Federal Circuit Reaffirms Gene Patents in AMP v Myriad

On August 16, 2012, biotechnology patent owners breathed a short sigh of relief, as the US Court of Appeals for the Federal Circuit issued a highly anticipated decision in Association for Molecular Pathology v. Myriad Genetics, finding that DNA sequences are indeed eligible for patent protection.  However, not all biotech innovators will be happy with the Myriad decision since diagnostic method claims were again struck down as ineligible for patent protection.   Additionally, one of the three judges on the panel dissented on the patentability of isolated DNA, arguing, “extracting a gene is akin to snapping a leaf from a tree.”  The final word on this subject may need to come from the Supreme Court.

The Myriad case had been on the Supreme Court docket briefly last year but was sent back down to the Federal Circuit for reconsideration in view of the Supreme Court decision earlier in its term in Mayo Collaborative Services v. Prometheus Laboratories.  In Mayo, the Supreme Court held that diagnostic claims essentially claiming a natural principle are not patent eligible under § 101 of the Patent Act.

On remand, in a 2-1 decision, the Federal Circuit upheld Myriad’s “isolated DNA” claims and the method claim directed to screening potential cancer therapeutics, but also held that certain method claims directed to “analyzing” or “comparing” gene sequences are not patent eligible subject matter under § 101 in view of Mayo. Judge Lourie, writing for the majority, clarified that the issue is “patent eligibility, not patentability,” and that policy questions – such as whether DNA warrants special treatment under the patent laws – are best left to Congress. 

In finding isolated DNA to be patent-eligible subject matter, the Judge Lourie noted that the Supreme Court precedents in Chakrabarty and Funk Brothers, and not Mayo, controlled patent eligibility for composition claims.  The Federal Circuit essentially followed its earlier logic in distinguishing these claims:  isolated DNA molecules are not found in nature, are man-made and the product of human ingenuity.  Both Judges Lourie and Moore drew a distinction between products of nature and products of man that “follow[], as all materials do, laws of nature.”  In her concurring opinion, Judge Moore indicated that the chemical difference between the in situ gene and the isolated gene was not by itself sufficient to justify protection, but that change in combination with the “enlargement of the range of . . . utility” derived from the isolation” led to patent eligibility.  Judge Moore also appeared to place considerable weight on the USPTO’s long-standing practice of granting patents on such subject matter.

In a dissenting opinion, Judge Bryson disagreed with this majority on this issue of patent eligibility for genes.  He concluded that the Mayo decision handled down by the Supreme Court earlier this year was instructive because the Court found that the method claim at issue in the Mayo case was not directed to patent-eligible subject matter because it contributed nothing “inventive” to the law of nature.  Judge Bryson likewise concluded that Myriad’s claims to isolated DNA were not patentable because the Myriad had not done “enough” to distinguish the alleged invention from a similar product of nature.  He dismissed the act of isolating the DNA from the in situ gene as merely a matter of breaking covalent bonds.

Upon reconsideration of the method claims also at issue in this case, the three-judge panel came to the same conclusions it had previously – albeit by different logic to take into account the Supreme Court’s reasoning in the Mayo case.  With regard to the method of comparing or analyzing claims, the Court held that there was no putatively transformative step to make each claim something other than a claim to a natural law, and that the methods were simply directed to the abstract mental process of comparing two sequences. 

The Federal Circuit judges also found the claimed method for screening of therapeutics to again be patentable subject matter, holding that even though a method includes known steps it can be sufficiently transformative if the steps are to create novel, i.e., transformed, subject matter.  The fact that the claim includes the steps of determining and comparing the cells growth rates “does not change the fact that the claim is based on a man-made, non-naturally occurring transformed cell – patent-eligible subject matter.”

The Federal Circuit’s application of the Mayo case to Myriad’s claims on diagnostic methods provides little guidance on how to draft such diagnostic claims to secure allowance – and survive future patentability challenges.  It is clear that the claims must recite something "transformative."  However, what constitutes a transformation in a diagnostic method remains to be elucidated.

Moreover, the discussion of patentability for DNA sequences is far from being over.  Should parties appeal in the next 90 days, the Supreme Court could again grant certiorari or there could be an en banc rehearing by the full Federal Circuit.

