Recent changes to the law may offer biotechnology companies a less costly alternative to patent litigation.
Imagine you are CEO of Biopromise, Inc., a small biotechnology company. Though not yet generating profits, the investing community believes Biopromise has a bright future, given your strong management skills and breakthrough research that has led to the development of three new potential cancer treatments. The most exciting of these treatments is one directed toward treating pancreatic cancer, which has undergone successful initial clinical trials. Biopromise has recently secured two years of financing, enough to keep the company viable until it becomes profitable. However, your positive outlook has been tempered by your discovery that a larger competitor, Theramed, Inc. has just obtained a patent on a method of treating pancreatic cancer that is generally different from that of Biopromise but with some similarities. It is moving full speed ahead with clinical trials. Your scientific advisor has expressed disbelief that this patent issued, since he knows of a publication authored by his academic colleague, Dr. Harrison, which predates the Theramed patent and discloses its contents. You are aware of Theramed's aggressive business approach and worry that Biopromise may not be able to pursue its own business plan successfully because of Theramed's activities and patent.1
Patents form the foundation of most biotechnology companies and are crucial for their economic growth and advancement. However, an up-and-coming company may well come across competitors' patents that could block its future progress. Such blocking patents can cover the exact technology sought to be marketed by the company, or merely block an important subset of its activities. Either way, such patents can cause tremendous problems for a young biotech company at a time when it does not have much money, and additional financing is hard to come by.
What can a biotechnology company like Biopromise do about a blocking patent? First, it should seek a patent counsel's opinion regarding the blocking patent's invalidity. Armed with such an opinion, the company could then continue its activities and hope that the owner of the blocking patent will not threaten or launch an infringement suit against it. If sued, the company could, of course, launch a defense that includes an invalidity argument. The problem with patent litigation, however, is that it is expensive, costing, at the median, about $500,000 and up, depending on the value at risk.2 Biotechnology inventors likely will not be interested in using a substantial portion of their investment to finance litigation.
Recently, another approach has become available -- namely, inter partes reexamination. This is an administrative route for challenging the validity of a patent within the US Patent and Trademark Office (USPTO, Washington, DC, USA). Generally, reexamination is a procedure by which the patentability of the claims in a patent can be reviewed in view of a prior art publication that predates the filing date of the patent. While there are substantial risks associated with this approach, it is an option worth exploring if a biotech company lacks the money required to mount an effective litigation strategy and is armed with a novelty-destroying document.
Reexamination Before the 21st Century
Starting on July 1, 1981, any person, including third parties, could file a written request asking the USPTO to reexamine any claim of an issued patent on the basis of prior art consisting of patents or printed publications that the person believed had a bearing on the patentability of any claim of the issued patent.3 The USPTO reviews this submission and initially determines whether the submitted prior art raises a substantial new question of patentability.4 If yes, then the patent undergoes an ex parte reexamination. This process is still available today.
Initially, this procedure contemplates that the patent owner can file a statement and any claim amendments in view of the submitted prior art, and any third party that might have filed the request is entitled to file a reply to the patent owner's statement. However, beyond this initial stage, a third party's involvement in the reexamination ends, and the patent goes through an examination process5 that is similar to the regular examination process for pending patent applications.
Thus, ex parte reexamination does not offer a satisfactory route to third parties to challenge blocking patents since the third party's involvement in the process is minimal, and the risk for a third party of bringing to the USPTO's attention a potentially damaging prior art document is that the patent owner will survive the challenge and obtain new, stronger claims. In fact, generally speaking, this is exactly what tends to happen in ex parte reexamination - patent owners, not third parties, benefit from the process by getting stronger patents
Inter Partes Reexamination
In response to criticism about the ex parte reexamination procedure, on November 29, 2000, reexamination in the USPTO was extended to an optional inter partes reexamination procedure.6 The inter partes provisions were introduced by the American Inventors Protection Act of 1999 and apply to any patents issuing from original applications filed in the United States on or after November 29, 1999. This has created a new gateway for challenging patents, but at present, experience in using the procedure is still quite limited.
Substantively, the inter partes reexamination procedure tracks the ex parte reexamination procedure, in that the reexamination request must set forth a "substantial new question of patentability" based on a prior art document. Further, as with ex parte reexamination, the patent owner cannot expand the scope of claims but can present narrower claims in view of any prior art cited in the reexamination. The USPTO's fee for filing the reexamination request is $8,800, a portion of which is reimbursed if the USPTO decides, upon initial review, that the prior art document cited by the third party requester does not raise a substantial question of patentability as regards the patent at issue.
