Posted by virenkonde@gmail.com on December 1, 2009 at 3:58 am
The recent editorial on “Intellectual property and biotechnology innovation: To protect or not protect” by Dr Yali Friedman, Managing Editor of the Journal of Commercial Biotechnology was thought provoking and led to this write-up. The editorial emphasized on the intellectual property protection differences between the developing and developed countries, and their drug manufacturers on the issues of patents, price controls, and research & development investments in the biotechnology sector. The remarks indicate that, the developed countries, being the ‘technology producer’ have favored strong intellectual property protection to motive the innovation and apparently the trade; while the developing countries being the ‘technology consumers’ have exploited the benefits of it at much lower cost by building a weaker intellectual property protection system.
Although it is logical that all countries, whether, developing and developed, should offer the strongest intellectual property protection possible, it is believed that, there are no legal definitions of “developed” and “developing” countries. The WTO members have announced for themselves whether they are “developed” or “developing” countries, with an open option to challenge the decision of a member to make use of provisions available to the developing countries. It was also believed in the agreement that the developed countries need maximalist IP regimes, as they are highly innovative and strong IP regimes provide the requisite incentives in this regard. On the other hand, developing countries require minimalist IP regimes, as they are hardly innovative and are often net importers of technology. These norms have also formed the basis for the 1970’s Indian Patents Act for the ‘developing India’. The amendments to Indian Patent Act in a timely fashion [Indian Patent (Amendment) Acts of 1999, 2002, and 2005] have driven India to ‘innovative (Product Patents) regime’ in its intellectual property policy.
Today, although, India continues to remain a “developing” country; it is also considered a ‘technologically proficient’, and therefore as an innovative developing country. Therefore, in the present times, the older definitions of intellectual property based on the differences between developed versus developing countries can not relate to India. Some developing countries like India are more scientifically advanced than others as a result of decades of investments in education, medical infrastructure, and manufacturing capacity. India hosts more drug manufacturing facilities that have been approved by U.S Food and Drug Administration than any country other than the United States. India’s biotechnology industry is managing to position itself on the strength of contract research, clinical research and contract manufacturing services together with the sales of off-patent biologics in the local as well as lightly regulated markets in the Middle East, Africa and Asia.
Unfortunately, India’s patent regime does not appear to be satisfying to the developed world given that India, though “technologically competent” in certain technology sectors like software and pharmaceuticals have not yet witnessed any significant levels of “innovation” in the biomedical utility sectors like biotechnological products and processes. Recently, the US-based Biotechnology Industry Organization (BIO) criticized India’s patent law and the Office of the US Trade Representatives kept India (and some other countries) on the USTR’s “Priority Watch List” in order to bring India’s patent law more in line with Western IP protections. Clearly, there are some issues and concerns that need clarification and that will be discussed here, such as the patentability criteria under section 3(d), and the provision of compulsory licensing in the Indian Patent Act; the price control and the cost difference of the innovator verses generic biotechnology drugs; the TRIPS mandate on clinical data protection and exclusivity; and also the pre- and post-grant patent opposition provisions used by Indian biogeneric manufacturers.
At its essence, the triple helix model is a partnership between the industrial, academia and governmental groups which recognizes the differing goals and stakeholder communities of these three groups but emphasizes on the common interest of those groups in order to provide value to the societies in which they reside. It is often operationalized as cosponsored programs. These programs support both small and large firms to transfer technologies from government and academic research laboratories and have enabled societies to more greatly benefit from the technological research that those same societies fund.
The landmark attempt towards the triple helix model was made by the U.S. when it enacted the Bayh-Dole legislation in 1980. This legislation granted permission for federally funded researchers to file for patents, and to issue licenses for these patents to other parties, thereby increasing participating of U.S. universities in national patenting. Conversely, in Eastern Europe, during the transition from socialism, some reformers were trying to remove government from a role in science and technology policy. Innovation systems were largely coming to a halt. Even though foreign direct investment was encouraged, it seldom involved utilizing local R&D resources. More recently, political leaders are moving away from that rigid position and bringing government back into the picture to take advantage of the R&D resources left behind from the previous era.
