Mayo v. Prometheus: Thought Leaders Express Concern and Evaluate the Impact

Posted under Blog, Companies, Diagnostics, Funding, Mayo v. Prometheus, Medical Devices, Medical Supply, Patently BIOtech, personalized medicine, Pharmaceuticals, Public Policy, Startups, Universities, Videos by biotechnow@bio.org (Biotechnology Industry Organization)

The Mayo v. Prometheus event hosted at George Washington School of Law with the Biotechnology Industry Organization created an opportunity for a panel of thought leaders to distill meaning from the case, the impact on personalized medicine, and possible solutions to the Court created problem.*

Is the decision a game-changer?

Judge Paul R. Michel, former Chief Judge of the Court of Appeals for the Federal Circuit handling patent cases, concluded that the Mayo v. Prometheus represents a “shift in attitude between the Supreme Court and Federal Circuit.  There’s a certain amount of trust, a certain amount of respect, a certain amount of suspicion that there might be some deeper immersion, deeper familiarity, harder thinking and greater exposure [to patent law] at the Federal Circuit than the Supreme Court itself can offer,” he said. “The game changer I see here is the Supreme Court is effectively saying ‘We’re done with the Federal Circuit.’ They don’t get any credit for greater immersion, greater expertise, harder thinking or anything of the sort.”  While many of the panelists disagreed on what exactly the Supreme Court concluded in the Mayo v. Prometheus decision, it was clear that all the panelists shared in the concern expressed by Judge Michel.

Some might think that a 9-0 decision represents a shared consensus of opinion on how to handle the “law of nature” exemption for patents.  Not so according to former Solicitor General to the United States, Seth Waxman.  Waxman asserted that when this Supreme Court rules unanimously “its language cannot be taken at face value.”  This court rarely suggests edits or withholds their votes unless certain language is included.  “But in the end, there is no way that all nine justices thought that this opinion has the broad consequences that people are catastrophizing.  I do not believe that every single justice on the Supreme Court thought that the entire field of molecular diagnostics, everything in personalized medicine, that’s over. There’s just no way that there was that level of consensus about how the patent laws have to be reasonably read.”

How will Prometheus affect the Myriad case?

The panelists expressed disagreement over how Prometheus would impact Myriad with some asserting a clear difference between the abstract idea claims in Mayo versus the tangible molecules in Myriad.  However, Donald Dunner from Finnegan indicated that future litigants are going to take Prometheus to the ultimate extreme until district courts agree and the federal circuits have to disagree and until the Supreme Court disagrees again.

However, all panelists agreed that the Courts and the Department of Justice were unclear on the science.  Professor Christopher Holman stated that no rigorous claim construction had occurred in the District Court.  As a result, there is as lot of misperception of what exactly the patent covers in the Myriad case.  Professor Holman argued that the Court created distinctions between isolated cDNA and gDNA that do not make any scientific sense.  Seth Waxman added that the considerable challenge for articulating the science and what the patent covers in the remand of Myriad is to correct the “unfortunate formulation conceived immaculately.”

How will these decisions affect businesses?

Paul Yasger, head of IP for Abbott Laboratories, stated that while the Prometheus decision may be good for litigators and patent office fees, it is not good for business because of the uncertainty it creates.  Phil Johnson, Chief Intellectual Property Counsel at Johnson & Johnson, pointed out that “capital is hard to come by these days and people are reluctant.”  Johnson and Johnson can invest money in R&D projects involving shampoo instead of biomarker research.  He said investors “have other things they can invest in but I don’t think we, and I mean mankind, can afford it.”

Michael Walker, Chief Intellectual Property Counsel at Dupont pointed out that these decisions have an impact beyond personalized medicine.  60% of Dupont’s R&D is in Ag and Food research and industrial biosciences such as biofuels.  Mr. Walker concluded that businesses have large settled business expectations in this technology and they look at Prometheus and Myriad and wonder if their technologies are just natural phenomena.

What are the solutions going forward?

Phil Johnson at J&J concluded that making it hard to get patent protection cannot help innovation because who will fund that work.  In this day and age, government sources of additional money are unlikely.  Chief Judge Michel pointed out that this is exactly the problem when the Court makes assumptions about patents stifling innovation without providing any convincing evidence that it was so.  Michel pointed out that the articles cited “don’t prove the point that the Court is assuming.  The preemption problem is all hypothesized as far as I can tell.”  Finally, Michel concluded it is dangerous to have unelected judges with no expertise in measuring the retarding effects compared to the beneficial effects make these kinds of decisions.

