The Australian Law Reform Commission Inquiry into Patenting of Genes and Genetic Material: Some Key Issues
Professor Anne Finlay, Commissioner, Australian Law Reform Commission
Paper delivered to ACIPA Conference, Canberra, 21 November 2003
Synopsis
The Australian Law Reform Commission (ALRC) is undertaking an inquiry into Intellectual Property Rights over Genetic Materials and Genetic and Related Technologies with a particular focus on human health. The ALRC released an Issues Paper (IP 27) in July 2003 and is currently preparing a Discussion Paper for release early in 2004 with the final report due by 30 June 2004.
This paper outlines the background to the inquiry and discusses some of the key issues raised in IP 27, the emerging avenues for reform and the issues that affect possible reform.
Although the Terms of Reference ask the ALRC to consider the impact of gene patents and licences on healthcare, the ALRC is also asked to examine their impact on the biotechnology sector and on research and its application and commercialisation. This highlights the complexity of the ALRC's task and the need for a careful balancing of potentially competing interests. Reforms that may be attractive to health providers might have an adverse impact on Australian biotechnology companies or be contrary to Australia's obligations under the TRIPS Agreement (Trade Related Aspects of Intellectual Property Rights).
Background to the Inquiry
The Australian Law Reform Commission and AHEC (the Australian Health Ethics Committee of the NHMRC) recently completed a joint inquiry into the Protection of Human Genetic Information. The report, ALRC 96 Essentially Yours, was tabled in Parliament in May 2003.
Intellectual Property issues were identified in that inquiry - but the ALRC considered that the terms of reference did not extend to a full examination of these issues and suggested that this would be a suitable subject for a follow up reference.
At the end of last year, we were asked by the federal Attorney-General to undertake such an inquiry and to report by the end of June 2004.
Terms of Reference
The Terms of Reference require the ALRC to consider the following matters, with a particular focus on human health issues:
(a) the impact of current patenting laws and practices-including licensing-related to genes and genetic and related technologies on:
(i) the conduct of research and its subsequent application and commercialisation;
(ii) the Australian biotechnology sector; and
(iii) the cost-effective provision of healthcare in Australia;
(b) what changes, if any, may be required to address any problems identified in current laws and practices, with the aim of encouraging the creation and use of intellectual property to further the health and economic benefits of genetic research and genetic and related technologies; and
(c) any other relevant matter.
As indicated, the Terms of Reference direct the ALRC to consider the impact of patents, and other intellectual property rights, not only on healthcare but also on research and commercialisation and the biotechnology sector. Therefore in recommending reforms directed towards issues such as access to healthcare, that the Commission must be mindful of the impact of the reforms on the biotechnology industry in Australia and on the potential for commercialisation of research.
Time Frame
The inquiry commenced in January and we released an Issues Paper (IP 27) in July followed by consultations around Australia with key groups. Public comment was invited on IP 27. To date, we have received about 60 submissions. As one might expect, they reflect a diversity of views.
IP 27 canvassed possible areas where reform might be proposed including new defences to claims of infringement of gene patents, such as where patents are used for research, for private non-commercial purposes, or for medical treatment. Additionally, the Issues Paper discussed those circumstances in which existing provisions of the Patents Act 1990 (Cth) covering Crown use or compulsory licensing might be invoked.
Currently, the ALRC is preparing a Discussion Paper identifying possible avenues for reform, to be released early 2004. This will be followed by another round of consultations nationally and a further call for submissions.
As the Discussion Paper is still some weeks away from finalisation, it is not possible to outline with certainty or in detail the draft proposals that will be included in that document. However, I can discuss some of the key issues that have arisen in the inquiry and the factors that will impact on reform proposals.
Background
More than 9,000 patents have been granted internationally on human gene sequences with some 125,000 applications lodged. Throughout the 1990s there was growing international disquiet about a range of issues presented by the new genetics. Many of these concerned matters that were addressed in the genetics information reference such as issues surrounding the use of genetic tests including discrimination on the basis of genetic status. Other concerns, however, have centred on the impact of the patenting of genetic material on healthcare and on scientific research.
Case study: patenting the breast cancer gene
Many of the issues for health care resulting from the grant of patents over DNA, DNA sequences and related diagnostic tests, are encapsulated by the story of the patents over BRCA1, a gene whose presence has been shown to increases a woman's susceptibility to breast cancer. The gene was isolated by a team of researchers at the University of Utah who formed an alliance with a US company, Myriad Genetics.
