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Managing Global Genetic Resources: Agricultural Crop Issues and Policies (1993)

Chapter: 12. Exchange of Genetic Resources: Proprietary Rights

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Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
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12
Exchange of Genetic Resources: Proprietary Rights

Plant variety protection has been an intense source of controversy in the debates surrounding the free international flow of germplasm. Other forms of proprietary rights have become equally controversial as plants and animals, as well as individual genes, are given protection under the regular patent system.

Studies of proprietary rights in agriculture, primarily of plant variety protection, have found that such rights bring somewhat increased private breeding activity but have not found significant effects on the genetic diversity of the varieties that are marketed (Butler and Marion, 1985; Council for Agricultural Science and Technology, 1985; Lesser, 1987; Mooney, 1983; Perrin et al., 1983). Nevertheless, there has been international political concern over the growth of proprietary rights in the biological area and particularly over the possibility that such rights benefit the developed world at the expense of the developing world.

One argument that is commonly made is that the developing world should or will respond to the growth of biological proprietary rights by restricting access to its genetic resources. Although the committee is unable to make the political judgments necessary to evaluate the likelihood that the governments of developing nations will adopt such a policy, it notes that, for the most part, this has happened only with industrial crops. Moreover, the actual flow of new germplasm from developing nations to the developed world is probably now quite limited; the major current flows are probably of advanced material in the opposite direction.

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
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The committee attempted to evaluate the underlying concern: what will be the actual effect of proprietary rights on the international flow of genetic resources, the practical terms of exchange, and particularly on the access of developing nations to genetic material? These affect all nations' access to germplasm resources and may also influence the willingness of developing nations to permit scientific access to their own genetic resources. The committee did not consider the issue of whether developing countries should strengthen their own intellectual property systems, either to encourage domestic innovation or to facilitate or limit the licensing of technology and genes from abroad.

In evaluating the effect of property rights on the exchange of genetic resources, the committee reviewed the growth of proprietary rights legislation and use, explored the actual barriers to exchange that have arisen or may arise for several species of importance to developing countries, examined several alternatives currently under discussion, and developed relevant recommendations.

PROPRIETARY RIGHTS ON LIVING BEINGS

Proprietary protection—whether patent, copyright, trade secrets, or other legal instrument—is a legal right conferred on the inventor or creator of a particular concept or thing. The legal right is that of excluding or restricting others from using the concept or thing, except in certain conditions or with the permission of the inventor. Such permission is usually given in return for a royalty or the equivalent of a royalty included in the price of a product. This special monopoly return, typically for 17 to 20 years, is designed to provide a reward for the innovation and to induce investment in such innovation (Bent, 1987; Office of Technology Assessment, 1989).

In most nations and for many forms of intellectual property, there is an obligation to disclose the innovation in return for obtaining this monopoly right. This concept of disclosure—with its implication that the patent be a building block to further knowledge—is generally taken quite seriously by the courts. Moreover, it is recognized that patent protection sometimes provides a socially beneficial alternative to other methods of proprietary protection that provide less public disclosure. Thus, patents sometimes provide an alternative to trade secret protection in which data are held confidentially within a firm, as exemplified by the use of hybrids in which parental lines are strictly controlled.

For the forms of intellectual property protection considered in this chapter, the monopoly conferred by national statutes is usually

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

effective only within the nation involved. If an invention is patented in the United States but not Canada, it is not a violation of U.S. or Canadian law to practice the invention in Canada, although U.S. law typically restricts import from Canada of the product or of products made through a patented process. There is a network of international conventions covering intellectual property; for those forms of intellectual property considered here, the conventions protect the right of nationals of one signatory to obtain protection in other participating nations, and some also establish minimum standards for the level and form of protection to be accorded by each participating nation.

Developed nations are strongly pressing for a new international intellectual property code beginning with the Uruguay Round of international trade negotiations (General Agreement on Tariffs and Trade). Under the drafts likely to be accepted if the Uruguay Round succeeds, nations will commit themselves to "provide for the protection of plant varieties either by patents or by an effective sui generis system." Most developing nations will have 10 years (and the least developed-countries even longer) before they must comply with this obligation. In the meantime, the obligation is to be reviewed ([Draft] Agreement on Trade-Related Aspects of Intellectual Property Rights, including Trade in Counterfeit Goods, MTN.TNC/W/FA, Articles 27, 65 and 66). Moreover, technology transfer is to be facilitated under the new Rio Convention on Biological Diversity on terms "which recognize and are consistent with the adequate and effective protection of intellectual property rights" (see Chapter 14).

Plants

A form of protection for vegetatively propagated plants has long been granted in the United States as a plant patent under the Plant Patent Act of 1930 (codified at 35 U.S. Code [U.S.C.] Sections 161–164). Such a patent conveys rights similar to those of any other patent and particularly that of prohibiting others from reproducing the plant asexually, but it could still be used for breeding. In 1970, similar legislation was adopted for sexually propagated plants, the Plant Variety Protection Act (codified at 7 U.S.C. Sections 2321–2583). A certificate under this act, which is the United States version of plant variety protection, conveys the right to keep others from selling the seed of the plant for seed purposes or for use in producing a hybrid (7 U.S.C. Section 2514). It does not, however, convey the right to keep others from using or making limited sale of the seed or plant for breeding purposes, nor does it prohibit a farmer from using, or

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

This improved variety of Mexican wheat is proving to be very successful for its yield and quality. Credit: Food and Agriculture Organization of the United Nations.

making limited sales of, seed from his or her own crops for seed purposes in following years.

