By Kevin E. Noonan --
Judge Rader wrote a vigorous dissent to the panel majority's opinion in Momenta v. Amphastar, disagreeing with the panel majority's interpretation that the "safe harbor" embodied in 35 U.S.C. § 271(e)(1) extended to post-approval activities. Before considering the substance of his dissenting opinion, the following facts should be remembered:
• First, Chief Judge Rader (at right) was a Senate staffer for Senator Orin Hatch and intimately involved in the legislative history of the Hatch-Waxman Act;
• Second, before he was Chief Judge, he wrote the Federal Circuit opinion in Merck v. Integra, which (like his dissent here) focused on Congress' intent in crafting the balanced Hatch-Waxman regime;
• Third, Chief Judge Rader joined with Judge Newman in the majority opinion in Classen Immunotherapies, Inc. v. Biogen IDEC, which came to precisely the opposite conclusion as to the scope of the safe harbor (i.e., that it does not extend to post-approval activity); and
• Fourth, Judge Moore wrote a spirited dissent to the majority opinion in Classen, based even more expressly than in the majority opinion here on her interpretation of the Supreme Court's Merck decision to mean that "the safe harbor extends to all uses that are reasonably related to submitting any information under the FDCA, including information regarding post-approval uses" (understandable in view of the typically broad language contained in Justice Scalia's opinion; see "Merck KGaA v. Integra Lifesciences I, Ltd. (2005)").
(And, as we will see in our discussion elsewhere of In re Beineke, the third member of the Momenta panel, Judge Dyk, can base his decisions on legislative history when it serves his purposes.) Here, in his dissent, the Chief Judge turns again to the limited scope of the safe harbor, based on his understanding of the fundamental right to exclude embodied in the patent statute and the limited exception to that right granted under § 271(e)(1). ("Thus, exceptions to the traditional property remedy amount to a get-out-of-jail-free card for the trespasser. Accordingly, such exceptions must occur only sparingly with awareness that this license allows the wrongdoer free reign to continue trespassing.") That limited scope is the result of a balance, expressly struck by Congress, between the recompense to patentees who lost patent term during regulatory review (comprising the patent term extension provisions of 35 U.S.C. § 156 et seq.) and the benefits to the public by legislative override of Roche Products, Inc. v. Bolar Pharmaceutical Co., 733 F.2d 858 (Fed. Cir. 1984) (preventing any infringing activity prior to patent expiration including activities required by the FDA or other government agencies for approval of drugs).
Here, despite a "strong incentive to invent the patented manufacturing method," Amphastar did not, according to the dissent -- Momenta did, and:
At that point, Amphastar stepped in and took Momenta's patented invention without permission and used it to manufacture each commercial batch it sells on the market. Indeed Amphastar continues to trespass and promises to trespass for years to come. In fact, as the court repeatedly acknowledges, Amphastar is only able to compete with Momenta by taking its patented invention. Amphastar has not developed its own method, but instead delights in trespassing and refuses to pay a reasonable royalty to make the trespass lawful.
And, the Chief Judge says with some incredulity, "[t]his court would allow this arrogance to continue by expanding the limited reach of 35 U.S.C. § 271(e)(1)." Further, he reminds his brother and sister that this decision "ignores the binding precedent of Classen Immunotherapies, Inc. v. Biogen IDEC."
In support for his dissent, Chief Judge Rader cites a relevant Supreme Court case, Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661, 669 (1990), which was directed expressly to the scope of the safe harbor under § 271(e)(1) in deciding that it extended to medical devices, to reach the conclusion that the text of § 271(e)(1) can be "not plainly comprehensible." This judicial recognition that the statute is not eminently clear justifies the Chief's resort to the legislative history (because, after all, the same language of the patent statute cannot be "not plainly comprehensible" some of the time and have a "plain meaning" at other times). The dissent then sets forth extensive portions of that legislative history to illustrate Congressional intent:
The purpose of 271(e)(1) and (2) is to establish that experimentation with a patented drug product, when the purpose is to prepare for commercial activity which will begin after a valid patent expires, is not a patent infringement. Since the Committee's Subcommittee on Health and the Environment began consideration of this bill, the Court of Appeals for the Federal Circuit held that this type of experimentation is infringement. In Roche Products, Inc. v. Bolar Pharmaceutical Co., 733 F.2d 858 (Fed. Cir. 1984), the Court of Appeals for the Federal Circuit held that the expiration date of a patent claiming that drug product constitutes patent infringement, even though the only purpose of the experiments is to seek FDA approval for the commercial sale of the drug after the patent expires. It is the Committee's view that experimental activity does not have any adverse economic impact on the patent owner's exclusivity during the life of a patent, but prevention of such activity would extend the patent owner's commercial exclusivity beyond the patent expiration date.
