SPEAKERS CONTENTS INSERTS
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66–043
2000
GENE PATENTS AND OTHER GENOMIC INVENTIONS
HEARING
BEFORE THE
SUBCOMMITTEE ON
COURTS AND INTELLECTUAL PROPERTY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
JULY 13, 2000
Serial No. 121
Printed for the use of the Committee on the Judiciary
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For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR S. SMITH, Texas
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
LINDSEY O. GRAHAM, South Carolina
MARY BONO, California
SPENCER BACHUS, Alabama
JOE SCARBOROUGH, Florida
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DAVID VITTER, Louisiana
JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
THOMAS E. MOONEY, SR., General Counsel-Chief of Staff
JULIAN EPSTEIN, Minority Chief Counsel and Staff Director
Subcommittee on Courts and Intellectual Property
HOWARD COBLE, North Carolina, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
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ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
WILLIAM L. JENKINS, Tennessee
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
MARY BONO, California
HOWARD L. BERMAN, California
JOHN CONYERS, Jr., Michigan
RICK BOUCHER, Virginia
ZOE LOFGREN, California
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
BLAINE MERRITT, Chief Counsel
VINCE GARLOCK, Counsel
DEBBIE K. ROSE, Counsel
CHRIS J. KATOPIS, Counsel
ALEC FRENCH, Minority Counsel
EUNICE GOLDRING, Staff Assistant
C O N T E N T S
HEARING DATE
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July 13, 2000
OPENING STATEMENT
Coble, Hon. Howard, a Representative in Congress From the State of North Carolina, and chairman, Subcommittee on Courts and Intellectual Property
WITNESSES
Dickinson, Todd, Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, Department of Commerce
Dixon, Carl F., president and executive director, Kidney Cancer Association
Henner, Dennis J., Ph.D., senior vice president, research, Genentech, Inc.
Merz, Dr. Jon F., assistant professor of bioethics, Center for Bioethics, University of Pennsylvania
Ryan, M. Andrea, vice president, Warner-Lambert Company and president-elect, American Intellectual Property Law Association
Scott, Dr. Randal W., president and chief scientific officer, Incyte Genomics
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Severson, James A., president, Cornell Research Foundation on Behalf of the Association of University Technology Managers
Varmus, Dr. Harold, president and CEO, Memorial Sloan-Kettering Cancer Center
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Coble, Hon. Howard, a Representative in Congress From the State of North Carolina, and chairman, Subcommittee on Courts and Intellectual Property: Prepared statement
Conyers, Hon. John, Jr., a Representative in Congress From the State of Michigan: Prepared statement
Dickinson, Todd, Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, Department of Commerce: Prepared statement
Dixon, Carl F., president and executive director, Kidney Cancer Association: Prepared statement
Gallegly, Hon. Elton, a Representative in Congress From the State of California: Prepared statement
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Henner, Dennis J., Ph.D., senior vice president, research, Genentech, Inc.: Prepared statement
Merz, Dr. Jon F., assistant professor of bioethics, Center for Bioethics, University of Pennsylvania: Prepared statement
Ryan, M. Andrea, vice president, Warner-Lambert Company and president-elect, American Intellectual Property Law Association: Prepared statement
Scott, Dr. Randal W., president and chief scientific officer, Incyte Genomics: Prepared statement
Severson, James A., president, Cornell Research Foundation on Behalf of the Association of University Technology Managers: Prepared statement
Varmus, Dr. Harold, president and CEO, Memorial Sloan-Kettering Cancer Center: Prepared statement
APPENDIX
Material submitted for the record
GENE PATENTS AND OTHER GENOMIC INVENTIONS
THURSDAY, JULY 13, 2000
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House of Representatives,
Subcommittee on Courts and
Intellectual Property,
Committee on the Judiciary,
Washington, DC.
The subcommittee met, pursuant to call, at 9:35 a.m., in Room 2141, Rayburn House Office Building, Hon. Howard Coble [chairman of the subcommittee] presiding.
Present: Representatives Howard Coble, Howard L. Berman, Elton Gallegly, John Conyers, Jr., Rick Boucher, Edward A. Pease, Zoe Lofgren, William D. Delahunt, and Mary Bono.
Staff present: Blaine Merritt, chief counsel; Chris Katopis, counsel; Vince Garlock, counsel; Eunice Goldring, staff assistant; Alec French, minority counsel; and Sam Garg, minority counsel
OPENING STATEMENT OF CHAIRMAN COBLE
Mr. COBLE. Good morning, ladies and gentlemen. The subcommittee will come to order.
It is well known to those who follow the work of this subcommittee that we spend a great deal of time on issues pertaining to the Internet. Today, however, we turn our interest to another very exciting and important area of the United States technological leadership, the biotechnology industry, which will have an equal, if not greater, impact on our lives in the years ahead.
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This year, the efforts of researchers in the public and private sectors will unveil the complete map of the human genome. For the first time in human history we will have a clear understanding of this science for the blueprint of human life. This landmark work will make the 21st century the biotechnology century.
The intellectual property questions surrounding these efforts have enormous consequences that will impact all aspects of life, America's continued global technology leadership, and the course of related research. These are issues of great interest to the subcommittee members and recent developments compel us to explore them.
While Congress will not consider any additional patent legislation on this topic this year, there are two points I would like to share with you. The concerns about all varieties of patents prompted Congress to pass landmark legislation, the American Inventor's Protection Act, last November. While our patent system is the envy of the world, as the provisions of last year's legislation, including the transformation of the Patent and Trademark Office into a more autonomous entity, the early publication of patent applications and expanded procedures like reexamination go into effect, the structure of our system will be greatly enhanced and more efficient.
In addition, I know that the subcommittee members and I are united in the belief that the PTO deserves to retain all of its user fees. This has been a torridly hot topic on this Hill in recent days and I want to emphasize the significance of that. In fact, I will digress a minute. I was at the Patent and Trademark Office this year, Todd, you will recall, and I, in perhaps a very indelicate manner, admonished the administration and the appropriators to keep their grubby paws out of the PTO coffers. I received great applause for that statement; not normally embraced on the Hill by many, however. But this is very significant. I'm sure we will touch on that today.
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The diversion of fees is unfortunate, to say the least, and will result in a negative effect for the biotechnology industry due to increased patent application pendency, lessened overall patent quality, and the deprivation of resources. It is our hope that the appropriations committee and the administration will restore this badly needed money.
We are very fortunate to have the benefit of talented witnesses, who are joining us this morning, to survey this exciting field and to help educate us in this process. I am now pleased to recognized the ranking member of this subcommittee, the distinguished gentleman from California, Mr. Howard Berman, for an opening statement.
[The prepared statement of Mr. Coble follows:]
PREPARED STATEMENT OF HON. HOWARD COBLE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH CAROLINA, AND CHAIRMAN, SUBCOMMITTEE ON COURTS AND INTELLECTUAL PROPERTY
The Subcommittee will come to order.
It is well-known to those who follow the work of this subcommittee that we spend a great deal of our time on issues pertaining to the Internet. Today, however, we turn our interests to another very exciting and important area of the U.S. technological leadership, the bio-technology industry, which will have an equal, if not greater, impact on our lives in the years ahead.
This year, the efforts of researchers in the public and private sectors will unveil the complete map of the human genome. For the first time in human history, we will have a clearer understanding of this science for the blueprint of human life. This landmark work will make the twenty-first century the ''bio-technology century.''
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The intellectual property questions surrounding these efforts have enormous consequences that will impact all aspects of life, America's continued global technology leadership, and the course of related research. These are issues of great interest to the subcommittee members, and recent developments compel us to explore them. While Congress will not consider any additional patent legislation on this topic this year, there are two points I wish to make.
The concerns about all varieties of patents prompted Congress to pass landmark legislation—the American Inventors Protection Act—last November. While our patent system is the envy of the world, as the provisions of last year's legislation—including the transformation of the PTO into a more autonomous entity, the early publication of patent applications, and expanded procedures like re-examination—go into effect, the structure of our system will be greatly enhanced and more efficient. In addition, I know that the subcommittees members and I are united in the belief that the PTO deserves to retain all of its user fees. The diversion of fees is unfortunate to say the least and will result in a negative affect for the biotechnology industry due to increased patent application pendency, lessened overall patent quality, and the deprivation of resources. It is our hope that the Appropriations Conference restores this badly-needed money.
We are very fortunate to have the benefit of talented witnesses who are joining us this morning to survey this exciting field and help educate us in the process.
I now turn to the Ranking Member, Mr. Berman, for an opening statement.
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Mr. BERMAN. Well, thanks very much, Mr. Chairman, for holding this hearing and for focusing us on these very important issues. In light of the rapid events, as we've seen in gene sequencing, I think it's very important that the subcommittee explore the legal and policy issues, which we're going to hear about today and it's appropriate that we do so at this time.
These are very complex issues dealing in arcane areas of science and law. Actually, I think the interest in these issues reveals something extraordinary about the times in which we live. What once was the arcane, what once was only heard and spoken of in the corridors of academia and legal institutions, is now a regular part of the public discourse. The front pages of the newspapers are regularly reporting the legal and moral issues that are raised by patenting in new areas of technology. At the same time, we are celebrating the successes of once anonymous researchers extending human knowledge at a previously unheard of pace. It is clear that the public is interested and even concerned about this intersection of intellectual property rights and science.
In time, health care is going to improve dramatically as a result of the sequencing of the human genome. And without the continuing efforts of those in both the public and private sectors, the medical advances we will hope to achieve would undoubtedly take much longer to develop and some would never occur. But, there are some who are asking whether the goals of the patent system and those of science and medicine are properly balanced.
Some are concerned that patent holders, public and private, will impose licensing terms on users of their inventions that will impede medical research or restrict patient access to affordable new clinical tests and therapeutic treatments. There have been a few notable cases already that suggest that this is an issue that at least warrants discussion. Some are concerned that patents have issued that may not meet the statutory requirements for patentability and they are concerned that the Patent and Trademark Office will not adequately elevate the bar to patentability in their new utility guidelines.
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Without question, we are looking into this at a time of substantial change, both in terms of what patent applicant seek to patent and how the PTO measures the patentability of submissions. Industry continues to make adjustments in light of what it learns about patents and licensing. The PTO is developing new guidelines and the rest of us are just beginning to understand the issues at play, but there clearly are policy questions that we need to be asking.