In the U.S., government-industry relations assumed increased significance in the 1990s even as university-industry bonds came to the forefront of attention in the 1980s. In much of the European Community these two sets of bilateral relations developed in reverse sequence with academic-industry connections following upon the development of government-industry relations. Academic-industry-government relations in the U.S. are taking on the cast that government-industry labor relations have long had in Europe. In the EU, EU sponsored activities, other efforts by European governments, NEXUS, IVAM are all examples of Government, Academia and Industry working together in order to maximize the commercial potential of macro and nano technologies in Europe.
This post in Part I on the larger area I intend to cover on the triple helix model for Technology Transfer on this blog.
Richard Barras, ‘Interactive Innovation in Financial and Business Services: The vanguard of the Service Revolution,” Research Policy, 19 (1990) 215- 37.
This year’s World Intellectual Property Day on April 26 focused on promoting green innovation as a key element in meeting the challenges of climate change In his message to mark the day, WIPO Director General Francis Gurry highlighted the contribution that a balanced intellectual property (IP) system can make in enabling the development of technology-based solutions to mitigate the impact of climate change.
The first to convert the discussion to action was the UK Intellectual Property Office when it announced that green inventions will be fast tracked through the patent process.David Lammy, Minister for Intellectual Property, announced the launch an initiative which will enable inventions with an environmental benefit to be given priority within the patent system.
There is speculation that companies in countries like India and China will take the lead in terms of green innovation. As per an Economic Times article a project by the Center for Scientific and Industrial Research (CSIR), an Indian organization, has resulted in a solar powered rickshaw with a top speed of 15 km an hour and a range of 50-70 km. The rickshaw runs on a 36-volt battery that can be replaced at a local solar-power charging station. The vehicle is now being tested in Delhi with the aim of replacing some of the city’s 500 000 rickshaws. If successful, the soleckshaw as it is called, will provide a clean and relatively speedy option for moving around crowded Indian streets.
Another innovation in China produced an inexpensive solar powered car. The car has a sticker price of just over $5000 with a range of up to 150 km. The tiny Chery QQ clone has been fitted with roof mounted solar panels that absorb 95% of the solar energy coming in. Although not luxurious, the vehicle may still be attractive to the rising middle class population in China
The concept behind this speculation is simple – companies in emerging economies innovate in the face of price sensitivity, although their consumers have lower expectations. In the green sector emerging economy players have an additional motivation in the fact that they are often based in countries that are much more polluted than developed nations. There is market demand as well as government impetus to come up with inexpensive ways to clean up the air and water.
The WIPO initiative and a trend following the developments of green inventions being fast tracked through the patent process in the United Kingdom by other nations can kick start a movement where IP will have a definite role to play in mitigate the impact of climate change.
This guest post comes from Professor Marcus Hurn, who is a distinguished Professor at Pierce Law and has taught fifteen different subjects during his teaching tenure. This post on the Taxonomy of Property focuses on classification on Intellectual Property in the Basics of Property. He broadly looks into Property and narrows down to the issues of Intellectual Property and even Trade Secrets.
A Brief Taxonomy of Property
There are four major classes of Property: Land, Goods, Obligations, and Intellectual Property. They differ based on whether they are tangible or not, physically movable or not, universal or not, and exhaustible or not. The traditional classification system has a superstructure, and there are significant sub-categories.
Property is real or personal.
Real property (immovables in civilian parlance) is space defined with reference to the surface of the earth, including the soil and things contained in or affixed to the soil. It is tangible but not movable. It cannot be lost, stolen, or physically destroyed. It has universal scope in the sense that an owner has rights against the whole world. It is exhaustible in the sense that only limited numbers of people can use it at one time. Its boundaries are physically ascertainable. It is ultimately controlled through possession and legal registries.
Personal property (movables in civilian parlance) is tangible or intangible.
Tangible personal property is goods/chattels.
It is literally movable, and can be lost, stolen, or physically destroyed. It has universal scope and is exhaustible. It physically defines its own boundaries. It is ultimately controlled through possession or sometimes legal registries.
Intangible personal property is Obligations or IP.
At common law most intangibles were choses/things/rights in action and not treated as property, merely as rights to legally compel or prevent some action or recover damages. Now nearly all obligations are assignable property in our system. (The major exception is some claims for personal torts.)
Obligations are rights to demand a performance or payment from some definite person or finite group of persons, thus they are not universal. They are not literally movable. All obligations are exhaustible.
Obligations are of two kinds: Wholly Intangible or Chattelized.
Wholly intangible obligations (e.g. contract rights, uncertificated stock, licenses) cannot be lost, stolen, or physically destroyed, are defined by proof of the legal obligation, and are ultimately controlled by notice to or coercion of the obligor (assignment, garnishment).
