Archive for the ‘Patent’ Category

 

–In Bilski v. Kappos, the Supreme Court Hits the Reset Button, Then Tosses the Baton Back to the CAFC

by Gerry J. Elman and Jerome R. Smith, Jr.

On June 28, 2010, the U.S. Supreme Court issued its long-awaited decision in Bilski v. Kappos.  The case was expected to resolve the hotly contested question of whether business methods could be protected by the claims of a U.S. patent, and there was some trepidation that the decision might adversely impact at least some patents for computer software as well.  Because the majority of the Court rested their decision on narrow grounds, they left intact much of the body of case law on patent eligibility, though hitting reset by disavowing a legal test known for short as machine-or-transformation. Many unresolved issues live on, to be addressed another day. 

In a decision written by Justice Kennedy, the Court voted unanimously to affirm the en banc judgment by the U.S. Court of Appeals for the Federal Circuit (“CAFC”) that the claims of Bilski and Warsaw’s patent application are not patent-eligible under 35 USC § 101. The majority opinion rests this affirmance on narrow grounds.  Yet a minority of three other Justices joined a separate opinion by retiring Justice Stevens that decries the patentability of “business methods” in general, recognizing that significant factions disfavor such protection. 

By this decision, issued on the last opinion day of the Supreme Court’s 2009-2010 term, thus concluded the saga of the most closely-watched patent appeal in history. 

The Legal Framework – We start by pointing to the provision in the U.S. Constitution (Article 1, section 8, clause 8 ) that grants Congress the power: “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  In exercise of that power, Congress has enacted laws providing for copyrights and patents.

The patent statute, Title 35 of the United States Code [“35 U.S.C.”], provides that “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”  35 U.S.C. § 101.  Some of the conditions stated in 35 U.S.C. are that the claimed invention be novel (as compared to the “prior art,” generally the information publicly available at the time the invention was made) and that it not have been obvious at that time to a person having ordinary skill in the art.  The statute also requires that the applicant disclose the subject matter clearly and completely enough to enable the invention to be made and used by others.

The owner of a patent has the exclusive right to make, use, sell or import the invention as defined by any of its valid claims.  The patent’s term is 20 years from the date the first regular patent application disclosing the invention was filed, subject to adjustment in certain situations and to the payment of a maintenance fee every few years.

If an applicant believes that a rejection by a Patent Examiner was improper, he may appeal within the Patent and Trademark Office (“USPTO”) to the Board of Appeals and Interferences (“Board”).  Failing to obtain satisfaction there, such an applicant may appeal to the CAFC.  Most appeals end there, but a still-dissatisfied applicant might also seek a further appeal to the Supreme Court, and sometimes, as in Bilski, the Supreme Court chooses to accept the case.

Background – Before 1998, it had been unclear whether an inventive process reciting a method of doing business could be the subject of a patent claim.  But that year the CAFC decided in State Street Bank v. Signature Financial Group that a claim to an apparatus that implements a business method is not for that reason unpatentable.  News of the State Street Bank decision led some to find opportunity to obtain protection for inventive business methods hitherto considered outside the scope of patenting.  Others were shocked to find that the kinds of things they were doing in their offices might infringe a patent granted to another company.

Two years before the CAFC’s State Street Bank decision, on April 16, 1996, Bernard Bilski and Rand Warsaw (the “Bilski” applicants) had filed a provisional patent application for a method to be used by an electric utility to hedge against adverse changes in the cost of fuel, so it could provide longer-term fixed pricing to its customers, despite “consumption risk” due to bad weather.  Within a year, they filed the requisite nonprovisional application, no. 08/833,892, including the following as its first claim:

 1.  A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:

(a)                initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;

(b)               identifying market participants for said commodity having a counter-risk position to said consumers; and

(c)                initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.

It is typical for claims of a patent application to be rejected for lack of novelty or for obviousness in view of two or more items of prior art, but the examiner rejected each of the 11 claims recited in this patent application solely on the basis that “the invention is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts.” 

Appeal to the Board – Bilski then embarked on what would become a multi-step appeals process by asking the Board to reverse this rejection.  On September 26, 2006, a panel of five administrative patent judges declined to reverse the examiner, though they chose to explain the rejection with different language.  Stating that the “USPTO is struggling to identify some way to objectively analyze the statutory subject matter issue instead of just saying ‘We know it when we see it.’” they explained that  “[n]ot every process in the dictionary sense constitutes a “process” under [35 U.S.C.] § 101” and noted that “[s]ome subject matter, although invented by man, does not fall within any of the four categories of  § 101. e.g. data structures, computer programs, documents, music, art, and literature, etc.” 

The Board recast the rejection as follows: “Although the examiner rejected the claims as nonstatutory subject matter, in part, because they ‘solve a purely mathematical problem’ our new ground of rejection is not based on the presence of mathematical algorithms, but focuses on the lack of a physical transformation and the lack of a practical application of the ‘abstract idea’ of risk management in the claims as a whole.”  The Board added: “We agree with appellants that ‘technological arts’ means ‘useful arts’ as stated in the Constitution, and that apparatus is not required to be claimed in order for a method claim to be a ‘process’ under § 101.”  Yet they concluded that: “None of the claims recites a transformation of physical subject matter and the claims recite an ‘abstract idea’ rather than a practical implementation of that idea.”

Appeal to the CAFC – Bilski then sought review by the CAFC, and the case was eventually heard by all of its judges, sitting en banc.  The rejection was upheld by a 9-3 vote.  The majority opinion by now-retired Chief Judge Michel asked, as did the Board below, whether the recited method is a patent-eligible “process” within the meaning of  35 U.S.C. § 101, and agreed that it was not.  “The true issue before us then is whether Applicants are seeking to claim a fundamental principle (such as an abstract idea) or a mental process.  And the underlying legal question thus presented is what test or set of criteria governs the determination by the [USPTO] or courts as to whether a claim to a process is patentable under § 101 or, conversely, is drawn to unpatentable subject matter because it claims only a fundamental principle.”

