Publications & Articles
ABA-IPL Newsletter, Volume 22, Number 4, Summer 2004
Numerous institutions conduct research on pharmaceutical and medical devices: some conduct pioneering research, others improve existing technology, and still others make generic equivalents of existing products. Which of these research activities are exempt from a patent infringement suit under the Hatch-Waxman Act? To make that determination, it is important to examine the scope of the exemption and see how it has evolved over the years.
Below, we trace the history of the Act to its common law foundation and examine the case law leading up to its implementation. Next, we look at the cases interpreting what remains of the common law experimental use defense after passage of the Act. Finally, we consider the cases interpreting the statutory exemption created by the Act and discuss what, if any, safe harbors still exist for scientific researchers.
The Common Law Experimental Use Exception
To understand the exemption provided by the Act, one needs to recognize its common law origins. The experimental use defense to patent infringement was formally recognized almost two hundred years ago in Whittemore v. Cutter.1 In that case, Justice Story stated that, “it could never have been the intention of the legislature to punish a man, who constructed such a machine merely for philosophical experiments, or for the purpose of ascertaining the sufficiency of the machine to produce its described effects.”2 Several months later, Justice Story refined this idea in Sawin v. Guild,3 reaffirming his position that it would not be infringement to make an invention “for the mere purpose of philosophical experiment, or to ascertain the verity and exactness of the specification.”4 Moreover, Justice Story opined that there must be “an intent to infringe the patent-right, and deprive the owner of the lawful rewards of his discovery.”5 Both Whittemore and Sawin introduced two core concepts of the experimental use defense: “philosophical” endeavors and “intent.” While the common law theory has been refined in modern patent law, these core concepts remain essentially the same.
The CAFC’s Landmark 1984 Ruling Regarding the Experimental Use Exemption
One of the most important CAFC decisions that addressed the common law defense is Roche Products, Inc. v. Bolar Pharmaceutical Co., Inc.6 In this case, the generic drug manufacturer Bolar intended to bring to market a generic version of a patented drug that was manufactured and sold by Roche. Bolar began conducting clinical tests required for FDA approval before the subject patent’s expiration date. When Roche became aware of Bolar’s activities, it sued for infringement. After considering the common law use exception and Bolar’s intent, the district court held that Bolar’s activities did not infringe Roche’s patent because its use of the patented drug was experimental, was for federally mandated testing, and was de minimis.
The CAFC reversed on appeal, relying primarily on 35 U.S.C. § 271(a), which stated that mere “use” of a patented invention, without either manufacture or sale, is actionable. Citing Pitcairn v. U.S.7 as controlling law, the CAFC reasoned that experiments that are in keeping with the legitimate business of an alleged infringer are not exempt from infringement.8 The CAFC concluded that Bolar’s use was solely for business reasons and not strictly for philosophical inquiry. As such, the experimental use exception did not apply.
The court did note that the term “use” was never defined in the patent statute, and its meaning had become a matter of judicial interpretation. It discussed several such interpretations in its decision and came to the conclusion that some types of experimental use could be exempt from infringement. The court ended its analysis by stating that Congress had before it a bill labeled the “Drug Price Competition Act of 1983” and the “Patent Term Restoration Act of 1983,” and Congress was the appropriate place to debate the issue. The CAFC declared, “[w]here Congress has the clear power to enact legislation, our role is only to interpret and apply that legislation…We will not rewrite the patent laws here.”9 The industry paid heed, and focused its efforts on legislation rather than litigation.
The Resulting Legislation: The Drug Price Competition and Patent Term Restoration Acts
The industry’s lobbying efforts were well-timed. In the late 1970s, the U.S. economy was in recession and the Carter administration needed to create more jobs. They reasoned that if the patent term were lengthened to compensate for the time lost for regulatory review, companies would be more willing to invest in research and development of new products. Despite their efforts, legislation stalled. The Reagan administration continued to promote the legislation, and eventually the chair of the House Health Subcommittee, Henry Waxman, began promoting the bill as an opportunity to improve the country’s healthcare system. To that end, he touted the social benefits that could result from restoring the patent terms to certain pharmaceutical inventions and allowing companies to prepare to market generic drugs before the corresponding pioneer patents expired. Senator Orrin Hatch joined in, stating that enactment of the bill would be a ground-breaking compromise in the public interest in which the public receives the best of both worlds—cheaper drugs today and better drugs tomorrow. However, it was not until after the CAFC handed down the Roche decision when Congress was able to rally behind what is now known as the Hatch-Waxman Act.
