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.
On Monday, October 22, 208, the US Court of Appeals for the Federal Circuit issued another blow to Allergan’s deal with the Saint Regis Mohawk Tribe (“Tribe”) by refusing to reconsider an earlier decision that rejected use of tribal sovereign immunity in inter partes reviews (IPRs). This is the latest setback for Allergan and the Tribe in their efforts to avoid IPRs before the Patent Trial and Appeals Board (“PTAB”).
As a general background, in September 2017, Allergan announced that they entered into an agreement with the Saint Regis Mohawk Tribe (the Tribe) in which Allergan transferred ownership of all Orange Book-listed patents for RESTASIS® (Cyclosporine Ophthalmic Emulsion) 0.05% to the Tribe, while being granted exclusive licenses in the patents related to the product. The patents transferred to the Tribe included U.S. Patent Nos. 8,629,111; 8,633,162; 8,642,556; 8,648,048; 8,685,930 and 9,248,191. RESTASIS® is an important product for Allergan since it generated around $1.5 billion in 2017. By transferring ownership of the RESTASIS® patent portfolio to the Tribe, Allergan and the Tribe hoped to dismiss the ongoing IPRs of the RESTASIS® patents based on the Tribe’s status of being a recognized sovereign tribal government to which sovereign immunity applies.
Thus far, however, Allergan’s strategy to avoid IPR challenges has faced significant hurdles. In February 2018, the PTAB rejected the attempt to dismiss based on tribal sovereign immunity, finding that Allergan retained ownership in the patents and the Tribe retained nothing more an “illusory or superficial right” to sue for infringement of the challenged patents. According to the PTAB, “[i]n view of the recognised differences between the state sovereign immunity and tribal immunity doctrines, and the lack of statutory authority or controlling precedent for the specific issue before us, we decline the tribe’s invitation to hold for the first time that the doctrine of tribal immunity should be applied in IPR proceedings.”
In July 2018, the Federal Circuit upheld the PTAB’s decision, concluding that tribal sovereign immunity cannot be asserted in IPRs, and therefore cannot be used to dismiss the IPRs filed against Allergan.
A month later, in August 2018, Allergan and the Tribe requested a panel rehearing and an en banc rehearing. This request was denied on Monday.
Despite the recent denial, Allergan and the Tribe can still appeal to the U.S. Supreme Court.
Allergan’s controversial move to circumvent IPRs in an effort to stave off generic drug entry adds fuel to the ongoing debate over IPR proceedings. We will keep you informed of developments related to IPRs as they occur.
On October 10, 2018 President Trump signed into law the “Patient Right to Know Drug Prices Act” (S.2554) which requires antitrust scrutiny of biosimilar settlements by the Federal Trade Commission (FTC). The law amends the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 to require Reference Product Sponsors and biosimilar applications to submit their settlement agreements to the FTC for review. The bill was introduced in March 2018 by Senators Susan Collins (R-Maine), Clair McCaskill (D-Missouri), and Debbie Stabenow (D-Michigan).
The new law will allow the FTC to access the terms of a deal without seeking additional authority from the commission. It will also allow the FTC to track biosimilar deals and develop a data record of relevant terms, similar to what has been down with small molecule generics.
The law comes at an important time. Humira®, which is the best-selling drug in the world yielding more than $18 billion in sales in 2017, entered the market in Europe this past Tuesday on October 16, 2018. However, no biosimilars of Humira® are expected to enter the market in the US until at least 2023. This is because in the US, AbbVie not only maintains a robust patent portfolio protecting Humira®, it has also reached deals with multiple biosimilar manufacturers, including Amgen, Samsung Bioepis, Mylan, Sandoz, and as of yesterday, Fresenius Kabi, to hold off competition until 2023.
Apart from this new law, other legislations addressing settlement agreements are also moving forward in Congress. It will be interesting to see if these legislations will increase the entry of biosimilars on the US market.
We will keep you informed of any new developments in this field.
It has been one year since the Federal Circuit issued its opinion in Amgen v. Sanofi that raised the hurdle for protecting antibody inventions by requiring more data when disclosing and claiming antibodies. Since the court decision on October 5, 2017, it has become more challenging for pharmaceutical companies to obtain broad protections for therapeutic monoclonal antibodies. While obtaining protection for antibodies is still very much possible in this current climate, certain types of claims are now more susceptible to attack and possible invalidation. Below we analyze the different types of claims protecting antibody inventions and discuss their relative strengths in the wake of Sanofi.
In Amgen v. Sanofi, the Federal Circuit ruled that in order to obtain broad patent coverage for a class of antibodies that bind to a particular antigen and perform a particular function, companies must disclose a sufficient number of representative antibodies across the claimed genus or establish a clear relationship between the function of the antibody and the genus of the antibody in their specification. In Sanofi, the claims were directed to a monoclonal antibody that bound to one or more of 15 different amino acid residues on the sequence of the target antigen and performed a certain function (e.g., blocked the antigen from binding to its target). Claim 1 of U.S. Patent No. 8,829,165 ("'165 patent") is representative. It recites:
“An isolated monoclonal antibody, wherein, when bound to PCSK9, the monoclonal antibody binds to at least one of the following residues: S153, I154, P155, R194, D238, A239, I369, S372, D374, C375, T377, C378, F379, V380, or S381 of SEQ ID NO:3, and wherein the monoclonal antibody blocks binding of PCSK9 to LDL[-]R.”
To support its claim that antibodies that bound one of the 15 residues or any combination of them were covered by the patent, Amgen disclosed two specific antibodies with binding data and affinity data. These data probably would have been sufficient prior to Sanofi. In Sanofi, however, the Federal Circuit ruled that such disclosure was insufficient. The court noted that patent specifications must disclose a representative number of species of the genus of claimed antibodies in order satisfy the written description requirement. The Federal Circuit did not, however, provide any guidance as to what a “representative number” of species would be. Therefore, it still remains an open question as to what counts as a representative number of species remains today.
Below we review several types of antibody-related claims in search of trends on which types of claims have fared better than others in the last year.
Historically, one of the broadest types of claims a company could get to an antibody was by its function. Functional claims to a genus of antibodies typically recite the functional property of an antibody without reciting any sequence information, for example “an antibody that binds to target Y”. Similarly, functional claims can be in the form of competition claims where “an antibody that competes with antibody X for binding to antigen Y” is covered. While such broad claims can cover nearly any antibody in a group of antibody products that are directed to the same target, such functional claims are becoming increasingly vulnerable in light of Sanofi, as courts will require a “representative number” of examples of the genus, i.e. a representative number of antibody sequences and associated binding data.
Method of Use/Treatment
Method of use or method of treatment claims have also proven to be vulnerable as these types of claims have not fared well when challenged in an Inter Partes Review (IPR) at the PTAB. These types of claims are by far the most popular target of IPR petitioners. In a study of antibody-related IPR petitions, the IPR petition grant rate on method of treatment claims is 65% (24 petitions granted, 13 denied), but, in all 6 of the Final Written Decisions to date, all instituted claims were held unpatentable. Therefore, it appears that if the PTAB institutes an IPR on a method of treatment antibody claim, those claims are likely to be found unpatentable. One potential reason for why these types of claims are easy to invalidate is because if you knew the antigen and what it does, it would be obvious to develop an antibody to treat people against that antigen. As such, method of use and method of treatment claims are probably the weakest types of claims in protecting antibodies.
On the opposite side are sequence claims. These types of claims define an antibody by its structure, which is most commonly claimed by its six complementary determining regions (CDRs), by its two variable regions, or even by its heavy and light chain sequences (both cDNA and peptide sequences). Patent prosecutors keen on obtaining the most protection for clients will attempt to claim sequences by the shortest and fewest number of sequences possible. Often times the amount of sequence data needed to pass examination hurdles will depend on the examiner. These types of claims will likely survive invalidation attempts because they are specific to one particular antibody. However, while antibody sequence claims are a strong type of claim to have, they are also the narrowest option, which makes them easier for a competitor to design around.
