Post Grant Review as a Tool for Challenging Pharmaceutical Patents

Under the recently passed Leahy-Smith America Invents Act (“AIA”), generic drug manufacturers will be able to use post grant review (“PGR”) to effectively invalidate or constrain pharmaceutical patents. The efficiency of PGR and the lower burden of proof for the PGR process in comparison to patent litigation makes PGR an attractive new tool for generic drug manufacturers.  Furthermore, generic drug manufacturers can effectively avoid estoppel under a counterclaim exception for PGR.  The primary constraint on PGR, with respect to pharmaceutical litigation, is that patents must be challenged under PGR within nine months of their issuance.  At that early stage, it could be uncertain if a particular pharmaceutical patent is valuable and worth challenging, as the compounds and treatment methods described in the patent may only be in the early stages of clinical trials.

The Post Grant Review Process

PGR is a process where a third party can challenge patent claims within nine months of their issuance using evidence on a broad range of grounds, such as subject matter, novelty, nonobviousness, enablement and written description. 35 USC § 321(b),(c).  PGR can only affect pharmaceutical patents issued at least a few years from now, as it only applies to those pharmaceutical patent claims with effective dates on or after March 16, 2013. § 329(f).  The Director will accept a third party petition for PGR if “the information in the petition, if such information is not rebutted, would demonstrate that it is more likely than not that at least one of the claims challenged in the petition is unpatentable” or if “the petition raises a novel or unsettled legal question that is important to other patents or patent applications.” § 324(a),(b).  If the petition satisfies either of these burdens, the proceedings between the petitioner and patentee are held before the Patent Trial and Appeal Board (“PTAB”). § 328(a).  Before the proceeding, the parties undertake a limited discovery, and during the proceedings they can present a wide variety of evidence, including presenting and cross-examining witnesses.  § 322(a), § 326(a)(5).

In a PGR, the petitioner is only required to prove unpatentability by a preponderance of the evidence. § 326(e).  During the PGR process a patentee can amend his claim once as a matter of right. § 326(a)(9), (d)(1).  The proceedings before the PTAB are limited to 1 year, and extendable to 18 months only for good cause. § 326(a)(11).  Ultimately, the parties can settle or the PTAB can confirm, narrow, or cancel contested claims. § 328(b).  Appeals are heard by the Court of Appeals for the Federal Circuit (“CAFC”). § 141.  A party cannot petition for a PGR if infringement litigation is underway, but any civil claims filed on or after the PGR petition are automatically stayed. § 325(a).  The petitioner is estopped from raising future “claims on any ground that the petitioner raised or reasonably could have raised during that PGR.” § 325(e)(1).  But there is an important exception to this estoppel effect.  The petitioner can still bring patent invalidity counterclaims in subsequent litigation, as they are independent of PGR estoppel. § 325(a)(3), (e)(2).  Many of the further details of the PGR process are uncertain as the PTO has yet to issue the regulations for PGR.

Utility of PGR in Challenging Pharmaceutical Patents

Because of the many beneficial attributes of PGR, it is a particularly useful way of challenging pharmaceutical patents.  First, the petitioner can invalidate the patent on nearly every ground that is available in litigation, including subject matter, novelty, nonobviousness, enablement and written description. § 321(b).  Second, the parties can use a broad range of evidence, such as witness depositions, in the proceeding. § 322(a), § 326(a)(5).  This is an advantage over Inter Partes Review, which offers fewer grounds to contest claims.  Third, the PGR process only requires an initial “more likely than not” standard to initiate review followed by a “preponderance of the evidence” standard for invalidity.  § 324(a), § 326(e).  Both of these standards constitute a much lower burden than the “clear and convincing evidence” standard used for invalidating claims in litigation.  Fourth, the proceeding can extend, at most, to 18 months. § 326(a)(11).  In contrast, patent litigation typically does not even begin until two years after the initial filings, and it can stretch on years thereafter.

