Zachary Silbersher v. Valeant Pharmaceuticals Int'l

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ZACHARY SILBERSHER, Relator, No. 20-16176

Plaintiff-Appellant, D.C. No. 3:18-cv-

01496-JD

and

UNITED STATES OF AMERICA, ex OPINION

rel.; STATE OF CALIFORNIA;

STATE OF COLORADO; STATE OF

CONNECTICUT; STATE OF

DELAWARE; STATE OF FLORIDA;

STATE OF GEORGIA; STATE OF

HAWAII; STATE OF ILLINOIS;

STATE OF INDIANA; STATE OF

IOWA; STATE OF LOUISIANA;

STATE OF MARYLAND; STATE

OF MICHIGAN; STATE OF

MINNESOTA; STATE OF

MONTANA; STATE OF NEVADA;

STATE OF NEW HAMPSHIRE;

STATE OF NEW JERSEY; STATE

OF NEW MEXICO; STATE OF

NEW YORK; STATE OF NORTH

CAROLINA; STATE OF

OKLAHOMA; STATE OF RHODE

ISLAND; STATE OF TENNESSEE;

STATE OF TEXAS; STATE OF

2 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

VERMONT; STATE OF

WASHINGTON;

COMMONWEALTH OF

MASSACHUSETTS;

COMMONWEALTH OF VIRGINIA;

DISTRICT OF COLUMBIA,

Plaintiffs,

v.

VALEANT PHARMACEUTICALS

INTERNATIONAL, INC.;

VALEANT PHARMACEUTICALS

INTERNATIONAL; SALIX

PHARMACEUTICALS, LTD.;

SALIX PHARMACEUTICALS,

INC.; FALK PHARMA GMBH,

Defendants-Appellees.

Appeal from the United States District Court

for the Northern District of California

James Donato, District Judge, Presiding

Argued and Submitted June 10, 2022

Portland, Oregon

Filed August 3, 2023

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 3

Before: Mary M. Schroeder and Gabriel P. Sanchez,

Circuit Judges, and John Antoon II, * District Judge.

Opinion by Judge Sanchez

SUMMARY **

False Claims Act

The panel reversed the district court’s dismissal of

relator Zachary Silbersher’s qui tam action under the False

Claims Act against Dr. Falk Pharma GmbH and drugmaker

Valeant Pharmaceuticals International, Inc., and remanded

for further proceedings.

Silbersher alleged that Valeant fraudulently obtained

two sets of patents related to a drug and asserted these

patents to stifle competition from generic

drugmakers. Silbersher further alleged that defendants

defrauded the federal government by charging an artificially

inflated price for the drug while falsely certifying that its

price was fair and reasonable. Dismissing Silbersher’s

action under the False Claims Act’s public disclosure bar,

the district court concluded that his allegations had already

*

The Honorable John Antoon II, United States District Judge for the

Middle District of Florida, sitting by designation.

**

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

4 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

been publicly disclosed, including in inter partes patent

review (“IPR”) before the Patent and Trademark Office.

The False Claims Act’s public disclosure bar, as

amended in 2010, applies if (1) the disclosure at issue

occurred through one of the channels specified in the statute;

(2) the disclosure was public; and (3) the relator’s action is

substantially the same as the allegation or transaction

publicly disclosed. Here, it was undisputed that the relevant

documents were publicly disclosed.

Under the first prong of the public disclosure bar, the Act

provides for the following three channels. Channel (i)

applies if a disclosure was made “in a Federal criminal, civil,

or administrative hearing in which the Government or its

agent is a party,” and channel (ii) applies if a disclosure was

made “in a congressional, Government Accountability

Office, or other Federal Report, hearing, audit, or

investigation.” Channel (iii) applies if a disclosure was

made in the news media.

The panel held that an IPR proceeding in which the

Patent and Trademark Office invalidated Valeant’s “‘688”

patent was not a channel (i) disclosure because the

government was not a party to that proceeding, and it was

not a channel (ii) disclosure because its primary function was

not investigative. The panel held that, under United States

ex rel. Silbersher v. Allergan, 46 F.4th 991 (9th Cir. 2022),

the patent prosecution histories of Valeant’s patents were

qualifying public disclosures under channel (ii). The panel

assumed without deciding that a Law360 article and two

published medical studies were channel (iii) disclosures.

The panel held that the “substantially the same” prong of

the public disclosure bar, as revised by Congress in its 2010

amendments to the False Claims Act, applies when the

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 5

publicly disclosed facts are substantially similar to the

relator’s allegations or transactions. None of the qualifying

public disclosures made a direct claim that Valeant

committed fraud, nor did they disclose a combination of

facts sufficient to permit a reasonable inference of

fraud. Accordingly, the public disclosure bar was not

triggered.

The panel resolved a cross-appeal in a separately-issued

memorandum disposition.

COUNSEL

Tejinder Singh (argued), Sparacino PLLC, Washington,

D.C.; Bret D. Hembd, Herrera Kennedy LLP, Burbank,

California; Nicomedes S. Herrera and Andrew M. Purdy,

Herrera Kennedy LLP, Oakland, California; Warren T.

Burns, Burns Charest LLP, Dallas, Texas; Christopher J.

Cormier, Burns Charest LLP, Washington, D.C.; for

Plaintiff-Appellant.

Michelle Lo, Assistant United States Attorney; Office of the

United States Attorney; San Francisco, California; for

Plaintiffs United States of America, States of California,

Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii,

Illinois, Indiana, Iowa, Louisiana, Maryland, Michigan,

Minnesota, Montana, Nevada, New Hampshire, New Jersey,

New Mexico, New York, North Carolina, Oklahoma, Rhode

Island, Tennessee, Texas, Vermont, Washington, the

Commonwealth of Massachusetts, the Commonwealth of

Virginia, and District of Columbia.

6 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

Moez M. Kaba (argued), Padraic W. Foran, Daniel C.

