Keeping score, strengthening policy and fighting bad actors over access to research tools

Abstract

A mix of policy options that enhance access to research tools are available to courts, legislators and government bureaucracies, including research agencies and patent offices.

Translational research is increasingly multidisciplinary, collaborative and reliant on platforms that aggregate data, materials and methods. Should policy makers and courts be concerned about patent holders locking up such research reagents? Although the wholesale disaster predicted by the anticommons hypothesis seems to have been overstated¹, adverse impacts on research and innovation may occur, for example, when platform technologies or repositories require the aggregation of patent rights held by diverse actors². Adverse impacts result not only from the granting of patent rights but also from their management, especially licensing practices. The real question is whether policy levers are sufficient to mitigate the excesses of the patent system, or whether more and better policies are needed. Should policy respond to a few bad apples and outlier cases, or do courts and policy makers already have the tools they need to respond to perturbations in an imperfect and noisy system?

We drew together evidence from high-profile cases that implicates the academic research enterprise and illustrates policy responses influenced by diverse stakeholders. Legislators, government bureaucracies, courts, universities, scientists, civic action organizations, patient advocates and other stakeholders all voice concerns, but rarely in a coordinated manner. History suggests that legislative reforms provide the most consistent responses, but given the diversity of interests, the reforms generally represent a compromise in which no one stakeholder group is fully satisfied. Courts interpret and apply legislative provisions in the context of interparty disputes. Government bureaucracies, from intellectual property (IP) offices to funding agencies, implement both legislation and court decisions. Institutional policies and guidelines also add to the mix of potential policy responses. Because of the complexity of legislative reform, we focus here on recent jurisprudence and the use of existing policy options that ensure access to research reagents in the United States (US). Lessons from the US experience are instructive for other jurisdictions with active biotech sectors.

Lack of coherent legislative reform

Recent debates over the US America Invents Act illustrate the complexities of legislative reforms to patent statutes³. Madey v. Duke University made clear the very limited research exemption under US case law, and early drafts of the Act included such an exemption, but that provision did not become law⁴. One problem was in the definition—it is difficult to draw clear distinctions between noncommercial research covered by a research exemption, research that is translational, and research with commercial intent. Australia recently amended its patent law in line with that of some European countries (e.g., France, Germany, United Kingdom). It implemented an experimental use exemption⁵, which enables research on a patented reagent (e.g., research to improve the reagent) rather than general research with the reagent (i.e., using the patented reagent for its intended purpose in research).

Another mechanism, compulsory licensing authority, was contemplated but rejected in the 1952 revisions to the US Patent Law⁶ to the chagrin of some legal scholars, who presciently predicted its absence would cause future problems⁷. Compulsory licenses are grants by a government or a court for public interest use of an invention without the consent of the owner of the patent rights. Discussions most commonly arise in the context of access to medicines in emergency situations or for countries facing health crises where the compulsory license may be issued to a generic drug manufacturer. Because compulsory licenses are generally available after negotiations have broken down, the rights holder is entitled to fair compensation set by an arbitrator. In some jurisdictions, compulsory licenses are permitted when exploitation of the patent rights violates competition law or the patent holder abuses his/her rights, for example, with excessive prices. A narrower type of compulsory licensing exists in the United States, namely, government use provisions. These are available in two forms, first under the Bayh-Dole Act⁸—for inventions resulting in whole or in part from federal funding—and second under Judiciary and Judicial Procedure (Box 1)⁹. These provisions may enable government noncommercial use for the public interest, such as the protection of public health. Indeed, the US government threatened Bayer Pharmaceuticals (Leverkusen, Germany) with government use for the antibiotic drug Cipro® (ciprofloxacin) during the 2001 anthrax attacks, forcing Bayer to reduce its prices.¹⁰ Collectively, these statutory mechanisms provide potential escape valves when rights holders thwart research interests¹¹. However, even when available, their use to protect broad research interests has been limited, with one example discussed below.

Jurisprudence: the courts step in

Without coherent statutory mechanisms in play, the United States Supreme Court has recently concerned itself with how exclusive rights might block, or “pre-empt” science and upstream innovation far from commercial application. Its policy lever of choice has been to constrain patentable subject matter in major cases for four years in a row (Box 2); the US Patent and Trademark Office (USPTO) has issued a recently revised and controversial guidance document to interpret this jurisprudence for the community¹².

