Due to the inherent nature of the technologies that underpin it, the biotechnology industry has faced challenges worldwide in relation to precisely what constitutes “patentable subject matter.” In particular, patents directed to genetic material have been the subject of significant public discourse and legal challenge. These challenges have led to a divergence of laws governing the patentability of genetic material between jurisdictions.
As will be seen from the analysis below, the divergence in laws relating to the patentability of genetic material between the US and other jurisdictions, such as Australia, has resulted in a heightened level of industry uncertainty and instability in the US, especially in the molecular diagnostics area.
A COMPARISON OF THE LAW OF SUBJECT MATTER ELIGIBILITY IN THE US AND AUSTRALIA
The threshold question of subject matter eligibility in the US is based on Section 101 of Title 35 of the US Code, as interpreted by the Federal Courts, which states in applicable part that:
Whoever invents or discovers any new and useful process, machine, manufacture or composition of matter … may obtain a patent …
At least up until recent Supreme Court cases, as long as the subject matter sought to be patented fell within one of the four statutory classes AND involved human intervention, it was patent eligible (as per Diamond v Chakrabarty, 447 U.S. 303, 1980, at 308-309).
On the other hand, in order for an invention to be of patentable subject matter in Australia, it must be a “manner of manufacture” (s18(1)(a) Patents Act 1990 (Cth)).
The guiding test for whether an invention is a “manner of manufacture” and therefore patentable subject matter in Australia was established by the High Court of Australia (Australia’s highest court) in National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252 (NRDC). In NRDC, the High Court ultimately held that a product that amounts to an “artificially created state of affairs” (i.e. something which, but for human intervention, would not exist) which also has economic significance will constitute a “manner of manufacture”. The NRDC case remains the leading case on subject matter eligibility in Australia, having been consistently applied to rapidly evolving technologies from information technology to biotechnology for over 50 years.
These respective principles were applied by the United States Supreme Court in Association for Molecular Pathology v Myriad Genetics, Inc, 596 US 12-398 (2013) and the Full Court of the Australian Federal Court in D’Arcy v Myriad Genetics Inc  FCAFC 115, in which the courts addressed whether claims directed to isolated genetic material constitute patentable subject matter in their respective jurisdictions.
THE MYRIAD BRCA GENE PATENTS IN SUIT
Nine composition claims from three patents were at issue in Association for Molecular Pathology v Myriad Genetics, Inc, 596 US 12-398 (2013), being:
- claims 1, 2, 5, 6, and 7 of US Patent No 5,747,282 (all to “isolated DNA”);
- claim 1 of US Patent No 5,693,473 (to “isolated DNA”); and
- claims 1, 6, and 7 of US Patent No 5,837,492 (all to “an isolated DNA molecule”).
The Australian Full Federal Court decision of D’Arcy v Myriad Genetics Inc  FCAFC 115 focussed on claim 1 of Australian Patent No 686004 (to an “isolated nucleic acid”).
(individually and collectively “the Myriad Patents”).
Each of the Myriad Patents is described in its corresponding specification as “methods and materials used to isolate and detect a human breast and ovarian cancer predisposing gene [BRCA1 for all patents except for 5,837,492 which was for the BRCA2 gene], some mutant alleles of which cause susceptibility to cancer, in particular, breast and ovarian cancer.”
THE US MYRIAD DECISIONS
The US Myriad case began in the Southern District Court of New York, which held that Myriad’s claims to isolated DNA were invalid because the DNA was a product of nature and therefore not patentable subject matter.
Myriad appealed the District Court’s decision to the United States Court of Appeals for the Federal Circuit (Federal Circuit) in The Association for Molecular Pathology & Ors v United States Patent and Trademark Office and Myriad Genetics Inc 653 F3d 1329 (2011), with the majority in that case overturning the District Court’s decision, holding the claims to be directed to patentable subject matter. Each of the judges of the Federal Circuit placed separate emphases on the differences between naturally occurring and isolated DNA. Whereas Judge Lourie focused on differences in physical size and covalent bonding between naturally occurring DNA and isolated gene sequences, Judge Moore placed greater emphasis on the fact that DNA does not occur in nature in an solated form, and that it had long been the US Patent Office’s practice to grant patents for isolated DNA molecules on this basis. Judge Bryson, dissenting, considered that the variations in covalent chemistry between naturally occurring and isolated DNA were not material as the functional coding sequence and therefore informational content of the molecule remained identical.
