Recovering Patent Life with Patent Term Extension
(as published in BioPharma)
Owners of patents covering methods of manufacturing drugs or biologics may be able to squeeze extra value out of their intellectual property by taking advantage of the obscure provision that makes patent term extension (PTE) rights more robust for “method of manufacturing” patents. This exception is particularly significant for biopharmaceutical companies if they are aware of it well before preparing their PTE applications.
It is, however, easy for firms to squander the value of this exception. The challenge lies in shifting partner and investor expectations based upon the dominant PTE paradigm, which this provision does not follow, and confronting typical licensing practices in which licensees are driving PTE-related decisions. Collaboration agreements themselves sometimes dictate such requirements, mandating that a patent on the biopharmaceutical itself be the basis for a PTE application. Such practices can negatively affect patent owners’ long-term interests despite the short-term gain of closing a deal.
The Basics of Patent Term Extension
PTE is a procedure for lengthening the terms of certain patents to compensate for time spent on clinical testing and regulatory review of related products. Patents usually expire 20 years after they are filed, regardless of how long it takes the patent owners or licensees to get their own products to market. PTE is an exception to this rule.
PTE can extend patents in certain respects by up to five years, helping companies recoup patent exclusivity lost during FDA approval process. This restored patent exclusivity allows companies to not only cover their research and development costs but also to profit from their biopharmaceutical, particularly since profits tend to be highest during this time due to increasing market penetration.
Typically, the PTE restoration applies only to the particular FDA-approved product that forms the basis for the PTE application. Depending on how things evolve, this restoration can end up being commercially insignificant. For example, a biopharmaceutical company might have a broad product patent that covers a class of drugs— including drug ABC and drug XYZ— but the patent is set to expire in 2015. If FDA approves drug ABC in 2013, the company could file a PTE application and potentially secure additional protection all the way through 2020. This PTE, however, would only protect drug ABC. Drug XYZ would be unprotected after 2015, even if it were approved and turned out to be much more successful than ABC.
Rule For Patents Covering Manufacturing Methods
There is an obscure provision that treats PTE differently with respect to patents that cover methods of manufacturing drugs or biologics, as opposed to patents covering the product itself or methods of using the product. The PTE protection for manufacturing patents includes manufacturing the initially approved product, and also any other drug or biologic product, provided it has gone through the applicable regulatory review process, such as new drug application or biologic license application.
Using the same example previously mentioned, but assuming that the patent claims a method of producing the drugs, the biopharmaceutical company would be able to prohibit others from using the method to produce either ABC or XYZ through 2020 (assuming both ABC and XYZ had gone through the applicable regulatory review process).
It does not appear that any patent case to date has addressed this provision. Nor is it clear why Congress departed from the usual rule that PTE protection only applies to the one product approved by FDA and the use approved for that product. The relevant language became law in 1988, as part of an amendment designed to allow for PTE in certain cases involving animal drugs and veterinary biologics. The legislative history sheds no light on why that amendment altered PTE rights granted under method or manufacturing patents to be different nor does it mention if the difference was intentional.
Nevertheless, the law itself is quite clear, and it stands in contrast to the corresponding language in the preceding subsections. Unlike the corresponding sections for product claims and method of using claims, the provision in question provides PTE rights that are not limited to the approved drug or its approved use. Rather, the PTE rights cover the method of manufacturing “the approved product” [i.e., the product forming the basis for the PTE] or methods of manufacturing other drug and biologic products approved by the FDA1. Thus, courts are likely to interpret PTE more broadly for method of manufacturing claims than for product or method of using claims.
Challenges and Conflicts
Unfortunately for patent owners, PTE law is also clear that the terms of multiple patents cannot be extended based on a single regulatory review. It does not matter if the patentee has an entire portfolio of patents covering the approved product itself along with methods of use and production. PTE is only available for a single patent, which can present a difficult choice, and manufacturing patents often get set aside in view of those covering products or methods of use. The latter types are often seen as more valuable because they are typically easier to enforce and harder to design around. Both are valid considerations but so too is the fact that PTE law treats manufacturing patents more favorably. The most important thing is to make a fully informed choice when deciding which patent merits a PTE request.
In many scenarios, the choice is not even the patent owner’s to make. Licensing deals often require that patentees turn over to the pharmaceutical company or other licensee the absolute right to control all decisions related to PTE. Alternatively, the contract itself may specify the required strategy (e.g., filing a PTE request for a certain patent in the event that a particular drug is approved). Moreover, sometimes, investor expectations play a role.
Conceding details related to PTE may seem like a small price to pay for closing a contract. However, in certain cases, it can prove to be a serious mistake. More importantly, any concession should be made with knowledge up-front.
There have been situations where companies with FDA-approved products were compelled by previous actions to file PTE applications on product or method of using patents rather than method of manufacturing patents covering their platform technology. In one case, the company was required by a license agreement to file a PTE on a particular patent family. In another case, the company felt obliged by investor expectations to file a PTE on the approved product. In both instances, the company later regretted those earlier decisions. If the company had consulted PTE-savvy patent counsel at the onset, the method of manufacturing PTE issue could have been addressed up-front, either bargaining for it in the collaboration agreement or setting investor expectations years ahead of time.
While PTE is only available for a single patent, PTE applications can be filed on multiple patents. The PTE applicant does not have to elect which of those multiple patents to extend until receiving a final determination of PTE.
It currently takes more than four years for the US Patent and Trademark Office to issue a final determination. In that time, collaboration relationships and investor expectations can change. Therefore, biopharma companies should consider filing a PTE application on the method of manufacturing patent, at least as a supplement to filing a PTE application on the product patent or method of using patent.
Preserving the option of obtaining PTE on a method of manufacturing patent years down the road could be particularly important for a biopharmaceutical company with platform technology. Intellectual property counsel experienced in PTE issues can provide the necessary framework to guide decision makers through this analysis.
The United States Patent and Trademark Office, 35 U.S.C. 156 Extension of patent term, http://www.uspto.gov/web/offices/pac/mpep/s2751.html
, accessed Nov. 8, 2013.