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Patents for Critical Pharmaceuticals: The AZT Case

Published online by Cambridge University Press:  24 February 2021

Evan Ackiron
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Abstract

Patents and other statutory types of market protections are used in the United States to promote scientific research and innovation. This incentive is especially important in research intensive fields such as the pharmaceutical industry. Unfortunately, these same protections often result in higher monopoly pricing once a successful product is brought to market. Usually this consequence is viewed as the necessary evil of an incentive system that encourages costly research and development by promising large rewards to the successful inventor. However, in the case of the AIDS drug Zidovudine (AZT), the high prices charged by the pharmaceutical company owning the drug have led to public outcry and a re-examination of government incentive systems.

This Note traces the evolution of these incentive programs — the patent system, and, to a lesser extent, the orphan drug program — and details the conflicting interests involved in their development. It then demonstrates how the AZT problem brings the interest of providing inventors with incentives for risky innovative efforts into a sharp collision with the ultimate goal of such systems: ensuring that the public has access to the resulting products at a reasonable price. Finally, the Note describes how Congress and the courts have attempted to resolve these problems in the past, and how they might best try to solve the AZT problem in the near future.

Type
Notes and Comments
Information
American Journal of Law & Medicine , Volume 17 , Issue 1-2: The Human Genome Initiative and the Impact of Genetic Testing and Screening Technologies , 1991 , pp. 145 - 180
Copyright
Copyright © American Society of Law, Medicine and Ethics and Boston University 1991

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References

1 Formally called Azidothymidine.

2 Hilts, Wave of Protests Developing on Profits From AIDS Drug, N.Y. Times, Sept. 16, 1989, at Al, col. 5.

3 Knox, AIDS Drug Price is Cut by 20 Percent, Boston Globe, Sept. 19, 1989, at 1, col. 6, 17, col. 1.

4 Hilts, supra note 2, at 1, col. 5.

5 AIDS Toll Goes Over 100,000 in Nation, Boston Globe, Jan. 25, 1991, at 14, col. 1 (citing Center for Disease Control statistics that 161,073 AIDS cases have been reported since 1981, and 100,777 of these people had died as of January 1, 1991).

6 Id.; Merlis, Acquired Immunodeficiency Syndrome (AIDS): Health Care Financing and Services, in AIDS LEGAL, LEGISLATIVE, AND POLICY ISSUES 341, 345 (N. Quist ed. 1989); Hilts, supra note 2, at I, col. 5.

7 Hilts, supra note 2, at 1, col. 5.

8 Knox, supra note 3, at 17, col. 1. Burroughs Wellcome dropped its price to distributors from $1.50 per capsule to $1.20. Retailers charge patients about 20% more. The price is in line with other drug prices. It is the high dosage (12 capsules per day) and the continued use that make the cost to patients so high. Burroughs Wellcome Cuts AZT Price by 20%, GENETIC TECH. NEWS, Oct. 1989, at 6.

9 See infra notes 156-64 and accompanying text.

10 Knox, supra note 3, at 1, col. 6.

11 Id. at 17, col. 1.

12 Hilts, supra note 2, at 1, col. 5.

13 Forcing Poverty on AIDS Patients, N.Y. Times, Aug. 30, 1988, at A18, col. 1.

14 35 U.S.C. § 154 (1988).

15 Patent Act of 1790, ch. 7, 1 Stat. 109.

16 The Patent Acts are codified as amended at 35 U.S.C. §§ 1-376 (1988).

17 Id. at §111.

18 Id. at §§ 101-103. See Graham v. John Deere Co., 383 U.S. 1, 12-19 (1966).

19 35 U.S.C. § 112 (1988).

20 Id. at § 132.

21 “A patent shall be presumed valid. Each claim of a patent … shall be presumed valid… . The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” 35 U.S.C. § 282 (1988). This is the form that administrative deference takes in the patent arena.

22 Id. at § 115.

23 28 U.S.C. § 1338 (1988). The infringer challenging validity must establish invalidity by clear and convincing evidence. Lindemann Maschinenfabrik GMBH v. American Hoist & Derrick Co., 730 F.2d 1452, 1459 (Fed. Cir. 1984).

24 Blonder-Tongue Laboratories, Inc. v. University of 111. Found., 402 U.S. 313, 350 (1971).

25 Special Equip. Co. v. Coe, 324 U.S. 370, 378 (1945).

26 35 U.S.C. §§ 283-86 (1988). These code sections detail the remedies available to a patentee upon a finding of infringement. See infra notes 100-05 and accompanying text for a further discussion of remedies.

27 35 U.S.C. §281 (1988).

