Merck v. Integra: (section) 271(e) (1) and the common law research exemption.

• Author: Borchardt, James

1. INTRODUCTION II. BACKGROUND A. Common Law Research Exemption B. The Statutory Research Exemption C. Patent System Goals and Research Exemptions D. Merck v. Integra: Facts and History III. ANALYSIS OF THE ARGUMENTS PRESENTED TO THE COURT A. Petitioner's Position B. Respondents' Position IV. ANALYSIS OF THE SUPREME COURT'S OPINION A. Interpretation of the Federal Circuit's Decision B. Partial Rejection of this Construction C. The Supreme Court's Three Element Test 1. The Regulatory Hook 2. Subjective Intent 3. Reasonable Basis V. RECOMMENDATIONS--APPLYING MERCK V. INTEGRA A. The Target of the Supreme Court's Standard B. The Statutory and Common Law Research Exemptions VI. CONCLUSION I. INTRODUCTION

   Protection from patent infringement liability for certain research-related activities has been a component of U.S. patent law from the early days of the patent system. These exemptions from infringement liability represent a limitation on patent exclusivity as well as an important mechanism for ensuring that patent exclusivity does not unduly hinder technological advancement. For these reasons, when the Supreme Court speaks regarding the scope of a research exemption, a close look at the scope of the exemption is warranted. In Merck v. Integra, (1) the Supreme Court issued an opinion explicitly interpreting a statutory research exemption. However, this opinion also provides guidance for how courts in the future should view the interaction between this statutory research exemption and the common law research exemption.

   Part II of this Note provides background about the development of the common law research exemption, the statutory research exemption of 35 U.S.C. [section] 271(e)(1) (2000), the various policy considerations relevant to analyzing the scope of research exemptions, and the facts of Merck v. Integra. Part III analyzes the major arguments raised before the Supreme Court by the petitioner and the respondent in Merck v. Integra--a case involving Merck's research using an invention owned by Integra. Part IV provides analysis of the Supreme Court's opinion in Merck v. Integra and determines the standard for applying [section] 271(e)(1) in the future. Part V provides an evaluation of the relationship between the common law research exemption and the statutory research exemption of [section] 271(e)(1). This analysis leads to the conclusion that the statutory research exemption begins to provide immunity from patent infringement liability immediately after the common law research exemption's immunity ends.

2. BACKGROUND

   First, this Part provides a brief synopsis of the development of the common law research exemption to patent infringement from its early common law roots to the modern Federal Circuit formulation. Second, this Part provides a look at the legislative intent and judicial interpretations of the statutory research exemption of 35 U.S.C. [section] 271(e)(1). Third, the various policy aspects of research exemptions are considered. Finally, this Part concludes with the factual and procedural setting of Merck v. Integra.

   1. Common Law Research Exemption

      The common law research exemption from patent infringement is widely recognized to trace its origins to two decisions from the early nineteenth century written by Justice Story. (2) These two cases, Whittenmore v. Cutter (3) and Sawin v. Guild, (4) stated that the use of a patented invention does not constitute patent infringement if the use is for the "mere purpose of philosophical experiment" (5) or to test the truth of the patent's specification. (6) This common law research exemption allowed for certain uses of patented inventions without the consent of the patentee as long as the use did not "divert to the accused infringer a portion of the profits" that rightfully belonged to the patentee. (7) In a more recent case, the Court of Claims (8) held that the United States could not utilize the common law research exemption when its use, testing to determine the capabilities of military helicopters built with patented technology, fell within the "legitimate business" of the United States military. (9) Thus, a use could not be experimental if the use was intended to further the user's legitimate business. These cases are representative of the understanding of the common law research exemption prior to the creation of the Federal Circuit in 1982. (10)

