09 October 2015

Australian High Court Nukes Biotech Industry from Orbit: “It’s the Only Way to be Sure”

Nuclear explosionThe High Court of Australia has followed the US Supreme Court in unanimously declaring that naturally-occurring DNA sequences – even when extracted from the cell nucleus and isolated by human intervention – cannot, in themselves, be validly the subject of patent protection.  In particular, all seven High Court judges found that claims 1-3 of Myriad Genetics’ Australian patent no. 686004, each of which is directed to isolated nucleic acid molecules corresponding with the BRCA mutation associated with increased breast cancer risk, are invalid because they do not define a patent-eligible ‘manner of manufacture’ under Australian law: D'Arcy v Myriad Genetics Inc [2015] HCA 35.

In arriving at this ruling, the High Court has reversed the decisions of six Federal Court judges – one at first instance (Cancer Voices Australia v Myriad Genetics Inc [2013] FCA 65), and five more on appeal to a full bench of the Federal Court (D’Arcy v Myriad Genetics Inc [2014] FCAFC 115) – all of whom found that nucleic acids, once extracted from a cell and isolated from a complete DNA molecule, are artificially-created products that are chemically, structurally and functionally different from their natural counterparts, and thus patent-eligible.

Furthermore, in reversing last year’s decision of the Full Federal Court, the High Court has (retroactively) made a liar of Australia’s Trade Minister, Andrew Robb.  For months, Mr Robb has been telling anyone who will listen that Australia does not need to extend ‘data exclusivity’ for biologic drugs, because this country provides more extensive patent protection for biological materials than some others.  This line has been followed primarily for the benefit of the US negotiators of the Trans-Pacific Partnership Agreement (TPP), who initially wanted the agreement to mandate a minimum 12 years’ data exclusivity. 

As recently as 6 October 2015, following finalisation of the TPP after seven years of negotiations, Mr Robb was talking up Australia’s patent system as a key factor in reaching agreement on the contentious issue of data exclusivity for biologics.  Yet, the very next day, the High Court dropped its nuclear bombshell on that argument, by not only replicating the action of the US Supreme Court in declaring isolated naturally-occurring DNA to be unpatentable, but going further in extending this to synthesised biologics – including cDNA – that essentially embody the same ‘information’ existing in the naturally-occurring biological molecule.

Just to be clear, nobody – not even Myriad Genetics – cares that three Australian patent claims directed to the isolated DNA comprising the BRCA mutations have specifically been declared invalid.  Quite aside from anything else, the patent has expired, having reached the end of its 20-year term on 11 August 2015.  There are also probably very few people who would be greatly concerned that isolated naturally-occurring DNA sequences are not patentable in Australia.  It is now widely regarded that the completion of the human genome project, along with the relative ease, speed and low-cost of gene sequencing nowadays, has largely rendered such claims unpatentable for lack of novelty or inventive step anyway.

The larger concern with the Australian High Court’s decision for the entire biotechnology industry is likely to be its focus on the information content of the naturally-occurring DNA as ‘an essential element of the invention as claimed’.  This reasoning will create significant uncertainty as to the circumstances under which any product – whether wholly, or partially, synthesised, and including cDNA – which essentially exists to provide a ‘medium’ for naturally-occurring information, may continue to be regarded as patent-eligible in Australia.

The Majority Ruling

All seven High Court judges concluded that Myriad’s claims to isolated DNA sequences do not satisfy the ‘manner of manufacture’ test for patent-eligibility in Australia.  I must say that I was astonished by this outcome, i.e. that not even a single judge on the entire bench of the High Court saw any validity in the arguments presented on behalf of Myriad, notwithstanding that six judges of the Federal Court of Australia had previously reached a different conclusion.  I frankly cannot explain or understand this, and I do not intend even to try.

However, the seven judges were not in complete agreement as to reasoning.  The majority (French CJ, along with Kiefel, Bell and Keane JJ) issued a joint opinion focussing on the ‘information’ content of the claimed products as the basis for assessing patent-eligibility.  In particular, the majority concluded (at [89]) that:

The code in the invention as claimed refers to the sequence of nucleotides which, in a cellular environment, can ultimately be translated into the BRCA1 polypeptide. That sequence can properly be described as "information" … the information stored in the sequence of nucleotides coding for the mutated or polymorphic BRCA1 polypeptide is the same information as that contained in the DNA of the person from which the nucleic acid was isolated. It is the existence of that information which is an essential element of the invention as claimed. The product is the medium in which that information resides. That characteristic also attaches to cDNA, covered by the claims, which is synthesised but replicates a naturally occurring sequence of exons. (Emphasis added.)

