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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health 3 The U.S. Patent System, Biotechnology, and the Courts The basis of the American patent system is found in Article I, Section 8 of the U.S. Constitution, which empowers Congress “to promote the Progress of Science and useful arts, by securing for limited Times to … Inventors the exclusive Right to their … Discoveries.” Congress enacted the first patent statute in 1790 and amended it in 1793. The 1793 amendment defined, in language written by Thomas Jefferson, what was patentable: “any new and useful art, machine, manufacture, or composition of matter, or any new or useful improvement thereof.” Jefferson’s phrasing remains at the core of the U.S. patent code, except for the replacement of the 18th-century word “art” with the modern equivalent “process” in a 1952 congressional overhaul of patent law. This chapter addresses intellectual property issues in the context of genomics and proteomics, focusing on patent law and interpretation—specifically, fields of activity, applicable law, and limitations on licensing and enforcement. FIELDS OF ACTIVITY The practice of patenting genes is at least as old as the biotechnology industry, providing a quarter century’s worth of legal precedents on the application of patent law to genetics and genomics. Inevitably, however, legal developments trail behind scientific developments, particularly in rapidly advancing fields. As the underlying science has advanced, research strategies and business models have become more diverse, generating patents that play different roles in the economy of biomedical research and practice than those of the early days of the biotechnology industry. Although some legal issues are now reasonably well settled, new and unresolved issues have come into view.
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health Beginning in the 1970s, firms sought and obtained patents on newly cloned genes encoding therapeutic proteins (Eisenberg, 1990). These early patents typically claimed an “isolated and purified” DNA sequence corresponding to the amino acid sequence for the protein, along with recombinant materials incorporating that DNA sequence for use in making the protein in cultured cells.1 As a legal matter, the courts and the United States Patent and Trademark Office (USPTO) treated these inventions as chemicals or “composition of matter,”2 a characterization that provided an extensive body of precedent that could be consulted to establish the ground rules for patents in this emerging field. Having long ago decided that chemicals isolated from nature through human intervention were eligible for patent protection,3 the courts and USPTO had little difficulty allowing patents on newly isolated genes. The gene-patenting pioneers in the new biotechnology firms of the 1980s saw themselves as high-technology drug developers, and in their search for a viable business model for therapeutic protein development, they emulated the patent strategies of major pharmaceutical firms. Patents on the genes that encoded therapeutic proteins secured exclusive franchises to manufacture these products. Such patents have been the focus of numerous judicial opinions concerning the requirements for patent protection,4 priority of invention,5 and determinations of infringement.6 The judicial opinions that resolve these disputes provide most of the existing legal precedent involving the patenting of DNA. Following the first wave of patents on genes encoding therapeutic proteins, the development of new tools and techniques for detecting genetic differences among individuals enabled researchers to bypass the stages of protein isolation and characterization and to identify directly the genes associated with diseases 1 See, e.g., U.S. Patent No. 4,757,006 (July 12, 1988), which claims, inter alia: 1. An isolated recombinant vector containing DNA coding for human factor VIII:C, comprising a polydeoxy-ribunucleotide having the [following] sequence: 4. A nonhuman recombinant expression vector for human factor VIII:C comprising a DNA segment having the [following] sequence: 5. A transformed non-human mammalian cell line containing the expression vector of claim 4. 2 See, e.g., Amgen v. Chugai Pharmaceutical Co., 927 F.2d 1200, 1206 (Fed. Cir.), cert. denied sub nom. Genetics Institute v. Amgen, 502 U.S. 856 (1991) (“A gene is a chemical compound, albeit a complex one …”). 3 E.g., Parke-Davis & Co. v. H.K. Mulford & Co., 189 F. 95 (S.D.N.Y. 1911) (adrenaline); Kuehmsted v. Farbenfabriken, 179 F. 701 (7th Cir. 1910), cert. denied, 220 U.S. 622 (1911) (prostaglandins); Merck & Co. v. Olin Mathieson Corp., 253 F.2d 156 (4th Cir. 1958) (vitamin B12). 4 See, e.g., In re Deuel, 51 F.3d 1552 (Fed. Cir. 1995) (nonobviousness); Regents of the University of California v. Eli Lilly, 119 F.3d 1559 (Fed. Cir. 1997) (nonobviousness); Genentech v. Novo Nordisk, 108 F.3d1361 (Fed. Cir. 1997) (enablement); Eli Lilly v. Genentech, 119 F.3d 1567 (Fed. Cir. 1997) (written description). 5 See, e.g., Fiers v. Revel, 984 F.2d 1164 (Fed. Cir. 1993). 6 See, e.g., Scripps Clinic & Research Found. v. Genentech, 927 F.2d 1565 (Fed. Cir. 1991); Genentech v. Wellcome Foundation, 29 F.3d.
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health (or disease susceptibilities) through positional cloning (Collins, 1995). These genetic discoveries had immediate value as diagnostic products. They also were useful as research tools in the development of therapeutic products, but the relationship between gene and therapeutic product typically was less straightforward than it had been for the first generation of biotechnology products. Patents on these discoveries, although similar in form to patents on genes encoding therapeutic proteins, played a different and less familiar role in the biomedical community, setting the stage for conflict between people and institutions that had barely taken note of the first generation of gene patents. Professional societies of doctors and clinical geneticists in particular have been outspoken critics of disease gene patents, especially when they are the subject of exclusive licenses to perform DNA diagnostic tests.7 They argue that patent-based restrictions regarding who may perform genetic tests interfere with the practice of medicine and prevent other laboratories from identifying and validating new mutations. These arguments are particularly compelling to doctors and geneticists working in academic medical centers that are equipped to administer “home brew” genetic diagnostic tests themselves in pursuit of a mixed mission of treatment and research. The advent of high-throughput DNA sequencing marked another important turning point in the history of genomic patents. By generating large amounts of DNA sequence information in advance of understanding the functions or disease relevance of particular sequences, high-throughput sequencing raised the possibility of obtaining patents on “upstream” genetic discoveries that—although potentially possessing patentable utility—were still far removed from developed products. As discussed in Chapter 2, the announcement of the filing by NIH of patent applications on the first expressed sequence tags (ESTs) identified by Craig Venter in a National Institutes of Health (NIH) laboratory set off controversy in the scientific community (Dickson, 1993; Milstein, 1993), although research scientists previously had expressed little concern about the patenting of genes encoding therapeutic proteins. If the DNA sequence discoveries that were claimed in the provocative NIH patent filings encoded therapeutic proteins or were relevant to particular diseases, no one could have known it at the time. The most obvious value of ESTs was not 7 See, e.g., Association for Molecular Pathology, AMP Position on Patenting of Genetic Tests (Dec. 17, 1999), posted on the Internet at www.ampweb.org/patent.htm; American College of Medical Genetics, Position Statement on Gene Patents and Accessibility of Gene Testing (Aug. 2, 1999), posted on the Internet at www.faseb.org/genetics/acmg/pol-34.htm; American Medical Association, H-140.944 Patenting the Human Genome, posted on the Internet at www.ama-assn.org/apps/pf_online?fn=browse&doc=policyfiles/HOD/H-14C; Academy of Clinical Laboratory Physicians and Scientists, Resolution: Exclusive Licenses for Diagnostic Tests (approved by the ACLPS Executive Council June 3, 1999), posted on the Internet at depts.washington.edu/lmaclps/license.htm; College of American Pathologists, Gene Patents Detrimental to Care, Training, Research, posted on the Internet at www.cap.org/html/advocacy/issues/Issue_Genepat.html.
