Background
Celgene Corporation holds patents on methods for safely distributing thalidomide (sold as Thalomid) to patients. Thalidomide is used to treat multiple myeloma and leprosy but can cause severe birth defects, so its distribution requires a strict risk-management program. Celgene’s patents, issued before the America Invents Act (AIA) became effective in 2012, covered the distribution safety system.
The Coalition for Affordable Drugs, an entity that petitions for IPR proceedings with the goal of invalidating pharmaceutical patents and reducing drug prices, filed IPR petitions challenging Celgene’s patents. The PTAB instituted review and found the claims unpatentable as obvious. Celgene appealed, arguing that applying IPR proceedings — created by the AIA — to patents that issued before the AIA constituted an unconstitutional “taking” of property without just compensation under the Fifth Amendment.
The Court’s Holding
The Federal Circuit affirmed and rejected Celgene’s constitutional challenge. Chief Judge Prost held that retroactive application of IPR proceedings to pre-AIA patents does not constitute a regulatory taking because IPRs are not significantly different from the patent re-examination mechanisms that existed before the AIA. Both pre-AIA reexamination and post-AIA IPR: (1) apply the same substantive grounds for invalidity (novelty and obviousness); (2) use a preponderance of evidence standard; and (3) apply broad claim construction. Because pre-AIA patent owners had always lived with the possibility of administrative review of their patents, they had no reasonable investment-backed expectation that their patents could never be challenged in an administrative proceeding.
The court rejected the argument that IPR’s higher invalidation rate and expanded third-party participation rights made it constitutionally different from prior reexamination procedures.
Key Takeaways
- The AIA’s IPR proceedings can constitutionally be applied to patents that issued before the AIA, without violating the Takings Clause.
- Patent owners have always faced the possibility of administrative invalidity review, so the retroactive application of IPR does not upset any reasonable expectation of finality.
- The decision foreclosed a major constitutional attack on the PTAB and IPR system that had been advocated especially by pharmaceutical and biotech companies with older patent portfolios.
- The ruling followed the Federal Circuit’s earlier decision in Oil States Energy Services v. Greene’s Energy Group (2018), where the Supreme Court upheld IPR proceedings against separation-of-powers challenges.
Why It Matters
Celgene v. Peter resolved one of the most significant pending constitutional challenges to the IPR system: whether companies that obtained patents before IPR was invented could be forced to defend those patents in PTAB proceedings under procedures that did not exist when the patents issued. The pharmaceutical industry was particularly invested in this question, as many valuable drug patents predate the AIA.
By holding that retroactive application of IPR is not a Fifth Amendment taking, the Federal Circuit confirmed that all issued patents — regardless of when they were obtained — are subject to IPR challenge. For patent challengers (including generic drug manufacturers and patent assertion defense organizations), this was a significant win confirming the breadth of the IPR system. For pharmaceutical and biotech innovators with older portfolios, it confirmed that no issued patent is safe from PTAB review.