Non-Voluntary Use HCV Patents USA

NonvoluntaryuseofpatentsfordrugstotreattheHepatitisCVirusintheUnitedStates:MechanismsavailabletotheFederal

Government,StateGovernmentsandPrivateActors

JamesLove,KnowledgeEcologyInternational

KEIPolicyBrief2014:1July18,2014ThisisbriefingnotesettingoutpossiblemechanismstoovercometheexclusiverightsofpatentsfordrugstotreattheHepatitisCVirus(HCV),intheUnitedStates. Eachapproachinvolvesleadershipfromdifferentactors.Eachhasadvantagesanddisadvantages,includinglegalandpracticalrisks.TableofContents

1. TheFederalGovernmentuseofHCVpatents,withoutpermissionfromrightholdera. 28U.S.C.1498.Patentandcopyrightcasesb. FoursofosbuvirtrialsinClinicalTrials.GovfundedbyUSgovernmentorother

2. StateGovernmentUseofHCVpatents,withoutpermissionfromrightholdera. InjunctionsforinfringementbyStatesb. TheeBayStandardforInjunctionsc. Statecompensationfornonvoluntaryuseofapatentedinventiond. FDAOrangeBooke. RegistrationofaDrugwiththeFDAwhenaStateauthorizesinfringementofthe

patent3. PrivateInfringementofHCVpatents,withoutpermissionfromrightholder4. RisksPosedbyTradeAgreements

a. Damagesb. Injunctionsc. PatentabilityStandardsd. ISDSe. Thirdpartyliability

5. PatentBuyout6. PatentPool7. PrizeFund8. CustomsIssues9. ConcludingComments

NonvoluntaryuseofHCVpatentsinUnitedStates 1of16

1.TheFederalGovernmentuseofHCVpatents,withoutpermissionfromrightholderThefirstmechanismisfortheUnitedStatestouseitsrightsunder28USC1498(a),whichreadsinpart:

28U.S.C.1498.Patentandcopyrightcases(a)WheneveraninventiondescribedinandcoveredbyapatentoftheUnitedStatesisusedormanufacturedbyorfortheUnitedStateswithoutlicenseoftheownerthereoforlawfulrighttouseormanufacturethesame,theowner'sremedyshallbebyactionagainsttheUnitedStatesintheUnitedStatesCourtofFederalClaimsfortherecoveryofhisreasonableandentirecompensationforsuchuseandmanufacture.

And,forclarity,thestatutealsosays:

Forthepurposesofthissection,theuseormanufactureofaninventiondescribedinandcoveredbyapatentoftheUnitedStatesbyacontractor,asubcontractor,oranyperson,firm,orcorporationfortheGovernmentandwiththeauthorizationorconsentoftheGovernment,shallbeconstruedasuseormanufacturefortheUnitedStates.

Sometimesreferredtoasagovernmentuseright,thisstatuteallowsfederalagenciesandthirdpartygovernmentcontractorstomanufactureand/oruseanyinventionwithoutauthorizationfromthepatentholder.Thefederalgovernmentsrightsarewithoutanobligationforpriornegotiation.ItwasthismechanismthatwasusedbyDHHSSecretaryTommyThompsonin2001,whenhethreatenedtobreaktheBayerpatentsonCiprofloxacin,inordertoimportlessexpensivegenericcopiesforUSgovernmentstockpilestotreatanthraxpoisoning.Intheend,ThompsonusedthisthreattoreachanagreementwithBayertocutitspricesby50percent.Onemajorchallengeinthisstrategyistodeterminethereasonableandentirecompensationfortheuse.Ontheonehand,Gileadcanpointtothe$1,000perpillpriceasabasisforthecompensation,claimingthepatentsrepresentmostofthevalueoftheproduct.ThegovernmentcouldcounterbydemonstratingthatGileadspricesareexcessive,andaccessislimitedtoasmallportionofpersonswhoneedthemedicine.Suchcasescandragonforyears,andgiventhemagnitudeofthepossibleclaimsthatGileadcouldmake,presentverysignificantrisksgoingforward.Also,eventhoughtheUSgovernmentcanuse28USC1948(a)toovercometherightsinthepatent,thefederalgovernmentmayfaceaseparatebarrierinregisteringtheproductwiththeFDA.Gileadhastheexclusiverighttorelyupontheoriginatorstestdatatoestablishthesafety


andefficacyofsofobuvir(anditsotherdrugs),inordertoobtainFDAmarketingapproval.(SeediscussionofFDAOrangeBook,below)TheGileadtestdatarightsforsofosbuvirextendsthroughDecember6,2018. KEIwelcomesinsightintotheissueoftheregulatorybarriers.TheremaybealegalwayfortheFDAtowaivethetestdataexclusivity,orforaproducttobedistributedwithoutbeingregistered,ornot.Alternatively,theUSgovernmentcouldsubmittestdataundertakenbypartiesotherthantheoriginator,andforSofosbuvir,thiscouldincludetestsunderwayorcompleted,includingforexampletwoNIHsponsoredtrials,atrialinFrancebyInsermANRSandatrialinAustraliabytheKirbyInstitute,aswellasnewtrialsnotyetundertaken.Inthisregard,trialsinvolvingsofosbuvirandledipasvirfixeddosecombinationsmaybeevenmoreimportant,ifthisnewcombinationislessexpensivetoproduceandeasiertoadministerthancombinationsinvolvingbiologicdrugssuchaspegylatedinterferonandribavirin.

