Paper No. ______
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` Filed: August 12, 2015
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`
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`___________________
`
`
`COALITION FOR AFFORDABLE DRUGS VI LLC
`
`PETITIONER
`
`V.
`
`CELGENE CORPORATION
`
`PATENT OWNER
`
`___________________
`
`CASE NO.: IPR2015-01102
`PATENT NO. 6,315,720
`FILED: OCTOBER 23, 2000
`ISSUED: NOVEMBER 13, 2001
`INVENTORS: BRUCE A. WILLIAMS, JOSEPH K. KAMINSKI
`
`TITLE: METHODS FOR DELIVERING A DRUG TO A PATIENT WHILE
`AVOIDING THE OCCURRENCE OF AN ADVERSE SIDE EFFECT KNOWN
`OR SUSPECTED OF BEING CAUSED BY THE DRUG
`___________________
`
`OPPOSITION TO PATENT OWNER’S MOTION FOR SANCTIONS
`PURSUANT TO 35 U.S.C. § 316(a)(6) AND 37 C.F.R. § 42.12
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`

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`IPR2015-01102
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`IPR20l5—0l 102
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`TABLE OF CONTENTS
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`TABLE OF CONTENTS
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`I.
`
`Introduction ...................................................................................................... ..l
`
`
`I.
`Introduction ........................................................................................................ 1
`II. Statement of Material Facts................................................................................ 3
`III. Response to Patent Owner’s “Relevant Facts” .................................................. 5
`III. Response to Patent Owner’s “Relevant Facts” ................................................ ..5
`IV. Argument ............................................................................................................ 7
`IV. Argument .......................................................................................................... ..7
`A. The Petitions are proper under the AIA and serve public interests. .............. 7
`A. The Petitions are proper under the AIA and serve public interests. ............ ..7
`B. Neither the Petition nor RPI abused or improperly used process. ................. 9
`B. Neither the Petition nor RPI abused or improperly used process. ............... ..9
`C. The Board cannot dismiss petitions prior to institution as a sanction. .........14
`C. The Board cannot dismiss petitions prior to institution as a sanction ........ .. 14
`V. Conclusion ........................................................................................................15
`
`II.
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`Statement of Material Facts .............................................................................. ..3
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`V. Conclusion ...................................................................................................... ..15
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`Cases
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`IPR2015-01102
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`TABLE OF AUTHORITIES
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`Abbott Labs. v. Brennan, 952 F.2d 1346 (Fed. Cir. 1991) ......................................13
`Baker Driveaway Co. v. Bankhead Enterprises, Inc., 478 F. Supp. 857
`(E.D. Mich. 1979) ................................................................................................14
`Cooper Techs. Co. v. Dudas, 536 F.3d 1330 (Fed. Cir. 2008) ................................15
`Earl v. Winne, 34 N.J. Super. 606 (Law Div. 1955) .................................................. 6
`Edward Katzinger Co. v. Chicago Metallic Mfg., 329 U.S. 394 (1947) ................... 9
`Houlahan v. WorldWide, 677 F. Supp. 2d 195 (D.D.C. 2010) ................... 10, 11, 12
`Intellectual Ventures II LLC v. JP Morgan Chase & Co., 781 F.3d
`1372 (Fed. Cir. 2015) .................................................................................... 14, 15
`Lear v. Adkins, 395 U.S. 653 (1969) .....................................................................1, 9
`Morowitz v. Marvel, 423 A.2d 196 (D.C. 1980) ......................................................11
`Nader v. Democratic Nat’l Comm., 555 F. Supp. 2d (D.D.C. 2008) ......... 10, 12, 13
`Neumann v. Vidal, 710 F.2d 856 (D.C. Cir. 1983) ..................................................10
`Prof’l Real Estate Investors, Inc. v. Columbia Pictures Indus., 508
`U.S. 49 (1993) ......................................................................................................13
`Scott v. District of Columbia, 101 F.3d 748 (D.C. Cir. 1996) .................................11
`SmithKline Beecham Corp. v. Apotex Corp., 403 F.3d 1131 (Fed. Cir.
