`
` Filed: August 11, 2015
`
`
`
`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.: IPR2015-01103
`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
`
`
`
`
`
`
`
`IPR2015-01103
`
`IPR20l5—0l 103
`
`TABLE OF CONTENTS
`
`TABLE OF CONTENTS
`
`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.
`
`Statement of Material Facts .............................................................................. ..3
`
`V. Conclusion ...................................................................................................... ..15
`
`
`
`
`
`i
`
`
`
`
`
`
`
`
`
`
`
`Cases
`
`
`
`IPR2015-01103
`
`TABLE OF AUTHORITIES
`
`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
`
`5 FCC Rcd. 3911 (1999) ..........................................................................................10
`U.S. Code
`
`35 U.S.C. § 316 ........................................................................................................14
`37 C.F.R. § 42.1(d) ..................................................................................................12
`
`
`
`ii
`
`
`
`
`
`
`
`
`
`
`
`Exhibit No.
`1034
`
`1035
`
`1036
`
`1037
`
`1038
`
`1039
`
`1040
`
`1041
`
`1042
`
`1043
`
`
`
`IPR2015-01103
`
`TABLE OF EXHIBITS
`
`
`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
`
`iii
`
`
`
`Exhibit No.
`1044
`
`1045
`
`1046
`
`1047
`
`1048
`
`1049
`
`1050
`
`1051
`
`1052
`
`1053
`
`1054
`1055
`
`
`
`
`
`
`
`IPR2015-01103
`
`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)
`
`iv
`
`
`
`Exhibit No.
`1056
`
`1057
`
`1058
`1059
`
`1060
`
`1061
`
`1062
`
`1063
`
`1064
`
`1065
`
`1066
`
`1067
`
`1068
`
`1069
`
`
`
`
`
`
`
`IPR2015-01103
`
`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)
`
`v
`
`
`
`
`
`
`
`
`
`IPR2015-01103
`
`Exhibit No.
`1070
`
`1071
`
`1072
`
`1073
`
`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
`
`vi
`
`
`
`
`
`I.
`
`INTRODUCTION
`
`
`
`IPR2015-01103
`
`Celgene’s motion is littered with references to the Petitioner’s and Real
`
`Parties-in-Interest’s (collectively, “CFAD”) “admitted profit motive,” and makes
`
`the curious argument that filing IPR petitions with a profit motive constitutes an
`
`“abuse of process.” Yet at the heart of nearly every patent and nearly every IPR,
`
`the motivation is profit. Celgene files for and acquires patents to profit from the
`
`higher drug prices that patents enable. Generic pharmaceutical companies
`
`challenge patents to profit from generic sales. Celgene’s argument is in conflict
`
`with Supreme Court precedent expressly finding it in the public’s interest for
`
`economically motivated actors to challenge patents. See 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”). Having
`
`an economic motive for petitioning the government simply does not turn the
`
`petition into an abuse of process.
`
`CFAD anticipates that fees and costs to complete an IPR for a single drug is
`
`approximately $1 million dollars. There are a limited number of entities capable of
`
`making that financial commitment. And fewer can make such a commitment
`
`without the prospect of profiting from their efforts. The fact is CFAD’s
`
`
`
`1
`
`
`
`
`
`
`
`IPR2015-01103
`
`motivations do not change the social value of its activities. Poor quality patents
`
`enable pharmaceutical companies to maintain artificially high drug prices and reap
`
`unjust monopoly profits paid for by consumers and taxpayers.
`
`Celgene accuses CFAD of motives that are not entirely “altruistic.” That is a
`
`truthful irrelevancy. The U.S. economy is based largely on the notion that
`
`individual self-interest, properly directed, benefits society writ large. Celgene’s
`
`motive is to profit from consumers and taxpayers from drug sales. Celgene’s
`
`patent-conferred monopoly results in Revlimid prices that exceed $580 per pill—
`
`creating costs in excess of $200,000 per patient year. (See Exs. 1036-38, showing
`
`prices for three Celgene drugs protected by challenged patents.) Revlimid sales
`
`were nearly $5 billion in 2014. Celgene is not giving Revlimid or its profits away.
