Amicus Curiae Brief — Oil States Energy Servs., LLC v. Greene's Energy Grp., LLC, 138 S. Ct. 350 (2017) (No. 16-712)

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[Supreme Cour. UE

OCT 30 2017

No. 16-712 OFFICE OF THE CLERK _|

Hn the Supreme Court of the Gnited States

OIL STATES ENERGY SERVICES, LLC, PETITIONER

Vv.

GREENE’S ENERGY GROUP, LLC, ET AL.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

—_«—

BRIEF FOR ~.SSOCIATION FOR ACCESSIBLE

MEDICINES AS AMICUS CURIAE

SUPPORTING RESPONDENTS

JEFFREY K. FRANCER

ASSOCIATION FOR

ACCESSIBLE MEDICINES

601 New Jersey Ave., N.W.

Washington, D.C. 20001

ERIC D. MILLER

Counsel of Record

PERKINS COIE LLP

1201 Third Ave., Suite 4900

Seattle, WA 98101

(206) 359-8000

BRIAN SAMUELSON emiller@perkinscoie.com

PERKINS COIE LLP

1120 NW Couch St.

Portland, OR 97209

TABLE OF CONTENTS

Page

Bentereent OF CamGtet GHBT UID nnn cesceccccesevscesvevsnnenisncssosnece scneresesienasennt 1

Summary of argument...................c.ccccccrsscssserssnrenseneesssessenssonsseens 3

PATIO secesseceeeevensensscosercossecemsonensanansuencsnioaectscsssncscepenecneseenenens 5

A. Inter partes review governs claims derived

from a federal regulatory SChEME..........:<..c:c-:ceeseeeees 6

B. Inter partes review is essential to the limited

regulatory objective of eliminating invalid

PALENES .........cccrererrerereeerccnrerenrsensserssnennsenrsenssaanesssusersnsscenaees 9

1. The PTO often issues invalid patents............-...0+ 10

2. Congress established inter partes review

to weed out invalid patents quickly and

eT cbeMt DY ......0ccercsnsseessncceccvessceneesconcescsosnsererees seesanensoes 11

3. Inter partes review accelerates the process

of weeding out invalid patents, while

retaining significant protections for valid

(. Eliminating invalid patents is necessary to

permit patient access to more affordable generic

and biosimilar MCCICINES .............c0sceererersceeeereeneeerees 15

1. The availability of generic and biosimilar

medicines saves money and provides greater

patient access to critical Medicines .............000 16

2. Invalid patents can block the introduction of

more affordable generic and biosimilar

IID casennecetetnesteceisionrceinninrernannaiettetintennneiasennis 18

ON i i eesiaaaminannnimiaeiiaaands

(I)

Il

TABLE OF AUTHORITIES

Cases: Page

Albertson v. FCC, 182 F.2d 397 (D.C. Cir. 1950) ...........0+. 7

Association for Molecular Pathology v. Myriad

Genetics, Inc., 133 S. Ct. 2107 (20138) ...........ceseeenereenees 18

Astra Aktiebolag v. Andrx Pharms., Inc., 222 F.

Supp. 2d 423 (S.D.N.Y. 2002)...............ccssessssserssernensennes 22

Barr Labs., Inc., In re, 980 F.2d 72 (D.C. Cir.),

cert. denied, 502 U.S. 906 (1991) ... ‘atau aa

B&B Hardware, Inc. v. Hargis fete. yee 135 Ss.

Ct. 1293 (2015) ... ae saivtttitinincienslan

Bell Atl. Corp. v. Twombly, 550 U.S. ‘544 (2007) ietieapevenearonn 13

Caraco Pharm. Labs., Ltd. vy. Novo Nordisk A/S,

I ee 18, 19, 20

Crowell v. Benson, 285 U.S. 22 (1982) ............-cscerrereneneee 5,6

Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131

St ieshinensepeustisininsnisiqenntiaemenineiengmiinanttienn 4, 8, 9, 12, 13

Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661

IE ieaecchsspsineititatpinergnivtdaialombieehlaeiecipababammmtcenenineinnenstsneann 16

FTC v. Actavis, Inc., 133 S. Ct. 2223 (2013) .............-0-e000 2

Gagnon v. United States, 193 U.S. 451 (1904) ..........ec0 7

a S.A. v. Nordberg, 492 U.S. 33

(1989).... = ceaapeehnataser

Hahn v. wien: 392 F.2d 1028 (Fed. Cir. 1989)... Lihieteesiadanams 7

Hazel-Atias Glass Co. v. Hartford-Empire Co.,

a Ba ecrrccctenseenscteimme 9

Kappos v. Hyatt, 566 U.S. 431 (2012) ...........c0ccceceeseeeereene 14

Koninklijke Philips Elecs. N.V. v. Cardiac Sci.

Operating Co., 590 F.3d 1326 (Fed. Cir. 2010).............. 7

Lear, Inc. v. Adkins, 395 U.S. 653 (1969) .........ccececesees 4, 10

Ill

Cases—continued: Page

Lujan v. Defenders of Wildlife, 504 U.S. 555

a cee ieinclios 13

Mayo Collaborative Servs. v. Prometheus Labs.,

a eee 18

Murray’s Lessee v. Hoboken Land &

Improvement Co., 59 U.S. (18 How.) 272 (1856)........... 5

Omeprazole Patent Litig., In re, 258 F. ee

221 (S.D.N.Y. 2001)... conten’ poinaianloaeel

Precision Instrument Myo. Co. v. ie ‘Maint.

