The Impact of Revenue from a Collaboration Agreement on the 271(e)(1) Defense in Patent Infringement Cases

Find a Lawyer Near You
The Hatch-Waxman Act, established in 1984, provided a significant reform to the regulatory framework surrounding pharmaceutical patents in the United States. A key element of this reform was the introduction of the ‘safe harbor’ provision, known formally as 35 U.S.C. § 271(e)(1). This provision shields certain activities related to the development and submission of information to the U.S. Food and Drug Administration (FDA) from claims of patent infringement.

The application of the § 271(e)(1) safe harbor is relatively straightforward in conventional scenarios, where activities are exclusively related to the development and FDA submission of generics. However, its application becomes less clear when economic aspects, such as revenue from a collaboration agreement, come into play. This article explores the implications of such financial arrangements on the § 271(e)(1) defense, supported by case law from the U.S. Supreme Court and Federal Courts.

One fundamental case in this regard is Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193 (2005), wherein the Supreme Court clarified the bounds of the § 271(e)(1) exemption. The Supreme Court held that the safe harbor exemption applies to preclinical studies “reasonably related” to the development and submission of information to the FDA, regardless of whether the particular studies are ultimately included in a submission to the FDA. In this case, financial arrangements were not directly at issue, but the broad interpretation given by the Court opened the door to considering a wider range of activities as covered by the safe harbor.

While the potential impact of revenue from a collaboration agreement on a party’s § 271(e)(1) defense has not been addressed explicitly by the Supreme Court, the Federal Circuit’s decision in Momenta Pharmaceuticals, Inc. v. Amphastar Pharmaceuticals, Inc., 686 F.3d 1348 (Fed. Cir. 2012) has offered some guidance.

In Momenta, the Court held that post-approval activities aimed at maintaining FDA approval do not fall within the safe harbor of § 271(e)(1), even if they are arguable “reasonably related” to the development and submission of information to the FDA. The rationale was that these activities were for business reasons rather than regulatory compliance, hence not immune under the safe harbor provision. Extrapolating this logic to collaboration agreements, it is conceivable that a court could find that revenue-generating activities not directly related to obtaining or maintaining FDA approval but instead serving primarily commercial purposes fall outside the bounds of the § 271(e)(1) exemption.

A similar line of reasoning was applied in Classen Immunotherapies, Inc. v. Biogen IDEC, 659 F.3d 1057 (Fed. Cir. 2011), where the Federal Circuit held that routine post-approval activities, including those related to updating vaccine safety databases and changing vaccine labels, fell outside the scope of the § 271(e)(1) safe harbor because these were part of “routine business” rather than regulatory compliance.

The case of Isis Pharmaceuticals, Inc. v. Santaris Pharma A/S Corp., Case No. 1:11-cv-01104-RGA (D. Del. 2014) is also illuminating. Isis Pharmaceuticals, Inc. filed a patent infringement lawsuit against Santaris Pharma A/S Corp. in 2011. The primary contention revolved around the application of the § 271(e)(1) safe harbor provision. Santaris, the defendant, engaged in drug discovery and development activities using their Locked Nucleic Acid (LNA) technology. Isis claimed that several of these activities infringed their patents and that Isis was set to receive significant upfront payments, milestone payments, and royalties for providing access to the infringing technology.

In response, Santaris filed a motion to dismiss and argued that their activities were protected under the § 271(e)(1) safe harbor provision since they were ‘reasonably related’ to the development and submission of information to the FDA. A unique aspect of this case was that Santaris conducted their activities under collaboration agreements with partners, and they generated revenue from these activities. The Delaware District Court examined the allegations of Santaris, particularly those related to the profit-oriented arrangement under the collaboration agreement, and that Santaris’ activities were not indisputably “reasonably related” to the type of information submitted to the FDA. The District Court thus denied the motion to dismiss and stated that Santaris’ argument is precisely what was warned against in Merck I – taking the position that views the safe harbor as “globally embrac[ing] all experimental activity that at some point, however, attenuated, may lead to an FDA approval process.”

The Isis Pharmaceuticals, Inc. v. Santaris Pharma A/S Corp. case highlights that revenue from collaboration agreements may not automatically exclude the applicability of the § 271(e)(1) defense. However, the distinction depends greatly on the extent to which the revenue-generating activities are directly and primarily involved in producing data for FDA submission, as opposed to merely constituting routine business or post-approval activities.

While the Supreme Court has yet to provide a direct answer, existing Federal Circuit case law suggests that the impact of revenue from a collaboration agreement on the § 271(e)(1) defense largely depends on the extent to which these activities can be classified as “reasonably related” to the development and submission of information to the FDA, as opposed to primarily serving commercial purposes, such as being the sole or large source of revenue for an entity. If a court determines that these activities are primarily profit-oriented and not directly involved in regulatory compliance, they likely will not be covered under the safe harbor provision.

The debate over the extent of the § 271(e)(1) exemption highlights the critical importance of clearly defining the bounds of business and regulatory activities when entering collaboration agreements in the pharmaceutical industry. It emphasizes the need for careful legal planning and due diligence to ensure the preservation of the § 271(e)(1) defense if required. The legal landscape on patent infringement claims and defenses is dynamic and subject to change as the Supreme Court or Federal Circuit courts clarify these issues in future decisions.

Brandon M. Schwartz

As a trial attorney at Schwartz Law Firm in Oakdale, Minnesota, Brandon M. Schwartz focuses his practice primarily on business law and business litigation involving such matters as shareholder disputes, derivative actions, non-competes and liquidated damage litigation, contract creation and litigation, company formation, patent infringement litigation and age discrimination for clients throughout Minnesota, Iowa, Wisconsin and Arizona.

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Posts