Historically, 35 U.S.C. § 101, the statute governing patent eligible subject matter, has been construed broadly—with its legislative history indicating that it should cover “anything under the sun that is made by man.” The Supreme Court crafted three exceptions to § 101: (1) abstract ideas, (2) laws of nature, and (3) natural phenomena. In recent years, the Supreme Court’s eligibility jurisprudence has further narrowed § 101 to effectively exclude meritorious medical diagnostic methods. Indeed, since the Court’s decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., the Federal Circuit has held every single diagnostic method claim brought before it patent ineligible.
This Note begins by discussing the merits of medical diagnostic tests and their relevance to modern precision medicine. It then dissects the Supreme Court’s decisions in Bilski v. Kappos and Mayo, highlighting the uncertainty regarding patent eligibility of medical diagnostic methods following these cases and the Federal Circuit’s application of the Court’s Alice/Mayo test. This uncertainty has rippled through the medical diagnostic and venture capital industries, sparking concerns about under-investment in diagnostic R&D.
The heart of this Note is an empirical study of venture capital investment in disease diagnostic technologies before and after Bilski and Mayo. Using a difference-in-difference methodology to analyze venture capital investment data from the PriceWater Clearinghouse Moneytree Tool, this Note examines whether current § 101 jurisprudence has caused these selective investors to decrease investment in companies developing medical diagnostics technologies that—in light of Mayo and its progeny—appear to be patent ineligible. Ultimately, the study indicates that in the four years following Mayo, investment in disease diagnostic technologies was nearly $9.3 billion dollars lower than it would have been absent Mayo.
This Note presents five key implications related to its central finding. First, the data supports the recent calls to Congress for reform of § 101. Second, it complements other key research regarding investment behavior following Mayo and Alice. Third, the data raises the question whether remaining innovation in the diagnostics space will be enough to support the precision medicine movement. Fourth, underinvestment in diagnostics and the discovery of disease biomarkers may lead to underinvestment in treatments. Lastly, this Note’s findings suggest that at least some venture capital firms employ greater caution when determining whether to invest in a company developing (or aiming to develop) diagnostics, which may spur hesitancy to form such companies in the first place.