IPRs lower drug costs---it invalidates low-quality patents and limits patent monopolies.

The PTO has many tools at its disposal in granting patents and providing oversight to our patent system—a system intended to reward genuinely new inventions. However, today’s patent system has become less an engine for real invention than a tool for companies, investors, and their lawyers to exploit using sophisticated legal and marketing tricks under the guise of that most nebulous of terms: “innovation.” The quest for ever-longer monopolies too often comes at the cost of people’s lives—the stakes are too high to keep tolerating it.

Restoring the patent system to one that prioritizes genuinely new inventions will require unlearning belief systems and policies from the past 40 years that have led us to this precipice. In the short term, however, there is clear evidence to support immediate changes that could greatly improve the quality of patents.

The Creation Of Inter Partes Review And The Backlash Against It

Following the passage of the America Invents Act (AIA) in 2011, the patent system has allowed any person, including a member of the public, to challenge a patent’s validity in an administrative proceeding before the PTO called inter partes review (IPR). This important new tool was seen as the most significant legislative change to the Patent Act since its modern reformulation in 1952 and had broad bipartisan support. Unfortunately, since its inception, IPR has faced constant and aggressive attacks from pro-patenting advocates, and the PTO has taken significant steps to weaken it. Defending and improving IPR is an important step toward improving patent quality and ensuring there is greater participation in the system.

Since the AIA procedures came online in September 2012, more than 1,000 challenges have been brought against pharmaceutical and biologic patents. The large number of patents that now commonly cover important drug products, known as patent thickets, are used to block and delay the early entry of less expensive generic or biosimilar products from the market. This makes tools, such as IPR, essential for clearing patent thickets to allow earlier entry of competing products that can help lower drug costs. However, after 2016–17, when IPRs against patents for small-molecule drugs and biologics were at their peak, we have seen a significant drop-off in IPR numbers. This decline is due to a few key factors.

The decline of IPR started with the multifaceted attack on the procedure by patent owners once they saw its potential success for weeding out poor-quality patents. Since 2015, the Biotechnology Industry Organization and Pharmaceutical Research and Manufacturers of America have lobbied Congress to exempt drug patents from IPR. The US Chamber of Commerce issued a report strongly criticizing the US patent system compared to other countries due to the alleged imbalance created by an overly strong IPR procedure in the US; this report has been repeatedly cited by the last director of the PTO and members of Congress as a sign that change is needed.

A group of independent inventors staged a protest against IPR by burning patent documents in front of the PTO headquarters. Legislation has been introduced in both chambers of Congress called the “STRONGER Patents Act” that would gut the usefulness of IPR through multiple constraints, including imposing a standing requirement similar to that required in federal court, limiting IPR challenges to one per patent, and raising the standard for showing patent invalidity to “clear and convincing evidence.” The constitutionality of the IPR has been challenged in court multiple times. The recent US Supreme Court decision in United States v. Arthrex indicated that the Patent Act should be interpreted, or implicitly modified, to give the PTO director discretion to review and overrule decisions by the administrative patent judges in the IPR process.

All these attacks, plus many other efforts, put pressure on the PTO itself to change the rules of the game so as to make the system “more balanced” for patent holders. The resulting changes swung the pendulum of the patent system firmly back in favor of patent holders, which is where it had been for the past 40 years. The biggest change by the PTO to the IPR process was its policy of discretionary denials. An IPR challenge begins when a member of the public files a petition with the Patent Trial and Appeal Board (PTAB) arguing that the patent is invalid. The PTAB should decide whether to institute a full IPR based on whether the petition and patent owner’s response demonstrates there is a “reasonable likelihood” that at least one patent claim is invalid. The AIA requires that a petition not meeting the “reasonable likelihood” standard be dismissed. Over the past few years, however, the PTO has steadily and deliberately expanded the circumstances in which it will deny institution of an IPR based on procedural grounds divorced from merits of the invalidity arguments. These so-called “discretionary denials” can leave invalid patents standing and unchallengeable, and they often do so for reasons that Congress rejected in drafting the AIA.

Discretionary denials, which were once rare (only six during 2016) have exploded, reaching 84 in 2019 and 167 in 2020. That means that the PTAB is taking a closer look at a declining number of challenged patents, leaving many intact. The discretionary denials policy comes on top of many other changes to IPR that the PTO has implemented, including:

reversing the PTO’s established policy of viewing issues of fact raised by a petition in the light most favorable to the petitioner in deciding whether to institute a full IPR;

reversing the PTO’s established policy of interpreting patent claims in IPR using the same standard applied by examiners—the broadest reasonable interpretation, and instead interpreting patents more narrowly to increase their odds of surviving an invalidity challenge.

As a result of these procedural changes by the PTO, patent owners have learned how to avoid IPR to protect their weak patents.

Cumulatively, these changes plus discretionary denials have substantially weakened IPR and tilted the field toward patent owners. In fiscal year (FY) 2014, the PTAB instituted for review 75 percent of filed petitions. For FY2020, the PTAB instituted petitions at a historically low rate of only 56 percent, and in FY2021 that rate increased only slightly to 59 percent. Having less petitions instituted necessarily means that IPR proceedings will be taking a closer look at fewer patents and weeding out fewer bad patents.

An Agenda For Strengthening Inter Partes Review

IPRs should be strengthened as a tool to address high prescription drug prices. A first step, as raised in the FDA and Judiciary Committees letters, is reversing the discretionary denials policy. This would mean that IPRs would be refused only if there was not a reasonable likelihood that a patent claim was invalid. The Restoring the America Invents Act recently introduced by Senators Patrick Leahy (D-VT) and John Cornyn (R-TX) would limit discretionary denials and expand the range of prior art that could be considered in IPR. Additionally, the bill would support petitioners’ ability to appeal if they disagree with the PTAB’s decision.

Additional changes are needed to strengthen IPR, however, and many of them may require legislation. The two PTAB procedures created by the AIA, post-grant review (PGR) and IPR could be combined and streamlined to allow petitioners to challenge patents with IPRs under all applicable grounds of invalidity (as is currently available under PGR) while using IPR’s more flexible window for filing after a patent issue. In that way, challengers could bring IPRs for violations of the “written description“ rule,” which requires a patent holder to fully describe the invention claimed, an important flaw in many pharmaceutical patents. And the FDA should recognize PTAB decisions (absent appeal) as a basis for allowing generic entry, rather than requiring a court decision/order.

Drug pricing is an issue with a lot of moving parts. Congress is contemplating some fundamental changes related to Medicare that will lower drug costs for patients, payers, and taxpayers, but more can be done. Patent and drug regulatory reforms must be introduced, starting with strengthening of the IPR to weed out weak patents.