When the Supreme Court remanded the Federal Circuit’s original panel decision in AMP v. USPTO for reconsideration in view of Mayo Collaborative Services v. Prometheus Laboratories, Inc., I said that nothing would change in that remand.  In particular, I predicted that the same two-to-one majority from that Federal Circuit panel (Judges Lourie and Moore in the majority, Judge Bryson in dissent) would again rule that the claimed isolated DNA sequences were patent-eligible under 35 U.S.C. § 101.  My primary reason for my confidence in that prediction was that the Supreme Court’s 1980 decision in Diamond v. Chakrabarty (man-made living organism is patent-eligible) would control on that claimed subject matter, not Mayo Collaborative Services.  See Chakrabarty Controls on Isolated DNA Sequences, not Mayo*.

So guess what happened in the AMP remand of?  As I predicted, simply “déjà vu”:  the same two-to-one majority ruling for essentially the same reasons, as well as confirming that Chakrabarty (not Mayo Collaborative Services) controlled on the patent-eligibility of the claimed isolated DNA sequences.  For the full decision see AMP v. USPTO II (August 16, 2012).

A new decision of the Federal Circuit (Lourie, Prost and Wallach) concerning a business-method invention — Bancorp Services LLC v. Sun Life Assurance of Canada — was handed down on 26^th July and provides a companion case to CLS Bank v Alice.

The inventions described in Bancorp’s US Patents 5,926,792 and 7,249,037 concerned methods, media and systems for administering and tracking the value of life insurance policies. A representative claim reads:

A life insurance policy management system comprising:

a policy generator for generating a life insurance policy including a stable value protected investment with an initial value based on a value of underlying securities of the stable value protected investment;

a fee calculator for calculating fees for members of a management group which manage the life insurance policy;

a credit calculator for calculating credits for the stable value protected investment of the life insurance policy;

an investment calculator for determining an investment value and a value of the underlying securities of the stable value protected investment for the current day;

a policy calculator for calculating a policy value and a policy unit value for the current day;

digital storage for storing the policy unit value for the current day; and

a debitor for removing a value of the fees for members of the management group which manages the life insurance policy.

Two weeks ago, I wrote about how fractured the Federal Circuit’s patent-eligibility landscape has now become for business methods and systems, as evidenced by the split decision in CLS Bank International v. Alice Corp. Pty. Ltd. See CLS Bank International: A Fractured Landscape of Patent Eligibility for Business Methods and Systems*. In CLS Bank International, I observed that each decision by the Federal Circuit on patent-eligibility under 35 U.S.C. § 101 “appears to hinge completely on the ‘luck of the draw’ as to which Federal Circuit judges make up the respective panel.” The latest ruling by a Federal Circuit panel in Bancorp Services, L.L.C. v. Sun Life Assurance Company of Canada (U.S.) reinforces that view and is yet more evidence of the further fracturing of the patent-eligibility landscape for business methods and systems.

The Bancorp Services case involved two patents, U.S. Pat No. 5,926,792 (the ‘792 patent) and U.S. Pat No. 7,249,037 (the ‘037 patent), relating to methods, systems, and computer-readable media for administering and tracking the value of life insurance policies in separate accounts. Both the ‘792 patent and ‘037 patent share a common patent specification having a priority date going back almost 16 years (September , 1996). Also, this is not the first time the Federal Circuit has grappled with ‘792 patent. There was an earlier 2004 Federal Circuit decision which reversed a grant of summary judgment of invalidity of the ‘792 patent based on “indefiniteness,” as well as a 2008 Federal Circuit decision which vacated a judgment of noninfringement of the ‘792 patent.

On Friday, July 20, the Federal Circuit heard oral arguments in the remand of the AMP et al. v. USPTO et al. appeal – the case better known as the Myriad Genetics “gene patent” case. The supplemental briefing in this case, and the oral argument itself, continue to reveal how those with diverse perspectives on DNA patents misunderstand each other. Scientists are making dubious assumptions about the operation of patent law. Patent lawyers are making inaccurate assumptions about how the science works. And those who are neither patent lawyers nor scientists just go by what they’ve been told. The Department of Justice’s (DOJ) supplemental amicus brief and oral argument in this case are a good example of the widening disconnect.

“Kitschy, Not Catchy”

Readers will recall that this is not the first time DOJ appears in this case. Two years ago when the Myriad case first reached the Federal Circuit, DOJ filed an unsolicited brief, replete with hypothetical examples of elemental lithium, cotton, coal, isolated electrons, and other things having nothing to do with molecular biology, siding in part with the American Civil Liberties Union (ACLU), and arguing that Myriad’s claims to BRCA-encoding DNA molecules are patent-ineligible under Section 101.

