Patent Eligibility Rejections Are Up for Natural Products

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By John T. Aquino

Sept. 30 — Patent examiner rejections for claims to naturally occurring materials have increased dramatically as result of Supreme Court decisions, conference panelists said Sept. 29.

And lower courts have rigidly followed the higher court's rulings in invalidating existing patents, even though that wasn't what the high court intended, said Kevin Noonan of McDonnell Boehnen Hulbert & Berghoff, Chicago.

“The court intended to draw the outer boundary and leave it to lower courts to figure the rest out. But that is not what is happening,” Noonan said. “As a result, there is uncertainty across the board about the eligibility and enforceability of certain types of claims in issued patents, in pending patent applications and in claims arising from university research.”

The resulting uncertainty companies developing biologics and personalized medicine approaches are facing makes their efforts more difficult and can discourage investment that is essential to the development process, panelists said.

The session, titled “How Diagnostics Can be Developed in a Post- Mayo World,” was part of the BIO IP & Diagnostics Symposium in Alexandria, Va.

Claims Rejections Have Increased

The panelists cited Supreme Court decisions in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 2012 BL 66018, 132 S.Ct. 1289 (2012 BL 66018) and Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 2013 BL 155804, 133 S.Ct. 2107. Mayo held that claims for methods for administering a drug are patent ineligible as laws of nature unless there is an “inventive step” and Myriad that composition claims for isolated DNA are patent ineligible because they recite the judicial exception to patent eligibility of products of nature.

Bernard Chao, associate professor of law at the University of Denver, said, “It looked like a ton of existing and pending patents would be no longer eligible after Mayo and Myriad.” He described how he tried to determine if this was true by using a data set of patent examiner rejections of appropriate PTO categories that would cover patents related to naturally occurring materials.

According to the analysis, 15.9 percent of these patent applications were rejected based on Section 101 patent eligibility provisions pre- Mayo and 86.4 percent were rejected under Section 101 post- Mayo. Chao said that the PTO category that covers methods for measuring or testing processes involving enzymes or micro-organisms had the most Section 101 rejections—50 percent—and the least success in overcoming the rejections, while the category covering recombinant enzymes and toxins and miscellaneous recombinant proteins had the least rejections and the most success at overcoming them.

“There's still a lot we don't know, and the research is ongoing. But what we're seeing is that Section 101 rejections have increased, sometimes dramatically, but not evenly across all [categories],” Chao said.

Diagnostic Claims Vulnerable

Noonan said that diagnostic methods claims are particularly vulnerable to being considered an abstract idea, which is a judicial exception to patent eligibility. The product is almost always information.

“The Supreme Court continues to evidence skepticism regarding the Federal Circuit's rulings and decisions by the Patent and Trademark Office. The practical effect of this is that no precedent is relevant to the court except its own. There is continued evidence of the court's disdain for patent law minutiae, also known as the law itself.”

The Supreme Court continues to search for the right balance, seemingly convinced that patents can both harm innovation and promote innovation, Noonan said.

“The court continues to fail to give deference to PTO expertise, which is contrary to administrative law precepts, and extends the court's penchant for deciding patent policy. There is, after all, no basis for judicial exceptions to patent eligibility except the court's precedent,” he said.

Noonan concluded, “In order to assist our clients, the life sciences industry and the patent community, we must continue to determine what the effect of these decisions on diagnostic method patents has been, what the effect has been on innovation and commercialization of diagnostic methods, and how we can go forward.”

Manage Investor Expectations

Michael Flavin, managing director of Flavin Ventures, a life sciences-focused venture capital firm, said that biologics, personalized medicine and drug-diagnostic combinations have taken control of the life sciences horizon. “Consequently, issues concerning naturally occurring substances will become even more pronounced. A CEO in the biotech space can pray that Congress will clarify this mess, file application in the [European Union] where it seems less complicated and, finally, work with expert patent counsel trained in biotechnology.”

Flavin advised companies that want to patent claims for naturally occurring substances and methods for diagnosis in the U.S. to:

  •  start early in the research and development planning process to overcome issues they will face in patenting claims;
  •  involve the R&D team in every step to make sure it is educated on patent issues—“Most scientists in the laboratory are familiar with patent law but not necessarily on how it affects areas they work with”;
  •  keep the patent counsel updated on progress throughout a project's life cycle;
  •  work with the R&D team to seek clever approaches to creating and protecting patent claims; and
  •  manage investors' expectations.

“When you're going out with fund-raising, the venture capital community will be questioning you on your patent portfolio, retain its own patent counsel and drill down on your patent claims. Many investors won't invest in this space right now because there's not enough clarity on what will happen in future litigation, legislation and regulation,” Flavin said.

He added, “Put a bunch of scientists together and you will be amazed at what they come up with. Have the R&D team assist in the preparation of patent application. The patent attorney will benefit from hearing scientists' ideas on how to craft patent claims and specifications.”

To contact the reporter on this story: John T. Aquino in Washington at jaquino@bna.com

To contact the editor responsible for this story: Randy Kubetin at rkubetin@bna.com

For More Information

Some of Chao's analysis of post-Mayo Section 101 rejections is at http://patentlyo.com/media/2016/04/Chao.2016.PersonalizedMedicine.pdf.

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