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Biotechnology, Patents and Liability

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Does the Intellectual Property Law of the Industrial Age Meet the Needs of the ... Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127 (1948): products of ... – PowerPoint PPT presentation

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Title: Biotechnology, Patents and Liability


1
Biotechnology, Patents and Liability
  • Rochelle Cooper Dreyfuss
  • Pauline Newman Professor of Law
  • New York University School of Law

2
Tomorrow Joint Inventorship and Authorship
  • Real issue for both sessions
  • Does the Intellectual Property Law of the
    Industrial Age Meet the Needs of the Information
    Age?

3
Overview
  • Theory of innovation
  • Basics of patent protection
  • Assumptions underlying the legal regime
  • Characteristics of modern science
  • Disparities as drags on intellectual production
  • Proposals for change

4
Theory of innovation Patterns of technological
advance
Vannevar Bush, Director of the Office of
Scientific Research and Development (1944) Linear
progression basic science applied
science technological development end products
5
Economics (economists) of advancement
Zvi Griliches
F.M. Scherer
Fritz Machlup
6
Economics
  • Basic science conception
  • - Mertonian ethos
  • - nonmarket rewards professorships, Nobel
    Prize
  • - spillover benefits
  • RemainderR D, commercialization and
    distribution
  • - need for market incentive for each end
    product
  • - problem of free ride and appropriability
  • - how much?
  • - the innovation lottery
  • - dry holes
  • - balancing user and producer needs

7
Basics of (US) patent protection
  • Subject matter drawing the
  • Utility patentability line
  • Novelty and nonobviousness
  • Disclosure
  • Scope
  • Defenses
  • Immunities

8
Subject matter
  • OReilly v. Morse, 56 U.S. (15 How.) 62 (1853)
    abstract principles (motive power of electric
    current) not patentable
  • Funk Bros. Seed Co. v. Kalo Inoculant Co., 333
    U.S. 127 (1948) products of nature (packets of
    nitrogen-fixing bacteria) not patentable
  • basic science excluded

9
Utility
  • Brenner v. Manson, 383 U.S. 519 (1966) only
    end-use utilities are patentable
  • (process for synthesizing a steroid of no known
    use)
  • A patent is not a hunting license. It is not
    a reward for the search, but compensation for its
    successful conclusion.
  • research vs. end use

10
Pyramid of Knowledge
where is the patentability line?
11
Novelty and inventiveness
  • Graham v. John Deere Co., 383 U.S. 1 (1966)
    (flexible plow, sealed sprayer)
  • contents of prior art
  • gap between this invention and prior art
  • skill of person of ordinary skill in the art
    (POSITA)
  • would the POSITA have bridged the gap?
  • linear progression

12
Disclosure
  • (1) enablement does it teach POSITA?
  • (2) written description possession
  • (3) best mode
  • (4) distinct claiming metes and bounds
  • protect spillovers

13
Scope of protection
  • (1) literal infringement
  • (2) infringement under the doctrine of
    equivalents
  • Graver Tank Mfg Co. v. Linde Air Products
    Co., 39 U.S. 605 (1950) whether persons
    reasonably skilled in the art would have known of
    the interchangeability of an ingredient not
    contained in the patent with one that was
  • one product-one patent

14
Scope of rights as defenses to infringement
  • reverse doctrine of equivalents
  • (2) general experimental use
  • where it is made or used as an experiment,
    whether for the gratification of scientific
    tastes, or for curiosity
  • W. Robinson, The Law of Patents for Useful
    Inventions
  • 898 (1890)
  • (3) experimentation for purpose of FDA approval
  • balancing user and producer needs

15
Immunity from liability
  • (1) prior user right runs in favor of one
    developed an invention more than a year before
    patent application filed by another, and
    commercially used it from before filing dateonly
    for methods (possibly, only business methods)
  • - covers activities of nonprofit research
    laboratories such as universities, for use in the
    lab and not for commercialization

16
Immunity from liability (contd)
  • (2) medical professionals performance of a
    medical or surgical procedure on a human body or
    an animal used in researchruns in favor of the
    practitioner, and the health care entity in which
    the activity was performed

17
Immunity from liability (contd)
  • (3) sovereign immunityruns in favor of state
    institutions, such as universities, for monetary
    damages (not injunctive relief)
  • Florida Prepaid Postsecondary Education Expense
    Board v. College Savings Bank, 527 U.S. 627
    (1999)
  • College Savings Bank v. Florida Prepaid
    Postsecondary Education Expense Board, 527 U.S.
    666 (1999)
  • balancing user and producer needs