After the Supreme Court ruled in Bilski v. Kappos that a claimed method for managing (hedging) the risks associated with trading commodities at a fixed price was patent-ineligible under 35 U.S.C. § 101, the Federal Circuit has gone “hither and yonder” in trying to determine when other business methods and systems reach (or don’t reach) the patent-eligibility zone.  At the patent-ineligible end is CyberSource Corporations v. Retail Decisions, Inc. where Judge Dyk (joined by Judges Bryson and Prost) ruled that a method and system for detecting credit card fraud in Internet transactions was patent-ineligible under 35 U.S.C. § 101.  At the patent-eligible end is Ultramercial, LLC v. Hulu, LLC (recently vacated and remanded by the Supreme Court for reconsideration by the Federal Circuit) where Chief Judge Rader (joined by Judges Lourie and O’Malley) ruled that a claimed method for monetizing and distributing copyrighted products over the Internet was patent-eligible.  See Throwing Down the Gauntlet: Rader Rules in Utramercial that Breadth and Lack Specificity Does Not Make Claimed Method Impermissibly Abstract.

These polar opposite decisions in CyberSource and Ultramercial illustrate how fractured the Federal Circuit’s patent-eligibility landscape has now become for business methods and systems.  The most recent split decision in CLS Bank International v. Alice Corp. Pty. Ltd. where a claimed trading platform for exchanging business obligations survived a validity challenge under 35 U.S.C. § 101 epitomizes this problem.  As CLS Bank International unfortunately shows, an objective standard for judging the patent-eligibility of business methods and systems remains elusive, subject to an ever growing “tug-of-war” between the “inclusive” and “restrictive” patent-eligibility factions of the Federal Circuit.  In particular, after CLS Bank International, we are no closer to having a judicially accepted definition of what is (or is not) an “abstract idea” when it comes to claiming business methods and systems.

There are essentially five substantive requirements that must be satisfied before any invention can be patented. These requirements together are commonly referred to as the patentability requirements.

Unfortunately, the patentability requirements are frequently misunderstood, including by the United States Supreme Court. For many who are not well versed in patent law one of the reasons it can be confusing when considering patentability is due to the fact that the first of the patentability requirements asks whether the invention exhibits patentable subject matter.  This is sometimes phrased in terms of patent eligibility, which leads the many anti-patent zealots and other patent neophytes to erroneously conclude that if an invention is patent eligible then a patent issues.  Nothing could be further from the truth, but those who hate the patent system aren’t exactly concerned with facts or reality.

So what is required for an invention to be patented?  The subject matter of the invention must be patent eligible, the invention must be useful, it must be new, it cannot be obvious and it must be described with the particularity required so that people of skill in the relevant field can understand what the invention is, make it and use it without engaging in undue experimentation.  Let’s take each of these one at a time.

One of the reasons that those knowledgeable about patent law get agitated when anti-patent forces criticize the patent system is because despite what they want to think it is not easy to obtain a patent.  This should be self evident really if you stop and think about it.  When was the last time in your own life that something valuable was easy to obtain?  Has anything valuable ever just been handed over to you or fallen into your lap?  Assuming that you were not born with a silver spoon in your mouth the answer is no.  So why then are so many people willing to accept the utter nonsense of those who detest patents?  Curious when you stop and think about it.

A decision with the right outcome but for the wrong reasons can confound jurisprudence nearly as much as a decision that is entirely wrong.

In our field an example is provided by the opinion of  Justice Douglas in Funk Brothers Seed v Kalo Inoculant, 333 US 127 (1948) which has recently been exhumed following decades of obscurity. The invention in that case concerned an inoculant for leguminous plants containing mutually non-inhibitive strains of Rhizobium bacteria. Modern readers would find it a surprising proposition that identifying such strains and enabling a farmer to conduct a single treatment of his fields when formerly six separate treatments were needed did not amount to invention. The rat which Justice Douglas smelled existed but was mischaracterised. As set out in the concurring opinion of Justice Frankfurter it was not enough to conceive of the idea that non-interfering strains might exist: it was necessary to go further and identify particular operable strains of bacteria (this was, of course, well before deposit systems for bacteria and other living species were established). The proper ground of non-enforceability was non-enablement, not obviousness.

Trying to divine what Mayo Collaborative Services v. Prometheus Laboratories, Inc. means for the future in judging the patent-eligibility of claimed methods and processes under 35 U.S.C. § 101 is like using a Ouija board. See The Way Forward from Mayo Collaborative Services is through the Classen Immunotherapies Remand.  The first inkling came 10 days after Mayo Collaborative Services in a motion for partial summary judgment in SmartGene, Inc. v. Advanced Biological Laboratories, SA, a case from the District Court of Columbia. When I first read this case, my initial reaction was “oh no, here comes the collateral damage we feared would come from Mayo Collaborative Services.” But having reflected on this case some more, and especially the claims involved, I think Judge Howell’s ultimate conclusion of patent-ineligibility of the claimed process and system under 35 U.S.C. § 101 is defendable. Even so, the reasoning expressed in Judge Howell’s opinion for reaching that conclusion gives pause for concern about the impact of Mayo Collaborative Services on rendering consistent and objective determinations of patent-eligibility under 35 U.S.C. § 101.