28 Id. at §§283, 284.

29 35 U.S.C.A. § 284 note 66 (West 1988).

30 U.S. CONST, art. I, § 8, d. 8.

31 Graham v. John Deere Co., 383 U.S. 1, 9 (1966).

32 Pennock v. Dialogue, 27 U.S. (2 Pet.) 1, 19 (1829).

33 Mercoid Corp. v. Mid-Continent Inv. Co., 320 U.S. 661, 665 (1944).

34 Kendell v. Winsor, 62 U.S. (21 How.) 322, 329 (1858), cited in United States v. Masonite Corp., 316 U.S. 265, 278 (1942).

35 A 1978 study by the Pharmaceutical Manufacturers Association (PMA) put the average cost of developing a new drug at $54 million. A 1987 PMA study upped this figure to $150 million per drug. Budiansky, The Cost of New Drugs Raises the Roof, U.S. NEWS & WORLD REP., Apr. 6, 1987, at 47. See also infra note 187 and accompanying text.

36 Adelman, & Juenger, , Patent-Antitrust: Patent Dynamics and Field-Of-Use Licensing, 50 N.Y.U. L. REV. 211, 290 (1975)Google Scholar.

37 Eisenberg, , Patents and the Progress of Science: Exclusive Rights and Experimental Use, 56 U. CHI. L. REV. 1017, 1026 (1989)Google Scholar.

38 Adelman & Juenger, supra note 36, at 290.

39 See, e.g., Roberts v. Sears, Roebuck & Co., 723 F.2d 1324, 1331 (7th Cir. 1983) (en banc) (infringement suit concerning patent for quick-release socket wrench remanded because jury was allowed to determine patent validity). On reversing the decision of the panel of the Court of Appeals written by Judge Posner, the full court flatly rejected the efficiency theory endorsed by the panel:

[n]or are we prepared to determine that “(t)he framers of the Constitution and the Patent Code would not have wanted patents to be granted where the invention would have been made anyway, and about as soon, without any hope of patent protection. The grant of a patent in such a case would confer no benefits that might offset the costs of monopoly.” We do not believe the recognized test of obviousness can be simply stated as “(t)he concept of obviousness identifies such inventions — inventions that do not cost much in time or other resources to make because existing products or processes embody most of the information that constitutes the invention — and denies them patent protection.”

Id. at 1331, quoting and reversing 697 F.2d 796, 797 (7th Cir. 1983).

40 See, e.g., Adelman & Juenger, supra note 36, at 291; Adelman, , Property Rights Theory and Patent-Antitrust: The Role of Compulsory Licensing, 52 N.Y.U. L. REV. 977, 984 (1977)Google Scholar [hereinafter Property Rights Theory].

41 35 U.S.C. § 103 (1988).

42 See Graham v. John Deere Co., 383 U.S. 1, 17 (1966) (“The emphasis on nonobviousness is one of inquiry, not quality, and, as such, comports with the constitutional strictures.“).

43 Adelman & Juenger, supra note 36, at 291.

44 E.g., Panduit Corp. v. Dennison Mfg., 810 F.2d 1561 (Fed. Cir. 1987). In this case, a manufacturer of plastic cable ties brought an infringement action against a competitor. The court held that a finding of nonobviousness was supported by the fact that the patentee had tried for years at great expense to design a successful product. Id. at 1564. See also Hardinge Bros. v. Marr Oil Heat Mach. Corp., 27 F.2d 779, 781 (7th Cir. 1928) (“In view of the long and expensive experiments made by defendant… defendant's urge that its removal was the obvious thing to do is not at all persuasive.“); Panduit Corp. v. Dennison Mfg., 774 F.2d 1082, 1095-96 (Fed. Cir. 1985) (fact that patent holder worked seven years and spent millions of dollars is evidence that prior art did not render invention obvious), vacated and remanded, 475 U.S. 809 (1986).

45 Property Rights Theory, supra note 40, at 985. See Richardson v. Suzuki Motor Co., 868 F.2d 1226, 1246-47 (Fed. Cir. 1989) (“Infringement having been established, it is contrary to the laws of property, of which the patent law partakes, to deny the patentee's right to exclude others from use of his property.“). But see Schenck v. Notron Corp., 713 F.2d 782, 786 n.3 (Fed. Cir. 1983) (rejecting the view that a patent is denned as a “monopoly” interest).

46 Property Rights Theory, supra note 40, at 985 n.31 (citing SUBCOMM. ON PATENTS, TRADEMARKS, AND COPYRIGHTS OF THE SENATE COMM. ON THE JUDICIARY, 85TH CONG., 2D SESS., AN ECONOMIC REVIEW OF THE PATENT SYSTEM 53-54 (Comm. Print 1958)). The author illustrates the distinction between a pure property right and a patent by comparing a homeowner to a patentee. The homeowner may exclude trespassers, but he may not prevent another from constructing an identical house. A patentee has both the property right to exclude and the right to prevent independent development.

