4
Trends in the Patenting and Licensing of Genomic and Protein Inventions and Their Impact on Biomedical Research

This chapter reports the committee’s findings with respect to its charge to determine current trends in the patenting of genomic- and protein-related inventions, licensing practices, and the impact on biomedical research and innovation. To address these issues to the greatest extent possible within the limits of the available time and resources, the committee consulted the existing research literature and received testimony from scholars in various fields, government officials, and stakeholders. In addition, the committee engaged in three original research efforts:

  1. a search for issued patents and published patent applications in selected biotechnology categories;

  2. a small survey of university licensing of selected categories of patents. This and the first effort supplemented information being gathered systematically by other investigators in larger-scale research studies; and

  3. a survey of biomedical research scientists to ascertain their experience with intellectual property and its effects on research.

The first and second tasks were performed by committee staff. The third, more ambitious project was a survey of approximately 2,000 randomly selected researchers in universities, industry, and government laboratories. It was conducted by John Walsh and Charlene Cho, University of Illinois at Chicago, and Wesley Cohen, Duke University, and it was supported by funding from the com-



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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health 4 Trends in the Patenting and Licensing of Genomic and Protein Inventions and Their Impact on Biomedical Research This chapter reports the committee’s findings with respect to its charge to determine current trends in the patenting of genomic- and protein-related inventions, licensing practices, and the impact on biomedical research and innovation. To address these issues to the greatest extent possible within the limits of the available time and resources, the committee consulted the existing research literature and received testimony from scholars in various fields, government officials, and stakeholders. In addition, the committee engaged in three original research efforts: a search for issued patents and published patent applications in selected biotechnology categories; a small survey of university licensing of selected categories of patents. This and the first effort supplemented information being gathered systematically by other investigators in larger-scale research studies; and a survey of biomedical research scientists to ascertain their experience with intellectual property and its effects on research. The first and second tasks were performed by committee staff. The third, more ambitious project was a survey of approximately 2,000 randomly selected researchers in universities, industry, and government laboratories. It was conducted by John Walsh and Charlene Cho, University of Illinois at Chicago, and Wesley Cohen, Duke University, and it was supported by funding from the com-

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health mittee.1 It builds on a more limited interview-based survey by Walsh, Cohen, and Ashish Arora—work carried out for the National Academies’ predecessor Committee on Intellectual Property Rights in the Knowledge-Based Economy (NRC, 2003). The new survey represents the first systematic effort to shed light on the concerns expressed by members of the academic community that patents on upstream discoveries may impede follow-on research and development if access to the foundational intellectual property is restricted or is too difficult, time consuming, or costly to obtain. The new survey goes further, however, to try to determine the extent of biomedical researchers’ involvement with intellectual property, its role—positive as well as negative—in decisions to initiate, redirect, or suspend research, and investigators’ experience with sharing of research data and materials, whether or not protected by intellectual property. The survey achieved a modest response rate and is subject to the limitations of an inquiry relying on memory and self-reporting, but its results are largely consistent with the findings of the earlier nonrandom interviews. The results of these inquiries and the committee’s interpretation of those results and of closely related studies are presented in this chapter. TRENDS IN PATENTING GENOMIC AND PROTEIN INVENTIONS Although not the only source of data on genomic and proteomic patents,2 the most extensive database of U.S. “gene” patents was initiated by the congressional Office of Technology Assessment in the early 1990s with assistance from the United States Patent and Trademark Office (USPTO) and Georgetown University scholars and was transferred to Georgetown University, where it is maintained and continually updated with the support of the National Institutes of Health (NIH) and the Department of Energy. Using a proprietary patent database, Delphion, the investigators have compiled a comprehensive set of patents from several broad biology-related patent classes. These are patents that refer to nucleic acids and closely related terms assembled into an algorithm to search in their claims. From 1971 until 2006, approximately 33,000 issued nucleic acid patents have been identified. The annual rate of patenting did not exceed 500, however, 1   The full report, J. Walsh, C. Cho, and W. Cohen, Patents, Material Transfers, and Access to Research Inputs in Biomedical Research, June 2005, is available at http://www.uic.edu/~jwalsh/NASreport.html. 2   See also A.M. Michelsohn, Biotechnology Innovation Report 2004: Benchmarks and Biotechnology Innovation Report. Washington, DC: Finnegan, Henderson, Farabow, Garett & Dunner, LLP. These sources have reported numbers and ownership of patents in several biotechnology categories, identified by key word searches. The results are not incompatible with those described below, but the use of carefully delineated search algorithms yields more discriminating results than do keyword searches.