This special issue of the NBIAP News Report looks at how patents and intellectual property rights affect agricultural biotechnology research and product development. Even when the science is straightforward, the path to commercialization of an agbiotech product frequently entails financial and legal arrangements between many players. Contributed articles by outside writers provide a glimpse into some of these interactions between companies, and between the academic research community and the private sector. Articles by regular News Report writers examine some of the background issues that are moving to the forefront of the debate over biotech patents. Our usual coverage of research news will return next month.
In the Senate, regulatory reform centered on two opposing bills. One bill, S-343, proposed by Senate Majority Leader Robert Dole, closely mirrored the House reform bill except that the trigger for risk assessment and cost-benefit analysis would be a $50 million hit on the economy. The other bill, S-291, offered by Senator William Roth, was deemed to be somewhat more moderate in that it placed greater emphasis on risk assessment while Congressional review of new regulations would be limited to those imposing a $100 million or more cost on the economy. Senator Dole's bill was being processed by the Senate Judiciary Committee while the Roth bill was unanimously cleared by the Governmental Affairs Committee. The Dole bill was opposed by Judiciary Committee democrats, while the Roth bill enjoyed bipartisan support.
Unlike the Roth bill, the Dole bill would give business and industry ample opportunity to mount judicial challenges against cost-benefit analysis conducted by federal agencies. And federal agencies may not exclude from review panels persons who have a financial stake in the regulation's outcome. Indeed, charges have been raised that portions of the Dole bill were drafted by law firms representing utilities, food processing and other companies affected by the bill. The Dole bill also revokes the contentious Delaney clause, a provision of the 1958 Food, Drug and Cosmetic Act, that allows only additives deemed to have zero risk of causing cancer to be used on processed foods.
During the Congressional recess, Republican and Democrat staff members of the Judiciary Committee worked to amend the Dole bill to try to give it a better chance of winning bipartisan support. However, following a rancorous, partisan session on April 27, the Judiciary Committee chairman, using an unusual parliamentary maneuver, forwarded the original bill, minus any amendments, to the full Senate. The Dole and Roth bills will now be combined into a single bill which is expected to be taken up by the full Senate in June. Democrats are sure to propose numerous amendments to any regulatory reform measure proposed by the Republican majority.
Administration spokesmen have criticized the House Regulatory reform bill and the Dole bill as attempts to undermine the nation's key environmental laws and have indicated that the President will not be party to a roll back of environmental regulations.
ADMINISTRATION OPPOSES DEPARTMENT OF SCIENCE At the recent Annual Science Budget Forum sponsored by the American Association for the Advancement of Science, Dr. John Gibbons, the White House Science and Technology Advisor, stated that the Administration is unequivocally opposed to the creation of a Department of Science as proposed by the Chairman of the House Science Committee, Robert Walker. Under the Walker proposal, the research programs of a number of federal agencies would be combined into a new Department of Science. Dr. Gibbons said that U.S. science relied upon a pluralism of support to ensure that good ideas are funded and that the Department of Science proposal would divorce science from the agencies it is designed to support.
SHOULD REGULATION OF BIOTECHNOLOGY PRODUCTS BE REDUCED?
In the April 13 issue of "Biotechnology" Russ Hoyle wrote an article entitled "Biotech needs and industry/government initiative," in which he states that the administration's best hope for staving off the 104th Congress's draconian reform of all regulations, including those governing biotechnology, is to "come up with an aggressive program of regulatory reform that will give the biotech industry a level playing field and expedient clearcut procedures for commercialization." He urges the biotech industry to make common cause with the Administration in the effort to iron out problems in the regulation of biotechnology.
Hoyle points out that the Administration hasn't faced the question publicly of whether the use of genetic engineering presents "significant enough dangers to the environment and public health to justify special regulatory attention." According to Hoyle, the agencies most involved in genetic engineering issues have repeatedly hedged about the safety of the technology, "preferring to put out scientifically inconsistent rules that not only contradict the best scientific thinking on the subject, but also place time-consuming and expensive hurdles in the paths of promising genetically engineered products." As a case in point, Hoyle argues that the EPA and FDA pre-market notification proposals for genetically engineered products should be scuttled to encourage more innovation and cooperative undertakings with industry to streamline the research and commercialization process.