Sheehan, and Haoxiaohan Cai, Hueston Hennigan LLP, Los

Angeles, California; for Defendants-Appellees Valeant

Pharmaceuticals International Inc., Valeant Pharmaceuticals

International, Salix Pharmaceuticals Ltd., and Salix

Pharmaceuticals Inc.

Christian E. Mammen (argued), Womble Bond Dickinson

(US) LLP, San Francisco, California; Mary W. Bourke and

Kristen Cramer, Womble Bond Dickinson (US) LLP,

Wilmington, Delaware; for Defendant-Appellee Dr. Falk

Pharma GmbH.

Justin T. Berger, Cotchett Pitre & McCarthy LLP,

Burlingame, California; Jacklyn DeMar, Taxpayers Against

Fraud Education Fund, Washington, D.C.; for Amicus

Curiae Taxpayers Against Fraud Education Fund.

Gordon D. Todd, Kimberly A. Leaman, Christopher S. Ross,

and Katy (Yin Yee) Ho, Sidley Austin LLP, Washington,

D.C.; Jack E. Pace III and Peter J. Carney, White & Case

LLP, New York, New York; for Amici Curiae Johnson &

Johnson and BTG International Ltd.

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 7

OPINION

SANCHEZ, Circuit Judge:

This appeal presents the question whether the public

disclosure bar to the False Claims Act (“FCA”) applies to

Zachary Silbersher’s claims against Dr. Falk Pharma GmbH

and drugmaker Valeant Pharmaceuticals International, Inc.

(collectively, “Valeant”). 1 Silbersher alleges that Valeant

fraudulently obtained two sets of patents related to the anti-

inflammatory drug Apriso and asserted these patents to stifle

competition from generic drugmakers. Silbersher further

alleges that defendants defrauded the government by

charging an artificially inflated price for Apriso while falsely

certifying that the drug’s price was fair and reasonable. The

district court dismissed Silbersher’s qui tam action under the

public disclosure bar. See 31 U.S.C. § 3730(e)(4)(A). This

case requires us to examine Congress’s 2010 amendments to

the FCA’s public disclosure bar and to determine whether

Silbersher’s claims are “substantially the same” as

information that was publicly disclosed in one of three

enumerated channels under the FCA. See id. We have

jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse. 2

1

In 2015, Valeant Pharmaceuticals International, Inc., acquired Salix

Pharmaceuticals, Ltd., and its wholly owned subsidiary, Salix

Pharmaceuticals, Inc. Valeant is now Bausch. We refer to these parties,

along with Dr. Falk Pharma GmbH, collectively as “Valeant” because

Silbersher raises the same allegations against them all.

2

We resolve Dr. Falk Pharma GmbH’s cross-appeal in a separately

issued memorandum disposition.

8 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

I. BACKGROUND

A. False Claims Act

The False Claims Act imposes civil liability on anyone

who “knowingly presents” a “fraudulent claim for payment”

to the federal government. 31 U.S.C. § 3729(a)(1)(A);

accord United States ex rel. Mateski v. Raytheon Co., 816

F.3d 565, 569 (9th Cir. 2016). Known as “Lincoln’s Law,”

Congress passed the Act at President Lincoln’s request to

combat fraud by Civil War defense contractors. See United

States ex rel. Bennett v. Biotronik, Inc., 876 F.3d 1011, 1013

n.1 (9th Cir. 2017). The Act allows private citizens, referred

to as “relators,” to bring fraud claims on the government’s

behalf against those who have violated the Act’s

prohibitions. United States ex rel. Silbersher v. Allergan, 46

F.4th 991, 994 (9th Cir. 2022); see 31 U.S.C. § 3730(b)(1). 3

If the government declines to proceed, the relator may

prosecute the action and, if successful, recover up to thirty

percent of the damages. 31 U.S.C. §§ 3730(b)(4), (d)(2).

The promise of bounty has sometimes incentivized

relators to bring dubious claims. The Supreme Court’s

decision in United States ex rel. Marcus v. Hess, 317 U.S.

537 (1943), provides the paradigmatic example of a

“parasitic” qui tam suit. Hess brought a qui tam action

alleging that electricians colluded to inflate prices by

coordinating their bids on government contracts. Id. at 539.

Before Hess’s qui tam action, the government had already

indicted the electricians for the same scheme and the

electricians entered a plea bargain requiring them to pay

3

Diligent readers of this Court’s opinions may feel a sense of déjà vu:

we recently wrestled with certain parts of the FCA in another case

brought by the same relator. See United States ex rel. Silbersher v.

Allergan, 46 F.4th 991 (9th Cir. 2022).

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 9

$54,000 in fines. Id. at 545. Spotting an opportunity, Hess

copied the government’s indictment and brought a qui tam

action against the electricians seeking hundreds of thousands

of dollars in damages. Id. The Court allowed Hess’s suit to

stand, reasoning that the action advanced “one of the

purposes for which the [FCA] was passed” because it

promised “a net recovery to the government of $150,000,

three times as much as the fines imposed in the criminal

proceedings.” Id. at 545.

“Hess inspired public outcry over the liberality of the qui

tam provisions that prompted speedy congressional

response.” United States ex rel. Springfield Terminal Ry. v.

Quinn, 14 F.3d 645, 650 (D.C. Cir. 1994). In 1943,

President Roosevelt signed amendments to the FCA that

barred qui tam claims “based upon evidence or information

in the possession” of the federal government. 31 U.S.C.

§ 232(C) (1945). Congress later determined, however, that

this “government knowledge” bar prevented too many

relators from bringing potentially meritorious claims. See

Mateski, 816 F.3d at 570. In 1986, Congress replaced the

government knowledge bar with the “public disclosure” bar.

31 U.S.C. § 3730(e)(4)(A) (1986). The change reflected

Congress’s effort “to encourage suits by whistle-blowers

with genuinely valuable information, while discouraging

litigation by plaintiffs who have no significant information

of their own to contribute.” Mateski, 816 F.3d at 570.

