Journal of Intellectual Property Rights Vol 9, July 2004, pp 332-341

Research Exemptions in Law

Kalyan Chakravarthy† National Law School of India University, Nagarbhari, Bangalore-560 072

and Nandan Pendsey† 1436 River Crest Road, San Marcos, CA-92078, USA Received 4 March 2004

Providing exemptions from infringement for research on is equally important as granting exclusive rights to inventors. Both play a crucial role in encouraging the progress of science and technology. While exclusivity in patent rights encourages invention and innovation by providing economic incentives, exemptions for research encourage innovative improvement, testing and use of patented inventions. Research exemptions boost competitive spirit and pro- mote further development in targeted fields of technology. In order to achieve efficient progress in science and technology, a proper balance must be struck between the patentee's rights and the exemptions granted for research. Various countries have been struggling to draw a line that de- fines the proper balance. The US allows a very narrow exemption for research that is limited to philosophical use and idle curiosity, but a much wider exemption is available under Indian pat- ent law. In both USA and India, companies enjoy an exemption for research in or- der to develop information for drug approval, but the scope of exemption varies distinctly. This paper comparatively describes the patent law on research exemptions in India and USA with an intent to point out the differences and to suggest an ideal law that would properly balance the in- terests of research and exclusivity in order to achieve optimum progress in science and technol- ogy.

Keywords: Research exemptions, patent law, drug approval, patented invention, philosophical use, idle curiosity, research and experiment

The significance of the patent system has exclusive rights to the inventor for a lim- increased exponentially as a result of the ited period of time allowing him to reap globalization of trade and commerce. The the benefits of his skill and labour thereby most important purpose of the patent sys- providing an incentive to invent and in- tem is to promote the progress of science vest. The patent system provides exclu- and technology. The patent regime grants sive rights to the inventor for the disclo- sure of his invention to the public that is ——————— †Email:[email protected] and nandanpendsey the quid-pro-quo (give and take) incorpo- @ yahoo.com rated in it. CHAKRAVARTHY AND PENDSEY: RESEARCH EXEMPTIONS IN PATENT LAW 333

A patentee enjoys exclusive rights to exemption from infringement for the pur- make, sell, use, offer for sale or import pose of obtaining federal approval, and, the patented invention. There are very two, exemption from infringement for the few exceptions to these exclusive rights. purpose of using a patent in order to sat- Exemption for research or experimental isfy idle curiosity and for philosophical use exemption is one of such exceptions. use. It protects researchers, which may include educational institutions, research institu- Exemption for the Purpose of Federal Approval tions, non-profit organizations and other In 1984, the United States Congress establishments, from infringement actions enacted the Hatch-Waxman Act, also brought by the patentees for use of their called the Drug Price Competition and patents. Patent Term Restoration Act of 19841. There is a direct conflict between the The Hatch-Waxman Act amended the right of the patentee to exclude others and Federal Food Drug and Cosmetics Act the aim of the patent system to promote (FDCA) and the patent laws in several progress of science and technology by important respects. The objective behind giving societal access to the patented in- the legislation was to balance the compet- vention. The patent law tries to strike a ing interests of the patent owners of a balance between these conflicting ends drug patent in obtaining partial restora- and this essentially determines the scope tion for time lost on the patent term due of the exemption for research. The scope to regulatory delays in the Federal Drug of granted by the pat- Approval on one hand and the interests of ent system differs from country to coun- generic drug companies in conducting try. The difference in scope can be attrib- pre-market testing of a generic drug be- uted to the difference in ideologies fol- fore the expiration of the term of the pat- lowed by each country based on its social ented drug on the other hand2. In order to conditions and needs. Nations of the balance the conflicting interests, the world have been struggling to draw a line Hatch Waxman Act introduced a process that defines the balance between the ex- for a (NDA) that clusive rights granted to the patentee and extended the patent term after the grant of exemptions granted for research. While FDA approval and created an abbreviated some countries have granted a wide ex- new drug application (ANDA) process ception for research, the others have made for generic drug developers to obtain it very narrow. To avoid problems due to FDA approval3. Section 1564 provides for diversity in the scope of research exemp- the extension of the term of a patent for tions in various countries, a uniform compensating the time lost in FDA ap- global policy on research exemptions has proval, and, Section 271(e)(1)5 allows to be adopted by all nations of the world. generic companies to enter the market as

Research Exemptions in USA soon as the patent term on the drug ex- Research exemptions under US law pires by permitting them to conduct tests can be classified into two categories. One, for FDA approval during the patent term. 334 J INTELLEC PROP RIGHTS, JULY 2004

The Hatch Waxman Act was passed by tent of the exemption under Section the US Congress in response to the deci- 271(e)(1)7 have been extensively litigated sion of the Court of Appeal for the Fed- in the light of the phrases used in it. eral Circuit in Roche Products Inc v Bo- 6 lar Pharmaceutical Co Inc where the Scope of the Term Patented Invention court held the competitor's use of a pat- The phrase ‘patented invention’ as it ented drug for the purpose of FDA ap- appears in Section 271 (e)(1) refers to an proval of its generic version to be infring- invention that requires federal approval ing in spite of the fact that the generic before entry into the market. The scope drug was not to be marketed until the ex- and extent of this phrase was the subject piration of the patent term. This decision of controversy before the US courts. It closed the door on tests conducted by ge- was contended that the phrase should be neric companies during the patent term, limited to the inventions covered under which would have enabled entry into the Section 1568 as Section 271(e) was market immediately upon expiration of passed along with Section 156 in the the patent term. The decision effectively Hatch-Waxman Act. Section 156 pro- extended the term of a patent by allowing vides for extension of the patent term if the patent holder an extra period of exclu- the product has been subject to a regula- sivity during the period of federal ap- tory review period before its commercial proval of the generic companies. In order marketing or use9. Litigants contend that to neutralize this anomaly, the US Con- Sections 156 and 271(e)(1) were passed gress responded with the Hatch-Waxman at the same time with the same objective, Act and provided an exemption for the and, therefore, inventions that are covered use of a patented invention if it is rea- under Section 271(e)(1) should be limited sonably related to the development and only to inventions covered under Section submission of information under federal 156. The United States Supreme Court, law. Section 271(e)(1) 7 deals with the however, rejected this argument by hold- exemption provisions. It provides that ing that the patented invention of Section ‘It shall not be an act of infringement 271(e)(1) is defined to include all inven- to make, use, offer to sell, or sell within tions and not just drug related inventions the United States or import into the covered under Section 15610. United States a patented invention … The decisions of the Federal Circuit solely for uses reasonably related to the have interpreted Section 271(e)(1) to ex- development and submission of informa- tend to all patented inventions whether or tion under a Federal law which regulates not covered under the scope of Section the manufacture, use, or sale of drugs or 156. In Abtox Inc v Exitron Corp11, the veterinary biological products.’ Federal Circuit held that a plasma steri- The section provides an exemption lizer, a class II medical device, would fall from infringement to generic companies under the scope of patented invention for the development of information to under Section 271(e)(1) even though Sec- obtain FDA approval. The scope and ex- tion 156 does not cover it. In Chartex Int'l CHAKRAVARTHY AND PENDSEY: RESEARCH EXEMPTIONS IN PATENT LAW 335

