PATENTS AND MEDICAL BIOTECHNOLOGY: AN EMPIRICAL ANALYSIS OF ISSUES FACING THE AUSTRALIAN INDUSTRY DIANNE NICOL AND JANE NIELSEN CENTRE FOR LAW AND GENETICS OCCASIONAL PAPER No. 6 All rights reserved Copyright ©2003 University of Tasmania, Dianne Nicol and Jane Nielsen Apart from fair dealing for the purposes of study, research, criticism or review, as permitted under copyright law, no part of this publication shall be reproduced by any process without written permission of the owners of copyright. Inquiries should be made to the authors or publisher. National Library of Australia Cataloguing-in-Publication Data ISSN 1445-2766 This issue may be cited as: Centre for Law and Genetics Occasional Paper No. 6 (2003). Published by Centre for Law and Genetics Printed by Faculty of Law UniPrint University of Tasmania University of Tasmania Private Bag 89 Private Bag 15 Hobart Tasmania 7001 Hobart Tasmania 7001 Australia Australia i TABLE OF CONTENTS Preface viii Abstract x PART 1: CONTEXTUALISING THE ISSUES Context Chapter 1: Aims of this Study 3 Context Chapter 2: Background 6 The Role of Patents in the Australian Medical Biotechnology Industry 6 Medical Biotechnology Research in Australia 12 Other Empirical Studies 16 Context Chapter 3: Patenting of Biotechnology Inventions in Australia 20 Patentability Requirements 20 Use Of Patents 34 Patent Activity in Australia 38 Context Chapter 4: Impact of Patents on Medical Biotechnology Research and Development 50 Patents and Public Sector Research 50 Restrictions on Access to Upstream Patents 53 The Tragedy of the Anticommons 56 ii The Consumer Perspective – Restrictions on Access to Biotechnology-Related Products 57 Context Chapter 5: Study Methods 64 Surveys 64 Interviews 67 PART 2: RESULTS OF THE EMPIRICAL STUDY Results Chapter 1: Research And Patent Issues 75 Patent Activity 76 Views On Patents 81 Results Chapter 2: Transfer of Technology 93 Survey Data on Collaborative Activity 94 Survey Data on Licensing-out Activity 100 Licensing, Assignment and Mergers 103 Technology Transfer Issues for Research Institutions 105 Technology Transfer from Upstream to Downstream Industry Sectors 110 Licensing-in 114 Licence Terms 115 Summary 122 Results Chapter 3: Impact of Patents on the Research Sector 124 Changing Attitudes towards Commercialisation of iii Biotechnology Research 125 Effect of Patents on Publication 126 Quantum and Quality Issues 130 Ownership and Clean Title 132 Under- and Over-Valuing 134 Summary 136 Results Chapter 4: Restrictions on Access to Upstream Patents 137 Blocking Patents 140 Refusals to Licence 145 Exclusivity 150 Costs and Delays Associated with Licensing Patents 156 Restrictive Terms 160 Failure to Exploit Patents 168 Summary 172 Results Chapter 5: Anticommons Issues 174 Preconditions to an Anticommons in Australia 176 Patent Searching Obligations 178 Survey Data on Number of In-Licences 184 Number of In-licences and Project Abandonment 186 Royalty Stacking 191 Reach-through Right Stacking 193 Summary 194 iv Results Chapter 6: Supply to End Users 196 Pharmaceuticals 196 Devices 198 Diagnostics 198 Summary 205 Results Chapter 7: Market Solutions 208 Collaborations and Licensing 208 Inventing Around 211 Patent Enforcement 214 Research Exemption 218 Challenges to Validity 222 Summary 224 PART 3: OUTCOMES OF THIS STUDY: THE WAY FORWARD Outcomes Chapter 1: The Legal Landscape And Options For Reform 229 Excluding Gene Sequences 231 Excluding Diagnostic Tests 233 Public Interest Provision 233 Increasing The Stringency Of Patent Invention and Disclosure Requirements 234 Exemptions From Infringement 236 v Compulsory Licensing / Government Use Provisions 236 Fair Use And Automatic/ Statutory Licensing 239 Collective Rights Organisations 242 The Role Of Competition Law 244 Summary 248 Outcomes Chapter 2: Conclusions 250 Study Findings 250 Reform Options 258 Bibliography 261 vi LIST OF TABLES Table 1: Patents linked to cessation of tests in the US and equivalent Australian patents 62 Table 2: Interview respondents 68 Table 3: Numbers of patents held 78 Table 4: Types of patents held 79 Table 5: General views on the impact of patents on research 83 Table 6: Views on the impact of types of patents on research 83 Table 7: Collaborative activity: research institution survey respondents 95 Table 8: Types of collaborators and their geographical location: research institution survey respondents 95 Table 9: Types of collaborators: company survey respondents 96 Table 10: Types of collaborators: diagnostic facility survey results 97 Table 11: Number and types of out-licences: research institution and company results 100 Table 12: Company and research institution respondents with patents but with no out-licences 101 Table 13: Views on the impact of patents on publication in the research institution and diagnostics sectors 127 Table 14: Numbers and types of in-licences 184 vii Table 15: Location of laboratory 199 Table 16: Types of tests 200 Table 17: Cost of tests 200 Table 18: Payment of licence fees or royalties 201 Table 19: Notifications 201 Table 20: Views on the impact of patents on diagnostic tests 202 viii PREFACE We are most grateful to all the people who participated in this study, particularly those people who agreed to be interviewed. Thank you for giving up so much of your valuable time and for your candour, patience and good humour. This research was supported by a University of Tasmania Institutional Research Grant (N0012490). Funding was also provided from grant DP0208258 from the Australian Research Council Discovery Grant Scheme. The study was approved by the Southern Tasmania