The APO has issued a decision which has created uncertainty regarding the patentability of business methods.

Until recently, our advice to clients was that business methods were patentable in AU, provided that the claims were limited to execution of the business method in a computer environment.

The APO has now issued the Iowa Lottery decision in which the Deputy Commissioner of Patents concludes (at para 17) that:

I do not believe there is any authority in Australian law for the proposition that the mere identification of a physical effect is sufficient for patentability. (underlining added)

The above reference to “physical effect” is a reference to the precedential decision of the Full Federal Court in the Grant case.  In 2006, the Full Federal Court concluded in the Grant case (Grant v. Commissioner of Patents [2006] FCAFC 120) that:

A physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required. In NRDC, an artificial effect was physically created on the land. In Catuity and CCOM as in State Street and AT&T, there was a component that was physically affected or a change in state or information in a part of a machine. These can all be regarded as physical effects. (underlining added)

Thus, the Full Federal Court in Grant found that “physical effect” is the touchstone of patentability.  It is especially noteworthy that the Full Federal Court expressly referred with approval to cases where a business method was implemented in a computer environment such that performance of the method resulted in a “change of state or information” in a part of the computer.

We find it very difficult to reconcile the Deputy Commissioner’s statement in Iowa Lottery with the precedential statements of the Full Federal Court in Grant.  The apparent discord between the Deputy Commissioner’s view and legal precedent may ultimately only be clarified by further appeals to the Federal Court by patent applicants denied claims to business methods.

Until such time that the law is further clarified, our practical advice to applicants is to draft and claim inventions in the context of being a method of operating a computer (as opposed to being a business method which happens to be implemented in a computer).  Such description and claims should focus heavily on the changes in state or information which occur within the computer and should make these features central to the invention.  For cases which have already been filed in AU, we suggest re-drafting, within the limits of allowable amendments, to focus heavily on the changes in state or information that occur within the computer.

The decision can be viewed here:

Today’s post is by Guest Barista Bill Bennett of Pizzeys.

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In a recent paper by Yali Friedman of the BiotechBlog, Yali looks at the growth of research capabilities in emerging economies such as India and China. With a substantial increase in the outsourcing of some of the more routine activities involved in pharmaceutical research and development (R&D), such as compound synthesis and preclinical toxicity tests, a question is whether research-based companies are shifting the volume and value of innovative science research to emerging economies.

This paper focuses on the location of innovation in the pharmaceutical sector, particularly in the United States as the world’s largest pharmaceutical market, comprising roughly 40% of the world’s pharmaceutical revenues. There were 1,400 first-year patents granted to drugs approved between 2001 and 2009.

Inventorship of these patents was concentrated in a small number of countries: 60% of inventors were from the United States, and 31.5% of inventors were from just seven other countries (United Kingdom, Japan, Germany, Sweden, France, Switzerland and Belgium).

So far, the emerging markets of India and China but the substantial time lag — often ~10 years or more between the initial discovery of a potential drug and its market approval — and the recent nature of the increase in investment in innovative research in such countries, this observation is not unexpected.

Read the results here:  Location of pharmaceutical innovation – 2000-2009

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For centuries now, farmers have been practicing agriculture by saving seeds from the harvest and using it for next year’s crop. Call it a form of insurance. Call it security. They may even exchange seeds with neighboring farms. This is their security blanket to keep poverty at bay as well as ensure crop genetic diversity.

However, with the myriad of seed patents being granted to the handful of agricultural giants controlling the world, farmers worldwide are being threatened. So is biodiversity.
By exchanging seeds, farmers ensure that different kinds of plants and plant species are cultivated and retain their intrinsic properties.

The slew of patents granted for Genetic Use Restriction Technology (GURT: colloquially known as “terminator technology”) spell the end of traditional methods of farming as we know it as well as for biodiversity. Terminator technology forces farmers to buy a fresh stock of seeds every year by genetically switching off seed germination upon triggering by a chemical. This means that the plant produces sterile seeds incapable of germination. This prevents farmers from saving seeds and re-planting them and instead forcing them to buy new seeds.

GURT was developed under a research and development agreement between Agricultural Research Service of the USDA and Delta and Pine Land Company (Information obtained from International Seed Federation). The Convention on BioDiversity further distinguishes between:

  • V-Gurt technology controls reproductive processes resulting in seed sterility, thus affecting the viability of the entire variety.
  • T-Gurt technology aims to control traits of plants such as insect or disease resistance or production of nutrients.

GURTs are typically used to restrict species for which hybrid technologies may not be well researched or developed. They may also be used to restrict inbreeding of crops and vegetatively multiplied crops.

It is not to say that GURTs have no advantages. Indeed, such a one-sided view would be unbecoming of a lawyer. They enable a producer to restrict trait expression especially during an onslaught of diseases which affect crops or farm animals. However, the potential impact on biodiversity is a lot more dire and outweighs the advantages.

