Sherry Knowles Speaks Truth to the Power of the PTO on § 101 Guidelines

Knowles, SherryLast week, Sherry Knowles, former chief patent counsel for GlaxoSmithKline and now principal at Knowles Intellectual Property Strategies, LLC submitted to Managing Intellectual Property magazine a detailed critique of the U.S. Patent and Trademark Office's Guidelines for examination under Section 101 of the Patent Act in view of the Supreme Court's opinions in Mayo v. Prometheus and AMP v. Myriad Genetics.  Her detailed (and critical) assessment of the Guidelines was prompted by a spirited defense of those Guidelines by Drew Hirschfield published by MIP in its March 4th issue, which in turn was occasioned by Ms. Knowles' assertion on March 26th at a MIP-sponsored panel session where, among other things, she characterized the Guidelines as "horrifying to the pharmaceutical and biotech industry."

Ms. Knowles raises the issue recognized by many in the patent community upon first inspection of the Guidelines:  rather than merely attempting to administer the Court's decisions by limiting them to their facts (a particularly appropriate approach in view of the fact-specific bases for the Court's decisions in each case), she asserts that "these Guidelines appear to expand the Supreme Court analyses, apply the expanded analysis to products and methods that have not yet been litigated, and in doing so arguably de facto expand the law, which currently stands only in the form of judicial exceptions to patentability."  These are not prospective or potential problems; Ms. Knowles rightly notes that this expansion of the "natural products" judicial exception is forming the grounds for rejecting U.S. patent applications now, and that the expected consequence (delay in obtaining patent protection and uncertainty about the validity and scope of such protection) could easily "chill[] any ability to attract venture capital and strip[] the value of numerous emerging life science companies."

She also raises the specter of the U.S. being out of step with the rest of the world, noting that many U.S. trade partners and competitors on the world stage (including the countries of Europe, China, Australia, Japan and Russia) grant patent protection for products now outside U.S. patent protection (according to the Guidelines) and that this reality threatens the U.S.'s position as a global biotechnology leader.  Insofar as developing countries look to the U.S. to lead, these Guidelines encourage the sort of "anti-innovation" sentiments the U.S. has long opposed (for example, those preventing pharmaceutical patenting that were part of the impetus for the GATT treaty).

Ms. Knowles asks a simple but fundamental question:  How did we get here?  In her analysis, which reviews the Constitutional approach to patent protection as implemented by U.S. patent law and in particular, the 1952 Act, places at least some of the blame for the current circumstance on Congress, which "has only issued one sentence on what constitutes patentable subject matter in the United States."  As a consequence, the "great void" created by this lack of attention has been filled by the Supreme Court, which is "immune from the political process" and lacks the resources needed to appreciate the effects on U.S. innovation its economy of its policy decisions.  This institutional lack of competence is illustrated by the Court's decision in Funk Bros. Seed Co. Vs. Kalo Inoculant Co. (333 U.S. 127; 68 S.Ct 440 (1948), which forms the basis for the PTO's interpretation of the Court's recent cases.  (Indeed, in a panel discussion at the Spring BIO IPCC meeting last week in Palm Springs, the Office's reliance on Funk Bros. was readily acknowledged by its representative on the panel.)  Ms. Knowles notes that the "fatal flaw" in Kalo's patent claim (Claim 4 of U.S. Patent No. 2,200,532) was that it attempted to encompass all combinations of Rhizobium species that could permit growth in each other's presence, a case of "an aspiration which defined the material not by what it is but by what it does."  This problem is one governed not by Section 101 of the Patent Act but rather Section 112, first paragraph (now Section 112(a)), for failure to provide an adequate written description of the invention.  Rather than rely on this principle (which, while as recited was part of the revisions to the patent laws enacted four years after Funk Bros., but which was already enshrined in prevailing law), the Court relied on its "gut-feel that if one simply tells the public to find a bacteria that works, and use a prior art method to do so, that alone is not patentable."  The result was "immeasurable damage []caused by using 101 as the rationale and with expansive, unnecessary and not politically tested verbiage that any mixture of natural materials is not patentable."  (As close readers of the opinion have long recognized, Ms. Knowles references Justice Frankfurter's concurring opinion which is much more informative than Justice Douglas's principle opinion on the Court's concern and intended scope of its opinion.)  And she puts paid to the misunderstanding of the case (that persists even today on the Court and particularly in the PTO) by citing Judge Giles S. Rich (author of the 1952 Patent Act) on this issue:

The real vice or inadequacy of the judge-made requirement for "invention" was in the truism Mr. Federico [one of the drafters of the 103 statute] restated, "the so-called standard of invention is an unmeasurable quantity having different meanings for different persons."  It left every judge practically scott-free to decide this often controlling factor according to his personal philosophy of what inventions should be patented, whether or not he had any competence to do so or any knowledge of the patent system as an operative socioeconomic force.  This was too great a freedom because it involved national policy which should be declared by Congress, not by individual judges or even groups of judges on multiple-judge courts.

