Government

Luigi Palombi explains the secrecy surrounding the latest round of international intellectual property negotiations and what's at stake for Australia

Negotiations over the Anti-Counterfeiting Trade Agreement (ACTA) commenced in January 2008 – with Australia as a participant - under conditions of strict confidentiality. It was only after a barrage of criticism and an almost unanimous European Parliament resolution calling for the draft text to be released that the participating governments agreed to lift their cone of silence and reveal the outcomes of their discussions to the rest of the world.*

The patent over the BRCA 1 gene was recently ruled invalid in the United States, and is now
being challenged in Australia

While the decision to release the draft text on April 20 was generally welcomed, it is puzzling that the enforcement of intellectual property, which is what ACTA is about, would require such secrecy. After all, patents, trademarks and copyright, well recognised property rights under the World Trade Organisation’s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs), are hardly matters of national security.

Dissatisfaction with TRIPs goes some way towards explaining the demand for a new international agreement on intellectual property. TRIPs was supposed to deal a decisive blow to trade in pirated goods (such as handbags and clothing) and to allay the concerns of the music, movie and television industries over the unauthorised copying of copyrighted works. It aimed to do so by mandating minimum IPR standards in all 153 WTO member countries. But TRIPs was negotiated when the internet was in its infancy, and its founders could not have foreseen the role the internet would come to play in facilitating the distribution of pirated music, movies and television programmes, costing copyright owners tens of millions of dollars in lost sales and royalties.  TRIPs’ failure to stop this illicit trade after 15 years may explain the renewed push by the United States, the European Union, Japan and Switzerland, ACTA’s protagonists, for stronger IP protection measures, which include the criminalisation of IP violations. It does not, however, explain the secrecy surrounding ACTA’s negotiation.

What might explain this secrecy is patents, particularly the sensitive issue of patents over genes, proteins and other biological materials. Gene patents (an imprecise term because these kinds of patents extend their reach to all manner of biological materials) have become increasingly important to a pharmaceutical sector currently facing a rather large problem: briefly, their traditional blockbuster-drug business model in which patent protection over a drug (e.g. Lipitor) earns the patent owner billions in revenue is not working as well as it once did. This is a worrying trend for an industry that has become accustomed to the large cash flows that patents can provide.

Yet despite enjoying the highest level of patent protection since the late 19th century, pharmaceutical firms appear to have shunned innovation as a strategy for countering declining profits; as patent protection has increased in recent decades, innovation in this sector has declined. Rather, companies in the now combined biotechnology-pharmaceutical sector seem to have set their sights on a new profit-generating strategy – the patenting of human genes, plant genes, animal genes (even viral genes) and the proteins that they code for, and the extraction of rents for their use by, amongst others, scientists, medical practitioners, and the patients they serve.

What’s particularly sensitive about this strategy is that the validity of patents over such things as genes is far from uncontested. Historically it has been accepted that patents should be granted only for actual inventions, not for naturally occurring biological materials. Yet as I discuss in detail below, over the past two decades, patents have increasingly been awarded for the simple discovery and isolation of materials that exist in nature - such as the identification of the underlying gene that causes breast cancer (BRCA 1). Armed with ‘ownership’ of such material, firms are now able to charge any number of potential ‘users’, from patients wishing to be tested for the presence of this gene in their own body (and thus their susceptibility to breast cancer) to scientists experimenting on the gene as they search for a cure.

What’s particularly sensitive about this strategy is that the validity of patents over such things as genes is far from uncontested. Historically it has been accepted that patents should be granted only for actual inventions, not for naturally occurring biological materials. Yet over the past two decades, patents have increasingly been awarded for the simple discovery and isolation of materials that exist in nature.

That pharmaceutical companies’ aggressive defence of their ownership of such materials has generated such public ire both in Australia and abroad should therefore come as no surprise.  The fact that ACTA’s protagonists are now seeking the criminalisation of patents the validity of which is so contentious is perhaps the most compelling explanation for the secrecy with which its negotiators are going about their business.

