In an interesting development, contrary to the finding of the US Supreme Court in a similar case in the United States, the Australian Federal Court in D’Arcy v Myriad Genetics Inc. [2014] FCAFC 115 has unanimously upheld a previous Federal Court decision that isolated gene sequences are patentable.

As in the United States, the case in this matter involved a Myriad Genetics patent over an isolated, but naturally occurring, BRCA1 gene, which is used in diagnostic testing for breast and ovarian cancer. Australia does not allow patents to be granted over naturally occurring things, unless there is “human intervention that creates an artificial state of affairs”.

Although the appellants in this case contended that isolated nucleic acids are not materially different to naturally occurring nucleic acids and are hence products of nature that cannot form the basis of a valid patent, the respondents disagreed and argued that isolated nucleic acids in fact do differ from nucleic acids found in human cells chemically, structurally and functionally. Ultimately, the Court applied the principals of the NRDC case [National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252] and agreed with the respondents, holding that: “The isolated nucleic acid, including cDNA, has resulted in an artificially created state of affairs for economic benefit.  The claimed product is properly the subject of letters patent.”.

The Court took the view that a person whose skill and effort has led to the isolation of DNA which is commercially useful should be able to be rewarded by grant of a patent which would not be the case if it would be held that patents of this nature are inherently non-patentable.

Reactions to the outcome of this case have been balanced. Proponents of the Court’s findings are of the view that patents are necessary to offset the high cost of development of such technologies and drive continued research and innovation.   Antagonists, on the other hand believe that such patents will limit research and development into genetic testing and treatments for genetic diseases and furthermore, make diagnostic testing for genetic diseases prohibitively expensive for patients. However, most countries, including Australia, provide for experimental use exemptions to patented subject matter, so the impact of such a court decision on basic research and development is likely to be limited. Furthermore, should such research and development on the patented subject matter give rise to an independently patentable, but infringing invention, there are mechanisms available to the patentee of the new invention to enable use of their invention. These mechanisms include voluntary or compulsory licensing.

In fact, the impact of both the Australian Federal Court decision and the conflicting US Supreme Court decision which held that isolated gene sequences are not patentable are unlikely to be particularly significant for Myriad in respect of their current BRCA1 and BRCA2 diagnostic testing per se, since Myriad’s major patents on the BRCA1 and BRCA2 genes will start expiring in 2014 and the field of technology has moved beyond the types of diagnostic tests that these patents cover.  The company executives have indicated that they intend to develop new technologies and diversify beyond the breast cancer test.

An interesting effect of the decision by the US Supreme court to disallow patents for isolated gene sequences may be that biotech companies will start to rely less on patents and more on trade secrets. For example, Myriad used to share gene sequences and mutations on a National Institutes of Health public database and cooperate with academic scientists on analysis of mutations, but now focusses on the development of its own database. It may be argued that the reliance on trade secrets for protection of such inventions may in fact stifle innovation more than patenting such inventions, in that such information may be kept out of the public domain as long as the company desires maintaining the confidentiality of the information. Patents on the other hand, require an enabling disclosure of the invention and provide for a limited period of monopoly. This coupled together with the experimental use exemption from infringement and various licensing options may in fact facilitate innovation rather than stifle it.