Keeping pace with the ever-changing life sciences industry, Morrison Foerster stays on top of the trends and political, legal, and economic drivers to support striking the balance between innovative discovery and purposeful business planning to assure our clients continued success. MoFo Life Sciences shares timely legal and business insights and in-depth analyses on trends and the complex technologies at the heart of the global pharmaceutical, biotechnology, diagnostics, medical devices, digital health, and AgTech fields.Learn more about our <a href="https://www.mofo.com/capabilities/life-sciences-healthcare" target="_self">Life Sciences practice</a>.<h2 dir="ltr">ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Dr. Meghan Poon counsels clients on patent preparation and prosecution, portfolio strategy, and IP due diligence in the areas of biotechnology and biologics. She has significant experience in diverse technologies including antibodies, cell therapies, gene therapies, diagnostics, and gene-edited plants. She represents clients ranging from large international pharmaceutical companies to midsized companies, startups, and universities.Meghan has filed numerous Patent Term Extension applications to secure additional term for her clients’ patents, which cover FDA-approved products. In addition, Meghan has extensive experience addressing complex obviousness-double patenting and subject matter eligibility issues impacting her clients’ patent portfolios. Meghan also represents clients in both investor-side and target-side due diligence, in deals from seed funding to initial public offerings.Prior to law school, Meghan attended graduate school at the University of California, Los Angeles, where she received a Ph.D. in biological chemistry based on her work on protein-protein and protein-DNA interactions at a molecular level. Meghan is the author of several scientific publications and has presented her research at international conferences.Meghan received her J.D. from the University of Southern California Law School and spent a year as a visiting student at Santa Clara University, where she focused on intellectual property.

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Dr. Meghan Poon counsels clients on patent preparation and prosecution, portfolio strategy, and IP due diligence in the areas of biotechnology and biologics. She has significant experience in diverse technologies including antibodies, cell therapies, gene therapies, diagnostics, and gene-edited plants.

Meghan Poon

Wolfgang advises clients on contentious and non-contentious matters involving their most valuable intellectual property assets in life sciences, digital, and high-tech industries.His subjects of focus include research and development collaborations, complex licensing agreements, and other technology transactions, as well as know-how protection strategies, and employee invention law. He also has substantial experience in litigating patents, trademarks, and other intellectual property assets, often in a multijurisdictional context. In addition, Wolfgang and his team frequently clear trademarks and ad campaigns and prosecute trademark applications.Wolfgang is co-editor of our <a href="https://lifesciences.mofo.com/" dir="ltr" target="_blank">MoFo Life Sciences Blog</a>.Wolfgang is a partner of Morrison Foerster based in our German office in Berlin.<h4 dir="ltr">Representative Transactional Matters</h4><ul dir="ltr"><li>U.S.-based BioTech fund on various research collaborations and other transactions with German start-ups or research institutions.</li><li>Negotiate multimillion-euro strategic partnership between two AgTech leaders concerning the development and commercialization of pest-resistant transgenic traits.</li><li>Craft global multi-million collaboration regarding AI-powered robotic MaaS.</li><li>UK-based digital health company on product roll-out of RPM applications in Germany; coordinate international expansion.</li><li>Advise numerous German start-ups on their U.S. expansion.</li><li>Draft diverse global patent and know-how license agreements in the areas of AgTech and life sciences—including gene licensing and licensing of genome editing technologies (e.g., CRISPR)—and medical devices; draft correlating supply and distribution agreements.</li><li>Structure IP rights in connection with joint ventures and other M&A transactions, including the carve-out of a patent-heavy semiconductor business comprising nine jurisdictions into a German–U.S. joint venture.</li><li dir="ltr">Advise on government-funded, multi-partner R&D projects and/or R&D projects with academic institutions, as well as on employee invention law.</li></ul><h4 dir="ltr">Representative Contentious IP Matters</h4><ul dir="ltr"><li>Lead counsel in an international dispute between software companies on rights and obligations following termination of a multi-million licensing and distribution arrangement; coordinate local counsel.</li><li>Defend Japanese chip manufacturer in high-profile SEP-litigation; advise on global settlement arrangement.</li><li>Represent leading internet retailer in patent infringement and concurrent invalidity proceedings in the context of a multijurisdictional dispute concerning touch-screen technology.</li><li>Represent diverse pharmaceutical and life sciences companies in national and cross-border patent infringement proceedings and other technology-related disputes, including preliminary injunctions as well as pre‑trial discovery and inspection proceedings, concerning, inter alia, drug-coating technologies, toner cartridges, medicinal gases, transgenic plants, and vaccines.</li><li dir="ltr">Conduct trademark, copyright, and false advertising litigation, including, most notably, a high-profile trademark litigation for a German bank, and a nine-country cross-border trademark litigation involving a famous pharmaceutical brand.</li></ul>

