[House Hearing, 110 Congress]
[From the U.S. Government Printing Office]
STIFLING OR STIMULATING--THE ROLE OF GENE PATENTS IN RESEARCH AND
SUBCOMMITTEE ON COURTS, THE INTERNET,
AND INTELLECTUAL PROPERTY
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
OCTOBER 30, 2007
Serial No. 110-66
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California LAMAR SMITH, Texas
RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
MAXINE WATERS, California DANIEL E. LUNGREN, California
WILLIAM D. DELAHUNT, Massachusetts CHRIS CANNON, Utah
ROBERT WEXLER, Florida RIC KELLER, Florida
LINDA T. SANCHEZ, California DARRELL ISSA, California
STEVE COHEN, Tennessee MIKE PENCE, Indiana
HANK JOHNSON, Georgia J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois TOM FEENEY, Florida
BRAD SHERMAN, California TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota
Perry Apelbaum, Staff Director and Chief Counsel
Joseph Gibson, Minority Chief Counsel
Subcommittee on Courts, the Internet, and Intellectual Property
HOWARD L. BERMAN, California, Chairman
JOHN CONYERS, Jr., Michigan HOWARD COBLE, North Carolina
RICK BOUCHER, Virginia TOM FEENEY, Florida
ROBERT WEXLER, Florida LAMAR SMITH, Texas
MELVIN L. WATT, North Carolina F. JAMES SENSENBRENNER, Jr.,
SHEILA JACKSON LEE, Texas Wisconsin
STEVE COHEN, Tennessee ELTON GALLEGLY, California
HANK JOHNSON, Georgia BOB GOODLATTE, Virginia
BRAD SHERMAN, California STEVE CHABOT, Ohio
ANTHONY D. WEINER, New York CHRIS CANNON, Utah
ADAM B. SCHIFF, California RIC KELLER, Florida
ZOE LOFGREN, California DARRELL ISSA, California
BETTY SUTTON, Ohio MIKE PENCE, Indiana
Shanna Winters, Chief Counsel
Blaine Merritt, Minority Counsel
C O N T E N T S
OCTOBER 30, 2007
The Honorable Howard L. Berman, a Representative in Congress from
the State of California, and Chairman, Subcommittee on Courts,
the Internet, and Intellectual Property........................ 1
The Honorable Howard Coble, a Representative in Congress from the
State of North Carolina, and Ranking Member, Subcommittee on
Courts, the Internet, and Intellectual Property................ 4
Mr. Lawrence M. Sung, J.D., Ph.D., Law School Professor and
Intellectual Property Law Program Director, University of
Maryland, School of Law, Baltimore, MD
Oral Testimony................................................. 7
Prepared Statement............................................. 10
Mr. E. Jonathan Soderstrom, Managing Director, Office of
Cooperative Research, Yale University, New Haven, CT
Oral Testimony................................................. 24
Prepared Statement............................................. 26
Dr. Marc Grodman, Chair of the Board and CEO, Bio-Reference
Laboratories, Elmwood Park, NJ
Oral Testimony................................................. 34
Prepared Statement............................................. 37
Mr. Jeffrey Kushan, Partner, Sidley Austin, LLP, on behalf of
Biotechnology Industry Organzation (BIO), Washington, DC
Oral Testimony................................................. 57
Prepared Statement............................................. 59
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Prepared Statement of the Honorable Howard L. Berman, a
Representative in Congress from the State of California, and
Chairman, Subcommittee on Courts, the Internet, and
Intellectual Property.......................................... 3
Prepared Statement of the Honorable Howard Coble, a
Representative in Congress from the State of North Carolina,
and Ranking Member, Subcommittee on Courts, the Internet, and
Intellectual Property.......................................... 5
Material Submitted for the Printed Hearing Record................ 117
OFFICIAL HEARING RECORD
Material Submitted for the Hearing Record but not Reprinted
A publication of the National Research Council of the National
Academies entitled ``Reaping the Benefits of Genomic and Proteomic
Research, Intellectual Property Rights, Innovation, and Public
Health.'' This publication is available at the Subcommittee and can
also be accessed at:
A report entitled ``The Better World Report Part One, Building a
Stronger Economy: Profiles of 25 Companies Rooted in Academic
Research, 2007 Edition.'' This report is available at the
Subcommittee and can also be accessed at:
A report entitled ``Technology Transfer Stories: 25 Innovations That
Changed the World, The Better World Report, 2006 Edition.'' This
report is available at the Subcommittee and can also be accessed
STIFLING OR STIMULATING--THE ROLE OF GENE PATENTS IN RESEARCH AND
TUESDAY, OCTOBER 30, 2007
House of Representatives,
Subcommittee on Courts, the Internet,
and Intellectual Property,
Committee on the Judiciary,
The Subcommittee met, pursuant to notice, at 2:14 p.m., in
Room 2237, Rayburn House Office Building, the Honorable Howard
L. Berman (Chairman of the Subcommittee) presiding.
Present: Representatives Berman, Watt, Lofgren, Coble, and
Staff present: Shanna Winters, Subcommittee Majority Chief
Counsel; Eric Garduno, Majority Counsel; Blaine Merritt,
Minority Counsel; and Rosalind Jackson, Professional Staff
Mr. Berman. Good afternoon. The hearing of the Subcommittee
on Courts, the Internet, and Intellectual Property will come to
I would like to begin by welcoming everyone to this
hearing, ``Stifling or Stimulating--The Role of Gene Patents in
Research and Genetic Testing.''
I noticed a couple of days ago that George Bush, when he
was talking about President Putin and some of the problems in
Russia, he said that in terms of whether or not it is possible
to reprogram the kind of basic Russian DNA, which is used to
centralized authority, that is hard to do, and so I would first
like to know if there is a patent for an authoritarian gene,
and how does it express itself, and can it be licensed?
Scientific knowledge concerning genes has expanded
considerably in the last half-century since James Watson and
Francis Crick put forth their discovery of DNA.
We know now that genes are the blueprints of all living
things. I am told that genes are chemical instructions stored
in our cells that tell our bodies to grow bones, make blood,
repair damaged skin, and perform tens of thousands of other
Efforts to map the human genome, like the Human Genome
Project headed by NIH, have allowed us to identify specific
genes, determine their function, and harness their usefulness.
As a result, we have been able to produce therapies to
alleviate human suffering, such as insulin, develop tests to
determine susceptibility to diseases, like Alzheimer's and
breast cancer, and create wholly new organisms, like cancer
mice and pesticide-resistant plants.
Many attribute this success to the incentives provided by
the patent system. Given the robust nature of the
commercialization of biotechnology research, it is fair to say
that patents have done their job in promoting new inventions in
this field. However, there are those that have raised concerns
about the impact of providing exclusivity for patents on genes.
For some, genes are thought of as products of nature and,
thus, should not be patentable subject matter. However, the
courts have long held that compositions of matter isolated and
purified from their natural state are worthy of patent
protection. This principle was made clearly applicable to
living matter like genes in the Supreme Court's Diamond v.
For some, gene patents should require a more rigorous
review. The USPTO revised their examination guidelines for gene
patenting in 2001, which strengthened utility requirements so
that a gene could no longer be patented based on uses like
being good for landfill.
But while the 2001 guidelines tightened patentability
requirements, some continue to argue that many gene patents are
still issued for uses that are speculative and unproven.
If the quality of gene patents remain a problem, stricter
utility standards requiring more concrete uses may be called
for. However, any lingering quality issues surrounding how gene
inventions are examined could very well be impacted by the
recent KSR v. Teleflex decision.
I know at least one of our witnesses will be speaking to
Still, others fear that gene patents will be used to hinder
research. They argue that if patent thickets were to form, it
would become too costly or too troublesome for researchers to
license the patented inventions they need, forcing them to
abandon their research. There is anecdotal information that
supports this notion that researchers have discontinued
research pursuits because of the threat of lawsuits by gene
patent holders. However, there is also data that suggests just
the opposite, that gene patents have had little impact on basic
A recent survey by the National Academy of Sciences found
that in biomedical research, ``There is a lack of substantial
evidence for a patent thicket or a patent blocking problem,''
primarily because researchers are not very concerned about
patents being enforced against them. However, the report went
on to say that this nonchalant attitude was based on the
assumption by many researchers that they qualify for a robust
research use exception, which many believe was eliminated by
the 2002 Madey v. Duke decision.
Regardless, it might only take one major victory against a
university to create a real and substantial chilling effect. As
such, we may need to examine the effects or necessity of a
clear research use exception.
Finally, for some, opposition to gene patents is a matter
of principle. They point out that patents on genetic tests is
harming patient access to and stunting improvement of these
tests. It is reasoned that since most insurance providers do
not provide coverage for genetic tests, the patent markup can
price tests out of reach for many patients.
In addition, some claim that gene patents have been
asserted in order to prevent others from improving possibly
inaccurate genetic tests and identifying whether these are even
applicable to certain population subgroups.
While I firmly support a patent holder's right to charge
what the market will bear for his invention, using a patent to
block efforts that check the efficacy of such tests borders on
the realm of patent misuse and may constitute anti-competitive
Patents are meant to encourage technological progress.
Thus, it is antithetical to the patent system for companies to
use their patents to freeze a technology at a particular stage
But is that what is happening? Are the practices of a few
unfairly coloring all gene patents in a negative light? Are
complaints related to gene patents based more on how they are
being used instead of what is being patented?
We need to examine the role gene patents play in
stimulating or stifling research in genetic testing. It is my
hope that this hearing will help us answer these and many other
It is now my pleasure to recognize my friend and colleague,
the distinguished Ranking minority Member of the Subcommittee,
Howard Coble, for his opening statement.
[The prepared statement of Mr. Berman follows:]
Prepared Statement of the Honorable Howard L. Berman, a Representative
in Congress from the State of California, and Chairman, Subcommittee on
Courts, the Internet, and Intellectual Property
Scientific knowledge concerning genes has expanded considerably in
the last half century since James Watson and Francis Crick put forth
their discovery of DNA. We now know that genes are the blueprints of
all living things. Efforts to map the human genome like the Human
Genome Project headed by NIH has allowed us to identify specific genes,
determine their function, and harness their usefulness. As a result we
have been able to produce therapies to alleviate human suffering such
as insulin, develop tests to determine susceptibility to diseases like
Alzheimer's and breast cancer, and create wholly new organisms like
``cancer mice'' and pesticide resistant plants.
Many attribute this success to the incentives provided by the
patent system. Given the robust nature of the commercialization of
biotechnology research, it's fair to say that patents have done their
job in promoting new inventions in this field. However, there are those
that have raised concerns about the impact of providing exclusivity for
patents on genes.
For some, genes are thought of as products of nature and thus
should not be patentable subject matter. However, the courts have long
held that compositions of matter isolated and purified from their
natural state are worthy of patent protection. This principle was made
clearly applicable to living matter like genes thanks to the Supreme
Court's Diamond v. Chakrabarty decision.
For some, gene patents should require a more rigorous review. The
USPTO revised their examination guidelines for gene patenting in 2001,
which strengthened utility requirements so that a gene could no longer
be patented based on uses like being ``good for landfill.'' But, while
the 2001 guidelines tightened patentability requirements, some continue
to argue that many gene patents are still issued for uses that are
speculative and unproven. If the quality of gene patents remains a
problem, stricter utility standards requiring more concrete uses may be
called for. However, any lingering quality issues surrounding how gene
inventions are examined could very well be impacted by the recent KSR
v. Teleflex decision.
Still others fear that gene patents will be used to hinder
research. They argue that if patent thickets were to form, it could
become too costly or too troublesome for researchers to license the
patented inventions they need, forcing them to abandon their research.
