Brazil has threatened to break a patent for Kaletra, one of three anti-retrovirals made by Abbott Laboratories Inc. Brazil said the price of Abbott's combination Lopinavir and Ritonavir pill is so high it created a public health threat. Brazil is encouraging other countries to use the World Trade Organization's rules on patents to challenge pharmaceutical giants in their pricing policy on AIDS drugs

The threat is credible and appears to be legal under the World Trade Organization's Doha Declaration (an amendment to the WTO's TRIPS agreement on trade-related intellectual property rights).

The Doha Declaration on the TRIPS Agreement and Public Health, adopted by the WTO Ministerial Conference in November 2001, affirms that the TRIPS Agreement should be interpreted and implemented so as to protect public health and promote access to medicines for all. The Declaration gives the right of WTO Members to make full use of the safeguard provisions of the TRIPS Agreement to protect public health and enhance access to medicines.

The WTO Declaration explicitly states that "intellectual property protection is important for the development of new medicines" and member countries made an unequivocal point of "reiterating our commitment to the TRIPS Agreement." Furthermore, the WTO members agreed to address the HIV/AIDS pandemic while "maintaining our commitments in the TRIPS Agreement." Article 31 (f) of the TRIPS Agreement stipulates that a compulsory license must be issued predominantly for the supply of the domestic market of the Member granting the license. Anti-retroviral virus treatment for HIV was the main impetus for this initiative.

Health Minister Humberto Costa said his country's actions were not primarily intended to set an example but to save the government millions on health costs. Oh, is that right? So the drug is available and Brazil could pay for it -- they would just like to choose not to do so. This isn't really a public health threat, only a government that would like to get out of paying for healthcare for its citizens. I wish I could choose my own payments for my bills.

In recent years, Brazil has repeatedly managed to get price reductions on drugs from big pharmaceutical makers by threatening to break patents. Brazil now says it would save US$54 million (euro44.4 million) annually by creating a generic equivalent of the pill.

Brazil is also in negotiations with two other makers of AIDS drugs, Merck & Co. and Gilead Sciences Inc. Brazil is seeking permission from the two companies either to produce generic equivalents or buy the drugs at discounted prices.

Abbott's combination Lopinavir and Ritonavir pill, Merck's Efavirenz and Gilead's Tenofavir are essential to Brazil's AIDS program, Costa said. The drugs would cost Brazil US$169 million (euro140 million) this year, or 67 percent of its annual budget for imported AIDS drugs. Not taken into account is that Abbott is already supplying drugs to Brazil at a loss.

On its face, this seems like a good outcome for people to access to cheap or free medicines. However, nothing in life is ever free and trying to kill the goose that laid the golden eggs will only bring short-term gain with long-term pain.

Pharmaceutical companies rely on government-granted patents to protect their huge investments in researching and developing new drugs. It takes 10-15 years and costs $800 million on average to bring a new medicine to market. If some countries try to break patents to get out of paying, guess who's going to foot the bill?

Without patents to protect all the inventions necessary to develop a drug for a limited time, others could simply copy the drugs immediately, offering their versions at a reduced price since they did not incur the high costs to develop the drug. This would seriously impact the pharmaceutical companies' ability to recoup their costs and reinvest in other research projects.

Brazil already legally makes copycat versions of several AIDS drugs, and has successfully forced international pharmaceutical companies to lower prices in the past by threatening to break patents. And for a country so concerns for it's citizens health, Brazil doesn't seem to mind adding a 9.6% import tariff for completed medicines and essential medical products. Apparently, it's not a public health threat unless the government is footing the bill.

Granted, it's the right of any nation to raise revenue but don't try to cloak yourself in some type of do-gooder image when you're really out to just save a buck. While the leaders of these countries are happy to lobby for more aid and demand that pharmaceutical companies offer their drugs at cost, they routinely tax medicines until they are unaffordable for the poor. These domestic taxes and tariffs directly prevent millions of their own citizens from receiving treatment.

Attacking patents and keeping high import tariffs only serves to hurt the sickest and poorest citizens in already poor nations. Let’s hope that the Brazilian government understands that it must pay it’s fair share.

Did Pfizer get punked by a nonprofit? The U.S. Patent and Trademark Office (USPTO) issued a ruling on one of several patents that Pfizer holds on Lipitor (atorvastatin), its top-selling cholesterol drug. In the reexamination proceeding initiated last year by the Public Patent Foundation ("PUBPAT"), the USPTO rejected all 44 of the claims of U.S. patent 5,969,156 when it ruled that Pfizer's arguments for securing the patent in 1999 were invalid.

Each of the 44 claims of the '156 patent claim crystalline atorvastatin, known by the chemical name [R-(R*,R*)]-2-(4-fluorophenyl)-beta,delta-dihydroxy-5-(l-methylethyl)- 3-phenyl-4-[(phenylamino)carbonyl]-1 H-pyrrole-1-heptanoic acid hemi calcium salt. The claims of the '156 patent differ only in having limitations regarding either (a) X-ray powder diffraction values, (b) solid-state 13C nuclear magnetic resonance chemical shift differences, or (c) moles of water. PUBPAT's Request for Re-examination alleged that the claims of the '156 patent are anticipated by U.S. patents 5,273,995 and 5,686,104 as having disclosed crystalline atorvastatin.

The USPTO has now rejected the claims as unpatentable under 35 U.S.C. 103(a) over US 5,273,995 (‘995) and/or US 5,686,104 (‘104). The Examiner contends that the ‘995 patent teaches a specific enantiomer of the racemic atorvastatin although admitting that it is not absolutely clear if the compound disclosed in the ‘995 patent is amorphous or crystalline. However, in col. 15, line 51, the word "recrystallized" is recited, which the USPTO says implies that the compound was initially crystallized. On this basis, the Examiner assumed that the compound in the ‘995 patent existed in a crystalline form unless Pfizer can show otherwise.

