Recommendation 2: International priorities. “It [The UK] should attach the highest immediate priority to achieving a unified EU patent court and EU patent system”.

Written evidence submitted by the BioIndustry Association (BIA)

I am writing on behalf of the BioIndustry Association (BIA), the trade association for the UK’s healthcare focused bioscience sector, with regard to the Business, Innovation and Skills Committee’s inquiry into the Hargreaves Review of Intellectual Property and the Government’s recent response to that Review.

The BIA welcomes the Committee’s inquiry into the Review and the added scrutiny this will bring to the IP issues under consideration. It is encouraging to see the increased focus on the importance of a robust and reliable IP framework in the UK, brought about by the Hargreaves Review and the Select Committee’s inquiry. IP, in the form of patents, is incredibly important to BIA members in helping to ensure equity is obtainable and the large financial outlays in drug development are suitably incentivised.

While the Hargreaves Review has a focus on the IT / software / digital sectors it is worth reiterating that changes to the IP framework for the benefit of certain sectors has the potential to affect all sectors. In the BIA’s view this should be borne in mind when considering the potential for unintended consequences in sectors where the IP framework is, on balance, effective, workable and conducive to growth such as in life sciences.

The BIA understands that the Committee will be reviewing the evidence submitted to the Hargreaves Review (a copy of the BIA response is enclosed for reference)1 and is keen to avoid submissions which repeat those points. With this in mind, a short response and reaction to the recommendations of relevance to the BIA and its members contained within the Hargreaves Review and the subsequent Government response to that Review is provided below for consideration. For the life sciences sector, this Review should also be placed in the context of other ongoing IP related policy initiatives and consultations, namely the Research and Bolar Exemption and the Patent Box.

Once again, the BIA welcomes the Business, Innovation and Skills Committee’s inquiry into the Hargreaves Review and the Government response as adding an important voice to the debate on the UK’s IP framework.

Nigel Gaymond

Chief Executive

2 September 2011

BIA response to the Hargreaves Independent Review of IP and Growth and the Government response

Overview

The BIA welcomes the Hargreaves Review and its focus on using Intellectual Property to support growth and innovation for UK companies. We further welcome the Government’s response to the Review and the clarification provided as to its future actions towards the IP framework.

While this Review, and subsequently the Government’s response, has predominantly focused on the digital / IT sectors it is the BIA’s view that some aspects touched by the Review have the potential to affect the wider IP environment and the life sciences industry. It is therefore important to ensure the views of all sectors are heard to avoid any unintended consequences.

As outlined in the original BIA submission to the Review, IP, specifically in the form of patents, form the lifeblood of bioscience companies. It is worth reiterating that for BIA members reliable and secure IPR underpin their development and value.

It costs, on average, $1bn and takes between ten to fifteen years to bring a biopharmaceutical product to market. Expenditures and risk taking of this magnitude can only be justified by the limited exclusivity right provided by a patent to recoup these research and development costs and to allow continued research on other projects.

SMEs in particular rely on IPR to protect their innovations, which form the value of their company. An SME is judged on the efficacy of its research, but that research is worthless unless it is adequately protected. Without the value conferred by IP, the company would be unlikely to attract finance (nor be able to find out-licensing partners) and this promising research would not be taken through the various clinical development stages to market.

The BIA is aware that the Hargreaves Review was tasked with examining the possibility that IP is obstructing growth and innovation in certain sectors. The BIA does not believe this is the case in the bioscience sector. It is the funding made available on the strength of the IP present that allows for innovation to flourish and growth in the UK bioscience sector.

It remains the BIA’s view that attempting to change or weaken the IP system to address the specific concerns of certain sectors where IP is perceived to be a block could have a significant adverse impact on the life sciences sector, an outcome which would be of considerable concern to our members. Changes made to one sector have the ability to affect all sectors and should be approached carefully to avoid these unintended consequences.

Continued growth within the bioscience sector in the UK can be aided by maintaining the UK’s positive approach to IPR and examining ways to enhance the system both in the UK and internationally. It remains important to have a strong and flexible IP system, both nationally and internationally, and we look forward to working with Government throughout the post-Review process to ensure this happens. The recently completed consultation on the Research and Bolar exemptions is a welcome development in this regard.

Recommendations of relevance to the BIA

While the Hargreaves Review appears to have a digital / IT / copyright focus, there are recommendations with regards to patents and the IP framework more generally which is of wider relevance. These specific recommendations are discussed below.

Recommendation 2: International priorities. "It [The UK] should attach the highest immediate priority to achieving a unified EU patent court and EU patent system".

The BIA agrees with this recommendation and supports the Government’s approach with regards to the ongoing Enhanced Cooperation procedure. We reiterated our support for the development of a unified EU patent, alongside the associated EU Patent Court, in a recent submission to the UK Intellectual Property Office following a notification from the Court of Justice of the European Union with reference to C-295/11 Italian Republic v Council of the European Union (Patents).

