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Biotech ‘New Era’ in Store if Patent Revamp Overcomes Opposition

Oct. 17, 2022, 9:41 AM

A congressional push to let drug companies patent diagnostic tests and other biotech inventions is rekindling a decade-old battle and dividing legal experts and stakeholders over whether the approach could spark innovation or stifle new treatments that could help patients.

Sen. Thom Tillis (R-N.C.) wants to restore the rights of drugmakers and others to bolster their intellectual property portfolios and block competition to their products. He introduced legislation (S. 4734) this summer that would reshape federal patent law to overcome several controversial US Supreme Court rulings.

The proposal follows years of backroom lobbying. Billions of dollars could be on the line.

The pandemic presented a clear example of what’s at stake, according to Jorge Contreras, a University of Utah professor specializing in intellectual property and science policy. Had Tillis‘ legislation been in place, he said, researchers could have patented naturally occurring viral RNA sequences, making it harder for others to develop Covid-19 vaccines and drugs.

IP specialists, however, say the opposite is true. They say drugmakers would not have been territorial over a lifesaving pandemic treatment and that restoring their rights over their innovations provides an incentive to invest in research, a move that might have facilitated an even faster response to the coronavirus crisis.

Adam Mossoff, a George Mason University law professor, said patents were the basis not just for the creation of the technology behind the vaccines but for “all of the commercial agreements that made possible the incredible response by the biopharmaceutical industry” to produce billions of doses.

Tillis is expected to reintroduce the bill in the next Congress as revamping patent eligibility law has long been a priority for the senator. The proposed change in the law comes as “a new era of biotechnology” fuels more genetic discoveries that could have vast impact, said Matthew A. Chivvis, a Morrison & Foerster LLP patent attorney in San Francisco. The legislation, “is trying to strike some sort of balance,” Chivis said, adding, “I don’t know whether it’s the appropriate one.”

Not So ‘Clear-Cut’

Historically, the law behind whether an idea could be patented was “very simple and clear-cut,” said Maria Laccotripe Zacharakis, a McCarter & English LLP partner who represents biotech companies.

Generally, an inventor could get IP protections on an invention so long as it was novel, non-obvious and had some utility. That began to change about a decade ago, stirred in part by a battle between two biotechs.

Prometheus Laboratories for years had held two patents for technology used in diagnostic tests that helped determine the correct dosages for the treatments of illnesses such as Crohn’s disease. In 2004, one of its customers, Mayo Collaborative Services, designed and began distributing its own, similar kits. Prometheus sued, alleging patent infringement.

The case ultimately reached the Supreme Court. In a 2012 ruling, the justices unanimously sided against Prometheus, concluding that its test reflected the naturally occurring metabolism of blood levels after interacting with doses and stating that laws of nature cannot be patented.

The high court reinforced that decision a year later in Association for Molecular Pathology v. Myriad Genetics Inc., striking down Myriad’s exclusive licensing of diagnostic testing services for genes associated with an increased risk for breast cancer.

In that case, the plaintiffs asserted that breast and ovarian cancer patients were being charged exorbitant testing fees—in some cases prohibitively high—because Myriad had patented its discovery of the location and sequencing of the two genes associated with breast cancer, information critical for the diagnostic tests. Myriad lost its patent, and the funding stream it created.

More broadly, the outcome made it more difficult for companies to get patents and easier for rival companies to argue in court that existing patents were invalid. The decision effectively discouraged the biopharma industry from focusing on such lifesaving inventions, according to critics of the rulings.

“Without that exclusivity, companies have no incentive,” said Carla Kim, a director in Sterne Kessler’s biotechnology and chemical practice group.

A New Era

Attorneys, patent examiners, and judges have in the ensuing years cried out for guidance, struggling to apply the Supreme Court’s rulings and attacking the precedents for omitting objective guidelines and failing to define crucial tenets of patent eligibility law.

The chief judge of the nation’s top patent court, Kimberly A. Moore, wrote in an October 2020 opinion that the Federal Circuit was “at a loss” on how to apply the Patent Act’s eligibility provision, Section 101. Nearly all of the 12 judges on the appeals court have asked the justices for more clarity on the issue.

Mossoff, who testified in 2019 before Congress in hearings on redrafting patent legislation, told Bloomberg Law the existing framework “has resulted in hundreds if not thousands of patent applications” being denied at the US Patent and Trademark Office “on lifesaving drugs and other medical treatments and inventions that are receiving patents in Europe and China.”

One example, he said, is a patent application from University of California researchers for a method to diagnose liver injuries or diseases. That patent was ultimately rejected in the US while China and the European Patent Office both allowed the innovation to be patented.

