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Bad news for biotechs: The government has come to 'help'

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"I'm from the government, and I'm here to help" used to be the punch line to a bad joke. Unfortunately, it's playing again in the Supreme Court's deliberations in the current Merck v. Integra litigation. Now, the U.S. government has weighed in on the case and it may not be bringing help to many San Diego biotechs.

Presumably by now, the local biotechnology community knows the background of the Integra litigation. Local biotechs, led by Integra Lifesciences (Nasdaq: IART), accused Merck KgaA (PNK: MKGAF) of infringing their RGD peptide "tool" patents during Merck's preclinical activities. Merck argued that its activities were exempt under the safe harbor of the pharmaceutical exemption provided in 35 U.S.C. section 271(e)(1).

The trial court rejected that defense, finding that Merck's activities were not "solely for uses reasonably related to the development and submission of information" to the FDA, as the statute explicitly provides.

Merck appealed and renewed its argument for the pharmaceutical exemption. But, a divided panel of the Federal Circuit again rejected that defense, finding Merck's preclinical research activities too remote to the clinical trial process.

Undaunted, Merck sought the intervention of the Supreme Court and, earlier this month, the court agreed to decide the case and determine the proper scope of the safe harbor.

What should be of interest to the biotech community is the government's appearance in the dispute on behalf of Merck. Because the Supreme Court often follows the positions advocated by the government on matters of patent policy, the local biotech community should take note.

Through an alphabet-soup of agencies (FDA, HHS, PTO, et al), the government takes aim squarely at biotechnology tool patents -- those patents that claim inventions generally only used in preclinical activities, and thus not infringed by the downstream use of the results.

The government contends that any distinction between preclinical and clinical activities will pose a "direct and substantial threat to new drug research." Because it contends that "some" preclinical activities are reasonably related to the submission of information to the FDA, the government effectively seeks to abolish the distinction altogether.

Instead, it argues that the exemption should apply as soon as a company "identifies a particular compound or a small number of analogs for preclinical research." As such, the government would protect even otherwise infringing activities on analog compounds that never reach clinical trials.

For some in the local life sciences community whose pharmaceutical "ship" has already docked, the government's position may be viewed with approval.

For others who have built capital structures and patent portfolios on assumptions of value for tool patents, the government's view will hardly be viewed as "help." Indeed, if the government's position prevails, for the first time, the court could judicially establish a category of patents that, although valid, can never be infringed.

For those biotechs who don't welcome the government's knocking, you have until March 28 to submit opposing views to the court. After that date, the "help" may soon follow.


Submitted by Stephen P. Swinton, chair of Cooley Godward's Intellectual Property Litigation practice and a member of the firm's litigation department.

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