Patent Docs author Dr. Kevin Noonan (at right) gave the following testimony at today's USPTO hearing on genetic diagnostic testing:

I want to thank the organizers for inviting me to testify today.

This study by the PTO is important because it should give the Office the opportunity to determine whether there is any evidence that "patents are the problem" with regard to patient access to genetic diagnostic testing.  It has become fashionable in some quarters (mostly the medical and legal academies) and in some industries to question the value of patenting in promoting innovation.  Those that do so analogize patents to a tax on innovation and even contend that patenting can retard innovation.  Judges and even some Justices have proposed that there needs to be a balance between patenting; like a judicial Goldilocks, there is abroad the idea that we need just the right amount of patenting, and that steps, like the "second opinion" exemption we are discussing today are ways to achieve that golden mean.

These ideas are current under circumstances where there is little evidence that patents are responsible for preventing patients from enjoying the benefits of the new genetic technology.  There is also little evidence that current genetic diagnostic test providers are beset by rampant error in the test results they provide.  It isn't as if no one has looked for these effects, but in every case the reports and studies are forced to begrudgingly admit that there is no apparent effect of patents on either access or quality, even while remaining steadfast that there could be or might be in the future.  This includes many academic studies as well as official U.S. government agencies including the Department of Health and Human Services SACGHS report.  I know of no study showing that limitations on patient access are not the consequence of behaviors and policies of private and government insurers, payors and providers rather than patents.  After all, in America, the one right patients don't have when it comes to medical treatment or diagnosis is an economic one.  Healthcare in this country depends on what each individual patient can afford, or if they have benefits through their employer, what their employer provides.  If an insurer won't pay for a genetic diagnostic test, it doesn't mean the test is too expensive — it means the insurer has decided that it, and its insureds, can wait until the price comes down.  The patent system didn't create this situation and weakening patenting won't solve it.

So we are left again with a discussion of what might be done with patents, that supporters contend will facilitate patient access and diagnostic reassurance even in view of a dearth of evidence that patents are the problem.  I propose that if we are willing to do that, we would be remiss if we didn't consider all of the consequences of such actions and to inquire whether patient access or test quality would improve or not (particularly if our efforts are not taken in parallel with reforms in other areas of healthcare system).

It is unlikely that the future will resemble the past, but it would also be a mistake to ignore the past.  And the record of the past 30 years is that biotechnology has been an extraordinarily fruitful and successful industry.  This is remarkable, if you remember that the industry is only about 30 years old.  As Judge Rader noted in his "additional views" in the Classen case, and Judge Moore in her concurring opinion in the Myriad case, biotechnology has prospered in large part because it was supported by the U.S. patent system.  And the reasons for that outcome are two-fold:  technology transfer from university research under the Bayh-Dole Act, and investment in the technology because of the existence of patent protection.

As an example of the importance of university tech transfer, since the passage of the Bayh-Dole Act, 6,000 new companies were founded on university inventions, more than 4,000 new products came on the market (including 153 new drugs, vaccines, or medical devices), at least 279,000 new jobs were created just in the period between 1996 and 2007, and over $457 billion was added to the country's gross national product.

Universities and research institutes have performed the basic scientific research, and the potential to protect the practical applications of that research through patenting have provided the incentives (and the economic benefits to those universities and research institutes) for companies to commercialize them.  This partnership has propelled the U.S. to the forefront of biomedicine, providing biologic drugs and diagnostic methods for important and previously intractable diseases.

These foundations of success may be negatively influenced by proposals that permit unfettered (and uncompensated) "second opinion" testing.  This is because of another reality:  while the Human Genome Project created the largest amount of scientific information in the shortest time in human history, in many ways it was what Bob Weinberg of MIT has called "the race to the beginning of the road."  The next 50-100 years will be consumed with a much more difficult task — understanding how this genetic information interacts with environmental factors to cause disease.  And in doing this we will be faced with another reality:  there will be very little "low hanging fruit" of unrecognized single-gene genetic mutations associated with human disease.  Most common diseases like cancer and diabetes involve genetic and other changes in multiple genes, unlike Myriad's BRCA test and other existing genetic tests.

