In 2012, inter partes review (IPR) came into effect as a procedure to correct errors in granting patents. As part of the enactment of the latest revision of the patent law, a procedure known as inter partes reexamination, which had been carried out by patent examiners and required significant time to complete, was replaced by IPR, which is more trial-like, is carried out by administrative judges, and takes about one year to complete. (The administrative judges are members of the Patent Trial and Appeals Board.)
After completion of an IPR procedure, it is possible that one or more (indeed, sometimes all) of the claims in a patent ends up invalidated. Inter partes reexamination, the previous procedure, allowed sufficient time and interaction with the examiner, so that the patent owner could amend the claim(s). Until recently, it has been very difficult to amend claims during IPR. The other approach to invalidating patent claims is through the courts. However, IPRs have a lower burden of proof for claim invalidation. To invalidate a claim in the courts, the requesting party must have a case or controversy (including likely harm); for an IPR to be instituted, the party must only convince the board that it is likely that at least one claim would be invalidated. Although many IPRs are instituted by a party that has been sued for patent infringement, they can also can be instituted by a party that has not been sued. (A prominent example of this is the case of hedge fund manager, Kyle Bass.)
The percentage of IPR petitions that are instituted into IPRs has dropped from an early rate of more than 80% to the present rate of approximately 60%. Similarly, the percentage of cases in which all claims are invalidated has dropped from an early rate of more than 85% to approximately 60%, and the percentage of cases in which at least one claim is invalidated has dropped from nearly 92% to approximately 75%.
The number of petitions for IPRs being filed continues to be more than 100 per month, though some months see 200 or more. Congress created IPRs to provide “quick and cost-effective alternatives to litigation.” However, the cost of an IPR is typically over $200,000 (and can be higher, when including appeals). IPR proceedings, after institution, take a year or slightly longer, which is typically much shorter than a patent trial at district court. Although the cost is significantly less than a typical patent litigation at district court, it remains a burden for a small company.
One reason that the burden of proof is lower through IPRs than in the courts is that the statute provided that the patent owner could amend the claims in an IPR. Until last fall, it was difficult for patentees to amend claims during an IPR proceeding, since the Board placed the burden of persuasion on them; that is, patentees had to convince the Board that the amended claims were patentable. On October 4, 2017, the Federal Circuit Court of Appeals issued an en banc opinion for Aqua Products, Inc. v. Matal, stating that, in the absence of a rule change, "the PTO [Patent and Trademark Office] may not place that burden on the patentee."
On November 21, 2017, the Chief Administrative Patent Judge, issued, to the Board, guidance on motions to amend following the decision of Aqua Products, Inc. Although it is too early to ascertain the effect, 2018 may find that patentees are in a different position regarding amendments during IPR. If the Board becomes more receptive to amendments by patentees, IPRs will result in fewer claims being invalidated, since patentees can amend the claims to overcome the cited art. However, the possibility of amending claims during IPR was made more uncertain by the petition for rehearing, to the Federal Circuit, in Bosch Automotive Service Solutions, LLC v. Matal, in which the solicitor for the USPTO insinuated that the USPTO could institute a rule placing the burden of persuasion on the patentee.
The constitutionality of IPRs has been questioned since, by invalidating patent claims, the Board takes away property rights without a jury trial. The Supreme Court granted certiorari for Oil States Energy Services LLC v. Greene’s Energy Group LLC, on the issue of constitutionality of IPRs, and has already held oral hearing. Although a change is not expected, predicting Supreme Court decisions is difficult.
More than 1,000 patents were invalidated during 2017, a number similar to preceding years. Although the rate of institution of petitions has slowed down and the percentage of proceedings in which at least one claim is invalidated has decreased, the number of patents in which one or more claims are invalidated by an IPR remains significant. One example is the patent portfolio for Humira, the blockbuster biologic from AbbVie. (In 2016, Humira's global sales totaled approximately $16 billion.) Although Humira's portfolio comprises more than 100 patents, AbbVie has seen more than 13 petitions for IPR being filed against patents in the Humira portfolio. AbbVie has done an excellent job of defending, so that many of those petitions were not instituted. But, during 2017, U.S. Patent 8,889,135 and two continuation patents were invalidated. The claims in the '135 patent are directed to methods of treating rheumatoid arthritis (RA) with a human anti-tumor necrosis factor-alpha (TNF-a) antibody. The patent was important (considered by some to be a key blocking patent), since biosimilar developers are required to follow the same method of treatment as the already-approved product, to secure FDA approval. (A biosimilar is a drug designed to have active properties similar to one that has previously been licensed, although the drug is not an exact copy.) RA makes up about one third of the Humira market. If a biosimilar manufacturer can work around the Humira formulation patents, the invalidation of the '135 patent clears the way to the RA market.
The effect of IPRs is perhaps most evident for small companies, which find it difficult to afford the cost of an IPR, despite it being significantly less than that of patent litigation. Investors considering investments in part of a small company's ownership, the value being based on the patents, do not know how certain that value is, due to the fear of an IPR.
If amendments during IPR prove to be as difficult during 2018 as they have been before, what other avenues are left for protecting or retaining some of the intellectual property? Reissue, a procedure at the USPTO whereby the patent can be amended and reexamined, has been proposed as an antidote to IPR. A patent owner can decide, for the key patents in a portfolio, to perform an IPR audit. If, after a search similar to that performed to invalidate a patent, it is decided that the patent claims would be vulnerable, the patent owner can decide whether to proceed with a reissue. In that manner, some protection of the intellectual property could be maintained.
In view of the above, 2018 will be an interesting year concerning IPRs.
