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Although it is not yet a bright line, the Federal Circuit has considerably decreased the fuzziness of the distinction between patent-eligible and patent-ineligible inventions, at least where the exception to 35 U.S.C. § 101 is a law of nature. In Rapid Litigation Management Ltd. v. Cellzdirect, Inc., Appeal No. 2015-1570 (Fed. Cir. July 5, 2016), the Federal Circuit reversed the district court’s holding of invalidity under § 101, ruling that the district court erred in applying both step 1 and step 2 of the Supreme Court’s framework for determining patent eligibility. See Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347, 2355 (2014).

The district court held that the patent in suit is directed to a law of nature—that hepatocytes, a type of liver cell, are capable of surviving multiple freeze-thaw cycles—and that the patented process lacks the requisite inventive concept. Hepatocytes have a number of uses, such as for investigating how drugs may be metabolized by the liver or measuring a drug’s effect on liver biology, but their availability is limited and their life span is short. The prior art disclosed freezing hepatocytes (“cryopreservation”), thawing them when needed, and recovering the viable cells using density gradient fractionation, but persons of ordinary skill in the art understood that that process could damage the cells and lead to poor recoveries of viable cells. Moreover, pooled samples from multiple donors, desirable to create a collection of cells approximating average liver cells, could be created only by accumulating and freezing cells from single donors and then thawing and combining them for immediate use. Those skilled in the art believed that cryopreservation could be employed only once, and cryopreservation could damage cells, which severely limited the creation of pooled cells.

The inventors’ discovery was a law of nature: that a fraction of hepatocytes can survive multiple freeze-thaw cycles. Based on that discovery, the inventors claimed a method of producing a collection of hepatocytes by subjecting previously frozen and thawed cells to fractionation to separate and recover viable cells, and refreezing the viable cells, which, after being thawed again, exhibit 70 percent viability. Thus, claim 1 recites:
<ol>
	<li>A method of producing a desired preparation of multi-cryopreserved hepatocytes, said hepatocytes being capable of being frozen and thawed at least two times, and in which greater than 70% of the hepatocytes of said preparation are viable after the final thaw, said method comprising:</li>
</ol>
(A) subjecting hepatocytes that have been frozen and thawed to density gradient fractionation to separate viable hepatocytes from nonviable hepatocytes,
(B) recovering the separated viable hepatocytes, and
(C) cryopreserving the recovered viable hepatocytes to thereby form said desired preparation of hepatocytes without requiring a density gradient step after thawing the hepatocytes for the second time, wherein the hepatocytes are not plated between the first and second cryopreservations, and wherein greater than 70% of the hepatocytes of said preparation are viable after the final thaw.
Claim 5 depends on claim 1 and limits the “preparation” to a pooled preparation of cells from multiple sources.

The patented process enables the production of cells that can be thawed later with sufficient viability, and for the first time permits refreezing of pooled hepatocyte preparations for later use. The district court, however, invalidated the claims under § 101 as directed to a law of nature (step 1) and as simply reapplying “a well-understood freezing process” (step 2).

The Federal Circuit accorded no deference to the district court, noting that patent eligibility is a question of law. Its reasoning in reversing the district court on both steps 1 and 2 reveals important factors in determination of the issue.

One factor, applicable to all of the exceptions to § 101, is whether the claimed invention preempts the natural phenomena, abstract idea, or law of nature. “The concern underlying these judicial exclusions is that ‘patent law not inhibit further discovery by improperly tying up the future use of these building blocks of human ingenuity.’” Slip op. at 7 (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1301 (2012)). Regarding step 1, the court emphasized that the exception applies only if the claims are “directed to” a patent-ineligible concept. The court reasoned that the patented claims on appeal are directed to a laboratory technique for preserving hepatocytes, not the law of nature, i.e. the ability of hepatocytes to survive multiple freeze-thaw cycles. Instead, the inventors “employed their natural discovery to create a new and improved way of preserving hepatocyte cells for later use.” Slip op. at 9. Moreover, the court relied on the district court’s finding that the patent in suit did not preempt the natural law as confirming its conclusion under step 1. Slip op. at 16-17. Thus, whether a claim is “directed to” a patent-ineligible concept appears to be closely related to whether it preempts the concept.

The court distinguished cases it had held to have patent-ineligible claims. Those cases, the court said, had claims that required merely observing or identifying the ineligible concept itself. Id. In Genetic Techs., Ltd. v. Merial L.L.C., 18 F.3d 1369, 1373-74 (Fed. Cir. 2016), the court explained, the patent claimed detecting a coating region of DNA based on its relationship to non-coating regions, the relationship constituting a law of nature. Consequently, “the claim amounted to nothing other than identifying ‘information about a patient’s natural genetic makeup.’” Slip op. at 9 (quoting Genetic Techs. at 1375). Similarly, the court explained that in Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371, 1373-74 (Fed. Cir. 2015), cert. denied, No. 15-1102, 2016 WL 1117246 (June 27, 2016), the patent-ineligible claims recited methods for detecting paternally inherited cffDNA in the blood of a pregnant female, and because the existence of cffDNA is a natural phenomenon, detecting it was “claiming the natural phenomena itself.” Slip op. at 9. And regarding the claims in In re BRCA1- &amp; BRCA2-Based Hereditary Cancer Test Patent Litig., 774 F.3d 755, 761-62 (Fed. Cir. 2014), the court reasoned that “comparing two sequences to detect alterations is a patent-ineligible ‘abstract mental process.’” Slip op. at 9 (quoting id. at 763) (emphasis added). The “essence of the whole” in each of those cases, according to the court, was a patent-ineligible concept. Slip op. at 9-10.