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health the speculative value that particular gene fragments might have for therapeutic or diagnostic uses, but the immediate value that collections of such sequences offered for use in gene discovery. With this shift, patenting genes began to look less like patenting end products and more like patenting research tools. Scientists argued that the progress of biomedical research would be better served by making the human genome freely available than by permitting its balkanization through patent claims and restrictive licensing agreements.8 This opposition became more vehement as EST sequencing moved from NIH to the private sector and as terms of access to privately held EST databases were set beyond the reach of many academic institutions (Eisenberg, 1996). The EST patenting controversy arose during a period of rapid transition in the culture of academic biomedical research from a tradition of open science to a more restrictive, proprietary enterprise. Although by this point many academic scientists had begun patenting their own inventions and licensing them through their universities to private firms, they still enjoyed relatively free access to scientific information and methods for use in their own research. The first patent filings on the results of high-throughput DNA sequencing coincided with a broader trend in the biomedical research community to claim intellectual property rights in research tools and to assert these rights against academic researchers (NIH Working Group on Research Tools, 1998). In addition to raising concerns about the patenting of research tools, the EST controversy highlighted the character of genomic discoveries as information, as distinguished from tangible molecules. Much of the value of ESTs lay in databases, rather than in tangible materials stored in a wet laboratory. From this perspective, ESTs were an early harbinger of an aspect of genomics and proteomics that has continued to be problematic for the patent system. The sequencing of genomes, the identification of polymorphisms and haplotypes, the development of gene expression profiles, and the determination of protein structures all involve the creation of valuable information resources and the analysis of information on a large scale. It is not always obvious how to use the patent system to capture the value of these information resources. The courts and USPTO initially resisted the extension of patent protection to information technology,9 although a series of deci- 8 Opposition to gene patenting from the scientific community has become more qualified over time, as scientific institutions have sought to establish ground rules that would limit patent protection to well-characterized genes while withholding patents on gene fragments and sequences whose function has not been established. These more qualified views have recently been set forth in comments on proposed USPTO guidelines on the utility and written description requirements for patent protection, posted on the Internet at www.usUSPTO.gov/web/offices/com/sol/comments/utilguide/index.html and www.usUSPTO.gov/web/offices/com/sol/comments/utilitywd/index.html. 9 Gottschalk v. Benson, 409 U.S. 63 (1972); Parker v. Flook, 437 U.S. 584 (1978).
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health sions of the Federal Circuit over the past decade have attenuated this once robust exclusion.10 From a commercial perspective, genomic and proteomic information resources are an important part of platforms for the development of future diagnostic and therapeutic products, and the developers of these resources have pursued a variety of patent claiming and licensing strategies that would permit them to share in the potential bounty of these future products. One controversial strategy is “reach-through licensing” of platform technologies in exchange for either royalties on future products that would not otherwise infringe the upstream patent (reach-through royalties) or a promise of an exclusive or nonexclusive license under future patents on inventions to be made by the user (grant-backs) (Eisenberg, 2001). The platform technology may be a patented research tool, or it may be an unpatented database that is accessible only under the terms of a database access agreement. Owners of platform technologies often seek reach-through royalties when the user is a pharmaceutical firm or other institution engaged in product development.11 Grant-backs are more typical when the user itself is a nonprofit institution, such as a university, that does not develop products but nonetheless generates further intellectual property.12 Both are primarily contract strategies, in which the role of patent law is largely limited to determining background rights. A more powerful strategy for allowing developers of research tools to capture the value that their tools contribute to future product development is called “reach-through claiming.”13 This strategy focuses on the patent itself rather than on license terms, using claim language that is broad enough to cover future products directly. Examples of reach-through claims are those directed to agonists or antagonists of a disclosed receptor, to methods of treatment involving administering to a patient a compound identified through a disclosed screening method, or to products designed to fit within a binding site on a protein for which crystal coordinates have been disclosed. Some of these claiming strategies raise unresolved legal issues, although it appears that the “written description” requirement would pose a significant obstacle to the patentability of such claims. 10 State St. Bank & Trust v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998), cert. denied, 119 S. Ct. 851 (1999); AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (1999). 11 Id. at 243. See, e.g., Bayer AG v. Housey Pharmaceuticals, Inc., 228 F. Supp. 2d 467 (2002). 12 Bargaining Over Research Tools, supra note 17, at 244. 13 For a description of reach-through claiming and a careful analysis of the doctrinal issues it raises under the patent laws in the U.S., the European Union, and Japan, see Report on comparative study on biotechnology patent practices theme: Comparative study on “reach-through claims” (Trilateral Project B3b, posted on the Internet at www.USPTO.gov/web/tws/b3b_reachtrhougyh.doc, hereinafter “Comparative Study”).
