▶ 0:18:11Chair Grassley: Good morning. Welcome everyone to this important hearing. We are here to discuss it a cutting-edge question, what inventions should be eligible for U.S. patent protection? First, as you can see on my right, the absence of a very important member of this committee for decades.
▶ 0:18:39Chair Grassley: I think it's important that we take a few minutes to remember and honor our friend and colleague senator lindsey graham. He passed away over the weekend, as we all know. He leaves behind a distinguished career as a U.S. senator and former chairman, ranking member of this committee.
▶ 0:19:08Chair Grassley: Lindsey was a resounding voice in this judiciary committee, especially through the high-profile and successful confirmations of justice brett kavanaugh and justice amy coney barrett. He saw many conservative judges appointed to all levels of the federal court. Notably, he did this and more through the covid pandemic. Public service was lindsey's calling.
▶ 0:19:37Chair Grassley: He approached it with enthusiasm and energy and tireless dedication. His leadership to this committee and the senate for this country will be missed. So I just want to take a moment of silence to remember senator lindsey graham.
▶ 0:20:14Chair Grassley: Thank you very much. Our nation's founders understood the importance of patent protection to the economy and wrote of our newborn nation. They guaranteed this protection in our constitution, and then at the earliest time in 1790, the first patent law was passed.
▶ 0:20:42Chair Grassley: The task before us today is not an easy one. Patent eligibility is a multilayered legal issue with detailed tests and case-by-case rules created by the supreme court. This law must be called and gleaned from many pages of the court's nuanced opinions. Next, we tie in science.
▶ 0:21:11Chair Grassley: All scientists from genes two machines to artificial intelligence, and then we mix in insatiable human curiosity and boundless creativity, we begin to understand why this area of law is so challenging and so relevant this very day.
▶ 0:21:39Chair Grassley: It is rules trying to keep up with scientific development and human imagination. There is much debate about how this -- how to deal with this complex patent issue. Senator tillis has done an excellent and diligent work including holding multiple hearings in the intellectual property subcommittee. I believe this is the first hearing we are holding on legislation at the full committee level.
▶ 0:22:08Chair Grassley: We may or may not agree on this bill entitled patent eligibility restoration act. I don't yet know. Most of us are still studying and trying to understand the bill and the effects it will have in order to determine what is the best path forward.
▶ 0:22:29Chair Grassley: That is why we are here today, to study and understand this important issue that has had tremendous impact on the well-being of humanity and the success of our economy. We have four experts joining us today. Thank you for being here. Others who are submitting written testimony for the record to help us understand this with insights and experience. The stakes could not be higher.
▶ 0:23:01Chair Grassley: Our country leads the world in cutting edge inventions and technology. This momentum feels our economy and advances our society, it cures diseases and helps us grow enough food to feed people throughout the world. We have a responsibility to americans to hold this lead, and to the world, to fulfill our potential.
▶ 0:23:31Chair Grassley: The question we ask today is how we do maintain this momentum and while also making sure that all americans can benefit from these advances. Learning how to strike this balance is why we are holding the hearing today. We will have a fascinating discussion.
▶ 0:23:54Sen. Durbin: Thanks, Mr. chairman. I know this is a meeting of the senate judiciary committee but something is missing, lindsey graham. After all these years working with him, his absence is felt personally by so many of us. For four years, I chaired this committee. He sat next to me. We were adversaries on many issues on nominees.
▶ 0:24:23Sen. Durbin: We were trusted friends with one another. His word was good. When he told me he would do something, he did it. I tried to keep that same trust in dealing with him. He ended up voting for 75 percent of the biden judicial nominees, 75%. It wasn't easy, but he said from the beginning, I think republicans have to vote for democrats and democrats up were republicans. That is the way it's always been.
▶ 0:24:53Sen. Durbin: I tried to live to that standard ever since. He was part of something called the gang of eight which is really unique in history of the senate. There were literally four democratic senators, myself included, four republican senators including john mccain and lindsey, who sat down to rewrite the immigration laws of america, and that is long overdue. We spent months at it every night after the session, sitting down and going through another section.
▶ 0:25:22Sen. Durbin: We finally put it together on a bipartisan basis. Lindsey was a critical part of that, as were many of the members of my colleagues. We put it to the floor. Business supported, labor supported it, the groups across the board supported it. It was thoughtful, it was balanced, it was a remarkable achievement on a bipartisan basis. It passed in the senate with an overwhelming vote that unfortunately was killed in the house of representatives.
▶ 0:25:51Sen. Durbin: Lindsay was part of that gang of eight. Lindsay was part of every gang. He couldn't be kept away. He was invited in because he was always trying to find that bipartisan position that resulted in a new law, new solution. Very important to him. Over 20 years ago, introducing this committee a bill called the dream act.
▶ 0:26:12Sen. Durbin: It said if you came to this country, your mother and father brought you here as a kid, you ought to have a chance to work your way to legal status and citizenship in this country. I introduced it over 20 years ago. It passed on the senate floor once in a while, and the house once in a while, never in both chambers. Each year I would introduce the bill, look for a republican cosponsor. In the beginning it was a lot easier and that it became harder.
▶ 0:26:42Sen. Durbin: Eventually the one person I could count on to be a bipartisan cosponsor was lindsey graham. And he did it at political peril. It was not a very popular position among very conservative members of republicans. But he did it for me, his kids, and I will never forget that he was there when we needed him. Last week, we were at the nato summit in turkey, several members came together.
▶ 0:27:07Sen. Durbin: We arrived to find of course lindsey graham who got there before us, working every crowd, you would think he is running for office. He had some ideas on how to end the war in ukraine and wanted to share it with everyone there. We met with president zelenskyy and many other leaders on a bipartisan basis. Each one of them rated lindsey by first name. Great to see you. It just shows you his reach of influence and his involvement in the key issues including war and peace of his day.
▶ 0:27:40Sen. Durbin: I'm sorry to say that wednesday was the last time I saw him, I think the same for senator coons. And then the terrible news came through on sunday morning. I am going to miss this man. He was an important part of the senate, important part of american government. He reached way beyond any definition of the job of senator. He was really a person you could trust on a personal basis. You could confide in him as he confided in you.
▶ 0:28:09Sen. Durbin: I'm happy his sister is going to take his place for the remainder of this year. He loved her. When his parents passed away, he became legal guardian of his 13-year-old sister. That meant so much to him. I know that he would consider this only right that she be chosen to fill the vacancy. The red and I send our condolences to her and lindsey's family and the legion of friends in south carolina and literally around the world who worked with this great man. Thank you, Mr. chair.
▶ 0:28:39Chair Grassley: Thank you. Senator tillis for an opening statement.
▶ 0:28:46Sen. Tillis: Thank you, Mr. chairman. I want to echo everything said about lindsey. He was a great man. Mr. chairman, you may not realize this, but in some respects, lindsey graham is sorta responsible for this hearing today. It was in 2019, 1 of your former staffers, who became my chief, suggested that we reestablish the intellectual property subcommittee. Senator graham authorized that.
▶ 0:29:14Sen. Tillis: The work of the subcommittee is now coming before the full committee for the first time. Mr. chair, also have to say, I know that you may have some questions and concerns, you are still examining this legislation. It's a real testament to your leadership to elevate something to the full committee that you yourself are still trying to work through some of the issues. I appreciate your leadership.
▶ 0:29:40Sen. Tillis: Our patent system, as senator grassley commented, is a part of our founding. We are the first nation to enshrine in our constitution this concept of intellectual property. I actually believe it's one of the reasons we have become the innovator that we are.
▶ 0:30:03Sen. Tillis: We started out thinking that thinking was important, and then being able to take that thought and put it into something that the person who invests their time and treasure could recover, it is what innovation is all about. Such a brilliant idea. It is not lost on me that some of the founding fathers were inventors themselves.
▶ 0:30:27Sen. Tillis: I don't know if it was a combination of vision or maybe some self interest there, but either way, we got it right, like so many things in our constitution. But the problem we have with patent eligibility today is that we are on the brink of losing our innovation advantage if we don't figure out that the world has changed since the founding of the constitution.
▶ 0:30:57Sen. Tillis: And that things that we could not possibly have conceived of need to be considered potentially for a patent. This is not guaranteeing you are getting a patent. It is simply saying the world has changed. The jurisprudence is all over the place. 12 judges have lamented the fact that they even had to deal with it when rendering a decision. Other jurisdictions are looking at expanding and have expanded eligibility.
▶ 0:31:26Sen. Tillis: Why would the united states fall behind? I am not requesting legislation that guarantees anything can get a patent. At the end of the day, what they are trying to do is simply trying to open the aperture to what may be patentable. Today, what I was telling the witnesses before hand, the debate club up to another level. In my committee, some of you have figured out, I am not overly formal.
▶ 0:31:54Sen. Tillis: I think we are at our best when we are doing work groups, having an exchange between the thought leaders directly. Then this hearing, the chair has allowed me to share it. I believe the chair will be leaving. You four should be taking notes, or your staff. At the end of this hearing when everyone else is worn out, I will stay here and we will drill down on topics where that interchange is so critical.
▶ 0:32:23Sen. Tillis: Because I believe regardless of what side of the issue you are on right now, there is a path forward. We can help those that are concerned with changing the status quo. At the same time, have a remarkable impact on stimulating and fostering creativity going forward with a very different way of looking at eligibility. I look forward to this committee hearing and to your feedback. Mr. chair, I appreciate you holding the hearing. Thank you.
▶ 0:32:51Chair Grassley: Let me introduce our distinguished panel. I apologize, I was told you did not want to speak. Please proceed. >> never met a senator that doesn't want to speak. Mr. chairman, thank you for your graciousness, to you and ranking member durbin, for your long and deep friendships with senator graham.
▶ 0:33:17Chair Grassley: I had the blessing of having dinner with him last wednesday night in ankara with some of our staff. He talked about how excited he was for this coming congress and for the way we might continue to do good things together legislatively on this committee and on others.
▶ 0:33:33Chair Grassley: My chief counsel just reminded me, he was my lead cosponsor of a bill signed into law by president trump earlier this year, not widely remarked, but extended terms of bankruptcy judges in my state and many others. We were at times fierce partisan adversaries but we also at times passed some really significant legislation. Whether it was an immigration or immigration, whether it was advancing our national interest or core values, lindsey fiercely love to this country.
