Patenting and Licensing of Research Tools and Biomedical Innovation

1. Patenting and Licensing of Research Tools and Biomedical Innovation John P. Walsh, University of Tokyo/UIC Ashish Arora, CMU Wesley M. Cohen, Duke University 2nd EPIP Conference: Maastricht, November 24-25, 2003 This research funded by The National Academy of Sciences’ Science, Technology and Economic Policy Board; and the National Science Foundation.

2. The Changing Context of Biomedical Innovation • Technological change • Policy change • Change in participants

3. Concerns Raised • Anti-commons [Heller&Eisenberg, Shapiro]: Numerous claimants lead to breakdown and loss of collective surplus (e.g., GoldenRice™) • Limitations on subsequent discovery and improvement due to use of patents on upstream, foundational discoveries [Merges&Nelson] • But be mindful of benefits of patents

4. Data and Method • 70 interviews • 10 pharmaceuticals firms • 15 biotech firms • University personnel • Patent attorneys, government officials, etc.

5. Preconditions for Breakdown • Growing number of patents • Many biotech firms • Increase in university patenting • Defensive patenting

6. Preconditions (cont.) “The patent landscape has gotten much more complex in the 11 years I’ve been here. When I started and we were interested in assessing the third party patent situation, back then, it consisted of looking at [4 or 5 named firms]. If none were working on it, that was the extent of due diligence. Now, it is a routine matter that when I ask for some search for third party patents, it is not unusual to get an inch or two thick printout filled with patent applications and granted patents. With the growth of biotech around the world, you have greater numbers and they overlap to a greater extent. In addition to dealing with patents over the end product, there are a multitude of patents, potentially, related to intermediate research tools that you may be concerned with as well.” (Biotech IP executive)

7. Preconditions for Restricted Access • Foundational discoveries and research tools now commonly patented • Recombinant DNA [Cohen-Boyer]-now expired • PCR and taq polymerase • Cre-lox, OncoMouse, etc. • Targets for intervention (COX-2, telomerase, etc.)

8. Preconditions (cont.) • Broad claims, especially if invention “not in hand” • Homology-CCR5 (HGS) • Reach through-COX-2 (U. of Rochester)

9. Anti-Commons Breakdown? • Vast majority of respondents (over 90%) say: “Never happens”

10. Access • Lots of tools and targets have limited access • AUTM (‘00): 90% of licenses to startup firms exclusive (compared to 37% to large firms) • Overall 50% exclusive • Henry, et al., Genetic Inventions • Univ/Govt Lab: 68% exclusive • Firms: 27% exclusive • Complaints about target access widespread (about one-third of sample) • Owners say it is appropriate to exclude

11. Access • “Your competitors find out that you’ve filed against anything they might do. They complain, ‘How can we do research?’ I respond, ‘It was not my intent for you to do research.’” (Pharmaceutical firm, licensing manager)

12. Access • Possible cost: diminished variety of attack • Firm specific libraries • Limited capabilities (small firms) • Diverse strategies

13. Access-examples • BRCA1 (Myriad) • Hepatitis C virus protease (Chiron) • Telomerase (Geron) • Note: In each case, while some were excluded, multiple firms have access.

14. Effects on University Research • Most non-commercial research uses OK • But, conflict over competitive use of diagnostics using patented genes • Royalties “high”: can be 100% of direct costs • Use of diagnostic clinical tests integral to research

15. MTAs a particular concern • Big increase in negotiation time: • Days -> Months; • Occasionally projects stopped • Campbell, et al. (2002): • 21% abandoned promising line of research • 24% had publication significantly delayed

16. Increasing Secrecy • Campbell, et al. (2002) • 35% said sharing decreased • Denials associated with doing commercially focused research • But, effort and concern about publication much more salient

17. Willingness to Share Information, by field, 1966 & 1998 　　　　1966 　 1998 Exp Bio 45% 14% Math 55% 42% Physics 52% 37%

18. Predictors of Secrecy • Scientific competition +++ • Industry funding + • Industry collaborator - • Patents 0

19. Working Solutions:Overcoming the Anti-Commons and Restrictions on Access • Relevant number of patents is moderate: 0-12 • “Working Solutions” combine: • License negotiation • General purpose tools widely licensed • Even targets often licensed non-exclusively • Inventing around • Off-shore • Challenge in court • Infringement/“Informal Research Exemption”

20. Infringement/“Informal Research Exemption” • Universities • Feel free to use technologies for “research” • Firms generally refrain from asserting (though clinical diagnostics are exception) • University research adds value • Community: • Repeated game with seller=buyer, information sharing • Norms of research collegiality and open access • Outsiders misbehave--Miami C.H.; duPont

21. University Research Exemption “It is not a problem. I know this is a murky legal issue, and you should talk to patent lawyers, but in everyday practice, it is not murky. There is a concept of “academic use”. If you have published it, I can use it for academic purposes. I’ve never heard of any case where someone was sued for using patented technologies. I don’t know if it is solidly defensible in the law, but it is the practice. When I have a patented technology, academic colleagues would not even think of paying to use it.” (University Scientist with 25+ patents)

22. Infringement/“Informal Research Exemption” • Firms • Hard to detect • About one third mention using this strategy, most say others do this • Some claim research exemption, or that patent scope very narrow • May take license later if target proves useful • If need be, can challenge in court, invalidate

23. Institutional Responses • “Public” databases • GenBank, PDB-Journal policies • Merck Gene Index • The SNPs Consortium • NIH advocating for public researchers • Cre-lox and OncoMouse • Stem Cells • New PTO guidelines-ESTs • Court’s narrowing of broad early claims • Still a lot of uncertainty

24. Conclusions • Increasing complexity of patent landscape • Little anticommons breakdown • Development of “working solutions” • Including “research exemption” • Supported by norms of exchange/access • Institutional pressures to increase access • Price discrimination reduces welfare loss • High technological opportunity reduces problem

25. Conclusions • New actors have to learn process and transition period is cumbersome • Concern over targets and other patented upstream discoveries • Possible negative social welfare implications • Patents doing what they are supposed to do?

26. Conclusions • And remember: • Patents encourage tool discovery • Tools increase R&D productivity • Could still get problems in the future • New technologies and new entrants likely to upset balance, but system seems robust

27. Questions, Comments, Suggestions? Prof. John P. WALSH Research Center for Advanced Science and Technology The University of Tokyo 4-6-1 Komaba Meguro-ku, Tokyo 153-8904 walsh@aee.u-tokyo.ac.jp