`2005)....................................................................................................................... 9
`State v. Roth, 289 N.J. Super. 152 (1996) .................................................................. 6
`Tedards v. Auty, 232 N.J. Super. 541 (App. Div. 1989) ............................................ 6
`U.S. v. Pendergraft, 297 F.3d 1198 (11th Cir. 2002) ................................................. 6
`Federal Communications Commission
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`5 FCC Rcd. 3911 (1999) ..........................................................................................10
`U.S. Code
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`35 U.S.C. § 316 ........................................................................................................14
`37 C.F.R. § 42.1(d) ..................................................................................................12
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`
`
`ii
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`

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`
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`
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`Exhibit No.
`1034
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`1035
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`1036
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`1037
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`1038
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`1039
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`1040
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`1041
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`1042
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`1043
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`IPR2015-01102
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`TABLE OF EXHIBITS
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`
`Description
`Orange Book Drug Product Listing Corresponding to the ‘501
`Patent, as published by the U.S. Food and Drug Administration on
`August 4, 2015
`Orange Book Drug Product Listing Corresponding to U.S. Patent
`No. 6,315,720, as published by the U.S. Food and Drug
`Administration on August 4, 2015
`Pricing Information for Revlimid® (lenalidomide) capsules from
`“Information for Vermont Prescribers of Prescription Drugs,” from
`Medi-Span and Celgene Corporation (July 1, 2015)
`Pricing Information for Thalomid® (thalidomide) capsules from
`“Information for Vermont Prescribers of Prescription Drugs,” from
`Medi-Span and Celgene Corporation (July 1, 2015)
`Pricing Information for Pomalyst® (pomalidomide) capsules from
`“Information for Vermont Prescribers of Prescription Drugs,” from
`Medi-Span and Celgene Corporation (July 1, 2015)
`Celgene Corp. v. Barr Laboratories, Inc. et al., Complaint, filed
`January 18, 2007, U.S. Dist. Ct. New Jersey, Case No.: 2:33-av-
`00001
`Celgene Corp. v. Natco Pharma Ltd., U.S. Dist. Ct. New Jersey,
`Complaint, Case No: 2:10-cv-05197-SDW-SCM
`Celgene Corp. v. Lannett Holdings Inc., et al., Complaint, U.S.
`Dist. Ct. New Jersey, Case No. 2:15-cv-00697-SDW-SCM
`Celgene v. Barr, Stipulated Dismissal, dated and filed May 21,
`2010, in U.S. Dist. Ct. New Jersey Case No. 2:07-cv-00286-SDW-
`MCA
`International Union of Bricklayers and Allied Craft Workers Local
`1 Health Fund v. Celgene Corp., Class Action Antitrust
`Complaint, filed November 7, 2014, U.S. Dist. Ct. New Jersey,
`2:14-cv-06997-KSH-CLW
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`iii
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`Exhibit No.
`1044
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`1045
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`1046
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`1047
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`1048
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`1049
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`1050
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`1051
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`1052
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`1053
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`1054
`1055
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`IPR2015-01102
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`Description
`Celgene Letter Motion dated September 3, 2014, to Bifurcate and
`Stay Expert discovery re: REMS Patents, in Celgene Corp. v
`Natco Pharma Ltd., U.S. Dist. Ct. New Jersey, Case No: 2:10-cv-
`05197-SDW-SCM
`October 24, 2014, Court Order granting Celgene Motion to
`Bifurcate and Stay Expert discovery re: REMS Patents, in Celgene
`Corp. v Natco Pharma Ltd., U.S. Dist. Ct. New Jersey, Case No:
`2:10-cv-05197-SDW-SCM
`Orange Book Patents Corresponding to Celgene’s Thalomid®
`(thalidomide) capsules, as published by the U.S. Food and Drug
`Administration on August 6, 2015
`Orange Book Patents Corresponding to Celgene’s Revlimid®
`(lenalidomide) capsules, as published by the U.S. Food and Drug
`Administration on August 6, 2015
`Orange Book Patents Corresponding to Celgene’s Pomalyst®
`(pomalidomide) capsules, as published by the U.S. Food and Drug
`Administration on August 6, 2015
`To Promote Innovation: The Proper Balance of Competition and
`Patent Law and Policy—A Report by the Federal Trade
`Commission October 2003
`“Evergreening: A Deceptive Device in Patent Rights,” Gaurav
`Dwivedi et al., Tech. in Society (2010) 32:324–30
`“Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers
`Billions,” FTC Staff Study January 2010
`May 28, 2015 Statement of the Federal Trade Commission on FTC
`v. Cephalon, Inc.
