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Jun 15, 2012

With Briefs Due June 15, Myriad Fires First Shot in Circuit Rematch Over Gene Patenting

Firm asked appeals court to dismiss the case because the sole plaintiff’s standing has changed since he left NYU.

With Briefs Due June 15, Myriad Fires First Shot in Circuit Rematch Over Gene Patenting

Myriad may still need to demonstrate that its patents are “particular” and “inventive” in the eyes of the Federal Circuit appeals court. [© Fineas - Fotolia.com]

  • Days before the June 15 deadline for briefs in the three-year-old legal wrangle over the patenting of breast cancer susceptibility genes BRCA 1 and 2, Myriad Genetics signaled that it intends to put the litigation behind it one way or another. Myriad has asked the U.S. Court of Appeals for the Federal Circuit to dismiss as moot the lawsuit filed in 2009 by 20 medical associations and individual doctors led by the Association for Molecular Pathology (AMP) and assisted by the American Civil Liberties Union (ACLU) and Public Patent Foundation.

    The plaintiffs sued Myriad and the U.S. Patent and Trademark Office (USPTO) over it issuing to the company seven patents related to BRCA1 and BRCA2 and Myriad’s method for analyzing sequences of those genes for mutations associated with breast cancer. Myriad cited a change of jobs for plaintiff Harry Ostrer, M.D. The geneticist last year left his longtime position as director of New York University’s (NYU’s) molecular genetics laboratory for his current positions as director of genetic and genomic testing at Montefiore Medical Center and professor of pathology and of genetics at Albert Einstein College of Medicine of Yeshiva University.

    Dr. Ostrer was the sole plaintiff found to have standing to sue by the Federal Circuit, before its decision was vacated in March. That standing was based in part on his declaration that Myriad blocked his lab from conducting BRCA testing due to a license agreement signed by the company and NYU in 1998 in exchange for royalty payments. The court said Myriad did not have to take action against Dr. Ostrer or any other plaintiff for the court to have jurisdiction but simply needed to show “some affirmative act” by the company related to enforcing its patent rights.

    In its May 30 filing, Myriad asserts that Dr. Ostrer’s standing has changed since he left NYU. It added that the company has made no similar license agreement with Montefiore. As a result, Myriad argues, there is no case for the court to decide.

    “Regardless of any subjective fear Dr. Ostrer may profess of being personally sued, his standing to maintain this suit depends on whether there is any kind of objective controversy between Myriad and Dr. Ostrer at his present institution,” Myriad asserted. “The case that now stands before the Court presents only abstract, philosophical questions of no immediate relevance to the parties and which are beyond the constitutional powers of a federal court to decide.”

  • Myriad’s Latest Filing

    Accompanying Myriad’s 21-page filing was a declaration by Richard Marsh, Myriad’s evp, general counsel, and secretary, who noted “Myriad has never asserted its patents against Montefiore; the ‘assertion’ [Dr. Ostrer] refers to was made in the context of the licensing offer from NYU,” the company told the Federal Circuit appeals court. “Dr. Ostrer’s claimed forbearance from conducting genetic testing at Montefiore is a unilaterally self-imposed harm. It cannot sustain standing.”

    That argument is designed to counter a declaration by Dr. Ostrer last year that he is as ready and willing to carry out clinical BRCA testing at Montefiore as he was at NYU but is “prevented from doing so as a result of Myriad’s assertion of its patents.”

    In 2010, the district court ruled flatly that genes were not patentable subject matter. However, last year, a three-judge panel of the Federal Circuit found Myriad’s gene composition-of-matter claims and its methods of screening for cancer compounds patent-eligible but found Myriad’s claims for the mutation analysis were not patentable, dismissing them as “abstract mental processes.” In March, the U.S. Supreme Court remanded the case to the Federal Circuit’s appeals court.

    In an interesting hedge of its legal bet, Myriad offered the Federal Circuit appeals court a choice: If it insists on not dismissing the appeal, the company said it would instead want the Federal Circuit appeals court to remand Association for Molecular Pathology v. U.S. Patent and Trademark Office to the district court for reconsideration of Dr. Ostrer’s standing.

    Myriad’s most recent filing came more than a month after the Federal Circuit appeals court ordered both sides in the case to file briefs by June 15 addressing a single question: “What is the applicability of the Supreme Court’s decision in Mayo to Myriad’s isolated DNA claims and to method claim 20 of the ’282 patent?” The’282 patent is Myriad’s US Patent 5,747,282 for methods and materials to isolate and detect BRCA1. Claim 20 of that patent is a screening method for cancer drugs.

    The Mayo case concerned the patent eligibility of a dosage calibration method marketed by Nestle’s Prometheus Laboratories subsidiary. On March 20, the U.S. Supreme Court ruled unanimously that Prometheus’ methods of dosage calibration for thiopurine drugs for gastrointestinal and nongastrointestinal autoimmune diseases were ineligible for patenting. In a decision written by Justice Stephen G. Breyer, the high court overturned a Federal Circuit decision in stating that Prometheus’ dosage calibration methods were unpatentable laws of nature that lacked “a particular, inventive application of the law.”

  • Company’s Business

    In addition to playing up Dr. Ostrer’s change of employment, Myriad is also playing down the impact of its court case to its business. “While this is a very important, potentially landmark court case, it only involves 15 of our 500 patent claims,” Myriad CEO Peter D. Meldrum pointed out. “The outcome of this particular litigation will not have material impact on the operations of the company, and I’m not sure that’s fully appreciated by shareholders.” Myriad has noted that its Melanoma Dx and lung cancer prognosis tests are set to enter the market next year. The company has nine tests on the market, with another 13 molecular diagnostic tests in its pipeline.

    However, BRCAnalysis® is Myriad’s lead product, accounting for 81% of the company’s total revenue during the third quarter of its fiscal year ending March 31 of $105.9 million, a 17% gain from a year earlier. All 23 of the patents involved in BRCAnalysis will expire between now and 2018. However, product revenues would start flattening sooner if the court case ends up going against Myriad.

    Overall, Myriad generated $129.8 million in revenue, a 27% year-over-year leap, and $29.6 million in net income, up about 6% from a year earlier. Based on that performance, Myriad raised its guidance range to investors for FY 2012 to $1.29 to $1.31, up from $1.20 to $1.25 EPS. Myriad also raised its revenue guidance to between $492 million and $496 million, up from between $445 million and $465 million.

    Leerink Swann raised its rating on the company’s stock to “outperform” on May 21, agreeing with Myriad that concerns over its IP were overblown. Leerink also raised its target price range to $30–$31 a share from $27–$30 a share.

    Myriad’s best long-range prospects for growth lie with addressing two key legal questions. The first question remains open: What intellectual material is patentable? The second was partly answered by Justice Breyer in Mayo: What has to be added to a law of nature to make it a patentable process?

    Mayo doesn’t make Myriad’s task easier, as a unanimous Supreme Court retreated from three decades of life-science-friendly patent rulings going back to Diamond v. Chakrabarty (1980). Myriad’s best argument is to show that its patents can coexist with the legal landscape as rewritten by Mayo by demonstrating a key quality of valid patents articulated by Justice Breyer in that ruling: “a particular, inventive application of the law.” Since he left the terms undefined, it will be up to Myriad to define “particular” and “inventive” and hope the Federal Circuit appeals court agrees.


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