`
`CFAD’s IPRs are part of its investment strategy, and it will only succeed by
`
`invalidating patents, which would serve the socially valuable purpose of reducing
`
`drug prices artificially priced above the socially optimum level. And even if,
`
`despite its best efforts, it does not profit—each petition that knocks down a barrier
`
`to generic entry benefits the public. It should be axiomatic that people do not
`
`undertake socially valuable activity for free—not Celgene, not generics, not
`
`shareholders, and not investment funds. Low drug prices will not simply
`
`materialize. They must be brought about by agents who will invest significant
`
`capital and do the hard work of identifying and challenging weak patents. Generics
`
`
`
`2
`
`
`
`
`
`
`
`IPR2015-01103
`
`sometimes serve this function. But the law does not render it “abuse” for others,
`
`including CFAD, to also play this important societal role.
`
`II.
`
`STATEMENT OF MATERIAL FACTS
`
`Celgene (Patent Owner or “PO”) listed the challenged ’501 and ’720 patents
`
`in the FDA’s Orange Book for not just one—but three—of its branded drugs:
`
`Thalomid®, Revlimid®, and Pomalyst®. (Exs. 1034, 1035.) PO has asserted both
`
`patents to prevent generic entry of Thalomid, and to prevent generic entry of
`
`Revlimid. PO asserted both challenged patents (and others) in lawsuits filed
`
`against three different generics to delay and prevent FDA approval of their
`
`ANDAs until the patents expire. PO asserted the two challenged patents against
`
`Barr’s Thalomid ANDA in January 2007 (Ex. 1039), against Natco’s Revlimid
`
`ANDA in October 2010 (Ex. 1040), and against Lannett’s Revlimid ANDA in
`
`January 2015 (Ex. 1041). PO settled with Barr in May 2010 (Ex. 1042), and was
`
`subsequently sued by a union accusing PO of asserting the challenged patents
`
`against generics in “sham” litigation (Ex. 1043 at 32, 49-55). Nearly five years
`
`have elapsed since PO first asserted the challenged patents against Natco, and no
`
`decision on the merits of Natco’s invalidity challenge has issued—and is unlikely
`
`to anytime soon because PO moved to stay the litigation on the challenged patents
`
`and the stay was granted. (Ex. 1044 at 1-2, Ex. 1045.) Despite PO first asserting
`
`
`
`3
`
`
`
`
`
`
`
`IPR2015-01103
`
`the challenged patents nearly nine years ago—no court has ever reached a
`
`decision on the merits of the validity of either patent.
`
`In the FDA’s Orange Book, PO currently lists 16 patents for Thalomid
`
`(Ex. 1046), 25 patents for Revlimid (Ex. 1047) and 18 patents for Pomalyst
`
`(Ex. 1048). None of these Orange Book patents had ever been challenged in any
`
`Patent Office proceeding until Petitioner filed challenges in April 2015.
`
`The Federal Trade Commission concluded more than a decade ago that, “in
`
`some ways the patent system is out of balance with competition policy” because
`
`“poor patent quality” (defined as patents that are “likely invalid” or contain claims
`
`that are “likely overly broad”) “may have anticompetitive effects [that] can cause
`
`unwarranted market power and can unjustifiably increase costs.” (Ex. 1049 at 5).
`
`It is an unfortunate fact that generic competition is not effective at policing
`
`brand evergreening strategies—and a further reason that CFAD’s activities should
`
`be encouraged—not sanctioned. (Ex. 1050 at 324). Just three months ago, the FTC
`
`stated that the “economic and regulatory context of brand-generic competition
`
`creates incentives for [those] companies to collude rather than compete, and the
`
`brand’s profits from preserving a monopoly through anti-competitive settlement
`
`can be enormous.” (Ex. 1052 at 3.) Such deals “cost consumers and taxpayers
`
`billions of dollars, driving up health care costs and depriving patients of needed
`
`medications.” Id. at 1. The FTC characterizes agreements ending validity
`
`
`
`4
`
`
`
`
`
`
`
`IPR2015-01103
`
`challenges as “‘win-win’ for the companies: brand-name prices stay high, and the
`
`brand and generic share the benefits of the brand’s monopoly profits. Consumers
`
`lose[]: they miss out on generic prices…as much as 90 percent less than brand
`
`prices.” (Ex. 1052 at 3; see also Ex. 1053 at 1 (CEPR economic impact study of
`
`proposal to exempt pharmaceutical patents from IPRs; finding “it is likely that
`
`many dubious claims end up going unchallenged,” and estimating costs arising
`
`from improperly granted patents over the next twenty years of $73–$220 billion).)
`
`III. RESPONSE TO PATENT OWNER’S “RELEVANT FACTS”
`PO’s motion (POM) does not present any material facts, it presents only
`
`attorney argument and popular press clips. PO’s “relevant facts” section starts by
`
`name-calling (POM at 2-3), then cites 16 exhibits to show Mr. Spangenberg and a
`
`third-party (IRDP) sent PO’s outside counsel similar draft petitions more than a
`
`year before CFAD filed these different Petitions. Id. at 3-4.
`
`Nor does PO submit any evidence (declarations, emails, or otherwise)
`
`establishing that any RPI or IRDP ever demanded payment. Neither email PO
`
`submits makes a demand. See (Exs. 2034, 2042.) And PO does not cite evidence of
`
`any negotiations or even follow-up correspondence. To the contrary, PO admits it
`
`“never responded” to Mr. Spangenberg’s email. (POM at 4.) PO does not cite any
`
`authority finding abuse of process based on emails attaching draft petitions that do
`
`not make a demand and were never filed. It is not abuse of process. See, e.g.,
`
`
`
`5
`
`
`
`
`
`
`
`IPR2015-01103
`
`Tedards v. Auty, 232 N.J. Super. 541, 549 (App. Div. 1989) (abuse of process
`
`requires “use of process after it has been issued”); Earl v. Winne, 34 N.J. Super.
`
`606, 615 (Law Div. 1955) (holding no abuse of process if process is not used).1
`
`The balance of PO’s “relevant facts” primarily quotes various press reports
`
`and editorials speculating about or criticizing CFAD for filing Petitions to make a
`
`profit. (POM at 5-7, quoting WSJ, Business Insider, Law360, Reuters). None of
`
`these articles are evidence—and even if they were they do not establish abuse. The
`
`fact is the RPI have not engaged in any misconduct, much less abuse or improper
`
`use of these proceedings. In contrast to press gossip, the attached declaration from
`
`Dr. Wu (Ex. 1054)—a Finance professor and short selling expert (id., ¶¶ 2-12)—
`
`establishes that short selling is common, legal, and regulated (id., ¶¶ 13-19).
`
`Markets, shareholders, the investing public, and even shorted companies can and
`
`do benefit from short selling. (Id., ¶¶ 20-25.) PO’s suggestions to the contrary
`
`(POM at 5-7, 11-14) are baseless. (Ex. 1054, ¶¶ 26-31.) (See also Ex. 1073 at 3-4.)
`
`
`1 PO accuses an RPI and IRPD of extortion (POM at n.1), but PO admits it did not
`
`pay, and the only statute or case PO cites requires “obtain[ing] property of
`
`another by extortion” for liability. State v. Roth, 289 N.J. Super. 152, 158 (1996)
`
`(quoting N.J. Stat. § 2C:20-5(g)) (emphasis added). Threats to file lawsuits are not
`
`extortion. U.S. v. Pendergraft, 297 F.3d 1198, 1205 (11th Cir. 2002).
`
`
`
`6
`
`
`
`
`
`
`
`IPR2015-01103
`
`IV. ARGUMENT
`The Petitions are proper under the AIA and serve public interests.
`A.
`
`PO contends its motion presents a “threshold, gatekeeping” issue (POM at
`
`n.3), but then does not address—or even acknowledge—the AIA’s threshold
`
`standing provision defining who can petition for IPR. This is fatal to PO’s motion.
`
`Statutory interpretation begins with the language of the statute, and “where the
`
`statutory language provides a clear answer, it ends there as well.” Hughes Aircraft
`
`Co. v. Jacobson, 525 U.S. 432, 438 (1999). 35 U.S.C § 311(a) provides, “[s]ubject
`
`to the provisions of the chapter, a person who is not the owner of a patent may
`
`file…a petition to institute an [IPR] of the patent.” PTO regulations implementing
`
`the AIA’s petitioner standing requirement provide, “[a] person who is not the
`
`owner of a patent may file with the Office a petition to institute an inter partes
`
`review of the patent unless” the petitioner, RPI, or a privy: (a) filed a civil action
`
`challenging the patent, (b) filed the petition more than one year after being served
`
`with an infringement complaint, or (c) are estopped from challenging on the
`
`grounds in the petition. 37 C.F.R. § 42.101(a)-(c). None of the three enumerated
`
`exceptions apply to CFAD, its RPI, or any privy. PO does not allege otherwise.
