Hatch files Amendment to Fix IPRs for Pharma, Save Hatch-Waxman

“My amendment will ensure that Hatch-Waxman continues to operate as originally intended by protecting the ability of generic drug companies to develop low-cost drugs while at the same time ensuring brand-name companies have sufficient protections in place to recoup their investments.” —Senator Orrin Hatch

Senator Orrin Hatch (R-UT). Photo by Gage Skidmore. CC BY-SA 2.0.

Late yesterday, Senator Orrin Hatch (R-UT), co-author of the Hatch-Waxman Act, filed an amendment in the Senate Judiciary Committee to address what many characterize as abusive inter partes review (IPR) filings relating to brand name pharmaceuticals. According to Senator Hatch, his amendment is intended to fix IPRs and restore the careful balance the Hatch-Waxman Act struck to incentivize generic drug development. The Hatch-Waxman Act encourages generic drug manufacturers to challenge patents of brand name drugs by filing Abbreviated New Drug Applications with the Food and Drug Administration, which can and typically does result in patent infringement litigation in federal district court.

“As the coauthor and namesake of Hatch-Waxman, I have a keen interest in ensuring we have a well-functioning generic drug industry,” said Senator Hatch in a press release published last night. “My amendment will ensure that Hatch-Waxman continues to operate as originally intended by protecting the ability of generic drug companies to develop low-cost drugs while at the same time ensuring brand-name companies have sufficient protections in place to recoup their investments.”

In recent years inter partes review (IPR) at the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO) has created an alternative path to challenge the patents of brand name drugs; a path alternative to the path envision in Hatch-Waxman. Those who support the Hatch-Waxman regime view IPRs as upending the careful Hatch-Waxman balance.

Senator Hatch’s amendment, the Hatch-Waxman Integrity Act of 2018, would require a generic manufacturer wishing to challenge a brand-name drug patent to choose between Hatch-Waxman litigation, which affords certain advantages such as being able to rely on the drug innovator’s safety and efficacy studies for FDA approval, and IPR, which is cheaper and faster than Hatch-Waxman litigation but does not provide the advantages of a streamlined generic approval process. Parties would not be able to use both. In this way the amendment aims to fix the misuse of IPRs by generics as parallel and duplicate proceedings to disputes already in place in Hatch-Waxman.

Politically, this Hatch pick a path amendment is going to be paired with S. 974, The CREATES Act of 2017 (H.R. 2212). This legislation aims to enable the sharing of samples so that generics can compete more effectively. You can learn more about the substance of the CREATES Act by reading Senator Leahy’s summary here. The Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act enjoys broad, bipartisan support from Senators Leahy, Grassley, Feinstein, Graham, Durbin, Lee, Whitehouse, Cruz, Klobuchar, Kennedy, Blumenthal. Generics want the CREATES Act, and there are 28 co-sponsors. The bill was voted out of the Judiciary Committee favorably this morning but Hatch voted against it.

Raising and connecting the Hatch-Waxman IPR fix to the CREATES Act balances two major interests of both the brand and generic industries. Brand needs this Hatch-Waxman IPR fix and generics want CREATES. Like Hatch’s original objective with Hatch-Waxman, each side gains something resolving a major problem and neither loses anything that they had any reasonable expectation that they would, or should, be able to maintain.

Senator Hatch’s amendment would not have any affect on IPRs relating to the tech industry. This is politically significant because IPRs, created primarily in response to the fictional narrative of patent trolling, was intended to be a faster, cheaper way to challenge patent validity than traditional litigation. What has happened, however, is IPR has become another expensive litigation proceeding. Nevertheless, Senator Hatch and others see IPRs as being enormously beneficial to the tech community, but believe there should be certain carve outs that protects pharmaceutical patents from the killing fields of the PTAB. Presumably, only innovators that have the audacity to have patented inventions being infringed by big tech should be subjected to the whims and fancy of the PTAB.

While Senator Hatch says IPRs frustrate the purpose of Hatch-Waxman and make it more difficult for generic manufactures to take generics to market, that claim is simply false.