With that said, I want to thank the witnesses for coming here today and I particularly want to thank Dr. Varmus for joining us. I look forward to the testimony. This is one of those issues that—you know, so many of the issues we deal around here, we start with our own sort of ideological and philosophical biases and political biases and past records and it's very hard to sort of overcome those perhaps genetic redispositions. But in this—this is true for me, at least. This is an issue that's just a fascinating subject to learn about. I only try to figure out what makes the best sense to do and very possibly to do nothing, except to try to follow and learn and let people with different views articulate them, in the event that something does crystallize all of this. So, I think it's just a great time to have this hearing, Mr. Chairman, and I want to thank you again for scheduling it.
Mr. COBLE. I thank the gentleman. Folks, inevitably, we're going to have votes here, as the morning progresses. So, in the interest of time, I want to restrict opening statements to Mr. Berman and me, and without objection, we will have any other member's statements entered into the record. We are pleased to be joined by Mr. Gallegly, the gentleman from California, and Mr. Delahunt, the gentleman from Massachusetts.
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[The prepared statement of Mr. Gallegly follows:]
PREPARED STATEMENT OF HON. ELTON GALLEGLY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Chairman Coble, I want to begin by thanking you for your tremendous leadership on patent issues and for scheduling this important hearing.
Mr. Chairman, the biotechnology industry is one of the most exciting and rapidly growing industries in the world today. Biotechnology products have not only dramatically improved our quality of health care, but they have increased the possibility of discovering the root causes of diseases and developing the cures to combat these diseases.
The United States intellectual property system provides the framework that makes the development of new medical or biological products possible. Patents are essential to the biotechnology companies because they allow companies to recapture the enormous cost of research and development on these products. It is imperative to the future of this industry that we ensure that this system continues to provide effective protection and promote innovation, especially in the development of new products that have the potential to provide cures to diseases such as Alzheimer's, cancer and osteoporosis.
I look forward to hearing the testimony of our distinguished panel of witnesses and thank them for coming.
[The prepared statement of Mr. Conyers follows:]
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PREPARED STATEMENT OF HON. JOHN CONYERS, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN
We are here today because the patent protection we give for genetic material that is used to develop new drugs—known as a gene patent—has generated a great deal of controversy over the morality and nuances of granting ''ownership'' over biological substances.
Some ask how it could be possible that people can obtain patents on genetic material, the building blocks of life. It has been a settled principle of law for twenty years now, though—most well known through the Supreme Court decision in Diamond v. Chakrabarty—that genetic material created or manipulated by humans can be patented.
And it is important to recognize that it is patent protection that drives scientists to spend countless hours in laboratories and develop new drugs from gene sequences even when the odds are against them. Without the promise of patents, our drug development industry would fold, leaving many diseases and illnesses with no hope for a cure.
That being said, I believe it would stifle future research for patents to be given on gene sequences that have no identified purpose. I am pleased that the PTO is developing regulations along those lines and that the drug industry and consumer groups are largely in agreement with them.
In the midst of this debate, though, we must not forget about the social issues that are raised by the biotech revolution. Patents cannot and must not be used to stifle research into potential cures for diseases and illnesses. Thankfully, it is an unspoken rule among most, if not all, scientists to share information and spur biotech innovation.
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Second, this country is facing a crisis over the rising cost of prescription drugs. It is my hope that these recent scientific breakthroughs will enable researchers to develop new drugs more quickly and easily, leading to lower costs for consumers.
Also, many Americans are concerned that gene sequencing will lead to discrimination by employers and others against people based upon their genetic makeup—commonly known as ''genetic discrimination.'' For instance, no job applicant would want a potential employer to know that his or her DNA indicates a likelihood of contracting cancer. Already, this country is feeling the strain of discrimination based on race, religion, ethnicity, gender, and sexual orientation, and I hope that government and industry can work together to ensure that we do not have to add another category to that list.
These questions will continue to be asked for years to come because we have hit only the surface of genetic discovery. The PTO has granted patents on approximately 1,000 human genes—there are between 30,000 and 100,000 genes left to discover. In addition, scientists recently determined the sequence of all 3.2 billion letters of the human genome—in essence, the blueprint for human life. This will increase exponentially the speed of discovery of the other thousands of genes and the controversies surrounding them.
I would like to thank the witnesses for coming and look forward to their testimony.
Mr. COBLE: The Government witness this morning is someone who is no stranger to this subcommittee, the Honorable Todd Dickinson, who is the Undersecretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office at the Department of Commerce. Mr. Dickinson is an active member of numerous professional associations, including the American Bar Association, the American Intellectual Property Law Association, the International Trademark Association, and the Copyright Society of the United States. A native of Pennsylvania, Mr. Dickinson earned a B.S. degree in chemistry from Alleghaney College and a J.D. from the University of Pittsburgh School of Law. He is a member of the Bars of Pennsylvania, California, and Illinois, and has practiced law in the private sector.
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The subcommittee has copies of Mr. Dickinson's testimony, which, without objection, shall be made a part of the record. And we invite you to the podium, Mr. Dickinson. Todd, you have many titles, but I still like the ring of Commissioner. That has a very authoritative sound to it. Which of your several titles do you prefer, Todd?
Mr. DICKINSON. Either one——
Mr. COBLE. Good to have you with us. And for the benefit of the remaining panelists who will join us subsequently, as each of you have—we'd like to restrict our oral testimony to 5 minutes. Now, that's not to say that you'll be key hauled if you go 5 1/2 minutes; but when the red light appears, that is your warning that you are running out of time. We're doing that in the interest of time, because, as I say, we're going to be interrupted, I am confident, for votes on the floor. Good to have you with us, Mr. Dickinson.
STATEMENT OF TODD DICKINSON, UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE, DEPARTMENT OF COMMERCE
Mr. DICKINSON. Thank you, Mr. Chairman, thank you very much, and to Mr. Berman. We appreciate the opportunity to testify today, and I commend the subcommittee for holding this hearing on patents in this cutting edge area of biotechnology. I'm hopeful that this discussion will clear the air of some of the misperceptions of what genetic material is and isn't patentable.
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One of the key tenets of the United States 210 year old patent system is that it's technology neutral. From gear shifts to genomics, it applies the same norms to all inventions and all technologies. The uniformity and facileness of the patenting standards, coupled with the incentives to invent, invest in, and disclose new technology have enabled millions of new innovations to be developed and commercialized. This, in turn, has enhanced our quality of life and helped fuel our robust economy.
The USPTO takes its direction on what subject matter is patentable from Congress and from the courts. Current patent law specifies that the basic statutory requirements that must be met to obtain a patent are novelty, nonobviousness, and utility.
The courts have ruled for some time that isolated and purified products of nature are eligible for patent protection. The most significant ruling on the patentability of biological products occurred in 1980 with the Supreme Court's landmark Diamond v. Chakrabarty decision. Finding the genetically engineered bacteria were patentable, Chief Justice Burger noted that the Congress intended statutory subject matter to include anything under the sun that is made by the hand of man.
In the wake of Chakrabarty, the courts have consistently ruled that genomic products are patentable subject matter, provided that they are the result of human intervention and are not in their naturally occurring state. So long as these conditions are met, a key issue for determine whether genomic inventions are patentable is the question of utility. As with any other invention, genomic products must be useful in order to obtain a patent. Raw DNA sequence data, such as that recently generated by the Human Genome project and by various corporate endeavors, is not patentable as it stands. There is no utility associated with it.
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In order to assure the highest standards of utility, the USPTO recently published revised utility examination guidelines in the Federal Register. These new utility guidelines, which we expect to finalize this fall, require patent applicants to explicitly identify, unless it's already well established, a specific, substantial, and credible utility for all inventions. In other words, one simply can't patent a gene itself without also clearly disclosing a real world use.
We believe this heightened standard futility will allow appropriate patents on genomic inventions, while also resulting in the rejection of hundreds of genomic patent applications, particularly those that only disclose theoretical utilities. I'm very pleased with the positive feedback we've received on these guidelines. The general consensus indicates that we've set the utility standard at an appropriate level to ensure incentives for research and the efficient dissemination of valuable data.
Despite these favorable comments, however, the patenting of genomic inventions does remain controversial. For example, some critics assert that genetic material can't be patented, because it's found naturally in our bodies. However, genes are basically chemicals; complex chemicals to be sure, but chemicals nonetheless. And as I've noted, chemicals and pharmaceuticals that have been isolated and purified from nature, penicillin for example, have long been held patentable. In addition, the USPTO has issued hundreds of patents to products extracted from the human body for pharmaceutical or diagnostic use, including clot-busting proteins to treat stroke, antigens for the detection of cancer, and antibodies to treat infection.
In a particular example, the cloning and subsequent patenting of the human insulin gene allowed researches to synthesize genuine human insulin in the laboratory, resulting in insulin protein that is less risky to human diabetics than that derived from animal sources.
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Secondly, some of the criticism is premised on the belief that patents unnecessarily impede access to the underlying technology. This is rarely proven true in practice, however. For example, the broad patents issued to the inventors Cohen and Boyer in the early 1980's regarding common DNA techniques, were used in a significant amount of molecular biological research. Owned by Stanford University and widely licensed for nominal fees, these patents are considered to be some of the most profitable in biotechnology. This profitability is largely due to their widespread use in the advancement of biological research. Indeed, the dominance of these patents did not stifle research, but spurred innovation by providing the incentive of patent protection.
With that said, the USPTO believes that inventors and owners of genomic patents need to be acutely aware of the heavy responsibilities inherent in that ownership. Licensing and other technology transfer regimes need to strongly account for the powerful public desire to ensure that the use of these inventions for the greater good is not unduly burdened. The administration is also pleased to see that, in keeping with the President's recent recommendations, several private industries, such as the SNP consortium, have agreed to make their raw human genome sequence data publicly available.
Lastly, many of the arguments against genomic patents are strikingly similar to those voiced in the past for other emerging technologies. For example, some 30 to 40 years ago, it was predicted that the polymer industry would be devastated if broad generic claims were granted on the building blocks of basic polymers. More recently, people argued that patents on software would impede the development of the software industry. Most would agree that these fears have failed to come to pass.