In the State Street Bank case, the CAFC in 1998 had posited a legal test for a patent-eligible process, namely that it produce a useful, concrete and tangible result.  Ten years later, in In re Bilski, the CAFC said “never mind” and articulated the test as follows:

 “A claimed process involving a fundamental principle that uses a particular machine or apparatus would not pre-empt uses of the principle that do not also use the specified machine or apparatus in the manner claimed. And a claimed process that transforms a particular article to a specified different state or thing by applying a fundamental principle would not pre-empt the use of the principle to transform any other article, to transform the same article but in a manner not covered by the claim, or to do anything other than transform the specified article.”  This concept was then described for short as the machine-or-transformation test, which the court held was “the applicable test for § 101 analyses of process claims”.  The court pointed out that “it is irrelevant to the § 101 analysis whether Applicants’ claimed process is novel or non-obvious.”

The CAFC concluded that: “Applicants here seek to claim a non-transformative process that encompasses a purely mental process of performing requisite mathematical calculations without the aid of a computer or any other device, mentally identifying those transactions that the calculations have revealed would hedge each other’s risks, and performing the post-solution step of consummating those transactions. Therefore, claim 1 would effectively pre-empt any application of the fundamental concept of hedging and mathematical calculations inherent in hedging (not even limited to any particular mathematical formula). …  Moreover, while the claimed process contains physical steps (initiating, identifying), it does not involve transforming an article into a different state or thing. Therefore, Applicants’ claim is not drawn to patent-eligible subject matter under § 101.”

Judge Newman dissented, stating: “The court today acts en banc to impose a new and far-reaching restriction on the kinds of inventions that are eligible to participate in the patent system. The court achieves this result by redefining the word ‘process’ in the patent statute, to exclude all processes that do not transform physical matter or that are not performed by machines. The court thus excludes many of the kinds of inventions that apply today’s electronic and photonic technologies, as well as other processes that handle data and information in novel ways. Such processes have long been patent eligible, and contribute to the vigor and variety of today’s Information Age. This exclusion of process inventions is contrary to statute, contrary to precedent, and a negation of the constitutional mandate. Its impact on the future, as well as on the thousands of patents already granted, is unknown.”

Judge Rader (who this month became Chief Judge of the CAFC) dissented, stating: “This court labors for page after page, paragraph after paragraph, explanation after explanation to say what could have been said in a single sentence: ‘Because Bilski claims merely an abstract idea, this court affirms the Board’s rejection.’” 

Appeal to the Supreme Court – After an oral argument November 9, 2009, the Supreme Court waited almost eight months to issue the Bilski decision.  There is speculation that the opinion had originally been assigned to retiring Justice Stevens, but that the condemnation of business method patents included in the opinion he wrote led to the majority opinion being reassigned to centrist Justice Kennedy. 

Justice Kennedy’s opinion of the Court pretty much follows the pattern suggested by CAFC Judge Rader’s dissent (and the Government’s brief). Bilski’s claims were held unpatentable, as they were drawn to an “abstract idea,” which, like laws of nature and physical phenomena, was previously recognized by the Supreme Court as being outside of  statutory subject matter under 35 USC § 101.   

This opinion also gives a nod to Judge Newman’s dissent in the CAFC case.  Looking at the term “process” in the patent statutes, the Court did not find any requirement that a process be tied to a machine or that it transform an article.  Accordingly, the Supreme Court disavowed the machine-or-transformation test as the sole and exclusive desideratum for patent-eligible methods.  Rather, the “’machine-or-transformation test’ is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101.”   

We read this as a sort of “safe harbor,” meaning that a claim that satisfies the machine-or-transformation test is almost certainly patent-eligible, but that if a claim doesn’t meet that test, it isn’t automatically unpatentable for not reciting statutory subject matter.

What does this mean for computerized methods and software?  This subject matter remains patentable, provided it does not fall within any of the exceptions to statutory subject matter for processes, e.g., laws of nature, physical phenomena, and abstract ideas.  However, further examples of these exceptions were left open for the CAFC to determine in future decisions. 

What about computerized components and systems?  These components and systems remain patentable as apparatus, as has always been the case under the patent law.

What about business methods?  Business methods are not excluded as a class from patent-eligible subject matter.  However, this opinion doesn’t give additional guidance about how to meet the requirement for claiming statutory subject matter, beyond reciting the aforementioned exceptions (e.g., laws of nature, physical phenomena, and abstract ideas).

What about medical diagnostic methods?  On June 29th, the Supreme Court issued a GVR in the cases of Mayo v. Prometheus Labs and Classen Immunotherapies v. Biogen IDEC.  This means that they granted certiorari to accept the appeals from the CAFC, then vacated the CAFC’s decisions and remanded the cases for further consideration in light of the Supreme Coourt’s Bilski decision.   The CAFC will soon have the opportunity to address whether a patent may validly claim a process that involves injecting a subject with a drug or immunogen and then comparing certain results.   Because real substances move in the world, the claims in Prometheus Labs appear to meet the transformation prong of the machine-or-transformation test.  So it seems likely that the CAFC will continue to find statutory subject matter in these claims.  The opposite result was obtained in the Classen case. Let’s see what happens when the CAFC catches the baton and runs with it.  Stay tuned. 

What about other methods?  Methods that are determined to fall outside the aforementioned exceptions to statutory subject matter remain proper subject matter for U.S. patents.

Workshop on May 26 to Explore the Intersection of Patent Policy and Competition Policy and its Implications for Promoting Innovation

WASHINGTON – The Department of Justice, the Federal Trade Commission (FTC), and the Department of Commerce’s United States Patent and Trademark Office (USPTO) announced today that they will hold a joint public workshop on the intersection of patent policy and competition policy and its implications for promoting innovation. Assistant Attorney General for the department’s Antitrust Division Christine Varney, Under Secretary of Commerce for Intellectual Property and Director of the USPTO David J. Kappos, and U.S. Chief Technology Officer Aneesh Chopra will give opening remarks at the morning session of the workshop. FTC Commissioner Edith Ramirez will open the afternoon session.

