Gene Licences

Gene Licences: Managing Rights to Intellectual Property

Michael Blank, M.Sc.
Copyright in manuscript-length by U.S. P.T.O.

The patent system has served Western civilization for five centuries. In combination with basic research, the patent system has fostered revolutionary technologies such as biotechnology. However, the application of the patent system to genetic information to encourage innovation in biotechnology has aroused opposition. As debate over patenting of genetic information comes from both noncommercial and commercial sources, it is time to revisit the application of intellectual property (IP) to genetic information as a whole.

This paper briefly reviews significant issues surrounding the patenting of genes. At the core of the debate, the tension occurs between the patentability of information and the pragmatic need to create a viable opportunity to create life-saving drugs. After acknowledging the key values of both sides, I propose a new form of (IP) called Gene Licences to manage rights to genetic information. Gene Licences bridge the gap between the unorthodox patenting of information (even within an invention), and the need for an IP which offers the chance to raise money for drug development. Such a proposal is timely, as free access to genetic information is needed to fully realize the potential of drug discovery that the Human Genome Project promised.

The issues: Real and Imagined

There are significant concerns about gene patents in academia and among lay people. These concerns include: Gene patents confer ownership of genes; Gene patents discourage other companies from using a gene for a different product; Gene patents exclude others from genetic information, including the prevention of individuals from accessing their own genetic profile; Gene patents restrict academic research and divert the resources of universities towards litigation.

Right to exclude vs. ownership

A popular concern is that gene patents mean that genes are ‘owned’. This view was championed by Jeremy Rifkin, who used strident terms such as “Human Beings as Intellectual Property”. Fortunately, Rifkin is largely mistaken in his appraisal of gene patents. According to legal principle, a patent does not confer ownership of a gene, but the opportunity to exclude others from using that gene for profit. An appropriate metaphor is marriage: a husband does not own his wife, but has the right to keep their relationship monogamous.




Intellectual property law has matured to the point that a company can exclude others from using a specific genetic sequence to make a specific product. For example, Amgen patented the genetic sequence of the hormone erythropoietin, and made an artificial form of the hormone called Epogen. Epogen, when injected, enabled patients with kidney disease to make their own red blood cells (instead of spending hours getting blood transfusions or dialysis). The product is a success for biotechnology, both in the doctor’s office and in the marketplace. Amgen does not own the genetic sequence for erythropoietin; rather it can (and has in court) exclude other companies from making pharmaceutically-effective artificial erythropoietin.

Discouragement of further innovation

Fortune magazine reported that some electronics companies stockpiled patents, and then sued other companies that infringed upon them with great returns. Whether this could occur in biotechnology is a serious concern. Fortunately, an attempt to patent random genetic sequences, without understanding the significance of the sequences, was rejected after lengthy debate.

Another issue arose with the results of the Human Genome Project (HGP). The HGP results showed that human beings are encoded by fewer genes than expected. In other words, a small number of genes have to be used in many different ways to encode our complex bodies. This creates an issue for patent law; if a gene is to be used in different ways, what if it is patented for only one pharmaceutical product. In other words, what if a company wants to make a product based upon one manifestation or expression form of a gene, but finds that another has already patented the gene for a different product?

This question was put by Scientific American to John Doll, Biotech section chief of the U.S. Patent and Trademark Office (PTO). His response was that genes are subdivided into smaller sequences, known as exons. In certain circumstances some exons are used by the cell, and in other circumstances other exons are used. Doll noted that different combinations of exons could be patented from the same gene, for different purposes. The term ‘gene patents’ is therefore misleading, but it will still be used here because of its widespread use.

Gene patents allow the control of information

Genes have both chemical and informational properties. The rationale for patenting genes is based on their chemical aspect alone. There are many precedents for chemical patents. In the 1950s and 1960s, many chemical patents were awarded. In 1974, the U.S. Supreme Court fostered the emergence of biotechnology by ruling that a bacterium is a bag of chemicals, and therefore patentable. As genes are composed of chains of deoxyribonucleic acid (DNA), it follows that genes are patentable.


