Myriad: How Did Public Policy Weigh In?

In Association for Molecular Pathology v. USPTO, the United States District Court for the Southern District of New York invalidated patents related to isolated BRCA1 and BRCA2 breast and ovarian cancer susceptibility genes. The surprising aspect of the decision was the reason for invalidity ' the district court held that the isolated genes did not constitute patentable subject matter under 35 U.S.C. ' 101.

Myriad Patents

The case is often referred to as the “Myriad” case, a reference to the declaratory judgment defendant Myriad Genetics, Inc. that has commercialized the patents at issue. Myriad provides clinical laboratory services within the claims of the patents and used its patent rights to preclude others from doing so. The declaratory judgment plaintiffs include the ACLU, taking a public policy position with respect to the patents at issue, and various organizations, testing labs, physicians and patients who feel they are precluded from practicing Myriad's patented invention.

There were seven patents owned or licensed by Myriad at issue in the motion for summary judgment. The patents relate generally either to compositions or to methods. The challenged composition claims are generally directed to isolated DNA molecules having a nucleotide sequence that translates into either the BRCA1 or BRCA2 protein. The challenged method claims are of two kinds. Certain method claims generally cover the process of identifying the existence of specific mutations in the BRCA genes by “analyzing” the sequence of BRCA gene nucleic acids, such as DNA, RNA or cDNA, obtained from a human sample. Other method claims cover methods of screening drugs for use as cancer therapeutics.

Public Policy Plays Role

The court extensively presents the public policy issues related to patents on the BRCA genes that favor the plaintiffs. Noting the $222M in revenue generated by Myriad's BRCA gene tests and the $3,000 cost to patients, the court observes that there are laboratories in the United States willing and able to offer the tests for much less who are prevented from doing so due to Myriad's patents. The court also notes that the 2003 testing cost to patients in Canada, where the corresponding Canadian patents are being ignored and the testing is offered by the governmental agents, is a third of that in the United States.

In the course of portraying Myriad to be profiting excessively from its patented inventions, the court ignores the fact that profits from a successful product must pay for the research and development that led to the product. The profits must also pay for the scores of failed experiments that did not result in a commercial product but may have ultimately led to the patented invention. Given these circumstances, it is hardly surprising that testing labs that do not have to bear the cost of research and development can provide the testing at a lower cost than Myriad.

Chilling Effect

Virtually swept under the carpet in the court's discussion of public policy is the fact that Myriad's development of its BRCA gene technology was funded by significant private investment. While university scientists received substantial grants from the National Institutes of Health, Myriad was largely financed by private venture capital totaling at least $22M. As some commentators have pointed out, if a patent applicant cannot enjoy its period of exclusivity to recoup its R&D costs and make a profit for its investors, from where will future financing of biotechnology come? Private equity funds will be reluctant to invest in biotechnology because of the uncertainty of recouping their investment, which in turn will have a chilling effect on biotechnological development.

In describing the societal costs of Myriad's patents, the court sympathetically cites examples of patients whose health insurance does not accept Myriad's costs or who are otherwise financially unable to afford the testing. The court notes assertions by scientists that improvements on BRCA gene testing to recognize more gene mutations and reduce false negative test results cannot be developed without infringing Myriad's patents on the basic technology. The court therefore concludes that patents on genes have a chilling effect on scientists' ability to conduct gene testing, and newer testing methods that are more comprehensive, more efficient, and more accurate are being denied to the public.

But how is this any different from any other patented invention? Surely there are countless examples relating to everything from computers to steamrollers where a patented product is able to enjoy higher profit margins. The higher price may put the patented product out of reach of some consumers. Even assuming, arguendo, that the existence of a patent has a “chilling effect” on improvements to the patented product, new and better technologies may be developed in an effort to design around existing patents.

Is the court's emphasis on societal costs different here because the Myriad patents relate to healthcare? Is it evil for a company to profit from the health-related misfortunes of others? The answers to these questions do not reside in ' 101, which does not provide for such distinctions.

