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'Gene patents no longer need to stand in the way of diagnosing life-threatening disease."

That's how Alex Munter, president and chief executive officer of the Children's Hospital of Eastern Ontario, summed up the impact of an out-of-court settlement in the lawsuit CHEO launched against Transgenomic Inc. in 2014.

Transgenomic, a biotechnology company based in Omaha, Neb., owns five gene patents related to the potentially deadly heart condition Long QT syndrome.

What that meant, practically, was that if CHEO (or any other hospital) wanted to test patients for Long QT, they had to send the blood sample to Transgenomic and pay $4,800 – even though the hospital had the ability to do the same tests for about $1,500. Further, if a genetic defect that points to Long QT was discovered incidentally – for example, when the lab did a panel on larger parts of the genome – that information could not be communicated to the patient, again because of the patent.

Dubious patents were preventing the timely diagnosis and treatment of sick children and "we found that morally reprehensible," said Gail Graham, CHEO's chief of genetics. So the hospital, with the help of pro bono lawyers, sued to have the patents invalidated and, in the process, strike down parts of the Canadian Patent Act.

The case had far-reaching implications because there are about 7,000 disease genes that are amenable to patenting in Canada and because we are on the cusp of the era where whole-genome testing will become the norm.

In 2013, the U.S. Supreme Court, in a landmark case involving Myriad Genetics Inc., ruled that genes could no longer be patented. Practically, that means companies can still market tests but cannot do so exclusively, so prices drop.

Because the CHEO-Transgenomic case did not get to court, this country's absurd patent laws still stand. (Canada is one of the only countries in the Western world that still allows genes to be patented.)

But Mr. Munter said a settlement was better for patients than a drawn-out legal battle. "We can't let the glacial pace of legal proceedings impede the lightning speed of genomic advances," he said.

Besides, the out-of-court settlement, which allows CHEO or any other publicly funded hospital or laboratory to test for the five Long QT genes without having to pay Transgenomic or having to report to the company, achieves the same end goal.

"We set out to invalidate patents and, instead, we found a way to make patents irrelevant," Mr. Munter said.

Doing the Long QT tests in-house will save Ontario about $200,000 a year, and likely bring down the $24-million a year it spends on out-of-country gene testing (most of it the result of patent issues).

But, much more important, the deal sends a warning signal to other biotech companies that profiteering from gene patenting will not be tolerated. This is crucial as we move from single-gene testing to exome- and whole-genome testing.

Richard Gold, a professor in the faculties of law and medicine at McGill University, said the key element of the agreement is that it sets out what reasonable terms are for testing for patented genes, namely that there should be no cost to publicly funded institutions.

The Commissioner of Patents can, under Canadian law, override a patent if the product is used for public, non-commercial reasons and if a user tried to negotiate a reasonable deal. The provinces have been calling on Ottawa to invoke this clause since 2003, when a legal dispute erupted with Myriad after the company patented the breast cancer genes BRCA1 and BRCA2, and Ontario and British Columbia opted to do the testing themselves, at a much lower cost.

Prof. Gold said having a public licensing agreement, as set out in the CHEO settlement, is a "much better approach than litigating for every test."

He said the agreement will also be a boon for innovation and research. Canadian patent law allows fairly broad use of patented genes for research purposes, but researchers will now be able to tap into clinical data from patients and, it's hoped, develop better tests and treatments, without the fear of litigation.

The takeaway message here is that patents – which reward those who bring new products and services to market with 20 years of reduced competition – remain important.

But some things should not be patentable – not water, not air and not human DNA.