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The Supreme Court dealt a defeat to the pharmaceutical industry Monday in a closely watched patent law case that drug makers had argued endangered their continued investments in drug research and development.

The case had nothing to do with prescription medications and centered on the minutiae of patent law. But drug makers had placed the stakes of the case in dire terms. The industry’s trade group warned in its briefs that an Obama administration rule, challenged in the case and upheld by the court on Monday, “breeds uncertainty and stifles innovation” in American medicine.

At issue in the case was a new process for challenging patents created by Congress in 2011. Known as inter partes review, they allowed patent challenges to be heard by an appeals board within the US Patent and Trademark Office.


In court litigation, which is how patents were typically challenged in the past, patents are presumed to be valid and understood by their “plain and ordinary meaning.” But in these new inter partes reviews, as established by the administration through regulation, patents are interpreted more broadly and therefore they are more likely to be overturned.

The plaintiff in the Supreme Court case — a company whose patent on a speedometer designed to warn drivers about speeding was invalidated — had challenged the administration’s rule that allowed for that broader interpretation of patents in inter partes reviews. They had been backed by brand-name pharmaceutical companies, which said that “meaningful patent protection is required to justify” investments in drug development.


The administration was supported by generic drug companies and health insurance plans, who argued that the drug industry exploits the patent system to keep prices high. New reviews that are more likely to invalidate patents, they said, could help lower drug prices.

The court, in an opinion written by Justice Stephen Breyer, sided with the administration. The justices ruled that the administration was within its legal authority when it decided that patents should be interpreted more broadly in the inter partes reviews. (The court’s decision was unanimous, though Justices Samuel Alito and Sonia Sotomayor dissented on one section.)

“The Patent Office’s regulation is reasonable,” Breyer wrote, “and this Court does not decide whether a better alternative exists as a matter of policy.”

The trade associations for generic drug makers and health insurance plans applauded the decision.

“Today’s decision from the Supreme Court is a significant win for consumers,” America’s Health Insurance Plans president and CEO Marilyn Tavenner and Generic Pharmaceutical Association president and CEO Chip Davis said in a joint statement. “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 Pharmaceutical Research and Manufacturers of America, the drug industry’s Washington trade group, said that it was “disappointed” in the ruling and that there will continue to be two different standards for interpreting patents in court and in inter partes review.

“This dual standard threatens the predictability and strength of the protections that the patent system is supposed to provide to innovators,” the group said.