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2001
Impetus for and Potential of Alternative Mechanisms for the Protection of Biotechnological Innovations
Prepared for
The Canadian Biotechnology Advisory Committee Project Steering
Committee on Intellectual Property and the Patenting of Higher Life
Forms
By Pat Roy Mooney
March 2001
Table of Contents
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Context
-
The Impetus for Options
-
The Potential for Alternatives
-
The Conditions for Change
-
The need for a new bargain between society and
science
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Context
In the last two decades intellectual property (IP) has become a
powerful, though imperfect, instrument to establish temporary
technological monopoly and advance market share. IP has been a
major force in the growth and consolidation of the biotechnology
industry. In the 1980s the US government took significant steps
to accommodate patents on living organisms and their components
by re-defining laws to allow for exclusive monopoly patents on
biological products and processes. At the World Trade
Organization and through bilateral trade agreements the biotech
industry has lobbied vigorously to advance the US IP regime
around the world.
Despite the push to harmonize, expand and enforce stronger IP
laws, patents are often a headache for the biotech industry. IP
laws, especially as they apply to biological products and
processes, are characterized by confusion and uncertainty. The
application of patent law to living materials has resulted in
immense and costly legal battles between enterprises competing
for ownership of strategic genes, traits and processes. In order
for patents to have economic value, corporations must defend
their patent claims and enforce licensing requirements under
civil law. As patentable subject matter grows in number and in
complexity so are patent applications.
Critics claim there are too many patents being granted for too
long, and, further, that the subject matter being monopolized is
too often someone else’s innovation. Instead of promoting
the useful arts, patents are criticized for stifling innovation
and hindering competition. The concerns are not just technical,
but go further to question the morality of a legal system seen
as fundamentally inequitable and piratical. Twenty-year
monopolies granted by national authorities in record numbers are
seen as jeopardizing basic human rights, threatening food
security and marginalizing public sector research.
It is in this context that industry is seeking new and
additional mechanisms - technological and regulatory - to secure
their control of biotechnology in the 21st century.
-
The Impetus for Options
Industry's discomfiture with the present intellectual
property system, then, can be summarized as follows:
-
Practically unreliable - The science, the IP
process, and the courts are too unpredictable to allow
enterprises to count on IP as a means of protecting
inventions and markets.
-
Politically unpredictable - Between
"Post-Seattle Syndrome", political turn-abouts in
the European Union, mounting opposition from UN Agencies and
the Human Rights Commissioner, and a backlash among
developing countries, the biotech industry does not trust
governments to "stay the course". For the first
time since the Seventies, legislative reversals are feared.
-
Technologically untrustworthy - Some new
technological advances seen designed to disassemble or
circumvent biotech patents. This points the way to what could
become a profitable move toward lawful patent piracies that)
in the current political environment) governments would be
reluctant to confront.
Each of these concerns is summarized briefly below.
-
Practical/Cost constraints:
The Canadian patent system is being positioned to mimic
the US system. Since the USA is the technological leader
in life sciences, this report will reference the US
situation in order to suggest the direction in which
Canada is moving unless a distinctly different path is
chosen.
It is extraordinarily difficult to monitor and monopolize
a technology that is advancing so quickly. The volume of
life sciences data is doubling every six months.1 In the face of rapid
technological change, the patent system has become
overburdened. (See chart.) IBM acquires 10 new patents
every working day.2 The
complexity of biological patents is also daunting and
increasing. In 2000, the US Patent & Trademark Office
received one biotech patent application that was the
equivalent of 400,000 pages in length.3
Complexity has led to a massive leap in transaction costs.
The legal costs of obtaining a patent approach US$10,000,
and it typically costs US$1.5 million (per side) to
litigate a patent.4
Operating costs at the US Patent Office now exceed US$1
billion.
The number of intellectual property lawyers in the United
States, for example, is growing faster than the amount of
research.5-6 Since 1995
in the USA, the number of intellectual property lawsuits
reaching federal courts has risen ten times faster than
other legal actions. There were 8,200 cases in 1999
alone.7
Because patents are civil law, these costs fall on the
industry. Were it only a matter of cost, the larger
companies would probably see the expense as a useful
barrier to entry for smaller enterprises. Indeed, the
costs are a barrier. Start-up biotech
“boutiques” are reported to be budgeting as
much for patent litigation as they are for research
expenditures. But even the largest enterprises cannot be
assured that the courts will be on their side. Twelve of
every one hundred biotech patents end up in court.
