Gov. Schwarzenegger Signs State Budget Includes NOL Carry Forward
As you probably know, the California state budget, after a historic delay, was signed by Governor Arnold Schwarzenegger last week. BIOCOM’s top priority in this budget was that the legislature leave the state research and development credit untouched. BIOCOM’s contract lobbyist, Maureen Higgins, put in countless hours over the past few months making this argument, and also encouraging legislators to conform California’s net operating loss carryforward to the federal standard of 20 years. Unfortunately, when a budget deal came together leadership of both parties chose to use the gimmickry of postponing the utilization of R&D and NOL credits, which does not generate new revenue, it merely pushes this year’s budget shortfall into future years. We were successful, however, in achieving conformity on 20 year NOL carryforward.
There were three specific elements of the budget for which tax professionals for life science companies should take particular notice. The first is that the use of R&D credits is capped at 50% of tax liability for two years (businesses with less than $500,000 net business income are exempt). Beginning in 2010, this item allows corporations that accumulate business tax credits to assign all or a portion of any unused credit to an affiliated corporation that is a member of the same combined reporting group. With respect to credits earned in tax years beginning before July 1, 2008, the assignee corporation would have to have been a member of the group from at least June 30 2008 through the year of assignment. For credits earned subsequently, the assignee corporation must be a member of the group in the year that the credit is earned through the year in which assignment occurs.
Also, utilization of net operating loss is suspended for two years. As discussed in the above paragraph, corporations do get conformity in the third year which includes both a 20 year carry-forward and a 2 year carry back. Businesses with less than $500,000 net business income are exempt.
Finally, a new penalty for corporations who underpay tax by $1 million or more will be enacted. The penalty will be equivalent to 20% of any understatement of tax for any open tax year from 2003 and later. Reports for tax years prior to 1/1/08 have until May 31, 2009 to be amended and not be subject to the new penalty.
The bill containing these provisions can be found at this link:
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1451-1500/ab_1452_bill_20080917_enrolled.html
Medical Device News from MDMA
Senate Committee Examines Medical Device Advertising
The Senate Select Committee on Aging held a hearing in September to examine the Food and Drug Administration’s policy on direct-to-consumer (DTC) advertising of medical devices. The panel heard testimony from government, industry, academic and other stakeholders. MDMA has been working with the Committee to highlight the benefits that may result from this form of marketing, including patients being proactive about their health care needs.
More information on the hearing can be found on the Committee’s website:
http://aging.senate.gov/hearing_detail.cfm?id=303085&
Finance Committee Examines Physician-Manufacturer Relationships
The Senate Committee on Finance held a hearing to discuss possible reforms to the health care delivery system. Among topics covered included a discussion on the relationship between drug and device manufacturers and physicians. The debate ensued in the context of the Physician Payment Sunshine Act proposed by Ranking Member Charles Grassley in September, 2007. One of the more pointed questions asked by Committee member Senator Orrin Hatch was whether a distinction could be drawn between device and drug manufacturers for valid training purposes. The witness, Dr. Eric Campbell of Harvard University School of Medicine, agreed that the two industries are, in fact, distinct, and that an accommodation in any transparency legislation could be made.
FDA Releases Final Rule Clarifying Device Labeling Changes
The Food and Drug Administration released a final rule in September regarding the parameters in which a device manufacturer can modify label changes to a product. Specifically, manufacturers can add or strengthen the contraindications, warnings, precautions or adverse reactions sections of labeling via a PMA supplement without prior FDA approval only when such modifications are based on newly acquired information and evidence of a causal association between the product and a safety signal is present. The rule also provides clarification as to what the Agency considers to be new information to be incorporated into a label change. Specifically, new information “must reveal risks of a different type or greater severity or frequency than previously included in submissions” and includes meta-analyses, the new regulation states.”
IP Update: Written Description Often Requires Multiple Examples
Often, an inventor will have a broadly applicable idea that may originally exist in only one embodiment. In some instances, one embodiment, i.e. species, is sufficient to describe a whole genus. Other times, it is not. For example, an inventor may find the gene and protein sequence for, say, rat insulin, and, knowing that the sequences are highly conserved in mammals, claim insulin for all mammals—even though only the rat insulin sequence was disclosed. This limited disclosure is not enough to support a generic claim to all mammalian insulins—and such was the holding in Regents of University of California v. Eli Lilly & Co. over ten years ago.
In Carnegie Mellon University v. Hoffmann-La Roche Inc., decided September 8, the claims of the patent at issue were directed to recombinant plasmids that contain gene coding regions for the expression of DNA polymerase I from a bacterial source. The inventors found that the polA gene could not be expressed in a plasmid unless the promoter region thereof was rendered nonfunctional. Indeed, the patent emphasized that this was an important feature of the invention. Moreover, even though the claim was directed to all polA genes of all bacteria, the E. coli polA gene was the only embodiment discussed in the specification. The court therefore held that the narrow disclosure failed to adequately support the claimed genus.
What does this mean to you? Although there is great incentive to file a patent application as quickly as possible, it is advisable that the inventors work closely with a patent professional to make sure, where possible, that every element in a broad claim is supported by description of multiple embodiments in the specification, particularly where a feature is considered “important.” Even better, in many cases, it may be wise to avoid characterizing features as important in the disclosure and prosecution history.
Submitted by BIOCOM's Intellectual Property Committee, by Les Overman with Stephen Reiter. This article is the opinion of the authors and not of their respective employers.
Please send your comments or suggestions to BiocomIP@gmail.com.