The workshop will be held on May 26, 2010, at the USPTO’s campus at 600 Dulany Street, Madison Building Auditorium, Alexandria, Va. The general public and press are invited to attend and view the proceedings. Seating will be on a first-come, first-served basis.

[GJE Note]: Since I served in the federal Antitrust Division for six years and am fervently committed to promoting innovation, I’m gonna accept this invitation to hightail it down to Alexandria for the “festivities.”

In recent years, federal agencies and the courts have recognized that patents and competition share the overall purpose of promoting innovation and enhancing consumer welfare. Timely, high-quality patents promote investment in innovation. The competitive drive of a dynamic marketplace fosters the introduction of new and improved products and processes. By contrast, delay, uncertainty, and poor patent quality can create barriers to innovation. Additionally, where standards for violating antitrust law are unclear, or where the threshold for antitrust violations is set too low or too high, innovation can be stifled. The workshop will address ways in which careful calibration and balancing of patent policy and competition policy can best promote incentives to innovate.

“Since innovation is the only sustainable source of America’s competitive advantage, the relationship between intellectual property, which captures the value of innovation, and competition policy, which maintains a dynamic marketplace for innovation, is of paramount importance,” noted Under Secretary of Commerce David Kappos. “This conference is designed to explore the relationship between competition policy and intellectual property policy and how it fosters innovation.”

“We will benefit from working together with our PTO and FTC colleagues to ensure that the United States is using patent and competition policy that maximizes the potential for innovation, which is the primary driving force of economic growth in the 21st century,” said Assistant Attorney General Christine Varney.

FTC Chairman Jon Leibowitz agreed. “The FTC appreciates this opportunity to work with the DOJ and the USPTO to explore a balance of patent and competition policy that most benefits consumers, by spurring more innovative products and lower prices.”

The first morning panel of experts will examine how challenges posed by the patent backlog affect the competitive strategies of patent applicants and innovators. The second morning panel will examine the impact of the Supreme Court’s 2006 opinion in eBay Inc. v. MercExchange L.L.C. on permanent injunctions for patent infringement in district courts and at the U.S. International Trade Commission (USITC). The afternoon panel will evaluate the role of patents in connection with industry standards and the impact such standards have on competition. The workshop will conclude with reflections on the panel discussions by the chief economists of the department’s Antitrust Division, the FTC, and the USPTO.

The schedule for the workshop is as follows:

WELCOMING REMARKS

9:00 a.m.-9:30 a.m.

David Kappos, Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office

Christine Varney, Assistant Attorney General, Antitrust Division, Department of Justice

Aneesh Chopra, U.S. Chief Technology Officer, Executive Office of the President

PANEL 1: The Patent Application Backlog: The Competitive Challenges for Innovators

9:30 a.m.-11:00 a.m.

Panelists

John F. Duffy, Oswald Symister Colclough Research Professor of Law,

The George Washington University Law School

Josh Makower, M.D., Founder & CEO, ExploraMed Development LLC

Michael Meurer, Professor of Law, Boston University School of Law

Richard T. Ogawa, Esq., Ogawa P.C.

Scott Stern, Joseph and Carole Levy Professor, Kellogg School of Management, Northwestern University and Visiting Professor, MIT Sloan School of Management

Break

11:00 a.m.-11:15 a.m.

PANEL 2: Permanent Injunctions in the District Courts and ITC: Effects on Competition and Innovation

11:15 a.m.-12:45 p.m.

Panelists

Bernard J. Cassidy, Executive Vice President and General Counsel, Tessera Technologies Inc.

Colleen Chien, Assistant Professor of Law, Santa Clara Law

Alice A. Kipel, Partner, Steptoe & Johnson LLP

Christine McDaniel, Economic Adviser to Chairman Shara L. Aranoff,

U.S. International Trade Commission

William Barr, former General Counsel, Verizon Communications Inc.

Emily Ward, Vice President and Deputy General Counsel, eBay Inc. (invited)

Lunch Break

12:45 a.m.-2:15 p.m.

Introductory Remarks

2:15 a.m.-2:30 p.m.

Edith Ramirez, Commissioner, Federal Trade Commission

PANEL 3: Standard Setting, Patent Rights, and Competition Policy

2:30 p.m.-4:00 p.m.

Panelists

Mark Chandler, Senior Vice President & General Counsel, Cisco Systems Inc.

Patrick Gallagher, Director, National Institute of Standards & Technology,

Department of Commerce

Brian Kahin, Senior Fellow, Computer & Communications Industry Association

Anne Layne-Farrar, Director, LECG

Amy A. Marasco, General Manager, Standards Strategy, Microsoft Corp.

A. Douglas Melamed, Senior Vice President & General Counsel, Intel Corp.

Break

4:00 p.m.-4:15 p.m.

Wrap-Up Discussion

4:15 p.m.-5:15 p.m.

Carl Shapiro, Deputy Assistant Attorney General for Economic Analysis, Antitrust Division,

Department of Justice

Joseph Farrell, Director, Bureau of Economics, Federal Trade Commission

Stuart Graham, Chief Economist, U.S. Patent and Trademark Office

Reading Myriad Genetics While Waiting For Bilski.

Why is this molecule different from all other molecules?

By Gerry J. Elman¹

As I write on April 29, 2010, the U.S. Supreme Court hasn’t yet issued its anxiously-awaited decision in the Bilski² case. This case is to determine the whether a particular business-related method is outside the scope of subject matter that is potentially capable of protection by the claims of a U.S. patent. The wider implications of the case are expected to be enormous.

The Framers of the Constitution understood the importance of innovation to the economy of their fledgling nation in the New World. They provided that Congress would have the power: “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”³ Congress has implemented this provision by enacting copyright and patent laws.

The patent law provides in section 101 that:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.⁴ [Emphasis added.]

This section of the statute implies a threshold test that must be satisfied before proceeding to inquiries raised in other sections of the law. We typically refer to it for short as the requirement for statutory subject matter, that is, that the claimed subject matter defining the invention or discovery fit into one of the four categories listed in the statute: process, machine, manufacture, or composition of matter.