The 1986 public disclosure bar prevented qui tam claims

“based upon” public disclosures “in a criminal, civil, or

administrative hearing, in a congressional, administrative, or

Government Accounting Office report, hearing, audit, or

investigation, or from the news media,” unless the relator

10 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

was an “original source” of the disclosure. 4 31 U.S.C.

§ 3730(e)(4)(A) (1986); see Schindler Elevator Corp. v.

United States ex rel. Kirk, 563 U.S. 401, 412 (2011). The

public disclosure bar applied when three conditions were

met: “(1) the disclosure at issue occurred through one of the

channels specified in the statute; (2) the disclosure was

‘public’; and (3) the relator’s action is ‘based upon’ the

allegations or transactions publicly disclosed.” United

States ex rel. Solis v. Millenium Pharms., Inc., 885 F.3d 623,

626 (9th Cir. 2018) (quoting Mateski, 816 F.3d at 1570)

(analyzing the 1986 version of the public disclosure bar).

Congress made important changes to the public

disclosure bar in 2010. As amended, the bar precludes qui

tam actions if:

substantially the same allegations or

transactions as alleged in the action or claim

were publicly disclosed—

(i) in a Federal criminal, civil, or

administrative hearing in which the

Government or its agent is a party;

(ii) in a congressional, Government

Accountability Office, or other Federal

Report, hearing, audit, or investigation;

or

(iii) from the news media,

4

An “original source” was defined as “an individual who has direct and

independent knowledge of the information on which the allegations are

based and has voluntarily provided the information to the Government

before filing an action under this section which is based on the

information.” 31 U.S.C. § 3730(e)(4)(B) (1986).

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 11

unless the action is brought by the Attorney

General or the person bringing the action is

an original source of the information. 5

31 U.S.C. § 3730(e)(4)(A) (2010). We recently concluded

in Allergan that our three-part test for determining whether

the public disclosure bar applies to a qui tam action remains

good law after the 2010 amendments. See Allergan, 46 F.4th

at 996.

The 2010 amendments narrowed the requirements for

triggering the public disclosure bar in several important

respects. Previously, the public disclosure bar was triggered

if the qui tam action was based upon information publicly

disclosed in any “criminal, civil, or administrative hearing.”

See 31 U.S.C. § 3730(e)(4)(A) (1986); see also A-1

Ambulance Serv., Inc. v. California, 202 F.3d 1238, 1243–

44 (9th Cir. 2000) (applying public disclosure bar to

information disclosed in county public bidding proceeding).

Now, only a “Federal criminal, civil, or administrative

hearing” qualifies as a specified channel (i) disclosure. 31

U.S.C. § 3730(e)(4)(A)(i) (2010) (emphasis added); see also

5

An original source is:

an individual who either (i) prior to a public disclosure

under [the public disclosure bar] has voluntarily

disclosed to the Government the information on which

allegations or transactions in a claim are based, or [(ii)]

who has knowledge that is independent of and

materially adds to the publicly disclosed allegations or

transactions, and who has voluntarily provided the

information to the Government before filing an action

under this section.

31 U.S.C. § 3730(e)(4)(B) (2010).

12 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

Allergan, 46 F.4th at 998–99. Likewise, for a “report,

hearing, audit, or investigation” to trigger the public

disclosure bar under channel (ii), it must now be “Federal.”

Compare 31 U.S.C. § 3730(e)(4)(A) (1986), with id.

§ 3730(e)(4)(A)(ii) (2010). See also Allergan, 46 F.4th at

998. Finally, for the public disclosure bar to apply under

channel (i), the “Government or its agent” must be “a party”

to the “Federal criminal, civil or administrative hearing.”

Compare 31 U.S.C. § 3730(e)(4)(A) (1986), with id.

§ 3730(e)(4)(A)(i) (2010).

B. Patent Prosecution and Inter Partes Review

A patent gives its owner the exclusive right to make, use,

or sell a patented invention for a limited period. 35 U.S.C.

§ 271(a). For an invention to be patent-worthy, it must be

novel and not obvious to a person with ordinary skill in the

relevant art. 35 U.S.C. §§ 102, 103. The process of

obtaining a patent is called a patent prosecution. In a patent

prosecution, an inventor submits a patent application to the

Patent and Trademark Office (“PTO”), which examines the

application before accepting or rejecting it. The PTO’s

examination is an ex parte proceeding. The PTO relies on

applicants to exercise good faith and candor about the

originality of their purported inventions. See 37 C.F.R.

§ 1.56(a). An inventor who applies for a patent must

disclose to the PTO “all information known to that

individual to be material to patentability.” Id. Patent

applications are generally made public eighteen months after

they are filed. See 35 U.S.C. § 122(b).

After a patent has been granted, anyone can challenge its

validity by petitioning the PTO to hold inter partes review

(“IPR”) of the patent. 35 U.S.C. § 311(a). IPR is a trial-like

proceeding conducted at the Patent Trial and Appeal Board

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 13

(“PTAB”), an adjudicatory branch of the PTO. See id.

§ 6(a). See generally id. §§ 311–19; 37 C.F.R. §§ 42.100–

42.123 (2021). In an IPR proceeding, the person challenging

the patent argues against the validity of the patent, and the

patent owner defends it. The PTAB presides as the

adjudicator. 35 U.S.C. § 316(c). Both the challenger and

the patent owner may present evidence. See Genzyme

Therapeutic Prods. Ltd. v. Biomarin Pharm. Inc., 825 F.3d

1360, 1365–70 (Fed. Cir. 2016). The challenger bears the

burden of proving the patent is invalid. 35 U.S.C. § 316(e).