In traditional farming systems, farmers breed and improve the quality of local seeds season after season. This method is dynamic enough that new genes kick in to maintain the fitness of the local flora. Employing GURTs would reduce or eventually completely displace the locally adapted genetic material. This would affect the local agricultural biodiversity.

Further, with V-GURT sterility kicking in in the second generation, if we factor in cross-pollination, then we have the added possibility of sterile seeds being spread in the neighboring fields/areas. This could perhaps reduce the yield over the coming years till the area collapses into a yieldless heap.

The most important repercussion if GURTs become commercially viable would be in terms of market power. The few companies that own the patents in GURTs would set non-competitive market prices. Seed supply would become a potential problem. Traditional methods of farming like seed-saving would not be allowed anymore and farmers would lose their security blanket of being able to save seeds for next season. In the event that some disaster befalls the company providing seeds, the farmer would be left high-and-dry.

According to one of the information papers submitted by the COP (Conference of Parties) to the CBD (Convention on Biological Diversity), patents in GURT may violate Art. 27.2 of TRIPS agreement which states:

Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect ordre public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.

If there is enough scientific evidence that GURT causes irreparable damage to the environment then merely rescinding the patents granted in this field is not sufficient. There has to be some other method of damage control and preventing commercialization.

Just for curiosity, I was browsing the USPTO to check who controls most of the patents in GURT and here is what I found. (Information from ETC group as of Jan 2005)

Syngenta US6700039 2March2004
Syngenta–application US20030154509A1 Filed:14August2003
Syngenta–application US20010022004A1 Filed:21March2001
Syngenta US6362394 26March2002
Syngenta(Zeneca) US6228643 8May2001
Syngenta(Novartis) US6147282 14Nov.2000
Syngenta(Novartis) US5880333 9March1999
Syngenta(Zeneca) US5808034 15Sept1998
Syngenta(Zeneca) WO9738106A 16Oct.1997
Syngenta(Zeneca) WO9735983A2 2Oct.1997
Syngenta(Zeneca) WO9403619A2andA3 17Feb1994
Delta&PineLand/USDA US5723765 3March1998
Delta&PineLand/USDA US5925808 20July1999
Delta&PineLand/USDA US5977441 2Nov.1999
BASF(ExSeedGeneticsISU) WO9907211 18Feb.1999
DuPont(Pioneer) US 2Oct2001
DuPont(Pioneer) US5859341 12Jan1999
Monsanto WO9744465 27Nov1997
PurdueResearchFoundation WO9911807 11March1999
CornellResearchFoundation US5859328 12Jan1999

Today’s post is by Guest Barista Shalini Menezes of D:ic.t:um.

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Welcome to another Autumnal Edition of Blawg Review, hosted this week by the Patent Baristas. We’re always glad to have people over to visit so grab a piping hot spiced latte and we’ll see what’s been going on around the blogosphere.

This week we honor Inventors’ Day (German: Tag der Erfinder), which is celebrated in the German-speaking countries Germany, Austria and Switzerland on November 9, the birthday of inventor and Hollywood actress Hedy Lamarr.  Lamarr, born Hedwig Eva Maria Kiesler, was an Austrian-born American actress.

Though known primarily for her film career as a major contract star of MGM’s “Golden Age”, she also co-invented an early technique for frequency-hopped spread spectrum communications in 1942, a key to many forms of wireless communication.

Composer George Antheil and Lamarr submitted a patent application for a secret communication system in June 1941. On August 11, 1942, U.S. Patent 2,292,387 was granted to Antheil and “Hedy Kiesler Markey”, Lamarr’s married name at the time. This early version of frequency hopping used a piano roll to change between 88 frequencies and was intended to make radio-guided torpedoes harder for enemies to detect or jam.

The day was proclaimed to encourage people towards their own ideas and for a change to the better and to remind people of forgotten inventors.

Without further ado, here is this week’s review, in no particular order:

Venkat Balasubramani writes over at the Technology & Marketing Law Blog about Holding on to a Domain Name to Gain Leverage in a Business Dispute Can Constitute Cybersquatting — DSPT Int’l v. Nahum.

At BlawgIT, Brett Trout writes about the AMP v. USPTO (Myriad) case in U.S. DOJ Reverses Policy – Now Argues Genes Should Not be Eligible for Patent Protection.

On Houston’s Clear Thinkers, Tom Kirkendall ponders the view of cancer as tenaciously persistent and able to regenerate after apparently disappearing — driven by a specific cell type lurking within the cancer that is capable of dormancy, growth and infinite regeneration – a cancer “stem cell” in The Cancer Sleeper Cell

Shamnad Basheer, at SpicyIP, writes about inadequate access to the patent system itself. This bottleneck ends up engendering more inequity, as it prevents poor “informal” innovators from partaking in the benefits offered by the patent system.  Informal Innovators and Fostering More Access to the Patent System.

