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A Roundup: Myriad, Monsanto, and the Supreme Court

Tuesday, June 18, 2013

In recent rulings on patents, the Supreme Court spoke with a rare, single voice, devising a framework that encourages innovation while also ensuring that its fruits are enjoyed fairly by consumers.

The Supreme Court giveth, and the Supreme Court taketh away, at least when it comes to patents in the field of biotechnology.

Thursday’s ruling by the Supreme Court that life sciences companies cannot obtain patent coverage for isolated DNA segments marks something of a setback for an industry whose lifeblood is innovation. At the same time, the Court’s decision exactly a month earlier that farmers may not replant patented soybean seeds without permission bolstered the rights of biotech patent holders. Taken together, the June Myriad ruling and the May Monsanto opinion — both issued by a unanimous Court — showcase a high court working to balance the need to promote innovation with the rights of the public.

Myriad: Weakening Some Patents, Strengthening Others

In Myriad, the Court considered for the first time whether isolated DNA sequences are patentable. Myriad Genetics, a Salt Lake City–based molecular diagnostic company, discovered the location and sequence of the BRCA1 and BRCA2 genes, mutations of which significantly increase the risk of breast and ovarian cancer. By isolating these genes on two chromosomes, Myriad was able to devise a diagnostic test that would determine whether any particular patient was unlucky enough to have the deadly mutations.

Myriad received a patent for this isolated gene sequence, as well as for BRCA1- and BRCA2-related “cDNA,” or complementary DNA, which are created synthetically in the laboratory.

After Myriad’s patents were issued, a group of doctors, patients, and activists — at one point including the ACLU — filed suit seeking to render the patents invalid because, in their view, DNA itself cannot constitute an “invention.” As Justice Thomas put it in an opinion joined by all the justices except Justice Scalia (and even he joined the vast majority of the opinion), Myriad’s patents: “Would, if valid, give it the exclusive right to isolate an individual’s BRCA1 and BRCA2 genes (or any strand of 15 or more nucleotides within the genes) by breaking the covalent bonds that connect the DNA to the rest of the individual’s genome. The patents would also give Myriad the exclusive right to synthetically create BRCA cDNA.”

The Court’s analysis began with the patent statute, which states that “whoever invents or discovers any new and useful … composition of matter, or any new and useful improvement thereof, may obtain a patent therefor.” The statute has consistently been interpreted to preclude the issuance of patents for laws of nature, abstract ideas, and natural phenomena, since such discoveries, however important, are not actual inventions.

Yet this distinction can often be a very fine one, and Justice Thomas recognized that “patent protection strikes a delicate balance between creating ‘incentives that lead to creation, invention, and discovery’ and ‘imped[ing] the flow of information that might permit, indeed spur, invention.’”

In this case, the Court found that “Myriad did not create anything. To be sure, it found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention. Groundbreaking, innovative, or even brilliant discovery does not by itself” meet the “invention” requirement of the statute.

Myriad argued that isolating the BRCA1 and BRCA2 genes required the severing of chemical bonds, and therefore the creation — not the discovery — of a substance that doesn’t occur naturally. But as Justice Thomas explained, the claims at issue were not for a method of isolating the DNA — which could potentially be patentable — but for the DNA molecules themselves and the genetic information encoded therein. In other words, if competitors found a different way to isolate the BRCA1 and BRCA2 genes, they would find themselves infringing Myriad’s patents, which the Court deemed unacceptable. Moreover, if a competitor found a way to isolate the offending genes along with another nucleotide sequence — in other words, not the precise molecule that Myriad argued it was patenting — Myriad’s claims would nevertheless cover that combination, since it, too, would include the naturally occurring genetic information in BRCA1 and BRCA2.

