`
`
`
`
`No. 16-712
`IN THE
`Supreme Court of the United States
`__________________________________________
`OIL STATES ENERGY SERVICES, LLC,
`
`
`
`
`
`Petitioner,
`
`v.
`GREENE’S ENERGY GROUP, LLC, ET AL.,
`
`
`
` Respondents.
`__________________________________________
`ON WRIT OF CERTIORARI TO THE
`UNITED STATES COURT OF APPEALS
`FOR THE FEDERAL CIRCUIT
`______________________________
`
`BRIEF OF AMICUS CURIAE MYLAN
`PHARMACEUTICALS INC. IN SUPPORT OF
`RESPONDENT GREENE’S ENERGY GROUP, LLC
`______________________________
`
`WILLIAM A. RAKOCZY
`Counsel of Record
`PETER J. CURTIN
`TRANG D. HOANG
`CHRISTOPHER P. GALLIGAN
`RAKOCZY MOLINO MAZZOCHI
`SIWIK LLP
`6 West Hubbard Street
`Suite 500
`Chicago, IL 60654
`(312) 527-2157
`wrakoczy@rmmslegal.com
`Counsel for Amicus Curiae
`Mylan Pharmaceuticals Inc.
`
`
`
`
`
`
`i
`
`II.
`
`TABLE OF CONTENTS
`
`INTEREST OF THE AMICUS CURIAE.................... 1
`SUMMARY OF ARGUMENT ..................................... 2
`ARGUMENT ............................................................... 6
`Inter Partes Review Benefits the Public as
`I.
`a Key Safeguard of a Strong Patent System
`Intended to Ensure High-Quality Patents
`and Reward True Innovation. .......................... 6
`Congress Created Inter Partes Review to
`Allow the PTO to Reconsider its Prior
`Administrative Decisions. .............................. 11
`The PTO First Assesses
`A.
`Patentability and Examines
`Applications Ex Parte, with Limited
`Resources. ............................................. 12
`Inter Partes Review, Like Other
`Post-Issuance Proceedings, Exercises
`the PTO’s Clear and Broad
`Responsibility to Examine
`Patentability. ....................................... 18
`Continued Agency Examination in
`Inter Partes Review Differs in
`Purpose and Function From
`Litigation in Article III Courts. ........... 23
`Inter Partes Review Does Not
`Preclude Adjudication By Article III
`District Courts. .................................... 26
`
`B.
`
`C.
`
`D.
`
`
`
`
`
`ii
`
`
`
`III. Mylan’s Experience Confirms Inter Partes
`Reviews are an Important Tool to Promote
`Patent Quality and Competition in the
`Pharmaceutical Industry. .............................. 28
`Inter Partes Reviews Help Promote
`A.
`Generic and Biosimilar Competition
`by Weeding Out Improperly Granted
`Patents. ................................................ 30
`Inter Partes Review Allows
`1.
`Generics To Challenge
`Patents That Could
`Unlawfully Delay Competition
`Under The Hatch-Waxman
`Act. ............................................. 31
`Inter Partes Review Also
`Allows Biosimilar Applicants
`To Clear The Patent Thicket. ... 34
`B. Mylan’s Inter Partes Review
`Petitions Have Resulted in the PTO
`Canceling Improperly Issued
`Patents, and Potential Earlier Entry
`of Lower Cost Generic and
`Biosimilar Products. ............................ 36
`CONCLUSION .......................................................... 39
`
`
`2.
