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Breaking News – CAFC Reverses Dt Ct Decision Not To Issue a Preliminary Injunction to Sequenom in an NIPT Patent Case

Friday afternoon, August 9, 2013, the Court of Appeals for the Federal Circuit, the appellate court for all patent cases, reversed an important patent decision by Judge Susan Y. Illston of the Northern District of California.  The four companies that offer non-invasive prenatal genetic diagnosis in the United States (Sequenom, Ariosa, Verinata, and Natera) are all suing each other in that district court for patent infringement.  Judge Illston had denied Sequnom’s motion for a preliminary injunction, which would have prevented Ariosa from offering its service in the U.S. at least until the case was finally resolved at trial or by settlement.  She did so for a variety of reasons, including some that boded extremely poorly for Sequenom’s chances of succeeding on the merits.

The CAFC has now reversed, in a unanimous opinion written by Judge Rader and joined by Judges Dyk and Reyna.  (You can download that opinion here.)   They vacated the lower court’s decision and remanded it for Judge Illston to “try again.”  They did NOT order that issue a preliminary injunction, let alone issue one themselves.  They did “correct her” about almost every reason she gave for denying the preliminary injunction.  Although there are still a few arguments open to Ariosa (and Judge Illston), the chances that Sequenom will be granted a preliminary injunction just got a lot greater.

The court first disagreed with the way Judge Illston had construed Sequenom’s patent claims. This is important because the way she construed them, Sequenom’s chances of success on the merits were small.  They aren’t now.  The court said “Even under the ostensibly more relaxed standard, the district court erred in its claim construction. As a consequence, the district court erred in finding a substantial question of noninfringement.”

The claim had talked about paternally inherited DNA, when the actual method looks at DNA inherited from both parents.  The lower court said the claim was limited to things that only found DNA known in advance to be paternally inherited – i.e., to a method that would only “read” the paternal DNA. The CAFC disagreed.

“Properly understood, this sentence describes the method of isolating and identifying any paternal characteristics by comparison to maternal characteristics, hardly a limitation to only paternal characteristics known in advance.”

The lower court read the claim’s discussion of “amplifying” as referring to amplifying only paternally inherited DNA.  The CAFC again said the lower court was just plain wrong.

Although Judge Illston concluded that Sequenom did not have a high likelihood of prevailing on the merits, she went ahead to analyze the other factors involved in granting a preliminary injunction as if it did have such a high likelihood.  She concluded, on several points, that the equities even then would favor NOT granting the injunction.  The CAFC disagreed on every, or just about every, point.

Although I am not and do not claim to be a patent lawyer, and I suspect I am missing something, As far as I can tell, the CAFC left only one obvious and substantial issue on which Sequenom could lose:  the question of patent-eligible subject matter under Section 101. This is the issue the Supreme Court has recently ruled on, in the Myriad case most recently as to “products of nature” and in the Mayo v. Prometheus case a few years ago as to “laws of nature.”

“The district court also found there was a substantial question over whether the subject matter of the asserted claims was to eligible subject matter. J.A. 16-19. Since the district court’s decision, the Supreme Court decided Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013) (Myriad), which held that product claims directed to isolated DNA segments were not eligible subject matter, but that product claims directed to synthetic cDNA were patent eligible. See id. at 2119-20. Because the district court did not have the benefit of Myriad and also in light of this court’s disagreement with the district court’s claim construction, this court remands for the district court to examine subject matter eligibility in the first instance.”

‘To be clear, this court offers no opinion as to whether there is or is not a substantial question regarding the subject matter eligibility of the asserted claims.”

Do Sequenom’s claims involve products or laws of nature?  Beats me, in part because I haven’t read the claims themselves and in part because I have very little idea of what the Supreme Court means by either phrase.

So, what does this mean?

Well, for starters, I think they are dancing in the streets in San Diego at Sequenom’s headquarters. Good news for them.  But what about for everyone else?

It’s clearly not good news for Ariosa, Natera, and Verinata, though just how bad it is won’t be clear  The companies all use somewhat different technologies and all have their own patents, which they say Sequenom is infringing.  It is way too early to know whether even if an injunction issues against Ariosa (which it may not), the same thing would happen to Natera or Verinata. And, of course, there are other firms providing the service in other countries who might enter the US market – I have no idea what their patent situation is.  Plus there are companies trying to enter  the field that use entirely different methods – CellScape, for example, is not trying to read cell free fetal DNA but to isolate whole, intact fetal cells.