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health until 1991 when it began accelerating, peaking at 4,500 in 2001. The number of issued patents declined sharply in 2002 and again in 2003 and 2004 (Figure 4-1). A more refined analysis has been done using bioinformatics methods to compare nucleotide sequences claimed in U.S. patents to the human genome (Jensen and Murray, 2005). This analysis shows that approximately 20 percent of human genes (4,382 of the 23,685 genes currently in the public databank) are explicitly claimed, not merely disclosed, in issued U.S. patents owned by 1,156 different assignees. A number of genes, including BRCA1, are subjects of multiple patents asserting rights to various gene uses and manifestations. In a few cases, single patents claim multiple genes, usually as probes on a DNA microarray. None of these circumstances is by itself indicative of a “thicket” or “blocking” problem absent information on patent claims, licensing, and corporate relationships. Large numbers of applications for patents with such claims are still pending, some of them since the early 1990s. Many of these can be retrieved from the database, because USPTO began publication of most 18-month-old applications in March 2001; but there are two reasons why the precise number for each year cannot be ascertained. First, under the American Inventors Protection Act of 1999, an application can be withheld from publication if the filer agrees not to seek a patent on her or his invention outside the United States. In biotechnology and organic chemistry the “withholding” rate was about 6 percent through 2002 (NRC, 2004). Second and more important, USPTO has not been systematic about publishing applications after 18 months of filing. For example, applications filed in 2001 and 2002 continue to appear for the first time in the database in 2005.3 Approximately 5,000, or 15 percent, of the issued patents in the Georgetown database are managed by universities, led by the University of California, the largest patent holder in the field overall. The dominance of the University of California is somewhat misleading, however, because the number is a compilation of the patenting activity of 10 major research institutions, including the University of California at San Francisco, the University of California at Berkeley, and the University of California at San Diego. More than 800 are assigned to the U.S. government. The government also has an “interest” in as many as 60 percent of the patents held by the leading academic patenting institutions, meaning that they derived from federally funded research.4 The majority of patents are held by U.S.-based biotechnology and pharmaceutical companies. Figure 4-2 shows the 30 largest holders of DNA-based U.S. patents. 3   The Georgetown University investigators observed this when recently adding pending DNA patent applications to their database. 4   A federal grantee is supposed to disclose in a patent application the government’s “interest” in the invention, but it is doubtful that this rule is followed consistently. Thus, the 60 percent figure for university genomic inventions may in fact be on the low side.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health FIGURE 4-1 Number of DNA-based U.S. Patents (as of June 30, 2005). 2005 Projection is based on mid-year total. SOURCE: Georgetown University Database.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health FIGURE 4-2 Thirty entities holding the largest number of DNA-based U.S. patents (as of June 30, 2005). SOURCE: Georgetown University database.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health In his charge to the committee at its first meeting, Francis Collins, Director, National Human Genome Research Institute, requested data on what patents have been issued or applied for, by whom, and in which countries for nine more specific categories of genomic- and protein-related patents: gene regulatory sequences, single nucleotide polymorphisms (SNPs) and haplotypes, protein structures, protein-protein interactions, gene expression profiling, genetically modified organisms, and related software, algorithms, and databases. Further discussions among the committee resulted in the selection of three additional patent categories, each representing a distinct disease-related molecular pathway: Cytotoxic T-Lymphocyte Associated Protein-4 (CTLA4), Epidermal Growth Factor (EGF), and Nuclear factor-Kappa B (NF-kB).5 CTLA4, EGF, and NF-kB were chosen from a longer list of known pathways on the basis of four criteria: they are seen as involved in or correlated with more than one category of disease, spanning cancer and autoimmune or inflammatory diseases; there is significant scientific research interest, as indicated by frequent citation in the scientific literature; they exhibit some variance in the number of related patents; and there is some but varying industry involvement, represented by pharmaceutical or biotechnology firm patenting activity, licensing of university patents, or clinical testing or even marketing of therapeutic products. 5   The following description is based on Walsh, et al., 2005. The biological pathways regulated by EGF, CTLA-4, and NF-kB are recognized widely by the biomedical research community for their roles in mediating disease and normal development. Stimulation of cells with EGF, for example, has been shown to induce cell division, an event that, if left unchecked, can lead to cancerous growth. The CTLA-4 receptor is involved in regulating T cell proliferation, and its loss of function is believed to contribute to autoimmune diseases such as rheumatoid arthritis, multiple sclerosis, and lupus. NF-kB also has been implicated in rheumatoid arthritis as well as asthma, septic shock, and cancer, and its role in the proper development and function of the immune system is supported by numerous studies of NF-kB knockout and transgenic mice. The intense interest of the scientific community in these pathways is reflected in scientific publications and in the patenting of composition of matter products and/or processes related to EGF, CTLA-4, and NF-kB. Foundational papers on EGFand NF-kB each have been cited more than 1,500 times, while the more recent discovery of the functions of CTLA-4 has yielded more than 900 citations. Since 1995, USPTO has granted more than 760 EGF-related patents, 90 NF-kB patents, and more than 60 CTLA-4 patents distributed among large pharmaceutical firms, biotechnology firms, universities, and the federal government. There are also on the market or in development several therapeutic products targeted to these proteins. For example, both Erbitux® (ImClone/Bristol-Myers Squibb) and Iressa® (AstraZeneca) are used for the treatment of cancers associated with EGF receptor expression. CTLA4-Ig® (Repligen) and Abatacept® (Bristol-Myers Squibb) also are patented and currently are in clinical trials for the treatment of multiple sclerosis and rheumatoid arthritis, respectively.