STRATEGIC INSIGHTS

Intellectual Property & The Law

What if that patent you're paying royalties on suddenly gets extended? Have you negotiated the best licensing deal possible? By Douglas J. Kline and Duncan A. Greenhalgh

December 15, 2003 | Imagine your company has been working for years to develop, say, a recombinant antibody-based product. You have looked for patents that might affect your right to make or sell the product, just like your patent attorney advised. You know of one patent, in particular, that might cover the process you are using to make your product, but you're not worried because you have a license to that patent and, in any event, it's set to expire in a few years. You and your investors are confident in your company's position.

One day, however, you discover that the owner of the soon-to-expire, licensed patent has done a deal with one of your competitors. As a result, a new patent has replaced the licensed one. The new patent includes identical claims to the original, but differs in one, critical way — the new patent's term extends a decade longer than the original one's term. You may already have, or probably can get, a license to the new patent, but it could be expensive.

What do you do? If you were Medimmune, an international biotech firm headquartered in Gaithersburg, Md., you might file a lawsuit.

In a case that has caught the attention of many in the biotechnology industry, Medimmune recently sued Genentech, Celltech, and others, in the U.S. District Court for the Central District of California. Medimmune claims that Genentech and Celltech entered into a collusive, anticompetitive agreement designed to extend improperly the patent monopoly over what Genentech calls "the 'fundamental technology' required for the artificial synthesis of antibody molecules."

Medimmune charges that the agreement has "profoundly and fundamentally altered the competitive landscape in the biotechnology industry," and has asked the court to declare Genentech's new patent invalid and unenforceable.

While the allegations made in the lawsuit could have wide-ranging implications for the biotechnology industry at large, the outcome of the case will be of particular interest to companies developing, producing, or selling recombinant antibody-based products. The recombinant antibody industry is still in its infancy, but it has tremendous growth potential. In 1997, Genentech's Rituxan product, for example, became the first recombinant antibody-based drug to receive FDA approval for the treatment of cancer in the United States. Last year alone, Genentech sold more than $1 billion worth of the drug.


Historical Background 
But this case actually began in 1983, when Celltech filed in a patent application in the United Kingdom methods of making recombinant antibodies and antibody fragments together with vectors and host cells useful in these processes. Celltech then filed a related patent application in the United States, subsequently known as the "Boss Patent." About two weeks after Celltech's original U.K. filing, Genentech filed a U.S. patent application directed to similar technology, which was issued as the "Cabilly Patent." Both these patents, issued on the same day, are set to expire in March 2006.

After Celltech's Boss Patent was issued, Genentech copied the Boss Patent claims into a previously filed Cabilly Patent continuation application. As a result, the U.S. Patent and Trademark Office (PTO) declared an interference between Celltech's issued Boss Patent and Genentech's Cabilly Patent continuation application in order to determine which company was the first to invent, and was therefore entitled to a patent on, the claimed invention.

Seven years after the Genentech-Celltech interference began, the PTO determined that Celltech's inventors were entitled to the patent.

Genentech appealed the PTO decision by filing a civil action in the U.S. Federal District Court for the Northern District of California. Following two years of discovery — that is, more than nine years into the dispute — the District Court denied Genentech's motions that it was entitled to a patent on the disputed technology.

According to Medimmune's complaint, in briefing those motions, Genentech and Celltech each argued that the other was not entitled to a patent. Shortly after the District Court ruled on those motions, Genentech and Celltech settled their dispute by entering into an agreement that is at the heart of Medimmune's lawsuit.

Medimmune alleges that the agreement between Genentech and Celltech resulted in the District Court issuing an order directing the Patent Office to:

· "Vacate the decision in [the prior interference proceeding]"

· "Revoke and vacate [the Boss Patent]"

· "Grant and issue to Genentech's inventors ... a United States patent [with the same claims as the Boss Patent]"

According to Medimmune, even though the PTO "expressed concerns about the ... agreement," it ultimately revoked the Boss Patent and issued a new U.S. patent to Genentech ("New Cabilly Patent").

All claims originally issued in the revoked Boss Patent were subsequently issued in the New Cabilly Patent. As a result, while the disputed invention was originally scheduled to pass into the public domain in 2006 upon expiration of the Boss Patent, Genentech exclusively owns it now until 2018, which is when the New Cabilly Patent is scheduled to expire.


Conspiracy Theory 
Interference proceedings, like litigation, can be expensive and unpredictable. Hence parties to these proceedings often settle privately, by agreement. It's not uncommon in these settlements for one party to abandon its patent or application and agree that the other party has the right to a patent on the disputed invention.

Medimmune charges that Genentech and Celltech conspired improperly to secure for themselves, through 2018, a dominant and exclusive position in the recombinant antibody field. Otherwise, the disputed invention would have been freely available for use by all upon expiration of the Boss Patent in 2006.

According to Medimmune, Celltech agreed to give up its soon-to-expire Boss Patent, despite prior rulings that Celltech was entitled to the patent over Genentech, in exchange for payment from Genentech and preferential access to Genentech's longer-term New Cabilly Patent. But it cannot be proper, Medimmune argues, for the disputed technology to enjoy a 29-year patent term. When put that way, Medimmune could have a point.

It's too early to safely predict the outcome of this fight. If taken all the way, the litigation could result in a judicial determination that the New Cabilly Patent is invalid or unenforceable. Or, the court could find the opposite. Of course, it's certainly possible for the parties all to agree to a private settlement that leaves the New Cabilly Patent intact, at least until it is challenged by somebody else. Only time will tell.

For the time being, however, companies developing recombinant antibody-based products, which might have thought they would become free and clear of the Boss and Cabilly Patents in 2006, now must consider whether they need to take a license under the New Cabilly Patent.

Medimmune charges that Genentech and Celltech conspired improperly to secure for themselves, through 2018, a dominant and exclusive position in the recombinant antibody field.

Douglas Kline is a partner and chair of the Patent and Intellectual Property Group at Testa, Hurwitz & Thibeault LLP in Boston. He may be reached at kline@tht.com.

Duncan Greenhalgh, Ph.D., is an associate at Testa, Hurwitz & Thibeault LLP in Boston. He may be reached at greenhalgh@tht.com.

> The Hidden Costs of 'Free' Software 

ILLUSTRATION BY MARK STEPHEN