The Supreme Court unanimously reversed a Federal Circuit decision and expanded the scope of the "safe harbor" provision of 35 U.S.C. § 271(e)(1). The Supreme Court held that the safe harbor exemption applies to all uses of patented inventions that are reasonably related to developing and submitting information to the FDA, including preclinical research. This broad interpretation encompasses experiments that do not ultimately lead to FDA submission and uses patented compounds in early-stage research. The decision significantly expanded the activities covered by the safe harbor exemption and is expected to impact existing bio-pharma licenses and patenting strategies.

1. Merck KGaA v. Integra
Analysis of the Supreme Court Decision and
Its Impact on Bio-Pharma Collaborations
Timothy J. Shea, Jr.
Director
Sterne, Kessler, Goldstein & Fox P.L.L.C.
LES Annual Meeting
Phoenix, AZ
October 17, 2005

2. Introduction
• Panel Members
– Kenneth C. Bass, III
• Of Counsel, Sterne, Kessler, Goldstein & Fox
• Primary author of amicus brief by Vaccinex, Inc.
– Steve M. Ferguson
• Director, Division of Technology
Development and Transfer at NIH
– Alan Hammond
• Chief Intellectual Property Counsel, Invitrogen
Corp.
– Gale F. Matthews
• Assistant General Counsel – Patents, Wyeth
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3. Introduction
• Merck KGaA v. Integra Life
Sciences I, Ltd., et al., 125 S. Ct.
2372 (2005)
– U.S. Supreme Court - June 13, 2005
• Construed scope of 35 U.S.C.
§ 271(e)(1)
– a.k.a. “FDA exemption”, “FDA safe
harbor”
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4. Background – FDA Safe Harbor
• 35 U.S.C. § 271(e)(1):
“It shall not be an act of infringement
to make, use, offer to sell, or sell
within the United States or import into
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 . . . .
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5. Background – FDA Safe Harbor
• Primary purpose of § 271(e)(1)
(from legislative history):
– Get generic drugs to market sooner
• Direct response to Roche v. Bolar (Fed.
Cir. 1984)
– “de minimus” interference with rights
of patent holder
– BUT, statutory language not limited to
generics
• Merck construed “depth” of safe harbor
– i.e., how far upstream in drug development
process exemption extends
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6. Merck KGaA v. Integra - Facts
• FACTS:
– Integra patents directed to “RGD peptides”
• Non-naturally occurring peptides containing Arg-
Gly-Asp sequence
– Mid-1980s – Researchers at Burnham Inst.:
• Discovered RGD peptides bind αvβ3 receptors on
integrins → promote cell adhesion
• Filed patent applications to RGD peptides,
receptors, and methods of mediating cell
attachment
• Formed Telios Pharmaceuticals
– Subsequently acquired by Integra
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7. Merck KGaA v. Integra - Facts
• FACTS:
– Late 80s – Scripps (Cheresh):
• blocking αvβ3 receptors inhibited angiogenesis
– 1988 – Research Support Agmt
• Merck funded Cheresh Lab in exchange for right to
license discoveries
– Cheresh to screen RGD peptides provided by Merck
– FDA submission was clear goal
– Led to identification of lead RGD peptide
– 1995 – Broader Research Funding Agreement
• Scripps to screen derivatives of lead peptide
• Scripps to screen RGD mimetics (non-peptide NCEs)
– 1996 – Merck moves forward with preclinical testing
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8. Merck KGaA v. Integra – Dist. Ct.
• District Court Suit
– Integra sued Scripps/Cheresh (direct
infringement) and Merck (inducement)
– Scripps and Cheresh dropped
– Jury trial
– Merck raised § 271(e)(1) as defense
– Jury found infringement and research not
exempt
• Awarded $15M in damages
– Merck’s JMOL denied
– Merck appealed
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9. Merck KGaA v. Integra – Fed. Cir.
• First Fed. Cir. case to address depth of
FDA safe harbor exemption
– Previous cases dealt with breadth issues
• Merck: “Rational Predicate” Test:
• safe harbor covers all drug development activity
that is “rational predicate” to generating info for
submission to FDA
– Includes tests to determine whether to proceed
with particular drug
• Why would Congress exempt culmination of
research, but not activity leading up to it?
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10. Merck KGaA v. Integra – Fed. Cir.
• Integra: “Proximate Relation Test”
• Statutory language requires proximate
relationship between activity and FDA
submission
– does not encompass the search for
drugs
– Screening peptide mimetics not
required for FDA approval
– Scripps not doing FDA experiments
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11. Merck KGaA v. Integra – Fed. Cir.
• Federal Circuit:
– Issue: Whether safe harbor covers
development and identification of new drugs
– Characterized Scripps/Cheresh research as
“preclinical”
– Considerable weight given to legislative
history
• Focus on generic drugs
• de minimus inteference
– Interpreted terms “solely” and reasonably as
placing some limit on the exemption
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12. Merck KGaA v. Integra – Fed. Cir.