There is anecdotal information that supports this notion that
researchers have discontinued research pursuits because of the threat
of lawsuits by gene patent holders. However, there is also data that
suggests just the opposite; that gene patents have had little impact on
A recent survey by the National Academy of Sciences found that in
biomedical research, there is a ``lack of substantial evidence for a
patent thicket or a patent blocking problem'' primarily because
researchers aren't very concerned about patents being enforced against
them. However, the report went on to say that this nonchalant attitude
was based on the assumption by many researchers that they qualify for a
robust research use exception, which many believe was eliminated in the
2002 Madey v. Duke decision. Regardless, it might only take one major
victory against a university to create a real and substantial chilling
effect. As such, we may need to examine the effects or necessity of a
clear research use exception.
Finally, for some, opposition to gene patents is a matter of
principle. They point out that patents on genetic tests is harming
patient access to, and stunting improvements of, these tests. First, it
is reasoned that since most insurance providers do not provide coverage
for genetic tests, the patent mark-up can price tests out of reach for
many patients. In addition, some claim that gene patents have been
asserted in order to prevent others from improving possibly inaccurate
genetic tests and identifying whether the tests are even applicable to
certain population subgroups. While I firmly support a patent holder's
right to charge what the market will bare for his invention, using a
patent to block efforts that check the efficacy of such tests borders
on the realm of patent misuse and may constitute anti-competitive
Patents are meant to encourage technical progress--thus, it is
antithetical to the patent system for companies to use their patents to
freeze a technology at a particular stage of development. But is that
what is happening? Are the practices of a few unfairly coloring all
gene patents in a negative light? Are complaints related to gene
patents based more on how they are being used instead of what is being
patented? We need to examine the role gene patents play in stimulating
or stifling research and genetic testing. It is my hope that this
hearing will help us answer these and many other underlying questions.
Mr. Coble. Thank you, Mr. Chairman and ladies and
This is a good hearing topic, Mr. Chairman, in large part
because the subject matter lends itself oftentimes to
At the outset, it seems to me that an inventor whose
application satisfies the requirements for gene patent is not
trying to patent ``life'' or personal DNA chemistry in
violation of the 13th amendment. The inventor's ultimate goal
is to develop a protein-based drug, a diagnostic test, or a
therapeutic modality that will improve public health, if not
I, therefore, hope the Subcommittee will collectively
acknowledge after this hearing that gene patenting is a
legitimate part of our patent system. It is a thriving
component, it seems to me, of our knowledge-based economy. More
importantly, gene patents ultimately contribute to the health
and welfare of the American people and patients all over the
The National Institutes of Health is the world's largest
agency for conducting basic medical and biological research
with a budget in excess of $28 billion, but the pharmaceutical
and biotech industries devote more than $50 billion annually to
research. The process of identifying a DNA sequence through
clinical testing and manufacturing of an FDA-approved drug may
cost the patent holder in excess of a billion dollars, yet only
a third of all drugs ever generate revenues sufficient to cover
those costs, and the great majority, I am told, Mr. Chairman,
of the biotech companies do not realize a profit.
Mr. Chairman, you did a very good, masterful job, I will
say, in negotiating the recently passed Patent Reform Act of
2007, but one thing we learned while debating that legislation
is that different industries employ different business models.
They use the patent system in various and sundry ways.
American biotech companies are more reliant on the Patent
Act than any other industry. While a few biotech companies are
large, most are smaller and lack the internal financing
resources to subsidize their drug research and development.
This is especially true of small start-up companies whose
valuation is an exclusive function of their patent portfolios.
At our hearing today, the witnesses and the Subcommittee
will explore some legitimate topics associated with gene
patents. Are gene patents an impediment to university research?
Do they inhibit competition and limit patient access to
diagnostic testing? Should the Government exercise march-in
rights to promote greater testing and research?
I look forward to the testimonies of our witnesses today on
these and other issues.
And, in conclusion, Mr. Chairman, on March the 14 of 2000,
about 4 months before you and I were involved in a Subcommittee
on this very issue, at a hearing--gene patents, as you know,
make inventions--I remember President Clinton and Prime Minster
Blair issued a joint statement on the human genome. They said
that all genes in the human body should be made freely
available to scientists everywhere, and some interpreted that
as an announcement of new Government policy that genes could
not be patented.
Then the biotech industry, of course, experienced bad
difficulty, losing several billion dollars and, the following
day, the White House released another statement emphasizing
that the Administration supported the patenting of genes.
I guess the moral of the story, Mr. Chairman, is to proceed
cautiously and deliberately, and you have a good reputation of
doing that, and I think I do, too.
This is a good topic for an oversight hearing, but I think
we must exercise great care about legislating in this area,
lest possibly important industry and compromised public health
Thank you, Mr. Chairman.
[The prepared statement of Mr. Coble follows:]
Prepared Statement of the Honorable Howard Coble, a Representative in
Congress from the State of North Carolina, and Ranking Member,
Subcommittee on Courts, the Internet, and Intellectual Property
Thank you, Mr. Chairman.
This is a good hearing topic, in large part because the subject
matter lends itself to misrepresentation. At the outset, let's be clear
that an inventor whose application satisfies the requirements for a
gene patent isn't trying to patent ``life'' or personal DNA chemistry
in violation of the 13th Amendment. The inventor's ultimate goal is to
develop a protein-based drug, a diagnostic test, or a therapeutic
modality that will improve public health if not save lives.
I therefore hope the Subcommittee will collectively acknowledge
after this hearing that gene patenting is a legitimate part of our
patent system. It is a thriving component of our knowledge-based
economy. More importantly, gene patents ultimately contribute to the
health and welfare of the American people and patients all over the
The National Institutes of Health is the world's largest agency for
conducting basic medical and biological research, with a budget in
excess of $28 billion. But the pharmaceutical and biotech industries
devote more than $50 billion annually to research. The process of
identifying a DNA sequence through clinical testing and manufacturing
of an FDA-approved drug may cost the patent holder north of one-billion
dollars. Yet only a third of all drugs ever generate revenue sufficient
to cover their costs. And the great majority of biotech companies do
not turn a profit.
Mr. Chairman, you did an outstanding job of negotiating House
passage of the ``Patent Reform Act of 2007.'' One thing we learned
while debating the legislation is that different industries employ
different business models that use the patent system in different ways.
American biotech companies are more reliant on the Patent Act than any
other industry. While a few biotech companies are large, most are much
smaller and lack the internal financing resources to subsidize their
drug research and development. This is especially true of small start-
up companies, whose valuation is an exclusive function of their patent
At our hearing today, the witnesses and the Subcommittee will
explore some legitimate topics associated with gene patents. Are gene
patents an impediment to university research? Do they inhibit
competition and limit patient access to diagnostic testing? Should the
government exercise ``march-in'' rights to promote greater testing and
research? I look forward to the testimony of our witnesses today on
these and other issues.
But I conclude with a cautionary tale. On March 14, 2000, about
four months before I chaired a Subcommittee hearing on gene patents and
genomic inventions, President Clinton and Prime Minister Blair issued a
joint statement on the human genome. They said that all genes in the
human body ``should be made freely available to scientists
everywhere,'' implying the announcement of a new government policy that
genes could not be patented. The biotech industry promptly crashed,
losing more than $40 billion in market capitalization. The following
day the White House released another statement emphasizing that the
Administration supported the patenting of genes.
The moral of the story, Mr. Chairman, is to proceed cautiously and
deliberately. This is a good topic for an oversight hearing. But we
must exercise great care about legislating in this area, lest we wreck
an important industry and compromise public health.
That concludes my statement, Mr. Chairman.
Mr. Berman. Thank you, Mr. Coble.
I am wondering whether the asset value of the companies
went back up by $2 billion on that next day when he said that
because, if it had, I can say anything now and correct it
Mr. Coble. And I am not sure I can answer that. [Laughter.]
Mr. Berman. I now will introduce a very distinguished panel
Lawrence Sung is Director of the Intellectual Property law
program at the University of Maryland School of Law. He is a
partner in the Washington, D.C., office of Dewey & LeBouef,
where he specializes in biotechnology, medical device, and
pharmaceutical patent litigation and counseling. Additionally,
he serves as a consultant to the National Human Genome Research
Institute and as Chair for Intellectual Property for the
National Research Council. Professor Sung earned a Ph.D. in
microbiology from the U.S. Department of Defense Uniformed
Services University of the Health Sciences and a J.D. from
American University's Washington College of Law.
John Soderstrom is the Managing Director of the Office of
Cooperative Research at Yale University, where he is
responsible for managing the university's intellectual property
portfolio, executing commercialization strategies and
developing spinoff ventures. His posture has allowed him to
participate in the formation of more than 25 new start-up
companies, many in the biotechnology sector. Prior to joining
Yale, Dr. Soderstrom was the director of program development
for Oak Ridge National Laboratory. Dr. Soderstrom is also
President-Elect of the Association of University Technology
Managers. Dr. Soderstrom received his Ph.D. from Northwestern
And I might point out we have had no less than the
President of Yale University testifying on patent issues
several times in the past few years.
Marc Grodman is founder of Bio-Reference Laboratories, the
largest clinical laboratory operating in the Northeast. In
addition to being a major regional laboratory, Bio-Reference
Laboratories also provides national services in informatics and
genomics. Dr. Grodman is also an Assistant Professor of
clinical medicine at Columbia University's College of
Physicians and Surgeons. Dr. Grodman received his B.A. from the
University of Pennsylvania, his M.D. from Columbia University,
and attended Harvard University's Kennedy School of Government.
Jeffrey Kushan is a Partner with Sidley & Austin, where he
serves as Practice Group Chair for the firm's D.C. office. Mr.
Kushan focuses his practice on Hatch-Waxman patent litigation,
patent appeals and proceedings, patent portfolio reviews, and
he represents clients, including trade associations, on
domestic and international patent policy matters. He is
testifying today on behalf of the Biotechnology Industry
Organization. Before entering private practice, Mr. Kushan
worked in Government as a patent examiner, in various policy
advisory positions at the USPTO, and as an IP negotiator at the
USTR. Mr. Kushan received his M.A. in chemistry from the
University of North Carolina at Chapel Hill and his J.D. from
George Washington University.
Gentlemen, it is really an honor to have you all here
today. Your written statements will be made part of the record,
in their entirety. I would ask you, if you would be willing to,
to summarize your testimony in 5 minutes or less, and to stay
within the time, there is a timing light at the table. When 1
minute remains, the light will switch from green to yellow, and
then red when then 5 minutes are up.
We are glad to have you here.
TESTIMONY OF LAWRENCE M. SUNG, J.D., Ph.D., LAW SCHOOL
PROFESSOR AND INTELLECTUAL PROPERTY LAW PROGRAM DIRECTOR,
UNIVERSITY OF MARYLAND, SCHOOL OF LAW, BALTIMORE, MD
Mr. Sung. My charge during our brief time is relatively
modest. I am not here to represent an organization, nor am I
here to press an agenda. Rather, I hope to help inform your
deliberations on gene patenting with insights about the nature
of patent protections for genomic inventions and also to
describe some available options that might assist in
effectuating the particular balance between patent exclusivity
and public access you ultimately deem appropriate.
These may not be actual answers to the question of gene
patenting, but then, as you know, what law professors do best
is to answer a question by raising more questions.
This Subcommittee has had the benefit of hearings focusing
on the state of the patent system and on the possibility of
patent reform legislation. I will not revisit these general
principles of the patent system, but instead address some of
the distinctions of gene patenting, three in particular.
First, patenting genomic inventions is different because
the underlying technology is different. Metaphorically
speaking, in the physical sciences, if one dedicates her career
to climbing the highest mountain, then on that day she can be
confident that she has seen all there is to see. By contrast in
the biological sciences, once you summit the highest mountain,
only then do you see that there are other mountains you have
never seen before. The science in this field is fluid, and this
creates an inherent tension with the patent system which, like
other systems of legal rights, depends upon static definition.
