Patent eligibility in Australia: the winding road ahead

In the highly anticipated decision in D’Arcy v Myriad Genetics, handed down earlier this month, the High Court of Australia has unanimously held that isolated naturally occurring DNA is not eligible for patent protection. This decision overturned two earlier Federal Court decisions (Cancer Voices Australia v Myriad Genetics 2013 and D’Arcy v Myriad Genetics 2014) which had unanimously upheld the patent eligibility of isolated DNA, specifically the isolated BRCA DNA which was the subject of Myriad’s Australian patent number 686004.

This decision has reversed decades of accepted practice in Australia in relation to patent eligibility and although now arguably aligning Australian patent eligibility practice more closely with that of the US, nevertheless sets it at odds with most other jurisdictions, including all of Australia’s major trading partners.

Australian effects

The BRCA patents, which claim both breast cancer diagnostic methods and the mutated form of the isolated BRCA DNA itself, have courted significant controversy. Specifically, attempts by the Australian licensee to centralise BRCA diagnostic testing in-house led to:

(i)  The Australian government instigating several enquiries which considered the appropriateness of granting gene patents;

(ii)  Litigation challenging the patentability of the claims to the BRCA gene; and

(iii)  The introduction of the Patent Amendment (Human Genes and Biological Materials) bill into the Australian parliament in 2012 which proposed to ban the patenting of biological materials which are identical or substantially identical to such molecules as they exist in nature.

Ultimately, the various government-instigated enquiries recommended against excluding isolated genes or other biological materials from patent eligibility, in favour of:

(i)  Focusing on raising the standard of the various patentability thresholds;

(ii)  Introducing a research use exemption; and

(iii) Ensuring the adequacy of the safeguards provided by Australian law to minimise the abusive monopolistic behaviour.

In terms of the federal court Myriad litigation, both the decision of first instance and the appeal decision held that the isolated BRCA DNA molecule is not the same as its naturally occurring counterpart, there being both structural and functional differences which result from its isolation, thereby giving rise to the “artificial state of affairs in a field of economic endeavour” which, for decades, has been understood as the test for patent eligibility in Australia (National Research Development Corporation v Commissioner of Patents [1959]).

The High Court, however, has now held that test is to be used only as a guide and not a rule. The High Court has indicated that a range of other factors should also be considered in determining patent eligibility, including:

The High Court also held that the correct analysis to be applied to the question of patent eligibility is to focus on the true nature of the characteristics of the invention and thereby consider the substance of the invention rather than its form. In applying these principles to Myriad’s BRCA DNA claims, the court found that the essential element of the invention was the coding information, being the sequence of nucleotides which enables a polypeptide to be generated and which is diagnostic of breast cancer.

The court held that this information was the same as exists in the body and was therefore not “made” but rather “discerned”. On this basis, the court held that the subject matter of the claim was not patent-eligible.

Which molecule?

In reaching this decision, the court concurred with the approach of the US Supreme Court  to patent eligibility in the corresponding US Myriad decision, AMP v Myriad Genetics, which also focused on the informational content of DNA rather than the isolated molecule itself.

However, the High Court has gone further than the Supreme Court and has also held that complementary DNA (cDNA) is not patent-eligible, this being a molecule which the Supreme Court had expressly indicated retained patent eligibility due to the difference in the sequence of nucleotides between cDNA and the gene.

The High Court, however, held that if one applied the substance over form principle, the reality is that the nucleotides of cDNA are in the same sequence as in genomic DNA, albeit the introns have been removed. That is, cDNA effectively replicates a naturally occurring sequence of exons, despite the fact that exons do not naturally exist in a DNA form in a continuous sequence.

In terms of isolated nucleic acid molecules, this decision is likely to have relatively little impact since the advent of the sequencing of the genomes of many species has effectively destroyed the novelty of claims directed to nucleic acid molecules which form part of these genomes. Accordingly, patents are now rarely granted to such molecules.

The question which must now be asked relates to the scope of the precedent created beyond nucleic acid.

The Supreme Court decision has been interpreted by the US Patent and Trademark Office (USPTO) to render all natural products patent-ineligible. Whether the US courts will ultimately concur with this view or will interpret the Supreme Court decision to stand for a narrower principle remains to be seen. As occurred with the USPTO, Australia’s intellectual property office, IP Australia, will be the first organisation to face the task of interpreting and applying the High Court decision to currently pending patent applications.

Practice note

In this regard, IP Australia has released a practice note, currently open to public comment, which proposes that the following molecules, whether isolated or synthesised, will not be regarded as patent-eligible:

However, IP Australia is expressly proposing to maintain the patent eligibility of molecules which do not merely represent information coding for a polypeptide, these being naturally occurring regulatory DNA, non-coding DNA or RNA, bacteria, viruses, polypeptides, chemical molecules purified from natural sources, cells, stem cells, probes, primers, interfering/inhibitory nucleic acid, monoclonal antibodies, fusion-chimeric nucleic acids and transgenes comprising naturally occurring gene sequences.

