By Kevin E. Noonan --
There has always been a tension between the need for a final arbiter of the law and the inherent power associated with such a role placed in the judicial branch. Jefferson himself was wary of this tendency, writing in a letter to Edward Livingston in 1825:
One single object . . . will entitle you to the endless gratitude of society; that of restraining judges from usurping legislation.
And Abraham Lincoln also perceived the dangers, in his first inaugural address:
The candid citizen must confess that if the policy of the government, upon vital questions, affecting the whole people, is to be irrevocably fixed by decisions of the Supreme Court, the instant they are made, in ordinary litigation between parties, in personal actions, the people will have ceased to be their own rulers, having, to that extent, practically resigned their government into the hands of that eminent tribunal.
Patrick Henry, noted for his fiery rhetoric was more direct:
Power is the great evil with which we are contending. We have divided power between three branches of government and erected checks and balances to prevent abuse of power. However, where is the check on the power of the judiciary? If we fail to check the power of the judiciary, I predict that we will eventually live under judicial tyranny.
While these sentiments have been raised generally regarding great social questions (racial integration, same-sex marriage, universal healthcare), the turning of the judicial worm in recent years regarding patent law has occasioned similar considerations in this sphere. From KSR, eBay, Medimmune, Bilski, Mayo, Myriad, Alice, and even Actavis, the Supreme Court has signaled the judiciary that in some ways it has endorsed "open season" on the patent system. That the judiciary has gotten this message can be ascertained by district court decisions such as Ariosa v. Sequenom, where the court crafted entirely new theories of patent ineligibility based on combinations of seemingly unrelated Supreme Court law (and in many ways, dicta).
Such outcomes are perhaps not unexpected in view of the failure of clarity that many of the Court's subject matter eligibility decisions have had, and both the U.S. Patent and Trademark Office and the courts are recognized as being in the middle of interpreting and incorporating the less than pellucid directives of the High Court on these questions. That this tendency has spread beyond patent eligibility, and indeed beyond the strict bounds of patent law itself, can be appreciated by considering the legal grounds enunciated by the California District Court in Amgen v. Sandoz in its opinion last Thursday denying Amgen a preliminary injunction to keep a biosimilar version of Neupogen® off the market while patent litigation is proceeding (see "Gotta Dance? Apparently Not -- A Biosimilar Update")
The basis for this decision was grounded in the District Court's interpretation of the following provisions of the BPCIA, the portion of the omnibus healthcare law enacted in 2010 and commonly referred to as "Obamacare" that provided a biosimilar approval pathway in the U.S.:
(2) SUBSECTION (k) APPLICATION INFORMATION.—Not later than 20 days after the Secretary notifies the subsection (k) [biosimilar] applicant that the application has been accepted for review, the subsection (k) applicant—
(A) shall provide to the reference product sponsor a copy of the application submitted to the Secretary under subsection (k), and such other information that describes the process or processes used to manufacture the biological product that is the subject of such application; and
(B) may provide to the reference product sponsor additional information requested by or on behalf of the reference product sponsor. [emphasis added]
This section of the law is governed by the following definitions:
(1) CONFIDENTIAL ACCESS TO SUBSECTION (k) APPLICATION.—
(A) APPLICATION OF PARAGRAPH.—Unless otherwise agreed to by a person that submits an application under subsection (k) (referred to in this subsection as the 'sub section (k) applicant') and the sponsor of the application for the reference product (referred to in this subsection as the 'reference product sponsor'), the provisions of this paragraph shall apply to the exchange of information described in this subsection.
(B) IN GENERAL.—
(i) PROVISION OF CONFIDENTIAL INFORMATION.—
When a subsection (k) applicant submits an application under subsection (k), such applicant shall provide to the persons described in clause (ii), subject to the terms of this paragraph, confidential access to the information required to be produced pursuant to paragraph (2) and any other information that the subsection (k) applicant determines, in its sole discretion, to be appropriate (referred to in this subsection as the 'confidential information'). [emphasis added]
where the remainder of this section provides limits on how the information can be used and the requirements for confidentiality imposed on the recipients of the information.
The law also contains provisions in the event that the biosimilar (section 351(k) applicant) does not comply with these rules:
(9) LIMITATION ON DECLARATORY JUDGMENT ACTION.—
(A) SUBSECTION (k) APPLICATION PROVIDED.—If a subsection (k) applicant provides the application and information required under paragraph (2)(A), neither the reference product sponsor nor the subsection (k) applicant may, prior to the date notice is received under paragraph (8)(A), bring any action under section 2201 of title 28, United States Code, for a declaration of infringement, validity, or enforce ability of any patent that is described in clauses (i) and (ii) of paragraph (8)(B).
(B) SUBSEQUENT FAILURE TO ACT BY SUBSECTION (k) APPLICANT.—If a subsection (k) applicant fails to complete an action required of the subsection (k) applicant under paragraph (3)(B)(ii), paragraph (5), paragraph (6)(C)(i), paragraph (7), or paragraph (8)(A), the reference product sponsor, but not the subsection (k) applicant, may bring an action under section 2201 of title 28, United States Code, for a declaration of infringement, validity, or enforce ability of any patent included in the list described in para graph (3)(A), including as provided under paragraph (7).
