Patents and Biotechnology
The biotechnology industry is vital to human progress and America’s economy. The sector depends heavily on the incentive provided by patents to rationalize the enormous risk of investing in life science research and development (R&D). These risks pay off for society by generating solutions that help diagnose, prevent, and treat diseases and disorders; improve human health and food production; and provide greater energy security, water development, and environmental protection. These accomplishments, moreover, create well-paying jobs and drive global competitiveness.
Despite these positive attributes, questions and controversies are emerging at the nexus of biotechnology and our patent system. These challenges will have significant impact on a wide array of scientific disciplines, including molecular biology, biotechnology, embryology, genetics, and bioinformatics. Indeed, these are sectors in which the United States has a comparative advantage that must be maintained. How well society addresses these issues will significantly influence the state of our economy and creative capacities for years to come.
ADMINISTRATIVE CHALLENGES. The patent system is plagued by the following three major problems that create uncertainty and pile on higher costs that encumber the biotech sector’s ability to maintain a high rate of innovation:
1. Patent backlogs and application processing delays due to the U.S. Patent and Trademark Office’s (USPTO’s) mushrooming workload, the increasing complexity of patent claims, and an inability to recruit and retain technically savvy examiners.
2. Poor patent quality, such as overly broad or ill-defined intellectual property (IP), which adds uncertainty and spawns resource-sapping lawsuits.
3. Excessive litigation, including the actions of patent trolls created to buy patents for the purpose of claiming infringement and extracting fees, rather than using IP to market useful goods.
LEGAL CHALLENGES. Four major legal challenges dominate the biotech patent landscape:
1. Defining what degree of alteration to naturally occurring matter, such as a gene sequence, is necessary to qualify as a patentable “invention” in light of the Supreme Court’s 2013 Association for Molecular Pathology v. Myriad Genetics, Inc. decision.
2. Identifying what constitutes patentable utility, novelty, unobviousness, and description of altered genomic and proteomic material.
3. Classifying what constitutes patent infringement, particularly for academic research using patented genomic material.
4. Protecting IP rights, particularly abroad.
INNOVATION CHALLENGES. Meeting four major challenges arising at the intersection of biotech and patent policy will deeply influence the fertility of the U.S. innovation system:
1. Finding the innovation sweet spot where genuine intellectual property is duly protected, while stimulating the openness, freedom, and collaboration upon which the scientific process thrives.
2. Clarifying what qualifies as pure research versus commercial pursuit for purposes of patent infringement indemnification.
3. Fostering the sharing of biomedical data as an open platform to drive innovation.
4. Reducing policy and legal uncertainty, created by changing patent standards, in transparency of patent awards, uneven IP protection, trolling abuses, and privacy rules, so that the innovation system can function more efficiently.
ETHICAL CHALLENGES. Four ethical challenges must be overcome to maintain a vigorous pace of biotech development:
1. Addressing public concerns regarding the human alteration of genetic codes—the blueprints for life.
2. Coping with unintended scientific, social, environmental, and public health consequences from DNA manipulation.
3. Making lifesaving biomedicine available to those who can’t afford it while continuing to incentivize innovation.
4. Protecting privacy of personal genomic information.
ORGANIZING GOALS AND PRINCIPLES. The effort by policymakers, business leaders, and the public to grapple with these challenges must be informed by a central organizing point: patents are a tool to drive innovation, not the other way around. Focusing on this strategic guidepost and observing a set of core principles will help us navigate the challenges more successfully.
- Harness incentive to drive R&D and the deployment of goods, services, and solutions.
- Maintain a set of essential balances between patent exclusivity and open scientific inquiry, society’s need for lower-cost therapies and the incentive needed to produce them, collaboration and competition in the innovation process, and the basic and applied research necessary for biotech invention.
- Mind the law of unintended consequences in policy setting, and ensure that innovation policymaking is proactive and well informed.
- Facilitate public support by protecting human dignity, personal privacy, and the public interest.
MAJOR ISSUES TO WATCH. After the Supreme Court’s Myriad decision stating that genes are a product of nature and therefore not patentable, two pivotal questions remained: (1) What degree of DNA alteration by humans renders genetic material patentable? (2) Will the inability to patent genetic sequences that are excised from the body stifle research and the ability to bring novel gene-based tests, medicines, and therapies to market?
As we tackle these questions, stakeholders should remain vigilant for significant developments that will shape the biotech innovation landscape:
- Response to Myriad. Look for changes resulting from the Supreme Court’s decision in capital investment and research patterns, gene therapy development and the search for single gene mutations, and the volume and claims of gene patent applications.
- America Invents Act (AIA). It is important to examine how the speed and accuracy of patent processing is improved by AIA reforms, including the expedited examination of applications, a new “first to file” standard, and the establishment of USPTO satellite offices.
- Patent standards/USPTO modernization. Keep an eye on any changes that occur in patent eligibility criteria—specifically, the core tenets of invention, novelty, utility, and unobviousness as they relate to genomic and proteomic applications. Observers should see the degree of improvement on genetic material that is needed for it to be patentable.
- Synergy of genetic science, information technology, and big data. Gene science is utilizing supercomputing and big data to understand and sequence the human genome; find correlations between genetic factors and human maladies; screen genes for drug leads; and develop better diagnostic tools, drugs, and therapies. Look for developments at the intersection of these disciplines, particularly in privacy issues and personalized care.
- Patent trolls. Look for efforts to curb lawsuit abuse and whether the cases are properly tailored in order not to envelope patent holders that maintain IP for legitimate reasons.
- International. Seek developments in biotech/biomed IP issues in international trade negotiations and patent harmonization efforts, particularly with the U.S.-EU and the Trans-Pacific Partnership negotiations.
- Microbial evolution. Look for public health and biomedical implications as microbes mutate around countermeasures more quickly, shortening the useful life of antibiotic medications and the window for biomedical firms to recoup investment.
STEPS TO CONSIDER. To better prepare ourselves to cope with life science patenting challenges and opportunities, consider the following steps:
- Reevaluate the architecture and performance of our biotech policymaking and administrative institutions in light of the system’s purpose of promoting innovation that serves the public interest.
- Improve the collection, analysis, and dissemination of biotech innovation data. Useful data on the impact that patent laws, policies, practices, and standards have on creativity will increase our understanding of the U.S. innovation system and better inform policymaking.
- Implement an IP education campaign. Public attention on IP issues is on the rise. Stakeholders at home and abroad need to understand the important role that IP plays in meeting human needs.
- Develop a biotech innovation policy strategy. The United States must be more strategic and purposeful in strengthening its innovation ecosystem in the critical biotech arena. A well- conceived strategy that calibrates our complex maze of laws, policies, and initiatives to bring solutions to the market faster would serve us well in years to come.
Business and industry associations should measure the impact of public policy on the life sciences as well as clearly communicate what’s at stake. There’s a particular need for knowledgeable actors to speak to the questions we’ve asked and to create a home for life science innovation policy. Despite the array of impressive benefits that genetic science has already yielded, Science magazine predicts that “biotech’s best years are yet to come, particularly in the pharmaceutical trade.” The National Research Council notes that “advances in the life sciences have the potential to contribute innovative and mutually reinforcing solutions to global-reaching, societal challenges ... and at the same time, serve as the basis for new industries that will anchor the economies of the future.” Perhaps most exciting is that we find ourselves in the infancy of what Massachusetts Institute of Technology (MIT) calls the “Third Revolution”—in which the “convergence of life sciences, physical sciences and engineering” will spawn revolutionary new products and processes with new market opportunities.
Without a more purposeful and comprehensive national attention to fostering life science innovation, the status quo could clog the pipeline of useful products and services on which our global competitiveness and prosperity will heavily rely. Competitors in Europe and in Asia understand the importance of life science innovation and are focusing research, development, and deployment initiatives on this future-defining arena. The warning for the United States to “innovate or abdicate” rings loudly. This begins going back to the strategic premise: the patent system exists to drive innovation and not the other way around.
In April 3, 2003, scientists representing the Human Genome Project (HGP) rose to the podium at a crowded news conference and made a historic announcement. The team had decoded the human genome—among the most important achievements in human history. Building on decades of genetic research, the pioneers had produced the Rosetta stone for deciphering the blueprints of life.
Cracking the genetic code has enabled mankind to read the billions of miles of DNA in the human body and comprehend its instructions for producing proteins—the building blocks of life. It has advanced man’s ability to anticipate and shape biological outcomes, as well as imitate, combine, and customize genetic instructions to create new life-forms of increasing sophistication and complexity.
Breakthroughs in genetic understanding have yielded new methods of anticipating, preventing, diagnosing, and treating human diseases and disorders. But the benefits continue to extend well beyond human health. Gene-based innovation involving plant, animal, microbial, and other nonhuman life-forms has the potential to help meet major global challenges involving food production, energy development, and environmental protection. By all accounts, the most spectacular life science marvels are yet to come; and the most disruptive breakthrough will likely be one we can barely imagine today.
What’s certain, however, is that achievements in life science hinge on America’s ability to maintain a superb ecosystem of innovation—an asset produced by the synergy of four key elements:
- World-class brains.
- Ample resources to finance solutions, research, development, and deployment.
- Excellent cross-disciplinary collaboration to drive transformational insight.
- Strong incentive to invest time, money, and energy in the innovation process.
Incentivizing and enabling individuals and enterprises with vision, talent, and ambition to turn creative ideas into useful goods is the mission of the U.S. patent. From its inception 225 years ago, the patent system has been the central catalyst of U.S. innovation that drives the most productive economy on Earth.
A patent grants the holder exclusive intellectual property rights to his or her invention or discovery for a limited period of time in exchange for making the innovation public. This enables the inventor to recoup his or her investments, before being undercut by imitators who neither risked capital nor toiled to invent, and reap the fruits of a job well done. Patents, in the words of Abraham Lincoln, “added the fuel of interest to the fire of genius.”
The quality and scope of U.S. patent laws, policies, and procedures will heavily influence our ability to fuel the fire of genius in the cutting-edge disciplines of bioscience and bring its life- improving potential to fruition in the years to come.
It is not the purpose of this paper to mire the reader in the arcana of bioscience patent law or the complexities of genetic science. The aim is to provide useful and timely input to policymakers, business leaders, and the public through the following:
1. Exploring why bioscience (i.e., genetics) is so essential to the nation’s economic future.
2. Examining the important role that patent policy will play in shaping the future.
3. Identifying the major issues and controversial questions at the intersection of genetics and patent policy.
4. Suggesting strategic objectives, principles, and approaches that may be helpful in coping with the legal, economic, and social challenges materializing on the biotech patent policy front.
Biotechnology: The Opportunities and Stakes
The marvels listed in this paper are but a small sampling of the transformational capabilities emerging from our biotechnology innovation system. As the state of genetic science matures, a greater variety of ways to meet essential human needs will be revealed. The industry’s crucial role in the country’s economy will expand. Reaping its full benefits, however, requires wise and prudent public policy—informed by a clear understanding of the stakes.
BENEFITS: JOB CREATION. As reported in Science magazine, “The North American biotech business has grown to a behemoth that consists of more than 1,280 companies, with market capitalization exceeding $200 billion. Last year’s sales of $13.4 billion and revenues of $18.6 billion more than doubled the industry’s figures for 1993, according to consulting firm Ernst & Young.” Moreover, in 2012, “American biotechnology companies spent $9.9 billion on research and development (R&D)” to keep the pipeline of solutions and job creation flowing.
According to the Biotechnology Industry Organization, the industry is responsible for “directly employing 1.42 million Americans in high-quality jobs and indirectly supporting an additional 6.6 million workers; [and] the average biotechnology employee makes $77,595 annually, far above the national average salary.” Wages in the field remain “79% greater than the average paid in the overall national private sector.” By some estimates, “biomedical engineering jobs are expected to grow a staggering 72% by 2018, the highest percentage growth of any field by far.”
“The message is clear,” says the Battelle and Biotechnology Industry Organization and Biothreport, “a strong bioscience industry base offers the United States of America ... a high value economic driver. It stands out in its creation of high quality jobs, the breadth of markets it serves, and its research and development.”
BENEFITS: COMPETITIVENESS. The United States, however, is not alone in recognizing the enormous potential of biotech. The Battelle and Biotechnology Industry Organization report cites the “mounting global competition for bioscience industry development as both developed and developing nations seek to grow and advance in this high-wage, high-growth industry.”
As the National Technical Information Service reports, “A number of nations have targeted biotechnology as being critical for future economic growth.” China is investing heavily in biotech and “hopes to keep the average annual rate of growth of the industry at 20% between 2013 and 2015.” Across the globe, biotech hubs and clusters are proliferating, taking center stage in the competitiveness strategies of countries both big and small. Not just in China, but in Canada (particularly the provinces of Ontario, Quebec, British Columbia), Asia (including Japan, Singapore, Taiwan, China, South Korea, Malaysia, and Australia), and Europe (especially Munich, Germany; Cambridge, United Kingdom; Basel, Switzerland; Oslo, Norway; as well as France, Denmark, Sweden, the Netherlands, and Belgium).
Our comparative advantage, though, is huge. We have the world’s greatest public and private research institutions, unique biomedical infrastructure, and strong federal support. The American system synchronizes the collaboration of academia, government, and the private sector, making us the global leader in delivering biotechnological developments. Our leadership, however, will be tested mightily in the years to come as demand grows and competition stiffens. Maintaining our excellence in this field of the future is a strategic and economic necessity.
BENEFITS: REVOLUTIONIZING HEALTH CARE. The field where biotechnology is expected to have its keenest impact is health care. The breakthroughs in diagnosing, preventing, and treating disease have not come as swiftly as predicted a decade ago. It turns out that diseases and disorders have more complicated origins than predisposition correlated to a single gene or set of genes. The genetic factors are themselves more complex than previously understood and many “nurture” issues also play a hand. Deciphering the multiform causes of human health problems has been complicated and time-consuming work, as has been deriving therapies from genomics and proteomics. Nevertheless, “more than 350 biotechnology-based drugs—designed to treat AIDS, Alzheimer’s disease, diabetes, heart disease, multiple sclerosis, and obesity, among other conditions—have started human clinical trials.” Increasingly, we will look to pharmacologists, makers of advanced medical devices and equipment, and providers of research, testing, and medical services to deliver better health care at far lower cost.
A report produced by the Human Genome Project (HGP) notes, “as our understanding at the molecular level of how things like diabetes or heart disease or schizophrenia come about, we should see a whole new generation of interventions, many of which will be drugs that are much more effective and precise than those available today. The HGP reports that “most new drugs based on the completed genome are still perhaps 10 to 15 years in the future.”
The next great leap forward is the era of personalized medicine. It will soon be possible to have one’s personal genome sequenced for $1,000, providing individualized data on hereditary susceptibility to disease and enabling prevention and customized therapies that could “transform the practice of medicine.”
By some estimates, genetically based diagnostics and preventative care could help stop health care costs in their tracks—an economic imperative for a country that is reeling from the highest health care costs in the world. In 2010, the United States spent $2.6 trillion on health care— by far more in gross terms and as a share of Gross Domestic Product (GDP) than any other country. U.S. health care spending leapt from 7.2% of GDP in 1970 to 17.9% of GDP in 2010. No other country even comes close, and our costs continue to expand at a faster clip than our productivity.
Enormous health care costs are placing a debilitating strain on our households, enterprises, and public finances—an average of $8,402 per person per year and growing. In many instances, these expenses are borne by businesses struggling to compete in a price-sensitive global economy. In a 2010 survey of more than 500 U.S. chief financial officers and senior comptrollers about their cost concerns, the No. 1 by far was the rising expense of employee benefits, including health care and pensions. Moreover, rising health care costs play a significant role in massive federal and state budget imbalances that degrade our business environment and endanger the country’s prosperity. By expanding productivity, spurring job growth, and reining in health care costs, biotech innovation is an economic necessity.
