The Relevance of Patent Exhaustion in the Myriad Genetics Case

By Kevin E. Noonan --

One of the arguments advanced by the plaintiffs in Association of Molecular Pathology v. U.S. Patent and Trademark Office ("Myriad") is that a pernicious effect of permitting patents on genes and genetic diagnostic methods is that women cannot obtain a "second opinion" of the results of genetic tests showing mutations in BRCA1 or BRCA2 genes.  Whether this in fact makes any clinical difference is open to debate:  while plaintiffs argue that there could be false negative results from Myriad's testing (insofar as all mutations are not assayed), there has been no specific allegation that there have been any such false negative results.  Nevertheless, the District Court included this argument, and the contentions of the parties regarding it, in its decision:

Plaintiffs contend that as a result of the patents-in-suit, BRCA1/2 genetic testing is one of the very few tests performed as part of breast cancer care and prevention for which a doctor or patient cannot get a second confirmatory test done through another laboratory.  Love Decl. ¶12.  In particular, women who receive a positive result cannot confirm the lab's findings or seek a second opinion on the interpretation of those results.  Ledbetter Decl. ¶23; Ostrer Decl. ¶11.  According to Myriad, absent any doubts regarding the accuracy of the original test, resequencing the patient's genes by another laboratory would be an unnecessary waste of resources, and Myriad has never prohibited a second interpretation of the results of its diagnostic tests.  Critchfield Decl. ¶64; Reilly Decl. ¶¶54,55.  In addition, there are multiple laboratories available to conduct confirmatory BRCA1/2 testing pursuant to patent licenses granted by Myriad, including both the University of Chicago Genetic Services Laboratory and Yale Diagnostic Laboratories.  Critchfield Decl. ¶62.  That confirmatory testing, however, it limited to the confirmation of certain, specific positive test results; the remaining types of positive test results as well as all negative test results are excluded from such testing services.  Matloff Decl. ¶¶9,10.

Association of Molecular Pathology v. U.S. Patent and Trademark Office, 669 F. Supp. 2d 365 (S.D.N.Y. 2010).  The District Court made no rulings on this basis ("[w]hether the patents at issue impact the testing for BRCA1/2 mutations favorably or unfavorably is an issue of factual dispute not resolvable in the context of the instant [summary judgment] motions"), but regardless of the persuasiveness of the argument on the District Court's decision, the argument certainly resonates with the public (see "'60 Minutes' and 'Newshour' Take Different Approaches to Covering Gene Patenting Story").

As mentioned in the District Court's decision, Myriad does permit some "confirmatory" testing under license, behavior that indicates such testing may be appropriate under at least some circumstances.  Presumably such testing (which is "confirmatory") is done for patient samples that have had been tested using Myriad's patented methods, covered by at least one of the method claims invalidated by the District Court:

1.  A method for detecting a germline alteration in a BRCA1 gene, said alteration selected from the group consisting of the alterations set forth in Tables 12A, 14, 18 or 19 in a human which comprises analyzing a sequence of a BRCA1 gene or BRCA1 RNA from a human sample or analyzing a sequence of BRCA1 cDNA made from mRNA from said human sample with the proviso that said germline alteration is not a deletion of 4 nucleotides corresponding to base numbers 4184-4187 of SEQ ID NO:1.

(U.S. Patent No. 5,709,999);

1.  A method for screening a tumor sample from a human subject for a somatic alteration in a BRCA1 gene in said tumor which comprises gene comparing a first sequence selected form the group consisting of a BRCA1 gene from said tumor sample, BRCA1 RNA from said tumor sample and BRCA1 cDNA made from mRNA from said tumor sample with a second sequence selected from the group consisting of BRCA1 gene from a nontumor sample of said subject, BRCA1 RNA from said nontumor sample and BRCA1 cDNA made from mRNA from said nontumor sample, wherein a difference in the sequence of the BRCA1 gene, BRCA1 RNA or BRCA1 cDNA from said tumor sample from the sequence of the BRCA1 gene, BRCA1 RNA or BRCA1 cDNA from said nontumor sample indicates a somatic alteration in the BRCA1 gene in said tumor sample.

(U.S. Patent No. 5,710,001);

1.  A method for screening germline of a human subject for an alteration of a BRCA1 gene which comprises comparing germline sequence of a BRCA1 gene or BRCA1 RNA from a tissue sample from said subject or a sequence of BRCA1 cDNA made from mRNA from said sample with germline sequences of wild-type BRCA1 gene, wild-type BRCA1 RNA or wild-type BRCA1 cDNA, wherein a difference in the sequence of the BRCA1 gene, BRCA1 RNA or BRCA1 cDNA of the subject from wild-type indicates an alteration in the BRCA1 gene in said subject.

