O Omnibus Congressional Christmas Tree

A $1.7 trillion appropriations and policy rider package funds the federal government through the remainder of fiscal 2023 and boosts the morally bankrupt “woke” agenda. To call the bill a Christmas tree so close to Christmas is too easy, but apt.

One of the ornaments hanging on the Senate-negotiated FY 2023 omnibus appropriations bill, H.R. 2617, is a gift to antitrust extremists on both sides of the aisle whose broader legislative designs lost steam. The further they advanced, the closer the scrutiny. Those bills ultimately failed.

The expanded version of H.R. 3843's, the Merger Filing Fee Modernization Act, language constitutes Division GG of H.R. 2617. In addition to raising Hart-Scott-Rodino merger fees, the provision also extends access to state venues for federal antitrust lawsuits and requires disclosure of foreign subsidies of companies involved in mergers.

As the Alliance on Antitrust-led letter of this past fall noted, “the Biden administration's Federal Trade Commission and Department of Justice have weaponized merger reviews.” This isn’t the FTC’s first time straying from due process and the rule of law. The new legislative measure provides FTC Chairwoman Lina Khan significant new dollars to disrupt proposed business mergers or acquisitions and to reverse done deals.

Recently, for instance, the FTC has fought such M&A deals as Microsoft’s acquisition of video game developer Activision. This is a vertical merger, the sort that until now hasn’t been considered as having the anticompetitive potential as and being harmful to consumer welfare as horizontal mergers (i.e., gobbling up direct competitors) might be.

The FTC has also challenged DNA sequencer Illumina’s bid to reacquire its spinoff company Grail. Grail is developing a multicancer early detection test that requires DNA sequencing. The tie-up would advance the cancer test’s reaching commercial markets (and not unimportantly, saving lives, improving health and saving or reducing future medical care expenses).

These antitrust enforcement agencies have stepped up the number and scope of merger reviews. They’ve even moved to unwind completed transactions. Their aggressive posture instills greater uncertainty into M&A. Transaction costs rise. Economic and business efficiencies are diminished. And consumers’ interests suffer.

But, hey, what’s the problem with handing antitrust ideologues, already causing explosions in the antitrust space, more dynamite?

Also, H.R. 2617 allows state attorneys general the ability to haul parties into state courts for cases involving federal antitrust law. The state venue provision takes language from H.R. 3460, the State Antitrust Enforcement Venue Act.

As the AOA letter explains, this litigation expansion carries many risks. Instead of advancing unique state interests, it hands political actors opportunities to engage in politically motivated issues using antitrust hammers. “[W]here antitrust litigation involves political gamesmanship, headline-seeking, or exacting big-dollar payouts, increased and duplicative involvement by a larger number of state AGs adds little and can do broader damage.”

State AGs notoriously engage plaintiffs' lawyers, who garner profits at consumers’ and taxpayers’ expense. Judge Richard Posner elucidated the problems with contingency-fee attorneys in state-sponsored litigation, well before this expanded access to state courts. That so many ostensible congressional tort reformers went along with this measure is sobering.

The part requiring disclosure of foreign subsidies in mergers has merit, but could have been enacted as a free-standing bill. It’s the Foreign Merger Subsidy Disclosure Act, H.R. 5639. This legislation aims to shine sunlight on foreign government financial backing of state-owned enterprises or other foreign national champions involved in M&A in the United States.

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It’s worth mentioning what’s not in the omnibus appropriations bill: the Pride in Patent Ownership Act. PPOA became a shattered Christmas ornament on the Senate floor.

All corners of the propatent, proinvention community, including CPR, mounted a full-court press. We warned lawmakers of the harm this bill would have on important aspects of our innovation ecosystem, how PPOA’s process lacks transparency and, as a result, that the bill remains heavily tilted in favor of patent infringers and against inventors and patent owners.

In short, PPOA would have deprived patent owners of the means they have of enforcing their property rights, and it would punish innocent future owners of patents for the recordation shortcomings of past owners. Dodging that bullet is something of a Christmas gift to America’s innovators and owners of intellectual property assets.

IRA’s Price Controls Make False Promises, Will Deliver All Too Real Socialist Results

Newly enacted government price controls aren’t even implemented yet, but they’re already having an effect. But instead of forcing down the prices of the highest priced (i.e., most valuable) brand medicines, price controls in the so-called “Inflation Reduction Act” are reducing biomedical innovation.

Pharmaceutical companies have begun to close lines of drug development because they would be subject to the IRA’s drug price controls, where Health and Human Services bureaucrats dictate the price HHS will pay for the drug—on a take-it-or-leave-it basis.

The IRA uses the euphemistic term “negotiation” of the government’s price for certain highly valuable medicines. The “negotiation,” which kicks in in 2026, initially applies to a limited number of drugs, though its reach balloons thereafter. For a drug targeted for this type of price control, the government-dictated price will be the price.

Another, equally nefarious government price-setting measure in IRA is a 95% excise tax on total revenues of a drug’s sales to Medicare. This punitive tax will apply to a biopharma innovator who doesn’t accept the “negotiated” rate.

The confiscatory tax also applies to drugs whose price increases higher than inflation. HHS reports that the list price of more than 1,200 medicines rose above the inflation rate from July 2021 to July 2022. They’ll soon face the 95% tax.

Yet another government price control in IRA is a $35 Medicare copay cap for insulin. Sen. Raphael Warnock, the Georgia Democrat facing a tight runoff election, has cajoled and harangued this to death. The leftist demagogue and many of his colleagues make it sound as though exorbitant out-of-pocket expense for insulin is rampant, though only one in five privately insured individuals pays more than $35, the uninsured having the biggest insulin bills.