Mach. Co., 324 U.S. 806 (1945) ..........c--crecrsssssrereeseseesers 9

Sandoz Inc. v. Amgen Inc., 137 S. Ct. 1664

eri cetasinsisssakindttisianiinatietpeteanscieceieimiasticouiastacnibcniiainiiniindes 2, 16, 20

Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225

Ge ic cenrnsccterennensemnninnsinncnutinienistsiimetcesiarimeminemanennsinemnet 3,6

Stern v. Marshall, 564 U.S. 462 (2011) ........--cce-eeee: 3, 5, 6,9

TC Heartland LLC v. Kraft Foods Grp. Brands

pe eg 5 Te 2

Thomas v. Union Carbide Agric. Prods. Co., 473

Sy eeiesstanatsinsieriasstiictesetennanesmmshianensininaduanienmtrcnianeens 9

United Gas Improvement Co. v. Callery Props.,

Ee 7

United States v. Denedo, 556 U.S. 904 (2009)..................... 7

Constitution, statutes, and regulations:

es es RI BG eticcieeccernintictersiniveineomneimemnnennmnibaish 6

Fs a CN, Ci irccieesciiinininsssinrnrsiccnsciiamaiianiahitn 3, 13

Biologics Price Competition and Innovation Act,

Pub. L. No. 111-148, Tit. VII, Subtit. A, 124

IV

Statutes and regulations—continued: Page

Drug Price Competition and Patent Term

Restoration Act of 1984, Pub. L. No. 98-417, 98

ee 16, 19, 22

Leahy-Smith America Invents Act, Pub. L. No.

NS) OL 2, 7, 8, 11, 12

Optional Inter Partes Reexamination Procedure

Act of 1999, Pub. L. No. 106-113, Tit. IV,

Eee 8

nN ER AE ee 18

21 U.S.C. 355()) ... a eceaae

21 U.S.C. 355())2\A)(i). i a cauesaseauianannl 17

te, ee

ee aT.

Si OE, snes 19

21 U.S.C. B55GM2A) (Vi) TIT) .ecceccnescseseeccccsssesessescecenssseseees 19

21 U.S.C. 356(j(2)(A)(VEI)TV) -sececcecone masieceinnvesie 19

21 U.S.C. 85562) BYGVID) -.-scscececcesesecessssssnevssseseseneeseeenee 19

i aictcsceecneseceniensincnssinsniiti 19

eT 7

RE ee Eh EE 19

ee aiisttirricnitnicsnininesmnintintiinnrnmminamsnnetnnesian ae

i EE aS RE cee andee a aetna or 8

RE ae OCS

V

Statutes and regulations—continued: Page

Be ts I acid eecncntinitnsenenesicetenalinilnminemnemanteniociid 15

NN arhicricnslatnetnienpstamensidentioneeniamsccchundiumnabetink 15

es CE sintiieesuciincniesenipcsinisinisioinptiniigmemnentnintennicammenenis 15

4 Se:

EET Ee STN D a RT ie rar OMe EE 14

Bs I ininicncinnsicanisiciiesepinbeeniseeadiibeuinaiinneiniapiiiiabiins 14

I csi cetiiencennsaiieteniedeensiinnimnintintaigainantiiils 14

Be Es TE icieiniseisasianndesnstopeeenndiieninngdasonsinineenpdanennineatiiiatinis 14

nso cnenensenreenrneisentsinienebinseiiadiineniineadeniantnabensiniariaic ae

I italien cuieeeeneneneenapiinaistonasiadeiginmmpadaniains 8, 15

A RTT irs cesccnsinseninaininnniinianeimabanienaiinnienetanaite 17

ak a aetaraetetellletieeieienleanldeaealt 20

TI ccs iciseriaisesrieassiesisspieninimensiiitmeesisabsdisisaiiibaiiaine 20

I oincecnsssieciniciciscidentnnennnedininnieninininabinemnaianeinins 13

er IE reteninsdercehiiontecliieseihscesseipioesonisemnenenianapeiemiiatienagia 14

Miscellaneous:

John R. Allison et al., Understanding the

Realities of Modern Patent ——e 92 Tex.

L. Rev. 1769 (2014)...... amasialia a ae

Association for cocaine Medicines, ats

Drug Access & Savings in the U.S. (2017) ........000000+ 17

Michael A. Carrier, Post-Grant Opposition: A

Proposal and a Comparison to the America

Invents Act, 45 U.C. Davis L. Rev. 103 (2011)............ 10

RUS CUI I, Gi BF aenesissecintininticcnscnmrnenicctannaninnmminnasts 11,12

VI

Miscellaneous—continued: Page

Examining Issues Related to Competition in the

Pharmaceutical Marketplace: A Review of the

FTC Report, “Generic Drug Entry Prior to

Patent Expiration”: Hearing Before the

Subcomm. on Health of the H. Comm. on

Energy and Commerce, 107th Cong. (2002)................ 21

Michael D. Frakes & Melissa F. Wasserman, Does

the U.S. Patent and Trademark Office Grant

Too Many Bad Patents?: Evidence from a

Quasi-Experiment, 67 Stan. L. Rev. 613 (2015)......... 10

Daniel I. Gorlin, Staving Off Death: A Case Study

of the Pharmaceutical Industry’s Strategies to

Protect Blockbuster Franchises, 63 Food &

I 21, 22, 23

H.R. Rep. No. 98, Pt. 1, 112th Cong., Ist Sess.

SE iiss ierdbcninhsasibapuiapsiniideassninnpeniicnieniegntitniiimvciieideaes 2,3, 4, 12, 14

H.R. Rep. No. 120, 107th Cong., 1st Sess. (2001)............. 11

Aaron S. Kesselheim et al., Extensions of

Intellectual Property Rights and Delayed

Adoption of Generic Drugs: Effects on

Medicaid Spending, 25 Health Affairs 1637

Cynthia Koons, Guarding Big Pharma’s Crown

Jewel, Bloomberg Businessweek, Sept. 11,

SINT ceaectanicinasianiasstenailainiansnaaiicndinadighehsionssiiaisnebennientinesmnvesaenvesees 23

U.S. Food & Drug Admin., Generic Competition

and Drug Prices (May 13, 2015)..........0sssesereserereseones 18

U.S. Patent and Trademark Office, Performance

and Accountability Report, Fiscal Year 2016

Jn the Supreme Court of the United States

No. 16-712

OIL STATES ENERGY SERVICES, LLC, PETITIONER

Vv.

