Category Archives: Medical Research

The tricky issue of ownership of employee inventions

It is typically assumed that the intellectual output of an employee belongs to their employer; and indeed, the common law in Australia will imply a term into employment contracts (where one doesn’t already exist) to the effect that the employer is entitled to the product of the work that the employee is paid to perform. This is the case even when the product is a patentable invention and Australian patent law vests rights in the first instance in the individual inventor.

However, there is an important common law exception to this rule which is particularly applicable in academia, but also translatable to scientific research institutes. This exception means that in certain circumstances the employee, rather than the employer, will own the output of their work. These circumstances can create issues for research institutes who seek to commercialise, license, sell, or otherwise deal with such intellectual output where their title to it is not clear.

Therefore, in order to effect ownership and commercialisation strategies without doubt, it is important for employers to ensure that the intellectual property created by their researchers vests on creation in the employer, through the insertion of appropriate clauses in employment contracts and/or binding intellectual property policies.

The common law exception

The reason why it is so important to have appropriate clauses in place is to avoid the situation that arose in the University of Western Australia v Gray[1] and Victoria University of Technology v Wilson[2] cases. In these cases the universities had failed to adequately displace the common law through the proper incorporation of intellectual property policies into the employee’s employment contracts, with the effect that when the dispute arose, the courts had to approach the issue from the common law perspective.

In these two cases the intellectual property created by the academics in question was ultimately deemed to be the property of those academics, and not the relevant University which employed them. These cases have relevance for research institutes as well. In fact, UWA v Gray was extensively cited in the Australian Patent Office case of The Royal Children’s Hospital v Alexander[3].

In the UWA v Gray and VUT v Wilson cases a distinction was drawn in respect to whether it could be implied that the academic is employed to invent, in addition to their role to perform research (UWA v Gray), or whether the research that the academic undertakes is of a kind which would normally result in the making of inventions (VUT v Wilson). Where the academic is not employed to invent (as found with Gray), or the research they undertake is not of a kind that would normally result in inventions (as found with Wilson), then it would be more likely that the academic’s inventions would be owned by the academic and not the employer.  In VUT v Wilson the court said that, while all the circumstances must be considered in each case, unless the contract of employment expressly so provides, or an invention is the product of work which the employee was paid to perform, it is unlikely that an invention made by the employee will be held to belong to the employer (my emphasis).

There are a few different considerations to take into account outside of the academic arena such as, for example, in research institutes. As was discussed in UWA v Gray, the nature of universities and the public purpose they serve means that there is an underlying objective of generating and disseminating information; this can negate any implication of a duty to invent because, for the purpose of profiting from such an invention an environment must exist where the results of the research are kept in confidence. As described in RCH v Alexander, in an industrial setting, an employer is interested in commercialising their inventions and therefore publication of an invention which destroys the validity of future patent rights would be undesirable.

For this reason, in the private sector, a duty of confidentiality on employees typically exists. However, this circumstance can not on its own determine whether there is an implied duty to invent; other relevant factors would need to be taken into account. In RCH v Alexander, for example, the Patent Office found that one of Alexander’s inventions was an improvement to a device where the existing design was already effective, and it could not have been expected of him as part of his employment at the RCH to pursue this particular improvement. Therefore, for this reason, and because Alexander’s employment contract did not displace the common law, it was determined that the invention belonged to Alexander and not his employer.

It is a difficult lesson to learn for these universities and institutes where, in good faith, they may have had an expectation of owning the work products of their employees, but it goes to show that it is always worthwhile, for any entity in the business of research, to carefully establish IP ownership from the outset.

Elizabeth Campbell

[1] University of Western Australia v Gray (2009) 179 FCR 346.
[2] Victoria University of Technology v Wilson (2004) 60 IPR 392.
[3] The Royal Children’s Hospital v Alexander [2011] APO 94.

The High Court’s decision in Myriad – the outcome and its potential impacts

In the decision handed down by the High Court on 7 October 2015 in D’arcy v Myriad Genetics Inc [2015] HCA 35, the High Court overturned the judgments of six members the Federal Court and found in favour of the applicant.

While delivered in three separate judgments, the finding of the High Court was unanimous: isolated nucleic acids are unpatentable in Australia. The judgment turns on its head decades of established precedent with respect to the rules for establishing what is patentable subject matter, and could have serious ramifications for the biotechnology industry in Australia.