FoursofosbuvirtrialsinClinicalTrials.GovfundedbyUSgovernmentorother

1.ClinicalTrials.govIdentifier:NCT01441180GS7977AloneorWithRibavirinforHepatitisChttp://clinicaltrials.gov/ct2/show/NCT01441180NationalInstituteofAllergyandInfectiousDiseases(NIAID)Intervention:GS7977RBVEnrollment:Enrollment:79

2.ClinicalTrials.govIdentifier:NCT02125500

PilotStudytoAssessEfficacyandSafetyofSofosbuvir/Ledipasvir(GS5885)FixeddoseCombinationinNS3/4AProteaseInhibitorexperiencedSubjectsWithHCVGenotype1InfectionandHIVCoinfectionhttp://clinicaltrials.gov/ct2/show/NCT02125500FrenchNationalInstituteforHealthandMedicalResearchFrenchNationalAgencyforResearchonAIDSandViralHepatitis(InsermANRS)Intervention:Sofosbuvir/LedipasvirfixeddoseEstimatedEnrollment:70


http://clinicaltrials.gov/ct2/show/NCT02064049SurveillanceandTreatmentofPrisonersWithHepatitisC(SToPC)KirbyInstituteIntervention:SofosbuvirandribavirinEstimatedEnrollment:650



CombinationTherapyforChronicHepatitisCInfectionhttp://clinicaltrials.gov/ct2/show/NCT01805882NationalInstituteofAllergyandInfectiousDiseases(NIAID)Intervention:Drug:FixedDoseGS7977/GS5885,Drug:FDCwithGS9451,Drug:FDCwithGS9669EstimatedEnrollment:325

IftheUnitedStatesfederalgovernmentelectedtouse28USC1498(a)toovercomethepatentrights,itwouldalsosolvetheissueofimportinganinfringinggood.Under19USC1337(l),Unfairpracticesinimporttrade,theUnitedStatesInternationalTradeCommissionisrequiredtopermitinfringingproductstoentertheUnitedStateswhenuseisbyorfortheUnitedStatesGovernment.Notethatin:

19U.S.C.Sec.1337Unfairpracticesinimporttrade(l)ImportationbyorforUnitedStatesAnyexclusionfromentryororderundersubsection(d),(e),(f),(g),or(i)ofthissection,incasesbasedonaproceedinginvolvingapatent,copyright,maskwork,ordesignundersubsection(a)(1)ofthissection,shallnotapplytoanyarticlesimportedbyandfortheuseoftheUnitedStates,orimportedfor,andtobeusedfor,theUnitedStateswiththeauthorizationorconsentoftheGovernment.Wheneveranyarticlewouldhavebeenexcludedfromentryorwouldnothavebeenenteredpursuanttotheprovisionsofsuchsubsectionsbutfortheoperationofthissubsection,anownerofthepatent,copyright,maskwork,ordesignadverselyaffectedshallbeentitledtoreasonableandentirecompensationinanactionbeforetheUnitedStatesCourtofFederalClaimspursuanttotheproceduresofsection1498oftitle28.

2.StateGovernmentUseofHCVpatents,withoutpermissionfromrightholderAseparatepathwouldinvolveastategovernmentacting,underthedoctrineofsovereignimmunity.In1999,theUSSupremeCourtheldina5to4decisionthataninstrumentalityoftheStateofFloridacouldnotbesuedforpatentinfringement,inacaseinvolvingapatentonamethodoffinancingstudentloans.TheconstitutionalissuesincludethetensionbetweentheEleventhandtheFourteenthamendmentstotheUnitedStatesConstitution.TheEleventhAmendmentbarsfederalcourtsfromextendingsuitsinlaworequityagainstastategovernment.TheFourteenthAmendmentsaysthatnostatemaydepriveapersonofpropertywithoutdue


processorlaw,andgivestheCongressthepowertoenforce,byappropriatelegislation,theprovisionsofthisarticle.

ArticleXITheJudicialpoweroftheUnitedStatesshallnotbeconstruedtoextendtoanysuitinlaworequity,commencedorprosecutedagainstoneoftheUnitedStatesbyCitizensofanotherState,orbyCitizensorSubjectsofanyForeignState.ArticleXIV1:AllpersonsbornornaturalizedintheUnitedStates,andsubjecttothejurisdictionthereof,arecitizensoftheUnitedStatesandoftheStatewhereintheyreside.NoStateshallmakeorenforceanylawwhichshallabridgetheprivilegesorimmunitiesofcitizensoftheUnitedStatesnorshallanyStatedepriveanypersonoflife,liberty,orproperty,withoutdueprocessoflawnordenytoanypersonwithinitsjurisdictiontheequalprotectionofthelaws.5:TheCongressshallhavepowertoenforce,byappropriatelegislation,theprovisionsofthisarticle.

