Supreme Court Outcome Unlikely To Dent IPR Popularity

The impact of an expected Supreme Court ruling to the US Patent & Trademark Office's Patent Trial and Appeal Board and its inter partes review process – proceedings intended to be faster and more affordable alternatives to challenging patents, versus pursuing litigation through the US court system – may not be as significant as the biopharmaceutical industry has been fretting over. The court heard oral arguments in the case, known as Cuozzo Speed v. Michelle Lee, on April 25. A decision is expected by the end of June.

While biopharmaceutical sector representatives were paying close attention to the reactions by members of the US Supreme Court during April 25 oral arguments in a case that could decide the future of so-called inter partes reviews (IPRs), an ultimate ruling by the justices, expected by the end of June, is unlikely to have a substantial impact on how the US Patent & Trademark Office (US PTO) Patent Trial and Appeal Board (PTAB) moves forward with its proceedings or on any particular sector, including drug makers, said Silicon Valley lawyer Eliot Williams, a partner at Baker Botts.

The case, however, is important, Williams said, because it's the first time the Supreme Court has had the opportunity to weigh in on the PTAB and the broadest reasonable interpretation (BRI) standard it uses to determine the validity of patents under IPRs – proceedings intended to be faster and more affordable alternatives to challenging patents, versus pursuing litigation through the US court system.

"The PTAB has certainly become a very important forum in the patent litigation landscape," he told Scrip.

While the PTAB and its IPR proceedings have only been around for a few years – created in 2011 under the America Invents Act, which moved the US from a first-to-invent to first-inventor-to-file standard – "everyone has recognized that it's a very useful forum for challenging the validity of patents, especially patents that are being asserted in litigation," Williams said.

Indeed, the PTAB's IPRs have grown increasingly popular – far beyond what the US PTO anticipated.

In the 42 months of IPRs, the PTAB has cancelled 10,000 patent claims, New York lawyer Garrard Beeney, a partner at Sullivan and Cromwell LLP, told the Supreme Court on April 25.

Beeney is representing Cuozzo Speed Technologies LLC, which contended the PTAB should not have applied the BRI standard in claim construction under an IPR, in which the board invalided one of the firm's patents covering certain components used in global positioning systems.

In its fight against the US PTO, Cuozzo argued the US Court of Appeals for the Federal Circuit erred when it ruled that, in IPR proceedings, the PTAB may construe claims in an issued patent according to the BRI standard rather than their plain and ordinary meaning – often referred to as the "Phillips" standard – which is used by district courts.

During the April 25 oral arguments, Supreme Court Chief Justice John Roberts said he thought it was a "very extraordinary animal in legal culture to have two different proceedings addressing the same question," which could lead to two different results.

"It just seems to me that that's a bizarre way to decide the legal question," Roberts declared.

The Supreme Court also is taking a look at whether a party may bring a challenge to the Federal Circuit of a decision by the PTAB to institute an IPR.

The high court, Williams said, will decide whether the PTAB is on the right track, doing what Congress has asked, or out of control and too aggressive in invalidating patents.

"Some of the Justices' questions showed concern about the possibility of the PTAB and a district court proceeding reaching inconsistent results as to the validity of the same patent," he said. "But that appears to be a necessary consequence of the statutory scheme Congress created."

Pharma Fretting

Given the PTAB has invalidated about 85% of the patent claims that have come before it through IPR process, representatives from the biopharmaceutical industry have insisted drug manufacturers have had good reason to fret.

Hans Sauer, deputy general counsel for intellectual property at Biotechnology Innovation Organization (BIO), told Scripearlier this year the group hears frequently from its members that the "availability of IPRs is changing the way companies decide to take which products forward into development and where to make investments."

"By putting more pressure on patents and creating more uncertainty about whether your patent will stand up to a challenge or hold up in a real commercial dispute, you are affecting corporate decision-making in an industry where there already are so many business uncertainties," like the probability the medicine will fail in clinical trials or be unable to attract enough investment, Sauer explained.

Earlier this month , Sauer's colleague, Tom DiLenge, general counsel and head of public policy at BIO, told Scrip that if the Supreme Court permits the process for IPRs to remain on its current course, not only will patent claims held by innovator drug makers likely continue to be invalidated at unprecedented levels, but investment in the biopharmaceutical sector and partnering and acquisition deals among drug companies are at greater risk of falling apart.

IPR challenges, DiLenge added, have become part of every licensing conversation.

But Williams was skeptical about all the worry over the impact of the Supreme Court's ultimate decision in Cuozzo.

If the justices agree with Cuozzo and tighten the claims construction standard to something mirroring what's used by district courts, Williams contended there may be only a "marginal" impact, with a few more cases where the PTAB does not institute an IPR for trial and there may be a few more cases where the board sides with the patent owner in the final written decision.

"In the vast majority of these cases, the difference between those two standards would not change the outcome in the case," Williams said.

Why The Anguish?

So why so much interest from both sides in the Cuozzo-US PTO lawsuit, which essentially has again pitted the high-tech industry against the biopharmaceutical sector, which often are foes in patent cases?

Companies that find themselves as the defendants in a patent infringement case want to take the least difficult path, "and certainly, the broadest reasonable interpretation makes it somewhat easier to challenge the validity of the claim," said Williams, who has been observing the Cuozzo case.

So, he said, they want the PTAB's ability to keep using the BRI protected.

But Beeney argued the BRI standard "in no way comports with the congressional purpose of inter partes review."

In an amicus brief submitted to the Supreme Court, however, the Generic Pharmaceutical Association asserted "Congress clearly did not intend for IPRs to duplicate district court litigation," but had wanted the PTAB to turn to the BRI standard for making its rulings.

While both sides of the debate "have some ammunition in the legislative history" to back up their views, Williams said he didn't think it was clear that Congress said one way or the other which standard should be used by the PTAB.

"It's not so clear Congress even spent a lot of time thinking about which claim construction standard to use," he said.

Even if Cuozzo were to win in getting the claim construction standard narrowed to like what's used in the district courts, Williams anticipated the PTAB to continue to be an "important forum for challenging the validity of patents."

Nonetheless, Williams said, with the current makeup of the court consisting of only eight justices rather than the full nine after the death in February of Justice Antonin Scalia, "there do not appear to be enough votes to overturn the PTAB's use of broadest reasonable interpretation standard."

"If I was a betting man, I'd bet in favor of the government on this one," he said.