`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________________
`
`
`COALITION FOR AFFORDABLE DRUGS IV LLC
`Petitioner
`v.
`PHARMACYCLICS, INC.
`Patent Owner
`_____________________
`
`Case No. IPR2015-01076
`Patent No. 8,754,090
`_____________________
`
`
`PETITIONER’S RESPONSE TO PATENT OWNER’S MOTION FOR
`SANCTIONS PURSUANT TO 37 C.F.R. § 42.12
`
`
`
`
`
`
`
`
`TABLE OF CONTENTS
`
`Congress Expressly Authorized Any Person to File a
`Petition for IPR ........................................................................... 2
`
`
`A.
`CFAD Has Standing to Bring This IPR ........................... 2
`
`B.
`
`PO’s Citation to Legislative History Is Inapplicable ....... 4
`
`The Noerr-Pennington Doctrine Bars PO’s Abuse of Process
`and Improper Use of the Proceedings Claims ............................ 5
`
`A.
`
`
`B.
`
`
`
`
`
`
`
`
`
`
`
`The Noerr-Pennington Doctrine Protects CFAD’s Right
`to Bring This IPR Petition ................................................ 5
`
`PO Has Failed to Establish That CFAD’s Petition Falls
`Within the Narrow Sham Exception to the Noerr-
`Pennington Doctrine ........................................................ 7
`
`1. PO has failed to allege, let alone establish, that
` CFAD’s petition is objectively baseless ..................... 7
`
`2. PO has failed to establish CFAD’s petition is
`
`brought with the specific intent to further wrongful
`
`conduct through the use of the process rather
`
`than the outcome of the process .................................. 8
`
`
`INTRODUCTION .......................................................................................... 1
`
`ARGUMENT ................................................................................................. 2
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`I.
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`II.
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`
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`C.
`
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`PO’s Abuse of Process and Improper Use Claims Are
`Legally Deficient in Other Respects .............................. 10
`
`III. Dismissal of This Proceeding as a Sanction Would Be Arbitrary,
`
`Capricious and Would Violate Due Process ............................ 12
`
`
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`
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`i
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`
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`IV. The Public Has a Strong Interest in Invalidating Poor-Quality
`
`Patents....................................................................................... 13
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`
`
`
`
`A.
`
`
`
`B.
`
`
`
`The Supreme Court and Congress Have Recognized the
`Strong Public Interest in Invalidating Poor-Quality
`Patents ............................................................................ 13
`
`The Public Has Expressed a Strong Interest in Having
`Poor-Quality Pharmaceutical Patents Invalidated
`through the IPR Process ................................................. 13
`
`
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`
`
`CONCLUSION ............................................................................................. 15
`
`
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`
`
`ii
`
`
`
`TABLE OF AUTHORITIES
`
`
`Cases
`
`Abbott Labs. v. Brennan,
`
`952 F.2d 1346 (Fed. Cir. 1991) ............................................................ 6
`
`Cal. Motor Transp. Co. v. Trucking Unlimited,
`
`404 U.S. 508 (1972).............................................................................. 6
`
`Dassault Systemes, S.A. v. Childress,
`
`No. 09-10534, 2014 U.S. Dist. LEXIS 167548
`
`(E.D. Mich. Dec. 3, 2014) .................................................................. 11
`
`Dep’t of Homeland Sec. v. MacLean,
`
`135 S.Ct. 913 (2015) ............................................................................. 3
`
`E.R.R. Presidents Conference v. Noerr Motor Freight, Inc.,
`
`365 U.S. 127 (1961).............................................................................. 6
`
`FilmTec Corp. v. Hydranautics,
`
`67 F.3d 931 (Fed. Cir. 1995) ................................................................ 7
`
`Illumina, Inc. v. Trs. of Columbia Univ. in the City of N.Y.,
