P a t e n t s

Concern about inter partes review, a PTO administrative trial method for challenging pat-

ents, has generated criticism that too many rightly approved biopharma patent claims are

being canceled. Some have called the PTO’s review board a ‘‘death squad’’ for patent claims

that has changed the landscape to the disadvantage of patent holders. A Bloomberg BNA

analysis of board deliberations on biopharma patent IPRs finds that the process appears to

be evolving.

Is the PTO Review Board a ‘Death Squad’ or Not?The Evolution of Inter Partes Review for Biopharma Patents

B iopharma industry patent holders continue toworry that administrative challenges to grantedpatent claims permitted under the America In-

vents Act are hurting their ability to protect their intel-lectual property.

The first decisions affecting biopharma patents over-whelmingly invalidated the patents. But the ratio of pat-ents invalidated to patents that survive the IPR processhas shifted, with more now surviving than being can-celed.

Under this process, challengers can submit a petitionrequesting inter partes review (IPR) of an existing pat-ent by the Patent and Trademark Office’s Patent Trialand Appeal Board (PTAB). In its first three years of ex-istence, across all industry sectors, the board invali-dated challenged patents in a majority of the cases it ac-cepted for review, creating a perception that the pro-cess unfairly disadvantages patent holders.

Bloomberg BNA analyzed PTO data and interviewedbiopharma-focused attorneys to better understand thereal impact of the PTAB’s process to challenge the va-lidity of existing biopharma patents.

According to the Bloomberg BNA analysis, bio-pharma patent challengers currently stand about a50-50 chance of having the PTAB grant an IPR petition.If it does, there’s a 40 percent chance the challenger will

succeed in canceling some or all of the patent’s claims.But, before the trial is over, the patent owner is likely toseriously consider settling because in granting the peti-tion the court made a determination that the challengercould conceivably win.

Biopharma Attorneys: Mixed Views on IPRs. Kevin Noo-nan of McDonnell Boehnen Hulbert & Berghoff LLPtold Bloomberg BNA in a May 12 e-mail that the biggestcriticism of the PTAB is in how it was implemented bythe PTO. He said the agency made decisions for proce-dural expediency rather than improving the patent sys-tem and striking a balance in favor of innovation be-tween inventors and the public.

‘‘It is remarkable that the Patent Office took the posi-tion that as an agency it had been remiss in granting somany patents having so many claims that were improp-erly granted,’’ Noonan said. ‘‘Besides the political op-tics, it unnecessarily calls into question the agency’s in-stitutional competence; in my experience the Officedoesn’t do as bad a job as the IPR experience wouldmake it appear.’’

Thomas J. Kowalski of Vedder Price, New York, toldBloomberg BNA in a May 11 phone interview that thePTAB is a ‘‘justifiable’’ method of the PTO policing it-self ‘‘and cancelling patents that should never have

COPYRIGHT � 2016 BY THE BUREAU OF NATIONAL AFFAIRS, INC. ISSN 1935-7257

Life SciencesLaw & IndustryReport™

been issued in the first place.’’ But Kowlaski also ex-pressed concerns that the PTAB is abandoning its pat-ent ‘‘examining function.’’

Origin of ‘Death Squad’ Perception. In October 2013,then-Chief Judge Randall Rader of the U.S. Court of Ap-peals for the Federal Circuit coined the term ‘‘deathsquads’’ in anticipation of the PTAB’s first IPR decision.

Rader said, ‘‘You have 7,000 people giving birth to[intellectual] property rights,’’ while in the PTAB ‘‘therewill soon be as many as 300 administrative patentjudges acting as death squads, killing property rights.’’

Rader’s use of the term was quickly picked up by at-torneys, companies and commentators over the nextfew years, especially as his comment appeared to beprescient in that the majority of the first patent claimsfor which the PTAB issued decisions were killed. Theboard invalidated the claims of the first 15 patents it re-viewed. Of the first 19 IPR trials on biopharmaceuticalpatents, 16 found all of the claims invalid.