Forty-six per cent of all US biotech patents that are
challenged in court are overturned and some legal experts
suggest that a still larger percentage would be rejected
if they were challenged. Nor can dominant patent-holders
be certain that a much smaller enterprise does not have a
"submarine" patent that will surface to hold
their market ransom at the point of commercialization. For
the world's biggest biotech companies, these
uncertainties are unacceptable.
-
Political concerns:
Compounding the functional uncertainties and costs
associated with IP, the industry is now discovering that
"patents on life" are politically contentious.
Whereas once, IP stirred no interest whatsoever in the
media or in parliaments, recently a public debate has
emerged.
In 2000, the President of the USA and the Prime Minister
of the UK jointly expressed concern that the biotech
industry would have patent monopoly over the human genome.
Religious leaders shared this concern. The 1999 United
Nations’ Human Development Report (the one that
annually declares Canada to be "the best country in
the world" according to our Prime Minister)
concludes, “the relentless march of intellectual
property rights needs to be stopped and
questioned.”8 In
August 2000 the United Nations Sub-Commission for the
Protection of Human Rights recognized that the World Trade
Organizations’ Trade-Related Intellectual Property
Agreement could infringe on the rights of poor people and
their access to both seeds and pharmaceuticals.9 In November 2000, a
blue-ribbon panel of ethicists and scientists brought
together by the UN Food and Agriculture Organization (FAO)
concluded that IP had gone too far and is a threat to food
security. Most recently, three cabinet ministers (for
trade, justice and the environment) in Sweden announced
their alarm over the scope of gene patenting. A number of
governments within the European Union are now banding
together to challenge an EU patent directive that, they
believe, goes too far in permitting the patenting of
living material. Originally, the directive was only
opposed by The Netherlands and Austria. As of this
writing, it is understood that Sweden, Italy and France
will join the opposition ranks and many anticipate that
Germany will side with those against the directive. In
February 2001 Oxfam UK joined an international campaign
waged by civil society organizations to force
multinational drug companies to make life-saving drugs
available to poor countries. The campaign specifically
attacks the WTO for using trade sanctions against poor
countries that fail to enforce 20-year monopolies on
drugs.10 South
Africa’s court battle with the world’s leading
pharmaceutical houses over the patents and prices for
AIDS-related drugs has also drawn world attention to the
patent issue. Media reports now appear on a daily basis in
Europe and elsewhere debating the merits and morality of
intellectual property in biotechnology.
The industry and its investors must worry that mounting
political opposition to patents could lead to legislative
changes that threaten their IP and the market premises
based upon their IP.
-
Technological complications:
Compounding practical and political constraints, the
biotech industry has discovered some significant
technological problems as well.
At one level, the industry appears to have overreached
itself in patenting "too much too often". In
December 1999, when the USA granted its six millionth
patent (since it began counting in the 1830's), three
human genomics enterprises allowed that they collectively
had human gene applications totaling over three million
claims. The applications were based on the assumption that
the human cell line contained at least 100,000 genes. When
the first genetic map, "The Book of Life" was
unveiled in February 2001, researchers concluded that
there might only be 30,000 to 40,000 genes. The revelation
immediately called into question the scientific
credibility and capability of the patent applicants - as
well as the competence of patent examiners.
Revelations in the Book of life have posed other
complications for the patent system. British researchers
announced that homosapiens share half their genes with the
banana, for example, while US scientists said that half
our genes could be found in ringworms. The conclusion must
be that some gene patents on plants could actually have
implications for people. In fact, a cold tolerance gene
found in arctic char might also be in arctic moss or in
the Inuit scientists doing the lab work. Science has
skewed the boundaries of species and kingdoms.
At another level, the cost and uncertainty of IP - and the
potential for patents to thwart innovation - has
encouraged some companies to "invent around" the
patent system altogether. The chief scientific officer at
Bristol-Myers, has said there are more than 50 proteins
possibly involved in cancer that his company is not
working on because the patent holders either would not
allow it or were demanding unreasonable royalties.
Another biotech company may have a solution. Athersys, a
company based in Cleveland, has developed a technique for
randomly turning on genes inside a cell. Cells are exposed
to low-level radiation that causes a random break in a
chromosome. The company then inserts a genetic
"on" switch into the break. This turns on a
nearby gene and causes the production of the associated
protein. By automating this process with respect to a vast
number of cells, the company ends up with a collection
that produces virtually every protein. It can then search
this collection for a cell producing a particular protein
of interest. Athersys maintains that since the protein is
produced without isolating or even knowing anything about
the gene, the protein can be used without infringing other
patents on the gene.11
The technology could provide a major enterprise such as
Bristol- Myers Squibb (which is collaborating with the
Cleveland firm) with the freedom to continue drug
discovery by circumventing IP.
