2.2. Intellectual Property and Genome Research

 pp. 14-20 in Bioethics and the Impact of Human Genome Research in the 21st Century

Author: Robert Kneller (RCAT Tokyo University; USA)

Editors: Norio Fujiki, Masakatu Sudo, and Darryl R. J. Macer
Eubios Ethics Institute

Copyright 2001, Eubios Ethics Institute All commercial rights reserved. This publication may be reproduced for limited educational or academic use, however please enquire with the author.
Introduction and Outline:

This talk provides an overview of significant areas of current debate concerning the patenting of genetic sequences. The main topics are:

1. The legal basis for genetic patents

2. Reasons for the surge in genetic patents

3. Problems associated with genetic patenting

4. Possible solutions, and

5. Benefits sharing with sources of genetic material.

The legal basis for genetic patents

 The 1980 Diamond vs. Chakrabarty decision by the U.S. Supreme Court confirmed the patentability of living organisms, and by extension the patentability of complete genes, at least those with clear function and utility.

The Supreme Court applied the basic criteria for granting a patent, i.e., an invention must be

1. new,

2. useful (have industrial utility) and

3. non-obvious (embody an inventive step), and also

4. the written description of the invention in the application must be sufficiently clear to enable someone skilled in the art to use or make the invention.

Usefulness was not a major issue in the Chakrabarty case or in many of the applications for patents on complete, full length genes. The Chakrabarty patent was for a genetically engineered bacterium that could break down oil and thus help in cleaning up oil spills. The gene for human erythropoietin is useful because it enabled Amgen, the holder of the patent, and Amgen's partner Kirin to genetically engineer bacteria to produce this erythropoietin as a drug to increases production of red blood cell. Patients undergoing hemodialysis and those undergoing bone marrow transplantation need this drug. Genes for human-like insulin growth factors are useful for genetically engineering bacteria to produce drugs for diabetic patients. [See Amgen v. Chugai, 927 F. 2d 122 and In re Bell, 991 Fed 781 (decisions of the U.S. Court of Appeals for the Federal Circuit in 1991 and 1993, respectively)] The BRCA1 and 2 "breast cancer" genes are useful for diagnosing persons with predisposition to breast and other cancers and to developing drugs for these cancers, .

What about the novelty requirement? Doesn't patenting a gene that exists in nature violate this requirement? Under U.S. patent law, laws of nature are not patentable, but there is no prohibition against patenting products of nature that are useful, non-obvious and which have not been previously described. A typical gene patent claim emphasizes the element of discovery through the use of effort and ingenuity. For example, the first claim of the BRCA2 gene reads, "an isolated DNA molecule coding for a BRCA2 polypeptide, said DNA molecule comprising a nucleic acid sequence encoding the amino acid sequence set forth in SEQ ID NO:2 [where SEQ ID NO:2 is a sequence of 3418 amino acids beginning Methionine-Proline-Isoleucine-...]."

Only in 1998 did the European Parliament pass a directive (98/44) requiring all members of the European Union (EU) to enact laws allowing the patenting of biological materials, including microorganisms, genes and even partial human gene sequences. Before that directive, national patent laws in EU member states differed over the patentability of products of nature. Now, if the isolation of genes outside the body is the "result of technical processes" used to identify, purify, classify and reproduce the genes, the novelty requirement is satisfied.

The requirement for "non-obviousness" or "inventive step" usually has not been difficult to satisfy in the case of complete genes. The BRCA 1 and 2 genes were the object of a search which took many years involving many teams of geneticists and bioinformation specialists throughout the world. However, this is becoming a more important barrier to genetic patents, as it becomes easier to identify and characterize genes (or gene fragments) using the growing amount of information in genetic data bases (including information on the genomes of non-human species) and the increasing power of gene finding computer algorithms.

The complete a brief overview of the basic laws governing the patentability of genes and partial gene sequences. Although differences remain in national patent system, from a broad perspective there has been considerable convergence of national patent systems with respect to genetic patenting. For better or worse, patenting of genes is a fact of life in almost all countries for the foreseeable future.

Reasons for the surge in genetic patents

Today there in the U.S. PTO about 1000 applications for patents on complete (or nearly complete) human genes under review. There are about 20,000 applications claiming partial gene sequences, RNA sequences, genetic probes, etc. One company has applied to patent 60,000 single nucleotide polymorphisms.