According to Professor of Law E.R. Gold of McGill University, the current practice of patent law ignores the informational properties of genes. Gold has written excellent articles on how information is privately held by patents on genetic screening tests such as Myriad’s patents on screening tests for BRCA1. Myriad discovered a genetic predisposition to breast cancer, and is using its legal right to control access to the screening test. Gold argued that this impaired individuals from accessing their own genetic information. Regardless of the morality of the BRCA1 patents, it is obvious that these patents confer the right to exclude others from genetic information. This conflicts with patent law of many countries (including the U.S.) which states that information is not patentable.

The most likely reason for the awarding of patents such as Myriad’s is that it is pragmatic. It offers the opportunity for people who made the scientific discovery and developed the test to be rewarded. With this test, people who are predisposed to breast cancer might be able to prolong their life by limiting threats to their health. For that reason, the morality of the BRCA1 screening test patent is murky. Gold did state that the best arguments in favour of patenting were to attract investment. So, without the opportunity to patent such a screening test, the initial research might not have been funded properly, delaying the finding by years. Alternatively, any venture capital used to develop the screening test might have been diverted to lucrative products, such as video game consoles.

Despite the pragmatism of the BRCA1 patent, patents which confer the right to exclude others from information is a serious threat to a knowledge-based economy. This is especially true in biotechnology, because development of the science which underlies biotechnology requires free access to information.

Intellectual property law will be continually scrutinized in order to maximize dissemination of available information. Obviously, this means that questions will be raised about the right to exclude others from information. However, an equally important question is providing an incentive in intellectual property law for the disclosure of information. Currently, the U.S. government pays $10 000 per researcher for access to the genetic information found and held by Celera Genomics, which ‘tied’ the publically funded Human Genome Project to sequence the human genome. Celera’s sequences are coveted by many researchers, in order to double-check the public HGP’s data as well as compare Celera’s human sequences to Celera’s mouse sequences.

Canada has many top-notch researchers, but can’t afford access to Celera’s databases. It is unfortunate that the home of Banting and Best, the discoverers of insulin, and Nobel Laureate Michael Smith cannot easily access the best information to perform world-class research. Canada’s burgeoning biotechnology industry would also benefit from low-cost access to the latest genetic information.



At such a high cost for basic research, there is an opportunity for a revisit to intellectual property law to encourage the dissemination of information. Otherwise, information would be kept private for an extended period of time, retarding the growth of science and medicine.

Basic research becomes illegal

Traditionally, universities have been given a ‘research use exemption’ on patented products for basic research. Philippe Ducor, a Swiss attorney, explained it succinctly. A university can do research on patented scale to improve it, but the moment it uses the scale to weigh a chemical for other research, the university must purchase the scale.

The research use exemption caused controversy at Duke University. A researcher was hired by Duke, and the researcher brought along a valuable, patented laser. The researcher moved on to another institution. Duke continued to use the laser for the purposes of research and education, without paying royalties to the researcher. A lawsuit ensued, and the court ruled against Duke, stating that Duke profited from using the laser as a teaching and research resource. Many critics are disappointed in the ruling, but some acknowledge that universities profit from the patent system, so they must not be exempt from the limitations imposed by patent law. Similar issues concerning biotechnology patents could easily arise in the future, probably raising the ire of public opinion.

One of the biggest threats to universities is diverting resources from academics. If a researcher had to spend significant amounts of time doing patent searches before starting research, it would slow the pace of progress. Alternatively, a researcher could unknowingly continue research on patented material, and the university could be sued successfully. Either way, the resources of academia may be diverted from academic pursuits to litigation.

The threat of litigation to progress

One threat to research and development in science and biotechnology is the amount of litigation over gene patents. For example, patents which are too broad in scope (i.e. claim too much) are struck down in court. According to Professor Gold, 42% of challenged patents are struck down. As successful drug development takes over US $300 million and over a decade to develop, designing an intellectual property system to decrease litigation is a socially valuable goal.