“A significant incentive exists to persist with filing and prosecuting patent applications in the US in an attempt to obtain and maintain commercially useful claim scope around natural products.”

It therefore appears that IP Australia is proposing to quarantine the application of the High Court decision to DNA and RNA which codes for a protein and corresponds to a naturally occurring sequence, in addition to cDNA. This approach is arguably limiting the High Court decision to its facts. If this proposal is ultimately adopted it will arguably have little impact on the biotechnology industry since naturally occurring DNA and RNA sequences are no longer patentable anyway due to lack of novelty.

This approach is in stark contrast to that of the USPTO which has held all of the above molecules to lack patent eligibility where they correspond to a naturally occurring counterpart.

Future developments

There is no doubt that from the point of view of industry there is likely to be an initial sense of relief that IP Australia is proposing to quarantine the application of the High Court decision in this way. However, the reality is that there will be those who argue that the High Court decision cannot be confined to its facts and that it defines a principle which applies more broadly to any molecule which contains information defined by a sequence of nucleotides, amino acids or other naturally occurring chemical subunits.

Ultimately, irrespective of the practice adopted by IP Australia, or even public sentiment, the scope and application of the High Court precedent will unfold over time as future courts grapple with its interpretation and application. In the meantime, this creates a significant element of uncertainty in relation to the validity of existing and future patents directed to natural products.

Patents are a key incentive for investment in research and development in the biotechnology and pharmaceutical sectors. Accordingly, ongoing judicial, legislative and political scrutiny in relation to the question of what type of technology should be regarded as patent-eligible presents significant challenges to these sectors. However, whereas the US represents a significant market for biotechnology and pharmaceuticals, the same cannot be said for Australia, which is a much smaller market.

Accordingly, despite the hurdles which exist in the US in relation to the patent eligibility of natural products, the reality is that a significant incentive exists to persist with filing and prosecuting patent applications in the US in an attempt to obtain and maintain commercially useful claim scope around natural products.

Depending on how the interpretation and application of the High Court decision unfolds, the same cannot necessarily be said of Australia.

At the time that the bill which proposed banning the patenting of biological materials was introduced into the Parliament of Australia, the Senate Committee established to consider the implications of this bill expressed concern that any limitation to the patent eligibility of biological materials in Australia could lead to undesirable outcomes such as:

The question of the impact of this decision on the recently negotiated Trans-Pacific Partnership (TPP) is also highly relevant since although the text of the TPP has not been released, the efforts by Andrew Robb, Australia’s minister for trade and investment, to reduce Australia’s obligations in relation to data exclusivity for biological drugs from a term of 12 years to five years were widely reported to be based on the argument that Australia provides a “robust” patent system for biologics which  is not “under attack” as is the US system.

In this regard, the minister made specific reference to the fact that genetic molecules are no longer patentable in the US. Unfortunately, the High Court decision was handed down the day after the TPP negotiations were finalised, thereby undermining the very basis upon which the data exclusivity terms were negotiated.

A decision of the High Court represents the last step in the judicial process. There is no further avenue of appeal. Although the proposed approach by IP Australia will no doubt provide some comfort to patentees, the reality is that there has occurred a seismic shift in the law in Australia in relation to patent eligibility, including the introduction of a range of very nebulous factors which are now to be applied in considering the patent eligibility of new technologies.

Only time will reveal the extent to which third parties may seek to challenge the patent eligibility of existing patents which claim non-nucleic acid natural products.

At this stage, the most significant issue is arguably the uncertainty that this decision has created in terms of the patent eligibility of naturally occurring molecules other than DNA and, further, to what extent the court’s finding in relation to cDNA may impact on other modified molecules.

This uncertainty is evidenced by the plethora of articles analysing this decision and which interpret it to stand for everything from confining it to its own facts through to its destroying the patent eligibility of all naturally occurring substances.

It is this uncertainty that could undermine the biotechnology industry in Australia. That being the case, there is an argument to be made that rather than prolonging this uncertainty by awaiting future judicial decisions which clarify the precedent created by the High Court decision, the Australian legislature should step in to codify patent eligibility.

This could be achieved, for example, by codifying the previously accepted test for patent eligibility, as has previously been recommended to the government by the Advisory Council on Intellectual Property, together with express inclusions in relation to patent-eligible subject matter, for example as appears in the European Biotechnology Directive. This would then, arguably, restore certainty to the Australian patent system.

Tania Obranovich is a special counsel at  Watermark Intellectual Asset Management in Melbourne. She can be contacted at:t.obranovich@watermark.com.au