The U.S. Patent and Trademark Office (“USPTO”) has renewed the hopes of applicants looking to patent method of treatment claims. A recent memo from the USPTO (the “Memo”) provides guidance on method of treatment claims, suggesting that when correctly drafted, such claims should generally be considered patent eligible subject matter.

The Memo comes in direct response to the Federal Circuit’s decision in Vanda v. West-Ward, issued on April 13, 2018. In Vanda, the Court, inter alia, distinguished certain method of treatment claims as patent eligible from those deemed ineligible by the Supreme Court in the infamous Mayo decision in 2012. The Court in Vanda found that the method of treatment claims at issue passed the first prong of the Mayo test, i.e., they were not directed to patent ineligible subject matter, and thus the claims did not need to be analyzed for an inventive concept under the second prong. To support its decision, the Vanda panel highlighted the specificity of the claims at issue:

At bottom, the claims here are directed to a specific method of treatment for specific patients using a specific compound at specific doses to achieve a specific outcome. They are different from Mayo. They recite more than the natural relationship between CYP2D6 metabolizer genotype and the risk of QTc prolongation. Instead, they recite a method of treating patients based on this relationship that makes iloperidone safer by lowering the risk of QTc prolongation. Accordingly, the claims are patent eligible.

For the reader’s convenience, an illustration from the USPTO on the Mayo test is reproduced to the left and a side-by-side comparison of the claim terms in Vanda and Mayo is set forth in the table below.

In analyzing the Vanda decision, the memo highlights three points:

  • First, claims should be evaluated as a whole. Thus, a claim should not be deemed patent ineligible simply because a claim requires a conventional step.
  • Second, patent eligible claims apply a natural relationship rather than claim such a relationship. For example, the claims in Mayo were deemed to be “directed to” the natural relationships of how the body interacts with certain drugs – “[a] method of optimizing therapeutic efficacy” – while the claims in Vanda apply a natural relationship through specific actions to treat a specific disease – “[a] method for treating a patient with iloperidone, [for treating] schizophrenia” and lowering adverse risks of such treatment.
  • Third, if a method of treatment claim is patent eligible under the first prong, of the Mayo test, the Court should not further proceed to the second prong of the Mayo test, i.e., analyzing the claims for something “more,” also known as the illusive “inventive concept.”.

With respect to the second point above, the Memo further explained that correctly drafted claims claim the application of a natural relationship rather than being directed to The Memo highlighted the order of the “primary steps” of “determining” the natural relationship then “administering” a specific quantity to “treat a particular disease.” A rule of thumb thus could be whether the following can be stated after reading a method of treatment claim: “The claim is directed to a method of using _______ [drug] to treat _______ [condition] comprising the following steps . . .”

The claims in Mayo, however, administered a drug and then analyzed the body’s natural reaction in order to provide advice on whether to increase or decrease dosage. In contrast, the claims in Vanda first determined the body’s natural reaction to a drug, then administered the drug in a specific dosage range to treat a particular disease.

While the Memo and the Vanda case signal good news for patentees, there is still a chance, as there always is with the Federal Circuit and the Supreme Court, that future decision may change these interpretations yet again. The Vanda decision was not unanimous. Chief Judge Prost of the Federal Circuit dissenting in Vanda believes that the claims were merely “drafting efforts designed to monopolize the law of nature itself.” According to Chief Judge Prost, “[t]he fact that a reduction of iloperidone dosage in poor metabolizers to the [sic] may reduce QTc prolongation is both the means and the ends of this claim..” A petition for rehearing en banc is currently pending before the Federal Circuit; a Supreme Court petition will likely follow.

Mayo: US Patent 6,355,623
Vanda: US Patent 8,586,610
1. A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:

(a) administering a drug providing 6-thioguanine to a subject having said immune-mediated gastrointestinal disorder; and

(b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder,

wherein the level of 6-thioguanine less than about 230 pmol per 8×108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and

wherein the level of 6-thioguanine greater than about 400 pmol per 8×108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

1. A method for treating a patient with iloperidone, wherein the patient is suffering from schizophrenia, the method comprising the steps of:

determining whether the patient is a CYP2D6 poor metabolizer by:

obtaining or having obtained a biological sample from the patient;


performing or having performed a genotyping assay on the biological sample to determine if the patient has a CYP2D6 poor metabolizer genotype; and

if the patient has a CYP2D6 poor metabolizer genotype, then internally administering iloperidone to the patient in an amount of 12 mg/day or less, and

if the patient does not have a CYP2D6 poor metabolizer genotype, then internally administering iloperidone to the patient in an amount that is greater than 12 mg/day, up to 24 mg/day,

wherein a risk of QTc prolongation for a patient having a CYP2D6 poor metabolizer genotype is lower following the internal administration of 12 mg/day or less than it would be if the iloperidone were administered in an amount of greater than 12 mg/day, up to 24 mg/day.