The scope of IPR is limited. Challengers can assert only

that the patented invention was obvious or not novel and

introduce as evidence only previously granted patents and

publications (referred to as “prior art”). See id. § 311(b). An

IPR does not decide whether an inventor obtained a patent

wrongfully—by committing fraud, for example. See id.; see

also Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d

1276, 1288–95 (Fed. Cir. 2011).

C. Factual Background

We now describe the facts as presented in Silbersher’s

qui tam complaint. Valeant manufactures Apriso, a

medication prescribed to treat ulcerative colitis. When

ingested, Apriso travels through the digestive system and

releases its active ingredient, mesalamine. Upon arrival in

the colon, mesalamine reduces the inflammation and

discomfort caused by ulcerative colitis. Valeant owns a set

of patents (“the Otterbeck Patents”) for Apriso’s delayed-

release formula, which maximizes the amount of

mesalamine that reaches the colon.

Beginning in 2012, Valeant enforced the Otterbeck

Patents to prevent competitors from creating cheaper,

generic versions of Apriso. The absence of generic

14 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

competition allowed Valeant to charge high prices for the

drug. A one-month prescription of Apriso retailed for about

$600, earning Valeant over $200 million each year. A

substantial portion of those proceeds came from the federal

government, which paid for Apriso through Medicare and

Medicaid.

The Otterbeck Patents rested on shaky ground. Several

patents predating the Otterbeck Patents describe similar

delayed-release formulas for mesalamine drugs. Viewed

against those prior inventions, Apriso simply put a new label

on an old pill. In 2012, Lupin, a generic drug manufacturer,

submitted an Abbreviated New Drug Application to the FDA

attesting that the Otterbeck Patents were invalid. If the

Otterbeck Patents were invalidated, generic competition

would drive down Apriso’s price. Valeant initiated an

infringement action against Lupin to prevent that from

happening. Seeing the writing on the wall, Valeant sought

to extend its monopoly by applying for a new patent,

claiming it had recently discovered that Apriso was effective

when taken without food. The PTO initially rejected the

application. After several rounds of revisions to the

application, Valeant finally succeeded, and the PTO granted

Patent No. 8,865,688 (“the ’688 Patent”) in 2014.6

Valeant’s gambit paid off. Approval of the ’688 Patent gave

Valeant leverage: even if Lupin successfully invalidated the

Otterbeck Patents, it would need to mount a new, separate

6

The ’688 Patent contained sixteen “claims.” A patent can include

several claims, each treated as a distinct invention and correspondingly

a distinct right to exclude others from practicing the invention. See, e.g.,

Leeds & Catlin Co. v. Victor Talking Mach. Co., 213 U.S. 301, 319

(1909). Only the first and sixteenth claims of the ’688 Patent are relevant

to the present appeal. Our discussion of that patent refers only to those

two claims.

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 15

challenge to the ’688 Patent before it could manufacture an

Apriso generic. In September 2014, Valeant dismissed its

infringement claims against Lupin relating to the Otterbeck

Patents, and Lupin agreed to refrain from introducing a

generic version of Apriso until 2022, four years after the

expiration of the Otterbeck Patents.

In 2015, another generic drug manufacturer, GeneriCo

LLC, sued to invalidate the ’688 Patent. GeneriCo

challenged the ’688 Patent through IPR, arguing it was

obvious that Apriso would be effective without food. As

evidence, GeneriCo presented two published medical studies

predating Valeant’s ’688 Patent application (“the Brunner

and Marakhouski studies”). See GeneriCo, LLC v. Dr. Falk

Pharma GmbH, No. IPR2016–00297, 2017 WL 2211672

(P.T.A.B. May 19, 2017), aff’d, 774 F. App’x 665 (Fed. Cir.

2019). The Brunner and Marakhouski studies established

that mesalamine drugs were effective when taken without

food, undermining Valeant’s purported later discovery of the

same result. Moreover, Valeant’s own head of research co-

authored both studies, discrediting Valeant’s claim that

Apriso’s effectiveness without food had been a new

discovery. Id. at *6. The PTAB agreed with GeneriCo and

invalidated the ’688 Patent as obvious. Id. at *24. 7

A legal news outlet, Law360, published an article

describing GeneriCo’s successful arguments and the

PTAB’s decision cancelling the ’688 Patent. See Matthew

Bultman, Part of Apriso Patent Nixed in IPR with Hedge

Fund Ties, Law360 (May 19, 2017, 4:58 PM EDT),

[https://perma.cc/56YR-ET78]. The article stated that

7

The PTAB invalidated “claims 1 and 16 of the ’688 patent.” GeneriCo,

LLC, 2017 WL 2211672 at *24. The other fourteen claims in the ’688

Patent were not affected by the PTAB’s decision. Id.

16 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

GeneriCo “had shown the challenged patent claims would

have been obvious” by pointing to “a collection of references

that included press releases from [Valeant] about clinical

drug trials and some academic papers.” Id. The article did

not mention that Valeant’s head of research had co-authored

the Brunner and Marakhouski studies. Id.

Silbersher was GeneriCo’s lawyer and led the IPR

challenge that resulted in the ’688 Patent being invalidated.

Silbersher’s investigations into Valeant’s Apriso-related

patents revealed other information that was not disclosed in

the IPR proceeding. He discovered that three years before

applying for the ’688 Patent, Valeant had applied for Patent

No. 8,921,344 (“the ’344 Patent”). In the ’344 Patent

application, Valeant claimed it had made an “unexpected

finding”: taking mesalamine with food made the drug more

effective. In other words, the ’344 Patent application

claimed it was obvious that mesalamine was effective

without food—the exact opposite of what Valeant would

claim a few years later in the ’688 Patent application.

D. Procedural History

Silbersher brought this FCA case seeking damages from

Valeant for making false claims for payment to the federal

government. He alleges that Valeant fraudulently obtained

the Otterbeck and ’688 Patents so that it could prolong its

monopoly and charge an “artificially high price” for Apriso.