So how did we get to this point? At what stage did the patent system begin to shift from rewarding innovation to recognising non-inventive processes like gene identification and isolation? And what does this shift mean for Australians?

The fact that ACTA’s protagonists are now seeking the criminalisation of patents the validity of which is so contentious is perhaps the most compelling explanation for the secrecy with which its negotiators are going about their business.

From ‘Invention’ to ‘Isolation’: The shifting sands of pharmaceutical patenting

In 1618 (before the genesis of the modern Anglo-American patent system in 1624) the London Pharmacopoeia taught that natural biological materials could be used as medicines when isolated (i.e., removed from their natural environment) and purified. Indeed, strychnine, morphine, atropine and colchicines were all developed during the 19th century applying this very idea. The active ingredient of Aspirin, the famous trade mark applied to a drug containing acetylsalicylic acid, is a derivative of salicin, a substance found naturally in the bark of a willow tree.

Salicin-rich plants had been known for thousands of years to be useful in the treatment of fever, pain and inflammation. However in 1838, Italian organic chemist Raffaele Piria converted salicin into salicylic acid. Although more effective (as a medicinal ingredient) than salicin, it produced unpleasant side effects. It was not until 1897, when Bayer chemist Felix Hoffmann converted salicylic acid into acetylsalicylic acid, that the side effects were eradicated. In 1898 Bayer applied for patents over acetylsalicylic acid and in February 1900 the United States Patent and Trade Mark Office (USPTO) granted Bayer US patent 644,077.

The most important point to note here is that in the Bayer patent, Hoffmann did not claim to have invented salicin; indeed, no mention is made of salicin nor the natural source of salicin. Rather, Hoffmann’s patent application described a new product that did not exist in nature. It was not merely a matter of isolating and purifying salicin from the bark of the willow tree - a kind of extraction that had been done for thousands of years and therefore was not inventive. Hoffmann’s claim to invention focused on the new process which, when applied to salicylic acid (an artificial derivative of salicin), produced  acetylsalicylic acid. Thus the invention was a new artificial product produced by a new artificial process.

This is in complete contrast to the kinds of patents being awarded to pharmaceutical and biotech companies today because the inventions which are claimed by these patents are to nothing more than isolated genes, proteins and other naturally occurring biological materials. The genes and the proteins which they code for are, apart from being in an artificial environment, substantially identical both structurally and functionally to those from which they have been derived.

The now booming gene patenting business was pioneered by Genentech, a Silicon Valley start-up that became the darling of the biotechnology industry in 1976 when Herbert Boyer (a professor of molecular biology) and Robert Swanson (a venture capitalist) listed it on the New York Stock Exchange and became instant multi-millionaires. Genentech earned billions by patenting the human gene for insulin. It was followed by Amgen (erythropoietin), Biogen (hepatitis B), Chiron (hepatitis C), Myriad Genetics (BRCA, breast and ovarian cancer genes) and a plethora of other biotech start-ups. According to an article published in Science, by 2005 over 20% of the human genome was “the subject of US IP”. That figure is now likely to be closer to 50%.

The Public Price of Gene Patents

The value of these gene patents is significant – but whilst private companies have been reaping the rewards, it’s the public that is paying the price. For example, in 2007 Amgen and Roche, owners of the only Australian patents over erythropoietin (a human hormone that regulates red blood cell production), earned nearly $100 million from the Pharmaceutical Benefits Scheme (PBS). Over the 22 years that Amgen’s first Australian erythropoietin patent was in force, the cost of erythropoietin to the Australian healthcare system was about $2.5 billion. And erythropoietin is the tip of the biotech/pharma drug iceberg.

By 2005 over 20% of the human genome was “the subject of US IP”. That figure is now likely to be closer to 50%. The value of these gene patents is significant – but whilst private companies have been reaping the rewards, it’s the public that is paying the price.

