It’s Not Patently Obvious: Ninth Circuit Holds Public Disclosure Bar Does Not Apply to IPR Proceedings

In a recent decision, United States ex rel. Silbersher v. Valeant Pharmaceuticals International Inc., 2023 WL 4940429 (9th Cir. Aug. 3, 2023), the Ninth Circuit ruled that an inter partes review (IPR) proceeding did not qualify as a “public disclosure” under the False Claims Act’s (FCA) public disclosure bar because the government was not a party to the IPR and the IPR’s primary function was adjudicative, not investigative. The appellate court also held that the remaining qualifying public disclosures “do not disclose a combination of facts sufficient to permit a reasonable inference of fraud.” This decision sheds light on the many considerations that factor into a court’s consideration of what constitutes a qualifying disclosure under the FCA’s public disclosure bar, particularly in patent-related FCA actions.

Beginning in 2012, Valeant enforced a series of patents known as the Otterbeck Patents. These patents prevented competitors from manufacturing generic versions of Valeant’s anti-inflammatory drug, Apriso. Competitors sought to invalidate the Otterbeck Patents. In response, Valeant applied for a new patent based on its recent discovery that Apriso was effective when taken without food. The new patent, Patent No. 8,865,688 (688 Patent) was granted in 2014.

Anyone can challenge the validity of a patent by petitioning the Patent and Trademark Office (PTO) to conduct IPR, an adjudicative trial-like proceeding. Generico LLC, a Valeant competitor, took this step in 2015, arguing that it was “obvious that Apriso would be effective without food,” and that Valeant already knew this as evidenced by its head of research co-authoring articles containing this conclusion well before the 688 Patent application was submitted. The Patent Trial and Appeal Board agreed and the 688 Patent was invalidated. A legal news outlet, Law360, published an article describing the proceeding and findings.

The relator, Silbersher, was Generico’s attorney who led the IPR challenge. He filed a qui tam suit against Valeant, alleging that Valeant fraudulently obtained both the Otterbeck and 688 Patents to prolong its monopoly and charge an “artificially high price” for Apriso. Silbersher also alleged that Valeant’s fraud enabled it to overcharge the government, which paid nearly US$250 million in Medicare and Medicaid between 2011 and 2016. The district court held that the public disclosure bar compelled dismissal of Silbersher’s qui tam suit because IPR qualifies as an “other Federal . . . hearing” under the bar. Silbersher appealed.

The Ninth Circuit reversed, distinguishing IPR from patent prosecution, which it previously held did qualify as a public disclosure. First, an IPR could not qualify as an “administrative hearing . . . in which the Government or its agent is a party” because the government was not a “party” to the IPR proceedings concerning the 688 Patent. Second, unlike a patent prosecution, which is an ex parte proceeding before the PTO, IPR could not qualify as an “other Federal . . . hearing” because IPR’s primary function was not investigative in the sense of conducting a “fact-finding or investigatory process to obtain information.”

Next, the appellate court turned to the disclosures that did qualify as public disclosures. Those included the patent prosecutions, which, per the Ninth Circuit’s prior decision, qualified. In addition, the Court also accepted, for the sake of argument, that the Law360 article and prior studies about the efficacy of similar drug formulas also qualified because they constituted “news media.” The Court nonetheless held that these public disclosures failed to trigger the public disclosure bar because they did not disclose facts sufficient to permit a reasonable inference of fraud.

The Ninth Circuit’s Valeant decision highlights the importance of the public disclosure bar as a critical threshold issue in patent-related qui tam cases. We will continue to monitor such cases, which are growing in number, for additional insights.

© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This blog is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.