`
`
`
`Having ignored the statutory text, PO’s lead argument purports to cite
`
`legislative history revealing that the AIA intended to forbid for-profit petitions
`
`from petitioners who short sell the PO’s stock. (POM at 7-9.) PO’s citations utterly
`
`
`
`7
`
`
`
`
`
`
`
`IPR2015-01103
`
`fails to support its view of the AIA’s IPRs. PO’s first cite (POM at 7) is not from
`
`the AIA, it is from the Patent Reform Act of 2007 (PRA), and it refers not to IPRs
`
`but the PRA’s litigation venue restrictions. And PO’s “very clear litigation abuses”
`
`cite (id.) was made in support of ending qui tam false marking lawsuits. PO’s
`
`“litigation reforms to rein in abusive lawsuits” cite (POM at 8) is from the PRA,
`
`not the AIA, and refers to PRA’s venue and damages provisions. PO’s “talking
`
`about the patent trolls” cite (id.)—in the portion replaced with ellipses—refers to
`
`entities that “vacuum up” patents, not IPR petitioners. Cf. (Exs. 1046-48) (listing
`
`dozens of patents, including patents issued to Celgene and those it vacuumed up).)
`
`PO’s final two cites fare no better. The “alternative to litigation” cite (POM at 8) is
`
`from the PRA, not the AIA—and that cite, as well as the “decrease litigations
`
`costs” cite (id.) supports CFAD. If successful, the Petitions would reduce litigation
`
`costs for the two generics seeking to sell generic Revlimid—as well as future
`
`Thalomid, Revlimid, and Pomalyst ANDA filers.
`
`Congress created the IPR process to vanquish low quality patents and
`
`improve quality. Congress resisted efforts to create IPR limits at odds with the
`
`essential reform: “enabling the experts at the PTO to correct errors in the
`
`examinations system[.]” (Ex. 1055 at 29; see also id. at 52-54 (concerns about IPR
`
`abuse were limited to abuses of the process after review begins; and citing Fed. R.
`
`Civ. P. 11 and the threshold standard for instituting review as tools that prevent
`
`
`
`8
`
`
`
`
`
`
`
`IPR2015-01103
`
`harassment of patentees); Ex. 1056 at 52 (Mr. Kappos preferring more IPRs rather
`
`than less because invalid patents are “more costly to our economy”).)
`
`A long line of Supreme Court cases establish that federal patent policy errs
`
`on the side of more patent validity challengers. After citing its prior case holding
`
`that public policy requires permitting even a seller of a patent issued to itself to
`
`challenge the patent’s validity, the Supreme Court explained why expanding
`
`validity challenges serves the public interest:
`
`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)
`
`(emphasis added; internal citations omitted). See also Lear, 395 U.S. at 670;
`
`SmithKline Beecham Corp. v. Apotex Corp., 403 F.3d 1131, 1354 (Fed. Cir. 2005)
`
`(“Both this court and the Supreme Court have recognized that there is a significant
`
`public policy interest in removing invalid patents from the public arena”).
`
`B. Neither the Petition nor RPI abused or improperly used process.
`The Board instructed the parties to address the elements of abuse of process.
`
`(Paper No. 5 at 2.) PO presents a collection of quotes, including two from
`
`
`
`9
`
`
`
`
`
`
`
`IPR2015-01103
`
`Neumann v. Vidal, 710 F.2d 856 (D.C. Cir. 1983). (POM at 10-11.2) Neumann has
`
`been abrogated, criticized, and distinguished. (Ex. 1057.) By way of example:
`
`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).
`
`Abuse of process occurs “when ‘process has been used to accomplish some
`
`end which is without the regular purview of the process, or which compels the
`
`party against whom it is used to do some collateral thing which he could not
`
`
`2 PO’s Heck v. Humphrey quote is dicta, but “a perversion of lawfully initiated
`
`process to illegitimate ends” is consistent with CFAD’s decisions analyzing abuse
`
`of process. Merely filing a petition is not and cannot be a perversion of the process
`
`(unless fraudulent or a “sham”), and short selling is not illegal. (See Ex. 1054, ¶¶
`
`13-19.) PO’s FCC cites found that—unlike the Petitions here—the petitions at
`
`issue “do not serve the public interest.” 5 FCC Rcd. 3911, 3912 (1999).
