Defending Privitization
(Cite as: 53 Emory L.J. 359)
Emory Law Journal
Winter 2004
Comment
*359 DEFENDING THE PRIVATIZATION OF RESEARCH TOOLS: AN EXAMINATION OF THE “TRAGEDY OF THE ANTICOMMONS” IN BIOTECHNOLOGY RESEARCH AND DEVELOPMENT
Heather Hamme Ramirez [FNa1]
Copyright © 2004 Emory Law Journal; Heather Hamme Ramirez
I. Introduction
In recent years, the United States has witnessed an explosion of research, development, and commercial interest in the biotechnology field. [FN1] Since 1992, the number of biotech patents granted has increased substantially, [FN2] and the industry has more than tripled in size. [FN3] New biotech drug and vaccine approvals rose from two in 1982 to thirty-five in 2002. [FN4] In addition, university technology transfer has grown steadily with increases in the number of invention disclosures, patents issued, and licenses executed for inventions developed in university laboratories. [FN5] Two reasons for these developments are the Supreme Court’s decision in Diamond v. Chakrabarty [FN6] in 1980 and Congress’s enactment of the Bayh-Dole Act [FN7] that same year. [FN8]
*360 In Chakrabarty, the Supreme Court held that a genetically engineered bacterium was patentable under
Research tools, as their name suggests, are materials used in the laboratory to aid investigators in discovering and developing new biotechnology products. [FN14] The National Institutes of Health (NIH) defines research tools as “the full range of tools that scientists use in the laboratory, including cell lines, monoclonal antibodies, reagents, animal models, growth factors, combinatorial chemistry and DNA libraries, clones and cloning tools (such as PCR), methods, laboratory equipment and machines.” [FN15] Research tools are sometimes referred to as “upstream” products because they comprise early-stage inventions that are used to develop end-products. [FN16] Similarly, end-products are known as “downstream” inventions because they are developed through the use of “upstream” research tools. [FN17] An example of a research tool *361 is polymerase chain reaction (PCR) technology. [FN18] PCR is a process that “selectively and exponentially amplifies (or multiplies) a specific region of DNA, producing quantities of DNA sufficient for experimentation and analysis.” [FN19] PCR has aided researchers in developing countless end-products and is a standard technique used in almost every molecular biology laboratory. [FN20]
Prior to the enactment of the Bayh-Dole Act, traditional scientific norms encouraged investigators to share information and make research materials freely available in the public domain. [FN21] After Bayh-Dole, however, researchers increasingly sought to patent their inventions and disseminate new technologies through licensing. [FN22] The NIH’s Working Group on Research Tools reported that difficulties with negotiating license agreements sometimes interfered with the widespread dissemination of research tools. [FN23] Consequently, some members of the scientific community are concerned that allowing patents for research tools will stifle technological advancement and decrease the availability of useful tools. [FN24] In particular, Professors Michael Heller and Rebecca Eisenberg have asserted that increased privatization of upstream research tools may result in a “tragedy of the anticommons.” [FN25] A *362 tragedy of the anticommons emerges “when multiple owners each have a right to exclude others from a scarce resource and no one has an effective privilege of use.” [FN26] Thus, Professors Heller and Eisenberg urge that if researchers and institutions continue to patent upstream research tools, the difficulty of obtaining access to important tools may impede the development of downstream products. [FN27]
In response to Heller’s and Eisenberg’s argument, several commentators have proposed solutions for avoiding a tragedy of the anticommons in biotechnology that involve creating exceptions to the patent laws specifically for research tools. For example, Professor Janice Mueller has proposed an expansion of the experimental use exception to promote development of downstream products. [FN28] Similarly, Professor Maureen O’Rourke suggests establishment of the fair use doctrine in patent law to overcome transaction costs and strategic bargaining problems related to the dissemination of important tools. [FN29]
This Comment will demonstrate that the potential for a “tragedy of the anticommons” in the biotechnology industry is overstated, and that imposing exceptions in the patent laws specifically for research tools is unnecessary. A “tragedy” is unlikely to emerge as a result of the privatization of biomedical research tools for at least three reasons. First, privatization provides the necessary incentive for investment in biotechnology research and development and has triggered the remarkable growth of the biotechnology industry. [FN30] Second, despite privatization, many research tools have been widely disseminated in the scientific community. [FN31] Third, scientists recognize the benefits of sharing materials freely whenever possible and have developed informal norms to achieve broad dissemination of research tools. [FN32] Furthermore, because the potential of a tragedy for the anticommons in biotechnology is remote, creating exceptions to the patent laws for research tools is unwarranted.
*363 Part II of this Comment describes the judicial and legislative developments in 1980 that dramatically changed the landscape of biotechnology research and development in the United States. Part III examines the theory of the tragedy of the anticommons and its implications in the biotechnology context. This Part also discusses the views of other commentators on the anticommons theory, focusing on those who propose changes to the patent system in order to avoid a potential tragedy of the anticommons in the biotech industry. Part IV defends the privatization of research tools and explains why the potential for a “tragedy of the anticommons” in biotechnology is overstated. First, Part IV.A presents empirical evidence to demonstrate that the privatization of research tools provides an incentive for investment in downstream research and increases the commercialization of useful end-products. Next, Part IV.B discusses recombinant DNA technology and PCR technology as examples of research tools that have been broadly disseminated despite being privately owned. Then, Part IV.C observes that researchers in both the public and private sectors share research tools freely whenever possible, and have developed informal norms to manage access problems to research tools. In particular, the NIH has taken a leading role in promoting access to research tools through publication of its Principles and Guidelines. Finally, Part V claims that making exceptions to the patent laws to overcome potential problems with the dissemination of research tools would interfere with the patent grant’s right to exclude. Prohibiting the owners of research tools from taking advantage of the right to exclude may decrease the incentive for disclosing new technologies for the public benefit and may ultimately lead to a reduction of downstream research. Furthermore, the current patent system and the courts are well equipped to ensure that unnecessarily broad reach-through claims are not permitted.
II. A Brief History of the Biotechnology Industry in the United States:
Chakrabarty and the Bayh-Dole Act In Diamond v. Chakrabarty, the Supreme Court ruled that a living organism qualifies as patentable subject matter under
In so ruling, the Court interpreted the patent statute broadly and stated that Congress intended patentable subject matter to include “anything under the sun that is made by man.” [FN39] In essence, the Court determined that the key to patentability was not whether something was living or nonliving, but whether the invention was the result of human intervention. [FN40] Chakrabarty thus expanded the categories of patentable subject matter and contributed to the increased importance of intellectual property issues in biotechnology research. [FN41] Commenting on the significance of this case, Paul Rabinow declared that Chakrabarty is “an emblem of an emerging new constellation of knowledge and power.” [FN42]
In addition to this judicial decision, Congress’s enactment of the Bayh-Dole Act [FN43] in 1980 significantly impacted the biotechnology industry. The Bayh-Dole Act encourages research institutions receiving federal funds to patent their discoveries and license the technology to companies in the private sector. [FN44] Bayh-Dole represented a major shift in federal policy. Prior to 1980, *365 scientific knowledge was generally viewed as a shared resource. [FN45] Therefore, scientists exchanged research materials and information relatively freely and shared information without the use of formal agreements. [FN46] Inventions that were developed in federally funded laboratories were made freely available to the public “to assure full utilization of publicly-sponsored research results for the public good.” [FN47] However, after the enactment of the Bayh-Dole Act, many researchers and institutions that received federal grants sought to obtain patent protection on new discoveries in order to increase revenues from licensing. [FN48]
Proponents of the Act believed that allowing recipients of federal funds to obtain patent protection for their inventions and subsequently to offer exclusive licenses to companies in the private sector would spur commercialization of biotech end-products. [FN49] “Bayh-Dole effectively shifted federal policy from a position of putting the results of government-sponsored research directly into the public domain to a pro-patent position that stressed the need for exclusive rights as an incentive for industry to undertake the costly investment necessary to bring new products to market.” [FN50] The prevailing view is that exclusive licenses are imperative for the development of early-stage technology because they induce companies to invest time and money in *366 technology that is not guaranteed to be successful. [FN51] Thus, the Bayh-Dole Act encourages universities to patent their inventions and collaborate with industry to promote the commercialization of new technologies. [FN52] The Act also requires universities to share patent royalties with individual inventors, thus providing researchers with an added incentive to seek patent protection for their discoveries. [FN53]
The emphasis on patenting inventions developed in academic and government laboratories has elicited significant debate over the proper scope of intellectual property rights with respect to research tools. [FN54] Although the NIH has proffered a definition of research tools, [FN55] determining whether a resource should bear that label is not always clear. [FN56] The difficulty with the term “research tool” is that, depending on one’s perspective, something could be used as both a research tool and an end- product. [FN57] An example is the discovery of a cell receptor. [FN58] A cell receptor may serve as either a pharmaceutical end-product that is sold commercially or a research tool used in screening assays to detect hormones. [FN59] The NIH suggests that researchers consider the following three factors to determine whether a resource fits the definition of a research tool:
(1) The primary usefulness of the resource is as a tool for discovery rather than an FDA-approved product or integral component of such a product;
(2) the resource is a broad, enabling invention that will be useful to many scientists . . . rather than a project or product-specific resource; and
*367 (3) the resource is readily useable or distributable as a tool rather than the situation where private sector involvement is necessary or the most expedient means for developing or distributing the resource. [FN60]
Research tools are important resources used in the biotechnology laboratory to identify and develop new and useful end-products. Many research tools have significant value to those who own them. [FN61] Because research tools are critical to scientific discovery, [FN62] the ability to access research tools is a main concern of many researchers.
