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While Supreme Court Mulls Machine/Transformation Test, Experts Debate Bilski's Impact on Dx Field

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By Turna Ray

Comments made by Justices during a Nov. 9 hearing on Bilski v. Kappos — a case that could end up impacting the patentability of genes — suggest that the US Supreme Court is struggling to define the circumstances under which processes not linked to a machine or to the transformation of physical matter are patentable.

Before Bilski v. Kappos reached the Supreme Court, the Federal Circuit determined that Bernard Bilski's business method patent claims for hedging risk in commodities trading were not patentable since they did not pass the so-called "machine-or-transformation" test — a method of determining patentability under which a process must either be tied to a particular machine or apparatus or transform an article into a different state.

Although it is impossible to definitively say which way the Supreme Court will rule before its decision is issued in the spring of 2010, legal experts believe the tenor of the Justices' discussion during the Nov. 9 hearing signals that they will likely uphold the Federal Circuit's decision to deny Bilski's patent claims. However, the Justices' comments also imply they are looking for a way to narrowly uphold the lower court's "machine-or-transformation" test in order to minimize the impact on other sectors, namely the technology and medical device industries.

The US patent law was crafted "in the nineteenth century … with respect to machines," Justice Stephen Breyer pointed out. "Now you're telling us: Make it today in respect to information. And if you ask me as a person how to make that balance in respect to information, if I am honest, I have to tell you: I don't know. And I don't know whether across the board or in this area or that area patent protection will do no harm or more harm than good."

Depending on the scope of the Supreme Court's decision on Bilski, the genetic testing industry will be affected due to the increasing application of complex algorithms to determine disease predisposition and drug response. Bilski is being closely followed by diagnostics manufacturers in light of the American Civil Liberties Union's gene patenting challenge against Myriad Genetics' patents on BRCA mutations for gauging women's predisposition to hereditary breast and ovarian cancer [see PGx Reporter 05-13-2009].

During the hearings, Justice Sonia Sotomayor expressed Breyer's reservations, saying, "I have no idea what the limits of the Federal Circuit rule would be in the medical field or the computer world." She cautioned that "[o]nce you announce an exclusive test, you're shoe-horning technologies that might be different." Furthermore, Sotomayor urged Malcolm Stewart, deputy solicitor general of the Department of Justice representing the US Patent and Trademark Office in the case, to guide the court in determining "a test that does not go to the extreme that the Federal Circuit did."

Expressing some inconsistency, Justice Ruth Bader Ginsburg at the start of the hearing praised the Federal Circuit's "machine-or-transformation" test as "elegant," but as the hearing progressed, inferred that Bilski "could be decided without making any bold step."

Justice Samuel Alito questioned whether Bilski was "a good case" with which to broadly decide on the patentability of all method claims.

In response, Stewart challenged the notion that the Federal Circuit's "machine-or-transformation" is so rigid that it cannot be applied broadly.

"All that the Federal circuit has really said is that to have a patent-eligible process you have to identify some link to a machine or a transformation of matter," Stewart said. "And the Federal circuit has said with respect to some processes the link to the machine may be so attenuated, the machine part of the process may be such a small segment of the process as a whole, that this wouldn't be enough."

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With regard to the genetic testing industry, how strictly the Supreme Court upholds the "machine-or-transformation" test will have serious ramifications for the genetic testing industry when comparing DNA sequences and in the patenting of isolated genes.

In the opinion of Ken Chahine, law professor at the University of Utah, the Federal Circuit's ruling in Bilski infers that "tying a process to a generic machine," such as "doing a comparison of DNA sequences where it entails a machine … wasn't going to save it."

"Even if the Supreme Court affirms the rejection of the Bilski claims, some industry sectors (such as the software and medical diagnostic industries) would likely consider anything less than a full-scale adoption of the ‘machine-or-transformation' test to be a victory of sorts," lawyers Ivan Alexander and Allan Ripp from the firm Morrison & Foerster said in written commentary on the hearing. "This would leave open the door to the possibility that the court could adopt a more flexible test down the road in a case that presents more nuanced issues."

High Stakes

"There really is a lot at stake" for medical device companies, Chahine said during a podcast on Bilski hosted by Burrill & Co.

The debate over the patentability of business methods in Bilski, broadly applied, brings into question "whether a gene or a segment of a gene can be patented at all," Chahine said. Furthermore, the patentability of algorithms that calculate genetic predisposition to disease is also at issue.

In vitro diagnostic multiplex tests based on algorithms are increasingly entering the market — so much so that the US Food and Drug Administration has exercised greater oversight over these tests due to the increased complexity and higher risks associated with them [see PGx Reporter 08-12-2009].

The challenge for diagnostics makers "is that field is evolving so rapidly that tying [an algorithm] to a current machine might really render that patent not very valuable," Chahine noted.

In issuing its recommendations on gene patenting, the HHS Secretary's Advisory Committee on Genetics, Health, and Society cited Bilski as one of the cases that stands to impact whether a gene or a gene's association to disease predisposition is patentable subject matter [see PGx Reporter 10-14-2009].

In a report that has yet to be finalized, the SACGHS task force on gene patents and licensing practices recommended the HHS Secretary support and work with the Secretary of Commerce to promote statutory changes that would exempt from infringement liability anyone developing or selling a test based on patent claims on genes for patient care or for research. At the time, those who disagreed with the committee's conclusions urged the task force to hold off on proposing congressional action and statutory changes to patent law until Bilski and the ACLU's challenge to Myriad's patents were decided.

While SACGHS' investigations found that gene patents did not necessarily encourage innovation, pointing to instances where diagnostics on unenforced gene patents have been developed, industry representatives asserted that without gene patents investors would not back the development of new genetic tests.

Certainly, the Justices' comments would suggest they are acutely aware that their decision on Bilski stands to impact the medical diagnostics industry.

In hearing the Justices' discussion, legal experts felt it likely the Supreme Court would not uphold Bilski's business method patent claims.

Alexander and Ripp of Morrison & Foerster see a "real possibility that the Supreme Court will affirm the rejection of Bilski's claims on the ground that they are too abstract, but may not necessarily endorse the Federal Circuit's ‘machine-or-transformation' test as "the only applicable test" for patent eligibility."

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Also, the Supreme Court could "say it is ruling only with respect to business method patents and say that [its ruling] shouldn't be applied to other industries," Chahine said.

Still another possibility is the Supreme Court might dismiss Bilski's patent claims as "obvious" and choose not to provide more clarity to other industries.

"Ultimately, the Court may merely clarify that the 'machine-or-transformation' test is not the sole and exclusive test for patent eligibility," Alexander and Ripp noted in their analysis. "The many and varied industry participants who are hoping that the justices will enunciate a more definitive test –– such as rules that would provide resolution on the eligibility of business methods, computer software, or medical diagnostics –– may be left still searching for answers."

Of course, ahead of the final decision being delivered, there is always the chance, however small, that the Supreme Court may overturn the lower court's decision and uphold Bilski's patents.

Isolated Genes: Patentable or Occurring in Nature?

On the "machine-or-transformation" test, if the Supreme Court does "rule narrowly on Bilski it will be interesting to see where [the Justices] define that line" with regard to how closely a process has to be tied to a machine, Chahine noted during the podcast.

That line is exactly what is being debated in the ACLU's anti-gene-patenting case against Myriad, University of Utah, and others. And if the Supreme Court chooses to apply the "machine-or-transformation" test too broadly in Bilski, it could be troublesome for Myriad's defense in the ACLU case.

In briefing documents submitted to the New York Southern District Court as part of its motion for summary judgment in Association for Molecular Pathology, et al. v. United States Patent and Trademark Office, et al., the ACLU cites Myriad's patent '999, which claims the act of looking at the patented BRCA1 gene, and patent '001, which covers the ability to compare a naturally occurring mutation with a patient's blood sample to confirm the presence of a gene mutation [see PGx Reporter 09-16-2009].

"The claim does not specify or claim any particular method of obtaining or comparing the sequences; it simply covers the act of looking at the two sequences and concluding they are the same or different," the ACLU states in its brief.

The ACLU's motion for summary judgment was filed a short time after Myriad filed to dismiss the case on the grounds that it lacked standing. The deciding judge in the case has denied Myriad's motion to dismiss. Meanwhile, the NY district court has ruled that the defendants' motion for summary judgment in the case will be due Dec. 2; the plaintiffs' reply due Dec. 9; and hearings will be held on Dec. 11 [see PGx Reporter 11-04-2209].

Ultimately, the ACLU has to convince the deciding judge that the "isolation" of genes — when genes are separated from the body for analysis in a laboratory environment — is not patentable, a process for which the USPTO has granted numerous patents. In fact, approximately 20 percent of the human genome is already patented.

In Myriad's view, in the process of "isolating" DNA, it has created unique, patentable material by changing the gene from DNA to complementary DNA.

However, the ACLU maintains that the "isolation" of genetic material "means nothing more than a gene that has been removed from the body and separated from surrounding cellular material." Since the isolated gene is still "functionally and informationally" identical to the gene occurring naturally in the body, it is not valid patentable material, the ACLU claims.

With regard to the Federal Circuit's transformation test, the Supreme Court Justices felt that Alexander Graham Bell's invention of the telephone, in converting sound to current and back to sound, was patentable as process.

"Certainly there are arguments by the ACLU and others that that is a product of nature that is not patent eligible under the rule that the court has applied for many years," Chahine noted. In this regard, the "court has made clear that mental processes or equations — the one that the court uses is Einstein's E=MC2 — could not have been patented."

More so than Bilski, Chahine is more worried about the opinions expressed by three justices in LabCorp v. Metabolite, a case which the Supreme Court ultimately decided not to hear in 2006.

In considering whether to hear LabCorp v. Metabolite, Justices Breyer, John Paul Stevens, and David Souter expressed opinions that comparison of the levels of a metabolite in order to correlate it to the predisposition of disease was not patentable. "That is a cause for concern" for diagnostics firms, Chahine noted.

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