- The Federal Court of Australia recently held that an isolated human gene is patentable, as it is a “method of manufacture”.
- Contrary to the Australian position, the US Supreme Court held that an isolated human gene is not patentable, as it is a “product of nature”, which is excluded from patentability under the US Patent Act.
- The Australian position is unlikely to be affected by the US decision. The Australian government’s stance is shifting away from a blanket exclusion and towards implementing safeguards to prevent unconscionable commercial exploitation, such as through research exemptions, compulsory licensing and Crown use, and a ban where commercial exploitation would be wholly offensive.
Angelina Jolie has sparked a renewed public interest in the human gene patents debate with the highly publicised news of her double mastectomy. Since our last article,1 the Australian Federal Court and the US Supreme Court have handed down the latest decisions in the Myriad gene patent cases. Further, major reports from the Productivity Commission and the Centre for International Economics have recently been released, dealing directly with the issues surrounding gene patentability.2
What do these developments mean for the future of gene patenting in Australia?
Are human genes patentable?
Australian position – Cancer Voices Australia v Myriad Genetics Inc
In the landmark decision of Cancer Voices Australia v Myriad Genetics Inc,3 handed down on 15 February 2013, the Federal Court of Australia confirmed the patentability of isolated nucleotide sequences (genes) in Australia.4
The decision relates to the patents held by Myriad Genetics (Myriad) over the BRCA1 and BRCA2 genes, which are used in the diagnosis of breast and ovarian cancer.5 Cancer Voices Australia, a national organisation representing cancer patients, sought revocation of these gene patents.
Under Australian law, the current test for patentability requires an invention to be a “method of manufacture”.6 The Federal Court applied the well-established test in the High Court decision of National Research Development Corp v Cmr of Patents7 (NRDC case) to determine whether the isolated DNA was a method of manufacture.
In the NRDC case, the court held that the phrase “method of manufacture” includes a product that consists of “an artificially created state of affairs which has economic significance”. The “economic significance” of the claimed invention was not argued by Cancer Voices Australia. Rather, the sole question before the Federal Court was whether the genes isolated by Myriad from its patients constituted “an artificially created state of affairs”.
Based on the NRDC case, the Federal Court ruled that the “isolated” nucleic acid that formed the BRCA1 and BRCA2 genes claimed by Myriad existed independently of their originating cells. Accordingly, by definition, the “isolated” nucleic acid did not exist within a cell like “naturally occurring” nucleic acid. The human intervention of isolating the nucleic acid from its “naturally occurring” state constituted “an artificially created state of affairs” and so was a “manner of manufacture” within the meaning of the Patents Act 1990 (Cth).
The Federal Court decision is currently under appeal to the Full Federal Court on the grounds that the court, at first instance, erred in its conclusion that isolating the gene constitutes a manner of manufacture.
US position – Association for Molecular Pathology v Myriad Genetics
Contrary to the Australian position, the Supreme Court of the United States more recently, in Association for Molecular Pathology v Myriad Genetics,8 invalidated Myriad’s US patents on the isolated DNA sequences that make up the BRCA1 and BRCA2 genes and their use in Myriad’s breast cancer diagnostic tests.9
Under US law as a result of this case, patent claims covering parts of the human genome are “products of nature”10 and therefore not patentable.
The Supreme Court found that it was well established in the scientific community that DNA fragments of the human genome, including the BRCA1 and BRCA2 genes, occur routinely in the human body when cells die and the constituent DNA is broken into fragments. As a result, the Supreme Court held that the genes were products of nature and that mere isolation of the genes did not change the character of the genes as such. Accordingly, the genes were not patentable.
However, the decision does not affect the patentability of gene testing, gene diagnostic methods, and the products of those methods (including cDNA versions of naturally occurring genes).
How will the US decision affect the Australian position?
In our view, the Australian position is unlikely to change in the current appeal to the Full Federal Court, notwithstanding the more recent and contrary US decision. The Full Federal Court is unlikely to take a narrow view of patentable genes in light of the High Court’s more liberal approach in the NRDC case, which led to a broadening of Australia’s patentability criteria.
Further, the test to determine patentability in Australia is remarkably different from the test that is applied in the United States. In Australia, the court must consider whether the isolated DNA is an “artificially created state of affairs”, whereas in the United States the relevant question is whether the isolated DNA is a “product of nature” and therefore not patentable. In light of this differing approach in principle, the Full Federal Court is less likely to attribute significant weight to the contrary US decision when considering the appeal.