Although few other nations distinguish vegetatively propagated and sexually propagated varieties in the way that the United States does, most developed nations and a very few developing nations have adopted bodies of law providing such protection for plants (Barton, 1982; Berland and Lewontin, 1986; Commission on Plant Genetic Resources, 1986; Mooney, 1983). Several developing nations are considering adopting such systems (Commission on Plant Genetic Resources, 1986). These laws generally meet the standards of the International Convention for the Protection of New Varieties of Plants (Union for the Protection of New Varieties, generally referred to as UPOV, December 2, 1961, as revised on November 10, 1972, October 23, 1978, and March 19, 1991). These standards are generally similar to those of the United States, but they vary in detail. For example, some cover both vegetatively and sexually propagated plants, and some

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

provide for national authorities to test the variety to determine that it is actually new and has value for cultivation and use. (Under separate seed catalogue legislation, many nations also permit only tested and approved varieties to be distributed to farmers.)

In an extremely important decision in 1985, the U.S. Patent Office Board of Appeals indicated in Ex parte [on the application of] Hibberd (227 USPQ 443 (1985)) that plants might also be protected under the regular patent law, in contrast to the special plant variety protection legislation (Byrne, 1986). A regular patent conveys somewhat broader rights than plant variety protection does; it might not recognize, for example, the farmer's exemption, under which a farmer can use one year's harvest as the next year's seeds without infringing a plant breeding rights certificate. Recent changes to the UPOV convention will allow nations to eliminate the farmers' exemption. It is possible that the member nations of the European Community will permit regular patents on various forms of plants (European Commission, 1989). Certain exemptions on protecting plant varieties, as opposed to plants incorporating particular genes or traits, may be included. They are modeled on provisions of the UPOV convention, which allows nations to use both regular patents and PVP rights for the same genus or species. Canada, however, has previously rejected the application of regular patents to plants in Pioneer Hi-Bred Ltd. v. Commissioner of Patents (11 C.I.P.R. 165 [Fed. Ct., 1987]) for a soybean variety produced through cross-breeding. The decision was sustained on appeal to the Supreme Court of Canada ([1989] 1 Sup. Ct. Rev. 1623).

In those few nations that use regular patents for plants or plant components, the exact scope of the patent holder's rights is still unclear and will probably depend on the particular claims included in the patent. Thus, a patent on a gene will probably be held to cover all plants that contain the gene. Whether a patent on a plant or a seed (as opposed to a particular gene) will reach crosses containing only a portion of the genetic material from the patented variety depends on the precise claims of the invention. It is also unclear whether a patent on the seed or the plant will be held to convey the right to keep a farmer from reusing seed, a right which the plant variety protection certificate holder does not currently have, although nations will be able to grant that right under the new UPOV convention. The European proposal would grant this right (although the right would be extremely difficult to enforce, and a patent holder would probably often choose to pass on the right to farmers and to price the seed accordingly).

As noted above, a patent conveys no rights beyond national boundaries. A nation's patent system can reach foreign products only if

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

these products are imported. Many nations maintain protection against the import of products that would have infringed a patent had they been made in the importing nation. In many cases, these rights even permit the exclusion of products manufactured legitimately under foreign license.

Finally, it should be noted that trademarks or certified seed systems can often provide an effective equivalent of proprietary protection. A particular trade name may obtain such recognition by farmers that its protection is equivalent to protection of a variety. If the right to sell certified seed under a particular name is restricted to specific firms, that right becomes a basis on which competitors can effectively be excluded from selling the same variety.

Animals

By logic parallel to that of Ex parte Hibberd and its well-publicized predecessor,Diamond [The Commissioner of Patents and Trademarks] v. Chakrabarty (447 U.S. 303 (1980)), the U.S. Board of Patent Appeals has also decided that animals may be patented (Ex parte Allen, 2 U.S.P.Q.2d 1425 (1987)). This particular case involved a claim for polyploid oysters produced through a hydrostatic process. Although the possibility of patentings such animals was upheld, the claim for these particular oysters was rejected because of the existence of previous chemical processes of inducing polyploidy in oysters. The hydrostatic process was patentable under traditional principles. This decision has become extremely controversial and the subject of congressional hearings; its overruling by legislative action is not at all inconceivable. A bill to exempt farmers from patent infringement suits for breeding of patented animals passed the House in 1988 (HR 4970) but did not reach the Senate floor.

Hungary, the Commonwealth of Independent States (under an inventor's certificate), and Germany, are the only other nations known to allow patents on animals (Byrne, 1985; World Intellectual Property Organization, Committee of Experts on Biotechnological Inventions on Industrial Property, 1987; Rote Taube, 1991). At the regional level, under the European Patent Convention, as determined by a 1990 appellate decision with respect to the Harvard mouse, animals are also patentable.

Microbes

Many nations have routinely permitted process patents, that is, patents on the process of using a particular microbe to produce a

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

specific chemical. Even nations that prohibit the patenting of pharmaceuticals often permit the issuance of process patents on specific microbial processes of producing pharmaceuticals (World Intellectual Property Organization, Committee of Experts on Biotechnological Inventions on Industrial Process, 1987). Canada, however, is probably not one of these countries, at least this is the implication of the Pioneer Hi-Bred Ltd. case discussed above, which criticized an earlier case, Re Abitibi Co. (62 C.P.R.(2d.) 81 (1982)), that supported the patenting of microorganisms.

