Supreme Court should end drug firms’ ‘pay for delay’

FEW CASES before the Supreme Court this session could have more direct impact on consumers’ pocketbooks than the drug industry dispute Federal Trade Commission v. Actavis. Generic drugs cost, on average, 85 percent less than brand-name drugs, and at the heart of the case is whether makers of brand-name drugs can pay to keep generic substitutes off the market. The government’s lawyers argue the practice — known as “pay-for-delay” agreements — violates antitrust laws and unduly adds $3.5 billion in health care costs annually. The court should agree.

Justices heard oral arguments in the case Monday, and a ruling is expected in June. It will likely hinge on how the court views the $20 million to $30 million the FTC suggests Belgian firm Solvay has paid Actavis each year since 2006 not to produce a generic version of AndroGel, a testosterone replacement therapy.

Solvay and Actavis are taking advantage of an unfortunate legal loophole in the 1984 Hatch-Waxman Act, a law that gave generic producers a financial incentive to contest weak drug patents in court. The idea was to speed generics to market, lowering prices for consumers. Instead, what’s increasingly common today is these cases are settled with “pay-for-delay” deals.

In any other industry, buying off would-be competitors is clearly illegal but, thanks to Hatch-Waxman, not for drug makers. Brand-name companies see the settlements as a bargain, protecting their market share — about 90 percent of which disappears when a generic is introduced — for a small fraction of their sales. (AndroGel sales top $400 million annually.)

Generic firms, too, often profit more from these arrangements than from actually bringing a drug to market. Besides being paid to do nothing and avoidingmore costly litigation, Actavis, for example, got another benefit: The company will be allowed to roll out its generic product in 2015, five year before AndroGel’s current patent expires. Lower courts, in fact, have accepted the argument that banning the payments would eliminate any incentive for the generic producers to challenge weak patents in the first place.

Losing out, however, are consumers. Brand-name drugs accounted for only 18 percent of total prescriptions written by doctors in 2011 but 73 percent of the roughly $320 billion spent on medicines in the United States that year, according to research firm IMS Health. Financially, patients taking AndroGel would have benefited most from paying the generic’s lower price since 2006, when Actavis’s version was first approved for marketing.

Patent protections shouldn’t be dismissed lightly. Pharmaceutical firms rely on patents to compensate them for conducting clinical trials, half of all drug development costs. Patients rely on trials to determine if a treatment is safe and effective. But this public good must be put up against the fact that, under Hatch-Waxman, generics successfully prove challenged patents are invalid nearly 75 percent of the time.

Neither patent law nor Hatch-Waxman validates allowing “pay-for-delay” deals to continue. But no matter how the court rules, Congress should also act to amend Hatch-Waxman to end this practice. Right now everyone involved is getting richer at the expense of patients, and that must change.



Illustration of “native” DNA in the human cell, from the majority opinion in Ass. for Mol. Path. v. Myriad Genetics, United States Court of Appeals for the Federal Circuit

A few weeks ago, I wrote a post about a case the US Supreme Court will hear on April 15th concerning whether genes can be patented. As we get closer to that date, I want to pick up the thread where it was left off.

As a quick reminder, the case before the court now concerns the validity of a patent that was granted to Myriad Genetics on a pair of genes (BRCA 1/2) whose presence has been shown to confer an increased risk of developing breast cancer. Here, I want to examine how this case turns on a difficult ontological question, namely: what kind of things are genes?

A number of people who support Myriad’s patent argue that human genes ought to be understood as a molecule like any other. They are a material object, nothing more and nothing less.

Others, including the co-discoverer of DNA’s molecular structure, Jim Watson, have urged the court to endorse a divergent vision. In a friend of the court brief, Watson argues that although genes are indeed a chemical molecule, they are also something more.

According to Watson, a gene is primarily an informational object. “It is a chemical entity,” he writes, “but DNA’s importance flows from its ability to encode and transmit the instructions for creating humans.” Watson goes on to cite some of the terminology commonly used in molecular biology, such as “transcription” and “translation” as evidence for this claim. He then makes the following, totally fascinating, statement:

“The myopic viewpoint thinks of a human gene as merely another chemical compound, composed of various bases and sugars. But history and science teach us otherwise. … The human genome’s ability to be our instruction book on life distinguishes it from other chemicals covered by the patent laws. No other molecule carries the information to instruct a human zygote to become a boy or a girl, a blonde or brunette, an Asian, African, or Caucasian.”