- Tom Engellenner

This entry was prepared with the help of Padma Choudry.  This blog is for information purposes only and should not be construed as legal advice on any specific facts or circumstances.  Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

New First to File (or Publish) Rules for US Patents

The America Invents Act (AIA) largely closes the gap between the U.S. patent laws and those of the rest of the world, where the general rule is that absolute novelty is required to seek patent protection for an invention.  Under the new U.S. rules (which will apply to all applications having an effective filing date after March 16, 2013), if an invention is made available to the public or on sale – anywhere in the world – before the effective filing date of a patent application, then no patent protection may be sought for the invention.  (Under our existing law, use or sale in a foreign country does not necessarily invalidate a patent.)

Additionally, a patent will not be granted to a second inventor to file a patent application if another inventor has already filed a patent application and such patent application matures into a patent or is published.  This is the first-to-file rule that applies almost everywhere else in the world.  However, to preserve the “grace period” that is deeply enshrined in the U.S. system, there are some exceptions, which can be explained by the following illustration:

Under our new system (for filings after March 16, 2013), A will still be entitled to a patent, despite an earlier disclosure and an earlier filing by another (B) because of the AIA’s exceptions to the first-to-file rule.  

The first exception (section 102(b)(1)) is that your own public disclosures will still not count against you so long as you file within one year.  (This will also be true if the earlier disclosure was by someone who derived the invention from you.)  Likewise, disclosures by others – even independent discoveries – will not count against you, if your own disclosure precedes the other disclosure (and again you file within a year).  Thus A can overcome both his own earlier disclosure and B’s earlier disclosure by virtue of the first exception.

The second exception is also applicable to this scenario.  Under section 102(b)(2), the second to file can overcome an earlier filing by another, if the second filer made a public disclosure prior to the first applicant’s filing date.  Hence A can overcome B’s earlier filing date because his or her disclosure preceded B’s filing date.

Thus, our new system is commonly being referred to as a “first inventor to file” system, but it might also be called a “first to file or publish” system.

- Tom Engellenner

This advisory is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

Supreme Court Remands Myriad

Following close on the heels of last week’s controversial decision in Mayo Collaborative Services v. Prometheus Laboratories, the United States Supreme Court sent another hotly contested biotech case back down for further consideration by a lower federal court. In Association for Molecular Pathology v. Myriad Genetics, the Supreme Court granted certiorari to the parties in the Myriad case, vacated the decision of the Court of Appeals for the Federal Circuit, and then promptly remanded the case to the Federal Circuit for reconsideration in accordance with the Supreme Court’s March 20th decision in the Mayo case, which held that a diagnostic method claim that simply recites a law of nature is unpatentable subject matter under 35 U.S.C. §101.
.
The patents being challenged in the Myriad case also contain diagnostic method claims. These claims, which recite “comparing” or “analyzing” BRCA1 and BRCA2 gene sequences, had been deemed ineligible for patent protection by the Federal Circuit. This conclusion is unlikely to change upon remand.

However, the Myriad case raises several other issues. Also at issue in Myriad are method claims for screening of therapeutics and composition of matter claims for isolated DNA. Prior to the remand, the Federal Circuit had found these claims to be patentable subject matter, holding that the claimed screening methods were also patentable because they include the transformative step of “growing cells” and that isolated DNA is patentable subject matter since it is chemically distinct from native DNA. The Federal Circuit’s reconsideration of and application of the Mayo decision to the screening method claims and to the composition of matter claims will be worth watching. 

The Federal Circuit will have to review the method claims for screening of therapeutics to determine whether the step of “growing cells” in the presence of a potential cancer therapeutic is still transformative in light of the Mayo decision. The question will be whether the step “transformed the process into an inventive application of the [law of nature].” 

How the Federal Circuit applies the Mayo case to Myriad’s claims on isolated gene sequences will also be of great interest to the biotechnology community. One consideration from the Mayo decision that will likely be important to the analysis of isolated gene claims is whether the term “isolated” is a “feature[] that provide[s] practical assurance that the process is more than a drafting effort.” 

The Federal Circuit’s earlier detailed discussion that these “isolated DNA molecules do not exist as in nature” and must be “chemically cleaved” from their natural environment, and thus are “distinct chemical entit[ies],” may indicate one basis by which the Federal Circuit can distinguish these claims from Mayo. A second, countervailing, consideration from Mayo may be whether the “isolation” of DNA should be considered a “well-understood, routine, conventional activity previously engaged in by scientists who work in the field.” While this argument was unpersuasively made before the Federal Circuit in 2011, it may now garner more support.