`
`IPR2012-00006, Paper 28 (PTAB Mar. 12, 2013) ............................... 8
`
`In re Applications of High Plains Wireless, L.P.,
`
`15 F.C.C. Rcd. 4620 (2000) ................................................................ 11
`
`Lear, Inc. v. Adkins,
`
`395 U.S. 653 (1969).................................................................. 1, 13, 15
`
`LKQ Corp. v. ClearLamp, LLC,
`
`IPR2013-00020, Paper 18 (PTAB Mar. 29, 2013) ............................... 8
`
`Loral Space & Communications, Inc. v. Viasat, Inc.,
`
`IPR2014-00236, IPR2014-00239, IPR2014-00240,
`
`Paper 9 (PTAB July 7, 2014) ................................................................ 4
`
`
`
`
`
`iii
`
`
`
`Macauto U.S.A. v. BOS GmbH & KG,
`
`IPR2012-00004, Paper 18 (PTAB Jan. 24, 2013) ................................ 8
`
`Nader v. Democratic Nat’l Comm.,
`
`555 F.Supp.2d 137 (D.D.C. 2008) ............................................... passim
`
`Pope Manufacturing Co. v. Gormully,
`
`144 U.S. 224 (1892)............................................................................ 13
`
`Prof’l Real Estate Investors, Inc. (“PRE”) v. Columbia Pictures Indus.,
`
`508 U.S. 49 (1993) ............................................................................ 7, 8
`
`Proportion-Air, Inc. v. Buzmatics,
`
`57 F.3d 1085, 1995 U.S. App. LEXIS 25871
`
`(Fed. Cir. 1995) ..................................................................................... 6
`
`Russello v. United States,
`
`464 U.S. 16 (1983) ................................................................................ 4
`
`Satellite Broadcasting Co. v. FCC,
`
`824 F.2d 1 (D.C. Cir. 1987) ................................................................ 12
`
`SmithKline Beecham Corp. v. Apotex Corp.,
`
`403 F.3d 1331 (Fed. Cir. 2005) .......................................................... 13
`
`Wenger Mfg., Inc. v. Coating Mach. Sys., Inc.,
`
`No. 4-98-CV-90083, 1999 WL 33268173
`
`(S.D. Iowa Sept. 30, 1999) ................................................................. 11
`
`World Enters. v. Aquila, Inc.,
`
`2013 U.S. Dist. LEXIS 122830
`
`(D. Utah 2013) .................................................................................... 11
`
`Other Authorities
`
`U.S. Const. Amend. I. .................................................................................... 5
`
`37 C.F.R. § 42.1(d) ....................................................................................... 12
`
`37 C.F.R. § 42.12(7) ..................................................................................... 10
`
`
`
`iv
`
`
`
`37 C.F.R. § 42.201 .......................................................................................... 3
`
`37 C.F.R. § 42.302 .......................................................................................... 3
`
`35 U.S.C. § 311 ............................................................................................... 3
`
`35 U.S.C. § 311(a) .......................................................................................... 2
`
`35 U.S.C. § 316(a)(6) ...................................................................................... 5
`
`157 Cong. Rec. S5402, S5409 (Sept. 8, 2011) ............................................. 13
`
`Hr’g, House Jud. Comm., Subcomm. on Intell. Prop. At 53
`(Statement of Atty. Pincus) (March 10, 2011) ................................................ 5
`
`Leahy-Smith America Invents Act § 8(a)(1)(B),
`112 P.L. 29, 125 Stat. 284 ............................................................................... 3
`
`Restatement (second) of Torts §682 (1977) ................................................. 10
`
`Securities Exchange Commission, Public Comments for New Regulation
`SHO, Rel. No. 3235-AJ00 (proposed Oct. 28, 2003) ..................................... 9
`
`
`
`v
`
`
`
`INTRODUCTION
`
`
`
`Pharmacyclics’ (“PO”) motion for sanctions has no merit—it is not
`
`supported by the statutes, judicial precedent or public policy. The plain language of
`
`the statutes and regulations permit Petitioner Coalition for Affordable Drugs IV
`
`LLC (“Petitioner” or “CFAD”) to file a petition for Inter Partes Review (“IPR”) of
`
`U.S. Patent No. 8,754,090 (“the ‘090 patent”). There are no restrictions on who
`
`may file a petition based on business form or motivation.
