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The Role of Courts for Sustainable Innovation- As Predominantly Reflected in Case Law on Patentable Subject Matter -

Joseph Straus, Munich/Pretoria

2013 Tongji Global Intellectual Property Forum,

Tongji IP Institute, Shanghai, December 4, 2013


Topics to Consider

• The rationale of the patent system & IP rights in general

• Science & technology – perpetual challenge for legislature

• Courts as key interpreters of "law" and "technology" – pacemakers of

technological innovation

• Innovation – shared responsibility of legislature & courts

• Some concluding thoughts – from a European perspective


The Rationale of the Patent System & IP Rights in General

• "To promote the Progress of Science and Useful Arts, by securing for

limited times to Authors and Inventors the exclusive rights to their

respective Writings & Discoveries"

U.S. Const. Art. I, § 8, cl. 8

• "[T]he Patent Clause reflects a balance between the need to

encourage innovation and the avoidance of monopolies which stifle

competition without any concomitant advance in the 'Progress of

Science and Useful Arts'".

U.S. Supreme Court, Bonito Boats, 489 U.S. at 146

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The Rationale of the Patent System

„The ground for granting a patent to the inventor is ultimately the

public interest in scientific and technological progress. Therefore the

unlimited protection of the patent is not justified in a case where the

further development of technology is hindered. The patent right – in

the national sector as well as in principle in foreign law is aimed at

promoting technological progress and stimulating the spirit of

invention in the industry in a profitable manner.“

German Federal Supreme Court [1998]R.P.C. 423 (435) – Confirmed by the

German Federal Constitutional Court in 2000


“It is clearly settled at law that a man, to entitle himself to the

benefit of a patent for monopoly, must disclose his secrets and

specify his invention in such a way that others may be taught by it

to do the thing for which the patent is granted, for the end and

meaning of the specification is to teach the public after the term for

which the patent is granted, what the art is, and it must put the

public in possession of secret in as ample and beneficial a way as

the patentee himself uses it…”

[Judge Buller in King v. Arkwright (1785)]

The Genuine "Traditional" Function of a Patent

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• The protection and enforcement of IP rights should contribute to

– the promotion of technological innovation and

– the transfer and dissemination of technology

– the mutual advantage of produces and users of technological knowledge, and

• in a manner conducive to social and economic welfare, and to a balance of rights and obligations.

Article 7 TRIPS

TRIPS Objectives

The Rationale of the Patent System & IP Rights


Science & Technology – Perpetual Challenge for Legislature

• Any system of positive law which attempts to regulate matter relating to imperfectly understood mental or physical facts – problem loaded

• They are not the development of evident and necessary truths, but are built up through the interpretations given by the courts to the terms in which the arbitrary will of the legislative body is expressed.

• Terms not always carefully selected, nor accurately adapted to the subjects which they are intended to control

• Court's interpretations are characterized by many apparent contradictions, by much uncertainty of language, and by frequent confusion of ideas which are, in themselves, essential dissimilar

W.C. Robinson, The Law of Patents [1890]

The Problems of Legislatures & Courts

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Inter alia

"Technology", "Discovery", "Invention", "Laws of Nature", "Physical

Phenomena", "Abstract Ideas", "Apparatus", "Process", "Machine",

"Computer Program", "Microorganism", "Plants", "Animals", "Plant &

Animal Varieties", "Essentially Biological & Non-Biological

Processes", etc.

Terms Left to Courts for Interpretation & Application

Science & Technology – Perpetual Challenge for Legislature


• Can an invention for breeding doves be patented?

• According to § 1(1) of the Patent Act – Unchanged since 1877 – patents available for new inventions that permit industrial application

• Originally – this was interpreted as a teaching of a technical character employing physical and chemical means alone known as predictable at the time the act was passed

• However, this original view can no longer determine interpretation of the Patent Act, because science and technology have changed significantly in the meantime

German Fed. Supreme Court - Red Dove Decision [1969]

The Response of the Courts

Technology – An Evolutionary Notion


The Response of the Courts

Technology – An Evolutionary Notion

• An historical interpretation of the term invention is even more unsatisfactory because invention is a basic concept in a field of law having as its most important task encompassing the patentable results of the most recent states of science and of research.

• Therefore, the intent of the Patent Act itself not only permits but even compels drawing upon the latest state of scientific knowledge to interpret the concept of invention, which was not construed more precisely by the legislator and which by its nature requires judicial determination

German Fed. Supreme Court - Red Dove [1969]


• Can a genetically modified microorganism be patented?

• Not patentable: Laws of nature, physical phenomena and abstract ideas

• Patentable: anything under the sun made by man

• “Congress… recognized that the relevant distinction was not between living and inanimate things, but between products of nature, whether living or not, and human-made inventions.”

