Bone Up on Standing in Patent Disputes, Biopharma Lawyers Say

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By John T. Aquino

Standing and other procedural issues are ones that many biopharma attorneys litigating patent cases wish they had paid more attention to in law school, conference panelists said March 28.

These issues are coming up in patent validity challenges under the inter partes review (IPR) process before the Patent Trial and Appeals Board (PTAB). “It is a new system, and everybody’s learning it, so what’s really a basic procedural thing that we were taught in law school can turn out to be a really big thing that’s bad. Ask Phigenix,” Michael Lisi, vice president and general counsel at Roche Molecular Diagnostics, said, referring to one of the parties in Phigenix, Inc. v. ImmunoGen, Inc., a recent IPR-related proceeding in which the plaintiff was unable to establish standing.

Standing affects the party’s ability to bring the litigation in the first place. In order to prove standing, a plaintiff must prove they are actually injured by another’s conduct. A failure to demonstrate standing can result in a case’s exclusion from court.

The panel was part of the BIO IP Counsels Committee Conference in Newport Beach, Calif.

PTAB Raises Procedural Issues

Panelists discussed procedural issues that have posed problems in patent cases, especially before the PTAB.

The America Invents Act (AIA) created the IPR process to allow third-party challenges to existing patents. Challengers file petitions with the PTAB, and the board first makes a decision about whether to institute a trial.

Challenges can come from companies that seek approval of generic or biosimilar drugs and want to undermine the patents of the brand companies to get the new products on the market sooner. Some challenges have come from hedge fund-related organizations that reportedly wanted to make money by challenging patents and short-selling the patent-owner’s stock.

The biopharma industry has been critical of the PTAB’s handling of the IPR process ( 10 LSLR, 5/27/16 ), asserting that it has resulted in an inordinate amount of patents approved by the PTO being found to be unpatentable. This opinion was frequently expressed at the BIO IPCC conference.

Lisa Pirozzolo, partner and co-chair of WilmerHale’s IP litigation practice, said that over the last three years, 62 percent of biopharma petitions resulted in the institution of trials. Of trials that were instituted, 38 percent found claims unpatentable, 33 percent found claims patentable and 7 percent were canceled. “The type of claims that were found unpatentable the most were methods of administration of drugs,” Pirozzolo said.

A similarly important procedural factor can be selection of venue; that is, which court will hear the case. In an earlier session, David Manspeizer, a partner at Morrison & Foerster LLP, described venue as one area of the law that over the years he’d wished he’d paid more attention to in law school, referencing the venue-related oral arguments the day before at the Supreme Court in TC Heartland v. Kraft Food.

Support for Standing Needed

“Standing to appeal is another thing you should have studied more in law school,” said Roche’s Lisi.

Christopher Noyes, a partner at WilmerHale, discussed the U.S. Court of Appeals for the Federal Circuit’s 2017 ruling in Phigenix v. ImmunoGen, which was an appeal of a PTAB IPR decision ( 11 LSLR, 1/20/17 ).

Noyes said, “Not to put it too bluntly, but Phigenix failed miserably to substantiate its alleged injury in fact in order to achieve standing before the court.”

ImmunoGen owns a patent that claims follow-on advances using the drug Herceptin (trastuzumab). Phigenix doesn’t develop products but instead has an extensive biopharma patent portfolio that includes a patent that claims treatment methods using drug compounds similar to ImmunoGen’s. The PTAB ruled that Phigenix’s attack on the ImmunoGen patent failed. Phigenix appealed on the merits of that judgment, but the Federal Circuit first addressed the standing question.

“Phigenix submitted two declarations that asserted only that it had suffered actual economic injury because ImmunoGen’s patent increased competition and the continued existence of the Immunogen patent prevented others from licensing Phigenix’s patents. And that didn’t cut it. The court found Phigenix lacked standing,” Noyes said.

“The practical effect of the case is that you need to have an economist come in and provide data on the extent of your injury,” Noyes said. “You need more than speculation.”

He noted that Kyle Bass [the hedge fund manager whose organization has filed over 30 IPRs against biopharma patents] hasn’t appealed any of his losses, probably because he would have to show injury.

Stopped From Appealing?

Estoppel means the losing party may not request further proceedings after a final decision. The AIA’s IPR estoppel provision (35 U.S.C. § 315(e)) says if the IPR results in a final written decision on a patent claim, the petitioner may not assert invalidity at the PTO, federal district court, or the International Trade Commission on any ground the petitioner raised or reasonably could have raised in the IPR.

Some district courts have viewed estoppel after a PTAB decision narrowly: The grounds that can’t be relitigated must have been in the IPR petition, Pirozzolo said, while others have taken a broader approach that has made estoppel more difficult against a petitioner on appeal.

Pirozzolo described how the Federal Circuit in Shaw Indus. Group, Inc. v. Automated Creel Sys., Inc. held that estoppel doesn’t apply to grounds denied by the board as redundant because they weren’t part of the trial decision. Other courts have applied Shaw to any potential trial ground not present in the petition.

Roche’s Lisi discussed Verinata Health, Inc. v. Ariosa Diagnostics, Inc., in which Ariosa, which was acquired by Roche after the litigation began, conceded that estoppel barred its contentions based on the ground actually decided in the IPR. The U.S. District Court for the Northern District of California followed Shaw and ruled Ariosa wasn’t estopped as to non-instituted grounds but was estopped to argue invalidity on a combination of only two of the three references that formed one of the instituted grounds.

“These areas are still evolving under the AIA,” Lisi said.

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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