The “Patent Dance” for Now: Rehearing Denied in Amgen v. Sandoz

November 9, 2015
Biotechnology, Patents, Pharmaceuticals

Jeff Simon, MJLST Staffer

On July 21, 2015, the Federal Circuit’s decision in Amgen v. Sandoz established that a biosimilar applicant does not have to follow the patent dispute resolution procedures set forth by the Biologics Price Competition and Innovation Act. The BPCIA’s “patent dance,” located at 42 U.S.C. § 262(l)(2)(a), sets forth procedures requiring biosimilar applicants to disclose the biosimilar application and information describing the methods and procedures of its production to the sponsor of the reference biologic drug. The Federal Circuit’s fractured decision denied the compulsory nature of the “patent dance,” while still holding that biosimilar applicants are required to provide the biologic drug sponsor 180 days advanced notice of the first commercial marketing of its biosimilar product in accordance § 262(l)(2)(a).

Considering that the decision of the court was split by favoring the biosimilar applicants regarding the issue of the “patent dance” while favoring the biologic sponsor when it came to market disclosure, the decision was far from a satisfying result for either party as neither party came out as the clear victor. As such, both Amgen and Sandoz filed petitions for an en banc rehearing on August 20, 2015. Amgen’s petition for review once again contended that the language of § 262(I)(2)(a) as stated by congress, specifically the use of the word “shall,” indicates that the “patent dance’s” procedures are mandatory. Sandoz contended among other things that the 180-day provision necessarily increases the exclusivity period from 12 years to 12 and a half years and further that the court incorrectly asserted that notice was mandatory and enforceable. Both parties submitted amicus curiae briefs in agreement that, as a matter of first impression, it was appropriate for an en banc rehearing.

However, despite a fractured panel deciding a matter of first impression, Federal Circuit denied a rehearing in decision on October 16, 2015. The decision came as surprise to many of those associated with the biologic drug industry, especially considering the novelty and discord upon the issues. Considering the fact that both parties sought a rehearing, the court may have decided that the issue was undeserving of the court’s continued interest and resources. Both parties may file petitions for certiorari.

In regards to the future implications of the decision, it’s important to note that many of the high revenue pioneer biologic drugs are set to have their US patents expire within the next few years. This expected “patent cliff’ is certain to drive momentum within the biosimilar market. This wave of biosimilar applications is sure to have large implications upon the BPCIA, and particularly whether the “patent dance” is optional. All considered, the issues presented in Amgen may be approaching a level of importance that draws the attention of SCOTUS. It’s possible that a grant of certiorari may be in order to settle the debate on the BPCIA’s “patent dance” and market disclosure requirements, particularly considering the economic ramification of the anticipated biologics’ patent cliff.

Data Breach and Business Judgment

November 9, 2015
Business Law, Cyber Security, Data, Internet

Quang Trang, MJLST Staffer

Data breaches are a threat to major corporations. Corporations such as Target Co. and Wyndham Worldwide Co. have been victim of mass data breaches. The damage caused by such breaches have led to derivative lawsuits being filed by shareholders to hold board of directors responsible.

In Palkon v. Holmes, 2014 WL 5341880 (D. N.J. 2014), Wyndham Worldwide Co. shareholder Dennis Palkon filed a lawsuit against the company’s board of directors. The judge granted the board’s motion to dismiss partially because of the Business Judgment Rule. The business judgement rule governs when boards refuse shareholder demands. The principle of the business judgment rule is that “courts presume that the board refused the demand on an informed basis, in good faith and in honest belief that the action taken was in the best interest of the company.” Id. The shareholder who brings the derivative suit has the burden to rebut the presumption that the board acted in good faith or that the board did not base its decision on reasonable investigation.

Cyber security is a developing area. People are still unsure how prevalent the problem is and how damaging it is. It is difficult to determine what a board needs to do with such ambiguous information. In a time when there is no set corporate cyber security standards, it is difficult for a shareholder to show bad faith or lack of reasonable investigation. Until clear standards and procedures for cyber security are widely adopted, derivative suits over data breaches will likely be dismissed such as in Palkon.