18
Assumptions underlying intellectual property law
  • Linear progression
  • Spillover benefits
  • Discrete technologies one patent, one product
  • End use OR research use
  • 5. Sole inventor
  • 6. Main economic problems
  • a. striking the right producer/user balance
  • b. encouraging commercialization

19
Bayh Dole Act (1980)
  • Runs mainly in favor of universities
  • Permits these entities to acquire patent rights
    in federally-funded research projects
  • these can be licensed out on exclusive basis
  • Does NOT require patent procurement
  • government retains right to patent instead
  • Government retains march in rights

20
Is this the right picture?
  • 1. Linear progression now or ever?
  • technology that develops without science (Thomas
    Edison)
  • sciences that are driven by technology (Carnot
    cycle discovered by observing steam engines)
  • technologies that include embedded science
  • (Biotechnology)

21
Is this the right picture (contd)?
  • 2. Spillover benefits Universities as patent
    holders
  • birth of technology transfer offices
  • source of arguments to extend patents upstream
  • source of negotiation problems
  • exclusive licensing (Johns Hopkins,Baxter
    Healthcare, Cell Pro)
  • potential competition
  • e.g. Myriad Pharmaceuticals BRCA 12 test kits

22
Is this the right picture (contd)?
  • 3. Are all technologies discrete? (Merges
    Nelson)
  • chemical technologies
  • (special case or paradigm)
  • cumulative technologies
  • - one product, many patents
  • - e.g. semiconductors (Hall and Ziedonis)
  • defensive patenting
  • cross licensing
  • patent pools

23
Is this the right picture (contd)?
  • 4. Are all uses either end- or research-uses?
  • - science-based technologies
  • - eg biotechnology DNA, proteomics
  • computer science algorithms
  • - patents as covering product markets vs patents
    that cover innovation markets

24
Is this the right picture (contd)?
  • 5. Sole inventors myth or reality?
  • Industrial re-organization (Woody Powell)
  • theory of the firm buy vs. integrate
  • team-based research
  • patents as signals and facilitators of knowledge
    transfer

25
PHARMA
BIO
Univ
B
UNIV
Bio
Pharma
Pharma
Pharma
B
Univ
Bio
Univ
U
Pharma
Bio
26
PHARMA
BIO
Univ
B
UNIV
Bio
Pharma
Pharm
Pharma
B
Univ
Bio
Univ
U
Pharma
Bio
27
Is this the right picture (contd)?
  • 6. Main economic problems
  • a. producer vs. user balance
  • producers are users
  • output as input
  • universities as producers of a special sort
  • capital resources
  • patent resources
  • human resources

28
Is this the right picture (contd)?
  • b. commercialization
  • readily commercialized science
  • e.g. proteomics
  • (information on protein structures)
  • distantly commercialized science
  • e.g. Merck Genome Initiative (expressed sequence
    tags (ESTs))

29
The bottom line patents as a drag on innovation
in biotechnology
  • The tragedy of the anticommons
  • (Heller and Eisenberg)
  • - pricing issues
  • - stacking and reach-through royalties
  • - thickets of rights raise transaction costs
  • Patents on innovation markets
  • - fundamental science as fundamental
  • - no inventing around
  • - strong rights as producing stalemates

30
3. Demise of the experimental use defense
Madey v. Duke University, 307 F.3d 1351
(Fed.Cir.2002)
  • our precedent does not immunize any conduct
    that is in keeping with the alleged infringer's
    legitimate business, regardless of commercial
    implications. For example, major research
    universities, such as Duke, often sanction and
    fund research projects with arguably no
    commercial application whatsoever. However, these
    projects unmistakably further the institution's
    legitimate business objectives, including
    educating and enlightening students and faculty
    participating in these projects. These projects
    also serve, for example, to increase the status
    of the institution and lure lucrative research
    grants, students and faculty.

