Merck KGaA v. IntegraAnalysis of the Supreme Court Decision and Its Impact on Bio-Pharma Collaborations

Timothy J. Shea, Jr.DirectorSterne, Kessler, Goldstein & Fox P.L.L.C.

LES Annual MeetingPhoenix, AZ

October 17, 2005

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Introduction

• Panel Members– Kenneth C. Bass, III

• Of Counsel, Sterne, Kessler, Goldstein & Fox• Primary author of amicus brief by Vaccinex, Inc.

– Steve M. Ferguson• Director, Division of Technology

Development and Transfer at NIH

– Alan Hammond• Chief Intellectual Property Counsel, Invitrogen

Corp.

– Gale F. Matthews• Assistant General Counsel – Patents, Wyeth

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Introduction

• Merck KGaA v. Integra Life Sciences I, Ltd., et al., 125 S. Ct. 2372 (2005)– U.S. Supreme Court - June 13, 2005

• Construed scope of 35 U.S.C. § 271(e)(1)– a.k.a. “FDA exemption”, “FDA safe

harbor”

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Background – FDA Safe Harbor

• 35 U.S.C. § 271(e)(1):“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 . . . 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 . . . .

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Background – FDA Safe Harbor

• Primary purpose of § 271(e)(1) (from legislative history):– Get generic drugs to market sooner

• Direct response to Roche v. Bolar (Fed. Cir. 1984)

– “de minimus” interference with rights of patent holder

– BUT, statutory language not limited to generics

• Merck construed “depth” of safe harbor– i.e., how far upstream in drug development

process exemption extends

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Merck KGaA v. Integra - Facts

• FACTS:– Integra patents directed to “RGD peptides”

• Non-naturally occurring peptides containing Arg-Gly-Asp sequence

– Mid-1980s – Researchers at Burnham Inst.:• Discovered RGD peptides bind αvβ3 receptors on

integrins → promote cell adhesion

• Filed patent applications to RGD peptides, receptors, and methods of mediating cell attachment

• Formed Telios Pharmaceuticals– Subsequently acquired by Integra

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Merck KGaA v. Integra - Facts

• FACTS:– Late 80s – Scripps (Cheresh):

• blocking αvβ3 receptors inhibited angiogenesis

– 1988 – Research Support Agmt• Merck funded Cheresh Lab in exchange for right to

license discoveries– Cheresh to screen RGD peptides provided by Merck– FDA submission was clear goal– Led to identification of lead RGD peptide

– 1995 – Broader Research Funding Agreement • Scripps to screen derivatives of lead peptide• Scripps to screen RGD mimetics (non-peptide NCEs)

– 1996 – Merck moves forward with preclinical testing

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Merck KGaA v. Integra – Dist. Ct.

• District Court Suit– Integra sued Scripps/Cheresh (direct

infringement) and Merck (inducement)– Scripps and Cheresh dropped– Jury trial– Merck raised § 271(e)(1) as defense– Jury found infringement and research not

exempt• Awarded $15M in damages

– Merck’s JMOL denied– Merck appealed

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Merck KGaA v. Integra – Fed. Cir.

• First Fed. Cir. case to address depth of FDA safe harbor exemption– Previous cases dealt with breadth issues

• Merck: “Rational Predicate” Test:• safe harbor covers all drug development activity

that is “rational predicate” to generating info for submission to FDA

– Includes tests to determine whether to proceed with particular drug

• Why would Congress exempt culmination of research, but not activity leading up to it?

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Merck KGaA v. Integra – Fed. Cir.

• Integra: “Proximate Relation Test”• Statutory language requires proximate

relationship between activity and FDA submission

– does not encompass the search for drugs

– Screening peptide mimetics not required for FDA approval

– Scripps not doing FDA experiments

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Merck KGaA v. Integra – Fed. Cir.

• Federal Circuit:– Issue: Whether safe harbor covers

development and identification of new drugs– Characterized Scripps/Cheresh research as

“preclinical”

– Considerable weight given to legislative history

• Focus on generic drugs • de minimus inteference

– Interpreted terms “solely” and reasonably as placing some limit on the exemption

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Merck KGaA v. Integra – Fed. Cir.• Holding: exemption not applicable

• Need reasonable relationship– Between activity and FDA approval process– Focus on safety and effectiveness

• Rejected Merck’s rationale predicate test

• Distinguished drug discovery– “The FDA has no interest in the hunt for drugs that may or may not later

undergo clinical testing for FDA approval.”