A troubling aside is the little bang we get for our health care buck. In its January 2013 report titled U.S. Health in International Perspective: Shorter Lives, Poorer Health, the Institute of Medicine of the National Academies says that while the United States is “among the wealthiest nations in the world ... it is far from the healthiest. Although Americans’ life expectancy and health have improved over the past century, these gains have lagged behind those in other high- income countries.” Ranking 17 high-income countries by life expectancy at birth (in 2007), U.S. males and females placed 17th and 16th, respectively. The “health disadvantage prevails even though the United States spends far more per person on health care than any other nation.” The Institute went on to say that “[t]he tragedy is not that the United States is losing a competition with other countries, but that Americans are dying and suffering from illness and injury at rates that are demonstrably unnecessary.”
BENEFITS: MODERN AGRICULTURE, ENERGY, AND JUSTICE ADMINISTRATION. The benefits of biotech extend well beyond the ability to revolutionize man’s ability to cost- efficiently predict, prevent, diagnose, and treat diseases and disorders. The industry will factor heavily in achieving global energy, water, and food security. Genetic technology is helping render crops more disease resistant, water efficient, and nutritious, and may be the only way to meet global food demand—expected to double by 2050—while protecting natural resources. More than 13.3 million farmers around the world use agricultural biotechnology to increase yields, prevent damage from insects and pests, and reduce farming’s impact on the environment.
In the energy sector, genetic know-how is being employed to alter how plants turn sunlight into chemical energy, making possible new, cheaper, and more environmentally friendly forms of biofuel. Craig Venter, widely credited as the first person to sequence the human genome, is working to genetically modify algae to produce energy. No fewer than 50 biorefineries are being built across North America to test and refine technologies to produce biofuels and chemicals from renewable biomass, which can help reduce greenhouse gas emissions. Even in the administration of justice, biotechnology is transforming the state of the art, helping genetically identify the guilty and exonerate the innocent.
BENEFITS: TRANSFORMING THE FUTURE. Despite the array of impressive benefits that genetic science has already yielded, Science magazine predicts that “biotech’s best years are yet to come, particularly in the pharmaceutical trade.” The National Research Council’s study titled A New Biology for the 21st Century notes that “advances in the life sciences have the potential to contribute innovative and mutually reinforcing solutions to global-reaching, societal challenges ... and at the same time, serve as the basis for new industries that will anchor the economies of the future.”
Perhaps most exciting is that we find ourselves in the infancy of what MIT calls the “Third Revolution”—in which the “convergence of life sciences, physical sciences and engineering” will spawn revolutionary “new products and processes with new market opportunities.” The potential was captured by authors John Naisbitt and Patricia Aburdene in their book Megatrends 2000: “As we move through the next millennium, biotechnology will be as important as the computer.” Looking ahead to 2050, The Economist says, “Medical miracles are likely to come from genetically targeted drugs, vaccines that do not need refrigeration during transport and stem cells that grow new tissues.”
MEETING A FUNDAMENTAL CHALLENGE. Such a future will not come to fruition, however, unless we are able to sustain a fertile environment in which the promise of biotech can blossom to its full potential—a strategic objective that can’t be achieved without a modern, efficient patent system. The patent system is an integral component of America’s overall innovation system—one that doesn’t run on autopilot, oblivious to the legal and economic environment. It is a complex architecture that is responsive to public policy choices and incentives that will either nurture or stymie it. Moreover, the view that intellectual property is bad for society is on the rise at home and abroad. An informed public discussion is essential to ensure that policymaking is positively influenced by educated public sentiment.
Why Patent Policy Matters
The intellectual property rights (IPR) protection system has been the lifeblood of American economic prowess since the birth of the nation. Its foundations were established in Article I of the U.S. Constitution, which empowered Congress “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”
In 1790, Congress exercised this authority to establish a national patent system for granting intellectual property protection to “any new and useful art, machine, manufacture, or composition of matter, or any new or useful improvement thereof.” Now, as then, the award of a U.S. patent confers on the recipient the exclusive right to make, use, and sell an invention for a limited period of time (usually 20 years) in exchange for public disclosure of the invention. The system is administered by the U.S. Patent and Trademark Office (USPTO) and enforced by the federal courts.
More than two centuries later, patent-driven innovation remains America’s fountainhead for job creation, productivity, and a rising quality of life. Nearly half of U.S. GDP since World War II has been derived from patent-reliant technology. IP-intensive industries employ more than 40 million workers and generate $7.7 trillion in gross output (nearly 33% of the total). The IP system will continue to pace our country’s development, particularly in the trade-based global economy where the sustaining a high rate of innovation is crucial.
Importance to Biotech. While we rely on the IP system to stimulate innovation across the economy, the modern biotech sector is perhaps the most patent dependent by virtue of the enormous costs of discovery in such a long-lead and labor-intensive industry.
It takes nearly 10 years and on average costs $1.8 billion to bring a new pharmaceutical to market. Even longer periods of time and higher costs are required to produce genetically derived therapies—in which failure is an integral part of the discovery process. “Typically, less than 1% of the compounds examined in the pre-clinical period make it into human testing. Only 20% of the compounds entering clinical trials survive the development process and gain Food and Drug Administration approval.”
Without having to incur these monumental development costs, imitators can readily reproduce winning therapies and offer them at far lower prices than those who bore the sacrifice of discovery. Lower costs sound appealing to a cash-strapped health care system. But without the ability to recoup their investments, the willingness of biotech innovators to spend enormous sums necessary on investigation will wither, starving the pipeline of new therapies.
This dynamic is especially relevant to “recombinant protein therapeutics” (RPT), the most promising biomedical frontier. The process of mixing and matching genetic material to derive therapies is exceptionally expensive, and the products are harder to bring to market than conventional drugs.
This is why RPT development depends so heavily on patent protection. “Patents,” reports the National Institutes of Health (NIH), “have largely played their traditional role of inducing investment in engineering and product development, including expensive post-discovery clinical research to prove safety and efficacy.”
What would our innovation system look like without patents? It’s hard to imagine that it would be much to look at given that the primary alternative would be trade secrecy. But the high cost of seeking patent protection overseas, among other reasons, is elevating the status of trade secrecy as an IP tool of choice, despite its chief shortcoming. As the NIH points out, “trade secret protection lasts for as long as the secret is kept confidential. If the secret is never publicly disclosed, it will never lose its protection. If the secret is uncovered by means of industrial espionage, disloyal employees, theft, or the like, the owner of the secret has legal recourse against those who misappropriated the secret, or anyone who procured it through such impropriety.” Protection is not afforded, however, “in the event that someone managed to successfully duplicate the recipe by legitimate means.”
A trend toward greater trade secrecy to avoid the pitfall of an insufficient patent regime poses two significant problems. For companies, it’s unsustainable because today’s technology makes inimitability exceedingly difficult to maintain. For society, it’s undesirable because secrecy deeply undermines the scientific process that feeds on the kind of transparency and collaboration that the patent system was conceived to deliver.
Opting for trade secrecy over patent protection will have a chilling effect on innovation and threatens to undermine broad-ranging scientific advancement. The quality of innovation touches our lives and enterprises in so many ways. Thus, we are all stakeholders in the patent debate and, in particular, the life science patent debate.
U.S. Patent System: The Challenges
Biotech, though a highly unique sector and particularly reliant on IP, must meet the same patent criteria for its innovations as apply to those of all other industries and faces the same challenges posed by the administration of the system. Regardless of industry, winning a patent for a “discovery” or “invention” requires the claimant to meet a four-part test. The discovery or invention must be novel. It must have usefulness. It must be unobvious. And it must be adequately described.
As simple as these requirements may appear, devising and applying fair, rational, and up-to- date criteria for each standard is extremely difficult, particularly when the system is dealing with complex, technical material in a high-stakes environment. Biotech, like other industries, lives at the mercy of the USPTO and suffers greatly when the IPR process is deficient, as does our economy from jobs and opportunity lost.
Three problems continue to loom large with our patent system in general—a significant and persistent backlog of patent applications, poor patent quality, and an increasing level of IPR litigation and violation. A poorly performing patent system is a major liability when speed to market, first-mover positioning, and cost control in a global economy are necessities, particularly in the frontier biotechnology field where the United States must remain a world leader.
BACKLOGS AND DELAY. As of September 2012, the USPTOs reported a logjam of unexamined patent applications exceeding 608,000 submissions. First Office Action Pendency (the average number of months from the patent application filing date to the date a “First Office Action” [i.e., the first documentary action made by the examiner regarding the substance of the patent is dispatched by the USPTO]) is currently 21.9 months. Traditional Total Pendency (the time that a patent application is originally filed to when the USPTO issues or abandons the patent) is currently 32.4 months. In 2008, the USPTO director, noting the trend of increasing applications and longer pendency periods, stated that the office’s “biggest challenge is to address the growth of pendency and the backlog of patent applications waiting to be examined while maintaining high quality.”
In 2012, the USPTO received more than 576,000 applications, three times the number submitted in 1992. Each year the applications are more technical and challenging. Meanwhile, the USPTO continues to experience difficulty maintaining a qualified cadre of examiners able to make good decisions in a timely fashion.
POOR PATENT NOTICE AND QUALITY. The USPTO’s deficit in human capital not creates only a sclerotic patent system but also one that issues too many poor-quality patents. Poor patents (those that are overly broad or don’t truly meet the novelty, utility, unobviousness, and describe- ability criteria) impede innovation as does the rejection or delay of legitimate applications.
As former Senator John Sununu pointed out in a recent Boston Globe editorial, “When the U.S. Patent and Trademark Office issues a patent that is overly vague, broad, or trivial, it invites uncertainty and litigation.”
Moreover, insufficient patent notice and titling is a significant burden on the system. Ill-defined and poorly publicized patents in particular, and improper patent decisions more generally, foster resource-sapping litigation that enriches lawyers at the expense of research and product development. According to one study of gene patents, more than one-third of a sampling examined was deficient.
Not only do these insufficiencies stem from patent examiners who aren’t up to speed on technology, but the lack of technological expertise by the judges who hear patent cases contributes to the problem.
LAWSUIT ABUSE. For those who successfully navigate the USPTO’s wickets and obtain a patent, another major problem awaits—costly lawsuit abuse. The problem has reached epic proportions with the emergence of sophisticated “patent trolls.” These are entities that exist for the purpose of filing patent lawsuits. The White House has described them as “firms who do not practice the patents they own and instead engage in aggressive litigation to collect license and other fees from alleged infringers”
A 2007 study by the University of Houston Law Center found that patent litigation increased 120% between 1990 and 2005. The American Enterprise Institute observes: “Patent law has turned into a legal game ... [and] there is an increasing trend of parties buying up patents and then suing companies that touch those patents.” These “parties,” otherwise known as patent trolls, have “perfected the art of turning patents into a lottery.”
As described in a 2011 Harvard Business Review article, “[M]any of these patent trolls don’t produce anything, but rather scoop up patents, wait for a successful product or service to come to market, and then threaten to sue the ‘infringers.’ The targets of their lawsuits are often the startups that are trying to drive real innovation in our economy, companies that rarely have the resources to fight back.” “Patent lawsuits, on average, cost about $10 million, take about five years to process, and ultimately inhibit future scientific developments.” This is time and money that could otherwise be devoted to inquiry and innovation. PricewaterhouseCoopers reports that the biotechnology and information technology sectors are seeing the fastest rise in patent dispute cases.
Experts believe that there are 219 patent troll organizations with more than 800 subsidiaries. According to PatentFreedom, trolls were party to more than 5,000 new litigation events in 2011. Many companies are responding by purchasing patents solely as a defensive measure against trolling abuses—a remedy that unnecessarily raises the cost of bringing innovative goods to market.
NEW APPROACHES. In 2011, to help solve three overarching problems—backlog, delay, and lawsuit abuse—Congress passed the America Invents Act. The law increased the number of USPTO satellite offices to speed processing. It replaced a “first to invent” standard with one favoring the “first inventor to file” to cut down on litigation and harmonize the U.S. approach with global standards. A Patent Trial and Appeal Board was established to provide a “Post Grant Review” process to facilitate speedier dispute resolution. And the law expanded the universe of what constitutes “prior art,” rendering more claims unpatentable for lack of novelty or for obviousness. Implementation of the law is recently under way, and time will tell whether the reforms will have the effect Congress intended.
Key Issues and Controversial Questions:
The Intersection of Genetics and Patent Policy
The biotech industry will reap the benefits if the America Invents Act hits its mark or suffer the consequences if the reforms fall flat. In either case, this vital industry will continue to face exceptional challenges. The intersection of gene science and patent law creates an additional layer of complexity for our patent and innovation systems.
Just a few years ago, the USPTO “granted the 50,000th U.S. patent that entered the DNA Patent Database at Georgetown University.” What’s unique about this milestone is that the leading holders of human gene patents are not companies but, rather, the federal government (e.g., the National Institutes of Health) and universities, which often develop their intellectual property using federal research funding. So the U.S. government is not just an innovation funder, IP policymaker, and patent administrator, but also a significant patent holder, especially in the gene science arena.
If America’s economy is to thrive in the 21st century, lawmakers, business leaders, and society at large must successfully cope with the spiraling complexities of life science policymaking and the consequential legal and administrative, economic, and ethical challenges involved.
LEGAL AND ADMINISTRATIVE. Fundamental legal and administrative questions are at the core of the public debate. Is nature patentable? What’s the standard for determining what constitutes “nature,” and what is altered by the hand of man? What are the limits to gene patenting? What standards apply to evaluate novelty, utility, and obviousness in determining the patentability of gene-based methods and materials? What constitutes infringement of patented biotechnology? What remedies should be available?
ECONOMIC. The answer to these legal and administrative questions helps evaluate a set of key economic questions with the objective of maximizing innovation. Where in patent policy is the sweet spot between proprietary protection and the academic openness to maximize innovation? What patent standards are necessary to protect bona fide intellectual property, while further engendering the freedom and collaboration on which the scientific process thrives? Does the use of patented material or a proprietary process in noncommercial research constitute infringement? Should it? What qualifies as pure research versus commercial pursuit? How does it affect basic inquiry when licenses to use patented “art” are nonexistent or prohibitively priced?
ETHICAL. A third set of issues touches on sweeping philosophical questions that will heavily influence the debate and policymaking. Is it proper for man to intervene in the coding of life? At what point are we trying to play God? Is it morally right to purposely forgo innovation that could cure debilitating diseases and disorders? What are the unintended scientific, social, environmental, and public health consequences that may result from manipulating human and animal DNA? Where does society draw the line? Who decides? Moreover, some argue that IP is a barrier to access to medicine, a cruel tax from rich countries on poor countries. What are the moral and public health implications of patented medicines and monopolistic pricing? What would be the cost to innovation if innovative companies are stripped of their patent rights in many countries?
How we answer these intricate and interrelated questions will bear heavily on the future of mankind, the quality of human health care, the vibrancy of our economy, the success of our firms, and the dignity of human life.
Legal and Administrative Issues in Focus
From the advent of genetics, two main questions have been at the center of the intellectual property debate. Is nature patentable? If so, under what circumstances?
It should be noted that the manipulation of nature to produce varieties of plants and animals bearing characteristics beneficial to human beings is an ancient practice. A commission established by President Reagan to examine the ethics of biomedical research observed, “For at least 10,000 years—since long before the principles of classical genetics had been scientifically established—human beings have brought about deliberate genetic changes in plants and animals through traditional reproductive methods. Many of the domestic animals, crops, and ornamental plants in existence today are human creations, achieved through selective breeding aimed at enhancing desired characteristics. In a broad sense, such genetic manipulation by breeding for a desired outcome might be considered genetic ‘engineering.’” Modern genetic engineering, of course, is far more technical and hands-on.
