Patent Reform and Inter-Partes Review (IPR)
Congress will shortly consider patent litigation reform legislation. The legislation in the Senate (S. 1137, the PATENT Act) contains a number of changes to the patent litigation process but, at this time, does not contain needed reforms to the PTO's administrative patent challenge system known as Inter Partes Review (IPR). NewYorkBIO is working with BIO to engage with the bill's key sponsors on the Senate Judiciary Committee (Senator Grassley, Senator Leahy, Senator Cornyn, and Senator Schumer) with the goal of gaining their agreement to include these needed reforms in any package considered by the Committee. As part of this process, BIO has made it clear that, without a balanced bill which meaningfully reforms the IPR system, BIO will oppose this legislation.
- House and Senate patent litigation reform legislation MUST INCLUDE provisions to balance the inter partes review (IPR) proceedings at the Patent and Trademark Office (PTO) by harmonizing the PTO standards and processes with those used in court to provide a fair mechanism for patent owners to defend their patents, and by imposing some restrictions on what IPRs can be filed and by whom.
- IPR is a relatively new procedure, created in the America Invents Act, where any person (not just a competitor or accused infringer) can challenge and invalidate patents at the U.S. Patent & Trademark Office (USPTO). The process was meant to be a faster and cheaper alternative to district court litigation, but in implementation, it has become a much easier system under which to invalidate patents.
- This is so because the PTO uses substantive and procedural rules that systematically disfavor patent owners and favor patent challengers ? including lesser standards than used in district court.
- As a result, about 80% of patents that are challenged and accepted by the PTO are invalidated. This is much higher than the district court rate of 43%, and has created disturbing trends and abuses within the IPR.
- Recently, a large hedge fund investor Kyle Bass announced plans to short the stocks of more than two dozen biotech companies and then go after their key patents using the IPR procedure, and we are seeing other efforts by IPR-filing entities attempting to extort very large payments from biotech companies in exchange for not filing the petitions on the key patents that protect their most valuable products.
- We are deeply concerned about these and other implications of the IPR procedures on the biopharmaceutical industry ? both what that means for future innovation and ultimately the ability of patients to have access to new therapies in the future. Unless we balance the overall IPR system, these abuses will only continue to morph and grow.
- Congress created the IPR system to provide a more efficient and less expensive patent dispute resolution process. Congress did not intend for the PTO administrative system to function in a way that kills off many patents that otherwise would be deemed valid in district court, thus undermining the fundamental ability of investors to rely on patents to protect their investments in innovation.