CALGENE BATTLING ON TWO FRONTS
According to the Wall Street Journal, Calgene Inc., of Davis, California, is experiencing serious and costly packing and shipping problems with its much heralded genetically engineered FLAVR SAVR (Tm) tomato. The tomatoes haven't been able to take the pounding incurred by Calgene's system for picking, packing and shipping, and they are being bruised and battered on their way to market. As a consequence, Calgene has had to do a costly overhaul of its packing methods, setting back the timetable for delivery of the tomatoes and causing a cash drain. Calgene maintains that FLAVR SAVR tomatoes will be in 2,500 stores by June. Meanwhile, DNA Plant Technology Corp. of Oakland, California, has demonstrated that its engineered Endless Summer (Tm) tomatoes require no special handling. They are being test marketed in Rochester, NY for rollout in the fall.
On the legal front, Calgene is engaged in a patent infringement suit with Enzo Biochem Inc. of New York over which company owns the rights to the "anti-sense" gene modification process used to produce the FLAVR SAVR. Enzo has alleged that Calgene infringes on its patent for altering genes, while Calgene claims that Enzo's patent is invalid on the grounds that a Calgene researcher was the first to demonstrate how the process works. The validating experiments were performed in 1983 at the Fred Hutchinson Cancer Research Center in Seattle. The Hutchinson Center sold Calgene a license to the process, for which the patent application is pending.
A leading biotechnology expert has testified that the Hutchinson Center research upon which Calgene's technique is based was fraudulent. If Calgene loses the case, it can appeal or pay a royalty to use Enzo's patent. In either event, a loss of the patent case could delay even further its planned nationwide distribution of the FLAVR SAVR tomato this summer.
RUNNING TOTALS FROM APHIS
From 1987 to mid-April 1995, the Animal and Plant Health Inspection Service (APHIS) has issued 689 permits to introduce genetically modified plants. Following the 1993 institution of a simplified notification process for certain types of introductions, APHIS has acknowledged 1739 notifications. The term "introduction" includes not only field tests, but importation into the U.S. and interstate movement, as well.
Combined data for permits and notifications shows that the most frequent genetically engineered phenotypes are herbicide tolerance (785), insect resistance (668), product quality (558), viral resistance (264) and fungal resistance (77). A total of 52 different organisms have been introduced, including engineered trees, flowers, fungi and bacteria. Genetically modified corn is the most used plant (894), followed by tomato (344), soybean (306), potato (262), cotton (230), and tobacco (147).
Two Internet sites provide databases of information on field test permits and notifications. NBIAP's BioMonitoring Database contains up-to-date records that may be searched by multiple criteria, with search output written to a downloadable file. Environmental Assessment documents are also available for viewing or downloading. Access information is listed at the end of this News Report. The APHIS server at ftp.aphis.ag.gov carries permit and notification records updated daily.
One area which has recently received much attention relates to the broad nature of some of the patents awarded to biotechnology firms. The issuance of these broad patents is partially a function of the newness of the industry for which little historical case precedence exists, forcing new patents to be evaluated based primarily on case law from the pharmaceutical and chemical industries. Two of the largest sectors of the biotechnology industry, biopharmaceuticals and plant agriculture, currently have companies involved in controversies related to the issuance of broad patents.
In late March, the biopharmaceutical firm Genetic Therapy Inc. (Gaithersburg, MD) was granted an exclusive license to a sweeping patent issued to the National Institutes of Health. The patent covers gene therapy techniques, with claims supported for all methods of ex vivo human gene therapy with human cells that have been genetically engineered in vitro to express a therapeutic protein or marker. This appears to be a coup for Genetic Therapy, given that over three-quarters of the gene therapies approved for clinical trial to date involve ex vivo therapies. The actual long-term benefit to the firm is still in question for a variety of reasons, one of which being the almost certain litigation that will likely arise from competing companies.
