Patents and research tools

12.26 The single most important concern has been about the effects on research of patents on genetic materials or technologies that are used as research tools. The literature in Australia and overseas expresses a range of concerns about the impact of patents on the use of research tools. The following material examines these concerns, some of which relate to research tools generally and some of which relate to those used in genetic research specifically.

12.27 In order to assess the significance of the concerns and possible means of addressing them, it is important to distinguish between the types of products and processes that may be referred to as research tools and the different meanings that may be given to this term.

What are research tools?

12.28 Research tools are resources used by scientists, where those resources have no immediate therapeutic or diagnostic value. In biotechnology, research tools may include cell lines, monoclonal antibodies, reagents, animal models, growth factors, combinatorial chemistry libraries, drugs and drug targets, clones and cloning tools, methods, laboratory equipment and machines, databases and computer software.^[37]

12.29 There are many different ways to categorise the range of research tools used in genetic research. For example, three basic categories are:

• Research techniques. Some gene patents cover laboratory techniques that molecular biologists use in research, such as the Cohen–Boyer techniques (for gene-splicing) and the polymerase chain reaction (PCR) methodology (for DNA amplification).

• Research consumables. Some gene patents cover particular enzymes or reagents that are used in the laboratory, such as Taq polymerase (used in PCR) and restriction enzymes (used in cloning and other applications).

• Research targets. Some gene patents cover genetic materials that are targeted in research, for example genes for receptor proteins used in designing new drugs or vaccines, such as the HIV-receptor CCR5.^[38] This category also includes expressed sequence tags (ESTs) and single nucleotide polymorphisms (SNPs), which can be targets of research or used to target other genetic materials.

Foundational research tools

12.30 In considering their impact on research, it is useful to distinguish foundational or upstream research tools from other research tools. The most important research tools are said to be ‘fundamental research platforms that open up new and uncharted areas of investigation’.^[39] It is said that these platforms are best utilised by multiple researchers because ‘a single patent holder is unlikely to see the myriad directions in which a broadly enabling research platform could be developed’.^[40] However, there is no bright line between foundational research tools and other tools; moreover the characterisation of a specific research tool may vary with time.^[41]

12.31 Foundational inventions are of such importance that all or much that follows in the relevant field flows from them.^[42] Examples include the Cohen–Boyer and PCR patents. The Cohen–Boyer technique has been described as a ‘quintessential’ research platform in that these recombinant DNA techniques were used in many different ways by many researchers. Contemporary examples of research platforms might be seen as including human genetic stem cell lines^[43] and RNA interference (RNAi) technology.^[44]

12.32 Concerns about the impact of patents on foundational inventions were expressed by the Medical Genetics Elective Group of the University of Newcastle which noted, in relation to RNAi technology, that selectivity in granting licences may ‘slow, or even halt, the discovery of further beneficial mechanisms of RNAi technology’. Small universities or hospital-based research laboratories may not be able to afford licences, ‘limiting the progression of RNAi research’.^[45]

12.33 The Walsh study suggests that if a research tool is foundational, the extent to which restricted access is likely to hinder progress in research will depend on whether the tool can be used in the development of a number of inventions that will eventually compete with one another. If a foundational invention is fundamental to competing downstream research applications, access is more likely to be restricted in some way, for example, through exclusive licensing.^[46]

12.34 Nicol and Nielsen state that ‘more prolific patenting’ of research tools sets up the main precondition for the concern that research may be impeded.^[47] Broad patent claims and demands for reach-through rights may then exacerbate the problem.^[48]

12.35 There are important differences between the Australian and United States research environments, which are relevant to the impact of patents on foundational research tools. The Nicol–Nielsen Study investigated the patent status in Australia of a number of foundational biotechnology patents that have been mentioned in the literature as being problematic. Their study found that, in many cases, the patents had not been filed or granted in Australia, meaning that certain avenues of research may not be as restricted in Australia as in the United States.^[49]

Research tools and end products

12.36 A characteristic of genetic research is that patents are commonly held over genetic materials and technologies needed for further research, as well as over the ultimate products of research, like diagnostic tests and pharmaceuticals.

12.37 One organisation’s end product may be another organisation’s research tool. Further, some research tools have uses other than in research. For example, a patented DNA sequence may be used as part of a diagnostic test, as well as in research to understand better the role of the relevant gene in disease.

