Biopharmas Should Stay Course as High Court Mulls Patent Reviews

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By Dana A. Elfin

The U.S. Supreme Court is set to rule in 2018 on whether a federal patent agency review procedure is constitutional, potentially upending administrative reviews of biopharma and medical technology patents ( Oil States Energy Services LLC v. Greene’s Energy Group, LLC , U.S., No. 16-712, petition granted 6/12/17 ).

The ramifications of a decision finding the U.S. Patent and Trademark Office’s popular inter partes review (IPR) proceedings unconstitutional could be huge and also extend to other administrative agencies that review patents such as the International Trade Commission.

If IPRs get the kibosh from the nation’s highest court, “it could be a real mess,” Brent Babcock, an intellectual property lawyer with Knobbe Martens in Irvine, Calif., told Bloomberg BNA in an Aug. 10 telephone interview. But Babcock said companies, including those in the life sciences, shouldn’t panic as they await the high court’s ruling.

“We’re not really recommending doing much different,” Babcock said. Instead, he has two primary recommendations: one for patent owners and the other for alleged patent infringers.

lPR proceedings allow alleged infringers and others to contest the validity of a patent before the PTO’s Patent Trial and Appeal Board and they’re increasingly used to challenge biopharmaceutical patents.

Preserve Issue

Patent owners currently embroiled in IPR proceedings should make sure to raise the constitutionality issue pending in the Oil States case to preserve it for a potential subsequent appeal, Babcock said. “Go ahead and make the argument so you can at least say you didn’t waive it,” he said.

“Raise it [the Oil States case] more than skeletally,” Babcock said. “You should devote some of your briefing to it. Don’t just raise it in a footnote.”

Don’t Delay Filing

Alleged infringers who are thinking about challenging patent validity through an IPR proceeding shouldn’t hold off on filing IPR petitions even though the Supreme Court ruling could upend the process, Babcock said. That’s because statutory deadlines under the America Invents Act (AIA) of 2012, which created the IPR procedure, require IPR petitions to be filed within one year of the petitioner being served with a patent infringement complaint in district court.

“You don’t really have that option because you’ve got to file within a year,” he said. “That statutory deadline is still there; it isn’t tolled.”

If there’s no patent infringement litigation pending in district court, a petitioner may have the flexibility to put off filing an IPR, Babcock said, “but, in general, 90 percent of the time, you get sued and you’ve got to file an IPR within a year.”

Constitutionality Question

The outcome in Oil States will affect the life sciences community, but the Oil States case isn’t a life sciences case; in fact, it involves a dispute over the validity of a hydraulic fracturing (fracking) patent.

The question in Oil States is whether a patent grant can be taken away by an administrative agency like the PTO—even if it’s the one that made the grant—or only by a federal court. Oil States maintains its patent is a private property right, not a public right, and the IPR proceeding deprives it of its Seventh Amendment right to a jury trial.

Typically, an alleged patent infringer is a defendant in federal court. Before IPR became available in 2012, an infringer had to make its arguments either in a traditional PTO reexamination proceeding or against a court’s presumption that a patent was valid.

The AIA eliminated that hurdle. An IPR petition presents prior patents and other documents to prove the patent either non-novel or obvious, where the documents were either not found or inadequately analyzed by the original examiner. The PTAB doesn’t presume the patent is valid during its review.

Cheaper, Faster

IPR proceedings have become a popular avenue for challenging life sciences patents, particularly in the biopharma arena, because the proceedings are cheaper and faster than traditional district court litigation.

But the biopharma industry has been critical of the PTAB’s handling of the IPR process, complaining it yields invalidity determinations for many patents the PTO initially approved. Claims relating to methods of administering drugs, for example, were most likely to be found unpatentable.

IPRs a Mixed Bag

“The value of an IPR is a mixed bag for the life sciences community,” Babcock said.

Life sciences companies are frequently on both sides of such proceedings--defending their intellectual property in some instances and challenging their competitors’ patents in others.

Life sciences companies find the procedure to be useful when they challenge others’ patents but they’re not so happy when the procedure is used against them, Babcock said.

1898 Case

Oil States hinges its constitutionality argument on an 1898 precedent, Babcock said, in which the Supreme Court held an administrative agency can’t deprive a party of a patent once it’s granted because the patent is now a private property right, not a public one ( McCormick Harvesting Mach. Co. v. C. Aultman & Co., 169 U.S. 606, U.S., 1898 ).

But, Babcock said, there’s an argument to be made that “the rise of the administrative state really happened in the last century so that precedent isn’t something that has to be followed.”

“Administrative agencies have been delegated these authorities for a long time,” he said.

A plethora of administrative proceedings affect patents, including the PTO’s patent reexamination and interference proceedings and the ITC’s review of patents and trade secrets.

In addition, other AIA-created administrative proceedings like post-grant reviews (PGRs) and reviews of covered business method patents (CBMs) could ultimately be affected by the Supreme Court’s ruling.

PGR petitions challenge a patent on any grounds within the first nine months of patent issuance. CBM reviews generally are for financial service industry-related patents. Beyond patents, even trademarks ultimately could be affected by a ruling deeming IPRs unconstitutional, Babcock said.

Crystal Ball

“We’re all very interested to see what happens,” Babcock said. “The bulk of commentators are predicting affirmance.”

“The Supreme Court is probably going to affirm and say this is constitutional,” he said. “If they upended it, it could really throw a monkey wrench into the works.”

But there’s always a possibility the Supreme Court could “come up with a solution to try to split the baby,” Babcock said.

One example of an intermediate solution, he said, could be to have the PTAB issue decisions that are merely recommendations to the district courts, much like the report and recommendations magistrate judges currently make to district court judges in federal court cases.

To contact the reporter on this story: Dana A. Elfin in Washington at delfin@bna.com

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

For More Information

The petition in Oil States is available at http://src.bna.com/koJ.

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