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January 12, 2010

Comments

Kevin,

Nice article. Proving once again that "journalism" doesn't exist anymore.

Shocked, shocked I tell you. This is back to the future, with the ghost of William O Douglas and the monopoly trust busters arisen again to take on patents. Oh boy, I know I am too old when I am old enough to see this wheel turn.

The newspaper is a hack liberal mouthpiece. Why are you surprised? They apply the same standards and ideology to any public policy issue.

Dear Max:

At least Justice Douglas had good reason to be wary, since he grew up in the age of trusts and true monopolies. He was as wrong as he could be about patents, but his prejudice was understandable.

What is more troublesome to me than the Times blissful ignorance is that the current Court seems to be as misinformed about patents as the Douglas court was. They treat patents like they were gold stars given out to good pupils (maybe that says something about their own school experiences) rather than as a bargain that promotes disclosure. And of course the Court is burdened by copious dicta, from Justice Douglas as well as 19th Century decisions, in the same parsimonious vein.

In contrast, the Burger court that decided Chakrabarty understood the limits of the law to fashion behavior as well as the limits of their own capacity to make the kinds of decisions better left to the political branches. (This was before Bush v. Gore, of course.) Until the Court starts listening to anyone who understands the usefulness and necessity of patents, we'll likely get the same philosophical basis for their decisions as we see in the Times editorial pages - misinformed.

Thanks for the comment.

"They treat patents like they were gold stars given out to good pupils (maybe that says something about their own school experiences) rather than as a bargain that promotes disclosure. "

I think that's because they understand 103 better than most people :( Including me and you Kev.

Justice William "the Man" Douglas had it right.

Who else could do this:

"He graduated fifth in his class in 1925, although he would thereafter claim to have been second."

"legal realist movement, which pushed for an understanding of law based less on formalistic legal doctrines and more on the real-world effects of the law.
"

We need more of the legal realist movement in today's troubled times.

There is so much win in this guy's wiki it's hard for me to take it all in at once. It is as if he was a "god" amongst judges.

Just read this:

"Ultimately, he himself believed that a judge's role was "not neutral." "The Constitution is not neutral. It was designed to take the government off the backs of the people...." "

I mean come on. That's tha shizzle for nizzle my dizzle.

"Impeachment attempts
There were two attempts to remove Douglas from office, both unsuccessful.
"

I mean come on, this guy trumps other justices by MILES. Not ONE, but TWO attempts to remove him from office and both amounted to naught! He's like Clinton on steroids!

Kevin,

It is true that the LA Times neglected the disclosure value of a patent. But your argument needs a serious qualification. No one is stopping the big biotechnology companies from pursuing the trade secret route even with a patent system. Thus, these companies pursue patents on the calculus that 20 years of patent monopoly is more valuable than potentially perpetual trade secrecy.

The flip side of this calculus is that the invention will presumably be made public more quickly under trade secrecy (due to the availability of reverse engineering and independent creation) than under patent protection. Otherwise, the companies would simply opt into trade secrecy. If you think that trade secrecy will give you longer and better protection, there is absolutely nothing stopping you from using it.

"It is true that the LA Times neglected the disclosure value of a patent. But your argument needs a serious qualification. No one is stopping the big biotechnology companies from pursuing the trade secret route even with a patent system. Thus, these companies pursue patents on the calculus that 20 years of patent monopoly is more valuable than potentially perpetual trade secrecy.

The flip side of this calculus is that the invention will presumably be made public more quickly under trade secrecy (due to the availability of reverse engineering and independent creation) than under patent protection. Otherwise, the companies would simply opt into trade secrecy. If you think that trade secrecy will give you longer and better protection, there is absolutely nothing stopping you from using it."

The truth! It burnses! It freezes!

Dear TJ:

Not quite. Even the Times editorial writers recognized that this is, in large part, a policy argument, and a policy meant to provide incentives for some behavior (disclosure) over others (trade secret).

Your analysis is lacking some important elements. For the past 30 years, university scientists and biotech start-ups (frequently with some of the same people wearing different hats) have done the initial work on the genetic bases of diseases, which is time-consuming, expensive and (generally) prone to failure. Under these circumstances, big companies have been happy to wait until the startup had something worthwhile, occasionally investing (Kirin with Amgen, for example) and occasionally acquiring (Hoffmann-LaRoche with Cetus (PCR) and Genentech). The small companies had several incentives to use the patent system, including most notably that the professors who were the scientific brains of the companies still had publication responsibilities to their universities, their colleagues, their students and their professions. In addition, patenting was the way small companies reduced the likelihood that a big company would simply expropriate their technology.