12.38 Some biotechnology enterprises focus on developing, manufacturing and supplying research tools to researchers. To these enterprises, research tools are commercial end products. They have a strong commercial interest in full recognition of intellectual property rights over them. Organisations that obtain a competitive advantage from proprietary research tools may also be unwilling to make them freely available and may seek to limit access, restrict use, or delay disclosure of research results.^[50]

Institutions tend to be high-minded about the importance of unfettered access to the research tools they want to acquire from others, but no institution is willing to share freely the materials and discoveries from which they derive significant competitive advantage. Thus many … were eager to establish that the term ‘research tool’ means something other than their own institution’s crown jewels.^[51]

Use and licensing of research tools

12.39 Access to patented research tools is largely dependent on the availability and terms of licences granted by patent holders to researchers who wish to use them during the term of the patent. There are many models for licensing research tools and other patented inventions. The following material highlights some aspects of licensing practice, as applied to the licensing of research tools in Australia and overseas. General aspects of licensing are discussed in Chapter 22.

12.40 Licences may be exclusive or non-exclusive. For example, the Cohen–Boyer patents held by the University of California San Francisco and Stanford University were subject to the grant of multiple, non-exclusive licences in return for minimal licence fees. This licensing strategy meant that users of the invention were inclined to obtain licences, which led to broad distribution of the technology.^[52]

12.41 Alternative strategies for university-based patent holders include granting an exclusive licence to a biotechnology company, which can then develop and apply the technology, making it available by contract to other biotechnology enterprises. Firms with such business plans ‘offer services such as the use of genomic array chips, procedures for producing a large variety of candidate drug compounds, and use of proprietary cell culture or identification techniques’.^[53]

12.42 Licensing may provide rights to use research tools with the purchase of products. This model is sometimes applied to PCR, where the Taq polymerase that is required for PCR is purchased from a biotechnology company licensed to manufacture and sell the enzyme. The purchase price includes limited, non-transferable rights to use that product for research purposes only. Further, for PCR to be authorised it may have to be performed in thermal cyclers purchased from a licensed supplier.^[54]

12.43 It is not uncommon for patent holders to distinguish between academic and commercial researchers in applying a licensing strategy. Licences granted for academic research may involve much lower fees than research licences granted to commercial entities. For example, access to the Cohen–Boyer patents was free to academic researchers, yet involved a substantial fee for commercial researchers. F Hoffmann–La Roche Limited, the PCR patent holder, has established different categories of licence, depending on the application and the users. Research and development licences do not include a right to perform or offer commercial services of any kind using PCR.^[55]

12.44 Australian biotechnology companies have also distinguished between academic and commercial research in their patent licensing practices. In July 2003, Genetic Technologies Limited (GTG) granted a licence to the University of Sydney to use GTG’s patents on methods of using non-coding DNA polymorphisms (GTG’s non-coding patents)^[56] in basic research for the remaining duration of the patents. GTG noted that the $1,000 fee was ‘several thousand-fold’ less than the fee for similar licences granted to ‘pure commercial entities’.^[57]

Reach-through licence agreements

12.45 Licence agreements for the use of research tools may contain ‘reach-through’ provisions, which give the patent holder ownership, licence rights or royalties in relation to future discoveries made by licensed researchers.

In effect, this approach calls for payment in future intellectual property rights or royalties on future products in lieu of cash … Recognizing that most academic users will not discover anything of commercial value, the owner of the tool seeks to recover a substantial profit in the rare case when a valuable discovery is made in order to cover the costs of all the other, unprofitable transfers.^[58]

12.46 Reach-through licence agreements may offer advantages to both patent holders and researchers, by permitting researchers to defer payment until the research yields valuable results and by providing patent holders with the opportunity to make profits from sales of downstream products, rather than from defined, but smaller, upfront fees.^[59]

12.47 The National Institutes of Health (NIH) Working Group on Research Tools suggested that reach-through licence agreements are more often entered into where a research tool may be used directly to produce another product,^[60] rather than in relation to ‘more basic research tools that have a more remote relationship to commercial products’.^[61] Reach-through rights may be the best way for some patent holders to protect their investment.

Infringing use of research tools

12.48 As discussed in Chapter 22, a range of commercial and practical factors are important in determining whether researchers seek to obtain licences from patent holders and, if not, whether patent holders enforce their rights against researchers. In practice, factors that influence whether researchers use patented research tools without obtaining a licence include ‘the often secret nature of the experiments, the limited expectation of damages by a patentee, the significant cost of patent litigation, and the often limited impact on a patentee’s commercial interests’.^[62]

12.49 It can often be difficult to detect patent infringement. The use of research tools occurs behind laboratory doors, making infringement difficult to monitor.^[63] For example, even in the case of Taq polymerase and the PCR patents, where a licence fee is incorporated into the purchase price of the product, some laboratories performing PCR or any other reaction reliant on enzymes may decide that it is cheaper to prepare their own enzyme.

12.50 Researchers may be unaware of the legal implications of using patented research tools and, even if they are, the prospect of litigation may appear remote. As discussed in Chapter 13, researchers may also assume that their use of research tools is exempt from claims of patent infringement.

