The Effects of Patenting on Innovation


By Jane Zara

On Nov. 28, the Supreme Court will hear oral arguments on a patent case, KSR International v. Teleflex. While this case involves a patent for adjustable gas pedals and electronic sensors, the substantive issue is the appropriate standard to be applied in determining whether an idea is obvious and therefore unworthy of patenting. A patent is a contract between an inventor and the government: If the inventor discloses his invention to the public, the government will enforce the inventor’s right to exclude all others from making or using the invention for up to twenty years.[1] The question in KSR is this: Does the claimed invention manifest “the extraordinary level of innovation that justifies the award of congressionally prescribed rights to exclude others from practicing the invention?”[2] The test applied to determine patentability by the Federal Circuit, according to the U.S. Patent & Trademark Office (PTO), “exacts a heavy cost in the form of unwarranted extension of patent protection to obvious subject matter.” The Federal Circuit’s stringent standards for obviousness are being contested in this case, but other deep-rooted concerns about the effects of the patenting system also exist.

While the standards for obviousness are being litigated in the courts, let’s turn our attention to more basic questions about patents in the US: Is the patent system an efficient way to provide incentives for developing new biologicals and otherwise addressing health care and food concerns, or do more appropriate paradigms for awarding innovation exist?[3]

Patents are issued to a vast array of biologicals, including nucleic acid sequences (e.g. genes and fragments of genes), proteins or fragments of them, receptors, bacterial and mammalian cells, stem cells and transgenic organisms, among other things. In the past twenty years or so, proprietary claims have been creeping farther upstream from end products to cover fundamental biological discoveries that provide the knowledge base for future product development, with the gap narrowing between fundamental research and commercial application.[4] Existing legislation draws little, if any distinction between downstream inventions that lead directly to commercial products and fundamental research discoveries that broadly enable further scientific investigation.[5] So the challenge we face is to distinguish discoveries that are better developed and disseminated through open access from those that occur under the protection of intellectual property rights.[6] These proprietary trends in basic biomedical research have been encouraged by the Court of Appeals by further extending the Supreme Court’s “expansive approach to patent eligibility” while relaxing the stringency of standards for patent protection such as utility and non-obviousness that might otherwise have prevented the patenting of incremental advances in upstream biomedical research.[7]

The exclusivity of basic biological findings through patents can have a chilling effect on the open exchange of scientific ideas, where the owners of patents impose prepublication reviews, disclosure restrictions, and reach-through provisions.[8] According to scholars such as Rebecca Eisenberg, the patenting of upstream discoveries can hinder subsequent research by permitting owners to charge a premium for the use of discoveries that might otherwise be more cheaply available in a competitive market or in the public domain, allowing in turn for the “balkanization” of intellectual property rights.[9] Delays in publishing scientifically validated findings of clinical significance before corresponding patents are filed can delay access to diagnostic testing.[10] What’s more, incentives created by patent financed research promote secrecy, rather than collaborations to solve hard problems, and patent monopolies give industry an incentive to spend large amounts of money lobbying politicians to shape the direction of legislation and/or regulatory practices, rather than promoting innovative solutions to difficult problems.[11]

Promising drug candidates for complex diseases are currently failing in preclinical or clinical trials, calling for a more open and collaborative approaches to solve these hard problems - calls have been made by public service advocates for improving access by requiring scientists and research institutions to put data and certain types of research tools into the public domain, or at least to license them widely and nonexclusively at a reasonable fee.[12]

Alternatives to the patenting system are now underway and more ambitious paradigms are under consideration. A prize fund for medical research is one idea, where large prizes for cures and vaccines for diseases such as AIDS and malaria would be awarded and small prizes would be awarded to me-too drugs.[13] This would be more efficient, more equitable and would provide strong incentives for research without the inefficiencies associated with monopolization.[14] The Free Market Drug Act proposes increasing public funding for biomedical research by amounts approximately equal to what industry currently spends on research (~$30 billion per year). This would be in addition to the $30 billion that goes to the National Institutes of Health for developing new drugs and bringing them through the FDA approval process.[15]

The federally Haplotype Mapping Project has been established and works toward cataloguing a publicly available database on human genetic variation.[16] Users can access the information freely, but the improvements made must also be made publicly available.[17] The Alliance for Cell Signaling is funded by a large federal grant and its goal is to map complex signaling networks.[18] Protocols and findings are publicly available and the direction of future experiments is agreed upon collaboratively based upon existing data.[19] Such projects provide for open collaboration and produces quality research at low costs, in contrast to the secretive methods imposed by the patenting system.





