Warning: Don’t Use Trademarked Olympic Hashtags, Images

Olympic hashtagsWith all of the hype and public attention paid to the Olympics, you and your employees should be aware of the rules that govern the use of hashtags and images related to the Olympic games. The U.S. Olympic Committee (USOC) and the International Olympic Committee (IOC) have historically been very aggressive in policing any use of the Olympic trademarks, images, and hashtags. This year’s games are no exception.

In the last few weeks, the USOC has sent a number of letters to companies that sponsor athletes (who now happen to be Olympians) but have no sponsorship relationship with the USOC or the IOC warning them not to discuss the games on their corporate social media accounts. Companies have specifically been told that they cannot use the trademarked hashtags “#Rio2016” or “#TeamUSA” in any of their postings. The letters also warn companies not to reference Olympic results or to repost or share anything from the official Olympic social media accounts, this includes use of any Olympic photos, logos, or even congratulatory posts to Olympic athletes. While media companies are largely exempt, all other commercial entities should carefully monitor their social media accounts for any Olympic commentary.

Olympic trademarks are the subject of intense legal protections around the world and the IOC and USOC will pursue alleged offenders regardless of their size. In fact, previous enforcement actions have ranged from trademark suits against small restaurants with the word “Olympic” in their names to issuing cease and desist letters to companies that used trademark hashtags such as #Sochi2014 during past games. Guidelines about Olympic brand usage can be found by clicking here.

© Copyright 2016 Armstrong Teasdale LLP. All rights reserved

Supreme Court Reinvigorates Effectiveness of Obtaining an Opinion of Counsel to Defend against Potential Enhanced Damages for Willful Infringement in Halo Electronics

Supreme Court Willful Patent InfringementOn June 13, 2016, the U.S. Supreme Court again reversed a decision of the Federal Circuit—the Circuit specially designated to hear all patent appeals—this time, in articulating the test for determining whether to award enhanced damages for willful patent infringement in Halo Electronics, Inc. v. Pulse Electronics, Inc.1  This is the third time in two years that the Court has reversed the Federal Circuit on remedies in high-stakes patent litigation.2  In an opinion that harkens, in part, back to 1980’s patent law, Chief Justice Roberts and a unanimous Supreme Court held that parties who have actual knowledge that their activities may infringe another’s patent must subjectively believe that their actions are legal, and no longer can rely on theories of objective reasonableness first developed at the time of trial to avoid enhanced damages.

I. Opinions of Counsel at The Federal Circuit

The Halo Electronics decision expressly overruled a 2007 Federal Circuit case, In re Seagate Technologies, which had used a two-part test to determine whether the defendant willfully infringed. Under Seagate, courts first had to find that the actions taken by the alleged infringer were objectively reckless.3  Second, the Court had to find that the defendant acted in a subjectively reckless manner: that they actually acted in bad faith to infringe the plaintiff’s patent.4

The Seagate test created a situation where defense counsel could place the weight of their strategy on showing that the defendant’s conduct was objectively reasonable after the fact at trial. Under this test, it was sufficient to show just one scenario where it would have been reasonable to believe that the defendant’s conduct would not have fallen under the plaintiff’s patent, or that the patent would be invalid.5  This emphasis on what the defendant could have thought, rather than what it actually had thought, resulted in the prospect of enhanced damages becoming very difficult to obtain.6

Seagate itself represented a shift away from the Federal Circuit’s earlier test, established by Underwater Devices in 1983, which placed an “affirmative duty” on the defendant to obtain a competent opinion of counsel to avoid the threat of treble damages.7  Such an opinion of counsel represented the documented legal understanding of the defendant as to whether it believed the plaintiff’s patent was valid, and/or covered the defendant’s activities. A defendant relied upon the opinion of counsel to avoid a finding of willfulness if its actions were later deemed infringing.

To be competent, an opinion of counsel had to investigate the file histories of the patents to determine both their validity and their applicability to the defendant’s actions.8  Additionally, whether the opinion came from a licensed patent attorney, and the extent to which the attorney was affiliated with the defendant, also were considered in determining the competency of the opinion.9  The Federal Circuit made it clear that conclusory opinions made by affiliated in-house counsel, lacking in patent training and expertise, would not be deemed competent.10

The Federal Circuit’s shift away from Underwater Devices came with industrywide changes in the field of patent litigation.11  With the rise in lawsuits pursued by non-practicing entities, the Federal Circuit recognized that many defendants lacked the resources to obtain a competent opinion of counsel every time they received a cease-and-desist letter from a patent holder. In this regard, the Halo Supreme Court also agreed with the Federal Circuit that the “affirmative duty” standard of Underwater Devices was inappropriate.

II. What Halo Electronics Means for Patent Defendants

The Supreme Court, in overruling Seagate, held that a showing of subjective recklessness nonetheless would be required for Courts to consider awarding enhanced damages.12  By removing Seagate’s “objectively reasonable standard” prong, Halo Electronics has the effect of shifting the timeline in which the defendant must establish the reasonableness of its actions. Rather than permitting an after-the-fact showing of objective reasonableness through theories devised for trial, Halo Electronics places an onus on defendant to prove that it believed, at the time of its actions, that it did not infringe another’s patent, or that the patent was invalid.

