Biotechnology - Genomic and Proteomics/Overview of Economics of Intellectual Property in BGP

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Literature Highlights on the effect of IP in Biotechnology

This section intends to provide a broad picture of the main literature that debates the impact of the Intellectual Property system within Biotechnology. We recognize that there is more literature available in this topic and invite ICP Wiki Users to contribute.

Introduction

  • The past three decades have seen a significant increase in the scope of formal intellectual property (IP) rights, such as patents, over knowledge traditionally maintained in the public domain (Mowery, et al 2001; Heller 2008).
  • This dramatic expansion in IP rights over the earliest stages of research has caused widespread debate about the effectiveness of incentives for innovation (Scotchmer 1991, 1996).
  • The implications of expanding IP rights in the earliest stages of the innovation process are mixed:
    • On the one hand, early stage IP may be important to encourage the establishment of new research lines, since upstream researchers can thereby avoid expropriation by downstream researchers (Scotchmer, 1996).
    • On the other hand, by requiring downstream innovators to contend with a large number of fragmented upstream IP rights, their projects may suffer from "gridlock" as a result of transaction costs and complexity (Heller & Eisenberg 1998; Heller 2008).
  • Additionally, since a single upstream idea can, in principle, be applied across multiple later-stage domains and applications (Breshnahan & Trajtenberg 1995, Rosenberg & Trajtenberg 2001) and it may be extremely difficult in advance to precisely articulate the diversity and range of applications arising from a given upstream idea (Rosenberg 1996), scholars point the diversity of scientific experimentation across a range of research lines also may be affected by the enclosure of ideas. (Murray at all 2009)
  • Murray at all (2009) concludes that: "if IP is used to restrict openness particularly at very early stages of the research line, then it is possible that the rich array of exploration projects that are key to diverse follow-on innovation will be stiffed." (pg 28):
    • "openness not only impacts innovation incentives within a given research line but also encourages exploration and investment in new and speculative research directions." See more (Murray at all 2009)
    • "openness favors the cross-fertilization of ideas within stages". (Murray at all 2009)
    • "positive shocks to openness foster research intensity, rather than hindering it because of appropriability concerns surround critical research outputs" (Murray at all 2009)
    • "Our theoretical framework suggests that the level and nature of follow-on research depend not only upon the quality and type of research inputs available but also upon the degree of "openness" of these research inputs." (Murray at all 2009)
  • When at least one of the starting materials or end products are non-obvious, biotechnology processes can be patented. This probably makes it less likely that people will keep trade secrets if they believe there is a possibility of licensing the process (Ladas & Parry, 1996)

Highlights on the importance of Patents for Biotech

  • to justify investment in R&D:
    • “On average, a lack of patent protection would have prevented the development of 60% of pharmaceutical and 38% of chemical inventions. In most sectors, a lack of patent protection would have had little impact, resulting in 17% fewer inventions in machinery, 12% less in fabricated metals, 11% less in electrical equipment, and no effect at all in office equipment, motor vehicles, rubber, and textiles.” (Arundel pp. 11)
    • “Only four chemical industries (drugs, plastic materials, inorganic chemicals, and organic chemicals) and petroleum refining rated process patent effectiveness higher than four on a seven-point scale, and only these four chemical industries and steel mills rated product patents higher than five.” (Levin pp. 796)
  • since the expansion of subject matter is "good for business":
    • research tools develop faster in biotech than in other industries - so there's a profit to be had just coming up with new research processes (Harison pp. 26)
    • Current US IP law does not make a distinction between discovery and invention, could have possible impact on innovation (pp. 28)
  • patents are relevant because of its strategical use:
    • “The patenting strategies of American firms appear to be strongly driven by the wish to block competitors and to prevent copying. The use of patents as a means of sharing information, for example through licensing or in negotiations, is less important for American firms than for European and Japanese firms.” (Arundel pp. 13)