According to Silbersher, Valeant “intentionally withheld

material information demonstrating that Valeant’s claimed

granulated mesalamine formulation would be effective when

administered without food.” Silbersher contends that

Valeant knew about the Brunner and Marakhouski studies

and the earlier ’344 Patent application but did not disclose

that information to the PTO when applying for the ’688

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 17

Patent. Similarly, Silbersher alleges that the Otterbeck

Patents are invalid because Valeant failed to disclose “at

least four prior art patents [that] anticipate all or nearly all of

the alleged inventions claimed in the Otterbeck Patents.”

Medicare and Medicaid allegedly paid nearly $250

million for Apriso from 2011 to 2016. Silbersher estimates

that the government would have paid about eighty percent

less if generic manufacturers of Apriso were allowed to enter

the market. Silbersher contends that Valeant therefore

committed fraud when it knowingly overcharged the

government and certified to Medicare and Medicaid that

Apriso’s price was fair and reasonable.

The district court dismissed Silbersher’s qui tam action

as precluded by the public disclosure bar. Guided by our

precedent interpreting the pre-2010 FCA, the district court

reasoned that IPR qualifies as an “other Federal . . . hearing”

under channel (ii) of the bar. The district court determined

that Silbersher’s allegations against Valeant had all been

disclosed in the IPR that invalidated the ’688 Patent.

Accordingly, the district court concluded that Silbersher’s

qui tam action was the “quintessence of the opportunistic

and ‘parasitic’ lawsuit Congress has always intended to bar.”

The court gave Silbersher leave to amend his claims, but

Silbersher instead filed this appeal.

II. DISCUSSION

We review the district court’s ruling on a motion to

dismiss an FCA action de novo. Allergan, 46 F.4th at 996.

To determine whether Silbersher’s qui tam action was

properly dismissed by the district court under the public

disclosure bar, we must assess whether “(1) the disclosure at

issue occurred through one of the channels specified in the

statute; (2) the disclosure was public; and (3) the relator’s

18 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

action is substantially the same as the allegation or

transaction publicly disclosed.” Id. (internal quotation

marks omitted) (quoting Solis, 885 F.3d at 626). The parties

do not dispute that the relevant documents that are the

subject of this appeal were all publicly disclosed. Therefore,

our analysis is confined to determining whether the public

disclosures in question occurred within one of the channels

specified by the FCA, and if so, whether they disclosed

“substantially the same allegations or transactions as alleged

in” Silbersher’s qui tam action. 31 U.S.C. § 3730(e)(4)(A).

Valeant points us to four sets of disclosures: (1) the

patent prosecution histories of the ’344, ’688, and Otterbeck

Patents; (2) the IPR proceeding in which the PTAB

invalidated the ’688 Patent; (3) the Law360 article

summarizing the IPR proceeding; and (4) the Brunner and

Marakhouski studies. We address first whether these

disclosures occurred within a specified channel.

A.

The FCA’s public disclosure bar requires federal courts

to dismiss qui tam suits under certain circumstances where

the complaint’s allegations closely match information that

was publicly disclosed in one of three specified channels. 31

U.S.C. § 3730(e)(4)(A). The full text of the public

disclosure bar is repeated below:

The court shall dismiss an action or claim

under this section, unless opposed by the

Government, if substantially the same

allegations or transactions as alleged in the

action or claim were publicly disclosed—

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 19

(i) in a Federal criminal, civil, or

administrative hearing in which the

Government or its agent is a party;

(ii) in a congressional, Government

Accountability Office, or other Federal

Report, hearing, audit, or investigation;

or

(iii)from the news media,

unless the action is brought by the Attorney

General or the person bringing the action is

an original source of the information.

31 U.S.C. § 3730(e)(4)(A) (2010).

“[T]he Supreme Court has instructed that to determine

the meaning of one word in the public disclosure bar, we

must consider the provision’s entire text, read as an

integrated whole.” Allergan, 46 F.4th at 997 (internal

quotation marks omitted) (quoting Schindler, 563 U.S. at

408). As we explained in Allergan, channels (i) and (ii)

focus on two distinct types of federal proceedings. Id. at

999. Channel (i) primarily involves adversarial proceedings

that are adjudicated on the merits before a neutral tribunal or

decisionmaker, whereas channel (ii) primarily involves

federal investigatory proceedings. Id.

Several textual clues lead us to this conclusion. A

“Federal criminal, civil, or administrative hearing in which

the Government . . . is a party” contemplates an adjudicatory

hearing before a neutral tribunal or decisionmaker. See

Hearing, Black’s Law Dictionary (11th ed. 2019) (“A

judicial session, usually open to the public, held for the

purpose of deciding issues of fact or law, sometimes with

20 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

witnesses testifying.”); Administrative Hearing, id. (“An

administrative-agency proceeding in which evidence is

offered for argument or trial.”). As we observed in Allergan,

the term “party” describing the government’s role in such a

hearing contemplates that channel (i) hearings are also

adversarial. Allergan, 46 F.4th at 999 (noting that channel

(i) “suggests a focus on adversarial proceedings because

criminal hearings are always adversarial, and civil and

administrative hearings are very often adversarial when the

government is a party” (citing Party, Black’s Law

Dictionary (11th ed. 2019)).

Conversely, in Allergan we concluded that prong (ii) “is

primarily concerned with proceedings to gain information.”

Id. A “report, hearing, audit, or investigation” all suggest

the “activity of trying to find out the truth about something,”

whether by “an authoritative inquiry into certain facts, as by

a legislative committee, or a systematic examination of some

intellectual problem or empirical question.” See

Investigation, Black’s Law Dictionary (11th ed. 2019).