The Court seemed most troubled by the idea that a truly malicious infringer could avoid treble damages under the Seagate test solely as a result of its trial lawyer’s creative trial presentation of what the defendant could have thought.13  Rather than provide defendants with beforehand and after-the-fact defenses, the Halo Electronics decision encourages defendants to be proactive. Although Halo Electronics reduces the number of options available to a defendant, the options that remain include a clear and safe path around the threat of potential enhanced damages by way of an opinion.

III. Halo Electronics Shields Patent Defendants Who Proactively Obtain an Opinion of Counsel

In some ways, Halo Electronics represents a shift back to the Underwater Devices era, with at least one critical difference. Underwater Devices made obtaining a competent opinion of counsel an affirmative duty for defendants in order to avoid enhanced damages. In contrast, the Halo Electronics decision rejected the notion of an “affirmative duty” as in Underwater Devices.

As Justice Breyer noted in his concurrence, Halo Electronics does not create any rigid affirmative duties akin to those in Underwater Devices.14  Instead, it implicitly holds that a competent opinion of counsel, though not necessary to avoid treble damages, nearly always would be sufficient to avoid them. By acting in honest reliance on documented, independent legal advice stating that the patents are either invalid or do not cover the conduct at issue, the defendant cannot act with the bad faith the Court requires. Thus, proactively obtaining a competent opinion of counsel can be a highly effective way to shield potential infringers from the threat of enhanced damages.

On a practical level, the up-front cost of obtaining an opinion of counsel pales in comparison to the cost of protracted litigation to determine the willfulness of the defendant’s actions. Ultimately, by relying on a competent opinion of counsel, a defendant can protect itself against the threat of enhanced damages well before trial at the pleadings or summary judgment stages. Moreover, the removal of enhanced damages also disarms a critical weapon plaintiffs could wield in settlement negotiations.

IV. Opinions of Counsel at Cadwalader

One area of practice of the Intellectual Property Group at Cadwalader specializes in advising clients regarding potential patent infringements and developing defenses once a client becomes aware of a potentially problematic patent. The IP Group has prepared hundreds of opinions of counsel in a diverse array of technologies, from electronics to pharmaceuticals and mechanical devices.


1 Halo Elecs., Inc. v. Pulse Elecs., Inc., 579 U.S. ___ (2016).

2 See Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744 (2014); Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014); see generally Ronald Mann, Opinion analysis: Where have I read this before? Justices tread familiar path limiting Federal Circuit control over remedies in patent cases, SCOTUSblog (Jun. 16, 2016, 8:04 AM), http://goo.gl/DzNlIC.

3 In re Seagate Tech., LLC, 497 F.3d 1360, 1384 (Fed. Cir. 2007).

4  “[Defendant’s] subjective beliefs may become relevant only if [plaintiff] successfully makes this showing of objective unreasonableness.” Id. Accord Prof’l Real Estate Inv’rs, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 61 (1993) (describing similar objective, then subjective, two‑part test determining when litigation is a “sham” for antitrust purposes); Octane Fitness, 134 S. Ct. at 1751-52 (refusing to further extend Prof’l Real Estate’s definition of “sham” litigation in context of patent litigation).

5 “Under that standard, someone who plunders a patent—infringing it without any reason to suppose his conduct is arguably defensible—can nevertheless escape any comeuppance under § 284 solely on the strength of his attorney’s ingenuity.”  Halo Elecs., 579 U.S. at ___ (slip op. at 10).

6 Id.

7 Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389 (Fed. Cir. 1983).

8 Id. at 1390.

9 Id.

10 Id.

11 “Seagate, it would seem . . . would reflect the Federal Circuit’s directed response to patent trolls. . . .” Dov Greenbaum, In re Seagate: Did It Really Fix the Waiver Issue? A Short Review and Analysis of Waiver Resulting from the Use of A Counsel’s Opinion Letter As A Defense to Willful Infringement, 12 Marq. Intell. Prop. L. Rev. 155, 183 (2008).

12 Halo Elecs., 579 U.S. at ___ (slip op. at 10).

13 Id. at ___ (slip op. at 9).

14 “[C]onsulting counsel may help draw the line between infringing and noninfringing uses,” but it is not required. Id. at ___ (slip op. at 3) (Breyer, J., concurring).

Sweeping Changes in EU Trademark Law and the Brexit Unknown

EU brexit referendum Brexit Street SignsBy now you have undoubtedly heard that in the Brexit Referendum held on June 23, 2016, the majority vote was in favor of United Kingdom leaving the European Union. Notwithstanding the outcome of the vote, it is presently unclear when, or even if, the UK government will give notification to the EU of its intention to leave the EU in accordance with Article 50 of the Lisbon Treaty. If notice is given, there will be a two-year period (which may be extended) to complete negotiations of the terms of UK’s exit from the EU.

Rights in existing EU Trade Marks (EUTM) and Registered Community Designs (RCD) remain unaffected until the UK exits the EU. Once the UK’s departure from the EU has been finalized, it is likely that existing EUTMs and RCDs will no longer automatically provide coverage in the UK. Although impact of the Brexit in that regard is unclear at present, it is anticipated that UK legislation will be implemented to ensure that such rights continue to have effect in the UK, for example, by converting existing EUTM rights to UK national rights enjoying the same priority/filing dates.

In terms of filing new applications during this transitional period, an EUTM remains a cost efficient option for brand owners wishing to obtain protection across the EU. Until we have further information as to how EUTMs and RCDs will be addressed after the UK exits the EU, brand owners seeking protection in the UK may wish to consider filing both an EUTM and a UK application.

