Eli Lilly and Co. v. Medtronic, Inc., 88-1409

• Decision Date: 29 March 1989
• Docket Number: No. 88-1409,88-1409
• Citation: 10 USPQ2d 1304,872 F.2d 402
• Parties: , 10 U.S.P.Q.2d 1304 ELI LILLY AND COMPANY, Plaintiff-Appellee, v. MEDTRONIC, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 402

872 F.2d 402

57 USLW 2587, 10 U.S.P.Q.2d 1304

ELI LILLY AND COMPANY, Plaintiff-Appellee, v. MEDTRONIC, INC., Defendant-Appellant.

No. 88-1409.

United States Court of Appeals Federal Circuit.

March 29, 1989.

Rehearing Denied May 31, 1989.

Suggestion for Rehearing In Banc Declined July 18, 1989.

Timothy J. Malloy of McAndrews, Held & Malloy, Chicago, Ill., argued for plaintiff-appellee. With him on the brief were Lawrence M. Jarvis and Gregory J. Vogler. Of counsel were Leroy Whitaker and Bruce J. Barclay, Eli Lilly and Co., Indianapolis, Ind.

Philip S. Johnson of Woodcock Washburn Kurtz Mackiewicz & Norris, Philadelphia, Pa., argued for defendant-appellant. With him on the brief were Gary H. Levin, Albert W. Preston and Henrik D. Parker. Of counsel were Joseph F. Breimayer and John L. Rooney of Medtronic, Inc., Minneapolis, Minn.

Before NIES and ARCHER, Circuit Judges, and COWEN, Senior Circuit Judge.

NIES, Circuit Judge.

Medtronic, Inc., brings an interlocutory appeal from a permanent injunction ¹ entered by the United States District Court for the Eastern District of Pennsylvania, Eli Lilly & Co. v. Medtronic, Inc., No. 83-5393 (E.D. Pa. Apr. 21 1988) (Ditter, J.), enjoining it from, inter alia, the manufacture, use, or sale of certain medical devices, and from the use of data generated from such medical devices. Medtronic asserts that 35 U.S.C. Sec. 271(e)(1) (Supp. III 1985) permits the use it is making of its medical devices, namely, for testing and obtaining certain approval by the Food and Drug Administration (FDA). Prior to trial, the district court had ruled that that statute applies to drug products only; Medtronic could not, therefore, assert it as a defense against Lilly's charges of infringement. See Eli Lilly & Co. v. Medtronic, Inc., 5 USPQ2d 1760, 1987 WL 26676 (E.D.Pa.1987). We disagree. Accordingly, we reverse the court's ruling that 35 U.S.C. Sec. 271(e)(1) is restricted to drugs, and we remand for determination of whether, in fact, Medtronic's use of its medical devices falls under section 271(e)(1). Because it is unclear that all of Medtronic's activities fall within the section 271(e)(1) exception, we leave it for the court on remand to decide to what extent the injunction should be vacated, modified, or stayed during further proceedings.

I

As an initial matter, we note that the propriety of the grant or denial of an injunction under 35 U.S.C. Sec. 283 (1982) is reviewable under an abuse of discretion standard. Windsurfing Int'l, Inc. v. AMF Inc., 782 F.2d 995, 1002, 228 USPQ 562, 567 (Fed.Cir.), cert. denied, 477 U.S. 905, 106 S.Ct. 3275, 91 L.Ed.2d 565 (1986). However, abuse of discretion may be established by showing an injunction is based upon a misinterpretation of applicable law. Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876, 9 USPQ2d 1384, 1392 (Fed.Cir.1988) (quoting PPG Indus. v. Celanese Polymer Specialities Co., 840 F.2d 1565, 1572, 6 USPQ2d 1010, 1016 (Fed.Cir.1988) (Bissell, J., additional views)). Here, we conclude that the district court interpreted 35 U.S.C. Sec. 271(e)(1) too narrowly.

II BACKGROUND

Lilly sued Medtronic for infringement of claims 1-6 of its U.S. Patent Re. No. 27,757 and claim 1 of U.S. Patent No. 3,942,536 under 35 U.S.C. Sec. 271(a) (1982). Lilly alleged that Medtronic's development and marketing of its automatic implantable cardioverter defibrillators and catheter electrodes infringed Lilly's patents covering such medical devices. Medtronic asserted the statutory noninfringement defense provided by 35 U.S.C. Sec. 271(e)(1), and moved for partial summary judgment on that basis. See Eli Lilly & Co., 5 USPQ2d 1760. The court denied Medtronic's motion, ruled that section 271(e)(1) does not apply to medical devices, and prohibited Medtronic from presenting evidence at trial regarding the section 271(e)(1) defense. Id. at 1762. Following a trial on the merits, which resulted in Medtronic being held to infringe Lilly's patents, the district court reaffirmed its interpretation of section 271(e)(1) and issued the subject injunction. See Eli Lilly & Co. v. Medtronic Inc., 696 F.Supp. 1033, 7 USPQ2d 1447 (E.D.Pa.1988).

