by Dennis Crouch
This post walks through a new petition for writ of certiorari involving claims that Valeant Pharma defrauded the U.S. government by using fraudulently obtained patent rights prop up its drug prices. [Read the Petition]
The False Claims Act (FCA), originally enacted in 1863 to combat contractor fraud during the Civil War, imposes civil liability on anyone who “knowingly presents” a “fraudulent claim for payment” to the federal government. 31 U.S.C. § 3729(a)(1)(A). The Act allows private citizens, known as “relators,” to bring qui tam actions on the government’s behalf against those who have defrauded the government. If successful, relators can recover up to 30 percent of the damages. 31 U.S.C. §§ 3730(b)(4), (d)(2).
To prevent opportunistic lawsuits, however, Congress has sought to strike a “balance between encouraging private persons to root out fraud and stifling parasitic lawsuits” through the FCA’s public disclosure bar. Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280 (2010). As amended in 2010, the public disclosure bar requires courts to dismiss a qui tam action “if substantially the same allegations or transactions as alleged in the action or claim were [already] publicly disclosed” in certain federal proceedings or the news media, unless the relator is an “original source” of the information. 31 U.S.C. § 3730(e)(4)(A). The basic idea here is that we don’t need qui tam actions for publicly disclosed fraud since for serious cases the information should have also made its way into the hands of prosecutors, and we can put down failures to prosecute as a system design element that we call prosecutorial discretion.
Over the past several years, patent attorney Zachary Silbersher has been pursuing FCA qui tam lawsuits against pharmaceutical companies who allegedly fraudulently obtain patent rights and then use those exclusive rights to charge the Federal Government high prices for the resulting drugs. In these cases, Silbersher is relying on public documents (file histories) which the pharmaceutical companies argue bar the qui tam proceedings under the public disclosure bar. But, so far, Silbersher’s cases have been proceeding.
In a case now pending before the Supreme Court, Silbersher argues that Valeant fraudulently obtained patents for its drug Apriso, allowing it to delay generic competition and charge inflated prices to the government. United States ex rel. Silbersher v. Valeant Pharms. Int’l, Inc., 89 F.4th 1154 (9th Cir. 2024). Specifically, Silbersher alleged that Valeant:
- Failed to disclose to the Patent Office material prior art (the Brunner and Marakhouski studies) rendering its patent on administering Apriso without food obvious.
- Made contradictory statements in two patent applications about whether it was obvious that Apriso could be effectively administered without food.
- Knew that its earlier Otterbeck patents on Apriso’s delayed-release formula were invalidly obtained over prior art.
The district court dismissed the action, finding the claims barred because the underlying facts were publicly disclosed in inter partes review (IPR) proceedings before the Patent Trial and Appeal Board (PTAB).
On appeal, the Ninth Circuit reversed — siding with Silbersher that the disclosures were insufficient to bar his action.
IPR Proceedings Not a Public Proceeding Under the Statute: First, with regard to the IPR proceedings, the 9th Circuit held that the IPR proceeding that invalidated Valeant’s patent was not a qualifying public disclosure under the False Claims Act’s (FCA) public disclosure bar. The first step for understanding this conclusion requires an understanding that the public disclosure bar statute includes a list of qualifying disclosures – much like 35 U.S.C. 102’s definition of prior art. And, the bar only applies for the listed disclosures.
In this case, the appellate panel analyzed whether the IPR fit within the channels specified in 31 U.S.C. § 3730(e)(4)(A)(i) or (ii). Subsection (i) covers disclosures made in a “federal criminal, civil, or administrative hearing in which the Government or its agent is a party.” Subsection (ii) encompasses disclosures made “in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation.”
The appellate court concluded that the IPR proceeding was not a disclosure under subsection (i) because, although it had many characteristics of a “Federal administrative hearing,” the government was not a “party” to the IPR proceeding as required by that provision. The mere fact that the Patent and Trademark Office (PTO) Director has certain adjudicatory and institution authorities did not transform the PTO into a “party.” The court also found the IPR was not an “other Federal … hearing” under subsection (ii) because its primary purpose was not “investigative” but rather adjudicatory. In a statutory application of a surplusage canon, the appellate panel concluded that treating an adversarial, adjudicatory hearing as an “other Federal hearing” under (ii) when the government was not a party would nullify the government-party requirement of subsection (i). Therefore, the IPR proceeding did not qualify as a public disclosure through either channel.
Other Documents Were Not Enough to Infer the False Claim: Still, there were several other documents that did qualify as a public disclosures, including two medical studies in the prior art, news report on about the IPR decision, and the prosecution history of of the patents. In its appeal decision, the ninth circuit concluded that these documents “when viewed together possibly reveal some of these true and misrepresented facts, but nothing in combination from which fraud can reasonably be inferred.”
