SPECULATIVE GENE PATENTS
2. CURRENT TRENDS IN BIOTECH PATENTING
Several factors have combined to put biotech patents in the spotlight. Ar- guably the single most important event was passage of the Bayh-Dole Act in 1980, which expanded both the range of entities patenting inventions and the types of inventions being patented.11The Bayh-Dole Act has also led to dramatic increases in patenting by universities and research institutes, fur- ther blurring the line between commercial and basic-science research.12This increase in university patenting has been accompanied by a steep rise in the patenting of basic-science research tools (also referred to as ‘‘upstream technologies’’) that are integral to a broad cross-section of biotech re- search.13At the same time, the rapid scientific developments that occurred during the 1980s and 1990s led to large influxes of private funding for biomedical research, which outpaced government funding for the first time in 1992 and continues to exceed public-sector funding today.14These trends have transformed biomedical science and brought private- and public-sector research closer together, and sometimes into conflict.15
The legal community has responded to these developments with a pan- oply of proposals and concerns. Commentators have paid particular atten- tion to the increased patenting of research tools and the rapid growth in the
number of biotech patents, both of which have the potential to impede innovation and research.16Broadly speaking, legal commentators are sep- arable into two camps, one optimistic, and the other pessimistic about whether licensing, and other market agreements, can resolve these tensions.
The optimists appeal to experience in well-established industries (e.g., elec- tronics, automobile) to argue that the market will work out any tensions between patents and scientific progress.17The pessimists typically focus on anecdotal evidence and other incipient signs that aggressive patenting is threatening biomedical research and development.18
Three central views dominate the discussion of patent law: (1) tradi- tional law-and-economics theories, which emphasize bright-line rules and markets, (2) an agency-based approach, which relies on experts to inter- vene when necessary to overcome market failures or to protect scientific norms, and (3) a judicial activist model that relies on so called patent
‘‘policy levers’’ latent in existing legal doctrines. Notably absent is a leg- islative approach, which a broad consensus of commentators believes would succumb to public choice pressures from specific industry inter- ests.19The Federal Circuit, for its part, has opted for bright-line rules and legal formalism over discretionary standards to promote clarity and pre- dictability.20
Neglect of the underlying science, however, has diverted the debate over biotech patent policy towards economic theorizing that overlooks the de- fining characteristics of biomedical science that influence biotech patenting.
Legal commentators have proposed several theories on patent scope and strategies for mitigating the negative impacts of patenting on biomedical innovation.21Patent scholars have advocated a variety of contrasting pol- icies that range from arguments that biotech patents should have narrow scope22 to claims that federal agencies, such as the National Institutes of Health, should be empowered to protect biotech innovation from incipient patent anticommons.23 Other commentators have argued for an eclectic approach premised on a technology-specific synthesis of patent policy, which maintains that biotech patents should be both broader and fewer in number.24
Despite their limitations and failure to consider the underlying science more concretely, the competing patent policy proposals have lent consid- erable insight into the relationship between patent policy and innovation.
Building on the legal literature, this part of the chapter focuses on the available economic information and recent survey data on biotech patenting. It then evaluates the patent policy debate in light of this empir- ical information.
2.1. Effects of Biotech Patents on Innovation
Studies of patenting in the biomedical sciences remain very limited. There are nevertheless a few things that we do know. First, there has been a well- established and‘‘pronounced surge in patenting of research tools, previously more freely available in the public domain’’ and a significant rise in defen- sive patenting, particularly in the genomic sciences.25Although, recent data suggests that this rise has flattened and that biotech patent applications may be declining.26Second, university patenting accounts for a significant frac- tion of this increase. Their share of the patents issued in three key biomed- ical utility classes increased from 8 to 25% of the total patents granted in these classes between the early 1970s and the mid-1990s.27The broad data available on patenting therefore lend support to concerns about emerging patent anticommons in the biotech sector and the important role that uni- versities are playing in this process.