H.R. REP. NO. 98-857, pt. 1, at 45-46 (1984) (emphases added). Remember, the Roche case had introduced a "lag in time" between patent expiry and generic drug market entry by prohibiting activities required by the FDA for generic drug approval. Accordingly, Congress intended to remedy this situation, according to the Chief, by permitting the generic drug manufacturer to "conduct tests using [the patented drug] product if the purpose of those tests is to submit an application to FDA for approval," citing 130 CONG. REC. 23060 (1984) (statement of Rep. Robert W. Kastenmeier, Chairman of the Subcommittee on Courts, Civil Liberties and the Administration of Justice, Committee on the Judiciary) (emphasis added). The dissent notes that this purpose was endorsed by groups having vastly different political agendas, namely the Pharmaceutical Manufacturers Association (PhRMA) and the Generic Pharmaceutical Industry Association (citing testimony before the House Judiciary Committee). And insofar as it is relevant, the Reagan Administration not only supported the Act but advocated for "a more limited exception," although "it clearly understood the boundaries of [§ 271(e)(1)] to be pre-approval experimental use."
The point of this historical exercise is to make the case that "§ 271(e)(1) won approval because it was limited in time, quantity, and type: [f]irst, as to time, § 271(e)(1) only applies to pre-marketing approval; [s]econd, as to quantity and type, § 271(e)(1) only applies to experimentation -- and therefore would have limited impact on the patentee's exclusivity during the life of the patent." Importantly, "the authors made clear that section 271(e)(1) would not apply to commercial sales, i.e., the 'infringing' product would not enter the market until after the patent's life" according to the dissent, citing H.R. REP. NO. 98-857, pt. 1, at 45 (1984) ("This section does not permit the commercial sale of a patented drug by the party using the drug to develop such information, but it does permit the commercial sale of research quantities of active ingredients to such party.") (emphasis added). The dissenting opinion supported these points by extensive and specific citation to the Congressional record.
Nothing like the activities the majority permits Amphastar under its interpretation was intended by Congress and there is evidence in the record that Congress specifically intended that such an outcome not result from the Hatch Waxman Act, according to Chief Judge Rader:
Nowhere in the legislative history can this court find any suggestion that § 271(e)(1) would apply other than in the limited scenario of conducting de minimis experiments pre-approval (i.e., to obtain FDA approval). Nowhere in the legislative history can this court find a hint that an "infringer" could continue to use its competitor's patented method in manufacture of each commercial batch for contemporaneous sale. Nowhere in the legislative history can this court find any mention of the post-approval, continuous, commercial sales allowed by this decision. Nowhere in the legislative history can this court find any suggestion that the mere maintenance or retention of information as part of a company's records is considered a submission that would trigger § 271(e)(1). In fact, this court makes no attempt to examine the legislative history of this section at all -- a very telling silence.
And turning to the heart of the matter, the dissent notes that the majority avoids these considerations by dismissing them, deciding that because the majority can "find no ambiguity" there is no need to "find out the purpose of the section it distorts." That "distortion" includes reading out of the statute the limitation that the permitted activities under the safe harbor are "solely" for developing and submitting information to the FDA, and in holding that a "submission" can include retaining manufacturing records (words that usually have opposing meanings, according to the Chief). As a result:
This new interpretation would allow almost all activity by pharmaceutical companies to constitute "submission" and therefore justify a free license to trespass. The FDA can inspect records of any drug manufacturer and seller. See 21 U.S.C. § 374. Thus, the drug manufacturer need only make a record, which could potentially be inspected by the FDA, and then any activity could satisfy this new meaning of "submission."
