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Over at Geron Corp., the rule is simple: Clone the sheep, not the patents. In 1999 the Menlo Park, Calif., company, had, through its purchase of U.K.-based Roslin Biomed, acquired the rights to a new technology that enabled various animals, most famously Dolly the sheep, to be cloned from adult cells. In biotech circles, this was a very big deal, as it enabled researchers to bypass the embryonic cells that everyone thought were necessary to clone and make copies of specific adult animals (a buttermilk-rich dairy cow; disease-resistant cattle). The invention turned out to be a big deal in the Patent and Trademark Office as well. Soon after the Roslin acquisition, during a routine search of newly issued patents, Geron learned that another company, Advanced Cell Technology Corp. of Worcester, Mass., held a patent that looked extremely similar to a patent application that Geron now owned. Indeed, the ACT patent, Geron claimed, was based on an invention Roslin had made first. Like a ne’er-do-well son still left in the will, ACT had gotten something it didn’t deserve. Geron needed to knock out the patent, and quickly. The company had a fledgling licensing program for patents that had already issued from the Roslin technology, and the confusion was taking a toll on business. “People didn’t know if they needed to license our technology, or ACT’s, or both,” says David Earp, Geron’s chief patent counsel and senior vice president of business development. In attacking the ACT patent, Geron didn’t opt for district court litigation, which would have been costly — assuming that Geron could even find a way into court. Nor did it opt for a patent re-examination, an internal PTO procedure for taking a second look at issued patents — and a process many lawyers loathe, as they have little control over the proceedings. Instead, Geron relied on a little used, poorly understood procedure known as an interference hearing, a procedure so convoluted and mysterious that fewer than ten lawyers in the country do it on a full-time basis. Arcane and chancy, an interference can also be a powerful weapon. “If you can get into an interference to attack a patent, there is no better forum,” says Jerry Voight, a partner in the Palo Alto, Calif., office of Finnegan, Henderson, Farabow, Garrett & Dunner who has been involved in over 100 interferences — the equivalent of 3,000 strikeouts in the clubby world of interference law. “You get knowledgeable judges, you don’t get bogged down in discovery.” There are no jurors to persuade; no arguments over infringement, no calculation of royalties. In theory, interferences cut right to the chase: Which party should own a patent? For the handful of lawyers who do them, interferences have been extremely good business. “It’s very, very profitable work, charged at the top rate of a senior partner at the biggest firms, over $600 an hour,” says Steven Bauer, a partner at Proskauer Rose’s Boston office who does one or two interferences a year. Yet it may be endangered work, too. New rules have made interferences costlier and harder to get into. New proposals for patent reform could render interferences unnecessary. In the end, the reforms may not even matter. Interferences may already be in a death spiral, done in by their increasing complexity and cost, and the decreasing willingness of the PTO to hear them. Either way, the end may be near for both a potent tool and a lucrative niche. For those who have gone through an interference, the experience can be like a marriage: rewarding, frustrating, and often completely incomprehensible. Like finding true love, one has to be in the right place at the right time — and still scheme a bit. Geron was lucky: Its pending patent application opened the door for a hearing before the Board of Patent Appeals and Interferences, the PTO unit that decides who made an invention first and should have the patent. (In other countries, the decision is a no-brainer: The patent goes to the first party to file.) Even getting this far is something of a feat. At least one party to an interference has to have a patent application before the PTO, and only a scant number of interferences are ever declared — the term that signifies that the PTO has granted a hearing. In 2003, for example, just 95 interferences were declared, but 376,810 patent applications were filed. Part of the reason interferences are rare is that in many fields — like mechanical engineering and microprocessor design — overlapping patents are rare. There might be 10 or 20 ways to solve a given problem. Interferences occur when there is just one way to solve a problem, but more than one company looking for the solution. “Half of all interferences are in biotechnology,” says