The United States, along with some other nations, has gone further and now permits patenting of the microbe itself. This is the basic holding of Diamond v. Chakrabarty (see above). The microbe must, however, be novel. This novelty requirement is likely to be satisfied if the microbe is genetically modified. It is a matter of debate whether the requirement is satisfied by the isolation of a strain found in nature. In such a case, virtually any microbe isolated from nature could be patented. The older leading case, In re Mancy (499 F.2d 1289 (CCPA 1974)), presumed that isolation was not enough. However, the same court ruled to the contrary later in In re Berger (563 F.2d 1031 (CCPA 1977)). This lower-court proceeding ultimately became Diamond v. Chakrabarty on appeal; the issue of the adequacy of isolation was abandoned before the case reached the U.S. Supreme Court.

For the patent disclosure to enable others to practice the invention and build on it for research purposes, the United States and a number of other nations require that a sample of the claimed microorganism typically be placed in a depository so that it can be stored and be made available for use by other researchers (In re Lundak, 773 F.2d 1216 (CAFC 1985); Feldman v. Aunstrup 517 F.2d 1351 (CCPA 1975); In re Argoudelis 434 F.2d 1390 (CCPA 1970); Rabies Virus (FRG Fed. Sup. Ct, 1987), 18 I.I.C. 396 (1987); Deposit of Biological Materials, 37 CFR Ch. 1, Subpart G, Section 1.801-1.809). Great Britain imposes a similar requirement (Patent Rules 1990, Schedule 2 (S.I. 1990 No. 2384), 29 November 1990) (American Cyanamid Co. (Dann's Patent) 1971 RPC 425 (H of L, 1970)); see also Cadman [1985]). There is also an international convention governing such depositories (Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Protection, April 28, 1977; 32 U.S.T. 1241, T.I.A.S. No. 9768).

The United States pattern requires essentially free access; thus, there is nothing to keep a competitor from obtaining material deposited by U.S. patent holders and then using it in nations that do not provide patent protection. Japan and Europe, however, generally

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

permit patent holders to require that anyone obtaining the material agree to use it for experimental purposes only and not to provide it to third parties. Industry and many patent experts are urging the global adoption of such stronger restrictions upon access to materials in depositories (Beier et al., 1985; World Intellectual Property Organization, Committee of Experts on Biotechnological Inventions on Industrial Property, 1987).

Related Rights

Of perhaps equally great importance is the growing body of patent right available on specific biological molecules, materials, or processes. Although it is probably too early to attempt a complete list, there are patents on at least the following types of biological entities and processes:

  • Specific genes. The patent office is regularly issuing patents for specific genes. What are actually claimed in a gene patent are typically the isolated gene sequences, novel plasmids incorporating the sequence, and plants transformed through such a plasmid; hence such a patent reaches the use of the gene for genetic engineering but leaves breeders free to work with the gene in its natural context (that is as it occurs naturally in a plant).

  • Traits. In at least one case (Ex parte Hibberd, 227 U.S.P.Q.443), the U.S. Patent Office has issued a patent for any plant (of a range of species) that is claimed to contain a novel trait like that produced through the technology described in the patent.

  • Specific processes. A number of processes of genetic engineering and tissue culture have been patented. There is the possibility of controversy as to how far protection extends to remote products of these processes.

  • Diagnostic probes. A variety of diagnostic tools are patented. It should be noted that the basic monoclonal antibody concept has not been patented, although a sandwich assay process for making antibody reactions into practical diagnostic tools has been patented (Hybritech, Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367 (Fed Cir. 1986)).

There are also questions over the rights of people who contribute material (for example, one of the person's own human cell lines) that is used in a commercial application(see Office of Technology Assessment, 1987b). The properly right concept was rejected by the California Supreme Court (Moore v. Regents of the University of the University of California, 57 Cal. 3d 120 (1990)). Proposal for the copyrighting

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

(as opposed to patenting) of specific gene sequences (Roberts, 1987) continue to be made, although they have not gained much support.

PLAUSIBLE IMPACTS OF PROPRIETARY RIGHTS ON THE TERMS OF INTERNATIONAL GERMPLASM EXCHANGE

Several possible effects of the growth of proprietary rights (and, more broadly, of the increased commercialization of biology) can be identified. These include price effects, decreased willingness of private and public entities to transfer genetic materials, and increased privatization of research activity.

Price Issues

Privately developed patented material is generally more expensive that publicly developed unpatented material. This may sometimes be a problem; in particular, the difficulty of paying the price may leave farmers in developing nations less well able to compete on world markets. It should be remembered, however, that the patent holder's ability to raise the price is limited by the existence of competition. Private or public competitors offering equivalent products can keep the price down. Moreover, even if the new material costs more than the previously used material did, the incremental cost must be less than the incremental benefit to the farmer; otherwise, the new material will not be bought. At least in the short term, then new developments in the developed world are unlikely to hurt the access of farmers in the developing world to genetic material because old material is also available. As new material becomes essential to meet new pathogens, however, the terms of access to the material becomes critical, and farmers in the developing world might be hurt by the evolution of the world plant breeding structure.

Issues of Increased Control of Germplasm

In both the public and the private sectors, the increased value of germplasm (a value that derives from the underlying commercial opportunities in plant breeding and biotechnology) is leading to hesitation in sharing this material. The patent system plays a mixed role in this hesitation. Under most nations' laws, it is impossible to obtain a patent if a description of the invention was published before the patent application; circulation of the material to be patented is thus risky and is generally avoided until after patent applications are filed. (The United States permits publication up to 1 year before filing, but business

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

practice normally reflects the need to obtain patent coverage abroad as well as in the United States.) Thus, the initial impact is to slow the circulation of material, as well as publication. The long-term impact, however, is to permit both publication and circulation. Once the material is patented, it can be exchanged without affecting commercial rights or it could be used for a fee. In the absence of a patent system, it might well be protected through secrecy instead. Examples of trade secrets are found in the hybrid corn (maize) and hybrid poultry industry where companies control the breeding stock and sell only the hybrids.

