Federal Circuit Interprets the 271(e)(1) Regulatory Approval Exemption Narrowly, a Welcome Development for the Developers of Research Tools

Today in Proveris Scientific v. Innovasystems the Federal Circuit construed the Section 271(e)(1) regulatory approval exemption narrowly, holding that the sale of a device known as an Optical Spray Analyzer (“OSA”)" does not fall within the 271(e)(1) safe harbor. As discussed in a previous post, the defendant argued that because the device is intended solely for use in generating data for submission to FDA under the FDCA and is only sold to pharmaceutical companies or FDA, sales of the OSA falls squarely within the plain language of the statute, which states in relevant part that “[i]t shall not be an act of infringement to . . . offer to sell, or sell . . . 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.” However, in a unanimous decision penned by Judge Schall, the Federal Circuit rejected this argument, holding that the OSA is not a “patented invention” because it is not a product that requires FDA premarket approval.

Citing to Eli Lilly v. Medtronic, a 1990 Supreme Court decision which held that the 271(e)(1) safe harbor applies to class III medical devices, Judge Schall noted that Congress had enacted 271(e)(1) primarily as a means of addressing two unintended “distortions” of the effective patent term of drugs. As the result of the second of these distortions, prior to the enactment of 271(e)(1) (as part of the Hatch-Waxman Act) drug patent owners enjoyed a de facto patent term extension resulting from the lag between patent expiration and the time required to secure FDA approval for a generic version of a drug (or other FDA regulated product.” However, the court held that “[b]ecause the OSA device is not subject to FDA premarket approval, and therefore faces no regulatory barriers to market entry upon patent expiration, [the defendant] is not a party who, prior to enactment of [271(e)(1)], could be said to have been adversely affected by the second distortion. For this reason, we do not think Congress could have intended that the safe harbor of section 271(e)(1) apply to it.”

Of course, in its 2005 Merck v. Integra decision, the Supreme Court held that the 271(e)(1) exemption applied to patented peptides used as research tools in preclinical drug discovery. Thus, the “patented invention” in Merck was not subject to FDA premarket approval but nevertheless fell within 271(e)(1). So although on its face Proveris suggests that 271(e)(1) only applies to products that require premarket approval, this would appear to be inconsistent with Merck - although in principle one might argue that one could seek FDA approval for Integra’s patented peptides, from a practical point of view these were never true drug candidates. Notably, Proveris does not mention the nature of the “patented invention,” in Merck, or attempt to reconcile the two decisions. But if the court had held that 271(e)(1) applied to the patented OSA, the decision would have raised serious doubts as to the value of a host of patents claiming instruments used in drug development research, and research tool patents in general. In his dissent to the Federal Circuit’s decision in Merck on remand, Judge Rader suggested that in that case the majority had effectively eliminated patent protection for research tools, but judging from the court’s decision in Proveris this clearly does not seem to be the case. A great deal of uncertainty remains with respect to where the court’s will draw the line between the “patented inventions” falling within the exemption (such as the peptides in Merck), and research tools falling outside the safe harbor.