United States: Scope Of Statutory Research Exemption Remains Unresolved

Law360, New York (July 02, 2013, 5:56 PM ET) - The statutory research exemption, 35 U.S.C. § 271(e)(1), affords immunization from patent infringement to developers of products subject to regulation by the U.S. Food and Drug Administration. Over the past several years, the Federal Circuit has embraced seemingly conflicting interpretations on the scope of the safe harbor.

On June 24, 2013, the U.S. Supreme Court declined an opportunity to resolve this tension when it denied a petition for a writ of certiorari by Momenta Pharmaceuticals Inc.¹ This article summarizes the legal landscape for the exemption and offers strategic considerations for both patentees and companies developing therapeutics, diagnostics and medical devices.

Broad Reach of the Statutory Research Exemption

The safe harbor emerged in the wake of the Federal Circuit's ruling in Roche v. Bolar (1984), which held it an act of infringement to conduct FDA-required testing with a patented compound prior to expiration of the patent.² After Roche v. Bolar, both pioneer and generic drug manufacturers were dissatisfied with "two unintended distortions" the FDA premarket approval process placed on patent terms.³

Pioneer drug developers desired extended patent terms to compensate for lost years of exclusivity prior to FDA approval. Generic drug manufacturers desired to eliminate the de facto patent term extension resulting from the fact that generic companies had to wait to begin the experimentation required for the lengthy FDA approval process until patent expiration or risk liability for infringement, as was the case in Roche v. Bolar. Congress addressed these competing economic interests in the Drug Price Competition and Patent Term Restoration Act, commonly known as the Hatch-Waxman Act.⁴

Title I of the Hatch-Waxman Act created an expedited route to FDA approval for generic drugs, the abbreviated new drug application (ANDA).⁵ Title II of the act amended United States patent law in two ways. The first provision of Title II, codified as 35 U.S.C. § 156, allowed innovators to recoup some of the useful life of the patent that now lay fallow during the FDA approval process through a patent term extension (PTE).⁶

The second provision of Title II, codified as 35 U.S.C. § 271(e)(1), provided a defense to infringement that allowed generic drug manufacturers to undertake commencing research, development and bioequivalency testing required for FDA approval before patent expiration.⁷

In the first Supreme Court case addressing § 271(e)(1), Eli Lilly & Co. v. Medtronic Inc. (1990), the court extended the exemption to the development of class III medical devices.⁸ Turning to the relevant regulatory framework for which use of a patented invention must be directed, the court broadly held that "a Federal law" in § 271(e)(1), when read in view of the amended Food, Drug and Cosmetic Act (FDCA) as a whole, extended to laws regulating the obtaining of marketing approval for all medical devices, not just drugs.⁹

The court observed that because patented products eligible for PTE also fell into the class of inventions whose use may be immunized by the research exemption, a "perfect 'product' fit" existed between §§ 271(e)(1) and 156(f).¹⁰ With respect to class I and II medical devices, which were not at issue in the case, the Eli Lilly opinion begged the question of whether those devices would fall within the exemption, given that neither qualify for PTE under § 156(f).

In AbTox Inc. v. Exitron Corp. (1997), the Federal Circuit followed Eli Lilly, held that a class II medical device could be immunized from patent infringement by § 271(e)(1) and concluded that "symmetry [between §§ 271(e)(1) and 156] is preferable but not required."¹¹

The Supreme Court revisited the statutory research exemption in Merck KGaA v. Integra Lifesciences I Ltd. (2005) and set forth a broad standard for determining whether use of a patented invention would be reasonably related to the FDA regulatory approval process.¹² In Merck, patent owners of a pharmacologically useful peptide sued defendants for infringement and inducement of infringement. At issue was whether § 271(e)(1) extended to immunize the defendants' preclinical use of the patented compound.

The Supreme Court thought it did and held that the broad reach of the exemption encompassed protections for all research reasonably related to the submission of information required for FDA approval, regardless of the phase of research in which it was developed or the particular submission in which it could be included.¹³

Three years after Merck, the Federal Circuit in Proveris Scientific Corp. v. InnovaSystems Inc. (2008) refused to apply the statutory safe harbor to the sale of "research tools," products which are not themselves subject to the FDA regulatory approval process.¹⁴

In Proveris, the defendant device manufacturer sold an infringing optical spray analyzer (OSA) to third-party biopharmaceutical companies who used the device in experiments necessary for FDA regulatory approval of therapeutics. The Federal Circuit found that the defendant's activity was outside the scope of § 271(e)(1) because the device manufacturer was not the type of user that § 271(e)(1) sought to protect.¹⁵

This reasoning is consistent with the Supreme Court's analysis in Eli Lilly because the OSA was not itself subject to FDA regulation. The defendant faced no regulatory barriers to market entry upon patent expiration. In addition, because the defendant was not itself involved in the FDA regulatory process, the company was not within the category of entities for whom the safe-harbor provision was designed to provide relief.

Three years later, in Classen Immunotherapies Inc. v. Biogen IDEC (2011), the Federal Circuit again narrowed § 271(e)(1) when it excluded certain post-FDA approval activities from the exemption.¹⁶ Classen sued several biotechnology companies for their use of its patented methods for optimizing immunization schedules in studies to evaluate long-term side effects resulting from FDA-approved

vaccines. The defendants' use was held outside the scope of § 271(e)(1) on the basis that the provision did not apply to information that might be "routinely reported to the FDA, long after marketing approval has been obtained."¹⁷ Despite Classen's request, the Supreme Court refused to consider the case.¹⁸

One year later, in Momenta Pharmaceuticals Inc. v. Amphastar Pharmaceuticals Inc. (2012), the Federal Circuit refined its position when it held that post-approval activity required by the FDA fell within the statutory safe harbor.¹⁹ Momenta sued the generics company Amphastar for infringing its patented method for testing batches in its manufacturing process.

On appeal, the Federal Circuit echoed Eli Lilly when it reasoned that based on the "flexible and expansive" language in § 271(e)(1), Congress intended the statute to broadly apply to submissions under any federal law that regulates the manufacture, use or sale of drugs.²⁰ As a generic drug manufacturer under an ANDA, Amphastar was required by federal law to conduct batch testing to meet strength and quality standards before selling the generic drug.²¹

Applying the broad standard, the Federal Circuit vacated and remanded the lower court's issuance of a preliminary injunction because Amphastar's use of the patented invention was likely pursuant to federal law, even if post-approval, and was therefore immunized by § 271(e)(1).

In order to harmonize its decision in Momenta with its previous one in Classen, the Federal Circuit distinguished Amphastar's use from the vaccination follow-on studies in Classen, which were not required under a federal law and thus voluntarily conducted and primarily for non-FDA purposes.²²

When given the opportunity, the Supreme Court again decided not to alter the Federal Circuit's ruling in this area and declined certiorari of Momenta.²³ Thus, it seems the evolution of the statutory research exemption remains in the hands of the Federal Circuit for the time being.

Taking Advantage of the Legal Framework

New entrants (potential infringers) and patent-holders alike should understand the metes and bounds of the protection currently afforded by § 271(e)(1) as well as the areas of potential uncertainty in order to formulate strategies that leverage or exploit those boundaries. For new entrants, this means understanding whether the "patented invention" is within the meaning of the statute, which may turn on who is using the invention.

Further, for the new entrant, care should be taken to ensure and to document that its activities are "solely for uses reasonably related" to the preparation or submission of information to the FDA in order to obtain (or maintain) marketing approval. These considerations may influence how a new entrant addresses potential freedom to operate issues, structures its research and development programs, as well as the care that it takes to document its reasonable belief that any potentially infringing use could lead to a product which would be the subject of an FDA application.

If the new entrant determines that its R&D program is unlikely to be protected by § 271(e)(1), it should also consider whether early licensing or a freedom to operate analysis would be appropriate. At the post-approval stage, new entrants should be acutely aware of the risks attendant in their activities in light of the current ambiguity in judicial interpretation of the statute and, if such activity is required, should take care in building their record that any such post-approval activity is primarily directed toward an FDA requirement.

This issue is particularly relevant for "diagnostics" companies in the personalized medicine or companion diagnostics business, since their products and services will quite often, but not always, be deemed a requirement of the FDA, thereby potentially insulating them from claims of infringement.

Patent owners seeking to protect their market share can take precautions through both drafting and enforcing their patents. After Momenta, patents directed to tools used in the development of a therapeutic may not be effective except as against companies that make and sell such tools, thus suggesting that advances in certain assays or methods of manufacture should be kept as trade secrets unless products embodying those inventions are sold in the market in a way that breaks the link between assay developer and therapeutic developer, as in Proveris.