The answer to the basic question of whether a discovery of something inherently natural can be legally patented, however, is no. The Supreme Court has ruled unambiguously that patent eligibility does not extend to “laws of nature, natural phenomena, and abstract ideas.” As the research arm of Congress notes, “[The] processes for extracting those objects can be patented, but not the objects themselves. For example, a newly discovered plant or bird or mineral cannot be patented.”
The lack of “novelty” in discovering some natural material or process is uncontroversial. Yet 80 years ago when man’s ability to directly manipulate genetic material in plants came of age, a more ambiguous question complicated the legal debate. What constitutes nature? The question was put to judicial test in a 1930 case looking at whether human-bred plants were patentable. At issue was the work of horticulturalist Luther Burbank, who used techniques such as grafting, hybridization, and breeding to develop “more than 800 strains and varieties of plants ... including fruits, flowers, grains, grasses, and vegetables.” The Supreme Court’s decision swung in Burbank’s favor finding that “a variety [of plant] resulting from cultivation was the creation of human agency and therefore was patentable.”
In that same year Congress passed the Plant Patent Act legislatively affirming the patentability of human-derived plant material (while limiting patent protection to “plants that could be reproduced asexually.”) The effect of these judicial and congressional actions was to firmly establish the legal principle that the human manipulation of plant DNA to produce a useful form of vegetation was not nature but a patentable, man-made “invention.” Thomas Edison, testifying before Congress in support of the pro-patent legislation, stated that “this [bill] will, I feel sure, give us many Burbanks.”
But 50 years later, the “patentability” question became even more complex as the ability to manipulate genes graduated from vegetation to higher life-forms. As noted by a National Research Council committee, “The advent of the molecular era in biology in the 1940s and 1950s, and in particular the development of the tools of recombinant DNA in the mid- 1970s, made it possible for scientists to isolate individual genes and determine their chemical composition and ultimately to sequence entire genomes.”
This advancement gave rise to a previously inconceivable human milestone—the man-made creation of a life-form unknown to nature. This was the achievement of General Electric chemist A.M. Chakrabarty. He had bioengineered a microorganism capable of consuming oil slicks; and in 1980, the question of whether the microbe was a patentable “invention” came before the Supreme Court in the case of Diamond v. Chakrabarty. The Court ruled definitively that “whether the invention is alive or not is irrelevant. The determinative consideration, instead, is whether the invention is a product of human ingenuity.” The justices determined that the creation of the microbe was such product and upheld the patent.
Notably, the justice’s opinion went even further, setting an overarching U.S. patent standard: “Anything under the sun that is made by man,” ruled the Court, is patentable subject matter. The Chakrabarty decision set the stage for major pro-patent legislation passed later that year by Congress. These important measures combined with rapid advances in genetic science and a generous flow of funding for life science research to spur a groundswell of gene patent activity.
The legislation in question was the Bayh-Dole Act of 1980 (Patent and Trademark Law Amendments Act), which enabled universities to patent the “products and processes” stemming from federally funded research. The legislation transformed the patent landscape, creating an enormous incentive for universities to marshal their intellectual capital to research and produce patentable advancements. For this reason, academic institutions own 39% of DNA patents, while holding only 3% of all general patents.
Through “technology transfer” offices, patents are transferred or licensed by the university to corporate sponsors under “research and development” agreements. These arrangements have become an important source of revenue for higher education institutions and have stimulated the pursuit of marketable innovations, placing our higher education system squarely in the debate on the standards and practices of patent law.
The Court’s “anything under the sun” standard prevailed again on the heels of the Chakrabarty case when Harvard University submitted a patent application for its “invention” of a life-form even more sophisticated than General Electric’s oil-eating bacterium. Harvard scientists had genetically engineered a rodent predisposed to cancer for use in oncological medical research. Patent rights for the so-called Oncomouse were acquired by DuPont and granted by the USPTO along with the Canadian, European, and Japanese patent authorities.
The creation of the Oncomouse symbolized the enormous progress being achieved in genetics. Human manipulation of DNA had started with plants a century ago, graduated to microbes and small mammals, and was soon to enter the human realm. Paced by the federally funded Human Genome Project (HGP) and a parallel private effort called Celera, our best scientific minds had busied themselves laying bare the full complement of 40,000 genes and the order of the 3 billion chemical “base pairs” that make up human DNA.
Since unraveling the “language of life”—the landmark celebrated at the HGP press in 2003— mankind has continued to gain a deeper understanding of cellular function at the molecular level. As the science has moved further into the domain of human genetics, however, the issues over the patentability of discovery and invention stemming from this work have grown trickier and more controversial.
Human genes in the body are clearly a product of nature and therefore unpatentable. The question of patentability as it relates to genetic material that is removed from surrounding tissue and altered to exist external to the body has proved to be far more ambiguous and contentious. Understanding how particular genes determine human characteristics, finding consequential genetic mutations, and correlating them to human diseases and disorders requires excising targeted genetic sequences from longer DNA strands so that they can be studied and tested for both research and clinical purposes. This is taxing work requiring time, money, and determination.
Whether these sacrifices are made by a university, a nonprofit research institute, or a corporate lab, the prospect of a patent is a significant incentive to do the hard work. The way in which this work is conducted, however, has raised new and challenging questions bearing on how we delineate nature and define “human ingenuity.”
THE MYRIAD DECISION. These issues came to the fore in a case decided by the Supreme Court in early June 2013. At issue in the case was a full complement of core issues at the intersection of cellular biology and patent law—that of nature versus human invention as well as the scope of standards such as novelty, utility, and unobviousness.
In 1994, genetic scientists at Utah University in association with Myriad Genetics isolated two DNA fragments (BRCA1 and BRCA2) found to present particular mutations that indicate the carrier’s hereditary susceptibility to breast and ovarian cancer. The company reported that it spent $500 million over 17 years of study to isolate the genetic mutations and correlate them to the incidence of cancer.
To wit, the company sought patent protection against unauthorized use of the gene it had isolated, its process for mutation testing, and any other tests that might “isolate the same gene.” The USPTO awarded Myriad a set of patents two years later, effectively granting it a monopoly on diagnostic testing for the particular mutations of the genes and on the isolated genes themselves, which had become the firm’s intellectual property.
The practical criticism and policy concerns raised by the patent focused on two issues. First, the patents may block research on the genes. In defending its patent, Myriad had issued cease and desist letters to academic centers doing patient research on BRCA1 and BRCA2 (and at least in some cases, the work was being performed for commercial purposes). Second, the price on the diagnostic test was viewed as too costly. The challengers in the case argued that “methods of isolating genes or using them therapeutically may be patentable. Yet DNA itself, whether resident in the body or extracted in the laboratory, is a product of nature and therefore cannot be patented.”
Myriad argued that isolating the gene (meaning “divested of ‘junk’ elements, and sequenced it through human intervention”) and purifying it (meaning excluding it “from the way the particular DNA occurs in nature”) was the act of human ingenuity entitling it to the patent on the extracted gene itself.
The USPTO awarded the patents to Myriad based on that rationale. There was judicial precedence as well. In the case of Parke-Davis & Co. v. H.K. Mulford & Co. (1912), “the applicant had patented adrenalin. The first claim of the patent was as follows: A substance possessing the herein-described physiological characteristics and reactions of the suprarenal glands in a stable and concentrated form, and practically free from inert and associated gland tissue. The Court held that a substance derived and purified from nature could be patentable.”
The case received significant public attention and has been the subject of much commentary by press and academia. The debate produced a fair amount of misinformation and abstraction. For instance, claims were made that genetic patent holders “own the genes” in our body—a falsehood that has dramatic appeal but no basis in truth. The law is clear that “naturally occurring genes as they exist in their native state (e.g., as they exist in the human body) are un-patentable products of nature, as is raw genetic sequence information.”
Some of these abstractions stemmed from passion surrounding the practical criticisms regarding potential research impediments and the high cost of diagnostic testing rather than whether the patents met the legal test of a patent.
Nevertheless, on June 13, 2013, the Supreme Court issued its ruling. It found unanimously that the patenting of DNA, even in the form of a section excised from surrounding sequence and isolated from the body, does not constitute an “invention” or “discovery” and thus is unpatentable. Justice Thomas, in writing the court’s opinion, stated simply, “separating the gene from its surrounding genetic material is not an act of invention."
On behalf of the Court, Thomas went on to state, “The rule against patents on naturally occurring things has limits, however. Patent protection strikes a delicate balance between creating ‘incentives that lead to creation, invention, and discovery’ and ‘imped[ing] the flow of information that might permit, indeed spur, invention.”
The outcome of the Myriad case is the most recent pivot point—albeit an important one—in a continuously evolving process of defining what the limits Thomas referred to will be and the consequences. In many ways, the most significant part of the opinion was not what the Court said about the circumstance at hand but about the science to come. Of the Court’s judgment, Thomas wrote, “We [did not] consider the patentability of DNA in which the order of the naturally occurring nucleotides has been altered. Scientific alteration of the genetic code presents a different inquiry, and we express no opinion about ... such endeavors. We merely hold that genes and the information they encode are not patent eligible ... simply because they have been isolated from the surrounding genetic material.” The Department of Justice’s Solicitor General, Donald B. Verrilli, Jr., ostensibly agreed that DNA, whether in the body or isolated by human intervention, is not eligible for patenting, but it added that “a variety synthesized from other genetic components, known as cDNA (complementary DNA), should be.”
MYRIAD IN CONTEXT. First, Myriad’s patents and its arguments defending them were not rejected by the Court in whole. The Court upheld Myriad’s testing protocol as legitimate intellectual property. What’s significant is its opinion that the isolated gene itself is not patent eligible. How the decision will affect similarly situated patents is still not clear. First, they are difficult to inventory. Second, every patent award presents different facts and circumstances. Third, the term “gene patents” is ill-defined.
Christopher Holman observes “the word gene is used in a variety of divergent ways, and often has dramatically different meanings for scientists working in different disciplines. In fact, many patents routinely referred to as ‘gene patents’ actually claim molecular constructs that do not exist in nature, but that instead merely correspond to, or are derived from, naturally occurring genes.” These would be patents that don’t fall within the purview of the Supreme Court’s Myriad decision.
What will the post-Myriad patent landscape look like, and what will be the net effect on innovation? The views expressed in the popular press and trade journals were schizophrenic, ranging from the gene patent system as we know it has been turned upside down, to it’s “no big deal.” The fact is that only time will tell.
Those who see in the decision far-reaching consequences would nod to a paper produced by Cornell University that looked at “longer claimed DNA sequences from existing gene patents, which ranged from a few dozen bases [base pairs] up to thousands of bases of DNA, and found that these long, claimed sequences matched 41% (9,361) of human genes. Their analysis concluded that almost all clinically relevant genes have already been patented, especially for short sequence patents, showing all human genes are patented many times over.” The specific facts and circumstance related to each patent will determine if the Myriad decision has material consequences.
Those who see little impact may note that the initial reaction on Wall Street to the decision resulted in an increase in the value of Myriad stock. More consequentially, however, they would point to the fact that patenting of particular genetic sequences is being overtaken by time and science. Many of the gene sequence patents first obtained in the 1990s are on the cusp of expiration. In fact, several of Myriad’s BRCA patents have already expired, and others were set to expire soon but for the Supreme Court’s decision short-circuiting the timeline. Other analyses downplaying the effects point out that many “gene patents” don’t claim the genetic material itself as the innovation but rather the process for identifying the mutation.
Ultimately, the consequences won’t be determined by law alone but also by a shifting scientific landscape. We are learning that many diseases can’t be correlated to a particular gene mutation but are produced by multiple factors. This raises the question whether a short gene sequence patent would have the “utility” required if put to an IP infringement test. Some observers may find that these trends diminish the relevance of the Myriad decision relevance; others will see quite the opposite. The logic for the latter view is that if disease involves a more complex set of genetic interactions, then the need to finance the investigative process will become greater and still costlier. Rather than looking for a needle in one haystack, we must find the needles in multiple haystacks and figure out how they work together in the causation or predisposition to adisease or disorder. There are thousands of diseases to explore for genetic precursors. The question is whether the Myriad decision’s limits on patentability will inhibit this investment, slow the rate discovery, and weaken the flow of therapies.
It’s important for policymakers and stakeholders, including the public, to understand that the Court’s determination was a “legal” decision having policy implications, not the other way around. The patents were not nullified because they were shown to be anticompetitive, proven to adversely affect public health, or because of some other undesirable consequence. The justices were simply unconvinced that removing a piece of DNA from surrounding genetic material constituted something “new.” Whether the decision will have net beneficial or detrimental effects will be proven by how our innovation system responds.
Evidence is already materializing on one consequence of the decision. Now that the genes themselves are not considered intellectual property, the competition for testing has increased. Press reports indicate that “just after the decision was released, DNATraits, a division of Houston-based Gene By Gene Ltd., announced that it would offer testing for the BRCA1 and BRCA2 genes in the United States for $995. That compares to $4,000 for the Myriad test.”
This is evidence that patients, insurance companies, and premium payers will benefit from the lower cost of testing for this particular genetic mutation. This also bodes well for consumers of genetic testing in general as the overall market is projected to grow by 9% between 2012 and 2017. Current spending on genetic tests is around $5 billion a year and is expected to reach $25 billion by 2021.
What’s not clear is whether inquiry into isolating particular genes and analyzing correlation to other diseases will be less robust in the wake of the decision. If so, what effect will this have on science and innovation? Will biotech companies alter their investment patterns and adjust their research focus away from finding genetic links to other diseases in the absence of a stronger patent incentive? How will the decision affect the flow of venture capital to the biotech sector in general and to genomic and proteomic research in particular? What, if anything, won’t we cure as a consequence of the effects of the Myriad decision? If other gene sequence patents are nullified, what will that mean for continued research and development? These are not questions for courts of law. They are issues for the public, Congress, and stakeholders to examine, and, if required, to remedy through the appropriate policymaking processes.
Another consequence policymakers must examine is how the Myriad decision comports with international patent norms and standards. International legislative bodies and courts have rejected broad sweeping prohibitions on gene patenting in biotechnology, and a blanket prohibition on genes or other biological materials is inconsistent with the Agreement on Trade-Related Aspects of Intellectual Property Rights accord (TRIPS).
Most industry experts urge harmonization of international patent regimes to improve IP protection and facilitate international trade, particularly in genetics where the U.S. biotech industry has earned a significant comparative advantage in global markets. Some experts have opined that the Myriad decision makes the United States the first country to categorically reject the patentability of isolated gene sequences. If so, what does the disparity mean? How will it affect our trade position and appeal as a location for biotech firms? What are the implications for the United States and our competitiveness given that we have always been expansive in our interpretation of patentable “art”?
Many of the most important questions here have measurable answers. It’s uncertain, however, whether Congress or the administration has its microscope and tape measure in hand.
LEGAL AND ADMINISTRATIVE CHALLENGES—WHAT’S NEXT? The answer to the question of what’s next at the intersection of gene science and patent law was foreshadowed in the Myriad decision when it upheld the patentability of methods to isolate and purify genes and for DNA altered in the laboratory. Perhaps in retrospect, the Court’s action will become more noteworthy for the aspects of gene patents it sustained than the claim it rejected.