Not Patentable

In establishing its standards for patentable subject matter, the district court cited In re Bergy, 596 F.2d 952, 960-61 (C.C.P.A. 1979), stating that “considerations such as novelty are irrelevant for ' 101 purposes.” This conclusion seems to many to be overreaching. While it may be true that novelty over other forms of prior art is not relevant, the analysis that the court conducts under ' 101 by comparing the modified form of a composition to the naturally occurring form seems to be exactly a novelty test.

Jumping the gun on the widely anticipated Supreme Court decision in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), which is expected virtually any day now, the district court determined that BRCA gene sequences and genetic testing as claimed in the Myriad patents do not constitute patentable subject matter under ' 101. The district court cited language from the Supreme Court case of Diamond v. Chakrabarty, 447 U.S. 303 (1980), that “[t]he laws of nature, physical phenomena, and abstract ideas have been held not patentable.” The district court further relied on Am. Fruit Growers, Inc. v. Brodgex Co., 283 U.S. 1 (1931), in which the Supreme Court concluded that products of nature do not constitute patentable subject matter absent a change that results in the creation of a fundamentally new product. In Am. Fruit Growers, which dealt with an orange whose rind is treated to inhibit mold, the Supreme Court acknowledged that the treated orange is not found
in nature, and “treatment, labor and manipulation” went into producing the fruit. Nonetheless, Am. Fruit Growers held that a naturally occurring article does not become a patentable “article of manufacture” unless it “possesses a new or distinctive form, quality, or property” compared to the naturally occurring article.

(To provide some context, at the time of the Am. Fruit Growers decision in 1931, scientists were still 13 years away from determining that DNA served as the carrier for genetic information. James Watson and Francis Crick were still 22 years from publishing their determination of the famous double-helix structure of DNA in the journal Nature.)

The district court concluded that the mere isolation of DNA does not “markedly change” the DNA such that it possesses a new or distinctive form, quality, or property, and thus the challenged composition claims were held invalid. Citing the Federal Circuit's en banc decision in Bilski, the district court determined that neither category of challenged method claims meet the “machine or transformation” test. While acknowledging that isolated and amplified fragments of DNA used in diagnostic methods in ways that native DNA cannot, the district court found that the sequence similarities between the isolated and native DNA, with regards to the composition and analyzing method claims, were more relevant than the other structural and functional changes that the DNA undergoes through isolation. The district court also invalidated the drug screen method claims in an odd application of the Bilski test.

Enforcing Public Policy Not for Courts

Commentators have pointed out that the court's conclusions fail to pass the “common sense” test. If the isolated DNA does not possess “a new or distinctive form, quality, or property” compared to the naturally occurring article, then why couldn't the plaintiffs simply have avoided the Myriad patents by testing the naturally occurring BRCA genes? Conversely, if genetic testing can be conducted only on the isolated DNA, doesn't it necessarily follow that the isolated DNA has “a new or distinctive form, quality, or property”?

At no point does the district court specifically cite public policy as a basis for invalidating the Myriad patents. However, given the proportion of the decision devoted to public policy issues, most of which are anti-patent, it is difficult to believe that public policy considerations did not play a large role in the court's decision. But enforcing public policy is not the role of the courts; it is the role of the legislature. As noted above, ' 101 does not distinguish patentable subject matter based on policy. If society wants to exclude genetic sequences from patentable subject matter or wants to clarify
' 101, the route to change is through Congress to amend the Patent Act.

Depending upon the Supreme Court's decision in Bilski concerning the patentability of methods, the invalidation of the Myriad method claims may be entirely reevaluated. But to conclude that isolated DNA does not possess a “a new or distinctive form, quality, or property” compared to native DNA, when the isolated DNA enables BRCA gene testing but the naturally occurring DNA does not, seems to many like a pretext for invalidating patents on the basis that they deprive patients of affordable healthcare. This is not the purpose of the patent system and certainly finds no support in
' 101.