• Holding: exemption not applicable
• Need reasonable relationship
– Between activity and FDA approval process
– Focus on safety and effectiveness
• Rejected Merck’s rationale predicate test
• Distinguished drug discovery
– “The FDA has no interest in the hunt for drugs that may or may not later
undergo clinical testing for FDA approval.”
• Does not encompass all experimental activity
РҤ 271(e)(1) does not globally embrace all experimental activity that at some
point, however attenuated, may lead to an FDA approval process.”
• Noted Merck’s test would vitiate rights of owners of biotech research
tool patents
• Also vacated and remanded damages award
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13. Merck KGaA v. Integra – Supreme Court
• Politically charged issue
– Intense political/social pressure to reduce
drug costs
– Pressure from Big Pharma re: stacking
royalties
• Research tool patents constrain input into drug
delivery pipeline
– Academic/Philosophical Arguments
• Research tool patents stifle basic research
• Concern with propriety of patenting human genes
• 18 Amicus Briefs
– 2/3 for Merck
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14. Merck KGaA v. Integra – Supreme Court
• Supreme Court Opinion
– Reversed and remanded
– Unanimous (Scalia)
• Issue: “[W]hether uses of patented inventions in
preclinical research, the results of which are not
ultimately included in a submission to the FDA, are
exempted from infringement by 35 U.S.C. § 271(e)(1).”
– Changed focus of case
• Noted preclinical data relevant to IND
• Noted that goal of research collaboration was IND
• Factual background mentions use of patented RGD
peptides in screening of peptide mimetics
– But S. Ct. did not see as research tool case (FN7)
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15. Merck KGaA v. Integra – Supreme Court
• Interpreted statute as giving “wide
berth” to use of patented drugs in
activities related to FDA approval
– Patented drugs only?
• Safe harbor encompasses all uses
of patented inventions
– So long as reasonably related to the
development and submission of any
information under the FDCA
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16. Merck KGaA v. Integra – Supreme Court
• Can include preclinical studies
• Can be for purposes other than testing
safety (e.g. mechanism of action)
• Phase of research not determinative:
– “There is simply no room in the statute for
excluding certain information from the
exemption on the basis of the phase of
research in which it is developed or the
particular submission in which it could be
included.”
• Research does not have to conform with
GLPs to fall under safe harbor
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17. Merck KGaA v. Integra – Supreme Court
• “Basic research” not exempt
– What is basic research?
“Basic scientific research on a particular
compound, performed without the intent to
develop a particular drug or a reasonable
belief that the compound will cause the sort
of physiological effect the researcher intends
to induce is surely not [exempt].”
- Research tools per se not addressed (See
FN7)
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18. Merck KgaA v. Integra – Supreme Court
• Experimentation on drugs not ultimately subject to FDA
submission can be exempt
• Use of patented compounds in experiments not ultimately
submitted to FDA can be exempt
• § 271(e)(1) allows for trial and error
• “Where a drugmaker has a reasonable basis for
believing that a patented compound may work,
through a particular biological process, to produce a
particular physiological effect, and uses the
compound in research that, if successful, would be
appropriate for submission to the FDA, that use is
‘reasonably related’ to the ‘development and
submission of information under . . . Federal law.”
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19. Merck KGaA v. Integra – Current Status
• Remanded to Fed. Cir. to consider
evidence presented at trial under
jury instruction
– D. Ct. instruction consistent with
Supreme Court opinion
• Brief of Appellant due today!
• Fed. Cir. seeking amicus briefs
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20. Merck KGaA v. Integra
Impact on Bio-Pharma Licensing
• Case has had impact
• Benitec v. Nucleonics (No. 04-174 D.Del.)
– Benitec provides gene silencing products and
services
– Brought suit against Nucleonics, Genscript and
Ambion for patent infringement
• `099 patent covers RNAi constructs and methods of
using to delay or repress target gene expression
• Covers both final products and use as research tool
– Benitec settled with Genscript and Promega when
they took licenses
– Benitec filed voluntary dismissal in Sept. against
Nucleonics on ground no case or controversy in view
of Merck v. Integra
• Counterclaims dismissed without prejudice
– Nucleonics has appealed dismissal of claims against
it!
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21. Merck KGaA v. Integra
Impact on Bio-Pharma Licensing
• What about Benitec licensees?
– Need for license if not infringing?
• Uses not clear
• Topics for Panel Discussion
– How is decision viewed in industry?
• By Biotech? By Pharma?
• Dramatic change? Wait for Fed. Cir. Decision?
• Where is the line now? What is the “basic research” that is not exempt?
What is the value of research tool patents?
• What will be net effect on innovation ? More or less?
– What effect has there been on existing licenses?
• Push back by existing licensees? Why or why not?
• Reach through claims?
– Changes to negotiation/drafting strategies?
• Hybrid agreements?
• Less patenting/ more trade secrets?
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22. Merck KGaA v. Integra
Thank You
Timothy J. Shea, Jr.
Director
Sterne, Kessler, Goldstein & Fox, P.L.L.C.
(202) 371-2679
tshea@skgf.com
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