EU TRADEMARK REFORM

Recently, there have been several other noteworthy changes in the EU pertinent to trademarks that also deserve consideration by trademark holders. On March 23, 2016, European Union Trademark Regulation No. 2015/2424 came into force bringing substantial changes to Community Trade Mark registrations and procedures. Some of the most relevant changes are as follows:

  • The names have changed. The Office for Harmonization in the Internal Market (OHIM) has changed its name to the European Union Intellectual Property Office (EUIPO), and the Community Trade Mark (CTM) was changed to the European Union Trade Mark (EUTM).

  • There is a change in the fee structure for trademark applications and renewals. The “three classes for the price of one” arrangement has been replaced by a “one-fee-per-class” system. Under the new system, the official fees for three classes are higher, while registration renewal fees have been slightly reduced.

  • Under the old system, all CTM applications filed prior to June 20, 2012 that used the complete Class heading as the specification of the goods and/or services were held to include all of the goods and services in the particular class. Under the new system, all registrations that use Class headings will be interpreted according to their literal meaning, irrespective of their filing date. Therefore, registrations filed prior to June 20, 2012 may not adequately cover the trademark holder’s goods and services.

  • The new regulation allows for a transitional period of six months, from March 23, 2016 to September 23, 2016, for owners of EU registrations which cover the entire Class heading, to amend the specification of goods and services. Therefore, owners of EU registrations that cover the Class heading should check if the Class heading covers everything they want to protect. If not, they should seek to amend their registration before September 23, 2016.

GENUINE USE OF A MARK IN THE EU

Under European Union Trademark Law, an EUTM registration may be revoked if “within a period of five years, following registration, the proprietor has not put the mark to genuine use in the Community in connection with the goods or services in respect of which it is registered, or if such use has been suspended during an uninterrupted period of five years.”

An EUTM mark has been found to be in “genuine use” within the meaning of current authority if it is used for the purpose of maintaining or creating market share within the European Community for the goods or services covered by the registration. This usage standard would be assessed by considering the characteristics of the market concerned, the nature of the goods or services, the territorial extent and the scale of use, as well as the frequency and regularity of use.

It has long been generally understood that use of a EUTM mark in any one EU member country would satisfy this use requirement. However, this has been called into question by a recent UK decision, The Sofa Workshop Ltd v. Sofaworks Ltd [2015] EWHC 1773 (IPEC), that found use of a mark in only the UK only was not sufficient to maintain the CTM registration. Instead, that court and other recent decisions have called into question whether use of a trademark in only one country of the EU is sufficient and have instead looked at other indicia of “use” such as percentage of market share over the entire EU.

These recent assessments of genuine use from courts located in the currently-constituted EU should be noted by brand owners and may provide additional rationale for brand owners seeking protection in the EU to consider filing for national rights (as opposed to EUTMs) where use of the mark may be limited.

© 2016 Neal, Gerber & Eisenberg LLP.

Federal Circuit Clarifies the “Commercial Offer for Sale” Prong of the On-Sale Bar

On July 11, 2016, a unanimous Federal Circuit en banc affirmed that The Medicines Company’s (“TMC”) use of third-party contract manufacturing services did not invalidate U.S. Patent Nos. 7,582,727 and 7,598,343 (the “patents-in-suit”) under the on-sale bar, reverting back to the district court’s original ruling but on modified grounds. The Medicines Company v. Hospira, Inc., No. 2014-1469 (“Hospira”). The Court provided useful guidance for companies and patentees that have third-party agreements to ensure they do not run afoul of the bar.

The on-sale bar under pre-AIA 35 U.S.C. § 102(b) prohibits patentability if “the invention” was “on sale” more than one year before the effective filing date of the invention. Here, TMC contracted with a batch manufacturer, Ben Venue Laboratories (“BV”), to produce Angiomax®, a blockbuster blood thinning drug covered by the patents-in-suit. More than a year before the effective filing dates of the patents-in-suit, TMC contracted with BV to manufacture a new formula of Angiomax® that met FDA requirements. In a decision penned by Judge O’Malley, the Federal Circuit reached the opposite conclusion from last year’s 3-judge panel decision holding that the patents-in-suit were not invalid under the on-sale bar.

The Federal Circuit addressed the first prong of the U.S. Supreme Court’s two-prong Pfaff test, which holds that a “claimed invention” is “on sale” when it is: 1) the subject of a commercial offer for sale; and 2) ready for patenting. Because the Federal Circuit dispensed with the issue on the first prong, it did not reach either the second prong or experimental use. The Court held that a “commercial sale or offer for sale” must bear the “general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code,” i.e., when parties, intending to be legally bound, agree to give and pass property rights for consideration. An offer for sale can also trigger the bar when the offer rises to a “commercial” level—that is, an offer that another party could make into a binding contract by simple acceptance (assuming consideration).

Here, the Federal Circuit held that the transactions between TMC and BV did not rise to a commercial level. The Court reasoned that § 102 requires the claimed invention to be “on sale,” in the sense that it is “commercially marketed.” The product and product-by-process claims of the patents-in-suit covered a product. But, the contract between TMC and BV was a manufacturing service contract for the claimed product, not a contract for the sale of the product. The Court identified four factors in reaching its decision:

  • Manufacturing Service-Style Terms and Conditions: The Federal Circuit indicated that the invoice between TMC and BV was “to manufacture” the product, and the amount paid to BV was only about 1% of the ultimate market value of the manufactured product— indicating a service, not a sales, contract.

