April 1, 2007 (Vol. 27, No. 7)

The Principles of Our Patent System Are Sound and Bring Immense Benefits

Gene patenting has been under attack for several years. Various academics have been leading the charge, closely followed by groups that perceive their professional interests to be threatened.

Now science fiction novelist Michael Crichton has jumped on the bandwagon. In his book Next, Crichton brings forth a host of biotech bad guys who represent virtually every stereotype imaginable. They include a greedy venture capitalist, dishonest and hypocritical scientists, a body-part-selling pathologist, and the obligatory sleazy lawyer.

Gene patenting is one of several biotech hot-button issues that run through the novel. In fact, Crichton even included an appendix in which he argues against gene patenting. It is the usual suspects—nobody should own our genes because they exist in nature, and gene patents are bad public policy because they suppress research and hurt patient care.

One is tempted to dismiss the novel, hoping that its poor reviews will limit the number of readers and, therefore, the dissemination of misinformation.

Unfortunately, the biotech industry cannot be complacent. Congressmen Xavier Becerra (D-Calif.) and David Weldon (R-Fla.) introduced a bill (H.R.977) to prospectively ban gene patents. The key provision states, “Notwithstanding any other provision of law, no patent may be obtained for a nucleotide sequence, or its functions or correlations, or the naturally occurring products it specifies.” Congressman Becerra’s introductory remarks make many of the same arguments that Crichton does.

Therefore, it is necessary to review, once again, the reasons why patents on genes are proper under U.S. patent law and why they represent wise social policy.

Foundation of the Industry

Gene patents, more specifically patent claims to nucleotide sequences, such as genes, plasmids, and probes, are fundamental and critical to the biotech industry. They are the foundation of the industry. Such claims protect therapeutic proteins, like human insulin; Mabs, like Herceptin®; transgenic plants, like insect-resistant corn; and diagnostic probes for genetic diseases, which are the foundation for personalized medicine. Banning such patents risks shutting down a large part of the industry and creating a major roadblock to progress in patient care and food production.

Inventions do not move from the laboratory to the marketplace without a huge investment of money, time, and effort. A Tufts University study has found that it takes over $800 million to bring a new drug to market. The author is not aware of similar studies for transgenic plants or gene-based diagnostics, but the cost must be substantial, even if less than for drugs.

For diagnostics in particular, critics have argued that it is a relatively quick and straightforward process for a laboratory to develop a molecular diagnostic once a particular disease-associated gene has been identified in the scientific literature. However, an examination of financial disclosure documents of some molecular diagnostic companies indicate that this is not the case.

For example, the prospectus for Genomic Health’s IPO, dated September 8, 2005, states that the company would use $20 million of the proceeds to fund R&D. Third Wave’s 10-K for 2005, the latest available, states that it spent $8.4 million for R&D for that year. These amounts would cover several products, but clearly a substantial amount of money is involved. Quite simply, this investment will not happen if, after it is done, a competitor can get a free ride on the pioneer’s efforts and knock-off the product.

Basic (but overlooked) Patent Law Principles and Policies

The Constitution provides for patents. The founders recognized that it takes time, money, and effort to develop an invention to the point where it can benefit humankind. Thus, they authorized Congress to provide inventors with the right to exclude others from the invention for a limited period of time. Thus, a patent is a limited property right. It is not a reward. It is also not a monopoly, even though the right extends to a class of things, because a monopoly is defined by market power. As many a disappointed inventor well knows, having a patent is no guarantee of commercial success. Quite simply, a patent is granted to provide the inventor and/or his company or investors the incentive to undertake the costly and risky process of further development and commercialization. They will do so because they can charge enough for the product to recover their investment.

In return, the public gets the invention, but not for free. What it gets for free is the new technical knowledge to build on because the patent must disclose how to make and how to use the invention in terms that a person skilled in that technology can understand. And, after the patent expires, the public even gets the invention for free.

The public is protected because the patent statute permits no more than the actual contribution made by the inventor to be the subject of the limited property right. The invention must be novel, that is, not disclosed in any printed document found anywhere in the world or publicly known or used in the U.S. Thus, the law recognizes the basic fact that the inventor created something that did not exist before. The invention must be useful. The invention must not be obvious; that is, the novelty should not be a trivial one that any person of routine skill in the technology could have envisioned. The invention must be described in a manner to enable other people skilled in that technology to make and use it. This permits others in the field to build on the new knowledge. Finally, the invention must be clearly claimed so that the public knows the scope of the limited property right.