The reason this distinction between genes-as-molecules versus genes-as-information matters so much is that it speaks directly to the question of whether genes are patentable. According to the United States patent law, any “new and useful machine, manufacture, or composition of matter” can be patented. That language is extremely broad, and it is designed to encourage innovation. But there is also an important exception, which states that a product of nature is not patentable. So the Myriad Genetics case crucially turns on whether the BRCA 1/2 genes are a product of nature.

In an earlier decision in favor of Myriad Genetics, the US Federal Circuit Court of Appeals argued that isolated genes do not occur in nature. As the majority opinion pointed out, “DNA in the cell … is packaged into twenty three-pairs of chromosomes.” (See the figure above.) That is, the genes on which Myriad Genetics holds a patent are always part of a larger assemblage. But Myriad Genetics did not seek patent protection over whole chromosomes. They only applied for a patent on a section of DNA that had been isolated and purified. As the court’s ruling noted, Myriad “cleaved” the BRCA 1/2 genes “from their native chemical combination with other genetic materials.” This rendered them a human invention, for “an isolated DNA molecule is not a purified form of a natural material, but a distinct chemical entity that is obtained by human intervention.”

(It is worth pointing out that in another friend of the court brief, Eric Lander argues that the Appeals Court’s decision rested on a factually inaccurate assumption. In fact, DNA in the human body is constantly broken and repaired. So much so that it is statistically certain that isolated versions of both the BRCA 1 and 2 genes have appeared in nature.)

Watson’s claim that genes are primarily informational objects throws a wrench in the Appeals Court’s reasoning. It also echoes the argument made by Judge Robert Sweet of the United States District Court of New York in the first hearing of this case. In his ruling to strike down Myriad’s patent, Sweet wrote that although certain chemical differences may distinguish DNA in the human body from DNA that has been isolated and purified in the lab, those differences are irrelevant to the case at hand. That’s because chemical differences alone are not enough: isolated DNA would have to be “markedly different” from the DNA sequences routinely found in nature to qualify as a genuine invention.

But what constitutes a marked difference? Answering this question is tricky and, according to Judge Sweet, requires taking the nature of the object in question into account. In fact, although Judge Sweet did not use the word himself, we might say that it requires taking the essence of the object into account. The question before the court, then, is whether purifying a stretch of DNA by isolating it from the rest of the genome changes its essential nature somehow.

Why would this be?

To see why this is the case, Federal Circuit Court of Appeals Judge Bryson asks us to imagine a baseball bat that has been fashioned out of an Ash tree. There is a real sense in which the bat is just a “purification” of the tree because you can fashion a bat simply by taking away the wood around it. The bat has been “extracted” from the Ash tree much like the BRCA 1/2 genes have been extracted from the genome. But in fashioning a tree into a bat we have changed its function and thus completely changed its nature. “The result of the process of selection is a product with a function that is entirely different from that of the raw material from which it was obtained.” The same is not true for the BRCA 1/2 genes.

In fact, exactly the opposite is true! The reason that Myriad patented the BRCA 1/2 genes is that they serve as a diagnostic tool. But for them to succeed on this score, it is crucial for the isolated sequences retain their homology to those regions of the genome that confer an increased risk of developing breast cancer. To quote from Bryson dissenting opinion again: “Biochemists extract the target genes along lines defined by nature so as to preserve the structure and function that the gene possessed in its natural environment.” For this reason, the process “does not result in the creation of a human invention.”

Let me just close with a couple quick observations. First, much like the case of Diamond v. Chakrabarty that I discussed in my previous post, this case again forces the court to wade into the deep waters of ontological deliberation. As you’ll recall, the Diamond v. Chakrabarty decision saw the court privilege one level of biological organization (whole organisms) over another (circular pieces of DNA) in deciding whether or not something is an invention or “nature’s handiwork.” This is surprising, and it links up with a controversy within biology about the levels at which evolution operates (usually referred to as the units of selection debate).

Now the court is again being asked to make an ontological decision. But this time, it’s not about whether we should privilege one level of biological organization. Rather, it’s about whether genes are just a chemical molecule or if they are something more; namely, an informational entity.