In the agricultural realm there are also a number of patents that have been issued over the last few years that have been considered by many to be exceedingly broad in their scope. In October 1992, Agracetus (Middleton, WI), a subsidiary of W.R. Grace & Co., was issued a patent covering virtually any type of genetically engineered cotton produced in the United States. This represented the first patent covering all transgenic forms of a single crop. Agracetus has also been granted a broad patent by the European Patent Office (EPO) covering genetically engineered soybean. A soybean patent is also believed to have been filed in the United States and Canada. Another U.S. company, Mycogen Corporation (San Diego, CA), was issued a seemingly broad patent covering a method for making plants resistant to certain insects using genes from the soil bacteria Bacillus thuringiensis (Bt). The patent broadly covers any method of modifying Bt gene sequences to make them resemble plant genes.
Whether or not these broad patents should be issued, and their impact on research (both industrial and academic) and society in general, is a matter of debate. From the industrial side, strategies employed by patent attorneys are not unlike those of any other industry in terms of seeking the broadest patent coverage possible. The argument is relatively simple and is often used in the justification of not only patents, but pricing as well: firms that invest the R&D dollars necessary to uncover a patentable discovery should be able to generate an appropriate return on investment, and without patent protection, this is difficult if not impossible. If claims can be supported, regardless of the breadth of the claim, and they are validated through issuance of a patent, companies will seek to leverage their protection through mechanisms including licensing. In essence, as noted by one industry spokesman, "just because a patent is broad doesn't mean it's bad... If somebody invented broadly, they deserve broad coverage". But the issuance of a patent that is considered broad in its scope is sure to bring with it a number of adversaries and a list of fairly generic arguments in opposition.
The Agracetus cotton patent is a fitting example of the path other broad biotechnology-based patents may wander down in the future. Following its issuance in 1992, numerous critics of the patent surfaced, with a few, including the USDA, requesting a re-examination of the patent. Criticisms included the potential negative impact the broad patent would have on research and the fact that the work of Agracetus depended on "prior art," or breakthrough research conducted previously by others. It was this concept of prior art that lead the patent office to consider and undertake re-examination of the patent, and to revoke their prior decision of approval in December of 1994. The patent has also since been revoked in India. Opponents felt vindicated at the patents revocation, while industry expressed concern over the fear that the patent process could become compromised if patents were to be taken back simply because they were controversial. Although revoked, the cotton patent is still in effect today as Grace and Agracetus have an opportunity to appeal the reversal, with the ultimate outcome as yet uncertain.
The impact of this reversal on industry and its ability to garner broad based patents in the future is also unclear. The European Patent Office (EPO) is currently considering a request for re- examination of the Agracetus soybean patent. In this case, an unusual cadre of bedfellows from farmer advocacy groups and industry have come together in opposing the patent, although their reasons differ. Organizations opposing the patent include the Rural Advancement Foundation International, Ciba-Geigy, Monsanto, and Pioneer Hybrid.
Although it seems clear from these recent events that patent agencies are willing to consider and reconsider claims related to broadly defined biotechnology-based patents, it is unlikely that companies will change their strategies of seeking the broadest patent coverage possible. What also seems certain is that opposition to broad agricultural biotechnology patents is solid and will remain undeterred in its efforts, given the potential long term impact that these patents may have on research and the supply of new crops and related technologies worldwide.
The Biotech Patent Climate in Europe
Two recent events in Europe exemplify the controversy that surrounds the issue of biotechnology patents worldwide. Since 1988, there has been an effort to draw up a harmonized biotechnology patent system for member states of the European Union (EU). As recently as December 1994, the European Council and the European Parliament failed to agree on compromised draft legislation, but in January of this year, a compromise had seemingly been reached. But in early March, the European Parliament rejected the directive, throwing the prospect for some kind of harmonized legislation out the window for the near future.
