Docs @ BIO: The Rest of the Story

Bloomberg BNA Hosts Panel on Subject Matter Eligibility

By Kevin E. Noonan --

Last month at the BIO convention, Randy Kubetin, Managing Editor of Bloomberg BNA's Life Sciences Law & Industry Report moderated a panel entitled "Patent Eligibility from the Trenches: Practical Implications of the Supreme Court's Mayo and Myriad Decisions."  The panel provided a counterpoint to the USPTO's presentation earlier in the day (see "USPTO Provides Update on Myriad-Mayo Guidance"), which set forth the Office's position on subject matter eligibility.  This panel consisted of Theresa "Terry" Stanek Rea, former Deputy Director of the PTO under David Kappos and Acting Director upon his departure; Dr. Dianna DeVore, Senior Vice President, IP and Legal Affairs, Ariosa Diagnostics Inc. (familiar to readers for taking the position that nothing related to natural products or diagnostic methods is or should be patent eligible; Katherine Neville, a patent prosecutor from Marshall Gerstein and Borun in Chicago; and Matthew MacFarlaine, an author of Bloomberg BNA's Report, Stopped at the Threshold: The Practical Implications of the Supreme Court's Mayo and Myriad Decisions on Biotechnology Patent Practices (see "Bloomberg BNA Issues Report on PTO's Patent Eligibility Guidance").

Mr. Kubetin introduced the panel and the topic by recapitulating some of his rhetoric he used in an earlier press conference introducing the Report:  speaking of the Mayo and Myriad cases and the USPTO Guidance, he asserted that the cases and the Guidance had "rewritten the playbook" and were (to use PTO Official June Cohan's phrase) "game changers."

He then introduced the panel and Ex-Deputy Director Rea was the first to speak.  Asking that the session should be "highly entertaining" and "interactive, she presented what she called a "where we are" talk with regard to the Guidances and recent case law.  She argued that the Court's "judicial exceptions" were a "coarse filter" better assessed using substantive patent law.  She also asserted that in a close case, where patent eligibility is a tossup, the Office should choose to let an application pass through the Section 101 test.  She said that the Office was looking for "bright line" tests and for the public's help in properly applying the Court's rubrics, citing the Office's May 9th forum on the scope of the Guidances.  She also cautioned restraint by the Office, and asked the audience to advise clients to encourage them to pursue claims outside the scope of the Guidelines to help the Office "get it right."  She also mentioned that the deadline for written comments was extended by the Office until July 31, 2014 and said "[e]ach and every person in [the audience] has a moral duty" to provide comments on the Guidelines to help the Office "get it right."

But she acknowledged that the "easy days" of having patent eligibility satisfied merely by reciting that a natural product was "isolated and purified" are gone, and what the Office needs are distinctions from the case law, particularly from the "scholars."  Ms. Rea also believes (from anecdotal evidence) that the Office and even certain examiners are looking for help in making the right determination; in this regard Ms. Rea cited the seven additional examples issued by the Office, including the one involving production of an antibiotic in yeast, which she believes should be patent eligible (unfortunately contrary to the Court's Cochrane v. Badische Anilin Soda Fabrik, 111 U.S. 293 (1884) precedent).

Ms. Rea also argued (by example) for transparency by the Office, recalling her experience with the Written Description Guidelines from January 2001 and Director Kappos's supplemental guidelines in 2010, both of which were fully vetted through the formal agency rulemaking process.  She then directed her argument to why "getting it right" was important to her (as it should be to all of us, grey-haired or not): "I want as many drugs as possible and as many diagnostic tests as possible so I can look as good as possible for as long as possible."  She ended her portion of the panel by reminding the audience of the comments earlier in the morning by former Solicitor General Nancy Linck, agreeing that the Office should err on the side of patentability and said that she has optimism that the Office will do the right thing but needs our help in getting there.

