August 1, 2010 (Vol. 30, No. 14)

Decision Will Have Lasting Impact on Industry

On the last day of its 2009 term, the Supreme Court issued an important decision in Bilski v. Kappos that addresses the fundamental question of what types of methods are eligible for patent protection under the primary patent statute, 35 U.S.C. § 101. While the patent at issue related to a business method, the law in this area is gaining increasing importance in the biotech industry, as courts are scrutinizing whether human genes, diagnostic methods, and personalized medicine methods should be eligible for patent protection, even assuming all other requirements for a patent are met. 

The Bilski decision itself may not directly impact biotech companies, but the fall-out from Bilski and cases that will be decided in Bilski’s wake will no doubt have a lasting impact on this industry.

Bilski’s patent described a method of hedging risk in the field of commodities trading. The Federal Circuit considered whether Bilski’s claims satisfied 35 U.S.C. § 101, which defines subject matter that may be patented.

Although the plain language of the statute is very broad, a number of Supreme Court decisions have placed limits on its reach. For example, “laws of nature, physical phenomena, and abstract ideas” are not patent-eligible, nor are “mental processes.”

In its Bilski decision, the Federal Circuit determined that the “machine or transformation test” is the appropriate way to determine whether method claims satisfy § 101. The court presented the test as having two independent parts, only one of which must be satisfied:

(1) the process is tied to a particular machine or apparatus, or
(2) the process transforms a particular article into a different state or thing. 

The court explained that the test has two further aspects: 

(i) the use of a specific machine or transformation of an article must impose meaningful limits on the claim’s scope, and
(ii) the involvement of the machine or transformation must not merely be insignificant extra solution activity.

Bilski’s methods admittedly failed the “machine” prong of the test, because the claims did not recite the use of any machine or apparatus. (Unlike many business method patents, Bilski’s claims did not require that any of the method steps be performed by a computer.) 

With regard to the “transformation” prong, the court reasoned that transformations of “public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test.”

Applying these principles to Bilski’s methods, the court held that they could not be patented because they “encompass the exchange of only options, which are simply legal rights to purchase some commodity at a given price in a given time period,” and do “not involve the transformation of any physical object or substance, or an electronic signal representative of any physical object or substance.” 

The Supreme Court held that the machine or transformation test is not the “only” way to determine whether method claims satisfy § 101. The Court did not discredit the test, however, stating that it is a “useful” tool. Moreover, the Court refused to adopt a rule that business methods cannot be patented. Still, the Court affirmed the Federal Circuit’s determination that Bilski’s claims are invalid, on the specific ground that they claim an “abstract idea.”

The majority opinion does not provide much guidance to aid future applications of § 101. Nor does it indicate how to determine whether a patent is invalid for claiming an abstract idea or natural phenomena, or how to address this issue in biotech-related fields such as genes, diagnostics, and personalized medicine.   

Where Does Bilski Leave Biotech?

While much awaited, the Supreme Court Bilski decision leaves the patent world in much the same situation as it was before.  Indeed, the U.S. Patent and Trademark Office (PTO) instructed examiners to continue to apply the machine or transformation test, but also consider whether there is a “clear indication” that the claimed method is or is not directed to an abstract idea. On the other hand, the Court vacated and remanded Prometheus, a diagnostic method case that the Federal Circuit had upheld under the machine or transformation test. This remand indicates that the patentability of such methods may not be settled after all. 

The PTO has granted patents related to diagnostic and personalized medicine methods without much controversy until somewhat recently. In 2006, diagnostic method claims made their way to the Supreme Court in Laboratory Corp. of America Holdings v. Metabolite Labs., Inc.

Metabolite sued LabCorp for inducing infringement by marketing blood tests that measured homocysteine levels, which doctors used to diagnose vitamin deficiencies.   Both the district court and the Federal Circuit upheld the validity of the patent and assessed damages against LabCorp. 

The Supreme Court originally agreed to hear LabCorp’s appeal, but then dismissed the case. Justice Breyer wrote a dissenting opinion to the dismissal, explaining why he believed the claims were invalid under § 101. In an opinion joined by Justices Stevens and Souter, Justice Breyer reasoned that Metabolite’s methods “embody only the correlation between homocysteine and vitamin deficiency,” and so are unpatentable as claiming a “natural phenomenon.” Because Justice Breyer’s opinion was not precedential, however, it did not negate the patentability of diagnostic and personalized medicine methods.

