This Just In -- The Anti-commons Aren't So Tragic

    By Kevin E. Noonan --

The problem, according to the academics and the pundits, is that patent exclusivity in certain areas (such as gene patents) could result in a "tragedy of the anti-commons," inhibiting innovation.  One of the many manifestations of this tragedy, according to such august bodies as the National Academy of Science and the Federal Trade Commission, was expected to be an increase in litigation as patentees protected their exclusive rights.  A related issue is the exposure to patent infringement liability for university researchers in the aftermath of the Madey v. Duke case, where the Federal Circuit ruled that university research did not fall under the "common law" experimental use exemption enunciated by Judge Story in Whittemore v. Cutter, 29 F. Cas. 1120, 1121 (C.C.D. 1813), because university research was not performed for "for amusement, to satisfy idle curiosity or for strictly philosophical inquiry," but as part of the university's "business objectives" (teaching and research).  The fear of this liability has led to proposals for basic research to be entitled to a broad exemption.

The underlying grounds for both types of concerns have once again been found to be non-existent, in a study published in the April 4th edition of Nature Biotechnology.  The study, by Ann E. Mills and Patti M. Tereskerz from the Center for Biomedical Ethics and Humanities, program in Ethics and Policy in Heath Systems at the University of Virginia, and entitled "Empirical analysis of major stem cell patent cases: the role of universities" is limited to stem cell patents and litigation involving such patents.  The authors identified these patents as being relevant to questions about the existence of an anti-commons tragedy because such patents were expected to become more important with the policy change on embryonic stem cell research by the Obama administration, and because "there are few or no alternatives to patented technologies that enable embryonic or adult stem cells to be directed into specific cell lineages" and "[t]he interdependence of the technologies involved with these stem cell patents and the fragmentation of their ownership across many organizations could make the task of coordinating access to key technologies an intensive as well as costly process, and so create an anti-commons in the field."

The study builds on earlier work by Bergman and Graf (2007, Nat. Biotechnol. 25:419–24), who indentified three International Patent Classes where most stem cell patents can be identified.  Mills and Tereskerz reviewed these IPCs from U.S. Patent and Trademark Office records for the number of patents in the PTO database in each class claiming stem cells and the number of these patents involved in litigation.  The authors report identifying 67 cases involving 23 patents, where one patent (U.S. Patent No. 5,352,605, owned by Monsanto) was involved in 32 lawsuits.  Of the three IPCs, one (C07K 14/peptides having more than 20 amino acids; 605 relevant patents) showed no patents involved in litigation, while the other two (C12N 5/undifferentiated human, animal or plant cells, e.g., cell lines; tissues; cultivation or maintenance thereof; culture media, 1,163 relevant patents, and C12 15/mutation or genetic engineering; DNA or RNA concerning genetic engineering vectors, their isolation, preparation or purification, 2094 relevant patents) showed no statistically-significant difference in litigation when the fact that some patents are involved in multiple litigations was taken into account.

Turning to the specifics of the parties, 7/67 cases involved university plaintiffs, and 5/28 plaintiffs were universities (18%).  In contrast, only 1/89 defendants were universities.  One plaintiff, Monsanto, showed a decided preference for suing on "older" patents, with U.S. Patent No. 5,352,605 being litigated 32 times, and U.S. Patent 4,940,835 being litigated three times.  Excluding cases involving Monsanto as a plaintiff, there were between one and five litigated cases per year between 1986 and 2007 involving patents from these IPCs, with the trend being markedly downward since 1998.

The authors conclude from their data that for these (stem cell) patents, "the rate of litigation to issued patents in the categories studied is extremely small, which calls into question the claim that a large amount of litigation is causing an anti-commons" (while noting that a patent from these IPCs that was litigated tended to be litigated several times).  The authors also note that, contrary to the popular belief that universities would be defendants, in a significant number of cases universities were plaintiffs, defending their own intellectual property.  (Not noted in the main body of the article was whether industry defendants were involved in suits where universities were plaintiffs, a result expected if university protection of intellectual property was being used to prevent commercial expropriation of technology developed by universities with public monies.)  In this regard, seven of twelve cases involving patents that had been litigated multiple times had university plaintiffs.

