Monday's ruling by the justices is the latest decision by the courts, overturning a ruling that limited patent infringement liability only to clinical trials designed to provide information for FDA approval of a new drug.
The decision, in a case brought by Merck of Germany against Integra LifeSciences is the culmination of a nine-year battle, in which the central issue at stake was the reinterpretation of a 1984 federal law that grants exemption from patent laws for research that is "reasonably related" to getting FDA approval for a new drug.
"We are pleased with the ruling and feel it is a victory not only for Merck but also for patients waiting for better treatments for cancer and other illnesses and for the whole biotech and pharmaceutical industry," said Bernhard Scheuble, chairman of Merck.
Merck was accused, by Integra, of infringing a patent Integra held on molecules that Merck had been using for research. The German company argued that a federal law gave them a certain degree of freedom to experiment.
Integra had sued for patent infringement after Merck participated in animal trials for a cancer treatment as part of a ten-year plan towards a marketable therapy. The peptides, or biological molecules, contain a specific amino acid sequence that researchers hoped would inhibit tumours.
A jury had previously awarded Integra $15 million (€12.4 million) in damages for patent infringement, but the amount was later reduced to $6.4 million. The US Court of Appeal had ruled against Merck, stating the exemption did not extend to exploratory research, but only covered later-phase, human clinical trials.
Merck argued that it was entitled under the 1984 law to conduct the research at issue and appealed to the Supreme Court.
All nine US Supreme Court justices agreed with Merck's argument that the 1984 US Drug Price Competition and Patent Term Restoration Act (commonly called the Hatch-Waxman Act) did not apply to just generic drug companies who use proprietary research to prepare their products for launch as soon as patents expire on branded pharmaceuticals.
Justice Antonin Scalia said the appeals court had adopted an "unduly narrow interpretation" of the law and that it had limited the exemption.
He added the use of patented compounds in preclinical studies is protected under the law at least as long as there is a reasonable basis to believe that the compound tested could be subject of an FDA submission and the experiments will produce the types of information relevant to a new drug application.
The decision by the Supreme Court could be interpreted as an effort to establish a balance between the needs of patent holders to profit from their innovations and the benefits of leeway for companies in conducting early-stage research.
Though the decision was unanimous, the decision is unlikely to change intellectual property law in the US. Merck's case was a unique one, concerned with the interpretation of the law and not its validity.
There will be however, potential losers as a result of the outcome. The research tool industry, which provides scientists with reagents and instruments for research, could be on the receiving end of a substantial dent in its $26 billion-a-year revenue.
Indeed, in the original case back in April, in a friend-of-the-court filing, Invitrogen, which develops scientific tools for use in drug research, said that their $26 billion industry would go bankrupt if larger companies are given freedom to poke around their patented work without paying a licensing fee first.