Proveris Scientific Corp. v. Innovasystems, Inc.: Federal Circuit Addresses 'Safe-Harbor' Immunity

In Proveris Scientific Corp. v. Innovasystems, Inc., 536 F.3d 1256 (Fed. Cir. 2008), the Federal Circuit addressed whether the “safe-harbor” provision of the Hatch-Waxman Act (codified at 21 U.S.C. ”355, 360cc and 35 U.S.C. ”156, 271, 282) applies to immunize infringement if the accused product is reasonably related to the development and submission of information to the FDA for regulatory approval purposes. Analyzing the statutory language and Supreme Court and Federal Circuit precedent, the Federal Circuit concluded that the safe-harbor provision does not apply because neither the patented product nor the accused product are products requiring FDA approval, the type of products that the Hatch-Waxman Act intended to protect.

Factual Background

The patented product is a system and apparatus characterizing aerosol sprays used to deliver drugs (e.g., nasal spray drugs). FDA approval is required for such inhaler-based drug delivery devices, and the patented product is thus used in obtaining FDA approval. Importantly, the patented product is not by itself subject to FDA approval. The infringing product is known as an optical spray analyzer (“OSA”). Like the patented product, the OSA is used as part of the FDA approval-process for nasal spray drug delivery devices, but is not by itself subject to FDA approval. The defendant, Innova, offered to sell its OSAs to pharmaceutical companies exclusively in connection with the application process for regulatory approval. Innova thus argued that its sales were immunized under the “Hatch-Waxman Act,” which states that it is not an act of infringement to sell 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 or veterinary biological products.” 35 U.S.C. '271(e)(1). Innova claimed that its sale of OSAs for use solely in the FDA approval process for nasal spray drugs fell squarely within this statutory language.

The Purpose of the Hatch-Waxman Act

The Federal Circuit analyzed Innova's argument by first looking at the purpose of the “Hatch-Waxman Act,” as discussed by the Supreme Court in Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661 (1990). The Hatch-Waxman Act is directed at the dual anomalies that the intersection of patent law and regulatory structure often creates. Starting with the premise that a patent is an approved monopoly for a specified length of time as a reward (or incentive) for invention, that monopoly should not be shortened as a result of the time period necessary to obtain regulatory approval (stated otherwise, a patentee cannot sell its product until it achieves regulatory approval, and thus would normally lose the benefit of its monopoly between the date the patent issued and the date of regulatory approval). The Hatch-Waxman Act addresses this anomaly by extending the patent term in certain situations. On the flip side, the need for regulatory approval could unjustifiably lengthen the patentee's monopoly if competitors were forced to wait until after the patent expiration to prepare to compete by seeking regulatory approval for their products. The Hatch-Waxman Act addresses this anomaly by allowing would-be competitors to seek regulatory approval for their products during the patent terms without fear of liability for infringement (in other words, it allows competitors to take certain regulatory-related steps to prepare to compete ' but not to begin competition ' during the patent term).

In Eli Lilly, the Supreme Court relied on the intent of the Hatch-Waxman Act in ruling that it applied to medical devices subject to regulatory approval (and not merely drugs, as the plaintiff had argued). In reaching its conclusion, the Court noted that the fact that the Hatch-Waxman Act addresses both anomalies negated any attempt to parse separately the patent extension, on one hand, and the safe-harbor provision, on the other. The Court concluded that Congress could not conceivably have intended to grant the plaintiff a patent extension for its patented device if it did not intend to also grant an accused infringer the immunization necessary to prepare for competition by seeking regulatory approval. Otherwise, the owner of a medical device patent would have a much longer monopoly than it should, as it would have the normal patent term, plus the extension, plus the time period in which its competitors' hands were tied, not by the patent, but by the regulatory approval process. Although the statutory intent arguably drove the Court's decision, the Court tied its ruling to statutory language by holding that the safe-harbor provision applied to all inventions within the ambit of 35 U.S.C. '156 (i.e., the statute that creates the patent extension). In other words, if the patentee is entitled to a patent extension, its would-be competitors are entitled to the safe harbor provision.