Chattelized Obligations (e.g. negotiable instruments, bills of lading, certificated investment securities and their modern electronic analogues) can be lost, stolen, or physically destroyed. They are defined by the words of the document/record and the law, and are controlled by transfer of the document by endorsement and delivery or encrypted transfer of the unique record. Loss of the document or record does not necessarily destroy the underlying obligation– if the document can properly be accounted for, the obligation can be enforced.
Intellectual Property
IP, as intangible property, cannot be lost, stolen, or physically destroyed. The “boundaries” are defined by grant or usage and the relevant law. It is ultimately controlled by assignment and, for some types, registries. Uniquely, it is inexhaustible — a potentially infinite number of persons can use it simultaneously or successively. Its oddity comes from combining one characteristic of tangible property– universality– with inexhaustibility.
Hybrids
There are, of course, some boundary problems and hybrids: e.g. fixtures, products of the soil, software embodied in goods. In a sense chattelized documents are hybrids. The paper form supplies the convenience of physical goods, and the electronic form (ignoring the physicality of the server) preserves that convenience (unique record) in intangible form.
Trade secrets are also a hybrid. They grow out of a combination of the law of tangibles (trespass to land, trespass to chattels– the safe, files, or computer) and obligations (confidentiality agreements). Trade secrets look universal, but are essentially finite obligations– anyone breaching the contract/tort security web is a wrongdoer, but one who learns the secret without culpability is not bound to defer to the original owner.
As the World Health Organization has raised its pandemic alert for swine flu to “phase 5” the second highest level, meaning that it believes a global outbreak of the disease is imminent, the relationship between patent rights and access to essential medicines has elicited again. As per WHO the phase 5 alert means there is sustained human to human spread in at least two countries. It also signals that efforts to produce a vaccine will be ramped up.
As it turns out that there is no vaccine available as yet and Tamiflu (Oseltamivir), a drug patented by Gilead and exclusively licensed to Roche is considered as one of the best drugs available today to cater to this kind of flu. Even at the time of the bird flu, it was known that Tamiflu was not the optimal drug to cater to such viruses– but only that of all the possible alternatives, it was the best.
In India, Deputy Controller of Patents, in a decision on the 23rd of March 2009, struck down Gilead’s patent application covering Oseltamavir compositions on the grounds of lack of inventive step, failure to comply with section 3(d) and failure to sufficiently disclose the invention claimed.
Since Gilead hasn’t patented this drug in all countries and has recently lost the Indian patent battle over “Tamiflu” just about a month back, these governments may turn to generic manufacturers for a cheaper priced alternative. And even if a patent exists , if Roche can’t meet the demands in terms of quantity and price some of these governments may decide to override the patent and grant compulsory licenses (treating it a case of national emergency) to enable cheaper alternatives.
It is interesting to note that the US does not have any compulsory licensing clauses within its patent regime that can be invoked. But there is a possible alternative that the situations can be worked into the ‘takings clause’ in 28 USC §1498 and perhaps the fifth amendment to the US constitution that contains ‘eminent domain’ principle. Under these principles, the government could use the patent without the permission of the patentee, subject only to payment of some reasonable compensation. The US had threatened to do something similar with Bayer’s patent during the Anthrax crisis.
But the bigger issue that was pointed out by Dr. Anatole Krattiger in a recent discussion with me is that “Back then, with Bayer’s Cipro, the US back-peddaled quickly so as not to undermine private patent rights. And now, most Western governments have stockpiled Tamiflu. But who will supply Tamiflu now to the low-income countries that have not had the currency reserves to stockpile Tamiflu?”
Further Reading:
Shamnad Basheer and Tahir Amin,Taming of the Flu: Working through the Tamiflu Patents in India , Journal of Intellectual Property Rights, Vol. 2, p. 113, March 2006
Whenever the term bioprospecting is mentioned, the country of Brazil is often cited. This is because the laws and regulations which have been created by Brazil are seen as extremely strict. In fact many people feel that instead of protecting the country against biopiracy, as Brazil undoubtedly seeks to, they are in fact reducing biodiversity research and slowing scientific advancement. The main reasons that the laws regarding biopiracy/bioprospecting were put into place is that the Brazilian government wanted to protect its indigenous people as well as its own financial interests in terms of seeing a product from its genetic and natural resources. The real questions are these: Is the level of restriction these laws impose justified in order to protect the indigenous peoples of Brazil? Or is the highly restrictive process put into place because the government is afraid of foregoing income?
