Patent Docs

Hologic, Inc. v. Minerva Surgical, Inc. (Fed. Cir. 2022)

By Kevin E. Noonan --

Last year, the Supreme Court declined an invitation to abrogate the doctrine of assignor estoppel by an assignor sued for patent infringement in Minerva Surgical v. Hologic.  Nevertheless, the Court followed its proclivities and vacated the Federal Circuit's opinion based on how the appellate court applied the doctrine and remanded.  Last week, the Federal Circuit issued its opinion on remand, in Hologic Inc. v. Minerva Surgical, Inc., once again determining that Minerva is estopped under the doctrine from asserting claims in a patent assigned by its principals to Hologic.

To recap, the case arose in an infringement suit over U.S. Patent Nos. 6,782,183 and 9,095,348.  The patents were directed to "procedures and devices for endometrial ablation."  Claim 9 of the '183 patent and claim 1 of the '348 patent were considered by the Court to be representative:

'183 patent:

9.  A method of detecting a perforation in a uterus, comprising the steps of:
passing an inflation medium into the uterus;
    monitoring for the presence of a perforation in the uterus using a pressure sensor;
    if no perforation is detected during the monitoring step, permitting ablation of the uterus using an ablation device; and
    if a perforation is detected during the monitoring step, preventing ablation of the uterus.

'348 patent:

1.  A device for treating a uterus comprising:
an elongate member having a proximal portion and a distal portion, the elongate member comprising
    an outer sleeve and an inner sleeve slidably and co-axially disposed within the outer sleeve;
    an applicator head coupled to the distal portion, the applicator head defining an interior volume and having a contracted state and an expanded state, the contracted state being configured for transcervical insertion and the expanded state being configured to conform to the shape of the uterus, the applicator head including one or more electrodes for ablating endometrial lining tissue of the uterus;
    a handle coupled to the proximal portion of the elongate member, wherein the handle comprises a frame, a proximal grip and a distal grip pivotally attached to one another at a pivot point and operably coupled to the applicator head so that when the proximal grip and the distal grip are moved closer together, the applicator head transitions from the contracted state to the expanded state;
    a deflecting mechanism including flexures disposed within the applicator head, the flexures including first and second internal flexures and first and second external flexures, the first and second external flexures being coupled to the outer sleeve and the first and second internal flexures being coupled to the inner sleeve, wherein the deflecting mechanism is configured so that translating the inner sleeve relative to the frame causes the applicator head to transition from the contracted state to the expanded state; and
    an indicator mechanism operably coupled to the inner sleeve, the indicator mechanism configured to indicate a dimension of the uterus [emphases added to indicate disputed claim terms not further discussed herein].

As set forth in the Federal Circuit's earlier opinion, inventor Truckai (named on both the '183 and '348 patents) founded Novocept, which developed a system for detecting perforations in a uterus that could cause serious side effects for women undergoing endometrial ablation; the system depends on introducing carbon dioxide into the uterus and monitoring gas escape.  It was undisputed that Novocept's ablation product uses the claimed technology, and that inventor Truckai assigned his right to these patents to Novocept.  Thereafter, Novocept was acquired by co-plaintiff Cytyc Corp., which was subsequently acquired by co-plaintiff Hologic.

Thereafter, Inventor Truckai founded accused infringer Minerva and developed the accused infringing article, termed the Endometrial Ablation System (EAS).  Hologic sued Minerva over sales of the EAS for infringing the '183 and '348 patents.  Hologic moved for summary judgment that Minerva was estopped from challenging the validity of both the '183 and '348 patents under the doctrine of assignor estoppel, which motion the District Court granted.  Minerva appealed the District Court's grant of summary judgment and the Federal Circuit affirmed; see Hologic, Inc v Minerva Surgical, Inc. (Fed. Cir. 2020)".

In vacating this judgment, the Supreme Court ruled 5-4 that while remaining viable the doctrine was limited to those instances where the assignor could be fairly understood to have warranted (either expressly or implicitly) the validity of the claims ultimately issued.  Thus, in many circumstances -- such as when an inventor assigns rights to a patent application that ultimately issues with significantly broader claims -- the doctrine should not apply.  In the case at bar, the Court recognized that Minerva's device worked in a different manner that the original device disclosed in the putatively infringed patent (including a moisture-impermeable head Minerva argued was not within the scope of the assigned claims).  Hologic (the successor-in-interest), had filed a continuation of the original application and pursued claims that would encompass devices regardless of the moisture permeability of the head; these claims issued and were the basis for the suit.  Because the Supreme Court understood that under these circumstances it could be unfair to the assignor to attribute assignment of such claims to result in the estoppel the Court vacated the judgment for reconsideration by the Federal of these factors.

The Federal Circuit once again affirmed the District Court's application of the assignor estoppel doctrine, in an opinion by Judge Stoll joined by Judges Clevenger and Wallach.  The Court framed the issue as whether the claims at issue were "materially broader" than the claims assigned to Hologic at the time of the assignment.  In doing so, the opinion set forth in brief what was disclosed in the specification and provides this comparison between claim 1 of the later-filed (i.e., post-assignment) '348 patent and claim 31 of continuation application no. 09/103,072 (which inventor Truckai assigned to Hologic's predecessor-in-interest):

This comparison provides the basis for the Federal Circuit's analysis of whether claim 1 of the '348 patent-in-suit is materially broader than claim 31 of the '072 application (regarding which it was undisputed that inventor Truckai assigned and would be subject the assignor estoppel).  The basis for Minerva's contention of material differences in breadth was that all assigned claims in the '072 patent expressly recited a moisture-permeable head, and while conceding claim 31 did not contain such a limitation maintained that this claim had been cancelled prior to the assignment and was not pending (and thus not within the scope of the assignment).  Hologic responded to this assertion by noting that cancellation of claim 31 during prosecution was "without prejudice" (pursuant to a restriction requirement) and thus that applicant had retained the right to pursue the claim in a related, later-filed application claiming priority to the '072 application.