Gene patents defy this type of containment.
Second, genes are simply something that we have a sense
should be part of the public common. That the subject matter
might fit within the legal standards of what is patentable does
not necessarily change the fact that many are left feeling that
something is just not right about treating genetic information
Third, the temporal distortion that exists between the time
one files a patent application and the time the courts
adjudicate those patent rights seems even greater when dealing
with gene patents. Sometimes decades separate these two events,
and when courts make pronouncements today about what was a
fledgling technology 20 years ago, that does not sit well with
a public that sees foremost what is at stake today.
Now the state of gene patenting has seen significant
evolution. When technology developed to allow rapid gene
sequencing to occur, patent claims began being filed in hordes,
what some called the patent gold rush, but, like most gold
rushes, virtually all of the claims were speculative and the
prospect of great wealth became illusory.
The Patent Office wisely issued a moratorium on examination
until setting forth revised standards of utility in written
description that could be applied more sensibly to patent
claims to DNA fragments known as expressed sequence tags or
ESTs. This era concluded with the 2005 Federal Circuit decision
In re Fisher which clarified that DNA fragments without some
demonstrated knowledge about its biological relevance were not
patentable for failure to teach a specific substantial and
This case arguably alleviates much of the wild concern over
what many generically and inaccurately call gene patents. To be
clear, gene patents still exist, but they are claims for DNA
for which we have been taught both what it is and what it does,
and this is somewhat more acceptable than the EST patent claims
that the public first rallied against.
But the issue of gene patents and their effect on research
and public access to genetic testing remains. For those of the
mind that action is necessary, one option is the maintenance or
the enhancement of the rigor with which the Patent Office
examines gene patent applications. The evolving jurisprudence
generally in the patent law doctrines of anticipation,
inherency, and obviousness, including the Supreme Court's
decision in KSR v. Teleflex, combined with the existing
disclosure requirements of written description and enablement
suggest that fewer gene patents will pass muster.
In addition, the Supreme Court decision in Merck v. Integra
will likely lessen the ability of certain patents, including
some gene patents to be enforced. The Supreme Court decision in
eBay v. MercExchange also implicates the restraint on the
grounds of public interest in granting injunctive relief to
gene patent plaintiffs even where infringement has occurred.
The Government's implementation of existing march-in rights
for federally funded technology covered by gene patents would
be another avenue to ensure public access.
For those that feel the status quo or the reinvigoration of
these standards fall short, new legislation might be considered
and these include three options. First is the creation of the
heightened standard of inventorship that effectively precludes
the mere elucidation of a natural property, such as the DNA
sequence or a biological pathway. Second is compulsory
licensing of gene patents or some form of mandatory patent
pooling of gene patents. And, third, is an academic research
use exemption from patent infringement.
In this last regard, my written submission for this hearing
details a proposal of an elective right to use patented
I appreciate your attention. In closing, I ask your
indulgence to be mindful that in the brief time here, I have
necessarily oversimplified many aspects of a complex set of
considerations. As I caution in my written statement,
generalization is problematic with regard to gene patents, and
I hope you will seek further insights of others on the
[The prepared statement of Mr. Sung follows:]
Prepared Statement of Lawrence M. Sung
Mr. Berman. Thank you very much, Dr. Sung.
TESTIMONY OF E. JONATHAN SODERSTROM, MANAGING DIRECTOR, OFFICE
OF COOPERATIVE RESEARCH, YALE UNIVERSITY, NEW HAVEN, CT
Mr. Soderstrom. Thank you, Mr. Chairman, for the invitation
to be here today.
As you indicated in your opening statement, some scholars
have argued that patents and their enforcement may impose
significant costs upon noncommercial biomedical research by
creating an anti-commons or a patent thicket that may make the
acquisition of licenses and other rights too burdensome to
permit the pursuit of these otherwise scientifically and
socially worthwhile research. These concerns have grown since
the Madey v. Duke decision that affirmed the affirmation of any
research exemption shielding universities from patent
Without diminishing the importance of these potential
concerns, it should be pointed out that the evidence offered to
support these contentions is primarily anecdotal, and I need
not remind you that the plural of anecdote is not data.
Although a few isolated incidents have received significant
attention, there is little systematic evidence that widespread
assertion of patent rights on genes has been significantly
hampered biomedical research.
Two recent surveys, as you pointed out, offer little
empirical basis for claims that restricted access to
intellectual property is currently impeding academic biomedical
research. The authors, in fact, further note that patents are
not typically used to restrict access to knowledge and tangible
materials that biomedical scientists require.
The surveys further show that firms generally do not
threaten infringement litigation against academic research
institutions, a de factor research exemption, if you will, in
part because such academic use may improve their invention or
because they wish to maintain good will and ensure access to
future academic inventions and also because the damages, as we
all know, are likely to be very small.
These studies also confirm that university technology
managers take a very nuanced approach to patenting and
licensing seeking only enough intellectual property protection
to facilitate the commercial development of an invention.
Decisions to patent and strategies for commercializing the
inventions depend on a determination of the level of protection
necessary to induce an interested company into investing in the
further development, testing, manufacturing, marketing, sales
of a product embodying the technology.
But these results should not be surprising. The practice of
university technology transfer managers reflect the salutary
effects of the guidance that the National Institutes of Health
has issued on patenting of research tools and genomic
inventions as well as the formation of professional norms and
standards of behavior encouraged by groups, such as the one
that I help lead, the Association of University Technology
Universities share certain core values, and we seek to
maintain to the fullest extent possible in all technology
transfer agreements. Chief among these values are the
protection of academic freedom and the open pursuit of
scientific inquiry. We seek balance between the business needs
of our licensing partners and the shared value of our
respective academic institutions.
Recently, a group of university research officers,
licensing directors, and a representative from the Association
of American Medical Colleges recognized the need to clearly
articulate a set of principles that strike such an appropriate
public policy balance.
The participating universities released a white paper in
the public interest, nine points to consider in licensing
university technology. These considerations were put forth in
an aspirational or self-correcting sense to encourage the
profession to set a high standard by creatively stretching the
boundaries of conventional and licensing practices and ensuring
that licensing activities are in the public interest for
The nine points included: one, universities should reserve
the right to practice licensed inventions and to allow other
nonprofit and governmental organizations to do so; two,
exclusive licenses should be structured in a manner that
encourage technology development and use as broadly and as
quickly as possible; three, that we should strive to minimize
the licensing of ``future improvements''; four, that
universities should anticipate and help manage technology
transfer-related conflicts of interest; five, ensure broad
access to research tools; six, enforcement action should be
carefully considered; seven, we should be mindful of export
regulations; eight, we should be mindful of the implications of
working with patent aggregators; and, nine, we should consider
including provisions that address unmet needs, such as those of
neglected patient populations or geographic areas, giving
particular attention to improved therapeutics, diagnostics and
agricultural technologies for the developing world.
Many of these points were already being practiced. In fact,
the nine points have been endorsed by a growing number of
academic institutions and professional organizations around the
world. We applaud these participating universities' efforts to
articulate these important principles and urge their adoption
and application by the wider community of universities.
In the end, we hope to foster thoughtful approaches and
creative solutions to complex problems that may arise when
universities license technologies in the public interest and
for society's benefit. We believe that patent policy, as well
as practice, should be guided by the goal of promoting
innovation and, in turn, improvements in human welfare.
That view drove Yale's interest in helping to draft the
nine points guidelines, which recommended that universities
endeavor to make genomic inventions that will serve primarily
as research tools as broadly available as possible.
Yale has long taken a balanced approach to patenting,
taking into account the nature of the invention, its relevance
to research, and the extent to which patent protection would be
necessary to give a commercial partner adequate incentive to
develop the product completely. We have taken a similar
approach to licensing, especially by insisting on the right to
make the invention available to researchers at Yale and other
We do not think that gene patents are having a significant
negative impact on academic research. There have been
thoughtful analyses of problems that could arise, but the most
comprehensive studies of this issue concluded that the patents
are not slowing the pace of research.
Yale and other research universities have a major stake in
ensuring access to research tools. We also recognize that
circumstances may change as the field of genomics and
proteomics continue to advance, and I am confident that the
scientific community, working with the National Institutes of
Health, the Association of Technology Managers, the Association
of American Medical Colleges and others, will continue to
monitor whether gene patents are interfering significantly with
My colleagues and I are grateful for the Subcommittee's
interest in this topic.
[The prepared statement of Mr. Soderstrom follows:]
Prepared Statement of E. Jonathan Soderstrom
Mr. Chairman, thank you for the opportunity to testify before your
Subcommittee on the topic of whether gene patents are helping or
hurting research in the life sciences.
My name is Jon Soderstrom. I am the Managing Director of the Office
of Cooperative Research (OCR) at Yale University. The Office of
Cooperative Research is the intellectual property management and
licensing organization for Yale University. I also serve as the
President-Elect for the Association of University Technology Managers
known as AUTM. AUTM is a nonprofit organization created to function as
a professional and educational society for academic technology transfer
professionals involved with the management of intellectual property.
AUTM was founded in 1974 as the Society of University Patent
Administrators. That group laid the foundation for the association that
exists today with more than 3,000 members strong representing over
1,500 institutions and companies across the globe.
SOURCES OF CONCERN
Scholars have recently argued that patents may impose significant
costs upon noncommercial biomedical research. Heller and Eisenberg \1\
suggest that the patenting of a broad range of the inputs that
researchers need to do their work may give rise to an ``anti-commons''
or ``patent thicket'' that may make the acquisition of licenses and
other rights too burdensome to permit the pursuit of what should
otherwise be scientifically and socially worthwhile research. Merges
and Nelson \2\ and Scotchmer \3\ highlight the related possibility
that, in some fields of technology, the assertion of patents on only
one or two key upstream, foundational discoveries may significantly
restrict follow-on research. A further concern is that the prospect of
realizing financial gain from upstream research may make researchers
reluctant to share information or research materials with one another,
thereby impeding the realization of research efficiencies and
complementarities. Similarly, researchers may be trading away rights to
conduct future research or to freely disseminate their discoveries in
exchange for current access to research inputs or financial support.\4\
Finally, prospective financial gains from the exploitation of
intellectual property may induce researchers to choose research
projects on the basis of commercial potential rather than scientific
\1\ Heller, M.A. and Eisenberg, R. S. 1998. ``Can Patents Deter
Innovation? The Anti-Commons in Biomedical Research.'' Science, Vol.
280. No. 5364, pp. 698-701
\2\ Merges, R. P. and R. R. Nelson. 1990. ``On the Complex
Economics of Patent Scope. ``Columbia Law Review 90:839-916
\3\ Scotchmer, S. 1991. ``Standing on the Shoulders of Giants:
Cumulative Research and the Patent Law.'' Journal of Economic
\4\ Cohen, W. M., R. Florida, and R. Goe. 1994. ``University-
Industry Research Centers in the United States.''; Thursby, Jerry G.
and Marie C. Thursby. 2003. ``University Licensing and the Bayh-Dole
Act.'' Science 301:1052.
Another aspect of the debate about whether intellectual property
fosters or hinders biomedical research relates to the `research tools,'
which are the ideas, data, materials or methods used to conduct
research. Many such materials and methods are disclosed or claimed in
DNA patents. Among DNA patents, there is particular concern about the
subset of gene patents and their relevance to research tools because
genes are not only inputs to developing genetic tests and therapeutic
proteins, and thus directly relevant to medically important products
and services, but also are crucially important tools for ongoing
research. Concern over the impact of patenting and licensing on
biomedical research has grown since the Court of Appeals for the
Federal Circuit's 2002 Madey v. Duke decision, which visibly affirmed
the absence of any research exemption shielding universities from
patent infringement liability. Patent claims based on DNA sequences can
be infringed by research activities that entail making or using the
claimed sequence, not just by selling products or services.
