August 14, 2014

The Use of Inter Partes Review Petitions in ANDA Litigation

Matias Ferrario, Jennifer Giordano-Coltart, and Leslie Grab – August 4, 2014

Since the implementation of the America Invents Act (AIA) and the creation of the inter partesreview (IPR) process, patent challengers have been using the Patent Trial and Appeal Board (PTAB) as an alternative or additional venue in patent disputes. In fact, the PTAB is currently the second most active venue for patent disputes. While the majority of IPR petitions filed to date have been in the electrical engineering or computer science arts, there has been a rise in the number of chemical or pharma requests (71 percent of electrical/computer IPR requests versus 13.3 percent for chemical/bio/pharma IPR requests). The use of IPRs in the pharmaceutical context, particularly in the context of ANDA litigation, presents some interesting and unique issues for patent holders, as well as first ANDA filers and follow-on generics. This article will discuss general strategies concerning the use of IPRs in the pharmaceutical context as well as special issues that may arise when there is a concurrent ANDA litigation proceeding.

While a full description of IPR is beyond the scope of this article, this relatively new procedure allows patent challengers to seek review of patents in the Patent and Trademark Office. Patentability may be challenged in an IPR only on a ground that could be raised under 35 U.S.C. §§ 102 (novelty) or 103 (obviousness), and only on the basis of prior art consisting of patents or printed publications. The PTAB will institute an IPR if it finds a reasonable likelihood that the petitioner would prevail with respect to at least one challenged patent claim, and a final determination by the PTAB will be issued within one year from institution (extendable for good cause by six months). IPR is available for a patent issued at any time but cannot be sought until after the later of: (1) nine months after the issuance or reissuance of the patent; or (2) termination of any post-grant review procedure (another relatively new procedure for challenging recently issued patents), and may no longer be sought after either of the following: (a) more than one year elapses after service of a complaint for infringement of the patent on the challenger, or (b) filing of a declaratory judgment action to invalidate the patent by the challenger (excluding counterclaims). Once a decision is made to institute an IPR, the parties are permitted to engage in some limited discovery. A more fulsome explanation of IPRs can be found in the article by Eric Hutchins, Mitchell Stockwell, and Wab Kabada, "Inter Partes Review: Rocket Docket Patent Validity Trials in the USPTO.

IPR Benefits for Patent Challengers in the Pharmaceutical Context
For parties seeking to invalidate or narrow a patent, IPR presents a good forum in which to present technical arguments (compared to district court litigation). Establishing invalidity of patents that cover drug formulations is often complicated and can involve complex obviousness arguments. PTAB judges often have technical degrees in the subject area of the dispute and are typically well-versed in patent law. Additionally, while district courts interpret claims using the "ordinary and customary meaning" standard (see Phillips v. AWH Corp., 415 F.3d 1303, 1312–18 (Fed. Cir. 2005) (en banc)), which involves looking to the claim language, the specification, the prosecution history, and relevant dictionary definitions, in IPR proceedings, the PTAB applies the broadest reasonable interpretation to the claims and need only look to the specification. See 37 C.F.R. § 42.100(b). Thus, the challenger receives the benefit of a broader claim interpretation, potentially opening up the patent to a larger universe of prior art. Also, the standard for proving invalidity in an IPR is only a preponderance of the evidence, in contrast to the higher clear and convincing evidence standard required in a patent litigation. Further, district courts are required to presume that the claims of a patent are valid. See 35 U.S.C. § 282(a). This is not the case in IPRs.

These standards and requirements are generally helpful for patent challengers but may be of particular use to those challenging pharmaceutical patents due to the technically complex nature of the claims being challenged. In combination with the heightened patent and technical experience of PTAB judges, IPRs provide an attractive forum for presenting highly technical or multi-reference obviousness arguments. In addition, these standards and the expertise of the PTAB judges means that prior art previously considered during examination may provide a strong basis for invalidity arguments, which district court judges and juries may be hesitant to accept, particularly in view of the presumption of validity.