It appears that special interest ultimately lead to the demise of the legislation. Opponents, including anti-technology "Green" activists have labeled the defeat a huge victory and are continuing with plans to challenge biotechnology-based patents that have been issued by the European Patent Office (EPO), one of the existing patenting mechanisms currently in place in Europe.
Although on the surface it would appear that this is a blow to the biotechnology industry, this is not necessarily the case. Many within the industry, although in favor of a more clearly defined patent system in Europe, felt that this directive had become watered down as a result of multiple compromises. Individuals within European biotechnology firms generally expressed the fact that they would prefer to work within the current system of EPO case law than to have worked under the guidelines of the failed directive. What is detrimental to European biotechnology firms is the negative political message this parliamentary vote sends potential investors in European biotechnology. Some feel that this vote has dealt a blow to European biotechnology, lending another competitive advantage to firms in the United States and Japan.
For now, those seeking patents will continue to file through the EPO or with individual national patent agencies. The outcomes for those filing agricultural biotechnology patents seems a bit unclear, as is much of this process. The EPO recently, for the first time, changed its interpretation of what constitutes a plant, versus a plant variety. The highest appeals board of the EPO ruled that a patent granted to Plant Genetic Systems (Ghent, Belgium) and Biogen (Cambridge, MA) for producing herbicide resistant plants through genetic engineering cannot cover plants and seeds resulting from the patented process. Although plant varieties are excluded from patentability under the terms of the European Patent Convention of 1973, this represents the first time that the EPO has restricted protection for a specified plant.
Although it is possible that this decision will impact a number of patents already issued by the EPO on other genetically engineered plants, PGS has expressed little concern stating that the decision will not in practice reduce its protection. It is thought that the reason for the ruling might be a reinterpretation of the term "plant," which by definition, could incorporate plant varieties and thus be unpatentable.
The failed EU biotechnology directive would have made it difficult for the EPO to not allow plants to be patented, according to some familiar with the draft legislation. Its failure to pass may open the door for opposition groups to more actively and successfully challenge the breadth of some of these biotechnology-based agricultural patents. Stay tuned!
William O. Bullock
Institute for Biotechnology Information
Research Triangle Park, NC
PUTTING TOGETHER THE PATENT PUZZLE -- THE KEY TO COMPETITIVE
POSITION AND PROFITS
Over the next few years, the application of biotechnology to agricultural and food products will be moving broadly from the realm of science into the marketplace. Many people in the financial community are skeptical over the commercial potential of the technology; however, we believe "Main Street" is well ahead of "Wall Street" in terms of recognizing the real world potential of agricultural biotechnology. While the first genetically engineered agriculture and food products are here today, there is a pipeline full of new value-added products waiting to come to market over the next few years.
Consumers are asking produce managers where they can buy the new generation of genetically engineered tomatoes, such as Calgene's FLAVR SAVR (Tm) tomato and DNA Plant Technology's Endless Summer (Tm) tomato, both of which have more consistent year-round taste. Unbeknown to many people, a transgenic version of the enzyme chymosin is now used to make most of the cheese in the U.S. The American dairy farmer is rapidly accepting Monsanto's Posilac (Tm) recombinant Bovine Somatotropin (BST), which is increasing milk production and lowering costs. In response to the anticipated beneficial impact on the production economics for the major row crops, farmers are expected to stand in line in 1996 to buy Ciba Seeds' (Ciba-Geigy) and Mycogen Plant Sciences' (Mycogen) insect resistant seed corn; Stoneville's (Calgene) herbicide tolerant cottonseed; Delta and Pine Land's insect resistant cottonseed; and Asgrow's herbicide tolerant soybeans. These products will reduce farmers' costs and create premium value-added characteristics for the farmer, the agribusiness and food distribution chain, and the consumer.
