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Existing Patent Eligibility Law Improves Pandemic Response and Preparedness

The striking contrast between the response to COVID-19 and severe acute respiratory syndrome (SARS) highlights the importance of patent eligibility limits. During the 2003 outbreak of SARS, the Supreme Court had not yet clarified that naturally occurring gene sequences are ineligible for patenting. That led multiple companies to seek patents on the virus and its genetic sequence.10 Concerned about the detrimental impact these patents would have on research needed to combat the SARS crisis, the U.S. Centers for Disease Control and Prevention (CDC) defensively filed its own patent applications, explaining this step was deemed necessary to “prevent folks from controlling the technology” and “give the industry and other researchers reasonable access to the samples.”11

HPW: One of the biggest points of contention in the pandemic agreement negotiations is pathogen access and benefit sharing, governing how World Health Organization (WHO) member states share the biological material of pathogens that may cause pandemics. How has the US addressed this in its global health security strategy?

Psaki: This goes back to the point that every experience is not going to be exactly like the COVID pandemic. But if we think for example, about some of the other outbreaks that I mentioned before, Ebola, in particular, we’ve had very, very few Ebola cases in the US. It is not a major threat to the United States. And so when we are thinking about how to respond to Ebola and how to ensure that countermeasures are developed and available, to date, it has largely been to ensure that those countermeasures are available to people living in the countries where the outbreak is emerging.

Health Policy Watch: The COVID-19 pandemic illustrated that weaknesses in the public health response in one part of the world can be a threat globally. Why did the US Administration release a Global Health Security Strategy now?

Stephanie Psaki: The goal is to build on and learn from the lessons of the COVID-19 pandemic. We started working on this new strategy as we emerged from the acute phase of the COVID pandemic feeling like it’s going to be enough in our rearview mirror that we can understand and learn from the lessons and have a more forward-looking approach with how we can prevent and address the next pandemic.

The devastating impact of COVID-19 has highlighted global vulnerabilities to high-consequence biological events. The international community was woefully unprepared for a pandemic that has led to millions of deaths and trillions of dollars in economic losses, and has upended daily life. However, notwithstanding the severe damage caused by COVID-19, it should be viewed as a warning shot.1 It will not be the last pandemic humanity faces, and the next high-consequence biological event could be as destructive or substantially worse.

We define global catastrophic biological risks (GCBRs) as biological events of tremendous scale that could cause severe damage to human civilization, potentially jeopardizing its long-term survival.2 The Johns Hopkins Center for Health Security has also developed a working definition of GCBRs,3 and this term is part of a broader discussion about global catastrophic risks that could arise from a variety of sources, including nuclear war, anthropogenic climate change, and advanced artificial intelligence that has not been sufficiently safeguarded.4,5 GCBRs could be caused by a naturally emerging infectious disease outbreak, an accidental release of a pathogen, or a deliberate attack. Naturally emerging infectious disease outbreaks that can grow into pandemics are likely to increase in frequency due to urbanization, globalization, and environmental degradation, and the world faces an increasing risk of high-consequence biological events resulting from accidental or deliberate misuse of the tools of modern bioscience and biotechnology.6-8 Not all outbreaks or global pandemics will grow to the scale of a GCBR as we define it in this article and as others have defined global catastrophic risks more broadly, because the threshold for this type of event is extremely high.

Indeed, Captain Kimberly J. Elenberg, Director for Force Modeling and Analytics for the Department of Defense Coronavirus 2019 Task Force, has credited current patent eligibility jurisprudence for playing a large role in allowing her team to coordinate the military’s response to the pandemic.14 For example, researchers discovered that a significant proportion of individuals infected with COVID-19 shed virus RNA in their stool, and therefore the level of virus RNA in wastewater can be measured to track community infection trends.15 Under existing patent eligibility law, the correlation between the amount of virus RNA in stool samples and community infection levels was not eligible for patenting, even with the addition of a conventional wastewater test. Therefore, both the CDC and military could freely conduct wastewater tests and use the results to determine where to allocate testing resources.

