[Excerpt] “In the biotechnology (biotech) industry, companies must be increasingly aware of their intellectual property and how their licensing strategies can impact their rights. When licensing patented technology, it is common practice for biotech companies to include restricted field-of-use provisions in their license agreements. Such provisions permit a licensee to only use licensed technology in a defined field and restrict use or development in another field. This licensing strategy plays an important role within the biotech industry because it allows companies to more effectively control their intellectual property and to more efficiently research and develop pharmaceutical products.
A problem that occurs in the biotech industry is when a company promotes the ―off-label use of an already-approved drug—a use that may be covered by another‘s patent, though perhaps undeveloped or unlicensed. This problem can be an unforeseen side effect of utilizing biological material to develop drugs that may have many, and often unknown, indications for disease treatments. One way to control off-label use promotion is through patent license agreements. Unfortunately, for many biotech licensors, patent licenses may not always prevent off-label use promotion. To illustrate, a licensee (or a third party downstream of the license agreement) could promote a drug approved by the Food and Drug Administration (FDA), developed from licensed technology, for an unapproved treatment covered by the licensor‘s patent that the party was not given the right to develop.
The U.S. Supreme Court has held that activity outside of the licensed field can constitute patent infringement because the patent owner has not transferred the rights for use or product development in that field. However, in 2008, the Supreme Court, in Quanta Computer, Inc. v. LG Electronics, Inc., implied that the patent holder in this situation may have exhausted its rights by licensing the technology and, therefore, cannot sue a third party for infringement even if the use being promoted is covered by the patent.
This Note discusses how Quanta should be interpreted and applied in the context of field-of-use restrictions in biotech license agreements and how a biotech licensor may sue for patent infringement as a remedy for downstream off-label use promotion when it licenses technology to be developed within a restricted field. Section I provides an overview of the biotech industry and how patent licensing plays an essential role in the growth and continuation of the industry. Section II highlights the problem of off-label use promotion and how the FDA appears to fall short of adequate regulation in this area. Section III outlines how the doctrine of exhaustion affects patent license agreements, specifically in the wake of Quanta. Section IV discusses the post-Quanta application of the doctrine of exhaustion to biotech licenses that incorporate field-of-use restrictions and how licensors should respond to Quanta when drafting license agreements to prevent off-label use.”
Kristal M. Wicks, Exhausted or Unlicensed: Can Field-of-Use Restrictions in Biotech License Agreements Still Prevent Off-Label Use Promotion After Quanta Computer?, 9 U.N.H. L. REV. 157 (2010), available at http://scholars.unh.edu/unh_lr/vol9/iss1/8