As I said earlier, I am not a patent lawyer.  Apart from the (admittedly important) issue of the patent infringement, as a matter of policy I would prefer a situation without an effective patent monopoly.  If Sequenom, or anyone else, has a patent-enforced monopoly on providing NIPT in the US, the technology will be more expensive, will expand more slowly, will improve more slowly, and will help fewer women than if there is effective competition.  So I’m rooting against Sequenom on this one, as a matter of policy, though I don’t know enough to have a good opinion on the proper outcome as a matter of law.

For the last time in this post, I’ll repeat that I am not a patent lawyer.  I hope some of my readers are.  What do you think about this decision?

Hank Greely

10 Responses to “Breaking News – CAFC Reverses Dt Ct Decision Not To Issue a Preliminary Injunction to Sequenom in an NIPT Patent Case”

  1. Horatio says:

    Well I am not a patent lawyer, but I am a scientist. As a scientist reading these claim constructions I always have to laugh since this entire opinion hinges on nuances of language, rather than the real science and empirical facts that accompany the methods described. For instance, Rader et al. completely ignore the elephant in the room. In their opinion, they act as if the paternal amplification is there just as a word, not as a concept. At the time the patent was written, there was no means by which one would be able to selectively detect the very small fetal fraction of DNA in the presence of a huge maternal fraction of DNA. The patent examiner correctly realized this, and that is why he made them add the use of paternal, since that would provide a means of differentiating the fetal from maternal fraction. Without this the method is never described in this patent as to how one would actually selectively amplify the fetal DNA.

    Proof that no method existed in this patent is the fact that even ten years after the patent was granted, there was no working method produced by the inventor. Further, the method he did come up with, using RNA, had nothing to do with ’540 and is what caused Sequenom to commit fraud since the method didn’t work. By the way, the inventor published two papers that I think should be retracted since they purport to show a nearly perfect method that we now know isn’t.

    Claim constructions and interpretations should really be decided by an objective panel of scientists and then sent to the courts to ensure that they are commensurate with existing legal standards and interpretations of the law.

  2. Brad F says:

    The inventive concept (and the “methods”) embodied in the claims is to use paternal free-floating DNA found in the mother’s blood to diagnose fetal disease. It is not simply identifying a law of nature.

    Feature of nature: DNA fragments are floating in the mother’s blood.

    Sequenom patent: detect the paternal (and thus fetal) origin of SOME of that DNA, and crunch the data to INFER a fetal abnormality.

    The idea was revolutionary and Lo should be rewarded for the invention. That’s what patent law is for! It stood unchallenged for 10 years and was widely recognized as the “mother” patent in the field….until certain corporate interests decided that they didn’t like the monopoly it created.

    Illston’s first decision could be blamed on scientific ignorance of a complex subject, although the depth of the bias in her reasoning makes it likely that Ariosa ‘s lawyer wrote the majority of the ruling and she rubber stamped it. Judges often do that when they have a heavy work load.

    However, now she has been reprimanded for her sloppy work. If she declines to grant the preliminary injunction AGAIN, based on an interpretation that the claims are somehow not patent eligible, then you have to reallly question her integrity.

  3. Ben says:

    Its a nice read, but i disagree with the blogger on the last point. While its true, that a monopoly position is from a client point of view, not a good thing, one can also not forget, that it was Dr Lo’s original work ( and sequentially, Sequenom there work ), what allowed / and showed that these methods for detecting chromosome abnormalities in a fetal fetus worked! So, one does not want a monopoly, but at the same time, the companies that pioneered the work, do not get rewarded for there work?

    Horatio brings up a few good point, but also tries to make it a blood fight. While the original method failed with RNA based testing, they showed that it worked with DNA based based sequencing. The reason for the focus on RNA detection, was simply because at that time, DNA based sequencing, was very expensive.

    The fact that one employee tried to hide the not working results, does not constitute of a entire company based fraud! They got cleared from that, by the SEC / FBI / etc …

    This research, cost a lot of money. Over the years Sequenom spend over a billion in R&D, for finding a good working method, that was usable in production.

    With that, i come back to Hank Greely his original statement. Why does Sequenom not get rewarded for there work?

    Ariosa has no patent in this case. It copycat the work that Sequenom did, and altered the “procedure” by trowing around two steps. What seems to be in hope, to prevent patent infringement.

    Yet, in all this time, we have not gotten one sign, that Ariosa was willing to talk about licencing Sequenom there patents? In fact, there response when pressed by Sequenom was: They sued Sequenom.

    Most of these work, comes back to the discovery from Dr Lo’s work, that was able to detect the fetal DNA in the mothers blood. If this was not discovered, where will we have been today? Most women still needed to undergo a procedure, what in all honesty, probably scares most grown men, with a risk for a miscarriage.

    Horatio, as a scientist, you do make strange claims, regarding the fact that ” the fact that even ten years after the patent was granted, there was no working method produced by the inventor”. As a scientist, you will know that there is a massive difference between discovering a method in a lab, compared to producing a working commercial mass production method.

