Myriad Back in Court Again — This Time as a Defendant

MyriadMyriad Genetics is once again embroiled in litigation over its BRCA-related patents. But this time Myriad is the defendant. Counsyl, Inc., a San Francisco-based company that focuses on genetic carrier testing, sued Myriad in U.S. District Court for the Northern District of California on September 20, 2013. As we noted in an earlier post, Myriad — as a plaintiffhas recently sued two small companies, Ambry and Gene By Gene, that have entered the BRCA testing market in response to the Supreme Court decision invalidating Myriad’s gDNA patent. Myriad presumably filed those suits — against vulnerable defendants — to send a message that it would maintain its testing monopoly by enforcing patent claims that had survived the earlier litigation. But it took the risk that the defendants might succeed in invalidating those surviving claims. Now, with the Counsyl suit, the BRCA controversy has entered a new stage, with a prospective competitor launching a preemptive strike against Myriad and its patents.

This is not the usual patent suit, where the plaintiff accuses the defendant of infringement and seeks damages. Here, Counsyl is asking the court for a declaratory judgment that (1) eight specified Myriad patents (each with many claims) are invalid and (2) even if they are valid, Counsyl isn’t infringing them. Declaratory judgments are a common tactic in intellectual property disputes. A company that thinks it’s about to be sued for infringement — a prospective defendant, in other words — jumps the gun and asks a court to rule in advance on the defenses it would raise if it were sued for an infringement. If Myriad sued Counsyl for infringement, Counsyl would defend by saying what almost every infringement defendant says: the plaintiff’s patents aren’t valid, but even if they are, we’re not doing anything that infringes them. By filing the declaratory judgment action, Counsyl gets to choose both the time and the court that will rule on these issues. Not surprisingly, it picked its home court. Otherwise, the case will play out exactly like an infringement suit. Because of something called the compulsory counterclaim rule, if Myriad thinks that Counsyl is currently infringing, it must assert its infringement claim as a counter-suit in this litigation.

One special hurdle that Counsyl will have to get over is an arcane constitutional law doctrine called standing. The Constitution does not permit the federal courts to decide hypothetical questions. To be eligible for a declaratory judgment ruling in advance of any infringement litigation, Counsyl must show that there is — right now — an actual controversy between it and Myriad. Most declaratory judgment plaintiffs satisfy this requirement by showing things like cease and desist letters from the patent owner. But there appears to be no evidence that Myriad has yet threatened Counsyl. In fact, Counsyl has told the media that it is not currently offering BRCA testing. Given these facts, it is very likely that one of Myriad’s first moves will be to ask the court to dismiss the suit for lack of standing.

Given all this, it is hard to figure out why Counsyl chose to file suit now. On the one hand, the filing allows Counsyl to determine the time and place of the litigation (now, and in San Francisco rather than later, and in Utah, Myriad’s clear preference). On the other, the compulsory counterclaim rule insures that Myriad will assert any infringement claims that it currently has. Counsyl must have decided that the benefits — especially avoiding Utah —outweighed the risks. That would make particular sense if Counsyl was persuaded that it is not doing anything right now that could give rise to an infringement claim.

If the case proceeds beyond the standing question, then the validity of Myriad’s patents will once again be at issue. All eight patents that Counsyl is challenging are also the subject of infringement claims in Myriad’s Ambry and Gene By Gene suits (which have been consolidated for trial before a single federal judge in Utah). The defendants in those cases have raised invalidity and non-infringement defenses. That means that two different federal district judges will now have an opportunity to rule on the validity of the Myirad claims that weren’t already invalidated by the Supreme Court (isolated gDNA) or by the portion of the Federal Circuit’s ruling that the Supreme Court didn’t review (methods of comparing normal and mutated BRCA sequences). Those judges’ validity rulings won’t necessarily be binding on each other, meaning that the second won’t have to follow the first (though they might decide to under a legal doctrine with the terrifying name of defensive non-mutual issue preclusion.) But that won’t make any difference in the long run, since both rulings would ultimately be appealed to the Federal Circuit.

There have also been some interesting further developments in the Ambry litigation since our last post. On August 5, 2013, Ambry responded to Myriad’s complaint not only by raising the expected defenses of invalidity and non-infringement, but by asserting a counterclaim under the Sherman Antitrust Act, charging Myriad with both attempted and actual monopolization of the BRCA testing market. Ambry alleges that Myriad has gained and maintained its market position through “exclusionary and anticompetitive conduct” that includes “bad faith enforcement of patent claims that are facially patent ineligible.”

Just three weeks later, Myriad filed a motion to dismiss the antitrust counterclaims (pdf). Myriad argues that Ambry must show that Myriad’s patent infringement claims have been “objectively baseless,” and that Ambry cannot possibly carry that burden.

Then, on September 11 and 12, 2013, the court held a hearing on Myriad’s motion for a preliminary injunction ordering Ambry and Gene By Gene to cease BRCA testing, a subject we discussed previously. The arguments continued into yet another court session on October 7. Myriad’s lawyers have argued that the defendants’ tests use a patented primer that does not occur in nature, while Ambry and Gene By Gene have countered that the primer does contain a sequence of unpatentable gDNA. There has been no reported decision yet. The publicly available filings (much has been redacted, presumably because of trade secret claims) reveal that both sides have devoted massive effort to submitting evidence, at this point in the form of affidavits and exhibits, and to briefing the legal issues for the court. Still no hint of where the judge might be leaning on this critical decision.

With little done in these consolidated cases beyond the trading of accusations, it is difficult to prognosticate. Nonetheless, here are some very preliminary thoughts:

  • Myriad has emphasized that the previous Federal Circuit and Supreme Court litigation invalidated only 11 of the 520 claims in its multi-patent portfolio (those 11 included the most powerful of Myriad’s claims, of course). But now most of the rest are squarely at issue, which means that the stakes for Myriad in these cases are extremely high.
  • The prior litigation involved only the threshold issue of patentable subject matter, leaving open the question of whether the challenged claims satisfied the other requirements for patentability, including novelty and nonobviousness. Myriad’s adversaries in these new cases have thrown the legal kitchen sink at its patents, raising all potential objections to validity. The novelty and obviousness challenges have real potential, and they should be watched carefully.
  • It is very difficult to prove an antitrust violation based on a patent holder trying to enforce its patents. It is possible, but only in extraordinary circumstances. Even at this very early stage, I would be very surprised if Ambry were to succeed on its antitrust counterclaims, and not at all surprised if those counterclaims were to be dismissed at an early stage. This feeling is supported in part by two recent Supreme Court cases (one of them an antitrust case) that significantly raised the bar for what a plaintiff (or a counterclaimant) has to show in its initial statement of its claims. It is not clear that Ambry will be able to get over this bar.

Acknowledgment: Thanks to my friend, former research colleague and occasional GLR contributor Allison Dobson of Kilpatrick Townsend for some helpful comments on a first draft of this piece.