Diagnostic Tests Can Be Patented, U.S. Court Rules

(Corrects story from December 2010 to remove reference to licensing of patents in 10th paragraph.)

Diagnostic medical tests can be patented, a U.S. appeals court ruled in its first decision on the issue since a landmark Supreme Court case six months ago on business-method patents.

Prometheus Laboratories Inc.’s method of determining the dosage of medicines to treat stomach diseases can be patented, the U.S. Court of Appeals for the Federal Circuit in Washington said. Closely held Prometheus had lost a lower court case in which it sued the Mayo Clinic for infringing two patents. The Federal Circuit reversed the ruling in 2009 and today upheld its decision, saying a judge erred in ruling the patents invalid.

The ruling may aid companies including Myriad Genetics Inc. (MYGN) and Novartis AG (NVS), which have tried to capitalize on burgeoning demand for “personalized medicine,” where doctors determine if a patient is genetically susceptible to a particular disease or would be more responsive to certain medicines. Interest in such testing has grown partly as health-benefit companies including Medco Health Solutions Inc. (MHS) see a way to trim costs.

“It’s a tremendous advance in the whole world of pharmaceuticals if you can better match people with the medicines you give them,” said Jennifer Gordon, a lawyer at Baker Botts in New York who submitted a filing in the case on behalf of Novartis. Companies “want the full capability of getting any type of patent that covers their technology. Patents have been very important to this industry.”

Myriad, which is appealing a federal judge’s ruling in a separate case that invalidated its patents on a test for breast cancer, rose 74 cents, or 3.2 percent, to $23.71 at 4 p.m. New York time in Nasdaq Stock Market composite trading.

Diagnostic Industry Boost

The Prometheus case was being watched to see how the court would interpret a June ruling from the Supreme Court that considered what types of innovations would qualify for legal protection. The Federal Circuit specializes in U.S. patent law.

“The court of appeals is fairly strongly of the view that methods of treatment and methods of diagnostics are patentable all the time,” said Nick Groombridge, a lawyer at Weil, Gotshal in New York who specializes in biotechnology and health patents.

“This is a significant boost for the diagnostic industry,” he said.

The two Prometheus patents are for a method to determine the proper dosage of medicines for ailments including Crohn’s disease or ulcerative colitis to maximize the effectiveness of the drugs while limiting toxic side effects.

Mayo Clinic

The Mayo Clinic, a not-for-profit medical practice based in Rochester, Minnesota, at one point shipped patient samples to Prometheus and paid the company to perform the test. That relationship ended in 2004, when Mayo created its own test using the same metabolites as Prometheus with different levels to determine toxicity.

After it was sued, Mayo argued that the patents covered mental steps to look at a body’s natural process, and a judge agreed, saying the subject matter wasn’t eligible for a patent.

Courts had long held that patents can’t be granted for “laws of nature, physical phenomena and abstract ideas.” Prometheus argued that its tests involve an application of a law of nature, not the law itself. The Federal Circuit agreed.

The patents “are in effect claims to methods of treatment, which are always transformative when one of a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition,” the three-judge panel ruled.

The Prometheus ruling may help Salt Lake City-based Myriad win its appeal of a judge’s findings that some elements of its patents for diagnosing a woman’s risk of getting breast cancer were simple mental steps. The bulk of the judge’s ruling on Myriad was that isolated DNA is directed to a law of nature and wasn’t an issue in the case ruled upon today.

The case today is Prometheus Laboratories Inc. v. Mayo Collaborative Services, 2008-1403, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Prometheus Lab Inc. v. Mayo Collaborative Services, 04cv1200, U.S. District Court for the Southern District of California (San Diego).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net

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