On March 29th, a month ago, federal district court judge Robert W. Sweet issued a summary judgment decision in a highly publicized⁵ case brought by a coalition of plaintiffs, primarily groups of medical specialists and their patients.⁶ It sought to establish the essential unpatentability of claims practised by Myriad Genetics relating to tests for various genetic abnormalities associated with an enhanced likelihood of developing breast cancer. Following extensive briefing by the parties and numerous amici curiae, Judge Sweet held that claims to certain isolated and purified genes and to certain test methods seeking to detect those genes in a human patient are not statutory subject matter under U.S. patent law.

With particular regard to inventions in the field of biotechnology, the Supreme Court was presented in 1980 with the question of whether a novel and nonobvious microorganism was statutory subject matter for a patent. In the case of Chakrabarty,⁷ Mr. Justice Burger wrote for a majority of the Court that “We have … cautioned that courts ‘should not read into the patent laws limitations and conditions which the legislature has not expressed.’”

Regarding the statute itself, he wrote:

In choosing such expansive terms as “manufacture” and “composition of matter,” modified by the comprehensive “any,” Congress plainly contemplated that the patent laws would be given wide scope.

Concluding that Congress had intended patentable subject matter to “include anything under the sun that is made by man,” the Court held that:

Judged in this light, [Chakrabarty]’s micro-organism plainly qualifies as patentable subject matter. His claim is … to a nonnaturally occurring manufacture or composition of matter—a product of human ingenuity.

Such a decision begged the question of whether the organism was a “manufacture” or a “composition of matter,” and implied that even if it was something that overlaps the two expressions, the novel organism was still patentable subject matter.

Based on that holding, it should be a slam dunk to characterize a polynucleotide – clearly within the statutory recitation as a composition of matter – as meeting the statutory test for patentable subject matter, as long as that substance hadn’t previously existed in the form recited in the patent claim under consideration.

Yet Judge Sweet had been persuaded by plaintiffs to hold otherwise. How come? The decision includes a scholarly review of the case law, including a skeptical consideration of the 1911 district court decision in Parke-Davis Co. v. H.K. Mulford Co..⁸ He then wrote:

In sum, the clear line of Supreme Court precedent and accompanying lower court authorities, stretching from American Wood-Paper through to Chakrabarty, establishes that purification of a product of nature, without more, cannot transform it into patentable subject matter. Rather, the purified product must possess “markedly different characteristics” in order to satisfy the requirements of § 101.

Judge Sweet’s decision proceeds to consider whether a purified polynucleotide could meet this requirement, as follows:

The central premise of Myriad’s argument that the claimed DNA is “markedly different” from DNA found in nature is the assertion that “[i]solated DNA molecules should be treated no differently than other chemical compounds for patent eligibility,” and that the alleged “difference in the structural and functional properties of isolated DNA” render the claimed DNA patentable subject matter [citations omitted].

Myriad’s focus on the chemical nature of DNA, however, fails to acknowledge the unique characteristics of DNA that differentiate it from other chemical compounds. . . .

DNA represents the physical embodiment of biological information, distinct in its essential characteristics from any other chemical found in nature [emphasis added]. It is concluded that DNA’s existence in an “isolated” form alters neither this fundamental quality of DNA as it exists in the body nor the information it encodes. Therefore, the patents at issue directed to “isolated DNA” containing sequences found in nature are unsustainable as a matter of law and are deemed unpatentable subject matter under 35 U.S.C. § 101.

The decision latches onto a characteristic of DNA, seeking to distinguish it from other biologically active molecules, stating:

This informational quality is unique among the chemical compounds found in our bodies, and it would be erroneous to view DNA as “no different” than other chemicals previously the subject of patents [emphasis added].

Myriad and many of the amici suggest that the invalidation of the patents-in-suit will result in the decimation of the biotechnology industry. See, e.g., Myriad Br. … (suggesting that a finding that DNA is unpatentable subject matter will invalidate patents to important chemical compounds such as the anticancer drug Taxol (paclitaxel) and leave “little to nothing” of the United States biotechnology industry). The conclusions reached in this opinion concerning the subject matter patentability of isolated DNA, however, are based on the unique properties of DNA that distinguish it from all other chemicals and biological molecules found in nature. [This is ftn. 51, emphasis added].

In light of DNA’s unique qualities as a physical embodiment of information, none of the structural and functional differences cited by Myriad between native BRCA1/2 DNA and the isolated BRCA1/2 DNA claimed in the patents-in-suit render the claimed DNA “markedly different.” This conclusion is driven by the overriding importance of DNA’s nucleotide sequence to both its natural biological function as well as the utility associated with DNA in its isolated form. [emphasis added].

Judge Sweet’s decision happened to precede by just a few hours my participation in a ceremonial meal at which Jews down through the ages have recounted the Exodus. Curiously, it seems to me that these confluent events have something else in common. That’s because the Passover Seder creates a night that is different from all other nights of the year. It is traditional for a youngster to recite in Hebrew the Four Questions, starting with the words Mah nishtanah, ha-laylah ha-zeh, mi-kol ha-leylot, traditionally translated freely as: “Why is this night different from all other nights?”⁹

Judge Sweet’s decision holds that a polynucleotide which represents a human gene is not patentable subject matter. Never mind that the U.S. Patent Office agrees that it’s novel and useful and nonobvious. Judge Sweet holds that DNA is different from all other biologically active molecules such as adrenaline or Taxol, because DNA uniquely is a carrier of information.

But then, after the four cups of wine mandated by the Seder, I started to wonder: doesn’t the presence of biological information uniquely in DNA imply the existence of some Intelligence who’s intending to send the information or at least putting it into the DNA to be received or otherwise utilized?¹⁰ So wouldn’t that imply that the distinction that Judge Sweet draws between the claimed molecules, polynucleotides, and other biologically active molecules is due to a Source of information?

