Diagnostic Medical-Test Patents Limited by U.S. High Court

The U.S. Supreme Court put new limits on the availability of patents for diagnostic medical tests, ruling in favor of the Mayo Clinic in a decision that will shape the growing field of personalized health care.

The justices today said two patents owned by Nestle SA (NESN)’s Prometheus unit are invalid because they cover a natural phenomenon. Prometheus argued that the patents concerned an application of a law of nature, not the law itself.

The case tested the types of medical inventions that are eligible for legal protection. Companies, trade groups and lawyers filed more than two dozen legal briefs, many warning that the court’s ruling might have widespread, unintended ramifications. Each side in the case said a defeat might stifle innovation.

Writing for the court, Justice Stephen Breyer pointed to “a concern that patent law not inhibit further discovery by improperly tying up the future use of laws of nature.”

Patent protection is important for companies that are focusing on personalized medicine, including Myriad Genetics Inc. (MYGN) and Novartis AG. (NOVN) The field involves determining whether a patient is genetically susceptible to a particular disease or would be especially responsive to certain medicines.

Salt Lake City-based Myriad fell $1.33, or 5.2 percent, to close at $24.31 in New York trading after dropping as low as $23.07 after the ruling. Genomic Health Inc. (GHDX), based in Redwood City, California, fell $1.19, or 3.8 percent, to $30.33.

Myriad Appeal

An appeal involving Myriad is awaiting high court action, perhaps as early as next week. A group of doctors, researchers and patients are challenging Myriad’s patents on genetic material used in tests for breast and ovarian cancer.

The Mayo dispute divided companies. Verizon Communications Inc. (VZ), Hewlett Packard Co. and Laboratory Corporation of America backed Mayo, arguing for patent limits. Trade groups for the biotechnology and pharmaceutical industries, along with SAP America Inc., sided with Prometheus.

The patents covered a method for determining the proper dosage of thiopurine, a stomach medicine, based on the rate at which particular patients metabolize the drug. Doctors can use the method, which involves testing blood for metabolites, to maximize effectiveness and limit toxic side effects while treating Crohn’s disease and other inflammatory bowel illnesses.

Monopoly Argument

Prometheus sued two units of the Mayo Clinic, the not-for- profit medical practice based in Rochester, Minnesota. Mayo 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.

Mayo contended the patents would give Prometheus a monopoly over all uses of the natural relationship between the metabolites created by thiopurine and the drug’s impact on the human body. The patents are so broad they would bar doctors familiar with the Prometheus method from even thinking about the connection between metabolite levels and the proper dosage for a patient, Mayo’s lawyers said.

Breyer agreed with that reasoning, saying, “the steps add nothing of significance to the natural laws themselves.”

The decision reversed a ruling by the U.S. Court of Appeals for the Federal Circuit, which specializes in patent issues.

‘Big Deal’

The ruling “is a very big deal, especially given that the opinion is unanimous,” said Adam Mossoff, a patent-law specialist who teaches at George Mason University School of Law in Arlington, Virginia. “It is a signal that the Supreme Court is unhappy with the expansive view of patentable subject matter that the Federal Circuit has developed in its rulings for the past two decades.”

The ruling was surprising and a “real departure” from past Supreme Court cases, said Erika Arner, a Washington lawyer who filed a brief on behalf of SAP urging the court not to restrict software and computer patents.

The court’s focus on laws of nature means the ruling will have a bigger impact on the biotechnology industry than computer companies, she said.

“The court was careful, it seems, to avoid any unintended consequences,” she said.

Nestle, based in Vevey, Switzerland, acquired Prometheus last year. Prometheus said the ruling will cause health-care companies to forgo new research and development.

“This decision will, in our view, encourage imitation, not innovation,” Prometheus said in an e-mailed statement.

Myriad, Novartis, Laboratory Corp. of America Holdings’s Monogram Biosciences and Genomic Health all have urged that diagnostic methods be patentable. Monogram and Genomic Health told the Supreme Court in 2009 that they would have difficulty getting funding without patent protection.

The annual market for diagnostic tests and drugs tailored to individuals may reach $42 billion by 2015, according to a 2009 report from PricewaterhouseCoopers LLP.

The case is Mayo Collaborative Services v. Prometheus Laboratories, 10-1150.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.