patents intended for human 
use.  The office relies on a 1957 decision of Eisenstadt v Watson, where 
the judge  expressed concern about the official imprimatur, as is note in 
the Notice of these hearings, that is associated with a patent, whether 
rightly or wrongly, and would leave the unsophisticated and the public to 
believe that the invention works in each and every way described in a 
specification.  But this argument misses the point, which has already 
been brought up this morning, that the official imprimatur does not give 
the public anything.  The public cannot have access to the drug without 
approval by the FDA, EPA, USDA and other regulatory authorities.  That 
brings me to the point of jurisdiction.  As early as the 1962 case In re 
Hardtop, the court recognized that jurisdiction in the issue of safety 
and efficacy belongs with primarily the FDA.  The Patent Office has never 
gotten to that decision.

One need only look at Title 21 of the United States Code, the Food, 
Drug, and Cosmetic Act, and all the implementing regulations under that 
Act, to see the FDA has jurisdiction on safety and efficacy issues.  If 
the Patent Office is disregarding the court decisions, it's disregarding 
these statutes and it continues to assert jurisdiction on the basis of a 
strained interpretation of a single word -- utility -- in the patent 
statute.  I believe the Patent Office should back off in this regard.  I 
think it should leave the question of safety and efficacy to the FDA.  
They are the ones who have the expertise to determine safety and 
efficacy, not the Patent Office.

I will stop here in the interest of time.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Toohey.

Next I'd like to ask Allen Dow, from Klarquist, Sparkman, Campbell, 
Leigh and Whinston to come forward. 


MR. DOW:  Thank you, Mr. Commissioner.  I'm an attorney with the law 
firm of Klarquist, Sparkman, Campbell, Leigh and Whinston, in Portland, 
Oregon.  And even as far northwest as Portland our public officials have 
thought of biotechnology as well as other high technology fields as 
undergirding economic development for the coming several decades, so this 
is of great interest to our region as well.

My position in the schedule has reduced my talk, in large part, to a 
series of ditto marks, so if I stumble and pause for a moment you can 
utter yourself the ditto.  I won't do that myself.  That's especially in 
regards to the citation of case law.

I'd like to respond in part to the Commissioner's comment regarding the 
presumption of utility and again harken to other areas of technology, 
like electrical and mechanical cases.  In this regard, I do have a cite 
that I haven't heard before from the attorneys who have preceded me, and 
others discussing the utility requirement, and that is the dissenting 
opinion by Judge Smith in In re Joly where he said that the application 
of the practical utility requirement to -- in that case chemical 
pharmaceuticals -- if that same standard had been applied to mechanical 
inventions, for example, or electrical inventions, would have rendered 
unpatentable the Wright Brothers airplane, the Bell Telephone, the Morris 
Telegraph, and Edison's light bulb at the stage of development at which 
they actually reached the Patent Office.

Now, I flew here in an airplane.  I dozed much of the flight.  I found 
it safe and effective.  I may not have had that same experience if I had 
flown that 120 feet at about 12 feet of altitude with the Wright Brothers 
in their first airplane.

I also think the case law, Chilowsky, Langer and others, also support 
the notion that utility should be presumed, at least until the examiner 
can cite to relevant scientific data that undergirds the argument of 
asserted utility.

More generally, in cases in which a pharmaceutical utility is asserted, 
it just blocks patentability altogether.  I've heard a couple of times 
from panelist here, the solicitor in particular, a request that we simply 
appeal to the Federal Circuit to get clarification of the case law.  And 
what may be, as the gentleman from Hoffman-La Roche indicated, a 
roadblock for Hoffman-La Roche just stops small biotechnology companies 
and universities dead in their tracks.  They simply cannot mount the 
funds to attack through the Board of Appeals to the Federal Circuit.  
It's also been stated that the standards of utility, as applied by the 
Patent Office, may wish to be reserved for the Supreme Court if the 
Federal Circuit were to find otherwise, and we believed that the 
likelihood of certiorari being granted by the Supreme Court is simply 
dismal if we were to try to take the same steps.

MS. LINCK:  I guess a this point I'd like to interrupt because, based on 
what I've heard, it sounds to me like we don't have a lot of Board of 
Appeals' cases that are inconsistent with the standards that we are 
trying to apply and we believe that you want applied.  So I guess at this 
point I would say, you know, at least get them to the Board, and if you 
can cite me cases where the Board has been inconsistent with the 
standards that you are espousing, you know, I would appreciate that as 

MR. DOW:  I'm happy to do so in my written comments.  I haven't really 
prepared a brief of recent Board decisions.  In fact, my basic point was 
an appeal for the Patent Office to simply apply the standards announced 
in the CCPA and Federal Circuit cases already discussed here today.  It's 
simply the case -- even an appeal to the Board for clients of ours, such 
as the Oregon Health Sciences University or Oregon State University and 
others, is simply an investment that they really feel they can't make and 
so we really need justice at the level of patent examination.  Deep 
pocket justice won't help us.  We've had several cases in which we've 
gone to the client and actually offered -- in one case in particular -- 
actually offered to do this as a pro bono effort and, in this case, the 
university said, "I'm sorry.  We just really don't want to go forward.  
If the Patent Office is going to consistently reject this kind of claim, 
we're just going to have to stop here."

MS. LINCK:  Again you're in an area, emerging technology, and it's 
difficult to apply case law in well established technologies to cases in 
emerging technologies, and we do the best we can.  But if you stop at the 
examiner level when we're struggling to do the best job we can, it's very 
difficult for us to identify the errors that are happening consistently.  
So that's why --

MR. DOW:  We're certainly going to do our best, Madam Solicitor, to 
encourage our clients to use our services in appealing to the Board.

MS. LINCK:  I appreciate that.  Thank you.

MR. DOW:  You're going to hear some dittos, and I just want to pass 
through the case law to some experiences I've had in actually trying to 
prosecute patent applications.  I think in one case in particular of a 
case in which human pharmaceutical utility wasn't asserted but rather a 
utility as an animal vaccine and, in this case again, we ran into 101, 
112 rejection based on lack of utility because we hadn't shown that a 
herd receiving a vaccine would necessarily be able to mount a response to 
the contagion.  And in this case the claim that was rejected was a DNA 
claim, and I just -- again, one of the comments from the panel has been 
that much of the I suppose high-pitch whining of the patent bar has been 
anecdotal at best.

I just want to toss one more anecdote into the ring.  In this case, up 
through four or five office actions at a cost to our client of tens of 
thousands of dollars, the claim continued to be rejected as a -- for lack 
utility even though it was a DNA claim and other utilities had been 
asserted in the specification, for example, as probes and so forth.  And 
it just seemed, to me at least, abusive in that particular case.

I will say, too, that it seems to be beyond the level of an individual 
examiner.  In this case, due to restriction requirement, there were at 
least three applications before the Patent Office and we received almost 
identical rejections in all three cases, which appeared to me to be less 
a sign of individual examiners being unreasonable than of examiners of a 
group representing some kind of policy, if you will.  And that troubled 
me more than individual examiner stories, which I think we're going to 
encounter in any practice group and on any given day.

Let me simply stop by again making my plea that the decisions of the 
CCPA and the Federal Circuit be applied consistently and fairly to 
applications in this field.

Thank you very much.

COMMISSIONER LEHMAN:  Can I just ask one question.  Are there any 
circumstances under which you think that -- would you say that human 
clinical data would never be required to prove utility?

MR. DOW:  "Would never be required to prove utility." I had actually 
prepared a short list which I nixed out but now I have time for that.  If 
I could just run through five instances where I think the legal standard 
would support not requiring human data.

First.  When those skilled in the art attest under oath that the test 
data offered by the applicant shows pharmaceutical utility, that really 
should be legally sufficient.

Second.  Where there's been proof that the animal model used is one 
commonly used by those skilled in the art.  Now, this is a problem 
especially in biotechnology.  I think in Cross v Iisuka, for example, not 
to require human data is clearly allowed, if you will.  And that for many 
biotechnology inventions there's no such thing really as a standard 
experimental model, simply because you have a new class of drug.  A 
brand-new class of drug.  And I think there once you simply looked at the 
literature, what are people using as tests to determine the 
pharmacological activity of the drug at question.  I really don't believe 
the public will be visited with any great ill as a result of a 
disclosure, perhaps premature, of pharmaceutical utility where the FDA 
and the market get to take their shot.

Also, finally, licensing is I think a clear sign of  utility; a company 
being formed to exploit the technology and the fact that a party has 
undertaken the expensive human trials, notwithstanding the lack of a 
patent or at least during the pendency of the patent.

COMMISSIONER LEHMAN:  Thank you very much.

MR. DOW:  Thank you.

COMMISSIONER LEHMAN:  Next I'd like to ask Ned Israelsen, of Knobbe, 
Martens, Olson and Bear, to come forward, please.


MR. ISRAELSEN:  Thank you, Commissioner, distinguished panelists.  My 
name is Ned Israelsen.  I'm a patent attorney with the firm of Knobbe, 
Martens, Olson and Bear.  I head up a 12-person biotechnology group and 
my clients include several biotechnology companies, universities, private 
research institutions and the National Institutes of Health.  In addition 
to sharing my personal views, two of my San Diego biotechnology clients 
-- ViCal, Inc., and Alliance Pharmaceutical Corp. -- have asked me to 
present testimony on their behalf.

As most of the other speakers have, I would first like to touch on the 
issue of utility and enablement; the rejections that we're getting under 
the broad heading of operability.  And, then, time permitting, I'd like 
to touch on a few new points that haven't been raised much; the average 
pendency statistics that the PTO has promulgated; the legal training of 
examiners; 102(e)/103 rejections; and a new type of In re Katz rejection.

In 1980 the CCPA decided Nelson v Bowler which held that mere 
demonstration of a pharmacological activity was sufficient to establish a 
patentable utility even without disclosure of any specific therapeutic 
use.  This decision has been followed in Cross v Iizaku and other cases 
that have been discussed today.  Also, in the Brenner v Manson case, the 
Supreme Court tied the utility of a method involving a compound to the 
utility of the compound itself, so I would propose that disclosure of a 
method for achieving a pharmacological activity is similarly patentable 
under the Cross v Iizuka standard.

Other speakers have pointed out that it is the FDA, not the PTO, that 
has the expertise and the statutory responsibility to determine safety 
and efficacy.  In re Anthony is a particular case in point.  There the 
FDA actually pulled the drug from the market and yet the CCPA said that 
it satisfied the statutory utility standard.

In direct contrast to the case law, I believe that Group 1800, in 
particular, has promulgated an extremely high standard of utility and 
that inventions dealing with pharmaceuticals and pharmaceutical 
treatments are held to a much higher standard in Group 1800 than, for 
example, comparable inventions are held in Group 1200.  I believe there 
is a clear conflict between the two groups in the way the law is applied.

The meeting Notice asked for specific sanitized examples, if available, 
of some of the horror stories that we're faced with.  Let me give you a 

My first example deals with a method for treating animals, a method that 
has general applicability, is not limited to human therapy, the claims -- 
although that's discussed in the specification -- the claims are not 
limited to human therapy.  This series of applications was filed five 
years ago.  Three and a half years ago the claims were held to be free of 
the prior art.  Since that time, though, a utility/enablement rejection, 
under Sections 101 and the first paragraph of 112, has been entered and 
five interviews later, seven declarations later submitting experimental 
evidence, and 17 publications by third parties who have successfully 
practiced the invention and reported the results, we still are faced with 
a utility and enablement rejection because although the industry has 
accepted the invention, the operability of the invention, the examiner 
has not.  The question of appeal was raised by Ms. Linck.  Should we take 
these cases on appeal, and certainly we struggle with that.  My 
perception is that appeals take several years now in the biotech area; 
that because there are fewer examiners-in-chief who have biotech training 
these cases are put on the slow track.  We just can't wait.

The next example deals with a gene therapy invention.  This application 
was allowed.  The examiner was then reassigned.  The case was withdrawn 
from issue.  A utility rejection was put in place and although the 
examiner cited no affirmative evidence in support of this rejection for 
lack of utility, it's been maintained.  The FDA had determined that 
evidence of safety is sufficient that -- and efficacy is sufficient that 
human clinical trials can begin.  Apparently the examiner is the only one 
who is not convinced.

The PTO in its Notice seeks to justify a high standard under the 
fallacious argument that a patent places the imprimatur of the federal 
government on the invention, perhaps to the point that it would mislead 
patients and others.  As other speakers have noted, it's the FDA, not the 
PTO that determines safety and efficacy.  And there's really no harm if a 
non-efficacious or non-commercializable invention ultimately makes it 
through the patent system and if it doesn't get FDA approval it will 
merely fade into obscurity.  And if you look at the statistics, out of a 
handful, out of I should say thousands of pharmaceutical patents that do 
make it through the gauntlet, there are only a handful of inventions that 
are -- new drugs that do receive FDA approval in any given year.  So if 
the PTO is measuring its success rate by whether an invention makes it to 
the market, that's the wrong measure of success.

There are some who say that applications should not be filed until 
extensive supporting data are in hand, but this ignores reality.  An 
early filing date is essential because except for the U.S. the entire 
industrialized world is on a "first-to-file" system, and we rely on our 
U.S. filing date for that purpose.  A patent can't wait, in any event, 
because inventors publish their results and these published results could 
then be used to reject the later application that has the more extensive 
data Group 1800 seems to want.

With a time period required of six, to eight, to ten years and over $100 
million to develop these data, small biotech companies simply cannot 
survive that long, and if they don't have the patent the investment 
capital will not be available.  The problem is even more acute for 
non-profit research institutions and institutions such as NIH.

Let me jump to a couple of new points.  When Congress amended the 
Section 103 to exempt rejections based on inventions made by people 
working at the same company, under Section 102(f) and (g), it had a major 
oversight.  That is that it forgot to include Section 102(e).  Now, when 
inventors work together and a CIP is filed, the -- if the inventorship is 
at all different, the second application is rejected over the first.  If 
the first patent issues the CIP is simply unpatentable.  If not, the only 
cure is to combine the two applications together, file a third 
application and then split them into fourth and fifth applications all to 
exalt form over substance and overcome an objection that really never 
should be made in the first place, that is the rejection of one 
inventor's invention over co-workers at the same company.

Another solution might be to amend the statute to allow corporations to 
be applicants for patent and focus on inventions coming out of a 
corporation rather than just inventions by particular inventive entities.

Next, the push to cut average pendency has been -- of applications in 
the biotech area has been counterproductive.  Although applications 
average pendency has shortened up, numerous continuations are now 
necessary with the result that it's taking longer than ever to get our 
biotech patents issued.

Thank you.

MS. LINCK:  I have one comment, again pushing for the appeals.  The 
Board has a number of new members on it since Mr. McElvy took over and I 
know that there are at least three that are skilled in the biotech art 
that have been added to the Board, so perhaps you'll have a little bit 
speedier action there.


COMMISSIONER LEHMAN:  Thank you very much.

That concludes our morning session.  We will be returning in 
approximately 50 minutes, 2:00 o'clock, to begin the afternoon session.

(Whereupon, at 1:10 p.m., the above-entitled matter recessed to 
reconvene at 2:00 p.m. the same day.)


COMMISSIONER LEHMAN:  We're back on the record and we'll get underway 
now.  I'd like to think the City of San Diego for being so nice and 
providing this great room for us and this is a wonderful facility for us 
to have our meeting in.

Our next witness is Barbara Rae-Venter from Weil, Gotshal and Manges.


MS. RAE-VENTER:  Commissioner Lehman and distinguished members of the 
panel, good afternoon.  My name is Barbara Rae-Venter.  I'm a partner 
with Weil, Gotshal and Manges and head of the biotechnologies practice 
for the firm.  I'm resident in the Silicon Valley office.

Weil, Gotshal and Manges is an international general practice firm with 
a diverse array of biotechnology and pharmaceutical clients.  My personal 
specialty is patent prosecution and counseling.  I'm speaking on behalf 
of BIO, of which Weil, Gotshal and Manges is a member.  I will testify on 
the case law relating to technical standards used in measuring 
nonobviousness and enablement of biotechnology inventions.  The full text 
of BIO's testimony on the subject has already been made of record and a 
supplemental to testimony by BIO in a previous hearing on nonobviousness.

Nonobviousness and enablement are distinct requirements of the patent 
code.  However, both inquiries are grounded in assessment of what the 
specification or prior art would teach or suggest to a person of ordinary 
skill in the art.  In many instances, the critical question to be 
answered in an obviousness inquiry is whether a person of ordinary skill 
in the art would have had a reasonable expectation of success in 
performing an experiment suggested by the prior art.  By the same token, 
often the critical question to be addressed in an enablement inquiry is 
whether in light of the teaching provided in the patent specification a 
person of skill in the art could make and use the claimed invention 
without undue experimentation.

Logic dictates that the skill level of this mythical person should not 
change as we move from Section 103 where examiners tend to see this 
person as one with genius level skill to Section 112 where examiners tend 
to see this person as one with very little skill.  I will focus my 
testimony around this apparent dichotomy and the effects that this has 
had on determining patentability of biotechnology inventions.

As regards the level of skill to be attributed to a person of ordinary 
skill in the art, during an obviousness inquiry, very few biotechnology 
cases have focused directly on this issue.  For example, in Bell, -- and 
I'm going to omit the cites for the cases -- Engine, and Vaeck, as well 
as the published cases from the PTO Board, the obviousness issue has 
turned on what the prior art would have suggested to a person of ordinary 
skill in the art, or whether that person would have had a reasonable 
expectation of success in carrying out an experiment, but the scientific 
attributes of the person of ordinary skill have not been elucidated.  
Even in In re O'Farrell, the case that contains the most discussion of 
the obviousness issue in the context of a biotechnology invention, 
specifics concerning the level of skill in the art are addressed solely 
by reference to the fact that, quote:  "Appellants say that in 1976 those 
of ordinary skill in the arts of molecular biology and recombinant DNA 
technology were research scientists who had extraordinary skill in the 
relevant arts and were among the brightest biologists in the world."  End 
of quote.  Nonetheless, there is no apparent basis in the case law to 
suggest that the standards for determining the applicable level of skill 
possessed by the person of ordinary skill in the art of biotechnology 
should be any different than those used for making that determination in 
other arts.  Thus it is clear that the person of ordinary skill in the 
biotechnology field should be considered to be the designer or problem 
solver in the art, not the user of the invention.  While the person of 
ordinary skill is presumed to be aware of all the pertinent prior art, 
she is one who thinks along the lines of conventional wisdom in the art 
and is not innovation oriented.  Consequently, the obviousness of an 
invention to the actual inventor is acknowledged to be irrelevant because 
inventors are acknowledged as a class to possess skill that sets them 
apart from the person of ordinary skill in the art.

Though the cases contain very little discussion of the attributes 
possessed by the person of ordinary skill, the positions taken by the 
Patent Office in In re Bell, Duel, and Movva, suggests that examiners may 
be applying under an obviousness analysis a far higher level of skill 
than that actually possessed by the ordinary person of skill in the art.

An example of the application of this high standard is that examiners 
are rejecting claims to DNA sequences on obviousness grounds based upon 
information concerning the amino acid sequence of a protein and a 
reference describing at most a general cloning method such as the use of 

And in In re Bell, the court considered such an obviousness rejection.  
In Bell the applicants had isolated the human IGF1 and IGF2 genes and saw 
it in earlier claims to those compositions having the DNA sequences of 
the isolated genes and certain DNA genes they would hybridize to the 
genes.  The PTO Board had affirmed the examiner's rejection holding that 
the examiner had established a prima facie case of obviousness for 
compositions having the claimed DNA sequences in light of the known amino 
acid sequence of IGF1, the correspondent link between amino acid sequence 
and DNA sequences based on the redundancy of the genetic code and a prior 
art patent describing a general method of isolating a gene for which at 
least a short amino acid sequence of the encoded protein is known based 
on constructing nucleic acid probes.

In reversing the PTO's decision holding that a prima facie case of 
obviousness had been established the Federal Circuit acknowledged that 
their PTO's decision rested on the assumption that, quote:  "Just as 
closely related homologues analogues and isomers in chemistry may create 
a prima facie case, the relationship between a nucleic acid sequence and 
the protein it encodes also makes a gene prima facie obvious over its 
correspondent protein."  The court then held that the PTO had not met its 
burden of showing that the prior art would have suggested the claimed 
sequences because the known amino acid sequence, in light of the 
degeneracy of the code, might have yielded 10 to the 36th sequences but 
would not have taught one of skill in the art which of those sequences 
corresponds to the IGF gene which was the claimed invention.

At the same time the court rejected the notion that the prior art patent 
filled the gap, i.e., when combined with a known amino acid sequence of 
IGF1, rendered the claimed sequence as obvious.  The court noted that 
when read carefully the reference actually taught away from the claimed 
invention because it suggested the desirability of designing probes based 
upon unique code-ons, and IGF had no such unique code-ons.

Finally, the court rejected the PTO's argument that the prior art 
reference supplied the necessary teaching because the applicant himself 
had used the method suggested by the prior art in designing the probes 
that were used to isolate the cloned gene -- the claimed, excuse me, 

Labeling the PTO's focus on Bell's method, quote, "misplaced," end of 
quote, the court pointed out that Bell's claimed compositions, not the 
method by which they are made, and cited case law supporting the 
proposition, that the patentability of a product does not depend on its 
method of production.  This latter statement by the court is quite 
important in that it is the difference between the subject matter sought 
to be patented and the prior art to which it is to be compared in the 
obviousness determination, not the method by which the invention is made 
that is relevant.

As recognized by the court and is supported by a long line of cases, 
whether a composition is patentable depends on whether the composition is 
known in the art or is obvious and not whether the process by which the 
composition is made is patentable.  Unfortunately, the decision in In re 
Bell appears to have done little to dissuade examiners from continuing to 
reject claims directed to DNA compositions based on some partial amino 
acid sequence data and the generalized assertion that a particular prior 
art cloning method would have resulted in a reasonable expectation of 
isolating the claimed compound.

In Ex parte Movva and Ex parte Deuel, the PTO again rejected claims as 
obvious based almost entirely on a prior art method to isolate the 
claimed compound.  In so doing, the PTO is failing to properly consider 
the statement by the court that it is the claims that define the 
invention, not the method of making the claimed compositions.  A careful 
reading of the facts in Deuel necessitates a conclusion that the focus of 
the PTOs inquiry is almost solely on the cloning method, not on 
structural similarity.  That focus runs directly counter to the Federal 
Court statement in Bell.  In Deuel, the prior art supplied only a partial 
amino acid sequence and only the most general information about cloning.  
Apparently absent from a general method was any information about the 
various parameters that one in the art may have needed to vary if 
attempting to apply the prior art method to a particular desired gene 
sequence.  In fact, this case highlights one of the biotechnology 
industry's main concerns with the PTO's position that such bare bones 
information fully satisfies its obligation to make a prima facie case of 
obviousness.  Placing the burden on applicants to prove the negative, 
i.e., that the alleged method would not be expected to yield the claimed 
composition, is nearly impossible, especially in light of the PTOs 
consistent refusal to cite relevant experimental parameters.

Returning to the skill level applied by examiners under Section 103, 
even if the determination that the skill level is high for the art was 
correct, examiners take a position concerning the level of skill in the 
art in connection with an obviousness inquiry that conflicts with the 
level of skill applied by the examiner in the enablement inquiry.  
However, as recognized by the PTO in their brief to the Federal Circuit 
in the Deuel case, quote:  "To that end the prior art must describe the 
compound in such full, concise and exact terms as to enable any person 
skilled in the art to make and use the compound."  End of quote.  In 
fact, in Hybritech the court reversed the district court holding and 
labeled internally inconsistent findings by the court that the method for 
producing monocloned antibodies was well known in the art in a Section 
103 inquiry, while at the same time holding the patent deficient for lack 
of enabling disclosure because it fails to teach how to make monocloned 
antibodies.  As a result, it is disingenuous to argue that a claim to a 
genus is not enabled due to the lack of disclosure of a sufficient number 
of species while simultaneously arguing that in light of some prior art 
reference one of skill in the art would have had a reasonable expectation 
of success in making one of the claimed species.

In summary, it is BIO's position that examiners are not properly 
construing and applying the statutory requirements for patentability.  In 
the area of nonobviousness, the PTO had misinterpreted the law concerning 
the test for patentability of biotechnology inventions.  In the case of 
both nonobviousness and enablement requirements, the law is often 
misapplied and inconsistent positions are taken.  Furthermore, all to 
frequently patent examiners failed to cite any prior art or other 
evidence in support of their conclusions, relying instead on supposition 
or unsupported assertion.  The practical effect of the PTO's position 
cannot be understated.  Patent Office statistics readily demonstrate that 
biotechnology patent applications take longer on average to prosecute 
than applications directed to any other technology.  The cases at issue 
are often extremely narrow and limited to embodiments that have been 
actually reduced to practice.  As a result, the claims are often of 
little commercial use.   Time is money and, unfortunately, far too many 
precious resources are being needlessly spent by biotechnology companies 
to secure protection for the results of their research.  At the same 
time, misapplication of the requirements for patentability effectively 
deprive these same companies of the full return due on their research 
investment.  Thank you.

COMMISSIONER LEHMAN:  Thank you.  I would say that I think there is 
something that you said which is incorrect and that is the biotechnology 
applications take longer to process.  They really don't.  They're -- 
Group 2300 has a longer pendency period, for example, than Group 1800.  
2300 is the --

MS. RAE-VENTER:  If you take into account the fact that biotechnology 
cases often get refiled several times, I believe it's correct that they, 
in fact, take a very, very long time.

COMMISSIONER LEHMAN:  Well, one of the things that I think we need to do 
is have better statistics about what  really is going on, and we're going 
to be working on that.  Because we seem to be hearing a lot of anecdotal 
evidence and we need to know whether that is really, you know, reflective 
of what's going on.

Thank you very much.  

Next I'm going to ask Timothy Gens to come back.  He only took five 
minutes of his time this morning and he wanted the other five minutes 
this afternoon so that he could discuss the issues that we're talking 
about here.  I assume you're going to talk about the obviousness question 
as well.


MR. GENS:  Good afternoon, Mr. Commissioner and distinguished panelists.  
I am Timothy Gens with Fenwick and West and I am presenting these remarks 
on behalf of BIO.  A complete copy of the text has been previously 

I'm going to address the first question under the issue of 
"obviousness," and, respectfully, Mr. Commissioner, I don't think you'll 
like these comments much better than this morning.  Rather than start 
round two just yet, I'd like to focus on a recommendation so that it is 
not overshadowed by the differences in other areas, and that is that we 
suggest to the Patent Office that it open the initial and continuing 
education program of the examiners to the public so that the basis of the 
examiners' legal education is known to the public.  This should provide a 
consensus starting point for legal arguments to be applied to the facts 
of the invention under examination.  There are clearly many advantages to 
establishing a legal education for the examiners which reflects a general 
consensus of both the Patent Office and the patent bar as representatives 
of the inventors.

Should fewer appeals result as a consequence, the savings and economic 
and inventive power alone justifies the effort.   Accordingly, we 
recommend allowing the patent bar to cooperate in the education of the 
examiners by providing comment on the Federal Court case law.  As it 
appears now, the Patent Office relies upon the appeal process to police 
the legal standards of the federal courts.  This is very costly for both 
the Patent Office and the inventors.  In the "Notice for Comments," the 
Patent Office recognizes that the body of case law is growing and is 
helpful in giving direction for implementing the requirement for 
obviousness.  Unfortunately, this is a harmful, self-fulfilling prophecy.  
This growing body of case law is being generated by the misapplication of 
legal standards which are already well defined, although in different 
technological areas or factual situations.  This is similar to a drug 
company doing away with quality control and gauging the quality of its 
products on survivors who sue or their family members.

The growing number of recent decisions by the Federal Courts on 
biotechnology patent issues is only the tip of the iceberg.  It 
represents a small fraction of the examiners' decisions that could have, 
probably should have, been appealed.  Very few inventors have the capital 
and human resources to challenge a misapplied legal standard; first 
through the Patent Office's examination, then through the Board of 
Appeals, and then into the Federal Courts.  The current implementation of 
legal standards through successive appeals saps the resources of both the 
patent office and the inventors.  Opening communication between the 
patent office and its users hopefully would decrease the number of 
appeals while more accurately and uniformly applying the requirement of 

Examples of misapplying the legal standards governing nonobviousness are 
in the "Notice for Comments" authored by the Patent Office.  The Notice 
refers to the suggestion that the Patent Office is imposing a per se rule 
of obviousness for inventions involving sequencing and the expression of 
genes once any sequence information has been publicly disclosed, whether 
the sequence information takes the form of a partial amino acid sequence 
of a protein or DNA sequence information derived from the expression of 
the gene.  The Patent Office asserts that it does not apply per se rules.

To the contrary, however, specific examples exist in the public record 
where examiners have expressly stated, and I quote:  "...the relationship 
between a gene and the protein it encodes requires a different type of 
obviousness determination..."  The Patent Office clearly changes the 
nonobviousness requirement when genetic material is involved.  The legal 
standards have been improperly simplified by focusing exclusively on the 
function of the DNA sequence as a information transfer vehicle while 
disregarding its chemical structure and the properties and 
characteristics resulting from its structure.  The patentability of a DNA 
sequence must include the properties and characteristics of its structure 
as it is inserted in a vector, the vector in a host, and the host grown 
to produce the desired protein.  It must be made absolutely clear that 
genetic material, and other inventions of biotechnology, are to be judged 
by the same legal standards as other technologies on the issue of 

And with that I'll conclude my remarks, and if you have any additional 
questions I'd be happy to address them.

COMMISSIONER LEHMAN:  Have you ever had any -- made any effort to 
participate in the Biotechnology Patent Institute that we have set up 
that I described in my opening remarks?

MR. GENS:  No, I have not.

COMMISSIONER LEHMAN:  Because that was the -- the whole purpose of that 
is to deal with the problem that you just suggested, and that is to talk 
about the training that the examiners get, the standards that are used, 
and it is basically intended -- and consists of people who are companies 
and people who are in the bar, so you might want to check that out.

MR. GENS:  I appreciate that comment, Mr. Commissioner.  The only 
question that I would have is that it does not help for a two-way lines 
of communication if I have to go into a situation without any basis of 
understanding how the examiner is being trained.  And if we can maybe 
open up that information that would make that dialogue much more fruitful 
for both sides.

COMMISSIONER LEHMAN:  My point is that there's a mechanism for raising 
that kind of issue and that's the Biotechnology Patent Institute, so you 
might want to -- I mean, obviously, there are two mechanisms:  One is 
this hearing and we're listening to what you have to say, and we will -- 
we may well make modifications based on it, but there's also another 
mechanism, too, for you to have an ongoing relationship and you might 
wish to avail yourself of that.

MR. GENS:  I'd be more than happy to do so if that is the intent of this 
other source.

COMMISSIONER LEHMAN:  Well, you're a member of the bar and you're out 
there representing companies and -- presumably in this sophisticated law 
firm, and I think you, you know, owe it to yourself to know what's going 
on if you're going to properly represent them.

MR. GENS:  Thank you.


Next, Elizabeth Lassen, please, of Calgene.


MS. LASSEN:  Good afternoon.  My name is Elizabeth Lassen.  I am chief 
patent counsel for Calgene, Inc.  I am here today on behalf of Calgene as 
a member of the Biotechnology Industry Organization and as a concerned 
member of the patent bar.  

Founded in 1981, Calgene is an agriculture biotechnology company which 
employs approximately 350 full- time employees, about 160 of which are 
engaged in research and development.  Patents are critical to Calgene.  
It has taken 12 years for us to commercialize our first genetically 
engineered product, the Flavor Saver Tomato.  In plant biotechnology the 
product is the factory, patents are all the more important.

I welcome the opportunity to participate in this hearing.  I believe 
that the BIO's written comments which amplify my remarks here are useful 
in cogent summation of the issues.  The fact that it was possible to 
generate a 100 plus page document, to get a group of patent attorneys 
with such a diverse clientele in the biotech industry to achieve 
consensus in this paper underscores the seriousness of the points raised.  
I've found the process of working with the other BIO members on our 
written comments to be both comforting and at the same time disturbing.  
The good new and the bad news is that Calgene is not alone.

My assigned topic relates to the level of skill possessed by persons 
working in the field of biotechnology.  A correct assessment of this 
level of skill is necessary for both obviousness and enablement 
determinations.  But, before I begin, I would like to make it clear on 
the record that my purpose in coming here today is not merely to 
summarize the issues regarding level of skill or other points but to meet 
Commissioner Lehman and try to help communicate the absolute seriousness 
of these types of issues to a company such as Calgene.

The Patent Office practices are effecting companies, universities and 
other research institutions.  They're having an impact on the decisions 
and strategies made by us all today.  These issues are creating 
uncertainty and increased costs.  It is changing the way companies and 
research institutions invest in research.  As patent practitioners advise 
their clients that  it's not clear whether they will get adequate 
protection for biotechnology invention, research dollars are going 

Is the PTO properly assessing the level of skill possessed by persons 
working in the field of biotechnology for obviousness and enablement 
determinations?  Obviousness determinations are made under 35 U.S.C. 103 
based upon whether the invention was obvious to one of ordinary skill in 
the art.  For purpose of obviousness, both the suggestion and expectation 
of success must be found in the prior art.

Enablement determinations are made under 35 U.S.C. 112, first paragraph, 
based upon whether the written description of the invention is found in 
the specification enabling any person skilled in the art to practice the 
invention.  Here the test is one of undue experimentation.  In the 
prosecution of biotechnology application, one finds that a 
unrealistically high standard will be applied for the evaluation of 
patent claims under Section 103 and a unrealistically low standard 
applied to the evaluation of patent claims under 112, even though that 
hypothetical skilled artisan upon which these standards are based is the 
same person.

There's an even greater complication in the improper identification of 
the skilled artisan because in almost every single biotechnology patent 
application that I have seen, regardless of who prepared the application, 
the technology or the examiner assigned to the case, both enablement and 
unobviousness issues are presented.  The Section 103 rejections and the 
Section 112, first paragraph, rejections become a game.  The level of 
skill in the art shifts during the course of prosecution depending upon 
whether the Patent Office is making an argument with respect to 
obviousness or enablement.  This liberty to take inconsistent positions 
on the part of the U.S. Patent Office creates a disbelief on the part of 
the scientists who look to the patent examiners kindred spirits.  It 
perpetuates an adversarial atmosphere with patent attorneys because the 
rejections are offered in sort of a checkmate attitude and it generates a 
lack of credibility in the entire patent system by the business 

Biotechnology is a rapidly developing field which employs a great number 
of highly skilled researchers and also relies upon a significant number 
of laboratory technicians.  Who is one of ordinary skill?  That of course 
depends on the particular facts of a given case, but, as a general rule, 
the highly educated examiners now in the biotech office are exposed on a 
daily basis to the very best, newest science in the world of 
biotechnology and they have forgotten that science is done one step at a 
time and that much uncertainty always exists before the experiment is 
completed.  They've forgotten that an invention can be obvious to one of 
greater than ordinary skill and they've forgotten that the published 
literature only reports successes.  They've become the Monday morning 
quarterbacks of science.

For example, I've observed that the PTO readily asserts that the mere 
knowledge of an assay for protein is enough to render a purified 
preparation of such a protein obvious.  In many cases methods do exist 
for every step necessary to go from protein to DNA, but it's random luck 
to chose the purification procedure from the infinite possible 
combinations of steps, times, reagents, columns, buffers and detergents, 
et cetera.  The skilled artisan cannot extract from a description of an 
assay for protein any particular characteristic which would assist the 
skilled artisan in its purification, such as the isoelectric point, size 
or shape, the requirements vary so much from protein to protein.  But 
obviousness rejections which pull such prior art together are 
commonplace.  Such simplistic views of the level of skill held by one of 
ordinary skill in the art is analogous to a software examiner refusing to 
grant any patents on software programs using existing languages.   

It is difficult to discuss the PTO's assessment of level of skill 
without blending into the test for predictability.  The PTO frequently 
dismisses the types of arguments and months of laboratory research as 
routine absent special considerations which are present.  Ask the skilled 
artisan, however, and the work required to obtain nucleic acid sequences 
from an apparently purified protein will be characterized as arduous and 
unpredictable, and such an artisan would be, and often are, justifiably 
insulted to hear that such work is dismissed as routine.

As with the determination of the skilled artisan for Section 103 
purposes, the proper identification of the person skilled in the art for 
Section 112 purposes is also critical to a correct determination of 
patentability.  Under Section 112 a patent specification must include a 
written description of the invention which will enable any person skilled 
in the art to make and use the invention.  The test for enablement 
requires that the claimed invention be practiced by the person skilled in 
the art without undue experimentation.  The higher the level of skill 
which is applied the greater the enabling power of a given patent 
application.  Unfortunately, a patent examiner typically defines the 
skilled artisan to have no ability to extrapolate away from the patent 
application when considering such enablement questions. 

For example, it's apparently the belief of Group 1800 that once a DNA 
sequence encoding a protein is disclosed that one skilled in the art is 
incapable of making any modifications to that sequence without undue 
experimentation.  This is an improper determination of the level of 
skill.  The researchers are able to make and test modifications of gene 
size, code on substitutions and screen for highly homologous sequences 
from related sources.  The fact that the examiners regularly reject 
claims on this basis is the subject of many appeal brief now before the 
Patent Office Board of Appeals.

The imbalance between level of skill applied under 112, first paragraph, 
as compared with the 103 analysis, goes to the heart of the patent 
practitioner's difficulty in prosecuting patent applications to 
biotechnology inventions.  How can a claimed subject matter be 
simultaneously obvious and not enabled, particularly when a Section 112 
person has the benefit of the specification while the Section 103 person 
does not?  The confusion is to the level of skill seems to work against 
the inventor in each case, never in favor of innovation.  This results is 
the anomalous and a logical view that the person having ordinary skill in 
the art, under Section 103, would have had an expectation of success to 
practice the technology, but once the patent specification has provided 
additional information the former competent person is changed to a person 
skilled in the art who lacks the certainty of what to do in order to 
practice the invention.

A statement made by an examiner in a recent action highlights how free 
the examiners are with this type of rationale.  We were given the 
argument that the claims were not enabled because the invention was not 
shown to work, yet the claims were obvious over the prior art.  We've 
even seen the same references applied for both 103 and 112, first 
paragraph, purposes.

Some quick examples further highlight this problem:  A protein with 
activity to a particular substrate was obvious over protein with 
specificity for a similar but different substrate.  Taking the prior art 
sequence with the known encoding sequence -- with the new encoding 
sequence, a third substrate was not enabled.  The expression of a certain 
protein in any host cell to effect a common metabolic pathway is obvious 
yet the specification only enables the change which was exemplified, 
i.e., the claims must be limited to a particular tissue from a particular 

The U.S. Patent office is an agency which is charged with promoting 
science and the useful arts.  Examiners are pressured to meet quotas and, 
as a result, do not seem to be given much encouragement to fully engage 
in meaningful dialogue with the patent bar.  Moreover, examiners are 
permitted to become removed from the methods and thinkings of science and 
permitted to engage in inconsistent arguments which result in improper 
application of Section 103 and 112 standards.  These issues are weakening 
the patent system we enjoy in the U.S., and the difficulties that I've 
briefly described are reviewed more fully in the BIO paper.

COMMISSIONER LEHMAN:  Thank you very much.

Next I'd like to ask Daniel Chambers of Viagene to come forward, please.


MR. CHAMBERS:  Commissioner Lehman, other members of the panel, good 
afternoon.  My name is Dan Chambers and I work as in-house patent counsel 
at Viagene, Inc., a San Diego based gene therapy company.

As it's been said before, the effect of the patent system is critical 
both to the success of my company and many other biotechnology companies.  
Today I'm speaking on behalf of BIO's Intellectual Property Committee and 
will address question four under the nonobviousness section of the --

COMMISSIONER LEHMAN:  How big a company is Viagene?


COMMISSIONER LEHMAN:  How big a company is Viagene?

MR. CHAMBERS:  I'm sorry, I still can't hear you.

COMMISSIONER LEHMAN:  Your company, how -- can you just tell me what 
size it is?

MR. CHAMBERS:  It has about 160 employees full time and about half that 
number are employed in terms of their research effort.  We're basically 
developing a variety of different systems to the liver.  You know, 
they're genes basically to people -- presently we have at least three 
different systems under development.  The most advanced system is based 
on retroviruses.

COMMISSIONER LEHMAN:  Do you have any products on the market then at 

MR. CHAMBERS:  Not on the market.  Six in Phase One clinical trials -- 
actually two in six different Phase One clinical trials, both in HIV 
immunotherapeutic and cancer immunotherapeutic.

Like I said before, I'm going to be addressing question number four 
under the nonobviousness section of the PTO's "Public Notice."  Question 
four asks:  "Are there specific practices of the U.S. Patent Office with 
regard to determinations under 35 U.S.C. or Section 112 for biotechnology 
inventions that you believe are inappropriate or inconsistent with legal 
precedent?"  The short answer is, "Yes."  In more detail what follows are 
specific examples of recurring rejections based upon PTO positions that 
are inconsistent with case law.

