The United States Supreme Court heard oral arguments yesterday in one of the most anticipated and potentially influential biotechnology cases in decades: Ass’n for Molecular Pathology et al. v. Myriad Genetics, Inc. et al. In simple terms, at issue is whether human genes are patentable.

The dispute began in 2009, when various non-profit research organizations and medical societies (“Plaintiffs” or “Appellants”) challenged the validity of two patent claims granted to Myriad Genetics and the University of Utah Research Foundation (“Myriad”), each covering a human gene (known as BRCA1 and BRCA2, respectively). Specifically, the Plaintiffs challenged the validity of the BRCA1 and BRCA2 claims based on 35 U.S.C. § 101, which states: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” The gist of Plaintiffs’ argument was that isolated human genes alone were not eligible for patent protection because they were merely naturally occurring substances.

To analyze the Plaintiffs’ argument, the district court stated that it had to determine “whether or not claims directed to isolated DNA containing naturally-occurring sequences fall within the products of nature exception of § 101,” and more specifically, “whether the isolated DNA claimed by Myriad possesses ‘markedly different characteristics’ from a product nature.’” Rejecting Myriad’s argument that the Court should focus exclusively on the differences alleged to exist between native and isolated DNA (i.e., to the exclusion of the similarities), the district court held that the claimed invention, as a whole, had to be evaluated “for what it is.” Applying that standard, the district court noted that “the isolation of the BRCA1 and BRCA2 DNA… require[ed] technical skill and considerable labor” and was “unquestionably a valuable scientific achievement,” but was “not markedly different from native DNA as it exists in nature.” The district court therefore ruled that the patent claims were invalid under 35 U.S.C. § 101.

Myriad appealed the lower court’s decision to the Federal Circuit. On August 16, 2012, the Federal Circuit issued a 2-1 decision reversing the district court’s opinion. Writing for the majority, Judge Lourie stated,

 [t]he isolated DNA molecules before [the Court] are not found in nature. They are obtained in the laboratory and are man-made, the product of human ingenuity. While they are prepared from products of nature, so is every other composition of matter. All new chemical or biological molecules, whether made by synthesis or decomposition, are made from natural materials. For example, virtually every medicine utilized by today’s medical practitioners, and every manufactured plastic product, is either synthesized from natural materials (most often petroleum fractions) or derived from natural plant materials. But, as such, they are different from natural materials, even if they are ultimately derived from them. The same is true of isolated DNA molecules.

The Federal Circuit rejected the district court’s “categorical rule excluding isolated genes from patent eligibility” and stressed that “§ 101 applies equally to all putative inventions, and isolated DNA is not and should not be considered a special case for purposes of patent eligibility under existing law.” Finding that the claims at issue were patent eligible under § 101, the Federal Circuit held, “the compositions here are not natural products. They are the products of man, albeit following, as all materials do, laws of nature.”

The Federal Circuit’s opinion set the stage for yesterday’s oral argument where the Supreme Court struggled with the question of whether human genes are patentable. The importance of this case to the public and, in particular, the biotech industry is readily apparent. The numerous friend-of-the-court (or amici) briefs submitted at each stage of this litigation have aptly shown what is at stake. For the biological and biotechnology industries, they are concerned that, if isolated human gene patents are deemed ineligible for patentability, their financial incentive to pursue research into isolated human genes will be eliminated (and their expected return on years of past research and development wiped out). On the other side, researchers, doctors and others, are concerned that allowing patents on isolated human gene would limit or stymie further research and innovation that could otherwise result in significant medical breakthroughs.

The Appellants started their argument yesterday by asking a simple question: “what exactly did Myriad invent?” They then provided this answer: “And the answer is nothing… Myriad unlocked the secrets of two genes… Now, Myriad deserves credit for having unlocked these secrets. Myriad does not deserve a patent for it.” The Appellants were careful to draw an important distinction—according to Appellants, the process of extracting the human DNA may be patentable, but the DNA alone—as an unchanged part of nature—should not be. Appellants argued by analogy, “[i]f you find a new way of using gold to make earrings… you may be entitled to a patent on that [new way]… If I find a new way of taking gold and making earrings out of it, that doesn’t entitle me to a patent on gold.”