47 Armstrong, , From the Fetishism of Commodities to the Regulated Market: The Rise and Decline of Property, 82 Nw. U.L. REV. 79, 85 (1987)Google Scholar.

48 Graham v. John Deere Co., 383 U.S. 1, 9 (1966) (citing VI WRITINGS OF THOMAS JEFFERSON 180-81 (Washington ed. 1813), reprinted in Eisenberg, supra note 37, at 1024 n.27).

49 Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405, 425 (1908).

50 Id. at 423.

51 Hartford-Empire Co. v. United States, 323 U.S. 386, 415 (1945).

52 Special Equip. Co. v. Coe, 324 U.S. 370, 381-82 (1945) (Douglas, J., dissenting).

53 Federal Court Improvements Act of 1982, Pub. L. No. 97-164, 96 Stat. 25 (codified as amended in scattered sections of 28 U.S.C.).

54 See, e.g., 28 U.S.C. §§ 1295, 1338 (1988).

55 Id.

56 Dreyfuss, , The Federal Circuit: A Case Study in Specialized Courts, 64 N.Y.U. L. REV. 1, 21 (1989)Google Scholar.

57 Schenck v. Notron Corp., 713 F.2d 782, 786 n.3 (Fed. Cir. 1983). See also Smith Int'l v. Hughes Tool Co., 718 F.2d 1573, 1577 (Fed. Cir. 1983) (“patents shall have the attributes of personal property“).

58 U.S. CONST, amend. V (“nor shall private property be taken for public use, without just compensation“).

59 H. MCCLINTOCK, EQUITY 395 (2d ed. 1948).

60 See Armstrong, supra note 47, at 85-86.

61 Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405, 429-30 (1908).

62 Armstrong, supra note 47, at 96.

63 See H. MCCLINTOCK, supra note 59, at 133-37.

64 Continental Paper Bag Co., 210 U.S. at 430. See also Boomer v. Atlantic Cement Co., 26 N.Y.2d 219, 231, 257 N.E.2d 870, 876, 309 N.Y.S.2d 312, 321 (1970) (Jasen, J., dissenting) (“Nor is it constitutionally permissible to impose servitude on land, without the consent of owner, by payment of permanent damages where the continuing impairment of the land is for a private use.“).

65 Armstrong, supra note 47, at 97.

66 See, e.g., Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978); Boomer, 26 N.Y.2d at 222, 257 N.E.2d at 871, 309 N.Y.S.2d at 314.

67 See, e.g., Hawaii Hous. Auth. v. Midkiff, 467 U.S. 229 (1984); Jenad, Inc. v. Village of Scarsdale, 18 N.Y.2d 78, 218 N.E.2d 673, 271 N.Y.S.2d 955 (1966).

68 See Grey, , The Disintegration of Property, in 12 NOMOS: PROPERTY 69 (Pennock, J. & Chapman, J. eds. 1980)Google Scholar.

69 42 U.S.C. § 2181 (1988).

70 Id. at §2182.

71 35 U.S.C. § 181 (1988).

72 Id. at § 183.

73 Plant Variety Protection Act, 7 U.S.C. § 2404 (1988).

74 28 U.S.C. § 1498 (1988).

75 Clean Air Act, 42 U.S.C. § 7608 (1988).

76 Arnold, and Goldstein, , Compulsory Licensing: The “Uncentive“for Invention, 7 PAT. L. REV. 113, 120 (1975)Google Scholar.

77 42 U.S.C. §7608 (1988).

78 28 U.S.C. § 1498 (1988).

79 TVI Energy Corp. v. Blane, 806 F.2d 1057 (Fed. Cir. 1986). so Patent and Trademark Act Amendments of 1980, Pub. L. No. 96-517, 94 Stat. 3019 (codified at 35 U.S.C. §§ 200-12 (1988)).

81 See Eisenberg, , Property Rights and the Norms of Science in Biotechnology Research, 97 YALE LJ. 177, 196 (1987)Google Scholar.

82 Under this legislation, universities may elect to retain patent rights to these inventions, subject to a non-exclusive license to the sponsoring agency, but only if they agree to file timely patent applications once their research results have been published. 35 U.S.C. § 202(a), (c)(2), (c)(3), (c)(4) (1988).

