Realizing two-tiered innovation policy through drug regulation

Stanford Law Review

Volumn 58, Issue 4, 2006, Pages 1221-1250

  Ridgway, William E ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

DRUG;

ARTICLE; DRUG APPROVAL; DRUG COST; DRUG INDUSTRY; DRUG LEGISLATION; ECONOMIC ASPECT; ECONOMICS; FOOD AND DRUG ADMINISTRATION; HEALTH CARE POLICY; HUMAN; LEGAL ASPECT; MASS COMMUNICATION; PATENT; RESEARCH; STANDARD; UNITED STATES;

DIFFUSION OF INNOVATION; DRUG APPROVAL; DRUG COSTS; DRUG INDUSTRY; ECONOMIC COMPETITION; HEALTH POLICY; HUMANS; INTELLECTUAL PROPERTY; LEGISLATION, DRUG; PATENTS; PHARMACEUTICAL PREPARATIONS; RESEARCH; UNITED STATES; UNITED STATES FOOD AND DRUG ADMINISTRATION;

EID: 33646677216     PISSN: 00389765     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Note

References (201)

1. See WILLIAM LANDES & RICHARD A. POSNER, ECONOMIC STRUCTURE OF INTELLECTUAL PROPERTY 23 (2003) ("Freedom to imitate, to copy, is a cornerstone of competition and operates to minimize monopoly profits.").
2. See, e.g., Duane M. Linstrom, Spontaneous Mutation: A Sudden Change in the Evolution of the Written Description Requirement as It Applies to Genetic Patents, 40 SAN DIEGO L. REV. 947, 970 (2003);
3. Janice M. Mueller, The Evolving Application of the Written Description Requirement to Biotechnological Inventions, 13 BERKELEY TECH. L.J. 615, 615-16 (1998);
4. Harris A. Pitlick, The Mutation on the Description Requirement Gene, 80 J. PAT. TRADEMARK OFF. SOC'Y 209, 209-10 (1998);
5. Arti K. Rai, Intellectual Property Rights in Biotechnology: Addressing New Technology, 34 WAKE FOREST L. REV. 827, 835 (1999);
6. Harold C. Wegner, The Disclosure Requirements of the 1952 Patent Act: Looking Back and a New Statute for the Next Fifty Years, 37 AKRON L. REV. 243, 244 (2004).
7. See, e.g., Univ. of Rochester v. G.D. Searle & Co., 358 F.3d 916 (Fed. Cir. 2004).
8. Bayh-Dole University and Small Business Patent Procedures Act of 1980, Pub. L. No. 96-517, 94 Stat. 3019 (codified as amended at 25 U.S.C. §§ 200-211 (2006)).
9. See Rebecca S. Eisenberg, The Shifting Functional Balance of Patents and Drug Regulation, 19 HEALTH AFF. 119, 125 (2001) (noting this revenue-extracting consequence of the Bayh-Dole Act).
10. 21 U.S.C. § 355(j) (2006).
11. See generally Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Act), Pub. L. No. 98-417, 98 Stat. 1585 (codified in various sections of U.S.C.)
12. 21 U.S.C. § 355(j) (2006).
13. An article by Rebecca Eisenberg constitutes the lone exception. Her work highlights the ways that several of the FDA's exclusivity provisions do not enhance the safety and efficacy of drugs, but rather implement innovation policy. See Eisenberg, supra note 5, at 123 (citing the Orphan Drug Act and the pediatric extensions to the Food and Drug Administration Modernization Act of 1997 as examples of the FDA getting involved "in economic regulation lying outside its core scientific competence"). Her article provided the groundwork for this Note.
14. 21 U.S.C. §§ 301-397 (2006).
15. Martin S. Lipsky & Lisa K. Sharp, From Idea to Market: The Drug Approval Process, 14 J. AMER. BD. FAM. PRAC. 362, 362-67 (2001).
16. Jim Gilbert et al., Rebuilding Big Pharma's Business Model, 10 IN Vivo: THE BUSINESS & MEDICINE REPORT 73 (2003) (executive summary), available at http://www.windhover.com/contents/monthly/exex/e_2003800191.htm;
17. see also TUFTS CTR. FOR STUDY OF DRUG DEV., HOW NEW DRUGS MOVE THROUGH THE DEVELOPMENT AND APPROVAL PROCESS (2001), available at http://csdd.tufts.edu/ NewsEvents/RecentNews.asp? newsid=4.
