By Pamela W. Bertani

#160 #160#160 #160#160 #160 Biotechnology and pharmaceutical companies – and their counsel – should take note that on January 7, 2005, the United States Supreme Court granted a writ of certiorari to review the Federal Circuit’s decision in Integra v. Merck.#160 (Integra Lifescienxes v. Merck et al. (Fed. Cir. 2003) 331 F.3d 860.)#160 The High Court will examine the scope of 35 U.S.C. �� 271(e)(1)– the statutory exemption from patent infringement for drug development testing required to obtain regulatory approval pursuant to federal law.#160 The Court’s decision could significantly impact a drug company’s ability to identify and develop new drugs and move those drugs to market. #160 #160#160 #160

35 U.S.C. �� 271(e)(1)is the so-called FDA exemption and provides, in pertinent part,#160 that making, using, offering to sell, selling or importing a patented invention is not an act of infringement if such activities are performed “solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.”#160 Thus, if a drug company practices another company’s patented invention in order to obtain and submit information necessary to get FDA approval on their drug, then that company is exempt from patent infringement liability.#160

#160 #160#160 #160#160 #160 The �� 271(e)(1) FDA exemption permits pre-market drug approval activity conducted for the sole purposes of sales after patent expiration.#160 The express objective of �� 271(e)(1) was to facilitate the immediate entry of safe, effective generic drugs into the marketplace upon expiration of a pioneer drug patent.#160 The House Committee that initiated this provision expressly described the pre-market approval activity as “a limited amount of testing so that generic manufacturers can establish the bioequivalency of a generic substitute.”#160 The Committee further characterized the limits of the exemption, noting that the nature of the interference with a patent owner’s rights would not be substantial, but rather de minimus, and, importantly, that “all that the generic can do is test the drug for purposes of submitting data to the FDA for approval.”#160

#160 #160#160 #160#160 #160#160 To appreciate the import of the case’s outcome, it is important to distinguish between experiments employing patented inventions to create data for FDA submission (i.e., activities that are currently exempt from infringement liability); and experiments employing patented inventions to identify potentially new drugs (i.e., activities currently not exempt from infringement liability).#160 The pre-clinical experimental drug testing in Integra was not performed to supply information for submission to the FDA, but instead was performed to identify the best drug candidate that Merck would subject to future clinical testing under FDA procedure.#160 The Federal Circuit affirmed the Southern District of California’s interpretation of the exemption to cover clinical trials – but, to exclude pre-clinical trial experiments that were performed to identify potentially new drugs.#160 The Federal Circuit held that the pre-clinical trial experiments at issue in the case were not exempt from infringement under �� 271(e)(1) because the tests were not performed for the sole purpose of providing information to the FDA – but rather for the commercial purpose of identifying potentially new drugs for Merck.

#160 #160#160 #160#160 #160#160 From both a scientific and economic standpoint, the issue of whether pre-clinical trial experiments are exempt from patent infringement liability is significant because pre-clinical trial testing often involves the use of what are known in the industry as “tool patents.”#160 Tool patents cover inventions that help companies identify potential new drug candidates.#160 Tool patents are useful primarily for two purposes – facilitating and expediting drug research to identify new candidate drugs; and facilitating downstream safety-related experiments on those potentially new drugs – both of which no doubt benefit us all.#160 The royalties that companies currently receive from issued tool patents encourages further research and development of these kinds of inventions.#160 If the Supreme Court reverses the Federal Circuit, and brings pre-clinical testing into the �� 271(e)(1) safe harbor from infringement liability, then the value of tool patents will become virtually nil, since companies could practice the patented inventions without paying corresponding royalties.#160 Conversely, if the Supreme Court affirms the Federal Circuit and excludes pre-clinical testing from the �� 271(e)(1) safe harbor, companies that wish to use another company’s tool patents for new drug development must maintain the status quo and continue paying royalty fees.#160 The United States Patent and Trademark Office has issued approximately 8,000 to 10,000 tool patents to date – the Court’s anticipated decision will determine the fate of their value.

#160 #160#160 #160#160 #160 As expected, the proponents and opponents of expanding the �� 271(e)(1) exemption are polarized.#160 On the one hand, Merck and its supporters argue that �� 271(e)(1) exempts drug development activities even before a drug is identified for potential FDA approval.#160 Obviously, this statutory construction leaves companies free to use existing tool patent inventions without paying royalties or being subject to infringement liability.#160 On the other hand, Integra and its supporters contend that such a construction of �� 271(e)(1) is contrary to Congress’ intent in passing the statute, which was to have a de minimus effect on existing patent rights while allowing competitors to complete regulatory testing, using patented technology while such patents are still in effect, which in turn would facilitate market entry upon expiration of the corresponding pioneer patent.#160

#160 #160#160 #160#160 #160#160 Several major biotechnology and pharmaceutical companies have obtained the Supreme Court’s permission to file amicus curiae briefs, including Wyeth and Eli Lilly.#160 The next article in this series will examine arguments advanced on both sides of the issue via those brief.#160 The outcome of the case – either way – will impact significantly new drug development from both a scientific and economic point of view.

Pamela W. Bertani is an associate in Weintraub Genshlea Chediak Tobin & Tobin Sproul’s Intellectual Property group.#160 Her practice includes providing advice in obtaining various forms of intellectual property protection, including patent, trademark, and copyright protection.#160 Ms. Bertani is a member of the United States Patent Bar, and her practice also includes both patent litigation and prosecution.