Supremes Rule Against LabCorp On Test Patent

One barrister believes there’s good news in the dissenting opinion of three justices

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CEO SUMMARY: It’s a bad news/good news outcome for pathologists and lab administrators hoping for clearer guidance on patents granted for DNA and other diagnostic technology. The bad news is that LabCorp gets no relief from lower court rulings that it infringed patents on homocysteine testing. The good news is that three justices wanted to rule in this case, and likely in favor of LabCorp.

BY DECIDING NOT TO ISSUE a ruling in the case of Laboratory Corporation of America Holdings versus Metabolite Laboratories, Inc., the Supreme Court of the United States effectively ruled against LabCorp. The Justices announced this action on June 22, 2006.

For clinical laboratories and anatomic pathology group practices, the lack of a definitive ruling means that the status quo in patent protection for many molecular tests and other medical processes is allowed to stand. However, some legal experts consider the willingness of the Supreme Court to consider LabCorp’s appeal as a sign that the justices are looking for an opportunity to review current patent law with a thought to changing how patents are currently granted.

“LabCorp was appealing lower court decisions against it in a civil case involving patent infringement,” stated David B. Cupar, an attorney with McDonald, Hopkins of Cleveland, Ohio. Cupar specializes in intellectual property rights, with a particular expertise in biotech and diagnostic patent law. “This case was high-profile because of expectations that the Supreme Court was about to issue a ruling that would affect patents granted for medical processes, DNA and molecular applications, as well as business methods.”

Losses In Lower Courts

Lower courts had ruled that LabCorp, by performing homocysteine assays without paying royalties to Metabolite Laboratories, had infringed the patent held by Metabolite Labs. That patent is No. 4,940,658. It covers determination of a deficiency of folic acid (B-12) by measuring the quantity of the amino acid homocysteine in a patient’s blood or urine. Over the past 10 years, the volume of homocysteine testing has increased steadily, as clinical studies offered evidence that high levels of homocysteine correlate to a higher risk of stroke or heart attack.

In 1998, LabCorp ceased paying royalties to Metabolite and Metabolite sued. LabCorp lost the civil case and was ordered to pay $5 million. On appeal, it lost again. It was ordered to pay the settlement and was also enjoined from performing homocysteine tests. (See TDR, November 1, 2004.)

“There was keen interest in this case because it centers around the key question of patents that are issued for scientific processes,” observed Cupar. “For example, is DNA patentable? This question has been argued in courts since the early 1980s and the LabCorp case had many scientific parameters common to earlier cases on this subject.”

Pathologists and laboratory administrators are all too familiar with patents covering scientific processes. Many molecular assays are protected by specific patents. Laboratory budgets are stretched thin by the need to pay royalties to the holders of these patents. Roche’s patents involving polymerase chain reaction (PCR) are probably the best known example.

Dismissal Is Rare Action

“In dismissing the LabCorp case without a decision, the Supreme Court took a rare action,” noted Cupar. “That’s because it had agreed to hear the case, then accepted written briefs and heard oral arguments. Why go this far, then decline to rule?

“I believe that, after studying the facts and arguments, the justices came to realize this was not the best case for them to use in establishing new legal precedents,” explained Cupar. “Since the early 1980s, when the first patents were granted for DNA and some basic scientific processes, a steady flow of cases has been filed to challenge the validity of these patents.

“Thus, this type of issue has been in front of the court several times in the past 25 years,” he added. “The LabCorp case has many of the scientific parameters that are common with earlier cases. That’s probably why the justices were originally interested in hearing LabCorp’s appeal of the lower court rulings against it.”

“For the clinical laboratory profession, I see some good news in this situation, despite the Supreme Court’s dismissal of LabCorp’s appeal” noted Cupar. “First, the fact that the Court did agree to accept this case is a strong signal that it recognizes the need to bring more legal clarity to the patent issues involving genetics and bioscience.

Dissent By Three Justices

“Second, even though the case was dismissed with a one-sentence statement, three justices dissented in the dismissal action,” he continued. “Justices Breyer, Suter, and Stevens issued a dissenting opinion. In it, they said, point blank, that the Metabolite Labs’ patent is invalid because it covers a natural phenomenon.

“In particular, Justice Breyer, who wrote the opinion for the three dis- senting judges, leaves an open door for LabCorp,” said Cupar. “He points out that, in the lower court actions, LabCorp did not make reference to §101 of the Patent Act, which addresses the ‘law of nature’ principle which is to guide the issuance of patents. Justice Breyer then observes that the higher court would ‘benefit from the views of the Federal Circuit, which did not directly consider the question.’

Door Open For LabCorp?

“This seems like an invitation to LabCorp to revisit the lower court and raise this specific question,” he added. “It remains to be seen how LabCorp will respond to this development.”

Cupar believes that the response of the dissenting justices to the LabCorp v. Metabolite case makes it inevitable that similar cases will find their way into the Supreme Court. “There is a silver lining in the refusal of the Court to decide this case,” he stated. “Breyer indicates, in his dissent, that LabCorp might have prevailed had it raised the §101 Patent Act ‘law of nature’ principle earlier in its arguments. That’s encouragement for other laboratories to litigate over patents deemed to involve a ‘law of nature’ process and defend their action with §101 of the Patent Act.”

Cupar believes that all laboratories and pathology groups must stay alert to issues triggered by patents affecting laboratory tests. He recommends that pathologists and laboratory directors develop two types of strategies to protect themselves from patent and intellectual property issues.

Defensive and Offensive

The first patent-protection strategy is defensive. The second is offensive. THE DARK REPORT has asked Cupar to address each of these strategies in detail. His recommendations and insights on how laboratories and pathology groups should protect themselves from patent royalty claims will be presented in coming issues.

Homocysteine Tests Covered Under Patent Granted For Determining Folic Acid Deficiency

MANY PATHOLOGISTS AND LAB DIRECTORS are familiar with the patent that is connected with homocysteine testing. That’s because the patent holder, in 2004, sent “royalty demand” letters to many hospital-based and independent laboratoriesin the United States.

First reported by THE DARK REPORT, in the fall of 2004, Competitive Technologies, Inc. (CTI) sent letters to many laboratories in the United States. The letter requested those labs which had performed homocysteine tests since January 1, 1998 to pay a $30,000 licensing fee and royalties of $1.83 per test sold by the lab since that date. That was CTI’s estimate of a 6% royalty on the patient list price charged by laboratories. (See TDR, November 1, 2006.)

Competitive Technologies holds the assay patent on behalf of the University of Colorado (developers Robert H. Allen, M.D. and Sally Stabler, M.D.) and Columbia University (developer John Lindenbaum, M.D.–died 1997.) The University of Colorado owns Metabolite Laboratories, Inc., which was organized to develop uses of the patented technology.

U.S. Patent No. 4,940,658 (’658) is a two step method. First, the level of homocysteine is measured in a patient’s blood or urine. Second, if elevated, that level can be correlated with a deficiency of folic acid (B12). It was developed in research to benefit patients with sickle cell anemia and vitamin B-12 deficiency, among other diseases.

The Supreme Court was facing a fundamental question: could a doctor infringe the patent “merely by thinking about the relationship” between homocysteine levels and B vitamin deficiencies after looking at a test result. LabCorp and its supporters argue that this is a basic scientific principle or natural phenomenon. It should not be patentable.

“If someone observes a correlation between X and Y and then announces he is going to use that correlation in a lab test, is that a patent able process? I think the court is troubled that this sort of correlation would be possible,” stated Jack Beirig, a Chicago-based attorney with Sidley Austin LLP. Beirig filed a friend-of-the-court brief supporting LabCorp on behalf of the American Medical Association and five other medical associations.

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