Specific examples of case law were obviousness rejections confuse tests 
of novelty, and nonobviousness include an analysis of the elements of a 
claim lacking consideration of whether the claim as a whole would have 
been obvious.  As an example, an examiner rejected as obvious a two-step 
method in view of a single reference stating that the preamble of claim 
one is taught by the reference.  Claim element 1(a), the determining 
step, is clearly met by figure o ne of the reference.  Claim element 
1(b), the step of comparing is taught by the reference.  Here the Patent 
Office dissected a claim and attempted to show that each element was 
taught or suggested by the cited reference.  This is wrong as a matter of 
law.  For example, the Board of Patent Appeals and Interferences 
explained in Ex parte Hiyamizu that citing references which merely 
indicated that the isolate elements or features recited in the claims are 
known is not a sufficient basis for concluding that the combination of 
claimed elements would have been obvious.

In another area the PTO often treats claims directed to DNA molecules as 
if they are presumptively anticipated.  Group 1800 has formulated a 
policy, apparently, where a novel nucleotide sequence does not render a 
claimed DNA molecule nonobvious, regardless of whether or not the prior 
art would have suggested the claimed nucleotide sequence.  Following this 
policy, for example, the Patent Office has rejected claims to novel DNA 
sequences encoding tissue specific promoters.  In one case, the Patent 
Office stated that "the fact that the claimed tissue specific promoter 
has a unique nucleotide sequence does not render it nonobvious."  It was 
not relevant to the PTO that the promoter was characterized by novel 
nucleotide sequence and that the prior art did not suggest how one could 
modify the nucleotide sequence of a known tissue specific promoter.

COMMISSIONER LEHMAN:  When you have an examiner reject a claim, like in 
the example that you gave a moment or two ago, and apparently that's a 
case in progress right now?

MR. CHAMBERS:  Well, these are not cases that are pending before 
Viagene.  These were basically put together by the BIO committee here.

COMMISSIONER LEHMAN:  I mean, do you request interviews with the patent 
examiner and try to make your case?  I'm trying to get at the process 
hereby which what are apparently perceived to be errors are corrected and 
you have -- You can have an examiner interview.  It's possible to talk to 
the supervisor involved.  That sort of thing.

MR. CHAMBERS:  Yes, Commissioner.  In one particular instance which I'm 
involved with, we have added -- like Viagene has had a case pending 
before the Patent Office for over seven years and, in the case of that, 
there have been -- in this case there have been interviews with the 
examiner and -- but I don't know, over 12 declarations submitted.  And 
we've just had an interview with the examiner and his SPE in the last two 
weeks and hopefully resolved the issues that were basically outstanding 
in the case, although we're somewhat apprehensive about the situation 
that previously we had an interview with the same examiner in the 
presence of his supervisor and the examiner had indicated his willingness 
to remove basically all the rejections that were outstanding both under 
103 and 112, which were the only issues still remaining in the case.  
Upon submitting the formal amendment, the examiner came back with a 
30-page office action basically putting forth new basis, new grounds for 
the same rejection and, again, it's just this process of trying to jump 
through the hoops.  I think interviews with the examiners definitely help 
but, in certain instances, certain examiners, for whatever reason, seem 
recalcitrant to want deal with --

COMMISSIONER LEHMAN:  Do you find this is a problem that -- Is this 
every application that you make or is this just occasionally that you run 
into what you call an unreasonable response?

MR. CHAMBERS:  It hasn't occurred in every case, although it seems to be 
more prevalent in what I would consider to be pioneering technology that 
really enables -- it is a foundation basically upon which companies are 
built.  For whatever reasons, those kind of patents seem to be the ones 
-- or applications seem to be the ones the Patent Office wants to look at 
the hardest, and for good reason.  We don't object to that, clearly.  But 
when one is forced to narrow claims down to basically a non-effective 
level of protection or have to dither in the Patent Office for seven to 
ten years, just at the examiner level without even having to go up on 
appeal, in certain instances, that seems to be counterproductive and I 
think those are the issues that are so important.

COMMISSIONER LEHMAN:  What I'm getting at, is there evidence that we 
have a -- that we have examiners all over the place -- you know, you'll 
go to one -- It's sort of a Russian roulette as to what examiner you get 
and that determines the ease of the process and whether or not you get 
the patent?  Or is the problem a problem of overall policy, for example, 
where you have the -- which is what you seem to be saying that it is -- 
where you have the pioneering invention and you always have a hard time? 

MR. CHAMBERS:  I'd say that's pretty much the case with respect to 
pioneering-type technology, and in certain technology fields as well.  I 
mean, gene therapy is obviously a very limited part of the body of 
technology industry generally, but -- and I don't know actually how many 
examiners actually are involved with the examination of those types of 
applications, although, to my knowledge, there are only a handful.  And, 
as a result of, you know, the concern for whether this is kind of 
groupwide policy or whether or not it's amongst two or three examiners, 
it might very well be just amongst two or three examiners.  But, if those 
happen to be the only examiners involved in your art area, it doesn't do 
you a lot of good if, in fact, it's not a policy that isn't being 
promulgated by the whole Group 1800.

Moving along.  As another example, with regard to the PTO promulgating 
rejections based upon the obviousness to try standard coupled with 
implicit hindsight.  For example, a claimed gene is often considered to 
be rendered obvious by the prior disclosure of the isolated protein 
encoded by the gene.  In one case, an examiner rejected claims directed 
to DNA molecules encoding an enzyme as obvious in view of primary and 
secondary and tertiary references.  The examiner's position was that, 
one, the primary references describe the purified enzyme; two, the 
secondary references describe methods for determining the amino acid 
sequence; and, three, that the tertiary reference described the method 
for isolating a gene encoding a protein for which a shorter amino acid 
sequence was known.  The examiner concluded that it would have been 
obvious to one of ordinary skill in the art to have purified the enzyme, 
to have learned at least part of its amino acid sequence, and to have 
isolated the enzyme using a method in the tertiary publication.

The examiner's analysis was flawed on two fronts.  First, it was 
factually wrong since the primary reference did not teach methods for 
obtaining sufficiently pure enzyme to sequence the part of the protein.  
Moreover, the inventors, as it was described in their specification, 
actually described the extra step they had to devise in which to purify 
the protein to a sufficient level of purity in order to sequence it 

Then on a legal front, the examiner's analysis was also erroneous in 
view of Ex parte Maizel where the Board of Patent Appeals and 
Interferences reversed a Section 103 rejection claim directed to DNA 
molecules and recombinant host cells comprising a DNA fragment encoding 
B-cell growth factor, also know as BCGF, because the protein BCGF had not 
been isolated to sufficient purity and in sufficient quantity for amino 
acid analysis.  Consequently, the Board concluded that it would have been 
virtually impossible to do what the applicant had done.

PTO has also stated that a previously unknown human gene is rendered 
obvious by the prior disclosure of a homologous mammalian gene.  As an 
illustration, an examiner rejected claims directed to DNA molecules 
encoding a particular human receptor because the primary reference taught 
the corresponding rat receptor gene while secondary references taught 
methods to clone human homologues of various rat genes.  The examiner's 
premise was that there was no suggestion in the art or any evidence of 
record which would suggest that the receptor gene first identified in 
rats would not also be present in humans.  Clearly, the examiner applied 
the obvious to try standard since the cited references, at best, only 
gave general guidance and no specifics about the claimed invention and 
how to achieve it.

Concerning rejections based upon overuse of hindsight to support an 
obviousness rejection.  One example involves an examiner stating that the 
primary reference teaches a gene encoding a rat receptor with 91-percent 
homology to the claimed human receptor.  Here, the examiner took the 
inventor's teachings and the specification and combined this information 
with the teachings of the primary reference to determine the level of 
homology that in fact existed.  That clearly is an improper combination 
based on impermissible hindsight.

In another case, an examiner decided the claims to an antiviral 
composition comprising components A and B would have been obvious, 
explaining that one skilled in the art seeking to inhibit the virus 
replication would be motivated to combine a variant of the component A 
described in the reference with the known antiviral agents, such as 
component B.  For their additive effects, applicant has indicated in the 
application that a synergistic composition results when component A is 
combined with component B.  Thus, according to the applicant, the mere 
combination of the two compounds is sufficient to achieve a state of 
synergy.  Again the examiner supported the rejection by improperly 
referring to a statement in the inventor's specification.

Additionally, he disregarded the significance of the synergistic effect 
between the two compounds which in and of itself is evidence for the 
nonobviousness of the invention.

As I can see I'm about out of time here, I'm just going to go ahead and 
move to the last aspect of what I wanted to talk about which is basically 
recommendations that we would like to see brought about at the PTO in 
terms of change.

One mechanism for change is obvious.  Provide training for examiners 
that they can:

One.  Appreciate the policy behind legal precedent.

Two.  Educate in case law concerning biotech inventions.

Three.  Are routinely updated on case law.

If the examiners follow the patent laws interpreted by the courts, 
patent prosecution for a particular case would be more predictable, 
making business decisions about filing and prosecution even easier.  And 
I think that's a very important consideration, and particular for small 
companies like the one that I work for.  We don't have a lot of resources 
to devote to haggling with the Patent Office or spending years trying to 
get our patents allowed.  We need things now because long term our 
company may not exist.  We're more concerned about two or three years 
down the road, not about the effective life of our  patent 15 years from 
now.  It's important to us that we get things moved ahead, and I think 
that's probably true as well for many other small companies.

So I guess assuming that the Group 1800 has the authority to generate 
its own internal policies and interpretations of the case law, it would 
be best if those could be aired, those interpretations and those policies 
could be aired in a public forum.  And, in fact, it's our understanding 
that the Administrative Procedure Act requires that interpretative rules 
be published.  So that's all.  Thanks.

COMMISSIONER LEHMAN:  As I understand, you know, your testimony coming 
from the point of view of a small innovative company which right now is 
still in basically the venture capital state, somebody's paying all those 
bills and you don't have a market yet, 160 paychecks every month or two 
weeks is a lot, and, as we've heard, at very high salary levels in many 
cases.  Clearly, you want to get, you know, in and out the door with your 
patent application, and hopefully a granted patent as quickly as you can, 
I assume.  And then, you know, get on with the process of commercializing 
the invention.


COMMISSIONER LEHMAN:  So, for you, the optimal system would be, and tell 
me if I'm wrong about this, would be very clear, bright line tests -- 
rules that you could understand, patent examiners could understand, a 
very expeditious examination process and issuance of a patent and then 
get on with it.  And then if the  -- you know, if you ended up being 
stuck in the FDA, and so on and so forth, then you'd probably opt for, I 
assume, some extended patent term registration legislation that would see 
you through that problem, and that would be really the optimal system for 

MR. CHAMBERS:  I tend to agree, but I think that with respect to bright 
line rules and those kinds of things, I'm not so sure that's applicable.  
I think currently the present standards, as have been discussed recently, 
are ones that are sufficient and easily understood by people who are 
educated in those areas, and I think --

COMMISSIONER LEHMAN:  And examiners don't understand it?

MR. CHAMBERS:  Well, right.  And maybe it's because they haven't been 
educated.  I mean, they are clearly highly educated individuals and 
that's something that we greatly appreciate, but with respect to the law 
I think it's one of those things where a little more effort could perhaps 
be put in and it would help everybody, including I think everybody in the 
biotech business and most patentees as well -- applicants.


MR. CHAMBERS:  Thanks.

COMMISSIONER LEHMAN:  Next I'd like to call on Thomas G. Wiseman, of 
Cushman, Darby and Cushman, please.

We're running behind this afternoon and it's partly because we're asking 
so many questions, so if people can be expeditious it would be 


MR. WISEMAN:  I'll keep my remarks brief and to the point.

My name is Thomas G. Wiseman.  I'm of counsel with the law firm of 
Cushman, Darby and Cushman.  The organization I'm here representing is 
the BIO organization.  It's a trade organization.  My relationship to 
them is as a member of their Law  Committee, their Intellectual Property 
Committee, and their Emerging Technologies Committee.

I could say a lot of things to you now but I'll give you a sense of what 
my background is because you may not be familiar with it.  I was a 
government employee for the period of about 22 years, 19 years of which 
were at the Patent and Trademark Office in a variety of positions.  I was 
also at the National Institutes of Health at their Office of Technology 
Transfer.  I was their acting patent branch chief.

At the Patent and Trademark Office, I had the honor of serving as a 
member of the Board of Appeals.  I was a supervisor, primary examiner, 
and I was an examiner.  My area as an examiner was in what is now called 
biotechnology.  I was examining these applications when it was still 

Many things have been said about your particular system but there have 
been some things that have been done that have been done very well.  At 
one point in time the technology that represents biotechnology was 
scattered amongst four examining groups.  It was brought together over a 
period of years and put into one examining group.  The problems which 
caused the art to be centered in this one particular group was comments 
like which you are receiving today; different standards were being 
applied in different groups, and what you're hearing as a bottom line 
here is that different standards may be being applied in the different 

I trained many of your SPEs.  They were examiners in my art unit.  I 
found them all to be a very motivated group, very well disciplined.  I 
found that if I had any problems I would call the SPE and the SPE would 
work it out.  If I had any problems that the SPE couldn't resolve, I 
talked to Chuck Warren.  Chuck Warren would take care of the problem or 
he would call me back and say, "Tom, you're on the wrong footing.  The 
person who is working for you is making a mistake."  I  look into it and 
I have a tendency to agree with Chuck on that particular issue.

I've had some problems where I've had to go and I've called Barry 
Richman because it was more in his expertise and he took care of the 
problems.  My bottom line is that the system does work.  You have to put 
effort into it.

I am a member of the Biotechnology Institute.  I may even be the 
chairman this coming year.  I think there is some education that has to 
be addressed, but that's nothing new.  It's not horror stories all the 
time.  There are instances when I've had to take over the prosecution of 
a case from another law firm; it's after final.  I've an examiner in 
Group 180 listen to three responses after final and eventually allowed 
the case.  The examiner saw the merits of the invention, felt it was 
worth his additional time.  Since he is on a counter system it is his 
additional time, it's his own free time, and this individual did help 
fashion the claims which eventually resulted in the allowance.  It's not 
all bad.  There are many good things.  If you look at what Chuck Barry 
and the SPEs in this particular group have done, they've assembled from 
what used to be -- I forget what the size of my original art unit was, 
but it was about 12 to 16 people.  They've taken that particular number 
of individuals and expanded it to a group size of about 188 examiners.  
That required training lots of new SPEs.  When you consider the short 
time frame relative to what it takes to educate an examiner so that 
they're up and coming, they've done a remarkable job and they should be 
given credit for what they have done.

There are many instances where you've run into an examiner who may not 
understand the law, but it does not help to tell you that all your 
examiners don't understand the law, because many of them do.  Many of 
them do a great job.  They do a terrific job and they sacrifice.  They 
set up committees on their own so they feel that they are more 
consistent.  Sometimes they set up their committees with the blessing of 
management, sometimes they don't.  Jim Martinell, Bob Benson and some 
others ran a brown bag seminar.  They met on Tuesdays, either every other 
month or every month, and within those particular brown bag lunches they 
did try to talk about problems and they did try to work out solutions 
which were similar.

I'm supposed to answer question five for you today, but, before I do 
that, I want to add just one more thing.   

While I was at the Patent and Trademark Office, I was involved in a 
number of the harmonization projects we had with the Japanese office and 
also with the European office.  I notice that with the Japanese office 
and also with the European office they used examination guidelines.  
These examination guidelines were much more detailed than the manual 
patent examining procedure. 

It is known to me that in the formation of these examining manuals by 
the Japanese Patent Office, and also by the European Patent Office that 
they did get some industrial input and some input from the bar in 
formation of their guidelines, and these guidelines are updated.  The 
formation of guidelines may be quicker and faster than Board of Appeal 
decision.  My particular point of view with regards to the Board of 
Appeals' decisions which have been coming down of late, they've been 
getting better and better and more on point all the time.  I like the Ex 
parte Anderson decision.  I thought that John Caucasian, M.L. Goldstein 
-- I can't remember the third member of the panel but that's just because 
my memory is fading with age -- and it was remarkable what the input they 
went into.

Bill Smith wrote a very good opinion in Ex parte Balzarini, which if you 
look at it and you look at the proofs and the burdens that were met and 
that were not met, and the consequences of it, and what could have been 
done to have changed the outcome, they were all quite clear and it's a 
question of proof, burdens, and the like.

Some of the examiners do work on a per se rule, and they are probably 
wrong in most instances.  They have -- there is a general statement in 
the utility area with regards to the value that the office must accord to 
the statement of utility, and if the examiner doubts that utility, it's 
their burden.

With regards to obviousness, the burden in on the examiner to fashion a 
prima facie case.

To answer question five which is what I was brought here for.  It does 
not appear that foreign systems provide a better legal framework than 
does the U.S. system.  The U.S. case law system provides a comprehensive, 
analytical framework for addressing issues such as obviousness, 
enablement, breadth of claims which are commensurate in scope with the 
disclosed invention.

We do note that, unlike the U.S. system, the foreign systems explicitly 
recognize the level of skill does not vary whether the inquiry is based 
upon the assessment of the prior art or the sufficiency of discloser.  
That point has been made many times before and I don't want to dwell on 
it anymore, but there does seem to be a little bit of disparate treatment 
in there.  But if you read the review article by Trasanski, which is 
cited in the BIO paper, he has lots of comments which would go along with 

With regards to the examiners' education system.  Dick McGar and other 
people at the Patent Academy had expended large amounts of resources in 
trying to provide the best training possible for the examiners under 
current budget problems, and Dick has done a good job and he's brought in 
outside trainers; John White, Kim Practice, John Trasanski are just some 
of the names.  These names are also worth noting because they are the 
same names that appear in the patent resources group training which is 
given to the private practitioners.  NIH has sent many of our patent 
advisors to the training that was available at the -- by this patent 
resources group, and the office is making use of the same training.

Do you have any questions of me?  I'll gladly answer them based on my 
upteen years of experience and being probably at fault for many of the 
policies that many of the people are complaining about today.

COMMISSIONER LEHMAN:  Thank you very much.  No, I don't really have --

MR. RICHMAN:  I have a question.  Who put you at the end of the 
schedule, Tom?

MR. WISEMAN:  It was the draw.

MR. RICHMAN:  I'd like to just expand on what Tom mentioned.  In many 
talks I've given -- the Director's office has a function and one of the 
functions of the Director's office is to resolve problems where examiners 
stray from acceptable practice -- and 308-1223 is my phone number.  I 
give it out wherever I talk.  This office needs to hear about these 
things so that they don't fester and have to surface in a public hearing 
like this.  This is a -- I'm not -- It is a good place for this to occur, 
but we need to have a chance to resolve these problems before it gets to 
maybe a stage that it is perceived to be at now.  

MR. WISEMAN:  I want to let you know that Barry is a person of his word.  
He was a union representative before he got into management and he 
usually delivered and he delivered in a very fair fashion.  And I've 
found over my 20 years or more of knowing Barry that he delivers on his 
word, and if I've ever had a problem, I've gone to Barry and he solved it 
and he solved it on a real time basis and it wasn't put off, and it was 
done in an efficacious fashion.

COMMISSIONER LEHMAN:  Well, it certainly is true that our -- we have 
many mechanisms to resolve problems.  One of which is to not only the 
examiner interview but, to where there's a problem of policy, to -- the 
examiner may not be following office policy, to bring it to the attention 
of the SPUD or the deputy group director or the group director, and 
that's something I would encourage people to do.

Obviously, knowing the inside of the office, you know more how to go 
about that so maybe what we need to do is do a better job of training 
practitioners before the office as well.

MR. WISEMAN:  It's a cooperative effort and if it gets adversarial it 
shouldn't be there, because it's only by working together that we can 
make a good system.

COMMISSIONER LEHMAN:  Thank you very much.

Next I'd like to ask George Johnston, the Law Department, Hoffman-La 
Roche, Incorporated.


COMMISSIONER LEHMAN:  I should ask you, Mr. Johnson, one of our earlier 
witnesses produced a little vial of medicine produced by your company in 
Switzerland that had been I think funded originally by the NIH, and one 
of the things we're struggling with in the government and the Department 
of Commerce, what's an American company and what should our policies be 
with regard to American companies.  Hoffman-La Roche is not an American 
company and looks like we're funding products that are being produced 
abroad and taking away jobs from American citizens.  You might want to 
comment on that a little bit.

MR. JOHNSTON:  I really don't want to comment on that, Examiner -- 

First off, Hoffman-La Roche is a U.S. company.  We do have a 
headquarters in Switzerland but we're red, white and blue just like 
everybody else, and we have more than 15,000 jobs in the United States.

COMMISSIONER LEHMAN:  Well, I think that's important.  We wanted to get 
that on the record so we're not, you know --

MR. JOHNSON:  Thank you.

Good afternoon, Mr. Chairman, members of the Patent Office.  My name is 
George Johnston, associate patent counsel at Hoffman-La Roche.  I present 
this testimony on behalf of BIO's Intellectual Property Committee.  I'll 
be speaking on two topics; the first involves question number two on 
obviousness, and the second involves the experimental use defense.  The 
specifics of my testimony can be found in more detail at pages 95 and 157 
of the BIO submission.    

Let's focus on the nonobviousness, question number two.  Whether the 
level of skill under Section 112, as developed by the courts is 
sufficiently clear and appropriate.  I know you're not going to be 
surprised when I say, "yes."
The case law is clear.  The speakers before me have gone into that so I 
will not do that at this moment.  The problem is that many of the 
examiners misapply the standard as requiring the inventor to demonstrate 
and provide convincing evidence to the Patent Office that the application 
is, in fact, enabled, and, as we have heard before, that's not the 
standard that should be applied.  If the examiner feels that we have not 
met our burden then the examiner should provide credible evidence to that 
effect -- objective evidence, not subjective evidence, not feelings, but 
specifics, because subjectivity will give rise to a lack of consistency 
which no one wants.

We recognize that many of the examiners might be frustrated with the 
standards that are applied.  They're good scientists; they believe 
they're protecting the public.  The Patent Office certainly is not 
attesting that, and there's a lot of work, frankly, in trying to find 
objective evidence which they feel they have in their head already.  Why 
do they have to go further? I'm sure many of them ask.

But let me digress for a moment.  We hired a patent attorney at Roche a 
few years ago.  Young fellow.  Ph.D., super biotech type.  Great schools.  
Very, very bright.  Came into the office prosecuting applications, and 
every time an inventor came to his office he'd find that invention 
obvious and he'd find that whatever the inventor did was insufficient for 
purposes of enablement.  He couldn't figure out how they could 
extrapolate beyond the specific experiment.  He was a challenge, as we 
say, a challenge to the supervisor.  They started calling him "Doctor No, 
the unpatent attorney."  His supervisor had to be very forceful and go 
right to the jugular and explain, "Where is your objective evidence?  Why 
is it unpatentable?  Where are the references?  Why can't you 
extrapolate?  Where is your documentation?"  And slowly but surely that 
patent attorney came around.  Actually became a very good patent 
practitioner.  I think this also applies to many of the examiners at the 
Patent Office that are equally as bright, equally as knowledgeable in the 
science, and I think they have to be better educated and more definitely 
educated in the law.  I think their supervisors also have to be of 
support as they have, and perhaps can be a little bit more, with regard 
to instructing the examiners as to the standards and asking the same type 
of questions as we have been asking our people under that example.

We talked about before where there was questions as to quality control 
and going to the Board, and I would respectfully suggest that it's a bit 
late at the Board level and that quality should be built in from the very 
beginning; right from the examiner's stage; right through the 
supervisor's stage; and right up to the Board.

Our recommendations are as follows:

Number one.  Simply apply he legal standards consistently.  Provide that 
objective evidence when required, and, if this is not already being done, 
what I'd suggest is that at the annual reviews of the examiners and 
supervisors that they specifically be reviewed whether or not there have 
been instances where this objective evidence has been applied on a case 
by case basis.

Now, my second topic, as I mentioned, involves experimental use defense 
focusing on topic C of your Notice of December 27, 1993.  Topic C 
involves whether or not there's a justification for or against a 
statutory use defense.

The BIO organization is very diverse.  There are pharmaceutical 
companies in it, agricultural companies, research, tool manufacturers, 
and they all have their idea as to what and what might be included within 
the experimental use exemption.

The position of BIO is to support the presently created experimental use 
defense.  BIO is against the erosion of this defense; however, we could 
not reach any consensus on the expansion of the defense by legislative 
action.  You see, sometimes it's very easy to know when an action is 
research and, therefore, falls within the experimental use defense.  
Sometimes it's easier than when it's commercial.  Sometimes it's hard.  
For example, if you're simply verifying whether or not an invention 
works, as explained in the patent, I think most people would conclude 
"that's strictly research."

On the other side of the coin, should you be using a third party's 
patent to perform an assay and screen your library of compounds to 
identify certain biological active compounds?  I think most people would 
conclude that's not permitted commercial use.  But the problem comes 
"what about in between?"  It's not easy to separate out the permitted 
research from the non-permitted commercial use.

We feel that however it is best to leave it to the courts who created 
this doctrine and who would best know how to apply it on a case-by-case 
basis.  The standard is clear.  In the Roche/Bolar case it was held that 
the adopting of a patented invention to an experimenter's business 
constituted a non-permissible use and did not fall within the 
experimental use defense.  But the dilemma of BIO is as follows:   

Some of our organizational members will conduct activities which might 
be perceived differently as falling within or out of this defense.  
Companies could, therefore, be on either side of a case.

There's a diversity and this diversity I think you can also see in the 
comments that were submitted to the Patent Office from many other 
organizations, both within and outside of BIO.  But there's one common 
thread.  The common thread, at least among the BIO organization, is that 
we believe that the experimental use defense involves after patent 
activities, normally the domain of the courts while the Patent Office's 
responsibilities involve pre-patent activities.   Therefore, our 
recommendations would be for the Patent Office to concentrate on areas 
toward pre- issuance of patents, as have been enunciated in these 
hearings, and leave to the courts the resolution of the experimental use 
defense cases on a case-by-case basis, because the court would be in a 
better position than anyone to weigh the equities and, based upon the 
specific facts of a case, determine whether or not the defense is 

Thank you.

COMMISSIONER LEHMAN:  Thank you.  The reason that we're interested in 
the experimental use defense issue is because we clearly have a 
responsibility to examine and issue patents, but there's no other place 
to go to make -- advise on legislative policy, excepting us, too.  So we 
have a policy function, and I have been receiving some complaints about 
the use of patent rights to unfairly prejudice experimentation.  And my 
impression is that one reason that it has not been as much a problem as 
this -- some of the recent complaints would suggest in the past -- is 
because by and large there's a certain tolerance for experimentation in 
the industry, which, you know, is sort of a culture of pharmaceutical 
research since everybody sort of has to do it, is not to just rush in and 
sue everybody else, particularly when you're talking about 
experimentation which takes place in the not-for-profit sector.  Is that 
-- Would you say that's true?

MR. JOHNSTON:  I think that's a fair statement.  I think if you look at 
the number of cases that have actually come down in this area, there's 
not a lot.  And I think there's somewhat of a tolerance, somewhat of a 
recognition that, as I mentioned before, that with regards to early stage 
activities you might find yourself on both sides of that coin, and I 
think there's simply a recognition as to that fact and the fact that it 
really doesn't make sense to bring someone to court on such a basis.

COMMISSIONER LEHMAN:  So, from your point of view, the present system 
which basically is a case-by-case method, is adequate?  We don't need any 
new legislative experimental use --

MR. JOHNSTON:  I think that says it beautifully.

COMMISSIONER LEHMAN:  And that reflects basically the view of 
Biotechnology Industry Organization?

MR. JOHNSTON:  I think there's a diversity in BIO where there are 
certain groups within the BIO association who would like to see it 
expanded.  There are others who are vehemently opposed to that expansion, 
and, if the Patent Office or any group were to proceed, I would recommend 
that they proceed with extreme caution.

COMMISSIONER LEHMAN:  Okay.  And let me say with regard to Hoffman-La 
Roche, we're more than happy to have more jobs here in the United States 
and we do everything we can to make our patent system attractive so there 
won't be hardly a job left except some, you know, just a management job 
that, you know, a bean counter left in Switzerland, so anyway.  

MR. JOHNSTON:  Thank you.

COMMISSIONER LEHMAN:  We want all the Ph.Ds over here.

Next I'd like to call Richard C. Peet, of Foley and Lardner, please.  
We've had Foley and Lardner of Madison so this is Foley and Lardner of 
Washington, D.C.  


MR. PEET:  Thank you, Commissioner Lehman and your colleagues from the 
Patent Office for giving me the opportunity to speak today.

My name is Richard Peet and I am, as I've mentioned, an attorney with 
the Washington office of Foley and Lardner.  Foley/Lardner represents a 
diverse array of organizations in the biotechnology industry, including 
small start-up companies, universities and multinational corporations.

I am submitting testimony today on behalf of the Intellectual Property 
Committee of the Biotechnology Industry Organization.  A detailed version 
of my presentation has been submitted for the record by BIO and is found 
on pages 163 to 171 of that book.

I would like to take this opportunity to commend the Patent Office for 
requesting comment on a frequently overlooked but very important part of 
the patent statute, and that is the Plant Patent Act.  Specifically, I 
submit testimony today on whether the Plant Patent Act should be amended 
to permit a holder of a United States plant patent to exercise exclusive 
rights with respect to parts of a protected plant, such as material 
harvested from the plant.  I would like to make two points, in 
particular, in my testimony.
First.  A court would likely find that unauthorized use of plant parts 
derived from an asexually propagated plant variety protected by plant 
patent constitutes infringement under current law.  However, this area of 
the law is very unsettled.

Second.  We strongly recommend a legislative effort to amend the Plant 
Patent Act to explicitly protect plant parts derived from asexually 
propagated and patented varieties in order to reduce the likelihood of 
costly litigation, and to provide breeders of asexually reproduced plant 
varieties with the same explicit protections under the Plant Patent Act 
as will be afforded plant breeders of sexually produced varieties under 
the amended Plant Variety Protection Act, signed into law by President 
Clinton on October 6th, 1994.

Let me give you a little bit of a historical perspective.  Since 1930, 
American plant breeders, American agriculture and the American public 
have benefitted from the stimulus to innovation in the plant sciences 
provided by the Plant Patent Act.  Reports of the House and Senate 
Committees that accompanied legislation enacting the Plant Patent Act 
state that the purpose of the Plant Patent Act was to stimulate invention 
in the agricultural sector by providing plant breeders with the patent 
protection equivalent to that available to inventors in industry.  The 
Report of the House Committee contains a statement, for example, by 
Thomas Edison that, quote:  "Nothing that Congress could do to help 
farming would be of greater value and permanence than to give the plant 
breeder the same status and the mechanical and chemical inventors now 
have through the patent law."

Mr. Edison's prediction that patent protection for the inventions of the 
plant breeder would stimulate and foster innovation and investment in 
agriculture was clearly accurate.  For example, the Economic Research 
Service of the United States Department of Agriculture estimated that 
cash receipts in this country in 1993 for nursery and greenhouse crops 
alone equaled $9 billion, nearly 11-percent of all farm crop cash 
receipts in this country.  As a result, this agricultural sector is the 
sixth largest among all commodity groups.  It is even larger than such 
crops as wheat, cotton and tobacco in terms of farm crop cash receipts.

The plant patent system is not only utilized by plant breeders for the 
protection of new varieties created for the ornamental plant industry, 
but is also used to protect new varieties of trees and plants producing 
fruits, nuts, berries and fiber.

COMMISSIONER LEHMAN:  What is your involvement is this?  What kind of 
clients do you represent in this that cause you to --

MR. PEET:  Our firm represents a large number of companies involved in 
the breeding of new varieties, both in the ornamental industry and as 
well as fruit, crops.  Many of these companies are small companies, 
frequently family owned, and so we represent a diverse array of these 

COMMISSIONER LEHMAN:  Do they tend to have a big California base?  Where 
would they --

MR. PEET:  We represent companies worldwide actually.  The United 
States, the industry is spread all over the country.  We represent many 
companies in Europe and throughout the world.

The Patent Office noted in the "Federal Register" Notice announcing 
these hearings that, quote:  "Growers reproduce and use, outside the 
United States, plants subject to a U.S. plant patent, and subsequently 
import products harvested from such plants, to the detriment of U.S. 
plant patent owner."  This very succinctly summaries a very severe 
problem in this sector of the plant biotechnology industry.

When competing in the market, against lawfully produced plants, these 
imported products have a decided competitive advantage because the 
importer has not invested in the research necessary to develop the plant 
variety.  In contrast, the breeder must sell the product at a price that 
recoups those research costs.  Furthermore, the importer benefits from 
the breeder's promotional and advertising efforts.  The income lost by 
American plant breeders due to the patent infringement inhibits 
investment in plant research and development programs which are the 
foundation of a strong horticultural industry in this country. 

The adverse consequences of patent infringement are particularly 
apparent in the cut flower industry.  For example, from data kindly 
provided to me by the American Association of Nurserymen, a single 
domestic rose breeder estimated lost royalty receipts in 1993 of $1.5 
million as a result of unauthorized import of patented imports produced 
in five Latin American countries. 

In my written testimony, already submitted to the Patent Office, I 
provide the legal rationale underlying why it is likely that a court 
would find unauthorized sale or use of plant parts derived from any 
asexually propagated and patented plant variety to be infringing, so I 
will not go into that in detail here.

However, we strongly recommend a legislative initiative to amend the 
Plant Patent Act to include the right to exclude others from unauthorized 
sale or use of any part of the asexually propagated plant variety.  The 
amendment could be achieved by revising 35 U.S.C. 163 of the Plant Patent 
Act along the lines already recommended by my honorable colleague Mr. 

This amendment would reduce the need for companies to engage in costly 
litigation to combat patent infringement by foreign competitors.   

The proposed amendment to the Plant Patent Act would also provide clear 
uniformity in the laws related to the scope of protection available under 
the Plant Patent Act for asexually propagated plant varieties, and under 
the amended Plant Variety Protection Act for sexually propagated 

On October 6, 1994, President Clinton signed into law amendments to the 
Plant Variety Protection Act which provide, in part, that unauthorized 
use of harvested material obtained from propagating material of a variety 
protected by Plant Variety Protection Act certificate constitutes 
infringement.  A separate legislative initiative is necessary to provide 
domestic plant breeders of asexually reproduced varieties with the same 
explicit protections under the Plant Patent Act as will be afforded plant 
breeders of sexually reproduced varieties under the Plant Variety 
Protection Act.

I'd be happy to entertain any questions that you have.

COMMISSIONER LEHMAN:  Thank you very much.  I don't think we have any.

Next I'd like to ask John Sanders of Mycogen Corporation to come 
forward, please.


MR. SANDERS:  Good afternoon, Commissioner Lehman.  My name is John 
Sanders.  I'm representing the BIO Intellectual Property Committee.  I am 
the general patent and trademark counsel at Mycogen Corporation here in 
San Diego.  I've been an intellectual property lawyer for about 14 years, 
all within corporations.  Most of that time was spent in the chemical 
area.  For the past 18 months I've been with Mycogen and have 
concentrated on two areas of biotechnology; biopesticides, namely 
bacilluster and jensus delta antitoxins, which are biopesticides, and 
plant biotechnology.

I am here today to emphasize the importance of utility patent coverage 
for inventions relating to plants.  After hearing over half of the 
speakers before me, and from reading in the PTO Notice of this meeting, 
I'm pretty sure everybody in this room understands how important patents 
are to all the companies and inventors involved.  I will try not to be 
redundant but I want to re-emphasize this fact with respect to plants.

Because of the obvious value plants have in our industry, and the fact 
that everybody here knows that, I tried to make up a cute analogy to 
stress the importance of patents.  I couldn't come up with a cute analogy 
but I did come up with a spokesperson for plant utility patents.  That 
spokesperson is the 1994 all American hero Forrest Gump.  If Gump were an 
attorney, I'm sure he would be a biotech patent attorney and he certainly 
would be here today.

To say the biotech industry depends heavily on the patent system is 
quite an understatement.  "Biotechnology Journal" reports that yearly 
agbiotech R&D expenditures are well over $100 million a year.  As a 
relative newcomer, from the chemical industry, I thought this figure was 
a little on the low side; however, the same article in "Biotechnology" 
indicated that there was an over 30-percent increase in R&D spending last 
year.  The private sector is uniquely positioned to comment on the 
critical role that utility patents play in the agbiotech industry.  
Staggering R&D investments -- in both time and money -- stringent 
regulatory review adds unique challenges as well as more time and more 
money.  Without the benefits of a utility patent, there's little hope for 
recovery to the investor of the substantial costs for R&D.  If there's no 
investor, there's no money.  If there's no money, there's no jobs and, 
consequently, then the research does not get done.

The agbiotech industry desperately clings to the utility patent system 
to maintain its critical mass from both an investor and science 
perspective, a critical mass that was shrinking until the expansion that 
occurred over the last year.  The agbiotech is dramatically different 
from the human health sector.

The human health sector, compared to the agbiotech sector, flourished in 
the lab, in the marketplace and on Wall Street in the 1980s.  As a 
general rule, the agbiotech industry cannot command the high profit 
margins that the drug industry gets.  In many cases, human health 
products provide a solution or a therapy that didn't exist before or, if 
it did exist, was many orders of magnitude inferior to the therapy or 
solution offered by the biotech inventions.  Erythropoietin, TPA, human 
insulin, human and animal growth hormones are just a few examples.

The agbiotech industry, on the other hand, faces a perception that 
there's already adequate technology out there.  Let's face it, the 
average lay person in the industrialized world does not really consider 
food and fiber production to be a major problem.  The do, however, think 
of AIDS, cancer, heart disease as problems near and dear to them.  For 
all these reasons, a strong utility patent system is the life blood of a 
successful agbiotech company.  Some patent practitioners are concerned 
that the new amendments to the PVPA to include hybrid seed may result in 
the PTO relinquishing jurisdiction of plant inventions to the USDA under 
the PVPA and the examining corps who handles the Plant Patent Act.  This 
should not, and from my perspective cannot, happen.  The utility patents 
have peacefully coexisted with the Plant Patent Act and the PVPA since 
1930 and 1970, respectively.  Compared to utility patents, the Plant 
Patent Act and the PVPA provide narrow protection to a particular plant 
line or variety.  Let's remember that the Plant Patent act and the PVPA 
were enacted in times when plant inventions were only envisioned by using 
standard plant breeding techniques.  These techniques were thought at the 
time not to comply or be able to coexist with the patent laws at the 
time.  Two issues come to mind:

Namely, the product of nature issue and the written description issue.

COMMISSIONER LEHMAN:  Do you think that we should consolidate the 
administration of the Plant Variety Protection Act under the Patent 

MR. SANDERS:  I think that would be a good consolidation into an 
examining corps that has the expertise all located in one location.

Neither the Plant Patent Act, nor the PVPA expressly or impliedly 
exclude utility patent protection.  There's no restriction of utility 
under 35 U.S.C. 101 in either of the legislative histories of these laws, 
and is indicated in the landmark case of Ex parte Hibberd.  To take the 
position that the PVPA and the Plant Patent Act cover all plant 
inventions would preclude patent protection to generic inventions, 
inventions that apply across the board to all plants, process inventions 
relating to plants, and intermediate composition inventions, all of which 
are claimable under a utility patent.  Overlap of utility versus plant 
patent versus PVPA doesn't mean irreconcilable conflict.  For example, In 
re Yardley it was held that under certain circumstances protection under 
the copyright law and design patent law was acceptable and coexist.  
There are other examples also.

Some other important issues relating to plant utility patents are the 
technology in plant biotech was not contemplated when the Plant Patent 
Act or the PVPA were enacted.  Now that the technology is here, we should 
b e able to protect it.

Plant biotech research is unique in at least one major aspect that I 
believe is affected in the Patent Office, and that's time.  From 
traditional chemistry and microbiology experiments are measured in 
chemistry usually on the order of hours or days; in microbiology, in the 
order of days to weeks, but in plant experiments and plant technology it 
is not uncommon for an experiment to run up to 10 months in a plant 
experiment.  To make a transgenic plant it involves transformation, 
tissue culture, selection, regeneration into primary transformance, 
maturation and progeny preparation and analysis.  The research cycle is 
many more orders of magnitude greater than traditional chemistry.  The 
inventor learns from these experiments and builds upon what he learns in 
the first experiment for what he does in the next experiment.  Because of 
this long research cycle, and the motivation to file patent applications 
early, plant utility patents should not be disadvantaged for not having 
working examples when, in fact, working examples are not required by 

The plant biotech invention should not suffer because of the unique 
attributes.  One way they are discriminated against is under 112, in 
particular, with respect to undue experimentation and breadth of claims.  
A 10-month experiment with plants is usually quite routine, where in the 
chemistry lab 10 months may usually result in undue experimentation.

Not only do plants qualify for utility patents, there is no valid 
general reason that a plant utility patent should be limited to specific 
plant lines or specific genes.  Overly narrow patents are many times 
useless.  Patents stimulate the incentives for agbiotech research.  We 
have seen the revolution in human health sector.  Biotech can offer 
equally exciting results in the agriculture in the abetment of hunger.  
For the greatest impact, a strong utility patent system is necessary.  So 
if Mr. Gump was here, he'd have very few words.  This meeting would 
probably be over already, but he would have very profound words.  He 
might say, "Transgenic plants happen.  Just patent it.  Have you patented 
your new plant today?" or "Say yes to plant utility patents."  I agree, 
and BIO recommends that you make all aspects of utility patents available 
to the plant technology.  

