PHOTOCREO Michal Bednarek /
13 August 2015Peter Pitts

Why biopharma patents should be free from PTAB clutches

The UK’s pharmaceutical industry reportedly employs more than 70,000 workers and in 2013 contributed around £13 billion ($20.2 billion) to the economy.

The industry’s future, however, could be in jeopardy due to patent law changes across the Atlantic. British drug firms’ intellectual property faces an unprecedented threat from a US patent review board. The Patent Trial and Appeal Board (PTAB) has invalidated many legitimate patents.

In 2011, Congress passed the American Invents Act (AIA), which established the PTAB. Lawmakers hoped the PTAB would efficiently resolve disputes between patent owners and alleged infringers that challenge the legitimacy of certain patents. Congress gave the PTAB the power to invalidate the overly broad patents used by ‘patent trolls’.

Under the PTAB, patent challengers must only demonstrate that it’s more likely than not that a claim to IP is too broad in order to invalidate a patent claim. By comparison, federal courts require alleged infringers to provide “clear and convincing” evidence that a patent is too broad and therefore cannot be infringed.

The PTAB’s burden of proof is about as reliable as a coin toss.

Because infringers can wipe away their guilty verdicts by successfully challenging a patent, the financial incentive to challenge legitimate IP rights is enormous. Last October, US company Ultratec, which makes closed-caption phones for deaf people, successfully defended its patents in the district court against an infringer and won $44 million in damages. The infringer challenged the patents’ legitimacy—which had already been upheld by the court—and won thanks to the PTAB’s weaker standards. The guilty verdict and the damages were overturned.

Rulings such as this have led Randall Rader, former chief judge of the US Court of Appeals for the Federal Circuit, to compare the PTAB to “death squads killing property rights”. The PTAB has reviewed three times as many challenges as the US government initially expected, and ruled in favour of the challenger in a high percentage of cases.

“Unlike a court of law, the PTAB doesn’t even require patent challengers to prove they’ve been damaged by the patent. Anybody can challenge any patent.”

Absent reform, innovators across the globe could see their patents gunned down by the PTAB.

Unlike a court of law, the PTAB doesn’t even require patent challengers to prove they’ve been damaged by the patent. Anybody can challenge any patent. As a result, hedge funds have bet that certain pharma company stocks will decline in value, and then filed challenges against those companies’ patents. The threat of the biased PTAB invalidating revenue-generating patents spooks investors and drives down the stock price.

This blatant manipulation could prevent biopharma companies from raising funds for new drug research.

Largely as a result of the PTAB, patents have lost two-thirds of their value since 2011, according to one broker from AmiCOUR IP Group, a consultancy firm. Richard Baker, president of another consultancy business, New England Intellectual Property, estimates that the AIA as a whole has cost the US economy more than $1 trillion.

Few other industries rival biopharma’s expensive research and development (R&D) process. The creation of a new medication costs on average £1.15 billion and  takes a decade. Only 12 percent of clinically tested molecules eventually win the approval of the US Food and Drug Administration, and even among those that do, only 20 percent ever turn a profit.

By undermining the validity of biopharma patents, the PTAB makes it even more uncertain that biopharma R&D will yield a return for investors. Firms will have little choice but to scale back research on risky projects. Given the global presence and integration of British biopharma giants such as GSK and AstraZeneca, cuts in the US will reverberate across the UK economy.

The PTAB’s skewed standards will have a chilling effect on innovation, deterring would-be inventors from taking risks and investing in the technologies of tomorrow. Congress must recognise that IP rights drive medical progress and exempt biopharma patents from the PTAB’s reviews.

Peter Pitts is a former FDA associate commissioner and is currently president of the  Center for Medicine in the Public Interest. He can be contacted at:

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