Likewise, the ‘104 patent teaches essentially the same compound of ‘995 (col. 2, lines 60-63), however in a more stable oral pharmaceutical composition. The ‘104 patent is silent to the crystallinity of the atorvastatin compound used and hence may be redundant of ‘995. Pfizer may be able to show that the compound in the ‘104 patent is different from that of ‘995 in terms of amorphism or crystallinity.

However the USPTO indicated that the more pertinent question is whether or not the compounds of the ‘104 patent and/or the ‘995 patent are different crystalline forms of atorvastatin compared to those of the current patent. If the former is true then Pfizer needs to make a showing over both the compounds (provided that they are crystalline, if they are amorphous, no showing is needed), alternatively, if the latter is true then only one showing is needed. The USPTO also took note of US patent 6,605,636, where the compound in US patent 5,273,995 is referred to as crystallized.

So, it's not over yet and generics won't show up at the local pharmacy tomorrow. This is just an obviousness rejection (sec. 103) and the presumption can be rebutted. Pfizer will now have two months to respond to the Patent Office's rejection while PUBPAT can no longer participate in the process. It is worth noting, though, that third party requests for reexamination, like the one filed by PUBPAT, result in having the subject patent either modified or completely revoked about 70% of the time.

For instance, the '156 patent attempts to distinguish itself over the prior art by stating it discloses "atorvastatin in a pure and crystalline form to enable formulations to meet exacting pharmaceutical requirements and specifications." even though none of the claims contain any limitation regarding pharmaceutical requirements or specifications. It is possible that the patent will eventually emerge with some additional limitations added to the claim language.

The ruling doesn't affect the company's two most important patents on atorvastatin, which give Pfizer the exclusive right to Lipitor through March 2010 and June 2011, respectively. However, these patents are the subjects of litigation with generic pharmaceutical company Ranbaxy Laboratories Ltd. The '156 patent at issue with the current re-exam was set to expire in 2017, thus extending the useful patent protection of the drug (keep in mind that Lipitor is set to become the world's first $10-billion-a-year drug so the stakes are extremely high).

Although the rejected patent is one of five patents listed by Pfizer with the U.S. Food and Drug Administration (FDA) for atorvastatin, it is the only one asserted by Pfizer in roughly two dozen patent infringement lawsuits filed last year against web sites selling generic atorvastatin to Americans. Two are under review by a Delaware court and the remaining two have never been asserted by Pfizer against any competitor to Lipitor.

The Public Patent Foundation (“PUBPAT”) is a not-for-profit legal services organization that claims to represent "the public's interests against the harms caused by the patent system, particularly the harms caused by wrongly issued patents and unsound patent policy." It's not clear who may be really behind this (or providing the funding for it) but it received seed funding from the Echoing Green foundation. You can see the Board of Directors here.

Download the USPTO Office Action in Ex Parte Reexamination here.

More information about the reexamination of Pfizer's Lipitor patent can be found at PUBPAT.

Download the PUBPAT Re-examination Request here.

The TechnoLawyer Blog's Eighth Annual TechnoLawyer @ Awards where announced for best products, services, and Web sites in a variety of categories.

While the Patent Baristas didn't win as Best Coffee-Themed, Bio-Pharma Patent Law Blog, our congrats go out to Dennis Crouch's Patently-O: Patent Law Blog for Favorite Practice Area Blog (definitely one of our favorites). Finalists included the terrific beSpacific by Sabrina Pacifici and Broc Romanek’s corporate & securities law blog, The CorporateCounsel.net blog (and yes, we always seem to forget the "the" in the URL).

See the whole enchilada here.

A U.S. District Court jury in Delaware yesterday dealt a blow to Boston Scientific Corp. finding that it infringed two cardiac stent patents of its main competitor in the field, Johnson & Johnson. BSX could be forced to pay damages to J&J although the exact amount will not be set until August at a separate trial.

Morgan Stanley expects that it will cost between $1 billion and $1.5 billion but the amount could triple if a court later finds the infringement was willful and awards treble damages. BSX said it will probably appeal the verdict.

Stents are tiny wire-mesh tubes used to prop open arteries after they have been cleared of blockages through a procedure known as angioplasty. The latest versions from both companies are drug-coated stents, which slowly release medication that prevents vessels from reclogging after procedures to open them up.

The benefits apparently last for years, and even very big blockages in very small vessels can be fixed this way. The devices work so well that when an older stent clogs, it's better to put a new drug-coated one inside it than to treat the problem with radiation as has been done in the past.

Johnson & Johnson argued that Boston Scientific products, including Taxus drug-coated cardiac stents, are based on stent designs it licensed partly from Julio Palmaz, an academic physician in Texas. Apparently, Boston Scientific turned down Palmaz's $40 million request in the early 1990s so he went to Johnson & Johnson.

The jury found in favor of Johnson & Johnson's claims that its patent rights to the Palmaz patent were violated. It also sided with Johnson & Johnson's claim that Boston Scientific's newest bare-metal stent design, called Liberté, violates another patent related to flexible stents.

The dispute dates back to 1997 when Johnson & Johnson claimed that a stent Boston Scientific previously sold violated the Palmaz patent. In 2000, a jury awarded Johnson & Johnson $324 million in damages but the award was set aside.

Meanwhile, BSX is now pursuing its own patent infringement case against J&J, leading some observers to predict an eventual settlement. However, BSX could face a court injunction to pull its best performing stent off the market, the Liberté. While difficult, it would not be impossible for J&J to prevail.

Boston Scientific last year reported $5.6 billion in revenue, with nearly half of it driven by sales of Taxus drug-coated cardiac stents, the focus of Johnson & Johnson's patent-litigation claims.

The U.S. Supreme Court agreed to consider limiting antitrust suits against pharmaceutical companies, computer makers and other patent holders. The justices said they will hear an appeal by Illinois Tool Works Inc., which is trying to block a lawsuit over devices it sells for use in industrial printers.

