shutterstock_1120355471-zimmytws
zimmytws / Shutterstock.com
31 July 2019AmericasSarah Morgan

IPR of pre-AIA patents isn’t unconstitutional, finds Fed Circuit

In a defeat for biotech company  Celgene, the US Court of Appeals for the Federal Circuit has concluded that the retroactive application of inter partes review (IPR) proceedings to a pre-American Invents Act (AIA) patent isn’t unconstitutional.

Yesterday, July 30, the Federal Circuit  dismissed Celgene’s constitutional challenge which argued that the retroactive application of IPRs is an unconstitutional taking under the Fifth Amendment.

Matt Rizzolo, an IP litigation partner at Ropes & Gray’s Washington, DC office, said that for the first time the Federal Circuit has substantively addressed the interplay between AIA proceedings and the Fifth Amendment’s Takings Clause.

Celgene had appealed against four IPRs brought by the Coalition for Affordable Drugs, an entity set up by Texas hedge fund manager Kyle Bass (CFAD).

The coalition had filed a petition for an IPR challenging the validity of US patent number 6,045,501 and three IPRs challenging the validity of US patent number 6,315,720.

Both of Celgene’s patents are directed to methods for safely distributing teratogenic or other potentially hazardous drugs while avoiding exposure to a foetus to avoid adverse side effects of the drug.

Teratogenic drugs can cause birth defects or other abnormalities following fetal exposure during pregnancy, with thalidomide being a prime example.

After instituting review, the Patent Trial and Appeal Board (PTAB) concluded that all of the claims of the ‘501 patent and claims 1–9 and 11–32 of the ‘720 patent were obvious.

Celgene appealed against the PTAB’s decision to the Federal Circuit, arguing that the board was wrong to find the claims obvious and that retroactively applying IPRs to patents filed before September 16, 2012 (when the AIA came into force) is an unconstitutional undertaking.

In addition to affirming the board’s findings of obviousness, the Federal Circuit also dismissed Celgene’s constitutional challenge.

The Takings Clause of the Fifth Amendment states that private property shall not “be taken for public use, without just compensation”.

“Specifically, Celgene advances a regulatory takings theory and argues that subjecting its pre-AIA patents to IPR, a procedure that did not exist at the time its patents issued, unfairly interferes with its reasonable investment-backed expectations without just compensation,” said Circuit Judge Sharon Prost, on behalf of the court.

In response to Celgene’s argument, the US Patent and Trademark Office (USPTO) claimed that when the board finds a claim unpatentable in an IPR, it doesn’t effectuate a taking under the Fifth Amendment because the patent owner “never had a valid property right because the patent was erroneously issued in the first instance”.

The USPTO also argued patents have been subject to reconsideration and cancellation by the office in administrative proceedings for nearly four decades, and Celgene’s patents were issued subject to this administrative revocation authority.

“In determining whether the retroactive application of IPRs to pre-AIA patents is an unconstitutional taking, we consider the effect that doing so has on the patent right granted by the PTO, and specifically whether IPRs differ from the pre-AIA review mechanisms significantly enough, substantively or procedurally, to effectuate a taking. We conclude that they do not,” said Prost.

Rizzolo added: “While the court did not dispute that a valid patent is private property for Takings Clause purposes, they pointed to the substantial similarity between IPRs and prior USPTO post-grant proceedings such as ex parte and inter partes re-examinations.”

The judge explained that IPRs don’t “differ sufficiently” from the USPTO reconsideration avenues available when the patents here were issued to constitute a Fifth Amendment taking.

Prost concluded: “Although differences exist between IPRs and their re-examination predecessors, those differences do not outweigh the similarities of purpose and substance and, at least for that reason, do not effectuate a taking of Celgene’s patents.”

Did you enjoy reading this story?  Sign up to our free newsletters and get stories like this sent straight to your inbox.


More on this story

Americas
28 September 2015   The US Patent and Trademark Office has rejected a request by biopharmaceutical company Celgene to sanction hedge fund manager Kyle Bass and his organisation the Coalition for Affordable Drugs.
Americas
28 October 2015   The Coalition for Affordable Drugs, an organisation closely tied to hedge fund manager Kyle Bass, has persuaded the Patent Trial and Appeal Board to institute an inter partes review concerning the validity of two patents owned by biopharmaceutical company Celgene.

More on this story

Americas
28 September 2015   The US Patent and Trademark Office has rejected a request by biopharmaceutical company Celgene to sanction hedge fund manager Kyle Bass and his organisation the Coalition for Affordable Drugs.
Americas
28 October 2015   The Coalition for Affordable Drugs, an organisation closely tied to hedge fund manager Kyle Bass, has persuaded the Patent Trial and Appeal Board to institute an inter partes review concerning the validity of two patents owned by biopharmaceutical company Celgene.