Guest post by Jonathan Stroud (Unified Patents) and Saurabh Vishnubhakat (Texas A&M Law).
After a long wait, the Federal Circuit last month decided Momenta Pharms. v. Bristol-Myers Squibb Co. (Fed. Cir. 2019), dismissing Momenta’s appeal of an adverse PTAB decision based on standing and mootness concerns. (The PTAB had instituted Momenta’s petition for inter partes review of Bristol-Myers Squibb’s patent on certain formulations of an immunosuppressive agent, but ultimately sustained the patentability of all the challenged claims. Momenta, a biosimilar applicant, had sought inter partes review preemptively, with no prior infringement suit by BMS.) The Federal Circuit’s conclusion that Momenta lacked Article III standing has important implications for access to appeals in unsuccessful PTAB challenges.
Building on Professor Crouch’s initial analysis of the Momenta decision, we explore the Federal Circuit’s developing case law on what counts as an adequate injury for a petitioner to have appellate standing from a PTAB decision. Of particular interest is the persistent ambiguity about how potential future patent infringement and the PTAB estoppel provisions of the AIA affect standing to appeal.
The Stakes of Appellate Standing
Article III standing applied on appeal has always imposed an asymmetric burden on the system for administrative patent revocation. Patent owners who appeal can almost always show the requisite injury for standing in the form of adverse effects on some or all of their patent rights. Unsuccessful petitioners, meanwhile, may not be able to show enough injury through potential patent infringement. Ironically, this especially true of those very parties who benefit the most at the margins from having access to administrative review—precisely because they could not otherwise have established standing to seek declaratory relief in federal court.
In effect, the more proactive and preemptive a challenge might be, the less likely that party is to be able to prove standing on appeal, adding another reason not to act until after litigation has begun. The asymmetry of this burden is especially salient in domains like pharmaceutical drugs and biosimilars, where the incentive to test the validity of patents has important social consequences, and the complexities of those decades-long disputes create fact patterns that can be difficult to unpack.
The Momenta Appeal
At the time of its 2015 petition for inter partes review, Momenta was working with Mylan to develop a biosimilar counterpart to Orencia®, the branded biologic drug whose active ingredient was covered by the BMS patent. Momenta’s plan was to enter the market as a biosimilar applicant under the Biologics Price Competition Act of 2009 (more detail here), which provides a pathway to generic competition for complex biologic drugs akin to the “Hatch-Waxman” Act provisions that govern small-molecule generic drug approval. Momenta first sought inter partes review of the ‘239 patent covering a formulation of Orencia®.
Unsuccessful in inter partes review, Momenta appealed the decision in early 2017. One major issue in the case (which one of us has discussed here in greater detail) was whether Momenta, who had no active district court litigation against BMS and had faced no direct threats of infringement and had not yet manufactured a competing product, had standing to maintain its appeal.
Momenta argued in briefing and at oral argument that the inter partes review was akin to an expensive “freedom-to-operate” action that resulted in immediate harm, presenting a “fork in the road” in its development process. Momenta concluded that losing the ability to appeal would force it to abandon its research efforts and leave millions of dollars wasted. BMS replied that any such harm was speculative and that the case law does not support Momenta’s standing.
In late 2018, almost a year after the oral argument concluded—but shortly before the Federal Circuit issued its opinion last month—Momenta sent a letter notifying the court that Momenta had initiated a conversation with Mylan “to exit [Momenta’s] participation in the development of M834, a proposed biosimilar of ORENCIA®.” Thus, Momenta no longer had the same interest in the appeal. BMS pushed to have the case dismissed as moot, though Momenta countered in a series of further letters that it still had a stake in the case and standing to appeal, noting that “[t]he concreteness of that stake is bolstered by the estoppel provision [of 35 U.S.C. § 315(e)], which the Board’s adverse decision already triggered.”
The Federal Circuit held that the case was largely moot given those recent developments, and dismissed the appeal. As one of us wrote recently, this case “shows the difficult position the court and parties are put in when standing is raised based on proactive business decisions revolving around patent challenges, and also demonstrates how principles of mootness and ripeness bleed into the standing inquiry easily.”
The Potential for Infringement as an Injury
For five years now, the Federal Circuit has been actively exploring the boundaries of Article III standing on appeal from administrative action. For instance, in 2014 in the inter partes reexamination context, the court in Consumer Watchdog v. Wis. Alumni Research Found. explained that appeals based on vague public interest concerns in invalidating the patent, without a particularized or personal injury, is not enough. There, WARF had obtained a patent related to human embryotic stem cell cultures, and Consumer Watchdog challenged the patent as ineligible subject matter.
