District Court Denies Myriad’s Preliminary Injunction Against Ambry

MyriadIn a 106-page opinion issued on March 10, 2014, Judge Robert Shelby of the federal district court in Salt Lake City denied Myriad Genetics’ Motion for Preliminary Injunction in its lawsuit against Ambry Genetics Corporation. For reasons I’ll try to explain, this is a significant development from a practical standpoint, but not earth-shaking from a legal point of view. Above all, it is not surprising. Reluctant as I am to say “I told you so,” well, I told you so.

As we previously reported, after the Supreme Court decided AMP v. Myriad Genetics, a number of competitors, including Ambry, jumped into the BRCA testing market. Myriad started suing them in the Utah federal district court, beginning with Ambry (filed July 9, 2013) and Gene by Gene (July 10). The cases were soon consolidated, to be handled together by Judge Shelby. In both cases, Myriad alleged that the defendant’s testing would infringe patent claims that had not been struck down by the Supreme Court’s AMP decision, which had held that DNA that had merely been isolated from the body was not patentable subject matter. In both cases, Myriad sought a preliminary injunction: a pre-trial order that the defendant must cease its testing activity for the duration of the case. If Myriad then prevailed at trial, the injunction would become permanent. The defendants denied Myriad’s allegations, opposed the preliminary injunction, and filed massive antitrust counterclaims alleging that Myriad has used its patents in unlawful ways to monopolize the BRCA testing market.

Myriad’s preliminary injunction motion was argued over three full days in September and October of last year. The argument was accompanied by over 700 pages of briefs and exhibits. It is therefore not surprising that the judge took more than five months to consider and draft his ruling. While that ruling was pending, the Gene by Gene case was settled on February 6, 2014, on terms that have been characterized as an unconditional surrender by the defendant. Gene by Gene reportedly agreed to cease “selling or marketing” BRCA gene tests, either on a stand-alone basis or as part of a broader panel, although it did retain the right to offer whole genome or whole exome testing, as well as certain “custom” products.

The key to understanding the legal standard for granting a preliminary injunction (or PI) is the word preliminary. To grant a PI, the judge must, in effect, pre-judge the case, deciding to give the plaintiff a remedy without benefit of hearing the witnesses examined and cross-examined at trial. Instead, the court relies on written affidavits from witnesses, documents appended to them as exhibits, and written briefs and oral arguments from the lawyers on the two sides. It’s a lot of stuff, but it’s not a trial. The biggest difference may be the absence of the cross-examination of live witnesses, where judges and juries get to hear weaknesses probed and make critical assessments about credibility.

As Judge Shelby recounted in his PI opinion, a plaintiff bears a heavy burden in supporting a motion for a PI—that is, providing a basis for the pre-judgment it’s asking the court to make. That burden has four elements: (1) That the plaintiff is likely to succeed at trial (“on the merits,” in legal jargon); (2) that the plaintiff will suffer “irreparable harm” if it doesn’t get the PI; (3) that the “balancing of the equities” favors the plaintiff; and (4) that the public interest favors the PI. Myriad persuaded Judge Shelby on issue (2) but failed on the (1) and (3), with (4) unclear. So no PI.

The bulk of the opinion is devoted to a detailed and learned discussion of genes and gene testing (though I’m sure my scientist and patent lawyer friends will have many quibbles) and the analysis of likelihood of success on the merits. The biggest issue was Ambry’s anticipated defense that the patent claims Myriad is suing on are invalid. (In an infringement suit the defendant can prevail by proving that the plaintiff’s patents should not have been granted in the first place.) Ambry raised every kind of invalidity argument: that Myriad’s patents do not recite patentable subject matter (section 101, the issue in AMP), that they lack novelty (102), that they are obvious (103), and that they fail to satisfy the written description requirement (112). The court—and this was a surprise—based its decision solely on section 101, finding the other arguments redundant. Specifically, it found that Myriad failed to show probability of success on the merits because Ambry had raised a “substantial question” about the validity of the relevant Myriad patent claims.