Walter Olson is Overlawyered writing about a nonprofit in suburban Chicago that encourages its woodworker members “to craft and donate wooden Christmas toys to less fortunate children.” After donating upwards of 700 toys a year in the past, it will have to discontinue the program in future since it can’t afford the third-party testing required under the Consumer Product Safety Improvement Act.  “The law that stole Christmas

Stephanie West Allen’s idealawg shows the Benefits of Contemplative Practice for Lawyers with Talks from The Mindful Lawyer 2010.

The irrelevance of law firm “knowledge management” ~ good piece on the people responsible for bad law firm contract templates and whether  law firm “KM just needs to be scrapped at law firms altogether.”

The the Electronic Frontier Foundation (EFF) looks at a jury this week that awarded $1.5 million in statutory damages ($62,500 per recording) to the record label plaintiffs in Capitol v. Thomas-Rasset. The case has repeatedly made headlines as the first action against an individual accused of illegal file-sharing to make it to the trial stage. As the litigation proceeded, however, the case (as well as another individual filesharing case, Sony v. Tenenbaum) has taken on new importance by shining a light on the irrationality of copyright remedies.

Enrico Schaefer at The Greatest American Lawyer ponders whether there are tremendous interests in preserving the “old way” of doing things within the legal profession — that “OLD WAY” being to preserve the good ol’ boys network primarily designed to keep citizens and prospective clients and clients in completely in the dark concerning legal services.  The American Bar Association apparently formed a working group “on the implication of new technologies.” Is the ABA Trying to Kill Lawyer Blogs, Facebook Profiles, Twitter Updates, Forum Posts and Lawyer Websites?

Basically, the ABA has put together a panel to take a hard look at online marketing in its myriad forms and provide some guidance.  The fear is that this panel will end up regulating the use of the internet by lawyers and make it harder for the small firms to compete with the larger ones. Do you think this is a “RED ALERT” moment?  Adrian Dayton has more at ABA, Social Media and a time to panic?

IpKat ponders the strength of the link between trade marks and innovation in the effect that the brand often provides an aspirational statement that may, itself, induce a firm to innovate – the example given was Gillette’s trade mark “Gillette: the best a man can get”.  Furthermore, reputation, as bottled in the brand itself was a spur to innovation as goodwill required topping-up from time to time, and you could do this by creating better products – innovating.

Bob Ambrogi’s Lawsites looks at the possible revival of the Peer To Patent pilot project, an innovative collaboration between  the U.S. Patent & Trademark Office and the Center for Patent Innovations at New York Law School’s Institute for Information Law and Policy. The pilot, which ran from 2007 to 2009, used crowdsourcing and the power of the Internet at large to help vet applications for business-methods and software patents. Project that Crowdsources Patent Review Gets a Second Life.

Our very own Patent Baristas asks, “Will you patent my DNA please . . . ?”

Although this is an over-my-head post that looks brilliant if only I had time to read it thoroughly, Brett Trout at the 271 Patent Blog quotes Donald Chisum where he cogently points out that most of the problems pertaining to patentable subject matter can be attributed to the Supreme Court’s decision in Benson, and that the decision “served no one’s interest . . . Its ambiguity allowed software patent proponents to subvert any bar that software patent opponents desired [and] also deterred legitimate inventors of software-implemented inventions from applying for patent protection.”

Our friends at Securing Innovation prove that there’s no such thing as an idea that is too stupid to patent. Too obvious, maybe, but too stupid? Don’t be silly.  [Ed. note:  Umm…it’s a stick.]

One for insiders . . . managing outside counsel . . . an audio interview for readers whose eyes are tired at the Wired GC.

One you’ll love for the headline alone:  when art imitates life; suing for defamation in fiction.  The Citizen Media Law Project notes that the mere fact that a novel is labeled a work of fiction will not automatically insulate its author and publisher from a suit for defamation.  Even if names or events are changed, libel in fiction is actionable if acquaintances can recognize the real-life individual in a character that is depicted in a defamatory manner.

As holidays approach, time to start thinking about new year’s resolutions at Brains on Purpose.

A view of law school debt on the other side of the pond from Charon QC, a UK law blog.  As Nicholas Green QC said…“This seems to me to be one of the major issues of the day and one which the profession needs to grapple with sooner rather than later.”

Ernie the Attorney offers a cautionary tale on free wi-fi. A new Firefox add-on, dubbed “Firesheep,” lets “pretty much anyone” scan a Wi-Fi network and hijack others’ access to Facebook, Twitter and a host of other services, a security researcher warned today.

An interesting view of law firms’ contributions to losing candidates at the Legal Pad.  Larry Sonsini, the chairman of Wilson Sonsini Goodrich & Rosati was among Meg Whitman’s biggest individual backers from the law firm community in her bid for California governor — which she lost in Tuesday’s election to Jerry Brown.

Point of Law highlights the post-election clout-fate of trial lawyers.

When is larry lessig NOT calling for radical overhaul ~ our favorite legal innovator at Freedom to Differ.

Law profs venture past their comfort zone — online teaching — welcome to 2010 PrawfsBlawg!