Banning gene patents changes this dynamic. Now, it is the big companies that have the incentives to take information gleaned from scientific publications, and combine it with their own proprietary technology, to produce the trade-secret based diagnostic tests I was discussing.

So you are right that "they can do it now," and some of them just might; but it isn't a good idea to make policy decisions that influence events in that direction.

And, believe me, the hubris that these tests will be easily reverse-engineered is unwarranted. I'll give you a drug example - Premarin. Not under patent, the method of making it is kept as a trade secret, and there is not now and probably will never be a generic drug competing with the brand. Genetic diagnostic testing for multigene diseases is much more like Premarin than you appreciate.

Thanks for the comment.

"No one is stopping the big biotechnology companies from pursuing the trade secret route even with a patent system. Thus, these companies pursue patents on the calculus that 20 years of patent monopoly is more valuable than potentially perpetual trade secrecy."

Because the current system properly rewards disclosure. They don't (usually) elect trade secret protection now, and we don't ever want them to. Non sequitur, TJ.

Call me stupid, but I do not understand which "side" is Kevin Noonan. Gene patents are different from Chakrabarty's invention which was a genetically modified bacterium. I agree with Mr. Noonan's assessment of LA Times' editorial rendition, but I am left wondering whether Mr. Noonan is on the side of ACLU et al or Myriad. Thank you.

Many of the media people and the so-called public policy advocates have never invented anything to feel what it is to be an inventor and then have your invention stolen. Patents, when awarded properly, provide a great recognition of human cognition and that's the reward that provides the impetus for innovation. The genetic diagnostics companies have got to do a better job in their PR and not have the LA times and ACLU dictate public policy. I guess the same applies to the crop companies.

Sean,

One thing people forget is that the bacterium in Chakrabarty was not recombinant or genetically engineered in the modern sense. The case was decided before PCR and largely before gene splicing and the bacterium was not subjected to either of these now-routine techniques.

It had simply been allowed to conjugate (i.e., swap genetic material through a natural process much like sexual reproduction) with another bacterium. Thus it is much more like a plant created through selective cross breeding than a bacterium expressing heterologous genes.

Also, this clearer understanding puts Chakrabarty much closer to the facts of the Funk Bros. case than most people realize. Chakrabarty simply put two (or more) species of bacterium together under suitable environmental conditions to allow for conjugation such that all the favorable plasmids of the various bacteria eventually concentrated in one bacterium. Sounds eerily familiar to figuring out the conditions under which you can package six heretofore mutually inhibitive strains of bacteria together (i.e., Funk Bros.).

"Sounds eerily familiar to figuring out the conditions under which you can package six heretofore mutually inhibitive strains of bacteria together (i.e., Funk Bros.)."

BJ,

Funk Bros. was one those awful opinions written by the most anti-patent of all SCOTUS justices, William O. Douglas. Thank goodness a majority of justices ignored him in Chakrabarty. If my memory serves me correctly, the host oil-spill eating bacterium created in Chakrabarty contained none of the plasmids naturally that were transmitted to it.

Dear Bruinjack:

Not exactly. First, in Funk Bros. there was nothing other than mixing the two strains. The only thing new was the mixture. In Chakrabarty, an entirely new bacterial strain was created.

Secondly, Chakrabarty involved creating a new plasmid, the combination (fusion) of two otherwise incompatible plasmids. This is distinguishable from Funk Bros. because these two plasmids were not compatible before manipulation by Chakrabarty. Justice Douglas' point was that the growth compatibility of the strains in Funk Bros' was a "secret of nature" that had always existed, which was not the case in Chakrabarty.

(Of course, the court frequently uses language of patent-eligibility when it should speak in terms of patentability - but that's another post.)

So I think Diamond v. Chakrabarty is not in conflict with Funk Bros. at all.

But thanks for clarifying that. You are right that we frequently neglect the facts when discussing these matters, to our detriment.

EG,

True, the bacterium did not initially contain the plasmids, but neither does a labrador have genes specific to a poodle until you cross them to get an adorable labradoodle. My point is not that the Chakrabarty bacterium existed in nature, only that it was produced by a simple, natural process (not genetic engineering). In other words, given enough time someone probably would have found the Chakrabarty bacterium ("1,000 monkeys working at 1,000 typewriters..."). This involved the "hand of man" to be sure, but not in the way most people imagine.

