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December 01, 2020 Feature

Life Sciences at the ITC: Predictions and Considerations for Biosimilar Litigation

Hassen A. Sayeed and Patrick Nack-Lehman

©2020. Published in Landslide, Vol. 13, No. 2, November/December 2020, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

Non-life-sciences products have historically accounted for most disputes heard at the International Trade Commission (ITC).1 The increasing frequency of biologics litigation in the U.S., however, raises the possibility of an inflection point: the ITC may soon become a more popular alternative forum for life sciences. This article briefly explores some of the benefits and risks associated with litigating biologics cases in the ITC in comparison to district court. The article also reviews the utilization of the ITC as an alternative forum for traditional pharmaceutical (Hatch-Waxman) and trade secret litigation.

Litigating Biologics Cases in the ITC

Biological medical products (biologics) are the fastest-growing class of therapeutic products in the U.S.2 Biologics are medicines approved by the U.S. Food and Drug Administration (FDA) produced by biotechnology in a living system, such as microorganisms or cells.3 Biologics are typically much larger and more complex than conventional drugs. A “biosimilar” drug is a biological product that is highly similar to the FDA-approved reference product and has no clinically meaningful differences from that product.4 As of July 7, 2020, the FDA has approved 28 biosimilars, and approvals are becoming more frequent, with 10 approvals in 2019 alone.5 As the number and frequency of biosimilar approvals increase, biologics companies may turn to new forums such as the ITC to enforce their rights.

The ITC is an administrative agency that “fulfills a range of trade-related mandates.”6 One part of the ITC’s mission is to “[i]nvestigate and make determinations in proceedings involving imports claimed to injure a domestic industry or violate U.S. intellectual property rights.”7 These investigations include alleged violations of 19 U.S.C. § 1337 (section 337 investigations). The ITC employs six administrative law judges to run the trial phase of section 337 investigations.8 Those investigations have historically focused on patent infringement but have also involved copyright and trademark infringement, as well as trade secret misappropriation and other unfair acts.9

Three key considerations make the ITC an attractive venue for biologics companies seeking to protect their intellectual property in the U.S. Each of these considerations has a countervailing factor that companies pursuing relief in the ITC must carefully consider, and which may at times favor their biosimilar competitors.

Jurisdictional Requirements

Unlike in district court cases, there is no requirement of personal jurisdiction at the ITC. The ITC’s jurisdiction is in rem—based on the imported product itself. This unique feature of ITC litigation eliminates the problematic personal jurisdiction disputes that are common in district court, particularly when foreign entities are involved. The ITC does, however, demand that parties pursuing a section 337 complaint satisfy a domestic industry requirement. In order to prevail, complainants must show that they have made domestic investments protected by their own intellectual property, typically in connection with plants and equipment, labor or capital, or research, development, and licensing.10 Meeting this domestic industry requirement requires a case-by-case assessment, but the U.S.’s growing biologics and biosimilar markets suggest that this requirement is unlikely to be a burden for parties seeking to avail themselves of the protections of the ITC. Additional reassurance on this point can be gained from the fact that a number of previous ITC investigations have involved biologic products.11

Pace of Litigation

Section 337 investigations may also be attractive to biologics companies because the ITC typically moves more quickly than district court litigation. In 2019, the average section 337 investigation resulting in a final determination on the merits lasted less than 18 months.12 That timing is similar to some of the fastest “rocket docket” courts in the U.S. and is significantly faster than the time required for many district court cases to reach trial. Although this expedited timeline may be tempting, it requires more flexibility in decision-making and discovery. For example, the ITC requires responses to discovery requests in 10 days instead of the 30 days permitted in district court litigation; responses to motions are also due in 10 days.13 Companies that cannot readily prepare and execute strategic litigation decisions on this timeline may find themselves disadvantaged by selecting the ITC as a forum.

Remedies

Money damages are not available at the ITC. Instead, the available remedies include an exclusion order directed to U.S. companies banning the importation of the articles at issue and a cease and desist order directed to U.S. companies preventing sale of articles that have already entered the U.S.14 When foreign supply chains are involved, these remedies can function much like an injunction barring sale in the U.S.—without supply, there is no product to sell. A party seeking similar injunctive relief in district court would need to first satisfy the traditional four-factor eBay test, including by showing proof of irreparable harm.15 The Federal Circuit Court of Appeals has made clear that the eBay test does not apply to ITC proceedings.16 To the contrary, Congress intended injunctive relief to be the “normal remedy” for section 337 violations.17

In deciding whether to issue an exclusion order, however, the ITC is obligated to consider the effect of such exclusion on factors affecting the public interest. Specifically, the ITC must consider the effect of an exclusion order “upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers.”18 Given the public interest associated with enforcing intellectual property rights and preventing unfair acts of importation, this consideration has rarely limited or prevented ITC remedies.