On appeal, however, Consumer Watchdog framed its argument in terms that the patent helped “loot taxpayer funds and force research overseas” and that a challenge benefited the public at large. As the party “seeking to invoke federal jurisdiction,” Consumer Watchdog bore the burden of establishing Article III standing, which included proving that it suffered an “injury in fact.” The court found it had not alleged facts sufficient to demonstrate such an injury.
In the 2017 Phigenix v. Immunogen case, Phigenix filed an inter partes review but failed. On appeal, Phigenix alleged harm apart from the threat of direct patent infringement—namely, that the existence of the patent was preventing others from taking a license to patents owned by Phigenix. This blocking effect, the argument went, caused economic harm that is cognizable in standing. The court allowed that alternative forms of economic harm were permissible and accepted the legal framework, but ultimately held that Phigenix had failed to meet its burden.
The court suggested that arguing possible or speculative future economic interest based on conclusory expert declarant testimony was not necessarily enough. The Phigenix decision also laid out the burdens of production and persuasion for appellate standing, suggesting that the requirements apply only to the party seeking to invoke the court’s jurisdiction: the appellant. It also allowed that such evidence can be produced for the first time on appeal.
On the other hand, in the nonprecedential PPG Industries v. Valspar Sourcing, the Federal Circuit found sufficient economic harm to establish standing on appeal from inter partes reexaminations. The PPG opinion held that PPG’s launched product and customer inquiries suggested a concrete stake in the outcome and noted that “[t]his stake is enhanced by the ‘estoppel provisions contained within the inter partes reexamination statute.’”
As for standing arguments related to infringement potential itself, the Federal Circuit JTEKT v. GKN Automotive has explained that there may be certain situations in which a PTAB petitioner has no infringing product on the market at the relevant time but may still be able to show Article III standing. However, in such situations, the petitioner must establish “concrete plans for future activity that creates a substantial risk of future infringement.” On that case’s own facts, JTEKT had sold no infringing goods, had not finalized its product design, and had not shown any concrete plans for future activity that would run afoul of GKN’s patent rights. The court similarly concluded in RPX v. ChanBond that petitioner RPX was not engaged in any activity that even potentially infringed the patent being challenged. This necessary specificity of future plans means that PTAB challenges even from direct market competitors may ultimately lack standing to support an appeal.
For direct competitors, however, standing to appeal may still be available where the parties are engaged in a live commercial dispute presenting a “significant risk” of infringement based on “significant involvement in research and commercial activities” involving the subject matter of the patent. As the Federal Circuit held in DuPont v. Synvina, evidence showing that the petitioner in that case had an operating facility capable of infringing a method of manufacture was enough to confer standing.
Understood in this context, Momenta is a dispute in which the patent challenger was engaged in likely-infringing activity at the outset, but lost its direct stake through an “intervening abandonment of the controversy” by ending its collaboration with Mylan on an Orencia® biosimilar. The case is notable both for its high stakes on appeal and the fact that the biosimilar applicant was clearly engaged in an expensive, years-long dispute over a billion-dollar biologic product.
Although Momenta may still be able to receive royalties on any relevant biosimilar that Mylan may later develop, the court found this to be the sort of speculative future economic interest that proved inadequate in Phigenix. As in ChanBond, the lack of any current activity that might potentially infringe undermined Momenta’s argument for revived standing, and the lack of any concrete plans going forward meant that the safety valves of JTEKT or DuPont were of little help. In the end, the Momenta decision dodged the more contentious issue of just how much investment, how much potential for future infringement, and how much certainty there must be about that future harm, are ultimately enough to confer Article III standing.
Estoppel as an Injury
Throughout most of these cases, there has also been a thread of discussion about whether the strong statutory estoppel of 35 U.S.C. § 315(e), applied after the final written decision issues in an inter partes review, constitutes an independent injury capable of sustaining standing. It is unclear whether the presence of estoppel “bolsters” or supports a finding of injury or is simply irrelevant. The court seems to have entertained the middle road in Momenta, never finding that estoppel alone could constitute injury, but with appellants arguing that it supports their overall arguments about the existence of a genuine Article III case or controversy.