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In reality, patents have been integral to the U.S. biotech industry's growth into the world leader it is today. The biotech and pharmaceutical industries are exceptionally research intensive and the majority of their research is privately funded. Understandably, the private sector often looks for security in the investment they make in supporting that research, namely through patents and other intellectual property rights. Without these incentives, research into genetic diseases and the development of tools for the diagnosis and treatment of such diseases would be significantly curtailed.
Mr. Chairman, we stand in the midst of an information revolution that rivals the great renaissances of centuries past. These advances would not have been possible without broad patent eligibility and the balance the patent system strikes between generating intellectual property and distributing those ideas. While we must remain vigilant to ensure the use of genomic inventions for the greater good, patents in this area are consistent with our law and with our practice. Just as the patent system has nurtured the development of telephony, aeronautics, and computers, so, too, will it ensure that the new discoveries in genomics lead to healthier, longer lives for all of humankind.
The USPTO and the administration look forward to continuing to work with you and the members of the subcommittee toward that end. Thank you, very much.
[The prepared statement of Mr. Dickinson follows:]
PREPARED STATEMENT OF TODD DICKINSON, UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE, DEPARTMENT OF COMMERCE
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Mr. Chairman and Members of the Subcommittee:
Thank you very much for inviting me to testify today on the patenting of genes and other genomic inventions. As you know, patents in this cutting-edge area of biotechnology are a topic of considerable interest and debate in many circles. While some of this debate is unfortunately fueled by misinformation, legitimate questions have been raised about just what genomic discoveries, if any, should be patentable and whether genomic patents will inhibit researchers' access to the data, materials, and methods needed to develop new tools for the diagnosis and treatment of disease.
Given the gravity and far-reaching implications of these issues, I commend the Subcommittee for holding this hearing. I am hopeful that this morning's discussion will help clear the air of some misperceptions of just what is and isn't patentable and provide all parties with a better understanding of the essential role the patent system plays in unlocking the mysteries of the human body.
U.S. Patent System
In order to understand why genes are patentable, I believe it is necessary to first review the underpinnings of the U.S. patent system itself and the role of the United States Patent and Trademark Office (USPTO) in administering this system. The basis for our patent system is found in Article 1, Section 8, of the Constitution, which provides that Congress shall have the power:
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To promote the progress of science and useful arts by securing for limited times to . . . inventors the exclusive right to their . . . discoveries.
In carrying out the intent of this Constitutional directive, our Founding Fathers designed an extremely flexible patent system based on principles that have proven remarkably suitable to 210 years of unceasing technological advancement. Indeed, one of the key tenets of our patent system is that it is technology-neutral; from gearshifts to genomics, it applies the same norms to all inventions in all technologies.
While some are critical of this aspect of the patent system, the uniformity and facileness of the patenting standards of novelty, obviousness, and utility—coupled with the incentives patents provide to invent, invest in, and disclose new technology—have allowed millions of new inventions to be developed and commercialized. This has enhanced the quality of life for all Americans and helped fuel our country's transformation from a small, struggling nation to the most powerful economy in the world. Equally as impressive, the patent system has done all this without the need for Congress to constantly retool the law—a powerful testament to the system's effectiveness in simultaneously promoting the innovation and dissemination of new technologies.
Patentability Criteria
In administering the patent system, the USPTO takes its direction on what subject matter is patentable from Congress and our reviewing courts. The current Act that details the standards of patentability, the Patent Act of 1952, specifies four basic statutory requirements that must be met to obtain a patent: (1) the claimed invention must be statutory subject matter and have utility; (2) it must be novel; (3) it must not have been obvious to a person having ordinary skill in the art at the time the invention was made; and (4) it must be fully and unambiguously disclosed in the text of the patent application, so that the skilled practitioner would be able to practice the claimed invention.
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Prior to granting a patent, the USPTO examines each patent application to determine whether it meets these four criteria, as set forth in Title 35 of the U.S. Code. With respect to the first statutory requirement, 35 U.S.C. §101 states that any person who ''invents or discovers any new and useful . . . composition of matter, or any new and useful improvement thereof, may obtain a patent . . .'' subject to the conditions and requirements of the law.
Going back nearly a half century, the courts began to rule that isolated and purified products of nature were eligible, as compositions of matter, to be patented. For example, not long after James Watson and Francis Crick published their seminal work on the structure of deoxyribonucleic acid (DNA) in 1953, the Fourth Circuit stated in 1958 in a case involving naturally occurring vitamin B compounds that ''There is nothing in the language of the [1952] Act which precludes the issuance of a patent upon a 'product of nature' when it is a 'new and useful composition of matter'. . . . All of the tangible things . . . for which patent protection is granted are products of nature in the sense that nature provides the source materials.'' The court further noted that ''[t]he fact . . . that a new and useful product is the result of processes of extraction, concentration and purification of natural materials does not defeat its patentability.'' (Merck & Co., Inc. v. Olin Mathieson Chem. Corp., 253 F.2d 156, 161, 163). Two decades later, the Court of Customs and Patent Appeals ruled in 1979 that a biologically pure bacterial culture was patentable since the culture did not exist in nature in its pure form and could only be produced in a laboratory under carefully controlled circumstances. (In re Bergy, 596 F.2d 952, 201 U.S.P.Q. 352.)
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The most significant ruling on the patentability of biological products occurred a year later, in the Supreme Court's landmark decision in Diamond v. Chakrabarty, 447 U.S. 303, 309, 206 U.S.P.Q. 193, 197 (1980). In that decision, which found that genetically engineered bacteria were patentable, Chief Justice Burger cited the Congressional Report accompanying the 1952 Patent Act in noting that ''Congress intended statutory subject matter to 'include anything under the sun that is made by man'.'' When considering the scope of subject matter eligible for patent protection, the U.S. Supreme Court stated:
[Chakrabarty's] microorganism plainly qualifies as patentable subject matter. His claim is not to a hitherto unknown natural phenomenon, but to a nonnaturally occurring manufacture or composition of matter—a product of human ingenuity ''having a distinctive name, character [and] use.'' (Hartranft v. Wiegmann, 121 US 609, 615 (1887)) . . . [T]he patentee has produced a new bacterium with markedly different characteristics from any found in nature and one having the potential for significant utility. His discovery is not nature's handiwork, but his own; accordingly it is patentable subject matter under §101.
Many commentators believe the Chakrabarty decision was a major factor in the phenomenal growth of the biotechnology industry. Indeed, the Supreme Court's ruling altered somewhat the philosophy of the USPTO, from one of skepticism of patentability to more openness, and paved the way for a variety of patents involving living materials. In the wake of Chakrabarty, for example, we issued the first transgenic animal patent to the now-famous Harvard ''onco mouse,'' a mouse genetically engineered to be more susceptible to tumor growth. Patents have since issued on other genetically engineered plants and animals.
Over the past twenty years, many patent applications have been filed that are drawn to subject matter relating to genes. The filing rate of applications relating to genes has dramatically increased in the past few years. Currently, over 20,000 applications relating to genes are pending before the USPTO. Since the first gene related applications were filed, approximately 6,000 patents have issued which are drawn to full-length genes from human, animal, plant, bacterial and viral sources. Of these 6,000 patents, over 1,000 are specifically drawn to human genes and human gene variations that distinguish individuals.
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To digress for a moment, the complexity of some of these applications is almost unimaginable. For example, we received a DNA sequence listing as part of a patent application that, had it been submitted on paper, would have totaled more than 400,000 pages. The challenges of searching and examining applications of this complexity are great, and we are working with our customers and industry to generate creative solutions to examining applications in these technologies. This is yet another reason why it is vital that the USPTO have sufficient funding, and I want to thank you, Mr. Chairman, for your outstanding leadership on that issue.
Consistent with the findings in Chakrabarty, the courts have consistently ruled that genomic products and their mutations fall within the statutory categories of compositions of matter and manufactures. (See, e.g., In re O'Farrell, 853 F.2d 894, 7 U.S.P.Q.2d 1673 (Fed. Cir. 1988) and Amgen, Inc. v. Chugai Pharm. Co., Ltd., 927 F.2d 1200, 18 U.S.P.Q.2d 1016 (Fed. Cir. 1991)). However, in order to be patentable, they must not be in their naturally occurring state, and their invention must be the result of human intervention. In other words, the gene must be isolated and purified from its natural environment. The patent statutes also provide that a new use for an old and known compound (e.g. a gene or gene fragment) would also be eligible for patent protection.
Provided that these conditions are met, a key issue for determining whether a genomic invention is patentable is the question of utility. As with any other invention, a nucleic acid must be useful in order to be patentable. Raw DNA sequenced data, such as that recently generated by the Human Genome Project and various corporate endeavors, is not patentable.
Utility Requirements for Genetic Materials
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The issue of the utility of an invention is one that the USPTO takes very seriously. That is why we continue to take steps to ensure that genomic patent applications are meticulously scrutinized for an adequate written description, sufficiency of the disclosure, and enabled utilities, in accordance with the standards set forth by our reviewing courts. In fact, in order to ensure the highest standards of utility, the USPTO published ''Revised Interim Utility Examination Guidelines'' in the Federal Register on December 21, 1999 (Volume 64, Number 244). A companion training document was also published on our website (www.ustpo.gov) on March 1, 2000. We are currently finalizing these guidelines, based upon public comments, and we expect to publish them by early this fall. We do not anticipate any substantive changes to the interim guidelines.
In order to meet the utility requirement of 35 U.S.C. §101, our new utility guidelines require patent applicants to explicitly identify, unless already well-established, a specific, substantial and credible utility for all inventions. In effect, we have raised the bar to ensure that patent applicants demonstrate a ''real world'' utility. One simply cannot patent a gene itself without also clearly disclosing a use to which that gene can be put. As a result, we believe that hundreds of genomic patent applications may be rejected by the USPTO, particularly those that only disclose theoretical utilities. Let me briefly explain the new utility definitions:
An asserted utility is credible unless the logic underlying the assertion is seriously flawed, or the facts upon which the assertion is based are inconsistent with the logic underlying the assertion. For example, at least some nucleic acids might be used as probes, chromosome markers, or diagnostic markers. Therefore, the per se credibility of assertions regarding the use of nucleic acids is not usually questioned. However, even if credible, at least one asserted utility must also be both specific and substantial.
