Biotechnology Industry Organization v. District of Columbia

to extend to actions for immunity cannot be read sovereign asserting from topped Katz, See, infringement. lawsuit, not abuse and did present in the (“In ratifying 126 S.Ct. at 1005 action in U.S. dismissing this its discretion Clause, ac- Bankruptcy States argument BPMC’s the face of quiesced in a subordination of whatever trary.

sovereign immunity they might otherwise proceedings necessary in C have asserted jurisdiction rem effectuate the in the conduct of argues that BPMC also courts.”). find bankruptcy Because we sys- of California the State that Katz cannot be read to overrule Flori- tem, litigation, particularly patent expressly implicitly, Prepaid, da either for all Cali- general waiver operates as correctly we find that the district court in participating fornia State defendants rejected argument. this little merits argument This patent suits. Coll. discussion. Ill prior case expressly overruled Bank Sav. urges— the notion BPMC supporting reasons, we find that foregoing For the

i.e., constructively waive can that asserting Elev- precluded DHS is not immunity by its Amendment its Eleventh sovereign immunity in enth Amendment regulatory in a scheme. participation therefore, We, the deci- case. affirm (“We 119 S.Ct. 527 U.S. at of the district court. sion experi- think that the constructive-waiver AFFIRMED conceived, and was ill ment of Barden party Each shall bear its own costs. salvage attempting see no merit Vas-Cath, it.”); see also any remnant (“It is established

473 F.3d at 1381 in the federal participation

a state’s im- of itself waive system does not respect

munity in federal court with ”). ... by the state infringement therefore, reject- must be argument,

This ed. BIOTECHNOLOGY INDUSTRY ORGANIZATION, Plaintiff- D Appellee, that a recent Su- Finally, argues BPMC decision, Virginia preme Court Central Katz, Community Coll. v. Pharmaceutical Research America, Manufacturers of Prepaid such implicitly overruled Florida Plaintiff-Appellee, avail- immunity longer is no sovereign actions. infringement able COLUMBIA, M. Adrian OF appeal, howev- DISTRICT raises this issue BPMC Fenty, Mayor Co- the District of er, potential it for Su- “preserve! ] Attorney lumbia, Gener- Office holding preme Court review.” Columbia, Robert the District of history of al for closely tied to the Katz was so Attorney Spagnoletti, unique as- General and the Bankruptcy Clause of Docu- Office District bankruptcy jurisdiction pects of Judge, Issuances dissents in the of petition ments and Administrative denial in rehearing separate of Arnold R. for en banc a of the District Administrator, Finlayson, opinion. Office of and Administrative Issu

Documents PANEL RE- ON PETITION FOR Columbia, De ances the District of REHEAR- HEARING AND fendants-Appellants. ING EN BANC No. 2006-1593. PER CURIAM. Appeals, United States Court of Federal Circuit. ORDER A combined petition panel for rehearing

Oct. 2007. rehearing by en banc was filed Earl, William J. Senior Assistant Attor- Appellants, response and a thereto was General, Attorney ney General Office invited the court and filed Columbia, Washing- for the District of plaintiffs-appellees. petition The for re- DC, ton, petition panel filed a combined for hearing panel was referred to the rehearing banc rehearing and en for defen- appeal, peti- heard the and thereafter the petition him on the dants-appellants. With tion for rehearing response en banc and General, Singer, Attorney were Linda judges were referred to the circuit who Kim, General, Todd S. Solicitor and Ed- request poll are authorized to whether Schwab, Deputy ward E. Solicitor General. to rehear the A appeal poll en banc. was taken, Ogden, requested, David W. Wilmer Cutler Picker- and failed. LLP, ing Washington, Hale and Dorr thereof, Upon consideration DC, response petition filed a for all IT IS ORDERED THAT: him

plaintiffs-appellees. With on the re- (1) petition panel rehearing for sponse for Research Pharmaceutical denied. Randolph Manufacturers of America were Moss, Small,

D. Anne K. and Catherine petition rehearing for en banc is M.A. response Carroll. On the for Bio- denied. Industry technology Organization were (3) The mandate of the court will issue Troy Shumsky, Daniel E. A. Eric Sid- on November 2007. LLP, ley Washington, Austin DC. GAJARSA, Judge, concurring Circuit MICHEL, Judge, Before Chief the denial of the petition rehearing for en NEWMAN, MAYER, Judges, Circuit banc.