InFloridaPrepaidPostsecondaryEd.ExpenseBd.V.CollegeSavingsBank(98531)527U.S.627(1999),themajorityopinionnotedTheunderlyingconductatissuehereisstateinfringementofpatentsandtheuseofsovereignimmunitytodenypatentownerscompensationfortheinvasionoftheirpatentrights.[Page640]Themajorityopinionsaid:

[A]Statesinfringementofapatent,thoughinterferingwithapatentownersrighttoexcludeothers,doesnotbyitselfviolatetheConstitution.Instead,onlywheretheStateprovidesnoremedy,oronlyinadequateremedies,toinjuredpatentownersforitsinfringementoftheirpatentcouldadeprivationofpropertywithoutdueprocessresult.[Page643]

TheMajoritynotedthatpatentholdersdohaveremediesforpatentinfringementbyastate,includingsuchpossibilitiesasgeneraltortclaims,ageneralunfaircompetitionsuit[Pages6434,Footnote8],andspecificallyinFloridaAggrievedpartiesmaypursuealegislativeremedythroughaclaimsbillforpaymentinfull,Fla.Stat.11.065(1997),orajudicialremedythroughatakingsorconversionclaim.[Page644,Footnote9]. TheMajoritycomplainedthatCongresswasmakingacaseforauniformsystemofremedies,buthadnotestablishedtheinadequacyofstateremedies,aswasrequiredtoovercometheArticle11sovereignty.


TheCourtoverturnedthelegislativeactthathadattemptedtomakeStatessubjecttoinfringementremediesunder35USC271(h)and35USC296.

35U.S.Code271Infringementofpatent(h)Asusedinthissection,thetermwhoeverincludesanyState,anyinstrumentalityofaState,andanyofficeroremployeeofaStateorinstrumentalityofaStateactinginhisofficialcapacity.AnyState,andanysuchinstrumentality,officer,oremployee,shallbesubjecttotheprovisionsofthistitleinthesamemannerandtothesameextentasanynongovernmentalentity.

35U.S.Code296LiabilityofStates,instrumentalitiesofStates,andStateofficialsforinfringementofpatentsa)InGeneral.AnyState,anyinstrumentalityofaState,andanyofficeroremployeeofaStateorinstrumentalityofaStateactinginhisofficialcapacity,shallnotbeimmune,undertheeleventhamendmentoftheConstitutionoftheUnitedStatesorunderanyotherdoctrineofsovereignimmunity,fromsuitinFederalcourtbyanyperson,includinganygovernmentalornongovernmentalentity,forinfringementofapatentundersection271,orforanyotherviolationunderthistitle.(b)Remedies.Inasuitdescribedinsubsection(a)foraviolationdescribedinthatsubsection,remedies(includingremediesbothatlawandinequity)areavailablefortheviolationtothesameextentassuchremediesareavailableforsuchaviolationinasuitagainstanyprivateentity.Suchremediesincludedamages,interest,costs,andtrebledamagesundersection284,attorneyfeesundersection285,andtheadditionalremedyforinfringementofdesignpatentsundersection289.

Themajorityopinionconcludedbyfinding:

ThehistoricalrecordandthescopeofcoveragethereforemakeitclearthatthePatentRemedyActcannotbesustainedunder5oftheFourteenthAmendment.TheexamplesofStatesavoidingliabilityforpatentinfringementbypleadingsovereignimmunityinafederalcourtpatentactionarescarceenough,butanyplausibleargumentthatsuchactiononthepartoftheStatedeprivedpatenteesofpropertyandleftthemwithoutaremedyunderstatelawisscarcerstill.ThestatutesapparentandmorebasicaimsweretoprovideauniformremedyforpatentinfringementandtoplaceStatesonthesamefootingasprivatepartiesunderthatregime.[11]TheseareproperArticleIconcerns,butthatArticledoesnotgiveCongressthepowertoenactsuchlegislationafterSeminoleTribe.


ThejudgmentoftheCourtofAppealsisreversed,andthecaseisremandedforproceedingsconsistentwiththisopinion.[Page648]

InjunctionsforinfringementbyStatesThefederalstatuteonthegrantofinjunctionsforpatentinfringementis35U.S.C.283,whichconsistsofasinglesentence:

35U.S.Code283InjunctionTheseveralcourtshavingjurisdictionofcasesunderthistitlemaygrantinjunctionsinaccordancewiththeprinciplesofequitytopreventtheviolationofanyrightsecuredbypatent,onsuchtermsasthecourtdeemsreasonable.

ThePatentRemedyActdidproposethatremedies(includingremediesbothatlawandinequity)areavailablefortheviolationtothesameextentassuchremediesareavailableforsuchaviolationinasuitagainstanyprivateentity.[35USC296(b)],butthenextsentenceinthesameparagraphdescribedsuchremediestoincludedamages,interest,costs,andtrebledamagesundersection284,attorneyfeesundersection285,andtheadditionalremedyforinfringementofdesignpatentsundersection289,anenumerationthatomittedsection283oninjunctions. CollegeSavingshadsoughtawiderangeofremedies,includingdeclaratoryandinjunctivereliefaswellasdamages,attorneysfees,andcosts.[Page633]Thefootnote11inthepenultimateparagraphofthemajorityopinioncriticizesthedissentformisrepresentingtheextenttowhichtheCongressionalActwouldhaveexposedstatestopatentinfringementremedies.

