When things go wrong: inherited claim formats, unforeseen consequences and using IPR to manipulate stock prices

Swiss style claims – what do they really mean?

Bio and pharma patent attorneys have had an entertaining few months following the exploits of Swiss-style claims in the Courts of England and Wales. As a reminder to those unfamiliar with these claims the format is below:

‘Use of drug X in the manufacture of a medicament for treating disease Y.’

The format is tremendously flexible though, and claims like this are possible:

‘Use of drug X in the manufacture of a medicament for preventing disease Y in an individual with gene Z that leads to susceptibility to disease Y, wherein drug X is administered by a device implanted in the arm of the individual which simultaneously delivers an electric current to the surrounding tissues.’

To avoid infringement of the Swiss claim no one
was told which drug was being manufactured

In January in Warner-Lambert Company, LLC v Actavis Group Ptc EHF & Others [2015] EWHC 72 (Pat) Mr Justice Arnold said the Swiss style claim requires the infringer to ‘subjectively intend’ that the medicament will be used for the relevant condition. Last week the Court of Appeal said that was incorrect in Warner-Lambert Company, LLC v Actavis Group Ptc EHF & Others [2015] EWCA Civ 556, and that actually all that is required is for the infringer to know, or be able to reasonably foresee, that the medicament would be used to treat the condition (Katpost here). In the decision the Court of Appeal complained:

‘54. There are other criticisms which could be made of Swiss form claims. If the purpose of the new form of claim was to maintain the policy of preventing doctors being sued for infringement, it is difficult to see how that is achieved. As the claim is a process claim (see below), its direct product, the medicine, is an infringement, and all those who use or dispose of the product will infringe. The EPC 2000 seems even more apt to catch anyone who uses the product. As Lord Nicholls of Birkenhead said in Sempra Metals v IRC [2007] UKHL 34; [2008] 1 AC 561 at [51]:  

"Legal rules which are not soundly based resemble proverbial bad pennies: they turn up again and again." 

55. So it is here. As I shall have to explain, thirty years after the decision in Eisai courts of member states are still working out how to deal with the fall-out from that case. It would have been better if doctors had been provided with a defence, or the restriction on methods of treatment repealed altogether.’ 

Passing on a claim format
is not always kind

Who knew 30 years ago that the High Court, England and Wales, would misinterpret the meaning of a Swiss style claim in this way? In fact I’ve known patent attorneys who deal with Swiss style claims every day. They understand them in their ‘bones’ so to say, and they’ve realised for many years the terrible complexity of deciding on how such claims would be infringed, as Mr Justice Arnold has discovered. In the second example of the claim I have given above, to what extent do the parties that detect gene Z, make the device or implant the device infringe?


Undoing things and the intergenerational inheritance of claims formats

Only now are we realising how inappropriate it was to use Swiss style claims to get round the prohibition on patenting methods of treatment. I recently read a paper by Thambisetty (see here) which talks of how

‘claim formats in Examination Guidelines often draw on previous texts and are the result of complex legal and technical compromises struck along the way, and intergenerational because often these compromises refer to historic arrangements, which although devoid of current substantive significance continue to have an impact on the contours of the claims’

So we ‘inherit’ our claim formats and are stuck with them, and there seems to be little we can do about that.

How is patent reform in the US going?

This Kat admits to being a bit lost trying to follow patent reform in the US. This blog gives occasional insights (here), but it is clear that there is a lot of legislation proceeding through Congress such as the following Acts (here):

The Innovation Act - has provisions for fee-shifting (the loser in patent litigation pays the attorney fees), heightened pleading standards and a “customer-stay provision” (which seeks to protect customers from patent lawsuits). 

The TROL Act – which addresses the sending of bad faith patent demand letters. 

The STRONG Patents Act - has several provisions including some relating to post grant proceedings carried out by the Patent Trial and Appeal Board (PTAB) requiring it to abandon the broadest reasonable interpretation standard (BRI) and mandating that claims be presumed valid. 

The PATENT Act - which also concerns litigation and includes higher pleading standards. 

The Innovation Protection Act - which concerns funding of the United Stated Patent and Trademark Office (USPTO).

The pace of reform happening in the US is quite astounding and impressive. Clearly Congress feels it must be responsive to problems in the patent system, and I wish the UK Parliament was equally responsive to IP issues.

Unintended Consequences of the America Invents Act (AIA)

The AIA brought in new post-grant procedures at the USPTO where third parties could attack and cause revocation of a patent. Such proceedings have been found to be a highly effective way of revoking a patent, and that happens in a high proportion of cases. Inter Partes Review (IPR) is one such procedure and is now being used to manipulate the stock prices of companies (here). The company stock is ‘short’ sold where a party makes money when the price of a stock goes down (here) and then an IPR is filed to bring the stock price down. Further, hedge funds are now filing IPRs as part of strategies to bring down the value of small pharmaceutical companies (here).


Unintended consequences

The provisions of the AIA came into effect in 2012 and 2013, and we are slowly discovering all the unintended consequences. Patent rights play a finely-balanced role in the economy. Whenever the rights are strengthened or weakened then many different parties will gain or lose, and there are always unintended consequences. On wonders what other fallout there will be from the AIA, and then in turn from all the other Acts which Congress is in the process of rolling out. The example of Swiss style claims is a reminder that things are not easily undone, and it is easy for quick fixes to leave problems for future generations.