Category: Biotech & Cleantech

Lawsuit Challenges FDA Approval of Genetically Engineered Salmon

BullmonLast November, we posted that the Food and Drug Administration (FDA) had approved a genetically engineered (GE) salmon: AquaBounty Techonologies’ AquAdvantage Salmon. This approval marked the first time that the FDA authorized selling a genetically engineered animal for human consumption.

Immediate backlash followed the FDA’s November 19, 2015 announcement from environmental and consumer advocacy groups. On March 31, 2016, environmental and food safety groups, as well as fisherman trade associations, sued the FDA and related agencies in federal court in California. The suit seeks to reverse the FDA’s approval of the fish for human consumption.

The complaint alleges that the FDA failed in its statutory duty to take a “hard look” at how GE salmon will impact the environment. The plaintiffs warn that the FDA did not appreciate the risk that the farmed salmon would inevitably escape, “interbreed with wild endangered salmon, compete with them for food and space, or pass on infectious disease . . . .”

The plaintiffs also take aim at the FDA’s authority to regulate GE animals under the Federal Food, Drug, and Cosmetic Act (FFDCA), arguing that, back in 1938, Congress did not expect the FDA to regulate genetically engineered animals for human consumption: “GE animals present enormously different risks and impacts than drugs, requiring different expertise, analyses, and regulation than were contemplated when Congress enacted the FFDCA.”

Whether additional lawsuits will follow this one remains to be seen. In our November post, we predicted that consumers could sue to challenge the labeling of the GE fish. Although the FDA initially determined that AquaBounty would not need to label its salmon as GE, a provision in December’s 2016 Omnibus Appropriations Bill required the FDA to ban GE salmon imports until it published labeling guidelines for the fish. In February, the FDA issued that ban and announced its plans to establish labeling guidelines.

Even if AquaBounty puts FDA-approved labeling on its product, consumers still may sue under failure to warn and related legal theories. The food industry has had some success defending state law food labeling claims based on federal preemption. But the federal Nutrition Labeling and Education Act exempts claims based on the adequacy of safety warnings unless the FDA has actually considered a risk and determined that no warning is necessary. So, the key question in any consumer personal injury suit involving GE salmon likely will be whether the FDA considered the risk of the alleged harm in implementing its new labeling guidelines.

Article By Amy M. Rubenstein & Katia Asche of Schiff Hardin LLP

© 2016 Schiff Hardin LLP

Solazyme Becomes TerraVia, Shifts Focus To Food And Specialty Ingredients

On March 11, 2016, Solazyme announced a name change to reflect a new focus on food, nutrition, and specialty ingredients instead of biofuels. TerraVia™ (TerraVia), as Solazyme is now known, will create value in plant-based food through a transformational algae innovation platform. TerraVia will focus on developing AlgaVia® Whole Algae ingredients (lipid rich powder and protein) and AlgaWise™ Algae Oils, as well as consumer food products that currently include Thrive® Culinary Algae Oil. The Company will also focus on animal nutrition ingredients and personal care ingredients, including AlgaPur Oils. The fuels, industrial oils, and Encapso™ business previously run by Solazyme have been moved to a unit called Solazyme Industrials, which is likely to be sold off. This shift towards high-value, low volume product areas is not surprising given the current low oil prices that are hurting biofuel profits, and is a key component in the continued success of the biobased industry.

Article By Kathleen M. Roberts of Bergeson & Campbell, P.C.
©2016 Bergeson & Campbell, P.C.

Biotechnology: Case Studies of Hypothetical, Genetically Engineered Organism

Discussed at Second Meeting on Modernizing the Regulatory System for Biotechnology Products to Illustrate Agencies’ Roles and Responsibilities

On March 9, 2016, the second public meeting on the July 2, 2015, memorandum entitled “Modernizing the Regulatory System for Biotechnology Products,” was convened in the U.S. Environmental Protection Agency’s (EPA) Region 6 Office in Dallas, Texas.  Representatives from EPA, the U.S. Food and Drug Administration (FDA), the U.S. Department of Agriculture (USDA), and the White House Office of Science and Technology Policy (OSTP) discussed their current roles and responsibilities regarding biotechnology products under the Coordinated Framework for Regulation of Biotechnology (CF) by reviewing case studies of hypothetical products.