Hal Wagner, partner at Foley & Lardner, argued that in spite of the lack of evidence of the stifling effect of patents on research, the rest of the world allows for an exemption for experimental use.  It does not hurt the patent owners and it gets rid of the stifling argument.  Dr. Sauer pointed out that Judge Newman, among other Judges on the Federal Circuit has expressed frustration on the lack of cases on this issue as researchers are not being sued and so the court cannot explore the U.S. exemption.

Chief Judge Michel closed the meeting by suggesting that participants focus their energy and attention on the federal circuit panels and district courts dealing with 101 issues over the next 12 months.  If at the end of the year it is a terrible mess then go to Congress for a solution.

 

*Comments by the panelists should not be taken to bind the clients, companies, law firms, or other organizations with which they are affiliated.

Clayton Christensen on the Future of Pharma

Posted under Blog, business model, change, Clayton Christensen, commercial model, Companies, conference, Diagnostics, Events, FDA, Funding, health analytics, healthcare, innovation, IP, leadership, Medical Devices, Medical Supply, Mitt Romney, People, Pharmaceuticals, Politics, Public Policy, R&D, Regulatory, Safety, SaS, Startups, Strategy, Technology, Uncategorized, Universities, Videos by Ben Comer

A keynote speaker at the 9^thAnnual SaS Health Care & Life Sciences Executive Conference on May 10, ‘disruptive’ author of The Innovator’s Dilemma and Harvard business professor Clayton Christensen sat down with PharmExec to discuss the future of the pharmaceutical industry, and what Mitt Romney could bring to the White House.

Ben Comer: Like tech companies a decade ago, many pharmaceutical companies are now outsourcing more and more of their core competencies in the name of efficiency, often short-term efficiency. Do they risk losing their core in the process?

Clayton Christensen: We absolutely worry that that’s exactly what is happening. I wrote a book called The Innovator’s Prescription, about the future of healthcare, and chapter nine is our view of where the pharmaceutical industry is headed. But the genesis is that, when we thought that diseases were defined by their symptoms rather than their causes, there were big blockbusters out there that were very attractive for [treatment]. And now we realize that a disease should not be defined by the symptom, but rather by the cause. It used to be that the FDA clinical trials process was like a final exam. If 30 to 35 percent of the patients responded to a drug, it was judged as a passing grade. And if your percentage was less than that, then you failed the test. But now we realize that if only 20 percent of the patients responded, then there must be something different about those 20 percent. They must have a different disease than all the rest. Rather than just project it, now we understand that managing clinical trials is an indispensable element of drug discovery. And so if you outsource that, then you’re outsourcing the activities that in the future will be the critical capabilities.

BC: How can big pharma companies foster a culture of innovation in the context of a large, lumbering bureaucracy?

CC: Rarely is the development or the absence of a product the problem in a company. Almost all companies are awash in ideas for new products. What they don’t do – and they could but they choose not to – is to create new business models that are tailor-made to the characteristics of the new product. You come up with this great idea, and you can’t do anything with it unless you get funded. To get funded, you have to, little by little, morph and shape and modify your business plan so that it fits the current business model. If it doesn’t fit the business model, they don’t perceive that it will be successful. So what comes out of the process is incremental innovation after me-too innovation. It’s not that the original idea wasn’t innovative, but in order to get it funded, you have to change your strategy so that it ultimately conforms to your company, rather than to the problem or unmet need in the market.

BC: Is it a viable strategy for pharma companies to spin out a separate entity, away from headquarters, to facilitate new kinds of development?

CC: It doesn’t have to be totally thrown outside of the corporation, but it needs to be a different business unit underneath the corporate umbrella. And you have to manage it at the level of the CEO, differently, than the mainstream. Almost never do you need to accomplish or accept lower profits when you set up this new business. But the formula by which you make acceptable money will be different.

BC: Is current US public policy harming or helping innovation in this country?

