The contents of this presentation represent the views of the author and do not represent the policies, viewpoints, or bu

1. Patenting Challenges for Diagnostic Methods: Patent Eligibility; Divided InfringementOctober 20, 2011AIPLA Annual MeetingWashington, D.C.James J. KelleySenior Director – Assistant General Patent CounselEli Lilly and CompanyIndianapolis, Indiana The contents of this presentation represent the views of the author and do not represent the policies, viewpoints, or business of Lilly or its management.

2. Diagnostics • Diagnosis = correlating a measurement with a medical conclusion • Measure (biomarker) • Correlate presence, absence, or amount of biomarker with safety, effectiveness, dose, etc. of pharmaceutical treatment • high fasting blood glucose  diabetes • high blood pressure  risk of stroke, heart disease • Lilly is not a diagnostics company • But Lilly’s products are becoming “tied” to diagnostics

3. Value of Diagnostics • “Diagnostic tests are estimated to influence 60 to 70 percent of all treatment decisions, yet account for only 5 percent of hospital costs and 2 percent of Medicare expenditures.” • McKinsey Quarterly, February 2010, The Microeconomics of Personalized Medicine

4. Personalized Medicine • Right drug, right patient, right dose, right time • Who is the “right patient?” What is the “right drug and dose?” When is best? • Genetics & proteomics & bioinformatics: “Disruptive technologies” – disrupting medicine • Dividing disease categories into smaller categories • “diabetes” “diabetes in patients with a particular genetic variation” • “Companion Diagnostics” • Drug labeling says “test for biomarker.” • Diagnostic labeling says “to be used with drug.”

5. Examples • Insulin & glucose and hemoglobinA1c (HbA1c) • “right dose” of insulin for a patient with diabetes • HERCEPTIN® & Hercep-Test™ • “right patient” = one with breast cancer cells having high level of HER2 protein • Genentech, Dako (1998) • ZELBORAF™ & cobas® 4800 BRAF V600 Mutation Test • “right patient” = one with melanoma & particular mutated protein • Roche, Roche (2011) • XALKORI® & Vysis ALK Break Apart FISH Probe Kit • “right patient” = one with late-stage lung cancer & particular mutant protein • Pfizer, Abbott (2011)

6. Complexity Payers Patent Holders Patients Pharma Cos. Health Care Providers Diagnostic Cos. Research Institutions Clinical Laboratories Research ASR (Analyte Specific Reagent) RUO(Research Use Only) Development IUO (Investigational Use Only test) Commercial Diagnostics LDT(Lab Developed Test) Waived (Class I novel device) 510(k) or “de novo” (Class 2 device, market clearance) PMA (Class 3 device, Pre-Market Approval) FDA Complex, evolving science Complex, evolving, competitive industry Complex, evolving regulatory environment Complex, evolving economics

7. Patent Uncertainty • Are diagnostic correlations patent-eligible? Should they be? • Natural phenomona? • Abstract ideas? • Divided infringement • Multiple actors

8. 35 U.S.C. 101 Inventions patentable. • Whoever invents or discovers any new and useful process, …, may obtain a patent therefor, subject to the conditions and requirements of this title.

9. LabCorp v. Metabolite • 13. A method for detecting a deficiency of [particular vitamins] in warm-blooded animals comprising the steps of: • assaying a body fluid for an elevated level of [a particular biomarker]; and • correlating an elevated level of [biomarker] with a deficiency of [vitamins]. Natural Phenomenon?

10. Justice Breyer, Dissenting from DIG(2006) “[T]he category of non-patentable ‘phenomena of nature,’ like the categories of ‘mental processes,’ and ‘abstract intellectual concepts,’ is not easy to define.” “There can be little doubt that the correlation between homocysteine and vitamin deficiency set forth in claim 13 is a ‘natural phenomenon.’” • LabCorp v. Metabolite

11. Justice Frankfurter (1948) • “It only confuses the issue, however, to introduce such terms as ‘the work of nature’ and the ‘laws of nature.’   For these are vague and malleable terms infected with too much ambiguity and equivocation. Everything that happens may be deemed ‘the work of nature,’…. Arguments drawn from such terms for ascertaining patentability could fairly be employed to challenge almost every patent.” • Funk Bros. v. Kalo(concurring) • Still ambiguous and confusing today.

12. Bilski • Machine-or-transformation test is not the exclusive test; only a clue. • Exception analysis • Laws of nature • Physical phenomena • Abstract ideas “… subject to the conditions and requirements of this title.” 102 • Inherency? • Over-breadth? • Vague? 112, 1st Meaning? Why? 112, 2nd • “The concepts covered by these exceptions are ‘part of the storehouse of knowledge of all men … free to all men and reserved exclusively to none.’” Bilski, quoting Funk Bros. • Deemed “reserved to the public.” “[Flook’s process was] unpatentable under § 101, … because once that algorithm [wa]s assumed to be within the prior art, the application, considered as a whole, contain[ed] no patentable invention.” Bilski AIA § 14 TAX STRATEGIES DEEMED WITHIN THE PRIOR ART.