Settle It Now, a negotiation blog thinks an a**hole is not a person but a behavior, not one person but two ~ thoughts on the Rally to Restore Sanity and/or Fear at Settle it Now.

Charon QC’s ongoing satirical series centering on the Muttley Dastardly firm continued recently with this meditation on the state of legal education in the UK and a meeting of the firm’s board.  “Law firms need to be ‘porous, virtual, multi-sourced, adaptable and agile”.  – These words were spoken by the Linklaters’ head of strategy and business transformation Rupert Egerton-Smith

The extraordinary prosecutorial misconduct of Christopher Parakilas prompted both an extraordinary remedy from the Connecticut Supreme Court and a pair of extraordinary legal posts from Gideon at A Public Defender and Ken at Popehat.

The copyright status of “Happy Birthday” comes up from time to time online and off; it’s been discussed more than once at TechDirt and Mike Masnick had occasion to mention it again as an example of copyright shenanigans and overreach.

A flurry of discussion over the past few weeks in criminal defense circles concerning a proposal to “strike” from the courts of particularly bad judges has focused on the proposer’s anonymity, motives, or thoughts. Mark Bennett focuses his contribution to the discussion on the merits of the plan — and find that there really aren’t any, in an unsparing post.

Kashmir Hill discusses a suit seeking to stay the use of full body scanners by the TSA; amongst the more interesting claims is that the official use of the machines violates the Video Voyeurism Prevention Act.

Tim Kevan’s Baby Barista offered a bit of insight this week when he was on the receiving end of his mentor’s legendary “Scales of Justice” argument in a case they contested against one another.

Elie Mystal was somewhat disdainful of a class gift offered by this year’s graduates of Brooklyn Law; he seemed unsure which was more lame — the quote from A League of Their Own or the class’ expressed hope that the plaque would become a good luck talisman for future students.

Asked to write a memoir for the Hebrew Immigrant Aid Society, Ilya Somin shared the results with us; it’s well worth your time to read.

We hope you’ve enjoyed this week’s edition of Blawg Review. Nothing herein should be construed as an endorsement of any product or service. The decision on any inclusion (or not) in the review was completely arbitrary and capricious. Past performance does not guarantee future returns.

Thanks for dropping by and visiting our place. We’ll meet at your place next time.

Blawg Review has information about next week’s host, and instructions how to get your blawg posts reviewed in upcoming issues.

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The Intellectual Property Owners Association (IPO) an amicus curiae brief in the AMP v. USPTO and Myriad Genetics case, a lawsuit challenging patents covering diagnostic tests for mutations in genes.  In the district court, the University of Utah and Myriad Genetics lost in a U.S. court ruling over patents for detecting inherited breast cancer related to the human genes known as Breast Cancer Susceptibility Genes 1 and 2, or “BRCA1” and “BRCA2.”  (Myriad Decision)

In its brief, IPO argued:

  1. the plaintiffs do not have standing sufficient to establish declaratory judgment jurisdiction in the suit against patent owner Myriad, whose patent rights are being challenged, and
  2. isolated human DNA is patent-eligible.  IPO’s brief said the consequences of the district court decision are not limited to isolated human DNA or biologic drugs produced from such DNA, but extend to any “natural product.”

In summary:

IPO believes that the declaratory judgment plaintiffs lack standing to challenge the validity of the patents in suit because: (1) Myriad has not directed any action toward the plaintiffs that would create an actual controversy of sufficient immediacy and reality to warrant declaratory judgment jurisdiction; (2) Myriad’s actions from over ten years ago are not of sufficient immediacy to create a justiciable controversy between the parties in this case; and (3) the plaintiffs’ mere formations of intent to potentially engage in undefined conduct that may or may not infringe any particular claim of the patents at some unspecified time in the future do not amount to “meaningful preparation” to conduct infringing activity. As a result, there is no substantial controversy in the present case of sufficient immediacy and reality to warrant declaratory judgment jurisdiction. Indeed, if the facts of this case provide adequate foundation for standing, then nearly anyone might seek to file a declaratory judgment action to challenge the validity of any patent — a result that would place a heavy burden on patent owners and on the already overburdened judicial system.

IPO also believes that claims directed to isolated DNA constitute patentable subject matter under 35 U.S.C. § 101. The standard for patent eligibility was enunciated by the Supreme Court in Diamond v. Chakrabarty, 447 U.S. 303 (1980), to include “anything under the sun made by man.” The Supreme Court has never overruled this standard and has never promulgated a categorical exclusion from patent eligibility for products derived from nature. Under this controlling Supreme Court precedent, claims to isolated DNA are patentable under Section 101.

If the standard for patentable subject matter applied by the District Court were adopted, it could render broad categories of important inventions patent-ineligible, including most biologic drugs, antibodies, antibiotics, hormones, metabolites, proteins, and genetically-modified organisms and food. This in turn would have a devastating effect on the viability of large portions of the biotechnology, pharmaceutical and other industries, industries that are built upon the availability of valid and enforceable patent protection for the fruits of their costly and risky research efforts.