These three areas of concern to the biotech industry make
it clear that companies have an incentive to search for
alternative or additional monopoly mechanisms.
Perhaps, the incentive for change is still greater because
the reasons for patents are less urgent now than they were
in 1980 when the US Supreme Court ruled that
microorganisms were patentable.
-
The Potential for Alternatives
The biotech industry is now exploring a number of new mechanisms
that could either supplement or even replace IP as the
"vehicle of choice" in establishing technological
supremacy in specific markets. These include:
-
Biological monopolies - Terminator and other
sterility or trait-control technologies that make it
difficult or impossible for customers to replicate the
biomaterial without returning to the inventor.
-
Biosensors - Satellite and other
DNA-detectors that will be able to identify marker genes or
sequences at any point in the product life cycle.
-
Regulatory or Contract controls – Laws
(including trade secrecy and contract law) that are more
enforceable than IP regimes and that – through
government enforced regulation – protect private
monopolies on the grounds of public or environmental safety.
Each of these strategies is summarized briefly below.
-
Terminator/trait control technologies:
Because patents on more technologies are unreliable and
because litigation is both expensive and uncertain,
transnational enterprises would be more than happy to find
more reliable systems of monopoly control. New Enclosure
mechanisms are being developed. Among them,
negative technologies (“Traitor
Tech”) are attractive because of their built-in
exclusivity and long-range controls. One prominent
variation of Traitor Tech are the
“Terminator” patents. The Terminator version
causes the planted seed to become sterile at harvest time
so that farmers cannot save the seed for another growing
season. Other Traitor technologies offer positive
or negative traits in plant varieties that can only be
activated or de-activated by the application of
proprietary chemicals. Advanced industry strategies
include the development of seeds that can be regrown but
only if farmers purchase specialty chemicals that
rejuvenate dormant seeds.
-
Biosensors:
The biosensor industry, including gene-chip technologies,
grossed US$400 million in 1998 but is expected to reach
US$ 6.3 billion by 2005. 12 The potential for remote and
hand-held DNA monitoring devices usable in the crop,
cannery or kitchen, is enormous and could ultimately rival
patents as a mechanism for ensuring contract control of
technologies. Some recent developments that point in this
direction:
-
GPS (Global Positioning System) are becoming an
important tool in identity preservation (IP), if an
experimental program in Australia succeeds. In
Tasmania, 600 agricultural fields are being assigned
special identification numbers associated with their
unique GPS coordinates. Backers of the plan are pushing
for all Tasmanian fields to be numbered in an effort to
expedite information exchanges between growers,
wholesalers, government, and consumers. (And patent
lawyers?)
-
Similarly, the Argentine government has launched an
“eye in the sky” to halt tax evasion by
using satellite imagery to monitor their crops.13
-
GeneScan Europe AG and Motorola are developing a new
DNA detection tool for genetically modified crops. By
utilizing Motorola's eSensor DNA detection system
(the “scan gun”), the eSensor could lead to
"on site" analyses via a hand-held device.
The eSensor uses organic molecules to form electronic
circuits that can detect numerous DNA targets
simultaneously.14
-
AviGenics, a US biotech company plans to create a
strain of chicken genetically engineered to have an
extra large breast to yield more meat, with a DNA
copyright tag inserted among its genes to stop anyone
breeding it without permission.15
Some of he new technological strategies are designed to
prevent GM products from infecting conventional crops. The
results can still be worrisome. Researchers have recently
announced a "safe sex seed" that would lead to a
genetic modification of maize in order to resist foreign
genes. In other words, if Monsanto has a sexually
transmitted disease, the rest of the world has to wear a
condom. Working with teosinte, a University of
Wisconsin-Madison scientist has found a molecular barrier
that is capable of completely locking out foreign genes.16
The industry and its investors must worry that mounting
political opposition to patents could lead to legislative
changes that threaten their IP and the market premises
based upon their IP.
In another strategy, Northland Seed and Grain (USA) has
patented a method of doing business - the rather
pedestrian process to establish the pedigree of non-GM
varieties from the farmer purchased seed to household
refrigerator sale (PCT WO/0048454).17
-
Regulation/Contracts:
Yet another New Enclosure strategy comes in the form of
government-enforced public safety requirements. Biosafety
protocols can be used to impose monopoly under the
assumption that the necessity to feed the world or
safeguard the environment warrants the risk of employing a
complex and potentially hazardous technology. Because of
the risk, governments could legislate a private monopoly
for the inventor company to manage the innovation. This
would not be the first time that the state has guaranteed
monopoly in the name of the public good.