18. FOOD & DRUG ADMIN., INNOVATION OR STAGNATION?: CHALLENGE AND OPPORTUNITY ON THE CRITICAL PATH TO NEW MEDICAL PRODUCTS (2004), available at http://www.fda.gov/oc/initiatives/criticalpath/whitepaper.html ("[A] new medicinal compound entering Phase 1 testing, often representing the culmination of upwards of a decade of preclinical screening and evaluation, is estimated to have only an 8 percent chance of reaching the market. This reflects a worsening outlook from the historical success rate of about 14 percent.").
19. 21 U.S.C. § 355(j)(2) (2006).
20. Id.;
21. PETER BARTON HUTT & RICHARD A. MERRILL, FOOD AND DRUG LAW: CASES AND MATERIALS 571 (2d ed. 1991).
22. Note that there is no abbreviated approval process for biologies. See generally 42 U.S.C. § 262 (2006). Every biologic is a new or "pioneer" drug that must be supported by the full preclinical and clinical investigation. Unlike chemically synthesized drugs, whose functional characteristics generally do not vary significantly, the safety or effectiveness of a biologic cannot be evaluated simply by identifying the physical structure of the active ingredient.
23. FOOD & DRUG ADMIN., FDA GUIDANCE CONCERNING DEMONSTRATION OF COMPARABILITY OF HUMAN BIOLOGICAL PRODUCTS, INCLUDING THERAPEUTIC BIOTECHNOLOGY-DERIVED PRODUCTS (1996), available at http://www.fda.gov/cder/ guidance/compare.htm. Because conclusions about the safety and effectiveness of a biologic cannot be separated from the specific process used to manufacture it, the FDA requires manufacturers to demonstrate that not only the product but also the manufacturing process are safe and effective.
24. Id.
25. 21 C.F.R. § 320.1(e) (2006) (defining bioequivalence as "the absence of a significant difference in the rate and extent to which the active ingredient or active moiety in pharmaceutical equivalents or pharmaceutical alternatives becomes available at the site of drug action when administered at the same molar dose under similar circumstances in an appropriately designed study").
26. 21 U.S.C. § 355(j)(2)(A)(ii) (2006).
27. Serono Labs., Inc. v. Shalala, 158 F.3d 1313 (D.C. Cir. 1998).
28. For inactive ingredients, the FDA approves unless "the inactive ingredients of the drug are unsafe" or "the composition of the drug is unsafe ... because of the type or quantity of inactive ingredients included or the manner in which the inactive ingredients are included." 21 U.S.C. § 355(j)(4)(H) (2006).
29. 21 U.S.C. § 271(e)(1) (2006)
30. ("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 ..."). This statute overrides the Federal Circuit's decision in Roche v. Bolar, 733 F.2d 858 (Fed. Cir. 1984),
31. and has recently been broadened by the Supreme Court in Merck KGaA v. Integra Lifesciences I, Ltd., 125 S. Ct. 2372 (2005).
32. 21 U.S.C. § 355(j)(2)(A)(vii).
33. § 355(b)(1) (requiring the applicant to file "the patent number and the expiration date of any patent which claims the drug for which the applicant submitted the application or which claims a method of using such drug and with respect to which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner engaged in the manufacture, use, or sale of the drug").
34. An electronic version of the Orange Book is available at http://www.fda.gov/cder/ob/default.htm (last visited Feb. 1, 2006).
35. The only exception to this rule is if a company is not seeking approval for one of the drug's uses. See 21 U.S.C. § 355(j)(2)(A)(viii) (2006).
36. § 355(j)(2)(A)(vii).
37. § 355(j)(2)(B).
38. § 355(j)(2)(B)(ii).
39. § 355(j)(5)(B)(iii).
40. § 355(j)(5)(B)(iii)(II).
41. § 355(j)(5)(B)(iii)(I).
42. Additionally, generics that successfully challenge under Paragraph IV certification receive 180-day exclusivity against competing generics. § 355(j)(5)(B)(iv).
43. See Richard J. Finday, Originator Drug Development, 54 FOOD & DRUG L.J. 227, 229 (1999).
44. See, e.g., Laura J. Robinson, Analysis of Recent Proposals To Reconfigure Hatch-Waxman, 11 J. INTELL. PROP. L. 47 (2003);
45. see also MICHAEL WROBLEWSKI, GENERIC DRUG ENTRY PRIOR TO PATENT EXPIRATION: AN FTC STUDY (2002), available at http://www.ftc.gov/ogc/healthcare/ wroblewski.pdf (finding that generic drugs now comprise more than forty-seven percent of prescriptions filled-up from nineteen percent in 1984-and characterizing these results as a "record of success").