Without diminishing the importance of these potential concerns, it
should be pointed out that the evidence offered to support these
contentions is primarily anecdotal. Although these isolated instances
have received significant attention, there is no evidence that
widespread assertion of patent rights on genes has significantly
hampered biomedical research. Contrary to these prevailing beliefs,
findings from a recent survey of 414 biomedical researchers in
universities, government, and nonprofit institutions offers little
empirical basis for claims that restricted access to intellectual
property is currently impeding academic biomedical research.\5\ The
authors noted that, although common, patents in this field are not
typically used to restrict access to the knowledge and tangible
materials that biomedical scientists require.
\5\ Walsh, J. P. Cho, C. Cohen, W. M. 2005. ``View from the Bench:
Patents and Material Transfers.'' Science 309: 2002-2003.
The authors cite a number of reasons, including the fact that firms
generally do not threaten infringement litigation against academic
research institutions (a de facto research exemption), in part because
such academic use may improve their invention, because they wish to
maintain good will and to ensure access to future academic inventions,
and also because the damages are likely to be very small. According to
``Our research thus suggests that `law on the books' need not
be the same as `law in action' if the law on the books
contravenes a community's norms and interests.''
These findings are consistent with another recent major survey of
19 of the 30 US universities with the largest number of DNA patents.
Their results showed that the licensing of DNA patents at US academic
institutions has not led to the decline in academic cooperation and
technology transfer that many observers have feared.\6\ In fact, based
on responses, the study demonstrated that in most cases the licensing
behavior of universities allows for collaboration and sharing of DNA-
based inventions among academic institutions.
\6\ Pressman, L. Burgess, R. Cook-Deegan, R. M. McCormack, S. J.
Nami-Wolk, I. Soucy, M. & Walters, L. 2006. ``The Licensing of DNA
Patents by US Academic Institutions: An Empirical Survey.'' Nature
Biotechnology 24: 31-39.
The study investigated the patenting and licensing behavior for
four main types of DNA-based inventions:
DNA sequences that encode therapeutic proteins
DNA sequences that are phenotypic markers only
DNA sequences comprising genes encoding drug targets
DNA discoveries or inventions representing research
The authors discovered that most universities base their decisions
to patent and strategies for commercializing the invention on a
determination of the level of protection necessary to induce an
interested company into investing in the further development, testing,
manufacture, marketing and sales of a product embodying the technology.
Thus, in the case of a fully sequenced gene that encodes a therapeutic
protein, where the utility and the development risks are both generally
acknowledged to be high, survey respondents generally agreed that they
would patent and license such inventions exclusively. However, in the
case where the gene encoded is simply a target for drug discovery, few
would consider even patenting such a discovery since researchers would
be free to screen their compound libraries against the target while the
patent application was pending and to use any resulting information
without fear on infringement. In addition, it has become commonplace
for universities, when licensing their inventions, to reserve the right
for their own faculty, as well as researchers at other non-profit
entities, to use the patented invention. The study confirmed that
university technology managers take a nuanced approach to patenting and
licensing, seeking only enough intellectual property protection to
facilitate the commercial development of the invention.
This market sensitivity is also reflected in data on patent trends.
The number of DNA patents has shown a fairly dramatic and steady
decline since their peak in 2001 (from about 4,500 to around 2,700 in
2005). Patent prosecution, maintenance and management costs that are
typically between $20,000 and $30,000 per patent militate against
patenting inventions that are unlikely to recover those costs and
encourage considerable selectivity in which inventions are patented. As
Pressman et al. point out, ``these practices are designed pragmatically
to accommodate both economic goals, such as revenue generation and new
company formation, and social goals, such as ensuring utilization and
availability of federally funded inventions.''
ESTABLISHING LICENSING PRINCIPLES TO PROMOTE ACCESS
These results are not surprising to persons currently involved in
technology licensing activities as practiced at major research
universities. To some extent the practices of university technology
transfer managers reflect the salutary effects of guidance that the
National Institutes of Health has issued on patenting of research tools
and genomic inventions as well as the formation of professional norms
and standards of behavior encouraged by groups such as the Association
of University Technology Managers. Universities share certain core
values that can and should be maintained to the fullest extent possible
in all technology transfer agreements, chief among these are the
protection of academic freedom and open pursuit of scientific inquiry.
When crafting agreements with industry, a balance must be struck
between the business needs of our licensing partners to generate
returns on their investments and the shared values of our respective
Recognizing the need to clearly articulate a set of technology
licensing principles that strikes the appropriate balance, a group of
university research officers, licensing directors and a representative
from the Association of American Medical Colleges met in July 2006 to
brainstorm about critical societal, policy, legislative and other
issues in university technology transfer.\7\ Our aim was and is to
encourage our colleagues in the academic technology transfer profession
to analyze each licensing opportunity individually, but with certain
core principles in mind.
\7\ The participating universities included: California Institute
of Technology, Cornell University, Harvard University, Massachusetts
Institute of Technology, Stanford University, University of California,
University of Illinois, Chicago, University of Illinois, Urbana-
Champaign, University of Washington, Wisconsin Alumni Research
Foundation, Yale University and Association of American Medical
The participating universities released a white paper, ``In the
Public Interest: Nine Points to Consider in Licensing University
Technology.'' \8\ The paper seeks to capture the shared perspectives of
the participating university research officers and licensing directors
on policy issues related to university technology transfer, in
particular, with respect to ensuring that licensing activities are ``in
the public interest and for society's benefit.'' These considerations
are put forth in an aspirational, rather than proscriptive, sense to
encourage others in the profession to set a higher standard by
stretching the boundaries of conventional licensing practices and
sharing with the greater technology transfer community the insights
that they gain in doing so.
\8\ ``In the Public Interest: Nine Points to Consider in University
Licensing,'' March 6, 2007. http://www.autm.org/aboutTT/
The nine points identified in the white paper (see Appendix for the
full elaboration of each point) included:
Point 1: Universities should reserve the right to practice
licensed inventions and to allow other non-profit and
governmental organizations to do so
Point 2: Exclusive licenses should be structured in a manner
that encourages technology development and use
Point 3: Strive to minimize the licensing of ``future
Point 4: Universities should anticipate and help to manage
technology transfer related conflicts of interest
Point 5: Ensure broad access to research tools
Point 6: Enforcement action should be carefully considered
Point 7: Be mindful of export regulations
Point 8: Be mindful of the implications of working with patent
Point 9: Consider including provisions that address unmet
needs, such as those of neglected patient populations or
geographic areas, giving particular attention to improved
therapeutics, diagnostics and agricultural technologies for the
As technology transfer professionals, we recognize that many of
these points are already being practiced. In fact, these points have
been endorsed by a growing number of institutions and professional
organizations around the world. We applaud the participating
institutions' efforts to articulate these important principles and urge
their adoption and application by the wider community of universities.
As often is the case, guidance as to implementation of practices that
will advance the mission of university technology transfer lags behind
our collective awareness of both the needs that exist and our role in
fostering an environment in which such needs can be met effectively.
Given recent criticism from some sectors that question the motives and
methods underlying university technology commercialization activities,
however, it is especially important that the principles used to support
our decision-making be recognized as serving the best interest of the
public not just of individual universities. Beyond the simple economics
of any agreement, it is our hope that our colleagues will give serious
consideration to these additional points before finalizing the terms
and conditions of any technology transfer agreement. In the end, we
hope to foster thoughtful approaches and encourage creative solutions
to complex problems that may arise when universities license
technologies in the public interest and for society's benefit.
We believe that patent policy, as well as practice, should be
guided by the goal of promoting innovation and, in turn, improvements
in human welfare. That view drove Yale's interest in helping to draft
the ``Nine Points'' guidelines, which recommend that universities
refrain from patenting genomic inventions that will serve primarily as
research tools. Yale has long taken a balanced approach to patenting,
taking into account the nature of the invention, its relevance to
research, and the extent to which patent protection would be necessary
to give a commercial partner adequate incentive to develop the product
completely. We have taken a similar approach to licensing, especially
by insisting upon the right to make the invention available to
researchers at Yale and other academic institutions.
We do not think that gene patents are having a significant negative
impact on academic research. There have been thoughtful analyses of
problems that could arise, and there have been anecdotal reports and
two comprehensive studies of this issue, cited earlier in my testimony,
that concluded that patents are not slowing the pace of research for
several reasons. Universities take a nuanced approach to patenting and
they are increasingly making specific provision for research uses of
inventions in licenses. There is evidence that a ``de facto research
exemption'' exists because companies rarely prosecute academic
investigators for research uses that may be infringing.
Yale and other universities have a major stake in ensuring that
access to research tools is not compromised (the ``Nine Points''
document is evidence of that); we also recognize that circumstances may
change as the fields of genomics and proteomics continue to advance. I
am confident that the scientific community, working with the National
Institutes of Health, the Association of University Technology
Managers, the Association of American Medical Colleges and others, we
will continue to monitor whether gene patents are interfering
significantly with research. My colleagues and I are grateful for the
Subcommittee's interest in this topic.
In the Public Interest:
Nine Points to Consider in Licensing University Technology
Universities should reserve the right to practice licensed inventions
and to allow other non-profit and governmental organizations to do so
In the spirit of preserving the ability of all universities to
perform research, ensuring that researchers are able to publish the
results of their research in dissertations and peer-reviewed journals
and that other scholars are able to verify published results without
concern for patents, universities should consider reserving rights in
all fields of use, even if the invention is licensed exclusively to a
commercial entity, for themselves and other non-profit and governmental
to practice inventions and to use associated
information and data for research and educational purposes,
including research sponsored by commercial entities; and
to transfer tangible research materials (e.g.,
biological materials and chemical compounds) and intangible
materials (e.g., computer software, databases and know-how) to
others in the non-profit and governmental sectors.
Clear articulation of the scope of reserved rights is critical.
Exclusive licenses should be structured in a manner that encourages
technology development and use
When significant investment of time and resources in a technology
are needed in order to achieve its broad implementation, an exclusive
license often is necessary and appropriate. However, it is important
that technology transfer offices be aware of the potential impact that
the exclusive license might have on further research, unanticipated
uses, future commercialization efforts and markets. Universities need
to be mindful of the impact of granting overly broad exclusive rights
and should strive to grant just those rights necessary to encourage
development of the technology.
Special consideration should be given to the impact of an exclusive
license on uses of a technology that may not be appreciated at the time
of initial licensing. A license grant that encompasses all fields of
use for the life of the licensed patent(s) may have negative
consequences if the subject technology is found to have unanticipated
utility. This possibility is particularly troublesome if the licensee
is not able or willing to develop the technology in fields outside of
its core business. Universities are encouraged to use approaches that
balance a licensee's legitimate commercial needs against the
university's goal (based on its educational and charitable mission and
the public interest) of ensuring broad practical application of the
fruits of its research programs.
In situations where an exclusive license is warranted, it is
important that licensees commit to diligently develop the technology to
protect against a licensee that is unable or unwilling to move an
innovation forward. In long-term exclusive licenses, diligent
development should be well-defined and regularly monitored during the
exclusive term of the agreement and should promote the development and
broad dissemination of the licensed technology. Ideally, objective,
time-limited performance milestones are set, with termination or non-
exclusivity (subject to limited, but reasonable, cure provisions) as
the penalty for breach of the diligence obligation.