Invoking the canon of noscitur a sociis, we observed that

“[a]ll four nouns apply to a fact-finding or investigatory

process ‘to obtain information,’ and together indicate that

Congress intended for prong (ii) to cover a wide array of

investigatory processes.” Allergan, 46 F.4th at 998

(emphasis removed) (citation omitted) (quoting Schindler,

563 U.S. at 410).

We held in Allergan that because a patent prosecution is

an ex parte proceeding before a federal administrative

agency—the PTO—such a proceeding qualifies as an “other

Federal . . . hearing” under channel (ii). Id. at 998–99. We

rejected the contention that “by adding the government-as-

a-party language to prong (i) in the 2010 amendment,

Congress intended to exclude administrative hearings in

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 21

which the government was not a party from the public

disclosure bar writ large.” Id. at 998. Such a sweeping

argument would seemingly read “other Federal . . . hearing”

out of existence from channel (ii), and we noted that the FCA

“contemplates some redundancy” between the channels. Id.

at 999 (quoting Schindler, 563 U.S. at 410). We explained

that an ex parte hearing before the PTO in which the

government is not a party falls within channel (ii), “[b]ut

when the PTO rejects a patent application and the inventor

appeals, the appeal could fall under prong (i) but not prong

(ii)” as an adjudication before the PTAB. Id.

This appeal requires us to address certain public

disclosures addressed by Allergan as well as other

disclosures that raise novel questions concerning application

of the statutory bar. We turn to the four sets of public

disclosures identified by Valeant.

The patent prosecutions involving the ’344, ’688, and

Otterbeck Patents are qualifying public disclosures under

channel (ii), as “other Federal . . . hearing[s].” See id. at

997–99. A public disclosure “also ‘encompasses publicly-

filed documents’ submitted as part of the proceeding.” Id. at

997 (quoting A-1 Ambulance Serv., 202 F.3d at 1244).

Allergan does not, however, resolve whether the IPR that

invalidated the ’688 Patent was a disclosure occurring within

a specified channel. See id. at 999 (observing that an appeal

by an inventor before the PTAB “could fall under prong (i)

but not prong (ii)” but not reaching the issue). We must

therefore determine whether the IPR proceeding falls within

channel (i) or channel (ii).

As previously explained, IPR is a trial-like, adversarial

hearing conducted before the PTAB between a patent owner

and patent challenger. See 35 U.S.C. §§ 311–19. Other

22 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

parties may join in the IPR at the discretion of the PTO. Id.

§ 315(c). The function of IPR is to adjudicate disputes about

the patentability of a patented invention under the criteria of

novelty and obviousness. Id. § 311(b). The parties may file

motions, take discovery, and present evidence and oral

testimony at a hearing. Id. § 316(a); see 37 C.F.R. §§ 42.20–

25, 42.51–55, 42.61–42.70. At the conclusion of IPR, the

PTAB issues “a final written decision with respect to the

patentability of any patent claim challenged by the

petitioner.” 35 U.S.C. § 318(a); see 37 C.F.R. §§ 42.20–25.

The PTAB’s decision may itself be appealed to the Federal

Circuit. See 35 U.S.C. § 143.

IPR presents many hallmarks of a channel (i) federal

administrative hearing. It is clearly “Federal”: the PTAB is

an adjudicatory body of the PTO, an agency within the U.S.

Department of Commerce. See 35 U.S.C. § 6(a); Allergan,

46 F.4th at 998. It is an “administrative hearing” in which

evidence and argument are presented before a neutral

tribunal that adjudicates the merits of a dispute about the

patentability of an invention. And it is an adversarial

proceeding between two or more parties to the litigation. See

35 U.S.C. § 311(a)–(b) (establishing grounds and scope of

IPR proceeding); id. § 313 (describing patent owner’s right

to respond); id. § 314 (defining basis for instituting IPR); id.

§ 316(a)(5) (establishing parties’ ability to take “discovery

of relevant evidence”); id. § 316(a)(8) (establishing parties’

ability to present “factual evidence and expert opinions” to

support their arguments); id. § 318 (“[T]he [PTAB] shall

issue a final written decision with respect to the patentability

of any patent claim challenged by the petitioner . . . .”).

But because the government was not a “party” to the IPR

proceeding concerning the ’688 Patent, the proceeding here

was not a channel (i) disclosure. See 31 U.S.C.

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 23

§ 3730(e)(4)(A)(i). Valeant contends that the government

was a party to the IPR because the Director of the PTO is

charged with determining whether an IPR should proceed

and is permitted to participate in an appeal of a PTAB

decision—procedural features that suggest the PTO is acting

on behalf of the United States. We disagree. That the

Director of the PTO decides whether an IPR should be

instituted, see 35 U.S.C. § 314(a), and may adjudicate claims

raised in the IPR as a member of the PTAB, see id. § 6(a),

does not transform the PTO into a “party” to the IPR

proceeding. A “party” is “[o]ne by or against whom a

lawsuit is brought; . . . [a] Litigant.” Party, Black’s Law

Dictionary (11th ed. 2019); see Allergan, 46 F.4th at 999.

The government did not participate as a litigant in the IPR

challenging the ’688 Patent. See GeneriCo, 2017 WL

2211672, at *1, 3–6, 21 (referring to the “parties” as the

petitioner and patent owner).

Valeant also contends that the IPR qualifies under

channel (ii) as an “other Federal . . . hearing.” Again, we

disagree. The IPR’s primary function was not investigative

in the sense of conducting a “fact-finding or investigatory

process ‘to obtain information.’” Allergan, 46 F.4th at 998

(emphasis removed) (quoting Schindler, 563 U.S. at 410). It

was adjudicatory—its purpose was to render a decision

between Valeant and GeneriCo as to the obviousness or

novelty of the ’688 Patent through a trial-like federal

administrative hearing. Moreover, as we emphasized in

Allergan, an important demarcation between channel (i) and

channel (ii) disclosures is whether the proceeding is ex parte

or adversarial. Id. at 999. Here, the IPR was without

question adversarial. To conclude that an adversarial,

adjudicatory, federal administrative hearing before the

PTAB in which the government was not a party nevertheless

24 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

qualifies under channel (ii) as an “other Federal . . . hearing”

would render the government-as-a-party requirement in

channel (i) a nullity. As Allergan noted, “[i]t is our duty to

give effect, if possible, to every clause and word of a

statute.” Allergan, 46 F.4th at 999 (alteration in original)

(internal quotation marks omitted) (quoting Duncan v.