In Association for Molecular Pathology (AMP) v. Myriad Genetics, a fight over Myriad Genetics’ (Salt Lake City, UT, USA) patents on BRCA genes associated with risk of breast and ovarian cancer, the Court drew a distinction between discovery and invention, invalidating patent claims on DNA molecules that could be found in nature¹³. It has further invalidated method claims on a diagnostic patent in Mayo Collaborative Services v. Prometheus¹⁴ and invalidated claims on business methods in Bilski v. Kappos¹⁵ and Alice Corp. v. CLS Bank International¹⁶. In contrast, the Federal Court of Australia upheld Myriad’s gene patent claims in D’Arcy v. Myriad Genetics¹⁷. The Australian court focused more on the interests of prospective inventors and the value of a patent incentive and less on the detrimental effects on research, in part, because Australia had recently broadened its statutory research exemption.

On October 30, 2014, Chief Judge Leonard P. Stark of the US District Court of Delaware applied Mayo v. Prometheus and AMP v. Myriad Genetics to invalidate the so-called ‘junk DNA’ patents held by Genetic Technologies (GTG) in litigation against Bristol-Myers Squibb and Merial¹⁸. GTG claimed methods for detecting allelic variation and haplotypes by amplifying genomic regions that span a noncoding sequence in linkage disequilibrium with the allele to be detected. Its claims had been confirmed in four reexaminations before the USPTO. Although GTG provided genetic testing services, primarily in Australia, its other business was to demand substantial licensing fees for its patents from companies and, controversially, licensing fees from universities and research institutions, albeit at lower rates for nonprofits than its corporate fees. One estimate identified nearly 2,000 potential licensees¹⁸. Many, including the US National Institutes of Health (NIH) director Francis Collins, condemned GTG for its aggressive licensing practices¹⁹. GTG brought US suits from 2002 to the present against 33 defendants, including pharmaceutical, biotech, genetic testing and bioinformatics companies. Many settled, including Myriad Genetics and Applera (Norwalk, CT, USA), and now the patents have been invalidated, bringing to an end the remaining six open cases. Judge Stark concluded that GTG’s claims were over laws of nature, and the additional analytical steps merely applied “well-understood, routine conventional activities already engaged in by the scientific community”¹⁸. The case suggests that past biotech patents run the risk of being found invalid if aggressively enforced.

Litigation: defending against the excesses of patent trolls

Although AMP v. Myriad has stolen much of the limelight and driven policy responses from the USPTO and other agencies, other cases illustrate how patents can affect research. Some cases involve suits against research institutions over patented inventions, defying the claim that patent holders always exercise rational forbearance in suing researchers for patent infringement. Leading this trend are nonpracticing or patent assertion entities (NPEs), commonly known as patent trolls, which aggressively assert patent rights through litigation. NPEs now file 62% of all IP infringement lawsuits in the United States, a tripling in the past two years²⁰. Hallmarks of fields ripe for NPE activity are uncertainty in the scope of both claims and infringing activities²⁰. Noting this, commentators have speculated about the potential impact of NPEs on biotech and biomedical research institutions^21,22.

NPEs operate from a position of strength—they cannot be countersued for infringement because they have no products in a market that would be threatened, and they have no repeat-player constraints. In uncertain environments, NPEs may “over-assert” claimed inventions to cover products and processes that were never meant to be included within the patent by its inventor or examiner²⁰. Nevertheless, such assertions are costly to counter—patent litigation can range from $1–6 million or more, depending on complexity. NPEs therefore rely on it being more cost-effective to pay a royalty than to engage in litigation. Thus far, specific legislative measures to control NPE activities have not passed the US Congress. The last remaining bill of the 14 introduced in 2013 narrowly targeted NPEs that send opaque or misleading demand letters²³.

In a recent case, the innocent-sounding Alzheimer’s Institute of America (AIA) secured substantial revenues from research institutions and companies using and distributing mouse models of a double mutation in APP (APPswe), a mutation responsible for one very rare form of inherited early-onset Alzheimer’s disease. After more than a decade of litigation, involving five separate cases in which AIA asserted its patents against 18 defendants, including one university, one foundation and three not-for-profit research organizations, AIA lost decisively before a jury in a district court²⁴, and the Court of Appeals for the Federal Circuit upheld that decision in May 2014²⁵. The litigation consumed 18.7 cumulative court years in six jurisdictions, engaged 98 lawyers on the record (39 engaged by not-for-profit research organizations, foundations and universities), and had 1,143 court filings (docket entries) for motions, pleadings, complaints, certifications, demands, notices, affidavits and stipulations. These indicate the high cost of infringement litigation for research institutions.

