The Patent Trial and Appeal Board recently denied petitions from generic drug companies Amneal, Par, and Roxane Laboratories challenging the validity of Jazz Pharmaceuticals’ four Orange-Book-listed patents covering the narcolepsy drug Xyrem^® under the America Invents Act’s (AIA) covered business method (CBM) review program. Par Pharm., Inc. et al. v. Jazz Pharm., Inc., CBM2014-00149, CBM2014-00150, CBM2014-00151, CBM2014-00153 (P.T.A.B. Jan. 13, 2015). The particular claims at issue cover a method of distribution that prevents abuse of Xyrem^®, a controlled substance that contains an intoxicant classified by the U.S. Drug Enforcement Agency as a “date rape drug.” The Board found that the patents were not related to a financial product or service, a requirement for bringing challenges under the CBM review program.

Last summer, the generic drug companies filed the CBM challenge to invalidate Jazz’s patents covering a method of distribution of Xyrem^® as a patent-ineligible abstract idea under 35 U.S.C. § 101. This challenge marked the first time CBM review has been used in a Hatch-Waxman case. Under the CBM review program set forth in Section 18 of the AIA, petitioners may challenge the validity of a patent for lack of patent-eligible subject matter if the claims are directed to “a method … used in the practice, administration, or management of a financial product or service.”

In the wake of the Supreme Court’s ruling in Alice Corp. v. CLS Bank, which held that claims directed to abstract ideas cannot be transformed to patent-eligible subject matter by implementing those claims on a computer, the challengers argued that the patent did no more than centralize the distribution of hazardous drugs to reduce the risk of abuse—an abstract idea. Further, the generic companies claimed that the Xyrem^® distribution patents qualify as CBM patents because they include the step of verifying an insurance payment for the drug or a patient’s ability to pay for the prescription.

The Board declined to reach the merits of the petitioners’ arguments, instead finding that the distribution method patents are not in fact covered business method patents because they are not financial in nature. The Board focused its analysis on an illustrative independent claim of U.S. Patent No. 7,668,730, which claims a computerized method for controlling access to a sensitive prescription drug prone to potential abuse or diversion by utilizing an exclusive central pharmacy and database to track all prescriptions for the drug.

Finding that the claim as a whole does not cover a financial product or service, the Board reasoned that petitioners failed to analyze the claim language to explain how it recites method steps involving the movement of money or extension of credit in exchange for a product or service (petitioners cited “distributing a prescription drug,” “receiving all prescription requests,” “checking the credentials of any and all doctors” as relevant claim limitations). Further, the claims do not recite a product or service particular to or characteristic of a financial institution, including, e.g., sale of the drug, processing of payments or insurance claims related to sale of the drug, or a method of insuring a patient. Finally, though the written description disclosed method steps for verifying insurance coverage or a patient’s ability to pay, these steps are not recited or required by the patent claims.

The Board likewise rejected petitioners’ argument that CBM review covers a claimed business method because it is “used in commerce,” as such an interpretation is inconsistent with the statutory language excluding a business method from review unless a petitioner demonstrates that the method is “used in the practice, administration, or management of a financial product or service.” The Board concluded that petitioners presented no clear evidence of legislative intent to include any business method “used in commerce” within the definition of “covered business method patent.”

The decision to deny CBM review of Jazz’s patents deviates from the Board’s pattern of consistently reviewing patents after finding they adequately satisfy the statutory definition of a “covered business method patent.” However, as the Par decision illustrates, ANDA filers seeking to invalidate Orange-Book listed patents via CBM review likely face a high bar to establish that a method claim of a pharmaceutical patent qualifies as a covered business method. A challenger cannot rest on the assertion that a claimed method is “used in commerce,” but rather must provide persuasive evidence and analysis that a claim recites method steps related to a financial product or service, which, according to the Board, involves movement of money or extension of credit.