Patenting and licensing of research tools and biomedical innovation
By John P. Walsh (Univ. of Illinois at Chicago), Wesley M. Cohen
(Duke) and Ashish Arora (Carnegie Mellon). 2003.
Pp. 285-340
in W.M. Cohen and S. Merrill, eds. Patents in the Knowledge-Based
Economy. Washington: National Academies Press.
FULL
TEXT
Patents often provide important incentives for biomedical innovation, but this is not always the case. Over the last two decades, technological changes in drug development and policy changes governing what can be patented and by whom have led to more patenting of upstream discoveries and research tools, and more patenting by universities.
These changes have raised two important concerns that the effect of patents on innovation may not be entirely beneficial. For one, a multitude of patents in a particular field may restrict innovators’ freedom to develop and commercialize new technologies, bringing about a loss of collective surplus. Economists call this predicament the anti-commons or patent thicket problem. Patents can also limit researchers’ access to fundamental discoveries. This restriction limits subsequent discovery and improvement, once again reducing social welfare. While patents imply the right to restrict access, this can result in too few “attacks” on any given biomedical problem, greatly reducing the chance of success. The case of restricted access is made worse when the invention is “not in hand”, either because of a homology based claim, which only minimally illuminates the actual function of the patented gene, or because of a reach through claim, where the applicant claims the known gene and unknown substances related to that gene that might have therapeutic effects.
This study explores the extent of these concerns in the biomedical research community and assesses how firms and universities have addressed them. The investigators conducted interviews with seventy people representing pharmaceutical firms, biotechnology firms, university personnel, and other informed parties. The interviews focused on respondents’ experiences with patenting and licensing, how these experiences have changed over time, and how firms and universities have responded to the changes.
Anti-commons and Restricted Access Problems
While the study finds that the patent landscape has become more complex, with more patents, more patenting by universities, and a greater likelihood that upstream discoveries will be patented, anti-commons problems are less common than one would expect given this complexity.
Nonetheless, there is evidence that access to many research tools that could prove useful in the development of new drugs is limited. Many innovators, especially universities, issue exclusive licenses, particularly to small firms, and respondents frequently complained that they could not use particular targets in their research. Researchers who wanted to study BRCA1, telomerase, human embryonic stem cells, and hepatitis C virus protease, among others, claimed that often, they could not get access on reasonable terms. But in nearly every one of these cases, there were other parties who enjoyed such access.
Working Solutions
On the whole, anti-commons problems were less common than one would have expected here because researchers have developed a set of working solutions. While the number of patents possibly relevant to a given subject might be very large, the number that researchers had to consider seriously in their work was generally modest. Within this smaller set of patents, licensing was common and solved the problem in many instances. Respondents also noted that they often managed to invent around troublesome patents. And if all else failed, they could often go offshore.
Other working solutions came from institutions. For example, the US Patent and Trademark Office (USPTO) responded to concerns about widespread patenting of gene fragments by raising the standards for patenting such technologies. The National Institutes of Health (NIH) have been advocating for broad access to research tools, including negotiating with owners of important research tools on behalf of NIH-funded researchers and developing guidelines for sharing research tools developed by grantees. Some firms have also developed publicly available research tools. And, the Court of Appeals for the Federal Circuit (CAFC) has recently handed down some rulings that limit the scope of research tool patents (e.g., University of Rochester v. Searle; Bayer AG v. Housey Pharmaceuticals).
Finally, many researchers navigated the anti-commons problem by invoking the informal research exemption. This practice was most common among university researchers, although some firms also claimed the right to use patented technologies for research purposes. Such research exemptions had weak legal standing at the time of the interviews, and the recent CAFC ruling in Madey v. Duke unequivocally states that university-based research does not qualify. Still, university and firm behavior suggests that both patent owners and technology users believe in the right to such an exemption. This practice was buttressed by social norms encouraging the sharing of research results and materials. Patent holders also tolerated infringement knowing that university and government research can add value to the patented technology.
The informal research exemption was also protected by the economics of a research tool infringement suit, which can be costly to the plaintiff, both in terms of legal fees and, in cases where the defendant is an academic, in terms of reputation and membership in the research community. Furthermore, the payoff in royalties granted would likely be small should the suit be successful. Firms and universities understood this logic and were reluctant to assert their patent rights against universities. One important exception occurred in clinical diagnostic technologies, in part because university use of these technologies has a commercial component.
The informal research exemption sometimes extended to firms, too, because asserting patent rights against firms involved some of the same economic costs. Firms also conduct much of their research in secret, making research tool patent violations hard to detect. Firms considering a research project may have felt that using a given tool without taking a license was an acceptable business risk. The import of the pending Integra Lifesciences v. Merck case, will depend on the magnitude of any damages awarded as a result of a research tool patent infringement. If the final royalties in this case are high, then large pharmaceutical firms are more likely rethink their willingness to infringe; lower damages may reinforce the practice.
All of these results confirm that the patent landscape is becoming increasingly complex, but as it turns out, the research community has developed a set of working solutions to address this complexity. These working solutions are generally effective, but they can sometimes be upset by aggressive assertion of IP rights, especially from outside the research community. Thus, we see a need for continued vigilance in order to maintain open science.
