May 1, 2005 (Vol. 25, No. 9)
Using Patent Pools to Overcome the Negative Consequences of Exclusivity And stacking
Advances in diagnostic genetic testing have resulted in the ability to diagnose an increasing number of genetic diseases, often through the use of multiple genes and/or gene fragments. These advances have been accompanied by an increasing number of patents covering not only the genes and their fragments, but also new diagnostic methods and microprocessing arrays.
Some commentators have predicted that this increase in patents pertaining to diagnostic genetic testing will continue to result in clinicians and researchers being prevented from developing and using these tests to benefit patients.
These potential road blocks to the widespread use of the new genetic testing technologies are said to result from patentees exercising their right to exclude the use of their patented technology by anyone other than themselves or their exclusive licensee (exclusivity) and the need to acquire multiple licenses to an increasing number patents owned by different patentees (stacking).
The problems of license exclusivity and patent stacking appear particularly acute in the area of multiplex arrays.
Several solutions have been proposed to address the concerns arising out of patenting diagnostic genetic tests.
It has been proposed that the U.S. Patent and Trademark Office (PTO) apply the existing statutory requirements for patentability more stringently to the field of genomics, or that the Court of Appeals for the Federal Circuit, the most specialized patent court in the U.S., should apply its nonobviousness standards as stringently to human gene patents as it does to other advancing fields of technology.
Other proposed solutions include compulsory licensing or legislative exemptions for diagnostic testing.
We propose that the use of patent pools may overcome the negative consequences of exclusivity and stacking in the field of diagnostic genetics. A patent pool is an arrangement in which two or more patent owners agree to license certain patents to one another and/or third parties.
The Antitrust Guidelines for the Licensing of Intellectual Property issued in 1995 by the Department of Justice (DOJ) and Federal Trade Commission, and the implementing principles articulated by the DOJ between 1997 and 2002 in analyzing three patent pools in the electronics industry (the MPEG-2, DVD, and Third Generation Mobile System Business pools) lay the groundwork for creating successful pools in diagnostic genetics.
According to the legal criteria gleaned from the electronics examples, a patent pool may be found to be procompetitive if it integrates complementary technologies, clears blocking positions, reduces transaction costs, avoids costly infringement litigation, and promotes the dissemination of technology.
However, a patent pool may be found to be anticompetitive and disadvantageous if it constitutes methods of fixing prices or allocating customers and markets, excludes or drives competitors from the market or reduces innovation, or discourages the participants from engaging in R&D.
Structuring and implementing diagnostics patent pools may be facilitated by the fact that institutions such as the American College of Medical Genetics (ACMG) are considering and issuing consensus statements detailing the genes and/or fragments deemed necessary to adequately predict or diagnose a genetic condition.
In 2001, the ACMG set the criteria for, and selected a standard panel of, mutations which are recommended for screening cystic fibrosis carriers. Standard panels for the genetic testing of many other diseases could, and most likely will, be set by the scientific community and medical organizations within the next few years.
We suggest that patent pools for diagnostic genetics should include only essential, valid patents selected by an expert committee to cover complementary but not substitutive technologies. The pool members should issue nonexclusive licenses to the pooled patents at reasonable nondiscriminatory royalties and allow pool members to offer licenses to one or more of their own pooled patents outside of the pool structure.
Grantback provisions, if any, should obligate licensees of the pool to grant back only essential patents on a nonexclusive basis at a fair and reasonable price. In this way the pools can be structured to promote the dissemination of the diagnostic technologies without restricting innovation.
One obstacle to forming any patent pool will always be finding incentives for the critical patent holders to provide their patents to the patent pool instead of going it alone.
The biggest incentive for the holders of essential patents, especially blocking ones, to join with other essential patent holders will occur once consensus-setting bodies like ACMG greatly expand the diseases for which they make recommendations and set standards.
If a well-established and respected entity such as ACMG deems it important enough to issue a consensus statement regarding a handful of mutations necessary to adequately predict a disease or condition, then the relevant patent holders will recognize how crucial it is that all of these mutations be tested simultaneously, and offer assistance by agreeing to participate in a patent pool.
Going at it alone will become the disfavored mode of doing business. Other incentives include a fair distribution of income generated from the pool and the ability for members to operate freely among the pooled patents.
Several commentators have raised potential problems with forming patent pools, particularly in the broad field of genomics. They have suggested that the genomics industry is too disperse, does not have common goals, advances too quickly making it difficult to identify the essential patents for a patent pool, and if there are a large number of required patentees, the pool may run afoul of antitrust laws.
While application of a patent pool to all of genomics would be difficult, if not impossible, if a patent pool is limited to diagnostic genetics for a given disease, it could circumvent several, if not all, of these potential problems.
First, the diagnostic genetics industry is not as diverse as the overall genomics industry. The genomics industry works with and patents at least three kinds of genes, i.e., those encoding therapeutic proteins, sequences with diagnostic information, or receptors useful in high throughput screening for drug discovery.
In contrast, the field of diagnostic genetics is commercially more focused and, when further limited to individual diseases such as breast cancer or CF, and to diseases that have a consensus statement on standard mutations, is ideal for a patent pool.
Unlike the varied genomics industry, the players in the market for disease-specific diagnostic geneticsregardless of whether or not they are a commercial enterprise or a nonprofit entityhave a clear common goal: to provide accurate tests and analytic devices so as to minimize false negative or false positive results for a given disease.
Furthermore, achieving a resolution of the alleged difficulty of identifying essential patents and the large number of predicted patentees that would be part of the pool would be aided by the presence of an expert committee and the selection of only essential patents, respectively.
We suggest that a patent pool created specifically with essential patents narrowly covering only the genetic diagnosis of a single polymutational disease and crafted with care so as to avoid anticompetitive effects, may well resolve potential roadblocks to the widespread use of the new genetic testing technologies.
As a result, the financial and social value of patent pools should become apparent to the diagnostic industry as their genetic testing technologies are made more broadly available.