Comiskey and Its Implications for Biotechnology Patents

In In re Comiskey, 499 F.3d 1365 (2007), the Federal Circuit held that claims reciting a “method for mandatory arbitration resolution regarding one or more unilateral documents,” which encompassed modes of practicing the method independently of a computer, were invalid under Section 101 for claiming unpatentable “mental processes.” However, the court held that other claims in the application that were limited to computer-implemented modes of performing the process could be patentable, stating that “[w]hen an unpatentable mental process is combined with a machine, the combination may produce patentable subject matter.”

Why do I bring up Comiskey on a blog dedicated to biotech IP? The decision includes a fascinating discussion of the interplay between patentable subject matter under 101 and nonobviousness under 103. The court opines that “[claims limited to computer-implemented modes of performing the method] at most merely add a modern general purpose computer to an otherwise unpatentable mental process []. The routine addition of modern electronics to an otherwise unpatentable invention typically creates a prima facie case of obviousness. Moreover, there is no pertinent evidence of secondary considerations because the only evidence offered is of long-felt need for the unpatentable mental process itself, not long-felt need for the combination of the mental process and a modern communication device or computer.” (footnotes omitted)

In other words, this panel of the Federal Circuit seems to be seriously suggesting that software that carries out a process that could be performed mentally is prima facie obvious, even if the underlying process is itself nonobvious. This would call into question the validity of a large number of software and business method patent claims.

But what most interests me is the implications for biotechnology and the patenting of genetic and biology-based inventions. “Laws of nature” and “natural phenomena” are clearly unpatentable under Supreme Court precedent, and thus it is well established that genes as they exist in nature (e.g., in the human body) are not patentable. It is only by isolating or chemically synthesizing a gene, or engineering it into a recombinant construct, that the genetic sequence is rendered “made by man” and hence patentable. Likewise, the discovery of a biological correlation cannot be patented per se.

But if the suggestion in Comiskey is correct, then could one not extrapolate and argue that an unpatentable phenomenon of nature (e.g., a naturally occurring genetic sequence, signaling pathway, or biological correlation), when combined with an obvious practical application of the phenomenon (e.g., an isolated polynucleotide or genetic construct embodying the genetic sequence, a process for inhibiting the signaling pathway, or a process of detecting and recognizing the correlation) is likewise prima facie obvious? Under the rationale proposed in Comiskey, this would apparently be the case even if the underlying phenomenon was itself nonobvious. What would be the ramifications for the validity of many gene patents, or patents broadly claiming the detection of genetic mutations or polymorphisms (think Myriad’s BRCA patents), or methods of correlating levels of metabolites in the human body (think LabCorp v. Metabolite), or methods of inhibiting a biological signaling pathway (think Ariad’s NF-kB patent and its litigation with Lilly and Amgen)? I think the ramifications could potentially be quite significant, particularly when considered in conjunction with KSR and In re Kubin (depending upon how the Federal Circuit decides that important case for biotechnology).

New Report Identifies $378 Billion in Savings From Generic Biologics

In a new report, Robert Shapiro identifies $378 billion in savings which he argues could eventually be realized if the US creates an accelerated pathway for the approval of follow-on biologics. Dr. Shapiro is a prominent economist who served as Under Secretary of Commerce for Economic Affairs during the Clinton Administration and currently heads up a private consulting firm. The report was sponsored by Insmed, a company that recently settled a patent infringment suit brought by Genentech and Tercica alleging that Insmed's follow-on product IPLEX infringed Genetech/Tercica patents covering the the innovator biologic prodcut Increlex (as discussed in another article, The Impact of Human Gene Patents on Innovation and Access: A Survey of Human Gene Patent Litigation). the settlement came while the case was on appeal to the Federal Circuit and after the district court found Insmed liable for patent infringement.

The report finds that biologics will play an increasingly important, albeit costly, role in US health care, and that by facilitating accelerated and less costly approval of follow-ons the US could save $378 billion over 20 years. Moreover, the report states that this estimate "almost certainly understates the savings." It suggests that the US emulate the EU's new regulatory pathway for follow-on biologics.

The report notes that earlier studies have found much lower saving (e.g., up to $14 billion over 10 years), but finds that the estimates of these studies are too low because they assume "such high costs to enter the market that few biogeneric competitors would emerge, which would keep by a generic prices relatively high and produce limited savings."

