Finlay, Anne --- "Gene Patenting and Human Health: the ALRC Issues Paper" [2003] ALRCRefJl 26; (2003) 83 Australian Law Reform Commission Reform Journal 51

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Reform Issue 83 Spring 2003

This article appeared on pages 51 – 55 of the original journal.

Gene patenting and human health: The ALRC Issues Paper

By Professor Anne Finlay*

The Australian Law Reform Commission (ALRC) has released an Issues Paper—Gene Patenting and Human Health (IP 27)—as the first stage of its inquiry into intellectual property rights and practices with respect to genetic materials and related technologies. The main focus of the inquiry is on the effect that patents and licences over genetic materials have on the provision of healthcare, further genetic research and Australia’s developing biotechnology industry.

IP 27 notes the tension between the use of patents to reward innovation and encourage research and development, and the potential for such patents—if overly broad or inappropriate—to increase the cost of healthcare and hinder research and development. Problems may arise because, once a gene patent is granted, the holder of the patent can prevent others from making use of the patented material unless they have a licence. If a licence is (overly) restricted or if the fees are too costly, this may inhibit treatments, tests and further research.

Concerns surrounding gene patenting are often attributed to the practices of the United States Patent and Trade Mark Office in particular, especially during the 1990s, in too readily granting patents over some genetic materials. Dr Francis Collins—the US scientist who led the Human Genome Project—recently told the World Genetic Congress in Melbourne that the United States had ‘led the world into a mess’ in gene patenting. The ALRC is seeking to identify the extent to which problems identified overseas are having an impact in Australia on healthcare and research.

IP 27 canvasses possible areas for reform that might assist research and ensure that improvements in healthcare are not stalled by licensing practices. Such reforms include new defences to claims of infringement of gene patents, such as where patents are used for research, for private non-commercial purposes, or for medical treatment. Additionally, the Issues Paper discusses those circumstances in which existing provisions of the Patents Act 1990 (Cth) covering Crown use, Commonwealth acquisition, or compulsory licensing might be invoked.

Impact on healthcare

Developments in genetics hold considerable promise for healthcare. Rarely a week passes without news of a promising test or an exciting new treatment for a genetic-related disease but there has been international concern about the possible adverse consequences of existing patent laws and practices on the provision of healthcare—especially on the use of medical genetic testing and novel therapies, such as gene therapy, the production of therapeutic proteins and the use of stem cells. Some of these concerns are speculative and will depend on the behaviour of patent holders or licensees.

Areas that raise most concern are predictive or diagnostic genetic testing involving the use of patented isolated genetic material and sequences. Concerns relate to monopoly control and its impact on the cost of testing, access to testing and related services, the quality of testing and medical practice, and the development of new or improved testing techniques. The Issues Paper asks a number of questions about the impact of gene patents on various aspects of healthcare provision.

There are presently about 220 medical genetic tests available from 44 laboratories across Australia. Some genetic tests offered overseas are not available in Australia. Likewise, some types of tests offered in Australia are not available, or not widely performed, in other countries. The availability of genetic testing in Australia may be dependent on decisions about which tests are ethically acceptable, and on a cost-benefit analysis of a particular test. Genetic testing varies in cost from less than $100 to more than $1,000. Depending on the test and the laboratory, testing may be free to the patient or fees may be charged. Because most medical genetic tests are ordered as part of healthcare services provided by state and territory public clinical genetics services, there is concern among health departments that high licence fees will have an adverse impact on their budgets.

Many of the concerns relate to those circumstances where patent holders grant exclusive licences that allow a monopoly over testing. Where a person is being tested for a genetic-related condition, the test for a gene or genetic sequence associated with the condition needs to identify a mutation in the relevant sequence in that individual. This requires the use of the genetic sequence of the normal gene, as well as that of the mutation. If a patent has been granted over genetic material that contains the genetic sequence, the use of the sequence in testing may constitute an infringement of the patent unless a licence is obtained from the patent holder or testing is conducted through another licensee.