How Can Someone Patent a Gene?

Crichton and other critics often ask, “How can anyone own my genes?” The answer is that they cannot. What someone can “own” is a DNA sequence that he or she was the first to isolate and that is useful. Similarly, a person who discovers a new function of a known DNA sequence, such as its previously unknown association with particular disease, can patent a method of using the isolated sequence to detect susceptibility to that disease. Isolated DNA sequences do not occur in nature. They are new.

Claiming them as isolated sequences is not “mere word play” as asserted by Congressman Becerra in his remarks. Rather, the language reflects the critical fact that, but for the actions of the inventor, the invention would not exist. The gene for human Factor VIII doesn’t do a hemophiliac any good when it is in somebody else’s genome. It is only useful when someone isolates it and a company spends time and money to bring human Factor VIII to the market. Since isolated DNA sequences do not occur in nature, they are not natural products. By patenting them, the inventor takes nothing from the public.

Social Policy: Myth v. Reality

The critics say that gene patents are bad social policy—they hinder research, raise costs, and limit patient access to care.

Academic researchers believe that scientific advancement occurs through the publication of research results. Society agrees that research is valuable and encourages it through billions of dollars of taxpayer-funded grants. However, this culture of information-sharing and government grants appears to have created a culture of entitlement where the property rights of others, specifically patent rights, are expected to be freely available in the name of research.

As with any human activity, even one as important as scientific research, there have to be limits. Respecting the patent rights of others has to be one of those limits if society is going to gain the benefits of the patent system.

As a practical matter, however, academic scientists who ignore patent rights have little to fear. The vast majority of patent owners simply do not want the adverse publicity of suing scientists and their universities, and the economic recovery is seldom worth the effort and money spent. They want patents in order to exclude competitors, trade them for needed technology, or raise money from investors.

The often-cited case of Madey v. Duke University (307 F.3d 1351 (Fed. Cir. 2002)), where a former Duke University professor sued the university for infringement of patents that he owned, is an aberration. The university had forced Madey out of his position as a laboratory director, and he responded with a powerful weapon that he had at hand—a patent-infringement suit.

More importantly, the fact that Duke was found to have infringed his patents goes to a fundamental aspect of the patent law. The law recognizes a limited research exemption from infringement. This exemption is limited to an examination of the patented invention; that is, research on the invention. This is completely consistent with the policy underlying the patent law of encouraging others to build upon the knowledge disclosed in the patent, including developing improvements or “inventing around” the patent.

This is quite different from using the patented invention in research. Simply because an organization is a nonprofit entity and/or engaged in a noble enterprise like scientific research does not mean that the organization or its employees have the right to infringe the patents of others. A patented reagent may cost more, but that is simply a cost of engaging in the activity, like any other cost.

Critics have also charged that patents raise costs to patients and/or limit patient access to medical care. One cited study is Cho et al., J. Mol. Diagn., 5: 3-8 (2003). The article reports the results of a telephone survey of 211 directors of laboratories that do molecular diagnostic testing. Of 122 respondents, 25% reported discontinuing performing patented genetic tests, and 53% stated they did not develop new tests because of patents.

However, a closer examination of the article shows that the respondents simply did not want to pay to license the patented tests. One of the respondents even acknowledged this by stating, “People shouldn’t be complaining that they can’t run tests. They should just pay.” Access to patented technology is a cost of doing business. Facilities and reagents are not free, and employees do not work for free. Why should new technology be free? The tests are available. It’s just a question of cost.

We Need Gene Patents

In the noise and misinformation about gene patents, basic, common-sense principles are lost. These principles have supported the patent system for over 200 years and have contributed to the technological greatness of this nation and to the benefits that technology brings to humankind. They bear repeating. The inventor brings something new to the world. The patent provides the incentive to bring it to market. And new biomedical and agricultural products improve the human condition.

Crichton and the other antigene patent folks love to talk about mouse traps. They have no problem with patenting better mouse traps. But society will have a problem if they get their way. We will have plenty of mouse traps but far fewer new drugs and diagnostics and far less food.

Geoffrey M. Karny is a partner in the Washington, D.C., office of Baker & Daniels. E-mail: [email protected]. The views expressed herein are his own and should not be attributed to Baker & Daniels or any client of the firm.

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