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Myriad – One Year Later

The Supreme Court decision last year on June 13, 2013 in Association of Molecular Pathology v. Myriad Genetics1 may have been a watershed moment for the biotechnology industry. So far the effects have been hard to detect, but don’t be fooled. The storm is still brewing.

At the center of the controversy in the Myriad case was Myriad’s so-called gene patents, which the Supreme Court struck down. The Court ruled that the isolation and identification of naturally occurring DNA sequences was unpatentable, even if the Myriad inventors were the first to realize these sequences correlated with aggressive forms of breast and ovarian cancers in patients. The Court concluded that the DNA sequences (known as the BRCA1 and BRCA2 genes) were ineligible for patent protection because they were products of nature.

Lurking behind the Court’s decision was a different public policy issue: how to rein in health care costs. Myriad was a convenient target because its breast cancer predictive tests were so expensive (costing as much as $5,000 until a few years ago). Some viewed the decision as a political exercise, with the Supreme Court just doing its part to make sure breast cancer tests would be accessible and affordable. Ironically, the price of Myriad’s assays had already started a downward spiral, and the Myriad patents at issue would have all expired by 2015 in any event.

Within days after the decision, Myriad’s competitors, such as Ambry Genetics and Quest Diagnostics, issued press releases indicating that they would begin offering genetic testing for the BRCA1 and BRCA2 genes at a significantly reduced rate. Quest even initiated litigation to challenge Myriad’s other patents that had not been before the Supreme Court.

Myriad put a brave face on following the decision, noting that the Court had also ruled that some of its DNA claims (directed to “complimentary DNA” or “cDNA”) were valid because the sequences were synthetic and did not occur naturally.

Myriad’s stock actually rose for a short period of time following the Supreme Court decision. However, a week later, Myriad’s stock had fallen from $34 to $26 a share, with the company losing nearly one-quarter of its value.

In short order, Myriad sued Ambry and several other diagnostics companies, asserting infringement of these cDNA claims, as well as claims to DNA primers for amplifying BRCA genes, methods of making isolated BRCA genes by amplifying genomic DNA and methods of diagnosing or identifying individuals with a predisposition to breast cancer using Myriad’s cDNA or primers. Myriad also filed counterclaims for patent infringement against Quest Diagnostics’ declaratory action suit.

However, Myriad has encountered several setbacks in its legal battles against its competitors. Recently, the federal court handling the Ambry Genetics case refused to grant Myriad a preliminary injunction, ruling that Myriad had not demonstrated sufficient likelihood of success and the potential harm to Myriad (price erosion) did not outweigh the potential harm to Ambry (being put out of business). As of a few months ago, Myriad had at least five patent infringement suits pending in Utah, as well as several declaratory judgment actions (brought by competitors) in other states. Many of these cases are in the process of being consolidated in Utah before the same judge who denied Myriad the injunctive relief it sought against Ambry.

The price for Myriad’s top-shelf BRCA1 and BRCA2 test has fallen, but it is expected to stay at or near today’s level at least for the next year or so – when the last of its remaining basic patents expire. (In January 2014, Myriad negotiated a reimbursement price of about $2,000 per test from the Centers for Medicare and Medicaid Services; other insurers are likely to strike similar deals with Myriad.)

Oddly, the consequence of all this is that Myriad’s stock price and market capitalization have risen back to the levels they were before the Supreme Court decision last year. Part of this is due to Myriad’s transition to the more comprehensive “MyRisk” assay, which is predictive for a large number of hereditary cancer markers.

Myriad’s competitors in the diagnostic arena (and biotechnology companies in general) are also doing well, although this may be a reflection of the currently bullish stock market. (Quest Diagnostics recently closed at about $60/share – only a few dollars less than its peak a year ago when the Myriad decision was handed down. Most of the other defendants in Myriad’s suits are privately held, so information on their market capitalization and profits are not readily available.)

Although the full impact of the Myriad decision has not been felt so far, this may all change soon. Several recent court decisions provide some insight into how trial and appellate judges are interpreting Myriad.

Aria Diagnostics, Inc. v. Sequenom (N.D. California No. 11-CV-6391) involved a declaratory judgment suit brought by Aria (now known as Ariosa) to challenge Sequenom’s patents, claiming methods of diagnosing prenatal issues by analyzing cell-free fetal DNA (cffDNA) in maternal blood. The federal district court that heard the case granted Aria’s motion for summary judgment, finding that Sequenom’s only invention was the discovery of the presence of cffDNA in maternal plasma, and that the detection of cffDNA using conventional techniques for DNA detection did not render the claim patent eligible. The case is currently on appeal to the Federal Circuit.