Finnegan’s Voight. “And half of the remaining half are in chemistry.” A bigger reason that interferences are so infrequent is that the PTO can be extremely stingy about granting them. A patent application’s claims — the written description of the invention — are closely scrutinized. “Examiners hate interferences, and there’s a lot of resistance to them,” says Scott Harris, a partner at Fish & Richardson in San Diego who typically does two or three interferences a year. “In the old days, they’d want the claims to be identical. If one was off, they wouldn’t allow the interference. Even today the claims need to be substantially the same.” A 1999 interference between a subsidiary of Germany’s BASF and Mitsubishi Chemical Corp. laid out a test for declaring an interference that lawyers say is far stricter than anything the interference board had used before. “Because of [the new test] you can’t set up interferences in a significant fraction of cases,” says Charles “Chico” Gholz, a partner at Oblon, Spivak, McClelland, Maier & Neustadt in Alexandria, Va., who devotes 85 percent of his practice to interference work. Often, the party that is initiating the interference will have to go back and recraft its patent claims to get them to better match — and thus interfere with — the other party’s claims. This is risky stuff. If the claims aren’t a close enough match, the interference won’t happen; if they are too close a match, and aren’t supported by the rest of the application, the claims — and any subsequent chance for a patent on that invention — will be tossed out by the PTO. Interference practice “is definitely one of, if not the most, complicated subspecialty practices in patent law,” says Paul Morgan, assistant general patent counsel at Xerox Corp. and a past chair of the American Intellectual Property Law Association’s interference committee. Morgan successfully ran three interferences that he initiated in the 1980s and since then has been the company’s point person for finding ways to avoid them or settle them quickly. “Interferences run on a very fast and fatal track,” says Morgan. “At least one party will lose patent claims, and now all parties often lose them.” Geron went back to its application and rewrote the claims. This second draft passed muster: On Jan. 30, 2000, the interference was declared. Now Geron had a two-step process to pass: a preliminary motions round, where each party attacks the other’s patent claims, hoping to get them thrown out, and a panel of three administrative patent judges (patent attorneys appointed by the director of the PTO) drafts a list of interfering claims, called the count; and a priority phase, where a panel of three administrative patent judges decides which party first made the inventions covered in the count. In the preliminary round, all of ACT’s claims were thrown out, and the resulting count consisted only of Geron’s claims. Geron’s Earp thought this settled the matter. It didn’t. The PTO scheduled a hearing for the priority stage. “In effect, they gave ACT the opportunity to prove it had made the invention covered by Geron’s claims,” says Ken Meyers, the Finnegan Henderson partner in Washington, D.C., who led Geron’s case. For Earp, that was downright screwy: “Why would they go to the priority phase? That’s a good question. The count has been reduced to our claims.” Entering into the priority phase, Geron caught yet another break: Roslin’s U.K. patent filing was dated Aug. 31, 1995. This was a crucial point. ACT, as the so-called junior party in the interference (while its patent had issued first in the United States, it actually had been the second to file in the United States), had the burden of proving that it had conceived of the invention and had been working diligently to make it before Geron, the senior party, conceived the idea. The U.K. filing allowed Geron to establish Aug. 31, 1995, as the date to beat. “We relied on that foreign filing because it was such an early date,” says Meyers. It’s safe to say that no one will ever mistake an interference priority hearing for the Michael Jackson trial: There are no live witnesses, just lawyers, judges and a whole lot of paperwork. Direct testimony is entered through affidavits, cross-examination is done through deposition, and argument is made through briefs and a very quick — 15 minutes in the Geron case — oral hearing. Interference lawyers need to have rock-solid drafting and deposition skills, and need to be quick on their feet when pummeled by judges. They also need to know how to unearth the many clues that can point to an idea’s genesis. This is CSI for lawyers. “You’ll bring in lab notebooks, lab reports, requisitions for materials used in experiments, purchase orders for equipment, computer records, printouts