Legislative Developments in Post-Grant Proceedings

Amidst a spate of high-profile IPR filings in the life sciences space by hedge fund financiers, the biotechnology industry has mobilized behind two chief legislative strategies designed to limit or eliminate its exposure to post-grant challenges.

First, medical device, pharmaceutical, and diagnostic companies have sought to change two key provisions in the IPR statute: elevating the burden of proof for invalidity from a preponderance of the evidence to clear and convincing evidence, and narrowing the claim construction standard from the "broadest reasonable construction" of a claim term to its "ordinary and customary meaning," as used in district court.

Senator Chris Coons (D-Del.) has pushed for these changes in S. 632, the STRONG Patents Act, which he introduced in February 2015. While the Senate has yet to vote on the measure in its entirety, the Senate Judiciary Committee in June approved a different bill, S. 1137, the PATENT Act, which incorporated the "ordinary and customary meaning" change but not the burden of proof provision, and also empowered the Patent Office director to decline institution if it "would not serve the interests of justice."

In parallel, the House Judiciary Committee in June approved H.R. 9, the Innovation Act, by a 24-9 margin, a bill that incorporated the "ordinary and customary meaning" language from the Coons act but, like the Senate companion measure, not the burden of proof provision. The Innovation Act also includes language that impairs the ability of hedge funds to hold "financial instruments" of the companies whose patents they challenge.

At the same time, the biopharma industry has trod a second path involving the exemption of life sciences patents entirely from the IPR system. In a July letter to Congress, the Biotechnology Industry Association and the Pharmaceutical Research and Manufacturers of America wrote that IPR "threatens to disrupt the careful balance that Congress achieved over 30 years ago, by increasing business uncertainty for innovative biopharmaceutical companies having to defend their patents in multiple venues and under differing standards and procedures."

Rep. Mimi Walters (R-Calif.) acted on this proposal, introducing an amendment to the Innovation Act that would have excluded biotech patents from IPR, but she withdrew the amendment in the face of opposition.

Meanwhile, a leaked analysis by the Congressional Budget Office concluded that the BIO/PhRMA proposal would cost the federal government $1.3 billion over the next 10 years because of the delayed entry to market of generic drugs. Biotech industry spokespeople disputed the report, arguing, among other things, that $130 million per year amounted to a very small sum, relatively speaking.

In any event, patent reform in general has stalled in both the House and Senate, leaving the fate of these IPR amendments and proposed exemptions highly uncertain. And in an election year, it's unlikely that these measures will see much action in Congress.

This article originally appeared in Fish's 2015 Post-Grant Report. Read the full report here.