AnalysisLife science, IT industries deeply divided over patent law reform

An ever more acrimonious debate over patent rights has been taking place in Washington for a year now, pitting two large, rich, and sophisticated industries — life science and IT — against each other. The Patent Act of 2005, introduced in the House of Representatives in June, is intended to overhaul fifty-year-old legislation which, all agree, has failed to keep up with fast-moving and fundamental changes in technology — especially in the life sciences and information technology sectors. One of the manifestations of the problem is the sheer number of patent applications: The number of annual applications to the U.S. Patent and Trademark Office, or PTO, has risen to 350,000 from just 185,000 a decade ago, according to the Government Accountability Office (GAO). The avalanche of increasingly complex applications driven by the convergence in technologies means that it takes an average of three years to get a patent. The understaffed and not-always-qualified PTI is another problem, since patent awarded are often of questionable quality and thus open to litigation.

All this poses serious problems for venture capitalists “who may be in and out of a deal before a patent is issued, or have no idea of potential competitors who may also have filed,” says Greg Blonder of Menlo Park, California-based Morgenthaler Ventures, which holds 100 patents, predominantly in information technology and manufacturing.

While all agree that there is a need to upgrade and improve the system, there are deep divisions between the life sciences and IT industries — and between the venture capitalists who invest in one or the other — about the best way of going about it. Life science companies typically depend on just one patent, while IT companies often rely on a raft of ideas which could not be sufficiently covered by any single patent. “Life science companies are unfundable without patents,” said Mark Radcliffe, partner in the Silicon Valley office of law firm DLA Piper Rudnick Gray Cary. “Because of the length of time it takes to develop a drug, a patent is essential for the company to be able to sell onto a pharmaceutical company. IT companies have dramatically shorter timelines —- products can become outdated after as little as six months or may even extend beyond a single patent, so a patent isn’t as crucial,” Radcliffe said.

Both sides have been lobbying strongly and heavily — the life scientists for a strong patent which would be harder to challenge and overturn and for which they are willing to pay, while the IT companies, often built on a collection of internally generated patents and patents licensed from other companies, would like a streamlined process making a challenge easier.

The deep and growing divisions between the life science and IT sectors led the industry’s trade body, the National Venture Capital Association, to abstain from taking a formal position in the debate.

-read more in the SiliconValley report