Patent Baristas

I’m really quite disturbed by a recent Federal Circuit decision which held that method claims can be infringed if the method is performed abroad, so long as “components of the method” are exported from the US. See Union Carbide v. Shell Oil Co. (Fed. Cir. 2005). This case is so wrong that I don’t know where to begin. The problem is that until it is overruled (not unless, until), it is going to create mayhem in patent law and business planning.

The authority, of course, for patent infringement comes solely from statute. There is no federal common law of patent infringement or unfair competition. The statute at issue provides:

(f)(1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

Congress enacted what is now Section 271(f)(1), as you know, in response to the Supreme Court’s decision in Deepsouth, which held that it was not infringement to assemble abroad a product even where the unassembled parts were shipped from the United States. It is clear that 271(f) was designed to, and seems largely to have, made it so that the owner of a patent on a product can prevent someone in the US from exporting most or all of the components with the intent that they be assembled abroad. That was its purpose, and it seems to have done the job.

Does 271(f) do more than make it an infringement to export components of a patented product for assembly abroad? The Union Carbide court said so. It held that 271(f)(1) permits the owner of a patent on a method to prevent the exportation of components that will be used abroad to practice the claimed method.

I just wrote a book on statutory interpretation and so maybe the errors are obvious to me. But let’s see.

Remember that method claims cover only use of the method. You’re supposed to construe statutes with ordinary meaning. Let’s try. How do I export a step in a method? It’s not enough to export instructions: instructions are not the doing of the method. Is there a “component” of a “method”? I’ve never heard anyone refer to a step in process as a component. “Have you performed all the components in the process?” Now, “have you used all of the components specified in the method claim” makes sense, but notice that it is not the component that is an element in the method: it is the step of using that component. I can export a component that can be used in a method claim, but what is covered by the method claim is the use of the component, not the component.

Suppose you think I’m wrong. One core principle of statutory construction is that you have to construe a statute as a whole. Is the word “component” used somewhere else in 271? You bet. Check this out:

(

c) Whoever offers to sell or sells within the United States or imports into the United States a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer….

Notice that Congress used two words: components describe what are parts of patented products; “material or apparatus” are “for use in practicing a patented process.” Thus, Congress used distinct phrases — components are what go into products, materials or apparatus are what are used to practice method claims — in this section. Thus, under this section, if someone sells in the US a material or apparatus used to infringe (and it’s not a stapel article, etc), then they infringe.

Now look back at 271(f): it says people who export components that are assembled abroad infringe; it says nothing about materials an apparatuses (apparati?) used for practicing a patented product.

So, where we are is the ordinary language of the statute doesn’t apply, and the phrase “component” is used in the same statute to apply only to product claims.

How did the Federal Circuit miss this? I don’t know. I do know, however, that the case is already the subject of discussion among CLE programs I’ve attended. “How do you draft a method claim to insure it includes components” was one question I heard asked.

It can’t because they won’t. But we won’t get this fixed for a while.

Tell me why I’m wrong, and yes I get mad about this sort of decision.

David Hricik
Mercer Law School

On Friday, Merck & Co.’s Zocor (simvastatin) will lose U.S. patent protection, and health plans are aggressively trying to promote low-cost generic versions of the drug for patients who don’t require a major cut in their cholesterol levels. The makers of Lipitor, Crestor and Vytorin will be battling more fiercely. You may have already noticed a large amount of DTC marketing efforts sprinkled among the commercials during your favorite TV programming. My personal favorite is Vytorin with Aunt Flo …. but I digress.

The makers of Vytorin announced at a medical meeting Sunday that their product lowers cholesterol better than Crestor. Vytorin is a combination of Zetia (ezetimibe) and Zocor (simvastatin), which has been proven to lower the risk of heart attack and stroke. Meanwhile, Crestor’s manufacturer said that when taken in combination with another drug, its product achieves unprecedented cholesterol reduction.

While it is clear that Merck will take a hit, another drug and the top cholesterol lowring drug on the market, Lipitor from Pfizer Inc.’s may suffer most in the new environment because many patients on low doses of Lipitor medicine could reach the necessary cholesterol level at a high dose of Zocor.

