Post-Grant Adjudication of Drug Patents: Agency and/or Court

Abstract

The America Invents Act of 2011 (“AIA”) created a robust administrative system—the Patent Trial and Appeal Board (“PTAB”)—for challenging the validity of granted patents. Congress determined that administrative correction of errors made in initial patent grants could be cheaper and more scientifically accurate than district court litigation over patent validity. In terms of private economic value per patent, few areas of technology can match the biopharmaceutical industry. Particularly for small molecule drugs, a billion-dollar drug monopoly may be protected from competition by a relatively small number of patents. Accordingly, the social cost of invalid patents—and, by extension, the potential benefit of PTAB review—is particularly acute in the biopharmaceutical industry. Conversely, to the extent that PTAB is overly assertive and improperly targets high-quality patents, the decrease in innovation incentives may be quite problematic. To investigate the issue empirically, our paper uses several novel datasets (made publicly available via the posting of this article) to study the respective roles of the PTAB and the district courts. Our empirical findings indicate that the PTAB’s role in adjudicating small molecule patents has been quite modest, substantially more modest than its role for other types of patents. Moreover, we do not find any evidence that the PTAB targets categories of small molecule patents that are generally considered high quality. To the contrary, the PTAB does not appear to differentially target even categories of small molecule patents that are generally considered to exhibit lower quality. We also find no evidence that the PTAB is targeting small molecule patents held by small entities. We conclude by discussing paths policymakers could take if they were interested in a more active role for the PTAB in policing the validity of small molecule drug patents.