Furthermore the U.S. Patent and Trademark Office (PTO) straining under the responsibility imposed on it. More than 20000 genetically-related patents have yet to be processed. Pressure to deal with these could result in mistakes, leading to more litigation. The U.S. PTO even offers incentives to its workers to increase their total output. As the incentives are designed for speed rather than care, there is a possibility that mistakes will occur, leading to more litigation.

Besides the cost of litigation to business, the cost to universities cannot be understated. An intellectual property system which diverts funds from academia to litigation must be seriously scrutinized. In general, an intellectual property system which lowers the chances of litigation would husband resources for education, basic research, and drug development.

Revisiting Intellectual Property Law

The key challenges to intellectual property law regarding genetic information are clearly demarcated. Ownership of information is not a problem but withholding information from patients, government researchers and other companies is should be mitigated. For this to occur, an incentive for disclosure of information should be considered in intellectual property law. Finally, controversies arising from the patenting of genetic information should be carefully examined so that changes will be made so as to lower the chances of costly litigation in the future.

Gene Licences

A system of Gene Licences (GL) would manage intellectual property rights to genetic information. Simultaneously, the patent system would still be used to manage intellectual property rights to inventions. Currently, patents claim both inventions (i.e. a genetic screening test) and the accompanying genetic information. That is the source of the controversy, as patent law traditionally holds genetic information as nonpatentable.

The following are the terms of Gene Licences. To claim a Gene Licence, an institution or individual would have to disclose the sequence of a gene as well as fulfil the specific utility requirement of the U.S. Patent and Trademark Office (U.S. PTO). The specific utility requirement, which is currently used in gene patents, states that the patentee must disclose how the gene is used in vivo. In other words, the licencee must explain how the body uses the gene.

In return, the licencee would gain a thirty-year term licence on the gene. The licencee would not have the right to exclude others from the gene. Instead, it would have the right to part of the revenue from any products derived from the gene. Specific royalty rates could be debated by legislators, but a fixed rate structure would enable business leaders to understand the costs of using licenced genes.

The following is an example of a fixed rate structure. Five percent of any revenue from any products which requires foreknowledge of the specific utility of the gene would go to the licencee. If company B made a product based upon a gene licenced by company A, 5% of revenue would go to company A. It is possible that a product could be based upon knowledge of many licenced genes. In such case, the GL costs could mount, thereby creating a disincentive for development of that product. In order to limit such a disincentive, a given product would have a cap on royalty fees of 10% of revenue for that product. The total royalty fees would be divided equally per licenced gene. This example of a fixed rate structure is one of many possibilities. The most important criterion in designing a rate structure is minimizing complications for those who are using the genetic information to make socially valuable products.

A combination of GL-patents would increase the disclosure and availability of genetic information. GL would offer the opportunity to profit from disclosure of the information, should it be used to make a new product. Just as important, GL would not grant the licencee the right to exclude other companies from the information. During the time when a gene is licenced, it would be available at no cost during product development.

As with any form of IP, a company or individual would not be forced to accept the quid pro quo of GL. It is possible that companies would not wish to switch from gene patents or the lucrative practice of selling access to unpatented, secreted databases. Therefore, the benefits of GL to industry and individual companies will be outlined in the next section.

GL would be good for business

A new IP system must consider corporate needs just as deeply as it considers social needs. Otherwise, there will be no fair exchange between the two partners of society and the holder of IP. In addition, the GL-patent combination adds a new relationship besides the society-corporation relationship. That is the relationship between a corporation which holds a gene licence and another corporation which develops products based upon the licenced gene. Both society-corporation and corporation-corporation business relationships will be discussed in this section.

The GL-patent combination would change the society-business relationship

If a new IP system were designed wherein companies would not have the right to exclude others from genetic information, other rights would have to be included to make the new IP attractive. Currently, a patent encompassing a gene allows a company to advertise an exclusive opportunity to make and sell products related to the gene. Therefore, they can acquire the investments necessary to meet U.S. F.D.A. requirements for new drugs. If a new IP were to be introduced, it must be done in a manner that acknowledges the importance of investment to biotechnology and pharmaceuticals.