III. The Tragedy of the Anticommons
Michael Heller’s and Rebecca Eisenberg’s influential article in Science magazine predicts a “tragedy of the anticommons” in biomedical research if researchers continue to seek patent protection for research tools. [FN63] They describe anticommons property as the mirror image of commons property. [FN64] In a “tragedy of the commons,” [FN65] a resource is prone to overuse, because many people have a privilege of use and no one has the right to exclude others. [FN66] Conversely, in a tragedy of the anticommons, a resource is prone to underuse, because multiple owners have the right to exclude others and no one has a privilege of use. [FN67]
As an example of anticommons property, Professor Heller offers empty Moscow storefronts in a postsocialist economy. [FN68] In Moscow, thriving storefront businesses did not appear after the transition from communism to free markets. Instead, many storefronts remained empty while merchants sold their goods from metal kiosks on the streets. [FN69] Professor Heller attributes this phenomenon to the way the government created property rights. [FN70] *368 Specifically, the government endowed multiple owners with rights in the storefront instead of giving one individual a bundle of rights that represented full ownership. [FN71] For example, one owner may have had the right to sell, another to receive sales revenue, and another to lease, occupy, and determine use of the property. The storefronts remained empty because each owner could block the others from using the space. [FN72] In short, Professor Heller explains that anticommons property emerges “when initial endowments are created as disaggregated rights rather than as coherent bundles of rights in scarce resources.” [FN73]
In the biotechnology context, Professors Heller and Eisenberg urge that “a proliferation of intellectual property rights upstream may be stifling life-saving innovations further downstream in the course of research and product development.” [FN74] They contend that an anticommons may emerge in the biotechnology industry because scientists are obtaining intellectual property protection for the kinds of discoveries that would have previously been made freely available to the public. [FN75] While recognizing that privatization of upstream research may have some benefits, [FN76] Professors Heller and Eisenberg warn that privatization may create obstacles to future research if too many owners hold rights in previous discoveries. [FN77] When there are too many “upstream” rights to exclude, there will be too little “downstream” privileges of use, ultimately resulting in a decrease in life-saving innovations. [FN78] They maintain that an anticommons is more likely to endure in biotechnology than in other areas of intellectual property because patents are more essential in the pharmaceutical and biotechnology industries. [FN79]
According to Professors Heller and Eisenberg, a tragedy of the anticommons can arise in two ways. The first is by creating multiple *369 concurrent fragments of rights in potential future products. [FN80] For example, a commercial end-product may require the use of multiple gene fragments, yet different owners may hold the rights to the individual fragments. A company that seeks to commercialize the end-product will need to obtain licenses from multiple owners before proceeding with product development. [FN81] The second is by permitting owners of research tools to impose reach-through obligations on downstream users. [FN82] Reach-through provisions could lead to stacking licenses, and a potential developer would have to bargain with all of the rights holders before developing an end-product. [FN83]
Several supporters of the anticommons theory have proposed changes to the patent system to avoid the emergence of an anticommons in biotechnology. [FN84] Professor Janice Mueller declares that “[t]he anticommons theory is far from a merely academic construct.” [FN85] She recommends an expansion of the experimental use doctrine as a means of overcoming difficulties in gaining access to patented research tools, and would permit researchers to use research tools freely, even if ultimately for commercial purposes. [FN86] However, she would require compensation to the patent owner for any new products developed through the use of the tool in the form of an ex *370 post royalty. [FN87] Similarly, Professor Maureen O’Rourke suggests that employment of a fair use doctrine in patent law would overcome transaction costs and strategic bargaining problems in the biotechnology industry. [FN88] She supports adoption of a fair use exception to excuse infringement in certain situations, such as when a developer has collected most of the required licenses to market a product, except for those of a holdout. [FN89] As discussed in Part V below, these proposals interfere with a patent’s right to exclude and may decrease the incentive for disclosing new inventions to the public.
Professor Kojo Yelpaala cautions that the transaction costs of increased privatization of gene fragments and sequences may become significant. [FN90] Problems with holdouts would undercut the efficient gains contemplated by the patent grant. [FN91] “Thus, the phenomenon of the tragedy of the anticommons suggests that the proliferation of property rights in biotechnology might, in fact, undermine the concept of private ownership.” [FN92] Professor Yelpaala declares that the tragedy of the anticommons is a systemic problem, and the solution may not lie in “mere tinkering with the system, such as an experimental use exception,” [FN93] but in an overhaul of the entire system. [FN94] The discussion in Parts IV and V will demonstrate that the potential for a tragedy of the anticommons is not as dire as Professor Yelpaala suggests, and that the current patent system is well equipped to deal with problems with research tool patents.
Some commentators are more doubtful that a tragedy of the anticommons may arise in biotechnology. Professor Thomas Field is not persuaded that there is an anticommons problem or that we lack the tools to deal with an anticommons, should one arise. [FN95] Patented inventions arising out of federally funded laboratories are subject to march-in rights, [FN96] and privately funded *371 patents could be subject to eminent domain. [FN97] In addition, Professor Field “find[s] no warrant for singling out any particular class of technology for blanket nonexclusivity.” [FN98] Similarly, Professor F. Scott Kieff does not believe that patents on inputs, such as research tools, prevent the production of outputs, such as commercial end-products. [FN99] He points out that many industries depend on patented inputs. For example, cars are manufactured using countless patented parts, processes, and subsystems. Similarly, biotechnology researchers use patented machines, reagents, and equipment in the ordinary course of research, and they should be expected to pay the licensing fee for such inputs. [FN100]
IV. Defending the Privatization of Research Tools
A tragedy of the anticommons is unlikely to emerge as a result of patenting upstream research tools for three reasons. First, the privatization of research tools provides the necessary incentive for investing in new technologies and encourages the commercialization of important end-products. Without patent protection for biotechnology innovations, fewer beneficial end-products would result from biomedical research. [FN101] Second, many important research tools have been broadly disseminated despite being privately owned. Two key examples are the Cohen-Boyer patents for recombinant DNA technology and polymerase chain reaction technology. These biomedical inventions demonstrate that allowing patents for upstream research tools does not serve as a roadblock to broad dissemination of important tools and can lead to innovative advances. [FN102] Third, members of the biotechnology research community recognize the benefits of freely exchanging research materials whenever possible and have developed norms to overcome obstacles in the dissemination of research tools. [FN103]
*372 A. Privatization of Research Tools Provides the Necessary Incentives for Investment in Biotechnology Innovation
Professors Heller and Eisenberg contend that the privatization of biomedical research tools may lead to a tragedy of the anticommons by setting up multiple “tollbooth[s] on the road to product development,” thus stifling downstream innovation. [FN104] However, Professors Heller and Eisenberg do not present empirical evidence to support this assertion. Contrary to their allegation, the biotechnology boom in the United States beginning in the early 1980s supports the proposition that privatization of research tools is essential for the continued success of the biotechnology industry and stimulates rather than stifles commercialization of useful products. [FN105]
Since the Supreme Court’s decision in Diamond v. Chakrabarty and the enactment of the Bayh-Dole Act in 1980, the biotechnology industry has experienced rapid growth and considerable prosperity. [FN106] New biotech drug and vaccine approvals have increased steadily over the past two decades, with a seven-fold increase in the number of biotech products on the market in the last ten years alone. [FN107] The amount of capital invested in biotechnology increased from $35 million in 1980 to $14.4 billion in 2002. [FN108] In fact, by 1990, private industry, not the federal government, represented the single largest source of funding for biotechnology research and development. [FN109] Revenues in the biotechnology industry increased from $8 billion in 1992 to $28.5 billion in 2001. [FN110] The first biotech company, Genetech, was founded in 1976, [FN111] and by 2001 there were 1457 biotech companies in the United States. [FN112] Almost all research universities now have technology licensing *373 operations, and hundreds of products developed under licenses are currently on the market. [FN113] These statistics demonstrate that the biotechnology industry has benefited from the increased privatization of upstream research tools, and that strong patent protection for research tools promotes, rather than stifles, downstream innovation. [FN114]
Importantly, patent protection provides the required commercial incentive for investment in new biomedical technologies. [FN115] Strong incentives are essential in the biotechnology industry to offset the extremely high costs of commercializing biotech products. [FN116] A biotech company may spend several hundred million dollars over a period of ten years or more to bring a single drug to market. [FN117] The risks of commercialization are also very high. [FN118] Only a small fraction of compounds that reach clinical trials will actually make it to market. [FN119] With this type of research and development profile, patent protection is more essential to the biotechnology industry than to other industries. [FN120] The ability of developers to obtain exclusivity has stimulated *374 investment in the biotechnology industry and has led to the commercialization of many valuable products. [FN121]
The Biotechnology Industry Organization (BIO) [FN122] asserts that the biotechnology industry would not survive without the opportunity to obtain patent protection and exclusively license discoveries from academic institutions as provided by the Bayh-Dole Act. [FN123] BIO avows that without the promise of exclusivity “many life-saving discoveries would not have been realized.” [FN124] Patent protection and favorable patent laws are key reasons that the United States is a major worldwide competitor in the biotechnology industry. [FN125]
B. Research Tools Have Been Broadly Disseminated Despite Being Privately Owned
1. Recombinant DNA Technology: The Cohen-Boyer Patents
Recombinant DNA technology is arguably the founding technology of the biotechnology industry, [FN126] and the Cohen-Boyer patents directed to this technology are considered to be the most successful patents in university licensing history. [FN127] Recombinant DNA technology, or gene splicing, is a *375 technique for producing proteins in large quantities. [FN128] Stanley Cohen, of Stanford University, and Herbert Boyer, of the University of California at San Francisco, developed the recombinant DNA technique in the 1970s. [FN129]
