Supreme Court: Research Use of Patented Compounds OK

July 6, 0005

Pharmaceutical Executive

Volume 0, Issue 1

We asked top intellectual property lawyers about what the Supreme Courts decision will mean for pharma and biotech companies. Here is our forward-looking analysis of their comments.

The Case:

The U.S. Supreme Court’s June 13 decision in the Merck KgaA v. Integra Lifesciences I Ltd. case shook up the industry’s understanding of the rules governing the use of patented compounds covered by the Hatch-Waxman Act. But only future interpretations by lower courts will determine the scale of the quake.

    Merck was funding experiments at the Scripps Research Institute. The company was interested in finding ways to inhibit blood vessels from growing out of existing vessels. As part of these studies, the researcher at Scripps used a patented protein fragment owned by Integra, which proved effective. Before the initial research agreement expired, Merck renewed its interest in the Scripps investigations, specifically using the Integra fragment.

    Integra sued Merck for patent infringement for using the compound. But Merck responded that the research was covered by the Safe Harbor clause of the Hatch-Waxman Act, 271(e).

The Decision:

The high court reversed the appellate decision in favor of Integra. The Supreme Court also returned the case to the Federal Circuit court, which will have to re-evaluate the case in light of the new interpretation of the Safe Harbor clause.

    In a rare unanimous decision, the Supreme Court determined that the Safe Harbor is not universal but that it does extend beyond the line drawn by the appellate court, dividing clinical trials from pre-clinical research.

    In section III, Justice Antonin Scalia, writing for the court, said that the Safe Harbor includes patented compounds that are “reasonably related to the development and submission of any information under the FDCA.” But in a later footnote, the court declined to offer an opinion about whether 271(e) extends to patented research tools.

    “There is simply no room in the statute for excluding certain information from the exemption on the basis of the phase of research in which it is developed or the particular submission in which it could be included,” Scalia wrote.

    The court chose not to mention the possibility of a common law research exemption, which was mentioned in a dissenting opinion by Federal Circuit Judge Pauline Newman.

The Impact on Statutory Law:

Experts agree this decision provides a new understanding of the Hatch-Waxman Act. According to Stan Lovenworth, partner at Dewey Ballantine LLP in New York, the Safe Harbor clause was originally written to allow generic drug manufacturers to conduct experiments on patented drugs prior to the end of the protection. This was supposed to speed up the entry of generic alternatives into the marketplace.

    The Supreme Court’s decision is an “appropriate interpretation,” Lovenworth stated. “It says what it says it [271(e)] says, but it isn’t what was meant.”

    Stephen Maebius, partner at Foley and Lardner LLP, contended that although the clause was created with generics in mind, the legislators “deliberately chose wording that went way beyond generics.” This allowed the Supreme Court to expand the clause to include patented compounds used for pre-clinical research.

    But Lovenworth asserted that if Congress intended a “full-bore research exemption,” it should take some action to solidify that court’s interpretation as law.

    “The next thing I would like to see happen is some congressional hearings,” he said.

    But Maebius asserted that a Congressional re-examination of the Safe Harbor is unlikely because it would be too difficult to balance the interests of pharma companies, which want to keep R&D costs low, and biotechs, which want to preserve their incentive for innovation. He said research toolmakers, who should now have the most interest in solidifying the meaning of the Safe Harbor, do not have enough strength to interest Congress in making the clause narrower.

How it Will Impact the Industry:

Although the clause was written with generic drug manufacturing in mind, the Merck v. Integra decision will not have a great impact this sector of the industry, Lovenworth said. But he asserted that for brand pharma companies, “it creates a very different playing field than we thought we had before the decision.”

    According to Sandip Patel, partner at Chicago’s Marshall, Gerstein and Borun LLP, the decision could prompt pharma companies to abandon the conservative approach of waiting until a compound’s patent has expired before using it in research.

    Maebius agreed, saying that drug manufacturers might be more resistant to licensing a product, if they feel they could make it in-house and be protected by the Safe Harbor.

    “It will affect the speed at which new drugs are introduced,” Patel said.

    It could also have a negative impact on biotech companies and other organizations that produce compounds for licensing, Patel said.

The Research Tool Issue:

But undoubtedly the biggest unanswered question for biotechs and research institutions is how this interpretation will influence future decisions concerning research tools.

    “This definitely leaves the door open for future litigation on that issue,” Patel said.

    Lovenworth predicted that if research tools were not distinguished as different from the compounds in the Merck case, it would decrease “the value of companies that make research tools.” It could also “seriously jeopardize what’s become a huge revenue stream for research universities,” he continued.

    Patel predicted that toolmakers would aggressively enforce patent rights. But Lovenworth asserted that the best bet for these companies is to couple patented items with “real know-how” that is not included in the patent application but retained on a trade secret basis.

    “If there were a way to do it that only Integra knew about, they might have been able to get in on the action,” he contended.

    Maebius said that toolmakers should find ways to optimize their patents. He pointed out that they would not be able to patent the end products of the tools due to the Feb 2004 University of Rochester v. GD Searle and Co. Inc. Federal Circuit Court decision, which said this was overreaching the patent. But toolmakers might be able to find an intermediate area, he said.

Proving Reasonable Belief:

Another question left open by the decision, according to Gregory Castanias a partner at Jones Day in Washington, D.C., is how pharma companies can prove the court’s requirement of reasonable belief.

    In the decision, the court said that the Safe Harbor extends as long as there is a “reasonable basis to believe that the compound tested could be the subject of an FDA submission and the experiments will produce the types of information relevant to an IND or NDA.

    Castanias questioned what level of proof would be necessary and wondered if the company using the compound would need to have set out with the initial intention of developing a new drug in order to claim safe harbor.

    Maebius predicted that heads of pharma company research departments would issue memos stating that the purpose of specific studies is to develop a drug to create a paper trail of proof. But he said that the memos can’t be “trumped up.” They will have to show that the company is on the path to drug discovery in a way that outside scientists could evaluate the memos and agree.

    He also questioned how specific the research will have to be in order to demonstrate the reasonable basis of belief.

    “What is enough?” Maebius asked. “A lead compound, structural motif, a mechanism of action?”

    On the other hand, Lovenworth said that the fact that a pharma company is conducting research using a compound would be proof enough.