Tuesday, October 9, 2012

Bowman v. Monsanto: An Important Case for Agricultural Biotechnology

The Supreme Court recently granted certiorari in Bowman v. Monsanto, an important case for agricultural biotechnology. If the Supreme Court decides to overrule the Federal Circuit's decision in favor of Monsanto, it could seriously impact the ability of agricultural biotechnology companies to recoup their investment in developing traits for seeds that farmers can harvest and replant, such as soybeans.

Prior to agricultural biotechnology, there was little incentive to invest in the development of improved seeds, since farmers have historically been able to save and replant second-generation seeds, preventing seed innovators from recouping the value they create in their seeds. The exception has been hybrid corn, which cannot be saved for replanting without losing beneficial characteristics of the hybrid, effectively forcing farmers to buy new seed each year. This natural technological restriction on seed saving encouraged investment by seed companies such as Pioneer in the development of improved strains of hybrid corn.

In the 1990s scientists at USDA and Delta Pine Land, a cotton biotechnology company subsequently purchased by Monsanto, developed genetic use restriction technology (GURT). GURT allows for the production of seeds that germinate and produce second-generation seeds, but those second-generation seeds are sterile. In effect, this would allow a seed company like Monsanto to impose a technological restriction on the ability of farmers to save and replant seeds, analogous to the inherent restriction on the replanting of hybrid corn. It would also allay concerns that genetically modified crops might escape into the environment and cause environmental harm. However, anti-biotechnology activists learned of GURT and dubbed it "Terminator" technology, and made it a public relations disaster for agricultural biotechnology, and particularly Monsanto. Agricultural biotechnology companies like Monsanto have not used GURT in their products, but have instead relied upon patents to prevent farmers from saving and replanting seeds. In 1999, Monsanto pledged not to use GURT in its products.

Instead, Monsanto has relied upon patent and contract law to prevent replanting of second-generation patented seeds. Basically, purchasers of seeds containing a patented Monsanto trait, such as Roundup Ready soybean, are required to sign a contract agreeing not to save second-generation seeds for replanting. Farmers are of course able under the contract to harvest the seeds for use as food or feed. A number of farmers challenged the enforceability of this system on a variety of grounds, but in 2002 and 2006 the Federal Circuit issued decisions upholding the validity of the arrangement in Monsanto v. McFarling and Monsanto v. Scruggs, respectively. In those cases, the farmer saved and replanted seeds harvested from their own fields, which the Federal Circuit held to constitute infringement of Monsanto's patents.

In 2008, the Supreme Court's decision in Quanta v. LG Electronics cast some doubt on the ability of Monsanto to use patents to prevent replanting of second-generation seeds. In Quanta, the Supreme Court overturned the Federal Circuit's decision that patent owners could place conditions on sales, and held that the authorized sale of a patented product exhausts patent rights in the product. Arguably, Quanta could be interpreted as precluding Monsanto from claiming patent rights in the progeny of seed that had been the subject of an authorized sale, as discussed in a previous post.

In Monsanto v. Bowman, the Federal Circuit held that even post-Quanta Monsanto was not barred by the first sale doctrine from enforcing its patents against farmers who save and replant second-generation seeds. Vernon Bowman is a soybean farmer, and for years he has purchased and planted Roundup Ready soybean, and signed the agreement not to replant. However, he later began purchasing commodity soybeans from a grain elevator that he knew probably were Roundup Ready, planting those seeds, and then harvesting and replanting some of the second-generation seeds grown in his field. He apparently believed that since he did not sign agreement with respect to commodity seeds he was not barred from replanting them. He sprayed the soybeans twice during the season with Roundup, demonstrating that not only did he know that the seeds are Roundup Ready, but also that he was using the glyphosate-resistance properties of the plants.

The Federal Circuit rejected Bowman's argument that his activities were protected by the first sale doctrine. The court held that his purposeful planting and growing of the second-generation seeds constituted more than simply "using” the patented seed, but impermissibly "making" patented product in violation of Monsanto's patent.

In his petition for certiorari, Bowman argues that the ability to make second-generation seed is an inherent characteristic of seeds, and that his natural and foreseeable use of the seeds to produce second-generation seeds is permitted under the first sale doctrine, regardless of whether he sells the seed for use as feed or replants it.

The US solicitor general was invited to file Amicus brief in the case, and did so, advising the Supreme Court not to grant certiorari. The solicitor general agreed with Monsanto and the Federal Circuit that the first sale doctrine under Quanta does not extend to second-generation seed.  The Federal Circuit and solicitor general recognize that the interpretation of the first sale doctrine advocated by Bowman would severely limit the ability of biotechnology companies like Monsanto to recoup their sizable investment in developing agricultural traits.