PLAGER, Judge,* Senior Circuit I concur the court’s denial of rehear- LOURIE, RADER, SCHALL, BRYSON, en banc this case. There is no need GAJARSA, LINN, DYK, PROST, and for en banc consideration as the decision is MOORE, Judges. Circuit

not inconsistent prior decisions of GAJARSA, Judge, Circuit concurs the United States Court or this petition rehearing denial of the for en panel banc Circuit. The decision reached the DYK, in separate opinion. proper Circuit correct result on legal basis. I * Judge Plager, original petition panel Senior rehearing. who was on the panel, participated only in decision on interference with to whether to the dissent D.C.’s briefly respond write purposeful, ]” rehearing en banc. “inadvertent! the denial change language cannot of the stat- we acknowledges The dissent ute, base our but must instead the District to hold that was correct analysis on entire statute as written. Drug Excessive Prescription Columbia’s Moreover, focusing only “price dis- by Act”) (the is 2005 Pricing Act of “D.C. crimination,” distorts the the dissent hold- laws. As by the federal preempted on a consid- panel, of the which relied notes, impermissibly Act seeks the D.C. it Act as a eration of the D.C. cohesive by requiring patent policy” to “establish whole, significant was based which what is to determine “the D.C. courts panel’s conclusion that part on the Dissent, spur innovation.” necessary to change “to attempt Act was a direct dissent, never- But the at 1349. slip op. of policy” within the District federal theless, deciding faults the Biotechnology Org. Columbia. grounds preemption” “conflict issue on District grounds. preemption” “field than rather (Fed.Cir.2007). As sophistry. grounded The dissent is out, correctly points theAs dissent cautioned, these has Supreme Court validity for presumption of heightened “rigidly distinct.” En- are not categories of traditional state statutes fields Co., Elec. 496 U.S. glish v. General by a only can be overcome (1990); 110 L.Ed.2d n. 110 S.Ct. pur- “the clear and manifest showing that (“Indeed, pre-emption id. field see also preempt is to the state pose of Congress” conflict species as a may be understood Blue Cross law. N.Y. State Conference of ”). Act That the D.C. pre-emption.... Plans, 645, 655, & Blue Shield also be considered could (1995). 115 S.Ct. impermissi- preemption” because “field purpose and manifest finding But a clear only patent policy, new bly establishes express statement require does not panel’s determination strengthens is Rather war- preemption. the D.C. is a direct conflict between there challenged state law ranted when the objects purposes Act and the ac- an obstacle to the clearly “stands as laws. full complishment and execution conclu- opposite dissent reaches objectives Congress.” purposes and of its by ignoring, purposes for the sion Council, Foreign Trade Crosby v. Nat’l statutory analysis, the D.C. Act’s conflict its clear invasion of