Next to speak was Dianna DeVore, Chief Patent Counsel of Ariosa Diagnostics; for those with short memories, Ariosa has taken the position (in its case against Sequenom) that genetic diagnostic tests utilizing "naturally occurring" fetal DNA were invalid under Section 101.  Dr. DeVore began her talk by stating that the "optimism is now over" and that the issue isn't how to get patents to grant from the Office but on how they can be enforceable.  Dr. DeVore acknowledged that the issues have not been completely resolved and that the current state of the law has had a "chilling effect" on diagnostics.  A result of this chilling effect is a "change IP regime," from "content based" (presumably genetic information) to "technology based," for example technology applicable to many diagnostics areas (she cited prenatal diagnostics and oncology as examples).  While admitting that not everyone believes these changes are good for diagnostics (a brave understatement particularly in front of this audience), she then predicted that as a result of the changes in the law, genetic diagnostic technology would rely more on trade secrets than patent protection, saying that the worst case scenario for a genetic diagnostics company would be to disclose its "secret sauce" in a patent application without being able to protect its methods.  (Without impugning Dr. DeVore's motivation it is clear that such a regime favors companies like Ariosa because it not only does not require disclosure but actively discourages it, so that the "term" of a proprietary diagnostic method can last far longer than the statutory patent term.)  Former Deputy Director Rea then piped up, saying that this scenario "really scares her" because the point of the patent system was disclosure; if Dr. DeVore's predictions became true the future would create specialized "institutes" where patients would need to visit to get a diagnosis.  Under these circumstances these institutes would "control" such testing because it would be difficult if not impossible to reverse engineer the test.  Dr. DeVore deflected this criticism by reminding the audience of the competition between the Scolnick lab and Mary Claire King's lab over the BRCA genes, implying that this sort of competition could avoid the consequences Ms. Rea had envisioned.  Unfortunately, while in the BRCA case there could have been such competition, the type of diagnostics Ms. Rea was talking about is unlikely to have the same sort of competition if only because such diagnostic tests are unlikely to involve inheritance of a single gene having the cancer-predisposing effects of BRCA (if only for the reason that it is one of the very few having such effects).

Dr. DeVore also conflates the Mayo and Myriad holdings (as Ariosa has in its arguments to the District Court and the Federal Circuit), illustrated as saying the holdings were "not internally consistent" because producing cDNA from mRNA was "routine" (and implying that cDNA thus should not be patent eligible subject matter).

Dr. DeVore ended her talk by mentioning the Court's decision in Alice Corp. v CLS Bank, saying that she has been "surprised" that the Court had been so interested in this area of the law.  She also stated that she believes the Federal Circuit will ultimately determine where the lines on patent eligibility will be drawn.

Ms. Katherine Neville was the next speaker, and her talk was directed to the expanded scope of patent ineligibility in the Guidance that she said included antibodies, antibiotics, and other natural products.  She said that in her experience as a patent prosecutor for Biomarin and other pharmaceutical clients she had seen "viable 101 rejections and ridiculous ones, and cited the NIH study on the source of approved drugs over the past thirty years that has been discussed at the BIO IPCC meeting in April (see "Sherry Knowles 'Speaks Truth to Power' on the PTO's § 101 Guidelines").

Ms. Rea again spoke up, reminding the audience that such drugs would not be brought to market unless a company can have an exclusivity position, citing bacitracin and taxol as examples.  Finally, Ms. Neville spoke about alternative claiming methods (such as methods of treatment) and the limitations of using these claim forms rather than claiming such natural products as compositions.

The final speaker was Matt MacFarlaine, one of the authors of the Bloomberg BNA Report, and his presentation was largely a recap of the information disclosed in Bloomberg BNA's earlier press conference.  His message:  that the Office was broadly applying the Guidance on a case-by-case basis, to invalidate many claims encompassing widely varying subject matter (including in a particular example methods for identifying products of selective breeding of cod using genetic testing; these claims were deemed patent ineligible).  The pattern the authors detected was to "reject first" and then review an applicant's response to determine whether it overcame the assertion of patent ineligibility.

Mr. Kubetin then started the truly interactive part of the program, presenting three claims and having the audience vote on whether the claims were patent eligible under the Guidances.  These claims were related to the following technologies:

• A method for optimizing treatment of breast cancer with Tamoxifen, patterned very closely to the claim invalidated in Mayo;

• A method for amplifying DNA patterned very closely on claims to the polymerase chain reaction (PCR); and

• A vector comprising a nucleic acid operatively linked to a heterologous promoter.