Fifth, the petitioner is not estopped from asserting invalidity counterclaims in later infringement litigation. § 325(a)(3), (e)(2).  The limitation of the PGR estoppel is that after a PGR proceeding a petitioner will not be able to initiate a declaratory judgment infringement action based on “claims on any ground that the petitioner raised or reasonably could have raised during that PGR” against the contested claims. § 325(e)(1).  Traditionally, accused infringers assert both an invalidity affirmative defense and an invalidity counterclaim.  And in fact, an invalidity counterclaim is more useful than an invalidity affirmative defense because, in contrast to an affirmative defense of invalidity, a counterclaim against a patent claim persists even after a patentee revokes the infringement action for that patent claim.  In instances where some courts invalidated an invalidity counterclaim (while sometimes upholding the invalidity affirmative defense), the courts have held that the accused infringer did not plead invalidity with sufficient specificity in the counterclaim.  However, with the benefit of the knowledge gained from a PGR proceeding, a petitioner should not have trouble later pleading an invalidity counterclaim with sufficient specificity in future infringement litigation on that patent.  Finally, unlike in litigation, a patentee’s claims could be narrowed at the end of the PGR. § 328(b).  Therefore, even if the petitioner doesn’t succeed in invalidating a claim outright, it may still be able to narrow the claims to the point they are no longer valuable to the patentee.

The Problem of the Nine Month Time Limit on Filing a PGR Petition

The primary problem of PGR with respect to pharmaceutical patents is that the 9-month window for PGR will have elapsed on many of the critical patents before the drug candidate is tested in clinical trials. § 321(c).  Of the clinical drug candidates that pharmaceutical companies file an Investigational New Drug (“IND”) Application for, only 20% of these drug candidates reach the point where the pharmaceutical company files a New Drug Application (“NDA”). Although the patents on the active ingredients may have issued early on, methods of treatment and formulations may be patented after the NDA is filed.

Generic pharmaceutical companies must, therefore, challenge pharmaceutical patents that may have a less than 1-in-5 chance of applying to a future valuable FDA-approved drug.  These challenges should be performed strategically by assessing IND information, clinical trials information, publicity related to any drug candidates and the potential weakness of the claims in a patent at issue.  The generic drug companies could also petition for PGR as a group, effectively spreading the cost of a PGR among the mutual potential beneficiaries and limiting free-riding. § 325(d).  A further advantage of PGR is that these invalidity issues can be challenged long before any Abbreviated New Drug Application (“ANDA”), thus settling expectations among the industry many years in advance.

Empirical Data from EPO Opposition Proceedings

The generic drug manufactures should also consider the results of Oppositions at the European Patent Office (“EPO”).  PGR is analogous to European opposition proceedings, but with some procedural and substantive differences (p.143). In a 2004 article, Hall and Harhoff discussed empirical data on the EPO opposition proceedings. They found that approximately 8% of patents at the EPO issued between 1980 and 1995 were opposed.  This suggests that at the EPO, patent challengers must find the Opposition practice useful.  The cost for a 2004 EPO opposition proceeding ranged from around $15,000 to $50,000.  This cost is about two orders of magnitude less compared to US patent infringement litigation, which generally costs between $2.5 to $5 million where there was between $1 and $ 25 million at risk. PGR proceedings may cost even less than the EPO Oppositions, as the EPO proceedings typically last at least a couple of years as opposed to the 1 year limit for PGR proceedings. § 326(a)(11).  Ultimately, the outcome of the EPO oppositions is that approximately one third of the claims are revoked, one third are narrowed, and one third are unchanged.  The PGR outcomes may be similar to these results as the EPO evidentiary standard of “balance of the probabilities” is analogous to the US “preponderance of the evidence” standard.

Conclusion

Post Grant Review could be a useful tool to challenge pharmaceutical patents.  PGR has the advantages of: (1) challenging the claims on a broad range of grounds and evidence; (2) it requires relatively low evidentiary standards; (3) it is generally limited to 1 year; (4) the petitioner is not estopped from later using invalidity counterclaims at trial; and (5) the patent claims can be productively narrowed, even if they are not invalidated altogether.  The primary difficulty of using PGR to challenge pharmaceutical patents is the nine month post-issuance filing limit.  This limit would frequently require petitioners to challenge patents using PGR before they know whether a pharmaceutical drug will originate from the patent.  This filing limit makes PGR more risky and expensive, but the advantages of using PGR to challenge the pharmaceutical patents outweigh these risks.  Finally, data on EPO Oppositions suggests that PGR will be useful, cost-effective, and that petitioners could ultimately amend or revoke two-thirds of contested patent claims using PGR.

Cite as: Gary Juskowiak, Post Grant Review as a Tool for Challenging Pharmaceutical Patents, Berkeley Tech. L.J. Bolt (March 19, 2012), http://btlj.org/?p=1735.
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