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health In short, it is reasonable to hypothesize that to the extent they arise at all, intellectual property complications will be greater in research involving at least some of these pathways than in genomic and proteomic research in general. Methods In consultation with USPTO supervising examiners in technology center “1600” (biotechnology), committee staff developed search algorithms for each of the categories of patents (see Appendix C). These searches were run on the patent claims field to obtain the number of U.S. patents and assignees, assignee countries, inventor countries, application years, and ultimate assignees over the period from January 1, 1995, to February 1, 2005. An independent search using the same algorithms for the same period was made subsequently by staff of the Georgetown University project. The numbers of patents found in the two sets of searches corresponded very closely but not exactly. In addition to U.S.-assigned patents, the searches included published U.S. patent applications and, for comparison, patents and applications issued by the European Patent Office (EPO). The “software,” “database,” and “algorithm” categories were limited to patent classification 435 (chemistry: molecular biology and microbiology). Table 4-1 summarizes the results. Especially for the “software” and “algorithm” categories, the class restriction may limit the results, because biologically related patents may have been placed in other patent classifications. It was not possible with the re- TABLE 4-1 Issued U.S. and European Patents and Patent Applications in Selected Categories of Biotechnology Inventions, 1995-2005 Category U.S. Granted U.S. Application EPO Granted EPO Application Genes and gene regulation 6,145 7,105 1,327 1,153 Haplotype/SNPs 1,482 2,292 266 293 Gene expression profiling 7,428 16,983 2,635 3,043 Protein structure 39 230 28 31 Protein-protein interactions 6,964 12,845 3,590 2,066 Modified animals 652 2,767 177 334 Software 60 209 11 28 Algorithms 91 325 64 113 Databases 1,466 3,765 A A EGF pathway 765 1,045 212 166 CTLA4 pathway 63 149 19 19 NF-kB pathway 94 206 42 81 NOTE: A = No biological class restriction is available for this category.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health FIGURE 4-3 DNA patent trends, 1995-2004. sources available to restrict the searches to human material, excluding plants, animals, microorganisms, and synthetic molecules.6 The patenting trends and published applications by year from 1995 to 2004 are shown in Figures 4-3 through 4-7, with the nine categories grouped as follows: DNA patents (including genes and gene regulation, haplotypes and SNPs, and gene expression profiling) and tools (modified animals, software, algorithms, and databases). Protein structures and protein-protein interactions are shown separately because of the vast difference in patenting activity, which is characteristic of other categories. Genes and gene regulation, gene expression profiling, and protein-protein interactions are by far the most active categories, followed by haplotypes and SNPs and databases. There are few protein structure patents and 6   This will be apparent in Table 4-2, in which some agricultural biotechnology firms appear as leading patent holders in some categories, especially genes and gene regulatory sequences and SNPs and haplotypes.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health FIGURE 4-4 Protein structure patent trends, 1995-2004. FIGURE 4-5 Protein-protein interactions patent trends, 1995-2004.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health FIGURE 4-6 Research tools patent trends, 1995-2004. FIGURE 4-7 Molecular pathway patent trends, 1995-2004.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health pending applications, as well as few biologically related software and algorithm patents. There are also sharp differences among the pathways. Indeed, that was a criterion of selection. The area of EGF shows considerably more activity than those of CTLA4 or NF-kB. The EPO data show lower levels of patenting in every category but similar variations among categories. Compared to the United States, the low European levels of patenting of haplotypes and SNPs and genetically modified animals are particularly striking and perhaps attributable to greater conservatism on the part of EPO in approving patents in those domains. Similar to the Georgetown University DNA patent data, patenting declined in most categories beginning in 2000-2001. The only case in which this is not readily apparent is protein structures, where the numbers are very low to begin with. Does this signify a general decline in biotechnology patenting that can be expected to continue? It is of course too early to tell. However, several possible explanations can be ruled out or considered unlikely: (1) public research funding was not declining during this period; in fact, the decline begins at a time when the NIH budget was being doubled; (2) research productivity was not declining; if anything it was increasing, with the automation of sequencing and improvements in other techniques; and (3) the economic environment could not have played a role, at least initially, because the patents that issued after 2000 derived