46. ROBERT PATRICK MERGES & JOHN FITZGERALD DUFFY, PATENT LAW AND POLICY: CASES AND MATERIALS 259 (3d ed. 2002).
47. J.E.M. AG Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 142 (2001) (citation omitted).
48. See 35 U.S.C. § 112 (2006).
49. U.S. CONST. art. I, § 8, cl. 8;
50. see Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 150-51 (1989) ("The federal patent system thus embodies a carefully crafted bargain for encouraging the creation and disclosure of new, useful, and nonobvious advances in technology and design in return for the exclusive right to practice the invention for a period of years.").
51. 35 U.S.C. § 112 (2006).
52. Markman v. Westview Instruments, Inc., 517 U.S. 370, 372 (1996).
53. Id. (citation omitted).
54. See Robert P. Merges & Richard R. Nelson, On the Complex Economics of Patent Scope, 90 COLUM. L. REV. 839, 846 (1990).
55. In re Wands, 858 F.2d 731, 736 (Fed. Cir. 1988).
56. In re DiLeone, 436 F.2d 1404, 1405 n.1 (C.C.P.A. 1971).
57. See Mark D. Janis, On Courts Herding Cats: Contending with the Written Description Requirement (and Other Unruly Patent Disclosure Doctrines), 2 WASH. U. J.L. & POL'Y 55, 62-70 (2000)
58. . The article characterizes written description's historical justification as "dubious." Id. at 63. The basic problem, according to Janis, is that the requirement derives from a Supreme Court case, Evans v. Eaton, 20 U.S. (7 Wheat.) 356 (1822)
59. which was decided at a time when United States patents were not required to contain claims. Janis, supra, at 63. Given this context, the language of Evans "clearly is directed towards satisfying this notice function, one which the modern written description does not require." Id.
60. Smith v. Bousquet, 111 F.2d 157, 159 (C.C.P.A. 1940);
61. see also Amgen, Inc. v. Chugai Pharm. Co., 927 F.2d 1200 (Fed. Cir. 1991), cert. denied sub nom.,
62. Genetics Inst., Inc. v. Amgen, Inc., 502 U.S. 856 (1991) (applying same principle to biotechnology).
63. 927 F.2d 1200 (Fed. Cir. 1991).
64. Id. at 1206.
65. 984 F.2d 1164 (Fed. Cir. 1993).
66. Id. at 1169-70.
67. In other fields, "[c]onception is complete when one of ordinary skill in the art could construct the apparatus without unduly extensive research or experimentation," Sewall v. Walters, 21 F.3d 411 (Fed. Cir. 1994), but for biotechnology, it appears the actual sequence is required.
68. See Dan L. Burk & Mark A. Lemley, Is Patent Law Technology Specific?, 17 BERKELEY TECH. L.J. 1155, 1173-82 (2002).
69. But see R. Polk Wagner, Of Patents and Path Dependency: A Comment on Burk and Lemley, 18 BERKELEY TECH. L.J. 1341, 1342-43 (2003) (distinguishing between micro- and macrotechnological specificity, and arguing against adopting the latter regime).
70. 119 F.3d 1559 (Fed. Cir. 1997).
71. Id. at 1567.
72. Id. at 1566.
73. 296 F.3d 1316 (Fed. Cir. 2002).
74. Id. at 1323.
75. See, e.g., Barbara Webb Walker & Sherry M. Carty, Is the Viability of the Lilly Doctrine on the Decline?, 21 NATURE BIOTECH. 943, 943-44 (2003) ("Recent cases indicate that the court is only applying the Lilly disclosure rule to certain fact scenarios and is willing to find that a functional description of genetic material meets the written description requirement where that function is sufficiently correlated to a particular known structure.");
76. see also Moba, B.V. v. Diamond Automation, Inc., 325 F.3d 1306, 1326 (Fed. Cir. 2003) (Rader, J., concurring) ("Fortunately, the viability of the Lilly rule is on the decline.").
77. 358 F.3d 916 (Fed. Cir. 2004).
78. Id. at 925.
79. MERGES & DUFFY, supra note 31, at 859.
80. 3 Cai. 175 (N.Y. Sup. Ct. 1805).
81. When the reward for discovering the sequence is limited to that sequence, it frees others to make the identical proteins using a different sequence. Covering all sequences for most proteins is impossible, especially ones like human heparin-binding growth factor from
82. 36 possible sequences exist. Thus, due to the degeneracy of the genetic code, written description particularly taxes DNA patent holders.
83. Jeffrey S. Dillen, Comment, DNA Patentability-Anything but Obvious, 1997 WIS. L. REV. 1023, 1028. The degeneracy results from the fact that multiple codon sequences can code for the same protein. A gene is a sequence of DNA that codes for a protein. The DNA consists of four different nucleotide bases (A, G, C, and T). One or more codons, which are a group of three nucleotides, encode for a particular amino acid. And these amino acids are pieced together to make proteins. To complicate matters considerably, there are sixty-three possible codon triplets using the four bases and twenty amino acids found in proteins. This means that many amino acids are designed by more than one triplet. For example, the codons CGU, CGC, CGA, CGG, AGA, and AGG all code for the amino acid arginine. This creates degeneracy because multiple codon sequences can code for the same protein.