The case against Myriad was brought by Yvonne D’arcy, a breast cancer survivor, and was aimed at having Myriad’s patent for the gene sequence which codes for mutations in the BRCA1 protein, which are indicative of susceptibility to breast and ovarian cancer, revoked. Darcy and her supporters’ position was that, as a sequence of naturally occurring DNA and RNA, even in isolated form, is a product of nature, it cannot form the basis of a valid patent.

The Court’s Finding

Only the first three claims of the Myriad patent in suit were at issue in the appeal. Each of the disputed claims was directed to a product, being an isolated nucleic acid coding for a mutant or polymorphic BRCA1 polypeptide. None of claims 1 to 3 was restricted to any particular application of the claimed nucleic acids (eg, their use in screening tests for cancer susceptibility).

The High Court noted that Myriad’s claims focused on the information conveyed in the claimed compounds, which information underlies the utility of the claimed nucleic acids in cancer screening. Importantly, their Honours noted that the information was not “made” by any human action, but merely “discerned”.

By the rules established in the seminal NRDC case, the High Court assessed whether the claims of the patent fell within the boundaries of patentable subject matter; namely, did the Myriad patent claim a “manner of manufacture”? Since NRDC, it has been accepted in Australia that in assessing patentability it is relevant to ask whether claims are directed to a product or process that has been made by human intervention (“an artificial state of affairs”) and have economic utility. However, in Myriad the High Court moved away from the established principle, explaining that this alone is not a sufficient test. Indeed, in the High Court’s view such a test may represent an overly narrow approach where a new application or extension of patent eligibility is at issue.

The Court propounded a list of other factors that should be considered in such cases, including:

  • whether the invention as claimed would give rise to a new field of monopoly protection with negative effects on innovation and have a “chilling effect” on activities beyond those the subject of the patent’s monopoly;
  • whether to accord patentability would enhance or detract from the coherence of the law relating to patentability;
  • considerations of international law and Australia’s obligations under it; and
  • whether according patentability in such a case would involve law-making of a type which should be done by the legislature.

Chilling Effect

Their Honours considered that the three claims in suit in the Myriad patent did not meet the threshold requirement to be patentable subject matter. In finding this, the Court considered that a “chilling effect” would be the outcome of Myriad’s claims, because use of the generic term “isolated nucleic acid” meant that the boundaries of the claimed monopoly were elusive. This outcome of the chilling effect was described by the High Court as leading to an “exorbitant and unwarranted defacto monopoly”, one of the practical consequences of which would be that a person carrying out a genetic test would not know until it was done whether or not the Myriad patent had been infringed. That is, the person’s DNA which was subject to the test may or may not have contained the relevant BRCA1 mutations.

Something that the Court did not consider though, was whether the changes to the “patentable subject matter” test for consideration of all new applications would in itself provide a chilling effect on innovation in the biotechnology sector.  Given the level of investment required at the R&D stage to reap the rewards of a patentable invention in biotechnology, this new test of patentability for new applications could put a dampener on the sector.

It is interesting too that the Court did not mention the research exception under Australia’s patent law, which means that a “chilling effect” would not occur with respect to the use of the claimed isolated nucleic acid used for research purposes, which was presumably one of the reasons for bringing the case.

Legislative Consideration and International Law

The Court also considered the law-making arm of the expanded test to be influential; to affirm the patentability of an isolated nucleic acid would require the Court to consider questions of public policy and conflicting interests which Parliament is better equipped to address.  However, in two senate enquiries in recent years the outcomes supported maintaining the patentability of isolated nucleic acid molecules. If Parliament wishes to allow isolated nucleic acid molecules to be patentable in light of this case, the High Court has effectively asked the Parliament to spell this out in the legislation.

In this context, the Parliament would no doubt consider the laws of other countries (the EU and China, importantly, still allow isolated nucleic acid molecules to be patented) and Australia’s position under TRIPS and under the recently negotiated TPP.

The Practical Effects

From a practical point of view, in terms of isolated nucleic acid molecules this decision is likely to have relatively little impact on patentability since the sequencing of the genome has effectively barred new patent claims directed to isolated nucleic acid molecules on the grounds of lack of novelty.  Accordingly, it is other “products of nature” type patents for which this decision may lead to more serious consequences.

