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CONTENTS Preface xxxiii About the Editors xxxvii About the Contributors xli Chapter I Introduction to Biotechnology and the Law 1 Robert F. Copple A. The Biotech Primer 4 B. Biotech Defined 4 1. Three-Branch Approach 5 C. The Biotech Company Life Cycle 5 1. Phase I: Start-up 6 a. Intellectual Property 6 b. Company Formation 7 c. Investment Capital 7 2. Phase II: Early Development 8 a. Additional Investment 8 b. The Regulatory Track 9 c. Business Growth and Complexity 9 3. Phase III: Later-Stage Development and Product Approval 10 4. Phase IV: Challenges Facing the Now Mature Company 10 a. Commercialization 11 b. Regulatory Oversight 11 c. Litigation 11 D. Conclusion 12 Glossary 13 Chapter II Managing Innovation: Patent Basics for Biotechnology Counsel 25 Dr. Michael H. Brodowski, Thomas A. Turano & Dr. Christine C. Vito A. Introduction 25 B. U.S. Patent Portfolios 26 1. Patent Rights-The Claims 26 2. Types of Patents 28 a. Provisional Patent Applications 29 b. Continuing Patent Application Practice 30 3. Requirements for Patentability 31 4. Preparation of a Patent Application 34 5. Patent Application Formalities 35 6. Publication of Patent Applications 38 7. Patent Prosecution 39 a. Appeal of Patent Office Final Rejections 41 b. Notice of Allowance 42 8. Post-Issue Patent Considerations 43 C. Foreign Patent Portfolios 45 1. Protection Strategy 46 2. Patentability Differences 49 3. Other Considerations 51 4. Prerequisites to Filing 52 5. Options for Filing in Other Jurisdictions 53 a. Additional Considerations 57 D. Managing the Company's Patent Estate 58 1. A Family Portrait 58 2. Keeping It in the Family 60 3. Skeletons in the Closet 62 a. Rights of Ownership 63 b. Correspondence to Products or Business Strategies 64 c. Freedom to Operate 66 Chapter III Company Formation 69 Andrew T. Hoyne, Steven E. Pozaric & Mark L. Stoneman A. Introduction 69 1. "But will it help us get money?" 69 2. The Importance of the Board of Directors 70 3. Speed 72 4. Simplicity 73 5. The Role of the Company's Attorneys 73 B. Biotechnology Company Models 73 1. Company Formed Before In-Licensing While R&D Continues at University 74 2. Technology Flip 75 3. Revenue-Funded Company 75 4. Corporate Deal-Funded Company 75 5. Venture Fund-Launched Company 76 6. Angel Investor-Funded Company 76 7. Significant Self-Funded Company 77 8. Shoestring Self-Funded Company 77 9. Charitable Corporation or Foundation 78 10. Debt-Funded Company 79 C. Entity Selection and Formation 79 1. No Perfect Choice 79 2. Sole Proprietorships and Partnerships 80 3. C-corporations 81 a. Limited Liability 82 b. Centralized Management 82 c. Owners 82 d. Transferability of Ownership 82 e. Classes of Ownership 83 f. Incentive Compensation 83 g. Taxation 83 4. S-corporations 84 5. Limited Liability Companies 88 a. Problems Using an LLC 88 b. LLC Organization 91 6. Exotic Entity Types 95 7. State of Organization 95 8. Name Selection 97 D. Capital Structure and Stock Grants 99 1. Introduction 99 2. Securities Law Compliance 99 3. Founders Stock, Restricted Stock, and Stock Options 100 4. Common and Preferred Stock 105 E. Relationships with Early Participants 107 1. Founders 108 2. Board of Directors 109 3. Scientific Advisory Board (SAB) 110 4. Management 111 a. Chief Executive Officer 111 b. Chief Financial Officer 112 c. Chief Scientific Officer 112 d. Clinical/Regulatory 113 5. Employees 113 F. Incubators 114 G. University Relationships 115 H. Early-Stage Company Agreements 117 1. Brief Review of Intellectual Property for the Non-IP Attorney 117 a. Patents 118 b. Trade Secrets 118 c. Trademarks 119 d. Copyrights 121 2. Confidentiality Agreements 122 3. Material Transfer Agreements 124 4. Research Collaboration Agreements 126 I. Positioning for an Exit 127 Appendix A: Mutual Confidentiality Agreement 132 Chapter IV Acquisition of Biotechnology- Technology Transfer 139 Hugh B. Wellons A. Technology Creation 140 1. Protecting Propriety of the Invention in the Early Stages 140 a. Confidentiality Agreements 140 b. Who Was First? 141 c. Company Records 142 2. Keeping Necessary Records 143 3. Who Owns What? (Employer v. Employee and JV Issues) 143 a. Work Made for Hire 143 b. Employee Rights 145 c. State Laws 145 d. Canadian and European Union Laws 146 e. Trade Secrets 147 f. Joint Venture Ownership 148 4. Patent Filing: Protecting an Invention and Limiting Others' Use 149 a. Why File a Patent? 149 b. Patent Requirements 149 c. Patent Claims and Rights 150 d. Types and Stages of Patents 150 e. Patent Prosecution 151 f. Post-Issue Considerations 151 g. Foreign Patent Filing 152 5. Possible Effects of Outside Funding 152 a. Ownership 152 b. Public Domain 154 c. Manufacturing or Sales Restrictions 154 B. Forms of Technology Transfer 155 1. Acquisition of Owner 155 a. Acquiring the Owner 155 b. Employing the Owner 155 2. Assignment 156 3. License and Sublicense 156 a. Common Form of Transfer 156 b. Alternative to Assignment 156 c. Sublicense 158 4. Fair Use Agreement 158 a. Fair Use and Experimental Use 158 b. Fair Use Agreements 160 c. Doctrine and Agreements' Effect on Intellectual Property Ownership and Due Diligence 160 5. Public Domain 161 C. Transfer from Academia 162 1. University Considerations 162 2. Material Transfer Agreements 168 3. Principal Investigator Considerations 169 a. Conflict of Interest and Conflict of Commitment 169 b. Conflict of Interest 169 c. Conflict of Commitment 170 d. Special Knowledge 171 4. Licensee Considerations 171 a. Policies and Procedures 172 b. It's a Long Way to Market, So Wrap Up the People You Need 172 c. Public Disclosure? 