from applications filed two or more years earlier, at the height of the boom. Greater conservatism on the part of USPTO is almost certainly a factor in the decline, perhaps especially in categories such as haplotypes and SNPs. Partly in response to criticisms of the standards being applied to genomic patent applications, the office conducted a broad review of its examination standards and practices and in January 2001 released new guidelines clarifying the written description and utility requirements. The guidelines are written to be generic to all technologies, but they had a significant effect on claims involving DNA and proteins, and most of the training examples given to examiners are in biotechnology. The written description guidelines were intended to bring USPTO practice into line with the Federal Circuit’s decision in Regents of the University of California v. Eli Lilly and Co.,7 in which the court ruled that simply describing a method for isolating a gene or other sequence of DNA is insufficient to show possession and that the complete sequence or other identifying features must be disclosed. The guidelines declared that the claimed utility of the invention must be “specific, substantial, and credible” and extend beyond a mere description of its biological activity. The guidelines were widely interpreted as raising the bar to patents on genomic inventions (see Chapter 3). 7   Regents of the Univ. of Cal. v. Eli Lilly & Co., 119 F.3d 1559 available at U.S. App. LEXIS 18221, 43 U.S.P.Q.2d (BNA) 1398 (Fed. Cir. 1997).

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health ing on one of the three molecular pathways, commercial activity was somewhat higher than the average for academics, especially for those involved with NF-kB and EGF, but less so for those working on CTLA4. The rather high level of commercial involvement, including patenting, contrasts with the rather low awareness of the existence of relevant, already-existing intellectual property bearing on investigators’ work, despite the proliferation of patents on elements of upstream research. Only 8 percent of academic respondents (32) indicated that their research over the previous 2 years involved information or knowledge covered by someone else’s patent. Nineteen percent reported not knowing, and the other 73 percent expressed confidence that they did not need access to other intellectual property. But do academic biomedical scientists attempt to find out if there are patents impinging on their research? Only 5 percent of respondents do so on a regular basis. The percentage is about twice as high for investigators engaged in drug discovery and research involving NF-kB, but not for those working on other pathways. In the aftermath of the Madey v. Duke decision, both institutional concerns and patent asserters are raising awareness somewhat. Approximately 22 percent of academic respondents have been notified by their institutions to be careful with respect to patents on research inputs, up from 15 percent five years ago. Five percent have been notified at one time or another that their own research may be infringing upon another’s intellectual property. Those external influences are having only a very modest effect on behavior, however. In the two years since the Madey v. Duke decision, only 2 percent of academic bench scientists have begun to check regularly for patents that might impinge on their research. Cautionary notifications from institutions are seemingly ineffectual: 5.9 percent of those who report receiving such notices regularly check for patents, compared with 4.5 of those who recall no such advice to consider the intellectual property rights of others. Does patenting provide a positive incentive for academic investigators to conduct certain kinds of research, apart from the reputational rewards, competitive influences, and norms that govern the behavior of the scientific community? Although motivations are exceedingly difficult to disentangle, it appears that the patentability of results is not a negligible factor in academic research choices—only 7 percent consider it more than moderately important—but it pales in comparison to scientific importance (97 percent), personal interest (95 percent), feasibility (88 percent), and access to funding (80 percent) as reasons to do the work. Of course, patentability and commercial potential rank much higher (19 percent and 22 percent, respectively) for those conducting research on drugs and other therapies than for the average academic scientist engaged in basic research (4 percent and 6 percent, respectively). Furthermore, intellectual property prospects may have a bearing on the availability of research funding, especially from industry. To what extent do patents negatively impinge upon research by leading aca-

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health demic investigators to abandon lines of work they otherwise might pursue or to modify research protocols or by raising costs or causing delays? To probe the adverse impact of patents on research, the survey questionnaire asked respondents to “… think about the most recent case where you seriously considered initiating a major research project and decided not to pursue it at that time” and to rank responses on a 1 (“not at all important”) to 5 (“very important”) scale. Table 4-3 shows the percentage of academic respondents in each research category and in the random sample as a whole scoring a given reason more than a “3,” or more than moderately important.19 The reasons for project abandonment were, in order of frequency, lack of funding, conflict with other priorities, a judgment that the project was not feasible, not scientifically important, or not that interesting, and the perception that the field was too crowded with competing investigators. Technology access issues—“unreasonable” terms for obtaining research inputs (10 percent) or too many patents covering needed research inputs (3 percent)—are less frequently cited as important factors. Terms of access weigh more heavily on investigators involved in work on drugs and therapies than on basic researchers (21 percent versus 