Another strategy involves reliance on contract law. Many
companies now see contracts as a more reliable strategy.
Pharmacia (Monsanto), for example, has employed
extraordinary measures to prevent farmers from saving the
company’s patented GM seed – including the use
of Pinkerton detectives to monitor rural areas. The
company has prosecuted vigorously to prevent farmers from
saving seed. Farmers are required to sign a licensing
agreement. Oklahoma’s Secretary of Agriculture,
Dennis Howard, recently commented: “After reviewing
Monsanto’s 2001 Technology Agreement, I would
discourage any farmer from signing this document. Not only
does this contract severely limit the options of the
producer, it also limits Monsanto’s liability.
Marketing agreements and contracts are only effective if
they serve to protect the interests of all parties
involved. The protection of the Monsanto contract is
strictly one-sided….”18
-
The Conditions for Change
It is arguable that IP is no longer essential - or, at least,
the sole effective mechanism - to achieve these ends. The notes
below summarize the present situation.
-
Private sector changes may make IP unnecessary
Global Mergers 1996-99
-
Year - 1996
Value - 0.9 Trillions US$
-
Year - 1997
Value - 1.6 Trillions US$
-
Year - 1998
Value - 2.5 Trillions US$
-
Year - 1999
Value - 3.4 Trillions US$
The role of IP – and the feasibility of alternatives
– has to be understood in the light of a number of
other enterprise developments including mergers and
alliances.
Mergers reduce the need for patent
monopolies: Intellectual property is intended
partly to control competitors and partly to control
customers. But, if the number of competitors is reduced to
a handful of giant enterprises through mergers and
acquisitions, much of the argument for patents dissipates.
Attached to this report are tables summarizing the global
market share of the top ten enterprises in 1999 in the
major industrial sectors concerned with biotechnology. The
figures indicate a trend toward oligopolistic markets on a
world scale.
-
When the US Supreme Court approved "life
patenting" in 1980, no single seed enterprise was
significant on the world stage. Today, the top ten
companies control 31% of the commercial seed market
worldwide.
-
About the same time. 65 pesticide manufacturers were
considered dominant in the research and development of
new biocides. No single enterprise was seen to
dominate. In 1999, the top ten enterprises controlled
more than 90 per cent of the global market.
-
The top ten veterinary medicine enterprises now control
68% of the world market.
-
Whereas in the late Seventies, the top 20
pharmaceutical houses held barely 5% of the global drug
market, the top ten in 1999 controlled over 51% of
world sales.
-
For all the talk of diversity, 6 major companies held
32% of all agricultural biotechnology patents issued by
the USA to the end of 1998 and only 30 private and
public research entities held 15 or more (of the 3092
patents) each.
The extent of corporate mergers grew from a record US$0.9
trillion worldwide in 1996 to a breathtaking US$3.5
trillion in 2000.19
Most observers find such figures incomprehensible. The
total of world mergers in 2000 amounts to a sum roughly
equivalent to 10 per cent of total world output (the
combined GDP of every country) in the mid-1990s.20 Global mergers in the last
two years of the bygone decade exceeded the total of the
previous eight years.
This represents an enormous concentration of power. It is
a sign of the pace of change that the securities and
investment industries have only lately begun to monitor
worldwide mergers. In 1974, the annual value of US
acquisitions stood at less than US$12 billion. In 1988,
the tally soared to US$330 billion, before dipping
slightly in the recession years that immediately followed.
In 2000, the US merger figure was well above US$1.7
trillion.21
By no means has all this activity been fuelled (or even
primarily initiated) by the biotech industry. Petroleum
and automobile industry mergers, as well as financial and
informatics (telecoms and media) industry mergers, have
led the field. At the mid-point of 2000, cross-border
mergers were up 26 % over the previous record-shattering
year with a tally in excess of US$1.9 trillion. Half a
trillion dollars’ worth of these mergers were in the
informatics sector.22
But the biotech-related industries (including food and
health as well as other bio-based products) have not been
a bystander. According to a UNDP study, mergers in the
global biotech industry (excluding pharmaceuticals, for
example) rose from just US$9.3 billion ten yeas ago to
more than US$172 billion in 1998.23 Roughly estimated, mergers
in the pharmaceutical sub-sector, that reached US$80
billion during the period 1994–97, have probably
exceeded US$400 billion today. In the first six months of
2000, drug company mergers added up to just under US$100
billion.24 At the
beginning of 2000, Glaxo Wellcome and Smithkline Beecham
(two UK drug firms) agreed to the (then) world’s
largest drug industry merger (US$76 billion). Days later,
Pfizer snapped up Warner-Lambert (two US drug majors) in a
still bigger deal valued at US$90 billion.25 Only Merck among the
world’s top ten drug companies is not thought to be
a potential buyer or seller. Mergers in the agribusiness
industry (including food processors and retailers as well
as ag input companies) leapt dramatically in 1999 when
DuPont bought the world’s largest seed company,
Pioneer Hi-Bred, for US$7.7 billion. Monsanto, however,
led in agricultural biotechnology mergers with its
purchases of almost US$8.5 billion in seed company stocks
since the mid-decade point. Now Monsanto itself has been
acquired by Pharmacia & Upjohn (to be called
Pharmacia) in a deal valued at US$37 billion. In the first
half of 2000, the pace of mergers in the food sector
increased with almost US$150 billion in acquisitions.26 With some deals still
to be confirmed, the estimate for mergers in 2000 in this
sector is now US$250 billion.