173 d. Stakeholders 173 5. Interests of Other Stakeholders 174 a. Other Underwriters 174 b. Government Agencies 174 c. Special Government Considerations 174 d. Nonprofits 175 6. Common Restrictions 175 a. License Only, Not an Assignment 175 b. Time Limitations 176 c. Restrictions on Participation by the Inventors 176 d. Audit 176 e. Scope of License 176 f. Indemnification 176 g. Sublicense Approval 176 h. Sublicensee Subject to License Terms 176 i. Original Licensee Always Liable 177 j. Cannot Use the Name of the University 177 k. Government Has a License 177 l. Other General Restrictions You Would Find in Most Other Licensing Agreements 177 7. Common Guidelines for Price and Provisions of the License 177 a. Standstill Fee 177 b. Up-front License Fee 177 c. Minimum Annual Payment 178 d. Periodic Licensing Fees (Such as Quarterly or Annual) 178 e. Participation in Third-Party Payments 178 f. Lump-Sum Royalties 178 g. Milestone Payments 178 h. Sales-Based Royalties 178 i. Equity in the Licensee 179 j. Equity Protections 179 k. Put of Shares 179 l. A Time for Sale 179 8. When Equity Is the Primary Consideration for the License 179 9. Applicability of Bayh-Dole Act 180 10. Application of "CREATE" Act of 2004 183 11. Conflict between Publication and Protection of IP 183 D. Transfer from Other Nonprofit Entities 184 1. Implications of Nonprofit Status 184 2. Unrelated Business Income Tax 185 3. Priorities of Nonprofit Technology Owner 185 4. Joint Venturing (especially qualification for STTR grants) 186 a. SBIR Grants 186 b. STTR Grants 187 c. Problems with STTR and SBIR Grants 187 5. Common Misconceptions 187 6. Case Study-Howard Hughes Medical Institute 188 a. Assignment of Rights 188 b. Sharing Patent Costs and Royalties 189 c. Equity Ownership 189 d. Collaborations 189 e. Time Limitations 189 f. Start-up Companies 189 g. Summary 190 E. Transfer from Individuals 190 1. Consideration of Terms 190 a. Parties 190 b. Recitals 190 c. Definitions 190 d. Property Licensed 190 e. Scope of the Assignment or License 191 f. Territory 191 g. Right to Sublicense 192 h. Follow-on and Later-Developed Technology 192 i. Term and Renewal of License 192 j. Termination 193 k. Deliveries 193 l. Retention of Rights 193 m. Payments, Including Fees, Royalties, Stock (Options, Warrants), Milestone, etc. 193 n. Audit Rights 194 o. Reporting and Marketing Responsibility 194 p. Representations and Warranties of the Inventor 194 q. Indemnification 194 r. IP Protection 194 s. Insurance 194 t. Assignability 195 u. Amendments 195 v. Alternative Dispute Resolution (ADR) 195 w. "Boilerplate" Language 195 2. Common Negotiation Points 196 a. Price Paid/Consideration 196 b. Fees and Royalties Are Both Negotiable Points 196 c. Records and Reporting 197 d. Warranty 197 e. Indemnification 197 f. IP Matters 197 g. Confirmation of Ownership 198 3. Patent Filing 199 F. Summary 199 Chapter V Financing a Biotech Company 203 William N. Wofford A. Overview 204 1. Drug Development Costs 204 2. Product Development Time Lines 206 B. Basic Securities Law Considerations 209 1. Registration or Exemption Under the Securities Act 209 2. Section 4(2) Exempt Transaction 210 3. Regulation D Exempt Transaction 210 4. Rule 701-Compensation Plans 212 5. State "Blue Sky" Laws 213 C. Pre-seed and Seed Capital 214 1. Founders' Stock 214 a. Restrictions on Transfer 215 b. Vesting 215 c. Lock-up 216 d. Drag-along 216 2. Employee Stock 218 a. Plan Basics 218 b. Securities 219 c. Tax 219 d. Corporate 220 e. Commercial 221 3. Stock to Service or Technology Providers 221 a. Securities 222 b. Tax 222 c. Conflicts of Interest 223 4. Friends and Family 223 a. Securities 223 b. Corporate 224 5. Loans 224 6. Generating Revenues to Reduce or Defer Need for Investment 225 a. Intellectual Property 225 b. Commercial 226 7. Government Funding 226 a. SBIR Grants 226 b. STTR Grants 227 c. Advantages to Receiving Federal Grant Funding 228 d. Disadvantages to Receiving Federal Grant Funding 228 e. Eligibility/51 Percent Rule 228 f. State Resources 230 D. Venture Capital 230 1. Financial Rights 231 a. Valuation 231 b. Liquidation Preference 231 c. Participating Preferred 231 d. Accruing Dividends 232 e. Protection of Ownership Percentage 232 2. Governance Rights 233 a. Board Representation 233 b. Protective Provisions/Class Voting 233 3. Exit Rights 233 a. Registration Rights 234 b. Redemption Rights 234 c. Co-sale Rights 235 4. Series B-Time to Start All Over 235 E. Corporate Investment 236 F. Initial Public Offering 237 G. Post-IPO Financing 239 1. PIPES 239 2. Convertible Debt 240 3. Project Finance 241 H. Conclusion 241 Glossary of Frequently Used Terms 253 