January 12, 2017
You’ve lost an IPR and are estopped from challenging validity in court, but you can’t appeal.
With very limited exception, any person may challenge a patent in inter partes review (IPR) before the U.S. Patent and Trademark Office (USPTO) Patent Trial and Appeal Board (PTAB). The IPR statute specifies that a challenger who loses in an IPR challenge can appeal through the court system. However, on January 9, 2017, in Phigenix, Inc. v. ImmunoGen, Inc., the Federal Circuit concluded that despite the statutory language, not every challenger who loses may appeal to the courts. Rather, the court concluded, there must exist a case or controversy between the challenger and the patent holder that is sufficient to confer Article III standing on the challenger.
This remarkable holding is expected to limit appeals from IPR proceedings. Additionally, the decision is expected to have a significant impact on the timing of IPR challenges. For instance, if you think you might make a competing product in the future, but do not make that competing product today, should you challenge the patent? If you lose, the estoppel provisions will apply, and you may not be able to appeal.
Phigenix initiated an IPR for U.S. Patent No. 8,337,856, which is owned by ImmunoGen. The ’856 patent relates to methods of treatment to combat a variety of cancers. ImmunoGen had granted Genentech Inc. a worldwide exclusive license to the ’856 patent, which Genentech uses to produce its drug Kadcyla. Phigenix alleged that one of its own patents covered Genentech’s activities relating to the ’856 patent. Ultimately, the PTAB found that the asserted claims of the ’856 patent were nonobvious. Phigenix appealed the decision of the PTAB to the Federal Circuit.
At the beginning of the appeal, ImmunoGen filed a motion to dismiss, asserting that Phigenix lacked standing to appeal the PTAB’s decision. The Federal Circuit dismissed ImmunoGen’s motion and allowed the parties the opportunity to fully address this issue in their briefs. In its decision, the court noted that “‘[s]tanding to sue is a doctrine rooted in the traditional understanding of a case or controversy’ required by Article III.” For an appellant to have standing, it “must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the [appellee], (3) that is likely to be redressed by a favorable judicial decision.” Further, the court noted that for an appellant to satisfy the injury-in-fact requirement, the injury must be both concrete and particularized. That is, the harm must actually exist and affect the appellant in a personalized and individual way.
The court stated that in establishing the legal standard for standing, the “standard must identify the burden of production; the evidence an appellant must produce to meet that burden; and when the appellant must produce that evidence,” concluding that an appellant’s burden of production is the same as that of a plaintiff moving for summary judgment. The court, citing Lujan v. Defenders of Wildlife, stated that “[w]hen the [appellant]’s standing is not self-evident . . . the [appellant] must supplement the record to the extent necessary to explain and substantiate its entitlement to judicial review.” That is, when an appellant’s standing is not self-evident, the appellant must provide additional evidence, such as affidavits or other evidence, to establish Article III standing. Finally, with regard to the timing of production, the court noted that the evidence must be demonstrated at the first appropriate time (e.g., in response to a motion to dismiss or in an opening brief).
Based on the above, the court held that Phigenix lacked standing to appeal the PTAB decision. In its brief, “Phigenix [did] not contend that it faces risk of infringing the ’856 patent, that it is an actual or prospective licensee of the patent, or that it otherwise plans to take any action that would implicate the patent.” Rather, Phigenix asserted that because the scope of the ’856 patent allegedly overlapped with the claims of the ’534 patent, Phigenix “suffered an actual economic injury because the ’856 patent increases competition between itself and ImmunoGen.” Specifically, Phigenix argued that the “existence of ImmunoGen’s ’856 patent has . . . encumber[ed] Phigenix’s licensing efforts while ImmunoGen receives millions of dollars in licensing revenue.” Phigenix did not substantiate this claim based on evidence of record before the PTAB, but rather, Phigenix attempted to substantiate this argument based on declarations.
In looking to the Federal Rules of Civil Procedure, specifically Rule 56(c)(4), the Federal Circuit noted that a “declaration used to support . . . a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the . . . declarant is competent to testify on the matters stated.” Because a declaration must set out facts, simple conclusions of law are not sufficient to support a motion for summary judgment. In this case, Phigenix’s declarations simply stated conclusions of law that the “existence of ImmunoGen’s ’856 patent has . . . encumber[ed] Phigenix’s licensing efforts” without sufficient factual allegations rising to the level of admissible evidence under the Federal Rules of Evidence. Accordingly, the court held that “the hypothetical licensing injury . . . do[es] not satisfy the requirements of Rule 56(c)(4),” since the purpose of Rule 56 “is not to replace conclusory allegations of the complaint or answer with conclusory allegations of an affidavit.”
Further, the court rejected Phigenix’s argument that it suffered an injury in fact because 35 U.S.C. § 141(c) “provides a statutory basis for appeal.” Essentially, Phigenix argued that because there is a right to appeal a PTAB decision on an IPR, the appellant must necessarily have suffered an injury in fact. The court rejected this argument, however, stating that “Phigenix cannot base its injury in fact upon a violation of § 141(c) because it has been permitted to file its appeal, and the exercise of its right to appeal does not necessarily establish that it possesses Article III standing.” Put simply, just because a statutory right to appeal exists, it does not follow that every appellant will have Article III standing.
The Phigenix decision is a significant case that should be considered in any matter where the challenger does not compete directly with the patentee. For more information, please contact Fitch Even partner Nicholas T. Peters or Fitch Even attorney George N. Dandalides.
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