In contemplating this distinction between a molecule bearing biological information and all other molecules with a physiological function in the cell, it seemed to me that Judge Sweet’s opinion tacitly implies as an aspect of science the concept of Intelligent Design.¹¹

Yet as a resident of Pennsylvania and former public servant of the Commonwealth, I was familiar with the federal case in Harrisburg that had settled, seemingly once and for all after a lengthy trial with eminent fact witnesses, that “Intelligent Design is not science.”¹² But I did a double-take as I recalled who it was that had energetically spearheaded this successful challenge to the teaching of Intelligent Design as an alternative explanation of biological origins. Because it was none other than the folks who brought us this assault on the validity of gene patents …. the venerable ACLU, the American Civil Liberties Union.

——————————————————————————

Footnotes

[1] Editor-in-Chief of Biotechnology Law Report and president of Elman Technology Law, P.C. (M.S. in Chemistry, Stanford) The opinions expressed herein should not be attributed to any client or other individual or entity. This article is scheduled to be published in Biotechnology Law Report, vol. 29, no. 2.

[2] Bilski v. Kappos, — U.S. —, reviewing the en banc decision of In re Bilski, 545 F.3d 943 (Fed. Cir. 2008). The Supreme Court argument was held November 9, 2009. see Wikipedia: In_re_Bilski

[3] U.S. Constitution, Article 1, section 8, clause 8.

[4] 35 U.S.C. § 101.

[5] See, e.g., PBS Newshour (April 2, 2010) and CBS 60 Minutes (April 4, 2010).

[6] Association for Molecular Pathology, et al. v. United States Patent and Trademark Office, et al., 1:2009cv04515, S.D.N.Y., filed May 12, 2009, decision on summary judgment March 29, 2010, as amended April 5, 2010 — F.Supp.2d —-, 2010 WL 1233416. The plaintiffs are: Association For Molecular Pathology, American College of Medical Genetics, American Society for Clinical Pathology, College of American Pathologists, Breast Cancer Action, Boston Women’s Health Book Collective and certain gene researchers and individuals potentially affected by breast cancer. The lawyers for plaintiffs are with the American Civil Liberties Union (ACLU) and the Public Patent Foundation. The named defendants are: United States Patent and Trademark Office (“USPTO”), Myriad Genetics, and the directors of the University of Utah Research Foundation. The case involves U.S. Patents 5,747,282; 5,693,473; 5,709,999; 5,710,001; 5,753,441; 5,837,492; and 6,033,857, owned by Myriad Genetics or licensed to Myriad by the University of Utah Research Foundation or other universities. For further background see the articles I co-authored, Biotechnology Law Report, vol. 29, no. 1. at 23-27 and 29-31.

[7] Diamond v. Chakrabarty, 447 U.S. 303 (1980).

[8] Parke-Davis Co. v. H.K. Mulford Co., 189 F.2d 95 (S.D.N.Y. 1911). After an extensive dissertation on the subject, Judge Sweet took the opportunity to candidly state in ftn. 46: “Although Judge Hand once turned his back on the author of this opinion arguing before him on behalf of the Government, his opinion in Parke-Davis deserves careful review but brings to mind that oft repeated adage ‘Quote Learned, but follow Gus [Hand].’ This author, confronted by genomics and molecular biology, also emphatically empathizes with Judge Hand’s complaint in Parke-Davis about his lack of knowledge of the rudiments of chemistry.” [citations omitted]

[9] Wikipedia: Ma_Nishtana

[10] Tiger, tiger, burning bright. In the forests of the night, What immortal hand or eye. Could frame thy fearful symmetry? William Blake, The Tiger (1794).

[11] Compare the science fiction novel by Robert J. Sawyer, Calculating God (Tor 2000) with Richard Dawkins, The God Delusion (Houghton Mifflin Harcourt 2006) esp. ch. 4.

[12] Tammy Kitzmiller, et al. v. Dover Area School District, et al., 400 F. Supp. 2d 707 (Docket no. 4cv2688)(M.D. Pa. 2005). Wikipedia: Kitzmiller_v._Dover_Area_School_District

Excerpt from transcript of April 2, 2010 PBS Newshour:

A major goal of modern health science has been to identify the links between our genes and disease, to assess risk, and to find treatments and cures. Over the last two decades, university researchers and a multibillion dollar biotech industry have expanded the study of the human genome and developed a working blueprint of human DNA that includes hereditary information stored on 23 pairs of chromosomes wrapped as double-helixes.

Companies have also filed patents on particular genes and the research connected with them. Roughly 40,000 patents are now held on about 20 percent of all human genes. Among those are patents owned by Myriad Genetics, a company based in Salt Lake City, for genes known as BRCA1 and BRCA2, the genes whose mutations have been linked to hereditary breast and ovarian cancers.

Myriad sells a test costing more than $3,000 that helps assess a woman’s risk for cancer. But a group of individuals and organizations challenged those patents in a lawsuit, arguing that, under the law, a so-called product of nature cannot be patented.

This week, a federal judge agreed with the plaintiffs in a ruling that could have a broad impact on future genetic research.

Here to discuss the case are Daniel Ravicher, executive director of the Public Patent Foundation at the Benjamin Cardozo School of law. The foundation was one of the plaintiffs in the case against Myriad Genetics. And Ken Chahine, a patent attorney and visiting professor of law at the University of Utah. He’s a former CEO of a biotech company, and filed an amicus brief on behalf of Myriad. . . .

Click the black bar with red text below to play the video or read the rest of the transcript.

by Scott Rylan Powell and Gerry J. Elman^†

In New York City on October 20, 2009, the American Civil Liberties Union  (“ACLU”) hosted a screening of In The Family, a documentary on the emotional turmoil experienced by people across the nation who carry certain mutations along the Breast Cancer 1 and 2 (“BRCA”) genes. Everyone has these genes, and as the name implies, the mutated forms are linked to an increased risk of breast cancer.  And certain specific mutations of these genes indicate a high probability of developing ovarian and/or prostate cancer. These types of cancer, after developing in one organ, are prone to spreading throughout the body and killing the host. 