Alliances reduce the need to use IP to create
market entry barriers: Corporate mergers are only
one way companies are taking over more territory and
technology. But, there are other strategies. In order to
avoid anti-combines laws or nationalist policies,
companies increasingly form alliances to share patents,
know-how and turf in less-regulated ways. Between 1996 and
1998, the world’s largest transnationals established
more than 20,000 such alliances. The top 20 pharmaceutical
houses, for example, had 375 alliances with biotech
boutiques in 1998 compared to only 152 a decade earlier.
Almost all of them were ‘cross-border’
arrangements. Since the early 1990s, corporate revenues
drawn from these alliances have doubled and now account
for about 20% of company income in Europe and 21% for the
US Fortune 500.27
Because of the protection provided by alliances, the
extent of global concentration in pharmaceuticals or in
agribusiness appears modest according to the
conventionally applied monopoly rules monitored by most
countries. But what are the implications, and what was the
deal, when Monsanto agreed to market its smashingly
successful arthritis drug with Pfizer? The new arthritis
treatment is actually outselling Pfizer’s famous
Viagra. To argue that the top ten drug houses have 51% of
the global market does not impress a monopoly commission
that is focused narrowly on asthma or cardiovascular
sub-markets. Neither are anti-combines officials
interested in monitoring the whole seed or pesticides
industry when they perceive the competition to be waged
between maize breeders or broad-leaf herbicide
manufacturers rather than across technologies. Governments
have shown little interest in – or capacity for
– cross-sectoral technology analysis. The monopoly
now arising is within a biotechnology industry
that governments don’t even understand to exist.
These enterprises share a common biotechnology that links
human genomics with human pharmaceuticals with veterinary
medicines with crop chemicals with plant germplasm with
cosmetics with household cleaning products. The biotech
industry is much wider than the competition monitoring
agencies.
There are, however, other factors working against the
patent system that companies must also consider.
-
Public Sector changes have surrendered the field:
There was a time when the academic community could have
argued that public sector research and development was an
effective instrument to keep the private sector
“honest” and socially beneficial. This may no
longer be the case. Public funding for agricultural
development - including research - is withering
everywhere. Annual foreign aid for agriculture in the
South fell by 57% between the publication of the
pro-agriculture Our Common Future (The Brundtland
Commission report) in 1988 and The World Food Summit of
1996 (from $9.24 billion down to $4 billion, in 1990
dollars). World Bank loans for agriculture and/or rural
development in general plummeted by 47% between 1986 and
1998 (from $6 billion to $3.2 billion, in 1996 dollars).28
The aid community's declining interest in agriculture
is reflected in the South's own lack of commitment. On
average, the South spends barely 7.5% of total government
budgets on agriculture. Only a tiny fraction of this goes
to research.29 The
disinterest in agriculture is incomprehensible.
Seventy-five per cent of the "$1 poor" (those
living on one dollar or less per day) are in rural areas
of the world. Rapid urbanization not withstanding, even in
2025, about two-thirds of the "$1 poor" will
still be rural.30 Even
though farmers feed the urban poor, rural areas have
access to hardly half the public services available to
urbanites.31 Almost a
quarter of the entire world's population is fed by
farmers who save their own seeds and struggle for survival
themselves.32
But, if public investment is vanishing, private
agricultural R&D is booming. In the OECD, private
R&D totaled $7 billion in 1993 - up sharply from $4
billion in 1981. Private investment in research during
this period represented an annual growth of 5.1%.
Conversely, publicly performed agricultural R&D rose
just 1.7% per annum, from $5.7 billion in 1981 to $6.9
billion in 1991.33 Well
behind population growth.