Warnock has company in New Hampshire Democrat Sen. Jeanne Shaheen and Maine Republican Susan Collins proposing to expand the IRA insulin price cap, even to private insurance. These politicians favor writing insulin’s copay into law, though the out-of-pocket price of insulin has been falling, helped by generic competition.

The true price of these price controls is fewer new medicines. Innovation, such as pharmaceutical breakthroughs, typically have higher up-front costs with lower overall costs and better benefits over time. Policies that treat high-value inventions like mere commodities disrupt this innovation-centric pattern.

That is, price controls and other government restriction on private property rights and free enterprise deprive the members of society of the kinds of substantial, positive effects and steady progress that benefit our entire society.

Another real-world consequence of government-set prices is higher overall health care costs. Innovative medicines and treatments today produce better health and longer lives. They keep us out of the hospital and help us avoid surgery.

Those with certain cancers or diseases that just a decade or so ago would have meant a death sentence are now treatable, manageable, some even curable. IRA’s and other government price controls threaten to stymie medical R&D and the medical benefits they bring patients—and the long-term health savings they bring consumers and government payors such as Medicaid and Medicare.

Remember the old commercial where the repair man said, “You can pay me now or you can pay me later?” That’s what’s at stake with IRA’s price controls. Just as in the commercial, the price now on preventive or an immediate medical fix is in the long run much less than the price of fixing after your health condition has gotten way worse.

For instance, a new medication at a “high” price today keeps you healthy enough to continue working and exercising, whereas if that medicine had been forestalled by government price controls, you’d end up sicker and less productive now, facing more extensive and expensive medical needs later on, and likely die an earlier, more painful death.

Those who voted for the IRA and those supporting legislation like that of Warnock, Shaheen and Collins turn to government price controls quashing the competitive market and innovation incentivizes. The IRA’s false promises will eventually be proven hollow—and extremely costly.

Bill Would Punish Patent Owners, Let Infringers Off the Hook

You’d suppose a substantive patent system issue doesn’t relate to the National Defense Authorization Act. And you’d be right.

You also might think that rushing half-baked legislation that significantly affects something as important and complex as the patent system, glommed onto unrelated or general end-of-session legislative packages, is unwise and shouldn’t be done. Again, you’d be right.

Sen. Pat Leahy, D-Vt., the author of much damaging patent legislation over the years and who is retiring, is attempting to hammer a few more nails in the coffin of the American patent system.

The legislation so unfriendly to inventors and patent owners includes the Patent Trial and Appeal Board (PTAB) Reform Act (S. 4417) (previously titled the Restoring the America Invents Act), the Patent Examination and Quality Improvement Act (S. 4704) and, the subject of this blog, the Pride in Patent Ownership Act (S. 2774 & S. 4543). (There’s also the detrimental Interagency Patent Coordination and Improvement Act (S. 4430), by a usual ally of inventors and good patent policy, Sen. Dick Durbin.)

The Pride in Patent Ownership Act would create a requirement that patent ownership be recorded and kept updated. This information would be made publicly available on a searchable database.

Any change in a patent’s ownership not recorded within 120 days would ding the patent owner with the loss of substantial monies in enhanced damages assessed against willful infringers. For the period of lagging recordation, willful infringers would only be liable for standard damages.

PPOA’s punishment far exceeds the error, like getting a 20-year prison sentence for a form-and-manner violation. With willful infringement, something that’s proven in a court of law, the patent infringer deliberately steals the use of someone’s patented invention.

Losing access to punitive damages for such malicious conduct means the infringed patent owner can’t get just, appropriate punishment applied to the infringer. It likely means the loss of millions, even billions of dollars that the infringer ought to owe.

PPOA has been called “one-sided nonsense.” Indeed, it is. The bill burdens the patent owner, who may not be aware of a given patent's transfer through a complex transaction for quite a while. PPOA does nothing to require the predatory infringer’s timely disclosure of real parties in interest on its side.

Rather, the burden on new owners rewards infringers by saving them discovery costs not alleviated for patent owners. This litigation savings advantage for infringers and costs on owners defending their patents would come into play not only in infringement court cases, but also in multiple challenges in federal court and in administrative "patent death squad" proceedings.

Suffice it to say, PPOA is consequential patent legislation. Yet, Sen. Leahy filed the utterly nongermane bill as an amendment to the NDAA. Tellingly, it isn’t contained in the Armed Services Committee’s NDAA manager’s amendment.

There’d been zero legislative action through normal channels except for an eleventh-hour, figleaf hearing Oct. 19, featuring a panel stacked 3-1 for the Infringers Lobby. Neither the Senate IP Subcommittee nor the Judiciary Committee moved PPOA through markup, where it might have been substantially amended or defeated. It certainly hasn’t been considered by the full Senate.

Further, it’s not like PPOA is some noncontroversial, consensus measure. Sen. Leahy’s colleagues at the hearing raised concerns. Some senators let Senate Armed Services leaders know of their concerns about putting PPOA in the NDAA. Rep. Bill Posey and several House colleagues weighed in with House leadership expressing similar concerns about PPOA’s recklessness.

Of all the changes that might be made to remediate the many harms Sen. Leahy, Congress, executive bodies and courts have done to U.S. patents and our private property rights-based patent system, a gratuitous proinfringer, antipatent recordation scheme isn’t one of them.