In other words, complexity will be the rule.  And when something is complex, it is harder to reverse engineer.  That reality produces the danger of proposals to weaken patent protection for genetic diagnostic testing.  I haven't picked up a pipette in 25 years, but even I can envision ways for a company to produce a genetic diagnostic test for a multivariate disease that can be protected without patenting.  Simply identify the genetic variants from the 6-12 genes involved and put diagnostic sequences on a gene chip along with probes for 10,000 other genes.  Encrypt each chip so that the diagnostic patterns — the diagnostically informative positions — cannot be identified without the encryption key, and then provide the public with the test.  No patents, no problem — and no disclosure and no end to the ability to charge whatever a provider wants, limited only by the time it takes for someone to independently make the same discovery.

But in such a world the partnership between universities and business that fueled the biotechnology revolution is broken, because universities cannot — and should not — fail to disclose the results of their research.  While not everything that university research has produced over the past 30 years has been patented, it has been disclosed (whether patented or not).  And support for some of that research has been provided by investors and companies translating that technology from the lab bench to the clinic, and the basis for that support will be diminished if not extinguished if genetic diagnostic methods lose the ability to be fully protected.

While such a scenario could also arise under present law, there is little incentive for it to do so, since the public can eat its cake and have it too — basic university research can proceed as it always has, being directed to science instead of technology.  Important technologies have resulted from such basic research, from Cohen and Boyer's identification of restriction enzymes to Fire and Mello's siRNA; these inventions arose unexpectedly from basic scientific research based on new biological discoveries.  Such discoveries don't always have clinically or commercially useful applications, but where they do they can be protected by patenting.  If that is changed, investment behavior may change, and it may not take a dramatic change in the scope of patent protection to change the incentives that exist today.  Permitting "second opinion" genetic diagnostic testing for some applications of biotechnology may be enough to make patenting less attractive compared with the effort necessary to protect genetic diagnostic methods by non-disclosure.

If there were no alternatives to legislating some sort of exemption from patent infringement liability for "second opinion" genetic diagnostic tests, then perhaps public policy concerns would tip the scales in favor of some form of the legislation as has been proposed.  But there are at least the following possible ways to prevent this outcome in the patent arena (and I'm sure many unexplored ways in the insurance and general healthcare space).

First, we can recognize that under Federal Circuit case law and PTO practice the written description and enablement requirements have limited the scope of medical and genetic diagnostic claims over the past decade or so — it is unlikely that a broad claim to detecting any mutation associated with a particular gene for a particular disease would be granted or enforced today.  So the specter of broad, overarching claims that inhibit all research on genetic mutations in a particular gene associated with a particular disease is and has been a strawman in the debate.

Second, other robust patent principles — such as patent exhaustion — can be employed to the problem if it arises.  The Supreme Court has extended patent exhaustion principles to method claims in the Quanta case.  Here, for example, an individual could be given the right to a "second opinion" test provide that she can show that she has obtained the first test from the patent holder or her licensee.

Third, as we heard from MPEG LA there are ways to avoid "patent thickets" even if they were to arise — and the possibility for them to arise is low, if only because many underlying gene patents will expire.  The telecommunication industry has used standard setting and other means to avoid patent thickets, and the biotechnology industry can as well.

Fourth, in egregious circumstances, the U.S. government can exercise "march-in" rights to encourage non-exclusive commercialization (although this option should be exercised sparingly).

Under any scenario in which second opinion genetic diagnostic testing is performed, a critical requirement must be that the lab that provides such a second opinion be at least as competent and provide at least as accurate a diagnosis as the patent holder or her licensee or an important reason for even considering unrecompensed second opinion testing will be unfulfilled.  One of the aspects of genetic diagnostic methodology is that implementing it with actual patient samples isn't as simple as performing an experiment in a lab — providing the required quality control is one of the things patent protection funds, so that the public gets the benefits of genetic testing in the first place.  Permitting any genetic testing without such safeguards would be irresponsible.

Finally, in addition to upsetting the settled expectations of a highly successful industry, any action to carve out an exemption from patent infringement liability for "second opinion" genetic diagnostic testing would amount to a taking that would need recompense.  Any legislation or policy change that would permit such second opinion testing — which would amount to a compulsory license — would need to take the public cost into account.  The same impetus underlying some of these proposals — the coming age of personalize medicine and widespread genetic diagnostic testing — will multiply and exacerbate the cost of any policy that permits someone other than the patentee from performing a patented genetic diagnostic test, and it is disingenuous not to consider the cost.  We will also need to factor in the cost to the economy in general if loss of patent protection leads to job losses in states like Massachusetts and California that have a disproportionately large number of biotech companies.

