Federal Circuit Finds Preemption Of State Law Penalty For Sitting Out Biosimilar Patent Dance

The Federal Circuit has issued its final decision in the biosimilar patent litigation between Amgen and Sandoz over the first product to be approved under the Biologics Price Competition and Innovation Act (BPCIA). Not surprisingly, the court determined that Amgen’s state law unfair competition claims were preempted by the “complex statutory scheme” of the BPCIA. Amgen’s claims were based on Sandoz’s failure to share its biosimilar application and participate in the patent dispute resolution procedures, but the court found that the federal statute did not leave room for any state law remedies.

No Federal Injunction For Sitting Out The Patent Dance

This decision was rendered on remand from the Supreme Court, which had decided that the BPCIA does not authorize an injunction to force a biosimilar applicant to share its biosimilar application and engage in the patent dance. Rather, the Court found that the only federal remedy available to the reference product sponsor when the biosimilar applicant does not follow the patent dispute resolution procedures of the BPCIA is provided by 42 U.S.C. §262(l)(9)(C), which authorizes the reference product sponsor (Amgen in this case) to bring an immediate declaratory judgment action to enforce its patents.

Read more about the Supreme Court decision here.

No State Law Penalty For Sitting Out The Patent Dance

Despite finding no injunction available under federal law, the Supreme Court left open the possibility that an injunction might be available under state law, and remanded to the Federal Circuit to determine whether such a remedy was available and not preempted by the BPCIA. As before, the decision on remand was rendered by Judges Newman, Lourie, and Chen. Judge Lourie authored the unanimous decision.

The Federal Circuit first determined that Sandoz had not waived the preemption issue:

Sandoz preserved its ability to assert preemption by pleading the defense in its answer. …. We thus discern no prejudice to Amgen by resolving the preemption issue now

The Federal Circuit then determined that Amgen’s state law claims were preempted under theories of field preemption and conflict preemption.

The court explained field preemption as follows:

Under field preemption, “state law is preempted where it regulates conduct in a field that Congress intended the Federal Government to occupy exclusively.” …. We may infer such a congressional intent from a “scheme of federal regulation . . . so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it,” or where an Act of Congress “touch[es] a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject.” Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947).

The court found field preemption here because:

The BPCIA’s comprehensive, carefully calibrated “scheme of federal regulation . . . [is] so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it.” Rice, 331 U.S. at 230.

The court explained conflict preemption as follows:

State laws are also preempted when they conflict with federal law. …. preemption occurs “where it is impossible for a private party to comply with both state and federal requirements, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” English, 496 U.S. at 79 (internal citation and quotation marks omitted).

The court found conflict preemption here because:

We must assume that Congress acted intentionally when it did not provide an injunctive remedy for breach of § 262(l)(2)(A)’s disclosure requirements. …. Where, as here, “Congress made a deliberate choice not to impose” certain penalties for noncompliance with federal law, state laws imposing those penalties “would interfere with the careful balance struck by Congress.” Arizona [v. United States], 567 U.S. 387], 405– 06 [2012].

Thus, the Federal Circuit concluded that “Amgen’s unfair competition and conversion claims” were “preempted on both field and conflict grounds.”

Will The Patent Dance Go On?

Although this decision means that a reference product sponsor can’t force a biosimilar applicant to participate in the patent dance, the dance may go on under the right circumstances. For example, a biosimilar applicant who wants to resolve patent disputes early could share its application and require the reference product sponsor to bring suit at the culmination of the patent dance or face the limitations on remedies set forth in 35 U.S.C. § 271(e)(6)(B).

If parties do continue to participate in the patent dance, they surely will be asking the courts to interpret the dance steps and any consequences for bowing out after the dance has begun.