A further appeal to the US Supreme Court in Association for Molecular Pathology v Myriad Genetics, Inc., 133 S. Ct. 2107 (2013)) resulted in the Court ruling in a unanimous 9-0 decision that:
a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but that cDNA is patent eligible because it is not naturally occurring. Id. at 2111… To be sure, [Myriad] found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention. Id. at 2117.
In the US, the Myriad case has unfortunately been extended beyond the patentability of genes and the decision seems to have created a roadblock to the patentability of other naturally occurring biologics. For example, the USPTO has begun to examine patent claims for other biologics such as proteins, stem cells, and other compositions under the Myriad test and has been consistently rejecting such claims. In many instances, unless a DNA or protein sequence is claimed in combination with a detectable label, or linked to a solid support, for example, the subject matter test of section 101 has been used to reject the claims as lacking patentable subject matter under Myriad.
THE AUSTRALIAN MYRIAD DECISIONS
Cancer Voices Australia and D’Arcy v Myriad Genetics Inc  FCA 65
D’Arcy v Myriad Genetics Inc  FCAFC 115
The applicant/s in each case argued that the invention defined in claim 1 did not involve an artificially created state of affairs, asserting that there was no material difference between the claimed isolated nucleic acid and the corresponding nucleic acid in its natural state within the cells of the human body.
The patentee, Myriad, on the other hand, contended that the claim was valid because it claimed a product which consists of an artificially created state of affairs providing a new and useful effect of economic significance. In doing so, Myriad relied on evidence said to establish that isolated nucleic acid differs chemically, structurally and functionally from nucleic acid found inside a human cell.
The economic significance part of the NRDC test was not put in issue by the applicant who conceded that the isolation of the nucleic acid leads to an economically useful result – in this case, the treatment of breast and ovarian cancer.
Neither the Federal Court of Australia nor the Full Federal Court (FFC) agreed with the applicant that the isolated nucleic acid was not patentable subject matter. The FFC in particular held that “the isolated nucleic acid, including cDNA, has resulted in an artificially created state of affairs for economic benefit”1 and that therefore the claimed product is patentable subject matter. Such a test is clearly broader than that applied in the US, which prohibits a patent from being granted on something that is naturally occurring, and this in part explains the difference between the outcomes of the two cases.
The FFC preferred the approach taken by Judges Lourie and Moore of the Federal Circuit who focussed on the difference between the isolated and naturally occurring DNA. Accordingly, the FFC stated that “the analysis should focus on differences in structure and function [of the isolated molecule] effected by the intervention of man and not the similarities” (at ). Further, the FFC noted that, contrary to positions of the US Supreme Court and Judge Bryson’s dissenting judgment in the Federal Circuit decision, the subject matter of the claims in the Myriad patent was “a compound; a nucleic acid. It is not a claim to information” (at ; see also ).
On 13 February 2015, the High Court granted D’Arcy Special Leave to Appeal the unanimous 5 judge FFC decision. This indicates that the High Court considers the patentability of isolated genetic material a legal issue of such importance that it requires addressing by Australia’s highest court. However, it should be noted that this does not necessarily mean that the High Court intends to reverse the FFC. Rather, it may indicate that the High Court wishes to issue a decision on behalf of Australia’s highest court that removes any doubt that isolated genetic material is patentable subject matter, just as it did in Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd & Ors  HCA 50, when it affirmed the lower courts’ decisions, and upheld longstanding precedent, that methods of medical treatment are patentable subject matter.
In the meantime, isolated genetic material remains patentable subject matter in Australia.
USPTO GUIDANCE AND RECENT AMBRY DECISIONS – UNCERTAINTY REMAINS
In December 2014, the USPTO issued an interim guidance notice concerning the examination of claims for subject matter eligibility (the Interim Guidance). The Interim Guidance superseded earlier guidelines that were issued by the USPTO in March 2014, and implemented a new procedure for determining the subject matter eligibility of claims under 35 U.S.C. § 101 in view of the Supreme Court’s decisions in Association for Molecular Pathology v Myriad Genetics, Inc. (2013) and Mayo Collaborative Services v Prometheus Laboratories, Inc. (2012).
Under the Interim Guidance, USPTO examiners are instructed to undertake a two-step analysis for determining subject matter eligibility under 35 U.S.C. § 101: firstly, considering whether a claimed invention is (1) “directed to one of four statutory categories” (i.e. a process, machine, manufacture, or composition of matter); and secondly, determining whether the claimed invention is “wholly directed to subject matter encompassing a judicially recognised exception.” In determining whether a claimed invention is a “judicially recognised exception”, examiners are directed to consider the analysis as set out in Mayo, being: (1) whether the claims at issue are directed to a judicially recognised exception (i.e. a product of nature, a natural phenomenon, or an abstract idea); and (2), whether any element, or combination of elements, in the claims renders them “significantly more than the judicial exception.”