According to various analyses—a Finnegan, Hender-son, Farabow, Garrett & Dunner, LLP website summa-rizing IPR data through April 1, 2016, and a 2015 studyauthored by Brian J. Love of the Santa Clara UniversitySchool of Law and Shawn Ambwani, chief operating of-ficer of Unified Patents—about 75 percent of patents re-viewed at an IPR trial had some or all of their claimscanceled by the PTAB. The number for biopharma pat-ents, according to Bloomberg BNA’s analysis, is 40 per-cent.

PTAB’s Reaction. The PTAB didn’t initially reject the‘‘death squad’’ label.

At an August 2014 meeting of the PTO’s Patent Pub-lic Advisory Committee, then-PTAB Chief Judge JamesSmith said, ‘‘The purpose of the proceedings is to iden-tify some limited number of patents and claims that areunpatentable and make sure the claims are removed. Ifwe weren’t, in part, doing some ‘death squadding,’ wewould not be doing what the statute calls on us to do.’’

Subsequently, Smith and other administrative patentjudges insisted that calling IPR decisions the work of adeath squad was unjustified.

Administrative Patent Judge Jacqueline Wright-Bonilla told a session at the 2015 BIO InternationalConvention that the 75 percent invalidation rate wasmisleading in that it didn’t take settlements into ac-count (9 LSLR 751, 6/26/15).

A PTO spokesman referred Bloomberg BNA to thestatistics on the PTAB website. When asked after hisOctober 2014 remarks to the PTAB about the ‘‘deathsquad’’ appellation, Smith responded, ‘‘I simply saythis: Please read our decisions.’’

‘Stuck in an Eddy.’ Bloomberg BNA asked Rader if hehad any reaction, three years after he made the ‘‘deathsquads’’ comment, about what has happened sincethen. He now heads The Rader Group, which providesintellectual property dispute resolution services and IPcounseling.

Rader said in a May 10 e-mail that, ‘‘in addition to myconcern over the ongoing schizophrenia of an agencydoing and undoing the same work at the same time,’’ heharbors a growing concern over an entire generation ofyoung patent professionals devoting their careers solelyto validity challenges, instead of balancing their careerswith patent licensing, patent valuation, and other formsof constructive patent enforcement.

‘‘When I express this concern to my dear friendsamongst this rising generation at the PTAB, they re-spond with enthusiasm that they are only flowing withthe current of ‘the law.’ To which I must respond thatthey are stuck in an eddy of the IP stream that does noteven afford the presumption of validity earned by pat-ent issuance or the standard of claim construction avail-able in district courts.’’

Rader was referring to the fact that in federal courtlitigation a patent is presumed valid, a presumption thatdoesn’t exist in the PTAB, and that a federal court inter-prets claims using a plain and ordinary meaning of dis-puted terms and the PTAB uses the broadest reasonableinterpretation (BRI).

How IPRs Work. The IPR process was created by theAIA and became effective on Sept. 16, 2012 (see Table1 for a primer on IPRs).

Petitioners for an IPR seek to convince the PTAB thata patent is invalid because it is lacking in novelty under35 U.S.C. § 102 and/or is obvious under 35 U.S.C. § 103in light of prior art—prior patents and publications.

Those filing IPR petitions have included:

s companies and individuals who feel that an ap-proved patent is invalid and that it’s preventing innova-tion and/or denying medicines the chance to get to thepatients who need them;

s companies that wish to make a generic of a drugor a biosimilar of a biologic and seek to challenge thevalidity of the patent for the drug or biologic both be-cause they believe the patents are invalid and to be ableto bring their product to market sooner;

s a drug or biologic company that is being sued by acompetitor for infringement in federal court and wishesto make the litigation moot by getting the patent invali-dated;

s companies that, after a federal court has alreadyruled the patent the company is alleged to have in-fringed isn’t invalid, go to the PTAB to see if they canobtain a different ruling; and

s non-competitors such as hedge fund companies orcoalitions they have formed and advocacy groups suchas Consumer Watchdog.

