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Executive Summary

Process patent legislation without a provision on partially processed products is expected to be considered by a House/Senate conference committee shortly. An agreement to remove the provision was reached by staffers for the conferees at a March 2 meeting. The provision was contained in the Senate version of the bill, but not the House version. The legislation is targeted for floor consideration by the end of March. The provision would have allowed retailers or distributors to avoid patent infringement penalties for partially manufactured products in transit or already in possession when notice of infringement is served. The loophole had been criticized by PMA as an incentive for stockpiling. Other changes in anticipation of the conference include an adoption of the Senate language in provisions relating to notice of infringement and limitations to liability for product "users." The Senate version imposes less of a burden on patent owners giving notice of infringement. It stipulates that notice be based on information "sufficient to persuade a reasonable person" that it is "likely" a product was made by an infringing process. The House language had required "actual knowledge" or notice of a "substantial likelihood" that a product was made by an infringing process. Both versions limit infringement penalties against users or retailers by requiring that remedies against importers and non-retail sellers be exhausted first. However, the Senate language, which has been adopted, also defines users as non-commercial entities. One major discrepancy between the House and Senate bills that has yet to be resolved is the disclosure requirement. Senate and House legislation on the infringement of process patents are part of HR 3, the omnibus trade bill. The disclosure requirement, which appears only in the Senate bill, states that patent owners may be asked by an importer to identify all process patents owned or licensed which would be reasonably asserted as grounds for infringement. The Senate bill also stipulates that patent owners must respond to such a request within 60 days. Although Senate staff reportedly has offered to alter certain aspects of the disclosure requirement, they have expressed a determination to keep the provision in the legislation. Another aspect of the trade bill which is due for conference reconciliation is the Senate provision to extend the patent of Warner-Lambert's Lopid (gemfibrozil) for five years, to 1994. The extension for the lipid-lowering drug is not in the House bill. That provision continues to meet with opposition from Rep. Kastenmeier (D-Wis.) and is therefore not likely to be reconciled at the staff level. To satisfy Kastenmeier's earlier concern that the legislation be considered in the House prior to the conference committee stage, a separate bill was introduced by Rep. Derrick (D-S.C.) and discussed at an Oct. 8 hearing held by the House Judiciary/Courts subcommittee, which Kastenmeier chairs. Kastenmeier has indicated he retains the additional concern that the Lopid extension will be viewed as a precedent by other drug companies despite assurances to the contrary. The subcommittee has yet to mark up the Derrick bill.

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