I definitely agree that Funk Bros. is a scourge to patent law and needs to be carefully read or overturned altogether. However, reading Frankfurter's concurrence in Funk Bros. sheds light on the fact the Court invalidated the claims on two independent and defensible bases. First, the mixture was obvious (using the pre-1952 phrase "lacked invention"). Second, the broadest claim did not specify the bacteria in the mixture and thus, as Frankfurter makes clearer than the majority, was essentially directed to the natural phenomenon of mutually noninhibitive bacteria (i.e., preemption). When read in this light, I think Funk Bros. was correctly decided. The problem is most people don't read it this way.

Kevin,

As I noted in my last post (which may not have actually posted yet) I agree that a close reading of Funk Bros. harmonizes it with Chakrabarty.

Not to beat the Chakrabarty horse into the ground, but I read through the Chakrabarty patent for "fun" a few weeks ago and could discern no application of the techniques we associate with molecular biology today. There were several references to specific plasmids that had been derived from natural bacterial sources. I tried unsuccessfully to track down info on these to see if they had been engineered (i.e., digested with restriction enzymes and heterologous genes ligated in). Perhaps you have that info, in which case I would defer to you.

But absent that, the entire discussion in the patent surrounds conjugation between naturally occurring bacteria to gather desirable (and, oddly similar to Funk Bros., non-inhibitive) plasmids into one strain.

The one reference in the patent to artificial plasmids is as follows:
In Escherichia coli artificial, transmissible plasmids (one per cell) have been made, each containing a degradative pathway. These plasmids, not naturally occurring, are F'lac and F'gal, wherein the lactose-and galactose-degrading genes were derived from the chromosome of the organism. Such plasmids are described in "F-prime Factor Formation in E. Coli K12" by J. Scaife (Genet. Res. Cambr. [1966], 8, pp. 189-196).
The abstract of this paper states:
A model for F-prime formation is presented. It predicts that an Hfr strain giving rise to an F-prime factor would acquire a deletion corresponding to the chromosomal fragment carried by the episome. Genetic studies have confirmed this prediction. Concomitant transfer to the episome of a gene determining a function vital to the cell has permitted selection of derived Hfr strains in which the episomal fragment has been translocated to various sites on the bacterial chromosome.
I interpret this to mean the plasmids (episomes) arose via natural internal processes in the bacterium and were isolated by selection ("isolated"... hmmm). This is a far cry from recombinant DNA technology and, as I said before, sounds like selective breeding to me.

Of course, all this arcane discussion ultimately obscures this main point: I agree whole-heartedly with you that isolated nucleic acids are patent-eligible and that the LA Times is dead wrong on this issue.

Dear Bruinjack:

I think what they did was take two plasmids that were incompatible (in the long term - you could get them into the same bacterium but they wouldn't remain) and treat the bacteria with UV light. This triggered the recA gene to repair the damaged DNA, and sometimes this resulted in plasmid 1 being introduced into plasmid 2 to make plasmid 3 - encoding both degradative pathway enzymes plus different drug resistance markers. Then all you had to do was keep the bacteria under dual selection and wait until the ones without plasmid 3 died.

I also think Justice Frankfurter's concurrence is the key - Justice Douglas had little to say except "not patentable," so the concurring opinion brings out the points you make.

Thanks for the comments.

Being a novice in the legal field, I must read Diamond v. Chakrabarty and the underlying patent. By the way, what is the patent number for it? Can't seem to find it. Thanks.

Dear Sean:

USP 4,259,444, granted March 31, 1981

Happy reading.

Kevin,

I don't think my basic model is incorrect. You seem to treat disclosure as itself a benefit. But disclosure provides little benefit until the patent expires, at least absent consideration of spillovers into other fields (i.e. design-arounds).

You raise the issue of where a university makes a pioneering breakthrough, and then a big company takes the pioneering breakthrough and develops the diagnostic test. I am not sure what this adds. Without patents, the university would not be able to reap any reward from this, since they have the imperative to publish the research anyway, and thus cannot keep it a trade secret. But how is the patent system facilitating the disclosure here? Without a patent system, the university would still disclose the technology because of the imperative to publish. It just wouldn't get money for it.

