Patent Barbarians at the Gate

DRAFT Patent Barbarians at the Gate: The Who, What, When, Where, Why & How of U.S. Patent Subject Matter Eligibility Disputes (DRAFT chapter in Okediji & Bagley, “Patent Law in Global Perspective” Oxford University Press 2014) Margo A. Bagley* Abstract Patent subject matter determinations continue to present a moving target in the United States, primarily for biotechnology, software, business methods, and diagnostic methods, with court decisions, patent office policies, and legislative initiatives sometimes expanding, and sometimes contracting, eligibility boundaries. Moreover, decisions in the United States often have repercussions for patenting abroad. This Chapter explores changes in the “who” (players), “what” (disputes), “when” (timing), “where” (venues), “why” (theories), and “how” (mechanisms) of patent eligibility challenges fueling these developments now and for the foreseeable future.

Shortly after the 1980 United States Supreme Court decision in Diamond v. Chakrabarty,1 a U.S. patent attorney attended an AIPPI 2 conference in a foreign country. After introducing himself to another attendee (a patent attorney from a different country) and identifying himself as an American, the foreign patent attorney said disgustedly to the U.S. patent attorney “You Americans are patent barbarians!”3 Perhaps such a statement is not the best way to make friends and influence people, but the speaker voiced a sentiment that probably has been shared by many foreign observers of the U.S. approach to patent subject matter over the years. Granting patents for “anything under the sun made by man”4 even with the judge-made limits concerning abstract ideas, laws of nature and natural phenomena, certainly could be deemed evidence of a lack of refinement. Nevertheless, much of the rest of the world has followed America’s lead, to differing degrees, in expanding the scope of patent-eligible subject matter, * Professor of Law, University of Virginia School of Law. This chapter benefitted from comments received during presentations at the European Policy on Intellectual Property (EPIP) conference at the University of Lueven (Belgium), DePaul University School of Law’s Manzo seminar, the University of Virginia School of Law faculty retreat, and the 2nd Annual Briggs & Morgan Patent Law Symposium at the University of Minnesota School of Law. Excellent research assistance was provided by Xiaoyan (Sabrina) Wang and the exceptional research librarians of the University of Virginia School of Law. 1

447 U.S. 303 (1980). However, although patents on living organisms had been granted prior to this time (such as U.S. Patent No. 141,072 to Louis Pasteur for yeast in 1873) the patentability of such inventions had later come under question. See Robert P. Merges & John F. Duffy , Patent Law & Policy: Cases and Materials , 147 (6th ed. 2013) (citing P.J. Federico, Louis Pasteur’s Patents , 86 Sci . 327 (1937), reprinted in 19 J. Pat. Off. Soc’y 966, 967 (1937)). 2

Association Internationale pour la Protection de la Propriété Intellectuelle or International Association for the Protection of Intellectual Property. 3

Special thanks to John White, Esq. for sharing this anecdote.

4

Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980).

1

DRAFT particularly with regard to living matter. Diamond v. Chakrabarty’s recognition of an oil-eating, living bacterium as patent-eligible subject matter may have appeared “barbaric” to some at the time (including the four dissenting Supreme Court justices in the case) but the patent laws of all EU countries, and most other countries with well-developed patent systems, routinely provide protection for microorganisms and have for quite some time. Many countries also have followed the United States in extending utility patent protection to isolated DNA and other genomic material, plants, animals and more, while drawing the line at other “barbaric” American expansions such as human cloning methods, human embryonic stem cell cultures, and some diagnostic and therapeutic methods.5 However, patent eligible subject matter determinations continue to present a moving target in the U.S. primarily for biotech, software, business methods and diagnostic methods, with court decisions, patent office policies, and legislative initiatives sometimes expanding, and sometimes contracting, eligibility boundaries. And decisions in the U.S. continue to have repercussions for patenting abroad. This chapter will explore, from a bird’s eye view, selected aspects of the who, what, when, where, why, and how behind some of the developments and forces fueling the expansion and contraction we see in U.S. patent subject matter eligibility determinations,6 and the sometimes surprisingly different approaches taken by other countries. Part I provides a brief background on the “what” with which patent eligible subject matter (PESM) disputes are concerned. Parts II and III describe several changes in the players and venues (“who” and “where”) associated with PESM inquiries that appear to be contributing to the disputes as well as the relevancy of timing (“when”), while Parts IV and V highlight some of the possible reasons for, and complicating factors in, continuing PESM controversies (“why” and “how”). Part VI concludes. I.

The “What” of U.S. Patent Eligible Subject Matter Challenges

The question of what types of inventions should be eligible for patent protection is an important, policy-laden inquiry, making it a difficult subject for harmonization efforts internationally and even within a given country. Article 27 of the Agreement on Trade Related Aspects of Intellectual Property (TRIPS) requires member countries to provide patent protection to inventions “whether products or processes, in all fields of technology,” but it also provides a laundry list of inventions members can exclude from patentability, such as plants and animals (other than microorganisms), diagnostic, therapeutic, and surgical methods for treating humans and animals, and inventions whose commercial exploitation might endanger public order or 5

See generally Geertrui Van Overwalle, Biotechnology and Patents: Global Standards, European Approaches and National Accents, in Daniel Wüger and Thomas Cottier, GENETIC ENGINEERING AND THE WORLD TRADE SYSTEM (Cambridge University Press 2008) ; Deming Liu, Now the Wolf Has Indeed Come! Perspective on the Patent Protection of Biotechnology Inventions in China, 53 Am. J. Comp. L. 207, 209 (2005); Margo A. Bagley, Patent First, Ask Questions Later: Morality and Biotechnology in Patent Law, 45 Wm. & Mary L. Rev. 469, 475-76 (2003); DIRECTIVE 98/44/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL ON THE LEGAL PROTECTION OF BIOTECHNOLOGICAL INVENTIONS, O.J. (L 213), 13–21 (EC). 6

This chapter highlights issues relating to biotechnology, computer-implemented inventions, and methods. See Dan L. Burk, Patent Law’s Problem Children: Software and Biotechnology in TransAtlantic Context, this volume, for a discussion of underlying reasons for the controversies in these technological areas).

2

DRAFT morality. While the patent laws of many countries take advantage of a number of these exclusions, the United States historically has not, choosing instead, as noted above, to grant patents on anything under the sun made by man, subject to judicially-created exclusions for laws of nature, natural phenomena, and abstract ideas. Thus, for example, patents on human embryonic stem cells (which require the destruction of human embryos) have issued and thrived in the U.S., while being denied in the European Patent Office and the European Court of Justice, due to conflicts with morality-based provisions of the European Union Biotechnology Directive.7 In Diamond v. Chakrabarty, the Supreme Court gave a green light to biotech researchers and investors by confirming that a living organism, in that case a genetically modified bacterium, can comprise patent-eligible subject matter under 35 U.S.C. § 101. Section 101 of the U.S. patent act provides that “whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter or any improvement thereof, may obtain a patent therefor.”8 In the years that followed, the United States Patent and Trademark Office (USPTO) used the decision as the basis for granting patents on a wide variety of controversial biotech inventions, including isolated DNA, human embryonic stem cell cultures, animal and human cloning methods, and transgenic plants and animals. The Supreme Court largely affirmed the USPTO’s broad approach to biotech PESM in 2001 in J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred International, Inc., which relied heavily on the Chakrabarty decision.9 There, the Court held that sexually and asexually reproducible plants can be the subject of utility patents, despite Congress' enactment of more specific statutory protection schemes for both types of plants.10 Another contested PESM area characterized by considerable divergence across national approaches is computer implemented inventions and business methods. While some countries, such as signatories to the European Patent Convention, have explicit statutory exclusions from patentability for methods of doing business and computer programs as such,11 the U.S. patent act contains no such prohibitions. Thus, as with biotechnological inventions, the United States has been at the forefront of full recognition of both business methods and software as patent eligible subject matter, although recent decisions indicate a retrenchment of sorts in this space.12 One year after handing down Diamond v. Chakrabarty, the Court decided Diamond v. Diehr, directed to a computer-implemented rubber curing process.13 After declining to assign patent eligible subject And providing another possible example of American “patent barbarianism.” See generally Oliver Brüstle v. Greenpeace e.V. Case C-34/10 18 October 2011; Case G2/06, WARF/stem cells, [2009] E.P.O.R. 15 (Enlarged B. App. 2008). 7

8

35 U.S.C. §101 (2011).

9

J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 134 (2001).

10

Id. The more specific plant protection states were the Plant Patent Act of 1930, 35 U.S.C. §§ 161-164 (2000); and The Plant Variety Protection Act of 1970, 7 U.S.C. § 2422 et. seq. (2000). The J.E.M. case basically affirmed the USPTO’s practice of granting patents on plants, first approved by the USPTO Board of Patent Appeals and Interferences in Ex parte Hibberd, 227 U.S.P.Q. (BNA) 443, 444 (1985). The USPTO had been granting patents on animals, also a controversial category, since 1988. See Nonnaturally Occurring Non-Human Animals Are Patentable Under §101, 33 Pat. Trademark & Copyright J. (BNA) No. 827, at 664 (Apr. 23, 1987). 11

See E.P.C. Art. 52.

12

See, e.g., Bilski et. al. v. Kappos, 130 S. Ct. 3218 (2010); CLS Bank Inc. v. Alice Corp. Pty, Ltd., 2013 WL 1920941 (2013). 13

450 U.S. 175 (1981).

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DRAFT matter status to computer-assisted inventions in two earlier cases, Gottschalk v. Benson 14 and Parker v. Flook, 15 the Court in Diehr held the claimed process to be patent-eligible. Full acceptance of the patent eligibility of such inventions proceeded gradually through a series of lower court decisions until the Court of Appeals for the Federal Circuit flung wide the gates to patents on business methods (in dicta no less), in the 1998 State Street Bank v. Signature Financial Group decision, holding that a transformation of data that provides a “useful, concrete, and tangible result” comprises PESM under Section 101. The decision very quickly resulted in a veritable flood of business method patent applications into the USPTO where previously there had been just a trickle. As business method patents were granted by the USPTO, infringement suits asserting these patents also proliferated, generating concerns regarding the appropriateness of such subject matter for patent protection and the ability of the USPTO to grant high quality patents in this area. Signs of an impending judicial retreat from this exceedingly broad approach to PESM arguably first appeared in In Lab. Corp. of Am. Holdings v. Metabolite Labs., Inc., relating to a diagnostic method patent where the patentee was charged with seeking to “claim a monopoly over a basic scientific relationship.” 16 The Court dismissed the grant of certiorari in the case as improvidently granted because the patent subject matter question had not been properly raised in the lower court. However, in dissent, Justice Breyer sent a warning signal to the Federal Circuit that the breadth of the State Street PESM decision was in conflict with Supreme Court precedent.17 Heeding the warning, the Federal Circuit retreated from its broad test for business method patent eligibility en banc in In re Bilski, a case involving a claim to a method of hedging risks in commodities trading.18 In a fractured decision that generated several dissenting opinions, the court articulated the “machine or transformation” test for determining the patent-eligibility of a process: a process must either be implemented on a machine or it must transform an article to a different state or thing to be eligible for patent protection. The Supreme Court granted certiorari in Bilski and, in a 5–4 decision, declined to ratify the Federal Circuit’s bright line machine or transformation test as the only determinant of process patent eligibility. Instead, the Court called for a flexible approach, upholding the rejection of

14

Gottschalk v. Benson, 409 U.S. 63 (1972).