Cohen and Boyer were initially hesitant to file a patent application for their technology; [FN130] however, after several years of discussions with Congress, the NIH eventually supported the patenting of the invention. [FN131] The patents were jointly awarded to Stanford University and the University of California at San Francisco. [FN132] The universities sought to encourage broad use of the technology, so they offered nonexclusive licenses for relatively low fees. [FN133]
There are three reasons that this technology was so successful: (1) the technology was inexpensive and easy to use; (2) there were no alternative technologies available; and (3) the technology was critical to research in molecular biology. [FN134] If these factors had not been present, users may have been more resistant to licensing. [FN135] But this was not the case, and the widespread dissemination of recombinant DNA technology through nonexclusive licensing resulted in a biotechnology boom. [FN136]
*376 The increase in biotechnology research and development that followed the widespread dissemination of recombinant DNA technology enabled the creation of countless biotech start-up companies. [FN137] The Cohen-Boyer patent is a positive example of the benefits of patenting research tools. [FN138] The inventors and universities recognized the benefits of making the technology broadly available. Consequently, private ownership of the invention did not stifle technology, but instead it opened the doors to innovation and resulted in the commercialization of countless products. [FN139]
2. Polymerase Chain Reaction and Taq Polymerase
Polymerase chain reaction (PCR) is a process that allows the rapid amplification of specific DNA sequences. [FN140] The process utilizes the thermostable enzyme Taq polymerase specifically for its unique ability to withstand repeated cycles at high temperatures. [FN141] PCR technology made experimentation with genetic material more efficient and flexible and profoundly impacted the practice of molecular biology. [FN142] Today, PCR is a standard technique used in molecular biology laboratories. [FN143] Kary Mullis is credited with the discovery of PCR during his employment at Cetus Corporation. [FN144]
*377 Unlike recombinant DNA technology, there was little controversy over whether PCR technology should be patented and licensed; the main controversy stemmed from the terms of the licensing agreements. [FN145] Cetus initially proposed reach-through licensing provisions that would have given Cetus rights to any downstream discoveries developed through the use of PCR technology. [FN146] Many researchers strongly opposed such terms and some even threatened a boycott. [FN147] However, Cetus maintained that it had a very broad process patent for PCR technology and it expected researchers to obtain a license for commercial use. [FN148]
Ultimately, the pharmaceutical corporation Hoffmann-La Roche (Roche) purchased the PCR patent from Cetus for $300 million. [FN149] Roche set up a licensing system that included multiple categories, but did not include reach-through obligations. [FN150] The categories were based on the researcher’s use of the technology and included research applications, [FN151] diagnostic applications, [FN152] and human diagnostic testing services. [FN153] According to Roche, its primary objectives in licensing the technology were to expand and encourage the use of PCR, to receive financial gain from its use, and to preserve the value of the PCR patents. [FN154]
*378 The successes of PCR technology and the advances in research that have resulted from its dissemination prove that private ownership of this research tool has had a positive impact on biotechnology research. “[S]cientists have produced new contexts and new uses [for PCR] with stunning regularity” and “[t]hese uses have opened new avenues of research.” [FN155] Tom Caskey, senior vice-president for research at Merck Research Laboratories, credits PCR for the success of the Human Genome Project, and claims that “if we did not have free access to PCR as a research tool, the genome project really would be undoable.” [FN156] Even though scientists balked at Cetus’s proposal to impose reach-through obligations and feared that the licensing terms would make PCR inaccessible, Roche successfully implemented a licensing scheme that resulted in broad dissemination of the tool. This success is evidenced by the fact that PCR is regularly used in almost every molecular biology laboratory that conducts DNA research. [FN157]
The patents for recombinant DNA technology and PCR technology are examples of research tools that have been widely disseminated and have contributed substantially to the progress of biotechnology. These examples demonstrate that members of the biotechnology community are capable of successfully negotiating licenses for patented technologies in order to ensure the advancement of downstream research.
C. Researchers in the Biotechnology Community Recognize the Benefits of Sharing Scientific Materials Freely Whenever Possible
Compared to other industries, the biotechnology sector is highly dependent on academic research. Collaboration between industry and academia is a significant part of the biotechnology research community. [FN158] Such collaboration existed in the early 1980s, [FN159] but research partnerships became especially prevalent after Bayh-Dole as universities developed technology transfer programs to protect their intellectual property. [FN160] Strong ties exist *379 between academia and industry also because many researchers in the private sector previously worked in academia. [FN161] Universities depend on the private sector for additional funding, [FN162] and the private sector depends on universities for expanding their research capabilities and expertise and for staying informed about important advances in science. [FN163] This mutual dependence between the public and private sectors provides a strong incentive for parties to reach mutual agreement when exchanging patented research tools and to share resources freely whenever possible.
Due to the relatively small size of the biotechnology community, informal norms have evolved, and will continue to evolve, to manage problems that arise with regard to the dissemination of research tools. [FN164] Lita Nelsen, Director of the Office of Technology Licensing at the Massachusetts Institute of Technology (MIT), notes that university technology transfer offices are still young organizations that are continually evolving and learning to deal with issues that arise regarding the transfer of intellectual property. [FN165] Yet she asserts that “the field is beginning to mature” and that universities and industry are capable of reaching compromise despite their competing interests. [FN166]
The dissemination of PCR technology is a prime example of how competing sectors in the biotechnology community can compromise to reach mutual agreement. [FN167] Cetus Corporation’s initial licensing proposal for the use of PCR included reach-through royalties. [FN168] Many scientists vehemently opposed such terms and some even threatened a boycott. In the end, Roche purchased the patent from Cetus and disseminated the technology without *380 imposing reach-through obligations on licensees. [FN169] As a result of the scientific community’s resistance to Cetus’s restrictive terms, Roche developed more equitable terms that scientists were willing to accept.
Moreover, researchers in both the public and private sectors have taken the position that certain research tools should be made freely available to the biotechnology community. Many universities maintain a presumption against patenting basic scientific discoveries that are further upstream from product development, and will only seek patent protection for research that requires exclusivity in order to induce commercial product development. [FN170] As Professor Arti Rai has observed, “Even in the face of commercialization pressures, many major research universities have drawn the line at claiming property rights in certain basic scientific discoveries, particularly upstream discoveries that may be useful in a variety of different future research paths or for the development of a variety of commercial products.” [FN171] The technology transfer policies at MIT, Harvard, and Stanford favor the patenting of intellectual property that is needed to induce commercial development, but disfavor patenting of research that is far removed from commercial development. [FN172]
Similarly, the Federation of American Societies for Experimental Biology (FASEB), an organization representing biomedical and life scientists, [FN173] agrees that exclusive licensing of research tools should be limited to commercial applications. [FN174] Specifically, FASEB supports the free exchange of research tools when the possibility of commercial development is remote because the “sharing of resources often serves as a catalyst for exciting discoveries in biomedical research.” [FN175]
*381 Merck, a leading pharmaceutical corporation, takes a similar position. In order to make important research tools widely available while at the same time recognizing the commercial potential of some discoveries, Merck urges the biotechnology industry to license research tools nonexclusively for research purposes, but supports exclusive licensing for commercial development of products. [FN176] To this end, Merck sponsors a public-access EST [FN177] database that makes DNA sequences from ESTs freely available to all scientists in both the public and private sectors. [FN178] Merck’s position is that ESTs “are so important to biomedical research that they should be made broadly available to the entire scientific community with no commercial obligations.” [FN179]
Likewise, many firms in the private sector are interested in keeping certain basic scientific research in the public domain. For instance, in 1999, several pharmaceutical and technology firms joined together with the Wellcome Trust to form the SNP Consortium, a nonprofit foundation organized to disseminate Single Nucleotide Polymorphisms (SNPs) in the pubic domain. [FN180] SNPs are common DNA sequence variations found in humans that serve as useful markers on the genome for identifying mutations that cause disease. [FN181] A stated objective of the Consortium is to “maximize the number of SNPs that enter the ‘public domain.”’ [FN182] The Consortium seeks to develop a high-quality SNP map that is “publicly available and freely accessible to the entire scientific and medical community.” [FN183]
One view of projects such as the SNP Consortium and the Merck EST database is that they evince a perception in the biotechnology community that patents on research tools have the potential to impede downstream research. [FN184] *382 Yet the fact that industry and universities are taking steps to protect information that they believe belongs in the public domain undermines the need to make changes to the patent system for research tools. The examples described above illustrate that both academia and industry support the free dissemination of research tools in many instances, as when the potential for commercial development is remote. A recent study of private firms and nonprofit institutions revealed that many entities recognize a difference between tools important to research and targets that may result in useful end-products. [FN185] “[T]ools useful to performing research should be made broadly available (like the Cohen-Boyer patent on recombinant DNA), while exclusive licensing may be necessary to promote investment in down-stream development.” [FN186] The fact that the public and private sectors recognize the benefits of sharing certain types of research tools and have taken affirmative steps to enhance the public domain decreases the likelihood that an anticommons will emerge in the biotechnology industry.