In performing its analysis, the panel first addressed whether claim 31 was part of the inventor Truckai's assignment (thus providing a warranty as to its validity).  The Court considered this question in light of what an "objective assignee" would understand from the prosecution history and the reason(s) claim 31 had been cancelled.  In reviewing the prosecution history of the '072 application, the opinion notes that inventor Truckai successfully argued against an anticipation rejection against claim 31 and obtained an allowance, after which the Examiner applied the restriction requirement leading to cancellation of this claim.  Under these circumstances, the Federal Circuit held that there was no concession, implicit or explicit, regarding the patentability of claim 31.  ("Put another way, Mr. Truckai canceled claim 31 for reasons other than patentability.")  The objective assignee would have recognized, the Court concluded, that applicant had retained the right to prosecute claim 31 (and the other non-elected claims) in a future application ("cancelation did not nullify the claim, as it remained viable for further prosecution in a divisional application filed by whomsoever owned the '072 application").  As stated in the opinion, "[a] claim canceled in response to a restriction requirement thus travels with the application."  Accordingly, the Court disagreed with Minerva's argument and held that claim 31 was both capable and was in fact assigned along with the rest of inventor Truckai's patent estate (the Court noting that the assignment included "the rights to any continuation, continuation-in-part, or divisional patent applications not yet filed").  This coupled with inventor Truckai's oath when the application was filed and representations in the assignment of having "'no present knowledge from which it could reasonably conclude' that these assigned intellectual property rights were invalid or unenforceable" as sufficient to satisfy an objective assignee's reliance that claim 31 was not invalid.

Turning to the task set forth by the Supreme Court, the panel considered whether claim 1 of the '348 patent was materially broader than claim 31 of the '072 application.  The opinion states that the parties have agreed that this question would be answered by the Court's consideration of only these two claims and a determination of whether there was a difference between moisture-permeable and moisture-impermeable devices.  (In a footnote the panel disclaims any wider consideration of the differences between "broader" claims and "materially broader" claims.)  The opinion sets forth the basis for its decision, wherein "if claim 31 is limited to moisture-permeable devices, the parties agree that claim 1 is 'materially broader' and assignor estoppel would not bar Minerva from asserting its invalidity defenses" (the Court already having construed claim 1 of the '348 patent to encompass moisture-permeable and moisture-impermeable embodiments of the claimed device).  In performing its assessment, the opinion states that the parties agree the "plain meaning" of claim 31 is not limited to moisture-impermeable devices (i.e., it is broad enough to encompass moisture-permeable devices as well).

In its construction the panel rejected Minerva's argument that claim 31 is missing a limitation to an "applicator head," stating that use of the open-ended term "comprising" actually supports devices comprising both moisture-permeable and -impermeable applicator heads.  The Court also rejected Minerva's argument that the term "electrode array" recited in claim 31 mandated the term to mean a moisture-permeable electrode array because the intrinsic evidence does not support this construction.  On the contrary, the Court states that the principle of claim differentiation supports the opposite conclusion, because claims 1 and 16 of the '072 application had expressly recited a moisture-permeable electrode array.  This showed that "Mr. Truckai and the other inventors knew how to draft claims that require moisture permeability" and "[t]he fact that they chose not to include this limitation in claim 31, unlike claims 1 and 16, indicates that they did not intend to so limit that claim," according to the Court.  And the opinion states that written description was not consistent with moisture permeability being "required or mandatory" and "it is improper to restrict claim 31 to this 'preferable' characteristic," citing Comaper Corp. v. Antec, Inc., 596 F.3d 1343, 1348 (Fed. Cir. 2010), and InterDigital Commc'ns, LLC v. Int'l Trade Comm'n, 690 F.3d 1318, 1328 (Fed. Cir. 2012).

The opinion concludes by noting that, Minerva not having disputed any of the "pertinent facts" relevant to whether assignor estoppel could be applied (other than the claim scope question), the Court reaffirmed its earlier determination that the District Court did not abuse its discretion in finding Minerva estopped from challenging the validity of the '348 patent on assignor estoppel grounds, and reinstated its earlier judgment on other appealed issues not affected by the Supreme Court's decision.

Hologic, Inc. v. Minerva Surgical, Inc. (Fed. Cir. 2022)
Panel: Circuit Judges Stoll, Clevenger, and Wallach
Opinion by Circuit Judge Stoll

LSI Corp. v. Regents of the University of Minnesota (Fed. Cir. 2022)

By Kevin E. Noonan --

A little more than three years ago, the Federal Circuit rejected the University of Minnesota's contention that LSI was barred from bringing (and the Patent Trial and Appeal Board barred from hearing) an inter partes review of certain University-owned patents under the sovereign immunity doctrine; see "Regents of the University of Minnesota v. LSI Corp. (Fed. Cir. 2019)").  Last week the Federal Circuit ruled on the outcome of the remaining IPR at issue in the prior appeal, affirming the PTAB's decision that two of the challenged claims were not invalid, in LSI Corp. v. Regents of the University of Minnesota.

To recap, the Regents of the University of Minnesota, an "arm of the state," sued separately LSI Corp. (a semiconductor chipmaker) and customers of Ericsson Inc. (a telecommunications company that intervened on its customers' behalf) for infringement of U.S. Patent Nos. 5,859,601 ('601 patent; LSI)) and 7,251,768 ('768 patent), 7,292,647 (RE45,230 patent), 8,588,317 ('317 patent), 8,718,185 ('185 patent), and 8,774,309 ('309 patent; Ericsson), and each defendant separately filed inter partes review (IPR) petitions against each asserted patent.  Before the Board instituted the IPRs, the University of Minnesota filed a motion to dismiss on State sovereign immunity grounds.  The PTAB, in an expanded panel, ruled that while State sovereign immunity applied, Minnesota had waived the immunity by filing suit.  The Federal Circuit affirmed, in an expansive decision holding that State sovereign immunity did not immunize Minnesota from IPR proceedings for the same reasons that tribal sovereign immunity did not preclude IPR proceedings involving the St. Regis Mohawk Indian Tribe (see "Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc. (Fed. Cir. 2018)").