Yet, private and public researchers perform markedly
different duties. First, little private research takes
place in the South. Corporate R&D in the South
typically account for no more than 10-15% of total
agricultural research in these countries.34 Secondly, only 12% of
corporate research goes to farm-level technologies. In
contrast, 80% of public research is (at least
theoretically) oriented to the farmer. Food processing and
post-harvest research dominates private research,
accounting for 30-90% of all private R&D. 35 In other words, less than
$100 million of corporate R&D is farmer-focused while
more than $5.5 billion in public funding is (ostensibly)
devoted to improving farm production. There is no chance
whatsoever that private companies will - or will want to -
take over this important research from public breeders.
Private biotech also dominates public biotech. In the
agricultural field, private biotech is spending about
US$1.5 billion per annum compared to about US$1 billion in
the public sector around the world. Aid-based funding for
agricultural biotechnology in the South is probably less
than US$80 million of which, the CGIAR accounts for
$25-$30 million.36 Once
again, the research orientation in the private sector is
very different from that of public researchers.
IP Constraints to U.S. Public Plant Breeding
-
Constraint: Training
Percentage Reporting Constraints: 23%
-
Constraint: Variety Release
Percentage Reporting Constraints: 28%
-
Constraint: Research
Percentage Reporting Constraints: 45%
-
Constraint: Germplasm Access
Percentage Reporting Constraints: 48%
The world's agricultural research is experiencing a
dramatic re-orientation toward post-harvest and food
processing technologies. The decline in public research,
therefore, should be no surprise. Public research is
farm-based; corporate research is factory-based. Half a
century ago, farmers (and their suppliers) accounted for
57% of the consumer's food purchasing budget - which
assured farmers majority control over agricultural policy.
At the end of the century, the farmers' share of the
consumer budget had shrunk to 28%.37 Farmers' Rights (adopted
as a concept by FAO in 1989 and by UNCED in 1992) have
dwindled accordingly.
Today it is common for universities to pay exorbitant
legal fees to defend their intellectual property.
According to the Association of University Technology
Managers annual report, dozens of major universities
– Brandeis, West Virginia, Tufts, and Miami among
them – spent more on legal fees in FY 1997 than they
earned from all licensing and patenting activity that
year.”38 As
companies were raking in close to $100 billion in
royalties, U.S. universities, in 1997, earned only $611
million in licensing fees - hardly half of one per cent of
total patent revenues.39
The doubts surrounding the usefulness of the patent system
for the public sector also include concerns regarding
Plant Breeders’ Rights (Plant Variety Protection)
legislation. Canada only adopted this legislation ten
years ago but the United States has had PBR for three
decades. One recent survey among public breeders in the
USA revealed that 23% of respondents felt that academic
training was constrained by the legislation; 28% felt that
the law inhibited varietal release; 45% said that it hurt
research and 48% claimed that it reduced their access to
breeding material. (See list below.)
Farm-oriented Research
-
Public: 87%
-
Corporate: 13%
-
The need for a new bargain between society
and science
The social contract achieved between industrial inventors and
society at the time of the Vienna World’s Fair of the
1870’s is no longer valid. It is time to re-open the
negotiations in order to be certain that society benefits and
that science is able to innovate responsibly. Governments that
ignore the growing controversy swirling around technological
monopolies do so at their peril.
Between 1980 and 1994 – a period that began with the US
Supreme Court’s decision to allow ‘life
patenting’ and ended with the GATT Uruguay Round –
the share of global trade involving high-tech (patented)
production rose from 12% to 24% and now accounts for more than
half of the GDP of OECD countries.40 This does not take into account
that the overwhelming majority of agricultural commodities
produced and traded by OECD countries are also
‘protected’ by patents and/or Plant Breeders’
Rights (plant variety protection). Perhaps the most telling
development is that the number of annual patent applications
made via the Patent Cooperation Treaty has skyrocketed from
barely 3,000 in the mid-1970s to over 76,000 in 1999 (see
Chart.) Half of all royalties and licensing fees paid to
inventors in the mid-1990s went to corporations in the USA.
Nothing better illustrates that patent monopolies are a strategy
to deny others access to markets than the estimate by WIPO
(World Intellectual Property Organization) that 90% of all
crossborder licensing payments – and 70% of all licensing
fees – are made between subsidiaries of the same parent
transnationals.41 In its 2000
Human Development Report, the UNDP estimates that 90% of the
patents related to high technologies are held by global
enterprises.42
In 1992, several scientific, industrial and civil society
organizations joined to form a nonconsensus dialogue process.
