Washington Editor

WASHINGTON - By June, the Supreme Court is expected to deliver its ultimate judgment in a lawsuit related to patent-exempted product research, and that decision likely is to reverberate throughout the biotechnology industry.

The big-picture issue is whether research in identifying new drugs or evaluating their characteristics is exempt from patent liability, or whether the exemption is limited strictly to research relevant to FDA approval.

On Wednesday, the process began, with all nine of the court's justices hearing oral arguments from lawyers for the two companies at odds, Integra LifeSciences Holdings Corp. and Merck KGaA. Prior court rulings have favored Integra, which initially was awarded a $15 million judgment after a jury found that Merck's research into the RGD peptide had violated patents belonging to Integra. Merck argued that its research was exempt from patent law under Section 271(e)(1) and took its case to a federal appellate court, the U.S. Court of Appeals for the Federal Circuit in Washington, but the majority of those judges upheld the lower court's ruling.

"I think it's an important issue because it is aimed toward the question of how to provide an inventor with incentive," said Lee Bromberg, a Boston lawyer whose firm is focused on intellectual property and is dedicated in part to medical research. "The patent system is designed to provide that incentive," while also allowing for public disclosure.

The patents in question are related to a short tri-peptide segment of fibronectin with the sequence Arg-Gly-Asp. Also called the RGD peptide, the sequence promotes cell adhesion to substrates in culture and in vivo. Integra, a medical device firm based in Plainsboro, N.J., holds the patents because better cell adhesion and growth are used in wound healing and biocompatibility of prosthetic devices.

Merck's interest in the same sequence stems from a discovery made at the Scripps Research Institute in La Jolla, Calif., which showed that the RGD peptide impacts angiogenesis. An agreement between Merck and Scripps focused on identifying drug candidates that might inhibit angiogenesis.

Merck, of Darmstadt, Germany, has continued to fight under its interpretation of Section 271 (e)(1), which was written into law in 1984 as part of the Hatch-Waxman Act to allow generic drug development to begin before patents expire, and is the source of the dispute that has landed at the Supreme Court. That clause states that research into a patented area is exempt from litigation as long as it is "reasonably related to the development and submission of information" to the FDA.

Merck's lawyer, Joshua Rosenkranz, argued that the court should broadly interpret the exemption. He said that all the company's research efforts eventually could be used in FDA submissions. Among its research were experiments to determine safety, efficacy, the mechanism of action, pharmacokinetics and pharmacology. "There is no such thing as a preclinical study that has only one purpose," he said. Previously supporting that thought, a dissenting appellate court judge wrote that the research was protected under the patent law exemption or was protected by a common-law research exemption. (Scripps was a prior defendant in the case, but was dismissed on grounds that its original experiments were protected by that common-law research exemption.)

Integra, on the other hand, has argued that such research was not conducted for eventual FDA review, in part because they were conducted in chicken eggs rather than under preclinical conditions endorsed by the FDA for eventual review. The company's lawyer, Mauricio Flores, therefore, said the original jury judgment should be affirmed.

Boiling the case down, Bromberg called it "a money issue" and pointed to the irony of "drug companies arguing for a cutback in patent rights."

A variety of interested companies have weighed in on the matter. Many on both sides filed amicus briefs with the Supreme Court, part of their broader efforts to explain how the case might affect the overall industry.

"There's a concern that a ruling that would allow a research use exception could potentially hurt innovation in the tools industry, and ultimately we are concerned that that could hurt the scientific community," said Alan Hammond, the chief intellectual property counsel at Invitrogen Corp., which was one of a number of research tool companies that have backed Integra's stand. "If there's an exception to patent protection, that could hurt the incentive to innovate and create new tools that will ultimately be used by the research community."

Bromberg added that holes in the patent law would hinder investments that drive the biotech industry, and said that cynical observers view the issue as a case of big pharma not wanting to share its money through licenses from universities, research institutes and small biotech firms.

"If a much larger company that operates in the same space can help themselves to your patented crown jewel," he told BioWorld Today, "there will be less money" going into the industry. Investors, he said, would shy away because of a perceived lack of return.

Opposing that view, Merck and backers at Eli Lilly and Co., Wyeth, Pfizer Inc., Genentech Inc. and Biogen Idec Inc. said their drug innovation would be stifled by a narrow ruling. Addressing the court on behalf of Merck, Daryl Joseffer, an assistant to the U.S. solicitor general, said the federal appellate court was incorrect in ruling that the exemption only applied to studies on a single compound destined for FDA review. "Companies can decide which compound to submit" for agency approval to move into the clinic based on previous preclinical studies on multiple related compounds, he said.

Rosenkranz said in his closing statements that no "rational drug innovator" would be able to move into the clinic without early stage research. Even if that young research isn't eventually submitted, it is the impetus for many companies deciding to push forward.

When the court issues a ruling, it could affirm the lower courts' rulings, or upend those judgments and create "some new area of the law," Bromberg said, or send the case back to the federal circuit court of appeals over concerns that if patent protection is too strong, valid research could be stifled.

"Stay tuned," Hammond said.