Chapter VI Employment Issues for Biotechnology Companies 265 Jeffrey A. Van Doren A. Employment At Will 265 B. Employee or Independent Contractor 266 1. The Common-Law Control Test 267 2. The IRS Control Test 268 3. The Economic Reality Test 270 4. Potential Liability 271 C. Employer Coverage Under Federal Civil Rights Laws 272 1. Title VII of the Civil Rights Act of 1964 (42 U.S.C. § 2000e et seq.) 272 a. Basic Coverage 272 b. Sexual Harassment 273 2. Age Discrimination in Employment Act (ADEA) (29 U.S.C. § 621 et seq.) 273 a. Basic Coverage 273 b. Older Workers' Benefit Protection Act 273 3. Americans with Disabilities Act (42 U.S.C. § 12,101 et seq.) 274 a. Basic Coverage 274 b. Reasonable Accommodation 274 4. Equal Pay Act (29 U.S.C. § 206(d)) 275 D. Employer Coverage Under State and Local Civil Rights Laws 275 1. State Civil Rights Law 275 2. Local Laws and Ordinances 275 E. Equal Opportunity and Affirmative Action Obligations of Government Contractors and Subcontractors 276 F. Other Federal Employment Laws 277 1. Fair Labor Standards Act (FLSA) (29 U.S.C. § 201 et seq.) 277 a. Basic Coverage 277 b. Basic Requirements 277 2. Family and Medical Leave Act (29 U.S.C. § 2601 et seq.) 281 3. National Labor Relations Act (29 U.S.C. § 151 et seq.) 281 a. Coverage of the NLRA 281 b. Employee Rights under the NLRA 282 c. "Protected Concerted Activity" 282 d. Union Organizing 282 e. NLRA Applicability to Non-union Employers 283 4. Employee Retirement Income Security Act (ERISA) (29 U.S.C. § 1001 et seq.) 285 5. Occupational Safety and Health Act (OSHA) (29 U.S.C. § 651 et seq.) 285 6. Immigration Reform and Control Act 1986 (IRCA) (18 U.S.C. § 274A-274C) 286 7. Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) (38 U.S.C. § 4301 et seq.) 287 8. Fair Credit Reporting Act (FCRA) (15 U.S.C. § 1681 et seq.) 287 a. Written Notice and Authorization 287 b. Adverse Actions Procedures 288 9. Employee Polygraph Protection Act (29 U.S.C. § 2001 et seq.) 288 G. Use of Employment Contracts 288 1. When Is an Employment Agreement Useful? 289 a. Security 289 b. Recruitment Incentive 289 c. Defined Performance Expectations 289 d. Defined Compensation Expectations 289 e. Confidentiality and IP Ownership 290 2. Items to Be Covered 290 a. Duration 290 b. Position and Title 291 c. Compensation 291 H. Employee Handbooks 299 1. Pros and Cons of Using 300 a. Reasons for Using 300 b. Reasons for Not Using 300 2. Items to Be Covered 301 a. Disclaimers and At-Will Statements 301 b. EEO Policies 301 c. Harassment Policy 302 d. Family and Medical Leave Policy 302 e. E-mail and Computer Usage Policy 303 f. Description of Benefits 303 g. Discipline Policy 303 I. Immigration Options for Biotech Employees 304 1. Obtaining a Visa and U.S. Entry 304 2. Non-immigrant Visas 305 a. H-1B "Specialty Worker" Visa 306 b. TN "NAFTA Professional" Visa 307 c. L-1 "Intracompany Transfer" Visa 308 d. E-1 "Treaty Trader" and E-2 "Treaty Investor" Visas 309 e. O-1 "Extraordinary Ability Alien" Visa 310 3. Immigrant Visas and Permanent Residence Status 311 a. Employment-Based Preferences 312 b. Visa Backlogs and Priority Dates 314 c. Labor Certification 314 d. Immigrant Visa and Adjustment of Status 315 Appendix A: Coverage of State Equal Rights Statutes 318 Chapter VII Federal Regulation of Research Through Funding 325 Melissa Ince & Jenny Kim A. Grants and Contracts 326 1. Federal Research Grants 326 a. Subgrants 327 b. Terms and Conditions 328 c. Grantor Agencies 330 i. Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Grants 330 ii. SBIR 331 iii. STTR 331 2. Contracts 332 a. Sale of Commercial Items and Services 332 b. Procurement Integrity: Off-Limits Information 337 c. Allowable and Unallowable Costs 340 d. Product Substitution 342 B. SBIR and STTR Grants 344 1. SBIR Grants 344 2. STTR Grants 345 3. Basic Characteristics 346 4. NIH Guidance 347 a. Significance 347 b. Approach 348 c. Innovation 348 d. Environment 349 5. Protection of Human Subjects 349 6. Vertebrate Animals 350 7. Criteria 351 8. Phase II Application Review Criteria 351 9. Amended Applications 352 10. Phase I/Phase II Fast-Track Application Review Criteria 352 11. Phase II-Competing Continuation Application Review Criteria 352 C. Ethics, Outside Activities, and Employment 353 1. Grants 353 a. Standards of Conduct 353 b. Financial Conflict of Interest 353 c. Misconduct in Science and Engineering 354 2. Contracts 354 a. Organizational Conflicts of Interest 354 b. Employment Discussions With and Hiring of U.S. Government Personnel 356 c. The National Institutes of Health (NIH) Government Employee Supplemental Regulations on Permitted Outside Activities 358 Chapter VIII Regulation of Preclinical Research 385 Daniel T. Pancamo A. Animal Use in Biomedical Research and Testing 386 1. The Basic Regulatory Scheme-the Animal Welfare Act (7 U.S.C. §§ 2131-2159) and Regulations (9 C.F.R. Parts 1-4). 