Lipitor’s share of new prescriptions fell to 50.5 percent in January 2006 from 52.7 percent in the year-ago period, according to Verispan LLC, a pharmaceutical information company. By April Lipitor’s share of new prescriptions had dropped to 48.5 percent.

Meanwhile, Zocor’s share of new prescriptions rose to 20.4 percent in January 2006 from 19.4 percent a year earlier. It was 21.3 percent in April.

Pfizer insists there’s abundant data proving Lipitor’s superiority over Zocor that will keep physicians loyal. In more DTC advertising, you may have noticed that Pfizer also recently launched their new ad campaign for Lipitor, featuring the doctor who invented the artificial heart (I think I counted seeing this ad over 5 times one eveing last week in just 2 hours of programming). But, Pfizer’s overall strategy remains the same: highlighting Lipitor’s ability to lower cholesterol and protect against heart attacks and strokes.

Lipitor’s share of new prescriptions fell to 50.5 percent in January 2006, down from 52.7 percent in the same period a year before, according to Verispan LLC, a pharmaceutical information company. By April, Lipitor’s share of new prescriptions fell to 48.5 percent.

Meanwhile, Zocor’s share of new prescriptions rose to 20.4 percent in January 2006, up from 19.4 percent in the year-ago period. It was 21.3 percent in April.

It is still unclear how much cheaper generic Zocor will be because of a legal battle over how many companies will be allowed to promote their versions. If there are only two during the first six months, as many believe, the price won’t drop dramatically until the end of the year.

Decision Resources, Inc., one of the world’s leading research and advisory firms for pharmaceutical and healthcare issues, came out with a press release today announcing that that Neurochem’s Alzhemed (tramiprosate) and Myriad Genetics’ Flurizan (R-flurbiprofen) will account for nearly 60% of the market to treat Alzheimer’s disease by 2015. Both drugs have shown promise in early clinical development, and will be the first treatments for Alzheimer’s disease that modify the course of the disease. Both agents will reach the U.S. market in 2008 and the European market by 2010.

Alzheimer’s disease is a progressive, neurodegenerative disease characterized by significant loss of function in more than one cognitive domain including memory, reasoning, and judgment. In the United States, France, Germany, Italy, Spain, the United Kingdom, and Japan, prevalent cases numbered more than 5.7 million in 2005.

The new Pharmacor report entitled Alzheimer’s Disease predicts that Alzhemed and Flurizan will account for 46% and 13% of sales, respectively, in the major pharmaceutical markets in 2015. The report also measures the extent to which upcoming patent expiries will reduce the market shares of the current mainstay classes of drugs used to treat Alzheimer’s disease-acetylcholinesterase inhibitors (AChEIs) and N-methyl-aspartate (NMDA) receptor antagonists. Drugs in these classes include Eisai/Pfizer’s donepezil, Novartis/Sigma-Tau/Esteve’s rivastigmine, Merz’s Axura, and Lundbeck’s Ebixa.

It is well-known that AChEIs and NMDAs merely stabilize or moderatly delay the cognitive decline that Alzheimer’s disease patients experience. What these type of agents cannot do is to modify the disease state. According to Kate Hohenberg, director at Decision Resources, Inc. “the need for more effective drugs for Alzheimer’s disease is so crucial that any agents that receive regulatory approval will capture market share. Alzhemed and Flurizan will likely show variable efficacy, but they will still capture a significant portion of the market to treat Alzheimer’s disease.”

It is still likely that the traditional acetylcholinesterase inhibitors (AChEIs) will continue to dominate the Alzheimer’s disease market for the next several years, with Eisai/Pfizer’s Aricept (donepezil) retaining a leadership position, and, to a lesser extent, Novartis’s Exelon (rivastigmine). However, sales of these drugs will decline because of the expiration of their patents. All agents in this class will lose patent protection by 2013.

And in what used to be a very radical theory regarding causation and linkage to Alzheimer’s, clinical trials now under way are testing the theory that the cause of Alzheimer’s disease is linked to diabetes. The trials are looking at whether the diabetes drug Avandia can slow or stop the progression of Alzheimer’s disease. Preliminary trials suggest that it can — at least in patients who do not carry the ApoE4 gene linked to earlier and faster-progressing Alzheimer’s disease.