• Does not encompass all experimental activity – “§ 271(e)(1) does not globally embrace all experimental activity that at some

point, however attenuated, may lead to an FDA approval process.”

• Noted Merck’s test would vitiate rights of owners of biotech research tool patents

• Also vacated and remanded damages award

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Merck KGaA v. Integra – Supreme Court

• Politically charged issue– Intense political/social pressure to reduce

drug costs– Pressure from Big Pharma re: stacking

royalties• Research tool patents constrain input into drug

delivery pipeline

– Academic/Philosophical Arguments• Research tool patents stifle basic research• Concern with propriety of patenting human genes

• 18 Amicus Briefs– 2/3 for Merck

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Merck KGaA v. Integra – Supreme Court

• Supreme Court Opinion– Reversed and remanded– Unanimous (Scalia)

• Issue: “[W]hether uses of patented inventions in preclinical research, the results of which are not ultimately included in a submission to the FDA, are exempted from infringement by 35 U.S.C. § 271(e)(1).”– Changed focus of case

• Noted preclinical data relevant to IND

• Noted that goal of research collaboration was IND

• Factual background mentions use of patented RGD peptides in screening of peptide mimetics– But S. Ct. did not see as research tool case (FN7)

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Merck KGaA v. Integra – Supreme Court

• Interpreted statute as giving “wide berth” to use of patented drugs in activities related to FDA approval– Patented drugs only?

• Safe harbor encompasses all usesof patented inventions – So long as reasonably related to the

development and submission of anyinformation under the FDCA

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Merck KGaA v. Integra – Supreme Court

• Can include preclinical studies • Can be for purposes other than testing

safety (e.g. mechanism of action)• Phase of research not determinative:

– “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.”

• Research does not have to conform with GLPs to fall under safe harbor

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Merck KGaA v. Integra – Supreme Court

• “Basic research” not exempt– What is basic research?“Basic scientific research on a particular

compound, performed without the intent to develop a particular drug or a reasonable belief that the compound will cause the sort of physiological effect the researcher intends to induce is surely not [exempt].”

- Research tools per se not addressed (See FN7)

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Merck KgaA v. Integra – Supreme Court

• Experimentation on drugs not ultimately subject to FDA submission can be exempt

• Use of patented compounds in experiments not ultimately submitted to FDA can be exempt

• § 271(e)(1) allows for trial and error

• “Where a drugmaker has a reasonable basis for believing that a patented compound may work, through a particular biological process, to produce a particular physiological effect, and uses the compound in research that, if successful, would be appropriate for submission to the FDA, that use is ‘reasonably related’ to the ‘development and submission of information under . . . Federal law.”

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Merck KGaA v. Integra – Current Status

• Remanded to Fed. Cir. to consider evidence presented at trial under jury instruction– D. Ct. instruction consistent with

Supreme Court opinion

• Brief of Appellant due today!

• Fed. Cir. seeking amicus briefs

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Merck KGaA v. Integra Impact on Bio-Pharma Licensing• Case has had impact• Benitec v. Nucleonics (No. 04-174 D.Del.)

– Benitec provides gene silencing products and services

– Brought suit against Nucleonics, Genscript and Ambion for patent infringement

• `099 patent covers RNAi constructs and methods of using to delay or repress target gene expression

• Covers both final products and use as research tool– Benitec settled with Genscript and Promega when

they took licenses– Benitec filed voluntary dismissal in Sept. against

Nucleonics on ground no case or controversy in view of Merck v. Integra

• Counterclaims dismissed without prejudice– Nucleonics has appealed dismissal of claims against

it!

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Merck KGaA v. IntegraImpact on Bio-Pharma Licensing• What about Benitec licensees?

– Need for license if not infringing?• Uses not clear

• Topics for Panel Discussion– How is decision viewed in industry?

• By Biotech? By Pharma?• Dramatic change? Wait for Fed. Cir. Decision?• Where is the line now? What is the “basic research” that is not exempt?

What is the value of research tool patents?• What will be net effect on innovation ? More or less?

– What effect has there been on existing licenses?• Push back by existing licensees? Why or why not?• Reach through claims?

– Changes to negotiation/drafting strategies?• Hybrid agreements?• Less patenting/ more trade secrets?

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Merck KGaA v. Integra

Thank You

Timothy J. Shea, Jr.Director

Sterne, Kessler, Goldstein & Fox, P.L.L.C.(202) 371-2679

tshea@skgf.com