386 a. Overview of the AWA 386 b. Overview of the AWA Regulations 389 i. General Overview 389 ii. Registration 390 iii. The IACUC 390 iv. Personnel Qualifications, Veterinary Care, Record Keeping 393 c. Implementation and Enforcement of the AWA and the AWA Regulations by the USDA Animal and Plant Health Inspection Service (APHIS) 395 2. U.S. Government Principles for the Utilization and Care of Vertebrate Animals Used in Testing, Research and Training (50 Fed. Reg. 20,864-02 (1985)) 396 3. Memorandum of Understanding Among APHIS/USDA, the FDA and the NIH 397 4. NIH Considerations 398 a. Health Research Extension Act; NIH 398 b. NIH Extramural Research 399 c. Guide for the Care and Use of Laboratory Animals; Institutional Animal Care and Use Committee Guidebook 400 5. FDA Considerations 401 6. CDC Considerations 402 7. State Law 402 8. Conclusion 402 B. Other Regulatory Schemes Applicable to Preclinical Research- Protection of the Environment and Public Heath 403 1. Introduction 403 2. EPA Jurisdiction and RCRA 403 3. Issues in Applying Environmental Law to Research Facilities 411 4. IACUC Responsibility 412 5. The Public Health Security and Bioterrorism Preparedness and Response Act of 2002; Select Agents and Toxins 412 C. Other Regulatory Schemes Applicable to Preclinical Research-Occupational Safety and Health Considerations and the Protection of Individuals Conducting Preclinical Research 416 1. Introduction 416 2. Occupational Safety and Health Administration (OSHA) Regulation; Standards; Resources 417 3. Selected Resource Tools-Chemicals and Biohazards 419 4. Radioactive Materials in the Research Setting 420 D. Conclusion 420 Chapter IX Research and Development Collaborations 423 Eileen Smith Ewing A. Introduction: The Collaborator as Biotechnology's White Knight 423 B. Finding a Strategic Partner: Beating the Mathematical Odds 424 C. Negotiating a Term Sheet 427 1. The Importance of the Term Sheet to the Transaction 427 2. Issues Crucial to Address at the Term Sheet Stage 428 3. Issues to Avoid Negotiating at the Term Sheet Stage 429 D. Key Issues in a Research Collaboration Agreement 430 1. Governance of the Research Collaboration 430 a. Composition of the Joint Steering Committee 430 b. Duties of the Joint Steering Committee 431 c. Meetings of the Joint Steering Committee 431 d. Decisionmaking by the Joint Steering Committee 431 2. The Scope of the Collaboration 432 a. Field 433 b. Scope Limitations Based on Patent Family 434 c. Scope Limitations Based on Timing 434 d. Scope Limitations Based on Project Funding 434 3. Intellectual Property 434 a. Core Intellectual Property of the Smaller Partner, Developed Prior to the Collaboration but Highly Relevant 435 b. Core Intellectual Property of the Larger Funding Partner, Developed Prior to the Collaboration but Highly Relevant 435 c. Background Intellectual Property of the Smaller Partner, Developed Prior to the Collaboration but of Possible Utility 435 d. Background Intellectual Property of the Larger Funding Partner, Developed Prior to the Collaboration but of Possible Utility 436 e. Intellectual Property Developed by One or Both Parties Arising Out of the Collaboration 436 f. Intellectual Property Developed by the Smaller Partner During, but Outside of, the Collaboration 436 g. Novel Intellectual Property Developed by One or Both Parties During the Collaboration That Does Not Arise Out of the Existing Intellectual Property of Either Party 437 4. License Grants 437 a. Research Licenses 438 b. Development and Commercialization License 438 c. Cross-Licenses; Freedom to Operate 438 d. Enabling License 439 e. License as Protection Against Infringement Claims 439 5. Financial Terms 440 a. Signature Payments 440 b. Research Funding 441 c. Equity Investments 441 i. Pricing the Equity 441 ii. Multiple Tranches 442 iii. Advantages of Equity Investment by a Collaborator 442 iv. Disadvantages of Equity Investment by a Collaborator 443 d. Milestone Payments 443 6. Option to Develop and Commercialize 447 a. Notice of Exercise 447 b. Right of First Refusal 447 c. Right of First Negotiation 448 d. Rights in Unoptioned Intellectual Property 448 7. Term and Termination 449 a. Term 449 b. Early Termination 449 E. Post-Closing Pitfalls That Can Derail a Research and Development Collaboration 450 1. Change in Strategic Fit or Commitment to the Project 450 2. Communication and Control Issues 453 3. Unrealistic Expectations 453 F. Alliances with Third Parties- Keeping Other Options Open 453 1. Right of First Refusal May Preclude Other Transactions 454 2. Right of First Negotiation May Also Have a Chilling Effect 454 3. The Deal May Be Worth It; Rely on Contractual Protections 454 G. Conclusion: Where Do the Parties Go From Here? 455 Chapter X FDA Regulation of Biomedical Research 457 Robert B. Nicholas A. Introduction 457 1. Introductory Note on Biotechnology and Clinical Trials 458 B. Part One-Overview of the Regulatory Framework 459 1. The History, Goals, and Purpose of Regulation 459 2. Government Regulation of Clinical Research 459 3. The Roles and Obligations of the Parties 461 a. Sponsor 462 b. Contract Research Organization (CRO) 462 c. Institutional Review Board (IRB) 463 d. Principal Investigator (PI) 464 e. The Legal Relationships Between the Parties: Contractual Agreements 465 i. The Sponsor and Principal Investigator 465 ii. The Sponsor and the CRO 466 iii. The Principal