Lab to Market: Use of Patented Subject Matter in Research

1. Lab to Market: Use of Patented Subject Matter in Research Katherine J. Strandburg, J.D., Ph.D. DePaul University College of Law

2. OUTLINE • THE LEGAL LANDSCAPE • TRADITIONAL RESEARCH EXEMPTION - Madey v. Duke III. REGULATORY RESEARCH EXEMPTION - Merck v. Integra IV. POLICY ISSUES FOR NON-PROFIT RESEARCH ENTITIES

3. I. THE LEGAL LANDSCAPE Patent infringement: 35 U.S.C. 271(a): - Without authority - Make, use, offer to sell, sell, import NO INTENT REQUIREMENT NO KNOWLEDGE REQUIREMENT

4. I. THE LEGAL LANDSCAPE Avoid infringement liability: • Get a license • Traditional research exemption • Hatch-Waxman Act regulatory exemption • De facto de minimis exemption (not worth suing) – not in the law! • No independent invention exemption (mostly)

5. II. TRADITIONAL RESEARCH EXEMPTION • Background • Recent case law • Proposals for change

6. II. TRADITIONAL RESEARCH EXEMPTION: BACKGROUND Judicially created exemption Justice Story 1817: “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.”

7. II. TRADITIONAL RESEARCH EXEMPTION: BACKGROUND Case law evolution: • Focus on “philosophical experiments” prong • Commercial/non-commercial distinction • “legitimate business” of the infringer (gov’t)

8. II. TRADITIONAL RESEARCH EXEMPTION: RECENT CASES Federal Circuit: • Narrow interpretation of the exemption • Any commercial purpose (even designing around) Embrex v. Serv. Eng’g • Madey v. Duke – “legitimate business of the university”

9. II. TRADITIONAL RESEARCH EXEMPTION: RECENT CASES Madey v. Duke • Research use of patented free electron laser • “unmistakably furthers the institution’s legitimate business objectives, including educating and enlightening students and faculty participating in these projects” NO EXEMPTION – CERT DENIED

10. II. TRADITIONAL RESEARCH EXEMPTION: RECENT CASES So what? NAS Report – 2003 Empirical study Pervasive working solution is infringement Presumption of “research exemption” Presumption that firms will not sue Are these presumptions still valid?

11. II. TRADITIONAL RESEARCH EXEMPTION: RECENT CASES Anything left of traditional exemption? Integra v. Merck, Newman, J., dissenting:  Madey = research tools • Exemption still exists for design around, study of patented invention, otherwise disclosure is pointless • Justice Story’s second prong! ISSUE NOT PROPERLY PRESERVED DOES ANYONE AGREE?

12. II. TRADITIONAL RESEARCH EXEMPTION: FUTURE PROSPECTS JUDICIAL: • Merck v. Integra: Supreme Court heard last month • unlikely to rule on traditional exemption • May preserve the issue • Will Judge Newman’s viewpoint prevail? • Difficult to preserve the argument • Possibly Supreme Court will open the door

13. II. TRADITIONAL RESEARCH EXEMPTION: FUTURE PROSPECTS STATUTORY: • NAS AND FTC have urged reform • Distinguish research tools from “experimenting on” • Other jurisdictions (Europe, etc.) have “experimenting on” exemption

14. II. TRADITIONAL RESEARCH EXEMPTION: FUTURE PROSPECTS STATUTORY: • AIPLA has proposed a broad experimenting on exemption “making or using the patented subject matter for purposes related to scientific or philosophical inquiry, including to discern or discover (1) the validity of the patent and the scope of protection afforded under the patent; (2) features, properties, inherent characteristics or advantages of the patented subject matter; (3) methods of making or using the patented subject matter; and (4) alternatives to the patented subject matter, improvements thereto or substitutes therefor.” NO COMMERCIAL/NON-COMMERCIAL DISTINCTION

15. II. TRADITIONAL RESEARCH EXEMPTION: FUTURE PROSPECTS STATUTORY: • AAAS has task force working on proposal BUT: Recently proposed bill does not deal with research exemption

16. III. Hatch-Waxman Regulatory Exemption 35 U.S.C. 271(e)(1): Exempts infringement “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.”

17. III. Hatch-Waxman Regulatory Exemption 35 U.S.C. 271(e)(1): Exempts infringement “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.” Statute intended in part to promote generic drug competition after patents expire

18. III. Hatch-Waxman Regulatory Exemption ISSUES: • BREADTH: Which Federal Laws?  DEPTH: What is “reasonably related”?

19. III. Hatch-Waxman Regulatory Exemption: Breadth Eli Lilly v. Medtronics, 496 U.S. 661 Exemption covers the “entire statutory scheme of regulation”, including “medical devices, food additives, color additives, new drugs, antibiotic drugs, and human biological products” Question: Does the exemption cover research tools?

20. III. Hatch-Waxman Regulatory Exemption: Depth Which research is “reasonably related” to development and submission of information? Merck v. Integra • Screening compounds to prevent blood vessel proliferation (tumors) • Federal Circuit: Not exempted b/c pre-clinical (Solicitor General’s amicus brief) How far back does the exemption extend?

21. III. Hatch-Waxman Regulatory Exemption: Depth Merck v. Integra NOTE: Some argued this was a research tool situation – not research tools NOTE: Some argued for Court to consider traditional research exemption – unlikely NOTE: American Council on Education brief argues exemption will render university patents valueless

22. IV. Policy Issues for Non-Profit Researchers Bayh-Dole Act 35 U.S.C. 200 et seq.  Universities retain rights to patents in federally funded inventions IDEA: promote commercialization But Tension! University as patent holder v. University as researcher

23. IV. Policy Issues for Non-Profit Researchers PROCEED WITH CAUTION! • Commercial activity – no traditional exemption? • Defensive use of patents by industry v. looking the other way • Royalties are generally low --$66K per license in 2000, most not licensed • Transaction costs of licensing, tax on research?

24. BIBLIOGRAPHY Integra v. Merck, 331 F.3d 860 (Fed. Cir. 2003) Merck v. Integra, Supreme Court No. 03-1237 - petition, amicus briefs, esp. Solicitor General Madey v. Duke, 307 F.3d 1351 (Fed. Cir. 2002) Eli Lilly v. Medtronic, 496 U.S. 661 (1990) NAS Report , A Patent System for the 21st Century (2004) FTC Report, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy (2003) K.J. Strandburg, What Does the Public Get? Experimental Use and the Patent Bargain, 73 Wis. L. Rev. 81 (2004) (for a review of case law)