In its revised opinion, the panel explained that “the scattered qualifying public disclosures may each contain a piece of the puzzle, but when pieced together, they failed to present the full picture of fraud.” Departing from other circuits, the ninth circuit held that the public disclosure bar applies only when the disclosures reveal both the “misrepresented state of facts” and the “true state of facts” together, such that fraud can be inferred without “stitching together” separate disclosures. Here, the “scattered disclosures” each revealed part of the puzzle, but it was Silbersher who put the pieces together to infer fraud.
Valeant’s Cert Petition
In its cert petition, Valeant raises two questions:
The False Claims Act’s public disclosure bar plays the critical role of preventing “parasitic” qui tam lawsuits filed by plaintiffs who “learn of the fraud through public channels.” Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 294, 296 n.16 (2010). These public channels include “a Federal . . . administrative hearing in which the Government . . . is a party” and a “Federal report, hearing, audit, or investigation.” 31 U.S.C. § 3730(e)(4)(A)(i)–(ii).
The questions presented are:
1. Whether a relator can avoid the public disclosure bar by “stitching together” public disclosures.
2. Whether inter partes review (IPR)—which this Court and the Federal Circuit have described as a hearing between the federal government and the patent owner—constitutes a channel for public disclosure, either because: (i) the government is a “party” to IPRs, or (ii) an IPR is a “Federal . . . hearing.”
Valeant contends the Ninth Circuit erred in holding that IPRs do not qualify as public disclosures under either subsection (i) or (ii). Its holding that the government is not a “party” to IPRs “conflicts directly with Federal Circuit precedent and the holding of this Court” that IPRs are “proceeding[s] between the government and patent owner.” Regents of the Univ. of Minn. v. LSI Corp.,
926 F.3d 1327 (Fed. Cir. 2019) (following Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 584 U.S. 325, 343 (2018)).
Additionally, by holding that IPRs are not “other Federal . . . hearing[s]” because they are not “investigative,” the Ninth Circuit deviated from other circuits that have rejected such a “narrow[]” reading of the amended provision. Instead, those circuits read “other Federal . . . hearing” according to its “broad, plain language.” See Moore & Co., P.A. v. Majestic Blue Fisheries, LLC, 812 F.3d 294, 302 (3d Cir. 2016)) (FOIA).
Valeant argues that the 9th Circuit decision “opens the floodgates to qui tams based on publicly disclosed information” and undermine the bar’s purpose of “prevent[ing] ‘parasitic’ and ‘opportunistic’ suits.” Of course, Silbersher might respond here that the way for Valeant to avoid lawsuits was to not commit (alleged) fraud on the United States.
What do you think: Is the Ninth Circuit’s use of FCA liability in this area proper as a policy matter to deter and punish fraudulent behavior that results in the government overpaying for patented products.
What irks me is the PC cowardice of choosing to shut the comments on the Woke posts.
The inability to handle comments is a giveaway to the shallowness of the PC.
What the government giveth, it can take away.
With one hand, the USPTO is striving to increase diversity and inclusion of inventors.
With the other hand, the USPTO is making it hard to get (look at those undiscounted fee increases/additions) and keep (IPRs can be filed throughout the life of a patent) patents.
The two subsequent blogs have no comment opportuntity. The most recent, “Unpacking the Innovator-Inventor Gap: Evidence from Engineers” has at least done some investigation and charting of the technical review committee and patent attorney process that many major corporations [the vast majority of applicants] use to decide what proposed inventions to file patent applications on, or not, in the interests of the corporation. However, having been actively involved in or directly observing that process for many, many years, I do not recall ever seeing or hearing any consideration in that decision of who the indicated inventors are, other than the occassional favoratism of some technical members towards filing invention proposals from higher level managers [absent known prior art], or overemphasis on current technology “fads”.
Furthermore, having observed a number of major layoffs of corporate technical personel, I have been shocked to see how relatively little attention was paid in that process to how many patents, or important patents, they held, unless it was an exceptionally large number.
Re:”Only one-third of engineers submit ideas through their firms’ formal invention processes.” Note that a relatively small percentage of engineers are normally in the initial design-selection phase of new product development programs, when most inventions occur. More engineers are involved in tooling, manufacturing, components procurement, testing, quality control, marketing, repair, etc.
I worked in the global research headquarters of a major corporation for several years and the article is well researched and its conclusions I generally agree with. There are a lot of factors that influence who submits disclosures and whose disclosures get rated to file. The factors include age and experience, cultural/ethnic/language background, gender, and all of the other unspoken, but very real and very present, favoritism and biases that exist in large organizations. I saw older, experienced researchers who were absolute credit hogs who claimed they invented everything. I saw older, experienced researchers who were very encouraging of younger, inexperienced researchers and who pushed to have their disclosures submitted and reviewed objectively.
The whiny crybabies of this site, of which there are many, will claim that there are no changes that need to be made. From my experience, that is false. All of these programs that major corporations use to solicit, review, and rate invention disclosures can be improved. And they should be.
“can be improved. And they should be.”
That is not the point.
The point is not providing equal opportunity, but non-equal opportunity in order to arrive at ‘equal outcomes.’
Equity does not equal Equality, and one does not fight an E V 1 L with that E V 1 L.