The Federal Circuit’s treatment of the Myriad claims on remand may provide better guidance on how to ensure that biotechnology patent claims survive future patentability challenges. Both Mayo and Myriad will undoubtedly have long-term ramifications in the pharmaceutical and biotechnology industries. Any potentially affected or interested parties should continue to follow the developments in this area, but it seems this may be just the beginning of a much longer conversation.

- Tom Engellenner

(This advisory was prepared with help from Padma Choundry, Konstantin Linnik and Lydia Olson, members of the Life Sciences and Intellectual Property Department at Nutter, McClennen & Fish, LLP.)  This advisory is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

Mayo v. Prometheus: Fire But No Light

Law professors are apt to say "hard cases make bad law" and the U.S. Supreme Court's recent decision in Mayo v. Prometheus Laboratories certainly falls into this category. In a unanimous decision issued on March 20, two patents that Prometheus had sought to enforce against Mayo Laboratories were struck down because the Court concluded that the patent claims were directed to natural laws and, hence, not eligible for patent protection. 



The decision, authored by Justice Stephen Breyer, has sent a shockwave through the biotechnology industry because the Court's reasoning may lead to the demise of diagnostic-method patents and remove the financial incentives that are currently propelling the growth of personalized medicine. If Breyer's reasoning is broadly applied, it is also hard to see how any diagnostic or even medical treatment method claim can survive scrutiny. 



The principal claim at issue in the Mayo case recited a first step of administering a drug to a patient and a second step of measuring the level of a particular metabolite in the patient's blood and a "wherein" clause that described a level above which there is a likelihood of harmful side-effects and below which the drug dosage may be ineffective. The claim was drafted this way to cover any supplier of an assay that would measure the particular metabolite. 



The Court found this "wherein" clause to be, in essence, an appropriation of a law of nature and not the sort of thing that should be patentable. Breyer compared the claim to Einstein trying to patent E=MC² or Newton trying to capture the law of gravity in a patent. Relying on a decision from the early days of the age of computers that found claims to a mathematical algorithm to be unpatentable because the claims were "so abstract and sweeping as to cover both known and unknown uses" of the formula, Breyer reasoned that the Prometheus claims would likewise "risk disproportionately tying up the use of underlying natural laws, inhibiting their use in making further discoveries." 



But was the discovery claimed in the Prometheus patent truly an abstract law of nature? The patent solved a known problem, namely selecting the right dosage for a very specific class of drugs that patients metabolize differently. Because of the metabolic differences, a dosage that is good for one patient is not necessarily good for another. The patent claim recited the metabolite levels that were too high and those that were too low — in essence identifying the sweet spot for therapeutic efficacy. This was a practical application of science, not an abstraction like the law of gravity. 



The problem with the Court's reasoning is that every diagnostic invention is at its core a discovery of a natural correlation between a biomarker or other analyte and a medical condition. Historically, the question that governed patentability of diagnostic methods, such measuring prostate-specific antigen as an indicator of prostate cancer or high-density lipoprotein as sign of unheathy cholesterol, has been whether the correlation discovered by the inventor was new and unobvious to one skilled in the art — not whether the correlation embodied a law of nature. How can any diagnostic method claim still be eligible for patent protection if the law now precludes diagnostic methods that rely on a scientific principle or law of nature? Would Breyer prefer diagnostic methods be based on lucky guesses or Ouija board results? 



Though not at issue in the Mayo case, the Court's logic in the Mayo decision also casts a shadow on method-of-treatment claims. For more than 200 years, the U.S. patent laws have allowed patent protection — in the form of method claims — for new and unobvious medical treatments with known drugs or agents. Many other countries do not allow patent claims for human treatment but the U.S. laws do — or did. Congress has from time to time debated the value of allowing method of treatment claims. Several years ago Congress did impose some limitations on surgical methods (requiring that the claims also recite a novel surgical instrument) but Congress did not abolish medical-treatment claims. 



However, the logic of the Mayo decision may put medical treatment claims into the "patent ineligible" category, as well. For example, a claim such as "treating a retroviral infection with an effective amount of AZT" (to paraphrase the famous first AIDS drug patent) could be suspect since it could also be considered to be a claim to a law of nature. AZT works by inhibiting reverse transcriptase, an enzyme necessary to the retroviral replication. The AZT inventors discovered this "law of nature." 