9 percent), on researchers working on NF-kB than on those involved with other pathways (19 percent versus 7 to 9 percent), on those involved in genomics than on those in proteomics, and on those involved in industry-funded research or other commercial activity than on those who are not. It is important to follow the experience of the academic respondents, although few in number (32), who concluded that they needed a research input covered by someone else’s patents. Twenty-four contacted the patent owner to obtain permission to using the patented input; five proceeded without contacting the owner; and one modified a project to avoid the input. None abandoned the work as a consequence of either delay or inability to receive permission. Of those who sought permission, seven reported not receiving it within one month. A higher proportion of those intending to use the patented technology as a drug experienced delays or difficulty than those intending to use it as a research tool. Of those seeking permission, only one encountered a demand for licensing fees, in the range of $1 to $100. Overall, the number of projects abandoned or delayed as a result of technology access difficulties is extremely small, as is the number of occasions in which investigators revise their protocols to avoid intellectual property issues or pay high costs to obtain one. Thus, it appears that for the time being, access to patents or information inputs into biomedical research rarely imposes a significant burden for academic biomedical researchers. 19   Without an index allowing comparison across an individual’s answers to all questions, the percentages in Table 4-3 do not reflect relative importance. That is, the data do not correct for the fact that some individuals may answer that everything is a 3 or higher.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health TABLE 4-3 Reasons for Not Pursuing Projects, by Research Goal and Pathway   Random Sample Research Goal Pathways Drug Discovery Basic Research Other CTLA4 EGF NF-kB No Funding 62 86 60 58 63 54 82 Too Busy 60 55 60 59 53 58 48 Not Feasible 46 41 46 47 33 55 53 Not Scientifically Important 40 24 41 45 40 36 50 Not Interesting 35 24 36 33 20 30 29 Too Much Competition 29 21 32 21 27 29 29 Little Social Benefit 15 21 14 15 13 5 22 Unreasonable Terms 10 21 9 6 7 9 19 Not Help w/Promotion/Job 10 21 7 15 0 13 5 Too Many Patents 3 3 2 3 0 4 0 New Firm Unlikely 3 3 2 3 0 4 0 Little Commercial Potential 2 3 2 3 0 4 0 Little Income Potential 1 3 1 3 0 4 0 Not Patentable 1 3 1 3 0 4 0 Respondents 274 28 213 33 16 24 22   SOURCE: Walsh et al., 2005.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health There are, however, reasons to be concerned about the future in addition to the earlier observation that the patent landscape is becoming more complex in many domains of research. First, the lack of substantial evidence for a patent thicket or a patent-blocking problem is associated with the general lack of awareness or concern among investigators about existing intellectual property.20 That could change dramatically and possibly even abruptly in two circumstances. Institutions, aware that they currently enjoy no legal protection, may become more concerned about their potential patent infringement liability and take more active steps to raise researchers’ awareness or even to try to regulate their behavior. The latter could be both burdensome on research and largely ineffective because of researchers’ autonomy and their ignorance, or at best uncertainty, about what intellectual property applies in what circumstances. It is much easier for corporations to exercise due diligence in the context of research that is centralized and directed than it is for universities, where research is highly decentralized and decisionmaking is fragmented. On the other hand, patent holders, equally aware that universities are not shielded from liability by a research exception, could take more active steps to assert their patents. The latter may not extend to more patent suits against universities—indeed, established companies may be reluctant to pursue litigation against research universities—but it could involve more demands for licensing fees, grant-back rights, and other terms that raise transaction costs that are burdensome to research. More assertions would, in all likelihood, prompt more defensive behavior on the part of institutions that traditionally are risk averse. Whether proactively in planned research or defensively in response to claims of infringement, established companies typically go to great lengths and considerable expense to determine what constitutes a “valid” patent. If necessary, the in-house legal department will consult outside counsel to verify its views. The resources necessary to conduct patent literature searches and arrive at validity judgments on a frequent or routine basis probably are beyond the capacity of most nonprofit research institutions and a wasteful diversion, in any case. Nevertheless, failure to perform due diligence could limit research institutions’ ability to approach demands for licenses by distinguishing between patents that probably are valid and patents that likely would be held invalid in litigation. According to information collected from 66 research universities by the American Association for the Advancement of Science,21 there was an increase in patent infringement notifications received in the aftermath of the Madey deci- 20   The two conditions likely reinforce each other. The absence of thicket or blocking problems encourages ignorance or inattentiveness and vice versa. 21   The survey was sent to 240 institutions, with a low response rate of just over 25 percent. It was conducted in association with the Association of American Medical Colleges, the Association of American Universities, the National Association of State Universities and Land-Grant Colleges, and the Council on Government Relations.