BioWorld Perspectives Contributing Writers

Editor's note: Ethan Horwitz and Kenneth Sonnenfeld are partners in the New York office of King & Spalding in the Intellectual Property practice. Jenny Lee is an associate in the practice.

The Supreme Court's recent decision in Bilski v. Kappos addresses the most basic issue in patent law — what may be patented. Although Bilski concerns business method patents, the decision's focus on what constitutes an unpatentable abstract idea has considerable relevance to both the biotechnology and pharmaceutical industries. Rather than providing a bright line test for determining patentable subject matter, the decision has created considerable uncertainty that hopefully will be addressed in two decisions the Federal Circuit will reconsider in view of the Bilski decision. (For more coverage of the Bilski decision, see BioWorld Today, June 29, 2010, and BioWorld Insight, July 5, 2010.)

Setting the Dividing Line Between Abstract and Patentable
An abstract idea cannot be patented. For example, a claim for "curing cancer" is not patentable because it is merely an abstract idea. On the other hand, a method for curing cancer with specific drugs or with specific dosing as a cure for cancer is patentable. The issue in Bilski is where, in between these two extremes, is the line for dividing an abstract idea from a patentable one. The case law on this issue revolves around business method patents, but the issues are equally applicable to other area such as biotechnology. Bilski and how it is followed could have a profound impact.

Recent history begins with a Federal Circuit decision in State Street, which set the test for patentability as whether the claimed method produced a "useful, concrete and tangible result." State Street started an explosion in patent applications claiming business methods and prompted significant criticism to business method patents.

The claim at issue in Bilski was for "instructing buyers and sellers how to protect against the risk of price fluctuations in a discrete section of the economy." Last year, the Federal Circuit held that this claim was not patentable and abandoned the broad test it had set forth in State Street. Instead it created a new "machine-or-transformation test," which provided that a process is patentable if: "(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing."

On appeal, the Supreme Court rejected the Federal Circuit's "machine-or-transformation" test and instead re-emphasized three categories that have been excluded from patent protection: "laws of nature, physical phenomena, and abstract ideas." With respect to the specific hedging transaction methods claimed by Bilski, "all members of the [Supreme] Court agree that the patent application at issue here . . . claims an abstract idea" and cannot be patented.

Moving Patents from the Industrial Age to the Information Age
Instead of affirming a relatively clear but limited "machine or transformation" test, the Supreme Court kept the test more nebulous, stating the "machine or transformation" test may have been appropriate for the Industrial Age, but is not for the Information Age, let alone for whatever emerging technologies are to come. Recognizing that "patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles," the Supreme Court specifically declined to "take a position where that balance ought to be struck." The Supreme Court invited the Federal Circuit to define "a narrow category or class of patent applications that claim to instruct how business should be conducted," which would be unpatentable "because, for instance, it represents an attempt to patent abstract ideas."

The Supreme Court explained that the Bilski claims were unpatentable because they claim the concept of hedging or its reduction in the form of a mathematical formula, either of which are abstract ideas. The Supreme Court then remanded two other cases involving medical diagnostic methods back to the Federal Circuit to apply the Bilski test. The two cases are Mayo v. Prometheus and Classen v. Biogen, both of which had been decided by the Federal Circuit and were on appeal to the Supreme Court. How the Federal Circuit will apply the nebulous test of the Supreme Court when it reconsiders these cases will be very instructive to the biotechnology and pharmaceutical industries.

In Prometheus, the claims are to "methods for calibrating the proper dosage of thiopurine drugs," where the method is to administer the drug, determine the level of the drug in the subject, and compare the levels to predetermined values and then adjust accordingly.

The claims in Biogen are methods directed to a "correlation between vaccination schedules and the incidence of immune mediated disorders." Specifically, the methods involve: "1) immunization of a treatment group; and 2) a comparison of the incidence of chronic immune mediated disorders in the treatment group relative to a control group."

Looking to Earlier Decisions for Guidance
How the Federal Circuit will decide these cases is unclear because of the lack of guidance provided by the Supreme Court in Bilski. Guidance may come from earlier Supreme Court decisions such as Diamond v. Diehr and Parker v. Flook.

In Flook, the Supreme Court held a catalytic conversion process consisting of "an initial step which merely measures the present value of the process variable (e.g., the temperature); an intermediate step which uses an algorithm to calculate an updated alarm-limit value; and a final step in which the actual alarm limit is adjusted to the updated value" is not patentable.

In contrast, Diehr held that a process for molding raw, uncured synthetic rubber into cured precision products by constantly measuring the actual temperature inside the mold and repeatedly recalculating the cure time was eligible for patent protection. The Supreme Court in Diehr stated:

[A] new mineral discovered in the earth or a new plant found in the wild is not patentable subject matter. Likewise, Einstein could not patent his celebrated law that E=mc2; nor could Newton have patented the law of gravity. Such discoveries are 'manifestations of . . . nature, free to all men and reserved exclusively to none.'

There are also some indications of how the Federal Circuit will be thinking when it deals with these two cases. For example, when it first dealt with Prometheus, the Federal Circuit stated: "[t]he transformation is of the human body following administration of a drug and the various chemical and physical changes of the drug's metabolites that enable their concentrations to be determined."

Moreover, the Federal Circuit established a bright-line rule that claims to methods of treatment "are always transformative when a defined group of drugs is administered to ameliorate the effects of an undesired condition."

Since the Federal Circuit's decision in Bilski, there has been considerable concern that it would cut a wide swath of unpatentability for patents in the biotechnology and pharmaceutical industries, particularly patents claiming diagnostics. While the Supreme Court's decision in Bilski reversed that limited approach, it is unclear how the Federal Circuit will apply the Supreme Court's standards. How the Federal Circuit applies the Bilski decision to Prometheus and Biogen will certainly be of great interest to the biotech and pharma industries.

Publlished: July 22, 2010