`“The Impact of Exempting the Pharmaceutical Industry from
`Patent Reviews,” Dean Baker, Center for Economic and Policy
`Research (July 2015)
`Declaration of Juan (Julie) Wu, Ph.D., M.S. (“Wu Decl.”)
`Review of Recent Judicial Decisions on Patent Law: Hearing
`Before the Subcomm. on Intellectual Property, Competition, and
`the Internet of the H. Comm. on the Judiciary, 112th Cong. 29
`(2011)
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`iv
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`Exhibit No.
`1056
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`1057
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`1058
`1059
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`1060
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`1061
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`1062
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`1063
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`1064
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`1065
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`1066
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`1067
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`1068
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`1069
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`IPR2015-01102
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`Description
`America Invents Act: Hearing Before the Subcomm. on Intellectual
`Property, Competition, and the Internet of the H. Comm. on the
`Judiciary, 112th Cong. 52 (2011)
`LexisNexis SHEPARD’S® Report on Neumann v. Vidal, 710 F.2d
`856 (D.C. Cir. 1983)
`Curriculum Vitae of Juan (Julie) Wu, Ph.D., M.S.
`Diether et al, “It’s SHO Time! Short-Sale Price Tests and Market
`Quality,” J. Fin., 64: 37–73 (2009)
`Timeline Summarizing Legislation and Regulation on Short
`Selling
`Excerpts from 2010 SEC 2010 Amendments to Regulation SHO,
`final rule 34-61595
`Karpoff et al, “Short Sellers and Financial Misconduct,” J. Fin. 65:
`1879–1913 (2010)
`Fang et al, “Short Selling and Earnings Management: A Controlled
`Experiment,” J. Fin., (forthcoming, 2015)
`Ekkehart Boehmer and Juan (Julie) Wu, “Short Selling and the
`Price Discovery Process,” Rev. Fin. Stud. 26: 287–322 (2013)
`Boehmer et al., “Shackling Short Sellers: The 2008 Shorting Ban,”
`Rev. Fin. Stud. 26: 1363–1400 (2013)
`Massa et al., “The Invisible Hand of Short Selling: Does Short
`Selling Discipline Earnings Management?” Rev. Fin. Stud.
`(forthcoming, 2015)
`Massa et al., “Governance through Threat: Does Short Selling
`Improve Internal Governance?” (INSEAD Working Paper
`2013/83/FIN)
`He et al., “Short Sellers and Innovation: Evidence from a Quasi-
`natural Experiment,” (Kelley School of Business Research Paper
`No. 2014-14)
`Dechow et al., “Short-Sellers, Fundamental Analysis and Stock
`Returns,” J. Fin. Econ. 61:77–106 (2001)
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`v
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`IPR2015-01102
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`Exhibit No.
`1070
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`1071
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`1072
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`1073
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`Description
`Akbas et al., “Peer stock short interest and future returns,”
`(Working Paper, 2015)
`Engelberg et al., “How are Shorts Informed? Short-Selling, News
`and Information Processing,” J. Fin. Econ. 105: 260–278 (2012)
`Diether et al., “Short–Sale Strategies and Return Predictability,”
`Rev. Fin. Stud. 22: 575-607 (2009)
`Hedge funds and independent analysts: How independent are their
`relationships?: Hearing before the S. Comm. on the Judiciary,
`109th Cong. 25 (2006) - June 28, 2006 Testimony by Professor
`Owen A. Lamont, Yale School of Management
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`vi
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`I.
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`INTRODUCTION
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`IPR2015-01102
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`Celgene’s motion is littered with references to the Petitioner’s and Real
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`Parties-in-Interest’s (collectively, “CFAD”) “admitted profit motive,” and makes
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`the curious argument that filing IPR petitions with a profit motive constitutes an
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`“abuse of process.” Yet at the heart of nearly every patent and nearly every IPR,
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`the motivation is profit. Celgene files for and acquires patents to profit from the
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`higher drug prices that patents enable. Generic pharmaceutical companies
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`challenge patents to profit from generic sales. Celgene’s argument is in conflict
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`with Supreme Court precedent expressly finding it in the public’s interest for
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`economically motivated actors to challenge patents. See Lear v. Adkins, 395 U.S.