To achieve broad dissemination of research tools, the NIH has taken a role in ensuring that the interests of universities and industry are protected so that the dual objectives of accelerating scientific discovery and facilitating product development are achieved. [FN187] The NIH issued Principles and Guidelines to aid recipients of federal funds in determining appropriate terms for dissemination and acquisition of research tools. [FN188] The purpose of the Principles and Guidelines is to ensure that such tools are transferred in a way that “facilitate[s] further biomedical research, consistent with the requirements of the Bayh-Dole Act.” [FN189] Although the Principles and Guidelines are only directly applicable to recipients of funding, the NIH urges the entire *383 biotechnology community to adopt similar policies “so that all biomedical research and development can be synergistic and accelerated.” [FN190]
The Principles and Guidelines encourage researchers to engage in licensing in a way that maximizes broad dissemination of research tools and to refrain from imposing or accepting reach-through obligations as a condition of use. [FN191] The Principles and Guidelines acknowledge the legitimate concerns of industry that sharing tools with universities for purely academic research may result in gains to their competitors if the university is also closely aligned with those entities. [FN192] Thus, the NIH cautions universities to be sensitive to these concerns, and implores biotechnology and pharmaceutical corporations to minimize restrictions imposed on nonprofit organizations that use the tools for academic purposes only. [FN193]
The NIH has taken the initiative to institute a policy that facilitates broad dissemination of research tools. [FN194] The Principles and Guidelines will help the biotechnology community develop norms to decrease transaction costs associated with the dissemination of research tools. Further, the biotechnology community will learn to balance its interest in disseminating research tools for the purpose of furthering scientific progress with its interest in promoting the commercialization of useful and important end-products.
The discussion above indicates that researchers in academia and industry are willing to share important tools when the possibility for commercialization is remote. However, while sharing these tools is an important step toward avoiding a tragedy of the anticommons, this Comment does not mean to suggest that the establishment of informal norms that support sharing will solve every concern related to the dissemination of research tools. Realistically, the biotechnology industry, like any other industry, is motivated by financial gain. Thus, reliance on informal norms to ensure widespread dissemination of research tools is idealistic. Problems with restrictive terms in licensing agreements, especially reach-through provisions, give credence to the anticommons theory in biotechnology. Nevertheless, as the next Part explains, the courts and the patent system are equipped to deal with these problems and ensure that patent protection does not hinder downstream research.
*384 V. Specific Exceptions in the Patent Laws for Research Tools Are Unwarranted
The U.S. Constitution gives Congress the power to “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” [FN195] This clause seeks to balance the interest in encouraging innovation with the interest in avoiding the creation of monopolies. [FN196] Accordingly, the patent laws provide the necessary incentive for inventive activity by giving inventors exclusive rights in their inventions for a limited time. [FN197] In order to secure the exclusive right of a patent grant an invention must satisfy the requirements of utility, novelty, nonobviousness, and written description. [FN198]
Accordingly, those who invent research tools that meet the requirements of patentability are entitled to enjoy the limited monopoly of the patent grant. [FN199] Creating exceptions to the patent system for research tools, when the invention satisfies the requirements of patentability, is inconsistent with the purpose of the Patent Act. As John Doll points out, “[N]ew areas of technology do not create the need for a whole new specialized patent law.” [FN200] Thus, expanding the experimental use exception or employing a fair use doctrine in patent law are inappropriate solutions for ensuring broad dissemination of research tools. [FN201]
Professor Mueller has suggested expanding the experimental use exception and allowing researchers to use patented research tools without obtaining a license from the patent owner, even if the research is for commercial *385 purposes. [FN202] To compensate the owner of the patented research tool, Professor Mueller would impose a reach-through royalty whereby the patent owner would receive royalty payments based on the market value of any products developed through use of the tool. [FN203] This solution would decrease the value of patents on research tools because the patent holder would be unable to exercise the right to exclude. [FN204] The right to exclude is at the heart of the patent monopoly [FN205] and denying the benefit of the exclusive right would reduce the incentive for disclosing new technologies to the public. [FN206] Specifically, taking away the patent owner’s right to exclude would disrupt the patent system’s “carefully crafted bargain for encouraging the creation and disclosure of new, useful, and nonobvious advances in technology . . . in return for the exclusive right to practice the invention for a period of years.” [FN207] Thus, such an approach is inconsistent with the purpose of the patent laws.
Moreover, Mueller’s ex post reach-through royalty approach does not address the current problems with reach-through royalties imposed in licensing agreements. As the NIH points out, royalties on the sale of products that do not embody the research tool serve to discourage use of the tool. [FN208] Researchers who are unwilling to agree to reach-through obligations in licensing agreements, negotiated before the tool is used, would be equally unwilling to accept such obligations after using the tool if the research resulted in a valuable end-product.
Professor O’Rourke’s fair use solution would have a similar impact on the value of patents. O’Rourke proposes employing a fair use doctrine in the biotechnology arena to excuse a certain amount of infringement. [FN209] In particular, she would permit researchers to infringe patents in order to design around the claims, even if the ultimate purpose was commercial. [FN210] If infringement is excused, a patent holder’s attempt to exercise his or her right to exclude would be limited, and the rights conferred by the patent grant would *386 be diminished. Such efforts to improve problems with access to research tools may lead to more fundamental problems with ensuring disclosure of important inventions. [FN211] If inventors are denied the full benefit of the exclusive rights, they may be less willing to disclose significant discoveries to the public and may alternatively choose to keep their inventions a secret. This result would invariably lead to a decrease in downstream innovation. [FN212]
One reason these solutions are inadequate is that problems with the dissemination of research tools stem more from restrictive terms in licensing agreements than from issues of patentability. [FN213] Most researchers do not oppose the patenting of research tools, but are concerned about obtaining access to research tools on reasonable terms. [FN214] The most problematic terms relate to reach-through provisions whereby licensors seek rights in products developed through the use of the licensed tool. [FN215] Licensors, however, must be careful to limit the scope of the reach-through to the scope of the invention. Courts will generally not interfere with a contract between two parties, but reach-through provisions may potentially constitute patent misuse if the patent holder forces payment of a royalty on a product that is outside the scope of the claimed invention. [FN216] Patentees should only seek royalties on products that are adequately disclosed and claimed in the patent.
Indeed, the Federal Circuit recently held that reach-through claims were invalid for lack of written description. In University of Rochester v. G.D. Searle & Co., [FN217] scientists at the University of Rochester developed an assay for targeting compounds that would inhibit a particular enzyme, cox-2, but would not affect the activity of another, related enzyme, cox-1. [FN218] Researchers *387 hypothesized that such compounds would serve as improved pain-relief medications because they would reduce inflammation without causing the undesirable side effect of stomach irritation. [FN219] The University of Rochester applied for and obtained a patent for the screening assay [FN220] and later obtained a patent for a “method for selectively inhibiting [cox-2] activity in a human host, comprising administering a non-steroidal compound that selectively inhibits activity of the [cox-2] gene product.” [FN221] While this second patent disclosed the assay methods for identifying such nonsteroidal compounds, it did not disclose any specific compounds that would serve the function of selectively inhibiting the activity of the cox-2 gene product. [FN222]
The University of Rochester brought a patent infringement suit against various pharmaceutical manufacturers who marketed drugs that worked in the manner disclosed in the patent. [FN223] The District Court for the Western District of New York held that the patent did not satisfy the written description requirement of 35 U.S.C.
*388 With the patent held invalid, the patentee could not impose reach-through royalties on the manufacturers of drugs that worked in the manner disclosed in the patent. Consequently, the scope of a research tool patent is important in determining appropriate licensing terms. For example, it would be proper for the inventor of an assay to patent and license the assay itself, but not to claim rights in the myriad of potential compounds that may be identified through use of the assay. [FN229] University of Rochester will make it more difficult for discoverers of “upstream” tools to collect royalties on “downstream” products.
VI. Conclusion
The ability of researchers in federally funded laboratories to patent their discoveries and license products to the private sector has had a substantial impact on the biotechnology industry in the United States. Allowing researchers to exchange materials through licensing agreements, when those materials would have been freely exchanged in an earlier era, has not impeded the development and commercialization of important new end-products.
Patenting research tools is unlikely to lead to a “tragedy of the anticommons” in the biomedical field for several reasons. First, the biotechnology boom that followed the enactment of the Bayh-Dole Act indicates that the privatization of research tools stimulates rather than stifles downstream research, and that the ability to obtain exclusive rights in biotechnology discoveries provides the necessary incentive for investment in important new technologies. Second, the dissemination of recombinant DNA and PCR technologies demonstrates that members of the biotechnology community are capable of reaching mutual agreement to ensure the broad availability of research tools. Third, researchers in both the public and private sectors recognize the benefits of sharing tools whenever possible, especially when the opportunity for commercial development is remote. Most public and private sector research institutions agree that researchers should only patent discoveries that require exclusivity to induce commercial development, yet freely disseminate discoveries that constitute basic scientific research.