84. See generally LUBERT STRYER, BIOCHEMISTRY 104, 109 (4th ed. 2000).
85. John P. Walsh et al., Research Tool Patenting and Licensing and Biomedical Innovation, in PATENTS IN THE KNOWLEDGE-BASED ECONOMY 285 (Wesley M. Cohen & Stephen A. Merrill eds., 2002). The methods of biotechnology are dependent upon these research tools. Defined broadly, the term includes "any tangible or informational input into the process of discovering a drug or any other medical therapy or method of diagnosing disease."
86. Id. at 287. According to Walsh, examples include "recombinant DNA, polymerase chain reaction, genomics, databases, microarrays, assays, transgenic mice, embryonic stem cells, or knowledge of a target, that is, any cell receptor enzyme, or other protein that is implicated in a disease and consequently represents a promising locus for drug intervention."
87. Id.;
88. see also Scott A. Chambers, Comments on the Patentability of Certain Inventions Associated with the Identification of Partial cDNA Sequences, 23 AM. INTELL. PROP. L. ASS'N Q.J. 53, 59 (1995).
89. See Eisenberg, supra note 5, at 125 (noting this consequence of the Bayh-Dole Act);
90. see also NAT'L INSTS. OF HEALTH, REPORT OF THE NATIONAL INSTITUTES OF HEALTH (NIH) WORKING GROUP ON RESEARCH TOOLS PRESENTED TO THE ADVISORY COMMITTEE TO THE DIRECTOR (1998), available at http://www.nih.gov/news/researchtools/ index.htm (finding that licenses for research tools "often involve future royalty obligations or rights to future intellectual property that constrain future opportunities for research funding and technology transfer").
91. Several empirical studies demonstrate the critical role played by early-stage patents on end-stage drug products. See, e.g., Richard C. Levin et al., Appropriating the Returns from Industrial Research and Development, in 3 BROOKINGS PAPERS ON ECONOMIC ACTIVITY 783 (Martin N. Baily et al. eds., 1987);
92. John P. Walsh et al., supra note 59, at 285;
93. Wesley Cohen et al., Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Finns Patent (or Not) (Nat'l Bureau of Econ. Res., Working Paper No. 7552, 2000) (discussing the importance of patents relative to other mechanisms of appropriation across various industries and concluding that patents are particularly important in the pharmaceutical arena).
94. Bayh-Dole University and Small Business Patent Procedures Act of 1980, Pub. L. No. 96-517, § 6(a), 94 Stat. 3019, 3019-28 (1980) (codified as amended at 35 U.S.C. §§ 200-212 (2006)).
95. ROBERT P. MERGES ET AL., INTELLECTUAL PROPERTY IN THE NEW TECHNOLOGICAL AGE 183 (3d ed. 2003).
96. The situation in In re Deuel, 51 F.3d 1552 (Fed. Cir. 1995), illustrates this phenomenon. In the case, the Federal Circuit overruled the PTO's decision that Deuel's patent was rendered obvious by a European patent that disclosed the amino acid sequence, even though the subsequent steps required to arrive at Deuel's patent product were routine in biotechnology.
97. See also Dan L. Burk & Mark A. Lemley, Biotechnology's Uncertainty Principle, 54 CASE W. RES. L. REV. 691, 700-01 (2004) (discussing the effect of written description on the obviousness inquiry).
98. The government gets a royalty-free, nonexclusive license to use for government purposes (including use by government contractors).
99. The Bayh-Dole Act states that its purpose is "to use the patent system to promote the utilization of inventions arising from federally supported research or development." 35 U.S.C. § 200 (2006) (emphasis added).
100. See David C. Mowery et al., The Growth of Patenting and Licensing by U.S. Universities: An Assessment of the Effects of the Bayh-Dole Act of 1980, 30 RES. POL'Y 99 (2001) (empirically assessing the impact of the Bayh-Dole Act and other factors on university patenting and licensing).