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A utility is specific when it is particular to the subject matter claimed. For example, a polynucleotide said to be useful simply as a ''gene probe'' or ''chromosome marker'' does not have specific utility in the absence of a disclosure of a particular gene or chromosome target. Similarly, a general statement of diagnostic utility would ordinarily be insufficient to meet the requirement for a specific utility in the absence of an identification of what condition can be diagnosed.
A substantial utility is one that defines a ''real world'' use. Utilities that require or constitute carrying out further research to identify or reasonably confirm a ''real world'' context of use are not substantial utilities. For example, basic research that uses a claimed nucleic acid simply for studying the properties of the nucleic acid itself does not constitute a substantial utility.
In general, if a partial nucleic acid sequence is useful for diagnosis of a particular disease, then the sequence would likely meet the utility requirement and patent protection commensurate in scope with the disclosure would be granted assuming the other statutory requirements for patentability are met. As increased amounts of information are provided both in the nature of the nucleic acid and its uses, broader coverage would be granted.
I am very pleased with the positive feedback the USPTO has received on these new guidelines. The general consensus from the major parties involved indicates that we have set the utility standard at an appropriate level to ensure incentives for both research and the efficient dissemination of valuable data. For example, the former Director of the National Institutes of Health (NIH), Dr. Harold Varmus, stated earlier this year that he was ''very pleased with the way [the USPTO] has come closer to [the NIH's] position about the need to define specific utility.'' Dr. Francis Collins, Director of the National Human Genome Research Institute, has said that the new utility guidelines are ''quite reassuring in terms of making sure that we end up with an outcome where the patent system is used to provide an incentive for research and not a disincentive.'' In addition, Dr. Craig Venter, the President and Chief Scientific Officer of Celera Genomics Corporation, recently stated that he was ''pleased to see [the USPTO] is raising the bar'' on gene patents.
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Responding to Concerns
Despite these favorable comments, the patenting of genomic inventions remains controversial. However, I believe much of this criticism stems from a lack of understanding of the legal issues at hand and of the functions of the patent system.
For example, some of the criticism we hear confuses issues of patentability with issues of access. Whether something is patentable subject matter is a related but entirely different issue from whether it will be licensed to ensure appropriate access by researchers. As I have described, the USPTO's chief duty is to determine whether an invention claimed in a given patent application meets the legal criteria for patentability.
With that said, the USPTO does take notice of the legitimate concerns regarding access to genomic inventions. Clearly, inventors and owners of genomic patents need to be acutely aware of the heavy responsibility inherent in that ownership; their licensing and other technology transfer practices need to strongly account for the powerful public desire to ensure that the use of these inventions for the greater good of all humankind is not unduly burdened. Moreover, the Administration is pleased to see that, in keeping with the President's recommendations, several private entities have agreed to make their raw human genome sequenced data publicly available.
As to the general assertion that patents inherently impede access, history provides little evidence that this is the case. For example, consider the broad patents issued to inventors Cohen and Boyer that have been at the center of molecular biology research since they were issued. U.S. Patents 4,237,224 and 4,468,464, issued in 1980 and 1984, respectively, cover a significant amount of the subject matter currently being used in biological research, including recombinant DNA materials and methods of making and using such materials. These patents, which are owned by Stanford University and widely licensed for nominal fees, are considered to be some of the most profitable patents ever to issue in biotechnology. This profitability is largely due to their widespread use in the advancement of biological research. Indeed, the dominance of these patents did not stifle research, but served instead to spur innovation by providing the incentives of patent protection.
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Secondly, there is a tendency among the patent system's critics to assert that genetic material cannot be patented because it is found naturally in our bodies. However, genes are basically chemicals—complex chemicals to be sure, but chemicals nonetheless—and chemicals and pharmaceuticals that have been isolated and purified from naturally-occurring sources have long been held patentable.
When Dr. Fleming discovered that mold in his petri dish had killed bacteria nearby, and then isolated penicillin from that mold, that drug was patented, and the world was a safer place. The USPTO has also issued hundreds of patents to products extracted from the human body for pharmaceutical or diagnostic use, including clot-busting proteins to treat stroke, cancer antigens for detection of cancer, and antibodies to treat infection. Human Growth Hormone was originally isolated from human pituitary glands, as were some vitamins.
It was the cloning and subsequent patenting of the human insulin gene that allowed researchers to synthesize genuine human insulin in the laboratory using recombinant DNA technology. This approach results in more reliable insulin protein and reduces complications than can occur from a reaction to animal insulin. Indeed, there are so many chemicals in the human body that, if we ruled them all off limits to patenting, we would rule out an extraordinary number of valuable and important inventions.
Many of the arguments of our critics also resemble those voiced in the past about emerging technologies. For example, thirty to forty years ago when polymer chemistry was an emerging technology, some argued that the industry would be devastated if broad generic claims were granted on the building blocks of basic polymers. Clearly, that didn't happen. The U.S. polymer industry is very much alive and well. More recently, people argued that patents on software would impede the development of the software industry. Most would agree that this has not happened either. In reality, patents have been integral to the United States' biotech industry's growth into the powerhouse it is today.
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Indeed, while the patent system provides protection to inventors for their innovations, it also provides for dissemination of information and technology that might otherwise be maintained as trade secrets. The biotechnology and pharmaceutical industries are some of the most research intensive industries in existence. Given that the majority of research in these areas is privately funded, it should come as no surprise that in supporting that research, the private sector often looks for financial returns. These financial returns are very often packaged as—or linked to—patents and other intellectual property rights.
Without the funding and incentives that are provided by the patent system, research into the basis of genetic diseases and the development of tools for the diagnosis and treatment of such diseases would be significantly curtailed. Moreover, genomic patents enable companies, especially smaller enterprises, to raise the capital needed to bring beneficial products to the marketplace or fund further research.
Conclusion
Mr. Chairman, the USPTO is committed to ensuring that our practices and policies promote the innovation and dissemination of new technologies. I am proud to say that we have a proven track record in that regard. Indeed, thanks in large part to invention and collaboration fostered by broad patent eligibility, we stand today in the midst of an Information Revolution that rivals the great renaissances of centuries past.
While we must remain vigilant to ensure the use of genomic inventions for the greater good is not unduly burdened, the patenting of genomic inventions is consistent with our law and with our practice. Just as the patent system has nurtured the development of telephony, aeronautics, computers, and a host of other industries, the balance it strikes between generating intellectual property and distributing those ideas will ensure that new discoveries in genomics lead to healthier, longer lives for all of humankind. The USPTO and the Administration look forward to continuing to work together with you and the members of the Subcommittee toward that end.
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Thank you, Mr. Chairman.
Mr. COBLE. Thank you, Mr. Dickinson. Good to have you back with us. As evidenced by this room's capacity today, there is widespread interest in this subject, Mr. Dickinson. I know that many await the new guidelines and I want to commend you for taking a cautious approach as to their content. Can you give us some indication as to when the guidelines will likely be finalized?
Mr. DICKINSON. Well, the new guidelines, as I indicated, were published last December. We have been examining two of them for some time now. They will be likely finalized this fall.
Mr. COBLE. Can you explain to us, Mr. Dickinson, in some detail, how the needs of the relevant PTO group section, which examines gene patents, differ from the other divisions, (a); and (b), how does ongoing and future funding shortfalls—I know the answer, but I want it on the record—affect your ability to serve the applicant needs of those in the biotech field?
Mr. DICKINSON. Well, the biotech area is examined in our Technology Cener 1600 and they have some very particular needs, Mr. Chairman; in particular, the need for greater automation tools to be able to do the kind of searching that's necessary. There's an extraordinary amount of data produced. We recently received a patent application that was 400,000 pages in length. I brought one patent here today that's not that long, but it gives you an idea of what the size and scale of these patents are looking like today.
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We need computers to be able to search those patent applications. They can't be searched in the traditional manner. And we had to buy last year a new one million dollar new server to be able to do that. This server is starting to have its capacity outstripped, so we need to buy another one or we won't be able to keep up.
On the human side, we do examination with a very trained cadre of high tech examiners, 150 of which in the biotechnology area have Ph.D.s. We need to be able to recruit more of those examiners, and we need to be able to retain them. For example, we were not able to hire 100 examiners, which were budgeted for this year, because we won't be able to pay them due to vagaries of the 2001 budget. So, if we don't have 100 new examiners, there is a significantly increased waiting time for patents to issue. In the biotech area, that's a particular challenge, because the patent applications on some of these sequences have been waiting examination for a while and we don't want to get to a defacto submarine situation. So, it is a very problematic issue for us. The budgetary impacts fall especially heavy in the biotech area.
Another concern we have is due to the law that was passed last year, as you'll remember, Mr. Chairman, where you have to make patent term adjustments when there are inordinate delays in our office. If we have to give patent term back for the kind of delays that we have as a result of not having the resources we need, that means patents will have unnecessarily longer terms and that will have, I think, a significant impact on areas like health care.
Mr. COBLE. Thank you, sir. Mr. Dickinson, I am advised that some people would like to see some of the issues relating to the standard of utility clarified by sending a test case to the courts to decide. What, if you have an opinion on this, can we expect in the foreseeable future, as to this course of action; and if such a test case is likely to come to the fruition of litigation? Do you have an estimate as to when we could expect a decision regarding the issue?
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Mr. DICKINSON. Thank you, Mr. Chairman. We, too, share that concern and we have been making appropriate rejections across the board. My understanding is that at least one of these is now considered a test case in our office that raises a number of very important issues: utility is one; written description, transitional language, and the scope and breadth of the claim subject matter are the others. This will be ready for the Board of Appeals, it's my understanding, by the end of the fiscal year. We have asked the Board to expedite that case as quickly as possible. It's presumed likely that it will then move on to the Court of Appeals for the Federal Circuit, who has also been acting expeditiously in recent years. That has generally taken about a year or so. So, if you ask me to guess, I would say it's probably a 1 1/2 or 2 years out until we get a final resolution at the Court of Appeals for the Federal Circuit.
Mr. COBLE. Thank you, sir. The gentleman from California?
Mr. BERMAN. Thank you, Mr. Chairman. Commissioner Dickinson, you've indicated in the past that it's not the role of the PTO to establish health care policy, but the fact is that PTO decisions as to what is patentable and what is not do impact health care, as it would any industry. PTO is in a very difficult position of placing themselves in the shoes of those skilled in the particular art, to make certain determinations. Some of those skilled in this art, particularly at the NIH, argue that certain things should not be patentable, based on their view of the science as it applies to describing a utility. Their concerns may be driven by public health; but the bottom line is that a significant community of those who are ''skilled in the art'' have strong views that certain subject matter does not meet the test for patentability.