▶ 0:34:06Chair Grassley: I am excited that his sister whom he dearly loved will be filling his seat for the remainder of this congress, grateful that I have the blessing of knowing this remarkable man who described himself simply as a country lawyer. But so often with his brevity and his indecisiveness and his incredible humor, got to the core of an issue and drove it forward. Also, senator tillis, thank you so much for your incredible partnership on this topic.
▶ 0:34:35Chair Grassley: It has confounded many efforts at clearing the underbrush, clarifying that ticket come as you said. About 15 years ago, the supreme court started wing into an area, section 101 patentability jurisprudence. There have been huge changes in technology.
▶ 0:34:54Chair Grassley: Every member of the federal circuit at some point has reached out and asked us for guidance, solicitor generals have repeatedly requested the supreme court revisit patent eligibility but they have refused, denying nearly 100 petitions. This isn't an academic exercise that senator tillis just laid out.
▶ 0:35:17Chair Grassley: Development and artificial intelligence and block chain, medical diagnostics, 5g are patentable in china and europe and not patentable here. I view this as critical for us to address in order to restore american leadership in innovation and to advance our national security. If the court won't clean up this mess, congress needs to act. That is why senator tillis and I have been advocating over many congresses.
▶ 0:35:44Chair Grassley: We at one point had 50 witnesses over three hearings on the subcommittee. Senator tillis has been tireless and determined. I'm grateful this bill has the endorsement and support of senators hirono and blackburn and the support of many other members of this committee. Mr. chairman, thank you for elevating this important topic to a full committee hearing. I so look forward to this hearing today, to these four very talented witnesses.
▶ 0:36:11Chair Grassley: Just wanted to close by thinking senator tillis or his tireless engagement on this important issue. Thank you, Mr. chair.
▶ 0:36:17Chair Grassley: Thank you, senator coons. I have the privilege of introducing these witnesses. Mr. andrei iancu, cochair of the council for innovation promotion , a partner at the law firm sullivan and cromwell. Between 18 and 21, served as director of the U.S. patent and trademark office. Mr.
▶ 0:36:45Chair Grassley: Iancu earned his jd, ms in mechanical engineering, bs in aerospace engineering from ucla. Mr. john lee is senior director, head of intellectual property policy at the computer and communications industry association.
▶ 0:37:14Chair Grassley: He previously served as chief counsel for intellectual property on the house judiciary committee. Before that, he worked as lead administrative patent judge on the patent trial and appeal board at the U.S. patent and trademark office. Mr. lee received his law degree, bs in bioengineering, ba in biology, new world science from university of pennsylvania.
▶ 0:37:46Chair Grassley: Dr. debra leonard -- I'm sorry. I skipped one here. Sue peschin serves as president, ceo of the alliance for aging research. She also serves on many boards including the association of black cardiologists, national health counsel, voices of alzheimer's, and others.
▶ 0:38:18Chair Grassley: Ms. peschin received her masters degree in health policy, johns hopkins bloomberg school of public health, bachelor degree in sociology, brandeis university. Dr. debra leonard fills out the panel.
▶ 0:38:37Chair Grassley: She is currently professor of pathology and laboratory medicine aemerita at the robert larner md college of medicine at the university of vermont. She serves as chair of the department of pathology and laboratory medicine until last year. Dr.
▶ 0:38:59Chair Grassley: Leonard earned her md degree and phd in biochemistry from new york university, and her bachelor's degree in biology, smiths college. Before you testify, we have a practice here of swearing people. Would you please stand?
▶ 0:39:21Chair Grassley: Do you swear or affirm that the testimony you are about to give before this committee will be the truth, the whole truth, and nothing but the truth so help you god? You have all responded in the positive. We will start out with Mr. iancu. Please proceed.
▶ 0:39:40Mr. Iancu: Thank you, chairman grassley, ranking member durbin, members of the committee. Thank you for the opportunity to testify today. Before I begin, I want to say that I am heartbroken about senator graham's passing. I was very much looking forward to seeing him on the day is today. He chaired this committee when I was pto director.
▶ 0:40:08Mr. Iancu: I have only fond memories of our meetings. He was gracious, smart, witty, and he loved this country. He was a statesman in the best sense of the word. He fought hard for his beliefs, and he reached across the aisle when it served america's interests. May others follow his lead, and may his memory be a blessing. My message for this hearing is simple.
▶ 0:40:39Mr. Iancu: Congress has not meaningfully updated the basic statutory categories defining what kinds of innovations and technology may be patented since 1793. Technology has changed a bit since then. Indeed, it has changed beyond recognition. The statute has not. What belongs in the patent system is a major policy question.
▶ 0:41:09Mr. Iancu: The constitution assigns the question to congress. I urge congress to answer it. And because congress has not done so, courts have filled the void. Over the past 15 years, courts have expanded judicial exceptions that congress never wrote, and that lower court judges say they cannot administer consistently or fairly. The consequences are real. The result is uncertainty in the technologies that will define the century.
▶ 0:41:42Mr. Iancu: Computing, medical diagnostics, biotechnology, artificial intelligence, and so much more. For example, courts have rejected tests that diagnose serious diseases as laws of nature. They have rejected improved digital camera technology as an abstract idea, and they have treated the collection, analysis, and presentation of information as categorically suspect and likely not in the patent system.
▶ 0:42:11Mr. Iancu: The resulting uncertainty discourages the resource intensive resources that america needs to confront its greatest challenges, from detecting and treating thousands of diseases that remain without effective therapies, to equipping our military with the most advanced computer-assisted technologies. Meanwhile, europe, china, japan, and south korea, the biggest other ip jurisdictions protect inventions that american courts turn away.
▶ 0:42:39Mr. Iancu: That is a self-inflicted competitive disadvantage in precisely the fields in which the united states is competing for technological leadership at this time. The burden falls especially hard on small innovators. Large companies can rely on scale, secrecy, and litigation budgets. For startups and other small businesses, patents may be the principal assets. The foundation for attracting capital, hiring employees, and bringing a product to market.
▶ 0:43:10Mr. Iancu: Reliable patent rights also encourage inventors to disclose their breakthroughs rather than keep them secret. Allowing others to learn from and build upon them. And they help attract manufacturing and investment to the united states. Para would restore clarity.
▶ 0:43:26Mr. Iancu: It preserves the broad technology neutral framework that has served the country since 17 93 while replacing unpredictable judicial exceptions with a defined list of matters that congress decides to include from the patent system. One clarification is essential though. The patent laws impose several distinct requirements. Section 101 asks only a threshold question. Is this the kind of technology the patent system may protect?
▶ 0:43:59Mr. Iancu: Other provision determine whether the invention is new, nonobvious, and adequately disclosed. Eligibility is not patentability. Passing through the gate does not guarantee a patent. Para is only about eligibility and leaves the patentability standards unchanged. The american patent system is a powerful engine of investment and growth.
▶ 0:44:25Mr. Iancu: But only when it's rules are clear, predictable, and properly balanced. Today at the threshold, they are not. Congress should decide what belongs in the patent system and give american innovators the confidence to invest, to build, to disclose, and to keep the next generation of breakthroughs here at home. Thank you. I look forward to your questions.
▶ 0:44:57Mr. Iancu: >> thank you. At the outset, I had a great privilege of meeting senator graham a few times in my career. I just want to briefly say that I join with countless americans and offering my deep condolences to senator graham's family, to his friends and colleagues. Chairman grassley, ranking member durbin, members of the committee, my name is john lee.
▶ 0:45:24Mr. Iancu: I'm the senior director and head of ip policy at the computer and communications industry association. Our members include some of the most innovative and prolific patent owners in the world and they depend on a strong balanced patent system to support innovation, protect ip, and encourage economic growth. It's a great privilege to be invited here to testify today and I appreciate the opportunity to share our insights on this important topic. In my opening remarks, I like to focus on three key points.
▶ 0:45:57Mr. Iancu: Predictability, innovation, and protection. First, but it debility. Despite some claims that the sky is falling when it comes to patent eligibility, the current state of that law in the united states is cogent and consistent. How do we know that? Empirical data has revealed patent eligibility decisions today are remarkably reliable and are seldom reversed or even draw a dissent on appeal.
▶ 0:46:26Mr. Iancu: A recent study in the iowa law review found that, since 2012, district court decisions and patent eligibility have been affirmed more than 85% of the time. Decision from the uspto have been affirmed more than 95% of the time. Usually unanimously.
▶ 0:46:47Mr. Iancu: This and other data shows courts understand the patent eligibility rules and apply them accurately to reach correct result in the vast majority of cases. And this shouldn't be that surprising. Because patent eligibility law has actually been largely consistent for over 170 years. Which brings me to my second point, innovation.
▶ 0:47:12Mr. Iancu: Consistent, predictable, patent eligibility rules have contributed to more than a century of american innovation and technological leadership. More importantly, current law continue to support robust innovation including in many of the areas we've been talking about already like artificial intelligence. If the current patent eligible he framework or suppressing innovation, as some would say, we would expect to see it reflected in the data but in fact we see the opposite.
▶ 0:47:42Mr. Iancu: For example, the uspto issued approximately 50,000 artificial intelligence patents last year alone. That's almost double since the supreme court's alice decision. R&d spending has also increased in that time period including in the industry's most affected by section 101 such as software including ai.
▶ 0:48:04Mr. Iancu: Venture capital investment in ai has also skyrocketed with the united states receiving 75% of global vc funding in the ai sector just last year, a total of $200 billion.
▶ 0:48:21Mr. Iancu: Importantly, the united states received about 12 times as much vc funding in ai as the eu which came in second place, and 15 times as much as china and third, which cast doubt on those who claim the supreme court's section 101 cases are disadvantaging U.S. companies. That brings me to my third point. Protection. One of the ways that patent eligibility rules contribute to innovation is by shielding innovative U.S.
▶ 0:48:51Mr. Iancu: Businesses from low quality patents. Without reasonable limits on patent eligibility, litigation brought by rent seeking patent assertion entities is likely to rise. Patent assertion entities often wield low quality patents on abstract ideas like sorting or organizing information with only token recitations of generic computers or devices. It's exactly what section 101 is designed to address. Section 101 protects U.S.
▶ 0:49:21Mr. Iancu: Businesses targeted by such low quality patents which freeze resources and rehearse investors to boost innovation. For example, a recent study found that vc funding to the industries most affected by the supreme court's alice decision actually increased by only 2% after the alice decision.