They obtained patents in America for the BRCA1 gene sequence; a number of its mutations and tests for detecting mutations and for screening samples taken from breast tumours. They also obtained patents in a number of other countries giving them a monopoly in many parts of the world over testing for the BRCA1 gene. A number of genetic organisations filed objections to the European patent, and when Myriad obtained a second European patent over the BRCA2 gene, which may indicate susceptibility to breast and ovarian cancer, further objections were lodged.
Objections have centred on the patents themselves and on the use of those patents by Myriad. There were particular concerns about Myriad's requirement in the United States, Canada and parts of Europe that testing for the BRCA genes be conducted only in their laboratories at Salt Lake City. The price being charged by Myriad for each test was around of $US2500, even though public laboratories had been doing the tests for much less.
Critics said the patents posed a threat to further research and the development of new diagnostic tests and methods - since the Utah researchers alone could use the results of the tests - and they would have a serious impact on access to testing. In Canada, the Ontario government announced it would ignore the threats from Myriad and would continue to carry out tests in its own laboratories. In British Columbia, genetic tests for the BRCA1 gene, were suspended in 2001, but resumed this year using techniques from Europe believed not to infringe the Myriad patent.
In Australia, Myriad granted an Australian company, Genetic Technologies Limited, (GTG) an exclusive licence in relation to the patent over the BRCA1 gene. However, GTG announced this year that it did not intend either to require that all BRCA1 testing be carried out in its laboratory in Melbourne or to charge royalties for testing done in other laboratories.
Nevertheless, concerns have remained within the health sector about the potential for a Myriad-type scenario to arise here. Prior to the announcement by GTG that it would not be enforcing its BRCA licence, the Australian Health Ministers Advisory Council (AHMAC) had identified six issues stemming from any monopoly over BRCA1 gene testing:
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a 2-3 fold increase in testing costs;
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the impact of these costs on clinical priorities and resource allocation in the context of finite health budgets;
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the potential for testing companies to bypass guidelines for best practice and regulations for gene testing and counselling;
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loss of expertise from publicly funded laboratories;
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the potential for incomplete testing at the same time as others are excluded from providing tests; and
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the potential for the exclusive control to stifle further innovation and research.
It was against this background that the ALRC was asked to undertake this inquiry.
International reports
Internationally in 2002-2003, a number of governments and organisations released reports discussing the ethical, legal, social and policy implications arising from gene patents. These included reports by the OECD; the Nuffield Council on Bioethics; the Royal Society, which examined the changing nature of scientific research; the Canadian Biotechnology Advisory Committee; the Ontario Ministry of Health and the New Zealand Ministry of Economic Development.
Since the publication of the Issues Paper, there have been a couple of other influential reports and findings. Chief amongst these is the UK report by Cornish, Llewelyn and Adcock which considered intellectual property rights and genetics and their impact on the health sector in the UK. Some of its main recommendations, that the UK Department of Health should recognise its unique position with regard to healthcare related intellectual property and take an active role in monitoring developments in intellectual property most notably patent law; that it should have mechanisms for assessing whether to challenge any patents or to challenge any abuse of monopoly power have proven to be influential as we shape our proposals for reform.
The Cornish report notes that Health Departments have multiple interests in patents. On the one hand, patents in this field may have an adverse impact on the cost of, and access to, diagnostic tests, for example, but on the other, the laboratories run by health services also keenly apply for patents as their research shows commercial promise. A vigorous program of challenging patents may expose their own patents to extra scrutiny.
Key Issues
As discussed above, IP 27 identified a number of issues for the inquiry. One is the need to balance the tension between rewarding risk and endeavour and maximising access to beneficial technologies. These are not necessarily competing priorities. It is possible to argue for a patent system to reward genuine innovation, but to argue against the abuse of the system-the granting of inappropriate or overly broad patents or the misuse of the power given by a patent by its holder engaging in rent-seeking behaviour.
There are two threshold issues: one concerns the ethical issues raised by gene patents; the other deals with the criticism that isolated genetic materials are merely 'discoveries', not inventions, and are not therefore not an appropriate subject matter for patent protection.
Ethical Issues
The Issues Paper asked: Should ethical and social concerns about patents on genetic materials and technologies be addressed through the patent system? Are there other or better approaches for dealing with these issues?
