The all-encompassing ex vivo gene therapy patent issued to NationalInstitutes of Health (NIH) researchers and licensed to GeneticTherapy Inc. will face its first challenge within the U.S. Patent andTrademark Office (PTO), which granted the broad proprietary rightslast year.

The PTO has declared two interferences with the NIH patent _ onein an application from Somatix Therapy Corp., of Alameda, Calif.,and the other in a filing from another company. Somatix Therapyrevealed the PTO's action Thursday. The identity of the otherapplicant was not disclosed.

When the NIH-Genetic Therapy patent was issued its claims coveringall uses of ex vivo gene therapy were so broad that challenges wereconsidered inevitable. Most early stage gene therapy clinical trialsinvolve an ex vivo approach as opposed to in vivo geneticengineering.

"It had to be challenged," said Marc Ostro, an analyst with UBSSecurities Inc. in New York, "or no one else could do ex vivo genetherapy."

If the controversy is not resolved by the PTO, it likely would shift tothe courts.

After getting the patent, Genetic Therapy, of Gaithersburg, Md., wasacquired by Sandoz Ltd., of Basel, Switzerland, for $295 million.Genetic Therapy officials said Thursday they could not comment onpending patent matters.

The PTO interference proceedings will attempt to determine who wasfirst to invent ex vivo gene therapy. The decision could be asignificant step in determining ownership rights to a technology inwhich cells are modified outside the body to correct geneticdeficiencies and then returned to the patient. In vivo geneticalterations would take place inside the body.

Mark Bagnall, Somatix Therapy's chief financial officer, said thePTO, after hearing arguments from the three parties, could narrowthe scope of claims, invalidate them or declare them valid.

"Somatix is not in this to get into a war with Sandoz and have itspatent invalidated," Bagnall said. "What we want to do is getstraightened out who owns what in ex vivo gene therapy."

In July 1985 Somatix filed a composition of matter patent applicationfor genetically modified epithelial cells, which cover internal andexternal surfaces of organs and are targets for cancer gene therapy.The patent was issued in December 1990.

In 1993 Somatix filed an application seeking to add to its 1990 patentex vivo gene therapy as a method of use for its genetically modifiedepithelial cells.

In the PTO's interference proceeding, Bagnall said, Somatix will beable to submit "evidence to support our claim that we were first."

He said the company would argue that the 1993 application for acontinuation of the 1990 patent should prevail as the earliestdiscovery of the technology.

Somatix's gene therapy is based on Richard Mulligan's research atthe Whitehead Institute for Biomedical Research at MassachusettsInstitute of Technology, in Cambridge, Mass. Mulligan is Somatix'schief scientific officer.

The NIH-Genetic Therapy patent application was filed in June 1989and issued in March 1995. The patent was granted for workconducted by NIH researchers French Anderson, Michael Blaese andSteven Rosenberg.

Bagnall said the NIH-Genetic Therapy patent's broad claims"muddied the waters" for other companies developing gene therapyand "cast a pall over where the patent office was going" with itspolicy on the technology.

Ostro said Sandoz probably could avoid an expensive battle bygranting licenses in exchange for a small percentage of royalties,much like Stanford University and University of California did whenProfessors Stanley Cohen and Herbert Boyer were awarded broadgenetic engineering patents in 1981.

"It would be far wiser to give everybody a license," Ostro said, "andthen everybody goes away happy."

Somatix's stock (NASDAQ:SOMA) closed Thursday at $5.87, up 12cents. n

-- Charles Craig

(c) 1997 American Health Consultants. All rights reserved.