In that light, I'd like to ask you a few questions. I guess for 20 years, these gene patents have been issued; but, as I understand it, the methodology initially during that time allowed the patents to be issued on applications on whole genes with clearly understood utilities. Now, we're in a situation—the current methodology, where we do sequencing by computers, where the importance of the utility guidelines becomes heightened, and you've responded to that fact. In preparing the new guidelines, have you studied whether the guidelines will set a standard that will produce a similar level of information about utility, as was the case in the early patents? In other words, this new methodology is not so revealing about the utility and what are the implications of that, in terms of your new guidelines?
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Mr. DICKINSON. Thank you, Mr. Berman. NIH is one of our most important customers in this area. As a matter of fact, the largest number of gene sequence patents that issue have issued to the NIH, so they are very concerned about this topic. In some of the areas in which they've done research, the human genome project, for example, they decided not to file patent applications and dedicated that information to the public.
In the drafting of our utility guidelines, we met several times with—actually with Dr. Varmus, one of your witnesses here today, and other members of NIH to discuss these topics. We're very pleased that both Dr. Varmus and Dr. Francis Collins from NIH have both indicated that they've been generally supportive of the approach that we've taken. They have indeed raised some very specific issues with regard to a particular subset of the gene sequence applications that are on file, what we call expressed sequence tags, which are gene—basically fragments of genes.
Mr. BERMAN. To what extent are those patentable?
Mr. DICKINSON. They're patentable to the same extent that any other invention is patentable, so long as they meet the test of patentability. And the question that it basically comes down to, as you rightly said, and the question of utility and the ability to demonstrate sufficient utility to meet the section 101 standard.
Mr. BERMAN. Can you give us just—can you give me an example of a patentable fragment?
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Mr. DICKINSON. I think that's a difficult question, because the fragment itself would probably be somewhat on the order of——
Mr. BERMAN. You can say almost anything and I wouldn't know what——[Laughter.]
Mr. DICKINSON. Some call the ESTs the filet mignon of the gene. They are a portion of the overall sequence itself. They're an extremely—often extremely—important portion.
The question comes down to the level of disclosure of the utility, as you mentioned. They have come in basically in we call generations. There are three generations of the ESTs applications. The first generation are cases where there is no disclosure of where the gene EST lies. There's very little disclosure of utility. Very, very few of these EST applications are going to make it through to a patent.
On the other end is the third generation, where there's a complete disclosure, they are located on the gene, and a very broad utility is disclosed, often an actual utility. Those will have a much greater chance of——
Mr. BERMAN. There are some segments where utility is revealed?
Mr. DICKINSON. Yes. And you'll hear from other witnesses today that take the other point of view. This is a topic that is widely debated. NIH stands as an applicant of our office and other applicants are here today to testify, as well. The question comes down to, as you've suggested, how much utility can be inferred from the computer modeling that is used now to determine the utility associated with a particular EST. The question is what percentage of that analogous information—it's called percent homology in the term of the art—is sufficient, in order to justify the utility.
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In traditional chemical practice, for example—I've been a chemical patent practitioner all my life—you basically make a general allegation of a utility and that's sufficient to meet 101. It's a very low standard in most chemical arts. The reason we've looked at this question again, and the reason that we've raised the bar, is because of the sensitivity of this issue, the concerns raised by NIH and others, and the need to make sure that we're doing it right in this particular circumstance.
Mr. BERMAN. Mr. Chairman, my time is up. I had one—I do have one more question——
Mr. COBLE. Without objection——
Mr. BERMAN [continuing]. On the second round—not that I want—we have a number of witnesses coming up, so I don't want to take too much time. But, at some point, either here or with the other panelists, I'd like to just get into the whole issue of homology and to what extent that's a legitimate basis for issuing patents. But, we'll do that later.
Mr. COBLE. We might do that for a later day, if that suits you, Howard. The gentlelady from California?
Ms. LOFGREN. Thank you, Mr. Chairman. I'd like to commend you for scheduling this hearing. I think it's an important thing to do and not only for us to discuss what the Commissioner and the witnesses, the whole issue of patenting the genome, which is very much of interest to the American public and to the world; but also to allow the Commissioner to tell us the steps that he has taken to address issues that have arisen prior to today's hearing. And I will guess that this is not the last time that we will be together sorting through these very complicated issues.
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First, I will state that I think there are a lot of comments made in the popular press that are so misunderstanding of what is at stake here. Clearly, the protection of intellectual property has fueled the growth of innovation in the United States and around the world and I don't think there's any of the witnesses or the members of this committee who would feel otherwise. So, the question really is how do you sort the balance between protection and providing incentive for further research and disclosure that allows other scientists to find out what's been found, so they can also advance human knowledge? And that's always a difficult thing to do, especially when something as new as this.
One of the things that has—I don't know what the answer is, but concern has been raised about the utility standard in the—as it's been applied early on, and I think your office has recognized that, because of the changes that you've proposed. One thing that has been brought to my attention, a concern is what happens and what impact will those early patents have on the advance of human kind? Will they—knowledge for human kind. What—where does that leave us, both in terms of those who hold the patents, and also in terms of researchers and those who are now perhaps even taking the research farther? Is that a looming—you said ''defacto submarine patent''—I don't know that you were applying it to this issue, but what do we do about that, if anything—not the Congress, but the Patent Office? How can that be dealt with?
Mr. DICKINSON. Well, several things. We work under a standard in section 282 of the Patent Act, that all patents are presumed valid. So all the patents which are issued issue with a presumption of validity. Having said that, we think it's also important to note, as Mr. Berman suggested, a lot of the patents which have issued to this point on gene sequences or gene fragments were done at a time prior to the very widespread use of sequencing machines. They were done using wet biology and there's a significant amount of disclosure in those patents that issued. We come to a new era now and that's, I think, one key reason why we want to take a look at that standard at this time.
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After patents have issued, there's very little our office can do. We have a procedure called reexamination, which I think you are all familiar with from your debates last year. The standard under reexamination only allows the Director to order reexamines when there is a 102 or 103 concern, based on patents or publications; not under 101, unfortunately. But, this, I think, is also a question. If there is a problem here, and it's not clear yet whether there is or is not, but if there is a problem here, the court's job is to look at all of this and say that some patents may have issued inappropriately. But, I think we're still under the presumption of validity.
Ms. LOFGREN. Let me ask you, and I'm not saying that—I'm not conclusionary, as to whether the patents are over broad, should have been issued, but just in terms of process and volume I'm interested in. Since the onset of computer sequencing and the publication of the new utility guidelines or standards, how many patents are we talking about, do you think, in the genome are?
Mr. DICKINSON. That have issued prior to the standards? Let me check.
Ms. LOFGREN. And since the rigorous onset of——
Mr. DICKINSON. My understanding is we've issued about 10,000 patent applications at this point. Excuse me just 1 second.
[Pause.]
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Mr. DICKINSON. My understanding is that approximately 6,000 patents have issued on gene sequences since we first started issuing them. We haven't tracked the exact number since the first issuance of the revised interim guidelines. We can provide that information to you, if it will be helpful.
Ms. LOFGREN. I'm just trying to—my time is up, but trying to get a sense of if this is going to be—this issue that has perked up is going to address the volume of litigation that might be facing the courts. It wouldn't be every case or every patent, clearly, but I'm just——
Mr. DICKINSON. That's a very interesting question. I think most observers would say that most of the patents that have issued so far have issued with sufficient utility and sufficient information, because they've come out prior to the real heavy use of the sequencing machines that are the subject of a lot of the debate.
Ms. LOFGREN. I'd be interested in what other further data you could get on that specific question after the hearing. Thank you, very much, Commissioner.
Mr. COBLE. I thank the lady. The gentleman from Massachusetts, Mr. Delahunt.
Mr. DELAHUNT. Thank you, Mr. Chairman. And I thought my colleague's question was very pertinent to the concerns that have been expressed by the research community. And I wonder if after a patent has been issued, there have been, in your experience, licensing practices that are so restrictive in nature, that they've caused a certain level of angst, if you will, to yourself and to the research community.
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Mr. DICKINSON. There are isolated instances that have been reported in the press, where the kind of licensing fees associated with it by some have been regarded as a concern. But with the exception of those, I think, rare and isolated cases, it's not normally the case. There's a reason for that. You will have other witnesses who can speak to that question, but I think you'll note one of the witnesses later will talk about the way that the biotechnology industry is now organized. The parts of that industry that are developing these sequences and obtaining the patents, the way in which they'll make their money, the way that they'll get a return on their investment is through the licensing of that information. They will not necessarily be the companies, which take those discoveries on, and build the pharmaceuticals from them. So, they're incented to make sure that the licensing regimes that they're going to offer won't be onerous.
Mr. DELAHUNT. Except I wonder whether those whose patents were issued early on, are in the position now have no idea, to leverage that minimal early investment into something of such magnitude that it really does cause a problem.
Mr. DICKINSON. I would only take exception with this piece. I would not call it a minimal early investment. I think there's an extraordinarily large investment, a substantial investment by the biotech community. Even the sequencing companies, if you see the vast investments they've made in this equipment and the scientists that they need to run it, it's a very substantial one.
Mr. DELAHUNT. Well, thank you for educating me.
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I guess I see your role and the role of the agency as really one to, if you will, monitor the public interest here. Clearly, the biotech world is the private sector and there is a profit incentive. And clearly, as you've indicated, that's important, in terms of the progress that has been made. But, also in your testimony, you did link the advances in health care, to what is happening now, in terms of the research, obviously with the recent announcement of the genome study and that wonderful result.
I guess what I'm saying is that it is of great consequence. I agree with my colleagues in applauding the Chair for calling this hearing, and I'm sure this will be one in a series of hearings to monitor what's happening. And I think it was Mr. Berman who indicated maybe we should do nothing and I think that's my—that's just my inclination at this point in time, because, as I'm sure you can tell from our questions, we're not particularly conversant with this rather esoteric topic. I speak for myself; I don't speak for Mr. Berman, of course.
