SCOTUS Ending Term with Patent Decisions


Over the past several days, the United States Supreme Court has issued several important decisions that will impact the patent system.

First, on June 13, 2013, the Supreme Court issued a decision in Association of Molecular Pathology v. Myriad Genetics, which has sometimes been referred to as “ACLU v. Myriad” in recognition of the fact that it was the American Civil Liberties Union that was responsible for bringing the challenge in the district court and pursuing the matter through the judicial system.

In Myriad, Justice Thomas wrote for a nearly unanimous Court.  Only Justice Scalia wrote a brief separate opinion in which he concurred in part and concurred in the judgment.

The majority decision in Myriad is not long, and the first 10 pages are background. Despite not giving much detailed attention to the significant legal issues presented, the Supreme Court did manage to do real and serious harm to much of the biotechnology industry.

Justice Thomas summarized the Court’s decision by saying:

“[W]e hold that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but that cDNA is patent eligible because it is not naturally occurring.”

The decision has widely been reported as the Court recognizing that cDNA is patent eligible, but the ruling is far more nuanced. In fact, Justice Thomas specifically recognized that some cDNA is not patent eligible. He wrote:

“cDNA is not a ‘product of nature’ and is patent eligible under §101, except insofar as very short series of DNA may have no intervening introns to remove when creating cDNA. In that situation, a short strand of cDNA may be indistinguishable from natural DNA.”

I have spoken with a number of people who are in the biotech industry and they all seem to think this decision means that cDNA is patent eligible and I shouldn’t make too much out of Thomas specifically saying that at least some cDNA is not patent eligible. Personally, I think this is misplaced hope; we all know how the district courts will respond, and it won’t be to an expansive reading of patent eligibility. While the USPTO seems poised to say that cDNA is patent eligible, the fact that some has been determined not patent eligible will be used by challengers and likely successfully so. Further, it seems clear that Thomas is saying that if something is man-made but identical to what appears in nature, it is not patent eligible. This fundamentally undercuts the most important aspects of Chakrabarty and would effectively kill research into such important areas as artificially grown organs, which by their very nature must be identical to what is produced in nature to be transplanted into the human body, for example.

For further discussion of the Myriad case see:

Supremes Rule Isolated DNA and Some cDNA Patent Ineligible
DNA patenting: There’s still hope (maybe)
AMP v. Myriad: Getting Beyond the Hype and Hyperbole

In another important case, FTC v. Actavis, the Supreme Court ruled on June 17, 2013, that reverse payments could be illegal under antitrust laws and that there was no justifiable reason for courts to prevent the FTC from challenging such payments.

The Federal Trade Commission (FTC) originally filed suit, arguing that reverse payments violated §5 of the Federal Trade Commission Act. The District Court dismissed the complaint and the Eleventh Circuit concluded that the anticompetitive effects of a settlement fall within the scope of the patent’s exclusionary rights and were immune from antitrust attack. Furthermore, the Eleventh Circuit explained they did not find it appropriate to disturb litigants’ ability to settle lawsuits, which is well-established public policy in the United States.

In ordering the case to move forward, the Supreme Court explained that reverse payment agreements are not immune from antitrust review simply because it might ultimately be determined that the anticompetitive effects of the reverse settlement agreement rightfully fall within the scope of the exclusionary potential of the underlying patent. The majority, per Justice Breyer, said reviewing courts should apply the rule of reason when determining whether reverse payments are illegal.

The decision is a curious one, given the complexity of the Hatch-Waxman regime and the underlying exclusive rights of the patent owner. Most courts had found that while reverse payments may be unsavory, they are authorized by the law and Congress has many times tried and failed to change the law. Thus, it would seem that appropriate deference to Congress mandated a different ruling in this case.

At least in the Actavis case, there were dissenting Justices (Chief Justice Roberts, Justice Scalia and Justice Thomas) who championed the exclusive right of the patent owner and openly took issue with the fact that such an agreement could ever possibly be found to be an antitrust violation given the nature of a patent and the overarching regulatory regime that authorizes such behavior.

For more on the Actavis case, please see Supremes Say Reverse Payments May Be Antitrust Violation.

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