Those who do not support including ethical and social considerations in the patent process argue that patents form part of an economic system for encouraging investment in research and they are concerned primarily with assessing the inventiveness and utility of new inventions. Ethical and social concerns are separate issues to be dealt with by other means. However, others suggest that any system that affects the interests of individuals or groups-as the patent system does-cannot be ethically or socially neutral. Some submissions commented that the grant of gene patent rights and use of genetic inventions are distinct issues and should be separately regulated.
In some jurisdictions, patent laws explicitly require decision-makers to consider ethical and social issues as part of the patent granting process. For example, under Article 53(a) of the European Patent Convention 'inventions, the publication or exploitation of which, would be contrary to ordre public or morality' are specifically excluded from patentability. Provisions permitting the exclusion of inventions from patent protection on ethical or social policy grounds also exist in the patent statutes enacted by the United Kingdom (implementing the EU Biotechnology Directive), New Zealand and Japan. But to date, these ethical exceptions have rarely been invoked with any degree of success.
In Australia, the Patents Act may allow social and ethical considerations to be addressed to some extent through exclusions to patentable subject matter. Human beings and the biological processes for their generation are specifically excluded from patentability under the Act. Moreover, s 50(1)(a) grants the Commissioner of Patents discretion to refuse to grant a patent for an invention the use of which would be contrary to law. It has also been suggested that the 'manner of manufacture' requirement in s 18 of the Patents Act may provide limited scope for ethical and social concerns to be considered in the patent process.
The issue for the inquiry is whether it would be appropriate to include within our legislation something equivalent to Article 53(a) of the European Patent Convention.
Submissions are mixed about the value of such a proposal. Arguments against include that the application of the exclusion is limited. It only applies where the commercial exploitation of an invention appears to be contrary to public order or morality. It will not address concerns about the desirability of patenting genetic inventions. Its purpose is to exclude criminal or other similarly offensive inventions - an example commonly given is a letter bomb.
There are also arguments that patent law and the patent process are not suitable vehicles for addressing the ethical and moral concerns raised by patents and that asking patent examiners to address such complex concerns as part of the examination process would be well beyond their range of expertise. An OECD Report considered that the patent law is probably not a suitable medium for the raising of philosophical objections to the patenting of living organisms and genetic inventions. Some submissions have however countered this view with suggestions about the use of expert advisory panels to advise on ethical matters.
Discovery
A second threshold issue is the claim that gene sequences ought not be patentable as they are discoveries not inventions. A 'discovery' does not constitute a 'manner of manufacture' under Australian patent law.
However, the courts have drawn a distinction between genetic materials in their natural state and those that have been 'isolated and purified'. In Kiren-Amgen Inc v Board of Regents of the University of Washington, a patent application for the purified or isolated DNA sequence encoding the human protein EPO was opposed. [1]
The Deputy Commissioner of Patents stated that although a claim directed to naturally occurring DNA would likely be claiming no more than a discovery per se and not be a manner of manufacture, the principle did not apply to the patent application at issue because the claims were directed to 'purified and isolated' DNA sequences that were 'an artificially created state of affairs'. This is the view that has prevailed in Australia. I do not see the inquiry challenging that conclusion-what we are concerned to see however, is that, where patents are granted that they are appropriate and not overly broad.
The Patents Act
There are problems with treating patents over genes in any different way from other any other technology. Patent protection is granted on a case-by-case basis. Care must be taken in invoking general arguments or concerns (which may be based on isolated examples rather systemic problems) to justify amendments to the current law. However, the ALRC is concerned that there is appropriate examination in each case.
Many of the critics of overly broad or inappropriate patents have raised concerns in particular about patents over expressed sequence tags or ESTs (short sequences of genes encoding proteins of uncertain or unknown functions). In response to issues that were raised by patent applications involving genetic sequences (particularly ESTs) for which a function was not known, the United States Patent and Trademark Office (USPTO) recently revised its guidelines on the satisfaction of the utility requirement. This appears to have gone someway to appeasing critics and has led to a drop in the number of gene sequence patents being granted.
In considering whether to recommend changes, it is important that we identify what are real and current problems. Changes such as those at the USPTO have meant that some issues identified as problems in the academic literature even a couple of years ago, may be less of a problem now. Also there are some speculative problems that have turned out in practice not to be of such concern.
In trying to identify the extent of problems with regard to the examination of patents, the ALRC has found recent empirical studies by Andrew Christie and Melanie Howlett at IPRIA at the University of Melbourne to be particularly helpful. In particular they have concluded that a fear of a flood of EST patent claims for probes without useful functions seems to be unjustified in practice both internationally and here in Australia.