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health sion. Most of them involved biomedical research, although it is not known how many instances pertained to genomic and proteomic patents. The number reported increased from 16 in the January-June 2003 6-month period to 36 in the July-December period. In about half of the cases, the notice was in the form of a request to take a license. These led to background investigations in only four cases and licensing agreements in only about one-fifth of the cases. At the same time, only 9 of the 66 institutions reported having a written policy encouraging faculty to consider whether they might be infringing on intellectual property rights in planning and conducting research.22 Although so far little disruption of research has occurred, few precautions have been taken to limit the infringement liability exposure of universities. A few cases of successful patent assertions could have a powerful demonstration effect and upset this equilibrium. The second source of concern is that biomedical research is becoming more complex and increasingly requires larger-scale efforts. The pattern of a single investigator working on a single gene or gene sequence is giving way to more multi-investigator projects entailing work on many genes or proteins simultaneously, more and more of them patented. The Walsh et al. survey, the sample for which included research teams of significant size, did not indicate that intellectual property-related complications are greater in proportion to the number of investigators involved in the effort, but it is a reasonable presumption that such would be the case with more research inputs. Of course, the resources to address intellectual property complexities also are likely to be greater the more substantial the project. Even if the status quo continues—with many investigators and research institutions not taking precautions to avoid infringement and not subject to frequent patent assertions—the absence of any shield from infringement liability raises a further concern. Institutions may encounter difficulties in licensing the inventions of their researchers in the future. Are the effects of intellectual property on research different for work on the three molecular pathways than for academic biomedical research in general? Research on EGF and NF-kB exhibits high levels of commercial activity, including patenting, while CTLA4 research is much closer to the norm for biomedical research. This is probably partly attributable to the more recent discovery of the functions of CTLA4 but not entirely; CTLA4, for whatever reasons, is not yet a target of much commercial interest. For all three fields, respondents choose their project primarily on the basis of scientific importance, interest, feasibility, and funding. However, EGF investigators are more likely to cite personal income (11 percent versus 2 percent for the random academic sample) and the opportunity to start a new firm (7 percent versus 1 percent) as additional reasons to choose projects. Those working on NF-kB were above average in citing unreasonable terms for research inputs as a rea- 22   Stephen Hansen, AAAS, presentation to the committee, February 11, 2005.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health son to avoid pursuing a project (19 percent versus 10 percent for the norm). In none of the fields do “too many patents” appear to deter research. The adverse effects of patents nevertheless occur more frequently for those who work on the pathways than for the random sample of academic biomedical researchers. Investigators working on the three pathways were two to three times more likely to indicate a need for access to a third-party patent than researchers in the random sample and were more likely to report adverse consequences. In CTLA4 research, there were no delays or modified projects, but one person abandoned a project. In EGF research, two researchers abandoned projects, three experienced delays, and one changed a research protocol. There were three reported NF-kB cases of delay and three of project redirection. Still the number of adverse incidents is small, representing less than 15 percent of the sample; and the number who had to abandon some project represents just 3 percent of those working on these pathways. What are the effects of intellectual property on biomedical research and development in industry? Presuming that patenting and commercialization are strong incentives to industrial research and development, especially in the biomedical arena, and that investigators would not report neglecting third-party intellectual property, the survey did not explicitly ask industry respondents about their reactions to upstream biomedical patents. However, a small number of industry respondents (17) answered related questions in which 60 percent said that they regularly check for third-party intellectual property and 35 percent acknowledged needing access to a third-party patent. Two out of the 17 said they had aborted a project for lack of such property, and 4 reported other adverse effects. It is unclear how many of these incidents were the result of being in direct market competition with the patent owner, but for this or other reasons it appears that the incidence of intellectual property-related problems is somewhat greater in industry than in academe. Patents, Publications, and Citations Fiona Murray and Scott Stern (2004) and Bhaven Sampat (forthcoming) have taken an entirely different approach in studying the effects of patents on scientific research and the anti-commons hypothesis regarding biomedical research in particular. Using slightly different methodologies, they examined what happens to the citations to a scientific article before and after a patent is issued on its subject matter. They found that articles associated with patents are more highly cited than articles not associated with patents, but that the citations are about 9 to 16 percent fewer than expected after the patent is awarded, suggesting some avoidance of the research direction and possibly some modest decline in “knowledge accumulation.” The finding is intriguing, especially in light of its corroboration by investigators using two different approaches. Nevertheless, for a host of methodologi-