Current patent eligibility law also plays a key role in protecting the public from future pandemics. Just like tracking new variants, detecting the emergence of new viruses requires unrestricted access to gene sequences, natural correlations, and conventional analytic methods implemented on generic computers. For example, Dr. Christopher Mason of Wiell Medical College has led a coordinated effort among researchers to sequence and characterize microbiota (bacteria, fungi, viruses, and other microbes) in cities across the world.16 Thus far, their work has identified 10,928 viruses and 748 kinds of bacteria that had never before been documented. 17 Thanks to the ability to freely match genes associated with pathogenic viruses as well as antimicrobial resistance to newly identified strains, Dr. Mason’s program is already helping us prepare for (and potentially mitigate) future health crises.18

Ultimately, patent policy must be improved. Ideally, it would be done without the need for additional regulation and new legislation, as any changes to regulation and legislation would most likely create further problems to be resolved by the interested participants and the courts. Ideally, the courts, including the Supreme Court would right the jurisprudential ship in accordance with our above critique of existing precedent. Unfortunately, after almost 15 years, that outcome seems unlikely, and the fate of improvements in the nation's patent policy is increasingly resting with Congress and the PTO.

Some have advocated for sweeping congressional legislation to overturn Myriad, such as Senator Tillis’s Patent Eligibility Restoration Act.339 The bill would effectively reverse Myriad and set gene patents back to pre-2013 status.340 However, gene patents were not perfect before Myriad.341 The Myriad suit was brought over very real concerns about the effects that gene patents had on healthcare costs and access by researchers.342 The bill, if enacted, would likely reopen those issues and reignite a number of debates over gene patents that would once again require judicial interpretation. Given the Supreme Court’s stance that genes should not be patentable, it is unclear whether those debates would lead to a different result. Such a move would likely provoke even greater uncertainty within the biotech industry and might ultimately prove counterproductive to the goal of reinvigorating investment in the field.

Some have advocated for sweeping congressional legislation to overturn Myriad, such as Senator Tillis’s Patent Eligibility Restoration Act.339 The bill would effectively reverse Myriad and set gene patents back to pre-2013 status.340 However, gene patents were not perfect before Myriad.341 The Myriad suit was brought over very real concerns about the effects that gene patents had on healthcare costs and access by researchers.342 The bill, if enacted, would likely reopen those issues and reignite a number of debates over gene patents that would once again require judicial interpretation. Given the Supreme Court’s stance that genes should not be patentable, it is unclear whether those debates would lead to a different result. Such a move would likely provoke even greater uncertainty within the biotech industry and might ultimately prove counterproductive to the goal of reinvigorating investment in the field.

This Section examines the impact of the Myriad decision on genetic testing. The decision in Myriad, in conjunction with Mayo, encourages competition and innovation in molecular diagnostics and omics192 by removing “gene patents as a legal barrier to large-scale sequencing.”193 Critics against gene patenting argue that the foreclosure of gene patenting opens the door for substitute testing options from competitors, thereby driving down the costs to patients and medical providers.194 According to them, an increase in testing will also help to “reveal more genetic variants and provide insights into their biological significance”195 thanks to the resulting increase in sample size and corresponding data. This could reveal new information to be shared on ClinVar, a public database funded by the National Institutes of Health (“NIH”).196 Currently, however, Myriad and its patent licensees have exclusive access to Myriad’s proprietary database containing valuable data on BRCA mutations, which in 2015 contained at least 300,000 cases197 and is protected by the company as a trade secret.198 The wider scientific community could substantially benefit from access to Myriad’s “most valuable asset”199 to collaborate on the “cataloging and interpreting” of mutation variants.200 Together, these concerted efforts could help advance understanding in this area at a much faster speed than would otherwise be possible. There have been calls from leading medical organizations to have Myriad and other labs share their variant classification data, however, Myriad has yet to do so on ClinVar.201

The Advisory Committee for Genetics Health and Society has also concluded that patent rights are “neither necessary nor sufficient conditions” for the development of genetic tests.170 Moreover, most empirical research shows that there is “little to no inhibitory effect” of DNA patents on later scientific research efforts.171 Further still, patents are not the only incentive system in place. For academic science, where substantial amounts of genetic discoveries are made, “public funding, professional rewards, and scientific norms of discovery already provide robust incentives for invention, thus undermining the justification for exclusive rights.”172 Thus, the Myriad holding that genes are patent-ineligible subject matter should not impede gene discovery efforts or development of genetic tests because patents were not a major driving force in the field to start.

An additional argument against gene patenting relates to the phenomenon known as patent thickets, which are “dense web[s] of overlapping intellectual property rights that a company must hack its way through in order to actually commercialize new technology,” typically by obtaining licenses from one or more patent owners.160 A patent thicket in the industry often involves a strategy of filing numerous patent applications (often continuation applications) for essentially the same invention with minor improvements or modifications to extend the duration of patent protection for a product.161 In the case of Myriad’s patent thicket, the company obtained thirteen patents:

[C]overing different aspects of the BRCA1 and BRCA2 genes, including their DNA sequences, the sequences of smaller DNA segments contained within the genes, the principal variants associated with increased cancer risk, methods of locating the genes, and use of the genes as diagnostic tools and screens for the development of drugs.162

One of history's important lessons is that dramatic, far-reaching innovation often requires significant backing from state actors. 413 A [*1253] version of the Internet, for instance, was first developed by the U.S. Department of Defense before making its commercial debut in the 1980s. 414 Heavy government funding and applied research are also largely responsible for significant innovations in GPS, aviation technologies, space technologies, cellular technologies, nuclear power, nanotechnology, infant formula, bar codes, vehicle tires, microchips, touch screens, vaccines, wind turbines, and many more. 415 In the pharmaceutical sector, government backing is said to be "responsible for 75 per cent of the most innovative new drugs annually." 416

The reason behind this is at least somewhat intuitive: "[T]ruly radical innovation needs patient, long-term, committed finance. This type of finance is hard to find in the short-termist private sector." 417Hence, traditional banks, venture capitalists, and other sources of potential funding are often reluctant to invest in innovations that only promise returns, if at all, after a long period of risky trial and error. 418 In part for this reason, commentators often criticize venture capitalists for primarily investing in projects that promise oversized returns in the near or immediate future. 419 And while such an approach may sometimes prove profitable, it makes it difficult for innovative start-up companies to obtain financing for the type of long-term innovation capable of yielding radical discoveries.

If a centralised open system is designed effectively, it can preserve a major role for competition in the provision of research, for example by having long-term contracts that are subject to renewal. In this situation, companies would have a strong incentive to ensure that their spending was productive. This sort of system would also maximise incentives for disclosure of research findings.24 A contractor would be able to make the case for the value of its research if one of its discoveries turned out to provide the basis for an important drug developed by a competitor. Rather than trying to hide results from competitors, this sort of system would encourage researchers to circulate them as widely as possible.

There is widespread agreement over the need for some amount of direct centralised financing for scientific research, although there are major disagreements over precisely the role that such funding should play. The consensus is that government needs to finance basic research that is not likely to yield commercial benefits in the immediate future. Few firms are willing to undertake basic research where the prospective return is not only uncertain, but often not even well-defined. For example, while the commercial benefits from the Internet are now quite evident, this was hardly the case in the 1960s and 1970s when the United States Department of Defense was financing the research that led to its creation. Similarly, much of the basic biomedical research financed by the National Institutes of Health has no immediate commercial use, even if follow on innovations may prove to be quite profitable if subject to patent protection. If these types of basic research were not supported through some mechanism of direct financing, the research would mostly not be done. The risks would be far too great to support large investments through a prize mechanism.18 Moreover, as Mazzucato (2014) has shown, many privately successful ventures have been dependent on government funded innovation for their successes.

