While the debate about health care reform seems to be just beginning, recent legislation actually takes a significant first step in that direction by setting the groundwork for capturing effectiveness data associated with various treatments. On February 17, 2009, President Barack H. Obama signed into law the American Recovery and Reinvestment Act of 2009 (ARRA), which contains far-ranging provisions designed to bolster the nation’s challenged economy. The $787 billion stimulus package has several provisions related to health care, including $1.1 billion set aside for comparative effectiveness research. For the first time, the United States will spend a significant amount of money for the federal government to compare the effectiveness of different treatments for the same illness or conditions. The outcome of this research may then help set the stage for future health care reform efforts.
Specifically under the legislation, researchers will receive $1.1 billion to compare drugs, medical devices, surgery, and other ways of treating specific medical conditions. Of the funds, $300 million will go to the Agency for Healthcare Research and Quality, $400 million will be made available to the National Institutes of Health, and the remaining $400 million will be given to the U.S. Department of Health & Human Services (HHS). In addition, the ARRA directs the Institute of Medicine to submit a report to Congress by June 30, 2009 that includes recommendations on the national priorities for comparative effectiveness research with input from stakeholders.
The ARRA also creates the Federal Coordinating Council for Comparative Effectiveness Research (Council), comprising up to 15 federal employees, to coordinate the research and to advise President Obama and Congress on how to spend the money. On March 19, 2009, the HHS named the 15 members of the Council, all of whom are experts in comparative effectiveness research and come from a variety of government agencies. The Council is charged with coordinating comparative effectiveness research among the federal agencies but will not recommend clinical guidelines for coverage, treatment, or payment. The complete list of Council members is available at http://www.hhs.gov/.
The comparative effectiveness program is intended, in part, to establish concrete evidence showing the value of many different treatment options, including the use of medical devices. The goal of this research is to help save health care dollars by discouraging the use of costly, ineffective treatments. President Obama supported comparative effectiveness research during his presidential campaign, and current administration officials and leading Democrats in Congress believe that such research will help government programs direct their dollars to the most cost-effective treatments.
Some of the questions comparative effectiveness research will try to answer include:
The methodology, results, and overall conclusions of any such comparative effectiveness evaluation will likely be subject to much scrutiny and debate. Interestingly, Congress did not specify in the ARRA how the findings from comparative effectiveness research should be used. In the conference report accompanying the ARRA, Congress said that it did not intend for the research money to be used to “mandate coverage, reimbursement or other policies for any public or private payer.” Private insurers may perhaps be expected to consider the data when deciding whether to cover new drugs, devices, and medical procedures, but it is unclear how the Medicare program will use the information. Under existing law, Medicare generally covers any treatment that it can be convinced is “reasonable and necessary for the diagnosis or treatment of illness or injury.” The Centers for Medicare & Medicaid Services, which administers the Medicare and Medicaid programs, does not currently have clear legal authority to take costs into account when deciding whether to cover a particular treatment, or to directly mandate clinical decisions as to what treatments will be utilized for its beneficiaries. Because controlling Medicare costs into the future is one expected goal of health care reform, it can be anticipated that there will be spirited discussion about providing Medicare with either or both of these authorities.
Generally, the medical device industry has come out in favor of comparative effectiveness research, although it has expressed concerns that such research should not force patients toward a single treatment based on cost or deny patients access to a particular treatment because it is deemed too costly. AdvaMed (Advanced Medical Technology Association), the trade association that represents the medical device industry, confirmed its support for the comparative effectiveness provision in the conference report: “We appreciate that changes were made to the report language to express the intent of Congress — specifically that the funds under the program are to be used to study the medical effectiveness of different approaches to treating illness. The purpose of the research is to assist patients and health professionals in making better treatment decisions, not to mandate one-size-fits-all coverage decisions that would deny patients access to safe and affective treatments.”
On the other hand, a coalition called the Partnership to Improve Patient Care, which includes the lobbying arms of the drug, device, and biotechnology industries as well as patient-advocacy groups and medical-professional societies, has publicly opposed the ARRA’s comparative effectiveness provisions that may be used “in an inappropriate manner that may limit treatment options for patients.”