Potential Impact on Biotech in Australia

The above passage is, as I have already noted, the most potentially concerning aspect of the decision.  Arguably, it establishes that any replication of ‘naturally-occurring information’ in any medium is potentially ineligible for patent protection.  At the very least, the majority appears to be saying here that cDNA is unpatentable in Australia.  Even the US Supreme Court did not go this far, as the Australian High Court majority itself points out (‘The Supreme Court had accepted that the creation of a cDNA sequence from mRNA resulted in an exon-only molecule that was not naturally occurring and was therefore patentable’, at [79]).

The impact of this finding on the biotech industry in Australia, and in investment in this country by international companies operating in the field, remains to be seen.  Australia is a small market for diagnostic and therapeutic goods and services, so the availability, or otherwise, of patent protection here may not be hugely significant from a purely economic perspective.  However, I am led to understand, by people more closely involved in the industry, that there is a very real fear that a decision of this kind sends a negative message to the global biotech community that could lead to a significant reduction in investment in Australia.

Concurring Opinions

A further joint opinion (by Gageler and Nettle JJ) focuses on the fact that isolated DNA, despite being a man-made product in the sense that it does not occur in the same context or chemical form in nature, ‘it does not involve any element of inventiveness’.  In particular, they argue that the presence of absence of the BRCA mutations associated with heightened cancer risk ‘in or from the isolated nucleic acid is entirely dependent upon whether they were present in or absent from the DNA of the patient from whom the isolated nucleic acid was extracted, and in effect that is the antithesis of a man-made artificial state of affairs’ (at [161]-[162]).

A further concurring opinion by Gordon J again focuses – though in a slightly different manner than the majority – on the fact that Myriad’s claims define the chemical product (i.e. isolated DNA) in terms of a code: ‘Each claim is to isolated nucleic acid with a characteristic – the coding for a mutant or polymorphic BRCA1 polypeptide, being one or more of the mutations or polymorphisms selected from the mutations and polymorphisms set forth in particular tables’ (at [277], italics in original).  However, Gordon J appears to differ from the majority in that, while she considers isolation of naturally-occurring DNA to be insufficient basis for a patentable invention, she does not go so far as to presume that this reasoning would necessarily extend to synthesised products, such as cDNA (see, e.g., at [283], where she seems to accept that the claims in question may encompass patentable synthetic nucleic acids as well as unpatentable naturally-occurring DNA).

Making Policy… Without Making Policy!

In its (genuinely) unanimous judgment last year, the Full Federal Court expressly noted that the Australian parliament had instigated and considered a number of formal reviews of the patent-eligibility of isolated genetic materials, and had passed on opportunities to legislate gene patents out of existence.  Thus – the Full Court concluded – any ‘policy’ considerations would point towards maintaining the status quo, consistently with its finding that Myriad’s claims were for artificially-created products, chemically, structurally and functionally different from their naturally-occurring counterparts, and thus a patent-eligible manner of manufacture.

The High Court majority has, in effect, taken the polar opposite position.  Specifically, the Court has ruled that since – according to its evaluation – the isolated genes in question do not fall within the established scope of a patentable ‘manner of manufacture’, it is incumbent upon the parliament to legislate in favour of their patentability should that be its intention.  Inaction (even seemingly ‘mindful’ inaction) is, in the High Court’s not-so-humble opinion, an insufficient indication of policy intent.  The Court stated, in particular (at [37]):

This Court is not concerned in this appeal with "gene patenting" generally, but with whether the invention as claimed in Claims 1 to 3 falls within established applications of the concept of manner of manufacture. If it does not, then the question is one of inclusion not exclusion. The legislative history cannot be read as impliedly mandating the patentability of claims for inventions relating to isolated nucleic acids coding for particular polypeptides. The legislative history does not assist the Court in answering the question posed in this appeal.

In other words, the High Court wants us to understand that, if it is overturning seemingly settled practices in relation to the patent-eligibility of isolated genetic materials – even where those practices have been relied upon by successive governments of differing political stripe in making policy over many years – this is not the Court’s concern.  It wants to to understand that, despite superficial appearances, it is not, in fact, making policy!

So, where the Full Federal Court concluded that isolated genes are patent-eligible, and that it was therefore for the parliament to legislate an exception, should that be its policy intent, the High Court concluded that they are not patent-eligible, raising concerns that ‘accord[ing] patentability to the class of invention as claimed would involve law-making of a kind which should be done by the legislature’ (at [28]).

Personally I find it very difficult to see how a High Court which unanimously overturns the prior concurring decisions of a total of six Federal Court judges (including one, Justice Annabelle Bennett, with actual scientific qualifications and direct ongoing involvement in the relevant area of technology) could be completely unmotivated in this by any considerations of ideology or policy.  But, of course, if they say that their reasoning is confined to proper consideration of the common law principles underlying development of the concept of ‘manner of manufacture’ (as they do, at [5], and then again at [7], and yet again at [18], and once more at [25], and then finally, and at greater length, at [26]), then I must accept this to be the truth.

