Stirring the Pot of AIA Alphabet Soup: Now that Hatch-Waxman IPR Challenges Are Passé, Are PTAB CBM Patent Challenges the Next Big Thing?

June 24, 2014

By Kurt R. Karst –      

Although we’re not patent attorneys, we’re smart enough to know that the September 16, 2011 enactment of the Leahy-Smith America Invents Act (“AIA”) signaled a sea change in the patent world.  Indeed, the effects of the AIA were immediately felt in our FDA-regulated space – and specifically, the Hatch-Waxman space – with an AIA provision resulting in a patent term extension that effectively ended a decade-old dispute (see our previous post here).  Then we started to see signs that the AIA’s Inter Partes Review (“IPR”) provisions – an administrative patent challenge proceeding at the U.S. Patent and Trademark Office (“PTO”) before the Patent Trial and Appeal Board (“PTAB”) that serves as a parallel or alternative to district court litigation to adjudicate patentability of issued patents – might be of some utility to generic drug manufacturers (see our previous post here).  Indeed, just last week we saw what has been billed as the first IPR decision involving pharmaceutical-related patents (see here).  Now, we’ve just witnessed the first intersection of the AIA’s Covered Business Methods (“CBM”) petition review provisions and the Hatch-Waxman Amendments.  Earlier this week, generic drug manufacturers Amneal Pharmaceuticals, LLC, Par Pharmaceutical, Inc., and Roxane Laboratories, Inc. submitted a Petition to the PTAB challenging U.S. Patent No. 7,895,059 (“the ‘059 patent”), which is listed in the Orange Book for XYREM (sodium oxybate), and is titled “Sensitive drug distribution system and method.”  The challenge comes just about halfway through the lifespan of the AIA’s CBM provisions, which sunset on September 16, 2020. 

So what’s a “covered business methods patent” and how can the AIA’s CBM provisions be at all relevant to Hatch-Waxman?  (Hint: It involves Orange Book-listed patents covering a Risk Evaluation and Mitigation Strategies (“REMS”), though you might have already guessed that based on the ‘059 patent description above.) 

The AIA defines a CBM patent as any “patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.”  The CBM petition challenge process allows a party charged with infringement of a patent (which occurs nearly each day under Hatch-Waxman) to challenge that CBM patent through a petition process before the PTAB.  (The PTO’s webpage on the AIA’s CBM provisions is available here.)  “CBM was largely imagined as a proceeding for the ¬financial services industry,” according to one of our patent law cheat sheets put out by Sterne Kessler Goldstein & Fox PLLC, which firm (H. Keeto Sabharwal, Dennies Varughese, and Deborah Sterling) also filed the recent CBM challenge to the ‘059 patent.  “In light of some Supreme Court decisions, notably In re Bilski, Congress determined certain ¬financial services patents need a special proceeding to test patentability.”  

But ¬financial services industry patents are a far cry from pharmaceutical industry patents . . . . aren’t they?  The answer, by way of the recent challenge from Amneal, Par, and Roxane, seems to be “usually yes,” but in some cases – at least where there are patents covering a REMS – “sometimes no.”  That’s right, we’re talking about an argument that Orange Book-listed REMS patents fall under the CBM patent definition.  According to the Petition, which seeks cancellation of all 16 claims of the ‘059 patent:

The challenged claims simply recite methods for centralized distribution of retail goods, specifically drugs, through a central pharmacy that encompasses steps such as interfacing with financial businesses, such as insurance companies, in order to secure payment for the prescription, rendering them incidental to a financial product or service.  And these claims are directed to methods and not any technological invention.  The claims’ recitation of a generic computer processor does not change this conclusion.  Moreover, the claimed distribution methods are not novel or nonobvious and do not solve a technological problem with any technological solution.  CBM review is, therefore, appropriate.

Citing the U.S. Supreme Court’s 2012 decision in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1297 (2012), and the very recent decision in Alice Corp. v. CLS Bank Int’l, No. 13-298, 573 U.S. (2014), the Petitioners argue that the ‘059 patent claims “are merely drawn to abstract ideas, and nothing more, artfully drafted in an effort designed to monopolize the abstract idea itself.”  These are the type of claims the Supreme Court warned against, say Petitioners. 

The filing of the Petition is now a new front in a larger battle over REMS and generic competition issues.  It follows recent FDA citizen petition decisions (here and here) and antitrust litigation that recently (and once again) brought the Federal Trade Commission into the fray (here and here).