Per Judge Rich, the test for "invention," as that term was inexactly used for many years by the Court, is embodied in Section 103 and adoption of that section of the patent law evinces Congress's judgment on how best to put into effect the Constitutional purpose of the patent grant.

Fast forward to the present day, and Ms. Knowles assays the current Court's statements in its Mayo and Myriad decisions showing that these principles and appreciation of Congressional intent have been forgotten if ever appreciated at all.  She notes that the Court has expressly stated that "mere discovery" does not satisfy the legal standard for invention, which requires the Court to ignore the words of the statute that "Whosoever invents or discovers any new and useful process, machine, manufacture or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor," and asks "[d]oes the Supreme Court have the right to pencil out two very important words of a statute?  Can the Supreme Court decide to honor only part of a statute and judicially except the rest?"  This is not interpreting the law, Ms. Knowles contends; it is changing it (and about that she is completely correct).

The next section of her piece is perhaps the most salient to the policy question raised by the Court and improvidently addressed by the Guidelines.  Relying on a 2012 report from the National Institutes of Health, Natural Product Branch, she recites the statistics relating to the number of FDA approvals (a total of 1,355) for new drugs falling into the following categories:

Drug type/source                                Number

Biological (B)                                                 203

Natural product (N)                                    55

Natural product (botanical) (NB)             149

Derived from a natural product (ND)     298

Totally synthetic (S)                                     393

Total synthesis/natural product (S*)      176

Vaccine (S)                                                      81

These statistics illustrate the consequences of the Court's and the Office's policymaking; of the 1,355 drugs approved between 1981 and 2010:

• 968 (71%) are outside the scope of the Guidelines

• 636 (47%) are B, N, NB, and V

• 50% of all small molecule drugs are natural products (2000-2010)

• About 75% of antibacterial drugs are natural products or derived from natural products

• Almost 80% of small molecule anticancer drugs were natural products or derivatives

The Report also has specific information on particular drugs among these different catagories.

Ms. Knowles does not state the obvious:  these statistics are chilling.  It is of particular note that during the 1982-2010 timeframe only 15% of approved drugs were biologics; every study has shown that the percentage of drugs that are biologics has been growing and will be the predominant type of drug developed in the 2011-2030 time period.  And these drugs are the among the ones that the PTO would preclude from patenting, based on its over-interpretation of the Court's decisions in Mayo and Myriad.

In closing, Ms. Knowles does not shy away from the implications of her analysis, that what we have here is a breakdown of the separation of powers that is the basis of our Federal government.  The Supreme Court is legislating rather than interpreting the law, and Congress seems unable to identify the portions of the patent law that are actually important for innovation, producing the legislative void the Court has taken upon itself to fill.  She notes that the Guidelines cite the "judicial exceptions to patent[-eligibility]" eighty-two times, without citing the relevant language of the Patent Act at all.  The short term answer may be as simple as having the Office listen to the patenting community and the outrage the Guidelines have created, but that may be a false hope:  the Office was tone-deaf enough to promulgate these Guidelines without notice and comment (which, even if not necessary would have alerted the relevant parties to provide whatever counter-arguments they are now raising after the fact).  And she is even more hopeful in calling for us all to "encourage our Congressional representatives to open the political process to update the patent statutes, and in doing so, provide the necessary clarity and leadership on patentability in this complex technology space and override the Supreme Court's 'judicial exceptions to patentability.'"  The solution may be as simple as the Office rescinding these Guidelines, publishing them for notice and comment, and then working with its relevant stakeholders to find a workable compromise.  No matter how this is resolved, we owe it to ourselves if not the public to try to educate our leaders on these important issues.


Topics:  AMP v Myriad, Biotechnology, GlaxoSmithKline, Mayo v. Prometheus, Patent Litigation, Patents, Pharmaceutical, SCOTUS, Section 101, USPTO

Published In: Civil Procedure Updates, Constitutional Law Updates, Intellectual Property Updates, International Trade Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McDonnell Boehnen Hulbert & Berghoff LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »