Supreme Court Invalidates Biotech Method Patent in Mayo v. Prometheus

Recently an article by Richard G. Gervase, Jr. and Daniel W. Clarke, Ph.D. of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. regarding Biotech Patents recently appeared in The National Law Review:

On March 20, 2012, the United States Supreme Court handed down a groundbreaking decision in the field of biotechnology; however, the repercussions of this decision will be felt throughout the patent community. In a highly anticipated decision, the Court reversed the United States Court of Appeals for the Federal Circuit in Mayo Collaborative Services and Mayo Clinic Rochester v. Prometheus Laboratories, Inc., unanimously finding that process claims directed to optimizing the dosage of a drug for treatment of an immune-mediated gastrointestinal disorder are invalid because they effectively claim no more than an underlying law of nature.

The two patents at issue are exclusively licensed to Prometheus, who sells diagnostic tests that employ the patented processes. At first, Mayo bought and used these diagnostic tests; however, in 2004, Mayo decided to use and sell a slightly different diagnostic test. Prometheus responded by bringing an infringement action in the United States District Court for the Southern District of California, which found that although Mayo infringed a claim of a Prometheus-licensed patent, the asserted claims were invalid for being drawn to non-statutory subject matter. The District Court reasoned that the patents claimed “natural laws or natural phenomena,” which are not entitled to patent protection. Specifically, the District Court opined that the correlations between metabolite levels and the toxicity and efficacy of drug dosages are patent-ineligible laws of nature. The Federal Circuit reversed, and held that the claims were directed to patent-eligible subject matter because they “transform an article into a different state or thing,” and the transformation was “central to the purpose of the claimed process.” The Federal Circuit subsequently reaffirmed this decision on remand from the Supreme Court for reconsideration in view ofBilski v. Kappos.

The question presented to the Supreme Court in Mayo v. Prometheus was “whether the claimed processes have transformed unpatentable natural laws into patent-eligible applications of those laws.” The Court recognized that the threshold inquiry to determine whether a claim is directed to patent-eligible subject matter is governed by 35 U.S.C. § 101, which provides “[w]hoever 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 representative claim analyzed by the Court was directed to methods of calibrating the optimal dosage of a thiopurine drug by administering the drug, and determining the level of subsequent metabolites, where certain metabolite levels correlate with certain results. The Court relied on case precedent, including Diamond v. Diehr and Gottschalk v. Benson, for the proposition that the meaning of “process” in § 101 has been limited to exclude fundamental principles, such as “laws of nature, natural phenomena, and abstract ideas,” but noted that “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.” The Court concluded that the claims were not patent eligible, reasoning that the claims were merely instructions to apply a natural law, i.e., a natural correlation.

Specifically, the Court stated that the additional steps of “administering” and “determining,” along with the “wherein” clauses, “add nothing specific to the laws of nature other than what is well-understood, routine, conventional activity, previously engaged in by those in the field.”

Although the Court recognized that in determining whether additional claim steps are routine or conventional, a § 102 novelty inquiry and a § 101 statutory subject matter inquiry “might sometimes overlap,” Justice Breyer repeatedly emphasized that from a policy perspective, a patent should not preempt natural correlations, thereby improperly inhibiting future innovation. The Court also warned that a non-statutory law of nature cannot be transformed into subject matter that is eligible for patent protection by mere clever claim drafting that amounts to no more than “insignificant post-solution activity.”

How the Supreme Court’s decision will impact medical diagnostic patents and patent applications in the future remains to be seen. We note that the Court declined to opine on the desirability of increased protection for diagnostic correlations, inviting Congress to develop “more finely tailored rules” for patent eligibility should the legislature disagree with the Court’s conclusion.

©1994-2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

European Commission Considers Taking Over Cartel Investigations to Prevent Exploitation of German Law Loophole

Recently The National Law Review published an article by Martina Maier and Philipp Werner of McDermott Will & Emery regarding the European Commissions Investigation of a German Law Loophole:

Under German law, companies may escape cartel fines by undertaking an internal restructuring. The German competition authority has indicated a willingness to reallocate such cases to the European Commission, which can impose a fine on the corporate group regardless of any internal restructuring. Commission officials speaking at a conference have suggested recently that the Commission would be willing to take over cartel cases from EU Member States, even at a late stage in the proceedings, in order to fine undertakings for their anti-competitive behaviour.

Background

The German competition authority can impose fines on undertakings that have violated European competition law by forming a cartel. Under German law, if the undertaking ceases to exist, for example by merging with another undertaking, only in exceptional circumstances can the legal successors be held liable for the violation of Article 101 TFEU. For the legal successor to bear any liability for the anti-trust infringement, the restructured company must be identical, or nearly identical, to the company that committed the infringement, such as in the case of a mere change of the company’s name or its legal structure.

