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Life Sciences Startups Need A Patent, Licensing Plan Early On

Friday, October 18, 2013
By Joyce E. Cutler

Oct. 16 --Life science startups need to plan and prepare their arguments about why their work deserves intellectual property protections amid greater uncertainty in litigation over beliefs rather than business reasons, the Wisconsin Alumni Research Foundation general counsel advised at an Oct. 10 life sciences conference in San Francisco.

Patent attorneys, companies with intellectual property and entrepreneurs are reviewing how to protect their interests given a series of decisions by the Supreme Court and the U.S. Court of Appeals for the Federal Circuit that raise questions about just what they can claim exclusivity on, panelists said.

WARF General Counsel Michael Falk said startups need a licensing plan, noting that challenging patents is expensive and takes about five years and “you'll have run out of money from your investors.”

Personalized medicine startups need to be “ready to be able to make articulate arguments about why it's important for you to have those rights and how you're managing them responsibly,” Falk said at the conference, titled “No Longer Business as Usual: Critical Changes in Investment and IP,” and cosponsored by Foley& Lardner LLP and QB3, a joint venture between the three University of California campuses at Berkeley, San Francisco and Santa Cruz.

“That's not written in the patent statute but in the real world as you're managing those rights, that's often an important posture to put yourself in as a company to get investors, to avoid these sorts of long and expensive arguments over nothing,” Falk said.

WARF, which manages the IP at the University of Wisconsin, has been involved in lengthy litigation and Patent and Trademark Office proceedings over three human embryonic stem cell (hESCs) patents granted to WARF based on UW research.

The PTO challenge was filed in July 2006, when the Public Patent Foundation and public advocacy group Consumer Watchdog--formerly the Foundation for Taxpayer and Consumer Rights--filed for inter partes reexamination (Reexamination No. 95/000,154) of an hESC patent (U.S. Patent No. 7,029,913) assigned to WARF . But the Supreme Court has made two decisions of note since then.

In the Myriad case, the high court held that product claims directed to isolated DNA are not patent eligible but, if directed to synthetic complementary DNA, they would be. Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107, 2013 BL 155804, 106 U.S.P.Q.2d 1972 (2013) .

The court in Mayo v. Prometheus also held that a diagnostic method patent was invalid because it did not do enough to transform an unpatentable law of nature into a patent-eligible application. Mayo Collaborative Services v. Prometheus Labs. Inc., 132 S. Ct. 1289, 2012 BL 66018, 101 U.S.P.Q.2d 1961 (2012) .

Using Myriad as a basis, Consumer Watchdog appealed the PTO's decision upholding the '913 patent to the Federal Circuit on July 2 (Consumer Watchdog v. Wisconsin Alumni Research Found., No. 2013-1377 (Fed. Cir., appeal filed July 2, 2013). PubPat, which filed the brief on CW's behalf, and the American Civil Liberties Union had brought the declaratory judgment action that led to the Myriad decision.

The appellants argued that the WARF patent's cell culture claims fall within the product-of-nature exception of what can be patented under 35 U.S.C. §101.

Public Perception
Falk said when he's raking leaves in his yard, “no one comes by and asks me about the big federal case I have against Intel on computer chips or against Siemens on medical imaging. Why? Society doesn't get excited about those things,” he said, yet “people do come and ask me about the BRCA I gene patents” associated with breast cancer and about stem cells.

Working in the area of personalized medicine, “there will be more attention paid to what you're doing not because of the technical merits of the underlying patents but because people are bugged by stuff like that. It concerns people,” Falk said.

WARF's inter partes reexamination “is very much like Myriad in another way, and that is that neither of them will have any business consequence. It's crazy that I'm still in appeal on this case. The patents are about to run out, I have dozens of other patents in the area, I have broad, non-exclusive licensing schemes that are available to anyone who wants to come in and get a license. There is no business reason for me to be litigating this case. On the other side there is no business reason,” he said.

Normally in a patent case, Falk said it is two parties who are “bickering about money,” as when WARF sued Siemens AG and Siemens Medical Solutions USA Inc. alleging patent infringement involving magnetic resonance imaging. In that case, the parties settled “because we realized there is no business reason to keep this battle going.” Wisconsin Alumni Research Found. v. Siemens AG, No. 3:11-cv-00785 (W.D. Wis., dismissed July 15, 2013).

Beliefs-Based Litigation
The assumption among many people in the business world is that business reason will prevail, Falk said. “But in both my inter partes reexam and in Myriad it wasn't a business decision. This was fought over people's core beliefs. This was to make a point.”

Myriad Genetics Inc. has dozens of other patents that weren't litigated, and the company still, from a business perspective, has a dominant position, he said.

“You can be right technically about a business and still lose. I'm spending hundreds of thousands of dollars in an inter partes reexam for no real good reason, fighting another nonprofit that in their belief system thinks we shouldn't have claims as broad as we have,” Falk said, adding, “being technically right isn't the whole game, and keep that in perspective as you're developing your patent portfolio because you could end up still in these sorts of arguments even though there's no business reason to be there.”

Split Federal Circuit
“The future development may be left to the Federal Circuit and how a case under patent legibility on [Section] 101 [is decided] may be very, very dependent on the panel that you draw for your Federal Circuit review, and you don't know who that panel is until you walk in there that day,” said Dianna DeVore, vice president for IP and legal affairs for Ariosa Diagnostics Inc.

That greater uncertainty is “not going to change any time soon,” Falk said. “The Federal Circuit has demonstrated that they will continue to bicker with each other in a way that is fascinating for lawyers but not so good for clarity in the world of people trying to put money into these companies.”

Parties in separate Federal Circuit decisions petitioned for cert arguing the appellate rulings were “hopeless.” Alice Corp. Pty. Ltd. v. CLS Bank Int'l, No. 13-298 (U.S., review sought Sept. 4, 2013), and WildTangent, Inc. v. Ultramercial, LLC, No. 13-255 (U.S., review sought, Aug. 23, 2013) .

Mayo and Myriad affected the diagnostic industry “quite a bit,” DeVore said.

Under Mayo, anything that is just a natural phenomenon is technically no longer patent eligible, DeVore said.

“One of the things that I think is going to happen is the shift from content-based development to technology-based development,” DeVore said. If looking just at the genetic sequence or a mutation just for cystic fibrosis, for example, that's a natural phenomenon. If looking at techniques that are more sensitive in detection, such as an assay, that's a technological development and still patentable, she said.

“Even within that sort of litmus test of 'remove the law of nature, remove the natural phenomenon and see what's left and whether it's patentable,' there still is a lot of room for interpretation within that,” DeVore said. “And I think we're going to be seeing some very different opinions on this, especially on the Article III courts for those claims that actually go forward in any kind of patent litigation.”

Myriad “opens up some of the possibilities of using different genetic content to companies that are looking at diagnostics or other types of genetic testing,’’ DeVore said.

To contact the reporter on this story: Joyce E. Cutler in San Francisco at

To contact the editor responsible for this story: Naresh Sritharan at

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