As well as impacting on public health budgets, higher costs may limit access to tests. Other concerns include whether patent laws and practices could have an adverse effect on the quality of genetic testing and associated medical practice. A recent study of clinical laboratories in the United States concluded that gene patents and licences had inhibited publication of research findings and information sharing thereby hindering the development of new genetic tests for clinical use.¹

Governments in Europe and Canada have raised particular objections to the behaviour of Myriad Genetics, the owner, internationally, of patents over two breast cancer genes, BRCA 1 and 2. One of the concerns has related to the anticipation that Myriad will require all testing for the gene mutations to be undertaken at their premises in Salt Lake City, which will increase the cost of testing and provide Myriad with tissue for further research. In Australia, Myriad has granted an exclusive licence relating to predictive genetic testing for breast and ovarian cancer genes to the Australian biotech company, Genetic Technologies Limited (GTG). GTG has stated publicly that it will not enforce its rights under this licence and will allow health providers in Australia and New Zealand to conduct diagnostic testing for BRCA 1 in their own laboratories and without paying royalties. GTG has, however, begun enforcing other patents its holds over the non-coding portions of DNA.

Impact on research and innovation

As well as considering the impact of gene patents and licences on healthcare, the ALRC is also asked to examine their impact on research and its application. This highlights the complexity of the ALRC’s task and the need for a careful balancing of potentially competing interests. Reforms that may be attractive to health providers, might have an adverse impact on biotechnology companies. Biotechnology is one of the world’s fastest growing industrial sectors and Australia is no exception. Internationally, Australia compares favourably with the United States in terms of the number of biotechnology companies relative to the size of the labour force, and is well ahead of the European Union. There is strong support for the development of a biotechnology industry from federal and state governments.

One of the major debates in this area is whether gene patents and licences inhibit research and innovation, rather than promoting them. These concerns are voiced by scientists undertaking basic research and echoed by some in the biotechnology industry concerned with obtaining access to patented inventions which are needed to develop new products.

The United States Patents and Trademarks Office has acknowledged that:

One of the biggest public concerns voiced against the granting of patents by the United States Patent Office (USPTO) to inventions in biotechnology, specifically inventions based on genetic information, is the potential lack of reasonable access to the technology for the research and development of commercial products and for further basic biological research.²

The potential for gene patents and licences to have a negative impact on research is attributed to concerns about infringing patents; reluctance to put information in the public domain in the light of the possibility of commercialising research; and the cost and complexity of negotiating licences especially where multiple patents operate in a single area. IP 27 notes that there have been conflicting results from overseas studies about the impact of patents and licences on research, with one study finding that the need to pay licence fees is inhibiting research,³ while another suggested that ‘patents and licenses for genetic inventions seem to stimulate research, knowledge flows, and the entry of new technology into markets’.⁴

One of the areas of most concern is that of patents over ‘research tools’. Research tools are the range of resources that scientists use in their laboratories that have no immediate therapeutic or diagnostic value but which are needed for further research and development. Genetic research is somewhat unusual in that patents are commonly held not only over the end products of research but also over the basic information and tools needed for further research. Researchers are concerned that patents may prevent or delay access to research tools by the need to negotiate licence agreements and their cost.

One issue for the ALRC is to identify the extent to which the problems that have been identified overseas are having an impact on Australian research and commercialisation. It is difficult to obtain empirical evidence of problems being encountered in Australia and the Issues Paper asks a number of questions that seek to elicit this information.

Possible areas for reform

IP 27 identifies a number of areas where there may be scope for reform. Not all involve legislative reform. For example, IP 27 discusses whether government funding and purchasing power might be used to control the cost of medical genetic testing that is subject to patents.

Among possible legislative reforms, IP 27 discusses new defences to claims of infringement of gene patents, such as where patents are used for research, for private non-commercial purposes, or for medical treatment. A ‘research use’ defence might overcome some of the problems discussed above. Currently the Patents Act does not expressly exempt research involving patented inventions from liability for infringement although many researchers often assume that non-commercial research is exempt. Both the United Kingdom and United States patents laws provide for research use exemptions.

However, an exemption for research is not without its problems particularly in relation to defining its scope. A key issue is the need to distinguish between ‘pure’ or ‘basic’ research and research that may have (or be intended to have) some commercial application. A further issue is the distinction between research on a patented invention (which may be exempt from claims of patent infringement) and research involving the use of a patented invention (which would not be exempt). This distinction may be significant in relation to patented genetic materials and technologies. For example, using a patented diagnostic genetic test to establish whether it accurately identifies particular mutations may fall within the scope of a research use defence, as it is currently formulated in most jurisdictions. However, using the same test to conduct research on a genetic mutation and its relationship to a particular disease may fall outside the scope of such a defence.