• “The briefs present a gruesome parade of horribles. Scientists, among them Nobel Laureates are quoted suggesting that genetic research may pose a serious threat to the human race, or …”

U.S. Supreme Court - Diamond v. Chakrabarty [1980]

Living v. Non-Living

Technology an Evolutionary Notion & Ethics


Living v. Non-Living

Technology an Evolutionary Notion & Ethics

• “It is argued that this Court should weigh these patented hazards in

considering whether respondent’s invention is patentable subject

matter under 101. We disagree…”

• “The choice we are urged to make is a matter of high policy for

resolution within the legislative process after the kind of investigations,

…, that legislative bodies can provide and courts cannot.”

U.S. Supreme Court - Diamond v. Chakrabarty [1980]


“It is trite law that you cannot patent a discovery, but if on the basis of

that discovery you can tell people how it can be usefully employed, then

a patentable invention may result. This in my view would be the case,

even though once you have made the discovery, the way in which it can

be usefully employed is obvious enough.”

Whitford J - Genentech Inc's Patent [1987]

Expressly approved by HOL - Kirin-Amgen Inc. v. Hoechst Marion Roussel [2005]

Discovery v. Invention

Courts as Pacemakers of Innovation


“There is no doubt that naturally occurring DNA and RNA as they exist

inside the cells of the human body cannot be the subject of a valid

patent. However, the disputed claims do not cover naturally occurring

DNA and RNA as they exist inside such cells. The disputed claims

extend only to naturally occurring DNA and RNA which have been

extracted from cells obtained from the human body and purged of other

biological materials with which they were associated.”

Federal Court of Australia - Cancer Voices Australia v. Myriad Genetics [2013]

Manner of Manufacture under Section 18(1)(a) Australian Patent Act



Practical Considerations v. Theoretical Reflections

"In accordance with the purpose of the Patent Act to promote technical

progress and stimulate the inventive spirit for industry in a beneficial

manner practical considerations also deserve stronger recognition than

theoretical reflections in the interpretation and application of the Patent

Act."

German Fed. Supreme Court - Rabies Virus [1987]


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Experimental Use Exemption

• Experiment under Sec. 11 No. 2 Patent Act

“… any planned act for the acquisition of knowledge, independent of the purpose for which the acquired knowledge is intended to serve eventually.”

• The subject matter of the invention must be the object of the test activity for the purpose of gaining knowledge

• Covers acts performed to determine the effects of a substance or new previously unknown applications – further medical uses

• Test may, eventually, serve commercial interests

German Fed. Supreme Court – Clinical Trials I [1997]


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Experimental Use Exemption

• Clinical trials with substances of same indication allowed as long as

not solely aimed at clarifying commercial facts, such as market needs,

price acceptance and marketing possibilities but not at further clarifying

properties, effects, possible uses and production possibilities of the

subject matter of an invention

• Even if introduced and carried out with the commercial goal of

obtaining marketing authorization with the data obtained

German Fed. Supreme Court – Clinical Trials II [1998]


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Limits of the Experimental Use Exemption

- Europe's Approach -

• Yardstick: activity aimed at gaining new knowledge – enriching the

state of the art

• Not covered: use of the invention as research tool (PCR, ESTs),

i.e. for the patented purpose


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Limits of the Experimental Use Exemption

- US Approach -

• "[I]t could never have been the intention of the legislature to punish a man, who constructed such a machine merely for philosophical experiments, or for the purpose of ascertaining the sufficiency of the machine to produce its described effects."

Justice Story - Whittemore v. Cuttler [1813]

• Only if the act is "solely for amusement, to satisfy idle curiosity, or for strictly philosophical inquiry" – no infringement

CAFC, Embrex v. Service Engineering [2000]; Madey v. Duke [2002]

Courts as Pacemakers of Innovation?

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• With the disclosure of a chemical structural formula, the individual compounds covered by this formula are, in principle, not yet disclosed.

• Deciding factor – whether the concrete compound disclosed

• Required information that easily enables the person skilled in the art to specifically implement the invention relating to this chemical compound, i.e. to obtain the specific compound

• Otherwise – in case of pre-published chemical structural formula with some medical indications nobody could invest in clinical trials to identify the specific and useful compound!

German Fed. Supreme Court – Olanzapine [2008]

Selection Inventions


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• Numerous patents granted on genomic & cDNA encoding proteins, hormones or representing diagnostic markers, GM plants, etc.

• Repeatedly challenged in courts – never viewed as – in principle - unpatentable

• Provided the foundation for a new branch of industry – biotechnology

• New companies emerged, e.g. Amgen, Biogen, Cetus, Chiron, Genentech and many more

• New drugs and diagnostics developed & entered the market: recombinant h-insulin, erythropoietin, GCFS (Neupogen), hGH, HCV, HIV, BRAC diagnostics – many based on patents claiming genomic DNA: not a multi billion business only and clear US lead, but cures and diagnostics for patients world-wide!