15

Parker v. Flook, 437 U.S. 584 (1978).

16

548 U.S. 124, 125 (2006).

17

He warned: Neither does the Federal Circuit’s decision in State Street Bank help respondents. That case does say that a process is patentable if it produces a “useful, concrete, and tangible result.” But this Court has never made such a statement and, if taken literally, the statement would cover instances where this Court has held the contrary.

Id. at 136. 18

545 F.3d 943 (Fed. Cir. 2008).

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DRAFT Bilski’s application but on the ground that Bilski’s business method was an unpatentable abstract idea, without explaining how courts are to identify such abstract ideas in the future.19 Mayo Collaborative Services v. Prometheus 20 brought together business method and biotech-related PESM concerns with a patent directed to diagnostic methods, which tend to be relevant in personalized medicine, an important area for biotechnology innovation. The case also provided an opportunity for the Court to expound on the parameters of a second exclusion from patent eligibility, laws of nature, having taken on abstract ideas (with dubious success) in Bilski. The Court provided slightly more of a bright line rule in Mayo by declaring all laws of nature patent ineligible unless their application involves an inventive concept. However, how inventive additional steps have to be, and how far the notion of a law of nature reaches is still unknown. Most recently, the Court opined on the third exclusion from PESM, natural phenomena, in the Ass’n for Molecular Pathology v. Myriad Genetics, Inc.,21 case where it had granted certiorari on the question “Are human genes patentable?”22 In Myriad Genetics, a large group of plaintiffs (patients, researchers, organizations and others, all represented by the American Civil Liberties Union and The Public Patent Foundation) challenged the validity of selected claims in several of Myriad’s patents on the breast cancer susceptibility genes (BRCA1 and BRCA2) and related methods, as ineligible under § 101. The district court originally invalidated all of the claims, finding claims to isolated DNA and cDNA to be unpatentable as lacking characteristics “markedly different” from sequences found in nature. It also invalidated claims to various methods, such as “detecting a germline alteration in a BRCA1 gene” by analyzing a sequence from a human sample as abstract idea comparisons that failed the machine or transformation test. The Federal Circuit reversed (twice actually, as the Supreme Court vacated the first reversal decision and ordered reconsideration in light of Mayo, and the second Federal Circuit decision came to the same conclusion as the first) as to all except the method of comparison claims, concluding that the isolated genomic DNA (gDNA) and complementary DNA (cDNA) claims constituted patent-eligible subject matter.23 Not surprisingly, the Supreme Court reversed, in a sense splitting the baby by holding claims to isolated gDNA not patent eligible as directed to products of nature, while upholding as patent eligible non-naturally occurring complementary

19

Bilski et. al. v. Kappos, 130 S. Ct. 3218 (2010). In a concurrence, Justice Stevens disparaged the lack of guidance supplied by the majority opinion: The Court, in sum, never provides a satisfying account of what constitutes an unpatentable abstract idea. Indeed, the Court does not even explain if it is using the machine-or-transformation criteria. The Court essentially asserts its conclusion that petitioners’ application claims an abstract idea. This mode of analysis (or lack thereof) may have led to the correct outcome in this case, but it also means that the Court’s musings on this issue stand for very little. Id. at 3236. See also Mark A. Lemley, Michael Risch, Ted Sichelman & R. Polk Wagner, Life after Bilski, 63 STAN. L. REV. 1313 (2011). 20

Mayo Collaborative Serv. v. Prometheus Labs, Inc., 132 S. Ct. 1289 (2012).

Ass’n for Molecular Pathology v. United States Patent and Trademark Office and Myriad Genetics, Inc., No. 12398, slip op. at 15-16 (Jun. 13, 2013) available at http://www.supremecourt.gov/opinions/12pdf/12-398_8njq.pdf. 21

22

132 S. Ct. 1794 (2012).

Ass’n for Molecular Pathology v. United States Patent and Trademark Office and Myriad Genetics, Inc., 689 F.3d 1303, 1343-1344 (Fed. Cir. 2012). 23

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DRAFT DNA (cDNA) claims.24 Unfortunately, the reasoning underlying the Court’s distinction between the patent eligibility of gDNA and cDNA could generously be called “opaque.” In the wake of this renewed interest in PESM by the Supreme Court, and for a variety of other reasons, some of which are discussed below, PESM disputes are persisting and growing in the United States.25 And for a variety of reasons, most of which cannot be fully discussed below, patent developments in the U.S. often influence, or are at least considered in, patent developments in other countries.26 Thus it is worth exploring the players, venues, timing, and other reasons behind these enduring PESM controversies to glean a better picture of what we may expect long term in the U.S. and abroad on this topic. II.

“Who”: The Players Driving Biotech Patent Eligibility Determinations

In the United States, patent eligibility cases historically have resulted from applicants appealing USPTO Section 101 rejections up to the U.S. Supreme Court.27 However, while these cases are still an important source of challenges, other players are emerging whose interests and motivations exert new and different pressures on PESM determinations. Moreover, certain PESMrelated decisions by existing players also contribute to continued controversy in this area. A.

Non-Competitor Alleged Infringers and Civil Society

The “who” includes non-competitor alleged or potential infringers such as farmers, patients, and researchers. With the expansion in the scope of eligible subject matter has come an expansion in the kinds of entities and individuals that may find themselves charged with patent infringement. For example, Vernon Bowman and Percy Schmeiser of Bowman v. Monsanto Co.28 and Monsanto Canada Inc. v. Schmeiser29 fame, respectively, are both farmers, as are many of the hundreds of plaintiffs in the Organic Seed Growers and Trade Association et. al. v. Monsanto Co. suit.30 In J.E.M. Ag-Supply v. Pioneer Hi-Bred,31 the defendant was a seed retailer; and in Myriad Genetics, many of the plaintiffs were researchers or patients. Such individuals or groups may see Ass’n for Molecular Pathology v. United States Patent and Trademark Office and Myriad Genetics, Inc., No. 12398, slip op. at 15-16 (Jun. 13, 2013) available at http://www.supremecourt.gov/opinions/12pdf/12-398_8njq.pdf. 24

See Classen Immunotherapies, Inc. v. Biogen IDEC, 659 F.3d 1057, 1074 (Fed. Cir. 2011) (“In the last several years, this court has confronted a rising number of challenges under 35 U.S.C. § 101.”) (Rader, C.J., additional views). 25

26

See Margo A. Bagley, Ruth L. Okediji and Jay Erstling, INTERNATIONAL PATENT LAW AND POLICY (West Publ. 2013)(discussing how patent developments in the U.S. provided impetus for the EU Biotech Directive). See also Cancer Voices Australia et. al. v Myriad Genetics Inc, [2013] FCA 65 para. 129-135 (discussing the Federal Circuit Myriad Genetics decision and reaching the same result but declining to adopt its reasoning due to differences in the relevant statutory provisions in Australia and the U.S.). 27

See, e.g., Diamond v. Chakrabarty, 447 U.S. 303 (1980); Diamond v. Diehr, 450 U.S. 175 (1981), Gottschalk v. Benson, 409 U.S. 63(1972); Parker v. Flook, 437 U.S. 584 (1978), Bilski v. Kappos, 130 S. Ct. 3218, 3225 (2010). 28

Bowman v. Monsanto Co., 133 S. Ct. 1761 (2013).

29

[2004] 1 S.C.R. 902

30

Organic Seed Growers and Trade Association et. al. v. Monsanto Co., No. 2012-1298 (Fed. Cir. 2013), available at http://www.cafc.uscourts.gov/images/stories/opinions-orders/12-1298.Opinion.6-6-2013.1.PDF. 31


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DRAFT a threat from patents, to their livelihood or other interests, that either was not present in the past or was not an issue due to the absence of aggressive patent enforcers in their particular field, and may be more inclined to raise PESM challenges.32 A sometimes related “who” are civil society groups representing public interest concerns. The involvement of such groups in biotech subject matter eligibility determinations is common in Europe and can be seen both in the negotiations that resulted in the European Union Biotechnology Directive as well as several opposition challenges to patents on plants, animals, human embryonic stem cells and more at the European Patent Office and in national courts.33 However, in the United States, the involvement of such groups in patent eligibility determinations historically has been marginal at best. The Supreme Court arguably facilitated the increased involvement of the public in patent eligibility questions in the United States by relaxing the standing requirement for challenging a patent in its 2006 Medimmune v. Genentech decision. 34 According to the Federal Circuit, “[w]hether intended or not, the now more lenient legal standard facilitates or enhances the availability of declaratory judgment jurisdiction in patent cases.” 35 It appears likely that Medimmune emboldened groups such as the Public Patent Foundation (PubPat) and the American Civil Liberties Union (ACLU) to challenge Myriad’s patents on genes associated with an increased risk of breast and ovarian cancer (BRCA1 and BRCA2) on PESM grounds, and for PubPat and various farmers and organic trade groups to challenge Monsanto’s RoundUp Ready® patents on moral utility and other grounds in the Organic Seed Growers and Trade Association et. al. v. Monsanto case.36 These challenges are notable in part because the last such challenge occurred more than twenty years ago, even though many controversial patents have issued from the USPTO In addition, the rise in patent infringement suits by “patent trolls” (or, less pejoratively, “patent assertion entities”) likely is also resulting in an increase in PESM challenges. A recent study commissioned by the non-partisan Government Accountability Office found the following: 32

[L]awsuits filed by monetizers [a.k.a trolls] increased from 22% of the cases filed five years ago to almost 40% of the cases filed in the most recent year. In addition . . . of the 5 parties in the sample who filed the greatest number of lawsuits during the period studied, 4 were monetizers. Only one was an operating company. Sara Jeruss, Robin Feldman, & Joshua Walker, The America Invents Act 500: Effects of Patent Monetization Entities on US Litigation, 11 DUKE L. & TECH. REV. 357 (2012). 33

See, e.g., Shobita Parthasarathy and Alexis Walker, Observing the Patent System in Social and Political Perspective: A Case Study of Europe (this volume). Kali Murray & Esther van Zimmeren, Dynamic Patent Governance in Europe and the United States: The Myriad Example, 19 CARDOZO J. INT’L & COMP. L. 287, 321–325 (2011). Plant Genetic Systems v. Greenpeace, Ltd., T 0356/93, 1995 Official J. Eur. Pat. Off. 545 (1995), Oliver Brüstle v. Greenpeace e.V. Case C-34/10 18 October 2011. Australia also has seen its first such patent challenge in the Cancer Voices Australia et. al. v Myriad Genetics Inc, [2013] FCA 65. While standing is not an issue for such groups in Australia, the “loser pays” system does adds a considerable level of risk of financial exposure. 34

127 S. Ct. 764 (2006).

Micron Tech. v. MOSAID Tech. Inc., 518 F.3d 897, 902 (Fed. Cir. 2008) (applying an “all circumstances” test instead of its pre-Medimmune “reasonable apprehension of suit test). 35