On Jan. 25, 2005, the U.S. Court of Appeals for the Federal Circuit issued a decision in Independent Ink Inc. v. Illinois Tool Works Inc. that held that in certain circumstances, patent and copyright owners will be presumed to possess market power. The concept of market power plays a crucial role in most antitrust cases. Generally, it means the ability to raise prices above competitive levels without sacrificing profits, e.g., by losing significant sales to competitors. Monopoly power represents a heightened form of market power and, as a practical matter, exists only where a single company controls the vast majority, if not all, of the sales in a market.

In most instances, to establish a cause of action under Section 1 of the Sherman Act (which condemns any concerted action between or among economically independent actors with an overall anti-competitive effect), the plaintiff must prove that the parties to the concerted action possess market power. This follows from the notion that parties lacking market power simply cannot force an anti-competitive result on the market. If a company without market power tries to increase its prices substantially above the market price, customers will defect to competitors’ products.

In an action brought under Section 2 of the Sherman Act (which prohibits deliberate attempts to obtain or maintain monopoly power), the plaintiff must prove that the defendant has an even higher degree of market power than what would suffice under Section 1, that is, either monopoly power or something dangerously close to it.

IP protection in patents and copyrights are often described as monopolies but these are not necessarily economic monopolies in the marketplace. After all, just because you have the exclusive right to sell a bad product doesn’t mean the marketplace must buy it instead of better alternatives. The patent grant may or may not contribute to a market monopoly but it’s not a certainty and each instance must be looked at on a case-by-case basis.

In 1962, the Supreme Court in United States v. Loew’s Inc. the “block-booking” of motion pictures, where studios would only license rights to copyrighted films in a package, as illegal tying. The Court held that “[t]he requisite economic power is presumed when the tying product is patented or copyrighted.” The Court relied on its 1947 opinion in International Salt Co. v. United States, a case in which the defendant tied the lease of a patented machine to the lessee’s purchase of an unpatented product. But International Salt doesn't mention market power as a necessary element of a tying claim nor does it describe a market power presumption due to ownership of a patent.

In 1988, Congress amended the Patent Act to provide that parties asserting the defense of patent misuse must affirmatively prove that the patentee has market power if the misuse claim rests on a tying theory. This seems to have removed any market power presumption that may have existed under the misuse doctrine.

The present case involves claims of "tying," which is when a company illegally conditions the sale of a sought-after product on the purchase of a second item. Tying is illegal when the seller has market power in selling the desired product and, therefore, can raise prices on that product without losing sales. Here, the patent owner Illinois Tool holds a patent for a device used to print bar codes on cartons. Trident's standard licensing agreement requires printer manufacturers also to buy their ink from Trident. The contract also prohibits refilling the printheads. Independent Ink Inc., which sells ink that can be used in Trident's printheads, sued, saying the licensing agreement is an illegal tying arrangement.

The U.S. Court of Appeals for the Federal Circuit said courts should presume that a company with a patent has market power in that field. In its appeal, ITW said the appeals court's approach "is the very embodiment of formalism over economic substance." ITW said that in many cases the patented product has competition that keeps down prices.

The District Court in California dismissed both the Section 1 and Section 2 Sherman Act claims on the basis that Independent Ink failed to show that Illinois Tool had the Section 1 statutorily required market power over the tying product or the required monopoly power under Section 2.

Acknowledging its mandate to follow Supreme Court precedent, the Federal Circuit made clear that unless and until changed by the Supreme Court or the legislature, the precedent was binding, stating:

The fundamental error in all of defendants’ arguments is that they ignore the fact that it is the duty of a court of appeals to follow the precedents of the Supreme Court until the Court itself chooses to expressly overrule them. This message has been conveyed repeatedly by the Court. The Court’s “decisions remain binding precedent until [it] see[s] fit to reconsider them, regardless of whether subsequent cases have raised doubts about their continuing vitality.” Hohn v. United States, 524 U.S. 236, 252-53 (1998). “If a precedent of th[e] Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to th[e] Court the prerogative of overruling its own decisions.” Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484 (1989). Even where a Supreme Court precedent contains many “infirmities” and rests upon “wobbly, moth-eaten foundations,” it remains the “Court's prerogative alone to overrule one of its precedents.” State Oil Co. v. Khan, 522 U.S. 3, 20 (1997). None of the authorities that defendants present, whether it be the language of Walker Process, the concurrence in Jefferson Parish, or the dissent from denial of certiorari in Data General, constituted an express overruling of International Salt or Loew’s. We conclude that the Supreme Court has held that there is a presumption of market power in patent tying cases, and we are obliged to follow the Supreme Court’s direction in this respect. The time may have come to abandon the doctrine, but it is up to the Congress or the Supreme Court to make this judgment.

However, addressing what it characterized as an unresolved issue, the Federal Circuit held that the presumption of market power was rebuttable, permitting the patent owner the opportunity to overcome it. As well, the CAFC held that the presumption of market power does not create a presumption of monopoly power, which is a requirement of Section 2, stating that:

The presumption of illegality in patent tying arises in section 1 cases. Neither International Salt nor Loew’s dealt with section 2 of the Sherman Act. See Int’l Salt, 332 U.S. at 393 & n.1; Loew’s, 371 U.S. at 39 & n.1. To establish a monopolization claim under section 2 of the Sherman Act, there must be monopoly power in the relevant market and the willful acquisition or maintenance of that power. Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP, 124 S. Ct. 872, 878-79 (2004). To establish an attempted monopolization claim, plaintiff must demonstrate that the defendant had specific intent to monopolize a relevant market and a “dangerous probability of success.” Spectrum Sports Inc. v. McQuillan, 506 U.S. 447, 455 (1993). It follows that in section 2 cases a definition of the relevant market and consideration of the defendant’s power within that market are required. Id. at 455-56; Walker Process, 382 U.S. at 177-78.

