The one component is a change from first-to-invent to first-to-file. How do you see that that specific component?
MALANDRO: Well, first of all I think having harmonization of U.S. patent law with rest of the world patent law, trying to get to some general consensus is probably a good thing. I think in an university environment we definitely rely on records of invention, in terms of laboratory notebooks, in terms of pathways of publication, and such that our faculty have lots of ideas all the time.

And so is first-to-invent more preferable? I would say yes it’s more preferable. Is it something that we invoke when we file intellectual property a lot of the time? Has interference ever came up since I’ve been here? The answer to that is no. And so, from our perspective, if I had to pick, I would say that that is probably less important to the university setting than one very important thing, which I think is in there, is the 12-month grace period from the time of disclosure.

Universities have research teaching and service as their primary mission and part of that is dissemination of the research knowledge that they produce here which— broad dissemination in filing of intellectual property sometimes don’t necessarily go as hand-in-hand as we would like them to. So we will never stop university professors or researchers from publishing inventions, giving talks from standing on a corner and shouting at the top of lungs if it’s research work. And so, in many cases we’ll find out about a technology after it has been disclosed. You know, we have roughly, probably about 4,500 faculty members and so, sometimes we read about something important in scientific literature, sometimes we see it online, sometimes we hear about it in the late press. But with that is because of the way universities operate is that necessity of that grace period for patent protection. So if we do find about the disclosure we can start, within that 12 months to wrap some intellectual property protection around that and I think that not only just benefits us, but benefits the eventual licensees and more importantly benefits society who is going to be, you know, sort of the user of the products that we’re developing from our research-based IP. So the 12-month grace period, absolutely, absolutely to us is one of the most important things.

Accordingly, do you see the aspects relating to third party submission as being something that’s going to be difficult to deal with from the university setting?
ORSINI: As far as third party submissions, that’s going to happen regardless to some degree. From our perspective, the issue is with the two windows. The first window we are fine with from a university’s perspective. The second window for submissions is a little more troubling because it can weaken the patent value as a whole and make it more difficult for the university to license their patent work portfolio. So that can be a little more troubling to deal with.

Essentially that someone can continue to challenge a patent for a seemingly endless period of time?
ORSINI: Exactly.

Are you concerned about the aspect of the legislation that limits the litigation damages?
MALANDRO: Well, sort of speaking from a general university perspective, we don’t commercialize any of our own intellectual property ourselves. We don’t make products. We don’t make drugs. We don’t make diagnostics devices. What we do is we license to people who do.

So anything that would materially affect the value of the asset we’re transferring to them, which is the patent, obviously would have some concern for us and concern for our license that we put out. But those are really concerns that, I think, are really weighing heavily on the smaller companies we license to. We do five to ten start-ups a year at the university and we license to a number of small companies. So, I think the limitation of damages, with respect to infringement, materially affects the value that they’re able to garter from a venture capital market when IP is their main asset, it’s a very formative stage.

Okay. So from an operational standpoint, when the university is researching something and let’s say, they’re funded either a VC firm or some entity, it is the university that secures the patent and then transfers it to the business entity?
MALANDRO: No, we take sponsored research dollars here from a couple of different sources. Our primary research support comes from federal government. And through the By-Dole Act of 1980, that act allows universities to elect title or elect to own invention that are result of federal funding. So, in those cases, we can own those technologies provided that we live up to some responsibilities in the act which are diligent commercialization among other things. So, we elect only intellectual property and on behalf of the inventors, we go ahead and try to license the technology for development into commercial products. We also take sponsored research support from the Gates Foundation, things of that nature. Some of those have different ideas about how they seek commercialization or how they see dissemination. So that can be a source of intellectual property. The last is corporate sponsored research. Corporate sponsored research is taken here at the university and if it’s sort of in line with the university’s mission. We don’t do work for hire. We don’t work where intellectual property automatically belongs to a company. We don’t feel that that’s sort of the place at a university. So, if someone sponsors work here at the university from a company then what they’ll have is, they’ll have some option to license any of the intellectual property that comes out of that, basically the same as anyone else. They may have some preferential timing. There may be some responsibilities of disclosure of intellectual property to them but really corporate sponsored research here must meet the mission of the university for publication, data dissemination, and if it does, then we’ll look to license that IP. So all of that kind of comes collectively into those types of things that we patent. And I’m pretty sure you’ll see that, not just at this university, but at most universities as well.

