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November 29, 2017

The Supreme Court's latest patent case could have big implications for drugmakers

Daily Briefing

    Supreme Court justices on Monday appeared split on a lawsuit involving the United States' patent process that could have implications for health care companies.

    Case details

    The lawsuit challenges 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.

    Here's your cheat sheet for understanding health care's legal landscape

    According to Politico's "Pulse," 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, the Wall Street Journal reports. 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.

    Justices seem split

    The Supreme Court on Monday heard oral arguments in the case. According to "Pulse," the Court's liberal justices seemed to favor keeping USPTO's inter partes review process in place as-is, while the Court's conservative justices voiced apprehensions about the process.

    According to the Journal, several of the high court's conservative justices said they were concerned that the process was allowing USPTO to terminate companies' property rights without giving the companies the opportunity for due process. For instance, Justice Neil Gorsuch said once patents are granted, they are "a private right belonging to the inventor" and only a court has the authority to invalidate the patent after that point.

    Chief Justice John Roberts said he was concerned that USPTO's director has the power to determine which administrative law judges weigh in on patent disputes under the process because they could skew outcomes.

    However, Justice Stephen Breyer said various government agencies "decide all kinds of matters through adjudicatory-type procedures often involving private parties," insinuating that the inter partes review process is no different. But Breyer later acknowledged that the process could cause problems for companies that have long-held and invested substantial amounts of money in patents that later are invalidated.

    Justice Anthony Kennedy also cited the potential for such issues, questioning whether the process means "that the patent owner has limited expectations as to the scope and the validity of the property right that he holds."

    According to Reuters, Justices Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor said USPTO has long had the authority to both grant patents and invalidate patents that were improperly issued. Ginsburg said of the process, "There must be some means by which the patent office can correct the errors it's made."

    Further, Sotomayor noted that entities can appeal inter partes review decisions to the U.S. Court of Appeals for the Federal Circuit for a full judicial review. "What saves this (is) even a patent invalidity finding can be appealed to a court," Sotomayor said.

    According to Reuters, the Supreme Court likely will issue a decision on the case by the end of June 2018 (Diamond, "Pulse," Politico, 11/28; Kendall, Wall Street Journal, 11/27; Chung, Reuters, 11/27; Barnes, Washington Post, 11/27; Liptak, New York Times, 11/27).

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