At this juncture, there are many more questions than answers about the comparative effectiveness provisions in the ARRA. For example, it remains to be seen how the comparative effectiveness funds will be allocated, what types of treatments the funds will be used to study, the outcomes of the research, and the purposes for which the research will be used. Companies whose products are likely to be impacted by the results will want to monitor and participate in the studies. It is clear, however, that the unusually large sum of funds set aside for comparative effectiveness research in the ARRA demonstrates that the federal government is serious about identifying the most cost-effective treatments, and this will play a significant role in the government’s continuing efforts at crafting widespread health care reform.
The doctor checked the patient’s pulse and recorded it in the new electronic health care records database. She then checked and recorded the patient’s blood pressure, other vital signs, and the prescribed medications. The doctor checked the patient, but did she check the patents?
Electronic health care records (EHRs) are likely to become widely adopted in the next few years. Why? Because the American Recovery and Reinvestment Act of 2009 (ARRA) allocates about $17 billion for incentive payments to health care providers to encourage adoption and use of EHRs.
Politicians, economists, and ethicists keep asking: Will our privacies be protected? Is the ARRA necessary? Do medical records belong online? These are all good policy questions. However, one of the questions that the EHR community should be asking is: Who owns the legal rights to EHR systems? Currently, there are more than 500 patents laying claim to methods and systems for electronic data processing and management of patient medical records, and the number of patents is rapidly growing.
One possible reason for the growth in the number of patents relating to EHR is that the government has telegraphed its health care information technology (HIT) transition initiative for years, first under President George W. Bush and now under President Obama. Even the current ARRA does not require a finished plan and implementation for another two years. As a result, forward-looking businesses are well positioning themselves with patents. Currently, the HIT field is a dense forest of patents — patents laying claim to all aspects of data uploading, processing, storing, retrieving, securing, and the rest. Without a close look, it is unclear who really controls what ground, or how strongly that ground is controlled. This article reviews the situation.
The ARRA itself is a thick document. Highlights include both carrots and sticks — for example, the ARRA provides for yearly payments totaling nearly $50,000 for eligible health care professionals and $11,000,000 for eligible hospitals that become “meaningful” users of EHRs by 2015, but impose Medicare and Medicaid reimbursement penalties for not becoming so. Becoming a meaningful user will certainly require investment in HIT — methods and systems for utilizing electronic medical records.
Why are patents important to this process? A patent gives its owner legal rights to exclude others from making, using, selling, offering for sale, or importing the patented invention. If a company sells, or a health care provider uses, an EHR system that infringes someone’s patent rights, the company or the health care provider may be liable for substantial monetary damages and may be enjoined from selling or using the EHR system.
Patents are organized according to the technology of the invention. Patents are put into various “classes” and “subclasses” to facilitate identifying patented technology. Class 705, subclass 3 is the U.S. Patent and Trademark Office (USPTO) classification for those patents and applications dedicated to “data processing” of “patient records management”. Since 1995, this 705/3 subclass contains 554 issued patents, and currently holds 1,546 published applications. More than 1,000 of the applications were published in the last four years — increasing at an average rate of 35 percent over each previous year. The chart below visually shows the rapid growth. Projecting linearly from the number of patents issued so far this year, the USPTO will issue another 120 patents and publish nearly 400 applications in this subclass in 2009.
Those patents that are assigned upon their issuance may list the assignee on the patent. From this indication, the assignment and ownership of the 705/3 subclass of issued patents appears scattered. Numerous smaller organizations and individuals are the owners.
The content and coverage of 705/3 patents also are varied, but many attempt to control necessary elements of EHR technology, operating under the assumption that a transition from paper files to EHRs will likely require passing through several critical nodes for the medical information to be securely transferred, uploaded, and stored in memory. The term “health information technology” as used in the ARRA has a broad definition. It includes hardware, software, integrated technologies or related licenses, intellectual property (IP), upgrades, or packaged solutions sold as services that are designed for or support the use by health care entities or patients for the electronic creation, maintenance, access, or exchange of health information.
