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The latest trends in patent litigation has led to a more harmonized patent system, which can benefit pharmaceutical companies that invest in patents.
The value of patent rights, and a patent owner’s ability to enforce those rights, has often been equated with a metaphorical pendulum. For over ten years, that pendulum swung rapidly and violently against patent rights. In general, the judiciary (the Federal Circuit Court of Appeals and the Supreme Court), the executive branch (the US Patent and Trademark Office (USPTO)), and Congress all made efforts to curb actions by “patent trolls,” as well as abuses in the obtaining and enforcement of patent rights. The changes made by the three branches of government were, of course, not limited to the troll problem. The patent system was, in essence, fundamentally changed for all patent owners, including negatively impacting enforcement efforts by pharmaceutical companies (and, more generally, the value of pharmaceutical patent portfolios).
The most significant of the government’s reform efforts was the introduction of inter partes review (IPR) proceedings at the USPTO in March, 2013-proceedings that, in the first five years, left a large swath of eviscerated patents. The perceptions of IPR proceedings was so poor that the body that administers the proceedings, the Patent Trial and Appeal Board (PTAB), was called “The Patent Death Squad” by the then Chief Judge of the Federal Circuit. One of the most egregious aspects of IPR proceedings then was the ability of patent challengers to undertake multiple attempts at invalidating valuable patent rights before the courts and/or the USPTO. At long last, however, the patent rights pendulum has reversed course and, since the appointment of new USPTO director Andrei Iancu, pharmaceutical companies have seen changes in the patent system that trend towards a stronger patent system.
The trends in this regard can be broadly categorized as a harmonization of litigation and Patent Office proceedings to conserve resources and limit the sometimes endless challenges to the validity of issued patents. This effort to conserve resources has come in four ways:
First, one of Director Iancu’s initial steps was to narrow the claim construction standard in IPR proceedings to match the standard used in district court litigation. Previously, a patent challenger was able to argue that claims should be broadly construed when seeking to defeat them in an IPR, but then narrowly construed when seeking to avoid infringement in district court litigation. Of course, this resulted in anomalous results and led to a multiplication of litigation, where claim construction had to be fully briefed and argued in both proceedings using different standards. The harmonized claim construction standard has already proven more efficient, with the courts able to rely on positions taken in IPR, and vice versa.
Second, the USPTO is making much more significant use of Section 325(d) of the Patent Act that allows for the denial of petitions seeking IPR for art or arguments that are the same as, or substantially the same as, what was already considered by the Office. Now, if a particular prior art reference was considered in the original examination of a patent, or a post patent grant proceeding (such as IPR), then significant hurdles must be navigated to have the USPTO consider that art anew in an IPR. While Section 325(d) has always been available to the Office, previously, patent challengers were successful in taking multiple shots at a patent using the repeated and old art or arguments. It is only in the past 18 months that significant use has been made of this provision and prevent multiple bites at the apple.
Third, the USPTO is making much more significant use of its discretion to deny petitions under Section 314(a). Examples of the Office’s use of this provision to conserve resources include: (a) denying petitions if a co-pending litigation is at a fairly advanced state (i.e., within a year to trial); (b) denying serial (or “follow on”) petitions that are efforts by the same party to take multiple attempts at the same patent; (c) as an extension of (b), the Office is even denying efforts by third parties to attack a patent in an IPR if that patent was previously subject to such an attack, using a series of factors to consider the issue; and (d) denying petitions where there is only limited success demonstrated in an IPR petition (i.e., that only 2 out of 20 challenged claims are likely to be found unpatentable).
Fourth, district courts are taking guidance from the “expert” USPTO and using findings from IPR proceedings and carrying them over to litigation. For example, in the context of claim construction, disclaimer of claim scope, indefiniteness, and unasserted claims, district courts have adopted determinations made by the Office and used those determinations to resolve issues in the courts.
The patent heyday of the early 2000s may never return, but pharmaceutical companies that invest in patents and would like to see patent value return, have to be heartened by the latest trends in patent litigation, which have led to a more harmonized patent system. The effects are obvious, IPR filings are down, patent litigation is ticking up, and optimism in the value of pharmaceutical patent rights has reversed its free fall.
Matt Cutler is Principal at Harness Dickey