WASHINGTON - The Supreme Court vacated a lower court's ruling on a patent lawsuit between Merck KGaA and Integra LifeSciences Holdings Corp., instead issuing a contrary opinion favoring a broad view of patent-exempted product research that could adversely affect research tool companies.
"The most important language," said Michael Dzwonczyk, a lawyer who works in biotechnology, pharmaceutical and chemical patent litigation, "is clearly this standard about the intent to develop a drug, or a reasonable belief that the compound is going to cause a particular physiological effect through a particular physiological process. That, to me, is the new test."
Documents released Monday by Justice Antonin Scalia said that the exemption "provides a wide berth for the use of patented drugs," but the high court declined to make a final decision on the case itself, instead sending it back to the Federal Circuit Court of Appeals. Nevertheless, the opinion's impact carries more weight across the drug industry than the disputed matter between the two companies, as many drug development companies favoring open-ended research access lined up on one side of the fence while smaller research tool firms sat in an opposite camp to defend their intellectual property.
"I think people who are patenting basic discoveries that have usefulness in the drug discovery process will have to think carefully about their claims strategy as a result of this case," said Steve Maebius, a partner in the intellectual property department at the law firm Foley & Lardner, as well as a member of its biotechnology and pharmaceutical practice group. "They might want to capture the end products that can be derived from the use of the research tool, rather than simply relying upon getting a patent that covers the research tool itself."
Neither he nor Dzwonczyk, a partner at Sughrue Mion, were surprised by the reversal of the appellate court's previous narrow view of the research exemption, but neither expected the open expansion. Dzwonczyk told BioWorld Today that he was pleased that the court's "articulation of the statutory exemption does not begin at a certain point in time in a company's research of a product," meaning that such research could begin very early as long as there is a "reasonable basis for believing that a patented compound may work." Maebius, a former biotech patent examiner, added, "this is a binding opinion that will affect parties long into the future."
Two months ago, all nine Supreme Court justices heard oral arguments from the two companies at odds, Integra and Merck. At the heart of their dispute is patent-exempted product research, which is allowed under Section 271(e)(1) of the 1984 Hatch-Waxman Act and serves as the basis for product testing by a non-patent holder during the life of a patent. (See BioWorld Today, April 21, 2005.)
According to the court's broad opinion, such patent-exempted product research "includes preclinical studies, both those pertaining to a drug's safety in humans and those related to a drug's efficacy and mechanism of action," even if specific patented compounds do not eventually become the subject of an FDA submission. Added Scalia, who wrote the court's opinion, "Congress did not limit 271(e)(1)'s safe harbor to the development of information for inclusion in a submission to the FDA; nor did it create an exemption applicable only to the research relevant to filing" for approval of a generic drug.
"I think that the court is very keen to the fact that you conduct this research for a purpose," Dzwonczyk said. "So even if a decision is made not to go forward with data submission, it makes sense from a policy perspective that the research be protected."
Still, Maebius said the court's opinion leaves a lot of gray area.
"It seems that Congress did intend for this to be developed on a case-by-case basis," he told BioWorld Today. "I think there's going to be some uncertainty ahead, and I think that some of the people who have licensed patents for drug research or drug discovery work may now be emboldened to take a second look at those licenses," and renegotiate for more favorable terms, stop payments altogether or avoid such licenses in the future.
Dzwonczyk added that companies that hold compounds as tools could find their business in trouble, as a result of conflicting language written by Scalia. "If you take [the court's opinion] literally," he said, "the decision doesn't apply to the research tool company. On the other hand, they said that any patented compound that is used with the intent to develop a drug is exempt." So for companies that produce compounds as markers or as other tests, "I would feel very threatened by the decision, because that which I have made, patented and sold, now can be used free of charge. So how do you square the language that today's decision doesn't apply to research tools with the fact that many compounds are themselves research tools?"
Maebius echoed such an opinion. "In my view, it's not a total evisceration of research tool patents," he said, "but it does devalue a certain group of them and may make it harder for owners of those patents to impose licenses on people who go out and use their products to go out and discover new drugs."
Lower court rulings in the past have favored Integra, which initially was awarded a $15 million judgment after a jury found that Merck's research into Integra's patented RGD peptide sequence had violated its intellectual property. Merck, of Darmstadt, Germany, had been sponsoring such research for an oncology application; Integra, a medical device firm in Plainsboro, N.J., held the RGD patents because of its interests in cell adhesion and growth for wound healing and biocompatibility of prosthetic devices.
Integra felt its patents had been violated, as the research had been conducted without a license and therefore violated its intellectual property. Merck argued that its research was exempt, and appealed to the Federal Circuit Court of Appeals. But two of those three judges upheld the lower court's ruling, though now they are to reinterpret their original opinions on the case. Mauricio Flores, who argued the case before the Supreme Court on behalf of Integra, told BioWorld Today that he expects another ruling to favor Integra based on the facts of its argument, which never were aligned with the Federal Circuit Court of Appeals' interpretation of 271(e)(1).
The patent exemption initially was written into the Hatch-Waxman Act to allow generic companies to begin their research before pioneer drugs lost protection, thereby providing follow-on drugs to hit the market as soon as a patent expires. But the Supreme Court said such research should not be limited solely to generic drug development.
"We decline to read the reasonable relation' requirement so narrowly as to render 271(e)(1)'s stated protection of activities leading to FDA approval for all drugs illusory," Scalia wrote. "Properly construed, 271(e)(1) leaves adequate space for experimentation and failure on the road to regulatory approval."