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health cal reasons, it should be interpreted with caution. Both papers’ authors refrain from causal inferences or speculation about what lies behind their observations. Do investigators in fact know that a patent has issued? At least for academic researchers, this seems unlikely in view of the survey evidence that they neither search for patents nor respond to notices to pay attention to potential infringement. If they become aware of patents, do they cease working in an area or continue working but cite other research? In industry, where there is little premium on publication, the legal department often reviews external publications and may withhold them to avoid provoking patentees. In either case the effect, if real, may be more on publication and citation behavior than on research conduct. The effect, if real, ultimately may be more on citation behavior than on research conduct. SHARING RESEARCH MATERIALS In the meantime, the Walsh et al. survey turned up evidence of a more immediate and potentially remediable burden on research, private as well as public, stemming from difficulties in accessing proprietary research materials, patented or unpatented. Conflicts arising from scientific as well as commercial competition have to be addressed in addition to simply the burden and cost of providing such materials. Concern over the flow of research materials, which may be critical inputs for the success of a research project, is not new. Nor has it gone unaddressed; the NIH research tool guidelines address the process of materials exchanges, and NIH has developed a model Material Transfer Agreement (MTA). The survey found that impediments to the exchange of biomedical research materials remain prevalent and may be increasing. For the period 1997 to 1999, Campbell and colleagues (2002) reported on the basis of a previous survey that academic genomics researchers denied 10 percent of material transfer requests. In the Walsh et al. study, the comparable number for 2003-2004 is 18 percent (95 percent confidence interval: +/− 3.7 percent). Other pertinent findings were as follows: Requests for material transfers between and within the industrial and academic sectors are widespread, although not of high frequency. About 60 percent of industry respondents and 75 percent of academic respondents initiated at least one request in the last two years. Approximately 40 percent of industry respondents and 69 percent of academic scientists had received such a request in the same period. Rates of initiation and receipt of requests are about the same for those doing drug discovery and those doing basic research. Between 7 percent (suppliers’ estimate) and 18 percent (consumers’ estimate) of university to university requests are denied. Typically, approximately half of respondents have had at least one request denied over a two-year period.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health TABLE 4-4 Sharing of Research Materials, by Consumer Sector and Supplier Sector Sectors Average Percent Non-Compliance Consumer Supplier Consumer Estimate (%) Supplier Estimate (%) University University 18 7 University Industry 32 27 Industry University 25 38 Industry Industry 22 26   SOURCE: Walsh et al., 2005. Rates of refusal or noncompliance are highest for university to industry, followed by industry to university and industry to industry requests (Table 4-4) The consequences of being denied a tangible research input can be more severe than the inability to license another’s intellectual property, because in the latter case work may proceed, albeit at some liability risk. The survey asked about four possible adverse impacts—abandonment, delay, change in research approach, or the need to develop the research input in the requester’s own laboratory. The results are shown in Table 4-5. What stands out is the higher incidence of adverse effects for drug discovery and pathway researchers, especially those working on NF-kB. Fewer than half of material requests entail an MTA, and the presence or absence of a formal agreement does not appear to be central to whether ultimately the materials are shared. But the process of negotiating an MTA frequently entails costs in terms of restricted freedom of action, delays in proceeding, and financial costs to institutions. Reach-through claims are common as are publication restrictions, more so than royalty payments. Negotiations over MTA terms frequently occasion delays (with 11 percent of the requests leading to negotiations taking more than one month to conclude), especially when the suppliers are industrial firms. Industry suppliers also are much more likely to require MTA than academic suppliers. Although agreements for transfer of patented technologies are more likely to contain restrictive terms and have protracted negotiation histories than are agreements involving unpatented technologies, one cannot infer that patenting per se was the cause of the difficulties. Both patenting and complex drawn out negotiations derive from the commercial potential of the technology and the desire of the supplier and conceivably the consumer to capture a greater share of the rents from that potential. For academics, the most common reason given for denying or ignoring a request was simply the effort involved and the need to protect publication. For

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health TABLE 4-5 Average Number of Adverse Effects from Not Receiving Research Inputs, Academic Respondents by Research Goal and for Pathways and Industry Respondents   Random Sample Research Goal Pathways Industry Drug Discovery Basic Research Other CTLA4 EGF NF-kB Academic Supplier Delay >1 month 0.68 0.98 0.69 0.33 0.83 1.2 2.85 0.78 Change Research Approach 0.56 0.89 0.54 0.3 0.45 0.7 2.24 0.68 Abandon 0.22 0.07 0.24 0.21 0.27 0.2 0.62 0.39 Make In-house 0.67 0.88 0.65 0.59 0.93 1.2 2.29 1.01 Industry Supplier Delay >1 month 0.4 0.75 0.39 0.18 1.02 1.1 0.87 0.35 Change Research Approach 0.46 0.66 0.42 0.56 0.68 0.7 1.66 0.49 Abandon 0.27 0.08 0.3 0.26 0.58 0.9 0.28 0.32 Make In-house 0.31 0.44 0.28 0.47 0.69 0.8 0.71 0.33 Respondents 242 24 195 23 21 24 26 62   SOURCE: Walsh et al., 2005.

