Final Word: Beware of Patent Infringement During Discovery Research

In 1996, the life sciences company Integra sued the German company Merck KGaA and its licensee, Scripps Institute, in the US District Court in San Diego, alleging infringement of several patents relating to the biologically active RDG peptide. Earlier, Merck had contracted with Scripps to evaluate several cyclic RDG derivatives with the expectation that one of the derivatives would be chosen for clinical testing under an IND directed to the treatment of cancer. Integra alleged that this research activity infringed on several of its patents.

Integra prevailed at trial and on appeal. This ruling strengthens the rights of patent owners — but with troubling implications for companies engaged in drug discovery research. A researcher performing experiments to find new drugs or improved therapies using a compound covered by someone else's patent can be liable for patent infringement.

In its defense, Merck argued that the allegedly infringing activity fell within the scope of the "safe harbor" of the Drug Price Competition and Patent Term Restoration Act of 1984. The Act includes provisions to expedite the availability of generic drugs by facilitating their immediate marketing upon patent expiration. The Act's safe harbor exempts generic drug manufacturers from patent infringement when they generate data (prior to the expiration of the drug patents) required by FDA for marketing approval.

Merck asserted that because it expected that one of the cyclic RDG derivatives would be the subject of an IND submitted to FDA, its activities were "solely for uses reasonably related to the development and submission of information under a Federal law regulating drugs." Merck’s position was that the Act's safe harbor was a broad exemption applicable to any activity generating information that would ultimately be submitted to FDA.

The District Court disagreed, ruling that the safe harbor does not extend to uses of compounds in drug discovery activities. The Court held that the Act was intended to facilitate generic drug approval, not pioneer new drug discovery. It cited the US House committee's comments that initiated the Act, illustrating that the safe harbor was intended to allow such a limited amount of testing that the effect on the patentee's rights would be de minimus. The Court concluded that the safe harbor only applied to work done to obtain data needed for approval of a generic drug and noted that Merck's contention that some of its data may eventually be presented to FDA strained a reasonable interpretation of the Act's language. It said that expanding the safe harbor to exempt otherwise infringing drug discovery activity would exceed the law's narrow, intended purpose and exempt the use of research tools as well, effectively excluding an entire category of inventions from patent protection. At the trial's end, a jury found Merck guilty of patent infringement.

Merck was also unsuccessful in its appeal. One of the three judges on the appeals panel, however, argued for a different outcome. Judge Pauline Newman observed that since 1813 the law has provided an experimental use exception to patent infringement for certain activities related to the study of patented inventions. Moreover, she argued that for the patent law and its underlying policy to be consistent, the public must be allowed to improve upon inventions; denying the exemption to activities related to making improvements is inconsistent with requirements to publicly disclose the invention upon granting of a patent.

Finally, Newman pointed out that exempting from infringement the experimental use of the patented compounds in order to modify and make improvements would not affect the enforceability of patents covering research tools (such as patented processes, kits, assays, enzymes, antibodies, and equipment that make, purify, screen, and evaluate the patented compounds).

Newman's opinion reflects a widely held philosophical position regarding the propriety of a broad experimental use exception to patent infringement. The appeals court decision, however, instructs us that Merck's drug discovery research seeking improvements and modifications of patented inventions is not exempt from a finding of patent infringement. Patentees can exclude others from studying compounds until patents expire. Placing such limitations on research represents another hurdle in the competitive business of drug discovery and could delay discovery of improved medicines. However, it enhances the competitive value of patents, giving patent owners the exclusive right to experiment with compounds covered by their patents.