The following patents are exemplary of the 703/5 subclass despite being picked virtually at random, and are seemingly directed to such critical nodes:
Not only do patents in the 705/3 subclass relate to the critical nodes in the health care electronic records transition, but some also disclose the tertiary nodes. For example, one of the intended purposes of a nationwide health care database is to “promote … early detection, prevention, and management of chronic diseases” among the national population. Related to this topic, U.S. Patent No. 7,024,370 discloses a “method for providing early detection and reporting of health-related events in a population” essentially by analyzing electronic patient data reported from emergency rooms, looking for correlations, and reporting potential issues to the Centers for Disease Control and Prevention. This patent issued on April 4, 2006 and lists Picis, Inc. as its assignee.
Many people who learn of the large number of patents and pending patent applications related to EHR technology question whether those “inventions” are protectable with patents. The answer is uncertain, since the law relating to the patent-eligibility of business methods, like EHR technology, has been “clarified” recently in the case of In re Bilski, decided by the Court of Appeals for the Federal Circuit in October 2008.
In Bilski, the Federal Circuit affirmed the USPTO's determination that Bilski's claimed invention (a method of hedging risks in commodities trading) does not satisfy the patentable subject matter requirements of the patent law. In doing so, the Court held that the "machine-or-transformation" test was the definitive test to determine whether a process claim in a patent is tailored narrowly enough to encompass only a particular application of a fundamental principle rather than to preempt the principle itself. The test stated that a claimed process is “surely patent-eligible” if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. All patents and pending applications on EHR business methods will be judged by this test. As a result, EHR patents that do not meet this test will be found invalid in post-Bilski litigation. However, the Court made clear that business methods and software will still be patentable — if they meet the machine-or-transformation test. The Court declined to adopt a broad exclusion over software or any other category of subject matter beyond the exclusion of claims drawn to fundamental principles.
As a result of both the rich ARRA funding and modern trends in medicine, health care information technology, and health care records databases are hot areas of focus for government, industry, and law. Businesses seeking to enter this field should have a forward-looking plan that ensures that the technology underlying their investments is not already patented and owned by another. Businesses need to identify and review patents potentially blocking their path, and consider how best to deal with the blocking patents — when to license, when to seek reexamination, when to litigate, when to design around the patent, or when to wait for the expiration of particular patents. Lastly, businesses should seek to cement their own claims and preempt future disputes through obtaining their own patents.
Businesses in the medical device industry understand how critical it is to obtain strong patent protection for their innovations — both in the United States and throughout the world. As companies develop their IP strategies, they face the challenging fact that while business is global, patent protection is local and thus can be quite different from country to country. Cooperative efforts among several patent offices — called the Patent Prosecution Highway (PPH) programs — provide a new tool that can help medical device companies achieve more consistent patent protection across more jurisdictions in a shorter amount of time.
Medical device companies seeking patent protection in Australia, Canada, Denmark, the European Patent Office, Germany, Japan, Korea, Singapore, or the United Kingdom in addition to the United States should consider the PPH programs. Initial results of the program between the United States and Japan reveal that the average time it takes to have an application examined can be dramatically reduced and the percentage of cases where a patent is granted — upon application and after further prosecution — is significantly higher when compared to applications outside of the PPH programs.
The PPH programs allow a patent applicant who has received a determination of allowable claims from one of the participating patent offices to expedite patent examination of related patent applications pending before the patent offices of the other participating jurisdictions. To participate in a PPH program, the applicant must amend the claims in a related patent application pending before the patent office of one of the other participating countries to recite substantially the same subject matter as the claims determined to be allowable by the first participating patent office. The other participating patent office will then advance the related application in the examination queue resulting in a substantial reduction in the amount of time that it takes for the patent office to begin examination of the related application.
Further, when the related application is examined, examination should proceed more quickly because the subsequent patent office is able to utilize the examination results from the first patent office. These two features of the PPH programs — advancement in the examination queue and utilization of the examination results of the first patent office — usually enable improvement in chances of allowance of related applications, and patents issue more quickly with lower prosecution costs than applications prosecuted outside of the PPH programs.
Participation in the PPH programs requires that claims in related applications have substantially the same scope as the claims determined to be allowable by the first patent office, but it does not foreclose other avenues for pursuing broader or different claims. For example, the applicant who receives a patent issuing from an application in a PPH program may file a continuation application to pursue broader or different claims.