At first glance, under this reexamination procedure third party requesters can participate in a much more meaningful way. For example, they can respond within 30 days to all papers filed by the patent owner and can comment on positions taken by the examiner in Office Actions.7 In its written comments, a third party can refute arguments made by the patent owner, present further arguments supporting arguments made by the examiner, and even cite additional prior art, if needed to rebut a patentee response or a finding of fact made by the examiner, or if the prior art did not become known or available until after the request was filed.8 Presumably, the third party might even submit comparative test data to support its arguments that the claimed subject matter in the patent at issue is neither novel nor non-obviousness over the prior art document.
However, inter partes reexamination is not without its problems. For example, the very short time period within which the third party must respond to papers by the patentee means that it may not have time to generate comparative test data or conduct comprehensive analyses of a patentee's position. Moreover, the process is based only on a prior art publication and cannot encompass other invalidity attacks on a patent (e.g., the patent lacks utility or a proper written description, or the patent claims are not enabled) that may be raised in litigation. Also, the procedure does not provide for any oral argument opportunities until the appeal stage before the Board of Patent Appeals and Interferences, an appellate body within the USPTO. Nor are litigation fact-finding mechanisms (e.g., discovery) available. Moreover, no interviews with examiners are allowed, since the USPTO feels that its personnel is not trained to handle such potentially adversarial encounters.9 The problem that the third party requester could not appeal a Board decision to the US Court of Appeals for the Federal Circuit was recently cured by changes in the law, as will be discussed later.
Yet the greatest problem with the inter partes reexamination provisions are three 'estoppels' or prohibitions that are imposed on a third party requester. First, the requester (or its privies) cannot again request or maintain an inter partes reexamination on any claim which a final court or agency inter partes reexamination decision finds as being patentable on the basis of any issues raised or that could have been raised in the action or reexamination. Inter partes reexamination can, however, be requested anew based upon newly discovered prior art unavailable to the requester at the time of the original inter partes reexamination. What prior art might be considered 'unavailable' to the requester is undefined.
Second, a requester is estopped (that is, prohibited) from later asserting in any civil action the invalidity of any claim finally determined to be patentable on any ground the requester raised or could have raised in the inter partes reexamination. The requester can later assert invalidity, however, based on newly discovered prior art that was not previously available.
Third, a requester who requests inter partes reexamination is estopped from challenging in a civil action any fact determined in a prior inter partes reexamination, unless the fact is later determined to be erroneous based on information unavailable at the time of the reexamination.
Therefore, if Biopromise were to launch an inter partes reexamination of Theramed's patent based on the Harrison reference, and the Theramed patent were to emerge from the reexamination with claims that are still problematic, Biopromise could never rely on the Harrison reference again, either in a subsequent inter partes reexamination or any civil action to try to invalidate the Theramed claims. Moreover, Biopromise would be precluded from raising any other validity issue that could have been raised in the reexamination. For example, Biopromise probably would be prevented from relying on any other prior art reference it knew about during the reexamination. Furthermore, Biopromise would be precluded from challenging any finally determined facts in the proceeding even though those facts were not subjected to the traditional litigation techniques for fact-finding. Consequently, there is very substantial risk associated with inter partes reexamination. It is because these 'estoppels' can severely curtail a third party requester's rights as well as because of some of the other limitations in the proceeding noted earlier, that, to date, patent attorneys have generally dissuaded clients from challenging a patent's validity by way of the inter partes reexamination process.
One of the ways for Biopromise to temper these risks is to have a thorough search conducted in both the academic literature and in various patent offices around the world (in particular in the US, Europe, and Japan) to find any invalidating prior art. Also, as suggested earlier, Biopromise should get a thorough invalidity opinion from its lawyer regarding the Theramed patent, considering not only the patent's invalidity in view of the Harrison reference and any other references found from the search, but also considering other grounds under which the patent might be found to be invalid. Biopromise should be prepared to assert any prior art document of which it is aware in the inter partes reexamination. Finally, Biopromise should consider launching a reexamination only if it believes, on consultation with its lawyer, that the Harrison reference (alone or in view of all other prior art to be raised in the proceeding) is strong enough, not only to invalidate the Theramed patent claims, but also to prevent Theramed from getting any narrower claims issued that might still be problematic for Biopromise. If it does choose to request reexamination, the extra money it costs to pursue an inter partes reexamination could be worth it.
Recent Changes to Inter Partes Reexamination
An improved inter partes reexamination process emerged on November 2, 2002, when President Bush signed into law HR 2215 (Pub. L. 107-373), which includes the 'Patent and Trademark Office Authorization Act of 2002.' This improved process contains the same features as described above, but with a few changes. Although this act made some housekeeping corrections to the reexamination laws, it also clarified, given the Federal Circuit's opposite ruling on point in In re Portola Packaging,10 that, in both ex parte and inter partes reexamination requests, "[t]he existence of a substantial new question of patentability is not precluded by the fact that a patent or printed publication was previously cited by or to the Office or considered by the Office". This is important because often the most pertinent prior art has been cited to the examiner examining the application, but the examiner has failed to appreciate its relevance. This can happen because examiners are under tremendous time pressures to examine an application and so do not always have the luxury of carefully reading every piece of prior art that he or she finds in a search or that is submitted by the patent applicant. For example, it is not uncommon for an examiner to receive what is called an 'information disclosure statement' from an applicant citing, for example, 25 or even more references and yet be required: (i) to review the patent application, all of the cited references, and any filed papers; (ii) to yield a conclusion on the patentability of the pending claims; and (iii) to prepare an Office Action, all within about 15 hours or less, depending on the examiner's seniority. Now, third parties that are familiar with a patent and the related prior art can rectify this deficiency in the examination process and potentially help themselves in the process.
