Two weeks ago, the Supreme Court issued two important decisions involving Inter Partes Reviews (IPRs). On April 24, 2018, the Supreme Court first issued a seven to two decision in Oil State Energy Services, LLC v. Greene’s Energy Group, LLC (Oil States), where it upheld the constitutionality of the IPR practice. That same day, the Supreme Court issued a five to four decision in SAS Institute Inc. v. Iancu (SAS), holding that when the Patent Trial and Appeal Board (PTAB) institutes an IPR, it must decide the patentability of all challenged claims, not just some of them. Here we discuss some of the implications that the Supreme Court rulings may have on biosimilar manufacturers.
The Supreme Court decision in Oil States was a welcome decision for biosimilar manufacturers. At a minimum, the decision affirmed the constitutionality of IPRs and held that, for the time being, IPRs are here to stay. That is not to say that IPR procedures will not change in the future or that there will not be further constitutional challenges to them. In fact, this decision opens the door for Congress to revisit the America Invents Act and address the many unresolved issues relating to IPR proceedings. However, IPRs and the general concept of challenging patents at the U.S. Patent and Trademark Office (USPTO), will continue to be an effective means by which biosimilar manufacturers can challenge issued patents outside of the traditional district court litigation route.
In contrast to the Oil States decision, the Supreme Court’s decision in SAS may have increased some of the hurdles faced by petitioners in challenging patents at the U.S. Patent Trial and Appeal Board (PTAB). According to the Court, the PTAB was improperly issuing “partial-institution” decisions and holding trials on only a subset of challenged claims. Thus, from now on when the PTAB decides to institute an IPR, the PTAB must decide the patentability of all challenged claims as opposed to only granting institution on and/or fully considering only some of the challenged claims.
This all-or-nothing approach to the new IPR treatment by the PTAB will require petitioners to be more careful and strategic in selecting the claims to be challenged due to estoppel considerations. Previously, if the PTAB decided not to institute an IPR on an invalidity argument, the petitioner could raise those arguments again in district court because IPR estoppel did not attach to grounds that were denied at institution. However, estoppel does attach to final decision. Therefore, if the PTAB now has to fully grant a petition in an “all-or-nothing” fashion, challenges that previously would have been denied at institution will be part of the final decision and petitioners will be estopped from raising those issues again in future district court challenges. To prevent being estopped from raising arguments in future litigations, biosimilar manufactures will, as a result, have to be more strategic in deciding which arguments to raise in an IPR proceeding.
Biosimilar manufactures, and petitioners in general, will likewise need to be more selective in the claims they decide to challenge. The dissent, written by Justice Breyer, notes that the PTAB has discretion not to institute review. Previously, if the petitioner challenged 16 claims, and the PTAB decided that the challenges to 15 of those claims were frivolous, the PTAB could institute review on only one claim. Now the PTAB could chose to simply deny the petitioner entirely if it feels the overall case is not strong. To prevent a denial of all of its challenges, biosimilar manufactures will need to put forth their best arguments against a carefully selected set of claims and not just throw everything at the wall and hope something sticks.
The SAS decision may also impact whether or not patent owners submit a preliminary response, which occurs before an institution decision is made by the PTAB. As of May 2016, preliminary responses have also been permitted to include expert testimony. Historically, patent owners could submit a preliminary response to avoid institution on certain claims. Now, if the patent owner feels that institution is likely, there is little incentive to submit a preliminary response since it may be strategically advantageous to withhold the best arguments and evidence until the proceeding is further advanced. Moreover, patent owners may wish to fight the claims before the PTAB and chose to forgo submitting a preliminary response thereby increasing the chance that the PTAB institutes review of all of the challenged claims. This will create estoppel with respect to the challenged claims and preclude future district court challenges on those claims. On the other hand, with the number of preliminary responses expected to decline, biosimilar manufactures will not have the benefit of knowing which arguments and evidence they may be up against in an IPR proceeding.
While the Supreme Court decisions in Oil States and SAS will have immediate implications on biosimilar manufacturers, there remain many unanswered questions especially with regard to how institution decisions at the PTAB will play out. If the PTAB considers only 2 of 10 claims to be worth review, will the PTAB simply deny the overall petition? Will the PTAB require that all claims be ripe for review before instituting an IPR proceeding? Will the petitioner even be told how the PTAB made its decision, or based on which evidence the decision was made, if the petition is denied? Bioimilar manufacturers should continue to stay tuned to how the PTAB behaves in the coming year as more developments concerning IPR processes are expected to follow.
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