Dr. Wolfgang Schönig berät Mandanten zum Schutz des geistigen Eigentums sowohl in streitigen als auch nichtstreitigen Angelegenheiten, mit einem besonderen Fokus auf die IP-rechtliche Beratung von Unternehmen aus den Bereichen Life Sciences, Digitalwirtschaft und High-Tech.Zu seinen Beratungsschwerpunkten gehören Forschungs- und Entwicklungskooperationen, komplexe Lizenzvertragsgestaltungen und andereTechnologie-Transaktionen, sowie Know-how-Schutz-Strategien und das Arbeitnehmererfinderrecht. Er verfügt zudem über umfangreiche Prozesserfahrung zur Durchsetzung von Patenten, Marken- und anderen IP-Rechten, häufig auch in einem grenzüberschreitenden Kontext. Darüber hinaus bewertet Dr. Wolfgang Schönig zusammen mit seinem Team regelmäßig die Rechtskonformität von Werbekampagnen, prüft die Verfügbarkeit von Marken und entwickelt entsprechende Anmeldestrategien.Dr. Wolfgang Schönig ist Co-Editor des Life Sciences Blogs von Morrison Foerster.Er hat seinen Doktortitel an der Heinrich-Heine-Universität Düsseldorf und seinen LL.M. an der Fordham School of Law in New York erworben, jeweils mit Schwerpunkt im gewerblichen Rechtsschutz. Seinen MBA-Abschluss erhielt er von der European University in Barcelona.Dr. Wolfgang Schönig ist Partner des deutschen Büros von Morrison Foerster in Berlin.<h4 dir="ltr">Repräsentative Transaktionen</h4><ul><li dir="ltr">BioTech-Fonds mit Sitz in den USA bei verschiedenen Forschungskooperationen und anderen Transaktionen mit deutschen Start-ups oder Forschungseinrichtungen</li><li dir="ltr">Verhandlung einer hochvolumigen strategischen Partnerschaft zwischen zwei Technologieführern im Bereich Crop Science betreffend der Entwicklung und Kommerzialisierung von bestimmten Resistenzen</li><li dir="ltr">Gestaltung einer globalen Multi-Millionen-Zusammenarbeit für KI-gestützte Roboter</li><li dir="ltr">Ein in Großbritannien ansässiges Unternehmen für digitale Gesundheit bei der Markteinführung von RPM-Anwendungen in Deutschland; Koordination der internationalen Expansion</li><li dir="ltr">Beratung zahlreicher deutscher Start-ups bei deren US-Expansion</li><li dir="ltr">Strukturierung und Verhandlung diverser Patent- und Know-How-Lizenzen in den Bereichen Ag Tech und Life Sciences – einschließlich Fragen zu genome editing wie CRISPR-Medizingeräte, sowie Gestaltung von Softwarelizenzverträgen und Erstellung korrespondierender Liefer- und Vertriebsvereinbarungen</li><li dir="ltr">Strukturierung von IP-Rechten im Zusammenhang mit Joint Ventures und anderen M&A-Transaktionen, darunter die Koordination eines neun Länder umfassenden IP Carve-Outs im Rahmen eines Halbleiter-JVs</li><li dir="ltr">Beratung zu staatlich geförderten Multi-Partner F&E-Projekten und/oder F&E-Projekten mit akademischen Einrichtungen sowie zum Arbeitnehmererfindungsrecht</li></ul><h4 dir="ltr">Repräsentative IP-Streitigkeiten</h4><ul><li dir="ltr">Lead Counsel in einem internationalen Rechtsstreit zwischen Softwareunternehmen über Rechte und Pflichten nach Beendigung einer millionenschweren Lizenz- und Vertriebsvereinbarung; Koordinierung der lokalen Anwälte</li><li dir="ltr">Verteidigung eines japanischen Chipherstellers in einem prominenten Streitfall bezüglich Standardessentieller Patente (SEP); Beratung zu einer globalen Vergleichsregelung</li><li dir="ltr">Verteidigung einer führenden Internetplattform gegen Ansprüche eines Patenttrolls wegen vermeintlicher Verletzung von Patent bezüglich Touchscreen-Technologie sowie korrespondierende US-Streitigkeiten</li><li dir="ltr">Vertretung von Pharma- und Life Science-Unternehmen in nationalen und grenzüberschreitenden Patentverletzungsverfahren und anderen technologiebezogenen Streitigkeiten, einschließlich einstweiliger Verfügungsverfahren und vorprozessualer Beweissicherungs- und Besichtigungsverfahren, unter anderem in Bezug auf Arzneimittelbeschichtungstechnologien, Tonerkartuschen, medizinische Gase, transgene Pflanzen und Impfstoffe</li></ul>

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Wolfgang Schönig is a partner of Morrison Foerster (International) LLP based in our German office in Berlin. His practice specialty is advising on IP aspects relative to transactions in, among others, the life sciences, AgTech and pharmaceuticals industry, as well as legal representation in IP disputes. Wolfgang is specialized in research and development collaborations, complex licensing agreements, technology acquisitions, know-how protection strategies, and employee invention law.

Wolfgang Schönig focuses his practice on IP aspects relative to transactions in the digital, telecoms, high tech, life sciences, and pharmaceuticals industry, as well as legal representation in IP disputes.

