PATENT PREEMPTION OF FOLLOW-ON RESEARCH * An Intra-Circuit Split and its Implications for Myriad Harold C. Wegner **

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1 PATENT PREEMPTION OF FOLLOW-ON RESEARCH * An Intra-Circuit Split and its Implications for Myriad Harold C. Wegner ** At some point in the second half of April 2013 the Supreme Court will hear the Myriad case, Ass n for Molecular Pathology v. Myriad Genetics, Inc., Supreme Court No , opinion below, 689 F.3d 1303 (Fed. Cir. 2012)(Lourie, J.), once again challenging 101 patent-eligibility, here, to claims for isolated DNA. A central point of the Myriad petition is the notion that any patent preempts follow-on research, a problematic premise in the context of two centuries of contrary domestic precedent that has been a model for the major patent regimes around the world. The global model has recently been endorsed at the Federal Circuit by both the Chief Judge and the dean of that court, whilst the Myriad majority takes the outlier view that third parties are preempted from practicing the patent[.] Given the uncertainties created by the Federal Circuit, it is no wonder that the Supreme Court has taken the globally outlier view in cases such as Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S.Ct (2012), and the earlier Bilski v. Kappos, 130 S.Ct (2010). * Paper prepared for The Supreme Court and the Federal Circuit as part of the Naples Midwinter Patent Law Experts Conference, Naples Ritz Carlton, February 5, 2013, This paper represents the views of the author and does not necessarily reflect the views of any colleague, organization or client thereof. This version: January 15, This paper may be cited as: Wegner, Harold C., Patent Preemption of Follow-On Research (Jan. 15, 2013), available at ** Former Director of the Intellectual Property Law Program and Professor of Law, George Washington University Law School; partner, Foley & Lardner LLP. contact: hwegner@foley.com.

2 This paper starts with the premise that the reader is aware of the developments in the law up Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193 (2005), as reported in the Post-Merck Paper, Wegner, Post-Merck Experimental Use and the Safe Harbor, 15 Fed. Cir. B.J. 1 (2005). A Fundamental Misunderstanding of the Patent System If the patentee loses at the Supreme Court in Myriad it will be in part because of Respondent s failure in the proceedings below to properly understand the operation of the Constitutional mandate that establishes the patent system and the flaws in the understanding by the majority below in Myriad and by the Supreme Court in Mayo and Bilski. Mayo and Bilski were lost by the patent applicant or patentee in part because the Court determined that patent protection in Mayo and Bilski would be contrary to the Constitutional mandate that a patent law should Promote the Progress of *** the Useful Arts. A key premise to this conclusion is that a patent preempts any experimentation on a patented invention. Neither a scientific experiment on the invention nor testing to make a determination of the truthfulness and preciseness of the patent disclosure is permitted. (This is in contrast to an infringing experimentation with an invention for its intended purpose such as the use of a research tool as a research tool. 2

3 For example using a patented laser research tool for research on an object is an infringing experimentation with the invention as opposed to studying the laser instrument itself which is an experimentation on the invention). Under the Court s misunderstanding that there is no right of the public to experiment on a patented invention, Justice Stevens statement in Bilski may be defended: [T]oo much patent protection can impede rather than promote the Progress of... useful Arts. Patents can discourage research by impeding the free exchange of information [.] Bilski, 130 S.Ct. at 3255 (Stevens, J., joined by Ginsburg, Breyer, Sotomayor, JJ., concurring in the judgment)(quoting Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc., 548 U.S. 124, 126 (2006) (Breyer, J., dissenting from dismissal of certiorari))(original emphasis). The same reference to Benson is repeated yet again in Mayo: [Benson] warn[s] us against upholding patents that claim processes that too broadly preempt the use of a natural law. Mayo, 132 S.Ct. at 1294 (citing Benson, 409 U.S. at 71-72)(emphasis added). The Myriad Majority Agrees with Mayo: Patents Do Preempt Research The Federal Circuit majority in Myriad has unequivocally stated that patents do preempt any unauthorized use of an invention, without qualification as to the mere construction of the invention for study and analysis or designing around or otherwise experimenting on the patented invention. The majority states without equivocation that during the term of the patent, unauthorized parties are 3

4 preempted from practicing the patent, but only for [the patent] term. Myriad Case, Association for Molecular Pathology v. U.S. Patent and Trademark Office, 689 F.3d 1303, 1331 (Fed. Cir. 2012)(Lourie, J.). The Myriad Federal Circuit Majority: An Outlier View of Preemption century: As explained by the leading patent scholar-practitioner of the mid-nineteenth [W]hen, the [the patented invention] is made by one not the patentee, for the mere purpose of experimenting on the sufficiency of the specification, no profits are taken away from the patentee. * * * [I]t was held by Mr. Justice Story, that the making of a patented [invention] is an infringement only when it is made for use or for sale, and the doctrine seem to be the same in England. [Jones v. Pearce, Webs. Pat. Cas. 125 (1832) (Patteson, J.)(denying infringement where party merely made them for his own amusement, or as a model. ).] The test is, whether the party made the [invention] with an intent to infringe the patent-right, and deprive the owner of the lawful rewards of his discovery. [Sawin v. Guild, 21 F.Cas. 554 (No. 12,391)(D. Mass. 1813)(Story, J.)]. George Ticknor Curtis, A Treatise on The Law of Patents for Useful Inventions 204, pp (2 nd ed.)(boston: Little, Brown and Co. 1854)(footnotes integrated into text; citations updated). Consistent with Story s doctrine, sixty-five years after Whittemore v. Cutter the Master of Rolls in Frearson v. Loe explained the experimental use exception to infringement as follows: 4

5 [N]o doubt if a man makes things merely by way of bonâ fide experiment, and not with the intention of selling and making use of the thing so made for the purpose of which a patent has been granted, but with the view of improving upon the invention the subject of the patent, or with the view of seeing whether an improvement can be made or not, that is not an invasion of the exclusive rights granted by the patent. Patent rights were never granted to prevent persons of ingenuity exercising their talents in a fair way. But if there be neither using nor vending of the invention for profit, the mere making for the purpose of experiment, and not for a fraudulent purpose, ought not to be considered within the meaning of the prohibition. Frearson v Loe, L.R. 9 Ch. D. 48 (1878)(Jessel, M.R.)(dictum) Thus, the patent law was passed for the purpose of encouraging useful invention and promoting new and useful improvements by the protection and stimulation thereby given to inventive genius ***. Bauer & Cie. v. O'Donnell, 229 U.S. 1, 10 (1913)(emphasis added) Professor Mueller notes that: Most [ ] countries around the world (including most industrialized countries and the world's leading patent systems Germany, Japan, and the U.K.) have long included a research use exemption in their domestic patent laws. These patent systems have not fallen apart because of the exemption, nor has innovation in these countries stopped. Janice M. Mueller, Facilitating Patient Access to Patent-Protected Genetic Testing, 6 J. Bus. & Tech. L. 83 (2011)(footnotes omitted). She quotes statutory provisions adopted in Germany that The effects of a patent shall not extend to... acts done for experimental purposes relating to the subject matter of the patented invention ; the United Kingdom that [a]n act which would constitute an infringement shall not [be such] if it is done for experimental purposes relating to the subject-matter of the invention ; and Japan that [the] patent right shall not extend to the working of the patent [ ] for the purposes of experiment or research. Id. at n

6 The view as expressed by both Curtis in his treatise and Lord Jessel in Frearson v. Loe is consistent with the global view amongst all major countries of the world that have considered the issue. Neither is the contrary view by the Myriad majority not supported by the case law of the regional circuit courts of appeal. The Several Views within the Federal Circuit At one time there was a significant voice within the Federal Circuit in agreement with the Myriad majority, as seen from developments prior to 1985 in the Post-Merck paper. The Myriad view, however, does not speak for the Federal Circuit at the dawn of To be sure, there had been viewpoints parallel to the Myriad viewpoint in dicta as explained in the Post-Merck paper, particularly by the author of the notorious Madey v. Duke Univ., 307 F.3d 1351 (Fed.Cir.2002), who no longer is a member of the Judiciary, having resigned his commission. The most recent statement by the Federal Circuit is diametrically opposed to the Myriad majority: [P]atenting does not deprive the public of the right to experiment with and improve upon the patented subject matter. As discussed in J.E.M. Ag Supply, Inc. v. Pioneer Hi Bred Int'l, Inc., 534 U.S. 124, 142 (2001), [t]he disclosure required by the Patent Act is the quid pro quo of the right to exclude, quoting Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 484 (1974). It is not necessary to wait for the patent to expire before the knowledge contained in the patent can be touched. In re Rosuvastatin Calcium Patent Litigation, F.3d,, 2012 WL , slip op. at 12 (Fed. Cir. 2012)(Newman, J.). 6

7 The Chief Judge of the Court has sub silentio repudiated Madey and the view of the Myriad majority that patents preempt study of an invention: [I]nformation in patents * * * is not insulated from analysis, study, and experimentation * * *. Momenta Pharmaceuticals, Inc. v. Amphastar Pharmaceuticals, Inc., 686 F.3d 1348, 1376 (Fed. Cir. 2012)(Rader, C.J., dissenting), quoting Classen Immunotherapies, Inc. v. Biogen IDEC, 659 F.3d 1057, 1072 (Fed. Cir. 2011)(Newman, J.). Broad Patenting, Per se, Promotes the Progress While patenting does not preempt research, patenting does preempt commercialization of the patented invention during the term of the patent. But this, too fosters the Constitutional objective to Promote the Progress of *** the Useful Arts. Innovation is encouraged precisely because of the patent. The Court itself has recognized that the grant of a patent may spur[ ] innovation by making it more attractive for a competitor to design around the patent than to take a license. Mayo, 132 S.Ct. at 1305 ( [The] very exclusivity [of patents] can impede the flow of information that might permit, indeed spur, invention., by, for example, raising the price of using the patented ideas once created. ). Thus, [o]ne of the benefits of a patent system is its so-called negative incentive to design around a competitor's products, even when they are patented, thus bringing a steady flow of innovations to the marketplace. State Indus. Inc. v. A.O. Smith Corp., 751 F.2d 1226, 1236 (Fed.Cir.1985). See also London v. Carson Pirie Scott & Co., 946 F.2d 1534, 1538, 20 USPQ2d 1456, 1458 (Fed.Cir.1991) 7

8 ( [D]esigning or inventing around patents to make new inventions is encouraged. ); Yarway Corp. v. Eur-Control USA, Inc., 775 F.2d 268, 277 (Fed. Cir. 1985)( [T]he incentive to design around patents is a positive result of the patent system. ) The Myriad Patent Challenger s Arguments in its Petition Preemption and the premise that there is no right to experiment on a patented invention are dual cornerstones of the Myriad petition for certiorari: [D]espite Mayo's explicit discussion of preemption, Judge Lourie [in Mayo] seemingly rejected the relevance of preemption in any patent case by emphasizing that patents are supposed to be preemptive. * * * As Mayo makes clear, a key aspect of the Section 101 analysis turns on whether the patent preempts use of the laws and products of nature. Does the patent risk disproportionately tying up the use of the underlying natural laws, inhibiting their use in the making of further discoveries relative to the contribution of the inventor? 132 S. Ct. at 1294, 1303; * * * The broad preemptive effect of these patents is further evidence that they claim laws and products of nature. *** The patents grant Myriad the authority to prevent all research and clinical testing of the genes, raising the same concerns about patenting a building-block that has troubled the Court. See Mayo, 132 S. Ct. at These patents tie up basic uses of the genes, foreclose[ing] more future innovation than the underlying discovery could reasonably justify. Id. at 1292 * * * The Federal Circuit *** failed to consider the[ patents ] preemptive effects while giving undue weight to patentees' interests. * * * 8

9 [A] claim that includes small segments of DNA that are not limited to the patented genes preempts researchers from working with that segment wherever it appears in the genome, foreclosing scientific inquiry far beyond what Myriad's discovery of two genes could ever justify. See Bilski, 130 S. Ct. at ; Gottschalk v. Benson, 409 U.S. 63, (1972); Funk Bros., 333 U.S. at 130. See also Lab. Corp. of Am. Holdings, 548 U.S. at (Breyer, J., dissenting) ( [S]ometimes too much patent protection can impede rather than promote the Progress of Science and useful Arts. ). * * * Testing the effectiveness of a potential therapeutic by comparing its effect on cell growth with the cell growth occurring without the compound is routine, conventional science. Preventing any researcher from engaging in this science to find a cancer treatment is precisely the preemptive effect that led this Court to invalidate the claim in Mayo and should invalidate this claim as well. Myriad Petition for Certiorari, 2012 WL (emphasis supplied in part). The Patentee s Opposition Argument on Preemption What precisely does the patentee say in opposition to whether there are exceptions to patent preemption? Nothing, absolutely nothing. What precisely does the patentee say in opposition to the statements in Mayo that patents preempt research? Nothing, absolutely nothing. In fact, the opposition uncritically cites Mayo, 132 S.Ct. at 1305 for the proposition, without qualification, that [b]y their nature, all patent claims are preemptive. 9

10 The Phony Research Tool Issue of Experimental Use A segment within the biotechnology patent community has expressed concern that a broad interpretation of the right to experiment on a patented invention will jeopardize the value of research tool patents. A research tool may be considered to be either a composition or machine or other tool that is used in research. Thus, for example, a laser as in the Madey case is such a research tool. Objects to be tested undergo such testing with Dr. Madey s laser research tool to analyze the objects. But, this is an infringing experimentation with the patented invention for its intended purpose. There has never been an experimental use right free from the patent to use that laser for its intended purpose as a laser: This is an infringing experimentation with the patented invention. (It would be a different story of someone purchased the patented laser with the idea of studying the operation of the laser to see how it operates and to create an improved laser. This would be an experimentation on the patented invention that is free from infringement.) 10

11 High Stakes for the Biotech Industry In Myriad, there is much at stake for the biotechnology industry. The continuation of this litigation places in jeopardy the green light to patenting the products of biotechnology research that was signaled in Diamond v. Chakrabarty, 447 U.S. 303 (1980); and J.E.M. Ag Supply, Inc. v. Pioneer Hi Bred Int'l, Inc., 534 U.S. 124 (2001). Whether Respondent can prevail will in part be determined by whether the patentee can satisfactorily explain that patents encourage follow-on research and do not, in any event, preempt the search for improvements or other evaluation of a patented invention. 11