Impact on Biologics and the TPP

Perhaps the most significant, and certainly the most topical, policy impact of the High Court’s decision relates to the very recent conclusion of the Trans-Pacific Partnership trade agreement negotiations.  Although the text of the TPP remains secret (a serious issue in itself, but not my primary concern here and now), it was widely reported over the past weeks and months that the final big sticking-point in reaching agreement was the minimum term of ‘data exclusivity’ to be provided in relation to biologic drugs.

A ‘biologic’, in this context, refers to a medicinal product manufactured in, extracted from, or synthesised from biological sources.  Biologics are significantly larger and more complex molecules that traditional pharmaceutical compounds, and often cannot be readily defined in purely structural terms.  Producers of biologics generally regard patents alone as being inadequate for safeguarding their IP.  The idea behind ‘data exclusivity’ is to allow for a period of time following marketing approval during which competing firms may not use the original safety and efficacy data that was used to obtain marketing approval for a new therapy.  Data exclusivity provides the company which originally develops and gains marketing approval for a new biologic drug with a minimum period of protection, regardless of the length of time required to bring the drug to market and/or whether or not it has (or is entitled to) patent protection.

Patent protection and data exclusivity are thus complementary mechanisms.  Of course, exclusivity of either kind delays the entry of generic competitors, and thus imposes a cost on society through the healthcare system, via continued premium pricing of the original drug.  Naturally, originating producers of biologic drugs can be expected to lobby for longer and stronger protections, while generic manufacturers and countries such as Australia have an interest in shorter terms of protection.  The US currently provides a 12 year term of data exclusivity, while Australia provides five years.

This is why Trade Minister Andrew Robb has been saying for months that Australia’s more generous patent protections for genetic products implies that we should not be required to provide a longer term of data exclusivity.  For example, back in August the Minister told Sky News:

Now I can see from the American point of view; the trouble with them is their patent system – as far as it applies to biologics – is vulnerable because they are not allowed, as a result of a court decision, to include a lot of genetic material in patents. Now that is not true in Australia, and as a consequence, our patent system is providing the protection that the Americans are asking for.  So I don’t see why we should move, and until they show me why…

It turns out Mr Robb lied, albeit unknowingly and unintentionally.  The High Court has now told us that the position in Australia is at least as restrictive as the US, and probably more so, when it comes to protecting genetic material via patents.  Who knew?  Not Mr Robb who, even on 6 October 2015, with the TPP finally bedded down, and the High Court yet to speak on Myriad’s patent claims, told the ABC’s AM program:

Well this was for us what they call a red-line issue, in other words, something that we could not negotiate any change to our system. And it took a lot of time and effort, but eventually we got to a point which I'd been putting to the Americans in particular for some time, and that is that our system is world-class, we have five years of data protection, but it is in combination with a very robust, perhaps the most robust patent system in the world, and we are providing sufficient protection to encourage a strong growth in our biologics sector, but we're also keeping the lid on prices in a way - through the PBS system - which has got the support of the community. So we were not for changing.

One day later, this argument was in tatters.  It could have been worse for Mr Robb, I suppose – if the High Court had handed down its decision a week earlier, the TPP negotiations might have collapsed, yet again.  As it stands, the deal is done, though the battle in the US to persuade the Congress to accept the terms of the TPP, and pass the necessary legislation to put it into effect, is only just beginning.  That process will not be eased by the High Court’s decision.  Indeed, if the Australian government does not act in the meantime, I would not be surprised to see Australia appear on a watch list in next year’s USTR Special 301 Report into countries that do not provide ‘adequate and effective’ protection of intellectual property rights or ‘fair and equitable market access to United States persons that rely upon intellectual property rights’.

Conclusion – The Government Must Act

In my view, the High Court has gone too far in finding that even synthetic products, such as cDNA, that replicate naturally-occurring ‘information which is an essential element of the invention as claimed’, are ineligible for patenting.  The potentially far-reaching consequences of this decision, and the resulting uncertainty for local and international stakeholders in the field of biotechnology, are unacceptable and quite likely to suppress investment, and hence innovation, in Australia.

This is happening at a time when the government, under new Prime Minister Malcolm Turnbull, is finally showing signs of providing some real policy support for innovation.

There will, no doubt, be intense lobbying from the Australian biotechnology industry for the government to legislate to undo some of the more damaging effects of the High Court’s decision.  Where the battle in the past has been over legislation to outlaw patents for genes, it will now be over amending the Patents Act 1990 to ensure that appropriate patent protections are available for genetic technologies.

The gene patent opponents behind the attack on the Myriad patent may yet come to regret that they were, in the end, too successful.  Had the High Court clearly limited its finding to naturally-occurring DNA that has ‘merely’ been isolated by conventional means, the potential commercial harm may well have been so slight as to be unworthy of any response.  As it stands, however, there will be strong corporate interests, as well as universities, research institutions, and research scientists with commercial aspirations for their work, who will all be powerfully motivated to pursue change.  They may even find the US government to be an ally in this project.


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