A less ominous reading of the Mayo decision is that the Supreme Court simply felt that there wasn't enough meat in the Prometheus claim and perhaps a more specific recitation of the assay steps would have passed muster. If so, then the decision leaves to the lower courts the dirty work of sorting out how much more specific a diagnostic claim must be. 



This process of leaving it up to the lower courts to divine the meaning of the Mayo case has already begun. A few days after its Mayo decision, the Supreme Court granted a petition to review another hotly contested case involving Myriad Pharmaceutical's patents on isolated breast cancer gene sequences — and then immediately remanded the case back to the U.S. Court of Appeals for the Federal Circuit, from whence it came, to reconsider its decision in light of the Mayo ruling. 



It is most unfortunate that the Supreme Court's decision in the Mayo case only discussed one claim of the Prometheus patents. There were several more specific dependent claims in the Prometheus patents that explained how the assay should be conducted, e.g., by measuring metabolite levels in red blood cells or by use of high pressure liquid chromatography. The biotechnology industry and patent practitioners would have benefited from some explanation as to why these claims were likewise unacceptable. Instead, the Supreme Court just kicked the can down the road.

- Tom Engellenner (adapted from my recent article in the National Law Journal)
This blog is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.

US Patent Law Reform Act is on its way to the White House for Approval

Competing patent reform bills were passed by the Senate and House of Representatives earlier this year. Yesterday, the Senate took the unusual step of bypassing reconciliation and instead adopted the House bill without changes, paving the way for President Obama’s anticipated signature on the “Leahy-Smith America Invents Act” (“AIA”). The Act provides the most comprehensive set of patent reforms since 1952. A number of the major provisions are summarized below:

Post Grant Review
Among the biggest changes is the new provision for an administrative process to challenge newly issued patents without having to resort to litigation in a federal district court. Moreover, unlike federal district court litigation (where the patent is “presumed” valid) and invalidity must be established by “clear and convincing” evidence, a challenger need only prove invalidity before the new Patent Trial and Appeal Board by a preponderance of the evidence.

Post grant review must be sought within nine months after the grant or re-issue of a patent. This provision of the act will take effect one year after enactment and apply to all patents issued before, on or after that date. Thus patents that issue before the one year anniversary may still be subject to post grant review provided that they have not been issued for more than nine months as of the effective date.

Unlike the current re-examination process, some discovery may also be permitted. Additionally, an oral hearing can be requested. The scope of discovery will be defined by rules yet to be promulgated by the USPTO. Nonetheless, the ability to conduct discovery and present oral arguments should go a long way towards leveling the playing field between the challenger and the patentee.

In addition to the new Post Grant Review, the traditional routes for reexamining patents will remain available to challengers. However, inter-partes re-examination will be renamed inter-partes review. The AIA also tweaks the standard for initiating review. The new threshold question will be: does the request show that there is a "reasonable likelihood that the requester would prevail" with respect to at least one claim. Inter-partes review will only be available after the nine month period for instituting post grant review proceedings expires. 

Forgiveness by Supplemental Examination
Patent owners will be able to request supplemental examination “to consider, reconsider, or correct information believed to be relevant to the patent.” One purpose of this provision appears to cleanse patents that might otherwise be unenforceable due to alleged “inequitable conduct” during prosecution. The bills provide that, subject to certain exceptions, “a patent shall not be held unenforceable under section 282 on the basis of conduct relating to information that had not been considered, was inadequately considered or was incorrect in a prior examination of the patent if the information was considered, reconsidered or corrected during a supplemental examination of the patent.”

First to File
In a roundabout way, the patent reform act provides that a patent will be issued to the first inventor to file a patent application. Both the House and Senate bills redefine prior art to include any earlier filed patent application by another, thereby ensuring that the second to file will be unable to get a patent. But both bills also provide for “derivation proceedings” before a Patent Trial and Appeal Board (which will replace current Interference proceedings) to determine whether a prior applicant had derived the subject matter in question from a later patent applicant. The effective date for the “first to file” provisions will be 18 months after enactment. 

The act also provides greater rights to prior users of an invention, who chose not to seek patent protection. Currently, US patent laws provide a “first inventor” defense to an action for infringement – but only for business method patents. The AIA appears to create a more general prior user right for those who used the “subject matter” on which they are being sued for infringement commercially more than one year prior to the effective filing date of the application giving rise to the patent.