Back before the PTAB, the University disclaimed all challenged patent claims except claims 13, 14, and 17 of the '601 patent.  The Board considered LSI's IPR petition for anticipation of these claims by two prior art references:  U.S. Patent Nos. 5,392,270 ("Okada") in Ground 1 and 5,731,768 ("Tsang") in Ground 2.

Claim 13 is set forth in the opinion expressly:

A method for encoding m-bit binary datawords into n-bit binary codewords in a recorded waveform, where m and n are preselected positive integers such that n is greater than m, comprising the steps of:
    receiving binary datawords; and producing sequences of n-bit codewords;
    imposing a pair of constraints (j;k) on the encoded waveform;
    generating no more than j consecutive transitions of said sequence in the recorded waveform such that j≧2; and
    generating no more than k consecutive sample periods of said sequences without a transition in the recorded waveform.

Dependent claim 14 recites the additional limitation "wherein the consecutive transition limit is defined by the equation 2≦j<10" and claim 17 further limits claim 14 with "limitations directed to an additional format for representing data and transitions."  The Board found claim 13 to be unpatentable over the Okada reference but that claims 14 and 17 were not, and that the Tsang reference was not prior art because it was not an invention "by another."  Specifically the Board held that claims 14 and 17 were not anticipated by the Okada reference because the reference did not disclose the limitation that "2≦j<10" and that a second argument in support of this ground (based on disclosure in Tables 8 and 9 of the reference) was not timely presented (although the Board also held that LSI did not establish anticipation by this disclosure either).

Regarding LSI's second ground based on the Tsang '768 patent, the panel recognized that LSI's anticipation argument relied on disclosure found in the Tsang patent that had been previously disclosed in a document called the Seagate Annual Report (prepared for an industry collaborator on the '601 patent inventors' research; the opinion notes that the Seagate Annual Report cannot be prior art to the '601 patent because it is not "of another").  The Tsang patent was the result of a patent application filed by a Seagate employee before the earliest filing date of the '601 patent and thus (according to LSI) was an anticipatory reference.  But because the subject matter in the Tsang patent relied upon by LSI was the same as was found in the Seagate Annual Report by the named inventors of the '601 patent, the Board held the Tsang patent was not prior art under the pre-America Invents Act statute, 35 U.S.C. § 102(e).

The Federal Circuit affirmed the PTAB's decision regarding claims 14 and 17 appealed by LSI, in an opinion by Judge Dyk joined by Judges Reyna and Hughes.  With regard to the Board's determination that LSI had not established that the Okada reference anticipated claims 14 and 17 of the '601 patent because the argument was presented untimely, the panel relied upon in Intelligent Bio-Systems, Inc. v. Illumina Cambridge Ltd., 821 F.3d 1359, 1369–70 (Fed. Cir. 2016).  There the Court had held that "the Board's rejection of arguments on the ground that they were newly raised in a reply brief was not an abuse of discretion even though the Board went on to address the merits" (the very argument LSI raised here); accord, Gen. Access Sols., Ltd. v. Sprint Spectrum L.P., 811 F. App'x 654, 659 n.3 (Fed. Cir. 2020), and more generally Gen. Access Sols., Ltd. v. Sprint Spectrum L.P., 811 F. App'x 654, 659 n.3 (Fed. Cir. 2020).

Turning to the Tsang patent and its availability as prior art, the Court applied the test set forth in Duncan Parking Techs., Inc. v. IPS Grp., Inc., 914 F.3d 1347, 1357 (Fed. Cir. 2019):

[T]he Board must (1) determine what portions of the reference patent were relied on as prior art to anticipate the claim limitations at issue, (2) evaluate the degree to which those portions were conceived "by another," and (3) decide whether that other person's contribution is significant enough, when measured against the full anticipating disclosure, to render him a joint inventor of the applied portions of the reference patent.

The panel rejected LSI's argument that because it relied upon the Tsang patent and not the Seagate Annual Report it had satisfied the first prong of the Duncan Parking test, saying LSI "misunderstands" the test.  The question was not merely whether the disclosure would anticipate, but Tsang's reliance in the '768 patent upon the University inventors' earlier work as set forth in the Seagate Annual Report.  "Tsang's summary of, and reliance on, the earlier work of [University inventors] Dr. Moon and Dr. Brickner does not make Tsang an inventor of the earlier work" was dispositive here, according to the opinion.  The portions of the '768 patent that did not rely on the University inventors' work were not relevant to the scope of the challenged claims according to the opinion (the Court having arrived at this conclusion from LSI's arguments regarding the distinctiveness of the invention disclosed in the '768 patent).  Thus, the Tsang '768 patent did not anticipate claims 14 and 17 of the '601 patent because the portions disclosed therein that could anticipate were not "of another" (because they were taken from the University inventors' work disclosed earlier in the Seagate Annual Report) and the portions "by another" (i.e., contributed solely by Inventor Tsang) were did not provide an anticipating disclosure.

Accordingly the Federal Circuit affirmed the PTAB regarding claims 14 and 17, granting costs to the University.  Presumably patent infringement litigation over these claims will now ensue (or recommence).

LSI Corp. v. Regents of the University of Minnesota (Fed. Cir. 2022)
Panel: Circuit Judges Dyk, Reyna, and Hughes
Opinion by Circuit Judge Dyk

Conference & CLE Calendar

August 15 to 18, 2022 - IP Attaché Roundtables (U.S. Patent and Trademark Office's) - 12:00 pm to 1:30 pm CT

August 16, 2022 - "Innovative Programs for Diversifying the Patent Bar" (Intellectual Property Owners Association) - 2:00 pm to 3:00 pm (ET)

USPTO IP Attaché Roundtable Series

The U.S. Patent and Trademark Office's Intellectual Property Attaché Program will be offering a series of IP Attaché Roundtables from August 15 to 18, 2022.  Each roundtable will be held from 12:00 pm to 1:30 pm CT.  The USPTO IP attachés will discuss the following topics:

• A sample of international posts
• Their day-to-day roles
• Benefits of an IP attaché career
• Their individual career paths

The roundtables will be moderated by USPTO Texas Regional Director Hope Shimabuku.  The IP attachés scheduled to attend represent the following regions:

• Brazil
• China – Guangzhou
• Europe
• India
• Mexico
• United Arab Emirates

The roundtables will be directed to the following audiences:

• August 15 –- trade organizations
• August 16 –- law schools (law students and staff)
• August 17 –- tech transfer, licensing, and commercialization groups
• August 18 –- bar associations

Those interested in registering for one of the roundtables, can do so here (trade organizations), here (law schools), here (tech transfer), or here (bar associations).

