In response to a Federal Register notice seeking comments on genetic diagnostic testing, KEI submitted comments detailing several proposals with respect to patents on diagnostic technologies and also included notes regarding our position in the American Molecular Pathology v. Myriad Genetics litigation. In addition to the questions listed in Federal Register notice, we recommended that the USPTO address two additional questions:
1. Are there better ways to reward investors in diagnostic inventions than the grant of patents, such as, for example, by creating prize funds that are resources by third party insurance reimbursement systems?
2. For the many cases where products involve multiple patented inventions, should the United States amend its patent law to provide for compulsory licenses of dependent patents or follow-through inventions on diagnostics?
With respect to prizes, the comments note, in particular, that the World Health Organization (WHO) has called on governments to experiment with prizes as a mechanism to de-link R&D prices from product prices.
In addition, with respect to patents on diagnostic technologies, the comments propose the consideration of a liability rule to award rights to remuneration rather than exclusive rights to use a patented invention:
KEI suggests the USPTO consider in particular the following proposal for a liability rule. That anyone be allowed to use any patented invention to make and sell a medical diagnostic test or service, if the manufacturer of the diagnostic test or the provider of the patented testing service pays a royalty of [ten or another number] percent of its revenue into a fund that will be distributed to patent owners by the USPTO or its designee. Under such a system, the manufacturer would have the option of negotiating a royalty for a lesser amount than paying the statutory rate, to satisfy all patent claims. This would work in a way similar to the statutory license on the copyright in music compensations. Legally, such a system could be implemented under the flexibility provided in Article 44.2 of the TRIPS, as a limit on the remedies for infringement of a patent.
The benefits of the liability rule approach are that it would (1) eliminate the high transaction costs, including time and money,for negotiating patent licenses, (2) ensure open non-discriminatory access to new technologies, and (3) reduce the monopoly power of the patent owners. The last point is quite important for expanding access to diagnostic tests, and the USPTO would need to consider if the reduced monopoly power was a net benefit, given the public interest in inducing investments. In such a system, the USPTO could provide the possibility of a patent owner making a case to be exempt from the liability rule, if the patent owner could provide evidence that such an exemption was necessary to induce sufficient investment in R&D in a new diagnostic test, and that the patent owner would otherwise protect the public interest, such as by pricing the invention at an affordable price, and accommodating follow-on innovations.
To conclude our comments, we provided our position on the current litigation over the patent eligibility of DNA in the American Molecular Pathology v. Myriad Genetics case and the negative impacts of the patents-in-suit on public health, diagnostic testing and further innovation. Not only is it more difficult, if not impossible, for patients to receive a second opinion, but exclusive rights forecloses all use of patents over the targeted DNA and impedes further research and development. We also note that the recent Supreme Court decision in Mayo v. Prometheus Laboratories repeatedly noted the danger of granting certain patents that will inhibit future innovation and impede the flow of information.