  • No Title Transfer: After clarifying that title transfer is a “helpful indicator” and not dispositive, the Court found that BV lacked title in the claimed products as it was not free to use or sell the products or to deliver the products to anyone other than TMC—reflecting a lack of commercial nature to the transaction (“[T]he inventor maintained control of the invention, as shown by the retention of title to the embodiments and the absence of any authorization to [the manufacturing service provider] to sell the product to others.”)

  • After noting that the confidential nature of the transaction is an important factor but not one of “talismanic significance,” the Court held that the “scope and nature of the confidentiality” imposed on BV supported the view that the sale was not a commercial sale of the patented invention.

  • “‘[S]tockpiling,’ standing alone, does not trigger the on-sale bar.” The Court clarified that mere “commercial benefit” does not trigger the on-sale bar. E.g., mere stockpiling of a patented invention by a purchaser of manufacturing services—irrespective of how the stockpiled material is packaged—does not constitute a “commercial sale” as it is “a pre-commercial activity in preparation for future sale.” Instead, the Federal Circuit focused on “those characteristics that make a sale ‘commercial’ in the most well-understood sense of that term and on what constitutes commercial marketing of a product, as distinct from merely obtaining some commercial benefit from a transaction….”

The Court also refused to create a blanket “supplier exception,” upholding its prior precedent and noting that the focus must be on the commercial character of the transaction and not solely on the identity of the parties.

Takeaways after Hospira

  • Now that contract manufacturing does not per se trigger the on-sale bar, drugmakers and others that cannot make products in-house can rest assured that their patents are free from challenge (“We see no reason to treat [TMC] differently than we would a company with in-house manufacturing capabilities” as “there is no room in the statute and no principled reason . . . to apply a different set of on-sale bar rules to inventors depending on whether their business model is to outsource manufacturing or to manufacture inhouse.”). Yet, careful attention should be paid to the type of contractual terms between patent owners (and/or their exclusive licensees) and third parties.

  • Structure supplier agreements as service manufacturing agreements, not product purchase/requirement contracts, and retain rights with title-retention clauses. The role of confidentiality and non-disclosure agreements over sales or offers for sale, as well as trade secrets, may expand to potentially avoid triggering the on-sale bar.

  • Pre-commercial activities, such as stockpiling and publicizing upcoming availability of a product for sale, should not trigger the on-sale bar. Nonetheless, active steps should be taken to not create an “offer” in the commercial sense, which another party could merely accept to create a contract.

For practice-based tips for practitioners which still apply despite Hospira’s holding, please click here and scroll down to Section IV.  To view the Court’s opinion, please click here.

© 2016 Sterne Kessler

Intellectual Property and You: University Edition

Intellectual Property at UniversityIt may be July, but school is still in session. Today, I’ll discuss another common but mysterious topic: intellectual property ownership, specifically in the university setting. Universities sponsor research, encourage experimentation, and foster collaboration. The hallowed halls of universities are treasure troves of intellectual property. However, the process can hit a snag when it comes time to start a company and (hopefully) make money. Intellectual property is the cornerstone of many companies and at the center of many disputes. Here, I will address a few items: 1) joint inventorship; 2) university policies and grant terms; and 3) employment agreements.

Joint Inventorship

As it is synonymous with intellectual property, let’s first tackle patents and the concept of “joint inventorship.” 35 USC §116(a) provides that when an invention is made by two or more persons jointly, they shall apply for a patent “jointly.” Further, inventors may apply for a patent jointly even though (1) they did not physically work together or at the same time, 2) each did not make the same type or amount of contribution, or 3) each did not make a contribution to the subject matter of every claim of the patent.

Case law maintains no minimum threshold for contribution. In Burroughs Wellcome Co. v. Barr Labs, Inc. (1994), the court posited that “conception is the touchstone of inventorship.” There, the patent application was prepared before the defendant’s scientists (Barr Labs) contributed to the research on the use of a pharmaceutical to treat HIV. The court held that inventors are those who thought of the idea, not those who only realized the idea. As such, discovery that an idea actually works and reduction of that idea to practice are irrelevant for inventorship. The idea must be “definite” and “permanent” in a sense that it involves a “specific approach to the particular problem at hand.” The typical contributions of a supervisor do not necessarily qualify.

Burroughs Wellcome teaches an important lesson for startup teams: everyone should have a clear understanding of their roles and duties. Over an idea’s lifecycle, many hands may touch the idea. Confusion among these matters can create disputes and unnecessary hurdles. Teams must secure the intellectual property rights of all inventors, otherwise, the intellectual property will have multiple owners. For example, three students are working on a project for a new light tracking technology. Each student contributed, but only two students were listed on the patent, which was assigned to the company IP, Inc. The third student has inventorship rights, and as such, she can have herself added to the application and more importantly, she has rights to the patent which she may assign and license at her pleasure. Put simply, your company may have a joint owner.

University Policies and Grant Terms

Second, always–and I do mean always–look at your university’s intellectual property and technology transfer policies and any funding terms that you receive. These terms will ultimately govern your relationship with the university and dictate your responsibilities and rights. Many of your questions may be answered right in the policy.

For my fellow Wolverines, let’s focus on the University of Michigan’s Tech Transfer Policy.

1. Ownership. Generally, the University claims ownership over intellectual property made by “any person, regardless of employment status, with the direct or indirect support of funds administered by the University (regardless of the source of such funds).” These funds include University resources, and funds for employee compensation, materials, or facilities.

