Par Pharm., Inc. v. Jazz Pharm., Inc.

Addressing for the first time a request for covered business method (CBM) review by a generic drug maker facing an infringement suit under the Hatch-Waxman Act, the U.S. Patent and Trademark Office’s (PTO’s) Patent Trial and Appeal Board (PTAB or Board) denied institution of a CBM patent review on the grounds that the claims did not relate to a method or apparatus performing data processing or other operations with respect to a “financial product or service.”  Par Pharm., Inc. v. Jazz Pharm., Inc., Case Nos. CBM2014-00149, -0150, -0151 and -0153 (PTAB, Jan. 13, 2015) (Murphy, APJ).

Jazz’s patents at issue relate to methods of controlling access to a prescription drug which is prone to being abused.  The claimed method involved a central pharmacy and database that tracks all prescriptions for the drug based on communications from physicians and pharmacies.  The database receives prescription requests, performs a series of checks to spot potential abuse, mails the drug to the patient only if the checks are passed and generates periodic reports to identify diversions in patient’s typical pattern of use.

The defendants are generic companies that had been sued by Jazz for infringement.  Presumably realizing that invalidity challenges under 35 USC § 101 cannot be raised in an inter partes review (IPR) proceeding, the defendants sought to characterize the asserted patents as falling within the scope of the statutory definition of a covered business method patent.

The PTAB denied the defendants’ petition, noting that claims—read as a whole—do not relate to a “financial product or service” or recite “an activity involving the movement of money or extension of credit in connection with the sale of a prescription drug.”  The PTAB rejected the defendants’ arguments that the patents are CBM-eligible on the grounds that the claimed methods would be used in commerce, are financial in nature and involve running the very business of a mail order pharmacy that ships directly to consumers.  Along similar lines, the PTAB rejected defendants’ arguments that the claims are CBM-eligible because they require steps of contacting the patient’s insurance company and flagging that the patient paid cash. The PTAB concluded, instead, that reading the claim as a whole shows that those steps are performed for purposes of preventing abuse of a prescription drug, not for purposes of verifying payment for or insurance coverage of the drug.

The defendants argued that certain actions of the PTO support their argument that the patent is CBM-eligible, namely the PTO’s classification of one of the patents as Class 705 (including “billing systems based on entered medical codes”) and the examiner citing prior art billing systems during prosecution.  The PTAB was not persuaded, however, noting that the actual claim language is the key feature to be considered and that the claims did not recite method steps used in billing or payment.