Regarding the effects of the Madey decision, the authors state that "it appears that the post-Madey fears of opening a floodgate of litigation against universities is not being realized at the moment."  The authors also compare their results with the results of two earlier studies by Walsh and colleagues (National Research Council, Committee on Intellectual Property Rights in Genomic and Protein Research and Innovation, Reaping the Benefits of Genomic and Protemic Research: Intellectual Property Rights, Innovation, and Public Health, National Academies Press, 2006; and Walsh et al., in Patents in the Knowledge-Based Economy (eds. Cohen W. & Merrill, S.) 285–340 (National Academies Press, Washington, DC, 2003).  These studies showed that university researchers were not sued by patentees for performing basic research (a result supported by several other studies, including Walsh et al., 2003, "Science and the Law: Working Through the Patent Problem," Science 299: 1020; Walsh et al., 2005, "Science and Law: View from the Bench: Patents and Material Transfers," Science 309: 2002-03; Straus, 2002, Genetic Inventions, Intellectual Property Rights and Licensing Practices; Nicol et al., 2003, Patents and Medical Biotechnology: An Empirical Analysis of Issues Facing the Australian Industry, Centre for Law & Genetics, Occasional Paper 6; Nagaoka, 2006, "An Empirical Analysis of Patenting and Licensing Practice of Research Tools from Three Perspectives," presented in OECD Conference in Research Use of Patented Inventions, Madrid).

The authors cite the Walsh studies for the proposition that patentees in industry "welcomed" academic research, because it advanced knowledge about the patented technology.  Indeed, traditional concerns were cited by scientists as being greater impediments than patents:  "'unreasonable terms for obtaining research inputs' was cited by 10% of survey respondents and 'too many patents covering needed research inputs' was cited by only 3% of survey respondents as a reason for project abandonment."

The authors conclude as follows:

We find no evidence that Madey is unleashing a floodgate of litigation in the areas we studied, despite the worry voiced by the three reports cited above.  We also find that for the stem cell patents studied, universities are proactive (and have been before Madey) in protecting their intellectual property, supporting the Madey contention that the boundary between industry and academia is blurring.

And yet, like an urban legend, the myth that university researchers are at risk for patent infringement liability, or that patents cause university researchers to abandon research areas for fear of litigation, or that there is a tragedy of the anti-commons, persist, despite all evidence to the contrary.  The only rational conclusion is that these fantasies support a political agenda that is antithetical to patenting.  Recognizing that these problems do not exist may be the first step in rejecting the several solutions proffered for these purely political reasons.

For additional information regarding this and other related topics, please see:

• "Science Progress Article Examines Impact of Gene Patents on Research," December 21, 2009
• "The Tragedy of a Bad Idea," August 25, 2009
• "Author of Nature Article Provides Rebuttal; Patent Docs Provides Surrebuttal," March 26, 2009
• "Genetic Diagnostic Testing: The 'Anti-Commons' Revisited?" March 25, 2009
• "The Effects of Intellectual Property Protection on Agricultural Research: Patents Are Not the Problem," February 3, 2009
• "Newsweek Joins the Anti-patent Bandwagon," January 26, 2009
• "Science Article Should Help Allay Gene Patenting Fears," December 17, 2008
• "Once Again, The New Yorker Gets It Wrong on Patents," August 10, 2008
• "Once Again, The New Yorker Gets It Wrong on Patents," August 7, 2008
• "BIO Report Indicts 'Patent Reform' Proponents," February 13, 2008
• "The True Tragedy of the Anti-Commons," October 8, 2007
• "The Future of DNA Patenting," February 20, 2007
• "The 'Anti-Commons' Aren't So Tragic, After All," October 27, 2006

Comments

[EG]

Kevin,

So, no tragedy of the "anti-commons"? Could it be instead a "commondey of errors"? (Sorry, couldn't resist the play on words.)

The fear about Madey is greatly overblown. An interesting case for some interesting law, but basically a "food fight" between a university and a disgruntled former university director/professor. And Duke could have protected themselves and avoided the huge court costs they incurred if they had bothered to get an appropriate agreement with Madey.

What Madey did establish is that you can gain immunity against a patent infringement suit if you carefully draft your federal grant to come under the "contractor defense" provision of 28 USC 1498. Universities should may be forget about arguing for the "research exemption," they've already got a great defense in place for any federally-sponsored research.

[Dan Feigelson]

Thanks for drawing our attention to this. When the Madey decision came out, I speculated that the suit was primarily personality- rather than commercial-driven, the implication being that the decision was not a harbinger of numerous patent infringement suits against universities and their researchers. I don't know if this article confirms my suspicion, but it's certainly good news.