A future legal scrum may well center on the question of what constitutes “altering” DNA in the laboratory such that it is a patentable invention. As pointed out in the patent trade press, “The Court did not provide guidance about the extent to which a naturally occurring DNA sequence must be modified to become patent-eligible, nor did it suggest how it would rule on other purified, isolated, or synthesized materials that may have a naturally occurring counterpart. All of these issues are likely to be the subject of future patent litigation.”
A Congressional Research Service report echoed the point, saying that “products of nature (a preexisting substance that is found in the wild) may not be patented, per se. However, a product of nature may be patentable if significant artificial changes are made. By purifying, isolating, or otherwise altering a naturally occurring product, an inventor may obtain a patent on the product in its altered form.” In light of Myriad, what degree of modification of a naturally occurring genetic material will constitute a novel, utile, and unobvious discovery or invention that is patentable? As the state of the art in science becomes better known, will the goalpost change on what makes a new genetic intervention “unobvious”?
A Stanford University report on the implications of the case suggested that patent applicants provide a description to the USPTO that “emphasizes the differences between the natural composition of matter and the claimed invention. Patent applicants with vulnerable claims should add new method claims about how to create or use the DNAs of interest and should add construct claims. ” Given these new approaches it’s possible that even the fundamentals of Myriad could be revisited at some point in adjudicating what level and aspects of “isolation” and “purification” may sufficiently alter the nature to make it a product of human ingenuity.
It could also be a topic Congress uses its lawmaking powers to address. The foundational policy question was posed by a widely cited academic report:
So while genes lay peacefully within the body, with no identified start and stop and no understanding of the correlation between an error in the genetic code and increased risk of disease, why shouldn’t there be a reward for those who spend time and money on genetic discoveries, even if it involves a piece of the human body?
In its Myriad case filing, the Justice Department indicated that there should be such a reward when it stated that patents should remain available “to cDNA, an edited version of the DNA that’s injected into a cell to produce a specific protein. That would provide some incentive for the first person to isolate a gene, but leave any given sequence of DNA open for research.”
The answer to the question of “what’s next” will also be heavily influenced by knowledge gained from the application of supercomputing power and big data to the study of gene sequences. These applications, deemed the gateway to personalized genomes and therapies, are sure to spawn new discoveries and inventions that may well end up writing the next chapter in the legal anthology of gene patents. As the World Intellectual Property Organization observes, “The development of personalized medicine and therapeutic innovation, however, has renewed interest in understanding which pharmaceutical and biotechnology inventions are patent-eligible.”
Again, patent eligibility is a legal question with vast policy implications. Many of the legal issues that will bubble up in and through the courts can’t be anticipated. But decision makers can help our innovation system remain more predictable, efficient, and fertile by proactively setting clear, purposeful patent law and policy. Doing so will help the country stay focused on the strategic goal of innovation and help reduce the legal uncertainty that impedes investments in biotechnology—resources that are critically needed to unlock the toughest life science mysteries and solve our most consequential challenges.
JUDGING NOVELTY, UTILITY, AND UNOBVIOUSNESS. A significant legal and practical matter that influences the efficiency and effectiveness of life science patenting is how the qualification standards are applied to life science patent submissions. The definitional nuances and legal intricacies of how applicants comply with norms and how patent examiners evaluate novelty, utility, and unobviousness are too numerous and complex to address them adequately in this report. Suffice it to say that proper scope and quality of patent claims and awards are essential to an efficiently functioning innovation system.
Harvard’s patent application for Oncomouse provides a perfect example. The university used its application to declare intellectual property rights not just for the particular processes and genetic material used to create the mouse but for “any transgenic mammal, excluding human beings, which contained in its genes an activated oncogene that had been introduced at its embryonic stage.” The system eventually narrowed the patent, but the administrative time, cost, and energy of dealing with overly broad claims of this nature is burdensome. There is evidence that this practice is not uncommon in gene-based patenting.
According to the findings of a comprehensive patent claim study published in Science magazine, “Some applicants took advantage of the redundancy of the genetic code by, for example, claiming the sequence of a protein within a patent and then also asserting rights over all of the DNA sequences that encode for that protein without describing those DNA sequences.” While individual interest might be served by making overly broad patent claims, the general practice can’t help but impede the system to the nation’s detriment.
The problems exceed questions of patent scope. More generally, the Congressional Research Service reports that “the quality of the gene patents awarded by the USPTO is a concern for some experts. A study by professors Jordan Paradise, Lori Andrews, and Timothy Holbrook found that 38% of the claims contained in 74 patents on human genetic material were ‘problematic.’ This means that they had significant questions of whether they met the three-part test of being novel, utile, and nonobvious. Just performing the patent process better can help eliminate problems with “patent thickets.” Applying the three criteria involves judgment, but the practical implication of defective patents is that they “... can act as a brake on research, since going to court to contest them is an expensive undertaking.”
The USPTO has implemented measures to tap the expertise of the scientific community for improving the examination process that deals with both human and agricultural genetic art. Among the greatest administrative challenges to our innovation development system will be ensuring that the examiners and their procedures can keep pace with the increasing complexity of gene science. This will require effective initiatives to recruit and retain qualified examiners and ensure they have ongoing technical training to keep pace.
INFRINGEMENT. Patent infringement occurs when one “makes, uses, or sells a patented invention without the patent holder’s permission ... and generally gives rise to liability.” Remedies can include temporary or permanent injunctive relief as well as suit for damages.
The legal interpretation of “infringement” is another complex aspect of patent law and beyond the scope of this paper. Critical aspects with a significant influence on life science innovation bear addressing. The first is whether purely academic research using a patented method or material constitutes an illegal trespass. The second is whether physicians are infringing when they use, without license or permission, a patented method for delivering “standard of care” health services.
The research question will be probed more deeply later in the report. As a matter of law, however, “there is no U.S. statutory exemption for non-commercial research on patented subject matter.” There is, however, a sweeping exemption for clinical research, both academic and commercial, enacted by Congress: “Anyone who wishes to obtain regulatory approval under the FDA statute for the manufacturing of a protein drug using patented recombinant DNA technology is immune from liability for patent infringement for all reasonably related activities. Such a person or company may, without fear of liability or injunction, make a patented gene construct, create a recombinant host with it, express a protein from it, and sell it to any other entity involved in carrying out clinical research.”
Some believe that this exemption is applied so broadly and sweepingly as to constitute a defacto safe harbor for research. Aside from that exemption, there had been a historic practice of allowing academicians to borrow patented material for noncommercial use. However, the 2002 federal circuit court of appeals decision in the case Madey v. Duke narrowed it to the point that it is unavailable in most practical circumstances; and it “shattered any illusion that just because research is not commercial one could proceed with indifference toward patents.”
What the practical implications are of a highly limited and generally inaccessible research exemption in law is not clear. The fact is that patent infringement actions against universities for research are exceedingly rare. Patent litigation is very expensive time consuming, and creates bad public relations for the plaintiff. Moreover, it can be self-defeating for the patent holder in that one doesn’t know what finding a university researcher may make that could confer even greater value to the patent and by extension on its holder. According to a report by subject expert Christopher Holman there has been only one final judicial determination of infringement dealing with research. A 2008 article in Science magazine discovered that “only six lawsuits had been filed in connection with gene-patented diagnostics and all had been dismissed or settled, apparently with negligible impact on scholarly research.”
In regard to standard of care medical services, the conflict between medical practitioners and patent holders has been described as follows: “On the one hand, the diagnostic industry wants to control diagnostic testing methods by mandating use of their test kits through patent enforcement in order to offset their costs of bringing a test kit to market. On the other hand, the clinical laboratory physicians need to provide clinical testing for their patients in a timely and cost-effective manner.” Congress approved legislation in 1996 holding free from liability physicians and institutions for infringement of “pure process” medical patents.
This narrowly tailored “medical procedures” exemption protects “any ‘medical practitioner’ or ‘related health care entity’ from injunction or damages if the practitioner or entity is carrying out a ‘medical or surgical procedure on a body.’ While the exemption applies to the administration of the genes to the patient, it does not extend to the “patented genetic constructs or isolated human genes.”In their report Human Gene Patents, Goldstein and Golod note that “if a commercial infringer does not fall under the clinical research or medical procedures immunities, it could be permanently enjoined from continuing its activities.”
The decision in the Myriad case would appear to further free researchers and medical practitioners from infringement liability. However, what tension remains between patent holders and the use by medical practitioners of patented materials and methods for clinical diagnosis and patient testing is unclear and will need to be assessed in the aftermath of the Myriad judgment.
Pre-Myriad, however, the practical implications of patents on testing were examined by the Association of American Medical Colleges. It reported that:
“Nowhere is there any objective evidence that any patient has been denied access to available genetic tests due to a patentee’s refusal to allow the test to be done. Nowhere is there any objective evidence that research on gene therapies has been inhibited by gene patents. The main issues of the most vocal of the gene patent opponents seem to reduce to their unhappiness that gene patents enable their inventors to recoup their investment in the inventive process by charging royalties for a license to their invention, or that the patentee asserts its right to perform the test itself.”
ENFORCEMENT. Of course, the practical value of a patent to its owner is only as good as the ability to enforce it. The theft of IP costs U.S. businesses billions of dollars per year and endangers jobs in IP-intensive industries. Generally, the “willful” piracy of IP copyright and infringement of trademark is a crime and is prosecutable. However, enforcement is the job of the patent holder through the civil justice system. Remedies include seeking injunctive relief to stop the infringement and suing for the payment of damages caused by the infringement. Most human gene patent litigation involves infringement allegations “based on the recombinant production of a therapeutic protein.” Only 1%–2% of patents are litigated, but these cases and the policies that flow from them reverberate throughout the bioscience community.
Suffice it to say that the enforcement of IP protocols at home and abroad has an enormous influence on U.S. economic well-being. Patent infringement is a growing problem, and its consequences will intensify as we increasingly rely on overseas sales of American innovation to create jobs and prosperity here at home. In the international trade arena, the Office of the U.S. Trade Representative and the Federal Trade Commission (Commerce), the International Trade Commission (Commerce), and the Department of Justice all play key roles in developing
bilateral and multilateral IP protection protocols as they monitor, report on, and advocate for the protection of IP rights. As a Duke University report warned, “Without a well-structured system of global patent protection, neither the research pharmaceutical industry nor the generic industry would be able to grow and prosper, as the rate of new product introductions and patent expirations would decline significantly.”
The Obama administration announced its White House IP enforcement plan in 2013. General recommendations for enforcing patents overseas include the following:
- Enhancing foreign law enforcement cooperation.
- Strengthening intellectual property enforcement through international organizations.
- Promoting enforcement of intellectual property rights through trade policy tools.
- Combatting foreign-based and foreign-controlled websites that infringe American intellectual property rights.
- Protecting intellectual property at ICANN (International Consortium for Assigned Names and Numbers).
- Supporting U.S. small and medium-sized enterprises in foreign markets.
- Examining labor conditions associated with infringing goods.
Economic/Innovation Issues in Focus
The legal issues reviewed here are largely definitional, technical questions bearing on the qualification standards, processing procedures, and IP protection mechanisms on behalf of any “new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” At the intersection of biotechnology and patents, however, are key economic issues vitally important to the societal role of these systems. The goal of our patent system is to promote the development and publicity of new inventions and discoveries. Propelling innovation creates jobs, drives U.S. competitiveness, and improves quality of life. Success in turning scientific insight into marketable solutions at an escalating rate requires striking the right balance: incentivizing investment of time, capital, and brainpower through the exclusivity of a patent on one hand and maintaining the openness and collaboration needed to keep the pipeline of discovery delivering strongly on the other.
INNOVATION, PATENTS, AND RESEARCH. The record on the extent to which gene patents impede scientific research is conflicting. Some reports claim that such impediments are rampant; others avow that they are extremely rare. Whether patents and research are at odds is a monumental question considering that the two were meant to be symbiotic. Patents are designed to spawn greater research, while vigorous research is supposed to yield practical inventions. Given its importance, the question demands officially generated, empirical evidence. The National Institutes of Health (NIH), the Food and Drug Administration, the National Academy of Sciences, the National Research Council, the Government Accountability Office, and the relevant committees of Congress, among other institutions, have jurisdictional stakes and responsibilities in the field and can contribute to the richer factual and analytical record on these critical issues.
Some key questions stand out. Is genetic patenting cramping openness and collaboration? What is the right balance of protection and access needed to drive creative progress, when even among researchers there is tension? Basic researchers seek maximum access to research tools, while applied researchers want “exclusion and protection.” Are the rights and privileges associated with the use of patents fair and productive? Would as much time, effort, and money be poured into isolating genetic material and studying the correlation of particular genes to health?
Part of answering these questions involves asking whether there is a “‘tragedy of the anti-commons’; as in, the possibility that the large number of patents on genes and their diverse set of owners will make it difficult to acquire the rights to all necessary research inputs, which could, in turn, result in the under use of valuable technologies.” The existence of such a problem would present heightened concern “for diseases and condition associated with multiple genes [for which] fragmented licensing burdens the development of treatment options.”
As stressed throughout this report, patents are an effective tool not only for stimulating creativity but for ensuring that innovations are laid bare for the public to examine. Fostering openness is an organic purpose of the patent system. As the Congressional Research Service (CRS), the research arm of Congress, points out, “Public science has flourished by permitting scientists to challenge and build upon the work of rivals.” The NIH adds that U.S. science has been built upon “its general openness and the sharing of data and research resources.”
The alternative to patenting is the use of trade secrecy—hardly a winning strategy for fostering collaboration. As CRS reports, despite the problems with patents “the disclosure obligations of the patent systems may better serve the objective of encouraging the diffusion of knowledge and raising social returns than the chief legal alternative, trade secret protection.” For now, patents are the method of choice, particularly for the pharmaceutical industry where formulas are easy to imitate. Critics, however, argue that while far better than the opaqueness of trade secrecy, the legal and cost impediments associated with patenting can’t help but hamper free academic inquiry and, by extension, scientific breakthroughs and disruptive solutions that are the centerpiece of U.S. economic success.
Many practitioners of basic research have long believed that genes, particularly human DNA (versus plant, animal, and microbial genetics), whether found in nature or altered through isolation and purification from their natural setting by human intervention, are inherently natural and should not be eligible for patent protection. This was the basis for urging the creation of a broad research exemption so that academics are free to use patented materials and methods without threat of liability or having to pay licensing fees that will slow down or price out scientific inquiry. The question is to what extent the Myriad decision mollifies concerns about the stifling of academic research.
As noted earlier “there is no U.S. statutory exemption for non-commercial research on patented subject matter.” Moreover, the FDA exemption described earlier is available. Regardless of whether it is interpreted to be broad or narrow, the fact remains that the predominance of empirical studies fails to find a strong impediment to research.
Working through the patent problem, Walsh and Cohen discuss the survey they conducted of research stakeholders. While the respondents cited an increasing number of patents per innovation (including patents on research tools), the authors stated “almost none of our respondents reported worthwhile projects being stopped because of issues of access to IP rights to research tools.”
In his study on human gene patent litigation, Christopher Holman states, “Criticism of human gene patents is largely based on an assumption that these patents have a negative impact on biomedical research, public health, and perhaps even human dignity and personal autonomy ... however these fears have, for the most part, not materialized, in the form of actual patent enforcement.” A study by Walsh, Cohen, and Cho says that only about 1% of the random sample of academics report experiencing delay or modification in their research due to patents. Similarly, a report published by the NIH notes little empirical evidence substantiating the fears that patent thickets are retarding research.
