R. STEPHEN CRESPI

Patent Consultant

In 1982 the Organisation for Economic Co-operation and Development (OECD) published its first report on biotechnology issues. ¹ Written with the help of three British academics, this first report summarised the then state of the art from the science, technology, and economics standpoints and it provided the starting point for a whole series of subsequent reports dealing with various aspects of this fast developing technology, including safety issues, wider economic impacts, and biodiversity issues. The second OECD report, ² published in 1985, dealt with intellectual property issues and was the first survey by a major international organisation of the possibilities of patent protection internationally for inventions in this field of technology. A later report³ dealt with technology transfer and genetic resources of the developing countries.

The recently published report, ⁴ which is the subject of the present brief summary, covers IPR issues for genetic inventions, especially those concerned with testing for genetic diseases, and the concerns that have been expressed by various commentators on these developments. This study was undertaken on the initiative of the Government of the Federal Republic of Germany, for whom matters of political importance had arisen from the pending consideration of the implementation by Germany of EU Directive 98/44/EC on the protection of biotechnological inventions.

The first two OECD reports on IPR issues followed a standard pattern. This involved the construction of a questionnaire aimed primarily at the governments of OECD Member States in order to determine the state of their laws and official practices on this subject, to analyse their official responses, and to draw conclusions and make policy recommendations. In addressing licensing practices, the current investigation might have been thought much more ambitious, perhaps even audacious, in being the first to turn the spotlight on the behaviour of the private sector as an important group of licensors of patents and other IPRs in biotechnology. As matters of this kind have a strong ‘commercial in confidence’ character, the questionnaire approach was not followed in this case. Instead, studies of the published literature on these issues were undertaken, followed by a two-day workshop in Berlin in January 2002 attended by over 100 private and public sector experts from 18 OECD countries. Papers were contributed by speakers from scientific, legal, and economics branches of academia, from the European Patent Office, the European Commission, US and European patent attorneys, from industry, and from the OECD.

The workshop sought to cover the following themes:

• the IPR system and its relevance to genetic inventions;

• new surveys of patenting and licensing practices for genetic inventions;

• the impacts of patenting and licensing practices on

  • (a) public research organisations,

  • (b) new product development, and

  • (c) human health and technology uptake; and

• lessons to be drawn and possible strategies to assure legitimate access to new developments in genetic testing.

The OECD report addresses the above themes in the light of the various concerns about patenting genes and other biomedical inventions which have been voiced in the scientific literature in recent years and are now fairly well known. Before summarising what the report has found on these issues, it would be appropriate to summarise one influential contribution to this subject made some years previously by eminent US academic lawyers under the following title.

In 1998, University of Michigan law professors M.A. Heller and R.S. Eisenberg raised the question whether patents can deter innovation in biomedical research. The primary context in which this question was asked was one deriving from the policy of the US Congress, initiated in 1980, ‘encouraging Universities and other institutions to patent discoveries arising from Federally supported research and development and to transfer their technology to the private sector’. Building upon ‘the Tragedy of the Commons’, a metaphor used by economists years earlier in relation to the over-use of scarce resources owned in common, Heller and Eisenberg coined the related title ‘the Tragedy of the Anticommons’ to describe what they saw as the potential consequences of this new initiative of Congress. Whereas previous policy was that ‘upstream’ research sponsored by Federal funding would be published and thereby made freely available to all for application to ‘downstream’ products for diagnosing and treating disease, these authors envisaged that under the changed policy ‘a proliferation of intellectual property rights upstream may be stifling life-saving innovations further downstream in the course of research and product development’. They referred to this scenario as one of ‘privatisation’ of biomedical research, a term which they regarded as apt to apply both to publicly funded research and to research funded by private sources.