This effect operates in the public sector as well as in the private sector. For many plant species, advanced traditional breeding is conducted primarily in the public sector, for example, in land-grant universities in the United States, in research universities and publicly funded research centers in other developed nations, in a variety of international research institutions, such as those operated by the Consultative Group on International Agricultural Research (CGIAR),and in the more advanced universities and public research institutions in developed nations. Although these institutions sometimes obtain legal protection for their working materials and research products, they have, at least until recently, generally made such materials and products freely available throughout the world.

This flexibility is changing, however, and public sector institutions are becoming less free with their innovations and materials (Johnson, 1987; National Institutes of Health, 1984). More and more, the public sector has been using confidentiality or patents as a way of supporting its own research or as a defensive step to respond to fears that ideas or material (including specific cell lines) will be patented or misappropriated by others. Restrictive distribution agreements are becoming very common, as universities require recipients of genetic materials to certify that the materials will be used to noncommercial purposes only. More and more, public entities are entering informal or formal affiliations under which information goes preferentially to small firms that are being spun off from public institutions or to large firms that provide support. Moreover, as genes become patentable under the regular patent laws, institutions have been known to restrict their distribution of improved materials out of fear of patent infringement.

In at least one case, that of the People's Republic of China, international access to germplasm has been limited since the nation gave rights to particular materials to specific international firms. There have also, it should be noted, long been specific governmental rules restricting the export of certain specialized and industrial breeding materials,

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

for example, pepper from India, oil palm from Malaysia, coffee from Ethiopia, and tea from Sri Lanka. These restrictions are in addition to practical restrictions deriving from inadequate funds or staffing for the supply of materials, and the practical restrictions are frequently more important than the formal legal restrictions. (It should also be noted that the practical scientific network frequently ignores all restrictions, except perhaps for those that serve guaratine purposes.)

The impact of patenting on the research use of material also deserves attention. Part of the idea of the patent system is to place information about patented technologies in the public sector so as to provide a baseline for further technological advance. This is the reason for publication and for depositories. It also implies a right to use patented materials without permission for certain research purposes; this right is explicit in many nations' patent laws but is only judicially mentioned in U.S. law. The exact scope of the right is unclear, however; under some U.S. statements of the law, academic experimentation is permissible, but experimentation by a profit-making institution might not be (for example, Pfizer Inc. v. Int'l Rectifier Corp., 217 U.S.P.Q. 157 (CD Cal, 1982)).

While plant variety protection permitted the use of a protected variety as breeding material for further varieties, the regular patent system is less likely to permit such use. Thus, a patent on a gene is likely to cover a variety of uses of the gene and, particularly, to cover varieties that are derived from patented materials and still contain the patented gene. This increases the patent holder's rights. Legal control, however, is limited to those nations in which the genes are patented; it is also limited by the fact that naturally occurring genes are unlikely to be patentable unless they are moved outside their normal host range.

Issues of Allocation of Research Between Public and Private Sectors and Developed and Developing Nations

The growth of new biotechnology firms, fostered in part by proprietary rights, is one of a number of factors that has led to a general transfer of human and financial resources to the private sector. Although some private sector firms are likely to participate quite fully in the international scientific material exchange network, some are not. Few firms are willing to supply their near-commercial materials, at least until they have obtained proprietary rights protection for those materials. Thus, privatization itself slows exchange to some extent (but proprietary rights permit some exchange that would not occur if the only protection available were secrecy).

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

There are also questions of the allocation of research capability between the developing and the developed world, which, so far, is unclear. This may be an industry in which the combination of high labor costs and (relatively) low research facility costs give the nations of the developing world a major opportunity. Conceivably, however, the opposite will prove to be true, and there will be a concentration of research in multinational corporations in the developed world with less opportunity for developing nations to enter the economically successful biotechnology sector. If the latter proves to be true, proprietary rights may make it harder for firms in developing nations to obtain access to markets in the developed world—and thus give these firms less opportunity to expand and to conduct further research.

SELECTED SPECIES

To examine the relative strengths of various possible effects of the patent system, it is useful to consider species for which the actual economic situation can be examined. The examples given in this section were chosen to provide a range in propagation form (hybrid, seed, vegetative, and animal) and economic focus (of interest to developed and developing nations or to developing nations only).

Maize

Maize is the classic example of a crop that was originally domesticated largely in the New World (North, Central, and South America and the Caribbean). Public sector breeding efforts have been substantial in both the developed world (for example, the U.S. landgrant system) and the developing world. There are base collections within the International Board for Plant Genetic Resources designated network in the Commonwealth of Independent State, Japan, Portugal, Thailand, and the United States (International Board for Plant Genetic Resources, 1987).

The Centro Internacional de Mejoramiento de Maíz y Trigo (International Maize and Wheat Improvement Center) has a substantial ongoing breeding program that involves the incorporation of germplasm from many nations into elite germplasm. It distributes its improved material through national programs and by sharing its material with private seed firms. About 35 million hectares are said to be planted in improved maize from the international system (Hawkes, 1985).