According to Allen D. Roses, the theory behind the treatment predicts that the same processes that underlie diabetes also underlie Alzheimer’s disease and that a number of researchers find similarities between the metabolism of diabetes and the metabolism of Alzheimer’s disease.

Roses, now senior vice president for genetics research at GlaxoSmithKline, and Ann M. Saunders, PhD — his research partner and wife — describe the theory in detail in the April 2006 issue of Alzheimer’s & Dementia: The Journal of the Alzheimer’s Association.

Roses isn’t the only Alzheimer’s researcher to back this controversial theory. But he’s among the most distinguished. In the early 1990s, Roses and colleagues were the first to link the ApoE4 gene to early-onset Alzheimer’s disease.

“We discovered that the ApoE gene is significantly associated with the common form of Alzheimer’s disease,” Roses says. “What wasn’t known is how it was operating in the brain. Over several years, we were doing experiments to see what the different forms of ApoE — ApoE4, ApoE3, and ApoE2 — were doing to metabolism in animals. We found a change in sugar utilization.”

The body has intricate, interconnected systems for controlling how its main fuel — sugar — is burned. In diabetes, the system is terribly out of whack, Roses states. [And,] it’s also out of whack in Alzheimer’s disease. He points to imaging studies showing that the brains of people who carry the ApoE4 gene have a lowered sugar-burning “thermostat.”

Roses reports that small clinical trials show that Avandia slightly improved mental function in patients with mild-to-moderate Alzheimer’s disease. But it only seems to work in patients who don’t carry the ApoE4 gene. Roses says the FDA has already approved a large-scale clinical trial of Avandia in genetically screened patients with Alzheimer’s disease. Until the results of this trial are known — and the results are years away — Roses strongly warns people not to try using Avandia as an Alzheimer’s treatment.

It will be interetsing to follow these new leads for Alzheimer’s drugs and whether or not there will actually be a drug presecribed for those who have a genetic predisposition to the disease in order to prevent or lessen its onset.

(SOURCES: Roses, A.D. and Saunders, A.M. Alzheimer’s & Dementia: The Journal of the Alzheimer’s Association, April 2006; vol 2: pp 59-70. Risner, M.E. The Pharmacogenomics Journal, Jan. 31, 2006, advance online edition. Allen D. Roses, MD, senior vice president for genetics research, GlaxoSmithKline. Bill Theis, PhD, vice president for medical and scientific affairs, Alzheimer’s Association, Chicago.)

The Baristas are pleased to announce that Professor David Hricik from Mercer University School of Law will be a guest Barista on this site, contributing in the area of IP ethics on a regular basis. David receieved his B.A. in 1984 from the University of Arizona and his J.D. in 1988 from Northwestern University Law School. He has been a member of the Mercer Law Faculty since 2002.

For those of you who are not familiar with David, David is currently the Chair of the Professionalism & Ethics Committee of the American Intellectual Property Law Association. In addition, David has also served as the Chair of the ABA Committee on Professional Responsibility of the Intellectual Property Section from 2002-2003.

From time to time, David will be posting to the Barista site, and sharing with us his own insights into some of the current legal ethics issues faced by practioners in the bio/pharma area and patent law generally. We hope you will enjoy David’s own special brew of wit and wisdom as he shares with us his thoughts and opinions regarding IP legal ethics.

I will be at the ABA’s Intellectual Property Law Summer Conference in Boston from June 21-24. If you’d like to take time to meet next week, drop me a line and we’ll arrange a meeting at the Marriott Copley Place Hotel. I’ll be there chatting with fellow bloggers over a cup o’ joe at the get acquainted reception that’s 6-7 on Wednesday evening.

The ABA IP Section has organized a “Bloggers’ Corner” event where gurus such as Matt Buchanan of Promote the Progress, John Welch of the TTABlog, Dennis Crouch of the Patently-O blog, and others will be set up in one corner of the room for discussion of all things blawg. It should be an interesting time. I look forward to seeing everyone at the meeting.

See the Flyer here.