In addition, these costs must be balanced with impending patent expiry, since any benefit to the public will be short lived in many cases and, if the result is unpatented but undisclosed genetic tests, any such benefit will likely be overwhelmed by increased costs from such unpatented tests.

These considerations, in my mind, make any proposal for permitting "second opinion" genetic diagnostic testing to be unnecessary, premature and ill-advised, and I urge the Office to include these reservations in its report to Congress.

Thank you.

By Donald Zuhn —

On Thursday, the U.S. Patent and Trademark Office will hold the first of two hearings on independent second opinion genetic diagnostic testing where patents and exclusive licenses exist that cover primary genetic diagnostic tests.  The Office is holding the hearings to collect information for the preparation of a report to Congress pursuant to § 27 of the Leahy-Smith America Invents Act (see "USPTO News Briefs," January 26, 2012).  Thursday's hearing will take place in the USPTO's Madison Auditorium located at 600 Dulany Street in Alexandria, Virginia, with a second hearing scheduled for March 9, 2012 in San Diego.

Agendas for both public hearings can be found here (February 16) and here (March 9).  WebEx and teleconference numbers and passwords or access codes for each hearing can be found on the agendas.  On Thursday, a USPTO panel consisting of Deputy Director Teresa Stanek Rea; Dana Robert Colarulli, Director, Office of Governmental Affairs; Janet Gongola, Patent Reform Coordinator; Stuart Graham, Chief Economist; and George Elliott, Director, Technology Center 1600 will hear testimony between 9:35 am and 12:05 pm from the following individuals:

• Thomas Kowalski, Shareholder, Vedder Price, P.C.
• Mercedes Meyer, Member, Board of Directors, American Intellectual Property Law Association
• Mary Williams, Executive Director, Association for Molecular Pathology
• Lori Pressman, Independent Consultant on Technology Transfer
• Hans Sauer, Associate General Counsel for Intellectual Property, Biotechnology Industry Organization
• Ellen Jorgensen, President, Genspace
• Lawrence Horn, CEO, MPEG LA, LLC and Kristin Neuman, Executive Director, Librassay, MPEG LA, LLC
• Lisa Schlager, Vice President, Community Affairs & Public Policy, FORCE
• Kevin Noonan, Patents Docs author and Partner, McDonnell Boehnen Hulbert & Berghoff LLP

Prior to this testimony, the panel will hear (via video) from Rep. Debbie Wasserman Schultz (D-FL) (at left) who introduced an amendment to H.R. 1249 that would have exempted from infringement a "genetic diagnostic tester's performance of a confirming generic diagnostic test activity" that would otherwise constitute infringement under §§ 271(a) or (b).  H.R. 1249 was eventually passed by both the House and Senate — without Rep. Wasserman Schultz's amendment (see "House Judiciary Committee Approves H.R. 1249") — and signed into law as the Leahy-Smith America Invents Act.  USPTO Chief Economist Stuart Graham will also give an overview of the genetic diagnostic testing study.  Unscheduled testimony will be taken beginning at 1:30 pm.

In addition to the public hearings, the Office is also seeking written comments, which must be submitted by March 26, 2012.  Additional information regarding the submission of written comments can be found here and in the Office's Federal Register notice (77 Fed. Reg. 3748).

By Donald Zuhn —

Last November, officials from the U.S. Patent and Trademark Office indicated that ten notices of proposed rulemaking to implement various provisions of the Leahy-Smith America Invents Act were being drafted and vetted by the Office, and that the notices would be published in January 2012 (see "USPTO News Briefs").  By the end of its self-imposed deadline, the Office had released five notices offering proposed rulemaking regarding:

• Changes To Implement Miscellaneous Post Patent Provisions of the Leahy-Smith America Invents Act (77 Fed. Reg. 442) — Patent Docs report;
• Changes To Implement the Preissuance Submissions by Third Parties Provision of the Leahy-Smith America Invents Act (77 Fed. Reg. 448) — Patent Docs report;
• Implementation of Statute of Limitations Provisions for Office Disciplinary Proceedings (77 Fed. Reg. 457) — Patent Docs report;
• Changes To Implement the Inventor’s Oath or Declaration Provisions of the Leahy-Smith America Invents Act (77 Fed. Reg. 982) — Patent Docs report; and
• Changes To Implement the Supplemental Examination Provisions of the Leahy-Smith America Invents Act and To Revise Reexamination Fees (77 Fed. Reg. 3666) — Patent Docs report.