Two documents were released prior to the public meeting:  (1) Table of the oversight of biotechnology products and relevant coordination across EPA, FDA, and USDA; and (2) Regulation of Biotechnology Products — Clarifying Roles and Responsibilities through Hypothetical Case Studies.  A copy of the agenda is available here.

According to OSTP’s blog item on the meeting, the table document summarizes current responsibilities and the relevant coordination across USDA, EPA, and FDA for the regulatory oversight of biotechnology products.  OSTP cautions that it should not be interpreted as a guarantee that specific products in any of the product areas described in the table have been in the past, or will be in the future, determined to be safe by the relative regulatory agencies.

The case studies document states that its intention is to provide general information to developers who believe they have, or are uncertain as to whether they may have, a biotechnology product that is subject to regulation under one or more of the federal laws described in the CF.  It also demonstrates how an innovator might navigate the regulatory framework, starting from research activities in the laboratory to full commercialization of the product.  OSTP states that all of the case studies are of hypothetical products, selected because they cover multiple biotechnology product areas with different characteristics and intended uses, and because they illustrate how agencies coordinate their oversight under the CF.  The case studies discussed included the following hypothetical, genetically engineered organisms:

1. Corn, a field crop used for food.  In the first case study, corn with pesticidal properties is engineered with a plant pest component to have pesticidal activity against certain insects.

2. Plum, a fruit tree/crop used as food.  In the second case study, plum with pesticidal properties is genetically engineered without a plant pest component to resist a fungus.

3. Canola, a field crop, used as food.  In the third case study, herbicide-tolerant Canola is genetically engineered with a plant pest component to tolerate an already registered herbicide.

4. Rose, an ornamental plant.  In the fourth case study, a rose is genetically engineered with a plant pest component to increase the production of a pigment in its petals.

5. Microbial Pesticide, a bacterium that is not considered a plant pest.  In the fifth case study, a microbial pesticide is genetically engineered to enhance its pesticidal properties.

6. Microbial Pesticide, a phytopathogenic bacterium.  In the sixth case study, a microbial pesticide that is genetically engineered to express a pesticidal substance that protects against insects.

7. Algae for Biofuels.  In the seventh case study, a unicellular alga is genetically engineered with a plant pest component to produce industrial oils for conversion into biofuels.

8. Rabbit, an animal.  In the eighth case study, a rabbit is genetically engineered to make a therapeutic protein (recombinant insulin) for treatment of humans lacking this protein activity.

The first public engagement session took place on October 30, 2015, at FDA’s White Oak Campus in Silver Spring, Maryland.  A transcript from the meeting is available online.  The third public meeting will be held on March 30, 2016, at the University of California, Davis Conference Center in Davis, California.

Article By

Biobased and Renewable Products Advocacy Practice Group Bergeson & Campbell, P.C.
©2016 Bergeson & Campbell, P.C.

2016’s TechBridge Challenge Focuses on Advanced Surfaces

Are you working on or interested in advanced surface technologies? Look no further than the TechBridge Challenge on Advanced Industrial Surfaces! In collaboration with ExxonMobil Research and Engineering Company, Fraunhofer TechBridge is using this Challenge to accelerate the development of new material formulations, manufacturing methods, deposition techniques, and other innovations to improve energy efficiency in the petroleum and chemical processing industries. Winners will be awarded up to $100,000 in prototyping, demonstration, and/or validation services from the Fraunhofer R&D network. To learn more about TechBridge, the TechBridge Challenge on Advanced Industrial Surfaces, and how to apply, read on!