AIA was the case of an NPE willing to shake down biomedical research institutions. However, the case also illustrates defensive actions and policy levers that research institutions can use to push back (Box 3). The first line of defense was to challenge the validity of AIA’s patents. Problems certainly existed in the USPTO’s grant of these broad early patents over research tools. Although the litigation centered on infringing uses of APPswe mice, the putative inventor, Michael Mullan, never produced a transgenic animal, and indeed no research group managed to generate an Alzheimer’s mouse model until 1995. A different group produced an APPswe transgenic mouse model for Alzheimer’s disease research in 1996, four years after Mullan filed his patent²⁶. It is clear that in 1992, the creation of a transgenic mouse, by a sole inventor who was a clinician-geneticist, with no background in transgenic or mouse research, was at best highly speculative, and granting the patent was probably an error in the USPTO’s evaluation of the state of the art at the time. Four years of intensive work by large teams to produce an APPswe transgenic mouse are proof of “undue experimentation,” which invalidates a patent based on the criterion that the description of the invention in the patent must enable the invention. Nevertheless, the USPTO granted Mullan patents claiming the DNA sequences and a patent claiming transgenic animals incorporating the mutations. Recent amendments to US patent law in the America Invents Act provide faster and less expensive means to challenge patent validity, namely, new methods for post-grant review of issued patents³. However, the case is a clear demonstration that patent offices need to improve examination and enhance patent quality, underscored by the very late invalidation of GTG’s intron patent claims.

AIA lost its APPswe patent rights for other, more idiosyncratic reasons. Because of a number of questionable actions by researchers, first at Imperial College and then at the University of South Florida, Mullan declared himself as sole inventor on the patent, which he assigned to AIA, an NPE controlled by a venture capitalist, Ronald Sexton. The judge ruled that Mullan excluded at least one co-inventor, John Hardy²⁴. Owing to improper inventorship, the patent was rendered invalid. The judge also ruled that even if he were inventor on a valid patent, Mullan had no rights to assign the patent to AIA, because under Florida law, the patent rights vested automatically in the University of South Florida²⁴.

Despite the facts unique to the APPswe litigation, the saga illuminated a number of policy tools to use against NPE tactics. The NIH might have employed its march-in rights under Bayh-Dole, but in this case, the research was not funded by any US government agency. The NIH therefore retroactively employed “Authorization and Consent” (Box 1) to enable the Jackson Laboratory (JAX; Bar Harbor, ME, USA) to distribute APPswe mouse models to the research community. AIA had asserted not only patent infringement against JAX, but also demanded the names of researchers to whom JAX had distributed mice. These demands left JAX with the impression that AIA intended to assert its patents against the institutions of Alzheimer’s disease researchers who had either developed novel APPswe lines, or who had used lines distributed by JAX for research. JAX therefore requested Authorization and Consent⁹, which was granted by NIH’s National Center for Research Resources with the effect of relieving JAX of infringement liability, as a government contractor. This effectively shielded JAX from suits over Alzheimer’s mouse models and substituted the federal government as defendant. Rather than take on the US Department of Justice, AIA dropped JAX as a defendant. However, to our knowledge, Authorization and Consent has never been applied to standard grants from the NIH. Whereas the NIH might consider on a case-by-case basis whether the research is essentially for and on behalf of the US government, research grants that benefit the research community and the public may or may not satisfy this criterion, and there is no case law on the point.

More generally, the financial cost of AIA’s loss in tits case is also an early instance of what could emerge as a powerful judicial precedent and disincentive for NPEs asserting invalid patents. Under new legal rules that make it easier to assess costs to losers in patent suits, the district court awarded legal fees to the winner in the case, so AIA must pay not only its costs but also the fees of the defendants it sued²⁷. This measure was already on the books, but the rules for “exceptional circumstances” in which it could be used were only recently loosened to address patent trolls. The former chief judge of the Court of Appeals of the Federal Circuit (CAFC), Randall Rader, urged exactly this remedy to discourage patent suits based on invalid patents²⁸. Legal scholars have also touted “loser pays” rules as a potent tool both to dissuade enforcement of invalid patents as well as to discourage infringement of valid patents²⁹. Proceedings to determine who pays the legal fees in Alzheimer’s Institute of America v Avid Radiopharmaceuticals are entering the endgame supervised by a magistrate in Florida. One problem with this procedure is that it is largely secret. We may never know the price AIA paid for losing this case, and yet the power of the “loser pays” precedent depends on those contemplating litigation knowing the risks and costs. Nevertheless, fee shifting has been considered in other similar cases. In Anticancer Inc. v. Leica Microsystems Inc., a federal judge in the Southern District of California narrowly avoided awarding attorney’s fees against Anticancer Inc.³⁰. The company attempted to enforce patents for the use of green fluorescent protein in animal models; the judge characterized the effort as “misguided.”