With multiple forums available to patent challengers, both in IPR proceedings and district court litigation, parties now have the opportunity to be selective in their invalidity strategies. For example, challengers may choose to make use of the PTAB's expertise and the lower proof standards of the IPR proceedings to present their most technical arguments in an IPR forum. The challenger could then focus their efforts during any concurrent litigation on other grounds of invalidity, such as arguments regarding patentable subject matter under 35 U.S.C. § 101, written description or enablement under 35 U.S.C. § 112, or prior art under 35 U.S.C. §§ 102 and 103 that is unavailable for use in an IPR, such as a prior art system. This provides patent challengers with the ability to focus their arguments during litigation and present a more concise case of invalidity to the court.

In addition, if an IPR is filed in the absence of concurrent district court litigation, not only is the patent holder forced to respond rapidly to the petition, but the patent owner may need take positions in the IPR proceedings that can be used against it in a future litigation. Without the benefit of discovery into the accused products, it may be difficult for the patent holder to present claim amendments that would still encompass the patent challenger's products, particularly for pharmaceuticals, where small changes in structure can have a significant impact on function or efficacy. Although filing an IPR provides notice to the patent holder and the market that the challenger likely is preparing to launch a competitive/generic product, unlike when a Paragraph IV certification is filed, the exact nature of the product would remain unknown. This fact may make it even more challenging for the patent holder to maintain claims that cover a soon-to-be introduced product.

Additionally, as IPRs are relatively much less expensive than litigation and, thus, provide a more cost effective means of invalidating a patent, challengers may choose to make use of IPR proceedings at earlier stages of product development or commercialization, when patent holders may not be in a position to mount an aggressive defense. For example, patents issuing to small companies or universities could be challenged before the patents have been licensed to pharmaceutical companies. Such patent holders may be unwilling or unable to fund the cost of defending a patent in an IPR proceeding. The quick pace of IPRs is also a factor that weighs in favor of challengers. For example, an IPR proceeding must be instituted by the PTAB within six months of a petition filing and dispensed within 12 months of institution (or up to 18 months with good cause). See 35 U.S.C. § 326(a)(11) and (c). Thus, IPR petitions can be used strategically as a leveraging tool during licensing negotiations with universities or start-up companies.

Another strategy for using IPR petitions is to attack patents listed in the Orange Book that a New Drug Application (NDA) holder chose not to assert against a potential infringer in a Paragraph IV litigation (filed under 21 U.S.C. § 355(j)(2)(a)(vii)) or related patents not listed in the Orange Book (e.g., claims to processes, packaging, intermediates). Thus, for parties in the pharmaceutical market, IPRs present an alternative and complementary means of challenging a patent holder's entire intellectual property estate concerning an Orange Book listed drug.

Finally, another facet of IPR challenges is the potential to engage in pre-litigation settlement discussions. By engaging in such discussions, the patent challenger may be able to reach a favorable monetary settlement or an agreement to stay off of the market. Some types of these settlements in the Paragraph IV litigation context have taken the form of "reverse payment" agreements, which continue to be the subject of heightened scrutiny by the Federal Trade Commission. It is not clear whether such settlements in the IPR context would receive as much attention from the FTC.

Strategies for Patent Holders in the Pharmaceutical Context
Patent holders are not without any defensive advantages against IPR attacks.

IPR petitions are subject to very strict requirements, which can make preparing an IPR petition difficult. An IPR petition must include certifications, identify the challenged claims and basis, provide claim constructions, and identify proposed rejections, including claim charts. Not only is there a 60-page limit for the petition, there are other formatting requirements, such as the requirement of double-spacing and 14-point font that may provide obstacles to potential IPR filers. See 37 C.F.R. §§ 42.24(a)(i) and 42.6(a). These obstacles can be particularly acute in the context of pharmaceutical patents with large claim sets or claims that may require multiple prior art references to establish obviousness. While a patent challenger could file multiple petitions to cover multiple sets of claims or to present multiple prior art combinations against the same set of claims, the high cost of preparing the petitions (each including their own set of prior art and expert declarations) and the filing fees may serve as a barrier to such practices. See 37 C.F.R. § 42.15(a)(1–4) (filing fee is $23,000 with additional fees for any claims above 20). Cost estimates for complex IPR petitions, such as are often found in the pharmaceutical context, can be quite high, which may discourage the use of these petitions in situations when the parties are also litigating in another forum.