...contrarytothedissentsintimation,seepost,at663(opinionofStevens,J.),thePatentRemedyActdoesnotputStatesinthesamepositionastheUnitedStates.UnderthePatentRemedyAct,Statesaresubjecttoalltheremediesavailabletoplaintiffsininfringementactions,whichincludepunitivedamagesandattorneysfees,see35U.S.C.284,285,aswellasinjunctiverelief,see283.Inwaivingitsownimmunityfrompatentinfringementactionsin28U.S.C.1498(a)(1994ed.andSupp.III),however,theUnitedStatesdidnotconsenttoeithertrebledamagesorinjunctiverelief,andallowedreasonableattorneysfeesonlyinanarrowclassofspecifiedinstances.

TheDissentrespondedtofootnote11withfootnote15,whichread:


Footnote15.ThemajoritysassertionthatthePatentRemedyActdoesnotputStatesinthesamepositionastheUnitedStates,ante,at648,n.11,ismisleading.Inthecaseofprivateinfringementsuits,trebledamagesareavailableonlywheretheinfringeractedinwantondisregardofthepatenteespatentrights,thatis,wheretheinfringementiswillful.ReadCorp.v.Portec,Inc.,970F.2d816,826(CAFed.1992)(reversingtheDistrictCourtsawardofenhanceddamages).Ontheotherhand,afindingofwillfulinfringementdoesnotmandatethatdamagesbeenhanced,muchlessmandatetrebledamages.Ibid.Attorneysfeesareavailableonlyinexceptionalcircumstances.35U.S.C.285.Onceithasdeterminedthatthecaseisexceptional,thedistrictcourthasdiscretionwhetherornottoawardattorneysfeesandthefeesmustbereasonable.GentryGallery,Inc.v.BerklineCorp.,134F.3d1473,1480(CAFed.1998).Inaddition,attorneysfeesareavailableinlimitedcircumstancesinsuitsagainsttheUnitedStates.Ante,at648,n.11.TheremainingdifferencesbetweentheUnitedStateswaiverofsovereignimmunityandthePatentRemedyActaresupportedbyquintessentiallyfederalconcerns.ThisCourthasfoundthattheprocurementofequipmentbytheUnitedStatesisanareaofuniquelyfederalinterest.Boylev.UnitedTechnologiesCorp.,487U.S.500,507(1988).Indeed,theimportanceofthefederalinterestinmilitaryprocurementledthisCourttofashionthedoctrineofGovernmentcontractorsimmunitywithoutwaitingforCongresstoconsiderthequestion.Id.,at531(Stevens,J.,dissenting).InjunctionsarenotavailableagainsttheUnitedStatesbecauseoftheFederalGovernmentsextensiveinvestmentinpatentedmilitaryinventions.[T]herighttoenjointheofficeroftheUnitedStates...virtuallyassertstheexistenceofajudicialpowertocloseeveryarsenaloftheUnitedStates.Crozierv.KruppA.G.,224U.S.290,302(1912).

Oneimplicationoffootnotes11and15ofthedecisionisthatbyoverturningthePatentRemedyAct,thereisnolongerastatutorybasisforgrantinginjunctions. FollowingtheSupremeCourtopinioninFloridaPrepaid,therehavebeeneffortstoovercomethesovereignimmunitydefensebyseekinginjunctionsundertheExparteYoungdoctrine,astrategythatinvolvesobtaininganinjunctionagainstindividualsworkingforgovernments.TheextenttowhichaplaintiffcansucceedinovercomingtheArticleelevensovereignimmunitybybringingasuitagainstindividualstateofficialsisnuanced,technicalandnarrow,andoftenlitigatedinthecontextofsociallycontroversialissues,suchasvotingrights,rightsofpersonswithdisabilities,healthcareorenvironmentalprotection.Theexperienceinobtainingsuchinjunctionsforpatentorcopyrightcasesismixed.Insomecases,effortstoobtainsuchinjunctionshavebeenrejected,suchasinPenningtonSeed,Inc.v.ProduceExchangeNo.299457F.3d1334(Fed.Cir.2006),whileinothercasesrequestshavebeensuccessful.


TheeBayStandardforInjunctionsTheriskofaninjunctioninanonvoluntaryuseofapatentisnotzero,butitisnot100percenteither,bothbecauseitischallengingtopersuadeacourttoaccepttheExparteYoungdoctrine,andevenwhenacourtconsidersaninjunction,theyarenotautomaticforinfringementsofintellectualpropertyrights,particularlyfollowingtheUSSupremeCourtdecisioninanothercase,eBayInc.v.MercExchange,L.L.C.,547U.S.388(2006). Inthe2006eBayvMercExchangedecision,JusticeThomasdeliveredtheopinionforaunanimousCourt,whichsetoutthefourfactortestthatmustbeconsideredinevaluatingarequestforapermanentinjunction.