COMMISSIONER LEHMAN:  Thank you very much.

Next I'd like to call Micheal Farber of Merchant and Gould. //


MR. FARBER:  Thank you, Commission Lehman and panelists.

My name is Micheal B. Farber and I'm a patent attorney with Merchant and 
Gould, in Los Angeles.  We are a full-service intellectual property firm, 
and our biotechnology clients include small start-ups, large Fortune 500 
multinational corporations, non-profit research institutions and 
universities in a broad range of biotechnology areas.  I would like to 
address several issues, particularly with respect to enablement and 
nonobviousness and the level of ordinary skill in the art.

I think with respect to enablement, which also ties in to some extent 
with utility, there has been a perceived lack of credibility for 
biotechnology which has almost put it into the same weird science 
standard as perpetual motion or cold fusion, and I don't think this is 
appropriate.  I think there's been a failure to realize that this work 
has built on the advances of the last 40 or 50 years in organic 
chemistry, genetics, biochemistry, cell biology and other well recognized 

Specifically, I think in many cases there will be a reference cited on 
general grounds to yield a rejection under 101 and 112.  The rejection 
will cite generalized reasons, such as, for example, an antiidio-type 
response for antibody, a human antimurine antibody response for an 
antibody that is partially derived from mouse or rat tissues, concerns 
about lack of bio availability or stability, without an attempt to apply 
it to the particular case.  In other words, this is a general research 
article which gives possible cautions but there is really no attempt to 
fit these possible cautions to the specific facts of the claimed 
invention.  Moreover, I think in many cases there is a requirement for 
virtually 100-percent certainty of efficacy even in conditions in which 
there is now virtually no effective treatment.  An example which I am 
involved in involves an antibody that may be useful for treatment of 
liver cancer.  As you may know, this is for all intents and purposes 
100-percent fatal, although I believe there have been some attempts made 
to treat it with liver transplants.   

The question I think would be:  Would a reasonable physician conversant 
with the research and advances in the art, a mainstream physician not 
willing to try things that are out of the ordinary, believe that this 
represents an advance that is worth trying clinically?  In other words, 
we have to go back to the constitutional mandate:  Does the claimed 
invention represent an advance of science in the useful arts?

Along the same lines, I think that there has been a serious lack of 
consistency with respect to rejections under 101 and 112 and then 
rejections on  103.  In another antibody case, I had a rejection in the 
same office action, under Section 101, based on lack of utility and, in 
the same action, a rejection under 103 based on the recognized and 
accepted diagnostic utility of an analogue, which according to the 
examiner provided incentive to modify to produce the claimed compound.  
This, of course, is completely inconsistent.  If one of ordinary skill in 
the art would believe that there was a sufficiently shown utility to make 
the modification that same person of ordinary skill in the art would then 
believe that the -- also believe that the new compound would, in fact, 
have such utility.  This goes back to the point that was raised earlier 
that when you're considering under Section 103 the person of ordinary 
skill in the art is a genius, when you're considering 101, and 
particularly 112, that same person suddenly turns into an idiot.  There 
is a lack of consistency in this area.

A third issue I think is a little bit more specific, and that has to do 
with the use of a couple of recent cases, notably, Amgen and Fiers, to 
cut down what I think is the proper standard for enablement that was 
decided by previous CAFC and CCPA decision in the chemical area.  And I'm 
talking about decisions such as Angstat which says that it is not 
necessary for an inventor to test all of the potential embodiments of an 
invention, even in a relatively unpredictable art such as organic 
chemistry.  I think this has come up in two areas that I have seen.  One 
is that an inventor has isolated or discovered a peptide or several 
peptides and now wants to claim nucleic acid that encode these peptides.   
The second is that the inventor has isolated or discovered a new antigen 
or a series of related antigens possibly related by allelic variation and 
now wants to claim antibodies, either polyclonal or molyclonal to these 
antigens.  And what I have seen is even in situations where the peptides 
are allowed with reasonable scope or the antigens are allowed with 
reasonable scope, they're saying that there is undue experimentation 
required in nucleic acid in putting together nucleic acid sequences or 
making the antibodies, even though when you know the peptide sequence all 
of the possible nucleic acid sequences that encode the peptide are 
automatically available by the genetic code.

In the absence, for example, of evidence that would lead one of ordinary 
skill in the art to suggest that some of the nucleic acid sequences would 
be inoperable, for example, is used to insert into vectors and used to 
transfect bacteria for expression, as a result of code-on choice or 
instability, or formation of abnormal secondary structure, I don't 
believe there's any basis for this rejection.  The Amgen and Fiers cases 
hold that if you merely are claiming a nucleic acid that encodes a 
molecule with a particular function with little or no structural data, 
you have at most a wish to obtain a product of a particular activity, 
this comes very close to the long proscribed single means claim.

The situation I'm referring to, though, is you have the protein or the 
antigen or the peptide and the rest of the experimentation, if any, is 
routine.  In the absence of evidence to suggest that, for example, a 
particular nucleic acid sequence would be inoperative as a probe or as an 
expression vector, or that a particular antigen could not be used to make 
antibodies, according to the generally accepted procedures in the art, 
there would appear to be no basis to reject the secondary claims.  I 
think this has the effect of giving the inventor less scope than he or 
she is properly entitled to under the law.

Thank you.

COMMISSIONER LEHMAN:  Thank you very much.

MR. FARBER:  Any questions?

COMMISSIONER LEHMAN:  I think -- I don't have any, unless someone else 
does, so I think we'll move along.

Next, Michael Roth of Pioneer Hi-Bred International.


MR. ROTH:  Good afternoon, my name is Michael Roth.  I'm a registered 
patent attorney and patent counsel for Pioneer Hi-Bred International, on 
behalf of whom I'm appearing.  Pioneer is the world's largest 
agricultural genetics company with about $1.8 billion in revenues, most 
of that in the United States.  We currently invest over $100 million per 
year in research and development and rely on both Section 101 utility 
patents and Plant Variety Protection --

COMMISSIONER LEHMAN:  Where are your headquarters?

MR. ROTH:  Des Moines, Iowa, not Switzerland.  And if you were there, 
you'd notice the difference.

COMMISSIONER LEHMAN:  We have to go to Geneva all the time and everybody 
says, "Oh, wow, it's really glamorous to go to Geneva," but I have to 
tell you I think Des Moines is a lot more exciting and a lot more 
interesting than Geneva, Switzerland.  The weather is better, too, 
believe it or not.

MR. ROTH:  Well, the last time I was in the Geneva airport I saw someone 
collecting for the poor of Geneva, and I assume that's a person who has 
only one BMW.

So, as I said, we invest over $100 million per year in R&D which means 
that we invest more in a given year than some companies have in total.  

We protect our products with Section 101 patents, Plant Variety 
Protection Certificates whether they are the product of newer methods of 
biotech innovation or earlier methods of genetic manipulation.

We have several comments in response to the questions raised in the 
official Notice.  With regard to the issue of enablement of 
biotechnological inventions, we believe the legal standards governing 
assessment of enablement and obviousness, as developed and interpreted by 
the Federal Courts are sufficiently clear and appropriate for 
biotechnology inventions.  Unfortunately, we have considerable difficulty 
getting the Patent and Trademark Office to follow those standards.  
Citations of case law are routinely ignored or explained away without 
citation of contrary decisions and without specific explanation of why 
the law as cited by the applicants is inapplicable to the facts of the 

Now, you asked for specific examples, and the one that I have involves 
an issue that is not specifically covered in the questions, and that is 
determination of who is an inventor and who is not.  Those who are 
familiar with the world of scientific publication know that co-authorship 
of a paper bears no rationale relationship to inventorship of any subject 
matter disclosed in the paper.  It's a highly political process by which 
academic careers are made and lost and by which debts are incurred and 
favors repaid.  Yet there are examiners on some of our cases who are fond 
of citing In re Katz for the proposition that co-authorsahip of a journal 
article raises a presumption of joint inventorship.  In fact, in that 
decision the CCPA specifically rejected -- and those were the words, "We 
specifically reject the examiner's position that the publication of the 
subject article provided even a tenuous ground for rejection under 35 
U.S.C. 102 (g)," and the court expressly held, and they used those words, 
"We expressly hold that an authorship of an article does not raise a 
presumption of inventorship with respect to the subject matter disclosed 
in the article."   Concluding, quote:  "Co- authors may not be presumed 
to be co-inventors merely from the fact of co-authorship." Unquote.  
Nevertheless, we are being forced to appeal these cases in order to have 
this highly improper rejection reversed, a process that, as has been 
mentioned, takes two to three years.  And in this business time can be 
even more important than money.

Let me also observe that an appeal isn't necessarily final.  We have a 
case that has been on file for about five years now.  A couple of years 
ago we took the case to appeal and roughly a year ago we got reversal of 
the examiner's decision.  The case is still awaiting issuance and we 
understand the examiner is looking for some reason to reopen prosecution 
and enter new rejections.

The office has noted complaints about the propensity of examiners to use 
a much higher standard when evaluating enablement than is used when 
evaluating obviousness.  As a specific example, we have a substantial 
effort to identify and patent proteins that have either anti-insect or 
antipathogen activity in plants.  If we can express those proteins in 
plants we can make a genetically engineered plant that has desirable 

We routinely receive rejections that argue that it would be obvious to 
screen proteins for anti-insect or antipathogen activity, to sequence 
those proteins, to assemble synthetic genes coding for those proteins, to 
insert those sequences into plant expression cassettes, to insert those 
expression cassettes into plant cells and to regenerate those transformed 
cells into whole plants.

References are cited in support of each of these propositions.  At the 
same time, the claims are rejected if we do not have actual data showing 
completion of each of these steps on the basis that the specification is 
non- enabling even though the specification explains how each of these 
steps is performed.  In these rejections, the examiner refers to, quote, 
"well known," unquote, uncertainties and difficulties in carrying out 
these steps.

If references are cited, they're often in conflict with the references 
cited in the obviousness rejections.  This reflects a win by any means or 
checkmate sort of approach to examination that is inconsistent with the 
ex parte nature of examination and the proposition that the examiner is 
there to assist the applicant as well as to represent the public.

Again, a specific example is the routine citation of an article by 
Potrykus, who is a Swiss scientist -- the article is now several years 
old -- which purports to set up several criteria for establishing 
successful plant transformation.

Setting aside for a moment the fact that the Potrykus article sets up 
unrealistically high standards for proof of plant transformation, we also 
routinely note that the references cited in rejecting the claims for 
obviousness do not meet the Potrykus criteria.

Even more specific is an example of a rejection of a patent application 
directed to a virus-resistent corn plant for non-enablement over 
Potrykus.  The examiner argued that the application failed to show that 
the Potrykus criteria for proving plant transformation had been met, yet 
the application showed regeneration of whole plants in the presence of 
selection for the herbicide resistance marker and the survival of their 
progeny in field testing in the presence of viral infestation in which 
the control plants did not survive.

We believe that the in vivo or in vitro results meet the criteria 
normally applied by commercial companies in advancing their commercial 
projects, and the pontifications by a bench scientist as to the sort of 
proof that would be needed to assure academic irrefutability should not 
stand in the way.

COMMISSIONER LEHMAN:  In that particular case -- Is that still pending? 
-- did you appeal to the Board of Appeals?

MR. ROTH:  Well, the case is still pending and we have to make a choice 
as to whether to appeal, drop the case, or refile it.

COMMISSIONER LEHMAN:  In that sort of a situation, do you talk to the 
group director where you think that the examiner is being -- is applying 
an inappropriate standard?  Or have you just kind of dealt with it -- 
relied -- gone no further than an examiner?

MR. ROTH:  In general, we rely on the examiner.  In many of these cases 
we have examiners who are not yet primary examiners and so we know that 
the office actions are being reviewed and signed by their SPE.

COMMISSIONER LEHMAN:  Do you talk to the SPE at all or try to contact 
them to raise these concerns?

MR. ROTH:  In most of the cases we talk to the examiner and the examiner 
talks to the SPE, in effect, on our behalf, if at all.  In some cases we 
have an examiner who agrees with us and the SPE is the one who disagrees.  
We're getting all this secondhand; the examiners are saying, "There's 
nothing I can do.  My boss won't let me make this change."  

The patent grant has traditionally been considered a reward for prompt 
public disclosure of technology.  Yet, under the scenario I've described, 
we're being penalized for filing our applications as early as possible.  
In many cases, the work involved in laborious and time consuming, as has 
been mentioned.  Plants have their own schedule for germination and 
development.  It could take months, even years to carry out a project, 
the results of which have already been foreseen by the inventors; 
foresight that is confirmed by the hindsight of the obviousness 
objection.  None of the work involved is particularly challenging to 
carry out using the disclosure as a guide.

What is needed is a consistent standard for assessing what sort of 
disclosure is needed to put biological inventions in the hands of the 
person of ordinary skill.

Turning to assessment level of ordinary skill.  Many of our patent 
applications are directed to -- directed to plant inventions are 
routinely rejected over review articles reviewing improvements and 
progress in genetic improvement of plants over the last 65 years.  The 
improvements achieved over that time period are cited as establishing 
that the level of skill in this art is such that the person of ordinary 
skill in the art can routinely make continued improvements of the sort 
that have been made over the past 65 years.  This approach is clearly 
defective for several reasons.

First, it's laden with hindsight.  It focuses on the record of successes 
and ignores millions of failures over the same period.  Most important, 
implicit in this approach is the unsupported assumption that successes 
reported in the past were routine and obvious.  It's akin to reviewing 
the official "Gazette" for the many patents issued in microelectronics 
since the first integrated circuit and concluding that such inventions 
have been made on a regular basis, the level of skill is such that one of 
ordinary skill can readily make similar improvements in the future.

Before closing, if I could, I'd like to raise one issue not addressed in 
your Notice and that is deposits of biological material.

In our view, deposits of biological material are currently available on 
terms inconsistent with the limited nature of the patent grant.  For 
example, the patent is limited to the geographical jurisdiction of the 
United States while anyone in the world can request a sample of deposited 
material.  The patent gives the right to prohibit others from making, 
using or selling the patented invention yet the samples, which in many 
cases are self-replicating embodiments of the invention, are available 
without any undertaking from the recipients not to make, use or sell the 
patented invention.  The PTO should not require that patentees place 
their invention at the disposal of the public and then aid and abet 
circumvention of the patentee's rights, either secretly in the United 
States or openly in other countries where comparable production is not 

COMMISSIONER LEHMAN:  Are you finding that is a problem?  Have you had 
-- actually had experience where somebody --

MR. ROTH:  Well, one of the problems we have, of course, is that the 
recipient of a sample can transfer that to third parties without notice 
to us.  So what we get from the American-type culture collection is a 
notice that a law firm has requested a sample.  We know they don't want 
it for themselves and who that ends up in the hands of, we have no way of 
knowing and so we have no way of finding out in whose research plot that 
material might be found.

With that, let me conclude and thank you for your time and attention.

COMMISSIONER LEHMAN:  Thank you very much.

Our next, Louis R. Coffman, has decided not to testify so that will put 
us right about on schedule now.  In fact, a few minutes ahead.

Now I'll ask Margaret Connor, from the Office of Technology Transfer, 
the Agricultural Research Service, U.S. Department of Agriculture, to 
come forward, please.  



MS. CONNOR:  Good afternoon.  My name is Margaret Connor.  I'm a patent 
advisor for the United States Department of Agriculture, Agriculture 
Research Service, Office of Technology Transfer, and I'm here today 
representing the USDA.

The USDA employs approximately 3,000 staff and research scientists and 
supports agriculture research in agriculture research facilities and land 
grand universities throughout the nation with a research budget of 
approximately $1.5 billion annually.

This department previously submitted written comments strongly 
advocating an experimental use defense to patent infringement.  Today I 
will emphasize two points in support of our position:  The need for and 
benefits of a research exemption from patent infringement, and our fear 
that recent use judicial decisions has seriously eroded the experimental 
use defense.

In addition, I will provide brief comments in support of broadening 
coverage of the Plant Patent Act to include plant parts and products.

First, a major contributor to the rapid advances in agriculture, 
medicine and other forms of technology that have benefitted the people of 
the United States and the world has been public sector scientific 
research.  That is research conducted by or supported by federal and 
state governments in government, academic and other public and 
independent research institutions.  The success of public sector 
scientific research has been shown to be critically dependent on the free 
exchange and use of ideas, research findings and their products.

The experimental use defense of patent infringement has provided 
protection for scientists in the public sector to pursue research avenues 
which have added to the knowledge base and led to rapid advances that 
have been the hallmark of American scientific enterprise.

We believe an experimental use doctrine is critical to the continued 
advance of agricultural technology.  Several representative examples of 
problem- solving research that have benefitted from the free exchange of 
plant materials illustrate this.  The USDA has been instrumental in the 
dramatic increase in crop productivity.  In the last 40 years the yields 
of corn, rice, wheat and potatoes have increased an average of 
134-percent, with conservative estimates contributing a minimum of 
60-percent of these increases to the development of new varieties by 
plant breeding.

Varietal development requires access to often dozens of ancestral 
varieties.  Typical of this is the rice variety La Mont, whose pedigree 
covers more than five generations and two dozen varieties.  La Mont rice 
is an important contributor to the 149-percent increase in rice 
production in the United States since 1950, yet elimination of access to 
even one unique parental line likely would have destroyed the chain 
necessary to create this important crop variety.  The result would also 
be reached in other instances of variety development.  For example, 
another important variety developed through public sector research is a 
wheat variety, Gaines wheat, that was the basis for the grain revolution 
in wheat.  It, too, was critically dependent on unrestricted access to 
the germ plasm of unique parents.  Lack of unrestricted access could have 
prevented or greatly delayed the development of these varieties.  We 
believe that continued progress in innovation in agricultural science 
will only be possible with free access.

Second, we no longer are sure what constitutes the present experimental 
use defense.  The extent of experimental use exception has been eroded by 
several recent judicial opinions.  Notably in Roche v Bolar, the Federal 
Circuit dicta has labeled as fatal to the experimental use defense any 
commercial intent or profit motive whatsoever.  This presents 
difficulties for the continued success of research in the public sector 
which has been placed under -- strengthens Legislative and Executive 
Branch mandates to transfer research discoveries to commercial 
applications.  The combined effect of the legislative mandate and the 
administration's technology policy makes it clear that the intent of the 
congress and the President is to move technology quickly to resolving the 
critical needs of the public.  Achieving this intended goal should not be 
hindered by counterproductive restrictions on research use of patented or 
otherwise legally protected technologies, plants or animals.

In the past, reliance on administrative and industrial practice and 
policy regarding research use of patented technology, coupled with 
judicial application of the experimental use defense, has allowed rapid 
progress.  There are recent examples, however, showing that public sector 
research has been hindered because companies have not permitted use of 
patented technology for research purposes or have made access to the 
technology difficult.  Thus, the past successes may have no future peers 
without clarification and/or codification of the experimental use 

The present system has evolved its own cultural checks and balances over 
the last 200 years allowing for benefit to the patent holder without 
undue restriction on further innovation and progress.  The Patent and 
Trademark Office has acknowledged the implicitness of experimental use in 
the disclosure requirements of the patent laws.  Accepted practice has 
long included both commercial as well as non- commercial development 
based on patent disclosures.  As an example, descendent patents are 
commonly applied for and issued during the life of the parent or dominant 
patent, even though the descendent patent cannot be practiced without 
backer cross-licensing.

Failure to allow experimental use, whether commercial or non-commercial, 
could create an artificial barrier to the most promising lines of 
research.  The United States Department of Agriculture supports the 
codification of a broad application of a research use exemption from 
infringement of patented technology to include not only research use for 
understanding the invention and its verification and replication but also 
to include attempts to improve the patented technologies to make new 
innovations available to the American people.  All of these aspects 
promote the progress of science for the general welfare of not only the 
public but of the American industry as well.

The research exemption included in the Plant Variety Protection Act has 
worked extremely well for agricultural research, both public sector and 
industrial, and could serve well as the model for our research exemption 
for utility patents.  It reads:  "The use and reproduction of a protected 
variety for plant breeding or other bona fide research shall not 
constitute an infringement of the protection afforded under this act."  
In this Act, plant breeding is analogous to new invention or improvement 
patents.  This approach is most consistent with the intent of Congress 
and with the technology policy of the administration, both of which 
represent initiatives to boost the commercial competitiveness of U.S. 
industry and the well-being of the general population.

Finally, in regards to the amendment of the Plant Patent Act.  The USDA 
supports attempts to broaden the extent of protection provided by plant 
patents to include harvested material, including entire plants and parts 
of plants.

Current protection can be circumvented by growing the plant outside of 
the United States and importing harvested materials back into the U.S. 
for sale.  Given recent efforts to extend the protection afforded by both 
utility patents and Plant Variety Protection Certificates to guard 
against this kind of act, it is appropriate to guard plant patent owners 
within this expanded umbrella of owners' rights.  The economic effects on 
the ornamental plant, fruit tree and other industries dependent on plant 
patent protection warrant this protection.

Thank you.

COMMISSIONER LEHMAN:  Thank you.  I don't think you gave us any, did you 
have some specific examples that you witnessed where there has been 
discouraging of experimentation based on someone else's patent rights?  I 
mean, that you know of in your USDA experience?  

MS. CONNOR:  Yes.  In our written comments there are some examples, and 
there was one case where in the breeding area they would not allow the 
U.S. scientists to have access to what they considered the most important 
line and, therefore, they had to just go without that and try to do 
breeding without that line.  And then, in the newest instance where 
there's this patent covering all the lines of genetically engineered 
cotton, there's an instance that we might not be able to use this without 
asking for a research license.  So it's possible that we may get to use 
it but it will be -- everything will be made more difficult and that's 
what we want to guard against, because, for example, in the breeding of 
the rice and the wheat that I mentioned, if there had been a lot of 
negotiations and back licensing of those many varieties involved there is 
a likelihood it just never would have gotten done.

COMMISSIONER LEHMAN:  Would you -- In your own technology transfer 
policies at USDA, do you -- At the time you grant exclusivity to 
developers, do you include provisions requiring them to issue licenses to 
other experimenters?  If USDA research is involved, you could use your 
licensing protocols to deal with that problem, couldn't you?

MS. CONNOR:  It's my understanding as far as the protected patented 
property that USDA has control of that we do grant experimental use 
ability for researchers to use it.  Our concern is that the USDA will not 
get to have experimental use of property protected that belong to other 
companies, and that's hindering our own research and other public sector 

COMMISSIONER LEHMAN:  Thank you very much.

Next, did you -- Since we missed one witness we'll --

MR. ROTH:  Excuse me.  I apologize for interrupting.  If I had know 
someone was going to come and speak on this subject from USDA I would 
have prepared some remarks on this subject.  I just want to ask one 
question that is escaping me and that is, if USDA is part of the U.S. 
government and rights of eminent domain they don't need a license.  They 
can take it.  I don't understand why they need a codified research 
exemption when the government doesn't worry about patent rights.  For 
example, the Department of Defense issues a contract for an airplane, 
they don't care who has the patent on the airplane.  The only remedy is 
in the Court of Claims.  Why does the Department of Agriculture need a 
research exemption?

COMMISSIONER LEHMAN:  I gather that you disagree with the Department's 

MR. ROTH:  Or at least would like an explanation.

COMMISSIONER LEHMAN:  Well, then you'll have to address that to them.  I 
think their concern probably goes beyond USDA research to research by 
others as well who don't have the capacity to violate the law and then 
just say, "sue me in the Court of Claims."

Next I'd like to call on Steven Brostoff of the Immune Response 
Corporation, please.


MR. BROSTOFF:  I would like to thank you for giving me the opportunity 
to testify before this hearing.  I'm Steven Brostoff, Vice-President of 
Research and Development, The Immune Response Corporation.

I would like to contrast two different experiences I have had with the 
Patent Office over the last ten years to illustrate problems that need to 
be addressed in the patent office.  I am the co-inventor on a patent that 
was filed in 1984.  It used a well established animal model of human 
disease to demonstrate a novel therapeutic approach.  After less than 
three years the patent was issued.  The technology was licensed to a 
biotechnology company and millions were raised to support the development 
of this approach which is now in Phase II trials for several indications.  
Five years later, after joining The Immune Response Corporation and using 
the exact same well established animal model, I was the co-inventor of a 
new therapeutic approach which was more specific and longer lasting than 
the first.  A patent for this approach was filed by The Immune Response 
Corporation.  The European patent application was filed a year later as 
was an Australian patent application.  This time it took over five years 
before the Patent Office acknowledged that we had allowable claims.  By 
this time, we had already been issued he European patent and the 
Australian patent, even though they had been filed a year later.

But wait.  The Patent Office changed its mind about issuing the patent 
because we had not demonstrated utility in humans.  This is the Catch 22 
of biotechnology patenting.  In order to raise the millions in capital 
needed to pursue clinical trials one needs a proprietary position.  
However, the Patent Office appears unwilling to grant the patent assuring 
this proprietary position without clinical data.  Moreover, this 
requirement for demonstration of utility in humans represents a departure 
from what had been needed just a few years ago.  It was not needed to 
obtain a patent on the previous technology using the same animal model of 

In fact, based upon our previous experience that the animal model data 
would be sufficient The Immune Response Corporation had proceeded into 
clinical trials using this technology and expending the millions of 
dollars needed to do so.  The money expended had been raised in the 
public markets and were not specifically raised to support this 
technology.  The decision by the company to expend this money was based 
on our assumption that a patent would be granted based upon criteria that 
had been used in the past by the U.S. Patent Office and that was being 
used currently by the European Patent Office.  We did not know that the 
rules had changed.  Fortunately, however, we had enough significant 
clinical data to overcome the utility in humans issue and, after another 
six months, were told once again that we would receive a notice of 

But wait.  The supervisor had reviewed the application and had questions 
about enablement, in spite of the fact that a primary examiner had 
decided to allow the claims.

I must say this is an experience similar to one we had with an HIV 
immunotherapeutic that we had developed which took approximately six 
years for the patent to issue.  In that case we did get the patent issued 
but, once again, had similar experiences and ultimately were required to 
supply clinical data that fortunately we had and fortunately we had had 
the resources to expend in doing those clinical trials prior to obtaining 
the patent.

This kind of behavior on the part of the Patent Office makes it very 
difficult to make rational decisions on expending the millions necessary 
to develop new therapeutics.  I will use an analogy that I think people 
here in California can appreciate.  Our recent dealings with the Patent 
Office is like trying to play football in the middle of an earthquake.  
As we try to execute our game plan the ground keeps shifting under us.  
Sometimes it takes us sideways.  Sometimes backwards, and occasionally 
forward.  What we need is a stable playing field on which to execute our 
game plan.  Moreover, we do not need unreasonable obstacles placed on the 
playing field. Since our competitors, outside the U.S., do not need to 
establish utility in humans they have an advantage in establishing a 
proprietary position in knowing how best to expend their capital in order 
to develop their technologies.  The current policies of the Patent Office 
can only harm the biotechnology sector and contribute to the loss of the 
United States dominant position in this field.  Most importantly of all, 
it will impede the development of many therapeutics that will ease pain 
and suffering and prolong the lives of millions of individuals.  Give us 
reasonable rules to follow, and reasonable criteria to meet, and the 
biotechnology industry will thrive and we will all benefit by the 
products that the biotechnology industry will provide for us.

Thank you very much for your attention.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Brostoff.

I'd next like to call on Robert Schaffer of Darby and Darby.


MR. SCHAFFER:  Good afternoon, Commissioner and panel.  I am Robert 
Schaffer.  I am a partner with Darby and Darby, in New York.  Darby and 
Darby represents a number of biotech firms ranging from multinational 
corporations to start-up high tech ventures, and I'm speaking today from 
the point of view of a practitioner in the Patent Office preparing 
applications for these clients and responding to office actions.   

There has been a consensus developing today that the standards in place, 
the legal principles in place are appropriate, and I agree with that 
developing consensus.  There also seems to be a developing consensus that 
those standards are not being properly applied in the Patent Office and 
that better education for examiners might address that issue.

I think that, however, many of the examiners in Group 1800, in fact, do 
understand the legal principles or much of them.  The examiners 
understand that in an emerging technology there may be questions about 
whether the claim of utility in the specification can be accepted on its 
face.  And it is appropriate for an examiner confronted with that doubt 
to ask the applicant for evidence of utility.  The problems arise when 
the applicant submits his proof, usually in the form of one or more 
declarations from experts in the field and that response is considered 
inadequate.  I think that the problem is not so much an interpretation or 
understanding of the law by examiners but, rather, what quantum of proof 
should be considered sufficient to overcome the examiner's initial doubt 
that the specification may not provide an adequate basis for utility.   

When a declaration is submitted, and I've heard many people here state 
that they have applications pending for years which have gone through 
many continuations, and after 12 declarations or so the application is 
still under rejection.  And I've had a similar experience and the 
response from the examiner to these declarations often takes one of two 
forms.  Either the examiner says the declarations have been carefully 
considered and are deemed not persuasive -- end of rejection. And that is 
clearly a misapplication of the law, as has been said earlier.

The examiner should and must set forth specific reasons why that proof 
was not adequate.  But, in many cases, the examiner understands that he 
or she is supposed to do that and, indeed, attempts to do so, and that 
usually takes the form of citing other references in the field which 
express doubts about the state of the art or what the technology can 
provide today, and so the applicant is in the position of providing sworn 
testimony that so and so, qualified expert, believes that a person of 
ordinary skill in the art would find a benefit, a practical benefit from 
following the teachings in the specification.  And there may be even 
additional data -- animal data or in vitro data or, in some cases, human 
data -- supplied but the examiner comes back and says, "Well, 
nevertheless, I'm not persuaded because here is an article which 
questions the validity of your animal model."  And this basically takes 
the form of a battle of experts, a battle by the applicant with third- 
party experts that he can't confront in the Patent Office and this is an 
insurmountable battle.

It seems to be a position by many examiners that if there is not a 
consensus within the scientific community or a general agreement in the 
field that your model is adequate or that this is a disease that can be 
successfully treated, no declaration that you would present would be 
sufficient unless, indeed, you then go to the final hurdle of submitting 
human data which definitively shows utility.

I think that the problem is one of standard and that a more appropriate 
standard to apply would be that the examiner should review the 
declarations submitted, the evidence submitted, and if those declarations 
provide a reasonable basis for finding a utility in the application then, 
from the Patent Office point of view, it should be accepted that the 
statutory requirement for utility has been met.  And only if defects in 
the reasoning or logic of the declaration or the scientific underpinnings 
for the declaration can be shown should those proofs be rejected.  It is 
a standard of reasonableness, and I think that basically the examiner 
should be asking, "Is the applicant claiming an invention of reasonable 
scope based on the utility either alleged in the claim itself or in the 
application, and based on the submitted proofs is it reasonable to 
believe that this invention is more likely than not to provide some 
benefit?"  And if the answer is, "Yes," then the utility requirement 
should be deemed satisfied.

There has been a question about whether there should be a presumption of 
utility and I think to some degree there is already a presumption of 
utility.  The applicant makes a claim of utility and that claim is 
accepted, and unless there is a reason to doubt it -- and I think that 
really the examiner should be asking, "Has the applicant put forward a 
plausible explanation for why his invention should be deemed useful," in 
the face of the examiner's doubts, and if he does so he's done all that 
he needs to do.

And the same type of problem applies in enablement rejections which are 
tied to the utility rejection.  Often the examiner will say, "Since you 
haven't proven that the invention works, you have not enabled a person to 
practice an invention that works."  This is troubling for an additional 
reason that the applicant can submit proof of utility after the filing 
date but the applicant cannot supplement his disclosure to satisfy 
Section 112.  And what can happen and has happened is that the examiner 
may be satisfied on the utility proof but then will say that the 
parameters of the experiment that you used to demonstrate utility were 
not set forth in the specification and, therefore, "Although I am now 
persuaded that the invention has utility you still don't meet the 
enablement requirement." And, again there, I think the standard should be 
one of reasonableness and -- as opposed to a very high standard of 
definitive proof being required or doubts expressed by others in the 
field and publications being held against the inventor, and education 
could help within the Patent Office to some degree, but I agree with the 
gentleman who proposed that guidelines be promulgated either through the 
NPEP or through OG notice, and I think that that would be the most 
helpful mechanism for directing examiners what standards are the most 
appropriate to apply and how to apply them.  I agree also that industry 
and the bar should review those proposals when possible, and I see that 
my time is up.

COMMISSIONER LEHMAN:  I want to thank you, Mr. Schaffer.  I think that 
was very helpful testimony.  There were some specific examples that you 

Next I'd like to call Bertram Rowland, from Flehr, Hohbach, Test, 
Albritton and Herbert.


MR. ROWLAND:  Before introducing myself I'd like to admonish the members 
of the Patent and Trademark Office for violating my constitutional rights 
as well as the other speakers.  To request that patent lawyers speak for 
only nine minutes on these topics I consider cruel and unusual 

COMMISSIONER LEHMAN:  I thought you were talking about our 
constitutional right to not to have to preserve our bottom ends from 
sitting here through all of these interminable hearings.  Sorry.

MR. ROWLAND:  Also considering the fact that you're three hours out of 
phase, I think it admirable that you're still awake and listening to us.

My name is Bertram Rowland of counsel with Flehr, Hohbach, Test.  I have 
the good fortune to have written the first patten in molecular biology in 
1974.  I've watched the field develop, worked at many academic 
institutions and start-up companies and I'm still active today.    

During this period, we have watched a great industry arise.  The 
industry has not only provided new therapeutic products but also promises 
to provide us with a continuing stream of new products.  Together with 
the academic community the industry has and is continuing to provide 
insights into physiological processes which will allow us to understand 
life better and to treat diseases better.

This industry has been dependent on the cooperation of academic 
institutions, venture capital, the drug industry and the dedication of 
numerous scientists in biological, chemical and electrical fields.

For the most part there has been a common motif in the finding of 
biotechnology companies.  A professor makes a discovery, that opens an 
opportunity for future development of commercial products, such as drugs 
and modes of treatment.  The professor's institution files a patent 
application that covers the discovery, and usually claims the use of the 
discovery toward the product development.  Supported by the professor's 
knowledge and experience, and his colleagues, one or more venture capital 
companies provide initial funding to carry the development further.  At 
some point the biotech company can raise enough money to do clinical 
studies or a drug company sponsors the further development for an 
interest in the product.

The hearing today is not about the exegesis of musty law but whether the 
development of the biotechnology industry will assume a new course.  If 
academic institutions are unable to obtain patents on their academic 
discoveries, despite government policies supporting obtaining patents, 
then the original seed which starts the process of company formation will 
not be available.

It is essential to academic institutions that their discoveries be 
promptly disseminated.  Patents on the intermediate events leading to the 
ultimate product, events which may take many years and large investments, 
will likely not be available to be patented and provide protection for 
the investment.  In deciding what is the basis for Section 101 utility, 
consideration must be given to the effect such determination will have on 
the role the Patent Office serves in encouraging investment in technology 
and who will obtain the reward.

Utility has become a major determinant of patentability in technology, a 
situation distinctly different from other technologies.  This is even 
true of chemistry where often the purposes for the invention -- diagnosis 
and treatment of humans -- are the same.

What is the rationale for this divergence?  One explanation might be the 
determination that biotechnology is extremely unpredictable.  This was 
certainly the basis for the decision in In re Vek.  Expression in 
sinobacteria of a pesticidal protein previously expressed in other 
procaryotes was found to be unobvious, but the experience with the two 
strains could not be extended to the genus.

A further consideration, possibly a more important one, associated with 
the many inventions directed to the development of therapeutics is that 
biotechnology companies are focusing their attention on indications for 
which there are no satisfactory treatments.  Frequently no treatments at 
all.  This means that there are no established models, no relationships 
to through gene and vitro models and animal models with experience in 
humans, no other compounds with which to compare results.

Proof of efficacy in humans is an insuperable obstacle to patentability.  
Biotechnology provides a logical approach to the development of 
therapeutics.  It allows us to identify the proteins or other compounds 
involved in the physiological processes associated with an indication.  
It permits a determination of the physiological pathway as well as the 
branches, the regulatory mechanism associated with the pathway and 
potential points of intervention.  In elucidating these pathways, 
processes and regulatory mechanisms there will be many inventions made 
before therapeutic compound is developed.  None of these inventions is 
free of uncertainties, and all will require large investments.  All of 
these inventions will aid in the development of a therapeutic and may be 
essential to the discovery of the therapeutic.  The possession of these 
compositions and processes will greatly aid in the identification of 
candidates for further investigation.  They will be used despite the fact 
that no prior history of their accuracy in predicting therapeutic 
activity in humans is available.  

In rejecting these inventions as not having practical utility, the 
Patent Office is asking for a risk free guarantee of probable activity.  
Asking for proof of the next five or ten years of research and 
development activity will pay off.  In the real commercial world, these 
efforts are calculated risks where the patent serves to reduce that risk.

Biotechnology has changed dramatically since the early eighties.  Most 
of the early work had direct application.  Today the targets are less 
obvious, require much greater effort toward achieving products, would 
involve multiple steps where new proteins and physiological processes 
will be identified, and will only occur over an extended period of time 
and by large investment.  In the absence of obtaining a proprietary 
position the start-up company must rely on trade secrets.  This will 
prevent the early dissemination of information, may inhibit investment 
which will impede bringing therapeutics to the marketplace, and could 
substantially diminish the U.S. leadership in biotechnology, all 
inimicable to the purposes of the patent system.

I would like to read you one example of the standard of utility in Group 
180.  For claim of a normal protein involved in the homing of white blood 
cells to sites of inflammation such as associated with rheumatoid 
arthritis and reprofusion injury the examiner stated, quote:  
"...further, since there was no clear causal relationship between any of 
the diseases and the proteins of the invention, it is unclear what value 
they would have in vitro, e.g., as diagnostic reagents.  Knowledge that 
the proteins are involved in homing and that lymphocytes are involved in 
a variety of important immunological functions does not demonstrate that 
the proteins of the invention, which are only one of many components that 
allow lymphocyte function to occur, can be used to treat or diagnose 
diseases or other physiologically important conditions."  End quote.  The 
invention may not be useful to this examiner, but its discovery required 
great ingenuity and expense, and may be very import to our effort to 
treat arthritis and many other disabling diseases.

The issue I have been addressing is what should be the standard of 
utility for tools which have a reasonable expectation of success but have 
yet to be established since what is being studied has no precedent.  
Brenner v Manson does not mandate the present standard.  In Brenner it 
was the compound produced by the process being claimed that had to be 
researched to find out if it had any activity.  Inventions today are 
intended to screen other compounds for their activity or to be used for 
scientific research no less than a microscope which may once have been 
used to look at organisms which had no known utility.

I'm going to skip to my recommendation.  Well, I guess I'll try to get 

One might decide that a practical utility for a tool, product or assay 
is a reasonable likelihood of aiding and obtaining a commercial 
disposable.  The devil is in the details of how "reasonable" should be 
defined.  By defining the term one way, one could come to the conclusion 
that any compound associated with an indication for which there are no 
known or only a few therapeutics is not patentable.  Since one cannot 
show its utility as a predictor of efficacy as a human therapeutic, no 
intermediate in the development of the therapeutic would be patentable 
until evidence of efficacy was available.  Patents would then go to the 
developer of the final evidence of efficacy.  Regardless of what prior 
results had shown, any successful Phase III result would be a basis for 
patentability.  This was the result of In re Gangadero.  This approach 
supports the established drug house.  It would sound the death nail to 
the biotechnology industry as we know it today.  

I would suggest that a reasonable standard for utility is that the tool 
does provide some useful information concerning a natural process or can 
be used to ascertain useful information about a natural process, or the 
effect of other compounds on the natural process.  The availability of 
the tool does further the needs of mankind.

Without tool patents, there will be reason for academic institutions to 
file patent applications.  For many companies, it has been these 
applications which have served as a nexus for founding of a biotechnology 
company.  As you can well appreciate, the question of the standard for 
utility in biotechnology is not an abstract issue.  It is already having 
an impact and the ruling resulting from this hearing will determine how 
the industry develops.

Thank you.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Rowland.  Next I'd like 
to call John W. Schlicher, of Crosby, Heafey, Roach and May.  


MR. SCHLICHER:  Commissioner Lehman, Mr. Van Horn, Mr. Kushan and other 
members of the panel, thank you for coming to California.  Thank you for 
having these hearings, and thank you for permitting me to come to testify 

I'm John Schlicher.  I practice patent law with the firm of Crosby, 
Heafey, Roach and May, and I'm here to give my personal perspective on 
these things.  I've worked as a patent lawyer for 20 years, some of that 
time in a biotechnology company, and have worked and thought about 
biotechnology and its economic significance for most of that time.  I 
also teach patent law from time to time at Stanford Law School.  

These hearings are about biotechnology but the issues transcend 
biotechnology.  I have said elsewhere and I will not repeat here, there 
is not and should not be any separate body of law for biotechnology.  
Patent law must transcend technical boundaries.  Historically it has.  
The courts insist they do, and we ought to adhere to that in this area as 

It's also true that throughout the history of patent law there have from 
time to time --

COMMISSIONER LEHMAN:  Could I ask  you a question?