Patent holders may also make use of the opportunity to strategically narrow certain claims to avoid prior art or to address infringement issues. For example, the PTAB recently granted a motion to amend claims in an IPR for the first time in International Flavors & Fragrances Inc. v. U.S. Department of Agriculture, IPR2013-00124 (P.T.A.B. May 20, 2014). While the motion was unopposed, and appears to effectively be a settlement by amendment (the new claims no longer posed a threat to the challenger), the decision indicates that it is possible to successfully present a motion to amend the claims of the challenged patent. Also, in the event of concurrent litigation, patent holders may have the benefit of discovery to inform decisions regarding potential amendments to more closely tailor the claims to an allegedly infringing product.

Patent holders may also choose to file retaliatory IPRs or infringement suits (if not filed already). A commercially successful patent holder may be in a good position to shift the cost-benefit analysis in its favor by aggressively responding to the patent challenger and increasing the challenger's costs. Through litigation, the patent holder could expand the scope of the dispute to patents not at issue in the IPR. One benefit of instituting an infringement action is that the patent challenger may be forced to take claim construction and invalidity positions in the IPR proceeding, without knowing the patentee's infringement positions in the litigation. A well-funded patent holder can also increase the stakes for the patent challenger by putting the challenger's own patent portfolio at risk.

Hatch-Waxman and IPR
The Drug Price Competition and Patent Term Restoration Act, informally known as the "Hatch-Waxman Act" (P.L. 98-417), sets forth the process by which a generic drug manufacturer can file an ANDA to seek approval of a generic drug by the U.S. Food and Drug Administration (FDA). See 21 U.S.C. § 355(j). The first generic drug manufacturer to file an ANDA containing a Paragraph IV certification—certifying that one or more of the Orange Book-listed patent claims for the approved drug are invalid, unenforceable, and/or not infringed—will be granted a 180-day market exclusivity for the generic market if it successfully maintains the patent challenge in litigation. See 21 U.S.C.§505(j)(2)(A)(vii)(IV).

Both first ANDA filers and later ANDA filers may take advantage of IPR petitions. There are unique issues associated with both of these potential filers as they relate to the Hatch-Waxman Act.

First ANDA filers. In spite of the benefits discussed above related to the standards and the expertise of the PTAB judges, potential first ANDA filers may not have a strong incentive to file an IPR proceeding against patents that have been asserted in an ANDA litigation. When a NDA holder files a Paragraph IV infringement suit against an ANDA filer, there is an automatic 30-month stay of FDA approval of the ANDA under the Hatch-Waxman Act (21 U.S.C. § 355(j)(5)(B)(iii)). his regulatory stay can be lengthened or shortened by the court. If an IPR petition is filed while there is an ongoing patent litigation in which the same patent is challenged in both proceedings, either party may ask the district court to stay the litigation. However it is not certain whether a litigation stay would extend the 30-month regulatory stay for approval of the NDA. See, e.g., Peschke Map Technologies, LLC v. J.J. Gumberg Co., C.A. Nos. 12-1525-SLR; 12-1527-SLR; 12-1528-SLR; 12-1530-SLR; 12-1572-SLR; 12-1573-SLR, (D. Del. Apr. 24, 2014) (granting stay of litigation pending outcome of IPR proceedings without addressing 30-month regulatory stay).