Besides claiming the antibody itself, a company can claim a pharmaceutical composition or formulation. While these types of claims are theoretically easier to design around because they include the antibody structure, they appear to be successful in surviving IPR challenges at the PTAB. In fact, the PTAB rarely institutes challenges to composition claims, and when it has, the claims almost always survive. Antibody formulation claims are the second most frequently challenged type of antibody claim behind method of treatment claims, discussed above. However, of the 13 IPRs that have been filed against claims to antibody formulations, three were instituted and 10 were denied. In the three instituted IPRs, all of the claims survived the challenge. Of the IPR petitions that were denied, most were because the petitioner failed to establish “a reasonable likelihood that the petitioner would prevail.” It is likely that these types of claims survive challenges because there is high unpredictability in the art since even small changes in antibody formulations can have unexpected effects on protein aggregation, viscosity, and other factors, making it harder to prove that such formulations are predictable and obvious. As such, pharmaceutical formulation patent are important to include when deciding how to protect antibodies.
A final type of patent for protecting an antibody is to develop antibody conjugates. These types of claims describe an antibody with a particular sequence fused to, or conjugated to, a drug. In an IPR challenge to Kadcyla®, an antibody-drug conjugate consisting of the monoclonal antibody trastuzumab, Herceptin®, linked to the cytotoxic agent emtansine, the PTAB ultimately upheld the claims because a person skilled in the art at the time of the invention would have expected Herceptin®-maytansinoid immunoconjugates to be unacceptably toxic. While claims to antibody conjugates may survive obviousness challenges, it is important to remember that they are also narrower because they describe both the antibody sequence and a drug. They will also likely face challenges as to how much data and support is required to be in the specification to broadly claim the antibody conjugate. Nevertheless, these types of claims may be valuable to an antibody patent portfolio.
The case law in the antibody space has made it more challenging for companies to obtain broad protections for therapeutic monoclonal antibodies, especially in the wake of the Sanofi decision. To maximize the value of your antibody portfolio, it is therefore important to review the antibodies on a case-by-case basis and decide which features to claim based on the amount of data and investment available.
Brand companies employ a variety of mechanisms to maintain their market exclusivity and delay generic entry. We have recently written about Johnson & Johnson’s rebate and bundling schemes in trying to hinder uptake of a Remicade® biosimilar. We have also written about Allergan’s attempts to sell its patents covering Restasis® to an Indian tribe in an effort to avoid inter partes review challenges. Well, Allergan again finds itself again in the middle of a dispute that touches on intellectual property, this time Allergan is alleged to have engaged in anticompetitive practices to delay generic competition because of its misuse of citizen petitions.
While citizen petitions are supposed to allow citizens an opportunity to raise legitimate safety concerns with the U.S. Food and Drug Administration (FDA), they have often been misused by innovator drug companies as a way of delaying generic market approval. One study analyzed all citizen petitions filed with the FDA between 2011 and 2015 that targeted pending generic drugs and found that innovator manufacturers file 92% of all the citizen petitions, with the FDA denying nearly all these petitions.
This situation arose recently in a class action case filed against Allergan Inc. alleging antitrust violations aimed at protecting its dry-eye drug Restasis®. Amongst other violations, the suit alleged that Allergan filed four baseless citizen petitions in an effort to hinder generic competition. Allergan filed a motion to dismiss this claim asserting that the suit was “meritless”.
Last week, however, U.S. District Judge Nina Gershon shot down Allergan’s efforts to sidestep the suit and sided with plaintiff union benefit plans and various pharmaceutical purchasers, claiming that it is probable that Allergan acted dishonestly in hindering generic competition.
In its ruling, the Federal judge declined to apply the Noerr-Pennington doctrine, which shields good-faith petitioning of the government even if it results in a competitive edge. She provided two reasons for not applying the doctrine.
First, Judge Gershon noted that the doctrine does not protect “objectively baseless” petitioning. Since the FDA denied each of Allergan’s petitions, the Judge found that it could be probably that the petitions were scientifically unfounded.
Second, Judge Gershon noted that that the doctrine does not protect actions that are solely intended to hinder competition. Since Allergan petitioned the FDA repeatedly asking for testing of generic Restasis® in human, something not required for generic drugs, and then did not appeal the FDA’s rejections of its petitions but instead filed subsequent petitions using duplicative motives, the Judge found that Allergan’s actions could show that Allergan filed the petitions with improper motives. According to Judge Gershon, “[i]t is highly plausible that a company willing to engage in such conduct was intending to delay the entry of generics into the market, rather than seeking to protect the public health.”