101. MERGES ET AL., supra note 62, at 323.
102. Id.
103. Nichols v. Universal Pictures Corp., 45 F.2d 119, 121 (2d Cir. 1930).
104. Several commentators criticize written description for failing to provide adequate incentives to invent. See, e.g., Steven J.R. Bostyn, Written Description After Enzo Biochem: Can the Real Requirement Step Forward Please?, 85 J. PAT. & TRADEMARK OFF. SOC'Y 131, 151 (2003);
105. Robert L. Harmon, Must a Patent Describe an Accused Infringement?, 85 J. PAT. & TRADEMARK OFF. SOC'Y 153, 154 (2003);
106. Linstrom, supra note 2, at 970;
107. Mueller, supra note 2, at 615-16;
108. Pitlick, supra note 2, at 209-10;
109. Rai, supra note 2, at 835 (1999);
110. Wegner, supra note 2, at 244 (2004);
111. Warren D. Woessner, "Do-Over!"-The Federal Circuit Takes a Second Look at Enzo v. Gen-Probe, 85 J. PAT. & TRADEMARK OFF. SOC'Y 275, 285 (2003);
112. Stephen J. Burdick, Note, Moba v. Diamond Automation, Inc.: Questioning the Separate Written Description Requirement, 19 BERKELEY TECH. L.J. 133, 151 (2004);
113. Jennifer L. Davis, Comment, The Test of Primary Cloning: A New Approach to the Written Description Requirement in Biotechnological Patents, 20 SANTA CLARA COMPUTER & HIGH TECH. L.J. 469, 487-88 (2004);
114. John C. Stolpa, Case Comment, Toward Aligning the Law with Biology? The Federal Circuit's About Face in Enzo Biochem, Inc. v. Gen-Probe, Inc., 4 MINN. INTELL. PROP. REV. 339, 366 (2003).
115. But see Zhibin Ren, Note, Confusing Reasoning, Right Result: The Written Description Requirement and Regents of the University of California v. Eli Lilly & Company, 1999 WIS. L. REV. 1297, 1324.
116. 35 U.S.C. § 156 (2006). On average, this provision increases patent term by over two years. CONG. BUDGET OFHCE, How INCREASED COMPETITION FROM GENERIC DRUGS HAS AFFECTED PRICES AND RETURNS IN THE PHARMACEUTICAL INDUSTRY 37-39 (1998).
117. Apparently, this category has become the method of choice. In addition to those discussed in the text, proposals for other approval exclusivities abound. One of the more creative is the so-called "wildcard exclusivity." In exchange for developing products for biodefense purposes, namely antibiotics, companies receive "'wildcard' extended market exclusivity for any drug within [their] portfolio." Jeffrey L. Fox, Concerns Raised over Declining Antiinfectives R&D, 21 NATURE BIOTECH. 1255, 1255-56(2003).
118. 21 U.S.C. § 360(c) (2006).
119. § 355(j)(4)(D)(iv).
120. § 355(a). The provision's purpose is to remedy the lack of information about drug effects in children, but it has been criticized for tending to protect blockbuster drugs that treat conditions rarely seen in children, such as arthritis, ulcers, hypertension, and adult-onset diabetes.
121. See LARS NOAH & BARBARA A. NOAH, LAW, MEDICINE, AND MEDICAL TECHNOLOGY 824 (2002).
122. See Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 146 (1989) (recognizing that federal patent laws "embod[y] a careful balance between the need to promote innovation and the recognition that imitation and refinement through imitation are both necessary to invention itself and the very lifeblood of a competitive economy"). Technically, this baseline embodies two distinct theories: reward and inducement. In the former, patents are rewards to inventive activity, and in the latter, patents should only be granted to inventions induced by the patent system.
123. See A Samuel Oddi, Un-Unified Economic Theories of Patents-The Not-Quite-Holy Grail, 71 NOTRE DAME L. REV. 267, 273-282 (1996).
124. A reverse phenomenon is developing with respect to copyright within the digital context. The virtual elimination of the costs of production and distribution makes the ratio of the cost of creation to the cost of imitation approach infinity. Mark A. Lemley & R. Anthony Reese, Reducing Digital Copyright Infringement Without Restricting Innovation, 56 STAN. L. REV. 1345, 1374-75 (2004) ("The great promise of digital dissemination-the virtual elimination of the costs of copy production and distribution-is a mixed blessing for copyright owners. Content owner costs go down as they embrace digital dissemination but so do the costs of counterfeiters. Indeed, as the costs of producing and disseminating copies approach zero, the public goods problem gets worse, because the ratio of the cost of creation to the cost of imitation approaches infinity.") (emphasis in original).
125. Note that drug approval is rule-based with respect to these initial categories (i.e., pioneer or generic) but seemingly embraces a standards-based approach for general testing (i.e., whether the drug is safe and efficacious). See infra note 81.
