By Alex Moss | September 9, 2021

Anyone who applies for a patent has a duty to be candid and act in good faith throughout the process. The duty of candor is essential to the functioning of the patent system: the patent examiners have too much work and too few resources to determine whether applicants are telling the truth about their own work. They must take what applicants say at face value. 

Sometimes, applicants are far less candid than they should be. For example, a company might mischaracterize its own test data to argue results were “unexpected” because proof of unexpected results can overcome an examiner’s determination that an application is too obvious to be patentable. Because examiners trust applicants to tell the truth, they’re likely to take applicants at their word, and grant patents on advances that were in fact obvious. 

When that happens, the results to the public can be devastating. Wrongly granted patents impose especially great costs on the public when they extend monopolies on medicines for years after patents on their active ingredients expire. Extending the patent owner’s monopoly blocks generic manufacturers from competing, which brings prices down dramatically—by 20% to 85%. Wrongly granted patents on secondary features of patented medicines can extend monopolies and inflate drug prices for years. That hurts the public by driving up health care costs, limiting access to medicine, and forcing the government (and thus taxpayers) to pay more than they should through programs like Medicare.  

Patent law doesn’t provide the government or taxpayers a remedy for harm wrongly granted patents cause. But other laws do. The False Claims Act allows private parties to step into the government’s shoes and demand companies pay back excessive charges that were paid because of false claims the companies made to the government.  

Unsurprisingly, patent owners want to avoid liability for harm their wrongly granted patents cause. In a Ninth Circuit case currently on appeal, certain pharmaceutical companies (Allergan and Adamas) are arguing the False Claims Act shouldn’t permit recovery of overcharges attributable to false claims discovered in submissions to the Patent Office. According to them, the act does not apply because the government could or should have been on notice of their false claims before the overcharges were imposed—i.e., during the patent application process. 

As our amicus brief explains, that argument is deeply flawed: it ignores the practical reality of the patent application process, the importance of the duty of candor and good faith to the administration of the patent system, and the strong incentives pharmaceutical companies have for obtaining patents of questionable validity that can extend monopolies—and monopoly prices—for years.

No matter what the Ninth Circuit decides, its decision will powerfully impact the patent system. Confirming the False Claims Act applies in cases like this will strengthen incentives for candor. That will improve the Patent Office’s efficiency and accuracy, stemming the tide of invalid patents, opening the door to generic competition, lowering drug prices, and easing a burden taxpayers unjustifiably shoulder. Exempting companies from the consequences of false claims made in connection with their patent applications do the opposite, emboldening them to seek invalid patents, diminishing patent quality, and ensuring the public pays excessive health care costs for years longer than we should.  

We hope the Ninth Circuit makes the right decision.