`
`
`
`
`
`
`
`
`iii
`
`TABLE OF AUTHORITIES
`Federal Cases
`Apotex Inc. v. Thompson,
`347 F.3d 1335 (Fed. Cir. 2003) ........................ 32
`Bonito Boats, Inc. v. Thunder-Craft Boats, Inc.,
`489 U.S. 141 (1989) ............................................ 6
`Cooper Techs. Co. v. Dudas,
`536 F.3d 1330 (Fed. Cir. 2008) ........................ 19
`Cuozzo Speed Techs., LLC v. Lee,
`136 S. Ct. 2131 (2016) .............................. passim
`FTC v. Actavis, Inc.,
`133 S. Ct. 2223 (2013) ...................................... 33
`Gayler v. Wilder,
`51 U.S. 477 (1851) .............................................. 6
`Graham v. John Deere Co.,
`383 U.S. 1 (1966) .......................................... 6, 13
`Hill-Ram Servs. v. Stryker Corp.,
`755 F.3d 1367 (Fed. Cir. 2014) ........................ 26
`In re Apotex, Inc.,
`49 F. App’x 902 (Fed. Cir. 2002) ...................... 27
`In re Etter,
`756 F.2d 852 (Fed. Cir. 1985) .......................... 24
`In re Swanson,
`540 F.3d 1368 (Fed. Cir. 2008) ........................ 24
`In re Yamamoto,
`740 F.2d 1569 (Fed. Cir. 1984) ........................ 25
`Kappos v. Hyatt,
`566 U.S. 431 (2012) .................................... 12, 13
`KSR Int’l Co. v. Teleflex Inc.,
`550 U.S. 398 (2007) .......................................... 25
`Lear, Inc. v. Adkins,
`395 U.S. 653 (1969) .......................................... 16
`
`
`
`
`
`
`
`
`iv
`Microsoft Corp. v. i4i Ltd. P’ship,
`564 U.S. 91 (2011) ............................................ 13
`Nautilus, Inc. v. Biosig Instruments, Inc.,
`134 S. Ct. 2120 (2014) .................................. 6, 25
`Nevro Corp. v. Boston Sci. Corp.,
`No. 16-cv-06830 (N.D. Cal. Oct. 4, 2017) ........ 15
`Novartis AG v. Noven Pharm. Inc.,
`853 F.3d 1289 (Fed. Cir. 2017) ........................ 27
`Patlex Corp. v. Mossinghoff,
`758 F.2d 594 (Fed. Cir. 1985) .......................... 21
`Precision Instrument Mfg. Co. v. Automotive
`Maintenance Machinery Co.,
`324 U.S. 806 (1945) ............................................ 7
`Redline Detection, LLC v. Star Envirotech, Inc.,
`811 F.3d 435 (Fed. Cir. 2015) .......................... 27
`Rhine v. Casio, Inc.,
`183 F.3d 1342 (Fed. Cir. 1999) ........................ 26
`Sandoz Inc. v. Amgen Inc.,
`137 S. Ct. 1664 (2017) ................................ 34, 35
`Sears, Roebuck & Co. v. Stiffel Co.,
`376 U.S. 225 (1964) ............................................ 6
`Federal Statutes and Constitutions
`21 U.S.C. § 355 ...................................................... 33
`21 U.S.C. § 355(b)(1) ............................................. 32
`21 U.S.C. § 355(c)(2) .............................................. 32
`21 U.S.C. § 355(j)(2)(A)(vii) ................................... 32
`21 U.S.C. § 355(j)(2)(A)(vii)(IV) ............................ 33
`21 U.S.C. § 355(j)(5)(B)(iii)(I) ................................ 33
`35 U.S.C. § 102 ...................................................... 13
`35 U.S.C. § 103 ...................................................... 13
`35 U.S.C. § 131 ...................................................... 13
`35 U.S.C. § 132(a).................................................. 13
`
`
`
`
`
`
`
`
`v
`35 U.S.C. § 141(a).................................................. 13
`35 U.S.C. § 145 ...................................................... 13
`35 U.S.C. § 271(e)(2)(A) ........................................ 33
`35 U.S.C. § 301(a)(1) ............................................. 18
`35 U.S.C. § 302 ...................................................... 18
`35 U.S.C. § 306 ...................................................... 19
`35 U.S.C. § 311(a).................................................. 21
`35 U.S.C. § 311(b)............................................ 11, 21
`35 U.S.C. § 312(a).................................................. 21
`35 U.S.C. § 314 (2000) ........................................... 19
`35 U.S.C. § 314(b)............................................ 11, 22
`35 U.S.C. § 315 (2000) ........................................... 19
