Human genes can be patented. That issue was settled years ago. Or so many experts thought.

The U.S. Patent and Trademark Office (USPTO) began issuing patents on human genes in 1982. Since then, the agency has granted 3,000-5,000 such patents, covering more than one-fifth of all human genes. The agency has issued, in addition, 47,000 patents on inventions involving human genetic material.

But the fundamental validity of all those patents had never been reviewed by a court. Not until April 5, when Federal District Judge Robert W. Sweet issued his ruling in Association for Molecular Pathology v. United States Patent and Trademark Office.

In a precedent-setting decision, Judge Sweet held that human genes can’t be patented. They are natural phenomena and thus excluded from patentability under Section 101 of the Patent Act.

The ruling stunned many biotech firms and patent experts. And if it is upheld on appeal, the ramifications would be considerable.

“This would be a game changer,” says Robert Gould, a partner at Duane Morris. “There’s a lot of stuff now considered patentable that would be nonpatentable.”

The decision dismayed the biotech community, but many others cheered.

“This is a substantial victory for the public good,” says Daniel Ravicher, executive director of the Public Patent Foundation, a non-profit that fights for limited patent rights and one of the lawsuit’s plaintiffs. “In this case, the USPTO’s harmful policy of issuing patents on genes resulted in patents that were being used … to deny women access to basic information about their own bodies. They were not being allowed to investigate if they had genes that predisposed them to cancer. The patents also stopped innovation and prevented competition. There were many ways in which these patents were harmful to society.”

Patients’ Rights

Breast cancer is the most common cancer in women. Ovarian cancer is the eighth. Together, they kill more than 50,000 women annually in the U.S.

Fortunately, there is a genetic test that can help diagnose trouble early and provide vital information for treatment options. Mutations in the BRCA1 and BRCA2 genes (often jointly called BRCA1/2 genes) signal a high risk of breast and ovarian cancer. Women with mutated versions of these genes face up to an 85 percent risk of breast cancer and a 50 percent risk of ovarian cancer.

Only one company in the U.S. can legally test for these gene mutations. That company is Myriad Genetics Inc., a medical services firm based in Salt Lake City, which has patented the BRCA1 and BRCA2 genes. More specifically, the company has patented the purified forms of these genes, which are required for both scientific research and medical tests.

Myriad has used these patents to prevent any other organization from performing BRCA1/2 gene tests. And the company has parlayed its monopoly on the tests into a nice revenue stream. In 2008, Myriad’s revenues from these tests were $222 million, while costs were just $32 million.

Myriad now charges more than $4,000 for a complete BRCA1/2 test. And the company doesn’t accept some insurance plans. As a result, some patients have been unable to purchase the BRCA1/2 test recommended by their doctors. Other patients want to get a second opinion of their test results, but can’t do so because Myriad forbids anyone else from performing the tests.

Natural Phenomena

All sides agree that, in general, Section 101 of the Patent Act provides a broad definition of patentable subject matter. The statute states that “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof” is potentially patentable.

The Supreme Court has interpreted this to mean that “anything under the sun that is made by man” is patentable subject matter–with three exceptions. “The laws of nature, physical phenomena and abstract ideas” are not patentable, the court stated in its 1980 ruling, Diamond v. Chakrabarty.

In this case, Judge Sweet ruled that a naturally occurring human gene was an unpatentable natural phenomena, and it did not become patentable just because someone isolated the gene from other parts of the human genome, thus obtaining the gene in a purified form. He found that “the clear line of Supreme Court precedent … establishes that purification of a product of nature, without more, cannot transform it into patentable subject matter. Rather, the purified product must possess ‘markedly different characteristics’ in order to satisfy the requirements of Section 101.” He concluded that because the purified form of the BRCA1/2 genes were “not markedly different from native DNA as it exists in nature, it constitutes unpatentable subject matter.”

Many experts disagree with Judge Sweet’s interpretation of Chakrabarty. “The case does mention ‘markedly different characteristics,’ but that was just a characteristic of that particular invention,” Gould says. “The Supreme Court didn’t say it was required for patentability. The district court grabbed the wrong phrase there.”

Limited Effect

Because this was merely a district court decision, the ramifications will be limited, according to many experts. Financiers may become more skittish about investing in biotech firms, fearing that biotech innovations may not be protected by patent law.

Businesses seeking gene patents may write their applications differently. “They may be able to craft some claims so they don’t focus only on isolating a gene. But that is such established practice, it will be hard to change,” says Rebecca Kaufman, a partner at King & Spalding.

The USPTO, meanwhile, has given no indication that it will revisit its current policy on granting gene patents. The agency is unlikely to do so unless the district court’s ruling is affirmed by the Federal Circuit.

If that court affirms, thousands of existing patents would be jeopardized. Biotech firms might face significant funding problems. Gene testing firms would face new, low-cost competition. But few patents on biologic drugs would be at risk, according to Kaufman, because these patents usually claim more than just the purified form of gene sequence.

The USPTO is widely expected to appeal Judge Sweet’s decision, and most experts expect the Federal Circuit will reverse the lower court ruling.

“I’d be really, really surprised if it was not overturned on appeal,” Kaufman says. “The claims here are of a type commonly issued by the USPTO. The long-standing practice of the USPTO … will hold some sway with the Federal Circuit.”

Some other experts disagree. “All those people who were surprised by the district court ruling expect it will be overturned on appeal, and they will be surprised when this doesn’t happen,” Ravicher says. “It will absolutely be upheld on appeal.”