Accordingtowellestablishedprinciplesofequity,aplaintiffseekingapermanentinjunctionmustsatisfyafourfactortestbeforeacourtmaygrantsuchrelief.Aplaintiffmustdemonstrate:

(1)thatithassufferedanirreparableinjury(2)thatremediesavailableatlaw,suchasmonetarydamages,areinadequatetocompensateforthatinjury(3)that,consideringthebalanceofhardshipsbetweentheplaintiffanddefendant,aremedyinequityiswarrantedand(4)thatthepublicinterestwouldnotbedisservedbyapermanentinjunction.

WhileinprincipletheeBaydecisiondidnotchangethelaw,ithasanenormouspracticalimpactonthewaythelawisunderstoodbyDistrictandCircuitcourts.Today,inlitigationconcerningtheremediesforinfringementofintellectualpropertyofallkinds,Courtswilloftenbeaskedtoconsideracompulsorylicensetotheinfringedpatentasanalternativetotheenforcementoftheinjunction.Thishasleadtoasignificantnumberofcompulsorylicensesbeingissuedforinfringementofpatentsintheareaofmedicaldevicesanddiagnostictests,aswellasincasesinvolvingsoftware,mobilecomputingdevices,automobiles,andothertechnologies.OnJuly1,2014,ajudgeintheEasternDistrictofTexasusedtheeBayinjunctionstandardtograntacompulsorylicensethatallowedGlobusMedicaltosellanadjustableintervertebralspacerusedforspineinjuries,thatwasbaseduponthemisappropriationoftradesecrets,subjecttoanongoingroyaltyof5percentfor15years.(http://www.keionline.org/node/2053).

StatecompensationfornonvoluntaryuseofapatentedinventionOnecanimagineanumberofcaseswhereastatemaydecidetowillfullyinfringepatentrightswithoutofferingcompensation,andgiventhelowbarsetbytheUSSupremeCourtinFloridaPrepaid,whichconsidersaggrievedpartiespursuingalegislativeremedythroughaclaimsbill


forpaymentinfullamongtheacceptabledueprocessalternatives,thereseemstobeconsiderableflexibility.However,inthecaseofpatentsonsofosbuvirorothermultibilliondollardrugs,astatedecisiontobreakapatentmonopolywilllikelybemoresustainableifthestategovernmenthasaprocessforremunerationforthenonvoluntaryuseofthepatentedinvention.ItisevenmoretrueasregardsinthechancesofafavorableoutcomefromanExParteYounginjunctioncase.TheStateshaveconsiderableflexibilityincreatingboththestandardsfortheremunerationandthedueprocessforresolvingdisputesovertheamountoftheremuneration.Forexample,astatecouldadoptasystemforremunerationforuseofapatentthatwaspaidoutofafundofafixedsizetocompensatepatentholders,forgeneralpatentinfringements,orspecificusessuchasforthetreatmentofHepatitisC.Astatecouldproviderighttoreasonableroyaltiesforinfringement,suchastheprovisionsintheAffordableCareActforbiologicpatentsthatarenotdisclosedonatimelybasis.AstatecouldadoptlanguagesimilartothetheprovisionsformandatorylicensingofpatentsnecessarytoimplementaCleanAirActstandardunder42USC7608.Toreduceuncertainty,astatecouldcreateguidelinesfortheroyaltyrate,suchastheJapaneseroyaltyguidelines.Astatecouldrequirethecompensationtobesettledthrougharbitration,suchasthesystemforcompensationforagriculturaltestdata,undertheFederalInsecticide,Fungicide,andRodenticideAct(FIFRA),whichamongotherthings,requiresrightholderstodiscloseactualR&Doutlays,andinformationregardingthemarketshareoftheinfringingproduct,inordertomakeaprorataallocationofcostsharing,overatimelimitedperiodthatisshorterthanapatent.Alloftheseandotherapproaches,couldbeconsidered,adoptedandimplemented,aspartofaplantobreakpatentmonopoliesfordrugsforHCV.

FDAOrangeBookIn1979,thefederalgovernmentcreatedapublicationnowreferredtoastheOrangeBook:ApprovedDrugProductswithTherapeuticEquivalenceEvaluations,inordertoprovideinformationtoassiststatesandandfacilitategenericsubstitution.In1984,theHatchWaxmanActcreatedanewpathwayforregisteringgenericpharmaceuticaldrugsthatincludedasuigenerisintellectualpropertyrightintestdata,whichconsistedofanexclusiverighttorelyupondatafromclinicaltrialsandcertainothertests,inanapplicationtotheFDAformarketingapprovalofapharmaceuticaldrug.Theperiodofexclusivitywasfiveyearsfornewchemicalentity(NCE),orthreeyearsforanewindication. TheHatchWaxmanActcreatedaprocessfordisclosingcertaintypesofpatentsonadrug,andcreatingbarrierstoregisteringdrugswhilethosepatentsarestillrelevant.UndertheFDArules,astheyhaveevolvedovertime,thelistingofapatentintheFDAOrangeBookcreatesthepossibilityofa30monthstaybeforetheFDAcanapproveanapplicationforagenericdrug.Thegenericapplicantcanreducethistime,butonlyifadistrictcourtdecidesthatthepatentisinvalidornotinfringed(includinganysubstantivedeterminationthatthereisnocauseofactionforpatentinfringementorinvalidity).[21USC355(c)(3)(C)(i)]


Forbiologicdrugs,adifferentpathwayexistsoutsideoftheOrangeBooksystem,andincludes12yearsofrightsintestdata,andacomplexsystemofdisclosureundernondisclosurerulesofrelevantpatents,andcompulsorylicensesonnondisclosedpatents.