In Association for Molecular Pathology v. USPTO, the United States District Court for the Southern District of New York invalidated patents related to isolated BRCA1 and BRCA2 breast and ovarian cancer susceptibility genes. The surprising aspect of the decision was the reason for invalidity ' the district court held that the isolated genes did not constitute patentable subject matter under 35 U.S.C. ' 101.

Myriad Patents

The case is often referred to as the “Myriad” case, a reference to the declaratory judgment defendant Myriad Genetics, Inc. that has commercialized the patents at issue. Myriad provides clinical laboratory services within the claims of the patents and used its patent rights to preclude others from doing so. The declaratory judgment plaintiffs include the ACLU, taking a public policy position with respect to the patents at issue, and various organizations, testing labs, physicians and patients who feel they are precluded from practicing Myriad's patented invention.

There were seven patents owned or licensed by Myriad at issue in the motion for summary judgment. The patents relate generally either to compositions or to methods. The challenged composition claims are generally directed to isolated DNA molecules having a nucleotide sequence that translates into either the BRCA1 or BRCA2 protein. The challenged method claims are of two kinds. Certain method claims generally cover the process of identifying the existence of specific mutations in the BRCA genes by “analyzing” the sequence of BRCA gene nucleic acids, such as DNA, RNA or cDNA, obtained from a human sample. Other method claims cover methods of screening drugs for use as cancer therapeutics.

Public Policy Plays Role

The court extensively presents the public policy issues related to patents on the BRCA genes that favor the plaintiffs. Noting the $222M in revenue generated by Myriad's BRCA gene tests and the $3,000 cost to patients, the court observes that there are laboratories in the United States willing and able to offer the tests for much less who are prevented from doing so due to Myriad's patents. The court also notes that the 2003 testing cost to patients in Canada, where the corresponding Canadian patents are being ignored and the testing is offered by the governmental agents, is a third of that in the United States.

In the course of portraying Myriad to be profiting excessively from its patented inventions, the court ignores the fact that profits from a successful product must pay for the research and development that led to the product. The profits must also pay for the scores of failed experiments that did not result in a commercial product but may have ultimately led to the patented invention. Given these circumstances, it is hardly surprising that testing labs that do not have to bear the cost of research and development can provide the testing at a lower cost than Myriad.

Chilling Effect

Virtually swept under the carpet in the court's discussion of public policy is the fact that Myriad's development of its BRCA gene technology was funded by significant private investment. While university scientists received substantial grants from the National Institutes of Health, Myriad was largely financed by private venture capital totaling at least $22M. As some commentators have pointed out, if a patent applicant cannot enjoy its period of exclusivity to recoup its R&D costs and make a profit for its investors, from where will future financing of biotechnology come? Private equity funds will be reluctant to invest in biotechnology because of the uncertainty of recouping their investment, which in turn will have a chilling effect on biotechnological development.

In describing the societal costs of Myriad's patents, the court sympathetically cites examples of patients whose health insurance does not accept Myriad's costs or who are otherwise financially unable to afford the testing. The court notes assertions by scientists that improvements on BRCA gene testing to recognize more gene mutations and reduce false negative test results cannot be developed without infringing Myriad's patents on the basic technology. The court therefore concludes that patents on genes have a chilling effect on scientists' ability to conduct gene testing, and newer testing methods that are more comprehensive, more efficient, and more accurate are being denied to the public.

But how is this any different from any other patented invention? Surely there are countless examples relating to everything from computers to steamrollers where a patented product is able to enjoy higher profit margins. The higher price may put the patented product out of reach of some consumers. Even assuming, arguendo, that the existence of a patent has a “chilling effect” on improvements to the patented product, new and better technologies may be developed in an effort to design around existing patents.

Is the court's emphasis on societal costs different here because the Myriad patents relate to healthcare? Is it evil for a company to profit from the health-related misfortunes of others? The answers to these questions do not reside in ' 101, which does not provide for such distinctions.