Many decisions made during the patent procurement process, including the decision to utilize a PPH program, will have an impact on the ultimate success of a company’s IP strategy. Utilization of the PPH programs may not be available or advisable in every situation, but for some patent applicants, the PPH programs provide an effective option for lowering patent prosecution costs while expediting establishment of patent protection; the programs also improve the consistency of coverage and likelihood of issuance within the United States and throughout the world.
Riegel v. Medtronicand the Medical Device Safety Act
By Victor de Gyarfas (firstname.lastname@example.org)
The “Premarket Approval” Process and the Medical Device Amendments to the Food, Drug, and Cosmetic Act
The 1976 Medical Device Amendments (MDA) to the Food, Drug, and Cosmetic Act provide for extensive oversight of Class III medical devices that undergo a premarket approval process. Under the premarket approval process, the U.S. Food and Drug Administration (FDA) reviews the design, labeling, and manufacturing specifications of devices. The premarket approval process is rigorous and requires submission of all studies and investigations of the device’s safety and effectiveness that have been published, a full statement of the device’s components and properties, and a full description of the manufacturing process. Samples of the device or device components, as required by the FDA, also must be submitted.
The FDA spends an average of 1,200 hours reviewing each application and grants premarket approval only if it finds reasonable assurance of the device’s safety and effectiveness. A January 2009 report from the Government Accountability Office states that the standard fee charged to medical device makers in fiscal year 2009 for original premarket approval submissions is $200,725.1 After review, the FDA may approve or not approve the device. If approved, the manufacturer may not, without approval, make changes in the design specifications, manufacturing processes, labeling, or any other aspect that would affect safety or effectiveness. After premarket approval, the devices are subject to continued reporting requirements concerning new studies or investigations, and the manufacturer is required to report incidents in which the device may have caused or contributed to significant injury or death.
The MDA also contains an express preemption provision in 21 U.S.C. § 360k(a) stating that, with limited exceptions, no state shall establish “any requirement” for the safety or effectiveness of medical devices that is different from or in addition to any requirement of the MDA.
Riegel v. Medtronic
In 1996, Charles Riegel underwent a coronary angioplasty. Although his coronary artery was diffusely diseased and calcified, his doctor inserted a balloon catheter into the artery. The balloon catheter was a Class III device that had undergone the FDA’s premarket approval process and originally received approval from the FDA in 1994. The warning label for the catheter used in Mr. Riegel’s angioplasty indicated that it was contraindicated for conditions such as Mr. Riegel’s. When Mr. Riegel’s doctor overinflated the balloon catheter beyond its rated burst pressure, the catheter ruptured. Mr. Riegel was placed on life support and had an emergency coronary bypass surgery.
Mr. Riegel and his wife sued in the United States District Court for the Northern District of New York, alleging that the catheter was designed, labeled, and manufactured in violation of New York common law, causing Mr. Riegel permanent injuries. Riegel v. Medtronic, Inc., 128 S. Ct. 999, 1005 (2008). The district court dismissed the claims as preempted by the MDA. That dismissal was affirmed by the Second Circuit. Id. at 1006
On appeal to the Supreme Court, the Court found that the MDA imposed safety requirements on the balloon catheter at issue. The balloon catheter was a device that went through the premarket approval process. That premarket approval process was a “federal safety review” imposing the requirement that the approved device be made with virtually no deviation from the specifications in the approval application. Therefore, the MDA imposed safety requirements on the balloon catheter. Id. at 1007. The Court then analyzed whether the Riegels’ common-law claims relied upon any requirement that was “different from, or in addition to” federal requirements relating to safety or effectiveness of the device. Id. at 1007. The Court framed the issue as whether duties under New York’s common law constituted “requirements” under the MDA. Relying on the majority opinion in Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996), the Court found that common law causes of action for negligence and strict liability do impose “requirements” that would be pre-empted because common-law tort liability is premised on the existence of a legal duty, which duty is a state law obligation. Id. at 1007-08.
2008 Proposed Legislation and Current Updates
In response to the Riegel case, in June 2008, the Medical Device Safety Act of 2008 (MDSA) (H.R. 6381) was proposed in the House of Representatives by Representatives Henry Waxman and Frank Pallone. In July 2008, a companion bill was proposed in the Senate (S. 3398) by Senators Patrick Leahy and Edward Kennedy. The MDSA would overturn Riegel by amending 21 U.S.C. 360k (c) to state that “[n]othing in this section shall be construed to modify or otherwise affect any action for damages or the liability of any person under the law of any State.” No vote was taken on the MDSA in the 110th Congress.