▶ 0:49:43Mr. Iancu: This study also revealed that the reason for that increase was directly related to the protection provided by section 101 against spurious litigation on low quality patents. In closing, we are living through one of the most consequential periods up and looked up -- technological advancement in our history with american leadership in areas like artificial intelligence, advanced computing reshaping our economy, society, and the world.
▶ 0:50:15Mr. Iancu: Section 101 is part of that success due to the three key points about patent eligibility I described, protect ability, which bruce innovation, including by protection of U.S. businesses, all greeting the balance that the patent system needs to continue promoting these and future innovations as it has for well over a century. I commend the committee for taking a thoughtful approach to understanding patent eligibility and thank you for inviting me to testify on this important topic.
▶ 0:50:49Ms. Peschin: Chairman grassley, ranking member durbin, members of the committee, thank you for the opportunity to be here. Before I get started, I also want to enjoy and others in saying I'm deeply sorry for the loss of your long tim colleague and friend, senator graham. Senator durbin, thank you for sharing your personal stories. My name is sue peschin, I serve as president and ceo of the alliance for aging research.
▶ 0:51:17Ms. Peschin: At the alliance, we are changing the narrative to achieve healthy aging and fair access to care. Personally, I'm also a family caregiver to my mom who is 85 and lives with kidney disease, arthritis, and dementia. Today's hearing is not an abstract policy debate for older patients and family caregivers like me. This is about lives, choices, and hope.
▶ 0:51:42Ms. Peschin: It's important to understand why the passage of the bipartisan patent eligibility restoration act or pera has become urgent. For 15 years, the U.S. patent system has struck down thousands of patents and failed to protect some of the most transformative innovations in diagnostics. Not because they were not new or useful, but because a series of supreme court rulings created confusion when broadening patent in eligibility and invalidation.
▶ 0:52:12Ms. Peschin: The problem is especially severe in medical diagnostics. The supreme court's expended exceptions for laws of nature, natural phenomenon and abstract ideas have made many diagnostic inventions ineligible for patents. As a result, the patent office often rejects applications for methods that detect disease to measure biomarkers, or convert biological discoveries into practical clinical tools.
▶ 0:52:40Ms. Peschin: A 20 study in the washington and lee law review found within only four years after one of the key cases, investments in diagnostics fell more than $9 billion short of what it otherwise would have been. The cost of lost diagnoses for families is one of alliance for aging research strongly supports pera.
▶ 0:53:01Ms. Peschin: The bill would restore clarity to the eligibility section of the patent act so that inventors of medical discoveries can reliably make their way from the lab to doctors and their patients. I want to note that patent eligibility doesn't guarantee patent approval, it just lets the patent office consider an invention. Without patent protection, many of these tests are never developed or they sit on a shelf.
▶ 0:53:25Ms. Peschin: One of the clearest examples is -- they developed a noninvasive prenatal test that could detect fetal abnormalities from a simple maternal blood sample, sparing moms and babies the risk of amniocentesis. It was a genuine scientific breakthrough.
▶ 0:53:47Ms. Peschin: Yet, the federal circuit invalidated the patents there judge richard lin stated in his concurrence that the invention was exactly the kind of advance the patent system is meant to encourage and protect, but the mayo decision compelled him to strike it down, and he actually called on congress to resolve the confusion. A similar situation arose when university researchers developed biopsy tests that could predict brain metastases and melanoma patients.
▶ 0:54:15Ms. Peschin: But patents on these methods were denied under the mayo and marriott standards, forcing researchers to abandon their efforts. As a result, many melanoma patients learned their cancer has spread to the brain after the fact when they may only have weeks to live. Pera would largely eliminate those barriers and let those diagnostics be judged under the normal patentability rules. What we really stand to lose in the future is as concerning as what patients have already lost.
▶ 0:54:45Ms. Peschin: Researchers are developing detection tests that have the potential to identify several cancers at once through a simple blood trial. These tests look for patterns in dna and protein markers that can indicate the presence of early stage cancer cells. Catching these cancers earlier will improve survival rates and reduce the burden of treatment for older adults. The promising work and develop it for biomarker based in diagnostics and parkinson's is also critical.
▶ 0:55:15Ms. Peschin: As seniors facing parkinson's often endure years of visiting doctors before receiving a diagnosis. Today, there is no single definitive test. This is exactly the kind of innovation america should be leading. But if diagnostic patents remain unpredictable in the U.S. from investor capital will move elsewhere. Members of the committee, it's encouraging to see bipartisan leadership on this issue.
▶ 0:55:45Ms. Peschin: There is sure agreement something is wrong in their shared commitment to fix it. On behalf of the alliance for aging research in older patients, and caregivers across the country, I respect fully to this committee and congress to pass pera before the end of this year. Thank you so much. >> Dr. leonard.
▶ 0:56:06Ms. Leonard: Ranking member durbin, other members of the committee, my deepest sympathies to all of you who are grieving the loss of senator graham. Thank you for the opportunity to testify today. My name is debra leonard. I've spent my medical career developing and overseeing clinical genetic testing used to diagnose disease and guide treatment.
▶ 0:56:34Ms. Leonard: I want to share with you my experiences with prior to the mira decision. The university of pennsylvania health system received seven patent enforcement letters between 1997 and 99 and again in 2002. The enforcements stopped my laboratory from performing four of our tests that we have been performing, and another clinical laboratory from performing one of their tests.
▶ 0:57:02Ms. Leonard: We obtained a license to perform the other two tests, one which led to increased costs for our patients. The medical consequences of gene patents are many. If testing for a disease is monopolized by one company, that company sets all the rules for access to testing such as not accepting certain forms of payment or not performing prenatal testing or testing for other purposes. The company can charge any price.
▶ 0:57:34Ms. Leonard: The company decides how the test will be performed which can result in incomplete testing. We lose the innovation in testing methods that happens when many laboratories are performing the test which often results in tests that are faster and at lower cost. Health care systems pay for the added costs and time of shipping specimens for testing.
▶ 0:58:00Ms. Leonard: One company obtains all the specimens from across the country, thereby limiting further research on the disease and testing methods. A gene patent holder may allow broader testing but charge any level of licensing and royalty fees. Please understand that in the current medical practice, we routinely test many genes in a single test, or even the entire genome.
▶ 0:58:26Ms. Leonard: Therefore, elimination of one or more genes by one or many patent holders makes the test incomplete or requires multiple tests which increases cost. By contrast, the university of michigan gave free licenses for their patent on the most common variant that causes cystic fibrosis to any not-for-profit clinical laboratory performing the test for their patients.
▶ 0:58:54Ms. Leonard: My point is that a gene patent holder has the legal right to totally control the use of the gene without regard for the impact on patients and medical care. Physicians are increasingly using genetics and health care with amazing innovations. We can sequence a sick newborn and parental genome, identifying the genetic cause for the sickness in the baby in about 25% of the babies.
▶ 0:59:22Ms. Leonard: For cancer patients, we can identify the genetic changes or biomarkers causing a patient's cancer to grow, which can allow treatment with genetically targeted therapies that achieve jurors and remissions more successfully than standard chemotherapy.
▶ 0:59:38Ms. Leonard: I could go on and on about all the incredible advances we have seen in genomic medicines since 2013, but the important point is that all of the success occurred under the current patent eligibility framework, not despite it.
▶ 0:59:55Ms. Leonard: We continue to reward true innovation through patents on novel technologies, therapies, and laboratory methods while ensuring the building blocks of biology remain available for researchers, clinicians, and patients. Having experience in both worlds, I can say with confidence that the current framework serves patients and drives innovation far better than the one that existed before . I want to be very specific about my concerns with pera.
▶ 1:00:27Ms. Leonard: We have a fundamental disagreement in that the medical community holds that any part of the human genome, and disease biomarker, any pathogen genome should not be patent eligible. We are not opposed to patenting any innovation or invention that uses a sequence found in humans or pathogens without then claiming a patent on the basic sequence or biomarker.
▶ 1:00:51Ms. Leonard: These foundational building blocks needed for medical care should remain available for everyone, for innovation, and invention. Please do not go back to dividing up the human genome by patents that restrict medical practice, increase costs of care, and limit patient access to life-saving tests and therapies. To be clear, pera is bad for patients went bad for health care, and bad for innovation. Thank you for the opportunity to testify.
▶ 1:01:20Ms. Leonard: I look forward to answering your questions.
▶ 1:01:24Sen. Tillis: Thank you Dr. leonard. I noted during the opening statements there was a lot of note taking, so I'm looking forward to the debate around that well and after my colleagues have had a chance to ask questions. Real quick, from each of you, do you believe that the court, specifically the supreme court, turned section 101 from a historically course faltered to a fine falter?
▶ 1:01:51Mr. Iancu: Thank you for the elevation to the doctor. . Appreciate the honorary degree.
▶ 1:02:00Sen. Tillis: I meant to say director, by the way.
▶ 1:02:04Mr. Iancu: Yes, senator, I believe that is exactly what the supreme court said.
▶ 1:02:09Sen. Tillis: Mr. lee?
▶ 1:02:11Mr. Lee: Thank you for the question, senator. Respectfully, I don't think that's the case. Supreme court's recent cases and section 101 have been mischaracterized a bit. Generally speaking, they are procedural. They describe a process in which you conduct the section 101 inquiry, but the substance of the inquiry is consistent.
▶ 1:02:32Sen. Tillis: Yes or no. We will get back to that in the debate round.
▶ 1:02:36Ms. Peschin: Yes.
▶ 1:02:38Ms. Leonard: No.
▶ 1:02:43Sen. Tillis: Director iancu, at your time at the pto, you issued guidance around section 101. I felt like a guidance did a lot of good, certainly instructed some of our thinking. But guidance alone will not get the job done. Tell us why.
▶ 1:03:06Mr. Iancu: Given the separation of powers, courts are not bound by administration guidance. They do what they think is right, independent of what the administration says. In fact, that is what they have done. I will say that the guidance has indeed done a lot of good at the pto and practice before the pto.
▶ 1:03:36Mr. Iancu: What the guidance did come of 2019 guidance, what it did is took the body of law at the supreme court and federal circuit has created in this area and the synthesized it in a way that examiners and applicants can understand and follow a very specific process. The result has been, in one year, immediately following the guidance, the consistency of decisions in this area went up by 44%.
▶ 1:04:09Mr. Iancu: And as Mr. lee noted earlier, the federal circuit affirms over 95% of decisions in this area from the pto. Therefore, the guidance basically follows the law given by the courts. Two points are important here. There are two problems with the courts and jurisprudence here. Number one, it is substantive.