III

This case raises a question of first impression, namely, whether the noninfringement defense of 35 U.S.C. Sec. 271(e)(1), added by amendment in 1984, applies to medical devices.

Shortly before section 271(e)(1) was enacted, this court addressed whether it was an infringing use under 35 U.S.C. Sec. 271(a) ² for a nonlicensee to use a patented drug product, prior to the patent's expiration, for purposes strictly related to obtaining FDA approval for a generic substitute intended to be sold commercially only after the patent expires. The case addressing that issue was Roche Products, Inc. v. Bolar Pharmaceutical Co., 733 F.2d 858, 221 USPQ 937 (Fed.Cir.), cert. denied, 469 U.S. 856, 105 S.Ct. 183, 83 L.Ed.2d 117 (1984). This court in Roche concluded that such use did not fall within any established experimental use exception and declined to extend or create an experimental use exception for FDA testing. The court noted that Congress was the appropriate forum to resolve the matter and that legislation was pending on related subjects which made it aware of the problem. Id. at 865, 221 USPQ at 942. Under the Roche ruling, infringement would be found for the investigational testing of an infringing medical device even though, under 21 U.S.C. Sec. 360e (1982 & Supp. III 1985) of the Federal Food, Drug, and Cosmetic Act, such testing is required to obtain FDA approval to market such devices.

The Roche decision resulted in an immediate effort by the generic drug manufacturers to escape the effect of the decision. An amendment of the patent statute was put forth in connection with the pending legislation noted in the Roche decision. ³ Before Congress, those interests urged that the time required to obtain FDA approval for their generic products, if they had to wait to begin testing until after a patent expired, gave an effective extension of the patent term, which was contrary to the interests of the public in obtaining lower cost drugs as soon as possible. It was an objective of the generic drug manufacturers to be able to place their generic substitutes for a patented drug on the market the day after the patent expired. That objective could be achieved only if they were able to acquire data and apply to FDA prior to that time, activities which were legally impermissible under Roche. At the same time, Congress had before it bills supported by the proprietary drug interests which had as their objective the extension of the patent term. The justification for such extension also lay in the FDA testing requirements which consumed, in many instances, a number of years of the patent term and effectively reduced the patentee's time for exclusive commercial exploitation of the invention.

The Drug Price Competition and Patent Term Restoration Act of 1984, Pub.L. No. 98-417, 98 Stat. 1585 (the Act), signed into law in 1984, simultaneously effected some of the aforementioned objectives. The Act overruled Roche by adding section 271(e)(1) to title 35 which reads ⁴ in pertinent part:

It shall not be an act of infringement to make, use, or sell a patented invention (other than a new animal drug or veterinary biological product (as those terms are used in the Federal Food, Drug, and Cosmetic Act and the Act of March 4, 1913)) solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs.

Section 271(e)(3) (Supp. III 1985) further provides:

In any action for patent infringement brought under this section, no injunctive or other relief may be granted which would prohibit the making, using or selling of a patented invention under paragraph (1).

Conduct within the ambit of section 271(e)(1) is not an act of infringement, and, hence, cannot be enjoined pursuant to section 271(e)(3). This appeal raises the question of whether section 271(e)(1) is a limited exception which applies only to drugs, as the district court ruled, or applies generally to patented inventions, including medical devices.

In the patent term restoration portion of the legislation, which became codified in 35 U.S.C. Sec. 156 (Supp. III 1985), the benefits of patent extension are not restricted to drugs, but extend to medical devices. See 35 U.S.C. Sec. 156(f)(1)(B). ⁵

IV

Each of the parties has urged that the above-quoted statutory language of 35 U.S.C. Sec. 271(e)(1) is "clear." However, each has put forth equally plausible interpretations of section 271(e)(1), which to us means the language is fraught with ambiguity. The district court and Lilly limit the exception for "patented inventions" to patented drugs by reading the last clause of 271(e)(1) as a restriction on that otherwise broad statutory language. Medtronic urges that the exception extends to all types of "patented inventions" provided the use being made is for testing to obtain approval from FDA for sale of a product after the relevant patent has expired. Per Medtronic, the last clause describes the type of law, not the type of patented invention. Furthermore, as is often the case, each side has been able to highlight general statements in the legislative history which allegedly support their own reading of section 271(e)(1). However, amidst ambiguous language in the statute, and ambiguous statements in the legislative history what is clear to this court, as well as to the parties and the district court, is that section 271(e)(1) was added to overrule this court's decision in Roche.

While the claimed subject matter in Roche was limited to a drug product, the holding of that case was not so limited. The holding provided an interpretation of the scope of 35 U.S.C. Sec. 271(a) without regard to what particular goods might be involved. Specifically, the court decided that the unlicensed...