Investigator and the Study Subject 467 C. Part Two-Anatomy of a Clinical Trial 468 1. Before the Trial Can Begin 468 a. Drugs: Investigational New Drug Applications (IND) 468 b. Devices: Investigational Device Exemption (IDE) 468 c. IRB Approval of the Protocol, ICF, and Study Advertisement 469 2. Beginning and Conducting the Trial 469 a. Subject Enrollment and Test Article Administration 469 b. Control of the Trial: Record Keeping and Reporting 471 3. After the Trial 472 a. Submission and Audit 472 b. FDA Inspection 473 c. Administrative Actions-Civil and Criminal Penalties 475 4. Preparing for FDA Inspections and Responding to FDA Allegations of Misconduct 475 5. FDA Criminal Actions and Other Potential Consequences: Qui Tam Suits and Adverse Publicity 476 D. Part Three-Conduct and Use of Non-U.S. Studies 477 1. IND/IDE or Not 477 2. FDA Acceptance and Use of Non-U.S. Clinical Data 478 3. Export of Test Article 478 4. EU Clinical Trial Directive 478 E. Conclusion 479 Chapter XI Privacy Issues for Biotechnology Companies 487 Steve A. Schwarm & Anne Stohr O'Brien A. Introduction 487 B. The National Approach to Health-Care Privacy 490 1. Health Insurance Portability and Accountability Act of 1996 490 2. HIPAA Privacy Regulations 496 a. Individual Rights 496 i. Notice of Privacy Practices 497 ii. Restriction of PHI by Individual Patient 499 iii. Access of Individuals to PHI 499 iv. Amendment or Change of PHI 501 v. Accounting of Disclosures 502 b. Use and Disclosure for Treatment, Payment, and Health-Care Operations 503 c. Disclosure of PHI with Authorization or by Agreement 504 i. Authorizations 504 ii. Defective Authorization 506 iii. Combined Authorizations 506 iv. Conditioning of Authorizations 506 v. Revocation of Authorizations 507 vi. Authorizations for Marketing 507 vii. Use or Disclosure Requiring Patient Opportunity to Agree or Object 507 d. Disclosure Pursuant to a Public Policy Exception 508 i. As "Required by Law"-45 C.F.R. § 164.512(a) 508 ii. Uses and Disclosures for Public Health Activities- 45 C.F.R. § 164.512(b) (Includes child abuse reporting) 509 iii. Disclosures About Victims of Abuse, Neglect or Domestic Violence-45 C.F.R. § 164.512(c)17 510 iv. Uses and Disclosures for Health Oversight Activities- 45 C.F.R. § 164.512(d) 512 v. Disclosures for Judicial and Administrative Proceedings- 45 C.F.R. § 164.512(e) 512 vi. Disclosure for Law Enforcement Purposes-45 C.F.R. § 164.512(f).24 514 vii. Uses and Disclosures about Decedents-45 C.F.R. § 164.512(g) 514 viii. Uses and Disclosures for Cadaveric Organ, Eye or Tissue Donation Purposes-45 C.F.R. § 164.512(h) 514 ix. Uses and Disclosures for Research Purposes-45 C.F.R. § 164.512(i) 515 x. Uses and Disclosures to Avert a Serious Threat to Health or Safety-45 C.F.R. § 164.512(j) 517 xi. Specialized Government Function-45 C.F.R. § 164.512(k) 517 xii. Disclosures for Workers' Compensation-45 C.F.R. § 164.512 (l) 517 e. Disclosure Pursuant to a Business Associate Agreement- (45 C.F.R. § 164.502(e) and § 164.504(e)) 517 f. Disclosure Pursuant to a Data Use Agreement 520 3. Preemption Issues 521 C. Recognition of State Approach to Health-Care Privacy 522 D. HIPAA Interplay with Federal Common Rule and Federal Certificates of Confidentiality 523 1. Introduction 523 2. Research and HIPAA 523 a. When Research Is Subject to HIPAA 523 b. Permission to Use or Disclose Research Information 524 i. Use or Disclosure Without Authorization 524 ii. Research Use/Disclosure with Individual Authorization 525 3. The Common Rule and HIPAA 525 4. Research and Business Associate Status Under HIPAA 527 5. Federal Certificates of Confidentiality 527 a. Certificates of Confidentiality Explained 527 b. National Institutes of Health Statement on Certificates of Confidentiality 528 E. Research Issues and Academic Medical Centers 529 F. Canadian Privacy Legislation 529 1. Accountability 530 2. Identifying Purpose 531 3. Consent 531 4. Limiting Collection 532 5. Limit Use, Disclosure, and Retention 532 6. Accuracy 532 7. Safeguards 532 8. Openness 532 9. Individual Access 533 10. Challenging Compliance 533 Chapter XII Medical Reimbursement 541 Paul W. Radensky A. Reimbursement Basics 541 1. Key Terms and Concepts 541 2. Coverage 542 a. Determining the Scope of Benefits 542 b. Checking for Specific Exclusions from Coverage 543 c. The Reasonable and Necessary Test 543 d. Medical Necessity for the Particular Patient 544 e. Implications of Coverage/Non-coverage 545 f. Coverage Process 545 3. Payment Law and Policy 546 4. Coding 547 5. Appeals 549 6. Who Are the Payers? 