2. Student Intellectual Property. The University generally does not claim ownership of intellectual property created by students. The policy defines “student” as a person enrolled in University courses for credit, except when that person is an employee. However, UM will claim ownership of intellectual property created by students in their capacity as employees (i.e., persons who receive a salary or other consideration from the University for performance of services, part-time, or full time). Interestingly, a student will be considered an employee, for the purposes of this policy, if they are compensated. UM gives the following examples as compensation: stipends and tuition.

The University of Michigan is relatively generous towards its students. However, employees (professors, graduate student instructors, research assistants, post-docs) are another matter.

Employment Relationships

Lastly, as hinted above, founders should pay close attention to the terms of their engagement with the university, which will include employment agreements or other related agreements. Typically, professors, graduate student instructors, research assistants, and the like will have these agreements in place and they are bound by their provisions. Each of these agreements is likely to have an intellectual property assignment clause, which will give ownership of created intellectual property to their respective university employer.

Conclusion

Although the university setting is a boon to intellectual property creation, it does come with strings attached. IP ownership can also become very messy due to concepts like joint inventorship and a lack of proper assignment documents. An unwary student group can end up with the university, or another party, as a co-owner in his/her intellectual property.

Here are a few suggestions:

  • Communicate. As stated above, it is important that everyone understand their role in your project/venture. Informed persons are less likely to assert unwarranted ownership claims.

  • Read your university, classroom, and grant policy. While some places can be student friendly (GO BLUE!), others may not.

  • Maintain clear documentation. Properly document your inventive processes. Also ensure that when you have a startup involved, have proper intellectual property assignments between participants and the startup.

  • Always read your employment agreements. These agreements can contain various obligations in regards to intellectual property. They may also contain intellectual property assignment clauses.

Keep in mind, there is a value to working with university intellectual property. The university may already have ownership, or in some cases, a venture (or students) may assign their intellectual property to tech transfer offices for help in commercialization efforts. The university is a valuable environment.

ARTICLE BY Fermin M. Mendez of Varnum LLP

© 2016 Varnum LLP

Federal Circuit Requires 180 Day Notice For All Biosimilars, Even After Patent Dance

biosimilars patent danceIn Amgen v. Apotex, the Federal Circuit rejected Apotex’s arguments that the 180-day pre-marketing notice requirement does not apply to biosimilar applicants who participated in the “patent dance” process of the Biologics Price Competition and Innovation Act (“BPCIA”), expanding on its decision in Amgen v. Sandoz that 42 USC § 262(l)(8)(A) is a mandatory, stand-alone requirement. The Supreme Court has asked the Solicitor General to weigh in on whether it should grant certiorari in Amgen v. Sandoz. Will this decision make the Court more or less likely to review the Federal Circuit’s interpretation of this important biosimilar statute?

The Biosimilar Patent Dance

The biologic product at issue is Amgen’s Neulasta® (pegfilgrastim) product. Amgen describes pegfilgrastim as “a recombinantly expressed, 175-amino acid form of … human granulocyte-colony stimulating factor (‘G-CSF’) conjugated to a 20 kD monomethoxypolyethylene glycol (m-PEG) at the N-terminus.” After Apotex filed a Biologic License Application (BLA) seeking FDA approval to market a biosimilar version of Neulasta® (pegfilgrastim), the parties followed several steps of the patent dance procedures, which resulted in Amgen asserting U.S. Patent Nos. 8,952,138 and 5,824,784 in the U.S. District Court for the Southern District of Florida. Those infringement claims are being litigated, although the ‘784 patent has been dropped since it expired.

The Biosimilar 180-Day Notice Dispute

As noted in the Federal Circuit decision, Apotex sent Amgen a letter on April 17, 2015, stating that it was “providing notice of future commercial marketing pursuant to 21 USC § 262(l)(8)(A), though Apotex lacked (as it still lacks) an FDA license.” Amgen sought a preliminary injunction to “require Apotex to provide … notice if and when it receives a license and to delay any commercial marketing for 180 days from that notice.” The district court granted that motion, citing the Federal Circuit decision in Amgen v. Sandoz that notice cannot be given before the biosimilar product is approved. Apotex appealed.

The Federal Circuit Decision

The Federal Circuit decision was authored by Judge Taranto and joined by Judge Wallach and Judge Bryson. The bottom line of the court’s decision is this:

The [§ 262(l)](8)(A) requirement of 180 days’ post-licensure notice before commercial marketing … is a mandatory one enforceable by injunction whether or not [the biosimilar applicant provided a copy of its biosimilar application to the reference product sponsor in accordance with  § 262(l)(2)(A)].

As it had in Amgen v. Sandoz, the court emphasized the “categorical” language used in the statute:

The subsection (k) applicant shall provide notice to the reference product sponsor not later than 180 days before the date of the first commercial marketing of the biological product licensed under subsection (k).

The court noted that § 262(l)(8)(A) “contains no words that make the applicability of its notice rule turn on whether the applicant took the earlier step of giving the [§ 262(l)](2)(A) notice that begins the § 262(l) information-exchange process,” and stood by its holding in Amgen v. Sandoz that the statute is “‘a standalone notice provision’ not dependent on the information-exchange processes that begin with [§ 262](l)(2)(A).”