GREENE’S ENERGY GROUP, LLC, ET AL.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR ASSOCIATION FOR ACCESSIBLE

MEDICINES AS AMICUS CURIAE

SUPPORTING RESPONDENTS

INTEREST OF AMICUS CURIAE*

The Association for Accessible Medicines (AAM),

formerly the Generic Pharmaceutical Association, is a

* No counsel for a party authored this brief in whole or in part,

and no person other than amicus or its counsel has made a mone-

tary contribution intended to fund the preparation or submission

of the brief. The parties have entered blanket consents to the

filing of amicus briefs, and copies of their letters of consent are

on file with the Clerk.

(1)

Z

nonprofit, voluntary association representing nearly

100 manufacturers and distributors of finished generic

drug products and bulk active pharmaceutical ingredi-

ents, as well as suppliers of other goods and services

to the generic pharmaceutical industry. AAM’s mem-

bers provide consumers with generic and biosimilar

medicines that are just as safe and effective as their

brand-name counterparts, but substantially more af-

fordable. Generic drugs account for roughly 89% of all

prescriptions dispensed in the United States but only

26% of total drug costs. Over the last decade, they

have generated $1.67 trillion in savings for patients

and taxpayers.

AAMW’s core mission is to improve the lives of con-

sumers by providing timely access to affordable medi-

cines. To further that mission, AAM regularly partic-

ipates in litigation as amicus curiae. See, e.g., Sandoz

Ine. v. Amgen Inc., 137 S. Ct. 1664 (2017); TC Heart-

land LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct.

1514 (2017); FTC v. Actavis, Inc., 133 S. Ct. 2223

(2013).

This case involves the inter partes review proce-

dure, an important tool established by Congress in the

Leahy-Smith America Invents Act, Pub. L. No. 112-

29, 125 Stat. 284, for efficiently weeding out invalid

patents. The America Invents Act was designed to

address “a growing sense that questionable patents

are too easily obtained and are too difficult to chal-

lenge.” H.R. Rep. No. 98, Pt. 1, 112th Cong., Ist Sess.

39 (2011) (Howse Report). In creating inter partes re-

view, Congress sought “to establish a more efficient

and streamlined patent system that will improve pa-

tent quality and limit unnecessary and counterproduc-

3

tive litigation costs.” Jd. at 40. Because manufactur-

ers of brand-name prescription drugs can and fre-

quently do use patents of dubious validity to prevent

the introduction of competing generics, inter partes

review is an important continuation of Congress’

longstanding effort “to get generic drugs into the

hands of patients at reasonable prices—fast.” Jn re

Barr Labs., Inc., 930 F.2d 72, 76 (D.C. Cir.), cert. de-

nied, 502 U.S. 906 (1991). The resolution of this case is

therefore of particular importance to AAM and its

members.

SUMMARY OF ARGUMENT

Non-Article III tribunals may adjudicate cases in

which “the claim at issue derives from a federal regu-

latory scheme, or in which resolution of the claim by

an expert Government agency is deemed essential to a

limited regulatory objective within the agency’s au-

thority.” Stern v. Marshall, 564 U.S. 462, 490 (2011).

Inter partes review involves claims that qualify under

both components of that test.

First, patent rights “exist only by virtue of stat-

ute,” and the patent system is a federal regulatory

scheme entrusted to the expert administration of the

United States Patent and Trademark Office (PTO).

Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 229

n.5 (1964). It is undisputed that Congress may assign

the issuance of patents to an administrative agency,

and it follows that Congress may also give the agency

authority to reconsider its decisions and correct its

own mistakes by revoking patents that should not

have issued. Inter partes review, which allows the

PTO to take “a second look at an earlier administra-

4

tive grant of a patent,” does exactly that. Cuozzo

Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2144 (2016).

Second, inter partes review is essential to the lim-

ited regulatory objective of eliminating invalid patents

that block valuable products like low-cost generic

medicines. Patents are issued “in an ex parte proceed-

ing, without the aid of the arguments which could be

advanced by parties interested in proving patent inva-

lidity.” Lear, Inc. v. Adkins, 395 U.S. 653, 670 (1969).

Faced with heavy caseloads and limited time and re-

sources to review patent applications, the PTO inevi-

tably issues some patents it should not. Inter partes

review was established to “provid[e] a more efficient

system for challenging patents that should not have

issued.” House Report 39-40. Compared to litigation

in federal court, the process offers the benefits of a re-

laxed standing requirement, more focused discovery,

streamlined evidentiary and hearing procedures, and

rapid deadlines for adjudication. At the same time, it

retains significant safeguards to protect the holders of

valid patents.

An efficient system for challenging invalid patents

is particularly important to the continued provision of

low-cost, high-quality generic and biosimilar medi-

cines, which are frequently denied to patients due to

invalid patents. Generic drugs are therapeutically

identical to their brand-name counterparts, and they

offer significant savings to patients and the taxpayers.

None of the benefits of generic medicines can be real-

ized, however, until after the brand-name manufactur-

er’s patent claims—even dubious ones—have been re-

solved. Delay in removing improperly awarded pa-

tents therefore leads to substantially higher drug

5

costs to our Nation. A speedy and efficient mechanism

to challenge improvidently granted patents is essen-

tial to the timely provision of generic and biosimilar

medicines.

ARGUMENT

This Court has long recognized that “there are mat-

ters, involving public rights, which may be presented

in such form that the judicial power is capable of act-

ing on them, and which are susceptible of judicial de-

termination, but which [Cjongress may or may not

bring within the cognizance of the courts of the United

States, as it may deem proper.” Murray’s Lessee v.

Hoboken Land & Improvement Co., 59 U.S. (18 How.)