language And the L.Ed.2d Instead, field. the dissent is a suffi- “[w]hat has cautioned purpose of alleged the Act’s siders be determined is to cient obstacle” See, e.g., preventing price discrimination. the federal express language of only by the dissent, poor (“Despite enactments, at 1349 “examin- slip. op. but also statutory Act, inadver- a whole and drafting of the D.C. statute as ing the federal ef- patent policy, and intended identifying invades the field tently (“[T]he designed IcL; id. entire thrust of the D.C. is see also the main fects.” be To the must of course of the statute prevent discrimination.... scheme be that which needs must Act is considered and the D.C. extent that which discrimination, force that implied I no con- is of no less see prohibit price Here, the direct conflict expressed.”). policy.”). bifurcated flict This objects and and the the D.C. Act of between approach improper. Regardless regarding laws purposes They of the federal invention. enable innovators to clear pharmaceutical patents makes Con- greater profits obtain than could have law. gress’ preempt intention to the D.C. been if obtained direct exist- ed. These act as incentives for course, is, well-established that the innovative activities. laws, including Drug Price Competition and Patent Term Restoration 98-857, H.R.Rep. No. at 15 (the Act”), Act of’ 1984 “Hatch-Waxman Cong. U.S.Code & Admin.News pp. (codified Pub.L. No. 98 Stat. 1585 2647, 2650; 24,427 Cong. see also 130 Rec. 156), § as amended 35 U.S.C. do not (statement Representative Wax- make, use, “create affirmative man) (“A patent monopoly, is a and when anything.” sell Leatherman Tool anyone holds a monopoly person has Indus., Group Cooper ability company ability the or that has the (Fed.Cir.1997). But right the charge highest price the because there patent upon the laws do confer patent competition, is no one else in and as a right to holders —the “exclude others from we, public policy matter of under the making, using, selling a claimed inven- law, give that protection person to the time,” tion a period for limited id.—is put money who has into research and de- granted not in a vacuum or for its own velopment for an prod- innovative and new Rather, sake. as the Constitution itself uct. But at point public policy some calls establishes, purpose granting the the system for the free market patentee the right pro- exclude is “to which bring will about the result of a lower Progress mote the of Science and useful Const, price for the consumer. That is pur- the Arts,” I, § art 8 cl. 8. And the pose legislation.”); Cong. Rec. primary by mechanism which right the (statement Hatch) of Senator promotes exclude such by innovation is (“[T]he Drug Competition Price and Pat- providing patentee the with the opportuni- ent Term Restoration Act of ... ty to greater profits obtain than it could add[s] stimulus for research on drugs* new have obtained without such a right to ex- and medical ... through devises an exten- clude. The Hatch-Waxman Act which ex- patent sion of life to patent help tended the recover the costs pharmaceutical term for obtaining FDA products approval.”). to account for Congress’ the costs and de- lays of approval process, purpose spur the FDA clear by provid- and its innovation legislative history, can, thus, make especial- right this link a to exclude be ob- ly patented clear for drugs. As only by the House structed not directly preventing an Energy Committee on and Commerce Re- others, inventor from excluding but also port explained: systematically preventing patentee reaping

Patents are promote profits innova- increased that would tion providing right to exclude come from exclusionary otherwise making, using, others from selling rights.1 See,

1. This regulation gains does not mean that patent. from its Patterson v. patentee’s profits that affects a Kentucky, so undermines 24 L.Ed. 1115 goals patent system be leeway regulate as to But that states have broad preempted. It is well patented products established that states they does not mean that generally regulate patented can products ability have unlimited to do so in situations part general police powers of their regulation significantly exercise of directly which the preemption, without impedes Congress's even if this providing incidentally patentee affects the right. marketing will allow the Moreover, particularly [The bill] costs. while there ... counterparts following pharmaceutical generic acute tension by in- ... original patent innovation term promoting expiration of the text between patents profit reward to overall creasing the The contribution of medications drugs, it in affordable public interest reduced drasti- cost of health care can be between these the balance precisely cally generic equivalents if these are intended to two interests timely in a brought marketplace passed when it carefully calibrate fashion.”). Act, not ex- Hatch-Waxman simply pre- about The D.C. Act is pharmaceutical term for