At first, access to genetic resources and traditional knowledge was covered by the Provisional Measure 2.186-16 which was codified into law in 2001. These laws where fairly restrictive as far as the authorization for access to biodiversity was concerned, with all forms of access and research requiring the approval of the Brazilian government. However, that original provisional measure was also less restrictive in certain ways. For example it didn’t provide for by-products of genetic resources, and only covered pure genetic information.
Just last year Brazil passed a new bill which changed the way in which they approach the issue of bioprospecting/biopiracy. Unfortunately, I couldn’t examine the new bill myself because I couldn’t find a version of it that wasn’t in Portuguese, but I did find this article which had a good summary of the differences between Provisional Measure 2.186-16 and the new bill. The main differences between the two documents appears to be that the newer bill requires a much clearer paper trail to keep track of the use of genetic resources. For example patent applications now must have a corresponding “access license” for any genetic resource or by-product of genetic resources obtained in Brazil. Whereas before, even non-profit or humanitarian research efforts using the genetic resources of Brazil had to be sanctioned by the government, the new bill does not require Government approval for access and research that is designated as non-profit. I speculate that even though it appears that Brazil wants to tighten their law regarding who benefits from the use of its genetic resources, they seem to be moving towards allowing easier access for non-profit research. I think this because with easier access to resources for research dedicated to non-profit research, the greater the opportunity for scientific advancement. It appears that the Brazil thinks along the same lines.
Brazil has a large native population whose indigenous knowledge and resources the government is trying to protect. And rightly so. There is an incredible amount of attention focused on Brazil and the rain forests in our modern era. Celebrities are trying to save it as it may hold the next cure for cancer or even HIV/AIDS. Is this the reason that so many people are focused on protecting the peoples and rainforest? Why isn’t there a huge emphasis on indigenous knowledge and biodiversity protection in New Zealand or the Samoan Islands? Is Brazil constantly in the news because of the biodiversity-rich rain forest or is it because the indigenous peoples are really making themselves heard?
I feel that the issue of bioprospecting is something that we are going to be dealing with for at least as long as there are unexplored areas of the earth, while there is still flora and fauna that have yet to be discovered. The most important thing that we have to keep in mind though is that the modern patent system, which is part of a greater system of intellectual property, is based upon the protection of “new” inventions, or processes, as opposed to protecting knowledge which is communally held or has been in existence for some time. Many Tribes of the Brazilian rainforest have expressed anger at the bioprospectors who use their help and knowledge of the forest to find plants useful for research. Then often times the bioprospector turns a profit from their ventures, and give nothing back to the tribes, although increasingly various companies (such as Diversa) as well as academic groups (such as the International Cooperative Biodiversity Groups ) are working to changing this. The system of intellectual property was not made with the protection of indigenous knowledge in mind, since native peoples at that time were only a dream in the minds of novelists and scientific speculator.
Trying to create a system by which indigenous knowledge and resources can be protected is a challenge within the current patent system. Strategies such as the use of Access and Benefit Sharing programs are on the right track to creating a system by which indigenous knowledge and resources can be protected, yet accessed and used, but there is still a long way to go. Countries like Brazil may seem overzealous in some of their rules and regulations, but these laws are only being passed in order to protect their interests and the interest of their people. However these provisions cannot be made at the expense of the furtherance of science, which, in turn, can benefit the very people who shared their knowledge and resources at the first place.
The issue of royalty payment has been recently discussed in an article “Public-funded R&D Bill — Creating the ecosystem for innovation” in The Business Line in India by Jyothi Datta. Relevant issue of royalty payment under Bayh Dole type legislation as per the article states:
“The draft Bill seeks to give back to the scientist or inventor, 30 per cent of the revenue from commercialization of his or her research. About 10 per cent is marked to the public-funded institute’s IP Management Cell and the rest of the revenue is ploughed back into the institute. The IPM Cell will help the researcher patent innovative work, besides negotiating with commercial institutions when it is ready to strike.”