Other changes in judicial rules also discourage NPEs by targeting specific tactics. NPEs commonly assert multiple patents against multiple parties, all of whom bear the burden of producing evidence to defend against claims of infringement. NPEs also threaten injunctions, which may damage the operations of innovative firms. Recent US Supreme Court decisions on enhanced standards for injunctions in patent disputes³¹ and America Invents Act reforms limiting the number of defendants that can be sued in a patent infringement suit³ all contribute to curbing the litigation excesses of NPEs. A further option is to increase the standards for pleadings, to increase the investigational costs for plaintiff NPEs.

Finally, private actors are recognizing an opportunity posed by NPEs and are offering IP insurance specifically directed toward the threat of suits brought by NPEs, labeled “Troll Defense Insurance Insurance, however, could be a double-edged sword, because in some circumstances it may encourage NPE suits as insurance coverage offers deep pockets to target.

Nevertheless, it is important to note that not all NPEs and not all patent aggregation is fairly characterized as “patent trolling.” Some areas of research require collection of multiple inventions, and some entities such as universities and small companies primarily engaged in discovery research may have legitimate claims to downstream uses of their inventions and discoveries even though they do not themselves produce the goods and services that find their way to market. The 2010 National Research Council report cautioned against exclusive licensing of patents to “private patent aggregators whose business model is limited to asserting patents against established firms rather than seeking to promote further development”³². This is not a blanket condemnation, and a recent analysis of Australian law and practice also points to important nuances in judging the benefits and harms of patent aggregation³³. There is no substitute for careful assessment of specific circumstances. The fact that abuses crop up and draw attention suggests a need for vigilance and use of the tools at hand to address them.

Mitigating aggressive licensing practices

The cases above document that aggressive licensing and enforcement practices of patent holders can be deployed against research uses. These were also exemplified by DuPont’s initial licensing terms for Oncomouse and cre-lox technologies in the 1990s that included reach-through terms and imposed onerous reporting obligations on researchers. Cetus’s initial threats to enforce its PCR patents also included researchers and their institutions³⁴. DuPont (Wilmington, DE, USA) and Roche (Basel), which acquired the rights to PCR in 1991, backed down from their most aggressive licensing terms in the former case after intervention by the NIH to negotiate access for researchers.

Other threats arise in the aggregation of IP to build community-level research resources². For example, two international consortia—the International Knockout Mouse Consortium and the International Mouse Phenotyping Consortium—are constructing standardized mouse models with phenotyping data to study gene function. These consortia distribute models through established repositories in North America, Europe and other developed regions. Some repositories, however, have difficulties in distributing to industry because of fear of third-party claims arising from IP that might have been infringed in the high-throughput pipeline for transgenic mouse development². Underlying patents that cover reagents and methods are difficult to identify in this complex environment. Once again, the NIH provided the US repositories with Authorization and Consent, but repositories in other jurisdictions are not so protected. Restrictions on distribution to industry threaten the long-term financial sustainability of resource repositories because they limit the ability of repositories to impose a split pricing model of cost recovery for academic uses and higher fees for industry.

The shadow hanging over transgenic mouse repositories serves as a warning for other repositories operating in uncertain IP environments, such as the distribution of CRISPR-Cas9–generated plasmids. At least there, the Broad Institute, with the first patent issued for the technology, is liberally licensing the technology for academic purposes³⁵, but it is clear that the patent landscape for CRISPR-Cas9 will involve many players with disparate interests. Concerns about freedom to do research using this powerful new technology will be haunted by the potential for patent disputes in coming years. As the key actors holding IP in this space are likely, in the first instance, to be academic institutions, their selection of licensees and the terms of their licenses will be crucial, particularly regarding onward licensing by those licensees to the research community. The Association of University Technology Managers recommends some caution in licensing university technologies to NPEs, for example, and recommends best practices for licensing to preserve rights for research uses³⁶. However, such laudable collective guidance may be trumped by increasing pressures on individual university technology transfer offices to generate revenue through technology licensing.

Conclusions

Who should act in the face of assertion of IP rights that limit research, and when should they act? Legislative initiatives, such as a research exemption or specific anti-troll legislation, have the potential to offer the most coherent and durable solutions, but legislation confronts realpolitik. We are therefore left with a variety of tools not specifically designed for ensuring that patent rights do not impede research, but that are useful nonetheless. Judicial decisions to award damages to winners and penalize losers, recent process-oriented reforms in the America Invents Act, and legal interventions such as Authorization and Consent are all available to funding agencies in some jurisdictions. An understanding of the broad range of policy options available, with examples of their deployment, should assist in tackling conflicts between assertion of IP rights and research uses. However, to claim special treatment and freedom to operate in research, research institutions must come to the debate with clean hands. Universities, in particular, need to ensure that they themselves do not behave in the same way as the patent trolls they decry³⁷.