(U.S. Patent No. 5,753,441);

1.  A method for identifying a mutant BRCA2 nucleotide sequence in a suspected mutant BRCA2 allele which comprises comparing the nucleotide sequence of the suspected mutant BRCA2 allele with the wild-type BRCA2 nucleotide sequence, wherein a difference between the suspected mutant and the wild-type sequences identifies a mutant BRCA2 nucleotide sequence.

2.  A method for diagnosing a predisposition for breast cancer in a human subject which comprises comparing the germline sequence of the BRCA2 gene or the sequence of its mRNA in a tissue sample from said subject with the germline sequence of the wild-type BRCA2 gene or the sequence of its mRNA, wherein an alteration in the germline sequence of the BRCA2 gene or the sequence of its mRNA of the subject indicates a predisposition to said cancer.

(U.S. Patent No. 6,033,857).

Presumably, confirmatory testing (in order to be infringing) is performed substantially the same way as the original testing, and is performed on the same sample (whether blood, cheek swab, or other source) from the same patient and assaying the same genes (BRCA1 or BRCA2).  This raises the question of whether the principle of patent exhaustion is relevant to this situation, wherein the patient as the purchaser of Myriad's services (performing the patented test) can obtain a second test without further authorization from the patent licensee.

The Supreme Court has spoken with regard to exhaustion of method claims, in Quanta Computer, Inc. v. LG Electronics, Inc., expressly reversing a Federal Circuit decision that method claims could not fall within the scope of the patent exhaustion doctrine.  The Court said in its decision that it had never treated composition and method claims differently, applying the "substantial embodiment" test to apply the patent exhaustion principle to method claims, citing earlier Supreme Court precedent including Ethyl Gasoline Corp. v. United States, 309 U.S. 436 (1940), and United States v. Univis Lens Co., 316 U. S. 241 (1942).  The test is whether sales "substantially embody" the patents in suit; such sales exhaust the patent right to obtain further royalties.  Controlling precedent (Univis) involved sales of eyeglass "blanks" for making patented compound lenses, and the products sold by the alleged infringers were the final eyeglasses containing lenses ground from the blanks sold by the patentee.  In Univis, the Court opined that the lens blanks embodied essential features of the patented lenses and thus sales of the blanks exhausted patent rights in the finished lenses.

In Quanta. defendants were makers of computers comprising both patented and non-patented components.  LG Electronics licensed the patents-in-suit (U.S. Patent Nos. 4,939,641; 5,379,379; and 5,077,733) to Intel, imposing a condition on its licenses with Intel that sales were not authorized to third parties that would mix Intel and non-Intel components, and further that Intel was under an affirmative obligation to inform its customers that such uses were not licensed.  The patents-in-suit claimed methods for organizing read/write requests in computer cache and random access memory (the '379 patent); methods for prioritizing access of peripheral devices to the microprocessor via the computer bus (the '733 patent); and a system for "ensuring that the most current data are retrieved from main [RAM] memory by monitoring data requests and updating main memory from the cache when stale data are requested" (the '641 patent).  It was undisputed that Quanta and the other defendants purchased patented microprocessors from Intel that fell within the scope of the LG patents, that they were aware of the restrictions and limitations placed on their use of these components by the license between LG and Intel, and that the defendants sold computer systems comprising Intel components operatively linked to non-Intel components.

The Supreme Court ruled that the components at issue, microprocessors and chipsets, "substantially embodied" the system and method claims of the patents-in-suit.  It analogized these components with the lens blanks in Univis (where the patentee argued the lens blanks "did not fully practice the patents at issue" because they needed to be ground into lenses); in Quanta, the patented microprocessors and chipsets did not "function at all" until they were assembled into the final product (i.e., the computer comprising non-Intel components).  "If [the Court's opinion stated], as in Univis, patent rights are exhausted by the sale of the incomplete item, then LGE has no postsale right to require that the patents be practiced using only Intel parts."  The Court found Univis controlling, inter alia, because the "only reasonable and intended use [of the microprocessors and chipsets] was to practice the patent," just as the only "reasonable and intended use" of the lens blanks in Univis was to make the patented eyeglasses.  Moreover, the microprocessors and chipsets embodied the essential features of the patented invention, since all that was required was to attach them to other conventional computer components in conventional ways (much as the lens blanks in Univis were converted to lenses using conventional grinding techniques not encompassed by the patent claims).  A similar rationale may be applicable in the case of second opinions in the Myriad case.  The test certainly "substantially embodies" the claimed methods, and the practice of the method on a patient sample (with the concomitant production of the patient's genotype) should by analogy with Univis and Quanta exhaust Myriad's patent rights.  One distinction between the method claims here and in Univis and Quanta is that those sales involved tangible items (lens blanks and chip sets) that are used to practice the claimed methods.  In that way the application of the method claims is ancillary to what is sold, whereas here the practice of the method is what is sold (and the genetic information is what is obtained).  The only tangible aspect is the patient sample (and, for the purposes of this discussion, the unpatented reagents used to perform the tests), and the product of the testing (genetic information) is not patentable per se (see "Patenting Information").