However, Justice Thomas found that Myriad’s cDNA claims did deserve patent protection. “The lab technician,” he wrote, “unquestionably creates something new when cDNA is made. cDNA retains the naturally occurring exons of DNA, but it is distinct from the DNA from which it was derived.” The Court also pronounced itself agnostic about the patentability of “innovative method claims” covering the act of isolating DNA, as well as altered DNA. Those battles will, undoubtedly, be fought down the road.

The decision touched off a firestorm in the life sciences community, which in recent years has felt the strain of legislative and judicial restrictions on patent rights. “This is the third narrow interpretation of [the patent statue] in as many years,” said Q. Todd Dickinson, executive director of the American Intellectual Property Law Association. “It’s hard not to feel that the patent system is under attack.” AIPLA’s president, Jeffrey I.D. Lewis, expressed concern that “while the Supreme Court has recognized the importance of patent protection to the health industry, today’s opinion may throw into question patent protection for important technology that is critical to improving health for the public, and that has become the cornerstone of the biotech industry.”

Sure enough, the next day the U.S. Patent and Trademark Office published a memorandum stating that patent examiners “should now reject product claims drawn solely to naturally occurring nucleic acids or fragments thereof, whether isolated or not, as being ineligible subject matter.” The memo also urged that “claims clearly limited to non-naturally-occurring nucleic acids, such as a cDNA … remain eligible. Other claims, including method claims, that involve naturally occurring nucleic acids may give rise to eligibility issues and should be examined under the existing guidance.”

Other analysts were more optimistic than AIPLA. On the influential Patently-O blog, Jason Rantanen of the University of Iowa College of Law wrote that he’s “skeptical that the Court's opinion will have a negative effect on the incentives for creating biotechnology-based applications. To the contrary: by affirming that cDNA can be patented, it may strengthen the incentives for investing in research in this area.”

Still, it cannot be denied that the Myriad decision constrained the patent rights previously held by biotech companies.

Monsanto: Bolstering Biotech

Last month, however, the tables were turned and patent rights were strengthened. International agri-giant Monsanto developed a genetically modified soybean that can survive exposure to herbicides such as the company’s ubiquitous Roundup spray. Monsanto calls these beans “Roundup Ready,” protects them with several patents, and sells their seeds to farmers.

But Monsanto imposes important conditions on its sale of these seeds to farmers. First, the farmer may plant her Roundup Ready soybeans only during a single season and may not save them for replanting. Second, the farmer may not supply the seeds to anyone else for replanting. However, the farmer may consume the soybean crop that results from the planting and she may sell that crop as a commodity, without restrictions, to a “grain elevator” that aggregates, stores, mixes, and resells beans to wholesalers or other end-users for consumption.

The reason for these restrictions is simple: “a single Roundup Ready seed,” Justice Kagan, writing for her Supreme Court brethren, explained, “can grow a plant containing dozens of genetically identical beans, each of which, if replanted, can grow another such plant — and so on and so on.” Were the farmer permitted to replant her soybeans, she would not need to buy them from Monsanto ever again.

In some ways, these restrictions may seem unfair, since the farmer is denied the full and complete use of her product, which the purchaser of a patented product typically enjoys under the doctrine of “patent exhaustion.” And yet, at the same time, certain aspects of that use — for example, replanting, which results in replicating the technologically advanced seed — inherently violate Monsanto’s own intellectual property rights, the traditional exception to patent exhaustion. This is precisely the ethical and legal conundrum the Supreme Court faced.

Vernon Hugh Bowman, an Indiana farmer who regularly purchased Roundup Ready soybean seeds, hatched a clever scheme to get around Monsanto’s restrictions. He bought seed from a grain elevator, knowing that the grain elevator in turn had bought at least some of its seed from other farmers who had planted Roundup Ready soybeans. Of course, not all of the “commodity seeds” Bowman bought from the elevator were Roundup Ready, so he sprayed the entire crop with a Roundup-like herbicide. Since only the strong survived, Bowman could cultivate a purely Roundup Ready seed base and avoid buying directly from Monsanto. Bowman then planted his Roundup Ready seed, which in turn yielded yet more Roundup Ready beans.