That analysis, however, is obviously more complicated in the context of therapeutic products; it requires reconciling the need to enforce U.S. trade laws and intellectual property rights with the benefits of making therapeutic products more widely available. Prior ITC experience with the investigation of therapeutics—including large-molecule drugs and medical devices—is instructive in illustrating the factors that the ITC may consider in assessing public interest. For example, in Certain Recombinant Factor VIII Products (337-TA-956),19 the accused products involved a recombinant protein used to treat the blood-clotting disease hemophilia. In addressing the question of remedy, the ITC sought briefing from the parties as well as public comment on more than a dozen discrete questions. These questions focused on the assessment of alternative medications and therapeutic outcomes; patient cost, insurance coverage, and treatment preferences; and the form of limited remedy order permitting continued access to the products at issue under certain circumstances.20 The matter settled before the ITC provided any substantive response to the comments, but the questions raised nevertheless remain illustrative for both biologics and biosimilars companies. In particular, they suggest that policy issues of cost and access might be an important factor in fashioning any remedy.

Policy issues appear to have already affected the outcome of at least one recent ITC decision, albeit in connection with medical devices. In Certain Microfluidic Devices (337-TA-1068), the ITC determined that the accused devices infringed the asserted patents, but nevertheless fashioned an exclusion order to allow continued importation for use by researchers who were “using such devices in the United States as of the date of” the order.21 Specifically, the exception covered researchers who had “a documented need to continue receiving the devices for an identified current ongoing research project for which that need cannot be met by any alternative product.”22 The ITC concluded that such “[b]asic scientific research” is “precisely the kind of activity intended by Congress to be included when it required the Commission to consider the effect of a remedy on the public health and welfare.”23

Other Life Sciences Litigation at the ITC

Hatch-Waxman Litigation

Although biosimilar litigation under the Biologics Price Competition and Innovation Act (BPCIA) is relatively new to the U.S. legal landscape, small-molecule drug litigation has been around for far longer. It is worth considering why the ITC has not been a more common venue for small-molecule drug patent disputes governed by the Hatch-Waxman Act. Under the Hatch-Waxman Act, a generic drug company can seek approval from the FDA to market a generic version of an innovator drug before the expiration of patents relating to the innovator product upon which the generic is based.24 Innovators retain the ability to sue those generics under the Hatch-Waxman Act for patent infringement; the FDA will delay the approval of the generic drug application for 30 months to permit the resolution of that litigation.25

One immediate explanation for why Hatch-Waxman litigation is pursued in district court rather than the ITC is that a 30-month stay is not available in the ITC. The stay provides plaintiffs with time to pursue litigation in circumstances where an expedited adjudication may be neither desired nor necessary. That is not to say, however, that Hatch-Waxman litigation is irrelevant to ITC proceedings. The ITC has been a useful venue for innovators with patents that were not challenged by generics in Hatch-Waxman litigation. In Certain Sildenafil or Any Pharmaceutically Acceptable Salt Thereof (337-TA-489), for example, the innovator was able to halt internet sales of an unauthorized version of Viagra® entering the U.S. from foreign countries.26 The ITC has also been useful for innovators to assert patents (such as process patents) that are not eligible for protection under the Hatch-Waxman Act. In Certain Gemcitabine & Products Containing Same (337-TA-766), for example, Eli Lilly tried unsuccessfully under the Hatch-Waxman Act to litigate patents covering its chemotherapy drug Gemzar®. After that litigation, Eli Lilly was still able to assert a patent for the process of manufacturing gemcitabine, the active pharmaceutical ingredient (API) in Gemzar®, against a number of foreign manufacturers and the generic purchaser that had prevailed in the Hatch-Waxman litigation.27 Similar proceedings involving process patents for making APIs have been seen at the ITC in the past.28