In truth, a successful IPR on a pharmaceutical patent would pave the way for generics to immediately enter the market, or as immediately as the FDA process will allow. In fact, a successful IPR would invalidate the patent claims that are being used by the brand name drug owner to prevent generic competition. Indeed, one would be hard pressed to define a process more likely to result in the quick entry of generics to the market.

What IPR does do is nullify the process established by Hatch-Waxman. It also makes it unnecessary for generic manufacturers to sue in federal district court to invalidate a patent claim. This is because Hatch-Waxman allows for gaming that rewards only the first generic manufacturer who challenges the brand name drug.

Thus, the problem Senator Hatch is trying to solve is not the streamlining of generics to the marketplace, but rather it is to prevent generics from utilizing IPRs to kill the patent rights of brand name drugs and then rely on the innovator’s efficacy studies in order to quickly gain FDA approval. If there were an interest in truly allowing generics to get to the market faster IPRs would be expanded for pharmaceutical patents, not curtailed.

Gene Quinn Gene Quinn is a patent attorney and a leading commentator on patent law and innovation policy. Mr. Quinn has twice been named one of the top 50 most influential people [...see more]

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com.

Join the Discussion

21 comments so far.

Anon
June 19, 2018 04:23 pm
xtian,

You misunderstand my statement by pointing to the items that exist as carve-out “gimmies” to the Pharma machine.

Those carve-outs exist? Sure.
But let’s take a closer look: activity in preparation is covered (technically) in all art units under the “experiments” exception. The counter of “filing a paper” to signify infringement has a direct correlation to the limit of the “experiments” exception. Coupled together, this is merely a corollary to any other art field vis a vis a conpetitor’s actions.

I will grant you that Pharma has been treated differently (while the underlying law remains the same), and that this “special treatment” has perhaps caused more grief than has been worth it. I would even grant that ALL preferential treatment of Pharma being stopped would likely bring about a much better overall system.

But the bottom line remains: patent law is not written to be bifurcated between Pharma patents and all other patents.

Any exceptions may be just that: exceptions (and as the saying goes, exceptions prove the rule) – to which I will add again, I am all for eliminating as many exceptions as possible.
xtian
June 19, 2018 11:48 am
Anon- ok, I’ll Play. Define “one patent system”

In the current system, the HW scheme is the only arena where a patent is asserted not on a product, but asserted based a paper filed with the FDA. Can you name any other technical art where it is an act of infringement to file a paper with a governmental agency? Further, can you identify in the mechanical arts where the patent owner is precluded from asserting willful infringement, despite the fact that your competition clearly and unambiguously knows the patent(s) that covers the product? One patent system indeed.
Anon
June 18, 2018 01:10 pm
xtian,

Sorry but no – we still have but one patent system.

That a mechanism for dealing with infringement does not negate that.
xtian
June 18, 2018 10:32 am
All,

One fact that may be overlooked/simplified is the fact that generic companies are exempt from patent infringement (Bolar) while they study their drug. Then, generic companies are incentivized to challenge a patent covering a drug product on the 4th year that the drug product is on the market notwithstanding how long of patent term remains. The creation of the HW indeed has created a “two-patent” system.

I’m sure all pharma co’s would be willing to go back to a “one-patent” system and get rid of HW all-together!
Josh Malone
June 16, 2018 06:16 pm
This is the way a public franchise right operates. Ask Congress to regulate your competitors and exempt your class. We have legislation soon to be introduced that will exempt independent inventors as well. We think it could go along way towards restoring the objective of promoting progress in the useful arts, with a property-like franchise for inventors – the ones who do the innovation. http://www.usinventor.org/2018/05/11/inventor-protection-act/
Joachim Martillo
June 16, 2018 02:32 pm
Night Writer@14, June 16, 2018 12:40 pm

I point out in Response to Request for Comments on: Changes to the Claim Construction Standard for Interpreting
Claims in Trial Proceedings Before the Patent Trial and Appeal Board that among some APJs and some judges, there seems to be severe confusion of obviousness speculation with an obviousness demonstration that renders a claim unpatentable.
Anon
June 16, 2018 02:17 pm
Night Writer,

While I do not doubt that such could happen, I think it a far cry from some actual “turning point” having been reached.