As long as research tools meet the requirements of patentability they should be accorded the benefits of the patent grant. The main concern with regard to research tools is not whether they should be patented, but whether patentees *389 should be permitted to obtain rights in products developed through the use of research tools. To achieve the appropriate balance between encouraging disclosure and furthering downstream research, reach-through rights should be limited to products adequately disclosed in the patent in accordance with the written description requirement of 35 U.S.C.
[FN1]. See F. Scott Kieff, Facilitating Scientific Research: Intellectual Property Rights and the Norms of Science—A Response to Rai and Eisenberg, 95 Nw. U. L. Rev. 691, 700 (2001) (underscoring the expansion of the biotechnology industry since 1980); Janice M. Mueller, No “Dilettante Affair”: Rethinking the Experimental Use Exception to Patent Infringement for Biomedical Research Tools, 76 Wash. L. Rev. 1, 5 & n.23 (2001) (noting that the amount of external financing raised by new U.S. biotechnology firms increased from $248 million in 1980 to approximately $3.1 billion in 1995).
[FN2]. Biotechnology Industry Organization, Biotechnology Industry Statistics (providing a graphical representation showing that the number of biotechnology patents increased from 2160 in 1989 to 7763 in 2002), at http:// www.bio.org/er/statistics.asp (last visited Jan. 30, 2004).
[FN3]. Id. (indicating that revenues in the biotechnology industry increased from $8.1 billion in 1992 to $28.5 billion in 2001).
[FN4]. Id.
[FN5]. Louis P. Berneman & Kathleen A. Denis, University Licensing Trends and Intellectual Capital, in Licensing Best Practices: The LESI Guide to Strategic Issues and Contemporary Realities 229, 229-32 (Robert Goldscheider ed., 2002).
[FN6]. 447 U.S. 303 (1980).
[FN7]. An Act to Amend the Patent and Trademark Laws, Pub. L. No. 96-517,
).
[FN8]. See Rebecca Eisenberg, Patenting Research Tools and the Law, in National Research Council, Intellectual Property Rights and the Dissemination of Research Tools in Molecular Biology 6, 7 (1997) (“Another contemporaneous development that has contributed to the prevalence of intellectual property in biomedical research is the passage of the Bayh-Dole Act.”).
[FN9]. 447 U.S. at 309.
[FN10]. Id. (internal quotation omitted).
[FN11]. Martin J. Adelman et al., Cases and Materials on Patent Law 107-08 (2d ed. 2003) (“Chakrabarty was a clear signal that patenting was broadly available in the biotechnology field, and this ruling opened the coffers of Wall Street to the biotechnology industry.”).
[FN12]. See 35 U.S.C.
[FN13]. See Eisenberg, supra note 8, at 7 (asserting that with the increase in patenting, access to patented discoveries is likely to become a significant issue for researchers); Report of the National Institutes of Health Working Group on Research Tools (June 4, 1998) (identifying access to research tools as a problem frustrating many scientists and research institutions) [hereinafter NIH Working Group], at http://www.nih.gov/news/researchtools.
[FN14]. See Paul F. Fehlner, Biotech Research Tools, Nat’l L.J., July 10, 2000, at B9.
[FN15]. Principles and Guidelines for Recipients of NIH Research Grants and Contracts on Obtaining and Disseminating Biomedical Research Resources: Final Notice, 64 Fed. Reg. 72,090, 72,092 n.1 (Dec. 23, 1999) [hereinafter Principles and Guidelines].
[FN16]. See Michael A. Heller & Rebecca S. Eisenberg, Can Patents Deter Innovation? The Anticommons in Biomedical Research, 280 Science 698, 698 (1998).
[FN17]. See id.
[FN18]. See Mueller, supra note 1, at 13.
[FN19]. Id. at 13 n.56 (citing Karl Drlica, Understanding DNA and Gene Cloning: A Guide for the Curious 153-57, 314 (3d ed. 1997)).
[FN20]. See infra notes 142-43 and accompanying text.
[FN21]. See, e.g., Arti K. Rai, Regulating Scientific Research: Intellectual Property Rights and the Norms of Science, 94 Nw. U. L. Rev. 77, 89-90, 94 (1999) (describing this scientific norm as “communalism” and explaining that prior to 1980, researchers generally viewed scientific knowledge as a shared resource); Arti K. Rai & Rebecca S. Eisenberg, The Public Domain: Bayh-Dole Reform and the Progress of Biomedicine, 66 Law & Contemp. Probs. 289, 289 (2003) (“[L]ongstanding norms call for relatively unfettered access to fundamental knowledge developed by prior researchers.”); NIH Working Group, supra note 13 (noting that in the past researchers generally exchanged information freely without the use of formal agreements).
[FN22]. See Rai, supra note 21, at 109-10. The number of patents granted to universities increased from fewer than 250 in 1980 to nearly 2700 in 1992. Id. at 109. In addition, the Technology Licensing Office at the Massachusetts Institute of Technology stated that its mission was to convey research results to the public domain through licensing. Id. at 110.
[FN23]. NIH Working Group, supra note 13; see also Frustrated Cancer Researchers: Who Owns Our Mice?, Mercury News, Oct. 31, 2003, available at http:// www.siliconvalley.com/mld/siliconvalley/business/industries/biotech/7152245.ht m.
[FN24]. See, e.g., John J. Doll, Biotechnology: The Patenting of DNA, 280 Science 689, 689 (1998) (noting that some people in the scientific community are concerned that patents on research tools may “impede cooperation among laboratories” and reduce the availability of research tools); Eisenberg, supra note 8, at 16 (“[E]xclusive rights risk inhibiting the optimal use of research tools and interfering with downstream incentives for product development.”);
Mueller, supra note 1, at 66 (asserting that exclusive rights on research tools increase transaction costs and “threaten to slow or stop the development of new drugs and devices critical to public health”).
[FN25]. See Heller & Eisenberg, supra note 16, at 698. Michael Heller first coined the phrase “tragedy of the anticommons” in his seminal article The Tragedy of the Anticommons: Property in the Transition from Marx to Markets, 111 Harv. L. Rev. 621, 624 (1998).
[FN26]. Heller & Eisenberg, supra note 16, at 698.
[FN27]. Id.
[FN28]. See Mueller, supra note 1, at 9.
[FN29]. See Maureen A. O’Rourke, Toward a Doctrine of Fair Use in Patent Law, 100 Colum. L. Rev. 1177, 1236-39 (2000).
[FN30]. See infra Part IV.A.
[FN31]. See infra Part IV.B.
[FN32]. See infra Part IV.C.
[FN33]. 447 U.S. 303, 309 (1980). Under
[FN34]. Chakrabarty, 447 U.S. at 305.
[FN35]. Id.
[FN36]. Eisenberg, supra note 8, at 6 & n.1 (citing Funk Bros. Seed Co. v.
Kalo Inoculant Co., 333 U.S. 127 (1948)).
[FN37]. 447 U.S. at 309.
[FN38]. Id. at 310. The Court stated that “the patentee has produced a new bacterium with markedly different characteristics from any found in nature” and that “[h]is discovery is not nature’s handiwork, but his own.” Id.
[FN39]. Id. at 309.
[FN40]. See Paul Rabinow, Making PCR: A Story of Biotechnology 20 (1996).
[FN41]. See Eisenberg, supra note 8, at 6.
[FN42]. Rabinow, supra note 40, at 21.
[FN43]. See An Act to Amend the Patent and Trademark Laws, Pub. L. No. 96-517,
).
[FN44]. Id. The Act provides that “[e]ach nonprofit organization or small business firm may ... elect to retain title to any subject invention.” 35 U.S.C.
It is the policy and objective of the Congress to use the patent system to promote the utilization of inventions arising from federally supported research or development; to encourage maximum participation of small business firms in federally supported research and development efforts; to promote collaboration between commercial concerns and nonprofit organizations, including universities; to ensure that inventions made by nonprofit organizations and small business firms are used in a manner to promote free competition and enterprise without unduly encumbering future research and discovery; to promote the commercialization and public availability of inventions made in the United States by United States industry and labor; to ensure that the Government obtains sufficient rights in federally supported invention to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions; and to minimize the costs of administering policies in this area.
Id.
[FN45]. See Eisenberg, supra note 8, at 7; Rai, supra note 21, at 90, 94.
[FN46]. See NIH Working Group, supra note 13.
[FN47]. Eisenberg, supra note 8, at 8.
[FN48]. See Rai, supra note 21, at 109 (“[U]niversities and individual researchers soon began to respond to the financial incentives of Bayh-Dole by rejecting communalism and increasing efforts to seek patents.”); Rai & Eisenberg, supra note 21, at 291 (describing the increase in patenting after Bayh-Dole as a “frenzy of proprietary claiming”). Prior to Bayh-Dole, fewer than 250 patents were issued each year to universities, yet in 1996 almost 2000 patents were issued to universities. Association of American Universities, University Technology Transfer of Government-Funded Research Has Wide Public Benefits (June 2, 1998), at http://www.aau.edu/research/techtrans6.3.98.html.
[FN49]. See Rai & Eisenberg, supra note 21, at 290.
