Federal Circuit Dismisses WARF Stem Cell Case – A Missed Opportunity

Recently in Consumer Watchdog v. Wisconsin Alumni Research Foundation, No. 2013-1377 (Fed. Cir. 2014), the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) dismissed Appellant Consumer Watchdog’s appeal on the ground that as a party, it lacked Article III standing. While the court’s decision raises interesting issues regarding litigation strategy, dismissal of the appeal leaves unanswered the substantive issue of whether a claimed in vitro culture of human embryonic stem cells is patent-eligible under 35 U.S.C. § 101. A review of the issue would have provided the court an opportunity to apply the U.S. Supreme Court’s Myriad jurisprudence to a claimed product of nature and much needed judicial insight into the U.S. Patent and Trademark Office’s (USPTO) recent Section 101 Guidance (for a review of the Guidance and its application to stem cells, see my prior posts dated March 5, 2014</A>; March 7, 2014</A>; March 20, 2014 and April 27, 2014).

A History of the Dispute

In April of 2006, the U.S. Patent and Trademark Office (USPTO) issued U.S. Patent No. 7,029,913, entitled “Primate Embryonic Stem Cells” (the ‘913 patent) to Dr. James A. Thomson (and his assignee, the Wisconsin Alumni Research Foundation (WARF)) for Dr. Thomson’s groundbreaking human embryonic stem cell technology. Soon thereafter, the Public Patent Foundation at Benjamin N. Cardozo School of Law (PubPat), now known as “Consumer Watchdog,” challenged the patent in an inter partes reexamination (No. 95/000,154) alleging the claims were unpatentable for failing to satisfy 35 U.S.C. § 102 (novelty) and 35 U.S.C. § 103 (non-obviousness). The challenge was unsuccessful and Consumer Watchdog appealed to the Federal Circuit.

After reexamination, claim 1 of the ‘913 Patent, the broadest and only independent claim recites:

“1.  A replicating in vitro cell culture of pluripotent human embryonic stem cells derived from a pre-implantation embryo, wherein the stem cells (i) will proliferate in an in vitro culture for over one year in an undifferentiated state without the application of exogenous leukemia inhibitory factor, (ii) maintain a karyotype in which the chromosomes are euploid through prolonged culture, (iii) maintain the potential to differentiate to derivatives of endoderm, mesoderm, and ectoderm tissues throughout the culture, and (iv) are inhibited from differentiation when cultured on a fibroblast feeder layer.”

Consumer Watchdog first raised the patent-eligibility issue on its appeal to the Federal Circuit. Although the ‘913 patent expressly recites that the claimed hESCs are an in vitro culture, Consumer Watchdog argued that the express limitation of an in vitro culture merely identifies properties that are inherent in all embryonic stem cells, including those that exist naturally. Consumer Watchdog also alleged that the ‘913 patent claims do not distinguish the claimed human embryonic stem cells from those that exist in nature and that the patentee did not create or alter the properties inherent in stem cells any more than Myriad created or altered the genetic information encoded in the DNA it claimed.

During a hearing in December, 2013, the Federal Circuit on its own initiative asked the U.S. government and the USPTO to brief the issue of whether Consumer Watchdog, as a third party requester, had standing to seek review of the USPTO’s affirmation of the ’913 patent claims. The U.S. government and the USPTO in a joint brief stated that in their view, Consumer Watchdog lacked standing and urged the court to dismiss the appeal.

Consumer Watchdog – No Injury in Fact

Consumer Watchdog argued that it was entitled to redress in the federal courts because WARF’s enforcement of the ’913 patent allegedly put a severe burden on taxpayer funded research in the State of California where it is located and because it was concerned that the ‘913 patent allowed WARF to preempt all uses of human embryonic stem cells, particularly those for scientific and medical research.

The Federal Circuit determined that Consumer Watchdog’s public interest arguments were insufficient to meet constitutional standing requirements. To invoke federal jurisdiction, the Federal Circuit explained, a party must demonstrate that: (1) it has suffered an “injury in fact” that is both concrete and particularized, and actual and imminent; (2) the injury is fairly traceable to the challenged action; and (3) it is likely, rather than merely speculative, that a favorable judicial decision will redress the injury. These constitutional requirements, the Federal Circuit noted, apply with equal force to appeals from administrative agencies, such as from the USPTO, to the federal courts.

The Federal Circuit noted that Consumer Watchdog did not allege any injury aside from the USPTO’s denial of the particular outcome it desired in reexamination – that of canceling the ‘913 patent claims. The court highlighted that Consumer Watchdog did not:

“allege that it is engaged in any activity involving human embryonic stem cells that could form the basis for an infringement claim. It does not allege that it intends to engage in such activity. Nor does it allege that it is an actual or prospective licensee, or that it has any other connection to the ’913 patent or the claimed subject matter. Instead, Consumer Watchdog relies on the Board’s [USPTO’s] denial of Consumer Watchdog’s requested administrative action—namely, the Board’s [USPTO’s] refusal to cancel claims 1–4 of the ’913 patent. That denial, however, is insufficient to confer standing.”

Slip Op. at 5.

The court also dismissed Consumer Watchdog’s argument that as a third party requester, it has a procedural right to appeal decisions favorable to patentability, on the ground that the statutory grant of a procedural right, e.g., the right to appeal, does not eliminate the Article III standing requirements.

Section 101 Jurisprudence

The Federal Circuit’s dismissal is the right result on the threshold standing issue regarding Consumer Watchdog. However, even if Consumer Watchdog would have established Article III standing, it is not clear that the Federal Circuit court would have entertained the Section 101 issue. Also in dispute in the appeal was whether a Section 101 challenge can be entertained in a reexamination proceeding.

In any case, a Federal Circuit decision here regarding the patent-eligibility of the claimed in vitro cultured stem cells would have provided the USPTO, the patent bar, and the public with much needed judicial guidance on the application of the Supreme Court’s recent Myriad decision to products derived from nature, other than the isolated genes examined in the Myriad decision. Under Example B of the Guidance, a purified naturally occurring product such as an isolated stem cell is not, in the USPTO’s view, patent-eligible if there are no structural differences between the purified product (a purified stem cell) and the naturally occurring product (the naturally occurring stem cell), or if the claim does not recite additional elements that add something significantly more to the claimed natural product.

On May 9^th, 2014, the USPTO hosted a forum to received public feedback on the Guidance. Individuals and stakeholders sharply criticized the Guidance for misinterpreting Supreme Court precedent and unnecessarily pre-empting patent protection for a range of useful and important inventions that address many unmet medical needs, e.g., vaccines. The May 9^th program and the individual presentations can be viewed on the USPTO web site. The USPTO also is accepting additional written comments on its website by the deadline of June 30, 2014 and those with an interest or stake in this issue are strongly encouraged to participate.