In the meantime, the High Court has called into the question the validity of thousands of issued Australian patents and IP Australia have advised that granted patents containing nucleic acid sequence claims will not be re-examined unless requested by a third party.

In terms of BRCA1, the case did not invalidate any of Myriad’s claims for a diagnostic use of an isolated nucleic acid, so Myriad’s monopoly on its use in diagnostics remains intact. It therefore appears, that in spite of the stated claims of the D’acry camp the real effect of this case is that it has created a huge amount of uncertainty for the Australian biotechnology and pharmaceutical sectors, which could undermine future investment and innovation.

Elizabeth Campbell

The Medical Research Future Fund to become a reality

On 12 August 2015, the Senate passed the government’s legislation to establish the Medical Research Future Fund (the MRFF). The intention of the Fund is to provide funding for medical research and innovation, and to provide stability for such funding into the future, with the capital to be preserved in perpetuity.

According to a joint press release, the MRFF will receive an initial contribution of $1 billion from the Health and Hospitals Fund. The remaining contributions into the MRFF will come from 2014-15 Budget savings in the health portfolio which have passed, or will pass through the Parliament in the future, until the balance in the MRFF reaches $20 billion. The first $10 million in additional medical research funding will be distributed in 2015-16 and over $400 million is estimated for distribution over the next four years.

I have previously written about the MRFF and commented on:

  1. the concerns surrounding the source of the funds in the MRFF;
  2. whether or not the MRFF will in fact be additional research funding to that offered by the National Health and Medical Research Council (NHMRC) and Australian Research Council (ARC); and
  3. whether the MRFF would support the translation of research through to product development and  commercialisation.

On the first issue, the government’s failure to part fund the MRFF through GP co-contributions has been well-documented and, with the current make-up of the Senate, such a measure is extremely unlikely to ever succeed.

On the second, setting aside whether or not the funds which will make up the MRFF will be cannibalised from funds that would otherwise have been available for distribution by the NHMRC or ARC, one of the 20 changes that the Senate made to the legislation was that the independent expert advisory board in charge of administering the MRFF will include the CEO of the NHMRC; my hope is that this will go some way towards providing cooperation and coordination between the two funds. In addition, the Minister for Health will be required to report to the Parliament once every two years on how research funded by the MRFF meets the MRFF board’s strategy and priorities. These reports will have to compare the spending profile for the MRFF against that of the other Commonwealth funds available for medical research and innovation and should prevent wastage of resources.

The third issue is, essentially, what stages of medical research will be supported by the MRFF. It is widely accepted that the translation of the excellent research and innovation emerging from Australia’s universities and research institutes is an area that needs attention. If the MRFF focusses solely on early stage innovations, and businesses are not given an incentive to translate, then ideas could move overseas for development and commercialisation with the investment from the MRFF never being realised through company growth and sales in Australia. On the other hand, funding late-stage commercialisation of medical research is a domain that would typically be left to – and some would argue is better left to – the private sector with its nous for assessing commercial risk. Translational research sits between academic research and the research required to commercialise medical innovation; investment in this key stage could increase the productivity and profitability  of the medical research sector in Australia.

The MRFF will raise Australia’s overall expenditure on medical research to the average OECD level. I hope that its administration will build on the strengths of Australia’s medical research sector.

Elizabeth Campbell

Another look at Myriad and the patentability of “genes”

Towards the end of last year, a unanimous decision of the Full Federal Court of Australia in D’Arcy v Myriad Genetics Inc [2014] FCFCA 115, found in favour of Myriad and upheld the first instance decision of the Federal Court that isolated nucleic acids are patentable in Australia.

The position put forward by the appellant D’Arcy was that a sequence of naturally occurring DNA and RNA, even in isolated form, are products of nature that cannot form the basis of a valid patent.

Myriad argued successfully that the sequence of DNA responsible for coding the BRCA1 gene that it had succeeded in isolating from the cell’s nucleus was a patentable “manner of manufacture” under section 18 of the Patents Act 1990 (Cth).  Myriad’s argument centred on an assertion that the isolated nucleic acid differs from nucleic acid found in a human cell chemically, structurally and functionally and the isolation of the nucleic acid will lead to an economically useful result.

However, far from the finding of the Full Court putting this issue to rest, D’Arcy’s application to appeal the finding of the Full Court was successful, meaning that the High Court of Australia will be considering the issue. According to the solicitors for D’Arcy this is scheduled to take place in April 2015.