Trade Secrets

Perhaps unsurprisingly given the ITC’s in rem jurisdiction, trade secret claims can also be brought at the ITC. These claims arise under the statutory authority permitting complaints based on unfair competition and other unfair acts.29 The Federal Circuit has held that ITC jurisdiction in the trade secrets context extends even where acts of misappropriation occur entirely outside the U.S.30 In TianRui v. ITC, a U.S. company licensed its trade secret manufacturing process to foreign manufacturers. A Chinese foundry sought such a license, but when negotiations failed, the Chinese foundry instead hired employees from other Chinese licensees. These events led to an ITC complaint by the U.S. manufacturer for trade secret misappropriation.31 The respondent moved to terminate the ITC proceedings on a theory that all alleged misappropriation occurred overseas and that section 337 was not intended to apply extraterritorially. The Federal Circuit, however, confirmed the ITC’s authority to investigate overseas misconduct where that misconduct related to goods imported into the U.S.32

At least one complainant has already taken advantage of this precedent and utilized the ITC as a trade secret venue for a biologic product.33 In early 2019, the ITC instituted an investigation against Daewoong (a Korean drug manufacturer) and Evolus (Daewoong’s U.S. licensee) for trade secret misappropriation related to DWP-450, a botulinum toxin product.34 The complainants—Medytox (a Korean drug manufacturer) and Allergan (the U.S. manufacturer of BOTOX® and Medytox’s licensee)—alleged that a former Medytox employee took confidential documents and a botulinum toxin strain with him to Daewoong, shortcutting the research and development that would otherwise have been required for Daewoong and Evolus to develop DWP-450.35 Like in TianRui, the alleged acts of trade secret misappropriation in Certain Botulinum Toxin Products were allegedly committed overseas by a non-U.S. actor; in this case, even one of the complainants (Medytox) was foreign. Investigations involving “purely trade secret misappropriation” are already becoming more common at the ITC,36 and given the international nature of many life sciences corporate collaborations, and the importance of trade secrets to those collaborations, one would expect life sciences trade secret litigation at the ITC to rise.

Conclusion

Given the increasing rate of biosimilar approvals in the U.S., the innovator-friendly rules at the ITC, and the general trends showing an increase of non-patent and non-consumer-electronics cases at the ITC, life sciences stakeholders should expect biosimilar litigation at the ITC to become more common. There are still distinct advantages to district court litigation, such as the availability of money damages, so the ITC is not expected to be a replacement for lawsuits in court. Rather, the ITC is best viewed as an alternative forum that is, at present, underutilized. Practitioners in the life sciences sector would be wise to brush up on section 337 practice, as the ITC offers unique benefits in terms of speed and jurisdiction that clients may find helpful.

Endnotes

1. Section 337 Statistics: Technology Areas of Accused Products (% over the Years), U.S. Int’l Trade Commission, https://www.usitc.gov/intellectual_property/337_statistics_types_accused_products_new_filings.htm (last visited Oct. 28, 2020).

2. Biosimilar and Interchangeable Products, U.S. Food & Drug Admin. (Oct. 23, 2017), https://www.fda.gov/drugs/biosimilars/biosimilar-and-interchangeable-products.

3. Agata Dabrowska, Cong. Research Serv., R44620, Biologics and Biosimilars: Background and Key Issues (2019).

4. Biosimilar and Interchangeable Products, supra note 2.

5. Biosimilar Product Information, U.S. Food & Drug Admin. (July 7, 2020), https://www.fda.gov/drugs/biosimilars/biosimilar-product-information.

6. About the USITC, U.S. Int’l Trade Commission, https://www.usitc.gov/press_room/about_usitc.htm (last visited Oct. 28, 2020).

7. Id.

8. Administrative Law Judges Bios, U.S. Int’l Trade Commission, https://www.usitc.gov/alj_bios (last visited Oct. 28, 2020).

9. See 19 U.S.C. § 1337(a); TianRui Grp. Co. v. Int’l Trade Comm’n, 661 F.3d 1322, 1326 (Fed. Cir. 2011) (“The Commission has long interpreted section 337 to apply to trade secret misappropriation.”).

10. 19 U.S.C. § 1337(a)(3).

11. See, e.g., Certain Human Milk Oligosaccharides, Inv. No. 337-TA-1120 (USITC filed Apr. 2, 2018) (complainant Glycosyn alleged importation and sale violate two process patents); Certain Recombinant Factor IX Prods., Inv. No. 337-TA-1066 (USITC filed July 7, 2017) (hemophilia treatments alleged to violate patents); Certain Antivenom Compositions, Inv. No. 337-TA-903 (USITC filed Oct. 20, 2013) (patents covered compositions of antivenom).

12. Section 337 Statistics: Average Length of Investigations, U.S. Int’l Trade Commission (Oct. 16, 2020), https://www.usitc.gov/intellectual_property/337_statistics_average_length_investigations.htm.