The “petitioner” estoppel of § 315(e) estoppel has two prongs. One applies back to the PTAB itself; the other, to outside forums. The plain language of the statute bars the maintenance of either another PTAB proceeding or an argument in a federal-court or ITC action that a patent is invalid based on any ground that was actually raised or reasonably could have been raised in the initial inter partes review. Moreover, estoppel applies not only to the petitioner but also to their real parties in interest and privies.
Running through the various opinions on standing is an argument that the legal detriment of estoppel is at least a factor in, if not a deciding vote for, finding standing on appeal.
In Altaire Pharms. v. Paragon Bioteck, a case where the court found standing in a post-grant review, the court pointed to estoppel as compounding the harm. As previously noted, the court found in the non-precedential PPG Industries case that the petitioner’s “stake is enhanced by the ‘estoppel provisions contained within the inter partes reexamination statute.’” And in Momenta, the appellant argued that that “[t]he concreteness of that stake is bolstered by the estoppel provision, which the Board’s adverse decision already triggered,” citing 35 U.S.C. § 315(e).
In JTEKT, on the other hand, the panel rejected appellant’s argument that inter partes review estoppel constituted a separate injury in fact, an issue the appellant there has raised in a petition for certiorari to the Supreme Court. RPX Corp. argued something similar in their opposition to the motion to dismiss their appeal, and have likewise made that argument the basis of a petition for certiorari, which, it should be noted, has drawn a “call for the views of the Solicitor General” from the high Court.
These arguments appear to be grounded in Justice Kennedy’s concurrence in Lujan, where he noted that “Congress has the power to define injuries and articulate chains of causation that will give rise to a case or controversy where none existed before.” But few actual cases exist holding that a statute itself creates standing, and it seems clear that the Federal Circuit, at least, is unconvinced that this argument holds water, certiorari petitions or no.
The Federal Circuit’s conclusion in Momenta that estoppel cannot constitute an injury-in-fact when Momenta “is not engaged in any activity that would give rise to a possible infringement suit” is potentially far-reaching. Standing to appeal depends on whether there is adequate injury-in-fact at the time of appeal—but estoppel, of course, lasts indefinitely. This is a significant disparity for petitioners, one that doubles down on the asymmetric burden that petitioners already face with regard to Article III standing.
Implications for Biosimilars
Although the opinion did not address it, it is noteworthy that Orencia® is listed in the Purple Book, which identifies what biological products the FDA has determined to be “biosimilar to or interchangeable with a reference biological product.” In another PTAB appeal decided just a few weeks prior to Momenta, the Federal Circuit in Amerigen Pharms. v. UCB Pharma (Fed. Cir. 2019) held that the listing of a patent in the FDA Orange Book (a Paragraph III certification) can constitute an injury sufficient to support Article III standing.
Accordingly, appellants confronted with administrative challenges prior to open district court litigation may be left scratching their heads and wondering just when standing kicks in and whether it continues through the life of any given appeal. That makes challenging biologics patents especially fraught with uncertainty. It also pushes would-be PTAB petitioners toward later or more reactive filing of inter partes review petitions rather than early filing of post-grant review or inter partes review challenges prior to a district court litigation. Given the complex regulatory schemes at work, it seems likely that these parallel proceedings will even further complicate ANDA and ABLA-related litigation and the related approval processes rather than streamline them.
We conclude that the Momenta decision has ultimately done little to ease concerns about who does and does not have standing to appeal. It is an important development in the ongoing evolution of Article III standing for appeals from PTAB trials, to be sure, as well as an informative survey of the relevant case law. Still, it may have created further confusion by injecting the issue of mootness into the debate. While courts have no control over the parties’ positions or the status of any particular appeal, the Federal Circuit’s decision making seems to reflect some discomfort with taking evidence on appeal in the first instance—as, for example, the D.C. Circuit does. This reluctance has led to longer briefing schedules and more complicated and uncertain appellate fact patterns. The weight of that uncertainty ultimately falls upon the parties and Federal Circuit panels themselves.
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Prof. Saurabh Vishnubhakat is an Associate Professor at the Texas A&M University School of Law and the Texas A&M Dwight Look College of Engineering, and is a former USPTO advisor. Mr. Jonathan Stroud is Chief Intellectual Property Counsel at Unified Patents Inc., an Adjunct Professor at American University Washington College of Law, and a former USPTO examiner. The arguments presented here are the authors’ and should not be imputed to Unified Patents, the USPTO, or to any other organization.