Whether this analysis holds will depend on the situs of infringement:  while the women as putative purchasers of the practice and results of the claimed methods may thereby be insulated from liability for inducing infringement, the question will be whether clinical labs practicing the claimed methods for these women are shielded from liability thereby.

Comments

[Skeptical]

Any correlation with the distinction between method claims and the other classes when it comes to importation?

[saddlepack maker]

Are there any claims that would prevent a patient, whose BRCAnalysis test results identified a specific point mutation, from seeking to confirm the specific point mutations from a secondary laboratory?

If the answer is no, the "second opinion" argument falls flat.

[Kevin E. Noonan]

Dear Skeptical:

I considered citing to the Bayer v. Housey case, which is on point (and it is cited in the earlier "Patenting Information" post).

If the product of a patented process is intangible (i.e., information), then it does not fall within the extraterritorial exception in 271(g). So I think there is a recognized difference between the tangible/intangible distinction I raised when it comes to method claims.

This does provide one avenue for the women to get a test - send the sample to a country where the method isn't patented. I know there is an argument about burdens here, but if the test is $1,000-2,000 cheaper in Canada (or elsewhere), the cost of a Fed Ex shipment of the sample seems trivial in comparison.

Of course, the real problem is that the insurance company won't pay for the test no matter who performs it or where, which is why even if they prevail the women won't get a remedy. Which suggests that they are merely pawns for the folks with a political (ACLU, PubPat) or financial (doctors and hospitals) agenda. I wonder who really has exploited these women more?

Thanks for the comment.

[Kevin E. Noonan]

Dear Saddlepack:

I don't think whether you target a particular mutation matters - look at any of the method claims - if you detect a mutant at an informative position you infringe.

Now, this does raise a claim scope issue for some of the claims. If you construe the claims to be limited to any of the mutations identified at the time of the application then an argument can be raised that detecting another mutation is outside the scope of these claims. And if you interpret the claims to include such later-discovered mutations, I think you have an enablement/written description invalidity problem.

Which is why arguments that these claims "exhaust" the concept of detecting mutations is spurious - if there is a new mutation it should be independently patentable.

Thanks for the comment.

[James Demers]

So the argument is that if you buy one embodiment of someone's invention, you're entitled to all of the other embodiments for free?

AMP threw a big bucket of scraps against the wall. If anything does stick, it certainly won't be this.

[Kevin E. Noonan]

Dear James:

That is the usual reaction, but not what I'm saying.

For something tangible, once you buy an embodiment the patentee's right to it has been exhausted. In Quanta, the Supreme Court said that this applies to a method claim as well. In Quanta, what was claimed was a method, executed by computer chips which were what was sold.

Now, if the principle of patent exhaustion requires the sale of a tangible object, then the exhaustion principle would not apply to Myriad's claims. But the Supreme Court spoke broadly in Quanta, raising the possibility that performing the same test on the same blood sample from the same woman looking for the same mutation in the same gene might be subject to the exhaustion principle.

There is no answer, just a suggestion (and one that rebuts one of the more emotionally resonant arguments made by plaintiffs in Myriad).

Thanks for the comment.

[James Demers]

Kevin: Thanks for clarifying. I understood the second test to be for a different mutation(s).

But even for an "identical" test, on DNA from the very same vial, getting a second test from Myriad is analogous to buying a second "identical" chip from Quanta. The customer ordering a second test is effectively purchasing a second set of probes and reagents from Myriad, so there are physical goods involved. It's just a question of who carries out the lab work. Even if one argues that it's the lab work that "embodies the method", the customer is contracting for a second unit of labor, which is not the "same" labor that was done the first time around.

As I see it, each Myriad test, like each Quanta chip, is an individually marketed unit embodying the invention, and rights aren't exhausted by the previous sale of other units.

[Skeptical]

James,

I think Kevin might have been pointing out a fundamental difference between method claims and other categories.

Whether or not physical goods are involved in a second test is not material, as the claim isn't to good s used in the method.

The question centers around is it the same method? I think it comes down to what does it mean to "exhaust a method"? The question is qualitatively different for this category. As my first question above alludes to, the courts have not been so kind in extending protection to method claims. It is quite conceivable that the payment of a first method does exhaust "the patent rights" to that method, and the payor does not owe any more for any additional tests - from the patent perspective. Now, from the business and service perspective, the payor may have to pay for each test - but that is a completely different question. In essence, once the first method has been paid for, the payor cannot infringe that method claim, whether or not he pays for the service for subsequent uses of the same method. It is a subtle, but important nuance.

