ALRC submission to the OECD Draft Guidelines for the Licensing of Genetic Inventions (11 March 2005)
1. The Australian Law Reform Commission (ALRC) makes the following submission to the Organisation for Economic Co-operation and Development (OECD) on the Draft Guidelines for the Licensing of Genetic Inventions (the Draft Guidelines) published in February 2005.
2. This submission does not represent the views of the Australian Government in relation to the Draft Guidelines.
3. The ALRC is a permanent authority, established under federal law in 1975, to undertake inquiries into areas of law reform referred to it by the Attorney-General of Australia .
An Australian Inquiry into Gene Patents and Human Health
4. In 2004, the ALRC completed the Report Genes and Ingenuity: Gene Patenting and Human Health (ALRC 99).[1] The Report, which contains 50 recommendations for reform, is the product of an extensive research and community consultation effort over 18 months. The need for an inquiry into these issues was identified by the ALRC and the Australian Health Ethics Committee (of the National Health and Medical Research Council) during the course of their two-year inquiry into the protection of human genetic information.[2] That inquiry, which was initiated in February 2001, had been asked to examine how best to protect privacy, prevent unfair discrimination, and maintain high ethical standards in relation to human genetic information. It was not possible to examine gene patenting issues in that inquiry because of difference in subject matter, as well as time and resource constraints. However, in December 2002, the Attorney-General of Australia provided the ALRC with Terms of Reference to conduct a separate inquiry into intellectual property issues raised by genetic information.
5. The Terms of Reference directed the ALRC to consider—with a particular focus on human health issues—the impact of current patenting laws and practices related to genes and genetic and related technologies on:
research and its subsequent application and commercialisation;
-
the Australian biotechnology sector; and
-
the cost-effective provision of healthcare in Australia .
The Inquiry was also directed to take account of Australia ’s international obligations (eg, TRIPS).
6. Part of the impetus for the Inquiry came from external events. Around this time, health officials in Australia and overseas were expressing growing concern about the implications of gene patents and licences for the cost of and access to healthcare. Of special concern was the approach to licensing of Myriad Genetics Inc (Myriad) and the breadth of the BRCA1 and BRCA2 patents and their manner of exploitation.
7. In Australia , Myriad licensed its BRCA1 patents to an Australian company, Genetic Technologies Limited (GTG). GTG announced during the course of the ALRC’s Inquiry that it was not proposing to charge a licence fee for BRCA1 testing by public sector laboratories, nor would it require that all BRCA1 testing in Australia be conducted at its laboratories. Nevertheless, concerns remained within the health sector that other companies holding patents over genes associated with predictive and diagnostic testing would, in time, replicate the more aggressive approach to intellectual property rights of Myriad.
8. Concerns also were expressed within the research community about the possible need to obtain licences for the use of patented genetic inventions in research. In Australia , the Patents Act 1990 (Cth) does not expressly exempt experimental or research use of patented inventions from liability for infringement. However, in practice, patent holders generally do not seek licence fees from researchers using patented inventions in their research, except in those circumstances where the fees are incorporated into the cost of purchasing a research tool or other product, or where the research is for commercial purposes. During the Inquiry, GTG revealed that it was asking some research institutions to take out a licence for research using its patented method for the use of non-coding DNA. However, GTG’s price structure for licensing was relatively modest, at least for academic researchers.
9. The ALRC found little evidence that gene patents or their exploitation have had any significant adverse effect to date on the conduct of genetic research in Australia . Many of the concerns expressed were anecdotal or hypothetical. In view of the equivocal nature of evidence about any present or future impact on research, the ALRC adopted a cautious approach towards recommending radical changes in patent law and practice in this area.
10. However, the ALRC’s recommendations are intended to result in a pattern of laws and practices that is flexible enough to anticipate and respond to future problems, dealing with errant behaviour without stifling future innovation and investment in genetic technologies and the development of the Australian biotechnology industry. Some of the reforms are intended to ensure that problems are identified at an early stage, for example, through the monitoring activities of the proposed Human Genetics Commission of Australia. Other recommendations encourage the use of existing mechanisms through which problems might be addressed if they emerge, including through improved educational programs or the development of guidelines in particular areas.
Licensing practices in Australia
11. Smooth patent licensing is particularly important to facilitate further research and to allow the development and commercialisation of products. The relatively limited size of the Australian biotechnology and venture capital markets make it unlikely that companies will be able to sustain long-term growth or profitability based solely on activities in the domestic market. In addition, the primary expertise of many Australian biotechnology companies is in the area of research. The resources and expertise of more established—often foreign-owned—companies are typically required to commercialise the results of research and produce a diagnostic or therapeutic product. Consequently, Australian biotechnology entities are unlikely to raise substantial revenue from the sale of genetic products or processes and are often dependent upon licence fees as a source of revenue.
12. In investigating licensing practices in Australia , the ALRC benefited from the results of an empirical study of patenting and technology transfer practices in Australia by two Australian academics, Dr Dianne Nicol and Jane Nielsen (Nicol–Nielsen Study).[3] Submissions to the ALRC Inquiry were consistent with responses to the Nicol–Nielsen Study, indicating that licences are being granted over a broad range of gene patents and that the inventions claimed in these patents are being further developed. Submissions also supported Nicol and Nielsen’s conclusion that refusals to license gene patents do not appear to be a significant issue in the Australian biotechnology market at this stage. It was suggested that failures to negotiate a licence generally reflected the normal operation of the market, rather than a concerted effort by Australian patent holders to limit access to gene patents.
Recommended reforms for Australia
13. The following provides an overview of the recommendations made by the ALRC as they relate to licensing, under headings used in the OECD Draft Guidelines. The ALRC’s Report Genes and Ingenuity (ALRC 99, 2004) is still under consideration by the Australian Government, and the recommendations have not been implemented to date.