Founded in 2010 at the Fraunhofer Center for Sustainable Energy Systems CSE, the TechBridge program aims to advance cleantech startups by evaluating and preparing innovative early-stage companies to demonstrate the value of their promising technologies to investors and the industry. Unlike traditional accelerators, TechBridge provides R&D and prototyping services to its clients, thereby helping to de-risk technologies and increase the chance for private investment.

TechBridge oversees several industry and government-sponsored programs each year, focusing on specific cleantech innovation areas and concluding with the selection of top startups to receive Fraunhofer’s services. For this TechBridge Challenge on Advanced Industrial Surfaces, improvement examples include:

– Improved performance of surface-enhanced features (e.g., improved heat exchange, reduced frictional losses, fouling, or adhesion)
– Improved thermal, mechanical, and chemical stability of equipment surfaces
– Improved deployment of surface modifications in retrofit applications and hard-to-reach locations
– Increased affordability and ease of adoption at scale
– Optimization for process fluids other than water

Completed proposals can be submitted at www.FhTechBridgeChallenge.org/surfaces. Applications are due February 17th so get started today!

Article By Katy E. Ward of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

©1994-2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Ariosa v. Sequenom: In Search of Yes After a Decade of No

The Federal Circuit this Wednesday declined to reconsider its June decision in Ariosa v. Sequenom, a closely watched medical diagnostics case involving patents on cell-free fetal DNA testing. Biotech companies, investors, and patent lawyers alike should expect a prompt petition for certiorari, and should hope that the Supreme Court grants it.  (Disclosure: I was one of twenty-three law professors who submitted an amicus brief urging the Federal Circuit to grant en banc rehearing.)

In the last decade, the Supreme Court has suggested in case after case that the inventions they were considering were not merely unworthy of patent protection because they were, say, not inventive enough or useful enough or disclosed in enough detail. Rather, the Court in these cases gave us information about the very boundaries of the patent system—by placing the disputed inventions outside those boundaries altogether. But they have not yet told us what is just inside those boundaries.

This legal uncertainty has a significant chilling effect on investment in innovation, one that we are increasingly able to quantify.  As USPTO Chief Economist Alan Marco and I explained in a 2013 paper in the Yale Journal of Law and Technology, when a court issues a decision resolving the legal uncertainty over whether a patent was valid, that newfound certainty actually moves the market as much as the initial patent grant does.  In other words, the unpredictability of courts forces the market to discount—by as much as half—how much trust to put in the legal rights that the Patent Office issues.

Patent holder Sequenom certainly experienced the downside of that uncertainty, as Wednesday’s rehearing denial sent its stock price tumbling over 14% in just two days.  Others have taken a hit as well, such as the large-cap DNA analysis firm Illumina, which has pursued Ariosa in a separate patent litigation and whose stock price fell 7% across the same two-day period.

The reason for this uncertainty is that we are effectively back in the late 1970s, when the Court was prominently rejecting inventions as patent-ineligible subject matter—Gottschalk v. Benson in 1972 and Parker v. Flook in 1978—without saying anything concrete about what was eligible.  Relief would come only after Diamond v. Chakrabarty in 1980 and Diamond v. Diehr in 1981, when the Court finally produced binding precedents going the other way.

The result is that today’s patentees can only try to run away from the settlement risk mitigation patent in Alice Corp. v. CLS Bank (2014), the breast cancer genetic diagnostic patent in AMP v. Myriad (2013), the thiopurine dosage monitoring patent in Mayo v. Prometheus (2012), the energy futures risk hedging patent application in Bilski v. Kappos (2010), and, although they were never definitively adjudicated, the vitamin deficiency diagnostic patents in LabCorp v. Metabolite (2006).  There is no case yet to run toward.

Ariosa v. Sequenom could have been that case and still can be, if the Court grants certiorari.  Certainly the Federal Circuit order has framed the issue well.  The per curiam order denying en banc rehearing was accompanied by three opinions that addressed in different combinations both the reach and the wisdom of the Supreme Court’s recent precedents.

