Patent Eligibility And Diagnostic Testing
In a key area of medical diagnostics, namely genetic testing, there has been tremendous growth over the last decade as diagnostic laboratories have created and improved thousands of genetic tests at a staggering pace.
The growth in medical diagnostics, which occurred after key Supreme Court decisions rendering human genes and diagnostic correlations ineligible for patenting, challenges a predominant narrative these decisions hindered innovation in medical diagnostics.
Legislative efforts that would change the landscape of patent eligibility must be carefully considered for their potential to disrupt innovation in laboratory-developed diagnostic tests.
Medical diagnostics have been squarely in the eye of the hurricane in debates over patent eligibility law. After the Supreme Court’s decision in Mayo Collaborative Service v. Prometheus Laboratories, Inc. applied patent eligibility doctrine under 35 U.S.C. section 101 to hold that a diagnostic correlation between a blood test outcome and a treatment regimen was unpatentable, critics have especially harshly described the doctrine as “unsound,” “problematic” and devastating [to] the biotechnology, personalized medicine, and medical diagnostics industries in the United States.” These criticisms have led to potentially fast-moving legislative proposals directed specifically at overturning the Supreme Court’s recent decisions and rendering diagnostic methods eligible for patenting.
To support claims that the Mayo decision and the patent eligibility doctrine have undermined innovation in clinical diagnostics, scholars and policy experts have turned to empirical research on investment in the diagnostics industry. For example, a widely cited survey of venture capital investors found decreases in willingness to invest, particularly in “pharmaceutical, biotechnology, and medical device industries.” Another study analyzed data on venture funding and concluded that, following Mayo, investment in disease diagnostics technologies increased at a slower rate compared to other industries. Additionally, the recent report by the U.S. Patent and Trademark Office on patent eligibility jurisprudence demonstrated interest in investment consequences, noting that stakeholders “explicitly or implicitly acknowledged a link between innovation and investment” and dedicated a section to reporting views about how patent eligibility and investment were tied. However, even in the diagnostics industry, views on the impact of Mayo and the patent eligibility doctrine are not uniform; other researchers have found more tenuous or no links between section 101 and investment. Importantly, all of these studies have focused on venture capital and investment.
For clinical diagnostics, this constant focus on investment as the driver of innovation ignores another important driver—arguably the most important: Diagnostic tests are developed not just by investment-backed firms looking to sell products to laboratories that perform tests, but also by the laboratories themselves in order to expand their service offerings. The clinical diagnostics industry is thus bifurcated between commercially sold tests and laboratory-developed tests (LDTs), the latter of which are unlikely to be venture-funded by virtue of surrounding regulatory law.
Based on publicly available data from a federally hosted database of testing services, this study finds substantial growth in one important sector of LDTs following Mayo in 2012: genetic testing and molecular diagnostics. The number of genetic tests developed has increased at least sevenfold between 2013 and 2022, as has the number of unique genes with developed tests. The vast majority of these, at a ratio of over 500 to 1, are LDTs rather than commercial tests. Although it is not easy to assess the economic benefits of this tremendous growth and further research is required, our preliminary findings show that an important dimension of innovation in the diagnostics industry, LDT development, is largely ignored in the policy discussion of patent eligibility law, and needs to be incorporated into that discussion.
In addition to challenging a dominant line of argument on the doctrine of patent eligibility, this study contributes a broader insight. The failure of patent policy experts to consider the role of LDTs in the diagnostics industry exemplifies a more general failure of patent law to consider the role of “user-innovators,” namely those individuals and firms that innovate not so much to profit off of the sale of proprietary technology as to use that technology to enhance their own businesses and practices. This study thus adds another data point to the burgeoning literature on user-driven innovation and its relationship with intellectual property law.