KRS July Final Jour.09. - Association of Biotechnology and Pharmacy

Current Trends in Biotechnology and Pharmacy
Vol. 3 (3) 225 - 240, July 2009. ISSN 0973-8916
claim language that covers products developed
through the use of the patented technology. But
reach-through royalties have met greater market
resistance for other patents, including the patents
on the Harvard onco-mouse and the polymerase
chain reaction (PCR).
Licenses with reach-through royalty
provisions might appear to solve the problem of
placing a value on a research tool before the
outcome of the research is known. One difficulty
in licensing research tools is that the value of the
license cannot be known in advance, so it is
difficult to figure out mutually agreeable license
terms. A reach-through royalty might seem like
a solution to this problem, in that it imposes an
obligation to share the fruits of successful
research without adding to the costs of
unsuccessful research. But it takes little
imagination to foresee the disincentives to
product development that could arise from a
proliferation of reach-through royalties. Each
reach-through royalty obligation becomes a
prospective tax on sales of a new product, and
the more research tools are used in developing a
product, the higher the tax burden.
A further complication arises in the case
of inventions that have substantial current value
as research tools but might also be incorporated
into commercial products in the future. It might
be necessary to offer exclusive rights in the
ultimate commercial products to innovating firms
to give them adequate incentives to develop the
products, but it might be impossible to preserve
this option without limiting dissemination of the
inventions for their present use as research tools.
For all of these reasons, exclusive rights
risk inhibiting the optimal use of research tools
and interfering with downstream incentives for
product development. Much depends on whether
the holders of exclusive rights can figure out how
to disseminate research tools broadly without
undermining their value as intellectual property.
232
These are difficult problems that defy
facile solutions. One of the purposes of this
article is to examine the solutions that different
institutions have come up with and see how they
have operated in practice. Which mechanisms
have worked well, which have worked badly, and
what can we learn from the experiences of others
We need to keep in mind that this issue implicates
the interests of many different players who value
intellectual property in different ways and for
different purposes.
Patenting DNA sequences
On the surface, any device, process, or
compound that meets the criteria of novelty,
inventiveness and utility should be patentable.
Since 1980, thousands of patent applications for
whole genes have been approved by patent offices
through out the world. The most valuable human
gene patent is for the production of recombinant
erythropoietin, which had sales of about $4 billion
in 2001.Erythropoietin, stimulates the formation
of red blood cells and is used to prevent anemia
in patients with kidney failure who require
dialysis. Many of the other patented gene
sequences are used as biomarkers.
With the advent of HGP and, in
particular, with the undertaking of the partial
sequencing of thousands of human cDNA
molecules from different tissues and organs, the
patenting of these sequences became extremely
contentious 13 . In 1991, the issue of patenting gene
fragments was broached when the U.S. NIH filed
for the patent rights for 315 partially sequenced
human cDNAs. Two additional filings brought
the total number of sequences to 6869. In 1994,
in a preliminary ruling, the US PTO notified the
NIH that it would reject the patent application
on the grounds that the functions of the sequences
were not known. In other words, partial sequences
by themselves did not fulfill the requirement of
utility and were not patentable. How ever, by
1997, over 350 patent applications for more than
Firoz et al