`35 U.S.C. § 315(b).................................................. 21
`35 U.S.C. § 315(e) ............................................ 22, 28
`35 U.S.C. § 316(a)(11) ..................................... 11, 22
`35 U.S.C. § 316(a)(5) ............................................. 22
`35 U.S.C. § 316(d) ........................................... 22, 26
`35 U.S.C. § 317(a).................................................. 26
`35 U.S.C. § 318(a).................................................. 27
`35 U.S.C. § 319 ................................................ 22, 27
`35 U.S.C. § 6 .......................................................... 23
`42 U.S.C. § 262(k) ................................................. 34
`Act of Dec. 12, 1980,
`Pub. L. No. 96-517, 94 Stat. 3015 ................... 18
`American Inventors Protection Act,
`Pub. L. No. 106-113, Div. B. § 1000(a)(9),
`113 Stat. 1536, 1501A–567 (Sec. 4604(a)) ...... 19
`U.S. CONST. art. I, § 8, cl. 8 ..................................... 6
`Federal Regulations
`21 C.F.R. § 314.53(e) ............................................. 32
`
`
`
`
`
`
`
`vi
`37 C.F.R. § 1.104(a)(1) .......................................... 13
`37 C.F.R. § 1.111(b) ............................................... 13
`37 C.F.R. § 1.111(c) ............................................... 13
`37 C.F.R. § 42.123 ................................................. 22
`37 C.F.R. § 42.51(b) ............................................... 22
` Legislative Materials
`157 CONG. REC. H4220 (June 22, 2011) ................ 12
`157 CONG. REC. S5347 (Sept. 7, 2011) .................. 20
`H.R. REP. NO. 112-98, pt. 1 (2011) ........................ 11
`Other Authorities
`Alison J. Baldwin & Aaron V. Gin, Inter Partes
`Review and Inter Partes Reexamination:
`More Than Just a Name Change, 11
`SNIPPETS 11 (2013) .......................................... 20
`C. Scott Hemphill & Bhaven N. Sampat,
`Evergreening, Patent Challenges, and
`Effective Market Life in Pharmaceuticals,
`31 J. HEALTH ECONOMICS 327 (2012) .............. 30
`Cecil D. Quillen, Jr., et al., Continuing Patent
`Applications and Performance of the U.S.
`Patent and Trademark Office – Extended,
`12 FED. CIR. B. J. 35 (2002) ............................. 17
`David Holt & Karl Renner, Settlement Doesn’t
`Guarantee End of Post-Grant Proceeding,
`Law360 (Feb. 14, 2014) ................................... 38
`Erwin A. Blackstone, Joseph P. Fuhr, Jr., The
`Economics of Biosimilars, 6 AM. HEALTH
`DRUG BENEFITS 469 (2013) .............................. 35
`FED. TRADE COMM’N, Competition Perspectives
`on How Procedures and Presumptions Affect
`Patent Quality in TO PROMOTE INNOVATION:
`THE PROPER BALANCE OF COMPETITION AND
`PATENT LAW AND POLICY (Oct. 2003) ......... 14, 17
`
`
`
`
`
`
`
`
`vii
`IPD ANALYTICS, LLC, Updated IPR Statistics
`In the Pharmaceutical Sector (Apr. 29,
`2016) ................................................................. 31
`Jason D. Grier, Chasing Its Own Tail? An
`Analysis of the U.S.P.T.O.’s Efforts to
`Reduce the Patent Backlog, 31 HOUSTON J.
`INT’L L. 617 (2009) ........................................... 10
`John Molenda & Richard Praseuth, Current
`Trends in Biologics-Related Inter Partes
`Reviews, Law360 (July 20, 2017). ................... 31
`John R. Allison & Mark A. Lemley, Empirical
`Evidence on the Validity of Litigated
`Patents, 26 AIPLA Q.J. 185 (1998) ................... 8
`Mark A. Lemley & Bhaven Sampat, Is the
`Patent Office a Rubber Stamp?, 58 EMORY
`L. J. 181 (2008) ................................................. 17
`Michael Christel, Pharm Exec’s Top 50
`Companies 2017, 37 PHARMACEUTICAL
`EXECUTIVE (June 28, 2017) ............................. 36
`Michael D. Frakes & Melissa F. Wasserman,
`Is The Time Allocated to Review Patent
`Applications Inducing Examiners to Grant
`Invalid Patents?: Evidence from Micro-Level
`Application Data, NW. L. & ECON. RES.,
`PAPER NO. 14-16 (July 18, 2014) ............... 15, 16
`Michael D. Frakes & Melissa F. Wasserman,
`Does the U.S. Patent & Trademark Office
`Grant Too Many Bad Patents?: Evidence
`from a Quasi-Experiment, 67 STAN. L. REV.