In an unprecedented move by the U.S. Patent and Trademark Office (USPTO), the Patent Trials and Appeals Board (PTAB) has permitted the filing of amicus briefs on whether the Saint Regis Mohawk Tribe (“Tribe”) should be permitted to terminate the inter partes review of Allergan’s patents contested in IPR2016-00127, IPR2016-01128, IPR2016-01129, IPR2016-01130, IPR2016-01131, and IPR2016-01132. Allergan assigned the patents challenged in these IPRs to the Tribe, while retaining an exclusive license in exchange for ongoing payments. As a sovereign entity, the Tribe seeks to terminate the IPR challenges of these patents, a move which the PTAB had ruled in 2016 shielded the University of Florida Research Foundation as a sovereign entity from IPRs. See Covidien LP v University of Florida Research Foundation Inc., IPR2016-01274, Paper 21 (PTAB Jan. 25, 2016). Amicus briefs of no more than 15 pages are due to be filed by December 1, 2017, and the Petitioners and Tribe are each authorized to file a single response to any amicus brief by December 15, 2017.

This maneuvering has caught the attention of many, including members of Congress and the district court specifically addressing the validity of these patents. In response to a bipartisan committee investigating the Allergan-Tribe deal, Senator McCaskill has already drafted a bill to block tribal claims of sovereign immunity, which could otherwise preclude USPTO review of patents assigned to tribes. Court of Appeals for the Federal Circuit Judge William Bryson, sitting by “designation” in the Eastern District Court of Texas, expressed concerned that Allergan sought to “rent” sovereign immunity from the Tribe. On the other hand, heralded as an innovative defense, patent attorneys now seek such a defense to patent challenges before the USPTO. The Saint Regis Mohawk Tribe has reportedly already taken ownership of patents from SRC Labs and is in discussion with another technology company.

Interestingly, the district court under Judge Bryson recently found four of the six patents invalid, a decision which will likely be appealed to the CAFC. However, the PTAB nevertheless will need to answer, inter alia, the question of  whether the Tribe’s right as a sovereign immunity will shield the Allergan patents from IPRs. Due to additional parties joining as Petitioner and the complicated issues surrounding this challenge, the PTAB has extended a deadline to render its final decision in the IPR from December 8, 2016, to April 6, 2018.

BioLoquitur has reported on legislative developments in the past, but never did we expect to discuss a tax bill. Last week, however, the U.S. House of Representatives passed the “Tax Cut and Jobs Act” Bill (H.R. 1) and H.R. 1 deserves a spotlight. After all, one of our goals is to provide the life science industry with the latest news that could affect the industry.

Below are a few provisions that could affect U.S. pharma and biotechnology companies and others investing in those companies.[1]

  • Section 3001 reduces the U.S. corporate tax rate from 35% to 20%. If the bill goes into law, the reduction will be the largest corporate tax cut in over 100 years.
  • Under Title IV, the U.S. will only tax the U.S. income of a corporation and exempt most or all foreign income. Currently, a corporation headquartered in the U.S. pays corporate income tax on all income, both U.S. and foreign income that has been brought back into the U.S.
  • Section 3401 eliminates the Orphan Drug Tax Credit (“ODTC”). Currently, the U.S. provides an orphan drug manufacturer a tax credit of 50% of qualified clinical research costs incurred between the date of approval for the drug and the date that the U.S. Food and Drug Administration (“FDA”) designates the drug as an orphan drug. According to the U.S. Department of the Treasury, the tax expenditures attributable to the ODTC credit are expected to be $2.3 billion in 2017 and would grow substantially over the next ten years; eliminating the credit would thus generate billions in revenue for the United States.
  • After December 31, 2022, Section 3315 provides that research and experimental expenditures are not deductible unless they are charged to a capital account, where they must be amortized over a five year period. Currently, the tax code allows such research and experimental expenses as a deduction without requiring amortization under 26 U.S.C. § 174(a).
  • Section 3312 changes the tax treatment for self-created patents, taxing the gains from sales of such patents as ordinary income rather than capital gains.
  • Section 3307 narrows the ability to deduct certain business expense, eliminating deductions for membership dues, any payments relating to “entertainment, amusement, or recreation,” and on-premises athletic facilities, among others.
  • Section 1308 repeals the deduction for medical expenses. The tax code provides for the deduction of medical expenses that exceed 10% of an individual’s adjusted gross income. H.R. 1 eliminates this deduction. Critics suggest the elimination may potentially leading to reduced consumer spending on medical needs and/or increased reliance on government healthcare resources.

