How Will Oil States Affect the Biologics Industry?

This past November, the US Supreme Court heard oral arguments in a case that may dramatically affect how patents covering biologic drugs are litigated: Oil States Energy Services, LLC v Greene’s Energy Group, LLC. The issue presented is whether inter partes review (IPR), a streamlined procedure to challenge patents before the Patent and Trial Appeal Board (PTAB), is unconstitutional. Or, put another way, can only federal district courts determine whether a patent is valid through a trial-like process?

Patent-owning biologics manufacturers hope that the answer is yes, as IPRs have otherwise become an attractive weapon for patent challengers because of their more lenient standard of review and expedited timeline to a final written decision. Because dozens of patents might cover a particular product, patent challengers have used the IPR process strategically to challenge key patents relating to biologics. For example, last August, AbbVie asserted more than 70 patents against Boehringer Ingelheim (BI) in an attempt to block BI’s biosimilar adalimumab product, and is now appealing decisions from the PTAB invalidating claims from 3 of those patents.

The Biotechnology Innovation Organization, the trade group for biologics manufacturers, and large biologics corporations like AbbVie and Allergan, filed amicus curiae briefs supporting the petitioners in Oil States seeking to undo IPRs. And for good reason: they have a lot to lose. As of January 31, 2018, 30 biosimilar IPR-related petitions were awaiting a PTAB decision on whether to institute, and approximately 23 instituted petitions were pending a final written decision. If IPRs are found unconstitutional, those 53 or so petitions are in jeopardy, much to the relief of the biologics manufacturers whose patents they target.

Statistics support the biologics patentees’ desire to avoid the streamlined US Patent and Trademark Office (PTO) proceedings. Although the PTAB institutes fewer than half of filed petitions challenging biologics patents, when it does institute, the challenged patent is often in peril. In nearly two-thirds of the PTAB’s final written decisions evaluating biologics patents, it found all claims of those patents unpatentable.

But even if IPRs are declared unconstitutional, biosimilar and competitor-biologics companies will still have avenues available to challenge potentially invalid patents. For example, they can still request that the PTO reconsider patent issuance through an ex parte reexamination petition, as seen in the recent In re Janssen Biotech decision affirming the invalidation of claims from a patent that purportedly covered infliximab. But ex parte reexamination can often be slow. Unlike IPRs, which carry an 18-month deadline to decision, ex parte reexaminations often conclude several years after they begin. For example, in Janssen, the PTO took nearly 4 years to complete its review. In an industry in which a single drug’s annual sales are measured in billions of dollars, challengers are likely to question the usefulness of ex parte reexamination.

Thus, if IPRs disappear, patent challengers are more likely to resort to patent litigation in federal court. That option has its own drawbacks, though. Challengers must navigate the litigation pathway provided under the Biologics Price Competition and Innovation Act as courts grapple with how to manage trial proceedings involving scores of patents.

How likely is a court decision changing the status quo? If the oral argument was any indication, not very. Although Justice Gorsuch appeared strongly in favor of finding IPRs to be unconstitutional, and Chief Justice Roberts had some reservations, the remaining vocal justices seemed skeptical. Yet, for now, everyone has to sit back and wait. A decision is likely to come in the next several months, as the Court typically issues all of its rulings before its term ends in June.