Highlights on possible negative effect of patents

  • Anti-commons
    • Patent thickets: web of patents that a company must acquire or license in order to produce a product
    • Submarine patents: patent first published and finally granted a long period after the initial application. Since the US signed the TRIPS agreement, this is no longer possible in America
    • Patents as nail houses: homes whose owners refuse to sell for development projects
  • Heller (0000): ways an anti-commons can arise in biomedical industries
    • concurrent fragments: gene therapies built from multiple fragments will have problems licensing in each. Patents can often overlap: a lexis-nexis search showed over 100 patents had «adrenergenic receptor» in the title. And long delays between filing and successful licensing can make overlap more likely
    • stacking patents: «Reach Through License Agreements» patent holders of upstream patents have rights to profits from downstream technologies. Gives upstream license holders the right to at least partially dictate how downstream inventions are to be used
      • Eg.: Cetus developed RTLA for use of polymerase chain reactions (PCR)
      • Eg.: DuPont offered RTLA's for its onco-mouse and cre-lox inventions

Highlights on the idea that patents are not necessary

  • When lead time, or others pointed below, is a primary competitive advantage
    • von Hippel and Levin both found that companies preferred to protect innovations or justify investment in innovation through secrecy and lead times (pp. 3)
  • When the goal is spreading information
    • only a small number (3%) of high technology firms use patent and copyright publications sources of new information. Compare to trade conferences: 70% (Arundel pp. 3,5)
  • When there are other means of protecting competitive advantages (Levin pp. 794):
    • on a scale of 1-7 (7 being the most important), business executives were asked to rate the importance of various techniques for protecting competitive advantages. The number is the average score, and the bracketed number is the margin of error. Compare between Products and Processes:


Processes Products
Patents to prevent duplication 3.52 (0.06) 4.33 (0.07)
Patents to secure royalty income 3.31 (0.06) 3.75 (0.07)
Secrecy 4.31 (0.07) 3.57 (0.06)
Lead time 5.11 (0.05) 5.41 (0.05)
Move down the learning curve 5.02 (0.05) 5.09 (0.05)
Sales or service efforts 4.55 (0.07) 5.59 (0.05)



  • As you can see from the table above, IP was viewed as marginally effective for protecting processes, and least effective compared to other methods for protecting products

Highlights Intellectual Property Impact on Academic Research versus Private Research: relation between freedom of research and openness

  • Academic freedom tends to dominate private sector focus at early stages on a research line (Aghion, Dewatripont and Stein 2008).
  • "Academic research (or freedom) differs from private-sector research in that it leaves control rights over the research strategy in the hands of the researcher." (pg 7) (Murray et all, 2009)
  • "The key result is therefore that academic freedom will be the optimal governance structure at earlier stages and private sector research will be optimal at later stages." (pg 8) (Murray et all, 2009)
  • In reality however there is value in experimenting with ideas that may lead to an entirely new research lines, consistently with the idea that scientific discoveries do not follow a purely linear" model. This does not alter the relative optimality of academia (vs. private research) in earlier (vs. later) stages of research. It does, however, raise the desirability of freedom in general (and academia as the institutional regime that supports such freedom), if we make the realistic assumption that pursuing the alternative strategy confers a higher probability of generating entirely new research lines than pursuing the practical strategy (note that, realistically, the probability of such an event, possibly the result of an \accidental" discovery, is nonzero for both strategies)" (pg 8-9) (Murray et all, 2009)
  • The fact that academic research in developed, in general, in non-profit institutions implies that (1) in relation to freedom: institutions will not incur in the cost of monitoring academics research and (2) in relation to openness: he reduction in the cost of accessing research inputs, should make a bigger difference for academic research than private sector research. (Murray et all, 2009)

Highlights on the discussion of Openness and Publication outputs

Two competing desires (http://www3.best-inclass.com/bestp/domrep.nsf/Content/C5C64DBA5F515832852572C00066FF03!OpenDocument)

(1) want to publish scientifically interesting information that will attract researchers and build credibility within the field