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`653, 670 (1969) (holding public interest requires permitting licensees to challenge
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`validity because they “may often be the only individuals with enough economic
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`incentive to challenge the patentability” and “[i]f they are muzzled, the public
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`may continually be required to pay tribute to would-be monopolists”). Having
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`an economic motive for petitioning the government simply does not turn the
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`petition into an abuse of process.
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`CFAD anticipates that fees and costs to complete an IPR for a single drug is
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`approximately $1 million dollars. There are a limited number of entities capable of
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`making that financial commitment. And fewer can make such a commitment
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`without the prospect of profiting from their efforts. The fact is CFAD’s
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`IPR2015-01102
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`motivations do not change the social value of its activities. Poor quality patents
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`enable pharmaceutical companies to maintain artificially high drug prices and reap
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`unjust monopoly profits paid for by consumers and taxpayers.
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`Celgene accuses CFAD of motives that are not entirely “altruistic.” That is a
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`truthful irrelevancy. The U.S. economy is based largely on the notion that
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`individual self-interest, properly directed, benefits society writ large. Celgene’s
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`motive is to profit from consumers and taxpayers from drug sales. Celgene’s
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`patent-conferred monopoly results in Revlimid prices that exceed $580 per pill—
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`creating costs in excess of $200,000 per patient year. (See Exs. 1036–38, showing
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`prices for three Celgene drugs protected by challenged patents.) Revlimid sales
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`were nearly $5 billion in 2014. Celgene is not giving Revlimid or its profits away.
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`CFAD’s IPRs are part of its investment strategy, and it will only succeed by
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`invalidating patents, which would serve the socially valuable purpose of reducing
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`drug prices artificially priced above the socially optimum level. And even if,
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`despite its best efforts, it does not profit—each petition that knocks down a barrier
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`to generic entry benefits the public. It should be axiomatic that people do not
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`undertake socially valuable activity for free—not Celgene, not generics, not
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`shareholders, and not investment funds. Low drug prices will not simply
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`materialize. They must be brought about by agents who will invest significant
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`capital and do the hard work of identifying and challenging weak patents. Generics
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`IPR2015-01102
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`sometimes serve this function. But the law does not render it “abuse” for others,
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`including CFAD, to also play this important societal role.
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`II.
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`STATEMENT OF MATERIAL FACTS
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`Celgene (Patent Owner or “PO”) listed the challenged ’501 and ’720 patents
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`in the FDA’s Orange Book for not just one—but three—of its branded drugs:
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`Thalomid®, Revlimid®, and Pomalyst®. (Exs. 1034, 1035.) PO has asserted both
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`patents to prevent generic entry of Thalomid, and to prevent generic entry of
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`Revlimid. PO asserted both challenged patents (and others) in lawsuits filed
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`against three different generics to delay and prevent FDA approval of their
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`ANDAs until the patents expire. PO asserted the two challenged patents against
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`Barr’s Thalomid ANDA in January 2007 (Ex. 1039), against Natco’s Revlimid
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`ANDA in October 2010 (Ex. 1040), and against Lannett’s Revlimid ANDA in
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`January 2015 (Ex. 1041). PO settled with Barr in May 2010 (Ex. 1042), and was
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`subsequently sued by a union accusing PO of asserting the challenged patents
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`against generics in “sham” litigation (Ex. 1043 at 32, 49–55). Nearly five years
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`have elapsed since PO first asserted the challenged patents against Natco, and no
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`decision on the merits of Natco’s invalidity challenge has issued—and is unlikely
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`to anytime soon because PO moved to stay the litigation on the challenged patents
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`and the stay was granted. (Ex. 1044 at 1–2, Ex. 1045.) Despite PO first asserting
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`IPR2015-01102
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`the challenged patents nearly nine years ago—no court has ever reached a
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`decision on the merits of the validity of either patent.
