FTC Comment to the U.S. Patent & Trademark Office Regarding Patent Trial and Appeal Board Rules of Practice for Briefing Discretionary Denial Issues, Docket No. PTO-P-2023-0048

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UNITED STATES
PATENT AND TRADEMARK OFFICE
Patent Trial and Appeal Board Rules of
Practice for Briefing Discretionary Denial
Issues, and Rules for 325(d) 	Docket No. PTO-P-2023-0048
Considerations, Instituting Parallel and
Serial Petitions, and Termination Due to
Settlement Agreement
COMMENT OF THE UNITED STATES
FEDERAL TRADE COMMISSION

FTC Comment
June 18, 2024
I. 	Introduction
The purpose of the U.S. patent system is to foster innovation. It accomplishes this purpose
by granting a limited period of exclusivity to qualifying inventions, which encourages their
creation and then making the invention freely available to the public after that period has
expired. Fostering innovation is also a key purpose of the federal antitrust laws. As discussed
below, the United States Federal Trade Commission (“FTC” or “the Commission”) has a
mandate to enforce the antitrust laws to prevent anticompetitive conduct and unfair methods of
competition, which may involve patents or patented products and includes the misuse or abuse of
patents.
The FTC and the United States Patent and Trademark Office (“USPTO”) share the
common goals of promoting innovation and fair competition. Both agencies have long
recognized that achieving these goals depends on cracking down on patent abuse. The patent
system works most efficiently and effectively when the USPTO issues and maintains only
properly granted and lawful patents. Improvidently granted patents or patents of improper
breadth, however, can serve as a barrier to innovation and frustrate entry of new competitors in
critical areas, including generic pharmaceuticals. As the FTC has previously noted, “Poor patent
quality and legal standards and procedures that inadvertently may have anticompetitive effects
can cause unwarranted market power and can unjustifiably increase costs.”1 In 2011, Congress
enacted the America Invents Act (“AIA”), which created the Patent Trial and Appeal Board
(“PTAB”) and granted it authority to hear several types of administrative challenges to the
validity of granted patents. Because invalid patents can improperly block competition—inflating
costs and dampening new business entry and growth—access to timely review of patent validity
is vital.
The USPTO issued a Federal Register Notice on April 19, 2024, requesting public
comment on a notice of proposed rulemaking (“NPRM”) proposing various modifications to the
rules of practice for inter partes and post-grant review proceedings before the PTAB.2 In this
rulemaking, the USPTO seeks to better align PTAB practices with the USPTO’s mission to
promote and protect innovation and with the congressional intent behind the AIA: “to establish a
more efficient and streamlined patent system that will improve patent quality and limit
unnecessary and counterproductive litigation costs.”3 The Commission appreciates the USPTO’s
focus on improving patent quality and better aligning PTAB inter partes and post-grant review
proceedings with the Congressional intent behind the AIA. The Commission further supports the
1 F ED. TRADE C OMM’ N, TO P ROMOTE I NNOVATION : THE P ROPER B ALANCE OF COMPETITION AND P ATENT LAW AND
P OLICY (Oct. 2003) at 5, http://www.ftc.gov/os/2003/10/innovationrpt.pdf [hereinafter 2003 report]; see also F ED.
TRADE C OMM’ N, THE EVOLVING IP M ARKETPLACE : A LIGNING P ATENT N OTICE AND REMEDIES WITH COMPETITION
(Mar. 2011) at 7, https://www.ftc.gov/sites/default/files/documents/reports/evolving-ip-marketplace-aligning-patent-
notice-and-remedies-competition-report-federal-trade/110307patentreport.pdf [hereinafter 2011 report] (explaining
that “poor quality patents can discourage innovation by creating uncertainty and raising costs”).
2 Patent Trial and Appeal Board Rules of Practice for Briefing Discretionary Denial Issues, and Rules for 325(d)
Considerations, Instituting Parallel and Serial Petitions, and Termination Due to Settlement Agreement, 89 Fed.
Reg. 28693 (Apr. 19, 2024) [hereinafter NPRM].
3 H.R. Rep. No. 112-98, pt. 1, at 40 (2011) (explaining that the AIA was “designed to establish a more efficient and
streamlined patent system that will improve patent quality and limit unnecessary and counterproductive litigation
costs”); S. Rep. No. 110-259, at 20 (2008) (predicting that the new post-grant review system “will give third parties
a quick, inexpensive, and reliable alternative to district court litigation to resolve questions of patent validity”).
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FTC Comment
June 18, 2024
USPTO’s ongoing vigilance to ensure that the PTAB review process is not abused, including by
the use of discretionary denials to impede meritorious challenges.