The Act can be divided into three main categories. The first part relates to drug price competition. Specifically, the legislation provides for an Abbreviated New Drug Application (ANDA) to be implemented by the U.S. Food and Drug Administration (FDA). Briefly, the ANDA provisions allow makers of generic drugs to apply for regulatory approval of their drugs if (1) the drug hasn’t been patented, (2) the patent term of the subject drug has expired, (3) the patent will expire before the generic goes on the market, or (4) the patent is invalid or not infringed.
The second part of the Act relates to patent term restoration. Briefly, this section provides that inventors of pioneer drugs may have their patent terms extended by an amount of time equal to one-half of the FDA’s investigational new drug period. The maximum term of extension is five years, but the effective market exclusivity may not exceed fourteen years.
The third part of the Act, relates to the research exemption to patent infringement. Specifically, 35 U.S.C. § 271(e)(1) states,
"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 (other than a new animal drug or veterinary biological product (as those terms are used in the Federal Food, Drug, and Cosmetic Act and the Act of March 4, 1913) which is primarily manufactured using recombinant DNA, recombinant RNA, hybridoma technology, or other processes involving site specific genetic manipulation techniques) 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."
This part of the Act has been the subject of much controversy. In the context of Roche, it would appear that the main reason that Section 271(e)(1) was enacted was so that generic drug manufacturers could enter their products into the marketplace as soon as the corresponding pioneer patents expire. However, because of the ambiguous language of the statute and equally unclear legislative history, there has been considerable debate as to the scope of this statutory exemption as discussed below.
The Common Law Experimental Use Defense after the Hatch-Waxman Act
A. Embrex v. Service Engineering
After Roche and the passage of the Act, few cases have discussed the common law experimental use exception. In Embrex v. Service Engineering,10 the CAFC considered and soundly rejected the defendant’s common law experimental use and de minimis use defenses to patent infringement. While such defenses were still available, the CAFC indicated that they were extremely narrow in scope and could not be used to escape liability for infringement simply by cloaking infringing activities in the “guise of scientific inquiry.”11
Particularly noteworthy is Judge Rader’s concurring opinion, which foreshadowed the opinion he wrote for the majority in Integra Lifesciences I, Ltd. v. Merck KgaA,12 discussed below. Rader wrote, “Since its inception, this court has not tolerated the notion that a little infringement—de minimis infringement—is acceptable infringement or not infringement at all. . . Rather, the statute accommodates concerns about de minimis infringement in damages calculations [only].”13 He further stated that neither the patent statute nor any Supreme Court precedent gave any reason to excuse infringement because it was committed with a particular purpose or intent, such as for scientific experimentation or idle curiosity.
Rader relied on Warner-Jenkinson Co., Inc. v. Hilton Davis Chemical Co.14 to validate that intent was not an element in infringement actions. He closed by stating,
"[The Supreme Court’s Warner-Jenkinson decision] precludes any further experimental use defense, even in the extraordinarily narrow form recognized in Roche. Of course, even if the experimental use excuse retains some lingering vitality, the slightest commercial implication will render the ‘philosophical inquiry/experimental use’ doctrine inapplicable, as occurs in the court’s resolution today . . . I would lay to rest permanently [the defendant’s] infringement excuses which find no support in the Patent Act."15
B. Madey v. Duke
The CAFC again discussed the common law exception more recently in Madey v. Duke.16 In that case, Madey, a researcher at Duke University, owned patents covering a new laser device. He left Duke without licensing or assigning any rights to the inventions. After he left, Duke continued to use his inventions without permission, and the suit followed.
The district court granted summary judgment in favor of Duke University, stating that Duke researchers were using the patented laser for basic scientific research that was not commercial in nature; therefore, it fell under the common law experimental use exemption. The CAFC disagreed, noting that the district court improperly focused on whether Duke is a nonprofit institution when it decided that Duke’s research was not commercial in nature. The CAFC reasoned that since academic institutions frequently conduct research without regard to commercial value, the focus instead should be on Duke’s legitimate business objectives.
Judge Gajarsa wrote for the court, “Our precedent clearly does not immunize use that is in any way commercial in nature. Similarly, our precedent does not immunize any conduct that is in keeping with the alleged infringer’s legitimate business, regardless of commercial implications.”17 The court reasoned that Duke’s business includes educating students as well as conducting research, which increases the status of the institution and lures lucrative research grants. Thus, the CAFC characterized Duke’s research as a part of its business. As such, the common law experimental use exemption did not apply. Madey appears to signal an end to the common law experimental use exception to patent infringement.