272, 284 (1856). Public rights—those rights “arising

‘between the Government and persons subject to its

authority in connection with the performance of the

constitutional functions of the executive or legislative

departments’”—are created by Congress, and Con-

gress may commit their adjudication to administrative

tribunals. Stern, 564 US. at 489 (quoting Crowell v.

Benson, 285 U.S. 22, 50 (1982)); see B&B Hardware,

Inc. v. Hargis Indus., Inc., 1385 8. Ct. 1293, 1316 (2015)

(Thomas, J., dissenting) (noting that administrative

agencies may “function as courts * * * with respect

to claims involving public or quasi-private rights”).

Under this “public rights doctrine,” non—Article III

tribunals may adjudicate cases in which “the claim at

issue derives from a federal regulatory scheme, or in

which resolution of the claim by an expert Govern-

ment agency is deemed essential to a limited regulato-

ry objective within the agency’s authority.” Stern, 564

U.S. at 490. Inter partes review involves claims that

qualify under both components of that test.

6

A. Inter partes review governs claims derived from

a federal regulatory scheme

Patent rights are public rights because they are de-

rived from a federal regulatory scheme. As this Court

has observed, patent rights “exist only by virtue of

statute,” and they can be conferred only by the gov-

ernment. Sears, 376 U.S. at 229 n.5. Unlike “a parcel

of land” (Pet. Br. 29), they do not exist until estab-

lished by Congress or an agency acting on its behalf.

Congress may therefore commit their adjudication to

an agency.

In the exercise of its Article I power “[t]o promote

the Progress of Science and useful Arts, by securing

for limited Times to Authors and Inventors the exclu-

sive Right to their respective Writings and Discover-

ies,” U.S. Const. art. I, § 8, cl. 8, Congress has directed

the PTO to approve a patent application if “it appears

that the applicant is entitled to a patent” under stand-

ards prescribed by law, 35 U.S.C. 131. By empower-

ing the PTO to grant patents, Congress devised an

“expert and inexpensive method for dealing with a

class of questions of fact which are particularly suited

to examination and determination by an administra-

tive agency specially assigned to that task.” Stern,

564 U.S. at 494 (quoting Crowell, 285 U.S. at 46); see

B&B Hardware, 135 S. Ct. at 1317 (Thomas, J., dis-

senting) (“Because [trademark] registration is merely

a statutory government entitlement, no one disputes

that the [PTO] may constitutionally adjudicate a regis-

tration claim.”).

Petitioner does not dispute that Congress may

permissibly assign to the PTO the authority to issue a

patent in the first instance. It follows that Congress

7

may also allow the PTO to revoke a patent if it deter-

mines that the issuance of that patent was erroneous.

It has long been recognized that “(t]he power to re-

consider is inherent in the power to decide.” Albert-

son v. FCC, 182 F.2d 397, 399 (D.C. Cir. 1950). For

that reason, this Court has held that courts have an

inherent power to correct their own mistakes. See,

e.g., Gagnon v. United States, 193 U.S. 451, 456 (1904);

see also United States v. Denedo, 556 U.S. 904, 912-913

(2009). And “[aJn agency, like a court, can undo what

is wrongfully done by virtue of its order.” United Gas

Improvement Co. v. Callery Props., Inc., 382 U.S. 223,

229 (1965).

For decades, the PTO has exercised the authority

to reconsider its patenting decisions in appropriate

circumstances. Before the America Invents Act, when

more than one party sought to patent the same subject

matter, the PTO conducted an “interference” proceed-

ing to resolve the competing claims and determine

which one was entitled to priority. 35 U.S.C. 135(a)

(2006); see Koninklijke Philips Elecs. N.V. v. Cardiac

Sci. Operating Co., 590 F.3d 1326, 1334 (Fed. Cir.

2010). Interferences were not limited to competing

applications but could be conducted whenever an ap-

plicant sought a patent that would “interfere with any

pending application, or with any unexpired patent.”

35 U.S.C. 135 (1952) (emphasis added). And for more

than 70 years, the statute provided that if the agency

determined that the applicant had priority, the pro-

ceeding could result in the “cancellation of the claims

involved” in the already-issued patent. Ibid.; see, e.g.,

Hahn v. Wong, 892 F.2d 1028, 1030 (Fed. Cir. 1989)

8

(describing procedure for interference between an ap-

plication and a patent).

In addition, since 1980, the PTO’s ex parte reexam-

ination procedure has allowed “({aJny person at any

time” to “file a request for reexamination” of an issued

patent by the PTO. 35 U.S.C. 302. If the PTO identi-

fies “a substantial new question of patentability,” it

can reexamine the patent and revoke it if appropriate.

35 U.S.C. 303(a); see Cuozzo, 136 S. Ct. at 2137. And

in 1999, Congress established an inter partes reexami-

nation procedure under which third parties had the

right to participate in the reexamination proceedings

and challenge the validity of a patent. See Optional

Inter Partes Reexamination Procedure Act of 1999,

Pub. L. No. 106-113, Tit. IV, Subtit. F, 113 Stat.

1501A-567. That procedure is the direct antecedent of

the inter partes review process established by the

America Invents Act.

Petitioner attempts to distinguish those traditional

procedures, but its efforts are unavailing. Petitioner

points out (Br. 49-50) that interference decisions are

subject to judicial review, but so are the results of in-

ter partes review. 35 U.S.C. 319. Petitioner also ob-

serves (Br. 50) that ex parte reexamination is not “an

adversarial proceeding with all the trappings of litiga-

tion.” That may be true, but petitioner does not ex-

plain why a relatively informal procedure for recon-

sidering an agency’s decision is constitutionally per-

missible while one that offers greater procedural pro-

tections to affected parties is not.

Whether it takes place in an interference proceed-

ing, through ex parte reexamination, or through inter

partes review, the PTO’s revocation of a patent does

9

not entail constitutionally impermissible adjudication.