The grant of certiorari is presumably cause for great concern to Monsanto and other agricultural biotechnology companies selling patented seed that can be saved and replanted. In recent years, when the Supreme Court has granted certiorari in patent cases it has tended to reverse the Federal Circuit, for example in Prometheus, Quanta, KSR, Bilski and Festo.  Because the Federal Circuit is generally the only Court of Appeals to decide patent cases, Supreme Court normally does not accept patent cases to resolve split between the circuits. The fact that it took the case suggests to me that at least some Justices question the Federal Circuit's decision in Monsanto v. Bowman. Of course, that does not necessarily mean the Court will reverse. For example, in LabCorp v. Metabolite (2006) the Supreme Court dismissed a petition for certiorari as improvidently granted, although three of the justices filed a dissent indicating they would have decided the case and overruled the Federal Circuit's decision.

Supporters of Bowman argue that they Federal Circuit's decision will end the long-standing practice of farmers saving and replanting seeds, and of grain elevator selling commodity seeds. They point out that today most of the soybeans collected by grain elevators and sold as commodity seeds contain the patented Roundup Ready trait, since most farmers are planting Roundup Ready soybeans. However, in this case Bowman clearly knew that the seeds he planted were Roundup Ready, since he sprayed the fields repeatedly with Roundup, which he would not have done if he thought he had planted non-glyphosate resistant seeds. I very much doubt whether Monsanto has sued any farmer who bought commodity seeds that happened to include the Roundup Ready trait, but who did not take advantage of the patented trait by using Roundup on his fields. Such a case of inadvertent infringement would clearly raise substantial policy issues, but those are not the facts of this case.

If the Supreme Court reverses the Federal Circuit and holds that companies like Monsanto cannot use their patents to prevent replanting a second-generation seeds, it would be analogous to interpreting the first sale doctrine in copyright as permitting anyone who buys a CD or DVD to make unlimited copies and sell those copies. Clearly the first sale doctrine does not go that far in copyright, and I don't think it should go that far in patent law with respect to self-replicating technologies like seeds. I don't think a farmer who innocently plants commodity seeds that happen to contain the patented Roundup Ready trait, and who does not take advantage of that trait by using Roundup on his fields, should be liable for patent infringement. But I don't think a farmer should be able to take advantage of the first sale doctrine to purposely acquire and grow patented seeds, benefit from the Roundup ready characteristics by using Roundup on the crops, and then use the first sale doctrine as a defense.

If the Supreme Court sides with Bowman in this case, I'm not sure what Monsanto and other agricultural biotechnology companies will do. They might have to alter their licensing practices, as discussed in a previous post. Perhaps they will have to reconsider the use of GURT or some other technological solution in lieu of patents.

Thursday, October 4, 2012

Momenta v. Amphastar:A Divided Federal Circuit Panel Addresses Scope of Hatch-Waxman Safe Harbor for Post-Approval Activities

Biosimilar legislation enacted as part of healthcare reform provides an abbreviated approval process for manufacturer’s of biosimilar biologic drugs. It provides even more benefits for a producer of an interchangeable biologic, including a period of market exclusivity for the first interchangeable brought to market. However, the chemical complexity of biologic drugs compared to traditional small molecule results in significant technical challenges for would-be providers of biosimilar or interchangeable products to demonstrate the chemical similarity required for FDA approval.

What happens if someone invents an analytical process for demonstrating biosimilarity and patents that process, particularly in a situation where there are no practicable alternative methods available for demonstrating biosimilarity? If the innovator company that brought the original biologic to market owns the patent, it could potentially prevent competitors from bringing a biosimilar to market, because they could not demonstrate biosimilarity required for FDA approval without infringing the patent. Alternatively, if a biosimilar manufacture had such a patent it could exclude other biosimilar manufacturers from bringing their products to market. That is, unless the Hatch-Waxman safe harbor under 35 USC 271(e)(1) applies.

A divided panel of the Federal Circuit actually addressed this issue on August 3, 2012, in Momenta Pharmaceuticals v. Amphastar Pharmaceuticals.  The particular drug in question, Lovenox (enoxaparin), it is technically not a biologic, but it is chemically complex and raises the same issues cited above in connection with demonstrating biosimilarity or interchangeability of a biosimilar.  Enoxaparin is a low molecular weight version of heparin, a naturally occurring polysaccharide. The chemical structure of heparin is chemically diverse, with molecules ranging in molecular weight between 5000 and 40,000 Da. There are also differences in disaccharide units and in the modifications to individual sugar units that vary from molecule to molecule.