126. Figure 1 depicts the relationship between drug-approval costs and a given drug's similarity to an already approved competitor. The dotted line shows the standards-based approach, and the two steps, ANDA and NDA, represent the costs under Hatch-Waxman. The region with vertical lines represents the so-called "design-around tax" imposed by Hatch-Waxman's rule-based approach. This Figure is intended to demonstrate the effects of Hatch-Waxman conceptually. Compared to actual costs, Figure 1 oversimplifies in two respects: (1) the costs are not as binary, meaning that the similarity to an already approved drug does influence NDA costs; and (2) the cost difference between ANDA and NDA is more severe, which tends to counteract the consequences of the first simplification. Thus, this Figure illustrates that, to the extent Hatch-Waxman employs a rule-based approach, it functionally imposes a design-around tax on drug manufacturers who compete with already approved products. 80. This relationship is oversimplified, as it is unlikely to be precisely linear.
127. Though the FDA's underlying rule, that a drug be safe and efficacious, suggests that the NDA process should change according to the drug's similarity to other approved drugs, in practice it does not because of the standardization of the number of trials and test subjects. See Richard J. Findlay, Originator Drug Development, 54 FOOD & DRUG L.J. 227 (1999).
128. Figure 2 illustrates the marginal value of additional patent scope. The horizontal line labeled "Normal" represents this relationship under normal conditions, and the dotted line represents the relationship under Hatch-Waxman.
129. Given the high levels of investment and risk, obtaining protection early in the development process is desirable, both to safeguard the interests of owners, investors, and other stakeholders and to preempt competitors who may be working on similar products and therapies.
130. This reference to costs only includes those that augment the problem of public goods. Costs that similarly affect imitators are not included.
131. The problem of distinguishing utility is further discussed in Part IV.B, infra.
132. That failed candidates receive overprotection may not seem problematic because nobody enforces useless patents. But as discussed in Part IV.C, infra, these drugs only fail with respect to specific indication; other uses may arise, which overprotection discourages.
133. The two-tiered system does not, as this simplified account tends to suggest, eliminate all problems related to under- and overprotection, because several candidates face postpatent costs without gaining FDA approval.
134. Indeed, debate over patent reform does not ask whether the proposed reexamination procedures will improve the PTO, but whether it is worth the cost. Mark A. Lemley, Rational Ignorance at the Patent Office, 95 NW. U. L. REV. 1495, 1531-32 (2001) (concluding that a sparing inquiry serves as the optimal level of examination for all patent applications because so few patents are the subject of licensing or litigation).
135. U.S. Patent No. 5,830,035 (issued Nov. 3, 1998). After distributing this draft, several people have remarked to me that their children love toe puppets, so I must acknowledge that, at least for some people, the resulting supracompetitve pricing is no joking matter.
136. See Giles S. Rich, The Principles of Patentability, 42 J. PAT. OFF. SOC'Y 75, 85 (1960) ("If [an invention] is a total dud, how is the public injured by a patent on it?").
137. MERGES & DUFFY, supra note 31, at 255.
138. See Matthew Erramouspe, Comment, Staking Patent Claims on the Human Blueprint: Rewards and Rent-Dissipating Races, 43 UCLA L. REV. 961, 961-65 (1996) (characterizing the race to patent the human genome as a modern-day gold rush).
139. 383 U.S. 519 (1966). The Manson decision was quite controversial.
140. See In re Kirk, 376 F.2d 936, 947-66 (C.C.P.A. 1967) (Rich, J., dissenting);
141. In re Jolly, 376 F.2d 906, 910-32 (C.C.P.A. 1967) (Smith, J., dissenting);
142. Iver Cooper, Patent Problems for Chemical Researchers-The Utility Requirement After Brenner v. Manson, 18 IDEA 23 (1976);
143. Paul H. Eggert, Uses, New Uses, and Chemical Patents-A Proposal, 51 J. PAT. OFF. SOC'Y 768 (1969);
144. Harold S. Meyer, Utility Requirement in the Statute, 49 J. PAT. OFF. SOC'Y 533 (1967);
145. Eric P. Mirabel, "Practical Utility" Is a Useless Concept, 36 AM. U. L. REV. 811 (1987);
146. Lawrence R. Velvel, A Critique of Brenner v. Manson, 49 J. PAT. OFF. SOC'Y 5 (1967);
147. Brent Nelson Rushforth, Comment, Patentability of Chemical Intermediates, 56 CAL. L. REV. 497 (1968).
148. But see Teresa M. Summers, Note, The Scope of Utility in the Twenty-First Century: New Guidance for Gene-Related Patents, 91 GEO. L.J. 475, 508-09 (2003) (advocating a heightened utility test).
149. Manson, 383 U.S. at 531.
150. Id. at 534-35.
151. Id. at 536.
152. 51 F.3d 1560 (Fed. Cir. 1995).
153. Id. at 1568.
154. Utility Examination Guidelines, 60 Fed. Reg. 36,263 (July 14, 1995).
155. U.S. PATENT & TRADEMARK OFFICE, REVISED INTERIM UTILITY GUIDELINES TRAINING MATERIALS 5 (emphasis in original), available at http://www.uspto.gov/ web/ menu/utility.pdf (last visited Feb. 18, 2006).
