I recently concluded my first semester of teaching my course Intellectual Property and Healthcare Technologies at Cornell Law School. This was not my first time teaching the course. In fact, I have taught it six previous semesters at the Harvard School of Public Health. However, in the seven semesters that I have taught the class, I am always amazed by what I learn, both from the course material and from the students. Below are five lessons that I learned from teaching my course this semester.
Overall, I really enjoyed teaching my class at Cornell. I hope to take some of the lessons learned from this semester to make the class even more informative and valuable next year.
On December 4, 2018, the District Court for the Eastern District of Pennsylvania again denied Johnson & Johnson and Janssen’s (“J&J”) motion to dismiss antitrust claims regarding sales of its blockbuster biologics, Remicade. In this case, retailers Walgreens and Kroger are suing on behalf of themselves and as the assignees of AmerisourceBergen Drug Corporation and Cardinal Health, Inc., respectively, who are pharmaceutical wholesalers that directly purchased Remicade from J&J for resale to Walgreens and Kroger. Walgreens and Kroger allege antitrust injury because they pay higher prices for Remicade as a result of J&J’s “Biosimilar Readiness Plan,” which involves exclusive agreements and rebate bundling with insurers and health care providers and prevents lower-priced biosimilar versions of Remicade to compete.
J&J moved to dismiss the claims on two grounds. First, J&J argued that the retailers lacked antitrust standing because they do not have consent from the distributors to pursue these claims, as may be required under their distributor agreements. To consider whether the retailers have antitrust standing and whether the distributor agreement encompasses their antitrust claims, the Court decided that it will have to interpret the agreements. To this end, the Court converted J&J’s motion to one for summary judgment and agreed to hear additional evidence.
Second, J&J argued that the retailers failed to sufficiently allege antitrust injury. J&J’s primary argument was that the retailers failed “to plead specific facts showing that Pfizer and Merck were excluded from competing in the infliximab market by Defendants’ Biosimilar Readiness Plan, rather than choosing not to compete.” In this regard, the Court denied the motion, finding that J&J’s Biosimilar Readiness Plan foreclosed lower priced biosimilar infliximab drugs from competing with Remicade and resulted in retailers paying “inflated prices for those products.”
This is the second time that the Pennsylvania Court has denied J&J’s motion to dismiss a lawsuit dealing with Remicade. We previously wrote that on August 10, 2018, the Court denied J&J’s motion to dismiss Pfizer’s antitrust lawsuit relating to its biosimilar, Inflectra. In that case, Pfizer sued J&J alleging that J&J has been conducting “anti-competitive practices,” such as forcing hospitals and insurers to enter exclusive arrangements and bundled rebate programs, to prevent biosimilar competition by preventing health insurers, hospitals, and clinics from offering Pfizer's lower-priced biosimilar product.
The results of these antitrust cases will be important for companies developing innovator and biosimilar products alike as these cases will likely provide more insights on which pricing practices are permissible under antitrust laws and which are not. We will continue to monitor the case and provide updates as they become available.
Contractors should take note of the recent changes to the landmark 1980 Bayh-Dole Act. Almost 40 years later this piece of legislation has proven its worth as critically important to the vibrant US start-up scene, especially in the biotech/biopharma field.
Bayh-Dole made it possible for US universities, not-for-profit organizations and companies to retain the ownership of inventions "conceived or first actually reduced to practice” in their laboratories with government funds, for example grants doled out by the National Institutes of Health, the National Science Foundation or the Department of Health and Human Services. Before Bayh-Dole the government owned all inventions made with grant money which often were not commercially utilized.
But Bayh-Dole did not stop there, it also encourages universities to promote the utilization of their patents and other IP by actively looking for the best way of commercializing the inventions, e.g. by licensing them. Bayh-Dole encourages utilization of intellectual property created with tax payer money and with that, ultimately, benefits the public.
Under Bayh-Dole the inventor has to fulfill a number of conditions to be able to retain ownership of an invention. Some of the most important ones are:
If the contractor fails to comply with these regulations the grant giving agencies of the government can elect – but do not have to - to request title to the invention within 60 days of the contractor’s non-compliance.