31
Where to go from here?
  • Six proposals
  • Subject matter carve-outs
  • Redefine utility
  • Tinker with novelty and nonobviousness
  • Emphasize disclosure obligations
  • Limit the scope of rights
  • Create new immunity from liability

32
Proposals
  • Subject matter carve-outs
  • John Barton proteomics as fundamental science
  • Richard Epstein exclude upstream inventions
  • Redefine utility
  • no patents without (significant?) end uses

33
Proposals (contd)
  • 3. Tinker with novelty and nonobviousness
  • worldwide standard of novelty
  • change POSITA to TOSITA (team.)
  • keep current with modern biotech
  • In re Deuel, 51 F.3d 1552 (Fed. Cir. 1995)
  • reject chemical technologies as paradigm for
    biotech

34
Proposals (contd)
  • Emphasize disclosure obligations
  • written description
  • Fiers v Sugano, 984 F.2d 1164 (Fed. Cir. 1993)
  • Regents of the University of California v. Eli
    Lilly Co., 119 F.3d 1558 (1997)
  • enablement
  • Genentech Inc. v. Novo Nordisk A/S, 108 F.3d 1361
    (Fed. Cir. 1997)

35
Proposals (contd)
  • 5. Limit the scope of rights
  • literal infringement defined by enablement
  • limit the doctrine of equivalents
  • broaden reverse doctrine of equivalents
  • Scripps Clinic Research Found. v.
    Genentech, 927 F.2d 1565 (Fed. Cir. 1991)

36
Proposals scope (contd)
  • institute a fair use defense
  • (e.g. Maureen ORourke)
  • (i) the nature of the advance represented by the
    infringement
  • (ii) the purpose of the infringing use
  • (iii) the nature the market failure
  • (iv) the impact use on the patentees incentives
    and social welfare
  • (v) the nature of the patented invention

37
Proposals (contd)
  • 6. Create a new immunity from liability for
    universities and their employees if
  • 1) the patented materials they wish to utilize
    are not marketed on reasonable terms
  • 2) the researcher agrees to publish the results
    of the work and
  • 3) the researcher agrees to refrain from
    patenting the results, or to patent the results
    and then license them on a nonexclusive basis and
    on reasonable terms (waiver)

38
Advantages of immunity approach
  • Avoids need to characterize invention or use, or
    to price
  • Patents available to spur invention, facilitate
    technology transfer
  • Recognizes differences between commercial and
    noncommercial research
  • incentive structure
  • monetary resources
  • human capital
  • patents for cross licensing

39
Advantages of immunity approach (contd)
  • Waiver
  • enriches public domain
  • softens effect of Bayh Dole by monetizing and
    internalizing benefits of allowing the work to
    fall into the public domain
  • restores Mertonian ethos

40
Problems with immunity approach
  • Devalues the product market
  • BUT how much, given downstream nature of use
  • Devalues the innovation market
  • BUT how much, since these uses are not high
    on the patentees own priority list
  • Who will have authority to waive?
  • BUT same issue under College Savings Bank
  • Tracing costs, pricing buyouts
  • BUT same issue for patent infringement

41
For comparative purposes
  • The EPC exempts acts done privately and for
    non-commercial purposes and acts done for
    experimental purposes, Art. 31 (a), (b)
  • - interpreted to permit experiments to establish
    the scope and application of a patented
    invention, including experiments to discover an
    improvement to it, but not experiments to prepare
    to duplicate and sell what is already on the
    market.

42
Royal Society Report, Keeping Science Open (April
2003), 3.23
  • Between these two extremes there is doubtful
    ground, and prudent people avoid doubtful ground.
    It would be conducive to the development of
    science if the position of scientific work under
    these exemptions was clearer.

43
Compatibility with TRIPS Agreement
  • Under art. 27 (nondiscrimination)
  • is de facto discrimination actionable
  • all sciences are not created alike
  • Under art. 30 (permitted exceptions)
  • is the immunity limited
  • is exploitation of innovation market normal
  • is it within the patentees legitimate interests
  • what of the interests of third parties, such as
    researchers and those who benefit from
    spillovers?

44
Compatibility with TRIPS Agreement (contd)
  • Under the remedies provisions
  • Art. 41(5) measures obligations by enforcement of
    other laws, including limits on speculative
    damages
  • Art. 45 measures royalty obligations by local
    demand, capacity to pay, position on parallel
    importation, and price controls
  • Art. 44 requires courts to be authorized to award
    injunctions, but courts retain discretion of
    equity
  • if nations can vary BENEFITS innovators can
    extract, they must also be able to vary COSTS
    innovators face

45
Summary
  • Organization and production of innovation
    industries have changed
  • how should national law respond?
  • are international agreements robust enough to
    tolerate adjustment?
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