Intellectual Property Outlook: Cases And Trends To Follow In 2013

1. Introduction

   In the coming year, we anticipate a series of events and decisions with varying degrees of impact on intellectual property law in the United States and the way we advise our clients. This article highlights cases we are monitoring that present, in our view, significant issues relating to various aspects of intellectual property law. Most of these cases are pending appeal at some level, and each has the potential for considerable impact on the landscape of U.S. intellectual property law. A small number of recently-decided cases have also been selected for inclusion in this discussion, as it remains to be seen precisely how these decisions will play out in practice over the coming year. Lastly, we take a look at continuing trends in the intellectual property marketplace and review key legislation, including what to expect from the recently-enacted America Invents Act.

2. Cases to Watch in 2013

   1. Patentability of Isolated Human Genes

      The Association for Molecular Pathology v. Myriad Genetics, Inc., No. 12-398, is once again headed to the Supreme Court—this time on the merits. The Supreme Court recently granted certiorari on one seemingly simple question: "Are human genes patentable?" In 2012, the Court reversed and remanded the Federal Circuit's split decision that isolated DNA sequences were patent eligible—ordering the Federal Circuit to reconsider its ruling in light of the Court's opinion in Mayo Collaborative Services v. Prometheus Laboratories, Inc. In finding that the claims at issue covered nothing more than laws of nature, the Mayo Court focused on "whether the claims do significantly more than simply describe [] natural relations" and whether the "claims add enough to their statements of the [law of nature] to allow the processes they described to qualify as patent-eligible processes that apply natural laws." On remand, the Federal Circuit achieved substantially the same result as before Mayo: a 2-1 split decision finding that isolated human DNA sequences are patent eligible.

      By way of background, Supreme Court precedent establishes three judicially created exceptions to Section 101's broad approach to patent subject matter eligibility: "laws of nature, natural phenomena, and abstract ideas." These general categories have also been interpreted to exclude mental processes and products of nature because "[t]he concepts covered by these exceptions are 'part of the storehouse of knowledge of all men . . . free to all men and reserved exclusively to none.'" Mayo further defined the law of nature exception, focusing on whether a particular claim would preempt others from applying a law of nature. On remand, the Federal Circuit once again found that isolated DNA is patent eligible; however, the fractured panel issued three separate opinions. The heart of the majority opinion that isolated DNA is patent eligible is its finding that "isolated DNA is not just purified DNA." Judge Lourie, the majority's author, explained, "Purification makes pure what was the same material, but was combined, or contaminated, with other materials. Although isolated DNA is removed from its native cellular and chromosomal environment, it has also been manipulated chemically so as to produce a molecule that is markedly different from that which exists in the body." Naturally occurring "DNA exists in the body as one of forty-six large, contiguous DNA molecules. Each of those DNA molecules is condensed and intertwined with various proteins, including histones, to form a complex tertiary structure known as chromatin that makes up a larger structural complex called a chromosome." Thus, because an isolated DNA molecule is a free standing nucleotide sequence divorced from the naturally occurring chromosome, isolated DNA molecules "are different from the natural products in 'name, character, and use.'"

      Judge Moore was unconvinced that the chemical change cited by Judge Lourie was sufficient to render an isolated DNA molecular patent eligible because, in part, the isolated gene "does not clearly have a new utility and appears to simply serve the same ends devised by nature." In the end, Judge Moore concluded that the settled expectations of the biotechnology industry and Congress' implicit approval of the USPTO's policy of awarding patents on human genes was enough to tip the scales. Thus, Judge Moore found "it is not clear to me that [precedent] leads inexorably to the conclusion that isolated DNA molecules are not patentable subject matter."

      While Judge Lourie, and, to a lesser extent, Judge Moore focused on the structural differences between isolated DNA and native DNA, Judge Bryson's dissent focused on the structural similarities. For Judge Bryson, Mayo dictates that "a patent involving a product of nature should have an inventive concept that involves more than merely incidental changes to the naturally occurring product." Judge Bryson continued, although an isolated DNA molecule may have different terminal ends than its naturally occurring counterpart, "[t]he functional portion of the composition—the nucleotide sequence—remains identical to that of the naturally occurring gene." Thus, for Judge Bryson, isolated genes fall outside of Section 101's broad subject matter eligibility net.

      The Supreme Court's decision will lay to rest the gene patent saga that has captured the attention of the popular press since Judge Sweet's district court ruling invalidated many of Myriad's patents in 2010. As the sea of amici briefs indicates, the issue of gene patents is hotly contested by patent practitioners as well as medical organizations. The Court will be forced to tackle difficult policy issues and the biotechnology industry's settled expectations, and decide whether to create a categorical rule excluding isolated genes from patent eligibility.

   2. Abstract Ideas and Mental Processes Post-Bilski

      Section 101 of the Patent Act provides that a "process, machine, manufacture, or composition of matter" may be patented. While the machine-or-transformation test may still be a presumptive starting point in any Section 101 analysis, following the Supreme Court's decision in Bilski, the Federal Circuit has increasingly looked to whether the claims at issue recite a process that is "manifestly abstract," and therefore ineligible for patent protection. However, neither the Supreme Court nor the Federal Circuit has set forth any clear test for evaluating whether a process is "manifestly abstract." In addition to the inherent difficulties in defining when something is "abstract," Federal Circuit jurisprudence post-Bilski has been complicated by the court's inconsistencies in deciding cases involving similar patents with comparable claim language, with the court often applying certain indicia of non-abstractness in one way in some cases and then in an entirely different way in others.

      The Federal Circuit's July 2012 opinion in CLS Bank Int'l v. Alice Corp., No. 11-1301, is an example of yet another sharply divided decision. Alice asserted patents relating to a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate 'settlement risk' against CLS Bank. The district court had granted summary judgment of invalidity on the basis that the patents did not claim patent eligible subject matter. When overturning the district court's decision, the Federal Circuit declined to define the concept of 'abstract,' instead implementing a new heightened standard for holding that a claim is not patentable under Section 101. Under CLS Bank, a claim is not abstract "when—after taking all of the claim recitations into consideration—it is not manifestly evident that a claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under §101."

      On the other hand, Judge Prost issued a relatively strongly worded dissent, characterizing the majority's decision as an attempt to resist the Supreme Court's unanimous directive to apply the patentable subject matter test with more vigor and by not following the Supreme Court's instructions in its holding and approach by failing to see if the claims include an "inventive concept." She noted that the Federal Circuit had been reversed in a §101 case for a second time in the last three terms of the Supreme Court, "hinting (not so tacitly) that our subject matter patentability test is not sufficiently exacting." Judge Prost's dissent found the claims clearly directed to an abstract idea.

      On October 9, 2012, the Federal Circuit vacated the July 2012 decision and ordered a rehearing en banc. The Federal Circuit will be considering two questions: a) what test should the court adopt to determine whether a computer-implemented invention is a patent ineligible "abstract idea;" and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea; and b) in assessing patent eligibility under Section 101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for Section 101 purposes?

   3. Claim Construction

      Earlier this year, the Supreme...