Although isolated DNA molecules clearly are “composition[s] of matter,” the district court ruled them unpatentable because it believed them to be the “purification of a product of nature” and patentable only if they possessed “markedly different characteristics” from naturally-occurring DNA.

IPO argues that the district court’s decision that isolated human DNA is patent-ineligible is based on an interpretation of the Patent Act having a broader impact than merely the patents-in-suit or similar patents claiming isolated human DNA, but would extend in principle to any patent claim encompassing a “natural product.”

A Ban on Patenting Isolated Human DNA Would Encompass More Than Human Genes

While isolated human DNA is the only DNA at issue in this case, a ban on isolated human DNA does not rely wholly on its status as being from a human being. The district court’s decision that isolated human DNA is the “physical embodiment of [genetic] information” applies with equal force to isolated DNA from other organisms. Banning patenting of isolated DNA from all known organisms would mean such a ban would apply to almost a thousand U.S. patents that claim isolated plant DNA, almost 25,000 U.S. patents on isolated animal DNA, almost 3,000 U.S. patents on isolated bacterial DNA, over 3,000 U.S. patents on isolated viral DNA, and 50 U.S. patents claiming vaccines based on isolated DNA.

The Vast Majority of Human Therapeutics Are Also “Natural Products”

Patents on isolated human DNA also support the development of biologics, i.e., drugs based on “naturally-occurring” human proteins. If the district court’s decision that patents on isolated human DNA are directed to patent-ineligible “natural products,” then biologics perforce would be patent-ineligible as well. Indeed, proteins like human Blood Clotting Factors VIII and IX, insulin, human growth hormone, erythropoietin, tissue plasminogen activator, and all monoclonal antibodies are “isolated” in substantially homogeneous form, are structurally unchanged from their sources in blood and other bodily fluids, and are less altered than the isolated human DNAs that are the subject of the claims to isolated human DNA that were invalidated as “natural products” by the district court.

District Court’s Decision Extends to Any “Natural Product”

Despite the district court’s attempt to limit the scope of the ban on isolated human DNA as a “natural product,” the rationale used by the court could logically be extended to any other invention produced as the result of exploitation of naturally-occurring compounds or substances. These include any naturally-occurring chemical compound, including compounds isolated from petroleum and other sources of organic matter, the products of fermentation by microorganisms, and chemical compounds produced by microorganisms, plants or non-human animals that can be adapted for human use.

Taken to its logical conclusion, the district court’s “natural products” ban on patent eligibility would extend even to inorganic matter, such as ultrapure silicon used to produce computer microchips, isolated metal products prepared from ore and other natural sources, minerals and glasses produced from silicon and other natural sources, and any other compound produced from any naturally-occurring source. Such a determination would categorically exclude such inventions from patent-eligibility regardless of how novel, useful and non-obvious such inventions may be.

IPO believes such a broad ban is not justified, since there is no other source for these materials but nature. Whether materials are “natural” should not determine whether such inventions are patent-eligible, but rather whether the hand of man has been used to invent them.

The IPO brief was approved by the Board of Directors and drafted by IPO members Paul Berghoff, Kevin Noonan, and Jeffrey Armstrong of McDonnell Boehnen Hulbert & Berghoff.

See the entire IPO Brief here:  IPO Myriad Brief

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In a lawsuit challenging patents covering diagnostic tests for mutations in genes, the University of Utah and Myriad Genetics lost a U.S. court ruling over some of its patents for detecting inherited breast cancer related to the human genes known as Breast Cancer Susceptibility Genes 1 and 2, or “BRCA1” and “BRCA2.”  The 152-page decision (Myriad Decision) addresses questions about whether human genes should be subject to patent protection.

In an amicus brief filed by the Biotechnology Industry Organization (BIO) and The Association of University Technology Managers (AUTM) set out this familiar position in an amicus brief of their own, stating:

Isolated DNA molecules are unquestionably “composition[s] of matter,” 35 U.S.C. §101; the district court’s ruling that they are nonetheless categorically unpatentable rested on three fundamental errors.

First, the court incorrectly treated isolated DNA molecules as merely “purified” forms of naturally-occurring substances; in fact, they are new, man-made chemical compositions that do not occur in nature.

Second, even if isolated DNA molecules could be treated as purified versions of naturally-occurring DNA, the process of isolation requires such a level of human intervention and so alters their character and use as to make them patentable under settled law.

Third, the district court was led astray by the comparison of DNA sequences to “information”—a common metaphor that is useful in conveying complex science to laypersons, but that does not change the fact that DNA remains a chemical compound, not an alphabet or a language.

The utility of isolated DNA molecules derives from their chemical structure, which is, and can only be, developed by human ingenuity using complex scientific expertise and equipment. As a result, isolated DNA molecules are patentable subject matter.