In practice, the PTAB has attempted to follow the in-tent of the AIA, which includes making the IPR processfaster and less expensive than federal court litigation,which can take several years and cost millions of dol-lars. Virtually all denials and trial institution decisionsare made four to six months after a petition is filed. All

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final written decisions have been made within 12months of a trial institution decision, usually in the 12thmonth. The AIA allows the court to take up to an addi-tional six months for good cause, although to date thishas happened in just a handful of cases.

IPR Petitions Skyrocketed at First. Bloomberg BNA re-viewed all petitions filed under the PTO’s TechnicalCenter 1600 (biotechnology and organic chemistry) butfocused on biopharma and diagnostics claims for calen-dar years 2014 and 2015 and for 2016 through April 30.

The analysis showed that there were 42 biopharmaIPR petitions filed from Sept. 21, 2012, through calen-dar year 2013 (see Figure 1). IPR petitions filed in cal-endar year 2014 reached 108, an increase of 152 per-cent from the first 16 months of the IPR. Calendar year2015 saw petitions filed grow to 184, a 70 percent in-crease from the previous calendar year. This jump inusage could attest to the increasing interest in the newprocess.

Some of the filings were related to a particular situa-tion. GeneDx, for example, filed 13 IPR petitions in2014, attempting to invalidate patent claims related totesting for the BRCA1 and BRCA2 genes associated

with breast and ovarian cancer for which Myriad Genet-ics and the University of Utah were suing GeneDx forinfringment. The IPR actions were all terminated whenthe litigation was settled (9 LSLR 197, 2/20/15).

Hedge Fund Filings. Some of the filings have been con-troversial. Hedge fund-related entities such as the Co-alition for Affordable Drugs (CAD) and hedge fundmanagers Kyle Bass and Erich Spangenberg filed acombined 33 challenges against drug-related patentclaims in 2015, drawing criticism from the Biotechnol-ogy Innovation Organization, among others, that thesechallenges aren’t the type for which the process was in-tended (9 LSLR 376, 4/3/15).

Critics alleged that CAD’s motive was to earn moneyby selling ‘‘short’’ the stocks of the companies whosepatents were affected. Short selling is the sale of a secu-rity motivated by the belief that the security’s price willdecline, enabling it to be bought back at a lower priceto make a profit.

In March 2015, House Democrats introduced theSupport Technology and Research for Our Nation’sGrowth (STRONG) Patents Act, a patent reform law billwhich would, among other things, significantly tighten

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the requirements for who could file a petition to initiatean IPR (9 LSLR 261, 3/6/15).

But the legislation is stalled, and the PTAB denied arequest for sanctions against the CAD, saying that themotives of petitioners are irrelevant (9 LSLR 19,10/2/15).

Interestingly, a 2015 study suggested that the Bass/Spangenberg/CAD IPR petitions didn’t consistently pro-duce statistically significant negative returns in the bio-pharma patent holders’ share prices. The paper, titled‘‘Attack of the Shorting Bass: Does the Inter Partes Re-view Process Enable Petitioners to Earn AbnormalReturns?’’ (63 UCLA L. Rev. Disc. 120 (2015)), was au-thored by J. Gregory Sidak and Jeremy O. Skog, chair-man and vice president, respectively, of expert eco-nomic witness provider Criterion Economics.

Petitions May Be Slowing. Petitions to challenge bio-pharma patents for the first four months of 2016 havedeclined 25 percent from those filed for the same periodin 2015, from 52 to 39 (see Figure 1), possibly indicat-ing that with fewer petitions being granted interest isdeclining.