Marijuana Industry Continues to Search for Banking Solution

November 9, 2015
Business Law, Competition, Economics

Neal Rasmussen, MJLST Managing Editor

While the legal marijuana industry continues to rapidly expand in the United States, a major question still looms: Where should the millions of dollars generated by the industry be placed? Up to this point the nation’s banks have refused to take money for fear of federal repercussions. The lack of banking is one of the biggest problems the industry currently has and creates a dangerous all cash environment. While it continues to be an industry dominated by cash vaults and armed guards, change could soon be on the way.

While the provisions of the unlicensed money remitter statute, 18 U.S.C. § 1960, the money laundering statutes, 18 U.S.C. §§ 1956, 1957, and the Bank Secrecy Act (BSA) still remain in effect with respect to marijuana-related business, the marijuana industry had hoped to take advantage of the new rules issued by the U.S. Treasury Department in 2014 which “clarifie[d] how financial institutions can provide services to marijuana-related businesses consistent with their BSA obligations, and aligns the information provided by financial institutions in BSA reports with federal and state law enforcement priorities.” In addition to the new rules, the Justice Department produced a memorandum calling for relaxed enforcement of the relevant federal banking laws so long as they followed the new rules. However, the most recent attempt by a Colorado state-chartered credit union, The Fourth Corner Credit Union, to take advantage of the new rules and memorandum has faced major opposition from the Federal Reserve Bank, who must provide clearance before the credit union can open.

The Federal Reserve Bank refused to grant the permission need to access the national banking system and The Fourth Corner Credit Union has sued in Federal Court demanding equal access to the federal system. While it remains unclear whether the presiding judge, R. Brooke Jackson, will hear the complaint, most view The Fourth Corner Credit Union as fighting a losing battle. Most believe that entering the federal banking system will be nearly impossible until marijuana becomes legal at the federal level. For now it will remain unclear as to where the industry should place its money.

The TPP – Commercial or Foreign Policy Victory?

October 28, 2015
Competition, Economics, International Law

Jing Han, MJLST Staffer

The Trans-Pacific Partnership (TPP) is a proposed trade among twelve Pacific Rim countries, which are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, United States, Singapore and Vietnam, concerning a variety of matters of economic policy, about which agreement was reached on October 5, 2015 after 5 years of negotiations. The 12 countries including the United States of America have agreed to build a new cooperation structure through this agreement. TPP’s 30 chapters have set binding rules on everything from service-sector regulation, investment, patents and copyrights, government procurement, financial regulation, and labor and environmental standards, as well as trade in industrial goods and agriculture. The combined Gross Domestic Product-GDP of the world’s largest pact of these 12 countries is nearly 28 trillion dollars. Those dozen states account for roughly forty percent of global gross domestic product, thirty percent of global exports and twenty-five percent of global imports.

Some people believe that one of the reasons for the recent push for new trade initiatives is a feeling that the WTO system is not working. This view is probably not an uncommon one. But is it correct? It is worth looking at just what the WTO does, and how it compares to the TPP as a possible alternative trade agreement and organization.

First, all 159 WTO members have made promises not to charge tariffs above rates that are set out in legally binding schedules. The TPP does have the potential to go further than the WTO in terms of tariff reductions and services liberalization. Of course, such commitments would be preferential, only given to a handful of trading partners, and thus would not be truly free trade. There are significant economic benefits to having free trade cover as many countries as possible, including the avoidance of complex and trade-restricting rules of origin.

Second, WTO rules also discipline special tariffs imposed against dumping and subsidies. Through the WTO, these tariffs are subject to detailed rules to prevent them from being abused, which they frequently have been over the years. The TPP will not address anti-dumping/countervailing duties or subsidies at all. And the WTO’s rules on regulatory protectionism are already working quite well, so it is difficult to imagine what the TPP would do in this regard.

Third, WTO rules govern customs procedures, including valuation and classification issues, to prevent these procedures from being used as a disguised means of protection. Furthermore, WTO rules include general prohibitions on using domestic regulations and taxes for protectionist purposes. The WTO’s jurisprudence on these issues is widely respected, and WTO rulings have addressed a range of regulatory protectionism. The TPP would also go beyond the WTO in areas such as intellectual property protection, foreign investment protection, and environmental and labor regulation. But further is not necessarily better. These items have been added to the trade agenda to drum up new support. However, they have also stirred up a good deal of new opposition, and made trade negotiations more complex and difficult.