83 H.R. REP. No. 857, 98th Cong., 2d Sess. 14, 15-18, reprinted in 1984 U.S. CODE CONG. & ADMIN. NEWS 2647, 2648-51.

In testimony before several Congressional Committees, representatives from the pharmaceutical firms that are heavily involved in basic research and rely upon patents, claimed that the average effective patent term of drugs has declined. They argued that a continuation of the decline would result in decreased expenditures for research and development and, eventually, in a decline in the introduction of new drugs. As compensation for the loss of patent term due to government review, the research intensive firms argued for patent term extension legislation. They stated that the legislation would create a significant, new incentive that would result in increased expenditures for research and development, and ultimately in more innovative drugs.

Id. at 2650.

84 Drug Price Competition Act and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (codified in scattered sections of 15 U.S.C, 21 U.S.C, 28 U.S.C. and 35 U.S.C).

85 35 U.S.C. § 156 (1988).

86 Orphan Drug Act of 1983, Pub. L. No. 97-414, 96 Stat. 2049 (codified as amended at 21 U.S.C.S. §§ 301 note, 360aa-ee, 42 U.S.C.S. §§ 236, 287i, 295g-i (Law. Co-op. 1984 & Supp. 1990)).

87 Orphan Drug Act of 1983, Pub. L. No. 97-414 § 1(b).

88 21 U.S.C.S. §§ 360aa-ee (Law. Co-op. 1984 & Supp. 1990).

89 Id. at §360bb(a).

90 Id. at § 360ee(b)(2).

The term “rare disease or condition” means (1) in the case of a drug: any disease or condition which (A) affects less than 200,000 persons in the United States, or (B) affects more than 200,000 in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such disease or condition will be recovered from sales in the United States of such drug … . Determinations under the preceding sentence with respect to any drug shall be made on the basis of the facts and circumstances as of the date the request for designation of the drug … is made.

Id. at § 360ee(b)(2).

This section, enacted in 1984, amended the original version of the Act that defined a “rare disease or condition” merely as one “which occurs so infrequently in the United States that there is no reasonable expectation that the cost of developing and making available in the United States a drug for such disease or condition will be recovered from sale in the United States of such drug.” Orphan Drug Act of 1983, Pub. L. No. 97-414 § 5, 96 Stat. 2056. As in the current version, determinations were made at the time of the request for designation. Id.

92 Pollack, Orphan Drug Law Spurs Debate, N.Y. Times, Apr. 30, 1990, at Al, col. 3. (late ed.).

93 Act of Oct. 30, 1984, Pub. L. No. 98-551 § 4, 98 Stat. 2817.

94 As enacted, the Act provided orphan drug status only for unpatented drugs. Act of Jan. 4, 1983, Pub. L. No. 97-414 § 2(a), 96 Stat. 2050. The Act was amended by the Act of Aug. 15, 1985, Pub. L. No. 99-91 §§ 2(1), (2), 3[(a)](3), 99 Stat. 388 (codified as amended at 21 U.S.C.S. §§ 360bb, 360cc (Law. Co-op. Supp. 1990)). See infra note 98 for the text of the House report discussing this amendment.

95 Food & Drug Admin., Cumulative List of Orphan-Drug and Biological Designations, 54 Fed. Reg. 16,294 (1989). See The Awful Cost of AIDS, THE ECONOMIST, Apr. 11, 1987, at 21.

96 U.S. Patent No. 4,724,232, issued Feb. 9, 1988, entitled “Treatment of Human Viral Infections,” J. Rideout, D. Barry, S. Lehrman, M. St. Clair & P. Furman named inventors.

97 H.R. REP. No. 840, 97th Cong. 2d Sess. 6, reprinted in 1982 U.S. CODE CONG. & ADMIN. NEWS 3577, 3578-79.

The academic medical research centers conduct mainly basic medical and clinical research. The role of systematic discovery and development of new drugs has been relegated to the private, profit-oriented pharmaceutical industry. Almost all new drugs brought out in the last 20 years were discovered in the pharmaceutical industry's laboratories.

This system is based on an assumption that the necessarily market-oriented activities of the pharmaceutical industry will produce the drugs and vaccines that the advance of basic medical science makes possible. Unfortunately, there is no governmental policy, and therefore no governmental mechanism, to facilitate the development of those drugs or vaccines, such as orphan drugs, for which the market offers no financial rewards.

98 H.R. REP. No. 153, 99th Cong., 1st Sess. 3, reprintedin 1985 U.S. CODE CONC. & ADMIN. NEWS 301, 302-06 (concerning the 1985 Amendments to the Act, which extended orphan drug protection to qualifying treatments even if they were patented).