This has created a loophole that can be exploited by internally restructuring the legal entity that has committed the infringement so it ceases to exist and no other legal entity within the group is (nearly) identical. Companies may thus escape cartel fines by, for example, redistributing their assets to affiliated companies within the corporate group, or by merging with a sister company, even if the original company’s assets remain within the same group and under the control of the same ultimate parent company. This loophole has been confirmed explicitly by the German Supreme Court. Although Germany is currently amending its competition legislation, it is not yet clear whether the proposed changes will be sufficient to solve the problem.

In the European Union, due to the broad interpretation of the concept of an “undertaking”, as well as the possibility of holding parent companies jointly and severally liable, the European Commission has broad discretion when it comes to imposing fines on parent companies, so an internal restructuring does not present a solution for infringing companies.

Reallocation of Cases

According to the Commission Notice on cooperation within the Network of Competition Authorities, reallocation of cases should normally take place within a period of two months, starting from the date of the first information sent by the relevant national competition authority to the European Competition Network. In general, the competition authority that is dealing with a case at the end of the two month period should continue to handle the case until completion of the proceedings. Reallocation of a case after the two month period should only occur where the facts known about the case change materially during the course of the proceedings. After the two month period, the Commission should in principle initiate proceedings only in exceptional cases.

If the Commission initiates proceedings, the relevant authorities of the Member States are relived from their competence to apply Article 101 TFEU and Article 102 TFEU. This means, once the Commission has opened proceedings, national competition authorities cannot act under the same legal basis against the same agreement or practices by the same undertaking on the same relevant geographic and product market.

Despite these procedural concerns, the Commission seems to be willing to accept a late reallocation of cases in cooperation with the German competition authority. It is not clear how this principle could or will be extended to other Member States and whether it could be applied under different circumstances where a Member State is prevented from fining a cartelist due to the application of a national law.

© 2012 McDermott Will & Emery

DOJ Goes After Smaller Fraudsters, Lets Big Fish Escape

An article featured recently in The National Law Review regarding the Department of Justice’s Prosecuting Fraud was written by Nicole Kardell of Ifrah Law:

Successful criminal prosecutions of mortgage fraud seem to have one thing in common: a fraud figure well below $10 million. One of the recent cases that generated a fair amount of press involved the convictions of co-conspirators in a mortgage scheme carried out by an ex-NFL player. That scheme, which took place during the housing boom in the early 2000’s, resulted in 10 convictions. Former Dallas Cowboy linebacker Eugene Lockhart is facing jail time of up to 10 years. The nine other individuals are looking at sentences of roughly two to five years.

The mortgage scheme – which led to convictions for wire fraud, conspiracy to commit wire fraud, and making false statements to a federal agency – seems pretty typical of the conduct that prosecutors have been going after: the use of “straw borrowers” to apply for loans on home purchases; falsification of data on loan applications to ensure that straw borrowers would qualify for home loans; and creation of artificially high appraisal values for the homes to be purchased by the straw borrowers. In the case of Lockhart and his cohorts, the Justice Department alleges that the scheme resulted in an actual loss to lenders of roughly $3 million.

While $3 million is not a trivial sum, it is a very tiny portion of the housing industry. Even the total amount in all similar prosecutions nationwide is quite small. Recent headline prosecutions involving similar schemes include a Florida case valued at $8 million in loan proceeds, an Alabama case valued at $2 million, and a New York case valued at $82 million in loan proceeds. At least the latter is a more aggressive number (as apparently was one of the defendants in the New York case, who moonlighted as a dominatrix in a Manhattan club).

The government has been touting these prosecutions as a part of a major crackdown on the mortgage business. The DOJ press statements note that“[m]ortgage fraud is a major focus of President Barack Obama’s Financial Fraud Enforcement Task Force.” But these are comparatively minor matters if one looks to the real causes of the housing crash that led to the 2008 financial crisis. Bank of America, Goldman Sachs, JPMorgan Chase, and Wells Fargo, who were all in the business of packaging and selling subprime mortgages, have been more or less covered with Teflon.

The lack of criminal prosecutions against the big banks in the subprime crisis has been written about many times. But that doesn’t mean it’s not worth repeating. Something seems just wrong about the DOJ’s focus on the smaller fraudsters and its soft approach to the bigger players.

Hopefully, the SEC’s recent decision to send Wells notices to Goldman Sachs, JPMorgan Chase, and Wells Fargo indicating possible enforcement proceedings, means that at least these banks could face some civil liability for their role in the housing crash. And Bank of America recently settled a False Claims Act case with the Feds for $1 billion. But approaching the banks with civil actions, and skirting individual culpability, sends the message that once you reach a certain level of success, you are above the law.

