Paper No. __
`Filed: August 20, 2015
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`UNITED STATES PATENT AND TRADEMARK OFFICE
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`________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`________________
`
`COALITION FOR AFFORDABLE DRUGS VI LLC
`Petitioner,
`
`v.
`
`CELGENE CORPORATION
`Patent Owner
`
`________________
`
`Case IPR2015-01102
`Patent 6,315,720
`________________
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`PATENT OWNER REPLY IN SUPPORT OF ITS MOTION FOR
`SANCTIONS PURSUANT TO 35 U.S.C. § 316(a)(6) AND 37 C.F.R. § 42.12
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`04841-00006/7124493.1
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`Filed: August 20, 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 IPR2015-01102
`Patent 6,315,720
`________________
`
`PATENT OWNER REPLY IN SUPPORT OF ITS MOTION FOR
`SANCTIONS PURSUANT TO 35 U.S.C. § 316(a)(6) AND 37 C.F.R. § 42.12
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`04841-00006/7124493.1
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`Patent Owner Reply Motion For Sanctions
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`TABLE OF CONTENTS
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`IPR2015-01102
`Patent 6,315,720
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`Page
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`I.
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`CFAD DOES NOT DENY PATENT OWNER’S FACTS ............................ 1
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`II. ARGUMENT ................................................................................................... 2
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`The Petition is improper under the
`AIA and does not serve the public interest ...................................................... 2
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`CFAD is abusing and improperly using the IPR process ................................ 3
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`Noerr-Pennington does not shield CFAD from sanctions .............................. 4
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`The Board can dismiss the Petition prior to institution ................................... 5
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`III. CONCLUSION ................................................................................................ 5
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`Patent Owner Reply Motion For Sanctions
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`IPR2015-01102
`Patent 6,315,720
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`CFAD’s focus on standing and the propriety of short selling is an attempt to
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`divert attention from the real issue: whether the manner in which CFAD uses IPRs
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`should be permitted. The answer is “no.” The use of IPRs to execute an
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`investment strategy—shorting stocks and then filing IPRs to drive down stock
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`prices—is improper, and an abuse of the IPR process that turns the AIA on its
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`head. This is true regardless of the merits of any petition. Here, Noerr-Pennington
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`does not protect CFAD’s actions. And despite CFAD’s protests, the regulations
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`expressly allow for “dismissal of the petition”; institution of trial is not necessary.
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`I.
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`CFAD DOES NOT DENY PATENT OWNER’S FACTS1
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`First, CFAD does not deny that the RPI demanded payment in exchange for
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`not filing IPRs in 2014. Instead, CFAD argues that PO presented no evidence, but
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`ignores that Ex. 2033 explains Spangenberg’s negotiation tactics. And at least one
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`court has recognized that the “or else! oozes” from statements similar to
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`Spangenberg’s 2014 email to Celgene. POM at 2-4 & Ex. 2034. Further, CFAD’s
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`counsel admitted during the Board call that authorized this motion that payment
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`was discussed. The discussions may be confidential, but at the Board’s request,
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`Celgene can supply evidence of the RPI’s substantial demand.
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`Second, CFAD does not deny its use of IPRs to execute its investment
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`strategy. Instead, it argues that “short selling is common, legal and regulated.”
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`
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`1 PO responds to CFAD’s “material facts” in Appendix A. 37 CFR § 42.24(c).
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`Patent Owner Reply Motion For Sanctions
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`IPR2015-01102
`Patent 6,315,720
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`Opp. at 6. Whether short selling is generally proper is irrelevant. CFAD offers no
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`evidence that taking short positions on publicly-traded companies, and then using
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`government petitions (IPRs) to drive down the companies’ stock prices, is proper
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`or contemplated by the AIA. PO presented evidence that the PTO “never thought”
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`that IPRs would be used “to move stock or as an investment vehicle.” POM at 9.2
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`Third, CFAD does not deny that it: (1) formed for-profit shell companies
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`whose “primary purpose” is to short stocks; (2) has no competitive interest in the
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`challenged patents; and (3) owes its investors a fiduciary duty that puts its
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`investment strategy above any alleged altruistic mission. POM at 5-7.