Another means of ensuring diligent development, often used in
conjunction with milestones, is to require exclusive licensees to grant
sublicenses to third parties to address unmet market or public health
needs (``mandatory sublicensing'') and/or to diligently commercialize
new applications of the licensed rights. Such a requirement could also
be implemented through a reserved right of the licensor to grant direct
licenses within the scope of the exclusive grant to third parties based
on unmet need. In such situations, it is important to ensure that the
parties have a common understanding of what constitutes a new
application or unmet need for the purpose of implementing such a
Absent the need for a significant investment--such as to optimize a
technology for wide use--broad, non-exclusive licensing of tools such
as genomic and proteomic inventions can help maximize the benefits
derived from those technologies, in part by removing obstacles to
further innovation. Unlike most research tools or manufacturing
methods, diagnostic tests often must go through the regulatory approval
process, and so may warrant exclusive licensing when the costs of test
development, approval or diffusion require substantial investment of
capital. Nevertheless, licensing of diagnostic tests based on broadly
applicable genomics or proteomics methods should strive to preserve
sufficient flexibility to permit testing for multiple indications
(i.e., not an exclusive licensee's single disease of interest) perhaps
through multiple field-restricted or non-exclusive licenses. Exclusive
licensing of a single gene for a diagnostic may be counterproductive in
a multi-gene pathology where only a panel of genes can yield an
adequate diagnosis, unless the licensee has access to the other genes
of the panel. Such licenses can also be limited in other ways. For
example, a university might license a genomics method exclusively for a
company to optimize and sell licensed products for diagnostic use. The
drafting of the exclusive grant could make it clear that the license is
exclusive for the sale, but not use, of such products; in doing so, the
university ensures that it is free to license non-exclusively to others
the right (or may simply not assert its rights) to use the patented
technology, which they may do either using products purchased from the
exclusive licensee or those that they make in-house for their own use.
In general, when no alternative testing strategy is available for a
given indication, consideration should be given to means of ensuring
reasonable access for patients and shielding individual healthcare
providers from the risk of suit for patent infringement. As with any
medical technology, licenses should not hinder clinical research,
professional education and training, use by public health authorities,
independent validation of test results or quality verification and/or
Strive to minimize the licensing of ``future improvements''
Although licensees often seek guaranteed access to future
improvements on licensed inventions, the obligation of such future
inventions may effectively enslave a faculty member's research program
to the company, thereby exerting a chilling effect on their ability to
receive corporate and other research funding and to engage in
productive collaborations with scientists employed by companies other
than the licensee--perhaps even to collaborate with other academic
scientists. In particular, if such future rights reach to inventions
made elsewhere in the university, researchers who did not benefit from
the licensing of the original invention may have their opportunities
restricted as well, and may be disadvantaged economically relative to
the original inventors if the licensing office has pre-committed their
inventions to a licensee.
For these reasons, exclusive licensees should not automatically
receive rights to ``improvement'' or ``follow-on'' inventions. Instead,
as a matter of course, licensed rights should be limited to existing
patent applications and patents, and only to those claims in any
continuing patent applications that are (i) fully supported by
information in an identified, existing patent application or patent and
(ii) entitled to the priority date of that application or patent.
In the rare case where a licensee is granted rights to improvement
patents, it is critical to limit the scope of the grant so that it does
not impact uninvolved researchers and does not extend indefinitely into
the future. It is important to further restrict the grant of
improvements to inventions that are owned and controlled by the
licensor institution--i.e., (i) not made by the inventor at another
institution, should they move on or (ii) co-owned with, or controlled
by, another party. One refinement to this strategy would be to limit
the license to inventions that are dominated by the original licensed
patents, as these could not be meaningfully licensed to a third party,
at least within the first licensee's exclusive field. As was discussed
earlier, appropriate field restrictions enable the licensing not only
of the background technology, but also of improvements, to third
parties for use outside the initial licensee's core business. In all
cases, a license to improvements should be subject to appropriate
diligent development requirements.
It should be recognized, however, that not all ``improvements''
have commercial potential (for example, they may not confer sufficient
additional benefit over the existing technology to merit the expense of
the development of new or modified products), in which case a licensee
might not wish to develop them. In general, it may be best simply not
to patent such improvements.
Universities should anticipate and help to manage technology transfer
related conflicts of interest
Technology transfer offices should be particularly conscious and
sensitive about their roles in the identification, review and
management of conflicts of interest, both at the investigator and
institutional levels. Licensing to a start-up founded by faculty,
student or other university inventors raises the potential for
conflicts of interest; these conflicts should be properly reviewed and
managed by academic and administrative officers and committees outside
of the technology transfer office. A technology licensing professional
ideally works in an open and collegial manner with those directly
responsible for oversight of conflicts of interest so as to ensure that
potential conflicts arising from licensing arrangements are reviewed
and managed in a way that reflects well on their university and its
community. Ideally, the university has an administrative channel and
reporting point whereby potential conflicts can be non-punitively
reported and discussed, and through which consistent decisions are made
in a timely manner.
Ensure broad access to research tools
Consistent with the NIH Guidelines on Research Tools, principles
set forth by various charitable foundations that sponsor academic
research programs and by the mission of the typical university to
advance scientific research, universities are expected to make research
tools as broadly available as possible. Such an approach is in keeping
with the policies of numerous peer-reviewed scientific journals, on
which the scientific enterprise depends as much as it does on the
receipt of funding: in order to publish research results, scientists
must agree to make unique resources (e.g., novel antibodies, cell
lines, animal models, chemical compounds) available to others for
verification of their published data and conclusions.
Through a blend of field-exclusive and non-exclusive licenses,
research tools may be licensed appropriately, depending on the
resources needed to develop each particular invention, the licensee's
needs and the public good. As suggested with respect to genomics and
proteomics method patents in Point 2 above, a university might license
a research reagent, kit or device exclusively to a company to optimize
and sell licensed products and services for research, diagnostic or
other end uses. The drafting of such an exclusive grant should make
clear that the license is exclusive for the sale, but not use, of such
products and services; in doing so, the university ensures that it is
free to license non-exclusively to others the right to use the patented
technology, which they may do either using products purchased from the
exclusive licensee or those that they make in-house for their own use.
Enforcement action should be carefully considered
In considering enforcement of their intellectual property, it is
important that universities be mindful of their primary mission to use
patents to promote technology development for the benefit of society.
All efforts should be made to reach a resolution that benefits both
sides and promotes the continuing expansion and adoption of new
technologies. Litigation is seldom the preferred option for resolving
However, after serious consideration, if a university still decides
to initiate an infringement lawsuit, it should be with a clear,
mission-oriented rationale for doing so--one that can be clearly
articulated both to its internal constituencies and to the public.
Ideally, the university's decision to litigate is based on factors that
closely track the reasons for which universities obtain and license
patents in the first place, as set out elsewhere in this paper.
Examples might include:
Contractual or ethical obligation to protect the
rights of existing licensees to enjoy the benefits conferred by
their licenses; and
Blatant disregard on the part of the infringer for
the university's legitimate rights in availing itself of patent
protection, as evidenced by refusal on the part of the
infringer to negotiate with or otherwise entertain a reasonable
offer of license terms.
Under all circumstances, it reflects poorly on universities to be
involved in ``nuisance suits.'' Exclusive licensees should be
encouraged to approach patent enforcement in a manner that is
consistent with the philosophy described in this Point 6.
Be mindful of export regulations
University technology transfer offices should have a heightened
sensitivity about export laws and regulations and how these bodies of
law could affect university licensing practices. Licensing
``proprietary information'' or ``confidential information'' can affect
the ``fundamental research exclusion'' (enunciated by the various
export regulations) enjoyed by most university research, so the use of
appropriate language is particularly important. Diligence in ensuring
that technology license transactions comply with federal export control
laws helps to safeguard the continued ability of technology transfer
offices to serve the public interest.
Be mindful of the implications of working with patent aggregators
As is true of patents generally, the majority of university-owned
patents are unlicensed. With increasing frequency, university
technology transfer offices are approached by parties who wish to
acquire rights in such `overstock' in order to commercialize it through
further licenses. These patent aggregators typically work under one of
two models: the `added value' model and the so-called `patent troll'
Under the added value model, the primary licensee assembles a
portfolio of patents related to a particular technology. In doing so,
they are able to offer secondary licensees a complete package that
affords them freedom to operate under patents perhaps obtained from
multiple sources. As universities do not normally have the resources to
identify and in-license relevant patents of importance, they cannot
offer others all of the rights that may control practice (and,
consequently, commercialization) of university inventions. By
consolidating rights in patents that cover foundational technologies
and later improvements, patent aggregators serve an important
translational function in the successful development of new
technologies and so exert a positive force toward commercialization.
For example, aggregation of patents by venture capital groups regularly
results in the establishment of corporate entities that focus on the
development of new technologies, including those that arise from
university research programs. To ensure that the potential benefits of
patent aggregation actually are realized, however, license agreements,
both primary and secondary, should contain terms (for example, time-
limited diligence requirements) that are consistent with the
university's overarching goal of delivering useful products to the
In contrast to patent aggregators who add value through technology-
appropriate bundling of intellectual property rights, there are also
aggregators (the `patent trolls') who acquire rights that cut broadly
across one or more technological fields with no real intention of
commercializing the technologies. In the extreme case, this kind of
aggregator approaches companies with a large bundle of patent rights
with the expectation that they license the entire package on the theory
that any company that operates in the relevant field(s) must be
infringing at least one of the hundreds, or even thousands, of included
patents. Daunted by the prospect of committing the human and financial
resources needed to perform due diligence sufficient to establish their
freedom to operate under each of the bundled patents, many companies in
this situation will conclude that they must pay for a license that they
may not need. Unlike the original patent owner, who has created the
technology and so is reasonably entitled to some economic benefit in
recognition for its innovative contribution, the commercial licensee
who advances the technology prior to sublicensing, or the added value
aggregator who helps overcome legal barriers to product development,
the kind of aggregator described in this paragraph typically extracts
payments in the absence of any enhancement to the licensed
technology.\9\ Without delving more deeply into the very real issues of
patent misuse and bad-faith dealing by such aggregators, suffice it to
say that universities would better serve the public interest by
ensuring appropriate use of their technology by requiring their
licensees to operate under a business model that encourages
commercialization and does not rely primarily on threats of
infringement litigation to generate revenue.
\9\ A somewhat related issue is that of technology `flipping',
wherein a non-aggregator licensee of a university patent engages in
sublicensing without having first advanced the technology, thereby
increasing product development costs, potentially jeopardizing eventual
product release and availability. This problem can be addressed most
effectively by building positive incentives into the license agreement
for the licensee to advance the licensed technology itself--e.g.,
design instrumentation, perform hit-to-lead optimization, file an IND.
Such an incentive might be to decrease the percentage of sublicense
revenues due to the university as the licensee meets specific
Consider including provisions that address unmet needs, such as those
of neglected patient populations or geographic areas, giving particular
attention to improved therapeutics, diagnostics and agricultural
technologies for the developing world
Universities have a social compact with society. As educational and
research institutions, it is our responsibility to generate and
transmit knowledge, both to our students and the wider society. We have
a specific and central role in helping to advance knowledge in many
fields and to manage the deployment of resulting innovations for the
public benefit. In no field is the importance of doing so clearer than
it is in medicine.
Around the world millions of people are suffering and dying from
preventable or curable diseases. The failure to prevent or treat
disease has many causes. We have a responsibility to try to alleviate
it, including finding a way to share the fruits of what we learn
globally, at sustainable and affordable prices, for the benefit of the
world's poor. There is an increased awareness that responsible
licensing includes consideration of the needs of people in developing
countries and members of other underserved populations.
The details involved in any agreement provisions attempting to
address this issue are complex and will require expert planning and
careful negotiation. The application will vary in different contexts.
The principle, however, is simple. Universities should strive to
construct licensing arrangements in ways that ensure that these
underprivileged populations have low- or no-cost access to adequate
quantities of these medical innovations.
We recognize that licensing initiatives cannot solve the problem by
themselves. Licensing techniques alone, without significant added
funding, can, at most, enhance access to medicines for which there is
demand in wealthier countries. Diseases that afflict only the global
poor have long suffered from lack of investment in research and
development: the prospects of profit do not exist to draw commercial
development, and public funding for diseases suffered by those who live
far away from nations that can afford it is difficult to obtain and
sustain. Through thoughtful management and licensing of intellectual
property, however, drugs, therapies, and agricultural technologies
developed at universities can at least help to alleviate suffering from
disease or hunger in historically marginalized population groups.
Mr. Berman. Dr. Grodman?
TESTIMONY OF MARC GRODMAN, CHAIR OF THE BOARD AND CEO, BIO-
REFERENCE LABORATORIES, ELMWOOD PARK, NJ
Dr. Grodman. Mr. Chairman, Members of the Subcommittee, I
want to thank you for the opportunity to testify on a critical
issue of public health.
My name is Marc Grodman. I am a physician as well as
founder and CEO of Bio-Reference Laboratories, a publicly
traded company. We are the largest independent regional
clinical laboratory in the Northeast, employing over 1,700
people with revenues this year that will exceed $250 million.
In 2006, Bio-Reference Laboratories purchased Gene Dx, a
laboratory in Gaithersburg, Maryland, that does primarily
genetic testing. This is an important business opportunity.
Unfortunately, the ability of Gene Dx to offer potentially
lifesaving genetic tests have been severely restricted. Gene
patent holders have granted exclusive licenses for the testing
of genetic disorders, keeping competitors of Gene Dx out, and
we think having an adverse effect on the public.
I am not here today to attack the patenting of genes. What
I am here to say is that using gene patents for the exclusive
licensing of genetic tests for conditions, such as cancer,
neurological disease, certain kinds of heart disease, among
others, should be severely restricted, if not barred.
A laboratory with an exclusive testing license does not
have to compete. It results in substantive quality of the
testing as well as excessive pricing, making the test
unaffordable to many. It also stifles research innovation.
Competition, on the other hand, is the most effective tool we
have to address the needs of public health. Let me describe
three examples that will explain what I mean.
The first example concerns one of our society's most
dangerous killers, breast cancer, and the related breast cancer
genes BRCA-1 and BRCA-2. The patent holder has granted an
exclusive license to one company to do the diagnostic testing
for these genes. Not surprisingly, over the course of time,
quality issues arose.
Dr. Chung, from Columbia University, who has submitted
testimony along with my testimony, cites in her testimony that
for about 10 years the tests of breast cancer genes was not as
comprehensive as it might have been, given that there were a
number of subsequent mutations that were not found. Competition
would never allow this situation to go on, and, in fact, this
information is confirmed in the peer-reviewed article, which is
also cited in Dr. Chung's testimony.
The second example involves long QT genes that can cause
sudden death from heart arrhythmias. These genes were patented
and an exclusive license was granted to a single laboratory.
For 2 years, the exclusive licensed laboratory went into
bankruptcy and no other laboratory could test for this gene.
During this hiatus, Abigail, a 10-year-old child with long
QT syndrome, died.
It is not just one or two genes. Each of the genes may mean
a different medicine may work. So you really have to do it and
do it well, and in that period of time, this girl never had
access to the test.
Dr. Chung also describes persistent problems with a test
performed by this exclusive laboratory, including long delays
in getting results, in determinant findings, high costs, and
just the basic lack of improvement by making the test better.
We can make a better test, but under the existing system,
The third example is raised by testimony that I submitted
from Dr. Kathy Matthews, a child neurologist and pediatrician
at the University of Iowa. Dr. Matthews describes serious
quality issues that she has encountered with the exclusive
licensing of laboratory tests for certain neurological
It is somewhat amazing that as time goes on and we learn
more about the association of different medical conditions and
genetic patterns that she is now at a point to where she is
These scenarios illustrate another problem, that the
laboratory with the exclusive license has no incentive to
conduct further research, and other laboratories, including
academic laboratories, are prevented by the patent holder from
doing research as well in many cases.
I believe that competition in diagnostic testing is
critical to protecting the public health and, fortunately, is a
remedy aside from legislative reform, and that is the Bayh-Dole
Act of 1980. This is the act that allows universities to get
paid patents on genes even though Federal funds help pay the
research. The act, however, recognizes that the patent monopoly
obtained through taxpayer funding could be misused.
It specifies specifically a remedy. When the public's
health or safety needs are not being reasonably satisfied by
the patent holder or its exclusive licensee, the Federal
funding agency has the power to march in and provide licenses
to other interested parties. Thus, under existing Bayh-Dole
legislation, when there are legitimate health and quality
complaints about genetic laboratory tests of an exclusive
licensee, the NIH may give licenses to other laboratories
willing and able to do the tests.
Opening up the licensing process to more than one
diagnostic testing laboratory will have a desirable benefit of
improvement quality, more research, lower price, and creating a
competitive framework at a higher standard by which even the
exclusive licensees have to be able to attain.
As a laboratory, we are not seeking any windfall. Under
Bayh-Dole, any laboratory given a license through the march-in
provisions can and should be charged a reasonable royalty to
use the patent.
Even though the NIH has refused to march in in three
instances in which it was asked to do so, those cases involved
drugs and not gene diagnostic testing and involved issues of
price, not efficacy. Therefore, Congress must compel the NIH to
enforce the margin provisions of the Bayh-Dole Act.
In conclusion, if we or any company can be able to provide
a faster, better, more thorough result, more complete, more
efficient tests to the public, the ability to go in and obtain
this on a nonexclusive license and then sweep the market will
be in the public health's advantage.
Thank you very much.
[The prepared statement of Dr. Grodman follows:]
Prepared Statement of Marc Grodman
Mr. Berman. I now change your name to Mr. Kushan.
TESTIMONY OF JEFFREY KUSHAN, PARTNER, SIDLEY AUSTIN, LLP, ON
BEHALF OF BIOTECHNOLOGY INDUSTRY ORGANZATION (BIO), WASHINGTON,
Mr. Kushan. Thank you, Mr. Chairman. Thank you, Mr.
I am pleased to be here today to provide the views of the
Biotechnology Industry Organization on the issue of gene
patents. BIO is the principle trade association representing
the biotechnology industry. There are more than 1,100 members
of BIO. You can find them in every state of the union, and they
presently employ more than 1.2 million people in the United
Biotechnology is still a young and growing industry. There
are about 300 public companies in the biotech industry. At the
end of 2005, their market cap was about $410 billion. The
remainder of the companies in the biotechnology industry are
The typical biotech company is a small business with no
products, no revenues and running itself on investor funding.
Many of these companies are formed to take advantage of a
significant scientific discovery or development. These
companies focus on performing cutting-edge research aimed at
discovering new products and services and bringing them to
market. They follow a high-risk, high-reward business model.
This model has been a signature of the industry since its
Three fundamental requirements exist for biotech companies
that are following this business model: first, scientific
innovation; second, adequate funding; and, third, dependable
I have chosen the word ``dependable'' in relation to
intellectual property intentionally. When a biotech company
develops an invention, they must make a judgment on whether the
invention can be patented and whether these patent rights can
be effectively used when and if they finally get a product to
market. That judgment is based on existing legal standards and
This certainty in the availability and use of patent rights
in the future is critical given the uncertainty that exists on
the scientific side of the business and whether they will ever
reach the market with a product.
Today's discussions focus on gene patents. The word ``gene
patent,'' as some of the other panelists have already pointed
out, is somewhat imprecise. What is at issue are patents that
claim nucleic acids. Nucleic acid inventions are developed
following extensive research and development. They rely on
sophisticated research on genomic information. The research
focuses on deciphering that genetic information and identifying
a practical application for using the nucleic acid.
It is important to recognize this is not a debate about the
quality of these patents. This is perhaps the one area of the
Patent Office that is the most competent, the most high quality
of all the areas. The PTF for more than 20 years has been doing
extensive research on developing its own first-class
examination group. You have more Ph.D.s in the biotech group
than any other area, and they certainly know their stuff.
One of my other co-panelists had mentioned that the
standards governing patent law in the biotech area have evolved
significantly over the last 20 years. I think one thing we can
assure you of is that when a patent issues in this sector, it
is reflective of a significant advance, the company is
deserving of the protection, and that will be used to develop
products and bring them to market.
There are three points that I feel need to be addressed
First, the biotechnology industry is extremely competitive,
and it is a lucrative business. You know, that dynamic is going
to create conflicts no matter how you look at it. It is good
for companies to have competition. It is also good for
companies to be able to develop their own technology, protect
it and rely on patents to do so.
You also have to appreciate that the competition is making
the industry healthy and strong, and it is also delivering
significant benefits for patients as products reach the market.
Without that lucrative drive for the incentive for reward on
innovation, you will not see the products coming to the market.
You will not see the technology reaching the market and form
valuable products and services.
It is also a fact that conflicts arise whenever you have a
lucrative, competitive market. Patent conflicts also are common
in this world, and the biotechnology industry accepts that as
part of the equation of doing business in this environment.
Given the dependence on patent rights and the acceptance of
the industry that there will be need to resolve disputes over
property rights, we are very concerned that there might be some
tinkering of the patent system that would alter the equation
that so many companies have relied on before they made their
The second point that was raised was the question of using
the march-in rights under the Bayh-Dole Act. In the mid-1990's,
there was some thought to using that authority in the Bayh-Dole
Act to regulate pricing of pharmaceutical products. The only
impact we could see from that is that the private companies ran
away from the Federal funding because to attach a string like
that upstream to invention of a product before you took the
funding from the Government basically made that a nonstarter
for the companies looking at that source of funding.
Third is to just touch on the research exemption. I think
what we have seen--and Dr. Soderstrom had pointed this out--
there are very few instances of patent owners suing
universities for many of the reasons he has already pointed
out. The Madey v. Duke was kind of a weird case involving a
particularly unhappy patent owner with an employment dispute
with Duke University, and I do not think it is a representative
fact pattern that most companies who hold patents see when they
are dealing with universities.
So I would just like to conclude in encouraging the
Committee to look very carefully at the issue of gene patents
and to also carefully consider what impact upstream, downstream
that might have if you start to look at changing some of the
parameters that companies have relied on before they made their
investments in the sector.
[The prepared statement of Mr. Kushan follows:]
Prepared Statement of Jeffrey P. Kushan
Mr. Berman. Well, thank you all very much.
I will recognize myself for 5 minutes to begin the
Dr. Sung, you proposed in your written testimony a very
specific legislative proposal that creates a research use
exception. One problem I have heard often in designing a
research use exception is being able to draw a bright line
between commercial use and a research use of an invention. How
did your proposal deal with that issue?
Mr. Sung. Well, Congressman, I should say that the research
use proposal that I laid out in my written submission was used
as a piece for further discussion points about that very aspect
of it. I do not think that it has been traditionally very easy
to make that delineation between commercial and noncommercial
use. In fact, a focus of the Federal Circuit opinion in Madey
v. Duke related to that difficulty.
That being said, the proposal, therefore, takes it and
makes it a selective opt-in process whereby it is a self-
identification issue on the part of entities interested in
engaging in that type of ``academic'' research use, and to the
extent they are willing to self-identify, there would need to
be some transparency and accountability for what they plan on
doing through the submission of a detailed research plan.
This is not meant to put both the academics and the private
industry at odds, but, hopefully, to help foster a more open
working relationship between the two for that purpose.
Mr. Berman. So the researcher opts in and then has some
kind of transparent process submitted to, what, the PTO or
Mr. Sung. Actually, it could be a notice directly to the
patent owner for that purpose and, again, to facilitate the
dialogue. Now some may say that it is problematic because
oftentimes researchers would not know about a patent in
existence, much less the patent owner, and the reason this is
drafted as an opt-in procedure is you could certainly rely on
status quo and conduct your affairs accordingly.
Mr. Berman. Mr. Kushan, you say that any change to the law
regarding gene patents would negatively affect expectations by
investors in biotechnology companies. You also indicate that
the biotechnology industry has had a long tradition of
refraining from asserting their patents against universities,
and you point to data that supports this.