▶ 1:04:31Mr. Iancu: The courts have taken upon themselves to exclude from patentability major areas of technology without congress ever saying it should do that. It is excluding, for example, the medical diagnostics, and for example, excluding the analysis of heavy duty analysis, technological analysis of information and data. There are other examples.
▶ 1:04:56Mr. Iancu: If there is some exclusion of major areas of technology that are to be done, this congress needs to debate that and make that decision for the country. That is a substantive problem. There is a procedural problem. By the way, the substantive problem, congress need to do. There is a procedural problem. The courts have created an inconsistent framework that is difficult to follow and predict in the court system itself.
▶ 1:05:24Mr. Iancu: That problem is solvable by the administration for processes in front of it, like we did with the 2019 guidance. And we solved the inconsistency problem. Courts could do the same thing if they wanted to but again they are not bound by it. What pera does is address the procedural and administrative problem.
▶ 1:05:51Sen. Tillis: I will hold some of my questions in the second run for me. Senator durbin.
▶ 1:05:57Sen. Durbin: Thanks, Mr. chairman. Bear with me. I'm a liberal arts lawyer who spent a lot of my life in politics. I wouldn't know what to do in a laboratory. I don't know much about genetic testing. I take it that that is one of the issues that we need to discuss. I will start with Dr. leonard.
▶ 1:06:19Sen. Durbin: I read the supreme court has said, when it comes to strike him down patents on abstract ideas, laws of nature, natural phenomena, and abstract ideas are not patentable. That seems to be the general conclusion of the court.
▶ 1:06:37Sen. Durbin: They go on to say, in other cases, natural phenomena is similar to abstract ideas, not patent eligible, whereas the application of natural phenomena in a man-made invention is eligible. Dr. leonard, what you describe is genetic testing. You were saying that some entities believe they have a patentable write two forms of genetic testing to the exclusion of other people who want to use it. Is that correct? Why is that a problem?
▶ 1:07:09Ms. Leonard: The wording in pera is such that a gene is protected as long as it remains in your body and my body, Mr. tillis' body. However, as soon as you purify or enrich a gene, it is patent eligible. I cannot tell the difference in the laboratory from the genes in your body and the genes that I make in a test tube.
▶ 1:07:40Ms. Leonard: They are identical. So basically, by saying when you make copies of a gene, you are changing that gene, you are not really. You are controlling the medical use of essential information for caring for patients.
▶ 1:08:00Ms. Leonard: So the basic building blocks, dna, when I have a patient that has a mutation in a gene, that mutation exists in that patient. I simply read it. It is a discovery. It is an uncovering of what exists in a patient. It is not an invention or innovation and should not be patent eligible.
▶ 1:08:26Ms. Leonard: So I have no problems with new testing methods, new sequencing instruments, long-range sequencing. If you don't know what that means, highly innovative, has not reached the clinical market. All I'm asking is that those basic building blocks being not controlled by any patent holder.
▶ 1:08:51Ms. Leonard: They can use those sequences in a patent, but then that sequence is still open for anyone to use for further invention and innovation, competition, which in medicine is so important for controlling costs, forgetting better therapies, better diagnostic tests. That is what I'm asking for.
▶ 1:09:13Sen. Durbin: Mr. lee, when I was a kid, we were scared of polio. We have a calling that is now suffering from long-term issues he has had from polio. Many of us knew personal stories. Along comes the vaccine. I didn't care for the shot in my arm but my mom was relieved and I realized how important it was in my life. The doctor said I'm not going to patent a vaccine, I want everyone to have it.
▶ 1:09:42Sen. Durbin: I think it's important to public health. When I listen to Dr. leonard, I hear her say that my research will be restricted by the patent rights of others are claiming. Do you feel the same?
▶ 1:09:52Mr. Lee: That certainly can occur depending on how that is scoped, how you look at section 101. Obviously, there are some views that the aperture should be increased. We have heard that. That would allow more patents on things that the supreme court has said our basic fundamental building blocks of research and innovation.
▶ 1:10:15Mr. Lee: The laws of nature, mathematical relationships that exist, these are things that are part of the storehouse of knowledge for all humanity, what the supreme court said. Because of that, those things have been restricted from patenting by the supreme court section 101 law. If that is changed in more of that material is allowed to be patented, owned exclusively by one patent owner, then it will be much harder to use those building blocks for further innovation.
▶ 1:10:43Sen. Durbin: Are you agreeing with Dr. leonard?
▶ 1:10:46Mr. Lee: I am. I think pera has some issues and could use some refinement to make sure that some of these dangers don't happen.
▶ 1:10:59Sen. Durbin: Thank you. >> senator durbin, could I clarify? I'm not talking about research come on talking about medical care for patients.
▶ 1:11:09Sen. Tillis: Senator blackburn.
▶ 1:11:14Sen. Blackburn: Thank you, Mr. chairman. Thank you to each of you. When I talked with tennesseans, they want to make certain that we stay on the cutting edge when it comes to medical innovation and utilization of health care technologies. Dr.
▶ 1:11:35Sen. Blackburn: Leonard, as you were just mentioning, talking about patient care, making certain that that care is available to tennesseans. Director, let me come to you. Thank you for the work that you were doing. We had looked at a state department study. China is now leading the U.S. and 57 of 64 critical and emerging technologies. >> yes, indeed.
▶ 1:12:07Sen. Blackburn: In this, they are also leading with ai. Is that accurate?
▶ 1:12:12Mr. Iancu: My personal understanding is ai is a very broad field. Many different technologies within it. They are leading in many of them, they are neck and neck with us and others. I believe that if we don't do something about our patent system here in the united states, we will eventually lose that race.
▶ 1:12:33Sen. Blackburn: Senator welch and I have been on this issue protecting intellectual property , making certain that we rein in the virtual space. We have been working on that since we were each over in the house.
▶ 1:12:54Sen. Blackburn: We have legislation, critical emerging technologies act, which would expedite patent exams for ai, semiconductor, quantum computing. You just touched on this. How would resolving this uncertainty that really surrounds these emerging technologies and the patent system, how would that strengthen our ability for keeping that innovation U.S.-based?
▶ 1:13:23Mr. Iancu: Thank you, senator. Great question. A bunch of issues. First of all, for the united states, as a free market economy, to maximize its innovation output, it needs reliable intellectual property laws that apply in a protectable way to the entire scope of technology.
▶ 1:13:49Mr. Iancu: Right now, there are major areas of technology that are basically not eligible for patent. Medical diagnostics we discussed. A lot of information based technologies. We live in the information age. Courts took it upon themselves to effectively exclude from the patent system the technological processing of massive amounts of data in innovative ways. That's another example.
▶ 1:14:16Mr. Iancu: Without that, surely, we will have some innovation here, and we do, there is investment in innovation, some of it. We do have that. But if we want for the united states to maximize its potential, the only way to do that reliably in a free market economy is through intellectual property laws which our founders understood from the very beginning. Without that, we will -- we already have fallen behind china as you have indicated, senator.
▶ 1:14:46Mr. Iancu: But we will fall far behind and will be very difficult to catch up for the rest of the century.
▶ 1:14:54Sen. Blackburn: Let me ask you this, just following onto this in pera, section 101, the patent act, the supreme court has refused to revisit that. Why do you think pera is the appropriate solution to bring some clarity, continuity, and confidence to that issue?
▶ 1:15:21Mr. Iancu: Because only congress can do that through statute. The constitution empowers congress to define the patent laws and section 101, for all practical purposes, was written in 1793. The four categories were written when jefferson and madison were writing laws in 1793.
▶ 1:15:48Mr. Iancu: Congress has not changed the categories of patentability effectively since then. Courts are having a difficult time figuring out how to apply an 18th-century statute to 21st century law. I want to emphasize how important this is for the united states. Yes, we will have a Dr. salk every now and then inventing unbelievable technologies and dedicating that to the public. People can choose to do that as they wish.
▶ 1:16:17Mr. Iancu: But for the united states, if we went investment at scale that can compete with very determined china and others, we need reliable intellectual property laws. Pera does that.
▶ 1:16:29Sen. Blackburn: Do you agree denying patent protection for ai innovations effectively forfeits american excellence in leadership to our competitors?
▶ 1:16:41Mr. Iancu: I very much do that. More than that, what it does is in addition to that, it concentrates technology in the established corporations. It allows big to get bigger. And it also pushes development toward trade secrecy. If anything, we want more transparency and artificial intelligence development not less.
▶ 1:17:12Mr. Iancu: The patent system -- a patent needs to lay open. The system encourages public disclosures. For all of those reasons, pera would help enabled the united states innovation system to maximize its potential.
▶ 1:17:29Sen. Blackburn: Thank you.
▶ 1:17:32Sen. Tillis: Senator coons.
▶ 1:17:35Sen. Coons: I have a number of documents I would like to submit for the record. Pera in support of, section 101 on ai patentability and lower article on the impact of patent eligibility. Congress passed the current patent act more than 70 years ago. Defining a very broad scope for eligibility from essentially anything under the sun is made by man. That worked fine for a half-century.
▶ 1:18:02Sen. Coons: As we discussed starting 15 years ago, the supreme court issued a series of decisions that eligibility, justice -- new unworkable test with new judicial invented carveouts a new uncertainty. Every member of the relevant federal circuit has asked us to act to clarify we had I am eager to get this passed to unwind a hodgepodge of judicially created exceptions. I will have some second-round questions.
▶ 1:18:32Sen. Coons: Let me bear down on this question about diagnostic tests and the patentability of genes. Ms. peschin, I have heard arguments pera would make tests less accessible rather than more accessible as someone who lost several loved ones to pancreatic cancer, for example, this simple blood test that would allow for an early detection of emerging cancers, the melanoma passing into the brain you referenced from a very important.
▶ 1:19:02Sen. Coons: How does making sure medical researchers can obtain patent protections possibly lead to more breakthroughs and cures?
▶ 1:19:09Ms. Peschin: Thank you for the question. The patent act you are referring to that was passed by congress in 1952, the basic purpose of it was to encourage inventors to create and disclose new inventions by giving them unlimited monopoly in exchange for making the invention public.
▶ 1:19:33Ms. Peschin: And that actually helps them with investment, to gain investment in order to bring it to commercial market and allow for a lot of americans have access to these types of tests. I don't disagree with Dr. leonard that someone like herself, who is a specialist and wants to provide those same tests to her patients, should be able to do so.