On Thursday, the Office released a set of seven notices requesting comments and/or providing additional proposed rulemaking.  Among the recent set of notices were the following:

• Practice Guide for Proposed Trial Rules (77 Fed. Reg. 6868);
• Rules of Practice for Trials Before the Patent Trial and Appeal Board and Judicial Review of Patent Trial and Appeal Board Decisions (77 Fed. Reg. 6879);
• Changes To Implement Derivation Proceedings (77 Fed. Reg. 7028);
• Changes to Implement Inter Partes Review Proceedings (77 Fed. Reg. 7041); and
• Changes To Implement Post-Grant Review Proceedings (77 Fed. Reg. 7060).

As with the first set of proposed rules, Patent Docs plans to discuss each of the notices published last week, beginning with the notice to implement the derivation proceedings provisions of the AIA.  Subsequent posts will address the other notices.

Section 3(i) of the Leahy-Smith America Invents Act amends 35 U.S.C. § 135 to provide for derivation proceedings in which an applicant may seek a determination that "an inventor named in an earlier application derived the claimed invention from an inventor named in the petitioner's application and, without authorization, the earlier application claiming such invention was filed" (see "AIA Overview: First-Inventor-to-File Provisions").  The 14-page notice of proposed rulemaking on derivation proceedings addresses the manner in which the Patent Trial and Appeal Board will resolve disputes as to which of two applicants is a true inventor.  In addition to the derivation proceedings provisions provided in AIA § 3(i), the notice indicates that:

Derivation proceedings will be conducted in a manner similar to inter partes reviews and post-grant reviews.  Unlike patent interferences, derivations will be conducted in a single phase without the use of a "count."  An inventor seeking a derivation proceeding must file an application.  35 U.S.C. 135(a).  An inventor, however, may copy an alleged deriver's application, make any necessary changes to reflect accurately what the inventor invented, and provoke a derivation proceeding by the timely filing of a petition and fee.

Pursuant to § 135(a), the Director shall determine whether to institute a derivation proceeding in response to a petition demonstrating that the standards for instituting a derivation proceeding have been met.  However, the notice states that "[a] derivation is unlikely to be declared even where the Director thinks the standard for instituting a derivation proceeding is met if the petitioner's claim is not otherwise in condition for allowance."

Under new § 135(f), the Director is not precluded from determining the patentability of the claimed inventions involved in the proceeding.  The notice indicates that "[t]he Director will delegate to the Board authority to resolve patentability issues that arise during derivation proceedings when there is good cause to do so."

Following a discussion of the changes to 35 U.S.C. § 135, the notice provides a discussion of specific rules for instituting and conducting derivation proceedings before the Board.  In particular, the notice proposes adding new subpart E to 37 C.F.R. part 42 to provide rules specific to derivation proceedings.  In three of the other notices issued last week, the Office proposes adding subpart A to 37 C.F.R. part 42, which sets forth the policies, practices, and definitions common to all trial proceedings (including derivation proceedings) before the Board; subpart B, which provides rules specific to inter partes review; subpart C, which provides rules specific to post-grant review; and subpart D, which provides rules specific to transitional program covered business method patents.

A brief discussion of the proposed rules for instituting and conducting derivation proceedings can be found on pages 7030-31 of the notice, and the text of the new rules can be found on pages 7039-41 of the notice.

Comments regarding the notice can be submitted by e-mail to derivation@uspto.gov; by regular mail addressed to:  Mail Stop Patent Board, Director of the United States Patent and Trademark Office, P.O. Box 1450, Alexandria, VA 22313–1450, marked to the attention of Lead Judge Michael Tierney, Derivation Proposed Rules; or via the Federal eRulemaking Portal.  The deadline for submitting comments is April 10, 2012.  Additional information regarding the submission of comments can be found in the Office's Federal Register notice (77 Fed. Reg. 7028).