Zombie patents — they cost the healthcare system billions, but just won’t die

Venture Beat — Thu, 28 Feb 2008 14:40:47 -0800

I’ve been generally unsympathetic to cries that biotech and medical-device companies will suffer if U.S. patent law is reformed, and that has a lot to do with some of the grotesque patent abuses biopharma companies have perpetrated — quite legally — over the years in order to lock out competition for as long as possible. While Big Pharma has probably been the biggest offender along these lines, Big Biotech has plenty to answer for as well.

Which is why the news that Genentech’s “Cabilly” patent, which lays claim to some fundamental techniques for making bioengineered antibodies, has just been rejected for a fourth time — although it’s still not dead — strikes me as a perfect occasion for Schadenfreude. For Cabilly, which continues to bring Genentech more than $100 million in royalties every year well after it should have expired, offers a terrific illustration of the the lengths companies will go to artificially extend patent terms. These zombie patents cost the healthcare system — which, of course, ultimately pays the price for shenanigans like these — billions of dollars, all the while stifling innovation and enriching those who have figured out how best to game the system.

The history of Cabilly is long and convoluted — anyone interested should take a look at this Legal Times piece (PDF link), tellingly titled “It Lives for 29 Years?” — so I’ll limit myself to the high points. In 1989, Genentech found its newly issued Cabilly patent in conflict with another, issued the very same day, owned by Celltech, a U.K. biotech that also claimed ownership of basic antibody technology. The companies clashed for years, first in the U.S. Patent and Trademark Office, then in the courts, before finally agreeing to settle the case.

Their 2001 agreement remains confidential, but the aftermath was clear. The court ruled in Genentech’s favor, voided the Celltech patent and, remarkably, issued Genentech a brand-new patent — “Cabilly II” — that covered exactly the same invention as Cabilly I. Genentech also agreed to pay Celltech the same royalties it would have received from its now-worthless patent until the date it would have expired in 2006. In other words, Celltech got paid as if it had won the case, while valuable antibody technology that would have entered the public domain two years ago remains locked up by Genentech’s new patent for another decade — until 2018, in fact.

The Cabilly patent, which earned Genentech $133 million last year, has come under sharp attack over the past several years. In 2005, MedImmune — now a unit of AstraZeneca — sued to invalidate Cabilly II on the grounds that it resulted from an illegal, anti-competitive agreement between Genentech and Celltech. That MedImmune case won’t actually be tried until June, as it was tied up for years in a procedural argument that went all the way to the Supreme Court. In the meantime, however, the patent office has also reexamined the patent and found it wanting on several occasions — most recently just two days ago.

Like the zombie it is, however, Cabilly keeps springing back to life every time someone thinks they’ve finally put it down. Genentech has the right to appeal the latest decision within the patent office and in the courts, has every incentive to run out the clock as long as it can. Unless, that is, the MedImmune case gets Cabilly first.

(Photo by Flickr user Bob.Fornal, used under Creative Commons license.)