TOM ENGELLENNER Pepper Hamilton, LLP IP in Japan Committee Meeting AIPLA Annual Meeting, Washington D.C. October, 2015 USPTO Rule Changes and IPR Procedures 1

Types of Post Grant Proceedings Recap of IPR Procedures Outcomes to Date Request for comments – June 2014 The Director’s Blog – Quick Fixes – March 2015 PTO’s Proposed Rule Changes August 19, 2015 PTO Responses to Comments PTO Proposals for Statutory Changes Presentation Overview 2

3 Types of Post Grant Proceedings Type Who Can Initiate? What Patents Qualify? When to File?Grounds for Filing Standard for Institution IPR3 rd Party Any unexpired Patent 9 months after patent grant, or termination of PGR proceeding §102 and §103 invalidity grounds; but only patents or printed publications Reasonable likelihood petitioner would prevail on at least 1 of the challenged claims PGR3 rd Party Patents with a priority date of 3/16/2013 or later During 9 month window after grant Any grounds for invalidity More likely than not at least one claim is unpatentable; or novel/unsettled legal question is presented CBM 3 rd Party sued or charged with infringement Covered Business Method Patent Only when PGR is not available Any grounds for invalidity More likely than not at least one claim is unpatentable

4 Filings as ofJuly 31, 2015 Over 3600 AIA proceedings have been filed to date -- (3277 IPRs, 368 CBMs, 10 PGRs)

5 Recap of IPR procedures

6 IPR Outcomes To Date

7 Unintended Consequences? “We are going to challenge and invalidate patents through the IPR process... [and] we are not going to settle.” “The companies that are expanding patents by simply changing the dosage or the way they are packaging something are going to get knee-capped.” “The beautiful thing is this will lower drug prices for everyone.”

8 Hedge Fund Challenges to Pharma CAD FundIPRs FiledTargetDrugDisease I5Acorda TheraAmpyraMultiple Sclerosis II3Shire PLCLialda & GattexShort bowel syndrome III1Jazz PharmaXyremnarcolepsy IV1PharmacyclicImbruvicalymphoma V3BiogenTecfidereMultiple Sclerosis VI5CellgeneRevlimidMultiple Myeloma VII4Pozen, Inc.VimovoPain & inflammation VIII1AegerionJuxtapidhypercholesterolemia IX1Bristol MyerEliquisStroke / blood clots X3AnacorKerydinantifungal XI3InsysSubsysCancer pain

9 The Director’s Blog March 27, 2015: “We never envisioned that our rules or guidance would be perfect at the outset.... In June 2014 we asked for your input on how these proceedings were working. I am pleased to tell you about the feedback we collected and how that feedback is shaping the direction of our AIA trials going forward.” PTO Director Michelle Lee “This spring we plan to issue a first rule package containing what we call "quick fixes”... Later this summer, we will issue a second proposed-rule package.”

10 Quick Fixes – May 19, 2015 Final Rules Petition UNCHANGED60 pages for IPRs 80 pages for CBMs and PGRs PO Prelim. Response UNCHANGED60 pages for IPRs 80 pages for CBMs and PGRs PO Response UNCHANGED60 pages for IPRs 80 pages for CBMs and PGRs Petitioner Reply UNCHANGED15 pages PO Motion to Amend Pages increased from 15 to 25 pages exclusive of any claim appendix Petitioners Opposition to Motion to Amend Pages increased from 15 to 25 pages PO Reply to Opposition to Motion to Amend Pages increased from 5 to 12 pages

11 More Quick Fixes May 2015 Required Font14-point, Times New Roman proportional font with normal spacing CounselClarifies that more than one back-up counsel may be named. Statements of Material FactsSupplying a statement of a material fact is optional. However, when responding to a statement of material fact, "a listing of facts that are admitted, denied, or cannot be admitted or denied" must be included. DiscoveryClarification that routine discovery is limited to cross-examination and that either party is permitted to file testimony as an exhibit.

12 August 19, 2015 Proposed New Rules  Testimonial Evidence (Expert Declarations) will be permitted in Patent Owner’s Preliminary Response  (but the testimony will be considered in the light most favorable to the petitioner when determining whether to institute an inter partes review proceeding)  Phillip-style claim construction standards for patents that “will expire” before final judgment  (instead of broadest-reasonable-interpretation)

13 August 2015 Proposed New Rules cont’d New Rule-11 Requirement associated with all papers filed with the PTAB – giving the USPTO “a more robust means with which to police misconduct.”

14 August 2015 Proposed New Rules cont’d  Word Count instead of page limits  IPR Petitions: 14,000 words  CBM & PRG Petitions: 18,700 words  Exchange of demonstrative exhibits before Oral Hearing  (7 days instead of 5 days)

15 Lee’s Response to Public Comments  The Broadest Interpretation is not Appropriate for Issued Patent Claims  “The Office appreciates the suggestions [but] will continue to apply the broadest … interpretation standard”  Motions to Amend Should Be Liberally Allowed  “These suggestions are not adopted.”  If a Motion to Amend is Denied, it should be converted to into A Request for Reexamination  “This suggestion is not adopted.”

16 Lee’s Report to Congress – Sept  Correction of Real Party in Interest  “The USPTO recommends that the statute be amended to allow for timely correction of real party in interest identification where the error identification arose without deceptive intent.”  Make Joinder Easier for Petitioners  “The USPTO recommends clarifying the joinder provisions to state that same party joinder is permitted.”  Ostensible to allow petitioners to challenge newly asserted claims from related district court litigation.

Pre AIA Patent Invalidity Challenges in District Courts: Defendant Prevails on Invalidity 42% U.S. Personal Injury Litigation Generally Plaintiff Prevails 52 % U.S. Contract Litigation Generally Plaintiff Prevails 64 % Toxic Tort Litigation Plaintiff Prevails 72% US Criminal Prosecutions Government Prevails 84% IPR Challenges to Patent under Current PTO Rules: Petitioner Prevails 96% Comparative Success Rates Various Cases 17

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THANK YOU 19 TOM ENGELLENNER Pepper Hamilton, LLP High Street Tower, 19 th Floor 125 High Street Boston, MA