IPO Webinar on Diversifying the Patent Bar

The Intellectual Property Owners Association (IPO) will offer a one-hour webinar entitled "Innovative Programs for Diversifying the Patent Bar" on August 16, 2022 from 2:00 pm to 3:00 pm (ET).  Michelle Bugbee of Eastman Chemical Company; Braxton K. Davis of the National Council on Patent Practicum; Ayana Marshall of Harrity & Harrity, LLP; and Tim Wilson of the Patent Quality Education & Training Foundation will discuss their innovative and collaborative programs for diversifying the patent bar and how attendees can get involved to be part of the solution.

There is no registration fee for the webinar.  However, those interested in attending the webinar should register here.

More on Professor Sarnoff's Perspective on Tillis Patent Eligibility Bill

As promised in our earlier post (see "Professor Sarnoff Provides His Perspective on Tillis Bill"), here we turn to Professor Joshua Sarnoff's thoughts on the portions of Senator Thom Tillis' (R-NC) bill regarding diagnostic method patents.  Those thoughts were presented in abbreviated form in the earlier post because we did not have the space the discussion deserved.  Here they are in full, followed by Kevin Noonan's response.

Professor Sarnoff:  Kevin posits that Mayo (and implicitly Myriad) have adversely affected innovation in diagnostic methods.  Perhaps Kevin is right in regard to venture and other capital investments in developing such methods (but see below that such investment has not been diminished in regard to diagnostics).  But the data shown below tell a different story in regard to whether the restrictions on eligibility have been bad for innovation, at least in the diagnostics space.

To make the point, I quote from the submission of the Association for Molecular Pathology (a trade association for diagnostics developers) on the 2021 PTO Jurisprudence Study request for comments, explaining why innovation and access have expanded, not contracted, for diagnostic tests post-Myriad and Mayo.  This is the only natural experiment that has been conducted in recent memory, so simply stating that investment has declined is not a meaningful response to the argument that innovation has nevertheless increased.  Hopefully, Kevin can respond with actual data to show that the AMP is wrong; if not, hopefully he will revise his views and accept that Myriad and Mayo should be preserved (at least for diagnostics).

AMP strongly supports the Supreme Court decisions in Mayo Collaborative Services Inc. v. Prometheus Laboratories Inc. (Mayo), Association for Molecular Pathology v. Myriad Genetics (Myriad), Inc., and Alice Corp. v. CLS Bank International (Alice).  As professionals developing, validating, and performing laboratory tests, we see no evidence that these court decisions have had a "dramatic negative impact on investment, research, and innovation" as it relates to molecular laboratory testing.  We present the following information to demonstrate that due to the protection afforded by these cases, the field of molecular diagnostics is innovating, growing, and thriving.

In 2001, a survey of 122 clinical laboratory professionals performing genetic testing demonstrated that most felt the patent environment was negatively impacting the cost, access, and development of genetic tests.  Ninety-one respondents said that their laboratories needed to obtain a license to use a patented method, device, or reagent.  A quarter of the respondents had stopped performing a test altogether because of a patent or license.  Moreover, fifty-three percent (53%) of respondents decided not to develop a new clinical genetic test because of a patent or license.  In a thorough assessment by the U.S Department of Health and Human Services Secretary's Advisory Committee on Genetics, Health, and Society (SACGHS) in 2010, the Committee recognized the burden associated with negotiating numerous licenses and how the cost of these endeavors may render a clinically valuable test unworthy of financial investment.  As scientific understanding of genetics and genomics has increased over time, so has an appreciation of the polygenic (involving more than one gene) nature of disease.  In 2021, the prospect of negotiating numerous licenses for multiple genes threatens standard medical practices that have evolved since Mayo, Myriad, and Alice.

Today, in a post-Mayo, Myriad, and Alice world, we are fortunate to have an environment where molecular professionals are not restricted by the existence of gene patents when developing and employing clinical laboratory tests in their practice.  We implore you consider these experiences and case studies . . . .

CGP, WES, and WGS are made possible because information about thousands of genes and the role of various segments of genetic sequences in human health and disease can be incorporated into a single test.  Prior to Mayo, Myriad, and Alice, this was not possible as it would have required a laboratory to obtain a license for every gene patent that existed or to exclude potentially clinically relevant genes from the analysis.  Instead of promoting an environment for growth and innovation, patents on genetic information would have siloed testing and inhibited patient access to more comprehensive testing options.  In fact, since these court decisions, there has been increasing support by researchers and genetic testing laboratories to share and provide open access to information on genetic variants . . . .

The necessity for molecular professionals to operate, innovate, and developed testing for patients in an environment free of considerations related to the patent-status of SARS-CoV2 and COVID-19 disease are crystalized when considering the necessity of frequent shifts in testing strategy due to external challenges experienced repeatedly since February 2020.  AMP members have been on the frontlines of responding to the COVID-19 pandemic by developing and providing molecular-based diagnostics for patients across the United States.  We surveyed our membership multiple times over the course of 2020 and collected over 250 responses from molecular laboratory professionals to understand their successes and hurdles when developing and providing the crucial and timely diagnostic services that patients needed during the COVID-19 pandemic.  In August and April of 2020, respondents reported that supply chain interruptions were having a significant impact on their work -- in August, over 90% reported that interruptions delayed and/or decreased testing.  Similar responses across all laboratory types indicated that additional resources were needed to implement and/or maintain testing, with commercially-available testing kits and platform-specific laboratory consumables identified as the most needed items.  To overcome testing supply shortages and maintain their testing capacity, molecular professionals deployed multiple testing methodologies, i.e. they built redundancy in test protocols within their laboratories in order to switch to a different testing platform when a shortage compromised use of another one.  Many used more than three methods, which were often a combination of both commercially available testing kits and laboratory developed testing procedures that they designed and validated in their own laboratories.  Our findings indicated that testing diversity continues to play an important role in the public health emergency to meet the clinical need.  If laboratories and manufacturers needed to navigate multiple patent and licensing arrangements related to SARS-CoV-2 RNA sequence with each assay adjustment or introduction, the observed testing response would not have been possible.

