SCOTUS in Myriad: Federal Circuit doesn’t know what’s patent-eligible

June 13, 2013

Justice Clarence Thomas of the U.S. Supreme Court doesn’t come out and say so in his straightforward, rhetoric-free, 19-page opinion for a unanimous court in Association for Molecular Pathology v. Myriad Genetics, but the takeaway from the ruling is not only that human genes are not patentable in and of themselves but that the Federal Circuit Court of Appeals isn’t very good at interpreting patent-eligibility under Section 101 of the Patent Act. As the Supreme Court decision notes, the Federal Circuit panel that ruled Myriad has the right to composition patents on genes associated with breast cancer disagreed on the rationale. One judge said that isolated genes are chemically distinct from the molecules found in nature. Another cited longstanding Patent and Trademark Office policy on gene patentability. The third disagreed with both explanations. So too did the entire Supreme Court, which said the dispositive question is whether the purported invention is created or found in nature. Genes are found in nature, the court said, and thus not patent-eligible.

Myriad’s share price actually bumped up after the court’s ruling because the justices also held that synthetic composite DNA is eligible for patenting, and that biotech companies may still seek patents on applications for human genes. In that regard, the Supreme Court decision is good news for both researchers, who argued that patents should not be used to restrict their use of identified genes, and the biotech industry, which quite understandably wants to profit from its investment in gene isolation.

But if you’re an IP lawyer trying to advise clients on the patent-eligibility of their research and development projects, the Myriad ruling is yet another exasperating sign that you can’t rely on the Federal Circuit to decide issues that are supposed to be at the heart of its mission. The United States has a centralized court for patent appeals because Congress wanted a single set of experienced judges to offer definitive interpretations of IP law, which often involves highly technical but economically critical decisions. As former Federal Circuit JudgeArthur Gajarsa, now senior counsel at Wilmer Cutler Pickering Hale and Dorr, said in a speech in March, the court’s statutory mandate is “to normalize patent law … by establishing rules which district courts can follow.”

That structure presumes, of course, that the Federal Circuit’s rules pass Supreme Court muster. Alas, that hasn’t been true in recent years. Instead, what we’ve seen repeatedly is that on threshold questions of patent-eligibility, Federal Circuit rulings don’t hold up. The Supreme Court struck down the Federal Circuit’s test for business method patents in Bilski v.Kappos in 2009. It raised the bar for method patents based on naturally occurring phenomena in Mayo v. Prometheus Laboratories in 2011, and then remanded cases involving software patents to the Federal Circuit in light of Mayo. You know the mess that ensued: last month’stortured and tormented en banc decision in CLS Bank International v. Alice Corporation, in which the appeals court spun out 135 pages of concurrences, partial concurrences and dissents by various groups of judges yet offered essentially no clarity on the standard of patent eligibility for software that permits the implementation of otherwise unpatentable abstract ideas. Undoubtedly, that question too will be resolved only when the Supreme Court gets involved.

I understand the tension Gajarsa outlined in his speech in March. The Federal Circuit wants to be an effective rulemaker for the USPTO and for patent developers, establishing standards that are “clear, concise and in some cases rigid,” the former judge said. The Supreme Court isn’t as interested in rigid rules as in interpreting the law. Gajarsa said that as a result, the high court has “muddled” straightforward patent-eligibility tests.

But that worldview, in which Gajarsa is not alone, seems to me to misunderstand the Federal Circuit’s place in the judicial hierarchy. Yes, the appeals court must set the law that guides the operation of the patent system. But it also has to assimilate the Supreme Court’s directives in executing that mission. The Federal Circuit has to look up as well as down.

And most importantly, the appeals court has to do a better job of reaching internal consensus, starting with a unified recognition that unless it pays more than mere lip service to the Supreme Court, it is not serving the patent system. Too often Federal Circuit judges have resisted the justices. Both the Mayo and Myriad cases, for instance, were remanded by the Supreme Court for reconsideration by the Federal Circuit. In both, the appeals court stuck to its guns, and in both the Federal Circuit was overruled by the Supreme Court.

That’s not an efficient process, especially considering that the Federal Circuit was supposed to streamline patent litigation. The patent system deserves – and demands – better.

(Reporting by Alison Frankel)

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