In Conversation with Prof. Brad Sherman: D'Arcy v Myriad Genetics Inc (2015) and the Future of Australian Patent Law

Prof. Brad Sherman

Prof. Brad Sherman

Professor Brad Sherman is an academic of the T.C. Beirne School of Law, and an alumnus of the London School of Economics and the University of Cambridge. His expertise includes the historical, doctrinal, and conceptual development of intellectual property law.

Prof. Sherman sat down with the JATL blog editor, Jocelyn Bosse, to discuss the implications of the recent High Court decision, D'Arcy v Myriad Genetics Inc [2015] HCA 35, which was handed down on the 7 October 2015.

Jocelyn: "The High Court of Australia recently held that an isolated human gene was not a patentable invention within the meaning of the Patents Act 1990 (Cth). The judgment overturns the unanimous decision of the Federal Court in 2014. Were you surprised by the decision?"

Brad: "To some extent, yes. I was surprised by the willingness of the Court to seriously engage with the legal issues for the first time. In some ways, I was not surprised by the style of argument used - particularly by the majority - which seemed to avoid the question about the meaning of "invention." Nevertheless, I was pleased with the decision."

Jocelyn: "During the proceedings, the Court seemed rather concerned with the wide scope for potential unintentional infringement of the patent. In the joint judgment of French CJ, Kiefel, Bell and Keane JJ, it was noted at [8] that “There is a real risk that the chilling effect of the claims, on the use of any isolation process in relation to the BRCA1 gene, would lead to the creation of an exorbitant and unwarranted de facto monopoly on all methods of isolating nucleic acids containing the sequences coding for the BRCA1 protein.” Is not this more an issue of ‘fair basing’ and less a question of ‘patentable subject matter’?"

Brad: "Yes, the Court was particularly concerned with the question of unintentional infringement of the patent. I think there are several things to bear in mind here. One is that recent research by Professor Dianne Nicol of the University of Tasmania has shown that the suggestion that gene patents have a 'chilling effect' is not supported by the evidence. But, having said that, there has been quite a bit of evidence to show that Myriad, in other jurisdictions, had an impact on the ability for women to access the types of services that they want, such as breast cancer screening at an affordable cost. So, it does have unexpected effects.

In relation to 'fair basing,' one of the things about patentable subject matter in Australia - and, for that matter, the USA and Europe - is that 'subject matter' has been conflated with other types of criteria. For example, in Europe, questions as to subject matter (particularly in the United Kingdom) are very closely linked to questions of inventive step. At the European Patent Office, they are taking subject matter very seriously. They ask a broad question: the "any hardware" approach. They ask whether it is "technological" - it does not matter whether it is new, old, or inventive. On the other hand, in Australia, we conflate all those things together, which is one of the reasons why it is so problematic.

The decision does introduce fair basing, but that is partly a consequence of how the case was argued. I do not know why it was argued as 'subject matter' in the first place."

Jocelyn: "Do you see that conflation changing in the future?"

Brad: "I don't think so. I would like it to happen, since the law would be much clearer if we adopted the approach of the European Patent Office. That would be on the condition that we took the other criteria of patentability, like inventive step, fair basing, sufficiency, etc. seriously. We do not take them seriously in Australia at this stage. The other problem is that it shifts the emphasis onto the Patent Office, so it is not as transparent."

Jocelyn: "Nettle and Gageler JJ argued that the manner of manufacture test invokes a requirement for an “inventiveness threshold” as well as the requirement for artificiality and economic usefulness.  Could this be a bit of a conflation of the question of ‘patentable subject matter’ with the other criteria for patentability, like ‘obviousness’ and ‘industrial applicability’?"

Brad: "In the same way in which the focus on 'fair basing' conflates questions of patentable subject matter, I agree that the "inventiveness threshold" also imports obviousness into patentable subject matter. I believe that is inherently problematic. When you are dealing with 'inventive step,' the parties can bring  in experts and you can argue on the particular facts of the case. We are mixing different issues here: on the one hand, patentable subject matter is about a class of inventions (e.g. genes, computer programmes), but the Court was talking about specific levels of inventiveness. They were moving between different issues. I think it would be much neater and clearer if the law focused directly on one of the two."