Further justifying its decision, the court emphasized that the BPCIA created a “two stage” patent litigation process, and found that the 180-day pre-marketing notice is essential to the second stage. In that regard, it explained that the 180 day period “gives the reference product sponsor time to assess its infringement position for the final FDA-approved product as to yet-to-be-litigated patents,” and “gives the parties and the district court the time for adjudicating such matters without the reliability-reducing rush that would attend actions for requests for relief against immediate market entry that could cause irreparable injury.”

The court also considered and rejected Apotex’s arguments based on the relationship between § 262(l)(8)(A) and other sections of the BPCIA, such as § 262(l)(9)(B) and § 262(l)(9)(C), which give the reference product sponsor the right to bring delcaratory judgment actions when the biosimilar applicant fails to follow some or all of the patent dance procedures.

Requiring 180-Days Notice Does Not Extend The 12-Year Exclusivity Period

Perhaps Apotex’s most compelling argument was that the court’s interpretation of 262(l)(8)(A) effectively gives original biologic products 12.5 years of exclusivity rather than the 12 years provided by Congress in § 262(k)(7). The court dealt with this argument in two ways. First, the court noted that “§ 262(k)(7) by its terms establishes the 12-year date only as an earliest date, not a latest date, on which a biosimilar license can take effect” (emphasis added). Second the court hypothesized that the FDA could implement the 12-year exclusivity period by “issu[ing] a license before the 11.5-year mark and deem[ing] the license to take effect on the 12-year date.” In that case, the 180-days notice could be given in time to expire when the 12-year exclusivity period expires.

(The FDA has not yet issued guidance or regulations on this issue, and is not bound by the Federal Circuit decision. Indeed, the U.S. Court of Appeals for the District of Columbia is the appellate court most likely to review the FDA’s interpretation of § 262(k)(7).)

What Will the Supreme Court Do?

As noted above, the Supreme Court has asked the Solicitor General to weigh in on whether it should grant certiorariin Amgen v. Sandoz. Since this decision is consistent with that one, it is not clear that it will make the Court more or less likely to hear the case. The opinion here provides a detailed summary of the patent litigation procedures of the BPCIA and the related sections of the patent infringement statute, 35 USC § 271. That analysis may make the Court more comfortable with the Federal Circuit’s interpretation, or could lead the Court to try its own hand at deciphering a statutory scheme that Judge Lourie characterized as deserving of  “a Pulitzer Prize for complexity.”

© 2016 Foley & Lardner LLP

Senate Judiciary Introduces CREATES Act To Expedite Access To Affordable Drugs

affordable drugsFollowing months of public outcry and Congressional probes into significant drug price increases, the Senate Judiciary Committee introduced legislation targeting “behavior that blocks competition and delays the creation of affordable generic drugs” and biosimilar products. The bill, entitled the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act of 2016, S. 3056, would punish the strategic refusal of “innovator” companies to (1) share drug samples needed for generic and biosimilar regulatory testing and approval; and (2) agree on a shared safety protocol for so-called “REMS products.” The CREATES Act is the latest in a string of legislative efforts around the country focusing on drug affordability and price transparency.

A. Regulatory Background

When and how a generic or biosimilar product (or brand drug or biologic) enters the pharmaceutical supply chain varies depending on whether the product is subject to Risk Evaluation and Mitigation Strategies (“REMS”) requirements. REMS originated with the FDA Amendments Act of 2007, which authorizes distribution restrictions and other REMS for medicines with higher toxicity and risk potential.  A REMS may include Elements to Assure Safe Use (“ETASU”), such as restricted distribution, physician and patient education, and/or evidence of safeuse conditions.

By law (21 U.S.C. § 355-1(f)(8)), REMS requirements cannot be used to “block or delay” generic approval. Nevertheless, FDA has publicly stated“we have found cases in which sponsors have tried to use the REMS to block generics.” Such efforts have been challenged in private antitrust litigation and generated more than 100 inquiries to FDA. The Federal Trade Commission has told Congress it “continue[s] to be concerned about potential [REMS] abuses . . . to impede generic competition,” which “may violate the antitrust laws.” Enter the CREATES Act.

B. The CREATES Act

Section 3 of the CREATES Act would establish causes of action for “delays of generic drugs and biosimilar biological products.” An “eligible product developer,” i.e., an ANDA applicant or 351(k) applicant, could bring a federal civil action against the license holder for a “covered product”—defined as an approved drug or biological other than one for which there is a short-term shortage—alleging the license holder

(1) “has declined to provide sufficient quantities of the covered product to the eligible product developer on commercially reasonable, market-based terms”; or

for products subject to a REMS with ETASU

(2) (i) “failed to reach agreement with respect to a single, shared system of elements to assure safe use with respect to the covered product[] or . . . at least 120 days have elapsed since the developer first initiated an attempt to reach an agreement”; or

(ii) “refused to allow the eligible product developer to join a previously approved system of elements to assure safe use with respect to that product.”

The Act would authorize judges to award injunctive relief and damages “sufficient to deter” similar delaying conduct. Damages could not exceed the revenue earned from sale of the drug during the refusal period, however.

The CREATES Act would exempt innovators from liability from “the failure of an eligible product developer to follow adequate safeguards to assure safe use of the covered product during development or testing activities.” Additionally, innovators would not be liable if, in fact, they “had [no] access to inventory of the covered product to supply to the eligible product developer on commercially reasonable, market-based terms” or if “the covered product could be purchased by the eligible product developer in sufficient quantities on commercially reasonable, market-based terms from the agents, distributors, or wholesalers of the license holder.”

