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Narrow Ruling in Bilski Is a Win for Dx Developers, Despite Ambiguity on Gene-Patent Questions

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Originally published June 28. Updated June 29.

This story has been updated in light of the Supreme Court granting writ of certiorari in Prometheus v. Mayo.

By Turna Ray

In narrowly ruling on the landmark Bilski v. Kappos case, the US Supreme Court has rejected a lower court's determination that a business method patent must be tied to a machine or undergo a transformation in order to be patentable — a decision that ultimately upholds the patent eligibility of certain innovations not tied to a physical instrument, such as software, data-driven processes, and medical diagnostics.

The Supreme Court today upheld the Federal Circuit Court of Appeals' determination that Bernard Bilski's business method patent claims for hedging risk in commodities trading were invalid. But it did so on the grounds that Bilski's patent claims are abstract ideas, not because they failed to meet the so-called machine-or-transformation test — a test that has been applied previously in cases to determine patentability where a process must either be tied to a particular machine or apparatus or transform an article into a different state (PGx Reporter 11/18/09).

The genetic testing industry has been keeping an eye on the Bilski case in light of the American Civil Liberties Union and the Public Patent Foundation's challenge against Myriad Genetics' BRCA gene mutation patents — another case that deals with method patents related to genetic testing. A US District Court in March ruled that the BRCA patents were invalid, and Myriad is appealing the decision in the Federal Circuit. Many industry observers believe the Myriad case will ultimately be tried in the Supreme Court and have viewed the Bilski decision as a harbinger of the court's thinking on the patentability of methods comparing isolated DNA sequences to gene sequences inside the body.

But while most in the biotech industry hailed the Supreme Court's decision in Bilski as a victory because it did not strictly enforce the machine-or-transformation test, the full impact of this decision on methods patents related to genetic testing is still a matter of debate among legal experts.

'An Abstract Idea'

"The machine-or-transformation test is not the sole test for patent eligibility under [the Patent Act 35 USC] Section 101," Justice Anthony Kennedy wrote in the majority opinion in Bilski v. Kappos. In order for an invention to be patentable subject matter under Section 101, it must be a process, a machine, manufacture, or a composition of matter that is new and useful, but not a law of nature, a physical phenomenon, or an abstract idea. This latter exception is where Bilski's patents failed, according to the Supreme Court.

Bilski's business method "is an unpatentable abstract idea," Kennedy wrote.

In their decision, the justices specifically note that the application of the machine-or-transformation test as a sole requirement for patent eligibility may be too restrictive for encouraging innovations in the Information Age.

"The machine-or-transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age — for example, inventions grounded in a physical or other tangible form. But there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age," Justice Anthony Kennedy wrote in the majority opinion. "As numerous amicus briefs argue, the machine-or-transformation test would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals."

Kennedy then emphasized that in Bilski, the Supreme Court is "not commenting on the patentability of any particular invention, let alone holding that any of the above-mentioned technologies from the Information Age should or should not receive patent protection."

Bilski's Impact

At first, the justices' reasoning did not appear to conflict with a lower court's determination on the biotech methods case Prometheus v. Mayo. However, the Supreme Court this week granted Mayo writ of certiorari, and sent the case back to the Federal Circuit asking it to revisit its application of the machine-or-transformation test to Prometheus method patents in light of the Bilski decision.

The Federal Circuit court's decision last year in Prometheus found that diagnostic claims using a correlation occurring in nature — in this case involving methods for identifying metabolites of a drug for gastrointestinal disorders — were patentable.

Since in Bilski the Supreme Court determined that the machine-or-transformation test cannot be the only test applied to determine an invention's patentability, it is now up to the Federal Circuit to figure out what other tests to apply to discern the validity of Prometheus' patents.

Bilski's impact is even less clear when one considers Association for Molecular Pathology, et al. v. United States Patent and Trademark Office, et al., in which the ACLU and the Public Patent Foundation are representing numerous researchers and patients in challenging Myriad's BRCA patents.

Federal District Court Judge Robert Sweet pinned his decision on the reasoning that isolated gene sequences patented by Myriad and the University of Utah are the same as DNA found in the body, and that the method of comparing isolated DNA and naturally occurring DNA is an abstract mental process that doesn't meet the machine-or-transformation test (PGx Reporter 03/31/10).

Before Bilski, many legal experts believed that the Federal Circuit's application of the machine-or-transformation test to Prometheus' patents on methods for analyzing metabolite levels for drug dosing supported the validity of Myriad's method patents related to genetic testing. After the Supreme Court granted CERT in Prometheus, it is anyone's guess as to how that case will impact Myriad's appeal.

In Sweet's application of Prometheus to Myriad's patents, he disagreed with Myriad's claims that analyzing and comparing gene sequences is a transformative process in the same way as gauging metabolite levels in patient samples in Prometheus.

Focusing specifically on Bilski, that Supreme Court decision "doesn't do anything that would make one think that the BRCA decision would be reversed," said Thomas Meyers, a partner at the law firm Brown Rudnick specializing in the life sciences field. "There is a long line of Supreme Court cases saying that phenomena of nature not altered by human beings are not eligible for patent protection. This is along the lines that Judge Sweet decided in the BRCA patent case. And there is nothing in [the Bilski] decision that would make us think that the Supreme Court would view that any differently."

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Legal experts agree that ultimately the outcome of ACLU/PUBPAT's gene patenting case rests on whether isolated gene sequences meet the criteria for patentability. "So, the question for the BRCA case is whether or not isolating these gene sequences from human tissue is sufficient to take it out of the realm of natural phenomena," Meyers added. After the Supreme Court decision on Bilski, "that's still an open question."

Daniel Ravicher, executive director of PUBPAT and counsel representing the plaintiffs in the anti-gene patenting case against Myriad, said that the Bilski decision "reinforces the line of case law that Judge Sweet relied upon in his decision striking down gene patents."

Ravicher added that the opinion also "utterly rejects the argument that 'anything' is patentable. Thus, it re-establishes that there are firm limits on patentability that preclude the patenting of laws of nature, natural phenomenon, and abstract ideas."

Tinkering with Abstract Ideas

However, in light of the minority opinion in Bilski, Judge Sweet's determination with regard to Myriad's patents might also raise questions as to what constitutes an "abstract idea." Four justices led by John Stevens maintained that business patents should not be patentable at all, and criticized the majority as "quite wrong" in suggesting that "any series of steps that is not itself an abstract idea or law of nature many constitute a 'process' within the meaning of Section 101.

"The language in the Court's opinion to this effect can only cause mischief," Stevens wrote in his dissenting view.

Stevens added that the Supreme Court should not have made broad statements about the definition of the term "process" or "tinker[ed] with the bounds of the category of unpatentable, abstract ideas." Instead, the "wiser course" for the Supreme Court would have been to "hold that the petitioners' method is not a 'process' because it describes only a general method of engaging in business transactions — and business methods are not patentable."

The ambiguity with regard to "abstract ideas" is already apparent when legal experts consider the impact of Bilski on Myriad's method patents at issue in the anti-gene patenting case.

While Meyers and Ravicher feel the Supreme Court's Bilski decision is in line with Judge Sweet's determination, Thomas Engellenner, partner and chair of the life sciences and patent group at the law firm Nutter McClennen & Fish, believes that the higher court's decision could be interpreted to demonstrate that Sweet wrongly applied the machine-or-transformation test to Myriad's method patents.

"But there is still at least an argument to be made that Judge Sweet got it right to the extent that he said that these method claims were simply abstract ideas," Engellenner said, adding that most people in the industry maintain that the comparison of isolated gene sequences and naturally occurring DNA is not an abstract process.

According to Meyers, Bilski's outcome in the Supreme Court tells industry that the machine-or-transformation test can't be the only determinant of patent eligibility, which may bode well for many of the life science clients he represents. However, the court doesn't offer much guidance with regard to what the other tests for patent eligibility may be.

Before Bilski's patents were challenged in court, the test for a patentable process was determined by considering whether the process produced a "useful, concrete, and tangible result," a much broader test than the current Supreme Court's decision.

"Prior to the Supreme Court's decision, the door was wide open," said Robert Tosti, partner at the law firm Brown Rudnick specializing in IP law. "The Court of Appeals' Bilski decision [to exclusively apply the machine-or-transformation test] pretty much shut the door. This Supreme Court decision opens the door up a little bit, but not as wide as it used to be … as they've clearly said they're not going to go back to the 'useful, concrete, and tangible results' test."

"We haven't heard from a lot of clients yet, but I think people should feel hopeful that the Supreme Court didn’t just rubber stamp what the lower court said," Tosti added. "That would have been restrictive."

'Times Change'

The Supreme Court Justices decided Bilski with a nod toward advanced process patents driven by new technology, particularly in the area of software or medical diagnostic inventions.

"It is true that patents for inventions that did not satisfy the machine-or-transformation test were rarely granted in earlier eras, especially in the Industrial Age," Justice Kennedy wrote in the majority decision. "But times change. Technology and other innovations progress in unexpected ways."

However, while the Supreme Court acknowledged that rapid innovation poses considerable challenges for the current patent system, the court made no attempt to resolve these challenges.

"With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles," Kennedy wrote. "Nothing in this opinion should be read to take a position on where that balance ought to be struck."

On the whole, Tosti believes that the justices' thinking in Bilski will not legally impact Prometheus or the ACLU gene patenting case. The justices are making "a long-winded acknowledgement [that] there may be other tests [for patent eligibility] out there, but what exactly they are, aren't specified," Tosti said. "If you don't meet this machine-or-transformation test that doesn't mean you're dead in the water … There may be other tests out there that make sense, but they don't say what those are. So, I don't think that gives any direction to a reader as to how they might rule in either of those other cases."

Still the justices' recognition of that technological innovation may require new tests for determining patent eligibility acknowledges that the US patent system cannot remain static. Impending difficulties with the current patents system amid rapid advances in the life sciences industry were brought to focus particularly in the aftermath of the federal district court's decision invalidating Myriad's BRCA patents. Following Sweet's decision, legal experts began discussing the need for strategies that would keep gene patent holders from monopolizing a particular testing market through ideas such as patent pools and research exemptions for patented genes in the US.

One company, MPEG LA, launched a gene patent "licensing supermarket" in April to allow test developers broader access to licenses with the aim of advancing the development of new diagnostics (PGx Reporter 04/28/10).

Although these early discussions offer a start toward facilitating more collaboration around gene patents, there is little consensus as to the best way to get industry to share IP around gene associations. Many leaders in the field of genomics have asserted that existing patents on gene associations won't be enforceable as whole-genome sequencing is more broadly adopted in healthcare research. Others are of the opinion that more companies will be at risk for patent infringement as whole-genome sequencing takes hold.

Additionally, industry observers had feared that Bilski could impact the patentability of certain algorithm-based medical diagnostics, so-called in vitro diagnostic multivariate index assays, if the Supreme Court upheld the lower court's application of the machine-or-transformation test.

In deciding Bilski, the Supreme Court cited Gottschalk v. Benson, which challenged a patent application for a method for converting binary-coded decimal numerals into pure binary numerals on a computer. In the 1972 case, the Supreme Court ruled that a numerical algorithm by itself was not patentable because it was an abstract idea.

However, in Engellenner's view, the Supreme Court's decision does not suggest that there would be any negative impact on algorithm-based diagnostic tests, since most of those technologies aren't solely dependent on the algorithms for calculating risk, but include patents on the link between a genetic sequence and a condition or disease.

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