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In Bristol-Myers Squibb Co. v. Rhone-Poulenc Rorer, Inc., [FOOTNOTE 1] the U.S. District Court for the Southern District of New York interpreted 35 U.S.C. � 271(e)(1) — the “safe harbor” provision of the Hatch-Waxman Act — as allowing research-based drug companies to use patented research tools without liability for patent infringement. However, in Integra Lifesciences I, Ltd. v. Merck KgaA, [FOOTNOTE 2] the U.S. Court of Appeals for the Federal Circuit dramatically narrowed the safe harbor from infringement afforded to drug developers under 35 U.S.C. � 271(e)(1) and restored the vitality of patent rights with respect to research tools. BACKGROUND The Hatch-Waxman Act “emerged from Congress’ efforts to balance two conflicting policy objectives: to induce name-brand pharmaceutical firms to make the investments necessary to research and develop new drug products, while simultaneously enabling competitors to bring cheaper, generic copies of those drugs to market,” the court wrote in Abbott Labs. v. Young, 920 F.2d 984, 981 (D.C. Cir. 1990). As the U.S. Supreme Court has explained in Eli Lilly & Co. v. Medtronic Inc., 496 U.S. 661, 669 (1990), the 1984 act was designed, among other things, to respond to “unintended distortions of the … patent term produced by the requirement that certain products must receive premarket regulatory approval.” In one respect, the Hatch-Waxman Act sought to compensate patentees “for the often-lengthy period of pre-market testing pending regulatory approval” that “can deprive a patentee of many years of its patent’s term,” the Integra court wrote. The statute addressed the inequity by providing in 35 U.S.C. � 156 for an extension of up to five years of the term of a patent covering a product that was, inter alia, subject to a regulatory review period before commercial marketing or use. In another respect, the Hatch-Waxman Act addressed a perceived unfairness that resulted from the Federal Circuit’s decision in Roche Prods., Inc. v. Bolar Pharmaceutical Co., 733 F.2d 858 (Fed. Cir. 1984), holding that the manufacture, use or sale of a patented invention would constitute an act of infringement even if the infringer had no commercial product and was merely developing information necessary to obtain regulatory approval. Roche required that a competing drug manufacturer “wait until the expiration of a patent even to begin the clinical and laboratory trials that FDA approval requires.” [FOOTNOTE 3] In response, the Hatch-Waxman Act “sought to ensure that a patentee’s rights did not de facto extend past the expiration of the patent term because a generic competitor also could not enter the market without regulatory approval,” the court wrote in Integra. Thus, the Hatch-Waxman Act enacted 35 U.S.C. � 271(e)(1), which provides a safe harbor permitting competitors “to conduct experiments in advance of the patent expiration as long as those activities [are] reasonably related to securing regulatory approval.” Section 271(e)(1) provides: 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. ‘BRISTOL-MYERS’ In the Bristol-Myers case, the court read � 271(e)(1) to protect even the use of a patented research tool in discovery stage drug research aimed at developing a product that would itself be non-infringing. Rhone-Poulenc Rorer (RPR) accused Bristol-Myers Squibb (BMS) of infringing RPR patents claiming intermediate compounds obtained during, and used in the synthesis of, taxol, an anti-cancer drug. BMS was not developing the intermediate compounds as drug candidates. Rather, BMS researchers used the patented RPR intermediates in developing a structure-activity relationship database to be used in attempting to identify a related compound that could supplant taxol. BMS used this information as “an important tool” in designing analogs of taxol. The Bristol-Myers court held that BMS’s use of RPR’s patented intermediates was, “on its face, [a] use reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs.” The court rejected RPR’s contention that � 271(e)(1) only applies after a particular drug candidate has been selected or filed with the Food and Drug Administration. The court stated that RPR’s interpretation of the statute “would have the effect of preventing competitors from experimenting with patented inventions in order to create new or improved drugs” and would thus “seem to negate Congress’ intent to have new drugs come to market without delay upon the expiration of a patent.” The court also rejected RPR’s argument that � 271(e)(1) did not apply because BMS was engaged in “early stage research to develop numerous … analogs, each of which has only a small probability of being sufficiently useful to warrant an application to the FDA.” The Bristol-Myers court held that there was a “decent prospect” that BMS’s accused use of the patented intermediates would contribute relatively directly to the generation of information sought by the FDA and that the statute did not require a showing that the new product would progress far enough actually to be submitted to the FDA. The decision indicated that because the goal of early stage drug research — involving the screening of numerous compounds to identify those worthy of further investigation — is ultimately to market an FDA-approved drug, pharmaceutical companies may conduct such basic research, under 35 U.S.C. � 271(e)(1), using patented research tools, without regard to the patent rights of others. Under the Bristol-Myers analysis, drug researchers would have been free to use patented research tools even where the research tools are used only preliminarily in identifying a product that may be wholly unrelated to, much less covered by, the research tool patent. In Integra, however, the Federal Circuit adopted a much narrower interpretation of � 271(e)(1), specifically excluding from the “safe-harbor” the use of patented research tools in developing products that are non-infringing. ‘INTEGRA’ Plaintiff Integra owned patents relating to a peptide sequence that promotes beneficial cell adhesion to substrates by interacting with certain receptors on the surface of cells. Integra alleged that its patents were infringed by Merck, which funded research aimed at identifying compounds that would block the same receptors. The underlying concept was that blocking the receptors