Validity in the US and Canada: The Challenges of Patent Enforcement. Lawrence T. Welch Assistant General Patent Counsel

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1 Validity in the US and Canada: The Challenges of Patent Enforcement Lawrence T. Welch Assistant General Patent Counsel

2 IP Rights Holders Seek Certainty Investments in R&D are risky Technology could fail Demand could be low Competitors could begin copying early Depends on level of investment needed and technical barriers to entry This varies by industry Patents can aid in providing some measure of protection against early copying The validity studies have shown a great deal of variability by country, technology, and route of challenge The data all relates to patents which are challenged One missing piece of information, not easily determined, is how many patents are not challenged because the potential copyists believe the patents are strong Goal for innovators is to have a system which awards patents which are less likely to be challenged Third parties in the same field want to be able to easily challenge invalid patents Need to find the right balance. Copyright 2011 Eli Lilly and Company 2 2

3 Acknowledgements Whitepapers by Committee members US: Robert Smith and Dorothy Auth, and colleagues at Cadwalader, Wickersham and Taft Canada: Mukundan Chakrapani and Beverley Moore, and colleagues at Borden Ladner Gervais firm Copyright 2011 Eli Lilly and Company 3 3

4 Invalidity in the US Three routes discussed in paper District court to Federal Circuit Supreme Court increasingly involved Incentives for patent challenges for drug products under Hatch- Waxman Act USPTO ex parte and inter partes reexamination Post Grant Review and Interpartes Review after AIA now ITC proceedings- not an Article III court Not binding on District Court or Federal Circuit Copyright 2011 Eli Lilly and Company 4 4

5 District Court Proceedings Patent Cases in District Courts involving validity by Year Total Cases where claims in patent held invalid Cases where claims in patent held valid Percent where claims in patent held valid 20% 14% 17% 9% 6% 14% Total Copyright 2011 Eli Lilly and Company 5 5

6 US District Courts By Technology Industry 1995 to to to 2010 Cases Rank Cases Rank Cases Rank Total 1 Consumer Products Biotechnology/Pharma Industrial/Construction Medical Devices Computer Hardware/Electronics Business/Consumer Services Software Chemicals/Synthetic Materials Automotive/Transportation Telecommunications Food/Beverages/Tobacco Clothing/Textiles Metals/Mining Energy Agriculture Financial Institutions/Investment Management/Insurance 17 Internet/Online Services Media Environment/Waste Management Aerospace/Defense Totals Copyright 2011 Eli Lilly and Company 6 6

7 Number of Cases Appealed to the Federal Circuit as Compared to the Number Invalidated Copyright 2011 Eli Lilly and Company 7 7

8 Trend Toward Invalidation at Federal Circuit Copyright 2011 Eli Lilly and Company 8 8

9 Validity Upheld Copyright 2011 Eli Lilly and Company 9 9

10 Invalidity Increasing at Federal Circuit Copyright 2011 Eli Lilly and Company 10 10

11 Obviousness Issues Highest at Federal Circuit Copyright 2011 Eli Lilly and Company 11 11

12 Grounds for Invalidity at Federal Circuit Copyright 2011 Eli Lilly and Company 12 12

13 Mechanical Cases Invalidated Most Often in US Copyright 2011 Eli Lilly and Company 13 13

14 Validity Rarely Final at Supreme Court, But Often Remanded for Further Review Copyright 2011 Eli Lilly and Company 14 14

15 US Reexam (Pre AIA) Copyright 2011 Eli Lilly and Company 15 15

16 Inter Partes Reexam Where Patent Owner participated (250) 40% (101/250): all claims cancelled or disclaimed 21% (52/250): no claims confirmed; at least one claim amended; other claims cancelled or disclaimed 26% (64/250): at least one claim confirmed; other claims amended, cancelled, or disclaimed 13% (33/250): all claims confirmed. Where Patent Owner participated and concurrent litigation (144) 38% (54/144): all claims cancelled or disclaimed 21% (30/144): no claims confirmed; at least one claim amended; other claims cancelled or disclaimed 28% (40/144): at least one claim confirmed; other claims amended, cancelled, or disclaimed 14% (20/144): all claims confirmed. Copyright 2011 Eli Lilly and Company 16 16

17 Ex Parte Reexam Owner Third Party USPTO Overall Requested Requested Initiated All claims 21% 24% 11% 23% confirmed All claims cancelled 9% 12% 23% 11% Claims amended 70% 64% 66% 66% Copyright 2011 Eli Lilly and Company 17 17