© 2012 Ifrah PLLC

The ICC Rules of Arbitration training

ICC (International Chamber of Commerce) will run two-day practical trainings on the 2012 ICC Rules of Arbitration in Paris, for the first time since their publication

Through this training, you will:

  • acquire practical knowledge of the main changes in the 2012 ICC Rules of Arbitration on topics such as Emergency Arbitrator; Case Management and Joinder, Multi-party/Multi-contract Arbitration and Consolidation
  • apply the 2012 ICC Rules of Arbitration to mock cases, studying them in small working group sessions
  • be provided with valuable insights from some of the world’s leading experts in arbitration including persons involved in the drafting of the New ICC Rules.

The revised version of the ICC Rules of arbitration reflects the growing demand for a more holistic approach to dispute resolution techniques and serves the existing and future needs of businesses and governments engaged in international commerce and investment: The 2012 ICC Rules of Arbitration are the result of a two year revision process undertaken by 620 dispute resolution specialists from 90 countries.

Who should attend?

Arbitrators, legal practitioners and in-house counsel who wish to know more about the 2012 Rules of Arbitration.


The ICC Rules of Arbitration training

ICC (International Chamber of Commerce) will run two-day practical trainings on the 2012 ICC Rules of Arbitration in Paris, for the first time since their publication

Through this training, you will:

  • acquire practical knowledge of the main changes in the 2012 ICC Rules of Arbitration on topics such as Emergency Arbitrator; Case Management and Joinder, Multi-party/Multi-contract Arbitration and Consolidation
  • apply the 2012 ICC Rules of Arbitration to mock cases, studying them in small working group sessions
  • be provided with valuable insights from some of the world’s leading experts in arbitration including persons involved in the drafting of the New ICC Rules.

The revised version of the ICC Rules of arbitration reflects the growing demand for a more holistic approach to dispute resolution techniques and serves the existing and future needs of businesses and governments engaged in international commerce and investment: The 2012 ICC Rules of Arbitration are the result of a two year revision process undertaken by 620 dispute resolution specialists from 90 countries.

Who should attend?

Arbitrators, legal practitioners and in-house counsel who wish to know more about the 2012 Rules of Arbitration.


The ICC Rules of Arbitration training

ICC (International Chamber of Commerce) will run two-day practical trainings on the 2012 ICC Rules of Arbitration in Paris, for the first time since their publication

Through this training, you will:

  • acquire practical knowledge of the main changes in the 2012 ICC Rules of Arbitration on topics such as Emergency Arbitrator; Case Management and Joinder, Multi-party/Multi-contract Arbitration and Consolidation
  • apply the 2012 ICC Rules of Arbitration to mock cases, studying them in small working group sessions
  • be provided with valuable insights from some of the world’s leading experts in arbitration including persons involved in the drafting of the New ICC Rules.

The revised version of the ICC Rules of arbitration reflects the growing demand for a more holistic approach to dispute resolution techniques and serves the existing and future needs of businesses and governments engaged in international commerce and investment: The 2012 ICC Rules of Arbitration are the result of a two year revision process undertaken by 620 dispute resolution specialists from 90 countries.

Who should attend?

Arbitrators, legal practitioners and in-house counsel who wish to know more about the 2012 Rules of Arbitration.


The ICC Rules of Arbitration training

ICC (International Chamber of Commerce) will run two-day practical trainings on the 2012 ICC Rules of Arbitration in Paris, for the first time since their publication

Through this training, you will:

  • acquire practical knowledge of the main changes in the 2012 ICC Rules of Arbitration on topics such as Emergency Arbitrator; Case Management and Joinder, Multi-party/Multi-contract Arbitration and Consolidation
  • apply the 2012 ICC Rules of Arbitration to mock cases, studying them in small working group sessions
  • be provided with valuable insights from some of the world’s leading experts in arbitration including persons involved in the drafting of the New ICC Rules.

The revised version of the ICC Rules of arbitration reflects the growing demand for a more holistic approach to dispute resolution techniques and serves the existing and future needs of businesses and governments engaged in international commerce and investment: The 2012 ICC Rules of Arbitration are the result of a two year revision process undertaken by 620 dispute resolution specialists from 90 countries.

Who should attend?

Arbitrators, legal practitioners and in-house counsel who wish to know more about the 2012 Rules of Arbitration.


