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The Breyer family stockbroker was busy this morning, executing a last-minute stock sale ordered by Justice Stephen Breyer’s wife Joanna that enabled the justice to participate in a key patent case argued today. The unusual sequence of events affecting Mayo Collaborative Services v. Prometheus Laboratories Inc. began Tuesday night when the lawyer for Prometheus, Richard Bress of Latham & Watkins, filed a letter with the Court clerk’s office reporting, belatedly, that Prometheus had been bought in July by a subsidiary of Nestle SA. The change in ownership, Bress said, “could be of interest to the Court, as individual justices assess whether to consider recusing themselves.” Bress was right about that. Breyer’s latest financial disclosure form revealed that he owned between $15,001 and $50,000 in Nestle stock, so the new information would have triggered an automatic recusal by Breyer under the law that keeps federal judges from participating in cases in which they have even as little as one share’s worth of financial interest. Instead, Breyer’s wife decided to sell the stock this morning – an increasingly used strategy that instantly cured the conflict of interest. Just minutes before arguments began at 10 a.m., confirmation of the sale was received at the Court, and Breyer took his place on the bench. Federal law now encourages the move made by Breyer by eliminating the capital gains taxes incurred by selling stock to avoid recusal. Some ethics experts have voiced discomfort with the idea of judges rearranging their stock ownership to stay in a case, but justices have used it more and more so that cases can be decided by as close to a nine-member Court as possible. The letter filed Tuesday night by Bress was aimed at fixing a serious omission. The Supreme Court’s Rule 29.6 requires that “every document” filed by a non-government corporation in a case contain either a corporate disclosure statement, a reference to an earlier statement, or an amended statement if ownership has changed. The company’s first filing in the case, opposing review by the high court, was on May 20, days before the May 24 announcement that Nestle was buying Prometheus. The acquisition was formalized on July 1. Bress’s brief on the merits, filed Oct. 31, contained no corporate disclosure statement of any kind, and no reference to Nestle. In his letter to the Court clerk’s office, Bress wrote, “Please convey my apologies to the Court that we did not bring this change to its attention sooner.” A recusal by Breyer actually could have worked to the advantage of Prometheus, which was defending its medical patent for a process that allows physicians to prescribe the right dosage of a powerful drug to patients with certain autoimmune diseases. The Mayo Clinic, after first using the Prometheus patented methods, decided to market its own version in 2004, triggering an infringement suit by Prometheus. A federal district court agreed with Mayo that the process was not patentable because it was based on a “natural phenomenon” that the procedure uses to estimate the right dose. But the U.S. Court of Appeals for the Federal Circuit has twice upheld the Prometheus patent under its traditional “machine-or-transformation” test for patentability. As the case reached the high court, it became viewed as a do-over of the 2006 case of Laboratory Corp. v. Metabolite Laboratories, which the Court dismissed without deciding. Breyer wrote a dissent in that case, in which he stated that he would have invalidated a medical process patent because it was based on a “natural phenomenon.” A similar finding in the case argued today would support Mayo, so Breyer’s recusal could have meant one less vote for Mayo, and could have raised the possibility of a 4-4 tie. That would leave standing the Federal Circuit’s ruling upholding the Prometheus patent. During the hour-long argument Wednesday, Breyer indicated he was rethinking what he had said in the 2006 dissent. That and other comments from the justices made the outcome of the case hard to predict. Stephen Shapiro of Mayer Brown, arguing for Mayo, said the Prometheus patent was invalid because it was based on the body’s natural reactions to drugs. He also asserted that it created “a huge practical problem” because it prevents other researchers from developing competing tests that might better serve patients. But justices peppered him with questions about how the Court could decide whether a patent is based on a non-patentable natural phenomenon, when many inventions do involve natural processes and reactions. Bress, arguing for Prometheus, got far fewer questions as he argued that his client’s patent was valid because it was “very specific” and did not preclude other research. Solicitor General Donald Verrilli Jr. offered a middle position, agreeing that the Prometheus process was eligible for patent protection, but might have failed to win a patent for other reasons. Briefs filed on both sides of the case highlighted its importance to the growing field of “personalized medicine,” which uses tests that measure biomarkers that indicate a patient’s reactions to certain drugs, allowing physicians to tailor treatments for specific patients. Tony Mauro can be contacted at [email protected].

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