In a conference call I participated in with Dr. Shapiro this morning, he noted that these earlier studies fail to adequately account for the capability of foreign countries like India and China to produce biologics at a lower price than US production facilities, and also substantial excess capacity in US biologic production facilities. When I questioned him regarding potential safety concerns with offshoring biologic production to countries like India and China, particularly in view of the heightened importance of process in the production of biologics relative to conventional small molecule drugs, Dr. Shapiro agreed that this was an important and critical issue that needs to be addressed, and that safety is of paramount importance in any plan to bring less expensive biologic products into the US market.

Clearly, concerns regarding the ability of FDA to effectively monitor production processes outside the US are substantial, as noted in a Washinton Post article last year, FDA Scrutiny Scant In India, China as Drugs Pour Into U.S. These concerns have led FDA to seek to establish offices in China and India. Just last week it was reported that:

"Chagzhou Scientific Protein Laboratories, which own the factory that supplies Baxter's blood thinner, heparin, was never checked by drug regulators in China. The plant has no certification. Heparin has led to four recent deaths in the USA, as well as hundreds of allergic reactions throughout the country."

Highlighting how difficult it is to monitor production processes for safety, USDA (which is generally considered to impose much stricter monitoring of food safety than FDA) recently issued the largest beef recall in history, covering beef produced over the last two years at a California facility, and acknowledging that most of the meat has probably already been eaten.

BIO Report Finds Little Empirical Evidence to Supports Calls for Patent Reform

The Biotechnology Industry Organization (BIO) recently released a report entitiled "Proposed Patent Reform Legislation: Limitations of Empirical Data Used to Inform the Public Policy Debate." The report critiques three recent studies by the FTC, NAS and NRC that have been widely cited by those claiming the current patent system is broken and in need of major reforms. In particular, the report points out a dearth of empirical evidence to support allegations that poor quality patents, patent thickets, patent trolls, etc., are impeding innovation and product commercialization. The report also notes a recent trend in the courts tightening up the requirements of patentability (e.g., Fisher and KSR) and limiting the availability of permanent injunctions (eBay v. MercExchange) could effectively address many of the concerns expressed by critics of the patent system, obviating the need for a legislative fix.

Particularly with respect to biotechnology and so-called "gene patents," scholars have noted that most of the attacks on the current patent regime are often based on assumptions and anecdote. See, e.g., See Timothy Caulfield et al., Evidence and Anecdotes: An Analysis of Human Gene Patenting Controversies, 24 Nature Biotechnology 1091, (2006). Empiricial studies that have been conducted indicate that third party patents have had little impact on biomedical research, particularly in the noncommercial academic sector. See, e.g., John P. Walsh et al., View from the Bench: Patents and Material Transfers, 309 Science 2002, 2002-03 (2005).

I recently conducted a study seeking to uncover empirical evidence of the impact of "human gene patents" on biomedical research and access to biomedical technologies. Human gene patents have been the subject of much controversy in recent years and are a primary target of H.R. 997, the bill introduced in Congress last year to bar the patenting of DNA and DNA-related inventions. I particular, I performed a comprehensive database search seeking a to identify all instances where a "human gene patent" has been asserted in a U.S. court. An article describing the results of my study will publish shortly in the University of Missouri - Kansas City Law Review, and is currently available on SSRN.

To summarize some findings of relevance to the debate over the need for patent reform, I found relatively little litigation has been brought alleging infringement of human gene patents in the context of research or genetic diagnostic testing, and the lawsuits that have been filed have tended to settle early. Noncommercial research has never been the subject of a lawsuit. I found no evidence of a patent thicket, little if any patent troll activity, and few if any instances where the assertion of a human gene patent has denied the public access to genetic diagnostic testing or other medical technology. Furthermore, the number of active human gene patent litigations has dropped off dramatically in recent years - to my knowledge, the only active litigations involve Amgen and its erythropoietin patents, which claim priority to applications filed in the early 1980s and which are set to expire over the next several years.

Federal Circuit Sides with Monsanto (Yet Again) in a Dispute with Seed-Saving Farmer

In Monsanto v. David (docket no. 2007-1104), decided February 6, 2008, the Federal Circuit affirmed a district court’s finding that Loren David, a commercial farmer with soybean fields in North and South Dakota, had infringed Monsanto’s U.S. Patent No. 5,352,605 (claiming chimeric genes comprising a CaMV promoter, a regulatory sequence widely used in genetically modified agricultural products) by saving and re-planting Monsanto’s glyphosate-resistant “Roundup Ready®” soybean seeds in violation of a Technology Agreement entered into between David and Monsanto.