Fourth, Congress recognized “the growing significance of the Internet as a trading platform in international commerce” and instructed President Obama to achieve objectives concerning digital trade in goods and services and cross-border data flows. The Obama administration wants “digital trade rules-of-the-road” in the TPP agreement. These rules could mark a turning point in the global governance of digital commerce. The importance of digital technologies to trade has grown without multilateral rules keeping pace. The WTO is the main source of multilateral trade agreements, but it was established before the Internet transformed how companies produce, sell, and deliver products and services. In a declaration of 1998, WTO members agreed not to impose customs duties on electronic transactions and recognized the need to address e-commerce directly. However, the WTO’s e-commerce work program has not progressed much because WTO members disagree on various issues.

Fifth, beyond the commercial implications, many experts regard the TPP as a key part of American foreign policy. Amid the rise of China and its increasing exercise of political and military power in East Asia, the Obama administration has said it would turn its attention more to the East, the so-called pivot to Asia, in an effort to strengthen U.S influence in that region. The challenge for China, should it wish to join the TPP, is undertaking the reforms that the agreement would require. For instance, joining TPP will require opening markets in areas such as services and investment and agreeing to new rules in sensitive areas such as the role of state-owned enterprises and access to the Internet. That said, many of the reforms that becoming a TPP party would require are consistent with the internal reforms that China has already identified as being necessary, including reform of its financial sector, strengthening the role of services in the Chinese economy, and encouraging innovation.

In sum, The WTO is an excellent system. Its great strength is its multilateral framework, incorporating most of the world’s nations. However, with the advent of the 21st century, the limits of the WTO’s functions have become increasingly apparent. The Doha Round, marked by conflict between the opinions of developed and emerging nations and the subsequent stalling of negotiations, stands as a symbol of these limits. With more nations participating and more comprehensive liberalization being pursued, it is unavoidable that negotiations will face difficulties. In relation to the TPP, a former senior U.S. official is said to have commented that the U.S. sought to demonstrate its level of commitment to the Asia-Pacific region through its active involvement in the agreement negotiations. The Asia-Pacific region is becoming increasingly important to the U.S., and this fact is manifested in the nation’s initiatives in relation to the TPP. In this respect, the TPP has more political implications compared with its commercial considerations.

UN Countries Strive to Develop Legal Framework for Climate Deal

October 28, 2015
Energy Law, Environmental Law, International Law

Vinita Banthia, MJLST Articles Editor

In December 2009, over a 100 world leaders gathered in Copenhagen, Denmark for the United Nations Climate Change Conference, which included the 15th Conference of the Parties (COP 15) to the United Nations Framework Convention on Climate Change (UNFCCC), and the 5th Conference of the Parties for the Meeting of the Parties to the Kyoto Protocol (COP/MOP 5). The international gathering culminated in the “Copenhagen Accord,” which member countries of the UNFCCC agreed generally to “take note of,” but failed to promise more substantial action.

While the Accord endorsed the Kyoto Protocol and included specific omission reduction targets for some countries, it did not set out any legal framework or structure for the enforcement of these guidelines. Developed countries agreed to provide $100 billion per year by 2020 to developing countries for climate improvement. Again, however, no strategy was developed for the implementation of this funding, and countries continue to disagree on the amount and sourcing of the funds.

Fast forward six years later to the meeting in Bonn, Germany last week, where delegations convened once again to negotiate an international climate agreement. In December, the delegations will reconvene in Paris for the 21st Conference of the Parties to the UNFCCC to further discuss the terms of an international climate deal, and ideally, all 195 attending countries will adopt it. However, many of the issues that prevented a deal from being developed in Copenhagen continue to haunt current discussions.

Frist, developing countries are concerned about the amount of funding developed countries are willing to provide for their transition to clean and sustainable energy sources. In addition, most countries are hesitant to agree to a predetermined emissions reduction target and prefer a self-guided, non-legally-binding requirement that is informally tracked. The members in attendance at the climate conference in Bonn took this strategy and allowed countries to determine their own emissions goals. These compromises allowed the nations to conclude the Bonn meeting with a draft agreement that is predicted to be more successful than the Copenhagen Accord, during the final round of negotiations in Paris. However, it will be important for nations to avoid the temptations of diluting the provisions too much to gain approval of a large number of nations. Instead, nations should take a more heavy-handed approach to ensure important actions are taken, while implementing a legal structure to enforce the provisions of any final agreement.

