Preparing Your Company for Hatch-Waxman

The Hatch-Waxman Act regulates the relationship between branded and generic drugmakers and attempts to strike a balance between two competing policy interests — encouraging pioneering drug development and facilitating market entry of lower-cost, generic alternatives. While most companies go to great lengths to minimize litigation risk, developing a successful pharmaceutical product all but assures generic competition and ensuing patent disputes. Pharmaceutical companies should therefore incorporate Hatch-Waxman considerations early in their patent prosecution and litigation strategies to set themselves up for future success.

Early patent considerations and prosecution tips

Pre-filing

Before filing a patent application, it is essential to engage experienced counsel, not to only get patent applications through the United States Patent and Trademark Office (USPTO), but also to obtain strong, enforceable patents that lay the groundwork for future litigation. The timing of filing a patent application typically is driven by the data the company has on hand, the understanding of the structure activity relationships, and the proximity in time to identifying the drug candidate, among other conditions. Companies (especially small companies) often issue press releases on new breakthroughs, and scientists like to discuss their work at conferences and in industry publications. Potential investors also like being kept apprised of such developments. These disclosures can hinder a company’s ability to obtain patents on the subject matter disclosed and can also come up as damaging evidence in future litigation. Exercising discipline in disclosing such information (even if you think a disclosure might not be “public”), is critical to minimizing risk of unwanted surprises later. Intellectual Property (IP) counsel should also vet such disclosures, regardless of whether a patent application has already been filed.

Filing

At the filing stage, early actions can set applicants up for future success:

• Drafting claims: Applicants are allowed to define their own terms in patent applications, but using overly complex definitions can be confusing to patent examiners, as well as judges and juries.Applicants can minimize the risk of losing patent rights in future enforcement actions by using reasonable definitions and straightforward terms at the outset.
• Conducting inventorship analysis: Before beginning the inventorship analysis, speak to the scientific team to determine the universe of people who could be considered inventors. And keep in mind that inventorship tracks patent claims; as claims change, inventorship can also change; nailing down inventorship issues early can prevent future headaches.
• Managing formalities; Ensure that inventors are under a contractual obligation to assign their rights in their inventions to the company. This is especially important when some inventors may be company (Applicant) employees and other inventors may work at another organization such as a university or contract research organization.

When crafting an invention story, it helps to speak to inventors early not only to aid in claim drafting, but because you will be better informed about what the inventors might say at trial. Inventors can help determine:

• The problem the invention solves
• The inventors’ unique appreciation of the problem
• Eureka moments during development of the invention
• Failures and hurdles along the way
• The invention’s benefits compared to previous approaches

Tell the invention story in the patent application by highlighting the problem solved, the hurdles overcome, and the benefits obtained. Tell this story in a way that is consistent with the inventors’ story so it can be used to support their testimony at trial. Also ensure that the claims require and focus on the key features of the invention and are commensurate in scope with what the inventors say they invented.

Certain documents can help to support inventorship and the invention story, including:

• Lab notebooks: Demonstrate that a particular event happened on a particular date and that the inventor appreciated the importance of the event
• Regular project reports: Present a big-picture view of the work, showing the scope of the work, the hurdles overcome, and how the team learned of things that were working or not working
• Gating documents: Show why a particular drug candidate was chosen over others for clinical studies

Make sure these documents are preserved and easy to find; don’t just file them away and assume the litigation team will be able to find them later.

Prosecution

Just as pharmaceutical companies should exercise discipline in managing public disclosures, they should also keep a clean prosecution record by exercising restraint in statements to the USPTO. Upon receiving a rejection, resist the urge to respond to the examiner with lengthy arguments. Say enough to respond to the rejection, but nothing more, as statements made during prosecution may be used by opponents in future litigation.

If pursuing patent protection in multiple jurisdictions, closely coordinate prosecution efforts across jurisdictions. Patent examiners in different countries often find similar prior art references, to which applicants should respond with similar arguments. Making inconsistent arguments to patent offices in different jurisdictions can open a line of attack for future challengers. Coordinating worldwide prosecution also allows applicants to track and monitor material prior art references discovered in different patent offices, thus also helping applicants fulfill their duties to the USPTO.

