Genetic Veterinary Sciences, Inc. v. LABOKLIN GmbH (Fed. Cir. 2019)

By Donald Zuhn --

Earlier this month, in Genetic Veterinary Sciences, Inc. v. LABOKLIN GmbH, the Federal Circuit affirmed a decision by the U.S. District Court for the Eastern District of Virginia granting a motion for judgment as a matter of law filed by Appellee Genetic Veterinary Sciences, Inc., d/b/a Paw Prints Genetics ("PPG"), and as a result, found that the asserted claims of U.S. Patent Nos. 9,157,114 were patent ineligible under 35 U.S.C. § 101.  The Federal Circuit also affirmed the District Court's denial of a motion to dismiss PPG's complaint for lack of subject-matter jurisdiction and lack of personal jurisdiction filed by Appellants LABOKLIN GmbH & Co. KG ("LABOKLIN") and the University of Bern ("the University").

The '114 patent, which is owned by the University, relates to in vitro methods for genotyping Labrador Retrievers, in order to discover whether a dog might be a genetic carrier of Hereditary Nasal Parakeratosis ("HNPK"), a disease that causes crusts and fissures to appear on a dog's nose.  A professor at the University discovered that the presence of HNPK in Labrador Retrievers resulted from a point mutation in the gene SUV39H2.  Claims 1-3 of the '114 patent recite:

1.  An in vitro method for genotyping a Labrador Retriever comprising:
a) obtaining a biological sample from the Labrador Retriever;
b) genotyping a SUV39H2 gene encoding the polypeptide of SEQ ID NO: 1 and
c) detecting the presence of a replacement of a nucleotide T with a nucleotide G at position 972 of SEQ ID NO: 2.

2.  The method according to claim 1, wherein the genotyping is achieved by PCR, real-time PCR, melting point analysis of double-stranded DNA, mass spectroscopy, direct DNA sequencing, restriction fragment length polymorphism (RFLP), single strand conformation polymorphism (SSCP), high performance liquid chromatography (HPLC), or single base primer extension.

3.  The method of claim 1, wherein the genotyping utilizes a primer pair comprising a first primer and a second primer, each comprising a contiguous span of at least 14 nucleotides of the sequence SEQ ID NO: 2 or a sequence complementary thereto, wherein:
a) said first primer hybridizes to a first DNA strand of the SUV39H2 gene;
b) said second primer hybridizes to the strand complementary to said first DNA strand of the SUV39H2 gene; and
c) the 3' ends of said first and second primers are located on regions flanking the position 972 of SEQ ID NO: 2, or of nucleotide positions complementary thereto.

The University, which is an instrumentality of the Swiss Confederation having a place of business in Bern, Switzerland, granted an exclusive license for the '114 patent to LABOKLIN, which is a German company with its principal place of business Bad Kissingen, Germany.  LABOKLIN entered into two sublicenses of the '114 patent in the United States.  PPG offers laboratory services for testing for genetic variations and mutations known to cause certain diseases in dogs, including a test for detecting the presence of a mutation in the SUV39H2 gene.

In January 2017, after obtaining the consent of the University, LABOKLIN sent a cease-and-desist letter to PPG asserting that PPG had infringed the '114 patent.  PPG responded by filing suit against LABOKLIN and the University and seeking a declaratory judgment that the asserted claims of the '114 patent are patent ineligible under § 101.  LABOKLIN and the University moved to dismiss PPG's complaint for lack of subject-matter jurisdiction and lack of personal jurisdiction.  The District Court, however, issued an Order finding jurisdiction established over both LABOKLIN and the University.  The dispute proceeded to trial on PPG's invalidity defense, and following the close of both parties' evidence, but before the case was submitted to the jury, the District Court granted PPG's motion for judgment as a matter of law and found the asserted claims patent-ineligible under § 101.

On appeal, LABOKLIN and the University argued that the District Court lacked personal jurisdiction over LABOKLIN because LABOKLIN lacked sufficient contacts with the forum, and lacked personal and subject-matter jurisdiction over the University because the University enjoyed sovereign immunity.  With respect to Appellants' argument that the District Court lacked personal jurisdiction over LABOKLIN, the Federal Circuit disagreed with Appellants' assertion that a cease-and-desist letter along with licensing activity in the forum was not enough to confer jurisdiction.  The Federal Circuit stated that "[a]s the District Court aptly pointed out, here, 'LABO[KLIN] is not merely a remote patentee assisting a U.S. company with enforcement, but instead, it is the U.S. enforcer.'"  The Federal Circuit therefore determined that the facts of the case established that LABOKLIN's activities satisfy the minimum contacts requirement without offense to due process, and thus, personal jurisdiction over LABOKLIN in the District Court was reasonable and fair.

