EXPERIMENTING with INFRINGEMENT

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By Ursula M. McGuinness, PhD

The patent system was originally implemented to promote technological advancement. In exchange for teaching the public how to make and use the invention, the inventor is granted a period of exclusivity to practise the invention. Recently, however, concerns have been raised regarding whether patents do promote innovation or whether they restrict basic research. There has been particular concern regarding broad patents for research tools that are used for discovery rather than as an end product.

Scientists from both academia and industry often use patented processes and materials in their research under the misconception that research is a non-commercial use and therefore exempt from liability for patent infringement. There are some exceptions to liability for infringement in both Canada and the United States, but the scope of these exceptions is limited. Some recent cases have helped to clarify the scope of these exceptions.

In Canada and the U.S., there are both common law and statutory exceptions to liability for infringement. In the U.S., the common law “experimental use” defence has its roots back in the 1800s. In Whittemore vs. Cutter 1 Gall. 429, 29 F. Cas. 1120, 1121 (CCD Mass. 1813) (No. 17,600), Justice Story justified a trial judge’s instructions to a jury that an infringer must have an intent to use a patented invention for profit. He stated:

“It could never have been the intention of the legislature to punish a man who constructed such a machine merely for philosophical experiments, or for the purpose of ascertaining the sufficiency of the machine to produce its described effects.”

Over the years, a doctrine began to appear that suggested that activities undertaken “without any intent to derive profits or practical advantage” were sheltered. In spite of the fact that the number of cases in which the experimental use defence has actually been invoked is relatively small, many institutions have relied upon its perceived breadth to engage in activities that would normally be considered infringing, under the assumption that, as long as their use was not for commercial purposes, they were safe from liability.

The limitations of an experimental use defence were recently tested. On June 27, 2003, the U.S. Supreme Court declined to hear Duke University’s (Durham, NC) appeal of a decision of the Federal Circuit Court of Appeals in the case of Madey vs. Duke University. The decision limits the ability of universities to use patented inventions.

In brief, Madey was a physicist who developed and patented a free electron laser (FEL). In 1988, Madey assumed a faculty position at Duke, and the university built a facility to house the FEL equipment. In 1998, Madey resigned from Duke after a disagreement over the use of the FEL. After Madey’s departure, Duke University continued to use the equipment, and Madey sued for patent infringement. The district court accepted Duke’s defence that its use of Madey’s equipment was exempt from infringement under the experimental use common law doctrine because its use was for experimental, non-profit, non-commercial purposes.

However, in October 2002, the Court of Appeals for the Federal Circuit (CAFC) held that the district court had applied an overly broad version of the experimental use defence. The CAFC found that Duke University used the patented equipment in the pursuit of its legitimate business objectives, “including educating and enlightening students and faculty,” as well as securing “lucrative research grants,” and thus was not entitled to the experimental use defence. The CAFC decision strictly limits the experimental use defence to experiments “solely for amusement, to satisfy idle curiosity, or for strictly philosophical inquiry.” The defence does not apply if the activity is “in furtherance of the infringer’s legitimate business.” The ramifications of this decision have been hotly debated by scientists, policy-makers and corporate officials.

In addition to the common law defence regarding experimental use, Section 271(e)(1) of the United States Patent Act provides an exemption from infringement for certain experimental activities as long as the use of the patented process or material is for purposes reasonably related to the development and submission of information for U.S. Food and Drug Administration (FDA) approval. The limits of a defence under this exemption were also recently tested. The issue of “reasonably related” was addressed in Integra Lifesciences Ltd. vs. Merck KGaA. Merck (Darmstadt, Germany) was found guilty of infringing patents to a peptide sequence owned by Integra (Plainsboro, NJ).

In brief, Integra had identified a short polypeptide having the arginine (R), glycine (G), aspartic acid (D) sequence, which promotes cell adhesion. Merck had an agreement with the Scripps Research Institute (La Jolla, CA) to bring a cyclic RGD peptide through clinical trials and FDA approval. Integra learned of the agreement and offered a licence to Merck. Merck declined the licence, and Integra sued for patent infringement.

Among the issues at trial was that of how far back the provisions under Sec. 271(e)(1) reach. The Court held that the term “reasonably related” does not embrace all activity leading ultimately to FDA approval. The Court also held that Merck’s activity was preclinical research, and not directly related to the furnishing of information for submission to the FDA. In other words, drug-discovery activities for the identification and development of new drugs are not exempt under Sec. 271(e)(1) if those activities do not directly generate data for submission to the FDA.