SmartGene was filed as a declaratory judgment action by SmartGene, seeking invalidity, unenforceability, and non-infringement of Advanced Biological Laboratories (ABL’s) U.S. Pat. No. 6,081,786 (the “’786 patent”) and U.S. Pat. No. 6,188,988 (the “’988 patent”). After prolonged litigation (including a stay of proceedings of two and a half years), SmartGene filed a motion for partial summary judgment, asserting that the ‘786 and ‘988 patents were invalid under 35 U.S.C. § 101. Both of these patents related to a system, method, and computer program for guiding the selection of therapeutic treatment regimens for complex disorders by ranking available treatment regimens and providing advisory information.

Just over three weeks ago the United States Supreme Court issued a decision in Mayo Collaborative Services v. Prometheus Laboratories, which sent much of the patent world into a whirlwind.  In that decision the Supreme Court unanimously found that the claims at issue did not exhibit patent eligible subject matter because the additional steps that were added to the underlying law of nature were well known in the industry.  A curious ruling for many reasons, and one that will have to be digested over many years as the United States Patent and Trademark Office and the Federal Circuit struggle to figure out how Diamond v. Diehr remains good law (it was not overruled) and remains consistent with a ruling that seems completely inapposite.

To continue to provide a variety of perspectives on this landmark ruling what follows is the reactions of those in the industry. Without further ado…

 

Elizabeth J. Haanes, Ph.D.
Director at Sterne, Kessler, Goldstein & Fox PLLC

A dissection of most any patent claim will reveal, at some level, a law or a product of nature. The holding in Prometheus does not hinge on whether a naked “law of nature,” e.g., gravity, is patent-eligible–clearly it is not. Rather, the question we will be grappling with in the coming years is: what additional elements must be included in the claim to render the claim sufficiently “unconventional” or “inventive” so as to confer patent-eligibility? The claims in Prometheus, included steps in addition to the “law of nature” that were determined by the Federal Circuit to be transformative. The Supreme Court, however, concluded that the steps were insufficiently “unconventional” to confer patent eligibility. In contrast, the Court distinguished a patent-eligible “law of nature” claim in the landmark 1981 Supreme Court case Diamond v. Diehr as “add[ing] to the [law of nature] something that in terms of the patent law’s objectives had significance–they transformed the process into an inventive application of the formula.” (Prometheus. at p. 12).

Not too surprisingly, the Supreme Court granted certiorari in AMP v. USPTO, vacated the Federal Circuit’s panel decision, and remanded for reconsideration in view of Mayo Collaborative Services v. Prometheus Laboratories, Inc.  On remand, the Federal Circuit is unlikely to “resurrect” the claims to the methods of “comparing” or “analyzing” DNA sequences that were deemed unanimously by the Federal Circuit panel to be invalid as being patent-ineligible under 35 U.S.C. § 101, and nothing in Mayo Collaborative Services changes that result, but simply reaffirms it.  But the story should also be no different for the claim directed to the method of screening potential cancer therapeutics that was unanimously upheld by this same panel as being patent-eligible under 35 U.S.C. § 101 because the Supreme Court’s reasoning in Mayo Collaborative Services is distinguishable for reasons given in the original AMP decision, as well as for reasons given in Judge Newman’s opinion in the remand of Classen Immunotherapies, Inc. v. Biogen IDEC.  See The Way Forward from Mayo Collaborative Services is through the Classen Immunotherapies Remand*.

Unfortunately this unspecific remand by the Supreme Court in AMP vacates as well the two-to-one ruling by this same Federal Circuit panel (Judges Lourie and Moore in the majority, Judge Bryson in dissent) that the claimed isolated DNA sequences were also patent-eligible under 35 U.S.C. § 101.  What, pray tell, does Mayo Collaborative Services change with regard to that ruling in the original AMP decision?  For those, like the plaintiffs in AMP (including the ACLU), who would like to upset this “applecart,” they’re likely to be very disappointed.  I can describe what should be the impact of the ruling (and reasoning) in Mayo Collaborative Services on the claimed isolated DNA sequences in three short monosyllabic words:  NONE AT ALL.  And the Federal Circuit can (and should) say likewise, perhaps in far more words.