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health APPLICABLE LAW In order to get a patent, an applicant must claim an invention that falls within a patent-eligible subject matter. The invention must be new, useful, and nonobvious in light of the prior art. The patent application must satisfy certain disclosure requirements, including a written description of the invention, an enabling disclosure that would allow a person of ordinary skill in the field to make and use the invention without undue experimentation, and disclosure of the best mode contemplated by the inventor of carrying out the invention. A patent gives its owner the right to exclude anyone else from making, using, selling, offering to sell, or importing the invention during the patent term, subject to limited exceptions. Patent owners generally enjoy considerable discretion to deploy these exclusionary rights as they see fit, although some licensing practices may violate antitrust laws or constitute “patent misuse.” For inventions made in the course of government-sponsored research, the government retains the right to practice the invention or to authorize others to practice it for governmental purposes, as well as “march-in” rights to grant licenses under the patent if necessary to get the invention developed. Patent Eligibility Do discoveries in genomics and proteomics fall within the range of subject matter that the patent system protects? On its face, the Patent Act extends protection to “any new and useful process, machine, manufacture or composition of matter,” without explicit subject matter exclusions.14 But in the past the courts and USPTO have sometimes seemed to endorse exclusions from patent eligibility for certain categories of inventions, including medical and surgical techniques,15 plants,16 agricultural methods,17 mathematical algorithms,18 and products and 14 35 U.S.C. § 101. 15 Morton v. New York Eye Infirmary, 17 F. Cas. 879 (No. 9865) (S.D.N.Y. 1862) (holding ineligible for patent protection method of performing surgery by applying ether to render patient insensitive to pain); Ex parte Brinkerhoff, 24 Comm’n MS Decision 349 (1883) (holding that “the methods or modes of treatment of physicians of certain diseases are not patentable”). But cf. Smith & Nephew v. Ethicon, 54 USPQ2d 1888, 1889 (D. Ore. 1999) (claiming “a method of attaching tissue to bone by using a resilient suture anchor which is pressed into a hole in the bone”); Catapano v. Wyeth Ayerst Pharmaceuticals, 88 F. Supp.2d 27, 28 (E.D.N.Y. 2000) (claiming a method of treating a human patient to effect the remission of AIDS). 16 Ex parte Latimer, 1889 Comm’n Dec. 13 (1889) (holding ineligible for patent protection a claim to “cellular tissues of the Pinus australis” tree separated from “the silicious, resinous, and pulpy parts of the pine needles and subdivided into long, pliant filaments adapted to be spun and woven”). But cf. J.E.M. Ag Supply v. Pioneer Hi-Bred International, 534 U.S. 124 (2001) (holding plants eligible for patent protection). 17 Wall v. Leck, 66 F. 552 (9th Cir. 1895) (invalidating patent on a process of fumigating citrus trees in the absence of light). 18 Gottschalk v. Benson, 409 U.S. 63 (1972).
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health phenomena of nature.19 These exclusions have been viewed skeptically by the Court of Appeals for the Federal Circuit (Federal Circuit) and by its predecessor, the Court of Customs and Patent Appeals,20 and by now most have been repudiated.21 In the landmark case of Diamond v. Chakrabarty, the U.S. Supreme Court held that the broad language of the patent statute indicates an expansive scope of eligible subject matter that includes “anything under the sun that is made by man.”22 USPTO has issued and the courts have upheld patents on tangible DNA and proteins in forms that do not occur in nature as new “compositions of matter.” Patents have thus issued on “isolated and purified” DNA sequences and proteins and on DNA sequences that have been spliced into recombinant vectors or introduced into recombinant cells of a sort that do not exist in nature.23 This is consistent with longstanding practice, even prior to the advent of modern biotechnology, of allowing patents to be issued on isolated and purified chemical products that exist in nature only in an impure state, when human intervention has made them available in a new and useful form.24 More recent advances in genomics and proteomics raise somewhat different issues concerning the patent eligibility of information, as distinguished from tangible new products and processes. Older cases have excluded from patent protection “scientific truths” and “abstract ideas.”25 The sequencing of genomes, the identification of polymorphisms and haplotypes, the development of gene expression profiles, and the determination of protein structures all provide valuable scientific information that arguably falls within these exclusions, to the extent 19 Funk Bros. Seed v. Kalo. Inoculant Co., 333 U.S.127 (1948). 20 Congress created the Court of Appeals for the Federal Circuit in 1982, consolidating intermediate appellate jurisdiction over patent law matters in a single court that would hear appeals from decisions of USPTO and decisions of the Federal District Courts in patent cases. Federal Courts Improvement Act of 1982, Pub. L. No. 97-164, 96 Stat. 25. An important goal was to bring about greater uniformity and consistency in interpretations of the patent laws. 21 E.g., State St. Bank & Trust v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998), cert. denied, 515 U.S. 1093 (1999); AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (1999); Pioneer Hi-Bred Int’l v. J.E.M. Ag Supply, 200 F.3d 1374 (Fed. Cir. 2000), aff’d sub nom. J.E.M. Ag Supply v. Pioneer Hi-Bred Int’l, 534 U.S. 124, 130 (2001). 22 Diamond v. Chakrabarty, 447 U.S. 303 (1980). 23 Amgen, Inc. v. Chugai Pharmaceutical Co., 13 U.S.P.Q.2d (BNA) 1737 (D. Mass. 1990). (“The invention claimed in the ’008 patent is not as plaintiff argues the DNA sequence encoding human EPO since that is a nonpatentable natural phenomenon ‘free to all men and reserved exclusively to none.’ … Rather, the invention as claimed in claim 2 of the patent is the “purified and isolated” DNA sequence encoding erythropoietin.”) 24 See, e.g., Merck & Co. v. Olin Mathieson Chemical Corp., 253 F.2d 156 (4th Cir. 1958) (upholding the patentability of purified Vitamin B-12). See also In re Bergy, 596 F.2d 952 (CCPA 1979) (upholding patentability of isolated and purified microorganism), vacated and remanded with directions to dismiss as moot sub nom. Diamond v. Chakrabarty 444, U.S. 1028 (1980). 25 See, e.g., LeRoy v. Tatham, 55 U.S. 156, 175 (1853)(“A principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.”); Mackay Co. v. Radio Corp., 306 U.S. 86, 94 (1939) (“While a scientific truth, or
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health that the exclusions remain good law, if the patent claims read beyond the materials themselves and attempt to define the invention in such a way that the use of information would be an act of patent infringement. Recent decisions concerning the patentability of computer-implemented inventions may provide more guidance than prior decisions about the patentability of discoveries in the life sciences and in predicting the patentability of informational inventions in genomics and proteomics. The overall trend of decisions in the Federal Circuit is toward the expansive interpretation of the scope of patent-eligible subject matter—even for categories of inventions that prior decisions seemed to exclude from the protection of the patent statute—in order to make the patent system “responsive to the needs of the modern world.”26 The most conspicuous recent example of this trend was the 1998 decision in State Street Bank & Trust v. Signature Financial Group27 upholding the patentability of a computer-implemented accounting system for managing the flow of funds in partnerships of mutual funds that pool their assets. Despite the fact that USPTO had been issuing similar patents for many years, it was argued that this invention fell within some previous judicial limitations that arguably excluded mathematical algorithms28 and business methods29 from patent protection. The Federal Circuit minimized the first of these limitations,30 holding that it excluded from patent protection only “abstract ideas constituting disembodied concepts or truths that are not ‘useful,’”31 and repudiated the second, insisting that “[t]he business method exception has never been invoked by this court, or [its predecessor], to deem an invention unpatentable,” and that other courts that had appeared to apply the business method exception always had other the mathematical expression of it, is not a patentable invention, a novel and useful structure created with the aid of knowledge of scientific truth may be.”); Gottschalk v. Benson, 409 U.S. 63 (1972) (“It is conceded that one may not patent an idea. But in practical effect that would be the result if the formula for converting BCD numerals to pure binary numerals were patented in this case.”); Diamond v. Chakrabarty (“Einstein could not patent his celebrated law that E=mc2; nor could Newton have patented the law of gravity. Such discoveries are ‘manifestations of … nature, free to all men and reserved exclusively to none.’”); Dickey-John Corp. v. International Tapetronics Corp., 710 F.2d 329 (7th Cir. 1983) (“Yet patent law has never been the domain of the abstract—one cannot patent the very discoveries that make the greatest contributions to human knowledge, such as Einstein’s discovery of the photoelectric effect, nor has it ever been considered that the lure of commercial reward provided by a patent was needed to encourage such contributions. Patent law’s domain has always been the application of the great discoveries of the human intellect to the mundane problems of everyday existence.”) 26 AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (1999). 27 149 F.3d 1368 (Fed. Cir. 1998), cert. denied, 119 S. Ct. 851 (1999). 28 See, e.g., Gottschalk v. Benson, 409 U.S. 63 (1972); Parker v. Flook, 437 U.S. 584 (1978). 29 Hotel Security Checking Co. v. Lorraine Co., 160 F. 467 (2d Cir. 1908). 30 The exclusion of mathematical algorithms from patent protection had already been substantially restricted by prior decisions of the Federal Circuit. See, e.g., In re Alappat, 33 F.3d 1526 (1996). 31 149 F.3d at 1373.