In this case, the alleged monopolization is over the tied product, the ink, not the tying product, the printhead technology. The patent tying cases do not create any presumption that market power over the tying product confers the degree of market power over the tied product necessary to establish a monopolization or attempted monopolization claim. See Fortner II, 429 U.S. at 619. In section 2 cases, the plaintiff bears the burden of defining the market and proving defendant’s power in that market. See Spectrum Sports, 506 U.S. at 455-56. As the district court found, plaintiff makes only the conclusory allegation of a geographic market without supporting economic evidence. Indep. Ink, 210 F. Supp. 2d at 1175. Such conclusory statements are not sufficient to define a relevant market. Morgan, Strand, Wheeler & Biggs v. Radiology, Ltd., 924 F.2d 1484, 1490 (9th Cir. 1991). Therefore, there is no genuine issue of material fact as to the section 2 claim and summary judgment was properly granted.

But this is not the case under Section 1 of the Sherman Act. Thus the Section 1 Sherman Act cause of action was sustained and remanded for further fact finding and the dismissal of the Section 2 Sherman Act claim was affirmed.

The Federal Circuit’s decision in Independent Ink v. Illinois Tool Works, Inc. is available here.

AIPLA amicus brief is here.

ABA amicus brief is here.

IPO amicus brief is here.

After just giving a talk this past week on international strategic alliances, I was struck by the recent Forbes article on the increasing number of big pharmaceutical companies increasingly forming alliances with biotech firms. It seems that almost 30% of big pharma's revenue now comes from products licensed from smaller biotech firms. This shows the powerful force that biotech has become in the world of targeted drug therapies.

But, figuring out how to make an alliance work is another matter. At least one-third of alliances between big pharma and biotechs are canceled or renegotiated, and less than 40% of alliances meet their stated objectives, according to a report by Deloitte & Touche.

Still, there does seem to be increased activity since the number of alliances last year between big pharma and biotech rose to 502, from just 69 in 1993, netting biotech companies a combined $11 billion last year. There's also been a boomlet of about 750 biotech-biotech alliances between 2000 and 2003.

Of the 126 biotech companies with revenues less than $500 million surveyed by Deloitte, nearly three-quarters said they plan to increase the number of alliances in the next three years. For 59% of firms surveyed, alliances are part of their core strategy.

So, what makes for a successful alliance? Biotech firms surveyed described four key factors:

* Commitment from senior management
* Favorable deal terms
* Market depth in particular therapeutic areas
* Firm alignment with the partner's core strategy

Since big pharma and biopharma are competing for alliances to make up for patent expirations and depleting pipelines, small biotechs are choosing from an average of eight candidates for each alliance deal and at earlier stages of product development.

As I always tell clients, you need to develop a patent and licensing strategy that is consistent with the company’s business plan. That is, look for a strategic partner that advances the company's goals and not just provides licensing revenue back to the licensor or you'll find yourself without a "next phase" in the plan. And while you always expect the best, you need to plan for the worse in case things go wrong. This includes setting up various exit strategies so you're not tied to a bad deal.

But most of all, remain flexible. Many times, I've had to work with clients to re-do a deal because things did not go well, such as regulatory approval or clinical trials. I've had to re-negotiate the licensing terms of more than one deal where the licensee finds out the payments are more than the market can bear. Often, it is when the company goes to the next round of financing and they find that no one will invest because of the royalty rates.

Then there are the tax ramifications. In globally-competitive development, manufacture, sales, or partnership agreements, there can be some overall tax savings or deferral (or improvement to the company balance sheet) through cross-border shifting of income, risk, and/or control. But, as they say, offshore tax strategies are hard to do properly -- you must establish residence for central management and control in an offshore jurisdiction.

Some of the substantial elements to establishing residence:

(a) a majority of directors are non-residents; (b) director’s meetings are held outside of current country; (c) licensing entity staffed with employees who have authority to direct operations; (d) books and records are maintained offshore; (e) all contracts are signed by offshore staff; and (f) day-to-day operations conducted by offshore staff.

And like they say, these are trained experts; don't try this at home without adequate supervision.

Janssen Pharmaceutica Products, L.P. (a subsidiary of Johnson & Johnson) and Synaptech filed suit against Barr Laboratories Inc., for patent infringement relating to Razadyne (galantamine hydrobromide), 4 mg, 8 mg, and 12 mg Tablets, formerly Reminyl. The action was initiated under the Hatch-Waxman Act as an infringement of a patent on the compound that expires in December 2008. They also filed against Teva Pharmaceutical Industries Ltd. Mylan Laboratories Inc., Dr. Reddy's Laboratories Ltd. and Alpharma Inc.

Barr filed an Abbreviated New Drug Application (ANDA) with the US Food and Drug Administration (FDA) for Razadyne tablets on February 28, 2005, the first day that an ANDA containing a Paragraph IV certification could be submitted based on the expiration of the New Chemical Entity (NCE) exclusivity on the product.

Barr received notification from the FDA of the application's acceptance for filing in April 2005. Following receipt of notice from FDA, Barr notified Janssen, the New Drug Application (NDA) holder, and Synaptech, the patent owner, of Barr's challenge to the patents protecting Razadyne.

Razadyne, formerly Reminyl, is a tertiary alkaloid that has been extracted from plant sources and is now synthesized for use in the treatment of mild to moderate Alzheimer's disease (AD). Galantamine acts both as a reversible competitive inhibitor of acetylcholinesterase (AChE) and as an allosteric modulator of nicotinic acetylcholine receptors.

More here.

Shares of Vicuron Pharmaceuticals increased 79% to an all-time high of $28.21 Thursday after Pfizer agreed to buy the biotechnology company for $1.9 billion, or $29.10 a share in cash (an price 84% premium with a market capitalization of about $1 billion).

The trend in Big Pharma seems to be one of buying biotech companies with products in late stages of development. Vicuron focuses largely on anti-infectives, with two New Drug Applications under review at the FDA. One, anidulafungin, is intended to treat fungal infections and recently showed superiority to fluconazole in a Phase 3 study. The other compound, dalbavancin, is an antibiotic targeted toward gram-positive infections. The present NDA for dalbavancin covers skin and soft-tissue infections (also called SSTIs).

Ever since penicillin, the first known antibiotic, was discovered in 1928 by Fleming, a small percent of the bacterial population is naturally resistant to antibiotics and drug pressure is increasing this percentage. In 1987 only .02 percent of bacteria were penicillin–resistant. By 2002, 16.5 percent were. Staphylococcus resistance is now at 40 percent. Resistance to Vancomycin, the most powerful of the antibiotics and so prescribed only as a last resort, had reached 12 percent by 1994.

