13 January 2014
Recent years have seen tremendous advances in the field of biotechnology that have revolutionized the pharmaceutical industry and led to the explosive growth of innovative drug therapies and diagnostics. Most major pharmaceutical companies have active target-based drug research programs that heavily incorporate biotech processes, while worldwide biotechnology product sales topped $163 billion in 2012.1 As a result, there has been an increased urgency to gain proprietary rights over these advances. In particular, the field has seen growth in the number of biotech patents as well as the enforcement of patents through litigation. Companies in this sector rely heavily on patents as a crucial asset to gather investment capital and to protect investment from imitators. From a legal perspective, patenting of these inventions poses unique challenges—to encourage investment and innovation, while leaving scientists free to access genetic material and research tools.
Our patent system grants an inventor a limited monopoly of 20 years from the filing of a patent application.2 The effective patent life for a pharmaceutical drug is much shorter, however, due to the regulatory approval process to get a drug on the market.3 Since initial investment in research and development is so costly—estimates put the cost of developing a new drug in the range of $4-$11 billion4—strong patent protection is an important step in recouping that investment. Once drugs lose patent protection, generics costing an average of 30 percent less than the brand name can shave as much as 90 percent off of a brand's sales.5 Furthermore, companies are increasingly experiencing strong competition within the same therapeutic class from other innovator companies. The amount of time between the entry of the first and second drug in a class fell to about 1.1 years in 2000-2003.6 These economic pressures, along with the recent spate of blockbuster drug patent expirations—a phenomenon referred to as the "patent cliff"7—have spurred pharmaceutical companies to turn increasingly to biologics to fill product pipelines.
The focus within the pharmaceutical industry has shifted from a concentration on small molecule drugs (those generally developed through chemical synthesis) to include an increasing number of biologic drugs (produced from living sources, such as vaccines, therapeutic proteins and monoclonal antibodies). While biotech products accounted for 7 percent of the revenue generated by the 10 top selling drug therapies in 2001, they accounted for 71 percent in 2012.8 The number of biotech products in clinical development grew 155 percent from 2001 to 2012.9 All of the largest pharmaceutical companies have biotech products in clinical development now, and about 40 percent of all biotech products in development are being developed by Big Pharma.10 Of the top 12 selling drugs of 2012, eight were biologics, including the number one selling drug, Humira.11 The high stakes and significant return on this investment makes patent protection essential.
To be patentable, an invention must be novel, or different, from subject matter disclosed by an earlier patent, publication, or other state-of-the-art knowledge.12 In addition, an invention is not patentable if the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.13 This requirement of "nonobviousness" prevents the issuance of patents claiming subject matter that would have been obvious to one of skill in a given field in view of what was known at the time the invention was allegedly conceived.14 The invention must also be useful, a requirement that is satisfied if the invention is operable and provides a tangible benefit.15 However, even if these requirements of novelty, nonobviousness, and utility are met, an invention is not patentable unless it falls within at least one category of patent-eligible subject matter. Although the range of patent-eligible subject matter is theoretically quite broad, courts and the U.S. Patent and Trademark Office (the entity responsible for examining and granting patent applications) have nonetheless concluded that certain subject matter, including abstract ideas and laws of nature, are not eligible for patent protection.16 This area of patent law, often referred to as "subject matter eligibility" or "patent eligible subject matter," and embodied in 35 U.S.C. §101, has been the subject of great interest in recent years. Nowhere is this more true than in the pharmaceutical industry, where the high cost of research and development makes it crucial for companies to avoid the pitfalls of investing in areas that may be deemed ineligible for patent protection.