It does not resolve questions of whether a patent has

been infringed. Instead, it is merely an exercise of the

agency’s inherent power to correct its own mistakes

and to take “a second look at an earlier administrative

grant of a patent.” Cuozzo, 136 S. Ct. at 2144. For

that reason, the claims involved are “so closely inte-

grated into a public regulatory scheme as to be a mat-

ter appropriate for agency resolution.” Granfinanci-

era, S.A. v. Nordberg, 492 U.S. 38, 54 (1989) (quoting

Thomas v. Union Carbide Agric. Prods. Co., 473 U.S.

568, 594 (1985)).

B. Inter partes review is essential to the limited

regulatory objective of eliminating invalid

patents

The inter partes review process is also “essential to

a limited regulatory objective within the agency’s au-

thority,” Stern, 464 U.S. at 490, namely, quickly and

cheaply eliminating patents that were improvidently

granted and are blocking valuable technology from

reaching the market. This Court has recognized that

the “possession and assertion of patent rights are ‘is-

sues of great moment to the public,’” and that “[t]he

far-reaching social and economic consequences of a pa-

tent * * * give the public a paramount interest in

seeing that patent monopolies * * * are kept within

their legitimate scope.” Precision Instrument Mfg.

Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 815-816

(1945) (quoting Hazel-Atlas Glass Co. v. Hartford-

Empire Co., 322 U.S. 238, 246 (1944)). The PTO fre-

quently issues invalid patents, and Congress estab-

lished the inter partes review process to remedy those

10

mistakes. Inter partes review simplifies and acceler-

ates the process of weeding out invalid patents, while

retaining significant protections for valid patents.

1. The PTO often issues invalid patents

This Court has observed that a patent “simply rep-

resents a legal conclusion reached by the Patent Of-

fice” that is “predicated on factors as to which reason-

able men can differ widely” and reached “in an ex

parte proceeding, without the aid of the arguments

which could be advanced by parties interested in prov-

ing patent invalidity.” Lear, Inc. v. Adkins, 395 U.S.

653, 670 (1969). Unfortunately, the examiners con-

ducting those ex parte proceedings have heavy case-

loads: In 2016, fewer than 9,000 patent examiners

were tasked with reviewing more than 660,000 patent

applications. U.S. Patent and Trademark Office, Per-

formance and Accountability Report, Fiscal Year

2016, at 15, 179 (2016) (PTO Report). On average, pa-

tent examiners have only about 20 hours to evaluate a

patent application, which requires reading the applica-

tion, searching for prior art, communicating with the

applicant, evaluating patentability, and writing up

their conclusions. Michael A. Carrier, Post-Grant Op-

position: A Proposal and a Comparison to the Ameri-

ca Invents Act, 45 U.C. Davis L. Rev. 103, 107 (2011).

It is no surprise, therefore, that the PTO frequently

issues patents later found to be invalid. See Michael

D. Frakes & Melissa F. Wasserman, Does the U.S. Pa-

tent and Trademark Office Grant Too Many Bad Pa-

tents?: Evidence from a Quasi-Experiment, 67 Stan.

L. Rev. 613, 615, 676 (2015) (describing consensus that

the PTO “is issuing too many invalid patents” and con-

11

cluding that “the Agency is in fact biased toward

granting patents”). Indeed, one recent study found

that federal courts hold challenged patents to be inva-

lid 43% of the time. John R. Allison et al., Under-

standing the Realities of Modern Patent Litigation, 92

Tex. L. Rev. 1769, 1801 (2014).

2. Congress established inter partes review

to weed out invalid patents quickly and

efficiently

Because the PTO will inevitably issue some patents

that it should not, a speedy and inexpensive process

for challenging patents of dubious validity is critical to

the health of the entire patent regime. Congress has

long recognized the need for an administrative mecha-

nism to review improvidently granted patents. See

H.R. Rep. No. 120, 107th Cong., 1st Sess. 3 (2001) (not-

ing that the 1980 creation of a reexamination process

was intended to “(i) settle validity disputes more

quickly and less expensively than litigation; (ii) allow

courts to refer patent validity questions to an agency

with expertise in both the patent law and technology;

and (iii) reinforce investor confidence in the certainty

of patent rights by affording an opportunity to review

patents of doubtful validity”). By 2011, when the

America Invents Act was passed, Congress had con-

cluded that the ex parte and inter partes reexamina-

tion procedures were “too lengthy and unwieldy to ac-

tually serve as an alternative to litigation when users

are confronted with patents of dubious validity.” 157

Cong. Rec. 12,992 (2011) (statement of Sen. Leahy).

And it noted “a growing sense that questionable pa-

tents are too easily obtained and are too difficult to

12

challenge.” House Report 39. As then-Senator Ses-

sions explained, the goal of the America Invents Act

was to “allow invalid patents that were mistakenly is-

sued by the PTO to be fixed early in their life, before

they disrupt an entire industry or result in expensive

litigation.” 157 Cong. Rec. at 3375 (statement of Sen.

Sessions); accord id. at 2844 (statement of Sen. Leahy)

(“The legislation also provides a modernized, stream-

lined mechanism for third parties who want to chal-

lenge recently issued, low-quality patents that should

never have been issued in the first place.”).