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`In the FDA’s Orange Book, PO currently lists 16 patents for Thalomid
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`(Ex. 1046), 25 patents for Revlimid (Ex. 1047) and 18 patents for Pomalyst
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`(Ex. 1048). None of these Orange Book patents had ever been challenged in any
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`Patent Office proceeding until Petitioner filed challenges in April 2015.
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`The Federal Trade Commission concluded more than a decade ago that, “in
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`some ways the patent system is out of balance with competition policy” because
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`“poor patent quality” (defined as patents that are “likely invalid” or contain claims
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`that are “likely overly broad”) “may have anticompetitive effects [that] can cause
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`unwarranted market power and can unjustifiably increase costs.” (Ex. 1049 at 5.)
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`It is an unfortunate fact that generic competition is not effective at policing
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`brand evergreening strategies—and a further reason that CFAD’s activities should
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`be encouraged—not sanctioned. (Ex. 1050 at 324.) Just three months ago, the FTC
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`stated that the “economic and regulatory context of brand-generic competition
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`creates incentives for [those] companies to collude rather than compete, and the
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`brand’s profits from preserving a monopoly through anti-competitive settlement
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`can be enormous.” (Ex. 1052 at 3.) Such deals “cost consumers and taxpayers
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`billions of dollars, driving up health care costs and depriving patients of needed
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`medications.” (Id. at 1.) The FTC characterizes agreements ending validity
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`IPR2015-01102
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`challenges as “‘win-win’ for the companies: brand-name prices stay high, and the
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`brand and generic share the benefits of the brand’s monopoly profits. Consumers
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`lose[]: they miss out on generic prices…as much as 90 percent less than brand
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`prices.” (Ex. 1052 at 3; see also Ex. 1053 at 1 (CEPR economic impact study of
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`proposal to exempt pharmaceutical patents from IPRs; finding “it is likely that
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`many dubious claims end up going unchallenged,” and estimating costs arising
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`from improperly granted patents over the next twenty years of $73–$220 billion).)
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`III. RESPONSE TO PATENT OWNER’S “RELEVANT FACTS”
`PO’s motion (POM) does not present any material facts, it presents only
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`attorney argument and popular press clips. PO’s “relevant facts” section starts by
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`name-calling (POM at 2–3), then cites 16 exhibits to show Mr. Spangenberg and a
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`third-party (IRDP) sent PO’s outside counsel similar draft petitions more than a
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`year before CFAD filed these different Petitions. (Id. at 3–4.)
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`Nor does PO submit any evidence (declarations, emails, or otherwise)
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`establishing that any RPI or IRDP ever demanded payment. Neither email PO
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`submits makes a demand. (See Exs. 2034, 2042.) And PO does not cite evidence of
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`any negotiations or even follow-up correspondence. To the contrary, PO admits it
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`“never responded” to Mr. Spangenberg’s email. (POM at 4.) PO does not cite any
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`authority finding abuse of process based on emails attaching draft petitions that do
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`not make a demand and were never filed. It is not abuse of process. See, e.g.,
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`Tedards v. Auty, 232 N.J. Super. 541, 549 (App. Div. 1989) (abuse of process
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`requires “use of process after it has been issued”); Earl v. Winne, 34 N.J. Super.
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`606, 615 (Law Div. 1955) (holding no abuse of process if process is not used).1
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`The balance of PO’s “relevant facts” primarily quotes various press reports
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`and editorials speculating about or criticizing CFAD for filing Petitions to make a
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`profit. (POM at 5–7, quoting WSJ, Business Insider, Law360, Reuters.) None of
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`these articles are evidence—and even if they were they do not establish abuse. The
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`fact is the RPI have not engaged in any misconduct, much less abuse or improper
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`use of these proceedings. In contrast to press gossip, the attached declaration from
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`Dr. Wu (Ex. 1054)—a Finance professor and short selling expert (id., ¶¶ 2–12)—
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`establishes that short selling is common, legal, and regulated (id., ¶¶ 13–19).
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`Markets, shareholders, the investing public, and even shorted companies can and
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`do benefit from short selling. (Id., ¶¶ 20–25.) PO’s suggestions to the contrary
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`(POM at 5–7, 11–14) are baseless. (Ex. 1054, ¶¶ 26–31; see also Ex. 1073 at 3–4.)
