Accused of Patent Infringement?

On Sept. 16, 2012, meaningful parts of the America Invents Act became law, kicking off some of the most significant changes to patent law in decades. Included in this law is the ability for anyone to challenge the validity of patent in a new inter partes review (IPR) process. Specifically, IPR is a new, streamlined proceeding conducted at the U.S. Patent and Trademark Office that reviews the validity of a patent on the basis of other patents or printed publications, which may show the alleged invention was anticipated or obvious. Since its introduction, the new IPR process unquestionably has achieved its purpose in allowing one to challenge the validity of a patent quicker and more inexpensively than could be achieved in the courts. The IPR process also has shown itself to have a particularly high success rate in invalidating a patent. Several dietary supplement companies have already been impacted by this new procedure.

Prior to the America Invents Act, a company accused of patent infringement could always assert that the patent should be invalidated because the inventor was not the first to invent the alleged invention or that the invention was obvious. However, the means to challenge such a patent was limited to lengthy and expensive options, such as fighting the issue in the federal court system along with other issues such as infringement, and/or challenging the patent in ex parte or inter partes reexamination proceedings at the U.S. Patent and Trademark Office (USPTO).

With respect to the speed in solving the problem, the new IPR option has advantages. The final written decisions in an IPR case must be issued within 18 months from the time of first filing, absent extraordinary circumstances. Meanwhile, the median time to trial in a federal court is 2.5 years, according to the PricewaterhouseCoopers 2013 Patent Litigation Study. Similarly, the time for reexamination proceedings has recently ranged between 21 and 38 months, according to the USPTO.

With respect to the costs in solving a problem, the IPR strategy has even more advantages. The cost of an IPR proceeding can range between $500,000 and $900,000 in attorneys’ fees and costs, depending the complexity of the case. Although they are not small sums, these costs are much lower than the average costs of a patent litigation in federal court, which range between $970,000 to $5.9 million, according to the 2013 American Intellectual Property Law Association report on patent litigation. Moreover, to the extent an IPR and a patent litigation are proceeding at the same time on the same patent(s), the federal courts overwhelmingly have been stopping the federal court litigation until such time as the U.S. Patent and Trademark Office first completes its inter partes review.

With respect to the disruption to business caused by discovery requests for information, documents and depositions of employees, the IPR process wins again because it is much less intrusive. In an IPR, discovery is generally limited to the prior art documents relied upon and the depositions of those people who voluntarily offer a signed declaration in support of their patent position. Meanwhile, discovery in the federal courts is much broader, time consuming and expensive. flowing from the general standard that discovery is permitted on any evidence or depositions that are “relevant" or could lead to relevant evidence.

With respect to proving the patent is invalid in an IPR proceeding, the odds favor the IPR process again. In an IPR, the accused infringer need only prove invalidity under a “preponderance of evidence" standard. In federal court patent litigation, however, the patent is presumed valid and the accused infringer must prove invalidity by the higher “clear and convincing" evidence standard. Depending on how one defines a victory, the success rate in showing the patent is invalid is as high as 80 percent in an IPR, far surpassing the success rate in federal court.

Recognizing the many advantages of IPRs, several dietary supplement and nutraceutical patents are now facing IPR challenges in response to patent infringement accusations. For example, Merck & Cie and the South Alabama Medical Science Foundation first sued Macoven Pharmaceuticals and Gnosis SpA in 2012 for allegedly infringing patents that covered the use of a reduced folate and other vitamins. Gnosis SpA responded by filing an IPR against the same patents, and in June 2014, Gnosis SpA prevailed by defeating all 58 of the 58 patent claims challenged.

Similarly, Valensa International first sued Cyanotech Corp. in federal court for infringing its patent alleged to cover the use of astaxanthin to treat retinal eye injury. In response, Cyanotech Corp. filed an IPR of the same patent in 2013. Soon thereafter, the USPTO instituted a trial finding a reasonable likelihood that Cyanotech will prevail in proving that several of the challenged patent claims should be invalidated. The case remains pending.

In 2012, Neptune Technologies and Bioressources Inc. first sued Aker Biomarine in federal court for infringing one patent, among others, alleged to cover the use of krill oil containing omega-3 phospholipids. In response, Aker Biomarine filed an IPR of the same patent. In 2014, the USPTO instituted a trial finding that there is a reasonable likelihood that Aker Biomarine will prevail in proving that all of the challenged patent claims should be invalidated. The case remains pending.

In February 2014, Complete Nutrition Holdings Inc. also filed an IPR to challenge a patent owned by Vireo Systems Inc. and the Board of Regents of the University of Nebraska that is alleged to cover the dietary use of a creatine HCl salt. The case remains pending.

A company should immediately consider the use of an IPR when accused of infringement. Although the ultimate decision to file such a review depends on many factors, the increasing use of IPRs is rapidly becoming the new normal in defending against patent infringement.

Join Rakesh Amin, partner, Amin Talati LLC, as he address key aspects of patent protection and enforcement with Steve P. Hassid, partner, Silicon Edge Law Group LLP; and Sri Sankaran, shareholder, Winthrop & Weinstine P.A., on Thursday, Oct. 9, from 2 to 4 p.m. at SupplySide West, Las Vegas. The session, “All Patents are not Created Equal," will teach attendees to draft patents with litigation in.

Rakesh Amin ([email protected]; (312) 327-3382) is a registered pharmacist by background and a 20-year attorney concentrating his practice in the areas of FDA, FTC, patents, trademarks, licensing, litigation and trials. He primarily represents food, beverage, supplement, drug, cosmetic, biotech and medical device companies. Rakesh M. Amin is a Partner at Amin Talati.