Indian Bayh Dole like bill titled “Public Funded R & D Protection of Intellectual Property Bill, 2008” which is before the Indian Parliament provides that inventors receive 30 percent of any royalties stemming from licensing.A similar legislation in South Africa that was recently enacted known as the ‘Intellectual Property Rights from Publicly Financed Research and Development Act’ that intends to enable and encourage recipients of government-funding to protect as Intellectual Property and license the results of their research in order to provide incentives for those recipients to work with industry players to commercialize research. Section 10 of the legislation provides that the creators and the inventors get a portion of the royalty stream generated from the licensing of the invention.
Jyothi Datta points out to the comments by Dr Prabuddha Ganguli, who was on an international expert team to help draft a similar legislation for South Africa:
“Parameters have also been outlined on the royalty that would be paid to the scientist/institute when the patented research gets commercialised, says the Bill’s architect. But IP expert Dr Prabuddha Ganguli, who was recently on an international expert team to help draft a similar legislation for South Africa, is uncomfortable with attempts to outline parameters on issues such as royalty payment. The legislation should be a broad guiding framework and specifics should be left to the rules that are made later taking into account in the changing environment. Though he has not seen the draft of the proposed Indian legislation, he points out that there are several texts and sub-texts to the issue — like whether the research has been fully or partially funded by the government; definition of national interest and if the government exercises its “march-in” rights on a critical product, does it pay for it, and so on.”
WIPO commissioned reports on Tech. Transfer of various Asian Countries in 2003 and they had a set of guidelines for developing models which were divided into 3 levels:
National Policy on Intellectual Property and University-Industry Technology Transfer.
University Policy on Intellectual Property and Technology Transfer.
Institutional Set-up and Practical Aspects for Technology Transfer from Universities to Industry
They include Income distribution (or royalty sharing) as a part of “University Policy on Intellectual Property and Technology Transfer” and not a part of the National Policy/ Law, that is also Dr. Gangully’s view on this issue as was published in an Indian Daily some time back.
In contrast Prof. Karen Hersey in her recent post “Royalty Sharing: A Matter of Law or a Matter of Policy” on the ITTI blog said that “setting a floor of 30% arguably accomplishes two things. first, it sends a message from government to research institutions receiving grants that the efforts of faculty and students who contribute to the process of innovation and commercialization is valued and second, it prevents grant recipients from, quite frankly, playing politics with rewards that their innovators justly earn.”
Although in an article published on SciDev.net, Shamnad Basheer (Ministry of HRD IP Chair Professor at WBNUJS, Kolkata) said that Indian IP Act would ensure that inventors receive at least 30 percent of any royalties stemming from licensing and the same is a laudable aspect of bill unlike the US Bayh-Dole Act, which leaves royalty-sharing policies to the academic institutions. Their remains to be dispute about the fact that having a mandatory provision for royalty sharing might not be the best of ideas and such specifics should be left to the rules that are made later taking into account in the changing environment or to the judgment of the University bodies, looking to their profits and the best way they can incentivize scientists and researchers to maximize the interest of the institutions.
Of far greater relevance, both the criticism and the attempted response (such as this patent pool) may be based on the faulty assumption that patents are the primary barrier to access to essential medicines. A study published in 2004 suggests that poverty, rather than patent policies, inhibits access to essential medicines in developing countries. The study examined sixty-five low- and middle-income countries and found that patenting was rare (1.4%) for the 319 products on the World Health Organization’s Model List of Essential Medicines (WHO-EML). The author argued that “[p]atents cannot cause essential medicines to be inaccessible in ‘many’ developing countries because they do not exist 98.6 percent of the time; similarly, patents cannot be a ‘global’ necessity of pharmaceutical business because companies forgo them 69 percent of the time.”
However, several objections have been directed against this study, including the fact that limiting the analysis too only “essential medicines” as defined by those medicines on the WHO-EML is overly narrow and imprecise (the reader is referred to the Attaran article for a more detailed discussion). Additionally, it has been argued that new drugs (as opposed to the older drugs on the WHO-EML) will not be available if pharmaceutical companies cannot gain returns for their investments. In such cases, patent pools may very well increase access in developing countries by reducing the transaction costs necessary to obtain a license and presumably also the licensing fee. This is not to suggest that patent pools are “the answer.” However, reading the above study to mean that patent policies are irrelevant – and I am not suggesting that that was the author’s intent – is likely an overstatement of the reality of the situation. While GSK’s gesture is not without merit (to GSK’s credit the patent pool is not the only avenue GSK is exploring), poverty is also clearly a factor that must be considered when addressing this issue. Ultimately, the precise interplay between poverty and patent barriers will determine the utility of these types of patent pools.