156. Id. at 6. Under these new guidelines, the Federal Circuit upheld the rejection by the PTO of a claim to five ESTs in a patent application as unpatentable for lack of utility under 35 U.S.C. § 101.
157. In re Fisher, 421 F.3d 1365, 1379 (Fed. Cir. 2005).
158. Because of these competing issues, for industries such as biotechnology, utility is essentially "a timing device, helping to identify when an invention is ripe for patent protection." Rebecca S. Eisenberg, Analyze This: A Law and Economics Agenda for the Patent System, 53 VAND. L. REV. 2081, 2087 (2000).
159. For a good discussion of the need for early-stage patents, see Phanesh Koneru, To Promote the Progress of Useful Articles?: An Analysis of the Current Utility Standards of Pharmaceutical Products and Biotechnology Research Tools, 38 IDEA 625, 667-70 (1998).
160. This result would effectively cloak research and development in secrecy and has already been rejected by the Federal Circuit. In re Brana, 51 F.3d 1560, 1568 (Fed. Cir. 1995) ("FDA approval ... is not a prerequisite for finding a compound useful within the meaning of the patent laws.").
161. See Philip A. Hunt Co. v. Mallinckrodt Chem. Works, 177 F.2d 583, 585 (2d Cir. 1949) ("If the claims were limited to the 'concise and exact terms' in which the specifications ordinarily describe a single example of the invention, few, if any, patents, would have value, for there are generally many variants well-known to the art, which will at once suggest themselves as practicable substitutes for the specific details of the machine or process so disclosed.").
162. MERGES ET AL., supra note 62, at 139.
163. See MERGES & DUFFY, supra note 31, at 393.
164. See id. at 394.
165. See, e.g., Harold L. Marquis, An Economic Analysis of the Patentability of Chemical Compounds, 63 J. PAT. OFF. SOC'Y 3, 40-42 (1981).
166. See, e.g., Eggert, supra note 93, at 915-17.
167. Physicians may prescribe and pharmacists may dispense drugs for purposes that are not indicated on the manufacturer's PDA-approved labeling, so long as the drug is not prescribed for an experimental purpose and the "off-label" use is supported by valid scientific opinion, usually in the form of peer-reviewed literature or some other authoritative text. Citizen Petition Regarding the Food and Drug Administration's Policy on Promotion of Unapproved Uses of Approved Drugs and Devices; Request for Comments, 59 Fed. Reg. 59,820 (Nov. 18, 1994).
168. See, e.g., MedicineNet.com, Minoxidil, http://www.medicinenet.com/ minoxidil/ article.htm (last visited Feb. 18, 2006).
169. See 21 U.S.C. § 355(a) (2006) (providing that "[n]o person shall introduce or deliver for introduction into interstate commerce any new drug, unless an approval of an application filed pursuant to subsection (b) or (j) is effective with respect to such drug").
170. Advertisements-which include those published in journals, magazines, other periodicals, and newspapers; and broadcast through media such as radio, television, and telecommunications systems-must include: the established name, the brand name (if any), the formula showing quantitatively each ingredient, and information in brief summary which discusses side effects, contraindications, and effectiveness. 21 U.S.C. § 352 (2006).
171. See Michelle Armond, Comment, Introducing the Defense of Independent Invention to Motions for Preliminary Injunctions in Patent Infringement Lawsuits, 91 CAL. L. REV. 117, 117-20 (2003) (criticizing so-called "submarine patents" that capitalize on competitor's sunk costs);
172. Julie S. Turner, Comment, The Nonmanufacturing Patent Owner: Toward a Theory of Efficient Infringement, 86 CAL. L. REV. 179, 183 (1998) (citing two "litigation-inducing reasons" for a patentee's failure to commercialize as subjective overvaluation and unwillingness to compete with a current product);
173. see also Michael J. Meurer, Controlling Opportunistic and Anti-Competitive Intellectual Property Litigation, 44 B.C. L. REV. 509 (2003) (discussing generally the anticompetitive effects of intellectual property litigation based on questionable rights).
174. In Merck KGaA v. Integra Lifesciences I, Ltd., 125 S. Ct. 2372 (2005), the Supreme Court unanimously set aside the Federal Circuit's holding that narrowly interpreted the statutory safe harbor of 35 U.S.C. § 271(e)(1) (2005). Writing for the Court, Justice Scalia found "it apparent from the statutory text that § 271(e)(1)'s exemption from infringement extends to all uses of patented inventions that are reasonably related to the development and submission of any information under the FDCA." Merck, 125 S. Ct. at 2380 (emphasis in original). The Court explicitly declined to address the question of research tools, noting in a footnote that it was not expressing a view about whether § 271(e)(1) exempts from infringement the use of "research tools" in the development of information for the regulatory process.