Wolfgang Schönig advises clients on IP aspects relating to transactions in, among others, the life sciences, AgTech and pharmaceuticals industry, as well as legal representation in IP disputes. His additional focus areas include research and development collaborations, complex licensing agreements, technology acquisitions, know-how protection strategies, and employee invention law.

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Patent-Eligibility Considerations & Prosecution Strategies for AI-Based Life Sciences Patent Applications

AI Transparency in Healthcare: Navigating a Changing Regulatory Landscape

Recentive: Raising the Patent-Eligibility Bar in AI-Related Inventions

April 2025 Update on Regulation of New Genomic Techniques in the EU

In Patent Prosecution, You Have the Right to Remain Silent. Anything You Say Can and Will Be Used Against You in the Court of Law

Recently, the Federal Circuit addressed a significant issue of first impression with respect to obviousness-type double patenting (ODP), holding that ODP applies to patent claims that claim priority to the same application and have different expiration dates due only to patent term adjustment (PTA).The case involves several Cellect patents (’369, ’742, ’626, ’621, and ’036) related to image sensors in personal digital assistants and phones. These patents are in a single patent family with a shared priority claim and 20-year expiration date. However, the patents received varying amounts of PTA due to delay in examination by the U.S. Patent Office. After Cellect sued Samsung for infringement, Samsung requested ex parte reexamination of Cellect’s patents, asserting that they were unpatentable for ODP over earlier-expiring family members. The examiner agreed in each of the reexaminations and the Patent Trial and Appeal Board (the “Board”) affirmed the unpatentability findings.<div data-reactroot=""><img src="https://media2.mofo.com/v3/images/blt5775cc69c999c255/blt45b201f9a4e9a120/6504a54720c4f9e2476fe36e/Screenshot_2023-09-15_113915.jpg?format=auto&amp;quality=60" alt="Patent Term Adjustment "/></div>On appeal, Cellect argued that PTA should be treated like patent term extension (PTE) for purposes of considering ODP, citing Novartis v. Ezra.[1] In Novartis, the Court held that PTE can be applied to a terminally disclaimed patent and that PTE extends disclaimed patents from the date resulting from the terminal disclaimer. Cellect stressed that, based on Novartis, a statutorily mandated extension should not be reduced by a judge-made doctrine like ODP.The Federal Circuit affirmed the Board, noting the “distinct purposes”[2] of PTE and PTA. Specifically, PTE is applied to a single patent to compensate for regulatory delay during FDA approval, whereas PTA is applied for delay by the Patent Office. Pointing to statutory language under 35 U.S.C. § 154 for PTA that differs from the provisions in § 156 for PTE, the Federal Circuit concluded that “ODP for a patent that has received PTA, regardless whether or not a terminal disclaimer is required or has been filed, must be based on the expiration date of the patent after PTA has been added.”[3]Finally, although holding the issue forfeited in this case, the Federal Circuit commented on the issue of “retroactive”[3] terminal disclaimer, observing that “terminal disclaimer is not an escape hatch to be deployed after a patent expires.”[4] Because the challenged patent claims had already expired, terminal disclaimer could not be used to cure the ODP issue.This decision underscores the significance of ODP and the importance of properly managing large patent families and/or portfolios of patents with different terms. Patent applicants should continue to employ strategies to mitigate ODP risk, such as invoking restriction requirements and filing divisional applications, which are protected by the 35 U.S.C. § 121 safe harbor. Applicants must now carefully consider the consequences of whether and when to file a terminal disclaimer.  Applicants should also be discerning about whether to file continuing applications and which claims to pursue in such applications, especially if PTA could be involved, given the potential ODP impact.[1] Novartis AG v. Ezra Ventures LLC, 909 F.3d 1367 (Fed. Cir. 2018).[2] In re: Cellect, LLC, No. 2022-1293 (Fed. Cir. 2023), p. 18.[3] In re: Cellect, LLC, No. 2022-1293 (Fed. Cir. 2023), pp. 20-21.  See also 35 U.S.C. § 154(b)(2)(B) (“No patent the term of which has been disclaimed beyond a specified date may be adjusted under this section beyond the expiration date specified in the disclaimer.”).[4] In re: Cellect, LLC, No. 2022-1293 (Fed. Cir. 2023), p. 25.

Dr. Meghan Poon counsels clients on patent preparation and prosecution, portfolio strategy, and IP due diligence in the areas of biotechnology and biologics. She has significant experience in diverse technologies including antibodies, cell therapies, gene therapies, diagnostics, and gene-edited plants. 

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Patent Term Adjustment Takes a Hit in Cellect Decision

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Recently, the Federal Circuit addressed a significant issue of first impression with respect to obviousness-type double patenting (ODP), holding that ODP applies to patent claims that claim priority to the same application and have different expiration dates due only to patent term adjustment (PTA).

