Are Generics Companies Using Inter Partes Review To Overturn Patent Court Cases?

NEW YORK – Will generics companies use a win under the new inter partes review mechanism in the United States to overturn pharmaceutical patents in court? A top attorney for a pharmaceutical innovator company says they could indeed. Meanwhile, a new analysis of the inter partes review so far shows it may not be as much of a cause for alarm as previously thought.

Inter partes review (IPR) was a new tool created by the 2011 America Invents Act (AIA), allowing challenges to patents before the Patent Trial and Appeal Board (PTAB).

According to Curt Oltmans, corporate vice president, general counsel, Legal, Patents, Quality, and Public Affairs, at Novo Nordisk, court cases brought by innovator pharma companies defending their patents could be undermined by PTAB decisions. Oltmans spoke at the 7th annual Corporate IP Counsel Forum, held on 11-12 March.

Under the 1984 Hatch Waxman Act, which was aimed at boosting the availability of generic drugs for consumers, a generics company can notify (with an abbreviated new drug application, or ANDA) a patent-holding innovator company that it is going to make a generic version, as it considers the patent to be invalid.

The innovator company, which typically would have about 10 years of patent protection after going to market, must respond to defend its patent in court. As of last fall, there were 32 Hatch Waxman patents subject to IPRs, he said.

The first generics company to file the notice, if it wins, gets 180 days of exclusivity before other generics can enter in. This 180-day window is where the generics companies make the most money, Oltmans told Intellectual Property Watch afterward, as they can charge as much as 80-90 percent of the full price of the original patented drug until other competitors enter the market.

The court process typically takes 30 months. If the generics company wins, the first ANDA applicant has 75 days to launch its product, or lose its exclusivity.

Meanwhile, under the IPR mechanism, another generics company (likely not the first one which stands to gain from the court case outcome) can challenge the patent, and likely get a decision within 12-18 months. It could then go to the judge in the court case and get them to overturn the patent in question. A judge, typically with a busy schedule of cases, might be willing to accept the decision of the US Patent and Trademark Office’s PTAB as patent experts.

It is still early going, but this could play out in the next one to two years, said Oltmans.

Oltmans argued that federal district courts and the PTAB should be on the same standard. The issue was not addressed under the AIA, but is being looked at in Congress as it considers further patent reform, he said, adding that there are differences in the standards for claim construction and patent validity. The courts follow a “clear and convincing” standard, which is higher than the PTAB’s 50-50 preponderance standard, he said.

Examples of cases are Ranbaxy Labs v Vertex, IPR2013-0024, and Activis Labs v Research Corp Tech, IPR2014-01126.

Another issue that may be undone by Congress is related to the “broadest reasonable interpretation” of claim terms, which would make the PTAB claim construction consistent with that of the courts. Currently, PTAB uses the broadest reasonable interpretation.

Progress of Inter Partes Review – No ‘Death Squad’?

The ability to bring challenges to the PTAB is a “seismic change” in the patents landscape, said Charles R. Macedo, an attorney at Amster Rothstein & Ebenstein in New York. Macedo’s firm was a sponsor of the conference.

Macedo spoke about trends in post-grant proceedings, which are the types of challenges that can be brought against an issued patent to the PTAB. This includes IPR and covered business method reviews (CBM), a limited exception for patents on business methods typically used in financial services.

In particular, his firm has analysed PTAB results based on filing date rather than simply the number of claims filed by month. This showed a less alarming trend in cases at the PTAB.

 

The new proceeding was first introduced as of September 2012. When first introduced, the number of petitions filed were relatively modest with less than 20 IPRs filed in the first month of implementation. But as the first graph shows, after the PTAB began instituting proceedings and started cancelling claims, some in the patent bar were alarmed. The first patent was killed in June 2013, and by October 2013, Judge Randall Rader, at the time chief judge of the Appellate Court which heard all patent appeals, called the PTAB a “death squad” for patents. It was not until February 2014 that the PTAB issued its first written decision where at least one claim survived.

