On Sept. 16, 2011, President Obama signed into law the Leahy-Smith
America Invents Act ("AIA"), which introduced numerous changes to the
United States patent laws. Since its introduction, there has been
considerable debate within the pharmaceutical industry as to how the AIA
will affect the management of patent portfolios that protect innovator
drugs and litigations related to those patents.
Two new proceedings introduced by the AIA are inter partes
review ("IPR") and post grant review ("PGR"), which are scheduled to go
into effect in 2012 and 2013, respectively. These proceedings offer
generic drug companies an alternative forum to challenge patent
validity, through short, trial-like proceedings at the United States
Patent and Trademark Office ("PTO"). Exploring whether and to what
extent generic drug companies may use these proceedings can provide
insight into what innovator drug companies should consider doing in
response to protect the patent portfolios covering their drugs.
Paragraph IV litigation finds its origins in the Drug Price
Competition and Patent Term Restoration Act ("Hatch-Waxman Act"). The
Hatch-Waxman Act allows the first generic company to file an Abbreviated
New Drug Application ("ANDA") containing a "paragraph IV" certification
asserting that the innovator company's patent is invalid, unenforceable
or not infringed, with eligibility for 180 days of marketing
exclusivity. This exclusivity translates into significant profits for
first-filer generic drug companies and is a major driver of Hatch-Waxman
litigation. Arguably, whether IPR or PGR will be employed by generic
companies will depend in large measure on whether they affect a generic
company's eligibility for the 180-day exclusivity.
Understanding the details and differences of IPR and PGR proceedings
help to understand which proceeding might be used. IPR is available
beginning nine months after a patent is issued or after termination of
PGR. A petition by a generic company for IPR requires that the PTO make a
threshold determination that the petition presents a "reasonable
likelihood" that the petitioner will prevail with respect to at least
one of the patent claims challenged in the petition. This threshold is
higher than the standard for inter partes reexamination (a proceeding that inter partes review will replace) and should result less than 95% of petitions being granted.
Unlike IPR, PGR is only available for a short time period as the
petition must be filed within nine months of the patent's grant date or
issuance of a reissue patent. PGR proceedings are initiated where the
petitioner establishes that it is "more likely than not" at least one of
the claims challenged is unpatentable.
Both proceedings contain estoppel provisions, which limit the ability
of the petitioner to make arguments and present evidence in federal
court that were (or reasonably could have been) raised during IPR or PGR
proceedings. PTO fees for those proceedings start at $35,800 for PGR
and $27,200 for IPR, for a patent with up to 20 claims.
To illustrate how PGR and IPR may affect paragraph IV litigation,
three hypothetical scenarios are presented below. These scenarios assume
that both PGR and IPR are in effect.
The Food and Drug Administration ("FDA") approves a New Drug
Application ("NDA") for an innovator drug which is awarded New Chemical
Entity ("NCE") status, meaning that the innovator drug enjoys five years
of marketing exclusivity, and that the first date on which a generic
company could file an ANDA with a paragraph IV certification is four
years from approval of the innovator drug. The innovator drug is covered
by patent no. 1 that was granted yesterday.
Today, a generic company could file a petition for PGR, or, in nine
months, a petition for IPR. Because PGR and IPR are accelerated
proceedings, it is possible that by year four, patent no. 1 has been
invalidated, leaving the generic with no opportunity to file a paragraph
IV certification and no opportunity to obtain 180-day exclusivity.
Thus, if maximizing profit is the goal of the generic, it may not make
sense for it to initiate PGR or IPR early into a NCE period of
Initiating IPR in year four may not make sense to the generic either.
In year four of NCE, a generic company can file an ANDA having a
paragraph IV certification, and could also initiate IPR. Assuming that
the innovator company initiated a paragraph IV litigation, a civil
action and IPR could proceed simultaneously. However, the generic
company would then run the risk that the federal court could stay the
civil action pending outcome of the IPR to avoid contradictory results,
potentially jeopardizing access to early summary judgment and an
ultimate determination of non-infringement or patent invalidity.
Furthermore, current experience with inter partes
reexamination teaches us that there is a 45% chance that the claims will
be modified during the proceeding. Similar results may be expected for
IPR. These claim modifications may or may not be beneficial to the
generic company in terms of a new non-infringement argument.
Nevertheless, in this hypothetical scenario, at the end of this
year-long (with an additional six months for good cause) process
(excluding appeal to the Federal Circuit), the generic company may still
have to wrestle with issues of estoppel as well as infringement and
validity issues in federal court. Thus, by initiating an IPR, the
generic company may have lengthened its time to market and spent more
money than it would have spent simply going forward with the paragraph
IV litigation in federal court.
Assume the same facts as above, but in year two of NCE exclusivity,
the innovator drug company obtains a second patent, patent no. 2,
protecting its drug. Here, it may be more likely that one of the two
patents becomes subject to an early PGR or IPR petition, simply because
the generic company no longer jeopardizes its opportunity to file a
paragraph IV certification, i.e., in year four of NCE there will
still be an extant patent against which to certify. Interestingly,
however, it is possible that the closer to year four that a patent is
granted covering a drug product, the less likely a generic company is to
file a PGR or IPR petition due to the uncertainties discussed above,
namely estoppel issues, the potential of a stay and the likelihood that
the claims are either confirmed or changed, necessitating further
litigation in federal court.
Assume the same facts as either Scenarios 1 or 2, but now there are
two generic companies, the first filer and the second filer, who are
interested in filing ANDAs on the same drug product. In this scenario,
it is given that the first filer will be eligible for the 180-day
exclusivity and that the second filer will not.
Second filers that join a litigation involving a first filer usually
seek to minimize legal expenditures by relying on the litigation work
done by the first filer. If the first filer fails in some way, for
example by failing to obtain tentative FDA approval within 30 months,
the first filer will lose its eligibility for 180-day exclusivity and
the second filer has a path forward to market its generic drug either
before or at the same time as the first filer. In this scenario, it
would make little sense for the second filer to seek PGR or IPR on
either patent because such proceedings would require the second filer to
spend more than simply relying on the first filer to litigate the
patents. Also, invalidating the patent via PGR or IPR does nothing for
the second filer if the first filer has already secured its 180-day
The above scenarios suggest that PGR and IPR petitions may be more
likely when there are multiple patents protecting an innovator drug that
has been awarded NCE status. What this in turn suggests for innovators
is that it may no be longer safe to wait to defend against patent
challenges in year four of NCE exclusivity.
The accelerated schedule for PGR and IPR proceedings may leave
participants with little time to fully assess their strategic positions.
Therefore, innovator companies may wish to be prepared, as they obtain
patent protection for their drugs to counter early validity challenges,
both at the PTO and in court. To do so, innovator companies should
consider obtaining the advice of outside counsel with expertise in both
patent prosecution and patent litigation earlier than before. Such early
preparation is a small price to pay for protecting a patent estate that
protects an innovator drug company's products.