What became known as the Crucible Group was galvanized by the
approval of two ‘species’ patents – on
soybeans and cotton – that appeared to grant exclusive
monopoly control of the biotech development of the crops to
Monsanto. The Group was also spurred into consultations by the
seemingly uncontrolled acceptance of patents on genes and on
indigenous knowledge. Civil Society Organizations warned that
intellectual property regimes had become rudderless and ruthless
and that there were no longer any ‘rules of the
game’. They argued that patents were no longer incentives
to innovation but bargaining chips big firms used to trade turf
among themselves and to exclude smaller enterprises. Patent
litigation costs – then estimated at about US$225,000 per
combatant – had turned intellectual property into a
non-tariff barrier to market entry for smaller innovators. They
speculated that if trends continued, we would see patents become
stock market negotiable assets – possibly even develop
their own ‘trading floor’ – and that the
sacred embargoes against patents on pure science, methods of
doing business, and mathematics would all erode.
In 1998, US courts confirmed that methods of doing business
– specifically trading practices and investment strategies
– were patentable. In effect, it is now possible to patent
Wall Street. In 1999, a San Francisco-based investment bank
announced plans to create a patent futures market by
‘securitising’ corporate patent portfolios and
selling notes to investors. At the same time, a virtual trading
floor in patent licences was created by Yet2.com so that
companies such as 3M, Allied Signal, Boeing, Dow, Dupont, Ford,
Honeywell, Polaroid, and Rockwell could ‘exchange’
patented technologies. Breaking the tradition that all inventors
are created equal before the patent office, the Japanese
government has announced plans to grant venture capitalists and
major IP (intellectual property) investors ‘various
preferential treatments’.43
While the media have been mesmerized by the antics of dot com
entrepreneurs like Amazon in trying to patent chunks of the
Internet and its functions, the most amazing intellectual
property claims have continued to come from the biotech
industry.
Some claims amount to ‘driftnet’ patenting. Not only
in human DNA, but also in the rainforests, the fields, and the
beaches of Canada’s and the world’s indigenous
peoples, biotech companies are scavenging for unique
(unpatented) diversity and placing claims on it without the
slightest notion of how it might be useful – or how others
have used it for thousands of years. At the end of the 1990s,
Heritage Seed Curators of Australia and RAFI identified 147
cases where patent or Plant Breeders’ Rights claims had
been made on plant material without apparent justification.
Almost all the possible abuses identified were based on a search
of the Australian records and amounted to at least 6% of all
plant variety applications in that country since legislation
first made such claims possible. Similar studies of plant claims
in other countries – perhaps especially in New Zealand,
Israel, South Africa, and the European side of the Mediterranean
– would be likely to yield similar scandals.
In 1990, total revenues from patent licences amounted to US$15
billion. By 1998, licencing fees garnered US$100 billion, and
some experts predict revenues of half a trillion dollars per
annum by 2005. For the first time in economic history, patents
are achieving a political profile their assignees could regret.
A recent independent British study of the global biotech
industry has shown that the level of confidence in the leading
companies is low. The following table indicates how the
companies were assessed in total in 12 relevant policy areas.
Engaging Stakeholders: The Life Sciences Report, 2000 Life and
Science: Accountability, Transparency, Citizenship, and
Governance in the Life Sciences Sector;
1 IBM news release.
“IBM announces $100 Million investment in the Life Sciences
Revolution,” August 16, 2000.
2 Anonymous, “Patent Wars,” The
Economist, 8 April 2000.
3 Aharonian, Greg. “PTO Gets 400,000 page biotech
patent application,” Internet Patent News Service, 23
February 2001.
4 Ibid.
5-6 Barton, John H., “Reforming the Patent
System,” Science, Volume 287, Number 5460, 1933-1934,
March 17, 2000.
7 Mullaney, Timothy J., and Spencer E. Ante, ‘Info
Wars’, Business Week, June 5, 2000, p. 107.
8 United Nations Development Programme, United Nations
Human Development Report 1999, New York: Oxford University Press,
July, 1999.
9 Sub-Commission on Intellectual Property Rights and Human
Rights, Commission on Human Rights, United Nations, “Resolution
on Intellectual Property Rights and Human Rights,”
E/CN.4/Sub.2/2000/7, 17 August 2000.
10 McNeil, D. “Oxfam Joins Campaign to Cut Drug
Prices for Poor Nations,” New York Times, 13 February
2001.