The Appellants’ argument seemed to resonate with at least some of the justices; however, Justice Kagan voiced concern regarding the real-world impact of finding the Myriad genes ineligible for patentability, and, in particular, the need to maintain incentives for companies to pursue research. Similarly, Justice Scalia pointedly asked the Plaintiffs, “Why would a company incur massive investment . . . if it cannot patent?” The Appellants noted various other incentives, such as desires for Nobel prizes, the possibility for further protectable innovation down the road, and enormous recognition, to which Justice Scalia skeptically remarked, “[w]ell, that’s lovely.” Clearly, the issue of financial incentives remained at the forefront, as Justices Kennedy, Alito and Breyer all posed questions about the potential impact research investment.

Myriad started its argument by intimating that this issue has already been determined by years of conduct, stating “[i]t is now 33 years after Chakrabarty, 31 years after the first isolated gene molecule patents issued, and 12 years after the Patent and Trademark Office issued its carefully reasoned Utility Guidelines confirming that new isolated gene molecules are eligible for patents, and it’s almost 16 years after Myriad’s patents began to issue.”

Myriad then offered its own answer as to what Myriad invented, proclaiming that, “[w]hat Myriad inventors created in this circumstance was a new molecule that had never before been known to the world.” Myriad objected to the “line-drawing exercise” that the Court asked Plaintiffs to engage in, rhetorically asking, “[n]ow, the line-drawing is what is the product of nature to start with? Is it me? It is the genome? Is it the chromosome?” But Justice Sotomayor quickly interrupted with an analogy, stating that she knows how to bake cookies but “can’t imagine getting a patent simply on the basic items of salt, flour, and eggs, simply because [she’s] created a new use or a new product from those ingredients.”

Myriad nevertheless pressed forward with its “new molecule” argument, stressing that the patented gene is comprised of only 5,914 nucleotides while the genome as a whole has over 3 billion nucleotides. Using its own argument-by-analogy approach, Myriad then remarked, “[a] baseball bat doesn’t exist until it’s isolated from a tree. But that is still the product of human invention to decide where to begin the bat and where to end the bat.” While this argument seemed to have some sway with certain justices, overall it did not find traction. Justice Kagan used it to inquire into whether a chromosome could be patented. Myriad responded that, provided it had a use, “it would pass through the section 101 gate.” Noting that Myriad’s response was “interesting” and suggesting the potential for a slippery slope, Justice Kagan then questioned whether a liver or even a part of a liver could be patented.

Ultimately, the Court drifted back to trying to find a balance between the financial incentives conferred by patents and the potential for patents to retard progress and innovation. Justice Breyer eloquently stated that, “patent law is filled with uneasy compromises” and that:

the compromise that has been built historically into this area is: Of course, if you get a new satisfying process to extract the sap from the plant in the Amazon, patented. Of course, if you get the sap out and you find that you can use it, you manipulate it, you use it, you figure out a way to use it to treat cancer, wonderful, patented. But what you can’t patent is the sap itself.

Justice Kennedy then opened the door for a potential middle ground, asking Myriad: “If we were to accept the Government’s position that the DNA is not patentable but the cDNA is, would that give the industry sufficient protection for innovation and research?” Myriad was unable to provide a clear answer, but did voice concern with respect drawing fine distinctions under Section 101.

How this case will be resolved is unclear, but clearly several justices are struggling with the concept that isolated human genes alone are patentable. It will be interesting to see whether the Court opts to devise some sort of workable middle ground, as intimated by Justice Kennedy, which tries to account for the legitimate concerns of both the biological/biotechnology industries and researchers and doctors. A decision is expected in June.