      In a series of several cases since its creation, the Federal Circuit significantly reduced the scope of the common law research exemption. (11) The Federal Circuit's final major ruling on the common law research exemption was Madey v. Duke University. (12) The plaintiff, Dr. Madey, was a former employee of Duke University. (13) During his time at Duke, Dr. Madey was director of a laboratory that conducted research using several patented devices; Dr. Madey owned the patents that covered these devices. (14) After he resigned from Duke, Dr. Madey sued Duke, alleging that the University infringed his patents by continuing to operate the research laboratory using the patented technology. (15)

      The Federal Circuit concluded that Duke's use of Madey's patented technology was not exempted from infringement liability because the type of research Duke was conducting "unmistakably further[ed] the institution's legitimate business objectives, including educating and enlightening students and faculty participating in these projects." (16) The Federal Circuit stated that if an "act is in furtherance of the alleged infringer's legitimate business and is not solely for amusement, to satisfy idle curiosity, or for strictly philosophical inquiry, the act does not qualify for the very narrow and strictly limited experimental use defense." (17) This ruling has been seen by many commentators as an effective evisceration of the common law research exemption. (18)

   2. The Statutory Research Exemption

      Realizing the need for certain research-related protection from patent infringement liability, Congress enacted a statutory research exemption in addition to the common law research exemption. The statutory research exemption of 35 U.S.C. [section] 271(e)(1) (19) states that:

      It 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. (20) According to the legislative history, the Act containing [section] 271(e)(1) was intended to benefit the public by increasing access to and lowering costs of generic drugs while limiting the disincentive effects (21) of these measures on the makers of non-generic drugs. (22) Section 271(e)(1) increases access to generic medical products by allowing manufacturers to use the patented product to generate the data necessary to obtain regulatory approval of the generic product without incurring liability for patent infringement. (23) Without the protection of [section] 271(e)(1), using the patented product in this manner has been held to constitute patent infringement. (24) In theory, this statutory research exemption allows the generic product to enter the market as soon as the original inventor's patent expires. (25) Congress also intended [section] 271(e)(1) to eliminate the "de facto" extension of the original inventor's monopoly that would result if generic manufacturers were forced to wait until the expiration of the patent to begin the long process of seeking regulatory approval for their generic product. (26)

      Congress was also concerned about the potential disincentive effects on non-generic drug manufacturers that might result from the statutory research exemption. To counterbalance these disincentive effects, Congress placed an additional provision in the same Act that provides "a patent-term extension for patents relating to certain products that were subject to lengthy regulatory delays." (27) This provision mitigates the disincentive effects created by the limitation of the patent monopoly caused by [section] 271(e)(1) by increasing the duration of the patent monopoly under certain circumstances.

      Since [section] 271(e)(1) was passed, courts have wrestled with determining the proper scope of the protection offered by the section. (28) In Eli Lilly v. Medtronic, (29) the question before the Supreme Court was whether the protection of [section] 271(e)(1) extends only to the production of generic drugs or whether this protection also extends to other products--such as medical devices--that are subject to pre-market regulatory approval. (30) Despite the universal focus on generic drugs in the legislative history and the use of the word "drug" in the text of [section] 271(e)(1), the Court concluded that the products that are eligible for the patent-term extension under 35 U.S.C. [section] 156 (31) are the same products that are subject to the research exemption of [section] 271(e)(1). (32)

      The Court reached this conclusion by finding that Congress likely intended to create a statutory scheme that simultaneously corrected two problems: (1) the de facto decrease of a patent term caused by the regulatory approval process incurred before the original inventor can market the invention, and (2) the de facto increase in a patent term caused by the delay faced by a manufacturer seeking regulatory approval for a generic product. (33) Consequently, the Court reasoned that it would be "implausible" that Congress would have intended that all of the non-drug inventions listed in [section] 156 should reap the benefit of the patent-term extension without bearing the burden of the research exemption of [section] 271(e)(1). (34) Thus, in its first interpretation of [section] 271(e)(1), the Supreme Court in Eli Lilly showed a willingness to read the statutory research exemption broadly.

   3. Patent System Goals and...