The decline appears to reflect a trend for IPRs acrossall sectors. The PTAB’s Web page statistics show 1,737petitions across all sectors filed for government fiscalyear 2015 (October 2014 to September 2015) and 741for the first six months of FY 2016 (October 2015through March 2016), which would suggest a year-endnumber in the 1,400 range across all sectors.

Projecting from these patterns, biopharma IPR filingswould reach 140 in calendar year 2016 compared to 184in 2015.

Jacob S. Sherkow, associate professor at the NewYork Law School’s Innovation Center for Law andTechnology, developed an analysis specifically of IPRsinstituted by companies that wanted to make a genericof a drug listed in the Food and Drug Administration’sOrange Book. He presented the data at the BIO Intellec-tual Property Counsels Committee Conference in SanAntonio on March 31.

‘‘If there’s seven to 15 challenges a month, and

one out of 15 wins, that’s one patent invalidated

by a generic drug maker each month.’’

JACOB S. SHERKOW, NEW YORK LAW SCHOOL INNOVATION

CENTER FOR LAW AND TECHNOLOGY

In a phone interview, Sherkow told Bloomberg BNA,‘‘The pattern is broadly a rapid increase in IPR filingsfor this subset, from none to one every other day if notevery day. This calendar year, there’s been a drop-off sothat it’s seven to 15 a month. Some have attributed thisto the decrease in filings from Kyle Bass and his coali-tions. There was an explosion, but it has tapered off.Still, seven to 15 a month is pretty significant. If there’sseven to 15 challenges a month, and one out of 15 wins,that’s one patent invalidated by a generic drug makereach month or 12 each year or 24 in two years and soon.’’

Steve Maebius of Foley & Lardner LLP toldBloomberg BNA in a May 10 e-mail, ‘‘I think we are

Figure 1 Biopharma IPR Petitions Filed

Source: Bloomberg BNA A BNA Graphic/ptab16g2

2012 to 2013 2014 2015 2016†

†Estimated (39 through April 30, running at 75% of same period last year, which was 52)

140184

108

42

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now seeing a more ‘normal’ state of biopharma IPRswhere mainly it is generics filing and competitor versuscompetitor—especially in the biosimilar area—thatmake up the bulk of new IPR proceedings.’’

Grant/Denial Ratio Narrowed. The ratio of biopharma-related IPR petitions denied to those granted appears tobe narrowing. Bloomberg BNA analysis found that forbiopharma-related IPR petitions filed in calendar year2014, 33 were denied and 50 were granted, which is aratio of 1 to 1.5 (see Figure 2).

For petitions filed in 2015, 55 were denied and 61granted, narrowing the ratio to 1 to 1.1. Two petitionswere abandoned by the patent owner. Forty-seven peti-tions, those submitted at the end of 2015, are awaiting agrant/denial ruling. The assumption is that, when de-cided, the grant/denial pattern will be similar to the de-cisions made earlier in 2015.

Attorneys consulted by Bloomberg BNA offered anumber of theories for the narrower ratio.

One theory is that the first patents challenged largelyrepresented the ‘‘low hanging fruit’’—ones that seem-ingly had flaws, leading the PTAB to grant review. By2015, the low hanging fruit had already been chal-lenged, and the board found fewer patents that meritedreview.

Data show that the board denied an increasing num-ber of petitions under 35 U.S.C. § 325(d) for presentingthe ‘‘same or similar art or arguments’’ previously con-sidered by the PTO and for failing to identify the realparty in interest.

Another theory is that patent owners learned fromthe mistakes made by the owners of the earliest chal-lenged patents. In the first full year of IPR review, therewas a debate about whether the patent owner shouldfile a ‘‘preliminary patent owner response’’ prior to thePTAB’s grant/deny decision.

After the predominance of grants of IPR petitions,patent owners started to use every opportunity to re-spond to the petitioner’s challenge, and it’s now consid-ered to be common practice for patent owners to file apreliminary response. The additional arguments mayhave been enough to produce decisions denying review.