12.51 Patent holders often tolerate academic research infringements. The reasons for this include the possibility that research will increase the value of the patent; the cost of a challenge; the risk that the patent will be narrowed or invalidated if challenged; the negative publicity from suing a university; and a reluctance to upset norms of open access for fear of losing both the goodwill of peers and access to materials and information.^[64]

12.52 The remedies for patent infringement include injunctions and compensation, or an account of profits.^[65] In the case of infringement by researchers, the most relevant remedy is likely to be an injunction to prevent further infringement. Damages or an account of profits will generally be relevant only where a product has been developed and sold. Most claims of infringement never reach the courts because the parties reach a settlement—possibly involving payment of a licence fee.

Concerns about patents on research tools

Access to research tools

12.53 Concern has been expressed that patents on some research tools (particularly foundational tools) can ‘pre-empt large areas of medical research and lay down a legal barrier to the development of a broad category of products’.^[66] It has been suggested that this result is highly likely in biotechnology because ‘there are so many broadly relevant patents; research builds on the use of so many prior discoveries; and solid and clear title to a product is so important to the pharmaceutical industry’.^[67]

12.54 The OECD Report referred to concern about the impact of research tool patents on collaboration and sharing of materials between researchers, noting that the terms of licences or material transfer agreements ‘can be such that they ultimately make collaboration and communication with other researchers more difficult’.^[68]

12.55 In Australia, the Nicol–Nielsen Study found that research tool patents were not considered to be particularly problematic by the majority of respondents. It stated that this may be because industry participants in Australia have not yet been faced with ‘the aggressive enforcement practices’ of some United States research tool patent holders ‘either because the relevant research tools have not been patented in Australia or because attention has not yet been focused on the Australian industry’.^[69]

12.56 Their surveys found that refusals to license were not a pervasive issue within the industry.^[70] However, researchers and companies stated that they avoided certain areas of research ‘if patents were held by competitors, or if it looked like obtaining a licence might prove to be too problematic’.^[71] In interviews, some respondents expressed frustration at difficulties in licensing-in enabling technologies, but they were greatly outnumbered by respondents who had not experienced any problems.^[72]

12.57 In its submission, the Queensland Government stated that Queensland universities are generally able to obtain fair and reasonable licences to use gene patents.^[73] McBratney and others noted they had no experience of research being hindered due to licensing or materials transfer agreements (MTAs), and that most researchers do not obtain licences, relying instead on an assumed research exemption, obtaining the material through an MTA or producing it themselves.^[74] A common theme in consultations was that the marketplace is capable of solving most problems concerning access to patented research tools.

Cost and delay

12.58 Patents on research tools may hinder research by requiring licence fees to be paid by researchers. From the perspective of researchers, the price demanded for use of a genetic invention may be too high.^[75]

12.59 Researchers also face transaction costs in negotiating licences. Negotiations over access to technologies can be long and complicated, imposing delays and administrative burdens on research. Even if the total licence fees can be kept low, one ‘hold out’ may be enough to cause a research project to be cancelled.^[76] Researchers may choose not to pursue research using patented research tools where they have to navigate complex sets of patents held by a number of different patent holders.

12.60 In the United States, the NIH Working Group on Research Tools reported that ‘many scientists and institutions involved in biomedical research are frustrated by growing difficulties and delays in negotiating the terms of access to research tools’.^[77] The reasons for this included that the value of research tools is difficult to assess, and varies greatly from one tool to the next and from one use to the next—so providers and researchers are likely to differ in their assessments of the value of research tools. Users of research tools may also have limited resources for paying up-front fees and be reluctant to share profits from potential future discoveries (under the terms of licensing agreements) with organisations that do not share the risks and costs of product development.^[78]

12.61 These complexities mean that case-by-case negotiation for permission to use research tools and materials may create significant administrative burdens, which delay research.^[79] The NIH Working Group noted that efforts to standardise licence terms for research tools had experienced ‘limited success’ and that differences in the nature and value of research tools and needs of patent holders and users of research tools make it ‘difficult and perhaps undesirable to standardize terms of access to research tools across the broad spectrum of biomedical research’.^[80] Chapter 22 recommends reforms to facilitate patent licensing in the Australian biotechnology sector, including through the development of model agreements for licences involving genetic materials and technologies.

12.62 Summarising information gathered from scientists, university technology transfer professionals, and private firms in the pharmaceutical and biotechnology industries, Professor Rebecca Eisenberg has stated that ‘there seems to be a widely-shared perception that negotiations over the transfer of proprietary research tools present a considerable and growing obstacle to progress in biochemical research and product development’.^[81]

12.63 Eisenberg concludes that the exchange of research tools within the United States research community may cause delay in or abandonment of research, and that transaction costs have remained ‘persistently high’.^[82] In Australia, Nicol and Nielsen reported that a number of respondents had experienced difficulties in conducting negotiations, particularly in terms of delay.^[83]

Licence terms

12.64 Objections have been raised about the terms that may be proposed by patent holders in licensing agreements or MTAs.^[84] These may include reach-through rights and restrictions on the publication of research results.