The Committee's expectation in 1983, when section 527 was established, was that the section would be used primarily by orphan drugs that can not get product patents. The experience with orphan drug development since then indicates that the patent status of orphan drugs is different in several respects than was anticipated. It is now apparent that even when orphan'drugs have product patents, the animal and human clinical research necessary for approval often is not initiated until late in the patent term. As a result, by the time testing begins the patents have expired or soon will expire. In many other cases, the original research on the use of a drug for a rare disease is not initiated by an individual or drug company which holds an outstanding patent, but by an independent medical researcher at a university in this country or abroad. As a result, by the time a drug company becomes interested in testing the use of the drug for the rare disease, the use can not be patented because of the earlier publication describing its use in the rare disease. Data available to the Committee on the drugs which have applied for the seven year period of marketing protection indicate that these situations occur regularly.

Id. at 3, reprinted in 1985 U.S. CODE CONG. ADMIN. NEWS, at 303.

99 21 U.S.C.S. § 360cc(b) (Law. Co-op. Supp. 1990).

100 Hartford-Empire Co. v. United States, 323 U.S. 386, 432 (1945).

101 See supra notes 49-52, and accompanying text (discussing Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405 (1908)).

102 American Safety Device Co. v. Kurland Chemical Co., 68 F.2d 734 (2d Cir. 1934).

103 Id at 735 (citation omitted).

104 35 U.S.C. § 284 (1988) (emphasis added).

105 Id. at § 283 (emphasis added).

106 Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488, reh'g denied, 315 U.S. 826 (1942).

107 Morton Salt Co., 314 U.S. at 493.

108 Id. at 490. The patentee held a patent for a salt dispensing device and used its monopoly to force buyers to also purchase its unpatented salt tablets.

109 See Besser Mfg. Co. v. United States, 343 U.S. 444, 447 (1952) (“compulsory patent licensing is a well-recognized remedy where patent abuses are proved in antitrust actions and it is required for effective relief“).

110 See Morton Salt Co., 314 U.S. at 492-94.

111 Id. at 492.

112 Royal-McBee Corp. v. Smith-Corona Marchant, Inc., 295 F.2d 1 (2d Cir. 1961).

113 Id. at 5-6. The patentee waited seven years to bring suit against the defendant's openly infringing activity.

114 See Siemens Aktiengesellschaft v. Beltone Electronics Corp., 407 F. Supp. 807, 809-10 (N.D. 111. 1975).

115 See supra notes 106-11 and accompanying text.

116 See supra notes 112-14 and accompanying text.

117 See, e.g., E.I. du Pont de Nemours & Co. v. Phillips Petroleum, 835 F.2d 277 (Fed. Cir. 1987); Foster v. American Mach. & Foundry Co., 492 F.2d 1317 (2d Cir. 1974); Vitamin Technologists, Inc. v. Wisconsin Alumni Res. Found., 146 F.2d 941 (9th Cir. 1945); City of Milwaukee v. Activated Sludge, 69 F.2d 577 (7th Cir.), cert, denied, 293 U.S. 576 (1934). See infra text accompanying notes 120-36 for a discussion of these cases.

118 Weinberger v. Romero-Barcelo, 456 U.S. 305, 311 (1982) (quoting Harrisonville v. W.S. Dickey Clay Mfg. Co., 289 U.S. 334, 337-38 (1953)).

119 Id. at 312-13 (citations omitted).

120 “[wjhether, however, a case cannot arise where, regarding the situation of the parties in view of the public interest, a court of equity might be justified in withholding relief by injunction, we do not decide.” Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405, 430 (1908).

121 City of Milwaukee v. Activated Sludge, 69 F.2d 577 (7th Cir.), cert, denied, 293 U.S. 576 (1934).

122 Activated Sludge, 69 F.2d at 593.

123 Nerney v. New York, 83 F.2d 409 (2d Cir. 1936).

124 American Safety Device Co. v. Kurland Chemical Co., 68 F.2d 734 (2d Cir. 1934). See supra text accompanying notes 102-03 for a discussion of this case.

125 Nerney, 83 F.2d at 411.

126 Id.

127 Vitamin Technologists, Inc. v. Wisconsin Alumni Res. Found., 146 F.2d 941 (9th Cir. 1945).

128 Id. at 943.

129 Id. at 943.

130 Id. at 943-44.

[Plaintiff] contends that all the claims obtain support from the commercial success of the monopoly granted. It describes the great number of children suffering from malformation of their bodies due to the defective bone metabolism… . Other maturer sufferers are described, all proving the great numbers of afflicted who, ex necessitate if they are to use such a boon to humanity, have been customers of the licensees of [plaintiff]. From the [plaintiff's] business manager it appears that it was largely from need of the poor that the business was supported.