RegistrationofaDrugwiththeFDAwhenaStateauthorizesinfringementofthepatentAstatewouldfacethechallengesofregisteringaninfringingdrugwiththeUSFDA.Inadditiontotheissueofrightsintestdata,whichmayormaynotbeforthcomingfromanNIHfundedclinicaltrial,thereisthe30monthpatentregulatorystayforpatentslistedintheUSFDAOrangeBook.Astatecouldwaitoutthe30months,orcouldasktheFDAtoconsideranonvoluntarylicensefromastateassufficienttomeetthestatutorystandardsforovercomingtheOrangeBookpatents.

3.PrivateInfringementofHCVpatents,withoutpermissionfromrightholderAsnotedabove,courtscanandroutinelydopermitprivatepartiestomake,sell,importandexportinfringingproducts,asanalternativetothegrantofaninjunctiontopreventsuchacts.Suchnonvoluntaryusesofpatentsareoftensubjecttoongoingroyaltypayments.Withoutwaitingforagovernor,statelegislatureorthefederalgovernmenttoleadontheHCVpatentissue,aprivatecompany,forprofitornonprofit,couldsimplyinfringe,andlitigateacompulsorylicenseundertheeBaystandardsforaninjunction. AllofthechallengesregardingtheFDAregistrationoftheproductthatfaceastategovernmentwillremain,althoughinasomewhatlessemotivecontext,becausethestatesovereigntyissueisprobablyconsideredmoreprovocativethanthenowcommoncompulsorylicenseunderaneBayinjunctionproceeding.UnclearinsuchascenariowouldbethereactionofajudgetotheassertionbytheinfringingactorthatadecisionbyafederaljudgetoforgotheinjunctionconstitutesasufficientresolutionofthepatentdisputetoallowtheregistrationoftheinfringingproductpriortotheexpirationoftheFDAs30monthstayforOrangeBookpatents.


4.RisksPosedbyTradeAgreementsAmongtherisksposedbytradeagreementsareprovisionsintradeagreementsondamages,injunctionsandthelinkageofpatentstatustotheregistrationofdrugs.

DamagesOntheissueofdamages,languagefromACTA,andtheproposedtextintheTransPacificPartnership(TPP)agreementareparticularlytroublesome.IntheTPP,theAugust2013textincludedthefollowinglanguage,asconsensustext:

Indeterminingtheamountofdamages...itsjudicialauthoritiesshallhavetheauthoritytoconsider,interalia,anylegitimatemeasureofvaluetherightholdersubmits,whichmayincludelostprofits,thevalueoftheinfringedgoodsorservicesmeasuredbythemarketprice,orthesuggestedretailprice.

Withoutgoingintodetails,suchastheimplicationthatthestandardevokestheEntireMarketValueRule(EMVR),andwouldignoreactualtransactionprices,itissufficienttoacknowledgethatthestandard,pushedbytheMotionPictureIndustryAssociationforcopyrightinfringements,isaggressiveandparticularlyinappropriateforpatents.GiventhehighsuggestedretailpriceforSovaldiandothertreatmentsforHCV,policymakerswillwanttoreflectonthisstandard,asregardsanobligationinatradeagreementthatissubjecttodisputeresolution.TheTPPtextdoesnotrequiresuperhighdamages,butitdoesrequireTPPmemberstogivejudicialauthoritiestherighttograntsuperhighdamages.Thiswouldbeindirectconflictwithmuchofthejurisprudenceunder28USC1498,andthestandardsforcompensationunder42U.S.Code2187Compensation,awards,androyalties.Ifappliedtocompulsorylicenses,itwouldconflictwiththecompensationundertheFederalInsecticide,Fungicide,andRodenticideAct(FIFRA),thestatutorystandardforthecompulsorylicensesintheAffordableCareAct,anditwouldconflictwithsomeoftheproposalssuggestedaboveforstateremunerationschemes.

InjunctionsTheobligationtomakeinjunctionsavailablealsocreatesissuesforsomeoftheoptionsavailabletostates,totheextentthatatradeagreementisusedtosanctionanoncompliantstateprogram.


PatentabilityStandardsIntheTPPnegotiations,USTRhasproposed

ThePartiesconfirmthat:patentsshallbeavailableforanynewusesormethodsofusingaknownproduct....aPartymaynotdenyapatentsolelyonthebasisthattheproductdidnotresultinenhancedefficacyoftheknownproductwhentheapplicanthassetforthdistinguishingfeaturesestablishingthattheinventionisnew,involvesaninventivestep,andiscapableofindustrialapplication.

GiventheproliferationofpatentsonsofosbuvirandotherHCVdrugs,includingpatentsontheusesofproductsincombinationtreatments,theTPPprovisionsonpatentabilitystandardsmakeitmoredifficultfortheUnitedStatesandothergovernmentstocurbthegrantingthetypeofpatentsthataddlittleornothingintermsofR&Dincentives,butharmconsumersbyextendingmonopoliesanddiscouragingordelayingimportantfollowonresearch.