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`1 PO accuses an RPI and IRPD of extortion (POM at n.1), but PO admits it did not
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`pay, and the only statute or case PO cites requires “obtain[ing] property of
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`another by extortion” for liability. State v. Roth, 289 N.J. Super. 152, 158 (1996)
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`(quoting N.J. Stat. § 2C:20-5(g)) (emphasis added). Threats to file lawsuits are not
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`extortion. U.S. v. Pendergraft, 297 F.3d 1198, 1205 (11th Cir. 2002).
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`IPR2015-01102
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`IV. ARGUMENT
`The Petitions are proper under the AIA and serve public interests.
`A.
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`PO contends its motion presents a “threshold, gatekeeping” issue (POM at
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`n.3), but then does not address—or even acknowledge—the AIA’s threshold
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`standing provision defining who can petition for IPR. This is fatal to PO’s motion.
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`Statutory interpretation begins with the language of the statute, and “where the
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`statutory language provides a clear answer, it ends there as well.” Hughes Aircraft
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`Co. v. Jacobson, 525 U.S. 432, 438 (1999). 35 U.S.C § 311(a) provides, “[s]ubject
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`to the provisions of the chapter, a person who is not the owner of a patent may
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`file…a petition to institute an [IPR] of the patent.” PTO regulations implementing
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`the AIA’s petitioner standing requirement provide, “[a] person who is not the
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`owner of a patent may file with the Office a petition to institute an inter partes
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`review of the patent unless” the petitioner, RPI, or a privy: (a) filed a civil action
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`challenging the patent, (b) filed the petition more than one year after being served
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`with an infringement complaint, or (c) are estopped from challenging on the
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`grounds in the petition. 37 C.F.R. § 42.101(a)–(c). None of the three enumerated
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`exceptions apply to CFAD, its RPI, or any privy. PO does not allege otherwise.
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`
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`Having ignored the statutory text, PO’s lead argument purports to cite
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`legislative history revealing that the AIA intended to forbid for-profit petitions
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`from petitioners who short sell the PO’s stock. (POM at 7–9.) PO’s citations utterly
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`IPR2015-01102
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`fail to support its view of the AIA’s IPRs. PO’s first cite (POM at 7) is not from
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`the AIA, it is from the Patent Reform Act of 2007 (PRA), and it refers not to IPRs
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`but the PRA’s litigation venue restrictions. And PO’s “very clear litigation abuses”
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`cite (id.) was made in support of ending qui tam false marking lawsuits. PO’s
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`“litigation reforms to rein in abusive lawsuits” cite (POM at 8) is from the PRA,
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`not the AIA, and refers to PRA’s venue and damages provisions. PO’s “talking
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`about the patent trolls” cite (id.)—in the portion replaced with ellipses—refers to
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`entities that “vacuum up” patents, not IPR petitioners. (Cf. Exs. 1046–48 (listing
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`dozens of patents, including patents issued to Celgene and those it vacuumed up).)
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`PO’s final two cites fare no better. The “alternative to litigation” cite (POM at 8) is
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`from the PRA, not the AIA—and that cite, as well as the “decrease litigations
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`costs” cite (id.) supports CFAD. If successful, the Petitions would reduce litigation
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`costs for the two generics seeking to sell generic Revlimid—as well as future
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`Thalomid, Revlimid, and Pomalyst ANDA filers.
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`Congress created the IPR process to vanquish low quality patents and
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`improve quality. Congress resisted efforts to create IPR limits at odds with the
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`essential reform: “enabling the experts at the PTO to correct errors in the
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`examinations system[.]” (Ex. 1055 at 29; see also id. at 52–54 (concerns about IPR
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`abuse were limited to abuses of the process after review begins; and citing Fed. R.
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`Civ. P. 11 and the threshold standard for instituting review as tools that prevent
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`IPR2015-01102
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`harassment of patentees); Ex. 1056 at 52 (Mr. Kappos preferring more IPRs rather
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`than less because invalid patents are “more costly to our economy”).)