See Ass’n for Molecular Pathology v. United States Patent and Trademark Office and Myriad Genetics, Inc., 689 F.3d 1303 (Fed. Cir. 2012). See also Organic Seed Growers and Trade Association et. al. v. Monsanto Co., No. 2012-1298 (Fed. Cir. 2013), available at http://www.cafc.uscourts.gov/images/stories/opinions-orders/121298.Opinion.6-6-2013.1.PDF. 36

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DRAFT since that time.37 After the USPTO announced in a 1987 Notice that it considered “non-naturally occurring, non-human multicellular living organisms, including animals, to be patentable subject matter” based on Diamond v Chakrabarty, opponents of patents on animals sought relief in court.38 Nine plaintiffs, including the Animal Legal Defense Fund, the American Society for the Prevention of Cruelty to Animals, and the Humane Farming Association, filed suit alleging that the USPTO Commissioner had violated the Administrative Procedures Act in filing the Notice without complying with the required public notice and comment period and sought an injunction against the issuance of any patents on multicellular living organisms, including animals, without explicit Congressional authorization.39 The plaintiffs also asked the court to hold that animals were not patentable subject matter under Section 101. In affirming dismissal of the suit for lack of standing, the Court of Appeals for the Federal Circuit noted that none of the plaintiffs were able to show “(1) “that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct” (personal injury), (2) that “the injury ‘fairly can be traced to the challenged action’ ” (causation), and (3) that the injury “is likely to be redressed by a favorable decision” (effective relief). While these requirements are still prerequisites to suit, Medimmune gave civil society groups a basis to argue (successfully in Myriad Genetics, less so, as of this writing, in Organic Seed Growers where the Federal Circuit has affirmed a denial of standing against the plaintiffs40) that these requirements were met outside of the normal patentee/competitor context. While such groups might be encouraged to bring future PESM challenges in light of the relative success of the Myriad Genetics suit, the difficulties encountered in the Organic Seed Growers case is likely to temper such challenges. Nevertheless, non-competitor plaintiffs facing infringement allegations can be expected to continue to have both the requisite standing and motivation to challenge PESM in the future. B.

Competitor Alleged Infringers

The “who” is starting to include competitors who are alleged or potential infringers. Historically, at least in the U.S., competitors sued by a patentee for infringement have avoided challenging validity on Section 101 grounds, focusing instead largely on Sections 102, 103, inequitable conduct or ownership issues.41 This behavior is not surprising, as such competitors

37

In fact, the main patents at issue in both cases issued well over a decade ago. See, e.g., U.S. Patent Nos. 5,747,282; 5,693,473; 5,837,492; 5,352,605; 5322, 938. 38

See 1077 O.G. 24 (April 21, 1987). See also Nonnaturally Occurring Non-Human Animals Are Patentable Under § 101, 33 PAT. TRADEMARK & COPYRIGHT J. (BNA) No. 827, at 664 (Apr. 23, 1987) 39

See Animal Legal Def. Fund v. Quigg, 932 F.2d 920, 924 (Fed. Cir. 1991).

40

Organic Seed Growers and Trade Association et. al. v. Monsanto, No. 2012-1298 (Fed. Cir. 2013), available at http://www.cafc.uscourts.gov/images/stories/opinions-orders/12-1298.Opinion.6-6-2013.1.PDF. See, e.g., Ass’n for Molecular Pathology v. United States Patent and Trademark Office and Myriad Genetics, Inc., 702 F. Supp.2d 181, 221 (S.D.N.Y 2011) (“[I]n the absence of a § 101 challenge to patent validity, the fact that courts have previously upheld the validity of patents directed to biological products in response to § 102 and/or § 103 challenges has no bearing on the present inquiry. . . . The Patent Act sets out patent invalidity as an issue to be raised by the parties, see 35 U.S.C. § 282, and it would be erroneous to treat a case involving DNA-related patents as holding that isolated human genes constitute patentable subject matter under § 101.”)(citations omitted). See also Christopher M. Holman, The Impact of Human Gene Patents on Innovation and Access: A Survey of Human Gene Patent 41

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DRAFT may own, or seek to own, patents on the same type of technology and would not want to categorically eliminate the subject matter from eligibility. As Professor Andrews explained more than a decade ago: There has yet to be a definitive legal case to address directly whether human genes are an appropriate subject matter for a patent in the first place. . . . [T]he court cases on gene patents are generally battles between two entities (such as a university and a biotech company) about who has rights to a particular patent. There is no incentive for either side to challenge whether a gene patent is an inappropriate patent on a product of nature because each side wants to reap the financial rewards of a gene patent.42 However, we now are seeing Section 101 challenges by competitors such as in Mayo Collaborative Services v. Prometheus Inc. 43 There, the Mayo Clinic was sued for patent infringement after deciding to discontinue use of the kit sold by Prometheus Labs and to start producing and selling its own diagnostic test kit. To the extent a competitor simply wants freedom to operate, and has other, perhaps policy-based reasons for not intending to seek patent protection on a class of inventions, such suits can be the best hope for early, clarifying, challenges to the patent eligibility of a new technology before judicial notions of “settled expectations” make it difficult to reach an objectively sound result.44 Such concerns appear to have been the deciding factor in Judge Moore joining Judge Lourie instead of Judge Bryson in the Court of Appeals for the Federal Circuit Myriad Genetics decision regarding the patent eligibility of isolated genomic DNA.45 C.

The United States Supreme Court and the Court of Appeals for the Federal Circuit

For good or for ill, the Supreme Court has chosen to eschew bright line rules in favor of murky standards, leaving further subject matter criteria development to the Federal Circuit and inviting continuing conflicts in lower court decisions regarding the proper boundaries of PESM.46 Litigation, 76 U. MO.-KAN. CITY L. REV. 295 (2007) (surveying patent infringement cases involving human gene patents). 42

Lori B. Andrews, Genes and Patent Policy: Rethinking Intellectual Property Rights, 3 NATURE REVIEWS : GENETICS, 805 (2002). 43

Mayo Collaborative Serv. v. Prometheus Labs, Inc., 132 S. Ct. 1289 (2012).

44

See infra Section III.A.


46

See generally Tun-Jen Chiang, The Rules and Standards of Patentable Subject-Matter, 2010 WIS. L. REV. 1353 (2010); John F. Duffy, Rules and Standards on the Forefront of Patentability, 51 WM. & MARY L. REV. 609, 622-23 (2009). See also Peter S. Menell, Forty Years of Wandering in the Wilderness and No Closer to the Promised Land: Bilski's Superficial Textualism and the Missed Opportunity to Return Patent Law to Its Technology Mooring, 63 STAN. L. REV. 1289, 1291 (2011) (“[T]he failure of the Bilski majority to elucidate the basis--constitutional, statutory, and/or jurisprudential—for deciphering the boundaries of patentable subject matter leaves other important industries and decision-makers in the wilderness.”). See also Rochelle C. Dreyfuss, Percolation, Uniformity, and Coherent Adjudication: The Federal Circuit Experience, 6-7 S.M.U. L. REV. (forthcoming 2013)(“The debate between the Supreme Court and the Federal Circuit over the use of bright line rules is another indicator that the sound

9

DRAFT For example, in Diamond v. Chakrabarty, the Court took an expansive view of patent eligible biotech subject matter, essentially declaring anything under the sun made by man to be eligible for patent protection, animate or inanimate, as long as the invention is “markedly different” from what exists in nature.47 But how different does something have to be to qualify as “markedly different?” In Myriad Genetics, the district court judge concluded that isolated gDNA, and cDNA, were not markedly different from native DNA in the body, and in fact their virtually identical nature was the sole basis for the value of isolated DNA.48 However, on appeal, the Court of Appeals for the Federal Circuit disagreed, concluding both types of DNA were markedly different from DNA in a human body because isolated gDNA “has been cleaved (i.e., had covalent bonds in its backbone chemically severed) or synthesized to consist of just a fraction of a naturally occurring DNA molecule)” and as such it exists “in a distinctive chemical form-as distinctive chemical molecules” from native DNA and cDNA, with its introns removed, was clearly not naturally occurring. 49 By not providing parameters for determining a marked difference from a natural product, the Supreme Court left lower courts to make policy-based decisions regarding where the patent-eligibility line should be drawn. Even after the Supreme Court decision in Myriad Genetics rejecting the patent eligibility of isolated gDNA claims and upholding the patentability of cDNA claims, the PESM boundaries in this area are still quite murky, raising perhaps as many questions as it answers that lower courts will be struggling to apply to claimed inventions for years to come.50 Moreover, the Court has refused to allow lower courts to bypass the often thorny subject matter eligibility inquiry. In Classen Immunotherapies v. Biogen,51 Chief Judge Rader opined on why the court should avoid Section 101 subject matter determinations: In the last several years, this court has confronted a rising number of challenges under 35 U.S.C. § 101. The language of § 101 is very broad. Nevertheless, litigants continue to urge this court to impose limitations not present in the statute. . . . This court should decline to accept invitations to restrict subject matter eligibility. . . . [E]ligibility restrictions usually engender a healthy dose of claimdrafting ingenuity, [evasions that] add to the cost and complexity of the patent administration of justice requires more than uniformity. The Federal Circuit is drawn to clear rules . . . and yet the Supreme Court has rejected every one of these rules.”) 47

447 U.S. 303, 310 (1980).

Ass’n for Molecular Pathology v. United States Patent and Trademark Office and Myriad Genetics, Inc., 702 F. Supp.2d 181, 221 (S.D.N.Y 2011). 48


Ass’n for Molecular Pathology v. United States Patent and Trademark Office and Myriad Genetics, Inc., No. 12398, slip op. at 15-16 (Jun. 13, 2013) available at http://www.supremecourt.gov/opinions/12pdf/12-398_8njq.pdf. For example, the Court held that isolated gDNA is not PESM because it is naturally occurring, yet suggested that claims to the subject matter might have been treated differently if drafted in terms of chemical composition as opposed to genetic information. Also, its analysis of why cDNA was indeed PESM was cursory and conclusory, and the Court explicitly declined to opine on the PESM status of other “scientific alterations of the genetic code.” Slip op. at 14-18. 50

51

Classen Immunotherapies, Inc. v. Biogen IDEC, 659 F.3d 1057, 1074 (Fed. Cir. 2011).

10

DRAFT system and may cause technology research to shift to countries where protection is not so difficult or expensive.52 Judge Rader is not alone in wanting fewer cases to be decided on patent eligibility grounds. Professors Crouch and Merges also have argued in favor of moving Section 101 inquiries to the back of the line and allowing most patentability determinations to be based on novelty, nonobviousness, or description grounds; as did the U.S. Government in Mayo Collab. Servs. v. Prometheus Labs. Inc.53 However, the Supreme Court dismissed such an approach in no uncertain terms, noting: This approach, however, would make the “law of nature” exception to § 101 patentability a dead letter. The approach is therefore not consistent with prior law. The relevant cases rest their holdings upon section 101, not later sections. . . . [We] decline the Government's invitation to substitute §§ 102, 103, and 112 inquiries for the better established inquiry under § 101.54 In response to this clear requirement to adjudicate PESM coupled with a lack of clear guidance on how to adjudicate it, the judges on the Federal Circuit are free to decide PESM questions through the prism of their particular view of appropriate patent policy. As one commentator explains in regards to the eligibility of method claims: The underlying philosophical divide in the Federal Circuit is evident in the increasingly divergent approaches to § 101 that different panels have applied over the last two decades. . . . On one side, some members of the Federal Circuit adhere to a “coarse filter” approach, characterizing § 101 as an initial filter meant to disqualify only the most bare abstract ideas that are not tied to any useful application. . . . On the other side of the divide are judges who favor a “limiting test” approach, seeking to replace the machine-or transformation test with a new formulation that would invalidate a significant number of overbroad patents under § 101 and the abstract idea exception.55

52

Id. (Chief Judge Rader, additional views).