Jocelyn: "Although laws of nature are not patentable, purified preparations of naturally occurring microorganisms (e.g. yeasts with brewing applications) had been patented in the USA since Pasteur’s patents in the 1870s right through to the engineered microorganisms in the Chakrabarty case in 1980. Naturally-occurring substances have previously been subject to the test of being an “artificially created state of affairs with economic significance,” although the High Court emphasised in Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd: “Nothing said in the Court's reasons for decision in that case can be taken as an exact verbal formula which alone captures the breadth of the ideas to which effect must be given.”

How does this most recent decision affect the patentability of other naturally-occurring substances?"

Brad: "The decision has important ramifications for the patentability of other naturally-occurring substances, subject to a number of limitations. The key issue about this decision, at least in the minority, was that the judgment of subject matter is done on the basis of difference between nature and artifice. Something is artificial if you can show there is a gap caused by human intervention. By focusing on the genetic dimensions of the gene, rather than the chemical dimensions, the Court could recognise that there was in fact no difference between them, and therefore it was not patentable subject matter.

Going forward, in relation to proteins and other things, it could be that if a protein were created artificially, it would depend upon how it was characterised. They are even more complicated than simply asking whether it's chemical or genetic, so it's even more hybrid. Certainly, I think it suggests that the courts will be much more willing to critically review the patentability of naturally-occurring substances."

Jocelyn: "Gordon J noted that: “Myriad submitted that such a result would put Australia out of step with some of its trading partners including the European Union and the United States of America. That issue, if it is to be addressed, is a matter for the legislature…”

Likewise, French CJ, Kiefel, Bell and Keane JJ stated that: “The proposition that a broad statutory concept applies to a new class of case on the boundaries of existing judicial development of that concept requires consideration of the limits of judicial law-making inherent in common law methodology. Where an affirmative application of the concept is likely to result in the creation of important rights as against the world, to involve far-reaching questions of public policy and to affect the balance of important conflicting interests, the question must be asked whether that application is best left for legislative determination. The patentability of nucleotide sequences derived from human DNA is in that category.” 

Do you agree that gene patents would be an extension of the concept of a ‘manner of manufacture’ which was not appropriate for judicial determination?"

Brad: "One of the interesting things about the NRDC case is that it stressed the importance of the law and the definition of 'manner of manufacture' to adapt to encapsulate new types of innovative technology. One of the issues in this case is the focus on the phrase  'manner of new manufacture' rather than the concepts that lie behind it. I think that the patent law has been able to appropriately accommodate conceptual changes in the past, so long as it is based on the principles that have been developed.

I think that it is appropriate for the courts to stand up and deal with this. If Parliament is unable to resolve this issue - and historically parliaments have had phenomenal difficulty in dealing with intellectual property law provisions - so I think there is enough of a conceptual framework that decision can be made, so long as it is taken seriously, and so long as the courts and the lawyers take a broader and more imaginative approach, rather than just reverting to the same old ideas."

Jocelyn: "It was argued by Myriad that Parliament had the opportunity in the past to specifically exclude gene patents, but it didn't go through. They essentially argued that Parliament was intentionally leaving it open."

Brad: "There are many different reasons why legislation does go ahead. Pieces of legislation are often the product of pork barrelling, or trading between partners, or lobbying, so the fact that something doesn't get through is not any indication that Parliament does not want to do it, and while it may be in some cases, that was a bill put forward by a senator who did not have the support of the party."

Jocelyn: "The Myriad decision in the USA specifically recognised that synthetic DNA created in a laboratory, known as cDNA, was not a product of nature and could be patented. On the other hand, the Australian High Court was silent with regard to those claims, with the exception of Gordon J, who stated in obiter dicta comments that genetic probes would be patentable. Some say this means that the High Court has gone further than the US Supreme Court. Do you think the biotechnology and other industries have any cause for concern here?"

Brad: "The omission of comment about synthetic DNA was a real oversight. On the reasoning of the decision, I would be highly surprised if synthetic DNA did not get up. It may be the case, however, if it were argued appropriately, that it would not get up on the basis of lack of inventive step. Under the basic principles of patent law, I don't see any reason why synthetic DNA would not get up. 

I am still very surprised that the High Court did not see how important it was to mention that: it was a real oversight, and completely bizarre since it came up during the proceedings."