`613 (2015) ........................................................... 9
`Michelle K. Lee, Enhanced Patent Quality
`Initiative: Moving Forward, DIRECTOR’S
`FORUM: A BLOG FROM USPTO’S LEADERSHIP
`(Nov. 6, 2015) ..................................................... 7
`
`
`
`
`
`
`
`
`viii
`PATENT OFFICE PROFESSIONAL ASS’N, Changes
`to the Patent Examiner Performance
`Appraisal Plan, Extension of the
`Pendency Award, Renewal of the Count
`System Initiatives, and Other Issues (June
`18, 2015) ........................................................... 15
`Ronald J. Mann & Marian Underweiser, A New
`Look at Patent Quality: Relating Patent
`Prosecution to Validity, 9 J. EMPIRICAL
`LEGAL STUD. 1 (2012) ......................................... 8
`Shine Tu, Patent Examiners and Litigation
`Outcomes, 17 STAN. TECH. L. REV.
`507 (2014) ......................................................... 14
`Stephen B. Maebius & Wenhua Yu, Key Trends
`in Pharmaceutical IPRs Filed by Generic
`Petitioners, PTAB Trial Insights (May 15,
`2017) ................................................................. 38
`U.S. GOV’T ACCOUNTABILITY OFF., GAO-16-479,
`INTELLECTUAL PROPERTY: PATENT OFFICE
`SHOULD STRENGTHEN SEARCH CAPABILITIES
`AND BETTER MONITOR EXAMINERS’ WORK
`(June 2016) ...................................................... 16
`U.S. PATENT & TRADEMARK OFFICE,
`PERFORMANCE AND ACCOUNTABILITY REPORT
`FISCAL YEAR 2016 (Nov. 14, 2016) ................... 14
`U.S. PATENT & TRADEMARK OFFICE,
`PERFORMANCE AND ACCOUNTABILITY
`REPORT, FISCAL YEAR 2010 (Nov. 9, 2010) ........ 9
`UNITED STATES PATENT & TRADEMARK OFFICE,
`INTER PARTES REEXAMINATION FILING DATA
`(Mar. 31, 2010) ................................................. 19
`UNITED STATES PATENT AND TRADEMARK
`OFFICE, Examination Time and the
`Production System (2016) ................................ 15
`VALEANT PHARMS. INT’L, INC., 4Q and FY 2016
`Financial Results (Feb. 28, 2017) ................... 37
`
`
`
`
`
`
`
`
`
`1
`
`INTEREST OF THE AMICUS CURIAE1
`Mylan Pharmaceuticals Inc. (“Mylan”) is one of
`the largest generic and specialty pharmaceutical
`manufacturers in the world. It is dedicated to
`providing greater public access to high-quality
`medicines by bringing
`lower-priced drugs and
`biologics to the market. Mylan has fought tirelessly
`to bring patients the earliest possible access to more
`affordable medicines. In approximately the last five
`years alone, Mylan’s patent challenges in district
`courts and through inter partes review have allowed
`consumers to benefit from earlier access to generic
`competition for more than $35 billion of annual costs
`of branded drug products. To do so, Mylan has
`erased more than 285 years of life from invalid
`patent claims, which should never have issued and
`would otherwise have continued to block lower-
`priced competition.
`
`To be sure, the pharmaceutical industry benefits
`from a patent system designed to fulfill the Consti-
`tutional command to “promote the Progress of Sci-
`ence and useful Arts.” But the system has become
`clogged with a glut of patents that fail to meet the
`statutory standards for patentability, which should
`never have issued. Pharmaceutical manufacturers
`have powerful economic incentives to obtain and use
`
`1 Per Supreme Court Rule 37.6, Mylan certifies that all parties
`have consented to this filing through blanket letters of consent.
`No counsel for any party authored this brief in whole or in part.
`No party, counsel for any party, or person other than amicus
`curiae or its counsel made a monetary contribution to preparing
`or submitting this brief.
`
`
`
`
`
`2
`
`
`
`these weak patents to maximize their monopolies.
`Mylan, therefore, often challenges the validity and
`patentability of weak patent claims before Article III
`district courts and the Patent Trial and Appeal
`Board (“PTAB”) of the U.S. Patent and Trademark
`Office (“PTO” or “Agency”) to invalidate, cancel, or
`reduce the scope of overly broad claims that unlaw-
`fully obstruct the stream of commerce and reduce the
`public’s access to more affordable medicines.