The NPRM includes a proposal specifically intended to support the FTC’s and the
Department of Justice’s enforcement work regarding anticompetitive conduct related to patent
settlements.4 The Commission appreciates this opportunity to share its views related to USPTO’s
efforts to require the filing of all settlement agreements made in connection with the termination
of an AIA proceeding and supports the proposal to require uniform disclosure of all such
agreements. As discussed below, certain patent settlement agreements between pharmaceutical
manufacturers can raise antitrust concerns where they include reverse payments that keep drug
prices high by impeding competition from lower-cost generic drugs. The Commission looks
forward to collaborating with the USPTO on this NPRM and on other areas at the intersection of
antitrust law and intellectual property law, consistent with the policy set forth in the July 9, 2021,
Executive Order on Promoting Competition in the American Economy.5
II. 	The FTC’s Interest in the NPRM
For more than 25 years, the FTC has addressed the complementary role of intellectual
property and competition in its policy and enforcement efforts.6 Many of these policy efforts
have considered issues relating to patent quality and competition.
In 2003, after a series of public workshops and consultations, the FTC issued a report,
“To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy,”
(hereinafter 2003 FTC IP Report) that highlighted numerous concerns around the impact of
patents that are likely invalid or contain claims that are overly broad—including how such
patents serve to block competition and impede innovation.7 For example, such patents may lead a
competitor to forgo research and development in the areas that the patents improperly claim.8 If
the competitor instead chooses to pursue research and development in areas improperly covered
by the patents without a patent license, it may face expensive and time-consuming litigation with
the patent holder.9 If the competitor instead chooses to negotiate a license to the questionable
patents, the costs of follow-on innovation and commercial development increase due to
unjustified royalties.10
4 NPRM, 89 Fed. Reg. at 28697.
5 White House, Executive Order on Promoting Competition in the American Economy (July 9, 2021), available at
https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-
competition-in-the-american-economy.
6 See, e.g., U.S. D EP ’ T O F J USTICE & F ED. TRADE COMM’ N, A NTITRUST G UIDELINES FOR THE LICENSING OF
I NTELLECTUAL P ROPERTY (Apr. 6, 1995), https://www.justice.gov/sites/default/files/atr/legacy/2006/04/27/0558.pdf
(revised Jan 12, 2017,
https://www.ftc.gov/system/files/documents/public_statements/1049793/ip_guidelines_2017.pdf).
7 2003 FTC IP Report; U.S. DEP ’ T O F J USTICE & F ED. TRADE COMM’ N, A NTITRUST E NFORCEMENT AND
I NTELLECTUAL P ROPERTY RIGHTS : P ROMOTING I NNOVATION AND COMPETITION (Apr. 2007),
https://www.ftc.gov/sites/default/files/documents/reports/antitrust-enforcement-and-intellectual-property-rights-
promoting-innovation-and-competition-report.s.department-justice-and-federal-trade-
commission/p040101promotinginnovationandcompetitionrpt0704.pdf.
8 2003 FTC IP Report at 5.
9 Id. at 6.
10 Id.
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June 18, 2024
In addition, questionable patents can contribute to patent thickets, which are large
numbers of patents obtained after the initial round of patents covering an innovative active
ingredient.11 After describing a number of concerns that flow from improperly granted patent
claims, the 2003 FTC IP Report detailed concerns about the inadequate options for challenging
questionable patents, and ultimately recommended that Congress create an administrative
procedure for post-grant patent review that allows for meaningful challenges to patent validity
short of federal court litigation.12 In the years following the 2011 enactment of the AIA, the FTC
has supported prior USPTO efforts to improve patent quality by explaining how a well-
functioning patent system can help incentivize new entry into markets, innovation, and
competition.13 Earlier this year, the FTC submitted a comment in connection with the draft
interagency guidance framework for considering the exercise of march-in rights, noting that
patent thickets may frustrate government efforts to use march-in rights to provide affordable
public access to drugs.14
The FTC also has a long history of pursuing enforcement actions at the intersection of
antitrust and intellectual property, to address the misuse and abuse of patents in ways that
undermine fair competition.15 The Commission has enforced U.S. antitrust laws to prevent
anticompetitive “reverse-payment” patent settlements between pharmaceutical brand and generic
firms, which can arise when parties settle patent disputes with the patentee paying its would-be
competitor to drop the challenge and stay off the market. These agreements are known as
“reverse-payment” settlements because “a party with no claim for damages … walks away with
money simply so it will stay away from the patentee’s market.”16 In FTC v. Actavis, the Supreme
Court held that reverse-payment agreements create a “risk of significant anticompetitive
effects.”17 The potential anticompetitive harm from this type of agreement is that the payment
“prevent[s] the risk of competition” and may allow the parties to “maintain supracompetitive
prices to be shared among the patentee and the challenger rather than face what might have been
