The U.S. Patent and Trademark Office rejects three patents held by the Wisconsin Alumni Research Foundation.

The Daily Deal (deal.com)

In a decision that could widen the field for embryonic stem-cell research in the U.S., the government’s patent office has overturned 10-year-old patents held by the University of Wisconsin after a complaint brought by two watchdog groups.

Though the decision is not final, the U.S. Patent and Trademark Office rejected three patents held by the Wisconsin Alumni Research Foundation, or WARF, the licensing arm of the state university. In 1998, researchers at the university led by James Thomson patented a process to grow embryonic stem cells outside the body by placing them on a bed of other tissue. It was hailed as a breakthrough that would allow researchers to grow “lines” of cells instead of having to find fresh sources. Challengers say the discovery didn’t deserve a patent, but it gave momentum to embryonic stem-cell research in this country and led to the controversial decision by President Bush to severely limit federal funding for the research in 2001. Bush’s ruling remains in place, but several states including California, Connecticut and Illinois have dedicated public funds to the research.

A challenge to the patents brought last summer by the Public Patent Foundation and the Foundation for Taxpayer and Consumer Rights convinced the patent examiner that researchers in the U.S. and Australia had done work before Thomson with embryonic stem cells from humans and other mammals that made the WARF claims “obvious” — patent language for not innovative enough.

Now, WARF has two months to respond to the rejection in a back-and-forth with the examiner that could last more than a year. It’s possible the examiner could reverse course and reinstate the patents. The average time for a patent re-examination, the process WARF is currently subject to, is 21 to 22 months, according to the PTO. Even if rejected by the PTO, WARF can take its case to the federal courts.

Meanwhile, WARF‘s patents remain valid. In a statement sent by a spokesman, WARF managing director Carl Gulbrandsen said, “WARF has absolute confidence in the appropriateness and legitimacy of these patents. It is inconceivable to us that Dr. Thomson’s discovery, which Science Magazine heralded as one of the greatest scientific discoveries in history, would be found to not be worthy of a patent. This discovery captured the imagination of people all over the globe from every discipline.”

But a great discovery does not necessarily make a valid patent. It’s up to the patent examiner — or if it gets that far, the court system — to decide if the inventor built incrementally upon previous work or made a great leap forward. WARF cannot argue it didn’t know about earlier work, so it must frame Thomson’s work as a great leap. “It’s the examiner’s job is to go back and find out whose shoulders the inventor was standing on,” said patent attorney David Deits of Davis Wright Tremaine LLP in Seattle.

One lawyer with a stake in the case put it differently: “Lots of scientific discoveries are valuable, but it doesn’t mean they’re patentable,” said John Wetherell, an attorney at Pillsbury Winthrop Shaw Pittman LLP in San Diego. (Wetherell represents several companies doing stem-cell work that could eventually fall under the WARF patents, but he was not involved in the patent challenge.)

The foundation changed its licensing terms in January, letting nonprofit labs do research sponsored by commercial companies without taking a license. Only when the work is brought into the commercial entity is a license required, said WARF spokesman Andy Cohn. WARF also clarified in January that the California Institute for Regenerative Medicine, or CIRM, the California agency doling out $3 billion in state grant money, need not pay WARF any fees as it administers grants or collects money from grantholders.

That shift didn’t appease the foundation’s critics. “These patents are undeserved and are still causing substantial chilling of stem-cell research and development,” said Dan Ravicher, PubPat executive director. “WARF should simply drop all its claims.”

If it doesn’t, however, the case could eventually reach the U.S. Supreme Court, which under Chief Justice John Roberts has shown growing interest in patent cases.

“It seems they’re becoming more restrictive in interpreting the rights of the patentee,” said Wetherell. “There’s a lot of pressure to get drugs out there as economically as possible, and [this court] seems more proactive to create that environment.”

Meanwhile, there is no limit to private funding for embryonic stem-cell research. The field is controversial because it involves using human embryos to study stem cells, which have the potential to turn into any type of cell in the body. How they do so is still a mystery, and many researchers believe solving that mystery may lead to breakthroughs in several disease areas and the ability to regenerate damaged tissue, even entire limbs.

The company with the most exposure to the ruling is the San Francisco Bay Area biotech firm Geron Corp. Geron has an exclusive license to the WARF patents for heart, pancreas and neural cells that could lead to treatments for several conditions including Parkinson’s diseases, diabetes and spinal cord injury. If WARF were to lose its claims, Geron would no longer have to pay license fees, spokesman David Schull said. However, it could also lose its exclusive rights, perhaps allowing other companies to enter the fields it is researching. Geron has an extensive patent portfolio beyond the WARF patent in dispute, and it was not immediately clear how that portfolio protects it from competition. Schull said the company wasn’t worried because it’s “so far ahead of everyone else.” Geron shares were down 3.4%, or 25 cents, to $7.16 in late afternoon trading Tuesday.

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