All antibiotics are derived from the same 15 or 16 compounds. With the average cost of developing a new drug now at $500 million, there is a disincentive to developing new antibiotics. In 2000, $26.4 billion was spent on drug research and of that, only 14 percent was toward new anti-infectives. Within that category, most money is directed toward finding drugs effective against HIV. Because few new antibiotics have been discovered, newer ones tend to be held in reserve for use against resistant germs, thus limiting their market potential.

So, will other Pharmas follow suit? Drug companies seem to have plenty of cash (see our earlier discussion of the tax repatriation perk). Some companies, like Merck and AstraZeneca, will probably follow with their own deals given their shortage of big hits in the pipeline. But, it's probably not going to be a wave of M&A's washing across the continent. Many will look to increasing development partnerships and collaborations with smaller companies (why buy when you can rent?).

Still, the pipelines of new drugs that the big drug makers maintain are too thin to support their present valuations. Drug companies need lots of new drugs in order to maintain such amazing profitability and pick up slack for those drugs going off patent. This should make smaller, biotech companies look plenty attractive.

AstraZeneca has been fined £60m (about $73 million) by the European Commission for illegally trying to prevent generic competition to its best-selling ulcer drug Losec. After a six-year investigation, the EC said the firm gave incorrect information about when the drug was first approved, enabling the firm to extend the patent's life.

Losec (omeprazole) is a proton-pump inhibitor for acid-related diseases, which is the world's largest-selling gastrointestinal product market. Losec was launched in its first markets in 1988. While still under patent protection in the 1990's, Losec was one of the biggest-selling prescription drugs in the world, with sales of around $6 billion a year.

In Europe especially, everyone feels a natural right to health and medicine, a sort of public good, naturally intended for the free circulation and use. In 1855, Carlo Farini, a philanthropic physician and scientist, investigator of tropical diseases, prevailed over the Piemontese patent law, which would become the Italian patent law, prohibiting the patentability of pharmaceutical inventions (which remained in force until 1978). This doesn't mesh well with the incentive-based patenting system designed to spur innovation in the first place.

I try to remind clients that a patent isn't a license to do anything you want in the marketplace. This was made clear by the U.S. Supreme Court long ago when it warned:

“…the possession of a valid patent or patents does not give the patentee any exemption from the provisions of the Sherman Act beyond the limits of the patent monopoly.”

U.S. v. Line Material Co., 333 US 287 (1948)

Some say AstraZeneca got off easy since the Commission has the ability to impose a fine equivalent to 10% of a company's annual sales if it is found guilty of anti-competitive actions. AstraZeneca said it had acted in good faith when it sought to extend the patent and would appeal against the verdict in the EU's Court of Justice.

More here.

While the U.S. Supreme Court's opinion did not extend the statutory research use exemption to patented research tools under 35 U.S.C. ss.271 (e)(1) in Merck KGaA v. Integra LifeSciences I, Ltd . (2005 WL 1386324 (U.S.)), the Court unanimously ruled for a broader interpretation of the exemption from patent infringement for use of 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." The Court specifically noted that patented "research tools" were not part of that interpretation.

Some lawyers for these companies also said it was hypocritical of drug companies, which constantly assert the importance of strong patent protection in spurring innovation, to argue that they should be permitted to infringe upon patents held by others.

The Supreme Court said in a footnote that this case was about research using patented drugs themselves, not about tools used to study those drugs. Therefore, it did not address whether drug companies could use research tools without worrying about patents.

This case involved the question of whether uses of patented inventions in preclinical research, the results of which are not ultimately included in a submission to the Food and Drug Administration (FDA), are exempted from infringement by 35 U. S. C. §271(e)(1). While it is generally an act of patent infringement to “mak[e], us[e], offe[r] to sell, or sel[l] any patented invention . . . during the term of the patent therefore,” the Drug Price Competition and Patent Term Restoration Act of 1984 provides:

“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) . . .) 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 . . . .”

The clause permits drug companies to infringe on patents "solely for uses reasonably related to the development and submission of information" to the Food and Drug Administration. But it is not specifically restricted to generic drugs, so there have been questions about how far it extends.

The appeals court that handles patent cases ruled in 2003 that the exemption should be narrow, covering, in effect, clinical trials but not earlier work like test-tube experiments to determine which of several compounds might be the best drug candidate.

Now, the Supreme Court ruled that the exemption applied to more than clinical trials. The Court stated that:

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 “reasonably related to the development and submission of information” to the FDA. It does not follow from this, however, that §271(e)(1)’s exemption from infringement categorically excludes either (1) experimentation on drugs that are not ultimately the subject of an FDA submission or (2) use of patented compounds in experiments that are not ultimately submitted to the FDA. Under certain conditions, we think the exemption is sufficiently broad to protect the use of patented compounds in both situations.

...

We decline to read the “reasonable relation” requirement so narrowly as to render §271(e)(1)’s stated protection of activities leading to FDA approval for all drugs illusory. Properly construed, §271(e)(1) leaves adequate space for experimentation and failure on the road to regulatory approval: At least 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 to include in a submission to the FDA, that use is “reasonably related” to the “development and submission of information under . . . Federal law.” §271(e)(1).

The use of a patented compound in experiments that are not themselves included in a “submission of information” to the FDA does not, standing alone, render the use infringing. The relationship of the use of a patented compound in a particular experiment to the “development and submission of information” to the FDA does not become more attenuated (or less reasonable) simply because the data from that experiment are left out of the submission that is ultimately passed along to the FDA. Moreover, many of the uncertainties that exist with respect to the selection of a specific drug exist as well with respect to the decision of what research to include in an IND or NDA.

The decision means that drug companies can do much of the laboratory, animal and human testing needed to win approval of a drug even if the new drug would infringe on the patent on another product. However, the new drug could not be sold until the patent on the other drug expired.