`
`
`
`Petitioner’s argument is in conflict with Supreme Court precedent finding it
`
`in the public’s interest for economically motivated actors to challenge patents. See,
`
`e.g., Lear v. Adkins, 395 U.S. 653, 670 (1969) (holding public interest requires
`
`permitting licensees to challenge validity because they “may often be the only
`
`individuals with enough economic incentive to challenge the patentability”
`
`and “[i]f they are muzzled, the public may continually be required to pay
`
`tribute to would-be monopolists”) (emphasis added). Having an economic
`
`motive for petitioning the government simply does not turn the petition into an
`
`abuse of process.
`
`This statutory scheme also aligns with the protections afforded by the First
`
`Amendment to the U.S. Constitution and the Supreme Court’s Noerr-Pennington
`
`doctrine. The First Amendment and Noerr-Pennington protect the rights of citizens
`
`to petition the government to redress their grievances. Under that protection,
`
`
`
`1
`
`
`
`government petitions are immune from claims, such as abuse of process, unless the
`
`challenged action is established to be a “sham.” The “sham” exception requires
`
`that the challenged action be, among other requirements, objectively baseless. PO
`
`has notably failed to even allege, let alone establish, that CFAD’s petition is
`
`objectively baseless.
`
`Congress and the Supreme Court have recognized a strong public interest in
`
`removing poor-quality patents from the public arena. This interest is especially
`
`strong for poor-quality pharmaceutical patents that allow companies, such as PO,
`
`to charge overinflated drug prices and delay market entry of affordable generic
`
`drugs, to the detriment of patients and society as a whole. Thus, regardless of
`
`CFAD’s motivation for challenging the validity of the ‘090 patent, the challenge
`
`serves an important public interest: it removes an invalid patent from the system
`
`and opens the door to competition through a process that is unaffordable to the
`
`typical consumer that will benefit most.
`
`ARGUMENT
`
`I.
`
`
`
`
`
`Congress Expressly Authorized Any Person to File a Petition for IPR
`
`A. CFAD Has Standing to Bring This IPR
`
`
`
`PO argues that it is improper for CFAD to bring a petition for IPR because
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`CFAD is a hedge fund and is seeking financial gain. To make this argument, PO
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`dodges the unambiguous language of 35 U.S.C. § 311(a), which authorizes any
`
`
`
`2
`
`
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`“person who is not the owner of a patent [to] file with the Office a petition to
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`institute an inter partes review of the patent.” The Federal Regulations governing
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`IPR mirror this liberal standard. 37 C.F.R. § 42.201 (2015). The liberal standing
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`requirement is consistent with that of the inter partes reexamination process it
`
`replaced, which permitted “[a]ny third-party requester at any time [to] file a
`
`request for inter partes reexamination.” 35 U.S.C. § 311 (pre-AIA). There are no
`
`statutes, regulations or rules limiting IPR standing based on the nature of the
`
`petitioner or the motivation behind filing a petition. In contrast, Covered Business
`
`Method review (“CBM”) standing is limited to a “person or the person’s real party
`
`in interest or privy [that] has been sued for infringement of the patent or has been
`
`charged with infringement under that patent.” Leahy-Smith America Invents Act
`
`§ 8(a)(1)(B), 112 P.L. 29, 125 Stat. 284, 330; 37 CFR § 42.302 (2015).
`
`
`
`The different standing requirements of these related sections of the AIA are
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`significant because “Congress generally acts intentionally when it uses particular
`
`language in one section of a statute but omits it in another.” Dep’t of Homeland
`
`Sec. v. Maclean, 135 S.Ct. 913, 919 (2015). This interpretative canon applies with
`
`particular force when the statutes or regulations are part of the same statutory
`
`scheme, as is the case with IPR and CBM. Id.
`
`Here, the plain language of the statutes and regulations permit CFAD to file
`
`its petition for IPR and this should be the end of the inquiry.
`
`
`
`3
`
`
`
`PO’s Citation to Legislative History Is Inapplicable
`
`B.
