Biopharmas Use Patent Board Challenges Strategically, Panel Says

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By John T. Aquino

Nov. 18 — Biopharma attorneys are using patent board proceedings strategically in a way unintended by Congress to protect and challenge patents, conference panelists said Nov. 16.

The America Invents Act (AIA) created inter partes review (IPR) for the Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) to review challenges to the validity of patents as a lower-cost alternative to litigation in federal district court.

Most IPR petitioners are using the IPR for “standard” reasons, such as when they have been sued for infringement or are seeking a declaratory judgment of noninfringement in federal district court. Or, they may be looking to invalidate their competitor’s patent in the PTAB to eliminate an infringement claim being brought against them, said Saurabh Vishnubhakat, associate professor of law at Texas A&M University, based on a study he co-authored.

But 30 percent of the petitioners haven’t been sued or haven’t asked for a declaratory judgment in federal court, he said. They file an IPR petition as part of a strategic preemptive strike against an issued patent as they consider entering the market and as a way of gaining an advantage they may pursue in a few years. They may also join the petitions of others who are challenging the same or related patents.

Visnubhakat said nonstandard use of the IPR was an unintended but not unforeseeable consequence of the AIA’s creation of the IPR.

Siegmund “Sige” Gutman, a partner and chair of the life sciences patent practice of Proskauer Rose, LLP, New York, said, “I think the trend will be an uptick in nonstandard petitioners. It will be valuable to have a record that could be leveraged later. As companies become more comfortable with the IPR [process], their involvement will increase, and nonstandard petitioners may eclipse the standard.”

The industry has evolved to where it views IPRs strategically, Vishnubhakat said. “If you are hit with an IPR, it is a signal that your patent is valid enough and uncertain enough to fight about.” He noted as well that a majority of petitioners overall have strategically filed both litigation in federal district court and a PTAB petition, which may also not have been the intention of the AIA and which was also noted in another conference session.

The session was part of the BIO IP Committee Counsels Conference in Savannah, Ga.

A Preemptive Strike

The panel didn’t view all nonstandard uses of the IPR favorably.

A well-publicized nonstandard use was by the Coalition for Affordable Drugs, which was created by hedge fund manager Kyle Bass. The Biotechnology Innovation Organization, which sponsored the conference, has argued that Bass has abused and misused the IPR process to make money. The CAD has filed 33 IRP petitions against biopharma patents, including several owned by Shire Pharmaceuticals.

Kara Martin, Shire’s director of intellectual property, said at the session that, except for Bass, most non-standard IPR petitions that she has seen have been preemptive strikes.

“They are from companies doing business in Europe prior to U.S. launches and those who need to assure investors. It is a cheaper first strike, a volley to throw against the other side. There’s often a little fishing going on, companies playing the long game five or six years ahead.”

Henry Gu, general counsel and head of intellectual property for Ariad Pharmaceuticals, said that for smaller companies an IPR petition can have a big impact. “An IPR can create a cloud of uncertainty, especially when you only have one or two products,” he said.

Impacts on Cost May Vary

After the session, Gutman discussed with Bloomberg BNA whether dual proceedings—applicants filing in both federal district court and the PTAB—weaken the argument that IPR proceedings lead to reduced costs.

“The cost of an IPR depends on the specific circumstances surrounding the IPR, including, for example, the complexity of the technology involved, the number of claims at issue, whether the unpatentability or invalidity of the claims or related claims have been previously addressed, and the number of experts involved.”

For a patent owner who may have sued for patent infringement someone who subsequently petitions for IPR of the relevant patent, the IPR may be seen as increasing the cost of litigation, Gutman said. “On the other hand, where a petitioner wishes to create freedom-to-operate and may not be able to be sued by the patent owner for patent infringement because an act of infringement has not yet occurred or there does not yet exist declaratory judgment jurisdiction, an IPR may be more cost-effective than waiting to address the same issues in district court litigation.”

To contact the reporter on this story: John T. Aquino in Washington at jaquino@bna.com

To contact the editor responsible for this story: Randy Kubetin at RKubetin@bna.com

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