While many companies are preparing to commercialize new ag-biotech products, their ability to do so depends on whether they have strategically developed the "freedom to operate", based on legal access to all technologies. The devil is always in the detail. What is not widely recognized is that the ability of a company to commercialize a genetically engineered product is limited by a number of factors: (1) a large number of technologies are used in developing a single product; (2) technologies are subject to proprietary intellectual property rights, many of which have been patented. A patent gives the holder the ability to exclude others from using and selling products which utilize these technologies; (3) the ownership of many technologies is uncertain, given the number of patent applications which are pending, as well as overlapping claims. Even after patents are issued, they are subject to interference claims and litigation; and (4) patented technologies may or may not be available on a licensing basis, based on different degrees of exclusivity.
The purpose of this article is not to deal with the complexity of the intellectual property and patent issues surrounding the technologies used in agricultural biotechnology. Patent law, as applied to agricultural biotechnology, is new and evolving. Rather, it is to focus on the real world issues and practical examples as to how companies are strategically creating the "freedom to operate" to commercialize products, which is the key to competitive position and profits. We will deal with three areas of discussion: (1) the key technology pieces which are typically required to genetically engineer a specific trait into a plant; (2) how companies are creating the "freedom to operate"; and (3) examples of how two companies, DNA Plant Technology and Mycogen, are solving their own "patent puzzles".
One Product Requires a Number of Key Technologies
The application of biotechnology to plants represents a broad spectrum of technologies, including recombinant DNA, which allows the direct transfer of a specific gene into a plant. An individual company's competitive position reflects: (1) the identification and isolation of genes that determine specific characteristics; (2) the development of efficient transformation systems, which include a large number of technologies, to create transgenic plants; and (3) the development of broad technologies that can create a pre-emptive competitive position. The ability to genetically engineer a specific trait, and most importantly, the "freedom to operate" from a commercial standpoint, requires legal access to a number of pieces of intellectual property, the most important of which are:
Negotiating the "Freedom to Operate"
Given the number of technologies, proprietary patent positions, and uncertainties over the ownership of other patents, a company's ability to develop the "freedom to operate" is critical. In our view, a company's ability to gain legal access to all the technologies necessary to commercialize a genetically engineered product and protect against the future resolution of uncertain patent ownership requires strategic technology positioning. While part of the answer is licensing, when it is available, licensing can become very expensive, whether it be based on an up-front paid-up fee or a royalty arrangement. In the latter case, what is not readily appreciated is the royalty load that some new genetically engineered products will carry, which will dramatically reduce their profitability.
In the long run, the companies that will be successful in terms of maximizing profits from their technology base will be those that are willing to strategically negotiate timely access to needed technologies. This can be accomplished through cross-licensing, the formation of joint ventures between holders of key technologies and commercial alliances. In our view, priority should be placed on commercializing products as quickly as possible, or otherwise, risk competitive position.
The Real World Of Putting Together the Intellectual Property
To get an idea as to how two companies are strategically positioning themselves to create the "freedom to operate", we will describe two different approaches: DNA Plant Technology's genetically engineered Endless Summer tomato, which is now in a test market and is expected to be rolled out commercially in fall 1995; and Mycogen's insect resistant corn, which is expected to be commercialized in 1996.
DNAP's Endless Summer Tomato - A Case of Developing Proprietary
Alternatives to Create the "Freedom to Operate". DNA Plant Technology's Endless Summer tomato has been genetically engineered to turn off the enzyme-based production of ethylene, which coordinates a number of the biochemical processes during the ripening of tomatoes. DNAP's competitive position is based on its proprietary technological base and the development of proprietary alternatives to insure its "freedom to operate". The following summary discusses DNAP's major technologies and its strategy to control its own destiny.