Fee Setting Authority
Currently, the USPTO submits a budget each year to Congress and proposes fees that will cover the cost of running the patent and trademark operations. Congress routinely approves the fees but only gives the USPTO part of the revenue. The rest of the money gets spirited away and spent by Congress for sundry projects. The Senate bill would have allowed the USPTO to set fees and retain all of its fee revenue. However, the final resolution (based on the House bill approach) will allow fees to be set aside in a special fund that can be accessed by the USPTO based on congressional approval. 

Prior Art Citation
The AIA expands the rights of third parties to submit prior art. Such submissions have to be considered by the examiner so long as they are submitted before allowance and no more than six months after publication. 

After issuance, the Act also permits submissions of written statements made by the patent owner in federal court or USPTO proceedings as to the position taken by the patent owner as to the meaning of one or more claims. Such statements can be used for claim interpretation in re-examination, inter-partes review or post grant review proceedings. 

Best Mode Requirement
In a nod towards international harmonization, the AIA disables the unique requirement of the US patent laws that applicants must disclose the “best mode” of practicing their inventions. The Act removes failure to disclose the best mode from the list of invalidity defenses to an infringement action by providing that this is “not a basis on which any claim of a patent may be canceled or held invalid or otherwise unenforceable.”

Direct Filing by an Assignee Rather Than the Inventor
The AIA provides for filing in the name of an assignee or one to whom the inventor is under an obligation to assign the invention. A person who otherwise shows “sufficient proprietary interest in the matter” may make an application “on behalf of and as agent for the inventor,” and the patent will issue to the real party in interest. The AIA thus paves the way for corporations to file directly and dispenses with the notion that patent applications must be filed by individuals – and only after filing can they be assigned to a corporate employer. 

Virtual Marking and an End to Marking Trolls
The AIA permits “constructive notice” (for seeking damages) to be met by notifying consumers that the product is patented and directing the public to an internet site that provides a current list of patents covering the product. The Act also puts an end to so-called “false marking” actions by enterprising plaintiffs (“marking trolls”) who have sought damages (as private attorneys general) for incorrect identification of patents covering products. Henceforth, only the US Government will be able to sue for false marking and collect statutory penalties. Entities that have suffered “competitive injury” will also be able to sue for actual economic damages but marking trolls will be out of luck.

Satellite Offices
“Subject to available resources” the USPTO is directed to open two more satellite offices (in addition to one in Detroit currently being planned) within three years of enactment. Several criteria for selecting the locations of these satellite offices are set out, including geographic diversity, origin of patent filers and the availability of technically trained personnel for hiring as examiners.

The Cutting Room Floor
A number of patent reforms that had been proposed in the prior unsuccessful House and/or Senate bills were scraped to make the package of patent reforms less controversial. These include prior attempts to legislate changes in the way damages are awarded in infringement action, e.g., calculation of compensatory damages, new definitions for willful infringement and calculation of enhanced damages upon a finding of willful infringement. Changes in the law on inequitable conduct were also abandoned (apart from new supplemental examination process discussed above). A requirement for 18 month publication of all applications was also nixed as were rules relating to venue and provisions for interlocutory appeals after a district court had completed claim construction but prior to final disposition of a case.

- Tom Engellenner

This blog posting is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

Gene Patents Survive the 'Magic Microscope' Test

Late last month the federal appeals court responsible for patent matters reversed a lower court decision that had threaten to eliminate all “gene patents.”  In the case of Association for Molecular Pathology v. Myriad Genetics a three-judge panel of the Court of Appeals for the Federal Circuit (CAFC) overturned (in part) a New York federal district court decision from last April.  The district court suit had been brought by several medical societies, physicians and individual cancer patients, seeking to invalidate several so-called “gene patents” held by Myriad Genetics and the University of Utah.  

Two of three judges concluded that isolated DNA molecules were indeed patentable subject matter.  Judge Lourie, writing for the majority, found that isolated DNA was not merely a purified product of nature.  The majority rejected a “magic microscope” argument advanced by the plaintiffs, who basically argued if you could see DNA, then it is a product of nature and, hence, not appropriate subject matter for a patent.