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health grounds for arriving at the same decision.32 Rather than seeing the language of §101 of the Patent Act as a significant limitation on the types of advances that might qualify for patent protection, the Federal Circuit characterized the statutory language as a “seemingly limitless expanse,” subject only to three “specifically identified … categories of unpatentable subject matter: ‘laws of nature, natural phenomena, and abstract ideas.”33 So far, USPTO has declined to issue patents on data as such, as have its counterparts in Europe and Japan. USPTO’s Examination Guidelines for Computer-Implemented Inventions34 distinguish between “functional descriptive material” (such as “data structures and computer programs which impart functionality when encoded on a computer-readable medium”) and “non-functional descriptive material” (such as “music, literary works and a compilation or mere arrangement of data [which] is not structurally and functionally interrelated to the medium but is merely carried by the medium”).35 A 2002 report on a trilateral comparative study by the European Patent Office, the Japan Patent Office, and USPTO (“2002 trilateral report”) considers the patentability of protein three-dimensional structure-related claims under the laws administered by each of those offices.36 Each of the three offices concluded that hypothetical claims to computer models of proteins generated with atomic coordinates, data arrays comprising the atomic coordinates of proteins, computer-readable storage medium encoded with the atomic coordinates, and databases 32 Id. At 1375-76. 33 AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999), citing Diamond v. Diehr, 450 U.S. 175 (1981). 34 61 Fed. Reg. 7478 (Feb. 28, 1996), posted on the Internet at www.usUSPTO.gov/web/offices/com/hearings/software/analysis/computer.html. 35 The focus on functional relationship between data and substrate echoes language from In re Lowry, 32 F.3d 1579 (Fed. Cir. 1994), in which the Federal Circuit upheld the patentability of a data structure for storing, using, and managing data in a computer memory. In that case, the Board of Patent Appeals had reversed the examiner’s rejection of the claims under 35 U.S.C. § 101 as claiming non-statutory subject matter, and the issue of patentable subject matter was therefore not properly before the court on appeal. Nonetheless, in its analysis of the remaining issues of patentability under 35 U.S.C. §§ 102 and 103, the court drew a distinction between claiming information content and claiming a functional structure for managing information: “Contrary to the USPTO’s assertion, Lowry does not claim merely the information content of a memory. Lowry’s data structures, while including data resident in a database, depend only functionally on information content. While the information content affects the exact sequence of bits stored in accordance with Lowry’s data structures, the claims require specific electronic structural elements which impart a physical organization on the information stored in memory. Lowry’s invention manages information. As Lowry notes, the data structures provide increased computing efficiency.” Id. at 1583. See also In re Warmerdam, 33 F.3d 1354, 1361 (Fed. Cir. 1994) (descriptive material per se is not patent eligible subject matter). 36 Trilateral Project WM4, Comparative studies in new technologies, Report on comparative study on protein 3-dimensional (3-D) structure related claims (Nov. 4-8, 2002).
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health encoded with candidate compounds that had been electronically screened against the atomic coordinates of proteins were not patent-eligible subject matter. The analysis of USPTO emphasized that the subject matter of each of these hypothetical claims was “nonfunctional descriptive material” and therefore “an abstract idea.” Although the views of USPTO and its foreign counterparts are of enormous practical importance in determining what gets patented, neither the USPTO guidelines nor the 2002 trilateral report has the status of binding legal authority. If a disappointed patent applicant appeals the rejection of claims covering atomic coordinates for proteins to the Federal Circuit, that court could reverse the rejection. To the extent that the exclusion of “nonfunctional descriptive material” from patent protection rests on the intangible nature of information, it may prove unstable in the face of recent Federal Circuit decisions that have de-emphasized the need for structural physical limitations in claims for computer-implemented inventions. This shift in emphasis is particularly apparent in AT&T v. Excel Communications,37 in which the court explicitly declined to focus on the “physical limitations inquiry” that had played a central role in distinguishing between unpatentable mathematical algorithms and patentable computer-implemented inventions in its prior decisions. Instead, the court asked “whether the mathematical algorithm is applied in a practical manner to produce a useful result.”38 This approach seems to merge the issue of patent eligibility with the issue of utility. It is unclear, however, whether the court would take the further step of opening the door to patent claims to information itself so long as it is “useful,” contrary to the time-honored understandings of the subject matter categories that are eligible for patent protection.39 37 172 F.3d 1352 (Fed. Cir. 1999). 38 Id. at 1358. 39 After the committee completed its deliberations, the issue of patent eligibility was raised in two settings. First, on October 26, 2005, the PTO issued new Interim Guidelines for Examination of Patent Applications for Patent Subject Matter Eligibility, see http://www.uspto.gov/web/offices/pac/dapp/ogsheet.html. If adopted, these guidelines would most directly affect the patenting of computer-related and business method patents. More pertinent to the issues raised here, the Supreme Court granted certiorari in Laboratory Corporation of America Holdings v Metabolite Laboratories Inc., 370 F.3d 1354 (Fed. Cir. 2004), (Supreme Court 2005). WL 2838583 (U.S. Oct. 31, 2005) (No. 04-607). The case raised several challenges to the validity of a patent claiming methods for detecting cobalamin (vitamin B12) or folate deficiency by testing for elevated levels of total homocysteine. However, the Court limited the scope of its review to the following question: Whether a method patent setting forth an indefinite, undescribed, and non-enabling step directing a party simply to “correlat[e]” test results can validly claim a monopoly over a basic scientific relationship used in medical treatment such that any doctor necessarily infringes the patent merely by thinking about the relationship after looking at a test result. Because the grant of certiorari is limited, it is difficult to know how far the decision of the Court might reach. Nonetheless, the case provides a vehicle for determining when diagnostic tests will be considered patent-eligible.