According to the NIH, one of the reasons for the paucity of evidence of patent-related research blockage is that commercial and academic research institutions are exercising a menu of workarounds. They include, “inventing around, going offshore, challenging questionable patents, and using technology without a license. ... The research system works because university scientists pervasively ignore the rights that technology licensing officials at the same university argue are necessary to generate income.” As a report by the American Enterprise Institute puts it, “It turns out that researchers seldom worry about what is patented and what is not. Moreover, litigation has been amazingly rare.” These findings are reinforced by congressional reporting that discovers little evidence that work has been curtailed due to intellectual property issues associated with research tools. Scientists are able to continue research by “licensing, inventing around patents, going offshore, the development and use of public databases and research tools, court challenge and simply using the technology without a license (i.e., infringement).”
In observing the absence of an “anti-commons effect,” the NIH observed that “the effects are much less prevalent than would be expected if its hypothesized mechanisms were in fact operating. The data show a large number of patents associated with genes. A recent study found that nearly 20% of human genes were associated with at least one U.S. patent, and many had multiple patents.” It goes on to say that “despite the large number of patents and numerous, heterogeneous actors—including large pharmaceutical firms, biotech startups, universities and governments studies that have examined the incidence of anti-commons problems find them relatively uncommon.”
Despite the lack of evidence for now, experts issue a note of caution. An NIH committee reported finding that “the number of projects abandoned or delayed as a result of difficulties in technology access is found to be small, as is the number of occasions in which investigators revise their protocols to avoid intellectual property issues or in which they pay high costs to obtain intellectual property. Thus, for the time being, it appears that access to patented inventions or information inputs into biomedical research rarely imposes a significant burden for biomedical researchers. For a number of reasons, however, the committee concluded that the patent landscape ... could become considerably more complex and burdensome over time.”
One of the key reasons for this is “a general lack of awareness or concern among academic investigators about existing intellectual property. That could change dramatically and possibly even abruptly under two circumstances. First, institutions, as they become aware that they may enjoy no protection from legal liability. ... Alternatively, patent holders, aware that universities are not especially shielded by law from patent infringement liability, could take more active steps to assert their competing patents.”
This debate is overshadowed by a more fundamental question of whether universities are protected from patent infringement actions under the doctrine of sovereign immunity. Marybeth Peters, former U.S. Register of Copyrights, testified before Congress in 2000 on the topic. She stated:
“For most of our history, it has been assumed that the States enjoyed no special immunity from suits for infringement of intellectual property rights, but in the past fifteen years those assumptions have been called into question as the Supreme Court has breathed new life into the doctrine of sovereign immunity. Last year, the Court held that provisions of the patent law and the Lanham Act permitting suits for damages against States were unconstitutional, and the Court offered little reason to hope that the analogous provision in the Copyright Act could be found constitutional. This year a court of appeals held that the copyright law provision is unconstitutional, and today we find ourselves in a situation where States can infringe copyrights, patents, and trademarks with impunity.”
Notwithstanding this important legal question, some believe that the likelihood of companies suing research institutions remains low for the practical reason that there are no commercial damages.
That’s not to say this will always be the case. The NIH points to “the longstanding concern that the owners of patents on fundamental technologies will exercise their rights to exclude in ways that will prevent others from developing or accessing the technology.” In fact, the NIH reports indications that university researchers are becoming stingier about sharing research findings. This is a worrisome trend and bears close monitoring to see how extensive it is, why it’s happening, and if it is related to patents held by universities or corporate sponsors of the academic research.
Vigilance must be strongly informed by continuously seeking answers to fundamental questions:
- What are the chilling effects on research, if any, of proprietary research tools and materials?
- As our knowledge of genomics and proteomics advances and an increasing number of patents are in play, how will this affect research? How will the effect influence the pipeline of new discoveries, products, and solutions?
- To what extent does the requirement to work around a patent lead to new and useful discoveries?
INNOVATION AND PATENT LICENSING. A common means of recouping value by patent holders and avoiding infringement by patent users is through licensing. The practice of licensing, whether it’s by a university, clinic, or corporate lab, is a way of ensuring that a potential commercial rival seeking to make a competing product bears a fair share of the cost of the innovation. For licensees, it’s a way of adopting a solution so that resources can flow to innovation where the field is still open. While both sides of a license transaction are served, an argument is made that licensing can be impedimental if it is unduly restrictive or excessively costly. To avoid the problem, some have called for compulsory research licensing or recommended that the NIH, which provides the bulk of federal bioscience research funding, condition grants and contracts on the agreement of recipients to provide “royalty-free research-use licenses to all inventions that they make using government funds.” Of course, this proposal begs the question of what delineates “research” activity from commercial enterprise. In any event, policymakers and patent holders need not rely solely on NIH policy or patent law to promote liberal licensing. IP owners can individually and collectively adopt policies, such as opting not to enforce patents against university researchers and reducing licensing fees for clinical testing by nonprofit clinics and hospitals. Other nonprescriptive alternatives include “liability exemptions, patent pools, experimental-use exemptions.” Other regulatory approaches are compulsory licenses and the prohibition of exclusive licensing. “There is much to be said for broad licensing of gene patents and diagnostics based upon them,” says a report published by American Enterprise Institute. “On the whole, though, gene patents are turning out to work more or less the way patents are supposed to work and have been working for a couple of centuries and more. The research process, and ultimately patients, are the beneficiaries.”
Britain’s scientific journal Nature found that “prices of patented and exclusively licensed tests are not dramatically or consistently higher than those of tests without a monopoly.” Whether exclusive or nonexclusive patent licensing, “compulsory licenses are viewed as being an unwanted and unnecessary governmental intrusion into the rights of citizens to carry out commerce and to contract freely.” The reality is,“For the most part, patent-holders take care to stay on the right side of the research community, offering free licenses and not enforcing most of the rights associated with their patents.” Litigation against research institutions is costly, generates poor public relations, and can result in forfeiting the development of better uses of a patent from which the holder can benefit.
The NIH and National Science Foundation (NSF) point to Stanford University’s experience with the Cohen-Boyer patents (gene splicing) as exemplary for its openness and inclusiveness in regard to its broad licensing to promote follow-on research. These types of best practices should be encouraged to find the sweet spot of access and incentive.
INNOVATION, PATENTS, AND UNCERTAINTY. One of the greatest impediments to investment for research and development is “uncertainty.” The elements of uncertainty are wide-ranging—not only for economic, market, and competitive uncertainty, but also for legal and political risk. For the biotech industry and the research community, risk is inherent in the USPTO processes and practices, including the definition of “patentability”; how the courts may alter the landscape; whether one will be sued for using methods or materials known or unknown to be under patent; or in the predation of patent trolls, just to name a few potentialities.
As an NIH report observes, “Uncertainty about how courts will resolve disputes ... could be detrimental to both academic researchers and the infant biotechnology industry. ... [R]egardless of the merit of claims by the different interested parties, resolving the current uncertainty may be more important to the future of biotechnology than resolving it in any particular way.”
Economic, market, and even political uncertainty can never be completely eliminated. However, if the nation wishes to sustain a vigorous biotech industry and its solutions, then public policy must be shaped to help eliminate unnecessary risk, particularly when it emanates from the rules and actions of government. This includes stopping the predatory abuses of patent trolls without harming legitimate patent holders; working to be as clear and consistent as possible in the form and application of patent rules, standards, and guidelines; ensuring the efficient and timely processing of patent claims; and providing transparent guidance on what practices constitute infringement, among many others.
Ethical Issues in Focus
The controversies involved in biotech patenting extend well beyond the treatment of IP claims related to human gene sequencing. They extend to issues of personal rights and human ethics. In many ways, the ethical issues emerging from the interplay of genetic science and patent law are the most difficult and emotional.
As the research arm of Congress reports, “It is also clear that the pace of genetic research and its likely impacts upon us has accelerated to the very limits of our ability to grasp its significance. We are developing the practical means to direct our course as a species in ways that would baffle the science fiction of only a few decades ago and we struggle to phrase these issues as matters that merit our solemn and resolute attention.”
HUMAN DIGNITY AND RESPECT FOR LIFE. During the debate leading up to the Myriad case, headlines and editorials raged that the genes in our body are owned by someone with a patent on them. This, as noted earlier, is not the case. The genes in a person’s body belong to no one but the individual. However, “The courts have taken the position that a person does not own any tissues or cells once they are outside the person’s body. They belong to the doctor or hospital.” This is an aspect of U.S. law likely to offend many people and color how they perceive the fairness of bioscientific policy. An individual may have moral, religious, or even economic reservations about tissue from his or her body being used without permission for research or other purposes with which he or she may disagree. What should law, policy, and practice require in such cases? Donor notification? Prior approval? Or is it a just premise that human tissue, once excised from the body, is no longer the property of the individual, even if the tissue is used for some purpose which the individual does not agree?
Man is in the midst of a steadily advancing march “to manipulate—indeed, literally to splice together—the material that is responsible for the different forms of life on earth.” What are the implications of these capabilities, good and ill?
Weighing these existential considerations, planning for them, and, where appropriate, factoring them into law and policy is not the purview of the courts or the USPTO but, rather, of society at large and of elected leaders responsible for balancing public priorities and national interests. As the nation parses through the ethical and even theological aspects of genetic science, it benefits us to exercise that responsibility by the light of broad public purposes and strategic goals—that is to say the objective of improving human life and the world in which we live.
HUMAN NEEDS, FREEDOMS, AND RESPONSIBILITIES. While the number and scope of DNA-derived innovations (with or without patent protection) seem limitless, undoubtedly there are checks society could and should place on the enterprise. The question of can we do something must be accompanied by the question should we.
Recombinant DNA technology (rDNA) presents the opportunity to gain new scientific insights and suggests profound capabilities that will improve life. Yet, if we can tweak a gene sequence to make a protein that prevents a human disorder, we can use the know-how to produce one that’s viral and deadly. If we can genetically alter plants to yield more fruit, we can either purposely or inadvertently make genetic changes that render material less hospitable to the environment. If we can make an algae capable of producing energy, is it possible to introduce some custom-created life-form that could inadvertently interrupt natural cycles with unintended consequences that we are unable to foresee or even imagine?
As our capabilities expand deeper into the human domain, the issues will become even more complicated. Will there be a point when genetic therapy for man is no longer applied simply to diseases and disorders but to enhancing human features? Will there be a field of “cosmetic genetics,” or the ability to imbue our children while in the fetal stage with physical and perhaps intellectual and emotional characteristics of our choosing? How about genetically engineering
a super race of athletes or super minds? We are not there yet, but one can conceive of it on the horizon.
Placing limits on individual and collective freedoms to serve greater societal interests is a well- established norm, but liberties are accompanied by responsibilities. We have the freedom of speech but the responsibility not to yell “fire” in a crowded theater when there is no emergency. We have the right, indeed the obligation, of scientific inquiry and to explore the limits of nature, but setting responsible limits requires that we ask ourselves fundamental questions. Where should man draw the line on his willingness to manipulate instructions of life, particularly human life? What’s our goal in undertaking this work? Under what circumstances and limits should this take place? Who will set those limits, by what criteria, and how will they be enforced?
To answer these questions, we must have a keen respect for consequences—intended and unintended. Assessing them requires that we ask ourselves a more granular set of questions. What are the risks to human health, natural systems, and the environment of creating life-forms with no precedence in nature? What would be the social and moral impact of manipulating genes not only to predict, diagnose, prevent, and treat diseases and disorders but to enhance human characteristics? How can we anticipate and prevent or mitigate potential adverse consequences? What should the processes, rules, and standards be to keep up with technology, and who will be the custodian?
This paper doesn’t aspire to answer these questions—only to put them on the record and to foster the idea that we need to start thinking more seriously about them. There is nothing in patent law or procedure that allows examiners to consider or factor in ethical considerations in the patent process. It is not, and should not be, the role of the USPTO to make such value judgments. That obligation rests with policymakers and other institutions better suited for these purposes. But the fact remains that these determinations will have to be made.
In 1978, Congress established the President’s Commission for the Study of Ethical Problems in Medicine and Biomedical and Behavioral Research “because of an urgent concern expressed to the President that no governmental body was ‘exercising adequate oversight or control, nor addressing the fundamental ethical questions’ of these techniques, known collectively as ‘genetic engineering,’ particularly as they might be applied directly to human beings.”
The need still exists, now more than ever, as our creative capacity graduates from developing microbes and mice to larger and more complex life-forms. We will need proper national and international bodies (in the form of public commissions and/or expert advisory committees) to consider the many ethical issues, examine our body of laws and institutions in light of these, and recommend ways to address them prudently and proactively, without impeding progress. The proper institutions must be complemented by appropriate legal and administrative mechanisms and procedures to ensure that ethical considerations are factored in to policymaking.
Among the ethical considerations at the center of the patent debate is the justice of exclusive interests in lifesaving therapy and pricing that makes it harder to make treatments available to those who need them. Again, these critical considerations must be measured against the potential that such therapies will never come into existence without patent incentive. Additionally, the issue of monopolistic pricing is mitigated by two factors—first, in many instances national health care systems serving countries around the world negotiate price with providers, greatly reducing the potential for monopoly premiums. Second, mandatory licensing rules and other mechanisms to foster price competition are available as tools to address public health care concerns. Whether these tools are appropriate or sufficient will remain hotly debated.
The issues of principle, ethics, and morality simply must be addressed; otherwise, we place at risk the enormous good that biotechnology can do—the kind of good that patent policy is intended to foster. An NIH advisory committee on the scientific, ethical, and legal issues associated with rDNA technology identified the importance of proactive debate and “enabling public acceptance of a critically important technology and creating an environment in which science can advance in an informed, safe, and ethical manner.
Of biotechnology, the 1978 commission observed a truth that resonates today and will into the future “as a product of human investigation and ingenuity, the new knowledge is a celebration of human creativity, and the new powers are a reminder of human obligations to act responsibly.”
Among the responsibilities inherent in genetic science are the security of personal genomic information and the respect of privacy rights. Early in 2013, it was reported that researchers with online access and “armed with little more than an internet connection identified nearly 50 people who participated in a large genomic study based on some of the participants’ genomes and other publicly accessible information.” The case highlighted huge gaps in privacy in genomic data collection, storage, and use.
The computerization of personal genomic information is needed to mine big data for insights to improve human health. The potential abuses inherent in the collection and storage of personal information place a heavy burden on our laws, policies, and practices to ensure that privacy rights are fully respected and protected. Doing so is essential if computer-based genomic research that depends on large volumes of personal data is to maintain the public trust and yield the human health insights we hope for.
The United States now enters the post-Myriad era of gene science and patent law. In turning our attention to the future, among the first priorities is to track and assess the effect of the Court’s decision on the biotech industry and the U.S. pipeline of innovation. Of equal importance, though, is to take stock of the changing environment and key emerging issues also likely to influence our capacity to turn greater scientific understanding into new products, services, and solutions.
In the lead-up to the Myriad decision, there were two big strategic questions. One, whether and under what circumstance is it appropriate to grant property rights to any part of human DNA? Two, do such gene sequence patents impede research and the delivery of health care? The question set has now changed. They are now, one, what degree of human alteration of DNA renders the material patentable? Two, will the inability to patent genetic sequences excised from the body and correlated to disease stifle research and the intensity of bringing new gene-based tests, medicines, and therapies to market?
At the outset of the report, we mentioned that excellent innovation is a function of the incentive that patenting provides. This incentive will be needed more than ever for four reasons:
- The demand for higher-quality but lower-cost health care is critical to meet the needs of an aging population and reduce the health care burden on families, enterprises, and public treasuries.
- We are in an era of government austerity, in which the private sector will be counted on to generously fund research and development to make up for limits on federal resourcing.
- Our economic recovery remains sluggish. Jobs are at a premium. Maintaining good-paying employment opportunities provided by the biotech industry depends on a robust flow of new therapeutics.
