Novartis, Myriad Get Boost After Court Patent Ruling (Correct)
Supreme Court
Chris Kleponis/Bloomberg
The U.S. Supreme Court in Washington, D.C.
The U.S. Supreme Court in Washington, D.C. Photographer: Chris Kleponis/Bloomberg
Consumer Genetics
Sandy Huffaker/Bloomberg
A gene-testing kit.
A gene-testing kit. Photographer: Sandy Huffaker/Bloomberg
(Corrects client name in 13th paragraph of story that ran June 29.)
Myriad Genetics Inc., Genomic Health Inc. and the rest of the burgeoning industry for personalized medicine stand to gain from yesterday’s landmark U.S. Supreme Court decision on patenting business methods.
The Supreme Court ruled that judges should be more flexible in determining if methods, rather than objects, are eligible for patents, citing emerging technologies such as medical testing. The justices followed through today, ordering a lower court to reconsider two cases involving Prometheus Laboratories Inc. and Classen Immunotherapies Inc., which sell tests that determine how to treat a patient.
“This puts diagnostic methods back in play in a way that they potentially would not have been,” said Heidi Keefe, a lawyer at Cooley Godward in Palo Alto, California, who represents biotech companies. “It gives them a new chance.”
The question now is how the Federal Circuit will apply the ruling to diagnostic tests. Novartis AG, Laboratory Corp. of America Holdings’ Monogram Biosciences and Genomic Health were among companies who said in court filings that they need the patent protection to attract investors. The companies make genetic tests that tell doctors if a patient is susceptible to a particular disease or would respond to certain medicines.
“Diagnostics are on the front line,” said Nick Groombridge, a lawyer at Weil Gotshal in New York who specializes in biotech and health patents. “The issue is always that, fundamentally, most diagnostic techniques are comparisons.”
$24 Billion Market
Interest in personalized medicine has grown partly as health-benefit companies including Medco Health Solutions Inc. and CVS Caremark Corp. see a way to trim costs by targeting drugs to people whose genetic makeup proves they will benefit.
The annual market for diagnostic tests and drugs tailored to individuals was expected to total $24 billion last year, according to a report in October from New York-based PricewaterhouseCoopers LLP. The sum may grow 10 percent a year, reaching $42 billion by 2015, the consulting company said.
Yesterday’s decision involved a patent sought by Bernard L. Bilski and Rand A. Warsaw, creators of a method of hedging weather-related risks when buying and selling fuel. The U.S. Court of Appeals for the Federal Circuit in 2008 ruled that patents shouldn’t be granted on business methods unless they have some physical component, through a connection to a machine or their power to transform an item into a different state.
The Supreme Court reviewed the decision and ruled that the standard for defining patent eligibility was too narrow and urged legal protections for registering business methods.
‘Sigh of Relief’
“Medical diagnostics companies will breathe a tremendous sigh of relief from this decision,” said Steve Henry, a lawyer at Wolf Greenfield in Boston. “All sorts of diagnostics and analytics claims would fail the machine or transformation test.”
Under current law, the U.S. Patent and Trademark Office can grant patents to machines, manufactured items, compositions of matter such as drug compounds, or processes. Courts have wrangled for decades over how to define processes and what standard to use. The definition of a “process” was the subject of the dispute before the Supreme Court.
The Federal Circuit, in a September 2009 decision involving San Diego-based Prometheus, overturned a trial judge and upheld patents related to methods of identifying metabolites of a drug used to treat stomach disorders. The court said the method of treatment results in physical changes in the body and therefore met the test it had set a year earlier. The Mayo Medical Laboratories, which operates within the Mayo Clinic, asked the Supreme Court to overturn the Prometheus decision.
‘Hard Questions Remain’
By remanding the Federal Circuit’s Prometheus decision today, “issues surrounding diagnostic patents remain up in the air,” said Mayo lawyer Jon Singer of Fish & Richardson in Minneapolis. “Some hard questions remain.”
The Supreme Court also ordered the Federal Circuit to reconsider a December 2008 decision that patents owned by closely held Classen over a way of evaluating the effects of vaccines were invalid. Classen had sued Biogen Idec Inc., GlaxoSmithKline Plc and Merck & Co.
In March, a federal judge in New York threw out some claims, or aspects, of gene-related patents owned by Myriad Genetics for a test to determine if a woman is at a high risk of getting breast cancer, saying that comparisons of DNA sequences are “abstract mental processes” and didn’t meet the test set by the Federal Circuit in its 2008 decision.
Setting New Rules
The decision separately invalidated claims related to the genetic markers themselves, with the judge saying they were no different than what occurs naturally in the body.
The decision “leaves the Myriad patentability fight for another day,” Amit Hazan, an analyst at Gleacher & Co. in New York, said in a note to clients. In an e-mail, he added: “It’s up to the federal courts now to develop new rules. Our belief continues to be that Myriad patents will eventually be invalidated.”
Patents on diagnostic methods “are integral and inseparable ingredients in the larger process of managing and treating disease,” Basel, Switzerland-based Novartis said in its filing with the Supreme Court. “Such claims are at the front-end of the healing process.”
‘Hard to Plan’
LabCorp’s Monogram Biosciences, which makes diagnostic tests for HIV and breast cancer, and Genomic Health, a maker of tests to determine the likelihood of recurrence of breast cancer, said they would have difficulty getting funding were it not for patent protection.
“In the end, fewer personalized medicine avenues will be explored and brought to market and patients will suffer,” the companies told the Supreme Court in a filing.
The decision from the Supreme Court is unlikely to end the debate over diagnostic patents.
“There’s going to be a period where the law is going to get clarified but it hasn’t yet,” Groombridge said. “It’s hard to make plans around this.”
The case is Prometheus Laboratories Inc. v. Mayo Collaborative Services, 2008-1403, U.S. Court of Appeals for the Federal Circuit (Washington). Yesterday’s case is Bilski v. Kappos, 08-964, U.S. Supreme Court. The appellate court case is In Re Bernard Bilski, 07-1130, U.S. Court of Appeals for the Federal Circuit (Washington).
To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net.
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