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Post-Grant Oppositions, ¶ IV Certifications, and Sanctions in ANDA Litigation

January 17, 2012

The post-grant opposition proceedings created by the America Invents Act, used in parallel with ANDA litigation, will alter the strategies of ¶ IV practice under the Hatch-Waxman Act. The use of USPTO post-grant proceedings in conjunction with ¶ IV certifications may provide collateral benefits to the ANDA applicant, apart from a direct challenge to patentability of claims covering an approved drug or method. If the same grounds of unpatentability asserted in a ¶ IV certification are presented to the USPTO, and the Office institutes a post-grant opposition, the ANDA applicant may secure a number of advantages even if the claims are not ultimately held invalid in the USPTO and canceled from the patent.

Generic drug makers who file ANDAs are required to make a certification with respect to each patent listed in the Orange Book by the NDA holder that allegedly covers the approved drug. The generic may maintain under ¶ IV that the listed patent is invalid, unenforceable, or not infringed by the proposed generic drug described in the ANDA. An ANDA applicant who contemplates filing a ¶ IV certification will be able to raise many potential litigation defenses in a post-grant proceeding before filing the ANDA, and can time its request with the USPTO to obtain an initial administrative determination on issues of patentability prior to the ANDA filing date. A final opposition decision should normally issue in the USPTO within one year, although this time may be extended to 18 months in exceptional cases.

One important consequence of the institution of post-grant oppositions will be their effect on the issue of potential sanctions for filing a frivolous ¶ IV certification of invalidity. The question of sufficiency of ¶ IV notices has been increasingly raised by patentees in ANDA litigation. The Federal Circuit affirmed an award of $16.8M in attorney fees to the patentee in Takeda v. Mylan, based on its conclusion that the theory of invalidity set forth in a ¶ IV notice, but later abandoned in litigation, was “completely baseless” and failed to raise even a prima facie case of invalidity. The institution of a post-grant review proceeding by the USPTO should provide a measure of insurance against Takeda-type sanctions, particularly in view of the burden of the petitioner to establish the likely invalidity of the challenged claims.

In order to institute post-grant review, under § 324 the petitioner must show that “the information presented in the petition filed under section 321, if such information is not rebutted, would demonstrate that it is more likely than not that at least 1 of the claims challenged in the petition is unpatentable.” The corresponding burden in inter partes review under § 314 is to show that “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” The petitioner’s burden to institute a post-grant opposition is a critical factor, because it closely approaches its ultimate burden of proving unpatentability by a preponderance of the evidence under §§ 316(e) and 326(e). Although the USPTO will clarify the showing that is required in a petition by regulation and Board decisions, it seems likely that the petitioner will be required to initially demonstrate prima facie unpatentability of a challenged claim by a preponderance of the evidence.

If the USPTO concludes that a petition demonstrates that a claim is likely to be held invalid, and institutes a post-grant opposition, it seems unlikely that a court would later determine that the same assertion in a ¶ IV certification is “completely baseless,” applying the opposition preponderance of the evidence standard.

Conversely, if the USPTO declines to institute a post-grant opposition, the petitioner may reconsider its decision to assert the same grounds of invalidity in a ¶ IV notice, decide to assert other grounds of invalidity, or elect to file a ¶ III certification. The ANDA applicant could also decide to proceed with a proposed defense in district court, based on additional discovery or evidence not presented in an opposition petition. A final USPTO decision confirming the validity of a claim in reexamination does not preclude a court from invalidating the claim in litigation.

Apart from the sufficiency of ¶ IV invalidity assertions, the institution of post-grant review should influence a branded manufacturer’s response to an ANDA applicant who makes a showing of presumed unpatentability under the preponderance standard applied in the USPTO. Sanctions can be awarded to an ANDA applicant if a patent owner pursues an objectively baseless infringement action, and the grant of a petition to institute an opposition proceeding, prior to the filing of an ANDA infringement action, could be a significant issue if the USPTO later cancels the claims asserted in litigation. Attorney fees were awarded Dr. Reddy’s where the court concluded that AstraZeneca pursued “unreasonable, frivolous, anti-competitive, anti-consumer litigation” in the absence of evidence of infringement by generic omeprazole.

Based on experience with current inter partes reexaminations, it appears likely that courts will be more inclined to stay infringement litigation for the relatively short time that will be required for administrative resolution of invalidity issues. Even if a USPTO decision is appealed to the Federal Circuit, the administrative determination could influence a district court in continuing or lifting a stay, and scheduling and considering early summary judgment motions. A court might have limited interest in advancing a trial on invalidity under the clear and convincing standard, when the issue might finally be resolved in the USPTO under a less-stringent preponderance standard, based on essentially the same evidence of invalidity.

A final USPTO decision confirming the validity of challenged claims may also simplify litigation, because an opponent will be estopped from raising any ground of invalidity in district court that was raised or could reasonably have been raised in inter partes review under § 315(e) or in post-grant review under § 325(e). A broad scope of estoppel could reduce many patent cases to trials on infringement alone, depending on the date on which an estoppel arises from an adverse USPTO decision and the specific defenses that would be precluded. Issues of estoppel may raise the stakes of an ANDA applicant who elects to pursue a post-grant opposition, but are balanced by the lower burden of proof and the ability to develop a full evidentiary record in the USPTO in the new proceedings.

With respect to the likelihood that the USPTO will institute a post-grant opposition, it is noteworthy that the Office has historically granted 95% of all petitions for inter-partes reexamination, and that 71% of the petitions concerned patents involved in litigation. It is not clear whether post-grant oppositions will be instituted less frequently, because the showing of invalidity required to institute inter partes review or post-grant review is significantly higher than the former inter partes reexamination standard of a “substantial new question of patentability.”

The advantages of obtaining an initial administrative determination that claims are likely to be held invalid and canceled from an Orange-Book listed patent, prior to filing a ¶ IV certification, will often justify the initial costs of preparing a petition for post-grant opposition. Post-grant oppositions will be front-loaded, and will often require testimony from fact and expert witnesses to accompany the initial petition. The schedule for USPTO decision will be rapid and unrelenting, with few opportunities for either party to correct errors.