MR. SCHLICHER:  Of course.

COMMISSIONER LEHMAN:  Is that what you think the people have been asking 
us to do here today is have a separate law for biotechnology?  Is that 
what you have been hearing?  If you were here earlier today.

MR. SCHLICHER:  I'd prefer not to characterize what other people have in 
mind.  I certainly hear lots of talk about biotechnology patent law and 
it seems to me there is a perfectly understandable impulse among lawyers, 
courts and business people for certainty in this area.  Bright line 
rules, as you referred to earlier, shorthand rules of thumb that help you 
solve your problems quickly and predictably are very attractive in this 
area.  My perception is that -- and I think history bears it out -- it 
usually turns out to be a mistake, because patent standards are difficult 
to define with great precision; it has to do with the economic purposes 
they have, the facts in which patent laws have to be applied change from 
time to time in highly unpredictable ways, and unless you adhere to a 
formulation that says, "Let's apply general principles to the facts of 
the situation now before us," I think the system is very prone to error.

My second main point is that the Notice that accompanied these hearings 
ought to be historically a noteworthy event in patent law, because the 
Notice insist that the information you want is about the economic effects 
of various rules and their effects on incentives for people to do 
research, development and commercialize inventions.  That is and always 
has been the right question.  The courts and the Congress and the lawyers 
have not always asked it and that is the reason, in my view, that patent 
law has for the last 200 years developed an extraordinarily complicated 
and confusing set of rules.  And only by asking it and answering it over 
and over again will we improve the situation, and that was the impulse 
for me to spend an unusual amount of time writing a book to try to do 

My third point is that the Notice talks about the economic role of 
patents to provide exclusivity to induce investment and risk taking in 
research, development and commercialization of inventions.  I would 
define the role of patents somewhat differently.  The goal of patents is 
to induce investment and risk taking in producing technological 
information about new products in processes that in the absence of 
patents the market would be unlikely to produce or produces early.  If 
someone produces information about the general character and features of 
a new product or process that distinguish it from prior products and 
processes, he or she traditionally has been and should be entitled to a 
patent even if there are large additional expenditures necessary to use 
that invention commercially, and even if there is no conceivable benefit 
that's perceptible at the time for consumers and no perceivable 
commercial potential for the invention.  This view of the patent system 
is consistent with the general history of patent law as it's operated for 
the last 200 years.

My fourth main point has to do about the operation of the Patent and 
Trademark Office and its proper role in the patent system, which is the 
specific subject of these hearings.

The Notice talks about the importance of enforceable patent rights, and 
the office I think has recently given much attention to trying to focus 
on the question of quality and it should be applauded for that effort.  
However, my view of that, there's one danger in pursuing quality.  In my 
view, an economically sensible role for the Patent Office in the system 
is that the office should screen out and refuse patents for inventions 
that plainly and clearly do not qualify under one or other standard for 
patent issue.  Because patent law standards do not draw bright lines, 
because the facts that underlie applications of those standards are 
difficult and expensive to ascertain, and because the patent office has 
limited resources in time, information gathering capability and 
technological expertise, the Patent Office cannot possibly make a 
100-percent accurate assessment of each particular patent application.

Congress set up the system with that in mind.  Before anyone ever has to 
stop doing anything because of a patent, they must get a Federal Court's 
order ordering someone to stop.  And before anyone has to agree to stop 
or pay a dime because a patent issues, the marketplace permits people to 
get together and talk about the decision the Patent Office made about the 
law and the facts and to bargain out a private marketplace assessment of 
whether or not a patent should have issued and, if it did, the likelihood 
that a court would agree with the office.

It seems to me there is a terribly important benefit to that system, not 
the least of which is avoiding a full-fledged costly, factual examination 
in all cases, and in confining it to the small number of cases where the 
patents become commercially significant and involve issues that are 
difficult for the private negotiation process to resolve.  Under that 
view, it is and ought to be of no concern that 10-, 20-, 30- or 
40-percent of the patents issued by the patent office are held invalid or 
otherwise improper by a court in an enforcement action.  And if the 
Patent Office perceives its job as making a 100-percent accurate 
assessment, my fear would be it would bias incentives of the examiners 
and the office against granting patents.

Now, you have raised a number of very important substantive questions 
and I cannot deal with all of them now and I will give you a written 
paper in which I have and have proposed I think some tests.

My view, if you haven't guessed it already, is that the law in all of 
these areas is, indeed, unclear, and making it more clear is our job.  In 
some areas I think we could improve it.  In others I think probably there 
are not.  And if I had time I'd like to talk about some of those.  The 
only one that I think I will talk about briefly is the utility 
requirement because it was first on your list and it seems to me it plays 
an important role in the second.

The law of utility today is that expressed in Brednner v Manson, which 
is deemed to be the controlling case simply because it's the last one 
from the Supreme Court.  In my view, Brenner v Manson is one of the low 
points in patent law.  The language in it that causes us so much trouble 
had no basis in law, no sense in policy, and ought to be utterly and 
totally disregarded, and, if we have any hesitancy about doing that, I 
would have no hesitancy to go into Congress on that.

My time has expired.  Thank you again for your time.

COMMISSIONER LEHMAN:  Can you just sort of complete that thought 
because, you know, that's very provocative?

MR. SCHLICHER:  An invention to talk about Brenner v Manson is an 
invention to a long discourse.

Brenner v Manson has so many problems it's difficult to know which one 
of them to pick out first to poke fun at.  The language obviously that 
causes everyone trouble is that until an inventor has developed an 
invention to the point that a specific benefit exists in currently 
available form there is insufficient justification to permit the inventor 
to engross what may turn out to be a broad field indeed.  And that 
language inclines you to believe that a patent ought not issue until 
specific benefits exists to consumers the day after the patent issues.

Obviousness is applied to a world in which the business and regulatory 
requirement requires years and hundreds of millions of dollars of 
investment in development after the fundamental characteristics of a 
product have been ascertained to some degree of certainty.  Brenner v 
Manson inclines you to try -- inclines you away from granting the patent 
until that additional development, expenditure, and until that additional 
time has run.  And it seems to me that in this industry, as well as in 
all others, that's a mistake.  That is not a hurdle that Thomas Edison 
faced when he first went to them with the light bulb, even though there 
were no transmissions lines and no wires in houses and there were not 
benefits, and I could go through the whole history of patents and it 
describes almost every important patent.  I think the language is 
difficult.  The decision is easy but I think that it was a fundamentally 
mistaken proposition that has caused us enormous difficulty.

COMMISSIONER LEHMAN:  That completes the thought and I really appreciate 
that, and I also think it's -- it fits in with my own view that we don't 
necessarily have to be guided by what, you know, the court's say.  I 
realize that's not what all of our witnesses said, that we have the 
capacity to develop our own position in the courts from time to time in 
the Patent and Trademark Office as well.

MR. SCHLICHER:  Since you have made that point, I profoundly agree with 
that, that in this area the Executive Branch has an independent 
responsibility to determine the policy that will best achieve the 
economic effects of the system and I would encourage that independence.

COMMISSIONER LEHMAN:  Thank you very much.

Next I'd like to call on Alain Schreiber, of Vical Corporation.


DOCTOR SCHREIBER:  Mr. Commission, lady and gentlemen of the panel.  I'd 
like to thank you for the opportunity to testify.  My name is Alain 
Schreiber.  I'm the president and CEO of Vical, Inc., a gene therapy 
biotech company here in San Diego.  I'm not a lawyer; I was trained as a 
physician and in my prior career I was head of preclinical research for a 
large pharmaceutical company Rompol-Lanke-Rohr.

I first would like to commend you.  I don't think biotech CEOs or 
pharmaceutical executives ever spent a whole day listening to clients and 
customers and users of their services ventilate frustration or anger and 
be presumptuous to give you suggestions or recommendations.  The other 
part of this day being very interesting for me, I thought I was being 
singled out as the only company that couldn't get some patents through 
the biotech office patent.  I see that I have a few other companies that 
have experienced similar cases.

I'd like to give you the perspective of a CEO of a small and struggling 
company and the current, difficult capital markets and what I perceive to 
be the needs of the industry.

We need an efficient system, a fair system.  The worst that an investor 
can face, adding to the uncertainty of clinical development or the drug 
discovery process, is uncertainty in the proprietary position of his 
investment.  Basically, the longer you drag that uncertainty the less 
people will be attracted to make speculative investments in, almost by 
definition, enabling technologies.

My second point is that I would make a plea for reasonableness that 
there should not be a double standard between how patents can be allowed 
and obtained for chemical entities, new chemical entities, to which I've 
been exposed quite a bit, and biotech patents.  And I think I'm echoing 
what some of my colleagues have said, in particular, focusing on utility 
and enablement and the high standards.

It is difficult to count angels on the pinheads.  First you have to show 
utility in man, that's already difficult to get there.  It is even more 
difficult to teach the skilled practitioner as to dose and regimen, and 
even FDA approval doesn't always guarantee or ascertain that we know all 
this.  So somewhere finding level playing fields and a dialogue of reason 
as to what can constitute a reasonable demonstration, in your own minds 
of a value of an invention, would be very valuable to continue this very 
exciting industry sector that, for good reasons, is in the United States.

You may have noticed by now my accent is not exactly from San Diego.  I 
am fortunate to come here and benefit from the opportunities of the 
American system.  The biotech industry i s definitely an American 
endeavor.  That was thanks to a number of factors, one of which is 
availability of capital, and, two, is the general climates encouraging 
investments, offering protection through your services.  It would be 
ironical if the European Patent Office or the Japanese Patent Office 
would now provide competitive advantages to this great emerging 
technology.  As a physician and as a businessman, I think we're trying to 
do exciting things.  You've helped so far and I would make that plea that 
clearly you have already taken a lovely step by coming to America's 
finest.  Thank you.

COMMISSIONER LEHMAN:  Thank you very much.

I'd next like to ask Eric Woglom of the Association of the Bar of the 
City of New York.  


MR. WOGLOM:  Good afternoon.  I'm Eric Woglom.  I'm from the firm of 
Fish and Nieve in New York.  I'm here today in my capacity as the chair 
of the Committee on Patents of the City Bar Association.  The City Bar 
Association is a voluntary association of 20,000 lawyers and judges.  
It's composed of a number of committees.  The Association speaks to the 
outside through its committees and I'm here today in my capacity as the 
chair of the Committee of Patents.  The views you will hear today are the 
views of my committee and not necessarily those of myself or my firm.    

Mr. Commissioner, I have to applaud you as everybody else has applauded 
you for holding these hearings.  One of the things that you mentioned 
earlier this morning was that you wanted to hear what your customers 
think, and I have some good news and some bad news.  The good news is we 
applaud these hearings.  The bad news is I suppose is we wouldn't have 
come all the way from New York City if we were happy in all respects with 
everything that was happening in Washington, D.C.

The major issue in the eyes of our committee is the question -- is the 
perception, and I emphasize perception because I don't know what the fact 
is.  The perception is that about four years ago the Patent Office 
decided to change its internal policy or its internal standards when 
dealing with the question of utility or operability.  This has created 
some tension between the bar and the office.  The people on my side of 
the bar are concerned because we seem to be in the dark.  We don't know 
exactly what the policy is -- it's just normal anxiety -- although I 
think we're getting to know what the policy is real quick.

There's also a concern because we're not able to accommodate ourselves 
to a policy which has not been announced.  There's also a concern because 
there's a policy, if it really is a policy, has been implemented without 
public discussion and, frankly, without an opportunity up until today, 
perhaps, to try to persuade you that the policy is wrong.

Where do we go from here?  I think step one is what you're doing right 
today, is to listen to the bar, listen to industry, listen to the people, 
listen to your consumers, listen to the people who are effected by what's 
happening in the Patent Office.

Step two I think would be for us to hear from you, hear from your 
office, as to whether or not the Patent Office did change its policy, did 
change its approach to the utility operability question, in at least 
Group 1800, about four years ago.  It may be that the policy hasn't 
changed.  It may be the view of the office that the policy has remained 
the same, it's just that the kinds of inventions which are being 
presented to the office have changed over the past four years.  That may 
be the answer and that may quell all the concern.  But the concern 
lingers nevertheless.

It may be that the policy did change four years ago, and if you could 
tell us that that would clear the air and make a lot of people much more 
comfortable about the practice.  

The question of accommodating ourselves to a policy is much easier 
accomplished if we know what the policy is.  The opportunity to argue 
against that policy or try to change your mind with regard to that policy 
is something which would help also, if we knew what the policy was.  When 
I say "you," I'm talking about you as the personification of the Patent 
Office.  Clearly, if I'm talking about something that was instituted four 
years ago it's not Bruce Lehman who is the person that instituted that 

There's speculation in the bar right now as to what is the purpose or 
what are the motivating forces behind what we perceive to be the new 
policy as of four years ago.  Is the Patent Office trying to carry out 
the role of the FDA?  Is the Patent Office trying to carry out some quasi 
SEC functions?  The Notice of these hearings referred to the imprimatur 
of the Patent Office on invention, how that may affect the economic value 
of the invention.  It may give rise or may destroy the hopes of people 
who have illnesses that might be treated by the invention.  These are not 
traditional patent issues.  That does not mean that they are irrelevant 
to the inquiry and it does not mean that they are irrelevant to the 
formulation of a policy but, again, if the air would be cleared by your 
office and to tell us whether or not the policy did change four years 
ago, that would be a big help for all of us.

COMMISSIONER LEHMAN:  Maybe I can answer that right now.  As I 
understand it, I don't think the policy changed four years ago.  I think 
that your characterization is partly correct in that the nature of the -- 
the nature of the technology started changing four years ago.  I think 
there have been a couple of factors.  That is the inventions for which 
patents are sought have changed, and then the other factor, too, 
ironically it's the flip side partly of one of the reforms that we made.

In my opening statement I indicated that now over half of our examiners 
in 1800 are Ph.D.s.  Well, I think that initially when a lot of these 
younger Ph.D.s came in, many of whom had come from the laboratory bench, 
there was a tendency -- they're very good scientists and there may have 
been a tendency to look at their work more as peer review rather than as 
patent examining.

Now, as part of our training process, I think we've changed that a lot.  
I think there's an internal perception in the Patent and Trademark Office 
that we're sort of ahead of what we've been hearing here.  That, in other 
words, a lot of the complaints that you've been hearing are complaints 
that go back to this transition period that I just described when we had 
examiners perhaps that got away from us, didn't fully -- were well 
trained technically but not well trained legally, and that given another 
six months or year you'd start to see a better response.  But I don't 
think -- bottom line, there was no deliberate change of policy four years 
ago.  I think these events that I've just described are what's happened.  
And, obviously, the purpose of this hearing is to -- we don't want to 
just wait for this just to gradually fix itself.  We want to try to fix 
it as quickly as we can so that there is a perception of confidence in 
the Patent and Trademark Office and that's why we're here today, and 
we're going to move quickly to try to give that sense of confidence 
following these hearings.

MR. WOGLOM:  Just to back up what I was saying with a few specifics.  
You heard from others today and I could tell the same stories with regard 
to people who have been practicing in the biotechnical field for 10 
years, people who have been practicing in the pharmaceutical field for 10 
years, and up until five years ago a certain showing, whatever that 
showing might would be, would be sufficient to deal with utility issue.

Up until, maybe starting four years ago, maybe starting with the 
Balzarini decision, that showing has not been accepted.  Now, it might 
have been as a consequence of the examiners on their own exercising some 
very educated hindsight, or it might have been a policy.  And one of the 
purposes I said was just to come here and try to clear the air in that 

A couple of other specifics, if I may.  Often the members of our 
committee, and other people I've talked to in the bar, complain that 
utility operability rejections are not supported by adequate scientific 
evidence that in terms of references to receptive articles.  What we have 
is, more often than not, examiners exercising their own subjective view 
as to what success might be predicted by one reasonable skilled in the 
art at the time.

Another problem is the problem with historical inconsistency.  Again, 
one of the earlier speakers referred to what had happened five years ago 
and then contrasting what's going on today.  What we have in situations 
is maybe an applicant gets a patent, what I'll call the old policy, 
acknowledging of course that the policy of course hasn't changed, but 
under the new system the patent doesn't get issued, and it may be on the 
same invention.  You basically have a patent and an application which 
interfere, in the classic sense, but interference will not be declared 
because the applicant cannot meet the utility requirement as is now being 
applied.  Would it not be useful to declare interference in those 
situations?  Especially in the situations where the applicant would be 
the senior party if an interference would be declared, and let those two 
parties fight it out between themselves, even if the examiner would like 
to make a sua esponde motion that there is no utility and ought not be a 
patent issued to either party.

Another question that comes up, of course, is the Section 112/103 issue 
that some examiners see only divine inspiration when they look at the 
prior art in diabolical obscurity when they look at the applicant 
specification.  That's an old issue but it's still a current issue.

Lastly, and I see my time is about to expire, I'd like to refer to the 
issue of the 20-year term.   The biotech members of my committee feel 
that that's something which would be hurtful to the biotech industry and 
wished there would be more debate on that and not be subject to an or 
down vote in Congress on the GATT treaty.  Likewise, restriction 
requirement with any term -- 20 years or otherwise -- running from the 
date of filing something is something which is very difficult for a 
biotech applicant.

COMMISSIONER LEHMAN:  Thank you very much.    

MR. WOGLOM:  Thank you.

COMMISSIONER LEHMAN:  Next I'd like to -- oh, by the way, Stacey 
Channing, from the Immulogic Pharmaceutical Corporation, we'll not be 
hearing and so we're going to move directly to T. Andrew Culbert from 
Drinker, Biddle and Reath.  Mr. Culbert is here?  Is he here?  If not, 
we're going to move right ahead.  Is Ronald Tuttle here from Houghton 
Pharmaceuticals?  Great.


MR. TUTTLE:  While I'm here I had planned to use this 30 minutes to 
organize my thoughts so just give me a second to shuffle my papers, if 
you will.

COMMISSIONER LEHMAN:  I thought you were going to say you were going to 
use the 30 minutes for your --

MR. TUTTLE:  No.  You'll be grateful to know I don't have any such 
intentions as that.

Thank you for the opportunity to appear here.  My name is Ron Tuttle.  
I'm not an attorney, I'm a scientist that's been doing R&D in the 
pharmaceutical industry for the last 28 years.  I want to direct my 
comments to what appears to be to me, as an inventor, a change in 
standard for utility.  It seems that that advent of biotechnology has 
caused a change in the practice of the patent offices that impacts not 
only inventions stemming from biotechnology but those drugs stemming from 
conventional uses in medicinal chemistry, and I contrast my past 
experience with my present experience; makes me think you're moving in 
the wrong direction.

I am the inventor of two patents which have turned out well insofar as 
drugs for the diagnosis and treatment of heart disease.  One of those was 
in 1972, the more recent one in 1992.  I think if we'd had the current 
standard for utility, that is I must at time of making application prove 
that the drug works not only in animal models of disease but in human 
models, neither of those drugs would have come to pass and the present 
patients who are benefitting from those drugs would not have benefitted.  
The reason for that is simple.  It costs a great deal of money to do 
clinical trials to obtain human data and we get caught in a cycle that I 
can't finance to get the money to do the clinical trials unless I can 
assure the investors of a proprietary position which can only come from a 

Lastly, in contrasting my experience at the present time with what I 
regard as good experience in 1972 and 1992 for the advent of those drugs, 
is a current patent we're trying to obtain, and, although I have supplied 
a great deal more data on animal models than we did in the past patents, 
we continue to receive rejections from the examiner based on the lack of 
human data.

We have supplied what I think are good arguments regarding the relevance 
of those animal models, and while we all are aware that there's 
oftentimes failures between animal models and clinical outcome, that 
generalized principle or finding that there's often failures should not 
be applied in the specific.  I believe if the examiner is going to reject 
our animal models of diseases irrelevant, specific reasons should be 
cited and tell us exactly why it's irrelevant in his view.

In the present application, we've gone so far as to supply the 
toxicology data.  We have supplied the institution review committee 
approvals for testing of the drugs in humans but still we're faced with 
rejections because of lack of human data on utility.

Lastly, in the Notice to the hearing, I noticed there was concern, which 
is probably appropriate concern, that some patients suffering from 
certain diseases for which a patent is issued may have their hopes 
falsely raised in believing that the issuing of a patent somehow shows 
the patients that the government believes in this invention.  I think 
that is a confusion of the mission of the Patent Office and the mission 
of the FDA.  And while it's an argument for better public education I 
don't think it's an argument for changing past practices of the Patent 
Office which I think past practices have benefitted patients, the 
industry and the competitive position of the United States.  So, 
obviously, I'm making an argument for the status quo, at least insofar as 
the advent of biotechnology should not impact how we view inventions from 
traditional medicinal chemistry.

Thank you.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Tuttle.

Next I'd like to call Jeffrey Miller of IXSYS Corporation.


MR. MILLER:  Thank you for giving me the opportunity to speak here 
today.  My name is Jeffrey Miller.  I am currently a postdoctoral 
scientist at IXSYS, a biotechnology company here in San Diego.  I'm 
co-inventor on patents arising from my work there at IXSYS.  However, 
today Bill Hughes, who's the founder and chief scientific officer of 
IXSYS thought that my testimony would shed a different light if I were to 
address this body as a representative of small, independent scientists 
who endeavor to protect their individual contributions and ideas in the 
arena of biotechnology.   Therefore, I am here as an individual patent 
applicant today.

In December of 1992, prior to coming to IXSYS, I filed a patent 
application for methods and compositions for in vivo sedensynthesis.  
This is a new and -- In the new terms, terms I'm starting to learn to 
use, a basic enabling technology.  The initial application has been 
through two office actions and I filed both PCT and continuation 
applications as well as related trademark applications.

During these two years, I have learned some of the terms and workings of 
the Patent Office and these experiences are the basis of some of the 
concerns that I voice here today.

First, it appears that a final action is frequently rendered by the 
patent office in response to the second office action or following the 
second office action.  This response is advanced without regard or 
consideration of progress which may be evident in the prosecution of the 
patent.  Now, this action appears to be -- on the outside to be a 
mechanism for restarting the patent examiner's clock and obtaining filing 
fees for the Patent and Trademark Office, rather than action necessary or 
desired for expediting patent review. 

Second, I'll say I've noted a lot of people have voiced their views 
today that there appears to be an inconsistency in the evidentiary 
standards required to determine the utility in patents related to 
biotechnology.  It is clearly impossible to expect an individual or a 
small biotechnology company to garner data required to determine efficacy 
for an invention in a primary patent application.

Current mechanisms for addressing this issue, from the scientist's or 
patent attorney's perspective, I understand include to continue to the 
costly and unproductive prosecution of the patent application, basically 
keeping the ball in the air and claims active while awaiting efficacy 
data from collaborators with deep pockets.  Unfortunately, run into a 
Catch 22 situation where any potential deep pocket collaborators 
generally require proof of proprietary position prior to advancing the 
funds to initiate the costly efficacy trials.

I think that the small inventor in biotechnology would like to see a 
return to normalized evidentiary standards where simple, reproducible, 
practical utility meets the basic requirements.  Typically, I'll say that 
patent applications are not requests for a hunting license, rather we're 
trying to protect ourselves from the large corporations which can turn 
the crank and circumvent our initial applications with refinements which 
require resources beyond our reach.  Therefore, I think you should let 
the market forces determine the efficacy or utility of the method or 

And one of the points that was brought up earlier is a good point and 
that is if you can get licensing money for your patent application, your 
method or your composition, that's a pretty good indication that somebody 
thinks that -- somebody who's got a good scientific background thinks 
your patent application, your patent has merit.  This approach allows a 
reasonable extrapolation of claims which will protect you downwind down 
stream and protect potential uses and serves to protect both the small 
innovative scientist and the large biotechnology company.  This 
consistent application of existing standards -- existing standards -- 
will allow exploitation and marketing of ideas and innovation without 
doing harm to the public.  Thank you.

COMMISSIONER LEHMAN:  Thank you.  Were you here earlier when Mr. 
Schaffer testified, the lawyer from New York who testified that one of 
the solutions might be for us to, in effect, establish a presumption in 
favor of declarations from experts as opposed to, you know, having any --

MR. MILLER:  I think --

COMMISSIONER LEHMAN:  Would this solve the problem for your company?

MR. MILLER:  If you're asking whether expert testimony would --    

MR. MILLER:   -- provide that, I think his point was that that might be 
useful.  However, you might also run into the problem where you would 
have two schools of thought, both of which are expert witnesses and they 
could be in disagreement.

COMMISSIONER LEHMAN:  In this case the only witnesses would the be 
witnesses that you produced.  

MR. MILLER:  That would help.

COMMISSIONER LEHMAN:  You don't have oppositions in --

MR. MILLER:  I don't have any problem with that.

COMMISSIONER LEHMAN:   -- the U.S. Patent Office as you do in Europe.

MR. MILLER:  That would be great.

COMMISSIONER LEHMAN:  So basically the -- The answer is "Yes," that 
would solve your problem?

MR. MILLER:  Yes, I think that would solve the problem.  Thank you very 
much.  Appreciate it.

COMMISSIONER LEHMAN:  Next I'd like to call Gail Kempler of Regeneron 


MS. KEMPLER:  My name is Gail Kempler.  I'm the patent counsel for 
Regeneron Pharmaceuticals.  We're located in Tarrytown, New York, so I'd 
first like to thank you for coming to these hearings in San Diego.  When 
I had the opportunity to meet you a couple of weeks ago, at a Council on 
Foreign Affairs breakfast, I told you that I thought current practices in 
Group 1800 were paralyzing the biotech industry.  You said you thought 
that that had all been resolved but, if not, I should testify today -- so 
here I am.

Regeneron Pharmaceuticals in a biotechnology company that was 
established in 1989 by two neurologists who were fed up with available 
therapies for treating neurological diseases, such as Lou Gehrig's 
Disease.  The founders recognize the potential of neurotrophic factors 
which are naturally occurring proteins which can be used to promote the 
and/or survival of neurons, and the had the concept that if these factors 
could be used to help neurons to survive that they would be useful for 
the treatment of neurological diseases where you have degeneration of 

Although we hoped when the company was founded that we would be the 
first to identify and clone these new factors, as it turns out, there are 
a lot of other companies that had the same idea and many of these 
companies have armies of cloners which we don't have.  Unfortunately, we 
only have currently 200 people at Regeneron.  So, more often than not, we 
lose out to the armies of cloners and other companies are the first to 
get the patents on the genes and the proteins.  However, since our roots 
are in neurobiology, we do pride ourselves in being able to figure out 
what a lot of these new proteins do and we do develop both in vitro 
assays in house, as well as novel animal models.  So often we do 
determine therapeutic utilities that have not been discovered by the 
companies that have cloned the new gene.  Accordingly, we have a patent 
portfolio that's filled with human therapeutic applications.

I spoke at a forum about a month ago where Charlie Warren was asked -- 
and I'm quoting the question:  "Sometimes an applicant must come up with 
data sufficient to persuade the FDA to approve a drug in order to 
persuade your department to issue a patent."  In response Charlie said, 
and I quote:  "That is not true.  I will say we have had examiners who 
have taken that tack in the past and hopefully the past is behind us and 
they don't do that anymore.  "However --" and I stress this "however," 
and I'm still quoting -- he said, "as I did say, there are some disease 
states where one skilled in the art, given contemporaneous knowledge in 
the art, will not accept anything less than human clinical data to 
establish utility and enablement." 

Well, obviously, the diseases that we're working on at Regeneron are 
part of these kind of diseases and basically Group 1800 has held us to 
this requirement for human clinical data.  I think it's common knowledge, 
at least I've heard this, that there are certain disease states that fall 
into this category; they seem to be cancer, and they seem to be AIDS 
treatments, they seem to be neurological diseases.  And it seems to be 
the diseases for which there are not very many therapies.  It also seems 
to be the diseases for which the therapies are most needed and most 

Although Group 1800 says that animal model data will suffice, the 
current standard requires that such animal models be art recognized.  
This means not only must the animal models have symptoms that mimic the 
diseases that you're going to treat but there also has to be a 
demonstrated correlation between he data derived in the animal model and 
human utility.  So, in other words, if you're a company like Regeneron 
where you've developed animal models that have never been utilized 
before, you're effectively punished because you cannot possibly correlate 
data obtained in these animal models with human data.  So, in effect, you 
have to run a human clinical trial to prove your models.  And, so, you 
know, if you're going to go to that you may as well just run your human 
clinical data -- human clinical trial and submit your human clinical 
data.  We've tried this, too, in a recent application that we've been 
prosecuting and have found that trying to submit human clinical data is 
wrought with even more problems.

The data comes continuously.  You don't have just one piece of data that 
you can submit to the patent office.  You have a continuous stream of 
data and so every time you get more data out of your clinical trial you 
run into the problem of:  "Do I have to continuously update the Patent 
Office every time I have some new information?"  You also have the 
problem that you have several treatment groups in your human clinical 
trial so you have to decide: "Do I have to submit to the Patent Office 
all of the treatment groups or just the ones that work?  Do I have to 
average them together ?" and then you're accused of withholding certain 
data and only submitting the good data if you only submit the data from 
the treatment groups that work.

We are also told by Group 1800 that the data has to be statistically 
significant at the same level as required by the FDA.

And, finally, our biggest problem, which I really haven't heard anyone 
mention here today, is we are a small biotech company and any data that 
we derive from a human clinical trial is material.  So the SEC requires 
that we make public any information that we have regarding our human 
clinical trial.  So when we submit data to the Patent Office to satisfy 
Group 1800's requirements, we also have to disclose the information to 
the public in some kind of a disclosure; press release, and also in our 

When you make such a disclosure in your prospectus, you generally have 
to put in some kind of disclaimer because you don't want to be accused by 
the SEC of hyping your drug before its time.  So we generally put a 
statement in our prospectus that says:  "The results of Phase I and Phase 
II clinical trials do not necessarily predict the results of the Phase 
III trial or any further trial or potential regulatory approval of or 
success of the drug."  And we've recently had this statement from our 
prospectus cited against us in an examiner's rejection.  So not only is 
Phase I and Phase II clinical data insufficient, you now have to have 
Phase III clinical data or any disclaimer that you put into any of your 
SEC-related statements will be used against you.

So the bottom line is that, despite Group 1800's indications otherwise, 
for diseases such as neurodegenerative diseases only data sufficient for 
FDA approval will suffice to obtain patent protection.  And small 
biotechnology companies, like Regeneron, just simply cannot afford to run 
these human clinical trials absent some form of patent protection.  The 
result is only the companies that -- the only companies that can run 
clinical trials are the ones with the army of cloners.  And I think that 
even though I would say in some cases we'd be happy to take all the works 
home because we're first to clone a protein, I think it's a problem when 
a company clones a protein and really hasn't discovered many of the 
utilities and therapeutic applications of that protein but yet they take 
home all the bacon because the companies that discover alternative 
therapies for those compounds simply cannot compete.  They simply can't 
run clinical trials.

We continue to believe that the understanding of novel proteins and what 
they do is as valuable and as deserving as protection as the cloning of 
the molecules.  The standard used to examine applications relating to the 
tough diseases such as cancer, AIDS and neurodegenerative diseases 
shouldn't be so tough that it discourages discoveries of therapies in 
these areas.

COMMISSIONER LEHMAN:  Thank you very much.

Next I'd like to call on Andrew D. Fortney of Oblon, Spivak, McClelland, 
Maier and Nestadt.


MR. FORTNEY:  Good afternoon.  My name is Andrew Fortney.  I'm a patent 
agent with Oblon, Spivak, McClelland, Maier and Nestadt.  We have offices 
in Arlington, Virginia, literally right across the street from the 
building in which Group 1800 is located, and we have an office in San 
Jose.  I'd also like to thank the Commissioner for informing me of the 
teleconferencing office to be set up in Sunnyvale.  I'm sure our firm 
will take full advantage of that.

I guess last night when I should have been thinking about what I was 
going to say today I was watching 60 minutes and if anybody else saw it 
there's a big story on this cloning of a gene from an Italian family who 
have really very little, if any, signs of cardiovascular disease even 
though a number of members of this family have life- threatening 
cholesterol conditions.  Since it didn't cost me anything, I'll submit 
the front page of "U.S.A. Today" as evidence of this discovery.

The point of the story I guess is hopefully there is some relevance to 
everybody -- to the public -- that now biotech has some really exciting 
offerings that can effect everyone directly.  

Doctor Shaw, who I guess is a doctor at Cedars Sinai who did the rabbit 
testing studies in this case, he was, you know, on TV telling the public 
this technology exists.  We can bring it to you now.  This is what 
biotechnology has to offer to you.  So, with that in mind, I'd like to 
actually go into a couple of things that I'm kind of curious about from a 
policy perspective which maybe we haven't really talked much today.  I 
guess I should also read the papers and listen to the news more often 
than I do, but from what I gather the Clinton Administration is 
interesting -- or interested in maybe three policy goals which the Patent 
Office can have a direct effect on.

One is advancing the business atmosphere in high technology.  This is an 
area in which the U.S. is concerned about losing its competitive 
advantage, biotech being one of these fields.

In the area of health care reform, they're interested in lowering the 
cost of pharmaceutical agents most prominently.

And another policy goal of the Clinton Administration, as I understand 
it, is minimizing the duplication of effort and of overlap between the 
different agencies.  I think some of the ideas we've heard today sort of 
address these things, but particularly the need by the biotech industry 
for early issuance of patents and getting some kind of reasonable claims' 
scope.  At least scope a little bit broader than the working examples.

I'd like to address this last issue that the industry wants, getting 
reasonable claims' scope.  Earlier we heard some testimony that over the 
last 10 or 12 years biotech has become somewhat more predictable than it 
was earlier.  I think this supports position of allowing somewhat broader 
claims' scope at the Patent Office, and, if necessary, maybe the Patent 
Office can consider looking into some kind of preponderance of the 
evidence standard for determining what the level of ordinary skill in the 
art is under 112 in order to evaluate what sort of claims' scope is 
allowable.  Over the long term this will also help to lower the cost of 
pharmaceuticals and primarily in the fact that it will help to give a 
little bit more certain atmosphere for conducting the business 
transactions necessary for the smaller companies to get the capital to do 
the studies later on.  It will help establish the proprietary positions 
with greater certainty, and it will kind of minimize the reliance on the 
doctrine of equivalence, if a patent ever needs to be enforced.  It will 
make it easier to establish direct infringement I think for very minor 
modifications.  Overall, that's going to lead to lowering the cost of 

I think under the utility issue, again we still would like to see your 
early issuance of patents with reasonable claim scope.  I think one -- 
although this will be the only comment I have about any direct practices 
of the PTO.  I think the issues for compound claims specifically, and it 
is proteins and polynucleic acids in biotech, should be addressed 
separately from the issues under -- or relevant to composition -- 
pharmaceutical composition claims and method of treatment claims.  For 
pharmaceutical composition claims, typically you have to recite an 
effective amount to achieve some desired medical result.  In method 
claims, typically you are counting on some sort of human treatment as the 
utility.  So I think the issues are different.

For compound claims specifically, there are a number of different 
utilities which are often asserted and I think the case law is fairly 
clear that if a compound claim has a utility other than for human 
treatment then it's met the utility statute.  However, as far as the 
pharmaceutical composition claims and method claims go, and this may be 
somewhat professional suicide for saying it, I think the Patent Office 
has legitimate concerns about whether the public is actually being served 
by issuance of a patent if there's some question about whether the thing 
is going to be effective or not.  

I think again the suggestion to simply accept at face value a 
declaration tying whatever results are there to prediction of in vivo 
effectiveness I'm also hesitant to support, because I think if there is 
evidence that the Patent Office is aware of that maybe the test isn't 
accepted, or that may challenge directly the evidence that was submitted 
by applicants in that case, then it raises some questions perhaps of the 
validity of the patent.  And it's certainly going to be a lot cheaper and 
easier to resolve this at the Patent Office than it will be to try to 
resolve it later on in litigation.  So I'd like to suggest in this case 
that maybe a preponderance of the evidence standard also be looked at as 
a possibility for resolving utility issues in applications where 
pharmaceutical compositions and methods of treatment are being claimed.

I guess that's pretty much it.  I do have a couple more quick comments.  
You asked for specific cases, and even though my firm really doesn't want 
me to speak about any specific cases for reasons of, you know, possibly 
generating estoppel or any bad will at the Patent Office, and believe me 
we regard our good will with the Patent Office with the utmost respect, 
we did have one case in the AIDS treatment area where we had a notice of 
allowability for a number of years.  I think it was there for about two 
years and every once in a while we'd check and see when we were going to 
receive the notice of allowance and it never came.  You know, we were 
real curious about why that was but I don't think we ever got a straight 
answer.  And I think it kind of underlies the perception that maybe there 
was some policy change at the Patent Office, even though, you know, we 
hear that there wasn't any.  Whether there was or wasn't, you know, I 
think is almost beside the point because it's -- it's obvious that some 
things have changed and, you know, at least personally I'm glad we're 
having this hearing to try and resolve the issues.

Also I think we heard some comments earlier about educating examiners on 
the cases, and I'm not so sure that's the best use of time and resources.  
My experience in interviewing examiners is that it doesn't really matter 
too much what the cases say, it depends on whether their supervisor is 
going to agree with what they say in the office action that counts.  And 
I think at least the preponderance of evidence standards that I suggested 
earlier, that's a pretty easy test to look at and see whether, you know, 
the evidence is on one side or another.

If I can make one last suggestion to you, Mr. Commissioner.  You were 
concerned about the length of prosecuting biotech applications relative 
to those in other areas of technology.  I think that can be resolved 
pretty quickly just by looking at the front cover page of most patents 
issuing from Group 1800.  It's pretty rare when there aren't any earlier 
filed applications cited in support of it, but I think in other areas, 
and I think most particular in polymer areas, it's pretty rare to see 
that there was an earlier filed application.  At least looking at the 
front page of each issued patent, that should give you some idea of how 
many continuation applications were filed in the prosecution of a 
particular case.  And, at least on our side, we look at cases rather than 
applications.  You know, we consider continuation applications to be part 
of the same case.

With that, I see my time is up.

COMMISSIONER LEHMAN:  Thank you very much.

Next I'd like to call Robert Benson of Genelabs, Incorporated.


MR. BENSON:  Thank you.  My name is Robert Benson.  I'm vice-president 
and general counsel for Genelabs Technologies, in Redwood City.  We have 
about 220 employees and we deal primarily with viral diseases.  We 
isolate novel nucleic acids.  From those we do assays for detecting the 
virus.  We do vaccines and therapeutic agents, and I think there's a 
tremendous need for isolating new viruses.  Quite a few of them are 
adapting themselves to the human host and we need to stay very active in 
this area.

The patent issues in this area of viral isolation are very critical to 
my company, and I think to all small companies in that the FDA regulatory 
testing required cost a great deal of money.  And it's been said already 
many times today, and I'm not going to belabor it, but delays in the 
patent process creates a tremendous sense of insecurity on the part of 
our investors and our corporate collaborators.

It's very important that we have a sense of patent stability in order to 
move these discoveries through to commercial products.  In many 
instances, the lack of a clear patent position undermines the ability of 
small companies to attract the needed resources.

In the interest of having listened to almost seven hours to other people 
talk, I'm going to summarize some of the things I was going to say, sort 
of a short ditto.

In the area of FDA data -- FDA-like data in order to get a patent 
allowed, that is human clinical testing, I think it's beyond the scope, 
or should be beyond the scope of what the examiners require and I think a 
practical utility basis is all that should be necessary.

I'd also like to comment on something that hasn't been brought up too 
much today and that is the patenting of novel nucleic acid sequences and 
their use, particularly in the area of reductions of practice either 
actual or constructive.  It's our position that nucleic acid sequence 
composition claims should not require a description of the best final 
utility, be it dependent upon human clinical data or any other kind of 
data; that what you need to have is a statement of practical utility 
together with enabling application.

There seems to be an awful lot of flux in the area of what a partial 
nucleic acid sequence qualifies you for in the U.S. Patent Office.  I 
would like to just drop back and say you should get whatever you disclose 
in your patent application, and that is if you can show that you can do 
something with it that is practical and that has a real utility then you 
should be able to get a claim for it, because others in the future will 
find improvement patents or other uses for it, that's fine.   We 
shouldn't foreclose that kind of improvement either.

Next I'd like to address briefly what I like to refer to as the double 
standard that the Patent Office practices in the area of 103 versus 112 
enablement issues.  It's always been hard to explain to an inventor how 
if he published something it becomes prior art against them that's going 
to block them, but if he puts the same information in a patent 
application it won't be sufficient for him to get a patent.  I have never 
been able to quite get that information across to an inventor.  In fact, 
sometimes I have trouble understanding it myself.  And I would like to 
see some type of reduction in this type of double standard where the 
ability of a patent applicant in -- to publish his research or to file a 
patent application is not made difficult.

And, finally, I would like to emphasize the importance of training and 
keeping a well experienced examining corps.  I know that the corporations 
and the law firms bear an awful lot of responsibility for their 
recruiting efforts on the trained examiners.  It's a problem that is 
largely economic until the Patent Office has the money necessary to 
retain the examiners the problem will continue, or until the world is 
saturated with qualified patent practitioners, but that's I think quite a 
ways off right now.