PLE v M D Pers Prod Corp12, the patent tive uses for the information is irrelevant owner alleged that the defendant's female to the inquiry. condom, which was either a Class I or II In Intermedic Inc v Ventritex Inc14, the medical device, was not within the scope Court stated that the phrase ‘reasonably of Section 271(e)(1) because neither a related’ (to development of information Class I nor Class II device is eligible for a for the FDA) as used in Section 271(e)(1) patent extension under Section 156. The reflects that the Congress used this phrase Court rejected this argument finding that to communicate its intention that the although Sections 156 and 271(e)(1) of courts give parties some latitude in mak- Title 35 were passed as Sections 201 and ing judgments about the nature and extent 202 of the Drug Price Competition and of the otherwise infringing activities they Patent Term Restoration Act of 1984, the would engage in as they sought to de- Court cannot read limitations from one velop information to satisfy the FDA. It section into another. Therefore, the term further stated that the Congress did not ‘patented invention’ as used under Sec- intend that a party should lose the exemp- tion 271(e)(1) has been construed to mean tion simply because it turns out, after the all inventions or discoveries and is not fact, that some of that party's otherwise limited merely to those inventions that are infringing ‘uses’ either failed to generate covered by Section 156. information in which the FDA was inter- ested or generated more information than Scope of the Phrase ‘Uses Reasonably Related to the Development and Submission of Informa- turned out to be necessary to secure FDA tion Under a Federal Law’ approval. The test is whether it would To be exempted from infringement, the have been reasonable, objectively, for a use, sale, offer to sell, manufacture or party in defendant's situation to believe importation of a patented invention under that there was a decent prospect that the Section 271(e)(1) must be ‘solely for uses ‘use’ in question would contribute to the reasonably related to the development generation of kinds of information that and submission of information under a was likely to be relevant in the process by which the FDA would decide on approv- Federal law’. There has been some litiga- 15 tion about the scope of activities that ing the product . would be reasonably related to develop- Both the decisions point out that ex- ment and submission of information for emption under Section 271(e)(1) would FDA approval. In Abtox Inc v Exitron be available if the activities are aimed at Corp13, the court opined that the statute producing information for federal ap- does not look to the underlying purposes proval. Whether the use results in such or attendant consequences of the activity information or not is not an issue at all. as long as the use of the patented inven- The intention behind the use would not be tion is reasonably related to FDA ap- considered. proval. It further opined that the intention Future Infringement behind the use or availability of alterna- It was argued in a few cases that the 336 J INTELLEC PROP RIGHTS, JULY 2004

use of a patented invention in the process The US patent statute does not have an of acquiring Federal approval would in- express provision dealing with exemption fringe the patent after the federal approval from infringement liability for research. It is granted. In Telectronics Pacing Sys- was first formulated by Justice Story in tems Inc v Ventritex Inc16, the patent Whittemore v Cutter19. In that case, holder sued for a declaratory judgment J Story held that it is not infringement if a alleging infringement based on the activi- patented invention is used for merely phi- ties of a defibrillator manufacturer during losophical experiments, idle curiosity or clinical trials arguing that the defibrillator for ascertaining the sufficiency of the ma- would infringe the patent once FDA ap- chine to produce its desired effects. The proval was granted. The court held that philosophy behind such an exemption the declaration of future infringement is was to help potential rivals to police the neither warranted nor proper for activities inventors by ensuring that the invention under Section 271(e)(1). The same deci- does what it claims to do, thereby reduc- sion was handed down by the court in a ing the number of invalid patents. Fol- suit for declaratory judgment in Amgen lowing Whittemore were the Chesterfield Inc v Hoechst Marion Roussel Inc17 in- v United States20 and the Finney v United volving a suit for infringement of several States21 cases. The courts in these cases patents covering a recombinant form of without analysing the issue of research erythropoetin. exemption on its merit merely held that it With regard to exemption for Federal was not infringement because the alleged approval, Section 271(e)(1) exempts ge- infringing acts constituted experimental neric companies from infringement if the use. The Chesterfield case involved pat- company uses a patented invention for the ents over cobalt-nickel alloys, which were purpose of getting FDA approval. The used by the government, and the Finney patented invention that is used by the case involved the patented Velcro glove company could be any invention or dis- used by NASA for the training mission of covery that falls under the scope of pat- Appolo XIV. entable subject matter under Section In Sawin v Guild22, J Story affirmed his 10118. The intention behind the use of the decision in Whitmore by saying, ‘This patented invention would not be consid- court already had occasion to consider the ered by the courts, it is enough if the use clause in question, and upon mature de- is capable of producing information for liberation, it has held that the making of a FDA approval. The exemption, therefore, patented machine to be an offence, must can be considered to be very wide cover- be with an intent to use for profit, and not ing a wide range of activities, which are for the mere purpose of philosophical capable of producing information for experiment, or to ascertain the verity and FDA. exactness of the specification.’ 23 Exemption for the Purpose of Idle Curiosity and In Ruth , the court following the Philosophical Use proposition of law stated by J Story, held CHAKRAVARTHY AND PENDSEY: RESEARCH EXEMPTIONS IN PATENT LAW 337