tended the discrimination,” directly venting “price but process simplified also products but targets and undermines this careful bal- 98 Stat. generic products. for approval drug innovation and costs. ance between history of legislative 1585. prohibition on “excessive The D.C. Act’s Act demonstrates Hatch-Waxman (and drugs patented prices” for scope of the readjustment of the Act’s aimed at ad- drugs only), purposefully products pharmaceutical of the federal justing scope and reward culmination ... “long of a represented the right. replace Congress’s It would two and balance these effort to combine (a) the different deliberate balance cost. 130 objectives” innovation and of foreign govern- other balance reached (statement Represen- of Rec. 23058 Cong. (such Australia, Germany, or the ments as also, Cong. see Madigan); tative although provid- Kingdom), United (statement Representa- of Rec. 23058-59 exclusivity, temper the benefits of that (“This accomplishes two Synar) bill tive of government with various forms incentives for goals: provides It important (b) control, jury determinations price and restoring por- a drugs by new research on companies should pharmaceutical how of during lost life that is tion of the for their innovation. See compensated be in- processes; [i]t FDA approval the so, 28-4552, doing §§ -4554. In D.C.Code mar- drug in the price competition creases clearly Act “stands as an obstacle the D.C. pro- by simplifying approval the ketplace accomplishment and execution to the Together, these generic drugs. cess objectives of full Con- purposes the drugs today bring cheaper about two will at Crosby, 530 U.S. gress,” ... This bill is drugs and better tomorrow conflict, the light And in 2288. improves that important compromise that the D.C. panel correctly determined increases development and research and id.; see also preempted. See Act was market- drug Boats, 489 Bonito Boats v. Thunder Craft (statement Repre- at place.”); id. L.Ed.2d (“Under Madigan) provision the sentative (“Where it clear how the is can be protection legislation, patent of this in a partic- that balance patent laws strike years, long as the up extended to 5 circumstance, judgment that is not ular time when added extension may second-guess.”). the States years. exceed 14 We remaining, does not the discrimi- alludes to The dissent guarantee this extension to provide must being Act not impact of the D.C. nation of resources for the continued commitment is an patent law. This conflict with federal drugs to development of innovative the before syllogism, since the issue erroneous of our changing health needs address the whether premised on time, panel the was I am con- At the same citizens. authority impose has the of health care D.C. with the containment cerned jurisdiction in general; ysis, restrictions the and our is exclusive. Therefore, any regulating was whether or not the state law the presented issue preempted by feder- specific prices patented pharmaceutical products D.C. statutes, e.g., 35 patent drug likely al U.S.C. would be as a result of panel correctly §§ panel’s holding. 154-57. The deter- the While D.C. stat- appears mined that was. ute this case to be invalid be- poor drafting, panel’s opin- cause of its Similarly, I note that the dissent over- suggests ion legitimate price even panel opinion states the breath of regulation is invalid. suggests opinion the extent that it preemption “any The held that the District of require would Co- patented Prescription Drug lumbia’s regulating prices phar- Excessive Pric- (the Act”) dissent, ing Act of 2005 products.” slip, maceutical See “D.C. panel opinion’s analysis preempted by law. op., at 1348. The must, rests, analysis prohibits patented D.C. Act as all sale statute, pharmaceuticals at specifics prices, of the D.C. consid- excessive See, e.g., presumption prices includes a Biotechnology ered as whole. more (“The than Org., prices charged fact 30% above for the same targeted patent right drug Kingdom, that the Act is at the the United Germa- Canada, ny, apparent applies only on its face. or Australia are if excessive protected drugs. drug by patents The District has thus “is or other marketing seen fit to exclusive change rights” that coun- borders.”). try. §§ within See Whether future ef- D.C.Code -4554. regulate drug provides forts of states to Act also prices, pharma- that a ceutical example target pat- which for did not manufacturer can refute the re- ent drugs significantly sulting presumption by showing, by or did not as a pre- evidence, directly ponderance undermine the balance of the of the price fed- patent right, preempted charged eral would also be in the District in excessive question day. light is a that remains for another several factors: invention, demonstrated costs of devel- Thus, for the foregoing reasons and opment production of the prescrip- decision, those in stated this drug, global tion sales and to correctly Court to declined consider this date, any consideration government case en banc. supported

funded research that the de- DYK, velopment Judge, dissenting drug, impact Circuit of the and the rehearing price denial of en to prescription drug banc. access by residents and government of the I respectfully dissent from the court’s District of Columbia. rehearing denial of en banc this case. 28-4554(b). §Id. my panel’s In view the decision this case presents important issue of sig- panel agrees broad that stat- Columbia, beyond nificance the District of provision utes contain no expressly our en warranting banc attention. As the preempting regulation price state noted, panel opinion Biotechnology patented Indus. goods. Biotechnology Org. v. District Org., F.3d 496 F.3d at 1372. cir- Under these 1362, (Fed.Cir.2007), cumstances, 1371-72 the District preempted only a state law is (1) footing Columbia stands on the same if it regulates either in an area where (so-called respect state with to anal- regulation is exclusive view, my In way preemption. in a conflict regulates preemption) field (so-called no con- provision presents discrimination with federal that conflicts Lig Cipollone preemption). See flict of the federal conflict with Inc., Group, gett law. (1992).1 2608, 120 L.Ed.2d 407 poor drafting, which inadver- Despite Boats, Inc. v. Thunder In Bonito Craft patent policy, the field of tently invades 971,