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health In October 2005, against the solicitor general’s advice, the Supreme Court announced that it will hear arguments in a case that could narrow the scope of patentability in the United States. In granting certiorari in Laboratory Corporation of America Holdings v Metabolite Laboratories Inc., the Court chose to address just one of the three questions presented by the petitioner and will focus only on the area of medical diagnostic and treatment patents. The question the Court will answer is “Whether a method patent setting forth an indefinite, undescribed, and non-enabling step directing a party simply to ‘correlat[e]’ test results can validly claim a monopoly over a basic scientific relationship used in medical treatment such that any doctor necessarily infringes the patent merely by thinking about the relationship after looking at a test result.” The case involves a diagnostic test carried out by doctors. Metabolite’s patent covers tests to determine homocysteine levels in the body, and according to Metabolite, additionally covers scientific relationship between homocysteine and vitamin B deficiencies. Thus, argues Metabolite, the patent claims all forms of correlating test results, such as a doctor seeing low homocysteine results and determining low vitamin B levels. The solicitor general’s brief had argued for denial of certiorari on the grounds that the history of the case and the facts of the dispute were not suitable to address the broader question of patent eligibility. The Court’s acceptance of the case, however, has set the stage for what could be a significant revision of patentability. Utility Another limitation on what may be patented that has been important in genomics is the utility requirement. The utility requirement straddles two statutory provisions in U.S. law: § 101, which defines patent eligible subject matter as “any new and useful process, machine, manufacture and composition of matter,” and § 112, which requires that a patent applicant disclose “the manner and process of making and using” the invention.40 In most fields of technology, the utility requirement does little work, because few people would want to patent a useless invention and few would care if they did, but the requirement plays a more important role in chemistry and biotechnology. This is because the course of discovery in these fields typically involves the identification of products first, followed by screening or testing for uses later. The need to describe and enable utility thus potentially defers the time when inventions in these fields may be 40 The requirement also finds authority in the language of Article 1, section 8, clause 8 of the U.S. Constitution, which authorizes Congress to enact patent legislation for a specified purpose: “To promote the Progress of Science and useful Arts ….” [emphasis added].
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health Disclosure of an amino acid sequence for a protein and a strategy for cloning the corresponding gene might be enough to satisfy the enablement standard, but it is not enough to satisfy the written description requirement, as elaborated by the Federal Circuit. USPTO has published guidelines and examiner training materials for the written description requirement that explain in some detail its application to genomic inventions,67 and written description is emerging as a significant constraint on proteomics claiming strategies as well.68 Although at least one member of the Federal Circuit has called for the court to reconsider decisions expanding the reach of the written description requirement,69 it appears to retain the support of a majority of the court. The recent opinions70 responding to the request for en banc reconsideration of the Federal Circuit panel decision in the case of University of Rochester v. G.D. Searle71 show the continuing vitality of written description and illustrate its potential to defeat proteomics claims that seek to reach through to future compounds that might be found through the use of protein structure information. The patent at issue in that case arose out of the discovery by scientists at the University of Rochester that stomach irritation associated with nonsteroidal anti-inflammatory drugs is caused by the inhibition of a protective enzyme (PGHS-1 or Cox-1) that is distinct from a similar enzyme (PGHS-2 or Cox-2) that causes inflammation. They hypothesized—correctly, as it turned out—that molecules that selectively inhibit Cox-2 only, without inhibiting Cox-1, might provide relief from pain and inflammation while reducing these gastrointestinal side effects. More recent studies have confirmed that these drugs have serious cardiovascular side effects (Bresalier et al., 2005). Without identifying or testing any such molecules, the University of Rochester obtained a patent on a “method for selectively inhibiting PGHS-2 in a human host, comprising administering a non-steroidal compound that selectively inhibits activity of the PGHS-2 gene product to a human host in need of such treatment,” and brought a patent infringement action against pharmaceutical firms that, meanwhile, had developed selective Cox-2 inhibitor products. The district court granted the defendants’ motion for summary judgment of patent invalidity for failure to comply with both the written descrip- 67 USPTO, Guidelines for Examination of Patent Applications Under the 35 U.S.C. 112, ¶1, “Written Description” Requirement. The examiner training materials are available on the web at www.usUSPTO.gov/web/menu/written.pdf. 68 For an analysis of how written description might constrain proteomics claims, see Trilateral Project WM4, Comparative studies in new technologies. Report on comparative study on protein 3-dimensional (3-D) structure related claims (2002). 69 Enzo Biochem, Inc. v. Gen-Probe, Inc., 296 F.3d 1316 (Rader, J., dissenting from denial of rehearing en banc); Moba, B.V. v. Diamond Automation, Inc., 325 F.3d 1306, (Fed. Cir. 2003) (Rader, J. concurring). 70 University of Rochester v. G.D. Searle, 375 F.3d 1303 (Fed. Cir. 2004). 71 358 F.3d 916 (Fed. Cir. 2004).
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health tion and enablement requirements, and the Federal Circuit affirmed on the written description ground without reaching enablement.72 The university’s motion for rehearing en banc was denied, but generated a set of concurring and dissenting opinions that revealed significant divisions within the court regarding the proper scope of the written description requirement. Nevertheless, the resolution of this case suggests that written description is likely to pose a significant obstacle to “reach-through” claims to compounds defined functionally in terms of the proteins with which they interact, rather than structurally (as in the past). Claims to compounds defined in relation to a hypothetical pharmacophore might present a better case for satisfaction of the written description requirement than the purely functional definition set forth in the University of Rochester claims. Arguably the disclosure of crystal coordinates and binding sites provides enough structural information about the size and shape of the claimed compounds, linked to the function of binding the target, to permit visualization of the molecules falling within the scope of the claim.73 But USPTO has indicated that such a claim would fail the written description standard “because one skilled in the art would conclude that the inventors were not in possession of the claimed invention.”74 For now, it appears that proteomics inventors are likely to be limited to claiming the actual proteins and peptides that they have disclosed and characterized in their patent applications, without being able to reach through to claim as yet unidentified compounds that ultimately might be found to interact with those proteins and peptides. Limitations on Licensing and Enforcement License terms for patented inventions pertaining to genomics and proteomics have sometimes been as controversial as the underlying patents themselves. Many biomedical researchers have limited resources to make up-front payments for access to materials that are used mainly in research, such as clones, reagents, and animal models. This has led some providers of these so-called research tools to propose contingent payment terms in the form of reach-through royalties on future product sales or reach-through licenses to future inventions. These terms have the advantage of making tools available at minimal up-front cost for use in noncommercial research, while still permitting the tool owner to share the wealth 72 University of Rochester v. G.D. Searle, 358 F.3d 916 (Fed. Cir. 2004). 73 See Dep’t of Comm., U.S. Pat. & Trademark Off., Guidelines for Examination of Patent Applications Under the 35 U.S.C. 112 ¶1, “Written Description” Requirement, 66 Fed. Reg. 1099, 1106 (Jan. 5, 2001) (stating that written description requirement may be met by disclosure of “functional characteristics when coupled with a known or disclosed correlation between function and structure”). 74 Trilateral Project WM4 at p. 28.