“An important take-away for practitioners is that one-size fits all policies to encourage inclusive innovation may not work, rather targeted strategies to address the specific hurdles faced by women and underrepresented ethnicities are warranted.”
What? On merit? Oh, we cannot have that, we need to inject Identity Politics here.
Encouraging managers and senior scientists or engineers to encourage younger or female scientists, engineers, technicians or software writers to submit invention proposals (IPs) for consideration is indeed a good idea. But another and very effective way to increase such invention porposal submissions is for patent attorneys to be regularly assigned to regularly personally review plans and prototypes of new product developments and suggest IPs on features that might be patenable. I have been involved in several situations in which valuable patents were obtained on inventions 0n which no IPs were being submitted by anyone until such patent attorney product development reviews.
Unfortunately, the (rather unhealthy) Narratives about “Patents are B A D,” have made such efforts be looked at as being self-serving.
The underrepresented clearly see that patents are bad and choose not to perpetuate the inequaliies they cause.
Sure, let’s go with that.
A bigger issue here is that large firms rely on IS sites to collect their inventions. There is a reason that large firms tend not to innovate.
A good IP attorney will have personal relationships with engineers, scientists, and product developers. A good IP attorney will attend development meetings and will tease out the invention irrespective of the race, sex, height, weight of the inventor. A good IP attorney must be searching for IP to the betterment of the company, and if that means “mining” for IP to protect the next blockbuster product, then that is the job of a good IP attorney. An good IP attorney will look past the characteristics of an inventor and evaluate the merits of the invention.
Again, the bigger issue is the fallacy that large firms think that a anonymous, fill-out-this-form, invention submission portal is good idea to capture innovation.
I wouldn’t disagree with anything you said. I would point out how challenging that is when you’re in a location with 2,000+ researchers, even if there are 12-15 patent attorneys on site. The real challenge is to work with the researchers to develop a culture of disclosure. That includes educating them on what is patentable. Many researchers and engineers and scientists think that they “just solved a problem” without realizing that may be what is novel and non-obvious and valuable to the company not just as a solution but as IP. Others don’t understand that even if the company is not going to use the technology it may be worth getting protection on for licensing purposes. It’s all of that. It also includes managing personalities/egos/power dynamics/cultures/language differences/etc.
Thank you for your 6.2.3.2 additions to, and support of, 6 and 6.2.3. I hope they get read even by academics isolating themselves from years of actual experience by direct practitions by prohibiting comments on their articles.
^^^ Not going to happen.
Call it what you will (Sprint Left, Identity Politics, Neo-Marxism, Woke, or the like), you will NOT see an engagement on the merits for anything that challenges the core of the Desired Narrative.
Sarcasm is something you may not be aware of on your side of the pond. Try the Oxford English Dictionary.
posted to wrong comment
And the patent attorneys should readily identify those who wrongly claim credit for everything and ensure the inventorship is accurate. If you were an attorney with such responsibility, either you failed to ensure the inventorship was recorded correctly knowing such claims were without merit, or your opinion that their claims were without merit was wrong. If you are not the attorney, then it is possible your opinion is wrong and the inventorship was recorded correctly. Either way, agreeing with the conclusions based on your own experience at this company would require your own research.
It sounds like you are making things up.
Wait, I thought that you were celebrating the lack of under-represented as choosing not to partake.
You cannot have it both ways. Please make up your mind.
Sarcasm is something you may not be aware of on your side of the pond. Try the Oxford English Dictionary.
Oh, I get sarcasm.
You however, had this go right over your head.
What “side of the pond” are you on? Perhaps between two sides?
The ramification on this are rather intriguing. Pharma companies quite often have patents found invalid during Hatch Waxman litigation. Second and third generation of patents covering minor changes in the original formulation are often very weak. Would each of these invalidations give rise to a possible FCA claim? Or would the courts determine that the case file, docket entries, briefs, etc. are public disclosures, unlike an IPR? Would a brief filed under seal with a protective order be a disclosure?
Fraudulent obtaining of a patent is not an issue that can even be raised in an IPR.
What? Did we miss the required number of virtue signaling posts?
“Because the progression from innovator to inventor happens largely behind closed, corporate doors”
If you actually believe this you’re certifiably tar ded. People that are inventors generally have been inventing quite awhile before they step into the corporation, period. Just not for a dollar.
It’s worse – they want an “equity” or equal results and promote disproportionate opportunity to get there.
ISMs hiding in plain sight.
You have no idea what you are talking about.
The 9th Circuit’s determination on an IPR not being a public proceeding – or the IPR file history not being a federal report – is nonsensical. Does this mean that every patentee should issue a press release every time an IPR goes against them, just so Silbersher can’t sue them?
This part of the case should probably have been disposed by the 9th Circuit in Silbersher’s favor using the same alternative basis they used for the “other documents” – that the full set of facts available through the public record is insufficient on its own to show or infer the fraudulent claim that Silbersher alleges, thus avoiding the bar of 3730(e).
Agreed – information versus information on or about fraud are clearly very different things.