[Kevin E. Noonan]

Dear James:

A perfectly reasonable position. However, I did posit that the methods/primers, etc. were not considered to be patented for my hypo.

Thanks for the comment.

[James Demers]

Not to be argumentative, but this gets more intriguing the deeper I get into it.

Let's say I patent a method of metal forming that comprises bending the metal at a rate that accelerates and decelerates within certain parameters. The method, surprisingly, gives much stronger formed parts, so they can be made thinner and lighter. I don't claim apparatus or software, just the method.

I license the technology to General Motors. Can it be that GM owes me nothing after fender #1 comes off the presses, because I've exhausted my patent rights?

If the answer is no - and I certainly hope it is - then there's nothing particularly "exhaustible" about method claims per se.

Which brings us to Bayer v. Housey and the distinction between insubstantial and substantial products of a patented process.

Is the argument that I still have an interest in GM's fender #2 (and indeed in fender #2,000,000) because automobile fenders are substantial, whereas if the product had been insubstantial, my patent rights would have been exhausted?

Let's totally abstract the concept from any particular or patented technology:

My claim is to "A method of learning if X is true, by doing Y with beeswax and bubble-wrap."

A (compulsively honest) customer mails me the requested royalty, in payment for the right to find out if X is true by doing Y. Or perhaps, at her request, I employ my own highly trained beeswax and bubble-wrap specialists to find out if X is true. Either way, I get paid, and she learns that -- in her particular situation -- X is true. So far, so good.

The same customer, at a later date, wants to know if X is still true. The (honest but compulsively thrifty) customer asks you whether (a) I am owed a second royalty payment, or (b) my rights are exhausted, and her single payment bought her an unlimited license to conduct future tests herself (or to contract with other highly trained beeswax and bubble-wrap specialists.)

Can she rely on Bayer v. Housey for the proposition that the insubstantial nature of the product gives a different result from that reached in connection with my metal-forming patent?

Bayer v. Housey was decided entirely on (1) the legislative intent and (2) the meaning of "made" in 35 USC 271(g). If the CAFC looks unkindly on method patents, the evidence so far is that it's limited to the context of imported insubstantial products. (Understandable: the court had a real problem with the notion that telling someone what you know, or merely entering the U.S. with the accused "product" in your head, could be an act of infringement.)

We are not dealing with 271(g) here, and I really don't see a judicial prejudice against method claims outside of that context. For that reason, my take is that the "metal-forming" and "determining X" claims get equal treatment in a patent exhaustion analysis.

That said, it is a subtle question, and there's little to prevent an anti-patent judge from holding to the contrary, if only on "policy" grounds -- although I think it would be an example of a tough case making for bad law.

[Kevin E. Noonan]

Dear James:

Your comment was the point of my post - this was an easy question to answer 20 years ago, but is less so now, since the zeitgeist has turned against patents.

One difference in your hypo and the Myriad case (besides Myriad being about breast cancer rather than beeswax - and I think that makes a difference to many) is that the second test for breast cancer isn't to determine whether X is still true, but whether X was true in the first place. So essentially looking for the same result (on the same sample, using the same method, etc.).

Another basis for distinguishing between this outcome and the fender hypo is that it isn't the same fender - it's the 2,000,000th fender. So it isn't just tangibility (although that is a part of it).

Thanks for the comment.

[Skeptical]

I may be the one missing a nuance here, but James your comment:

"I license the technology to General Motors. Can it be that GM owes me nothing after fender #1 comes off the presses, because I've exhausted my patent rights?"

made me wonder - When you licensed your technology (method claim), did you actually license a specific number of uses? If not, did you re-license after the first use?

There may be a conflation here with how you (or anyone) puts a value on a license by so incorporating a per item fee. However, such an arrangement is a business deal, and does not change the patent right - As I mentioned above, not paying for a second test may get you into trouble for a contract or service violation - but in both cases, a patent violation may be off the table.

[James Demers]

The question of replicate analyses does make it a much closer call. As a licensee, I'd want to be free to do a test multiple times if I desire some statistical certainty. If this is explicit in the terms of the license, no problem; the question here would be what to do if the license is silent on the matter. (Although perhaps there's a question whether a license that calls for continued royalties on exhausted patent rights is enforceable.)

Myriad, of course, isn't licensing the test - they conduct it themselves. (The fender analogy would have me sell a few fenders to GM, after which they claim to be free to make their own.)

It's a large concept that's at stake; not all DNA tests are $3,000 breast cancer tests.