CC: I think that it facilitates a particular type of innovation. But I don’t think government is the core problem. I think finance and hedge funds and private equity funds are the big bad actors in the system. Investors like hedge funds and private equity funds and venture capitalists have a measure of performance called internal rate of return. And internal rate of return is a ratio; the way you get internal rate of return up is that you only invest in things that have a very short time horizon. If you just invest more and more for faster and faster quick wins, IRR goes way up. And you think that you’re innovating, because of the quick returns you’re getting. But what that means is that you can’t invest for the long term, because the truly disruptive business units don’t pay off for five to eight years. So then because the government says, ‘Well if you keep your money in the investment for 366 days, we’ll count it as long-term capital gain.’ There isn’t anything about 366 days that is long term. So the government should re-frame that, so that if you keep your money in for five years, there’s no tax, and if you keep it in for eight years, it’s a negative tax. All of these massive amounts of capital that are in private equity funds and so on, you re-purpose it through the tax code, and it would behave very differently, and invest in very different kinds of things.

BC: What is your message to the pharmaceutical industry, and is there a solution to the productivity gap?

CC: I think I know the right question, but I don’t know the answer. I would love to get together with deep thinkers in the industry to sort it through. As a general rule, when other industries are at this kind of an intersection, what has happened is that, at one stage in the value-adding stack in an industry, at one stage if it’s becoming commoditized and modular, you cannot make money at that level in the stack. But the whole industry doesn’t become unprofitable, rather its activities above and below that original [product or service], that’s where the money is made. And that has to be happening in the pharmaceutical industry, but I can’t see what it is yet. By example, the auto industry is becoming commoditized; cars are being assembled by sub-assemblies from tier-one suppliers. Anybody can get these modules and snap together a car. So it’s really hard to differentiate your car from anybody else’s car, so where the money is being made is in the subsystems that define the performance of the car, and by activities that sit on top of that, like OnStar. That’s where the money is made. Somehow, I have a sense that selling the pill, in the future, is not where the money will be made. It will be the attachments on top or underneath it. I haven’t heard anybody articulate what those look like, but I think they’re emerging, and we need to identify them.

BC: I read in The New Yorker that you’ve lived near the Romneys, and both you and Mitt are active in the Mormon church. Do you have any thoughts about a President Romney?

CC: He’s really a good man. He’s very smart, but it’s true that he was raised in a wealthy home, in a prominent home, and then accrued even more wealth, and his kids have been raised in an even more prominent family. And that’s actually about the toughest environment in the world to be raised in, and have your head be screwed on straight. It truly is. And so people think of that, that he’s not connected with the real world. But he has raised his family to create unbelievably good kids. But more important than that, in the Mormon church, we don’t pay professional ministers to teach us and to take care of us, but we help other people and teach each other the gospel of Jesus Christ. What that means is – because the members have to take care of one another – you meet everybody. And so Mitt was the bishop of our church, and bishop just means that he had responsibility for about 500 members of the church. And he had a family, he was trying to build Bain at the same time, and to be the bishop meant that he spent, on top of all that, 30 hours a week. And I don’t know if you ever saw the first Star Wars movie, but Luke Skywalker came in to meet Han Solo at some kind of a café, and the band that was playing, there was one of every conceivable form of life in the band, that’s what a Mormon church looks like; one of every conceivable type of person. If you’re the bishop, you’ve got to help all of those people. Under his leadership we built three significant new congregations in the inner city, in three different languages. So he really has seen a lot. I don’t think journalists have really realized, when he left [Bain & Company], the consulting firm, to create Bain Capital, that was going great. And the original owners of Bain & Company decided to sell their ownership stake to the next generation of partners. In order to pay the selling founders off, they had to take all of the profits the consulting activity made, and then some, to pay off [the owners]. And these people were just sitting at the side, rolling it in. As a result, Bain & Company would have gone bankrupt in two weeks. So they said, ‘Mr. Romney, could you please leave [Bain Capital] and come here and take presidency of Bain & Company, and somehow you have to prevent bankruptcy.’ So Mitt sat down with the six selling partners, and essentially convinced them to agree to take one-sixth of the amount of money that they thought they were owed, and got them to feel good about it. Just the way that he got these people, instead of knocking their heads together, he led them to agree on something that was very counterintuitive to all of them, and that is the idea that we are all best served if we try to help the other side win. I just think that someone with that instinct in the White House, in the climate of Washington, that would be a good skill.

Christensen’s new book – How Will You Measure Your Life? – takes his experience and thinking in business and applies it to personal decision-making. He has been the subject of lengthy profiles this month in both Bloomberg Businessweek and The New Yorker.