Perhaps not surprisingly, the vast majority of audience participants believed the first claim not to be patent eligible, based on its similarity to the Mayo claim.  This sentiment seemingly ignored the question of whether it was known (at the time the method was invented) that Tamoxifen was a treatment for breast cancer; the similarity to the Mayo claim was enough for most of the audience to arrive at its conclusion of patent ineligibility.  At least one questioner pointed out that this sentiment was based on the assumption that Tamoxifen was not a new compound and posed the question of whether the result would be different if it was novel (Dr. DeVore remained steadfast in her position that this claim would just be a natural correlation whether Tamoxifen was a new compound or not.)

The other two claims were deemed by the majority of the audience to be patent eligible.  However, one audience member reacted to the PCR claim by stating that "this was exactly what the Supreme Court was trying to get rid of in Myriad, . . . control of genetic information."  Unless this was an ACLU plant, this outburst provided a measure of how far the ACLU's position has taken hold even among BIO attendees.  However, it is important to realize that this position conflates claims to a method for obtaining (genetic) information with the information itself, and also forgetting that genetic information per se is not patent eligible and has never been patented.  The recombinant DNA claim was less controversial if only because it was polled at the very end of the session (which had of course gone overtime); from earlier discussions it was clear that even this claim had some audience members believing that patent eligibility would depend on whether making recombinant DNA was "routine and conventional," something the Supreme Court has not held but criteria clearly implicated in the Office's Guidance.

Taken together, this session, Bloomberg BNA's press conference regarding its Report, and the PTO's session earlier in the day firmly established that the law of subject matter eligibility is in flux throughout the patenting space, a situation created by the Supreme Court, abetted by the USPTO and the excessive Guidances, and one that decidedly does not "Promote the Progress of . . . the Useful Arts."

Comments

[Weary Practitioner]

I have seen many discussions on “theoretical” claims. Let me give you a real life example. Just got the first Office Action since the guidelines were released. The application is a continuation from an issued patent. All claims were rejected under 101. This result is devastating, since it is also saying that all the claims in the issued patent are invalid. Ultimately, all of my client’s patents obtained over the last 10 years are invalid under this new interpretation of 101. Looking forward, my client has no hope of getting any patents in the future if these guidelines become permanent. Examiners in the Biology Art Groups are rejecting everything under 101. It was hard enough before these guidelines, now it is impossible.

These guidelines mean the end to any new products in the area of nutraceuticals and health food products. People want “natural” products, not synthesized chemicals.

Additionally, I know of a company who bought a patent portfolio, for which they paid several hundred of millions of dollars, to a "natural product" that shows excellent medical results. The compound must be a natural product obtained from the organism because its chemistry is so complex that it cannot be synthesized. What are we to do? Stop looking for the miracle cure synthesized by nature over millions of years. Why even look if you cannot protect your discovery?

Myriad did not say “natural products” were patent ineligible.

[Frohman]

I think it might help explain the situation to people who are happy with the Myriad/Mayo/guideline situation if there were a list of examples of previously patented products that would not be eligible under the new regime, along with their indications and economic value, and preferably some anecdotes from patients who had been helped by those products. Similar to the AUTM 'Put a Face on it' project, to show concrete examples of patented products that improve people's lives. And of course pointing out that without patents on such products, the business model of building a company with such products will either change to a trade secret model or just go away. I guess in addition to the private clinic model discussed in the post, there might also be the option of traveling to other countries where companies sell the product because patent protection is still available there. Hopefully the health and safety standards in those countries will protect people who may feel that route is their only option.

[GrzeszDeL]

Responding to Frohman's comment at 8:45 AM:

I have dim hopes of companies continuing to do R&D simply because they can still get a patent in Europe or Japan or what-have-you. Especially with regard to pharmaceuticals, the U.S. is the market that makes the whole undertaking profitable. The rest of the world imposes statutory price caps on drugs, such that most drug discovery would not be profitable if one could not sell for an outsized profit in the U.S. (See, e.g., http://www.kellogg.northwestern.edu/faculty/dranove/htm/dranove/coursepages/Mgmt%20444/Health%20Affairs%20submission%20Dranove-Kyle.pdf). That is to say, if the only incentive a Pharma innovator has is the lure of a European or Japanese patent, that is little better than no incentive at all, so there will be rather little pharma innovation in such a scenario.