2010 will be an important year for industry and developing countries that hope to promote the commercialization of genetic resources (GR) and traditional knowledge (TK).Next year, the Convention on Biological Diversity (CBD) plans to conclude negotiations to develop an international regime on access and benefit-sharing (ABS) of biological resources.Bio-diversity rich developing countries with relatively little research and development expertise and funding resources have a particular interest in these negotiations to promote international collaborations.The ongoing negotiations cover many topics such as compensation for resource providers, prior informed consent of knowledge holders, the logistics of providing access to the GR, and how benefits resulting from the collaborations will be shared.One important topic of ongoing discussion is whether the CBD should create international standards to implement ABS or allow contracts to be negotiated on a case by case basis pursuant to a set of underlying standards and principles.(See Source 1).
Material Transfer Agreements (MTA) are one type of agreement that can be tailored to benefit both developing countries and industry collaborators alike.MTA’s are agreements governed by contract law that generally define the provider and recipient of materials, the identity of the materials, what the recipient can do with them, and the obligations of each party.MTA’s can also protect the GR or TK of a discrete local community as a trade secret, assuming the knowledge is not widely known.MTA’s involve legal concepts from contract law, intellectual property law, technology transfer, antitrust law, and sometimes may include biodiversity and biosafety issues.MTA’s have the additional advantage of being accepted and even endorsed for the purpose of developing GR and TK by industry, such as the American BioIndustry Alliance (ABIA).
The use of MTA’s has been proposed for the protection of biological resources such as plants, seeds, genes, and chemical compounds around the world. (See Source 2).The MTA provides the ownership rights necessary for the developing countries to protect their GR and TK in the course of bioprospecting and to combat biopiracy.Bioprospecting involves analyzing biological materials for active components that may have commercial value.However, biopiracy occurs when the country harboring the material, sometimes knowing of its medicinal qualities for thousands of years, is denied revenue or royalties from industries that have successfully commercialized the material.
The countries that are the most vulnerable to loosing commercial opportunities relating to their biological resources are those countries with legal and regulatory systems which cannot effectively monitor bioprospecting.Further, the misappropriation of a country’s biological resources may or may not actually be illegal in that country, depending on the whether laws regarding biopiracy have been instituted.The MTA may be a particularly useful tool in such a system to document the ownership of these resources.Countries often require a permit to remove indigenous plants at a minimum, but may be lacking in defining and documenting the ownership and purpose of the removal or, more importantly, may not have sufficient capacity to negotiate mutually beneficial terms.
The MTA has been proposed to be used to transfer indigenous biological resources in conjunction with Prior Informed Consent (PIC) from the local community in which the biological resource originated.PIC is required under Article 15 of the United Nations Convention on Biological Diversity, which reaffirms that “states have sovereign rights over their own biological resources.” Obtaining PIC necessarily requires the bioprospector to seek the approval and recognize the rights of the local community in which they are harvesting their research materials.To properly manage the use of a MTA and PIC, a government must develop MTA’s that properly address the ownership rights desired, that maintain the confidentiality necessary to preserve the patentability of the biological resource, and a mechanism to verify the truthfulness and accuracy of the informed consent.This may still be a daunting prospect for some governments, so the use of a private institution to manage the MTA and PIC agreements may be desirable.For example, Costa Rica chose to employ the National Institute of Biodiversity (INBio), a private research and biodiversity management center in Costa Rica that tracks that country’s biological resources and encourages their sustainable use.
The CBD should consider the MTA as part of an integrated solution to implementing ABS standards.MTA’s are a flexible legal tool that can conform to protect the interests of a variety of parties and meet the specific contract terms that must be tailored to the circumstances of each GR and TK.
Vanessa Lancaster
Additional Sources
1. Sikina Jinnah and Stefan Jungcurt, Could Access Requirements Stifle Your Research? 323 Science 464 (2009).
2. Daniel M. Putterman, Model Material Transfer Agreements for Equitable Biodiversity Prospecting, 7 Colo. J. Int’l Envtl. L. & Pol’y 149 (1995).
In February of 2009, the CEO of GlaxoSmithKline (GSK), Andrew Witty, proposed a voluntary patent pool in which the company would contribute its patents for drugs for certain diseases like malaria and tuberculosis. Through contributing to these patent pools, GSK particularly intends to encourage research for neglected diseases that do not currently have treatments. Patent pools such as the one proposed by GSK can either encourage innovation or stifle it depending on the technology donated to the patent pool and how the patent pool is managed.