Judge Dyk’s concurrence concluded that the precedents, particularly Mayo and Alice, do apply to the present facts and that those precedents are generally sound.  He invited “further illumination” from the Supreme Court only on whether the all-important inventive concept must come at the second step of the two-step Mayo test (application of the natural law or abstract idea) or may also come at the first step (discovery of the natural law).  Meanwhile, Judge Newman’s dissent concluded that the precedents, particularly Mayo and Myriad, do not apply here, for the facts “diverge significantly.”  She found the Sequenom patent’s subject matter to be eligible and would have proceeded to more specific patentability analysis under §§ 102, 103, 112, etc.

Their midpoint and the best argument for certiorari was Judge Lourie’s concurrence, which agreed that Mayo controls, with “no principled basis to distinguish this case from Mayo”—but which also urged that Mayo and the Supreme Court’s other precedents from Bilski onward are an increasingly unsound basis for differentiating between natural laws and abstract ideas on the one hand, and applications of those laws and ideas on the other hand.  Echoing a previously expressed position of the Patent Office, he favored the “finer filter of § 112” for issues of indefiniteness or undue breadth (rather than what the agency’s post-Bilski Subject Matter Eligibility Guidelines called the “coarse filter” of § 101).

He also pushed back directly against a argument that the Supreme Court frequently invokes to express its preference for flexible standards that foster over predictable rules that can be manipulated: the draftsman’s art.  Decisions from Flook and Diehr to Mayo and Alice have rested in part on the suspicion that patent lawyers may at any time evade substantive doctrinal limitations through clever claim drafting.  To this Judge Lourie’s opinion aptly responded that “a process, composition of matter, article of manufacture, and machine are different implementations of ideas, and differentiating among them in claim drafting is a laudable professional skill, not necessarily a devious device for avoiding prohibitions.”

In these regards, Judge Lourie’s approach may well represent the “center” of the Federal Circuit on subject-matter eligibility.  He was in the en banc majority in Bilski and authored the panel opinion in Mayo.  He authored both panel majority opinions in Myriad (before and after the Supreme Court’s GVR order).  And he authored the five-judge en banc plurality opinion in Alice, whose analysis was ultimately consolidated and endorsed in the Supreme Court’s opinion in that case.

With the issues so well framed and the recent subject-matter eligibility precedents so well synthesized, then, there is reason to be optimistic that a decade of hearing “no” from the Supreme Court may finally give way to a “yes” and better orient us on the true boundaries of our patent system.

Article By Saurabh Vishnubhakat of Texas A&M University School of Law

© Copyright 2015 Texas A&M University School of Law

Health Officials’ Latest Tool in Tool Box – Whole Genome Sequencing

In late October, the Food and Drug Administration (FDA), Centers for Disease Control and Prevention (CDC), along with state and local officials investigated an outbreak of E. coli infections linked to food served at a major fast-casual restaurant chain. Much of the underlying information documenting the outbreak has been derived from an advanced laboratory technique called “whole genome sequencing” (WGS). This is a fairly new instrument in the CDC toolbox. WGS reveals the complete DNA make-up of an organism, thereby enabling health officials to better understand variations both within and between potentially pathogenic species. Such information can then be compared with clinical isolates from sick patients, and, if they match, there may be a reliable link established between the illness and the pathogen. This new technique has the potential to define the scope of a foodborne illness outbreak more quickly and ideally will help to prevent additional cases. Traditionally, this analysis has been done via a process known as pulse-field gel electrophoresis (PFGE). But PFGE has a shortcoming in that it is unable to differentiate between related species of organisms, which can be critical when health officials are trying to delineate the specific source of the outbreak, and want to know whether to recall a product or not.

The FDA cites numerous examples of how it has used WGS: 1

  • To differentiate sources of contamination, even within the same outbreak;

  • To determine which ingredient in a multi-ingredient food harbored the pathogen associated with an illness outbreak;

  • To narrow the search for the source of a contaminated ingredient;

  • As a clue to the possible source of illnesses; and

  • To determine unexpected vectors for food contamination.

