Patent Infringement at the ITC: Implications for Brand-Name Drug Companies

The U.S. International Trade Commission (ITC) is the federal agency tasked with determining the impact of imports on U.S. industries and directing actions against certain unfair trade practices, including violations of intellectual property rights, such as patent infringement.  Once a valid complaint is filed with the ITC alleging that an imported good infringes an enforceable U.S. patent, the ITC conducts an investigation to determine whether the imported good violates certain sections of the Tariff Act of 1930 (Tariff Act).  Actions resulting from an investigation that confirms a violation include issuance of an exclusion order that bars importation of the good and may include issuance of a related cease and desist order that directs a violating party to cease specific actions.  Given that brand drug companies rely so heavily on the exclusivity afforded by patents as a strategy for recovering costs associated with drug research and development, blocking importation of infringing drug products via ITC proceedings can, in some cases, provide a significant patent enforcement option by which a brand drug company can protect its patent rights.

Infringing at the ITC

Section 337 of the Tariff Act (19 U.S.C. § 1337) declares unlawful the importation into the U.S., the sale for importation, or the sale within the U.S. after importation by the owner, importer, or consignee, of articles that infringe a valid and enforceable U.S. patent.  Section 337 also authorizes the ITC to investigate allegations of such claims.

An August 2015 Federal Circuit ruling in Suprema, Inc. v. ITC affirmed, in line with an extensive legislative history, that violations of Section 337 may indeed arise from acts of induced infringement.  Suprema began in May 2010 when Cross Match Technologies, Inc. filed a complaint with the ITC, alleging that its U.S. Patent No. 7,203,344 (the ‘344 patent) and additional patents related to fingerprint scanning devices were infringed by Mentalix Incorporated, a domestic importer of fingerprint scanners.  Cross Match also accused Korean fingerprint scanner manufacturer Suprema, Inc. of inducing Mentalix’s infringement.  The alleged scanners were manufactured by Suprema abroad and then imported into the U.S. by both Suprema and Mentalix.  Once the scanners were imported into the U.S., Mentalix combined software with the scanners and subsequently used and sold the bundled scanners in the U.S.  The ITC found that the ‘344 patent was directly infringed by Mentalix because each limitation of claim 19, directed to capturing and processing a fingerprint image, was practiced by the bundled scanners in the U.S.  The ITC also found that Suprema had induced Mentalix’s direct infringement by knowingly helping Mentalix incorporate its software with the imported scanners to practice claim 19.  Consequently, the ITC issued a limited exclusion order barring Suprema’s infringing scanners from entering the U.S. and a cease and desist order preventing Mentalix from distributing the infringing scanners.

Suprema and Mentalix appealed the ITC’s findings to the U.S. Court of Appeals for the Federal Circuit, upon which a divided panel vacated the ITC’s findings and the limited exclusion order.  The panel held that the “articles that infringe” language of Section 337 is a temporal stipulation requiring an infringing state at the time of importation and that, therefore, a violation of Section 337 cannot be premised on induced infringement in a situation where the act of direct infringement does not occur until post-importation.  The decision elicited a great deal of attention in the patent community because it effectively prevented the ITC from finding induced infringement of many method claims, and thus, created a sizeable “loophole” that would allow infringers to perform some steps of a patented method outside of the U.S. and the remaining steps after importation.

Cross Match and the ITC petitioned for rehearing en banc, following which the Federal Circuit overturned the panel decision and confirmed that the ITC does indeed have jurisdiction over induced infringement claims.  The Federal Circuit concluded that imported goods do qualify as “articles that infringe” under Section 337 in cases where a goods provider induces direct infringement that occurs post-importation, an interpretation of the Tariff Act the court said was consistent with the established Congressional intent of Section 337 to curb unfair trade practices involving the importation of goods into the U.S.

Although the August 2015 Suprema decision was premised on a method claim involving electronics technology, the decision may have a significant impact on the ability of brand drug manufacturers to use the ITC for protection against the importation of generic drugs that infringe method of treatment patents.

Infringing Method of Treatment Patents

When the Food and Drug Administration (FDA) approves a New Drug Application (NDA) granting a brand drug company approval to market a new, brand-name drug, the FDA lists any patent that claims a method of using the drug (a method of treatment) in its Orange Book publication.

Under the Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Act), a generic drug company can file an Abbreviated New Drug Application (ANDA) requesting FDA marketing approval of a generic drug that is sufficiently similar to a brand-name drug of an NDA.  If the ANDA is filed with a Paragraph IV certification asserting that a patent listed in the Orange Book is either invalid or will not be infringed by the generic drug, filing of the ANDA in and of itself constitutes an act of patent infringement under 35 U.S.C. § 271(e)(2), which may trigger patent litigation under the Hatch-Waxman Act.  If the brand drug company sues the generic drug company within 45 days of being notified of the ANDA filing, the FDA cannot grant final approval of the ANDA for 30 months from the notification.  This so-called 30-month stay allows simultaneous resolution of the patent litigation and FDA review of the ANDA, in addition to assurance that the generic drug company will not launch the generic drug during the ongoing patent litigation.

Occasionally, the generic drug company may choose to begin marketing the generic drug (launching the drug at risk) upon expiration of the 30-month stay even if the patent litigation has yet to be resolved.  As a result of the August 2015 Suprema decision, a brand-name drug that is solely protected by a method of treatment patent and that is threatened by a generic drug launched at risk may now be eligible for adjudication before the ITC in cases where the generic drug is imported into the U.S and then prescribed by doctors or administered to patients post-importation.

Inducing Infringement of Method of Treatment Patents at the ITC

Given that the ITC is now empowered to resolve claims of induced infringement, a brand drug company holding a method of treatment patent and facing an at risk launch may be able to thwart continued efforts of a generic drug company by filing a complaint with the ITC for a generic drug that will be imported into the U.S. and then directly infringe the patent after importation.  Furthermore, litigating method of treatment patents at the ITC may have significant advantages over litigating such patents in a federal district court.  For example, due to fairly strict target dates that dictate ITC procedural schedules, ITC proceedings are typically carried out much faster (usually within 12-16 months) as compared to more lengthy proceedings that usually occur in a federal district court.  Additionally, ITC jurisdiction and discovery rules facilitate effective litigation against foreign respondents and defendants, whereas comparable processes in a federal district court often prove to be much more complicated and time-intensive.

If the ITC finds that a generic drug does in fact infringe a method of treatment patent in a manner that violates Section 337, the ITC can issue a general or limited exclusion order, enforceable by the U.S. Customs and Border Protection (CBP) agency, that bars U.S. importation of the drug and may also issue a related cease and desist order that prevents certain future actions of infringing entities.  While plaintiffs obtaining an injunction in a federal district court do not have access to CBP and thus must petition the court to enforce an injunction against patent infringers, the ITC has special expertise in technical and legal issues related to imported products, which facilitates its interactions with CBP for enforcing such exclusion orders.  In sum, ITC litigation can be an attractive means by which brand drug companies seek to protect their method of treatment patents following an FDA 30-month stay.