Id. at 943.

132 Id. at 946.

133 Id. at 945.

134 Id. at 956.

135 Foster v. American Mach. & Foundry Co., 492 F.2d 1317 (2d Cir. 1974).

136 Id. at 1324.

Here, as the District Court noted, the appellee manufactures a product; the appellant does not. In the assessment of relative equities, the court could properly conclude that to impose irreparable hardship on, the infringer by injunction, without any concomitant benefit to the patentee, would be inequitable… . To grant him a compulsory royalty is to give him half a loaf. In the circumstance of his utter failure to exploit the patent on his own, that seems fair.

137 Smith Int'l v. Hughes Tool Co., 718 F.2d 1573 (Fed. Cir. 1983).

138 Id. at 1577-81.

139 Id. at 1577-78, 1581.

140 Polaroid Corp. v. Eastman Kodak Co., 641 F. Supp. 828, 228 U.S.P.Q, 305 (D. Mass.), aff'd, 789 F.2d 1556 (Fed. Cir. 1985).

141 Polaroid Corp., 228 U.S.P.Q. at 343-44.

142 Windsurfing Int'l, Inc. v. AMF, Inc., 782 F.2d 995, 1003 n.12 (Fed. Cir. 1986).

143 Shiley, Inc. v. Bentley Laboratories, 601 F. Supp. 964, 971 (CD. Cal. 1985), aff'd, 794 F.2d 1561 (Fed. Cir. 1986).

144 Shiley, Inc., 601 F. Supp. at 971.

145 See Richardson v. Suzuki Motor Co., 868 F.2d 1226, 1246-47 (Fed. Cir. 1989); see also W.L. Gore & Assocs., Inc. v. Garlock, Inc., 842 F.2d 1275 (Fed. Cir. 1988); Spindelfabrik Suessen-Schurr Stahlecker & Grill v. Schubert & Salzer Maschinenfabrik Aktiengesellschaft, 829 F.2d 1075, 1076 (Fed. Cir. 1987). ,

146 Eli Lilly v. Premo Pharmaceutical Laboratories, 630 F.2d 120 (3d Cir. 1980). See infra text accompanying notes 182-87 for a discussion of this case.

147 Kingston, Your Money or Your Life: The High Cost of Living a Bit Longer on AZT, SCI. FOR THE PEOPLE, Sept.-Oct. 1987, at 13, 14.

148 AIDS, Drugs, Need, and Greed, N.Y. Times, Sept. 29, 1989, at A39, col. 1.

149 Gorman, How Much for a Reprieve From Aids?, TIME, Oct. 2, 1989, at 81.

150 See supra notes 86-99 and accompanying text for a discussion of the Orphan Drug Act.

151 U.S. Patent No. 4,724,232, issued Feb. 9, 1988, entitled “Treatment of Human Viral Infections,” J. Rideout, D. Barry, S. Lehrman, M. St. Clair & P. Furman named inventors.

152 Kingston, supra note 147 at 15. This information cannot be verified because the company refuses to open its books. Kingston, , The Unhealthy Profits of AZT, 245 THE NATION 408, 408 (1987)Google Scholar.

153 Merlis, supra note 6, at 344.

154 Jaffe, The Medical Facts About AIDS, in AIDS AND THE COURTS 7, 12 (C. Abt & K. Hardy eds. 1990) [hereinafter AIDS AND THE COURTS].

155 AIDS toll goes over 100,000 in Nation, Boston Globe, Jan. 25, 1991, at 14, col. 1.

156 See Merlis, supra note 6, at 349.

157 See Costs for New AIDS Patients Predicted to Exceed $24 Billion, Daily Labor Rep. (BNA) No. 46, at A-8 (Mar. 10, 1989) (citing F. HELLINGER, NATIONAL FORECASTS OF THE MEDICAL CARE COSTS OF AIDS: 1988-92 (National Center for Health Servs. Res. & Health Care Tech. Assessment 1988)) (an individual diagnosed with AIDS between 1988 and 1992 is likely to need a total of $60,000 worth of treatment); Fox, Common False Assumptions About the Financing of AIDS Health Care, in AIDS AND THE COURTS, supra note 154, at 291, 292 (the annual cost of inpatient care for adults with AIDS is about $25,000, and the annual cost of outpatient care is about $1,000); Merlis, supra note 6, at 345.

158 Knox, supra note 3, at 17, col. 1.

159 See The Awful Cost of AIDS, supra note 95, at 21.

For now, there is no way of calculating even how AZT will affect the cost of AIDS care. Burroughs Wellcome, the drug's manufacturer, says only that it reduces expenses in the first year of illness by about a quarter for each AIDS patient, mainly by cutting hospital stays … . But AZT-takers will need extra medical monitoring, blood transfusions and other expensive services to control toxic side-effects. By prolonging the lives of severely ill people, the drug could end up raising the lifetime costs of AIDS treatment — or lowering them. No one knows.