53

See Dennis D. Crouch & Robert P. Merges, Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making, 25 BERKELEY TECH. L.J.1673 (2010). See also Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012). 54

Id. See also Rebecca S. Eisenberg, Wisdom of the Ages or Dead–Hand Control? Patentable Subject Matter for Diagnostic Methods After In re Bilski, 3 CASE W. RES. J.L. TECH. & INTERNET 1 (2012) ((“Some scholars have suggested that patentable subject matter is redundant to other doctrinal limitations on patentability that would support the same outcomes, raising the question of whether it is necessary or appropriate to use patentable subject matter limitations to do this work. But these other doctrines may sometimes fail, leaving patentable subject matter limitations as a backstop. Doctrinal redundancy is a common feature of legal systems and may make sense if the interest at stake is important.”). 55

Dina Roumiantseva, The Eye of the Storm: Software Patents and the Abstract Idea Doctrine in CLS Bank v. Alice (March 10, 2013), 28 BERKELEY TECH. L.J. (July 2013), forthcoming. Available at SSRN: http://ssrn.com/abstract=2231250

11

DRAFT The 2013 CLS Bank Int’l v. Alice Corp. Pty. Ltd. decision provides a timely illustration of this conundrum.56 In CLS Bank, the ten member en banc Federal Circuit delivered a disturbingly fractured per curium opinion with a fifty-four word majority holding and seven separate opinions, spanning 135 pages. No single opinion, concurring or dissenting, garnered a majority of votes, thus the simple holding of patent in-eligibility has no rationale supporting it on which lower courts, and later Federal Circuit panels, can rely. While the CLS Bank case dealt with method, system, and computer-readable medium claims directed to lessening the settlement risk of financial instrument trades, the problems with PESM determinations it evidences are not limited to a particular technological environment. D.

The United States Congress

Congress recently waded into the PESM waters with the 2011 Leahy-Smith America Invents Act (AIA), 57 which included three relatively new opportunities for PESM challenges: codification of the Weldon amendment,58 the Tax Strategy Patent provision and the transitional Covered Business Method Program. The Weldon amendment prevents the issuance of patents “encompassing a human organism” and was apparently designed to give effect to the USPTO’s interpretation of the Thirteenth Amendment as banning patents on humans.59 It is new to the patent statute, but not new to U.S. law as it has been included in annual appropriations bills since 2004. The provision states “[n]otwithstanding any other provision of law, no patent may issue on a claim directed to or encompassing a human organism.” While Section 33 of the AIA does not amend Section 101 of the Patent Act, it is a type of PESM limitation and it is ripe for litigation, as key terms such as “human” and “encompassing” are not defined in the statute.60 Section 14 of the AIA contains a limitation on patents directed to tax avoidance strategies, providing that “[f]or purposes of evaluating an invention under section 102 or 103 of title 35, . . . any strategy for reducing, avoiding, or deferring tax liability, whether known or unknown at the time of the invention or application for patent, shall be deemed insufficient to differentiate a claimed invention from the prior art.” Section 14 thus serves as an indirect PESM limitation, as a tax strategy alone cannot qualify for a patent. Finally, Section 18 of the AIA creates an eight-year window for a party who has been sued for infringement of a covered business method (CBM) to challenge the patent in a special, speedy, post grant review (PGR) proceeding and simultaneously

56

2013 WL 1920941 (2013).

57

P.L. 112-29 (2011).

58

Id. at Sec. 33. The provision is named after Representative David Weldon, M.D., the Congressman who introduced the bill. 59

See Commissioner of Patents and Trademarks, Policy Statement on the Patentability of Animals, 1077 Off. Gaz. Pat. Office 24 (April 7, 1987). See also Wendy H. Schacht and John R. Thomas, The Leahy-Smith Act: Innovation Issues, Congressional Research Services, 19 (2013), available at http://www.fas.org/sgp/crs/misc/R42014.pdf. The USPTO Manual of Patent Examining Procedure (MPEP) states “If the broadest reasonable interpretation of the claimed invention as a whole encompasses a human being, then a rejection under 35 U.S.C. 101 must be made indicating that the claimed invention is directed to non-statutory subject matter.” MPEP 2105. 60

12

DRAFT stay the infringement suit.61 The statute defines a “covered business method patent” as “a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.”62 The first challenge under Section 18 was filed on September 16, 2012, the effective date of the provision, by SAP against Versata, with SAP arguing that the claims at issue were not directed to PESM.63 The USPTO agreed with SAP and invalidated the claims under 35 U.S.C. §101.64 These three new provisions have the potential to generate an increasing number of PESM challenges in the future. Of course, this is not a comprehensive list of the players whose actions are affecting PESM disputes, nor are their actions only affecting the Section 101 inquiry.65 But these selected examples do illustrate the important impact changing dynamics in system participants can have on the incidence and determination of patent questions. III.

“When” and “Where” Challenges are Occurring (and Why It Matters)

In addition to developments in PESM participants, we are also seeing changes in where disputes are being adjudicated and possibly also when. Interestingly, both timing and location can affect the outcome and availability of PESM challenges. A.

Timing of PESM Disputes In the United States, third party PESM challenges sometimes are not brought until long after the USPTO has started granting patents in the area. 66 This is likely due, at least in part, to the facts, as noted earlier, that pre-AIA post grant proceedings in the USPTO did not allow for PESM challenges and that competitors historically have been loath to use PESM deficiencies as an infringement defense. This is unlike the situation in the European Patent Office and elsewhere, where post-grant opposition proceedings allow patent eligibility questions to be raised by third 61

See P.L. 112-29 Sec. 18 (2011). The regular PGR procedure created by the AIA only applies to patents including a claim with an effective filing date on or after March 16, 2013, the effective date of the AIA first-inventor-to-file provisions. 62

Id.

63

SAP America, Inc. v. Versata Development Group, Case CBM2012-00001 (MPT) (PTAB Jan. 9, 2013).

64

Id.

65

For example, special interest groups who lobbied Congress for the various statutory changes, amici who write persuasive briefs encouraging or discouraging review in a particular case, the Solicitor General when asked by the Supreme Court for input on whether to hear a case, and many more are all important players in the patent system generally and in PESM disputes more particularly. See generally John F. Duffy, The Federal Circuit in the Shadow of the Solicitor General, 78 GEO. WASH. L. REV. 518 (2010)(describing the USSC’s increasing reliance on the views of the solicitor General in deciding whether to grant certiorari in patent cases); Nicholas Thompson, Gene Blues, THE WASHINGTON MONTHLY, April 2001, p. 14 (discussing special interest groups); Colleen V. Chien, Patent Amicus Briefs: What the Courts’ Friends Can Teach Us About the Patent System, 1 U.C. IRVINE L. REV. 395, 388 & n. 21 (2011)(noting the filing of over 1,000 briefs in Federal Circuit and Supreme Court patent cases over a 20-year period).. See, e.g., J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 134 (2001). , Ass’n for Molecular Pathology v. United States Patent and Trademark Office and Myriad Genetics, Inc., 689 F.3d 1303, 1343-1344 (Fed. Cir. 2012). 66

13

DRAFT parties very early in the life of a patent.67 The fact that challenges are often brought long after many patents have been granted in a biotech area appears to affect some court conclusions of patent subject matter eligibility due, at least in part, to concerns regarding the impact on innovation incentives and the effects on long-standing property rights and settled expectations. In her concurring opinion in Myriad Genetics, Judge Moore explained the importance of settled expectations, citing Supreme Court precedent: If I were deciding this case on a blank canvas, I might conclude that an isolated DNA sequence that includes most or all of a gene is not patentable subject matter. The scope of the law of nature/manifestation of nature exception was certainly enlarged in Prometheus. But we do not decide this case on a blank canvas. . . . [T]he United States Patent Office has allowed patents on isolated DNA sequences for decades, and, more generally, has allowed patents on purified natural products for centuries. There are now thousands of patents with claims to isolated DNA, and some unknown (but certainly large) number of patents to purified natural products or fragments thereof. . . . I believe we must be particularly wary of expanding the judicial exception to patentable subject matter where both settled expectations and extensive property rights are involved. . . . The settled expectations of the biotechnology industry—not to mention the thousands of issued patents—cannot be taken lightly and deserve deference. This outpouring of scientific creativity, spurred by the patent system, reflects a substantial investment of time and money by the biotechnology industry to obtain property rights related to DNA sequences. The type of fundamental alteration in the scope of patentable subject matter argued in this case “risk[s] destroying the legitimate expectations of inventors in their property.”. . . The Supreme Court has warned that “courts must be cautious before adopting changes that disrupt the settled expectations of the inventing community.” . . . “ ‘To change so substantially the rules of the game now,’ ” after more than a century of practice, “ ‘could very well subvert the various balances the PTO sought to strike when issuing the numerous patents which have not yet expired and which would be affected by our decision.’”68 Although Judge Moore’s reasoning was not dispositive for the Supreme Court in the Myriad Genetics case, the Court has previously given much weight to settled expectations in some of its decisions, giving lower courts the basis to do so as well in future cases. 69 Consequently, 67

See discussion supra at __.


See Ass’n for Molecular Pathology v. United States Patent and Trademark Office and Myriad Genetics, Inc., No. 12-398, slip op. at 15-16 (Jun. 13, 2013) available at http://www.supremecourt.gov/opinions/12pdf/12-398_8njq.pdf (refusing to defer to the USPTO’s practice of granting isolated DNA patents in part due to change in governments position regarding eligibility of such claims). See generally Microsoft v. i4i (relying in part on settled expectations in retaining clear and convincing evidence standard for presumption of validity), J. E. M. Ag Supply, Inc. v. Pioneer HiBred Int’l, Inc. , 534 U.S. 124 (2001) (relying in part on USPTO’s 16+ year practice of granting plant patents in deciding case); Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 739(2002) (“[C]ourts must be cautious before adopting changes that disrupt the settled expectations of the inventing community.” (citing Warner– Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 28(1997))). 69

14

DRAFT when a PESM challenge is brought can affect the PESM decision, suggesting that challenges earlier in the life of a patent may be more likely to focus on the true merits of the case. 70 If we begin seeing challenges sooner, before rights and expectations are entrenched, such as through the new Post Grant Review (PGR) proceeding established by the AIA or as a result of the new players in the system, that could have an important effect on judicial determinations of eligibility. B.