The Supreme Court sent the case back to the appeals court for reconsideration in light of the new ruling.

Seth Godin, listed as an author, entrepreneur and agent of change, recently published his thoughts that Small is the New Big. He argues that while big used to matter, small is now where it's at. [Disclaimer alert: I work for a law firm with 370+ attorneys spread over seven offices] In weaving together a conclusion from empirical evidence, he looks at Fortune 500 as where workers made value from efficiency of scale and contrasts that with the demise of Enron. He postulates that since American Airlines (big) is in trouble but Jet Blue (think small) is doing well, small is all that matters. I guess being shackled with labor and pension costs has nothing to do with it.

He laments that:

Big accounting firms were the place to go to get audited if you were a big company, because a big accounting firm could be trusted. Big law firms were the place to find the right lawyer, because big law firms were a one-stop shop.

And then small happened.

Without giving out too many real statistics, he touts that today, little companies often make more money than big companies. For example, he points out that Craigslist (18 employees) is the fourth most visited site according to some measures (his statistic).

This all is well and good but we part ways on our opinions with his belief that a "small law firm or accounting firm or ad agency is succeeding because they’re good, not because they’re big. So smart small companies are happy to hire them." This doesn't really tell the whole story, does it?

A small firm, with small overhead, often charges less -- and that can lead to success. For some, good enough is, well, good enough. But certainly large firms, especially in today's climate, no longer succeed because of their size and stature. Everyone is price (and value) conscious. That means larger firms also succeed because they're good.

Often, large (and medium-sized firms) bring together a team of attorneys with individual specialties that no small firm can match. I am currently working with a client that in one "small" matter, has issues involving not just patent protection but issues in taxation, bankruptcy, interstate & international commerce, regulatory and criminal law, all rolled into one. Fortunately, we're able to put together the right mix of attorneys to work through the problems and come up with a success overall.

As with his Airline example above, on an average day, American Airlines will fly more than 2,600 flights. Meanwhile, Jet Blue has 68 aircraft that connect 32 cities (about 290 flights a day). Let's hope that we don't all need to rely on just Jet Blue or we'll be using a lot of bus service.

Don't get me wrong, I love small. I miss my small, corner grocery store every week whenever I'm forced to go to the big-boxes that have now forced everyone else out of the area. I love the family bicycle shop and the tiny corner coffee shop. But what really matters is personal attention. What we like to call Midwestern values or some sort of hometown attitude. People want to feel appreciated and to feel that their matter is important. To be known by name and to be get attention. That's why our firm doesn't feel "large" -- we take time to notice people and to care about what matters to them.

This is something every large(r) firm needs to learn.

The U.S. Court of Appeals for the Federal Circuit in Washington today upheld an earlier decision that three patents held by Purdue Pharma LP can't be enforced because of misrepresentations to the U.S. Patent and Trademark Office about the painkiller's effectiveness thus giving Endo Pharmaceutical Holdings Inc. the right to sell a generic version.

OxyContin, a time-release painkiller generally prescribed to cancer patients and chronic-pain sufferers, had about $2 billion in sales last year. The drug is considered a controlled substance because its potential for abuse is similar to morphine's.

This was a patent infringement case in which the patents were held unenforceable by the trial court due to inequitable conduct during prosecution before the USPTO. Purdue Pharma filed an infringement suit against Endo alleging that Endo’s proposed generic versions of OxyContin®, would infringe three Purdue patents. The district court found that Endo would infringe Purdue’s patents, but determined the patents were unenforceable due to the inequitable conduct that occurred during prosecution. Purdue appealed the inequitable conduct judgment.

The three patents asserted by Purdue against Endo are directed to controlled release oxycodone medications for the treatment of moderate to severe pain. The patents are related: U.S. Patents No. 5,656,295 (the “’295 patent”) and No. 5,508,042 (the “’042 patent”) are, respectively, a continuation-in-part and a divisional of U.S. Patent No. 5,549,912 (the “’912 patent”). The ’912 patent itself is a continuation-in-part of U.S. Patent No. 5,266,331 (the “’331 patent”), which Purdue has not asserted against Endo.

The “Detailed Description” section of the written description in each asserted patent opens with the following statement, which played a prominent role in the trial court’s inequitable conduct determination:

It has now been surprisingly discovered that the presently claimed controlled release oxycodone formulations acceptably control pain over a substantially narrower, approximately four-fold [range] (10 to 40 mg every 12 hours—around-the-clock dosing) in approximately 90% of patients. This is in sharp contrast to the approximately eight-fold range required for approximately 90% of patients for opioid analgesics in general.

The thrust of this language is that the invented oxycodone formulation using a four-fold range of dosages (e.g., between 10 mg and 40 mg) achieves the same clinical results as the prior art opioid formulations using an eight-fold range of dosages (e.g., between 10 mg and 80 mg). The written description later explains that the “clinical significance” of the four-fold dosage range of the oxycodone formulations of the present invention, as compared to other opioid analgesics, such as morphine, requiring twice the dosage range, is a more efficient titration process, which is the process of adjusting a patient’s dosage to provide acceptable pain relief without unacceptable side effects.

However, the trial court concluded that Endo had shown by clear and convincing evidence that Purdue’s patents were “invalid” due to Purdue’s inequitable conduct during prosecution of the patents before the PTO based its inequitable conduct determination on underlying findings of materiality and intent.

First, the court found that in view of Purdue’s repeated statements to the PTO that it had discovered an oxycodone formulation for controlling pain over a four-fold range of dosages for 90% of patients, compared to an eight-fold range for other opioids, Purdue failed to disclose material information because it did not inform the PTO that the “discovery” was based on “insight” without “scientific proof.” Second, the trial court found the record as a whole reflected a “clear pattern of intentional misrepresentation.”

Purdue contended it is irrelevant that it lacked scientific proof of the four-fold dosage range for oxycodone because the inventors never stated during prosecution of the patents that the discovery had been clinically tested, and thus did not expressly misrepresent a material fact. But that was not the basis for the trial court’s materiality finding. The court found Purdue had relied on its discovery of a four-fold dosage range throughout prosecution and failed to disclose material information that was inconsistent with its arguments for patentability.