The Courts’ Interpretations of Section 271(e)(1)
Just as the courts have limited the scope of the common law exception, they also have recently begun to restrict the scope of the statutory exemption. This was not always the case. Initially, the courts appeared to have interpreted Section 271(e)(1) rather broadly, beginning with Eli Lilly and Co. v. Medtronic.18
A. Eli Lilly and Co. v. Medtronic
In one of the first cases to define the scope of the Act, Lilly sued Medtronic for infringement of its two patents covering implantable cardiac defibrillators. Medtronic defended their activities based on the experimental use shield of Section 271(e)(1). The district court sided with Lilly, stating that Section 271(e)(1) did not apply to medical devices.
Relying on a combination of legislative intent and Roche, the CAFC reversed the district court’s decision. They noted that Congress explicitly stated that Section 271(e)(1) would “have the net effect of reversing the holding of Roche.”19 They further noted that Roche’s holding was rather broad: “the unlicensed use of a patented invention for testing and investigation, even though strictly related to obtaining FDA approval for a substitute, was an infringement under 35 U.S.C. Sec. 271(a).”20 In reconciling Congress’s intent and the holding of Roche, the CAFC used Justice Scalia’s reasoning in United States v. Fasto21 to conclude that Roche’s interpretation of §271(e)(1) was repealed by implication by the newly enacted statute. That is, Congress meant to allow testing and investigation of a patented invention if strictly related to obtaining approval for a substitute, regardless of the product involved.
On appeal, Justice Scalia, writing for the Supreme Court, noted that the statute and legislative history were both ambiguous, and found that the CAFC’s interpretation appeared to be closer to what Congress intended. To that end, the high court recognized that medical devices fall within the purview of Section 271(e)(1) and, thus, broadened the scope of the statutory research exemption.
B. Intermedics v. Ventritex
Soon after the Supreme Court’s ruling, the Northern District of California lent its interpretation to Section 271(e)(1) in Intermedics v. Ventritex.22 Well before Intermedics’ patents on a medical device expired, Ventritex began preparing to commercialize an allegedly infringing device. The district court found for Ventritex, reasoning that the timing of preparations for commercialization was irrelevant. They focused on whether a party’s uses were de minimis and whether the party reasonably believed that their use would contribute to the generation of relevant information for the FDA. The district court further noted the protection of Section 271(e)(1) wasn’t negated even if some of the uses either failed to generate information or generated more information than necessary to secure FDA approval. Intermedics thus broadened the scope of Section 271(e)(1) in terms of both the timing and the extent of the allegedly infringing activities.
C. Telectronics v. Ventritex
Later in Telectronics v. Ventritex,23 the Federal Circuit catalogued the types of activities exempt under Section 271(e)(1). In that case, Telectronics sued Ventritex for patent infringement based on their manufacture, sales and marketing of an allegedly infringing device. Ventritex defended that their activities were exempt under Section 271(e)(1): their manufacture and sales were limited to their clinical trials and their marketing was necessary to raise funds to support the clinical trials and further manufacture. The CAFC agreed that Ventritex’s activities were exempt, either because they were reasonably related to FDA approval or were simply “dissemination of the data developed for FDA approval.”24 The CAFC noted that Congress was aware that some fund raising and related marketing activities were necessary to enable competitors to enter the market after a controlling patent expired. Telectronics thus further broadened the scope of activities permitted under Section 271(e)(1).
D. Amgen v. Hoechst Marion Roussel
In Amgen, Inc. v. Hoechst Marion Roussel, Inc.,25 the District Court of Massachusetts further defined the limits of the exemption. Amgen sued Hoechst for manufacturing and using their patented erythropoietin product to develop a competing product. Hoechst intended to sell their product after the expiration of Amgen’s patents. The district court opined that the statutory phrase “solely for uses reasonably related” to FDA approval does not prevent companies from engaging in activities for purposes other than FDA approval. That is, the court found that certain ulterior motives or alternate purposes do not preclude the Section 271(e)(1) exemption, if a party reasonably believes that there was a decent prospect that “the use in question would contribute (relatively directly) to the generation of kinds of information that was likely to be relevant in the processes by which the FDA would decide whether to approve the product.”26 (Emphasis added.) In Amgen, the court found that such activities included exporting the patented product to evaluate manufacturing processes, testing to comply with European and Japanese standards, making an amount of the product in excess of that required for the FDA approval process, and characterizing the product. Moreover, the district court held that the aforementioned activities would be exempt even if the results were eventually discarded or abandoned for reasons unrelated to FDA approval. Amgen further broadened the scope of exempt activities.
