Sherry Knowles "Speaks Truth to Power" on the PTO's § 101 Guidelines

By Kevin E. Noonan --

Last week, Sherry Knowles, former chief patent counsel for GlaxoSmithKline and now principal at Knowles Intellectual Property Strategies, LLC submitted to Managing Intellectual Property magazine a detailed critique of the U.S. Patent and Trademark Office's Guidelines for examination under Section 101 of the Patent Act in view of the Supreme Court's opinions in Mayo v. Prometheus and AMP v. Myriad Genetics.  Her detailed (and critical) assessment of the Guidelines was prompted by a spirited defense of those Guidelines by Drew Hirschfield published by MIP in its March 4th issue, which in turn was occasioned by Ms. Knowles' assertion on March 26th at a MIP-sponsored panel session where, among other things, she characterized the Guidelines as "horrifying to the pharmaceutical and biotech industry."

Ms. Knowles raises the issue recognized by many in the patent community upon first inspection of the Guidelines:  rather than merely attempting to administer the Court's decisions by limiting them to their facts (a particularly appropriate approach in view of the fact-specific bases for the Court's decisions in each case), she asserts that "these Guidelines appear to expand the Supreme Court analyses, apply the expanded analysis to products and methods that have not yet been litigated, and in doing so arguably de facto expand the law, which currently stands only in the form of judicial exceptions to patentability."  These are not prospective or potential problems; Ms. Knowles rightly notes that this expansion of the "natural products" judicial exception is forming the grounds for rejecting U.S. patent applications now, and that the expected consequence (delay in obtaining patent protection and uncertainty about the validity and scope of such protection) could easily "chill[] any ability to attract venture capital and strip[] the value of numerous emerging life science companies."

She also raises the specter of the U.S. being out of step with the rest of the world, noting that many U.S. trade partners and competitors on the world stage (including the countries of Europe, China, Australia, Japan and Russia) grant patent protection for products now outside U.S. patent protection (according to the Guidelines) and that this reality threatens the U.S.'s position as a global biotechnology leader.  Insofar as developing countries look to the U.S. to lead, these Guidelines encourage the sort of "anti-innovation" sentiments the U.S. has long opposed (for example, those preventing pharmaceutical patenting that were part of the impetus for the GATT treaty).

Ms. Knowles asks a simple but fundamental question:  How did we get here?  In her analysis, which reviews the Constitutional approach to patent protection as implemented by U.S. patent law and in particular, the 1952 Act, places at least some of the blame for the current circumstance on Congress, which "has only issued one sentence on what constitutes patentable subject matter in the United States."  As a consequence, the "great void" created by this lack of attention has been filled by the Supreme Court, which is "immune from the political process" and lacks the resources needed to appreciate the effects on U.S. innovation its economy of its policy decisions.  This institutional lack of competence is illustrated by the Court's decision in Funk Bros. Seed Co. Vs. Kalo Inoculant Co. (333 U.S. 127; 68 S.Ct 440 (1948), which forms the basis for the PTO's interpretation of the Court's recent cases.  (Indeed, in a panel discussion at the Spring BIO IPCC meeting last week in Palm Springs, the Office's reliance on Funk Bros. was readily acknowledged by its representative on the panel.)  Ms. Knowles notes that the "fatal flaw" in Kalo's patent claim (Claim 4 of U.S. Patent No. 2,200,532) was that it attempted to encompass all combinations of Rhizobium species that could permit growth in each other's presence, a case of "an aspiration which defined the material not by what it is but by what it does."  This problem is one governed not by Section 101 of the Patent Act but rather Section 112, first paragraph (now Section 112(a)), for failure to provide an adequate written description of the invention.  Rather than rely on this principle (which, while as recited was part of the revisions to the patent laws enacted four years after Funk Bros., but which was already enshrined in prevailing law), the Court relied on its "gut-feel that if one simply tells the public to find a bacteria that works, and use a prior art method to do so, that alone is not patentable."  The result was "immeasurable damage []caused by using 101 as the rationale and with expansive, unnecessary and not politically tested verbiage that any mixture of natural materials is not patentable."  (As close readers of the opinion have long recognized, Ms. Knowles references Justice Frankfurter's concurring opinion which is much more informative than Justice Douglas's principle opinion on the Court's concern and intended scope of its opinion.)  And she puts paid to the misunderstanding of the case (that persists even today on the Court and particularly in the PTO) by citing Judge Giles S. Rich (author of the 1952 Patent Act) on this issue:

The real vice or inadequacy of the judge-made requirement for "invention" was in the truism Mr. Federico [one of the drafters of the 103 statute] restated, "the so-called standard of invention is an unmeasurable quantity having different meanings for different persons."  It left every judge practically scott-free to decide this often controlling factor according to his personal philosophy of what inventions should be patented, whether or not he had any competence to do so or any knowledge of the patent system as an operative socioeconomic force.  This was too great a freedom because it involved national policy which should be declared by Congress, not by individual judges or even groups of judges on multiple-judge courts.

Per Judge Rich, the test for "invention," as that term was inexactly used for many years by the Court, is embodied in Section 103 and adoption of that section of the patent law evinces Congress's judgment on how best to put into effect the Constitutional purpose of the patent grant.

Fast forward to the present day, and Ms. Knowles assays the current Court's statements in its Mayo and Myriad decisions showing that these principles and appreciation of Congressional intent have been forgotten if ever appreciated at all.  She notes that the Court has expressly stated that "mere discovery" does not satisfy the legal standard for invention, which requires the Court to ignore the words of the statute that "Whosoever 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," and asks "[d]oes the Supreme Court have the right to pencil out two very important words of a statute?  Can the Supreme Court decide to honor only part of a statute and judicially except the rest?"  This is not interpreting the law, Ms. Knowles contends; it is changing it (and about that she is completely correct).

The next section of her piece is perhaps the most salient to the policy question raised by the Court and improvidently addressed by the Guidelines.  Relying on a 2012 report from the National Institutes of Health, Natural Product Branch, she recites the statistics relating to the number of FDA approvals (a total of 1,355) for new drugs falling into the following categories:

Drug type/source                                Number

Biological (B)                                            203

Natural product (N)                                    55

Natural product (botanical) (NB)               149

Derived from a natural product (ND)          298

Totally synthetic (S)                                  393

Total synthesis/natural product (S*)           176

Vaccine (S)                                                 81

These statistics illustrate the consequences of the Court's and the Office's policymaking; of the 1,355 drugs approved between 1981 and 2010:

• 968 (71%) are outside the scope of the Guidelines

• 636 (47%) are B, N, NB, and V

• 50% of all small molecule drugs are natural products (2000-2010)

• About 75% of antibacterial drugs are natural products or derived from natural products

• Almost 80% of small molecule anticancer drugs were natural products or derivatives

The Report also has specific information on particular drugs among these different catagories.

Ms. Knowles does not state the obvious:  these statistics are chilling.  It is of particular note that during the 1982-2010 timeframe only 15% of approved drugs were biologics; every study has shown that the percentage of drugs that are biologics has been growing and will be the predominant type of drug developed in the 2011-2030 time period.  And these drugs are the among the ones that the PTO would preclude from patenting, based on its over-interpretation of the Court's decisions in Mayo and Myriad.

In closing, Ms. Knowles does not shy away from the implications of her analysis, that what we have here is a breakdown of the separation of powers that is the basis of our Federal government.  The Supreme Court is legislating rather than interpreting the law, and Congress seems unable to identify the portions of the patent law that are actually important for innovation, producing the legislative void the Court has taken upon itself to fill.  She notes that the Guidelines cite the "judicial exceptions to patent[-eligibility]" eighty-two times, without citing the relevant language of the Patent Act at all.  The short term answer may be as simple as having the Office listen to the patenting community and the outrage the Guidelines have created, but that may be a false hope:  the Office was tone-deaf enough to promulgate these Guidelines without notice and comment (which, even if not necessary would have alerted the relevant parties to provide whatever counter-arguments they are now raising after the fact).  And she is even more hopeful in calling for us all to "encourage our Congressional representatives to open the political process to update the patent statutes, and in doing so, provide the necessary clarity and leadership on patentability in this complex technology space and override the Supreme Court's 'judicial exceptions to patentability.'"  The solution may be as simple as the Office rescinding these Guidelines, publishing them for notice and comment, and then working with its relevant stakeholders to find a workable compromise.  No matter how this is resolved, we owe it to ourselves if not the public to try to educate our leaders on these important issues.