At 450 pages, H.R. 1 is a complex and dense bill — the list above is not exhaustive, of course.  We will keep you updated as tax reform continues.


[1]          Title V amends several provisions relating to exempt organization that are beyond the scope of this article, but may be of interest to research universities and foundations. If you have questions on the potential impact of Title V, please contact us and we will refer you to our tax and benefits colleagues for further information.

The Federal Circuit’s Review of Bayer’s Erectile Dysfunction Treatment Suggests Tolerance for a Wide Girth When Aiming for a Narrow Point

In Bayer Pharma AG v. Watson Laboratories, Inc. (Fed. Cir. November 1, 2017), the Federal Circuit overturned the District of Delaware’s finding that Watson failed to prove by clear and convincing evidence that the subject matter encompassed by the claims of Bayer’s U.S. Patent 8,613,950 (the ‘950 patent) was obvious under 35 USC 103. The CAFC invalidated claims 9 and 11 of the ’950 patent as unpatentably obvious. The Federal Circuit made this determination de novo based on the underlying findings of fact from the district court. Continue Reading When Are Swashbuckling Experts Seemingly ‘Flooding’ a Court with Large Number of References?

The America Invents Act (“AIA”) provides for post grant challenges of U.S. patents in the Patent Trial and Appeal Board (“PTAB”) of the U.S. Patent and Trademark Office. One type of AIA proceeding, Inter Partes Review (“IPR”), came into effect in September 2012, and provides a process for relatively quick determination of invalidity of challenged patent claims based on published prior art. [1] IPR decisions rendered in the past five years have created a body of law addressing a variety of issues related to invalidity challenges before the PTAB. In a recent IPR proceeding, a novel strategy has arisen that posts an interesting question of first impression, whether the assignment of a patent involved in an IPR proceeding to a U.S. Indian tribe can avoid an IPR proceeding based on a sovereign immunity defense. The present blog post summarizes the new issue that the PTAB will be required to decide in the IPR. Continue Reading Indian Tribal Sovereign Immunity Asserted in an IPR

Inequitable conduct arises when a material reference was intentionally withheld by the patent applicant in order to deceive or mislead the examiner into granting a patent. Both materiality and intent must be proven by clear and convincing evidence.[1] In Therasense, the en banc CAFC stated that proving specific intent to deceive the U.S. Patent and Trademark Office (“USPTO”) requires clear and convincing evidence of:

(1) knowledge of the withheld material information;

(2) knowledge that the withheld information was material; and

(3) a deliberate decision to withhold the information.[2]

The court elaborated that “the specific intent to deceive must be ‘the single most reasonable inference able to be drawn from the evidence.’”[3] On July 24, 2017, the Federal Circuit issued their opinion in Regeneron Pharms., Inc. v. Merus, N.V., Appeal No. 2016-1346, affirming such an adverse inference of specific intent to deceive the USPTO.

In March 2014, Regeneron Pharmaceuticals, Inc. (“Regeneron”) filed suit in the Southern District of New York accusing Merus B.V. (“Merus”) of infringing claim 1 of U.S. Patent No. 8,502,018 (“’018 patent”). Merus asserted a counterclaim of unenforceability due to inequitable conduct.

In general, the ’018 patent relates to using large DNA vectors to target and modify endogenous genes and chromosomal loci in eukaryotic cells.[4] One practical use of this technology is that users may target and modify specific genes in mice so that the mice develop antibodies that can be used by humans. Claim 1 of the ’018 patent, the only claim at issue here, recites, in its entirety, “[a] genetically modified mouse, comprising in its germline human unrearranged variable region gene segments inserted at an endogenous mouse immunoglobulin locus.”[5]

In Merus’s counterclaim of unenforceability due to inequitable conduct, it argued that Regeneron’s patent prosecutors withheld four references (the “Withheld References”) from the USPTO during prosecution of the ’018 patent. According to Merus, these references were cited in a third-party submission in related U.S. patent prosecution and in European opposition briefs, were “but-for” material, and were withheld by Regeneron with the specific intent to deceive the USPTO. There was no dispute that Regeneron knew of the Withheld References during prosecution of the ’018 patent. Regeneron argued, however, that the references were not “but-for” material and instead that the references were cumulative to those that the USPTO actually relied on during prosecution. Regeneron also argued that it did not have specific intent to deceive the USPTO.