 

Judge Lourie disagreed and concluded that the claimed DNA sequences had markedly different chemical structures compared to the DNA found in our bodies.  However, the panel did affirm the district court’s decision to revoke certain analytical method claims –on narrow grounds.  On the assay claims, the CAFC panel concluded that the claimed methods failed to recite any “transformative” steps and were so broad as to read on purely mental steps.

The patents at issue in the case were based on the discovery that certain mutations in two gene sequences, BRCA1 and BRCA2, in some individuals were correlated with a heightened susceptibility to breast cancer.  Once these sequences were identified, the inventors also realized the isolated DNA could be used to construct screening assays for the mutations and therapeutics.  The inventors filed for patents on these discoveries. 

The attorneys representing the plaintiffs, the ACLU Foundation and the Public Patent Foundation, challenged seven of the patents for claiming subject matter not eligible for patent protection.  The challenged patents cover both isolated DNA derived from the BRCA1 and BRCA2 gene sequences as well as diagnostic methods for determining a patient's predisposition to breast cancer based on identification of certain mutations in BRCA genes extracted from patients and screening tests for new therapeutics.

The federal district court decision by Judge Sweet of the southern district of New York to revoke all of the patent claims had surprised much of the patent community because it was contrary to the longstanding practice of the Patent and Trademark Office in issuing gene patents as well as to practice of other government agencies like the NIH in seeking and obtaining patents on DNA sequences.  Basically, Judge Sweet adopted the argument advanced by ACLU Attorney Hensen: “Genes isolated from the human body are no more patentable than gold extracted from a mountain.”  However, this legal reasoning ran contrary to a large body of case law that biological materials, such as proteins, hormones and even stem cells can be patented in their isolated form.

The case took a surprising turn last October when the U.S. Department of Justice decided to throw the Patent Office under the bus (on the issue of isolated DNA) and weighed in on the side of those seeking to erase gene patents.  At the oral hearing in the appeal, the government made its argument by way of a “magic microscope” test.  According to the government’s test, if an imaginary microscope could focus in on the claimed DNA molecule as it exists in the human body, the claim covers unpatentable subject matter.

Judges Lourie and Moore of the CAFC panel ultimately rejected this reasoning as flawed.  “The ability to visualize a DNA molecule through a microscope, or by any other means, when it is bonded to other genetic material, is worlds apart from possessing an isolated DNA molecule that is in hand and usable. . . .  The government’s microscope could focus in on a claimed portion of any complex molecule, rendering that claimed portion patent ineligible, even though that portion never exists as a separate molecule in the body or anywhere else in nature, and may have an entirely different utility.”

With regard to the analytical method claims, the CAFC panel affirmed the district court’s decision that the method claims were invalid – but on somewhat different grounds.  The judges noted that the method claims were so broad as to merely recite steps of “comparing” or “analyzing” two gene sequences. For example, Judge Lourie pointed to one claim that recited a method for screening a tumor sample by “comparing a first BRCA1 sequence from a tumor sample and a second BRCA1 sequence from a non-tumor sample, wherein a difference in sequence indicates an alteration in the tumor sample.”  He rejected this claim as reciting “nothing more than the abstract mental steps” necessary to compare two different nucleotide sequences.

The CAFC panel’s treatment of the method claims was very much in line with the recent U.S. Supreme Court decision in Bilski v. Kappos, which invalidated certain “business method “ patent claims because they were simply “abstract ideas.”

Even though Myriad’s method claims were revoked, the CAFC decision distinguished similar method claims that were found to pass muster in Prometheus Labs., Inc. v. Mayo Collabarative Servs., where the CAFC recently did find transformations in assay steps.  Judge Lourie noted that Myriad’s claims did not include the step of “determining” the sequence of BRCA genes by, e.g., isolating the genes from a blood sample and sequencing them, or any other necessarily transformative step.

Thus, the Myriad opinion broadly hints that those claiming biotech analytical methods can avoid a similar fate by reciting more concrete transformative steps, such as biopsying blood or tissue, removal of DNA from biopsied cells, separating the particular sequences of interest and preparing the isolated sequences for analysis to detect mutations. 

Lurking between the lines of Myriad decision is the problem of the cost of genetic assays.  According to the plaintiffs, the $3,000 price tag charged by Myriad for the full assay, effectively puts the test out of the reach for most Americans whose health plans will not fully cover the test.  The Justice Department’s position to support the plaintiffs may have been driven by factors far removed from patent practice -- the looming costs of personalized medicine as universal health care goals clash with federal budget cuts.