The use of techniques such as WGS reflects FDA’s shift toward a broader preventative-centric approach to food safety. This approach can be associated the Food Safety Modernization Act (FSMA), signed into law on January 4, 2011, which requires comprehensive, science-based preventive controls across the food supply.2 FSMA provides the FDA with new enforcement authorities designed to achieve higher rates of compliance with prevention-based and risk-based food safety standards, and to better respond to and contain problems when they do occur. Lastly, the law also gives the FDA important new tools to hold imported foods to the same standards as domestic foods and directs FDA to build an integrated national food safety system in partnership with state and local authorities.

WGS also has been employed in the context of recent illness outbreaks associated with products regulated by the Food Safety and Inspection Service (FSIS), which oversees the safety of meat and poultry. In some circumstances involving FSIS, the regulated industry has found itself on the receiving end of confusing scientific input, as regulatory recommendations based upon PFGE analysis were subsequently negated by WGS data.

A shift to WGS may allow health officials to more quickly and more precisely connect the dots during an outbreak, and use of this tool may also benefit the regulated community. The enhanced precision of WGS may provide the regulated community with a new ability to prevent being falsely labeled as the source of the outbreak. Under the prior testing regime, PFGE tests were often unable to differentiate between related species of organisms, and as a result, regulators were at times forced to cast an overly wide net to capture the source of an outbreak. The new WGS technique provides authorities with a more precise and accurate tool. But, as circumstances with FSIS suggest, companies may also encounter confusion over growing pains associated with the movement from one generation of technology to another. We will continue to monitor the development and use of new tools and techniques the FDA, FSIS, and other federal agencies are using to prevent and respond to food safety issues.

ARTICLE BY Robert G. Hibbert of Morgan, Lewis & Bockius LLP

1 Food and Drug Administration, Examples of How FDA Has Used Whole Genome Sequencing of Foodborne Pathogens For Regulatory Purposes, (last visited Nov. 9, 2015).
2 FDA Food Safety and Modernization Act, Pub. L. No. 111-353, 124 Stat. 3885 (2001). 

Biometrics: Facebook Files Motion to Dismiss Privacy Suit over Facial Recognition Technology

As discussed in a previous post on facial recognition technology, a putative class action has been filed against Facebook over the collection of “faceprints” for its online photo tagging function, Tag Suggestions.  (See e.g., Licata v. Facebook, Inc., No. 2015CH05427 (Ill. Cir. Ct. Cook Cty. filed Apr. 1, 2015) (the case has been transferred to a San Francisco district court, Licata v. Facebook, Inc., No. 15-03748 (N.D. Cal. Consolidated Class Action Complaint filed Aug. 28, 2015)).

The plaintiffs claim that Facebook’s use of facial recognition technology to scan user-uploaded photos for its Tag Suggestions feature violates Illinois’s Biometric Information Privacy Act (BIPA), 740 ILCS 14/1, and has been used to create, what the plaintiffs allege, is “the world’s largest privately held database of consumer biometrics data.”

Plaintiffs allege that Facebook extracts face geometry data (or faceprints) from user-uploaded photographs and retains such “biometric identifiers” within the meaning of the BIPA. The complaint alleges, among other things, that Facebook collected and stored biometric data without adequate consent.  The complaint seeks an injunction and statutory damages for each violation (note: BIPA provides for $1,000 in statutory damages for each negligent violation, and $5,000 for intentional violations, plus attorney’s fees).

Last week, Facebook filed its motion to dismiss, arguing, among other things, that based on the choice of law provision in its terms of service, California, not Illinois, law should apply (thereby precluding users from bringing a claim under BIPA), and that, regardless, Section 10 of BIPA expressly “excludes both ‘photographs’ and ‘information derived from photographs’ from its reach.”