Citizen petitions are a legally protected act so attacking them under antitrust law has traditionally been difficult. To prove that a citizen petition violates the law, plaintiffs have to show they are so baseless that they constitute a total sham. This case shows that its is possible to clear the first hurdle in demonstrating that citizen petitions are a sham and thus shows a possible path forward for generic drug plaintiffs hit with such petitions in future disputes.
I recently spoke at a biosimilars conference in Boston, MA and one topic that came up multiple times is the antitrust issue relating to Remicade®. I reviewed the recent decision involving Remicade® and its biosimilar, Inflectra®, to see if the court provided any insights into how antitrust issues dealing with biosimilars, particularly those involving “exclusionary contracts” and rebates, will be addressed.
On August 10, 2018, the Pennsylvania Court denied Johnson & Johnson’s (“J&J”) motion to dismiss Pfizer’s antitrust lawsuit relating to its Remicade® biosimilar, Inflectra®. We previously wrote how Pfizer sued J&J in the U.S. District Court for the Eastern District of Pennsylvania in September 2017 alleging that J&J has been conducting “anti-competitive practices” to prevent biosimilar competition by effectively preventing health insurers, hospitals, and clinics from offering Pfizer's lower-priced biosimilar product. According to Pfizer, J&J forced hospitals and insurers to enter exclusive arrangements and bundled rebate programs to ensure that Remicade® was given preferential treatment over Inflectra®.
J&J moved to dismiss the lawsuit, but on August 10, the Court denied Janssen’s motion and is allowing the antitrust suit, the first lawsuit of its kind in the biosimilar field, to continue. In it’s ruling, the Court provides insights as to how some antitrust issues relating to biosimilar market entry may be analyzed.
First, the Court addressed the issue of exclusionary agreements. In Pfizer’s lawsuit, Pfizer alleged that J&J forced hospitals and insurers to enter exclusive arrangements to exclude biosimilars other than Remicade® from coverage under their plans, thereby making Remicade® the exclusive infliximab available to patients covered by that plan. These exclusionary agreements are particularly important in the context biologics. Remicade® and Inflectra®, like most biologics, are administered intravenously at a clinic or hosptial. They are a “medical benefit” product, rather than a “pharmacy benefit” product, which means they must be stocked in advance by providers, rather than directly purchased by patients on an as-needed basis. Since the providers bear the financial risk of reimbursement, there is an incentive for them to stock the drug that will actually be covered by most insurers.
J&J tried to argue that there is no correlation between Inflectra’s® poor market traction and sales and J&J’s exclusionary contracts with insurers and providers and pointed to a number of alternative theories to explain the marked difference in sales between the two products. In particular, J&J argued that the lack of commercial success of Inflectra® was independent of J&J’s exclusionary agreements, and instead were due to provider’s lack of comfort with biosimilars, Inflectra's® status as a “biosimilar” rather than as an “interchangeable”, and Remicade’s® cost-effectiveness.
In the end, the Court dismissed J&J’s argument that Pfizer needed to disprove all of their alternate theories of why sales of its product were lagging at this stage of litigation. By holding that Pfizer was not required to disprove all other theories on a motion to dismiss, the Court left open the possibility that J&J, or a future innovator, could exonerate itself using one or more of these alternate theories. That is an important takeaway because it suggests that even though J&J’s actions could lead to antitrust liability, i.e., by entering into exclusionary contracts, it also provided ways to avoid such liability.
Bundled Rebates and Multi-Product Bundling Programs
Second, the Court addressed the issue of bundled rebates and multi-product bundling programs. In one instance, Pfizer alleged that J&J introduced a rebate program that would provide savings off Remicade®’s increasing list price for all existing Remicade® patients, which would, in effect, bundle the base of existing Remicade® patients with new patients entering the infliximab market. To this end, the Court held that bundled rebates can be anticompetitive when they preclude competition for new infliximab patients by being linked to noncontestable (existing) patients. This, of course, assumes that new patients are contestable because they are not anchored to a product while existing patients are incontestable because they are anchored to a product. Under this reasoning, the Court found that J&J’s rebate program could be anticompetitive since it “bundled its power over existing Remicade patients to break the competitive mechanism and deprive new infliximab patients (and their insurers) of the ability to make a meaningful choice between Remicade and its biosimilars.” The Court, therefore, refused to dismiss Pfizer’s bundling claim. Since most biologics have legacy patients, this factor may be relevant to future rebate schemes. Specifically, this shows that rebate schemes may be tailored by innovators to potentially exclude non-competitive products and avoid antitrust liability
Additionally, Pfizer alleged that J&J bundled rebates across multiple products to force insurers to grant exclusivity to Remicade® or pay higher prices on other J&J products. J&J argued that this claim should be dismissed because Pfizer failed to offer its own multi-product bundles. The Court appears to have sided with J&J on this issue and held that bundling rebates across multiple products is not, per se, an antitrust violation. The Court noted that Pfizer was not a single-product company and therefore had the capacity to offer such bundles itself. This seems to suggest that whether or not rebates schemes are permissible will depend, in part, on who the biosimilar competitor actually is.