However, the ability to charge monopoly prices is at the core of the patent system, which is designed to reward for a limited period of time those who add to mankind’s knowledge.  The monopoly price also provides an incentive for others to find alternatives to the patented invention.  In fact, Myriad’s revenues are a far cry from the billions of dollars that many drug patents reap annually for their owners in the pharmaceutical industry.  Judge Lourie’s decision in the Myriad case stays true to these principles: “Changing course years after the fact will only serve to punish those companies who made the reasonable decision to invest large amounts of time and money into the identification, isolation, and characterization of genes.”

Of course, the CAFC panel’s decision in the Myriad case may not be the last word on whether isolated DNA is patentable.  The parties will in all likelihood seek rehearing en banc before all twelve of the judges of the CAFC.  After that, the U.S. Supreme Court may very well have its own opinion on the government’s “magic microscope” argument.

- Tom Engellenner

This posting is an adaptation of my recent analysis in IPLaw 360.  This blog is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.

US Patent Law Reform Is Waiting In the Wings

With the clock ticking down on the possibility of financial meltdown in two weeks, one can only hope that Congress will come to its senses and address the debt limit.  Assuming sanity prevails, there is a high probability that Congress can get back to its business of making laws in August and the most comprehensive patent reforms since 1952 can become a reality by the end of this summer.

These days, every bill has to have a moniker.  So they coined the term the “America Invents Act” and attached it this year’s patent reform bill, which is largely a recapitulation of reform measures that have died previously in the last three sessions of Congress.  Maybe a catchy name does make a difference.  This year patent reform legislation sailed through both houses of Congress.  The Senate passed Bill S. 23 by a vote of 95-5 on March 8, 2011 and the House of Representatives passed Bill HR 1249 by a vote of 304 - 117 on June 23, 2011. 

Reconciliation of the two bills seems to be a foregone conclusion because they are so similar and President Obama has indicated a willingness to sign the legislation.  Accordingly, this seems to be a good time to review what reforms have been agreed upon – and what has been left on the cutting room floor.

Post Grant Review

Finally, we appear poised to join the rest of the civilized world and have an administrative process to challenge newly issued patents without having to go to federal district court and spending three years and perhaps a million dollars to invalidate patents that have been issued by “mistake.”

Both the House and Senate bills provide for petitions to review newly issued patents.  Review must be sought within nine months after the grant or re-issue of a patent.   Unlike federal district court litigation (where the patent is “presumed” valid), a challenger need only prove invalidity by a preponderance of the evidence. 

Unlike the current re-examination process, some discovery will also be permitted.  Additional, an oral hearing can be requested.   The scope of discovery will be defined by rules yet to be promulgated by the USPTO.  Nonetheless, the ability to conduct discovery and present oral arguments should go a long way towards leveling the playing field between the challenger and the patentee.

In addition to the new Post Grant Review, the traditional routes for reexamining patents (with all their flaws) will remain available to challengers. However, inter-partes re-examination will be renamed inter-partes review.  The AIA also tweaks the standard for initiating review.  The new threshold question will be: “does the request show that there is a reasonable likelihood that the requester would prevail with respect to” at least one claim.  Inter-partes review will only be available after the period for instituting post grant review proceedings expires. 

Forgiveness of Sins by Supplemental Examination

Patent owners will be able to request supplemental examination “to consider, reconsider, or correct information believed to be relevant to the patent.”  One purpose of this provision appears to cleanse patents that might otherwise be unenforceable due to alleged “inequitable conduct” during prosecution.  The bills provide that, subject to certain exceptions, “a patent shall not be held unenforceable under section 282 on the basis of conduct relating to information that had not been considered, was inadequately considered or was incorrect in a prior examination of the patent if the information was considered, reconsidered or corrected during a supplemental examination of the patent.”

First to File

In a roundabout way, the America Invents Act (“AIA”) provides that a patent will be issued to the first inventor to file a patent application.  Both the House and Senate bills redefine prior art to include any earlier filed patent application by another, thereby ensuring that the second to file will be unable to get a patent.  But both bills also provide for “derivation proceedings” before a Patent Trial and Appeal Board (which will replace current Interference proceedings) to determine whether a prior applicant had derived the subject matter in question from a later patent applicant. 