Should human genes be patentable
Underlying this consideration of legal patentability is the normative debate about whether genetic material should or should not be patentable.
No, human genes should not be patentable
Advocates for non-patentability of genes argue that genes are natural substances that form part of the human body and ethically should be available to all as part of our common heritage.
Patent expert Luigi Palombi considers that the decision of the Australian Federal Court “ignores human dignity, lacks equity and denies justice to every Australian”.11 Palombi argues that the holder of a patent is entitled as a matter of law to an exclusive right to exploitation of the patented subject matter. Therefore, Palombi reasons that granting of a patent over human genes effectively creates a private right to impose a tax on those genes.
Palombi’s argument is part of a broader concern that allowing genes to be patented prevents equitable access to medical advice and treatment that relies on the use of gene sequences. Undertaking Myriad’s patented test is an expensive endeavour. In the United States, the patented test costs approximately US$3000. In Australia, the test costs A$2000-A$2500 and, for those in families with a history of breast cancer, it costs up to A$1800.
In recent years, the Australian government has undertaken sweeping reforms to patent legislation most notably the enactment of the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth), which raised patent standards and introduced an exemption from patent infringement for research activities.12 IP Australia is currently addressing equitable access concerns, such as those raised by Palombi, in its public consultation of the proposed amendments to the Patents Act.13 In particular, IP Australia is seeking submissions on the government’s intention to introduce an exclusion into the legislation that would render inventions unpatentable where commercial exploitation of the invention would be wholly offensive to a reasonable and informed member of the public. Submissions to IP Australia close on 27 September 2013.
Yes, human genes should be patentable
The Centre for International Economics (CIE) has recently released its final report investigating the economics of isolated human gene patents in Australia.14 In summary, the report found that patents are generally an important tool for incentivising innovation, recouping costs and offsetting risks associated with commercialisation.
Approximately $795 million was invested in gene technologies related to human health in Australia during 2011-12, with 21% of that coming from private investors.15 Proponents for gene patentability argue that expenditure of this volume would simply not occur without the incentive of market exclusivity provided by the patent system, especially in light of the high risk of failure and the significant costs of capital associated with gene therapy research. Accordingly, on one view, the patent system is conducive to increased social welfare and wellbeing for Australians in that it stimulates the development of new technologies and therapies that would otherwise not have been commercially viable, absent a functioning system of patents.
Further, the CIE’s report found that costs often associated with the patenting of human genes, such as the cost of gene diagnostic tests or the inability to improve diagnostic processes, are in fact often caused by factors external to the patent system. These external factors include issues in respect of exclusive licensing, the complexity of the technology, or business relations.
Compulsory licensing and Crown use of human gene patents
In its recent inquiry into the effectiveness of the compulsory licensing provisions in the Patents Act, the Productivity Commission concluded that specifically excluding genes from the patent system is unwarranted. However, the Commission has also recognised that there is a prima facie case for the government to ensure equitable healthcare access.16 Rather than changing the scope of patents, the Commission suggests imposing and strengthening safeguards in the patents system, including safeguards such as compulsory licensing of patents and clarifying the scope of the Crown use of patents.
These two regimes are discussed in more detail below. However, we note that these regimes are rarely used: there have been only three applications for compulsory licences in the last 100 years, none of which have been successful, and two applications for Crown use, both of which have been successful, according to the Productivity Commission Report.
The compulsory licensing provisions in the Patents Act are a key safeguard to ensure that the patent system operates in the interests of the community as a whole. Compulsory licensing operates as an exception to the exclusivity granted by the patent system, providing a mechanism for parties to seek access to patented inventions from a court where certain requirements are met. A compulsory licence may be granted to an applicant where the exercise of the exclusive rights conferred by a patent are not meeting the reasonable requirements of the public or constitute anti-competitive conduct.17
Currently, the Patents Act defines the reasonable requirements of the public by reference to the interests of domestic trade and industries, rather than the broader community. The test of whether a patent is meeting the reasonable requirements of the public turns on whether the interests of domestic trade and industries would be unfairly prejudiced by the patentee’s actions.18 Accordingly, the test in its current form could potentially lead to a compulsory licence being issued where the licence would alleviate prejudice to domestic trade or industries but is otherwise not in the interests of the community as a whole. As a result, the Commission has proposed that a public interest test be used instead.
