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Legal protections for intellectual property (IP), undergirded by the U.S. Constitution, are a major reason why our economy has led the world over the past century. But that historical legacy cannot be taken for granted. A high-profile lawsuit between leading U.S. and European life sciences companies illustrates some of the dangers.

A recent article by Stanford University’s Stephen Haber, “Patents and the Wealth of Nations,” reviews a body of historical and statistical studies that show a causal relationship between the strength of patent rights and innovation. As Haber put it (surveying non-petro-states in 2010), “there are no wealthy countries with weak patent rights, and there are no poor countries with strong patent rights.” Hence, it is of some comfort that the U.S. Chamber of Commerce’s 2017 International IP Index ranks the United States first overall among 45 countries. 

For a long time, the U.S. legal system has robustly protected intangible property rights. The Constitution expressly authorized Congress “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” The first Congress promptly acted under this grant of power to enact a federal patent statute, which President Washington signed into law. Justice Story (author of the influential Commentaries on the Constitution and an early architect of U.S. patent law), writing for the Supreme Court in 1824, stressed the importance of the constitutional provision. He emphasized that during the term of the patent, the inventor has “a property in his inventions … of which the law intended to give him the absolute enjoyment and possession.”

American law protected patents as property secured by statute, guaranteeing that the rights of inventors would be strongly enforced. This went beyond the more limited protection that patents had received in Great Britain, where they were regarded as privileges granted by the Crown. On that theory, the British government could use the patented invention without the inventor’s permission. American law was different. As law professor Adam Mossoff showed in 2007, 19th-century U.S. courts “enthusiastically” applied the Fifth Amendment’s Takings Clause to patents, “securing these intangible property rights as constitutional private property,” which was to be protected even against government. That approach is consistent with the Supreme Court’s opinion in Horne v. Department of Agriculture (2015), which tellingly notes that the Clause applies to patents.

The Supreme Court remains keenly interested in the constitutional status of patents as property. On June 12, the Court agreed to hear the case Oil States Energy Services LLC v. Greene’s Energy Group, LLC. In its order agreeing to hear the case, the Court limited its review of the issues presented to just one question, which the petitioner framed as follows: 

Whether inter partes review, an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents, violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

The current inter partes review system was established by Congress in the America Invents Act in 2011. The Court’s forthcoming decision in the Oil States case could have very significant implications for the stability of U.S. patent rights and for innovation generally. 

A fundamental attribute of property is the right to exclude others from its use (hence the Constitution’s “exclusive Right” language). Like other property rights, patent rights are often enforceable by injunctions — court orders. Chief Justice Roberts pointed out in a 2006 case that “from at least the early 19th century, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.” 

That leads us to Amgen, Inc. v. Sanofi. Amgen scientists invented antibodies that dramatically lower the level of “bad” cholesterol (LDL-C) in the blood. That led to a new drug, Repatha. Sanofi and Regeneron (“Sanofi” for short) developed a competing drug, Praluent. After Amgen filed suit for patent infringement, Sanofi rushed to launch its drug on the market. 

Admitting infringement, Sanofi contested the validity of Amgen’s patents. But a jury unanimously disagreed. The trial court decided that a permanent injunction should issue that would order Sanofi to stop selling Praluent. Sanofi appealed to the Federal Circuit. Oral argument was held on June 6. 

Although it received little or no explicit attention at the oral argument, one of Sanofi’s legal theories poses a particularly acute risk to innovation. Sanofi’s counsel argued that the public interest — a factor that courts consider in weighing injunction requests — favors consumer choice between competing products. They say that affirming the injunction against Sanofi (which has been temporarily stayed pending appeal) would deprive patients of life-saving medicine, even though the FDA has approved Amgen’s product as safe and effective for all patients who are eligible to receive the Sanofi product.

Sanofi’s legal theory is inconsistent with very recent Federal Circuit precedent. In 2016, the court squarely held that “the goal of having more manufacturers” of a good in the market — even a “life-saving” good — is not a sufficient public-interest basis for denying an injunction. That holding is sound. If Sanofi’s counsel are correct, then IP rights — and, therefore, investment incentives — are weaker for valuable medical therapies than for other classes of products. On Sanofi’s theory, a company can sell infringing therapies for as long as it wishes, subject only to the risk of a damages award. In other words, medical innovators can be compelled to grant the equivalent of licenses to patent infringers, at prices set by courts.

That would have very undesirable consequences for medical innovation. As the Federal Circuit has said, a “calculating infringer” may decide “to risk a delayed payment to obtain use of valuable property without prior negotiation or the owner's permission.” Here and abroad, unscrupulous competitors will ramp up infringement — factoring expected damages into the cost of doing business — if they face no injunction risk. And if U.S. courts begin granting compulsory licenses to infringers, other countries will surely follow by imposing their own licensing and price control measures to curtail U.S. intellectual property rights. American jobs and innovation — and over the long run, the welfare of patients and consumers worldwide — will suffer. 

The Supreme Court has observed that the federal guarantee of exclusive patent rights provides “an incentive to inventors to risk … often enormous costs in terms of time, research, and development.” Without the possibility of an injunction to enforce it, the guarantee of exclusivity becomes a guarantee in name only. The Federal Circuit’s decision in the Amgen-Sanofi dispute could send an important signal to our trade partners and competitors about the degree to which intellectual property rights and investment are truly supported by U.S. law.

C. Boyden Gray previously served as White House Counsel and U.S. ambassador to the European Union. Ambassador Gray’s law firm, Boyden Gray & Associates, represents a number of clients with interests in law and policy issues relevant to technology and innovation, including Amgen.

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