from analysis done by instruments — and every one of these documents has to have a date on it to reinforce the inventor’s testimony,” says Meyers. “You’ll bring in testimony from the lab technician who worked with the inventor. It all helps to show what the inventor did, how he did it, and when he did it.” In the Nov. 15, 2004, priority hearing, ACT ran into trouble almost from the start. Its lead lawyer, Ronald Daignault, a partner at Merchant & Gould in Washington, D.C., attempted to prove that ACT had conceived the invention — the cloning of a cow — on June 22, 1995, by directing the court to a lab notebook entry from that date. Immediately, the judges pounced on Daignault, as there was no mention of any cow in the entry. “Where’s the cow?” demanded Judge Fred McKelvey, according to a transcript of the hearing. Daignault acknowledged that there was no mention of a cow. “Well, if there’s no cow here, how can this be a conception of count four [the cloning of the cow]?” asked Judge Mark Nagumo. Daignault steered them to a notebook entry from June 27 that mentioned bovine cells. “This is still before August 31,” Daignault said. The court then quizzed Daignault about gaps — here a few days, there a couple of weeks — in research performed after June 27. As part of its case, ACT had to show that its researchers had worked diligently since conception to actually make the invention. The court was wary of those breaks. “Maybe they were on vacation,” Daignault offered. “That’s a maybe, not an explanation for the gap,” replied Judge Nagumo. At the end of Daignault’s argument, Nagumo told Meyers and Earp not to even bother presenting their case. On Dec. 20, the panel ruled for Geron, remarking that ACT’s attempts to prove conception and diligence “fail at virtually every level.” Daignault would not comment for this article. ACT has appealed the decision to the U.S. district court in Washington, D.C., replacing Merchant & Gould with Pierce Atwood in Portland, Maine, as lead counsel, and Oblon Spivak’s Chico Gholz as co-counsel. On Feb. 24, 2005, Geron also won an interference on a second ACT patent, a decision ACT is also appealing. Even without considering the evidence, Geron’s win was hardly shocking: An overwhelming majority of interferences — some 70 percent to 75 percent — are won by the first party to file. Yet in the end, neither party had the patent. ACT’s was invalidated, and while Geron won the interference, its patent application is still pending. “The interference board has the power to issue the patent to the winning party, but it generally won’t do that if there’s an appeal,” says Meyers. Geron, however, claims that new patent or not, the interference win gave the company a big boost, enabling it to license its existing patents without any veil of uncertainty. In April, Geron started a joint venture with Exeter Life Sciences Inc., called stART Licensing Inc. “The joint venture was made possible by our victories in the interferences,” says Earp, whose company took in $4 million up front as part of the deal. “They made the landscape clearer.” The Geron case may not go down as one of the landmark interferences — that honor will go to interferences over the telephone and polypropylene, a widely used type of plastic — but it may go down as one of the last. Even as the number of patent applications rise each year, the number of declared interferences have dropped, from 124 in 2001 to 95 in 2003. Rule changes in 1998 and 2004 have sped interferences up — they now typically last two or three years, instead of six or more. Motions and evidence now must be submitted in strict timelines, which not only picks up the pace, but also adds some order to a procedure that had long gone undocumented, with incomplete rules and no written procedure for how it worked. “It was almost like a black art,” says R. Danny Huntington, a partner at Bingham McCutchen in Washington, D.C., and one of the most active interference lawyers in the country, having done some 200. The timelines, says Huntington, have been “an exceedingly good thing.” For clients, however, the “new” interference has been an exceedingly expensive thing. Even the top interference attorneys concede that the new rules have driven up prices. “The costs went up remarkably in 1998,” says Gholz. What’s more, the stricter time requirements mean that the costs are now front-loaded; parties need to get their cases and motions and evidence together faster. “There is far less time for settlement negotiations before significant costs may accrue,” says Xerox’s Morgan. Just how high the price can go is the subject of some debate. Gholz says that even with the rising costs, an interference is still roughly one-tenth the price of a district court litigation, running $500,000 