ISDSOfconsiderableimportanceintradeagreementsareprovisionsforinvestorstatedisputesettlement(ISDS),whichwouldpermitaprivatepartysuchasRoche,Merck,AbbVieorGileadtobringprivatesuitstoenforceprovisionsintradeagreements,ormoregenerallytoaddressexpropriationofinvestments.The2012U.S.ModelBilateralInvestmentTreaty(BIT)languagepublishedinUSTRincludesanArticle6:ExpropriationandCompensation,whichcoversbothdirectandindirectexpropriation.InthemodelBIT,USTRallowsthat:

Article6(5).ThisArticledoesnotapplytotheissuanceofcompulsorylicensesgrantedinrelationtointellectualpropertyrightsinaccordancewiththeTRIPSAgreement,ortotherevocation,limitation,orcreationofintellectualpropertyrights,totheextentthatsuchissuance,revocation,limitation,orcreationisconsistentwiththeTRIPSAgreement.

UnderanISDS,theprivatepartyandprivatearbitrators,operatingoutsideofanationalcourtsystem,woulddeterminetheextenttowhichanactionisconsistentwiththeTRIPSAgreement.UnderISDS,investorssuitsagainsttheUnitedStateswouldhavetocomefrominvestorsresidinginforeigncountries.Buttodayrightholdersfindallsortsofwaystochangetheirlegalresidency.Forexample,PfizerandAbbViearebothcurrentlyintheprocessofattemptingrelocationsoflegalresidencetoavoidUSfederaltaxes.Withenoughmoneyontheline,holdersofkeyHCVpatentswouldhaveopportunitiesandincentivestorelocatetobringISDSactions.

Thirdpartyliability


Thereisconsiderablepressurefromthemotionpictureandpharmaceuticalindustriestoincludeprovisionsintradeagreementstocreateorexpandthirdliabilityforinfringements,includingentitiesthatprovidingnonpatentedmanufacturinginputs,transportinfringingproducts,orprocessfinancialpaymentsforinfringeproducts.AllofthesemeasurescreatepotentialissuesforStatesorprivateentitiesengagingininfringingactivities.

5.PatentBuyoutThediscussionsaboveaddressthemechanismstousepatentswithoutpermissionfrompatentholders.Governmentsandinsurersmightalsoconsiderpatentbuyoutstrategies,usingeithercompletelyvoluntarynegotiations,orifgovernmentsareinvolved,anonvoluntarytakingofthepatent.Thebuyoutcanbeforallusesandallgeographicareasofthepatentedinvention,orafieldofuse(HCV)andageographicareaforapatent.Thepatentbuyoutwouldbejustifiedonthegroundsthatthepatentwouldbemorevaluabletosocietyiftheproductswereavailableatmarginalcosts,giventhefactthattheinventionsaretreatingpatientswithdifferentialhealthbenefits,andthediseaseisinfectious. Inpatentbuyouts,thecriticalissueforallconcernedwillbetheprice.Totheextentthattherearemultipleproductsinthesametherapeuticclassthatcanbereasonably,evenifimperfectly,substitutedforeachother,thereisanopportunitytoplayonepatentholderoffagainstanother.If,ontheotherhand,theonlydrugcombinationworthhavingissofosbuvircombinedwithledipasvir,thenegotiationwillbechallenging,andthepriceextremelyhigh.Evenifthepriceofthebuyoutisextraordinarilyhigh,involvingtensofbillionsofdollars,governmentswouldbebetteroff,sincetheyaregoingtospendtensofbillionsinanycase,butunderthebuyouttheycouldtreatfarmorepeopleforthesameamountofmoney.Thechallengeinapatentbuyoutscenarioistoorganizealloftheentitiesthatbenefitfromthebuyouttocooperatetofinancethebuyout.Dividedandunorganized,consumerswillpayalot,andgetverylittle.Organized,theycanpayless,andgetmore.

6.PatentPoolThereisinfactaverylargeandgrowingnumberofpatentsonHCVproducts,andextensivelitigationbetweenmanyparties.TheMarch30,201410QReportbyGileadusesmorethan3,000wordstodescribeitslitigationwithRoche,Merck,AbbVie,Idenixandothersoversofosbuvirpatents,andincludessuchissuesastheAbbVieclaimthatithaspatentedtheuseofthecombinationoftwoGileaddrugs,sofosbuvirandledipasvir,totreatHCV. GiventheimportanceofcombinationsandfollowoninnovationtoeffectivelytreatHCV,andtheextensiveandcomplexpatentclaimsbeingfiledbyvariousparties,HCVisatriskfrompatentthickets.Inthepast,theUnitedStateshasrespondedtosuchcasesbymandatingthatright


holdersplacepatentsintoapatentpool,orriskseizureofthepatentsbythefederalgovernment.ThiswaspreviouslydoneforbothAircraftandRadiopatents(KEIResearchNote2007:6),andshouldbeconsideredforHCV.

