Isolated human genes are patentable subject matter, the U.S. Court of Appeals for the Federal Circuit has ruled in a closely watched controversial case.

The divided July 29 panel ruling in Association for Molecular Pathology v. Myriad Genetics Inc. reversed a Southern District of New York ruling that “Myriad’s composition claims to “isolated” DNA molecules cover patent-ineligible products of nature under [the Patent Act].”

The ruling also made two specific rulings on Myriad’s method claims. One was that Myriad’s method claim for screening potential cancer therapeutics through cell growth rate change is patentable. The other was that Myriad’s method claims related to “comparing” or “analyzing” DNA sequences are not eligible because those claims do not include transformative steps.

Judge Alan Lourie filed the court’s opinion. Judge Kimberly Moore filed a concurring-in-part opinion. Judge William Bryson filed a concurring-in-part and a dissenting-in-part opinion.

Lourie wrote that “an isolated DNA molecule is not a purified form of a natural material, but a distinct chemical entity….We therefore reject the district court’s unwarranted categorical exclusion of isolated DNA molecules.”

The American Civil Liberties Union and Public Patent Foundation, on behalf of researchers, pathologists and women’s health groups, sued Myriad Genetics Inc., a Salt Lake City-based molecular-diagnostics company in May 2009. They claimed Myriad’s patents on genes associated with an increased risk of breast and ovarian cancer hampered research and patient care.

Myriad’s April 4 oral argument argument boiled down to the assertion that isolated DNA does should be patentable because it does not exist in nature.

The court also grappled with the issue of which plaintiffs have standing to sue.

The Federal Circuit ruled that one of the plaintiffs, New York University researcher Dr. Harry Ostrer, had standing to challenge the validity of Myriad’s patents.

On July 27, Myriad’s lawyer, Greg Castanias, a Washington Jones Day partner, penned a letter to the Federal Circuit challenging the standing of Ostrer, whose role and potential standing was the subject of discussion at oral argument.

The letter noted that Ostrer would be leaving NYU for the Department of Genetics at the Albert Einstein College of Medicine in the Bronx effective in August, if not sooner.

The letter claimed that Einstein Genetics “does not offer, and is not qualified to offer, clinical genetic testing.”

Castanias referred questions to the company. In a written statement, Myriad’s president and chief executive officer, Peter Meldrum, said the company strongly supports the court’s decision that isolated DNA and cDNA are patentable.

“Furthermore,” he stated, “we believe this decision is in the best interests of the agriculture, biotechnology and pharmaceutical industries, as well as the hundreds of millions of people whose lives are bettered by the products these industries develop based on the promise of strong patent protection.”

The plaintiffs are “pleased that the Federal Circuit invalided the method claims and found that at least one of our clients has standing, but disappointed they concluded genes are patentable” said Chris Hansen, an American Civil Liberties Union Foundation staff attorney who argued for the plaintiffs at the Federal Circuit.

“We’re encouraged by the common sense and legal discussion in the dissent,” Hansen said. “We continue to think the majority of court is wrong and the dissent is right and are going to have to consider what next steps to take.”

Hansen said Ostrer would be running a genetics lab in his new post. “His standing hasn’t changed and won’t change when he changes jobs,” Hansen said.

“It’s a good day for the biotech industry, but stay tuned,” said Edward Reines, a partner in the Redwood Shores, Calif., office of New York’s Weil, Gotshal & Manges, who filed an amicus brief in the case.

“The Supreme Court promises to be involved in this area in the Prometheus case, if not Myriad itself,” Reines said.

Last month, the Supreme Court granted certiorari in Mayo Collaborative Services v. Prometheus Laboratories Inc., which concerns patents for drug dosage adjustment methods based on a patient’s individual metabolism.

“Although the [Myriad] decision was fractured in parts, the court was unanimous that important process claims were patentable subject matter,” Reines said.

As for the process claims, “all the judges agreed that the process claims that just involved a comparing step and nothing else were not patentable subject matter [and] all agreed that the process claims that had transformative steps such as taking blood and the like were patentable subject matter,” Reines said.

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