The private sector, however, is by far the most important supplier of seeds. It includes both large companies with their own breeding programs and smaller firms that depend on the development of inbred

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

lines by the public sector (Hawkes, 1985). In a number of nations, there are public analogues, such as the French Institut National de la Recherche Agronomique. In general, these entities retain their own inbred lines and typically sell only hybrids. Some of the seed is sold internationally; some is produced abroad by multinational seed companies, local firms, or the local public sector. These seed sources are responsible for the majority of the supply of seeds in the developed world and for some portion of the supply in the developing world. The exact portion of this trade in the developing world is unclear in some developing nations, however, a substantial portion of the seed used is hybrid, most, but not all, of which may be bred and produced locally but with financial support from international firms. The international firms often possess the best local distribution systems.

As suggested earlier, the use of hybrid seed provides the seed company with a biological equivalent of patent law. Unlike open-pollinated corn, farmers cannot use the hybrid crop as seed the following year without substantial loss of productivity. They are constrained to return to the seed producer. The seed producer thus has a strong incentive to use and invest in research in hybrids. Thus, by retaining control over certain of their parental lines, the firms can ensure effective protection of the crop. Such physical control can be as affective as (if not more effective than) intellectual property protection. It also implies that developing nations are not likely to be able to obtain the parental material, except through the process of developing new lines and inbreds from the segregating hybrid materials. (Note that even when suppliers are willing to provide the material, there may still be the economic cost of importing or paying royalties on breeding material. Foreign materials are often of little direct agricultural use.)

Because of the use of hybrids, plant variety protections are essentially irrelevant for maize. It must be noted, however, that some 80 plant variety protection certificates had been issued for maize in the United States as of February 1, 1988. This compares with 436 for soybeans and 1,924 for all crops combined. In contrast, regular patent law has played—and may continue to play—an important role with respect to maize. This is a crop for which there will be significant biotechnological research in the United States. The Ex parte Hibberd patent is itself for corn that contains more than a specified percentage of tryptophan, although it is hard to visualize how such a claim can be justified as being novel or as being properly enforceable against methods of achieving maize with a high-tryptophan content other than that disclosed. Other potential impacts include the development

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

of varieties resistant to specific herbicides (maize is one of the crops for which there appears to be an especially large number of alliances between chemical firms and seed firms [Mooney, 1983]), insects, or specific pathogens. There are also a number of recent patents on tissue culture techniques for corn. Moreover, there is strong interest in the development of new growth regulators, which could be patented under traditional principles (Office of Technology Assessment, 1986).

If traditional maize varieties or comparable hybrid varieties continue to be available (both in a market sense and in the sense that they have not become susceptible to an evolving pathogen), and if breeding materials are shared reasonably within the public sector, the existence of other new maize varieties cannot hurt the access of farmers in the developing world to genetic material. At worst, it can hurt farmers' economic competitive position compared with that of farmers in the developed world. Fundamentally, it is only if the traditional materials become unavailable that farmers in the developing world can actually lose access to genetic material (and even then there is a possibility of reconstruction from commercial material). To maintain this access, developing countries should continue to produce or introduce a reasonable number of hybrid materials in either the public or the private sector, which may then be used for further selection. Note that this analysis does not address the questions of the economic competitiveness of agriculture in developing nations, which declines as developed nations adopt more advanced varieties and improves as the developing nations themselves adopt more advanced varieties. Nor does it address the effects on the environment or pest management of introducing genes for herbicide resistance or a single gene for disease resistance, both of which are among the early likely targets of maize research.

Rice

Rice, which, along with wheat, is probably the most important crop to much of the developing world, presents a completely different breeding pattern. In general, breeding is done by the public sector. Even in the United States, for example, breeding in the west is done through a network involving the land-grant universities, the Rice Research Board operating under the authority of the California Department of Food and Agriculture, and the California Cooperative Rice Research Foundation, Inc. (Rice Research Board, 1987). This network, which has been working on crosses with Africa and Asian varieties (Rice Research Board, 1986), produces a number of varieties;

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

the leading four make up over 90 percent of the area planted to registered seed used in California (Rice Research Board, 1987).

The leading breeding work of importance to the developing world has been done at the International Rice Research Institute (IRRI). In some cases, IRRI has provided new lines that are directly used; in others, it has provided materials that are used in national breeding systems (Hawkes, 1985). These materials are provided by IRRI without charge. The resulting cultivars are planted in over 50 percent of the developing world's rice-growing area (Dalrymple, 1985, 1986b). Within the rice network, there are base collections in Japan, Nigeria (International Institute for Tropical Agriculture), the Philippines (IRRI), and the United States. The International Rice Germplasm Center collection at IRRI in the Philippines is undoubtedly the most important of these (Chang, 1984b; International Board for Plant Genetic Resources, 1987). In addition, a number of nations (Colombia, India, Indonesia, Japan, Korea, Taiwan, Thailand, and the People's Republic of China) have substantial rice breeding programs.

Rice is a crop for which the activity of the private sector and proprietary rights have been largely irrelevant to the developing world. However, the development of an effective system for the production and use of F 1 hybrids by scientists in the People's Republic of China means that this situation may change quickly and radically in the near future. Hybrid varieties occupy more than 40 percent of the total area planted to rice in China. If these varieties become widely used in the rice industry outside China, they will undoubtedly encourage private investment in rice breeding, especially in such wealthy areas as Japan, the Republic of Korea, Taiwan, and the United States. One of the leading research goals for rice, however, is the use of apomixis (asexual seed production) to bring down the cost of producing hybrid rice seed (Rutger, 1986). Should this prove to be possible, the economics of the industry will quickly revert to its pattern before the introduction of F1 hybrids.