In addition, the act changed the law such that now third party requesters in inter partes reexamination proceedings can appeal USPTO agency decisions (that is., from the Board) to the Court of Appeals for the Federal Circuit, and be a party to any appeal to that court taken by a patent owner from an unfavorable reexamination ruling on a patent. This is a tremendous improvement, since third party requesters are now on more equal footing with the patent owner in the reexamination proceeding. Furthermore, now that third parties have the same opportunities to appeal the administrative level decision in a reexamination to a court of law, the still-existent and far-reaching estoppel provisions are a little less frightening, because there is potentially more opportunity to examine the issues and finally and fairly resolve them either at first instance or on appeal. Moreover, if the examiner were to make any legal errors in his analysis, third party requesters can now go to a court to try to fix the problem.
Conclusions
The cost of patent litigation can be staggering and beyond the reach of a starting biotechnology company. In certain circumstances, the new and improved inter partes reexamination process can provide a more reasonable and more cost-controlled option for challenging blocking patents that are believed to be invalid. It also provides an opportunity to get a scientifically trained USPTO official to rule on the validity of a patent's claims, rather than a potentially less scientifically proficient judge or jury. This can be particularly attractive in the biotechnology area.
However, before a biotechnology company chooses to use this procedure, it must be fully aware of its substantial downsides. Whereas the inter partes reexamination process could initially be faster in terms of getting an answer at first instance as to the validity of patented claims, an appeal from that decision could be time-consuming and costly. On the other hand, the costs and other burdens associated with discovery and evidentiary motions that would otherwise be present in litigation would be avoided in an inter partes reexamination. (Of course, the fact-finding benefits of discovery also will be absent.) Furthermore, the estoppels that are imposed upon the third party requester in an inter partes reexamination can severely curtail the third party's rights, and, for example, prevent that party from using some arguments in the future to protect itself from an infringement charge, if the patent survives the reexamination (that is, the patent is confirmed with narrower but still problematic claims).
The new-and-improved inter partes reexamination proceeding is not yet as open for third parties as a European opposition proceeding, which allows third parties to challenge issued patents on a multitude of grounds (that is, not just based on a prior publication), and provides for both written and oral submissions by third party challengers. On the other hand, unlike European opposition proceedings that need to be commenced within nine months from the publication of the mention of the grant of a European patent, an inter partes reexamination proceeding can be commenced at any time during the life of the blocking patent.
Any biotechnology company that chooses to use the inter partes reexamination process as a dispute resolution mechanism must realize that, although the price may be right, it will not be possible to address a wide range of patent-related issues which would otherwise be possible to address in a traditional litigation setting, and yet serious estoppels will be imposed as to those matters that are raised. In addition, some of the important fact-finding tools of a trial also will not be available. Nonetheless, in a difficult economy, as a biotechnology company determines how best to implement its business plan while using invested funds wisely, inter partes reexamination provides an approach worthy of consideration for challenging blocking patents that are stifling or hampering their progress and are believed to claim processes or compositions that are neither new nor unobvious over prior art publications. For Biopromise and companies like it, it may be the only option.
John W. Behringer is a partner and Natalie M. Derzko is an associate in the Washington, D.C. office of Fitzpatrick, Cella, Harper & Scinto. The views expressed in this article are those of the authors and not of Fitzpatrick, Cella or its clients
Footnotes
1. The names Biopromise, Theramed and Harrison are all fictitious and are not meant to be or bear any resemblance to any real companies or people; any similarities to names of real corporations or people are purely coincidental and unintended.
2. AIPLA Report of Economic Survey 2001 (American Intellectual Property Law Association, Fetzer-Krause, Inc., Washington, D.C., 20001).
3. 35 U.S.C. §§ 301 and 302.
4. 35 U.S.C. §§ 303 and 304.
5. 35 U.S.C. §§ 132 and 133.
6. 35 U.S.C. §§ 311-318 and 37 C.F.R. §§ 1.902-1.997.
7. 35 U.S.C. § 314(b)(2).
8. 37 C.F.R. § 1.948.
9. 37 C.F.R. §§ 1.937 and 1.955.
10. 42 U.S.P.Q.2d 1295 (1997), petition for rehearing denied, 44 U.S.P.Q.2d 1060 (1997).