[Warren Woessner]

FYI: The two Monsanto patents cited as being involved in a lot of litigation have nothing to do with mammalian stem cells. They are directed to vectors and gene for the transformation of plant cells to yield herbicide resistant plants. I was working with Monsanto/DEKALB in this area when these patents issued.
Thought you might want to know.
Warren Woessner

[James Demers]

Madey was a bit more than a "food fight" between cranky rivals. The patented technology at issue was not the *subject* of the research, but rather a tool used in research. To those who make a living developing and selling research tools and instrumentation, that's an important distinction.
Even under 271(e)(1), it remains to be seen how far the exemption can be pushed. Merck v. Integra might be pointing the way ... or it might turn out to be a stop sign.

[Kevin E. Noonan]

Dear Warren:

Thanks - and in addition, of course, these patents have been asserted against farmers who violate their agreements not to replant using saved seed. Generally following the point that litigation does not seem to be a vehicle for inhibiting basic research.

Thanks for the comment.

[6]

Kev, anticommons are always tragic. Very tragic.

[EG]

"Madey was a bit more than a "food fight" between cranky rivals."

JD,

As I explained, the Madey case has provided us some illuminating law as it relates to defenses for federally sponsored research against patent infringement and in (again) construing the so-called "ezperimental use" defense (also referred to as the "research exemption") extremely narrow. But for the litigants involved, it was essentially a "food fight" by a disgruntled former director/professor (Madey) who took revenge against his former university (Duke) "hey, those machines you're using in my former lab are covered by patents I got from another university (Stanford)." If don'te believe me, go read the facts in the Federal Circuit opinion.

Both Madey and Duke could have saved quite a bit of money by simply settling this suit at the outset (as eventually happened after who knows how much was shelled out in attorney fees by Duke sending those patented devices to Madey (now with a university in Hawaii). But then again, if they had settled (or if Duke had gotten an agreement with Madey over use of these patented devices as they could have and should have), we wouldn't have had all that wonderful law I just mentioned.

[David Koepsell]

Hey Kevin, Stephen Colbert's with you, and mentions you by name!

http://www.colbertnation.com/the-colbert-report-videos/271371/april-15-2010/formula-01-liquid-genetic-material

[David Koepsell]

...except, of course, when they are actually tragic:
http://www.scientificamerican.com/article.cfm?id=gene-patent#comments

[Kevin E. Noonan]

Dear David:

thanks for the shout-out re: Colbert - pretty funny.

I am reading Bob's case studies now and will post on them. Since they are contrary to every other study to date, you'll pardon me if I'm skeptical (at least until I've read the original research),

But I respect Bob's scholarship, so maybe he'll surprise me.

Hope you are well.

[Bob Cook-Deegan]

Kevin,

This whole analysis is very muddled and not about the anticommons at all.

As Becky Eisenberg points out in her thoughtful re-examination of the "anticommons" hypothesis in Univ Houston Law Review, one would not expect the anticommons problem to present itself in litigation, and it would not be found in academic-industry conflict; indeed litigation is a poor measure of its impact. The postulated problem of anticommons is transaction costs in aggregating sufficient rights to proceed with innovation. Measures would be about the difficulties in such aggregation (e.g. search costs for identifying requisite IP, failure of in-licensing from academe to industry), not litigation (which is most apt to be a fight over competitors both of whom have made it to market--the point of anticommons is you don't get to market in the first place).

Universities would be an input to subsequent uses, and licensing is a much more direct measure of it, and difficulty licensing the prime measure.

Litigation is thus a crummy measure of the wrong thing. Moreover, it is the downstream users who face any anticommons problem and it would materialize later rather than earlier in the value chain.

Walsh and Cohen's very useful and persuasive survey work is valuable to know, but it's not a very direct assessment of the anticommons problem either. Their work informs the problem of "blocking" patents in academe, not the anticommons (which is conceptually the opposite of blocking). Walsh and Cohen basically find massive and pervasive infringement combined with obliviousness to IP among scientists. The obvious conclusion is *not* that IP is important and good for basic science, but that it is pretty much irrelevant and probably does not do much harm. If it did any work at all, it would probably be obstructive, and the happy finding is that no one pays any attention to patents when they are doing science, thus mitigating the theoretically possible adverse effects. The policy solution would be research exemption in US law, although the absence of litigation does suggest that this problem is not severe, and may not warrant legislative remedy.

Metrics of litigation are interesting and useful, but they are not about anticommons or even about blocking (because blocking will usually be detected not by litigation but by enforcement letters and foregone innovation--again blocking patents won't generally cause litigation, which arises among rivals both of whom get to market). Indeed, it's not entirely clear what litigation measures in patent theory except propensity to sue.