Of course, historians of science have been thinking about this question for some time. For example, Lily Kay’s book Who Wrote the Book of Life argues that molecular biologists during the 1950s and 60s adopted the DNA-as-code metaphor because many of them had a background in physics and mathematics and because research on computers and information-processing was taking off at the time. Philosophers of biology, too, have debated the utility of thinking about genes in this way. (Hereis an excellent review by Peter Godfrey-Smith.)

Despite all the debates, almost every historian and philosopher agrees that when biologists like Watson talk about genes as informational objects they are speaking metaphorically. DNA is not really a set of instructions or a codebook, but it might be heuristically useful to think of it in that way.

The question for most historians and philosophers of science, then, is not whether genes are informational entities, but whether the metaphor has been a useful and productive one. There is a deep irony in the fact that we are about to see the United States Supreme Court grapple with exactly this question, but that it will be doing so in a very literal way.



The Loyola University Chicago Law Journal will be holding a conference entitled “Patents, Innovation, and Freedom to Use Ideas” on April 11, 2013 at the Philip H. Corboy Law Center in Chicago, IL.  The conference will consist of the following sessions:

  •  Questioning the Assumptions of the Patent System;
  •  What Can We Learn from Creators?
  •  Innovations to Improve Juror Understanding in Patent Trials — Luncheon  address to be presented by The Honorable James F. Holderman of the U.S. District Court for the Northern District of Illinois;
  •  Shortcomings in the Patent System; and
  •  Learning by Example: Case Studies of Patent Use.

Additional information, including an agenda and list of speakers, for the conference can be found here.

There is no registration fee for students, scholars, and professionals who are not seeking CLE credit.  For those wishing to obtain CLE credit, the registration fee is $50 (non-alumni) $40 (alumni), or $25 (attorneys working in the areas of government or public interest), and no charge for current School of Law faculty, staff, or students.  Those interested in registering can do so by e-mailing Conference Editor Jimmy Kritsas at

Apex court verdict in Glivec case on Monday

After seven years of legal wranglings, the Supreme Court on Monday will deliver its verdict on the contentious patenting status of Glivec, an expensive anti-cancer drug, manufactured by pharmaceutical major Novartis.

After being denied protection on the molecule in India, Novartis challenged a key provision in the Indian Patent Act that inhibits protection of intellectual property rights on variants of an existing molecule unless there is significant therapeutic improvement.

The court verdict may also touch upon the price of leukaemia drug Glivec and other expensive drugs whose cheap generic versions are available in the market.

Glivec (imatinib mesylate) is the salt form of a previously known anti-cancer drug, sold in India for a price of Rs 1, 20,000 ($2,400) per patient per month. Indian firms sell its generic versions for Rs 8,000– 10,000 ($160–200) per patient per month. Since the original molecule was developed before 1995, it does not have a product patent in India.

Because of the World Trade Organisation requirement, India in 1995 agreed to allow patenting of pharmaceutical products and processes under Trade Related Aspects of Intellectual Property Rights (TRIPS) within 10 years.

While amending the patent law to meet this requirement in 2005, the government introduced Section 3(d) of the Indian Patent Act, prohibiting patents on variants of existing compounds that do not show enhanced efficacy. It was done ostensibly to take care of public health taking advantage of a TRIPS provision.

The pharmaceutical industry argues this clause establishes an unacceptably high barrier to patenting and limits incentive for research. But many others defend the law as a way to promote public health by enabling more drugs—particularly those who are hugely expensive—to be produced as generics.

Citing 3(d), Indian Patent Office in 2006 rejected Novartis’ application for a patent on the crystalline form of the basic compound in Glivec.

The company not only challenged the decision in Chennai High Court but also moved a separate petition questing the constitutional validity of the section 3(d). The High Court ruled against Novartis in 2007 and two years later Intellectual Property Appellate Board turned down Novartis plea on the patent cover for Glivec. Novartis moved the apex court in 2009.

The Supreme Court’s judgment could very well be a watershed verdict setting the ground rule on patent protection of many new medicines, which may only have an incremental benefit from its predecessor.


Bayer to approach HC against order on Nexavar

Bayer has said it will approach the high court in Mumbai against a ruling by Intellectual Property Appellate Board that upheld the compulsory licence issued to India’s Natco Pharma to make and sell a low-cost generic of the German drug major’s patented cancer drug Nexavar.