(C) SUBSECTION (k) APPLICATION NOT PROVIDED.—If a subsection (k) applicant fails to provide the application and information required under paragraph (2)(A), the reference product sponsor, but not the subsection (k) applicant, may bring an action under section 2201 of title 28, United States Code, for a declaration of infringement, validity, or enforceability of any patent that claims the biological product or a use of the biological product.
(Notably, these provisions are reciprocal and affect the rights of both the reference product sponsor and the biosimilar applicant.) Also, the BPCIA provides the opportunity for the reference product sponsor to seek a preliminary injunction upon notice of commercial marketing:
(8) NOTICE OF COMMERCIAL MARKETING AND PRELIMINARY INJUNCTION.—
(A) NOTICE OF COMMERCIAL MARKETING.—The subsection (k) applicant shall provide notice to the reference product sponsor not later than 180 days before the date of the first commercial marketing of the biological product licensed under subsection (k).
(B) PRELIMINARY INJUNCTION.—After receiving the notice under subparagraph (A) and before such date of the first commercial marketing of such biological product, the reference product sponsor may seek a preliminary injunction prohibiting the subsection (k) applicant from engaging in the commercial manufacture or sale of such biological product until the court decides the issue of patent validity, enforcement, and infringement with respect to any patent that is—
(i) included in the list provided by the reference product sponsor under paragraph (3)(A) or in the list provided by the subsection (k) applicant under para graph (3)(B); and
(ii) not included, as applicable, on—
(I) the list of patents described in paragraph (4); or
(II) the lists of patents described in paragraph(5)(B). [emphasis added]
It is clear from these provisions that Congress intended this protocol, colloquially termed the "patent dance," to be mandatory and not optional, evidenced inter alia by the fact that where options were intended to exist the statute recites them. The rationale for these steps in the dance are evident: without knowledge of the nature of the biosimilar and the methods for manufacturing it contained in the biosimilar application, the reference product sponsor has no way of knowing which patent to assert, and (as evidenced by the outcome here) is put in the position of facing generic competition without any avenue to prevent it.
Nevertheless, the District Court held that Congress had not intended "shall" to have its ordinary meaning, either in the English language ("must; is or are obliged to") or as used in statutes:
Use of "shall" and "may" in statutes also mirrors common usage; ordinarily "shall" is mandatory and "may" is permissive.38 These words39 must be read in their broader statutory context, however, the issue often being whether the statutory directive itself is mandatory or permissive.40 Use of both words in the same provision can underscore their different meanings,41 and often the context will confirm that the ordinary meaning of one or the other was intended.42 Occasionally, however, context will trump ordinary meaning.43
38 "The mandatory 'shall' . . . normally creates an obligation impervious to judicial discretion." Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 35 (1998). "The use of a permissive verb — 'may review' instead of 'shall review' — suggests a discretionary rather than mandatory review process." Rastelli v. Warden, Metro. Correctional Center, 782 F.2d 17, 23 (2d Cir. 1986).
39 "Should" sometimes is substituted for "may" as a permissive word. Union Elec. Co. v. Consolidation Coal Co., 188 F.3d 998, 1001 (8th Cir. 1999). "Will" and "must" can be additional mandatory words. Bankers Ins. Co. v. Florida Res. Prop. & Cas. Jt. Underwriting Ass'n, 137 F.3d 1293, 1298 (11th Cir. 1998).
40 See IA SUTHERLAND, STATUTES AND STATUTORY CONSTRUCTION § 25:4 (Norman J. Singer ed., 6th ed. 2002 rev.).
41 See, e.g., Lopez v. Davis, 531 U.S. 230, 241 (2001) ("Congress' use of the permissive 'may' . . . contrasts with the legislators' use of a mandatory 'shall' in the very same section"); and United States ex rel. Siegel v. Thoman, 156 U.S. 353, 359-60 (1895) ("in the law to be construed here it is evident that the word 'may' is used in special contradistinction to the word 'shall'").
42 See, e.g., Escoe v. Zerbst, 295 U.S. 490, 493 (1935) ("doubt . . . is dispelled when we pass from the words alone to a view of [the statute's] ends and aims").
43 See, e.g., Moore v. Illinois Cent R.R., 312 U.S. 630, 635 (1941) (substitution of "may" for "shall" "was not, we think, an indication of a change in policy, but was instead a clarification of the [Railway Labor Act's] original purpose [of establishing] a system for peaceful adjustment and mediation voluntary in its nature"). See also discussion in Gutierrez de Martinez v. Lamagno, 515 U.S. 417, 432 n.9 (1995) ("shall" sometimes means "may").
44 The Dictionary Act provides that "unless the context indicates otherwise," "words importing the singular include and apply to several persons, parties, or things; words importing the plural include the singular." 1 U.S.C. § 1.