E. Nexcell Therapeutics v. AmCell
The district court in Delaware took a similarly broad view of Section 271(e)(1) in Nexcell Therapeutics Inc. v. AmCell Corp.27 In this case, AmCell was planning to seek FDA approval for the clinical use of a magnetic cell-separating device that used Nexcell’s patented antibodies. The district court found AmCell’s activities exempt under Section 271(e)(1), which included recruiting clinicians to participate in FDA studies to evaluate the device, displaying the device at a conference, advertising the device in medical journals and providing to FDA-approved clinicians the device and reagent kits with the patented antibodies. In an unusual litigation move, Nexcell asked the FDA to comment on whether AmCell’s activities were reasonably related to FDA approval. The FDA responded by stating that “the ultimate construction and application of § 271(e)(1) lies with the court . . .” and that “there is no reason to assume any direct correlation between [the] FDA’s evaluation of AmCell’s submissions and the appropriate construction of section 271.”28 Nonetheless, in finding for AmCell, the district court specifically stated that “a large degree of deference to activities conducted in furtherance of FDAapproved clinical trials is appropriate,”29 because it will not always be clear to a party exactly what kinds of information and what quantities are necessary. Thus, Nexcell broadened the scope of the statutory exemption a bit more.
F. Integra Lifesciences v. Merck
The most recent decision addressing the statutory exemption to patent infringement, and the one that has been said to reverse the broadening trend, is Integra Lifesciences I, Ltd. v. Merck KgaA.30 Merck hired researchers at Scripps to perform “the necessary experiments to satisfy the biological bases and regulatory (FDA) requirements for the implementation of clinical trials”31 on a series of peptidyl compounds that inhibited angiogenesis. Scripps began in vivo and in vitro experiments “to evaluate the specificity, efficacy, and toxicity of [several drug candidates] for various diseases, to explain the mechanism by which these drug candidates work, and to determine which candidates were effective and safe enough to warrant testing in humans.”32 Ultimately, Scripps identified one of these peptidyl candidates for clinical development. Unfortunately for Merck and Scripps, Integra owned five patents that covered the peptidyl candidate. When Integra became aware of the allegedly infringing use of their patented compounds, they offered a license to Merck. License negotiations failed and litigation ensued. The district court found Merck liable for infringing four of Integra’s patents, finding that the safe harbor of Section 271(e)(1) was not available to Scripps and Merck between 1994 and 1998.33 The CAFC affirmed with respect to the Section 271(e)(1) exemption, with Justice Newman dissenting.
1. The Majority Opinion
The majority opinion reviews the history of the Hatch-Waxman Act, Roche, and Eli Lilly; explains the scope of Section 271(e)(1); and clarifies what constitutes premarket approval activity. According to the majority, in enacting the legislation, the House Committee considered that the premarket activity would be “a limited amount of testing so that generic manufacturers can establish the bioequivalency of a generic substitute.”34 They further note that the House intended that “all that the generic can do is test the drug for purposes of submitting data to the FDA for approval. Thus, the nature of the interference [with the patent holder’s rights] is de minimus [sic].”35
The majority felt that the Scripps-Merck experiments were conducted to identify the candidates to subject to future clinical testing, not to supply information to the FDA. Thus their answer to the question: “[Does] the §271(e)(1) safe harbor reach back down the chain of experimentation to embrace development and identification of new drugs that will, in turn, be subject to FDA approval”36 was a resounding no. The focus of the entire statutory exemption to patent infringement is to provide information to the FDA, and the express objective of the Act was to facilitate the immediate entry of safe, effective generic drugs into the marketplace upon expiration of the corresponding pioneer drug patent. Since the Scripps’ research was not clinical testing to supply information to the FDA, but only general biomedical research to identify new pharmaceutical compounds, it did not fall within the narrow scope of Section 271(e)(1).
The majority recognized that Section 271(e)(1) was being interpreted quite broadly and appear to believe that the results were not what Congress envisioned. They theorized that the implications of the continued broadening of Section 271(e)(1) could mean that holders of research tool patents would lose the benefits of patent protection. As such, the majority decided that extension of Section 271(e)(1) by the courts under the circumstances of Integra would be unwarranted.