The cost of securing and maintaining a patent across the European Union territories is significantly more expensive than in many other comparable geographies, the US or Japan for example. This disadvantages European businesses and is particularly prohibitive for Small and Medium Sized Enterprises which form the majority of the BIA membership. As such, it is the BIA’s view that streamlining the patent process in the EU is to be encouraged and would support the growth of sectors reliant on robust IPR, such as the bioscience industry.

Discussions regarding an EU Patent have been ongoing for a number of years and it is therefore in this context that the decision to commence with Enhanced Cooperation was taken. Given the length of time discussions have been taking place, and the broad alignment from the majority of Member States on the parameters of an agreement, the BIA believes the utilisation of the Enhanced Cooperation procedure was the correct one. We support the UK Government’s involvement in this procedure and hope to see it successfully followed through to conclusion. Furthermore, it is not our belief that the use of the procedure in this case has set any kind of precedent for future use in other cases but rather is justifiable when applied to the current circumstance.

It is also worth stressing that the EU patent must come into affect alongside the proposed EU Patent Court. There must be an agreed enforcement framework in place. It is our understanding that there are provisions within the draft EU Patent regulations which stipulate they will not come into force until a court structure has been agreed in order to provide for this.

The BIA is encouraged by the momentum which has been built towards completing the project and is keen that this should not be lost.  It is, however, important that it does not serve to obscure or override the need for quality and cost efficiency in the new Court procedures which must be designed to ensure that the Court produces decisions of consistently high quality in a reasonable time and at a reasonable cost.  We consider that adoption of the proposals currently under consideration would not achieve these objectives and, accordingly, we and others in industry will continue to work constructively with the UK IPO and others to seek improvements.

Recommendation 6: Patent thickets and other obstructions to innovation. In order to limit the effects of these barriers to innovation, the Government should:

- Take a leading role in promoting international efforts to cut backlogs and manage the boom in patent applications by further "work sharing" with patent offices in other countries;

- Work to ensure patents are not extended into sectors, such as non-technical computer programs and business methods, which they do not currently cover, without clear evidence of benefit;

- Investigate ways of limiting adverse consequences of patent thickets, including by working with international partners to establish a patent fee structure set by reference to innovation and growth goals rather than solely by reference to patent office running costs. The structure of patent renewal fees might be adjusted to encourage patentees to assess more carefully the value of maintaining lower value patents, so reducing the density of patent thickets.

The BIA is supportive of international work sharing arrangements and recommends the UK continues to lead by example and promote best practice. In its response to this point of the Review the Government has committed to reduce global backlogs through work-sharing with other patent offices and encourage greater use of suitable mechanisms, including the Patent Prosecution Highway. The BIA agrees that work sharing with other patent offices that meet the same quality standards are to be encouraged. The duplication of international patent searches for example can cause unnecessary delay. The Peer to Patent initiative also holds promise and we look forward to the completion of the first pilot study.

With regards to patent thickets more generally it is the BIA’s view that these are considered a problem in the IT / digital sectors. In these sectors technology is fast moving with patents quickly becoming obsolete as developments occur. Further, there are often multiple patents held within each product. In contrast, development timelines for bioscience companies are long and, as explained above, it is vital that a company holds robust IP protection to ensure the potential for a return at a future date.

It is therefore towards the end of the patent life, when the product reaches market, that it is profitable to a company. It would be counterproductive to punish a company financially by demanding higher fees when its innovation is realised. This would not act as an incentive to the continuing development and early marketing of products and medicines in the UK.

There is also some danger in subjectively attempting to ‘value’ innovation in determining its patent renewal fee. Innovation is a fluid concept and within the life sciences sector is currently the subject of discussion with regards to the shift to Value Based Pricing.

Therefore, proposals to amend the patent fee structure, as explained in the BIA’s submission to this Review, should be considered carefully with full consideration of the potential negative consequences on all sectors.

The Government has committed, in its response, to investigate the prevalence of issues with patent thickets, including whether they present a particular problem to SMEs seeking to enter technology sectors. The IPO will publish findings on this issue by November 2011 and the BIA looks forward to reviewing this.

Recommendation 8: Enforcement of IP rights. "In order to support rights holders in enforcing their rights the Government should introduce a small claims track for low monetary value IP claims in the Patents County Court."

In its response the Government has committed to introducing a small claims track along the lines recommended by the Review and subject to establishing the value for money case. It is also suggested in the Government’s response that this may necessitate the changing of the name to the Intellectual Property County Court.

The BIA submitted views on the cost limits imposed on the newly formed Patents County Court and believes a period of time is now required to allow the PCC to develop before a review of its operations is carried out. Similarly, it may be that as the PCC develops and is refined it is able to capture the type of cases this recommendation for a small claims track seeks to cater for. However, as this recommendation is now being taken forward we agree with the Government that the small claims track is unlikely to be suited to the complexities of patent disputes.