13. Ariad v. Lilly 80. [A method for modifying effects of external influences on a eukaryotic cell, which external influences induce NF-κB-mediated intracellular signaling, the method comprising altering NF-κB activity in the cells such that NF-κB-mediated effects of external influences are modified, wherein NF-κB activity in the cell is reduced] wherein reducing NF-κB activity comprises reducing binding of NF-κB to NF-κB recognition sites on genes which are transcriptionally regulated by NF-κB. • Inherently anticipated • over-breadth • abstract, vague 102 Do we not trust “the conditions and requirements of this title?” 112, 1st 112, 2nd

14. Prometheus v. Mayo A method of optimizing therapeutic efficacy for treatment of [condition X]…, comprising: • (a) administering a [particular] drug … to a subject; and • (b) determining the level of [biomarker] in said subject, • wherein the level of [biomarker] less than about 230 … indicates a need to increase the amount of said drug subsequently administered to said subject and • wherein the level of [biomarker] greater than about 400 … indicates a need to decrease the amount of said drug subsequently administered to said subject. The particular drug is converted to another compound in the body. This “metabolite” is the biomarker.

15. Prometheus v. Mayo • Machine or transformation test • Exception analysis

16. Prometheus v. Mayo A method of optimizing therapeutic efficacy for treatment of [condition X]…, comprising: • (a) administering a [particular] drug … to a subject; and • (b) determining the level of [biomarker] in said subject, • wherein the level of [biomarker] less than about 230 … indicates a need to increase the amount of said drug subsequently administered to said subject and • wherein the level of [biomarker] greater than about 400 … indicates a need to decrease the amount of said drug subsequently administered to said subject. Data- Gathering? Transformative Pre-empt a Natural Phenomenon? Abstract Idea? Correlating The particular drug is converted to another compound in the body. This “metabolite” is the biomarker.

17. Prometheus v. Mayo • The correlating “step” involves a natural phenomenon … • The court did not define what natural phenomenon it was talking about. • Holds that the claim does not pre-empt all uses of a natural phenomenon (whatever it is). • The correlating “step” is an abstract idea/mental step … • But the preceding steps are not merely extra-solution “data-gathering” steps – they are the purpose. • Holds that the claim is not ineligible for being abstract.

18. Issue Presented – Mayo v. Prometheus “This case concerns whether a patentee can monopolize basic, natural biological relationships. The Court has twice granted certiorari on the question presented, without yet resolving the issue [this case and LabCorp]. “The question presented is: Whether 35 U.S.C. § 101 is satisfied by a patent claim that covers observed correlations between blood test results and patient health, so that the claim effectively preemptsall uses of the naturally occurring correlations, simply because well-known methods used to administer prescription drugs and test blood may involve ‘transformations’ of body chemistry.” • http://www.supremecourt.gov/qp/10-01150qp.pdf

19. Myriad 1. A method for detecting [certain] germline alteration[s] in a BRCA1 gene … in a human which comprises • analyzing a sequence of a BRCA1 gene or BRCA1 RNA from a human sample or • analyzing a sequence of BRCA1 cDNA made from mRNA from said human sample …. 1. A method for screening a tumor sample from a human subject for a somatic alteration in a BRCA1 gene in said tumor which comprises [] • comparing a [BRCA-related] first sequence … from said tumor sample, … with a second [BRCA-related] sequence … from a nontumor sample of said subject …, • wherein a difference in the sequence[s] … indicates a somatic alteration in the BRCA1 gene in said tumor sample. “determining the level of [biomarker] in said subject, …” Transformative in Prometheus, even without administering step Not Transformative Not Transformative

20. Myriad A method for screening potential cancer therapeutics which comprises: growing a transformed eukaryotic host cell containing an altered BRCA1 gene causing cancer in the presence of a compound suspected of being a cancer therapeutic, growingsaid transformed eukaryotic host cell in the absence of said compound, determining the rate of growth of said host cell in the presence of said compound and the rate of growth of said host cell in the absence of said compound and comparing the growth rate of said host cells, wherein a slower rate of growth of said host cell in the presence of said compound is indicative of a cancer therapeutic. Transformative Does not pre-empt a Natural Phenomenon