▶ 1:19:58Ms. Peschin: However, the inventor of those tests that devoted time and money and investors that also devoted time and money into the invention should be able to license it to her in order to use it. In the very fact she is able to re-create it is due to the patent system and the transparency within the patent system.
▶ 1:20:22Ms. Peschin: So pera and the reason why it is so important is because what the supreme court cases have done is they have muddied the waters by broadening these exceptions and making it harder for the cases that have come after so there is a lot less predictability for inventors.
▶ 1:20:44Sen. Coons: Dr. leonard, I hear your concerns that you have raised with pera it could open the door to making some inventions patentable and create barriers to research. There is an explicit provision in pera that says human genes are not patentable. Wood building in an experiment will use or research use exception to patent infringement help address this issue?
▶ 1:21:08Sen. Coons: Do you have other revisions you would suggest that might help us make sure that we are not causing unintended harm to the development of critical medical diagnostics?
▶ 1:21:24Dr. Leonard: I don't want to do verbal -- verbal rewriting. I have not found that diagnostics had been inhibited. I know that there is data that shows there are 175,000 genetic tests on the market now and 10 to 14 more coming on each day as data genetics.
▶ 1:21:54Dr. Leonard: I find medical genetics is not being inhibited by not being able to patent genetic sequences, human genes.
▶ 1:22:05Sen. Coons: We have clear disagreements. Help me understand how to square that circle and why we still might need to legislate in this area.
▶ 1:22:15Mr. Iancu: So on diagnostics, every innovation is a balance between incentivizing and protecting the innovation and investment in that in a basement in public access to that innovation. Like with anything else, you need to have the innovation there in the first place for public to even have access.
▶ 1:22:41Mr. Iancu: If we are talking at scale for the united states to be maximizing its innovation output, if we don't have the stability of the law, then we are going to miss out on technologies that we don't even know about. So for Dr. leonard and patients and others to have access to that technology in the first place, it has to have been invented. Then after that, we can talk about appropriate access. There is licensing.
▶ 1:23:10Mr. Iancu: There is, as you indicated that, the potential for a research exemption. There are other ways to address medical pricing and pricing for the diagnostics that have nothing to do with the patent system. The threshold question for creating innovation in the first place -- the first leg of that balance needs to be a reliable patent system.
▶ 1:23:35Sen. Coons: You said in passing earlier but it bears repeating for folks who don't spend their lives on this, a company has a choice between keeping something secret, protecting it as a trade secret, or publishing for the world, laying it open as a patent. In that choice is in part driven by whether or not there is predictability in patent eligibility jurisprudence?
▶ 1:23:57Mr. Iancu: That is absolutely right. There is lots of evidence that since the supreme court -- recent supreme court cases, there has been a push toward secrecy, but for diagnostics and also for certain ai types of technologies that senator blackburn was asking about.
▶ 1:24:20Sen. Coons: Thank you.
▶ 1:24:22Sen. Tillis: Senator welch.
▶ 1:24:24Sen. Welch: Thank you very much. The conflict here is, number one, should you get a patent on something you did not invent, which is a gene. The patent system as I understand it has never been used to grant that. Number two, there is a real debate here about whether a patent system would actually stifle innovation.
▶ 1:25:00Sen. Welch: Mr. iancu, we have enormous experience or with patent holders abusing the patent system. They create patent tickets, determine -- they fight every rule and sue people who are coming on. There is overwhelming evidence that, while I am a strong supporter of the patent system, I am well aware of the abuse of the patent system. You said there are ways which some of these could be worked out.
▶ 1:25:31Sen. Welch: Let me just say to you, let me know what they are because I want to stop the patent abuses out there. Dr. leonard, I want to go back to you. I thought you made a varied good distinction between -- you made a very good distinction between something naturally occurring and were to do the research that should be available to researchers without having to pay a fee. You also were on the receiving end of cease-and-desist or I guess letters that then stopped research midway.
▶ 1:26:01Sen. Welch: Just respond to this distinction that you are making about how this legislation in your view would interfere with innovation in patient care.
▶ 1:26:14Dr. Leonard: To be clear, I was stopped from doing clinical testing for patients. I research was not stopped. We had to stop doing four tests, the fit when -- the fifth one.
▶ 1:26:34Dr. Leonard: I think what is not understood is as a pathologist, I can develop and validate genetic tests in my clinical laboratory that is certified and form that for patients. I don't need a patent. I don't have to license patents because the genes I'm testing are not patentable now. And that is what will stop -- and every academic laboratory --
▶ 1:27:06Sen. Welch: Walked how that would stop.
▶ 1:27:09Dr. Leonard: Right now we can sequence a baby and parental genomes, a baby just been born and not looking right. 25% of those patients, babies, we can find a diagnosis that allows for treatment. If not treatment then, then --
▶ 1:27:30Sen. Welch: That has to be done immediately.
▶ 1:27:32Dr. Leonard: Yes. It is often done immediately. Imagine 25,000 genes in the genome and if even 1/10 of those are patented, then I have to go get licenses or royalty fees or rights to use that genetic information for my patient. And I became a physician to practice medicine, not to practice law.
▶ 1:28:04Dr. Leonard: That is what it became at the university of pennsylvania because of genetic sequences that were patented. We did not need the patents for protections. Companies do. To go back to Mr. coons with pancreatic cancer, we now for the first time at an ecology meeting have a treatment for pancreatic cancer. That lengthens life. And it is not as much of a death sentence.
▶ 1:28:34Dr. Leonard: It has the opportunity to turn pancreatic cancer into a chronic disease. Innovations are still happening. Therapeutics are being developed rated tests are coming on the market. I don't understand the data being cited that it is being inhibited. Maybe in ai, in other areas, there is a real need.
▶ 1:28:58Dr. Leonard: But right now, I'm not seeing the need in medical practice for, basically, going backward.
▶ 1:29:05Sen. Welch: Going back to the nicu example, as a clinician, you would not be able to do what is necessary for the well-being of that baby?
▶ 1:29:18Dr. Leonard: I might be able to after obtaining 100 or 200 licenses each at -- license fees we were charged for $25,000 by one company. We had to pay $120,000 for another. We ended up having to pay a fee for test -- one test that was more than what medicare reimbursed us for doing that test.
▶ 1:29:46Sen. Welch: My time is up so I'm going toyield back.
▶ 1:29:50Sen. Tillis: Specific exchange that was happening while you're not here is about this bill having a specific provision that says you cannot patent human gene and some of the conditions she is describing her before the supreme court ruled cannot patent human gene. Is it is important to put these in an appropriate time contexts.
▶ 1:30:14Sen. Tillis: Senator hirono.
▶ 1:30:24Sen. Hirono: -- >> may I say something to something that was said?
▶ 1:30:32Sen. Tillis: Senator blumenthal, would you defer? Or senator hirono, would you defer?
▶ 1:30:46Sen. Hirono: I know patent law is very complicated and I know the supreme court and the mayor decisions create a lot of uncertainty in the patent system, so I do think senator tillis and kunz for coming up with a bill which I am a cosponsor of that that sought to create some level of predictability so that our patent system can be more useful . That is one way of looking at it I suppose.
▶ 1:31:16Sen. Hirono: Mr. iancu, you said the supreme court created or we have been a consistent framework, can you explain why our patent system is in a consistent framework?
▶ 1:31:33Mr. Iancu: Yes, thank you, senator. At least two problems at the high level. First of all, there's a substantive problem as I mentioned earlier. The courts have taken it upon themselves to create to exclude from patenting whole areas of technology without congress debating that issue or permitting such exclusion stop that is the substantive problem.
▶ 1:32:01Mr. Iancu: Second, they have the framework of the two step framework the supreme court articulated has become difficult to apply for the lower courts and for practitioners to understand what the outcome would be. So a procedural framework has created a lot of confusion in the space.
▶ 1:32:21Sen. Hirono: Do you think the patent eligibility restoration act would help to restore some level of predictability? Would you support this act?
▶ 1:32:33Mr. Iancu: Yes, I do believe pera fixes those issues. It addresses the substantive problem and allows congress to actually decide after a proper legislative debate what is in and out of the patent system. And it also addresses the procedural problem and eliminates the confusing two step proceeding -- process that the courts have implemented.
▶ 1:33:03Mr. Iancu: If I may quickly, very quickly on that procedural problem, one of the concerns that have emerged from the courts jurisprudence is the courts are effectively co-mingling areas of patent validity. The patent act of 1952 created distinct areas of -- distinct lanes of analysis. 101 is one lane but that we have a separate statute for novelty.
▶ 1:33:34Mr. Iancu: In the a separate statute for obviousness and yet another one for adequacy of disclosure in claiming. Supreme court's juice prudence -- jurisprudence coming also and pera subset.
▶ 1:33:51Sen. Hirono: The patent court has asked for clarification and they have provided -- not provided that. Also said we are moving -- there is a push toward secrecy.
▶ 1:34:07Sen. Hirono: I think that is not what we want to promote at a time when sharing of information, even if maybe the patent system has its own limitations, but that at least provide some level of information that others can build upon. So moving toward -- forcing people I suppose or directing people toward resorting to trademarks, for example, is not the way we should be going I would think.
▶ 1:34:32Mr. Iancu: That's right, senator. It is detrimental for the united states in general and it is detrimental for further add on innovation.
▶ 1:34:44Sen. Hirono: So I note that Dr. leonard, you testified you are not -- I think I note that you are not supportive of patents because of your own experience.
▶ 1:35:00Dr. Leonard: Oh, no, no.
▶ 1:35:05Sen. Hirono: Can you speak into the mic? I can barely hear you.
▶ 1:35:08Dr. Leonard: I was speaking softly because you were still speaking.
▶ 1:35:12Sen. Hirono: In light of the desire to share --
▶ 1:35:15Dr. Leonard: I am in full support of patents, just do not think that any one patent should control human genetic sequence, pathogen genetic sequence from an association between a biomarker and disease -- those things are needed for free use in medical practice.
▶ 1:35:39Dr. Leonard: That does not mean that building on understanding that a gene is associated with the disease and I'm going to make a treatment for that, that treatment should be patented. That takes a lot of effort and a lot of money. But with the basic information that we use in medicine should not be patentable.
▶ 1:36:01Sen. Hirono: Thank you, Mr. chairman.
▶ 1:36:04Sen. Tillis: Senator blumenthal.
▶ 1:36:08Sen. Blumenthal: I want to add my thanks to senator coons and chose for their hard work. Just try to bring back to every day lives of people, I'm a lawyer. I know very little about patent law I have to acknowledge.