Addressing the question of why petitions are beingdenied, Sherkow, whose analysis has focused on ge-neric drug-related challenges, gave as an example priorart that was asserted by hedge fund manager Bass andhis coalition that the board determined wasn’t prior artunder the petition.

Vedder Price’s Kowalski told Bloomberg BNA that heisn’t surprised that, after the first wave of IPR patentcancellations, the board has started denying morebiopharma-related petitions and there are more verdictsin favor of the patent owner than the petitioner.

‘‘You see, over the last few years, there has been astricter application by the PTO of Sections 102, 103 and112 [written requirements] of the patent law on the bio-pharma side and therefore there have been fewer of the‘patents that never should have been issued in the firstplace.’ I don’t think the ‘death squad’ label is fair.’’

Pre-Trial Settlements Common. In 2014, 25 of the bio-pharma cases reviewed by Bloomberg BNA were settledbefore the board made a decision on whether to grantthe petition (see Figure 2).

Foley & Lardner’s Maebius told Bloomberg BNA, ‘‘Ibelieve there have been quite a few settlements in bio-pharma proceedings.’’

‘‘Because many biopharma patent owners have pend-ing continuation applications (which is not the case inthe electronics/software fields), it may be better forthem to avoid facing institution decisions and just settleearly, leaving them free from any board decisions topursue new claims in continuation applications beforethe examiners and without opposition by an adver-sary,’’ he said.

Decisions, Standards Criticized. The first IPR decisionsacross all sectors and also those concerning biopharmaclaims overwhelmingly went against the patent owner.

In July 2014, the House Subcommittee on Courts, In-tellectual Property, and the Internet lobbed concerns atPTO director Michelle Lee, complaining that the boardwas asserting authority that the AIA didn’t provide andthat its interpretations of AIA provisions were makingthe proceedings overly complex (8 LSLR 775, 8/8/14).

There were also complaints, such as Judge Rader’snoted earlier, that the PTAB’s rules require administra-tive patent judges to use the ‘‘broadest reasonable inter-pretation’’ of a challenged claim, which is differentfrom a district court’s more stringent ‘‘plain and ordi-nary meaning’’ approach under Phillips v. AWH Corp.,415 F.3d 1303 (Fed. Cir. 2005) (en banc), despite thefact that both are assessing patents that were alreadygranted.

The biopharma industry supported the argument ofCuozzo Speed Technologies in its request for review be-fore the Supreme Court in Cuozzo Speed Techs., LLC v.Lee. BIO and the Pharmaceutical Research and Manu-facturers of America said that the standard for inter-preting challenged claims used by the PTAB and thefederal courts should be the same (10 LSLR 09,4/29/16). The court granted review, heard oral argu-ments and is expected to reach a judgment by late June.

Motions to Amend. There has also been criticism inthe patent community that the PTAB had placed theburden on the patent owner of showing that the claimsare patentable in view of all relevant prior art in judg-ments, such as in the PTAB decision in Idle Free Sys.,Inc. v. Bergstrom, Inc., P.T.A.B., No. IPR2012-00027,1/7/14 (8 LSLR 179, 2/21/14). Some contend as well thatthe PTAB has demonstrated a reluctance to grant mo-tions to amend the challenged patent claims.

As of April 30, the board has had 118 opportunities torule on a motion to amend challenged claims of anytype since the IPR process became effective. It grantedall substitute claims in only two, and some substituteclaims in only four others.

In a May 9 blog, Acting Chief Administrative PatentJudge Nathan Kelley wrote, ‘‘[I]f the PTAB grants sucha motion, the new claims will issue (and be enforceableagainst the public) without any examination to ensurecompliance with the statutory requirements for patent-ability.’’

The PTAB March 31 announced changes to its trialopposition procedures but declined to change its prac-tice in assessing motions to amend.

Life Sciences Decisions Shift. According to theBloomberg BNA analysis, of the 19 IPRs institutedagainst biopharma patent claims from petitions filed in2012 and 2013 for which the PTAB reached decisions,16 invalidated all claims, one invalidated some of theclaims and for two the board dismissed the cases.

