pageok
pageok
pageok
[Sabrina Safrin (guest-blogging), March 6, 2007 at 9:23am] Trackbacks
Its Not Just About Money: Propertization of Genetic Material and a Tit-for-Tat.

Yesterday, my post explored how patents can beget additional patents as people and corporations, like lemmings, following the patenting activity of others. Today, I want to explore one of the best examples of reactive propertization -- the emergence of exclusive property rights over raw genetic material.

Until recently, nations and individuals treated genetic material -- the subcellular sequences that direct the structure and characteristics of all living things -- as open access property. Like information in the public domain, genetic resources were available in principle for the use of all. No one held an exclusive ownership interest in this material, and individuals and countries freely shared samples of seeds, soil and even animal specimens containing it.

In sharp contrast, today extensive ownership rights envelop genetic material. Individuals and corporations patent genetic sequences that they have isolated. Patients no longer share biological specimens that they contributed in the course of receiving medical treatment as readily as they once did. Meanwhile, national governments of developing countries, which house most of the world's genetic material in its natural state, increasingly assert sovereign ownership rights over biological samples containing this material.(I discuss this trend in a prior article: http://ssrn.com/abstract=658421.)

What accounts for this transformation? The canonical explanation offered by Harold Demsetz for the evolution of property regimes is that private property rights emerge when the economic value of a resource changes relative to the costs of controlling it such that it becomes cost-efficient to establish a property regime over the resource and to internalize costs or benefits previously experienced as externalities. Changes in relative value typically occur when some external shock, like the introduction of a new technology or the opening or closing of particular markets, alters the costs and benefits of the existing property regime.

Demsetz's thesis as well as traditional theories for the granting of intellectual property rights explains the actions of those who first sought to patent bioengineered goods and isolated genetic sequences as well as developed countries' grant to them of these first generation property rights. The biotechnology revolution offered economic reward to those who could isolate genetic sequences and create bioengineered innovations.

These theories do not, however, adequately explain nor even usually anticipate the second wave of propertization: the emergence of exclusive ownership rights over raw biological material. Granting property rights in naturally-occurring genetic material does not encourage innovation. This material already exists. While a desire to profit from biological samples plays some role in demands both by developing countries and by patients for a property interest in their raw biological samples, it leaves much unexplained.

Instead, I believe these second generation property rights arose in response to the first generation patent rights. A tit-for-tat dynamic, rather than a cost-benefit analysis designed to capture the actual or potential economic value of raw genetic material, animates the emergence of these responsive property rights. Patients and developing countries felt that if researchers and corporations obtain property rights by patenting cell lines and genetic sequences isolated from tissue samples, than they too should claim a property interest in the raw tissue samples from which those patents sprung.

As John Dawson observed three decades ago, "Uncompensated gains are pervasive and universal; our well-being and survival depend on them…" And so we share. Indeed, experiments show that people cooperate and forgo free riding much more often then economists predict. In fact, as Cass Sunstein notes, if most people cooperate and share "the social meaning of non-cooperation is greed."

However, if some stop sharing and cooperating, preferring instead to claim certain property or knowledge as exclusively their own, continuing to share under such circumstances transforms the good public citizen into a public patsy. Game theorists have shown that in a repeated game, players will cooperate in the first period but will defect in subsequent periods if the other player defected in the immediately preceding period. Absent such defection, they will continue to cooperate.

Underlying the creation of property rights over raw genetic and biological material lays a desire by those demanding such rights that others not exploit them. When individuals and corporations began to patent isolated and purified genetic sequences, cell lines and living organisms, those from whom the raw biological material came felt exploited. They no longer viewed the sharing of raw biological material as international collaboration but rather as "biocolonialism." As the president of Tanzania said, "[M]ost of us in developing countries find it difficult to accept the notion that biodiversity should [flow freely to industrial countries] while the flow of biological products from the industrial countries is patented, expensive and considered the private property of the firms that produce them. This asymmetry … is unjust." Developing countries created property rights over material that they had previously shared to prevent others from taking advantage of them.

