Law360 (April 2, 2020, 3:00 PM EDT) --
This news casts the patent system in an unsavory light, where it appears to impede progress rather than promote it. However, it can also illustrate the crucial role of the patent system in health care. Despite the bad optics created by one patent litigant in the midst of this COVID-19 crisis, Congress should (in the future) enact legislation to make patents more available for inventions related to diagnostic tests.
On March 9, in the U.S. District Court for the District of Delaware, Labrador Diagnostics LLC sued BioFire LLC and its parent company bioMérieux SA, alleging that BioFire’s FilmArray products infringed two U.S. patents. After a flood of criticism and revulsion, Labrador announced on March 17 that it would offer a royalty-free license for COVID-19 testing, and it insisted that it did not know BioFire was developing COVID-19 tests. Labrador and BioFire have agreed to extend the date for BioFire's response to June 30.
Outrage over Labrador's suit was intensified because Labrador does not make COVID-19 tests itself, nor has it announced any plans to do so. Labrador was formed on March 6 and does not have any facilities of its own.
Since Labrador is not practicing its patented technology, some called it a patent troll. Trolls are villainous, ugly creatures in many fairy tales, demanding money in order to let the hero continue on her journey. The term patent troll has been used for many years to describe patent owners that do not make or sell products, but demand payments in the form of royalties from those who actually do make products.
But that pejorative term can obscure that many nonpracticing entities (such as universities, nonprofit research centers, and the National Institutes of Health) regularly make crucial inventions and protect them with patents, even though they themselves do not manufacture or distribute those inventions. Instead, the patents covering those inventions are licensed to companies for further development, manufacture and widespread distribution.
Yet patents are involved in another, less publicized way in the Labrador case, in that the defendants have their own patents and rely upon them to protect their innovations. BioFire's virtual patent-marking page lists numerous U.S. patents covering its FilmArray instruments, kits and materials for medical testing, and bioMérieux confirms the importance of patents to the field of diagnostics in its annual reports:
Diagnostic systems, which are underpinned by a combination of instrumentation, IT and biology, are heavily reliant on the protection of intellectual property; the players in the sector therefore seek to obtain strong positions in matters of patents.
BioMérieux's statements reflect the primary economic purpose of patents in providing incentives for innovators. The promise of patent protection encourages them to invest in costly research and development, affording a later opportunity to reap the financial rewards of their innovations. If bioMérieux and other diagnostic developers lose faith in the patent system, their R&D investments and efforts for diagnostic testing are likely to decline.
The COVID-19 crisis shines a spotlight on the fundamental role of diagnostic tests in public health and medical care. Of critical importance, if testing and testing kits had been more available in the United States in February, March’s spike in new COVID-19 cases — causing the U.S. to exceed every other country in infections — would have been flatter. Initial test kits made by the Center for Disease Control and provided to state laboratories turned out to be invalid due to a manufacturing error.
Throughout February, legal and bureaucratic constraints prevented anyone other than the CDC to make tests for the U.S. By Feb. 29, when the U.S. Food and Drug Administration began granting emergency use authorizations, less than 4,000 samples had been tested in the U.S. in total.
By that point, South Korea was said to be testing 15,000 patients per day. South Korea moved quickly after the initial outbreak to encourage medical companies to develop effective diagnostic tests for COVID-19, and its Ministry of Food and Drug Safety issued the first of several approvals on Feb. 4. Widespread early testing provided the foundation for South Korea’s relative success in flattening the curve of COVID-19 infections.
The world can see as it never has before that diagnostic testing is crucially important not just to individual patients, but also to local and national communities. In light of such importance, each nation should provide robust incentives for test development. One might expect that a nation’s patent system would provide some of those incentives, since the rationale of the patent system is to incentive research and innovation. However, the availability of U.S. patents for diagnostic testing has actually diminished over the past decade.
Since 2012, the U.S. Supreme Court has expanded the long-standing exceptions to patent eligibility for laws of nature and natural phenomena to strike down patents related to diagnostic testing: "Phenomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work." Although the general rule is that any invention or discovery made by man is patentable, the courts have always made exceptions.
In 2012, the Supreme Court issued a far-reaching decision that invalidated patents covering processes for doctors to determine whether a dosage of a drug was too low or too high for a patient. The patent disclosed the discovery of a correlation between certain levels of drug metabolites in a patient's blood and risks that the drug would be ineffective or harmful. The court held that this correlation was a law of nature and that the patent's requirements of administering the drug to the patient and determining metabolite levels failed to transform the correlation into a patentable application.
Since then, the courts and the U.S. Patent and Trademark Office have been more aggressive and imaginative in finding judicial exceptions in patents, looking beyond the literal words of patent claims and probing whether the claims are directed to an exception.
In one instance, a patent directed to detecting bacteria that cause tuberculosis and determining their resistance to a common antibiotic was struck down by a federal appellate court. In another recent case, the USPTO rejected a patent application for detecting rare and unknown genotypes of a virus in patients who are receiving a drug for treating infection by that virus.
Many are troubled by the impact of such decisions, and Congress has considered legislation to address the expanded use of the judicial exceptions to limit patents on diagnostic testing. In April and May, a bipartisan and bicameral group of legislators released proposals and a draft bill to revise the patent law.
In June, Congress heard testimony from leading life science innovators about the state of patent law and its potential consequences:
In recent years, decisions from the federal courts have cast a cloud of uncertainty over our work in the field of diagnostic tests and life sciences. On multiple occasions, the federal courts have ruled that patents we received from the United States Patent and Trademark Office (USPTO) were invalid, even arguing that guidance issued by the USPTO did not carry legal weight. These decisions have created uncertainty that can deter investment from new products that could have a significant impact on patient care.
Even judges from the federal appellate court that decides patent cases have voiced concern over the current state of the law:
The math is simple, you need not be an economist to get it: Without patent protection to recoup the enormous R&D cost, investment in diagnostic medicine will decline. To put it simply, this is bad. It is bad for the health of the American people and the health of the American economy.
Unfortunately the proposals and drafts were not followed by the introduction of a formal bill, and progress on the legislative effort seemed to stall in the autumn of 2019. Congress undoubtedly has a tremendous number of worries at the moment, but when the COVID-19 crisis subsides, it should resume its consideration of how to make the patent system provide greater incentives for diagnostic testing.
Michael Harlin is a partner at Neal Gerber & Eisenberg LLP.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
 U.S. Securities and Exchange Commission, "Theranos, CEO Holmes, and Former President Balwani Charged With Massive Fraud", Press Release, March 14, 2018.
 BioFire Diagnostics, Legal Notices. Available at: www.biofiredx.com/legal-notices (Accessed: 1 April 2020).
 bioMérieux, 2018 Registration Document and Annual Financial Report, p. 45.
 Gottschalk v. Benson , 409 U.S. 63, 67 (1972).
 Mayo Collaborative Servs. v. Prometheus Labs., Inc. , 566 U.S. 66, 72,132 S.Ct. 1289, 1294(2012).
 Congressional Research Service. "Patent-Eligible Subject Matter Reform in the 116th Congress", R45918, Prepared by Kevin J. Hickey. Sept. 17, 2019.
 Testimony of Peter O’Neill, Executive Director of Cleveland Clinic Innovations, to the U.S. Senate Committee on the Judiciary, Subcommittee on Intellectual Property, June 11, 2019.
 Athena Diagnostics, Inc. v. Mayo Collaborative Servs., LLC , 927 F.3d 1333, 1358,2019 BL 246748, 24 (Fed. Cir. 2019) (Moore, J., dissenting from denial of en banc rehearing).
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