The Riegel case provides protection and certainty to manufacturers of Class III medical devices that have undergone the extensive premarket approval process. Overturning Riegel legislatively could subject manufacturers of devices that have undergone the premarket approval process to lawsuits brought under state common law. On March 5, 2009, Senators Leahy and Kennedy reintroduced the Medical Device Safety Act in the Senate2 as did Representatives Pallone and Waxman in the House.
Medical device plaintiffs beware, the pro-plaintiff tide in a notoriously favored jurisdiction may be receding. The U.S. District Court for the Eastern District of Texas remains the country's most popular court for patent litigation. In fiscal year 2007, 359 patent cases, or 12.4 percent of all the patent cases filed in the United States, were filed in the Eastern District.2 One reason the Eastern District is so popular is its perceived reputation as being a pro-plaintiff jurisdiction. Plaintiffs have come to expect several things by litigating there, including a relatively short track to trial, the strict use of specific local patent rules, a no-nonsense policy toward discovery, and a low likelihood of cases being transferred. Most important, plaintiffs have relied on the reputation that the Eastern District's judges rarely grant defendants summary judgment and that its juries frequently decide in favor of plaintiffs. Indeed, until recently, no jury in the Eastern District had invalidated a plaintiff's patent. This reality limited defendants for practical purposes to non-infringement defenses and provoked many, often lucrative, settlements in plaintiffs' favor.3
Recent evidence suggests, however, that the pro-plaintiff tide may be turning in the Eastern District of Texas. As an initial matter, the sheer volume of cases filed there has taken a toll. The time from filing a case to getting to trial in the Eastern District has now doubled from one year to approximately two years.4 Beyond just increasing plaintiffs' costs, longer case schedules buy defendants time, a key asset that can assist them in locating additional prior art, finding helpful witnesses, or otherwise developing defenses and preparing them for the most effective presentation at trial. In addition, the Eastern District's reluctance to transfer cases to other venues may be curtailed by the recent decision in In re Volkswagen of America, Inc., 545 F.3d 304, 318-19 (5th Cir. 2008), in which the Court of Appeals for the Fifth Circuit ordered a case transferred out of that district, finding the trial court reached a patently erroneous result and abused its discretion by denying transfer.
A stronger indication of the turning tide, however, is the increasing number of patents being invalidated in the Eastern District. Research shows that from 2000 to 2005, only three patent cases in the Eastern District reached judgment for defendants on invalidity grounds, all by judge-decided motions for summary judgment.5 In 2006, however, patents were invalidated in three separate cases, including what is believed to be the first jury verdict of invalidity in the Eastern District.6 Then 2007 saw five more cases where patents were invalidated, and two of those came by way of jury verdict.7
So far in 2008, defendants have invalidated patents in four cases, most recently in CandelaCorp. v. Palomar Medical Technologies, Inc., No. 9:06-CV-277, 2007 WL 738615 (E.D. Tex. Feb. 22, 2007).8 Foley represented the defendant, Palomar Medical Technologies, Inc. (Palomar). Palomar, a leading researcher and developer of light-based systems for cosmetic treatments, prevailed in a significant patent infringement suit in the Eastern District. On October 7, 2008, a jury sitting in Lufkin, Texas found that the company's products did not infringe Massachusetts General Hospital (MGH) and Candela Corporation's (Candela) U.S. Patent No. 5,810,801 (‘801 Patent), titled “Method and apparatus for treating wrinkles in skin using radiation,” and also found that the asserted claims of that patent were invalid. In their complaint, MGH and Candela had accused Palomar of infringing the ‘801 Patent and two additional patents, U.S. Patent Nos. 6,120,497 and 6,659,999 (‘497 Patent and ‘999 Patent). MGH and Candela accused seven different Palomar hand piece products used in combination with four different base units. MGH and Candela also requested injunctive relief and enhanced damages because they alleged Palomar's infringement had been willful.