Since the biotechnology industry does not sue universities
that are making research use of their gene patents, would
legislating a clear research use exception upset investor
expectations? Wouldn't an explicit research use exception for
gene patents just codify an already existing practice and,
therefore, be of no real importance to investors?
Mr. Kushan. Well, as your past 3 years of effort in
carefully drafting patent reform has shown, the words you
choose to articulate that line will be very difficult to write
down and to make sure they do not have an overbroad or
underbroad or unintended consequences.
Mr. Berman. We will not use a second window. [Laughter.]
Mr. Kushan. I think it is fair to say that this has been
kind of an academic question that we have seen for the past 15
years, whether it is necessary to create this kind of statutory
bright line to shield purely academic research. One of the
challenges we see, is that we very infrequently see purely
I think one concern that can immediately come up is if you
have an academic researcher who is sponsored by your biggest
competitor running programs intending to make an infringing
product, we would not want to see a statutory research
exemption somehow shield that person from the commercial
liability they are going to create, and I think as you go
through some of these types of scenarios----
Mr. Berman. Why would it? Take Dr. Sung's formulation. The
researcher opts in and then tells the patent holder, even
though he is being asked to do this by the potential
competitor, exactly what he is doing, and the patent holder is
sitting there watching to see the day it goes from research
into commercial development and whacks him not only for
infringement, but for breach of contract or whatever.
Mr. Kushan. Well, I will go back to kind of whether that
would ever happen. First, there are two scenarios that are out
there on this example.
One is that a researcher who is doing purely academic
research is going to be concerned about a patent and liability
from that, and I do not think there are many researchers who do
purely academic research that believe that they are at risk.
The second scenario is if there is really a commercial
motivation driving that researcher, putting yourself squarely
in the headlights of a patent owner would not be recommended by
most attorneys representing the company that is sponsoring that
research because it will create unnecessary risks.
I think as a practical matter, we see very few instances of
patent owners going after purely academic research, both
because there are very limited damages at the outset. You know,
the work that is being done does not reflect the kind of
Mr. Berman. Well, my time has expired, but----
Mr. Kushan. Yes, I am sorry.
Mr. Berman. You say they very rarely go after purely
academic research, and then you say but they really do not do
purely academic research.
Mr. Kushan. Well, that is part of the challenge of drawing
that line you are trying to draw. I think if it is truly
academic research, there is nothing they should be concerned
with. If it is something that is not--if it is a sheep in
wolf's clothing or a wolf in sheep's clothing--then you should
not really be shielding that activity under a research
exemption because it is not appropriate to do that. That is
actually commercially competitive types of scenarios.
Mr. Berman. Thank you.
Mr. Coble. Thank you, Mr. Chairman.
Let me direct this question to all the witnesses.
Are most of the complaints about gene patents based on
isolated incidents or anecdotal evidence? The appendices of Dr.
Grodman's testimony cite some disturbing cases, and I am
wondering is there a systematic problem with the exclusive
licensing of genetic associations.
Mr. Grodman, why don't I start with you?
Dr. Grodman. Thanks.
In the testimony, we both have in there, both peer-reviewed
articles. There is one article, that from JAMA, that talks
about breast cancer specifically and talked about in those
areas where there were two genes that were found out that
scientific research said that there were other areas, other
insertions, genetic arrangements and mutations that, in fact,
that 17 percent of the cases in which it seemed to be negative
were, in fact, positive under the light of new studies. But in
the cases of the one laboratory doing the test, it was not the
same incentive or urge to be able to go up and update the test,
as if there was another laboratory that was keeping it up to
There also were in there specific cases when results come
back in an indeterminate manner, which is something that no
degree of regulation could attach, could be able to deal with,
that in those cases, it is up to between the referring
geneticist and the doctor in the laboratory to come up with a
satisfactory result, and in that case, that geneticist who
referred the test had nowhere else to go for the test.
So the concern is that exclusive licenses in diagnostic
gene testing, we believe, does lead to a situation of where
there is no proper competition or urge to produce a better
Mr. Coble. Mr. Kushan, let me ask you this. What would
happen to the biotechnology industry if the Federal Government
exercised march-in rights on a regular basis, A, and should the
standards of section 203 of the Patent Act be amended to
encourage greater use of march-in rights?
Mr. Kushan. Those are two difficult questions, and I will
do what I can to respond to that.
Mr. Coble. Well, you are a Carolina man. That is why I put
it to you.
Mr. Kushan. Thank you. Notice my Carolina blue tie.
I think the first question of the use of the march-in
authority would have a fairly significant chilling effect on
the biotech industry, in part because the political decisions
that might drive use of that authority are very scary to
companies that have invested money in developing a product. The
idea that you are going to do all this work, spend all this
money, finally reach the market, and then at the back end of
your business model, an uncertainty that you could not have
imagined will pop up and deprive you of the patent exclusivity
is going to have an impact on use of those funds.
The second part of this is that we have seen the NIH takes
steps in the past decade to use their influence without the
march-in authority. To set standards of conduct, for example,
they developed guidelines relating to use of materials and
sharing of research tools when there had been Federal funding
involved in that, and that is kind of a better model,
essentially putting on the table that before you take funding,
you know that there will be conditions attached to it.
I think when you look at the march-in experience, the fact
that they have never been used, and that there is so much
reticence about going to that as a mechanism, has created a
fairly significant set of expectations in the industry that
they will not be used at the back end in the commercial
Mr. Coble. Thank you.
Before my time expires, let me go to Dr. Sung and-or Dr.
We have compulsory licenses in the Copyright Act. Why
shouldn't we have compulsory licenses for patented
pharmaceuticals and biologics, either of you two?
Mr. Soderstrom. I would simply echo many of the comments
that Mr. Kushan just made in that when we are negotiating
licenses, particularly to start-up companies or biotech
companies, this issue comes up all the time. What are the
Government reserved rights? What are march-in rights? How often
are they used?
It is something that for investors is of extreme concern
because of the reasons he pointed out. If they are going to put
a significant amount of money at risk over a long period of
time in a fairly high-risk technology development exercise,
they need some assurance that that investment, if they are
successful, would be protected.
Mr. Sung. I would have little to add to those particular
comments, just to say that I think the standard recourse for
purposes of saying compulsory licensing is bad defeats
investment-backed expectations at the front end.
Mr. Coble. Quickly, Dr. Grodman. The red light is about to
Dr. Grodman. It is already on there.
Mr. Coble. It has illuminated.
Dr. Grodman. One point about it: As you mentioned in your
opening comments, the cost of getting a new drug to market may
well be a billion dollars. What we are talking about, what I am
really addressing are diagnostic genetic tests, the cost of
which could take from the association between the clinical
rendition of this sequence that is done in the university and
then licensed out. To have a laboratory to bring up that test,
that might be anywhere from $25,000 to $50,000 to, at most with
new technologies, may be a quarter of a million dollars. It is
not the same investment that we are talking about with
therapeutics. It is very, very different.
Mr. Coble. I yield back, Mr. Chairman. Thank you.
Mr. Berman. Thank you.
We will have a chance to explore that specific subject you
are raising later in the third and fifth rounds of questioning.
Mr. Issa. Thank you.
The fifth round is where I get my really tough questions
You know, I looked for something that was akin to this
subject. You know, when did we discover something and grant it
a patent? And, oddly enough, I found something that was a
little bit close, and that was when the product now known as
Botox took something that was commonly understood and said,
``But you can do it for this. Do what it does, and you can do
it for this reason,'' and it was granted a patent and continues
to be an ever more broadly successful product, including for
people with migraine headaches now. I think Congress should
figure out that Botox is the antidote for what we do.
So, I mean, I see the importance of it, and I guess I will
ask two major questions.
Dr. Grodman, this is Coca-Cola. It is a secret. Nobody
knows what it is. And I understand that you support the
patents, but just because you support it and yet have a problem
with the exclusion, if we were to not grant patents in this
area, would it be a little bit like this, except we would not
see it in the marketplace?
People would discover and then continue to keep it a secret
so that they could do the follow-on work. Isn't that a risk we
take when we do not patent something which we want discovered,
but it could be discovered and kept a secret and, for example,
diagnostic centers could preclude you from knowing what you
need to know while they know what they need to know and say,
``Just send it to us, and we will tell you whether you have
this fatal disease.''
Dr. Grodman. Well, I would probably be scarcely the last
one on this panel who would be championing patents. I think
that in the medical arena, we do know what the formula, if you
will, of Coca-Cola is. It has been well researched and
referenced in medical journals. The question is whether or not
we are able to go in and have access to that different
So I am by no means, for my purpose today, supporting or
not supporting patents. What I am supporting is the fact that
there needs to be competition that when we have certain
information about diagnostics that people can compete over
producing a better test.
My own preference is that the information is open and that
people do benefit. In a system of what I am addressing, that
license for Coke is the best one there is and everyone knows
what it is, I am saying, fine, but pay them a license if you
want to be able to do it, but be able to allow everyone to be
able to enjoy Coke no matter what the outside----
Mr. Issa. So, essentially, you have to make the argument
for a patent. Otherwise, there would be nothing to license. It
would just be a secret.
Dr. Grodman. I am not making the case for or against
patents. My concern is the ultimate amount of patient care and
creating the competition for the exclusionary idea that people
cannot perform a test.
Mr. Issa. Mr. Sung, I guess I will switch to you just to
see if I can get a dissenting opinion.
If we, in fact, deny patents in this field, don't we induce
universities, perhaps the private sector because universities
might choose to publish regardless, don't we induce people to
cloak discoveries in a way that allow them to further their
business practices without ever releasing them? Couldn't you
end up with five or ten or 20 different research facilities
discovering the same thing, but keeping it to themselves
because if they cannot enjoy a period of patent protection,
they might as well enjoy a period of exclusivity through
Mr. Sung. No, I agree with those comments. I think that
what you are risking if you were to deny patent exclusivity in
a particular area is to risk that, without that encouragement
for disclosure, that there may be, I guess, more of a
motivation, if you will, toward keeping something secret for a
business purpose, but that would depend in a particular
industry on the various market and business approaches. But I
do agree that you would be removing the encouragement for
disclosure that the patent system was designed to protect.
Mr. Issa. And, Dr. Grodman, I will go back to you. I will
get off Coca-Cola for a moment.
I was an electronics manufacturer with now hundreds, but in
those days 37 of my own patents, and I made it a practice not
to license anybody. I made it a practice to produce my own
products and to provide a superior product based on my patent.
Why is it, you think, that a medical diagnostic company,
whether or not they invented it or they licensed it, should not
have that same ability to do it, and why do you think that it,
per se, causes them not to want innovation? Isn't their clock
ticking, and that if there is not an encouragement by the
licensee to get the inventor to invent more and to continue, if
that encouragement is not there by the large dollars and the
ticking clock on the patent, why wouldn't that, in fact, induce
good development and good products?
Dr. Grodman. I would argue that that is not necessarily the
case when it comes to medical diagnostic and genetic
diagnostics, that when you go in and have an area which has a
clinical association, what you are really doing is not having a
product or something that you are going to sell. You are
patenting an association, whether it be for a type of
arrhythmia in three or four different genes, and if you go in
and you will do that test, if you do it without competition,
you will perform that test, and if people have that, they will
have nowhere else to go for that answer.
Let us say someone else goes in and says, ``You know what?
There are three or four other genes that we can discover that
will make the answer clearer, better for those who are at risk,
maybe with medicines they need to be on or not. There is no
possible way that a test could be done on those without getting
the permission or a license on the original genes. As a result,
innovation in that case, gets to be stifled and patient care is
If the second group of people had a license to perform
those tests, they can go in and make the ultimate test better.
That would be lost if only one person had the innovation.