Although isolated DNA molecules clearly are “composition[s] of matter,” the district court ruled them unpatentable because it believed them to be the “purification of a product of nature” and patentable only if they possessed “markedly different characteristics” from naturally-occurring DNA.

The district court’s analysis was doubly flawed. First, isolated DNA molecules are not the “purification” of naturally-occurring DNA. Rather, they are entirely different man-made molecules that do not appear in nature. Second, even if isolated DNA molecules could be considered “purified” forms of native DNA, the isolation process transforms the DNA into a new and different article with distinctive form, properties, and uses, rendering the isolated molecules patentable under longstanding precedent.

Native DNA simply cannot be used in these therapeutic applications. Rather, it is only when a new, isolated DNA molecule is produced independently from a chromosome that these uses become possible. Accordingly, this is not a situation in which natural substances “serve the ends nature originally provided and act quite independently of any effort of the patentee.” Funk Bros. Seed Co. v.Kalo Inoculant Co., 333 U.S. 127, 131 (1948).

Invalidating Patents On Isolated DNA Molecules Kills Innovation

According to BIO and AUTM, unless reversed, the decision will cause serious harm to U.S. biotechnological innovation. The biotechnology industry depends heavily on patent protection to encourage the investment of time and capital necessary to develop inventions—including those discovered industrially or in-licensed from world-class universities in support of further academic research—into real-life products. The average cost of bringing a single biotechnology-related therapeutic to market, including basic research, clinical trials, and post-approval testing, exceeds $1.2 billion. Grabowski, Follow-On Biologics, 7 Nature Reviews Drug Discovery 479, 482 (2008). For every successful product, many more are abandoned, often only after large investments have been made (only 30% of biological therapeutics that make it as far as human trials succeed).

A ruling that isolated DNA molecules are categorically ineligible for patent protection would kill investor confidence and interfere with the ability of biotechnology companies, particularly small companies, to attract the capital needed to fund further research and development.

The decision potentially casts doubt on patent protection for a wide variety of natural substances that have been isolated and purified to the detriment of the biotechnology industry and the public.

Patents On Isolated DNA Molecules Benefit Rather Than Harm The Public

As we’ve said before, the issue is not that Myriad has a patent and is withholding treatment from patients.  The issue is that Myriad is charging high prices, which could possibly keep some women from seeking preventative genetic testing.  There is a natural cycle where medical breakthroughs receive patent protection, which allows the patent-holder to charge higher prices. High prices yield high profits, which creates an incentive to develop the next generation of therapeutics and diagnostics.

The question might be better framed as “Who should pay for health care costs as expensive diagnostics become available?”  It would seem to be more productive to focus on what we can do to address health care costs that are spiraling out of control. There is nothing particularly extraordinary about gene patents that should require that they be held to a higher standard than, say, pharmaceutical patents or non-gene based diagnostics, both of which can be subject to high cost and limited availability based on the patent holder’s rights.

This case arose from insurance companies with restrictive reimbursement policies for payment of important therapeutics and diagnostics.  An effort to abolish patents on isolated DNA molecules, however, is misdirected and short-sighted. It mistakes problems in the insurance system for problems in the patent system and will harm rather than help patients in the long run.

It is easy to argue after an invention has already been discovered and disclosed that the public would be better off if it were not patented. It is just as easy to single out a particular invention and argue with the benefit of hindsight that patent protection was not necessary for its discovery and development. Such facile arguments ignore the long-term benefits that the public derives from providing patent protection in exchange for the disclosure of new and useful discoveries.

In the life sciences, early-stage companies hold roughly two-thirds of the future clinical pipeline. Boston Consulting Group, Rising to the Productivity Challenge 6 & Ex. 4 (2004). Without patent protection for isolated DNA molecules, many companies would be unable to see those projects through to completion.

See the BIO/AUTM Brief here:  BIO-AUTM Amicus Brief AMP v Myriad

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Earlier, the American Civil Liberties Union (ACLU), the Public Patent Foundation (PUBPAT), and a whole gaggle of others filed a lawsuit challenging patents covering diagnostic tests for mutations in genes.   Association for Molecular Pathology, et al. v. United States Patent and Trademark Office, et al.

On March 29, 2010, the University of Utah and Myriad Genetics lost a U.S. court ruling over some of its patents for detecting inherited breast cancer related to the human genes known as Breast Cancer Susceptibility Genes 1 and 2, or “BRCA1” and “BRCA2.”  The 152-page decision (Myriad Decision) addresses questions about whether human genes should be subject to patent protection.

Sandra Wells, VP and Chief IP Counsel of Affymetrix, gave her view that a purified product must possess “markedly different characteristics” from a product of nature in order to be patentable.  Wells believes that gene patents potentially inhibit development and commercialization of products and technologies that look at many genes simultaneously, à la Affymetrix.

Now, the briefs are rolling in to the CAFC, including Myriad’s own brief (Myriad’s Brief of Appellant) arguing that Judge Sweet’s ruling is an erroneous application of settled patent law and policy that, if upheld, “would have far-reaching negative consequences” for the continued development of biotechnology.