I was very upset to find out that $30 million of our fee money was going 
into the general fund as opposed to, as I had been led to understand, to 
support the Patent Office and the maintenance of a qualified examining 

I would like to go into just one little piece of what I would call sort 
of technical argument here and it has to do with the patenting of partial 
nucleic acid sequences, which I've recently seen in the press a lot where 
some are upset about patent applications containing partial sequences.  I 
would just like to put in the record what I think are a few utilities 
which I think should support the patentability of a nucleic acid 

One example would be encoding a unique antigenic peptide that provides 
an antigenic site for detecting the presence of antibody of clinical 
significance, particularly in the area of being able to test for a virus 
-- something like that. 

Another example would be encoding a polypeptide that provides a unique 
receptor, binding lignin, that modulates the activity the receptor 

A third example would be providing a unique hybridizing sequence that 
permits detection of a target nucleic acid sequence having clinical 

And still another would be nucleic acid primers that give specificity to 
a polymer chain reaction assay of clinical value.   

These are all examples of ways in which a nucleic acid sequence can be 
used in a very real way but that do not necessarily mean that the patent 
applicant knows the entire sequence or necessarily what the entire 
sequence will be able to do.  That I would leave to future inventors to 
go into the laboratory and discover.

Finally I would like to sort of digress a little and that is when I 
first entered patent law I was in a Washington law firm and a man left 
the U.S. Patent Office named Irving Marcus.  He'd been there for I think 
about 30 years.  He was in the office next to me and I used to go over to 
him all the time because I couldn't understand why the Patent Office was 
doing stuff and he would try to explain to me how the patent office 
worked, and that sometimes there were champions within the patent office 
for certain positions, and how he had been a champion for certain issues 
two or three times and he had been right and it had worked out pretty 
well for him and he managed to move up within the Patent Office.  And I 
think one of the things I'd like to see is some champions today who take 
positions for improving the patent system and particularly resolving 
problems like our current dilemma involving human clinical testing in 
order to get patent applications.  I would like to see more of an ex 
parte situation and less of an adversarial proceeding in the securing of 
patent applications.

Thank you.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Benson.

Next I'd like to call our second witness from Isis Pharmaceuticals, 
Lynne Parshall.


MS. PARSHALL:  Thank you Commissioner Lehman and other members of the 
hearing board, good afternoon.  My name is Lynne Parshall.  I'm senior 
vice-president of Isis Pharmaceuticals and Doctor Crooke from our company 
spoke with you earlier today.  Among my responsibilities at Isis is to 
supervise our patent prosecution.  I appreciate the opportunity to talk 
to you today.  I'm going to focus on just one item in connection with our 
patent prosecution that's affected us significantly, which is something 
that you've heard a lot about today, rejections that we've received based 
on incredible utility.  

As a development stage research based pharmaceutical company, for many 
years our most significant asset has been and will continue to be our 
patent estate.  We've invested extremely heavily in this area.  Our major 
focus at Isis has been on the development of antisense technology and the 
commercialization of drugs based on this technology.  We're the leading 
company in our area and have invested more than $100 million in this 
technology during the past five years.  Many major pharmaceutical 
companies and other development stage companies also have antisense 

In many respects, we think antisense technology epitomizes some of the 
special challenges that the Patent Office faces in dealing with new 
technologies.  It also epitomizes some of the potential harm that can be 
done by inconsistent activities with regard to the evaluation of patent 

Antisense technology is a true innovation in drug discovery and 
development, as are many of the technologies you've heard about today.  
It's very broadly applicable to many different therapeutic areas.  It's a 
technology that has extraordinary promise and importance and it's a 
technology we believe that needs and deserves the protection of the 
patent system.

We have focused our technology on a new target for drug discovery, RNA, 
and used a new class of chemicals, modified nucleotides to approach this 
target.  At Isis, we've simultaneously invented new minuscule chemistry 
and the basic pharmacologic framework to apply this technology.  Even for 
practitioners remaining abreast of this technology is very difficult.  In 
this way the antisense field is really though no different from any other 
important field in which rapid innovation is occurring.  What is 
different, however, appears to be how the patent office analyzes the 
growing body of literature concerning antisense technology.

In reviewing this literature, as you would expect, you will find work of 
varied quality; good and bad, and work expressing a variety of approaches 
to and views of the field.  In addition, you'll find work which due to 
the rapid pace of innovation is no longer state of the art.  It's the 
selective use of this literature by the Patent Office to doubt rather 
than support innovations in antisense that hinders our patent prosecution 
and which we believe provides an obstacle to patenting innovations in the 

Not surprisingly, in the beginning of this technological area there were 
more questions than answers about the potential for antisense compounds 
to be drugs.  Today we believe most of those questions have been answered 
and the overwhelming wealth of current evidence supports the contention 
that our technology will, in fact, yield important therapeutic advances.  
This evidence includes efficacy data from many animal models of disease 
and from many different laboratories.  It also includes clinical data on 
two antisense drugs that we've studied in humans.  Despite this wealth of 
data, we're continually facing rejections based on utility for our 
compositions of matter and therapeutic use patents.

In the last year, we've received office action rejections in 
approximately 70 different applications that included some sort of 
incredible utility or lack of utility rejection.  Responses to these 
office actions has cost us hundreds of thousands of dollars in legal 
fees, which probably makes some members of the audience more happy than 

Patent applications of ours have been rejected for compounds for which 
we've shown significant inhabitation of viral replication in well 
recognized models, including models that the government's using in its 
agencies for therapeutic screening.  In the face of the fact that more 
traditional chemical showing activity in these models have, in fact, been 
granted patents, patent applications have been rejected for compounds for 
which we've shown significant activity in animal models of disease when 
more traditional chemical showing activity in these models have also 
received patents.  Even patent applications for compounds for which we've 
shown evidence of activity in humans have been rejected.  For example, 
one of our pending patent application claims  composition of matter to 
certain phosphorothioadal alignin nucleotides used to treat a 
debilitating viral infection.  Today patients are being treated with one 
of these alignin nucleotides to help the spread of this disease.

In the latest office action we received for this application, the 
examiner maintained a previous 101 rejection for lack of patentable 
utility.  This rejection has been maintained in the face of declarations 
from two experts in support of this application.  One of these 
declarations was from a clinician actually treating patients with the 
drug in our ongoing clinical trial.  The declaration detailed the 
positive activity of the drug in patients.  The other declaration came 
from a well respected scientist who reviewed the current state of the 
antisense field.  These declarations from well known, well respected 
clinicians and scientists were dismissed by the Patent Office.

COMMISSIONER LEHMAN:  How were they dismissed?  On what grounds?   

MS. PARSHALL:  We were told that they were conclusionary and anecdotal.

COMMISSIONER LEHMAN:  Can I ask you a question about that, because, you 
know, I earlier referred to Robert Schaffer's testimony recommended 
basically that we adopt a policy of providing a presumption to such 
declarations.  And then we heard another witness just a few minutes ago, 
Mr. Fortney who opposed that because he said:  Well, you know, what's 
going to happen there then is that on the basis of sometimes inadequate 
declarations a patent is going to issue and then, you know, you'll be out 
in the marketplace with a potentially invalid patent and, you know, 
you'll have to spend then not just $200,000 but you'll have to spend, you 
know, $1 million on a patent infringement case.  It will, you know, put 
you out of business.

What's your response to that?  We hear Mr. Schlicher say basically that 
we should err in favor of getting the patents out the door and literally 
leave it to the litigation system to sort of round off the edges.

MS. PARSHALL:  My feeling is you're talking about two different issues 
here.  One of them is whether or not there's an invention that's truly 
different from what's both in the literature and what's been claimed in 
other patent applications.  And the other issue is whether or not the 
Patent Office believes that there's utility associated with this 
particular invention to give it -- to grant it the status of something 
that's patentable.  I think the Patent Office's job  is to do the former 
and not second guess experts in the field with regard to the latter.  I 
think the Patent Office needs to look at the existing literature to make 
sure that something put in front of it is truly inventive.  I think that 
when the Patent Office is faced with physicians and well respected 
scientists who say, in fact, "In this area this is likely to work," -- 
the Patent Office I know is composed of, you know, very good scientists 
as well, but I think they can't hope to be experts in every single area, 
particularly with the type of innovations going on among the companies 
that you've heard talk today.

Our frustration is that our science is being second guessed by people 
who, although they try and be as expert as they can, aren't experts.  Not 
that the Patent Office is making errors in looking at what's out there 
and what's been invented in the past.

COMMISSIONER LEHMAN:  We can certainly say they are experts in the prior 
art.  Probably the best experts because they work with it every day, but 
they, as you point out, are not experts in what's coming down the pike.

MS. PARSHALL:   That's right.

To continue with just another example.  We face similar Patent Office 
rejections in basic chemistry cases.  Just a few days ago we received an 
office action on a process patent application.  The invention claimed in 
the application as an improved process for preparing phosphorothioadal 
alignin nucleotides, and in the office action the examiner rejected all 
of the claims as lacking patentable utility.  The examiner stated, and I 
quote:  "The antisense activity of the instantly claimed compounds 
borders on the incredible and such an asserted utility is deemed unlikely 
to be correct in view of contemporary knowledge in the art."  End of 
quote.  It's difficult to understand the examiner's position.  The recent 
scientific literature does not indicate that the activity of 
phosphorothioadal alignin nucleotides is incredible and deemed unlikely 
to be correct.  In fact, ongoing clinical trial of these compounds do not 
indicate either that the activity of phosphorothioadal alignin 
nucleotides is incredible and deemed unlikely to be correct.  The 
declarations that we've submitted from well respected clinicians and 
scientists do not indicate that the activity of the phosphorothioadal 
alignin nucleotides is incredible and deemed unlikely to be correct.

I'm not trying to suggest that drug discovery is not fought with 
uncertainty.  We all know -- you probably heard a lot about how long it 
takes to come up with drugs and how long it takes and how expensive it 
is.  What I do urge you to see, though, is that antisense compounds 
merely represent yet another example of a new area of innovation similar 
to those that have been encountered numerous times in pharmaceutical 
patenting new classes of chemicals designed to intervene in disease 
processes in a new way.  Support of this type of innovation in the 
pharmaceutical industry by granting patent protection of reasonable scope 
has been and continues to be necessary to simulate continuing innovation.

With regards to patents in biotechnology, we feel that there's a 
different standard applied than that applied to traditional 
pharmaceuticals.  Demands for definitive proof of therapeutic utility 
which seems to equate to pivotal controlled human clinical trials have 
resulted in many patent application rejections.  As Doctor Crooke said to 
you earlier today, there's no harm done and, in fact, significant public 
policy is served by giving pharmaceutical innovators the benefit of the 
doubt in terms of the utility of their inventions.  

I'd like to reiterate the recommendations Doctor Crooke made to you 
earlier today:

We recommend that the Patent Office return to traditional practices with 
regard to pharmaceutical patents.  This would include a return to a 
positive bias towards innovation with the acceptance of reasonable proof 
of potential utility for inventions.

We request that you treat patents from so-called biotechnology companies 
and pharmaceutical companies as equivalent.  We're the same industry with 
the same customers practicing the similar science.

We request that you act consistently across and within technology areas.  
Just because one technology is labeled a new technology and another is 
not does not mean that the basic approaches or risks are necessarily 

We further request that when in doubt you grant therapeutic claims based 
on the specific examples provided with scope commensurate with reasonable 
extrapolation from the examples that have been provided.

Let me thank you for this opportunity to speak to you today.  I think 
this issue is a very critical importance to us and to innovation in 
health care.  I'm confident that as you consider the issue, and hear all 
that you've heard today and will continue to see in the record, that you 
will agree that it is in the public interest to continue to encourage 
innovation in the pharmaceutical industry, not to discourage it.

COMMISSIONER LEHMAN:  Thank you very much.  

Next I'd like to call on Robert Sobol of the San Diego Regional Cancer 
Center.  Mr. Sobol?  Guess he's not here.

Susan Perkins of Cambell and Flores.

If Mr. Sobol comes back we'll try to fit him in.  He might be hanging 
around because we're about a half hour out of time.  I'll call him later.


MS. PERKINS:  I was going to make that specific request before I got 
into my testimony.  If he Doctor Sobol -- given that we are about a half 
hour ahead -- could go after my testimony.

COMMISSIONER LEHMAN:  I think we've told people that there was a half 
hour either way so we're right at that cutoff, you know, at that far 

MS. PERKINS:  My name is Susan Perkins and I'd first like to start my 
testimony by echoing many of Tom Wiseman's positive comments he made 
today.  Having worked as a patent examiner for over four years in the 
biotechnology group, I too am familiar with the fine and hard working 
people at the Patent Office who are trying to make this system work.

I'm currently in private practice for Campbell and Flores, a San Diego 
based law firm that specializes in biotechnology patent law.  We work 
primarily for small start-up companies, not-for-profit organizations and 
universities.  You have heard today from a number of our clients -- and 
hopefully Doctor Sobol.  Universally these clients have commented on the 
more stringent and unrealistic standards that are being applied in Group 
1800, particularly as to utility.  Our clients have also commented, and 
I'd like to further emphasize, just how critical patent protection is for 
the continued research and development to these companies.  I would like 
to add briefly to those comments already provided by our clients.  While 
the views I express are my own, they are derived not only from my recent 
experiences with the patent office but also those of other practitioners 
at my firm as well as and, more importantly, the experiences of our 

In one application in our office we successfully interviewed the 
application.  It was deemed allowable, having removed all the 103 and 112 
rejections.  We then got a call from the examiner that prosecution was 
going to need to be reopened for new utility rejections and new 
enablement issues.  When asked if we could reinterview the case.  We were 
told by the examiner that we could argue the utility issues until we were 
blue in the face, that this examiner was taking direction from his 
superiors and that the examiner, and I quote, "feels like a robot in 
following the mandate of his supervisors."

I cannot help but wonder how happy this examiner must be in their job, 
and I'm very familiar with what an enjoyable job patent examining can be.  
But more importantly, it appears to me that this application has been 
prejudged and finally determined without us even having had the 
opportunity to interview or submit a response because of the current 
utility standards being applied today.  This case is not unusual for what 
we are seeing in our office.  We are often having cases reopened for 
prosecution based on utility and enablement issues which I think speaks 
directly to the changed standards over the last couple of years.  And it 
is also not uncommon that where we submit sufficient legal arguments or 
supporting technical data, this does not appear to be enough.

In this particular case, the inventor's response to the utility 
rejection was he'd be happy to do human clinical trials.  If only the 
examiner would give his right arm for that injection, he'll do the human 
clinicals.  This may seem like a ridiculous statement -- I laughed myself 
-- but I think it certainly speaks to the frustration that the inventors 
are feeling today with the Patent and Trademark Office and these enhanced 
standards of utility.

In other cases, we are now seeing restrictions drawn along in vitro and 
in vivo lines.  Claims to in vitro procedures or uses are held to be 
patentably distinct from in vivo uses or procedures.  We even get this 
restriction where we have not specifically claimed in vitro or in vivo 
uses or procedures.  The examiners argue that the claims are generic to 
in vivo and in vitro.  One problem with this is that you must realize 
that restrictions drawn along in vivo and in vitro lines can result in 
more groups in a single restriction than there are claims in an 
application.  I think these restrictions are really so the examiner 
doesn't have to deal with the in vivo utility issues until you file a 
divisional application, not that in vivo and in vitro inventions are 
patentably distinct.  And I don't think a restriction for utility 
purposes and those additional uses of utility for in vivo inventions 
warrant a restriction.

Now, there is a positive side to these in vitro/in vivo restrictions.  
Now, it would appear that the Patent Office cannot apply prior art 
disclosing in vitro data only as rendering obvious in vivo claims.  One 
of the largest downsides I see to these restrictions is I'm not sure how, 
where an applicant elects the in vitro group, to prosecute that 
application where we don't even have an in vitro use or procedure 
disclosed.  And it's not uncommon that we have cases that get these 
restrictions between in vitro and in vivo lines where we don't even have 
in vitro inventions disclosed, yet the examiner has made this restriction 
and indicates we have some in vitro invention.  I don't know how we're 
supposed to prosecute those applications.

On another issue regarding the double standard, which has been talked at 
great length today, but I'd like to focus specifically there also on in 
vitro and in vivo.  The examiner is holding in vitro data disclosed in a 
publication as rendering obvious applicant's invention, but that in vitro 
data or animal models are not sufficient to meet the current utility 
standards.  While I as a former examiner appreciate the need for compact 
prosecution and that we make all possible rejections in the first office 
action, and I even appreciate that there's different standards between 
enablement and obviousness, it seems to me that the Patent Office needs 
to really make a decision about whether or not in vitro data in a 
disclosure renders something obvious or whether applicant's in vitro data 
and animal model is going to be sufficient for utility.  These two 
inconsistent positions cannot both be correct, and yet we're seeing these 
rejections vigorously maintained until we refile the application and 
argue it again in a new continuing application.

When I was an examiner, I routinely made these apparent inconsistent 
rejections of 103 and 112 and 101, but generally one of those was wrong 
and had to fall, and I think that's particularly true where you've got in 
vitro data supporting an obviousness rejection but in vitro data fails to 
support enablement and utility.

Many people also have spoken on the need for more legal education.  I 
would strongly agree.  And as I understand it, Howard Shane's legal 
precedent course has not been taught since the time when I was back at 
the Patent Office which is now over two years ago.  I know myself and 
many other examiners considered Howard Shane's legal precedent class to 
be invaluable, and I would just strongly recommend that he or other 
superiors in Group 1800 again take up teaching a legal precedent course 
within Group 1800.

My last comment is that I understand there's been consideration of other 
time for interviews between applicants and examiners, to give the 
examiners other time for the interviews.  I hope that goes through.  I 
think many people have spoken today about how much interviews help 
facilitate dialogue, and certainly cuts down on the pendency of 
applications, which I know is of real concern to the Patent Office.  

I thank you very much for the opportunity to testify. 

COMMISSIONER LEHMAN:  Thank you very much.  You know, I just would make 
the point that we are, indeed, considering giving examiners additional 
time for interviewing, but, in addition to the $30 million Congress has 
taken out of our pocket, basically out of your pocket, we also have 
restrictions that are being imposed upon us from above by -- regarding 
the number of people that we can hire at the Patent and Trademark Office 
even if we have the business to do and even though we have the money to 
pay them, and this makes it extremely difficult to give examiners some of 
this time.  We'll probably do it anyway but we can only stretch so far, 
and I think it's incumbent upon our constituents to follow these things 
carefully; to let Congress know; to let the Office of Management and 
Budget know, and so on, because, otherwise, we can't provide you with the 
kind of service that we would like to.

These hearings are two-way streets.  They give us a chance to tell you 
what's going on and hear what you're thinking.

It looks to me like Mr. Sobol has arrived, and so why don't you come 
forward -- from the San Diego Cancer Center.


DOCTOR SOBOL:  I'm a physician and have never been on time to anything 
in my life and today I thought for sure I was going to break that, but 
here I am late.  I apologize.

COMMISSIONER LEHMAN:  I want you to know that, you know, in the Bill 
Clinton Administration that we're over Clinton time now.  We're a half 
hour early, we're not a half hour late.

DOCTOR SOBOL:  Oh, I see.  I won't feel so badly then.

My name is Robert Sobol.  I'm a medical oncologist and a clinical 
investigator at the San Diego Regional Cancer Center where I serve as the 
Director of Clinical Science.  I appreciate having the opportunity to 
testify before you today concerning the use of animal models to obtain 
patent approvals.  I provide the perspective of a current patent 
applicant from an academic non-profit research institution.

In the past, animal data was sufficient to obtain patent approvals.  The 
patent approval process, based upon animal efficacy data, resulted in 
expenses for research and patent prosecution costs that were within the 
means of most non-profit research institutions.  These issued patents 
protected the intellectual property of investigators at non- profit 
institutions which have very strained overall budgets.

In addition, these approvals fostered the clinical development of novel 
therapies by providing the private sector with the confidence to make the 
considerable capital investments required to obtain FDA marketing 
approvals.  This process based on patent approvals from animal data has 
been responsible for the rapid growth and preeminence of the 
biotechnology industry in the United States.    

I would like to share with you from our own experience how the 
development of novel treatments may be threatened by the recent 
unwillingness of patent examiners to accept animal data as sufficient for 
patent approval.  We had demonstrated in an animal tumor model the 
effectiveness of a novel approach for the treatment of cancer; however, 
the statistically significant data was rejected by the patent examiner 
who requested evidence in human subjects that the therapy would be 
efficacious.  The animal data rejected by the examiner was, however, 
deemed satisfactory to justify clinical application of the approach in 
human subjects by federal review boards containing scientists and 
physicians skilled in the art of our developed therapy.

The further development of this particular technology is threatened by 
the patent examiner's request for human data.  This would entail 
significant expenditures requiring hundreds of thousands or possibly 
millions of dollars, depending on the manufacturing requirements to 
generate the clinical grade materials required for human study.  These 
costs are well beyond the means of most non- profit research institutions 
and the private sector support to develop this technology would be 
enhanced by an approved patent.

An alternative is to appeal the patent examiner's ruling.  However, this 
process is also formidable as appeals may take several years of 
litigation with resulting legal expenses beyond the means of many 
academic institutions which are becoming increasingly strained 

We are frustrated by the apparent requirement to expend significant 
amounts of capital and time to protect our intellectual property if human 
clinical data is required for approvals.  The trend in current policy to 
demand human data will discourage patent filings from our non-profit 
academic institutions where many novel technologies originate.

It would be detrimental to the progress of medical research in our 
country if academic research institutions can no longer afford the costs 
of obtaining issued patents.  Animal models are predictive of effects in 
humans and the results of these studies should remain sufficient for 
patent approvals as they are for the clinical application of novel 
therapies in human subjects.  Thank you.

COMMISSIONER LEHMAN:  Is there any circumstance under which you think 
human testing should be required for proof of utility?  Can you imagine 

DOCTOR SOBOL:  Well, I think to those skilled in various elements of 
medical research where certain animal models would be known not to be 
predictive of what would happen in humans, that under those circumstances 
evaluation of humans would be required.

COMMISSIONER LEHMAN:  I think that's probably exactly what's happened in 
some cases.  We've probably had those kinds of situations and that's what 
causes --

MR. RICHMAN:  That's exactly correct.  You have, in essence, competing 
literature where on one hand someone is saying it is predictive and on 
the other hand people are saying animal models are not predictive of that 
disease state, and that's what we have to deal with.

DOCTOR SOBOL:  That's always a difficult situation, but I believe that 
in most circumstances the animal data has been predictive of what does 
occur in humans and it's on that basis that many clinical trials are 
approved for humans and therapies are developed for humans.  And I think 
it's perhaps more the exception rather than the rule and that that may be 
what we need to have guiding the decisions.

COMMISSIONER LEHMAN:  Your organization, is it primarily a research 
organization or is it a treatment organization doing some research?

DOCTOR SOBOL:  It's really dedicated to research, translational 
research, taking the studies that are developed in vitro and in animals 
and apply them in clinical settings in humans.

COMMISSIONER LEHMAN:  And it's not for profit?

DOCTOR SOBOL:  It's a non-profit; that's correct.  So we really base all 
of our work on moving things rapidly into clinical trials with humans, 
and that's all predicated on results that we obtain in in vitro systems 
and animal models.  And that's --

COMMISSIONER LEHMAN:  You're of course a user of research as well then 
and so you would have a sense of -- since you're not really a profit 
making company -- of the implications possibly of issuing patents that 
shouldn't be issued, and I assume that you basically don't see much of a 
problem there?

DOCTOR SOBOL:  I think that that's less of a concern than the opposite:  
Having something not issue and get protected that really requires it to 
be developed, and I think if one had to err one would prefer to err on 
the side of making certain that we were able to provide protection for 
intellectual property, provide the stimulus for development.  I think we 
will harm more people, slow the development of novel treatments for 
patients that suffer from diseases by being too conservative in what we 
allow to be patented, and if errors have to be made I think it's better 
to err on the side of granting and issuing patents.    

COMMISSIONER LEHMAN:  Have you had any problems with experimental use of 
other people's patented technology?  We heard at least one witness call 
for the need for a statutory experimental use exception.  Is that a 
problem for you at all?

DOCTOR SOBOL:  Not encountered it personally, no.

COMMISSIONER LEHMAN:  Thank you very much.

Next I'd like to ask if David Lowin of Syntex is here?
it's perhaps more
MR. LOWIN:  Mr. Commissioner, members of the panel, and die-hard members 
of the audience.  It's been about two hours since somebody congratulated 
you on still being here and listening to us so it's probably time for 
another counter to that effect.  Thank you for staying and listening.  
It's important. 

I'm David Lowin, Assistant Director, Patent Law Department, at Syntex.  
I also teach patent law at Stanford Law School and at U.C. Berkeley's 
Bolt Hall.  My testimony is offered as a matter of personal opinion, not 
on behalf of any organization.

Suffice it to say that nine minutes isn't long enough to address the 
full subject matter of this hearing so I'm also working on a written 
submission that will hopefully be of a broader scope.  My prepared 
remarks are addressed to the somewhat different approach on the policy 
behind the utility requirement and the environment in which that policy 
must be carried out.

The Notice setting this hearing started by reference to the Supreme 
Court's decision in Brenner v Manson.  There the court upheld the 
rejection of the chemical process patent application for failing to 
establish a substantial utility.  Now, Brenner may not be the greatest 
decision the Supreme Court's ever handed down and I think a lot of that 
has to do with the underlying facts, what the application had in it and 
what was trying to be argued.  But I think there are some things within 
Brenner that can still be applicable today and that can help the Patent 
Office accomplish what's been requested by the industry here, and that's 
what I'll turn my attention to.

I think there are two key aspects to the majority's conclusion in 
Brenner v Manson.  First, the majority concluded a patent is not a 
hunting license; it is not a reward for the search but compensation for 
its successful conclusion.

Now, whether an invention represents the successful conclusion of the 
search kind of depends on what it is that you're searching for in the 
first place.  Biotechnology has changed what we're searching for in the 
first place.  It's made it possible for us to understand the complexity 
of life and to intervene with disease at a level far more precise than 
was possible when the Supreme Court considered Brenner v Manson.

The successful conclusion in today's search for cellular mechanisms and 
ways to modulate them would have probably been considered only an 
invitation to further experimentation back in 1966, and what we consider 
to be the successful conclusion today is going to be different 10 years 
from today.  The point is that the legal principles, such as the 
successful completion of the search, have to be applied in the manner 
consistent with the progress of technology.

The second key aspect of the Court's decision in Brenner v Manson is the 
quotation they took from the CCPA decision in application of Rushut.  A 
patent system must be related to the world of commerce rather than to the 
realm of philosophy.  So what's the world of commerce to which the 
successful conclusion of today's search must relate?  It's a different 
world of commerce than it was in 1966.  Just as the patentable subject 
matter, definition of Section 101, had to expand to cover Chakrabarty's 
bacteria as part of anything under the sun that is made by man, so now 
our definition of the world of commerce must expand to cover the state of 
the art in the commercial impact of today's biotechnology inventions.

When we clone the DNA for a protein that's known to be involved in a 
disease; when we develop that protein into an assay for screening 
potential therapeutic drugs; when potential therapeutic drugs are 
identified as active in that model, and when those drugs are tested in 
clinical trials, all of these efforts involve hundreds of scientists, 
thousands of other people performing related tasks in hospitals, in 
banks, in shipping companies, in equipment manufacturers, in accounting 
firms, and even in the United States Patent and Trademark Office.  Every 
step along the way entails enormous investment.  The successful 
conclusion of each of these searches triggers even more investment.  
Ultimately, hundreds of millions of dollars change hands during the 
development of a single drug, and that's commerce.  That's commerce at a 
level that the founding fathers couldn't even have imagined.

Today's hearing is taking place because the U.S. Patent and Trademark 
Office has, seemingly more often than not, refused to allow our 
applications for patents on the DNA, on the proteins and on the screening 
models, allegedly because they aren't the successful conclusion of the 
search and they don't relate to the world of commerce.  The patent office 
has refused to issue patents on the drugs because they haven't been 
proven safe and effective in statistically powered human clinical trials 
even though, in this first-to- file world, the patent applications cannot 
be filed containing such data because they have to be filed years before 
the clinical trials can be started.

And now, if eventually granted, the terms of these patents will have 
been expiring since the day they were filed, and the GATT implementing 
legislation appears to require an applicant to make a choice between an 
extension for appeals or interferences versus extension under the 
provisions of Waxman-Hatch.  It's under 156(a)(2).  This is Waxman-Hatch 
says if the patent has previously been extended, it doesn't say under 
this provision that you can't extend it under this provision.  That's 
something that will just get cleared up after the implementing 
legislation goes through.  But that's something that we're facing today.

COMMISSIONER LEHMAN:  I assume you favor a revisitation of the patent 
term registration legislation to make it more favorable to the --

MR. LOWIN:  Yes, I definitely do.  Particularly in the context of the 
new 20-year term that's soon to be.

COMMISSIONER LEHMAN:  But you also correctly point out that for all 
practical purposes most global competitors already live under the 20-year 

MR. LOWIN:  Absolutely.  I mean, it's a practical reality of the world 
we're living in.

COMMISSIONER LEHMAN:  So we could fashion an equitable solution by -- 
because the biotech industry is unique in this regard really.  By 
fashioning -- we already have built in of course to the legislation 
five-year extension for interferences and appeals, and so on.  But we 
also --  Then we have the existing patent term with extension legislation 
as well, but we could expand on that.  That's not violative of any of our 
GATT obligations, I don't believe, and then we can have hopefully a 
win/win situation when we get better external access in foreign markets 
such as Japan.  We please other aspects of the patent industry that don't 
want patent terms going on forever and then we solve your problems at the 
same time.

MR. LOWIN:  That would be just great.  Good luck.  I will be happy to 
help with that.  We've got some ideas.

If you would put up the first slide.  I wanted to put things in 
perspective on the standard of utility.  On the mechanical side, the 
Patent Office is regularly granting inventions on anything up to and 
including the kitchen sink, and witness U.S. Patent 53494708 issued 
September 27th for the foldable kitchen sink.

Next slide, please.  Not to mention also issued on the same day the 
patent on the nail file protector device.

Next slide, please, and the last of these that I'll take your time with.  
The air cooled umbrella. 

COMMISSIONER LEHMAN:  I thought you were going to do the paper clip.

MR. LOWIN:  No, that one's good.

COMMISSIONER LEHMAN:  I still don't understand that one, I must say.

MR. LOWIN:  Depends on when it was issued.  I'm sure all three of these 
inventions were worthy of patent protection, but I'm also that even 
combined these inventions covered by these three patents are not going to 
effect the world of commerce to the same degree as even one of the 
legally useless biotech inventions we've been talking about today.

I think the office needs to apply the utility requirement consistent 
with the current commercial and scientific standards.  The utility 
standards should resolve doubts in favor of the patent applicant, and 
when an applicant pleads for allowance of its application because its 
competitors are already practicing the claimed invention, it doesn't make 
sense to reject the application as lacking utility.  We've got room in 
this area of the law for the principle, "no harm, no foul."  The courts 
are not being clogged and the progress of science in the useful arts is 
not being blocked by patents covering technology that just doesn't work.

Very briefly.  I know I'm out of time.  I thought a great suggestion was 
made earlier and that was establishing a group within the office that 
occasionally picks up an application and looks at it from the standpoint 
of the applicant and says:  Gee, how would I feel about this?  That would 
be a great balance to the other group that you have.

COMMISSIONER LEHMAN:  What would your view be about the suggestion about 
giving greater weight to declarations to substitute for clinical data?

MR. LOWIN:  I think that's fine.  I think the procedures already provide 
for that.  If there has been a declaration, then there needs to be some 
evidence, under oath, to counterbalance it.  And when there isn't 
counterbalancing evidence then the declaration has to have the weight.

COMMISSIONER LEHMAN:  Thank you very much.

MR. LOWIN:  Thank you. 

COMMISSIONER LEHMAN:  Sarah Adriano of Merchant and Gould will not be 
here this evening so that moves us up a little bit further.  We're going 
to probably end up finishing -- looks to me like we'll finish probably 
about 50 minutes, 45 minutes ahead of time.

Is Jeffrey Sheldon from Sheldon and Mak here?


MR. SHELDON:  Honorable Commissioner, thank you for the opportunity to 
address you and your colleagues, and my colleagues that are still in the 

I am the founding partner of Sheldon Mak.  We're an intellectual 
property law firm with offices in Pasadena, California; Palo Alto, and 
San Bernardino.  We have a diverse biotechnology practice representing 
individual inventors; the University of California; non-profit 
organizations; and some Fortune 500 companies.  I'm here on behalf of the 
firm and myself.  I'm also president of the Los Angeles Intellectual 
Property Law Association, and past chairman of the State Bar of 
California Intellectual Property Section.  I teach advanced patent at 
Loyola University, but I'm not here on behalf of any of those 
organizations, just to add some import to the weight of my comments.

Initially I was only going to talk on the 20-hear term; however, you've 
asked some questions which I'd like to address on two other issues.  One 
is the utility requirement asking should the Patent Office err in favor 
of issuing patents or continue its present system of insisting on some 
utility.  I believe strongly it should err on issuing patents.  If, for 
some reason, a mistake is made that the patent invention in fact has not 
utility, who cares?  Simple as that.  If it doesn't work nobody is going 
to infringe.  The few reported cases, and I think one is at the Court of 
Appeals -- I use it in my patent law course but I don't remember the cite 
-- where somebody challenged the patent on utility grounds but when shown 
to have infringed the patent the court disposed of that automatically.  
It said:  "How can you at the same time infringe the patent and claim it 
has no utility?"  So go ahead and issue all the useless patents you want.  
David Lowin just showed you three of them.  Who cares?  So if you're 
going to err, err on the side of getting these patents out there so that 
if they do have utility people can invest.

The other point, and, again, I didn't --

COMMISSIONER LEHMAN:  One of the concerns, though, is that, you know, 
foldable kitchen sink or whatever, is an area where somebody can have 
something very similar.  It's a crowded field of technology, and one of 
the problems of biotechnology is that it isn't, particularly where you 
are focusing on the more breakthrough inventions.  It's not necessarily a 
crowded field and obviously the concern is that you will place roadblocks 
to alternative developments because of the power of the patent grant if 
you issue indiscriminately certain patents.  We certainly are hearing 
here that there doesn't seem to be much of a concern about that here, at 
least the industry doesn't seem to share that concern.

MR. SHELDON:  Again, the marketplace will take care of that.  If, in 
fact, it is a roadblock it must have some utility and generally it's some 
sort of license negotiation will develop.  I -- In my practice, I've not 
seen a roadblock of a patent who should not have issued because of 

COMMISSIONER LEHMAN:  Well, of course, you know, if it's a valid patent 
it's a valid patent and I think the concern is that we would issue 
invalid patents and also they would be a roadblock to other people and 
other people's inventions.

MR. SHELDON:  In my practice, the roadblocks I've seen are invalidity on 
102 and 103 grounds and not utility grounds, and that has been a problem 
but that's not what you're here to listen to.   

I didn't plan on addressing the inconsistency of the Patent Office 
between enablement and obviousness; however, I happen to have in my 
briefcase to review in breaks an amendment written by one of my 
associates on a simple technology, its capillary zone electrophoresis.  
The patent application discloses six, seven applications for it.  It has 
specific examples.  On one of them we have two rejections:  One rejection 
is we're entitled to only the one claim where we disclose how to use this 
invention for uric acid analysis.

By the same token, I have a 103 rejection.  The Patent Office says:  
"The selection of appropriate anilities, enzymes, coenzyme, and 
wavelength is conventional and within the skill of the art to which the 
invention pertains."  An obvious inconsistent position, so I can't get 
anymore current than that since we're responding to the amendment.

I'm not going to take up the suggestion of going over the examiner's 
head because whenever that happens the next time I have the same examiner 
life gets very difficult, and it would just be as if somebody went over 
my head or one of my subordinates' heads in the office.  It's politically 
not a good idea.

Now, let me get to the main points I wanted to deal with was the 20-year 
term.  The 20-year term -- and I have some solutions to the problem.  The 
20-year term creates problems in view of the Patent Office's position on 
utility because if I've got to prove the utility by clinical data it's 
going to take me ten years at best and I'm left with ten years at best, 
and it also provides problems with the restriction requirement.  The 
current system in the Patent Office strongly encourages examiners to give 
restriction requirements.  It's my understanding there's a quote system, 
there's a bonus system based on dispositions.  If you can examine one 
application and do all the hard work and do the search and then you can 
give a restriction requirement and get eight divisionals, you're going to 
look awfully good when it comes bonus time.  So the current system in the 
Patent Office is encouraging restriction requirements.  An example -- and 
I have a book how to write patent applications, and we talk about in the 
book how to claim a new protein isolated and purified from natural 
sources.  There's 15 different ways to claim that at least, and the 
Patent Office in many cases will give you 15 restriction requirements, 
but it's really only one basic invention.

The one suggestion I have is, if we are going to have a 20-year term, I 
think the legislation that's pending that says the longer of 20 years or 
17 years from date of issuance should be what goes through.  I believe 
that would comply with all requirements that the Patent Office currently 
has, so that is one possible solution to a lot of the issues raised on 
the 20-year term.

COMMISSIONER LEHMAN:  When we had a hearing like this in Silicon Valley 
earlier this year we heard lots of complaints that were just the exact 
opposite, they were that we should have shorter patent term, not longer 
patent term.  We really  have this sort of dichotomy between the two 
California interest groups; biotechnology and computer software.  So how 
would you respond to that?

MR. SHELDON:  Well, if I were probably up there representing my computer 
software clients and they have a different view -- but I think a longer 
term overall is best, particularly for the biotechnology.  And I have not 
seen a problem in the fast advancing arts in the computer --

COMMISSIONER LEHMAN:  The problem basically, as I gather -- I mean, the 
problem really boils down to not that a 17-year or 20-year term is 
inherently inadequate.  The problem has to do with the unique 
relationship of biotechnology to both the regulatory review process and 
the exceptionally long development period from the invention -- from 
inception of the invention to, you know, practical application.  That's 
really the problem here; isn't it?

MR. SHELDON:  Well, let me suggest other alternatives.  A second 
alternative is if you're -- the Patent Office -- is requiring utility by 
human testing then built into the statute, much as we have a patent 
extension term for FDA regulatory delay, a delay in meeting the utility 
requirement of the Patent Office.  Consider as a third alternative a new 
reissue proceeding where I issue my patent where I claim utility in 
rabbits, if I can later on show that I have utility in humans get me a 
reissue patent on that.  And it will be a broader claim so it would take 
a new reissue statute.  It's a creative approach.  Consider that.  
Definitely we need less strict application of the restriction requirement 
and what will go a long way for that is reducing the examiners' incentive 
for restriction requirements.  Either give them no credit for divisionals 
or less credit for a divisional than they get for original application.

Another way would be to allow -- like in the Trademark Office we can 
examine in a single application all the so-called separate inventions by 
paying an extra fee, if necessary, and give the examiner a little bit of 
extra credit for that.  And when the patent actually issues, if we're 
going to enforce the interpretation of the patent statutes that you only 
get one patent per invention and one invention per patent, then require 
divisionals.  Divide it out at that time, at least it will reduce the 
cost.  I don't have to prosecute nine applications and get nine different 
office actions.  I can do everything at one time.  I think that will be 
to the benefit of the Patent Office.

My time is up and I thank you for listening to my remarks.

COMMISSIONER LEHMAN:  Thank you, sir.  Very interesting suggestion, the 
one you just made.

Just to give you an example of the problem from some other end that 
we're getting a few.  Tune into the Internet, you'll find on it the 
following:  For those of you who are fans of Jerome Lemuelson, here's yet 
another of his submarine patents that issued with a continuation division 
chain back to 1954.  For those of you who hate submarine patents your 
fears of lawsuits will be well fed by the claims to this patent which are 
infringed by most U.S. industries so, you know, that's the kind of thing 
that we're hearing loud and clear complaints about in terms, and the  
20-year term from filing has attempted to address that kind of concern.  
But that doesn't mean that there aren't very real concerns of biotech 
industry and we will do what we can to try to address those.

MR. SHELDON:  If I may, the suggestion that all the divisionals are 
prosecuted at the same time with dividing them out right before issuance 
would address the submarine patent concern and still meet the objections 
of the 20-year term.

COMMISSIONER LEHMAN:  Thank you very much.

We're getting down near the end.  Is Ted Green of Amylin Pharmaceuticals 


MR. GREEN:  You're actually running a little ahead of schedule according 
to my chart.

COMMISSIONER LEHMAN:  Yes, we are.  We had a couple of people that 
canceled that's why.  We had three cancellations and we're just about 
that far ahead of schedule.

MR. GREEN:  All right.  Well, my name is actually Howard Edward Green, 
Junior, and people know me by the nickname Ted.  I am chairman and chief 
executive officer of Amylin Pharmaceuticals, Incorporated, a seven-year 
old biotech company working to develop novel medicines for treating 
diabetes.  Before becoming a full-time employee of Amylin, I was a 
venture capitalist and helped start six medical technology companies; 
five of which have gone public.  Earlier I was chief executive of 
Hybritech, Incorporated, which was acquired by Eli Lilly in 1986.