`
`PO attempts to distort the statute and regulations through selective and
`
`
`
`misleading reference to inapplicable legislative history. This effort should be
`
`disregarded because when “the statutory language is unambiguous, in the absence
`
`of a clearly expressed legislative intent to the contrary, that language must
`
`ordinarily be regarded as conclusive.” Russello v. United States, 464 U.S. 16, 20
`
`(1983) (internal quotations omitted). Accordingly, any reference to the legislative
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`history is unwarranted in this case.
`
`
`
`Moreover, even considering the legislative history, it does not support PO’s
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`argument that Congress created IPR exclusively as an alternative to litigation, or
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`otherwise intended to bar petitions like CFAD’s. Contrary to PO’s position, the
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`Board has held that “[i]nter partes review is not a substitute for district court
`
`litigation.” Loral Space & Communications, Inc. v. Viasat, Inc., IPR2014-00236,
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`IPR2014-00239, IPR2014-00240, Paper 9 at 7 (PTAB July 7, 2014). Although the
`
`IPR process can be an alternative to litigation, it is in no way limited to such. Like
`
`the inter partes reexaminations they replaced, IPRs may be brought absent any
`
`threat of litigation.
`
`
`
`To the extent there is any relevance to the legislative history, the statute and
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`regulations authorizing sanctions for abuse of process and “improper use of the
`
`proceeding” in 35 U.S.C. § 316(a)(6) were not enacted to curb legitimate merit-
`
`
`
`4
`
`
`
`based IPR petitions, such as the one filed by CFAD. Instead, according to the
`
`alleged legislative history cited by PO, the purpose was to prevent “frivolous”
`
`petitions and “repetitive” claims against the same patents and the same parties. (PO
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`Motion, Paper 20 “Mot.” at 4) (citing Hr’g, House Jud. Comm., Subcomm. on
`
`Intell. Prop. at 53 (Statement of Atty. Pincus) (March 10, 2011). PO makes no
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`allegation that CFAD’s petition is either frivolous or repetitive.
`
`II. The Noerr-Pennington Doctrine Bars PO’s Abuse of Process and
`Improper Use of the Proceedings Claims
`
`
`
`
`
`A.
`
`The Noerr-Pennington Doctrine Protects CFAD’s Right to Bring
`This IPR Petition
`
`
`CFAD’s right to file a petition for IPR is strongly reinforced by the
`
`protections it is afforded by the U.S. Constitution and the Supreme Court’s Noerr-
`
`Pennington doctrine. The First Amendment of the United States Constitution
`
`prohibits laws “abridging the right of the people . . . to petition the government for
`
`redress of grievances,” and gives safe harbor to all genuine efforts to influence
`
`government decisions. U.S. Const. Amend. I. The “Noerr-Pennington doctrine
`
`holds that defendants who petition the government for redress of grievances,
`
`‘whether by efforts to influence legislative or executive action or by seeking
`
`redress in court,’ are immune from liability for such activity under the First
`
`Amendment.” Nader v. Democratic Nat’l Comm., 555 F. Supp. 2d 137, 155, 156
`
`
`
`5
`
`
`
`(D.D.C. 2008) (citing E.R.R. Presidents Conference v. Noerr Motor Freight,
`
`Inc., 365 U.S. 127, 138 (1961)).
`
`
`
`Noerr-Pennington’s “reach has been extended to include common-law torts
`
`such as malicious prosecution and abuse of process.” Nader, 555 F. Supp. 2d at
`
`156 (dismissing abuse of process claim under Noerr-Pennington); Proportion-Air,
`
`Inc. v. Buzmatics, 57 F.3d 1085, 1995 U.S. App. LEXIS 25871, *4-*6 (Fed. Cir.
`
`1995) (unpublished) (applying Noerr-Pennington doctrine to abuse of process
`
`claims). The doctrine’s immunity applies to federal agency proceedings, including
`
`those before the USPTO. Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S.
`
`508, 510 (1972) (extending Noerr-Pennington doctrine to “the approach of citizens
`
`. . . to administrative agencies” and holding “Noerr shields from the Sherman Act a
`
`concerted effort to influence public officials regardless of intent or purpose.”);
`
`Abbott Labs. v. Brennan, 952 F.2d 1346, 1355-56 (Fed. Cir. 1991) (reasoning that
`
`abuse of process claim not actionable in PTO unless the “entire federal agency
`
`action was a ‘sham’” and that challenging motives of petition is insufficient to
`
`establish sham).