▶ 1:36:31Sen. Blumenthal: But I do know our patent system can impact the prices that people pay for pharmaceutical drugs. And I think we can all agree we need a patent system that works for our innovators, our companies, for their investors and researchers, but also for the everyday american who wants prices at the lowest -- who wants to buy drugs at the lowest possible prices. Let me ask you Dr.
▶ 1:37:00Sen. Blumenthal: Leonard and others, feel free to add, what impact would potential patent eligibility form have on patient costs and access?
▶ 1:37:14Dr. Leonard: Prior to the. Decision coming. Charged $4000 per sequencing thebrca 1 and @ thebrca 1 and 2 genes that can identify high risk of breast cancer. Today, and granted technology has changed a lot, but today we do over 80 cancer genes for a few hundred dollars.
▶ 1:37:45Dr. Leonard: So also before enforcements for mary ad, the prices that laboratories doing brca 1 and 2 testing were higher than laboratories who were stopped from doing that testing. Marie had would not accept medicare, medicaid payments. Because they were too low.
▶ 1:38:07Dr. Leonard: And when I was stopped from doing genotyping in my laboratory at the university of pennsylvania for alzheimer's disease, by athena diagnostics, they charged twice the price to do that test than I was currently charging in my laboratory.
▶ 1:38:25Dr. Leonard: So patents do increase the cost of care, rightfully so, when there is a huge investment like creating a new diagnostic that will -- is able to treat pancreatic cancer or other cancers or things like that or the crisper technology that treats a baby in utero for genetic disease. There are technologies that need to be protected by patents.
▶ 1:38:53Dr. Leonard: >> senator blumenthal, if I may come at issue here is not about whether patents are allowed or not allowed. It is about what level -- at what level innovation is it about. If you allow a patent on the fundamental building block committee abstract idea the law of nature, you are going to only allow one patent owner to control everything to do with that law of nature. For medical issue or whatever it is. So that is one way to do it.
▶ 1:39:23Dr. Leonard: The way it is currently done is if you can take that law of nature or that mathematical formula and apply to particular diagnostic test or particular device or particular product, you can get a patent on that. That promotes innovation because as you develop a product, you can benefit from that patent. But it also permits more innovation because there are more products, more competition, more choice, more broad-based innovation. That is a current system.
▶ 1:39:54Dr. Leonard: Moving to a system where there is more patents of higher level basic building blocks is what we want to avoid.
▶ 1:40:09Ms. Peschin: The concern Dr. leonard brings up about that actress were not allowing licensing or sending threatening letters and all of that, as an advocacy organization, we would be happy to work with you and bring that out and put pressure on them. But I don't want that to be a reason why we don't push forward with this legislation.
▶ 1:40:33Ms. Peschin: There are bad actors in every aspect of health care and folks who abuse things, but the reason why people look into creating new diagnostic tests for a lot of the conditions that we care about, including alzheimer's disease, is because there is investment in them. And it takes years and it takes study and go to the fda and a lot of work. The patent becomes public and allows individuals and other clinicians like Dr.
▶ 1:41:02Ms. Peschin: Leonard to replicate those tests and be able to use them in their practice. So there is benefit to it. The remarks they keep saying everything is fine, there's a lot of different tests, I just want to bring up very quickly a study by sab professor david taylor.
▶ 1:41:21Ms. Peschin: He demonstrated that there were negative impacts on investment making decisions and he interviewed four -- 475 venture capital and other private equity investors to study the impacts of the supreme court's decisions.
▶ 1:41:36Ms. Peschin: He found 74% of investors consider patent eligibility to be an important factor when their firms decide to invest in companies developing new technology and 62% agreed their firms are less likely to invest given the unavailability of patents.
▶ 1:41:56Sen. Blumenthal: I appreciate those points. The best loss on the books can be abused, but we want to try to achieve a system that prevents ineffective profiteering and manipulation of the system. When I was attorney general of connecticut, I sued companies because they engaged in extending patents by changing the color of pills or whatever.
▶ 1:42:29Sen. Blumenthal: But we want a system that is as immune as possible to abuse and protects the cost of discovery and research, honestly, failing to do so would discourage it.
▶ 1:42:48Sen. Blumenthal: But I think my feeling is there is just so much more that can be made available to patients at lower costs if we have some reformed patent system.
▶ 1:43:04Sen. Tillis: Senator schiff.
▶ 1:43:07Sen. Schiff: I want to join my other colleagues in acknowledging the loss of our colleague lindsey graham. Add great pleasure of traveling with senator graham many times. Just treasured his sense of humor, his knowledge, his relationships with leaders around the world. He was a great traveling companion and he was a great companion and colleague and we will miss him dearly.
▶ 1:43:40Sen. Schiff: So what I am most focused on in this legislation is the overturning of the myriad case. I would like to ask you all to comment on it. I just pulled up the opinion here. The summary says, held the naturally occurring dna segment is product of nature and not patent eligible merely because it has been isolated.
▶ 1:44:07Sen. Schiff: But cdna is patentable because it is not naturally occurring. It seems like a rational conclusion to me. Why is, for those of you who think this case was wrongly decided, what is this decision flawed?
▶ 1:44:30Sen. Schiff: And I would ask you all to comment on what is obviously a balance here, which is we need investment in these new tests and treatments on the one hand and we want to incentivize it and by providing a patent, you have security for that investment.
▶ 1:44:46Sen. Schiff: A way to encourage investors at the same time if you go too far, then you give companies a monopoly on tests and treatment that raise the cost for everyone and make it potentially prohibitive to discover disease. But tell me why those of you that think that was improperly held and needs to be overturned, why that is erroneous?
▶ 1:45:14Mr. Iancu: I am happy to start. Thank you for the question bridwell, -- question. You may or may not be surprised to know I don't think pera overturns the result of the myriad case. As a matter of fact, pera effectively codifies the myriad case.
▶ 1:45:39Mr. Iancu: Pera especially says things that occur naturally or in particular human dna is found in the human body, including human dna as found in the human body that is isolated -- which is the first half of the myriad holding -- should not be eligible for patent.
▶ 1:46:04Mr. Iancu: Pera expressly states that got on the other hand, myriad does say that if the dna is modified by humans in that case, there is what is called cdna -- I don't need to get into the details but it was modified -- the supreme court said that is eligible.
▶ 1:46:29Mr. Iancu: Pera, likewise, states that affirmatively. So the bottom line is, all in, the results of myriad is expressly codified by pera. The one problem with all of the supreme court cases combined is the methodology of how they get there, which has resulted later in the lower courts misapplying it from expanding it broadly, and so forth.
▶ 1:47:01Sen. Schiff: Do you all agree this bill codifies the decision?
▶ 1:47:07Ms. Peschin: I agree that is the aim of the bill. I understand that Dr. leonard and her association have some concerns about language that could refer to laboratory processes. Before you arrived, Dr. leonard talked about some potential language that they could propose which I think everyone here would be open to because we want to get this over the finish line.
▶ 1:47:40Ms. Peschin: The aim of this is to make it clear that human genes, whether isolated or found in their natural state, are not patent eligible. We all agree on that. So if there is something that needs to be done, rather than sort of rallying opposition to the bill, let's work together to clarify and make sure that absolutely it is codifying myriad.
▶ 1:48:05Sen. Schiff: May allow the other witnesses --
▶ 1:48:08Sen. Tillis: Senator schiff, I had actually told senator durbin if he wanted to leave I would not begrudge him because I'm considering this part to be the debate around. How we have done it in the committees. I know senator coons has. There are some issues where I go people taking notes or furling brows and I just believe in owned cash open and honest communication to get the most out of these hearings. Please, continue.
▶ 1:48:34Sen. Schiff: I would love to hear from the other two witnesses.
▶ 1:48:40Mr. Lee: I don't know if this was intentional or just an oversight, but just one example as to why there might be some confusion about this. You noted in the summary of the myriad cases supreme court ruled isolating a gene makes it -- does not make it patent eligible. It is still a human gene, product of nature cannot be patented.
▶ 1:49:02Mr. Lee: In the portion of pera that talks about human genes, says something that is purified or enriched counts as being modified. It does not say isolated. Later when it is talking about a different type of invention, natural material, it does say isolated, purified, enriched. Would make it modified.
▶ 1:49:31Mr. Lee: I don't know if that was intended to be different or what have you. In any event, I think more importantly, the issue with these supreme court decisions, there is a lot of -- you are hearing from both sides. Some people think they were correctly decided. Some people think they have created a lot of uncertainty or were poorly decided. What I will say to that, we have hard data now about whether that is the case or not.
▶ 1:49:57Mr. Lee: There is hard data that shows -- there was a study that studied every single patent-eligibility case the federal circuit since the alice decision. That found 85% of decisions by district courts in applying that law were affirmed. It really was so unpredictable and so in certain. You would expect there would be a lot of variability.
▶ 1:50:23Mr. Lee: Judges don't know what to do, it is a mess, they do their best in the federal circuit does not know what to do, it is a mess. You would not expect to see that level of uniformity in the data. But that is what we see. I think the data shows in fact after more than a decade of experience, the proof is that it is predictable, consistent -- in fact, it was one of the most predictable patent law issues the study looked at.
▶ 1:50:49Dr. Leonard: So the problem is purified, which has john points out company still in pera, the same thing is isolated. In pera, if I'm quoting it correctly, there are many multiple negatives like an unmodified gene is now modified if it is purified or enriched.
▶ 1:51:20Dr. Leonard: That means it becomes patent eligible as soon as you take it out of the human body. I can't practice medicine to look at the genes in patient when there remain in the patient. I need to be able to purify or isolate and if that then makes it patent eligible, that means I will be stopped from doing that by some patent holder on that genetic sequence.
▶ 1:51:50Dr. Leonard: Cdna is a little more complicated in that it is copies of messenger rna from it which is made from dna. I now started talking greek, sorry. Cdna is a whole another issue we need to get into if you really want to go there, but I would ask that human genome, pathogen genomes relationships between variants and genes and disease
▶ 1:52:22Dr. Leonard: Is not to be patentable. They can be a building block, as john says, for other patents on top of that. But that way we can use this information for medical practice.
▶ 1:52:36Sen. Schiff: If you fear as it is written now it would give patents and overly broad way restrict what you could do a dna.
▶ 1:52:47Dr. Leonard: Yes.