160 Id. E.g., Mo. ANN. STAT. § 208.152 (Vernon 1983 & Supp.); see also ALA. CODE § 22-6- 4.2 (Michie 1990); ME. REV. STAT. ANN. tit. 22, § 3173-C (West 1980 & Supp. 1990); Miss. CODE ANN. § 43-13-117 (1972 & Supp. 1990).

161 Fox, supra note 157, at 292.

162 The Awful Cost of AIDS, supra note 95, at 21.

163 Lipson, , A Crisis in Insurance, in THE AIDS EPIDEMIC: PRIVATE RIGHTS AND THE PUBLIC INTEREST 285, 290 (O'Malley, P. ed. 1989)Google Scholar.

164 Fox, supra note 157, at 291, 293.

165 Jaffe, supra note 154, at 15 (figures are from Dep't of Health & Human Services, Public Health Service and Center for Disease Control).

166 Id.

167 The Awful Cost of AIDS, supra note 95, at 21.

168 See, e.g., American Safety Device Co. v. Kurland Chemical Co., 68 F.2d 734 (2d Cir. 1934); see also supra notes 115-45 and accompanying text for a summary of the public policy exception.

169 Vitamin Technologists, Inc. v. Wisconsin Alumni Res. Found., 146 F.2d 941 (9th Cir. 1945).

170 See supra notes 127-34 and accompanying text.

171 See Foster v. American Mach. & Foundry Co., 492 F.2d 1317 (2d Cir. 1974); see also supra notes 135-36 and accompanying text for a discussion of this case.

172 State Indus, v. Mor-Flo Indus., 883 F.2d 1573, 1580 (Fed. Cir. 1989).

173 J. EGAN, H. HIGGINBOTHAM & J. WESTON, ECONOMICS OF THE PHARMACEUTICAL INDUSTRY 74 (1982).

174 It is usually more profitable to copycat than invent. This effect is commonly cited as the primary justification for the patent system. See generally Graham v. John Deere Co., 383 U.S. 1 (1966).

175 See supra note 6 and accompanying text.

176 See Gorman, supra note 149, at 81. The estimate that 40,000 persons received AZT in 1989 is based upon the $1.20 per capsule wholesale price. Burroughs Wellcome Cuts AZT Price by 20%, supra note 8, at 6. At a dosage of 12 capsules per day, 365 days per year, this amounts to sales of $5256 per patient per year. With total sales amounting to $200 million, this means that about 40,000 patients’ worth of the drug was purchased.

177 In fact, that is the premise upon which the infringer's public policy argument is based. If a large number of buyers of AZT are not currently deterred by the monopoly prices charged by Burroughs Wellcome, then a public policy problem does not exist.

178 Vitamin Technologists, Inc. v. Wisconsin Alumni Res. Found., 146 F.2d 941 (9th Cir. 1945).

179 In Vitamin Technologists the patentee was not using the protected process to enrich margarine with essential nutrients while the infringer was, and the infringer persuaded the court that halting his production of vitamin-enriched margarine would cause a rickets epidemic. Vitamin Technologists, 146 F.2d at 945. See supra notes 127-34 and accompanying text.

In Activated Sludge only the infringer could use the patented invention to supply the City of Milwaukee with waste treatment services, a task which the patentee was neither performing nor could be expected to perform within a time frame that could avert irreparable harm to the city. City of Milwaukee v. Activated Sludge, 69 F.2d 577, 593 (7th Cir.), cert, denied, 293 U.S. 576 (1934). See supra notes 121-22 and accompanying text.

180 See ALM Surgical Equip., Inc. v. Kirschner Med. Corp., 15 U.S.P.Q.2d (BNA) 1241 (1990) (fact that patentee has ample capacity to meet the entire demand for the product in question is a factor weighing in favor of an injunction).

181 See supra text accompanying notes 137-45.

182 Eli Lilly v. Premo Pharmaceutical Laboratories, 630 F.2d 120 (3d Cir. 1980).

183 Smith Int'l v. Hughes Tool Co., 718 F.2d 1573 (Fed. Cir. 1983). See supra text accompanying notes 137-39 for a discussion of this case.