7.PrizeFundSenatorBernieSanders(IVT)hasproposedtheeliminationofexclusiverightsforpatents,eitherforallpharmaceuticaldrugsorfordrugsforHIV/AIDS.Thisapproach,particularlytheHIV/AIDSprizefundlegislation,S.626inthe113thCongress,couldbemodifiedforHCV.Indeed,onecanimagineexpandingS.626toincludetreatmentsforHCV,orotherinfectiousdiseasesthatmightappropriate.

8.CustomsIssuesAsnotedabove,under19USC1337(l)Unfairpracticesinimporttrade,theUnitedStatesInternationalTradeCommissionisrequiredtopermitinfringingproductstoentertheUnitedStateswhenuseisbyorfortheUnitedStatesGovernment,subjecttoreasonableandentirecompensationinanactionbeforetheUnitedStatesCourtofFederalClaimspursuanttotheproceduresofsection1498oftitle28.Forimportsbyentitiesnotprotectedby1337(l),thereisthepossibility,under,19USC1337(d)(1)fortheInternationalTradeCommission(ITC)topermitaninfringingimport,inordertoaddressconcernsover:

thepublichealthandwelfare,competitiveconditionsintheUnitedStateseconomy,theproductionoflikeordirectlycompetitivearticlesintheUnitedStates,andUnitedStatesconsumers.

Moreover,eveniftheITCdoesallowaninfringingimport,thePresidentmayoverridetheITC.Thiswaswasdone,forexample,byUSTRheadMichaelFroman,actingonbehalfofthePresident,onAugust3,2013,inadecisiontopermitimportsofinfringingAppleInc."smartphonesandtabletcomputersthatinfringeaU.S.patentownedbySamsungElectronics,"intheITCInvestigationNo.337TA794. IntheabsenceofadecisionbytheITCorthePresidenttopermitinfringingimports,theproductscanbemanufacturingintheUnitedStates.Inthisregard,notethatCIPLArecentlybuiltamanufacturingplantinUganda,tomanufacturedrugsofsimilarcomplexitytothenewHCVdrugssoldbyGileadandAbbvie,andsuchanarrangementwouldlikelybepossible,ifitwaslegaltomakeandselltheproductsintheUnitedStates.


9.ConcludingCommentsThereexistanumberofwaysthatgovernmentscanovercometheexclusiverightsinpatentstoexpandaccesstoHCVdrugs,andaddresstheaffordabilityissues.Eachmechanismhasitsadvantagesbutalsorisks.ActionsbytheFederalgovernmentorbyStategovernmentsarefeasible,andshouldbepursued.Intheabsenceofleadershipbygovernmentofficials,privatepartiescanalsoact. Thefederalgovernmenthasthegreatestfreedomtoact,includingtoimportandregistergenericversionsofdrugs.Withoutchangesinfederalstatutes,theprimarybarriertoafederalinterventionusing28USC1498willbetoresolvedisputesoverthecompensationtopatentholdersaprocessthatwouldlikelytakeseveralyearstoplayout,andinvolvehugesumsofmoney.ThecompensationissuecouldbemanagedmuchbetterwithnewlawsthatcreatedamorepredictableframeworkforsettingcompensationonHCVdrugpricesthatalsoaddressedconcernsoverhealthcarebudgetconstraints,suchascapsoncompensationrelatingtomultiplesofactualR&Dinvestments(theapproachusedinFIFRA),asimplefixedmaximumcompensation(theapproachusedinS.626fortreatmentsforHIV/AIDS),orasapercentageofoutlaysontreatment,tomentionafewpossibleapproaches.StategovernmentshaveamoredifficultpathforwardasregardspossibleinjunctionsandtoregisterproductswiththeFDA,buttheyhaveonesignificantadvantagetheabilitytocreatetheirownnormsforcompensationandsystemsofdueprocessfornonvoluntaryusesofpatents,aswellascompleteimmunityfromfederalsuitsfordamages.Privatepartieshaveavailablemechanismsthataretodayfairlyawellknownandacceptedpathforwardforanonvoluntaryuseofapatent,buttheoutcomewilldependupondecisions,firstbyadistrictcourtjudge,laterbytheCourtofAppealsfortheFederalCircuit,andpossiblybytheSupremeCourt,overinjunctionsanddamages.Apatentbuyouteffortwouldhaveanumberofadvantages,andinthesomescenarios,reduceuncertainty,butrequireconsiderablecoordinationamongbuyers,andchallengesinfinancingthebuyoutforanassetthatprovidesbenefitsoverseveralbudgetyears.Thepatentpoolingscenariousedin1917toconsolidateaircraftpatentsortheproposaltoreplacetheHCVpatentmonopolywithaprizefundareamongthemoreinnovativewaysforwardthatrequirechangesourthinkingabouttheroleofthepatentsysteminsupportingmedicalinnovation.Theyshouldataminimumbemodeledandevaluatedbypolicymakers.TheNationalAcademiesshouldbeaskedtoconsiderprizefundalternativesfortreatmentsforhepatitisC,eitheronitsown,orinconnectionwithproposalsforaprizefundforHIV/AIDS.


Documents

Non-Voluntary Use HCV Patents USA