Companies developing innovator and biosimilar products, alike, should be aware of the outcomes of this dispute. At least one United States District Court has found that certain pricing tactics may rise to the level of impermissible monopolization. The outcome of this case 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.
The Massachusetts Legislature passed non-compete reform in the final days of the 2018 session which will take effect on October 1, 2018. A non-compete clause, or covenant not to compete, is a clause under which one party (usually an employee) agrees not to enter into or start a similar profession or trade in competition against another party (usually the employer). The purpose of these clauses is to protect employers against an employee who may exploit confidential information, trade secrets, or sensitive information, such as customer/client lists, business practices, etc., to gain a competitive edge when working for a competitor or starting a business. These types of clauses are sometimes referred to as "restrictive covenants."
Massachusetts has long debated non-compete reform. This reform will not only affect biotech and pharma employers in Boston, but other employers in Massachusetts as well. While employers will still be able to use non-compete agreements for most workers under the new law, employers will have to adopt a new approach to drafting, implementing, and enforcing these agreements. Some key components of the new law, known as “An Act relative to the judicial enforcement of noncompetition agreements,” (the “Act”) are provided below:
Employer need to pay during the restricted period: The Act requires employers to pay employees “garden leave pay” or some “other mutually-agreed upon consideration” during the restricted period. The Act imposes no specific requirements on the value or timing of any “other” consideration the employer and employee may agree upon as an alternative to garden leave.
The new law only applies to agreements entered into on or after October 1, 2018: Older agreements are not voided, but employers should consider revisiting the existing agreements and determining whether they should be updated or amended.
Continued employment is not sufficient consideration: Employers must provide “fair and reasonable consideration independent from the continuation of employment.” Therefore, for non-compete agreements signed after employment has commenced, continued employment is not sufficient consideration.
Non-competes must be reasonably tailored to protect a legitimate business interest: The Act recognizes three “legitimate business interests”: (a) the employer’s trade secrets; (b) the employer’s confidential information that otherwise would not qualify as a trade secret; and (c) the employer’s goodwill. Under the Act, the non-compete covenant will be presumed to satisfy this element if the employer can demonstrate that no other type of restrictive covenant (e.g., a non-solicitation or non-disclosure covenant) would be sufficient to protect the legitimate business interest at issue.
Non-competes must be limited in duration and geographical scope: Non-competes cannot last more than one year and must be limited to the area where the employee actually worked or had a material presence in the prior two years.
Non-competes include both employees and independent contractors: Under the Act, the definition of a covered “employee” includes independent contractors.
Not all employees are covered by the Act: Employers cannot enforce non-competes for non-exempt employees, college or graduate students, short-term employees, or anyone under the age of 18.
Non-competes may not always be enforceable: If an employee is terminated without cause, a non-compete will be void.
The new law does not apply to all agreements with restrictive covenants: The law does not cover certain types of agreements, including non-solicitation, non-disclosure, and certain separation agreements. These agreements will continue to be analyzed under Massachusetts common law, but now against the backdrop of the new public policy on non-compete restrictions.
The new non-compete law has wide-ranging legal and practical implications for employers in Boston and Massachusetts in general. Employers will now have to evaluate their overall non-compete strategy and human resources processes to ensure compliance with the new law. Moreover, employers will have to review their existing non-compete agreements and update their agreements, if necessary, to ensure compliance. Given the stakes involved, and how widely applicable it is, disputes over the new law will likely take place. We will keep you updated on any developments.