Patent Term Adjustment Takes a Hit in Cellect Decision

Should the recent bill entitled the Patent Eligibility Restoration Act of 2023 (PERA) become law, it would override the existing jurisprudence and redefine which inventions are eligible for patenting under 35 U.S.C. § 101.By way of the Patent Act of 1952, the United States Congress established four statutory categories defining limits on inventions eligible for patent protection that are still in use today: process, machine, manufacture, and composition of matter.<a href="#_ftn1" target="_self" dir="ltr" id="_ftnref1">[1]</a> On its face, this framework would appear to allow for the patenting of medical diagnostics, which often revolve around a process and/or machine (e.g., a diagnostic device). However, the current patent-eligibility environment in the United States surrounding medical diagnostics is unforgiving and those seeking to patent such inventions face significant challenges in trying to protect their innovations. This is largely due to courts having created, in their established role of interpreting and applying laws, judicially recognized exceptions to the four broad categories of patent-eligible subject matter that bar the patenting of abstract ideas, laws of nature, and natural phenomena.<a href="#_ftn2" target="_self" id="_ftnref2">[2]</a>Foundational to a medical diagnostics invention is the underlying correlation of a result to a condition (e.g., the level of a protein correlating with presence of a human disease). Mayo, an opinion handed down by the Supreme Court in 2012, cemented the basic idea that, for medical diagnostics, such underlying correlations are laws of nature and are not patent-eligible without claiming significantly more than the natural law itself. Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012). A patchwork of additional jurisprudence has built up over the decade since Mayo, establishing additional patent-eligibility roadblocks for the patenting of medical diagnostics. Recently, U.S. Senators Tillis and Coons introduced legislation aiming to provide clarity to patent eligibility in a bill titled the Patent Eligibility Restoration Act of 2023 (PERA).<a href="#_ftn3" target="_self" id="_ftnref3">[3]</a> Should this bill become law, it would override the existing jurisprudence and redefine which inventions are eligible for patenting under 35 U.S.C. § 101. There is currently no language in PERA expressly stating that medical diagnostics inventions are per se patent-eligible. However, as both senators have singled out the field of medical diagnostics in <a href="https://www.tillis.senate.gov/2023/6/tillis-coons-introduce-landmark-legislation-to-restore-american-innovation" target="_blank">public statements regarding the bill</a>, it is readily apparent that a driving purpose of PERA is to foster innovation in this space by eliminating the current hurdles to patent eligibility (e.g., Senator Coons is quoted as stating “[c]ritical technologies like medical diagnostics and artificial intelligence can be protected with patents in Europe and China, but not in the United States”). Here, we discuss select aspects of the bill that would change the current legal landscape in this field to allow for the direct patenting of medical diagnostics in the United States (e.g., a method of diagnosing a disease in an individual).Restarting the clock on statutorily defined patent subject-matter eligibilityAs noted above, judicially recognized exceptions to the four categories of patent-eligible subject matter are significant obstacles when pursuing patent protection of medical diagnostics. PERA would expressly eliminate all current judicial exceptions to patent subject-matter eligibility. This does not mean that exceptions will not exist. Rather, PERA will establish new exceptions (many of which are based on currently practiced and accepted exceptions). Specifically, PERA provides that “[w]hoever invents or discovers any useful process, machine, manufacture, or composition of matter, or any useful improvement thereof, may obtain a patent therefor, subject only to the exclusions in subsection (b) and to the further conditions and requirements of this title” (emphasis added).Hope for broader subject-matter eligibility of medical diagnosticsWith relevance to medical diagnostics, under the Eligibility Exclusions detailed in PERA (subsection (b)), it is stated that “a person may not obtain a patent for any of the following, if claimed as such; . . . (C) A process that (i) is a mental process performed solely in the human mind; or (ii) occurs in nature wholly independent of, and prior to, any human activity.” This language would appear to stop exceptions to patent eligibility short of the current reach of judicially recognized exceptions. For example, one could apply the language of PERA to claims in question in Mayo and reasonably conclude that the active steps therein (e.g., administering a drug and determining the level of an analyte) are human activities that do not occur in nature wholly independent of, and prior to, any human activity.<a href="#_ftn4" target="_self" dir="ltr" id="_ftnref4">[4]</a> This aspect of PERA signals that medical diagnostics will be patent-eligible should they be carefully drafted to include features readily distinguishable from capabilities of the human mind and/or features demonstrating human activity related to performance of such medical diagnostics.We find additional confirmation that PERA will allow for medical diagnostics to be generally subject-matter-eligible under subsection (c). Subsection (c) states that “eligibility shall be determined . . . (B) without regarding to . . . (ii) whether a claim element is known, conventional, routine, or naturally occurring.” There are two aspects worthy of discussion here as they represent a distinct departure from current patent subject-matter eligibility law. Firstly, under current law, having a claim element that is directed to the naturally occurring (such as the underlying correlation of a medical diagnostics) results in an analysis of the claimed invention where one is forced to establish why the subject matter is in fact patent-eligible. Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014). The language in subsection (c) flips this current notion on its head and in some regards preserves more of a presumption of patent eligibility, whether or not there is a claimed feature that can be attributed to a naturally occurring phenomenon. Under PERA, it seems likely that one will then need to establish why a claimed invention, when viewed as a whole, is not eligible for patent protection for reasons other than containing a naturally occurring phenomenon, as one element.Secondly, subsection (c) expressly prohibits assessing, for purposes of subject-matter eligibility, whether a claimed element is “conventional” or “routine.” Current subject-matter eligibility law is becoming increasingly entangled with assessing conventionality.  Such language could change how court cases are being decided today. In CareDx, for example, a Federal Circuit court held that claims to noninvasive detection of graft rejection in transplant patients were unpatentable subject matter under 35 U.S.C. § 101 because they involved detection of a natural phenomenon using only conventional techniques. CareDx, Inc. v. Natera, Inc., 40 F.4th 1371, 1381 (Fed. Cir. 2022). In a similar fashion, in Ariosa Diagnostics, a Federal Circuit court held that claims to detecting paternally inherited nucleic acid of fetal origin performed on material serum or plasma were also not subject-matter-eligible as they only recited known methods of analyzing fetal DNA. Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371 (Fed. Cir. 2015). Under PERA, subject-matter eligibility determinations may avoid such a reliance on conventionality of techniques. This would be a significant change in patenting medical diagnostics as there is a commercial drive for developing medical diagnostics that can be performed using “conventional” or “routine” techniques (e.g., conventional PCR or mass spectrometry) to enable widespread adoption.Next stepsPERA is still in its infancy as a bill. We are continuing to monitor developments related to PERA and will provide relevant updates. If you have any questions about this topic or would like to discuss patenting your own medical diagnostics inventions, please reach out to MoFo’s Patent Strategy + Prosecution team.Special thanks to Janet Xiao, Meghan Poon, and Laura Ray for the development of this article.<a href="#_ftnref1" target="_self" dir="ltr" id="_ftn1">[1]</a> Title 35, United States Code, section 101.<a href="#_ftnref2" target="_self" dir="ltr" id="_ftn2">[2]</a> E.g., Diamond v. Diehr, 450 U.S. 175, 185 (1981).<a href="#_ftnref3" target="_self" dir="ltr" id="_ftn3">[3]</a> Patent Eligibility Restoration Act of 2023, S.2140, June 22, 2023.<a href="#_ftnref4" target="_self" id="_ftn4">[4]</a> U.S. Patent Nos. 6,355,623 and 6,680,302.