175. Id. at 2382 n.7.
176. Rebecca S. Eisenberg, Patents and the Progress of Science: Exclusive Rights and Experimental Use, 56 U. CHI. L. REV. 1017, 1017-18 (1989);
177. Rebecca S. Eisenberg, Proprietary Rights and the Norms of Science in Biotechnology Research, 97 YALE L.J. 177, 179-80 (1987);
178. Janice M. Mueller, No "Dilettante Affair": Rethinking the Experimental Use Exception to Patent Infringement for Biomedical Research Tools, 76 WASH. L. REV. 1, 17 (2001);
179. Janice M. Mueller, The Evanescent Experimental Use Exception from United States Patent Infringement Liability: Implications for University/Nonprofit Research and Development, 56 BAYLOR L. REV. 917 (2004);
180. Maureen A. O'Rourke, Toward a Doctrine of Fair Use in Patent Law, 100 COLUM. L. REV. 1177, 1205 (2000);
181. Eyal H. Barash, Comment, Experimental Uses, Patents, and Scientific Progress, 91 NW. U. L. REV. 667, 669 (1997).
182. As Lawrence Lessig notes, fair use is functionally a right to a lawyer. See LAWRENCE LESSIG, FREE CULTURE: HOW BIG MEDIA USES TECHNOLOGY AND THE LAW TO LOCK DOWN CULTURE AND CONTROL CREATIVITY 292 (2004) (criticizing the "fuzziness" of fair use).
183. 21 U.S.C. § 355(a) (2006).
184. Rebecca Eisenberg points out how pharmaceutical companies already exploit this distinction to remedy the problem of parallel trade. Eisenberg, supra note 5, at 124-27.
185. Patent law often fails to prevent arbitrage because many countries permit the importation and resale of patented products purchased abroad, which the Treaty on Trade Related Aspects of Intellectual Property Rights (TRIPs) does not prevent because of its exception for exhaustion of intellectual property rights. See id. The pharmaceutical industry prevents parallel imports through the FDA instead, by prohibiting importation of products made for foreign markets governed by different labeling requirements and even reimportation of previously exported U.S.-manufactured drugs. See id.
186. See John R. Allison et al., Valuable Patents, 92 GEO. L.J. 435, 435, 441 (2004) (noting that ninety-nine percent of patent owners never enforce their rights and that, in light of litigation costs, a rational patent owner will not file suit unless the expected return is at least a few million dollars).
187. See 21 U.S.C. § 333 (2006). The food and drug law is distinct from ordinary regulatory and criminal law in that the defendant can be held criminally liable "without proof of knowledge of the event or intention to perform the act that results in a violation."
188. 1 JAMES T. O'REILLY, FOOD AND DRUG ADMINISTRATION § 8.02 (2005).
189. Over the more than 2500 patent lawsuits filed each year, the average cost of litigation is upward of $4 million. Kelly C. Hunsaker, Taking Care of Business: Patent Reform Should Promote Innovation, Not Imitation, S.F. CHRON., Aug. 30, 2005, at B7.
190. A. Mitchell Polinsky & Steven Shavell, Punitive Damages: An Economic Analysis, 111 HARV. L. REV. 869 (1998);
191. see also A. Mitchell Polinsky & Steven Shavell, The Economic Theory of Public Enforcement of Law, 38 J. ECON. LIT. 45 (2000).
192. U.S. CONST, art. I, § 8, cl. 8.
193. In University of Rochester v. G.D. Searle & Co., 358 F.3d 916 (Fed. Cir. 2004), the court extended the principle of written description to small-molecule chemistry.
194. Written description also applies to nondrug candidates, for which the FDA provides no justification. The other justifications that may exist are outside the scope of this Note.
195. MERGES & DUFFY, supra note 31, at 259.
196. 481 N.B. 173 (K.B. 1778).
197. In Liardet v. Johnson, Lord Mansfield stipulated that a patentee must file a full and detailed specification to qualify for a patent and is often said to have enshrined the disclosure theory in patent doctrine. Id.
198. But see CHRISTINE MACLEOD, INVENTING THE INDUSTRIAL REVOLUTION: THE ENGLISH PATENT SYSTEM, 1660-1800, at 49-53 (1988);
199. John N. Adams & Gwen Averley, The Patent Specification: The Role of Liardet v. Johnson, 7 J. LEGAL HIST. 156 (1986).
200. See MACLEOD, supra note 128, at 49-53;
201. Adams & Averley, supra note 128, at 156.