Walker, 533 U.S. 167, 174 (2001)). Accordingly, we

conclude that the IPR proceeding invalidating the ’688

Patent was not a disclosure occurring in a specified channel.

Finally, Valeant contends that the Law360 article and

Brunner and Marakhouski studies are qualifying “news

media” disclosures under channel (iii). See 31 U.S.C.

§ 3730(e)(4)(A)(iii). Silbersher does not meaningfully

challenge this argument. We need not resolve Valeant’s

contention because, as we explain below, the Law360 article

and the Brunner and Marakhouski studies do not disclose

“substantially the same . . . allegations or transactions” as

Silbersher’s claims.

In sum, we hold that the disclosures in the IPR

proceeding at issue here did not constitute a disclosure

occurring within a specified channel. The prosecution

histories of the ’344, ’688, and Otterbeck Patents were

disclosures in the second channel. See Allergan, 46 F.4th at

997–99. And we assume without deciding that the Law360

article and the Brunner and Marakhouski studies were

disclosures occurring within the third channel.

B.

We next consider whether the qualifying disclosures

reveal “substantially the same . . . allegations or

transactions” as Silbersher’s qui tam action. We have not

yet interpreted the “substantially the same” prong of the

public disclosure bar as revised by Congress in its 2010

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 25

amendments to the FCA. Compare 31 U.S.C.

§ 3730(e)(4)(A) (2010), with id. (1986). In the previous

version of the Act, the public disclosure bar applied when a

relator’s allegations were “based upon” a prior public

disclosure. See id. (1986).

Ordinarily, Congress’s decision to change “based upon”

to “substantially the same as” would indicate the two phrases

have different meanings. See Rumsfeld v. F. for Acad. &

Institutional Rts., Inc., 547 U.S. 47, 57–58 (2006); Stone v.

INS, 514 U.S. 386, 397 (1995). Here, however, the change

aligns with our caselaw interpreting the previous version of

the Act. Under the pre-2010 version of the FCA, our circuit

interpreted “based upon” to mean “substantially similar to.”

See generally Mateski, 816 F.3d at 573 (“Under our case

law, for a relator’s allegations to be ‘based upon’ a prior

public disclosure, ‘the publicly disclosed facts need not be

identical with, but only substantially similar to, the relator’s

allegations.’” (emphasis added) (quoting United States ex

rel. Meyer v. Horizon Health Corp., 565 F.3d 1195, 1199

(9th Cir. 2009)); see also United States ex rel. Lujan v.

Hughes Aircraft Co., 243 F.3d 1181, 1189 (9th Cir. 2001).

Thus, as we suggested in Allergan, we conclude that

Congress re-enacted its prior law in clearer terms by

replacing “based upon” with “substantially the same as,”

leaving our precedent interpreting that phrase undisturbed.

See Allergan, 46 F.4th at 996 n.5; Mateski, 816 F.3d at 569

n.7, 573 n.14.

Guided by our precedent interpreting “based upon,” we

next ask whether “substantially the same allegations or

transactions . . . alleged in [Silbersher’s] action or claim

were publicly disclosed.” 31 U.S.C. § 3730(4)(A). We have

recognized a distinction between an “allegation” and a

“transaction” for purposes of the public disclosure bar. An

26 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

allegation refers to a prior “direct claim of fraud,” while a

“transaction” refers to the disclosure of “facts from which

fraud can be inferred.” Mateski, 816 F.3d at 571 (endorsing

the definition adopted in Springfield Terminal, 14 F.3d at

653–54).

As the parties acknowledge, none of the public

disclosures makes a direct claim that Valeant committed

fraud. We instead turn to the broader question: whether the

qualifying disclosures reveal “facts from which fraud can be

inferred.” The Mateski court explained that “[I]f X + Y = Z,

Z represents the allegation of fraud and X and Y represent

its essential elements. In order to disclose [a] fraudulent

transaction publicly, the combination of X and Y must be

revealed, from which readers or listeners may infer Z, i.e.,

the conclusion that fraud has been committed.” Mateski, 816

F.3d at 571 (first alteration in original) (quoting United

States ex rel. Found. Aiding the Elderly v. Horizon W., Inc.,

265 F.3d 1011, 1015 (9th Cir.), amended on denial of reh’g,

275 F.3d 1189 (9th Cir. 2001)). In the Mateski formula, the

variables X and Y stand for the fundamental elements of

fraud: “a misrepresented state of facts and a true state of

facts.” Id. (quoting Horizon, 265 F.3d at 1015); see also

Amphastar Pharms. Inc. v. Aventis Pharma SA, 856 F.3d

696, 704 (9th Cir. 2017) (“If enough of the underlying facts

making up the elements of fraud are disclosed, the [public

disclosure] bar applies.”).

Applying this framework, we conclude that the

qualifying public disclosures here do not disclose a

combination of facts sufficient to permit a reasonable

inference of fraud. To refresh, Silbersher’s qui tam

complaint alleges that (1) Valeant “intentionally withheld

material information” demonstrating that Apriso’s

effectiveness without food was obvious from prior art (the

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 27

Brunner and Marakhouski studies) when Valeant filed the

’688 Patent application; (2) Valeant’s claims in the ’688

Patent prosecution directly contradicted its claims in the

earlier ’344 Patent prosecution that taking mesalamine with

food made the drug more effective; (3) the ’688 Patent was

invalidly obtained because Valeant was aware that the

Otterbeck Patents were themselves invalid based on prior art

and vulnerable to challenge; and (4) by fraudulently

obtaining the ’688 Patent, Valeant prolonged its monopoly

of Apriso and charged the government an “artificially high

price for the drug,” all while falsely certifying that the drug

price was “fair and reasonable.”