[Bob Cook-Deegan]

URL to the Dranove course paper did not work (from GrzeszDeL post) above.

Terry Rea makes a strong point when she highlights a need for ways to distinguish patent-eligible from ineligible subject matter. But pointing to initial office actions that differ from previous practice and wishing for the old strike zone won't help. SCOTUS is clearly signaling that CAFC and USPTO have been too willing to grant exclusivity on claims that *have the effect* of blocking access to genetic information, and SCOTUS reached that conclusion because claims granted and enforced such as the method and oligomer claims in Myriad patents *really do* have that effect. Those claims were granted, litigated, and SCOTUS made the calls in Mayo and Myriad 9-0. Complaining won't help. Helping find new rules to distinguish claims that have those preclusive effects from others that protect valuable inventions without those effects would be much more useful.

If you add in Judge Bryson's assertion that the USPTO review of the 2001 written description and utility guidelines was "cursory," and Jonathan Harkness's scholarship asserting that Learned Hand's dicta in Parke-Davis were rookie mistakes, now understood as such (see Judge Sweet's analysis), there's much work to be done to figure out how to claim (and create exclusivity for) antibiotics, hormones, vaccines, and genetic diagnostics without making research an infringement.

Sounds like USPTO's current tactic is to reject claims, and then consider applicants' rebuttals case by case. What is the alternative? Clearer rules? What would those be? Structure plus distinct function not found in nature, with clear limitations that do not preclude research and upstream R&D?

SCOTUS had complete unanimity in calling balls what CAFC and many in the patent bar assumed were strikes. You can complain about the ump, or you can ask for a definition of the strike zone (which the ump has not shown any inclination to provide). Looks like it's up to CAFC, patent prosecutors and litigators, and the USPTO to define that new strike zone. Of course USPTO is going to have to reject claims that once would have passed muster. That's now a given, like it or not.

[Skeptical]

Bob - try the URL but delete the period and the close parenthesis at the end.

[Kevin E. Noonan]

Well, Bob, I don't think unanimity has much value here, in view of the language in both Mayo and Myriad showing how little understanding the Court has about patent law.

The complaints are more with how the Office is implementing what the Supreme Court said, no matter how incoherently. One specific complaint is to blend the "routine, conventional and well-understood" standard of Mayo into Myriad facts - I actually heard the Ariosa lady say that a recombinant vector comprising a novel gene and a heterologous promoter might not be patent eligible if making a vector is routine.

And June Cohan has said that a natural product + natural adjuvant = Funk Bros. Sorry, the Office has gone off the rails - I think there are areas where can agree, but this isn't one of them.

Hope you are well. Let me know offline what's happening at Duke

[Weary Practitioner]

Myriad discusses the eligibility of “products of nature”. However, the PTO has changed the term to “natural products” in the guidelines. Products of nature and natural products are NOT the same. A combination of natural products is NOT a product of nature since that combination does not occur outside the laboratory.

Everything is a combination of natural products. Steel would be ineligible because it is just a combination of iron and carbon.

I think there is a big difference in how academics and practitioners view the guidelines. Practitioners see the effect of the guidelines put into action on a daily basis. Our clients risk losing their companies because someone at the PTO decides to expand the ruling in Myriad.

[Skeptical]

"Off the rails" is not all that surprising, and sadly, "I told you so" (not to anyone in particular here) is cold comfort.

The anti-software and anti-business method patent rhetoric is simply too close to being anti-anything patent rhetoric.

The Breyer Two-Step Divide and Conquer Gist-Abstract resulting "weapon" will be used indiscriminately. Count on it.

Analogously, dividing art field from art field has (largely) obscured and distracted the focus of promoting the good that the patent system as a whole provides. Foes of the patent system (and be very wary of those that would hold out that there are none) are only too eager to play off one art field against another. Divide. Conquer. History. Repeat.

[Just Curious]

Weary -- Did the combination of bacteria in the Funk Bros claim "occur outside the laboratory?"

[6]

"this outburst"

Kev, you so funny and so dramatic!