In Rapid Litig. Mgmt. Ltd v. CellzDirect, Inc., the Federal Circuit reversed a ruling of patent invalidity under Section 101, reviving a biotech patent to a method of preserving hepatocytes, liver cells, for medical use.  The Federal Circuit reversed the district court at both steps of the Supreme Court’s framework for patent eligibility set out in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012).  In the wake of the Supreme Court’s recent denial of certiorari in Sequenom Inc., v. Ariosa Inc., where Sequenom sought guidance on the proper application of the Mayo two-step test, the Federal Circuit’s decision provides important guidance for how to determine patent eligibility for biotech inventions that build on natural discoveries.  It also may help stem what many, including several Federal Circuit judges, have described as a crisis in medical innovation due to how courts and the Patent Office have applied Mayo.

The district court invalidated the patent on summary judgment, holding that the patented method – freezing hepatocytes multiple times without loss of cell viability – was patent ineligible subject matter under the Mayo two-step test.  The district court found that the patent claims were directed to a law of nature, the capacity of hepatocytes to survive multiple freeze-thaw cycles, and thus failed step one of the Mayo test.  The court then held that the claims failed under Mayo’s step two since the patented process merely applied a well-understood freezing process to that natural discovery.

Previously, the district court, affirmed by the Federal Circuit, had found the same claims to be nonobvious and granted a preliminary injunction.  The Patent Office also separately reconfirmed nonobviousness of the claims on reexamination.  But on review of the claims after the Supreme Court’s decision in Mayo, the district court determined that the claims were directed to patent ineligible subject matter and that apart from the discovery that hepatocytes have the ability to survive multiple freeze-thaw cycles, the claimed method lacked any inventive concept.  Two amici, the Biotechnology Industry Organization (BIO) and National Venture Capital Association (NVCA), supported the appeal of the district court’s decision, arguing that the district court’s application of Mayo would render most biotech patents invalid as they all touch on natural discoveries at some level and can be described as implicating a natural property of the subject matter.

The Federal Circuit reversed the district court at both steps of the Mayo test.  At step one, it held that while the inventors “employed [a] natural discovery”— the ability of hepatocytes to survive multiple freeze-thaw cycles — the patent claims were not “directed to” that discovery but rather “to a new and useful laboratory technique for preserving hepatocytes.”

The court explained:  “[t]he inventors certainly discovered the cells’ ability to survive multiple freeze-thaw cycles, but that is not where they stopped, nor is it what they patented.”  Making use of the Supreme Court’s decision in Myriad, the Federal Circuit went on to explain that “‘as the first party with knowledge of’ the cells’ ability, [the inventors] were ‘in an excellent position to claim applications of that knowledge.’”  Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107, 2120 (2013).  And, “[t]hat is precisely what they did.”  The inventors “employed their natural discovery to create a new and improved way of preserving hepatocyte cells for later use.”  The Federal Circuit stressed that the “end result of the [] patent claims is not simply an observation or detection of the ability of hepatocytes to survive multiple freeze-thaw cycles.  Rather, the claims are directed to a new and useful method of preserving hepatocyte cells.”

Notably, echoing the concerns of the amici in this case and the biotech community, the Federal Circuit stated that the patent claims at issue in this case are like “thousands of others that recite processes to achieve a desired outcome, e.g., methods of producing things, or methods of treating disease.”  The court explained that simply because “one way of describing the [claimed] process is to describe the natural ability of the subject matter to undergo the process does not make the claim ‘directed to’ that natural ability.”  The court elaborated that patent eligible subject matter such as treating cancer with chemotherapy or treating headaches with aspirin could be described “as directed to a cancer cells’ inability to survive chemotherapy” or “directed to the human body’s natural response to aspirin” respectively.  But that does not make the subject matter patent ineligible or directed to natural phenomena.  Indeed, if it were otherwise, it would not be possible to get a patent on an “innovative method that acts on something that is naturally occurring, simply because of the nature of the underlying subject matter.”  The Federal Circuit emphasized that “Section 101 is not so narrow.”  It explained that “to preclude the patenting of an invention simply because it touches on something natural would eviscerate patent law.”

The Federal Circuit also reversed the district court at step two of Mayo.  It held that the claims, when considered as a whole, did not simply apply a well-understood freezing process to a natural phenomenon.  The court explained that while “[t]he individual steps of freezing and thawing were well known . . . a process of preserving hepatocytes by repeating those steps was itself far from routine and conventional.”  As recently stressed by Sequenom and its amici in support of certiorari, the Federal Circuit held that “in examining claims under step two, [the court] must view them as a whole.”  The court explained that the fact that “each of the claims’ individual steps (freezing, thawing, and separating) were known independently in the art does not make the claims unpatentable.”  The court appreciated that the inventors repeated steps that the art taught should be performed only once as a result of their “discovery of something natural,” the discovery that some percentage of hepatocytes can survive multiple freeze-thaw cycles.  But the court held that “[t]o require something more at step two [of Mayo] would be to discount the human ingenuity that comes from applying a natural discovery in a way that achieves a new and useful end.”

The Federal Circuit ended with two additional points.  It explained that arguments that the patented claims follow from a natural discovery do not have any place in a patent-eligibility analysis.  It stated that “patent-eligibility does not turn on ease of execution or obviousness of application” and that those questions are determined under Section 103 of the Patent Act.  The Federal Circuit also stated that pre-emption, while not the test for determining patent eligibility, “is certainly ‘the concern that undergirds . . . § 101 jurisprudence.’”  The court noted that the district court’s findings that the patent “does not lock up the natural law in its entirety” and that the patent challenger “has already managed to engineer around the patent” accord with its conclusion that the patent is not directed to patent-ineligible subject matter.

The Federal Circuit decision provides important guidance for how to determine patent eligibility for biotech inventions that apply natural discoveries and provides the clarification that Sequenom and its many amici sought from the Supreme Court.  The consideration of claims as a whole in a patent eligibility analysis and recognition that applications of natural discoveries can be patent eligible even when the natural discovery leads to the particular application should go a long way in ameliorating the current crisis in biotech innovation.