The blog in a nutshell

The blog in a nutshell

Tuesday, October 27, 2015

Article III and the Patent Act: Into Obscurity

I want to turn to a case currently pending on petition for certiorari (this means the Court hasn't decided whether they will hear it), specifically, an important prescription drug patent case involving similar issues, Mylan Pharmaceuticals vs. Apotex.  The case there involves a curiousness in the way generic drugs are regulated.  

Here is the situation, as simplified as I can, based on my not-quite-expert knowledge (so I apologize if I get anything wrong here): if a party has a valid patent on a drug, then they have an exclusive right to market that drug for the life of the patent.  At any point, a generic can essentially challenge the patent by registering its own drug for marketing.  Or, a generic can challenge the patent in federal court - up to the challenger.  At that point, the patent-owner maintains exclusivity untill the FDA approves the generic, and then once the FDA ultimately approves the drug (which it will do since the patent-owner has disclaimed its validity), the patent-owner and the generic get shared exclusivity for 180 days from when the generic markets the drug, and then it is a free-for-all.  The 180 days is the reward for challenging the patent. 

The problem is that once the patent is registered with the FDA in something called the "orange book," they can't just disclaim the patent.  Once that happens, if someone wants to prove the patent invalid to the FDA, it still has to challenge the patent by the Paragraph IV or in federal court.  Normally, that's not quite a big deal, since people don't generally disclaim their patents when there's value to them - even delay is good, because they continue to have exclusivity while litigation is ongoing.  (The non-disclaimer rule, a friend tells me, is so that it can't be disclaimed even after a loss in a way that would void the generic's 180-day period.  Sure, makes sense in most circumstances: even though doing so would hurt both the patent owner and the challenger, such a hurt-yourself-to-spite-your-opponents makes sense as a credible challenge to repeat players, much like the class action defender increasing everyone's costs before forcing a low-level payout in Campbell-Ewald.)

But here, there's a huge wrinkle.  In the Mylan-Daiichi dispute, Mylan (the first generic) had to challenge two patents to market the drug.  Daichii (the patent owner) disclaimed one patent, and won the other.  Strangely - Congress should fix/clarify this - while Mylan lost the only meaningful dispute - it still has a successful Paragraph IV claim because of the disclaimed patent. It gets its 180 days - but only after the valid patent expires (the disclaimed patent would last longer; I assume but am not sure that the result would be different if the bad patent expired first).  A win for Mylan, and another for Daiichi.   

Apotex (another generic) - who wants to market as soon as the patent expires, filed a Paragraph IV challenge of their own, on the disclaimed patent only.  Under the law, if Apotex's challenge succeeds (which it must), that would give Mylan 75 days to market its drug or lose its rights.  Since Apotex's claim will be resolved more than 75 days before Daiichi's valid patent expires, Mylan's rights will be forfeit.  Defeat snatched from the jaws of victory!  But Mylan and Daichii came up with a solution, and argued that Apotex's challenge can't succeed because Daichii doesn't dispute that the patent is invalid, and thus there is no case or controversy.  (The Federal Circuit rejected this, and this is the issue on petition for cert.)

Now, again, we have a "case" that "arises" out of the laws of the United States (the Patent Act).  And while the parties don't agree, there's certainly something in controversy - the extremely valuable exclusive rights to market the (invalidly) patented drug.  Under my theory, that's all you need, and Mylan's petition should be denied.  Nor was the issue "mooted" by the disclaimer.  Saying it was would be like saying that an expired offer "mooted" the claim in Genesis Healthcare or Campbell-Ewald, when Plaintiffs obtained no relief on their claim.

If the Court takes this case and reverses, it will turn Article III jurisprudence into a game lawyers play to cheat others.  The Supreme Court should get out of this business by making clear that Article III jurisdiction exists whenever there is a claim brought under a federal law, where the Court has the ability to enter in a meaningful order on that claim.  That's all a "case" should require.

And what makes this all the more amusing is that Mylan wants to prevent Apotex from bringing a dispute because there was no real dispute.  But Mylan obtains its rights over something there was no real dispute, either!  And while Mylan raises the concern that courts shouldn't litigate "disputes" when the parties don't disagree, as that may lead to collusion, that's no less true if Mylan's challenge succeeds.  Then, a generic could collude with a patent owner who owns "a good patent" and "a bad patent" to challenge two patents, disclaim one, have the generic roll over on the other, and then both get an extra 180 days from the expiration of the good patent.  

Even without such collusion, Mylan's results could have the unforeseen impact of having people challenge good patents along with bad patents as a way to "cheat" and file early, thereby securing priority.  Of course, that might be preferable to the alternative, which is to have patent owners file bad patents after good ones in order to use the litigation period to extend their monopoly.

There could be downsides to having Apotex win at all.  There may be cases in which a party actually succeeds in eliminating some but not debatably-viable patents necessary to market a drug.  And in that case, we may want to reward the generic for doing that - though perhaps without having to simultaneously challenge "good" patents as well.

But, aside from getting rid of the drug patent system entirely, the solution is Congress substantively drafting the rules so they make sense, and making more clear what we want to reward generics for and what we do not.  Article III should have nothing to do with it.  If Congress wants an 180-day reward for knocking out one, but not two, of the patents, it should have said so.

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