18 United States- Whitepaper results Higher proportion of invalidity for litigated patents The whitepaper notes that at the Court of Appeals for Federal Circuit, since 2007, the number of patents invalidated by the Federal Circuit has remained consistently higher than in the years prior. Further, in the first six months of 2012, more patents have been invalidated than in any of 2002, 2003 or 2004, suggesting that 2012 will produce an even higher number of invalid patents. And, also: the rate patents have been invalidated by the Federal Circuit between 2002 and Here it becomes even more clear a trend is forming, toward patent invalidation by the Federal Circuit. [26% rate of invalidation year to date] As for reexam, there was a marked difference in positive outcomes for the patent owner when comparing inter parties reexam (40% all claims confirmed) when comparing ex parte reexam (23% all claims confirmed). Copyright 2011 Eli Lilly and Company 18 18

19 Canada-Patent Office Challenges Can file prior art during prosecution Can request reexamination proceedings Usage does not appear to be great Limited role for third parties in both proceedings Copyright 2011 Eli Lilly and Company 19 19

20 Canada- Court Challenges Two routes in courts Regular actions Notice of Compliance (NOC) Proceedings (similar to US Hatch Waxman); initiated by a Notice of Allegation (NOA) According to the whitepaper: For NOC proceedings, the validity rates seem to swing. In 2002, all cases were found to be invalid. However, for the next 4 years, the innovator was successful more often. This tide swung again between 2007 and and again looks to be swinging back in At this point, we are unsure what could account for this pendulum effect. Regarding other court actions, the paper notes that the: [D]ata shows that 100% of patents were found valid in 2004, 2006 and The split was even in 2008, and again the majority of patents were found valid in 2009 and Arguably this data points to a more consistent finding of valid patents in infringement actions than in NOC proceedings, which could be attributed to the burden being on the challenger to prove invalidity in actions where the burden is on the patentee in NOC proceedings to prove the patent is valid. Copyright 2011 Eli Lilly and Company 20 20

21 Data on Invalidity- Canadian Reexam Table 3: Rulings from CIPO Patent Re-Examination Board - Parsed by Subject Matter General Subject Matter of Patent Valid Invalid Partially Valid Currently Pending Re-Exam. Suspended Did Not Require Amendment By Applicant Required Amendment By Applicant Pharma Non-Pharma Table: Rulings from CIPO Patent Re-Exam. Board - Parsed by Originator of Request Originator of Re-Exam. Request Valid Invalid Partially Valid Currently Pending Re-Exam. Suspended Did Not Require Amendment By Applicant Required Amendment By Applicant Applicant Third Party Copyright 2011 Eli Lilly and Company 21 21

22 Patent Validity by Route of Challenge percentage NOC invalid percentage NOC valid percentage action invalid percentage action valid Copyright 2011 Eli Lilly and Company 22 22

23 Appeals by Route of Challenge % Appeals Heard in NOC cases where patent found invalid at first instance % appeals heard in NOC cases where patent found valid at first instance % appeals heard in Actions Copyright 2011 Eli Lilly and Company 23 23

24 Validity on Appeal- Canada % Appeals Heard in NOC cases where patent found invalid at first instance % appeals heard in NOC cases where patent found valid at first instance % appeals heard in Actions Copyright 2011 Eli Lilly and Company 24 24

25 Canada- Invalidity by Industry- Pharma Dominates NOC Pharma Actions Other Actions Copyright 2011 Eli Lilly and Company 25 25

26 Invalidation Reasons- Canada- Lack of Utility Dominates Most Recently anticipation obviousness double patenting insufficiency lack of utility/sound prediction s. 53/73 invalid disclaimer invalid selection Copyright 2011 Eli Lilly and Company 26 26

27 Reasons for Invalidity in NOC Proceedings for Canada anticipation obviousness double patenting insufficiency lack of utility/sound prediction overbreadth s. 73 abandonment mere discovery invalid selection invalid disclaimer not patentable subject matter Copyright 2011 Eli Lilly and Company 27 27

28 Utility Issue in Canada for Biopharma Patents* No. of Decisions Figure 1: Pharma v. Non-Pharma Decisions on Utility by Year Non-Pharma Pharma * Anderson, et al, IPO International Committee Newsletter January 2012 Copyright 2011 Eli Lilly and Company 28 28

29 Hatch-Waxman Patent Litigation Results * Total Cases Studied: 344 Cases Successful Defense? Number of cases Win No generic entry before patent expiry 84 Loss Generic entry before patent expiry 98 Other 37 Still Active 125 Why only a 46% success rate for originators when they assert their patents? *Research of U.S. Hatch Waxman Challenges performed by Pangea3 Copyright 2011 Eli Lilly and Company 29

30 Originators of new medicines win in 40 of 50 patent challenges involving BFPs * Outcome for Originator is 80% Success for BFPs 80% 20% Win Loss * But for Patents : Those that claim the active ingredient per se Copyright 2011 Eli Lilly and Company 30

31 Originators of new medicines win in only 44 of 122 patent challenges for AOPs* Outcome for Originator is 33% Success for AOPs 33% 67% Win Copyright 2011 Eli Lilly and Company 31 Loss *All Other Patents: Any subsequent innovation on dose forms, modes of administration, or uses.