`
`Mylan, like the public at large, shares a vital in-
`terest in ensuring patent quality. Accordingly,
`Mylan has a significant interest in this Court con-
`firming the constitutionality of inter partes reviews
`(“IPRs”). As discussed below, these post-issuance
`proceedings provide an efficient mechanism for the
`Agency to reexamine its earlier decision to issue a
`challenged patent, and to correct its own errors
`(when appropriate), by canceling unpatentable
`claims that unlawfully block generic and biosimilar
`competition.
`
`
`SUMMARY OF ARGUMENT
`Mylan takes no position on whether the rights
`conferred by an issued patent constitute “public” or
`“private” rights. Regardless of the decision on that
`point, the current statutory framework for inter
`partes review complies with both the separation of
`powers required by Article III of the Constitution
`and patent-holders’ Seventh Amendment rights, for
`at least the reasons described in Respondents’
`briefing. (See Fed. Resp. Br. at 15-53; Resp. Br. at
`26-54).
` Because the parties and others have
`
`
`
`
`
`3
`
`
`
`thoroughly briefed the constitutional issues, Mylan
`submits this brief to illuminate the purpose, benefits,
`and practical consequences of inter partes review in
`the context of the pharmaceutical industry. As the
`biopharmaceutical
`industry’s most prolific
`inter
`partes
`review petitioner, Mylan has gained
`considerable experience with the issues surrounding
`inter partes review.
`Inter partes review evolved from predecessor post-
`issuance proceedings (ex parte and inter partes
`reexaminations) which similarly allowed the PTO to
`reassess
`its earlier patentability decisions and
`correct mistakes where appropriate. Decades of
`precedent
`confirm
`the
`sound
`statutory and
`constitutional bases for allowing the PTO—as the
`administrative agency tasked with determining
`patentability—to continue the examination and
`reconsider a patent grant in further administrative
`proceedings. By creating
`inter partes review,
`Congress sought to improve patent quality, promote
`innovation, and reduce the number of improperly
`granted patents deterring or blocking competition.
`The outcomes of patent cases litigated to final
`judgment in the years leading up to the 2011 passage
`of the America Invents Act (“AIA”) demonstrated a
`need to improve patent quality. Studies suggest that
`courts had ruled more than half of all patents
`litigated to final judgment invalid by clear and
`convincing evidence. These results may be explained
`in part by the difficult administrative challenge
`facing the PTO throughout the 1990s and 2000s.
`During those decades, the demand for patents
`exploded and Agency resources could not keep pace.
`
`
`
`
`4
`
`
`
`Application backlogs and average pendency times
`ballooned, creating serious concerns about the PTO’s
`ability to devote sufficient time and resources to
`ensure issuance of only truly innovative, high-quality
`patents. In view of the PTO’s practical limitations,
`Congress created inter partes review to serve as an
`efficient and effective mechanism for the PTO to
`reconsider its prior patentability decisions with input
`from interested third parties.
`Inter partes review plays an important role in the
`pharmaceutical industry. The statutory framework
`Congress provided to accelerate approval of generic
`drugs under the Drug Price Competition and Patent
`Term Restoration Act of 1984 (“Hatch–Waxman”)
`has worked well in many ways, but the automatic 30-
`month stay of FDA approval triggered by Hatch-
`Waxman litigation allows suspect patents to delay
`lower-priced generic competition regardless of the
`scope or strength of the patent. As discussed below,
`generic drug companies have defeated all challenged
`patents in at least 45% of the Hatch-Waxman cases
`litigated to final judgment. This statistic highlights
`the high costs improperly granted pharmaceutical
`patents impose on consumers and the economy by
`extending brand monopolies and delaying full and
`fair competition. It also illustrates the benefits of
`inter partes review, which provides an efficient,
`effective, and much less costly mechanism for the
`PTO to reconsider its decisions and cancel patents
`that should never have issued.
`The availability of inter partes review may be
`even more vital to the emerging biosimilar industry,
`as branded biologics can be covered by hundreds of
`
`
`
`
`5
`
`
`
`patents. Under the Biologics Price Competition and
`Innovation Act (“BPCIA”), there is no way to determine
`all patents a branded company believes cover its
`product until years after the biosimilar company’s
`initial investment, which often exceeds $100 million.