552 B. Applying the Basics 552 1. Coverage, Payment, and Coding for Drugs and Biologicals 552 2. Coverage, Payment, and Coding for Procedures Involving the Use of Medical Devices 554 3. Coverage, Payment, and Coding for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 556 4. Coverage, Payment, and Coding for In Vitro Diagnostics 557 C. Special Payment Rules for New Technologies 557 1. Inpatient Prospective Payment System 557 2. Outpatient Prospective Payment System 558 3. Ambulatory Surgical Centers-Payment for New Technology Intraocular Lenses 558 4. Private Payer Carve-outs 559 D. Reimbursement for Investigational Products 559 1. National Coverage Determination on Routine Costs of Qualifying Clinical Trials 559 2. Investigational Device Exemptions 560 E. Compliance Considerations 561 1. Requirements for Proper Billing 561 2. Reimbursement Support Services 564 3. Discounts and Related Fraud and Abuse Considerations 564 F. Conclusions 565 Table of Acronyms 566 Chapter XIII Approval of Products for Human Use 569 Areta Kupchyk A. Standard Pathways to Market 569 1. Drugs 569 a. Preclinical 569 b. Investigational New Drug Applications 570 i. Exemption from Law 570 ii. Institutional Review Boards 571 iii. Clinical Hold 571 iv. Types of INDs 573 v. Phases of Clinical Trials 573 c. New Drug Applications 574 i. New Drug Application Content and Format Requirements 575 ii. Facility Inspection 578 iii. Labeling Review 578 iv. Advisory Committees 580 v. Completion of Review and Decision 580 d. Generic Drugs 581 i. Abbreviated New Drug Applications 581 e. 505(b)(2) Applications 583 2. Biological Products 583 3. Human Cells, Tissues, and Cellular and Tissue-Based Products 585 4. Medical Devices 586 a. Device Classifications 587 i. Class I Medical Devices 587 ii. Class II Medical Devices 587 iii. Class III Medical Devices 587 b. The 510(k) Notification Process 587 c. The Premarket Application Process 588 d. Investigational Device Exemption 588 5. Combination Products 588 B. Special Pathways to Market 590 1. Fast-Track Programs 590 2. Orphan Drug Designation 592 C. Future Pathways to Market 593 Chapter XIV The Regulation of Biomedical Products for Animal Use 601 Robert B. Nicholas & Kent McClure A. Regulation of Animal Health Products 601 B. The Animal Health Industry 603 1. Development Incentives 603 2. Size Matters 603 3. Complexity 605 C. Biotechnology-Derived Products 606 D. Overview of FDA Regulation of Animal Drugs 607 1. FDA Regulates Animal Drugs: Defined 607 2. Critical Elements in the Regulatory Regime 608 a. Approval of New Animal Drugs 609 b. Denial and Withdrawal of Approval of New Animal Drugs 610 c. Post-approval Requirements 610 d. Inspection, Enforcement, and Compliance 610 E. Distinguishing Factors Between FDA Regulation of Animal and Human Drugs 611 1. Drugs for Food Animals: Human Food Safety 611 2. Drugs Administered in Animal Feed 613 3. Import of Use of an Approved Drug in Different Species; Minor Species and Uses; Use in Pets; Animal Drug Availability 614 4. Practical Considerations for Interacting with the Center for Veterinary Medicine (CVM) 615 F. CVM Regulation of Biotechnology Products 617 G. Overview of USDA Regulation of Animal Biological Products 619 1. USDA Regulates Veterinary Biologics 619 2. Overview: Virus-Serum-Toxin Act 620 3. Critical Elements in the APHIS Regulatory Requirements 620 a. Veterinary Biologics Defined 620 b. Licensing 621 c. Permits 622 d. Standard Requirements 622 e. Record Keeping 622 f. Adverse Event Reports 623 g. Enforcement Procedures 623 h. Exemptions to the Regulations 623 4. The Agricultural Bioterrorism Protection Act of 2002 624 5. Animal Health Protection Act 624 6. Special Consideration for Biotech Biologics 625 H. Conclusion 626 Chapter XV Approval Process for Biotechnology Products in Agricultural Use 639 Dr. J. Winston Porter A. Coordinated Federal Framework 640 B. Role of the Environmental Protection Agency 642 C. Role of the U.S. Department of Agriculture 644 D. Role of the Food and Drug Administration 646 E. Role of the States in Regulation of Biotech Crops 648 1. EPA and the States 648 2. USDA and the States 648 3. FDA and the States 649 F. Biotech Crop Regulation in Other Countries 649 1. Argentina 650 2. Brazil 650 3. Canada 651 4. China 652 5. European Union 652 Chapter XVI Legal Requirements After Approval 655 Areta Kupchyk A. The Food and Drug Administration 655 B. Office of Inspector General, Department of Health and Human Services 657 C. The Neurontin Case 657 D. Import and Export Requirements 658 E. Current Good Manufacturing Practice Requirements 660 F. Reporting Requirements to FDA 661 1. Drug and Biological Products 661 2. Medical Devices 662 3. Promotional Materials: Form FDA-2253 664 G. Sales and Marketing Regulations 664 1. Prescription Drug Marketing Act 664 2. FDA Regulation of Advertising 665 3. Three Basic Types of Advertisements 669 a. Product-Claim Advertisements 669 b. Reminder Advertisements 669 c. Help-Seeking Advertisements 669 4. Requirements for Product Claim Advertisements 669 5. Print Advertisements: the Brief Summary 670 6. Broadcast Advertisements: the Major Statement 670 7. Prior Approval and Post-marketing Notification 671 8. FDA Notification 672 9. Promotion of Off-Label Use 672 10. Exchange of Scientific Information 673 11. The First Amendment 674 12. Other Cases of Interest-Product Liability 677 13. The Federal Trade Commission 677 H. Withdrawal of FDA Approval 678 I. False Claims Act 679 J. Anti-kickback Statute and Other Illegal Remuneration 679 Chapter XVII Development and Commercialization Alliances 685 Eileen Smith Ewing A. Introduction: Why Choose to Partner? 