a competitive market.”18
11 Id. at 7.
12 Id. at 7-8.
13 U.S. Dep’t of Justice Antitrust Division & Fed. Trade Comm’n, Comment on Proposed Requirements for
Recordation of Real-Party-in-Interest Information Throughout Application Pendency and Patent Term (Feb. 1,
2013) at 4, https://www.ftc.gov/sites/default/files/documents/advocacy_documents/proposed-requirements-
recordation-real-party-interest-information-throughout-application-pendency.pto-p-2012-0047-patent-and-
trademark-office/130201pto-rpi-comment.pdf; U.S. Dep’t of Justice & Fed. Trade Comm’n, Comment on
Enhancing Patent Quality (May 6, 2015) at 3,
https://www.ftc.gov/system/files/documents/advocacy_documents/comment-united-states-federal-trade-
commission-united-states-department-justice-united-states/150507ptocomment.pdf.
14 Comment of the United States Federal Trade Commission (Feb. 6, 2024), Comment No. 2023-008-0821, National
Institute of Standards and Technology, Draft Interagency Guidance Framework for Considering the Exercise of
March-In Rights, FR Doc No. 2023-26930.
15 See,e.g., Overview of FTC Actions in Pharmaceutical Products and Distribution (April 2024), Overview of FTC
Actions in Pharmaceutical Products and Distribution, available at
https://www.ftc.gov/system/files/ftc_gov/pdf/Overview-Pharma.pdf.
16 FTC v. Actavis, Inc., 570 U.S. 136, 152 (2013).
17 Id. at 158-59.
18 Id. at 157.
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FTC Comment
June 18, 2024
Congress took steps to enhance the FTC’s ability to detect potentially anticompetitive
patent settlement agreements by passing the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (“MMA”), which requires pharmaceutical companies to file patent
settlements and related agreements with the FTC and the Department of Justice.19 Congress
recognized that “pacts between big pharmaceutical firms and makers of generic versions of
brand-name drugs that are intended to keep lower-cost drugs off the market” posed a potential
threat to competition.20 In 2018, Congress expanded this filing requirement to include certain
patent settlement agreements involving biologics and biosimilar applicants.21
The Commission has also taken aim against patent holders engaged in other unfair
methods of competition, including sham patent litigation,22 anticompetitive “loyalty programs”
that impede generic entry,23 and “product hopping” schemes that preserve monopoly profits on a
patented product by making modest reformulations that offer little or no therapeutic advantages
and deprive the public of the benefits of generic competition.24 The FTC continues to scrutinize
patentholder conduct that can delay and deter entry of lower-cost generic competitors, including
pharmaceutical companies’ improper listing of patents in the FDA’s Orange Book.25
III. 	The NPRM Settlement Proposal Would Enhance the FTC’s Ability to Monitor
Anticompetitive Conduct Related to Patent Settlements
As discussed in the NPRM, the PTAB currently requires all parties that settle their case
after an AIA proceeding has been instituted to file the settlement agreement and any collateral
agreements with the PTAB before the proceeding will be terminated. The statute provides for
filed settlement agreements to be made available to federal government agencies on written
request.26 The proposed rule would, among other things, clarify that parties must file with the
19 Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173 §§ 1111-1118,
117 Stat. 2461-64 (codified at 21 U.S.C. § 355 note).
20 S. Rep. No. 107-167 at 4 (2002).
21 Patient Right to Know Drug Prices Act, Pub. L. No. 115-263, 132 Stat. 3672 (2018).
22 Complaint, Fed. Trade Comm’n v. AbbVie Inc., No. 2:14-cv-05151 (E.D. Pa. filed Sept. 26, 2014),
https://www.ftc.gov/system/files/documents/cases/140908abbviecmpt1.pdf.
23 Amended Complaint, Fed. Trade Comm’n v. Syngenta Corp., No. 1:22-cv-00828 (M.D.N.C. filed Dec. 23, 2022),
https://www.ftc.gov/system/files/ftc_gov/pdf/amended_complaint_public_redacted.pdf.
24 Joint Motion for Entry of Stipulated Order for Permanent Injunction and Equitable Monetary Relief and
Dismissal, Fed. Trade Comm’n v. Indivior, Inc., No. 1:20-cv-00036 (W.D. Va. filed Jul. 24, 2020), ECF No. 3,
https://www.ftc.gov/system/files/documents/cases/jt_mtn.pdf; Joint Motion for Entry of Stipulated Order for
Permanent Injunction and Equitable Monetary Relief and Dismissal, Fed. Trade Comm’n v. Reckitt Benckiser Group
PLC, No. 1:19-cv-00028 (W.D. Va. filed Jul. 11, 2019), ECF No. 2,
https://www.ftc.gov/system/files/documents/cases/reckitt_joint_motion_for_stipulated_order_7-11-19.pdf.
