The pharmaceutical industry continues its efforts to exempt pharmaceutical and biotechnology patents from inter partes review (IPR). Neither the House’s Innovation Act nor the Senate’s PATENT Act currently contain any provisions that would exempt particular patents from these proceedings. But as we reported in June, some members of the Senate judiciary committee appear sympathetic to addressing the pharmaceutical industry’s concerns with an exemption for pharmaceutical and biotechnology patents.

Objections of the pharmaceutical industry

The pharmaceutical industry objects to the use of post-grant proceedings under the America Invents Act for review of pharmaceutical and biotechnology patents for at least two reasons. First, the industry argues that the Hatch-Waxman Act and Biotechnology Price Competition and Innovation Act (BPCIA) already contain balanced procedures for the resolution of patent disputes in advance of the launch of generic and biosimilar drugs. Second, some members of the industry contend that they have been subjected to extortionist practices by entities backed by hedge funds that have filed IPR petitions on the patents for certain drugs while the hedge funds short the stock of the brand company. Most notably, hedge fund manager Kyle Bass and the “Coalition for Affordable Drugs” have been cited for this practice.

According to BIO and PhRMA, the exemption for drug patents should apply to patents “covering the product, its use or manufacture, and only after the date of FDA approval.

Proposed solution

In a July 15, 2015, letter to Congress, the Biotechnology Industry Organization and Pharmaceutical Research and Manufacturers of America argued that pharmaceutical patents should be exempt from IPR because the IPR process would upset the balance created under Hatch-Waxman and BPCIA. According to BIO and PhRMA, the exemption for drug patents should apply to patents “covering the product, its use or manufacture, and only after the date of FDA approval.”

Alternatives could address some issues

Two alternative changes to IPRs could address at least the concern about hedge-fund backed entities filing IPRs while the hedge-fund shorts the brand company’s stock.

First, the current version of the House’s Innovation Act includes a provision that would require an IPR petitioner to certify that it has not shorted the stock of the patent owner and has not demanded a payment from the patent owner in exchange for not filing the IPR petition.

Second, Congress could introduce a standing requirement for IPRs, similar to the standing requirement in District Court, under which an IPR petition could only be filed by a party that faces a threat of a patent infringement lawsuit. Neither the current House nor Senate bill contains such a provision, and the Senate Judiciary Committee expressly voted against including such a provision in the PATENT Act.