(2) want to publish positive reviews of their products to attract investors

"If openness enhances basic research and the creation of new lines, this implies that it should have a long-lasting effect on the flow of subsequent publications. This is because new lines take a significant amount of time before maturing, and their development could lead to even more research lines being created. Indeed, starting a new line means a positive probability of a long dynamic flow of new discoveries whose research lines continue long after the original line has ended." (pg 9-10) (Murray et all, 2009)

Other innovation incentives found

  • Variety of reasons for choosing not to patent (Levin pp. 784):
    • not perfect appropriable
    • often not worth the cost of the application process
    • patents considered easily circumvent-able
  • As seen in above table, there seem to be other means of capitalizing on competitive advantage

Highlights on the discussion of Openness when there is public or non-for-profit funding involved

  • Puplic funding and the Taxpayer Access movement pushing for Openness: Government seems to be moving towards policies of openness in data and papers
    • Papers: NIH open access policy
    • All research projects that get funding from the NIH must make their manuscripts publicly available (http://www.earlham.edu/~peters/fos/2009/04/nih-oa-mandate-after-one-year.html)
      • possibly has had effect of increasing total use of scientific material. March 2008 (pre-NIH mandate) pub med had 550,000 articles downloaded. March 2009 (1 year after the mandate) there were 680,000
    • thus far successful - people are participating
    • receiving challenges from congress (Conyers)
    • Other examples around the world:
      • Wellcome Trust in England,
      • Italian National Institute of Health (ISS)
  • Statement of policy: “The Director of the National Institutes of Health shall require that all investigators funded by the NIH submit or have submitted for them to the National Library of Medicine’s PubMed Central an electronic version of their final, peer-reviewed manuscripts upon acceptance for publication, to be made publicly available no later than 12 months after the official date of publication: Provided, That the NIH shall implement the public access policy in a manner consistent with copyright law.” (http://publicaccess.nih.gov/policy.htm)
  • Reaction
  • Enclosure: Companies seem to be moving towards policies of enclosure
Number of Biotech patent approvals (Oliver pp. 59)
Drugs Microbiology Multicellular organisms Recombinant DNA
1977 660 591 0 14
1982 730 711 1 111
1987 958 1099 19 204
1992 1691 1965 52 356
1997 3372 4178 318 506

Is there a tendency towards secrecy?

  • There appears to be an emerging trend towards secrecy in the biotech industry. Two reasons can account for this. First, the explosion of patents has increased the incentive to keep all information before the patent is actually filed to be kept secret. And second, firms that once submitted to voluntary safety tests at the NIH no longer due so, preferring instead to keep their data secret
  • Patents:
    • Even before Bayh-Dole, Diamond vs. Chakrabarty encouraged universities to patent more of their work (Wright and Wallace, pp. 108)
    • Growth in patenting:
      • 1978 - 30 biotech patents requested
      • 1988 - 500 patents requested
      • Between 1994-1997 - 48,000 patents requested (12,000 per annu) (Wright and Wallace, pp. 113)
  • NIH tests:
    • Researchers used to present their projects to the NIH to advise them about possible risks of genetic engineering. This process ended in the 1980's, when responsibility for insuring safety in genetic testing was delegated to local biosafety committees. (Wright and Wallace, pp. 111)
    • Late 1970's, large firms like Genentech stopped submitting their data to the NIH biosafety committee because of the fear of disclosing proprietary information (Wright and Wallace, pp. 119)
  • Confirmation of trend:
    • In 1979, Paul Berg said ‚"No longer do you have this free flow of ideas. You go to scientific meetings and people whisper to each other about their companies's products. It's like a secret society." (Wright and Wallace, pp. 109)
    • Evidence that researches are delaying publication of research findings until patents approved (A.J. Lemin, "Patenting Microorganisms: Threats to Openness," in Vivian Weill and John Snapper, eds. Owning Scientific and Technical Information : Values and Ethical Issues (New Brunswick: Rutgers University Press, 1989). Cited in Hettinger, "Patenting Life," (1995) p. 293. )
    • This delay in publication has lengthened the time between initial publication and repeat confirm/deny experiments (Wright and Wallace, pp. 115)
    • one in five faculty delayed publication of their results in the biotech field (Wright and Wallace, pp. 115)

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