* Unanimous ruling is first of its kind for U.S. top court
* Compromise decision was sought by Obama administration
* Myriad Genetics shares close 5.6 percent lower on Nasdaq
* Decision could help people get cheaper genetic tests
By Lawrence Hurley
WASHINGTON, June 13 (Reuters) - A unanimous U.S. Supreme Court on Thursday prohibited patents on naturally occurring human genes but allowed legal protections on synthetically produced genetic material in a compromise ruling hailed as a partial victory for patients and the biotechnology industry.
The ruling by the nine justices, the first of its kind for the top U.S. court, buttressed important patent protections relied upon by biotechnology companies while making it clear that genes extracted from the human body cannot be patented.
Researchers and advocates for patients said it could make it easier for people to get cheaper genetic tests for disease risk.
The court’s ruling came in a challenge launched by medical researchers and others to seven patents owned by or licensed to Salt Lake City, Utah-based biotechnology company Myriad Genetics Inc on two genes linked to breast and ovarian cancer.
The decision “sets a fair and level playing field for open and responsible use of genetic information,” said Dr. Robert Darnell, president and scientific director of the New York Genome Center, an alliance of medical centers and research universities. “At the same time, it does not preclude the opportunity for innovation in the genetic world.”
Myriad’s work on cancer screening gained worldwide attention this year when actress Angelina Jolie announced she had a double mastectomy after undergoing a test and finding she had an extremely high risk of developing breast cancer.
The biotech industry saw some good in the ruling, noting that the justices left intact patent protections on forms of DNA produced by scientists in laboratories and the processes used to carry out tests such as cancer screenings. The industry had said an expansive ruling against Myriad could have threatened billions of dollars of investment.
The contentious, uniquely 21st century question before the court was whether any human genes can ever be patented - meaning the holders have exclusive rights to their intellectual property for a defined period. The issue has gained increasing importance as scientists make progress in identifying specific genes, or mutations, linked to a variety of diseases.
The court, in an opinion written by Justice Clarence Thomas, ruled that forms of DNA that have been manipulated in the lab in a way that alters their natural state can be patented.
Called cDNA - the “c” stands for “complementary” - it is essentially an edited form of a gene, with extraneous stretches excised. This DNA is patent eligible, the court said, because it is not naturally occurring, unlike isolated DNA simply extracted from a human body.
In the opinion, Thomas wrote that because cDNA is not naturally occurring, it can be patented under federal law. A laboratory technician, he added, “unquestionably creates something new when cDNA is made.” Thomas noted that so-called method patents, which concern technical procedures for carrying out a certain process, are not affected by the ruling.
The compromise outcome, which had been recommended to the justices by the Obama administration, will have less impact on Myriad than if the court had barred patents for all types of human genetic material. The Myriad patents in dispute will all expire by 2015, though the company said it holds other patents that will protect its tests through 2018 and potentially beyond.
Myriad’s shares initially rose nearly 13 percent to as high as $33.87 after the company declared victory and several industry analysts said its most important patents had been upheld, providing protection for its BRCA test revenue. The genes at the heart of the case are called BRCA1 and BRCA2.
Shares gave back the gains and turned lower after potential rivals announced intentions to market BRCA gene tests. Myriad shares closed down $1.91, or 5.6 percent, at $32.01 on Nasdaq.
“Based on our initial review of the court’s decision, we expect it will open opportunities for Quest Diagnostics to develop new testing services, including in the area of hereditary breast cancer,” Quest spokeswoman Wendy Bost said.
“As the leader in women’s health and cancer diagnostics, we are very interested in offering a BRCA testing service. We now intend to validate and offer a BRCA1 and BRCA2 test service to physicians and patients this year,” Bost added.
Myriad said the decision left intact 24 different patents that relate to the BRACAnalysis test. Peter Meldrum, Myriad’s president and CEO, said the ruling ensures “strong intellectual property protection for our BRACAnalysis test moving forward.”
A group of medical researchers, associations and patients - represented by the American Civil Liberties Union - filed suit in 2009, saying human genes including synthetically produced material should not be patented.
The plaintiffs said they were not concerned about the ruling on cDNA because patents relating to that, in their view, have little impact on genetic testing, their focus in the case.
Harry Ostrer, a professor at the Albert Einstein College of Medicine of Yeshiva University in New York, predicted a “much more even playing field” for genetic tests now that a company like Myriad cannot control access to the genes themselves.
With the ruling, “labs can begin to offer this testing immediately and many say they will,” said Ellen Matloff, head of cancer genetic counseling at Yale Cancer Center and one of many academic scientists who tried to have patients tested for breast cancer genes only to be told it would violate a gene patent.
Gregory Graff of Colorado State University, who led a recent study analyzing gene patents, said people will now be able to “get a second opinion on their BRCA test because other companies will be able to offer tests” based on forms of DNA that the court said cannot be patented.
The U.S. Patent and Trademark Office has granted patents on at least 4,000 human genes to companies, universities and others that have discovered and decoded them. Patents now cover some 40 percent of the human genome, according to one study.
The decision will stop the practice of the Patent and Trademark Office granting patents to companies that isolate DNA but will allow patents for firms that build DNA from its basic chemicals, said Ed Reines, of Weil, Gotshal & Manges LLP.
“The patent office was granting patents on isolated biological composition, such as DNA. That will not be happening in the future,” Reines said.
The case is Association for Molecular Pathology v. Myriad Genetics, U.S. Supreme Court, No. 12-398.