Not Patentable

In establishing its standards for patentable subject matter, the district court cited In re Bergy, 596 F.2d 952, 960-61 (C.C.P.A. 1979), stating that “considerations such as novelty are irrelevant for ' 101 purposes.” This conclusion seems to many to be overreaching. While it may be true that novelty over other forms of prior art is not relevant, the analysis that the court conducts under ' 101 by comparing the modified form of a composition to the naturally occurring form seems to be exactly a novelty test.

Jumping the gun on the widely anticipated Supreme Court decision in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), which is expected virtually any day now, the district court determined that BRCA gene sequences and genetic testing as claimed in the Myriad patents do not constitute patentable subject matter under ' 101. The district court cited language from the Supreme Court case of Diamond v. Chakrabarty , 447 U.S. 303 (1980), that “[t]he laws of nature, physical phenomena, and abstract ideas have been held not patentable.” The district court further relied on Am. Fruit Growers, Inc. v. Brodgex Co. , 283 U.S. 1 (1931), in which the Supreme Court concluded that products of nature do not constitute patentable subject matter absent a change that results in the creation of a fundamentally new product. In Am. Fruit Growers, which dealt with an orange whose rind is treated to inhibit mold, the Supreme Court acknowledged that the treated orange is not found
in nature, and “treatment, labor and manipulation” went into producing the fruit. Nonetheless, Am. Fruit Growers held that a naturally occurring article does not become a patentable “article of manufacture” unless it “possesses a new or distinctive form, quality, or property” compared to the naturally occurring article.

(To provide some context, at the time of the Am. Fruit Growers decision in 1931, scientists were still 13 years away from determining that DNA served as the carrier for genetic information. James Watson and Francis Crick were still 22 years from publishing their determination of the famous double-helix structure of DNA in the journal Nature.)

The district court concluded that the mere isolation of DNA does not “markedly change” the DNA such that it possesses a new or distinctive form, quality, or property, and thus the challenged composition claims were held invalid. Citing the Federal Circuit's en banc decision in Bilski, the district court determined that neither category of challenged method claims meet the “machine or transformation” test. While acknowledging that isolated and amplified fragments of DNA used in diagnostic methods in ways that native DNA cannot, the district court found that the sequence similarities between the isolated and native DNA, with regards to the composition and analyzing method claims, were more relevant than the other structural and functional changes that the DNA undergoes through isolation. The district court also invalidated the drug screen method claims in an odd application of the Bilski test.

Enforcing Public Policy Not for Courts

Commentators have pointed out that the court's conclusions fail to pass the “common sense” test. If the isolated DNA does not possess “a new or distinctive form, quality, or property” compared to the naturally occurring article, then why couldn't the plaintiffs simply have avoided the Myriad patents by testing the naturally occurring BRCA genes? Conversely, if genetic testing can be conducted only on the isolated DNA, doesn't it necessarily follow that the isolated DNA has “a new or distinctive form, quality, or property”?

At no point does the district court specifically cite public policy as a basis for invalidating the Myriad patents. However, given the proportion of the decision devoted to public policy issues, most of which are anti-patent, it is difficult to believe that public policy considerations did not play a large role in the court's decision. But enforcing public policy is not the role of the courts; it is the role of the legislature. As noted above, ' 101 does not distinguish patentable subject matter based on policy. If society wants to exclude genetic sequences from patentable subject matter or wants to clarify
' 101, the route to change is through Congress to amend the Patent Act.

Depending upon the Supreme Court's decision in Bilski concerning the patentability of methods, the invalidation of the Myriad method claims may be entirely reevaluated. But to conclude that isolated DNA does not possess a “a new or distinctive form, quality, or property” compared to native DNA, when the isolated DNA enables BRCA gene testing but the naturally occurring DNA does not, seems to many like a pretext for invalidating patents on the basis that they deprive patients of affordable healthcare. This is not the purpose of the patent system and certainly finds no support in
' 101.