In an amicus brief filed by the Department of Justice (DOJ), on behalf of the United States, the Government has gone against the longstanding policy of the US Patent and Trademark Office (PTO) in arguing that isolated human genes, without further modification, are a product of nature and do not constitute patent-eligible subject matter under § 101 of the Patent Act.

In 2001, PTO published revised examination guidelines for the “utility” requirement of section 101. See Utility Examination Guidelines, 66 Fed. Reg. 1092 (Jan. 5, 2001). The PTO stated that, if the specification of a patent discloses a particular use for a gene — e.g., that the specified gene expresses a useful protein — then “an inventor’s discovery of a gene can be the basis for a patent on the genetic composition isolated from its natural state and processed through purifying steps that separate the gene from other molecules naturally associated with it.”  The PTO stated that a DNA molecule that has been “isolated” in this way is not a product of nature “because that DNA molecule does not occur in that isolated form in nature.”

The Government argues that no court has previously addressed whether an isolated but otherwise unaltered genomic DNA itself — that is, genomic material excised from an organism’s genome and isolated from the cellular environment in which it normally occurs, but without material change to its naturally occurring chemical structure and function — is patentable subject matter under 35 U.S.C. § 101.


Whether human-engineered DNA molecules, such as cDNAs, are patent-eligible subject matter under 35 U.S.C. § 101.

Whether isolated but otherwise unmodified genomic DNA is patent-eligible subject matter under section 101.

The Government’s brief argues that:

The boundary between eligible and non-eligible subject matter is defined, in significant part, by the settled principle that the patent laws do not embrace laws of nature, physical phenomena, or abstract ideas. See Bilski, 130 S.Ct. at 3225.

In attempting to apply that principle here, the district court erroneously cast doubt on the patent-eligibility of a broad range of man­made compositions of matter whose value derives from the information-encoding capacity of DNA. Such compositions — e.g., cDNAs, vectors, recombinant plasmids, and chimeric proteins, as well as countless industrial products, such as vaccines and genetically modified crops, created with the aid of such molecules — are in every meaningful sense the fruits of human ingenuity and thus qualify as “‘human-made inventions’” eligible for patent protection under section 101. J.E.M. Ag  Supply, Inc. v. Pioneer Hi-Bred Int’l, Inc., 534 U.S. 124, 130 (2001) (quoting Diamond v. Chakrabarty, 447 U.S. 303, 313 (1980)). The district court therefore erred in invalidating the challenged composition claims, such as claim 2 of the ‘282 patent, that are directed solely to cDNAs.

The district court correctly held, however, that genomic DNA that has merely been isolated from the human body, without further alteration or manipulation, is not patent-eligible. Unlike the genetically engineered microorganism in Chakrabarty, the unique chain of chemical base pairs that induces a human cell to express a BRCA protein is not a “human-made invention.” Nor is the fact that particular natural mutations in that unique chain increase a woman’s chance of contracting breast or ovarian cancer. Indeed, the relationship between a naturally occurring nucleotide sequence and the molecule it expresses in a human cell — that is, the relationship between genotype and phenotype — is simply a law of nature. The chemical structure of native human genes is a product of nature, and it is no less a product of nature when that structure is “isolated” from its natural environment than are cotton fibers that have been separated from cotton seeds or coal that has been extracted from the earth.

Thus, the patent laws embrace gene replacement therapies, engineered biologic drugs, methods of modifying the properties of plants or generating biofuels, and similar advanced applications of biotechnology. Crossing the threshold of section 101, however, requires something more than identifying and isolating what has always existed in nature, no matter how difficult or useful that discovery may be.

The Patent and Trademark Office has issued thousands of patents on genes of various organisms, including on an estimated 20 percent of human genes.  The fact that the Government is jumping into the fray now probably has a lot to do with the bad publicity Myriad has attracted on its patents covering BRCA1 and BRCA2 genes — along with the over $3,000 that Myriad charges to perform the test on the genes to see if women carry mutations that predispose them to breast and ovarian cancers.

The brief does not mention that biotechnology companies spent an average of eight years and $1.2 billion to get a new treatment to the market, about 24 percent more than it cost makers of traditional drugs to develop a medicine. Source: Tufts University.

Government programs directly cover 27.8% of the population (83 million), including the elderly, disabled, children, veterans, and some of the poor, and federal law mandates public access to emergency services regardless of ability to pay. Public spending accounts for between 45% and 56.1% of U.S. health care spending.  You can see why the federal government would be so interested in biotech patents:

Ernst & Young estimate global biotech industry revenues for publicly-held companies at $79.1 billion for 2009, an 11.8% decrease from the previous year.  The firm also estimates that revenues of publicly-held biotech companies in the U.S. declined 13% to $56.6 billion.