C. Reactions and Implications

The CREATES Act enjoys broad support from the generic industry, physicians, pharmacists, hospitals, consumer advocacy groups, antitrust experts, and insurers. During a recent Congressional hearing, the CREATES Act waspraised for confronting anticompetitive regulatory manipulation by promoting competition and, in turn, improving consumer choice and welfare. The hearing’s lone dissenter, the Pharmaceutical Research and Manufacturers of America (“PhRMA”), claimed the bill “uses a blunt instrument to address a narrow issue.”  Among other things, PhRMA objected to litigation as the mechanism for resolving product safety concerns and breakdowns in complex, multiparty REMS negotiations.

These criticisms raise legitimate issues. Reliance on litigation to remedy delays in generic entry risks a slow, expensive, and unpredictable enforcement process. Determining if a “term” is “commercially reasonable,” for example, presents fact-bound, context-specific questions typically reserved for a finder of fact. What legal consequence, if any, flows from a generic’s failure to engage in good faith negotiations to join the brand’s shared REMS?

The law also could leave innovators facing conflicting statutory obligations. It would allow “[a]n eligible product developer [to] submit . . . a written request for the eligible product developer to be authorized to obtain sufficient quantities of an individual covered product subject to a REMS with ETASU,” in which case “provision of the covered product by the license holder under the terms of [an] authorization will not be a violation of the REMS for the covered product.” Yet, it (currently) does not amend the statutory provisions governing the enforcement of REMS programs (21 U.S.C. § 355(p)(1)(B); 21 U.S.C. § 333(f)(4)(A)). Without a legislative fix, sharing samples of a drug with REMS with ETASU could expose a brand company to civil and criminal penalties.

Some or all of these matters may be mooted by amendments to the CREATES Act as it makes it way through the legislative process.  Time will tell.

D. Striking A Balance

The CREATES Act seeks to tweak the elusive balance between encouraging development and continued research for new drugs and biologics while ensuring timely availability of lower-cost generic and biosimilar drugs.  While the fate of the CREATES Act remains uncertain, its impact on the American healthcare system would be significant for stakeholders on all sides of the public debate over drug affordability.

ARTICLE BY James W. MatthewsDavid L. RosenKaty E. Koski & Jason L. Drori of

The New Federalization of Trade Secret Law – What You Should Know About the DTSA

trade secretsOn May 11, 2016, the Defend Trade Secrets Act of 2016 (DTSA) officially became law, creating for the first time a federal private civil cause of action for misappropriation of trade secrets. The DTSA is actually an amendment to the Economic Espionage Act, which was passed 20 years ago and provides for criminal prosecution of trade secret theft.

Prior to the DTSA, civil actions for trade secret misappropriation were governed solely by state law. Over the years, 48 out of 50 states have adopted some form of the Uniform Trade Secrets Act (UTSA).  The two exceptions are Massachusetts, which adopted its own trade secret statute distinct from the UTSA, and New York, which has relied on common law alone.

Many viewed this state-by-state approach as inadequate. The application of state-specific nuances in the law led to unpredictability, and the lack of federal law governing conduct that increasingly involved interstate or foreign activities caused jurisdictional and choice-of-law issues, including concerns that US companies had insufficient recourse against trade secret thieves operating overseas. In such cases, access to federal courts was not automatic. Such access required either diversity of citizenship or supplemental jurisdiction based on another asserted claim arising under federal law.

In view of these concerns, Congress has proposed various federal trade secrets bills over the past several years. Finally, with broad bipartisan support, the DTSA passed in spring 2016.

Importantly, the DTSA does not preempt state trade secret misappropriation laws. Parties may still pursue claims based on state law. But in cases with a nexus to interstate commerce, plaintiffs also will have access to the new federal statutory regime. Some parties have argued that having access to both state and federal causes of action may actually create complexity rather than engendering a more harmonized body of law, but that remains to be seen. Based on the substantial overlap in the DTSA’s and the UTSA’s definitions of “trade secret” and “misappropriation,” one might expect that DTSA and UTSA claims in the same case will not differ much from a substantive perspective. Likewise, DTSA remedies are similar to UTSA remedies: injunctive relief, compensatory damages (in the form of actual damages, unjust enrichment or reasonable royalties), enhanced damages for willful and malicious misappropriation (capped at two times compensatory damages) and attorneys’ fees (in cases involving bad faith or willful and malicious conduct). Nonetheless, there are differences between the DTSA and the UTSA, and having a new federal cause of action available should compel plaintiffs to weigh carefully which claim or claims to pursue, and where to file such claim.

A key feature of the DTSA that has received significant attention is the ex parte seizure provision, 18 USC § 1836(b)(2), which is a new remedy not available under state versions of the UTSA, although UTSA plaintiffs may have had similar vehicles of relief, such as a temporary restraining order. Under the DTSA, per a plaintiff’s expedited, unilateral request, courts may order law enforcement to seize property “necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.” This procedure is intended only for emergency situations to prevent or mitigate immediate and irreparable injury when less severe procedures would be ineffective. Indeed, this provision requires “extraordinary circumstances” and, if abused, can result in damages against the seizing party. To that end, the movant must post a bond sufficient to cover such damages if the seizure was unwarranted.

In addition, satisfying the threshold requirements for an ex parte seizure is not easy. A plaintiff must prove that the defendant actually possesses the misappropriated information and must identify “with reasonable particularity” the property to be seized and its location. Once seized, that property remains safeguarded by the court pending an expedited hearing on the propriety of the seizure.