The U.S. Supreme Court addressed the issue of patent subject matter eligibility under §101 in the field of biotechnology on two recent occasions: Mayo Collaborative Servs. v. Prometheus Labs.17 and Association for Molecular Pathology v. Myriad Genetics.18 In Mayo, the court struck down patent claims to a method of determining the proper dose of a drug by determining an individual's rate of metabolizing the drug, holding that the "invention" was simply the recognition of a law of nature.19 A year later, in Myriad, the court found that naturally occurring DNA—the building blocks of nature—are not patent eligible.20 Myriad had patented isolated human genes known as BRCA1/BRCA2, which were found to be associated with a predisposition to breast and ovarian cancer, and therefore key to diagnostic screening. In contrast, the court also held that cDNA, a synthetically stripped-down version of DNA, is patent eligible because it is not naturally occurring. The line drawn is one between discovery and invention. According to the court, discovery of naturally occurring sequences, even after great effort, is not equivalent to invention.
Due to the impact on health care, Myriad drew much attention from the public and life sciences sector alike with attention-grabbing headlines such as "Myriad Genetics CEO Claims He Owns Your Genes."21 As patent protection is an important aspect of the success of many biopharmaceutical products, the outcome of the case and any ban on "gene patents," was seen as having a great impact on innovation in the biotech industry. Although Myriad provoked a great deal of panic, to date it has not proven itself to be the death knell that many feared.22 The opinion itself spells out how claims directed to methods of manipulating gene sequences and applications of knowledge relating to gene sequences may still be patent eligible. Justice Clarence Thomas explained: "Had Myriad created an innovative method of manipulating genes while searching for the BRCA1 and BRCA2 genes, it could possibly have sought a method patent." "Similarly," he continued, the Myriad decision "does not involve patents on new applications of knowledge about the BRCA1 and BRCA2 genes," which the court noted Myriad was in an excellent position to do (emphasis in original). Finally, Myriad does not consider "the patentability of DNA in which the order of the naturally occurring nucleotides has been altered."23
As such, considerable latitude exists going forward in protecting intellectual property related to a particular gene. Now that the court's decision has assuaged earlier concerns that all genetic sequences might be found patent ineligible under Myriad, innovation in the life sciences has persisted and will continue to persist, as companies continue to use patent law as a robust part of their business plans. In recent years the industry has moved past claiming isolated naturally-occurring DNA and companies typically hold patents with claims covering synthetic sequences or innovative methods of using DNA sequences, which remain patent eligible after Myriad.24
In fact, following the Supreme Court decision, Myriad immediately sued a number of companies that introduced BRCA1/BRCA2 diagnostic tests onto the market, alleging that laboratory testing and analysis of these genes infringes the claims of its patents that go to DNA primers for amplifying BRCA1/BRCA2 genes, methods of making isolated BRCA1/BRCA2 genes by amplifying genomic DNA and methods of diagnosing or identifying individuals with a predisposition to breast cancer.25 According to Myriad, certain primers and probes (short pieces of DNA that are complementary to the BRCA1/BRCA2 genes) are fundamentally different from genomic DNA because they do not originate in the body; rather they are synthetically created DNA, made in the laboratory. As for its method claims, Myriad argues that they recite more than "abstract mental steps" or "routine or conventional steps" and therefore, the claims fall outside the scope of Mayo and Myriad.26
Method claims may represent a viable route to pursue for practitioners. The Myriad court noted that innovative methods of manipulating genes while searching for the BRCA1 and BRCA2 genes were not considered in rendering its holding.27 These specific applications could cover, for example, methods of using particular nucleic acid sequences to screen for therapies. Certainly, where a method incorporates patentable matter, i.e., synthetic DNA or other man-made product, the claims would be patent-eligible under Mayo and Myriad. What remains to be answered is how courts will handle innovative methods that incorporate otherwise unpatentable subject matter, e.g., the naturally occurring genes.
When a patent-ineligible law of nature lies at the heart of a method claim, additional elements must do significantly more than implement the law of nature to transform the claims into patent-eligible subject matter. For example, in PerkinElmer v. Intema, the Federal Circuit found method claims that recited certain steps for measuring and determining the risk of the presence of Down's syndrome in a fetus based on those measurements ineligible for patent protection under §101. Citing Mayo and comparing the asserted claims to those at issue in Myriad, the court found that the fact that "an increased risk of fetal Down's syndrome produces certain analytical results is a natural process, an eternal truth that 'exists in principle apart from any human action.'"28 In considering whether Intema's claims "added enough to the statements of ineligible subject matter to direct the claims, not to the ineligible concepts themselves, but to applications of those concepts," the court concluded that they did not.