But the second graph, showing results based on filing date, shows that in fact while the number of petitions in which a final written decision cancelled all claims (see red) is high, there is also a significant number of petitions in which at least one claim survived a final written decision (see green).

 

Indeed, as the this third graph shows, while still few in number, there are quite a number of petitions in which all of the claims survived (see Black).

 

“Claims have survived a lot more final written decisions than people have realised,” Macedo told Intellectual Property Watch.

Macedo said they are seeing a higher number of PTAB petitions not being instituted (meaning the PTAB will not consider the challenge). This might be good for a company, he said, but does not necessarily stop a challenger from doing it again.

One strategy discussed at the conference was jointly filing an IPR to save money and share expenses. Macedo noted that while this procedure may make sense in a case where there is a bad actor patentee that needs to be taught a lesson, even though the demand is small, it does not make sense in a higher stake litigation where a petitioner may want an option to settle. Because the PTAB will not necessarily stop an IPR proceeding if the parties settle late in the process, Macedo said that a patent owner would have little or no incentive to settle an IPR with just one of many petitioners.

Panellists, including Macedo, Oltmans, Timothy Wilson, senior counsel at SAS Institute, and Lisa Winsor, associate general counsel, IP, Medical Supplies at Medtronic, discussed the petition process.

Wilson called the IPR the “single best tool we’ve been given” for technical challenges. Macedo said that whether it is good, bad or indifferent is still being decided. It “might not be making better patents, just getting rid of patents,” he said.

The panellists advised that petitions be focused – the opposite of the “kitchen sink” approach – because they are being reviewed by specialised judges who are patent experts, and there is limited space. The best arguments should be upfront, and the entire trial, arguments, witnesses and so forth needs to be mentioned in order to be able to bring it up later.

New Top-Level Domains

Another panel addressed an issue that continues to occupy the attention of corporate IP lawyers: how to react to the expansion of new generic top-level domains (gTLDs).

Speakers on the panel included: Scott Evans, associate general counsel, trademarks, copyright, domains, and marketing; Gretchen Olive, director, policy and industry affairs, CSC Digital Brand Services; and Michael Sperling, vice president, associate general counsel, 1800flowers.com.

It is still “early days” for knowing how the new gTLDs (a gTLD example is .com) will play out, speakers said. The new domains were approved and led by the Internet Corporation for Assigned Names and Numbers (ICANN).

Many companies have thought they needed to register new domain extensions as a defensive measure to protect their brands. Some have begun to let them go, now that they see there is no threat to them.

A key question related to the value of new gTLDs is how many will be commercially successful, and how will they relate to online searches.

Several speakers predicted that as many as 90 percent of new gTLDs will fail, though Sparling noted that the remaining 10 percent still means many new domains will now exist.

Speakers said a critical question is how Google and other search engines will rework their algorithms to recognise the new gTLDs, if they do at all. Olive said they believe Google will start trusting related domain extensions in results as giving a kind of veracity, which could move them up in results.

It is a question of whether a gTLD will enhance the search outcome in your favour, Olive noted, adding that there is evidence that TLDs are moving up search results.

Google has spent millions on this issue, one speaker said, including for the .app domain. Separately, the .blog domain went for $30 million, but it remains to see if it will be worth it, he said. It was noted that back in 2002, the .biz domain launched but few businesses have used it.

Using new gTLDs is both a way to promote a brand, but also a security measure, speakers said. For instance, a bank could convince its clients that a website must have its domain extension to be legitimate, which could eliminate phishing exercises.

And concerns were raised from the US industry side about the prospect of the US Commerce Department National Telecommunications and Information Administration (NTIA) giving up its last element of control over the internet management to ICANN, something that has been developing toward a September 2015 deadline.

Separately, another panel addressed IP issues related to cloud computing. One speaker noted that open source software is tremendously useful to firms, as it would otherwise be necessary to reproduce thousands of lines of code every time. But speakers warned that the choice of licensing terms for the open source software must be carefully understood, as it could lead to a requirement that all additional code be made open source as well.

Speakers also discussed the questions about jurisdiction raised by cloud computing, such as where data is stored.