Kevin Noonan's response:  Before turning to the contrary data, a few points are important.  Everyone's opinion is necessarily informed by their experience, and it is not surprising that doctors believe that their mission to save lives is paramount.  Fortunately, this does not extend to burglarizing pharmacies to get drugs for patients that cannot afford them, but there comes from many doctors a whiff of "white coat immunity" when making their arguments, particularly where patents are concerned.

Also, there are the considerations that companies like Myriad can do a more consistent job in providing reliable diagnostic information than "home brew" testing done by physicians, who after all are trained and thus much better at making differential diagnoses and giving appropriate treatments than they are at performing controlled diagnostic assays.  Which is why most diagnostic tests are performed by big companies like LabCorp and Quest Diagnostics rather than in university hospitals and clinics (and even in the latter case the tests are typically performed using test kits produced and sold by such companies).

Finally in this regard, the effect of the Mayo/Myriad/Alice trio of Supreme Court opinions has been that these companies now have the type of free rein all companies used to have regarding university-based research (including associated teaching hospitals) prior to enactment of the Bayh-Dole Act.  As a consequence, companies who licensed university technologies became easy prey to the biotechnology equivalent of "efficient infringers" and were subject to the expected consequences.  The poster child for these consequences is of course Sequenom, which lost so much of its value after its foundational patents for detecting cell-free fetal DNA in maternal blood were invalidated that it was acquired by LabCorp.

And I think it more productive to leave the COVID experience to another time, it being a black unicorn, once-in-a-century event that makes it less productive for understanding events in more normal times.

The countervailing evidence to the arguments made by AMP quoted by Professor Sarnoff is enumerated below.

Appropriately we begin with a law review article by David O. Taylor, Associate Professor of Law at the SMU Dedman School of Law (D.O. Taylor, Patent Eligibility and Investment, Cardozo Law Review 41: 2022-104 (2020).  In his article, Professor Taylor reviews recent Supreme Court case law on subject matter eligibility and its negative effects in cases like Ariosa v. Sequenom.  The Professor presents three principal findings regarding the effects of these cases on investment:

First, "the investors who responded to the survey overwhelmingly believe patent eligibility is an important consideration when their firms decide whether to invest in companies developing technology.  Indeed, overall, 74% of the investors agreed that patent eligibility is an important consideration in firm decisions whether to invest in companies developing technology; only 14% disagreed.  Likewise, investors reported that reduced patent eligibility for a technology makes it less likely that their firm will invest in companies developing that technology.  For example, overall 62% of the investors agreed that their firms were less likely to invest in a company developing technology if patent eligibility makes patents unavailable, while only 20% disagreed."

Second, "reduced patent eligibility correlates with particular investment behaviors in particular industries.  Investors overwhelmingly indicated, for example, that the elimination of patents would either not impact their firms' decisions whether to invest in companies or only slightly decrease investments in companies developing technology in the construction (89%), software and Internet (80%), transportation (84%), energy (79%), and computer and electronic hardware (72%) industries.  But investors, by contrast, overwhelmingly indicated that the elimination of patents would either somewhat decrease or strongly decrease their firms' investments in the biotechnology (77%), medical device (79%), and pharmaceutical industries (73%).  Thus, according to these investors, on average each industry would see reduced investment, but the impact on particular industries would be different.  And the life sciences industries are the ones most negatively affected."

Third, "[a]lmost 40% of the investors who knew about at least one of the Court's eligibility cases indicated that the Court's decisions had somewhat negative or very negative effects on their firms' existing investments, while only about 15% of these investors reported somewhat positive or very positive effects.  On a going-forward basis, moreover, almost 33% of the investors who knew about at least one of the Court's eligibility cases indicated that these cases affected their firms' decisions whether to invest in companies developing technology.  These investors reported primarily decreased investments, but also shifting of investments between industries.  In particular they identified shifting of investments out of the biotechnology, medical device, pharmaceutical, and software and Internet industries."

Fourth, "investors familiar with the Supreme Court's eligibility cases indicated different changes in firm investment behavior as compared to investors without this familiarity [albeit these data were garnered with regard to software and the Internet and are presented here for completeness]."

The article provides copious amounts of evidence for these conclusions that are of course outside the limits of this post.  But the Professor's conclusion is as succinct as it is depressing:

In the meantime, the major takeaway is clear:  The Supreme Court's "drastic and far-reaching experiment in patent eligibility standards" has likely resulted in lost investment in the life sciences that has delayed or altogether prevented the development of medicines and medical procedures.

A law student Note, having perhaps a little less gravitas, is in agreement.  In "The Impact of Uncertainty Regarding Patent Eligible Subject Matter for Investment in U.S. Medical Diagnostic Technologies Matter for Investment in U.S. Medical Diagnostic Technologies," Washington and Lee Law Review 79: 397-451, A. Sasha Lee focuses on the uncertainty the Supreme Court's Mayo/Myriad/Alice quarto (including Bilski for good measure) has engendered and the harm it has and will cause.  Ms. Lee characterizes her Note as "an empirical study of venture capital investment in disease diagnostic technologies before and after Bilski and Mayo."  The Abstract sets forth her conclusions:

This Note presents five key implications related to its central finding.  First, the data supports the recent calls to Congress for reform of § 101.  Second, it complements other key research regarding investment behavior following Mayo and Alice.  Third, the data raises the question whether remaining innovation in the diagnostics space will be enough to support the precision medicine movement.  Fourth, underinvestment in diagnostics and the discovery of disease biomarkers may lead to underinvestment in treatments.  Lastly, this Note's findings suggest that at least some venture capital firms employ greater caution when determining whether to invest in a company developing (or aiming to develop) diagnostics, which may spur hesitancy to form such companies in the first place.