25 FTC Challenges More Than 100 Patents as Improperly Listed in the FDA’s Orange Book (Nov. 7, 2023),
https://www.ftc.gov/news-events/news/press-releases/2023/11/ftc-challenges-more-100-patents-improperly-listed-
fdas-orange-book; FTC Expands Patent Listing Challenges, Targeting More Than 300 Junk Listings for Diabetes,
Weight Loss, Asthma and COPD Drugs (Apr. 30, 2024), https://www.ftc.gov/news-events/news/press-
releases/2024/04/ftc-expands-patent-listing-challenges-targeting-more-300-junk-listings-diabetes-weight-loss-
asthma; see also Federal Trade Commission Statement Concerning Brand Drug Manufacturers’ Improper Listing of
Patents in the Orange Book (Sept. 14, 2023),
https://www.ftc.gov/system/files/ftc_gov/pdf/p239900orangebookpolicystatement092023.pdf
26 35 U.S.C. § 317(b).
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June 18, 2024
USPTO all pre-institution settlement agreements, including any collateral agreements, similar to
what is required for post-institution settlement agreements.27
The potential for patent settlement agreements to violate antitrust laws is well-
established.28 This concern extends to patent disputes that are settled at any point in the PTAB
review process, including those that are finalized prior to the commencement of a PTAB
proceeding. Extension of disclosure requirements to any settlement regardless of timing or
effective date would support the FTC’s ability to identify and investigate potentially unlawful
settlements in the pharmaceutical context and more broadly. While the FTC receives certain
patent settlement agreements pursuant to the MMA, the USPTO’s proposed rule applies to a
broader set of patent settlement agreements related to pharmaceuticals as well as those in other
industries, which would be beneficial to the FTC’s ability to enforce the antitrust laws and
prevent unfair methods of competition.
The Commission agrees that the proposed changes would enhance the government’s
ability to monitor and curb potentially harmful and unlawful pre-institution settlement
agreements, including through potential antitrust enforcement actions. According to the NPRM,
since FY2020, pre-institution settlements have made up over half of all settlements in AIA
proceedings. Given the significant percentage of settlements that are currently not required to be
disclosed but nonetheless may carry the same antitrust risks, the Commission believes the
proposed rule will support efforts to detect and investigate potentially anticompetitive conduct
related to settlement agreements.
Moreover, the Commission supports the proposed rule because it closes a loophole that
may otherwise allow parties to circumvent disclosure requirements. As the NPRM describes,
parties are currently able to avoid disclosure of settlements by filing a motion to dismiss or
withdraw their petition before institution of proceedings.29 The institution of proceedings is
solely within the discretion of the parties, and the current scheme encourages settlements prior to
the institution of proceedings for those looking to avoid the consequences of disclosure.
Extending the disclosure requirement to settlements regardless of when they are signed is
consistent with the intent of Congress to require disclosure of settlements that arise out of
proceedings before the USPTO.
IV. 	Conclusion
The U.S. patent system, bolstered by the AIA and the implementation of robust post-
grant proceedings, is foundational to encouraging the innovation and technological advances that
fuel our economy. However, abuse of the patent system can block rivals, impede new business
formation and growth, inflate costs, and harm the public. The Commission appreciates the
USPTO’s commitment to preventing patent abuse and ensuring that post-grant proceedings serve
27 NPRM, 89 Fed. Reg. at 28697.
28 See, e.g., FTC v. Actavis, Inc., 570 U.S. 136 (2013); Impax Labs., Inc. v. FTC, 994 F.3d 484 (5th Cir. 2021); In re
Lipitor Antitrust Litig., 868 F.3d 231 (3d Cir. 2017); King Drug Co. of Florence v. Cephalon, Inc., 88 F. Supp. 3d
402 (E.D. Pa. 2015); In re AndroGel Antitrust Litig. (No. II), No. 1:09-cv-955-TWT, 2018 WL 2984873 (N.D. Ga.
June 14, 2018).
29 NPRM, 89 Fed. Reg. at 28697.
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June 18, 2024
as an efficient and fully accessible alternative to lengthy and expensive district court patent
litigation. The Commission supports the inclusion of a provision in the PTAB rules of practice
that would require the filing of all settlement agreements. We look forward to continuing to
participate in the USPTO’s efforts to advance our agencies’ shared goals of promoting
innovation and fair competition.
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