Impact on sequential innovation

Some scholars have suggested that the solution to preventing an anticommons from development is to grant fewer patents to DNA sequences.²¹¹ There is the

possibility that an anticommons can be prevented by precluding DNA patents given if the cost of DNA sequencing is low, and provided that non-proprietary incentives are abundant.²¹² This line or argument now seems to apply to isolated gene sequences in the US.²¹³

However, there are already thousands of patents on DNA sequences.²¹⁴ In addition to patents covering DNA, genes and fragments of genes, patents have also been granted for the methods of sequencing and other various research tools. The issue centres on the quantity of rights with various owners that must be combined. For instance, if a company wants to develop a therapeutic protein that requires several gene fragments, that company will be required to obtain licenses on all the patented gene fragments to avoid patent infringement. If each gene fragment is owned by different owners, then the transaction costs will be very high before an organization can acquire the right to create the product. Heller and Eisenberg maintain that issuing patents on

210 Brief of James D. Watson as Amicus Curiae in Support of Neither Party. The Association of Molecular Pathology, et al., v. Myriad Genetics, Inc., et al., No. 12-398. 2013 at 19: “For a new assay using hundreds of human genes, the sea of patents and patent applications would create hundreds, if not thousands, of individual obstacles to developing and commercializing the assay. The best way, in my view, to resolve this problem is to eliminate the unnecessary patenting of human genes.”

211 Jacobs, P. & G. Van Overwalle. “Gene Patents: A Different Approach” in European Intellectual Property Review. Vol. 23, Iss. 11, 2001 at 505. Jacobs and Van Overwalle advance the argument that patents should not be granted for DNA sequences themselves, but only for downstream products.

212 See supra note 4, Burk & Lemley at 1626.

213 For instance, Rebecca Eisenberg and Robert Merges wrote a legal opinion letter advancing the argument that the National Institutes of Health (NIH) patent applications on expressed sequence tags are not patent eligible. See: Eisenberg, R. & R. Merges. “Opinion Letter as to the Patentability of Certain Inventions Associated with the Identification of the Partial cDNA Sequences,” in American Intellectual Property Law Association Quarterly Journal. Vol.23, pp.1-52, Winter 1995.

214 Thomas, S. et al. “Ownership of the Human Genome” in Nature. Vol. 380. 1996 at 387.

68 gene fragments “makes little sense,”²¹⁵ because many genes are required to make a therapeutic protein or a genetic diagnostic test.

A proliferation of patents on individual fragments held by different owners seems inevitably to require costly future transactions to bundle licenses together before a firm can have an effective right to develop these products.²¹⁶

The problem could be intensified with reach through license agreements (RTLA), which gives the patent owner of the patented invention rights to subsequent downstream discoveries through royalties in exclusive or non-exclusive licenses.

“RTLAs may lead to an anti-commons as upstream owners stack over-lapping and inconsistent claims on potential downstream products.”²¹⁷ This may create complex obstacles when a user needs access to multiple patented inputs to create a single useful product. For example, if an company wants to develop a genetic testing kit for

hereditary colon cancer, it could run into licensing issues.²¹⁸ 2.5.4. Is there an anti-commons in biotechnology?

Despite the argument that patent protection creates a vast thicket and could lead to an anticommons, there are several limitations to the argument when it is applied to the patent system. First, patent rights are intangible in nature, which differ from traditional tangible property rights.²¹⁹ An inherent part of the anti-commons line of reasoning is that like land scarcity, there is a scarcity to the biological commons.²²⁰ On

215 See supra note 192, Heller & Eisenberg at 699.

216 Ibid.

217 Ibid.

218 A commonly inherited condition that could increase an individual’s risk of colon cancer is a disorder known as hereditary non-polyposis colorectal cancer (HNPCC), which occurs when there is a mutation in one of the DNA repair enzyme genes MLHI, MSH2, MSH6, PMSI, or PMS2. However, each of these genes code for different types of proteins and RNA (See Stadler, W. (Ed). Cancer Biology Review: A Case-Based Approach. New York: Demos Medical Publishing, 2014 at 14). The genetic test created to test for the five DNA repair enzyme genes may actually need to test for many more combinations of proteins, RNA and DNA. If the various components of proteins, RNA and DNA are patented by several companies, then it would mean the company developing the test would need to obtain licenses for the various parts that would be included in the test to avoid infringement. In this situation, patents cause a blockage in the form of a ‘patent thicket’ which can be problematic for innovators wishing to enter the market.

219 Leung, S. “The Commons and Anticommons in Intellectual Property” in UCL Jurisprudence Review.

Vol. 16, pp.16-28, 2010.

220 Buchanan, J. & Y. Yoon. “Symmetric Tragedies: Commons and Anticommons” in Journal of Law &

Economics. Vol. 43, 2000 at 1.

69 the contrary, the intangible commons is very different from physical land in that it does not depreciate with multiple usage. What is unique to genetic research is that there are various pathways with multiple starting points that can lead to the development of an innovative product or process.²²¹

In addition, patent rights are temporal.²²² The very concept of the anti-commons exists as a reactionary entity to the problems arising from when ownership is accepted to be absolute.²²³ It is submitted that a property right resulting from a patent grant is temporary and not absolute:

Even the full-blooded owner in theory does not have absolute rights over a resource…the range of excludability that an owner may have can be limited: the range of excludability that an owner may have others in the governance of a particular resource may vary.²²⁴

Thus, due to the temporal nature of patents, patent holders are restricted in exercising their exclusionary rights for twenty years, and the negative effects that can arise from an anti-commons will fade.

