Regulatory Focus™ > News Articles > Federal Circuit: Use of a CMO Prior to Filing Drug Patents Does Not Invalidate the Patents

Federal Circuit: Use of a CMO Prior to Filing Drug Patents Does Not Invalidate the Patents

Posted 11 July 2016 | By Zachary Brennan 

Federal Circuit: Use of a CMO Prior to Filing Drug Patents Does Not Invalidate the Patents

Pharmaceutical and biotech companies will likely be relieved to hear that the use of a contract manufacturing organization (CMO) cannot cause a drug’s patents to be invalidated under what’s known as the “on sale” bar, according to an opinion released Monday from the US Court of Appeals for the Federal Circuit.

The opinion hinges on an important concept linked to the patenting of pharmaceuticals, the use of CMOs and the manufacturing processes necessary to produce pharmaceuticals. Under US law, if a product (not necessarily a drug) is “on sale” for more than a year before filing a patent application, any issued patent is invalid and “the right to exclude others from making, using, and selling the resulting product is lost,” according to Kathleen O’Malley, US federal judge of the US Court of Appeals for the Federal Circuit.

Hospira v. Medicines Co.

The lawsuit in question arises from Hospira’s submission of two abbreviated new drug applications (ANDAs) that sought US Food and Drug Administration approval for generic versions of the Medicines Company’s blood thinner Angiomax (bivalirudin), prior to the expiration of the patents.

As part of that suit, Hospira argued that because the Medicines Company used the services of the now-defunct CMO Ben Venue prior to its patenting of the drug, the Medicines Company had violated the on-sale bar and the patents should be lost.

“Hospira contended that any transaction that provides a commercial benefit to the inventor is enough to trigger the on-sale bar,” Monday’s opinion says. “Because MedCo [the Medicines Company] was able to stockpile its product for future sale, and, thus, replenish the pipeline that had been depleted when it had to cease use of its previous manufacturing methods, Hospira argued that MedCo received a commercial benefit from the transactions with Ben Venue.”

A merits panel of the Federal Circuit later agreed with Hospira and reversed a district court’s ruling regarding the applicability of the on-sale bar.

The panel acknowledged that, “Ben Venue invoiced the sale as manufacturing services and title to the pharmaceutical batches did not change hands,” but disagreed with the district court’s conclusion that Ben Venue’s sale of services did not mean a commercial sale of Angiomax. The panel further explained that “where the evidence clearly demonstrated that the inventor commercially exploited the invention before the critical date, even if the inventor did not transfer title to the commercial embodiment of the invention,” the on-sale bar applies.


But Monday’s opinion did not draw the same conclusions as the panel, thus offering pharmaceutical companies that rely on CMO services a moment of reprieve from a decision that could fundamentally disrupt the nature of how and when drugs are manufactured and patented.

“The most natural conclusion to draw from all of the evidence presented in this case is that Ben Venue sold contract manufacturing services—not the patented invention—to MedCo. Under MedCo’s instructions and using an API [active pharmaceutical ingredient] supplied by MedCo, Ben Venue acted as a pair of ‘laboratory hands’ to reduce MedCo’s invention to practice. The invoices for the manufacturing service stated, ‘Charge to manufacture Bivalirudin lot,’” the opinion says.

In addition, the opinion notes that “MedCo paid Ben Venue only about 1% of the ultimate market value of the product Ben Venue manufactured. As described above, MedCo paid Ben Venue a total of $347,500 to make the three batches, even though these batches were commercially valued at well over $20 million. Unsurprisingly, therefore, the district court chose MedCo’s description of the transaction as one in which ‘Ben Venue was paid to manufacture Angiomax for [MedCo],’ over Hospira’s description of the transaction as a ‘sale of the validation batches.’”

The appeals court also made clear that the act of stockpiling a patented invention by a pharmaceutical company purchasing CMO services does not mean that the patents of that drug should be invalidated.

“Rather than rest our decision on formalities, our focus is on what makes our on-sale bar jurisprudence coherent: preventing inventors from filing for patents a year or more after the invention has been commercially marketed, whether marketed by the inventor himself or a third party,” the court says. “For this reason, we find that the mere stockpiling of a patented invention by the purchaser of manufacturing services does not constitute a ‘commercial sale.’”




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