Barr Pharmaceuticals, Inc. has agreed to settle litigation claims made by Novartis AG units Invamed Inc and Apothecon Inc. related to the raw material source in blood thinner Warfarin Sodium. Warfarin is a generic version of Coumadin, which is designed to reduce the threat of blood clots. Under the terms of the agreement, the Company has agreed to provide a one- time payment of $22.5 million to the plaintiffs. As a result of the settlement, the Company will record the $22.5 million payment.

In February 1998, Invamed, Inc. and Apothecon, Inc. named Barr and several others as defendants in lawsuits filed in the U.S. District Court for the Southern District of New York, alleging violations of antitrust laws and also charging that Barr unlawfully blocked access to the raw material source for Warfarin Sodium. The two actions were consolidated. On May 10, 2002, the District Court granted summary judgment in Barr’s favor on all antitrust claims in the case, but found that the plaintiffs could proceed to trial on their allegations that Barr interfered with an alleged raw material supply contract between Invamed and Barr’s raw material supplier. Invamed and Apothecon appealed the District Court’s decision to the U. S. Court of Appeals for the Second Circuit.

On October 18, 2004, the Court of Appeals reversed the District Court’s grant of summary judgment and held that the plaintiffs raised issues of material fact on their claims that Barr and others conspired to restrain trade and monopolize the supply and retail markets of generic warfarin sodium in violation of §§ 1 and 2 of the Sherman Antitrust Act and § 7 of the Clayton Act. A trial had been scheduled to begin on June 12, 2006.

The suit arose after Barr entered into an exclusive supply agreement pursuant to which ACIC/Brantford would supply Barr exclusively with commercial quantities of clathrate until another manufacturer began selling generic warfarin sodium. They also executed a confidentiality agreement that for five years prohibited either party from disclosing “valuable, proprietary, technical, commercial and other confidential information.”

In September 1997 Geneva received FDA approval for its generic warfarin sodium application. The next day it sent ACIC/Brantford an order to purchase 750 kg of clathrate for $1.8 million. By October 1997 Geneva still had not received an acceptance of its order, and it threatened legal action. On October 20, 1997 ACIC/Brantford formally rejected Geneva’s order, and thereafter refused to accept further Geneva orders. It was then that Geneva first learned of the exclusive deal between ACIC/Brantford and Barr, and that as a result, ACIC/Brantford would not be able to supply it with clathrate. Geneva sued ACIC/Brantford and Barr alleging that their secret exclusive dealing arrangement unfairly gave Barr exclusive access to the only available source of clathrate and effectively delayed their entry into the generic warfarin sodium market for one year giving Barr a monopoly in this drug during that period.

The U.S. Food and Drug Administration (FDA) announced new steps to strengthen existing protections against the growing problem of counterfeit drugs. The measures, which were recommended in a report by the agency’s Counterfeit Drug Task Force, emphasize certain regulatory actions and the use of new technologies for safeguarding the integrity of the U.S. drug supply. FDA officials believe that the prevalence of bogus drugs is low but said drug counterfeiters are becoming increasingly sophisticated. The FDA’s Office of Criminal Investigations opened 32 counterfeiting cases last fiscal year and 58 in fiscal 2004, compared with fewer than 10 cases a year five years earlier. Some of the most commonly counterfeited drugs are Viagra and Cialis for erectile dysfunction, the antipsychotic drug Zyprexa, Lamisil for nail fungus and Procrit, which is often used by cancer and AIDS patients to treat anemia, according to the FDA.

Among other new measures, FDA will implement regulations requiring drug distributors to provide documentation of the chain of custody of drug products — the so-called “pedigree” — throughout the distribution system. FDA had placed on hold certain regulatory provisions because of concerns raised at the time about the impact on small wholesalers. Most recently, in early 2004, FDA delayed the effective date of certain regulatory provisions regarding pedigrees to allow the industry time to adopt electronic technology (RFID) for tracking drugs through the supply chain. The FDA had expected this technology to be in widespread use in the drug supply chain by 2007, but it now appears that this won’t happen. The FDA felt that continuing the hold would perpetuate the current confusion and further allow opportunities for counterfeit and diversionary practices. FDA determined that it can no longer justify not implementing these regulations. Therefore, the hold, which will expire in December, will not be continued.