- America’s economic future depends on extending its comparative advantage in areas where it excels, such as biotech, to remain competitive in a tightly contested global economy. Above all, biotechnology has the capacity to help solve our most pressing global challenges in health care, food security, and energy production. Emerging legal, economic, and ethical developments and factors are likely to influence gene patents and therefore our ability to mobilize biotech to meet these pressing needs.
The next section of this report looks to the future in three parts. The first section suggests for the reader’s consideration some key goals and principles that should inform public debate on biotech patent policy. Second, it provides a sampling of key issues and questions likely to influence the debate and shape real world outcomes. Finally, it offers a selection of approaches that policymakers and stakeholders may consider to better position themselves to handle key challenges, recognizing that given the importance of the issues surrounding biotech patenting, we are all stakeholders.
Goals and Principles
Earlier, the report noted that the Myriad decision was an interpretation of law, not a policy statement, about whether gene sequence patents are good or bad. The question before the Court was whether the gene sequence in question met a legal test: Was DNA the product of nature or of human invention? The Court decided the former. One can quibble with the determination, but it’s important for policymakers and the public to understand exactly on what question the Court was ruling.
GOALS AND PRINCIPLES: PATENTS AS A TOOL. In assessing the consequences of the ruling, we would do well to pull back for a strategic-level view of the issues at hand and for policymakers to refocus on the fundamental purposes of the patent system. The patent system was not established to make domestic or industrial policy or value judgments, nor was the Court for that matter. Its job is to adjudicate a basic question: Does the “discovery” or “invention” meet the test for patentability under applicable laws and standards? The patent system is a tool—one that has served our nation well from its inception.
The tool wasn’t conceived as a way to enrich inventors or increase the nation’s fund of monopolies. The purpose was to “promote the progress of science and useful arts.” It was designed to help bring to fruition and public light innovation that might not otherwise materialize or be made public without the incentive of recoupment. The idea was to stimulate the investment of time, brainpower, and money by extending a period of exclusive rights and foster the publicity of innovation so that society could use and build upon it.
Quite aside from Supreme Court decisions, the system’s ability to perform these functions efficiently is the measure by which policymakers and the public must evaluate it. Where it fails in that function our policymakers are obliged to take remedial action or, alternatively, to accept the consequences of such deficiency. The latter is fine as long as society consciously understands the ramifications and is able to make a rational, purposeful judgment about the superiority of the alternative objective to which we would be yielding.
For this reason, as the nation considers the weighty issues involved with life science patents, we should retrain our focus on what’s key: the purpose of the system and the roles and missions of its institutions. This entails evaluating the USPTO’s job of administering the process, the judiciary’s role in interpreting patent law, and Congress’ responsibility of ensuring that the system is fulfilling its mission and making necessary adjustments when it is not.
With a keen focus on the strategic goal in question, our evaluation should start with understanding that the patent system was built around a central premise: “incentives matter.”
GOALS AND PRINCIPLES: HARNESSING INCENTIVE. Lisa Haile of the San Diego Union-Tribune observes, “Understandably, if there is not a competitive advantage in the form of patents, investors may balk at sinking millions of dollars into development of a product if other companies can freely develop the same product.”
As we navigate the post-Myriad world we should come back to the principle of incentive and in doing so ask ourselves again some basic questions:
- How powerful is the patent incentive in stimulating investment in discovery?
- Does the existence of life science patents disincentivize more robust innovation by discouraging minds and investment from particular areas in which broad patents are established?
- Does the existence of a patent for a process or material stimulate creativity in finding alternatives?
- Will the decision that DNA sequences excised from the body are not patentable cause R&D resources to flow elsewhere? To where? For what purpose? And are these changes desirable?
- Will the disappearance of some unproven fear of patent infringement liability stimulate researchers to apply new vigor to gene research? By all accounts, incentives still matter greatly and their effects are knowable if we choose to understand them. The principle must continue to undergird the structure and evaluation of the innovation system.
GOALS AND PRINCIPLES: BALANCING ELEMENTS AND INTERESTS.
Another preeminent requirement to maintain a healthy innovation system is ensuring that the patent system strikes a set of important balances. The first is balancing patent exclusivity with the openness of scientific inquiry needed to drive innovation, stoking the fires of genius by granting a reward that does not “impede further advancements.” Finding this balance will be difficult, but strike it we must. As the Association of Medical Colleges observes, “A patent policy that is hostile to research tools and their developers will certainly not encourage the development of products that promise to accelerate research processes and make them more efficient.” Conversely, if openness renders exclusivity meaningless, the incentive to make the substantial investments in bringing goods, services, and solutions to market is severely diminished.
Focusing on gene science, the National Human Genome Research Institute puts it this way: “[The] fundamental question is how to provide access to genetic information and inventions without inhibiting the commercial development of new products and services by the biotechnology and pharmaceutical industries.”
The goal of finding the sweet spot that provides the reward of exclusivity while ensuring that creators and improvers are able to build upon existing ideas, add new twists, and rework innovations to still greater advantage is an important goal to which the country must devote significant policy focus. Maintaining the sweet spot in a constantly evolving economic, scientific, and social landscape is likely to be the toughest job of all. Ultimately, the objective is not just to balance exclusivity and open inquiry but to synergize them to maximize our innovative powers.
Another area where balance is required is between the rights of life science IP holders and the broader needs of society. Once again, this is a tough but essential reconciliation to achieve—a job that falls to Congress, not to the USPTO or the courts. Sustaining a strong patent system requires a broad societal view that it is working well for the public.
When compelling public interests collide, lawmakers must weigh the competing interests, examine the options, measure the consequences, and act. Recall the controversies surrounding the Waxman- Hatch Act, which played a major role in relaxing the regulatory hurdles for generic firms and facilitating higher levels of generic entry. A Government Accountability Office (GAO) study found that from 1999 to 2010, generic drugs saved pharmaceutical purchasers more than $1 trillion. What we cannot know is what drugs or therapies would have been created had at least a portion of the proceeds been plowed back into biomedical research. Certainly, without the innovation of new drugs, facilitated by the patent incentive, new generic drugs have no basis to emerge.
Society’s need for lower-cost drugs to benefit human health and reduce the health care budget burden is as compelling as is the need to maintain the integrity of the patent system to produce the therapies in the first place. As described in a report on biotech innovation:
A different set of tradeoffs has figured in the debate about drug patents. The pharmaceutical industry, lobbying for stronger patent laws throughout the world, has sung the praises of the patent system as a means of promoting costly and risky investments in research and development (“R&D”). In contrast, public health advocates, calling for restrictions on patent rights, have stressed the importance of improving access to drugs for people who otherwise cannot afford them.
Congress examined closely the term of patent protection needed to provide incentive to develop while ushering in generics as quickly as possible to induce price competition. It found somewhere between 11.5 and 14 years to be the sweet spot. The point is that the competing needs were acknowledged and reconciled, not by changing the entire patent system but through targeted changes in law seeking to strike a correct balance. Whether we have achieved the correct equilibrium in this instance can be debated, but the need to keep trying seems evident. In terms of pricing, we must try to find some appropriate balance between ensuring affordability of medicines without destroying the incentive system that spawns their development.
This balance finding is required under the international patent policy as well. “Under Trade-Related Aspects of Intellectual Property Rights (TRIPS) rules, a voluntary license is required if an entity other than the patent holder wants to market the patented product. However, in the case of a national emergency, extreme urgency, or public noncommercial use, the need for a voluntary license can be waived and a compulsory license issued by a judicial or administrative authority.” Mandatory licensing has become a tool used by policymakers to reconcile public health requirements with the need to protect valid IP.
A report by the World Health Organization (WHO) asserts, “While patents and intellectual property rights protect innovation, they directly and adversely affect access to HIV/AIDS medicines and supplies in developing countries. Licensing, voluntary or not, is increasingly used to mitigate the problem.” One of the strategies that the WHO has employed is the Medicines Patent Pool, which “works to stimulate pooling of patents on antiretrovial drug, and makes available assessments of their patent situations in countries.”
At Doha, it was agreed that in the interests of public health, patents could be broken. Important questions prevail: What constitutes an emergency? How is “public interest” defined? How will we resolve conflicts over emergency declarations? What can be done to provide flexibility so that public officials can respond to emergencies while providing therapy providers with a reasonable amount of certainty needed to make rational decisions on which the flow of new and improved medicines rely? How can safeguards be placed so that these flexibilities are not utilized by a government as industrial policy to promote domestic generics industries under the guise of public health?
Further, the system must find a synergistic balance between collaboration and competition in the innovation process. Competitive fire to be first and best drives innovative excellence as it does performance in every other area of human endeavor. What’s clear, though, is that innovation today is achieved at the intersections and margins of multiple disciplines, a reality requiring that we collaborate as well as compete.
The NIH reported a survey of stakeholders which found “substantial evidence of a ... remediable burden on research—private as well as public—stemming from difficulties in accessing proprietary research materials, whether patented or unpatented. The committee found that impediments to the exchange of biomedical research materials remain prevalent and may be increasing.” This isn’t a patent problem; it’s a transparency and systems approach problem.
We continue to witness the power of crowd sourcing across many domains of society. The innovation process is no exception. We need as many great minds as possible trained on scientific breakthrough and finding the most promising solutions to our greatest challenges. In the 21st century, the symbiosis of collaboration and competition propels innovation. Policy attention must focus on the architecture necessary to nurture and feed it.
Finally, we must strive for balance between basic and applied research. The federal government mainly finances basic research, whereas companies focus resources on applied science. This creates a continuum of innovation in which the private and public sectors are interdependent partners. Basic research is an essential platform to build applications, and without applied research, good things don’t get to market, making the basic research count. Striking the balance between federal and private funding and between basic and applied research is essential to maintaining the vigor and productivity of our innovation system.
GOALS AND PRINCIPLES: BEWARE OF THE LAW OF UNINTENDED CONSEQUENCES AND OVERREACH.
As we seek a patent system that harnesses incentive, balances exclusivity with openness, and synergizes collaboration and cooperation to “promote the progress of science and useful arts,” we must remain alert to the gremlin of unintended consequences. This requires a disciplined process and relentless questioning to ensure that policy is developed judiciously, based on evidence and the due consideration of actions’ full net effects. Questions like these will be important:
- Lower-priced therapies are essential, but do efforts to compel lower prices dry up the incentive to create the treatments in the first place?
- Exclusivity is a vital incentive. But if the application impedes scientific advancement or other societal needs, is its purpose being served?
- Judging that a DNA sequence is a product of nature rather than of man may be legally correct, but should it remain unaddressed if found to impede investment and research in essential gene-based diagnostics and therapies?
- Patent trolls are harmful, but should the effort to defang them threaten patent holders with loss of rights or diminished enforceability for reasons having nothing to do with filing predatory lawsuits?
- Creating a bacterium to remediate pollution is good and patentable, but if the life-form threatens to impair a fragile ecosystem should it stand?
The author doesn’t presume to offer answers to these questions or the many like it that must be asked. He’s only urging that policymakers keep asking and answering them if we are to achieve the strategic goal of spawning rapid and beneficial life science innovation.
GOALS AND PRINCIPLES: PROACTIVITY.
As we ask tough but essential questions, we should do so with the objective of being proactive. Innovation is too important and the global economy moves too swiftly for our policymaking and oversight apparatus to be continuously in reactive mode. It ill-serves the public, the economy, commerce, and the nation if we are not constantly scanning the horizon for trends, threats, and opportunities affecting our innovation system and its patent component. The United States creates a Global Trends report regarding issues affecting national and international security. We should employ similar methods of identifying meaningful trends and factors bearing on our innovation future. The aim should be to implement policies that head off adverse trends and avoid threats to innovation. Doing so will improve America’s innovation ecosystem and minimize the uncertainty that impedes investment and sound decision making.
GOALS AND PRINCIPLES: PATENT EFFICIENCY. Given that the patent system is a keystone of our innovation architecture, the nation’s policy apparatus needs to continuously scrutinize the efficiency and accuracy with which intellectual property is defined, scoped, and approved. An excellent patent system must value both speed and accuracy if it is to keep pace with the nation’s needs in a fast-paced economy. This makes it incumbent upon government to ensure that the system is guided by clear laws, policies, practices, and standards and that the USPTO is properly resourced to do its job. The strategic goal is not only the sheer quantity and timeliness of patents handled but the quality of patent examination as well.
Poorly defined, overly broad, and dubious patents are not useful. They clog the courts, improperly provide exclusivity, and cordon off subject matter from full inquiry. So, too, the rejection of patents that should be granted lurks in unknown quantity but does as much damage to incentives for innovation. Avoiding these detriments to innovations is a shared responsibility:
- If biotech companies wish timelier patent decisions, a more efficient system, and less litigation, then patent applications must be properly tailored and well defined.
- If the USPTO and policymakers wish to avoid patent conflicts and unnecessary constraints on inquiry, then the system must have the clearest possible qualification standards.
- If Congress wants a thriving biotech patent system to drive beneficial solutions to the market, then it must properly direct and resource the nation’s patent system to get the job done.
GOALS AND PRINCIPLES: SAFEGUARD HUMAN DIGNITY, PROTECT PRIVACY, AND SERVE PUBLIC INTEREST.
Finally, if society is to ensure that life science innovation is sustainable, then we must ensure that it is responsible for safeguarding human dignity and serving the public interest. As noted earlier, DNA is the code of life. Working with it touches on enormously powerful and consequential forces with ramifications that go well beyond economy, commerce, and law. It encompasses deeply moral and theological issues. This requires that we operate with a sense of care and humility, and the clear understanding that with the rights of scientific inquiry and commerce is the responsibility to respect the dignity and power of life. Perhaps as policymakers evaluate gene patent law, policies, and practice, they should consider a checklist with the following criteria:
- Does the law, policy, or practice promote the progress of science and useful arts (i.e., advance biomedical research and drive the innovation of diagnostic and lifesaving cures)?
- Does it properly balance society’s needs and take into consideration third-order effects and unintended consequences (i.e., does it meet the needs of scientific development, broad public health, and good commerce)?
- Does it respect human rights, dignity, and privacy?
Issues to Watch
WATCH! RESPONSE TO MYRIAD. Time will tell what effect that the Myriad decision will have on basic and applied research on genetic material and the pipeline of biotech innovation. While Myriad resolved certain legal questions for the time being, it raised many others bearing on research, innovation, and product development. Among the consequences and factors to watch:
- Changes in investment patterns and research priorities of universities, research clinics, and biotech companies; the deemphasis on sequencing DNA strands; and a refocus of investment and scientific attention on other areas of gene science and biotechnology.
- Changes in gene therapy development work and the search for single gene mutations.
- Changes in the number, rate, and claims of gene patent applications.
- Levels of product and price competition for BCRA1 and BCRA2 testing.
- The extent to which similar patents are affected by the decision.
- Any evidence of increased research using the BCRA1 and BCRA2 genes and other similar gene sequences on which patents are held due to the elimination of the putative patent thicket.
- Whether the judgment facilitates any offshoring of research or product development involving the gene where broader patent protection may be available.
- Whether the decision will affect gene patents for plants and animals or impact genetic research and biotech development in these areas. These observations will provide key lessons learned about the gene patent system and will point to areas where remedial and proactive policymaking should be considered.
WATCH! AMERICA INVENTS ACT. The law described earlier in this report was enacted in 2011 and made several major reforms to the patent system. They include increasing the number of USPTO satellite offices, replacing a “first to invent” with a “first to file” patent eligibility standard, and implementing new administrative dispute resolution procedures. Among the issues to watch are the following:
- The extent to which the speed and accuracy of patent processing is improved by the reforms (e.g., prioritized examination—a procedure for obtaining expedited examination of applications—aimed at a final disposition of the application within 12 months of the office’s granting of prioritized status).