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`II. ARGUMENT
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`The Petition is improper under the AIA and does not serve the public
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`interest. CFAD’s arguments to the contrary lack merit. First, CFAD incorrectly
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`argues that the AIA’s standing provision is fatal to POM. Opp. at 7. POM is not
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`challenging who CFAD is, but how it is using IPR proceedings. While anyone can
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`file a petition, the regulations expressly permit dismissal of a petition that is used
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`for an improper purpose or if it is an abuse of process. 37 CFR § 42.12.
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`Second, CFAD complains about PO’s citations to the 2007 PRA legislative
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`history (Opp. at 7-8), but ignores that all of PO’s arguments are supported by the
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`2 Contrary to CFAD’s incorrect assertion, newspapers are “evidence that is self-
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`authenticating.” See FRE 902(6); 37 CFR § 42.62.
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`Patent Owner Reply Motion For Sanctions
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`IPR2015-01102
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`AIA’s 2011 legislative history (POM at 7-8). Congress clearly intended to stop
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`non-practicing entities (“NPE”), like CFAD, from using abusive litigation tactics
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`for personal financial gain. Id. Congress did not intend to allow those same NPE
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`to turn around and use abusive IPR tactics for personal financial gain. Id.
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`Third, CFAD’s caselaw does not support its position. As CFAD
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`emphasizes, the Supreme Court encouraged “interested persons,” such as
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`“licensees,” to challenge patents. Opp. at 9, 1. CFAD has not presented any
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`evidence that it is an “interested person.” It cannot. It does not seek to market a
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`competing generic product, and it has not licensed Celgene’s patents. Also, its
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`IPRs (even if successful) will not result in generic competition, at least because, as
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`CFAD admits, it has not challenged all of Celgene’s Orange Book patents. Opp. at
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`4. In any event, FDA, not CFAD, controls access to generics, and FDA has not
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`even tentatively approved any generic version of Thalomid®, Revlimid®, or
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`Pomalyst®. Further, there are several interested parties that can challenge
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`Celgene’s patents under the AIA. Their petitions would be proper. CFAD’s is not.
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`CFAD is abusing and improperly using the IPR process. CFAD does not
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`challenge that its actions are an abuse of process under Neumann. Rather, it argues
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`that “Neumann has been abrogated, criticized, and distinguished.” Opp. at 10.
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`This is false. Neumann remains good law. State and/or federal district courts
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`cannot “abrogate” a circuit court decision, and later decisions from the same court
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`Patent Owner Reply Motion For Sanctions
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`IPR2015-01102
`Patent 6,315,720
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`do not reverse earlier ones unless they do so explicitly; that has not occurred.
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`Regardless, CFAD’s actions are an abuse of process even under its cited caselaw,
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`which focuses on improper motive (which is admitted) and some other act that is
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`not a “regular” part of the proceedings. Here, CFAD is admittedly using IPRs to
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`affect stock prices to cash in on “short” positions. This is “some end which is
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`without the regular purview of [IPRs],” and an “act in the use of process other
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`than such as would be proper in the regular prosecution of [IPRs].” Opp. at 10-12.
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`Even if CFAD’s short positions are not illegal, its use of IPRs to execute its
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`investment strategy is not within the regular purview of IPRs.3
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`Noerr-Pennington (“NP”) does not shield CFAD from sanctions. NP is
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`not a defense to “common litigant sanctions imposed by courts themselves.”
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`BE&K Const. v. NLRB, 536 U.S. 516, 537 (2002). This logically extends to the
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`Board’s discretion to issue sanctions here. NP also requires a “grievance,” which
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`CFAD does not have; it cannot be injured by the ’720 patent. Even assuming that
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`NP applies—it does not—CFAD mischaracterizes the standard for proving that its
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`petitions are a “sham.” Opp. at 12-14 (alleging that PO must prove objective and
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`subjective baselessness). Instead, when the petitioner “is accused of bringing a
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`3 CFAD also argues that dismissal is improper because filing the Petition does not
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`constitute process being issued, but ignores that even threats to file petitions can
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`support abuse of process. See 5 FCC Rcd. 3911, 3912 (1990).