`
`
`
`CFAD’s right to petition the Board for IPR is protected by the First
`
`Amendment and provides CFAD immunity against PO’s abuse of process and
`
`“improper use” claims.
`
`
`
`
`
`6
`
`
`
`B.
`
`PO Has Failed to Establish That CFAD’s Petition Falls Within the
`Narrow Sham Exception to the Noerr-Pennington Doctrine
`
`
`Noerr-Pennington immunity from liability for seeking government redress is
`
`
`
`lost only when the challenged action is both (1) “objectively baseless in the sense
`
`that no reasonable litigant could realistically expect success on the merits” and (2)
`
`“brought with specific intent to further wrongful conduct ‘through the use of the
`
`governmental process – as opposed to the outcome of that process.” Nader, 555 F.
`
`Supp. 2d at 156 (citing Prof’l Real Estate Investors, Inc. (“PRE”) v. Columbia
`
`Pictures Indus., 508 U.S. 49, 60-61 (1993)). PO has proved neither.
`
`1.
`
`PO has failed to allege, let alone establish, that CFAD’s
`petition is objectively baseless
`
`
`PO’s only criticism of the merits of CFAD’s petition is relegated to a
`
`footnote and asserts that the petition “raise[s] the patent owner’s own alleged prior
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`art references . . . all of which the Examiner considered during prosecution.” (Mot.
`
`at 6 fn. 3.) This criticism is not only incorrect, but amounts to no more than PO
`
`believing that the ‘090 patent will survive IPR. This is insufficient to establish
`
`objective baselessness. The “Supreme Court has forbidden [courts] to equate loss
`
`on the merits with objective unreasonableness.” FilmTec Corp. v. Hydranautics, 67
`
`F.3d 931, 938 (Fed. Cir. 1995). Instead, objective baselessness requires “pursuit of
`
`claims so baseless that no reasonable litigant could realistically expect to secure
`
`favorable relief.” Id.
`
`
`
`7
`
`
`
`PO’s argument is further flawed because there is nothing wrong with
`
`asserting invalidity based on prior art cited during prosecution. The Board in
`
`several instances has instituted an IPR based on prior art considered during
`
`prosecution. See, e.g., Macauto U.S.A. v. BOS GmbH & KG, IPR2012-00004,
`
`Paper 18 (PTAB Jan. 24, 2013); Illumina, Inc. v. Trs. of Columbia Univ. in the City
`
`of N.Y., IPR2012-00006, Paper 28 (PTAB Mar. 12, 2013); and LKQ Corp. v.
`
`Clearlamp, LLC, IPR2013-00020, Paper 18 (PTAB Mar. 29, 2013). Thus, PO has
`
`offered absolutely nothing to establish the “objectively baseless” prong of the sham
`
`exception.
`
`2.
`
`PO has failed to establish CFAD’s petition is brought with
`the specific intent to further wrongful conduct through the
`use of the process rather than the outcome of the process
`
`
`The subjective prong of the sham exception should not even be considered
`
`
`
`where, as is the case here, PO has failed to establish the first prong. PRE, 508 U.S.
`
`at 60. Indeed, the “sham exception does not extend to genuine attempts to secure
`
`government action, even though the defendant harbors wrong intent.” Nader, 555
`
`F. Supp. 2d at 157.
`
`
`
`Regardless, PO fails to meet the subjective prong. PO’s attack on CFAD’s
`
`intent boils down to its assertion that CFAD filed its petition for financial gain.
`
`(Mot. at 3.) That attack has no merit. “[E]very litigant has a personal stake in an
`
`action and, thus, a selfish motive of some sort. . . . Were the court to adopt the . . .
`
`
`
`8
`
`
`
`principle that any motive other than the altruistic impulse to see that the law is
`
`observed renders a litigant liable, then . . . the ability of individuals to petition the
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`government for a redress of grievances would be endangered . . . .” Nader, 555 F.