The AbTox Decision

After discussing the Supreme Court's holding in Eli Lilly, the Federal Circuit noted that it had expanded upon this holding in AbTox, Inc. v. Exitron Corp., 122 F.3d 1019 (Fed. Cir. 1997). In AbTox, the Federal Circuit faced a different situation than the Supreme Court had in Eli Lilly: namely, a medical device that was not eligible for a patent extension under 35 U.S.C. '156. Notwithstanding the Supreme Court's analysis of the parity of the patent extension and the safe-harbor provisions, the Federal Circuit held that the term “patented invention” was not limited to inventions eligible for an extension under 35 U.S.C. '156, but rather included any medical device.

Finally, the Federal Circuit discussed precedent concerning activities that are “reasonably related” to FDA approval. It does not require actual submission of information to the FDA, but applies to activities in which a party engages with a reasonable belief that, with successful results, the research would be appropriate to submit to the FDA. In other words, it includes preclinical research.

OSAs Used Only in Applications for FDA Approval

After discussion of the foregoing precedent, the Federal Circuit addressed Innova's contention that it was entitled to the “safe harbor” immunity because its OSAs were used only in applications for FDA approval. It noted that the issues could be clearly framed as follows: “whether section 271(e)(1) immunizes the manufacture, marketing, or sale of Innova's OSA, which is used in the development of FDA regulatory submissions, but is not itself subject to the FDA premarket approval process.” The Federal Circuit concluded that it did not.

The Federal Circuit principally relied on the purpose of the Hatch-Waxman Act as discussed in Eli Lilly, and the dual anomalies that it sought to redress: “the first distortion was the reduction of effective patent life caused by the FDA premarket approval process, while the second distortion was caused by the de facto extension of effective patent life at the end of the patent term ' also caused by the FDA premarket approval process.” Only the second anomaly would be potentially relevant to Innova's conduct. Yet, Innova's OSA was not subject to FDA approval, and Innova was not seeking regulatory approval in order to compete upon the expiration of a patent. The Federal Circuit concluded that “insofar as the OSA device is concerned, Innova is not within the category of entities for whom the safe harbor was designed to provide relief.” Because Innova was never at risk from the second anomaly ' that is, a person who could not compete immediately upon patent expiration due to a need for FDA approval ' the Federal Circuit concluded that Congress did not intend for the safe harbor to apply to Innova's actions.

The Federal Circuit found further support for its conclusion from the fact that Proveris was never at risk from the first distortion. There was no reduction in the life of its patent because its invention likewise was not subject to FDA premarket approval.

In the end, the Federal Circuit re-emphasized the parity that was key to the Eli Lilly decision: “Because Proveris's patented product is not subject to a required FDCA approval process, it is not eligible for the benefit of the patent term extension afforded by 35 U.S.C. '156(f). At the same time, because Innova's OSA device also is not subject to a required FDCA approval process, it does not need the safe harbor protection afforded by 35 U.S.C. '271(e)(1).”

Procedural Challenges

The Federal Circuit also addressed two procedural challenges to trial court rulings. First, Innova challenged a JMOL of infringement of the majority of the claims in the patent in suit. The Federal Circuit affirmed the JMOL, agreeing with the trial court that Innova had conceded the issues of infringement of such claims through the testimony of its own witness and by its failure to object to the court's statements concerning conceded infringement. Second, Innova challenged the exclusion of testimony from two proffered expert witnesses. Again, the Federal Circuit affirmed on the basis that one witness did not provide a required expert report, and the other witness was properly limited to issues within the scope of his expertise.

Megan M. O'Laughlin is an attorney at Hitchcock Evert LLP in Dallas. She specializes in complex commercial litigation with a specific emphasis in intellectual property litigation.