The focus of these scholars is investment, which the AMP says is not important for developing diagnostic methods.  Perhaps, but perhaps only for well-established large diagnostics companies encouraged and enabled by academic research no longer protectable by patent and precluded by culture and ethics from being kept as trade secrets.  But it is good to remember that:

For better or worse, we live in a world that Myriad made.  In 1997, genetic diagnosis of cancer risk was in its infancy; traditional genetic linkage analysis had been successfully performed for diseases like Huntington's disease and other rare genetic diseases.  While some academic researchers had identified genes involved in cancer, these were typically loss-of-function mutations in several (~5-6) genes.  BRCA gene analysis was different, because it predicted with ~90% certainty that an affected woman would develop breast or ovarian cancer.  These biological consequences suggested radical prophylactic methods for prevention, each of which involved medical and personal costs.

Myriad was thus in the position of having to convince doctors that their test was beneficial and was sufficiently predictive to justify both the diagnosis and the treatment.  It also required that Myriad establish a network of genetic counselors capable of interpreting the genetic information and counseling affected women (and in the context of there being the "variations on unknown significance" that occurred at much higher frequency then than it does 16 years later).  And it required Myriad to lobby governments and private payers that the cost of Myriad's test was justified by the lower medical costs of prevention (which were not inconsiderable) than treatment of breast or ovarian cancer (because the personal costs were not the payers' problem and the alleviation of which not their perceived responsibility).

Myriad asserts that it spent about half a billion dollars to establish its business including all these ancillary costs on top of the scientific and technology costs.  Myriad did not spend this money due to altruism; like it or not, basing a society on the principle of "from each according to her abilities, to each according to her needs" was tried, famously, in the Twentieth Century with disastrous results.  But if we turn the clock back and let major medical centers in New York, and Boston, and San Francisco, and New Haven, and Bethesda develop BRCA testing, is there any hope or realistic expectation that women in Appalachia, or Oklahoma, or rural communities throughput the country would have had better, or even equivalent access to such testing?

See "Why Does Myriad Think It Can Win BRCA Gene Lawsuits?"

Turning to innovation instead of investment, and some of the arguments made in favor of the status quo of diminished eligibility thereupon, it would be good to consider these data:

• A 2002 study undertaken by the German government, to determine whether patents on DNA molecules impeded entry into particular fields of research in which isolated DNAs had been patented found that DNA patents created no such barriers to entry.  The great majority of those interviewed across the entire surveyed group clearly favored the so-called "absolute product patent protection" of genes.  Strauss et al., "Genetic Inventions and Patent Law: An Empirical Survey of Selected German R & D Institutions," Max Planck Institute for Intellectual Property, Competition and Tax Law (2002).  Similarly, in 2002, the OECD Working Party on Biotechnology Report (OECD Report), despite documenting a number of specific concerns held by researchers, failed to substantiate fears that growth in the number and complexity of biotechnology patents is preventing access to inventions for research purposes.  Organisation for Economic Co-operation and Development, Genetic Inventions, Intellectual Property Rights and Licensing Practices: Evidence and Policies (2002), 12–15.

• A 2005 survey of academic researchers conducted by Walsh, Cho, and Cohen concluded that "patenting does not seem to limit research activity significantly, particularly among those doing basic research," with only 1% of their random sample of 398 academic respondents reporting a project delay of more than a month due to patents on knowledge inputs necessary for their research, and none reporting abandoning of a research project due to the existence of patents.  John P. Walsh et al., Final Report to the National Academy of Sciences' Committee Intellectual Property Rights in Genomic and Protein-Related Inventions: Patents, Material Transfers and Access to Research Inputs in Biomedical Research (Sept. 20, 2005).

• In 2006, David Adelman and Kathryn DeAngelis published a detailed study of over 52,000 biotechnology patents granted in the U.S. between January 1990 and December 2004.  In the words of the two authors, their study described "the general trends in biotechnology patenting including patent counts, patent-ownership patterns, and the distribution of biotechnology patents across distinct areas of research and development."  They concluded:  "This analysis finds few tangible signs of patent thickets that define the anticommons" (Adelman and DeAngelis, Patent Metrics: The Mismeasure of Innovation in the Biotech Patent Debate).

• A 2006 report by the National Research Council found the "number of projects abandoned or delayed as a result of difficulties in technology access is reported to be small, as is the number of occasions in which investigators revise their protocols to avoid intellectual property issues or in which they pay high costs to obtain intellectual property."  Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health at 134 (2006).

• Another 2006 study (Caulfield, Cook-Deegan, Kieff and Walsh, Evidence and Anecdotes: An Analysis of Human Gene Patenting Controversies, Nat. Biotechnol. 2006 Sep; 24(9): 1091, surveyed the current scholarship and concluded based upon existing conditions that policy recommendations for patent reform surrounding genetic patents have largely been driven by a small number of high-profile incidents and controversies and that these anecdotes do not accurately reflect the larger realities surrounding patenting in biotechnology.  Regarding the oft-stated fears of a developing anticommons logjam, Caulfield et al. concluded that the effects predicted by the anticommons problem are not borne out by the available data.

• A 2009 Canadian report on researcher perspectives on commercialization and patenting of genomic research similarly found that there is little evidence that the progress of research itself is in fact being seriously hindered or that gene patents are being aggressively enforced.  CJ Murdoch et al., "Commercialization, Patenting and Genomics: Researcher Perspectives," Genome Medicine 1:22 (2009).

• The FTC subsequently concluded that concerns that patenting upstream technology, or "research tools," would actually obstruct commercialization of new products and hinder follow-on innovation in biotechnology "has yet to materialize."  Emerging Health Care Issues: Follow-on Federal Trade Commission report on follow-on biologics, June 2009, at 32.

• Of some 40,000 DNA-related patents, only six have been litigated in the diagnostic testing area.  "Property rights: The granting of patents on human genes has so far not been the disaster it was predicted to be."  458 Nature 386 (2009).