`
`Supp. 2d at 158. The PO’s allegations are completely consistent with CFAD
`
`desiring to win on the merits of its petition, and do not even make a prima facie
`
`case that the petition is a sham.
`
`
`
`PO suggests that CFAD’s alleged method of financial gain, through “short
`
`selling” of PO’s stock in connection with its challenge to the validity of the ‘090
`
`patent, is somehow improper. Contrary to PO’s unsupported argument, short
`
`selling is legal, not improper, not manipulative and important to an efficient stock
`
`market. (Ex. 1026 [Wu Declaration].) According to the Securities and Exchange
`
`Commission, “market participants who believe a stock is overvalued may engage
`
`in short sales in an attempt to profit from a perceived divergence of prices from
`
`true economic values. Such short sellers add to stock pricing efficiency because
`
`their transactions inform the market of their evaluation of future stock price
`
`performance.” Securities Exchange Commission, Public Comments for New
`
`Regulation SHO, Rel. No. 3235-AJ00 (proposed Oct. 28, 2003). PO’s assertion
`
`that short selling is improper is unsupported by any evidence and contrary to the
`
`opinion of the federal securities regulator and academic authorities.
`
`
`
`
`
`9
`
`
`
`C.
`
`PO’s Abuse of Process and Improper Use Claims Are Legally
`Deficient in Other Respects
`
`
`PO argues that the Board should follow the Restatement (second) of Torts §
`
`
`
`682 for abuse of process claims in IPR proceedings. Regardless of the elements,
`
`Noerr-Pennington protects the filing of the IPR petition. Abuse of process claims
`
`are directed to something else: abuse of the proceedings after they have begun.
`
`In advocating for the Restatement approach, PO selectively quotes Comment
`
`a. to argue that under the Restatement standard, “the Board need not consider the
`
`Petition on its merits to reach the conclusion of misconduct.” (Mot. at 8.)
`
`Comment a. read in context says nothing of the sort. Comment a. supports CFAD’s
`
`position because it provides that abuse of process is “not the wrongful procurement
`
`of legal process . . . it is the misuse of the process . . .” and that only “subsequent
`
`misuse of process, though properly obtained, constitutes the misconduct for which
`
`the liability is imposed.” Restatement (second) of Torts § 682 cmt. a (1977)
`
`(emphasis added). Initiating legal process is not abuse of process.1 Any other
`
`reading would fly in the face of the Noerr-Pennington doctrine.
`
`
`1 PO’s “improper use of the proceedings” claim also depends solely on actions
`
`during the proceedings, not the mere filing of the petition. 37 C.F.R. § 42.12(7)
`
`(improper use of proceedings includes “actions that harass or cause unnecessary
`
`delay or an unnecessary increase in the cost of the proceeding”).
`
`
`
`10
`
`
`
`Also, PO ignores that the use of “primarily” in the Restatement rule with
`
`respect to motivation means that “there is no action for abuse of process when the
`
`process is used for the purpose for which it is intended, but there is an incidental
`
`motive or an ulterior purpose of benefit to the defendant.” Id. at cmt. b. This
`
`essentially incorporates the Noerr-Pennington doctrine into abuse of process by
`
`requiring the challenged claim to be objectively baseless before liability may
`
`attach. PO has not even attempted to establish that CFAD’s petition is objectively
`
`baseless or that it is for a purpose other than to invalidate the ‘090 patent.