[FN50]. Introduction, in National Research Council, supra note 8, at 1, 3.
[FN51]. See Lita Nelsen, The Rise of Intellectual Property Protection in the American University, 279 Science 1460, 1460 (1998).
[FN52]. Berneman & Denis, supra note 5, at 555.
[FN53]. 35 U.S.C.
[FN54]. See, e.g., Eisenberg, supra note 8, at 14 (“[T]here are reasons to be wary of patents on research tools.”); Heller & Eisenberg, supra note 16, at 698 (warning that the privatization of research tools may stifle life-saving innovation); Mueller, supra note 1, at 7 (commenting that the transaction costs associated with accessing research tools may serve to “impede, postpone, or stop the development of important new products”).
[FN55]. See supra note 13 and accompanying text.
[FN56]. See NIH Working Group, supra note 13.
[FN57]. Id.
[FN58]. A receptor is a site in a cell that can combine with another molecule to change the cell’s function. Stephen G. Kunin et al., Reach-Through Claims in the Age of Biotechnology, 51 Am. U. L. Rev. 609, 617 n.48 (2002).
[FN59]. Id. at 617.
[FN60]. Principles and Guidelines, 64 Fed. Reg. 72,090, 72,094 (Dec. 23, 1999)
.
[FN61]. NIH Working Group, supra note 13.
[FN62]. Id. (declaring that research tools “play a critical role in the furtherance of knowledge and innovation”).
[FN63]. Heller & Eisenberg, supra note 16, at 698.
[FN64]. Id. at 623.
[FN65]. Garret Hardin first proposed the theory of the “tragedy of the commons” in 1968 to explain overpopulation, air pollution, and species extinction. Heller & Eisenberg, supra note 16, at 698 (citing Garret Hardin, The Tragedy of the Commons, 162 Science 1243 (1968)).
[FN66]. Heller, supra note 25, at 623-24.
[FN67]. Id. at 624.
[FN68]. Id. at 622-23.
[FN69]. See id.
[FN70]. Id. at 623.
[FN71]. See id.
[FN72]. See id.
[FN73]. Id.
[FN74]. Heller & Eisenberg, supra note 16, at 698.
[FN75]. Id.
[FN76]. Id. For instance, they acknowledge that patent protection on upstream discoveries may provide the necessary incentives to undertake risky research projects. Id.
[FN77]. Id.
[FN78]. Id. at 701. In essence, this theory claims that “[e]ach upstream patent allows its owner to set up another tollbooth on the road to product development, adding to the cost and slowing the pace of downstream biomedical innovation.” Id. at 699.
[FN79]. Id. at 700 (stating that pharmaceutical and biotechnology industries may be less willing to participate in patent pools, and lack of substitutes for certain biomedical discoveries may lead to more holdout problems).
[FN80]. Id. at 701.
[FN81]. Id.
[FN82]. Id. A reach-through license gives the owner of a research tool rights in discoveries developed through use of the tool. Reach-through rights may include royalties on the sale of downstream discoveries. Id. Reach-through royalties are royalties paid to the owner of a patented research tool on the sale of products developed through use of the research tool, even if the patented tool is not incorporated in the end-product. Eisenberg, supra note 8, at 8.
[FN83]. See Heller & Eisenberg, supra note 16, at 701 (“In effect, the use of ‘reach-through rights’ gives each upstream patent owner a continuing right to be present at the bargaining table as a research project moves downstream toward product development.”).
[FN84]. See Molly A. Holman & Stephen R. Munzer, Intellectual Property Rights in Genes and Gene Fragments: A Registration Solution for Expressed Sequence Tags, 85 Iowa L. Rev. 735, 740 (2000) (recommending a registration system for Expressed Sequence Tags (ESTs), gene segments that are useful for isolating and identifying full-length genes); Mueller, supra note 1, at 7-9 (proposing expansion of the experimental use doctrine); O’Rourke, supra note 29, at 1236-37 (suggesting application of the fair use doctrine in patent law); Kojo Yelpaala, Owning the Secret of Life: Biotechnology and Property Rights Revisited, 32 McGeorge L. Rev. 111, 184-85 (2000) (asserting that a return to common ownership may be more efficient than private ownership).
[FN85]. Mueller, supra note 1, at 7. Professor Mueller goes as far as to state that privatization of upstream research tools “threaten[s] to slow or stop the development of new drugs and devices critical to public health.” Id. at 66.
[FN86]. Id. at 9 (“[W]here significant transaction costs are associated with accessing the patented research tools necessary to develop downstream application products... the non-consensual use of those tools, even though for ultimately commercial purposes, should no longer be automatically disqualified from the benefits of the experimental use doctrine.”).
[FN87]. Id.
[FN88]. O’Rourke, supra note 29, at 1236 (“A fair use doctrine would help to break logjams in licensing negotiations when rights are widely distributed, mitigating not just transaction-cost problems, but also blockages caused by strategic bargaining.”).
[FN89]. Id. at 1237-38.
[FN90]. See Yelpaala, supra note 84, at 185.
[FN91]. Id.
[FN92]. Id.
[FN93]. Id. at 186.
[FN94]. Id. at 185.
[FN95]. Thomas G. Field, Jr., Response to Policy Commentary by J.J. Doll and Review by M.A. Heller and R.S. Eisenberg, at http:// www.sciencemag.org/feature/data/980465/field.shl (last visited Feb. 27, 2004).
[FN96]. See 35 U.S.C.
[FN97]. See Field, supra note 95.
[FN98]. Id.
[FN99]. See F. Scott Kieff, Property Rights and Property Rules for Commercializing Inventions, 85 Minn. L. Rev. 697, 720 (2001).
[FN100]. Id.
[FN101]. See discussion infra Part IV.A.
[FN102]. See discussion infra Part IV.B.
[FN103]. See discussion infra Part IV.C.
[FN104]. Heller & Eisenberg, supra note 16, at 699.
[FN105]. See supra notes 1-5 and accompanying text (providing statistical information about the increase ibn biotechnology research and development beginning in the early 1980s).
[FN106]. Kieff, supra note 99, at 725. The biotechnology industry in the United States has been especially prosperous compared to biotechnology industries in other countries that did not adopt the same changes in their patent systems. See id. at 725-26; see also supra Part II (discussing the judicial and legislative developments that impacted the biotechnology industry).
[FN107]. Biotechnology Industry Organization, New Biotech Drug and Vaccine Approvals/New Indication Approvals by Year, at http:// www.bio.org/investor/signs/200210apr.asp (last visited Nov. 2, 2003).
[FN108]. See Biotechnology Industry Organization, Capital Raised by Public Biotech Companies, at http://www.bio.org/investor/signs/200210fin.asp (last visited Dec. 3, 2003).
[FN109]. Kieff, supra note 1, at 700-01 (citing Office of Technology Assessment, Biotechnology in a Global Economy 1-33 (1991)).
[FN110]. Biotechnology Industry Organization, supra note 2.
[FN111]. Carilee Berg et al., The Evolution of Biotech, 1 Nature Rev. 845, 845 (2002).
[FN112]. Biotechnology Industry Organization, supra note 2.
[FN113]. Nelsen, supra note 51, at 1460; see also National Technology Transfer Center, University Resources (providing a listing of university technology transfer websites), at http:// www.nttc.edu/resources/university/university.asp (last visited Oct. 18, 2003). Products developed from university technology transfer include gene splicing technology, diagnostic tests for breast cancer and osteoporosis, and vaccines. Association of American Universities, supra note 48.
[FN114]. See Tim Beardsley, Big-Time Biology, Sci. Am., Nov. 1994, at 90, 92A (noting that the benefits to society of university-industry collaboration, which is based on strong patent protection, have been immense); Robert Mullan Cook-Deegan, Response to Policy Commentary by J.J. Doll and Review by M.A. Heller and R.S. Eisenberg (“It is no accident that strong patent protection parallels strong performance among U.S. pharmaceutical firms.”), at http:// www.sciencemag.org/feature/data/980465/cook_deegan.shl (last visited Feb. 27, 2003).
[FN115]. See Doll, supra note 24, at 689 (declaring that privatization promotes dissemination of biotechnological information and stimulates investment in research, development, and commercialization); Introduction, supra note 50, at 3 (alleging that the government’s shift to a pro-patent position provided the necessary incentive for industry to bring products to market); Nelsen, supra note 51, at 1460 (“[E]xclusive licenses [are] imperative for the development of early-stage technology.”).
[FN116]. See Kieff, supra note 99, at 724; Biotechnology Industry Organization on Bayh-Dole and Technology Transfer Before the President’s Council on Science and Technology Office of Science and Technology Policy 2 (Apr. 11, 2002) [hereinafter BIO on Bayh-Dole], at http:// www.bio.org/ip/pdf/bd20020509.pdf.
[FN117]. Kieff, supra note 99, at 724. The Biotechnology Industry Organization estimates that a biotechnology company may spend more than $500 million dollars over ten to fourteen years before generating any product revenue. BIO on Bayh-Dole, supra note 116, at 2.
[FN118]. BIO on Bayh-Dole, supra note 116, at 2. The biotechnology industry is “a high-risk, long-term investment sector that has an extraordinarily high rate of failure.” Id.
[FN119]. Kieff, supra note 99, at 724.