In Proveris Scientific Corp. v. Innovasystems, Inc. , 536 F.3d 1256 (Fed. Cir. 2008), the Federal Circuit addressed whether the “safe-harbor” provision of the Hatch-Waxman Act (codified at 21 U.S.C. ”355, 360cc and 35 U.S.C. ”156, 271, 282) applies to immunize infringement if the accused product is reasonably related to the development and submission of information to the FDA for regulatory approval purposes. Analyzing the statutory language and Supreme Court and Federal Circuit precedent, the Federal Circuit concluded that the safe-harbor provision does not apply because neither the patented product nor the accused product are products requiring FDA approval, the type of products that the Hatch-Waxman Act intended to protect.

Factual Background

The patented product is a system and apparatus characterizing aerosol sprays used to deliver drugs (e.g., nasal spray drugs). FDA approval is required for such inhaler-based drug delivery devices, and the patented product is thus used in obtaining FDA approval. Importantly, the patented product is not by itself subject to FDA approval. The infringing product is known as an optical spray analyzer (“OSA”). Like the patented product, the OSA is used as part of the FDA approval-process for nasal spray drug delivery devices, but is not by itself subject to FDA approval. The defendant, Innova, offered to sell its OSAs to pharmaceutical companies exclusively in connection with the application process for regulatory approval. Innova thus argued that its sales were immunized under the “Hatch-Waxman Act,” which states that it is not an act of infringement to sell 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 or veterinary biological products.” 35 U.S.C. '271(e)(1). Innova claimed that its sale of OSAs for use solely in the FDA approval process for nasal spray drugs fell squarely within this statutory language.

The Purpose of the Hatch-Waxman Act

The Federal Circuit analyzed Innova's argument by first looking at the purpose of the “Hatch-Waxman Act,” as discussed by the Supreme Court in Eli Lilly & Co. v. Medtronic, Inc. , 496 U.S. 661 (1990). The Hatch-Waxman Act is directed at the dual anomalies that the intersection of patent law and regulatory structure often creates. Starting with the premise that a patent is an approved monopoly for a specified length of time as a reward (or incentive) for invention, that monopoly should not be shortened as a result of the time period necessary to obtain regulatory approval (stated otherwise, a patentee cannot sell its product until it achieves regulatory approval, and thus would normally lose the benefit of its monopoly between the date the patent issued and the date of regulatory approval). The Hatch-Waxman Act addresses this anomaly by extending the patent term in certain situations. On the flip side, the need for regulatory approval could unjustifiably lengthen the patentee's monopoly if competitors were forced to wait until after the patent expiration to prepare to compete by seeking regulatory approval for their products. The Hatch-Waxman Act addresses this anomaly by allowing would-be competitors to seek regulatory approval for their products during the patent terms without fear of liability for infringement (in other words, it allows competitors to take certain regulatory-related steps to prepare to compete ' but not to begin competition ' during the patent term).

In Eli Lilly, the Supreme Court relied on the intent of the Hatch-Waxman Act in ruling that it applied to medical devices subject to regulatory approval (and not merely drugs, as the plaintiff had argued). In reaching its conclusion, the Court noted that the fact that the Hatch-Waxman Act addresses both anomalies negated any attempt to parse separately the patent extension, on one hand, and the safe-harbor provision, on the other. The Court concluded that Congress could not conceivably have intended to grant the plaintiff a patent extension for its patented device if it did not intend to also grant an accused infringer the immunization necessary to prepare for competition by seeking regulatory approval. Otherwise, the owner of a medical device patent would have a much longer monopoly than it should, as it would have the normal patent term, plus the extension, plus the time period in which its competitors' hands were tied, not by the patent, but by the regulatory approval process. Although the statutory intent arguably drove the Court's decision, the Court tied its ruling to statutory language by holding that the safe-harbor provision applied to all inventions within the ambit of 35 U.S.C. '156 (i.e., the statute that creates the patent extension). In other words, if the patentee is entitled to a patent extension, its would-be competitors are entitled to the safe harbor provision.