`
`
`
`10
`
`
`
`
`
`
`
`IPR2015-01103
`
`legally and regularly be required to do.’” Houlahan, F. Supp. 2d at 199 (quoting
`
`Morowitz v. Marvel, 423 A.2d 196, 198 (D.C. 1980)). Abuse of process has two
`
`elements: “‘(1) the existence of an ulterior motive; and (2) an act in the use of
`
`process other than such as would be proper in the regular prosecution of the
`
`charge.’” Id. (quoting Hall v. Hollywood Credit Clothing Co., 147 A.2d 866, 868
`
`(D.C. 1959) (emphasis in original). Contrary to PO’s argument, “the fact that a
`
`person acted spitefully, maliciously, or with an ulterior motive in instituting a legal
`
`proceeding is insufficient to establish abuse of process[.]” Scott v. District of
`
`Columbia, 101 F.3d 748, 756 (D.C. Cir. 1996) (citing Restatement (Second) of
`
`Torts § 682 cmt. b (1977) (emphasis added). Morowitz held:
`
`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.
`
`First, the only process that has been used is filing Petitions, so regardless of
`
`ulterior motives, there has not been any abuse of process “after issuance.” Second,
`
`neither Petitioner nor RPI have performed any act—within or outside the
`
`
`
`11
`
`
`
`
`
`
`
`IPR2015-01103
`
`proceeding—that is not “legally obtainable.” Apart from PO’s misinformed
`
`suggestions that short selling is “nefarious,” it has not identified any illegal acts or
`
`perversion of this process.3 In fact, PO does not present any evidence establishing
`
`CFAD’s Petitions caused it any harm at all. PO has thus “failed to make a
`
`colorable showing that [RPI] committed a willful act in the use of the process other
`
`than such as would be proper in regular prosecution of the charge.” Houlahan, F.
`
`Supp. 2d at 201 (original emphasis).
`
`Moreover, before even addressing whether PO has a claim for sanctions
`
`based on abuse of process, PO must first establish the sham exception to the Noerr-
`
`Pennington doctrine, which “holds that [individuals] 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, 555 F. Supp. 2d at 155 (internal cite omitted).
`
`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.
`
`3 PO contends the PTO has not defined a standard of proof, and urges the
`
`“reasonable likelihood” standard. (POM at 10, n.3.) PO is wrong on both counts.
`
`The PTO defined the standard of proof in 37 C.F.R. § 42.1(d), providing: “[t]he
`
`default evidentiary standard is a preponderance of the evidence.” The Board should
`
`apply that default standard to PO’s motion and deny it for lacking any evidence.
`
`
`
`12
`
`
`
`
`
`
`
`IPR2015-01103
`
`Noerr-Pennington immunity from liability for government petitioning is lost
`
`only when a petition is both “objectively baseless in the sense that no reasonable
`
`litigant could realistically expect success on the merits;” and subjectively “brought
`
`with specific intent to further wrongful conduct ‘through the use of the
`
`governmental process-as opposed to the outcome of that process.” Id. (citing Prof’l
`
`Real Estate Investors, Inc. v. Columbia Pictures Indus., 508 U.S. 49, 60-61
`
`(1993)). “Objectively baseless” means no reasonable litigant could realistically
`
`expect success on the merits. PRE, 508 U.S. at 60-61. When a petition is not
`
`objectively baseless there is no “sham” petition and intent is irrelevant. Id.
`
`“Subjectively baseless” means the petition is brought with specific intent for
`
`wrongful conduct “through use [of] the governmental process—as opposed to the
`
`outcome of that process.” Id. “The sham exception does not extend to genuine
`
`attempts to secure governmental action even though the [petitioner] harbors a
`
`wrongful motive.” Nader, 555 F. Supp. 2d at 157.
`
`The Federal Circuit applied these principles to reject an abuse of process
`
`claim arising from interference-related petitioning activity. See Abbott Labs. v.
`
`Brennan, 952 F.2d 1346, 1355-56 (Fed. Cir. 1991) (holding abuse of process claim
`
`based on interference petitioning not actionable unless the “entire federal agency
`
`action was a ‘sham’” and that “challenging motives” of petition is insufficient to
`
`establish sham); see also Baker Driveaway Co. v. Bankhead Enterprises, Inc., 478
`
`
`
`13
`
`
`
`
`
`
`
`IPR2015-01103
`
`F. Supp. 857, 859 (E.D. Mich. 1979) (filing PTO protest implicates the freedom to
`
`petition the government and “will not be curtailed without some extraordinary
`
`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
`
`should end abuse of process and “improper use of the proceedings” inquiry.
`
`C.
`
`The Board cannot dismiss petitions prior to institution as a sanction.
`
`35 U.S.C. § 316 delegated authority to the PTO to prescribe regulations for
`
`the conduct of IPRs. Specifically, § 316(a