45 Public Citizen, Inc. v. Mineta, 340 F.3d 39, 54 (2d Cir. 2003).
Statutory Interpretation: General Principles and Recent Trends, Congressional Research Service Report for Congress, August 31, 2008. The District Court decision flies directly in the face of this precedent, wherein Congress not only used the mandatory "shall" but in the same section used the permissive "may," evincing precisely the type of distinction cited in the Report.
That the District Court was looking to find this outcome can be gleaned by its concerns of the times provided in the statute for the patent dance (~230 days) and the marketing notice (180 days). No one cognizant of the realities of patent litigation (as we can assume a Federal District Court judge must be) can believe that either of these time frames are excessive; indeed, the overwhelming commentary on the patent dance is how rapidly these exchanges and notifications must occur. Even the Hatch-Waxman Act provides a 30-month (~900 day) stay in FDA approval to permit the patentee and the generic challenger to engage in litigation, and modern patent litigation has not become less complex or proceeds more quickly in the 30 intervening years from enactment of the Hatch-Waxman Act in 1984. It should also be appreciated that the quickness with which Sandoz obtained approval (less than 10 months from filing in August, 2014 to approval in March, 2015) is a function of the extensive experience Sandoz has in Europe with a biosimilar form of Neupogen®, which has been approved by the EMEA and on the market in Europe for several years, and with the FDA's decision to permit Sandoz to rely in the U.S. on some of the pharmacological and clinical evidence adduced by Sandoz in obtaining European approval. But this situation (while likely to arise in other biosimilar applications having similar histories) will not be the norm in future, when the reference product sponsor will have the benefit of the 12 year market exclusivity period to litigate patent protection upon biosimilar application filings 4 years after the reference product has been approved.
Moreover, current patent reform legislation (while generally exempting ANDA litigation under the Hatch-Waxman Act) will require more specific factual assertions and allegations to comply with pleadings requirements in patent cases, and ignorance of the contents of the biosimilar application and manufacturing methods will make it harder for the reference product sponsor to comply. And judicial economy and expeditious resolution of these disputes will not be fostered by forcing the reference product sponsor, as Amgen has been forced to do, to guess which patent to assert and then seek leave to amend its complaint upon getting the information in discovery that the statute mandates in the first place.
This baroque interpretation of these provisions of the BPCIA stands in stark contrast to the District Court's denial of Amgen's motion that 42 U.S.C. § 262(l)(9)(C) precludes Sandoz of asserting counterclaims of invalidity, non-infringement or unenforceabilty. Here, the Court correctly noted that this portion of the law would preclude a biosimilar applicant, like Sandoz, who did not comply with the disclosure provisions from bringing a declaratory judgment action, but does not preclude assertion of these counterclaims. Should it do so, the consequences of non-disclosure would strip the biosimilar applicant of any procedural avenue to challenge the reference product sponsor's asserted patents, a consequence not supported by the plain language of the statute.
The Supreme Court has changed its view of its role in deciding patent cases in the almost thirty-five years since deciding Diamond v. Chakrabarty, where the Chief Justice Burger wrote:
Our task, rather, is the narrow one of determining what Congress meant by the words it used in the statute; once that is done our powers are exhausted. Congress is free to amend §101 so as to exclude from patent protection organisms produced by genetic engineering. Compare 42 U.S.C. §2181, exempting from patent protection inventions "useful solely in the utilization of special nuclear material or atomic energy in an atomic weapon." Or it may choose to craft a statute specifically designed for such living things. But, until Congress takes such action, this Court must construe the language of §101 as it is.
To the sentiments voiced by Justice Breyer in Mayo v. Prometheus:
[W]e must recognize the role of Congress in crafting more finely tailored rules where necessary. Cf. 35 U.S.C. §§161–164 (special rules for plant patents). We need not determine here whether, from a policy perspective, increased protection for discoveries of diagnostic laws of nature is desirable.
Following these views, the District Court clearly felt empowered to require plaintiffs to petition Congress to "clarify" what it meant by "shall" in the statutory language. Perhaps this situation is caused by the apparent disdain the Supreme Court has for patent law, or the Federal Circuit's recent lack of advocacy for the patent system, or the chaos created in Congress due to IT industry advocating that patents inhibit innovation (when what they actually do is protect patentees from predation by large corporations). The BPCIA was enacted to contain a carefully crafted "patent dance" whose very complexity may have encouraged the creative arguments by Sandoz that prevailed in the district court. The California District Court has permitted Sandoz to avoid the dance (for now; Sandoz faces a "launch at risk" situation should the Federal Circuit reverse). But it is apparent that district courts have been empowered to use their own judgment on the relative societal benefits (e.g., cheaper biologic drugs) to craft creative interpretations of legislation, particularly when the question is framed as a preliminary injunction where the effect on the public is a legitimate consideration. But as a consequence the "will of the People" (insofar as it is embodied in the actions of the legislature) is subjugated to the whims of the judiciary, as the Founding Fathers feared. It is hard to see how this is a positive development.