Those wanting a preview of the plaintiffs’ response to Facebook’s motion should look to a similar privacy action against Shutterfly currently being litigated in Illinois federal court.  (See Norberg v. Shutterfly, Inc., No. 15-05351 (N.D. Ill. filed June 17, 2015)).  There, the plaintiff brought claims under BIPA against the photo storage service Shutterfly for allegedly collecting faceprints from user-upload photos for a tag suggestion feature without express written consent and “without consideration for whether a particular face belongs to a Shutterfly user or unwitting nonuser.”  In its motion to dismiss, Shutterfly, like Facebook, argued that scans of face geometry derived from uploaded photographs are not “biometric identifiers” under BIPA because the statute excludes information derived from photographs.

In his rebuttal, the plaintiff Norberg claimed if the intermediation of a photograph before processing face geometry excluded such data from the definition of a biometric identifier, then the statute would be meaningless:

“Defendants’ interpretation of the BIPA as inapplicable to face scans of photographs is contrary to the very nature of biometric technology and thus would undermine the statute’s core purpose. A photograph of a face is exactly what is scanned to map out the unique geometric patterns that establish an individual’s identity. Taken to its logical conclusion, Defendants’ argument would exclude all the biometric identifiers from the definition of biometric identifiers, because they are all based on the initial capture of a photograph or recording.”

We will be watching both disputes closely – if the suits are not dismissed on procedural or contractual grounds, this will be the first time a court will have the opportunity to interpret the contours of the Illinois biometric privacy statute with respect to facial recognition technology.

Article By Jeffrey D Neuburger of Proskauer Rose LLP

© 2015 Proskauer Rose LLP.

Vermont GMO Battle Continues in Second Circuit

The Second Circuit Court of Appeals is currently in the midst of an interlocutory appeal by the Grocery Manufacturer’s Association (“GMA”) and others of the District Court of Vermont’s denial of a request for a preliminary injunction against Vermont’s “Right to Know” Act.

The Act, passed by the Vermont legislature on May 8, 2014, and effective July 1, 2016, has the stated goal of establishing a system to allow for informed decisions by consumers with respect to the potential health effects of “genetically engineered foods,” commonly referred to as “GMOs.”  The Act applies to products entirely or partially produced with genetic engineering, with a focus on raw agricultural commodities and covered processed foods.  Labels on covered food products must either state that they are “produced with genetic engineering” or “may be produced with genetic engineering.”  Limited exceptions are made for foods derived entirely from animals, restaurant foods, alcoholic beverages and foods that have been independently verified to have “minimal” GMO content.  Penalties under the Act include $1,000.00 per day, per product, fines for food manufacturers.

The GMA filed its initial Complaint with the District Court in June 2014, and sought a preliminary injunction in September 2014.  U.S. District Judge Christina Reiss refused to enjoin the law in a ruling issued on April 27, 2015, which was promptly appealed to the Second Circuit.  Oral argument in the appeal took place on October 8, 2015.

The crux of the issue before the Second Circuit is the proper standard for evaluating GMA’s position that the Act violates the First Amendment by imposing a burden on speech by, inter alia, food manufacturers, based upon the content of that speech.  In reaching her decision to deny the preliminary injunction, Judge Reiss applied the less-stringent First Amendment analysis set forth in Zauderer v. Office of Disciplinary Counsel,  471 U.S. 626 (1985).  Given what the appellants term the “controversial” information/disclosures mandated by the Act, they argue the U.S. Supreme Court’s decision in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557 (1980) and its stricter level of scrutiny applies.  Appellants further rely on Second Circuit precedent, arguing that the case of Int’l Dairy Foods Ass’n v. Amestoy, 92 F.3d 67 (2d Cir. 1996), bars the state legislature from enacting a law that “trammel[s] manufacturer’s free speech rights to appease “consumer curiosity” and was ignored by the District Court.  The State of Vermont continues to argue that the District Court’s reliance on Zauderer and its less-stringent “rational basis” test was proper, in that the Act merely serves to provide consumers with “factual information.”