The decision to allow the appeal is an important one for a number of reasons:

  • firstly, it is clear that the High Court considers this question to be one of such importance as to require a serious reconsideration and a definitive resolution from Australia’s highest court, especially as the decision to allow the appeal was given in the face of the unanimous decision of the judges of the Full Court of the Federal Court and the judge of the Federal Court at first instance;
  • secondly, it potentially opens the door for the High Court to take a view on the patentability of isolated nucleic acids in Australia which conforms with that in the USA, where an isolated gene sequence is not currently patentable; and
  • finally, the flow-on effects to the biotechnology industry in Australia will be of serious concern, both in terms of the revenue potential of patents, as well as the funding of research and development into this area if a return on that investment will be difficult to obtain.

In its media release of 13 February 2015 on the successful application to appeal, Maurice Blackburn, the solicitors for D’Arcy, stated that the issue “has enormous significance for access to genetic testing, research and the development of treatments for diseases suffered by millions of Australians.” While this statement is intended to demonstrate reasons why the High Court should overturn the decisions of the lower courts, to me it could also be used to support the Full Court’s decision. If researchers are not able to patent the isolated nucleic acids which are the fruits of considerable scientific endeavour and effort, would the impetus to carry out this research and development exist? The failure of research in this area would indeed have significance on access to genetic testing in that the testing would not be available.

The media release further states that the issue for consideration by the High Court “raises a number of ethical, philosophical and legal questions about the commercialisation of the human body” and indeed it does. However, in my view, and, it seems, in the few of the Full Court, these are issues for the consideration of Parliament and not the High Court.

While I fully appreciate that the statements in this media release are not legal argument, they do serve to paint a useful picture of the way that these issues are considered outside of a legal forum. Written submissions are already being made to the High Court by the parties in this matter, and the Institute of Patent and Trade Mark Attorneys of Australia has sought leave to intervene as amicus curiae, and so we wait with baited breath for its decision.

Elizabeth Campbell

MRFF: what is the future of the future fund?

Reading the recent reporting and commentary on the Medical Research Future Fund (MRFF), it is difficult to get a grasp on whether its introduction will be a “good thing”.

Overwhelmingly, research institutes support the introduction of the MRFF, though some commentators have requested a more “socially acceptable” way of funding the research. The opposition in this respect had been focussed on the prospective source of the funds, namely the $7 dollar GP co-payment. While the government’s rethink of the policy would exempt certain vulnerable groups from the requirement to pay to visit their GP, commentators have pointed to evidence from around the world that suggests that any co-payment will stop people from accessing health care. If people skip necessary GP appointments and get sicker, costing the health system and the broader economy in doing so, will a MRFF funded in part by the savings made from these individuals ultimately have no net benefit?

Other commentators question whether the MRFF is simply an accounting sleight of hand – a way for the government to say that it is not making any cuts to health spending while doing just the opposite. In this way  “savings” in health (such as the cuts made to National Health and Medical Research Council (NHMRC) and Commonwealth Scientific and Industrial Research Organisation (CSIRO)) are repurposed to build the $20 billion MRFF, the interest on which will be spent on medical research. The net saving to the government’s budget is immediate. However, as the payments from the net interest earnt on the MRFF will now begin in the 2015-16 financial year, and as the government is in deficit, it will have to add further borrowing to its normal borrowing (which covers the deficit) in order to finance the spending on medical research through the MRFF. As a mere lawyer it has taken me ages to understand the thinking behind this argument, but it seems to me to mean that the money for medical research is ultimately coming from the same place. Is it drawing too long a bow to say that the MRFF is not additional research funding at all?

Further, it should be asked what the MRFF will support that is not currently supported by the country’s two main funding bodies, the NHMRC and Australian Research Council (ARC). I would like to see a focus on funding to support the translation of research through to product development and ultimately to commercialisation. A recurring theme at industry events is that, while Australian scientists excel at research, we fall far behind in translating that research to commercial outcomes.

Setting aside where the funds will come from, and to what end they will be directed, Australia’s current level of investment in medical research is just 75 cents of every $1,000 of the nation’s GDP and less than two-thirds of the OECD average. Investing more in medical research is a solid investment for the future and one which the government should embrace.

Elizabeth Campbell