In order to market a generic version of Lovenox, FDA requires the generic manufacturer to demonstrate a sufficient level of chemical similarity in terms of molecular weight and chemical structure between branded Lovenox and the generic enoxaparin. Establishing this similarity was apparently not trivial, and Momenta (a generic manufacturer) obtained a patent claiming a method of performing the analysis, US Patent Number 7,575,886. Momenta received FDA approval to market generic enoxaparin in July 2010, and begin generating sales revenue of $260 million per quarter.

In September 2011, Amphastar received FDA approval to market its own generic version of enoxaparin, and momenta sued Amphastar for  infringing its patent. Amphastar defended itself by arguing that its use of the patented method fell under the safe harbor of 35 USC 271(e)(1), which provides:

it shall not be enacted infringement to make, use, offer to sell, or so within 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 ** * .

In particular, Amphastar argued that it was required to perform the tests to ensure that the product complies with FDA requirements, and that it retained the data so that it could submit it to FDA as necessary.

In response, Momenta argued that the safe harbor did not apply under the circumstances, since the product had already been approved and because Amphastar did not actually submit the information to FDA.

The District Court sided with Momenta, finding that the safe harbor did not apply under the circumstances, and issued a preliminary injunction. The Federal Circuit's 2011 opinion in Classen Immunotherapies v. BiogenicIDEC would seem to support this decision. In Classen, the panel stated that "[271(e)(1)] does not apply to information that may be routinely reported to the FDA, long after marketing approval has been obtained."

On appeal, a divided panel reversed and remanded, finding that the safe harbor does apply to Amphastar’s activities, essentially because the patented test is being used to confirm that its generic product meets the FDA requirement of similarity to branded Lovenox. The majority opinion is written by Judge Moore, who wrote a dissent in Classen arguing for a more expanded interpretation of the safe harbor that would encompass post-approval submissions to FDA.

In Momenta, Judge Moore found that a plain reading of the statute did not limit the safe harbor to pre-approval FDA submissions, and the legislative intent was to promote the availability of generic drugs. She also felt that the requirement that data be generated  for "submission" to FDA was satisfied in this case because FDA regulations required Amphastar to test the drugs for similarity and to maintain the records for one year so they would be available for FDA inspection.

Judge Moore acknowledged that the Classen decision is binding precedent, but she reads Classen as being limited to cases involving "routine submissions" to FDA. In the present case, she found that Amphastar’s actions are not routine, since the company is required to make the data available for FDA in order to maintain FDA approval, in contrast with the optional "routine submissions" at issue in Classen.

Judge Moore also rejected Momenta's argument that the safe harbor did not apply because there were alternate methods available for performing the necessary analysis. She found that the safe harbor applies even if FDA would accept the use of other, non-patented testing methods.

In a strongly worded dissent, Judge Rader (who wrote the majority opinion in Classen) argued that the safe harbor does not apply in this case, and under Classen should not be available for infringing activities relating solely to post-approval FDA submissions. He basically found Judge Moore's decision inconsistent with the majority opinion in Classen, but entirely consistent with her dissent.

Judge Rader adopts a fundamentally different characterization of the Amphastar’s infringing activity than the majority. While the majority finds that the patented test is used to generate data necessary to satisfy FDA regulatory requirements, Judge Rader finds that the method is also being used for the purpose of manufacturing the product. Neither characterization seems implausible to me. Of course the test is being used to analyze the product, but Judge Rader's point is that in order to manufacture FDA-approved generic enoxaparin, it is necessary to conduct the analytical test to ensure that the product meets specifications.

I think the outcome in the case hinges largely upon this distinction between analyzing a product and manufacturing a product. If we accept Judge Rader's view that the patent covers a method used in manufacturing the drug, then the patented invention fails to satisfy the statutory requirement of being used "solely for uses reasonably related to the development and submission of information" to FDA, and the safe harbor should not apply. However, if we characterize the patented method as a method of product analysis, Judge Moore's decision seems reasonable.

In any event, a significant aspect of the decision is that it apparently limits the ability of innovators and biosimilar manufacturers from using patents covering methods of product analysis to keep biosimilar competitors off the market.  This could be important as biosimilar manufacturers seek to enter the market in competition with innovators and other biosimilar companies.