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`Patent Owner Reply Motion For Sanctions
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`IPR2015-01102
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`whole series of legal proceedings”—as is the case here—“the test is . . . [w]ere the
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`legal filings made, not out of a genuine interest in redressing grievances, but as a
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`part of a pattern or practice of successive filings undertaken essentially for
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`purposes of harassment?” Primetime 24 v. Nat’l Broad Co., 219 F.3d 92, 101 (2d
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`Cir. 2000). Here, the answer is “yes.” CFAD’s “series of legal proceedings” is
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`“harassment” that is, among other things, frightening off investors. This is an
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`abuse of process under Neumann. POM at 11-13. Further, Abbott and Baker do
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`not support CFAD’s position. Opp. at 13-14. Both rejected tort abuse-of-process
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`claims because, as Abbott noted, “PTO procedures themselves provide a remedy.”
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`952 F.2d at 1357; Baker, 478 F. Supp. at 860 (PTO should “decide [issues] without
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`interference from this court”). Here, the PTO’s remedy is sanctions.
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`The Board can dismiss the Petition prior to institution. CFAD is wrong
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`to suggest that the statute’s use of the word “proceeding” requires the Board to
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`wait until after institution. See, e.g., CBM2014-00142, Paper 10 (dismissing
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`petition under § 42.12(b)(8) before institution for failing to comply with “[c]onduct
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`of the proceeding”). In any event, abuse of process and improper use of the
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`proceeding are separate sanctionable actions under 37 CFR § 42.12(a), and no
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`“proceeding” is required for “abuse of process.”
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`III. CONCLUSION
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`For these reasons and those in POM, the Petition should be dismissed.
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`Patent Owner Reply Motion For Sanctions
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`IPR2015-01102
`Patent 6,315,720
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`Date: August 20, 2015
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` Respectfully submitted,
`
`By: /F. Dominic Cerrito (Reg. No. 38,100)/
`F. Dominic Cerrito (Reg. No. 38,100)
`QUINN EMANUEL URQUHART &
`SULLIVAN, LLP
`51 Madison Avenue, 22nd Floor
`New York, NY 10010
`Tel: (212) 849-7000
`Fax: (212) 849-7100
`nickcerrito@quinnemanuel.com
`
`Anthony M. Insogna (Reg. No. 35,203)
`JONES DAY
`12265 El Camino Real
`Suite 200
`San Diego, CA 92130
`Tel: (858) 314-1200
`Fax: (858) 314-1150
`aminsogna@jonesday.com
`
`Attorneys for Celgene Corporation
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`Patent Owner Reply Motion For Sanctions
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`IPR2015-01102
`Patent 6,315,720
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`APPENDIX A
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`Celgene (Patent Owner or “PO”) listed the challenged ’501 and ’720 patents in the
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`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.)
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`PO admits that it submitted the ’501 and ’720 patents to the FDA for listing in
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`the “Orange Book” in connection with the New Drug Applications for
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`Thalomid®, Revlimid®, and Pomalyst® and, except as so admitted, denies
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`CFAD’s allegations.
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`PO has asserted both patents to prevent generic entry of Thalomid, and to prevent
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`generic entry of Revlimid.
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`PO admits that it asserted the ’501 and ’720 patents against filers of
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`Abbreviated New Drug Applications (“ANDA”) that infringed those patents
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`by filing certifications with the FDA pursuant to 21 USC
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`§ 355(j)(2)(A)(vii)(IV) against those patents and, except as so admitted, denies
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`CFAD’s allegations.
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`PO asserted both challenged patents (and others) in lawsuits filed against three
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`different generics to delay and prevent FDA approval of their ANDAs until the
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`patents expire.
