Drug makers complained bitterly last week after the US Supreme Court left intact a controversial procedure for reviewing patent disputes, arguing that the decision threatens valuable research efforts and that patients will eventually suffer. But the truth of those claims is debatable.
The ruling upheld a process Congress created five years ago for challenging patents outside the courts. It allows the US Patent and Trademark Office to issue the “broadest reasonable interpretation” of patents. The case at hand had nothing to do with pharmaceuticals, but drug makers believe it will make their patents more easily challenged, and more likely to be overturned.
The companies believe the procedure, known as inter partes review, is riskier than patent disputes decided in federal courts. An industry trade group cited statistics showing that the US Patent Trial and Appeal Board, which conducts the reviews, granted 79 percent of all challenges filed. The board also decided that some patents were not warranted in 89 percent of its decisions. By contrast, lawsuits claiming patents were invalid have succeeded 42 percent of the time, according to its court filing.
“Without the promise of effective patent rights, investments [in new medicines] would be far more difficult — if not impossible — to undertake,” a trade group for biotech companies told the court in a filing.
To be sure, a company might think twice about pursuing a product if the system for protecting patents appears uncertain. And the pharmaceutical industry is right to worry about some challengers, especially after Kyle Bass, a high-profile hedge fund manager, shorted stocks in companies whose patents he was challenging.
Yet the pharmaceutical industry appears to be overstating the case.
For one thing, data showing the patent office grants most challenges applies to all industries, not just drug makers. In reality, 35 percent of pharmaceutical patents were found to be “unpatentable” during inter partes reviews, said Matthew Kreeger, a patent attorney. “Losing one-third of the time is not a small number, but it is not out of line” with losses the drug makers suffer in court, he explained.
There is another point worth noting.
Very few of the challenges are against patents that cover a core invention, according to Jacob Sherkow, an associate professor at New York Law School who has researched the challenges. Instead, the vast majority are filed against so-called secondary patents that may pertain to another use of a medicine, as well as new formulations and different dosages.
“I can’t imagine it’s going to do any damage,” he said. “I don’t really believe R&D pipelines will suffer.”
Consumer advocacy groups have long complained that drug makers too often file additional patents for their medicines for inventions that may not be truly innovative but can extend the monopolies that come with patent protection. And such “low-quality patents” end up costing consumers more money, the AARP wrote in a brief filed with the Supreme Court.
For this reason, the trade groups for insurers and generic drug makers, which regularly battle with their brand-name rivals over the validity of patents, are gleeful over the court ruling. Like the consumer groups, these organizations framed the debate over the patent reviews as a choice between access to affordable medicines and granting questionable patents that can create unfair monopolies.
“On one hand, you want to encourage innovation,” said Kevin Noonan, a patent attorney and one of the authors of the Patent Docs blog. “But if the consequence is that you have drugs and nobody can afford them, then you have another issue.”
Arti Rai, a Duke University law school professor who specializes in biopharmaceutical patents, cautioned that it’s unclear how many challenged drug patents “are useless or not innovative. … But if it turns out mostly dubious secondary patents are the ones that are invalidated, then the effect [on innovation] will be relatively small.”
Going forward, we can expect to see drug makers lobby Congress to change the law, according to Matthew Cutler, a patent attorney who has studied inter partes reviews. In fact, the biotech trade group noted in a statement that it “continues to urge” Congress to change the law.
Meanwhile, drug makers would do well not to suggest that the proverbial sky is falling. If they are truly worried about these reviews, no one would challenge the wisdom of filing better patents.