Although given much credence by scholars and others for whom the very notion of IPR went somewhat against the grain, the Heller and Eisenberg paper was essentially predictive rather than based on concrete evidence. This is no criticism of their contribution, however, since prophetic insight must often have this character and such warnings must always be heeded. All the dangers envisaged by Heller and Eisenberg have been taken seriously by many commentators since then, and they were embraced as part of the investigation by OECD in the report under discussion here (see below).

The most prominent example of a possible ‘anticommons’ situation which engages many commentators at the present time is the topic of gene patents.

Whilst patent specialists tend to see DNA patenting as a mostly ‘settled’ issue, subject always to further decisions of the courts and patent offices, the patenting of genetic inventions still raises, for others, questions of an ethico-legal nature. The report summarises these concerns as follows:

The report spells out some specific issues that arise in connection with patents on genes and biologically useful proteins.

Research issues are said to affected by so-called blocking patents and overly broad patents, citing as two examples the CCR5 receptor patent in relation to AIDS research and patents on embryonic stem cell inventions. In both cases the report acknowledges that such fears are so far unfounded. Delays in publication and slowing of the pace of research are mentioned but without much in the way of hard evidence. To the present commentator one obvious reason for this, if it were to happen on a significant and disturbing scale, is that biomedical workers in research institutions are well aware of the potential for huge rewards in the results of research of this kind, to their institutions and themselves, and they will often find it necessary to balance these prospects against the traditional emphasis on obtaining scientific literature priority for important findings. This latter kind of motivation is certainly still supremely strong, however, and in the experience of the present writer will usually win out in academic circles if securing scientific priority is in any way compromised by patent considerations.

Research and transaction costs are also said to be significant factors, especially over negotiations on licensing and material transfer agreements. That is unfortunately the name of the game for anyone who seeks to gain from this technology. Commercial issues are seen in relation to the proliferation of DNA patents, leading to ‘patent thickets’ that have to be penetrated by would-be entrants to the market, and the ‘royalty stacking’ that may be a consequence of this, though little commercial data exists to substantiate the extent of these complications. ‘Reach-through’ claims on research tool inventions are also a bone of contention for some (who may be unaware of the fact that it is increasingly difficult to persuade patent examiners to allow claims of this kind).

Clinical use issues are perhaps the more serious in the present context. These are manifested mainly in relation to diagnostic tests for genetic disease, the BRACA gene patents being the example most usually cited. But here the report clearly distinguishes the existence of the patent right as such from the manner in which the patent-holder chooses to exploit this right, an important consideration often overlooked by critics of the present system. This particular problem is most acute for the public genetic testing laboratories that need to introduce state-of-the-art diagnostic methods at manageable costs.

As a prelude to a discussion of these issues, the OECD report summarises how patenting is carried out in this particular field.

This is dealt with in Chapters II and III of the report. Chapter II covers the basic principles, a necessary exposition for those unfamiliar with such matters and inescapable in any critical assessment of how patent law seeks to come to terms with developing technologies of many kinds. The main kinds of patentable subject-matter are outlined here as a useful basic primer for the non-specialist in these matters.

Chapter III covers ‘The Patent Data’ and contains mainly statistical data showing the sky-rocketing of numbers of applications filed and patents granted in recent years. For many critics of patenting, these figures are often seen as evidence of a system ‘out of control’, whereas for its supporters they are proof of a vigorous eruption of research activity and a positive development to be expected in a developing new science and technology that has such potential value for society.

These are outlined in Chapter IV of the report.

Session I addressed the IPR system and its relevance to genetic inventions and dealt with contentious matters of patent law. The report is mainly defensive of the present system in holding that patents are no threat to research per se. It explains the demands made on applicants if they are to obtain patent protection and places special emphasis on the need to establish ‘utility’ for the claimed invention, a requirement that is forcefully applied in the most recent tightening up of the regulations laid down by Patent Offices, especially the USPTO. The debate on ‘absolute’ versus ‘use-limited’ product claims for novel DNA molecules or other chemical compounds is mentioned here in the context of the TRIPS Agreement requirement for non-discrimination as to technology.