    Let me give a silly argument: Why is it, despite every year getting 10 claims about massive improvements in battery life/capacity/charge time, we have yet to see any off that work in the field. Does that make all those patents invalid?

    Its easy to find 100.000′s off patents, with no products ever developed, because its economically too expensive to go from a laboratory developed method, to a actual commercial usable product.

    This brings us back to the claims you made. While it took 10+ years, to develop a test, and they did have a wrong turn with the RNA approach, they did succeed … And they did so, at major cost.

    Hank Greelyn and here i come back again, to this point. Cost vs Gain. If a company like Ariosa can just blatantly copy a test, change two steps ( switch them around ), and then just start mining the market. What does that do to other companies on the market? Sequenom / Verinata, both who have patents.

    Does Ariosa deserve to be “rewarded” by allowing to compete with Sequenom. But in order to compete, one must also have some fair battle ground. Ariosa sell’s there test, at 1/3 the costs, majorly undercutting Sequenom there prices. Then there is the selling into low risk market. ACOG clearly stated, that they wanted these tests, for now limited to high risk ( 35+ ) markets, … Same with other organisations there analysis of the methods.

    From a outsiders perspective, Ariosa looks like a bully, who steals people’s work, and then uses it to undercut the real inventors. And thus damaging the real patent holders ( or maybe even attempting to drive them out of the market ).

    ———–

    Verinata is a different company in this discussion, as they hold patent from Dr Quake ( what do seem to be later then Dr Lo’s ), and the claims off superiority seen several patents going from Minor to Senior in the latest patent battles ).

    And Verinata seems to be willing to talk to Sequenom, as we have had several instances from talks going on.

    ————

    Horatio: If we left everything to the scientists, we will have no patents left.

    Tell me, is the earth warming up? 20 years ago, you will have had most scientists calling you stupid, for even mentioning that. Today, scientist who claim the earth is not warming up, are considered the goofballs.

    For every scientist, that said (a), you will have one that said (b). In fact, by this standard having scientists interpretative those patents, they can just as well destroy a lot of patents. Because most patents hold some errors, or badly chosen words. Using that as a standard, it means we can invalidate Sequenom ( Dr Lo ), Verinata ( Dr Quake ), Natera there patents, and make it a free for all.

    But that bring us back to the main point: Who will spend a billion or more, into R&D, for commercializing a test, if you can not get the rewards from it.

    Up to now, this whole legal battle, has cost Sequenom 11 Million dollars in 2012, and probably more in 2013. We can assume that 1/3 of that costs, is directly related to Ariosa. Why does a company need to wast this amount of money, loss in sales, reputation damages ( Ariosa has made some bold claims ), for a company, who seems to be just a copycat company.

    Many need to thank Sequenom for pioneering the work, and allowing women all over the world to enjoy a simple blood draw, for detecting potential problems with there child. Yet, we see that the world off business, is not such a nice place, as just about everybody wants a part of the pie. And most do not want to pay for there part on the table.

    And that is what it comes down to. Money… Patents are here for a reason. While we have been hit over the years, with patent trolls, and companies who’s only living, is to pester other companies with there troll patents. Yet, here we have a company, that did exactly what was expected from them. Patent, R&D, Commercialization. What more can one expected to do?

    That it took them a while? So … do we need to take away every companies patents/right, because it took them a long time?

    Do we need to punish them, because one rotten apple, screwed up? I think the markets did that already and massively, as in all those years, the companies stock did not recover. And this in turn, damaged there ability to fund themselves.

    Do we need to let other companies just copy there product, alter a few things, and voila … compete away. And please, do not pay a cent.

    Wanting to or not, the CAFC took the right decision, to trow the case back to Judge Illston. I may add, that its not the first time, that Illston has made strange calls. Recently with one regarding Google, it surprised a lot of people.

    Its now back in her court, and this time the argument regarding “its Ariosa there only product” will not fly anymore. Also much time has passed from the original case, and the appeals, that now from Sequenom there point of view, its much easier to show damages.

    We shall see how things turn out, but Ariosa has a decision to make: Try and not pay, or finally negotiate, or face going out of business.

  4. sammyjammin says:

    well said brad and benjiro

  5. D Coleman says:

    There appears to be a lot of confusion from the court about the technical details of the various applications. It is normal for a court in a substantive trial to hear extensive expert evidence about the subject matter before making any judgment about the merits of the case. In the case of this injunction application, the court has been forced to make an assessment of the merits without the benefit of an assessment from someone who actually understands the technical matters in the case.