One caveat that should be noted in the view of “just pick the important ones” is that OFTEN it is not possible to know a priori which ones ARE the important ones. Further, the later “sinking” occurs AFTER most of the sunk costs of prosecution. Thus couple the fact that prosecution need be before any “hit” occurs, and one knows not beforehand which items are EITHER “important” or even may be hit, the “smart” thing to do will STILL be to file LOTS of applications. Inside counsel may want to be more selective as to families and play the “s t r e t c h – o u t” game, so ther may be some drop in multiple active applications, but these types of things will not create a free-fall.

Add to this, that those fighting for strong patents ARE making some ground, and our efforts are continuing. Point in fact is that this very article provides for a solid gain for those who desire a strong patent system.

We have a long way to go. but now is not the time to simply quit.
Night Writer
June 16, 2018 12:40 pm
@12 anony

I am just talking about what I hear from higher ups.

Basically what they say:

1) no injunction can be had.
2) almost any patent can be killed with an IPR
3) KSR makes it so that 103 can kill anything and if that doesn’t get it then 101 at dist. ct. or CAFC will

So–what they think is that the odds of any one patent being worth more than the cost of a few IPRs is almost zero. So they look at patents like junk bonds. They are saying maybe some have value. 90 percent do not. We don’t want to file so many just pick the important ones and kill anything else right away. Just junk.

That attitude from the upper people is seems to have become pervasive and indicates to me that patent filings from US companies could take a giant nose dive.
Anon
June 15, 2018 07:21 pm
anony,

Thank you for that – this reflects my prior posts as to the importance of challenging the handwaving that examiners may engage in.

A prima facie case requires of examiners MUCH MORE than what Article III personnel may “get away” with.

Examiners simply are not judges (or Justices) and cannot get away with dispensing with the necessary factual predicates during their examination.

Further, let me repeat that “Official Notice” (even if not used by name) is not allowed to be used by examiners in any sense of use related to state of the art.
This aspect need not even be raised as a matter of law, given that the Office memorandum on Official Notice is binding on the examiners.

What this means is that when called out for attempting to merely mouth “conventional,” the examiner must be able to provide a proper factual basis (and their “say-so” is not permitted) – or must withdraw the rejection.

The more steadfast applicants and their attorneys are to this – the quicker the Office will be in properly doing their job (their APA and executive branch limited job, and NOT the “job” that an Article III person may attempt to get away with).
anony
June 15, 2018 02:24 pm
Night Writer @ 7 and 8

I see you point for why there might be a drop in filings. However, there is hope that the PTAB is beginning to listen to reason, see PTAB Appeal decision dated 2018-05-30 for US App No. 12/852,224 at pages 4-5:

Appellant contends that the Examiner “failed to establish that claim 1 merely recites ‘computer functions that are well-understood, routine and conventional activities.”‘ App. Br. 7 ( emphasis omitted); see Reply Br. 2, 4–5. More specifically, Appellant asserts that “the Examiner has not provided any supporting evidence for asserting that all claimed functions are ‘well-understood routine, conventional activit[ies]. “‘ App. Br. 8; Reply Br. 2, 4. Appellant also asserts that “[ s ]imply because the general function of ‘analysis and storage of data’ is ‘well-understood, routine, and conventional’ does not of itself establish that claim 1 ‘s ‘engine [that] determines [a] payment hierarchy via an automated learning algorithm that analyzes subjective assessments’ is routine or conventional.” Reply Br. 3; see App. Br. 8.

…

Based on the record before us, we agree with Appellant
Joachim Martillo
June 15, 2018 10:34 am
Night Writer@7 June 15, 2018 8:14 am,

The attack on the US patent system begins with the switch-over from pre-GATT to GATT rules in 1995.