685 B. Considerations in Choosing a Partner 686 C. The Stage of the Drug Candidate Will Define the Alliance 686 1. Early-Stage Deals 687 a. Target Identification and Validation 687 b. Hits 688 c. Leads 688 d. Optimized Leads 688 2. Preclinical-Stage Licensing 688 a. ADME/Tox Studies 688 b. Investigational New Drug Application 689 3. Clinical-Stage Licensing 689 a. Phase I 689 b. Phase II 689 c. Clinical Trials (Phase III) 689 4. Pre-launch Licensing 689 D. The Development and Commercialization License Agreement 690 1. Nature and Scope of License Grant 690 a. Identifying the Subject Technology 690 b. The Rights Granted 691 c. Scope of Rights 692 d. Retained Rights of the Licensor 693 2. Consideration for the License Grant 694 a. Milestone Payments 694 b. Royalty Payments, Generally 696 c. Term of Royalty Payments 699 d. Punitive Reduction in Royalty Rates 700 e. Reduction in Royalty Rates for Third-Party Licenses 701 3. Other Intellectual Property Issues 701 a. Responsibility for Patent Prosecution and Maintenance 701 b. Abandoned Jurisdictions 701 c. Ongoing Cooperation 702 d. Trademarks, etc. 702 e. Prosecution of Infringers 702 4. Cooperation of the Parties During the Regulatory Approval Process 703 5. Participation in the Upside 704 a. "Co-rights" 704 b. Bulk Supply Rights 706 E. Anticipating Changes of Control of Either Party 706 a. Licensor Issues 707 b. Licensee Issues 707 c. Tailoring a Solution 708 F. Terminating the Agreement If the Alliance Fails 708 1. Material Breach by the Licensee 709 a. The Licensor's Perspective 709 b. The Licensee's Perspective 709 2. Material Breach by the Licensor 710 a. The Licensor's Perspective 710 b. The Licensee's Perspective 710 3. Termination Without Cause 710 G. Conclusion: The Importance of Getting It Right 711 Chapter XVIII Expansion: European and International Considerations for Biotechnology Companies 713 Daniel Pavin A. An Overview of Relevant European Institutions, Regulatory Bodies, and Legislative Framework 715 1. The European Commission 715 2. The European Medicines Agency 715 3. National Regulatory Bodies (Competent Authorities) 717 4. European Legislation and Other Instruments 717 B. The Definition of "Medicinal Products" Under European Law 718 C. Standards for Non-clinical Tests: Good Laboratory Practice and Laboratory Animal Welfare 719 1. Introduction 719 2. Guidance from the ICH and the EMEA 720 3. Laboratory Animal Welfare 720 4. Non-clinical Studies and Animal Testing: Other Countries 720 a. GLP 720 b. Animal Testing 721 D. Clinical Trials in the EEA 721 1. Introduction: The Regulatory Framework 721 2. Provisions of the Clinical Trials Directive 722 3. Scope of the Clinical Trials Directive: What Is a "Clinical Trial"? 723 4. What Is an "Investigational Medicinal Product?" 723 5. Who Is the "Sponsor" under the Clinical Trials Directive? 724 6. Sponsors Who Are Not Established in the EEA 725 7. Applying for Clinical Trial Authorization 725 8. Manufacture and Importation of Investigational Medicinal Products (IMPs) 726 9. GMP and GCP Inspections 727 10. Notification of Adverse Events and Suspected Unexpected Serious Adverse Reactions 728 11. Suspension of Trials 728 12. Effect of Noncompliance 729 13. Liability and Insurance 729 14. Clinical Trials and Data Protection (Privacy) Law 729 15. GCP and the GCP Directive 731 E. Obtaining a Marketing Authorization in Europe 731 1. Introduction 731 2. What Information Must Be Contained in a Marketing Authorization Application? 733 3. What Is the Format of a Marketing Authorization Application? 734 4. Summary of the Centralized Procedure 734 5. Duration of a Marketing Authorization 735 6. Responsibilities of the Holder of the Marketing Authorization 735 7. Can Patented Inventions Be Used for Uses Relating to Applying for a Marketing Authorization? 736 a. The Historical Position in Europe 736 b. The New Bolar Exemption 736 F. Clinical Trials and Marketing Authorizations: International Strategies and Issues 737 1. Product Development Strategies 737 2. Where to Conduct a Clinical Trial 739 3. Use of U.S. Non-clinical and Clinical Trials Data to Support a Marketing Authorization Application 740 4. International Coordination 741 a. Introduction: The ICH 741 b. The Common Technical Document 741 G. Post-marketing Issues in the EEA 742 1. Pharmacovigilance 742 a. Introduction 742 b. Roles and Responsibilities of an MAH 742 c. Supervision and Enforcement 743 2. Advertising, Promotion, and Labeling 744 3. Manufacture, Importation, Classification, and Inspections 745 a. Manufacturing and Importing 745 b. Classification 745 c. Inspections 745 4. Abridged Applications 746 a. Introduction 746 b. Abridged Applications for "Generic Medicinal Products" 746 c. Abridged Applications for Similar Biological Medicinal Products 747 5. Bibliographic or "Well-Established Use" Applications 747 6. Regulatory Data and Marketing Exclusivity 747 7. Price Controls and Government Purchasing 749 8. Parallel Importation and Parallel Distribution 749 a. Parallel Importation 749 b. Trademark Issues: Repackaging and Relabeling 750 c. Medicines Legislation 751 d. Parallel Distribution 751 9. Confidentiality and Freedom of Information 752 H. Other Areas of Regulation 753 