A similar sentiment animates patient property claims to biological specimens. Patients willing donated biological specimens when they believed they were contributing to a greater social good. The obtainment of patent rights by researchers and institutions over cell lines and genetic sequences fractured this cooperative spirit. Contributors, like those who joined the effort to find the gene responsible for Canavan disease and then sued the researchers who patented the gene as well as John Moore who sued those who patented a cell line isolated from his spleen, felt taken advantage of.

Their fury and sense of violation do not stem from concern over lost potential economic opportunities but rather from being used. As John Moore exclaimed: "What the doctors had done was to claim that … my genetic essence was their invention and their property." The furious Canavan donors did not seek a share of future royalties. Rather, in their complaint, they sought to prevent the patent holders from restricting access to the Canavan gene and from limiting genetic screening tests.

jv:
A question - Suppose you decide to have a bioengineered child. If the child has a child, does that constitute a patent infringement? Could the patent holder decide who can have children and who doesn't? (I can see such case with, say, athletes)
3.6.2007 11:28am
GMUSL 3L (mail):
Sabrina,

I would hope that you would avoid the errors of the recent Crichton screeds in the NY Times and be a little more precise when you talk about "patenting genes". The imprecision of language with which most people talk about this has led to a great deal of uninformed anti-patent ranting online, particularly among the tech-heavy set.

As we all know, naturally-occurring genes cannot be patented in and of themselves -- i.e., they cannot be the subject of a device, apparatus, or composition of matter claim -- as they fail at least one of the factors of 35 U.S.C. 102, especially 102(f).

However, these genes can be the SUBJECT of patents, in that non-natural methods of use, methods of (re)production, and methods of detection may be patented. Naturally occurring gene sequences themselves, even in isolation, are no more patentable than gold is when purified from ore, though purification methods may of course be patentable. Just as one did not "invent" gold, one does not "invent" a gene by isolating it.

In the Moore v. Regents case, the cause of action was misappropriation. Despite Moore's rhetoric, neither he nor others sought a declaratory judgment for invalidity. They may have sought to prevent the patentee from restricting access, but they did not have any claims "arising under" the patent laws of the US. This case is not particularly relevant to a discussion of biotech/gene patents.

I would also be interesting in hearing your thoughts on the counterfactual of what would happen if patent rights were weaker in the gene/biotech area. I suspect, from your posts, that you think that these would enter the public domain in terms of usability, as well as the information they already provide to the public domain via publication. While some weakened patents might fall in to the public domain, I think that you are presenting a false dichotomy.

The tradeoff is not between patent and public domain -- it's between patents, which include enabling disclosures, almost always open to the public (but for national security reasons and those rare instances when patentees swear not to file in foreign JDX) and are published 18 months after submission in the US, on one hand and TRADE SECRETS, not public disclosure, on the other. The tradeoff is between information in the public domain, with a smaller set of use covered by the patent claims lagging for about 15 years, and between no information and no use.

Unlike patents, trade secrets are potentially indefinite in duration and have NO contribution to the public domain. In the absence of something like the current level of patent protection, I find it highly implausible that profit-maximizing businesses will choose to forego recouping their massive investments and just release this information to the public, rather than keeping this highly valuable information under lock and key.

I see no value in incentivizing any individual or corporation to treat material as trade secret rather than patent.
3.6.2007 11:44am
GMUSL 3L (mail):
jv -- your question is unanswerable in the abstract. It depends mostly, if not entirely, on claims of the patent at issue as informed primarily by that patent's specification and prosecution history.
3.6.2007 11:45am
Kovarsky (mail):
GMUSL,