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The situation reversed for petitions filed in calendaryear 2014 (see Figures 3 and 4). Of the 50 petitionsgranted, 28 went to judgment, a judgment hasn’t beenissued in 10, 10 were settled after the petition wasgranted and for two the patent owner requested adverserulings, which is a strategy employed to prevent relatedbut different cases from being affected.

Out of the 28 trials that went to judgment for peti-tions filed in 2014, the PTAB found the petitioner hadn’tshown that any of the claims were unpatentable in 16,in 11 it invalidated all of the patent claims, and in one itinvalidated some of the claims.

The picture the data give of the ultimate outcome af-fecting IPR petitions filed in 2014 appears to validatethe ‘‘low hanging fruit’’ theory.

Attorneys contacted by Bloomberg BNA agreed thatthe IPR process is new and that there has been a learn-ing experience for the PTAB, attorneys and those theyrepresent.

PTAB’s Comfort Level Growing? A look at some of theIPR outcomes affecting biopharma patents involvingthe same parties presents a series of snapshots of IPRdecisions.

Illumina, Inc. v. Trs. of Columbia Univ. On Sept. 16, 2012,the day that the IPR procedures became available, Illu-mina Inc. filed IPR petitions against patents owned byColumbia University (6 LSLR 922, 9/21/12). Columbiawas suing Illumina in the U.S. District Court for theNorthern District of California, asserting that Illuminahad infringed the patents that Illumina is challenging inthe IPR (6 LSLR 779, 7/27/12).

On March 6, 2014, in one of the first IPR biopharmadecisions, the PTAB found that the Columbia patentswere invalid as obvious (8 LSLR 253, 3/21/14). The

claimed technology related to nucleotides used insequencing-by-synthesis reactions. Columbia had at-tempted to cancel the pending claims and file a new setof amended claims. But the PTAB began a pattern ofnot allowing patent owners to introduce the amendedclaims. The PTAB found that the amended claims wereinvalid for having a similar scope to the original claimsand as unpatentable over the prior art. A three-judgepanel of the Federal Circuit affirmed the board’s judg-ment (9 LSLR 829, 7/24/15).

Trs. of Columbia Univ. in the City of N.Y. v. Illumina, Inc.On July 25, 2014, the PTAB invalidated all of the chal-lenged claims of U.S. Patent 7,057,026 owned by Illu-mina Cambridge in an IPR related to litigation by Co-lumbia University and its licensee IBS against Illumina.The claims of this patent were also related to nucleo-tides for sequencing-by-synthesis reactions. Instead offiling a patent owner’s response, Illumina asked theboard to cancel the claims and let it replace them. Theboard granted Illumina’s motion to cancel claims butdenied the company’s request to replace them. Theboard’s order canceling the claims effectively renderedthem invalid.

Intelligent Bio-Systems, Inc. v. Illumina Cambridge Ltd.,On Oct. 28, 2014, the PTAB issued a final judgment in-validating all of the challenged claims of U.S. Patent8,158,346 in an IPR filed by IBS against Illumina Cam-bridge (8 LSLR 1064, 10/31/14). The board againgranted Illumina’s motion to cancel claims but deniedthe company’s request to replace them.

Intelligent Bio-Sys., Inc. v. Illumina Cambridge Ltd. Afterthis series of IPRs in which all of the claims at issuewere canceled, as well as several in which the PTAB in-validated some of the claims at issue, on Feb. 11, 2015,the PTAB issued another judgment in the dispute be-tween IBS and Illumina Cambridge. But this time, theboard upheld the validity of all of the challenged claims,finding that IBS hadn’t met its burden to show that theclaims were obvious in view of the prior art cited in theIPR.