3. Inter partes review accelerates the process

of weeding out invalid patents, while

retaining significant protections for valid

patents

To accomplish its goal of “improving patent quality

and providing a more efficient system for challenging

patents that should not have issued,” Congress estab-

lished a streamlined process for challenging patents

through inter partes review. House Report 39-40; see

id. at 47; see also Cuozzo, 136 S. Ct. at 2143-2144 (de-

scribing features of inter partes review that make the

procedure “less like a judicial proceeding and more

like a specialized agency proceeding,” offering “a sec-

ond look at an earlier administrative grant of a pa-

tent”). The inter partes review process contains a

number of cost- and time-saving features designed to

allow the PTO to identify improvidently granted pa-

tents—and correct its own mistakes—quickly and effi-

ciently. Those benefits include

« A relaxed standing requirement. To chal-

lenge a patent in district court, the challenging

13

party must have Article III standing, which,

among other things, requires the party to have

suffered a concrete, particularized, and actual

or imminent “injury in fact.” Lujan v. Defend-

ers of Wildlife, 504 U.S. 555, 560 (1992). In con-

trast, inter partes review may be initiated by

any person who is not the owner of the patent

at issue. 35 U.S.C. 31l(a); see Cuozzo, 136

S. Ct. at 2143-2144 (“Parties that initiate the

proceeding need not have a concrete stake in

the outcome; indeed, they may lack constitu-

tional standing.”) That relaxed standing re-

quirement allows a prospective competitor—

such as a prospective manufacturer of a generic

drug—to resolve the validity of a blocking pa-

tent before devoting the substantial resources

necessary to develop a competing product.

That greatly increases the chance that invalid

patents will be quickly identified and eliminat-

ed.

Focused discovery. In contrast to the broad

discovery allowed in federal courts by the Fed-

eral Rules of Civil Procedure, discovery in inter

partes review proceedings is limited to the dep-

osition of witnesses submitting affidavits or

declarations and “what is otherwise necessary

in the interest of justice.” 35 U.S.C. 316(a)(5);

see 37 C.F.R. 42.51(b). The process thus avoids

“the potentially enormous expense of discov-

ery” associated with litigation. Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 559 (2007).

14

Streamlined evidentiary and hearing proce-

dures. Proceedings before the Board are most-

ly conducted through the submission of written

testimony and briefs. See 35 U.S.C. 316(a)(8).

Testimony to the Board must be presented in

the form of an affidavit. 37 C.F.R. 42.53(a).

Similarly, cross-examination must be submitted

in the form of a deposition transcript. /bid. The

parties are entitled to an oral hearing. 35

U.S.C. 316(a)(10).

Rapid deadlines for adjudication. An inter

partes review must be completed within one

year of when it is instituted. 35 U.S.C.

316(a)(11). The PTO may extend the deadline

only by six months, and only for good cause.

Ibid. According to the PTO’s annual Perfor-

mance and Accountability Report, the office has

succeeded in meeting the statutory deadlines.

PTO Report 71; compare House Report 45 (dis-

trict court litigation in patent cases is “often

costly and protracted”).

Decisions rendered by a panel of experts. I[n-

ter partes review is conducted before a three-

member panel consisting of specialized adminis-

trative patent judges appointed to the Patent

Trial and Appeal Board by virtue of their “com-

petent legal knowledge and scientific ability.”

35 U.S.C. 6(a), (c); 35 U.S.C. 316(c); see Kappos

v. Hyatt, 566 U.S. 431, 445 (2012) (noting that

“the PTO has special expertise in evaluating pa-

tent applications”). If the matter is not dis-

15

missed, the panel must issue a written decision.

35 U.S.C. 318(a).

Despite the efficiency of inter partes review, signif-

icant protections remain to protect legitimate patents.

For example, the PTO may grant a petition for inter

partes review only if the information presented in the

petition shows that “there is a reasonable likelihood

that the petitioner would prevail with respect to at

least 1 of the claims challenged”—a standard designed

to eliminate frivolous or meritless petitions. 35 U.S.C.

314(a). Similarly, a petitioner may not seek inter

partes review if it has previously filed a civil suit chal-

lenging the validity of the same claim, 35 U.S.C.

315(a)(1), or if it was served with a complaint alleging

infringement of the patent more than one year before,

35 U.S.C. 315(b). Moreover, the scope of inter partes

review is narrowly focused on the correction of erro-

neously issued patents. A petitioner in an inter partes

review may request to cancel a patent claim only

based on obviousness or lack of novelty, and only

based on prior-art patents and publications. 35 U.S.C.

311(b). Other issues, such as infringement or invalidi-

ty on other grounds, must be adjudicated in federal

court. Finally, the Board’s written decision on patent-

ability is subject to appeal to the United States Court

of Appeals for the Federal Circuit. 35 U.S.C. 319.

C. Eliminating invalid patents is necessary to

permit patient access to more affordable generic

and biosimilar medicines

Pharmaceutical patents provide a compelling illus-

tration of the need for an efficient mechanism for the

PTO to retract improvidently issued patents. Inter

16

partes review is essential to ensure patient access to

low-cost generic medicines that would otherwise be

blocked by invalid patents.

1. The availability of generic and biosimilar

medicines saves money and provides

greater patient access to critical medicines

Congress has recognized the benefits offered by

generic medicines, and it sought to encourage their

introduction by enacting the Drug Price Competition

and Patent Term Restoration Act of 1984, Pub. L. No.

98-417, 98 Stat. 1585, commonly known as the Hatch-

Waxman Amendments. See Eli Lilly & Co. v. Med-

tronic, Inc., 496 U.S. 661, 676 (1990) (Congress sought

“to enable new drugs to be marketed more cheaply

and quickly”); In re Barr Labs., Inc., 930 F.2d 72, 76

(D.C. Cir.) (purpose of Hatch-Waxman was “to get ge-

neric drugs into the hands of patients at reasonable

prices—fast”), cert. denied, 502 U.S. 906 (1991). More

recently, Congress sought to speed up the introduc-

tion of biosimilar medicines by enacting the Biologics

Price Competition and Innovation Act, Pub. L. No.

111-148, Tit. VII, Subtit. A, 124 Stat. 804. See gener-

ally Sandoz Inc. v. Amgen Inc., 137 S. Ct. 1664 (2017).

Patient access to low-cost, high-quality generic and

biosimilar medicines remains critically important to-

day given the high cost of healthcare in the United

States.