The example in the testimony that we gave about where there
were certain genes about breast cancer that were done, it took
10 years of time for the one company that had the exclusive
license to include those other genes to help make the test
clearer for risk of breast disease. In a competitive framework,
that would not be the case.
I would argue that the genes on products or patents on
products or drugs is different than in this case of the
diagnostic association between a clinical condition and a
sequence. There are fundamental differences which makes it
important for multiple people to do the test.
Mr. Issa. Thank you. I yield back.
Mr. Berman. I think we will do a second round.
I have a couple of questions, but let me just make sure I
understand. You are not arguing to nullify gene patents? Is
there something different between a patent on a gene segment
and a patent on a genetic diagnostic test? Are those two
Mr. Soderstrom. No, sir. They are essentially the same. In
fact, were we as universities to have that competition on the
front end where there are multiple companies that are
interested in commercializing these products, that would be a
great thing. That is not often the case. In fact, it is seldom
the case with universities, and this is another misconception.
We often think of it as there is a patent, and there is a
product, and, as you know from your experience, those two
things are not necessarily equal and, in fact, oftentimes, we
are in the business of aggregating technology so that we can
create the product, and that is one of the misconceptions.
So, while I admit that there have been some examples where
we probably as universities could have done licenses
differently in hindsight, oftentimes we are not in that
admirable position. We are looking toward trying to induce
somebody to invest in the technology and trying to bring it
into a product form as quickly as possible.
So we do take a nuanced view. We do not necessarily always
grant across-the-board licenses. We divide it up into fields of
use, for example.
Mr. Berman. For me, I want to really get it down to
something so simple that I can pretend to understand it. I
think of a medicine, and biotechnology produces medicines, and
then I think of tests, which determine whether or not you have
something, or you have a predisposition to something or a
genetic makeup that might mean a higher likelihood of getting
something. Should I be thinking about patents in the context of
these different things, or does it all blur into one?
Mr. Soderstrom. Ultimately, they are the same. They are
products that embody claims to a patented invention, and to the
extent that you deliver that in a pill bottle or to the extent
that you deliver that in a set of reagents that are going to be
mixed with a patient's blood and then spotted on a slide, they
are no different.
Mr. Berman. In other words, they may have different goals,
treating versus diagnosing, but----
Mr. Soderstrom. When we are presented with a discovery of a
new gene that affects a disease category, there are usually
four different sets of claims that you write for it. One is the
use of the protein that is expressed as a therapeutic, the gene
itself as a potential diagnostic, the gene potentially as an
antigen that would be used in a vaccine or other prophylactic,
and then the third is as a research reagent for the discovery
of other things. Those are the four major claims that are on
all DNA-based sequences that we typically use. How they----
Mr. Berman. You mean it is sort of boilerplate?
Mr. Soderstrom. It is pretty close nowadays, yes. It is
fairly routine. It is still expensive, but it has become much
Mr. Berman. All right. Then I will ask at least one other
question that I wanted to ask before I went down this road.
Mr. Kushan, why wouldn't BIO support the use of march-in
rights in the kind of case that Dr. Grodman is talking about,
where the need to have others provide genetic tests is great?
Again, I guess some of that depends on how I understand the
questions I was asking you.
Can you have march-in rights for this? I guess march-in
rights exist. They are just never utilized. But can we
encourage the use of march-in rights in this sort of subset of
an area where the investment is not billions, it is thousands,
tens of thousands, hundreds of thousands to achieve the kinds
of purposes that Dr. Grodman was talking about?
Mr. Kushan. Well, I think your earlier question is getting
to the challenge that is at the root of this problem. The
patents that issue are going to have claims on nucleic acids
corresponding to a gene that, you know, you discovered. That
single patent is going to protect many different potential
One might be development of a method of making the protein
which then becomes a drug. Another might be using this clinical
diagnostic setting where you are going to be screening and
trying to determine if that gene is present in a sample. I do
not know what another application might be, but for the
purposes of this process, you are talking about the single
Putting a condition through march-in rights on limiting the
use of that patent right is the thing that cause concern within
the biotech sector. The idea that at the back end of the
process, once you have reached the market, there is going to be
a Government-mediated decision to limit those patent rights,
that is, I think, the chilling effect that I was trying to
Mr. Berman. My----
Mr. Kushan. I think----
Mr. Berman. I am sorry.
Mr. Kushan. No, I think one of the other questions that I
wanted to address is just can you address the concerns that
have been raised in these settings of clinical diagnostic use
versus patent rights and product development. I do not think
you can do that cleanly through the patent system or by
limiting patent rights.
One of the things we always like to point out is that the
patent rights are rights over the invention, and if there is
conduct or other types of conditions that are seen in the
market regarding the behavior of these companies, there are
other ways of addressing that, other than through the patent
system, and I guess that is one question to tackle, is whether
that is something that is worth looking into.
Mr. Berman. Mr. Coble?
Mr. Coble. Thank you, Mr. Chairman.
Because this issue is firing away, I will come back at you
with a two-part question. What is your opinion of the biotech
examiners at PTO, A, and, B, are they approving overly broad
biotech patents similar to what occurred with business method
patents in the late 1990's?
Mr. Kushan. Well, I was at one point in my life a biotech
examiner, and I think for that sector of the Patent Office, I
feel like those patent examiners probably are on the higher end
of the scale of experience and training of most patent
examiners. Many of them have Ph.D.s. They are probably the best
of the group over at the Patent Office based on their training,
experience, et cetera.
I think the Patent Office is doing the best job I have seen
of really tying down our patent claims. I think anybody that
works in the area of getting patents out of that group can
share my pain of saying that the claims that you emerge with
are often viewed to be exceedingly narrow, driven by both the
strictness of the examiner's perspective and how the Patent
Office uses these significant cases that have come down.
That goes to one of my comments in my testimony. This is
one area where you are not talking about a patent that should
not have issued. These are patents that are meritorious. They
are narrow. They match the contribution in the patent
application, and so that is why we are looking at these rights
with great interest. They are very strong patent rights that
should be respected.
Mr. Coble. Thank you, sir.
To either of the other three witnesses, gentleman, to what
extent are patent pools used today and should the Congress do
anything to encourage their use?
Mr. Soderstrom. Congressman, the use of pooling of patents
has become much more routine on universities' parts, but
probably the most impressive one is the pharmaceutical
industry's patent pooling on snips, the small repeated
segments, unique segments in genes that we find.
It has become a reality for most of us in licensing
technologies that we only own a small part, in part because of
what Mr. Kushan just said, which is our claims have become
significantly narrowed, and that is a significant reality in
the last 6 or 7 years, that it has become much more difficult
to get broad claims in the Patent Office.
In my case at my university, it is very frequent, probably
10 to 20 percent of the time, we are putting together
intellectual property, not just from Yale, but from other
university colleagues to try to put together a package which
then could be licensed.
It is not difficult to do. It has become relatively
routine, and I do not see it as being a significant barrier to
entry for a product.
Mr. Coble. Yes, sir?
Dr. Grodman. I cannot comment on what it is like in the
academic environment. In the commercial environment, you know,
it is a noble attempt to be able to overcome a problem, but it
is something which has not taken hold. I mean, there are many
cases in which we can talk about where some genes will diagnose
a condition and three other genes may diagnose it better or
differently, and in those cases, there is very little
camaraderie or ability to be able to share information, often,
when that happens, causing conflict. It is a noble attempt, but
it has not helped the diagnostic arena in a commercial
Mr. Coble. Dr. Sung, do you want to weigh in before my time
Mr. Sung. Only to say that what we have here as a result
for looking at patent pools is that DNA is a de facto industry
standard for biological sciences. You cannot wake up tomorrow
and say, ``I will not use DNA for these purposes,'' and so for
that reason, the ability to design around in this field is very
different than you might see in other mechanic or electrical
technologies where patent pools first grew up. So I think there
is a need for this in many instances that are more heavily----
Mr. Coble. Thank you.
Thank you, gentlemen.
I yield back, Mr. Chairman.
Mr. Berman. Mr. Issa, here is my problem.
Mr. Issa. Yes, sir.
Mr. Berman. I have to go to the DOD Authorization
Conference Committee to push language that the Foreign Affairs
and Judiciary Committees are both recommending on the issue of
Iraqi refugees. They want me there now for this Conference
Committee. My inclination would be to give either of you the
gavel to let you keep going, but I am told I am not allowed to
Mr. Issa. Yes, the Senate has gotten in trouble for doing
Mr. Berman. To give it to a Republican?
Mr. Issa. Giving it to me. [Laughter.]
Mr. Issa. And I did not even abuse it. Okay. You want me to
Mr. Berman. So, I mean, the fact is I have five or eight
more questions I want to ask all of you, but I am not going to
be able to do it during this process. I would hope you would
allow us to be in touch with you to pursue some of these things
because we have in some cases just touched the surface, and we
intend no commercial use of our research. [Laughter.]
Mr. Issa. Thank you, Mr. Chairman. I will be quick.
Dr. Soderstrom, there was an earlier statement that somehow
patents were barring people from doing follow-on research to
discover new genes. In your experience, is that incorrect?
Mr. Soderstrom. That is incorrect.
Mr. Issa. Okay. So Yale University does not feel that even
if somebody over here has an exclusive license, that you read
the patent, that it allows you to take what they have done and
look at it for your follow-on work. You just cannot incorporate
it in your later release. Would that be fair?
Mr. Soderstrom. Two points: One, is there is no tendency to
look at patents prior to conducting research. At Yale,
university faculty members are free to pick any area of
inquiry. Second, in terms of the discovery that they ultimately
make, we do do novelty searches to see if there is other
Mr. Issa. Sure.
Mr. Soderstrom [continuing]. And in those cases, we may
choose not to patent simply because we do not see the point,
and we would just encourage publication as soon as possible. If
we do think that it would be a significant improvement, we
usually would approach whoever has the exclusive rights.
Mr. Issa. Okay. Now this is an academic question, but, for
me, it was not academic. My experience has been that
exclusivity, being excluded from somebody's invention, caused
me to, in fact, figure out a way to skin the cat differently.
I am not in your industry. I am not in your academic
endeavors, but isn't it somewhat true in all areas of endeavor
that what you do not have access to--and, Dr. Sung, Larry, I
saw you perk up on this, so you get first thing--isn't it true
that in a sense there is a benefit to exclusivity which is it
causes people to go elsewhere and discover other things or
around it? Isn't that an experience that even in medicine goes
Mr. Sung. Well, I do think as a generality the patent
system is designed to encourage design-around efforts and
forward progress as a result of those efforts. I do think that
in certain instances, again, because we are talking about
genomic information here, the ability to do so may be somewhat
stricter and harder to do. So I think there are instances where
there may be blocking patents that might issue to this that are
impossible as a technological matter to design around.
Mr. Issa. Okay.
Mr. Sung. But I think your general proposition is correct.
Mr. Issa. And isn't the pooling that has gone on, to a
certain extent, the result of those blocks causing people to go
to other areas, create, if you will, block backs that then lead
to the pooling being a necessity so that you have an ability to
invent in an area in which very little is known?
Mr. Soderstrom. That has certainly been our experience.
That is what we have recognized, because people see it as a
utility, as an opportunity to get around some of the things
that are blocking them.
Mr. Issa. Same? Same?
Dr. Grodman. No, I would disagree with that.
Mr. Issa. So we only have three out of four. Okay. Well,
you know that we can get a suspension pass with that here. Time
is limited for the Chairman, too, so I appreciate that we sort
of have a disagreement, but at least we got that out, as to
what the value of exclusivity is potentially.
Thank you, Mr. Chairman.
Mr. Berman. All right.
With great regret, I have to adjourn because of the way
this place works, but I do appreciate you coming, all your
efforts, particularly the effort some of you made coming a ways
to testify, and we will be following up individually and
perhaps with questions.
Thank you very much.
[Whereupon, at 3:28 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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