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What does big pharma have to lose if Oil States gets rid of IPRs?

Zachary Silbersher

On November 27, 2017, the Supreme Court heard oral argument in Oil States v. Greene’s Energy.  At issue is whether petitions for inter partes review (IPRs) are constitutional.  We previously reviewed the arguments regarding the challenged constitutionality of IPRs.  Putting those arguments aside, the sector with the most to gain if the Supreme Court dissolves IPRs is branded pharma.  While big tech and generic pharmaceutical companies have resoundingly endorsed the benefits of IPRs, branded pharma is one of the few sectors where a single patent can mean the difference of billions in revenue.  It is thus no surprise that branded pharma trade organizations, including PhRMA (The Pharmaceutical Research and Manufacturers of America) and BIO (Biotechnology Innovation Organization) filed amicus briefs arguing against the constitutionality of IPRs.

At the heart of the constitutional argument is that IPRs deprive persons of private rights without adequate due process.  That due process requires, at a minimum, adjudication by an Article III judge, who enjoys lifetime tenure and salary protection.  But Oil States has also argued, in reliance on the Seventh Amendment, that because an issued patent is a private right, it should be invalidated through recourse to a jury trial.  (p. 12).  Likewise, PhRMA’s amicus brief argued that because the Federal Circuit previously ruled that patents are public rights, it failed to adequately address whether invalidity challenges demand a right to be decided by a jury.  (p. 32).

There is an irony lurking in this argument.  Whereas branded pharma will clearly gain if the Supreme Court bins IPRs, it is not clear it will gain from securing jury trials for invalidity challenges to its patents.  Even if IPRs go away, accused infringers will still have the opportunity to invalidate patents in district court.  Yet, while most patent infringement cases are tried before a jury, pharma cases are not.  Cases under the Hatch-Waxman Act or the BPCIA are typically bench trials; they are tried before the Judge in the absence of a jury.  Why?  Because the Federal Circuit previously held that pharmaceutical patent cases occur before any damages accrue.  Thus, because only equitable relief is sought—i.e., an injunction against the generic or biosimilar—then the Seventh Amendment does not guarantee a right to a jury trial.  In re Apotex, Inc., 49 F. App’x 902, 903 (Fed. Cir. 2002).

The irony is that, in the course of eviscerating IPRs, pharma could theoretically open the door to jury trials for its patents.  That may not work against branded pharma.  For better or worse, bench trials have suited branded pharma seeking to keep generics at bay very well. Intentionally or not, bench trials force the parties to focus their presentations on the technical merits of the obviousness or anticipation arguments.  There is less of an opportunity to put on show for the jury and tell a story. 

By contrast, if Hatch-Waxman cases or BPCIA cases are to be tried before a jury, the generics will shift to telling a damning story.  And the story that generics will tell will be simple: you, members of the jury, are paying more for your pharmaceutical drugs because this company managed to go to back to the Patent Office and squeeze out a new patent based on a minor or negligible change to the dosage regime or formulation.  Arguably, pharma is already against the ropes of public opinion, and yet for better or worse, it does not have to face that scourge of public opinion in the courtroom.  If a company has pursued the business model of dramatically raising prices, that will likely be something that will have to be accounted for before the jury. At this point, almost any juror likely knows someone who has a complaint about the high cost of pharmaceutical drugs.  If the evisceration of IPRs opens the door to jury trials for pharma patents, then that may make keeping generics at bay even harder.