Use of Patented Compounds in Drug Research Doesn't Infringe Patent

On June 13, the U.S. Supreme Court unanimously decided in Merck KGaA v. Integra LifeSciences I, Ltd. that the use of patented compounds in most drug development research falls within the “safe harbor” provision of the Hatch-Waxman Act (35 U.S.C. § 271(e)(1)), and therefore is exempt from patent infringement.

However, the Supreme Court’s decision did not address whether the use of patented “research tools” in drug development research also was exempt from patent infringement.

The present case arose from research conducted on certain patented peptides. The German company of Merck KGaA sponsored research at the Scripps Research Institute in San Diego to develop cancer drugs that would block formation of new blood vessels using peptides.

Some of the peptides used in the Scripps research were patented by the Burnham Institute (the patents were acquired by Integra LifeSciences).

Integra sued Merck for patent infringement for its use of the peptides in drug development research. Merck and Scripps defended themselves by claiming (among other things) that the use of the peptides was exempt from patent infringement under the safe harbor provision of the Hatch-Waxman Act.

Integra was victorious: A San Diego jury awarded Integra $15 million in damages for the actions of Merck and Scripps.

After losing in federal district court, Merck appealed to the Court of Appeals for the Federal Circuit (CAFC), which hears appeals of patent infringement lawsuits. A three-judge panel of the CAFC decided that the drug research “safe harbor” from patent infringement applies only to clinical trials that will be reported in a submission to the Food and Drug Administration (FDA). The appeals court ruled, in essence, that only late-stage clinical experiments were exempt from charges of patent infringement.

The CAFC’s decision represented a potentially significant limitation on the Hatch-Waxman Act, which was enacted to insulate drug research from charges of patent infringement so long as the research is “reasonably related to the development and submission of information” to the FDA.

The CAFC decision was welcomed by patent holders, including holders of “research tool” patents, who found the value of their patents enhanced overnight.

Supreme Court’s Ruling

In Merck v. Integra, the Supreme Court disagreed with the CAFC, and in overturning its decision restored (and perhaps even expanded) the breadth of the safe harbor provision of the Hatch-Waxman Act.

Practically speaking, essentially any research on patented compounds that is conducted in furtherance of an FDA submission is exempt from patent infringement. It should be noted that the decision means research is exempt from infringement regardless of whether data from the research is submitted to the FDA.

The Supreme Court’s decision affirms that the use of patented compounds in preclinical experimental studies is protected “at least 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 [Investigational New Drug application] or NDA [New Drug Application].”

Protected activities include preclinical studies pertaining to safety, efficacy and mechanism of action, “even when the patented compounds do not themselves become the subject of an FDA submission.”

Thus, researchers and drug makers are free to use patented compounds in experimental studies that are “reasonably related to the process of developing information for submission under any federal law regulating the manufacture, use, or distribution of drugs.”

Companies and research institutions should bear in mind that research that uses patented compounds and is unrelated to an FDA submission is not necessarily exempt from patent infringement.

However, research using patented inventions other than compounds may not be exempt from patent infringement under the Supreme Court’s decision in this case.

Most prominent among these are “research tools” of various kinds that are frequently used in biotechnology and pharmaceutical research.

The ruling specifically mentioned that it did not consider whether, or to what extent, drug development research that includes the use of patented research tools is similarly exempt from patent infringement.

Examples of this include the use of patented methods of screening compounds or devices and machines used in research. These do not appear to be covered by the Supreme Court’s decision, and therefore may not be exempted from patent infringement.

A better understanding of the effect of the Hatch-Waxman safe harbor on research tools will await further court decisions on such matters.

Winners and Losers

Big pharmaceutical companies are the clear beneficiaries of this decision. The court has reaffirmed the ability to conduct drug discovery research without fear of patent infringement lawsuits, at least for research that utilizes patented compounds.

However, companies conducting research should not approach drug discovery research as though no restrictions exist. As noted above, it is not as clear if research using research tools is also exempted.

Holders of patents claiming compounds are potential losers. The Supreme Court’s decision is a clear signal that companies conducting drug discovery research need not pay up front for using the patented compounds, at least prior to submitting a drug application to the FDA. This may adversely impact licensing of such patents.

However, potential licensees must be mindful of the consequences of conducting research on patented compounds without a license. If the research shows that a patented compound is useful as a drug, the cost of obtaining a license to the patent will be significantly higher once proof of utility has been obtained. Stated another way, it is likely to be much cheaper to license a patented compound sooner rather than later.

Extracting Value From Compound Patents

For patent holders, the Merck decision need not be a roadblock to licensing patented compounds if creative approaches (and persuasion) are used.

One approach for patent holders in licensing patented compounds to drug companies is to obtain a smaller initial payment, with milestones tied to FDA submission and approval. This can be a good solution for the patent holder, which gets at least some return on its research and patenting activities.

It also is a good solution for the licensee, which does not pay a large sum up front, but gets certainty that it will not be precluded from using the patented compound in a drug product, thereby losing a huge investment in time and money. Other deal structures that benefit both patent holder and licensee undoubtedly are possible.

The Merck decision also emphasizes the need to obtain comprehensive and broad patent coverage for compounds (and other inventions), such that others cannot use the patented invention without recognizing a significant downside exists when a license to the patent is not obtained.

Broad patent coverage will increase the likelihood that a potential licensor will not be able to design around the patent, for example, by performing research on a patented compound to develop another compound not covered by the patent but of the same chemical class as the patented compound.

John Van Amsterdam is a shareholder with Wolf Greenfield in Boston involved in patent prosecution, IP transactions and patent interferences in the areas of biotechnology, pharmaceuticals and molecular biology. His areas of expertise include polymer-based and biological-based drug delivery systems, improved immune response inducers, antisense nucleic acid therapeutics, and newly discovered genes for diagnostic and therapeutic uses. He can be reached by email at [email protected] or (617) 646-8233.