Other industry initiatives

22.61 It has been suggested that the biotechnology industry should adopt self-regulatory solutions to address difficulties in obtaining access to patented genetic materials and technologies. The OECD has proposed that ‘novel solutions, such as patent pools, clearinghouses and collective licensing organisations, should be further explored to understand their potential utility and their real impact on the biopharmaceutical sector’.^[101] This section considers these initiatives in further detail.

Patent pools

22.62 A ‘patent pool’ is an agreement between two or more patent holders to license their respective patents to one another, or to third parties, on a non-exclusive basis.^[102] Participants in a patent pool typically retain ownership of their respective patent rights, and license the pooled patents directly, or through an administering intermediary established for the purpose.

22.63 The establishment of patent pools has been considered in the biotechnology industry as a means of addressing the perceived difficulties created by a growing interdependence among gene patents owned by multiple patent holders and increasingly burdensome transaction costs associated with gene patent licences.^[103] The OECD has suggested that patent pools may: (a) help integrate complementary technologies; (b) reduce transaction costs; (c) clear blocking positions; (d) avoid costly infringement litigation; and (e) promote the dissemination of technology.^[104]

22.64 However, patent pools have been criticised on the basis of the perceived anti-competitive effects of such arrangements—including that they encourage collusion and price fixing.^[105] These issues are discussed further in Chapter 24. In addition, some critics have suggested that patent pools may shield invalid patents.^[106]

22.65 Questions have also been raised about the feasibility of establishing patent pools in the biotechnology sector. The OECD has commented that the biotechnology industry is unlike other industries in which patent pools have been established, where defining standards and interoperability of technologies appears to have acted as an incentive.^[107] Further, Professor Arti Rai has argued that:

the relevant players in the biotechnology industry include institutions ranging from federal agencies and academic institutions to various types of private companies, each of which has a different agenda. In the context of a patent pool, these heterogeneous parties would probably have difficulty reaching agreement on the licensing policy the pool should adopt.^[108]

22.66 However, Rai considered that a patent pool might be formed in the biotechnology context where multiple patents are absolutely necessary to conduct basic research on a gene or a particular disease.^[109] The OECD has also suggested that some of the impediments to patent pools in the biotechnology sector might be overcome if limited fields of application and essential patents can be defined.^[110]

Patent clearinghouses

22.67 Patent clearinghouses—or collective rights organisations—are, in effect, formalised patent pools.^[111] Clearinghouses may cover a broader range of technologies than a particular patent pool and are more likely to rely on a single entity to coordinate the administrative functions associated with the licensing of patent rights.

22.68 Patent clearinghouses are analogous to collecting societies that administer licences over certain types of copyright works.^[112] Professor Robert Merges has identified a number of distinctive features of such arrangements including: establishment by knowledgeable industry participants who are able to divide intellectual property rights into categories based on their knowledge and experience; and setting a pre-determined price for the rights within each category (either individually or as a package), which applies equally to all similarly situated licensees.^[113] Gregory Graff and David Zilberman have suggested that an effective patent clearinghouse would also provide an arbitration mechanism for monitoring and enforcing contracts.^[114]

22.69 The advantages of patent clearinghouses are similar to those identified in the case of patent pools, namely: ‘the consolidation of intellectual property rights by intellectual property holders so that negotiating contracts with numerous rights holders is streamlined and transaction costs are consequently reduced’.^[115]

22.70 Nicol and Nielsen have proposed that the use of patent clearinghouses in the Australian biotechnology industry warrants further consideration. They suggested that a clearinghouse arrangement may be particularly useful in the context of patented genetic sequences and genetic research tools, but may not be suitable for patent licences relating to drug development.^[116]

Submissions and consultations

22.71 DP 68 proposed that AusBiotech should consider ways in which industry initiatives can facilitate the licensing of patented genetic materials and technologies, for example through the establishment of patent pools or patent clearinghouses.^[117] A number of submissions encouraged AusBiotech to explore ways in which gene patent licensing might be facilitated.^[118] Some submissions supported further consideration being given to the feasibility of establishing biotechnology patent pools or patent clearinghouses.^[119]

22.72 However, other submissions expressed reservations about the need for patent pools or clearinghouses at this stage.^[120] The Queensland Government suggested that such initiatives might be premature and, if implemented too early, could have adverse effects—such as to ‘hinder industry when there are no real problems; and not be adequate to deal with subsequent problems’.^[121] The Garvan Institute of Medical Research observed that a patent pool that included only Australian patents would not be particularly useful, given the global nature of the biotechnology industry.^[122]

22.73 Some submissions commented on reasons why biotechnology patent holders might be reluctant to enter into patent pools. The Centre for Law and Genetics suggested that patent pools are most likely to occur when parties in the pool each hold blocking positions—‘where this is not the case, a patent pool is unlikely to be a desirable option’.^[123] The Centre also noted that low levels of cross-licensing in the Australian biotechnology sector might make patent pools difficult to establish at this stage.^[124] Similarly, GlaxoSmithKline submitted that ‘voluntary patent pools can help reduce patent thickets and transaction costs, although patentees unwilling to license their patents widely may well be unwilling to add their patents to the pool’.^[125]

22.74 The competition law issues associated with patent pools were raised in some submissions. These matters are considered further in Chapter 24.

ALRC’s views

22.75 The development of education programs and the creation of model licence agreements will address some of the issues faced by Australian biotechnology companies and research organisations in licensing gene patent rights (see Recommendations 22–1 and 22–2). However, these reforms may not address all the difficulties that Australian entities face in identifying gene patents for which a licence may be required, and in meeting the high transaction costs of negotiating patent licences. Although there is no evidence that further reforms are necessary at this stage, additional mechanisms may be required in the future to facilitate licensing of genetic materials and technologies within the Australian biotechnology sector.

22.76 The ALRC believes that a representative industry body should monitor these issues and consider whether additional industry initiatives are needed. As noted above, AusBiotech is the peak biotechnology industry body in Australia, with a diverse membership base. It would be an appropriate body to encourage and coordinate the consideration of industry-based initiatives, including examining the feasibility of establishing patent pools or patent clearinghouses over particular types of patented genetic materials or technologies.