`
`Significantly, none of PO’s cases find an abuse of process. See, e.g., In re
`
`Applications of High Plains Wireless, L.P., 15 F.C.C. Rcd. 4620, 4623 (2000)
`
`(dismissing abuse of process claim because petition was used for proper purpose);
`
`Wenger Mfg., Inc. v. Coating Mach. Sys., Inc., No. 4-98-CV-90083, 1999 WL
`
`33268173, at *5 (S.D. Iowa Sept. 30, 1999) (dismissing abuse of process claim);
`
`Dassault Systemes, S.A. v. Childress, No. 09-10534, 2014 U.S. Dist. LEXIS
`
`167548, *29-*30 (E.D. Mich. Dec. 3, 2014) (stating that the misconduct “is not the
`
`wrongful procurement of legal process or the wrongful initiation of criminal or
`
`civil proceedings, it is the misuse of process”).2
`
`2 PO’s evidentiary burden of proof for an abuse of process claim should be
`
`“preponderance of the evidence” because it is the burden utilized in abuse of
`
`process cases (see, e.g., World Enters. v. Aquila, Inc., 2013 U.S. Dist. LEXIS
`
`
`
`11
`
`
`
`III. Dismissal of This Proceeding as a Sanction Would Be Arbitrary,
`Capricious and Would Violate Due Process
`
`
`
`Were the Board to grant PO’s request as a sanction, that decision would be
`
`arbitrary, capricious and would violate due process. Under “[t]raditional concepts
`
`of due process incorporated into administrative law” an agency is precluded “from
`
`penalizing a private party for violating a rule without first providing adequate
`
`notice of the substance of the rule.” Satellite Broadcasting Co. v. FCC, 824 F.2d 1,
`
`3 (D.C. Cir. 1987) (reversing FCC’s dismissal of SBC’s applications because the
`
`FCC regulation at issue was unclear). An agency “through its regulatory power
`
`cannot, in effect, punish a member of the regulated class for reasonably
`
`interpreting Commission rules.” Id. at 4. If the agency “wishes to use [its]
`
`interpretation [of a rule] to cut off a party’s right, it must give full notice of its
`
`interpretation.” Id. “Dismissal of an application . . . is a sufficiently grave sanction
`
`to trigger this duty to provide clear notice.” Id. at 3.
`
`Like in Satellite Broadcasting, CFAD’s interpretation of the statutory
`
`requirements for filing a petition for IPR is reasonable. If the Board were to grant
`
`PO’s motion, it would have failed to give fair notice and its actions would be
`
`arbitrary, capricious and would violate due process.
`
`
`122830, *22 (D. Utah 2013)) and it is the default burden in IPR proceedings. 37
`
`C.F.R. § 42.1(d).
`
`
`
`12
`
`
`
`IV. The Public Has a Strong Interest in Invalidating Poor-Quality Patents
`
`A.
`
`The Supreme Court and Congress Have Recognized the Strong
`Public Interest in Invalidating Poor-Quality Patents
`
`
`PO ignores the useful public purpose served by CFAD’s petition. Both the
`
`Federal Circuit and “the Supreme Court have recognized that there is a significant
`
`public policy interest in removing invalid patents from the public arena.”
`
`SmithKline Beecham Corp. v. Apotex Corp., 403 F.3d 1331, 1354 (Fed. Cir. 2005).
`
`This is because there is a “strong federal policy favoring the full and free use of
`
`ideas in the public domain,” Lear, 395 U.S. at 674 and “[i]t is as important to the
`
`public that competition should not be repressed by worthless patents.” Pope
`
`Manufacturing Co. v. Gormully, 144 U.S. 224, 234 (1892). Likewise, Congress
`
`implemented administrative challenges to patents, such as IPR, to “ensure that
`
`poor-quality patents can be weeded out through administrative review rather than
`
`costly litigation.” 157 Cong. Rec. S5402, S5409 (Sept. 8, 2011) (Statement of Sen.
`
`Schumer).
`
`B.
`
`The Public Has Expressed a Strong Interest in Having Poor-
`Quality Pharmaceutical Patents Invalidated through the IPR
`Process
`
`
`CFAD’s interest in challenging PO’s poor-quality patent aligns with that of
`
`
`
`the public. Organizations such as AARP and health insurers have expressed
`
`disagreement and concern to Congress about proposed legislation that would shield
`
`or “carve-out brand name drug manufacturers from the inter partes review (IPR)
`
`
`
`13
`
`
`
`process.” (Ex. 1027 at 1.) Their concern focuses on the “widely-used practice
`
`known as ‘evergreening’ where manufacturers make minor modifications to
`
`existing products in order to extend the patent protection for years.” (Id.) Those
`
`organizations are keenly aware, “[e]vergreening results in substantial additional
`
`spending on prescription drugs that do not measurably improve quality of care.”