By contrast, the court noted that the patent claims before it were “directed to a new and useful method of preserving hepatocyte cells,” not just the ability of the cells to survive multiple freeze-thaw cycles. Slip op. at 10 (emphasis added). The patent claims
are like thousands of others that recite processes to achieve a desired outcome, e.g., methods of producing things, or methods of treating disease. That one way of describing the process is to describe the natural ability of the subject matter to undergo the process does not make the claim “directed to” that natural ability. If that were so, we would find patent-ineligible methods of, say, producing a new compound (as directed to the individual components’ ability to combine to form the new compound) . . . .
Slip op. at 10.

Regarding the pooling of cells required by claim 5, the court relied on the difference between product and process claims. The court distinguished Funk Bros. Co. v. Kalo Innoculant Co., 333 U.S. 127 (1948), where the Supreme Court held that a mixture of different bacterial species was not patent eligible because each species in the mixture performed in its natural way, by observing that Funk Bros. involved product claims while in the case before it “the claims are directed to a new and useful process of creating that pool, not to the pool itself.” Slip op. at 11. The court noted that in Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107, 2116 (2013), the Supreme Court similarly observed that that case held composition claims to isolated DNA ineligible and that “[h]ad Myriad created an innovative method of manipulating genes . . . it could have possibly sought a method patent.” Slip op. at 11 (quoting Myriad, 133 S. Ct. at 2119-20) (emphasis added). In the case before it, the Federal Circuit reasoned, “the inventors developed an innovative method of manipulating hepatocytes . . . .” Slip op. at 11 (emphasis added).

The court concluded regarding step 1 by emphasizing that mere involvement of a patent-ineligible concept does not invoke the prohibition of step 1 if the claim is not “directed to” the patent-ineligible concept. The patent in suit, the court reasoned, “does not simply claim hepatocytes’ ability to survive multiple freeze-thaw cycles,” but “instead claims a ‘method of producing a desired preparation of multi-cryopreserved hepatocytes.’” Slip op. at 13 (quoting claim 1).

Having held that the district court erred in its holding regarding step 1, the Federal Circuit could of course have stopped. Perhaps to provide additional guidance in this developing area of the law, however, the court proceeded to explain why the district court also erred regarding step 2. The Federal Circuit reasoned that the claimed process improved an existing technological process sufficiently to transform it into an inventive application of what the defendants alleged was a patent-ineligible concept. The claims “recite an improved process for preserving hepatocytes for later use. The benefits of the improved process over the prior art methods are significant. . . . The claimed method is patent eligible because it applies the discovery that hepatocytes can be twice frozen to achieve a new and useful preservation process.” Slip op. at 13-14.

The court rejected the argument that because each claimed step was known individually, the combination of steps did not make the claim patent eligible. It explained, “in examining claims under step two, we must view them as a whole, considering their elements ‘both individually and as an ordered combination.’” Slip op. at 14 (quoting Alice, 134 S. Ct. at 2355) (internal quotations and citation omitted). The court reasoned that although freezing and thawing were well known, “[r]epeating a step that the art taught should be performed only once can hardly be considered routine or conventional. This is true even though it was the inventor’s [sic] discovery of something natural that led them to do so. . . . To require something more at step two would be to discount the human ingenuity that comes from applying a natural discovery in a way that achieves a ‘new and useful end.’” Slip op. at 15-16 (quoting Alice, 134 S. Ct. at 2354).

Finally, the court made two important observations. First, “patent-eligibility does not turn on ease of execution or obviousness of application” once the natural law was discovered. “Those are questions that are examined under separate provisions of the Patent Act.” Slip op. at 16 (citing Mayo, 132 S. Ct. at 1304). Second, the court relied on the district court’s finding that the patent in suit did not preempt the natural law and that the defendant had already managed to design around the patent. “[W]hile pre-emption is not the test for determining patent-eligibility . . ., it is certainly the ‘concern that undergirds . . . § 101 jurisprudence,’ Alice, 134 S. Ct. at 2358.” Slip op. at 16. As noted above, the court asserted that the lack of preemption confirmed its conclusion that the patent is not “directed to” a patent-ineligible law of nature. Slip op. at 16-17.

In summary, key points from the case appear to be:
<ol>
	<li>Claims that do not preempt one of the exceptions to § 101 tend to be patent eligible.</li>
	<li>Mere involvement of a law of nature, and perhaps natural phenomena or abstract ideas, does not render a claimed invention patent ineligible unless the claims are “directed to” one of those exception to § 101. A claim that simply recites a law of nature is likely “directed to” that law of nature.</li>
	<li>A claim that applies a law of nature or abstract mental process merely by reciting a step of observing, identifying, detecting, or comparing may be held to be “directed to” the law of nature or abstract mental process.</li>
	<li>But a claimed method that goes further and applies a law of nature to achieve a better way of producing something or treating disease will likely qualify for patent protection.</li>
	<li>In applying step 2, that all of the claimed steps individually were well known does not disqualify a process from patenting if the combination of steps is new and therefore not routine and conventional.</li>
	<li>That a patented process would have been obvious once the law of nature was discovered does not render the process patent ineligible, but rather depends on application of § 103.</li>
	<li>Preemption vel non, although not conclusive, is an important factor in determining patent eligibility.</li>
</ol>

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