Public order and morality provisions in European patent law are also touched on, recognising the difficulties that applying moral tests entails ‘in the absence of commonly agreed criteria for making moral judgements as to the application of new technology’. The distinction between legality and morality is also noted.

Session II surveyed patenting and licensing practices in this field. This session brought forward for the first time data revealed in properly conducted surveys of industry and public research institutions, as opposed to the few individual anecdotal examples that have been used so far by the critics, and the opinions of legal commentators expressed in academic publications.

This study, commissioned by the German Government and directed by Professor Joseph Straus (Max Planck Institute), involved interviews with pharmaceutical and biotechnology companies, research institutions, and genetic test centres in Germany. The upshot of these enquiries was that most of the potential problems have proved superable, and flexible working solutions have usually emerged for most organisations consulted. This was especially true for royalty stacking, it being realised that royalty rates must be adjusted to conform to commercial realities. None of the organisations wanted a special law for genetic inventions and most believed that a proper equilibrium would be reached in time for all of the factors involved.

Professor John Walsh (University of Illinois) reported on a survey of US organisations on the subject of ‘research tools’ in relation to the situation envisioned by Heller and Eisenberg in their much-cited paper mentioned above. These authors had predicted the stifling of research and innovation in this field as a result of the multiple and diffuse ownership of blocking patents. In reality, however, there was so far little evidence of breakdown of IP negotiations or the slowing of research. While a perfunctory search of the patent literature may reveal large numbers of patents as potential thickets that have to be penetrated by a would-be entrant to a field of research or commercial activity, a more thorough analysis of their claims can often reduce this number to manageable proportions. One example quoted in the Heller Eisenberg paper to illustrate the proliferation of blocking patents was the search that revealed more than 100 issued US patents with the term ‘adrenergic receptor’ in the claim language, which the authors considered to present ‘a daunting bargaining challenge’. But a more focused search carried out later by patent attorneys R.K. Seide and J.M. MacLeod showed that the academic lawyers’ assumption was misplaced and that, for example, the great majority of these patents would present no obstacle to a downstream researcher wishing to use the receptor as a ‘research tool’ in screening for compounds that activated or blocked this receptor.

Session III had addressed the possible impact of patenting and licensing practices on research. The main topics reported on were the policies of public research organisations (‘PROs’), including the US National Institutes of Health (‘NIH’) and some European academic and other public sector technology transfer organisations (mainly in France and Germany).

For NIH there had been special concerns over the problem of patents on research tools, especially those developed with NIH funding. In 1997, the NIH Working Group on Research Tools had defined this term as ‘embracing the full range of resources that scientists use in the laboratory’, including ‘cell lines, monoclonal antibodies, reagents, animal models, growth factors, combinatorial chemistry libraries, drugs and drug targets, clones and cloning tools (such as PCR), methods, laboratory equipment and machines, databases and computer software’. This definition goes much wider than might be expected since many of these items are potential or actual commercial products in themselves and could hardly be exempted from patent protection. NIH policy is to require recipients of their funding to adopt non-exclusive licensing policies and to provide research exemptions for academic use. The notion of ‘research exemptions’ or ‘experimental use exemptions’ in patent law could not be avoided in this context and is briefly discussed, noting the lack of international unanimity as to the scope of this concept. Two US bills currently presented to Congress have sought such a research exemption for researchers not wholly engaged in commercial activity.

Session IV dealt with the impact of patenting and licensing policies on new product development and received contributions on behalf of pharmaceutical, genomic, and biotechnology companies. Once again, the perceived problems of ‘patent thickets, royalty stacking, and reach-through rights’ were recognised by contributors but pragmatic ‘working solutions’ were said to be possible, and various examples of anti-stacking royalty provisions in licence agreements are listed in this report in support of this view. The solution of this problem by means of ‘patent pools’, supported in principle by the US Patent Office (provided anti-trust complications are avoided), was not received with enthusiasm by most speakers, although this solution has worked well in some other newly developing technologies very different from biotechnology. The SNP Consortium is cited as an example of successful collaboration within industry to arrive at a patent policy for achieving widespread dissemination of knowledge of single nucleotide polymorphisms that enable drugs to be chemically designed to suit specific groups of patients.