H.R.8 and the Hydropower Improvement Act of 2015—Another Missed Opportunity

October 28, 2015
Energy Law, Environmental Law, Regulatory

Catherine Cumming, MJLST Lead Note & Comment Editor

While many people see the hydropower industry as a clean and sustainable energy source, most hydropower facilities are decades old and have severe environmental, economic, and social externalities. Relicensing provides an opportunity to bring aging dams up to modern environmental standards and compliance requirements. Over the past thirty years, American Rivers and the Hydropower Reform Coalition used the licensing process to improve hydropower dams and restore rivers. With over 6,000 megawatts of hydropower due for relicensing within the next five years, there are hundreds of dams and thousands of miles of river with an opportunity for improvement. Recent legislation, however, has failed to address the amount of hydropower due for relicensing and the opportunities it presents for increased energy production and environmental compliance. When Congress passed the Hydropower Regulatory Efficiency Act of 2013, it failed favored efficiency over oversight and failed to the amount of hydropower due for relicensing and the opportunity it provided for efficiency upgrades.

This fall, Congress missed yet another opportunity to modernize hydropower and decrease its negative externalities. Rather than “modernize” hydropower, the Energy & Commerce Committee’s approval of a hydropower amendment to H.R.8, the “North American Energy Security and Infrastructure Act of 2015” and Senator Lisa Murkowski’s “Hydropower Improvement Act” ignore the opportunity for increased efficiency and sustainability by creating compliance loopholes for the hydropower industry. If enacted, these bills would allow energy companies to opt out of Clean Water Act, Endangered Species Act, and state water quality and wildlife protections; allow dam owners to pass the costs and burdens of obeying water quality standards, wildlife laws, and cleaning up pollution caused by dams to taxpayers; and transfer state and federal agency authority to protect natural resources to the Federal Energy Regulatory Commission. While 2011 was the “Year of the River,” 2015 is becoming the “Year of Hydropower.” Community interest groups and environmental organizations are concerned that H.R.8 and the “Hydropower Improvement Act” will “turn back the clock and take the hydropower industry back to a time when they could destroy rivers with impunity.”

Shape Up or Ship Out: E.P.A. Forced to Reevaluate Their General Ballast Water Regulation Permit

October 20, 2015
Environmental Law, EPA, Invasive Species

John Biglow, MJLST Staffer

In the recently decided Natural Resources Defense Council v. U.S. E.P.A., — F.3d — (2d Cir. Oct. 5, 2015), the Second Circuit granted the petitioners’ motion, in part, for a review of the Environmental Protection Agency’s 2013 Vessel General Permit (VGP) regulating the discharge of ballast water from ships. The petitioners, four environmental conservation organizations, argued successfully that the EPA acted arbitrarily and capriciously in a number of ways when it set the technology based effluent limits (TBELs) and water quality-based effluent limits (WQBELs) which must be complied with under its VGP. In so deciding, the Second Circuit has remanded the matter to the EPA for proceedings consistent with their opinion, and has kept the 2013 VGP in place until the EPA issues a new VGP.

The EPA has the authority to regulate ballast discharge under §402(a) of the Clean Water Act (CWA). When freighter ships take on or unload cargo, they adjust for changes in weight by taking on or discharging ballast water. As the court stated, this amount “can range from hundreds of gallons to as much as 25 million gallons.” The regulation of ballast discharge is an important aspect of environmental conservation due to its role as a conduit for the spread of invasive species and pollutants. When a ship takes on ballast water in a polluted or infested area, it is possible for these organisms and pollutants to get sucked up with the water, surviving in the ballast tanks before being discharged in some distinct body of water. One study referenced by the court estimated the damage from invasive species to be upwards of $137 billion annually, making the prevention of their spread both a top environmental and economic priority.