• In a 2010 series of case studies on the impact of DNA patents on genetic research, diagnostic test development, and patient access to genetic testing services published as a special supplement in Genetics in Medicine (vol. 12 (4), April 2010), the authors, despite identifying several particularized concerns about licensing practices relating to some individual gene patents, found little systemic negative impact of gene patents on genetic research, test development, patient utilization, and pricing of testing services.

• An exhaustive 2019 study by Sampat and Williams concludes that human DNA patents do not appear to have hindered follow-on innovation, while on the other hand trade secrecy protection of human genetic sequences induced measurable declines in follow-on scientific research and product development.  The authors write that "this pattern of evidence suggests that changes to patent policy must carefully consider what strategies that firms will use to protect their discoveries in the absence of patents, and that an understanding of the relative costs and benefits of patent protection compared to [the alternative option of trade secrecy] is needed in order to evaluate the welfare effects of patent policy changes."  B. Sampat and H. Williams, "How Do Patents Affect Follow-On Innovation? Evidence from the Human Genome," American Economic Review 2019, 109(1): 203–36.

The facts seem to bear out that while some (particularly doctors) have raised possibilities that potential negative effects on innovation might arise due to patenting, these seem not to exist when scrutinized outside the biases carried by those discerning these possible negative outcomes.

It is clear this debate will be on-going, as this bill advances (although it is likely not to get to the House floor in the time remaining in this Congress).  But the effort to bring some clarity and certainty to subject matter eligibility is one that is both worthwhile and necessary and can be expected to continue.

Hat tip to everyone who provided some of the evidence set forth in this post, and thanks to Professor Sarnoff.

Professor Sarnoff Provides His Perspective on Tillis Bill

Patent Docs has always ascribed to the notion that respectful debate is good for most issues, and with the adage that if you are dumb, it's best to surround yourself with smart people and if you are smart surround yourself with smart people who disagree with you.  In that spirit we give our readers the thoughts of Professor Joshua Sarnoff on our recent post discussing Senator Thom Tillis' bill for reforming 35 U.S.C. § 101 (see "Senator Tillis' Patent Eligibility Reform Proposal: A Biopharma Perspective").

A brief response to Kevin Noonan's "Senator Tillis' Patent Eligibility Reform Proposal: A Biopharma Perspective"

By Joshua Sarnoff --
DePaul University

Professor Sarnoff:  Kevin and I disagree with two assertions he makes his blog post, and in the underlying premise of his argument I believe the evidence argues against a fundamental assumption.

The first of these is that Myriad decision was limited to claims to products as they occur in nature.  Kevin states that:  "There are several subsections in proposed revised Section 101 that specifically and frankly address not only the concerns of the biopharma patent community but also its critics and discontents.  The frankest example is Subsection (b)(1)(C), which codifies the Court's decision in Myriad that human genes in nature are not patent eligible per se.  Subsection (b)(1)(D) further codifies the extension of this principle that has arisen in practice, that any naturally occurring product is ineligible as it occurs in nature.  The genesis of this distinction, and one that the proposal attempts to constrain, is that 'mere' isolation of a natural product may not be (although in practice often has been found not to be) patent eligible."

I agree with the last emphasized sentence but disagree with the preceding emphasized sentence.  In my view, Myriad held that isolated genetic sequences (without some further, and insufficiently specified requisite changes) are not eligible, despite the fact that isolated genetic sequences do not occur in nature.  Justice Thomas stated that "In this case, by contrast, Myriad did not create anything.  To be sure, it found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention . . . .  Nor are Myriad's claims saved by the fact that isolating DNA from the human genome severs chemical bonds and thereby creates a non-naturally occurring molecule."  Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 591, 593 (2013).

In my view there is a question of whether the Myriad precedent is limited to human genes, and until SCOTUS takes a case on claims to things derived from natural products again we won't know.  But Myriad was clear that for human genes "mere" isolation from natural conditions, even with chemical changes resulting therefrom, is not enough for eligibility.  Proposed Tillis Bill subsections 101(b)(1)(C) & (D) would exclude from eligibility only "[a]n unmodified human gene, as that gene exists in the body" and "[a]n unmodified natural material, as that material exists in nature."  Proposed subsection 101(b)(2)(B) makes ever clearer that mere isolation now would provide eligibility (if not necessarily patentability):  ''(B) HUMAN GENES AND NATURAL MATERIALS.—For the purposes of subparagraphs (C) and (D) of paragraph (1), a human gene or natural material that is isolated, purified, enriched, or otherwise altered by human activity, or that is otherwise employed in a useful invention or discovery, shall not be considered to be unmodified."

Hence, the Myriad precedent goes well beyond what Kevin suggests (as least as to genes), and it is precisely that precedent that the Tillis Bill would overturn.  And it is precisely why "the American Civil Liberties Union . . . a vocal critic of Senator Tillis' attempts to remedy patent eligibility issues . . . [has argued that] 'mere' isolation is not enough to confer patent eligibility."

Kevin Noonan's response:  My understanding of the Myriad precedent differs somewhat from Professor Sarnoff's.  Justice Thomas was clear that the decision was based on the fact that mere isolation was not enough, because doing so changed the gene in no patent-relevant way.  Complementary DNA (cDNA) was different, and the Court was careful not to address instances where genes were altered (changed nucleotides, etc.).  Professor Sarnoff reads the bill differently than I do, to the extent that taken together the provisions indicate to me that on the one hand genes are sui generis in this regard, and on the other any natural product existing as it does in nature is not patent eligible.  Section (b)(2)(B) as I read it requires something more than what was proscribed by the Myriad decision and makes explicit what should be the case presently.  For example, should an inventor isolate a genomic DNA sequence and insert it into a recombinant expression construct and thereby permit production of the encoded protein, the basis for Justice Thomas' distinction -- that "mere" isolation is not enough -- no longer holds, because such a construct does not occur in nature and evokes a change consistent with the rationale in Diamond v Chakrabarty (which the Court did not overturn in its Myriad decision):

Judged in this light, respondent's micro-organism plainly qualifies as patentable subject matter.  His claim is not to a hitherto unknown natural phenomenon, but to a nonnaturally occurring manufacture or composition of matter -- a product of human ingenuity "having a distinctive name, character [and] use."  Hartranft v. Wiegmann, 121 U. S. 609, 121 U. S. 615 (1887).  The point is underscored dramatically by comparison of the invention here with that in Funk.  There, the patentee had discovered that there existed in nature certain species of root nodule bacteria which did not exert a mutually inhibitive effect on each other.  He used that discovery to produce a mixed culture capable of inoculating the seeds of leguminous plants.  . . .  Here, by contrast, the patentee has produced a new bacterium with markedly different characteristics from any found in nature, and one having the potential for significant utility. His discovery is not nature's handiwork, but his own; accordingly it is patentable subject matter under § 101.