A Glimmer of Hope for Simplified Patenting of Medical Diagnostics in the United States

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Dr. Michelle Bradley focuses her work on patent drafting and IP due diligence inquiries, including freedom-to-operate and patentability analyses, with an emphasis on biotechnology and pharmaceuticals.

Michelle Celine Bradley Ph.D.

Michelle Bradley

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Dr. Chapman provides patent and intellectual property services to clients on pharmaceutical, chemistry, biotechnology, and medical device matters.
He is experienced in drafting patent applications, pr

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A Glimmer of Hope for Simplified Patenting of Medical Diagnostics in the United States

Recent Digital Health-Related FDA Announcements

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By way of the Patent Act of 1952, the United States Congress established four statutory categories defining limits on inventions eligible for patent protection that are still in use today: process, machine, manufacture, and composition of matter.

A new Biden administration Executive Order proposes to enforce more rigorously U.S. manufacturing requirements attendant to federally funded inventions. While the aim of the Executive Order is to support domestic manufacturing and jobs, the policy could have the unintended effect of discouraging U.S. company participation in federally funded research and development activities.Issued on July 28, 2023, the “<a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2023/07/28/executive-order-on-federal-research-and-development-in-support-of-domestic-manufacturing-and-united-states-jobs/" target="_blank" style="direction: ltr;text-align: left;">Executive Order on Federal Research and Development in Support of Domestic Manufacturing and United States Jobs</a>” (“Executive Order”) has as a policy aim “that when new technologies and products are developed with support from the United States Government, they will be manufactured in the United States whenever feasible and consistent with applicable law.” The Executive Order does not call for a change in existing law, but tasks government agencies with more careful consideration and application of domestic manufacturing requirements in research and development funding agreements. It also suggests that agencies could find “exceptional circumstances” to apply so as to extend U.S. manufacturing requirements beyond the current application to exclusive licensees, particularly with respect to “critical and emerging technologies.” The administration’s directives could cause agencies to insert such requirements in agreements where legally acceptable but not necessarily legally required, or to apply more frequently exceptions that are now rare. The new directive could also lead agencies to grant fewer waivers of U.S. manufacturing requirements under existing research grants and funding agreements.The Executive Order also suggests improvements to the current processes for invention utilization reporting and applying for U.S. manufacturing waivers, which should help to standardize federal invention reporting and the waiver process.Current Domestic Manufacturing Requirements for Federally Funded InventionsThe Bayh-Dole Act GenerallyThe Bayh-Dole University and Small Business Patent Procedures Act of 1980 (“Bayh-Dole Act” or “the Act”), as amended, governs intellectual property rights in inventions stemming from federally funded research.[1] The Bayh-Dole Act established a uniform federal policy with respect to inventions made by non-profit organizations, universities, and small businesses under federally supported research and development programs, giving such entities ownership of inventions resulting from their research, and thus encouraging participation. The government later extended the Bayh-Dole Act to cover businesses of all sizes.[2]The Bayh-Dole Act applies to research and development procurement contracts, grants, and cooperative agreements issued by all federal executive agencies.[3] Some notable exceptions where the Act does not apply are with cooperative research and development agreements (CRADAs)[4] and other transaction agreements (OTs), including National Aeronautics and Space Administration (NASA) Space Act Agreements.[5] In addition, by its terms, agencies may deviate from Bayh-Dole Act requirements: (i) where the contractor is not located in the United States or does not have a place of business in the United States, or is controlled by a foreign country; (ii) in “exceptional circumstances” when the agency determines “that restriction or elimination of the right to retain title to any subject invention will better promote the policy and objectives” of the Act; (iii) when necessary to protect foreign intelligence and counterintelligence operations; or (iv) with respect to operation of Department of Energy (DoE) facilities involving nuclear weapons or programs.[6] In practice, agencies do not frequently use these exceptions, except that the DoE (in addition to the nuclear-related exception) uses the “exceptional circumstances” language to take title to inventions made by large businesses under many DoE funding agreements, unless a waiver is granted.[7]Where applicable, the Bayh-Dole Act provides contractors or grantees with the option to elect to retain title to any invention conceived or first actually reduced to practice in the performance of work under a federal funding agreement (called a “subject invention”)[8] after the contractor or grantee makes the required disclosures to the government.[9] In turn, the federal government obtains a nonexclusive, nontransferable, irrevocable, paid-up license to practice, or have practiced for or on behalf of the United States, any subject invention throughout the world.[10]If a contractor or grantee does not meet the Act’s timing deadlines for disclosure of the subject invention to the government, election to retain rights to the subject invention, or the filing of a patent application, the government may take title to the subject invention.[11] The Bayh-Dole Act also provides for “march-in” rights should the contractor, grantee, or their assignees or licensees fail to commercialize any subject invention within a reasonable period of time.