Federal Circuit Affirms PTAB Finding That UC's and Broad's Foundational CRISPR Technologies Are "Patentably Distinct"
On September 10, 2018, the U.S. Court of Appeals for the Federal Circuit (CAFC), in University of California v. Broad Institute, Inc., affirmed the Patent Trial and Appeal Board’s (PTAB) earlier determination that there was no interference-in-fact between the University of California’s (UC) patents and those owned by the Broad Institute, MIT, and Harvard (collectively “Broad”), directed to CRISPR-Cas9 technology. In so doing, the CAFC upheld the PTAB’s underlying finding that, “given the differences between eukaryotic and prokaryotic systems, a person of ordinary skill in the art would not have had a reasonable expectation of success in applying the CRISPR-Cas9 system in eukaryotes.”
In general, CRISPR-Cas9 is a targeted DNA-cutting system that occurs naturally in prokaryotes, and which has been used to edit the DNA of eukaryotic cells in recent years. In August 2012, UC published an article demonstrating that the CRISPR-Cas9 system could be used in vitro, i.e. in a non-cellular experimental environment. Within a few months of UC’s publication, several groups, including Broad, independently applied CRISPR-Cas9 in eukaryotic cells. Broad’s researchers described the use of CRISPR-Cas9 in a human cell line in a published article in February 2013. Both UC and Broad sought patent protection for their respective CRISPR-Cas9 technologies. Whereas UC filed its patent application with claims directed to methods of cleaving DNA using CRISPR-Cas9 without reference to a specific cell type or environment, Broad filed its patent applications with claims limited to the use of CRISPR-Cas9 in eukaryotic cells.
To determine whether the CRISPR-Cas9 claims of UC and Broad were “patentably indistinct,” and which party was the first to invent the claimed technology, the PTAB instituted an interference proceeding under pre-AIA 35 U.S.C. § 102(g) (since the applications were filed before enactment of the AIA). When determining whether claims are “patentably distinct,” the PTAB asks whether the subject matter of a claim of one party, if prior art, would have rendered obvious (or anticipated) the subject matter of a claim of the opposing party.
In examining the claims of UC and Broad the PTAB determined that no interference-in-fact existed because UC’s claim would not have rendered obvious or anticipated Broad’s claims. Broad provided extensive expert testimony about the differences between prokaryotic and eukaryotic systems and how those differences rendered the application of the CRISPR-Cas9 system in eukaryotic cells unpredictable. Moreover, Broad presented statements from UC inventors acknowledging doubts and frustrations about engineering CRISPR-Cas9 systems to function in eukaryotic cells and noting the significance of Broad’s success. Finally, the PTAB found that the developments of other gene editing systems were not particularly informative in assessing the reasonable expectation of success of CRISPR-Cas9 in plant and animal cells. In light of all this evidence, the CAFC concluded “that the Board’s fact finding as to a lack of reasonable expectation of success is supported by substantial evidence.”
In upholding the PTAB’s ruling, the CAFC rejected UC’s arguments that simultaneous inventions may serve as evidence of obviousness: “[t]he fact that six research groups succeeded in applying [CRISPR-Cas] in eukaryotic cells within a short period of time after [UC’s disclosure] is certainly strong evidence that there was a motivation to combine the prior art in this manner.” While the PTAB recognized UC’s evidence of simultaneous invention in this context, it concluded such evidence pointed to a motivation to combine the prior art references but not ‘necessarily’ an expectation of success. The CAFC thus affirmed the PTAB’s finding, but noted that the decision is limited to “the scope of two sets of applied-for claims,” and “is not a ruling on the validity of either set of claims.”
The decision has important implications for the CRISPR-Cas9 patent landscape as it upholds both UC’s and Broad’s patent claims to this foundational and potentially game-changing technology. Third parties that are active in the field may thus have to seek a license from both groups if they want to commercialize this technology. Moreover, since the intellectual property landscape of the CRISPR-Cas9 is so intertwined, even UC and Broad may have to cross-license the technology between themselves to continue research. While the CAFC’s affirmation of the PTAB’s earlier decision seems to provide a modicum of clarity to this complex landscape for those waiting on the sidelines to capitalize on the discovery, given the financial stakes involved and the flexibility of this technology, it is likely that further disputes over the foundational CRISPR-Cas9 innovation will likely continue for some time into the foreseeable future.
We will continue to monitor trends and disputes involving CRISPR-Cas systems and provide updates.
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.