Patents are probably more important to the pharmaceutical and biotechnology industries than to any other industries. A complete discussion of the reasons for this is beyond the scope of this presentation. However, one reason is that the process of drug development is long, risky and expensive. Most compounds that are drug candidates, including genetic-based drugs, are abandoned sometime during the development process. Human clinical trials, the final stage before a drug can be marketed, are especially long and costly. On average each new drug costs at least $300 million to develop, after including the costs of drugs that fail the development process. However, once clinical trials show a new drug to be safe and effective, it is easy to copy. Patent protection, is the main barrier to such copying. Without patent protection, few companies would invest the large amounts of money needed to develop promising new drug candidates. Penicillin was discovered before WWII, but because patent protection was not available, no company undertook its development for 11 years. Only government investment as a result of the War developed it to the point where private companies were willing to market it.

Another reason patents are important concerns the role of companies financed by venture capital in the development of many biomedical technologies. Bioventure companies aim to develop early stage discoveries whose commercial potential is highly uncertain (often discoveries arising from publicly-supported university research) to the point where large companies are willing to assume the risks for final development and marketing. For the first several years of operation, many bioventures have large research and development expenses but no sales revenue. Their only resources to attract funding are their human capital and intellectual property (IP). Without strong IP rights, many of these companies would not survive.

Finally, by allowing individuals to appropriate the returns on their own creativity, patents may even lead to more efficient forms of production. Without patent protection, creative researchers often are compelled to work in large organizations that can finance their work and shield the inventors early discoveries from copying. With strong patent protection, innovative researchers can form their own companies. There is evidence that creative work is incompatible with employee status and that small venture companies are better able to develop new technologies than large established companies.

In summary, patenting offers important social benefits. They encourage invention, mobilize capital to develop innovations, and enable the establishment of work environments conducive to such development

Problems associated with genetic patenting

 Patenting of genes and gene fragments results in the privatization of a wide range of early stage research results that often have unclear scientific and commercial implications. The identification of a gene on a particular chromosome is itself an early stage "basic" research discovery. Although it is possible to make diagnostic agents and genetic probes from the genes themselves, it is usually impossible to made medicines or vaccines. Genes code for proteins, and very often proteins can be the basis of drugs. But knowing the structure of a gene (i.e., the order of the nucleic acid base pairs that make up the gene) does not yet enable scientists to know the structure of the encoded protein.

If Company A obtains a patent on gene Z, private investors may have increased incentives to help Company A produce diagnostic kits for this gene or genetic probes based upon gene Z . However, this patent may give Company A the right to charge university researchers or other companies "tolls" or "rents" for using Gene Z to develop drugs based upon the proteins coded for by Gene A, or even to block such drug development by outside parties. I say "may" for two reasons. First, most countries' patent laws allow use of patented technologies for research use only, even without permission of the patent holders. However the scope of this "research use" excemption is limited and unclear, at least in the U.S. Second, if Company B invents, patents and markets a drug based upon the protein encoded by Gene Z, Company B need not necessarily obtain permission from Company A. Whether B's drug development program infringes A's patent depends upon the scope of A's patent and whether B's development work is "obvious" in light of A's patent and the information disclosed in A's patent application. Nevertheless, because the law in these areas is uncertain and highly situation-dependent, holders of patents on complete genes often do have some leverage to extract concessions from developers of medicines based indirectly on those genes.

This phenomenon is being pushed back to an even earlier stage, by patent applications and even issued U.S. patents on fragments of genes, specifically on expressed sequence tags (ESTs). ESTs are fragments of the DNA nucleic acid sequences that are complementary to the intermediate RNA sequences that actually code for proteins. In other words, ESTs are fragments of man-made complementary DNA (cDNA) and correspond to short segments of genes that happen to be activated in the cells from which the RNA are extracted. But often the neither the corresponding gene nor its function are known when ESTs are isolated. ESTs have relatively modest value as probes to detect activated genes. When combined together, they may give a diagnostic picture of a pattern of gene activation in a cell of particular interest. For example, precancerous cells from the inner lining of the stomach may show a particular pattern of gene activation, which may be detectable by a carefully constructed EST detection kit. In such a case, if Company A holds patents on these ESTs, it and private investors may have incentives to develop such a detection kit. Alternatively (or in addition), these patents may allow Company A to claim entire genes or entire active regions of particular genes, even though the complete genes may not yet be identified. In this case, Company A may be able to block or demand royalties from outside researchers who identify the complete genes or who seek to develop more medicines or diagnostics based upon a more complete understanding of what these genes do. This is an example of how patents or early stage discoveries can enable to patent holders to tax or charge tolls or rents on subsequent research.