[12] Under these march-in provisions, the government can force a license to a third party that will commercialize the subject invention.[13]The Bayh-Dole Act’s U.S. Manufacturing RequirementsAs most relevant here, the Bayh-Dole Act includes domestic manufacturing restrictions. Notably, these restrictions generally apply only to exclusive licensees, not to the inventor or non-exclusive licensees. Specifically, the Act prohibits a contractor or grantee that receives title to a subject invention from granting any person an exclusive license to use or sell the subject invention “unless such person agrees that any product embodying the subject invention or produced through the use of the subject invention will be manufactured substantially in the United States.”[14] The failure of an exclusive licensee to abide by such an agreement is one of the grounds upon which the government may exercise its march-in rights.[15]We are not aware of any published circumstance under which the government has exercised its march‑in rights based on a violation of the U.S. manufacturing section of the Bayh-Dole Act.[16] In addition, there is considerable uncertainty as to what “manufactured substantially” in the United States means. This term is not defined in statute and review of the legislative history of the Act suggests that the meaning of this term was not specifically discussed or deliberated during the legislative process. Applying dictionary definitions and common meanings of the term would suggest that a licensee with an exclusive right to use or sell a subject invention (or products derived therefrom) in the United States would be required to manufacture any products based on the subject invention largely, but not entirely, in the United States. Such a definition provides little concrete guidance for licensees or federal agencies.Finally, even though the Act does not formally apply to CRADAs and OTs, it is common to find Bayh‑Dole-like requirements, including requirements for domestic manufacturing, in these agreements.Waiver of U.S. Manufacturing RequirementsThe Bayh-Dole Act allows inventors to seek a waiver of the requirement to manufacture a product “substantially” in the United States. The federal agency that was a party to the funding agreement may waive the requirement in individual cases upon a showing by the inventing party “that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible.”[17] Waiver applicants are generally required to provide extensive information in support of their arguments for waiver, including proof of what efforts towards licensing have been made to date, manufacturing plans, and identification of benefits accruing to the United States, even if manufacturing ultimately is based elsewhere.The Biden Executive Order and Its ImplicationsWith this background in mind, the Executive Order has the potential to create, within the confines of existing law, some significant shifts in the application of domestic manufacturing requirements for federally funded businesses.First, the mere goal that products and technologies developed with any federal funding “be manufactured in the United States whenever feasible”[18] is at odds with the current application of U.S. manufacturing requirements almost entirely on exclusive licensees.Second, the Executive Order urges the agencies with significant research spending to “consider domestic manufacturing in Federal R&D funding agreement solicitations, as appropriate and consistent with applicable law.”[19] In this regard, the administration specifically identifies Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.[20] More pointedly, with respect to OTs, the Executive Order goes so far as to suggest that these agreements should include terms to “ensure that the product is substantially manufactured in the United States.”[21] As the Bayh-Dole Act does not apply to OTs, nothing would prevent inclusion of such requirements for the OT holder and all licensees (as opposed to only exclusive licensees).Finally, where “critical and emerging technologies”[22] are being developed, the Executive Order strongly suggests that agencies consider using the “exceptional circumstances” exception to Bayh-Dole to extend U.S. manufacturing requirements to the recipients of federal research and development funding and to non-exclusive licensees.[23] This would be a fundamental shift that could change the calculus for companies doing research in essential fields, including advanced computing, artificial intelligence, biotechnology, renewal energy, semiconductors, and microelectronics. If forced to manufacture any product embodying an invention developed in part with federal government money in the United States, these companies may seek funding elsewhere, thereby depriving the United States of government purpose licenses to the technology, and potentially slowing the pace of technology advancement. Interestingly, the administration seeks to impose the U.S. manufacturing burden here only on large companies, suggesting that small businesses and non-profits should get a pass from the restrictions.[24]The administration proposes to monitor compliance with U.S. manufacturing requirements by requiring federal funding recipients to report on the location(s) in which subject inventions are manufactured, and to provide the names of all licensees and their manufacturing locations.[25]Executive Order Implementation and Potential BenefitsThe news is not all bad for federal research funding recipients. The Executive Order seeks to streamline and standardize funding recipients’ annual utilization reports for subject inventions by directing the National Institute of Standards and Technology (NIST) to develop common invention utilization questions, to be used by all agencies as of May 1, 2024.[26] NIST is also to develop a plan to transition all agencies to the online iEdison reporting system by calendar year 2025.[27] This will reduce administrative burden on funding recipients by eliminating certain agencies’ unique, and in some cases antiquated, reporting requirements.The Executive Order also proposes improvements to and standardization of the process of applying for waivers from the U.S. manufacturing requirements under the conditions specified in 35 U.S.C. § 204.