But, I guess your position, Mr.—Commissioner, would be that, as of this point in time, you don't see any need for any changes in the statutory scheme whatsoever. Is that a fair statement?
Mr. DICKINSON. That's a very fair statement. I think—as I indicated in testimony, I think one of the strengths of our system is that it is facile enough to deal with all new technologies as they emerge. I think that's proven itself through time. That does not mean, by any means, that this committee and others in Congress should not provide appropriate oversight on these issues; they should. Our job is to try to strike the right balance; and I think that what you'll hear from witnesses today is that there are some that criticize us from one side and some that criticizes from the other side, which is something of an indication that we may have struck the right balance.
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Overall I think the most important part to remember is that the kind of benefits that the human genome project and other discoveries in this area will result in will only be made possible through a strong and vigorous patent system. Just this week, the Scientific American magazine has a study on the business of the human genome. There's a quote that says, ''Without such patents, a company like Myriad Genetics in Salt Lake City could not afford the time and money required to craft tests from mutation of genes, BRCA–1 and –2, which have been linked to breast cancer.'' And so they need that kind of protection, in order to justify the kind of investment.
Mr. DELAHUNT. Well, I really welcome your testimony and I think your points are well taken. I was also pleased to hear the Chair prompt from you again the absolutely critical need for that resources, so that the advances that we look forward to can actually happen. And I'm sure you're aware that members of this committee have been advocating vigorously on behalf of funding, so that the American people—and this is really what it's about—can enjoy the rewards of these incredible advances, in science and particularly the health sciences.
Mr. DICKINSON. Thank you, Mr. Delahunt. You're absolutely on point with regard to the resource question. It's critical to the ability of us to do our mission, both for the applicants, but more important, as you suggested, for the American public. And I want to thank you personally and on behalf of the USPTO, and all of the committee, for their vigorous defense of that, because it's critical to our work.
Mr. DELAHUNT. Well, thank you. And I hope that the biotech industry and the research community bring that message to Congress and to the American people, because I agree, it's critical. I yield back.
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Mr. COBLE. I thank the gentleman. Let me extend what the gentleman from Massachusetts said. I don't mean to be critical of anyone, but many people think in promoting a cause, that all they have to do is take a half of page ad in Roll Call and that will take care of it. You're going to have to knock on some doors folks, to help us in this funding scenario.
We have been joined by our colleague from Indiana, Mr. Pease.
Mr. PEASE. Mr. Chairman, I have no statement at this point. I would like, though, to say publicly what I've said privately on a number of occasions, and that is how grateful I am for the professional manner, in which Mr. Dickinson conducts himself and his office. He and his staff have been very helpful to us. And I am grateful for the opportunity to say that publicly and to you and the ranking member for having us here.
Ms. LOFGREN. Would the gentleman yield?
Mr. PEASE. Indeed.
Ms. LOFGREN. I would just like to echo the comments made by my colleague. Commissioner, I think you are really doing quite a wonderful job and your staff has been very responsive and I just wanted to concur on this side with the professionalism with which you've dealt with these issues.
Mr. BERMAN. Would the gentleman yield?
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Mr. PEASE. Certainly
Mr. BERMAN. In addition to totally agreeing with your comments, I wanted just—the point raised by Mr. Delahunt was initially raised by the chairman—just, I don't want my silence to be thought of as somehow not agreeing with the importance of their comments regarding the—how stupid it is over the long term for us not to understand what is going on in the context and what your office has to do and the resources you need. If ever the designation, ironically, it's totally—it's totally anticipated, but if ever the time to apply the application emergency funding to an issue, it is the resources we can now plow in, to allow you to do what you need to do, to staff up, to even amplify what you've done, in terms of professionalizing the office, to have the kinds of people who can make the judgments on these incredibly complicated questions that you're presented with and the benefits to the American economy and to human health and the human condition are so dramatic. It's a very dry and technical issue involving the appropriations process, but it has incredible implications.
And so, I mean, we have to persuade the appropriators on both sides of the aisle, that the ability to pluck funds from these fees for what seem like important causes at the time is so penny-wise and pound foolish, and that we have to stop that practice and provide additional resources.
Mr. PEASE. Thank you, Mr. Chairman. I yield the balance of my time.
Mr. COBLE. Mr. Dickinson, in defense of the gentleman from Indiana, to assure you that he's not buttering you up, he had said those same things to me in private. He's saying in public what he said in private.
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Mr. DICKINSON. Thank you, Mr. Chairman. We enjoy working with all the committee and all the committee staff. We're only saddened that we won't have Mr. Pease on the committee next year, because we have enjoyed working with him and his staff.
Mr. COBLE. I was about to say he will be sorely missed on this subcommittee next year. I think we all agree with that. Now in the era of political correctness, when I said that many people believe in taking a half page ad out in Roll Call, there are two Hill newspapers, so perhaps a half page ad in The Hill, as well, might suffice for some.
Mr. Dickinson, as has been stated today, and ladies and gentlemen, this is the first step of a long journey. I'm sure you will be in contiguous contact with the subcommittee, Mr. Dickinson, and we, again, thank you for your attendance today.
Mr. DICKINSON. Thank you, Mr. Chairman, for having us here. One of the inquiries was to see what an actual gene sequence patent looked like. We didn't want to bring a copy of this one for everybody, so we brought a smaller one, and we can give it to your staff for distribution, if that's all right.
Mr. COBLE. Mr. Berman can read that on his next trip to California.
Mr. DICKINSON. Thank you, Mr. Chairman.
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Mr. COBLE. Thank you, sir. If the next panel will come forward. Now, folks, I want to apologize to each of you for the 5-minute time frame, because this hearing, as Howard just said, could last for 2 days; but, we have a very important appropriations bill on the floor and the bell was going to ring before too long. In the interest of time, we do need to keep it on a fairly short leash today. I'm sure we will see witnesses subsequently from time to time and I appreciate your attendance today.
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The introduction will take some time, but I think it's important that we all know the credentials that these witnesses bring to this table. Our first witness is Dr. Randal Scott, who is currently president and chief scientific officer for Incyte Genomics. Dr. Scott is the co-founder of the company, which is at present, has been awarded the most number of human gene patents on record. He is a native Kansan and holds his undergraduate degree from Emporia State University in Kansas, and his doctorate in chemistry from the University of Kansas.
Our next witness is Dr. Dennis Henner, vice president of research at Genentech prior to his 18 years of science and research at Genentech. He was with the Scripps Clinic and Research Foundation. Dr. Henner holds a doctorate in microbiology from the University of Virginia Medical School and has published more than 60 scientific articles and books.
Our third witness is Andrea Ryan, who is the president elect of the American Intellectual Property Law Association. Ms. Ryan is also vice president and associate general counsel, Intellectual Property, for the Warner-Lambert Company, Morris Plains, New Jersey. Prior to that, she was an attorney in private practice. Ms. Ryan is a cum laude graduate in chemistry from Emmanuel College in Boston, and received her law degree from the Hofstra School of Law in New York.
Our next witness is Dr. James F. Severson, who is currently the president of the Association of University Technology Managers, a national organization of university technology transfer professionals. He is also the president of the Cornell Research Foundation, where he has overall responsibility for the university's technology transfer activities. Dr. Severson received a B.S. in zoology, and a Ph.D. in physiology from the Iowa State University and did post-doctoral research at the University of Southern California. He also served on the faculty at the University of Southern California School of Medicine.
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Our fifth witness is Mr. Carl Dixon, who is the president and executive director of the Kidney Cancer Association. Mr. Dixon is a magna cum laude graduate of the Illinois Wesleyan University. He was the recipient of the Edward R. Murrow Fellowship to the Fletcher School of Law and Diplomacy and holds a law degree from the University of Chicago. Mr. Dixon has practiced law in private practice and has spent the last 20 years in service to various health organizations, including on the board of the American Lung Association.
Our next witness is Dr. John F. Merz, who serves as an assistant professor of bioethics at the University of Pennsylvania. Mr. Merz holds an undergraduate degree in nuclear engineering from the Rensselaer Polytechnic Institute, a J.D. from the Duquesne University School of Law, and a Ph.D. from the Carnegie-Mellon University. He is a prolific author and commentator on the public policy issues in the patent and bioethics field.
Our final witness is a gentleman unknown to none in the community, a Dr. Harold Varmus. Dr. Varmus was the co-recipient of the Nobel Prize for Medicine for his investigatory work pertaining to the genetic basis for cancer. He also served as the Director of the National Institutes of Health from 1993 to 1999. Dr. Varmus has a B.A. from Amherst College, a masters from Harvard, and is a graduate of the Columbia University's College of Physicians and Surgeons. He currently serves as the president and chief executive officer of the Memorial Sloan-Kettering Cancer Center in New York City.
We have written statements from all the witnesses on this panel, and I ask unanimous consent to submit into the record in their entirety. Again, lady and gentlemen, it's good to have you all with us, and Dr. Scott, if you will kick it off. Dr. Scott?
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STATEMENT OF DR. RANDAL W. SCOTT, PRESIDENT AND CHIEF SCIENTIFIC OFFICER, INCYTE GENOMICS
Mr. SCOTT. Thank you, Mr. Chairman. In the essence of time, I will not read my written testimony but just make a few comments. We very much appreciate the opportunity to engage in this public dialogue, and in fact, we're very excited about what I think will be a very long discourse in society about the future of genomics technology, genetics, the impact that's going to have, not only in patents, but in many of the ethical issues that face us.
Truly, this is a unique time and place in history. If we step back and think for a second of the obvious, human genes have been around, well, just about as long as humans have been around, and yet they haven't necessarily been available for the diagnosis and treatment of disease. It's only over the course of the last few decades that we have had the technology to be able to isolate, purify genes and take them out of a form they're found in nature in the human body, into purified, isolated compounds that we can now use in a commercial venue to be able to diagnose and treat disease.
So, this is a phenomenal accomplishment by mankind. In fact, in the last 10,000 years of recorded history, it's only been the last five to 10 years that we've really been able to apply these technologies in a way that allows us to study now thousands of genes at a time, not just one gene at a time. In fact, it drives the hope that over the course of the next ten to 20 years, we will be able to identify the molecular basis for virtually every human disease. We'll be able to identify the appropriate targets for Alzheimer's disease, for AIDS, for various different types of cancers and be able to apply these genes as tools into diagnosing and solving those disease problems.