The May 2018 Amendments to Bayh-Dole and What They Mean
In 2016 the Secretary of Commerce gave the National Institutes of Standards and Technology the authority to suggest changes to the Bayh-Dole regulations. These changes went into effect on May 14, 2018. Following is an overview of the most critical changes:
Formalizing the Expansion to Include Large Companies
The right to retain the title to an invention was expanded to include large companies - in addition to small companies and nonprofit organizations – via an Executive Order in 1987. Only now, however, were the implementing regulations in 37 C.F.R formally amended to include this expansion. The revised 37 C.F.R. § 401.1(b) now explicitly states that it applies “to all funding agreements with firms regardless of size.”
This clarification finally makes sure that all contractors, regardless of their size, are subject to the same set of rules with respect to the treatment of inventions.
Removal of the 60-Day Election Limit
The 60-day limitation for the government to elect to request title to the invention after a contractor’s non-compliance has been eliminated.
This change is very important as it seems to give the government unlimited time to take title from a non-compliant contractor instead of just 60 days. This leaves the contractor with just one option for recourse, namely seeking a retroactive extension of time. Granting this extension is at the discretion of the agency and therefore probably a long shot in a case where the agency has decided to take title of the invention. Contractors need to make sure to adhere to the timelines to avoid inadvertent transfer of title.
Responding to USPTO Office Action
Previously contractors had to notify the agencies of a decision not to prosecute an application within 30 days before a response was due to an Office Action issued by the USPTO. This period has now been extended to 60 days.
This amendment seems small but spells potential trouble for contractors who tend to respond to Office Actions late in the allotted response period (typically: an initial three-month response deadline and three additional months of extensions). The new 60-day rule requires a decision whether to respond to the Office Action within the first 4 months after receipt.
The Case of the Federal Agency Employed Co-Inventor
In addition, the amendments address a number of issues that previously left room for interpretation. One such area is a joint invention where a co-inventor is a federal employee. The amendments clarify that the federal agency, at its discretion but in consultation with the contractor, can file the initial patent application, provided the contractor retains its ability to elect rights. This means that the agency that employs a government employee co-inventor now has patenting priority over the funding agency when the contractor has declined to elect title.
For contractors this means that they have to carefully evaluate joint invention scenarios; it is likely to in their best interest to control the patent prosecution rather than leave it to the federal agency that employs the co-inventor.
Requirement of Written Assignments
Another amendment expands the duty of contractors vis-a-vis their employees. Previously, a contractor had to get written agreements from each employee stating that they would promptly disclose any invention to their employer (the contractor). The amendments add an additional requirement: contractors also have to obtain written assignments from all their employees stating that they assign all rights and title to any inventions to them.
This addition is considered a reaction to the Supreme Court ruling in Stanford vs. Roche and an attempt to temper that ruling.
Provisional Patent Application
The previous version of Bayh-Dole required a contractor to file PCT and/or foreign patent applications within 10 months of filing an initial US application. The amendment expands these filing requirements to non-provisional applications filed after an initial provisional application. If these timelines are not met, the Federal Agency has the right to obtain the title to the invention.
For contractors, paying close attention to filing dates and deadlines is now even more important than it used to be.
Government grants are very attractive for founders or companies looking to grow their business or undertake potentially risky but rewarding R&D. And although government money comes with strings attached those strings are generally considered well worth it for the title to the inventions. For contractors it is therefore very important to make sure they are aware of the changes to Bayh-Dole and adhere by the new timelines and requirements to not jeopardize their ability to obtain and retain title. To this end, companies should review any funding agreements governed by the Bayh-Dole Act to ensure compliance with the regulations to avoid any unnecessary surprises down the road with respect to patent ownership.
BioPharma Law Blog posts updates and analyses on IP topics, FDA regulatory issues, emerging legal developments, and other news in the constantly evolving world of biotech, pharma, and medical devices.