▶ 1:52:49Sen. Tillis: We have senator hawley coming and we will ask him -- let him ask questions. We are going to come back to you. A part of what senator coons talked about was getting straight -- the whole reason we have had witnesses and endless workgroups is to try and address the legitimate concerns. We will come back to that.
▶ 1:53:12Sen. Tillis: For now, because I also want to ask the basic question you can be thinking about, this is the eligibility phase of the process. I would like for some people to talk about examples of whether sections 102 and 103 would knock out the patent ability. Even if it was eligible. So be thinking about that. Senator hawley.
▶ 1:53:33Sen. Hawley: Thank you very much for calling this hearing and thank you to the witnesses for being here. Dr. leonard, I wanted to start with you if I could and ask a question or two about prescription drug prices. Everybody I know every missouri and I know, heck from everybody from any state I know, is struggling to afford prescription drug prices in this country. It seems they do nothing but go up and up. Drug prices in the U.S. are significantly higher than our closest peer nations.
▶ 1:54:03Sen. Hawley: I think we have a poster here I'm going to put up, and analysis from the rand corporation back in 2024 comparing U.S. brand name drugs to those of other countries. 32 countries were compared in the study. We have here canada, france, germany, italy, mexico, the united kingdom.
▶ 1:54:25Sen. Hawley: It shows how much more the united states prices, how much our prescription drugs cost on average than prescription drugs in those countries. Canada, our drugs are 324% more than canadians. 445% more than what the french paper 464% more than japan. On average in this 32 country index, 422% more. There's a cost of insulin. The average U.S.
▶ 1:54:53Sen. Hawley: Insulin manufacturer price per unit is $98.70. Australia, it is $6.94. $12 in canada. U.k., $7.52. This seems to me totally outrageous. Totally unaffordable for every american. Somebody is getting rich off of this. It certainly is not the american people.
▶ 1:55:19Sen. Hawley: Senator welch and I have introduced the fair drug prices that was stopped big pharma from selling drugs in the U.S. at a higher price than the international average. That there would be stiff penalties for those who violate that rule. Do you have a view on legislation like that or what we are going to do about the cost of prescription drugs more broadly? I think this is a crisis to go on any longer and it is time we took action on it. I am curious what your thoughts are on this?
▶ 1:55:47Dr. Leonard: This is totally off the topic other than prescription drugs are usually patented. I think it goes back to the basic problem in the united states, if you look at any of those other countries, have national health care. I will stop.
▶ 1:56:06Sen. Hawley: Anyone else what to comment on this?
▶ 1:56:08Ms. Peschin: Sure. Thank you. I don't disagree with what you put up at all. We care a lot at the alliance for aging research about affordability, particularly, for older adults. I would love to be with you and talk about the work we previously have done on affordability and prescription drugs. Patents generally are not the reason prescription drugs cost so much. Without them, a lot of treatments would not exist.
▶ 1:56:39Ms. Peschin: So we would not really have anything to argue about if we did not have the drugs themselves. Pence really encourage investment in new therapies and improvements in existing ones. Happy to talk to you about affordability issues.
▶ 1:56:56Sen. Hawley: Don't you think we can find a way to protect our patent system, which I'm all for doing, and let's be clear, the pharma companies are absolutely gaining the -- gaming the patent system to keep their prices high. I think there's no doubt about that you cannot look at these numbers are not paying our pharma companies are not ripping off consumers in the united states of america. That may not be the square topic of this hearing, I tell you what, it is what the american people care most about.
▶ 1:57:26Sen. Hawley: They care about this right here. They cannot afford the prescription drugs. Until this congress do something to bring down the cost of prescription drugs, we're just whistling dixie. The america people don't care about that. They care about, what are you going to do to make health care cheaper in this country? So far this congress has done precisely zero to make health care cheaper in the united states of america. Nothing to bring on the cost of prescription drugs.
▶ 1:57:52Mr. Lee: I don't think you'll
▶ 1:57:55Hear A Lot Of -- Mr. Iancu: I don't think you'll hear a lot of disagreement about needing to reduce drug prices under proper circumstances, but that should not come as the cost of innovation. The cost of a drug that is not invented and brought to market after lots of research and development is basically infinite. The cost on the american health care system and the taxpayer of having diseases go untreated is extraordinarily high.
▶ 1:58:26Hear A Lot Of -- Mr. Iancu: That is point number one. Point number two, there are two sides of the chart you are showing. The main problem is there is tremendous free writing overseas on american innovation. As a result of that, the cost of innovation is borne disproportionately by the american taxpayer.
▶ 1:58:50Hear A Lot Of -- Mr. Iancu: So instead of engaging in a race to the bottom and decimating the american innovation ecosystem, we should work hard to force our trading partners to bear their fair cost for that innovation.
▶ 1:59:07Sen. Hawley: The race to the bottom, I mean, the amick and innovation system when it comes to prescription drugs is not going to do the american patient much good if they cannot afford the drugs.
▶ 1:59:16Mr. Iancu: The reality is, nine of 10 prescription drugs in the united states are filled with generic substitutes. Far higher than the average in the oecd. In the end, I agree with you, but the way to do it is to force our trading partners to bear their fair cost which will decrease the cost to the american taxpayer.
▶ 1:59:42Sen. Hawley: I want to say to the various companies who hold the patents on these various drugs and are selling them, because that whatever price you want in the international market , but you cannot price gouge the american people.
▶ 1:59:53Mr. Iancu: Foreign governments prevent that and that is off the topic here and I'm not an expert in that issue.
▶ 1:59:59Sen. Hawley: Why should we prevent that? That is my point. Why are we allowing the american people to get the shaft? Other countries are protecting their citizens and we don't read we are told, that is the price of innovation so you just have to suck it up, americans come and pay the cost per 80, can afford your drugs or insurance, can afford to the doctor anymore, but we have a great health care system that is all innovative. It doesn't do people much good if they connected to the doctor.
▶ 2:00:25Mr. Lee: I want to get back on --pera it relates topera, you can speak. The broader issue, I think it is something you have debated ad nauseam. Quite honestly, the cost of a drug and a therapy that can save millions that was never invented is zero. Ok? I was a research and development manager back in the mid-80's.
▶ 2:00:52Mr. Lee: When I started looking, it was technology rated but when I had a smart person come into my office and say, we a promising new technology, I need thousands of dollars to invest in it to bring it to market, my first question was, number one, there is a technologically viable? Number two, we going to have enough -- long enough horizon to recover our investment to make this work?
▶ 2:01:17Mr. Lee: If the answer was a question, that r&d person went back to r&d and worked on another project. And I did not authorize that project. If you want a real working example on when government gets wrong -- and this is all before I get back to pera -- on artificial drug pricing, go listen into some of the minutes of the board meeting notes about six months after inflation reduction act was passed when they noted 60% of their small volunteer -- molecule research
▶ 2:01:47Mr. Lee: Budget had been slashed. And what happens to the people were hoping on the innovation to save them? So the problem with washington is we have an oversimplified approach to solving a legitimate problem. It is not just about telling the pharmaceutical companies to cut their prices -- unless you want to cut the enormous benefit they have to the american people.
▶ 2:02:11Mr. Lee: When people get sick anywhere in the united states, they're more likely going to want to come to -- anywhere in the world, they're more likely to want to come to the united states more than anywhere else because we do invest, we innovate. If people want to have a serious, nonpolitical discussion about reducing health care prices, you need to get everybody in the health care value chain into the barbershop and everybody needs a haircut.
▶ 2:02:37Mr. Lee: But if you do it arbitrarily and you are driven politically, you're going to be having the same discussion 20 years from now and the patients of america suffer. You need to bring in the litigious environment we have here, the revelatory environment we have here. Mirror that against other countries. The cost structure provide the drug in various jurisdictions is a meaningful part of that discussion.
▶ 2:03:00Mr. Lee: If we want to have that discussion, nonpolitical really nerdy detailed lots of work sessions, count me in. But if we want to have the beat up anybody in the value chain discussion, boy, there is a long list of people that get harmed if we don't get it right. >> might I intervene for one minute.
▶ 2:03:20Sen. Tillis: I am here -- ironically, I'm here --
▶ 2:03:25Sen. Hawley: Mr. lee was good answer my question.
▶ 2:03:30Sen. Tillis: If it moves it and somehow relates to pera, proceed.
▶ 2:03:37Mr. Lee: This bill is not related to the issue. It is not the topic of this hearing.
▶ 2:03:46Sen. Tillis: I understand. Mr. lee, to the extent you can respond to Mr. hawley's question and the context to how it relates to the pera bill, rock on.
▶ 2:03:59Mr. Lee: I will do my best. This is an issue -- it is not limited to pharmaceutical drugs. Our prices are something americans are really struggling with in a lot of different areas. Pharmaceutical drugs being one. What I would say is we really can't have it both ways -- can have it both ways. We can have a patent system that advises and patents that have limits that already exist in the law.
▶ 2:04:29Mr. Lee: Limits on those patents to make sure whatever benefit --
▶ 2:04:33Sen. Hawley: You did hear that the generic equivalent, know how they become generic, right?
▶ 2:04:39Mr. Lee: That is a situation where it is working great where it is working great were genetic was able to come into the market the limit on the patent whether it is temporary because it expired or should not have been graded in the first place and it was invalid and invalidated at the appeal board or something, that is examples where limits are being enforced and patents are not over extended beyond where they should be.
▶ 2:05:02Sen. Tillis: I'm not dismissing what senator hawley says in terms of the pricing problem, but somebody that has worked in the space for a while, served clients in this space, and have talked to the hospitals from the patients, the pharmacy benefit managers, health care providers -- all of those are in the value chain. All of them are part of the solution. If we go at it in pieces, we going to have a suboptimal result.
▶ 2:05:32Sen. Hawley: I'm just trying to get an answer to my question, Mr. chairman.
▶ 2:05:34Sen. Tillis: Mr. lee, we submit a response for the record?
▶ 2:05:42Sen. Hawley: I've never seen where the chairman testifies for the witnesses. I know you don't like my questions.
▶ 2:05:46Sen. Tillis: I've never seen a hearing where the entire discussion was off the topic of the bill. Do you have any specific questions on pera? This is a committee hearing on trying to improve patent eligibility. You have any questions on that matter?
▶ 2:06:01Sen. Hawley: I have questions -- I can ask any question I want.
▶ 2:06:03Sen. Tillis: You can within five minutes.
▶ 2:06:08Sen. Hawley: You talk to his answer.