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health if the research yields a commercial product. But many tool users balk at agreeing to reach-through terms. As such terms become more common in proposed research tool licenses, the obligations imposed by different tool providers may come into conflict75 or create mounting royalty obligations that reduce incentives for future product development. Moreover, it may be difficult in the future to trace a particular discovery or product to prior use of a research tool and to establish that it is subject to the reach-through obligation. These difficulties increase the transaction costs of negotiating over terms of access to proprietary research tools, slowing their dissemination and delaying research. More generally, reach-through royalties impose a cost on product development, diluting incentives of downstream innovators to reward upstream innovators who may have no continuing involvement in the project. Such an allocation might undermotivate downstream research and development. Patent Misuse Some users of research tools have argued that the use of reach-through provisions in licenses should be impermissible under the common law doctrine of “patent misuse,”76 but so far the courts remain unpersuaded. In Bayer AG v. Housey Pharmaceuticals, Inc.,77 a pharmaceutical firm argued that the owner of patents on screening methods to identify potential pharmaceutical products was misusing its patents by licensing them on terms that required the payment of reach-through royalties on future products that were not themselves covered by the patent claims but that were identified through use of the patented screening methods. The district court concluded that, although it would be patent misuse for a patentee to “condition” a license upon the payment of royalties on unpatented products and activities,78 reach-through royalty terms are nonetheless permissible for the mutual convenience of the parties, when the evidence indicates that the patent holder was willing to consider other payment options. Judicial deference to agreed license terms generally makes good sense. If the 75 For example, some tool providers may request an option to take an exclusive license to future discoveries made by the user. A researcher who uses more than one proprietary tool may only promise such an option once, and may have already provided such an option to a research sponsor. Even a precommitment to extend a nonexclusive license to use future discoveries would conflict with an obligation to extend an exclusive license to use the same discoveries. 76 “Patent misuse” means improper exploitation of a patent, e.g., by violating the antitrust laws or by extending the patent beyond its lawful scope. If misuse is found, the patent may not be enforced until the misuse has been purged by abandoning the abusive practice and dissipating any harmful consequences. 6 Chisum on Patents § 19.04 (2000 and Supp. 2003). 77 228 F. Supp. 2d 467 (2002). 78 Bayer AG v. Housey Pharmaceuticals, Inc., 169 F. Supp. 328 (2001) (denying patent holder’s motion to dismiss claim of patent misuse on the pleadings).
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health biomedical research community finds it difficult to arrive at mutually agreeable terms of exchange for research tools, the courts should not aggravate the problem by foreclosing options that might help the parties strike a deal. Reach-through provisions could help the bargaining parties resolve disputes about valuation and enable resource-poor institutions to gain access to unaffordable research tools by financing the license through deferred payments that come due if and only if the research yields a successful product. Experimental Use Exemption Despite patent law’s requirements that the patentee disclose the knowledge underlying an invention and the way in which it is made and utilized, biological information may be used effectively only when researchers can examine, and experiment on, the products and processes subject to the patent. Many scientists believe that their use of patented inventions as the subject of research does not (or at least should not) subject them to infringement liability. The U.S. Patent Act has no general statutory exemptions for noncommercial, experimental, or research uses of an invention, apart from a provision added as part of the Hatch-Waxman Act of 1984 to permit the use of a patented invention “solely for uses reasonably related to the development and submission of information under the Federal law which regulates the manufacture, use, or sale of drugs….”79 Many other nations provide somewhat broader exemptions. The European Commission’s proposed Council Regulation on the Community Patent excludes from the effects of a community patent “acts done privately and for non-commercial purposes” and “acts done for experimental purposes relating to the subject-matter of the patented invention.”80 The national patent laws of many European Union member states contain similar provisions, as does Japanese law.81 In a line of cases going back to the 1813 opinion of Justice Story in Whittemore v. Cutter,82 the U.S. courts have recognized an “experimental use” defense to patent infringement as a theoretical matter, but they have generally declined to apply the defense to the facts of the cases before them.83 Justice Story 79 35 U.S. Code § 271(e)(1). 80 Commission of the European Communities, Proposal for a Council Regulation on the Community Patent, Art. 9 (Aug. 1, 2000), Official Journal of the European Communities C 337 E/278-90 (Nov. 28, 2000), available at http://www.mdjuris.com/itlaw/ce3372000en.pdf (visited Dec. 19, 2002). 81 For a thoughtful critique of U.S. law and comparison to the laws of other nations on this point, see J. Mueller, “No ‘Dilettante Affair’: Rethinking the Experimental Use Exception to Patent Infringement for Biomedical Research Tools” Wash. L. Rev. 76:1-66 (2001). 82 29 F. Cases 1120 (D. Mass. 1813). 83 See, e.g., United States Mitis Co. v. Carnegie Steel Co., 89 F. 343 351 (C.C.W.D. Pa. 1898) (noting that defendant’s use of patented invention “was a commercial use, extending over a period of
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health argued that “it could never have been the intention of the legislature to punish a man, who constructed a [patented] machine merely for philosophical experiments, or for the purpose of ascertaining the sufficiency of the machine to produce its described effects.”84 But although subsequent courts have consistently acknowledged that the defense might be available in an appropriate case, only one case, Ruth v. Stearns-Roger Manufacturing Co.,85 has generated a published opinion squarely holding that use of a patented invention in a university laboratory qualifies for the defense. The Federal Circuit has been signaling its discomfort with the experimental use defense for over 20 years. In its first encounter with the defense in the 1984 case of Roche v. Bolar,86 the Federal Circuit rejected the argument of a generic drug manufacturer that the defense applied to its use of a patented drug to conduct clinical trials during the patent term. The court characterized the defense as “truly narrow” and refused to extend it to a use that was “no dilettante affair such as Justice Story envisioned” but rather had “definite, cognizable, and not insubstantial commercial purposes.” Shortly thereafter, Congress amended the patent statute as part of the Hatch-Waxman Act87 to provide a defense from infringement liability for the use of a patented invention “solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs….”88 In Madey v. Duke University,89 the Federal Circuit rejected the common law experimental use defense as applied to academic research, declaring the noncommercial character of the research irrelevant to its analysis of the case. What matters to the Federal Circuit is whether the research “is in keeping with the alleged infringer’s legitimate business, regardless of commercial implications.” In the case of a major research university, noncommercial research projects “unmistakably further the institution’s legitimate business objectives, including educating and enlightening students and faculty participating in these projects.” Activities several months, and involved a very large product”); Bonsack Machine Co. v. Underwood, 73 F. 206, 211 (C.C.E.D.N.C. 1896) (noting that machine “has not been made simply as an experiment, but has been used for profit, that is, for the purpose of selling the [defendant’s] patent”); Albright v. Celluloid Harness-Trimming Co., 1 F.cas. 320, 323 (1877)(No. 147) (holding use of patented invention in trial manufacture “is a technical infringement, and is sufficient to authorize an injunction restraining … future use” but not sufficient for award of damages); Poppenhusen v. Falke, 19 F. Cas. 1048, 1049 (C.C.S.D.N.Y. 1861)(No. 11,279) (noting that defendants “are rivals of the complainant in the very business to which his patents relate”). 84 29 F. Cas. at 1121. 85 13 F. Supp. 697 (D. Colo. 1935). 86 733 F.2d 858 (Fed. Cir. 1984). 87 35 U.S.C. § 271(e). 88 This defense is codified at 35 U.S.C. §271(e)(1). 89 307 F.3d 1351 (Oct. 3, 2002).