I am a named inventor on two patents, both of which have broad method of 
use claims.  The first patent covers Hybritech's product technology for 
two-site monoclonal antibody assays and is I think considered somewhat of 
a landmark among biotech patents.

The second patent covers one of Amylin's technologies for treating 
diabetes and is the focus of a major development program in collaboration 
with Glaxo, Britain's largest pharmaceutical company.

I'm speaking today on behalf of myself and other inventors in the 
pharmaceutical field who have made discoveries with broad medical 
potential.  My message is this:  We need broad method of use claims in 
order to raise the investment capital needed to develop our products.  
Moreover, these method of use claims should not be held to a higher 
standard of clinical utility than have the composition claims 
traditionally pursued by drug companies.

Recent pharmaceutical history shows why broad use claims are so 
important.  Two pioneering inventions stand out.  The first is the 
discovery of H2 antagonists for treating stomach ulcers, and the second 
is the discovery of ace inhibitors for lowering blood pressure.  The 
companies that pioneered these products have now been merged out of 
existence.  Why?  Well, partly because they did not have broad enough 
patent coverage.  Within a few years of the first H2 antagonist, that was 
Tagamet from SmithKline, and the first ace inhibitor, Capatin from 
Squibb, competitors Glaxo and Merck launched "me too" medicines that 
treat the same diseases by the same mechanisms of action.  In my opinion, 
SmithKline and Squibb were unable to reap the full rewards of their 
inventions because they did not have the right patent coverage.  
SmithKline and Squibb probably would be independent companies today if 
they had been issued broad methods of use claims for H2 antagonists and 
ace inhibitors.

Now we read in the newspapers about drug firms buying distribution 
companies rather than investing in pharmaceutical research.  In effect, 
the industry and Wall Street are now questioning the value of research 
expenditures which run to hundreds to millions of dollars for pioneering 
medicines.  Why?  Because competition from "me too" products within 
therapeutic classes is killing the investment returns from pioneering 
products because traditional pharmaceutical patents protection has been 
narrowly focused on composition claims, because the most important 
inventions, the sites of drug action, have not been claimed in patents.

We all know that recent discoveries in biology combined with modern 
pharmaceutical technologies are replacing random screening and blind luck 
in the development of new medicines.  The disclosure of a novel site of 
action, such as the H2 receiptor or the ace enzyme now teaches 
competitors how to make their own drug.  Just ask any competent medicinal 
chemist.  Without patent claims to protect these important discoveries 
inventors and entrepreneurs will not receive the protection to which they 
are entitled and they will have difficulty attracting sufficient risk 
capital to carry their inventions all the way to market.

I also wish to state it is very important to receive patent protection 
quickly for these discoveries rather than after years of negotiating with 
the PTO.   

First, potential equity investors want to know that they will be 
protected and ongoing rejections from the PTO make investors very 
nervous, to say the least.  I remember when our patent counsel calmly 
announced that we had received a, quote, "final rejection," for one of 
our applications, which engendered raw panic in our management ranks.  We 
have since gotten that patent issued.

Second, the big drug companies often don't pay much attention to patent 
applications preferring to wait to see what will actually issue.  
Consequently, it's harder to do deals with just patent applications.

Third, the lack of issued claims means the potential competition can't 
define the boundaries clearly.  A situation which may encourage 
considerable economic waste.

At my company Amylin, we are pioneering new concepts for explaining why 
diabetes happens and why the disease is so difficult to treat.  So far we 
have dedicated seven years to this effort, recruited over 150 highly 
skilled employees, and raised over $130 million in capital.  I believe we 
have spent more money on diabetes research than either the American 
Diabetes Association or the Juvenile Diabetes Foundation have since their 

For our key products we have received U.S. patents with broad methods of 
use claims and these claims have played an important role in attracting 
both investor and corporate partner support.  In short, without patent 
protection there would be no Amylin Pharmaceuticals in San Diego.

Our patent laws have played a central role in making America the world's 
technological leader in general and in biotechnology.  Our patent laws 
have encouraged innovation and risk taking that is the envy of the world.  
Our patent laws have helped make pharmaceuticals one of America's 
strongest industries and have encouraged the birth of our biotech 
industry.  It would be a tragedy to strangle pharmaceutical innovation by 
denying the breadth of patent coverage for methods of use to which our 
scientific pioneers are entitled.  Thank you. 

COMMISSIONER LEHMAN:  Thank you very much for your pioneering work that 
you've done and for your statement.

We're down to the bitter end now and we're going to hear I believe from 
a witness who's already testified before.  Came all the way from 
Wisconsin so he's still here.  If it wasn't for the fact that he's from 
Madison, which is my hometown, I'd say, you know, we're done, but I can't 
possibly say that now.    


MR. SCANLON:  Thank you very much for letting me testify again.  I 
appreciate it very much and so does the party that I'm testifying for 
here.  As indicated in my earlier testimony, my name is William Scanlon 
and I am a partner with the firm of Foley and Lardner in it's Madison, 
Wisconsin, office, and other biographical details you can obtain from the 
earlier testimony.  I do have a written statement which I'll give to Mr. 
Kushin at the end, along with a floppy disk with everything on it.

I'm testifying today on behalf of the Wisconsin Biotechnology 
Association.  This association h as over 70- member organizations which 
are involved with biotechnology and are either based in Wisconsin or have 
operations there.  Membership has tripled since 1992 and continues to 
grow rapidly.  Testimony has been presented earlier today by 
representatives of several members of the association, including Mycogen, 
Pioneer Hi-Bred, Hoffman-La Roche, Ernst and Young, Merchant and Gould, 
and my own firm Foley and Lardner.

We are h ere today simply to make of record our concern over the patent 
system of the United States, our concern that it function effectively 
with respect to biotechnological inventions.  I won't take time here to 
detail these concerns.  We will submit a lengthily written statement in 
accordance with the Notice, the Commissioner's Notice.

Biotechnology is a major industry in our state.  Businesses, 
universities and non-profit research organizations in Wisconsin are 
heavily involved in biotechnology research and development and diagnosis 
and treatment of human disease, dairying and agriculture generally, 
forestry and papermaking, environmental remediation, brewing and food 
processing, specialty chemical production and other areas.   The 
Commissioner, who we note is a son of Wisconsin, is surely familiar with 
many of these activities.

These activities are greatly affected by how well the  patent system as 
it relates to biotechnology functions.  Our concern that the patent 
system function effectively involves several issues relating to the 
Patent Office's handling under present law of patent applications on 
biotechnological inventions.  Some of these issues are raised in the 
Commissioner's Notice of this hearing.

Our concern also involves effects that changes in the law pursuant to 
the GATT, or otherwise, as indicated in the Notice, or failure to enact 
such changes in the law might have on the patent system generally both in 
and outside the Patent Office as the system relates to biotechnology.

An effective patent system provides important incentives for the major 
investment required for advances in biotechnology and commercialization 
of biotechnological products and processes.

An effective patent system provides legal and economic bases for 
strategic alliances among business organizations or between such 
organizations and academic or governmental institutions, and these 
alliances spur progress in biotechnology and are often essential for 
commercialization of products and processes of the science.

An effective patent system provides legal and economic bases for 
economic development, that is for the creation of businesses to develop 
biotechnological inventions made in academic or governmental 

To function effectively for biological inventions, the patent system 
must -- like it must for all technologies -- reward with a grant of 
exclusive rights of appropriate breadth for a reasonable time discoveries 
in all fields relevant to biotechnology including, of course, plants and 

To function effectively, the patent system must function efficiently in 
granting such rights promptly and at a reasonable cost when such a grant 
is warranted, and we are concerned on both counts.

We understand that the Commissioner's responsibilities extend to all of 
the great range of technologies of concern to the Patent and Trademark 
Office and we thank him for the special concern for biotechnology he has 
demonstrated in holding this hearing today and, indeed, in sitting 
through the entire hearing.

We believe it would be appropriate for the Commissioner to hold another 
hearing, perhaps in six months or so, to determine how much progress will 
have been made in implementing the various changes in the law and Patent 
Office procedures recommended in today's proceedings.

And finally we recommend that this next hearing be held in Wisconsin.  A 
beautiful place.  A wonderful place, especially in the spring.  But also 
a hot bed of biotechnology and at the center of major biological activity 
throughout the midwest.

Thank you very much.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Scanlon.

MR. SCANLON:  Do you have any questions?

COMMISSIONER LEHMAN:  I think not.  And it's unusual that we would have 
this many people staying over that have such an interest in this hearing 
so I want to thank you all for sitting with us here and keeping us 
company all day long.

That concludes our hearing and we will be announcing I'm sure, in the 
not too distant future, a number of policy initiatives will flow out of 

(Whereupon, at 6:41 p.m., the above-entitled matter was concluded.)




San Diego, CA

October 17, 1994

	Stanley T. Crooke, M.D., Ph.D.

	Chairman and Chief Executive Officer

	Isis Pharmaceuticals

Good afternoon.  I am Stan Crooke.  I am the founder and Chief Executive 
Officer of Isis Pharmaceuticals, a development stage, technology-based 
pharmaceutical company.  Prior to founding Isis, I was President of 
Research and Development for SmithKline Beckman and, before that, a Vice 
President at Bristol Myers.  I am a physician and scientist.  In my 
career, I have been involved in the development of more than 15 drugs 
that are currently marketed and numerous other drugs in development and 
have published more than 300 scientific papers and 16 books on 
pharmacology, drug discovery and development.

I believe that we can all agree that it is in the public interest to 
encourage innovation in the pharmaceutical industry by prompt issuance of 
patents of appropriate scope.  We can also agree that public policy, or 
institutional behavior that discourages pharmaceutical innovation, is not 
in the public interest and will likely reduce the international 
competitiveness of one of America's most important industries. 

Where we may diverge - and where I think we need to work together to 
find common ground is the topic I want to discuss today:  What data are 
sufficient to support claims of potential therapeutic utility?  Although 
there is no universal or absolutely right answer to this question, I 
believe that there are precedents that have stood the test of time that 
can provide guidance and can serve as a basis for reaching agreement.

The evaluation of the potential utility of an innovation in the 
pharmaceutical industry is especially complex.  On average, more than 15 
years elapse between discovery of a new drug and its marketing.  Even 
after marketing, we may gain additional information that indicates that 
the product does not have sufficient therapeutic utility to remain 
available to the public.  Furthermore, prior to marketing, on average 
more than $350 million must be invested.  It would be impossible for a 
company to make this kind of investment without reasonable expectations 
with regard to patentability, particularly in light of the risk of 
investments in this area.  We know that, historically, less than 1 in 
1000 of the compounds synthesized and patented by the pharmaceutical 
industry become products.

Many factors contribute to the risk and uncertainty in drug discovery 
and development, but there is one that I particularly want to emphasize 
today:  the only way to determine the value of a new pharmaceutical 
technological innovation is to evaluate the fruits of that innovation, 
i.e. the drugs that are based on that innovation, in man.  

As an example, let's consider the history of the treatment of ulcer 
disease.  It has been known for many decades that ulcer disease is 
correlated with stomach acid secretion and a large number of 
physiological processes that influence acid secretion were identified.  
Early on, the cholinergic arm of the autonomic nervous system was shown 
to increase acid secretion, so it was hypothesized that anticholinergic 
drugs would have therapeutic utility in this disease.  Literally 
thousands of compounds of this type were synthesized, tested and 
patented.  A few were even marketed, but the side effects of these drugs 
were very limiting, so the true therapeutic utility of anticholinergic 
drugs for ulcer disease was modest at best.  Research continued and other 
involved factors, including histamine, that increase acid secretion were 
identified.  This led to the notion that a blockade of a specific 
receptor for histamine, the H2 receptor might be of therapeutic value.  
This concept was hotly debated, but research continued.  The first H2 
antagonist to enter clinical trials, Metiamide, failed, but the next, 
Tagamet, worked and revolutionized ulcer treatment.  Then came the 
hypothesis that the inhibition of an enzyme, H/K ATPase, might be 
beneficial as the enzyme was thought to result in the secretion of acid.  
Again, this was highly controversial.  Many compounds were synthesized 
and patented and most failed.  Omeprazole ultimately was marketed and has 
improved ulcer treatment.  	

The points that I want to make by reciting this well-known history are 
several and they are important.  First, new concepts and approaches 
(technologies) that might result in therapeutic innovations arise 
constantly.  Second, only after a drug of a particular mechanism has been 
shown to work in the clinic have these new concepts (technologies) been 
validated.  Third, it is a normal part of this process that some members 
of a particular class of drugs fail and yet the basic concepts that 
supported the creation of these broad innovations have proven to be 
valid.  Fourth, innovations are controversial and the controversies are 
not resolved till drugs based on this innovation are thoroughly tested.  
Fifth, despite these complexities, the traditional practices of the U.S. 
Patent and Trademark Organization resulted in effective stimulation of 
innovation and enormous public benefit.

Those traditional practices were to allow claims of reasonable scope 
long before definitive proof of utility was obtained.  This was done by 
accepting reasonable evidence for potential utility and by maintenance of 
an attitude that was biased toward rewarding and encouraging innovation 
by giving the benefit of the doubt to new concepts.

Very recently, with regard in particular to patents in "biotechnology", 
we feel there has been a substantial change in the practices of the U.S. 
Patent and Trademark Office.  Demands for definitive proof of therapeutic 
utility (which I remind you can truly only come after a drug has been 
marketed for 2-3 years to assure that it is safe with broad use) have 
resulted in many patent application rejections.

Now, let's look at the potential impact of this change in the patent 
environment.  In other words, what will happen if the Patent and 
Trademark Office were to continue to require definitive proof of utility 
before granting therapeutic use claims?  What will happen is simple:  new 
drug innovation will be dramatically impeded.

So the risks of continuing this practice are very large, while the risks 
of relaxing the policy are really quite negligible.  The drug discovery, 
development and commercialization processes have built-in self-regulating 
mechanisms that ensure that drugs that should fail, do.  What harm is 
done if a patent with appropriate claims is granted to a drug candidate 
and the drug or the technological concept behind it fails?  The company 
loses its investment, but that's the risk it takes.  Nothing has been 
lost by society.  In fact, the public actually gains from the exploration 
of the concept or the technology.  On the other hand, if companies stop 
investing in new compounds derived from novel concepts or technologies 
because of patent uncertainty, everyone loses.  The loss cannot be made 

So what am I recommending?

	Return to traditional practices with regard to pharmaceutical patents.  
They work.

	Return to a positive bias to innovation with the acceptance of 
reasonable proof of potential utility.

	Treat patents from so-called biotechnology companies and 
pharmaceutical companies equally.  We are the same industry with the same 
customers, practicing similar science.  The traditional approaches are 
sufficient to stimulate investment in innovation in both sectors of the 
drug discovery and development-based industry.

	Emphasize consistency across and within technological areas.  Just 
because one approach is labeled a "new technology" and another is not, 
does not mean that the basic approaches or risks are necessarily 

	When in doubt, grant therapeutic claims based on the specific examples 
provided with scope commensurate with reasonable extrapolation from the 
examples provided.

	Finally, be even more prudent in the allowance of broad "concept" 
patents.  Allowance of reasonable claims based on the examples provided 
in the application is sufficient to stimulate innovation.  Granting of 
broad "concept" patents is very rarely justified in the pharmaceutical 

Again, let me thank you for this opportunity.  I believe this issue is 
of critical importance to the viability of innovation in health care, and 
I am confident that as you consider this issue, you will agree that it is 
in the public interest to continue to encourage innovation, not destroy 

I'll be glad to respond to any questions you may have.





San Diego, CA

October 17, 1994

B. Lynne Parshall

Senior Vice President

Isis Pharmaceuticals, Inc.

Commissioner Lehman and other members of this hearing board, good 
afternoon.  My name is Lynne Parshall.  I am Senior Vice President of 
Isis Pharmaceuticals.  Dr. Crooke from our Company spoke with you 
earlier.  Among my responsibilities at Isis is to supervise our patent 

I very much appreciate the opportunity to talk with you today.  I plan 
to focus on one item in connection with our patent prosecution that has 
affected Isis significantly:  rejections we have received based on  
"incredible utility."

As a development stage, research-based pharmaceutical company, for many 
years Isis' most significant tangible asset will be our patent estate.  
We have  invested heavily in this area.  

Our major focus at Isis has been on the development of antisense 
technology and the commercialization of drugs based on this technology.  
We are the leading company in our area and have invested more than $100 
million in this technology during the past five years.  Many major 
pharmaceutical companies and other development stage companies also have 
antisense programs. In many respects, antisense technology epitomizes 
some of the special challenges that the patent office faces.  It also 
epitomizes some of the potential harm that can be done by inconsistent 
activities with regard to the evaluation of patent applications.  

Antisense technology is a true innovation in drug discovery and 
development.  It is broadly applicable among therapeutic areas.   It is a 
technology that has extraordinary promise and importance.  It is a 
technology that needs and deserves the protection of our patent system.

Antisense technology focuses on a new target for drug discovery, RNA, 
and uses a new class of chemicals, modified oligonucleotides, to approach 
this target.  At Isis we have simultaneously invented a new medicinal 
chemistry and the basic pharmacological framework to apply this 
technology.  Even for practitioners, remaining abreast of this technology 
is difficult.  In this way, the antisense field is no different than any 
other important field in which rapid innovation is occurring.  What is 
different however, appears to be how the patent office analyzes the 
growing body of literature concerning antisense technology.  In reviewing 
this literature, as you would expect, you will find work of varied 
quality (good and bad) and expressing a variety of approaches to and 
views of the field.   In addition, you will find work which, due to the 
rapid pace of innovation, is no longer state-of-the-art.   It is the 
selective use of this literature by the PTO to doubt rather than to 
support innovations in antisense that hinders our patent prosecution and 
provides an obstacle to patenting innovations in the field.

Not surprisingly, in the beginning there were more questions than 
answers about the potential for antisense compounds to be drugs.  Today, 
most of the questions have been answered and the  overwhelming wealth of 
current evidence supports the contention that antisense technology will 
yield important therapeutic advances.  This evidence  includes efficacy 
data from many animal models of disease, from many different laboratories 
and it also includes clinical data on two antisense drugs that Isis has 
studied in humans.  Despite this wealth of data, we are continually 
facing rejections based upon "utility" for our compositions of matter and 
therapeutic use patents.  In the last year we have received office action 
rejections in approximately 70 applications that included some sort of 
"incredible utility" or "lack of utility" rejection.  Responses to these 
office actions has cost us hundreds of thousands of dollars in legal 

Patent applications have been rejected for compounds for which we have 
shown significant inhibition of viral replication in well recognized 
models (including models used by government agencies for therapeutic 
screening) when more traditional chemicals showing activity in these 
models have been patented.  Patent applications have been rejected for 
compounds for which we have shown significant activity in animal models 
of disease,  when more traditional chemicals showing such activity have 
received patents. Even patent applications for compounds for which we 
have shown evidence of activity in humans have been rejected.  

For example, one of our pending patent applications claims compositions 
of matter to certain phosphorothioate oligonucleotides used to treat a 
debilitating viral infection.  Today, patients are being treated with one 
of these  phosphorothioate oligonucleotide to halt the spread of this 
disease.  In the latest office action we received for this application, 
the examiner has maintained a previous 101 rejection for lack of 
patentable utility.  This rejection has been maintained in the face of 
declarations from two experts in support of this application.  One of 
these declarations was from a clinician treating patients with this drug 
in our ongoing clinical trial.  This declaration detailed the positive 
activity of the drug in patients.  The other declaration came from a 
well-respected scientist who reviewed the current state of the antisense 
field.  These declarations from well-known, well-respected clinicians and 
scientists were dismissed.

We face similar patent office rejections in basic chemistry cases.  Just 
a few days ago, we received an office action on a process patent 
application.  The invention claimed in the application is an improved 
process for preparing phosphorothioate oligonucleotides.  In the office 
action the Examiner rejected all of the claims as lacking patentable 
utility.  The Examiner stated (quote) "... the antisense activity of the 
instantly claimed compounds borders on the incredible and such an 
asserted utility is deemed unlikely to be correct in view of contemporary 
knowledge in the art." (end of quote)

It is difficult to understand the Examiner's position.  The recent 
scientific literature does not indicate that the activity of 
phosphorothioate oligonucleotides is "incredible and...  deemed unlikely 
to be correct."  Ongoing clinical trials of these compounds do not 
indicate that the activity of phosphorothioate oligonucleotides is 
"incredible and... deemed unlikely to be correct."  The declarations we 
have submitted from well-respected clinicians and scientists do not 
indicate that the activity of phosphorothioate oligonucleotides is 
"incredible and... deemed unlikely to be correct."

I am not suggesting that drug discovery is not fraught with uncertainty 
or that the road from drug discovery to commercialization is not long.  
What I do urge you to see is that antisense compounds merely represent 
yet another example of a new area of innovation, similar to those that 
have been encountered numerous times in pharmaceutical patenting:  new 
classes of chemicals designed to intervene in disease processes in a new 
way.  Support of this type of innovation in the pharmaceutical industry 
by granting patent protection of reasonable scope has been and continues 
to be necessary to stimulate continuing innovation.

With regard to patents in "biotechnology", we feel there is a different 
standard applied than that applied to traditional pharmaceuticals.  
Demands for definitive proof of therapeutic utility (which the PTO seems 
to equate with pivotal, controlled human clinical trials), have resulted 
in many patent application rejections. As Dr. Crooke said to you earlier 
today, there is no harm done and, in fact, significant public policy is 
served, by giving pharmaceutical innovators the benefit-of-the-doubt in 
terms of patenting.

I would like to reiterate the recommendations Dr. Crooke made to you 
earlier today.  We recommend that the PTO return to traditional practices 
with regard to pharmaceutical patents.  This would include a return to a 
positive bias toward innovation with the acceptance of reasonable proof 
of potential utility for inventions.  We request that you treat patents 
from so-called "biotechnology" companies and pharmaceutical companies 
equivalently;  we are the same industry with the same customers, 
practicing similar science.  We request that you act consistently across 
and within technological areas.  Just because one technology is labeled a 
"new technology" and another is not, does not mean that the basic 
approaches or risks are necessarily different.  We further request that, 
when in doubt, you grant therapeutic claims  based on the specific 
examples provided with scope commensurate, with reasonable extrapolation, 
from the examples provided.

Again, let me thank you for this opportunity to speak to you today.  I 
believe this issue is of critical importance to the viability of 
innovation in health care, and I am confident that as you consider this 
issue, you will agree that it is in the public interest to continue to 
encourage innovation in the pharmaceutical industry, not discourage it.

I'll be glad to respond to any questions you have.

Honorable Commissioner and panelists, my name is Michael B. Farber.  I 
am a patent attorney at Merchant & Gould in Los Angeles, specializing in 
biotechnology.  Merchant & Gould is a full-service intellectual property 
law firm.  My clients include Fortune 500 companies in pharmaceuticals 
and diagnostics, smaller start-ups, universities, and research 

I would like to address three points in particular.  The first of these 
points is that the Patent and Trademark Office seems to see a lack of 
credibility of the science on which biotechnology is based, leading to an 
inappropriately high standard for utility under 35 U.S.C.  101 and 
enablement under 35 U.S.C.  112.  The second point is inconsistency in 
issuing rejections under 35 U.S.C.  101 or  112 and under 35 U.S.C.  
103, even in the same office action.  The third point is more narrow and 
is what I believe is a misinterpretation of the Amgen v. Chugai and Fiers 
v. Sugano cases to narrow the scope of enablement under 35 U.S.C.  112 
in certain situations, a narrowing which I believe is contrary to 
previous case law.  


Recent actions by the Patent and Trademark Office have suggested that 
biotechnology is almost placed in the same "weird science" category as 
cold fusion and perpetual motion.  This is a distortion of the basis of 
biotechnology, which is an outgrowth of the work of the last 40 years in 
genetics, cell biology, organic chemistry, biochemistry, microbiology, 
and other disciplines.  This seeming lack of credibility given the 
science has led to an enhanced standard both for utility under 35 U.S.C. 
 101 and for enablement under 35 U.S.C.  112.  This is contrary to case 
law on "incredible utility", such as In re Chilowsky, 229 F.2d 457, 108 
U.S.P.Q. 321 (C.C.P.A. 1956).  The science on which biotechnology is 
based is not contrary to recognized physical laws or is of such a nature 
that it cannot be tested by known scientific principles.

In particular, this reluctance to credit the soundness of the science 
involved has led Examiners to strain to make rejections under  101 and 
the first paragraph of  112.  A frequently used tactic has been to find 
a research article or review that cites a potential problem with a 
treatment method, such as the possible existence of a human anti-murine 
antibody response ("HAMA"), an anti-idiotype response, or concerns about 
the stability or bioavailability of a reagent such as a monoclonal 
antibody, and then use this article or review to reject the claims to the 
reagent or to methods for its use.  This rejection is made even though 
there is no specific basis for believing that the problems set out in the 
article would apply to the claimed reagent or method; the concerns are 
general in nature.  

Another aspect of this reluctance to credit the science on which 
biotechnology is based is a seeming requirement for a cure in 100%, or 
nearly 100%, of the cases when human treatment is contemplated.  I had 
one application, involving a monoclonal antibody for which one of the 
possible indications was renal cancer, in which a rejection was made 
because the Examiner considered that the success rate was not likely to 
be more than 20%.  This rejection was made on general concerns of the 
type discussed above, and there was again no specific basis for asserting 
that these concerns would limit the success rate to 20% in the use of 
this particular antibody.  However, even accepting the soundness of these 
assertions, a 20% success rate in a disease now almost completely 
untreatable and uniformly fatal represents a significant advance in the 
art.  I believe that we must go back to the constitutional mandate of 
"progress in science and the useful arts," and consider the situation 
from the standpoint of a well-informed physician who is conversant with 
recent medical advances, not a quack or a fringe practitioner, but one 
who is willing to try new advances in an otherwise hopeless case.  If 
such a practitioner would accept a 20% success rate in an otherwise 
untreatable condition such as renal cancer as an advance in the art, the 
Patent and Trademark Office should do likewise.


The second point that I would like to raise is inconsistency in issuing 
rejections under  101 or  112 and under 35 U.S.C.  103.  I recently 
received an office action in an application for a monoclonal antibody 
directed against a CD antigen (i.e., an immune system antigen) in which a 
rejection was made under  101 for lack of utility, and, in the same 
office action, under  103 based on the accepted diagnostic utility of a 
prior art antibody considered analogous by the Patent and Trademark 
Office.  This is inconsistent and illogical.  If one of ordinary skill in 
the art would believe that there was a sufficiently shared utility to 
provide an incentive to make the modification resulting in the claimed 
antibody, that same person of ordinary skill in the art would also accept 
that the claimed antibody would have a similar diagnostic utility.  These 
rejections should not be based on inconsistent reasoning.  When the 
Patent and Trademark Office seeks to make a rejection under  103, the 
"person of ordinary skill in the art" seems to a be a genius; when the 
rejection is sought to be made under  101 or  112, that "person of 
ordinary skill in the art" suddenly turns into an idiot.  


The third issue on which I would like to speak is narrower and more 
technical.  It concerns the use by the Patent and Trademark Office of 
Amgen, Inc. v. Chugai Pharmaceutical Co., 927 F.2d 1200, 18 U.S.P.Q. 2d 
1016 (Fed. Cir.), cert. denied, 112 S.Ct. 169 (1992), and Fiers v. 
Sugano, 984 F.2d 1164, 25 U.S.P.Q. 2d 1601 (Fed. Cir. 1993) to narrow the 
scope of enablement and thus the scope of claims.  

This arises particularly in two situations:

(1)  An inventor isolates or discovers a protein or peptide and 
determines its complete amino acid sequence, and now wants to claim 
nucleic acid sequences encoding the protein, for use as probes or in a 
recombinant expression system.

(2)  An inventor has isolated or discovered a new antigen, such as a 
protein or a peptide, that occurs in several different forms, as a result 
of allelic variation or other factors, and wants to claim antibodies 
(monoclonal or polyclonal) that bind the different forms of the antigen, 
after actually making one or more antibodies. 

In either of these cases, the claims should be allowed absent specific 
evidence of inoperability or specific reasoning that compels a conclusion 
that species within the claims are inoperative.  In the first case, once 
the primary amino acid sequence is known, all possible nucleic acid 
sequences can be determined by the genetic code.  Unless there is 
evidence that certain nucleic acid sequences would be inoperable, e.g., 
as probes or for expression vectors, as a result of peculiar secondary 
structure, abnormal codon utilization in hosts for the vectors or other 
factors, the claims should be allowed.  In the second case, in the 
absence of specific evidence that any of the forms of the antigen would 
be non-immunogenic, the claims to the antibodies should be allowed even 
if the inventor has not prepared antibodies to all possible antigens.

The Patent and Trademark Office is wrong to reject claims of this type 
as lacking enablement under the first paragraph of  112 by analogy to 
cases such as Amgen v. Chugai and Fiers v. Sugano.  These situations are 
in no way analogous to a claim that seeks to encompass all nucleic acids 
having a particular function without any structural information.  Here, a 
specific structure or structures are known.   The situation in cases such 
as Amgen v. Chugai and Fiers v. Sugano resembles a "single means claim," 
a type of claim long proscribed.  Here, by contrast, a defined structure 
or structures are recited, and the inventor is seeking additional 
protection for molecules produced by generally well-understood processes 
using the information contained in the original, completely defined, 

Therefore, it is improper to reject claims of this sort as "broader than 
the disclosure" or for "undue breadth" under the first paragraph of 35 
U.S.C.  112.  Rejections of this sort, which are sometimes purportedly 
justified by recitations of the potentially large number of structures 
encompassed by the claim, are contrary to much Court of Customs and 
Patent Appeals case law in the organic chemical field, such as In re 
Angstadt, 537 F.2d 498, 190 U.S.P.Q. 214 (C.C.P.A. 1976).  The inventor 
need not make or test every possible species within the scope of claims 
in order for enablement to exist under the first paragraph of 35 U.S.C.  
112 under this line of cases.  These rejections, therefore, are improper.


In conclusion, I believe that the Patent and Trademark Office must 
examine biotechnology applications in accordance with the principles that 
the courts have developed for organic chemical and pharmaceutical 
inventions, paying due heed to the constitutional mandate.  This will 
resolve many of the problems encountered by applicants in biotechnology 
at the present time.

October 24, 1994

Honorable Commissioner of Patents and Trademarks 

Washington, D.C. 20231

Attention:  Jeff Kushan, Office of Legislation and International Affairs

RE:  Patent and Trademark Office   

Notice of Public Hearings and   

Request for Comments on Patent  

Protection for Biotechnological Inventions

Dear Sir:

My name is Andrew D. Fortney, Ph.D.  I am a patent agent for Oblon, 
Spivak, McClelland, Maier & Neustadt, where I have actively prosecuted 
patent applications in all areas of chemistry, biotechnology and medical 
technologies, and to a more limited extent in mechanical and electrical 
technologies.  I am also a student in the fourth year of the evening 
program at the George Washington University National Law Center.  The 
following remarks, which represent my personal views, are offered in 
response to the notices in the Federal Register and the Official Gazette.  
My views have been influenced by numerous discussions with members of 
Oblon, Spivak, McClelland, Maier & Neustadt, particularly with Dr. 
Richard Chinn and Mr. Steven Kelber, and with persons (both clients and 
non-clients) active in the biotechnology industry and in related fields.


President Clinton has advocated at least three policy- related goals 
affecting the biotechnology industry which the U.S. Patent and Trademark 
Office (the "PTO") may affect through its actions, including:

(1)  Fostering the growth of "high-technology" industries, including 

(2)  As a part of an overall program to reform health care, reducing the 
costs of medical care and particularly of pharmaceuticals; and

(3)  Minimizing the size and expenses of the Federal bureaucracy, 
including resolving conflicts between Federal agencies and eliminating or 
minimizing duplication of effort among Federal agencies.

As an administrative agency, the PTO can have an effect on executive 
policies by the manner in which it investigates questions of 
patentability (e.g., utility, operability and obviousness).  However, the 
analysis of patent applications is necessarily fact-based, and is 
performed on a case-by-case basis.  Thus, it may be difficult or 
inappropriate to apply general rules of patentability to examination of 
biotechnological patent applications, such as granting a presumption of 
inherent utility to all biotechnological inventions.  Such a presumption 
may result in patents being obtained from applications which may not 
disclose the utility of the invention.  This would circumvent the "quid 
pro quo" of the patent system, full disclosure of the invention, 
including disclosure of contemplated uses.

In my opinion, the PTO can more effectively accomplish President 
Clinton's policy objectives by:

(A)  Allowing claims with reasonably broad scope;

(B)  Permitting Examiners to accept applicants' assertions of utility 
and operability unless objective evidence questioning such assertions is 

(C)  Where assertions of pharmaceutical utility are raised, consistently 
treating claims to compounds separately from claims to pharmaceutical 
compositions and methods of use; and

(D)  Where pharmaceutical utility is relied upon for patentability, 
adopting a preponderance-of-the-evidence standard for establishing 
pharmaceutical utility.

Adoption of proposed policies (A)-(D) by the PTO above will result in 
(i) earlier issuance of patents and (ii) greater patent protection for 
inventors.  The proposed policies will achieve the President's policy 
goals by more adequately rewarding inventors for the knowledge which they 
provide, thus encouraging further research and development of 
biotechnological products and services, in turn fostering the growth of 
the biotechnology industry.  

Earlier issuance of patents and broader patent protection will reduce 
the costs of prosecuting patent applications, and thus contribute 
directly to reduced costs for pharmaceuticals and medical services.  
Earlier issuance of patents will also result in an earlier end to the 
patent right, thus allowing competition to enter the marketplace at an 
earlier date, further resulting in lower costs through competition.

Finally, where the PTO has challenged asserted utilities and broad 
statements of operability in an application, adopting a 
preponderance-of-the-evidence standard for resolving questions of 
pharmaceutical utility and of predictability in the art will reduce the 
amount of evidence which Examiners must review, and thus, the amount of 
time spent reviewing such evidence.  As a result, the costs of running 
Group 1800 will be reduced, and duplication of effort between the PTO and 
other regulatory agencies, such as the Food and Drug Administration 
(FDA), the United States Department of Agriculture (USDA) and the 
Environmental Protection Agency (EPA), which must independently analyze 
data supporting assertions of safety and efficacy, will be minimized.  
Consequently, potential conflicts between such agencies can also be 


The Public Hearing on Patent and Protection for Biotechnological 
Inventions held by the PTO in San Diego, California on October 17, 1994 
demonstrated the effects of perceived practices by Group 1800 of the PTO 
on the biotechnology industry.  Many industry representatives believe 
that the PTO requires clinical data in many cases asserting 
pharmacological utility.  Many of those in the industry also perceive 
Group 1800 as viewing the levels of ordinary skill under 35 U.S.C. 103 
and 35 U.S.C. 112 quite differently (and in the opinion of some, almost 
antithetically).  Such practices are viewed by the biotechnology industry 
as impeding the progress of the industry, and thus, as not advancing 
President Clinton's policy of encouraging the growth of biotechnology.
For example, many representatives of "start-up" biotechnology companies 
and of non-profit research organizations explained that, due to 
rejections under 35 U.S.C. 101 and 35 U.S.C. 112, first paragraph, for 
lack of utility and lack of enablement, they cannot obtain patent 
protection unless clinical data are submitted.  Typically, the start-up 
company or non- profit research organization does not have the capital 
necessary to conduct clinical studies, and must look to larger 
pharmaceutical companies or venture capital firms for funding.  However, 
unless the patent is granted, they are unable to make business agreements 
(e.g., licenses) and thus obtain the capital necessary to conduct 
clinical studies.  Thus, the PTO is perceived by the biotechnology 
industry as pursuing a policy which impedes further growth and 
development in the industry.

Furthermore, patents which are issued by the PTO are too often 
restricted in scope to working examples (e.g., to a protein having a 
particular sequence, to a particular deposited strain of microorganism or 
cell, etc.).  As a result, it becomes fairly easy for competitors to 
design around the patented invention.  In addition, patent owners must 
rely to a greater degree on enforcement under the Doctrine of Equivalents 
(as opposed to direct infringement), thus increasing the costs of 
enforcing a patent.  The increased costs of litigation in turn increase 
the costs of any products or services covered by the patent.  
Consequently, considering the value of the contributions offered by 
innovators in biotechnology, the value of the patent is frequently not as 
high as it should be to justify the costs of bringing a product to the 



The proposals stated above will achieve the President's policy 
objectives in a manner both consistent with the law and more to the 
satisfaction of the biotechnology industry.   First, I would like to 
address the topic of allowing reasonably broad claim scope in 
biotechnological patent applications.  Of the issues detailed in the 
Official Gazette and Federal Register Notices, the degree of disparity in 
the levels of ordinary skill under 35 U.S.C. 103 and 35 U.S.C. 112 may 
be the most important because it affects every application filed in Group 
1800.  (On the other hand, the perceived requirement for clinical data in 
applications asserting pharmacological utility affects only those 
applications asserting pharmacological utility).  As described above, 
allowing claims with reasonably broad claim scope increases the value of 
the patent.  This will directly increase the reward for innovators, thus 
directly fostering the growth of the industry.

Such a policy on the part of the PTO is consistent with the law and with 
President Clinton's policy objectives.  Reasonably broad claim scope will 
also provide greater certainty of patent protection with regard to 
modifications of the disclosed invention.  As a consequence, one's patent 
position will be established to a greater degree of certainty, and one's 
business position will be more stable.  In turn, more reliable business 
agreements can be made based on the protection provided by the patent.  
As a result, business agreements can be made at an earlier stage and with 
less effort, thus lowering the cost of the effort involved and the amount 
of time needed to develop and market the product.  These factors all 
contribute to (1) a healthy business atmosphere for biotechnology and (2) 
an overall, long-term lowering of the costs of biotechnological products.

Allowing claims with reasonably broad scope is legally acceptable where 
the technology is reasonably predictable.  As we heard in a number of 
comments at the hearing, biotechnology is in general, becoming more 
predictable.  An noteworthy example of the level of predictability in 
biotechnology as it exists today was provided on October 16, 1994, by 
CBS' 60 MINUTES.  A story on the cloning of a particular mutant gene from 
an Italian family was reported.  Many members of this family had 
life-threatening cholesterol conditions, but showed little or no signs of 
coronary disease.  Doctors identified the gene, and Pharmacia apparently 
cloned it in a recombinant microorganism.  Sufficient quantities of the 
mutant protein now appear to be available to conduct the studies 
necessary to bring the protein to the marketplace.

Tests with the mutant protein in rabbits displaying coronary disease 
conditions (i.e., fatty tissue deposits in arteries) showed a 70% 
reduction in fatty tissue deposits.  Dr. Shah of Cedars-Sinai Medical 
Center and UCLA explained to the American public that this technology 
presents a potential cure to coronary disease the like of which has not 
been seen before.  Further, Dr. Shah also explained to the public that 
the means and the technology for bringing therapies based on the protein 
(including gene therapy) to the public exists now.  In the absence of 
human clinical data, this assertion is strong evidence of the 
predictability of the biotechnological arts in bringing useful, effective 
products to the marketplace once they have been identified and once 
preliminary test data in an acceptable model indicate a reasonable 
likelihood of effectiveness.

Furthermore, the leading cases interpreting predictability in the art of 
biotechnology are based on technology that is generally from 7 to 15 
years old.  Thus, the state of the law regarding predictability of 
biotechnology a level of skill considerably lower than that which exists 
today.  In fact, the most recently decided cases indicate that there is 
some predictability in modifying biotechnological inventions.  Thus, 
where the level of ordinary skill is such that one can make minor 
modifications to the disclosed invention reasonably predictably and 
without undue experimentation, one should be entitled to claims having a 
scope commensurate with (1) that supported by the application and with 
(2) the level of ordinary skill.

What can the examining corps in Group 1800 do to achieve the President's 
goals?  One low-cost, low-effort option is to accept patent applicants' 
statements at face value, unless there is a reason to question such 
statements (and preferably, where such questions are supported by 
objective evidence).  However, as an administrative agency, the PTO may 
have a reasonable public policy interest in challenging statements of 
operability, particularly where they are not believable on their face.  
Where legitimate questions of operability exist, a preponderance-of- 
the-evidence standard (as explained above) should be acceptable for 
establishing the level of ordinary skill.  

Thus, at the Examiner level, the Examiner should be permitted to accept 
assertions in the application at face value, particularly in the absence 
of objective evidence challenging such assertions.  However, where 
objective evidence challenging operability assertions exists, the 
Examiner may shift the burden onto the applicant to provide evidence 
supporting operability for the scope of protection sought.  However, once 
applicants rebut such a challenge with objective evidence establishing 
the level of ordinary skill and/or the level of predictability in the 
art, the Examiner should weigh all of the evidence on the record 
objectively.  Where the weight of the evidence supports operability and 
predictability of modifications commensurate in scope with applicants' 
assertions and with the claimed invention, the Examiner should rule in 
the applicants' favor.  However, where the weight of the evidence does 
not support the applicant's assertions, the Examiner may properly reject 
an application for lack of operability over the entire scope of 
protection sought.