The Commission recommends that the new test should specify that a compulsory licence to exploit the patented invention should only be made available if:
- Australian demand for a product or service is not being met on reasonable terms, and access to the patented invention is essential for meeting this demand;
- the applicant has tried for a reasonable period, but without success, to obtain access from the patent owner on reasonable terms and conditions; and
- there is a substantial public interest in providing access to the applicant, having regard to different factors such as the benefits to the community from meeting the relevant unmet demand and the commercial costs and benefits to the patent holder and licensee from granting access to the patented invention.
The Commission’s recommended public interest test provides an access regime for cases where greater use of a patented invention would deliver a substantial net benefit to the community.
The Patents Act contains specific provisions for the federal and state governments to use a patented invention without the owner’s authorisation (Crown use).19 Governments will generally find Crown use to be a less costly and time-consuming option than compulsory licensing, as there is currently no requirement for the Crown to first attempt to negotiate with the patent owner.
There is some uncertainty as to whether the legislative allowance for Crown use extends to the use of healthcare-related patents. The Productivity Commission identifies some considerations that suggest that Crown use may not cover healthcare-related patents including that, currently, Crown use is specified to allow use “for the services of” a government. Interpreted narrowly, this phrase may exclude healthcare from the ambit of Crown use. Further, Crown use may not cover the provision of healthcare services by non-government organisations.
The Commission proposes that this uncertainty in scope be addressed through a number of means. In particular, the Commission recommends that the Patents Act be amended to make it clear that Crown use can be invoked for the provision of a service that the federal, state and/or territory governments have primary responsibility for providing or funding.
Given that governments are responsible for providing, funding or substantially funding the vast majority of genetic tests, they would be found to have primary responsibility under the amended test. As a result, genetic testing would be eligible for Crown use, including when it is undertaken by private providers for private patients.
Future of human gene patents in Australia
While the cases will ultimately decide the patentability of genetic material, it may have little practical impact on patenting activity in the future. A key finding of the CIE report was that patent activity related to isolated human gene sequence patents has been declining dramatically since the completion of the Human Genome Project in 2003. The CIE report also found that current patent activity is more focused on modified gene sequences or method claims, which are patentable under current laws.20
The issue of the patentability of isolated DNA may also decline in relevance in the next few years as the patents on the BRCA1 and BRCA2 genes are set to expire in August 2015 and December 2015 respectively.21
The government’s stance in relation to the patentability of human genes is also shifting away from a blanket exclusion and towards implementing safeguards to prevent unconscionable commercial exploitation, such as through research exemptions, compulsory licensing and Crown use, and a ban where commercial exploitation would be wholly offensive.
1 C Logan and W Liu “Patent law update – government signals reforms to address concerns over gene patents” (2012) 25(3) Australian Intellectual Property Law Bulletin 38.
2 Productivity Commission Compulsory Licensing of Patents: Productivity Commission Inquiry Report, No 61, 28 March 2013; Centre for International Economics Final Report: Economic Analysis of the Impact of Isolated Human Gene Patents May 2013.
3 Cancer Voices Australia v Myriad Genetics Inc (2013) 99 IPR 567;  FCA 65; BC201300552.
4 For the procedural history, see L Hartland “Cancer Voices Australia v Myriad Genetics Inc” (2013) 25(9) Australian Intellectual Property Law Bulletin 191.
5 BRCA1: Serial nos 686004, 691958; BRCA2: Serial no 773601.
6 Patents Act 1990 (Cth), s 18(1)(a).
7 National Research Development Corp v Cmr BRCA1: Serial of Patents (NRDC case) (1959) 102 CLR 252;  ALR 114;  RPC 134; BC5900480.
8 Association for Molecular Pathology v Myriad Genetics (2013) 569 US 12-398.
9 Above, n 1.
10 US Patent Act, 35 USC §101.
11 L Palombi “Patent law must recognise human genes are no invention” The Drum 20 February 2013, available at www.abc.net.au.
12 Specifically, for “experimental purposes”: see Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth), s 119C. For a discussion, see P Ng and W Liu “Raising the bar? The new patent law reforms and their impact on patentability of genetic material” (2011) 24(4) Australian Intellectual Property Law Bulletin 87.
13 IP Australia Patentable Subject Matter: Consultation on an Objects Clause and an Exclusion from Patentability July 2013, available at www.ipaustralia.gov.au.
14 Above, n 2.
15 Above, n 2.
16 Above, n 2.
17 Patents Act, Ch 12.
18 Patents Act, s 135.
19 Patents Act, Ch 17 Pt 2.
20 Above, n 14.
21 Above, n 5.