INTELLECTUAL PROPERTY · Patents, so critical to encouraging investment in developing new technologies, threaten to become a legal and economic minefield that could prevent effective commercial exploitation of genomics.

By David P. Lentini and Stephen A. Bent

November 19, 2004 | The technology necessary to enable the integration of genomics with drug discovery and medicine is complex and multifaceted. Tests for gene-expression patterns require from hundreds to thousands of specific nucleic acid sequences placed at precisely known locations on chemically prepared surfaces that are exposed to various reagents, processed, and then scanned with specialized instruments. The gathered data must then be processed to determine reliably whether a gene expression pattern has been recognized. Often, each of these elements is a subject of one or more patent claims from different parties. In addition, large patient populations are required to provide the necessary statistical robustness to ensure the analyses for the presence of an expression patterns are reliable. Thus, the development and growth of integrated genomics requires the participation of myriad different actors, each with a unique stake in the growth of the technology.

The diversity of technologies necessary to enable integrated genomics has also created a thicket of patents covering those technologies. A patent gives the owner the right to prevent others from making, using, selling, offering to sell, or importing the claimed subject matter during the life of the patent (usually between about 17 and 20 years). The patent holder owning rights to a basic element of a technology can command all appli-cations of that technology by forcing parties developing the applications to acquire licenses from the patent holder—if the patent holder wants to grant licenses.

A patent holder can also use the threat of an infringement suit to become the sole provider of a technology or service. Moreover, multiple parties may hold different patent interests in a technology that combines diverse technical elements. Thus, an end-user may require sev-eral licenses — and payment of so-called "stacking royalties" — to use an end product.

Furthermore, there is no requirement for a patent holder to actually exercise or license his or her invention. A patent holder can simply use the patent to block any practice of the patented technology.


Safe Harbor?
U.S. patent laws provide few safe harbors for using patented technolo-gies without proper license. For example, the Court of Appeals for the Federal Circuit (the most senior patent court next to the Supreme Court) recently held that even academic institutions performing non-profit, basic scientific research can be held liable for patent infringement. In the Court's opinion (Madey v. Duke University), Congress has not provided for any specific relief from claims of infringement just because the infring-ing acts provide no monetary profit to the infringer. If the actions benefit the infringer's self-interest, then the infringer is liable for damages. The only question for consideration, then, is the calculation of damages. That result is still pending.

Another Federal Circuit opinion scaled back one safe harbor provided by Congress to protect parties from patent infringement liability in the course of performing acts for FDA clinical trials. In that case (Integra Lifesciences I, Ltd., et al. v. Merck KgaA et al.), a pharmaceutical com-pany used a patented drug target to screen its libraries for compounds that were potential drugs. The pharmaceutical company argued that its ac-tions were within the FDA trials safe harbor, since the infringing acts were done to develop a new drug that would be the subject of an FDA trial. The Court disagreed, holding that the research in question was too far upstream of a clinical trial to fall within the acts defining the safe har-bor. However, the question as to how much the infringer owes in damages remains to be decided.

These factors indicate that patent holders have powerful legal tools at their disposal. And parties active in integrated genomics will continue to be affected by these developments for some time to come. For example, the Madey and Integra decisions indicate that any activities, whether or not for monetary profit or basic research, can be subject to patent infringement. Indeed, the threat of infringement has led to severe criticism of some players in the integrated genomics field.

Myriad Genetics, which holds the patent for the BRACAnalysis rtest to determine the presence of the breast cancer-related gene BRCA, has been criticized for requiring that full sequence testing be done only at its laboratory and for charging a premium price for the test. Chiron has been criticized for its patent dominance over the hepatitis C ("HCV") genome and the terms that company seeks from third parties seeking to develop new diagnostics and therapeutics for HCV. The patent holders respond that the high costs, large failure rate, and long lead times to profit necessitate such licensing terms; otherwise, basic research could not progress for lack of sufficient economic incentive.

Notwithstanding the free-market rationale for patenting and licens-ing, some attempts have been made to reduce the risk of patent liability, and thereby reduce costs to the end users, by providing a specific safe harbor to patent infringement for using genomic technology under cer-tain conditions. In 2002, for example, a bill (H. R. 3967) was introduced in Congress "to provide for noninfringing uses of patents on genetic sequence informa-tion for purposes of research and genetic diagnostic testing, and to require public disclosure of such information in certain patent applications." This legislative initiative appears to have stalled, however.


Offshore Screening
Another approach to avoiding patent liability or licensing costs may be to perform any infringing screening activities outside of the U.S. and relay the resulting data back on-shore for analysis. This approach would follow the Federal Circuit's recent decision in Bayer AG, et al. v. Housey Pharmaceuticals, Inc., in which the Court held that transmitting data resulting from the offshore practice of a process that would have otherwise infringed a U.S. patent had it been practiced onshore to a receiver in the U.S. does not constitute patent infringement. Thus, a party seeking to utilize data from genomic testing for any purpose (e.g., research, drug development, or diagnostic testing) could arrange for the samples to be tested offshore and the resulting data relayed back to the U.S. for analysis. Such an approach could take advantage of geographical gaps in patent coverage, and the more restrictive patenting and enforcement laws of other countries regarding genetics-related technologies.

As with any developing technology, the integration of genomics with re-search and healthcare is evolving in response to the needs and constraints established by various interested parties. Two of the key parties involved in this evolution are patent holders, who represent the myriad of enti-ties attempting to establish this technology in the marketplace, and the patients who are the ultimate end-users and beneficiaries. The interaction of these two parties presently is creating economic and legal hurdles that may ultimately hamper the fullest application of this technology without some degree of relief from lawmakers or the courts.

That relief may come in the form of safe harbors from patent infringement. However, whether and how such relief is presented is not yet clear.