There are many other issues around the legislation that are not covered in this paper.
Research and experimental use
One of the criticisms of gene patents and licences is that they have an adverse impact on the conduct of genetic research. There are two principal reasons advanced for this: fear (whether misplaced or real) of infringing patents; and reluctance to put information in the public domain in the light of the possibility of commercialising research. Other concerns include the cost and complexity of dealing with patents and licences.
The Nuffield Council on Bioethics and others have expressed particular concerns about the grant of gene patents over inventions that constitute 'research tools', namely those involving genetic sequences and other genetic materials that have no immediate therapeutic or diagnostic value, but which may be useful (even essential) in conducting genetic research.
The Patents Act does not expressly except experimental or research use of patented inventions from liability for infringement. However, an implied experimental use defence may exist in Australian law, as it does in other common law jurisdictions. An issue for the inquiry therefore is whether there should be a statutory 'research use' defence in Australia. In some jurisdictions, a research (or 'experimental') use defence exists either by virtue of an express statutory provision or by case law. Whatever the nature and extent of the experimental use defence available in different jurisdictions, it is always necessary to differentiate between experimentation on a patented invention (which is covered) and experimentation using a patented invention for broader research purposes.
Many academic researchers assume that their use of patented inventions is immune from claims of patent infringement. Recent research conducted by Dr Dianne Nicol and Jane Nielsen at the University of Tasmania confirms that many Australian researchers and research institutions harbour erroneous assumptions about the scope of an existing experimental or research use defence. Others commented on the difficulties in determining whether an exemption from patent infringement may apply and confirmed that enforcement by patent holders is rare.
However, recently GTG has been seeking to enforce its patent over non-coding DNA, the so-called 'junk DNA'. GTG has obtained a research use licence from Sydney University. While the cost of the licence is not great, the principle of a licence for research is what concerns many people. This is on the basis of a belief that if all holders of gene patents or licences sought to enforce their rights, research could be greatly impeded. Others however have recognised that many institutions currently pay licence fees in many areas - so called 'shrink-wrap' licence fees, fees that are incorporated into the cost of test kits or software, for example.
The Issues Paper asked: Should the Patents Act 1990 be amended to include a defence for research use? If so, should the defence be limited to activities involving research on an invention claimed in a gene patent? Should the scope of the defence also encompass research use of a gene patent directed to: (a) improving upon the claimed invention; (b) finding a new use for the claimed invention; or (c) creating a new product or process using the claimed invention?
There has been considerable support in submissions for a statutory research use defence in Australia in order to provide clarification. Some opponents of its inclusion have pointed out, however, that even a statutory exemption may not provide the freedom that some researchers assume. Both the United Kingdom and the United States have research use exemptions, but these have been very narrowly interpreted by the courts (eg Madey v Duke). In particular, there is a real issue about determining the scope of such an exemption, given the difficulty of drawing a distinction between commercial research (where there would be no exemption) and non-commercial research. As universities and other public sector laboratories frequently commercialise their research or work in collaboration with commercial partners-where is the line to be drawn?
A further issue is that of research tools-if a research-use exemption extended to these the patent would be virtually worthless since their sole use is in research. This would suggest therefore that, even if there was a general research-use defence in the legislation, it might not answer the critics of GTG in relation to licences by universities.
There are a couple of models for a research-use defence. The EU approach may be a useful model allowing research or experimental use directed to improving upon a claimed invention or finding a new use for a claimed invention. Such an exemption is not wide-ranging but it is intended to encourage experimental testing and follow-on innovation. It would not however extend to research using a patented invention. Similarly the UK Patents Act allows a defence based on a) private and non-commercial purposes; or b) to study the subject-matter of the patented invention, to investigate its properties, improve upon it or create a new product or process.
Healthcare
Many of the issues around gene patents centre on their impact on predictive and diagnostic testing and the impact on healthcare is at the heart of the Inquiry. There are presently around 220 medical genetic tests available from 44 laboratories across Australia. Some genetic tests offered overseas are not available in Australia. Likewise, some types of tests offered in Australia are not available, or not widely performed, in other countries. The availability of genetic testing in Australia may be dependent on decisions about which tests are ethically acceptable, and on a cost-benefit analysis of a particular test. Genetic testing varies in cost from less than $100 to more than $1000. Depending on the test and the laboratory, testing may be free to the patient or fees may be charged. Because most medical genetic tests are ordered as part of healthcare services provided by state and territory public clinical genetics services, there is concern by health departments that high licence fees will have an adverse impact on their budgets.