[FN120]. See Cook-Deegan, supra note 114 (“Other sectors depend far less on patents, and so patent policies are correspondingly a less decisive factor in commercial competition and innovative advance.”).
[FN121]. See Jack L. Tribble, Gene Patents—A Pharmaceutical Perspective, 7 Cambridge Q. of Healthcare Ethics 429, 429 (1998) (“The ability to obtain limited exclusivity for products and processes has stimulated investment in a thriving biotechnology industry.”).
[FN122]. BIO is a trade association comprising more than 1000 companies, universities, and biotechnology centers worldwide. Its mission is to “[a]dvocate the industry’s positions to elected officials and regulators,” “[i]nform national and international media about the industry’s progress, contributions to quality of life, goals and positions,” and “[p]rovide business development services to member companies, such as investor and partnering meetings.” Biotechnology Industry Organization, About BIO: Partner to a Dynamic Industry Coming of Age, at http://www.bio.org/aboutbio/history.asp (last visited Oct. 18, 2003).
[FN123]. See BIO on Bayh-Dole, supra note 116, at 2. “Since the enactment of Bayh-Dole, technology partnerships have led to the founding of more than 1,100 companies based on [federally funded] research.” Id.
[FN124]. Id. at 1.
[FN125]. See Kieff, supra note 1, at 699-700 n.4. According to BIO, the United States is the worldwide leader of biotechnological innovation “because U.S. patent laws and legislation such as the Bayh-Dole Act have provided favorable incentives to mitigate the high risks.” BIO on Bayh-Dole, supra note 116, at 1.
[FN126]. Case Studies, in National Research Council, supra note 8, at 40, 40; see also Beardsley, supra note 114, at 90 (declaring that Cohen’s and Boyer’s invention “launched the biotechnology industry”); Ronald I. Eisenstein & David S. Resnick, Going for the Big One, 19 Nature 881, 881 (2001) (crediting the Cohen-Boyer patent as “one of the the major stimuli for the creation of the biotechnology industry”), available at http:// www.nature.com/cgi-taf/DynaPage.taf?file=/nbt/journal/v19/n9/full/nbt0901- 881.html.
[FN127]. See Case Studies, supra note 126, at 40. The Cohen-Boyer patents had 480 licensees over their fifteen-year lifetime. Margaret Young, The Legacy of Cohen-Boyer, Signals (June 12, 1998), at http:// www.signalsmag.com/signalsmag.nsf/61dbe17a63981409882565ae00822f19/b7367c099e6 24afe8825662000609d01? OpenDocument.
[FN128]. Bertram Rowland and the Cohen/Boyer Cloning Patent [hereinafter Rowland], at http://www.law.gwu.edu/tech/rowland.asp (last visited Feb. 27, 2003). In recombinant DNA technology, a gene from the DNA of an organism is inserted into a piece of bacterial DNA. The new DNA is inserted into a living organism where the desired gene is reproduced in unlimited quantities. See id.
[FN129]. See Case Studies, supra note 126, at 41.
[FN130]. Id. Cohen remarked, “My initial reaction ... was to question whether basic research of this type could or should be patented and to point out that our work had been dependent on a number of earlier discoveries by others.” Rai, supra note 21, at 94 (quoting Leonard G. Boonin, The University, Scientific Research, and the Ownership of Knowledge, in Owning Scientific and Technical Information: Value and Ethical Issues 253, 262 (Vivian Weil & John W. Snapper eds., 1989)). In fact, Cohen insisted that the invention had no commercial value and was not patentable. See Rowland, supra note 128. The patent ultimately realized about $300 million in revenues. Id.
[FN131]. Case Studies, supra note 126, at 41.
[FN132]. Id. The Cohen-Boyer patents consist of three patents. One is a process patent that claims “a method for replicating a biologically functional DNA.” Eisenstein & Resnick, supra note 126, at 881. The other two are product patents that claim the proteins produced using both recombinant eukaryotic DNA and recombinant prokaryotic DNA. Id.
[FN133]. See Young, supra note 127. The licenses required an initial fee of $10,000, followed by a minimum annual payment of $10,000. In addition, there was a royalty agreement when use of the technology resulted in successful products. Id.
[FN134]. Case Studies, supra note 126, at 41.
[FN135]. Id.
[FN136]. Id. at 42. Ironically, the technology transfer in this case was the reverse of that contemplated by the Bayh-Dole Act. Id. at 41. The premise of Bayh-Dole is that exclusivity induces investment because industry would be unwilling to invest in risky projects without a guarantee of exclusivity. Id. (quoting Lita Nelsen, Director of the Technology Licensing Office at the Massachusetts Institute of Technology). Nevertheless, the Cohen-Boyer patents were widely disseminated even though it was nonexclusively licensed.
[FN137]. See Beardsley, supra note 114, at 90; Case Studies, supra note 126, at 42; Young, supra note 127.
[FN138]. Mueller, supra note 1, at 13; Rochelle K. Seide & Janet M. MacLeod, Response to Policy Commentary by J.J. Doll and Review by M.A. Heller and R.S. Eisenberg, at http://www.sciencemag.org/feature/data/980465/seide.shl (last visited Feb. 27, 2003).
[FN139]. See Seide & MacLeod, supra note 138 (noting that dissemination of the Cohen-Boyer technology resulted in a great deal of research with significant commercial application). Some of the products developed through the licensing program for the Cohen-Boyer patents include tissue plasminogen activator for heart attacks, erythropoeitin for dialysis patients, insulin for the treatment of diabetes, growth hormone for children with growth deficiencies, and interferon for cancer patients. Rowland, supra note 128.
[FN140]. Rabinow, supra note 40, at 1; see supra note 19 and accompanying text.
[FN141]. See Tom Abate, Drug Companies Battle Over Patent for Enzyme Used in DNA Testing, S.F. Chron., Jan. 31, 2000, at B1. Taq polymerase made it possible to automate the PCR process and lead to the development of PCR machines. See id.
[FN142]. See Rabinow, supra note 40, at 1. “PCR opened the door for an extraordinary proliferation of knowledge in many areas.” Id. at 134; see also Case Studies, supra note 126, at 43 (“PCR technology has had a profound impact on basic research ... because it has made feasible some experimental approaches that were not possible before the development of PCR.”).
[FN143]. Rabinow, supra note 40, at 2.
[FN144]. Case Studies, supra note 126, at 43. Mullis won a Nobel Prize for his contributions to the development of PCR technology in 1985, only eight years after he published the first paper relating to this discovery. Id.
[FN145]. Id. at 43-44.
[FN146]. See Heller & Eisenberg, supra note 16, at 699.
[FN147]. See Eliot Marshall, Battling Over Basics, 277 Science 25, 25 (1997). One financial analyst cautioned that Cetus’s aggressive approach to licensing could potentially scare away users and adversely affect sales. Cetus to Exact Royalties from PCR Sales, Biotechnology Newswatch, Sept. 5, 1988, at 7.
[FN148]. Cetus to Exact Royalties from PCR Sales, supra note 147, at 7.
Cetus’s president, Robert Fildes, set forth Cetus’s position:
We will make sure that the Abbotts, the Eli Lillys and the Genetechs are not going to take our invention and run away with it.... Our attitude to the universities is: Use PCR, but don’t give the results to the pharmaceutical houses without giving us a piece of the pie.
Id.
[FN149]. Case Studies, supra note 126, at 44.
[FN150]. Marshall, supra note 147, at 25; see also Heller & Eisenberg, supra note 16, at 699.
[FN151]. Research applications include discovery of new genes, studies of gene expression, and work on the Human Genome Project. Case Studies, supra note 126, at 44.
[FN152]. Diagnostic applications include human in vitro diagnostics and the detection of disease-linked mutations. Id.
[FN153]. For human diagnostic testing, there are no up-front fees or annual minimum royalties; however, in some cases the fees for obtaining rights to PCR technology are very high. The entry fee for selling PCR products can range from $100,000 to $500,000. This is much higher than the $10,000 fee for obtaining rights to the Cohen-Boyer technology. Id. at 45.
[FN154]. Id. at 44.
[FN155]. Rabinow, supra note 40, at 1.
[FN156]. Case Studies, supra note 126, at 43.
[FN157]. Marshall, supra note 147, at 25.
[FN158]. See Cook-Deegan, supra note 114; see also Perspectives from Different Sectors, in National Research Council, supra note 8, at 57, 61.
[FN159]. Beardsley, supra note 114, at 92A. A study conducted in 1985 showed that forty-seven percent of academic researchers in biotechnology at forty research universities consulted for industry. Id.
[FN160]. See Nelsen, supra note 51, at 1460-61. A stated objective of the Bayh-Dole Act is to promote university-industry collaboration. 35 U.S.C.
[FN161]. In the mid-1970s, when scientists began to realize the potential commercial value of discoveries in molecular biology, researchers began to collaborate with industry and many scientists left academia to join entrepreneurial firms. As a result, many biotechnology companies developed strong ties with the academic world. See NIH Working Group, supra note 13.
[FN162]. See Nelsen, supra note 51, at 1461 (“Universities see industrial support as a potential replacement for funds cut by the federal government.”).
[FN163]. NIH Working Group, supra note 13.