If your hypothetical is to make sense, then it must be that in a system of patents, the big company would take the pioneering technology (which gets disclosed no matter what), and obtain its own later patent on improvements. In a system without patents, the big company will keep the improvement as a trade secret. But this is where my earlier point comes in: the big company can keep the improvement a trade secret in either regime, and the pioneering technology gets disclosed in either regime. The only difference is that in a patent regime, the big company will opt to patent the improvement also. But that is a net loss for society, because the big company must calculate (and presumably calculate rightly) that they can fleece the public for longer under a patent regime than under a trade secrecy one. There is no other reason not to keep the improvement a trade secret.

To be clear, here is what I am not talking about: (1) the incentive to create--the university might invest less in creating the pioneering technology in the first place--since you did not mention that incentive in the initial post; (2) distributional consequences--i.e. universities are popular and like to get patent royalties for their stuff rather than publish it free--because patents shouldn't be simply to favor politically popular constituencies, nor to be granted where the disclosure would occur anyway due to publish-or-perish incentives. If you think that patents are moral rewards (rather like gold stars) to be given for achievement whether or not they are strictly necessary, then we simply have a normative disagreement.

Dear TJ:

Well, I don't think patents are merit badges or gold stars - I think they provide a useful incentive for societal goals, with consequences that are beneficial for the US economy and society.

But you use of the word "fleece" has convinced me that we certainly have at least a normative disagreement, which I'm sure we can't resolve through comments on the blog.

But I appreciate your position, and thanks for your comments.

Kevin:

Since you say the same thing over and over, I will do the same: critics of "gene" patents do not (generally) care about composition patents on full-length genes. They care about patents claiming a process for correlating a genetic marker with a trait or disease. They should care about this. A correlation between a genetic marker and a trait/disease is a fact of the natural world, and while the person who discovers this fact may be entitled to get his name in the newspaper, he is not entitled to prevent others from thinking about or observing this fact. If he develops a new process for identifying the presence or absence of the genetic marker, then by all means give him a patent. Short of that, give him a cookie.

The idea that we will see less tests on the market by prohibiting patents on the correlation underlying the test is the most ridiculous thing ever perpetuated on this and other blogs. That's all for today!

Dear Gary:

I'll stop saying "the same thing over and over" when newspapers, the ACLU and others stop repeating the same falsehoods and distortions. It's that simple - I'm not going to let these kinds of lies just sit there without challenging them.

If those who oppose gene patents limited their objections to genetic diagnostic testing, my post would be different. But they don't - not the newspapers, not Congressman Becerra, not the ACLU, not PubPat and not any of the other plaintiffs in the SDNY lawsuit. So we need to consider the consequences of what they are proposing - a ban on patenting genes, period. You can't pick and choose the consequences you like and ignore the ones you don't (or that you recognize are a bad idea with real negative impacts on biologic drug development, to mention one such impact).

And while TJ at least recognizes that the outcome I envision is possible (although he thinks it is equally likely with or without patents), you seem to think it is an impossibility. Enlighten us - why? What is it about the technology that you think would preclude that outcome? And (since neither one of us can be certain about what will happen), why are you willing to risk that outcome?

Thanks for the comment.

TJ (to some extent) and Gary,

The big thing not discussed much is the incentive to develop and disseminate a test, as opposed to the incentive for initial discovery. No company will pour millions of dollars into educating doctors and patients about a test only to build up a competitors market.

Sure, university researchers will continue to study and validate associations, but this almost never reaches the docs themselves. It takes forever to change the standard of care in this field without a corporate party with sufficient incentives pushing for it.

So while we're talking about the patent law's goal of bringing the benefit of innovations to members of society, let's look at "conditions on the ground."

Disclosure is nice (and certainly one of the goals of the patent system), but bringing advances to the people is better.

Bruinjack:

As I've told Kevin, it takes money to start a coffee shop, too! Seriously, go take a look at the roster of tests offered by Quest Diagnostics and LabCorp, the two leading reference laboratories, and you'll find that the overwhelming majority of them are not, and never were, patented.

A much better plan is to adopt a regulatory exclusivity scheme for tests similar to that currently in place for drugs. This will come at a cost, namely greater scrutiny of a test's sensitivity and specificity, but that's a good thing, right?

Dear Gary:

A regulatory exclusivity pathway for these tests might also work, but there isn't one. Should there be one, maybe a discussion of precluding patents on such tests would be timely. Let's not put the cart before the horse.

Thanks for the suggestion.