The Interim Guidance has confined the scope of patent ineligible subject matter as compared to the previous guidelines issued by the USPTO in March 2014, clarifying that “the application of the overall analysis is based on the claims directed to judicial exceptions… rather than claims merely involving an exception”. Furthermore, whereas the former guidelines emphasised the importance of the existence of “structural” differences between a natural product and a claimed invention, the Interim Guidance has clarified that “changes in functional characteristics and other non-structural properties can evidence markedly different characteristics.”
While the Interim Guidance provides welcome clarification to US patent applicants in the biotechnology industry, isolated naturally-occurring material remains patentable ineligible subject matter in the US. By contrast, the Australian Patent Office continues to grant patents over isolated genes with known functions, as long as such patents do not fail for lack of novelty or inventive step.
THE AMBRY DECISIONS
Following the Supreme Court’s decision in Myriad, a number of Myriad’s competitors, including Ambry Genetics Corp. (Ambry), announced that they intended to begin marketing their own versions of Myriad Genetics’ BRCA gene diagnostic test. Myriad subsequently instigated proceedings against those parties in the District Court for the District of Utah, alleging that such tests would infringe various claims in its patents that had not been struck down by the Supreme Court’s decision, being:
- Primer Claims directed to single-stranded DNA primers that are used in the polymerase chain reaction process for replicating BRCA1 and BRCA2 genes; and
- Method Claims directed to techniques for screening BRCA genes for mutations by comparing patient sequences with ordinary “wild-type” sequences.
In March 2014, Judge Shelby denied a Motion for a Preliminary Injunction that Myriad had filed against Ambry, holding that Ambry had indeed “raised a substantial question of invalidity” under 35 U.S.C. § 101. Judge Shelby found that the Primer Claims may not constitute patentable subject matter because they may fall within the ambit of the Supreme Court’s rejection of claims to mere isolated DNA in Myriad, and that the Method Claims may be rejected in the light of the Supreme Court’s decision rejecting claims directed to a diagnostic method involving the observation of a natural correlation in Mayo Collaborative Services v Prometheus Laboratories Inc 132 S Ct 1289 (2012).
Myriad appealed to the Federal Circuit, where it argued that primers are essentially the same as cDNA, which the Supreme Court explicitly found to be patent eligible. Ambry argued, however, that a primer is essentially just isolated DNA, which the Supreme Court held to be not patent eligible. With regard to the Method Claims, Myriad argued that the methods are applications of the discovery of the BRCA gene sequences, which the Supreme Court has held are patent-eligible, not the gene sequences themselves.
In December 2014, the Federal Circuit affirmed the District Court’s decision, determining that both the Primer and Method Claims were directed to patent-ineligible subject matter in violation of 35 U.S.C. § 101. The Federal Circuit found that the Primer Claims were not directed to patent-eligible subject matter because the primer sequences to which the claims were directed, were identical to the BRCA sequence directly opposite to the strand to which they were designed to bind, and structurally identical to the ends of DNA strands found in nature. The Federal Circuit therefore held that the Primer Claims were not distinguishable from the isolated DNA found to be patent-ineligible in Myriad.
Citing the Supreme Court’s decision in Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) (Alice), the Federal Circuit held that the Method Claims were not directed to patent-eligible subject matter on the basis that they merely recited an abstract idea of comparing BRCA sequences and determining the existence of alterations. The Federal Circuit further held that because such sequence comparison techniques were well-understood, routine and conventional techniques used by scientists, the Method Claims contained no inventive concept capable of rendering the subject matter of the claim patent-eligible (as per Alice at 2355).
Isolated nucleic acid sequences are patentable in many jurisdictions, including Australia, Canada, China, Europe, Japan, Russia and South Korea. For now, the US has segregated itself and is clearly not harmonising its law with the rest of the world.
It is clear that the biotech industry in the US requires certainty following the uncertainty introduced by the Myriad and Ambry decisions. Without such certainty, pharmaceutical and biotechnology companies are unlikely to be incentivised to continue to research and develop new and useful diagnostic or therapeutic products from subject matter that is of biological origin.
On the other hand, the Australia Patent Office and judiciary’s preparedness to leave any such specific subject matter exclusions to the legislature provides for a more certain non-retroactive environment, conducive to research and development, and investment, in the Australian biotechnology industry. Appropriate patent protection as well as certainty is particularly pertinent in the biotechnology industry if the advancement of medicine is not to be impeded.