• Hatch-Waxman Extraction
  • June 26, 2003
  • Law Firm: Orrick, Herrington & Sutcliffe LLP - San Francisco Office
  • On June 6, 2003, in a 2-1 decision, the Federal Circuit in Integra Lifesciences I, Ltd. v. Merck kGaA, 2003 WL21299492 (Fed. Cir. June 6, 2003), in an opinion by Judge Rader with Judge Newman dissenting, significantly limited the scope of § 271(e)(1) to exempt from infringement only those activities "reasonably related" to generating information that would be submitted to the FDA. The court held that the use of research tools to identify drug candidates that might later require FDA approval was not exempt from infringement. The court acknowledged that the Hatch-Waxman Act had two key purposes: (1) to restore to pharmaceutical patents a portion of the expired patent term to compensate for delays in regulatory approval; and (2) to overrule the Bolar decision, so that competitors could conduct experiments in advance of patent expiration such that introduction of generic drugs would not be unnecessarily delayed. Despite its emphasis on generic drugs, the court noted that all clinical trials were exempt under § 271(e)(1).

    In analyzing the specific facts in Integra, the court noted that the experiments-at-issue did not generate information for submission to the FDA, but were screening activities conducted to identify drug candidates for further testing. In refusing to hold those activities exempt, the court emphasized that the "safe harbor"exemption applies "solely" to activities which generate information for submission to the FDA. In this case, the work sponsored by Merck was considered by the court to be "only general biomedical research to identify new pharmaceutical compounds" and that "the FDA has no interest in the hunt for drugs that may or may not later undergo clinical testing for FDA approval." Thus, the court held that the experimental work sponsored by Merck in this case was not "solely for uses reasonably related" to testing for submission to the FDA.

    Accordingly, the exemption does not embrace the identification of potential new drugs simply because a new drug product, once identified, would eventually need FDA approval. Indeed, the court stated that "[t]he safe harbor does not reach any exploratory research that may rationally form a predicate for future FDA clinical tests." With regard to research tool patents, the court noted that extending § 271(e)(1) to cover the Scripps-Merck activities "would effectively vitiate the exclusive rights of patentees owning biotechnology tool patents," and would certainly not be a "de minimis encroachment on the rights of the patentee." Thus, the decision in Bristol-Myers Squibb Co. v. Rhone-Poulenc Rorer, Inc. 2001 WL 1512597 (S.D.N.Y. Nov. 28, 2001) is not the law.

    Addressing damages, the court vacated the award because it was not clear that the lower court had analyzed the hypothetical negotiation regarding damages before the infringement began. The court noted that the value of a license could be "dramatically different" at a later date. In determining the amount, the court held that the level of risk associated with the technology should be assessed, as well as the parties inability to predict success, and the number of patent licenses necessary to conduct the research. Thus, the Federal Circuit gave broad discretion to the lower court (jury) in determining the methodology for assessing damages.

    Judge Newman, in dissent, was concerned with the chilling effect that the threat of infringement liability might have on research in general and opined that the common law research exemption should exempt early pharmaceutical research, and after that, § 271(e)(1) should take over and protect further research until commercialization. However, her opinion ignores the Madey v. Duke University, decision where the court eviscerated the common law research exemption. Thus, Newman's analysis here is not compelling.