Nevertheless, patent owners should continue to pursue claims for inventions that cover compounds and uses (e.g., research vectors and plasmids, screening and binding assays) that are further removed from the type of information that reasonably would be submitted in an FDA application. If a patent owner seeks to enforce its patents, special care should be paid to the type of entity named as a defendant in any such suit and what conduct along the path to commercialization is most susceptible to attack.

Lastly, both new entrants and patent holders in the research tool and diagnostic test markets should be mindful that their alignment, or lack thereof, with a regulated drug or device may have a dramatic effect on the royalty base used in any potential patent infringement litigation.

Indeed, arguments for or against coverage by the statutory safe harbor, which are only relevant during the time frame in which submissions are arguably required for submission to the FDA, may be used against the party making those arguments to substantially expand or retract the royalty base - an issue with lingering effects long past FDA approval.

Footnotes

1 Momenta Pharm., Inc. v. Amphastar Pharm., Inc., 12-1033, 2013 WL 655193 (2013).

2 Roche Prods., Inc. v. Bolar Pharm. Co., 733 F.2d 858, 861, 863 (Fed. Cir. 1984).

3 See Proveris Scientific Corp. v. Innovasystems, Inc., 536 F.3d 1256, 1260-61 (Fed. Cir. 2008).

4 H.R. REP. 98-857(II) at 7 (1984); Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L.

98-417, 98 Stat. 1585 (1984).

5 H.R. REP. 98-857(II) at 5, 11-12. Using the ANDA pathway, generic drug manufacturers could enter the market with copies of pioneer drugs without repeating costly and time-consuming clinical trials that had already completed by a pioneer drug manufacturer. H.R. REP. 98-857(I) at 14-15 (1984).

6 35 U.S.C. § 156(a). The statute provides a patent term extension for patents claiming "a product, a method of using a product, or a method of manufacturing a product" subject to regulatory delays cause by the FDA premarket approval process. Id.

7 See H.R. REP. 98-857(II) at 26-27. Specifically, 35 U.S.C. § 271(e)(1) provided a safe harbor that immunized generic drug manufacturers from infringement on account of making, using, offering to sell, or selling within the United States or importing into the United States a "patented invention . . . solely for uses reasonably related to the development and submission of information" for FDA regulatory approval.

8 Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661 (1990).

9 Id. at 666-67.

10 Id. at 673-74. For the purpose of § 156, the term "product" means any "drug product" and "[a]ny medical device, food additive, or color additive subject to regulation under the [FDCA]." 35 U.S.C. § 156(f).

11 AbTox, Inc. v. Exitron Corp., 122 F.3d 1019, 1029 (Fed. Cir. 1997).

12 Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193, 206-07 (2005).

13 Id. at 202. The Court provided guidance for determining when use of a patented invention is "reasonably related" to seeking regulatory approval: Properly construed, § 271(e)(1) leaves adequate space for experimentation and failure on the road to regulatory approval: At least where a drugmaker has a reasonable basis for believing that a patented compound may work, through a particular biological process, to produce a particular physiological effect, and uses the compound in research that, if successful, would be appropriate to include in a submission to the FDA, that use is 'reasonably related' to the 'development and submission of information under . . . Federal law.' Id. at 207 (alteration in original) (quoting 35 U.S.C. § 271(e)(1)).

14 Proveris, 536 F.3d at 1265.

15 Id.

16 Classen Immunotherapies, Inc. v. Biogen IDEC, 659 F.3d 1057 (Fed. Cir. 2011).

17 Id. at 1070 (emphasis added). The court vacated and remanded the district court's judgment of infringement based on § 271(e)(1)). Id. at 1072.

18 GlaxoSmithKline v. Classen Immunotherapies, Inc., 133 S. Ct. 973 (2013).

19 Momenta Pharm., Inc. v. Amphastar Pharm., Inc., 686 F.3d 1348, 1359 (Fed. Cir. 2012), petition for cert. filed, 81 U. S. L. W. 3496 (U.S. Feb 15, 2013).

20 Id. at 1354-56.

21 Id. at 1357 (citing 21 U.S.C. §§ 331(a), 351(b)). In addition, FDA regulations required that all of Amphastar's records associated with the batch testing be retained and be readily available for authorized inspection by the FDA at any time. Momenta, 686 F.3d at 1357; see 21 C.F.R. § 211.180(a); 21 C.F.R. § 211.180(c).

22 Momenta, 686 F.3d at 1357-59.

23 Momenta

Previously published by Law360, New York, July 02, 2013

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