“Where” Patent Eligibility Challenges are (for now) Occurring

New venues and challenges are increasing the importance of where patent eligibility challenges can take place. Conversely, the increase in patent eligibility disputes and the lack of clear guidance on how to adjudicate the PESM question may be contributing to a move to eliminate some venues as a way to reduce the number of, or completely eliminate, such challenges. 1. The USPTO: In many countries, patent office challenges to a granted patent may be brought in the patent office during a limited period of time after grant; for example, nine months in the European Patent Office (EPO),71 through an opposition proceeding. Post-grant opposition proceedings, such as those in the EPO, include the opportunity for oral hearings and significant participation by third parties. As earlier noted, the AIA gave the United States an opposition proceeding called Post Grant Review (PGR), which applies to patents obtained under the new firstinventor-to-file rules.72 PGR challenges must be initiated within the first nine months after a patent grant, and can be based on most patentability criteria, including Section 101 subject matter eligibility, unlike the other USPTO third party challenge proceedings (inter partes reexamination, ex parte reexamination, and inter partes review) which were and are limited to issues of novelty and non-obviousness.73 PGR thus creates a new venue, the patent office, for patent subject matter eligibility challenges in the United States. While PGR only applies to post-AIA patents, the AIA also created a special PGR for certain pre-AIA “Covered Business Method” patents, as discussed above in relation to the SAP v. Versata case.74 2. District Court under the APA: In Exela PharmaSciences, LLC v. Kappos,75 the district court approved a different strategy for patent infringement defendants to challenge the improper issuance of a patent later asserted against them. The court denied a motion by the USPTO to dismiss a declaratory judgment action against the USPTO under the Administrative Procedure Act (APA) for issuing the patent. The decision appeared to hold real promise as an additional avenue for parties seeking to challenge the issuance of patent on subject matter eligibility grounds.

70

However, the converse is that a court may be hesitant to stifle a technology near its inception before harms and benefit have been meaningfully demonstrated. See, e.g., Greenpeace v Plant Genetic Systems NV, ([1995] 8 OJ EPO 545 (refusing to revoke patent under EPC Art. 53 since at the time of the decision sufficient evidence had not been adduced of a threat to the environment from commercialization of the invention.) 71

European Patent Convention, Art. 99 (2007), available at http://www.epo.org/law-practice/legal-texts/epc.html.

72

See 35 U.S.C. §321 (2012).

73

See 35 U.S.C. §§ 303, 311, and 321 et. seq. (2012).

74

Need cite for case

75

2012 WL 3638552 (2012).

15

DRAFT However, on December 6, 2012, the Federal Circuit held in a different case, Pregis Corp. v. Kappos,76 that a competitor who has been sued as an infringer cannot lodge an APA challenge against the USPTO’s issuance of a patent. This issue thus is likely to be the subject of a petition for certiorari to the U.S. Supreme Court in the future and may, ultimately, provide an additional path to challenge USPTO patent eligibility determinations. 3. District Court Patent Infringement/Declaratory Judgment Proceedings: An interesting effort to eliminate subject matter eligibility determinations in U.S. courts is the argument that courts are barred from adjudicating Section 101 PESM questions in patent infringement or declaratory judgment litigation. This argument was recently advanced in the RMail v. Amazon.com and PayPal case in the Eastern District of Texas. As argued by Rmail in response to a motion for summary judgment on ineligible subject matter: The entire jurisprudential "murky morass" of subject matter eligibility need not arise again in any litigation. Rmail acknowledges that this argument is for the good faith extension or modification of existing caselaw. Courts until now have uniformly overlooked Congressional will on this question. Namely, while Section 101 analyses are appropriate in Patent Office application proceedings, this Court lacks any statutory basis for analyzing Section 101 issues as a litigation defense. . . . Under the Patent Act of 1952, only enumerated patent defenses exist. If an issue is not denominated an infringement defense within the Patent Act, then the Court lacks jurisdiction to address it. . . . It does not matter that the statutory misinterpretation has lasted so long, or so pervades conventional thinking. . . . Prometheus, admittedly arose within an infringement defense context. However, no one seems to have pointed out to the Supreme Court this important threshold issue of statutory construction, and statutory limitations on the powers of the federal courts. Prometheus thus does not bar this Court from issuing a correct ruling in the present adversarial context.77 35 U.S.C. 282 specifies defenses that must be alleged in a civil action on a patent: The following shall be defenses in any action involving the validity or infringement of a patent and shall be pleaded: (1) Noninfringement, unenforceability,

absence

of

liability

for

infringement

or

(2) Invalidity of the patent or any claim in suit on any ground specified in part II of this title as a condition for patentability, (3) Invalidity of the patent or any claim in suit for failure to comply with – (A) any requirement of section 112, except that the failure to disclose the best mode shall not be a basis on which any claim of a patent may be canceled or held invalid or otherwise unenforceable; or 76

2012 WL 6051956.

77

RMail v. Amazon.com and PayPal, Case 2:10-cv-00258-JRG, 25-27 (E.D.Tx 2012)(citations omitted).

16

DRAFT (B) any requirement of section 251. (4) Any other fact or act made a defense by this title. As Rmail further notes: Only parts (2) or (4) [of Section 282] may even arguably apply to subject matter ineligibility under Section 101. Part (2) does not apply because the “ground specified in part II of this title as a condition for patentability” applies solely to Sections 102 and 103 (as confirmed by their headings). Part (4) does not apply because statutory language must clearly demarcate a fact or act as a litigation defense for it to apply.78 Professors Hricik 79 and Crouch 80 have also opined on the availability of PESM as a litigation defense under Section 282, and Chief Judge Rader argued in favor of such a reading of the statute in his additional reflections in the CLS Bank case, noting that “the Supreme Court long ago held that Section 101 is not a “condition of patentability” [and] the statute does not list Section 101 among invalidity defenses to infringement.”81 Actually, Supreme Court precedent appears rather murky on the issue;82 thus, a court ultimately will need to confirm or refute the availability of Section 101 challenges in USPTO and district court actions. Because Section 282 also governs challenges in the AIA PGR proceedings, 83 a determination that PESM challenges under Section 101 are not allowable under Section 282 seemingly would have the further troubling effect of eliminating the USPTO as a venue for such

78

Id. at 26.

79

David Hricik, Are the Courts Correct in Their Assumption that a Patent Issued on Non-patentable Subject Matter is Invalid?, (Aug. 27, 2012), available at http://www.patentlyo.com/patent/2012/08/are-the-courts-correct-in-theirassumption-that-a-patent-issued-on-non-patentable-subject-matter-is-invalid.html. A counter proposition by Professor Mark Lemley in commenting on Professor Hricik’s post is that “102, 103, 112, 251 are defenses that must be pled, but 101 are threshold issues that are not defenses at all, but pure questions of law, and therefore not things on which the defendant bears the burden of proof, and which can be raised even if not pled.” Dennis Crouch, Can a Third Party Challenge Section 101 Subject Matter Eligibility in the USPTO’s new PostGrant Review Procedure?, (Aug. 29, 2012), available at http://www.patentlyo.com/patent/2012/08/can-a-third-partychallenge-section-101-subject-matter-eligibility-in-the-usptos-new-post-grant-review-procedure.html. 80

81

CLS Bank Inc. v. Alice Corp. Pty, Ltd., 2013 WL 1920941, 60 (2013).

82

For example, in Graham v. John Deere, 383 U.S. 1 (1966), the Court stated "The [Patent] Act sets out the conditions of patentability in three sections. An analysis of the structure of these three sections indicates that patentability is dependent upon three explicit conditions: novelty and utility as articulated and defined in § 101 and § 102, and nonobviousness, the new statutory formulation, as set out in § 103." Although it does not mention subject matter, according to the Federal Circuit (in dicta) it is “beyond question” that subject matter is a condition of patentability. See Aristocrat Tech. v. Int'l Game Tech., 543 F.3d 657, 661-63 (Fed. Cir. 2008). 83

See 35 U.S.C. §311 (2011).

17

DRAFT challenges, potentially leaving alleged infringers, civil society groups and other interested parties with no opportunity to challenge patents on PESM grounds.84 IV.

The “Why” of Continued Patent Eligible Subject Matter (PESM) Controversies

There are many factors contributing to the enduring nature of patent subject matter eligibility inquiries and a variety of explanatory theories have been put forward by scholars.85 The few examples discussed below show interesting connections with several recent patent eligibility cases and illustrate some of the many reasons why we are continuing, and will continue, to see patent eligibility challenges.. A.

Technological Advances and the Patent Incentive

As the United States Supreme Court noted in Bilski, “[T]imes change. Technology and other innovations progress in unexpected ways . . . Section 101 is a “dynamic provision designed to encompass new and unforeseen inventions.” 86 Despite Section 101’s ostensibly “dynamic nature, as Professor Duffy notes, “law follow[s] technology.”87 That lag creates legal uncertainty during the period of time before the courts are able to adjudicate the subject matter issue (which, as noted above, may be a very long time indeed). According to Abraham Lincoln, patents added “the fuel of interest to the fire of genius.”88 This is because patents can be powerful weapons, allowing their owners to block off markets, charge monopoly pricing, gain leverage in negotiations, change the competitive landscape and much more. Thus the incentives to obtain patent protection are strong. And that creates pressure on patent subject matter boundaries. As Professor Sarnoff explains: Given the substantial incentives to seek patents on applications of newly discovered but categorically ineligible science, nature, and ideas at the forefront of medical and biotechnological research and development, we can continue to expect disputes over patent eligibility to arise. Such disputes will likely be hotly contested due to the long-standing historical normative commitments to protecting this public domain from piecemeal encroachment through wholesale or more limited retail 84

It is theoretically possible that the USPTO could raise, sua sponte, the issue of patent eligibility as an extraordinary action in a reexamination, similar to the withdrawal from issue in Blacklight Power Inc. v. Rogan, 295 F.3d 1269 (Fed. Cir. 2002). 85

See, e.g., Kevin E. Collins, Prometheus Laboratories, Mental Steps, and Printed Matter, 50 HOUSTON L. REV. 391 (2012); Joshua D. Sarnoff, Patent-Eligible Inventions After Bilski:History and Theory, 63 HASTINGS L J. 53 (2011); Efthimios Parasidis, A Uniform Framework for Patent Eligibility, 85 TUL. L. REV. 323, 329 (2010); Arti Rai, Addressing the Patent Gold Rush: The Role of Deference to PTO Patent Denials, 2 WASH. U. J.L. & POL'Y 199 (2000)). . 86

Bilski et. al. v. Kappos, 130 S. Ct. 3218, 3227 (2010).

87

John F. Duffy, Why Business Method Patents?, 63 STAN. L. REV. 1247, 1263 (2011)(arguing that patents on business methods arose due to technological and industrial changes that in effect transformed many business fields into branches of engineering, and that law followed and accommodated these developments). 88

Abraham Lincoln, a Lecture on Discoveries and Inventions (1859), cited in MICHAEL NOVAK, THE FIRE OF INVENTION, THE FUEL OF INTEREST: ON INTELLECTUAL PROPERTY 6 (AEI Press 1996)

18

DRAFT patent claims to those discoveries. Furthermore, with the accelerating pace of scientific and technological discoveries, we can expect to confront these complex issues of eligibility in regard to a wide range of new and important products and processes, such as personalized medicine, computational genomics, synthetic agriculture, nanotechnology, and so on.89 Because knowledge will continue to increase, patent offices will continue to be faced with mapping Section 101 and other statutes/treaties onto new and complex technological developments resulting in continued controversies. And, as noted by Professor Dreyfuss, the “traditional tools for balancing public and private interests are largely broken,” thus “it is no wonder, then, that subject matter challenges have been on the upswing in U.S. courts.”90 B.

