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Looming Judge Fight Threatens Generics’ Favored Patent Forum

Jan. 7, 2021, 10:30 AM

Generic drugmakers are pushing to save a forum they lean on to kill brand name patents from collapsing at the hands of the Supreme Court.

Industry groups representing Apotex, Dr. Reddy’s Laboratories, and other companies and organizations fear a high court ruling in a case over the constitutionality of Patent Trial and Appeal Board judges could eliminate the tribunal’s patent validity trials or leave them subject to political influence.

Preserving those trials, called inter partes reviews, is critical for maintaining low drug prices, the groups argue. IPRs are known for their speed and high rate of revoking intellectual property rights—which generic producers can rely on to get cheaper products more quickly to the market.

“Generics have found IPRs to be very useful,” Dorothy Whelan, a patent attorney at Fish & Richardson, said. “It’s something they’ve benefited from, and they don’t want to see it go away.”

In United States v. Arthrex, the justices will hear arguments March 1 over whether the U.S. Court of Appeals for the Federal Circuit was correct in finding PTAB judges powerful enough to be principal officers under the Constitution, requiring presidential nomination and Senate confirmation.

They’ll also consider whether the Federal Circuit fixed the problem by severing PTAB judge removal protections, meaning they can be fired at will.

Arthrex Inc., whose surgical device patent is at the center of the fight, is urging the justices to find the board’s IPRs unconstitutional and let Congress decide whether and if it wants to fix the process.

But “dismantling the entire system” would uphold patents that “serve as an illegitimate barrier to cheaper generic and biosimilar alternatives,” the Association for Accessible Medicines, an advocacy group comprised of generic producers and others, warned the justices in a brief.

The Coalition Against Patent Abuse argued there’s no constitutional problem with the board. But the group, which counts AAM, health-care providers, and patient advocacy organizations as members, said in a brief that if the justices see a fix is needed, they “should impose minimal political interference upon the Board, to ensure that its decisions on patentability remain credible, reliable, and impartial.”

‘Deleterious Consequences’

Envisioned by Congress as a cheaper and faster litigation alternative for challenging patents, the U.S. Patent and Trademark Office’s PTAB has historically been viewed as more likely than not to find challenged patents invalid. IPRs typically conclude within a year of being instituted.

There’s an “idea that people have, that you’re more likely to succeed on a patent challenge in an IPR versus district court litigation,” Doug Robinson, a patent attorney at Harness, Dickey & Pierce, said.

What’s more, the timing “limitations on IPRs are more favorable to challengers,” Robinson said. “Going the IPR route can clear the landscape for you faster than litigation.”

In AAM’s view, “eliminating IPR, even temporarily, would have deleterious consequences for the patients who seek cost-effective medications and the generic and biosimilar manufacturers who must make investment decisions about what products to bring to market.”

A temporary halt to IPRs could come to fruition if the Supreme Court decides there is a constitutional problem with the PTAB and calls on Congress to fix the issue. How temporary such a halt would be is an open question.

“The legislative process in the best times takes a long while,” Igor Timofeyev, a Paul Hastings litigation partner, said. “Who knows how quickly Congress would enact a fix.”

That could put many patent review proceedings between brand name and generic drugmakers in limbo.

Companies sued in federal court for patent infringement often use the PTAB to invalidate the intellectual property. Brand name drugmakers typically sue generic companies when the latter apply to introduce a generic version of their drug. This blocks the Food and Drug Administration from approving the generic for 30 months, unless the suit is dismissed or a court finds the patent not to be infringed or invalid.

A PTAB finding that a patent is invalid doesn’t end the 30-month stay. But if the district court pauses the case for the PTAB to finish the proceeding, the 30-month stay could expire before the litigation is fully over—allowing the generic company to enter the market while the lawsuit is still pending.

Executive Meddling

If the justices uphold the Federal Circuit’s ruling, the patent office director would have greater control over agency judges. That may empower the pharmaceutical industry to pressure the agency into outcomes unfavorable to patients, the Coalition Against Patent Abuse told the justices.

The Federal Circuit read the Constitution “to encourage—even require—executive power to meddle with Board decisions,” CAPA said in a brief.

“Congress structured the Board to conduct inter partes reviews impartially based on the law, largely free of political pressures from powerful lobbies such as the pharmaceutical industry,” CAPA said.

PTO Director Andrei Iancu, a Trump appointee, is widely viewed as focused on making the PTAB, historically viewed as favoring patent challengers, a more balanced forum.

Greater executive oversight could mean that a politically appointed PTO director is “attuned” to the administration’s overall drug policies, and issues “regulations and guidance that emphasize the importance of that policy consideration,” Timofeyev said.

While PTAB judges would still try to be fair, they would be “conscious” of the director’s view and of the fact that the director could dismiss judges who disagree with him, Timofeyev said.

As the Supreme Court grapples with PTAB judge constitutionality, generic companies are more concerned about disruptions to their ability to challenge patents.

“Was the fix sufficient, because if it’s not, then the process collapses,” Whelan said, referring to IPRs. “That would throw a lot into disorder.”

To contact the reporter on this story: Ian Lopez in Washington at ilopez@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com

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