Fed. Cir. Finds Biotech NPE Lacks Standing to Appeal Adverse PTAB Ruling, Sets Novel Standing Framew

On Monday, January 9, 2017, the Federal Circuit found that Phigenix, Inc. lacked standing to appeal an adverse decision it suffered when challenging an Immunogen, Inc. patent (licensed to Genentech) in an inter partes review (“IPR”) proceeding before the Patent Trial and Appeal Board (“PTAB”). In reaching its decision, the Court provided a first-ever standing framework for the appeal of agency decisions having implications for certain IPR petitioners including non-practicing entities (“NPEs”).

In Phigenix v. Immunogen, 2017 U.S. App. LEXIS 323, (Fed. Cir. Jan. 9, 2017), Phigenix, a self-described biotech research company and licensor that does not manufacture products, attempted to license its U.S. Patent No. 8,080,534 (the “‘534 patent”) to Genentech based on Genentech’s activities under U.S. Patent No. 8,337,856 (the “‘856 Patent”) licensed from Immunogen.

After Genentech refused to take a license to the ‘534 patent, Phigenix petitioned for an IPR, alleging that the claims of the ‘856 Patent would have been obvious. The PTAB rejected Phigenix’s arguments, held for Immunogen, and Phigenix appealed this adverse ruling to the Federal Circuit.

Before considering the merits, the Court assessed standing under Article III of the U.S. Constitution, i.e., whether Phigenix’s alleged (1) “injury in fact,” (2) was “traceable to the challenged conduct,” (3) and “likely to be redressed by a favorable court decision.” The Court explained that although Article III standing is not necessarily a requirement to appear before an administrative agency like the PTO, “an appellant must nevertheless supply the requisite proof of an injury in fact when it seeks review of an agency’s final action in federal court[.]”

The Court stated “[i]n the nearly thirty-five years since the court’s inception, we have not established a legal standard for demonstrating standing in an appeal from a final agency action.” The Court went on to provide such a standard. In short, the Court held that an appellant in a final agency action must prove the three Article III factors by a burden of proof that is the “same as that of a plaintiff moving for summary judgment in the district court.”

The Court further stated that in some instances (e.g., when the appellant is the “object of the action” in question) standing will be “self-evident.” In such circumstances there is no need to look at evidence outside the administrative record. However, the Court explained, when standing is not self-evident, the appellant must supplement the record to the extent necessary with “arguments and any affidavits or other evidence” “to explain and substantiate its entitlement to judicial review.” “[I]f there is no record evidence to support standing, the appellant must produce such evidence at the appellate level at the earliest possible opportunity.”

Based on this newly articulated analytical framework, the Court found that Phigenix had failed to prove injury in fact. Phigenix did not contend that it risked infringing the ‘856 patent, “that it [was] an actual or prospective licensee of the patent, or that it otherwise plan[ned] to take any action that would implicate the patent.”

Instead, Phigenix attempted to show injury in fact in its briefing papers and affidavit submissions by arguing it suffered an “actual economic injury because the ‘856 patent increases competition between itself and ImmunoGen,” the existence of the ‘856 patent “encumber[ed] Phigenix’s licensing efforts[,]” and but for the existence of the ‘856 patent “at least a portion” of the licensing revenue going to Immunogen would instead go to Phigenix. The Court rejected these and other injury in fact arguments based largely on lack of factual evidence and dismissed Phigenix’s appeal.

Accordingly, risk of inability to show satisfactory injury in fact at the appellate level yields the concomitant risk that such petitioners will have just one bite of the apple (in the PTO), whereas patent-holders would still have a second bite on appeal should they suffer an adverse PTAB ruling.

The full case opinion can be found here: http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/16-1544.Opinion.1-6-2017.1.PDF

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