Thursday, April 1, 2010

The ACLU Gene Patent Decision from an Investor's Perspective: A Black Eye for the US Patent System

I am trying to put myself into the shoes of a biotechnology investor, and when I do I'm not real happy with the US patent system right now. I'm not well-versed with legal decisions dating back nearly a century dealing with the patentability of citrus fruit treated with mold resistant borax or purified tungsten, the primary case law used by the district court in its decision that the Myriad claims reciting isolated polynucleotides are patent ineligible. I'm not even that sure as to this distinction between "patent eligibility" and patent validity.

However, I do know that for years investors have been willing to invest in biotechnology based in large part upon a belief that patent protection is available for innovation in this important technological sector. For 30 years, the Supreme Court's decision in Diamond v. Chakrabarty, which held that patent protection is available for "anything under the Sun made by man,” including a microorganism modified by the introduction of naturally occurring DNA sequences, had established that in the US patents would be available for biotechnology inventions, including so-called "gene patents."

I know that years ago the US Patent and Trademark Office issued guidelines specifically finding that isolation of a naturally occurring DNA sequence can render it patentable. These guidelines point to a number of earlier decisions in which isolated biomolecules, such as human adrenaline and the molecules responsible for the smell of strawberries, were found to be patentable because the isolation of these biomolecules created a new product with distinct useful properties unavailable absent isolation of the molecules from their native source.

I might also be aware that the controversy over gene patents has been around for many years, and the Federal Circuit has never done anything to indicate that claims such as Myriad's invalidated isolated polynucleotides claims are patent ineligible. In fact, in In re Fisher, decided I believe around 2005, a panel of the Federal Circuit explicitly address the patentability of EST sequences, short segments of naturally occurring genetic DNA. In that case, Affymetrix submitted an amicus brief arguing that naturally occurring genetic sequences are patent ineligible, citing essentially the same case law and rationale as used by the district court in ACLU case. Even though the argument was presented to the Federal Circuit, it never gave any indication in its decision that the argument had any legs.

And look at Europe, which after years of debating the issue has come around to what we thought was the US position, and allowed for the patenting of genetic inventions. Myriad's patents have been challenged in Europe, and the patents have withstood the challenge, albeit the scope has been reduced somewhat, as discussed in a previous post on this blog.

There is something seriously wrong with a patent system that would allow investors to believe for 30 years that these sorts of inventions are patentable, which has resulted in literally thousands of patents and a huge amount of investment, before essentially pulling the rug out from under these investors. That's why it's so important that the Federal Circuit intervene and reverse the district court, at least with respect to most of the claims.

The claims which I think might have trouble in the Federal Circuit are process claims reciting methods for analyzing for genetic mutations in the BRCA genes, without any limitation requiring some physical act of isolating or analyzing the actual DNA molecule. Under the current state of affairs, after Bilski and Prometheus decisions, I think these claims are in trouble. I think Myriad is aware of this problem, which is why they argued to the district court that the claims inherently are limited to processes that involve some physical isolation and the collection of DNA, although I think the district court correctly ruled that the claims do not include such a limitation.

If it turns out these sorts of method claims are not patentable, there are implications as we move into an era of personalized medicine. There is talk about a time in the not-too-distant future when patients will have their entire genome sequence for a reasonable cost. In that case, diagnosis for a genetic mutation would not necessitate any physical transformation of molecular DNA, only analysis of information, so how valuable will method claims be that require some actual physical manipulation of DNA in the United States?