By definition, generic drugs are therapeutically

equivalent to their brand-name counterparts. To be

approved by the FDA, generic medicines must have

the same active ingredients and must meet the same

rigorous standards of strength, quality, purity, and

17

potency. 21 U.S.C. 355(j)(2)(A (ii), (iii), (iv). Likewise,

a biosimilar medicine has “no clinically meaningful dif-

ferences” in “safety, purity, and potency” from the

brand-name biologic product. 42 U.S.C. 262(i)(2)(B).

The principal difference between generic or bio-

similar medicines and brand-name prescription drugs

or biologic products is cost. Association for Accessible

Medicines, Generic Drug Access & Savings in the U.S.

24 (2017) (Generic Drug Access). Generics account for

89% of prescriptions dispensed in the United States,

but only 26% of total drug costs. /d. at 16. In total,

generic medicines generated $253 billion in savings for

the American healthcare system in 2016, and $1.67

trillion in savings over the last decade. Id. at 20. Eve-

ry year, generic medicines save the Medicaid system

$37.9 billion and save the Medicare system $77 billion.

Id. at 21.

The benefits of more affordable generic and bio-

similar medicines extend beyond mere cost savings.

Lack of adherence to treatments is responsible for ap-

proximately 125,000 deaths annually. Generic Drug

Access 26. Generic drugs reduce the problem of lack

of adherence because new patients are three times

less likely to stop taking generic medications than

brand-name drugs. /bid.

All of these benefits flow directly from the competi-

tion that generic and biosimilar medications provide to

brand-name drugs that would otherwise enjoy monop-

oly status. The more competitors there are, the great-

er the savings: The entry of a second generic manu-

facturer into the market reduces the average generic

price to nearly half the brand-name price, and for med-

icines that attract a large number of generic manufac-

18

turers, the average generic price falls to less than 20%

of the branded price. U.S. Food & Drug Admin., Ge-

neric Competition and Drug Prices (May 13, 2015),

http://www .fda.gov/aboutfda/centersoffices/officeof

medicalproductsandtobacco/cder/ucm129385.htm.

2. Invalid patents can block the introduction

of more affordable generic and biosimilar

medicines

Patent law “strikes a delicate balance between cre-

ating ‘incentives that lead to creation, invention, and

discovery’ and ‘imped[ing] the flow of information that

might permit, indeed spur, invention.’” Association

for Molecular Pathology v. Myriad Genetics, Inc., 133

S. Ct. 2107, 2116 (2013) (quoting Mayo Collaborative

Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 92

(2012)) (alteration in original). Especially in the

pharmaceutical context, that balance is frequently up-

set by the assertion of invalid patents, which inevita-

bly leads to lengthy and expensive litigation. Delay in

removing improperly awarded patents can lead to

substantially higher drug costs for patients, insurers,

and taxpayers.

a. When a brand-name drug manufacturer submits

an application to the FDA for approval of a new drug,

it must include a list of every patent related to the

drug that the patentee could reasonably assert would

be infringed by the manufacture, use, or sale of a ge-

neric version of the drug. 21 U.S.C. 355(b)(1). Those

patents are then listed in the FDA’s “Orange Book,”

formally titled “Approved Drug Products with Thera-

peutic Equivalence Evaluations.” See Caraco Pharm.

Labs., Ltd. v. Novo Nordisk A/S, 566 U.S. 399, 405-406

19

(2012). Patents listed in the Orange Book represent

significant barriers to the entry of generic competi-

tors.

Under the Hatch-Waxman Amendments, a compet-

itor hoping to enter the market with a generic version

of an existing drug may file an Abbreviated New Drug

Application (ANDA). See 21 U.S.C. 355(j). As part of

the ANDA, the generic drug manufacturer must iden-

tify any patents claiming the brand-name drug in the

Orange Book. 21 U.S.C. 355(j2)(A)(vii). For each

listed patent that has been properly filed and has not

expired, the generic drug manufacturer must either

agree to wait for FDA approval until after the patent

expires, 21 U.S.C. 355G)(2)A)(vii(IID), or certify that

the “patent is invalid or will not be infringed by the

manufacture, use, or sale” of the proposed generic, 21

U.S.C. 355(j(2)(A)(vii (TV).

Filing that latter certification, known as a Para-

graph IV certification, “means provoking litigation.”

Caraco, 566 U.S. at 407. The ANDA filer must pro-

vide notice to the brand-name manufacturer “of the

factual and legal basis” of its patent challenge, 21

U.S.C. 355G)(2)(B)iv)(ID, and the brand-name manu-

facturer may immediately sue to enforce its patents,

35 U.S.C. 271(eX(2)(A). If the brand-name manufac-

turer files suit, the FDA is automatically precluded

from approving the proposed generic drug for 30

months, unless the court declares that the patent is

invalid or not infringed before that time. 21 U.S.C.

355(9)(5)(B)Gii). If the brand-name manufacturer pre-

vails in its suit, the generic manufacturer’s application

cannot be approved until the patent expires. 35 U.S.C.

271(e)(4).

20

The Paragraph IV litigation process is thus “likely

to keep the generic drug off the market for a lengthy

period,” whether or not the patent is eventually ruled

invalid. Caraco, 566 U.S. at 408. Even after the 30-

month stay has elapsed, a generic manufacturer that

enters the market before the litigation is fully re-

solved does so at risk of being held liable for substan-

tial damages if the court later rules in favor of the

brand-name manufacturer. 35 U.S.C. 271(e)(4)(C).

And when it comes to generic drugs, even modest de-

lays have high costs. One study, for example, exam-

ined three different drugs and concluded that delays

ranging from 21 to 33 months in the introduction of

generic substitutes cost the Medicaid program alone

more than $1.5 billion. Aaron S. Kesselheim et al., Ex-

tensions of Intellectual Property Rights and Delayed

Adoption of Generic Drugs: Effects on Medicaid

Spending, 25 Health Affairs 1637, 1643 (2006).