`Inter partes review allows the biosimilar company to
`challenge suspect patents that potentially cover the
`branded product before making such a substantial
`investment, and thus obtain legal certainty earlier in
`the development process. The availability of these
`proceedings—which allow
`limited and
`focused
`challenges on a predictable timeline—confers a
`considerable benefit to those companies, whatever
`the outcome. Mylan’s experiences with inter partes
`review highlight the pro-competitive nature of inter
`partes review.
`
`
`
`
`
`
`
`
`6
`
`ARGUMENT
`
`I.
`
`Inter Partes Review Benefits the Public
`as a Key Safeguard of a Strong Patent
`System Intended to Ensure High-Quality
`Patents and Reward True Innovation.
`Congress enacts the laws governing our patent
`system under the authority granted by Article I of
`the Constitution to “promote the Progress of Science
`and useful Arts” (the “Patent Clause”). Nautilus,
`Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120, 2124
`(2014); U.S. CONST. art. I, § 8, cl. 8. Accordingly, pa-
`tents confer rights that “exist only by virtue of stat-
`ute.” Sears, Roebuck & Co. v. Stiffel Co., 376 U.S.
`225, 229 n.5 (1964); Gayler v. Wilder, 51 U.S. 477,
`494 (1851) (observing that a patent monopoly “is cre-
`ated by the act of Congress; and no rights can be ac-
`quired in it unless authorized by statute, and in the
`manner the statute prescribes”).
`
`law,
`interpreting patent
`When crafting and
`Congress and the courts have consistently recognized
`that granting monopoly
`rights
`to
`so-called
`“inventions” already known or available to the public
`imposes considerable social costs, and undermines
`the Patent Clause’s central goal
`to promote
`innovation. See Bonito Boats, Inc. v. Thunder-Craft
`Boats, Inc., 489 U.S. 141, 148 (1989) (A monopoly on
`publicly known information “would not only serve no
`socially useful purpose, but would in fact injure the
`public by removing existing knowledge from public
`use”); Graham v. John Deere Co., 383 U.S. 1, 6 (1966)
`(“Congress may not authorize the issuance of patents
`whose effects are to remove existent knowledge from
`
`
`
`
`7
`
`
`
`the public domain, or to restrict free access to
`materials already available.”).
`
`This Court has recognized inter partes review as
`one means for the PTO to promote patent quality,
`intended to “protect the public’s ‘paramount interest
`in seeing that patent monopolies . . . are kept within
`their legitimate scope.’” Cuozzo Speed Techs., LLC v.
`Lee, 136 S. Ct. 2131, 2135 (2016) (quoting Precision
`Instrument Mfg. Co. v. Automotive Maintenance
`Machinery Co., 324 U.S. 806, 816 (1945)).
`
`The various mechanisms for post-issuance patent
`review—including inter partes review—allow the
`PTO to check its work, often in light of new infor-
`mation and arguments, and efficiently weed out pa-
`tents that should never have issued. These proceed-
`ings improve patent quality, and promote genuine
`innovation. In the words of a former PTO Director:
`
`
`Patents of the highest quality can help
`to stimulate and promote efficient li-
`censing, research and development, and
`future innovation without resorting to
`needless high-cost court proceedings.
`Through correctness and clarity, such
`patents better enable potential users of
`patented technologies to make informed
`decisions on how to avoid infringement,
`whether to seek a license, and/or when
`to settle or litigate a patent dispute.
`
`
`
`
`
`
`
`8
`
`
`
`Michelle K. Lee, Enhanced Patent Quality Initiative: Moving
`Forward, DIRECTOR’S FORUM: A BLOG FROM USPTO’S
`LEADERSHIP (Nov. 6, 2015).2
`
`When Congress enacted the AIA, various studies
`of litigation outcomes had shown the need to improve
`patent quality and the value in providing mecha-
`nisms for doing so. A study examining cases decided
`by the Court of Appeals for the Federal Circuit be-
`tween 2003 and 2009 found that the court ruled 60%
`of challenged patents invalid. Ronald J. Mann &
`Marian Underweiser, A New Look at Patent Quality:
`to Validity, 9 J.
`Relating Patent Prosecution
`EMPIRICAL LEGAL STUD. 1, 7 (2012); see also John R.