One area where the House and Senate bills differ is in the rights afforded prior users of an invention, who chose not to seek patent protection.  Currently, US patent laws provide a “first inventor” defense to an action for infringement – but only for business method patents.  

The Senate bill retains the defense only for business method patents but would make a minor change to this to extend the protection to others who practiced the claimed subject matter at the direction of the first inventor but would not allow the transfer or license of the first inventor’s “prior use” rights. 

The House provision goes much further and would create a more general prior user right for those who used the “subject matter” on which they are being sued for infringement commercially more than one year prior to the earlier of the effective filing date of the application giving rise to the patent.

Fee Setting Authority (and an End of Fee Diversion?)

Currently, the USPTO submits a budget each year to Congress and proposes fees that will cover the cost of running the patent and trademark operations.  Congress routinely approves the fees but only gives the USPTO part of the revenue.  The rest of the money get spirited away and spend by Congress for sundry projects.  Any wonder why the USPTO has a huge backlog of unexamined patent applications?

The Senate bill would allow the USPTO to set fees and retain all of its fee revenue.  The House bill would allow fees to be set aside in a special fund that could be accessed by the USPTO based on congressional approval.  Given the financial turmoil over the federal debt, things seem to be tilting toward the House provision and less autonomy for the PTO.

Prior Art Citation

Both bills expand the rights of third parties to submit prior art.  Such submissions have to be considered by the examiner so long as they are submitted before allowance and no more than six months after publication. 

After issuance, both bills also permit submissions of written statements made by the patent owner in federal court or USPTO proceedings as to the position taken by the patent owner as to the meaning of one or more claims. Such statements can be used for claim interpretation in re-examination, inter-partes review or post grant review proceedings.

Best Mode Requirement

In a nod towards international harmonization, both bills disable the unique requirement of the US patent laws that applicants must disclose the “best mode” of practicing their inventions.  Both bills remove failure to disclose the best mode from the list of invalidity defenses to an infringement action by providing that this is “not a basis on which any claim of a patent may be canceled or held invalid or otherwise unenforceable.”

Direct Filing by an Assignee Rather Than the Inventor

Both bills provide for filing in the name of an assignee or one to whom the inventor is under an obligation to assign the invention.  A person who otherwise shows “sufficient proprietary interest in the matter” may make an application “on behalf of and as agent for the inventor,” and the patent will issue to the real party in interest.  The AIA thus paves the way for corporations to file directly and dispenses with the quaint notion that patent applications must be file by individuals and only after filing can they be assigned to a corporate employer.  For a while it looked like a few strict constitutional constructionists in Congress would derail this provision but it’s still in both bills.  Even if this provision doesn’t get cut, look for someone to challenge “assignee filings” on constitutional grounds since Article 1, section 8 of the Constitution provides that Congress may grant patents to “inventors.”

Virtual Marking and an End to Marking Trolls

Both bills permit “constructive notice” (for seeking damages) to be met by notifying consumers that the product is patented and directing the public to an internet site that provides a current list of patents covering the product.  Both patent reform bills also put an end to so-called “false marking” actions whereby enterprising plaintiffs (“marking trolls”) have sought damages as private attorneys general for incorrect identification of patents covering products.  Henceforth, only the US Government will be able to sue for false marking and collect statutory penalties.  Entities that have suffered “competitive injury” will also be able to sue for actual economic damages but marking trolls will be out of luck.

Satellite Offices

“Subject to available resources” the USPTO is directed to open two more satellite offices (in addition to one in Detroit currently being planned) within three years of enactment.  Several criteria for selecting the locations of these satellite offices are set out, including geographic diversity, origin of patent filers and the availability of technically trained personnel for hiring as examiners.

The Cutting Room Floor

A number of patent reforms that had been proposed in the prior unsuccessful House or Senate bills have been scraped to make the package of patent reforms less controversial.  These include all of the prior attempts to legislate changes in the way damages are awarded in infringement action, e.g., calculation of compensatory damages as well as new definitions for willful infringement and calculation of enhanced damages upon a finding of willful infringement. Changes in the law on inequitable conduct were also abandoned (apart from new supplemental examination process discussed above).  A requirement for 18 month publication of all applications was also nixed as were rules relating to venue and provisions for interlocutory appeals after a district court had completed claim construction but prior to final disposition of a case.  
- Tom Engellenner  
 

This blog is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.