One of the first district court decisions decided after Mayo and Myriad dealing with subject matter eligibility of biotech claims, Ariosa Diagnostics v. Sequenom,29 dealt with method claims. In that decision, Judge Susan Illston in the Northern District of California, granted summary judgment invalidating patent claims drawn to prenatal testing methods performed on a maternal serum or plasma sample from a pregnant female. Specifically, the invention was based on the discovery that cell-free fetal DNA (cffDNA) may be detected in maternal serum or plasma samples, thereby allowing for non-invasive pre-natal determination of gender, blood-type and other genotyping. This non-invasive method provided an alternative to techniques such as amniocentesis, which can pose risks to the mother and child.
Judge Illston looked to both the recent Myriad and Mayo decisions in finding that the claimed method did not qualify for patent protection. The court reasoned that even if the inventors discovered cffDNA in the mother's plasma or serum, a diagnostic method based on this recognition was not patentable, as it merely recognized this naturally occurring phenomenon. The court held that "the only inventive concept contained in the patent is the discovery of cffDNA, which is not patentable." Thus, the detection of cffDNA using conventional techniques for DNA detection was not sufficiently inventive to render the claim patent eligible. The opinion is noteworthy because it echoes the roadmap Justice Thomas set out in Myriad for inventors in the field:
Had the inventors of the [asserted] patent created an innovative method of performing DNA detection while searching for paternally inherited cffDNA, such as a new method of amplification or fractionation, those claims would be patentable.30
The Sequenom decision, if upheld by the Federal Circuit, may signal a curb on patent claims to genetic diagnostic testing. The court's analysis under §101 seemingly utilizes a "non-obvious" inquiry—essentially asking whether a conventional method was applied to a natural phenomenon. Likewise, this analysis could be used to invalidate the application of a conventional method to a product of nature (an unmodified gene). The court's decision provides insight as to how subsequent courts will apply the Myriad and Mayo analysis to a broad range of biotechnology patents. As the industry continues to assess the Myriad and Mayo decisions, the next question to be posed is whether the decisions go beyond the diagnostic field to impact therapeutic biologics as well as protein and gene based research tools which are increasingly crucial to drug discovery.
Accordingly, although recent decisions such as Myriad and Sequenom suggest that pharmaceutical companies may need to be creative in developing workarounds (such as asserting only those patent claims that cover patent-eligible cDNA sequences or methods relating to such sequences), the industry is well-equipped to do so. In fact, most genetic patents acquired over the last decade have been for synthetic sequences, a statistic that suggests what was lost in Myriad is not the most commercially important tool that pharmaceutical companies had in their arsenal when the case was decided.31 The sweeping pronouncements that the media made following the Myriad decision are thus misleading, as in truth, "[i]t's not that you can't patent DNA sequences [after Myriad], it's how you go about doing it" that matters now.32
So far the increased investment in biologics seems to be paying off. As blockbuster small molecule drugs wane, the products best positioned to record an increase in peak annual sales over the next five years are biologics such as the autoimmune disease fighters Humira, Enbrel and Rituxan.33 Although it is too early to know whether biologics currently in development will form the next generation of top grossing medicines, the indicators so far seem good. Several monoclonal antibody products are poised to have a dominant impact on the market as targeted therapies for certain cancers and high cholesterol. How pharmaceutical companies will go about protecting their investments in biologics is a question at the forefront of many people's minds in the field. As drug companies work to navigate this evolving patent landscape, they are doing so even as the face of the pharmaceutical industry itself is rapidly changing.
Lisa Ferri is a partner and Emily Nash is an associate at Mayer Brown in New York.
Reprinted with permission from the January 13, 2014 edition of New York Law Journal © 2015 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.
1. Tufts CSDD Impact Report, Vol. 15, No. 6, November/December 2013.
2. 35 U.S.C. §154(a)(2).