American Invents Act Strategies Highlighted at the IPCC Conference

Posted under AIA, American Invents Act, Blog, Companies, Diagnostics, Funding, IPCC, Medical Devices, Medical Supply, patent, Patently BIOtech, Pharmaceuticals, Public Policy, Startups, Universities, Videos by biotechnow@bio.org (Biotechnology Industry Organization)

By David Saravitz, Alston + Bird

Day 2 of the 2012 BIO Intellectual Property Counsels’ Committee (IPCC) Spring Conference kicked off with a panel on the America Invents Act (AIA).  The panel focused on how practitioners and the U.S. Patent & Trademark Office (USPTO) are dealing with various provisions of this new patent act.

Mr. Ira Finkelstein, Senior Patent Counsel with Baxter Healthcare, led off the session initially discussing the first-inventor-to-file provision of the AIA (§ 3) which becomes effective on March 16, 2013, and the interplay of its one-year grace period for public disclosures by an inventor.  Mr. Finkelstein reminded the audience that in most foreign countries a pre-filing, public disclosure by the first inventor would be disqualifying prior art.  Thus, Mr. Finkelstein concluded that his strategy is: “Don’t rely on the grace period. File early, and file often!”

Mr. Finkelstein also discussed the best mode requirement of 35 U.S.C. § 112, first paragraph.  Mr. Finkelstein pointed out that § 112 still requires an applicant for a patent to disclose the best mode contemplated by the inventors and that he will continue to require his inventors to disclose the best mode in patent applications. According to Mr. Finkelstein, it is likely that this information will need to be in the disclosure anyway, to support claims to narrow, dependent claims.

Dr. Murray Spruill, Leader of the Alston & Bird’s Biotechnology, Chemical and Pharmaceutical Patents Group, took the podium next to discuss “Post-Grant Proceedings.”  Dr. Spruill pointed out that a defendant in an infringement lawsuit older than 1 year after the patent owner files a complaint alleging infringement of a patent needs to decide whether to bring an inter-partes challenge against the patent in USPTO before September 16, 2011 because the defendant would be barred from requesting the new inter partes review proceeding in such a circumstance.  Finally Dr. Spruill reviewed similarities and differences between the new post-grant review and inter partes review proceedings

The third and final speaker was Dr. Remy Yucel, Director, Central Reexamination Unit (CRU), U.S. Patent & Trademark Office.  Dr. Yucel indicated that since the inception of reexamination proceedings at the USPTO the number of reexamination filings per year has generally trended upward.  She indicated that, although there has been a sharp increase in number of reexamination filings per year since 2002, the CRU had reduced the time from filing to the issuance of a reexamination certificate from about 40 months in 2006 to about 22 months in 2011.

Regarding reexamination and the AIA, Dr. Yucel pointed to three key changes that would impact the CRU: the change in the standard for granting an inter partes reexamination (IPR) effective September 16, 2011; the transition from inter partes reexamination to inter partes review at PTAB effective September 16, 2012; and the commencement of supplemental examination on September 16, 2012.  Dr. Yucel indicated that the new, AIA-mandated “reasonable likelihood” standard for instituting an IPR does not require that the requester establish a prima facie case. And, unlike the prior standard of the “substantial new question,” the AIA-mandated standard does not require that a legal question be “new.”

Next, Dr. Yucel turned the focus to Supplement Examination.  Some of the proposed rules that she discussed provide that the request must be filed by owner of the entire right, title, and interest in the patent, that third party participation is prohibited, that the number of items of information is limited to 10 per request, and that an unlimited number of requests may be filed at any time.  Dr. Yucel also discussed proposed rule 610 which indicates that the request must include: a list of each item of information and its publication date; identification of each issue raised by each item of information; explanation for each identified issue; identification of how each item of information is relevant to each aspect of the patent to be examination and how each item of information raises each identified issue; a copy of each item of information; and a summary of each document over 50 pages in length.

Dr. Yucel discussed  the equitable conduct immunization of supplemental examination but later indicated that if Director learns of “material fraud” committed in connection with the patent subject to supplemental exam, the Director has authority to confidentially refer the matter to the Attorney General and may take other action pursuant to § 257(e).  She indicated that the Office regards “material fraud” to be narrower in scope than inequitable conduct as defined in Therasense.  77 Fed. Reg. at 3667.  Before concluding her presentation, Dr. Yucel discussed some additional non-AIA-related changes to streamline the reexamination practice before yielding the podium to permit the audience to ask her and her fellow panelists some questions.

