In a closely watched case with huge repercussions for the biotechnology industry, a federal appeals court has held for the second time that isolated human genes are patent-eligible.

On August 16, a split panel of the U.S. Court of Appeals for the Federal Circuit, hearing the case on remand from the U.S. Supreme Court, echoed its divided July 2011 ruling. The case concerns Myriad Genetics Inc.’s composition and methods claims involving isolated human “BRCA” genes, whose mutations are associated with a predisposition to breast and ovarian cancers.

In response to a petition for certiorari, the Supreme Court vacated the Federal Circuit’s first decision and remanded the case back to the Federal Circuit. That Supreme Court directive stemmed from its March ruling in Mayo Collaborative Services v. Prometheus Inc., which held that two patents on a diagnostic test used for autoimmune diseases treatment were not patentable subject matter.

The recent decision “effectively puts back into place the Federal Circuit’s 2011 panel decision,” said Gregory Castanias, a Washington partner who chairs Jones Day’s Federal Circuit and intellectual property appeals practice and argued for all defendants. “It gives some comfort to the biotech industry that for core products that have allowed that industry to grow and flourish, patent protection remains in place,” Castanias said.

“For biotech or pharma patents the status quo continues as the case is moving forward,” said Chris Hansen, a staff attorney with the American Civil Liberties Union Foundation, who argued for the plaintiffs. “They were unmoved by the fact that the Supreme Court suggested they might have gotten [the first decision] wrong. I don’t know why,” Hansen said.

Judge Alan Lourie filed the majority opinion in Association for Molecular Pathology v. Myriad Genetics Inc. Judge Kimberly Moore filed an opinion concurring in part, and Judge William Bryson filed an opinion concurring in part and dissenting in part.

In the recent decision, the Federal Circuit majority made three key rulings.

First, it reversed a ruling by the Southern District of New York that Myriad’s claims to “isolated” DNA molecules were patent-ineligible products of nature “because each represents a non-naturally occurring composition of matter.” Lourie noted, “Mayo does not control the question of patent-eligibility of such claims. They are claims to compositions of matter, expressly authorized as suitable patent-eligible subject matter.…[W]hen cleaved, an isolated DNA molecule is not a purified form of a natural material, but a distinct chemical entity that is obtained by human intervention.”

The court also reversed the lower court’s ruling that Myriad’s method claim for screening potential cancer treatments through changes in cell growth rates is patent-ineligible. Lourie wrote that, unlike the invalidated claims in Mayo, the claim does more than apply a law of nature: “It applies certain steps to transformed cells that, as has been pointed out above, are a product of man, not of nature.”

Finally, the majority affirmed the lower court’s ruling that Myriad’s method claims for “comparing” or “analyzing” DNA sequences are patent ineligible; “such claims include no transformative steps and cover only patent-ineligible abstract, mental steps.”

Moore joined the majority on the rulings on the patentability of the method claims and claims related to isolated cDNA sequences. She concurred in the judgment on isolated DNA sequences. But she wrote separately to explain her reasoning.

“If I were deciding this case on a blank canvas, I might conclude that an isolated DNA sequence that includes most or all of a gene is not patentable subject matter,” Moore wrote. “But we do not decide this case on a blank canvas. Congress has, for centuries, authorized an expansive scope of patentable subject matter. Likewise, the United States Patent Office has allowed patents on isolated DNA sequences for decades, and, more generally, has allowed patents on purified natural products for centuries.…The patents in this case might well deserve to be excluded from the patent system, but that is a debate for Congress to resolve. I will not strip an entire industry of the property rights it has invested in, earned, and owned for decades unchallenged under the facts of this case.”

In his concurring and dissenting opinion, Bryson wrote, “I concur with the portions of this court’s judgment that are directed to standing the patentability of the cDNA claims, and the patentability of the method claims. I respectfully dissent from the court’s holding that Myriad’s BRCA gene claims and its claims to gene fragments are patent-eligible. In my view, those claims are not directed to patentable subject matter, and the court’s decision, if sustained, will likely have broad consequences, such as preempting methods for whole-genome sequencing, even though Myriad’s contribution to the field is not remotely consonant with such effects.…to argue that the isolated BRCA gene is patentable because in its native environment it is part of a much larger structure is no more persuasive than arguing that although an atom may not be patentable, a subatomic particle is patentable because it was previously part of a larger structure.”

The ACLU Foundation and the Public Patent Foundation for the Benjamin N. Cardozo School of Law in New York were co-counsel for the plaintiffs. Hansen disputed the notion that a ruling for the plaintiffs would have harmed the biotechnology industry. “The biotech world would have you believe the world would have come to an end. That’s not true,” Hansen said.

Several intellectual property lawyers who aren’t involved in the case said the ruling will have a major impact on the biotechnology and pharmaceutical industries, but the impact on the law is unclear.

“There has to be a big sigh of relief that isolated DNA molecules are still considered patent eligible,” said John Van Amsterdam, a partner at Boston’s Wolf, Greenfield & Sacks. “I think many people probably felt that the subject matter would remain patent eligible but the uncertainty is going to now be dispelled. It’s going to be welcome news for the biotechnology industry and pharmaceutical industry.”

But the sorts of method steps that are patent-eligible for these types of method claims is still an open question, he said. “We still have a bit of a question as to what will get over the patent eligibility hurdle for diagnostic method claims. Specifically, diagnostic method claims that relate to analyzing sequences.”

Tim Worral, a partner in Dorsey & Whitney’s patent group, agreed that “the biotech industry is breathing at least a temporary sigh of relief.” Even though the ruling will likely be appealed to the Supreme Court, it’s an important win, Worral said.

“Much of the value associated with DNA-based or implicated inventions, ranging from diagnostics to therapeutics, would be eviscerated if the court determined that the DNA claims were not patentable,” Worral said.

Taken together, this decision and the Mayo ruling “leave somewhat undefined exactly where the boundaries are for patentable subject matter for claims involving correlating genetic sequences,” said Bill Gaede, a McDermott Will & Emery partner who co-chairs its life sciences and medical products group. Since many of these types of patents have limited life left, “this issue on isolated DNA sequence claims itself may be of limited impact going forward,” Gaede said.

“The Federal Circuit correctly held that the Supreme Court’s decision in Mayo had no bearing on the question of whether isolated DNA molecules were patent eligible,” said Gerald Flattman Jr., an intellectual property partner at New York’s Paul Hastings. “The court made a point that I think was well worth making. While these isolated DNA sequences are prepared from nature, so is pretty much anything else on earth.”

Sheri Qualters can be contacted at squalters@alm.com.