Comments

[Heebie-Jeebies]

I remember when Erwin Chermerinsky taught the con law part of the BARBRI course, he did not attempt to synthesize various (contradictory) doctrines. He just said, "This is what the court said in this case", and limited himself to the facts of each case (knowing that the bar exam itself would be so limited). It's not just too bad the USPTO hasn't taken a similar approach in applying the Myriad decision; it's amazing that the PTO is as out of touch with reality as is SCOTUS.

[EG]

Kevin,

Sherry's analysis is spot on. Our Judicial Mount Olympus simply ignores the language of the patent statutes when it doesn't suit their anti-patent purposes, Breyer being a prime example of that problem. Now the USPTO has picked up on this dysfunctional approach by Our Judicial Mount Olympus to be a license to promulgate these inane Guidelines. And people wonder why the patent bar is so unhappy with Our Judicial Mount Olympus?

[Nate]

What about a judicial challenge of the Guidelines based on a procedural due process violation? The PTO did not follow proper rulemaking procedures under the Administrative Procedures Act for these Guidelines, which have resulted in a loss of property.

[Derek Freyberg]

@Nate:
My understanding is that because the Guidelines are just that - guidelines for the examining corps and not regulations of the kind that appear in Chapter 37 CFR - no rulemaking procedure is required. They're like the MPEP, and do not have the force of law. The problem for patent applicants is that the examining corps will follow the guidelines unless and until case law makes it clear that they are wrong, and that is a lengthy and expensive process through which many applicants will have to suffer. Best hope in the short run is that the uproar from interested groups will cause the PTO to revise the guidelines.

[GrzeszDeL]

I agree with Ms. Knowles' broad thesis (Congress should step in to reverse some of the Supreme Court's recent 101 jurisprudence), but her essay was a terrible piece of writing.

The essay is supposed to be about 101, but nearly a third was given over to a digression about how badly the courts used to mess up "inventive step" jurisprudence before Congress added 103 to title 35. What is this supposed to prove? That the courts can get things wrong? Such a thesis hardly deserves this sort of extensive treatment, especially when the subject matter is so orthogonal to the broader point.

I am also not clear as to what I should make of the claim that "[t]he US is losing its position as the global leader in biotechnology." What does that have to do with 35 USC 101? Does Ms. Knowles imagine that US researchers are motivated by US patent law, while foreigners are motivated by their respective laws? Surely not. Korean biotech firms are hoping to sell their inventions in the US at least as much as they are hoping to sell them in Korea.

If the US courts restrict the scope of patent protection biotech companies can get in the US, this will not discourage biotech researcher from working in the US. Rather, it will discourage investors from investing in biotech, both in the US and abroad. This is bad, but it will not affect the US any more particularly than anywhere else.

[Skeptical]

GrzeszDeL,

Your thinking that the essay was poorly written based on your comment of "What is this supposed to prove?" only proves that you lack the appreciation of what 101 covers.

The 1952 Act has direct and meaningful implications to what 101 covers PRECISELY because Congress acted to add 103.

That you lack this understanding does not at all mean the two are "orthogonal." It merely means that you do not understand the importance of the point.

[TBP]

Does Ms. Knowles believe that facts about biological correlations can be protected with patents, as Prometheus attempted to do?

Apparently so.

There's no reason to take her fearmongering about the end of biotech any more seriously than the NRA's fearmongering that the "government is going to come take away all your guns." She's an industry shill.

[TBP]

Skeptical: "The 1952 Act has direct and meaningful implications to what 101 covers PRECISELY because Congress acted to add 103."

Did Congress intend to make products of nature eligible for patenting?

[EG]

Skeptical,

I fear that TBP (aka "Malcolm Mooney," "MM," etc.) is on the loose again. Guilty until proven otherwise.

[Skeptical]

Get well soon PatentDocs from your apparent latest infestation of Malcolm Mooney and his merry band of sockpuppets.

When I see a new name trot out the notion that someone is trying to patent information itself, well, that alone makes me skeptical.

But when that person comes out and starts calling others the names that would easily fit that person, I become more than...

[Kevin E. Noonan]

I think what Dr. Knowles was doing was pretty clear. First, she was pointing out that the concept of "inventiveness," as a requirement for patentability, was and has been accepted to be what we consider obviousness today. Dr. Knowles didn't reinsert this concept into the Section 101 context, Justice Breyer did in his Mayo decision. In pointing this out, the piece also points out another example of the Court ignoring what Congress has mandated in view of its own plenary review of patent law - something it does nowhere else (remember, the Chief Justice voted in favor of the healthcare act last term on the grounds that while the Court may not think much of an Act of Congress, it could only override that decision if Congress had overstepped its Constitutional grounds). More on that later.

As for the science, the argument is persuasive that the PTO Guidelines make patent ineligible "products of nature" far in excess of what is required by the Court's Myriad decision. This became even more evident at a BIO meeting last week, where a PTO representative would not concede the patent eligibility of a novel anticancer drug isolated from a natural source, formulated with a naturally occurring substance like starch, as a pharmaceutical formulation. Far from being alarmist, Dr. Knowles is accurately illustrating the consequences that will certainly arise from the PTO's current position.

One more thing. As noted above, even the Court recognizes the limits of its own authority, and even in the patent area Congress had overruled Court decisions - Roche v. Bolar and Deepsouth Packing come to mind. The issue here is what is the consequence when the Court, not Congress, acts in ways that do not "promote the progress" of the useful arts by, as here, ruling in ways that justify the type of categorical exclusion of patent eligibility reflected in the PTO Guidelines?

As for MM etc., he is welcome on this site, provided he (nor anyone else) descends to the level of "Jane, you ignorant slut!"

[Kevin E. Noonan]

A reader having trouble connecting writes:

"I heartily endorse Sherry Knowles’ comments, but I have a question for her and the PatentDocs readers: do you think it is possible that the USPTO has created these radical and onerous Examination Guidelines with the ultimate BENEFIT of patentees in mind, because they utterly disagree with both Mayo and Myriad? Keep in mind the way the PTO administration was dissed by the DoJ on the SCOTUS amicus briefings (a forced “joint” brief in Mayo; DoJ only in Myriad, with the execrable “magic microscope” theory and other policy nonsense), and how apologetic the administration and examining corps seem to be in promulgating the Guidelines.

Is it possible that by extending in these Guidelines the radical change in the law regarding patent-eligibility created by Mayo and Myriad to the broadest (un)reasonable interpretation, the USPTO is providing the framework and extreme motivation for the patent bar, BIO, AIPLA, PhRMA and other stakeholders to go to Congress to get this unwarranted judicially-created disaster fixed, for once and for all? Is this the motivation to amend 100(a), 100(b) and/or 101 to make it clear what subject matter IS patentable, including isolated natural products, natural laws plus ANY application, any method that includes a machine or transformation, etc.? Because it is clear we cannot rely on the courts to fix this – history shows that SCOTUS will only make it worse the next time they get their hands on a case with patent-eligibility issues.

In other words, rather than pursuing a policy of Chamberlain-eseque appeasement, trying to get the USPTO to back off here and there on particularly egregious results of the Guidelines, but losing on the primary issue of expanding the scope of exclusion from patent-eligibility, perhaps the patent bar, BIO, AIPLA, PhRMA and other stakeholders should USE these Guidelines to march on Congress and DEMAND amendments to the statutes to prevent this. Whether or not that was the USPTO’s actual intent, this may be the ONLY way to stem the tide of anti-patent judicial legislation, and to avoid being nibbled to death by ducks – increasingly anti-patent SCOTUS decisions that undermine settled expectations of the industry and especially the investors in biotechnology and pharmaceutical companies."

I wish I shared our reader's optimism on the PTO's political sophistication or the prospect of Congress getting this right (much more likely in my view that Section 101 would become a forest of special interest "thou shalt nots") but these views deserve to be heard and so we repost them here.

[Skeptical]

Calling someone an industry shill (without backing that call up with any analysis of the legal points put forth) seems an awful lot like:

"Jane, you are a female who has many casual sexual partners, lacking knowledge or awareness in general."

But with far less panache.

[Skeptical]

As to "optimism on the PTO's political sophistication or the prospect of Congress getting this right,"

I too remain...