On May 9, on IBS’s appeal, the Federal Circuit upheldthe PTAB’s Feb. 11, 2015 judgment (10 LSLR 10,5/13/16). It said that the PTAB had arrived at its conclu-sion incorrectly but that the conclusion was justified byfactual findings.

The court also solidly supported the PTAB’s interpre-tation of its rules. The court found that the board didn’tabuse its discretion by not considering evidence thatdidn’t comply with the board’s regulations for IPRs. Itfound that ‘‘the expedited nature of IPRs brings with itan obligation for petitioners to make their case in thepetition to institute [an IPR],’’ the court wrote.

Weeding Out ‘Bad’ Patents. Some of the attorneys con-tacted by Bloomberg BNA found value for the bio-pharma industry in the IPR process.

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‘‘There have been patents that needed to be

weeded out, and the IPR process has rightly done

so.’’

THOMAS J. KOWALSKI, VEDDER PRICE, NEW YORK

Vedder Price’s Kowalski said that he has representedboth patent owners and petitioners and prefers the pe-titioner’s side because ‘‘the weight in the IPR processhas been in favor of taking out a bad patent. It’s not thatthe PTAB is meant to be unfriendly to patent owners,but it has had to be true to the statute. It’s a favorablekind of procedure if the patent never should have beengranted.’’

‘‘There have been patents that needed to be weededout, and the IPR process has rightly done so,’’ he said.‘‘I also feel that the PTAB has been under a very toughcrunch because of the way the statute is set up, with itsfocus on expedited review.’’

However, Hans Sauer, BIO’s deputy counsel for intel-lectual property, had issues with the term ‘‘bad patent,’’telling Bloomberg BNA in an April 22 phone interview,‘‘Whether a patent is good or bad depends on the stan-dard you apply. ‘Bad’ patents became bad when the pat-ent law changed.’’

MBHB’s Noonan agreed. ‘‘It depends on whether youthink there were many ‘bad’ patents. It isn’t so blackand white for most; there is usually patentable subjectmatter disclosed, but generally protection even for thathas been lost.’’

Changing IP Strategy. Sarah Korman, senior counselfor intellectual property and litigation for Amgen Inc.,told Bloomberg BNA in a May 11 e-mail, ‘‘In general,challenging patents using the IPR process has been ahighly effective strategy. If they haven’t already, phar-maceutical and life science patent owners should re-view their existing IP strategies in view of potentialIPRs.’’

Korman suggested biopharma patent owners shouldconsider incorporating a large number of claims andmultiple claims strategies into new patent filings. Thiscould include devising claims of varying and overlap-ping scope, developing an overlapping portfolio of pat-ents covering the same general field but with differentclaiming approaches and keeping a continuation appli-cation pending to enable citation of new art with thePTO, she said.

Question of Power. BIO’s Sauer discussed the chal-lenges biopharmas are facing by referencing thePTAB’s use of the broadest reasonable interpretationstandard for IPRs, which differs from the plain and or-dinary meaning standard used in federal court litiga-tion.

‘‘The BRI and other issues before the Supreme Courtin Cuozzo have a lot to say about the relationship be-tween the federal courts and the PTAB and the balancebetween them in shaping patent law,’’ Sauer said. ‘‘Itdoesn’t surprise me that the Supreme Court would beinterested in relationship questions, especially as theyrelate to power. We don’t think there’s any justification

for the argument that what the PTO is doing is whatCongress had in mind.’’

Sauer expanded on what BIO said in its Cuozzo am-icus brief, telling Bloomberg BNA that a recurringtheme in the PTO’s arguments is the PTAB’s need forunfettered discretion, independence and flexibility.

‘‘The problem is that there are cases where the PTABhas over-ridden the federal courts on validity. The pat-ent owner has to win every time and only has to loseonce for the patent to lose its validity,’’ Sauer said.

‘‘If the PTO is right that their processes were meantto be independent, as opposed to the court and thePTAB using the same thought processes to reach thesame outcome, what is the point of having the districtcourt involved at all?’’ Sauer asked.