Following partial summary judgment decisions in Palomar's favor, MGH and Candela were forced to drop from the case many of their accusations against certain of Palomar's products, and to drop all of their claims of infringement of the ‘497 and ‘999 Patents. Plaintiffs went forward at trial arguing infringement of the apparatus claims of the ‘801 Patent. The jury, however, found that none of Palomar's products infringed any of these claims. In addition, the jury found all of these claims to be invalid. Specifically, the jury found that the asserted claims of the ‘801 Patent were anticipated by one prior art reference and found them all rendered obvious by four separate combinations of additional prior art. Following the trial, the jurors told counsel they had quickly decided non-infringement and then spent the bulk of their deliberations considering the prior art and the validity of the plaintiffs' patent.
Why are Eastern District juries now willing to consider and, more and more, accept invalidity defenses? Perhaps defendants are now doing a better job educating juries on their role in being the ultimate decision-makers about the validity of patents. Perhaps the less patent-friendly publicity of the past few years, as Congress debates patent reform and industry complains about the costs of patent litigation, has filtered down and is making an impression. And perhaps in the current economic climate, juries are taking a harder look at whether plaintiffs really should be entitled to significant recoveries.
Whatever the specific combination of factors in play, plaintiffs can no longer take for granted some of the perceived advantages in the Eastern District. Plaintiffs undoubtedly will continue to file a large number of patent cases there. Defendants, however, should no longer assume that jurors are unwilling to analyze prior art or unlikely to carefully weigh invalidity defenses.
1 John Gutkoski and a team from Foley & Lardner LLP recently successfully represented defendant Palomar Medical Technologies, Inc. at trial in the Eastern District, together with David Beck and a team from Beck Redden & Secrest LLP.
2 Administrative Office of the United States Courts, Judicial Business of the United States Courts 2007 Annual Report of the Director, Table C-11 Intellectual Property Cases, Securities/Commodities/Exchanges Cases, and Bankruptcy Appeals Filed, Terminated, and Pending, 194-207 (2008).
5 Minton v. National Ass'n of Securities Dealers, Inc., 226 F. Supp. 2d 845 (E.D. Tex. 2002); Williams v. General Surgical Innovations, Inc., No. 1:00-CV-037, 2002 WL 32114466 (E.D. Tex. May 22, 2002); Touchcom, Inc. v. Dresser, Inc., 427 F. Supp. 2d 730 (E.D. Tex. 2005).
6 Halliburton Energy Services, Inc. v. M-I, LLC, 456 F. Supp. 2d 811 (E.D. Tex. 2006); Maurice Mitchell Innovations, L.P. v. Intel Corp., No. 2:04-CV-450, 2006 WL 3447632 (E.D. Tex. Nov. 22, 2006); Hyperion Solutions Corp. v. OutlookSoft Corp., No. 2:04-CV-436 (TJW) (E.D. Tex. Nov. 22, 2006).
7 Computer Acceleration Corp. v. Microsoft, Corp., No. 9:06-CV-140, 2007 WL 4223218 (E.D. Tex. Nov. 27, 2007); Forgent Networks, Inc. v. EchoStar Comm. Corp., 2007 WL 1775289 (E.D. Tex. 2007); Golden Bridge Tech., Inc. v. Nokia, Inc., No. 2:05-CV-151, 2007 WL 294176 (E.D. Tex. Jan. 29, 2007); TGIP, Inc. v. AT&T Corp., 512 F. Supp. 2d 727 (E.D. Tex. 2007); Advanceme, Inc. v. RapidPay, LLC, 509 F. Supp. 2d 593 (E.D.Tex. 2007). There was also one case where a patent was held to be unenforceable due to inequitable conduct. Avid Identification Systems, Inc. v. Phillips Electronics North America Corp., No. 2:04-CV-183, 2007 WL 2901415 (E.D. Tex. Sept. 28, 2007).
8 Black v. CE Soir Lingerie Co., Inc., No. 2:06-CV-544, 2008 WL 3852722 (E.D. Tex. Aug. 15, 2008); PureChoice, Inc. v. Honeywell International, Inc., No. 2:06-CV-244, 2008 WL 190317 (E.D. Tex. Jan. 22, 2008); Cooper Tech., Inc. v. Thomas & Betts Corp., No. 2:06-CV-242, (E.D. Tex. Sept. 11, 2008).