Another key aspect of the DTSA remedies provision is the inclusion of employee mobility protections similar to protections in states that reject the “inevitable disclosure” doctrine. Section 1836(b)(3)(A)(i) restricts injunctive relief that would “prevent a person from entering into an employment relationship,” requiring that such relief be “based on evidence of threatened misappropriation and not merely on the information the person knows.” Notably, the law explicitly seeks to avoid conflicts with existing state employment laws—an area where disputes are expected to arise given that the DTSA is likely to be asserted against former employees.

Yet another employee protection of the DTSA is the immunity provided to whistleblowers who might disclose confidential information when reporting unlawful activities to government officials or as part of an anti-retaliation lawsuit. Under § 1833(b), employers are required to provide notice to employees of this immunity protection in any agreement governing the use of trade secret or other confidential information. As a result, it is important for companies to review and, if necessary, modify their standard employment and non-disclosure agreements to bring them into compliance with the DTSA.

The DTSA is silent on whether the plaintiff must first identify its asserted trade secrets with reasonable particularity before conducting any discovery. This is a fundamental statutory protection for defendants in certain states, such as California. Federal courts have grappled with whether this provision (Cal. Civ. P. Code § 2019.210) is applicable in federal cases under the Eriedoctrine.

The DTSA recognizes the great economic harm inflicted on US businesses by theft of trade secrets, particularly by overseas entities. The law requires the US Attorney General and other agencies to report to Congress (within the next year and biannually thereafter) on the breadth and extent of this threat, as well as on any hurdles preventing trade secret owners from avoiding misappropriation by foreign actors and recommendations for further reducing the threat. At a time when many innovators are carefully evaluating whether to guard their intellectual property as trade secrets or patents (particularly in view of legal developments that have invalidated many patents), this new law signals that trade secret protection in the United States is becoming more muscular.

Defend Trade Secrets Act: Got Trade Secrets? Protect Them With Federally-Issued Gun

Trade SecretsTrade secrets are protected, right? They cannot be stolen or misappropriated, right? You are probably shaking your head at this. Right, right. But if they are, what can you really do about it? Have the grubby thief thrown in jail? Sure, but that’s not going to restore your loss—get you back the money you are now not making because your blueprints, your formulas, your client lists, etc. have been misappropriated. You could sue, you might be thinking. You could. But previously you could only do so in state court, through an often unstructured and painfully slow process. With the recent passage of the Defend Trade Secrets Act of 2016, that has changed. That state court trade secret action now looks like a slingshot compared to the weapon the Feds are delivering. Consider it a gun. A very big and federally-issued gun.

In July 2015, the Defend Trade Secrets Act was proposed to allow a private cause of action in federal court for the misappropriation of trade secrets. The intent was to offer those in need of protecting their trade secrets the same effective, uniform efficiency of litigation in federal court that holders of other types of intellectual property (patents, trademark, copyright) have enjoyed for quite some time. Previously, a cause of action for trade secret theft was only a state court claim, with each “trade secret act” often varying from state to state. This also proved an ineffective weapon to try and recover trade secrets that crossed state lines. A federal cause of action that allows injunctive and monetary relief with uniform nationwide discovery is, for trade secret owners, a very big gun. But wait, there’s more!

Subject to various limitations, the Act also provides ex parte property seizures where a plaintiff can enlist the federal government to seize misappropriated trade secrets without providing notice to the alleged wrongdoer.Wait, what? The government will find your disgruntled employee, sneak up on him, and get your blueprints back. That’s a pretty powerful arsenal. If the federal cause of action is the gun, consider the property seizure a big net. Catch the perpetrator with your trade secrets, recover your valuable information, and you still get to shoot the guy – in the wallet, where it counts.

In all, the new Defend Trade Secrets Act is expected to open many doors for companies struggling to protect valuable intellectual property. We anticipate many trade secret misappropriation suits will be filed in federal court now that the Act has passed. If you’re currently exploring recovery options for trade secret theft, give this one some thought. One of the primary types of trade secrets many companies fail to properly protect are customer lists. Think of the information you maintain about your customers that is not publicly available: their buying habits, shipping preferences, birthdays, anniversaries, family member names, unlisted numbers, staff member names, and contact info, etc. Looking at it this way, you can easily see the value in it.

Such details about your clients and customers—those that are not generally known or easily attainable—are what make your list a trade secret, as well as your investment in and efforts to compile these types of details and keep the list a secret. If it’s digital, keep it password-protected, and on a separate hard-drive locked in a safe. Implement policies among your staff to maintain its secrecy. These safeguards can enable you to establish the list as a trade secret and defend it in federal court.

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Supreme Court Defers Certiorari Decision In Amgen Sandoz

Amgen Sandoz Supreme Court Biosimilar PatentOn June 20, 2016, instead of deciding whether to grant certiorari in the biosimilar patent dance dispute between Amgen and Sandoz, the Supreme Court invited the Solicitor General “to file a brief in this case expressing the views of the United States.” While this will delay any Supreme Court review of the Federal Circuit’s first decision interpreting the patent dance provisions of the Biologics Price Competition and Innovation Act (BPCIA), it could give the Court an opportunity to consolidate its consideration of the biosimilar statute with other biosimilar cases making their way through the courts.

These articles discuss some of the issues raised to date in biosimilar patent disputes surrounding Neupogen®, Nuelasta® and Remicade®:

© 2016 Foley & Lardner LLP