Turning to Appellants' argument that the District Court lacked personal and subject-matter jurisdiction over the University because the University enjoyed sovereign immunity, the Federal Circuit began by noting that under the Foreign Sovereign Immunities Act ("FSIA"), "a foreign state is presumptively immune from the jurisdiction of United States courts; unless a specified exception applies, a federal court lacks subject-matter jurisdiction over a claim against a foreign state," and that under 28 U.S.C. § 1605(a)(2), if a foreign state engages in "commercial activity . . . in the United States," an exception to sovereign immunity applies.  Citing Intel Corp. v. Commonwealth Sci. & Indus. Research Org., 455 F.3d 1364, 1370 (Fed. Cir. 2006), the Court further noted that a defendant's "acts of (1) obtaining a United States patent and then (2) enforcing its patent so it could reap the profits thereof—whether by threatening litigation or by proffering licenses to putative infringers—certainly" are commercial activity.

In response to Appellants' argument that the University was presumptively immune from the jurisdiction of U.S. courts under the FSIA because the District Court erred in finding that the commercial activity exception under the FSIA applied to the University's immunity, the Federal Circuit explained that "[t]he University cannot claim immunity in the District Court because it obtained a U.S. patent and then participated in licensing and enforcing the '114 patent, which constitutes 'commercial activity' under the FSIA."  The Court also explained that "it matters not to [the Court's] analysis that it was LABOKLIN that physically wrote and sent the cease-and-desist letter to PPG, because the University conceded that it still retained substantial rights in the patent, such that the University, as the sole 'patentee,' ultimately controlled enforcement of the '114 patent."  The Federal Circuit therefore determined that the commercial activity exception to sovereign immunity applied such that the District Court properly exercised subject-matter jurisdiction over the University pursuant to § 1605(a).

On the issue of patent eligibility, LABOKLIN and the University argued on appeal that the asserted claims are directed to a patent-eligible application of the discovery of the underlying natural phenomenon because the asserted claims claim a man-made laboratory procedure.  The Federal Circuit, however, disagreed with Appellants' argument.

The Federal Circuit began its patent eligibility analysis by briefly reviewing four of its previous decisions:  Ariosa Diagnostics, Inc. v. Sequenom, Inc.; In re BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litigation; Vanda Pharmaceuticals, Inc. v. West-Ward Pharmaceuticals International Ltd.; and Natural Alternatives International, Inc. v. Creative Compounds, LLC.  The Court then declared that "[h]ere, the Asserted Claims are not directed to a new and useful method for discovery because they begin and end with the point discovery of the HNPK mutation in the SUV39H2 gene," adding that:

[C]laim 1 simply states that the search for the mutation involves the laboratory examination of Labrador Retriever DNA, which resulted in the revelation of the mutation.  The mutation location itself and the fact that it is inherited through male and female dog carriers mating are both natural phenomena.

Noting that "the plain language of claim 1 demonstrates that it is directed to nothing more than 'observing or identifying' the natural phenomenon of a mutation in the SUV39H2 gene," the Court determined that "the Asserted Claims are directed to natural phenomenon at Alice step one."

The Federal Circuit also disagreed with Appellants' argument that the claimed methods apply a new discovery of the SUV39H2 gene and develop novel genotyping methods for Labrador Retrievers, finding instead that "[n]othing in claim 1's language suggests the invention of a new method for genotyping."  In affirming the District Court's finding of patent ineligibility, the Federal Circuit determined that "the Asserted Claims provide no tangible result save the observation and detection of a mutation in a dog's DNA."  So, while such discovery constituted "a positive and valuable contribution," the Federal Circuit found that "these claims fall short of statutory patentable subject matter."

Genetic Veterinary Sciences, Inc. v. LABOKLIN GmbH (Fed. Cir. 2019)
Panel: Circuit Judges Wallach, Hughes, and Stoll
Opinion by Circuit Judge Wallach

Comments

[Paul Cole]

See EP-B-2666871.

Also CA-C-2815869.

The outcome in the US is now seriously out of step with that in other countries/regions. Perhaps some people in the US judicial system have TRIPPED up somewhere (Art 27, TRIPS).

[Skeptical]

Mr. Cole,

I invite you to sketch out in more detail the notion that the US is NOT TRIPS compliant.

Please keep in mind and account for each of 1) the various provisions within TRIPS for Sovereign-specific latitude, 2) any lack of definitions for terms (such as "technical"), and 3) the fact that at least for the US Sovereign, treaties like TRIPS are NOT self-enacting into the law of the Sovereign.

I am genuinely interested in having these (potential) points of distinction clearly understood.

[Paul Cole]

Hopefully a posting or paper next month will deal with this in detail.

[Skeptical]

Excellent - looking forward to it.