Third, patents do not necessarily mean that resources are under exploited. Patent owners have the option to both use their invention and exclude others from the usage of the invention. What is clear is that the patent holder intends to make money from the utilization of the invention.²²⁵ Since the patent is temporal, it becomes a ‘wasting’ asset because the holder faces the possibility of new and old patents during the duration of the right, and new techniques that fall into the public domain will erode their dominance.²²⁶ Therefore, if patent holders do not exercise their inventions or license them to other parties, they will miss out on income opportunities.

221 Buckley, T. The Myth of the Anticommons. Biotechnology Industry Organization, May 21, 2007, http://www.bio.org. Accessed February 24, 2012.

222 35 U.S.C. § 154(a)(2) and Article 63(1) of the EPC (1973)

223 Lametti, D. “The Morality of James Harris’s Theory of Property” in The Properties of Law: Essays in Honour of James Harris. T. Endicott, J. Getzler and E. Peel, (eds.). Oxford: Oxford University Press, 2006.

224 Lametti, D. “The Concept of Anticommons: Useful, or Ubiquitous and Unnecessary?” in Concepts of Property in Intellectual Property Law. Howe, H. and J. Griffiths (eds.). Cambridge: Cambridge University Press, 2013 at 248.

225 Epstein, R. & B. Kuhlik, “Is There a Biomedical Anticommons?” in Regulation. Vol. 27, No. 2, Summer 2004 at 55.

226 Ibid.

70 Moreover, patents can help facilitate further investment and development into biotechnology sectors that are uncertain and risky, and thus, costly. As such, the exclusive rights granted to patent owners have a positive effect in that it directs resources into areas of industry that may otherwise not be developed.²²⁷

Fifth, there is a lack of empirical evidence over the probable negative effects connected with patent thickets. Rather, a US study which consisted of a survey of 70 attorneys, scientists and managers in the biotechnology and pharmaceutical industries over whether there was a patent blockade revealed that almost none of the participants believed the current patent regime posed unbeatable impediments that prevented the effective use of research tools.²²⁸ Similarly, a study conducted by the UK’s Intellectual Property Office revealed that the thicket problem does not deter innovation, particularly for small companies.²²⁹ Finally, a 2013 study conducted by the EPO’s Economic and Scientific Advisory Board concluded that a patent thicket is not a problem in itself, but maintains that procedures to improve patent quality can assist in reducing the intricacy of the system and address patent thickets indirectly.²³⁰

Although this thesis does not deny the existence of the theoretical problem of the anti-commons in biotechnology, it suggests that it can be overcome in practice. In fact, the data gathered from interview participants from the biotechnology/research sector

227 Mireles, M. “An Examination of Patents, Licensing, Research Tools, and the Tragedy of the

Anticommons in Biotechnology Innovation,” in University of Michigan Journal of Law Reform. Vol. 38, 2004, at 155 & 163.

228 Walsh, P. et al. “Effects of Research Tool Patenting and Licensing and Biomedical Innovation” in Patents in the Knowledge-Based Economy. Cohen, W. and S. Merill (eds.) Washington: National Academies Press, 2002 at 285.

229 The UK IPO emphasized that even a finding of a barrier to entry created by patent thickets is not proof that reducing that barrier would lead to increased innovation. See UK Intellectual Property Office. A Study of Patent Thickets. July 30, 2013. www.ipo.gov.uk/ipresearch-thickets.pdf. Accessed November 19, 2013 at 60.

230 European Patent Office Economic and Scientific Advisory Board. Report of Workshop on Patent Thickets. March 2013. Available at:

http://documents.epo.org/projects/babylon/eponot.nsf/0/B58781F239B083CEC1257B190038E433/$FILE /workshop_patent_thickets_en.pdf. Accessed October 3, 2013. The report proposed 6 possible solutions (at 18): (1) improving the granting process (pricing, quality); (2) improving dispute resolution

(specialized court, better opposition); (3) improving standards related to IP management (streamlined licensing); (4) improving transparency (registry); (5) market-based incentives (encouraging better applications, patent pools) and (6) compulsory licensing.

71 suggests that they have not encountered any ‘patent thickets’, and, when necessary, license with other parties.²³¹ Moreover, there has been a lack of empirical data for the assertion that a patent blockade governs patent innovation.²³² Nevertheless, there has been a persistent call for the diminishing of patent protection for biotechnology inventions. In the UK, for instance, the Nuffield Council on Bioethics considered whether granting patents for DNA sequences achieved the patent system’s goal of stimulating innovation for the public good and rewarded innovators for useful new inventions and ultimately maintained that patents should be the exception and not the norm.²³³ In Germany, the Protestant Church of Germany denounced patents on DNA sequences and genes as they already exist in nature and are not inventions. ²³⁴ In the US, a 2006 study by the National Research Council (NRC) acknowledged the possibility of an anticommons pertaining to biotechnology patents, and advocated that the standard for patenting should be strengthened.²³⁵