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health industry respondents, the key reported reasons were the need to protect commercial value and the consumer’s unwillingness to accept restrictive terms. Gene-Based Diagnostic Test Patents An area where patents seem to be having an inhibitory effect on research and related clinical practice involves gene-based diagnostic tests (see Chapter 2 for a discussion of breast cancer diagnostics). This was not a focus of the committee’s survey, in part because Mildred Cho and colleagues (2003) have conducted telephone surveys of U.S. clinical laboratory directors who were members of the Association for Molecular Pathology. The first concern is that a patent owner’s refusal to make a single patented gene available for licensing on reasonable terms will inhibit follow-on research on the incidence of mutations in the gene as well as limit patient access to testing at a reasonable cost and the possibility of obtaining a second opinion on the result. Exclusive licenses also limit the opportunity for the development of improvements in the test and verification of the result. An anti-commons effect also can be anticipated in the future as clinicians begin to develop tests for multigenic traits. Cho and colleagues’ sampling frame of 211 laboratory directors combined listings in the most recent Association of Molecular Pathology directory and on the genetests.org website maintained by the University of Washington with federal funding. The result was a sample of corporate, university, private hospital, federal government, and other nonprofit laboratories. They analyzed the responses of 122 individuals, a large majority of whom had licenses to perform genetic tests for a wide variety of conditions, including hereditary breast and ovarian cancer (BRCA1/2), Canavan Disease, Hereditary Hemochromatosis, and Fragile X syndrome, among others. The results suggest that holders of gene-based diagnostic patents are active in asserting their intellectual property rights. Sixty-five percent of respondents reported having been contacted by a patent or license holder regarding their potential infringement in performing a test. Twenty laboratories had received notification for 1 test; 51 had received notifications for up to 3 tests, and 26 laboratories for 4 or more tests. These enforcement efforts focused on 12 tests that, as a result, 1 or more laboratories had ceased to perform. In all, 30 laboratories responded that they had ceased administering at least 1 test. This number included almost all of the corporate laboratories and about one-quarter of university laboratories. Asked to evaluate their experience, respondents indicated that patents had had a negative effect on all aspects of clinical testing and reported a decline in information sharing between laboratories. Inclination to undertake test development, too, was adversely affected, according to respondents. Thus, patents do appear to be blocking the clinical use of tests insofar as such clinical use is closely related to follow-on research. Because clinical research often is more efficiently

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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health done with an entire battery of tests, both blocking and an anti-commons might be in effect. CONCLUSION After reviewing the existing research literature and conducting research on (1) issued patents and published patent applications in a subset of biotechnology categories; (2) a small set of university licensing practices of selected categories of patents; and (3) biomedical research scientists’ experiences with intellectual property and its effects on research, the committee identified four areas of concern. First, the apparent lack of substantial evidence for a patent thicket or a patent-blocking problem is associated with a general lack of awareness or concern among investigators about existing intellectual property. This situation could change dramatically as institutions increasingly realize that they enjoy no legal protection and concerns are raised about possible patent infringement liability; this may lead them to take more steps to raise awareness and regulate their behavior. Second, although the survey did not reveal significant differences in experience between investigators working independently and those working in multimember teams, the growing complexity of biomedical research may make intellectual property more problematic as work on a single gene or gene sequence gives way to research entailing far more extensive inputs, more and more of them patented. Third, the licensing of some gene-based diagnostic tests does appear to be having an inhibiting effect on research and related clinical practice. Finally, impediments to the exchange of research materials among laboratories exist, although these impediments appear to be largely independent of intellectual property. Instead, they are associated with scientific competition and the lack of rewards for the time and effort entailed in meeting requests for research inputs and academic respondents’ commercial interests.