I will concede that the language could be interpreted as Professor Sarnoff does, but that would (in my view) require ignoring the context.

Professor Sarnoff's reply:  I agree with Kevin that the Myriad decision treated cDNA differently, by adopting a simple "novelty" standard rather than the "markedly different" standard it applied to isolated DNA.

Professor Sarnoff:  Second, in my view nothing in these subsections actually "address[es] . . . the . . . concerns of the . . . critics" of the biopharma patent community, although it would codify a much more restrictive concept of the limits of patent eligibility.  In fact, those "critics" have been directly opposed to overturning both the Myriad and Mayo decisions.  And for good reason (as discussed next).  So in my opinion the Tillis Bill does not "giv[e] something to everyone."  I don't consider this to be a "compromise," but only something less than a total repudiation of any and all eligibility limits while still eliminating any meaningful limits.  No doubt, Kevin and many in the "biopharma patent community" think that is a good idea.  But as I see it many in the "biopharma community," including "critics" of the subset of that community that are the "biopharma patent community," think that expanding eligibility in this was and is a very bad idea.

Kevin Noonan's response:  The reason I used the taxol example is that it strikes at the heart of why eligibility law needs clarification.  DNA is, to be frank, a very 20th Century concern, particularly human genes.  But there are countless numbers of natural products that can be made into drugs and other important compounds as a consequence of their being "mere" isolated.  In my view, the rather loose language in Myriad has led to the concept that anything that can be "merely" isolated should be ineligible.  The proposed statute addresses this problem without rendering human genes patent eligible as I understand the language taken as a whole to mean.

Professor Sarnoff's reply:  Again, I agree that this is the intent of the bill (except that the language would also render eligible merely isolated human genes, and I believe that was also the intent).  As to whether that is a good idea, we will just have to beg to differ.

Professor Sarnoff:  As Kevin notes, "[w]ith regard to diagnostic method claims reconsideration under proposed Section 101 is less directly addressed; indeed, changes in the definition of 'process' carries much of the water supporting such claims.  But the provisions of Subsection (c)(1)(A) and (B)(ii) are important because they would proscribe the habit, used by district courts and affirmed by the Federal Circuit . . . of parsing claims into their component parts and then cherrypicking claim elements to arrive at a Mayo/Alice-sanctioned ineligibility conclusion . . . .

But as with semiconductors and artificial intelligence, there may be a window for convincing other Members that the current eligibility regime is inimical to innovation in the biopharmaceutical arts and that foreign competitors will be all too willing to step into the breach to charge American consumers whatever the traffic will bear for diagnostic methods and therapeutic drugs produced abroad."

Thus, Kevin posits that Mayo (and implicitly Myriad) have adversely affected innovation in diagnostic methods.  Perhaps Kevin is right in regard to venture and other capital investments in developing such methods (but see the evidence below that such investment has not been diminished in regard to diagnostics).  But my understanding of the data is inconsistent with Kevin's position that restrictions on eligibility have been bad for innovation, at least in the diagnostics space.  To make the point, I quote from the submission of the Association for Molecular Pathology (a trade association for diagnostics developers, which is also part of the "biopharma . . . community") on the 2021 PTO Jurisprudence Study request for comments, see https://www.regulations.gov/comment/PTO-P-2021-0032-0066, explaining why innovation and access have expanded, not contracted, for diagnostic tests post-Myriad and Mayo.  (Additional analysis of the innovation effects can be found in the testimony of molecular geneticist Dr. Sean George of Invitae Corporation on the prior draft legislation from Senator Tillis, see https://www.judiciary.senate.gov/download/george-testimony.)  This is the only significant natural experiment that has been conducted in recent memory on U.S. eligibility, so simply stating that investment has declined is not a meaningful response to the argument that innovation has nevertheless increased.  Hopefully, Kevin can respond with actual data to show that the AMP is wrong; if not, hopefully he will revise his views and accept that Myriad and Mayo should be preserved (at least for diagnostics).

Kevin Noonan's response:  To be fair this section of Professor Sarnoff's submission is too detailed and too important for a quick response in this post.  AMP's contentions can be found on the record linked above.  It does not surprise me that AMP would think diagnostics innovation has improved but there would appear to be two costs.  The first is access:  while I am sure that in the rarefied precincts in Boston, New York, Chicago, etc., the existence of teaching hospitals has had the effect AMP asserts.  But I'm not so sure the same is true in Appalachia, the Four Corners area of the Southwest, or other, particularly rural parts of the country.  Second, as noted in my post "The ACLU, Working for the Man," the prime beneficiaries of the Mayo/Myriad decision has been the big diagnostics companies, who can take advantage of academic research for free.  This was the situation forty-plus years ago that was the impetus for the Bayh-Dole Act, which has provided a return on investment (of time, effort, and intellect) expended by university researchers.

Professor Sarnoff's reply:  Here we are getting to truly meaningful discussions, with evidence.  I'll look forward to Kevin's analysis of the AMP's (and possibly to Dr. George's) conclusions, and to any other data that he can supply (particularly if it is industry-wide) on innovation effects of Myriad and Mayo.  Thanks as always for engaging, Kevin.  It is truly my pleasure to do so.

Patent Docs thanks Professor Sarnoff for his thoughts and comments on Senator Tillis' bill.  The AMP's position, and comments regarding it, will be the subject of a later post.