The AbTox Decision

After discussing the Supreme Court's holding in Eli Lilly , the Federal Circuit noted that it had expanded upon this holding in AbTox, Inc. v. Exitron Corp ., 122 F.3d 1019 (Fed. Cir. 1997). In AbTox, the Federal Circuit faced a different situation than the Supreme Court had in Eli Lilly: namely, a medical device that was not eligible for a patent extension under 35 U.S.C. '156. Notwithstanding the Supreme Court's analysis of the parity of the patent extension and the safe-harbor provisions, the Federal Circuit held that the term “patented invention” was not limited to inventions eligible for an extension under 35 U.S.C. '156, but rather included any medical device.

Finally, the Federal Circuit discussed precedent concerning activities that are “reasonably related” to FDA approval. It does not require actual submission of information to the FDA, but applies to activities in which a party engages with a reasonable belief that, with successful results, the research would be appropriate to submit to the FDA. In other words, it includes preclinical research.

OSAs Used Only in Applications for FDA Approval

After discussion of the foregoing precedent, the Federal Circuit addressed Innova's contention that it was entitled to the “safe harbor” immunity because its OSAs were used only in applications for FDA approval. It noted that the issues could be clearly framed as follows: “whether section 271(e)(1) immunizes the manufacture, marketing, or sale of Innova's OSA, which is used in the development of FDA regulatory submissions, but is not itself subject to the FDA premarket approval process.” The Federal Circuit concluded that it did not.

The Federal Circuit principally relied on the purpose of the Hatch-Waxman Act as discussed in Eli Lilly, and the dual anomalies that it sought to redress: “the first distortion was the reduction of effective patent life caused by the FDA premarket approval process, while the second distortion was caused by the de facto extension of effective patent life at the end of the patent term ' also caused by the FDA premarket approval process.” Only the second anomaly would be potentially relevant to Innova's conduct. Yet, Innova's OSA was not subject to FDA approval, and Innova was not seeking regulatory approval in order to compete upon the expiration of a patent. The Federal Circuit concluded that “insofar as the OSA device is concerned, Innova is not within the category of entities for whom the safe harbor was designed to provide relief.” Because Innova was never at risk from the second anomaly ' that is, a person who could not compete immediately upon patent expiration due to a need for FDA approval ' the Federal Circuit concluded that Congress did not intend for the safe harbor to apply to Innova's actions.

The Federal Circuit found further support for its conclusion from the fact that Proveris was never at risk from the first distortion. There was no reduction in the life of its patent because its invention likewise was not subject to FDA premarket approval.

In the end, the Federal Circuit re-emphasized the parity that was key to the Eli Lilly decision: “Because Proveris's patented product is not subject to a required FDCA approval process, it is not eligible for the benefit of the patent term extension afforded by 35 U.S.C. '156(f). At the same time, because Innova's OSA device also is not subject to a required FDCA approval process, it does not need the safe harbor protection afforded by 35 U.S.C. '271(e)(1).”

Procedural Challenges

The Federal Circuit also addressed two procedural challenges to trial court rulings. First, Innova challenged a JMOL of infringement of the majority of the claims in the patent in suit. The Federal Circuit affirmed the JMOL, agreeing with the trial court that Innova had conceded the issues of infringement of such claims through the testimony of its own witness and by its failure to object to the court's statements concerning conceded infringement. Second, Innova challenged the exclusion of testimony from two proffered expert witnesses. Again, the Federal Circuit affirmed on the basis that one witness did not provide a required expert report, and the other witness was properly limited to issues within the scope of his expertise.

Megan M. O'Laughlin is an attorney at Hitchcock Evert LLP in Dallas. She specializes in complex commercial litigation with a specific emphasis in intellectual property litigation.