Biotech Patent Case Law Updates at the IPCC

Posted under Blog, Companies, Diagnostics, Funding, IPCC, Medical Devices, Medical Supply, patent, Patently BIOtech, Pharmaceuticals, Public Policy, Startups, Universities, Videos by biotechnow@bio.org (Biotechnology Industry Organization)

By John W. Cox, Counsel at Alston+Bird LLP

The Spring 2012 BIO Intellectual Property Counsels’ Committee (IPCC) Conference, held in Austin, Texas, provided an excellent forum for intellectual property (IP) practitioners in the biotech industry to socialize, network, and participate in panel discussions focusing on the dynamic developments in the patent laws.  The conference began for the general participants over margaritas and Tex-Mex fare, where attendees were already discussing recent Supreme Court and Federal Circuit decisions impacting the industry.  By the final panel on Wednesday morning, the Supreme Court had handed down two more opinions impacting the biotech industry.

Patent practitioners have been monitoring the guidance provided by the Federal Circuit since its creation almost 30 years ago.  The patent laws for biotech inventions have evolved over much the same time period, stemming from Diamond v. Chakrabarty in 1980.  But in the past few years, more cases involving biological arts have not only reached the Federal Circuit but been taken up by the Supreme Court.  Indeed, it appears that the Supreme Court has been more active in the patent field related to the biotech industry since the Fall 2011 BIO IPCC meeting than any similar time period.  Moreover, two new acts of Congress impacting the industry have come into play, namely the America Invents Act and the Biologics Price Competition and Innovation Act.

The first of two panels discussing case law focused on Prometheus and the guidance – or lack thereof – provided therein.  The panel, including Richard P. Bress of Latham & Watkins and Raymond Chen of the U.S. Patent & Trademark Office (PTO), provided insight into the Supreme Court’s opinion, describing the new frontier for biotech IP.

The final panel took up the mantel to update the conference on a wide range of case law that will impact the practice of IP in biotech.  Four of the most talked about cases in patent law happen to impact the biotech industry, and they are either currently active or were recently decided.  Deepro Mukerjee, of Alston & Bird, led a discussion of Novo Nordisk, the case decided by the Supreme Court just the previous day.  Dr. Jitty Malik, also of Alston & Bird, presented the Therasense case, which, until Prometheus, was the main case IP practitioners had been talking about.  Steve Reese, of Olswang in London, provided the European perspective on the standards to obtain or avoid injunctions in patent cases and compared that with the recent Kimberly-Clark decision.  Any one of these cases could have spurred discussion on the Supreme Court’s recent interest in patent cases.  Together, they signal both danger and opportunity to patent practitioners in this industry and have BIO member companies and IP practitioners alike looking to the Supreme Court and Federal Circuit together for guidance.

To close out the conference, Dr. Judy Jarecki-Black of Merial returned us to the Myriad Genetics case, which the Supreme Court vacated and remanded back to the Federal Circuit in view of Prometheus.  Dr. Jarecki-Black raised a myriad of issues associated with the case—from ethical considerations to the scope of patentable subject matter in the biotech industry and what is necessary to save claims directed to genetic diagnostic testing—leading a dynamic discussion to formerly close out the conference.

All of the attendees, panelists included, are now figuring out what to do in view of Prometheus.  The PTO recently provided guidelines to its examiners based on that opinion, though the impact of the 9-0 decision has yet to make itself heard in other cases.  That, however, is not the situation for the industry itself.  BIO member companies are considering how to pursue their research and protect their IP, aware that the Supreme Court has moved the boundaries of the frontier for patentable subject matter in this field.

Despite the clock signaling the end of the Spring 2012 BIO IPCC program, the attendees once again returned to the Prometheus and Myriad Genetics cases.  The venerable Driskill Hotel heard musings about what will happen as Myriad Genetics moves up and down the appellate ladder.  The conference provided a forum at which IP practitioners came together to see old friends and meet new ones, enjoy some Texas hospitality, and get briefed on the hot topics in IP currently impacting the industry.  At its close, instead of scattering to the south Texas winds, we departed with renewed interest in considering, together, what dangers and opportunities this new frontier holds.