United States: Stricter Standing For Inter Partes Review?

Neither the statutes nor the regulations governing Inter Partes Review (IPR) require the party challenging the patent to have been charged with infringement, or even to establish any interest in practicing the claimed subject matter. While the costs of IPR proceedings may prevent casual challenges, now that hedge fund manager Kyle Bass has filed several IPR petitions to challenge pharmaceutical patents and possibly short the stocks of pharmaceutical companies, some are calling for stricter standing requirements for IPR petitioners.

The Coalition for Affordable Drugs

According to this Wall Street Journal article, Kyle Bass founded the Coalition for Affordable Drugs to target patents that he believes "have little value other than to drive up prescription drug prices." The Coalition has filed IPRs against the following Orange Book-listed patents:

The Ampyra® petitions were filed in February, while the others were filed in April. Thus, it is too early for Patent Owner Responses or institution decisions.

The Patent Trial and Appeal Board Workload

One justification for traditional "standing" and "case or controversy" requirements is to conserve judicial resources, and not clog the courts with purely academic disputes. Does the PTAB need this type of protection?

According to recent USPTO statistics, over 2700 IPR petitions have been filed since the proceedings became available September 16, 2012. The PTAB has issued institution decisions in about 1670 cases, and about 870 of those have been decided, settled, or dismissed. If the rate of IPR filings continues to climb, the USPTO may have to manage its workflow to meet its statutory obligation to render decisions within 12 months of institution. (Congress gave the USPTO authority to limit the number of IPRs filed in the first four years only.) In view of these numbers, it seems reasonable to take measures to ensure that the PTAB's resources are being used wisely.

Writing at Oblon's Patents Post Grant blog, Scott McKeown suggests that the USPTO can use its rulemaking authority under 35 USC § 316 to require petitioners to have a direct commercial interest in the outcome. If I were Mr. Bass, though, I would argue that Congress intended to permit anyone to challenge any patent in an IPR proceeding. In support of this argument I would cite the fact that Congress required CBM petitioners to have been "charged with infringement" but did not impose any qualifications on IPR petitioners.

Thus, if opportunistic IPRs are problematic, it could take Congressional action to impose limits on who can bring IPR proceedings. But since Congress is still debating "the patent troll problem," any legislative action is likely a long way off.

What About Appeals?

If the Coalition for Affordable Drugs is not successful at the PTAB, will it have standing to bring a Federal Circuit appeal? Although 35 USC § 141(c) states that "[a] party to an inter partes review ... who is dissatisfied with the final written decision of the Patent Trial and Appeal Board under section 318(a) ... may appeal the Board's decision only to the United States Court of Appeals for the Federal Circuit," we know from Consumer Watchdog v. Wisconsin Alumni Research Foundation, that the statutory right to appeal does not fully answer the question. As an Article III court, the Federal Circuit only can hear from parties who have suffered an "injury in fact" that is traceable to the challenged action, and that likely will be redressed by a favorable decision. Maybe the problem of opportunistic IPRs will solve itself after a few unappealable losses at the PTAB.

The Best Defense?

An alternative strategy for patent holders is to strengthen their defensive position against IPR challenges. For example, pharmaceutical companies could review their Orange Book-listed patents, identify the most important ones, and determine whether they are vulnerable to prior art challenges. If so, they can consider raising the issues themselves in a Supplemental Examination proceeding, where they will have a more realistic opportunity to amend claims, a more liberal ability to present evidence, and can discuss their position with the examiner without involvement by an opposing party. (Supplemental Examination proceedings also have the unique advantage of possibly shielding the patent from charges of inequitable conduct surrounding any items considered in the Supplemental Examination.)

Once the USPTO is considering (or has considered) the most relevant prior art in such an ex parte proceeding, the patent holder could urge denial of any IPR petitions based on 35 USC § 315(d), citing by analogy 35 USC § 325(d), which permits the PTAB to deny petitions "because, the same or substantially the same prior art or arguments previously were presented to the Office."

The Real Impact of Opportunistic IPRs

While this article in Business Insider reports that Kyle Bass has proclaimed a goal of "lower[ing] drug prices for everyone," the most immediate impact of his IPRs may be on pharmaceutical company stock prices. Indeed, the relationship between the Coalition's IPRs and drug prices appears to be tenuous at best, since they have not challenged every Orange Book listed patent for the targeted drugs, and larger hurdles than the patents may stand between any would-be a generic competitors and FDA approval of a generic product.

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