[28] NIST is to develop guidance on the factors for agencies to use when determining waiver eligibility, and also to develop common waiver application questions for use by all agencies.[29] Administration priorities are clear from its instructions regarding waivers. For example, the list of considerations for waiver questions includes “the benefits that will accrue to domestic manufacturing and United States jobs as a result of the subject invention being brought to market,” and “the conditions under which the subject invention would be manufactured abroad, including unionization of workplaces, health and safety standards, labor and wage laws, and environmental impacts.”[30] And in a not-so-subtle attempt to prohibit manufacturing in China, the Executive Order directs that agencies “should consider limiting waivers to applicants that commit to manufacture in locations that maintain a market economy.”[31]Parting ThoughtsUnlike other Executive Orders that require extensive implementing regulations and thus are limited in immediate effect, this order relies on existing law, and merely encourages agencies to put a different spin on their approach to research and development funding. As such, funding recipients could see rather immediate changes in how waivers are processed. For new contracts, grants, OTs, and CRADAs, changes in U.S. manufacturing requirements may appear in funding opportunity announcements, requests for proposals, and draft agreements. How extensive and widely adopted these changes may be remains to be seen.Funding recipients also will have limited opportunities for input on the potential impacts of the administration’s directives. Only the NIST waiver guidance will be subject to public comment.[32] As such, the only way to assess the impact of the Executive Order will be to examine whether proposed changes result in reduced participation by contractors and grantees in federal research and development activities. In the meanwhile, we urge prospective funding recipients to very carefully examine the opportunity announcements to which they respond, and the agreements they are asked to sign, and to be certain they fully understand all limitations on subsequent subject invention manufacturing for themselves and any licensees.[1] Public Law 96-17, §6(a), Dec. 12, 1980, 94 Stat. 3020; codified at 35 U.S.C. §§ 200-212, with implementing regulations at <a href="https://www.ecfr.gov/current/title-37/chapter-IV/part-401" target="_blank" style="direction: ltr;text-align: left;">37 C.F.R. Part 401</a>.[2] See Presidential Memorandum “Government Patent Policy” (February 18, 1983); <a href="https://www.archives.gov/federal-register/codification/executive-order/12591.html" target="_blank" style="direction: ltr;text-align: left;">Executive Order 12591</a>, Facilitating Access to Science and Technology (April 10, 1987), as amended by <a href="https://www.reaganlibrary.gov/archives/speech/executive-order-12618-uniform-treatment-federally-funded-inventions" target="_blank">Executive Order 12618</a>, Federally Funded Inventions (December 22, 1987); 37 C.F.R. § 401.1(b) (as revised effective May 14, 2018).[3] 35 U.S.C. § 201(b).[4] The Stevenson-Wydler Act permits federal laboratories to enter into CRADAs to transfer personnel, services, facilities, equipment, intellectual property, or other resources to non-federal parties. 15 U.S.C. § 3710a.[5] Congress has authorized nearly a dozen federal agencies to use other transaction agreements—which generally do not follow a standard agreement format or include mandatory terms and conditions—to help meet agencies’ mission needs. NASA first received this authority in 1958, followed over the ensuing decades by authorization for the Departments of Defense (DOD), Energy (DoE), Health and Human Services (HHS), Homeland Security (DHS), and Transportation (DOT). Congress has also granted OT authority to five agencies within these departments, including DOT’s Federal Aviation Administration (FAA), DHS’s Transportation Security Administration (TSA), and the National Institutes of Health (NIH) at HHS.[6] 35 U.S.C. § 202(a).[7] See, e.g., <a href="https://www.energy.gov/gc/articles/department-energy-determination-exceptional-circumstances-under-bayh-dole-act-further" target="_blank" style="direction: ltr;text-align: left;">Department of Energy Determination of Exceptional Circumstances under the Bayh-Dole Act to Further Promote Domestic Manufacture of DOE Science and Energy Technologies</a> (June 6, 2021).[8] 35 U.S.C. § 201(e).[9] 35 U.S.C. § 202(a),(c).[10] 35 U.S.C. § 202(c)(4).[11] 35 U.S.C. § 202(c)(1)-(c)(3).[12] 35 U.S.C. § 203[13] Id.[14] 35 U.S.C. § 204.[15] 35 U.S.C. § 203(a)(4).[16] One of the few federal judicial decisions discussing the U.S. manufacturing requirement is Ciba-Geigy Corporation v. Alza Corporation, 804 F.Supp. 614 (D.N.J. 1992). In that case, the court observed that a party that fails to manufacture its product in the United States in accordance with Section 204 does not automatically lose its exclusive license. Instead, the federal agency under whose funding agreement the subject invention was made would have to exercise its march-in rights, after providing notice and an opportunity for a hearing to the licensee. 804 F. Supp. at 629. The court also emphasized that there is no private right of action to enforce Section 204. Id.[17] 35 U.S.C. § 204.[18] Executive Order, § 1.[19] Id., § 3.[20] Id. § 3(c).[21] Id. § 3(d).[22] This document contains a list of “critical and emerging technologies” as identified by the administration: <a href="https://www.whitehouse.gov/wp-content/uploads/2022/02/02-2022-Critical-and-Emerging-Technologies-List-Update.pdf" target="_blank" style="direction: ltr;text-align: left;">https://www.whitehouse.gov/wp-content/uploads/2022/02/02-2022-Critical-and-Emerging-Technologies-List-Update.pdf</a>. It includes, among other essential technologies, advanced computing, artificial intelligence, biotechnology, renewal energy, semiconductors, and microelectronics.[23] Executive Order, § 5.[24] Id., § 5(a)(ii).[25] Id., § 4(b),(c).[26] Id., § 4(d),(g).[27] Id., § 4(e).[28] Id., § 7.[29] Id., § 7(d)&(e).[30] Id., § 7(e)(i).[31] Id., § 7(h)(i).[32] Id., § 7(d).