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`A long line of Supreme Court cases establish that federal patent policy errs
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`on the side of more patent validity challengers. After citing its prior case holding
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`that public policy requires permitting even a seller of a patent issued to itself to
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`challenge the patent’s validity, the Supreme Court explained why expanding
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`validity challenges serves the public interest:
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`In thus emphasizing the necessity of…keeping open the way for
`interested persons to challenge the validity of patents which might
`be shown to be invalid, the Court was stating an often expressed
`policy that [i]t is the public interest which is dominant in the patent
`system, and that the right to challenge is not only a private right to
`the individual, but it is founded on public policy…for the interest
`of the public fostered by freedom from invalid patents[.]
`Edward Katzinger Co. v. Chicago Metallic Mfg., 329 U.S. 394, 400–01 (1947)
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`(emphasis added; internal citations omitted). See also Lear, 395 U.S. at 670;
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`SmithKline Beecham Corp. v. Apotex Corp., 403 F.3d 1131, 1354 (Fed. Cir. 2005)
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`(“Both this court and the Supreme Court have recognized that there is a significant
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`public policy interest in removing invalid patents from the public arena”).
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`B. Neither the Petition nor RPI abused or improperly used process.
`The Board instructed the parties to address the elements of abuse of process.
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`(Paper No. 5 at 2.) PO presents a collection of quotes, including two from
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`Neumann v. Vidal, 710 F.2d 856 (D.C. Cir. 1983). (POM at 10–11.2) Neumann has
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`been abrogated, criticized, and distinguished. (Ex. 1057.) By way of example:
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`Houlahan repeatedly cites Neumann…[which] is arguably inconsistent
`with the stricter standard formulated by the D.C. Court of Appeals in
`Bown v. Hamilton, 601 A.2d 1074, 1080 n.14 (D.C. 1992), and
`Morowitz. Several courts in this jurisdiction properly have declined to
`adopt the expansive formulation outlined in Neumann[]. See Nader v.
`Democratic Nat’l Comm., 555 F. Supp. 2d 137, 160–61 (D.D.C.
`2008), aff’d on other grounds, Nader v. Democratic Nat'l Comm., 567
`F.3d 692, 386 U.S. App. D.C. 164 (D.C. Cir. 2009) (noting that
`Neumann…ha[s] been “superceded by more recent decisions
`embracing the more restrictive standards of Bown…and Morowitz”)[.]
`Houlahan v. WorldWide, 677 F. Supp. 2d 195, 199, n.3 (D.D.C. 2010).
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`Abuse of process occurs “when ‘process has been used to accomplish some
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`end which is without the regular purview of the process, or which compels the
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`party against whom it is used to do some collateral thing which he could not
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`2 PO’s Heck v. Humphrey quote is dicta, but “a perversion of lawfully initiated
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`process to illegitimate ends” is consistent with CFAD’s decisions analyzing abuse
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`of process. Merely filing a petition is not and cannot be a perversion of the process
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`(unless fraudulent or a “sham”), and short selling is not illegal. (See Ex. 1054,
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`¶¶ 13–19.) PO’s FCC cites found that—unlike the Petitions here—the petitions at
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`issue “do not serve the public interest.” 5 FCC Rcd. 3911, 3912 (1999).
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`legally and regularly be required to do.’” Houlahan, F. Supp. 2d at 199 (quoting
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`Morowitz v. Marvel, 423 A.2d 196, 198 (D.C. 1980)). Abuse of process has two
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`elements: “‘(1) the existence of an ulterior motive; and (2) an act in the use of
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`process other than such as would be proper in the regular prosecution of the
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`charge.’” Id. (quoting Hall v. Hollywood Credit Clothing Co., 147 A.2d 866, 868
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`(D.C. 1959) )(emphasis in original). Contrary to PO’s argument, “the fact that a
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`person acted spitefully, maliciously, or with an ulterior motive in instituting a legal
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`proceeding is insufficient to establish abuse of process[.]” Scott v. District of
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`Columbia, 101 F.3d 748, 756 (D.C. Cir. 1996) (citing Restatement (Second) of
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`Torts § 682 cmt. b (1977) )(emphasis added). Morowitz held:
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`The critical concern in abuse of process cases is whether process was
`used to accomplish an end unintended by law, and whether the suit
`was instituted to achieve a result not regularly or legally
`obtainable. The mere issuance of the process is not actionable, no
`matter what ulterior motive may have prompted it; the gist of the
`action lies in the improper use after issuance. Thus, in addition to
`ulterior motive, one must allege and prove that there has been a
`perversion of the judicial process…
`423 A.2d at 198 (emphasis added). Thus, PO cannot establish abuse of process.