[1] Jorge a Goldstein & Elina Golod, Human gene patents, Acad. Med., Vol. 77, No. 12, Part 2 (Dec. 2002

[2] Brief for the U.S. as Amicus Curiae Supporting Petitioner at p. 10, KSR International Co. v. Teleflex Inc., et
al., No. 04-1350.

[3] Dean Baker CEPR (Center for Economic & Policy Research) Issue Brief October 2005: Bird Flu Fears: Is there a better way to develop drugs?

[4] Rai and Eisenberg

[5] Rai and Eisenberg

[6] Arti K. Rai and Rebecca S. Eisenberg, Bayh-Dole Reform and the Progress of Biomedicine, American Scientist, Vol. 91, No. 1 p. 52, avail at www.americanscientist.org/template/AssetDetail/assetid/16219.

[7] Arti K. Rai, Open and Collaborative Research: A New Model for Biomedicine, in Robert w.
Hahn, ed., Intellectual Property Rights in Frontier Industries, Chapter 6, pages 131-158, AEI-Brookings Press (2005) avail at http://eprints.law.duke.edu/archive/00000882/01m,
citing in re Brana for utility and in Re Deuel, for nonobviousness.

[8] Philip Mirowski and Robert Van Horn, the contract research organization and the commercialization of scientific research, social studies of science, vol. 35, no. 4, pages 503-548, aug, 2005, citing eisenberg and rai, 2003; Clifton Leaf, The Law of unintended consequences, CNNMoney.com, http://money.cnn.com/magazines/fortune/fortune_archive/2005/09/19/8272884/index/htm
(Sept. 19, 2005); Wendy D streitz and Alan B Bennett, Material Transfer Agreements: A university perspective, Plant Physiology, Vol. 133, pages 10-13,
sept 2003.

[9] Arti K. Rai and Rebecca S. Eisenberg, Bayh-Dole Reform and the Progress of Biomedicine, American Scientist, Vol. 91, No. 1 p. 52

[10] Mildred K. Cho, S. Illangasekare, M.A. Weaver, DGB Leonard and JF Merz, Effects of patent and licenses on the provision of clinical genetic testing services, J. Molecular Diagnostics, Vol. 5, No. 1, Feb 2003, pages 3-8; JF Merz, AG Driss, DGB Leonard and MK Cho, Diagnostic testing fails the test, the pitfalls of patents are illustrated by the case of haimochromatosis, Nature, Vol. 415, 577-579 (Feb 2002).

[11] Dean Baker

[12] Arti K. Rai, Open and Collaborative Research: A New Model for Biomedicine, in Robert w. Hahn, ed., Intellectual Property Rights in Frontier Industries, Chapter 6, pages 131-158, AEI-Brookings Press (2005) avail at http://eprints.law.duke.edu/archive/00000882/01m

[13] Joseph Stiglitz, www.newscientist.com (16 Sept 2006) page 21. Give Prizes not patents; James Packard Love, Round Table Discussion, Drug development incentives to improve access to essential medicines, consumer project on technology, bulletin of the World Health Organization, vol. 84(5), p. 408 (May 2006); see also http://europa.eu.int/comm/research/headlines/news/article_05_03_25_en.html.

[14] Stiglitz;

[15] Dean Baker CEPR (Center for Economic & Policy Research) Issue Brief October 2005: Bird Flu Fears: Is there a better way to develop drugs?

[16] Rai and Eisenberg, Open and Collaborative Research…

[17] rai and Eisenberg, Open …

[18] Rai and Eisenberg

[19] Rai and Eisenberg.