`Allison & Mark A. Lemley, Empirical Evidence on
`the Validity of Litigated Patents, 26 AIPLA Q.J. 185,
`205 (1998) (finding 46% of litigated patents were in-
`validated).3 These results and others discussed be-
`low indicate that the PTO has issued a substantial
`number of low-quality patents.
`
`Focusing on the pharmaceutical industry, generic
`drug companies have successfully litigated to final
`judgment against at least 220 patents alleged to cov-
`er more than 100 branded drugs before federal dis-
`trict courts and the Federal Circuit since passage of
`the Hatch–Waxman Act. Indeed, since 1989, generic
`challengers have defeated all blocking patents cover-
`
`
`2 https://www.uspto.gov/blog/director/entry/enhanced_patent_q
`uality_initiative_moving
`3 These patents were ruled invalid despite the statutory
`presumption of validity and the enhanced evidentiary burden
`imposed on patent challengers.
`
`
`
`
`
`9
`
`
`
`ing a branded drug—opening the market to lower-
`priced generic competition—in at least 45% of Hatch-
`Waxman cases litigated to final judgment. And
`those numbers do not include the many more cases
`resolved by negotiated settlements or other dismis-
`sals (most dispositions), which also reflect commer-
`cially successful patent challenges by generic manu-
`facturers. The invalidated patents should never have
`existed or been used to delay lower-priced competi-
`tion.
`
`Through the 1990s and the first decade of this
`century, the PTO was faced with significant re-
`source-based challenges. The number of patent ap-
`plications filed skyrocketed while the PTO’s re-
`sources did not. These circumstances created an in-
`crease in the backlog of pending patent applications,
`a substantial increase in application pendency times,
`and led to concerns about the quality of issued pa-
`tents. See Michael D. Frakes & Melissa F. Wasser-
`man, Does the U.S. Patent & Trademark Office Grant
`Too Many Bad Patents?: Evidence from a Quasi-
`Experiment, 67 STAN. L. REV. 613, 651 (2015) (“Con-
`temporaneous with this documented decline in the
`Agency’s resource balance is naturally a substantial
`increase
`in the Agency’s backlog of examina-
`tions . . . . While
`this backlog grew only 14%
`throughout the first five years of the 1990s, it grew a
`staggering 114% over the subsequent five years. It
`then grew a further 190% over the course of the
`2000s.”); U.S. PATENT & TRADEMARK OFFICE,
`PERFORMANCE AND ACCOUNTABILITY REPORT, FISCAL
`
`
`
`
`
`10
`
`
`
`YEAR 2010 18, 125 (Nov. 9, 2010)4 (average applica-
`tion pendency of 35.3 months and a backlog of
`726,331 applications in FY 2010); Jason D. Grier,
`Chasing
`Its Own Tail? An Analysis of
`the
`U.S.P.T.O.’s Efforts to Reduce the Patent Backlog, 31
`HOUSTON J. INT’L L. 617, 626-27 (2009) (“[T]he tre-
`mendous demand for patents has swamped the lim-
`ited resources of the USPTO, even with the hiring of
`more examiners. As a result, the USPTO faces a
`backlog of over 700,000 patent applications. This
`backlog has lengthened pendency . . . to an average
`of 31.3 months . . . . Both the backlog and pendency
`problem threaten the quality of patents and burden
`the courts with litigation over bad patents.”). As the
`problems worsened with no resolution in sight, the
`need for significant reforms and additional Agency
`resources became clear.
`
`After years of legislative wrangling, Congress
`created the current inter partes review system as one
`of the patent reform measures in the AIA. Among
`other things, inter partes review allows the PTO to
`efficiently
`revisit
`its
`initial
`patentability
`determination in proceedings strictly limited in scope
`and duration.
` Petitioners may
`
`challenge
`patentability only on anticipation (35 U.S.C. § 102)
`and/or obviousness (35 U.S.C. § 103) grounds, based
`only on prior art patents or other printed
`publications, and the reviews have strict deadlines
`requiring a decision within 18-24 months of the
`
`
`4 https://www.uspto.gov/sites/default/files/about/stratplan/ar/U
`SPTOFY2010PAR.pdf
`
`
`
`
`
`11
`
`
`
`petition’s filing date. 35 U.S.C. §§ 311(b), 314(b),
`316(a)(11).
