Update: Continued Speculation on Myriad’s Motives Down Under

Last week, we wondered what Myriad Genetics had in mind by offering to surrender one of its Australian breast cancer patents as a “gift…to the people of Australia.” This week, in an interview with Turna Ray of the Pharmacogenomics Reporter, Luigi Palombi, director of the Genetic Sequence Right Project at The Australian National University, attempted to shed some light on the issue.

According to Palombi, “Myriad’s objective in surrendering the [‘004 Patent] is to bring the proceedings to a premature end.” Palombi contends that Myriad’s effort to surrender the ‘004 Patent (pdf) is designed to avoid Australian litigation that could set a harmful (even if non-binding) precedent in similar and ongoing U.S. litigation. Myriad, for its part, has so far refused to comment publicly.

A Successful Strategy? As we wrote last week, even if this is what Myriad intends, we are not so sure they will succeed. Offering up the ‘004 Patent for surrender may be a first step in heading off litigation, but without more it is difficult to explain (1) why the plaintiffs would accept the patent surrender, particularly given their stated objective (pdf) to use this litigation as a “test case” for the validity of gene patents or, (2) even if the surrender is successful, why the plaintiffs would refrain from bringing a second “test case” challenging one or more of Myriad’s other patents covering BRCA-1 and BRCA-2 and methods for diagnosing mutations in those genes. (The plaintiffs’ current complaint identifies several of these patents, but challenges the validity of only the ‘004 Patent.)

Other commentators have speculated that, given the apparently limited financial upside to Myriad from the Australian testing market, Myriad may not be interested in investing the time and expense (including negative publicity) necessary to litigate this issue in Australia. Even though Myriad’s President, Mark Capone, recently told investors that the company had secured representation for its legal activities at a fixed cost of $200,000 – a bargain made possible because, according to Capone, “the lawyers want their names on [the Myriad litigation]” – it is surely the case that Myriad would prefer to avoid this litigation and all of its attendant costs if possible.

Still, no matter how expensive or inconvenient the litigation, or unimportant the Australian market to Myriad’s bottom line, it is unlikely that Myriad would be willing to surrender the remainder of its Australian patent portfolio simply to avoid litigation. Doing so would not only open up additional competition within Australia, potentially impacting Genetic Technologies Limited, Myriad’s exclusive licensee in that country, it might also permit would-be Myriad competitors to provide Australian-based BRCA testing to customers in the United States, Europe and elsewhere. That could, in turn, threaten Myriad’s BRACAnalysis product, which accounts for nearly 90% of the company’s revenues.

Cause for Delay? While it is possible that Myriad’s offer of surrender might succeed in halting the Australian litigation before it even begins, the more likely scenario is that it will serve to delay the litigation. Indeed, that appears to have already happened: the first hearing in the Australian litigation, initially scheduled for September 1st, was recently rescheduled for October 14th. That delay is likely related to Myriad’s offer to surrender the ‘004 Patent and the statutory requirement that all offers of surrender be held open for public comment for one month following its publication in the Australian Official Journal of Patents before any ruling is made. Further delays in the Australian litigation could result if the surrender is successful and the plaintiffs are forced to file new litigation challenging one or more of Myriad’s remaining patents.

Regardless of the reason, every delay increases the likelihood that the Australian litigation will lag behind its U.S. counterpart, thereby reducing the likelihood that an unfavorable ruling in Australia could serve as an unwelcome (from Myriad’s perspective) precedent for a U.S. court. Either way, with the deadline for public comment on Myriad’s offer of surrender now passed, and upcoming court proceedings in both Australia and the U.S., it will not be long before the next chapter is written.