Another example of early genetic discoveries establishing a basis for broad assertions of intellectual property rights involves a patent issued in 1999 to Incyte Corporation (U.S. Patent No. 5,817,479). Using cDNA sequences in Incyte libraries, Incyte scientists had identified 44 ESTs expressed by human genes coding for the production of a family of kinases, i.e., a family of signaling proteins inside cells. The Incyte patent claimed any gene or gene fragment containing the these one or more ESTs without identifying or further characterizing the complete genes or gene fragments. In other words, it claimed close to the entire family of kinase producing genes, even though the location, complete sequence, specific physiologic function, and exact number of these genes were unknown. This patent gives Incyte the right to prevent others from making, using or selling any of these gene sequences. Researchers who develop drugs or diagnostics using these sequences will probably have to obtain a license from Incyte.

Similar concerns arise in the case of researchers who identify a gene (or a gene fragment) in a non-human animal and then, by looking for similar DNA sequences in human genome data banks, identify the likely corresponding human gene (i.e., gene identification by inter-species homology). Although applications have been filed claiming human genes identified in this manner, recent U.S. court decisions and statements from the U.S. PTO suggest that such applications probably will not be approved.

Let's take a closer look at the effect of privatization of early stage research results:

Large pharmaceutical companies are concerned that they are having to pay lots of money for early stage discoveries that have highly uncertain value. An example is an exclusive license Amgen obtained from Rockefeller University in 1995 for the leptin obesity gene. Amgen paid $20 million in up front royalties and had to make additional payments to renew the license. So far, efforts to develop medicines based upon the leptin gene and proteins have been disappointing. The flip side of this concern is that some companies will find access to promising early stage technologies blocked entirely. Amgen's competitors in developing drugs to manage obesity cannot develop drugs based upon leptin. Another concern is Aroyalty stacking" and the transaction costs of negotiating a large number of licenses. In other words, if a pharmaceutical company has to obtain licenses on a large number of patented genes, gene fragments, proteins, screening tools, promoters, etc. in order to develop a new drug, the time to negotiate such licenses and the accumulated royalties it must may be significant. In general, pharmaceutical companies do not like patents on genes and other early stage discoveries, while biotechnology companies view such patents as their life blood.

Biomedical researchers, particularly those in non-profit institutions such as universities or government laboratories, are concerned about access to data and research tools. In a number of cases, university researchers have been denied access to patented genes or other research tools unless they agree to pay high fees or to offer the patent holder exclusive access to data or discoveries made using the research tools. Patent owners justify these demands as legitimate measures to prevent their hard earned discoveries from leaking to competitors. Sometimes, however, suppliers of patented research tools are also non-profit institutions, exercising their rights under laws intended to give universities incentives to ensure the effective commercialization of government-funded discoveries.

In addition, there is evidence that university genomic researchers have become more secretive, probably in part as a result of races to discover genes and the winner take all aspect of the patent system which awards patent rights only to the research team that first discovers a gene. However, secrecy and the patent system is a double edged sword. Patents are intended to encourage the disclosure of new technologies. The basic social contract behind patents is that inventors reveal their discoveries in return for a limited period (now less than 20 years) during which they have the right to limit the use of their inventions by others. Once a patent application is filed, inventors can discuss their discovery freely and still be assured their commercial rights will be protected if the patent is awarded. If patent protection on genes is not available, some researchers may be more open about their research. However, the fact that academic prestige is still highly linked to being first to publish would still give rise to much competition and secrecy. In addition, when commercial stakes are high, the main alternative to patenting is not disclosure but rather secrecy until or even beyond the time that final commercial product is launched. In the absence of patents, many genetic researchers with close ties to industry simply might not publish many of their findings.

What about the interests of the public? Genetic patents may drive up the costs of new drugs and diagnostic tests. Jon Merz of the University of Pennsylvania has complied examples of patents on genes and on their use to diagnose genetic diseases that were licensed exclusively to a single company. In some cases the licensors were universities that had received government funds to make the discoveries. He argues that, since these inventions were essentially complete and did not require further investment to be marketable, the public would have been better served if they had been marketed non-exclusively. Instead, one company now has a monopoly on each test and can charge consumers and other laboratories monopoly rents. However, data that such monopoly rents are actually being charged is not available.