Purdue first told the PTO it had “surprisingly discovered” the four-fold dosage range for controlled release oxycodone, compared to the eight-fold range for other opioids. In response to an obviousness rejection, under headings containing the phrases “Surprisingly Improved Results” and “Results Obtained,” Purdue distinguished its oxycodone formulations from other opioids based on the “surprising result” of the four-fold dosage range and its “clinical significance”—a more efficient titration process. Purdue presented this argument even though neither the written description nor the pending claims of the ’331 patent application made reference to the four-fold dosage range.

The court held that:

In light of Purdue’s consistent representations of the four-fold dosage range for controlled release oxycodone as a “surprising discovery” and the context in which that statement was repeatedly made, we cannot say the trial court’s finding that Purdue failed to disclose material information was clearly erroneous. While Purdue never expressly stated that the discovery of the four-fold dosage range was based on the results of clinical studies, that conclusion was clearly to be inferred from the language used by Purdue in both the patents and prosecution history.

Therefore, the court concluded that weighing materiality and intent is a matter of judgment and thus, the trial court’s findings on materiality and intent were well-founded, and thus not clearly erroneous.

The case is Purdue Pharma LP v. Endo Pharmaceuticals Inc., 04-1189, 04-1347 and 04-1357, all U.S. Court of Appeals for the Federal Circuit. See opinion here: Download file

Maybe we're on to something with coffee and legal work. The Editor of the Blawg Review suggested we trademark Patent Baristas and set up a new shop after seeing this posting on George Lenard's Employment Blawg

(photo by Fifi LePew/Marcia Cirillo via flickr)

We won't ask why he was looking for "law & coffee" but he stumbled across this Dallas-based coffeeshop/law office combination offering a la carte basic flat fee legal services.

While I think most anything goes better with coffee, patents would certainly pair particularly well (the tedious details, you know). We'll have to consider a new venture of "Patents & Coffee" ... by the ocean. And with scones.

If you aren't familiar with them already, check out the Employment Blog for their news, analysis & comments on labor & employment law.

We'll see you at the beach.

[Updated 06/10/05. ed.]

The U.S. Court of Appeals for the District of Columbia Circuit ruled that Pfizer and other drug companies have the right to sell unbranded versions of their own drugs even if they undercut sales of generic competitors in a suit by Teva Pharmaceutical, which sought to stop Pfizer from selling its own generic version of the epilepsy drug Neurontin. (see

In Teva Pharmaceutical Industries Ltd. v.Lester M. Crawford, Jr., Acting Commissioner of Food And Drugs, et al. (No. 05-5004 , Decided June 3, 2005), Teva Pharmaceutical Industries sued to overturn the Food and Drug Administration’s denial of its “citizen petition” requesting that the agency prohibit Pfizer, Inc., the holder of the approved New Drug Application (NDA) for gabapentin, from marketing that drug in “generic” form during the 180-day exclusivity period provided by the Drug Price Competition and Patent Term Restoration Act, also known as the “Hatch-Waxman Amendments” to the Food, Drug, & Cosmetic Act. Because the exclusivity provision does not apply to the holder of an approved NDA, the district court entered a summary judgment for the FDA.

Section 355(j) of 21 U.S.C. provides that a drug manufacturer may submit an “Abbreviated New Drug Application” (ANDA) for approval to market a so-called “generic” drug, which is the bioequivalent to a “branded” drug previously approved pursuant to a NDA filed under 21 U.S.C. § 355(b). Unlike a NDA, an ANDA need not contain clinical evidence of the safety or efficacy of the drug.

The ANDA must certify either that the approved product is not protected by a patent or “that such patent is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted.” 21 U.S.C. § 355(j)(2)(A)(vii)(para. IV). The statute rewards the first generic applicant successfully to challenge the patent on an approved drug with a 180-day exclusivity period during which no other ANDA for the same drug may be approved.

The Federal Trade Commission, at the urging of three U.S. senators, is looking into whether authorized generics are anti-competitive. Under federal law, the first generic-drug maker to challenge patents on a drug wins six months of exclusive marketing rights. Teva argued that Pfizer, the world’s largest drug company, sought to thwart competition by undermining that incentive.

In the appellate case, Teva’s argument stemmed from the following premises: (1) the purpose of the 180-day exclusivity period was “to encourage generic companies to file Paragraph IV challenges to brand-drug patents”; (2) the marketing of a brand-generic competitor during that period will reduce the revenues going to the first to file an ANDA; and (3) such “brand-generic intrusion [into the exclusivity period] developed only recently as a routine brand-company business strategy.”

The Appeals Court held that:

..when Teva goes on to argue that because the Congress could not have anticipated brand-generic competition during the exclusivity period, adhering to the “literal” terms of the statute would lead to an absurd result, namely, that § 355(j)(5)(B)(iv) grants only a “meaningless” exclusivity against subsequent ANDA filers rather than a “commercially effective” exclusivity that runs against the NDA holder as well.

It does not follow, however, from the Congress having intended to create an incentive to challenge brand-drug patents --as it clearly did --that the incentive it created is without limitation. Rather, as even the formal name of the Hatch-Waxman Amendments (the Drug Price Competition and Patent Term Restoration Act) reflects, the Congress sought to strike a balance between incentives, on the one hand, for innovation, and on the other, for quickly getting lower-cost generic drugs to market. Because the balance struck between these competing goals is quintessentially a matter for legislative judgment, the court must attend closely to the terms in which the Congress expressed that judgment.

The DC Circuit affirmed stating that § 355(j)(5)(B)(iv) of the Act clearly does not prohibit the holder of an approved NDA from marketing, during the 180-day exclusivity period, its own “brand-generic” version of its drug.

Get the entire opinion here.

It appears that the Commonwealth of Kentucky has it out for blogs. As detailed by Ben Cowgill on his Legal Ethics Blog, the Kentucky Attorney's Advertising Commission has taken the position that a weblog is an advertisement.