12.65 Researchers may perceive reach-through rights as having the potential to benefit patent holders disproportionately, in the event that research outcomes are commercialised. Further, reach-through rights may prejudice researchers’ later technology transfer and commercialisation prospects. Potential commercial partners are likely to demand that intellectual property be unencumbered by competing interests.

12.66 In the United States, reach-through rights are said to have led to some of the ‘more intractable disagreements’ about the terms of licensing agreements.^[85] Universities and other non-profit research institutions may baulk at reach-through licence agreements for the use of research tools.^[86] The terms proposed for the use of the DuPont Cre-lox gene-splicing tool were one such example.^[87] This research tool was initially developed by Harvard University but licensed exclusively to DuPont Pharmaceutical Co, which required public sector researchers to sign agreements that limited their use of the technique and required pre-publication vetting of articles. DuPont also sought reach-through rights to future inventions that might result from experiments using the technique. These licence terms were said to permit DuPont to ‘leverage its proprietary position in upstream research tools into a broad veto right over downstream research and product development’.^[88]

12.67 In Australia, the Walter and Eliza Hall Institute of Medical Research expressed concern about problems where materials suppliers ‘seek inappropriate levels of control or commercial reach-through into the recipients’ research activities’.^[89]

12.68 Ultimately, it is up to patent holders and prospective licensees to reach mutually acceptable contractual terms. In some cases, patent holders have been unsuccessful in seeking to impose reach-through rights, for example in relation to the PCR patents, where reach-through rights were abandoned as a licensing model after strong resistance from downstream users.^[90]

12.69 Nicol and Nielsen reported complaints from some respondents that patent holders over some research tools unreasonably demanded reach-through royalties.^[91] They observed that a number of variables will determine whether or not reach-through rights to future inventions are likely to be included in a licensing arrangement, including the nature of the technology or product being licensed; whether or not the licensed technology is core to the activities of the licensee; and the relative bargaining power of the negotiating parties.^[92]

12.70 Heller and Eisenberg have suggested that while reach-through licence agreements may offer advantages in principle, in practice they ‘may lead to an anticommons as upstream owners stack overlapping and inconsistent claims on potential downstream products’.^[93] Chapter 17 discusses issues relating to patents and the commercialisation of research by the biotechnology industry.

Concerns about patents on isolated genetic materials

12.71 Particular concerns have been raised about patents over isolated genetic materials and the genetic sequences they contain.^[94] As discussed above, an important category of research tools comprises isolated genetic materials that are targeted in research or used to target other genetic materials.^[95]

12.72 The United States Patent and Trademark Office has summarised concerns about patents restricting access to genetic research tools as follows:

Many feel that by allowing genetic information to be patented, researchers will no longer have free access to the information and materials necessary to perform biological research. This issue of access to research tools relates to the ability of a patent holder to exclude others from using the material. Further, if a single patent holder has a proprietary position on a large number of nucleic acids, they may be in a position to ‘hold hostage’ future research and development efforts.^[96]

12.73 The United Kingdom’s Nuffield Council on Bioethics has suggested a number of ways in which patents covering genetic sequences, whose primary function is as research tools, might inhibit innovation. These included increased costs of research; impediments to research if licences must be negotiated; possible issues about exclusive licensing or the withholding of licences to force up prices; and difficulty in negotiating a number of royalties (‘royalty stacking’).^[97]

12.74 While the Nuffield Council stated that the granting of patents that assert rights over DNA sequences as research tools should be discouraged, it conceded that there was insufficient evidence to assess the extent to which patents over DNA sequences as research tools is producing negative effects on research.^[98]

Concerns about other research tools

12.75 Some concerns were expressed in submissions and consultations about the implications for research of GTG’s non-coding patents. These patents are fundamental to many key applications in genetic analysis, molecular diagnostics and genomics.

12.76 GTG has offered non-exclusive licences for basic research using GTG’s non-coding patents for modest fees. Much higher payments have been negotiated with commercial organisations.^[99] In the United States, a major biotechnology company, Applera Corporation, is facing an infringement action for refusing to obtain a licence to use GTG’s non-coding patents.^[100] Other suits against United States biotechnology companies have been settled.^[101]

12.77 Another set of concerns relate to the effects on research of Chiron Corporation’s patents relating to the Hepatitis C virus, which include claims to the composition of the virus itself and its use in diagnostic tests, vaccines and drug development.^[102]