▶ 2:06:09Sen. Tillis: Your time had expired when we continued the discussion. I want to get back to the basic question of 102 and 103 affecting after you got to the eligibility list affected the actual patentability. Mr. iancu?
▶ 2:06:29Mr. Iancu: So as we discussed, there are at least four statutes that govern whether a patent should be issued. Number one in section 101 eligibility. After that, we have three other statutes. 102 on novelty, 103 on obviousness, 112 on the appropriate scope of disclosure and climbing.
▶ 2:06:56Mr. Iancu: Pera affects only the first one, section 101. After that, we need to go through the rest of the statutory lens. If we talk about a dna sequence that is in the human body, the human genome has long been fully identified and published.
▶ 2:07:23Mr. Iancu: At a minimum, if somebody says, I have discovered this sequence, it will fail -- even if it gets passed section 101 -- it wouldn't, by the way, because pera excludes that. Let's assume hypothetically it gets past that, it was still fail under the novelty for obviousness statutes. The second point, it has been said multiple times here, somehow diagnostic -- U.S.
▶ 2:07:56Mr. Iancu: Diagnostic market has not been affected. Sure enough, there is innovation, obviously. But it is not at scale. There are studies that show in the year following nato, the diagnostic market in the united states has been reduced by $9 billion. There are other studies that show the vast majority of the diagnostic market in the united states is moving overseas and, in particular, china.
▶ 2:08:21Mr. Iancu: These decisions have real-world consequences when we speak about scale.
▶ 2:08:27Sen. Hawley: Ms. peschin, you wanted to react earlier -- Sen.
▶ 2:08:33Tillis: Ms. peschin, you wanted to bring up and interchane with senator blumenthal?
▶ 2:08:45Ms. Peschin: What has struck me as it has been brought up a couple of times by Mr. lee, this idea that the courts have been consistent over time that that is a reflection that things are going ok. I wanted to bring up there was an interesting piece that these very readable for folks who want to learn more about it was in the hill and from a federal court judge that was retired that referred to the study he
▶ 2:09:17Ms. Peschin: Keeps talking about that the courts just sort of follow each other. They stated together that this review was misleading. That it is true that experts can predict the outcome of the disputes which generally involve finished products that have already been brought to market, but start up companies are not making research and investment decisions based on finished products.
▶ 2:09:44Ms. Peschin: So I think it is just a really important point that following cash if the courts are just kind of mirroring each other because of the unpredictability and validating each other on that, that is not a sign of how things are going and in fact I think some of the other studies looking at venture capital and the decrease in investment in the $9 billion -- those are real reflections.
▶ 2:10:07Sen. Tillis: Mr. lee?
▶ 2:10:09Mr. Lee: I'm not familiar with the particular comments from -- that were quoted. I would say the study conducted looked at every single federal circuit 101 decision from I believe 2012-2023, over a decade. It did not distinguish based on finished product. Every single case. It found it was externally predictable.
▶ 2:10:37Mr. Lee: The 101 inquiry, I was her former judge. I decided 101 cases in my port. It is difficult. It is hard. Is it unpredictable? Is it uncertain? Unworkable? The data shows that is not true. These decisions are being affirmed an extraordinarily high rates for patent issues. It is consistent.
▶ 2:11:02Sen. Tillis: I really do generally hope y'all can take a look -- genuinely hope you can take a look at the language. Reach out to talk about the other issue of people being opportunist and maybe charging too much. That is separate.
▶ 2:11:23Sen. Tillis: But for your particular purposes, if you do have language, we would be more than welcome or we would warmly receive any language that would address some of the behaviors you are seeing red but that is the whole point of this process, folks. I know from the perspective of industries that are comfortable with the status quo that change is concerning.
▶ 2:11:46Sen. Tillis: I believe that there are several innovations, several inventions that will not come to be if this jurisdiction -- if we don't recognize some of the challenges we have. I'm not one who wants to throw a baby out with the bathwater. I want to get this right. Those who are interested in advancing the legislation and constructively bringing forth use cases that say, how do you address for that?
▶ 2:12:16Sen. Tillis: We are all about that. For people who just want to argue against any change in favor of the status quo because it benefits their particular sector without looking at some of the challenges that are created if we do nothing should kind of look in the moral mirror and try to figure out a way to get it right.
▶ 2:12:38Sen. Tillis: Now come, be at the end of the day when you come and show me all of the pro and con and I could be convinced not to push as hard on my own bill, but right now I believe in my heart of hearts we are moving in the right direction. We want to engage the stakeholders. Many of the stakeholders are people I work with an industry for years. I get it. But let's be smarter. Let's be innovative ourselves and try to figure out a way to get the language right so we are the jurisdiction that people look to like they have since the founding of this country.
▶ 2:13:11Sen. Tillis: Senator coons, any comments?
▶ 2:13:14Sen. Coons: Mr. lee, have cited repeatedly now the iowa law review study about the federal circuit and its affirming validation section 101. Consistently bad would be my rejoinder.
▶ 2:13:29Sen. Coons: They may be consistently applying but you cited specific case where potentially patent eligible invention, innovation that would have given early morning that melanoma was crossing the blood brain barrier, the relevant judge said, "I wish I did not have to invalidate this" and repeated the call to congress to legislatively fix it.
▶ 2:13:54Sen. Coons: It may be being consistently applied, but in mayo, the court cautioned to brought an interpretation of its exclusionary principles could eviscerate patent law. In the years innately following five years following, district courts and validated 60% of patents challenges ineligible. The court of appeals for the fed circuit validated 90%. They may have been consistent but I would argue consistently bad. Part of the impact is cost.
▶ 2:14:25Sen. Coons: Drug costs, Ms. peschin, our central question that never got -- I mean, we had two different senators who tried to ask the question. In exchanges with senator blumenthal, was all about medical diagnostics. Not about the cost of pharmaceuticals. Dr. leonard, when my colleague from missouri sort of launched, he said, this is off the topic.
▶ 2:14:50Sen. Coons: My core assertion would be that in terms of the patentability or patent eligibility of drugs, from student goals, pera is on the snow impact. It is very rare for pharmaceuticals to be invalidated. There is a separate issue which is patent picketing, pat - hopping.
▶ 2:15:16Sen. Coons: Am I correct these are unrelated, what we are trying to do here ineligible reform legislation that would address abuses of the patent system to raise patent prices?
▶ 2:15:25Ms. Peschin: Yes, very much so. It has a disproportionate impact on diagnostics. You are correct.
▶ 2:15:34Sen. Coons: There was a lot of smeariness because medical diagnostics, which you are expert, and pharmaceuticals basically quite different and a lot of the senators who are here briefly failed to grasp that point. I will reinforce my friend and colleague senator tillis that, doctor, if you have a different way for us to get at purifying, there are slight differences in human genome versus any genome.
▶ 2:16:04Sen. Coons: And we were trying for the best language. If all four of you would look at that particular piece, I think what we are doing in pera is codifying the mayo decision, that you cannot patent a human gene. I asked you earlier about a medical research exception. We are out of time and there is a vote we have to get you on the floor.
▶ 2:16:24Sen. Coons: I am wide open to and colleague is as well refinement of this land which but this is taking an exhausting link long time to get to in this congress is just about over. Mr. iancu, we spent no time on national security. This was all about drug prices which was at that relevant to the topic. I am worried that we are falling behind ai and blood chain and 5g.
▶ 2:16:54Sen. Coons: How would pera shore up our global and national research?
▶ 2:17:00Mr. Iancu: I share your concerns. Pera first of all would bring back into the realm of patentability areas of technology such as information processing in a very complicated technological ways that the courts are currently excluding. That is just one example. Same for diagnostics where we as a nation depend a lot on china and other foreign countries.
▶ 2:17:29Mr. Iancu: From a national defense -- security perspective, we have to do everything we can to maximize the innovative potential of the united states. In a free market society where inventors and investors have the free will to invest as a will or not invested all or invest in other countries, the only way we know how to do that at scale is what the founders recognize.
▶ 2:17:57Mr. Iancu: It is with reliable intelligent system and pera goes a long way in that direction. There are for sure other things that need to be improved in the patent system. But pera is threshold, section 101, the first thing that gets analyzed, and that is something that has to be codified by the rule of law. >> Dr. leonard, if you would like to speak? It would be fitting to have Mr.
▶ 2:18:28Mr. Iancu: Lee have the last word. >> quick clarification? You what language that will codify myriad? >> did I say mayo?
▶ 2:18:39Dr. Leonard: We would like mayo,y, office.
▶ 2:18:46Sen. Tillis: We're not trying to get around any of this. This is what we are intending to do. >> and the possibility of pending human genes, we want to make sure we are not harming. >> to answer your question directly, currently, more than half of U.S. patents, I think 56% or something like that, and more every year, are being granted to foreign recipients and not U.S. recipients.
▶ 2:19:19Sen. Tillis: If you relaxed the rules and limits on patents across the board here in the united states, the benefit of that -- some of that goes to U.S. companies, it's true. But more than half of the patents are being granted to foreign companies. You are granting control over those technologies, more than half of them, to foreign countries or companies from foreign countries. That should be factored in as well.
▶ 2:19:41Sen. Coons: Is your argument we should weaken the american patent system so exclusively they can patent them overseas?
▶ 2:19:47Mr. Lee: No, relaxing section 101 limits, patent eligibility limits, and expecting that is going to boost U.S. natural security, I think it is a tenuous elation ship between us because the benefits of the patent system currently -- and we should do something about this -- or flowing more to foreign patent recipients than U.S. patent recipients.
▶ 2:20:11Sen. Tillis: We work together very well since 2019. I think the debate club works. I would not recommend every chair doing it. But the fact -- again, it is to point out that we are not here to talk past each other and score a big opening statement or a killer answer to a question, folks, we are trying to solve a problem here. I believe the problem exists.
▶ 2:20:37Sen. Tillis: It may not exist and it may not feel broken to you, but there are very demonstrable examples of where we are losing the opportunity to innovate. We just want to get that right. The discourse he was great. I like the perspectives of both sides. I would engage, encourage you all continue to engage. Hopefully we reach a point where everybody thinks we got to a good work product. This is going to conclude our hearing today. Mr.
▶ 2:21:05Sen. Tillis: Lee, I would appreciate for the record if you would respond to senator hawley's question. And I will take a look at it as well. The record will remain open for one week, for anyone to submit additional materials. I should also say I will be submitting a written opening statement for the record as well read without objection. Thank you all. This hearing is adjourned. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap.org]