PTAB Lost ‘Examining’ Function. Vedder Price’s Kow-alski, although generally noting some benefits of theIPR, also expressed concerns about the PTAB’s concep-tion of its role.

He said that the PTAB is part of the same agency thatgranted the patent in the first place.

‘‘The PTO should be self-policing, but the PTAB isn’tdoing all of what the agency it works for does. Theproblem is, that under the PTAB’s predecessor, theBoard of Patent Appeals and Interferences, the admin-istrative patent judge was called ‘the examiner-in-chief.’The PTAB has moved away from the ‘examiner-in-chiefrole’ and conceives its role as being 100 percent judi-cial. It has lost its focus. It has lost the examining func-tion,’’ Kowalski said.

‘‘This is why you see it granting only six out of 118motions to amend,’’ he added. ‘‘The word ‘review’ ispart of the title of an ‘Inter Partes Review’ proceeding.But they aren’t reviewing. Their focus is on judging.The board has shown no ability or desire to do the workof examining.’’

Baby, Bath Water. MBHB’s Noonan told BloombergBNA, ‘‘The IPR process has generally proved moreonerous on patent holders than necessary. Many be-lieved that, even if IPRs were not necessary they wouldhave the beneficial effect in improving patents becausepatentees would be able to amend claims and thus get abetter—albeit perhaps narrower—claim set than theyhad received initially. That hasn’t happened.’’

Noonan said that, in the few instances where patentshave been granted improvidently, they have been prop-erly invalidated. ‘‘But the ‘all-or-nothing’ nature ofmany—or most—of the IPRs has thrown the baby outwith the bath water. What harm has the IPR processcaused, if any? Patents having patentable subject mat-ter, although too broadly claimed initially, have lostprotection for what could have legitimately been ob-tained.’’

‘Generation of Lost Talent.’ Rader told Bloomberg BNAthat the entire ‘‘patent reform’’ movement, of which theAIA is a part, continues to diminish the value of Ameri-can inventions.

He alluded to the Supreme Court’s statement in Bo-nito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S.141, 150-151, 109 S. Ct. (1989), that the patent system isa ‘‘carefully crafted bargain for encouraging the disclo-sure of new, useful and non-obvious advances in tech-nology and design’’ in return for the exclusive right topractice the innovation. Patent reform appears to bebased ‘‘on the ‘empirically unproven, and logically un-

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LIFE SCIENCES LAW & INDUSTRY REPORT ISSN 1935-7257 BNA 5-27-16

tenable, notion’ that too many ‘non-obvious advances intechnology’ somehow stifle innovation,’’ Rader said.

He listed ‘‘myths’’ such as ‘‘patent thickets’’—anoverlapping set of patent rights that requires innovatorsto reach licensing deals for multiple patents from mul-tiple sources—and the multiple royalty obligationsknown as ‘‘royalty stacking’’ that he said ‘‘have re-placed genuine analysis of the intellectual propertymarketplace for too long. In fact, the marketplace itselfshows that high technology and patent-intensive fieldsof endeavor have continued to decline in overall pricewith robust competition and growing product availabil-ity,’’ Rader said.

He concluded, ‘‘The market itself discredits the ‘pat-ent reform’ horror stories and will eventually reinstate

proper IP doctrines and value, but I still worry about ageneration of lost talent in both diminished inventiveand legal investment.’’

BY JOHN T. AQUINO

To contact the reporter on this story: John T. Aquinoin Washington at jaquino@bna.com

To contact the responsible editor for this story:Randy Kubetin at rkubetin@bna.com

Sherkow’s data on IPRs related to FDA Orange Booklistings can be found at https://dataverse.harvard.edu/dataset.xhtml?persistentId=doi:10.7910/DVN/RBWCRK.

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5-27-16 COPYRIGHT � 2016 BY THE BUREAU OF NATIONAL AFFAIRS, INC. LSLR ISSN 1935-7257