The Patent and Trademark Office has decided to revoke a fundamental patent held by Genentech, the biotechnology company, that was at the center of a recent Supreme Court decision.
The patent office’s decision could cost Genentech hundreds of millions of dollars in royalties over the next decade but would save a like amount for rivals that are paying the royalties, including MedImmune, Abbott Laboratories, Johnson & Johnson and ImClone Systems.
In a statement yesterday, Genentech said it would appeal the decision through the patent office and, if necessary, the courts. The company said the patent would remain “valid and enforceable” through the appeals process.
The decision is the latest in a long controversy, and even mystery, surrounding the patent. The patent was awarded in 2001 even though the inventions on which it was based were made in the early 1980s. If not revoked, the patent, often called the Cabilly II patent after the lead inventor, Shmuel Cabilly, would expire in 2018.
Last month the Supreme Court ruled that MedImmune could challenge the patent even though it had licensed the rights to use it. Lawyers said the decision would have a big impact on how patent licensing deals are structured.
The patent covers techniques for making monoclonal antibodies, which are the basis for many of the biggest selling products made by the biotechnology industry. Genentech shares revenue from the patent with its research partner at the time, the City of Hope, a medical center in Duarte, Calif.
Genentech said that in 2006 it earned 6 cents a share, equivalent to $105 million in pretax income, from the patent, after subtracting what it paid to City of Hope. That was less than 3 percent of its adjusted earnings per share of $2.23.
A Genentech spokesman said the biggest royalties come from Humira by Abbott, Remicade by Johnson & Johnson, Synagis by MedImmune and Erbitux by ImClone.
An analyst at Sanford C. Bernstein & Company, Geoffrey C. Porges, wrote in a note yesterday that the impact of the decision “is greater for the companies paying royalties on Cabilly than it is for Genentech.” Genentech, based in South San Francisco, Calif., is enjoying booming sales of its drugs for cancer and eye disease.
In moving to revoke the Cabilly II patent, the patent office said other patents had predated it, including the original Cabilly I patent, which expired last year.
The office had issued a preliminary ruling to revoke the patent in 2005, saying it represented double patenting of the same invention and would inappropriately extend Genentech’s patent protection by 12 years.
The re-examination of the patent was requested by a Chicago lawyer, Liza V. Mueller. She has not revealed whom or which company she represents, though it is presumably one of the companies that pay royalties to Genentech.
MedImmune filed a lawsuit against Genentech in federal court in Los Angeles in 2003, challenging the patent. It also said Genentech had violated antitrust laws by colluding with Celltech, a British company and unit of UCB, to extend patent protection.
Genentech denied all of those accusations.
Both Genentech and Celltech were awarded patents covering similar antibody technology in 1989. Genentech then added some claims from the Celltech patent to a second patent application that it had previously filed on the same work. That forced the patent office to decide whether Genentech or Celltech was the first inventor.
In 1998, the patent office ruled in favor of Celltech. Genentech then took its case to Federal District Court in Northern California.
In 2001, however, Genentech and Celltech reached a settlement, agreeing that Genentech was the rightful inventor. The reason given was that Genentech had discovered an early draft of its patent application that predated Celltech’s application.
The court ordered the patent office to grant a new patent to Genentech. The new patent, Cabilly II, would extend to 2018, even though both the original Cabilly and the Celltech patents would have expired in 2006.
MedImmune raised questions about whether Celltech was also profiting by giving up its soon-to-expire patent in favor of Genentech’s new one. The terms of the settlement between Genentech and Celltech have never been made public.
According to a brief filed by City of Hope in the recent Supreme Court case, Celltech shared in some of the royalties from the new Cabilly patent for a limited period but received less money than it would have if its own patent had remained in force.
The court in Los Angeles dismissed MedImmune’s antitrust charges, saying that the settlement between Genentech and Celltech had been appropriately approved by the judge overseeing their case. It also said MedImmune could not sue to invalidate the patent since it was a licensee of the patent.
MedImmune appealed that latter decision to the Supreme Court, which last month ruled that a party did not have to breach a patent license to challenge a patent. MedImmune’s claims regarding the Cabilly II patent will now be tried in the lower courts.
MedImmune’s general counsel, William C. Bertrand Jr., said the company was pleased with the decision to revoke the patent.
“We believe they adopted a lot of the arguments that we’ve propounded concerning this particular patent over the years,” Mr. Bertrand said.