would inhibit the process for generating new blood vessels and thereby halt tumor growth by starving rapidly dividing tumor cells. At trial, the jury found Merck liable for infringing several Integra patents and the district court determined that the � 271(e)(1) exemption did not apply. In affirming the district court decision, the Federal Circuit noted that “[s]ection 271(e) permits premarket approval activity conducted for the sole purposes of sales after patent expiration,” quoting Hoeschst-Rouseel Pharms., Inc. v. Lehman, 109 F.3d 756, 763, (Fed. Cir. 1997). The court pointed to the fact that the U.S. House of Representatives Committee that initiated � 271(e)(1) described the permitted premarket approval activity as “a limited amount of testing so that generic manufacturers can establish the bioequivalency of a generic substitute.” The House Committee characterized as “de minimis” the “nature of the interference with the rights of the patent holder.” The Federal Circuit further held that because the � 271(e)(1) exemption 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).” Moreover, the court stated that because the focus of the exemption is “the provision of information to the FDA,” activities that “do not directly produce information to the FDA … strain[ ] the relationship to the central purpose of the safe harbor.” The court observed that the Merck-sponsored research at issue was “not clinical testing to supply information to the FDA, but only general biomedical research to identify new pharmaceutical compounds.” The court stated that the “FDA has no interest in the hunt for drugs that may or may not later undergo clinical testing for FDA approval” and thus does not require information about drugs not featured in an Investigational New Drug Application. The circuit court concluded that, under � 271(e)(1), the Merck research was not “solely for uses reasonably related to clinical testing for FDA.” The Integra court noted that the language of � 271(e)(1) “is clearer in the context of the role of the 1984 Act in facilitating expedited approval of a generic version of a drug previously approved by the FDA.” The circuit read � 271(e)(1), in context, as not encompassing drug development activities “far beyond those necessary to acquire information for FDA approval of a patented pioneer drug already on the market.” Consequently, � 271(e)(1) does not embrace “all experimental activity that at some point, however attenuated, may lead to an FDA approval process. The safe harbor does not reach any exploratory research that may rationally form a predicate for future FDA clinical tests.” The court explained that extending � 271(e)(1) to encompass new drug development would ignore the “language and context” of the statute and would not limit � 271(e)(1) to instances of de minimis infringement. Moreover, the Federal Circuit recognized that a broad reading of � 271(e)(1) would “effectively vitiate the exclusive rights of patentees owning biotechnology tool patents.” In other words, because patented tools often facilitate both “general research to identify candidate drugs” as well as “downstream safety-related experiments on those new drugs” and because the “downstream clinical testing for FDA approval” would be exempt under � 271(e)(1), an expansive reading of � 271(e)(1) “would swallow the whole benefit of the Patent Act for some categories of biotechnological inventions.” Thus, without even citing the Bristol-Myers case, the court made short-shrift of the holding in that case. Evidently, the Federal Circuit will limit � 271(e)(1) to clinical testing of drugs that are the subject of an FDA application. Patents covering research tools which are the means rather than the ends of a research effort are excluded from the � 271(e)(1) safe harbor. DISSENTING VIEW It may well be, though, that we have not heard the last word on this subject from the courts. Judge Rosella G. Newman dissented from the majority opinion in Integra, taking the position that the discovery-based research at issue in that case was protected either under the common-law research exemption or under � 271(e)(1). Newman explained that pursuant to the “common law” research exemption, the subject matter of patents may 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.” Otherwise, according to the judge, a first patentee in a field would stop “the advancement of technology” in the field. Newman stated that while a patentee may “exact tribute from or enjoin commercial and pre-commercial activity, the patent does not bar all research that precedes such activity.” In the judge’s view, the fact that profits are the ultimate goal or hope of a research effort should not eliminate the exemption; “[t]he better rule is to recognize the exemption for research conducted in order to understand or improve upon or modify the patented subject matter, whatever the ultimate goal.” Although Judge Newman agreed with the majority that � 271(e)(1) does not embrace the “development and identification of new drugs,” she wrote that the territory that Merck’s research had traversed, “from laboratory experimentation to development of data for submission to the FDA” “was either exempt exploratory research or was immunized by � 271(e)(1).” Newman argued: “It would be strange to create an intervening kind of limbo, between exploratory research subject to exemption, and the FDA statutory immunity, where the patent is infringed and the activity can be prohibited. That would defeat the purposes of both exemptions; the law does not favor such an illogical outcome.” Even Newman’s broader reading of � 271(e)(1) would not encompass research tools that are used in developing drug products. Accordingly, going forward, research-based companies are likely to have to obtain licenses to the use of patented research tools and owners of such tools are likely to be able to protect and profit from their inventions. Aaron Stiefel is a member of Kaye Scholer ( www.kayescholer.com). If you are interested in submitting an article to law.com, please click here for our submission guidelines. ::::FOOTNOTES:::: FN1 2001 U.S. Dist. LEXIS 19361 (S.D.N.Y. Nov. 28, 2001). FN2 2003 U.S. App. LEXIS 11335 (Fed. Cir. June 6, 2003). FN3 Amgen, Inc. v. Hoechst Marion Roussell, Inc., 3 F.Supp. 2d 104, 112 (D. Mass. 1998).

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