Post-issuance

Preparation for Hatch-Waxman litigation continues even after a patent is issued. Patent prosecutors must continue to coordinate with the clinical, commercial, and regulatory teams to ensure consistent messaging across teams and across various agencies. This can reduce the risk of making statements that are inconsistent with information you have provided to the USPTO and Food and Drug Administration (FDA). Avoid creating “bad documents” that opponents can spin later in litigation, which can include both commercial documents (e.g., documents discussing “evergreening”) and clinical documents (e.g., documents that are inconsistent with the invention story).

Often, a patent covering a drug candidate issues years before the drug is approved. Once the drug label is finalized prior to approval, reanalyze the issued claims against the label to ensure that there is still alignment between the two. It is also advantageous to keep a continuation application pending, which provides flexibility in obtaining new claims (that are supported by the application as filed). To shore up your portfolio or fill gaps in patent coverage, consider filing Track One applications to expedite allowances. If you discover minor errors in your claims, rectify them with certificates of correction.

Company policies, procedures, and training

Considerations for branded companies

Branded drugmakers seeking IP protection for their products should consider trade secrets as an alternative to patents, particularly for products that are not Orange Book-listable. Trade secrets offer a few key advantages over patents, including in the area of public disclosure. While patent applicants must fully disclose their technologies to the public, trade secret protection carries no such requirement. On the contrary, the essence of trade secret protection is that the information sought to be protected must be subject to reasonable measures to protect its secrecy, making it an ideal form of protection for information that may not be worth patent protection, but nonetheless provides value to the company.

Considerations for generic companies

Generic companies should begin preparing for Hatch-Waxman litigation by evaluating the branded company’s patent portfolio (including Orange Book-listed patents, manufacturing patents, and soon-to-issue patents) to identify exploitable weaknesses or mistakes. For Orange Book-listed patents, determine which patents to certify first and whether to argue non-infringement, invalidity, or both. Also evaluate the commercial conditions surrounding the reference product, including:

• Exclusivity expirations
• Settlements with other generic competitors
• The number of generics entering the marketplace
• Carve-out opportunities
• The risk of “product hop” — i.e., the branded company switching to a newly patented drug formulation where patents covering the current formulation are expiring

Generic companies that begin the drug development process early enough may even be able to pursue design-around opportunities, particularly for method-of-use patents.

Written communications

Companies should be mindful of using written communications when in-person communications or video calls are more appropriate. All written communications — including emails, instant messages, collaboration platforms, lab notebooks, and presentations — are potentially discoverable in litigation. Accordingly, companies should exercise caution when writing anything down, even if the document is sent only internally or later deleted. The attorney-client privilege protects written communications made for seeking legal advice; however, including attorneys systematically on emails clearly not seeking legal advice will not give rise to the privilege.

Generally, written communication is most appropriate for:

• Communicating facts
• Messaging simple answers
• Asking clarifying questions of fact
• Arranging in-person or video calls

Other forms of communication are more appropriate when:

• Discussing a highly charged or sensitive issue
• Troubleshooting inconsistent or confusing data or outcomes
• There is uncertainty or speculation about facts
• Opinions or conclusions about facts are being shared

When communicating in writing, use language carefully, as these communications could be reviewed years later in litigation and taken out of context. Avoid using legal terms of art, which require legal analysis and are not considered facts on their face. Instead, use science-based or technical language. For example, instead of “invention,” use “project.” Instead of “enablement,” use “implementation.” Do not use the terms “novelty” and “obviousness” (use “differences between X and Y” instead); “infringement” and “freedom to operate” (use “potential technical overlap” instead); or “prior art” (use “references,” “citations,” or “articles” instead).

Document retention policies

Document retention policies, wherein documents are deleted under certain conditions or after specific lengths of time, can help solve the problem of “bad documents.” When implementing a document retention policy, consider:

• How long until documents are automatically deleted?
• How long after employees leave is their data retained?
• Will hard copies be held off site?
• Who is subject to the policy?

While liberal deletion policies can keep a clean slate, they can also lead to allegations of spoliation and may prevent access to useful data and records for your invention story.

Discovery considerations and best practices

Discovery in Hatch-Waxman cases can require collecting, reviewing, and producing potentially millions of documents, often over the course of only a few months. Hiring experienced counsel is thus critical to managing discovery. Your Hatch-Waxman counsel can assist in interviewing fact witnesses, managing contract reviewers for first-level review and quality control, reviewing highly confidential and privileged information, and managing discovery disputes.