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health that further these “business objectives,” including research projects that “increase the status of the institution and lure lucrative research grants, students and faculty,” are ipso facto ineligible for the experimental use defense. In contrast to the restrictive position of the Federal Circuit toward the scope of the common law research exemption, the recent decision of the U.S. Supreme Court in Integra v. Merck90 took an expansive approach toward the scope of the Hatch-Waxman statutory research exemption. The alleged infringement in that case involved the use of patented peptides to assess their potential therapeutic efficacy in the inhibition of angiogenesis in the course of a collaboration between scientists at the Scripps Research Institute and Merck KGaA. Although Merck KGaA had originally raised both the common law experimental use defense and the Hatch-Waxman statutory exemption in the district court, after the Madey decision came down it decided to focus its appeal exclusively on the statutory exemption, arguing that its use of the peptides was reasonably related to the development of information for submission to FDA. On appeal, the Federal Circuit panel majority held that the statutory exemption did not extend to the sort of preclinical research at issue in that case. The majority opinion addressed the common law experimental use exemption only in a footnote, noting that the common law exemption was not before the court, although questioning whether the exemption would be available even if the issue had been properly raised.91 In a dissenting opinion, however, Judge Newman argued that the Scripps/Merck activities should have qualified either for the common law exemption or the statutory exemption. The Supreme Court granted review to consider the scope of the statutory exemption and reversed the Federal Circuit by a unanimous vote.92 Noting that “the statutory text makes clear that it provides a wide berth for the use of patented drugs in activities related to the federal regulatory process,” the court rejected the argument that the statutory exemption covers only clinical trials and not preclinical research.93 On the other hand, the court recognized some limits to the scope of the exemption, noting that “[b]asic scientific research on a particular compound, performed without the intent to develop a particular drug or a reasonable belief that the compound will cause the sort of physiological effect the research 90 331 F.3d 860 (Fed. Cir. 2003), cert. granted, 160 L. Ed. 2d 609 (2005). 91 Id. at note 2 (“[T]he common law experimental use exception is not before the court in the instant case…. [T]he Patent Act does not include the word ‘experimental,’ let alone an experimental use exemption from infringement…. [T]he judge-made doctrine is rooted in the notions of de minimis infringement better addressed by limited damages.”) 92 Merck KGaA v. Integra Lifesciences, 2005 U.S. Lexis 4840 (2005), bench opinion available at http://a257.g.akamaitech.net/7/257/2422/13jun20051230/www.supremecourtus.gov/opinions/04pdf/03-1237.pdf (visited June 14, 2005). 93 Id. at 8-9.
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health intends to induce, is surely not ‘reasonably related to the development and submission of information’ to the FDA.”94 Although some amicus curiae briefs urged the court to consider the common law exemption as well as the statutory exemption, 95 it did not do so. The court’s decision thus broadens the scope of the statutory exemption to cover some preclinical research activities in the course of drug development, without offering any relief from infringement liability for basic research at an earlier stage before drug development and FDA submissions are dominating the course of research and development. On the other hand, the Court’s opinion made clear that even failed attempts at development may be considered part of the efforts to generate research data for FDA submission.96 Some observers believe that Merck v. Integra leaves open a number of important questions. First, it states that “[b]asic scientific research on a particular compound, performed without the intent to develop a particular drug or a reasonable belief that the compound will cause the sort of physiological effect the researcher intends to induce, is surely not ‘reasonably related to the development and submission of information’ to the FDA.”97 It provides no guidance, however, on how to implement the line drawing envisioned. Second, because the court refers to patented compounds, and not to patented inventions, it raises questions about whether patented processes or other patented inventions that are used in the course of drug development but are not the intended subject of an FDA submission should be treated in the same way. This ambiguity is intensified by the court’s statement that it “need not—and do[es] not—express a view about whether, or to what extent, [the statutory exemption] exempts from infringement the use of ‘research tools’ in the development of information for the regulatory process.”98 Finally, there is comparable precedent in federal statute. The 1996 Ganske-Frist amendment to the infringement statute of U.S. patent law (35 USC § 287) exempts from infringement liability medical practitioners who perform patented medical or surgical procedures that do not employ a patented device or process, so long as the procedure is carried out in association with a health care entity such as a medical clinic, university, or hospital. Currently, the amendment specifically excludes biotechnology patents or any patent tied to molecular biological methods and life science. 94 Id. at 12. 95 See, e.g., Amicus Brief of the Bar Association of the District of Columbia, Brief of the Consumer Project and the EFF as Amicus Curiae in Support of Merck KGaA. These and other briefs in the case are posted on the Internet at http://patentlaw.typepad.com/patent/2005/02/merck_kgaa_stat.html (visited May 9, 2005). 96 2005 U.S. Lexis at 13-14. 97 Merck KGaA v. Integra Lifesciences. 125 S.Ct. 2372, 2382 (2005). 98 Id. at 2382, note 7.
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health Compulsory Licensing The United States has consistently taken the position that there should be no general provision for the compulsory licensing of patents.99 However, lawmakers in other countries think differently. Several nations provide by law for a compulsory license in the event that the patentee refuses to engage in the activities required to fully disseminate the invention. For example, in the United Kingdom, the state is permitted to compel licensing if a patented invention is not commercialized “to the fullest extent that is reasonably practical” for three years.100 German patent law provides for a compulsory license if the patentee is not willing to grant a license to someone who offers “reasonable compensation.”101 Although there has been little litigation under this provision in recent years, German practitioners claim it has a significant in terrorem effect on patentees. Other examples include the Competition Act, § 32 (Canada); the Patent Law 1999, § 93 (Japan); and the Patents Act 1990 (Cth), §§ 133, 163-167 (Australia). Even in the United States, patents are sometimes subject to government control. Royalty-free licenses are used occasionally as a remedy in anti-trust litigation.102 Compulsory licenses have been created by statute when important national interests are at stake.103 Furthermore, the federal government and its contractors can use inventions without authorization, but subject to the payment of just compensation.104 The federal government also enjoys so-called march-in rights to inventions created with government funding. When the rights holder fails to take steps to commercialize such an invention within a reasonable time, the federal agency that provided funding may step in and grant licenses to parties that are willing to bring the invention into public use.105 Accordingly, even the general sentiment against compulsory licensing should be understood as giving way when important public interests are at stake. The Agreement on Trade-Related Aspects of Intellectual Property Rights also permits compulsory licensing in response to particular problems. It permits members to use compulsory licenses to control anti-competitive practices.106 Furthermore, it allows members to permit unauthorized uses when specified con- 99 See, e.g., Dawson Chemical v. Rohm & Haas, 448 U.S. 176 (1980) (noting “the long-settled view that the essence of a patent grant is the right to exclude others from profiting by the patented invention” and that “[c]ompulsory licensing is a rarity in our patent system”.) 100 Patents Act, 1977, c. 37 § 48. 101 German Patent Act § 24 (Law of December 16, 1980, as amended Dec. 9, 1986). 102 See, for example, United States v. General Electric Co.115 F.Supp. 835 (D.N.J.1953). See also Charles Pfizer & Co. v. Federal Trade Comm’n, 401 F.2d 574 (6th Cir.1968) (requiring licensing at a reasonable royalty), cert. denied, 394 U.S. 920, 89 S.Ct. 1195, 22 L.Ed.2d 453 (1969). 103 See, e.g., the Clean Air Act, codified at 42 U.S.C. §7608. 104 28 U.S.C. 1498. 105 35 U.S.C. § 203. 106 TRIPS Agreement, art. 40.
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health ditions are met.107 Each case must be considered on its individual merits; use must be limited in time and manner to the purposes authorized; any license granted must be on a nonexclusive and nonassignable basis, use generally must be limited to local needs; and the rights holder must be paid adequate remuneration. Except in national emergencies, the rights holder must be given the opportunity to license on its own and, in every case, the rights holder must be notified as soon as is reasonably practical. Patent Pooling A patent pool is an agreement between two or more patent owners to license one or more of their patents to one another or to third parties.108 In general, pool members assign or exclusively license their intellectual property to a separately administered entity, which then controls the licensing of the patent portfolio back to the members and, if the pool is “open,” to third parties as well. Members might be entitled to use the bundle of intellectual property on a royalty-free basis, or they might have to pay. In addition, licensing revenue generated by the pool can be divided in several different ways, and management of the pool might involve diverse voting structures or veto rights. Patent pools remove intellectual property barriers to the exploration of technology, promote the integration of complementary technologies, and reduce the transaction costs of obtaining multiple licenses. They also are viewed sometimes as a cheaper and faster way to resolve some disputes than litigation would be (Clark et al., 2000; OECD, 2005). Patent pools have been identified as another possible solution to any eventual biotechnological anti-commons. The potential role of patent pools in the biotechnology industry has received considerable attention in the literature. Some analysts have argued that in view of possible royalty stacking, anti-commons, and other situations in which existing patent rights could become impediments to further research and development, patent pools have significant benefits and therefore should be encouraged. For example, a 2000 white paper issued by USPTO promoted their use, stating: The use of patent pools in the biotechnology field could serve the interests of both the public and private industry, a win-win situation. The public would be served by having ready access with streamlined licensing conditions to a greater amount of proprietary subject matter. Patent holders would be served by greater access to licenses of proprietary subject matter of other patent holders, the generation of affordable pre-packaged patent “stacks” that could be easily licensed, and an additional revenue source for inventions that might not otherwise be developed. The end result is that patent pools, especially in the bio- 107 TRIPS Agreement, art. 31. 108 See Klein, supra at www.usdoj.gov/atr/public/speeches/1123.html.
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health technology area, can provide for greater innovation, parallel research and development, removal of patent bottlenecks, and faster product development. (USPTO, 2000, p. 11) Patent pools, like most licensing arrangements, usually are beneficial to competition. They may, however, occasionally reduce or eliminate it. Nevertheless, patent pools are uncommon in the biotechnology industry so far (OECD, 2005). Concerns exist about whether patent pools could solve problems in markets for genetic inventions. For example, a recent Organisation for Economic Co-operation and Development survey of biotechnology and pharmaceutical companies, genetic testing centers, and public research organizations found that respondents did not consider patent pools or cross-licensing agreements to be helpful in increasing access to genetic inventions (OECD, 2002). Respondents cited the difficulty of measuring the value of the contributions that each party would bring to the arrangement. Even though the utility of patent pools for the biotechnology industry is arguable, it generally is accepted that patent pools may benefit both patent owners and consumers, provided the pool is limited to complementary and/or blocking patents. Under these conditions, patent pools may facilitate the integration of complementary technologies, reduce transaction costs, facilitate the clearing of blocking patent positions, and avoid infringement litigation (Bratic et al., 2005; OECD, 2005). Some features particular to the biopharmaceutical industry may create disincentives to patent pooling. Patent pools are more common in industries that use patents defensively, whereas in the biopharmaceutical industry patents tend to be used offensively. Patent holders who enter a pool risk losing the more significant revenue they might receive if they exclusively licensed their patents. Biotechnology companies generally prioritize the accumulation of patents, which makes them attractive for buy-out, while large pharmaceutical companies have tended to buy the intellectual property and/or small companies they need. However, large companies no longer have the capital to continue buying whatever intellectual property they need, which may create an incentive for more patent pooling. There also may be an incentive for pooling when the complexity of intellectual property requires a pool for research to progress; one example is the international patent pool for SARS. In order to avoid antitrust liability, all patents in the pool must be essential for the particular aim. A pool that is enabling is probably justified—the existence of multiple licenses to the pool creates a safe harbor—while a pool that restricts output or use is more problematic. There also is cause for concern if the pool revolves around price setting or standard setting, although this concern is often addressed by the federal antitrust agencies’ exercising oversight of a pool’s operation.
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Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health CONCLUSIONS Although the same patent laws apply to all fields of technology, new technologies inevitably present USPTO and the courts with new problems in the interpretation and application of old standards to determine such issues as patent eligibility, utility, novelty, nonobviousness, and adequacy of disclosure. Because the resolution of legal disputes takes time, a lag between the emergence of new technologies and the resolution of disputed issues of patent law that the new technologies raise will occur. Most of the existing legal precedents involving genomic patents address technology that is at least a decade old. Important issues concerning the patentability of ESTs—a technology from the early 1990s—are only now being addressed by the Federal Circuit. Meanwhile, USPTO and the scientific community have had notable success in working together to determine how best to apply the standards of patent law to new types of discoveries in genomics, providing a model for addressing emerging patent law questions in proteomics and structural genomics in a more timely fashion.
Representative terms from entire chapter: