Generic drugmakers win US Supreme Court case

The US Supreme Court's recent ruling in a patent case, allowing the US Patent and Trademark Office's Patent Trial and Appeal Board to use a "broader standard than federal courts" in patent claims has been hailed as a win for the makers of generic drugs. It is claimed the broader standard makes it easier to challenge patents before a board, rather than using the costly legal process. The ruling could also have implications for patent fights over medical devices, medical diagnostics and other medical technologies.

In deciding a case over who should have the upper hand in patent battles, the U.S. Supreme Court delivered a win to generic-drug makers and those hoping to hold down drug prices.

Monday's decision could, however, make it more difficult for makers of brand-name drugs to protect their patents, which they say allows them to invest in developing new drugs.

The Supreme Court's opinion comes amid renewed scrutiny over drug prices.

The Supreme Court decided Monday in Cuozzo Speed Technologies v. Lee (PDF) to affirm a lower court ruling allowing the U.S. Patent and Trademark Office's Patent Trial and Appeal Board to continue using a broader standard than federal courts when it comes to interpreting patent claims. Many argue that the broader standard makes it easier for challengers to invalidate patents before the board than in federal court.

In 2011, Congress began allowing patent challengers to take their fight before the board, rather than to federal court, as an alternative to costly, time-consuming court battles.

“To the very significant extent that brand-name drug makers are very unhappy with these proceedings, their unhappiness is going to persist,” said Arti Rai, a Duke University law professor and expert in intellectual property law and health policy, of the decision.

Janelle Waack, a member at Bass Berry & Sims who focuses on intellectual property, said the decision Monday also has implications for patent fights over medical devices, medical diagnostics and other medical technologies.

The case wasn't actually over drugs. It centered on an invention that alerts drivers when they're speeding. But a number of drug industry groups had weighed in on the case in briefs, noting that the decision could have major implications for them and consumers.

The Pharmaceutical Research and Manufacturers of America filed a brief (PDF) saying the board's continued use of the broader standard would breed uncertainty for manufacturers.

“Uncertainty regarding the scope of patent claims and their validity is costly to the inventive community and discourages innovation,” PhRMA wrote in its brief.

PhRMA said in cases before the patent board that used the broader standard, 87% of final decisions found at least some claims unpatentable. In federal court, where the narrower standard is used, those challenging patents' validity won 42% of the time.

Rai said PhRMA is also likely unhappy with the process because it's allowed hedge funds to challenge patents while shorting the stock of brand-name drug companies. Some criticize the tactic as hedge funds gaming the system, while others say it's a way to tackle rising drug prices. Hedge funds wouldn't otherwise be allowed to challenge the patents in federal court, Rai said.

But insurance industry group America's Health Insurance Plans and the Generic Pharmaceutical Association also filed a brief (PDF) in the case, saying the broader standard is “largely working as intended by providing a more cost-effective avenue to challenge weak patents.”

“By protecting and reaffirming the importance of the inter partes review, the Court recognizes the vital need for an efficient patent review process—one that promotes a competitive, affordable prescription drug market for consumers,” the groups said in a statement.

The groups said in their brief that without the current process, healthcare costs would rise by at least $73 billion between 2018 and 2037, as calculated by the Center for Economic and Policy Research.

PhRMA did not immediately respond to a request for comment on the decision Monday.

Waack said the takeaway for patent holders following this decision is to work hard on the front end to create strong, strategic patent portfolios that will withstand challenges before the board.

“Healthcare companies need to invest in their patent drafting and prosecution upfront, understanding if you're challenged you'll likely be pulled into a (patent trial and appeal board) proceeding where the rules are tilted in favor of the challenger,” Waack said.

Others, however, say the decision might not have as big an impact.

The board's ability to use a broader standard than courts use when evaluating patents hasn't always led to the starkly different outcomes that many said it would, said Andrew Williams, a partner at McDonnell Boehnen Hulbert & Berghoff who specializes in such proceedings. He said when the board's decisions are appealed to the U.S. Court of Appeals for the Federal Circuit, that court has also tended to put limits on the board's interpretations.

“In theory, it should be easier to invalidate claims at the patent office, but what we're seeing in practice is the two standards are not really making as big a difference as people were worried that they would,” Williams said.

Writing for the court, Justice Stephen Breyer said Monday that the board's use of the broader standard is a “reasonable” exercise of its authority.