Finally, many persons, are uneasy that rights to a substantial proportion of the human genome may soon end up being held by a handful of U.S. and perhaps one U.K. company.

Possible Solutions

 I think there is a reasonable chance that a combination of market forces and judicious policies by national patent offices and organizations such as the NIH will enable many of the worst problems to be avoided. The entire biomedical industry knows that Amgen's payment of over $20 million for a license to the leptin gene was a bad deal. In the future, licensors and licensees will be more judicious. Patents that are overly broad or that are licensed on highly restrictive terms will be subject to intense efforts to invalidate them. Also, such patents will spur other companies to innovate around them, to develop competing if somewhat similar inventions. Finally, it is not clear that patents on genes or gene fragments themselves will cover drugs or diagnostics based upon proteins encoded by the genes, and it is even less likely that they will cover drugs or diagnostics based on the knowledge revealed about the nature of the patented gene.

As a result of criticism of the Incyte patent and concerns among academic researchers about access to patented research tools, the U.S. PTO has begun to raise the threshold for issuing patents. In 1999 it issued new guidelines limiting the scope of patents to uses clearly described in the patent application, and prohibiting the issuance of patents for speculative or unproven uses. There are ongoing programs to educate U.S. PTO examiners what types of genetic inventions are obvious under current technologies, and when it is not appropriate to award an inventor a broad patent on the basis of limited data submitted (as arguably happened in the case of the Incyte patent)..

There have been a number of measures to ensure that government-funded discoveries are made widely accessible. The Clinton-Blair announcement urging that all raw genetic data be made public reflects U.S. and U.K. government policies that the results of all genetic information they fund be made public. In the case of centers doing large- scale government-funded genetic sequencing, genetic sequence data must be deposited into public data banks within 24 hours of its generation. Scientists funded under individual government research grants must deposit their findings within 6 months.

Furthermore, NIH guidelines now call for NIH funded research tools (including genetic sequences whose main value is as research tools rather than commercial products) to be licensed non-exclusively. These measures do not prohibit patenting of government-funded genetic discoveries (this would be difficult to do under the law cited above to encourage university-industry technology transfer). However, by promoting non-exclusive licensing and the rapid publication of genetic data, they attempt to assure wide access to data and research tools developed with government support.

Anecdotal evidence suggests that non-exclusive licensing can bring the owners of many inventions that do not require further development great financial rewards, while ensuring wide access to the invention. The Cohen-Boyer recombinant DNA patent licensed non-exclusively by Stanford and University of California is the largest royalty generator among any university license. The Axel patents on a method to generate mammalian proteins in cell cultures is Columbia University's largest revenue generator. NIH policy issues exclusive license on inventions from its own laboratories only if further development is needed and an exclusive license is necessary to attract private resources to achieve that development. NIH's largest revenue generating invention is the HIV test kit, co-patented with Institut Pastuer, which the two institutions license non-exclusively.

Finally, the requirement that genetic data generated by the Human Genome Project (HGP) should be deposited in public data banks as quickly as possible is intended to undermine the patentability of the genes so deposited. If the sequence for gene Z is deposited in GenBank before Celera scientists identify gene Z, then Celera cannot patent it because it is no longer novel. The fact that the HGP and Celera raced to sequence the human genome suggests that a large number of genes will not be patentable because their sequences were deposited in public data bases before private companies could identify the genes.

Despite a number of inquiries, I have found no examples of drugs or diagnostics that faced barriers to development because the underlying genetic sequences had been published in public data bases and thus were unpatentable. This suggests that the social value of patents on genes or gene fragments may be low. Competition from the HGP has forced companies such as Celera, Incyte and Human Genome Sciences to focus more on adding value to raw genetic data, than on simply generating such data and and applying for patents whenever possible.

Whether these measures will be sufficient depends to a large extent on how companies use their gene patents If companies such as Celera and Incyte charge high royalties to use their patents, license exclusively to selected companies, and seek to rigorously enforce their patents against researchers engaged in basic or early applied research, the results may unfortunate. On the other hand, if they license most of their patents non-exclusively at reasonable royalties and work out reasonable cross licensing arrangements with other patent owners, the negative consequences of pervasive genetic patenting may be minimized.