Monsanto, needless to say, was not amused. It sued Bowman, arguing that he infringed their patents when he created the new seed. Bowman responded that Monsanto’s patents were exhausted when Monsanto sold its soybeans to farmers who resold them to the grain elevators. He also argued that if anything infringed Monsanto’s patents, it was the bean itself, which replicated on its own.

The Supreme Court weighed both parties’ claims and ultimately found for Monsanto. Justice Kagan wrote for (another) unanimous Court that under the patent exhaustion doctrine “the initial authorized sale of a patented item terminates all patent rights to that item.” However, she also quoted an 1873 case holding that “the purchaser of the [patented] machine ... does not acquire any right to construct another machine either for his own use or to be vended to another.”

While Bowman enjoyed the right to resell or consume the elevator beans he had bought, “the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission.” Bowman’s proposed extension of the exhaustion doctrine would, the Court held, eviscerate Monsanto’s rights. As the Court put it:

Were the matter otherwise, Monsanto’s patent would provide scant benefit. After inventing the Roundup Ready trait, Monsanto would, to be sure, “receiv[e] [its] reward” for the first seeds it sells … But in short order, other seed companies could reproduce the product and market it to growers, thus depriving Monsanto of its monopoly. And farmers themselves need only buy the seed once, whether from Monsanto, a competitor, or (as here) a grain elevator. The grower could multiply his initial purchase, and then multiply that new creation, ad infinitum — each time profiting from the patented seed without compensating its inventor.

The Court was sympathetic, however, to Bowman’s argument that “in planting Roundup Ready seeds … he is merely using them in the normal way farmers do.” Barring the application of the exhaustion doctrine in his case, Bowman contended, would carve out “self-replicating technologies” entirely. And yet the Court ultimately concluded that replication has never been a “use” protected by the exhaustion doctrine because otherwise “the undiluted patent monopoly … would extend not for 20 years (as the Patent Act promises), but for only one transaction,” which “would result in less incentive for innovation than Congress wanted.”

Justice Kagan also took exception to what she called Bowman’s “blame-the-bean” defense, in which he argued that the soybean itself, not its planter, bore responsibility for its replication. “Bowman was not a passive observer of his soybeans’ multiplication,” Justice Kagan wrote for the Court:

or put another way, the seeds he purchased (miraculous though they might be in other respects) did not spontaneously create eight successive soybean crops. As we have explained … Bowman devised and executed a novel way to harvest crops from Roundup Ready seeds without paying the usual premium. He purchased beans from a grain elevator anticipating that many would be Roundup Ready; applied a glyphosate-based herbicide in a way that culled any plants without the patented trait; and saved beans from the rest for the next season. He then planted those Roundup Ready beans at a chosen time; tended and treated them, including by exploiting their patented glyphosate resistance; and harvested many more seeds, which he either marketed or saved to begin the next cycle. In all this, the bean surely figured. But it was Bowman, and not the bean, who controlled the reproduction (unto the eighth generation) of Monsanto’s patented invention.

And thus, the Court sided with the company instead of the farmer.

But there are other wrinkles to the story. Some anti-GMO activists suspect Monsanto deliberately instructs its farmers not to tell the grain elevators about the restrictive covenants in their license agreements so that the elevators do not segregate GMO seeds from conventional seeds. Without this commingling, the critics reckon, the elevators could not resell the GMO beans to many countries in Europe that prohibit the sale or use of any genetically modified agriculture.

Other activist groups took up the mantle on behalf of Bowman. One anti-GMO organization, the Center for Food Safety (CFS), weighed in by filing an amicus brief of its own. “Patenting should not interfere with a farmer's right to save seeds,” the group’s attorney said in an interview with Reuters. “They should not resell them or repackage them or become competitors of Monsanto, but the seed they buy, they should be able to use them in a natural way for planting. This is not only about farmer rights, it's about farmer survival.”