`The public benefits from inter partes review as
`part of the statutory and regulatory framework
`designed by Congress to enhance patent quality and
`reward true innovation. H.R. REP. NO. 112-98, pt. 1,
`at 48
`(2011)
`(Congress sought to provide “a
`meaningful opportunity to improve patent quality
`and restore confidence in the presumption of validity
`that comes with issued patents in court.”).
`II.
`Congress Created Inter Partes Review to
`Allow the PTO to Reconsider its Prior
`Administrative Decisions.
`This Court has recognized inter partes review as a
`specialized agency proceeding having a purpose and
`procedures different from district court litigation.
`Cuozzo, 136 S. Ct. at 2143. In doing so, the Court
`rejected an argument that inter partes review was
`intended
`to establish
`trial-like procedures
`to
`adjudicate patentability. Id. at 2135. The Court
`observed:
`accompanying
`and
`name
`The
`procedures suggest that the proceeding
`offers a second look at an earlier
`administrative grant of a patent.
`Although Congress changed the name
`from
`“reexamination”
`to
`“review,”
`nothing convinces us that, in doing so,
`Congress wanted to change its basic
`purposes, namely, to reexamine an
`earlier agency decision.
`
`
`
`
`
`12
`
`
`
`Id. at 2144 (discussing Congress’ changes to the
`then-existing inter partes reexamination to create
`inter partes review under the AIA) (emphasis added).
`Thus, inter partes review allows the Agency to
`revisit and reassess patents it may have issued in
`error in order to fulfill Congress’ stated goal to
`“screen out bad patents while bolstering valid ones.”
`157 CONG. REC. H4220, H4425 (June 22, 2011)
`(remarks of Rep. Goodlatte). If the PTAB determines
`the challenged claims are patentable, it confirms the
`Agency’s initial patentability decision, rejecting the
`asserted significance of prior art and arguments
`raised during the inter partes review. But if the
`PTAB finds some or all issued claims unpatentable,
`the Agency efficiently corrects
`its mistake by
`cancelling those that do not meet the statutory
`standards for genuine innovation. As described
`below, these PTAB decisions
`fall within the
`continued patent examination process conducted by
`the PTO—a specialized agency responsible
`for
`evaluating patent applications and only issuing
`patents that meet those standards.
`A. The PTO First Assesses Patentability and
`Examines Applications Ex Parte, with
`Limited Resources.
`Pursuant to its authority under the Patent
`Clause, Congress created the PTO as an agency with
`“special expertise in evaluating patent applications,”
`with authority to issue a patent only if “it appears
`that the applicant is entitled to a patent” under fed-
`eral law, which includes requirements for novelty
`and nonobviousness. Kappos v. Hyatt, 566 U.S. 431,
`
`
`
`
`13
`
`
`
`445 (2012); Microsoft Corp. v. i4i Ltd. P’ship, 564
`U.S. 91, 95-96 (2011); 35 U.S.C. §§ 102, 103, 131.
`
`After the Agency receives a patent application, an
`examiner analyzes the claimed inventions against
`the prior art in the relevant fields to decide whether
`the claims meet the statutory requirements for
`patentability.
` Cuozzo, 136 S. Ct. at 2136-37;
`Graham, 383 U.S. at 18 (recognizing that the “Patent
`Office is confronted with the most difficult task”
`because “the primary responsibility for sifting out
`unpatentable material lies in the Patent Office”); see
`also 35 U.S.C. § 131; 37 C.F.R. § 1.104(a)(1). The
`applicant and the PTO engage in a series of ex parte
`exchanges which culminate in the Agency decision to
`allow or reject the application.
`If the examiner determines a proposed claim is
`unpatentable, the examiner rejects that claim and
`explains the rejection in an office action. 35 U.S.C.
`§ 132(a). The applicant may then amend the claims,
`submit arguments to explain why the invention
`actually differs from the prior art, or both. 35 U.S.C.
`§ 132(a); 37 C.F.R. § 1.111(b), (c). If the PTO issues a
`final rejection, the applicant has a statutory right to
`judicial review. Cuozzo, 136 S. Ct. at 1237; Kappos,
`566 U.S. at 434; see also 35 U.S.C. §§ 141(a), 145.
`During the initial examination, only the PTO and
`the applicant can participate;
`there are no
`established procedures for an interested third party
`to take part. Further, there is no mech
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