Companies should implement document/litigation hold policies when litigation is reasonably foreseeable, but in no case later than the filing of a lawsuit. Document/litigation hold policies should cover the inventors of all relevant patents, any parties listed on Rule 26 initial disclosures, and all other relevant persons (e.g., patent prosecutors and potentially the Chief Executive Officer). If your standard document retention policy has an automatic deletion feature, ensure that it is deactivated, and that all parties subject to the hold are instructed to not manually delete anything. Failure to properly retain documents in anticipation of litigation or after receiving a litigation hold notice can lead to allegations of discovery violations.

When disclosing highly confidential and sensitive documents — for example, product development plans — to the opposing side, seek protective orders from the court to limit dissemination. Protective orders can restrict disclosure of sensitive information in discovery to certain individuals, such as outside counsel only or in-house IP advisors only. They may also include prosecution bars, which prevent any parties who are involved in patent prosecution from receiving any information from the other side that is subject to the protective order. Failure to obey the terms of protective orders can result in severe penalties.

Non-email electronic communication, such as instant messaging, is increasingly common. But even communications in less formal systems are still discoverable and can be no less damaging in litigation. If you use an instant messaging platform in your operations, consider how the messages are stored (i.e., internal vs. cloud), whether they are encrypted, how long they are stored, and who has access to them.

While information covered by attorney-client privilege is not discoverable, companies can inadvertently waive that privilege by disclosing the contents of communications with attorneys to third parties. Generally, it is a best practice to CC attorneys on any advice forwarded to individuals with “engineer” in their title. If that is not possible, consult with your company attorney to determine the best way to proceed. To minimize the risk of waiving attorney-client privilege, limit emails to attorneys seeking legal advice, avoid forwarding emails from attorneys to third parties, and never forward emails from attorneys to anyone outside the organization without first obtaining approval from your in-house counsel.

Identifying and retaining expert witnesses

Patent litigation, including Hatch-Waxman litigation, is heavily dictated and controlled by experts. These experts fall into one or more of three categories: consulting experts, testing experts, and testifying experts.

Consulting experts

Patent attorneys are not subject matter experts in all areas. Consulting experts assist attorneys understand their clients’ technologies, and their advice on technical issues and strategies does not need to be disclosed to the opposing side in litigation. While consulting experts should have subject matter expertise, they do not necessarily need to be “persons of skill in the art.” When selecting consulting experts, consider the feasibility of walling them off from other experts.

Testing experts

Testing experts provide testing in support of infringement and/or validity, typically by obtaining a sample of the products at issue in the litigation. Like consulting experts, they need not be persons of skill in the art, but should have subject matter expertise, and may also need certifications and access to the appropriate testing facilities and equipment. Because testing often requires tight turnarounds, consider the expert’s bandwidth when making your selection.

Testifying experts

Testifying experts provide testimony (including declarations) for claim construction, infringement, validity, and damages. Unlike fact witnesses, they can offer opinions. Testifying experts must be persons of skill in the art in addition to having subject matter expertise and other credentials, such as publications, awards, society memberships, and prior experience testifying. They must also have substantial bandwidth, as expert reports, depositions, and trial preparation take significant time. When choosing potential testifying experts, consider their impeachability. Has the expert written any articles or given talks that contradict their testimony or undermine the positions they are taking in your case? Also consider whether the expert has ever been subject to a successful Daubert motion or previously discredited by a court.

How to identify potential experts

Most companies find experts using one or more of the following methods:

• Client recommendations: Experts recommended by clients likely are familiar with your client’s technology and are willing to help. However, connections to the client can provide impeachment material for cross-examination and may undermine their credibility.
• Internet searches (e.g., Westlaw, Lexis, PubMed, Google): Companies seeking independent experts are more likely to find them using internet searches than going through client recommendations. However, finding experts on the internet can be tricky, as they may be difficult to contact and have unknown conflicts.
• Expert consulting networks: The primary benefits of using a consulting network to find experts are that the search firm handles the initial legwork and the candidates they identify are more likely to have testifying experience. However, search firms typically take a portion of the fees, and the experts’ rates generally are higher.
• Colleague recommendations: Experts recommended by other attorneys at your firm are likely to have prior experience working with the firm and be proven testifiers. However, significant work with the same law firm can provide fodder for cross-examination.

The onboarding process for experts — finding them, vetting them, running conflict checks, and bringing them up to speed — can take significant time. As such, aim to retain experts early — ideally during the pre-suit phase, but in no case later than fact discovery. Above all, retain experts before the other side can retain them. Niche fields typically have few qualified experts, while broad fields can have few prominent experts, so competition can be fierce.