It is also important to appreciate that unlike the R&D which goes into traditional chemical drug development, much of which is almost all privately funded, the R&D that made Amgen’s discovery possible was the product of public moneys granted to US scientists employed by US universities. It was this publicly funded research that gave Amgen scientists the tools to identify the human gene which contained the genetic information (the formula) for erythropoietin. Yet Amgen alone claimed the prize – the patent over the human gene – exclusively. And Amgen and its authorised licensees were able to use the human gene in the production of erythropoietin. This gave Amgen a complete legal monopoly over erythropoietin -- a monopoly that Amgen exploited to maximise its worldwide revenues.

Moreover, unlike Hoffmann’s invention of acetylsalicylic acid, which involved the production of an entirely new product using an entirely new process, Amgen’s patent claimed as an ‘invention’ the human erythropoietin gene (which existed in nature) and erythropoietin (which also existed in nature and which was also known). The core of the biotechnological process which Amgen applied to make erythropoietin was also well known (it was first invented by Herbert Boyer and Stanley Cohen in 1973), yet Amgen also claimed that as part of its ‘invention’.

It should thus come as no surprise that the validity of such patents are now being challenged world-wide by those with an interest in the promotion of scientific discovery and of the affordability of medicines for all peoples.

It should thus come as no surprise that the validity of such patents are now being challenged world-wide by those with an interest in the promotion of scientific discovery and of the affordability of medicines for all peoples.

The most significant of these challenges involves the patent over the gene linked to the cause of breast and ovarian cancer – BRAC 1. The public outrage over the use of this patent to charge for medical testing resulted in a US court challenge, the March 2010 outcome of which has shaken the biotech-pharma industry to its core.

BRAC 1: How a Scientific Patent caused Public Outrage

In 1992 Dr Mark Skolnick and Mr Peter Meldrum, his venture capitalist partner, started Myriad Genetics. The objective, as Dr Skolnick said recently, was  in “isolating and discovering the underlying gene” that was linked to the cause of breast and ovarian cancer. That gene was known as BRCA 1.

BRCA 1 is located on human chromosome 17q. BRCA 2 is also a gene. It is located on human chromosome 13. BRCA 1 was mapped in 1990 by Prof Mary-Claire King after 16 years of publicly funded research undertaken at the University of California at San Francisco. BRCA 1 was isolated within four years of Prof King’s announcement. BRCA 2 was isolated the following year. Both the BRCA 1 and BRCA 2 genes are naturally occurring. Every human being has these genes. However, in some people these genes contain mutations which have been linked to breast and ovarian cancers. People who carry the BRCA 1 and BRCA 2 gene mutations have a significant risk of developing breast and ovarian cancers.

The ‘isolated’ BRCA 1 gene became the subject of a US patent application. Eventually this became US Patent 5,747,282 and Australian Patent 686,004. The ‘invention’, other than being ‘isolated’, was identical to the naturally occurring BRCA 1 gene. To isolate the gene Skolnick’s team had simply removed it from the human body. That patent application, however, laid the groundwork for a series of US and other patents granted around the world over the BRCA 1 gene and its use in diagnostics and other medical technologies.

The same occurred with BRCA 2, except that in Europe Myriad was pipped at the post by the UK’s Cancer Research Campaign Technology Limited (CRCTL), which filed a European patent application a few weeks before Myriad filed its US patent application. This meant that CRCTL’s application had priority over Myriad’s. Regardless of the spanner thrown into the works by CRCTL’s European patent application, Myriad successfully secured patents all over the world over BRCA 1 and BRCA 2 genes and their use in diagnostic testing.

The angry reaction in Europe was palpable. Twenty-six organisations, such as the Belgian Society of Human Genetics, Curie Institute and the British Society of Human Genetics, joined forces to oppose Myriad’s European patents granted by the European Patent Office. That fight only ended at the end of 2008 when the Technical Appeal Board of the European Patent Office reinstated Myriad’s European patent over BRCA 1, albeit with modified claims. Even so, European clinicians, such as Dr Dominique Stoppa-Lyonnet from the Curie Institute, maintain that the modified claims are unenforceable. According to her, “the patent ruling won’t stop us testing the gene in France”.