Translating Silbersher’s allegations into the formula, X

stands for the misrepresented facts—Valeant’s claim that it

was not obvious that Apriso would be effective without food

and that the Otterbeck Patents for Apriso’s delayed-release

formula were original discoveries. And Y stands for the

alleged truth—it was obvious that Apriso can be effectively

administered without food and that the Otterbeck Patents

were invalidly obtained. The scattered disclosures possibly

reveal both X and Y, but never the combination of the two.

See Mateski, F.3d at 571. Valeant claimed in the ’688 Patent

that Apriso’s effectiveness without food was not obvious.

Nothing in the prosecution history of that patent, however,

reveals the alleged truth—that it was obvious. In

mathematic terms, the ’688 Patent discloses X but not Y.

The ’344 Patent, meanwhile, has the opposite problem. In

that patent prosecution, Valeant claimed it was obvious that

Apriso would be effective without food. But the ’344 Patent

application contains no misrepresentation, thus disclosing Y

without X. To prove fraud under the FCA, the relator must

demonstrate that a person “knowingly present[ed]” a

“fraudulent claim for payment” to the federal government.

28 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

31 U.S.C. § 3729(a)(1)(A). Silbersher’s qui tam allegations

provide a critical fact necessary for scienter: Falk and

Valeant took conflicting positions in their patent

prosecutions of the ’344 and ’688 Patents. Neither of these

patent prosecutions, or any other disclosure, reveals that fact.

The Law360 article states that “two claims in the [’688

Patent] were obvious based on a collection of references that

included press releases from [Valeant] about clinical drug

trials and some academic papers.” But the Law360 article

does not disclose—nor even imply—that Valeant knowingly

withheld information when applying for the ’688 Patent.

Similarly, the Brunner and Marakhouski studies (and

Valeant’s involvement in those studies) reinforce that

Valeant understood the obviousness of Apriso’s food-free

effectiveness. The studies do not, however, say anything

about Valeant’s application for the ’688 Patent. The Law360

article and the medical studies thus reveal Y and not X.

Finally, none of the qualifying disclosures—the ’688 and

’344 Patents, the Law360 article, or the scientific studies—

makes any mention of the Otterbeck Patents, much less

disclose anything about the validity of these patents. Valeant

allegedly misrepresented to the PTO that Apriso’s delayed-

release formula underlying the Otterbeck Patents was an

original discovery. The patent prosecutions, however, do

not reveal the alleged truth: the patents were invalidly

obtained. Once again, the Otterbeck Patents disclose X but

not Y.

In sum, the scattered qualifying public disclosures each

contain a piece of the puzzle, but none shows the full picture.

In his qui tam action, Silbersher filled the gaps by putting

together the material elements of the allegedly fraudulent

scheme. See Mateski, 816 F.3d at 571.

SILBERSHER V. VALEANT PHARMACEUTICALS INT’L 29

Valeant contends that our decision in Amphastar should

guide us to a different conclusion. In Amphastar, we

affirmed the dismissal of FCA claims asserted against a drug

manufacturer under the 1986 version of the public disclosure

bar. Amphastar, 856 F.3d at 711. Amphastar, a generic drug

manufacturer, filed an application seeking the Food and

Drug Administration’s approval to market a generic blood

thinner. Id. at 701. The patent holder, Aventis, sued in

federal district court for patent infringement. Id. at 701–02.

In its amended answer and counterclaim, Amphastar

asserted that Aventis had obtained an invalid patent through

“misrepresentations,” alleged that Aventis “attempted to

maintain or obtain a monopoly” over others, and claimed

that Aventis “wrongfully derive[d] income” from this

conduct. Id. at 704. After Amphastar succeeded in

invalidating the patent, it filed a qui tam action against

Aventis alleging the patentee had “obtained an illegal

monopoly” over the drug “and then knowingly overcharged

the United States.” Id. at 702.

In upholding the dismissal of the qui tam suit, we

grounded our decision on several factors that distinguish it

from the present case. There, dismissal was based on the

1986 public disclosure bar, which prevented qui tam claims

based upon public disclosures “in a criminal, civil, or

administrative hearing” and did not require, as now, that the

government be a party to the hearing. 31 U.S.C.

§ 3730(e)(4)(A) (1986); see Amphastar, 702 856 F.3d at 702

n.7. The Amphastar court also held that the prior public

disclosure—the amended answer and counterclaim—“made

nearly identical allegations” of fraud as the qui tam

complaint. Id. at 704 (emphasis added). Here, no party

contends that any public disclosure has made a direct claim

of fraud. Finally, we concluded that Amphastar’s prior

30 SILBERSHER V. VALEANT PHARMACEUTICALS INT’L

amended answer and counterclaim also revealed sufficient

facts from which fraud could be inferred, noting all the

material facts had been disclosed in that filing except the

claim of overcharging the government. Id. at 704–05.

Unlike in Amphastar, no public disclosure here, individually

or in combination, establishes facts from which fraud could

be inferred. It is the combination of disclosures and conduct

alleged in Silbersher’s complaint that bring together the

constituent elements of fraud.

We therefore determine that the public disclosure bar is

not triggered here. In concluding that prior public

disclosures did not reveal “substantially the same”

allegations or transactions as described in Silbersher’s qui

tam complaint, we make no statement about the sufficiency

of the pleadings. The Federal Rules require fraud to be

pleaded with particularity, see Fed. R. Civ. P. 9(b), and the

district court did not address whether Silbersher’s

allegations meet that requirement. We remand this case for

the district court to consider whether Silbersher’s qui tam

action may proceed.

III. CONCLUSION

We reverse the district court’s order dismissing

Silbersher’s action and remand the case for further

proceedings consistent with this opinion.