1. Regulation of Human Embryonic Stem Cell Research 753 a. Introduction 753 b. The Council of Europe's Convention on Human Rights and Biomedicine 753 c. European Harmonizing Legislation-The Current Position 754 d. National Regulation within the EEA 754 e. Other Countries 755 2. Human Tissue and Cells 755 a. Introduction 755 b. The Human Tissues and Cells Directive 755 3. Advanced Therapies 757 a. Europe 757 b. International 758 4. Blood and Blood Components 758 5. Medical Devices 759 I. Regulation of GMOs 759 1. Regulation of GMOs: Legislation and Practice in the EEA 759 2. The EEA Legislative Framework with Respect to GMOs 760 a. Experimental Release of GMOs into the Environment 760 b. Placing on the Market of GMOs for Cultivation, Import, or Processing into Industrial Products 760 c. Placing on the Market of GMOs for Food or Feed/Food or Feed Containing GMOs 761 d. Safeguard Clause 761 e. Labeling and Traceability 761 f. Sanctions 762 g. Practical Implications for Industry 763 h. Developing and Marketing Authorizations for Medicinal Products Consisting of or Containing GMOs 764 3. International GMO Regulation 765 J. Intellectual Property 766 1. Introduction 766 2. Patents 766 a. Legislative Background 766 b. Obtaining Patents in Europe 767 c. Substantive Patentability Criteria; Differences to the U.S. Position 768 d. Excluded Subject Matter 769 e. Microbiological Processes and Products 769 f. Human Material 770 g. Morality: Stem Cells 770 h. Morality: Transgenic Animals 771 i. Transgenic Plants 771 3. Trademarks 771 4. Copyright and Database Right 772 5. Plant Breeders' Rights 773 6. The Interplay Between Intellectual Property Rights and European Community Law 773 7. Enforcement of Intellectual Property Rights 774 K. EC232 Competition Law 774 1. Introduction 774 2. EC Competition Procedures 774 3. Article 81 775 a. Introduction 775 b. Block Exemptions 776 4. Article 82 776 Chapter XIX Biotechnology Patent Litigation for the Non-Patent Attorney 791 Julie Fleming Brown A. Judicial and Extrajudicial Proceedings 793 1. Reexamination 794 a. Ex Parte Reexamination 794 b. Inter Partes Reexamination 795 c. Director-Initiated Reexamination 796 2. Reissue 797 B. General Overview of Patent Litigation Issues (Substantive) 797 1. Claim Interpretation 799 2. Definition of Infringement 800 a. Types of infringement 802 3. Proof of Infringement 803 a. Possible Defenses and Counterclaims 803 b. Non-infringement 804 c. Patent Invalidity (§§ 102, 103, 112) 806 i. Anticipation 807 ii. Obviousness 808 iii. Section 112 defenses 809 d. Patent Unenforceability 811 e. Antitrust 812 i. Patent Misuse 812 ii. Walker Process Counterclaim 813 iii. Handgards Counterclaim 814 f. Other Defenses Not Special to Patent Cases 814 4. Damages Issues 815 a. "No Less than a Reasonable Royalty" 816 b. Lost Profits 818 c. Enhanced Damages 819 i. Willfulness 820 ii. Attorneys' Fees 821 d. Equitable Relief 821 C. Phases of a Patent Case (Procedural/Strategic) 821 Chapter XX Litigation Issues 835 Robert F. Copple A. Intellectual Property and Confidential Business Information 836 1. Trademark Issues 837 a. Registration and Protection 837 b. Litigation Claims-Infringement and Dilution 837 2. Trade Secrets 841 a. Trade Secrets Defined 841 b. Establishing the Foundation for Trade Secret Protection 842 c. Misappropriation 843 d. Inevitable Disclosure Doctrine 844 B. Products Liability 845 1. Defects and Causation 846 2. Establish a Record of Compliance and Responsibility 846 C. Business Liability 847 1. Corporate Disclosures and Insider Trading 848 a. Misstatements and Omissions 848 b. Insider Trading 849 2. Corporate Governance 849 3. False Claims and Whistleblowers 850 4. Average Wholesale Price Drug Litigation 851 D. Document and Information Retention 851 1. Regulatory Record-Keeping Requirements 852 2. Litigation Discovery Issues 852 3. Data Management Policy 853 E. Alternative Dispute Resolution 858 1. ADR Defined 858 a. Arbitration 858 b. Mediation 859 2. ADR Myths and Misconceptions 859 a. A Sign of Weakness 859 b. Free Discovery 860 3. An Integrated Strategy for ADR 860 a. Before the Dispute Arises 860 b. In the Early Stages of the Dispute 861 c. Parallel Strategies 862 d. Private Forums and Confidentiality 862 4. A Special Case for Patent Litigation 863 a. Participation by Senior Management 864 b. Advantages of ADR Confidentiality 864 c. ADR as an Alternative to Foreign Litigation 865 5. ADR Guidelines 866 Chapter XXI Biotechnology Resources 871 Jennifer Korpacz Treatises 871 National Academies Press 872 Major Federal Acts 874 Selected Federal Register Documents 878 Federal Agency Resources 878 Key Federal Cases 890 State Laws 896 Additional Resources 896 Europe 901 Foreign Countries 911 Index 913
Library of Congress Subject Headings for this publication:
Biotechnology industries -- Law and legislation -- United States.
Biotechnology -- United States.
Biomedical Technology -- legislation & jurisprudence -- United States.
Biomedical Technology -- economics -- United States.
Biomedical Research -- legislation & jurisprudence -- United States.
Health Care Sector -- legislation & jurisprudence -- United States.