`
`(Id.)
`
`The Center for Economic Policy Research (“CEPR”) studied this issue and
`
`concluded that “the IPR process appears to be an effective mechanism for quickly
`
`removing dubious patent claims before they impose major costs on the economy”
`
`and that exempting pharmaceutical patents from the IPR process could cost the
`
`public as much as an additional $220 billion over the next 20 years. (Ex. 1028 at
`
`1.) Thus, the ability of anyone to challenge the validity of pharmaceutical patents
`
`through IPR is “a critical consumer protection against abusive patent extensions
`
`that limit patient access to more affordable treatment options, delay market entry of
`
`less expensive generic therapies, and drive up drug costs.” (Ex. 1027 at 1.)
`
`
`
`PO’s ‘090 patent is a prime example of abusive evergreening for its drug
`
`Imbruvica. The ‘090 patent covers a known and obvious method of using an
`
`already-patented drug. PO has at least 11 patents directed to Imbruvica and the
`
`‘090 patent is part of a second wave of patents that expire in 2031—five years after
`
`the original patents. (Ex. 1029.) Removing the ‘090 patent from the public arena is
`
`
`
`14
`
`
`
`a step towards opening competition and speeding the entry of a less expensive
`
`generic product. With Imbruvica, bringing down the cost is critical. It is priced at
`
`about $130,000 per patient per year—making it one of the most expensive cancer
`
`therapies on the market. (Ex. 1030.) If any party is guilty of an abuse of process for
`
`a financial gain, it is the PO for misusing the patent system to inappropriately
`
`extend patent coverage for a product to obtain unconscionable profits.
`
`
`
`Few, if any, consumers have the financial wherewithal to challenge poor-
`
`quality pharmaceutical patents. Lear, 395 U.S. at 670. Thus, regardless of CFAD’s
`
`business form or motivation for challenging the validity of the ‘090 patent, the
`
`challenge serves an important public interest: it removes an invalid patent from the
`
`system and opens the door to competition through a process that is unaffordable to
`
`those who will benefit most.
`
`CONCLUSION
`
`
`
`CFAD respectfully requests that the Board deny PO’s motion for sanctions.
`
`Respectfully submitted,
`
`Date: August 13, 2015
`
`
`
`
`
`By:/Jeffrey S. Ward/
`Jeffrey S. Ward (Reg. No. 32,774)
`MERCHANT & GOULD, P.C.
`10 E. Doty Street, Suite 600
`Madison, WI 53703-3376
`Telephone: (608) 280-6751
`Counsel for Petitioner
`
`
`
`15
`
`
`
`CERTIFICATION OF SERVICE
`
`The undersigned hereby certifies that PETITIONER’S RESPONSE TO
`
`PATENT OWNER’S MOTION FOR SANCTIONS PURSUANT TO 37 C.F.R. §
`
`42.12, PETITIONER’S UPDATED APPENDIX OF EXHIBITS and EXHIBITS
`
`1026 - 1046 for the above-captioned matter were served in their entirety on August
`
`13, 2015, upon the following parties via electronic mail:
`
`John Desmarais
`Kevin McNish
`Lauren M. Nowierski
`Desmarais LLP
`230 Park Avenue
`New York, NY 10169
`jdesmarais@desmaraisllp.com
`kmcnish@desmaraisllp.com
`lnowierski@desmaraisllp.com
`PharmacyclicsIPRService@desmaraisllp.com
`
`Respectfully submitted,
`
`Dated: August 13, 2015
`
`MERCHANT & GOULD P.C.
`
`
`
`
`
`
` BY: /Jeffrey S. Ward/
`Jeffrey S. Ward (Reg. No. 32,774)
`
`MERCHANT & GOULD, P.C.
`10 E. Doty Street
`Suite 600
`Madison, WI 53703-3376
`Telephone: (608) 280-6751
`FAX: (612) 332-9081
`
`ATTORNEYS FOR PETITIONER
`
` (Trial No. IPR2015-00990)
`
`
`
`
`
`
`
`
`
`
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