- The extent to which the “first to file” standard improves fairness and reduces patent claim conflict.
- The procedural and practical benefits to U.S. biotech companies of harmonizing the filing standard with Europe’s and Japan’s systems.
- Whether administrative dispute resolution eases the burden of litigation or adds a bureaucratic layer that encourages dispute and serves as a stepping stone to the courts.
- The extent to which the reforms result in a more efficient innovation ecosystem.
WATCH! PATENT STANDARDS/USPTO MODERNIZATION. As genetic science advances, four questions regarding patentability standards loom large. One, how will the criteria— invention, novelty, utility, and nonobviousness—evolve and be applied by the USPTO? Two, how extensive “incremental improvements” to currently patented subject matter must be in order to qualify as patentable new art? Three, what level of human manipulation of genetic material will qualify material as an invention rather than as a product of nature? Four, how and will the scope of patents will change? Poor-quality patents contribute to the litigation thicket and encumber innovation. Too narrow or improperly denied patents diminish their incenting effect. Overly broad or ill-defined patents, which are the far more common criticism, can create greater hindrance than help. This is a two-part problem. By having an interest in making their claims overly broad and ill-defined, applicants are submitting poor-quality patents. Too often, the USPTO is approving them. Applying good criteria accurately and consistently requires tough calls particularly when dealing with highly technical subject matter such as genetics. The job is made much tougher by USPTO’s trouble recruiting and maintaining patent examiners possessing the necessary expertise. As the science grows more complex, patent examination will only get tougher and persistent personnel deficiencies will become even more conspicuous. An essential part of the solution is ensuring that patent guidelines incentivize quality patents, not just quantity. Today, quantity is the basis for bonuses and financial rewards for examiners by the USPTO. Among the issues to watch:
- Whether the backlog and processing time for patents improves, stays the same, or grows worse.
- Changes in the four-part criteria for patentability standard—invention, novelty, utility, and nonobviousness—in light of the Myriad decision and as the nature of gene and other life science patent claims evolve.
- The signals from the USPTO, Congress, and the administration about how they plan to cope with personnel challenges involving recruitment, retention, compensation, and a continuum of professional education and development.
WATCH! SYNERGY OF GENETIC SCIENCE, INFORMATION TECHNOLOGY, AND BIG DATA. Gene science is utilizing supercomputing and big data to understand and sequence the genome, find correlations between genetic factors and human diseases or disorders, screen genes for drug leads, and develop better diagnostic tools, drugs, and therapies. Moreover, the computerization of genetic data and techniques is promoting greater access to genetic information to researchers, medical practitioners, and patent examiners. Among the issues to watch:
- The extent of practical applications to harness these synergies, such as the growth of genomic databases.
- The potential of this synergy to aid research and product development.
- Policies and other factors that may impede the cross-collaboration.
- The extent to which use of these methods affects the importance of Myriad-type patents on material excised from DNA strands.
- Whether privacy right issues will arise with the use of crowdsourced genetic data for biotech research and development.
WATCH! PRIVACY. Differences of opinion exist about the significance of genetic information for individuals and their families. What makes genetic information unique is that it reveals information not just about the individual from whom it was collected, but also about his or her family members who may not even be aware that genetic information was gathered. It may also reveal information about the larger population of which the individual is a member. Genetic information also can be revealed about individuals and their families and populations simply from a tissue sample or database. Consequently, the decoding of the human genome makes privacy and confidentiality issues extremely acute. In the future, genetic data on individuals and families—including, ultimately, an individual’s entire genome—will become increasingly known and available. “Medical research centers and other health care organizations will need to revise current protection procedures to avoid dignitary harms, such as stigmatization and discrimination associated with violations of genetic privacy.” Participants often express anxiety and concern about privacy aspects of the informed consent process. Those taking part in genetic studies may not want family members to know that they carry a specific trait, fearing that they will be ostracized or blamed. Furthermore, they may not want to disclose to family members the results of their genetic tests because of potential discrimination by insurance companies and concerns that test results may make the family uninsurable. Indeed, in 2008 Congress passed genetic information nondiscrimination legislation so that personal genomic information will not result in discrimination in insurance or employment.
WATCH! PERSONAL GENOME DEVELOPMENT. The field of “bioinformatics”—an emerging discipline that acts as a “merger of microbiology and computer engineering will empower inexpensive, individualized genetic testing.” Experts predict that individualized genomes will be available soon for under $1,000—a price expected to tumble further.
Personalized genomic mapping will point to an individual’s hereditary risk for diseases and disorders, information that can indicate preemptive changes in lifestyle and diet, preventative therapies, and the application of personalized medicine that could greatly improve health care outcomes at lower costs. The big data created by individual genomes can aid disease research and therapy development. As noted in 2012 press coverage, “With the help of big data that shows the effectiveness of various treatment regimens on different kinds of patients, personalized medicine can ‘better match patients with complex diseases to the best therapies, eliminating the trial-and-error process that often has resulted in ineffective treatments, particularly in the use of pharmaceuticals.’” Among the issues to watch:
- Continued decline in the price of personal genome typing.
- Continued progress in the ability to translate individualized genomic typing into useful health care information and the patent eligibility of these advancements.
- The progress of initiatives such as the Harvard Personal Genome Project, the National Geographic Society/IBM’s Genographic Project, and multiple private efforts to collect and make use of individualized genetic data.
- Trends in patent applications for bioinformatics and personalized genome inventions.
WATCH! FEDERAL R&D FUNDING. In the era of government sequestration, we must watch carefully the trends in basic life science research and whether these spending levels will enable the United States to maintain its primacy in biotechnology. A downward trend in federal R&D funding will point to the need for promoting greater private-sector investment in life and health sciences, in which patent policy plays a central role. Among the issues to watch:
- The effect of sequestration and budget deals on federal funding for life science research, in particular the NIH budget.
- The effect of Myriad on private-sector investment volumes and focus areas.
WATCH! UNIVERSITY-BASED RESEARCH. More and more genetic research is being conducted at universities, rather than in corporate laboratories. Universities are entitled to hold patents, including for IP development using government funds. And together with government, they hold the bulk of gene patents. Conversely, universities house academic researchers who have been among those most concerned about the impact of patent thickets on basic inquiry, Among the issues to watch:
- Whether the Myriad decision will increase or diminish university-based genetic research.
- Whether the trend toward university-based research and away from corporate labs continues and what the implications of this trend are for the U.S. innovation system.
- Changes in the balance of interests between university-owned IP and the open inquiry of its researchers.
WATCH! RECOMBINANT DNA TECHNOLOGY (rDNA). This form of DNA is created by splicing genetic material, often of different species. The field is believed to offer the most promising new therapies. Many gene patents are based on recombinant genetics, and most human gene patent litigation involves infringement allegations “based on the recombinant production of a therapeutic protein.” Among the issues to watch:
- Whether there are court challenges as to the patentability of rDNA based on rationale employed in the Myriad case.
- Whether a patent thicket exists and hinders rDNA research.
The same issues and questions accrue to cloned DNA. The creation of this material requires human intervention in naturally occurring gene sequences. Does the level of human intervention, however, satisfy the threshold implied by the Myriad decision for its development to be patentable? Experts believe that the future of gene-based innovation and therefore patenting in the field appears to be in the production of nonnaturally occurring DNA molecules. As the Association of Medical Research Colleges stated presciently in 2002 “it is important that those who participate in this discussion understand clearly the difference between genomic sequence, which exists in nature, and gene-based inventions, for which patent protection is appropriate.” This admonition is all the more important in the aftermath of the Myriad case.
WATCH! PATENT TROLLS. There are growing calls to reduce the incentives for patent trolls. Among the strategies under consideration is providing judges with great authority to require that the plaintiffs filing “abusive” litigation pay the legal fees of the defense.
Moreover, the House and Senate Judiciary committees have expressed the intent to address the troll issue by the end of 2014. Trolls are widely regarded as an abusive and counterproductive enterprise that saps resources from innovation, product development, and other useful business activities.
It will be important to make sure that remedies are well targeted and do not have adverse impacts on well-intentioned patent holders. As pointed out in a recent Boston Globe editorial, “When the president defines trolls as entities that ‘don’t actually produce anything themselves,’ he fails to understand the complexity and strength of American innovation. Legislation that fundamentally restricts the actions of ‘trolls’ will almost certainly hurt research-focused businesses, universities, and individuals."
Compounds are easily imitable and can be changed just slightly to create new patentable art. That’s why companies file thousands of patents and may use only one. Two issues are raised. Does the holding of these patents constitute trolling? Proposed remedies must take care not to confuse defensive patent purchasing with the practice of trolling itself. Additionally, policymakers and administrators must understand that the nonuse of a patent can be for numerous legitimate reasons having nothing to do with predation. Remedies for trolling must take into account these factors to ensure that proposed cures don’t come with side effects as problematic as the disease.
Moreover, one can imagine the advent of new trolling activity in which trolls begin looking for infringement at universities and research clinics. As the NIH reports, “While established companies usually are reluctant to pursue litigation against research universities—it could involve more demands for licensing fees, grant-back rights, and other terms that are burdensome to research.” Among the issues to watch:
- The specific strategies and tools the government intends to use in countering patent troll abuses.
- Whether these tools will create financial or administrative burdens, liabilities, or business uncertainty for enterprises that are holding IP for legitimate business uses, rather than as a tool for lawsuit abuse.
- Whether trolls are beginning to examine noncommercial activities at universities and research clinics as targets of opportunity for lawsuits.
WATCH! OFFSHORING. Moving offshore is often cited as a viable workaround for researchers who may desire to avoid real or perceived impediments to research or liabilities resulting from gene sequence patents. Driving research activity abroad to avoid legal impediments or compelling innovators to go elsewhere to obtain more desirable patent protection is not a winning strategy for U.S. innovation. Among the issues to watch:
- The extent to which offshoring research is induced by infringement concerns.
- The extent to which offshoring research offices or other biotech corporate facilities and activities stems from the view that the U.S. patent system is not hospitable.
- How the biotech industry compares the benefits of the U.S. patent system with those of other regions.
WATCH! COLLABORATION AND GENE PATENT POOLING. Experts cite the promising use of genomic databases, the employment of research platforms, and the pooling and cross- licensing of genomic and proteomic patents. The World Health Organization’s patent database is an example of the type of resource sharing in practice. These mechanisms help foster openness, ease of access, and collaboration, as well as protect against lawsuits, obviate expensive licensing fees, and mitigate the difficulties of operating in a patent-intensive environment.
The USPTO, which has been promoting the practice of patent pooling to encourage collaboration and reduce infringement claims, describes patent pooling as the “Affordable pre-packaged patent “stacks” that could be easily licensed, and an additional revenue source for inventions that might not otherwise be developed. The end result is that patent pools, especially in the biotechnology area, can provide for greater innovation, parallel research and development, removal of patent bottlenecks, and faster product development.”
Idle data being held by biotech companies seem to be wasting potential valuable resources. Better mechanisms to pool and jointly license donated IP must be explored and implemented. Pooling and other collaborative efforts require scale and volunteerism to work effectively. While each raises significant questions and hurdles, models are in operation and represent a way to create the synergy of competition and collaboration that our innovation needs. Among the issues to watch:
- The degree to which current pools, databases, and platforms are driving innovation, reducing patent infringement claims, and operating to the satisfaction of participants.
- The extent to which public policy changes or guidelines are needed to improve the performance of these collaborative tools.
WATCH! RESEARCH. Among the biggest controversies involving life science patents is their effect on research. The record indicates little evidence of patent thickets impeding academic research. U.S. patent law contains no broad research exemption per se, but commercial and academic research institutions are exercising a menu of workarounds to avoid patent entanglements. These include “inventing around, going offshore, challenging questionable patents, and using technology without a license.” Also available is a putatively broad patent liability exemption extended to research conducted for purposes of obtaining regulatory approval of an innovation. Among the issues to watch:
- Empirical evidence of patent thickets and IP-related impediments to basic research.
- Whether a clarification is needed about the coverage of the FDA exemption.
- Whether updates are needed to NIH guidelines for federal funding recipients in terms of research licensing.
- Whether impediments to research require a more explicit and broader exemption to foster innovation.
WATCH! CALLS FOR SECTOR-BASED PATENT POLICY. Some have proposed overhauling patent law and customizing rules, procedures, and eligibility criteria to discrete industries, such as software, and genetics. As pointed out by The National Human Genome Research Institute, “The U.S. government has generally argued that patents are good for all technology, and that there should be no discrimination against any one field or area of potential patenting. This would make it difficult to carve out criteria specific to genetic patents.” There are, however, exceptions to the one-size-fits-all approach. “For example, patent law has been used to control innovation and development of atomic energy. In another instance, Congress legislated special treatment to the airline industry, allowing companies to pool patents to promote the then-nascent industry’s development without concern for antitrust considerations.” The field of genetics presents its own set of particular challenges and opportunities, but lawmakers have not provided special treatment to the life sciences, except for, perhaps, the research with special treatment regarding the application of patent law. Among the issues to watch:
- Continued discussion and more sophisticated proposals for how customized, targeted changes in the law would work, including the costs and benefits of doing so.
- Whether a compelling case can be made that biotech innovation would be enhanced with changes in the law targeted only at life sciences.
WATCH! BRAIN INITIATIVE. The Obama administration announced in 2013 the creation of a multiyear, multibillion dollar research effort to map the structures and processes of the brain. Previously referred to as the Brain Activity Map project, BRAIN (Brain Research through Advancing Innovative Neurotechnologies) “aspires to map the function of thousands or hundreds of thousands of neurons simultaneously, as they function at the speed of thought ... [and] ultimately aims to help researchers find new ways to treat, cure, and even prevent brain disorders, such as Alzheimer’s disease, epilepsy, and traumatic brain injury.” BRAIN could be a platform to drive new and exciting life science innovations. Among the issues to watch:
- Whether Congress funds BRAIN at its full requested level, and if so, whether the funding is provided by reductions in other life science research accounts.
- How the initiative will encompass stakeholders in the biotech arena and the rule and guidelines for participation.
- How intellectual capital developed through the initiative and its collaboration will be treated.
Other major public national and international research initiatives created to advance mankind’s knowledge and capability will raise the same questions, challenges, and opportunities. Patent policies regarding breakthroughs associated with public-sponsored work must be carefully thought out to maximize participation in as well as the practical benefits derived from such public investments.
WATCH! JUDICIAL AND EXAMINER EXPERTISE. Lack of technological expertise in the judiciary continues to be a burden on the system. Beginning in 2013, a 10-year pilot patent program will help get U.S. district court judges up to snuff for hearing patent cases.
WATCH! INTERNATIONAL. The globalization of R&D pipelines and the fierce international competition to innovate and win market share in biotech intensify the need for the best possible patent system, not only at home but abroad where our companies must sell their goods.
The United States is the place to be for biotech development because it enables companies to get to the best market fastest. Yet there are many lures for a biotech innovator to venture abroad, including a growing abundance of human talent, expanding markets, and differing tax and regulatory environments. The degree to which other countries process and enforce patents is a factor bearing on not only where companies choose to innovate but on whether they are able to compete fairly and well in overseas markets.
U.S. patents do not automatically provide protection in other countries. Innovators must receive a patent in whatever country they wish to market their product; however, we are party to an international Patent Cooperation Treaty that “streamlines the process of filing patents in multiple countries. ... By filing one patent application with the U.S. Patent and Trademark Office (USPTO), U.S. applicants can concurrently seek protection in up to 143 countries.”
Patent recognition policies abroad are highly consequential. As The Economist points out, “Drug companies, facing paltry growth in rich countries, want to sell medicines to developing ones where demand for new drugs is rising along with rates of chronic disease. But governments are keen to boost their own pharmaceutical firms and are wary of patented drugs’ high costs. As a result, brawls over patent protections and prices have broken out from Brazil to Thailand.”
