TORONTO -- One of the most contentious issues in genetics is whether researchers should be allowed to patent human genes found to cause disease and to commercialize diagnostic tests based on those mutated snippets of DNA.

Courts in the U.S. and Australia, for example, have banned the practice, but in Canada no law prohibits scientists from taking out patents on bits of the human genome and their associated products for use in patients.

But an out-of-court settlement earlier this month between an Ottawa hospital and a global company that holds patents on genes and a related test for a potentially deadly heart rhythm disorder may have vastly altered the Canadian gene-patenting landscape.

In what could be characterized as a David and Goliath contest, the Children's Hospital of Eastern Ontario (CHEO) launched a court challenge in late 2014 against U.S.-based Transgenomic Inc., which holds patents on five of the flawed genes underpinning long QT syndrome and the diagnostic test for the inherited disorder.

CHEO argued that human genes should not be subject to patents for commercial or any other purposes. In the case of Canadian patients suspected of having long QT syndrome, their DNA samples had to go to U.S. labs for testing at a cost of at least $4,500, more than double the price tag in Canada.

That patent-driven cost, argued CHEO, meant hundreds of thousands of dollars a year in excess costs to the country's publicly funded health-care system.

"But the broader issue was that those kinds of single-gene patents on naturally occurring sequences or mutations would in theory prevent us from moving forward with the next generation of genetic testing, which is already starting to be used," said Dr. Gail Graham, a clinical geneticist at CHEO.

That testing -- called whole-exome sequencing -- examines key chapters of all of the roughly 23,000 genes in the human genome. A consortium of Canadian researchers led by CHEO, called Care For Rare, has already identified 81 new gene anomalies related to extremely rare inherited diseases in children.

"So in theory, if we had a child who we thought had a very rare genetic condition ... and we wanted to use whole-exome sequencing to find an extraordinarily rare disease gene in that child, the long QT patents might have prevented us from doing that," Graham said.

"Because we weren't supposed to be reading through those particular genes, which are part of the exome."

That would have meant doctors couldn't tell a child's family about their findings -- or their risks of having another child with the condition -- without infringing on the patent.

"And we just found that unacceptable," she said.

"If you're the one in a million who has a newborn baby who dies in the first few months of life, it's absolutely devastating. And you would do almost anything to prevent that from happening again."

But on March 9, CHEO announced a settlement with Transgenomic, which agreed to allow it and all other public-sector Canadian hospitals and labs to use its long QT syndrome test on a not-for-profit basis.

While the agreement doesn't set a precedent in law -- no Canadian court has ruled on whether human genes can be patented -- it does serve as a precedent for the operation of the Patent Act, said Richard Gold, a professor in law and medicine at McGill University who helped advise CHEO on its challenge.

"CHEO did achieve a precedent ... that a private entity looking after its commercial interests recognizes that it shouldn't be making money off of the public sector," Gold said, adding that the agreement provides a template for publicly funded institutions challenging other gene-related patents in the future.

"So the next time someone comes into Canada with a gene patent and says we want to exercise it against a hospital or a lab, the answer is you should cite this agreement ... there are mechanisms that exist within the Patent Act that force essentially the same (outcome)."

However, patent attorney Noel Courage isn't convinced.

"I wouldn't call it a precedent. I wouldn't call it binding in any way in any other gene case, but it's a really interesting angle to the case," said Courage, a partner at Bereskin & Parr LLP in Toronto.

"To me, this doesn't settle whether isolated genes are patentable; it doesn't settle anything about whether methods of diagnosis are patentable.

"There was no court decision on that, so that's still an open issue."

Courage wonders whether Transgenomic capitulated because it believed its legal position wasn't strong or because the company decided it wasn't worth spending hundreds of thousands of dollars to litigate the case in the comparatively small Canadian market.

"It doesn't say much about what's going to happen in any other case," he said. "Someone else with a robust business in Canada may decide to fight for it.

"If somebody starts a new case, they're starting from scratch."

So what might this mean for Canadian researchers who make new discoveries about disease-causing genes and want to seek a patent?

"Fundamentally, I don't think it will affect researchers at all," said Samuel Abraham, former vice-president of research at the BC Cancer Agency, which took out "defensive" patents after leading the Canadian research team that first sequenced the SARS virus genome in 2003.

"We took out patents on that on the proviso that we were able to work with groups nationally and internationally to create a patent pool," Abraham said from Vancouver. "And we did that so we never lost control of access to it ourselves."

The purpose was to allow the global research community and pharmaceutical partners access to SARS' genetic signature without ceding exclusive rights to any of them.

"At the end of the day, they would generate vaccine and other methodologies for detecting, inhibiting (the virus) if SARS ever came back. And perhaps even coming up with therapeutic vaccines," he said.

"Those end products are what they got their patents around. The seminal or underlying information they never got to touch."

While there is nothing stopping a researcher from seeking a gene patent, Gold said their legality in Canada, at least, is still up in the air.

"My opinion is that these patents related to isolated genes are invalid in Canada, but no one knows that for sure until a court decides," he said.

"So if I'm a researcher, would I spend the money patenting it when I know that ... even if a patent is issued to me, it's quite likely invalid?

"And my answer would be no."