Session V covered the effects of patents on the uptake of the technology of genetic testing and other aspects of human health care, especially by publicly funded clinical laboratories. Mildred Cho of Stanford University quoted results of a survey in the United States of DNA testing laboratories, some of which had felt constrained to withdraw certain types of test for patent reasons, particularly after approaches from the relevant patent-owners.

The reasons for such decisions are not always fully apparent from the limited information that becomes published. The following illustration of this is given in the OECD report.

A large proportion of US clinical laboratories surveyed had introduced a genetic test for mutations in the HFE gene (which cause this disease) after the method was published in the scientific literature. Three US patents subsequently issued. This particular case revealed a complex history of industrial companies involved in exploiting the IP. The original innovative company failed after $10 million has been spent on the research. A series of mergers, acquisitions, and licence deals followed before the final licence terms for clinical laboratories to perform the tests were settled by the eventual owner of the patent. The licence fees demanded in the early period of the test’s existence were at a level unacceptable to public clinical test laboratories and many withdrew from offering the test in consequence. However, current terms are at a much lower level. It is accepted that without the potential value of the patented invention, the initial investments in research might not have been made and gene discovery delayed. But whether the licensing strategy actually adopted was the best method of securing financial reward in this particular case is a question on which academics and businessmen may well differ.

The results of such studies might suggest that solutions should be sought through modification of the patent law, which at present is generous in the degree of protection that it allows where the current patentability requirements are met. It is however difficult to draw the line between what are thought by some commentators to be an appropriate or inappropriate scope of patent protection. Moreover, the problem would not be resolved by an embargo on gene patents, that is, patents with product per se claims to DNA. Even if such claims were not permitted, the claims to the method of testing and the reagent kits for use in these methods would still be patentable and enforceable. Erosion of protection for genetic inventions, especially for DNA sequence patents, would therefore adversely impact investment in therapeutic research.

The report continues with a section on the pricing of genetic tests and the varying attitudes among companies in this field. This section, and the remedies that are discussed for dealing with the problem of access to such tests, must be read in their entirety for proper assessment of their value as possible solutions to the perceived problem.

This OECD report has raised an important subject of extensive concern to many commentators and organisations in both the public and private sectors. As the report states, ‘The Berlin Workshop contributed to the debate on genetic inventions by providing a platform for researchers, industry and governments to discuss both the access problems they have encountered and to begin to debate possible remedies.’ It deserves attention from all bodies concerned with IPR protection and licensing in the field of genetic inventions including those who detect mounting by-stander criticism of the IPR system itself. The OECD is fully aware of problems that call for continuing study, and much more needs to be done to gather data on licensing practices which might lead to the development of good practice guidelines, especially for the public research organisations. But the two principal conclusions of the report, namely, (1) that the patenting of such inventions is not fundamentally in question among users of the system, and (2) that there is no evidence of systematic breakdown in the licensing of such patents, must be encouraging to those who work within the system on behalf of the public and private sector research communities. ⁶

1. ‘Biotechnology – International Trends and Perspectives’, OECD, Paris 1982.

2. ‘Biotechnology and Patent Protection – An International Review’, OECD, 1985.

3. ‘Intellectual Property, Technology Transfer, and Genetic Resources’, OECD, 1996.

4. ‘Genetic Inventions, Intellectual Property Rights and Licensing Practices’, OECD, 2002.

5. J.F. Merz et al., ‘Diagnostic Testing fails the Test’, Nature, 415, 7 February 2002, 577 to 579.

6. OECD publications are obtainable from OECD at 2 rue Andre Pascal, 75775, Paris Cedex 16, France.

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