In a blow for pharma, Supreme Court upholds the hated IPR patent challenge

The Supreme Court found that inter partes reviews are constitutional. (SupremeCourt.gov)

Branded drugmakers have said "no fair" to the U.S. Patent and Trademark Office's inter partes review system almost since its inception seven years ago. One reason? "It's unconstitutional," the companies contend.

The Supreme Court, in a Tuesday ruling, disagreed.

In a 7-2 vote, the U.S. High Court held that the system is constitutional. It doesn't violate Article III of the Constitution, which gives the judicial branch alone the power to decide legal arguments. Nor does it violate the Seventh Amendment, the right to a trial by jury.

Free Daily Newsletter

Like this story? Subscribe to FiercePharma!

Biopharma is a fast-growing world where big ideas come along daily. Our subscribers rely on FiercePharma as their must-read source for the latest news, analysis and data on drugs and the companies that make them. Sign up today to get pharma news and updates delivered to your inbox and read on the go.

It's a limited ruling specific to the issues in this particular case, Oil States Energy Services v. Greene’s Energy Group. In the majority opinion, the justices emphasized that they addressed "only the precise constitutional challenges that Oil States raised here." 

Justices John Roberts and Neil Gorsuch dissented, saying only an independent judge—not a political appointee at the PTO—should be able to revoke patents, which they equated with personal property such as a home or a farm.  

RELATED: Pharma's contentious inter partes reviews come under Supreme Court scrutiny 

In a statement, PhRMA spokesperson Nicole Longo said the "narrowly tailored decision" found only that IPRs are constitutional, not "efficient or fair." The arguments and a Tuesday ruling in another case—SAS Institute v. Iancu—mean it's "clear there are problems with the IPR process that need to be addressed," she added.

The inter partes review system was born in 2011 as part of the America Invents Act, intended to be a cheaper, easier alternative to patent fights in court. The IPR system only allows challenges based on "obviousness," essentially, that the patented IP wouldn't be obvious to a person similarly skilled in the field. Nonobviousness is one requirement for winning a patent in the first place.

Proponents say it's appropriate for the federal agency to fix its own mistakes through administrative hearings, while others say it's unconstitutional to strike down intellectual property outside of the courts. 

One thing the case didn't cover: The IPR process now applies retroactively, to patents issued before the America Invents Act. Eric Dittmann, a partner with law firm Paul Hastings, told FiercePharma  he expects that challenge "in the near future."  

In pharma, it's not just a legal argument. After the IPR process launched, Kyle Bass and his Coalition for Affordable Drugs immediately challenged several pharma patents, claiming to be targeting frivolous patents. By striking those patents down, drugs would go generic faster and bring costs down, too, Bass contended

Drugmakers countered that Bass was profiting from the reviews by shorting pharma stocks. His challenges were ultimately unsuccessful.

RELATED: Bye-bye Bass? In the end, 'consumers pay,' he warns of thwarted patent challenges  

Other challengers, though, did succeed. Generics maker Torrent Pharmaceuticals won its challenge to IP covering Novartis' multiple sclerosis blockbuster Gilenya, putting it at risk of earlier generics. Novartis lost an appeal of the case.

Meanwhile, Argentum Pharma won its own big challenge—against a patent shield protecting Johnson & Johnson's prostate cancer med Zytiga. With the decision, one analyst expects a generic version to launch in October.

More recently, Allergan started a firestorm over IPR reviews with its Restasis brouhaha. The company entered a deal with the Saint Regis Mohawk Tribe in September to transfer patents and license them back, attempting to sidestep an IPR by applying tribal sovereignty. 

Allergan ran into intense opposition, and the strategy is now under appeal.  

To defend against the criticism, Allergan CEO Brent Saunders said the U.S. patent review system is "flawed" because drug companies are forced to defend their patents at the PTO and in courts around the country. He said the situation amounts to "double jeopardy."  

RELATED: Allergan's much-maligned tribal licensing deal wins reprieve at appeals court 

At the time, industry trade group PhRMA said it "continues to support reforms to the IPR process that better protect the rights of legitimate patent holders and will foster innovation." 

But even as many branded drugmakers have criticized the reviews, the Financial Times reported last year that they often use the process against each other to try to invalidate patents. According to the newspaper, Pfizer, Merck, Novartis and Sanofi are among the companies to have used the IPR process the most. 

Editor's note: This story was updated with comments from Eric Dittmann, a partner at law firm Paul Hastings.