Percolation and the Federal Circuit

Professor Dreyfuss traces some of the problems we see in patent law doctrinal development to creation of the Federal Circuit, which has resulted in a lack of percolation of patent law issues in the appellate courts,91 and which may be a significant contributing factor in why we see so much dissatisfaction with Supreme Court PESM decisions. When an issue is the subject of a regional circuit split and the USSC grants certiorari, the issue likely has come before different courts in varied factual scenarios leading to diverse judgments, thus allowing the USSC to see a variety of facets of the problem and adjudicate accordingly. When the Court grants certiorari in a CAFC case, if it is a bad case on the facts, we may be more likely to see “bad law” resulting.92 According to Professor Dreyfuss: [I]t is time to consider whether the proceduralists who founded the court were wrong to dismiss the role of percolation. After all, federal law is not typically the product of a dialogue between two courts hierarchically related to one another. . . . in a country as complex as the United States, the adjudicatory system is stronger when courts have overlapping jurisdiction and the independence to question one another, modify each other’s outcomes, and resolve similar issues differently; that the Supreme Court benefits from—and depends upon—this activity; and that percolation provides important information to Congress.93 Applying this reasoning to a recent decision, one can view Bowman v. Monsanto as an unfortunate case for the Supreme Court to take on the question of patent exhaustion for self89

Joshua D. Sarnoff, Patent Eligible Medical and Biotechnology Inventions After Bilski, Prometheus, and Myriad, 19 TEX. INTELL. PROP. L.J. 393 (2011). 90

Rochelle C .Dreyfuss, Implications of the DNA Patenting Dispute: A U.S. Response to Dianne Nicol, Journal of Law, Information & Sci. (2012), DOI:10.5778/JLIS.2012.22, EAP 1-2 (citing the basic research defense, compulsory licensing, and patent misuse as some of the broken tools). 91

Rochelle C. Dreyfuss, Percolation, Uniformity, and Coherent Adjudication: The Federal Circuit Experience, 6-7 S.M.U. L. REV. (forthcoming 2013)[hereinafter “Percolation”]. 92

Id., citing Frederick Schauer, Do Cases Make Bad Law?, 73 U. CHI. L. REV. 883 (2006), for the notion that not only hard cases, but all cases can make bad law. 93

Id. at 15-16.

19

DRAFT replicating technologies because Mr. Bowman actually was trying to obtain the benefits of the patented RoundUp Ready® genetically modified seed technology through his activities. 94 A different set of facts before a different regional circuit court could have resulted in a different appellate result and a different set of considerations for contemplation and review by the Supreme Court. For example, in the Organic Seed Growers and Trade Association v. Monsanto Co. case, the farmer-plaintiffs do not want genetically modified seeds and pollen in their fields and fear being sued for infringement due to contamination they absolutely will not take advantage of yet cannot avoid.95 A different merits decision by an appellate court in this case could, perhaps, have resulted in a different decision by the Court on this important issue. Professor Dreyfuss also notes that a lack of percolation can also be detrimental to patent law development on the way down from Supreme Court review.96 Federal Circuit judges who have made public statements regarding a particular issue may not be as amenable to gracefully accepting the Court’s decision (with its often opaque analysis) as judges on a different court which had not been reversed (which would be more likely to happen with certiorari granted to resolve a circuit split). As she explains, the Supreme Court often leaves the hard work of implementing its approach to further development below. In the context of the Federal Circuit, this is a real problem. First, it is difficult for any court to figure out how to implement a standard with which it does not agree, and that is especially true, as it often is with the Federal Circuit, when an en banc (rather than a circuit split) was the signal to grant certiorari. In such cases, every judge suffers from anchoring and framing effects; each has already debated the issue with everyone else on the court and staked out a public position. Second, because the Federal Circuit is more specialized that the Supreme Court, its judges can become intellectually complacent (some might call it arrogant) about whose resolution is correct.97 For example, in CLS Bank v. Alice, a post-Mayo PESM case, Chief Judge Rader, criticized the Court’s broad characterization of a “law of nature” in Mayo, stating that “equating the personalized medicinal effect of a human-created pharmaceutical in patients of different metabolic rates and genetic makeups with the speed of light (or even gravity) is only possible in a netherworld of undefined judicial insights.”98 This is interesting, in part because, as noted above, the Chief Judge stated in Classen that he would prefer courts to avoid Section 101 enquiries, an approach rejected in no uncertain terms by the Supreme Court in Mayo.99 Unfortunately, we can expect the

94

Bowman v. Monsanto Co., 133 S. Ct. 1761 (2013).

95

See Organic Seed Growers and Trade Association et. al. v. Monsanto, No. 2012-1298 (Fed. Cir. 2013), available at http://www.cafc.uscourts.gov/images/stories/opinions-orders/12-1298.Opinion.6-6-2013.1.PDF. See also Margo A. Bagley, The Wheat and the GMO Tares: Lessons from Plant Patent Litigation and the Parables of Christ, 11 ST. THOMAS L.J. (forthcoming 2013, Symposium issue). 96

Dreyfuss, Percolation at 18.

97

Id.

98

CLS Bank Inc. v. Alice Corp. Pty, Ltd., 2013 WL 1920941, 61 (2013) (Rader, C.J., additional reflections).

99

See supra Section II.C.

20

DRAFT effects of this lack of percolation to manifest themselves in patent eligibility determinations and other patent disputes, for the foreseeable future. C.

Patent Inflation

Another “why” underlying the continuing biotech subject matter eligibility controversies is the notion of “Patent Inflation” theorized by Professor Jonathan Masur. 100 According to Professor Masur, the asymmetrical relationship between the USPTO and the CAFC causes, over time, a gradual expansion in patent subject matter boundaries. As he explains: If a patent applicant is denied a patent by the PTO, she can appeal that denial to the Federal Circuit. However, if the PTO grants the patent, no other party has the right to appeal that grant. Accordingly, the PTO can avoid appeals and reversals, both of which are costly in monetary and reputational terms, simply by granting any patent that the Federal Circuit might plausibly allow. Because the PTO will grant nearly any plausible patent, the vast majority of rejected applications that are appealed to the Federal Circuit will concern boundary-pushing inventions that are unpatentable under current law. Occasionally, a particularly patent-friendly panel of Federal Circuit judges will elect to reverse the PTO and grant a patent that the Agency has denied. The Federal Circuit’s decision will create a new, inflationary precedent. The boundaries of patentability will expand slightly, as this new precedent exerts influence on the other circuit judges. And as the Federal Circuit’s conception of what may be patented expands, the PTO will similarly inflate its own standards in order to maintain an adequate margin for error and avoid denying a patent that the Federal Circuit is likely to grant on appeal. Patent law will thus be subject to a natural inflationary pressure. While the patent inflation theory is not without its critics or flaws, 101 it does have explanatory power, particularly in the area of biotech patents. The overt102 and covert103 expansion in patent subject matter eligibility by the USPTO certainly contributed to cases such as J.E.M. Ag100

Jonathan Masur, Patent Inflation, 121 YALE L.J. 470 (2011). Professor Wasserman proposes a similar theory in Melissa F. Wasserman, The PTO’s Asymmetric Incentives: Pressure to Expand Substantive Patent Law, 72 OHIO ST. L.J. 379 (2011). See, e.g., Arti K. Rai, Who’s Afraid of the Federal Circuit? 121 YALE L.J. ONLINE 335 (2011) (responding to Masur’s article), Lisa Larrimore Ouellette, What are the Sources of Patent Inflation? An Analysis of Federal Circuit Patentability Rulings, 121 Yale L.J. Online 347 (2011) (same). Also, recent research indicates that patentability decisions vary considerably by examiner at the USPTO, making it exceedingly difficult to assess a particular policy approach by the agency. See Mark A. Lemley and Bhavan Sampat, Examiner Characteristics and Patent Office Outcomes, 94 REV. OF ECON. & STATS. 817 (2012) (pointing to the importance of human resource policies as patent system reform levers as “the most important decisions made by the patent office are significantly affected by the happenstance of which examiner gets an application.”) 101

102

Such as the 1987 Notice regarding the patenting of animals, see supra note __.

103

Like the unannounced decision to stop denying patents on mammalian cloning methods, originally adopted because such patents, under 35 U.S.C. §271(g), could “encompass” a human as the provision grants exclusionary power over products (e.g., cloned humans) to owners of patents on processes (e.g., human cloning). See Office Action, U.S. Pat. Application No. 08,935,052, Mar. 28, 1999 (issued as U.S. Pat. No. 6,235,970), discussed in Margo A. Bagley, Patent First, Ask Questions Later: Morality and Biotechnology in Patent Law, 45 WM. & MARY L. REV. 469, 506-507 (2003).

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DRAFT Supply104 and Myriad Genetics105 finally reaching the Supreme Court, and, as discussed above, there are enough differing views of the proper boundaries of PESM on the Federal Circuit to create the opportunity, with any given panel, for a further expansion. While the new Post Grant Review procedure created by the AIA will allow concerned parties to attack the grant of a patent on Section 101 grounds, the proceeding is costly, which may give pause to would-be challengers.106 D.

Chain Reaction

Another driver of biotech patent subject matter controversies appears to be the “tit for tat” chain reaction phenomenon identified by Professor Sabrina Safrin. Professor Safrin posits that the expansion of patent subject matter eligibility requirements to grant property rights in genetic material, begun in the Diamond v. Chakrabarty decision, initiated a “chain reaction” leading to the desire among biodiversity-rich developing countries for second generation property rights over genetic resources used to create inventions. As she explains: Developing countries harbor the greatest amount of the world’s naturally occurring genetic material . . . . Why, these countries asked, should individuals and companies from gene-poor developed countries obtain genetic material free of charge from gene-rich developing countries when they then patent these genes and at times sell them back to the country where the genetic material originated? Moreover, developing countries faced increasing pressure to extend patent protection to man-made living organisms and their genetic material . . . . The key operating dynamic is that of a tit-for-tat. Namely, if developed countries assert and demand that developing countries recognize intellectual property rights over manmade living organisms and isolated and purified genetic sequences, then developing countries believe that they should also assert property interests over the raw genetic material that may contribute to the patented goods. Raw genetic material has contributed to pharmaceutical innovations and improved crops from time immemorial. Yet sovereigns only asserted ownership rights over this material after the patent system recognized private ownership rights over the material and internationalized these property rights.107 Many biodiversity-rich countries such as China, India, and Brazil, have enacted biodiversity protection laws that regulate access to genetic resources and their use in creating inventions so as to enable the sharing of the benefits garnered from the resources with the providing country. In view of Professor Safrin’s theory, it is interesting and ironic to note that a biotech 104


Ass’n for Molecular Pathology v. United States Patent and Trademark Office and Myriad Genetics, Inc., No. 12398, slip op. at 15-16 (Jun. 13, 2013) available at http://www.supremecourt.gov/opinions/12pdf/12-398_8njq.pdf. 105

See discussion supra at__. See also Elizabeth A. Doherty, IPR and PRG: They are NOT “American Oppositions,” http://www.aiablog.com/global-harmonization/ipr-and-pgr-they-are-not-american-oppositions/ (“The current filing fee for an EPO opposition is €745. As of March 2013, the current filing fee for an IPR or PGR is $23,000 or $30,000, respectively, plus additional fees for challenging more than 20 claims. Moreover, because of the lack of discovery, an EPO opposition is a lower cost proceeding overall.”) 106

107

Sabrina Safrin, Chain Reaction: How Property Begets Property, 82 NOTRE DAME L. REV. 1917, 1928-1931 (2007).