3. Drug companies today typically have an estimated 11 years of market exclusivity, down from 17 years in the 1960s. Josh Bloom, "Should Patents on Pharmaceuticals Be Extended to Encourage Innovation?," Wall Street Journal, Jan. 23, 2012.
4. Matthew Herper, "The Truly Staggering Cost of Inventing New Drugs," Forbes, Feb. 10, 2012.
5. Jack DeRuiter Ph.D. and Pamela Holston, R.Ph., "Drug Patent Expirations and the 'Patent Cliff'," U.S. Pharmacist, June 20, 2012.
6. Tufts CSDD Impact Report, Vol. 11, No. 5, September/October 2009.
7. Duff Wilson, "Drug Firms Face Billions in Losses in '11 as Patents End," New York Times, March 6, 2011.
8. Tufts CSDD Impact Report, Vol. 15, No. 6, November/December 2013.
11. "Top 20 Best-Selling Drugs of 2012," Genetic Engineering & Biotechnology News, March 5, 2013.
12. 35 U.S.C. §102.
13. 35 U.S.C. §103.
14. See KSR Int'l v. Teleflex, 550 U.S. 398 (2007).
15. See In re Fischer, 421 F.3d 1365, 1371 (Fed. Cir. 2005).
16. See Bilski v. Kappos, 130 S. Ct. 3218 (2010).
17. 132 S. Ct. 1289, 566 U.S. — (2012).
18. 133 S. Ct. 2107, 569 U.S. — (2013).
19. Mayo, 132 S. Ct. at 1305.
20. See Myriad, 133 S. Ct. at 2120 ("We merely hold that genes and the information they encode are not patent eligible under section 101 simply because they have been isolated from the surrounding genetic material").
21. Steven Salzberg, "Myriad Genetics CEO Claims He Owns Your Genes," Forbes, April 13, 2013.
22. The number of patents potentially affected by Myriad was generally though to be in the thousands. One 2012 study identified 4,977 patents that claimed human genetic sequences. See Gregory D. Gaff et al., "Not Quite a Myriad of Gene Patents," Nature Biotechnology, Vol. 31 No. 5 (May 2013).
23. Myriad, 133 S. Ct. at 2120.
24. Edward R. Ergenzinger, "Winning a Battle, Losing a War: Why ACLU's Strategy in Myriad Genetics Patent Case May Have Backfired," WRAL TechWire, available at http://wraltechwire.com/winning-a-battle-losing-a-war-why-aclu-s-strategy-in-myriad-genetics-patent-case-may-have-backfired/12945433/ (last visited Dec. 16, 2013).
25. There are presently six such lawsuits pending in the District of Utah (against Ambry Genetics, Gene-by-Gene, Quest Diagnostics, GeneDx, Invitae, and LabCorp), which Myriad has brought against BRCA market entrants since July 2013. See Case Nos. 2:13-cv-00640, 2:13-cv-00643, 2:13-cv-00954, 2:13-cv-00967, 2:13-cv-01049 and 2:13-cv-01069.
26. For example, in seeking a preliminary injunction in the 2:13-cv-0640 case filed against Ambry Genetics, the Myriad plaintiffs argued that the Supreme Court implicitly adopted the Federal Circuit's explanation in Ass'n for Molecular Pathology v. USPTO, 689 F.3d 1303 (Fed. Cir. 2012) that when claims include physical, transformative steps, such as the use of synthetic DNA, they necessarily encompass patentable subject matter.
27. Myriad, 133 S. Ct. at 2119-20.
28. PerkinElmer v. Intema, 496 Fed. Appx. 65, 70 (Fed. Cir. 2012) (quoting Mayo, 132 S. Ct. at 1297).
29. Ariosa Diagnostics v. Sequenom, No. 11-cv-6391, 2013 WL 5863022 (N.D. Cal. Oct. 30, 2013)
30. Id. at *10.
31. Ergenzinger, supra note 24.
33. Simon King, "The Best Selling Drugs of All Time; Humira Joins the Elite," Forbes, Jan. 28, 2013.