Date01 June 2022
AuthorTu, S. Sean


Pharmaceutical patents listed in the FDA's "Orange Book" are some of the most valuable patents in the world. Accordingly, for this valuable subset of patents, it is paramount that the Patent & Trademark Office (PTO) correctly issue valid patents and preclude invalid patents from issuing.

In this paper, we study what happens to those patents in litigation, reporting the results for every Orange Book patent case that resulted in a merits decision. We find that about 25% of active Orange Book patents were invalidated in court. Since these invalid patents could wrongly increase the costs of prescription drugs, we investigate what happens during prosecution of these patents at the PTO. Our study is the first to link the prosecution of Orange Book patents directly to litigation outcomes. Our goal is to determine if there are ways to identify and prevent the issuance of these later invalidated Orange Book patents.

We find that litigated Orange Book patents have unique characteristics that distinguish them from other pharmaceutical patents. They are issued by a relatively small number of examiners. Most litigated patents (90%) are "secondary " patents--minor alterations to an existing drug rather than a patent on a new chemical. The owners of these later-litigated patent applications treat them very differently than they do other patents in the same field. They are part of large patent families, suggesting that the applicants are trying to build a patent fence around a known product. They frequently employ a procedural device known as "Track One" to obtain quicker patent prosecution. They are more likely to be subject to rejections based on double-patenting. When initially rejected by the patent examiner, owners of these applications are more likely to fight back rather than amend their claims. All of this suggests that applicants enter prosecution with these patents knowing that they are important and likely destined for litigation, and that they are deliberately creating patent "thickets " to make it harder for generics to enter the market.

Remarkably, we find that while patent examiners already have more time to spend on Orange Book patents than on other patents, the prosecution histories of many of these invalidated patents are identical. That is, many of these invalidated patents have the same assignee, the same examiner, and the same prosecuting attorney. Furthermore, both examiners and applicants cut and paste rejections as well as responses, thus creating identical or very similar prosecution histories.

We also find that while the patents that end up being litigated are clearly distinguishable from other pharmaceutical patents during patent prosecution, there is little difference in the PTO between the patents that end up surviving a court challenge and the ones that are invalidated.

Our data offer important guidance for reforming the process of prosecuting Orange Book patents. We can and should take advantage of advance knowledge about the importance of these patents to give them a more thorough examination early on. At the same time, the experience with cut-and-paste rejections suggests that we cannot simply give examiners more time and hope that they will do a more thorough job. That not only helps inform the policy suggestions we offer, but it sheds light on a longstanding academic debate about how much time and money we should spend examining patents.

Further, our data highlight the importance of secondary patents and patent thickets in Orange Book litigation. We offer a number of suggestions to simplify and streamline patent prosecution and litigation to make it harder to exclude generic entry with a thicket of bad patents.

  1. THE HATCH-WAXMAN BALANCE AND ORANGE BOOK PATENTS A. The Patent Examination Process B. Orange Book Procedure II. THE DATASETS A. Litigation Dataset B. PAIR Dataset C. Invalid Orange Book Patent Dataset D. Statistical Significance III. RESULTS A. Litigation Outcomes B. The Prosecution Process 1. Patent Family Characteristics and Family Size 2. Applicant Management of the Prosecution Process 3. Examiner Responses to Litigated Patents 4. Applicant Responses to Examiner Rejections IV. IMPROVING PHARMACEUTICAL PATENT LITIGATION A. Do We Need to Do Anything? B. Targeting Examiners--Review by a Team of Examiners C. Targeting the Multiplicity of Patents Covering a Drug 1. Terminal Disclaimers 2. Consolidating Applications into a Single Patent 3. Allow Firms to File One IPR that Targets Claims from Related Patent Families D. Use of Competitors to Stop Invalid Patents CONCLUSION APPENDIX STATISTICAL APPENDIX INTRODUCTION