[FN164]. See Kieff, supra note 99, at 726-27 (“[T]he relatively small size of the academic science community suggests that informal norms may evolve to manage any anticommons concerns that do exist.”); Nelsen, supra note 51, at 1461 (remarking that certain norms have arisen in the field of university technology transfer).
[FN165]. Nelsen, supra note 51, at 1461.
[FN166]. Id. In terms of competing interests, Nelsen states that industry has an interest in confidentiality and control of intellectual property, while universities are interested in “protect[ing] and foster[ing] the development of [their] intellectual property in the cause of public economic development.” Id.
[FN167]. See supra Part IV.B.2 (discussing the development and dissemination of PCR technology).
[FN168]. See supra notes 146-48 and accompanying text.
[FN169]. Marshall, supra note 147, at 25.
[FN170]. Rai, supra note 21, at 112. Professor Rai observes that “[m]ajor research universities have sought to maintain certain aspects of traditional scientific norms even while embracing the development-promoting aspects of property rights.” Id.
[FN171]. Id. at 115.
[FN172]. See id. at 112-13.
[FN173]. FASEB is composed of twenty-one independent member-societies that serve the interests of biomedical and life scientists. Some members include the American Society of Biochemistry and Molecular Biology, the American Society of Pharmacology and Experimental Therapeutics, and the American Society of Human Genetics. FASEB holds educational conferences and disseminates information on biological research through publications. See About FASEB, at http://www.faseb.org/faseb/WhatIsFASEB.html (last visited Feb. 2, 2004).
[FN174]. See Letter from David G. Kaufman, FASEB President, to Barbara M. McGarey, NIH Office of Technology Transfer, at http:// www.faseb.org/opar/letters/1999/McGarvey.html (Sept. 7, 1999).
[FN175]. Id.
[FN176]. Tribble, supra note 121, at 431.
[FN177]. An EST, or expressed sequence tag, is a segment of a gene that encodes a protein. See Holman & Munzer, supra note 84, at 748. ESTs are powerful research tools used for isolating full-length genes and locating genes on a genome map. Id.
[FN178]. Fehlner, supra note 14; Tribble, supra note 121, at 430.
[FN179]. Tribble, supra note 121, at 430.
[FN180]. See About the SNP Consortium, at http://snp.cshl.org/about/ (last visited Feb. 2, 2004). Members of the Consortium include Amersham Biosciences, AstraZeneca, Aventis, Bayer AG, Bristol-Myers Squibb, Hoffman-LaRoche, GlaxoSmithKline, IBM, Motorola, Novartis, Pfizer, Searle, and the Wellcome Trust. Consortium Members, at http://snp.cshl.org/about/members.shtml (last visited Feb. 2, 2004).
[FN181]. See Single Nucleotide Polymorphisms: An Introduction, at http:// snp.cshl.org/about/introduction.shtml (last visited Feb. 2, 2004).
[FN182]. The SNP Consortium—Full Genome Representative SNP Map Program Summary, at http://snp.cshl.org/about/program.shtml (last visited Feb. 2, 2004).
[FN183]. The SNP Consortium: Frequently Asked Questions, at http:// snp.cshl.org/about/faq.shtml (last visited Oct. 18, 2003).
[FN184]. See Rai & Eisenberg, supra note 21, at 298-99 (“The willingness of private firms in a patent-sensitive industry to spend money to enhance the public domain is powerful evidence of a perception that intellectual property rights in the research results could create significant barriers to subsequent research and product development.”).
[FN185]. Michelle R. Henry et al., DNA Patenting and Licensing, 297 Science 1279, 1279 (2002).
[FN186]. Id.
[FN187]. See Principles and Guidelines, 64 Fed. Reg. 72,090, 72,092 (Dec. 23, 1999).
[FN188]. See id. at 72,090. The Principles and Guidelines resulted from a recommendation of the Working Group of the Advisory Committee to the Director. Id. at 72,092. Harold Varmus, Director of the NIH, asked the Working Group to investigate problems encountered in the dissemination of research tools. The Working Group found that restrictions on research tools could stifle downstream product development, but that reasonable restrictions were necessary to provide incentives for commercial development. The Working Group recommended that the NIH issue guidelines to help researchers achieve the appropriate balance between these competing interests. Id.
[FN189]. Id. at 72,090.
[FN190]. Id.
[FN191]. Id. Reach-through rights contribute to “the general proliferation of multiple ties and competing interests that is the source of the current access problems.” Id. at 72,091.
[FN192]. Id. at 72,093.
[FN193]. Id.
[FN194]. Fehlner, supra note 14.
[FN195]. U.S. Const. art. I,
[FN196]. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 146 (1989).
[FN197]. Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 480 (1974) (“The patent laws promote [the Progress of Science and useful Arts] by offering a right of exclusion for a limited period as an incentive to inventors to risk the often enormous costs in terms of time, research, and development.”).
[FN198]. See Bonito Boats, 489 U.S. at 150. The patentability requirements of utility, novelty, nonobviousness, and written description are codified at 35 U.S.C.
[FN199]. Bonito Boats, 489 U.S. at 150.
The applicant whose invention satisfies the requirements of novelty, nonobviousness, and utility, and who is willing to reveal to the public the substance of his discovery and ‘the best mode ... of carrying out his invention,’ is granted ‘the right to exclude others from making, using, or selling the invention throughout the United States,’ for a period of 17 years.
Id. (citation omitted).
[FN200]. Doll, supra note 24, at 689.
[FN201]. See generally Mueller, supra note 1 (proposing an expansion of the experimental use exception for research tools); O’Rourke, supra note 29 (proposing employment of the fair use doctrine in patent law).
[FN202]. Mueller, supra note 1, at 9.
[FN203]. Id.
[FN204]. Mueller’s model would “prohibit[] the patent owner from enjoining the non-consensual use of the research tool.” Id.
[FN205]. See Hybritech, Inc. v. Abbott Labs., 849 F.2d 1446, 1456 (Fed. Cir. 1988) (“[T]he principal value of a patent is its statutory right to exclude.”).
[FN206]. See Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 150 (1989).
[FN207]. Id. at 150-51.
[FN208]. Principles and Guidelines, 64 Fed. Reg. 72,090, 72,091 (Dec. 23, 1999).
[FN209]. O’Rourke, supra note 29, at 1237.
[FN210]. Id. at 1238.
[FN211]. An inventor may choose to keep the invention secret; however, the patent laws provide exclusive rights for a limited time “in consideration of [the invention’s] disclosure and the consequent benefit to the community.” United States v. Dubilier Condenser Corp., 289 U.S. 178, 186 (1933).
[FN212]. See Thomas D. Mays, Biotech Incites Outcry: Public Policy Debates Arise Over Human-Animal Hybrid Patents and Germline Gene Therapy, Nat’l L.J., June 22, 1998, at C1, C27 (“[T]he impairment of a patent holder’s rights may have unanticipated consequences, restricting the flow of new knowledge that leads to the discovery of new drugs to alleviate pain and suffering.”).
[FN213]. Cook-Deegan, supra note 114. Cook-Deegan notes that scientists “may or may not care about whether they can secure patents on their work, but they are concerned about paying fees, and can become apoplectic about having to obtain licenses if those licenses seriously hinder their work.” Id.
[FN214]. Introduction, supra note 50, at 2.
[FN215]. See NIH Working Group, supra note 13.
[FN216]. Nicky Androsov, How Far Should Biotech Patents Extend?, available at http://www.currentdrugdiscovery.com/pdf/2001/3/3complete.pdf (Mar. 2001).
[FN217]. See Univ. of Rochester v. G.D. Searle & Co., 2004 WL 260813 (Fed.
Cir. Feb. 13, 2004).
[FN218]. See id. at *1. Cox-1 and cox-2 are also referred to as PGHS-1 and PGHS-2. Univ. of Rochester v. G.D. Searle & Co., 249 F. Supp. 2d 216, 219 n.1 (W.D.N.Y. 2003).
[FN219]. Univ. of Rochester, 2004 WL 260813, at *1.
[FN220]. U.S. Patent No. 5,837,479 (issued Nov. 17, 1998).
[FN221]. U.S. Patent No. 6,048,850 (issued Apr. 11, 2000).
[FN222]. Univ. of Rochester, 2004 WL 260813, at *11.
[FN223]. Specifically, the University of Rochester, sought to collect billions of dollars in royalties from Pfizer for the sale of its drug Celebrex. See Andrew Pollack, University’s Drug Patent Is Invalidated by a Judge, N.Y. Times, Mar. 6, 2003, at C3.
[FN224]. Univ. of Rochester v. G.D. Searle & Co., 249 F. Supp. 2d 216, 224 (W.D.N.Y. 2003).
[FN225]. Univ. of Rochester, 2004 WL 260813, at *11.
[FN226]. See id. at *10.
[FN227]. Id. at *13.
[FN228]. Id.
[FN229]. Allowing inventors of research tools to claim rights in products developed through the use of the tool is analogous to allowing the seller of a sifter for use in panning for gold to claim rights in the gold discovered through use of the sifter. Kunin et al., supra note 58, at 637.
[FNa1]. J.D., Emory University School of Law, Atlanta, Georgia (2004); B.S., Pennsylvania State University, University Park, Pennsylvania (1998). I would like to extend my gratitude to Professor Margo Bagley for providing helpful comments and encouragement throughout the writing process, to my family for their unconditional love and support, and to Rich, for everything.
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