This is the result of Rule 7.02 of the Kentucky Code, which states:

7.02 "advertise or "advertisement" means to furnish any written, printed or broadcast information or any other communication containing an attorney's name or other identifying information...

Like we've posted before, does this mean I can't leave my real name at a restaurant for reservations for fear of it being deemed an advertisement?

The regulations also require the lawyer to submit a copy of the advertisement to the Commission, along with a filing fee of $50.00. In the past, the Commission has interpreted those requirements to mean that the lawyer must pay a filing fee of $50.00 each and every time the content of the advertisement is modified. Ouch!

Needless to say, this would make blogging impossible as it is not static but constantly changing. Let's hope that the Commission does the right thing in this case.

You can send your comments directly to:

Linda Gosnell
Chief Bar Counsel
Kentucky Bar Association
514 W. Main Street
Frankfort, KY 40601
E-Mail: lgosnell--at--kybar.org

Bill Heinze of I/P Updates recently posted a note about "A Step-By-Step Guide To Getting a Patent," which ran in the Wall Street Journal's Startup Journal.

The article quotes a U.S. Patent Office spokeswoman as saying that 63% to 65% of applications are eventually allowed as patents, but then displays the following "reality check:"

I used to be in-house counsel at a major university handling a large patent portfolio and these numbers are no surprise to me. Very, very few inventions ever return a great ROI. What did shock me out of my chair was the quote in the Journal article that "This stage is also where the real money starts to pile up. A patent agent or attorney will usually charge around $2,000 to prepare a patent application." Sure, maybe twenty-five years ago!

Granted, the article did give the caveat "but the price can go as high as $10,000 or even $50,000, depending on the attorney's fees and the complexity of the invention." But this does not erase the disservice of printing such a low estimate for "usually charge" -- it makes it sound like any higher cost is only due to paying higher fees to some greedy attorney.

The AIPLA Report of the Economic Survey 2003, states that the typical charge for an "Original non-provisional application on invention of minimal complexity" was $5,504 in 2002 -- more than 2-1/2 times the Journal's estimate and this was three years ago. These kinds of articles get me fired up because they create such unrealistic expectations in the public. In complex, high-technology applications for chemical and biotech arts, patent applications run well over $10,000 to draft. There is just no way around it and it's better to be blunt upfront than sorry afterwards.

You just know some inventor is going to go to a patent attorney and say "Hey, it should only be $2000 so you're ripping me off." I have clients who are really quite sophisticated who still think that a complicated invention should only cost $4-5000 because that's the number they remember from a decade or two ago. It's like saying a car should only cost $10,000 because that's what you paid in the 1980's. This doesn't even get into all of the post-filing costs of prosecution, formal drawings, continuations, appeals, foreign filings, translations, and so on. I've had many inventions where the total cost ran far into the hundreds of thousands of dollars due to the complexity and the counties involved.

It doesn't help anyone to create false hope in an unviable number. I think we should be able to expect better from the Wall Street Journal than this kind of (misleading) journalism.

We've gotten behind in some (OK, a lot) of to-do items on the site so we'll try to get caught up on some housecleaning. One item of note is that the Patent Baristas received a nice mention by Monica Bay in the Common Scold. Besides being editor-in-chief of Law Technology News, editorial director of Law Firm Inc. and Small Firm Business, and a rabid Yankees fan, she includes singing with Luciano Pavarotti in her spare time.

The Common Scold, named after the Puritan act of dunking opinionated women in the local pond, is a tough, opinionated law blog but hard to describe in a nutshell. Law news? Check. Law practice management? Check. Legal technology? Double check. Lawyer jokes? Of, course! Wine recommendations? Got that, too. Line up of all the best baseball movies? It's in there.

If you're not already a regular reader, we recommend you check out the Common Scold (whether or not you happen to be a Yankees fan).

There has been a flurry of news reports this year showing the heightened awareness of the biotech industry and the concomitant growth.

Business Week recently published an article touting that Biotechnology has finally come of age after 30 years of biological research. Now, recent developments in gene and exotic chemical manipulation have brought a wave of biological drugs, many of them reengineered human proteins. These drugs represent real progress for a range of diseases all but untreatable just five years ago.

The article points out that a decade ago there were fewer than 10 oncology drugs in clinical trials, most of them highly toxic chemotherapies. Today, there are 230 medicines and related products created from biotech techniques with over 400 cancer drugs being tested in humans, and almost all are targeted biotech drugs.

Last year alone, the Food & Drug Administration approved 20 biotech drugs and there are at least 50 of 250 biotech drugs currently in late-stage clinical trials that should gain FDA approval. This represents a success rate of almost three times that of Big Pharma.

This all means that biotech investors are starting to be optimistic even though few of the 1,500 companies in this sector are profitable (see BW Online, 6/2/05, "Why Biotech Stocks Are Sedated"). A new report from Ernst & Young shows a 17 percent increase last year in global revenues at publicly traded biotech companies, to $54.6 billion. In the United States, equity financing rose 17 percent, to $16.9 billion from $14.4 billion in 2003. In Europe, the percentage increase was even higher, with equity financing increasing 31 percent, to $3.4 billion last year from $2.6 billion in 2003.

It's not all rosy, though. The biotechnology industry lost a combined $6.4 bln in 2004, according to Ernst & Young, leaving biotech a money-losing, niche industry of 1,400 companies that employ about 183,000 workers nationwide.

But the drugs are selling. Ernst & Young International estimates that nine new biotech drugs approved in 2004 will bring in total revenues of $3 billion this year. By 2007, sales of just those products should grow to $8 billion. These numbers have spurred efforts by Big Pharma to mimic biotechs or merge with them.

Interestingly, the article points out that this blooming of biotech really owes a debt of gratitude to academic researchers who, since 1973, have been the real forefront to gene manipulation and gene targeting.

Many now see stem cells as the next great advance of bio-medical research, which may enable many different kinds of tissue regeneration in patients to repair or replace diseased organs.

Let's hope politics don't get in the way of real advances in medicine.