While the undermining of the US patent system is taking place, its pace is not rapid. There is probably time left to mobilize against utter ruination, and the USPTO Director seems friendly.

Yet there seems to be a paucity of mobilization among inventors and their advocates.

I tried to find comments in response:

1) to the USPTO Proposed Rulemaking for Claim Construction Standard used in PTAB Proceedings and

2) to the USPTO Request for Comments on Determining Whether a Claim Element Is Well-Understood, Routine, Conventional for Purposes of Subject Matter Eligibility.

I found four comments.

The director might be able to convince Congress of the need for inventor-friendly changes if inventors and their advocates showed more interest.

IANAL, but I am interested. I may be off-target, but I submitted some comments on the first solicitation, which I understood as a request for suggestions on the next steps.

https://drive.google.com/open?id=19oMCc9tu7Txhu8mCyXCeirV1GXR3VkzN
Joachim Martillo
June 15, 2018 10:13 am
I may somewhat beyond the leading edge of technology, but I feel that drug development and FDA approval are about to get a lot cheaper. The drug industry is about where the computer industry was in the last half of the 70s. There is one glaring difference because there is no Homebrew Pharma Club as there was a Homebrew Computer Club.

I was chatting with Professor Arti Rai a few months ago, and I was trying to explain to her that a monopoly on an invention is hardly the same as a monopoly on a market. She told me that I have that belief because I work in hi-tech and not in pharma — something that is not exactly true.

We are at the point where if there is a disease or disorder is treated by a certain pharmaceutical, it is possible to develop a reasonable biochemical model for the disease or disorder, determine where the pharmaceutical is active, and hypothesize another place in the model where another pharmaceutical might be even more effective.

I am describing the sort of reasoning we used in reverse engineering in order to develop non-infringing products to offer customers of computer manufacturers less expensive alternatives to the expensive adapter cards these manufacturers provided for their proprietary busses.
Brian Keith Buchheit
June 15, 2018 09:48 am
Following on from @4 by Jake Holdreith,

My first thought at reading the article were that a protection for Pharma from IPRs would be an illusion since any 3rd party (Unified Patents, for example) could bring the IPR that a generic drug maker couldn’t. Then the generic could free ride and effectively negate the effect of the amendment.

Jake’s comments (I hadn’t looked at the act) show an attempt to prevent this by limiting the IPR effects to “rely on” an IPR decision. That said, invalidation of a patent via IPR will invalidate any underlying contract dependent on a patent (generally). This is especially true when the patent can still be challenged (in some fashion) in court.

I suspect that the amendment REALLY tried to establish a carve out and likely was well thought out by very smart lawyers. The structure of IPRs and patent laws in general are just very adverse to such a carve out. It is “clever” trying to carve out pharma based on the unique other carve-out for generics – but at the end of the day without directly changing the Patent Act and creating an Article 3 exception for pharma litigation (which would likely be unconstitutional), I personally don’t know how you could do it. Maybe other IPWatchdog readers have more insight?

I wanted to emphasize that personally, I REALLY don’t want a carve out. It seems pharma is naturally a big money interest adverse to the big money interest of tech when it comes to patents. Small tech players need all the support (for their patent rights) that they can get given the institutional advantages big tech possesses. Losing pharma’s support for “strong patents” would be a very significant blow to everyone else.
Night Writer
June 15, 2018 08:16 am
So my bet is that we have reached a tipping point for a new phase where original US filings will drop by 40% over the next 3 years.
Night Writer
June 15, 2018 08:14 am
>>(Pharma has LONG sought to play the “divide and conquer” game vis a vis having their own version of patent law)

Yes and this is a half step to the bifurcation. If the patent system is bifurcated, then the EE/mechanical side is dead in a matter of 5 years.

I am seeing a dramatic reduction in the respect or need for patents from large corporations. The new mantra is that we want some but not so many and only important ones. Let’s cut the budget by 40 percent. That seems to be what is going on.

