Patent Infringement Liability
The extent of liability depends, in large part, on the status of the importer. It is unlikely, for example, that a pharmaceutical company would pursue patent infringement damages from individuals personally importing foreign prescription drugs. For obvious reasons, the image of a large pharmaceutical company dragging someone's grandmother into court would not play well with public opinion.
While larger corporations engaged in wholesale importation of prescription drugs may provide a potentially more lucrative target for patent infringement suits, it is unclear what percentage of pharmaceutical imports will be attributed to such corporate entities. Thus, the cost benefit analysis for pursuing infringement damages against parties that may ultimately represent a minor share of the importation market may tip in favor of the importers.
The more likely candidates for the orchestration of large-scale importation of U.S.-originating foreign prescription drugs are the federal and individual state governments. A government entity would face the same liability, potentially, as a private, unauthorized importer. This liability could attach whether the government entity actively engaged in the drug reimportation, or merely facilitated or encouraged the importation by others.
A number of states have already considered policies to facilitate the reimportation of foreign prescription drugs. Although state governments certainly possess the deep pockets to make a patent infringement litigation worthwhile to the pharmaceutical patent holder, a significant roadblock to this remedy lies in an Eleventh Amendment constitutional prohibition against a private individual bringing a suit against a state in federal court.
Does this mean that the patentee is without recourse? Not necessarily. While the Eleventh Amendment precludes federal jurisdiction over a state in an infringement action, the Supreme Court made an exception to Eleventh Amendment immunity in its decision in Ex parte Young. It held that state officials could be enjoined from acting in their official capacity (i.e., carrying out drug reimportation) for future activity.
In addition, while states are currently immune from private action for patent infringement, the immunity does not extend to local governments. The result is that individual city or county governments are generally not entitled to Eleventh Amendment immunity from federal suit, and may be a promising target for patent infringement litigation by pharmaceutical patentees.
Given the uncertainty surrounding the recourse for a patentee faced with infringement of its patent by reimportation of branded drugs, some have suggested that Congress, if it truly wishes to affect an efficient reimportation process, should appropriately legislate to clarify the outcome of reimportation. Congress could affirm the property right held by the patentee and make necessary changes to permit a pharmaceutical patentee to enforce the full scope of its intellectual property rights against unauthorized reimporters.
Alternatively, Congress could legislate to effectively impose an international exhaustion doctrine with respect to pharmaceuticals. In fact, several bills introduced in the 109th Congress aim to do just that. One such proposal, sponsored by Minnesota Representative Gil Gutknecht, is the Pharmaceutical Market Access Act of 2005 (H.R. 328). Congressman Gutknecht's bill, and others like it, would serve to legislatively reverse the Federal Circuit's decision in Jazz Photo by making an amendment to 35 U.S.C. 271 to include the following section:
(h) It shall not be an act of infringement to use, offer to sell, or sell within the United States or to import into the United States any patented invention under section 804 (21 U.S.C. 384) of the Federal Food, Drug, and Cosmetic Act that was first sold abroad by or under authority of the owner or licensee of such patent.
While the enactment of such legislation would certainly clarify the respective rights and liabilities of patent holders and prescription drug importers, it would also serve to partially divest the patent holder of a property right whose origins reach back to the original drafting of the U.S. Constitution. In addition, if enacted, a revision of section 271 of Title 35 faces possible judicial scrutiny and certain constitutional challenge by patent holders as an unconstitutional legislative taking of property, and violation of the Fifth Amendment.
If such a statute does not provide a means for giving the patentee just compensation for the property rights taken by the legislature, then it is likely that such a law would be deemed to be, at least in part, unconstitutional.
The tension between reigning in the soaring costs of prescription medication and simultaneously protecting the property rights of drug manufacturers as well as providing incentive for the development of new drugs, is inherent in the question of how to properly implement drug reimportation policies in the U.S.