Bayer will not accept a ruling by the Intellectual Property Appellate Board (IPAB) in Chennai on Monday, upholding the compulsory licence granted on March 9 last year and it will appeal against the patent office order at the high court in Mumbai, a spokesperson said.

Bayer holds the patent right for Nexavar in India until 2020 and it will continue to defend its intellectual property rights within the Indian legal system, the spokesperson said.

The IPAB ruling was in response to a petition filed by the German drug maker on May 4 last year seeking to overturn the compulsory licence issued by the Controller General of Patents, Designs and Trademarks to the Hyderabad-based Natco Pharma. In an initial judgement, the IPAB had in September last year dismissed a petition by Bayer to stay the compulsory licence.

Supreme Court Vacates, Remands in Dispute over Textbook Copyrights

WASHINGTON, D.C. – (Mealey’s) Citing its ruling last week in Kirtsaeng v. John Wiley & Sons Inc. (568 U.S. ___ [2013] ( subscribers may access Supreme Court briefs and the opinion for this case)), the U.S. Supreme Court on March 25 granted certiorari in another dispute over copyrighted textbooks, this time for the limited purpose of vacating and remanding the case to the Second Circuit U.S. Court of Appeals (Vinod Kumar et al. v. Pearson Education Inc. et al., No. 11-1343, U.S. Sup.) ( Supreme Court briefs).

Justice Stephen G. Breyer took no consideration in the grant of certiorari, according to the order.

Summary Order

At issue in the dispute between petitioners Vinod Kumar and Dart Air Inc. (Kumar, collectively) and respondents Pearson Education Inc., John Wiley & Sons Inc., Cengage Learning Inc. and the McGraw Hill Cos. Inc. is Kumar’s resale in the United States of textbooks lawfully manufactured by the respondents in India.

In September 2011, the Second Circuit affirmed via summary order findings by U.S. Judge Charles S. Haight Jr. of the Southern District of New York that the defendants’ actions constitute copyright infringement. The Second Circuit rejected the defendants’ attempts to invoke the first sale doctrine, codified at 17 U.S. Code Section 109(a), relying instead on its August 2011 holding in John Wiley & Sons Inc. v. Kirtsaeng (654 F.3d 210 [2nd Cir. 2011]). “Defendants argue that John Wiley & Sons is wrongly decided,” the Second Circuit wrote, adding that it “is bound by the holding of that case unless it is reversed by the Supreme Court.”

No Geographical Limitation

On March 19, 2013, the Supreme Court did just that, finding that there is no “geographical limitation” in Section 109(a). Accordingly, pursuant to its holding in Kirtsaeng, the Second Circuit’s holding must be vacated and remanded to the Second Circuit for further consideration, the Supreme Court held.

The case was twice distributed for conference, on Sept. 24, 2012, and March 22, 2013.

The petitioners are represented by Vivek S. Suri of New York. Theodore B. Olson of Gibson, Dunn & Crutcher in Washington represents Pearson.

Developer Freedom At Stake As Oracle Clings To Java API Copyrights In Google Fight


Java_logoEditor’s note: Sacha Labourey is CEO of CloudBees was formerly CTO at JBoss. Follow him on Twitter @SachaLabourey. Steven G. Harris is senior vice president of products for CloudBees and was formerly SVP of Java Server Development at Oracle. Follow him on Twitter @stevengharris.

You could hear a collective sigh of relief from the software developer world when Judge William Alsup issued his ruling in the Oracle-Google lawsuit. Oracle lost on pretty much every point, but the thing that must have stuck most firmly in Oracle’s throat was this:

So long as the specific code used to implement a method is different, anyone is free under the Copyright Act to write his or her own code to carry out exactly the same function or specification of any methods used in the Java API. It does not matter that the declaration or method header lines are identical. Under the rules of Java, they must be identical to declare a method specifying the same functionality — even when the implementation is different. When there is only one way to express an idea or function, then everyone is free to do so and no one can monopolize that expression. And, while the Android method and class names could have been different from the names of their counterparts in Java and still have worked, copyright protection never extends to names or short phrases as a matter of law.