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DRAFT patent subject matter challenge (based on a biodiversity law which was itself enacted in response to the expansion of patent subject matter to include living things) has been lodged at the European Patent Office against European patent number EP 1962578 issued to Monsanto Invest B.V. on May 4, 2011 for closterovirus-resistant melon plants. Two oppositions to the melon patent were filed before the opposition period ended in February 2012: One based on lack of novelty and inventive step filed by Nunhems, the vegetable seed-producing subsidiary of Bayer CropScience, the other from a coalition of NGOs acting under the name "No Patents on Seeds."108 The coalition has asserted technical arguments against the patent, but the opposition papers also charge that the melon claimed “is not patentable under Article 53(a) as it is against order public for violating provisions of the Indian Biological Diversity Act, 2002.” In other words, the group is arguing that because Monsanto did not comply with the biodiversity law in India in obtaining genetic material for its invention, that should be grounds for invalidating the patent under Article 53(a), which provides “European patents shall not be granted in respect of: (a) inventions the commercial exploitation of which would be contrary to "ordre public" or morality . . . .”109 While the chances that the opposition on Article 53(a) grounds will be successful seem slim, the novel use of biodiversity law violations as a basis to challenge PESM is another reason to expect biotech subject matter challenges to continue. E.

Patent First, Ask Questions Later

As biotechnological advances increase and create new opportunities, they often also create or revive questions regarding the role societal concerns (e.g., environmental, moral, legal, and ethical) should play in determining limits on patent subject matter. As noted earlier, the World Trade Organization’s (WTO) Agreement on Trade Related Aspects of Intellectual Property (TRIPS) allows member countries to exclude inventions from patentability based on morality, public order, environmental and other concerns, and many countries have incorporated such exclusions into their laws. Moreover, proposals (and in some cases, requirements) for patent applications to include additional information, which may impact patentability determinations, on issues such as the origin of genetic resources used in creating the invention, are indicative of a more critical view of appropriate patent subject matter limits.110 Such considerations are largely foreign to United States patent law which tends to view technological progress as synonymous

108

See EPO, The Melon Patent Case-FAQ, http://www.epo.org/news-issues/issues/melon.html. The coalition apparently is supported by a diverse group of organizations, including the Berne Declaration (Switzerland), GeneWatch (UK), Greenpeace (Germany), Misereor (Germany), Development Fund (Norway), No Patents on Life (Germany), Reseau Semences Paysannes (France) and Swissaid (Switzerland). These organizations are seeking a revision of EPC to exclude breeding material, plants and animals and food from patentability. More than 250 organizations and over 50,000 individuals have signed a petition to this effect. See also Vandana Shiva, Opposition to Monsanto´s Patent on Indian Melon, NAVDANYA (Feb. 3, 2012), http://www.navdanya.org/news/223-oppositionto-monsantoas-patent-on-indian-melon. 109

European Patent convention Article 53(a).

110

See QUEEN MARY INTELL. PROP. INST. REPORT ON DISCLOSURE OF ORIGIN IN PATENT APPLICATIONS 52-55 (Oct. 2004), available at http://trade.ec.europa.eu/doclib/docs/2005/june/tradoc_123533.pdf (describing a variety of such requirements in national laws).

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DRAFT with societal progress.111 Certainly from Chakrabarty to the present, the United States has taken the lead in pushing the boundaries of patent eligible biotech subject matter. As a group, biotech inventions tend to be more likely than most to implicate moral considerations, either because of concerns that some research should not be conducted and patents provide government-granted incentives for that research, or concerns that the underlying research should be conducted and should be free from exclusive rights.112 In addition, biotech patents may be more likely to raise expressive concerns that may negatively impact particular groups.113 Moreover, U.S. law states that “[a] person shall be entitled to a patent unless” the USPTO can establish he is not so entitled, and there is no statutory basis for inquiring into the morality of an invention as a criterion for patentability due to the demise of the moral utilty doctrine.114 The “moral utility” doctrine is a common law construct based on the idea that to be “useful” within the meaning of the patent statute, and thus eligible for patent protection, an invention has to meet certain standards of morality. For over 150 years, courts cited this requirement as the basis for rejecting a variety of morally controversial inventions, including gambling machines and fraudulent articles. Over time, however, courts and the USPTO grew uncomfortable with making ad hoc morality determinations and virtually cabined the doctrine out of existence.115 Thus patents routinely issue from the USPTO on useful, novel, non-obvious, yet morally controversial biotech inventions and to the extent some segment of the population is disturbed by the patents issuance, questions are asked ex post about whether the Office should be granting such patents. In a 2003 article, I discussed this U.S. “Patent First, Ask Questions Later” regime and contrasted it with “Ask Questions First, Then Patent” systems in which moral concerns can be considered during the patentability inquiry such as in Europe, China, Japan, and many other countries. 116 Without statutory limits on morally controversial subject matter, patents will continue to issue from the USPTO on inventions which will be challenged eventually, either in the United States or abroad as foreign offices are pressured by applicants to expand subject matter eligibility to be coextensive

111

Organic Seed Growers Complaint at para. 78-92, available at http://www.pubpat.org/assets/files/seed/OSGATAv-Monsanto-Complaint.pdf (arguing that patents on genetically modified plants lack moral utility due to the variety of ill-effects caused by such plants and related products). 112

Morally controversial biotech subject matter includes: transgenic animals (de-valuing life), genetically modified plants (impact on farmers, the environment, food supply) genes/DNA (products of nature, building blocks of life/research), methods of cloning humans/ cloned humans (“ownership” of humans), Human embryonic stem cells (destroying human embryos), and mixed human/animal chimeras (human dignity, species integrity). 113

See, e.g., Shubha Ghosh, Race-Specific Patents, Commercialization, and Intellectual Property Policy, 56 BUFF. L. REV. 409 (2008); Johnathan Kahn, Race-ing Patents/Patenting Race:An Emerging Political Geography of Intellectual Property in Biotechnology, 92 IOWA L. REV. 353 (2007); Timothy R. Holbrook, The Expressive Impact of Patents, 84 WASH. U. L. REV. 573 (2006). 114

The judicially-created tool for assessing morality historically in the U.S. is the now largely defunct moral utility doctrine first articulated in Lowell v. Lewis, 15 F. Cas. 1018 (C.C.D. Mass. 1817) (stating that to be patentable, an invention must not be “injurious to the wellbeing, good policy, or sound morals of society.”) 115

See, e.g., Diamond v. Chakrabarty, 447 U.S. 303 (1980); Juicy Whip, Inc. v. Orange Bang, Inc., 185 F.3d 1364, 1367 (Fed. Cir. 1999); Ex parte Murphy, 200 U.S.P.Q. (BNA) 801, 802 (Bd. App. 1977). 116

Margo A. Bagley, Patent First, Ask Questions Later: Morality and Biotechnology in Patent Law, 45 WM. & MARY L. REV. 469, 475-76 (2003). See also Margo A. Bagley, The New Invention Creation Boundary in Patent Law, 51 WILLIAM & MARY L. REV. 577 (2009).

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DRAFT with that in the United States. As Lord Justice Jacob explained in the UK Aerotel and Macrossan decisions: [T]here is pressure from would-be patentees on patent offices. . . . This pressure in part stems from the fact that . . . people have been getting patents for these subject-matters in the USA. Since they can get them there, they must as a commercial necessity apply for them everywhere. If your competitors are getting or trying to get the weapons of . . . patents you must too. An arms race in which the weapons are patents has set in . . . [I]t by no means follows that because of pressure from applicants, the grant of patents for excluded categories should be allowed or that the excluded categories . . . should be construed narrowly. Just as with arms, merely because people want them is not sufficient reason for giving them.117 However, the possibility of moral limits on patent subject matter in the U.S. just refuses to go away. The most recent approving citation of the doctrine was by the USPTO in 1998 when, faced with a patent application on a mixed human/non-human creature, the Office issued an advisory which stated “inventions directed to human/non-human chimera could, under certain circumstances, not be patentable because, among other things, they would fail to meet the public policy and morality aspects of the utility requirement.”118 But now the doctrine is being revived in an argument against the patentability of genetically modified seeds by plaintiffs in the Organic Seed Growers and Trade Association v. Monsanto Co. case.119 There the plaintiffs note Justice Story’s original articulation that to be patentable, an invention must not be “injurious to the wellbeing, good policy, or sound morals of society . . . a new invention to poison people . . . is not a patentable invention.” 120 They then cited a variety of ill effects associated with GM plants, including the potential loss of biological diversity as GM crops contaminate and overtake conventional crops, unknown toxic effects from the dramatically increased and widespread use of glyphosate, and harmful, poisonous effects on people.121 It is worth noting that even if the USPTO evaluated moral utility at the time the patents at issue in the Organic Seed Growers case issued, it is unlikely the patents would have been denied on that basis, simply because the evidence being asserted now was not available at the time the applications were being prosecuted. Thus the hypothetical possibility of harm likely would not 117

Nevertheless, the pressure has resulted in the whittling away of patent subject matter exclusions in many countries, often through patent office claim drafting fictions such as Swiss-type claims in the EPO which, for many years, allowed applicants to circumvent the statutory prohibition in EPC Art. 53(c) against diagnostic and therapeutic methods by claiming, for example, “the use of composition A in the manufacture of a medicament for the treatment of disorder B,” now replaced by claims to “Substance X for the treatment of disease Y.” See In re Abbott Respiratory, G 0002/08 (2010), available at http://www.epo.org/law-practice/case-law-appeals/recent/g080002ex1.html. 118

Media Advisory, U.S. Patent & Trademark Office, Facts on Patenting Life Forms Having a Relationship to Humans (Apr. 1, 1998), available at http://www.uspto.gov/ web/offices/com/speeches/98-06.htm. 119

Organic Seed Growers and Trade Association et. al. v. Monsanto, No. 2012-1298 (Fed. Cir. 2013), available at http://www.cafc.uscourts.gov/images/stories/opinions-orders/12-1298.Opinion.6-6-2013.1.PDF. 120

Lowell v. Lewis, 15 F. Cas. 1018 (C.C.D. Mass. 1817).