The first set of arguments made by the petitioners centered on whether the TBELs set by the EPA were arbitrary and capricious. The petitioners first argued that in setting the TBEL standard to mirror the standard adopted by the International Maritime Organization in 2004 (the IMO standard), the EPA acted arbitrarily and capriciously. The Court agreed, primarily because a higher standard was attainable. The CWA requires the EPA to apply the “best available technology economically achievable” (BAT) when setting their TBELs. In its investigation of the available technology, the EPA employed the Science Advisory Board (SAB) to issue a report on the different available systems. According to their report, there were a number of ballast-water treatment systems that would be able to achieve standards 10 to 100 times greater than the IMO in the near future. By ignoring this potential and instead setting the standard at the IMO, the court found that the EPA acted arbitrarily and capriciously.

Next, the petitioners argued that the EPA acted arbitrarily and capriciously when it limited the SAB’s investigation of ballast treatment systems to shipboard treatment; ignoring onshore treatment options. The court agreed, refusing arguments from the EPA that these systems were not considered because the facilities needed to implement them were not yet in existence. The court reasoned that the time and expense of creating onshore treatment infrastructure was similar to that required for shipboard treatment, and that it was arbitrary and capricious to ignore the possibility. In remanding this issue back to the EPA, the agency will need to fully consider onshore treatment options before adopting or dismissing them in their new VGP.

The petitioners further argued that the EPA was arbitrary and capricious in exempting ships built before 2009 that only sail the great lakes water system (pre-2009 Lakers). The court agreed, reasoning that there was no true distinction between pre- and post-2009 Lakers. The court further stated that exempting ships because they did not currently have the technological capacity to adopt the technology necessary to meet the VGP requirements conflicted with the CWA’s BAT requirement, which seeks to force technology to keep up with contemporary environmental demands.

The petitioners next argued that several facets of the WQBELs were arbitrary and capricious. The WQBELs were designed as a safeguard to be utilized when the TBELs alone are insufficient to meet and maintain water quality standards. In its 2013 VGP, the EPA refused to set numerical values for its WQBELs, instead stating simply that “Your discharge must be controlled as necessary to meet applicable water quality standards in the receiving water body or another water body impacted by your discharges.” The court agreed that setting a narrative WQBEL was arbitrary and capricious, noting that it fails to give ship owners clear guidance as to whether or not they are in compliance with the WQBELs.

The petitioners also argued that the monitoring requirements of the WQBELs was arbitrary and capricious. The 2013 VGP required only that ship owners monitor the expected time, place, and volume of their ballast discharges. The court agreed, reasoning that the EPA could consider requiring ship owners to monitor the actual statistics on their ballast discharges, rather than the expected ones.

It is a critical victory for environmentalists that the Second Circuit is requiring the EPA to revisit what was an incomplete and insufficient 2013 VGP; however, it is critical that the EPA get it right the second time around. The economic and environmental impact of ballast discharges is significant and due to the cost and time requirements involved in creating the infrastructure necessary to meet the VGP system requirements, we are likely to be stuck with whatever the EPA sets as the BAT for a very long time.

Apple Loses Multi-Million Dollar Lawsuit

October 20, 2015
Intellectual Property, Patents

Riley Conlin, MJLST Staffer

Earlier this month, the Wisconsin Alumni Research Foundation (WARF) won a large patent lawsuit against Apple Inc. The suit relates to WARF’s 1998 patent of a technology that improves microchip efficiency. WARF initiated the suit in January 2014 contending that Apple’s A7, A8 and A8X processors violate the patent. The processors are found in the iPhone 5s, 6, 6 Plus, and many variations of the iPad.

Apple denied that their microchips infringed WARF’s patent and contended that the patent was invalid. The U.S. Patent and Trademark Office declined to review the patent’s validity. The jury, sitting in the U.S. District Court for the Western District of Wisconsin, concluded that Apple’s processing chips improperly used technology owned by WARF. U.S. District Court Judge William Conley has scheduled to trial in three phases. First, the jury determined whether or not Apple was liable. Second, the jury will determine the appropriate damages. Finally, the jury will consider whether Apple willfully violated the patent, which could lead to additional damages. Based on Conley’s recent ruling, Apple already faces damages reaching potentially $862.4 million.

WARF has initiated lawsuits around this patent before. In 2008, the foundation used that patent to sue Intel Corp. However, that case never made it to trial, because it was settled shortly prior to it beginning.

In September 2015, WARF filed a subsequent lawsuit against Apple. The foundation contends that Apple’s A9 and A9X chips also infringe upon their patent. The A9 and A9X chips can be found in Apple’s more recent technology including the: iPhone 6S and 6S Plus, and the iPad Pro.