The Second Circuit panel reviewing the case addressed the issue of ripeness during oral argument, and remains, given the impact of the Act as the first of its kind to have a set effective date, at the forefront of debate over the regulation of GMO food and food products.  The Second Circuit’s decision bears watching, as the costs to industry resulting from enactment of the Act and the potential domino effect of similar acts being passed by other state legislatures could be significant and will require extensive advanced planning to ensure compliance.

The Second Circuit case is Grocery Manufacturers Association, et al. v. Sorrell, Case No. 15-1504.  The District Court case is Case No. 5:14-cv-117 and the Court’s order denying the preliminary injunction is Document #95.  A link to a .pdf copy of the Order is provided immediately here.

Article By Scott K.G. Kozak of Armstrong Teasdale

© Copyright 2015 Armstrong Teasdale LLP. All rights reserved

IRS Releases Favorable Guidance for Individual Investors in Community Solar to Claim Section 25D Tax Credit

The IRS recently issued a Private Letter Ruling (PLR) clarifying that an individual investor in a net-meted community solar project may claim the federal residential Investment Tax Credit (ITC) under Section 25D of the Internal Revenue Code. (A copy of the PLR is available here.) The PLR is also significant because it appears to eliminate a number of contractual requirements that the utility and taxpayer needed to agree to regarding the tracking and ownership of the power produced by the solar project to be eligible for the credit.

Section 25D Tax Credit and Prior IRS Guidance

Just like the Section 48 ITC, the Section 25D ITC permits an owner of solar and other renewable energy property installed before January 1, 2017 to receive a 30% tax credit against federal income taxes. However, in order to claim the credit the property must “generate electricity for use in a dwelling … used as a residence by the taxpayer.” Some tax practitioners interpreted that to meant the credit was limited to solar projects on or adjacent to the taxpayer’s residence. A few years ago, the IRS provided some guidance in Notice 2013-70 (at Q&A Nos. 26 and 27) that taxpayers could in fact claim the credit for off-site solar projects. However, the fact pattern in the Notice described an off-site net-metered project that was owned by the taxpayer, so questions remained whether taxpayers could claim the credit for investments in co-owned community solar projects. Further, the IRS limited the Notice so that it only applied to net-metering arrangements whereby the taxpayer specifically contracts with its local utility to track “the amount of electricity produced by the taxpayer’s solar panels and transmitted to the grid and the amount of electricity used by the taxpayer’s residence and drawn from the grid” as well as stipulate in the contract that the taxpayer holds title to the energy until it is delivered to the taxpayer’s residence. These requirements were problematic because they were often at odds with utility tariffs and state net-metering laws.

The PLR

The PLR is partially redacted but it was provided to a Vermont taxpayer requesting clarification as to whether his investment to purchase 10 solar panels in a 640-panel community solar farm along with a partial ownership in related racking, inverters and wiring is eligible for the Section 25D ITC. (A brief write-up about the project and taxpayer in the local press is available here.) The PLR explains that the project’s entire solar energy output is provided to the taxpayer’s local utility which then calculates a net-metering credit pursuant to its tariff and applies a portion of that credit against the taxpayer’s monthly electric bills. The PLR also explains that the taxpayer’s solar panels are not expected to generate electricity in excess of what the taxpayer will consume at his residence and that the taxpayer along with the other owners of the community solar project are members of an entity that coordinates with the utility the information needed to calculate each person’s allocable share of energy produced by the entire project. Based on these facts, the IRS determined that the taxpayer is entitled to the Section 25D credit. The PLR makes clear the fact that other individuals own solar panels in the project’s solar array does not disqualify the taxpayer from claiming the Section 25D ITC. The PLR did away with the requirement the utility specifically track the exact amount of electricity produced by the taxpayer’s portion of the community solar project and can instead determine the taxpayer’s allocable share of the entire project. The PLR also did away with the requirement the utility contractually agree that the taxpayer retains ownership of the electricity until delivered at his residence. Thus, to recap, under the PLR a taxpayer investing in a community solar project is generally entitled to the Section 25D ITC so long as: (1) the community solar project provides power to the taxpayer’s local utility, (2) the utility provides a credit for the taxpayer’s allocated energy production of the entire project, and (3) the taxpayer’s allocable share is not in excess of its residential needs.