DNAP's "freedom to operate" to commercialize their Endless Summer tomato is subject to negotiating a cross-licensing agreement with Monsanto for use of the 35S promoter and the kanamycin (kanR) selectable marker gene system. While the current version of the Endless Summer tomato utilizes these two patented components, DNAP is currently in the process of substituting a proprietary fruit specific promoter to drive expression of the TRANSWITCH construct and an ALS-based selectable marker system, which is made up of the proprietary ALS gene (patented by DuPont) along with a proprietary promoter and terminator. In collaboration with DuPont, DNAP developed a selectable marker system, which is resistant to chorsulfuron, a sulfonylurea-based herbicide, which is produced from a plant-based enzyme, ALS (acetolactate synthase). DNAP's proprietary ALS promoter has a patent which is pending. A newer technology package, based on its proprietary promoter and marker gene system will be used in the new second generation version of the Endless Summer tomato. With regulatory approval of the Endless Summer tomato with the new technology package expected in early 1996, DNAP will have complete "freedom to operate".
Mycogen's Insect Resistant Corn - A Case of Cross Licensing to
Accelerate Commercialization and Create the "Freedom to Operate"
Mycogen and Ciba Seeds each are expected to be the first two companies to commercialize B.t. (Bacillus thuringiensis) insect resistant seed corn in 1996, which has shown very effective protection from the European corn borer. The intellectual property position in bringing B.t. to the major crops is complicated by the number of players, the number of technology pieces which are patented and the number of patent filings which are pending. While it may not be clear whether any one company has the complete "freedom to operate", Mycogen believes that its broad intellectual property and patent position, both issued and pending in both the U.S. and Europe, puts it in the leading B.t. technology position.
Mycogen's strategic approach to become one of the first companies to commercialize insect resistant seed corn and create the "freedom to operate", is based on a two phase strategy. The first phase was the signing of a cross licensing agreement and research collaboration with Ciba Seeds in 1993. In return for giving Ciba Seeds access to its technologies for its first generation product, Mycogen was able to accelerate its entry into the marketplace by gaining access to Ciba Seeds' first generation B.t. transformed corn plant.
Ciba Seeds' recognition of Mycogen's broad intellectual property position as related to bringing B.t.'s to plants, in our opinion, was instrumental in forging the Ciba Seeds/Mycogen relationship. This position is based on four critical technology areas: (1) the transformation of plants with insecticidal B.t. genes to bring insect control to plants. A patent covering this broad area issued in Europe and is pending in the U.S.; (2) the synthesis of B.t. genes to dramatically improve B.t. protein expression in plants. A patent covering the synthesis of B.t. genes was issued in the U.S. in early 1995 and is pending in Europe;(3)the composition of plants containing synthetic B.t. genes for optimal insect control. Related patent filings are pending in both the U.S. and Europe; and (4) Mycogen's large collection of proprietary B.t. genes based on patents, both issued and pending.
Mycogen access to Ciba Seeds' technology base, combined with its own, has created almost complete "freedom to operate". Ciba Seeds' technology base includes the following major components:
In taking a two phase approach, along with the solidification of its broad B.t. intellectual property position, Mycogen is creating the "freedom to operate".
The Bottom Line
While intellectual property and patents are valuable assets, they have no real value if you cannot bring products that utilize these technologies to the marketplace. The key to a company's competitive position and ability to profit from its technology base, reflects an attitude and sense of urgency to develop market-oriented solutions to develop the "freedom to operate", and real-world strategies to get into the marketplace as quickly as possible.
Sano M. Shimoda, President
BioScience Securities, Inc., Orinda, CA
BioScience Securities, Inc. is a brokerage firm that specializes in institutional research and investment banking in the agricultural biotechnology industry.
WHAT TO EXPECT WHEN INDUSTRY CALLS (OR WHEN YOU CALL INDUSTRY)
Many companies are now seeking to fill holes in their technology pipeline by obtaining rights to research being conducted at universities and other nonprofit research institutions. At the same time, shrinking federal research budgets are causing researchers to look to industry for laboratory support. University researchers will find themselves surrounded by conflicting interests when faced with the prospect of obtaining industry funds to support their programs.