Medical treatment exemption
Some countries have addressed concerns about the impact of patents on healthcare by excluding certain diagnostic, therapeutic or surgical methods of treatment from the scope of patentable subject matter. Australia has not adopted this approach to date. Provided that an invention meets the requirements for patentability set out in the Patents Act, the Australian Patent Office will allow patents on diagnostic, therapeutic or surgical methods of treatment. The Issues Paper asked whether the Patents Act should be amended to include a defence to allow for the use of a patented genetic material or technology for the purposes of medical treatment of humans.
The US has a medical treatment exemption, added at the last-minute, on the floor-of-the-House, to prevent a doctor from being sued if they use a patented material in the course of treatment. This is not the main issue in genetics where most activity concerning patented inventions, is centred on diagnostic laboratories and the work is carried out by scientists and technicians rather than by medical practitioners. Indeed certain activities are expressly excluded from the ambit of the US 'medical treatment' defence, including clinical laboratory services and those that would breach a biotechnology patent. While there have been some moves to extend the defences to these areas, this raises issues about the value of gene patents in such circumstances.
Given that in Australia most genetic diagnosis is carried out by state health departments, reforms around the existing Crown use or compulsory licensing provisions of the Patents Act may be of more relevance.
Crown use
Under the Crown use provisions, the Commonwealth or a State, or someone authorised by them, may exploit an invention covered by a patent if such exploitation is necessary for the proper provision of the services of the Commonwealth or a State. The extent to which the Crown use provisions may allow the provision of healthcare services by the Commonwealth or a State using patented genetic materials or technologies without infringing patent rights is not always clear. IP 27 asked whether the current Crown use provisions in the Patents Act are capable of applying to the provision of healthcare services using patented genetic materials and technologies and, if not, whether these provisions should be amended to apply to such use.
The ALRC is looking at the issue of clarification of the Crown use provisions. It is arguable that a Crown use provision should not be relied upon too readily and should only be invoked in exceptional circumstances in order to preserve confidence in the patent system. This raises the question of whether it would be valuable to develop guidelines about the circumstances when recourse to the Crown use provisions might be appropriate.
Although on their face the Crown use provisions might prevent something like a Myriad-monopoly situation arising here, arguably issues about competition law problems are better dealt with through the compulsory licensing provisions and through the use of the Trade Practices Act in appropriate circumstances.
Compulsory licences
The Patents Act also provides for compulsory licensing and these provisions may provide another mechanism to address concerns relating to access to gene patents, including for use in research and the provision of healthcare. A prescribed court may order the grant of a compulsory licence if:
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the reasonable requirements of the public with respect to the patented invention have not been satisfied; and
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the patent holder has given no satisfactory reason for failing to exploit the patent.
The court must be satisfied that the applicant for the compulsory licence has tried, unsuccessfully, to negotiate a licence on reasonable terms and conditions for a reasonable period of time. The patent holder is entitled to be paid for use of the patent at an agreed rate or one determined by a prescribed court. IP 27 sought comments as to whether the existing compulsory licensing provisions are adequate to address concerns about access to gene patents and, if not, how these provisions should be amended.
The Issues Paper noted the recommendation of the Intellectual Property and Competition Review Committee (Ergas Committee) that a competition-based test be the basis for compulsory licences. The Federal Government-in its response to Ergas-stated that a competition-based test should supplement rather than replace the current 'reasonable requirements of the public' test. The Discussion Paper will discuss this.
Dr Dianne Nicol and Jane Nielsen in a recent article raised the issue of a greater role for the ACCC in monitoring developments in this area. This is not out of keeping with the Cornish, Llewelyn and Adcock recommendation about a greater role for competition law in the field of genetic patenting and licensing. While it is not always easy to balance the rights given by the grant of a patent with the objectives of competition legislation, there may be some scope for the use of competition laws where there are abuses of the patent system.
Other issues being considered include database rights; issues around intellectual property management and research and some consideration of issues around publicly funded research and commercialisation.
Conclusion
The Discussion Paper, due for release in the New Year, will outline the ALRC's proposals for reform. I invite you all to play an active part in the next phase of our inquiry and we welcome your submissions.
Notes
[1] Whether the claimed invention was a 'manner of new manufacture' was not a ground of opposition in the case but arose in relation to the Deputy Commissioner's consideration as to whether the invention related to a mere discovery: Kiren-Amgen Inc v Board of Regents of University of Washington (1995) 33 IPR 557.