Impact

It is important to note PLRs only apply to the individual taxpayer requesting the ruling and may not be cited or relied upon as precedent by other taxpayers. That said, PLRs provide valuable insight to the IRS’s views on a particular matter, and we expect that this PLR should incentivize investment in community solar and lead to even further expansion in the market. Until now, the market has been primarily driven by tax equity investors claiming the Section 48 ITC and depreciation, however, this PLR opens up opportunities for homeowners who cannot install solar systems for various reasons to invest in community solar.

Article By David B. Weisblat & Kurt R. Rempe of Foley & Lardner LLP
© 2015 Foley & Lardner LLP

FDA’s Proposed Naming Convention for Biologics

On August 27, 2015, the Food and Drug Administration (FDA) released draft guidance on nonproprietary naming of biological products. The agency’s draft guidance proposes that the core nonproprietary name for originator biological products, related biological products, and biosimilar products be appended with a unique, four-letter suffix designated by the FDA in order to distinguish each product and minimize inadvertent substitution of products that are not interchangeable.

A New Naming Convention

The proposed framework for the naming convention includes the nonproprietary name — otherwise known as the proper name — of the originator biological product along with a designated four-letter suffix attached to the core name with a hyphen. Importantly, a related, biosimilar, or interchangeable product will share a core name with the originator biological product, but will also include a distinct four-letter suffix. This convention will indicate a relationship among the products while highlighting the unique identification of each product.

For example, two products sharing the core name of replicamab might have the following nonproprietary names:

  • replicamab-cznm

  • replicamab-hixf

The FDA has not yet decided whether the nonproprietary name for an interchangeable product should also include a unique four-letter suffix or whether it should be assigned the same proper name and suffix as its reference product. The draft guidance notes that the agency is seeking comment on these alternative approaches.

Which Products Are Covered?

The FDA’s proposed naming convention would apply both prospectively and retrospectively to biological products licensed under sections 351(a) and 351(k) of the Public Health Service Act, although the agency is still considering how the convention should apply to interchangeable products. As indicated in the draft guidance, the FDA believes that the designated suffix is warranted for both newly and previously licensed biological products in order to advance a number of goals, including (1) ensuring that patients only receive the biological products intended to be prescribed to them, (2) facilitating manufacturer-specific pharmacovigilance, (3) encouraging the routine use of designated suffixes, and (4) avoiding any inaccurate perceptions of the safety and effectiveness of biological products based on their path to licensure.

Designating a Suffix

Applicants and current license holders may propose their own suffix, which should consist of four lowercase letters devoid of any meaning. Proposed suffixes should not be promotional, include any abbreviations commonly used in clinical practice, contain or suggest the name of any drug substance, or look too similar to the name of a currently marketed product or another product’s suffix designation. The FDA will evaluate a proposed suffix and notify the applicant of its determination. Given the FDA’s previous selection of “sndz” for Sandoz’s Zarxio (filgrastim-sndz), it will be interesting to see the approach and development of these suffixes.

Comments and suggestions on the draft guidance are due by October 27, 2015, at www.regulations.gov. (Docket No. FDA-2013-D-1543).

Relatedly, the FDA issued a proposed rule to be published in the Federal Register on August 28, 2015, that would designate “the official names and the proper names” for six biological products that qualify as either a reference product, a related biological product, or a biosimilar product. As the agency explains, its proposed action with respect to the six products covered by the rule is meant to encourage the routine usage of designated suffixes.

Article By Nathan A. Beaver, David L. Rosen & Anna S. Ross of Foley & Lardner LLP

© 2015 Foley & Lardner LLP