Genentech v. Hospira – Constitutionality of IPRs on Patents Issued Pre-AIA

On July 11, the Federal Circuit will hear oral argument in Genentech v. Hospira. In that case, Genentech appealed the PTAB’s final written decision in IPR2016-01771, which concluded that all five claims of U.S. Patent No. US 7,622,115 (the ’115 patent) were invalid as unpatentable as obvious over two pieces of prior art. The patent claimed methods for treating cancer by administering the antibody bevacizumab, which targets vascular endothelial cell growth fact (VEGF). One issue on appeal, described in more detail below, is whether it is constitutional to subject patents that issued prior to the America Invents Act (AIA) to inter partes review (IPR).

We previously reported on Genentech’s opening brief, which was filed on August 20, 2018, and on the Federal’s Circuit’s certification of the constitutionality issue to the U.S. Attorney General. On November 19, 2018, Hospira filed its response and the U.S. filed its intervenor brief. Genentech filed its reply on December 12, 2018.

In its opening brief, Genentech argued that allowing IPR on a patent that issued before the AIA is an unconstitutional taking without just compensation and a denial of due process. More specifically, Genentech argued that termination of its patent rights without compensation based on post-issuance legislation interfered with its investment-backed expectations in pursuing the pre-AIA patent. According to Genentech, it pursued prosecution of the ’115 patent based on expectations that did not include IPR challenges and that Genentech consequently incurred the cost of publicly disclosing information that it might otherwise have decided to keep secret. The alleged taking thus resulted in Genentech’s technology being in the public domain and cancelling Genentech’s right to exclude with its patent. Because the government did not compensate Genentech for this taking, Genentech argues the taking was unconstitutional.

Genentech also argued that precedent did not foreclose its argument. First, Genentech argued that the Supreme Court’s decision in Oil States Energy Services, LLC v. Greene’s Energy Grp., LLC, 138 S. Ct. 1365 (2018), which upheld the constitutionality of IPRs, expressly did not address the retroactivity issue now presented by Genentech’s appeal. Second, Genentech argued that the Federal Circuit’s decision in Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985), which upheld the constitutionality of applying ex parte reexamination to patents issued prior to legislation that created that procedure, did not foreclose the question as to IPRs because IPR and ex parte reexamination are critically different.

In its responsive brief, Hospira argued that subjecting pre-AIA patents to IPRs is constitutional. First, Hospira argued that application to patents issued before the AIA was not a retroactive application of the law “because it does not attach new legal consequences to pre-AIA conduct.” Hospira took the position that in establishing IPRs, Congress merely set up jurisdictional and procedural rules as to patent reconsideration, not substantive legal changes. Second, Hospira argued that even if the procedure were considered to be retroactive, it would not constitute a taking without just compensation or a denial of due process because it served a rational legislative purpose. This purpose, according to Hospira, was to protect the public interest and correct mistakenly granted patents. Third, Hospira argued that the procedure did not interfere with Genentech’s investment-backed expectations because all patent applications since 1981 have been similarly subjected to administrative review and cancellation through ex parte reexamination. In addition, Hospira stated, no constitutionally-protected property rights exist in an “erroneously granted patent.” Hospira also argued that the Federal Circuit’s decision in Patlex as to ex parte reexamination applied with equal force to IPRs.

The US government in its intervenor brief also argued for the constitutionality of IPR as applied to patents issued pre-AIA. As an initial matter, the government argued that Genentech forfeited its constitutional arguments because the issue was first raised on appeal. However, it suggested that the Federal Circuit could hear the issue due to the number of pending retroactivity challenges. The government then provided three reasons why application to pre-AIA patents comported with the Constitution. First, the government argued, similar to Hospira, that this was not a retroactive application of the law because there were no new legal consequences to events completed prior to the AIA. The government took the position that IPR did not alter patent holders’ substantive rights, but revised procedures, and did not create an administrative review mechanism where one did not previously exist. Second, the government argued, retroactive application of IPR would not violate due process because Congress acted rationally in enacting the IPR procedures as a means to preserve the balance of the patent system in encouraging innovation and avoiding monopolies that stifle competition without advancing science. Further, the government argued that Patlex foreclosed Genentech’s challenge. Third, the government argued that retroactive application of IPR would not effect a taking without just compensation because the patent holder never had a “valid property interest” in an invalid patent that is cancelled by the PTAB in an IPR.

Genentech responded by arguing first that it did not waive its constitutionality argument because it would have been futile to raise it at the PTAB. Further, Genentech argued that no party would be prejudiced by the Federal Circuit deciding the fully-briefed, purely legal constitutional question. Second, Genentech argued that the AIA does apply retroactively because Congress stated so in the AIA statutes. Third, Genentech responded to Hospira’s and the government’s positions, arguing that Genentech did have a valid property interest in the challenged patent and that reexamination and IPR are meaningfully different. Genentech argued that reexamination differed from IPRs because reexamination is an inquisitorial dialogue with the patent examiner that allows amendments, whereas IPR is adversarial and party-directed with limited amendment possibility.

Stay tuned to Big Molecule Watch for further developments in this case as we follow the oral argument on July 11.