The case of In re Roslin Institute (Fed. Cir. No. 2013-1407, May 8, 2014) involved an appeal from a U.S. Patent Office decision not to allow claims to “cloned mammals.” The Roslin Institute created Dolly the cloned sheep, among other things. The Court of Appeals for the Federal Circuit sustained the Patent Office position that a cloned mammal was still a product of nature insofar as Roslin “did not create or alter any of the genetic information” of its clones.

On March 4, 2014, nine months after the Supreme Court’s Myriad decision, the U.S. Patent Office announced guidance based on the Myriad decision for patent examiners working on biotech patent applications. (Many interested parties objected to the issuance of “guidance” as an underhanded way for a federal agency to implement a major policy change, since, unlike federal rules and regulations, there is no requirement for a public comment period prior to implementation.)

Reading the Myriad decision broadly, the Patent Office guidelines set forth a three-stage inquiry and a 12-factor analysis to determine whether biotechnology patent applications are claiming patent-eligible subject matter. The guidance gave numerous hypothetical examples of claims and was accompanied by a training slideshow that elaborated on the examples.

The Patent Office guidelines were immediately criticized as going beyond the holdings of the Myriad case (as well as a related case decided by the Supreme Court the year before, Mayo Collaborative Services v. Prometheus Laboratories, No. 10-1150 (2012)). For example, the hypothetical example of amazonic acid (derived from the leaves of an imaginary Amazonian cherry tree) in the guidance has been roundly criticized for its conclusion that claims to purified amazonic acid would be unpatentable – despite the hypothetical fact that one teaspoon of such purified products would yield the same medicinal effect as eating 30 pounds of leaves.

Similarly, according to the guidance, claims to methods of treatment with purified amazonic acid were also ineligible for patent protection unless they also included very narrow limits on dosages and outlined very specific periods of time for administering the Amazonian cherry tree drug.

Others have objected to the proposed guidance for Patent Office examiners because of the emphasis on the need to reject any broad claim that might substantially foreclose others from using or applying a product of nature or natural principle in other ways.

In many ways, the PTO guidance fulfills the dire predictions made by industry groups that filed amicus briefs when the Myriad case was before the Supreme Court. A brief submitted by BIO, an industry group, identified several patented inventions that would be ensnared by rules prohibiting the patenting of isolated biological materials: vaccines (derived from live viruses), antibiotics (isolated from bacteria, fungi or soil samples), insulin, human growth hormones and a slew of industrially or therapeutically useful enzymes.

A particularly controversial aspect of the PTO’s new policy is the test for claims involving a product of nature. According to the guidance, the examiner must ask himself or herself whether the claimed invention is “marked” or “significantly” different from the natural product itself. To put this in the context of the PTO’s own examples, a pill containing purified amazonic acid is not markedly different than consuming 40 pounds of plant leaves. The Supreme Court’s decision in the Myriad case does not support this sweeping “markedly different” standard. In fact, in its ruling, the Court made it very clear that the ruling was limited to DNA: “We merely hold that genes and the information they encode are not patent eligible under §101 simply because they have been isolated from the surrounding genetic material.”

In the real world, purified compositions derived from natural products do indeed have properties different from their natural counterparts, e.g., they are not only more potent but also typically free of associated molecules that affect their solubility, speed of uptake, and specificity. In the end, the PTO guidance will probably just shift the analysis to arguments as to how “different” the claimed invention is from a natural ancestor – and the problem will be that the “markedly different” standard is entirely subjective, allowing examiners to reach varied and contradictory conclusions.

The PTO guidance also creates the anomaly that even a trivial change from the natural product can bestow patent eligibility to a composition.

Although the PTO has agreed to accept public comments on the guidelines until June 30, 2014, it seems unlikely that the guidance will be suspended or substantially changed. The biotechnology industry and patent practitioners should brace themselves for a long battle over whether the PTO’s new policies are correct and workable.

A Publication of Pepper Hamilton LLP, a EACCNY Member

1 Pepper Hamilton examined the issues in this case while the world was awaiting the ruling, in our May 22, 2013 Client Alert, “The Curious Case of Human Gene Patents.”

By Thomas J. Engellenner