So you think that the University of Pittsburgh is not unique in this mode of operation?
MALANDRO: Yes, it’s actually fairly common. All universities are all recipients of federal funding capital under the By-Dole Act and so, the more federal money that comes in, the more our office and our like offices in other universities are going to operate similarly. I think what you’ll see is different balance of federal funding, foundation funding, sponsored research funding but in virtually every case, if not every case, most of the funding at the university level comes from some sort of federal obligation.

The current patent laws, before they proposed the legislation that we’re now looking at and appear to be ever-changing as amendments continue to surface. What is good about the current patent system in our country? How do you see it working and being beneficial either from a business perspective or from the university’s standpoint?

I think that people look at the patent office very critically, and I also think people don’t give it credit for the sheer volume of information that goes through that office on a daily basis.

MALANDRO: From my perspective, the whole idea of rewarding disclosure of a patent essentially is telling people how you did things in exchange for getting some period of exclusivity on any products to come out of it from a philosophical standpoint is well within what the university is trying to accomplish from its licensing perspective. I think that people look at the patent office very critically, and I also think people don’t give it credit for the sheer volume of information that goes through that office on a daily basis. I look at the amount of patents that we file which is probably in the top 20% to 30% of the universities and if you take that in combination with everything that’s filed across the United States, I think the fact that it does operate— operates with some issues but for the most part, operates fairly well I think is something to be said. In terms of patent laws, as I said the 12-month grace period that we see from disclosure to still seeking patenting in the U.S. is something that is, as I understand, fairly unique in the U.S. but it’s something again that, as we talked about before, is very important to us.

ORSINI: I would agree with everything that Marc said and just build upon that by adding that I think one of the best aspects of our patent law system, at least up until recently, is the fact that it is consistent and predictable. All the players in the game know what the rules are and part of the problem that we’re facing now has to do with new rules that have come out of the patent office, the pending legislation, new casework— it puts the whole system in a state of flux and I think it’s a little more difficult for everyone in this system to function when you don’t know what the rules are going to be on a day-to-day basis.

MALANDRO: And as I’m sure you’re aware John, from an investment perspective and from people investing in technology as well as capitalists investing in companies being public or private, uncertainty is the worst of all possible worlds.

Yes, I hear concern from venture capital firms who fund high tech projects that they’re not sure the companies they fund are going to be able to secure a patent that they’ve known would be likely secured in the past.
MALANDRO: I think some of the issues are sort of the retroactive nature with some of these changes. Sometimes those recent ones put forth by the patent U.S.PTO itself that have been blocked by injunction, some of those would apply rules to patents that are examined that were filed several years ago where you couldn’t have known what the rules were, and so I think everyone is of the mind, look make a decision one or the other. It’s probably going to be good in some respects and in other respects we’ll learn how to live with it and we’ll function within it. There will be some adjustment period from both a market perspective but also procedural perspective. We’ll learn how to function within it and then we’ll move forward but uncertainty is just the bane of everyone’s existence.

I had some research that indicates the patent trade office, we were talking about the volume issue before, and that there about 460,000 or so applications in the last fiscal year that were received and there is backlog of 760,000.
MALANDRO: I think one of these issues is that the backlogs and the time it takes from filing to examination and to hopefully, eventual issuance is so hard to swallow. The patent life wouldn’t start on the time of filing but rather would start on the time of issuance. So right now the patent clock starts to tick on the time of filing of that application and so if it doesn’t get examined and the patent doesn’t get issued for five or six years, if the backlog keeps holding things, then you’re losing valuable patent licenses. If the patent clock would start ticking on the time of issuance there are some problems and you can get some frustration but you would still have the full patent life. I just think that the impact of the backlog wouldn’t be as great.