Patent recognition and protection as well as data exclusivity are traditionally negotiating points in bilateral and multilateral trade agreements. There is a broad network of reciprocity agreements built into international trade agreements. The United States is party to the TRIPS Agreement, which requires the signatories to implement a basic set of IP protection standards. However, much discussion has been focused on harmonizing the approach of the European Patent Office, the United States Patent and Trademark Office, the Korean Intellectual Property Office, and the Japan Patent Office to provide a more consistent and rationale economic playing field. Among the issues to watch:
- How much patent harmonization would benefit U.S. biotech companies in markets abroad.
- To what degree harmonization would enhance international collaboration, public and private, in the biotech arena and produce greater innovation through larger intellectual economies of scale.
- How patent harmonization is treated in the U.S.-EU and the Trans-Pacific Partnership trade negotiations.
- The acceptability of patent term restoration and data exclusivity to other countries.
As an aside, pharmaceutical companies file for a patent on a compound at the beginning of the discovery process, at which point the patent clock begins. The time spent marshaling the particular compound through the FDA premarket approval process to prove the discovery’s “safety and effectiveness” can take years, eating well into the 20-year patent term before revenue can be generated. Congress sought to address this problem with a targeted measure enabling drug makers to receive additional time to their patent rights (known as patent term restoration) to make up for the time lost in the regulatory process. Patent term restoration is a key subject of trade negotiations and will be an issue to watch in the major trade discussions that the United States is engaging in with Europe and the Pacific Rim countries.
WATCH! DEFINITION OF A NATION’S NATURAL RIGHTS. National and international patent policies call for duly compensating the nation of origin for biotic material used to develop medicines and other products, for instance, payment to Brazil for its contribution of a native plant or to a native people whose genomic or proteomic properties are used to make a medicine. The need to compensate China and other nations for use of their traditional, unpatented medicines in modern, patented therapies is often cited as a purpose to create such arrangements. Among issues to watch:
- To what extent will the concept be imbedded in international agreements and patent rules?
- How will such rights be defined?
- What degree of compensation is fair without impeding research, discovery, and the development of medicine?
WATCH! IP PROTECTION. Defining and awarding intellectual property through the patent system is only the first part of the equation; protecting it is the other critical component. IP protection is a large and complex topic, and its intricacies are not dealt with in this paper. Suffice it to say that infringement of U.S. IP is an enormous problem, and the United States has an enormous stake in remedying it through vigorous diplomacy, international agreements, and other means. Infringement can take place through criminal enterprise, or even government policy such as when a country utilizes its tools to provide cheaper medications under the premise that they’re necessary to serve local populations in need, only to capture them from reexport to a third country for profit. Some issues to watch:
- The treatment of IP protection in the U.S.-EU and Trans-Pacific Partnership trade negotiations.
- Whether anti-troll actions harm legitimate patent holders and the implication for the innovation system.
WATCH! MICROBIAL EVOLUTION. Another issue that must be watched closely is the shrinking life span of antibiotic drugs because bacteria mutate around countermeasures faster and faster. The quicker the bugs mutate, the shorter the life span of a drug remedy. The shorter the useful life of an antibiotic, the smaller the window that medicine makers have to recoup their investments. This means either one of two outcomes—the manufacturer will lose money—which means the initial research would be unlikely to occur—or the drug cost will be enormously high—a poor outcome for society. This is an excellent example of where policymakers must proactively address (not just through patent policy but through public health policy and other tools) what is a major public health menace on the horizon.
Steps to Consider
It is not the role or intent of this paper to set an agenda for life science patent policy reform but only to identify important issues, raise relevant questions, and explore some of the issues and considerations central to the debate. To further enrich the debate, however, this concluding section offers a set of strategic proposals that if implemented may better prepare our patent system to meet the country’s needs. The ideas would benefit all sectors of innovation but, in particular, the fast-moving and economically critical biotech domain.
STEP: REASSESS ROLES AND MISSIONS. Policymakers and the institutions responsible for the proper functioning of the U.S. life science patenting system should reassess the scope and performance of their respective roles and missions in the broader biotech innovation system. We need a more strategic framework to foster and drive innovation.
Congress’ role is to protect the long-term public interest. It appropriates the money for life science research and must better exercise its duty to ensure that patent policies and administration make these investments as fruitful as possible. As Justice William Brennan observed in the Diamond v. Chakrabarty case, “It is the role of Congress, not this Court, to broaden or narrow the reach of the patent laws. This is especially true where ... the composition sought to be patented uniquely implicates matters of public concern.” As of this writing, no signal has been given by the relevant committees of Congress that a hearing will be held on the innovation impact of the Myriad decision.
Congress also has a role to step in when its actions create harmful, even if unintended, consequences. There is evidence that fewer companies are putting money into AIDS medicine research, and those that do are spending less. This is in part because under existing public policies and practices it’s unlikely that the investment can be recouped. In these cases, can government step in financially to recreate the incentive of patent pricing? If not, can it match what the private sector does regarding applied research and the development of drugs? If neither is the case, what are the tradeoffs? These are questions legislators must address head-on.
The USPTO’s role is to impartially evaluate patent submissions, but it is not the only agency with significant influence on the patent process. The FDA is an integral part of the innovation system for drugs and therapies. Its rules and timelines in assessing the “safety and effectiveness” of pharmaceuticals significantly influence the quality of our system to develop and market innovations to diagnose, prevent, and treat diseases and disorders. The FDA must be speedy but accurate as delayed decisions curtail the availability of therapies and increase their costs. But speed at the cost of accuracy can cost lives, create litigation, and foster distrust when therapies are withdrawn from the market. “FDA regulation, like patent protection, confers valuable exclusionary rights as a reward for investing in certain kinds of R&D, thereby adding to both the profits and costs of drug development.”
Because medicinal compounds are easily copied, the FDA grants protection for data leading to the biologic treatments for 12 years to bolster incentive to innovate in a way that patent law can’t. How well the agency performs its functions significantly impacts public health, the degree of litigation involving biopharma, and the overall success of the U.S. biotech industry.
The NIH distributes much of the funding for bioscientific research. Its protocols and standards highly influence how funding recipients treat the intellectual capital they develop with public dollars. As a major patent holder, the NIH must continue to show that it is impartially exercising its authorities to foster innovation. Moreover, the NIH needs to further develop its liaison with the biotech industry, universities, and other stakeholders to promote mutual understanding and collaborate as appropriate in the pursuit of shared objectives.
Advanced recombinant genetics, like other areas of gene science, encompass issues that fall within the jurisdiction of numerous federal departments and agencies. Among them are the departments of Commerce, Energy, Health and Human Services, Energy, Justice, and Defense, along with the Environmental Protection Agency, the Food and Drug Administration, the National Institutes of Health, the National Academy of Science, the Centers for Disease Control and Prevention, the Federal Trade Commission, and the U.S. Trade Representative. Each of these agencies can either help or hinder the evolution of gene science innovation and in the balances discussed earlier.
Mechanisms and procedures to ensure interagency cooperation in identifying and removing impediments to the innovation system should be considered.
The fact is that innovation is the product of a complex and interdependent system with many factors and variables shaping its performance. Policymakers and stakeholders must develop proper means to study and understand the intricacies of the system and to make adjustments where needed to maintain the health of the network.
STEP: OBTAIN LESSONS LEARNED FROM MYRIAD. We need an “innovation impact statement” on the Myriad decision and, more generally, from all major shifts in patent policy whether emanating from Congress, the courts, or the USPTO. The purpose would be manifold:
- To track and report on the degree to which the decision altered incentives in the biotech innovation system.
- To ascertain how the decision modified investment patterns and research focus and to evaluate the ramifications of these changes on innovation.
- To determine how the decision altered the volume, quality, and approach of incoming gene patent applications.
- To assess whether basic research on patented genes changes—how, why, and to what effect.
The same could and should be done for the implementation of the America Innovates Act and the Bayh-Dole Act. Post-action evaluation will inform policymakers so that they can better do their job of reforming patent and related policies to meet the strategic goal: stimulating beneficial life science innovation.
STEP: IMPROVE DATA COLLECTIONS, ASSESSMENT, AND DISSEMINATION. A consistent feature of life science patenting is a dearth of well-documented facts on key issues that must be the foundation of informed policymaking. The effort to generate better data must be led by Congress and harness the authorities and subject matter expertise of institutions such as the NIH, FDA, National Acadamy of Sciences, and NSF. The area is too important to the U.S. economy and quality of life for decisions to be made on poor or nonexistent data. We need evidenced-based policymaking. Here are some examples:
- Reporting is schizophrenic and must be pieced together from numerous expert but nonofficial sources on whether a gene patent thicket exists and to what degree it is or is not impeding basic research. This is knowable subject matter and highly consequential. The responsible authorities and stakeholders can’t make informed judgments about the wisdom of gene patent policy without an empirically based answer to that seminal question. One report on this topic noted, “The paucity of documented examples in which the fears surrounding gene patents have manifested themselves is striking, particularly when one considers the high level of public concern and the extraordinary nature of the proposed legislative fix.”
- The proof of whether “innovation policy” (i.e., patent policy) is working is indicated by patterns in private-sector investment and research focus. Better and more widely disseminated information on these trends is crucial. The ability to detect cause and effect on the level and focus of research investment can help point to policy changes needed to stimulate greater investment in research and development and fortify the pipeline of useful innovation.
- We need to know what effect patent policies are having on a vital strategic objective: minimizing health care costs while driving the development of life-enhancing diagnostics, therapies, and cures. This question has huge implications for U.S. competitiveness, job creation, private- and public-sector financial solvency, health care policy, and the like.
- Finding the best patent terms that encourage innovation but stimulate price competition. Separating fact from fiction and providing better data and analysis on what’s going on in the real world will not only improve patent policymaking but will point to changes needed in other areas of public policy bearing on innovation, including health care policy, industrial policy, federal R&D budgeting, tax, and regulatory policy. A pivotal question is whether we have the appropriate mechanisms and assessment tools in place to evaluate these types of questions and ensure that the answers get to decision makers. That’s one worth answering as a first order of business.
STEP: IMPLEMENT EDUCATION CAMPAIGN. The 1978 Commission for the Study of Ethical Problems in Medicine and Biomedical and Behavioral Research, which set out to examine the issues and controversies involving gene science and its commercial applications set forth goals that are still valid today, “educating the public, clarifying concerns, identifying the public policy issues, and evaluating the need for oversight, guidelines, regulation, and law.” That seems like an agenda worth following today. As Christopher Holman points out, “Some of the misperceptions and undue fear surround gene patents likely stems from the failure of much of the published commentary on gene patents to explicitly define the term, or even to provide a specific example of a gene patent.” More generally, a public information campaign is needed both domestically and abroad to explain how and why the patent system has served the public well and the likely consequences if IP incentives were significantly weakened or eliminated—including that the absence of IP would weaken the flow of therapies to have a discount or be subsidized. An informed debate would point to the circumstances when it’s a must for government policy to provide a medication either at a subsidized price or for free.
Without the public’s understanding of the issues and their informed participation in the debate, the chances of sustaining wise patent policy without an avoidable and adverse backlash based on imbalances or misperceptions is low.
STEP: DEVELOP A NATIONAL BIOTECH INNOVATION POLICY STRATEGY. The patent system is a tool for driving innovation and the publicity of useful goods, services, and solutions. Centered on this goal, we need a national biotech innovation policy strategy. Such a blueprint would recognize the biotech sector’s important role in our society and economy. It would help policymakers and stakeholders identify the key objectives, elements, and interdependencies of the biotech innovation system. Given the enormous influence that federal policies (e.g., patents, taxes, regulations, research funding, liability laws, and trade) have on the industry, it would promote more rational, purposeful, fact-based, and wiser decision making to stimulate advancement in this area. The strategy should have comprehensive public- and private-sector input, be updated regularly, and be used as a framework to guide policymaking that is mission focused, strategically coherent, and proactive.
STEP: REFINE BEST PRACTICES. A committee empaneled by the NIH recommended three efforts to ensure that public resources used to foster genomic and proteomic advancement achieve optimal results: “Improving and facilitating best practices and norms in the conduct of genomics and proteomic research; adapting the patent system to the rapidly changing fields of genomics and proteomics; and facilitating research access to patented inventions through licensing and shielding from liability for infringement.”
These recommendations are worth considering as they encompass the goals, principles, and approaches discussed in this paper. They recognize the crucial synergy of robust research and patent protection, the importance of proactivity, and that best practices are a normative means of creating an ecosystem of innovation that harnesses both collaboration and competition.
The NIH is a significant funder of genomic, proteomic, and other life science research central to our innovative vitality. The agency has issued a set of standards and guidelines for the practice of patenting and the use of patented material among its grantees.
This report does not purport to evaluate those guidelines. Strategically, what’s important to appreciate is that as the chief funder of basic biomedical research, the NIH policies are highly influential. Rules and conditions accompanying the agency’s funding make a powerful tool. Done correctly, they can drive the adoption of strategically helpful norms. For that reason, they require extensive debate, evaluation, and oversight. In the assessment of the NIH, “Many of the potential problems looming in the realm of genomics, proteomics, and intellectual property can be avoided if scientists and their institutions, whether public or private, follow the best practices already articulated by the National Institutes of Health (NIH), the National Research Council, and others.” Perhaps that’s so, but the job of being sure falls to the full range of stakeholders.
STEP: PROTECT DIGNITY AND ETHICS. The purpose of innovation, patents, public policies, and all the stakeholders, challenges, and issues raised here center on an overarching purpose: to meet human needs. None of the good that’s possible can be accomplished without the support of a public convinced that biotechnology and gene science, including the manipulation of human genes, is moral, appropriate, and in the public interest.
Earlier we addressed some of the ethical concerns and issues at stake. They mustn’t be ignored. The failure to identify and address them proactively greatly increases the chance that controversy will arise, delaying or derailing useful and necessary work. We must be sure that we have the proper institutions to clearly and comprehensively identify and deal with the ethics of genetic research and DNA-based innovation.
In 1974, the NIH established the Recombinant DNA Advisory Committee to serve as a “forum for open, public deliberation on the panoply of scientific, ethical, and legal issues raised by recombinant DNA technology and its basic and clinical research applications.” the NIH reported that “over the course of the Committee’s existence, transparency and access have been its defining characteristics, enabling public acceptance of a critically important technology and creating an environment in which science can advance in an informed, safe, and ethical manner.” We should make sure that we have the proper organization to continue exploring these issues so that we can be more proactive.
Gene science has the potential to solve many of mankind’s most significant issues: significantly improving human health at lower costs, providing us with the energy we need, cleaning up the environment, and many other benefits. Incentive, in the form of patent policy, will play an important role in realizing the potential. We have discussed some of the factors and issues that will impact whether we are able to seize the opportunity or are impeded by the obstacles.
If the author hopes for the reader to take away one message from this report it’s that the patent system isn’t an end, it’s a means. Patenting is a conduit for innovation, not the other way around. The legal issues enmeshed in patent policy are complex and so are many of the policy questions. But, as we work through them in the public square, it will help us as business leaders, policymakers, and members of the public to approach the debate with a better picture of the landscape and clearer strategic priorities in mind.
The NIH, possibly, put it best: “Avoiding a conflict between open dissemination and access to scientific discoveries and the protection of inventors’ rights is critical to furthering scientific progress and enhancing human health.” Only by meeting this challenge can we achieve President Lincoln’s vision of a patent system that adds the fuel of interest to the fire of genius— words that take on new importance on the threshold of promising new frontiers in the life sciences.