  6. Joey says:

    It appears after reading many opinion pieces and of course, the opinion itself. 1. The Federal Circuit should have granted an injunction. 2. Illston at this juncture, should issue one at her earliest convenience. Judge Illston made critical errors in judgement (meaning her reasons) when she did not grant the injunction last year. It almost appears she “felt bad” for Ariosa, and much of her basis for her decision was based on ‘feelings’ not the law. I believe that is why the FC Rader and the unanimous decision by all was handed down harshly, critically and without any room for a misinterpretation of their belief and disappointment It was not only a sloppy ruling but an embarrassment for anyone involved to read her original opinion.
    The problem she has caused at this juncture is universal.
    Ariosa continues with business free to infringe and obviously has new hires and other relationships built since last year.
    2. Sequenom has been beaten to where they are actually the company that is on its way out??
    How did that work out Illston?
    Now – with the correction of Illston’s bad judgement and previous interpretatiions of law – - Everyone must pay.
    Sequenom to re-establish everything they had built and Ariosa to tear down the fabricated walls of a business built on deciet. Then again – the walls are not that strong since they have only been in business 2.5 years. Long enough to throw together a lab and start slinging lawsuits for their cause.

  7. Joey says:

    ‘The CAFC has now reversed, in a unanimous opinion written by Judge Rader and joined by Judges Dyk and Reyna. They vacated the lower court’s decision and remanded it for Judge Illston to “try again.” ‘
    It appears Illston may be able to avoid (which it appears she is avoiding anyway) making any decision regarding the injunction. While Ariosa is getting kicked out NY for testing without a license – Sequenom is just about out of business. They have laid off 75 employees and have currently announced they are trying to sell off part of the company, to stay afloat, one would assume. Why in a unanimous decision by the CAFC with detailed “errors” for a job that should have been performed the first time….would a judge not act on their advice? Again, her problem may be solved soon enough with the elimination of Sequenom as business unit. Not a worthy perfomance and a slight to CAFC, in my ‘opinion’

  8. Hank Greely says:

    Actually, if I read Genome Web’s report correctly, Sequenom is considering its future business strategy with respect to all of its business EXCEPT the NIPT part.

    “Sequenom said after the close of the market on Monday that its board has authorized a “review of potential strategic alternatives” for its Genetic Analysis segment.

    The San Diego-based firm has hired Jefferies as a financial advisor and will evaluate “a full range of potential strategic alternatives” for the Genetic Analysis business. It has not decided to enter into any transaction at this point, and “there can be no assurance that Sequenom will enter into such a transaction in the future,” it said in a statement.

    The company provided no further details.

    Sequenom’s Genetic Analysis business offers its MassArray System for measuring genetic target material and variations, as well as its iPlex assay for analyzing multiplex SNPs and somatic mutations.

    It excludes its MaterniT21 Plus non-invasive prenatal diagnostic testing business, however.”

    Here’s the URL to the whole story in Genome Web Daily News. I don’t know whether it’s correct or not, of course, or any broader background on Sequenom.

  9. Matt David's says:

    Hank:

    Your last statement demonstrates to anyone who has any idea about this matter how absolutely clueless you are. (no offense). But why is it that you think they are attempting to sell the genetic analysis unit? To be able to keep the business as a whole intact by raising cash to fund the ongoing operations. Synonomous to selling all of your furniture to pay the rent/ mortgage. Or selling one of your kidney’s to pay medical bills. They wouldn’t be parting with a strategic asset if they weren’t required to to offset the market damage inflicted by patent thieves.

    How is it that you think advances in medicine are achieved? If you destroy incentive for pioneer that invest hundreds of millions of dollars and many years of focused difficult work – guess what, the advance never happens. If this legal issue is not rapidly resolved in sequenom’s favor, the repercussions will be catastrophic for patent system in this very important field.

    • hgreely says:

      I think your post demonstrates that you didn’t read my last post on this thread correctly. “Joey” said “Sequenom is just about out of business.” I then almost entirely quoted a Genome Web piece that says Sequenom announced it was reviewing alternatives for its Genetic Analysis business, which does NOT include its NIPT. I never said they were planning to go out of business entirely or that they weren’t focusing on the NIPT part of their business. My last comment on this says nothing about who should win the patent fight.

      If, by “your last statement,” you meant the last part of my original blog post on this, posted over 2 months ago, first, it would have been helpful if you had made that clear. I said, as a matter of policy, I’d prefer a marketplace for this invention without a patent monopoly, but had no idea whether or not these particular patents should, as a matter of law, be upheld. How important patents, in general, to innovation remains controversial and seems to vary according to the field. How important these particular patent claims were to this one company’s investment in this technology is also unclear. Patent fundamentalism (all patents are always critically important to innovation, at all times) is as silly, I think, as any other kind of fundamentalism.

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