The main focus of In The Family is that, once a woman learns that she carries any of the mutations, the only preventative step she can take is to have her breasts and ovaries surgically removed.  Understandably, the women interviewed in the documentary struggled with the prospect of voluntarily excising these organs before cancer had even struck.  Ones who chose the surgery had joined emotional support groups. Many of those who had chosen to forego surgery died after the cancer developed and spread throughout their bodies. All in all, the movie paints a gloomy picture, leaving the viewer desperately looking for a solution to end the trauma.

After the movie, the ACLU presented their solution: sue the U.S. Patent and Trademark Office, along with anyone associated with patents relating to the BRCA 1 and 2 genes. Representatives from the ACLU proudly announced that ACLU and Public Patent Foundation (“PubPat”)( lawyers, on behalf of a variety of plaintiffs including makers of home-brew genetic testing kits that infringe intellectual property rights, had already filed such a lawsuit.

If the connection between the problem and the proposed solution seems attenuated, that’s because it is. However, with gross oversimplification and some sleight-of-hand, the ACLU converted their emotionally-charged, if slightly-confounded, audience of laypeople into supporters of the ACLU/Pubpat’s lawsuit.

The Lawsuit

On May 12, 2009, lawyers for the ACLU and the Public Patent Foundation (“PubPat”), an organization affiliated with the Benjamin N. Cardozo School of Law, filed a federal lawsuit in the Southern District of New York against the U.S. Patent and Trademark Office, Myriad Genetics Inc., and directors of the University of Utah Research Foundation.[1] Myriad Genetics (“Myriad”), portrayed as the archetypal evil corporation in the propaganda issued by the ACLU and PubPat, is a practitioner of a patent-protected test used to determine whether a person carries certain  mutations of the breast cancer susceptibility genes.  A number of patents are at issue in the case: US 5,693,473; US 5,709,999; US 5,710,001; US 5,747,282; US 5,753,441; US 5,837,492; and US 6,033,857.  All of the patents are owned or co-owned by the University of Utah Research Foundation. Myriad is a co-owner of US 5,747,282 and is a licensee of the other patents.

Patents for Genes?

First some background: To provide a means for inventors to recover their research and development costs and to incentivize further innovation, Article I of United States Constitution grants patent holders a time-limited exclusive right to practice their invention.  When the founding fathers drafted the Constitution, inventions were primarily mechanisms. Accordingly, whether a given area of technology qualifies as patent-eligible subject matter is a question that repeatedly appears as science and engineering branch out into new fields.

Fast-forward to 1972, when, having developed an oil-eating bacterium that would be particularly useful for cleaning up oil spills at sea, a scientist at General Electric Company, Ananda Chakrabarty, applied for a patent with claims to the microorganism itself.  When the application was examined for patentability, Chakrabarty immediately encountered resistance at the U.S. Patent and Trademark Office (“PTO”).  The government rejected the notion that a man-made microorganism could be patent-eligible subject matter. That began a struggle starting at the PTO, winding its way through appellate-level venues, and reaching its conclusion at the U.S. Supreme Court in 1980, when Chakrabarty’s bacterium was finally deemed to be patent-eligible.[2] As a result, the doctrines of U.S. patent law were adjusted to recognize the patent-eligibility of biological entities generated through human ingenuity.

Such a change in perspective was timely, given that during the interim, molecular biologists had been hard at work developing improved techniques to splice together DNA fragments and arrive at previously-non-existent sequences.  In short, U.S. patent law was seen as recalibrated to accommodate and support the burgeoning field of biotechnology.

Man-Made Molecules or Products of Nature?

The case strikes at the validity of any patent claims to polynucleotide molecules embodying naturally occurring genetic sequences, though “isolated” through a man-made process. The ACLU/PubPat arguments obscure the latter aspect by repeatedly stating in their complaint and through widely distributed propaganda that the patent claims are drawn to subject matter that is purely a product of nature. Whether it is through a misunderstanding of the science and U.S. patent law, or through intentional misrepresentation, the ACLU/PubPat’s efforts threaten to pull the rug out from under an entire biotech industry that has invested heavily in intellectual property and which is relying on the U.S. patent system in order to recover costs attendant to innovation. Whatever the underlying reasons for the ACLU/PubPat’s joint efforts in this regard, would-be infringers of the patents are all too happy to join the bandwagon. Indeed, one maker of a home-brew test for the BRCA mutations spoke at the New York City film screening to express her outrage at receiving a cease-and-desist letter for infringing the patents.

The Right to Exclude after eBay v. MercExchange

Moreover, the thrust of the ACLU/PubPat’s case is misguided.  In 2006, the Supreme Court issued a decision in eBay Inc. v. MercExchange, L.L.C., which reinterpreted one of the fundamental principles of U.S. patent law.[3]  Prior to the decision, a patent was understood to give its owner an automatic ability to enjoin others from practicing the patented invention, absent exceptional circumstances. Indeed, the Patent Act states that “patents shall have the attributes of personal property,” including “the right to exclude others from making, using, offering for sale, or selling the invention.”[4]  The availability of an injunction against patent infringement differed from most other areas of federal law, where a four-factor test is utilized to carefully weigh the pros and cons of granting this extraordinary type of relief instead of money damages. The test requires the plaintiff to show (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity (such an injunction) is warranted; and (4) that the public interest would not be disserved by a permanent injunction.[5]

In the case of eBay v. MercExchange, this reinterpretation of patent law allowed eBay and its customers to continue using the “buy it now” feature of eBay’s online auction system, even though MercExchange owned a patent covering that functionality.

As a result of the Supreme Court’s holding that the same four-factor test also applies for injunctions against infringement of U.S. patents, the public interest is now a relevant consideration in whether a court would enjoin a patent infringer to altogether stop practicing the invention or instead hold that the infringer should just compensate the patent holder with money, rather as if it were a licensee of the patent.

The ACLU/PubPat lawyers justify their case by arguing that since a patent gives the patent holder the right to exclude all others from practicing the invention, members of the public are prevented from getting the test for BRCA mutations from anyone but Myriad. The lawyers argue that, in order for members of the public to have the option of getting a second opinion on whether their BRCA genes contain the mutations indicative of breast, ovarian, or prostate cancer, the patents must be deemed invalid.