Some countries have addressed concerns about the impact of patents on healthcare by excluding certain diagnostic, therapeutic or surgical methods of treatment from the scope of patentable subject matter. Australia has not adopted this approach to date. Provided that an invention meets the requirements for patentability set out in the Patents Act, the Australian Patent Office will allow patents on diagnostic, therapeutic or surgical methods of treatment. IP 27 asks whether the Patents Act should be amended to include a defence to allow for the use of a patented genetic material or technology for the purposes of medical treatment of humans.

IP 27 also considers the circumstances in which the provisions in the Patents Act relating to Crown use, Commonwealth acquisition, or compulsory licensing provisions may be invoked and asks whether these provisions are adequate to remedy the possible adverse effects of gene patents and, if not, how patent laws and practices might be reformed.

Under the Crown use provisions, the Commonwealth or a State, or someone authorised by them, may exploit an invention covered by a patent. The extent to which the Crown use provisions may allow the provision of healthcare services by the Commonwealth or a State using patented genetic materials or technologies without infringing patent rights is not always clear. IP 27 asks whether the current Crown use provisions in the Patents Act are capable of applying to the provision of healthcare services using patented genetic materials and technologies and, if not, whether these provisions should be amended to apply to such use.

In a similar vein, s 171 of the Patents Act provides for compulsory acquisition by the Commonwealth of an invention covered by a patent or patent application. The Act does not stipulate any limitations on the circumstances in which the Commonwealth may acquire an invention. However, the Commonwealth must compensate a patent holder for such an acquisition of a patent. While this provision has the potential to allow the Commonwealth to exercise some control over the cost of healthcare involving the use of patented genetic materials and technologies, it is arguable that the provision should not be relied upon too readily and should only be invoked in exceptional circumstances to preserve confidence in the patent system.

The Patents Act also provides for compulsory licensing and these provisions may provide another mechanism to address concerns relating to access to gene patents, including for use in research and the provision of healthcare. A prescribed court may order the grant of a compulsory licence if:

• the reasonable requirements of the public with respect to the patented invention have not been satisfied; and

• the patent holder has given no satisfactory reason for failing to exploit the patent.⁵

The court must be satisfied that the applicant for the compulsory licence has tried, unsuccessfully, to negotiate a licence on reasonable terms and conditions for a reasonable period of time. The patent holder is entitled to be paid for use of the patent at an agreed rate or one determined by a prescribed court. IP 27 seeks comments as to whether the existing compulsory licensing provisions are adequate to address concerns about access to gene patents and, if not, how these provisions should be amended.

In considering proposals for reform, IP 27 examines constraints imposed by Australia’s obligations under international treaties and the degree to which the constraints affect practical options for reform.

IP 27 also considers the interplay between patent law and competition law. The issue is addressed because of the potential for the holder of a gene patent or licence to behave in an anti-competitive manner. The Trade Practices

Act 1974 (Cth) proscribes a range of anti-competitive conduct.⁶ However, some of these provisions do not apply to patents and licences. One provision that does is s 46, which deals with misuse of substantial market power. IP 27 discusses whether this section might have a role to play where a patent or licence holder makes improper use of its monopoly position. IP 27 also asks whether there is a role for the Australian Competition and Consumer Commission in monitoring the impact on competition of gene patents and licences.

* Professor Anne Finlay is a full-time Commissioner of the ALRC and is a lead Commissioner of the inquiry into gene patenting and human health.

Endnotes

1. M Cho and others, ‘Effects of Patents and Licenses on the Provision of Clinical Genetic Testing Services’ (2003) 5 Journal of Molecular Diagnostics 3, 8.

2. United States Patent and Trademarks Office, Patent Pools: A Solution to the Problem of Access in Biotechnology Patents? (2000), United States Patents and Trademarks Office, Washington, 2.

3. M Cho and others, ‘Effects of Patents and Licenses on the Provision of Clinical Genetic Testing Services’ (2003) 5 Journal of Molecular Diagnostics 3, 8.

4. Organisation for Economic Co-Operation and Development, Short Summary of the Workshop on Genetic Inventions, Intellectual Property Rights and Licensing Practices, (2002) OECD, Paris, 2.

5. Patents Act 1990 (Cth) s 133(2).

6. Trade Practices Act 1974 (Cth) Part IV, s 4D.