Added protection for US method patents could restrict local research

By Wayne Condon and Lisa Simonds.

Key Points:
The bill reduces the ability of companies to avoid infringement of US method patents by utilising research agencies overseas.

The United States recently proposed "long arm" legislation designed to add another layer of protection for US patent holders by reducing the ability of companies to avoid infringement of US method patents by utilising research agencies overseas. This may have profound implications in the pharmaceutical and biotech sectors.

Under current US law, the owner of a US method patent can initiate proceedings under USC 35 § 271(g) against an alleged infringer for importing a product which is manufactured in another country using the patented method.

Specifically, 35 USC § 271(g) states:

"Whoever without authority imports into the United States or offers to sell, sells, or uses within the United States a product which is made by a process patented in the United States shall be liable as an infringer, if the importation, offer to sell, sale, or use of the product occurs during the term of such process patent."

It is important to note that 35 USC § 271(g) does not make clear whether the importation, sale or use of "mere" information or data obtained through the exploitation of a patented method qualifies as a "product of a patented process".

This issue was considered by the US Court of Appeal in Bayer AG v Housey Pharmaceuticals Inc (2003). In this case the court held that liability under 35 USC § 271(g) only applies to the importation into the US of physical objects derived from a manufacturing process. As a result, the importation of "information" derived from a patented process does not constitute infringement.

The Informatics Act of 2005 seeks to amend 35 USC § 271. Notably, the new bill expands the definition of "product" for purposes of patent infringement provisions to include both physical goods and information in any fixed format. If passed the bill will significantly increase the value of US method patents providing coverage for not only use of the method but information produced by the use of the method.

While the bill may be of significant value for many US biotechnology and pharmaceutical companies, it may also be of detriment to research agencies abroad. For example, a research organisation in Australia conducting research according to a US method patent pursuant to a contract with a US company may be infringing the US patent when information derived from the research is provided to the US company which commissioned the research.

Australian-based research organisations should take care to follow the passage of the bill. If it is passed into law they will need to take care to ensure they are not exposing themselves to US patent infringement suits. At a minimum, the negotiation of a carefully worded indemnity clause would be prudent from the point of view of a research organisation conducting research outside the US in respect of a US method patent when the results of the research are to be provided to a US-based entity.