Social Sciences Human Research Ethics Committee. We would like to thank Bruce Newey, Tim Graham, Rebecca Keep, Brendan Gogarty and Liz Sharp for research assistance. We also thank Rhys Edwards for assisting us in the design of our surveys and for other advice during the course of this study. We are grateful to both Mildred Cho and John Walsh for visiting us and generously providing us with their insight and guidance. We thank Donald Chalmers, Lynden Griggs, Matthew Rimmer, Andrew Christie, Joshua Gans, Amanda Lim, John Walsh, Tim Caulfield, Margaret Llewelyn and the Australian Law Reform Commission commissioners and staff involved in the gene patenting reference for commenting on drafts of this Report. Some of the material in this Report has previously been published. Where necessary, permission has been granted to use this material. See particularly: D. Nicol ‘The Impact of Patents on the Delivery of Genetic Tests in Australia’ (2003) 15(5) Today’s Life Science22-27 D. Nicol ‘Patents and Access to Genetic Tests’ Centre for Law and Genetics Symposium Breaking the Code Murdoch Children’s Research Institute And Walter And Eliza Hall Institute, Melbourne 28 and 29 November 2002. In: Centre for Law and Genetics Occasional Paper No 5 (2003) D. Nicol ‘Patents and Access to Drugs’ Centre for Law and Genetics Symposium Regulating the New Frontiers: Legal Issues in Biotechnology, University of Tasmania 10 December 2001. In: Centre for Law and Genetics Occasional Paper No 4 (2002) 52. [...]... examining these issues Particular challenges facing the Australian industry make these issues relevant, and a number of other issues may confront the industry. 25 We have identified these challenges as being: • • the need for Australian companies to seek foreign investment and enter into alliance activity with international companies; and the fact that most Australian patents falling into the biotechnology... research programs and on the capacity of diagnostic facilities to continue to offer diagnostic tests The GTG example provides a snapshot of the complex issues involved in finding the right balance in protecting the rights of both the holders and the users of patented technology It is only when we have an understanding of how the industry is operating and the true extent of the social benefits and costs associated... commercialise; the extent of collaborations, assignments and licensing-out of patents held by the Australian industry and the nature of the arrangements; the general terms and conditions contained in licences entered into by the Australian industry for the purposes of commercialising research (licensing-out); the extent to which the Australian industry needs to obtain authorisation from other patent holders... challenges facing the Australian industry in mind This Report will generally consider the issues raised in the studies outlined above Our initial focus when commencing the study was an analysis of whether there is any evidence of restricted access to upstream patents having a consequent effect on downstream research in Australia, and whether there is any evidence of an “anticommons” within the Australian medical. .. companies, necessitating the need for Australian companies to negotiate access deals with these companies.26 The impact of gene patenting and licensing on the development of the Australian biotechnology industry has not yet been assessed, although there is now some recognition of the need for examination of these issues During the course of conducting this study, the Australian Law Reform Commission announced... AIMS OF THIS STUDY To date, there has been little or no analysis of the impact of patents and technology transfer on the commercial success of the Australian biotechnology industry, on the capacity of Australian research institutions to continue with their world-class research and on consumer access to the products of biotechnology research, particularly health care products The challenge is whether the. .. Similar patents have been granted to Myriad in Australia, for example patent AU691958, which is entitled “17q-linked breast and ovarian cancer susceptibility gene” What Myriad has obtained, through these and other patents, is broad claims over mutant BRCA 1 gene sequences and their use in diagnosis and prognosis of breast, ovarian and other cancers, therapies and drugs The patents include claims... its research and commercialisation, specifically focusing on the types of patents that are being enforced in Australia and the quantum of in-licensing; the general terms and conditions contained in licences entered into by the Australian industry for the purposes of obtaining access to patents held by others; the particular issues faced by the research institution, diagnostics and private industry sectors... the extent to which they have an effect on other socially desirable goals Patents grant patent holders and their licensees a period of market exclusivity, which enables them to charge monopoly prices on the sale of their products for the life of the patent and prevent others from using the patented technology for the life of the patent Although the justification for patents is that they enable innovations... nationally and internationally In addition, the expertise of members of the Centre for Law and Genetics lies primarily in the area of medical law and ethics and to date the research work conducted within the Centre has been focused primarily in these areas For these reasons, the study reported herein focuses primarily on the Australian medical biotechnology industry, although some data are included from other