A first Paragraph IV ANDA filer benefits from a 180-day exclusivity period under the Hatch-Waxman Act. See 21 U.S.C.§505(j)(5)(B)(iv). First-filer exclusivity blocks final approval of other ANDAs with Paragraph IV certifications for 180 days. See 21 U.S.C. § 355(j)(5)(B)(iv). If an Orange Book-listed patent is invalidated in an IPR proceeding, it is still unclear whether the first ANDA filer may receive the benefit of the exclusivity period because a decision by the PTAB in an IPR may not qualify under the statute to trigger the exclusivity period. Additionally, if the IPR petition is not successful, the ANDA filer must still go through Paragraph IV certification and potential litigation in an attempt to invalidate the patent. In this situation, the ANDA filer would be estopped from raising any art in the litigation that was "raised or reasonably could have raised" during the IPR. See 35 U.S.C. § 315(e).

Later ANDA filers. Later ANDA filers are arguably in the best position to use IPR petitions most effectively. First, because IPR petitions are generally more cost effective than litigation, a later ANDA filer may choose to "clear" certain patents on invalidity grounds while waiting for the first filer's data exclusivity period to run. The lower burden of proof and broader claim interpretation standards are also helpful for second ANDA filers seeking to be proactive in clearing potentially problematic patents.

Second, later ANDA filers receive the benefit of seeing any invalidity arguments that have been presented by a first ANDA filer and have the opportunity to potentially improve upon those arguments or to take arguments that were presented in a litigation proceeding and put them against the more challenger-friendly standards at the PTAB. This strategy was successfully employed by Apotex against Alcon Pharmaceuticals. Alcon had previously sued Teva, the first Paragraph IV filer. Alcon, Inc.v.Teva Pharms. USA, Inc., 664 F. Supp. 2d 443 (D. Del. 2009). Teva had raised certain prior art during the litigation but the court found Alcon's patents valid and infringed by Teva. Apotex was a later ANDA filer and was sued by Alcon. Alcon v. Apotex, No. 1:12-cv-00960 (D. Del. July 20, 2012). Apotex filed two IPRs using the same art that had been previously considered by the district court in the Teva litigation. See Apotex Inc. v. Alcon Pharms., Ltd., IPR2013-00012 (P.T.A.B. Mar. 19, 2013) and IPR 2013-00015 (P.T.A.B. Mar. 19, 2013). The PTAB granted the IPR for all challenged claims. Alcon and Apotex then settled both the litigation and the IPRs.

Third, due to the accelerated nature of IPR proceedings, a later ANDA filer may actually be in a better position to launch its generic drug relative to a first ANDA filer. Although a later ANDA filer may not have its application approved until the expiration of the first ANDA filer's 180-day exclusivity period, later ANDA filers may be able to use an IPR to trigger the 180-day exclusivity period by securing a final judgment of invalidity or noninfringement on the Orange Book patents that had been asserted against the first ANDA filer. Such a scenario would occur if the later ANDA filer receives a final IPR decision before a first ANDA filer's product is ready for launch. This might trigger the "failure-to-market forfeiture" provision of 21 USC § 355(j)(5)(D)(i)(I)(bb)(AA) (the Medicare Modernization Act), allowing the second ANDA filer to enter the market. This last factor is more complicated as it is not yet clear whether an IPR decision would qualify as "an infringement action . . . or declaratory judgment action" that would start the clock under the "failure to launch" provision. Further, it is an open issue whether the affirmance of an IPR decision by the Federal Circuit would meet the statutory requirement or whether the later ANDA filer would also have to move for final entry of a judgment with a district court after the affirmance.

In summary, the strategic use of IPR petitions as an offensive tool in the pharmaceutical context is still in development. It is already clear, however, that IPR petitions can be a powerful tool for patent challengers who are involved in ANDA litigation, or are simply contemplating the launch of a generic product. However, patent holders are not without recourse as there are a number of tactical advantages in IPR proceedings that are available to them as well.

Keywords: litigation, intellectual property, ANDA, inter partes review, pharmaceutical, Hatch-Waxman, PTAB

Matias Ferrario, Jennifer Giordano-Coltart, and Leslie Grab – August 4, 2014