And while this very public brawl tempered Myriad’s ability to exclusively control BRCA gene testing in Europe, in the United States where there was, seemingly, little opposition to the US patents, Myriad was able to exert complete and exclusive control over all BRCA genetic testing. As a result, a full BRCA genetic test currently costs US$3,200 and is undertaken by Myriad’s laboratory in Utah.

The Tide Begins to Turn

However, on March 29 2010, Myriad Genetics Inc (Myriad) lost a landmark case over seven US patents that claimed these genes as ‘inventions’. The decision, handed down by Judge Sweet, a federal court judge of the US District Court for the Southern District of New York, is the first in US legal history dealing with the patentability of naturally occurring biological materials that have been ‘isolated’ from their natural environments. His decision has shaken the biotechnology industry around the world by reminding us all that patents are granted for ‘inventions’ not ‘products of nature’. Consistent with “the clear line of Supreme Court precedent and accompanying lower court authorities, stretching from American Wood-Paper through to Chakrabarty”, Judge Sweet held that the “purification [or isolation] of a product of nature, without more, cannot transform it into patentable subject matter”.

In the US Supreme Court’s famous 1980 decision in Diamond v Chakrabarty, Chief Justice Berger made it clear that although US patent law was flexible enough to permit the patentability of a genetically modified bacterium created using the Boyer/Cohen process, the bacterium had to display “characteristics markedly different to anything found in nature” before a product of nature could no longer be defined as “nature’s handiwork”. What persuaded the US Supreme Court in Chakrabarty to hold that the GM bacterium in question satisfied the test was its ability to degrade crude oil. This function was not something any naturally occurring bacterium could perform.

On the basis of the evidence before him, Judge Sweet concluded that isolated BRCA gene mutations and the proteins coded for by those genes were unchanged by their isolation from the human body. They were, as such, unpatentable.

On the basis of the evidence before him, Judge Sweet concluded that isolated BRCA gene mutations and the proteins coded for by those genes were unchanged by their isolation from the human body. They were, as such, unpatentable.

Myriad has announced that the decision will be appealed to the US Court of Appeals for the Federal Circuit (CAFC). And whatever the outcome it is reasonably foreseeable that the CAFC’s decision will be appealed to the US Supreme Court. A final determination is many years away. However, Judge Sweet’s decision now represents the law in the United States and will continue doing so until it is overturned (if it is ever overturned).

Lessons and Questions for Australia

The lesson in all of this is that patents are not necessarily valid when they are granted. In the case of Amgen’s erythropoietin patents, while certain aspects of the European patent which applied in the UK were invalidated by the UK’s House of Lords 2004 decision, this made very little difference as the patent expired only six weeks later. In the meantime, Amgen had asserted its patent ‘rights’ to the full for 20 years in all countries in which it held patent rights. And that was before ACTA was on the drawing board.

The question for all Australians, particularly the policymakers embroiled in the ACTA negotiations, is whether patents should be afforded the kinds of protections which are being considered by the negotiators.

The question for all Australians, particularly the policymakers embroiled in the ACTA negotiations, is whether patents should be afforded the kinds of protections which are being considered by the negotiators. This is an important issue especially as rights once granted are more difficult to modify or remove. Apart from the significant bias which current IP regimes already give to IP rightholders, should ACTA become a reality, in the context of gene patents, that bias will be felt especially with the spectre of criminal sanctions being applied against those who will be least likely to challenge their validity, namely research scientists and the publicly funded institutions which employ them.

*ACTAs negotiating parties are Australia, Canada, the EU, Japan, Jordan, Korea, Mexico, Morocco, New Zealand, Singapore, Switzerland and the United States.

Professor Luigi Palombi

Adjunct Professor of Law, Law School, University of Sydney

The Regulatory Institutions Network, The Australian National University

Editor's Note: The Australian Senate is currently holding an Inquiry into Gene Patents, the reporting time for which has been extended until June 17th 2010. For more information click here.