The U.S. Supreme Court closed the door Tuesday on hopes of a constitutional escape from inter partes review (IPR) challenges of valuable patents that are the foundation for biotech and med tech.

In a 7-2 decision in Oil States Energy Services LLC v. Greene's Energy Group LLC, the court defined patents as a public right or franchise, adding that an IPR is simply a reconsideration of the grant of that right. In other words, an IPR is a way of correcting mistakes made in granting a patent in the first place.

Writing for the majority, Justice Clarence Thomas stressed the narrowness of the court's decision. However, he noted that it "should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause."

For drug and med-tech innovators, the decision dashes the "Hail Mary hope" that the Supreme Court would once and for all do away with IPRs, Kevin Noonan, a partner with McDonnell Boehnen Hulbert & Berghoff LLP, told BioWorld.

David Silverstein, a partner at Axinn, Veltrop & Harkrider LLP and former in-house counsel at Par Pharmaceutical Inc., had a different take on the decision. It should be a relief for generics and branded companies alike, he said, because "we know now IPRs are here to stay."

He said he expects IPRs to prove more valuable in the future as the pharma industry evolves into biologics, which tend to have dense patent thickets. The IPR process, with its tight timeframes, will make it easier for both innovators and competitors to negotiate that thicket, Silverstein told BioWorld. The same could prove true for combination products and other medical products swathed in patents.

In its decision, the Supreme Court recognized Congress' power to assign patent challenges to the Patent and Trademark Office. Oil States had challenged that power partly based on the Seventh Amendment, which guarantees a trial by jury when the contested value exceeds $20. The court responded, "When Congress properly assigns a matter to adjudication in a non-Article III tribunal, 'the Seventh Amendment poses no independent bar to the adjudication of that action by a nonjury factfinder.'"

"Really, it's about congressional power," Noonan said of the decision. That sense of congressional power also appeared in a second opinion the court handed down Tuesday. The 5-4 decision in SAS Institute Inc. v. Iancu held that the America Invents Act, which went into effect in 2012, requires the Patent Trial and Appeal Board (PTAB) to decide the patentability of all claims challenged in an IPR that's instituted instead of the pick-and-choose policy – or "partial institution" – it's been following.

Unintended consequences

When Congress replaced the old inter partes reexamination process with IPR for patent challenges based on obviousness, it posed the new process as an alternative to litigation, which can be costly and time-consuming. But in some instances, IPR has been used as a parallel route to undo patents or manipulate the market. (See BioWorld Today, June 30, 2015.)

For instance, the patent claims involved in Oil States had been upheld by a federal district court, only to be killed by PTAB, which follows a different standard for claim construction than that used by the courts. Some drug and device patents have suffered a similar fate before PTAB, but Silverstein said those numbers have been overblown, as PTAB is not the patent killer it's rumored to be.

Those rumors may be grounded in unrealized expectations. The IPR process was originally envisioned as being more like the patent system in the EU in that it would give patent holders the opportunity to amend challenged claims and thus keep more limited patent rights, Noonan said. It hasn't worked out that way, as PTAB has turned "a deaf ear to amendments," he added.

Deferring to Congress to resolve the unintended consequences that have crept in with the implementation of IPRs, "courts have said, 'That's not our job,'" Noonan said. He pointed out a few things Congress could do to improve the process. At the top of the list would be requiring PTAB to use the same claim construction standard the courts use.

Another possibility Noonan suggested would be setting a deadline for when IPRs can be filed. While would-be competitors have a year to file an IPR to toll patent infringement litigation initiated by the patent holder, anyone can submit an IPR petition at any point in the life of a patent. That means a patent is never free from IPR risk, Noonan said.

Companies can lose a lot of money when hit with an IPR, especially in biotech, Noonan said. When used to manipulate the market, as they were in the early days, IPRs can impact the economy, cost jobs and affect people's lives. Putting a time limit on when IPRs can be filed would reflect an awareness of the seriousness of such challenges and balance the public interest in competition with the need to protect investment in innovation. But "that's a policy decision for Congress to make," Noonan said.