Research Exemptions

This memo explains what I’ve found so far about research exemptions in the United States and in Europe.  I know that a similar exemption exists in Canada, but was unable to find much detail about our position beyond a paragraph in Vaver.  Most of this information focusses on the pharmaceutical industry and experiments performed to obtain regulatory approval as well as basic statutory exemptions.

The United States

General History

Experimental use as a defense to patent infringement began as a common law principle in the U.S.  Justice Story first expressed the exception in Whittemore v. Cutter 29 F.Cas. 1120(C.C.D. Mass. 1813) and elaborated in Sawin v. Guild, 21 F.Cas. 554, No. 12 391 (C.C.D. Mass. 1813).  He outlined a two step test to qualify for the exemption.  The action alleged to infringe the patentee’s rights must (1) be performed to ascertain the veracity or exactness of specification or philosophical experimentation and (2) not be done with the intent to profit.

Early cases were mainly concerned with distinguishing between commercial research and research performed for “the sole purpose of gratifying a philosophical taste, or curiosity, or for mere amusement” (Popenhusen v. Falke, S.D.N.Y. 1861, 19 F.Cas. 1048).  Commercial research essentially covered any applied research in industry while noncommercial research meant basic research in academic settings.  Today, this distinction is far less appropriate.  Academic institutions increasingly market their research for commercial purposes and the biotechnology industry performs a great deal of basic research (although its purposes are still ultimately commercial).  Although academic institutions were rarely targeted for patent infringement suits in the past, there have been a couple of cases and more are expected.

*I couldn’t find the suits you were talking about between Myriad and its licencees – any hints?

Biotech Exemption

In the U.S., most of the debate surrounding research exemptions focuses on the biotech industry, specifically with respect to patenting generic drugs and medical devices.  The paradigmatic case was Roche Products, Inc. v. Bolar Pharmaceutical Co.  In Roche, the defendant (a generic drug manufacturer) conducted bioequivalency tests using a patented drug in order to secure FDA marketing approval as soon as possible after the patent’s expiry.  The Federal Circuit held that the experimental use exception was “truly narrow” and that the defendant’s use was solely for business purposes.

Legislative Response and Interpretation

Congress responded by implementing 35 U.S.C. 271(e):

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 or veterinary biological products.

This legislation specifically overruled Roche to encourage research and speed new drugs to market.  The protection of s.271(e)(1) was first interpreted narrowly in Scripps Clinic and Research Foundation v. Genentech, Inc. 678 F. Supp. 1429, 6 U.S.P.Q. 2d 1429 (1988).  The court in that case held that “solely for uses reasonably related” only covered the limited testing necessary for FDA approval and nothing else.  That decision has since been rejected in favour of a broader construction of “reasonably related”.  The court stated in Intermedics, Inc. v. Ventritex Inc. that “the inquiry is not generally whether the allegedly infringing party has engaged in conduct that shows that it has purposes beyond generating and presenting data to the FDA.”  

A two part analysis is now applied to interpret 271(e)(1): (1) only infringing uses are analyzed under the section and (2) only those infringing uses that are not “reasonably related” to obtaining regulatory approval.  In the Intermedics district court, the judge stated the second part of the analysis as: “[W]ould it have been reasonably, objectively, for a party in the defendant’s situation to believe that there was a decent prospect that the ‘use’ in question would contribute (relatively directly) to the generation of kinds of information that was likely to be relevant in the processes by which the FDA would decide whether to approve the product?”

Despite the broad interpretation, the U.S. courts have denied the exemption under 271(e)(1) where a company manufactures and subsequently ships a patented product abroad for foreign approval with no link to an FDA filing.  The courts have also held that stockpiling drugs in anticipation of FDA approval was too far from conducting clinical trials and were not exempted (Biogen Inc. v. Schering AG 42 USPQ2d 1681 (D. Mass. 1996 and NeoRx, 877 F.Supp. at 207-08)

Application of 271(e)(1) to Medical Devices

Although only drugs are explicitly mentioned in the statute, the Supreme Court in Eli Lilly & Co. v. Medtronic Inc. held that 271(e)(1) applies to medical devices as well.  The Federal Circuit held that 271(e)(1) applies to any type of patented invention if used  solely for the restricted uses authorized by the statute.  This decision may mean that the exemption can apply to non-medical products that are subject to FDA approval such as food additives.

The European Union

Monsanto v. Stauffer was one of the first European cases to deal with the experimental use exception.  In Monsanto, the court observed that “a limited experiment to establish whether the experimenter could manufacture a quality product commercially in accordance with the specification of a patent” was covered by s. 60(5)(b) of the Patents Act, 1977, which states that:

An act which, apart from this subsection, would constitute an infringement of a patent for an invention shall not do so if (b) it is done for experimental purposes relating to the subject matter of the invention.
This statutory exemption is similar to that of most European patent laws and many of the European countries have adopted the language of article 31 of the Community Patent Convention:

The rights conferred by a Community Patent shall not extend to: (a) acts done privately and for non-commercial purposes; (b) acts done for experimental 
purposes relating to the subject-matter of the patented invention.

* I haven’t managed to find out if the CPC is in force yet, but it appears that many of the European countries have adopted it regardless.

In Smith Kline & French Laboratories Ltd. v. Evans Medical Ltd., the court held that section 60(5)(b) of the Patent Act covers acts done for experimental purposes, including experiments with a commercial end in view, but the purposes must relate to the claimed subject matter of the patent in suit in the sense of having a “real and direct connection with the subject matter”.  Instead of automatically excluding commercial uses, the European courts distinguish between experiments “on” an invention and experiments “with” an invention.  In the first case, the experiment pertains to the subject matter of the invention and can lead to further innovation in the field.  In the second case, however, the invention is used for the very purpose for which it was designed and does not relate to the subject matter of the invention.  

Regulatory Approval in the EU

The court in Monsanto specified that trials could not be carried out on patented materials for regulatory approval:

Trials carried out in order to discover something unknown or to test a hypothesis or even in order to find out whether something which is known to work in specific conditions, eg of soil or weather, will work in different conditions can fairly, in my judgement, be regarded as experiments.  But trials carried out in order to demonstrate to a third party that a product works or, in order to amass information to satisfy a third party, whether a customer or a [regulatory body], that a product works as its maker claims are not, in my judgement, to be regarded as acts done “for experimental purposes”.

This approach is similar to the old American approach and is currently being adopted in Japan.  However, the German Federal Supreme Court recently abandoned this reasoning in Boehringer Ingelheim International GmbH v. Dr. Rentschler Arzneimittel GmbH and others.  The Court expressly refused to follow its own earlier decision along with Dutch decisions because they were decided under previous law.  The court also distinguished Monsanto although the provision in question was equivalent to the German statute.  The court observed that:

An action for experimental purposes which is related to the subject matter of the invention and therefore legitimate can exist if a patented pharmaceutical substance is used in clinical tests with the aim of finding whether and, where appropriate, in what form, the active substance is suitable for curing or alleviating certain other human diseases.

…it is therefore appropriate to exempt clinical tests and investigations with active substances on humans as experimental actions … as long as these experiments are directly aimed at obtaining information.

…it is not contrary to the permissibility of clinical tests that the defendants are carrying out or supporting these with the further aim of licensing under the laws relating to pharmaceuticals.

The European Parliament resolved in April of 1996 that pharmaceutical companies should be enabled to conduct laboratory experiments and regulatory preparations in order to register generic pharmaceuticals developed in the EU to be available on the market immediately after the expiry of a patent or SPC for a proprietary product.  I haven’t found out what measures the EU countries have taken in response the resolution.