Zachary Silbersher

The debate around whether patents are unnecessarily propping up drug prices has been simmering for years. A recent policy memo from the Hudson Institute has thoughtfully raised concerns about the data underlying this debate, and the memo made its way up to the U.S. Senate Judiciary Subcommittee on Intellectual Property. While the memo may have successfully poked holes in some of the data, it draws questionable conclusions regarding what those holes might mean. Unpacking this debate is therefore necessary to guide the correct policy on the intersection of patents and drug prices.

Automobiles, smartphones, laptops, medical devices, among other end products, contain scores of individual components supplied by vendors. For end products sold domestically, vendors for the components are often U.S. companies. They design and develop their products in the United States. They deploy teams of marketing and sales personnel in the United States to win incorporation of their components into end products for the U.S. market. They enter general business agreements in the United States with end product companies in the United States. They comply with U.S. certifications, standards and qualifications that make their components fit for the U.S. market. They provide customer support in the United States to end customers located in the United States. In short, they actively compete for a share of the U.S. market for their technological components. Yet, when it comes to facing liability for patent infringement, they claim to be exempt. They claim they don’t make any products in the United States—the products are made by contract-manufacturers located abroad. They claim they don’t actually sell any products in the United States either—the actual purchase orders and invoices, as well as shipment and delivery for specific units, occurs between foreign subsidiaries and contract manufacturers, also located abroad. A case currently pending before the Federal Circuit could upset these tactics: Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 2019-1246, 2019-1247 (Fed. Cir.).  At the heart of the case is the question of whether patent law has grown out-of-sync from the supply-chain realities of making, selling and marketing technological components for end use in the United States today. For instance, invoicing and shipment for particular units may be farmed out abroad. That creates an ostensibly easy way for companies selling technological components to claim they are neither making nor selling any product in the United States. But it ignores that domestic infringement can nevertheless cause foreign damages. Indeed, the recent decision of the Supreme Court in WesternGeco LLC v. ION Geophysical Corp.138 S. Ct. 2129 (2018) expressly held that foreign damages caused by domestic infringement are recoverable.

Patents covering an antibody are often claimed by the antibody’s function (the residues where it binds to the antigen) rather than its structure (amino-acid sequence). This tactic can successfully cast a very wide net of patent protection over potentially millions of different antibodies. In doing so, even if the patent holder’s own antibodies never make it out of the laboratory, the patents can nevertheless corner the market on intellectual property covering a new class of inhibitors. The risk of this strategy, however, is that extremely broad patent scope can simultaneously doom a patent’s validity for not being sufficiently enabled or lacking written description. As an example, a recent decision from the District of Delaware, MorphoSys AG v. Janssen Biotech, Inc., No. 16-221 (LPS) (Dkt. 471) (Jan. 25, 2019), invalidated broad antibody patents for not being sufficiently enabled, as well as coming near to invalidating the same patents for lacking written description. The case is important to the growing body of patents covering biologic drugs because it delineates more precisely when functionally-claimed antibody patents can survive enablement and written description challenges.

Celgene faces a new gang of generics moving in on its blockbuster Revlimid®.  Over the past year, a number of generics have filed ANDAs against Revlimid®, including Dr. Reddy’s, Zydus, Cipla, and Lotus Pharmaceutical.  Those ANDAs have triggered corresponding Hatch-Waxman lawsuits from Celgene.  Among the asserted patents, most of them expire by 2022, with the exception of two polymorph patents that could extend Revlimid® monopoly until 2027.  The lawsuits are in their early stages, but an upcoming Markman hearing in the case against Dr. Reddy’s is shaping up to be critical to whether Celgene can protect is Revlimid® monopoly past 2022.

In the case, Amgen v. Sanofi, the Court vacated an injunction Amgen obtained against a competing drug to its new PCSK9-inhibitor.  The Court’s decision turned on a finding that the jury was improperly instructed on the criteria for invalidating a patent directed to an antibody for lack of written description.  Thus, will the precedent recently established in Amgen’s PCSK9 case doom the validity of its patents covering Enbrel®?  There are likely two ways that the decision in Amgen v. Sanofi made a validity challenge to Enbrel®’s patents easier.

Joint-defense groups lower costs and increase efficiencies for all defendants in the groups. Certain prominent patent litigation boutiques and Big Law departments have skillfully made a business of being retained by many of the accused infringers in a single multi-defendant case. Even if counsel is not shared among defendants, the benefits of joint-defense groups inure greatly to small- and medium-sized companies that gain the benefit of top-notch defense teams retained by larger tech companies, without having to pay for them. Joint-defense groups also leverage economies of scale to accomplish more at lower costs for everyone. For instance, filing four or five IPR petitions may be feasible when those costs are spread around a group, but prohibitive for any individual defendant. In short, the pre-TC Heartland framework provided significant cost-savings and efficiencies to defendants, and in particular, small- and medium-sized companies.

On January 5, 2017, the District of Delaware issued its long-awaited decision in the patent dispute pending between Amgen and Regeneron wherein the Court granted Amgen’s request for a permanent injunction against Regeneron’s new PCSK9-inhibitor cholesterol drug. Both Amgen and Regeneron each independently spent billions of dollars over the past decade-plus developing a new class of cholesterol drug. The drug itself comprises an antibody that binds to PCSK9 proteins… Whereas Regeneron managed to be the first to market, Amgen succeeded in getting to the Patent Office first. Amgen originally sued Regeneron, along with Sanofi, its European partner, in October 2014. Amgen asserted three patents directed to antibodies that bind to PCSK9. Over the next month, Amgen commenced additional lawsuits as new patents issued from the Patent Office. The cases were eventually consolidated, but Amgen eventually went to trial against Regeneron on only two of the originally asserted patents.

A case currently pending before the Federal Circuit is anticipated to provide greater guidance into the answer to this question, namely, how district courts should determine whether a claim is directed to an abstract idea. The case, McRo, Inc. v. Bandai Namco Games America, No. 2015-1080, recently heard oral argument on December 11, 2015. The panel’s questioning indicated that its anticipated decision may provide greater insight into how district courts are to determine whether a claim is, in fact, directed to an abstract idea. The patents are directed to automatic three-dimensional lip-synchronization for animated characters. Whereas prior art lip-synchronization required manually synchronizing an animated character’s lips and facial expressions to specific phonemes, the patents are directed to rules for automating that process.