    Pharmaceutical patents are at the center of a major health and public policy controversy. On the one hand, there is widespread consensus in the patent community that strong patents are important to encourage pharmaceutical innovation. (2) On the other hand, drug prices are out of control, and both scholars and Congress have pointed the finger at drug patents and at a variety of efforts by pharmaceutical companies to extend the life of their patents after their normal expiration date by patenting small changes in the product. (3)

    Against this backdrop, it is critically important to distinguish good pharmaceutical patents that increase social welfare from nuisance patents that are created only to make it more difficult for competitors to enter the market. That is an important goal in all sectors, and it has generated a great deal of policy and scholarly debate in recent decades. (4) But it is particularly important for pharmaceuticals. Allowing bad patents means that many people do not get access to lifesaving medicines, and that those who do potentially pay tens of billions of dollars more than they should. Wrongly rejecting good patents has less immediate consequences, but it may undermine the incentive structure that drives the development of new drugs, making everyone worse off.

    In this Article, we take a close empirical look at how the Patent and Trademark Office (PTO) decides whether to issue key pharmaceutical patents, and we tie that process to what ultimately happens to those patents in court. We identify every pharmaceutical patent in the FDA's Orange Book (5) that was litigated in court. We compare the patent prosecution record of those patents that were upheld to those that were invalidated, and we measure both groups against patents from the same fields of technology that were not enforced in court.

    We find that the important patents--the ones that end up in the Orange Book and enforced in court--have a very different record in the PTO than their counterparts, suggesting that applicants know in advance which patents are the important ones. By contrast, there is very little in the current prosecution record that allows us to distinguish good from bad patents. We also find that having examiners spend more time on the important patents, as some have suggested, (6) is not likely to help much; examiners who get more time to work on important cases now do not do more work, but instead cut and paste their existing work from prior cases.

    Our data allow us to suggest some targeted reforms to the patent process. We would require applicants to identify up front patents they intend to list in the Orange Book. Those applications should be subject to extra scrutiny--not by giving examiners more time, but by putting them into a special process similar to the PTO's Central Reexamination Unit. (7) If they survive that more intensive process, we should give those patents a stronger presumption of validity. These reforms should provide a cost effective and efficient means to reduce the number of duplicative invalid patents issued by the PTO in this critical area of technology.

    Our data also highlight the difficulties with patent thickets in the pharmaceutical industry. Under current law, patent owners can game the regulatory system by obtaining multiple patents that are virtually indistinguishable from each other. By dramatically increasing the number of weak patents issued, brand firms are able to increase entry costs for generic competitiors. (8) We suggest significant reforms both to how we grant patents in these large families and to how we regulate generic entry into pharmaceutical markets.

    In Part I, we discuss the regulatory structure of pharmaceutical patents and the Hatch-Waxman Act. We discuss our data and methodology in Part II. In Part III we present our results. Finally, in Part IV we offer policy recommendations and a critique of some other proposals based on our findings.


    Pharmaceutical patents are important. (9) Indeed, patents are probably more important in pharmaceuticals than anywhere else. (10) Drug patents are subject not only to the normal rules of patent law but to a complex regulatory regime under the Hatch-Waxman Act. In this section, we explain the background of that system. A. The Patent Examination Process

    When an application is sent to the PTO, it is first sorted for examination by technology type. (11) Each application is assigned to an "art unit" which is a group of patent examiners who examine applications related to a specific technology type. (12) Once in the art unit, a supervisory patent examiner (SPE) will then assign applications, for the most part randomly, to a reviewing examiner. (13) However, once an examiner receives an application, there is a much higher likelihood that the same examiner will examine any related family members. (14)

    There are many programs at the USPTO that allow applicants to speed up the review process. (15) The most important for Orange Book applications is the "Track One" program. (16) The Applicant can petition for Track One status, which aims to give applicants a final disposition within twelve months from the Track One request grant. Importantly, applicants do not have to perform pre-examination search to qualify for Track One status. (17)...

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