Boats, Inc., 109 S.Ct. Act is the main thrust D.C. between prevent price to discrimination providing intel- held that patented pharmaceutical products sales similar property protection lectual and in certain other coun- the District protection was exclusivity. confer See tries that In 109 S.Ct. 971. patent law. Id. respect, § In D.C.Code 28-4554. this preempted, the Court holding the state law con- significant public Act reflects the found both field and appears to have drug disparity between cern about to field respect preemption.2 flict With in- States and other prices United Supreme Court found preemption, pharmaceutical nations with dustrialized careful balance be- patent statute’s “[t]he generally, U.S. patent protection. See monopoly to public right private tween Commerce, Pharmaceutical Price Dep’t of is a activity creative certain promote Implica- Countries: Controls OECD perva- ... so of federal ‘scheme Consumers, Re- Pricing, tions make reasonable the inference sive as to Development, and Innovation search and no room for the States left The District determined ” it.’ Id. at 109 S.Ct. supplement dis- regulate important Fe Elevator (quoting Rice v. Santa health, protect public due crimination to Corp., 331 U.S. such concern that (1947)). L.Ed. pharma- deny important access would Act, in my the D.C. problem to some District resi- products ceutical ac- view, misguided in a effort to is that afford needed are unable to dents who statutes, it seeks to commodate § 28-4551. medicines. D.C.Code subject patent policy and thus is establish drugs because that is limited the This is so because preemption. to field price the discrimination the area which (in courts ad- requires the D.C. statute exist. and access issues pricing) dressing the defense to excessive that the D.C. Act is de- the extent To necessary to price what to determine discrimination, I prohibit price signed innovation, § see D.C.Code 28- spur policy. Clear- see no conflict with 4554(b), that Con- determination policy anti- with federal ly, there is no conflict the not intend to leave to gress surely did law, Robinson-Patman such as the not, however, trust ground the This is states. Act, under certain circum- here, prohibits, which which rests on panel the decision preemp- Supreme Court found conflict appropriate 2. The preemption is also 1. Conflict tion, concluding that the state law “conflicts “compliance with both federal and state when gener- all ideas in the 'that with impossible," physically in effect La. law is dedicated to the common al circulation be Fed. Commc'ns Serv. Comm’n v. Public protected by a valid good they are unless 1890, Comm’n, 355, 368, 106 S.Ct. " (quot- 109 S.Ct. 971 patent.’ Id. at allega but there is no 90 L.Ed.2d 369 Adkins, Lear, 89 v. Inc. that this is the case here. tion 1902, (1969)). 23 L.Ed.2d 610 S.Ct. 1350 price example,

stances, patented products be- sellers of have “discriminate[ion] special right no fix purchasers of commodities the tween different quality products ... where the the are sold. United grade of like Co., 476, may v. Elec. such discrimination be sub- States Gen. U.S. 493- effect of (citing or tend to 71 L.Ed. 362 stantially to lessen 13(a). cases). § monopoly....” create a 15 U.S.C. rejected argu- has Supreme The Court Second, panel suggesting the errs in circumstances, ment, comparable under patent that the statutes is statutes that federal discrimination a patentee reap prof- to allow maximum prohibi-

preempt state during exclusivity period the because respects more de- tions that are some “the limitation on the size of the Md., Corp. v. manding. Exxon Governor patentee’s profit during carrot the [the exclusivity period] should be dictates marketplace.” Biotechnology In- panel Org., (quoting King The finds no conflict with the anti- dus. 496 F.3d at 1372 laws; rather, it finds a conflict Corp. Perego, trust Instruments (Fed.Cir.1995)). patent panel laws. The concluded that A patent grant is de- “penaliz[e] high prices signed patent the D.C. Act would not to allow holder to ... exploit and ... the full exercise of the the grant profit limit[ ] for the maximum bear, exclusionary power that derives from a merely market will but ... patent re-balanc[ing] right exclusivity. the statu- confer a panel’s [thus] tory contrary framework of rewards and incentives assertion to the is inconsistent insofar it relates longstanding Supreme prece- inventive new with drugs.” Biotechnology Org., 496 dent. words, In F.3d at 1374. other Congress is well established that in-