to $1.5 million for a two-year interference that does not settle. Jim Salter, the senior director of intellectual property and patent counsel at Macrovision Corp., which is currently involved in two interferences it initiated against InterTrust Technologies Corp. in 2003, says that in a complex case even that $1.5 million figure is “a gross underestimation.” Macrovision’s case, for example, involved both factual and expert witnesses, multiple patents, hundreds of claims, and hundreds of hours of depositions and discovery. “It cost multiples of $1.5 million,” Salter says. “This is full-blown litigation and should not be entered into lightly.” Yet an interference, he says, was Macrovision’s only choice: “Sometimes you stumble into them whether you want to or not. We had pending applications that converged with their patents. An interference was the only viable option.” The drop in interferences doesn’t seem to be worrying, at least outwardly, the small go-to group of experts who devote the bulk of their practice to interferences. And small, indeed, the group is. Even counting lawyers who do an occasional interference, the total number is widely estimated at well under 50. Many large firms won’t touch an interference. “It has very particularized rules and procedures, and our clients are better served by firms that specialize in interferences,” says Mark Pals, a partner at Kirkland & Ellis in Chicago, which has referred interference matters to Finnegan Henderson. Every now and then a new lawyer will try an interference. The old-timers love going up against these newbies. “You can have a field day with them,” says Huntington. The go-to clique includes Gholz, Huntington, Meyers and Voight, along with Steve Kelber at Piper Rudnick Gray Cary and Raymond Green at Brinks Hofer Gilson and Lione. A handful of work isn’t necessarily a bad thing when there’s just a handful of people to do it. “We get all the cases we can handle,” says Voight, who has represented Agilent Technologies Inc., Glaxo Smith Kline and Wyeth. Nonetheless, they’re constantly working to get noticed. Gholz, who has represented The Dow Chemical Co., Intel Corp. and Eastman Kodak Co., writes prolifically and will speak, he says, before “anyone who will have me.” Voight, Huntington and Kelber teach a class once a year on interference practice; the idea being, Huntington says, that if the students don’t quite go home understanding the nuances of interference law, they’ll at least know who to call for help. If the growing cost and declining frequency of interferences isn’t a threat, an end to interferences may be. Some high-powered players, including the PTO, the Federal Trade Commission, the American Intellectual Property Law Association, and corporate heavyweights including IBM Corp. and Microsoft Corp., are backing the idea of a postgrant patent opposition procedure, where any party — not just one with interfering claims — can argue that a patent should never have been issued. Hearings on reform were held by the House subcommittee on courts, the Internet and intellectual property this spring. “If they push the legislation through, it’s going to take away a lot of the push we see to have more interferences,” says Gholz. Still, he’s not quite signing up for new CLE classes. “The PTO has been saying [that postgrant opposition] is going to happen, and it’s going to happen soon, but I’m much more dubious,” says Gholz. Yet even his peers think postgrant oppositions are inevitable. “There’s a feeling that the PTO is embracing postgrant and wants to put all of its efforts into it,” says Voight. Any procedure ultimately crafted is likely to borrow heavily from interference practice, giving lawyers like Gholz and Voight a leg up on landing the work. Indeed, when Bingham McCutchen recruited Huntington from his firm of 23 years, Burns, Doane, Swecker & Mathis, in April, it was with an eye toward future postgrant work, as well as existing interference work. “While it’s true that fewer interferences are being declared, an opposition practice in the PTO is as likely as it has ever been, and the people who have experience doing interferences will be in the best position to do them,” says Fabio Marino, who co-chairs Bingham’s intellectual property litigation and patent prosecution group. The bigger threat is if the U.S. patent system joins the rest of the world and moves to a first-to-file system. Here, too, there is growing momentum. First-to-file would make interferences irrelevant. Some lawyers, like Proskauer’s Bauer, think this may be inevitable: “With interferences we have this massive infrastructure to help a few people who were late to file — and they lose most of the time, anyway. This is not a growth area.”

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