Yet, since the day eBay v. MercExchange was decided, the public interest is a factor to be carefully weighed before a court grants a patent holder an injunction to prevent others from practicing an invention recited in a patent claim. If the goal is to ensure the availability of health care that includes widely available genetic tests, there is no need to challenge the patentability of molecules embodying isolated genetic sequences.  Instead, the same ends of enabling other entities to perform the BRCA gene tests could be achieved simply through licensing the patents to others.  And if as seems to be the case, the owners of the pertinent patents are unwilling to license them to others, the courts are now open to considering the public policy arguments that weigh in favor allowing others to pay monetary damages, equivalent in effect to licensing royalties, instead of enjoining others from performing the tests.

The Research Exception to Patent Infringement

Another assertion that the ACLU/PubPat lawyers make is that research that could lead to developments of cures for cancer resulting from mutations along the BRCA genes is stifled because the act of researching the genes would constitute infringement of the BRCA patent claims. However, U.S. patent law provides an exception to patent infringement for research and development efforts that could lead to such a cure. Title 35, section 271(e)(1) of the United States Code states, in pertinent part:

It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention … solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.

The Supreme Court visited this topic in the case of Merck KGaA v. Integra Lifesciences I, Ltd. and helped further define the metes and bounds of this statutory exception to patent infringement.[6] In that case, the Supreme Court said that (1) experimentation on drugs that are not ultimately the subject of an FDA submission or (2) use of patented compounds in experiments that are not ultimately submitted to the FDA can still fall within the protection of 35 U.S.C. §271(e)(1).[7]  In other words, if an entity, such as a research physician or hospital, is developing a drug that will cure or treat cancer caused by mutations along the BRCA genes, then it is reasonable to expect that entity will be submitting information about the drug to the FDA in the future. Correspondingly, the entity would be protected under 35 U.S.C. §271(e)(1) and free to use the isolated genetic sequences recited in the claims of the BRCA patents for research and experimentation.  According to Merck v. Integra Lifesciences, even if the experiments are not ultimately submitted to the FDA, perhaps because further testing revealed that the drug is ineffective, there is still no infringement.[8]

Accordingly, the ACLU/PubPat’s tearful assertion that research into treatments and cures for breast and ovarian cancer is inhibited by the BRCA patents has little merit.  Their tears are crocodile tears, unnecessarily shed but to gather support from lay people for their assault on the protections fostered by U.S. patent system.

The Claims in Question

 Perhaps the most glaring disconnect between the ACLU’s statements and reality is the nature of certain patent claims that the ACLU seek to invalidate. The ACLU argue that the patent claims in dispute fall outside the scope of statutory subject matter, defined in a 35 U.S.C. §101 as “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” The ACLU assert that the claims recite products of nature, a class that has been judicially recognized as falling outside the scope of statutory subject matter.[9]  A quick look at the challenged patent claims reveals that they are directed to isolated DNA sequences of BRCA. Isolation is a process that must be carried out by a person or machine. In other words, for an isolated sequence of BRCA to exist, there must be human intervention. As the Supreme Court said in Chakrabarty, “non-naturally occurring manufacture or composition of matter – a product of human ingenuity” is patent-eligible subject matter.[10] The claims in question, reproduced below, all recite “isolated” as a limitation, thereby excluding naturally occurring compositions of matter from their scope:
 

U.S. Patent 5,693,473

Claim 1: An isolated DNA comprising an altered BRCA1 DNA having at least one of the alterations set forth in Tables 12A, 14, 18 or 19 with the proviso that the alteration is not a deletion of four nucleotides corresponding to base numbers 4184-4187 in SEQ. ID. NO:1.

(b) a DNA having the nucleotide sequence set forth in SEQ ID NO:1 having an extra C at nucleotide position 5385;

U.S. Patent 5,747,282

Claim 1: An isolated DNA coding for a BRCA1 polypeptide, said polypeptide having the amino acid sequence set forth in SEQ ID NO:2.

Claim 2: The isolated DNA of claim 1, wherein said DNA has the nucleotide sequence set forth in SEQ ID NO:1.

(c) a DNA having the nucleotide sequence set forth in SEQ ID NO: 1 having G at nucleotide position 5443; and, (d) a DNA having the nucleotide sequence set forth in SEQ ID NO:1 having 11 base pairs at nucleotide positions 189-199 deleted.

Claim 5: An isolated DNA having at least 15 nucleotides of the DNA of claim 1.

Claim 6: An isolated DNA having at least 15 nucleotides of the DNA of claim 2.

Claim 7: An isolated DNA selected from the group consisting of:

(a) a DNA having the nucleotide sequence set forth in SEQ ID NO:1 having T at nucleotide position 4056;

U.S. Patent 5,837,492

Claim 1: An isolated DNA molecule coding for a BRCA2 polypeptide, said DNA molecule comprising a nucleic acid sequence encoding the amino acid sequence set forth in SEQ ID NO:2.

Claim 6: An isolated DNA molecule coding for a mutated form of the BRCA2 polypeptide set forth in SEQ ID NO:2, wherein said mutated form of the BRCA2 polypeptide is associated with susceptibility to cancer.

Claim 7: The isolated DNA molecule of claim 6, wherein the DNA molecule comprises a mutated nucleotide sequence set forth in SEQ ID NO:1.

The Bayh-Dole Act

As mentioned previously, the BRCA patents in dispute are owned in whole or in part by the University of Utah Research Foundation, with Myriad as a partial owner of one of them and a licensee of the remaining patents. In other words, even though the ACLU/PubPat lawyers portray Myriad Genetics as an evil corporation hoarding patents on naturally-occurring material, the reality is that the patents are by-and-large owned by the University of Utah, which is collecting fees from Myriad Genetics to practice the patents. The court complaint also briefly references the fact that the Trustees of the University of Pennsylvania have an ownership interest in two of the patents. To the lay person, it may seem odd that educational institutions, which on their face seem to support the free flow and sharing of knowledge, are actually building fences and toll-booths around the products of their research.