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Tina is a partner in Morrison & Foerster’s Government Contracts practice. She represents a wide variety of government contractors including information technology, defense, biotechnology, and pharmace

Tina Reynolds

Tina is co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She counsels a wide variety of government contractors on compliance with federal acquisition and ethics regulations. She drafts and negotiates contracts on their behalf and has been involved with numerous internal investigations and compliance reviews, and with bid protest, contract claims, and False Claims Act litigation. She also advises on M&A transactions involving government contractors.

Tina D. Reynolds

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A new Biden administration Executive Order proposes to enforce more rigorously U.S. manufacturing requirements attendant to federally funded inventions. While the aim of the Executive Order is to support domestic manufacturing and jobs, the policy could have the unintended effect of discouraging U.S. company participation in federally funded research and development activities.

Biden Executive Order Has Potential to Discourage U.S. Company Participation in Federal Research

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Elena Catherine Klonoski

Elena Klonoski

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On June 30, 2023, the Centers for Medicare and Medicaid Services (CMS) released its much-anticipated final guidance (“Final Guidance”) for the Medicare Drug Price Negotiation Program (“Negotiation Program”) through the Inflation Reduction Act (IRA).[1]  The Negotiation Program is an unprecedented program intended to lower the cost of healthcare for millions of Americans by requiring that manufacturers of the top ten highest cost prescription drugs covered by Medicare engage in a negotiation process to determine a “maximum fair price” (MFP).  

Medicare Drug Price Negotiation Program Final Guidance

Brigid Bondoc and Wendy Chow authored an article for HealthTech about what the recent growth of generative artificial intelligence (AI) tools means for providers and patients.“In the absence of a clear legal and ethical framework that promotes the complete scope of the benefits of generative AI across the healthcare ecosystem, the full potential of the technology cannot be attained,” the authors wrote.They added: “AI healthcare applications today are cautiously serving in the administrative and supportive roles of the delivery system. But the true potential lies in the shift of technological tools from assistive to primary instruments of medical care. To integrate those tools into the healthcare environment, there must be a framework that addresses hard ethical and legal questions. Who will be practicing medicine: the doctor or the machine? What role should governments play in ensuring safety, impartiality and accountability?”Read the <a href="https://healthtechmagazine.net/article/2023/07/5-questions-generative-ai-in-healthcare-perfcon" target="_blank">full article</a>.

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Brigid Bondoc

5 Questions About Generative AI in Healthcare