Potatoes

The potato is a vegetatively propagated crop that is important in both the developed and the developing worlds. (True seeds are used in certain breeding processes, while the vegetative propagating material is, in practice, called a seed potato.)

In the United States, new varieties are developed by the public sector, and propagating material is multiplied and marketed by the private sector. Intellectual property is irrelevant because of restrictions in the Plant Patent Act of 1930 that exclude potatoes form intellectual

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

property protection. Although the history is not entirely clear, the law was oriented toward asexual reproduction of fruits and flowers, and there was evidently believed to be difficulty in patenting breeding material that was itself the marketed edible product.

In most Western European nations, however, potatoes are covered by plant variety protection. Among these, The Netherlands is a major exporter of seed potatoes. For potato exports to nations without plant variety protection, there is no legal method to prevent further multiplication of the varieties. At present, that is not a serious problem for the exporter, since disease-free multiplication is difficult. One or two generations of multiplication can be taken into account in the pricing; after that, new seed material will be required because of the accumulation of virus disease in stocks. As more nations realize the ability to produce disease-free seed potatoes, it is possible that these exports will be restricted or subject to contractual protection.

The global base collection of potatoes is in Peru (International Board for Plant Genetic Resources, 1987, 1990), and there is a substantial public sector breeding program of great importance for the developing nations. Thus, the Centro Internacional de la Papa (International Potato Center) has provided germplasm to more than 70 nations in forms ranging from clones to seeds (Bofu et al., 1987; Hawkes, 1985).

Additional major collections of wild potato relatives are held in the German-Dutch germplasm bank at Braunschweig, Germany, and in the United States at Sturgeon Bay, Wisconsin. Both adhere to the policy of making their collections freely available to bona fide users.

Given the relative magnitudes of the research programs, it is unlikely that proprietary rights will significantly affect the access of developing nations to germplasm. There are sales of potato-propagating materials from developed to developing nations. Mooney (1983) emphasizes the role of Dutch firms and states that they export about 300 million guilders (US$105 million) a year in seed potatoes, of which 100 million guilders (US$35 million) goes to developing nations. The yield in the developing world is about half that in the developed world, but the rate of yield improvement in the developing world has exceeded that in the developed world (Horton and Fano, 1985).

Oil Palm

The oil palm is included as a representative of a tropical industrial crop. Its share in the total annual production of the leading edible oils has been increasing over the past decade. Among the oil palm producers, Malaysia is by far the leader, producing 4.1 million metric tons in comparison with about 1.8 million metric tons each in

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

Indonesia and in the rest of the world. Extensive new plantings in many countries of Latin America, Africa, and the Pacific pose a long-term threat to this position, however.

On the research side, Malaysia has taken a decisive lead. The plantation companies have traditionally played a major role; but since the 1970's their activity has been supplemented by the Palm Oil Research Institute of Malaysia (PORIM), a government entity. The fruits of such research are considered as a national asset that is to be guarded carefully from others.

In particular, since the early 1970s, Malaysia has banned the export of oil palm seeds, a ban whose effect is supported by the fact that commercial planting material is based on a hybrid. Thus, the owners of the parental breeding lines are able to exercise control with little need for proprietary protection.

Hybrid protection, however is being threatened by the development—after long research—of methods of clonal reproduction of oil palm through tissue culture. The research, started in Malaysia by the Oil Palm Genetics Laboratory, a group financed by a number of plantation companies, was brought to a conclusion by Unilever (United Kingdom), followed by the Institut sur Recherche de Huile et Oléagineaux (France) and a number of other research organizations, including PORIM of Malaysia. There have been problems of mutations in the cloned offspring, but once these problems have been worked out, any owner of a population of hybrids will be able to multiply selected palms in such populations.

Plant breeder's rights have not, so far, been used with oil palms. This is partly due to the lack of uniformity. The hybrids do not satisfy the requirements of uniformity, and their parents are typically chosen as individual palms from a heterozygous population. Moreover, a buyer tends to select among suppliers on the basis of trust and reputation rather than on variety name.

For this crop, the actual restrictions on the flow of material, which is likely to be decreasingly effective over time, derive from developing nations themselves rather than from the developed world. Moreover, the role of proprietary rights in the breeding material has so far been minimal; it is likely to continue that way. What may prove to be important, instead, are new technologies of working with—or finding substitutes for—palm oil. Some of these technologies may be patentable.

Cattle and Poultry

For cattle, breeding material is typically supplied through the sale of live animals, embryos, or semen. In the case of dairy cattle,

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

there has been relatively extensive use of the new technologies, and there has been a trend to spread the Holstein breed from Europe and the United States to other areas. This narrows genetic diversity; the use of artificial insemination reduces the number of effective sires and embryo transfer also reduces the number of females. For beef cattle, the transfer of genetic material is in the opposite direction, with imports of new breeds from Europe through Canada and directly from Brazil (Council for Agricultural Science and Technology, 1984b).

So far, formal intellectual property protection plays little effective role here, and those working in the field see their objective as one of upgrading the global animal stocks. Naturally, the price of the breeding material reflects the economic benefit of the improved material. And, in appropriate cases, for example, the sale of a bull, the price also reflects the value of the animal for breeding purposes. It is hard to see that legal barriers based on proprietary rights will significantly increase the costs of breeding stock, which already reflect discounted future benefits. Nevertheless, the scarcity of material affects its cost, and breeders in developing nations as well as others may well pay substantially more for the particular germplasm.