Watch out because a tipping point could be reached and 80 percent of the US patent filings could just suddenly stop. Remember I am the one that has predicted much of what has happened over the last 10 years. I was complaining about Google years before anyone else and predicted Alice. What I see now is corporate counsel basically saying these patents are junk. They are saying we are willing to pay for a few if we can get licenses from them and a few to beat up start-ups and to counter threaten other corporations, but by-and-large these things are a waste of time and money. That is what I am hearing.

Wait until it is n*t cutting time. The patent budget is going to go. Ironic, but the CAFC is working its way out of a job. No need for the CAFC in a few more years of burning the system down. The PTO will have to lay off probably 40 percent of the people in 5 years.

Anyway, those are my predictions. I don’t see any relief.
Anon
June 15, 2018 07:27 am
I am dwelling on the phrase “while at the same time ensuring brand-name companies have sufficient protections in place to recoup their investments.” and I am wondering if I am reading too much into that phrase.

Along the line that the essence of a patent right is a negative right, that patents (in and of themselves) are not a monopoly, and that patents do not guarantee any type of positive cash flow, I wonder if it is I that have taken those lines “too far,” or is it the politician, listening to the voices of Big Pharma, that have turned the possibility of protecting positive cash flows into some type of demanded protection of positive cash flows.

In no other art unit, that I am aware of, is there any talk of this level of protection for the recovery of costs involved with innovation efforts.

Yes, everyone is aware that patent protection is there for the hope of the market choosing one’s innovation, and after that market choice, protecting against knock-offs and the like. But in those situations, there still very much is the presence that recouping one’s costs remains apart from the innovation protection and in the choice of the market.

Perhaps there are shades of grey along a spectrum here, and perhaps it is my own animus against the power of Big Pharma (an animus altogether not unearned), but it seems to me that there is some “extra” push when it comes to the Pharma arena that is decidedly lacking in most all other arts.

Do others see this?

Is this something seen, but consciously decided to be ok, given that human health is involved?
Erich Spangenberg
June 15, 2018 07:07 am
Any possible connection between the $2.77 million pharma gave to Senator Hatch and this amendment? https://www.opensecrets.org/members-of-congress/summary?cid=N00009869&cycle=Career

Of all the many critical issues facing the citizens of Utah and the US, I am sure we can all agree that IPRs in pharma is absolutely at the very top of the list–section 5e getting rid of shorts that file IPRs is particularly critical. Absolutely no doubt that money has no impact on Senator Hatch addressing this horrific problem that plagues the great State of Utah and the toiling masses of US citizens. We must all be grateful for Senator Hatch’s unbiased and devoted service and blind devotion to fixing the critical issues that face this great nation. Bravo. Hail.
Jake Holdreith
June 14, 2018 06:16 pm
The amendment says a filer cannot “rely on” a decision in IPR or PGR. So if a third party invalidates in the PTAB, does that mean no one can certify and no one can enter the market unless and until the dead patent is de-listed? How do you certify the patent is invalid without relying on the invalidity decision? I guess you could certify to the grounds for invalidity but not the decision itself, but then are you prohibited from raising an estoppel in the district court? Doesn’t seem like this was even drafted carefully, in addition to the comments in the post.
Anon
June 14, 2018 04:27 pm
“If there were an interest in truly allowing generics to get to the market faster IPRs would be expanded for pharmaceutical patents, not curtailed.”

Hello 1984.

(Pharma has LONG sought to play the “divide and conquer” game vis a vis having their own version of patent law)
CP in DC
June 14, 2018 03:31 pm
I am so glad you see through this falsehood as well.

Hatch Waxman litigation needs a triggering event, the filing of the ANDA. This triggers the “dance.” To delay entry, brand names sue in district court getting an automatic 30 month stay for FDA approval. IPRs have no stays, don’t need the triggering event, and are done well before 30 months.

So the amendment is simply a method to delay entry of generics into the marketplace.

If brand names feel that IPR is abused by those seeking to invalidate their patents quickly and cheaply…. well take a number and get in line.
Arie Michelsohn
June 14, 2018 02:50 pm
Spot on, Gene!