The Prometheus case raises this issue again. Prometheus’ patents describe methods of optimizing dosage by measuring metabolite levels. A representative claim reads:

“A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:

(a) administering a drug providing 6-thioguanine to a subject having said immune-mediated gastrointestinal disorder; and

(b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder, wherein the level of 6-thioguanine less than about 230 pmol per 8 X 108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and wherein the level of 6-thioguanine greater than about 400 pmol per 8 X 108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.”

The Federal Circuit determined that the methods satisfy § 101 because they recite the transformative steps of administering a drug to a patient or determining the level of a metabolite in a patient sample. The court stated that “methods of treatment [claims] . . . are always transformative when a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition.”

With regard to the “determining steps,” the court noted that “determining the levels of the metabolites in a subject necessarily involves a transformation, for those levels cannot be determined by mere inspection.” That is, “the determining step, by working a chemical and physical transformation on physical substances, . . . sufficiently confines the patent monopoly.” 

Now that the Supreme Court has vacated and remanded Prometheus, the Federal Circuit will have to reconsider its decision to uphold these method claims. Indeed, the Supreme Court may be signaling that it wants the Federal Circuit to specifically consider the patent eligibility of diagnostic and personalized medicine methods regardless of whether they pass the machine or transformation test. 

If the Federal Circuit is going to uphold Prometheus’ claims again, Prometheus will have to show that its methods do not fall under the recognized exceptions to § 101: “laws of nature, physical phenomena, and abstract ideas.”

Addressing the Policy Issues

While the Supreme Court did not offer any new guidance on the application of § 101, discussions in both the Kennedy and Stevens opinions raise policy issues that biotech companies should take under consideration. 

Justice Kennedy, in a portion of his opinion that does not form part of the majority opinion, recognized that the machine or transformation test may not be well-suited for “determining the patentability of inventions in the Information Age.” Kennedy noted that the test “would create uncertainty as to the patentability of . . . advanced diagnostic medicine techniques,” citing the amicus brief of BIO. 

Kennedy emphasized “the larger object of securing patents for valuable inventions without transgressing the public domain,” and warned that “the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles.” 

Justice Stevens raised a different balancing issue in his concurring opinion, which was joined by Justices Ginsburg, Breyer, and Sotomayor. Stevens considered the “dynamics of cost, risk, and reward,” and noted that “scholars generally agree that when innovation is expensive, risky, and easily copied, inventors are less likely to undertake the guaranteed costs of innovation in order to obtain the mere possibility of an invention that others can copy.” 

Stevens reasoned that “whether a patent monopoly is necessary to motivate the innovation” is a subject matter-specific inquiry, and suggests that deciding whether a process can be patented under § 101 likewise requires a subject matter-specific inquiry into whether granting a patent “would, on balance, facilitate or impede . . . progress.” 

Biotech companies may not be concerned about these policy issues, assuming that the high costs and high risks of innovation in the complex fields of biotechnology will always weigh in favor of patent protection. However, the BRCA1 breast cancer case brought by the ACLU against Myriad Genetics’ gene patents has many arguing that patent protection is not needed to promote genetic research. 

The ACLU and others believe that government entities will undertake the research necessary to identify genetic markers and develop related diagnostic methods, and argue that patents hinder, not help, innovation in these fields.  Those on the other side say that these arguments underestimate the complexities and costs of the research required to identify and validate genetic markers, and translate that research from laboratory bench to patient bedside. 

The district court determined that Myriad’s patents are invalid under § 101 because they claim “products of nature”  and “abstract mental processes”.  Myriad appealed to the Federal Circuit, which may consider this case together with Prometheus.     

The remand of Prometheus and the appeal in Myriad give biotech companies an opportunity to have their voices heard on these issues, through individual and group amicus briefs to the Federal Circuit.  In the meantime, those seeking patents in this field probably will be advised to pursue claims that pass the machine or transformation test and include concrete language to minimize the risk of being found to be an abstract idea or natural phenomenon.

Courtenay C. Brinckerhoff ([email protected]) is a partner, member, and vice-chair of the chemical, biotechnology & pharmaceutical practice of Foley & Lardner and editor of Pharma The views expressed herein are the author’s own and may not represent those of Foley & Lardner or its clients.

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