A patent portfolio can be a significant source of income for a university, biasing it towards a proprietary view of its research efforts instead of an open, socialistic approach. For example, the University of Utah Technology Commercialization Office reports that it received over $25 million in licensing income for 2008.[11] The MIT Technology Licensing Office states that granted 67 patent licenses and brought in $66.3 million in royalties in 2009.[12] In universities, the old model of 1) research, then 2) publish has been replaced by 1) research, 2) apply for patent, and then 3) publish. The argument for the new process is that the revenue generated from licensing the resulting patents is necessary to fund further research. This appears to be a valid argument and would probably be agreeable to most lay people. What most lay people might not find agreeable is that their tax dollars are actually being appropriated to these institutions to help fund their research, the fruits of which the institutions are obtaining exclusive rights to.

The Bayh-Dole Act, passed by Congress in 1980, the same year as the aforementioned Chakrabarty decision, allows the recipient of government funding for research and development to hold sole title to the patents for any resulting inventions.[13] In fact, the Bayh-Dole Act requires that an entity receiving government funds and obtaining title to any resulting inventions seek patent protection for and commercialize the inventions.[14] Naturally, a university that intends to keep pace with its competition is going to take advantage of the government funds for research, and correspondingly, comply with the provisions of the Bayh-Dole Act. The result is that universities build up patent portfolios based on subject matter they might have simply published, if they were operating under the pre-Bayh-Dole model of 1) research, then 2) publish. 

There are those who assert that the principles of the Bayh-Dole Act should be blunted when gene patents are involved.  On February 5, 2010, a federal advisory committee to the Secretary of Health and Human Services approved a draft report on Gene Patents and Licensing Practices and Their Impact on Patient Access to Genetic Tests.[15]  

To head off the position expected of the SACGHS report, a press conference was convened by the Biotechnology Industry Organization (“BIO”) on February 4^th.  There former U.S. Senator Birch Bayh said that the legislation he had co-sponsored with former Senator Bob Dole came at a time when the federal government owned all the inventions that came from federally-funded research and U.S. innovation was stagnating and investment in R&D was not growing.  He added that the Senate Judiciary Committee reported “that it could not find a single instance where the old policies had resulted in even one drug being developed when the government controlled the patent.  We found numerous potentially helpful medical discoveries simply languishing on laboratory shelves, benefiting no one.”

“The American taxpayers had invested $30 billion in research and had received no return on investment,” Bayh added, pointing out that there needs to be incentives to get people and companies to invest in such ideas. “This incentive would not exist unless the investor has a right to the patent in which he’s investing.”

“Collaboration fostered by the Bayh-Dole Act and fueled by massive amounts of private investment means that research is translated into tangible medicines, diagnostic tests, and other healthcare-related products that save lives, improve diagnoses, and alleviate suffering for millions of people worldwide,” added BIO President and former Congressman Jim Greenwood. Although the SACGHS report indicates that gene patents and licensing practices have not had an adverse impact on patient access to genetic tests, the committee is nevertheless making recommendations that “would undermine the U.S. patent system and the Bayh-Dole technology transfer system that have served our nation so well,” he said.

SACGHS task force member Brian Stanton, Ph.D., a former biotechnology expert at the PTO and former director of the Division of Policy at the National Institutes of Health’s Office of Technology Transfer, said the report shows “no evidence of harm, and yet it still calls for changes.” One proposal under consideration has been exempt infringers of gene patents from liability. Acknowledging that the Task Force on Gene Patents and Licensing had identified isolated instances of harm that need to be addressed, it also determined that “the court systems and the systems of checks and balances that are built into the fabric of the patent system were more than capable of addressing problems on a case-by-case basis.” He pointed out that the SACGHS report includes a letter of dissent from the only three members of the full committee who have direct experience in business and law with respect to intellectual property and private sector development of products and services.

Conclusion

The ACLU/PubPat lawsuit exemplifies an oversimplified and ultimately incorrect view of the underlying facts and law. Their grandstanding threatens to sway public opinion in a direction that would reverse the advances fostered since 1980 by the U.S. patent system. It is of utmost importance that the defendants and the patent bar in general correct the ACLU/PubPat’s misrepresentations and reverse the damage that the ACLU has caused and prevent any further damage.  Evidence of such damage due to misguided public opinion is in the SACGHS recommendations approved on February 5^th.  It is to be hoped that HHS Secretary Kathleen Sebelius will take them with a grain of salt.

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^†  Attorneys with Elman Technology Law, P.C.  Opinions expressed herein should not be attributed to anyone else.  However, the authors wish to thank Geoffrey Karny for his thoughtful discussions on the subject of this article. This article is published at Biotechnology Law Report. February 2010, 29(1): 23-27.

[1] Association for Molecular Pathology, et al. v. United States Patent and Trademark Office, et al., 1:2009cv04515, S.D.N.Y., May 12, 2009.  The plaintiffs are: Association For Molecular Pathology, American College of Medical Genetics, American Society for Clinical Pathology, College of American Pathologists, Breast Cancer Action, Boston Women’s Health Book Collective and certain gene researchers and individuals potentially affected by breast cancer. The named defendants are: United States Patent and Trademark Office (“USPTO”), Myriad Genetics, and the directors of the University of Utah Research Foundation.

[2] Diamond v. Chakrabarty, 447 U.S. 303 (1980).

[3] eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). 

[4] 35 U.S.C. §§ 261, 154(a)(1).

[5] 547 U.S. 388, 391 (2006).

[6] Merck KGaA v. Integra Lifesciences I, Ltd, 545 U.S. 193 (2005).

[7] Id. at 206.

[8] Id.

[9] Diamond v. Chakrabarty, 447 U.S. 303 (1980).

[10] Id. at 309.

[11] http://www.tco.utah.edu/metrics.html

[12] http://web.mit.edu/tlo/www/about/office_statistics.html

[13] 35 U.S.C. §§200-212; 37 C.F.R. §401

[14] 35 U.S.C. §§202(c)(3),(5).

[15] Secretary’s Advisory Committee on Genetics, Health, and Society, Twenty-first Meeting, February 4-5, 2010, Washington, D.C.