Benefits sharing with providers of genetic material

 What about persons or communities that donated the genetic material that lead to the patented discoveries? Do they have any right to share in benefits from the commercialization of their samples. U.S. Regulations for the Protection of Human Research Subjects place a clear obligation on federally supported researchers to inform research subjects of the risks and benefits of participating in a study, not to coerce participation or offer undue financial inducements, and to ensure research subjects' privacy. However, these regulations give donors no rights over their tissues once they are removed. [45 CFR 46]. In probably the most significant judicial decision to date on this issue, the California Supreme Court ruled unanimously in the 1990 case, Moore vs. Regents of the University of California, that medical personnel are under a fiduciary obligation to disclose to patients financial interests they have in their treatment. However in the same case, the judges by a 5-4 split decision ruled that patients do not have a strong enough ownership interest in tissue removed from their bodies to allow them to sue medical personnel for conversion (i.e., illegally appropriating such tissues for their own benefit).

Today in an ironic extension of the logic of the Moore decision, it is increasingly common for the informed consent process to include notification to subjects that commercially valuable products may be derived from their tissues, but to make clear that they have no right to share in any related financial benefits. For example, in its next round of sample collections for genetic epidemiology studies, the Medical Research Council of the U.K. is requiring as part of the informed consent procedure that (1) subjects agree that their tissues samples are charitable donations and that they renounce their ownership of them, and (2) subjects be informed that their sample or products derived from it may be used by the commercial sector and that they will not be entitled to share in any profits that might ensue [http://www.mrc.ac.uk/tissue_gde.pdf/ ].

Issues ownership and benefits sharing have also arisen in the context of course of collaborative research with Chinese institutions. In 1997, senior Chinese geneticists expressed concern that if foreign laboratories analyze Chinese tissue samples, discoveries related to these samples would likely be patented and commercialized by foreigners, and China would not share in the commercial benefits. This concern, which has reached the highest levels of the Chinese Government, was directed towards transfer of samples to academic a well as for-profit laboratories. For a few months in 1997, the export of most samples was halted.

Most sample transfers to U.S. laboratories had resumed by June 1998 when the Chinese State Council issued Interim Measures for the Administration of Human Genetic Resources (AInterim Measures"). The Interim Measures require approval from central government agencies for all international projects involving collection of human genetic material, as well as the export of samples, publication of information about the samples, and patent applications based upon the samples. The Chinese and foreign collaborators must jointly apply for and co-own patents. Transfers to third parties of IP rights, data, and know-how from the collaboration require the agreement of both parties. The benefits obtained from the collaboration must be shared in accordance with the parties' respective contributions. These obligations must be formalized in a contract between the Chinese and foreign collaborators that must be approved by the central government. It is still unclear how the Interim Measures are being implemented in practice.

In the future, laboratories in developed countries may have to routinely negotiate contracts with source countries to address issues of ownership and benefits sharing before conducting international genetic research.. If the Chinese Interim Measures become the model for such arrangements, the complexity and transaction costs of such collaborations may increase significantly and the likelihood that promising discoveries will be commercialized may decrease.

One alternative might be to develop a standard material transfer agreement that would not require co-ownership of patents but which would commit the institution receiving genetic samples either to (1) require that any licensee of its inventions negotiate a benefits sharing agreement with the source country institution or (2) share any of the licensing benefits it receives with the source country institution. Such a model agreement could also grant source country institutions some influence over licensing decisions, particularly licenses that cover rights in the source country. It also could provide for data sharing and for appropriate opportunities for source country researchers to conduct research and receive training in the foreign institution. Finally, it could protect the interests of the donor individuals and their communities by requiring that sample collection occur safely and with appropriate IRB approval and informed consent, and for providing, in appropriate circumstances, for them to share in any commercialization benefits.

Conclusion

 It may seem anticlimactic that such a scientifically and ethically complex issue as gene patenting can be reduced to mundane technical issues such as exclusive-nonexclusive licensing, appropriate thresholds for patentability, research use exemptions, MTAs, etc. On the other hand, the fact that such mechanisms are available to address this problem provides ground for optimism. This may not be the case with other issues related to genetics and ethics.

Please send comments to Email < asianbioethics@yahoo.co.nz >.

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