Biotechs Beware: Safe Harbor No More?

• Publication year: 2003

Shawn C. Troxler⁰

I. Introduction

The Presidential election of 2000 forever will be known as one of the most highly contested elections in United States' history. After the final tally, a mere 537 votes decided the presidency.¹ One of the key issues at the heart of the election was the high cost of prescription drugs, especially for senior citizens.² Both candidates hoped to lower prescription drug prices and, at the same time, facilitate the entry of generic drugs into the marketplace to drive down prices.³ Coincidentally, nearly twenty years earlier, Congress faced a similar debate. That debate led to the creation of The Drug Price Competition and Patent Term Restoration Act ("Hatch-Waxman Act"),⁴ which dramatically affected the patent and food and drug laws as well as the manner in which the pharmaceutical industry operated.

Congress enacted the Hatch-Waxman Act in 1984 essentially to reverse the Federal Circuit's decision in Roche Products, Inc. v. Bolar Pharmaceuticals Co.⁵ In Roche, the Federal Circuit concluded that a generic drug manufacturer's use of a patented drug to obtain information needed for the regulatory approval of its generic drug constituted patent infringement.⁶ This decision prevented generic drug manufacturers from using patented drugs to gather the information needed to obtain pre-market approval for generic drugs, thereby delaying the marketing of any generic drugs until the relevant patents had expired. The pre-market approval process of pharmaceuticals is a lengthy process that requires the drug manufacturers to comply with various statutes, regulations, and guidelines set forth by the Food and Drug Administration ("FDA").⁷ The result of the Roche decision was that a patentee would continue to enjoy commercial exclusivity in a practical sense, even after the patent had expired.⁸

Congress hoped to remedy this situation by enacting legislation that would allow generic drug manufacturers to use patented drugs to obtain pre-market approval, including "bioequivalency testing."⁹ Generic drug manufacturers perform bioequivalency testing to ensure that the generic drug contains the same amount of active ingredient as the patented drug.¹⁰ To this end, Congress enacted 35 U.S.C. § 271(e)(1), which created a safe harbor by exempting from infringement all conduct "reasonably related to the development and submission of information" necessary to obtain regulatory approval.¹¹ As a result, it was estimated that, by the end of 2002, generic drugs would account for over two-thirds of all prescriptions written and approximately twenty billion dollars in retail.¹²

This Recent Development examines the Federal Circuit's recent decision in Integra Lifesciences I, Ltd. v. Merck KGaA¹³ and argues that the Federal Circuit properly narrowed the scope of the exemption provided by the § 271(e)(1) safe harbor provision. Additionally, this Recent Development proposes that the Supreme Court should grant certiorari and affirm the Integra decision because it is consistent with the legislative intent of § 271(e)(1). Moreover, this Recent Development proposes that Congress should enact a statute codifying the common law research exemption to bring the state of patent law in accord with twenty-first century principles.

II. The Safe Harbor Provision

A. Section 271(e)(1)

Congress enacted § 271(e)(1) as a safe harbor provision to ensure that generic drugs would be ready for market as soon as any relevant patents expired.¹⁴ Section 271(e)(1) provides

[i]t shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention . . . 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.¹⁵

Although the scope of the exemption was initially limited to the manufacture of drugs, the protection afforded by the section has since been expanded.

B. Expansion of the Safe Harbor Provision

The first dramatic expansion came in the landmark case, Eli Lilly & Co. v. Medtronic, Inc.¹⁶ In Eli Lilly, the Federal Circuit held that the law was not limited to "drugs" but included medical devices subject to FDA approval.¹⁷ In affirming the Federal Circuit's decision, the Supreme Court broadened the scope of § 271(e)(1) even further.¹⁸ The Court focused on the phrase "a Federal law which regulates the manufacture, use, or sale of drugs," and considered whether this phrase referred to "an isolated statutory section" or "to an entire Act."¹⁹ The Court concluded that the phrase applied to all products subject to approval under the Federal Food, Drug, and Cosmetics Act.²⁰ If Congress had intended to include only drug patents, the Court reasoned, it easily could have done so by stating that in the statute.²¹ Additionally, the Court held that "[t]he phrase 'patented invention' in § 271(e)(1) is defined to include all inventions, not drug-related inventions alone."²² As a result of Eli Lilly, the safe harbor provision encompasses not only drugs, but also medical devices, food additives, color additives, and human biological products.²³