Competing Interests - While universities might ultimately be interested in seeing their research lead to inventions which are adopted by industry and generate profits, short term profit making is generally anathema to the academic goals of fostering education and seeking knowledge for its own sake. Universities, whose mission is to disseminate knowledge through publications and teaching, will seek to make knowledge gained from research available to the scientific community, and to use that work to further the interests of their students. The interest of industry, on the other hand, is specifically geared to the profit that can be generated, always weighing the risk of investing in research against the possibility of obtaining profits.
Professors must address the overriding interests of industrial sponsors and their university employers -- short term profits and long term discovery -- when faced with the prospect of attracting industrial funding. This is not a simple task, since the professor's interest will not necessarily coincide with that of either the university or the company.
Forms of Industrial Support - While private companies sometimes make unrestricted grants or gifts to universities, generally the support will take the form of a research contract where the companies obtain some rights to the intellectual property (usually patents) that is derived from the work. The researchers will have the right to publish research results, but the sponsor should have prepublication review and the rights (1) to delay publication to seek patent rights, and (2) to delete any confidential information that may have been included in the publication.
Most often, the exact terms for obtaining rights to intellectual property are negotiated in a license agreement after the intellectual property is developed. As a rule, universities prefer to retain title to the intellectual property but are willing to offer exclusive rights to industrial sponsors. Payment for these rights will vary, but the basic components consist of (1) payment of patent costs, (2) an up front payment, and (3) royalties based on sales for the term of the license.
When a company is very interested in the work of a particular researcher, it may seek to retain the person as a consultant in addition to paying the university for laboratory work. In this way, the company can obtain the expertise of the professor directly, along with intellectual property that may be developed solely through the consulting relationship. This also gives the company some insurance to procure the intellectual property of the professor's lab, if the professor changes institutions. Generally, the professor is the key to moving a discovery through to commercialization. Even though the company may have rights to the intellectual property continued in the lab by students and postdocs, the inventions are often worth very little without the continued involvement of the inventor.
University Policies - Researchers must be very careful to consult their employment contracts as well as the policies of the university to determine just how much industry involvement is allowed. This will vary from one institution to another. Minimally, the institution will insist on disclosure of the activity. Some institutions require approval at various levels of the administration. The rules become more complicated if the company offers equity to the professor in return for services. When professors obtain actual ownership in a company, often approval must be secured from the Board of Regents or other governing body of the university.
A Balancing Act - Industry can be a very lucrative source of research funding for university laboratories, which can often include additional direct consulting income for professors. Universities, especially publicly funded institutions, are very careful to keep control of the direction of their research and avoid conflicts of interest by researchers. The immediate profit motives of industry must be balanced with the long term research and teaching interests of universities.
Paul Elihu Stern
Sills, Law, Essad, Fiedler & Charboneau
Sills, Law is a Michigan-based law firm offering a wide range of legal services to corporations, educational institutions, nonprofits, and government agencies.
DEBATE CONTINUES OVER PATENTING ANIMALS
The potential for patenting a living organism derived through technological intervention arose in 1973, when recombinant DNA was first inserted into a host microorganism. Initial applications for patents of living organisms were refused, but a seminal test case before the US Supreme Court in 1980 changed everything. In Diamond vs Chakrabarty, the Court ruled that any human invention, including a biological invention, was patentable under the utility patent law. The case specifically concerned a bacterium genetically engineered to degrade environmental oil spills, but the decision extended patent protection to any biological material with unique features acquired in a brush with science. This ruling was followed by the granting of patents on plants, and by 1987, the US Patent and Trademark Office (PTO) considered all nonhuman, multicellular living organisms to be patentable.
The vital criteria embodied by a utility patent are novelty - biological material is new and has not previously been described; utility - the invention has a useful purpose; and non-obviousness - the invention is not a simple extension of the state of the art. Although not designed for protection of living organisms, utility patents now apply to plants, animals, and microorganisms. Some forms of property may also be protected as trade secrets, assuming that crucial information can be withheld from the public. An example might be retaining as a trade secret a microorganism, while selling its products.
