Innovate Articles

Think Twice Before Splitting Invalidity Theories Between the PTAB and District Court

Bruce Dekock and Scott Davis

            Patent defendants have two potential forums to invalidate patents asserted against them:  the district court in which they were sued and the USPTO.  Filing an Inter Partes Review (IPR) proceeding at the USPTO is a common strategy.  The defenses that can be raised in an IPR proceeding are by statute[1] more limited than those in a district court, and the potential estoppel[2] resulting from an IPR decision causes practitioners to carefully consider whether to request IPR and what grounds to raise at the USPTO.  On the flip side, in the IPR proceeding the accused infringer “only” needs to prove unpatentability by a preponderance of the evidence,[3] while in a district court the defendant must establish invalidity by clear and convincing evidence.[4]  A wary defendant may be tempted to divide invalidity arguments between the two forums, but there are potential downsides of such a strategy.

Background

 Liquidia Technologies, Inc. (“Liquidia”) developed a formulation of treprostinil manufactured using Liquidia’s proprietary PRINT^® technology.  On January 27, 2020, Liquidia filed a Section 505(b)(2) New Drug Application (NDA) with the U.S. Food and Drug Administration (FDA) for a new drug, YUTREPIA, which is an inhaled powder formulation of treprostinil for the treatment of pulmonary hypertension. 

United Therapeutics Corporation (“UTC”) markets TYVASO^® (treprostinil) inhalation solution that is approved by the FDA for treatment of pulmonary arterial hypertension.  In response to Liquidia’s NDA application, UTC sued Liquidia for patent infringement, asserting three patents: U.S. Patent No. 9,593,066 (“the ’066 patent”); U.S. Patent No. 9,604,901 (“the ’901 patent”); and U.S. Patent No. 10,716,793 (“the ’793 patent”).  The ’066 and ’901 patents include product-by-process claims directed to treprostinil and pharmaceutically acceptable salts of treprostinil, and methods for manufacturing treprostinil and its salts.  The ’793 patent claims a method of treating pulmonary hypertension by administering inhaled treprostinil.  As in all ANDA-type litigation,[5] UTC’s lawsuit stayed FDA approval of Liquidia’s NDA.

In response to the UTC complaint for patent infringement, Liquidia challenged each of UTC’s patents by requesting the Patent Trial and Appeal Board (PTAB) to institute an IPR against each patent.  The PTAB instituted IPRs with respect to two of the patents:  the ’901 patent and the ’793 patent. 

The ’793 patent is directed toward the method of treatment and was the main obstacle faced by Liquidia.  By statute, only grounds of unpatentability based on patents or printed publications may be asserted in IPRs.[6]  Liquidia asserted the ’793 patent was obvious over U.S. Patent 6,521,212 (“the ’212 patent”), in view of two prior published abstracts (the “Voswinckel abstracts”).  The ’212 patent described delivering treprostinil to patients via inhalation, while the Voswinckel abstracts described the doses and number of breaths claimed in the ’793 method of treatment claims. Before the PTAB, UTC challenged the prior art status of the Voswinckel abstracts, arguing that Liquidia had failed to adequately show that those references qualified as “printed publications” under pre-AIA 35 U.S.C. § 102(b).  The main point of contention was whether the Voswinckel abstracts had been distributed and made available to attendees at two medical conferences more than one year prior to the ’793 priority date (e.g., the “critical date”).  Thus, while ostensibly the defense raised by Liquidia in the IPR was based on prior printed publications, the key evidentiary point related not to the contents but whether the Voswinckel abstracts in fact had “published” before the critical date.

Obviousness Defense Dropped in District Court in Favor of IPR

 The district court held a bench trial from March 28 to 31, 2022.  On the second day of trial, Liquidia dropped its obviousness defense against the ’793 patent.  Liquidia maintained other invalidity defenses in court:  lack of enablement and lack of written description.  Perhaps Liquidia’s decision was due to the tricky evidentiary points relating to the Voswinckel abstracts.  Proving the publication “date” of the Voswinckel abstracts was not straightforward.  Liquidia argued that the Voswinckel abstracts were available in various research aids prior to the critical date, as well as available to conference attendees prior to the critical date.  Or perhaps the decision was pragmatic in view of limited trial time.  In any event, the choice was made – different invalidity theories were presented to the PTAB and the district court. 