Initial § 271(e)(1) jurisprudence also focused on the interpretation of other key terms and phrases in the safe harbor provision. The original focus was on the word "solely" and whether the infringing "uses" related "solely" to seeking regulatory approval.²⁴ This interpretation helped to narrow the scope of § 271(e)(1) in early federal decisions. However, federal courts have since concluded that "solely" is correctly read as modifying "uses," and is not determinative, expanding the protections of § 271(e)(1).²⁵

Recent federal district court decisions involving § 271(e)(1) have addressed whether particular conduct is "reasonably related" to obtaining regulatory approval.²⁶ In Amgen v. Hoechst Marion Roussel,²⁷ the District Court of Massachusetts concluded that the phrases "solely for uses reasonably related" and "use solely for purposes reasonably related" were not the same, the latter being more restrictive.²⁸ Generally these decisions have concluded that only uses reasonably related to gathering data for regulatory approval are within the safe harbor.²⁹ Such an analysis greatly expanded the protection available to alleged patent infringers.

The most recent and broadest reading of § 271(e)(1) was rendered by the District Court for the Southern District of New York in Bristol-Myers Squibb Co. v. Rhone-Poulenc Rorer, Inc.³⁰ In this case, the court held that Bristol-Myers' research using Rhone-Poulenc Rorer's patented chemical intermediates to investigate and identify potential new drug candidates was protected by the safe harbor provision.³¹ The court concluded that § 271(e)(1) protects all research, including synthesis of new drug candidates, their initial testing, and the determination of whether drug candidates should be pursued.³² Thus, the court concluded that the § 271(e)(1) exemption includes all patents covering all inventions that are involved in the FDA approval process.³³ The recent Federal Circuit decision in Integra, therefore, comes at a time of increasing judicial reluctance to narrow the scope of the safe harbor provision.

C. Integra Lifesciences I, Ltd. v. Merck KGaA³⁴

In Integra, the patentee, Integra, owned patents relating to a peptide sequence that promoted beneficial cell adhesion to substrates by interacting with vβ receptors on cell surface proteins.³⁵ Integra alleged that Merck, which funded research that used Integra's research tools for identifying compounds that would block the same receptors, infringed its patents.³⁶ Merck discovered that blocking these receptors would inhibit the formation of new blood vessels and possibly halt tumor growth.³⁷

1. The Majority Opinion

At trial, the District Court for the Southern District of California held that the § 271(e)(1) exemption did not apply to the Merck-sponsored research³⁸ The Federal Circuit affirmed, focusing its analysis on the legislative intent.³⁹ The Federal Circuit noted that the House Committee that initiated the safe harbor 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."⁴⁰ Such an infringement would only be "de minimis."⁴¹ The Federal Circuit concluded that because § 271(e)(1) is limited to activities that are "solely for uses reasonably related to the development and submission of information" to the FDA, the exemption "cannot extend at all beyond uses with the reasonable relationship specified in § 271(e)(1)."⁴² Moreover, the court stated that § 271(e)(1) "simply does not globally embrace all experimental activity that at some point, however attenuated, may lead to an FDA approval process."⁴³

Additionally, the court concluded that extending § 271(e)(1) to encompass new drug development would not limit the exemption to instances of de minimis infringement.⁴⁴ Furthermore, the Federal Circuit recognized that a broad interpretation of § 271(e)(1) would "effectively vitiate the exclusive rights of patentees owning biotechnology tool patents."⁴⁵ The court stated that an expansive reading of § 271(e)(1) "would swallow the benefit of the Patent Act for some categories of biotechnological inventions."⁴⁶ Finally, the court held that the Merck-sponsored research was not embraced by the language and context of the safe harbor provision.⁴⁷

2. The Dissent

In her dissent, Judge Newman explained that pursuant to the "common-law" research exemption, the subject matter of patents might be studied "in order to understand it, or to improve upon it, or to find a new use for it, or to modify or 'design around' it."⁴⁸ Otherwise, a patentee would stop the "advancement of technology" in a certain field.⁴⁹ In Judge Newman's view, Merck took a patented product that was of no value in Integra's hands...