April 27, 2018

In blow to name-brand drugmakers, Supreme Court upholds patent review process

Daily Briefing

    The Supreme Court on Tuesday in a 7-2 decision upheld an expedited process for challenging patents, dealing a blow to name-brand drugmakers that oppose the process.

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    Case details

    The case centered on the U.S. Patent and Trademark Office's (USPTO) process for dealing with patent challenges outside of the court system, known as inter partes review. The process generally allows entities to challenge patents in a manner that is more efficient and less costly than going through the courts, and has been favored by generic drugmakers and health insurers.

    However, critics of the process—which include major technology companies such as Apple and Google and major drugmakers such as AbbVie, Allergan, and Celgene—say USPTO invalidates patents under inter partes review much more frequently than the rate at which patents are invalidated in federal court because the standards for invalidating a patent are higher in federal court than they are under the review process. Further, some patent owners have called the process unfair and unconstitutional because it gives a government agency the power to cancel patents without a court's input. But lawyers for the Department of Justice have argued that the process grants USPTO no more authority than it has when it first looks at patent applications and decides whether to approve them.

    The Supreme Court in November 2017 heard oral arguments in the case, and the justices appeared to be split, with the Court's liberal justices seeming to favor keeping USPTO's inter partes review process in place as-is, while the Court's conservative justices voiced apprehensions about the process.

    Ruling details

    Justice Clarence Thomas in the Court's majority opinion wrote that USPTO is responsible for making original decisions on patents, so it is justified that the office also should review patent challenges. "Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the [USPTO's] authority to conduct that reconsideration," he wrote.

    Justices Samuel Alito, Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan, Anthony Kennedy, and Sonia Sotomayor joined Thomas in the majority opinion.

    However, Justice Neil Gorsuch in a dissenting opinion joined by Chief Justice John Roberts argued that the courts should be involved in invalidating patents. Gorsuch wrote, "Until recently, most everyone considered an issued patent a personal right—no less than a home or farm—that the federal government could revoke only with the concurrence of independent judges."

    Reaction

    Stephanie Martz, general counsel of the National Retail Federation, said the ruling constitutes "a major step toward stopping patent trolls and their attempts to commit extortion against retailers and other businesses that have done nothing wrong."

    America's Health Insurance Plans (AHIP) touted the ruling as a win for patients, who "had a lot at stake" in the case, the group said. AHIP in a statement said, "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."

    But Adam Mossoff, a law professor at George Mason University, said the ruling "destabilizes the foundation that patents provide to the U.S. innovation economy, as stable and effective property rights are the necessary platform from which inventors, venture capitalists, and companies create the new products and services that have made life a modern miracle."

    Nicole Longo, a spokesperson for Pharmaceutical Research and Manufacturers of America (PhRMA), said the inter partes review process is unfair and called on Congress to review the issue. "PhRMA has raised significant concerns with the current [inter partes review] process, as it requires innovative companies to defend patents in multiple venues under different standards and with procedural rules that are less fair to patent owners than a federal court," she said.

    According to the Wall Street Journal, a USPTO spokesperson said the office was reviewing the ruling (Baker, "Vitals," Axios, 4/25; Kendall, Wall Street Journal, 4/24; Liptak, New York Times, 4/24; Commins, HealthLeaders Media, 4/25).

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