13. Compare 19 C.F.R. § 210.30(b)(2), with Fed. R. Civ. P. 34. See also 19 C.F.R. § 210.15(c).

14. See 19 U.S.C. § 1337(d), (f). Other potential ITC remedies include preliminary relief under 19 U.S.C. § 1337(e) and seizure or forfeiture under 19 U.S.C. § 1337(i).

15. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).

16. Spansion, Inc. v. Int’l Trade Comm’n, 629 F.3d 1331 (Fed. Cir. 2010).

17. Id. at 1358.

18. See 19 U.S.C. § 1337(d)(1), (e)(1), (f)(1).

19. Certain Recombinant Factor VIII Prods., Inv. No. 337-TA-956 (USITC filed Apr. 16, 2015).

20. Certain Recombinant Factor VIII Products; Determination to Review in Part a Final Initial Determination Finding No Violation of Section 337 and a Summary Determination; Schedule for Filing Written Submissions on One Issue under Review and on Remedy, the Public Interest, and Bonding, 81 Fed. Reg. 51,463 (Aug. 4, 2016).

21. Certain Microfluidic Devices, Inv. No. 337-TA-1068, Commission Final Determination (USITC Dec. 18, 2019).

22. Certain Microfluidic Devices, Inv. No. 337-TA-1068, Commission Opinion (USITC Jan. 10, 2020).

23. Id.

24. Paragraph IV Drug Product Applications: Generic Drug Patent Challenge Notifications, U.S. Food & Drug Admin. (Dec. 12, 2019), https://www.fda.gov/drugs/abbreviated-new-drug-application-anda/paragraph-iv-drug-product-applications-generic-drug-patent-challenge-notifications.

25. See 21 C.F.R. § 317.107(b)(3).

26. Inv. No. 337-TA-489 (USITC filed Jan. 29, 2003).

27. Certain Gemcitabine & Prods. Containing Same, Inv. No. 337-TA-766 (USITC filed Jan. 20, 2011). That ITC action settled within a year of filing.

28. See, e.g., Certain Alendronate Salts & Prods. Containing Same, Inv. No. 337-TA-584 (USITC filed Aug. 22, 2006) (Merck asserted its process patent for the active ingredient of its Fosomax® drug); Certain Diltiazem Hydrochloride & Diltiazem Preparations, Inv. No. 337-TA-349 (USITC filed Feb. 1, 1993) (Marion Merrell Dow and Tanabe Seiyaku Company alleged infringement of the process patent for the active ingredient of Cardizem®); Certain Crystalline Cefadroxil Monohydrate, Inv. No. 337-TA-189 (USITC filed Feb. 1, 1989) (resulting in an exclusion order for Bristol-Myers complaint covering its drug Duricef®); Certain Indomethacin, Inv. No. 337-TA-183 (USITC filed July 21, 1983) (resulting in an exclusion order for Merck complaint covering its drug Indocin®).

29. See 19 U.S.C. § 1337(a)(1)(A); TianRui Grp. Co. v. Int’l Trade Comm’n, 661 F.3d 1322, 1326 (Fed. Cir. 2011) (“The Commission has long interpreted section 337 to apply to trade secret misappropriation.”).

30. TianRui, 661 F.3d 1322.

31. Id. at 1325.

32. Id. at 1332–33.

33. See Certain Botulinum Toxin Prods., Inv. No. 337-TA-1145 (USITC filed Jan. 30, 2019).

34. Press Release, U.S. Int’l Trade Comm’n, USITC Institutes Section 337 Investigation of Certain Botulinum Toxin Products (Mar. 1, 2019), https://www.usitc.gov/press_room/news_release/2019/er0301ll1057.htm.

35. Certain Botulinum Toxin Prods., Inv. No. 337-TA-1145, Complaint (USITC Jan. 30, 2019).

36. There were four active ITC investigations involving “solely trade secret misappropriation” in fiscal year 2019, which is more than any fiscal year within the past decade. See Section 337 Statistics: Types of Unfair Acts Alleged in Active Investigations, FY 2006–FY 2015, U.S. Int’l Trade Commission, https://www.usitc.gov/intellectual_property/337_statistics_types_unfair_acts_alleged_active.htm (last visited Oct. 28, 2020).

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Hassen A. Sayeed, MD, is a partner in O’Melveny’s New York office. He focuses his practice on representing life sciences companies in contested matters involving pharmaceuticals, biotechnology, and medical devices.

Patrick Nack-Lehman is an associate in O’Melveny’s Silicon Valley office. He focuses his practice on patent and technology-related litigation.