In the brief, CFS called what Bowman did a “non-inventive activit[y]” and argued that “planting seed in the normal course of farming and having it reproduce is vastly and fundamentally different than genetic engineering.”

A Balancing Act

So what is the net effect of the Myriad and Monsanto decisions, separated as they are by one month? For one thing, it’s encouraging to see the Supreme Court speaking with a single voice on these important issues, a rarity given its ideological makeup and often strident dissents and concurrences. The relatively clear guidance the Court issued in both cases will help steer patent practitioners, biotech companies, patients, doctors, farmers, and grain elevators in a consistent direction.

Second, the opinions are internally consistent, in the sense that genetically modified soybeans, unlike isolated DNA segments, are “new and useful composition[s] of matter.” In essence, Roundup Ready soybeans are to ordinary soybeans what cDNA is to naturally occurring DNA. Thus, to the extent that the Myriad and Monsanto rulings were designed to articulate a common legal principle, they seem to have succeeded: natural phenomena, however challenging to discover, are not patentable, while artificial manipulations of life forms, however unpalatable they may be to certain activists, are.

Third, it’s hard not to conclude that, in issuing these two decisions, one upholding existing patent rights and another restraining them, the Court was staking out what it saw as a balance between, in Justice Thomas’s words, “creating ‘incentives that lead to creation, invention, and discovery’ and ‘imped[ing] the flow of information that might permit, indeed spur, invention.’” Some may quibble with the balance the Court struck in either (or both) Myriad and Monsanto, but this was plainly its goal.

With respect to genetic sequencing, synthetic genes will remain patentable as will, it seems likely, methods of isolating even naturally occurring genes. Life science companies and their attorneys will need to be a bit shrewder in how they draft their claims, and the breadth of patent scope previously available is a bit narrower, but genetic innovation will persevere.

As for soybeans, farmers will continue to enjoy the right to consume and sell their Roundup Ready crops, but they will not be able to replicate that bean in quite the way Monsanto invented. Those who purchase patented products remain at liberty to do whatever they would like with those products — except copy them, even if such copying is the natural outgrowth of their customary use.

Finally, both Justice Kagan’s and Justice Thomas’s opinions deliberately left unanswered certain follow-up questions. “Our holding today is limited,” Justice Kagan stated, “addressing the situation before us, rather than every one involving a self-replicating product … In another case, the article’s self-replication might occur outside the purchaser’s control. Or it might be a necessary but incidental step in using the item for another purpose.” The Monsanto decision offered little guidance on how the Court would resolve such situations, but it hinted in these words that the result may well be different.

Similarly, as set forth above, Justice Thomas left open the door to the patentability of method claims and inventions claiming “altered” genetic content. Yet by not including those alternative inventions in its strictures, the Myriad Court signaled at least some openness to deeming them patentable.

So while much remains to be decided on these issues, all nine justices on the Supreme Court appear to be pulling in the same direction toward devising a framework that encourages innovation while ensuring that its fruits are enjoyed fairly by consumers. A Herculean task, to be sure, but one from which the Court, to its credit, hasn’t shirked.

Michael M. Rosen, a contributor to The American, is an attorney and writer in San Diego.

FURTHER READING: Rosen also writes “Software Patents: Reform, Not Repeal,” “Patents Defended,” “Steal This F&$#ing Book!” and “The New Textualists’ Finest Hour?” John E. Calfee writes “Decoding the Use of Gene Patents.” James Pethokoukis asks “Should Human Genes be Patented? Should Anything?” and answers “Why One-Size-Fits-All Patent Law is a Bad Idea.” Scott Gottlieb argues that “Supreme Court’s Ruling on Genetic Tests Will Make a Bad Business Worse,” and Jon Entine says “On GMOs, New York Times Foodie Mark Bittman is a Dark Cloud in the Brightening Sky of Reason.”

 

Image by Dianna Ingram/Bergman Group

 

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