The development of transgenic animals dates to the early 1980s, when it was shown that genes from some source other than parental germplasm could be inserted into the reproductive cells of another animal. Under ideal circumstances, the offspring of the recipient animal carry the modified genes and the traits they encode. Although initial efforts focused on mice and rabbits, extensive effort is currently being applied to development of transgenic cattle, swine, goats, sheep, poultry, and fish.
The first patent on a genetically manipulated animal, Harvard's OncoMouse, was granted in 1988. A nearly five-year hiatus in the issue of patents for animals followed, but now the PTO has issued patents for other transgenic mice and for a transgenic rabbit. It remains true that most potentially patentable animals are transgenics, produced by some form of genetic manipulation. It is likely only a matter of time before pending patent applications for transgenic farm animals are approved.
The arguments for and against the patenting, and more fundamentally, the ownership, of animals are legion. The major argument of biotechnology companies regarding patents is economic, suggesting that funds would not be invested in research without patent protection to guarantee profitability. They also contend that patenting encourages invention, since the legal protection of intellectual property and obtaining of exclusive use of an invention yield incentives for the sort of entrepreneurial investment needed to bring new products to the market. Lobbyists for biotechnology companies have been instrumental in the defeat of proposals to establish temporary moratoriums on animal patenting to allow lawmakers time to examine the issue.
Opponents of animal patents feared the broadness in Harvard's claim for the OncoMouse. It has been speculated that if granted a European patent, Harvard would be able to collect royalties on any non-human mammal developed with the same method (introduction of an oncogene into an embryo of the animal of choice). This sort of monopoly could be very costly in the entire scheme of research; only the intervention of a not-for-profit foundation has brought the OncoMouse into a cost position which allows its general use in cancer research.
In the case of commodities such as hybrid seed corn, companies profit by selling seed to farmers year after year. However, transgenic domestic animals could in theory represent a one-time purchase, leaving little impetus for development of the animals in the first place. Pro-biotech lobbyists have mediated defeat in Congress of bills to grant livestock farmers a royalty exemption on offspring their transgenic stock may produce. It is more likely now that an initial fee would cover purchase of a transgenic animal and subsequent offspring.
Patent royalties on transgenic animals could be waived for farmers, but are not likely to be. There may be no way to strike a balance between farmers who want to lower costs and biological seedstock suppliers desiring maximum profit. But the issue may be irrelevant for traditional farmers if, as has been predicted, agriculture shifts from being an extensive effort to an intensive one and large companies retain ownership of transgenic animals.
Production groups point out that inequality between genetic engineering and breeding may result, since genetic engineers may have greater access to animal varieties than breeders have to genes. Furthermore, genetic uniformity may increase. Patenting may increase the monopolization of agriculture, as well as increase the dependency of farmers on biotechnology companies. A patent challenge can be a lengthy and expensive process, affordable only by large companies. Small companies may have no choice but to pay up. With a broad patent claim, entire market sectors could be closed to competition.
The concerns of some animal patent opponents extend to the possible lowering of social barriers which prevent maltreatment of living organisms, to say nothing of the issue of fairness. If domestic animals have evolved naturally through biological history, affected to a greater-or-lesser extent by human intervention, it seems ludicrous that engineering of a very small change in an animal's makeup should allow one to gain exploitative legal control over it and its descendants.
Animal welfare issues also figure into the generation and patent protection of transgenic animals, largely in the sense that the animals' well-being not be subjugated to profitability. It may, in some cases, be ill-advised to assign intellectual property rights, with exclusive rights to exploit, to some inventors. Furthermore, there is valid concern that patents on living organisms could negatively alter society's perception of what constitutes life, blurring the line between animate and inanimate. In the end, the key to a balanced solution may be the integral involvement of scientists in decision-making processes, rather than making this a strictly legal or political debate.
J. Glenn Songer
University of Arizona
The material in this News Report is compiled by NBIAP's Information Systems for Biotechnology, a joint project of USDA/CSRS and the Virginia Polytechnic Institute and State University. It does not necessarily reflect the views of the U.S. Department of Agriculture or of Virginia Tech.
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