121

Organic Seed Growers Complaint at para. 78-92, available at http://www.pubpat.org/assets/files/seed/OSGATAv-Monsanto-Complaint.pdf.,

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DRAFT have been deemed sufficient for a rejection under the Supreme Court’s reasoning in Diamond v. Chakrabarty. However, even the possibility to ask questions “much later” when relevant evidence is available, may not be available to concerned persons, as the case was dismissed for lack of standing, a holding affirmed by the Federal Circuit. 122 Nevertheless, it seems likely that the plaintiffs will petition for Supreme Court review, which ultimately may allow the merits of the case to be reached and the question of moral utility to be addressed. In the meantime, the U.S. “Patent First” regime, in conjunction with the other theories discussed in this section, and the pressures the U.S. approach creates for other countries, also supports the notion that biotech subject matter eligibility challenges will continue in the U.S. and abroad.

V.

The “How” of Biotech Patent Eligibility Challenges

As the cases above show, patent eligibility challenges are often brought as appeals of patent office rejections, defenses to charges of infringement and requests for declaratory judgments of invalidity based on subject matter. But patent eligibility issues do not always appear as straightforward interpretations of the relevant subject matter statute; the presentation can be far more subtle than that and can result in a policy-based interplay with other patent doctrines, as seen in the following non-U.S. cases. A.

Claim Construction and Claim Scope - Broadening

Consider the Canadian Monsanto v. Schmeiser and the EU Monsanto v. Cefetra decisions.123 The Monsanto Company owns numerous patents covering technology for genetically modifying plants to make them resistant to the herbicide glyphosate, sold under the trademark RoundUp®. Monsanto prohibits farmers planting the patented “RoundUp Ready®” seeds from saving any harvested seeds for replanting in a subsequent season. In Monsanto v. Schmeiser, Monsanto did not have a patent on its genetically modified RoundUp Ready canola plants in Canada; the patents only covered the genes, cells, etc. used to modify and produce the plant.124 Just two years earlier, the Canadian Supreme Court had ruled in Harvard College v. Canada that higher life forms, such as plants, were not patent eligible subject matter, as they failed to qualify as either a manufacture or a composition of matter. 125 Nevertheless, the Court concluded that a claim to a plant cell (lower life form) offered the same patent infringement protection as a claim to the plant, making obviation of the higher life form

122

Organic Seed Growers and Trade Association et. al. v. Monsanto, No. 2012-1298 (Fed. Cir. 2013), available at http://www.cafc.uscourts.gov/images/stories/opinions-orders/12-1298.Opinion.6-6-2013.1.PDF. 123

Monsanto Canada Inc. v. Schmeiser, [2004] 1 S.C.R. 902 (Can.); Monsanto Tech, LLC v. Cefetra BV, Case C 428/08, Eur. Ct. Justice (2010). 124

Monsanto Canada Inc. v. Schmeiser, [2004] 1 S.C.R. 902.

125

Harvard College v. Canada (Commr. of Patents), [2002] 4 S.C.R. 45.

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DRAFT patent prohibition a simple claim drafting exercise. In other words, interpreting a claim broadly can be equivalent to expanding patent subject matter eligibility. B.

Claim Construction and Claim Scope – Narrowing

The reverse is also true and evidenced in the Court of Justice of the European Union (CJEU) Monsanto v. Cefetra decision.126 There Monsanto sued importers of soymeal prepared from RoundUp Ready soybeans grown in Argentina, where Monsanto lacks patent protection for the RoundUp Ready technology and was thus unable to collect royalties from the farmers who grew the soybeans that were converted to soy meal. However, Monsanto does have patent protection for the chimeric genes, cells, and plants throughout Europe, and sued the meal importers for infringement of those patents on the basis that the meal still contained the chimeric patented gene. The CJEU concluded that Article 9 of the EU Biotechnology Directive governed the case. Article 9 of the Directive, entitled ‘Scope of protection,’ provides: The protection conferred by a patent on a product containing or consisting of genetic information shall extend to all material … in which the product is incorporated and in which the genetic information is contained and performs its function.127 Because the function of the claimed gene was to protect the plant from glyphosate, which would otherwise kill the plant, the Court ruled that the patented gene was not performing its function in the dead soymeal; thus there was no patent infringement. As the CJEU’s ruling in Monsanto v. Cefetra shows, how broadly or narrowly a claim is construed affects the patent owner’s ability to enforce the patent against third parties. It also illustrates a reaction to perceived patentee overreaching.128 It is unlikely that Monsanto would have brought the case if it had patent protection on Roundup Ready seed in Argentina. Thus, allowing Monsanto to sue dealers in downstream products appears not only unnecessary, but could also have more wide-ranging consequences. As Dr. Christopher Heath of the EPO Board of Appeals notes: If Monsanto’s position were correct, similar cases could arise for the importation of cotton, the [RoundUp Ready®] variety of which Monsanto has started selling in India without corresponding patent protection. Any trace of the protected DNA in, say, imported jeans or t-shirts would allow the patentee to raid

126

Monsanto Tech, LLC v. Cefetra BV, Case C 428/08, Eur. Ct. Justice (2010).

127

DIRECTIVE 98/44/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL ON THE LEGAL PROTECTION OF BIOTECHNOLOGICAL INVENTIONS, Article 9, O.J. (L 213), 13–21 (EC). 128

See Elizabeth K. Rowe, Patents, Genetically Modified Foods, and IP Overreaching. 64 SMU L. REv. 859, 866867 (2011).

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DRAFT the premises of any manufacturer or shop commercially manufacturing or selling these goods—an interesting, but somewhat worrying scenario.129 The CJEU decision does not mention such concerns; it focuses instead on interpretation of the Directive in light of its goals and purposes. Nevertheless, the decision certainly constrains the scope of gene patents by denying absolute product protection to this specific subject matter category, possibly because of the perception of patentee overreaching. Thus an exercise in claim construction for infringement purposes can have the effect of an eligibility limitation decision, especially in light of the fact that Article 9 was ostensibly designed to be a patent eligibility provision. Consider the following complaint: [T]here is a significant risk that countless biotechnology products are not protected by enforceable patent claims. . . . Furthermore, the opinion’s impact may extend far beyond a narrow conception of the biotechnology industry. For example, the viability of patents claiming isolated DNA or RNA sequences used as reagents – including reagents used in diagnostic methods such as gene tests and DNA chips – are now in jeopardy. . . . The [CJEU] decision is surprising because Article 9 of the Directive . . . was intended to define what constitutes patentable subject matter when the claims in question cover living and replicating organisms. Article 9 was not intended to define the scope of enforceable rights in the context of alleged patent infringement.130 Whether or not Article 9 was intended to define the scope of enforceable rights in the patent infringement context, it clearly does now, a result that might not have occurred without Monsanto arguably overreaching in bringing this particular case. The case also raises the question of whether restricting patent enforcement (e.g., via compulsory licensing, research exemptions, etc.) might, in some cases, be preferable to/or provide a safety valve for, subject matter eligibility determinations. The use of other patent doctrines as proxies or levers for indirectly narrowing or broadening patent eligibility is not a new phenomenon,131 nor is it foreign to the United States. In fact, concerns about patent claim scope preempting research, justified or not, have been the subject of some debate in the U.S. 132 As one group of scholars notes “We don’t exclude inventions from patentability because the invention is too abstract. We refuse to patent certain claims when those

129

Christopher Heath, The Scope of DNA Patents in Light of the Recent Monsanto Decisions, 40 IIC 956 (2009).

130

Richard Peet et al., The Future of Biotechnology Patents in the European Union: The Potential Impact of Monsanto Technology LLC v. Cefetra et al. on Patent Infringement, INTELL. PROP. WATCH (Aug. 17, 2010, 6:43 PM). (emphasis added). 131

For more on various patent doctrines as levers to accomplish particular policy objectives more generally see Dan L. Burk and Mark A. Lemley, THE PATENT CRISIS AND HOW COURTS CAN SOLVE IT, Chicago, IL: University of Chicago Press (2009). See Katherine Strandburg, Much Ado about Preemption, 50 HOUS. L. REV. 563 (2013)(“Preemption”has emerged as the leading contender for conceptual grounding of the patentable subject matter doctrine’s exclusion of abstract ideas and natural phenomena from patentability.”) 132

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DRAFT claims reach too broadly and thereby threaten downstream innovation.”133 Moreover, the moral utility challenges against genetically modified plants brought in the Organic Seed Growers case can also be viewed as indirect attacks on PESM. In addition, as noted earlier in Part II, the new Weldon amendment and tax strategy patent provisions in the 2011 AIA, while not part of Section 101, do both implicate patent subject matter eligibility. VI.

Conclusion

The American approach to patent eligible subject matter determinations may not be barbaric, but it is in flux. After almost three decades of taking an exceptionally broad approach to patent eligible subject matter the United States Supreme Court has, in Bilski, Mayo, and Myriad Genetics, revisited the abstract idea, law of nature, and natural phenomena exclusions from subject matter eligibility in ways that appear to narrow eligibility in some respects while leaving it open or broadening it in others, all with the stated goal of ensuring both an open system and incentives for innovation. In addition, patent subject matter eligibility issues have again captured the attention and interest of civil society groups to the extent of prompting legal action, as manifested in the Myriad Genetics and the Organic Seed Growers litigations, both of which involve numerous plaintiffs challenging, in declaratory judgment actions, patent validity in a way rarely seen before in the United States. Both cases also raise important standing questions regarding how open the patent system really is and should be to all stakeholders. These U.S. movements are taking place concurrently with patent eligibility decisions in Europe, Australia and beyond, that sometimes limit, sometimes expand patent subject matter eligibility and patent scope in ways that are likely to generate more patent eligibility questions in the future. A serious consideration of the who, what, when, where, why and how of patent subject matter determinations leads inevitably to the conclusion that there is no end in sight to such challenges and that we are likely to see a continued morphing of the types of parties, actions, and venues involved. How these disputes play out in the U.S. and abroad can be expected to impact innovation and to have other collateral effects. As the United States Supreme Court has noted: Patent protection is, after all, a two-edged sword. On the one hand, the promise of exclusive rights provides monetary incentives that lead to creation, invention, and discovery. On the other hand, that very exclusivity can impede the flow of information that might permit, indeed spur, invention, . . . At the same time, patent law’s general rules must govern inventive activity in many different fields of human endeavor, with the result that the practical effects of rules that reflect a general effort to balance these considerations may differ from one field to another.134

133

Mark A. Lemley, Michael Risch, Ted Sichelman & R. Polk Wagner, Life after Bilski, 63 STAN. L. REV. 1313, 1346 (2011). 134

Mayo Collaborative Serv. v. Prometheus Labs, Inc., 132 S. Ct. 1289, 1305 (2012).

29

DRAFT Patent eligible subject matter questions are often complex and not amenable to easy or lasting resolution due to a variety of factors both exogenous and endogenous to patent offices and courts, many of which have been discussed in this chapter. By recognizing some of the new players in the system and areas where additional pressure has been put on the PESM inquiry to do work previously done by other patent law doctrines or to address new problems, the courts, the USPTO, and/or Congress possibly could alleviate some of that pressure by reinvigorating or calibrating existing patent tools (e.g., the experimental use exception) to do the work they are more properly designed to do, and thus reduce the need and desire for recourse to the PESM inquiry. Ultimately, however, the patent barbarian label notwithstanding, accepting that patent subject matter boundaries will continue to be a moving target in the U.S. and abroad, and affirmatively recognizing the levers that affect them, may be our most viable course.

30