Monsanto has filed numerous infringement lawsuits against farmers and seed producers for unauthorized planting of its patented Roundup Ready® seeds. I recently conducted a Westlaw search, a quick review of which indicated that at least 63 individual lawsuits of this type have been filed by Monsanto in district courts throughout the country since 2003, many of them naming multiple defendants. At least 19 have been filed since Jan. 1, 2007, the most recent was filed on Jan. 28, 2008 in Monsanto’s home district (Monsanto v. Woods, docket no. 08-00137 (E.D. Mo.)). Monsanto has prevailed in a number of instances, including at least three prior victories in the Federal Circuit (Monsanto v. McFarling, 302 F.3d 1291 (Fed. Cir. 2002); Monsanto v. Ralphs, 382 F.3d 1374 (Fed. Cir. 2004); and Monsanto v. Scruggs (459 F.3d 1328 (Fed. Cir. 2006).

Proving infringement was complicated by the fact that David purchased some Roundup Ready soybean seeds and apparently planted those along with some unauthorized saved seeds in an attempt to avoid detection. Monsanto needed to provide expert testimony that the number of acres planted by David far exceeded the amount of seed purchased, and evidence that David had purchased large quantities of Roundup herbicide that would have killed all his crops if they were not all glyphosate-resistant, which convinced the court that David must have planted saved seeds. David’s case was not helped by his lack of credibility as a witness; the court noted that he had changed his story at least three times, including claiming at one point that he only planted the perimeter of his fields with Roundup Ready seeds, while planting the interior with conventional seeds. David’s conduct is reminiscent of that of Percy Schmeiser, the defendant in Monsanto v. Schmeiser, an important case heard by the Canadian Supreme Court a few years ago (in which Monsanto also prevailed).

The district court had awarded Monsanto a total of $786,989.43, including $10,000 in enhanced damages, $164,608 in costs and $323,140 in attorney fees. The Federal Circuit affirmed the enhanced damages, costs and attorney’s fees, based on David’s willful infringement and attempts to cover up his infringement and deceive Monsanto, and characterized David as “a farmer with apparent disregard for patents rights, license agreements and the judicial process.” However, it did vacate the district court’s determination of reasonable royalty damages, based on the lower court’s error in determining the density at which the seeds were planted, and remanded for a redetermination on the issue of reasonable royalty.

Quanta Oral Arguments

Quanta Computer v. LG Electronics, argued before the Supreme Court on January 16, 2008, addresses an issue of critical importance to the biotechnology industry, i.e., to what extent, if any, can a patent owner impose restrictions on the use or resale of a patented product subsequent to an “authorized purchase,” and enforce such restrictions by means of a patent infringement action. In 1992, the Federal Circuit held in Mallinkrodt that patent owners can impose post-sale restrictions on authorized purchasers by providing adequate notice to the purchasers, essentially granting purchasers a limited license under the patent. The Solicitor General and others argue that Mallinkrodt was wrongly decided and have asked the Supreme Court to decide Quanta in a manner that overrules it. They assert, along with the defendant Quanta, that under Supreme Court precedent an authorized sale exhausts all patent rights in the purchased item.

In a previous post, I discussed the importance of enforceable post-sale restrictions to biotechnology, and noted that BIO and organizations representing seed and agricultural biotechnology companies have filed amicus briefs in support of Mallinkrodt and the Federal Circuit’s position on post-sale restrictions. However, it seems to me that the particular facts of Quanta and the manner in which the case has been framed by the parties render it a poor vehicle for resolving this important issue. As a consequence, the oral arguments for the most part failed to adequately address the crux of the question to be decided.

The patent owner, LGE, has completely distanced itself from Mallinkrodt and the question of whether a patent owner can impose post-sale restrictions on a patented product. Instead of defending Mallinkrodt, LGE seeks to avoid patent exhaustion by arguing that the doctrine only applies in cases where the asserted patent covers the product that was the subject of the authorized sale, and that its patents do not cover the products sold by Intel (i.e., the “authorized purchases”). They point out that their patents are not infringed until LGE combines the non-infringing Intel product with other components to make an infringing computer. In effect, LGE is providing the Court with an opportunity to rule in its favor without necessarily upholding, or even addressing Mallinkrodt or post-sale restrictions on the sale of patented products. This might be good litigation strategy, particularly with the SG coming down in favor of overturning Mallinkrodt, but as a consequence during oral arguments there was no one to advocate in defense of Mallinkrodt and enforceable post-sale restrictions.