With regard to the perceived requirement for human clinical data, again 
I would like to encourage the Group 1800 examining corps to accept 
applicants' assertions at face value.  Thus, where the assertions are 
believable on their face, an Examiner should be permitted to find the 
application and claims acceptable under 35 U.S.C. 101.  
However, where an application asserts a medical or pharmaceutical use, 
there may be a public concern regarding whether the assertion is true on 
its face, particularly where supporting evidence is scant or not yet 
widely accepted in the art.  In such cases, the PTO should consistently 
treat compound claims separately from pharmaceutical composition and 
method of use claims.  

Compound claims (e.g., drawn to a protein or polynucleic acid) often 
rely on non-pharmaceutical utilities, such as use in an in vitro 
diagnostic assay.  As a result, compound claims often do not rely solely 
on pharmaceutical utility to comply with 35 U.S.C. 101.  Thus, 
challenges to compound claims on the basis of failure to demonstrate 
medical or pharmaceutical effectiveness in humans should be made only 
when only pharmaceutical or medical utility is asserted utility for the 

On the other hand, pharmaceutical composition claims typically recite an 
effective amount of an active agent.  Where the desired effect may be in 
a human, the claims may rely on effectiveness in humans for utility.  
Naturally, claims to methods of treating medical conditions and/or 
administering pharmaceutical agents necessarily rely on pharmaceutical 
utility to comply with 35 U.S.C. 101.  Consequently, questions regarding 
effectiveness in humans are more easily raised in claims to 
pharmaceutical compositions and methods.  
However, the biotechnology industry perceives an over- reliance by the 
PTO on clinical data to resolve such questions.  As explained above, this 
perceived over-reliance is causing some difficulty for the biotechnology 
industry and appears to impede rather than advance President Clinton's 
stated policy objectives.

In resolving questions regarding claims which rely on effectiveness in 
humans for utility, I propose that a preponderance-of-the-evidence 
standard is appropriate.

The leading case on pharmaceutical utility is Brenner v. Manson.  In 
Manson, a method for preparing a compound structurally related to, but 
distinct from, a certain steroid known to have pharmaceutical utility was 
claimed.  Manson relied on homology of the product of the claimed process 
to a steroid have tumor-inhibiting effects in mice, and the potential 
usefulness of product of the claimed process for patentability.  Although 
the C.C.P.A. held that a novel chemical process is patentable so long as 
its yields the intended product and so long as the product is not itself 
"detrimental," the Supreme Court held that until the product of a process 
claim has been shown to be useful, the metes and bounds of the monopoly 
of knowledge encompassed by the process patent are not capable of precise 
delineation.  The process patent would grant its owner the right to 
prevent others from finding the first use for the product of the process, 
and thus, the patent may block off whole areas of scientific development 
without compensating benefit to the public (i.e., the knowledge of the 
usefulness of the products of the process).  

As a result of their holding, the Supreme Court struck down the concept 
that an invention is useful so long as it is not frivolous or 
detrimental.  I believe this would make any presumption that 
biotechnological inventions are inherently useful to be inconsistent with 
the Supreme Court's interpretation of 35 U.S.C. 101 regarding chemical 
process or pharmaceutical inventions.
Manson failed the proposed utility evaluation tests explained above.  
First, the application apparently made no assertions of utility for the 
products of the process.  Accordingly, the usefulness of the process 
itself was not readily apparent on its face, and could be challenged.  
Secondly, Manson provided no evidence that the products of his claimed 
process were useful.  Consequently, after the PTO shifted the burden onto 
Manson, Manson failed to provide sufficient evidence to outweigh the 
PTO's concerns.

Subsequent cases decided by the Federal Circuit and the Patent Office 
Board of Appeals are also consistent with the suggested tests above.  For 
example, in Nelson v. Bowler, claims to prostaglandins shown to be 
effective in rat blood pressure and gerbil colon smooth muscle 
stimulation tests were found to be useful under 35 U.S.C. 101.  Although 
the Board of Appeals upheld the rejection for not showing adequate proof 
of practical utility because the tests were "rough screens, uncorrelated 
with actual utility," the Federal Circuit found that tests evidencing 
pharmacological activity may manifest a practical utility even though 
they may not establish a specific therapeutic use.  Thus, in weighing the 
evidence, Nelson's evidence, which was held to be reasonably indicative 
of the desired response, and which was challenged on the basis of 
statistical significance rather than on the basis of objective evidence, 
were found to have a utility under 35 U.S.C. 101.  The weight of the 
evidence in this case was clearly on the side of the applicants.
In In re Jolles, a pharmaceutical composition and a method for the 
treatment of acute myeloblastic leukemia were claimed.  Declarations 
reporting the results of clinical treatment were submitted.  A rejection 
of the claims under 35 U.S.C. 101 and 112, first paragraph, for lack of 
proof of utility were based on assertions of incredible utility and that 
the clinical data were not convincing.  The rejection was reversed by the 
C.C.P.A. because the Board of Appeals dismissed the evidence as not being 
relevant to human utility.  Again, the weight of the objective evidence 
was on the side of the applicant.  

In In re Langer, claims to a dentifrice and method for reducing enamel 
solubility were rejected under 35 U.S.C. 101 for lack of proof of 
utility.  Langer provided both in vitro and in vivo animal test data 
showing that the claimed composition reduced enamel softening and 
erosion.  The Examiner cited a number of references disclosing in vitro 
test data supporting an assertion that those skilled in the art would not 
accept applicant's allegation [of utility] as obviously valid and 
correct.  The animal test data were attacked on the bases that (i) the 
tested material appeared to be a denture adhesive rather than an 
emollient dental paste, (ii) the concentration tested was insufficient 
for the claimed range, and (iii) the test animals may have received 
fluoride in their drinking water.  However, the unsupported assertions by 
the PTO regarding the in vivo data were rejected by the C.C.P.A., holding 
that the evidence submitted was sufficient for compositions and methods 
reciting Sn2EDTA, but insufficient for generic claims.  The logic of the 
C.C.P.A. was based largely on the weight of the evidence submitted.

In Ex parte Balzarini, the Examiner established with objective evidence 
a lack of correlation between applicants' in vitro test method and a 
reasonable expectation of effectiveness in vivo.  In response, Balzarini 
made the unsupported assertion that the test conditions resembled 
circumstances in vivo as much as possible.  Thus, in this case, the PTO 
provided the greatest weight of evidence regarding the utility on which 
the claimed invention relied (treating retroviral diseases in an animal 
or patient and treating human cells in a manner effective to inhibit the 
replication and effects of HIV).

In Ex parte Deuel, the application apparently failed to disclose the use 
of the claimed protein.  The Board of Appeals recognized that this 
application necessarily fails to comply with the requirement set forth in 
Brenner v. Manson that at least one use of the claimed product be 
disclosed.  As a result, the Board of Appeals issued a new ground of 
rejection under 35 U.S.C. 101 and 112, first paragraph.  Again, in this 
situation, any asserted utility could be properly challenged, and in the 
absence of evidence, applicants fail the proposed weight-of-the-evidence 

Similarly, Ex parte Stevens also concerned an application claiming a 
therapeutic or prophylactic composition and a method for treatment of 
cancer, rejected under 35 U.S.C. 101 and 112.  The rejection was 
affirmed because Stevens expressly acknowledged that no actual evidence 
of the effectiveness existed.  As a result, Stevens necessarily failed a 
weight-for- the-evidence test after having the burden of proof shifted 
onto them.
In Ex parte Heicklen, a composition and method for retarding the aging 
process were claimed.  A rejection under 35 U.S.C. 101 for incredible 
utility was made (i.e., questioning the assertion of utility on its 
face).  The evidence submitted by Heicklen merely showed that mice 
receiving the active agent lived longer than mice which did not receive 
the active agent.  In the Board's opinion, insufficient evidence was 
submitted to establish that the increased longevity resulted from a 
retardation of the aging process (the utility relied upon by Heicklen for 
patentability).  The rejection was thus maintained by the Board.  
Naturally, Heicklen failed the weight-of-the-evidence test for 
establishing the relied-upon utility.

In Ex parte Aggarwal, a method for the treatment of tumors was claimed.  
A rejection for lack of utility under 35 U.S.C. 101 and a lack of 
enablement rejection under 35 U.S.C. 112 were issued by the Examiner, 
based on inoperability over the broad range of cancers and tumors 
claimed.  The Examiner provided a list of reasons why treatment of tumors 
is essentially unpredictable.  The prior art relied upon by the Examiner 
and appellants confirmed the Examiner's skepticism regarding the relied 
upon utility.  Furthermore, in the Board's opinion, the evidence 
submitted Aggarwal by was not shown to have been recognized by the art as 
being predictive of success in the treatment of tumors.  Consequently, 
the rejection was maintained by the Board.  Coincidentally, Aggarwal also 
failed the proposed weight-of-the-evidence test.

In Ex parte Rubin, claims to a method for improving the effectiveness of 
interferon in the treatment of neoplastic conditions and a composition 
containing interferon and an agent for inhibiting tyrosinase were 
rejected under 35 U.S.C. 101 and 112, first paragraph for incredible 
utility.  However, the evidence in the case showed that the 
anti-neoplastic utility of interferon was known.  Further, the Examiner 
failed to provide any objective evidence to support the challenge to the 
asserted utility.  Thus, Rubin passed the proposed weight-of-the-evidence 
test.  Furthermore, the rejection under 35 U.S.C. 101 was reversed by 
the Board.
In Ex parte Busse, claims to a method for reducing metastasis and 
neoplastic growth were rejected under 35 U.S.C. 101 and 112.  The 
specification expressly asserted utility in humans.  Consequently, the 
claims were held to rely upon effectiveness in humans for utility.  
Evidence submitted by Busse established only that further study of a 
compound tested for suitability as a human anti-neoplastic and 
anti-metastatic drug was warranted, rather than any likelihood of 
effectiveness for the claimed method.  Thus, the Board maintained the 
rejection, and regarding the proposed weight-of-the-evidence test, no 
evidence was provided supporting the asserted utility.

Consequently, I believe that a preponderance- or weight-of- the-evidence 
test is appropriate where assertions of pharmacological activity are (1) 
not believable on their face and (2) relied upon for patentability.


Looking at the issues from the PTO perspective, what policy objectives 
are furthered by the perceived practices of the PTO regarding 
biotechnological inventions?  There may be a general public concern with 
the effects of biotechnological inventions.  Many, if not, most of the 
members of the public are unfamiliar with biotechnology.  In the wake of 
recent, highly publicized environmental disasters and increased health 
risks associated with the products of high technology, a significant 
section of the public may be uncomfortable with biotechnology, and may 
wish to suppress advances in the field until the technology receives wide 
public acceptance.  

The PTO may also be concerned with the imprimatur of the Federal 
Government, which may raise or lower expectations of those afflicted with 
illnesses which biotechnological inventions may be designed to treat.  
Further, some consumer organizations and government representatives have 
expressed concern over the costs of pharmaceuticals.  Patents are 
typically cited as one cause of excessive pharmaceutical prices.  Thus, 
by reducing the availability of patents or by discouraging obtaining 
patents as a means of protecting intellectual property, the PTO may be 
effecting a control on the pharmaceutical industry to keep expensive 
products out the market.

There are a number of problems with such policy objectives.  First, the 
effort exerted by the PTO to examine data regarding the ultimate 
effectiveness of pharmaceuticals in humans and to address concerns over 
safety and efficacy of biological products unnecessarily duplicates the 
effort of the FDA and/or the USDA, who must review such data 
independently in order to evaluate whether such products should be 
allowed into the marketplace.  The patent right concerns only the right 
to exclude others from making, using or selling the patented invention, 
rather than any right to enter the marketplace.  On the other hand, one 
cannot market a new pharmaceutical drug or a new biological product 
without obtaining approval from the FDA or the USDA, respectively.  In 
response to public concerns, the FDA has evaluated several recent, 
highly-publicized biotechnological products quite closely.  Thus, public 
concerns regarding safety and/or acceptability of biotechnological 
products are best represented by the FDA and the USDA.

Furthermore, in the conventional medical marketplace, medical doctors 
and patients typically look to the FDA as the ultimate authority on 
safety and efficacy of pharmaceutical compounds.  However, in the 
"underground" medical  marketplace, actual examples of efficacy in 
patients are the basis upon which judgments to use a particular 
pharmaceutical agent are made.  Sources of information regarding actual 
examples of efficacy are readily available through scientific 
publications, approval notices by the FDA at an introductory or 
intermediate level (e.g., Phase I or Phase II trials) and word-of-mouth 
stories of successful treatment therapies.  Approval of a patent 
application may indicate some probability of effectiveness, but 
ultimately, actual examples of effectiveness are the most persuasive 
evidence of effectiveness, both to those in the FDA- regulated 
marketplace and in the "underground" marketplace.

The policy also conflicts with Securities and Exchange Commission and 
EPA regulations, which may prohibit inventors from asserting 
pharmacological utility or from testing recombinant organisms in the 
field prior to their approval.  Furthermore, if the Clinton 
administration is concerned over the appearance of unfair prices 
established by a particular company for a particular pharmaceutical 
agent, it seems reasonable to have the SEC investigate and resolve the 
situation.  Increasing the difficulty level in obtaining patent 
protection as a means to reduce the price of pharmaceuticals appears to 
punish all practitioners in biotechnology for the perceived sins of a 

With regard to pricing of pharmaceuticals, the SEC may be the most 
appropriate agency for evaluating such concerns.  The current PTO 
policies actually result in an increase in the cost of pharmaceuticals 
and of other biotechnological inventions.  As explained above, the 
perceived practices of Group 1800 result in increases in the costs of 
application prosecution and of patent enforcement.  Further, relatively 
narrow claims are less valuable and result in increased uncertainty as to 
the scope of protection.  As a result of this uncertainty, licensing 
arrangements are riskier and take longer to consummate, thus causing 
delays in taking the steps necessary to further develop and market the 
product.  As a result, approval by other regulatory agencies and the 
entry of competition into the marketplace is delayed.  Competition may 
very well be the key to reducing the costs of pharmaceuticals.  By 
delaying issuance of the patent, the end of the patent term is extended, 
thus increasing the period of time under which a marketing company may 
price its product without competition.  Thus, the perceived PTO policies 
serve to increase the costs of pharmaceuticals.

In summary, other agencies, such as the FDA, USDA, SEC and EPA, may be 
more appropriate for addressing policy concerns regarding the effects of 
individual products entering the marketplace.  


President Clinton has advocated at least three policy- related goals 
affecting the biotechnology industry, including (1) Fostering the growth 
of biotechnology, (2) reducing the costs of medical care and of 
pharmaceuticals; and (3) minimizing the size and expenses of the Federal 
bureaucracy, including minimizing duplication of effort among Federal 
agencies.  As an administrative agency, the PTO can more effectively 
advance the President's policies by 

(A)  Allowing claims with reasonably broad scope;

(B)  Permitting Examiners to accept applicants' assertions of utility 
and operability unless objective evidence questioning such assertions is 

(C)  Where assertions of pharmaceutical utility are raised, consistently 
treating claims to compounds separately from claims to pharmaceutical 
compositions and methods of use; and

(D)  Where pharmaceutical utility is relied upon for patentability, 
adopting a preponderance-of-the-evidence standard for establishing 
pharmaceutical utility.

Adoption of proposed policies (A)-(D) by the PTO above will result in 
(i) earlier issuance of patents and (ii) greater patent protection for 
inventors.  The proposed policies will achieve the President's policy 
goals by more adequately rewarding inventors for the knowledge which they 
provide, thus encouraging further research and development of 
biotechnological products and services.  Earlier issuance of patents and 
broader patent protection will reduce the costs of prosecuting patent 
applications and enforcing patents, will increase the certainty of patent 
positions and license agreements, thus increasing the speed with which 
further product development occurs, and will result in an earlier end to 
the patent right, thus allowing competition to enter the marketplace at 
an earlier date, further resulting in lower costs through competition.  
Finally, where the asserted utilities and statements of operability in an 
application are challenged, adopting a preponderance-of-the- evidence 
standard for resolving questions of pharmaceutical utility and of 
predictability in the art will reduce the effort of Examiners on 
reviewing such evidence.  As a result, the costs of running Group 1800 
will be reduced, and duplication of effort between the PTO and other 
regulatory agencies, including the FDA and the USDA, will be minimized, 
and potential conflicts between such agencies can also be avoided.

Respectfully submitted,

Andrew D. Fortney, Ph.D. 


Mr. Commissioner, members of the panel and the audience:

I'm David Lowin, Assistant Director of the Patent Law Department at 
Syntex.  I also teach Patent Law at Stanford Law School and at U.C. 
Berkeley's Boalt Hall.  My testimony is offered as personal opinion, not 
on behalf of any organization.

Suffice it to say that 9 minutes isn't long enough to address the full 
subject matter of this hearing, so I am also working on a written 
submission covering a broader scope.  My prepared remarks are addressed 
to a somewhat different approach on the policy behind the utility 
requirement, and the environment in which that policy must be carried 

The notice setting this hearing started by reference to the Supreme 
Court's decision in Brenner v. Manson, where the Court upheld the 
rejection of a chemical process patent application for failing to 
establish a substantial utility.  Now, this may not have been a great 
decision, but that is mostly due to the underlying facts.  I believe that 
the decision is not, however, inconsistent with the positions urged at 
today's hearing, and it is to this that my remarks are focused.

I think there are two key aspects to the majority's conclusion in 
Brenner v. Manson which shed light on practical utility problem faced by 
biotech inventions today.

First, the majority concluded that "...a patent is not a hunting 
license.  It is not a reward for the search, but compensation for its 
successful conclusion."

Whether an invention represents the successful conclusion of a search 
depends on what you're searching for in the first place.  Biotechnology 
has changed what we're searching for.  It has made it possible for us to 
understand the complexity of life, and to intervene with disease at a 
level far more precise than was possible when the Court considered 
Brenner v. Manson.  The successful conclusion in today's search for 
cellular mechanisms and ways to modulate them would have probably been 
considered only an invitation to further experimentation back in 1966.  
And what we consider to be a successful conclusion today is going to be 
different again ten years from now.  The point is that legal principles 
such as "successful completion of the search" have to be applied in a 
manner consistent with the progress of technology.

The second key aspect of the decision in Brenner v. Manson is the 
quotation taken from the CCPA's decision in Application of Ruschig, "[A] 
patent system must be related to the world of commerce rather than to the 
realm of philosophy."

So, what is "the world of commerce" to which the successful conclusion 
of today's search must relate?  It's a different world of commerce than 
it was in 1966.

Just as the "patentable subject matter" definition of Section 101 had to 
expand to cover Chakrabarty's bacteria as part of "anything under the sun 
that is made by man," now, our definition of the "world of commerce" must 
expand to recognize the state of the art and the commercial impact of 
today's biotechnology inventions.

When we clone the DNA for a protein known to be involved in a disease, 
... when we develop that protein into a model for screening potential 
therapeutics, ... when drugs are identified as active in that model, ... 
and when those drugs are tested in clinical trials, these efforts involve 
hundreds of scientists and thousands of others performing related tasks 
in hospitals, banks, shippers, equipment manufacturers, accountants, and 
even in the United States Patent and Trademark Office.  Each step along 
the way entails enormous investment.  The successful conclusion of each 
of these searches triggers even more investment.  Ultimately hundreds of 
millions of dollars change hands during the development of a single drug.  
Now that's commerce, commerce at a scale our founding fathers couldn't 
have even imagined.

Today's hearing is taking place because the United States Patent and 
Trademark Office has more often than not refused to allow our 
applications for patents on the DNA, on the proteins, and on the 
screening models (allegedly because they are not the successful 
conclusion of the search, and do not relate to the world of commerce).  
The PTO has also refused to issue patents on the drugs (because they 
haven't been proven safe and effective in statistically powered human 
clinical trials) even though, in this first to file world, the patent 
applications cannot contain such data because they have to be filed years 
before clinical trials could even begin.  And now, if eventually granted, 
the terms of these patents will have been expiring since the day they 
were filed.  [At this point erroneous mention was made to a perceived 
problem in the GATT implementing legislation that could preclude 
Waxman-Hatch extensions.  The error was brought to my attention by Mr. 
Van Horn upon conclusion of the hearing.  I regret any inconvenience or 
misimpression that may have resulted.]

Just to put things in perspective, the same United States Patent and 
Trademark Office regularly grants patents on mechanical inventions for 
anything up to and including the kitchen sink, such as U.S. Patent No. 
5,349,708, issued September 27, 1994 for "Foldable Kitchen Sink," not to 
mention the patents on the "Nail File Protector Device" and the "Air 
Cooled Umbrella" both issued the same day.  Now I'm sure that all three 
of these inventions were worthy of patent protection.  I'm also sure that 
even combined, the inventions covered by these three recently issued 
mechanical patents will not effect "the world of commerce" to the same 
degree as any of the "legally useless" biotech inventions we're talking 
about today.

I think that the Office needs to apply the utility requirement 
consistent with current scientific and commercial standards.  The utility 
standard, as applied, should resolve doubts in favor of the patent 
applicant.  When an applicant pleads for allowance of its application 
because its competitors are already practicing the claimed invention, it 
doesn't make sense to reject the application as lacking utility. 

There is room here for the common sense principle, "no harm - no foul." 

The courts are not being clogged, and the progress of the useful arts 
and science is not being blocked, by patents covering technology that 
just doesn't work.

Thank you for your attention.


A Consumer's Perspective and Recommendations

Testimony before the Commissioners of the U.S. Patent & Trademark Office

October 17, 1994

Eugene P. Schonfeld, Ph.D.

President and Chief Executive Officer

National Kidney Cancer Association

1234 Sherman Avenue

Evanston, Illinois  60202

708 - 332 - 1051

By way of introduction, I am a kidney cancer patient.  Chemotherapy and 
radiation are not effective in treating kidney cancer.  Biological 
response modifiers created through biotechnology are helpful, but these 
agents are far from perfect and most patients are not cured despite 
rigorous therapy.

I am also President and Chief Executive Officer of the National Kidney 
Cancer Association, a non-profit charity which provides information to 
patients and physicians, sponsors biomedical research, and acts as an 
advocate on behalf of the nation's 75,000 kidney cancer patients.

I hold a Ph.D. in Management from the J. L. Kellogg Graduate School of 
Management at Northwestern.  I have also worked as a new product 
consultant in the Advanced Methods Group of N.W. Ayer, a major 
advertising agency.  In addition, I have started five high tech 
computer-related companies, including one that has been publishing 
economic information on research and development expenditures for 15 

I have no financial interest in any drug, biotech or health care 
company.  However, I am a kidney cancer patient whose life depends upon 
private industry efforts to find a cure for my disease.

General Perspective

Patent policy in biotechnology is extremely relevant to the well-being 
of millions of Americans who suffer from cancer, AIDS, Alzheimers, and 
other diseases for which there are no effective treatments.  Patent 
policy can speed scientific progress or retard it, accelerate products to 
patients or delay cures.  Therefore, as health care consumers, patients 
cannot be indifferent to the work of the Patent and Trademark Office.

If patent policy creates high hurdles, companies will be granted few 
patents or have to expend extraordinary resources to get a patent.  If 
too few patents are granted, incentives for invention will be diminished 
and the public will get fewer medical advances.  Similarly, if tremendous 
resources are consumed obtaining a few patents, the public will get fewer 
medical advances as dollars are shifted from laboratories to legal 

Similarly, a patent policy which is too lax would generate too many 
patents.  These patents would represent a cheap currency.  It would 
create intellectual assets devoid of real economic value with limited 
protections.  It would also water down the incentives for legitimate 
discovery.  The public would enjoy fewer advances.

When patent policy is either too restrictive or too lax, corporate 
management and outside investors would be less willing to commit capital 
to research intensive ventures.  No manger or investor wants capital 
consumed by an overly complicated patent process that adds little value 
to products delivered to the public.  No manger or investor wants capital 
committed to creating intellectual property which has no value and 
limited protection even though it is patented.

From this perspective, the Patent & Trademark Office and the patent 
process itself should add economic value to inventions.  An optimal 
patent policy should maximize this value.  The public will be served 
because maximized value will stimulate investment and the development of 
more life saving inventions.

Making Life Saving Inventions Special

In addition to maximizing value, the Patent & Trademark Office should 
speed the processing of patent applications so life saving advances reach 
the public more quickly.  As I understand current operations of PTO, 
patent applications are supposed to be processed within eighteen months.  
However, this goal is not always achieved.  

The public has a unique and special interest in life saving inventions 
in contrast to inventions which are primarily commercial.  Therefore, as 
a matter of public policy, the Patent & Trademark Office should 
automatically make "Special" all patent applications for inventions which 
diagnose and treat life threatening illnesses.

There is significant precedent for accelerating the processing of 
important patent applications.  During the energy crisis of the 1970's, 
the PTO embraced a policy of making "Special" all patent applications for 
energy conservation inventions.  Public health and the lives of the 
nation's cancer, Alzheimers, and AIDS patients are no less important than 
energy conservation.

Many life saving inventions also reduce the cost of health care.  Too 
often, I see cancer patients go from therapy to therapy in search of a 
drug which will stop their disease.  Great sums of money are expended on 
treatment after treatment which does not work.  Accelerating the patent 
process for life saving inventions will help control health care costs by 
bringing new, more effective treatments to market faster.

To implement the policy which I have recommended, the Patent & Trademark 
Office should expand its core of biotechnology patent examiners through 
new hiring and retention of its existing staff.  Congress should 
appropriate the funds to support the needed staffing.

The eighteen month goal should be a "hard target" for life saving 
inventions both on the part of the PTO and the applicant.  Additional 
computerized systems and other resources may be needed to expedite and 
support the processing of patents.  Investment in PTO infrastructure is 
probably money well spent and Congress should be urged to make the 
required investment. 

Practical Utility and Clinical Trials

As we all know, Practical Utility is an essential criteria in patent 
decision making.  While human clinical trial data are valuable for 
documenting Practical Utility of a new invention, the standard for 
determining Practical Utility should not be a human clinical trial.

In clinical care, many intervening factors may determine clinical 
efficacy or safety.  It is often impossible for an inventor to control or 
even anticipate these factors, such as:

1.   The characteristics of an affliction such as a tumor, bacteria, 
genetic damage, or injury.  For example, you and I can both have

the same type of cancer, but biologically yours is different from mine 
because genetically our tumors are different even though we share the 
same diagnosis.

2.   The characteristics of the host which bears the affliction.  For 
example, biologically you and I are unique and different from other 
individuals suffering from the same illness.

3.   The effect of a drug on both the affliction and the host may depend 
upon unique characteristics of the drug or agent, the amount of substance 
administered, the route of administration, the method of administration, 
the timing of administration, and where it is administered.  For example, 
it is recognized that many living organisms, including people, have 
circadian biological rhythms which are extremely important to health, yet 
we know little about these rhythms except that we know that the same drug 
can produce different side effects and different benefits depending upon 
the timing of its adminstration.

From this perspective, there is a biological and clinical gestalt which 
must be understood in order for the utility doctrine to be meaningfully 
and reliably implemented from the perspective of human clinical trials.  
Unfortunately, it is often impossible to forecast the gestalt itself let 
alone control it.  The development and clinical use of Interleukin-2 
provides interesting proof of this point.

Interleukin-2:  A Clinical Case History

IL-2 was first identified as an anti-cancer agent in 1976.  It was first 
given to humans about 1984.  It came up for review before the FDA in July 
of 1990 and was not approved even though it had been approved in nine 
European countries and had been shown to be safe and effective when 
tested in thousands of patients with advanced kidney cancer.

The reason that it was turned down was that it produced only a 15 
percent response rate and the side effects of IL-2 were so severe, 
patients were put in intensive care when they received the drug.  
Eventually, with more research and a push from the National Kidney Cancer 
Association, IL-2 was approved by the FDA in early 1992.

During its review, the FDA focused on IL-2 as a single agent given in 
high doses by IV.  However, that is not the way the drug is used today. 
One of the most effective ways for a cancer patient to get IL-2 today is 
to inhale the drug using an inhalator like asthmatics use.  Since 
metastatic kidney cancer occurs most frequently in the lungs, inhalation 
of the drug delivers high concentrations of the drug where it is needed 
while avoiding the side effects of systematic therapy.

In German clinical trials for metastatic kidney cancer in the lungs, 
inhalation therapy has produced a 65 percent response rate and is an 
outpatient therapy with almost no side effects.  Many clinicians now 
believe that the human body produces and uses IL-2 locally rather than 
systemically.  Inhalation therapy may be effective because it more 
closely approximates what the body itself is doing.

The lesson in this case history is that nobody ever envisioned that IL-2 
would be inhaled when it was invented, or when it went through U.S. 
clinical trials, or when it came before the FDA.  In fact, initial 
clinical trials shed little light on Practical Utility and the initial 
trial data almost led the FDA not to approve the drug at all.

Accelerated Patent Processing and Human Clinical Trials

In addition, requiring lengthy human clinical trials is completely at 
odds with a policy of accelerating the patent process for life saving 
inventions.  Animal experiments are one substitute for human clinical 
trials, but even more is possible.

Surrogate end points are often needed and used as precursors to human 
clinical end points.  In fact, modern clinical practice itself is moving 
away from a blind reliance on average response rates derived from 
clinical trials.  For example, in vitro drug tests using a patient's 
living tumor tissue are now being used to determine a specific 
individual's drug sensitivity and resistance, and to design "patient 
specific" therapies.

The FDA has adopted a policy of using surrogate end points in its 
evaluation of AIDS drugs.  T-cell counts and other markers have been used 
by the FDA as a basis for the approval of new drugs.

Many of the same scientific advances which allow gene fragments and 
other tiny biological components to be evaluated, also enable the Patent 
Office to adopt surrogate end points for patent decision making.  What is 
required is the motivation by the Patent Office to develop and use an 
evaluation system composed of valid surrogates.

In this regard, it may be wise for the Patent & Trademark Office to 
develop "advisory boards" as the FDA has.  These advisory boards, 
however, would not advise on any specific patent applications.  Their 
responsibility would be confined only to the system of evaluation and 
assist the Patent Office in the selection of appropriate surrogate 
markers used in evaluating biotechnology patent applications.


To sum up my recommendations:

1.   Develop a patent policy which maximizes the value of patented 
inventions, a policy which is neither too restrictive nor too lax.

2.   Adopt a policy of making "Special" all patent applications which 
involve life saving inventions, and in so doing, accelerate the patent 
process for these inventions.

3.   Beef up the corp of biotechnology patent examiners.

4.   Do not rely on human clinical trial data for decision making.  It 
is helpful but is not the proverbial "gold standard" for decision making 
for clinical practice or for the FDA.

5.   Develop a system of surrogate end points for use in evaluating new 
life saving inventions and in evaluating biotechnology patents.

6.   Build an advisory board to help the Patent & Trademark Office 
develop and update its system of surrogates and decision making criteria.

I urge you to consider these recommendations because, if adopted, they 
will enable the Patent & Trademark Office to better serve the public, 
particularly those of us who are suffering from life threatening 
illnesses.  Thank you.






ON OCTOBER 17, 1994

Commissioner Lehman, Mr. Van Horn, Mr. Kushan, and the other members of 
the panel, thank you for the opportunity to appear and give my personal 
views on these issues.  I am a patent lawyer with the firm of Crosby, 
Heafey, Roach & May in its Oakland, California office.  I also teach 
patent law at Stanford Law School as a part-time Lecturer.  

My comments are arranged in the following order:  

1.	Patent Law Should Be Based On Sound Economic Analysis

2.	The Economic Purpose Of Patent Law

3.	There Is Not And Should Not Be A Separate Set Of Patent Law Doctrines 
For Biotechnology

4.	Practical Utility For Biotechnological Inventions

5.	Proof Of Operability For Human Therapeutic Inventions

6.	Standards Used In Measuring Nonobvious And Enablement Of 
Biotechnological Inventions

7.	Experimental Use Defense To Patent Infringement

8.	Implications Of Pending Legislative Reform On PTO Operations And 
Examination Procedures

9.	Other Issues

10.	The Most Efficient Use Of The PTO's Resources In The Overall Patent 

These hearings focus on patent law and biotechnology.  Patents are 
important to the biotechnology industry.  The advances of the past twenty 
years have created vast opportunities for future research.  However, the 
policy and legal issues transcend the biotechnology industry.  The policy 
and substance of patent law should apply to all technologies in the same 
way.  Biotechnology inventors should be treated no less and no more 
favorably than any others.  

1.	Patent Law Should Be Based On Sound Economic Analysis

I commend you for holding these hearings and for preparing a thoughtful 
notice to focus the issues.  The notice is a model of good sense in one 
critical respect.  The notice focuses on the  economics of the patent 
system.  The notice asks for information about the effect of the law on 
the amount or rate of investment in attempts to create the technological 
information about new products and processes that patent law calls 
"inventions."  Patent law has not always developed to best serve the 
United States economy because the people responsible for making and 
interpreting the law failed to ask that question or to answer it 
correctly.  A classic example is the Supreme Court's decision in Brenner 
v. Manson.  By asking the right question, these hearings have improved 
the likelihood that patent law will develop to better serve the country.  
My concern about the economic effects of patent law lead me to write a 
book to focus attention on this question and to try to help answer it.  
Much of what I say here is described in greater detail in that book.

2.	The Economic Purpose Of Patent Law

The notice is fundamentally correct when it says the patent system 
exists to induce investment and risk-taking in research, development and 
commercialization of biotechnology inventions.  The notice is right on 
target by focusing on increasing incentives to invest in inventing and 
take the risk of failure.  There are other theories of patent law.  The 
notice provides a valuable insight by ignoring them. 

For purposes of developing patent law standards, I would define the role 
of patents only slightly differently.  Patent law exists to alter the 
private incentives for use of resources that the market would otherwise 
provide.  By "resources," I mean anything that is scarce and that, if put 
to one use, may not also be put to another.  A market may misdirect 
resources, if people do not expect to capture all the benefits their 
investments provide to other people.  In the absence of corrective laws, 
potential producers of technical information are likely to spend too few 
resources over a given period attempting to produce technical 
information.  They will do that, because they anticipate being unable to 
capture all of the value of the information they produce.  

I would say the economic goal of patents is to induce investment and 
risk-taking in producing technological information about new products and 
processes that, in the absence of patents, the market would be unlikely 
to produce or produce as quickly. Whether this information-generating 
activity is called "research" or "development," the goal is to identify 
and grant rights in those situations where the cost and risk of 
production would likely have been sufficiently large that potential 
profit-motivated producers would likely have shunned the effort in the 
absence of patent rights.  

Patent law seeks to assist markets to induce the owners of resources to 
use more of them in producing new technical information about potential 
new products and processes.  This means patent law also induces the 
owners of resources to use fewer of them in producing the products and 
processes available from existing technical information.   United States 
consumers benefit from this better use of the country's scarce resources.  
The improved supply of technology may permit different or better products 
to be produced in the future or to be produced more cheaply.  

If the level or rate of information production increases due to patents, 
the level or rate of commercialization of new products and processes will 
also increase.  However, patent law leaves commercial use to the market, 
not to legal regulation.  Like all other property rights systems, the 
patent system relies on self-interested decisions by producers, consumers 
and the market to decide which inventions to try to make, which to 
develop and use commercially, and how much to pay for that use.  Patent 
rights were historically granted by the government without regard to 
their potential benefits to consumers or their potential commercial 
value.  The patent system leaves it to producers and consumers to make 
those judgments, however wise or foolish they might appear to the 
government.  It is entirely likely that a rational patent system may 
induce many patentable inventions and only a small percentage of them 
will be used in a commercial product.  That fact is and ought to be no 
cause for concern.  

There is one decision by the Supreme Court in 1966, Brenner v. Manson, 
that can be read to say the patent system exists to induce the 
development and bringing of new products to the market.  If the goal is 
to induce developing and bringing new products to market, the standards 
for patent availability would be quite different than they have been for 
the last 200 years and are today.  

3.	There Is Not And Should Not Be A Separate Set Of Patent Law Doctrines 
For Biotechnology	

United States consumers benefit from advances in biotechnology and all 
other technologies.  For that reason, patents apply to all areas of 
technology where there are opportunities for profit-motivated people to 
conduct research and produce technical information.  Because the policy 
of patent law applies to all technologies, patent law doctrines must 
apply across the board to all technologies.  

There is not or should not be a special subset of patent law doctrines 
for biotechnology.  One risk is that a separate set of biotechnology 
standards may develop in a way that makes patents for biotechnology 
inventions more difficult to obtain or less valuable than patents in 
other areas.  Patent law would be unwise if it created greater relative 
incentives to invent in the 10,000th mouse trap design than the first 
therapy for a previously untreatable human disease.  

In general, I find the notice to be consistent with that view.  However, 
the notice refers to the Court of Appeals for the Federal Circuit 
"refining" the law of nonobviousness for biotechnological inventions.  I 
do not understand the Court of Appeals for the Federal Circuit to have 
created a subset of patent law doctrines for biotechnology.  While the 
decisions cited in the notice discuss patent law in the context of 
biotechnology, the legal standards found in the decisions are the same 
standards applied to all types of technologies.  

In the patent area, people sometimes confuse legal principles with 
decisions applying legal principles to particular facts.  It is important 
for patent lawyers and the Patent and Trademark Office ("PTO") to 
understand that a decision by a court to find a particular invention 
unpatentable or a patent invalid for lack of utility, obviousness, or 
lack of an enabling disclosure does not establish a new legal principle.  
For example, if the PTO issued a patent on an invention based on research 
that identified a gene that encodes a particular protein (by identifying 
the protein sequence, creating sets of probes and probing DNA libraries), 
and a court were to declare that invention obvious and unpatentable, this 
decision does not change the law of nonobviousness one iota.  That 
decision is and ought to be irrelevant to the obviousness of a different 
invention based on research that identified a different gene that encodes 
a different protein (again by identifying the protein sequence, creating 
sets of probes and probing DNA libraries).  The decision declaring the 
first invention obvious and unpatentable does not and ought not provide a 
basis for the same decision in a second case that looks superficially 

People who work with patent law often try to find certainty in the law 
where certainty does not exist and to simplify the process of applying 
the law to the facts, where simplicity is not possible or wise.  The 
easiest way to achieve certainty (and predictability) and to reduce the 
cost of decision-making is by applying formal or informal (that is 
secret) rules of thumb across all fact situations that appear at some 
general level to be similar.  Lawyers, patent examiners, courts and 
others need to resist that impulse.  They need to apply the same general 
legal standards to the particular facts in each particular situation.  
The notice affirms that is the operating procedure in the PTO.  The 
notice, borrowing a phrase from antitrust law, affirms there are no per 
se rules.  Each application is examined based on applying general legal 
principles to the unique facts surrounding the application.  That 
declaration is very important.  The challenge is to make this approach 

4.	Practical Utility for Biotechnological Inventions

The notice asks about the purpose of the utility requirement.  That is 
the right question.  Unfortunately, the Supreme Court in Brenner v. 
Manson gave the wrong answer.  The Court said:

The basic quid pro quo contemplated by the Constitution and the Congress 
for granting a patent monopoly is the benefit derived by the public from 
an invention with substantial utility.  Unless and until a process is 
refined and developed to this point -- where specific benefit exists in 
currently available form -- there is insufficient justification for 
permitting an applicant to engross what may prove to be a broad field. 

In my view, the Court was wrong.  

In Brenner v. Manson, Justice Fortas, and six other Justices, implied 
that inventors seeking a patent must first show that the invention had 
been developed to the point where "specific benefit exists in currently 
available form."  Justice Fortas seemed to believe it undesirable to 
issue a patent on the process of producing a chemical, if the only known 
use for the chemical was to conduct further research into uses for it.  
Justice Fortas also seemed to believe that research is useless and 
researchers do not count as consumers in need of better products and 
processes.  I find it startling to suggest that all of the instruments 
and all of the reagents sold by numerous companies to the biotechnology 
industry for conducting research are beyond the pale of the patent 
system, because research is deemed an inherently useless activity.  If 
someone might be willing to pay for a material, whether an isolated 
strand of DNA, an isolated polypeptide, an isolated protein, or an 
isolated microorganism, that material has, in my view, sufficient utility 
to be patentable.  

In my view, Brenner v. Manson's language is unclear and, if taken 
literally, inappropriate for a well-functioning patent system.  I have 
explained why elsewhere.  If someone produces information about the 
general character and features of a new product or process that 
distinguishes it from earlier products and processes, he or she 
traditionally has been and should be entitled to a patent even if (1) 
there may be no perceivable benefits to consumers or others and no 
commercial potential for that invention, or (2) there is commercial 
potential, but there are large additional development expenditures 
necessary to use that invention commercially.  In my view, Brenner v. 
Manson should also be of limited importance.  That decision is 
inconsistent with more recent Supreme Court decisions defining the 
purpose of patent law.  The Brenner v. Manson majority decision is 
premised on a "quid pro quo" theory that diverts attention from the real 
issue - incentives to invent.  The dissenters, Justices Harlan and 
Douglas, asked about the effect of that decision on the incentives to do 
research into new processes, and reached the correct result.  I believe 
the dissenter's approach consistent with the theory the Court applied in 
its later patent decisions in the 1970's and 1980's, such as Chakrabarty, 
Dawson, Kewanee Oil, and Diehr and that the Federal Circuit often 

Rather, the test articulated by Justice Joseph Story (who sensibly 
defined most fundamental patent law rules in the early part of the last 
century) made clear that the criteria for issuing patents had nothing 
whatsoever to do with the anticipated benefits of the invention.  Under 
Justice Story's test, that prevailed until 1966, any invention was 
patentable if it might be put to a beneficial use rather than being 
useful only in harmful enterprises such as poisoning people.  If the 
invention might be put to some use that was not "mischievous or immoral", 
it was patentable even though consumers and the market might attribute to 
that invention an economic value of zero.  Under that standard, one asked 
only whether the patented invention might be useful for any lawful 
purpose, and was invalid only if it could not possibly be used for any 
such purpose.  