that experimental use of patented ma- were performed for commercial purposes, chine without authority from patentee for regardless of whether they led to the sale the sole purpose of gratifying philosophi- of competitor’s injection machines. cal taste or curiosity or for instruction and The most recent case on this point is amusement does not constitute infringing the decision of the Federal Circuit in use. Making or using patented invention Duke v Madey 26. The Federal Circuit, in merely for experimental purposes without consonance with the cases decided ear- any intention to derive profits or practical lier, reiterated in this case that research advantage, is not an infringement. The exemption is only available for idle curi- person who supplied mining and milling osity and philosophical use. This case machines in this case to the Colorado involved the use of a laser patent by the School of Mines for experimental use was University of Duke, which was owned by held to be not a contributory infringer as Madey, a research professor who worked the use of the machines was experimental at the University of Duke. The court held and was therefore exempted from in- that University of Duke’s activities fell fringement action. outside the scope of research exemption In Bonsack Mach Co v Underwood 24, as it attracted federal funds for its re- the court while dealing with a suit in eq- search and as it was involved in quality uity by the Bonsack Machine Company research projects making the research against J B Underwood for alleged in- activity conducted on the laser patent di- fringement of certain patents for cigarette rectly related to legitimate business ob- machine held that the making of an in- jectives. fringing machine merely as an experi- The above mentioned cases suggest ment was not an actionable infringement, that the law of research exemptions as it but if it was to be used for the purpose of stands today in US is strictly non- selling the patent under which it was commercial and is limited to idle curios- made, it would then be regarded as used ity or philosophical use, which means that for profit, and therefore a suit would lie the use of a patent by non-profit organiza- for infringement. tions including universities would not be In Embrex25, the plaintiff Embrex was exempted just on the basis of their non- a licencee for a patent on a method of profit status, if the use helps in furthering inoculating birds against disease by in- their legitimate business activities. After jecting vaccines into a specified region of the Duke decision, it is difficult to think the egg before hatching. After obtaining a of any use, which would be exempted licence for this patent, Embrex started from infringement. manufacturing machines to perform the claimed method. SEC started experiment- Research Exemptions in India ing with these devices and the in ovo The patent system in India is governed method of injecting vaccines. The court by the Patent Act of 1970, which has refusing the experimental use exception been amended in 1999 and subsequently argument held infringement as the tests amended in 2002, in consonance with 338 J INTELLEC PROP RIGHTS, JULY 2004

India’s obligations under the WTO re- Interestingly, the section provides exemp- gime. The patent regime in India is still in tion to meet requirements under foreign its infancy and the courts have not got an laws also. Such an exemption is too broad opportunity to expound the law as there and unwanted because companies and has been very little or no litigation in this inventors would get an opportunity to area. Like United States, India also has exploit a patented invention under the two types of research exemptions, one is pretext that their activities are required the exemption for submitting data to a under some remote law in a remote coun- drug regulatory authority and the second try. one relates to exemptions for research and Research Exemption for Research and Experi- experiment. ment The law relating to research exemp- Research Exemption for Submitting Data to a tions has been codified under Section 47 Drug Regulatory Authority of the Patent Act28. It reads: The grant of The Patent (Amendment) Act 2002 ex- a patent under this Act shall be subject to pressly provides that it would not be in- the condition that any machine, apparatus fringement if a patent is used for generat- or other article in respect of which the ing data for submission to an Authority of patent is granted or any article made by India, if required under any law. This ex- the use of the process in respect of which emption has been framed to enable ge- the patent is granted, may be made or neric companies to get marketing ap- used, and any process in respect of which proval in order to launch biologically the patent is granted, may be used, by any equivalent drugs as soon as the patent person, for the purpose merely of experi- term on the drug expires. ment or research including the imparting Section 107A clause (a) provides that of instructions to pupils. Section 107 any act of making, distributing, using or which provides defenses in suits for in- selling a patented invention would not be fringement states under clause (2) that an infringement if such activity is solely any suit for infringement of a patent by for uses reasonably related to the devel- the making, using or importation of any opment and submission of information machine, apparatus or other article or by required under any law for the time being the using of any process or by the impor- in force, in India, or in a country other tation, use or distribution of any medicine than India, that regulates the manufacture, or drug shall be a ground for defense if 27 construction, use or sale of any product . such making, using, importation or distri- Though the amendment is primarily bution is in accordance with any one or aimed at generic companies, the exemp- more of the conditions specified in Sec- tion is not limited to activities of generic tion 47. companies. It extends to all activities re- Section 47 allows the use of a patent lating to development and submission of merely for research or experiment includ- information under any law, not only to ing instruction to pupils. Any activity, laws relating to drug approval process. which falls under the scope of Section 47, CHAKRAVARTHY AND PENDSEY: RESEARCH EXEMPTIONS IN PATENT LAW 339