During litigation in district court, Regeneron listed a chart and memo prepared by Dr. Brendan Jones, Regeneron’s outside counsel, in connection with his review of whether to disclose the Withheld References to the USPTO. On the eve of the deposition of Dr. Jones, Regeneron disclosed both the chart and the memo. Merus asserted that this disclosure resulted in a broad privilege waiver and brought a motion to compel.

In association with the waiver of privilege, the district court determined that Regeneron needed to produce any documents that reflected additional thoughts, concerns, and considerations given to whether certain references should have been disclosed. The district court’s broad Order included any other memos or communications related to whether such references should have been disclosed to the USPTO. Included within the Order would have been drafts of Dr. Jones’s chart or memo, which might have contained a different conclusion, memos of others who questioned Dr. Jones’s conclusion, and the like. Regeneron disclosed certain limited documents resulting in the parties arguing as to the scope of the waiver and sufficiency of documents disclosed by Regeneron. In all, the district court concluded that there were three categories of documents that presented serious concerns of discovery misconduct:

  1. Non-privileged documents that were not produced and instead resided throughout litigation on the privilege log (e.g., numerous Excel spreadsheets with scientific test results, third party filings to the PTO, and fact statements by non-lawyers not seeking legal advice).
  2. Previously privileged documents as to which Regeneron affirmatively waived the privilege by disclosing the Jones Memo and that the district court ordered be produced pursuant to its Order.
  3. Documents on the privilege log relating to precisely those topics waived by Regeneron when Regeneron filed trial declarations of Drs. Smeland and Jones.

The third category was most troubling for the district court. In the third category, the district court concluded that many documents on the log were directly relevant to the topics as to which privilege has been waived. In particular, these documents were directly relevant to Drs. Smeland and Murphy’s mental impressions of the Withheld References during prosecution of the ’018 patent. The documents would therefore have been relevant to determining if Regeneron specifically intended to deceive the USPTO by failing to disclose the Withheld References during prosecution of the ’018 patent. Accordingly, the district court sought an alternative remedy and concluded that it was appropriate to draw an adverse inference against Regeneron from the undisclosed documents. The district court ultimately concluded that Regeneron failed to disclose the Withheld References to the USPTO during prosecution of the ’018 patent with the specific intent to deceive the USPTO.

The district court scheduled a bench trial on Regeneron’s inequitable conduct, but bifurcated the trials based on the two elements of inequitable conduct: a first bench trial on the materiality of the Withheld References, and a second bench trial regarding the specific intent to deceive the USPTO.[6] Following the first trial, the district court issued a lengthy opinion detailing the materiality of the Withheld References.[7]


“[A]s a general matter, the materiality required to establish inequitable conduct is but-for materiality.”[8] A prior art reference is “but-for material if the USPTO would not have allowed a claim had it been aware of the undisclosed prior art.”[9] In determining the materiality of a reference, the court applies the preponderance of the evidence standard and gives claims their broadest reasonable construction.[10]

A reference is not but-for material, however, if it is merely cumulative.[11] A reference is cumulative when it “teaches no more than what a reasonable examiner would consider to be taught by the prior art already before the USPTO.”[12]

The district court in the Regeneron matter found that certain uncited references were “but-for material” to patentability even though the court did not find the ’018 patent claims invalid on the substantive content of these references.

Adverse Inference of Specific Intent

The district court never held a second trial to determine if Regeneron acted with the specific intent to deceive the USPTO during prosecution. Instead, the court sanctioned Regeneron for its litigation misconduct by drawing an adverse inference of specific intent. In particular, the district court discussed Regeneron’s repeated violations of the district court’s discovery orders and improper secreting of relevant and non-privileged documents. Based on this misconduct, the district court drew an adverse inference that Regeneron’s agents failed to disclose the Withheld References to the USPTO with the specific intent to deceive the USPTO.

For a finding of inequitable conduct, in addition to proving the materiality of withheld references, “the accused infringer must prove that the patentee acted with the specific intent to deceive the PTO.”[13] “[A] court must weigh the evidence of intent to deceive independent of its analysis of materiality. Proving that the applicant knew of a reference, should have known of its materiality, and decided not to not to submit it to the USPTO does not prove specific intent to deceive.”[14] “In a case involving nondisclosure of information, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.”[15]. Direct evidence of intent is not, however, required. A court may infer intent from circumstantial evidence.[16] An inference of intent to deceive is appropriate where the applicant engages in “a pattern of lack of candor,” including where the applicant repeatedly makes factual representations “contrary to the true information he had in his possession.”[17]

Having determined the but-for materiality of the Withheld References and drawn an adverse inference of Regeneron’s specific intent to deceive the USPTO, the district court determined that Regeneron had committed inequitable conduct and held the ’018 patent unenforceable.

The CAFC concluded that substantial evidence supported the district court’s finding of but-for materiality of the Withheld References.[18] The CAFC further held that the district court did not abuse its discretion by drawing an adverse inference of Regeneron’s specific intent to deceive the USPTO.


Judge Newman dissented chastising the majority that intent to deceive cannot be inferred., relying on Aptix Corp. v. Quickturn Design Systems, Inc., 269 F.3d 1369 (Fed. Cir. 2001), for the proposition that litigation misconduct cannot support a finding of  unenforceability of a patent for inequitable conduct. However, in addressing the dissent, the CAFC majority confirmed that neither the parties nor the district court relied on Aptix, and for good reason: Aptix is inapposite. The CAFC stated,

In Aptix, the district court declared a patent unenforceable as a “penalty” because Aptix engaged in litigation misconduct under the doctrine of unclean hands. 269 F.3d at 1378. We reversed that decision holding that “the doctrine of unclean hands [does not] provide a suitable basis for the district court’s judgment, as this equitable doctrine is not a source of power to punish.” Id. We did so because “the relief for unclean hands targets specifically the misconduct, without reference to the property right that is the subject of the litigation.” Id. at 1376. Essentially, we held that courts may not punish a party’s post prosecution misconduct by declaring the patent unenforceable. Here, Regeneron is accused not only of post prosecution misconduct but also of engaging in inequitable conduct during prosecution.[19]

Regeneron’s litigation misconduct, however, obfuscated its prosecution misconduct. In particular, Regeneron failed to disclose documents directly related to its prosecuting attorneys’ mental impressions of the Withheld References during prosecution of the ’018 patent. The district court drew an adverse inference to sanction this litigation misconduct. The district court did not punish Regeneron’s litigation misconduct by holding the patent unenforceable. Only after Merus proved the remaining elements of inequitable conduct did the district court hold the patent unenforceable. In light of Appellant’s widespread litigation misconduct, including Appellant’s use of sword and shield tactics to protect Drs. Smeland and Murphy’s thoughts regarding disclosure of the Withheld References to the PTO during prosecution of the ’018 patent, we conclude that the district court did not abuse its discretion by drawing an adverse inference of specific intent to deceive the PTO.

Practice Tip

Generally, it is a best practice to submit all references and associated litigation documents to the USPTO and to avoid making a determination of the necessity to submit art to the USTPO based on the materiality of the subject matter.

In circumstances where certain material art is inadvertently not submitted to the USPTO during prosecution, patentees should consider supplemental examination or ex parte reexamination to have the USPTO consider information and related issues that a challenger might raise against the patent during litigation.

[1] Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1287 (Fed. Cir. 2011) (en banc).

[2] Id. at 1290.

[3] Id. (quoting Star Scientific Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1366 (Fed. Cir. 2008)).

[4] See the ’018 patent at col. 1, ll. 17– 33.

[5] Id. at col. 29,  ll. 24–26.

[6] See Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1287 (Fed. Cir. 2011) (en banc).

[7] Regeneron Pharm., Inc. v. Merus B.V., 144 F. Supp. 3d 530 (S.D.N.Y. 2015) (“Regeneron I”).

[8] Therasense at 1291.

[9] Id.

[10] Id. at 1291–92.

[11] See Dig. Control Inc. v. Charles Mach. Works, 437 F.3d 1309, 1319 (Fed. Cir. 2006) (“However, a withheld otherwise material prior art reference is not material for the purposes of inequitable conduct if it is merely cumulative to that information considered by the examiner.”).

[12] Regents of the Univ. of Calif. v. Eli Lilly & Co., 119 F.3d 1559, 1575 (Fed. Cir. 1997).

[13] Therasense, 649 F.3d at 1290.

[14] Id. (citing Star Sci., Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1366 (Fed. Cir. 2008)).

[15] Id. (quoting Molins PLC v. Textron, Inc., 48 F.3d 1172, 1181 (Fed. Cir. 1995)) (internal quotation marks omitted).

[16] Id.

[17] Apotex Inc. v. UCB, Inc., 763 F.3d 1354, 1362 (Fed. Cir. 2014).

[18] Regeneron Pharms., Inc. v. Merus, N.V., Appeal No. 2016-1346 (Fed. Cir. July 24, 2017), available at

[19] Cf. Dissent at 4 (“[I]n order to invalidate the patent, the inequitable conduct must have occurred in patent prosecution.”).

shutterstock_99945896The value of an early stage biotech company is driven primarily by the quality and scope of its intellectual property. As such, these companies’ primary goal is to stake out and consolidate a defensible claim in their technology space.

In sizing up an early stage company’s IP portfolio during due diligence, many investors and acquirers tend to focus on prior art issues related to patentability and freedom-to-operate concerns posed by the potential risk of someday being sued for infringing a third party patent. However, a hyper-focus on patentability and freedom to operate may be misplaced during early stages of technical development.

Often overlooked is the fact that substantive patent prosecution often winds through years of negotiation with the Patent Office. Moreover, claim sets in a filed patent application continuously evolve not only in response to Examiner rejections but also to track and cover important developments in lead candidate selection and pre-clinical product design, for example.

Additionally, biotech companies usually take advantage of the safe harbor set forth in 35 U.S.C. § 271(e)(1) to avoid charges of infringement for research activities associated with pre-/clinical development. This affords them a certain luxury of freedom with respect to third party patents as they develop their technologies.  Therefore, while early stage companies are expected to understand their competitive IP ecosystem, be aware of potentially threatening third party IP and even have an informal game plan in place to deal with such risks; sophisticated investors and BigPharma acquirers infrequently require that such companies will have actually made cash-draining licensing investments or aggressively attacked third party patents through litigation or Inter Partes Review.

In practice, therefore, sophisticated due diligence with respect to an early stage intellectual property portfolio is often better served scrutinizing an entirely different and more pressing aspect of the technology: Chain of Title.

Between 2007 and 2012, U.S. industrial biopharmaceutical annual R&D spending dropped by about 15%.  It is reasonable to assume that BigPharma’s internal early stage research programs disproportionately fell victim to such cuts.  It is no surprise, therefore, that we have seen an increasing amount of initially publically funded academically derived technologies flowing through start-ups into larger companies.

Inventors generating these new technologies usually collaborate with other researchers at various universities, corporations and service providers. While University professors and post-docs generally owe a duty to assign their inventions to their respective institutions, industrial sponsored research arrangements and third-party grant making entities such as government agencies and philanthropies may nevertheless have their own rights in the IP arising out of the research they support.

Thus a complex juxtapositions of funding sources, inventors, technicians, institutions and former employers — particularly in an area of investigation where the number of experts is small — represents a minefield with respect to issues of technology control and ownership. If not properly managed from the outset Chain of Title issues can explode once a technology is deemed to have commercial value and an aggrieved party believes they are being excluded when the proverbial ‘cookie tray’ is being passed around in the form of liquidity event, for example.

We have often helped parties dealing with tangled chain of title issues.  In the best cases, critical transactions are merely held up and cap tables potentially adjusted while ownership issues are cleaned up.  In the worst cases, an exit is scuttled or a party is sued for breach of contract, breach of a duty of loyalty and misappropriation of trade secrets for example or even accused of inequitable conduct before the USTPO for willfully misnaming or excluding inventors.

Irrespective of who ultimately prevails on the merits in such disputes, the cost in terms of unproductive time, lost opportunity, money, anxiety and reputational damage will no doubt, have been immense. These are particularly painful to bear at the start up stage when cash and key person attention are at a high premium.

Therefore, when conducting due diligence on early stage biotechnologies, it is of critical importance to generate a comprehensive list of all scientists and technicians who were involved in the earliest stages of a technology asset.  Each such individual’s contribution should be carefully analyzed with respect to whether they likely qualify as a legal inventor for example.  Inventorship under U.S. law is tied to conception and linked in concrete terms a claim in a patent or patent application.  The standard for inventorship with respect to know how can be much less clear.

In addition to analyzing inventive contribution, each such person’s obligations to assign their rights in their inventions must be assessed. For example, is a person entitled to keep all rights for themselves or are they obligated to assign to their respective employer/university?  Have the critical requirements of the Bayh-Dole Act, e.g., iEdison reporting, been complied with by federally-funded institutions?  Furthermore, does the inventor in question have a relationship with a funding agency, e.g., through a sponsored research agreement with a biopharma industry partner that has a rights, e.g., of first refusal, to the inventions it funded.  It is imperative that these investigations are conducted early, be properly memorialized and that relevant employee policies, employment and funding agreements are collected and cataloged in preparation for potential future third party due diligence.

Only after matters related to IP inventorship, ownership and control are clarified, is a company in a strong position to efficiently go about raising money or seeking partners to exploit its intellectual property assets.

shutterstock_501756571The U.S. Patent and Trademark Office (USPTO) recently unveiled a new pilot program designed to assist patent applicants and practitioners during patent prosecution. The Post-Prosecution Pilot program, otherwise known as P3, arises under the Enforced Patent Quality Initiative and incorporates components from two existing programs, the Pre-Appeal Brief Conference and the After Final Consideration Pilot 2.0 (AFCP 2.0).1

In 2005, the USPTO established the Pre-Appeal Brief Conference program in order to afford applicants with an avenue to request a formal review of the patent application rejections prior to incurring the costs of filing an appeal brief when the “rejections of record are clearly not proper and without basis.”2 The Pre-Appeal program requires that the applicant to file a notice of appeal a request and a five-page or less set of arguments relating to claim patentability as the basis for the request.3

In 2013, the USPTO established the AFCP 2.0, which includes an interview with the examiner and likewise allows examiners to consider office action responses filed after a final rejection.4 In order to qualify, a response must include remarks and amendments that “may require further search and consideration, provided that at least one independent claim include a non-broadening amendment.”5 If the response does not place the application in condition for allowance, the examiner may then proceed to conduct an interview with the applicant to identify patentable claim subject matter.6

In a continued effort to increase patent quality and prosecution efficiency, last year the USPTO launched the Enforced Patent Quality Initiative (EPQI) with consideration for applicants, the USPTO’s backlog, and patent quality.7 The USPTO solicited comments from the general public in order to “guide the agency in formulating, prioritizing, and implementing changes to enhance[e] patent quality.”8 The new Post-Prosecution Pilot program (P3) is the result of the EPQI and is geared towards improving “Excellence in Customer Service.”

The P3 program began on July 11, 2016 and will run through January 12, 2017, or until the USPTO has received 1,6000 compliant requests.9 P3 incorporates “(i) an after final response to be considered by a panel of examiners (Pre-Appeal), (ii) an after final response to include an optional proposed amendment (AFCP 2.0), and (iii) an opportunity for the applicant to make an oral presentation to the panel of examiners (new).”10

In order to qualify, a P3 request must be filed within two months of mailing of the final rejection and before the filing of a notice of appeal, the application must be a non-provisional or international utility application filed under 35 U.S.C. § 111(a) or 35 U.S.C. § 371, and the applicant cannot have previously filed a compliant request to participate in either the Pre-Appeal or the AFCP 2.0 on the same outstanding final rejection.11

Furthermore, to be considered compliant, the P3 request must contain a request form, a statement of willingness to participate in a conference with the panel of examiners, a response including no more than five pages of arguments under 37C.F.R. 1.116, and optionally, a proposed non-broadening amendment to one or more claim(s).12 The USPTO will enter timely and compliant requests into the P3 program and then subsequently contact the applicant to schedule the mandatory conference.13 During the conference, the applicant will have twenty (20) minutes to make their oral presentation to the panel of examiners.14 Following the conference, the panel will notify the applicant of their decision in writing, either upholding the final rejection, allowing the application, or reopening prosecution.15

The USPTO’s goals for the P3 program include (1) increasing the value of after final practice, (2) reducing the number of appeals, issues to be taken on appeal to the PTAB, and the number of RCEs, and (3) streamlining options for applicants during the time period after a final rejection.16 The P3 program offers a useful option for applicants and practitioners when deciding how to proceed following a final rejection.

1 Post-Prosecution Pilot Program, 81 Fed. Reg. 44,846 (July 11 2016).
2 Id.
3 Id.
4 81 Fed. Reg. at 44,846.
5 Id.
6 Id.According to the USPTO, a goal of AFCP 2.0 “is to reduce pendency by reducing the number of RCEs and [to] encourag[e] increased collaboration between the applicant and the examiner.” Id.
7 80 Fed. Reg. 6,476 (Feb. 5, 2015).
8 Id.
9 Post-Prosecution Pilot, USPTO, The program will accept a maximum of 200 compliant requests per each technology center.
10 81 Fed. Reg. at 44,846.
11 Id.
12 Id. at 44,847.
13 Id.
14 Id.
15 Id. at 44,487-89
16 Id. at 44,849

shutterstock_586286306Last week, the USPTO issued further guidelines for patent examiners, instructing that rejections of applications based on ineligibility require detailed explanations for the basis of the rejection.1 This new requirement is distinguished from the previous guidelines by requiring examiners to provide more substantive information in their claim rejections. Along with the guidelines the USPTO issued several examples, which can be useful for examiners and applicants alike.2 The examples illustrate various claim scenarios, appropriate eligibility analysis, and potential applicant responses.3

The purpose of the guidelines is to advance prosecution and allow patent applicants to respond to the rejection effectively.4 For years, examiners claim rejections informed an applicant that a claim was directed to ineligible subject matter, with little further guidance.5 The same was true for applicant’s response assessments as examiners would only assert that the applicant’s response was unpersuasive and failed to overcome the rejection.6