Patent pools can bring together components of a technology necessary to develop a product when the components are controlled by multiple patent rights holders. This fragmentation of patent rights can increase the cost of bringing new products to market due to the transaction costs of negotiating multiple licenses and the cost of multiple royalties. Patent pools, like portfolio cross licenses, can help encourage innovation by reducing the cost of negotiating licensing agreements and reducing royalty stacking.
Several critical elements should be considered to facilitate the successful establishment of patent pools for neglected diseases such as malaria and tuberculosis that both promote innovation and avoid antitrust violations. One important element for patent pooling to encourage innovation is to only include patents in the pool that are vital to the development of the technology. Essentially, the donating parties must be willing to submit the necessary patented technology to the patent pool for innovation to occur, not just the technology that has been a commercial dead end. Furthermore, including a patent in the pool that is not an essential patent to the technology may give the owner of that patent additional and unjustified influence on the patent pool.
The requirement of including only essential patents in the pool should not be construed to mean that only patents that currently have a lucrative market should be donated to patent pools for neglected diseases. For example, GSK has been criticized for holding back its patents to HIV/AIDS technology, which is clearly a disease with significant importance in developing countries, suggesting to some commentators that industry is reluctant to contribute meaningful technology to patent pools. However, donating patents that currently generate lucrative returns is a difficult hurdle for companies that have fiduciary duties to their stockholders. Instead, companies like GSK have reduced the cost of such patented drugs in developing countries, keeping the patented drug profitable in other regions. Choosing the members in a patent pool is suggested to be performed by an independent evaluation by an expert committee to ensure the optimization of the patent pool for producing a commercial product and promoting innovation. (See Source 1).
Another important element for promoting innovation through patent pools to include only a narrow set of patented technology. The negotiation of patent pools often fail because the patent holders do not have aligned interests or because advances in the technology occur at a fast pace and no clear platform, or standards, have emerged. To overcome this difficulty, a patent pool should be established for a particular and narrow purpose requiring a defined set of technology to promote the development of the desired product or service. For example, it has been proposed that patent pools for the development of specific genetic diagnostic tests, such as for breast cancer or cystic fibrosis, can be successfully formed because enough genetic information is now available to establish a standard that accurately predicts these diseases. (See Source 1). A patent pool may have a better chance of being successfully negotiated through the development of standards because the patent holders of these specific genetic sequences would likely have the common goal of producing a profitable diagnostic test. The source of these standards will likely be a consensus among the scientific community or an opinion produced from a standard setting organization.
Patent pools should also be structured to avoid violation of antitrust law, particularly in the United States and in Europe. A joint study by the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) showed that patent pools are particularly susceptible to anticompetitive violations such as price fixing, output restrictions among competitors to drive up product prices, and collusion. The study showed that patent pools need careful review and oversight to prevent such anticompetitive practices. The DOJ/FTC study found that procompetitive patent pools include terms such as the licensors retaining the right to license their patents individually (ie., a nonexclusive license), license agreements being available to all interested licensees, and the pool providing a clear understanding of the contents of the license. Some commentators have also urged industry to establish an independent governance framework for patent pools with an explicit mandate for public transparency and for promoting the public good, mostly by preventing undue influence by the members of the patent pool. (See Source 2).
Overall, effectively encouraging innovation for neglected diseases through the establishment of patent pools requires transparency of the licensing terms, competent planning, independent governance, and for industry to contribute patented technology in good faith. Successful patent pools like the one proposed by GSK for malaria and tuberculosis stands to benefit millions of people in developing countries by establishing collaboration among experts, the rapid development of desperately needed drugs and diagnostics, and the reduction of the cost of resulting products when they are distributed to the poor. Perhaps a positive outcome of GSK’s patent pool will encourage other industry leaders to establish similar patent pools that would lead to innovative solutions to diseases such as HIV/AIDS.
Vanessa Lancaster and Jason Kasting
Additional Sources:
1. Ted J Ebersole, et al., Patent Pools and Standard Setting in Diagnostic Genetics, 23 Nature Biotechnology 937 (2005).
2. Timothy Caulfield, et al., Trust, Patents and Public Perceptions: The Governance of Controversial Biotechnology Research, 24 Nature Biotechnology 1352 (2006).
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