In Canada, there are similar statutory and common law exemptions for certain experimental uses. The common law, experimental use exemption has a long history. It is based on a U.K. decision from over a century ago. In 1878, George Jessel, Master of the Rolls, summarized the law’s perspective on the use of patented technology for testing purposes in Frearson vs. Loe:

“Patent rights were never granted to prevent persons of ingenuity exercising their talents in a fair way. But if there be neither using nor vending of the invention for profit, the mere making for the purpose of experiment, and not for a fraudulent purpose, ought not to be considered within the meaning of the prohibition, and if it were, it is certainly not the subject of an injunction.”

This perspective was accepted by the Supreme Court of Canada in Micro Chemicals Ltd. vs. Smith Kline & French Inter-American Corp., [1972] SCR 506 at 520, 2 CPR (2d) 193 (SCC). This case is often cited as a basis for the presumption that Canada has a broad research use exemption.

The facts of this case are that Micro had applied for a compulsory licence and made a small amount of the patented product in order to test the manufacturing process, so it could go ahead once the licence was granted. In this case, the Supreme Court found that it was prudent for Micro to show the Commissioner of Patents that it had the capacity to manufacture so that the chance of obtaining a licence would be greater, and that this did not constitute infringement.

This case was decided in the context of an application for a compulsory licence. Since the compulsory licence provision of the Patent Act has been repealed, it is unclear how such a case would be decided today. Since there is a lack of case law on this issue, there is uncertainty regarding the scope of the common law exemption for research activities.

The Canadian Biotechnology Advisory Committee (CBAC) (Ottawa, ON) raised this issue in its recent report to the government. One of the report’s 13 recommendations is the proposal that the Patent Act should be amended to include a research exception provision. The CBAC report suggests that the following statement should be included:

It is not an infringement of a patent to use a patented process or product either:
a. privately and for non-commercial purposes or
b. to study the subject matter of the patented invention to investigate its properties, improve upon it, or create a new product or process.

It remains to be seen whether this type of language will be included in the next amendments to the Patent Act.

Canada also has a statutory exception for certain activities. Section 55.2(1) of the Patent Act provides that it “is not an infringement of a patent for any person to make, construct, use or sell the patented invention for uses reasonably related to the development and submission of information required under any law of Canada, a province or country other than Canada that regulates the manufacture, construction, use or sale of any product.” Thus, a generic company can make certain quantities of a patented drug to compare its product to the brand name to obtain equivalency data for submission of an application for a Notice of Compliance.

Again, the limits of this exception have not been fully tested in the courts. In one recent case, the court found that listing on a provincial formulary does not serve a regulatory purpose, and thus, activities relating to an application for listing on a provincial formulary are not entitled to the exemption against infringement provided in Sec. 55.2. The question of whether drug-discovery activities that ultimately lead to a product that is the subject of an application for regulatory approval fall within this exemption has not yet been addressed by the courts in Canada.

As researchers are increasingly under pressure to outline the commercial applications of their proposed research in grant proposals, it is likely that fewer and fewer projects will be exempt from liability for infringement under the experimental use exemptions of Canada or of the United States. Although the limits of the experimental use exemptions in Canada have not been fully addressed by the courts, the recent U.S. cases highlight the need for corporations and institutions that are involved in research and development to review their activities. It remains to be seen what the fallout from these decisions will be. The narrow interpretation of research exemptions in the U.S. may encourage some companies to perform more research activities outside of the U.S. On the other hand, suing non-profit research institutions may damage the public image of a company and jeopardize mutually beneficial collaborations.

Much of today’s high-technology research uses patented research tools to achieve a goal. In view of the uncertainty regarding experimental use exemptions, research institutes, universities and corporations cannot afford to make assumptions that their activities are exempt from liability for infringement. It may be a good idea to include a research tool checklist in all invention disclosures. All research and development activities should be reviewed to determine whether they are within the scope of permitted investigations and, if not, a licence should be negotiated as soon as possible. Addressing these issues at the start of a research program will help prevent expensive headaches in the future.

Ursula M. McGuinness, PhD is a member of the Intellectual Property Group in the Hamilton, Ont. office of Gowling Lafleur Henderson LLP. She is a registered patent agent in both Canada and the United States. Her practice focuses on patent preparation and prosecution in the broad areas of biotechnology and medical devices.