For poultry, which has a much higher replication rate, the marketing pattern is quite different. Here, parental or grandparental lines (which are often inbred) are typically maintained for breeding purposes and are carefully controlled as a form of effective protection. Only the later generations or hybrids are sold. The number of firms is relatively limited, and the genetic base is said to have been reduced significantly (Council for Agricultural Science and Technology, 1984b). Whether it is parental or grandparental material that is maintained in the developed world, the increasingly important large-scale poultry operator in a developing nation must regularly return to a supplier in the developed world to obtain commercial stock (Hill, 1986). Thus, for finished lines, the current terms of international transfer do not favor developing nations. It would take time, investment, and trained animal geneticists to breed new material from the range of germplasm that is available.

The cattle marketing patterns have already responded to the new animal reproductive technologies (such as embryo transfer); it is not clear how or whether they will change further in response to biotechnology and the possible emergence of animal patents. It is not unlikely that a patentable cattle improvement, for example, a cow genetically modified to produce and respond to increased quantities of bovine growth hormone, will be most effectively marketed through the traditional method of selling animals, embryos, or semen (at prices

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

that capitalize the breeding value of the improved animals. Depending on the evolution of the law, however, it might become possible to obtain royalties from further generations of genetically modified animals. In such a case, patent rights might impose significant costs on international transfer of the improved animals. In the absence of such rights over progency, however, breeders might vertically integrate with the dairy or meat sectors in order to protect their technology.

The effects of possible animal patents are arguably more favorable to developing nations in the case of poultry. Research in this area is oriented toward diagnostics and vaccines as well as increased productivity (Purchase, 1986). If animal patents are actually issued and provide protection for subsequent generations, the poultry firms may be more willing to supply newly patented breeding lines for a long-term royalty. Patenting in the poultry area might also be healthy for the overall diversity of poultry materials. The relatively few lines that provide the basis for current industry might well be expanded.

Microbes

There has been some flow of microbial genetic material from developed to developing nations, for example, as part of the pharmaceutical industry's search for antibiotics. There may be more in the future, particularly in the biological pest control area and because new applications of industrial biotechnology appear to be increasingly appealing (Demain, 1983). At the same time, except for natural fermentations and the like, there have been relatively few applications of industrial biotechnology in the developing world. Moreover, microorganisms are significantly engineerable in the sense that genes for particular functions can be transferred from organism to organism. This is also an area in which there are some explicit legal export restrictions, such as those under the U.S. Export Administration Act (50 U.S.C. App. 2401-24-20) (see also 15 C.F.R. Part 399.1, Suppl. 1, group 7 [including certain culture media and certain chemicals obtained by bioprocessing] and group 9 [including certain viruses and microbes]).

Manufacturers attempt to protect their microorganisms in two ways: physical protection (for example, ensuring that the organism itself is not transferred to other parties) and patenting. There is a trade-off involved in patenting, in that a patent disclosure, as discussed above, must be enabling, which, in the case of a microorganism, typically means that the patent holder must place a sample of the material in a depository so that it is available to other researchers.

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

The strategic cost of providing information to competitors in this way may often lead a firm to use the physical protection method of protection instead of patents.

It can thus be anticipated that in certain sectors, such as those involved in fermentation and pharmaceutical production processes in which the organism can be physically retained, the materials may be closely held rather than patented. Competition among the developed countries in the technology is very strong and information is carefully guarded. It has been said, for example, that the fermentation technology of the pharmaceutical firms is so closely held that university research in the area is well behind. It also follows that the transfer of the fermentation and production processes to firms in the developing world will suffer; these technologies may have to be independently developed in developing nations, possibly relying on local sources of genetic material. Thus, in this sector, the patentability of microorganisms as such is likely, at worst, to make little difference—positive or negative—in providing access to the materials and, at best, to permit some access to materials that would otherwise be held closely.

Patentability, however, will arise as a central issue in those market sectors in which the microorganism itself must be provided to the customer. This is the case, for example, with bakers' yeast and a number of microbial pesticides. In these cases, the opportunity to support substantial research (and to support product effectiveness, safety studies, and licensing costs) is very likely to depend on patentability. The lack of protection in some markets in developing nations may slow application there, depending on the firm's fear of competition and the effort and investment needed to develop the market.

This is an area that risks significant tension. Consider the possibility of a patented gene derived from a microbial source in the developing world and applied in a product that is sold back or used in a process that competes with an export from a developing nation. It is also likely to be very difficult to argue that a purified strain of a natural microorganism (as opposed to an engineered strain) should be protectable or that an individual should be able to protect his or her own cell line, and not to accept an argument that a nation that is the source of such a strain or cell line has a claim as well.

IMPLICATIONS OF THE EXAMPLES

The examples presented above emphasize three points. First, there are major differences among different species: the structures of the international maize and international rice sectors are radically different,

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

as are those of the poultry and cattle sectors. Second, for the species considered here, the impacts of new forms of intellectual property are relatively small. Either there is already some form of proprietary or trade secret protection or there is a significant public sector. Third, significant barriers are imposed by governments in both the developing and the developed world. (It is possible that somewhat different patterns might emerge in such areas as vegetables or legumes.)

For almost all the plant and animal (but not microbial) innovations analyzed here, there is a common pattern, as outlined below.

  1. A new development occurs in the developed world (which may or may not depend on use of germplasm from the developing world).

  2. This new material costs more than the previously used material, but the incremental cost is less than the immediate or short-term benefit to the farmer.

