Facing The Patent Cliff

By: Debby Winters

All eyes have been on Washington, D.C. this month as the White House and Congress confront the fiscal cliff, an end-of-the-year deadline for budgeting that will trigger a slew of automatic penalties if an agreement cannot be reached. But that isn’t the only cliff we are facing. There is also a patent cliff that you should be aware of.

Why do they call things like this a cliff? A cliff is a handy geographic metaphor for an impending deadline with perilous consequences. The fiscal cliff is so named because of the condition the country will be in if the current laws slated for 2013 go into effect. The dramatic impact on the economy would be so dramatic as to simulate going off a cliff. As the fiscal cliff begins, the patent cliff for the pharmaceutical industry may end. This cliff is following an estimated time of approximately 18-months during which major drug companies lost exclusive rights to many billion-dollar-selling drugs.

The patent cliff could be seen coming for a long time. Indeed, efforts to mitigate the expected loss in profits kicked in years ago as drug makers struggled to invent and commercialize replacement blockbuster drugs. As, one by one, those efforts failed, the industry turned to more creative ways of going over the cliff and surviving. They shifted their focus to developing drugs for unmet medical needs, expanding in growing geographic markets, licensing drug candidates from biotech companies, buying biotech companies, partnering with innovative research organizations, and gutting bloated research organizations. Some companies played the “if you can’t beat ’em, join ’em” card by bolstering generics portfolios.

While this business revamp was going on, the sector was also being transformed by changes in U.S. health care laws that solidified in 2012 when the Supreme Court upheld the Affordable Care Act and President Barack Obama was reelected. All of these events are coalescing to create a significantly reformed, if for now less profitable, pharmaceutical industry.

Examples of the business revamp started in January 2012, when Bristol-Myers Squibb  (BMS) announced the acquisition of Inhibitex, which focuses on hepatitis C drugs. This was a $2.5 billion acquisition. But in the months that followed, multi-billion-dollar acquisitions continued to be outnumbered by more modest research pacts and partnerships in which drug companies acted to add promising compounds to their pipelines. There was a flurry of research pacts focused on oncology, typical of a more targeted approach. Takeda Pharmaceuticals,, Merck & Co., Eli Lilly & Co., and Astra Zeneca  all gained access to compounds that biotech firms were developing for cancer.

 

But the major cause of the cliff was due to patent expirations. The impact was felt in the first quarter nowhere more succinctly than at Pfizer,  which lost patent protection for its cholesterol reducer Lipitor, the world’s top-selling drug, at the end of 2011. Lipitor sales dropped 42% in the first quarter of 2012 compared with the year-earlier period.

Another example is Lilly’s October 2011 loss of exclusivity on the schizophrenia treatment Zyprexa that resulted in a 56% hit to first-quarter sales for the drug. AstraZeneca, which lost patent protection for its schizophrenia drug Seroquel IR in March, suffered a 25% drop in sales for the drug in the first quarter. The company also faced generics competition for its breast cancer drug Arimidex and its heartburn drug Nexium.

Most companies pointed to patent expiration as the cause, there could be more factors in play such as the decline to the cliff’s convergence with other economic problems, a kind of “perfect storm” that finally caught up with the drug industry. In other words, the tumble from the patent cliff was worsened by the continued economic crisis worldwide, which has European health care payers in a state of disarray. The combination of these factors just made matters worse.

There could be good news to this situation as well. Despite the doom and gloom for the companies involved, expiring patents open up the market to a generic version of drugs, which offers great opportunities for generic pharmaceutical companies who may pass that on to the consumer.

So, as we watch today, December 31, 2012, to see if Washington can keep us from going over the fiscal cliff, keep in mind that it isn’t the only cliff that might affect your wallet in 2013!

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Who owns YOUR photos? You? or Instagram?

By: Debby Winters

“You agree that a business may pay Instagram to display your photos in connection with paid or sponsored content or promotions without any compensation to you.” What does that statement made by Instagram in a change to its terms really mean?

Remember when Instagram was just an online photo-sharing and social networking service that enabled its users to take a picture, apply a digital filter to it, and share it on a variety of social networking services, including its own? Then along came Facebook, who acquired Instagram in early 2012 and helped catapult Instagram to fame. The deal was believed to be a cash/stock deal worth $1 billion dollars at the time it was announced. Because of Facebook’s decline in stock valuation the deal is only worth about $715 million dollars now.

Users are claiming that Before Instagram become part of Facebook, the terms of service were always creator-friendly. The photos were always your photos and would remain your photos but now things have changed. Many users are considering deleting their Instagram accounts and heading to another service. A class action lawsuit was filed just before Christmas by a woman from San Diego named Lucy Funes, due to the one sentence added to the site’s terms of service recently that sparked most of the anger among many of the service’s 30 million members.

In the originally changed Terms of Service (TOS),  Instagram had basically said that they could use your photos for whatever they want without compensation. They also said they may choose to advertise alongside your photos,Instagram did not have to tell you and you would not make any money from it. No one forces you to use their service so if you did not agree with these terms you could just delete your account. But if you continue to use the service, you’re making an agreement to abide by their terms. And what if you delete your account? What would happen to your pictures? The lawsuit says customers who don’t agree with Instagram’s terms can cancel their profile but forfeit the rights to photos they previously shared on the service. “In short, Instagram declares that ‘possession is nine-tenths of the law and if you don’t like it, you can’t stop us,’” the lawsuit says. Instagram founder and CEO Kevin Systrom has back pedaled on the parts of the change to the TOS pertaining to copyright and use of the photos.

As the laws of the internet develop, it will be interesting to see what is decided about copyright ownership. Since the photos are posted to the public domain will they be ruled that Instagram owns the rights to use in whatever fashion they see fit? Is it necessary for the one who took the photos to explicitly grant this right, such as in the TOS Instagram has made changes to? By putting the photos in the public domain do you also grant any other user the right to use the photos? These are questions without answers. But what it all means and how it plays out remains to be seen so stay tuned to see who owns the copyrights to  the photos you post on Instagram.

Did you spot any of these imitation products while Christmas shopping?

By Debby Winters

 

Christmas has come and gone but perhaps you noticed some of these imitation products when Christmas shopping recently. The following are just a few involved in design patent litigation:

USB adapter

  • Patent number. D.624,501 is owned by Ever Win International and is for a dual USB adapter. It is allegedly being infringed by similar devices being sold at CVS and other locations. Amazon sells the Ever Win product for $20.

usbusb1

Crimping Tool

  • Mr. BD Kidd has sued Home Depot and others for infringing his Patent No. D.646,537 covering a crimping tool that fits in your pocket.

crimpcrimp1

Flashlights

  • Nebo’s No. D.659,869 covers these  flashlights that are allegedly being infringed.

neboneb01

Practice Tees

  • Jugs Inc. owns No. D.451,566 that covers a five-position batting practice tee that is allegedly being infringed by Wilson’s and others. Wilson’s version of the product is shown in yellow. Wilson’s is claiming it invented its design in 1996, five years before the patent’s 2001 priority date.

.  jugs1jugs2Wilsons

Sunglasses

  • Oakley has again asserted its D. 397,350 that covers eyeglass fronts.

oakley

Yoga pants

  • Lulumon has asserted its Design Patent No. D.645,644 for yoga pants against Calvin Klein. Klein immediately caved.

lulu

calvin