The FDA also announced that, during the next year, its enforcement of the pedigree regulations will focus on products most susceptible to counterfeiting and diversion. The FDA intends to announce in the Federal Register the availability of a draft compliance policy guide for public comment describing this enforcement approach. By providing guidance on the types of drugs that are currently of greatest concern to the FDA, the agency intends to give wholesale distributors a better idea on where and how to focus their initial energies to come into complete compliance with the regulations (21 CFR Part 203) for all the prescription drugs they distribute. The draft guidance clarifies how the FDA intends to prioritize its pedigree-related enforcement resources in 2007. The FDA may initiate regulatory action including criminal prosecution, for pedigree violations that do not meet the factors listed in the guidance.

A Task Force report recommends the widespread use of e-pedigrees using electronic track and trace technology, including RFID, would provide an electronic safety net for our nation’s drug supply. The report recommends that companies continue to work toward that goal, and that their implementation of RFID technology be used first on products most susceptible to counterfeiting and diversion.

Additional subjects discussed in the Task Force’s report include the following key issues related to electronic track-and-trace that are in need of resolution:

All Task Force Reports are posted on FDA’s Web here.

The Boston Globe on ran a story on Senate Finance Committee Chair Chuck Grassley (R-Iowa) and his role as the driving force behind a congressional charge to change FDA. According to the Globe article, Grassley has “exposed internal FDA memos, emails and conversations to unprecedented public scrutiny” in his attempts to “prod the agency to change a culture that stifles and punishes dissenters.” Grassley feels the FDA puts too much emphasis on approving drugs and not enough on follow-up on the safety of already approved drugs. Grassley has proposed legislation that would create an Office of Drug Safety at FDA that would operate separately from drug safety reviewers at the agency’s Office of New Drugs. According to the Globe, many at the FDA oppose the legislation.

Grassley has urged lawmakers to consider legislation that would address FDA’s postmarket regulation of approved drugs. Grassley is pushing his bill (S 930), co-sponsored by Sen. Christopher Dodd (D-Conn.), which would authorize FDA to conduct postmarket drug reviews. Citing a GAO report that said the FDA “lacks a clear and effective process” for tracking safety issues related to approved drugs, GAO researchers concluded that that disputes between FDA’s Office of Drug Safety and Office of New Drugs slowed the evaluation process.

Currently, both the Office of Drug Safety (ODS) and the Office of New Drugs (OND) are part of CDER, an arrangement that some feel results in an improper balance of power between postmarket safety and the reviewing decision. The GAO does not specifically advise taking the drug safety office out of CDER but recommends that the FDA commissioner clarify its role. The GAO reports that the Office of New Drug has sometimes excluded analyses by drug safety staffers at advisory committee meetings held to review particular medications. The GAO also recommended that Congress consider expanding the FDA’s authority to require drugmakers to conduct postmarket safety studies.

One of the FDA problems that have attracted the attention of Senator Grassley include investigations into misconduct during the largest of three key trials to measure the safety of the antibiotic Ketek, made by Sanofi-Aventis. An FDA official called in May for a drug company to halt clinical trials of an antibiotic in children because the drug could be deadly, according to internal memorandums sent to other FDA officials. Ketek is being tested as a treatment for ear infections and tonsillitis in nearly 4,000 infants and children in more than a dozen countries, but Ketek, which is currently approved for use only in adults, has been reported to cause liver failure, blurred vision and loss of consciousness in adults.

An official in the Office of Drug Safety at the FDA wrote that there is growing evidence that Ketek is unusually toxic and that the agency should consider forcing Sanofi-Aventis to withdraw Ketek from the market, severely restrict its uses, even in adults, or add a prominent warning to its label about potentially fatal side effects. The FDA said it dismissed the study’s results and instead asked the company to report its experience with Ketek in Europe, where it was approved in 2001. In April 2004, the FDA approved Ketek to treat sinusitis, bronchitis and pneumonia based on data in Europe.

Since then, problems with the drug have surfaced with reports of 110 cases of liver problems associated with Ketek, most of which occurred in otherwise healthy people, according to the safety review. Sanofi-Aventis has now suspended enrollment in studies of Ketek in children. Sanofi said the Food and Drug Administration did not request the action. It also said the suspension was not linked to a report in the New York Times that said an FDA official last month requested the trials be halted because Ketek could be deadly.