[House Hearing, 110 Congress]
[From the U.S. Government Printing Office]


 
   STIFLING OR STIMULATING--THE ROLE OF GENE PATENTS IN RESEARCH AND 
                            GENETIC TESTING

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON COURTS, THE INTERNET,
                       AND INTELLECTUAL PROPERTY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            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

                                                                   Page

                           OPENING STATEMENTS

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

                               WITNESSES

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

                                APPENDIX

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:

    http://www.nap.edu/catalog.php?record_id=11487#toc

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:

    http://www.betterworldproject.net/documents/AUTMBWR1.pdf

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 
    at:

    http://www.betterworldproject.net/documents/AUTM_BWR.pdf


   STIFLING OR STIMULATING--THE ROLE OF GENE PATENTS IN RESEARCH AND 
                            GENETIC TESTING

                              ----------                              


                       TUESDAY, OCTOBER 30, 2007

              House of Representatives,    
      Subcommittee on Courts, the Internet,
                         and Intellectual Property,
                                Committee on the Judiciary,
                                                    Washington, DC.
    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 
Issa.
    Staff present: Shanna Winters, Subcommittee Majority Chief 
Counsel; Eric Garduno, Majority Counsel; Blaine Merritt, 
Minority Counsel; and Rosalind Jackson, Professional Staff 
Member.
    Mr. Berman. Good afternoon. The hearing of the Subcommittee 
on Courts, the Internet, and Intellectual Property will come to 
order.
    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? 
[Laughter.]
    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 
functions.
    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. 
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 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 
that issue.
    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 
research.
    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 
practices.
    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 
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 in genetic testing. It is my 
hope that this hearing will help us answer these and many other 
underlying questions.
    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 
basic research.
    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 
practices.
    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 
gentlemen.
    This is a good hearing topic, Mr. Chairman, in large part 
because the subject matter lends itself oftentimes to 
misrepresentation.
    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 
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, 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 
world.
    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 
could result.
    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 
world.
    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 
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 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 
tomorrow.
    Mr. Coble. And I am not sure I can answer that. [Laughter.]
    Mr. Berman. I now will introduce a very distinguished panel 
of witnesses.
    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 
University.
    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.
    Dr. Sung?

    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 
as property.
    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 
credible utility.
    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 
technology.
    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 
important specifics.
    Thank you.
    [The prepared statement of Mr. Sung follows:]

                 Prepared Statement of Lawrence M. Sung





























    Mr. Berman. Thank you very much, Dr. Sung.
    Mr. Soderstrom?

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 
infringement liability.
    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 
Managers.
    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 
society's benefits.
    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 
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, 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 
research.
    My colleagues and I are grateful for the Subcommittee's 
interest in this topic.
    Thank you.
    [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 
merit.
---------------------------------------------------------------------------
    \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 
Perspectives 5:29-41.
    \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 
the authors:

        ``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 
        tools

    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 
academic institutions.
    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 
Colleges (AAMC).
---------------------------------------------------------------------------
    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/
Points_to_Consider.pdf
---------------------------------------------------------------------------
    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 
        improvements''

        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 
        aggregators

        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 
        developing world

                             IN CONCLUSION

    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.
                               __________

                             __ APPENDIX__ 

                        In the Public Interest: 
       Nine Points to Consider in Licensing University Technology

                                Point 1

 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 
organizations:

          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.

                                Point 2

  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 
provision.
    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 
control.

                                Point 3

      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.

                                Point 4

 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.

                                Point 5

                 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.

                                Point 6

           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 
disputes.
    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.

                                Point 7

                    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.

                                Point 8

   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' 
model.
    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 
public.
    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 
milestones.
---------------------------------------------------------------------------
                                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 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, 
we cannot.
    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 
disorders.
    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 
referring less.
    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, 
                               DC

    Mr. Kushan. Thank you, Mr. Chairman. Thank you, Mr. 
Chairman.
    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 
States.
    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 
private companies.
    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 
inception.
    Three fundamental requirements exist for biotech companies 
that are following this business model: first, scientific 
innovation; second, adequate funding; and, third, dependable 
intellectual protection.
    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 
an assessment.
    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 
today.
    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 
investments.
    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.
    Thank you.
    [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 
questioning process.
    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 
another authority?
    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 
academic research.
    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 
scale----
    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?
    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 
date.
    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 
service.
    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 
setting.
    Mr. Coble. Thank you.
    Before my time expires, let me go to Dr. Sung and-or Dr. 
Soderstrom.
    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 
illuminate.
    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?
    Mr. Issa. Thank you.
    The fifth round is where I get my really tough questions 
in.
    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 
information.
    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 
nondisclosure?
    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 
affected.
    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 
different?
    Dr. Soderstrom?
    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 
more routine.
    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 
applications.
    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 
patent.
    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 
describe before.
    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 
environment.
    Mr. Coble. Dr. Sung, do you want to weigh in before my time 
expires?
    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 
do that.
    Mr. Issa. Yes, the Senate has gotten in trouble for doing 
that, too.
    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 
wrap up?
    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 
intellectual property----
    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 
on?
    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?
    Doctor?
    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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