The present guidelines are divided into two categories: “(i) how examiners should formulate a subject matter eligibility rejection under § 101, and (ii) how examiners should evaluate an applicant response to such a rejection.”7

Eligibility rejections should focus on the two-part analysis found in the Interim Eligibility Guidance. Under Step 2A, examiners should identify with specificity what the abstract idea, law of nature, or natural phenomenon is as recited in the claim and then explain why it is considered an exception.8 Under Step 2B, examiners should identify additional elements of the claim and provide an explanation as to why these elements, individually and in combination, are not “significantly more” than the identified exception.9 In formulating these rejections, the USPTO suggests that examiners cite to appropriate court decisions and formulate arguments that are sufficiently clear and specific so as to put the applicant on notice.10

With regard to applicant responses, the UPSTO urges that examiners fully evaluate the arguments raised.11 It states that “[i]f applicant’s claim amendment(s) and/or argument(s) persuasively establish that the claim is not directed to a judicial exception or is directed to significantly more than a judicial exception, the rejection should be withdrawn,” however “[i]f [the] applicant properly challenges the examiner’s findings but the examiner deems it appropriate to maintain the rejection, a rebuttal must be provided in the next Office action.”12

Although it is not immediately apparent whether these guidelines will impact the amount of rejections issued, they are seen as an aid for applicants. More importantly, they will hopefully curb blanket ineligibility rejections that left applicants with little guidance on how to proceed with overcoming the rejections.

3 See id.
4 Ryan Davis, UPSTO Calls For Clearer Alice Rejections, Aiding Applicants, LAW360 (May 5, 2016, 10:49 PM),
5 See id.
6 See id.
7 USPTO Guidelines, at 2.
8 See id.
9 Id.
10 Id. at 2.
11 Id. at 5.
12 Id. at 5.

Ishutterstock_176793578n Genetic Technologies Limited v. Merial L.L.C., the Federal Circuit upheld a district court’s determination that many claims of a patent relating to methods of analyzing sequences of DNA are invalid under 35 U.S.C. § 101.1 According to the opinion, Dr. Simons, the named inventor of U.S. Patent No. 5,612,179, discovered that amplifying and analyzing non-coding, or “junk” DNA could be used to detect genetic disorders.

The Federal Circuit emphasized the Mayo and Alice decisions, in which the Supreme Court articulated a two-step test for patent eligibility under Section 101.2 The Federal Circuit then applied the two-step test to claim 1 of U.S. Patent No. 5,612,179, the only claim at issue in the appeal. With respect to the first step of the Mayo/Alice test, the court found that claim 1 is “directed to a natural law—the principle that certain non-coding and coding sequences are in linkage disequilibrium with one another,”3 and is thus unpatentable subject matter.

The second step of the test is to determine whether the claims “do significantly more than simply describe [a] natural relation,” and for patent eligibility, such claims “must provide something inventive, beyond mere ‘well-understood, routine, conventional activity.’”4 The court concluded that the remaining elements of claim 1 failed to provide the “inventive concept necessary to render the claim patent-eligible.”5

The Federal Circuit stated that the two physical “implementation” steps recited in claim 1 – “amplifying” genomic DNA with a primer pair, and “analyzing” the amplified DNA to provide a user with information, were both “clearly well known, routine, and conventional at the time the ‘179 patent was filed.”6

Genetic Technologies Limited (GTG), the patent owner, argued that claim 1 instructs users “to detect the [coding region] allele,” which no one had done before the ‘179 patent was filed, and thus “provide[d] sufficient inventive concept to pass step two of the Mayo/Alice test.”7 The Federal Circuit disagreed, stating that the term “to detect the allele” was merely a “mental process step,” which “merely sets forth a routing comparison that can be performed by the human mind.”8 Such method steps “embody the ‘basic tools of scientific and technological work’ that are free to all men and reserved exclusively to no one.’”9

1 Genetic Technologies Limited v. Merial L.L.C., No. 15-1202, slip op. at 2 (Fed. Cir. April 8, 2016).
2 Id. at 7-8.
3 Id. at 11-12.
4 Id. at 12, citing MayoM, 132 S. Ct. at 1294
5 Id. at 13.
6 SeeId. at 13-14.
7 Id. at 15-16.
8 Id. at 16.
9 Id. citing Cyber-Source Crop. V. Retail Decisions, Inc., 654 F.3d 1366, 1373 (Fed. Cir. 2011) (citing Benson, 409 U.S. at 67.)