Jocelyn: "What likely implications will this decision have for access to certain types of genetic material by the scientific and research community? Would it really improve the provision of genetically derived healthcare services and the capacity to conduct unfettered biotechnological research?"

Brad: "I mentioned the research by Professor Dianne Nicol, which suggested that there has not been a lot of evidence of any stifling effect of gene patents. There has, however, been some indications in the agriculture industry, where lawyers involved in the research process take a conservative approach, and have effectively stifled the research. A more imaginative approach would allow them to get around it, but if you get the wrong lawyers involved and an institution like a university or public agency, then it does have a stifling effect.

Although it is not as bad as some people claim, I think it is important in terms of the impact. Going forward, it would allow researchers to argue more strongly that their activities are not covered by patents. Insofar as the potential threat to genetically-driven healthcare is concerned, and although there are potentially ways to get around it, the conservative legal system and the lawyers involved are a bit institutionally averse to challenging these provisions. So, we get the situation where cancer victims or potential cancer victims get railroaded. In the United States, there are lots of examples of threats issued against people researching in the field, and that will disappear going forward.

Given that the patent had lapsed in Australia, it is obviously a dead issue, but in other areas it is very important: it is not just for gene patents. Had the High Court been a little bit clearer, it would have been a much better decision."

Jocelyn: "The Court gave particular credence to patent law internationally. In the judgment of French CJ, Kiefel, Bell and Keane JJ, it was noted that: “The relevant law of other countries may appropriately be taken into account where an application of the Act would enhance or detract from the harmonisation of Australia's patent law with other jurisdictions.” What do you make of the weight which was given to the state of affairs in our regional trading partners like China, Japan, Korea, Singapore and India, and the purported need for harmonisation with Europe and the USA?"

Brad: "The issue of harmonisation of patent laws in the judgment was odd. Members of the judiciary in recent years have been stressing the fact that universities are providing inadequate education about statutory interpretation. I would have thought that a statute which says, quite clearly, that the meaning of "invention" is derived from the phrase 'manner of manufacture' would be interpreted according to the relevant principles and concepts, and not deriving from perceptions of what the laws are like in some countries, like China, Singapore, etc. I mean, why not Canada? Why not France? How do you select those five countries out of the hundreds of countries?

I do not see why questions of harmonisation are important. These are issues for Australian people, particularly Australian women, and I think that the issues about harmonisation are completely irrelevant. If there were issues about harmonisation, it would be about Australian researchers getting the same level of protection overseas. I found it to be the most bizarre part of the decision.

Australia complies with its international obligations like the TRIPS agreement, which is very specific about the laws and we provide the correct levels of protection. There is some scope for member states under the TRIPS agreement to interpret things according to their national needs. I think that it is much better for a country to pursue its own interests. Often arguments for harmonisation just reflect a particular policy, because decisions have to be made about which countries to harmonise with - why not Canada, or France, or North Korea [laughs]?"

Jocelyn: "Is there anything else you would like to add?"

Brad: "The decision is very important. It sends a strong message, and it's really pleasing that the Court would engage in a way which it has never done with patent jurisprudence. Some aspects of the decision are a bit disturbing or unnecessary - it's really not an example of evidence-based decision making. On the one hand, the Court is saying that it is a matter for the politicians to decide, and on the other, it is raising political issues in the reasoning.

Harmonisation is an issue that I really don't think is relevant in this context. The lack of guidance about the synthetic DNA was an oversight, although I do not think there would be any doubt about the law. It is just something that could have been dealt with really quickly, but was not.

It is heartening to see the Court beginning to develop some Australian jurisprudence. However, it is a mix: on the one hand, they have their own jurisprudence, and on the other, they are falling back onto other countries. Australian patent law has been a bit homeless since the British joined the European Patent Convention, so we couldn't follow the UK, or the USA, and so now we do not know where to look - as though we've been thrust out by our parents and have not quite grown up yet. Part of the decision is us wanting to go live back at home (but we aren't really sure where home is, so we are looking around for a country to befriend us) and the other part of the decision is us trying to grow up.

Overall, though, the outcome is fantastic."

Jocelyn: "Thank you so much for taking the time to speak with Pandora's Blog."