In recognition of the importance of raising funds for drug development, GL must be kept in combination with current patent practice for actual inventions. The patent system would still protect a company’s invention, such as a new drug. This would allow investments to continue to support drug development from conception to approval.

At the same time, GL would manage rights to the genetic information which can be used to devise new drugs. In developing a new IP to manage rights to genetic information, the concern is not one of fostering socially valuable investments for drug development. Instead, the concern is that the IP should be attractive enough that companies which have genetic databases would seek to acquire GL for the genes that they know about. If selling access to genetic databases is more profitable than acquiring a GL, then the GL proposal is worthless, as no company would consider entering such an agreement. A similar challenge arises if the aim was to encourage a company which already had a patent encompassing a gene to switch from patent rights to GL rights for the gene. The GL rights would have to exceed or equal patent rights to the gene to make it worthwhile.

One way a new IP for genetic information could become more attractive than gene patents is the length of the term. The term for GL should be 30 years in length, for two reasons. First, the 30 year term makes up for the loss of strong patent rights which are only twenty years in length. Second, as drug development can take up to 14 years, it might take that long before a drug based upon a given gene could be developed. The term of GL should grant a significant number of years of revenue, due to the probable delay in revenue between disclosure of the gene and product development. The length of GL could be made even longer, to make up for the fact that the licencee is entitled to only low percentages of revenue from any marketed product which uses the gene.

The second benefit to a company which holds a GL would be the possibility to have multiple revenues from a single GL. A single gene might be associated with many products from many companies. Therefore, if many products are made on the basis of a licenced gene, there would be many revenue streams at once. This is another benefit for the licencee, which is necessary to make GL more attractive than the loss of lucrative rights to exclude others from a patented gene or a secreted database.

GL would foster cooperation between companies

Currently, a company who holds a gene patent must sell access to the gene to satisfy its responsibility to shareholders. This situation makes the information rivalous in consumption. The goal of one company is to access the gene at a low cost, because the costs to drug development are already quite high. Simultaneously, the company which sells access to the genes is required by law to look after its shareholders’ interests first, meaning that it would sell access to the gene dearly.

GL would make the information non-rivalous in consumption. In fact, it would make the revenue of both companies tied to revenue from a marketed product. Therefore, the company holding the gene licence would have a vested interest in cooperating with other companies to develop products. In practice, this would mean that all information concerning the gene would be disclosed.

An argument could be made that the returns from GL would not generate as much revenue as a gene patent. This would be probably true. However, the revenue from a GL-patent combination (i.e. GL for a gene, patent for a genetic screening test) could exceed a gene patent. The GL-patent combos separates 1)revenue from the GL from 2)revenue from selling access to a patented invention. A GL would probably not be useful in attracting the hundreds of millions of dollars necessary to develop a drug, but the patent system would still be available for that purpose. Finally, some might expect a guarantee of return for a company who disclosed important genetic information. Such an expectation is contrary to the criteria for IP, as Bankole Sodipo asserted that IP offers only an opportunity for a reward, not a guarantee for a reward. Otherwise, society would have to pay for useless inventions or, in the case of GL, insignificant genetic information. If GL were adopted, the value of a particular Gene Licence would be determined by the capabilities of those who use the genetic information to develop products, and market forces which determine the usefulness of those products.

Conclusions

Gene Licences would reduce the controversies surrounding the patenting of genetic information. An incentive for the disclosure of information would profit companies, as well as revitalize basic research, which is the core of biotechnology. Most importantly, Gene Licences would encourage the disclosure and availability of information for development of new products. These new products have the especial potential to ameliorate human health, and therefore any effective alternative to gene patents deserves consideration. The word patent is derived from the Latin patere, which means ‘to open’. Gene Licences would open up tremendous new opportunities for scientific research and product development, and should be adopted as law.


A manuscript-length version of this proposal is registered with the U.S. Patent and Trademark Office (U.S. P.T.O.). If you are interested in discussing the contents, a collaboration or co-authorship, contact me at mehow73@gmail.com