Patent Law Preempts Local Attempts to Regulate the Price of Patented Products

Biotechnology Industry Organization v, District of Columbia, [2006-1593] (August 1, 2007)[GAJARSA, Bryson, and Plager] The Federal Circuit affirmed the judgment of the trial court that the District of Columbia's Excessive Drug Pricing Act of 2005 was preempted by the federal patent laws, and enjoining its enforcement.
BRIEF: The District of Columbia adopted legislation making it unlawful for any drug manufacturer to sell or supply for sale, or impose minimum resale requirements for a patented prescription drug that results in the drug being sold in the District for an excessive price. The Federal first considered jurisdiction, concluding that the action did arise under the patent laws. The Federal Circuit then address the standing of the plaintiff, and concluded that because members of the plaintiff organizations would be injured by enforcement, that the plaintiffs did have standing. The Federal Circuit finally turned to the question of preemption. The Federal Circuit noted that there was no express provision in the patent laws prohibiting the regulation of patented goods, but nevertheless state law must yield to Congressional enactments if it "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." The Federal Circuit said that fundamental goal of patent law is spelled out in the Constitution which gives inventors "exclusive rights". The Federal Circuit said that "Patentees value the right to exclude in part because the ability to foreclose competitors from making, using, and selling the invention may allow them an opportunity to obtain above-market profits during the patent’s term." The Federal Circuit found that "By penalizing high prices—and thus limiting the full exercise of the market power that derives from a patent—the District has chosen to re-balance the statutory framework of rewards and incentives insofar as it relates to inventive new drugs." The Federal Circuit concluded "The Act stands as an obstacle to the federal patent law’s balance of objectives as established by Congress" and held that it was preempted by federal patent law.