Contractual Good Faith: Having Rights Doesn't Necessarily Mean You Can Use Them

Recently in The National Law Review an article by Anthony C. Valiulis and Melinda J. Morales of Much Shelist, P.C. regarding Contractual Rights:  

It can be a painful lesson to learn: just because you have discretion to do something under a contract does not mean you can exercise those rights anytime you want. Why is that? The covenant of good faith and fair dealing, implied in every contract, requires that a party vested with discretion exercise it reasonably and not arbitrarily, capriciously or in a manner inconsistent with the reasonable expectations of the parties. The purpose of this duty is to ensure that parties do not take advantage of each other in a way that could not have been contemplated at the time the contract was drafted or do anything that would destroy the other party’s right to receive the benefit of the contract.

The City of Woodstock learned this lesson the hard way in a recent Illinois Appellate Court decision. Reserve at Woodstock, LLC v. City of Woodstock, decided in September 2011, involved a 10-acre piece of property annexed to the City of Woodstock pursuant to a 1993 annexation agreement. In addition to zoning the property as residential (for 20 lots) and binding the parties for 20 years, the agreement contained a provision that no change could be made to any ordinance, code or regulation during the term of the agreement that would affect the zoning classification or uses permitted on the property. However, the agreement also gave Woodstock the right to re-zone the property for agricultural uses or de-annex the property if it was not developed within five years of annexation (i.e., the development window). Ultimately, the property was not developed within the specified period.

Reserve at Woodstock purchased the property from the original owner in 2005 and requested approval of a 20-lot plat in 2006. Woodstock’s Plan Commission issued a report stating that the plat complied with both the annexation agreement and relevant city ordinances, and recommended approval of the plat. However, the Woodstock City Council denied approval despite the fact that Reserve had invested hundreds of thousands of dollars in connection with its efforts to get the plan approved, met all of the municipality’s demands for impact studies and other assurances, and presented evidence that the plat was fully compliant.

Reserve sued the City of Woodstock, which responded by rezoning the property as agricultural and taking certain other steps that caused the property to be de-annexed. Although Woodstock had the right to take such action under the annexation agreement, the court nonetheless held that city’s actions violated the implied covenant of good faith and fair dealing.

What does this mean for you and your business? First, bear in mind that this implied covenant exists in every private contract, as well as those involving a municipality. And discretion is common in certain types of contracts, such as in contracts for the purchase and sale of goods. Thus, if you have an agreement that gives you the right to perform within certain parameters or limits, the covenant of good faith and fair dealing should guide how you exercise that right.

Ask yourself whether your decision will deprive the other party of their expectations under the contract, and think twice before acting. Relying on the contract language may not be enough, so it is wise to discuss the matter with legal counsel. When it comes to contracts, an ounce of prevention is always better than a pound of cure.

© 2012 Much Shelist, P.C.

The ICC Rules of Arbitration training

ICC (International Chamber of Commerce) will run two-day practical trainings on the 2012 ICC Rules of Arbitration in Paris, for the first time since their publication

Through this training, you will:

  • acquire practical knowledge of the main changes in the 2012 ICC Rules of Arbitration on topics such as Emergency Arbitrator; Case Management and Joinder, Multi-party/Multi-contract Arbitration and Consolidation
  • apply the 2012 ICC Rules of Arbitration to mock cases, studying them in small working group sessions
  • be provided with valuable insights from some of the world’s leading experts in arbitration including persons involved in the drafting of the New ICC Rules.

The revised version of the ICC Rules of arbitration reflects the growing demand for a more holistic approach to dispute resolution techniques and serves the existing and future needs of businesses and governments engaged in international commerce and investment: The 2012 ICC Rules of Arbitration are the result of a two year revision process undertaken by 620 dispute resolution specialists from 90 countries.

Who should attend?

Arbitrators, legal practitioners and in-house counsel who wish to know more about the 2012 Rules of Arbitration.


The ICC Rules of Arbitration training

 

ICC (International Chamber of Commerce) will run two-day practical trainings on the 2012 ICC Rules of Arbitration in Paris, for the first time since their publication

 

Through this training, you will:

  • acquire practical knowledge of the main changes in the 2012 ICC Rules of Arbitration on topics such as Emergency Arbitrator; Case Management and Joinder, Multi-party/Multi-contract Arbitration and Consolidation
  • apply the 2012 ICC Rules of Arbitration to mock cases, studying them in small working group sessions
  • be provided with valuable insights from some of the world’s leading experts in arbitration including persons involved in the drafting of the New ICC Rules.

 

The revised version of the ICC Rules of arbitration reflects the growing demand for a more holistic approach to dispute resolution techniques and serves the existing and future needs of businesses and governments engaged in international commerce and investment: The 2012 ICC Rules of Arbitration are the result of a two year revision process undertaken by 620 dispute resolution specialists from 90 countries.

 

Who should attend?

 

Arbitrators, legal practitioners and in-house counsel who wish to know more about the 2012 Rules of Arbitration.