Kevin:

Huh? I don't care if there is a regulatory exclusivity pathway for tests or not, but the lack of one sure doesn't make timely or untimely a discussion about whether tests ought to be patented. Ask Myriad, Prometheus, and the Mayo Clinic whether such a discussion is timely.

Listen, the issue of whether a generic process for correlating a biological marker with a disease or trait is patent-eligible is, in the immortal words of Justice Breyer, not a close call, and you know it. In that sense, it's kind of like the ESTs back in the good ol' days. The folks at Human Genome Sciences and Incyte and Millenium had an eloquent script they read from as to why ESTs were entitled to patent protection, but I don't think even they really believed what they were selling. Certainly there are significant differences between these two situations, but the bottom line is that I don't know anyone who thinks there ought to be patent protection for tests other than those whose pockets would be lighter by the lack of such patent protection.

Dear Gary:

Your opinion - you're entitled to it. But it always comes down to the greedy patentee argument, which is tiresome. The issue raised in the editorial was gene patenting, not genetic diagnostic patenting, and my post was about the poor policy decision a gene patenting ban would turn out to be.

Justice Breyer is also entitled to his opinion (and his is more important than yours or mine), but his opinion was just as irresponsible, since it would preclude ALL diagnostic method claims. I think whenever you have an opinion to preclude ALL of a certain type of subject matter from patenting, unless it falls within the broad categories set out by the Supreme Court in Chakrabarty and other cases, you are making a mistake.

And, if you have read the Fischer case, ESTs are patentable, provided a patent applicant satisfies the utility requirement.

Thanks for the comment.

Kevin:

A flat prohibition on composition patents for isolated nucleic acids would be an outrageously bad thing. So it sure is a good thing that such a prohibition will never occur. This is what bugs me about your posts. You know that such a prohibition will never happen, but you act like it will if these editorial boards and academics are not stopped in their tracks. Listen, there is no doubt that many of these commentators are not schooled in the finer (or even duller) points of biotechnology patent law, and that certainly comes out in their comments. But the true position they are advocating -- prohibition of patents for generic processes for correlating a genetic marker with a disease or trait -- is not only legitimate, it is absolutely, undeniably the correct one.

You can call Breyer irresponsible if you want, but his statement of the law in this area is the only correct one out there. Don't forget that Scalia agreed with Breyer (and the Solicitor General) during oral argument in LabCorp v. Metabolite. The only reason the Court didn't decide the case (which would have been a slam dunk in favor of LabCorp) is because the specific 101 issue had not been raised in the lower courts. Personally I thought the Court was wrong about this, but I guess I can understand it.

And yes, I know all about Fisher. But remember, prior to that case, the Incytes of the world were arguing that ESTs were patent-eligible even as probes. It was a ridiculous position, and luckily the CAFC saw right through it.

Dear Gary:

Actually, I think the Court did those with your position a favor in CIG'ing the Labcorp case. Counting Justice Scalia (which I don't think is certain - he can question closely those he disagrees with), there would have been 4 votes for Labcorp. But remember, the Chief Justice did not participate in the case. So it could have been 4-4, and then there would be a decision contrary to your position - instead of a dissent with no precedential value.

You may think a gene patenting ban is ridiculous and will never happen, but that is precisely what the Plaintiffs in the AMP case have asked the court to rule. That is what Congressman Becerra's bill would have done. I haven't lost sight of that, and I ask you not to do so.

Thanks for the comment.

bruinjack:

The reason that I didn't discuss the incentive to develop the test is because Kevin put that out-of-bounds in the initial post ("Insofar as these sentiments speak to the drive to innovate and develop diagnostic tests, they are correct."), relying instead on the incentive to disclose only. My point is that the incentive to disclose, alone, can never suffice to justify patents--you always need an incentive to create story. Otherwise, the disclosure occurs only if the patent monopoly is better than the trade secret monopoly.

My sense is that Kevin is actually wrong about the incentive to create aspect: that we actually do need patents to develop diagnostic tests and not just to disclose them. But that is an entirely different line of argument.

I LOVE this post, Kevin. You have given the trade secret regime problem the more thorough treatment it deserves here.

TJ and Gary:

A critical point is that disclosure is ENCOURAGED by the patent system and would be DISCOURAGED without it. The public does accrue benefit from this immediately, in that others in the field may begin to improve on the disclosed invention right away.

Reverse engineering is a wasteful use of resources, especially considering that the same resources could be used for R&D into new and better technology under the patent system (rather than just for figuring out existing technology).

Thanks again, Kevin!

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