The dilemma was also on display in a Texas case this year. Ravgen, a Maryland-based biotech that specializes in prenatal diagnostic testing, had sued LabCorp, the nationwide testing company, for infringing on a patent it devised for a test that helps expectant parents screen for Down syndrome and other genetic disorders. LabCorp denied wrongdoing, claiming the test was based on its own patented test method.

In September, a jury sided with Ravgen, and granted its demand that LabCorp pay it $100 for each of the 2.75 million tests it had used—swelling the verdict to $275 million.

But the outcome isn’t clear. The patent’s validity is currently being challenged at the Patent Trial and Appeal Board.

A Path to a Solution

While diagnostic medical tests and software inventions have been the most vulnerable to eligibility attacks, the muddled case law has taken down other inventions as well.

The nation’s top patent court was starkly divided on whether American Axle & Manufacturing Inc.’s method of manufacturing driveshafts to reduce vibrations was patent-ineligible because it was based on a physics principle also considered a “law of nature.”

The full court deadlocked on the issue, and the solicitor general recommended the justices use the case to provide clarity. The Supreme Court, however, refused to review the driveshaft patent issue. That led the patent office, attorneys, and others to push Congress to restart legislative talks that had sputtered during the pandemic.

In 2019, Tillis, along with Sen. Chris Coons (D-Del.), had tried assembling stakeholders from the technology and pharmaceutical worlds to hammer out legislation that worked for all sides.

Pharma’s interests were already clear, but Big Tech was concerned that a patent system where it was easier to secure IP protections marked a threat. That’s because for years, patent holders on an array of technological ideas sued companies like Apple over technological components, leading to a slew of costly legal battles.

When Covid hit, the legislative effort fell behind the scenes.

The legislation Tillis ended up introducing, dubbed The Patent Restoration Act, seeks to appease both sides. It would create a list in the Patent Act of specific types of processes and innovations that aren’t eligible for patent protection—mathematical formulas, mental processes, and unmodified human genes are a few of the newly carved-out exceptions.

But the bill would also essentially state that inventions like diagnostic tests or therapies created through the modification of a natural, genetic material can be patented—unraveling the past court decisions and giving testing and biopharmaceutical companies a pathway to retain exclusive rights to their discoveries.

“It’s a huge boost for diagnostics,” said Arti Rai, a Duke law professor who advises agencies and Congress.

The legislation would return to the patent system that “spurred the investments and promoted the development of the entire biotech sector in the first place,” said Mossoff, the George Mason law professor.

The Biden administration has sidestepped supporting or opposing the bill as written by Tillis. However, through Patent and Trademark Director Kathi Vidal, the administration lent its support to a legislative fix, noting that much of what needs to change in patent law lies with Congress.

The agency also launched a pilot program in July and is looking into updating patent office guidance on eligibility law in an effort to provide some clarity.

Concerns Remain

The American Civil Liberties Union, which argued on behalf of the plaintiffs who won the Myriad ruling, opposes Tillis’ bill for many of the same reasons that emerged in that case. It says the new measure would enable a handful of companies to monopolize information essential for more innovation and hamper access to lifesaving diagnostics.

“This legislation is a gift to patent lawyers and predatory companies while risking the creation of a disturbing market for exclusive rights over material found in nature and abstract ideas,” Sandra Park, senior staff attorney at the ACLU’s Women’s Rights Project, said in a statement. “Such a law would debilitate efforts to treat health conditions and thwart future pandemics while stymying technological development, harming patients, doctors, and consumers.”

Contreras sees the legislation as creating potential hurdles for researchers.

Unlike other countries, the US doesn’t have a research exemption from patent infringement outside of limited circumstances, meaning patent infringement by researchers is likely, Contreras said. He said this was the state of play during previous virus outbreaks including H1N1, SARS, and MERS, all of which predate the Supreme Court’s upheaval in Myriad.

Turning back the clock could have implications for Covid or future pandemics, he said.

“Suppose we find that there are some people in families who are immune from Covid or who suffer from long Covid or don’t lose their sense of taste,” Contreras said. “Imagine what would’ve happened if only one company could produce a Covid vaccine or antigen test. It could’ve been very expensive. And they might not have been able to meet demand.”

If Republicans take the Senate in November, Tillis plans to hold a series of hearings on patent eligibility issues, including ones focused on his legislation. He wants to pass some version of the bill before the end of his second term in 2027.

“It seems like he’s trying to forge a path forward,” Chivvis said. “It’s really a policy choice. Where do we want to draw the line on patent eligibility?”

To contact the reporters on this story: Ian Lopez in Washington at ilopez@bloomberglaw.com; Samantha Handler in Washington at shandler@bloombergindustry.com

To contact the editors responsible for this story: John P. Martin at jmartin@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com; Cheryl Saenz at csaenz@bloombergindustry.com