Many of us in the patent world (me included) have pounded our heads against the reasoning (not result) expressed in Mayo Collaborative Services v. Prometheus Laboratories, Inc.  See A Matter of Patent Law Despotism: The Nonsensical Reasoning in the Supreme Court’s Mayo Collaborative Services Decision Part 2*.  The reasoning in Mayo Collaborative Services makes no patent law logical sense on numerous grounds, including disregarding an important paragraph in the Supreme Court’s 1981 case of Diamond v. Diehr that is not only binding precedent, but also tells us that Breyer’s opinion repeatedly does what this paragraph from Diehr says not to do in an analysis of method or process claims under 35 U.S.C. § 101.

But the question now becomes what do we do to keep the reasoning in Mayo Collaborative Services from exploding into completely irrational, as well as patent law insane doctrine?  The way forward to patent-eligibility rationality, as well as sanity, is through the remand decision in Classen Immunotherapies, Inc. v. Biogen IDEC.  See CAFC on Patent-Eligibility:  A Firestorm of Opinions in Classen.  Put differently, there may yet be “light” in this currently “dark” patent-eligibility tunnel.

The biotech community has been chattering ever since the Mayo Collaborative Services v. Prometheus Laboratories (“Prometheus”) ruling was issued by the U.S. Supreme Court March 20, 2012.  Biotech folks, unaccustomed to the flurry of appellate activity surrounding some recent biotech cases, including the July 2011 Federal Circuit decision, Assoc. for Molecular Pathology et al. v. U.S.P.T.O. and Myriad Genetics, 2010-1406 (2011), are understandably nervous and have been engaged in a parlor game of guessing the effects of the decision on the biotech industry.  The dinner discussions in my own household have centered on the subject (my kids think their parents are total nerds).  Several posts and the many comments on this august blog and on other blogs are indicators that the biotech patent bar has found itself thrust into the legal limelight in a series of decisions which many fear may seriously harm the biotechnology industry, still struggling in a slow economy.  In fact, the stock prices of several prominent biotech companies fell at the news of the Prometheus ruling, including Myriad’s stocks, which had fallen 9% at one point.  As many of my esteemed colleagues have and will continue to dissect the case, I will instead focus on the effect of the decision on the future of biotech patents.

Unlike many in the biotech community I do not think the Prometheus decision will break the biotech industry or even seriously affect it .  Much like the car mechanic in a small Caribbean island told me when my engine light came on in my rental car, “no worries, no problem!” (our car, in fact, never broke down, even on a mountain road with no shoulders).   I believe the holding in Prometheus prevents what could be a future legal quagmire, where overly-broad patents could serve to block entire fields of practice and create an enforcement nightmare in which ghosts of legal uncertainty and licensing ambiguities would haunt hospital hallways, R&D labs, boardrooms,  and investment entities throughout the country.  If the Prometheus decision would have gone the other way, it would not have been status quo, but rather been fairly harmful to future innovation.

As many of you now understand, I’ve got many bones to pick with the reasoning in Breyer’s opinion in Mayo Collaborative Services v. Prometheus Laboratories, Inc.  See Eviscerating Patent-Eligibility of Drug Testing Methods: The Nonsensical Reasoning in the SCOTUS Prometheus Decision*.  See also A Matter of Patent Law Despotism: The Nonsensical Reasoning in the Supreme Court’s Mayo Collaborative Services Decision Part 2*.  But I may have found the ultimate “doozy” for why Breyer’s reasoning in the Mayo Collaborative Services opinion should be “hung, drawn, and quartered.”  (And I wished I had discovered this faux pas earlier.)

For lack of a better word, I call this faux pas “selective precedent amnesia.”  What I’m referring to is a paragraph from the Supreme Court’s 1981 case of Diamond v. Diehr (which held that a claimed rubber molding method using an Arrhenius equation was patent-eligible under 35 U.S.C. § 101).  Or more appropriately, Breyer’s opinion in Mayo Collaborative Services repeatedly doing what this paragraph from Diehr says not to do in an analysis of method or process claims under 35 U.S.C. § 101.

The Prometheus decision reflects that Supreme Court is obviously concerned about the possibility that a patent claim might preempt a law of nature and thereby broadly restrict use and application of the underlying principles.  Perhaps the concern is heightened by the fact that the claimed method relates to treatment of disease, and the prospect of preempting such treatment is troubling.  The reasoning set forth in the opinion, however, is anything but helpful.

The court dismisses a suggestion that virtually any step beyond a law of nature should transform an unpatentable law of nature into a potentially patentable application, sufficient to satisfy §101 whereby patentability could be determined under applicable novelty and obviousness analyses pursuant to 35 U.S.C. §102 and 103, saying that such an approach would render the “law of nature” exception to §101 a “dead letter.” The court, never the less, decides the status of the claimed subject matter under §101 under a point of novelty approach, leaving the reader to puzzle about which part of the opinion should be considered as determinative of what is proper under the law.