Anecdotal evidence is also troubling. One of the most publicized and debated cases have involved efforts to reduce the incidence of blindness due to vitamin A deficiency by genetically modifying rice to produce vitamin A.
In order to undertake this research, licenses to 70 patents and access to 15 pieces of technical property spread over 31 institutions had to be negoti- ated.28Although, ultimately resolved through a collective set of agreements for royalty-free licenses, this case has become the poster-child for many critics of biotech patents.29
Similar examples have been identified in more traditional areas of the biomedical sciences. The andrenergic receptor, which is important in met- abolic pathways, was found to have 100 related patents.30Less extreme, but still troubling, the Hepatitis-B vaccine is covered by 14 patents controlled by several organizations and burdened by stacking royalties that totaled $1.47 per dose, or 13–15% of sales.31Furthermore, significant alarm persists over patents that restrict access to critical drug targets (e.g., receptors, mutated genes) or biotech techniques (e.g., genechips, diagnostic tests).32
Prompted by these concerns about biotech patenting, the National Acad- emy of Sciences commissioned a study (NRC Study) on the effects of pat- enting in the biomedical sciences and prepared a report on patent policy issues (NRC Report).33To many people’s surprise, the authors of the NRC Study found ‘‘little evidence of routine breakdowns in negotiations over rights, although research tool patents are observed to impose a range of social costs and there is some restriction of access.’’34 They also concluded that although ‘‘access to foundational upstream discoveries has not yet im- peded biomedical innovation significantly, [their] interviews and prior cases
suggest that the prospect exists and ongoing scrutiny is warranted.’’35 The authors opined that, in addition to several ‘‘working solutions’’ that had evolved over time, the large number of opportunities in biotech research had neutralized much of the potential for patents to impede innovation.36
The more detailed findings of the NRC Study are also instructive. In a series of interviews, the NRC Study found near unanimity that the patent landscape has become more complex and requires much more extensive due diligence.37 Yet, while respondents acknowledged that a large number of patents may need to be considered initially (sometimes 100s), ‘‘in [general]
practice there may be, in a complicated case, about 6–12 that they have to seriously address, but that more typically the number was zero.’’38In sum, the number of patents one must evaluate is generally manageable. Consist- ent with this general result, the NRC Study found that, although time con- suming, negotiations over licensing agreements rarely halted projects39and that royalty payments did not threaten biotech research and development.40 The NRC Study is more equivocal and raises greater concerns about patents on research tools. Access to important research tools, such as drug targets and stem cells that are covered by one or a few patents is the primary concern in this context.41 Half of the study’s respondents complained of licensing fees on research tools, but nevertheless conceded that the costs did not preclude projects.42Further, while royalties are often high, respondents acknowledged that fees on research tools were more than offset by produc- tivity gains.43 Redirecting research projects around research tool patents was also found to be common, but in most cases did not entail shifting to an entirely new research area (e.g., new disease or technical approach).44 The complexity of most diseases apparently permits a range of different research strategies.
The NRC study concludes by describing a number of working solutions that have mitigated the potential impact of strategic patenting in the bio- medical sciences. Most of them are obvious, such as licensing, inventing around, and court challenges, but a few are more unexpected. Two working solutions of special significance are the use of technology without a license and the resurgence of support for public databases in the public and private sectors.45Norms of the research community, as Arti Rai has argued, play an important role in these developments.46In particular, researchers, whether public or private are ‘‘somewhat reluctant to assert their intellectual property against one another if that means they will sacrifice the goodwill and information-sharing that comes with membership in the community.’’47 As a consequence, university researchers, and to a lesser extent even those in the private sector, routinely use patented inventions without obtaining a
license under the guise (at least until recently) of a‘‘research exception’’ to patent liability.48 The viability of this working solution is aided by the difficulty of enforcing patent rights against research infringement, which is far harder to detect because of its small scale and the absence of the open sale or manufacture of an infringing product.