Genetically-engineered drugs, or “biotech” drugs, represent about 9% of the total global prescription drugs market, and about 19% of the U.S. prescription market.  The U.S. Centers for Medicare & Medicaid Services (CMS) forecast called for prescription drug purchases in the U.S. to total about $260.1 billion during 2010, representing about $800 per capita.  That projected total is up from $246.3 billion in 2009 and a mere $40 billion in 1990.

The Government stated flat out that this was a reversal of decades long practice at the PTO, writing:  “We acknowledge that this conclusion is contrary to the longstanding practice of the Patent and Trademark Office, as well as the practice of the National Institutes of Health and other government agencies that have in the past sought and obtained patents for isolated genomic DNA.”

The Government’s new policy seems to be a result of discussions among agencies within the Obama administration, including the National Institutes of Health and the Patent and Trademark Office.  For now, the patent office said that it would not immediately put the policy into effect and will “maintain the status quo while this matter is pending resolution by the Federal Circuit Court of Appeals.

See the Governments brief here:  US Amicus Brief in AMP

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Browsing the aisles of Costco, taking in the consumerism the Christmas has come to denote, my mind was drawn to its jewelry and watch section. As I was feasting my eyes upon baubles and trinkets I have no use for, I recalled the not so recent Ninth Circuit Costco v. Omega which in turn reminded me that Supreme Court is all set to hear the case. What better time to refresh our memory and ponder over the implications of the case ruling?

Costco Wholesale Corporation sold Swiss watches manufactured by Omega S.A. without prior permission from Omega. Omega brought a copyright infringement suit against Costco claiming that Costco’s act of selling watches manufactured by Omega was an infringement of Omega’s copyright protection as afforded by United States laws. Essentially Costco had purchased watches meant for international markets other than the United States (hence the lower price) and sold it in the U.S. at prices lower than offered by other U.S. distributors. Costco sought protection under the first sale doctrine.

The first sale doctrine was first propounded by the Supreme Court in 1908 in the case of Bobbs Merrill Co. v Straus and later included in the US Copyright Act as a limitation on copyright. Briefly the first sale doctrine allows the purchaser to transfer, sell or donate a copyrighted work without permission of the copyright holder once it has been obtained. This implies that the copyright holder relinquishes all rights related to that particular copy once sold so long as no further copies are made by the purchaser. Parallel importation refers to a good that has been produced and sold legally but illegally imported into a country, without the consent of the copyright owner. Thus parallel imported goods are often referred to as ‘grey goods’ because they are produced with the consent of the copyright owner unlike black market goods. This restriction provides that the same material does not compete with itself on price. Consequently geographical product monopolies are set up.

Costco claims that the first sale doctrine is not territorial. The Ninth Circuit held that the first sale doctrine is indeed territorial and does not apply to imported goods manufactured abroad. A similar argument was used in BMG v. Perez where the Ninth Circuit Court of Appeals held that the importation of phonorecords, which were lawfully purchased in Mexico, violated U.S. Copyright Law when they were imported into the United States. The Ninth Circuit pointed out that since copyrights are territorial, U.S. Copyright Law is not applicable outside of the United States and thus, first sale had not occurred in Mexico.

According to the Ninth Circuit §109(a) granted protection of first sale doctrine only to copies legally made and sold in the U.S. Granting protection of first sale doctrine to copies made and sold outside of the U.S. would render § 602 meaningless.

17 U.S.C. § 109(a): Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.

17 U.S.C. § 602(a): Importation into the United States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under section 106, actionable under section 501

In the Quality King case, the product was manufactured and sold in the United States and then re-imported. The manufacturers had already relinquished their rights as soon as the product was sold and shipped outside of the U.S. The Supreme Court reversed the Ninth Circuit Court’s decision and held that “[T]he whole point of the first sale doctrine is that once the copyright owner places a copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution.”

Returning to the case at hand, it seems odd that while Omega enjoys copyright protection for its “Omega Globe Design” in the U.S., still claims that a copy manufactured in a foreign country enjoys the foreign copyright law, not United States law. The Ninth Circuit decision is extremely narrow in perspective. It does not take into account the economic implications of its decision. It essentially means that copyright holders do not relinquish their rights upon copies sold or given away. There would be no downstream market. Also, manufacturing copies abroad under foreign copyright laws while still enjoying selectively United States copyright protection is what it seems Omega is doing. It seems counter-intuitive that even when using a logo protected by U.S. laws, Omega insists that the articles were manufactured abroad.

The Ninth Circuit gracefully agrees with prior Supreme Court decisions that the first-sale doctrine applies to works manufactured in the U.S. However, what are the factors that decide where an article was manufactured? Would manufacturers shift production units abroad and thus circumvent the first sale doctrine as well as control over the resales in the U.S? What does this portend for the already deteriorating U.S. job market?

In light of the current economic circumstances, the Supreme Court should allot a wider realm of meaning to the first sale doctrine. Players like Omega should be dissuaded from using U.S. protection for logos for articles manufactured abroad and simultaneously putting at a disadvantage the U.S. retailers.

Today’s post is by Guest Barista Shalini Menezes of D:ic.t:um.

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