I disagree with some of Sabrina's account, but I'm not sure (1) what real difference her use of the term "gene" instead of "gene sequence" makes (nobody, not even lay people, think a patentee gets ownership over the actual human being with the patented sequence - there's no "confusion" created by the truncated term); (2) why the fact that Moore was not a patents case matters, as Sabrina's point is about the exclusive right to use and alienate assets generally, not exclusively as-through patent law.
3.6.2007 11:59am
Michael Martin (mail):
Interesting theory -- I think I see a connection to the "cascade effects" described in group decisionmaking literature. The fact that those from whom biological samples are taken (either individuals or nations) feel exploited does not (at least as an empirical matter, and at least for the time being) affect the cost of isolating gene sequences from those samples. Nor do feelings affect the benefit of potential new treatments facilitated by isolating gene sequences from the samples. I might feel exploited and at the same time be happy to know that others are going to benefit from my exploitation in the future. Also, the fact that some individuals have sought to prevent exclusive access to materials derived from their biological samples rather than damages or royalties is not surprising since they presumably received benefits from the treatment independent of such royalties (why else would they have agreed to do it in the first place?), and were not apparently inconvenienced by the taking of the samples since they did not know they were taken until much later. I'm not sure it's strong evidence that people would never agree to assign ownership rights in their biological materials. Don't some people sell their hair to wig makers? Maybe hair isn't as personal as genes.

I've heard others point out that the behavioral economic studies mentioned here (such as Viscuse's study of blood donors) can be explained using conventional cost-benefit analysis. (Asking whether patenting genetic or other biological materials is "fair" or "just" is no different from asking that our cost-benefit analysis of the need for property rights in such materials be further refined.) Sharing uncompensated gains is not necessarily inconsistent with the fundamental hypothesis of rationality. My utility functions make take as one of its arguments somebody else's utility function.
3.6.2007 12:01pm
Steve Reuland (www):
Until recently, nations and individuals treated genetic material -- the subcellular sequences that direct the structure and characteristics of all living things -- as open access property.



Say what? Last I checked, GenBank was free to the public. And it dwarfs, by many orders of magnitude, any privately controlled sequence database. In fact I'm not even sure that private consortiums even bother with genome sequencing anymore. There are way too many publically financed sequencing projects just giving the information away.
3.6.2007 1:54pm
tsotha:
GMUSL,

I see no practical difference between patenting a gene and patenting all the reasonable ways of exploiting it.

And I don't believe drug companies spend a large amount of money on gene research. First of all, drug companies only spend 15% of outlays on research. Secondly, almost all the money in drug development gets spent between the inception of a compound and its birth as an approved drug, not in the development of the drug itself. And finally, much of the genetic research that does occur happens in "public-private partnerships" with a substantial portion paid with tax dollars.

So-called "gene patents" are nothing more than a cheap way for companies to discourage competition.
3.6.2007 2:31pm
Andrew Morton:

I see no practical difference between patenting a gene and patenting all the reasonable ways of exploiting it.

While this might be accurate, it seems to presuppose that someone who discovers a particular gene sequence can, by virtue of that discovery, necessarily patent all reasonable ways of exploiting it. That's simply not realistic. As with patents found in many other areas, it can be very difficult to foresee what clever applications someone else might find for your idea, particularly in conjunction with other similar or derivative ideas that may have been patented.

Allowing people to patent "the gene" essentially gives them a monopoly on usage of that gene in any application without actually knowing what those applications might be. If you force people to patent a particular process that employs the gene in question, the scope of the patent is considerably more narrow.

With respect to the original post, the observation that the use of donated biological material for a subsequent profit motive subsequently motivates donors to either withhold or demand rights of their own, is interesting. I'm not entirely sure that the use of such donations for profit is such a new idea (even if it does benefit the overall "social good"), but the fact that we have more recently solidified the profit motive through property rights perhaps makes that issue more clearly visible.
3.6.2007 3:12pm
John Herbison (mail):
"Propertization of Genetic Material and a Tit-for-Tat"

Am I the only one who thought of Dennis Miller's line from SNL Weekend Update: "What's tat; where can I get it; and how can I exchange it for the other?"
3.6.2007 3:38pm
tsotha:
Andrew Morton,

Read GMUSL's post a again, especially this part "...methods of (re)production, and methods of detection may be patented."

Say you've come up with an idea for a targetted treatment based on a group of genes. The idea is to test people for certain gene combinations related to illness and tailor a treatment for the individual patient, or groups of patients. This is a pretty hot area of research, since some diseases, like breast cancer, may arise from different sets of replication errors. So the best course of treatment depends on whether the damaged genes are ABC or XYZ.

By patenting the obvious methods of detection and reproduction, I've set up a turnpike on your road to a new treatment even though I may never have had any idea what the genes in question actually do.
3.7.2007 2:05pm