- The Supreme Court on Tuesday defended the constitutionality of a relatively new process for challenging patents, a decision sure to have lasting effects for pharmaceutical companies and their products.
- In Oil States Energy Services LLC v. Greene's Energy Group LLC, the court ruled against a claim that inter partes review (IPR) violates Article III of the U.S. Constitution because it allows a patent to be revoked outside a federal court.
- IPR came about in 2012 through the passing of the America Invents Act. The process allows a person or company to challenge existing patents by filing a petition to the Patent Trial and Appeal Board (PTAB), a special body within the U.S. Patent Trademark Office (PTO). If the board finds merit in the petition, it can review and ultimately strike down patent claims.
The pharma industry has a love-hate relationship with IPR. The deciding factor is generally what side a company is on: those challenging patents are in favor, while those defending are less fond of the process.
Drugmakers large and small have tapped into power of IPR. Small-cap biotech Coherus Biosciences Inc. used it to take on AbbVie Inc. regarding patents for the mega-blockbuster Humira (adalimumab), though the PTAB ultimately denied that petition.
More recently, the board knocked down a controversial move from Allergan plc aimed at protecting patents for its eye treatment Restasis (cyclosporine). Allergan at the time declined to comment on the decision, but it surely didn't sit well with CEO Brent Saunders, who had issued a letter several months prior lamenting about IPR.
"[T]he IPR process has created a situation where patents that have already have been upheld in the federal court system can be held hostage by entities such as hedge funds with no involvement in biopharmaceutical development," Saunders wrote in the letter.
With the Supreme Court's ruling, it looks like IPR will live on — at least in the near term. That's good news for organizations like America's Health Insurance Plans, an insurance trade group.
"Congress designed inter partes review as a quick and cost-effective way to weed out weak patents — including patents for branded prescription drugs," AHIP said in a statement. "By upholding a faster and less costly patent review process, the Supreme Court has protected an important pathway that allows generic prescription drugs to get to patients faster. Generic drugs increase competition and choice in the market, which helps to lower drug prices."
Oil States Energy Services LLC v. Greene's Energy Group LLC involved two oilfield services companies battling over a patent that covered a method for protecting wellhead equipment used in hydraulic fracturing. While Oil States gained the upper hand in lower federal courts, Greene's Energy gained the backing of PTAB in a parallel petition filed with the board.
Against that backdrop, Oil States then turned to questioning the constitutional validity of IPR. The Supreme Court now provides an answer.
"The primary distinction between inter partes review and the initial grant of a patent is that inter partes review occurs after the patent has issued. But that distinction does not make a difference here. Patent claims are granted subject to the qualification that the PTO has 'the authority to reexamine — and perhaps cancel — a patent claim' in an inter partes review," the court wrote in its opinion.
"Patents thus remain 'subject to [the Board's] authority' to cancel outside of an Article III court."