“Inconsistent” Rulings

             After the bench trial, the district court made short order of the enablement and written description invalidity defenses.  However, prior to entry of judgment, the PTAB held on July 19, 2022 (confirmed after rehearing on February 2, 2023) that the relevant claims of the ’793 patent were unpatentable as obvious over the ’212 patent in view of the Voswinckel abstracts.    

            So what now after the inconsistent results?!  Liquidia, having prevailed against the ’793 patent claims at the PTAB, submitted the PTAB decision to the district court and argued that the decision compelled the district court to treat the ’793 patent as invalid.  Liquidia conceded that the PTAB decision was not a final decision binding on the district court, but gamely argued that the PTAB decision meant that Liquidia could not induce infringement of the ’793 method claims.  The Supreme Court had in fact invited “accused inducers” to “seek inter partes review at the Patent Trial and Appeal Board and receive a decision as to validity within 12 to 18 months” to “be immune from liability.”[7]  Alternatively, Liquidia asked the district court to stay its judgment until the PTAB proceedings were complete and the appeals exhausted based on the intervening PTAB decisions. 

The district court, however, was not persuaded.  The district court rejected first the argument that the intervening IPR vitiated the finding of induced infringement.  The decision of the PTAB was not a “final” decision.  Only after being affirmed by the Federal Circuit would the PTAB’s determination of invalidity become “final” and hence binding on the district court, and thus had no impact on the court’s finding of induced infringement.

Second, the district court rejected the request to stay its judgment.  Having found the ’793 patent infringed and not invalid, the district court wrote that “UTC is entitled to a non-discretionary injunction delaying final FDA approval.  35 U.S.C. § 271(e)(4)(A).”[8] 

The upshot of the failure to assert the obviousness argument in the district court was that the inconsistent result between the PTAB and district court was, at least pending appeal, resolved in favor of the district court’s findings.  Thus the risk, particularly in ANDA litigation, that an inconsistent result between the district court and the PTAB results in application of the district court ruling and an injunction while the appeals are sorted out. 

            Of course both parties appealed, and after a first decision from the Federal Circuit affirming the district court,[9] the Federal Circuit affirmed the PTAB’s decision of invalidity.[10]  Now with a “final” decision in hand, Liquidia returned to the district court to successfully vacate the portion of the judgment blocking final approval of YUTREPIA by the FDA.[11]  Nearly 18 months after entry of the Final Judgment by the district court, Liquidia had finally prevailed in the original patent litigation sparked by its NDA filing. 

            Unfortunately for Liquidia, in between entry of the Final Judgment and the vacating of the portion of the district court’s judgment blocking approval of its NDA, UTC filed a new lawsuit against the FDA, asserting that the FDA had improperly allowed Liquidia to amend its NDA application to add a new indication.  The FDA then on August 16, 2024 (two years after the district court’s judgment) issued a new Exclusivity Decision granting UTC additional data exclusivity relative to its TYVASO^® product, thus effectively delaying any approval of YUTREPIA by an additional nine months.  Approval of Liquidia’s NDA for YUTREPIA was thus again delayed!  Litigation between UTC and Liquidia continues.