184 An oral antibiotic substitute for penicillin.

185 Eli Lilly, 630 F.2d at 137. See also Smith Int'l, 718 F.2d at 1573 (public interest is inherent in strong protection of patent rights). Both Eli Lilly and Smith International seem to grant more weight than their predecessors to the economic model. See supra notes 35-44 and accompanying text for a discussion of the economic model. Both cases characterize the economic effect of protecting patent rights with injunctions as strengthening the economic incentives of research and development.

186 See supra notes 106-11 and accompanying text.

187 Property Rights Theory, supra note 40, at 1006-07. While price fixing is recognized under antitrust doctrine as a violation, price gouging is not. W. BOWMAN, PATENT AND ANTITRUST LAW 57 (1973).

188 See supra notes 30-44 and accompanying text.

189 Hilts, supra note 2, at 1, col. 5.

190 Id.

191 See Budiansky, supra note 35, at 47. (“It's kind of like drilling for oil. Six to 12 drugs may go to clinical trials for every one that finally reaches the market. You have to pay for the losers as well as the winners, or the operation shuts down.“) (quoting Economist Steven Wiggins of Texas A & M Univ.).

192 H.R. 4638, 101st Cong., 2d Sess., 136 CONG. REC. HI 1931-01 (1990).

193 101st Cong., 2d Sess., Cong. Index (CCH) 35,088.

194 Memorandum of Disapproval for the Orphan Drug Amendments of 1990, 26 WEEKLY COMP. PRES. DOC. 1796 (Nov. 8, 1990). See infra text accompanying notes 200-01.

195 21 U.S.C.S. §§ 360bb(a)(2), 360ee(b)(2) (Law. Co-op. Supp. 1990).

196 H.R. 4638, 101st Cong., 2d Sess., 136 CONG. REC. H5799-01 (1990).

197 Id.

198 136 CONG. REC. H5799-01 (1990) (statements of Rep. Bliley).

199 id. (statement of Rep. Waxman).

200 Memorandum of Disapproval for the Orphan Drug Amendments of 1990, supra note 194.

201 Id.

202 Pollack, supra note 92, at Dl, col. 3.

203 See, e.g., Clean Air Act, 42 U.S.C. § 7901 (1988); Atomic Energy Act, 42 U.S.C. §§ 2183-90 (1988).

204 See United States v. National Lead Co., 332 U.S. 319 (1947). The Supreme Court recognized the “issue of the constitutionality” with respect to a compulsory license granted as a remedy for patent misuse, but did not directly rule on the issue. Id. at 349.

See also Pravel, Say “No” to More Compulsory Licensing Statutes, 2 AM. PAT. L.A.QJ. 185, 195-208 (1974)

It might be argued that compulsory licensing places a product into use by the public and this makes it a ‘public use,’ but that kind of logic or reasoning could justify the requirement by the government for the transfer of any private property from one individual to another so long as the property being transferred is used or sold to the public for use… . Any attempt at a general compulsory licensing statute strictly for non-use, excessive pricing or profits, or for other reasons that do not fall within the categories of eminent domain and police power are unconstitutional.

Id. at 195, 208; Schecter, , Would Compulsory Licensing of Patents Be Unconstitutional?, 22 VA. L. REV. 287 (1936)Google Scholar (arguing that such licenses would be constitutionally permitted).

205 Hawaii Hous. Auth. v. Midkiff, 467 U.S. 229 (1984).

206 Id. at 244.

The mere fact that property taken outright by eminent domain is transferred in the first instance to private beneficiaries does not condemn that taking as having only a private purpose. The Court long ago rejected any literal requirement that condemned property be put into use for the general public.

207 Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984). The case concerned provisions of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). Insecticide manufacturers were required to reveal the composition of their products to the EPA upon applying for a manufacturing license. Much of this information is considered by law to be trade secrets, and thus a protected property right under state law. Ruckelshaus, 467 U.S. at 100-04. FIFRA further allowed the EPA to disclose this information to future applicants to facilitate those applicants’ licensing process.

208 Ruckelshaus, 467 U.S. at 1014 (citing Berman v. Parker, 348 U.S. 26, 33 (1954)).

209 Ruckelshaus, 467 U.S. at 1005 (citing Prune Yard Shopping Center v. Robins, 447 U.S. 74, 83 (1980)).

210 Plant Variety Protection Act, 7 U.S.C. § 2404 (1989). See supra notes 73-78 and accompanying text.

211 See Adelman, supra note 40, at 978.

If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it.

Id. (quoting SUBCOMM. ON PATENTS, TRADEMARKS, AND COPYRIGHTS OF THE SENATE COMM. ON THE JUDICIARY, 85TH CONG., 2D SESS., AN ECONOMIC REVIEW OF THE PATENT SYSTEM, STUDY No. 15 at 3-5, 25-44 (Comm. Print 1958)).