finds a conflict between and a patents upon tended to confer their hold- supposed policy law to allow only “a right ers limited to exclude others reap maximum holders to from making, using, selling a claimed during monopoly the term of the limited time,” invention for a period limited but on use of the invention. any not to “create right affirmative First, make, use, This seems to me incorrect. anything.” or sell Leatherman Indus., Inc., laws are not to confer Tool Group Cooper Inc. v. immunity antitrust-type regulation. (Fed.Cir.1997); F.3d see 35 154(a). § has not conferred on a U.S.C. Court has patentee enlarge scope pat frequently “to applied principle to con- [exclusionary] ent monopoly using clude that preempt does not power it competition” confers to restrain conflict with state and reg- federal statutes except the patent ulating prohibiting to the extent that law the sale of See, exclusivity. products. confers Ill. Tool Works Inc. v. Virginia, Webber v. Ink, Inc., 37, 28, 344, 347-48, (1880) Indep. 547 126 U.S. S.Ct. 26 L.Ed. 565 (2006) 1281, (quoting (finding 164 L.Ed.2d 26 tax applied state Jef Hosp. Hyde, patented products); Parish Dist. No. 2 v. to sale of Patterson v. ferson 2, 16, 104 466 2 Kentucky, U.S. S.Ct. 80 L.Ed.2d 24 U.S. L.Ed. 1115 (1984)); Sanitary Mfg. (holding patent rights see also Standard subordinated States, v. safety Co. United 33 to state governing require- statute (1912). Thus, oil); S.Ct. 57 L.Ed. 107 for ments for lighting see also Standard (hold presumption against pre- overcome the Sanitary, 226 U.S. at circumstances, emption under these to rights apply preempt do not ing patent party asserting preemption must demon- imposed price-fixing restrictions Act). purpose strate that “the clear and manifest is no indication that There Sherman supports preemption. Id. It Congress” and Patent Drug Competition Price (the that, is clear to the extent that the D.C. Act of 1984 Term Restoration Act”), 98-417, to prohibits price No. Act discrimination en- Pub.L. “Hatch-Waxman clearly public important sure access to medi- changed this estab 98 Stat. cations, it falls within the core of the legislative his legal principle. lished powers, triggering Act shows no states’ traditional tory of the Hatch-Waxman exclusivity strong presumption against preemption. more than a desire to allow im- designed laws were not to higher profits. it would result in because See, legitimate munize holders from No. at 17 e.g., H.R.Rep. regulation state the states’ traditional Cong. & Admin.News U.S.Code (“Patents legislative spheres. are p. right promote providing innovation A on discrimination prohibition enable[ing] to exclude ... innovators may may legislation. not be desirable profits than could have been greater obtain But preempt the decision whether to existed.”). obtained if direct legislation is for the such with nothing A law that does to interfere make, I agree and not this court. While exclusivity nothing also does to interfere panel correctly invalidated this There is not a word purpose. with this statute, pan- I dissent from the particular history of the Hatch- legislative the cited apparent holding prevention el’s any suggesting concern about Waxman discrimination is inconsistent with price regulation patented pharma and manifest the clear The D.C. Act does not products. ceutical statutes, and I dissent from the denial purposes conflict with the of federal of en banc review. the D.C. Act’s limitations because any way price discrimination do not any patent

interfere with holder’s

exclusivity. The D.C. Act does not author make, use, or person

ize other sell any patented products. GMBH, Opto and Osram OSRAM a conflict between Finally, finding GmbH, Semiconductors and federal Appellants, I think that the failed patent policy, adequate pre- give consideration TRADE INTERNATIONAL N.Y. against preemption. See sumption COMMISSION, & Blue State Blue Cross Conference Appellee. Co., Ins. Shield Plans v. Travelers 645, 654-55, No. 2006-1282. presumption This Appeals, United States Court strong respect to state particularly Federal Circuit. police regulations pursuant to the states’ 31, 2007. Oct. regula- power in “fields of traditional state tion,” protecting health and such as laws

safety. 1671. To Id.

Case Details

Case Name: Biotechnology Industry Organization v. District of Columbia

Court Name: Court of Appeals for the Federal Circuit

Date Published: Oct 30, 2007

Citation: 505 F.3d 1343

Docket Number: 2006-1593

Court Abbreviation: Fed. Cir.