Turning to Classen, Chief Judge Rader notes that the Court has "already decided the meaning of this statute" not to encompass post-approval activities (based on the same considerations of the legislative history rejected by the majority here). Amphastar's activities are antithetical to the Congressional intent according to the dissent because these activities are not "pre-approval" because they occur after Amphastar has obtained FDA approval; are not "limited because Amphastar uses Momenta's invention on a continuous basis in the manufacture of each commercial batch and during the life of Momenta's patent"; and are not "experimental because Amphastar uses Momenta's invention in manufacturing each commercial batch of its product for contemporaneous sale on the market (in commerce) to obtain profits and to compete with Momenta." Accordingly, the majority's decision is directly contrary to binding precedent under Classen according to Chief Judge Rader. He notes the analytical sleight of hand used by the majority to avoid the Classen precedent, and refutes the argument that the Classen decision was not based on the distinction between pre- and post-approval with quotes from Judge Moore's Classen dissent directed precisely to that specific point. And the Chief's dissent frankly acknowledges the jurisprudential consequences:
This decision ("post-approval studies"; "after approval"; "not restricted to pre-approval activities") cannot be genuinely reconciled with Classen ("pre-marketing approval"). Instead, the court in this decision uses the same language as the dissent in Classen ("post-approval"; "I conclude that the safe harbor extends to all uses that are reasonably related to submitting any information under the FDCA, including information regarding post-approval uses"). This decision should instead request the entire court to resolve the issue en banc.
And the argument that the FDA mandates Amphastar to infringe are equally unavailing for Chief Judge Rader:
Momenta thus far has created and developed the only successful method by which one can show the FDA's requirement has been met. Amphastar is free to invent its own method to satisfy these requirements. Instead it chooses to trespass. Because it has not ventured to find another way to perform these tests, it is unfair to suggest that Amphastar's hands are tied.
And, save for a discussion on the chimerical "tragedy of the anticommons" (discussed previously; see "Chief Judge Rader (Not Surprisingly) Gets it Right about Chimerical 'Tragedy of the Anti-Commons'"), Chief Judge Rader's dissent ends with his analysis of the Supreme Court's construction of § 271(e)(1) under Eli Lilly and Merck; in his reading, there is nothing inconsistent in these decisions with the conclusion that the safe harbor is limited to pre-approval activities. He concludes:
Every day, Amphastar, a competitor of Momenta, is infringing Momenta's patent. This decision allows that trespass. Moreover, to reach that result, this court must ignore its own prior decision in Classen and the purpose of the statute explained in the legislative history. Sadly this decision abrogates Momenta's hard-achieved property right and reallocates that entitlement to its competitors -- a sad day for property owners and an undeserved victory for those who decline to invest in the expense and difficulty of discovery and invention.
The principle that courts must interpret statutes "as they find them" (which forms one basis for the majority's decision) is certainly one of judicial parsimony. However, Congress cannot be expected to write any but the simplest laws having the most limited scope in language that will clearly instruct judges how to apply it in every (in)conceivable situation. This is a truth even more relevant to a statute like the Hatch-Waxman Act, which by its express language is crafted to strike a balance not only between competing interests but diverse laws (patent and regulatory). Thus, it seems prudent that legislative history be considered, keeping in mind that the search will frequently be fruitless; it is rare when the policy considerations are as expressly recited in the record as they appear to be in Chief Judge Rader's recitation (and his personal involvement lends credence to his arguments). In some ways this is analogous to claim construction, where prudence requires courts to review the specification if only to ascertain whether the patentee has disclaimed aspects of the claims that would otherwise fall under the plain meaning of claim terms. And this is in a much more limited context, where the patentee is responsible for the scope of the claims and the extent of the disclosure supporting them. Sage Products, Inc. v. Devon Industries, Inc., 126 F.3d 1420 (Fed. Cir. 1997). As illustrated here (and perhaps in Merck), failure to consider express Congressional intent risks deciding contrary to that intent, and while Congress retains the capacity (theoretically) to rectify judicial misinterpretation, the inefficiencies of using this way of construing statutes does not seem to be balanced by any principled basis for taking statutes as a court finds them. And refusing to consider express Congressional intent runs the risk of decisions being driven by the court's, not Congress', intent, something clearly outside our constitutional scheme. And yet, under Chief Judge Rader's analysis that is exactly what happened here. A decision on en banc review (if one is filed) might indicate whether the Court as a whole sees things with the Chief or the majority.