E.C.J Leaves U.S. Organizations to Search for Alternative Data Transfer Channels

October 20, 2015
Cyber Security, Data, EU Law

J. Adam Sorenson, MJLST Staffer

The Court of Justice of the European Union (E.C.J.), the European’s top court, immediately invalidated a 15-year-old U.S. EU Safe Harbor Program Oct. 6th (Schrems v. Data Prot. Comm’r, E.C.J., No. C-362/14, 10/6/15). This left the thousands of businesses which use this program without a reliable and lawful way to transfer personal data from the European Economic Area to the United States.

The Safe Harbor Program was developed by the U.S. Department of Commerce in consultation with the European Commission. It was designed to provide a streamlined and cost-effective means for U.S. organizations to comply with the European Commission’s Directive on Data Protection (Data Protection Directive) which went into effect October of 1998. The program allowed U.S. organizations to voluntarily join and freely transfer personal data out of all 28 member states if they self-certify and comply with the programs 7 Safe Harbor Privacy Principles. The program was enforced by the U.S. Federal Trade Commission. Schrems v. Data Prot. Comm’r, however, brought a swift halt to the program.

This case revolves around Mr. Schrems, an Australian Facbook user since 2008 living in Austria. Some or all of the data collected by the social networking site Facebook is transferred to servers in the United States where it undergoes processing. Mr. Schrems brought suit against the Data Protection Commissioner after he did not exercise his statutory authority to prohibit this transfer. The case applied to a 2000 decision by the European Commission which found the program provided adequate privacy protection and was in line with the Data Protection Directive. The directive prohibits “transfers of personal data to a third country not ensuring an adequate level of protection.”(Schrems) The directive goes on to say that adequate levels may be inferred if a third country ensures an adequate level of protection.

The E.C.J. found that the current Safe Harbor Program did not ensure an adequate level of protection, and therefore found the 2000 decision and the program itself as invalid. This means all U.S. organizations currently transferring personal data out of the EEA are doing so in violation of the Data Protection Directive. This case requires U.S. organizations to find alternative methods of approved data transfer, which generally means seeking the approval of data protection authorities in the EU, which can be a long process.

Although the EU national data protection authorities may allow for some time before cracking down on these U.S. organization, this decision signals a massive shift in the way personal data is transferred between the U.S. and Europe, and will most likely have ripple effects throughout the data privacy and data transfer worlds.

Akamai Techs. v. Limelight Networks: An Expansion of the Scope of Patent Direct Infringement

October 13, 2015
Intellectual Property, Litigation, Patents

Tianxiang (“Max”) Zhou, MJLST Staffer

This August the Federal Circuit Court delivered an en banc opinion of Akamai Techs. v. Limelight Networks, affirming the jury decision awarding $40 million in damages. The per curium opinion provided that the Court “unanimously set forth the law of divided infringement under 35 U.S.C. § 271(a)” and there was substantial evidence “support[ing] the jury’s finding that Limelight directly infringed U.S. Patent No. 6,108,703.” Accordingly, the Federal Circuit reversed the District Court’s grant of Limelight’s motion for judgment of non-infringement as a matter of law.

The issue in this case is whether Limelight should be liable for direct infringement of the patent by inducing consumers to infringe the patent and should thus be jointly and directly liable under 35 U.S.C. §271(a). The Supreme Court held that induced infringement under §271(b) requires a single direct infringer. According to the Supreme Court, Limelight should not be liable as the it only performed some but not all of the infringement steps.

The Federal Circuit expanded the scope of direct infringement and held Limelight liable. The Federal Circuit held that Direct infringement under §271(a) occurs where “all steps of a claimed method are performed by or attributable to a single entity.” According to the Federal Circuit, when there are two or more actors from a joint enterprise, all can be charged with the acts of the other, “rendering each liable for the steps performed by the other as if each is a single actor.” The Court further cited the definition of joint enterprise in Restatement (Second) of Torts and provided four factors in determining whether there is joint enterprise.

The case is important because it set forth the rule that the actors in a joint enterprise can be liable for the other actors. The case prevented a possible way to dodge the direct infringement liability by inducing the consumers to perform some of actions of infringement.

Home | Contact Publishing Services | My Account