  3. Competitive harm to farmers in developing nations can arise from the possibility that (a) farmers in the developed world will use the product first and be more competitive for some period, (b) foreign exchange costs of importing the advanced material will be prohibitive or (c) the materials will be more adapted to production in the developed world.

  4. As long as public or old material is also available and useful, farmer access to these resources is not actually reduced as a result of the new innovation or its patenting in the developed world. Availability of nonrestricted material is a function of the rate at which such material becomes obsolete because of vulnerability to evolving pathogens, the degree of market competition, the presence of public sector breeding, and demand for products.

  5. The increased commercial value of germplasm creates pressures on both the public and the private sectors to control access to their information and genetic materials. To the extent that such access is restricted, whether by institutions in the developed or the developing world, there may be more severe costs for developing nations.

It is this last step that is most important. Extrapolation from the species analyzed here suggests, at least in the short term, that the developing world has relatively little to fear (from a genetic resources perspective) from the developed world's adoption of proprietary rights for life forms. Given the existing private sector restrictions, the more serious issues are deliberate public sector restrictions on access, whether taken as part of a commercialization process or as a political response to proprietary rights. In several cases, moreover, there is a trade-off between disclosure and patentability under which the emergence of

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

patent systems may improve the access of developing nations to materials that would otherwise be retained physically. This is particularly important for hybrid crops, poultry, and microorganisms.

The discussion also suggests several technical legal issues that will be at least as important for developing nations as is the issue of patentability itself.

  • To what extent can a patent on a life form be invoked to restrict movement of the products of the patented life form in international commerce? This is more of a commercial than a germplasm issue, but it will be extremely significant.

  • To what extent can a patent be used to restrict the use of a life form as one of several sources of genetic material for further breeding purposes? This may be especially important in those systems that allow patents on individual genes, because a claim on the gene itself would reach all offspring that contained the same gene.

  • To what extent can reproduction rights in the offspring of a patented organism be retained when the organism is sold? If they can be retained, royalties are likely to be claimed for the lifetime of the patent; if they cannot, some organisms (for example, poultry breeding material) may not be made available at all.

  • When deposit of a new strain is required as a condition of patentability, what are the restrictions on access to and use of the deposited strains?

  • Are any of the protections (for example, for research purposes or for farmers to use saved seed) inherent in the plant variety protection system built into the new regular patent system as it works in practice? (Note that a seed producer may find it wise from administrative and marketing perspectives to give up right to prevent farmers from reusing seed and, instead, to price the initial sale in anticipation of such reuse.)

The central issue for developing nations is usually whether or not there is a substantial public sector program or domestic breeding industry in that nation. If there is such an industry, there is likely to be effective fairness in access for farmers in the developing world, and in such a case there is likely ultimately to be a reciprocity that avoids any perception of unfairness deriving from the developed world's access to the developing world's genetic resources.

Finally, although political arrangements for the resolution of disputes over germplasm are discussed in Chapter 14, there may be value in facing some of the issues posed in this chapter through a scientific code of conduct designed to encourage the exchange of

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

germplasm at the precommercial and noncommercial levels. Such a code could usefully be addressed to institutions in the public and private sectors as well as to governments. It might, for example, cover issues of access to materials in depositories, support a common understanding of the line between research and commercial use, and encourage both the public and the private sectors to make available to developing nations research and advanced materials on as liberal a basis as possible.

RECOMMENDATIONS

Although proprietary rights may sometimes constitute barriers to the international flow of germplasm, their effects so far have been much smaller than those of barriers imposed by public institutions, including governments responding to the increased value that biotechnology and growing commercial use have placed on germplasm. Issues of proprietary rights could be wisely addressed through a code of conduct governing the exchange and availability of genetic material.

Intellectual property protection systems should be designated to minimize the potential for restricting the free exchange of germplasm among nations.

Areas of particular concern include (1) terms of availability of material placed in depositories, including depositories acting in support of plant breeders' rights; (2) whether intellectual property rights make provision for protected materials to be usable for research and breeding purposes; and (3) import restrictions intended to prevent the circumvention of process patents.

Public institutions should not respond to the commercialization of germplasm by enacting restrictions that could limit the use of genetic resources by developing nations.

In an era of shrinking research budgets and strong competition to improve the quality of staff and facilities, many public institutions use the royalties from patents to fund research. To the extent that this practice inhibits international exchange of germplasm it should be limited. Certain of the CGIAR research centers may find it necessary to patent their materials to prevent protection being applied by others. If these institutions find it necessary to patent materials, they should provide royalty-free licenses when necessary and possible for the benefit of all countries. This approach is similar to the policy of the Agricultural Research Service of the U.S. Department of Agriculture (Brooks and Murphy, 1989).

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
×

Private sector institutions are encouraged to make available their materials in developing nations on as broad a basis as possible.

In particular, this includes material that is not currently the basis of varieties being marketed in developed nations and royalty-free licenses for the use of materials with a low commercial potential.

Suggested Citation:"12. Exchange of Genetic Resources: Proprietary Rights." National Research Council. 1993. Managing Global Genetic Resources: Agricultural Crop Issues and Policies. Washington, DC: The National Academies Press. doi: 10.17226/2116.
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This anchor volume to the series Managing Global Genetic Resources examines the structure that underlies efforts to preserve genetic material, including the worldwide network of genetic collections; the role of biotechnology; and a host of issues that surround management and use.

Among the topics explored are in situ versus ex situ conservation, management of very large collections of genetic material, problems of quarantine, the controversy over ownership or copyright of genetic material, and more.

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