After Myriad, courts grapple with gene test patents

Ten months after a landmark U.S. Supreme Court ruling, gene testing companies continue to battle over where the lines should be drawn for patent protection.

Despite recent adverse rulings in district court, two patent holders are trying to keep their genetic patent claims - Utah-based Myriad Genetics Inc., the respondent in last year's high court ruling, and San Diego-based Sequenom Inc.

Myriad offers diagnostic tests to assess risk factors for breast and ovarian cancer, using patents that outline the isolation and synthetic creation of certain human genes, named BRCA1 and BRCA2. Sequenom offers noninvasive, prenatal tests to screen fetal DNA for genetic abnormalities.

Their business competitors and legal adversaries argue that the patent claims should be invalidated because they cover unpatentable natural phenomena.

They're relying on the Supreme Court's unanimous, though narrowly tailored, decision in June that isolated segments of human DNA are a naturally occurring phenomena that fall outside the bounds of patent protection. Association for Molecular Pathology v. Myriad Genetics Inc., 132 S. Ct. 2107 (2013).

The recent flurry of litigation also comes as biotech rivals angle for an influential foothold in a rapidly growing market. U.S. spending for genetic and molecular diagnostic tests reached $5 billion in 2012 and could hit $25 billion by 2021, according to the research arm of Minnesota-based UnitedHealth Group Inc., one of the nation's largest health insurers.

Myriad and Sequenom, critics maintain, are trying to cut off access to valuable, in-demand technology.

In November, U.S. District Judge Susan Y. Illston in San Francisco invalidated a Sequenom patent outlining methods to extract fetal DNA. Ariosa Diagnostics Inc. v. Sequenom Inc., CV11-6391 (N.D. Cal., filed Dec. 19, 2011).

Illston held that Sequenom's technology did not reveal any new procedures or concepts, handing a win to San Jose-based Ariosa Diagnostics Inc.

Dianna L. DeVore, Ariosa's senior vice president of legal affairs and intellectual property, said Illston's decision was a warning to companies with overly broad claims. "Patent claims that are directed to a natural law and add some technicalities can tie up the field in research and development," DeVore said.

U.S. District Judge Robert J. Shelby in Salt Lake City last month reached a similar conclusion when he denied Myriad's preliminary injunction motion against rival Ambry Genetics Corp. of Aliso Viejo.

Shelby ruled in his 106-page decision that Ambry had raised a "substantial question" of whether Myriad's technology fell outside the bounds of patent protection.

He also noted the "striking" parallels between the Myriad case before him and the Sequenom case, in that both patent holders were wrongfully attempting to close off access to naturally occurring phenomena.

"Plaintiff's Method Claims effectively construct a wall around the naturally occurring BRCA1 and BRCA2 genetic sequences, which, like the [cell free fetal] DNA in Sequenom, are naturally occurring, patent ineligible subject matter," the judge wrote.

Shelby's opinion likely has broader implications on the breast cancer diagnostic testing market. Along with Ambry, South San Francisco-based Counsyl Inc. and San Francisco-based Inviate Corp. are among the several test providers currently involved in litigation with Myriad.

Myriad and Sequenom have separately appealed their respective cases to the U.S. Court of Appeals for the Federal Circuit.

Sequenom's appeal has already drawn supportive briefs from industry lawyers. The Biotechnology Industry Organization, a Washington, D.C. trade group, maintains that Illston's decision to invalidate Sequenom's patent would negatively impact diagnostic testing research.

"Continued development of this technology will depend on patent protection to provide the incentive for investment," Chicago-based lawyer Kevin E. Noonan wrote for the trade group.

Noonan also argued that without patent protection, biotechnology companies would be inclined to keep their technology innovations as trade secrets, further hindering innovation.

DeVore said patent protection can apply to diagnostic testing so long as the patents do not restrict access to natural laws. "A lot of our patent portfolio is directed toward novel technologies rather than the genetic subject matter itself," she said.

For Sequenom's appeal, Ariosa has been joined by two other genetic testing providers, San Carlos-based Natera Inc. and Redwood City-based Verinata Health Inc.

Myriad and Sequenom may be facing difficult fights to maintain their patent claims, but they continue to find success in the market.

The Utah company has invested more than $500 million over nearly two decades on its cancer detection technology. Diagnostic BRCA testing products brought in more than 85 percent of Myriad's $613.1 million in revenues collected during the company's previous fiscal year, Myriad disclosed to federal regulators in August.

Sequenom earned $119.5 million last year through its diagnostic testing services, about three-fourths of its total revenue, the company disclosed in February in its annual report to federal regulators. But even after Sequenom's patent was invalidated, company executives seemed unfazed.

The executives claimed that Sequenom already "has been competing in the marketplace without the benefit of the patent being recognized by competitors."

Jacob S. Sherkow, a fellow at the Center for Law and Biosciences at Stanford Law School, said the recent court decisions will have little effect on the litigants or the industry as a whole because technology has expanded beyond the relatively straightforward patent claims disputed in litigation.

"With the winnowing of patentable subject matter that the Supreme Court has been doing and the difficulty of getting patents on personalized diagnostic techniques ... it just doesn't seem like the patent disputes are going to be the central factor of the advancement of the technology," he said.

Daniel B. Ravicher, executive director of the Public Patent Foundation at the Benjamin N. Cardozo School of Law, agreed that genetic testing companies will likely focus more on the competition in the marketplace than in the courtroom as they develop new innovations.

"If you look at Myriad, even though they were denied a preliminary injunction in their new round of cases against competitors, they're still being successful in the market," said Ravicher, who opposed Myriad in the Supreme Court case.

Neither Sequenom nor Myriad responded to requests for comment.

DeVore said genetic testing companies should turn their efforts away from patent litigation and more toward research, development and marketplace competition.

"By having more competition in the area and having more options for physicians and patients, the result will be better prenatal testing for women," DeVore said.