11 Pollack, Andrew, "Bristol-Myers and Athersys Make
Deal on Gene Patents", New York Times, January 8, 2001
12 Hord, Bill, "Food Industry Hungry for Biotech Tests
Companies look for ways to quickly and accurately identify genetically
altered crops", Omaha World-Herald, February 11, 2001,, Pg. 1m
13 Reuters, "Argentina Uses Sputnik To Cut Farm Fraud
",1/9
14 "GeneScan Europe AG And Motorola Establish
Technical Collaboration To Detect Genetically Modified Crops"
(SRC:PR Newswire -- ATH:)
15 Meek, James ,"Genetic chickens get DNA copyright
tag: Biotech firm plans to create strain with extra large breasts for
more meat", The Guardian (London), July 31, 2000 Pg. 4
16 "GENE BARRIER IN CORN MAY BOOST TRADE, ENVIRONMENT
"
17 New Scientist, 9 December, 2000, p.7.
18 Dorris, Eva Ann. “Monsanto Contracts: To Sign or
Not to Sign,” Mississippi Farmer, December 1, 2000. The
article can be found on the internet at:
http://www.biotech-info.net/to_sign_or_not.html.
19 Corrigan, Tracy, ‘Cross-border M&A deals at
record levels’, Financial Times, April 5, 1999, p. 16.
Actually, the article sets the figure for the first three months of
1999 at $855 billion – just under the global 2996 record but
there is reason to believe that final adjustments will raise this
figure slightly. The same article places the global M&A total in
1998 at $2.5 trillion. Both the Financial Times article and
RAFI use, as a major source, the Securities Data website.
20 Our Creative Diversity – Report of the
World Commission on Culture and Development, UNESCO, 1995, p. 138.
21 For a more complete discussion of the US and global
merger environment in the 1974–97 time period, please see
Development Dialogue, the journal of the Dag
Hammarskjöld Foundation, Special Issue, 1998, ‘The Parts of
Life’, Chapter 7, ‘Private Parts’, pp. 134 7, by Pat
Mooney of RAFI.
22 The Economist, ‘Business this
week’, July 8th 2000, p. 5.
23 Human Development Report, UNDP, 1999, p. 67.
24 The Economist, ‘Business this
week’, July 8th 2000, p. 5.
25 Pilling, David, and Michael, Adrian, ‘Pfizer seals
Warner-Lambert deal’, Financial Times, February 8,
2000, (ft. com website feature business story).
26 The Economist, ‘Business this
week’, July 8th 2000, p. 5.
27 ‘Mergers and Alliances Hold My Hand’,
The Economist, 15 May 1999 (from the Economist
website library).
28 Robert Paarlberg, “The Global Food Fight”
Foreign Affairs, May/June, 2000, Vol. 79, No. 3, p. 35..
29 Robert Paarlberg, “The Global Food Fight”
Foreign Affairs, May/June, 2000, Vol. 79, No. 3, p. 36
30 Prof. Michael Lipton, Sussex, personal communication,
June 23, 2000.
31 Human Development Report 2000, Human Rights and
Human Development, UNDP, New York, page 33, Figure 2.3.
32 According to the Global Plan of Action for Plant Genetic
Resources adopted in Leipzig in 1996, 1.4 billion people obtain their
food from farmers who save seed.
33 Alston, J.M., P.G. Pardey, and J. Roseboom, 1998.
“Financing Agricultural Research: International Investment
Patterns and Policy Perspectives”. World Development Vol. 26,
No. 6: 1057-1071.
34 Alston, J.M., P.G. Pardey, and J. Roseboom, 1998.
35 Alston, J.M., P.G. Pardey, and J. Roseboom, 1998, p.
1066.
36 Personal communication from Meridiam Vonsultants,
Washington DC.
37 Torres, Fileman, Martin Pineiro, Eduardo Trigo, and
Roberto Martinez Nogueira, Agriculture in the Early XXI Century:
Agrodiversity and Pluralism as a Contribution to Address Issues on
Food Security, Poverty, and Natural Resource Conservation, DRAFT,
GFAR, Rome, April 2000, p.14.
38 Eyal Press and Jennifer Washburn, “The Kept
University,” Atlantic Monthly, March, 2000, pp. 39-54.
39 Mullaney, Timothy J. and Spencer E. Ante, "Info
Wars", Business Week, June 5 2000, p.12.
40 Human Development Report, UNDP, 1999, pp. 67 and 57
respectively.
41 Human Development Report, UNDP, 1999, p. 68.
42 Human Development Report 2000, Human Rights and
Human Development, UNDP, 2000, Box 49, p. 84.
43 Rivette, Kevin G. and David Kline, Rembrandts in the
Attic, Garvard Business School Press, Boston, 2000, pp.
8–10.
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