The Future of ANDA Litigation under the America Invents Act– Will the Balance Shift to Favor Generics?

November 05, 2011

The newly enacted America Invents Act will result in the most radical changes to U.S. patent law in 60 years, replacing historic novelty standards with a worldwide absolute novelty requirement, subject only to an illusory “grace” period. The new statute will arm patent challengers with potent new weapons, both by greatly expanding prior art applicable to future patents, and more importantly, by providing new USPTO pre-and post-grant administrative procedures to revoke existing patents or block the issuance of new applications. One of the most significant aspects of this Act is the creation, for the first time in U.S. patent law, of effective inter-partes patent revocation procedures, which are intended to complement district court invalidity challenges by providing an alternative, and much more rapid, administrative forum that bypasses the courts and is intended to provide final administrative resolution of validity questions within one year.

For generic drug manufacturers who file ANDAs with Paragraph IV certifications and face immediate infringement actions, these new post-grant proceedings will provide effective avenues to defend preemptively, and decisively, against innovator actions. As a result, branded manufacturers with Orange Book listed patents will face new and unfamiliar validity challenges, which may be initiated during FDA exclusivity periods, requiring an in-depth understanding of the new procedures in order to protect their interests.

Historically, the district courts have been the principal venue for invalidating patents in the U.S., but only for defendants already involved in an infringement lawsuit or under the imminent threat of litigation. In order for a generic drug maker to enter the market before the expiration of a patent covering an FDA-approved drug or method of treatment, the generic manufacturer must file an ANDA and a Paragraph IV certification, alleging that any patent listed in the Orange Book is invalid or will not be infringed. Typically, a Paragraph IV certification is followed by an infringement action, which results in an automatic 30-month stay of approval of the ANDA by the FDA. Resolution of validity challenges presented in the Paragraph IV notice is typically delayed by fact and expert discovery, and only occurs after trial or occasionally by summary judgment. The unfavorable legal presumptions, costs and delays of litigation and FDA approval, and uncertainty of district court litigation and appeal, have strongly favored branded manufacturers in defending extremely valuable markets protected by a small number of critical and extremely valuable patents.

This balance will be shifted by the panoply of patent challenges created by the new Act, which include post-grant review; inter-partes review, which will replace existing inter-partes reexamination with a more streamlined procedure; and derivation proceedings. The strategic use of the new procedures, in combination with existing ex parte reexamination, interferences, will transform the landscape of both USPTO administrative and district court litigation. Unlike existing reexamination proceedings, the new post-grant proceedings will be fully “inter-partes” and will frequently involve discovery, depositions of fact and expert witnesses, and an extensive motions practice in a trial conducted by an Administrative Patent Judge on an extremely short schedule.

Like current reexaminations, the new inter-partes review will be limited to questions of novelty and obviousness based on printed publications or patents. In post-grant review oppositions, however, the challenger can raise any ground of invalidity that could be presented in a district court ANDA action, including prior art, nonenablement, lack of written description, double patenting, and utility, among other defenses. The possibility will now exist for an ANDA filer to raise its contemplated Paragraph IV defenses in the USPTO, either before filing the ANDA or during the course of litigation, and obtain a final decision that could invalidate the asserted claims within one year after the proceeding is initiated.

Among other advantages to generics, the USPTO post-grant proceedings will involve a significantly lower burden of proving invalidity by a preponderance of the evidence, rather than “clear and convincing” proof in district court, and a significantly broader construction of critical claim terms by the Patent Trial and Appeal Board, without the necessity of a district court Markman hearing. Moreover, unlike district court judges, the Administrative Patent Judges of the Patent Trial and Appeal Board are experts with years of experience in considering patentability issues, and are generally familiar with the patented technologies at issue. These advantages of the new post-grant proceedings must be balanced against the estoppel consequences of an adverse USPTO decision, which can result in the loss of some or all defenses that could be raised in district court.

These substantive and procedural advantages of the new post-grant proceedings will enable patent challengers to raise invalidity defenses far more effectively in the USPTO, and to obtain a final decision canceling invalid patent claims prior to district court consideration of the same issues. It is likely that patent litigation will come to involve concurrent but separate proceedings in district court and the USPTO, and the new post-grant procedures will govern district court litigation strategies, including stays and preliminary injunctions, which are specifically addressed in the Act.

The Act contains other specific provisions that apply only to ANDA litigation, that will significantly modify existing Paragraph IV strategies based on inequitable conduct, by restricting the patent owner’s ability to “cure” inequitable conduct by submitting withheld information in a “supplemental examination” proceeding after patent issuance.

Whether used preemptively or in response to an infringement action, there is no doubt that inter partes review and post-grant review will prove to be effective and cost-efficient avenues for challenging Orange Book-listed innovator patents. The procedures for conducting post-grant proceedings will be complex and unforgiving, and it will be critical for an innovator to respond immediately to a post-grant petition by fashioning a comprehensive legal, factual, and procedural strategy to present an effective defense.

The new statute is likely to transform the conduct of ANDA litigation, and it is essential for both generic and branded manufacturers to become familiar with the contours of the new post-grant procedures, as a critical element both of ANDA filing and product life cycle management.