21. Classen 1. A method of immunizing a mammalian subject which comprises: (I) screening a plurality of immunization schedules, by • identifying a first group of mammals and at least a second group of mammals, said mammals being of the same species, the first group of mammals having been immunized with one or more doses of one or more infectious disease-causing organism-associated immunogens according to a first screened immunization schedule, and the second group of mammals having been immunized with one or more doses of one or more infectious disease-causing organism-associated immunogens according to a second screened immunization schedule, each group of mammals having been immunized according to a different immunization schedule, and • comparing the effectiveness of said first and second screened immunization schedules in protecting against or inducing a chronic immune-mediated disorder in said first and second groups, as a result of which one of said screened immunization schedules may be identified as a lower risk screened immunization schedule and the other of said screened schedules as a higher risk screened immunization schedule with regard to the risk of developing said chronic immune mediated disorder(s), (II) immunizing said subject according to a subject immunization schedule, according to which at least one of said infectious disease-causing organism-associated immunogens of said lower risk schedule is administered in accordance with said lower risk screened immunization schedule, which administration is associated with a lower risk of development of said chronic immune-mediated disorder(s) than when said immunogen was administered according to said higher risk screened immunization schedule. Transformative

22. Classen 1. A method of determining whether an immunization schedule affects the incidence or severity of a chronic immune-mediated disorder in a treatment group of mammals, relative to a control group of mammals, which comprises immunizing mammals in the treatment group of mammals with one or more doses of one or more immunogens, according to said immunization schedule, and comparing the incidence, prevalence, frequency or severity of said chronic immune-mediated disorder or the level of a marker of such a disorder, in the treatment group, with that in the control group. Not Transformative

23. “A Coarse Filter” Removes BIGthings and lets SMALL things pass. What is a BIGthing? • Correlation between force and (mass and distance)? • Correlation between mass and energy? • All means of telegraphy? • A basic algorithm in computer technology?

24. BIG or SMALL? • Correlation between a particular biomarker and a particular vitamin deficiency? • Correlation between the level of metabolites of a particular drug and its safety? • Correlation between a genetic variation and effectiveness of a particular drug? • Correlation between having any 3 out of 25 genetic markers and long-term survival while on a particular class of cancer drugs?

25. Meanwhile, . . . . • How do you write a claim that will be eligible? • Claim-drafting ingenuity? • To “evade” eligibility limitations? • Add a “transformative” step or steps?

26. Eligibility Evasions and Restrictions Decried “[E]ligibility restrictions usually engender a healthy dose of claim-drafting ingenuity. In almost every instance, patent claim drafters devise new claim forms and language that evade the subject matter exclusions. … Excluding categories of subject matter from the patent system achieves no substantive improvement in the patent landscape.” Classen v. Biogen IDEC, RADER, Chief Judge, additional views, joined by PAULINE NEWMAN, Circuit Judge, August 31, 2011, 3-4.

27. Divided Infringement • BMC (2007) (“joint liability may be found when one party ‘control[s] or direct[s]’ the activities of another party.”) • Akamai (2010) (“as a matter of Federal Circuit law there can only be joint infringement when there is an agency relationshipbetween the parties who perform the method steps or when one party is contractually obligatedto the other to perform the steps.”) • McKesson (2011) • Concern about contracting away liability.

28. Diagnostics Actors • Patients • Health care providers – docs, hospitals, clinics • Clinical Laboratories • Diagnostic Cos. • Pharma Cos.

29. Ingenuity Encouraged “The concerns over a party avoiding infringement by arms-length cooperation can usually be offset by proper claim drafting. A patentee can usually structure a claim to capture infringement by a single party.” • BMC Resources Inc. v. Paymentech LP, 498 F.3d 1373, 1381 (Fed. Cir. 2007).

30. En Banc Questions “If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?” Akamai Technologies, Inc. v. Limelight Networks, Inc. “1. If separate entities each perform separate steps of a method claim, under what circumstances, if any, would either entity or any third party be liable for inducing infringement or for contributory infringement? [] “2. Does the nature of the relationship between the relevant actors—e.g., service provider/user; doctor/patient—affect the question of direct or indirect infringement liability?” McKesson Technologies, Inc. v. Epic Systems, Corp.

31. AIPLA Position • “Whoever” in § 271(a) is singular or plural • 1 U.S.C. §1, ¶ 2 (“words importing the singular include and apply to several persons, parties, or things.”) • Dictionary (“whatever person or persons”) • “Whoever” in §101 (“whoever invents”) may be singular or plural (§116 Joint inventors). • Joint Tortfeasor “3-step” • All elements conducted by one or some? • Who (all) caused harm? • Who’s participation was substantial enough for liability?

32. Summary • Key eligibility and divided infringement cases are at Supreme Court and Federal Circuit (en banc). • Potentially BIGimpact on diagnostics patenting. • Follow fundamental claim-drafting principles: • minimize # of steps • single entity carrying out all steps, if possible • transformative gerunds • explain transformative gerunds in specification