            Hindsight is 20/20, and it is easy to second guess decisions once the final outcomes are known.  In this case, one wonders what would have happened if Liquidia had not dropped its obviousness defense in the district court.  Had Liquidia prevailed at the district court earlier, might it have obtained FDA approval before UTC filed its lawsuit against the FDA, and before the FDA issued its new Exclusivity Decision?  While the burden of proof was higher in the district court, Liquidia presumably would have had greater leeway to present evidence in the district court through testimony that the Voswinckel abstracts had been publicly disseminated and made available at the medical conferences.  Might such additional evidence have mitigated against the higher burden of proof?  While there was always the risk that the district court could have found that Liquidia failed to prove that the Voswinckel abstracts were prior art documents, there was certainly also the same risk at the PTAB even under the reduced burden of proof.  Might it have been better to have two bites at the apple to prove the Voswinckel abstracts were prior art?  And given that this case was subject to 35 U.S.C. § 271(e)(4)(A), the relief to be granted to UTC in the district court should Liquidia fail to prevail on its other non-infringement or invalidity arguments was clear – there would be effectively an injunction against approval pending appeal regardless of the outcome of the PTAB proceedings.  To avoid that outcome, Liquidia would have to win on a theory of either non-infringement or invalidity in the district court regardless of what grounds of unpatentability were presented to the PTAB.

Maintaining the Best Invalidity Theories in Court and at the PTAB

 Is it possible for a party to have its cake and eat it in two fora?  Yes, at least sometimes.

While there is never a “one size fits all” approach, where there are risks there can be opportunities.  There are options to leverage the fact that an accused infringer has two fora available to it—both the district courts and the PTAB.  

Recall the caution about IPR estoppel at the start of this article.  There is real risk that a prior art defense will be lost in court if an IPR is not successful.[12]  But there are opportunities to effectively preserve prior art defenses in court for a proverbial second bite at the apple.  Some options may include:[13]

1. Timing, to stay or not to stay?  While courts can and often do stay litigation until an IPR concludes, courts are not required to do so and rarely would the patentee asserting infringement request that a court do so.  If a court’s schedule would decide validity before the PTAB would decide an IPR (about 18 months from the IPR filing date), then IPR estoppel will not apply to limit defenses in court.  Thus, it can be possible to have two bites at the apple with the court deciding a prior art defense under the clear and convincing evidence standard and the PTAB deciding an IPR under the preponderance of the evidence standard.[14]  Allowing the court to get ahead of the PTAB may be a risky strategy for accused infringers facing a potential damages judgment, but far less risky for a defendant in an ANDA case where no damages are in play.
   
   
2. Shaping invalidity theories to avoid estoppel in court.  IPR estoppel is actually narrow in scope.  Only grounds based solely on prior art publications are barred in court after a failed IPR.[15]  IPR estoppel does not apply to other theories of invalidity available in court that cannot be pursued in an IPR, such as defenses under 35 U.S.C. §§ 101, 112 and obviousness-type double patenting, nor does IPR estoppel bar prior art defenses based (at least in part) on non-publication prior art, such as prior sales and public uses.  Consider the Voswinckel abstracts mentioned above.  They related to studies of inhaled treprostinil.  Especially if studies were done in the U.S.,[16] then evidence beyond the published abstracts potentially could have been obtained in discovery for use in court and adding that evidence to the abstracts could create an invalidity theory based on effectively the same prior art but not subject to IPR estoppel.  Such evidence could include testimony from those involved with the studies, doctors prescribing the claimed method of treatment, unpublished documents like lab notebooks and internal reports, and the things used in the study such as the inhalable treprostinil composition itself and samples of the types of inhalation devices used to deliver the claimed dosages.  None of those things would count as printed publications that can be used in an IPR, and thus combining them with the publication prior art could create a new ground that could not have been raised in IPR and would not be subject to IPR estoppel.

Any of these strategies also would require careful implementation in view of recent Patent Office changes related to discretionary denial of IPR petitions.[17]  While implementation of the recent guidance on discretionary denials has only just begun, early experience suggests that overlapping issues of patentability to be determined in the district court and the at the PTAB may result in denial of IPR absent a robust stipulation by the IPR petitioner agreeing not to raise any ground in district court that reasonably could have been raised in the IPR.  Those stipulations are not new, but a more robust stipulation may now be required, e.g., agreeing not to raise in court prior art systems that relate to the patents or printed publications at issue in the IPR.

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Patent litigators ought to carefully consider how to assert the best defenses in the district court and the best grounds of unpatentability at the PTAB—and embrace opportunities to effectively have two bites at the apple.[18]