General Licensing Practices
14. Due to the lack of available evidence suggesting that Australian licensing practices are unduly restrictive, t he ALRC was not inclined to make recommendations aimed specifically at regulating gene patent licensing practice, or prohibiting certain types of licensing arrangements. However, there was evidence (particularly from the Nicol–Nielsen Study) to suggest that some participants in the Australian biotechnology sector find the negotiation of patent licences to be problematic. These difficulties stem from a variety of causes, including lack of commercial experience in licensing patents, the unequal bargaining power of the parties, and inadequate resources to commit to extended licence negotiations. In addition, the increasing complexity of the Australian patent landscape may make it difficult to identify relevant patents and negotiate licences.
15. One of the recommendations made by the ALRC for overcoming the difficulties of licensing was the development of model licence agreements and interpretive guidelines by the peak industry body in the biotechnology sector (AusBiotech Ltd).[4] This recommendation was based in principle upon solutions proposed by the OECD. It was considered that model licence agreements could reduce the financial costs and time involved in negotiating licences to gene patents, and would be particularly useful for small and medium sized Australian enterprises, which have limited resources. It was envisaged that agreements developed by bodies such as the National Institutes of Health and the Association of University Technology Managers (AUTM) in the United States, and the licensing guidelines being developed by the Biotechnology Working Group of the OECD, may be useful resources in developing the proposed model agreements.
Health Care and Genetic Inventions
16. The ALRC recommended that government health departments (federal, state and territory) should take a much more informed, strategic role in monitoring the use of gene patents. In particular, the ALRC recommended that where particular gene patent applications, granted patents or patent licensing practices are considered to have an adverse impact on medical research, government health departments should consider whether to exercise any existing legal options to facilitate access to the inventions.[5] These existing mechanisms include:
-
challenging a patent application or granted patent by initiating proceedings to oppose, request re-examination of, or apply for revocation of, a patent;
-
making a complaint under anti-competition laws;
-
exploiting or acquiring a patent under Crown use and acquisition provisions;
-
applying for a grant of a compulsory licence.
17. It should be noted that the ALRC also made a recommendation for amendment to the existing compulsory license provisions, adding a competition-based test as an additional ground for the grant of a compulsory licence.[6]
Research Freedom
18. A significant recommendation made by the ALRC was for the introduction of an express experimental use exemption in the Patents Act.[7] At present there is significant uncertainty about the existence and scope of any implied experimental use defence to patent infringement in Australia. The ALRC concluded that experimental use of patented inventions is consistent with important goals of patent law, namely, promoting the attainment of new knowledge and the development of new and improved inventions. The ALRC considered that the reform should be limited to protecting experimental use on the subject of a patented invention—that is, research with a focus on discovering more about the invention and its properties. It is intended that the statutory exemption should more closely resemble the law of the United Kingdom and other member States of the European Union (which permit experimentation to have commercial objectives) than the more restrictive position reflected in United States case law (namely, the Madey decision).
Commercial Development
19. The ALRC recommended a number of approaches aimed at assisting Australian entities to negotiate licences more successfully, including through:
-
educational programs aimed at developing commercial and negotiation skills;[8]
-
further investigation into whether additional industry initiatives (such as patent pools and patent clearinghouses) are necessary or desirable.[9]
Competition
20. The ALRC made certain recommendations seeking to clarify the relationship between existing anti-competition laws and intellectual property rights, and enhance oversight of anti-competitive conduct in this field.[10] As noted above, it was recommended that government health departments make greater use of anti-competition law complaint procedures where evidence arises of anti-competitive conduct that may breach existing laws and have an adverse impact on medical research or the cost-effective provision of healthcare. It was also recommended that the Australian Competition and Consumer Commission, the key government anti-competition watchdog, monitor practices in this field.
Comments on OECD Draft Guidelines
21. In general, the ALRC supports the approach of the OECD’s Draft Guidelines. They are consistent with the approach to patent law and practice adopted by the ALRC in its Report Genes and Ingenuity (ALRC 99).
[1] This report is available online at <www.alrc.gov.au>.
[2] For the report of that inquiry see Australian Law Reform Commission and Australian Health Ethics Committee, Essentially Yours: The Protection of Human Genetic Information, ALRC 96 (2003), which is available online at <www.alrc.gov.au>.
[3] D Nicol and J Nielsen, Patents and Medical Biotechnology: An Empirical Analysis of Issues Facing the Australian Industry (2003) Centre for Law and Genetics Occasional Paper No 6. Nicol and Nielsen are based at the University of Tasmania . Their study is similar in nature to the one conducted in the United States: A Schissel, J Merz and M Cho, ‘Survey Confirms Fears about Licensing of Genetic Tests’ (1997) 402 Nature 118.
[4] See ALRC, Genes and Ingenuity (ALRC 99), [22.45]–[22.60] and Rec 22–2.
[5] See ALRC, Genes and Ingenuity (ALRC 99), [19.55]–[19.82], Rec 19–3.
[6] See ALRC, Genes and Ingenuity (ALRC 99), Ch 27 and Rec 27–1.
[7] See ALRC, Genes and Ingenuity (ALRC 99), Ch 13 and Rec 13–1.
[8] See ALRC, Genes and Ingenuity (ALRC 99), [22.30]–[22.44] and Rec 22–1.
[9] See ALRC, Genes and Ingenuity (ALRC 99), [22.61]–[22.76] and Rec 22–3.
[10] See ALRC, Genes and Ingenuity (ALRC 99), Ch 24 on Competition Law and Ch 25 on Prices Oversight.