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At my company, Incyte, when we founded the company back in 1991, we were drive by the principle that the history of science was long and arduous. Identifying a biological function and then painstakingly purifying the one molecule out of a commish of biological molecules was very hard work. In effect, we begin operating on a different principle, that we could begin to take cells and tissues of interesting biological meaning, such as prostate cancer and normal prostate tissue and start to scan thousands of genes and look at the differences between those genes, which genes association with different diseases, for example.
It was really that driving force that led us in 1991 to begin to launch an internal program to essentially discovery every gene in the human genome. It's with great pleasure that we can look back now over the last 10 years and know that we now have most of the genes in hand that will be the future of all medical research, because while biology is complex, it's also absolutely finite.
The ability to take those genes now and put them into commercial viable forms to be able to study, diagnose and treat disease, as well as simply to get those into the hands of scientists to be able to do research is a phenomenal new and growing industry. In fact, I would argue that the genomics industry of today or biology of today is exactly where the computer industry was in the 1970's. In fact, it's being driven by many of the same factors, Moore's Law, Metcalf's Law.
Every year, we sequence DNA at ever cheaper costs and at more rapid rates, just like the computer industry provides us with greater computer power at lower costs. The impact of that is that we are able to not only identify and have all of the genes in the human genome available, we can begin to put every piece of DNA from the human genome onto a DNA chip. It was asked earlier about EST's and how fragments of genes can be patentable. Well, in fact, you don't have to have an entire gene to be able to use a piece of that gene to diagnose the presence or absence of that gene in a patient and how it correlates to disease.
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So, in fact, one of the most phenomenal commercial accomplishments, I think, of this decade will be the first DNA chip that has every gene in the human genome on that chip. We believe that will be a universally accepted commercial product that will allow scientists the world around to diagnose, treat disease, to look at the toxicity associated with many drugs and many compounds. Thus, the real world utility of genes is facts not just buried in their biological function and what they do naturally in the body. The real world utility of genes is based around our ability to use those as tools, as diagnostics, as markers for disease and drug therapy.
Our company has been one of the leaders in licensing practice. We believe that gene patents are incredibly valuable, that they've been a tremendous incentive to this industry, with billions of dollars raised for R&D, and that R&D going toward helping suffering people, people with disease who need hopes for a cure.
Those same gene patents are also a great trust. We describe our own intellectual property, which now comprises almost 500 gene patents. In fact, we're still second in the world to the NIH and the government in terms of the number of gene patents issues, but it's also an incredible trust. We established a policy five to 6 years ago that said we would only license genes nonexclusively in the research field and that we would license those broadly to anyone who asked.
We also established a policy that we would license genes in the diagnostics field nonexclusively to anyone who would ask because we can't predict the future of diagnostics. We don't know which formats will work and which formats won't work, so we want to insure the commercial viability of those products. Internally, we like to describe that sometimes as the Dolby stereo school of business. We don't make the stereos, in Dolby's case. In our case, we don't make the drugs. We make the drugs faster, better and cheaper. Same thing for diagnostics.
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By essentially making this technology available broadly, we think we have added tremendous value to industry and a tremendous value to society. We also believe that we're seeing a changing time in the pharmaceutical industry, just as we've seen in the computer industry. In the early days of the computer industry, every company did everything. They made their own chips. They made their own software. They had their own sales and distribution network, but effectively, as Intel and Microsoft and many companies came along, they began to fragment that industry. Pretty soon it was discovered that it was much more effective for one company to make chips and sell them to all manufacturers.
You're beginning to see some of that same influence in the pharmaceutical industry, where in the past every company, every researcher, went all the way from A to Z, making the discovery, screening and developing the compound, developing that drug. Companies like ourselves no longer focus on the end product of manufacturing a drug and taking that to the clinic and to the market, but rather on the early discovery phase and providing that as a service to the entire industry. That's been the basis of our company.
We now have 18 out of the top 20 pharmaceutical companies in the world are already subscribers to our database. They have licenses to all the genes and all the genes' patents that we've identified. They have those nonexclusively, so they share with each other the capability to do research and to develop diagnostic and therapeutics off of that information. With that, I'll close out my opening comments, and we're very much appreciative of the opportunity to join you here today.
[The prepared statement of Dr. Scott follows:]
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PREPARED STATEMENT OF DR. RANDAL W. SCOTT, PRESIDENT AND CHIEF SCIENTIFIC OFFICER, INCYTE GENOMICS
EXECUTIVE SUMMARY
Incyte Genomics is a genomic information company. Our mission is to revolutionize health by providing genomic information to researchers and consumers through a worldwide network of collaborators. Our goal is to help provide scientists with an understanding of the molecular basis for all major human diseases within 10 years.
By discovering and characterizing the functions of all of the genes in the human genome, genomics companies like Incyte contribute to improved efficiency in the health care industry, to the ultimate benefit of the public. Genomics technologies have already begun to accelerate the development of new drugs and diagnostic tests. They hold the promise of dramatically reducing drug development costs and improving drug safety, both of which will save lives and reduce health care costs.
Genomics is the most innovative new approach to curing disease in the history of medical research. Genes cannot be patented as they exist in nature. Consequently, the science required to identify and characterize genes is substantial and represents significant invention. Genomic inventions and gene patents are critical to the continued success of the genomics industry, providing incentives for private enterprise to make the necessary investments and, in contrast to trade secret laws, encouraging broad access to and use of gene-based inventions. Given the impact of genomic inventions on health care, the award of patents on these inventions is entirely consistent with the Constitution's goal of granting patents to enable ''progress in science and the useful arts.''
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The patent system is designed to create incentives for invention, and nowhere is its role more apparent than in the case of genomic inventions. Existing patent guidelines, which have spurred the tremendous advances we've recently seen in medical research, must remain intact to ensure continued discovery. These revelations already have made a profound impact on the acceleration of drug development and the availability of new molecular diagnostic tests. The real world utility of these discoveries entitles them to patent protection. In keeping with its mission, Incyte licenses its gene patents broadly for research and diagnostic uses, facilitating the acceleration of the development and delivery of health care products and services.
It is not the role of the patent system to create health care policy, just as it is not the patent law's role to create any other industrial policy. As a consequence, patent laws should apply neutrally across categories of inventions, including genomic inventions.
I. OVERVIEW OF INCYTE AND ITS BUSINESS
Incyte is the leading genomic information company in the world. Its business is focused on the discovery and characterization of genes, with an emphasis on those genes that affect response to disease and drugs.
Incyte shares its discoveries on a non-exclusive basis for research purposes with a worldwide network of pharmaceutical, biotechnology and academic collaborators. This nonexclusive business model, based on Incyte's ability to put its discoveries in the hands of as many researchers who can profitably use them, has enabled Incyte to become the leading genomics information company, in terms of numbers of employees, customers, revenues and data collections.
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Founded in 1991 with 10 employees, Incyte now employs approximately 1300 employees. Incyte is based in Palo Alto. Approximately 1000 of its employees work in the San Francisco Bay Area; another 200 work in Incyte's St. Louis, Missouri facility, and another 100 are in Cambridge, England.
In the year 2000, Incyte expects to spend approximately $180 million dollars on research and development. Of its approximately 1300 employees, more than 10% hold Ph.D.'s. These statistics demonstrate the capital, both monetary and intellectual, that Incyte is investing in its discovery of genes and the role they play in disease and drug response.
Incyte was the first company to license its information, via database subscriptions, on a nonexclusive basis to pharmaceutical researchers. Incyte pharmaceutical subscribers now number more than 20, and account for approximately 75 percent of worldwide pharmaceutical research and development expenditures, as illustrated by the following slide.
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More recently, Incyte has begun to provide its databases to leading biotechnology and academic researchers. This year, Incyte began to make its information products available on-line, and plans to make all of its information products available through this medium by the end of this year. Incyte also has a vast network of distributors who distribute its products in Europe and Asia. All of these distribution channels are dedicated to the broad dissemination of Incyte's genomic discoveries and their use to alleviate disease.
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Based on revenue generation, Incyte has for several years been named as one of the fastest growing companies in Silicon Valley, a region noted for spectacular growth. Based on its 1999 revenues of about $157 million, Incyte had more revenue than any other genomic information company, confirming our position as the number one genomic information company.
Incyte's nonexclusive business model enables it to derive its revenues by providing useful discoveries to researchers more efficiently than would be possible were they to generate the discoveries themselves. In this way, Incyte has developed a business that leads the world in its sector, while at the same time accelerating the genomics revolution that promises unheard-of benefits for health care.
II. THE GENOMICS REVOLUTION
Human genes have obviously existed at least as long as humans. In over 10,000 years of modern civilization, however, humans have never been able to use genes to diagnose, cure or predict disease until now.
In the last several years, companies like Incyte Genomics have isolated, purified, sequenced and discovered a commercial utility for genes and put them into commercially useful formats for development of drugs and diagnostic tests. It is this transformation of a gene as it occurs in nature into a purified, isolated commercially viable product that entitles companies like Incyte to patents on these discoveries.
By providing its customers with a systematic understanding of the structure and function of ALL of the genes in the genome, Incyte is helping researchers to focus their efforts on genes known to be in classes that are important to disease or drug response. This enables researchers to avoid much of the trial and error that previously characterized pharmaceutical research. This increased efficiency should result in less expensive drugs and diagnostic products. This systematic understanding of the structure and function of genes will also enable the development of safer drugs. Because the interaction of drugs and genes will be better known, undesirable side effects that sometimes accompany drug treatment will be reduced and make patients less subject to unanticipated results that have long plagued drug use treatments.
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By providing its information products nonexclusively to those who are in the best position to utilize the information, Incyte is making a substantial contribution to the increased efficiency of drug and diagnostic development. Under this model, Incyte is able to focus its efforts on its core competency. As a result, its customers avoid the inefficiency and duplication of effort that would be required if they were to engage in target identification and validation on their own.
In this way, the evolution in the pharmaceutical industry parallels the demise of the old vertical computer industry. Until the early 1980's, the computer industry was characterized by a high degree of vertical integration, as illustrated by the following chart:
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Under this model, computer companies developed their own microprocessors, operating systems, computer designs and in many cases, their own applications programs. They sold their integrated products through their own dedicated sales forces. Because of the duplication of effort and high overhead associated with this model, computers were generally very expensive, and only researchers in government, academic institutions and large corporations could afford to use them.