2. The Dissent
In her dissent, Newman sua sponte evoked the common law experimental use exception to patent infringement, 37 stating that it should apply to all of the activity conducted by Scripps and Merck before 1998. She believed that the true issue of the case should have been “whether, and to what extent, the patentee’s permission is required in order to study that which is patented.”38 The dissent makes an intriguing distinction between conducting research on a patented invention and using a patented invention to conduct research. Not surprisingly, the dissent’s views on the common law use exemption have been well received by certain groups in the academic and research communities. Accordingly, it is quite possible that the ideas espoused by Newman may resurface in future legislation or litigation to redefine the scope of statutory and common law exceptions to infringement.
The range of activities that are considered reasonably related to FDA approval for generic substitutes of patented drugs or medical devices seems to remain rather broad. As a practical matter, it appears that the Section 271(e)(1) defense will be available only to those planning to market a generic version of a medical device or drug upon the expiration of the corresponding patent. It remains to be seen if this exemption is still an available defense for nongeneric companies, as it was for all of the above defendants. For those involved in basic research and the search for improvements and substitutes for patented medical and biotech inventions, if the safe harbor of Hatch-Waxman is not available, other measures such as licensing, litigation, or acquisition should be considered in the interim. By recognizing the limitations to the Section 271(e)(1) defense, attorneys and their clients will be able to develop successful strategies that will respect the rights of patent holders and leave them less vulnerable to suit.
1. 29 F. Cas. 1120 (1813).
3. 21 F. Cas. 554 (1813).
4. Id. at 555.
6. 733 F.2d 858 (1984).
7. 547 F.2d 1106 (1976).
8. Id. at 1125–26.
9. 733 F.2d 858, 865.
10. 216 F.3d 1343 (2000).
11. Id. at 1348.
12. 331 F.3d 860 (2003).
13. 216 F.3d 1343, 1352.
14. 117 S. Ct. 1040 (1997).
15. 216 F.3d 1343, 1352.
16. 307 F.3d 1351 (2002).
17. Id. at 1360.
18. 496 U.S. 661 (1990).
19. 872 F.2d 402, 406 (1989), citing H.R.Rep. No. 857, 98th Cong., 2d Sess., pt. 2 at 27.
20. 872 F.2d 402, 406.
21. 484 U.S. 439 (1988).
22. 775 F. Supp. 1269 (1991), affd, 991 F.2d 808 (1993).
23. 982 F.2d 1520 (1992).
24. Id. at 1524.
25. 3 F. Supp. 2d 104 (2002).
26. Id. at 108.
27. 199 F. Supp.2d 197 (2002).
29. Id. at 204.
30. 331 F.3d 860 (2003).
31. Id. at 863.
33. After 1998, the defendants formally filed an Investigational New Drug Application with the FDA for the infringing compound.
34. Id. at 866, citing H.R.Rep. No. 857, at 8, reprinted in 1984 U.S.C.C.A.N. at 2692.
35. Id. at 865, citing H.R.Rep. No. 857, at 8, reprinted in 1984 U.S.C.C.A.N. at 2714.
36. Id. at 865–66.
37. The majority pointed out in a footnote in its opinion what it considered the flaws in Newman’s analysis: “In her dissent, Judge Newman takes this opportunity to restate her dissatisfaction with this court’s decision in Madey v. Duke Univ… However, the common law experimental use exception is not before the court in the instant case. The issue before the jury was whether the infringing pre-clinical experiments are immunized from liability via the ‘FDA exemption,’ i.e., 35 U.S.C. § 271(e)(1). The district court did not instruct the jury on the common law research exemption with respect to the Merck’s infringing activities. On appeal, Merck does not contend that the common law research exemption should apply to any of the infringing activities evaluated by the jury. Neither party has briefed this issue to this court. Moreover, during oral arguments, counsel for Merck expressly stated that the common law research exemption is not relevant to its appeal. Judge Newman’s dissent, however, does not mention that the Patent Act does not include the word ‘experimental,’ let alone an experimental use exemption from infringement…Nor does Judge Newman’s dissent note that the judge-made doctrine is rooted in the notions of de minimis infringement better addressed by limited damages.” Id. at 864.
38. Id. at 872.
Pradip K. Sahu is a staff attorney with the 18th Judicial Circuit Court of Illinois in Wheaton, Illinois. He was a clinical intern with the intellectual property law firm Brinks Hofer Gilson & Lione in Chicago when he co-authored this article. He can be reached at 630/407-8896 or email@example.com.
Shannon Mrksich, Ph.D. is a shareholder at Brinks Hofer Gilson & Lione and an adjunct professor at The John Marshall Law School. Dr. Mrksich can be reached at 312/321-4200 or firstname.lastname@example.org. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.