Mallinkrodt has been championed by a diverse coalition of supporters in addition to representatives of biotech and seed companies. The list includes AIPLA, IPO, Qualcomm, Yahoo!, IPO, WI-LAN, academics (including myself), and many others. I particularly liked the AIPLA and WI-LAN briefs – WI-LAN provides a good case study of the important role enforceable post-sale restrictions have played in the development of HD radio. Clearly, the importance of the case extends far beyond biotechnology. Unfortunately, the legal and policy argument in favor of Mallinkrodt received little attention during oral arguments, with one brief exception. Near the end of the Quanta attorney’s initial argument, Justice Kennedy asked the following question (the only question he asked throughout the entire oral arguments): “Are there cases where some downstream restrictions on use might be necessary to prevent the patent from becoming worthless, i.e., in the biological area for replication of seeds in agriculture and so forth?”

Quanta’s attorney started to distinguish between the patent owner’s right to use and the right to make – I assume that she was preparing to argue that patent exhaustion only bars the enforcement of post-sale restrictions on the right to use an invention, not the right to make an invention, and restrictions on the replanting of patented progeny seeds implicate the right to make rather than the right to use. However, before she could develop this argument Justice Kennedy noted that Univis, one of the principal cases cited by Quanta and the SG, involved the right to make a product. After fumbling a bit, she dropped the issue without ever really answering the question. Aside from this brief exchange, the positive aspects of the Mallinkrodt rule were never addressed during oral arguments.

I don't think that distinction between the rights to make and use is really applicable to patented crop seeds. The only use of these seeds is to plant them and grow more seeds, which can be harvested and sold as food or feed, or saved and replanted. In other words, use of the seeds necessarily involves making new copies of the patented invention, so in a sense making and using the invention are one in the same. But seed patent owners do not object to farmers to growing copies of the patented seeds, they seek to restrict the subsequent use of those copies, i.e., sale as food or feed is permitted, saving for replanting is not permitted.

Furthermore, while the downstream control of patented recombinant seeds is important, there are others contexts where post-sales restrictions play a critical role in permitting biotechnology patent owners to profit from their innovations. As noted in an earlier post, post-sale restrictions provide an important means for a patent owner to engage in differential pricing. For example, the owner of a patent claiming an invention useful as a research tool might charge a relatively low price to purchasers that use a product for basic research, and a higher price when the product is used commercially, such as in drug development or a diagnostic test. This flexibility in pricing is beneficial in making the technology accessible to basic researchers, while allowing the patent owner to share in the profits when the technology is employed in more lucrative commercial applications. Such restrictions would be difficult to enforce if Mallinkrodt were overturned, and would not be saved by the distinction between restrictions on using and making alluded to by Quanta’s attorney in her response to Justice Kennedy.

Transcript of the oral arguments can be found here.

Do Gene Patents Deny US Patients Access to the Best Available Genetic Diagnostic Testing Services?

Last week, while at the annual meeting of the American Association of Law Schools (AALS), I attended a talk by Professor Lori Andrews in which she described the supposed evils of gene patents and called for legislation to ban them. She alleged that US patients are dying as the result of gene patents, and asserted in particular that superior genetic diagnostic testing for mutations of the BRCA breast cancer gene is available in other countries because Myriad’s US gene patents block availability to the supposed superior test in the US. I’ve seen this assertion made a number of times by opponents of gene patents. But to what extent is it true? I personally lack the expertise to evaluate the relative merits of the competing genetic testing protocols, but it seems to me that if superior tests are available outside the US, then US patients and clinicians would seek to avail themselves to these tests rather than relying on the allegedly inferior Myriad test.

To investigate the question, I decided to ask someone with some actual practical expertise in the area, an M. D. who works at a breast cancer clinic and who has a great deal of experience ordering and using BRCA testing services. She informed me that the Myriad test is quite good and comprehensive, and is the test that she uses, but that it is possible that there might be tests in other countries that look for certain mutations not considered in the Myriad test. However, no test is perfect, and she did not think that any foreign test provided sufficient added value relative to the Myriad test that would warrant a US patient having their blood tested outside the US, and she knew of no instances where this had occurred.

If there were a significant difference in test quality, it would certainly be feasible for a US clinic to send a patient blood sample to a non-US laboratory for testing. Europeans regularly send their blood samples to other countries for testing, and there are predictions that in the future diagnostic testing will be increasingly off-shored to India and other Asian countries. To be sure, there are logistic hurdles that must be overcome by a US patient wishing to use the genetic testing services of a non-US laboratory. In particular, international shipments of blood are regulated and certain paperwork must be completed. This can be burdensome, but international shipments of blood happen all the time, so not a real obstacle for a determined patient or clinic. Perhaps more important is the issue of insurance reimbursement. Myriad has negotiated with major insurance companies and has procedures in place that facilitate patient reimbursement for tests conducted by Myriad. A patient using the services of a non-US laboratory might have more difficulty in receiving the necessary authorization for reimbursement from their insurance company.