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`IPR2015-01102
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`PO admits that it asserted patents against ANDA filers that infringed those
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`patents by filing certifications with the FDA pursuant to 21 USC
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`§ 355(j)(2)(A)(vii)(IV) against those patents and, except as so admitted, denies
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`CFAD’s allegations.
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`PO asserted the two challenged patents against Barr’s Thalomid ANDA in January
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`2007 (Ex. 1039), against Natco’s Revlimid ANDA in October 2010 (Ex. 1040),
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`and against Lannett’s Revlimid ANDA in January 2015 (Ex. 1041).
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`PO admits that it asserted the ’501 and ’720 patents against Barr in January
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`2007, against Natco in October 2010, against Lannett in January 2015, and,
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`except as so admitted, denies CFAD’s allegations. In particular, no patents
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`were asserted against any “ANDA” and, to PO’s knowledge, Lannett has
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`never filed a Revlimid ANDA.
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`PO settled with Barr in May 2010 (Ex. 1042), and was subsequently sued by a
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`union accusing PO of asserting the challenged patents against generics in “sham”
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`litigation (Ex. 1043 at 32, 49-55).
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`PO denies that it settled with Barr. Barr voluntarily and unilaterally
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`withdrew its ANDA (see Celgene Corp. v. Barr Labs., Inc., No. 07-286 at D.I.
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`157 (D.N.J. May 13, 2010)), after which the case against Barr was dismissed
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`and Barr’s counterclaims were dismissed with prejudice (see Celgene Corp. v.
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`Barr Labs., Inc., No. 07-286 at D.I. 160 (D.N.J. May 26, 2010)). PO admits
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`that the International Union of Bricklayers and Allied Craft Workers Local 1
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`Health Fund filed suit against PO and, except as so admitted, denies CFAD’s
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`allegations.
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`Nearly five years have elapsed since PO first asserted the challenged patents
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`against Natco, and no decision on the merits of Natco’s invalidity challenge has
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`issued—and is unlikely to anytime soon because PO moved to stay the litigation on
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`the challenged patents and the stay was granted. (Ex. 1044 at 1-2, Ex. 1045.)
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`PO admits that it first sued Natco in October 2010 and that no decision on the
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`merits of Natco’s invalidity challenge has issued. PO admits that it filed a
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`meritorious motion to bifurcate and stay the litigation on the ’501 and ’720
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`patents due to facts and circumstances that are subject to a Discovery
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`Confidentiality Order in Civil Action No. 10-5197 (D.I. 36) (D.N.J.), and
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`Judge Arleo granted that motion. PO otherwise lacks knowledge or
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`information sufficient to form a belief about the truth of the remainder of
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`CFAD’s allegations.
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`Despite PO first asserting the challenged patents nearly nine years ago—no court
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`has ever reached a decision on the merits of the validity of either patent.
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`IPR2015-01102
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`PO admits that no court has ever reached a decision on the merits of the
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`validity of the ’501 and ’720 patents, and, except as so admitted, denies
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`CFAD’s allegations.
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`In the FDA’s Orange Book, PO currently lists 16 patents for Thalomid (Ex. 1046),
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`25 patents for Revlimid (Ex. 1047) and 18 patents for Pomalyst (Ex. 1048).
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`PO admits that it submitted the currently listed patents to the FDA for listing
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`in the “Orange Book” in connection with the New Drug Applications for
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`Thalomid®, Revlimid®, and Pomalyst® and, except as so admitted, denies
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`CFAD’s allegations.
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`None of these Orange Book patents had ever been challenged in any Patent Office
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`proceeding until Petitioner filed challenges in April 2015.
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`It is unclear what CFAD is implying. To the extent CFAD is referring to
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`IPRs, PO admits that no IPRs had been filed against any of the Orange Book
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`patents for Thalomid®, Revlimid®, or Pomalyst® before April 2015.
