The perpetual tussle between lower drug costs for consumers and higher profits for the shareholders of biotechnology and pharmaceutical firms drew more limelight - if such a thing is possible - with last week's ruling by the U.S. Supreme Court that patent holders cannot stop other firms from starting related research.

Look out, tool companies, especially.

In the dispute between Merck KGaA and Integra LifeSciences Holdings Corp., the high court vacated a lower court's decision and gave forth a contrary edict, favoring a broad view of patent-exempted research.

How broad? Hard to say, exactly. Documents released by Supreme Court Justice Antonin Scalia allowed for "a wide berth for the use of patented drugs in activities related to federal regulatory process," but the top court backed away from a final decision on the case itself, instead sending it back to the Federal Circuit Court of Appeals.

Still, the phrasing served as a signal, and the impact of the opinion is likely to be felt across the research board, with drug development companies favoring open-ended research and the humble tools-oriented firms hoping to hang onto their intellectual property advantage.

The dispute itself is pretty straightforward. Integra claimed Merck infringed on a patent related to molecules Merck was investigating for cancer. Merck had started only animal studies but Integra said the would-be compound contains peptides under patent until 2006.

If the Supreme Court opinion holds any oomph (it didn't decide on the details of the particular case, after all, and Integra plans to keep fighting), then the ruling could be particularly bad news for the already-beleaguered research tools space, where chemicals, enzymes and equipment of various types come into play.

"In typical fashion, the Supreme Court decided only as much as it had to," said Ian DiBernardo, partner in the IP group at Stroock & Lavan LLP.

As many parties filed briefs related to the case, the fight put pharma firms in the somewhat unusual situation of claiming they ought to be allowed to sidestep the patents held by smaller companies - a position put forth by some of the same big entities that previously have championed patent protection as a way to protect their own research work.

At the center of the dispute is patent-exempted product research allowed under Section 271(e)(1) of the 1984 Hatch-Waxman Act, meant to serve as the basis for product testing by a non-patent holder during the life of a patent. The high court ruling "at least says this exemption from patent infringement not only applies to generics, but now is open to cover preclinical work," DiBernardo told BioWorld Financial Watch.

Specifically, the decision related to the types of data submitted for an investigational new drug application, said Amy Wilson, technical consultant for Stroock. With the IND, "you're getting a lot of preclinical work, in vitro studies in cells, very early stage," she said. "It's those types of experiments that [the courts had said] were not included in those. This decision says, Wait a minute, they are.'"

The exemption originally applied to generics, she said.

"You would go in and show bioequivalence, do some safety studies, and that would be it," Wilson said, and the widened rule favors big pharma over biotech.

"Early stage biotech will, in general, maybe get a good assay, a target, and then try to market that," she said, whereas big pharma has the money to take the investigations further.

What's more, the ruling "opens the door to having [the exemption] apply to tools," DiBernardo added, though Wilson noted that the court "sidestepped the issue" of what a tool is - and even "made a point of saying, We're not going to define it.'" Such matters would be decided on a case-by-case basis.

DiBernardo said the opinion does seem to clear researchers of patent worries regarding what they use in the laboratory, "tool" or not, if they are "reasonably sure [the compound they are investigating] will work." He and Wilson acknowledged, though, that most firms would not move ahead with laboratory experiments if they lacked that confidence anyway.

"They don't do anything without an underlying intent and a good faith belief," Wilson said.

Bottom line, said DiBernardo: The decision clarifies the way Section 271(e)(1) is interpreted, while leaving Merck and Integra to continue their battle over specifics in that case, which involved Integra's patents on cyclic RGD peptides.

"An RGD peptide is not a tool," Wilson said - but the argument may not always be so simple, except in cases such as polymerase chain reaction methods, which most people likely would agree fall into the tool category.

Very much alive are the questions of whether the latest ruling amounts to an invitation for the pharmaceutical industry to use whatever it wants, and whether the biotech industry should bother patenting - and therefore making public - its work, she said.

The situation represents "an interesting quandary," she said. "Will it ultimately come down to biotech not patenting things [but] holding them as trade secrets and trying to license them that way?" Such a strategy would be risky, Wilson pointed out, since publishing greatly enhances credibility and therefore the value of research in the eyes of potential licensees.

Among the firms filing briefs was Applera Corp.'s, "hardcore tool people, and I don't know that they're at risk," she said. "I would say [the decision imperils] smaller companies that have developed good model systems, and their future as far as licensing them out. Any small to mid- range biotech would be pretty nervous about this."

On the other hand, Wilson noted, big pharma sorely needs a pipeline, and biotechnology firms have been helping to provide it, so "I don't know that if it's in pharma's best interest to trample over [biotech's] rights, by not seeking a license."

Furthermore, in the end, if a biotech firm has a patent, and Pfizer or anyone else wants to develop something related to it, "they still have to wait for the patent to expire," she noted. "They can't bring the compound to market with the patent out there, and since development takes so long, it would not be a big deal to wait."

Among others to file amicus briefs in the case were Genentech Inc., Biogen Idec Inc., Sepracor Inc., Isis Pharmaceuticals Inc., Invitrogen Corp. and Vaccinex Inc., along with the pharma companies Wyeth and Eli Lilly and Co.

The exemption under Section 271(e)(1) is made explicitly broader by the latest ruling but, after Merck-Integra, Wilson knew of no other disputes pending before the high court that might force justices to clarify the "tools" issue further, so that piece must await decisions from lower level lawsuits that may be inevitable.

"This is the [case] that's been on everyone's radar," she said of Merck-Integra. "It's been on everyone's mind."