Because the 30-month stay in the Paragraph IV lit-

igation process does not depend on the strength of the

brand-name drug manufacturer’s infringement claims

or on the merits of its asserted patents, even invalid

patents may block generic substitutes for lengthy pe-

riods of time. A speedy and efficient mechanism to

challenge improvidently granted patents is therefore

essential to the timely provision of generic medicines.

Much the same is true of biosimilar medicines. By

statute, the FDA may approve such products as “in-

terchangeable” with a brand-name biologic product.

42 U.S.C. 262(k). Such approval is permitted only af-

ter a 12-year period of exclusivity for the brand-name

product. 42 U.S.C. 262(k)(7); see Sandoz, 137 S. Ct. at

1670. But by using estates of multiple patents, even

21

patents of doubtful validity, brand-name biologic man-

ufacturers can delay the introduction of biosimilar

products until well after the expiration of that 12-year

period.

b. Recent experience with efforts to introduce ge-

neric drugs and biosimilar medicines shows that the

costs of invalid patents are not merely theoretical.

Prilosec is the brand-name version of omeprazole,

which is approved by the FDA to treat peptic ulcer

disease and some forms of gastroesophageal reflux

disorders. Daniel I. Gorlin, Staving Off Death: A Case

Study of the Pharmaceutical Industry’s Strategies to

Protect Blockbuster Franchises, 68 Food & Drug LJ.

823, 882-833 (2008). Omeprazole was first patented in

1979 by a predecessor to AstraZeneca PLC. In 1998,

it became the world’s largest selling pharmaceutical

product, and by 2001 it enjoyed $5.7 billion in annual

sales. Jd. at 834.

When AstraZeneca first sought FDA approval for

omeprazole, it listed only the original patent in the Or-

ange Book. Gorlin, 68 Food & Drug L.J. at 836. In an

effort to extend its monopoly even after the expiration

of that patent, it soon added additional patents cover-

ing, among other things, making the drug into a pill

that could be taken orally and using the drug to treat

certain infections. Ultimately, the Orange Book listed

ten different patents covering the drug. Jbid. In add-

ing those additional patents to the Orange Book,

AstraZeneca sought “to create a situation where ge-

neric drug manufacturers must litigate 90 claims on

six patents, making it impossible to resolve any dis-

pute within the thirty month stay.” /d. at 837 (quoting

Examining Issues Related to Competition in the

22

Pharmaceutical Marketplace: A Review of the FTC

Report, “Generic Drug Entry Prior to Patent Expira-

tion”: Hearing Before the Subcomm. on Health of the

H. Comm. on Energy and Commerce, 107th Cong. 25

(2002) (prepared statement of Business for Affordable

Medicines)).

In 1998, four generic drug companies filed ANDAs

under the Hatch-Waxman Amendments, submitting

Paragraph IV certifications and asking the FDA to

approve their versions of omeprazole. Gorlin, 63 Food

& Drug L.J. at 836. AstraZeneca sued its would-be

generic competitors for patent infringement, trigger-

ing the 30-month stay enjoining the FDA from approv-

ing their applications. [bid.

Of the six patents AstraZeneca sued to enforce,

most were ultimately found to be invalid. See In re

Omeprazole Patent Litig., 258 F. Supp. 2d 221

(S.D.N.Y. 2001). And the valid patents were deter-

mined not to be infringed by a bioequivalent version of

omeprazole. Astra Aktiebolag v. Andrx Pharms.,

Inc., 222 F. Supp. 2d 423, 547-560 (S.D.N.Y. 2002).

Nevertheless, the multitude of listed patents had their

intended effect: Although the generic competitors

filed their applications in 1998, a consolidated trial on

AstraZeneca’s patent infringement claims did not

even start until December 2001—more than three

years later. Gorlin, 63 Food & Drug L.J. at 836. By

then, both the original patent on omeprazole and the

30-month stay on generic entry under the Hatch-

Waxman Amendments had expired; the first generic

manufacturer to file an application had received final

approval from the FDA, but no generic version of

23

Prilosec had been introduced to the market. Jd. at

838.

A generic version of the drug was finally introduced

in December 2002, 14 months after the expiration of

AstraZeneca’s original patent. Gorlin, 63 Food &

Drug L.J. at 839. Those 14 months allowed Astra-

Zeneca to collect billions of dollars in extra revenue, at

a cost to the taxpayers of hundreds of millions of dol-

lars. Ibid.; see Kesselheim et al., 25 Health Affairs at

1642.

Brand-name drug companies could employ similar

techniques to delay the entry of more affordable bio-

logic medicines. See, e.g., Cynthia Koons, Guarding

Big Pharma’s Crown Jewel, Bloomberg Busi-

nessweek, Sept. 11, 2017, at 17 (noting that AbbVie

Inc., has secured more than 75 ancillary patents on its

best-selling rheumatoid arthritis drug Humira, most

within several years of the expiration of the original

patent).

By allowing speedier resolution of patent validity—

and prompt correction by the PTO of its own mis-

takes—inter partes review avoids unnecessary delays

and furthers the congressional goal of ensuring that

the patent monopoly on brand-name medicines be of

limited duration, thus bringing more affordable treat-

ment options to patients sooner.

24

CONCLUSION

The judgment of the court of appeals should be af-

firmed.

Respectfully submitted.

JEFFREY K. FRANCER

ERIC D. MILLER

ASSOCIATION FOR

Counsel of Record

ACCESSIBLE MEDICINES PERKINS COIE LLP

601 New Jersey Ave., N.W. 1201 Third Ave., Suite 4900

Suite 850 Seattle, WA 98101

Washington, D.C. 20001 (206) 359-8000

(202) 249-7100 emiller@perkinscoie.com

BRIAN SAMUELSON

PERKINS COIE LLP

1120 NW Couch St.

10th Floor

Portland, OR 97209

(503) 727-2000

OCTOBER 2017