Supreme Court ruling will have mixed impact on the biotech industry, experts say
By Andrea Gawrylewski | January 18, 2007
The U.S. Supreme Court ruling last week allowing companies to challenge patents while under license may increase lawsuit frequency and force biotechnology companies to tread carefully when applying for patents, but is less likely to affect research or funding, according to biotech experts.
"I don't think this [ruling] is a major impediment" to research in the biotech industry, Robert Nicholas, a biotech patent attorney at McDermott Will and Emory, told The Scientist. "People are going to continue to invest in areas that have a lot of biomedical promise."
The 8-1 ruling found that MedImmune could continue its lawsuit against Genentech over the validity of Genentech's patent on Cabilly II, a process involving the production of human antibodies.
MedImmune obtained a license for Cabilly I in 1997, which it uses to make Synagis, a drug that prevents lower respiratory tract disease in children and accounted for approximately 80 percent of the company's revenue in 2005. In 2001, when the Cabilly I patent was replaced by the Cabilly II patent, which has broader coverage, Genentech claimed that Synagis fell under the new patent and that MedImmune should pay royalties. Afraid that they might lose their license to the patented process, MedImmune paid the royalties but brought a suit of invalidity, arguing that Synagis was not subject to the new patent.
The Supreme Court decision reversed a previous federal court ruling that determined that because MedImmune was still paying royalties at the time of filing the lawsuit, they were precluded from pursuing the case against Genentech for an invalid patent. In other words, the federal circuit found that paying royalties essentially acts as an acceptance of the patent and therefore undermines invalidity action against that patent. The Supreme Court disagreed.
A spokesperson for Genentech told The Scientist that the Supreme Court ruling is merely "procedural" and does not speak to the merit of MedImmune's challenge of the patent. The case deciding the validity of the patent with regard to Synagis will proceed in the lower courts.
MedImmune failed to comment in time for this article's deadline. On Tuesday (January 16), the Supreme Court followed up on its earlier ruling by sending a similar patent-challenge case between MedImmune and Centocor Inc. back to the lower courts, allowing the suit to proceed, and reinforcing the Supreme Court's decision that a licensee could challenge a patent while still paying royalties.
These rulings open the door for licensed patent users to challenge the validity of the original patents, putting the strength of current patents under the microscope. "It has the potential to affect existing licenses where the patents are relatively easily challenged," said Nicholas. A patent is considered weak if it covers products that rely on common technology, or enters a market with numerous patents on similar products. Also, he said, "If you're headed in a research area where you don't think you're getting strong patent protection there may be disincentive [to proceed]."
Still, only large corporations, who can afford litigations, will likely challenge patents following this decision, and these cases therefore will remain a minor occurrence, experts predict. "This court case offers up another tactical-level opportunity for the licensee," John Fraser, president of the Association of University Technology Managers, told The Scientist. "But from the company's viewpoint it's probably cheaper to pay the royalties instead of paying for the lawsuit."
Other than big corporations pursuing big and costly lawsuits, in general, experts say, the ruling will have a minimal, if any, effect on researchers at universities and corporations. While the pursuit of exclusivity in new research may influence some biotech companies, the importance of research and potential money to be made will far outweigh the risk of patent disputes, according to Nicholas. "I don't think [the decision] is that dramatic," Ronald Eisenstein, an intellectual property attorney at Boston law firm Nixon Peabody, told The Scientist.
According to estimates by Dana Bostrom, associate director of the Industry Alliances Office at the University of California in Berkeley, 45 percent of the thousands of biotech patents issued each year are generated by universities, while 55 percent are generated by corporations. Tens of thousands of licenses are issued on those patents each year.
As a result of the new ruling, Bostrom said she anticipates that new conditions will be written into patent license agreements. "You'll start seeing contracts that say you cannot challenge their license," she told The Scientist. "They'll now require that you won't participate in any invalidity activity. Whether that can be enforced or not is another story."
Links within this article:
Supreme Court opinion
Association of University Technology Managers
RI Eisenstein and DS Resnik, "Biotech patents under fire," The Scientist, September 2006.
Biotechnology industry facts, BIO