Legal & Economic Consequences – US & Europe


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Statistics on Patents Granted in the US

Nature Biotechnology, October 2013

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US "Gene" Patents Granted

Nature Biotechnology, October 2013

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Top Ten Categories of Biologic Drugs in Terms of US Sales

Source: Nature Biotechnology , October 2007


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Source: Nature Biotechnology, October 2007

Top 18 Companies that Comprised the Majority of Salesof Biologic Drugs



FDA New Molecular Entities and Biologics Approvals 1997-2011

Source: Nature Biotechnology, 2012



Patent DE 197 56 864 C1 of April 29, 1999 - Dr. O. Brüstle

Neural precursors, method of production and use for therapy of neural defects

Claims:

1.Isolated, purified precursor cells with neuronal or glial characteristics from embryonic stem cells1)2) containing at most about 15% of primitive embryonic and non-neural cells, obtainable through the following steps:

a) culturing of ES-cells to embryoid bodies

b) ....

5. Cells according to one of the Claims 1-4, whereby the embryonic stem cells from oocytes are obtained after a nuclear transplantation



• Applied the broadest possible definition of an embryo• No protection available for all inventions using stem cells derived from

destroyed human embryos • No matter how legal the stem cells were generated• No matter that the invention claimed does not use human embryos and is

not dependent on their repeated use• No matter that the generation of human pluripotent stem cells and stem

cell lines is not even described• No matter that products derived from human embryonic stem cells may

be commercialized in a number of EU Member States – Art. 27(2) TRIPS compliance?

• Everybody can (even) commercially use/exploit the respective invention free of charge! Strange ethics!

CJEU (Grand Chamber) - Brüstle v. Greenpeace [18 October 2011]

No Patents for Human Embryonic Stem Cells in Europe



No Exhaustion of Rights in Patented Seeds

Held:

•Patent exhaustion does not permit a farmer to reproduce patented seeds through planting and harvesting without the patent holder's permission

•Exhaustion doctrine restricts the patentee's rights only as to the "particular article" sold – it leaves untouched the patentee's ability to prevent a buyer from making new copies of the patented item.

•By planting and harvesting Monsanto's patented seeds, Bowman made additional copies of Monsanto's patented invention

•His conduct thus falls outside the protections of patent exhaustion

US Supreme Court – Bowman v. Monsanto Co. et al. [2013]


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Genomic DNA Not Patentable

We 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

• Patentable processes for manipulating and isolating genes, as well as new applications of genes

• Not decided: patentability of DNA in which the order of the naturally occurring nucleotides has been altered

US Supreme Court – Association for Molecular Pathology et al. v. Myriad Genetics Inc. [2013]


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Myriad's Consequences

• No patents on genomic DNA – granted and still in force patents can be challenged and not defended

• The reach goes [could go] far beyond human genomics and genomics in general

• Potentially puts into question patents on isolated biological material in general

• May seriously affect [high]risk investments in this entire area

• It may be used in Europe against the rules set forth in the EU Biotech Directive – allowing such patents


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• Non-statutory unpatentable subject matter – an area where the newly activist Supreme Court needs to act with caution

• Recent decisions* over laws and products of nature have upset long-standing understanding of what is and what is not patentable – creating great uncertainty within research programs that have a long gestation

• Business – it is often said – hates uncertainty and may hold back research funding in genomics until the patentability uncertainties are resolved

Prof. W. Lesser (2013)

* Mayo Cell. Serv. v. Prometheus Labs [2012] Association for Molecular Pathology et al. v. Myriad Genetics Inc.


Concerns Raised

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Innovation – Shared Responsibility of Legislature & Courts

• Legislature – to provide a statutory framework flexible enough to

enable courts to cope with challenges of science and technology

according to the mission and rationale of the patent system

• Courts - to interpret and apply positive law in compliance with the

mission and rationale of the patent system, i.e. to promote


• Legislature – to provide for statutory relieve if case law does not or

cannot comply with the mission of the patent system, e.g. by

adopting specific rules on "experimental use", patents on natural

products, or patentability of human pluripotent embryonic stem cells.

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Some Concluding Thoughts – From a European Perspective

• Over centuries the patent system – if applied in line with its

genuine mission has proven as a reliable promoter of


• The patent system has not been conceived for any particular

technological world but as a permanent incentive for technological

innovation in general

• Law makers and courts should respect the genuine mission of the

patent system and act accordingly!

• They are responsible for promoting technological innovation also

to the benefit of future generations!

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