Nevertheless, there are quite a few laboratories performing BRCA testing in other countries, and they can be identified at website such as www.genetests.org (a site funded by NIH), which lists a number of laboratories throughout the world that perform BRCA testing. This website is set up as a service for US patients and clinicians, implying that US patients could avail themselves of the services of these non-US laboratories if there was reason to do so.

With this in mind, it seems to me doubtful that US patients are being denied substantially superior tests because of US gene patents, and if they are there is nothing to stop a determined US patient from having their test done overseas. Advocates seeking to make the best genetic diagnostic testing services available to US patients might do well to consider reforms aimed at facilitating transfer of blood samples outside the US and insurance reimbursement rather than seeking to ban the patenting of DNA.

Gene patents have played a critical role in securing investments in biotechnology that have resulted in life-saving products, including products benefiting women afflicted with cancer (Genentech’s Herceptin, for example). Even in the context of BRCA testing, patents have incentivized Myriad to make investments that have resulted in the continuing improvements in BRCA testing, so that today’s tests provide much more information than the tests that were first made commercially available. Moreover, Myriad has raised public awareness of the availability of BRCA testing, and facilitated insurance reimbursement for the testing, which has probably resulted in many more women being tested than would have occurred otherwise. On the other hand, the negative aspects of gene patents (to the extent they exist) could be circumvented by off-shoring genetic testing services. In my view, the fact that this option appears not to have been pursued with any vigor supports my position that gene patents are probably not such a grave threat to public health as some would have us believe.

Patented Research Tools and the 271(e)(1) Exemption

Proveris Scientific v. Innovasystems, (Civ. No. 05-12424 (D. Mass.)) a case pending before the Federal Circuit involving a "spray data acquisition system" used to test perfumes and nasal sprays, provides the court with an opportunity to clarify the applicability of the 271(e)(1) research use exemption to research tools. 271(e)(1) states in relevant part that “[i]t shall not be an act of infringement to . . . offer to sell, or sell . . . a patented invention solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.” Innova, the alleged infringer, argues that the device is intended solely for use in generating data as required under the FDCA and is only sold to pharmaceutical companies or FDA, and thus falls squarely within a plain reading of the statute.

The patent owner (Proveris) argues that 271(e)(1) does not encompass laboratory equipment, but is limited to what it refers to as “products” – drugs, medical devices, food additives and color additives regulated under the FDCA. In the alternative, Proveris argues that Innova does not fall within the exemption because it is not generating data for submission to FDA, but rather selling equipment used by others to generate such data. The district court sided with Proveris, and ruled that a machine is not a “patented invention” within the meaning of the statute, denying Innova recourse to the 271(e)(1) exemption as a matter of law.

Congress enacted 271(e)(1) primarily for the purpose of exempting generic drug companies from infringement liability for testing a patented drug prior to patent expiration for the purpose of generating the data necessary for FDA approval, but the language is much broader, and the courts have interpreted the statute as covering more than just patented drug candidates. For example, in Medtronic the Supreme Court held that the exemption encompasses medical devices, and in Merck the Court indicated that 271(e)(1) potentially reaches any invention used in the generation of data which might reasonably be appropriate for FDA submission. The Merck decision specifically refrained from deciding whether 271(e)(1) applied to “research tools,” but later in Classen the Maryland District Court held that 271(e)(1) (as interpreted in Merck) does apply to at least some research tools (in that case a computer-implemented system for analyzing adverse event data).

Innova seems to be correct in arguing that a plain reading of the statute would encompass the sale of a device that is only used for preparing data for FDA submission. But if the Federal Circuit agrees it would raise some interesting line drawing questions. Would it be enough if the device is predominantly used for generating data for FDA submission, even if it has some other minor R&D applications (the Proveris patent states that the invention is useful for R&D as well as generating data for FDA). Merck provides little guidance as to where in the process of going from early stage drug discovery to clinical trials the 271(e)(1) exemption kicks in. Would the courts adopt a standard similar to 271(c), where liability would depend upon whether the device has a “substantial non-exempt” use? In a case where a device can be used for both basic research and for generating data for FDA submission, could a seller of the device fall under the exemption by notifying its customers that they are only authorized to use the device for activities reasonably related to generating data for FDA? If FDA requires a certain type of test to secure marketing approval, could someone patent the test (or a device necessary for performing the test), and hence block competitors from securing approval of a non-patented product? (I don’t know how feasible that would be in practice, but it is essentially one of the arguments raised by Innova.)