Judge Shelby grouped the Myriad claims into two categories: “Primer Claims,” which are product claims relating to single-stranded DNA primers used in the polymerase chain reaction (PCR) replication of BRCA 1 and 2 genes, and “Method Claims” that cover screening BRCA genes for mutations by comparing the sequences of patient samples with wild-type, or normal, sequences. The judge found that the Primer Claims might not be patentable subject matter because they fell within AMP’s rejection of claims on merely isolated DNA, even though the primers in question are composed of cDNA (synthesized, with non-coding regions excised), not g(genomic)DNA. This finding may be controversial on appeal: most observers—including Myriad’s lawyers—thought that the Supreme Court had barred patents only on isolated gDNA. But Judge Shelby focused on two sentences in the AMP opinion in which the Supreme Court said: “cDNA is not a ‘product of nature’ and is patent-eligible under § 101, except insofar as very short series of DNA may have no intervening introns to remove when creating cDNA. In that situation, a short strand of cDNA may be indistinguishable from natural DNA” (emphasis added). Judge Shelby thought that the Myriad primers were just such “short strand[s] of DNA, and hence likely to be patent-ineligible.

With respect to the Method Claims, Judge Shelby found them indistinguishable from the claims rejected in the Supreme Court’s Mayo v. Prometheus decision and the Federal Circuit’s method claims rulings in AMP, which were not reviewed by the Supreme Court. Specifically, the judge held that “[a]side from the patent ineligible, naturally occurring nucleotide sequence of the BRCA1 and BRCA2 genes, the other steps set forth in the Method Claims are conventional activities that were well-understood and uniformly accepted by those working with DNA.” That is, just as the Mayo claims added only conventional medical activity to a law of nature, the Method Claims add only conventional interpretive activity to a product of nature—so no patentable subject matter in either case. The Mayo analogy strikes me as a bit of a stretch.

The court did rule for Myriad on irreparable harm, on the theory that even if Myriad won the case and collected damages, the lack of a PI would have caused “price structure erosion” that could not be undone. But this finding was overwhelmed by balancing the harm to Ambry if the PI were granted and it were ultimately found not liable: it would almost certainly have been put out of business. The court then found that the public interest was unclear: would the public be better off as a result of short-term price competition or by letting Myriad continue as a high-quality if high-priced patent monopolist?

In understanding the decision, the key factors may be the numbers three, 700, and 106. The typical strong PI case is straightforward and simple, something like this: the defendant is a former employee who stole our trade secret in violation of a confidentiality agreement and is now seeking to sell it to a competitor; if you don’t stop him now the trade secret may become public, which cannot be undone. But tell me that a PI hearing goes on for three days with 700 pages of paper, and that it will take the judge 106 pages to explain his decision, and I’ll predict that this case is just too complicated for the pre-judgment that a PI requires.

A unique aspect of an order granting or denying a PI is that—unlike almost all other pre-trial orders—it is immediately appealable. So rather than awaiting the end of the trial, Myriad can take this decision to the Federal Circuit now. A trial is likely to be at least a year away, and an appeal of the PI could suspend proceedings and delay trial another by six months or a year. As I said above, Judge Shelby’s reading of AMP will be controversial, and his Mayo methods analogy will be as well. The Federal Circuit judges might well disagree on either or both points. But even if they do, that doesn’t mean that they’ll order him to issue the PI. A lower court decision can be affirmed on any ground that’s discernible from the record, whether or not the lower court relied on it. So, for example, the Federal Circuit might reverse on likelihood of success (that is, likelihood of the patent claims proving invalid), but still affirm the denial of the PI on the basis of the balance of the harms. Or it might just say that the case is far too complicated to determine likelihood of success, which would also result in the PI being invalidated.

In terms of significance, the ruling means that Ambry can continue to compete. Judge Shelby would presumably reach the same conclusion about these same patents in any other infringement cases that come before him. But it is only a preliminary ruling by a federal trial court, so it has no legally binding effect on any other court. In fact, since it’s preliminary, it has no binding effect in this case—the judge could change his mind after trial and issue a permanent injunction. Other courts might find it influential, but they need not. As I said at the beginning, this decision has substantial business significance, at least in the short term, but it does not make law.