Ninth Circuit Construes Post-2010 Public Disclosure Bar to Include Facts Disclosed During a Patent Office Patent Prosecution

In United States ex rel. Silbersher v. Allergan, Inc., 2022 WL 3652967 (9th Cir. Aug. 26, 2022), the Ninth Circuit ruled that the FCA public disclosure bar, as amended in 2010, encompasses information provided to the U.S. Patent & Trademark Office (“PTO”) during a patent prosecution.  Accordingly, a qui tam action premised entirely on materials obtained from PTO records is barred.

The Relator filed a series of FCA suits relating to pharmaceutical products whose underlying patents were invalidated in PTO or judicial proceedings.  For each suit, Relator reviewed the records of the PTO proceedings and identified information Relator asserted was omitted or incorrectly presented, to support allegations of fraud on the PTO.  This fraud, Relator asserted, led to improper issuance of patents, which in turn excluded generic competition, which in turn led to high drug prices, which in turn elevated government reimbursement costs.

As the Supreme Court explained in Schindler Elevator Corp. v. United States ex rel. Kirk, 563 U.S. 401, 412–13 (2011), the public disclosure bar stops relators from bringing “parasitic” or “opportunistic” cases.  To achieve that goal, the bar prevents relators from bringing FCA cases based on publicly available information.  Otherwise, as the Allergan court explained, a relator could “merely repackage[e] information … for personal profit by asserting an FCA claim.”

But not all public information comes within the bar.  Instead, the FCA’s text specifically enumerates three distinct categories of disclosures to which the bar applies.  See 31 U.S.C. § 3730(e)(4)(A)(i)–(iii).  The first prong applies when information is disclosed “in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party.”  Id. § 3730(e)(4)(A)(i).  The second prong applies when information is disclosed “in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation.”  Id. § 3730(e)(4)(A)(ii).  The third prong applies when information is disclosed “from the news media.”  Id. § 3730(e)(4)(A)(ii).

Allergan turned on whether a patent prosecution constitutes an “other Federal … hearing” under prong (ii).  The Ninth Circuit held that it does.  “A patent prosecution is an administrative hearing”—one of many examples of “administrative hearings in which a government agency adjudicates the merits of a claim or request.”  A patent prosecution is such a hearing because “inventors submit applications to the PTO, an administrative agency” in pursuit of a patent.  The Court also noted that, for purposes of the public disclosure bar, “publicly-filed documents” are part of that hearing or proceeding.

Turning to whether the patent prosecution is an “other … Federal hearing” within the public disclosure bar, the Ninth Circuit began with the plain text of prong (ii).  Looking to the phrase “other Federal report, hearing, audit, or investigation,” the Court determined that “[a]ll four nouns apply to a fact-finding or investigatory process to obtain information.”  This suggests “that Congress intended for prong (ii) to cover a wide array of investigatory processes.”  Underscoring this conclusion, prong (ii) applies to disclosures “in a congressional, Government Accountability Office [“GAO”] or other Federal” proceeding.  Because an “other Federal” proceeding must be different from a congressional or a GAO proceeding, the Court concluded that “an ex parte administrative hearing[] before the PTO”—an executive agency—is “of course” included and “fits comfortably within” prong (ii)

Relator argued that this reading renders prong (i)—which applies when the government is a party to a proceeding—superfluous.  He suggested that in adding the government-party requirement to  prong (i), Congress intended to preclude any proceeding to which the government was not a party from triggering the public disclosure bar.  The Court rejected this argument.  First, it would make much of prong (ii) inoperative.  Second, the Court noted that prong (i) generally applies to “adversarial” hearings, as opposed to the information-gathering or inquisitorial roles the government plays in prong (ii) proceedings.

For these reasons, the Ninth Circuit reversed the district court’s order denying Defendants’ motion to dismiss on public disclosure bar grounds and remanded for further proceedings.

Sidley Austin LLP represents another manufacturer in a nearly identical case brought by Silbersher and submitted an amicus brief in support of the Allergan appellants.  The brief urged the court to read prongs (i) and (ii) as applying, respectively, to proceedings implicating the government’s adversarial and inquisitorial functions.  As noted, the Ninth Circuit’s analysis largely tracked this interpretation.

Allergan is an important milestone in defining the scope of the public disclosure bar and will be of particular value in cases where relators premise an FCA case on publicly available materials that have been submitted to the federal government—whether in court, through Congress, or as part of an administrative hearing.  The opinion is available here.