Thursday, February 28, 2008

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).

Tuesday, February 19, 2008

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.

Tuesday, February 12, 2008

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.

Thursday, February 7, 2008

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.