Are there desirable changes to legal standards?  If the Brenner v. 
Manson language is the legal standard, change is plainly desirable.  
Under a better rule, the whole question ought to be whether an invention 
may or might be used by anyone for any lawful purpose.  Among the lawful 
purposes for which an invention might be useful is the conduct of 
additional research.  

I should note that many of the points I have made here and elsewhere 
were articulated by Judge Rich in his dissenting decision in In Re Kirk, 
376 F.2d 936, 946 (CCPA 1967).

5.	Proof Of Operability For Human Therapeutic Inventions

The notice characterizes the next substantive issue as the requirement 
that an invention be "operative."  "Operativeness" is a word sometimes 
used as a synonym for the utility requirement and for the enabling 
description requirement in Section 112.  The notice directs attention to 
application of these requirements for inventions whose sole use is the 
treatment of human disorders.  While I do not believe that the law in 
this area is as clear as it might be, I do not propose to discuss it in 
any detail.  I offer these thoughts.  

First, I believe much of the confusion in applying the utility 
requirement to that type of invention derives directly from the 
misstatement of the utility requirement in Brenner v. Manson.  Assume the 
law is that an invention is not useful, until a "specific benefit exists 
in currently available form" presumably to consumers.  If the regulatory 
reality of development and introduction of human therapeutic agents 
requires many years of development before anyone may lawfully make a 
product available to consumers, this utility rule seems to preclude a 
patent until all testing is completed. 

Because I do not believe that the utility standard should have anything 
to do with potential commercial significance, it is an error to require 
that an applicant have in hand all of the information that will be 
necessary to immediately introduce a commercial therapeutic product.  
While some decisions expressly renounce tests that would require 
possession or disclosure of all commercially significant technical 
information, the language in Brenner creates a danger that the rules will 
be applied by decision-makers to require such information.  The Supreme 
Court uttered those words in 1966 and it is difficult to put that genie 
back in the bottle.  However, I think it is necessary to utterly ignore 
Brenner v. Manson for purposes of applying the utility requirement to 
human therapeutic inventions.  That is a proper thing to do because the 
applicant in Brenner v. Manson did not assert that its process produced a 
human therapeutic agent.

Second, while patent law, as I understand it, formally rejects 
application of Food, Drug and Cosmetic Act standards for safety and 
efficacy as having anything to do with patent standards of utility, the 
danger is that in practice they will applied.  If the law insists that 
the PTO and the courts make judgments about whether "specific benefit 
exists in currently available form," it is likely that many 
decision-makers will be tempted to take that regulatory reality into 
account in applying and developing patent standards.  The law and the PTO 
would do well, in my view, to repeatedly and emphatically make clear that 
the requirements for distributing a drug under the Food, Drug and 
Cosmetic Act, or under any other regulatory regime, have no applicability 
at all to patent law.  

Patent law seeks to increase the rate of research about potential new 
products and leaves it to people and market forces to choose the nature, 
type, timing and commercial use of the results of the research.  The 
Food, Drug and Cosmetic Act seeks to decrease the rate of research about 
potential new products, and to replace private, market-driven decisions 
with government decisions.  Adopting Food, Drug and Cosmetic Act 
standards for patent law (whether formally or informally) would be 
economic folly.  

Third, the utility requirement in this area raises an issue that patent 
law does not address with much specificity.  The question is whether the 
patent law does, or ought to, require some minimum level of certainty 
that the technical assertions in a patent application are true before a 
patent should issue.  Should the patent law permit inventors to patent 
their guesses?  Should an inventor be permitted to patent the use of a 
certain agent for treatment of a certain disease because he or she has 
some theory that, while somewhat plausible, is more likely than not to be 
untrue?  Should Linus Pauling have been able to patent the use of Vitamin 
C for treatment of the common cold in the early 1970's?  In my view, the 
law does and must insist that the information in a patent meet some 
minimum level of accuracy and correctness.  I would impose that 
requirement not out of concern that some apparently goofy idea will in 
fact turn out to be goofy and an utterly useless patent issue.  Rather, I 
would be concerned that issuing a patent to the first person to take a 
wild stab, or even an educated guess, at a potential therapeutic 
invention decreases the incentives of other inventors, who are 
undertaking the costs and risks of determining whether such a therapeutic 
invention in fact will work.  By "work", I mean have some biological or 
pharmacological activity in humans that might potentially be useful in 
treatment of disease.  

The difficult question is how certain one must be before an application 
is filed.  I do not have a good answer.  For the near term, I can not do 
much better than suggest a "reasonable degree" of certainty, recogizing 
that test is not very meaningful.  I would be inclined today to ask 
whether there is sufficient certainty that we would be willing call-off 
all research by others on the same invention and rely on the person who 
developed the basis for that degree of certainty to carry on the work.  
It is clear to me is that absolute certainty is the wrong standard, and 
that certainty to the extent required by the Food, Drug and Cosmetic Act 
is the wrong standard.  Again, I understand the law to endorse those two 
views.  The more difficult, but necessary, task is for us to decide how 
and where to draw that line.  

Fourth, if the law imposes a requirement that there be some degree of 
certainty about the correctness of an assertion of therapeutic utility, 
what is the standard that should trigger the PTO's ability to ask for 
proof and what is the proof that an applicant must provide?  Those are 
difficult questions.  I have no clear answer.  However, there are two 
things I would caution against.  

The notice asks about "incurable" diseases.  This is an area in which it 
is unwise to attempt to develop a particular legal standards for each 
type of disease and each type of therapy.  I do not believe it is wise to 
automatically require proof or require more persuasive types of proof for 
proposed therapies for "incurable" diseases than for any others.  The 
standards for requiring proof and the nature of the proof should be the 
same regardless of one's judgment of the history of success or failure in 
the past.  With the exception of a person's ability to patent a machine 
that violates the Second Law of Thermodynamics, I do not believe that 
patent law has historically applied any different standard in other areas 
of technology with a long histories of failure.  Bell, Edison, Marconi 
and the others faced no special obstacle when they pioneered new fields.  
I would not treat medicine differently.  

I also believe it important the law avoid placing patent applicants in 
this area in a substantive and, perhaps, procedural disadvantage that 
does not exist in other areas.  My concern is with the operation of rules 
that shift some type of "burden" from the PTO to the applicant.  First, 
if the law says some "burden" has shifted to the applicant, the law may 
unnecessarily bias the decision-making process against issuing patents in 
this area.  In the close or difficult cases, and there are many, there is 
a temptation to say the person with the burden losses.  Second, the law 
may bias the process against issuing patents if the threshold for 
requiring proof is low and the threshold for satisfying the burden is 
high.  For example, assume the rule (1) requires the PTO to insist on 
proof if the assertion of utility is not "likely to be true" or if there 
is a "reasonable" basis for doubt, and (2) requires that the proof must 
be "convincing," "persuasive" or some other word meaning very highly 
likely to be true.  This is also an area where there is often a 
reasonable scientific basis for some uncertainty about therapeutic 
effects.  In an area where the legal standard is not easy defined and 
there is always some inherent uncertainty about the facts, these rules 
may operate to require proof in all situations and then require very 
highly probative evidence, such as substantial human clinical trials, 
before a patent application may be filed or a patent issued.  I believe 
we should be cautious about such a rule. 

6.	Standards Used In Measuring Nonobvious And Enablement Of 
Biotechnological Inventions 

The law governing the application of the nonobviousness requirement, 
Section 103, (and its predecessor nonstatutory invention requirement) has 
been the most difficult patent doctrine to define and apply, in an area 
of the law with many serious contenders.  The enablement requirement has 
been less difficult in practice, but no less difficult in theory.  These 
rules defy brief explanation.  I would offer only these comments.  	
First, the notice refers to many decisions in this area by the Court of 
Appeals for the Federal Circuit and the Board of Patent Appeals and 
Interferences and notes that they provided "much needed guidance" when 
applying those standards to "biotechnology inventions."  That statement 
prompts me to repeat what I said earlier.  There is not as I understand 
the courts, and should not be, as I understand the purpose of the law, a 
separate body of biotechnology nonobviousness or enablement law.  Nor 
should the actual decisions in particular factual settings be 
extrapolated in decision-making into other settings that look 
superficially similar.  

This is not the first technical field in which the urge to develop 
shorthand formulas for deciding obviousness has been exhibited.  The law 
books are full of cases that tried to articulate rules of thumb for 
determining obviousness.  Perhaps the most famous was the so-called 
synergism test for determining the obviousness of "combination" 
inventions.  These rules of thumb have been repudiated.  We should be 
careful not to repeat those experiences in this important technical 

Second, the notice frames the discussion of nonobviousness in terms of 
one of its elements, namely, determining the level of skill of an 
ordinary person at the time the invention is made.  In my view, the law 
has not articulated wonderfully clear standards for decision-making about 
that subpart of the Section 103 analysis.  The Court of Appeals for the 
Federal Circuit has pointed us to six factors to take into account, but 
it is far from clear how to do so.  On another one occasion, the Court of 
Appeals for the Federal Circuit announced that a person of ordinary skill 
is one who "thinks along the line of conventional wisdom in the art and 
is not one who undertakes to innovate, whether by patient, often 
expensive, systematic research or by extraordinary insight, it makes no 
difference which."  However, that standard does not seem to uniformly run 
through all the that court's decisions.

One of the factors the Court of Appeals for the Federal Circuit has said 
should be considered in determining the level of ordinary skill is 
whether the act is "advancing rapidly."  It has never been clear to me 
how to employ that consideration.  The fact that technology in a 
particular area is moving rapidly does not suggest to me that, if patents 
are eliminated, the same advances will continue at the same rate.  The 
patent system must be applicable to all industries and technologies, 
whether the pace of technical change appears to be fast, slow or 
nonexistent.  Of course, the pace of technical change does alter the 
administrative burdens for the PTO in ways that Congress may dimly or 
slowly perceive in budget considerations.  However, it is important that 
the PTO avoid any effort or tendency to micromanage the rate of technical 
change.  If technical change in a particular technology appears to be 
slow, that is no reason to try to issue more patents to speed it up.  
Conversely, if technical change appears to be very fast, that is no 
reason to issue fewer patents to try to slow the pace.  

Third, the notice refers to changes in the state of the art affecting 
determinations as to the level of skill possessed by individuals working 
in the field.  While it is true that skilled people are deemed to have 
available to them the state of the art, I would caution against taking 
that notion very far.  The danger is that, because the state of the art 
may, for example, include many examples of researchers successfully 
identifying and isolating genes for particular proteins, all similar 
efforts are deemed to be within the level of ordinary skill and all such 
activities deemed obvious and unpatentable.  That is very unwise economic 
policy.  The fact that many success stories are reported in the 
scientific and patent literature does not indicate to me that there are 
not many failures we can not read about or that the successes came easily 
and with little risk of failure.  

My reading of the decisions in this area over the past about 150 years 
is, stated generally, that the economic purpose of the unobviousness 
requirement is to identify and eliminate from the realm of patentable 
inventions, those that involve such little cost and so little risk that 
it is highly likely, if not certain, that private producers of products 
(and today those who make a living as researchers) would have produced 
those inventions and done so at about the same time.  In short, the 
market would yield those inventions without the additional incentives 
provided by a patent.  If that is the general economic purpose, the fact 
that many people have used generally similar strategies to, for example, 
identify and clone genes for particular proteins in many prior 
situations, tells me little about whether it is economically sensible to 
grant patents for people investing effort and taking risks in attempting 
to identify and isolate other genes.  If the costs and risks of that 
activity in a particular situation are significant, any resulting 
invention should be a serious candidate for a patent.  The fact that many 
other people have followed similar strategies earlier and many had 
succeeded does not indicate that patents do not have an important role in 
inducing researchers dependent on the market from continuing to invest 
effort and take risks in that activity.  	

Viewed this way, decisions by the PTO and the courts under Section 103 
are not merely technical decisions.  They are technical and economic 
decisions of vast importance.  If we lose sight of the economic purpose 
of the rule in the overall system, we may apply the rule in a way that is 
inconsistent with achieving the goals of the system. 

The difficult issue is that the law has not defined with much precision 
the minimum levels of cost and riskiness that we require before we say 
that an invention is not obvious.  Perhaps, we will do somewhat better in 
the future.  However, the law does not and should not find inventions 
unpatentable, because a researcher sitting somewhere in an office would 
probably have recognized that (1) the invention was one of many possible 
ones to which attention might be given and (2) the most likely way of 
making it was a strategy sometimes used successfully in the past on 
similar problems.  That those thoughts would have passed through the mind 
of an ordinary person should not render the invention unpatentable, if 
there were significant risks and costs of carrying out the project.  The 
reason is that simply because someone recognizes the possibility of 
making an invention and a potential way of doing it, does not mean that, 
in the absence of likely patent protection, researchers operating in the 
private marketplace, attempting to make money from that endeavor, would 
in fact have undertaken the program at about the same time.

7.	Experimental Use Defense to Patent Infringement

The December 27, 1993 notice about hearings on the experimental use 
issue asked many important questions about the economic purpose of patent 
law and an experimental use doctrine.  However, it frames analysis in two 
respects that I find less helpful than the current notice.  

In my view, the purpose of the patent system to promote innovation 
requires that a person who receives the patent for a particular product 
or process should not be able to preclude others from using that 
invention (and making embodiments of it) for the sole purpose of making 
improvement inventions or substitute inventions.  The basic reason is 
that, if we permit an inventor to capture the value of commercial 
embodiments of the product or process embodying his or her invention 
(namely, those supplied to consumers or used to make products supplied to 
consumers) and the value of all subsequent potential inventions whose 
development depends on use in research of the patented product or 
process, we would permit an inventor to acquire a patent whose value 
exceeds the value of that inventor's particular contribution.  Hence, I 
have always assumed that a patent did not give the owner a right to 
exclude others from making or using the invention in order to make 
complimentary or substitute inventions.  While I believe there is room 
for disagreement about my view of the economic consequences, my 
understanding of the development of patent law over the years by Congress 
and the courts is that this view is the prevailing one.

Until the early 1980s, I believe there was a doctrine which generally 
permitted others to use an invention in conducting research.  I believe 
that the reason there was so little litigation to test that proposition 
and so few cases, as the earlier notice indicated, was that there was 
universal consensus about that rule.  While the words in the cases seemed 
somewhat narrower, most patent owners either understood (or operated on 
the implicit assumption) that others could conduct research using their 
inventions, when that research was designed to make other inventions, 
whether complementary or substitute, or to do research simply for the 
sake of doing research, historically the function of our universities.  
The Federal Circuit's Roche decision in 1984 and Congress' response to 
it, as well as other cases, have created confusion and uncertainty.  The 
problem with the Congressional response is that it left unclear whether 
experiments other than those protected by that section are non-infringing 
activities under the general experimental use doctrine.  

Therefore, while I find nothing implicit in the public disclosure of the 
invention in the patent on the day it issues or in the quid pro quo 
theory to lead me to believe that use of an invention for experimental 
purposes should not be infringement, I believe it generally should not 
be.  There are two situations where experimentation may be infringement.  
The first is experimentation involving the use (or making) of an 
embodiment of an invention, that is useful only in research and is 
incapable of any other use, such as use by ordinary consumers.  Hence if 
someone invents and patents scientific instruments or reagents useful 
only by researchers, the making and use of such inventions for their 
intended purposes should be infringement.  However, their use (and 
making) for the purpose of inventing improved or substitute versions of 
those instruments and reagents should not be infringement.  The second is 
research conducted only for the purpose of developing a commercial 
product or process that would itself embody the patented invention.  In 
other words, research undertaken solely and, perhaps, principally to 
implement a business decision to make, use or sell an infringing product 
may be called infringement.  Such research is no different than building 
a plant to make the infringing product.  It is logically infringement, 
since the principal value of that activity depends upon some subsequent 
infringing use of the invention in commercially used products or 
processes.  An alternative is to reach the same result by permitting an 
owner to bring an action for threatened patent infringement, whenever it 
appears that someone else has made a definite decision to infringe and 
has begun to invest in projects or facilities (including research 
projects) whose only use would be as a step toward the make, use or sale 
of an infringing product.  However, the courts have limited that 
availability of that action to such an extent that it may be useful to 
alter infringement doctrines to make clear that the activity is an act of 
infringement.  The hard cases will be where a company undertakes research 
that might logically be designed (1) to improve an invention or to find a 
substitute for it or (2) to use the invention commercially.  

I do not find it helpful in these contexts to describe one kind of 
research as commercial or for business reasons, and another kind 
experimental or for philosophical reasons.  Those distinctions seem to me 
to bias decision-making against private sector research enterprises that 
may be conducting research primarily for the purpose of developing 
improvements or substitutes, and yet, by virtue of their very nature, 
operate with a commercial and business-oriented goal.  

I do not have a view at this time about whether this is a problem best 
taken to Congress, to the courts, or for patent owners and users simply 
to work out among themselves.  My impression is that legislation might be 
appropriate in this area.  If legislation is proposed, I do not believe 
that the legislation enacted after the Roche decision was necessarily a 
happy model.  

8.	Implications Of Pending Legislative Reform On PTO Operations And 
Examination Procedures

The notice invites comments about potential changes to the patent 
system, including a 20-year term measured from the United States filing 
date and automatic publication of application 18 months after the 
earliest effective filing date.  I am not a proponent of these so-called 
reforms.  My view is that, on balance, this 20-year patent term 
diminishes the expected economic value of a patent and hence the 
incentives to do research.  The effective term of a patent now depends 
directly on the length of prosecution.  For complex inventions, 
prosecution is likely to exceed three years, and the value of patents for 
such inventions declines.  The length of prosecution for all inventions 
depends in part on the resources available to the PTO.  Those resources 
depend on Congress, and the political process.  If the political process 
allocates too few resources to the PTO, the system is devalued.  I am not 
aware of sufficient benefits to offset that cost and risk.  I would much 
rather have dealt with with the trivial number of so-called "submarine" 
patent holders by extensions of estoppel and laches defenses to conduct 
before the PTO.  My view is that these changes are unwise and that, if we 
were the only country in the world, no one would have dreamed of 
suggesting them.  However, we are not and the events of the last ten to 
twenty years cannot be rewritten.

If I am correct that the 20-year term will have some effect in reducing 
incentives to invent, this will in the long run reduce the number of 
patent applications filed.  Of those that are filed, the term rule will 
have some effect of inducing applicants to respond more promptly to the 
PTO and generate increased pressure on the PTO to promptly process 
applications.  My principal concern is that, if the net burdens on the 
PTO increase, Congress will not provide the additional funds that will 
permit the PTO to effectively meet these increased demands that rule will 
place on the system.  

The change to a 20-year term from filing, particularly if it is 
ultimately coupled with a rule that the filing date is used to determine 
priority, will force applicants to make very difficult decisions about 
when to file.  These will be particularly difficult depending upon how 
the courts apply the utility requirement.  In in order to win priority 
contests, one's incentives will be to file quickly.  In order to sustain 
the basis for a patent under the utility requirement, one's incentives 
are to file after the proof is in hand.  

The notice directs attention to the restriction practice.  I believe a 
first step in reconsidering restriction practice is to ask what 
restriction practice is designed to accomplish?  There seem to me two 
possible candidates.  One is to confine an application to an invention or 
group of inventions so closely related that the fees reasonably relate to 
the costs the Office anticipates with respect to searching, examining and 
other procedures on that application.  The second is to confine an 
application to an invention or group of inventions that are sufficiently 
closely related to that, if a single patent issues, it will be possible 
for the PTO and other people who wish to know about patents to identify 
its subject matter from the title, the abstract and the classifications 
that are assigned to it.  For both purposes, a standard of "patentable 
distinctness," whatever it means, is one that I do not find terribly 
helpful.  This is an area in which I believe the Commissioner has 
considerable discretion and some modifications would be helpful.  I 
cannot today suggest what they are.  

9.	Other Issues

The notice invites comments on other issues.  There are a number of 
changes to patent law that I believe would have a positive impact on the 
patent system.  I have described many of them elsewhere.  Among other 
substantive issues I would focus on are (1) the patent misuse doctrine 
that overregulates agreements between owners and users, (2) the Lear 
doctrine and related rules that limit potential agreements that reduce 
the risks and costs of litigation, (3) the interpretation of Section 
102(b), (4) the application of Sections 102(e) and 102(g) as sources of 
"prior art" (in the latter case where the prior inventor is not himself 
or herself seeking a patent),  (5) the rules determining the scope of a 
patent,  (6) the inequitable conduct doctrine and (6) the damage 

10.	The Most Efficient Use of the PTO's Resources in the Overall Patent 

These hearings are, in part, about the application of patent law in the 
Patent and Trademark Office.  The notice refers to the importance of 
"enforceable patent rights" to the value of those rights to inventors.  
Throughout the history of patent law, there have been those who 
criticized the performance of the PTO in its review and patent-issuing 
responsibilities.  That criticism has often focussed on the frequency 
with which the courts in enforcement actions found patents to be invalid 
under one or another of the criteria for a patent to issue.  This type of 
criticism is largely misplaced and may bias the PTO's decision-making 
process against issuing patents.  

Because (1) patent standards do not draw bright lines, (2) the facts 
that underlie application of those standards are difficult and expensive 
to ascertain and (3) the PTO has limited resources in terms of time, 
information-gathering capability and technical expertise, the PTO cannot 
possibly make one hundred percent "accurate" assessments of each 
particular application.  Congress set up the system with that reality in 
mind.  Before a patent permits an inventor to capture any of the value of 
the invention by excluding someone from using one or more of the rights, 
the owner of the patent must bring an action in a federal court.  In that 
action, the person accused of infringement may seek to prove that the PTO 
incorrectly issued the patent.  Moreover, before anyone will agree to be 
excluded or pay for the privilege of using a patented invention, the 
market place permits patent owners and users of inventions to review the 
PTO's decision and make a private assessment of the likely application of 
legal standards in a judicial proceeding and make a financial 
accommodation based on that assessment.  

There are several important benefits to that system Congress adopted, 
not the least of which is confining a full-fledged, costly factual 
inquiry to those small percentage of patents that become commercially 
significant and involve issues that are difficult for the private 
negotiation process to resolve.  This concept of the role of the PTO in 
the system is that the PTO should screen out and refuse patents for 
inventions that plainly and clearly do not qualify under one or another 
standard for a patent to issue.  Under this view, it is and ought to be 
no cause for concern that ten, twenty, thirty or forty percent of patents 
litigated in the courts would be found invalid under one or the other of 
the criteria applied by the PTO.  If the PTO perceives its job as making 
a one hundred percent "accurate" assessment of the facts and application 
of the law (meaning that only a small percentage of its decisions will be 
overruled by a court), it seems to me the PTO may operate with a bias 
against granting patents.  While one should commend the PTO for its focus 
on doing a quality job, I think it would be unfortunate if that important 
goal translated into a bias against issuing patents.  Rather, it seems to 
me the system is designed to operate most efficiently if the PTO were to 
issue patents unless it is not clear that the facts and the law require 
that a patent not issue.	


[1]	I have worked as a Research Fellow in chemistry at Stanford 
University, a scientist with Syntex Corporation, an attorney with Fish & 
Neave in New York City, and in-house counsel for Genentech, Inc., a 
leading biotechnology company.  I am the author of the book Patent Law:  
Legal and Economic Principles (Clark, Boardman, Callaghan 1992). 

[2]	"Molecular genetics has made a beginning; a wealth of detail about 
many biological systems is already available.  But the successes do not 
amount to a complete or even a very profound understanding.  on the 
contrary, current ignorance is vaster than current knowledge."  Paul Berg 
and Maxine Singer, Dealing With Genes (1992), Epilogue, p. 241. 

[3]	I refer to the notice appearing in the September 1, 1994 Federal 
Register p. 45267.

Schlicher, J., Patent Law, Legal and Economic Principles (Clark Boardman 
Callagan 1992).

The notice also refers to patents as a device to facilitate 
relationships between "government, university, and private sector 
partners by providing an impetus and a mechanism for commercializing 
advances at the cutting edge of biotechnology research."  Patents provide 
a mechanism for a researcher in any type of institution, and even one 
working alone at home, to capture part of the commercial value of the 
invention he or she makes.  If the producer is incapable of using the 
rights commercially or is less capable than others, the law permits 
transfer of the rights to a person able to better put them to commercial 
use.  However, the purpose of patent law is not to shift income from 
private sector businesses to universities or government or to encourage 
commercial use of inventions that a university or government producer is 
incapable of using.  The purpose is to increase the value of inventing 
whether performed by a private sector, university or government entity.  
While it is probably true in many cases that the existence of patent 
rights lowers the transaction costs of licensing between any two 
entities, I do not regard that effect as a principal purpose for a patent 

[4]	Research by the government or a university, whose principal 
endeavors are presumably not to develop and sell products commercially, 
is important in one respect.  To the extent the patent law standards are 
interpreted to encourage development and commercial production of 
products, the law will bias the system against the ability to patent 
inventions produced by university or government researchers.  Indeed, one 
of the principal advantages of the patent system is that it permits a 
number of different people, acting separately, to make inventions that 
may ultimately be used together to produce or sell a commercial product.  
This permits those best able to make certain parts of a total bundle of 
technical information more efficiently than other parts to focus their 
energies on the parts they are best able to produce.  The market in 
rights will permit these separate to be combined to yield a commercial 
product.  The ability of patent law to permit researchers to specialize 
in different parts of a total technological puzzle has that important 
benefit and operates best if each part of a commercial technological 
puzzle is separately patentable.  Again, to the extent that patent law is 
perceived as devised to induce investment in the development and 
commercialization of products, the law will tend to bias decision-making 
against issuing patents that contain less than a total bundle of 
information necessary for the commercial production and sale of a 

[5]	Schlicher, Patent Law, chapter 2 and particularly  2.18.

[6]	I refer here to the notice appearing in the September 1, 1994 
Federal Register p. 45267.  

[7]  Those effects on others are sometimes called "external effects" or 

[8]  For a more detailed explanation, see Schlicher, Patent Law, chapter 

[9]  Many people own resources (such as their time and energy, and the 
resources they may buy with their savings) that they may devote to making 
and selling an existing product or to trying to design a better product.  
If they make and sell the existing product (or invest their savings in 
companies that do so), others can not use the products unless they pay 
for them.  If those people try to design the new and better product (or 
invest their savings in companies that do so), others may use the design 
without paying.  There are many ways a producer of a new design may lose 
exclusive possession of it.  The design may become available to others 
who contribute nothing to producing it and who benefit from it without 
being required to pay.  In that situation, people may devote to many 
resources to making existing products and too few resources to trying to 
design new and better products.  

[10]	Schlicher, Patent Law  3.02.

[11]	Brenner v. Manson, 383 U.S. 519 (1966).

[12]	Today, the standards of patentability are not directed exclusively 
to whether anyone previously introduced the same product into the market.  
If an invention is described in an article on a library shelf and has 
never been developed or marketed, it may not be patented even though the 
patent would increase the private profitability of undertaking 
development and marketing.  Patent law standards do not even ask whether 
an inventor intends to market a product or thinks there is a market for 
the product.  Indeed, a person may obtain and enforce a patent even 
though he or she plans not to use the invention commercially. Continental 
Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405, 426-30 (1908); cf.,  
Special Equip. Co. v. Coe, 324 U.S. 370, 371-77 (1945).

[13]	Brenner v. Manson, 383 U.S. 519, 534-35 (1966).  The utility 
requirement, as interpreted by the Supreme Court in 1966, has not been 
part of the patent system for 200 years.  Brenner v. Manson was a totally 
unexpected and significant change in the formulation and application of 
that standard.

[14]	Schlicher, Patent Law  3.02[3]. 

[15]	Id.  1.05, 2.18[1], 3.03[5][c], and, e.g., Paulik v. Rizkalla, 
760 F.2d 1270, 1276 (Fed.Cir. 1985).  An added feature of Brenner v. 
Manson is that the Supreme Court said that it should not permit a patent 
to issue, unless the court could determine that Congress's intent was to 
"clearly command" that a patent issue in that situation.  The Supreme 
Court during that period often invoked this notion that patents should be 
made unavailable and construed narrowly unless Congress clearly commanded 
otherwise.  The Court's later decisions in Chakrabarty, Diehr and others 
expressly reject that approach to interpreting the Patent Act.  

[16]	Id.  3.02[2].  

[17]	 While Section 112 focuses on the nature of the specification in 
the application, the Court of Appeals for the Federal Circuit, as noted 
in the notice, has interpreted the "how to use" language of Section 112 
to incorporate the utility requirement of Section 101.  In other words, 
if the application does not disclose a "practicable utility" for the 
invention, then the invention is not patentable under Section 101 and 
Section 112.
I do believe it is legitimate to ask whether people skilled in the art 
would consider the historical difficulty of developing a treatment for a 
particular disorder as bearing on the likelihood that a particular 
proposed therapy will yield a biological response that might be useful in 

[18]	Id. at  5.03.

[19]	Schlicher, Patent Law, at 5.03[13] and 5.03[18].

[20]	Id.  5.04[2].

[21]	Environmental Designs v. Union Oil Of California, 713 F.2d 693, 
696-98 (Fed. Cir. 1983). 

[22]	Standard Oil Co. v. American Cyanamid Co., 774 F.2d 448, 454 
(Fed.Cir. 1985).

[23]	Environmental Designs v. Union Oil Of California, 713 F.2d 693, 
696-98 (Fed. Cir. 1983)("...(4) rapidity with which innovations are made 

[24]	Graham v. John Deere Co., 383 U.S. 1, 10 (1966)( "The difficulty of 
formulating conditions for patentability was heightened by the generality 
of the constitutional grant and the statutes implementing it, together 
with the underlying policy of the patent system that "the things which 
are worth to the public the embarrassment of an exclusive patent," as 
Jefferson put it, must outweigh the restrictive effect of the limited 
patent monopoly.  The inherent problem was to develop some means of 
weeding out those inventions which would not be disclosed or devised but 
for the inducement of a patent.").  The Court said one should weed out 
the inventions that would not be "disclosed or devised" but for the 
inducement of the patent.  The issue is how to do that.  One way is to 
focus on the costs and risks of making the particular invention.  If they 
are significant, the invention should be patented.  If they are not, it 
should not be.

[25] 	First, the notice asks about "the balance of rights" between 
patent owners and "the general public regarding research oriented use of 
patent protected technology."  That notice inferentially includes as part 
of the "general public," the United States government and the country's 
universities.  My concept of a patent system is that it exists to 
increase the level of investment in producing inventions by increasing 
the value of those inventions to their producers.  The general public 
benefits from that reallocation of resources because, in the absence of 
rules, people would have too little incentives to direct their efforts 
toward that activity.  When too little resources are devoted to 
inventing, the products and processes ultimately used to provide goods 
and services to consumers do not improve as quickly as they should or at 
all.  If an experimental use doctrine is justified, and I think it is, 
the reason for it does not lie in finding some proper trade-off between 
patent owners and the general public.  Rather, it can be found only by 
asking whether the rule will induce patent owners and others in the long 
run to behave in ways that would benefit the general public.  

Second, and more importantly, the earlier notice, unlike this notice, 
says there are two primary objectives of the patent system.  One is the 
promotion of innovation that provides the frame of reference in the 
current notice.  The second is the "public disclosure of inventions."  
This is the quid pro quo theory, a variant of which I criticized earlier 
and which I have criticized elsewhere. Schlicher, Patent Law,  2.18[3].  
While I recognize that the courts have from time to time tried to explain 
the patent system on that basis, I do not find it a satisfactory or 
sufficient explanation for the system, and I find it uniquely unhelpful 
in developing sensible patent law.  

[26]	Schlicher, Patent Law,  8.04.  

[27]	 Schlicher, "If Economic Welfare Is the Goal, Will Economic 
Analysis Redefine Patent Law?" in 4 The Journal of Proprietary Rights 12 
(Prentice Hall, 1992);  "Department of Justice Antitrust Policy, Economic 
Growth, and Intellectual Property Licensing," Intellectual 
Property/Antitrust 1993 (Practicing Law Institute, 1993); "A Lear v. 
Adkins Allegory", 28 Journal Of The Patent And Trademark Office Society 
427 (1986).


October 17, 1994

San Diego, CA

Honorable Commissioner and Distinguished Panel:

I thank you for the opportunity to testify today.

I am a registered practitioner working with the private firm of Spencer, 
Frank & Schneider.  Our firm is a multifaceted intellectual property firm 
covering all aspects of intellectual property practice.  The views I will 
express today are my own and are not necessarily espoused by Spencer, 
Frank & Schneider.

I hold a doctorate in Biochemistry and am currently completing the J.D. 
degree.  As part of my legal training, I have extensively studied the 35 
U.S.C. 101 and 112, first paragraph, so-called "practical utility" 
requirements.  Thus, when notice of these hearings was recently 
published, I felt more than obliged to testify upon the issues presented.

Having thoroughly studied the issue of "practical utility" under the 
patent statute, I come to the conclusion that the Patent and Trademark 
Office is wrong to maintain a policy of rejecting certain classes of 
Biotech inventions on the alleged basis of a lack of "practical utility."  

The Patent Office is wrong in narrowly reading the statute.

The Patent Office is wrong in misinterpreting the decisional law.

The Patent Office is wrong in asserting jurisdiction that it does not 
rightly have.

That is my view.

Let us first look at the statute.  In misinterpreting section 101, the 
Patent Office follows the 1966 Supreme Court decision Brenner, Comm. 
Pats. v. Manson (148 USPQ 689 (U.S. 1966)).  This reliance is, at best, 

Starting with the case of In re Bremner (86 USPQ 74 ( CCPA 1950)), the 
court and the Patent Office agreed that a patent applicant must state the 
usefulness of his invention in his application.  Contrary to this 
doctrine, the Manson applicant, however, failed to assert any utility for 
his invention.  For this reason alone, the result in the Manson decision 
was correct.  The invention was not disclosed in compliance with 
well-settled case law and was therefore unpatentable to the applicant.

Unpatentable, however, NOT because of the class of invention -a 
pharmaceutical.  Unpatentable NOT because of its intended use - as a 
treatment for, inter alia, humans.  Rather, unpatentable for a procedural 
error on the part of the applicant.

In dicta, the Manson majority indicated that section 101 should be 
construed narrowly.  The Court later corrected itself in the 
ground-breaking Chakrabarty (206 USPQ 193 (U.S. 1980)) decision in 1980.  
The Patent Office has never corrected itself accordingly.

The Chakrabarty Court followed the eloquent exposition of the Honorable 
Judge Giles Rich in the appellate decision in that case.  Judge Rich, a 
co-drafter of the 1952 Patent Act, set forth in that decision the 
statutory scheme of the Act.  Judge Rich reminds us, and the Supreme 
Court echoed, that the Committee Reports accompanying the 1952 Act states 
that section 101 is intended to include "anything under the sun made by 

Are Biotech inventions encompassed in "anything under the sun made by 
man"?  Certainly, certainly YES!

There has been some discussion this morning as to whether the Patent 
Office should adopt a policy holding a presumption of "practical 
utility."  I would like to briefly address that issue.

In In re Langer (183 USPQ 288 (CCPA 1974)), the C.C.P.A. ruled that a 
patent application "must be taken as sufficient to satisfy the utility 
requirement of section 101 for the entire claimed subject matter unless 
there is reason for one skilled in the art to question the objective 
truth of the statement of utility or its scope." (emphasis in the 
original).  That would seem to be a clear statement that a presumption of 
"utility" already exists, though perhaps unrecognized by the Patent 

As further evidence of a presumption of "utility," one need only look to 
the presumption of patentability embodied in section 102.  That statutory 
section states that the patent applicant is entitled to a patent unless 
certain statutorily defined conditions are met.  I argue that a 
presumption of patentability, expressly stated in the statute, 
necessarily implies a presumption of "utility" under the Patent Act.

Another focus of these proceedings is the Patent Office policy, whether 
intentional or not, of requiring applicants with certain types of Biotech 
inventions to show "statistically significant" results of "clinical 
trials" in humans.  The Office often takes the position that anything 
short of completely successful human trials is insufficient to show a 
"practical utility" for the invention.

The court, however, has consistently held since the 1961 Krimmel (130 
USPQ 215 (CCPA 1961)) decision, that proof of "utility" ("operability") 
in "standard experimental animals" is sufficient to satisfy the 
requirements of section 101.  One would think that the Patent Office 
would embrace such a position.  Animal tests are less expensive than 
human tests.  Animal tests are less time consuming than human tests.  And 
most importantly, animal test are less dangerous than human tests.  
Again, one would think that the Patent Office would embrace such a 
position.  It does not.  But the Patent Office does not justify why it 
would require testing in humans for patentability when the statute has no 
such requirement.

More and more these days, animal tests are being replaced by in vitro 
models of human disease.  These tests have all the benefits of animal 
models with the additional desirability of not using animals.  This is a 
particular policy concern for that section of the public that questions 
the ethical propriety of animal experimentation.  One would think that 
the Patent Office would embrace such a policy, whereby the needs of 
science are met and animals are spared.  But the Patent Office does not.  
I respectfully submit, something is amiss.

One also questions why industry accepted standards, be they animal 
models or in vitro models, would not be acceptable to the Patent Office.  
Certainly the fact that the industry relies on these models ought to 
carry significant weight with the Patent Office, absent compelling policy 
reasons to the contrary.  The courts have long recognized the realities 
of the pharmaceutical industry and the nature of its research.  It is 
high time that the Patent Office make a similar recognition.

At this point, I note that I have routinely had client's claims allowed 
in the European Patent Office and the Japanese Patent Office with data in 
the disclosure showing "utility" in laboratory animals.  In other cases 
before those Patent Offices, no showing of "utility" has been required 
because the foreign examiner recognizes the clear "utility" of the 
invention.  Yet counterparts to these same applications, claiming 
substantially the same subject matter, are forever blocked in the U.S. 
Patent and Trademark Office.

The Patent Office has argued in the past (and continues to argue) that 
it must be extremely cautious in issuing patents for inventions intended 
for use in humans.  The Patent Office relies on the rationale of the 1957 
decision Isenstead v. Watson, Comm'r. Pats. (115 USPQ 408 (D.D.C. 1957)), 
where Judge Holtzoff expressed concern that the "official imprimatur" 
associated with a patent, rightly or wrongly, would lead the 
unsophisticated in the public to believe that the patented invention 
works in all ways disclosed in the specification, including use in 
humans.  Without reference to the Isenstead decision, the Official Notice 
of these proceedings brings this argument to the table.

What the Patent Office must recognize is that regardless of an "official 
imprimatur," if one exists, the public cannot legally obtain the 
pharmaceutical in question without that product first complying with the 
requirements of the Food, Drug and Cosmetic Act.  The issuance of a 
patent is thus neutral with respect to public safety and/or drug 

This brings us to the issue of jurisdiction.  As first pointed out in In 
re Hartop (135 USPQ 419 (CCPA 1962), and subsequently reaffirmed, the 
issue of drug "safety" and "efficacy" is squarely within the jurisdiction 
of the Food and Drug Administration (and the EPA, OSHA, SEC, etc. to a 
much, much lesser extent).  To discover the proper jurisdictional basis 
in this regard, one need only look to the pages upon pages of detailed 
statute in Title 21 of the United States Code - the Food, Drug and 
Cosmetic Act, as amended - and the hundreds of pages of implementing 
regulations.  Jurisdiction on the issues of drug "safety" and "efficacy" 
is certain.

Yet the Patent Office disregards the courts; disregards the proper 
interpretation of the statutes; and asserts jurisdiction on the strained 
interpretation of a single word - "useful" - in the Patent Act.  This 
jurisdictional assertion by the Patent Office is clearly wrong.

The Biotechnological industry needs valid patents to protect its 
intellectual property.  We have already heard this common theme from 
early on in these proceedings.  The Biotechnological industry needs 
patents to spur investor interest and fund further research.  We have 
heard this also this morning.  The public needs the speedy issuance of 
valid Biotechnical patents to promote research and hasten valuable new 
products based upon this technology to the market.

I conclude that the Patent Office should discontinue its practice of 
slowing the progress of Biotechnical inventions to the market place and 
impeding the Biotech industry under the policy of issuing legally 
baseless "practical utility" rejections.

Thank you for your time. 









CROOKE	37, 94

DOW	42





FORTNEY	79, 99

GENS	30, 48










LINCK	26, 29, 35, 40, 45

LOWIN	87, 105















SCANLON	36, 92


SCHONFELD 	17, 107






TOOHEY	40, 119





Page 2		PTO Biotechnology Hearing

PTO Biotechnology Hearing		Page 1