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`Celgene’s U.S. Patent No. 6,315,517, however, has been through
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`reexamination.
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`The Federal Trade Commission concluded more than a decade ago that, “in some
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`ways the patent system is out of balance with competition policy” because “poor
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`patent quality” (defined as patents that are “likely invalid” or contain claims that
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`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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`PO admits that the quoted language appears in Ex. 1049. PO otherwise lacks
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`knowledge or information sufficient to form a belief about the truth of the
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`remainder of CFAD’s allegations at least because it is an opinion, and not a
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`fact.
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`It is an unfortunate fact that generic competition is not effective at policing brand
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`evergreening strategies—and a further reason that CFAD’s activities should be
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`encouraged—not sanctioned. (Ex. 1050 at 324).
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`PO denies CFAD’s allegations.
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`Just three months ago, the FTC stated that the “economic and regulatory context of
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`brand-generic competition creates incentives for [those] companies to collude
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`rather than compete, and the brand’s profits from preserving a monopoly through
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`anti-competitive settlement can be enormous.” (Ex. 1052 at 3.)
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`PO admits that the quoted language appears in Ex. 1052, and, except as so
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`admitted, denies CFAD’s allegations.
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`Such deals “cost consumers and taxpayers billions of dollars, driving up health
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`care costs and depriving patients of needed medications.” Id. at 1.
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`PO admits that the quoted language appears in Ex. 1052, and, except as so
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`admitted, denies CFAD’s allegations.
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`The FTC characterizes agreements ending validity challenges as “‘win-win’ for the
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`companies: brand-name prices stay high, and the brand and generic share the
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`benefits of the brand’s monopoly profits. Consumers lose[]: they miss out on
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`generic prices…as much as 90 percent less than brand prices.” (Ex. 1052 at 3; see
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`also Ex. 1053 at 1 (CEPR economic impact study of proposal to exempt
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`pharmaceutical patents from IPRs; finding “it is likely that many dubious claims
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`end up going unchallenged,” and estimating costs arising from improperly granted
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`patents over the next twenty years of $73–$220 billion).)
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`PO admits that the quoted language appears in Ex. 1052 and Ex. 1053, and,
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`except as so admitted, denies CFAD’s allegations.
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`UNITED STATES PATENT AND TRADEMARK OFFICE
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`________________
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`________________
`
`COALITION FOR AFFORDABLE DRUGS VI LLC
`Petitioner,
`
`v.
`
`CELGENE CORPORATION
`Patent Owner
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`________________
`
`Case IPR2015-01102
`Patent 6,315,720
`________________
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`CERTIFICATE OF SERVICE
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`CERTIFICATE OF SERVICE
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`Pursuant to 37 C.F.R. § 42.6(e), the undersigned hereby certify that
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`PATENT OWNER REPLY IN SUPPORT OF ITS MOTION FOR SANCTIONS
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`PURSUANT TO 35 U.S.C. § 316(a)(6) AND 37 C.F.R. § 42.12 was served on
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`August 20, 2015 by filing this document through the Patent Review Processing
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`System, as well as e-mailing a copy to sarah.spires@skiermontpuckett.com,
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`parvathi.kota@skiermontpuckett.com, and paul.skiermont@skiermontpuckett.com.
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`Date: August 20, 2015
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` Respectfully submitted,
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`By: /F. Dominic Cerrito (Reg. No. 38,100)/
`F. Dominic Cerrito (Reg. No. 38,100)
`QUINN EMANUEL URQUHART &
`SULLIVAN, LLP
`51 Madison Avenue, 22nd Floor
`New York, NY 10010
`Tel: (212) 849-7000
`Fax: (212) 849-7100
`nickcerrito@quinnemanuel.com
`
`Anthony M. Insogna (Reg. No. 35,203)
`JONES DAY
`12265 El Camino Real
`Suite 200
`San Diego, CA 92130
`Tel: (858) 314-1200
`Fax: (858) 314-1150
`aminsogna@jonesday.com
`
`Attorneys for Celgene Corporation
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