shall not constitute an act of ‘infringe- of the patented invention for instruction ment’ as per Section 47 and Section 107. and education without liability. As there is a dearth of legislative history Though the phrase ‘experiment or re- and case law on this section, the scope it search including imparting of instructions covers is not clear. Though this provision to pupils’ is qualified by the term has not been litigated up till now, there is ‘merely’ which means that an activity can a high probability of litigation because qualify under this section only if it is lim- liberalization of the Indian market has ited to experiment or research or instruc- brought in multinational companies, tion to pupils it would not make a differ- which consider patents as one of their ence because such usage would not limit most important business strengths. Such a the extensive scope of the terms ‘re- situation would necessitate a probe into search’ and ‘experiment’. the scope of the exemption through inter- pretation of the words used in the statute. Hypothetical Fact Pattern Section 47 has been drafted in such The hypothetical fact pattern and general language that a very wide inter- the explanations that follow, clearly illus- pretation is possible. The section uses trate the differences in the law relating to terms like experiment or research, which research exemptions in USA and India. are not defined anywhere in the statute. Company X is a pharmaceutical com- As they are not defined, the terms would pany based in USA having two branches be interpreted as per their ordinary mean- in India. It specializes in drugs for genetic ing. The term ‘experiment’ has been de- disorders of the eye. It has patents in In- fined by the American Heritage Diction- dia and USA over two compositions for ary as a test under controlled conditions the treatment of retinitis pigmentosa, a that is made to demonstrate a known congenital eye disorder in human beings. truth, examine the validity of a hypothe- Company Y, a pharmaceutical company sis, or determine the efficacy of some- based in India in collaboration with a thing previously untried and the term ‘re- University Z uses the two patented com- search’ has been defined as scholarly or positions of Company X for research and scientific investigation or inquiry. As the devises a drug therapy for treating Usher legislature has expressly chosen words Syndrome. It sells its drugs in both the like research and experiment which have countries India and USA. Company X a wide scope and which encompass every sues company Y and University Z for scholarly or scientific activity, the court in both USA and In- would most probably decide that it is the dia. Company Y and University Z take intention of the legislature to create a the defense of exemption for research in broad exception to patent liability. The both the courts. phrase ‘including imparting of instruc- Result tions to pupils’ allows universities and In the US Court: Company Y and Uni- other educational institutions to make use versity Z would be liable for infringement 340 J INTELLEC PROP RIGHTS, JULY 2004

because the research activities of Y and Z business interests, such use would fall would fall outside the scope of research within the scope of research exemptions exemptions under US patent law. US pat- because the Indian patent law does not ent law provides exemptions for research consider motive behind the use as long as only if the research activity is in further- such use is meant for research and ex- ance of philosophical use or idle curios- periment. Therefore, in an Indian court, ity. In this fact pattern both Company Y Company Y and University Z might not and University Z did not use the patent be liable for infringement as their activi- only for philosophical use or idle curios- ties fall within the scope of research ex- ity and had a legitimate business interest, emptions in patent law. thus making their use ineligible for re- search exemption. Conclusion Company Y used the patent to research There is great diversity in the law relat- on developing a new therapy for genetic ing to research exemptions in USA and disorders, which was with an aim to fur- India. On one extreme is USA which pro- ther its business in drug therapies for ge- vides a very narrow research exemption netic disorders. University Z's research on in the form of idle curiosity and philoso- the patented genes were in furtherance of phical inquiry and on the other extreme is its legitimate business interests to attract India with a very broad research exemp- good students to join the university and to tion, exempting any kind of research and get funding for research from government experimental activity irrespective of or private agencies. As uses of the pat- whether the activity is commercial or not. ented genes by Company Y and Univer- The potential danger of a narrow ex- sity Z were in furtherance of their busi- emption under the US law is that it im- ness interests they fall outside the scope pedes legitimate research activities, of research exemptions under US patent which would otherwise help in progress law, making them liable for patent in- of science. On the other hand, the danger fringement in the United States Court. of a broad research exemption is that it In the Indian Court: Company Y and dilutes patent protection and takes away University Z might not be liable for in- the incentive to create, invent and invest. fringement under the Indian Patent law The best law on research exemption lies because the scope of research exemptions somewhere in between the two where is very broad in India. Under the Indian enriching the public domain would not patent law, any use of the patented inven- inhibit the incentive system of the patent tion for research or experiment would not law. be infringement irrespective of the motive A model law on research exemption and final outcome of the research. for the purposes of drug approval should Though Company Y and University Z clearly define the limits of such exemp- used the patented genes for research in tion to drug approval. The exemption order to devise a therapy for a genetic would be ideal if it is confined to specific disorder in furtherance of their legitimate activities that aid in acquiring information CHAKRAVARTHY AND PENDSEY: RESEARCH EXEMPTIONS IN PATENT LAW 341

necessary for drug approval under a par- 2 Hollie Baker, Patents on New Drugs and ticular law. The precise drug approval Inducing Infringement (Hale and Dorr LLP Publications), 13 March 2003 http://www law should be clearly mentioned in the haledorr.com/publications/pubsdetail.asp?ID provision to avoid confusion. It would be =98153132003 advisable to limit the exemption to the 3 Id drug approval within the country as pat- 4 35 USC Section 156 (2003) 5 35 USC Section 271(e)(1) (2003) ent protection is territorial and rights un- 6 733 F.2d 858 (C.A.Fed.,1984) der it would be undermined if exemption 7 35 USC § 271(e)(1) (20(3) is allowed with regard to a foreign law. 8 35 USC § 156, (2003) With regard to general research ex- 9 Id emptions the ideal law should take into 10 Eli Lilly v Medtronics, 496 U.S. 661, 665 (1990) account two factors: one, the commer- 11 122 F.3d 1019, 1028 (Fed.Cir.1997) cial/non-commercial motive of the re- 12 5 F.3d 1505 (Fed.Cir.1993) searcher and/or two, improvement of the 13 122 F.3d 1019,1030 (C.A.Fed. (Mass.),1997)., subject area of technology. Due weight 1029-30 14 775 F.Supp. 1269,1280 (N.D.Cal, 1991) should be given to both the factors while 15 Id framing or amending research exemption 16 982 F.2d 1520 (C.A.Fed. (Cal.), 1992) laws. A non-commercial research activity 17 3 F.Supp.2d 104 (D.Mass, 1998) should be exempted as long as it does not 18 35 USC Sec. 101 (2003) interfere with the legitimate interests of 19 Whittemore v Cutter, 29 F. Cas. 1120 (C.C.D.Mass.1813) the patentee or the normal exploitation of 20 Chesterfield v United States, 159 F. Supp. the patent. As the aim of any patent sys- 371, 375-76 (Ct. Cl. 1958) tem is to foster development of science 21 Finney v US , 538 F.2d 347 (Ct.Cl., 1976) and technology, an exemption in favour 22 Sawin v Guild, 21 F.Cas. 554 (C.C.Mass. 1813) of a research activity, which improves the 23 Ruth v Stearns Roger Mfg Co 13 F. Supp. 697 subject area of technology would be rea- (D. Colo 1935) sonable. Whatever factors might be con- 24 Bonsack Mach Co v Underwood 73 F. 206 at sidered, an ideal research exemption law 210 (C.C.N.C 1896) should effectively promote progress of 25 Embrex Inc v Service Engineering Corp. 216 F. 3d. 1343 science and technology by balancing pat- 26 Madey v Duke University 307 F. 3d 1351 entee’s rights with the interest of the so- (Fed. Cir. 2002) ciety in free circulation of ideas. 27 Section 107A, Indian Patents Act, 1970, as amended in the year 2002 References 28 Section 47(3), Indian Patents Act, 1970 1 (1984 Act), 98 Stat 1585