As the friends-of-the-court submissions supporting Oracle show, this ruling has a lot of entrenched corporate heavyweights up in arms, too. It’s not every day you find Oracle in bed with rivalsMicrosoft and IBM (via the Business Software Alliance), and you can bet that the common denominator is about defending the aging Empire from the startup Foundation. Add a former head of the U.S. Copyright Office. To sweeten the stew, why not sprinkle in support from various industry players in the arts. Former Sun execs Scott McNealy and Brian Sutphin have also piped in.

This lineup of amicus curiae briefs should be alarming to software developers in general and to the future of our industry. Why? Their collective argument is that Judge Alsup’s ruling is bad for business. It may in fact be bad for the old guard’s business that is increasingly threatened by changes driven by open source and cloud-based services. But make no mistake: if Judge Alsup’s ruling is overturned on appeal, it’s not going to be in your interest as a software professional.


APIs exist for a reason: They act as the communication channel, the lingua franca, the boundary, between the provider of the implementation and users of that implementation — developers. Of course they require an investment to create. Deep expertise — and even taste — is required to create effective APIs. But, companies and individuals make those investments because they want developers to use an implementation that is exposed through the API. That implementation might give people an incentive to buy your hardware, software or services. Who knows, maybe it gives you a more effective way to sell ads.

You make some bets when you create an API, but they’re not about monetizing the API. They’re about monetizing the things the API unlocks access to. You’ll find APIs documented and used in many books, blogs and open-source projects. Adoption is probably the key measure of success of an API. But then if you encourage developers to use your APIs, why can you prevent them from implementing “the other side” of them? When Captain Picard orders a “Tea, Earl Grey, Hot,” at the Oracle replicator, he’s using a kind of API: “Object. [Qualifiers…]”. Google or anyone else should be able to create their own replicator without Oracle insisting they use some other syntax.

Oracle lost in their attempt to protect their position using patents. They lost in their attempt to claim Google copied anything but a few lines of code. If they succeed in claiming you need their permission to use the Java APIs that they pushed as a community standard, software developers and innovation will be the losers. Learning the Java language is relatively simple, but mastering its APIs is a major investment you make as a Java developer. What Android did for Java developers is to allow them to make use of their individual career and professional investment to engage in a mobile marketplace that Sun failed to properly engage in.

What about compatibility and fragmentation? We’re big believers in Java compatibility and the value of branding and compliance testing. We sit on the Java Community Process Executive Committee. There is no doubt that Android is a messy world of compatibility issues compared to Java, and that Google’s compatibility regime has been less than a blazing success. (Java ME is no panacea of compatibility, though, either.) By creating a new non-Java virtual machine (Dalvik) underneath Android’s Java API-based libraries, Google sidestepped the strict specification license restrictions of required compatibility and no subsetting, supersetting or namespace pollution. Not many of us can afford to do that!


Regardless, thanks to Android using Java APIs, Java developers feel right at home with Android, even if it doesn’t come with a coffee cup logo on it. The economic reality for Java developers is that they’ve gained much more in opportunity from Android than they lost in compatibility assurances due to Android’s subsetting the standard Java platform APIs. We are working with others inside the JCP to advance the current rules to be more in sync with the fork-friendly open source and cloud world. We believe that Oracle’s quest for a legal stranglehold on the Java API, which itself has been advanced through the Java Community Process, has nothing to do with compatibility and everything to do with cashing in on Java at the expense of the community.

With the IT industry shifting from packaged software to a cloud-based service model, this debate becomes even more important. As companies increasingly invest in SaaS, PaaS and IaaS solutions, their operations will depend on third-party APIs. Formal standards are only just emerging and adding FUD over the legal standing of API usage in the meantime is going to place a drag on the industry.

Now is the time to decide who should hold the knife by the handle: Will our economy thrive and be more competitive because companies can easily switch from one service provider to the other by leveraging identical APIs? Or will our economy be throttled by allowing vendors to inhibit competition through API lock-in? And should this happen only because a handful of legacy software vendors wanted to protect their franchises for a few more years?

This decision will impact us for decades to come and will apply to a new IT model – the cloud; yet, this decision is being made now amid heavy lobbying by legacy vendors who are struggling to survive in this whirlwind of change. Developers, your long-term livelihood, the richness of technology choices, and the competitiveness of our industry are at stake.