Beginning in the early 1980's, a new, horizontal computer industry began to emerge, as illustrated by the following chart:
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The benefits of this evolution are well-known. By focusing their research and development efforts, and by achieving the economies of scale associated with the sale of their products through multiple channels, companies focused their efforts on individual parts of the value chain, many of which are only components of the products ultimately sold to end users. The result has been that the new computer industry has put computing power in the hands of millions of people throughout the world thanks to lower production costs which resulted in the creation of better, cheaper computers.
Similarly, the health care industry has historically been characterized by a high degree of vertical integration, as illustrated below:
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Like the old vertical computer industry, this vertically-integrated model is characterized by a high degree of inefficiency and duplication of effort. For example, individual pharmaceutical companies engaging in target discovery and validation largely duplicate the effort of their competitors.
In contrast, the emergence of genomics companies like Incyte Genomics, coupled with other related trends in health care, promise the creation of a new pharmaceutical industry, which might eventually look like the following:
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This new, horizontal pharmaceutical industry will be much more efficient, which should result in lower costs. By making use of standard, off-the-shelf genomics products, health care researchers will increasingly be able to avoid costly, time-consuming duplication of effort, which will speed drug development. The ultimate result will be to make new drugs available to health care consumers, at lower prices and with greater assurance of safety, than would otherwise have been possible.
The systematic understanding of the molecular basis for disease and drug response will also enable dramatic increases in the pipeline for new products. At the current rate, it is conceivable that by the year 2010, the genomics revolution will have enabled the understanding of the molecular basis for most major human diseases.
The potential, in terms of lives saved and health care cost reductions, are enormous. Recent developments provide evidence that the benefits of this revolution are already beginning to manifest themselves. Examples include the following:
In 1999, CV Therapeutics, an Incyte collaborator, was able to use Incyte gene expression technology, information about the structure of a known transporter gene, and chromosomal mapping location, to identify the key gene associated with Tangiers disease. This discovery took place over a matter of only a few weeks, due to the power of these new genomics technologies. The discovery received an award from the American Heart Association as one of the top 10 discoveries associated with heart disease research in 1999.
In an April 9, 2000, article published by the Bloomberg news service, an Incyte customer stated that it had reduced the time associated with target discovery and validation from 36 months to 18 months, through use of Incyte's genomic information database. Other Incyte customers have privately reported similar experiences. The implications of this significant saving of time and expense for the number of drugs that may be developed and their cost are obvious.
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In a February 10, 2000, article in the Wall Street Journal, one Incyte customer stated that over 50 percent of the drug targets in its current pipeline were derived from the Incyte database. Other Incyte customers have privately reported similar experiences. By doubling the number of targets available to pharmaceutical researchers, Incyte genomic information has demonstrably accelerated the development of new drugs.
In a May 26, 2000, article in the Wall Street Journal, one Incyte customer stated that by using Incyte's database, it quickly discovered a new histamine receptor gene which had long eluded researchers, and which is being used to develop an effective drug that is specific for brain tissue. In fact, after isolation of the gene and using high-throughput screening, a candidate drug was identified in less than a month. Again, by making new drug targets available to the pharmaceutical industry, Incyte helped the company go from picking a target receptor to developing a potential drug in just 18 months, a process that typically takes five years or more, clearly accelerating the drug discovery process by three-fold or more.
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As these examples demonstrate, the inventions of Incyte Genomics and others are already having a dramatic impact on the acceleration of drug and diagnostic test development. They give confidence that the 21st century will truly be the Genomic Age.
The genomic revolution is in its infancy. With the availability of a first draft of the human genome, discoveries in the field promise to accelerate. Incyte believes that the following discovery time line, while aggressive, is achievable:
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If this schedule is achieved, the implications for health care are enormous. The investments that pharmaceutical and biotechnology companies make in discovering drug targets will no longer be necessary, saving them and consumers untold billions of dollars. Using rapid, accurate technologies, it will be possible to test drugs for toxicity and effectiveness against known classes of genes, thereby eliminating many costly drug failures late in the drug development cycle. By understanding the role of genetic diversity in disease and drug response, safer, more effective drugs will be developed and health care providers will be in a position to tailor therapies to the genetic profiles of individual patients, resulting in personalized medicine.
The obvious result of this revolution will be safer and cheaper drugs that will be administered more efficiently and effectively. Perhaps even more importantly, diagnostic tests and new therapies will be developed for diseases that are currently untreatable.
III. THE IMPORTANCE OF GENE PATENTS IN THE DEVELOPMENT OF GENOMICS TECHNOLOGIES
Gene patents play a critical role in providing the incentives and legal infrastructure to support the role of genomics in accelerating drug development, thereby promising to deliver more drugs that are safer and cheaper.
The availability of patents to support the massive investment in genomic research is essential to capital formation. Investors in genomics companies require assurance that these companies will be able to profit from their research and development investments.
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The recent announcement by President Clinton and Prime Minister Blair on the issue of the public availability of genomic information from the Human Genome Project vividly illustrates this point. This announcement was erroneously interpreted by the investment community as signaling a governmental decision to eliminate gene patents. Within hours of this announcement, Incyte and other genomics and biotechnology companies lost billions of dollars in their market capitalization.
The swift reaction of the investment community demonstrates the importance that investors place on patents as a vehicle for profiting from private sector research and development. In the absence of patents, it will become much more difficult for companies like Incyte to obtain access to capital. This in turn will inevitably slow the development of genomic information and technologies, which will have a seriously negative impact on the promised acceleration in health care research.
Patents also encourage the broad dissemination of genomic information in two ways. First, to obtain a patent, a patent applicant is legally required to disclose enough information about his/her invention and its use to enable someone with reasonable skill in the art to use the invention. This disclosure requirement enables other researchers to learn the teaching of the patent, and to conduct their own research that will enable further innovation and invention.
Patents also provide a system of legal rules that encourage the patent owner to distribute his/her invention broadly. In the absence of patent protection, the only legal protection for genomic information is through trade secret protection. To be eligible for trade secret protection, the owner of information must demonstrate that it has taken reasonable steps to protect the secrecy of his/her information. This means that access to and use of the information must be restricted, and confidentiality agreements are required with those who have access to the information. These requirements are obviously antithetical to the broad dissemination and use of genomic information that are critical to the business models of companies like Incyte, and that are essential to the promised Genomic Revolution.
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By way of example, during the year 2000, Incyte plans to make all of its information products and clones available to customers over the internet. This broadening of the market for Incyte products will further accelerate the impact of Incyte's genomic information on health care research. In the absence of patent protection for genes, on-line distribution of proprietary information becomes much more problematic, as this method of distribution is arguably inconsistent with the preservation of trade secret protection.
For these reasons, the availability of gene patents provides crucial support for the acceleration of health care research.
IV. GENE PATENTS ARE CONSISTENT WITH THE GOALS OF THE PATENT SYSTEM, AND ARE HELPING TO ACCELERATE RESEARCH
Under Article III of the United States Constitution, Congress is authorized to establish a patent system to provide incentives to inventors, with the goal of promoting ''progress in science and the useful arts.'' Given this goal, genetic inventions, which enable further innovation in health care research, are particularly deserving of patent protection.
Gene patents are enabling a revolution in health care. Given the role of gene patents in creating incentives for genomic research, gene patents can be credited with dramatically increasing the efficiency of health care research, with the attendant promise of delivering new drugs that are safer and cheaper than otherwise would have been possible.
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Critics of gene patents claim that they will retard innovation. Those who make this argument have no concrete evidence to support this hypothesis. Indeed, the evidence to date indicates that genomic research, supported by the patent legal system, has accelerated innovation in health care research. Instead of identifying drug targets on an individual basis, health care researchers, armed with a systematic understanding of the structure and function of genes, are able to bypass previously-expensive and time consuming steps in the drug development process.
''Research tools'' like gene patents are particularly deserving of patent protection. Critics of gene patents often argue that they are merely research tools, and as such should not be eligible for patent protection, to avoid the risk of making research more expensive. Upon examination, this argument falls apart.
First, as mentioned above, under the Constitutional standard, inventions that enable further scientific progress are particularly deserving of protection. As one might expect, then, nothing in the history of the patent law or in court decisions interpreting it supports the distinction between unpatentable ''research tools'' and other patentable inventions.
Second, virtually any invention that improves productivity or efficiency, from a computer to PCR to the technology that was the subject of the famous Cohen-Boyer patent, are ''research tools.'' Consequently, if one were to accept the premise that ''research tools'' are somehow inappropriate subject matter for a patent, then a number of these fundamental inventions which have enabled tremendous growth in knowledge, and which in some cases are responsible for the development of entire markets, would not have been eligible for patent protection.
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Gene patents do not represent real invention. The amount of science required to identify and characterize genes is substantial. To date Incyte alone has spent upwards of $200 million to identify and characterize expressed genes. The fact that companies like Incyte have applied industrial principles to create high-throughput ''factories'' that make these inventions does not render the inventions somehow less significant or useful.
Some argue that the invention is not complete until the precise biological activity of an individual gene is identified; indeed, there is some indication that the Patent Office intends to apply the new guidelines in this way. This argument ignores the real world utility, described above, associated with the isolation, sequencing and identification of genes and their classification into categories whose general functions are known. If this standard were to apply, then only those companies that adhered to the inefficient, vertically-integrated pharmaceutical industry model would be entitled to patents. This approach would be at odds with the evolution of the pharmaceutical industry, with its attendant efficiencies.
Patent licensing issues that may or may not arise from the grant of gene patents should be addressed as licensing issues, not by misguided attempts to codify health care policy into the patent law by changing patentability standards that apply to only one category of invention. Some have argued that the grant of patents on full-length or partial genes will create licensing complications that threaten research. See, e.g., M.A. Heller and R.S. Eisenberg, Science 280:698–701 (1998). Unfortunately, these arguments apply equally to any fundamental invention that leads to further invention.
For example, the invention of both the transistor and the integrated circuit enabled the microprocessor industry, which has seen innovations by and patents issued to countless inventors. While many of these inventions overlap, the industry has been able to work out cross-licensing arrangements that have enabled the delivery of unprecedented computing power to the general public. If one applied the reasoning of commentators like Pro