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`First, the only process that has been used is filing Petitions, so regardless of
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`ulterior motives, there has not been any abuse of process “after issuance.” Second,
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`neither Petitioner nor RPI have performed any act—within or outside the
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`proceeding—that is not “legally obtainable.” Apart from PO’s misinformed
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`suggestions that short selling is “nefarious,” it has not identified any illegal acts or
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`perversion of this process.3 In fact, PO does not present any evidence establishing
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`CFAD’s Petitions caused it any harm at all. PO has thus “failed to make a
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`colorable showing that [RPI] committed a willful act in the use of the process other
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`than such as would be proper in regular prosecution of the charge.” Houlahan, F.
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`Supp. 2d at 201 (original emphasis).
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`Moreover, before even addressing whether PO has a claim for sanctions
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`based on abuse of process, PO must first establish the sham exception to the Noerr-
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`Pennington doctrine, which “holds that [individuals] who petition the government
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`for redress of grievances, whether by efforts to influence legislative or executive
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`action or by seeking redress in court, are immune from liability for such activity
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`under the First Amendment.” Nader, 555 F. Supp. 2d at 155 (internal cite omitted).
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`Noerr-Pennington’s “reach has been extended to include common-law torts such
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`as malicious prosecution and abuse of process.” Nader, 555 F. Supp. 2d at 156.
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`3 PO contends the PTO has not defined a standard of proof, and urges the
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`“reasonable likelihood” standard. (POM at 10, n.3.) PO is wrong on both counts.
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`The PTO defined the standard of proof in 37 C.F.R. § 42.1(d), providing: “[t]he
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`default evidentiary standard is a preponderance of the evidence.” The Board should
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`apply that default standard to PO’s motion and deny it for lacking any evidence.
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`Noerr-Pennington immunity from liability for government petitioning is lost
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`only when a petition is both “objectively baseless in the sense that no reasonable
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`litigant could realistically expect success on the merits;” and subjectively “brought
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`with specific intent to further wrongful conduct ‘through the use of the
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`governmental process-as opposed to the outcome of that process.” Id. (citing Prof’l
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`Real Estate Investors, Inc. v. Columbia Pictures Indus., 508 U.S. 49, 60–61
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`(1993)). “Objectively baseless” means no reasonable litigant could realistically
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`expect success on the merits. Id. When a petition is not objectively baseless there is
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`no “sham” petition and intent is irrelevant. Id. “Subjectively baseless” means the
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`petition is brought with specific intent for wrongful conduct “through use [of] the
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`governmental process—as opposed to the outcome of that process.” Id. “The sham
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`exception does not extend to genuine attempts to secure governmental action even
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`though the [petitioner] harbors a wrongful motive.” Nader, 555 F. Supp. 2d at 157.
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`The Federal Circuit applied these principles to reject an abuse of process
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`claim arising from interference-related petitioning activity. See Abbott Labs. v.
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`Brennan, 952 F.2d 1346, 1355–56 (Fed. Cir. 1991) (holding abuse of process claim
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`based on interference petitioning not actionable unless the “entire federal agency
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`action was a ‘sham’” and that “challenging motives” of petition is insufficient to
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`establish sham); see also Baker Driveaway Co. v. Bankhead Enterprises, Inc., 478
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`F. Supp. 857, 859 (E.D. Mich. 1979) (filing PTO protest implicates the freedom to
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`petition the government and “will not be curtailed without some extraordinary
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`showing of abuse”). PO has not put forth any material facts establishing—or even
`
`alleging—that these Petitions are objectively or subjectively baseless—and that
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`should end the abuse of process and “improper use of the proceedings” inquiry.
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`C.
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`The Board cannot dismiss petitions prior to institution as a sanction.
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`35 U.S.C. § 316 delegated authority to the PTO to prescribe regulations for
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`the conduct of IPRs. Specifically, § 316(a)(6) empowers th