The creation of public databases has been one of the most important, and surprising, developments. Several major databases exist for genes (e.g., Genebank), proteins (e.g., Blueprint Worldwide, Protein Data Bank), and genetic probes (e.g., the quasi-public Merck Gene Index and SNPs Con- sortium).49Similarly, Merck has initiated a program to create 150 patent- free transgenic mice that will be made available to the research community at cost and without patent or use restrictions.50 The scientific community has also been instrumental in preserving and enhancing openness and access to technologies. Biology journals, for example, have required authors to deposit sequences in public databases, such as Genebank or Protein Data Bank.51 More recently, the National Institutes of Health (NIH) has nego- tiated generic license agreements for academic researchers to ensure that they have access to important privately owned research tools, provided funding for development of new research tools (e.g., transgenic lab animals), and even conditioned receipt of grants on commitments not to patent inventions that derive from NIH-supported research.52
2.2. Legal Policy and Biotech Patenting
The dynamics of patenting in the biomedical sciences are not readily cap- tured by any of the legal theories mentioned above. First, while the NRC Study found that the expanding number of patents is requiring more licenses to be negotiated and increasing the costs of biomedical research,53it has not led to the emergence of significant anticommons problems. Biomedical re- search has not been markedly impeded by the growing number of biotech patents.54 It appears instead that working solutions aided, as I will argue below, by the characteristics of the science itself have mitigated many of the negative effects of this trend.
Second, the most serious threats the NRC Study identified were from discrete patents on key research tools.55This finding undercuts legal policies premised on restricting the breadth of patents because, even where narrowly drawn, patents on key research tools can be used to limit a diverse range of work by competitors. For example, even a narrow patent on the Cohen- Boyer method, or other irreplaceable research tools, would have a broadly
preclusive effect if access to the technology were denied. Conversely, where numerous alternative research tools are available, promotion of narrow patents will be unnecessary, as alternative avenues for conducting research will already exist. For similar reasons, the eclectic prescriptions that Pro- fessors Dan Burk and Mark Lemley have advocated are simply inappro- priate.56 Raising the standard for obviousness in patent law, as Burk and Lemley advise, will have little or no effect because key research tools, by their very nature, represent major advances beyond the prior art. Worse still, the loosening of disclosure requirements only stands to aggravate technology-access problems by allowing patents on research tools to claim a broader constellation of uses.57
The failings of these legal theories might incite market enthusiasts to claim victory for traditional economic theory. According to this line of argument, patent scope is secondary to maintaining clear rules, strong property rights, and low transaction costs for technology licensing. The problem with this view is that transaction costs for licensing biotech patents are in fact significant and are not diminishing.58More importantly, the most effective working solutions identified by the NRC Study do not center on reducing transaction costs or clarifying the law, but instead involve abro- gating property rights and abandoning private ownership altogether.59The two most prominent working solutions were reliance on the (now defunct) research exemption, and dedications of research tools to the public domain.60
The dynamics of biotech patenting (including the working solutions de- scribed in the NRC Study) are not solely attributable to either legal or economic factors, though both are obviously important.61Making sense of the interplay between law, economics, and science in the biomedical sciences requires that the third prong of this trio be more fully understood and taken into account. The NRC Study includes two revealing observations in this regard. First, one of the respondents remarked that‘‘we have more targets than we have chemists to work on them’’ and noted later that the value for targets has decreased over time due to their abundance.62Second, another respondent made the following comment:
I have never worked with a disease where one particular protein makes the only dif- ference. A patent gets you exclusive rights to a class of drugs, but there may be other classesy. I could imagine a genetic disease where a single target was involved, but I don’t think that the big medical problems fall into this case.63
Both observations highlight the diverse set of research options that have emerged in the biomedical sciences.64 This diversity has lowered the
economic value of protectionist tendencies of inventors in the private and public sectors and, equally importantly, afforded numerous opportunities for developing new research tools.65As argued more fully below, the nature of biomedical science itself has played a critical role in reducing potential frictions between biotech innovation and the patent system.