While the merits of direct financing through a centralised system for basic research are widely accepted, this is much less the case for research focused on developing end products such as prescription drugs or medical equipment. The argument against this sort of financing is that a centralised mechanism is likely to be overly bureaucratic, slow-moving in response to changes in technology or changes in needs, and subject to political interference. This raises the risk that government financing could end up being largely wasted, with favoured companies or individuals being perpetually funded for work that ends up being of little value. The same issues exist with funding for basic research; however, in the case of basic research there is no feasible alternative. Therefore, these problems, insofar as they arise, are an inevitable cost. In practice, the peer review system used by, for instance, the National Science Foundation in the US, has proven itself to be free of these problems. Similarly, DARPA (the Defense Advanced Research Projects Agency), widely credited with creating the Internet, has proven itself as effective sponsor of advanced research.19

There are also many clear benefits from direct funding through a centralised mechanism. First and foremost, the output from this research can be made freely available. This applies to both the final product (when the research yields a marketable product) as well as to the research results. In the case of the final product, since the research has been paid for upfront, there is no reason that product should not be sold at its free market price, without any sort of monopoly protection.20 This would make a dramatic difference in the price of many products, most notably prescription drugs. Instead of new drugs selling for tens or even hundreds of thousands of dollars per patient, these drugs would be available as generics and likely sold at far lower prices. There would be a similar situation with many types of medical equipment that often sell for prices that are hugely out of line with production costs, due to patent monopolies. By paying for research upfront, the problem of making drugs and modern medical equipment accessible to the world’s poor would become far more manageable.

In addition to making the end products available at its free market price (at the marginal cost of production), the openness associated with directly financed research and testing is also an enormous benefit. This is very clear in the case of prescription drugs and medical equipment where there can be serious problems of asymmetric information. The pharmaceutical company or equipment manufacturer is likely to have far more knowledge of the benefits and drawbacks of their product than the doctor who is trying to determine the best treatment for a patient. However, if all the test results pertaining to the effectiveness of a drug or the usefulness of medical equipment were in the public domain, then doctors would be much better situated to make informed decisions. For example, if a particular drug had been shown to be more effective for men than women, this would be important information for a doctor to have when deciding on the best drug to prescribe for a patient. Similarly, for information concerning possible side-effects.

An area of particular concern should be the use of patents and patent licensing strategies to diminish competition or put up roadblocks to new entrants. Policymakers should certainly not support these abuses of the patent system, and indeed should take steps to prevent them.

In the mobile communications space, patent licensing already plays an outsized role. There are reportedly between 250,000 181and 314,000 182patents on the smartphone alone, and litigation over cell phone technologies has lasted decades by now. Patents will thus inevitably have an impact on technologies like 5G or the Internet of Things, so the question is what that impact will be.

This article has looked at the recent policy conversations on patents and national security, and questioned a common line of reasoning in those conversations, namely an argument that increased patent protection will increase national security. Both historical evidence and modern research into cybersecurity offer reasons to dispute that argument. With regard to history, patents have on multiple notable occasions interfered with the U.S. government's ability to prepare for war or protect the public from terrorism, leaving the government forced to take sometimes forceful measures to resist assertions of patent rights in the name of national security. With regard to cybersecurity, economic and computer science research suggests that robust competition enhances cybersecurity by giving technology firms market-based incentives to secure their products, and by preventing vulnerable monocultures from arising. Insofar as patents can suppress competition, patents can thus be in tension with cybersecurity and national security. Based on these identified tensions and historical predicaments, the article recommends that policymakers take steps to account for the nuanced relationship between patents and national security, and in particular focus on policies that enhance competition rather than imposing patents on technologies necessary to protecting the public.

Patents are not the only incentive for innovation: Government policy may also encourage innovation through a variety of means, including prizes for inventions, research grants, and tax subsidies. 195Each has its advantages and drawbacks: Patents offer theoretically market-based rewards but create perverse incentives due to monopoly rights; prizes and grants avoid anticompetitive opportunities but present moral hazard and valuation difficulties. 196

Despite the many tradeoffs among different forms of innovation incentives, much of the literature and most policymakers have tended to gravitate toward patents as the default tool of innovation policy. 197

Patents differ from prizes, grants, and tax incentives in another way. While the latter are paid directly by the government (and, thus, taxpayers) through spending, issuing patents doesn’t cost the government much.84 But patents definitely have a price. Patent incentives are financed by consumers of products that incorporate patents who must pay higher prices for those goods.85 By enabling patent owners to charge supracompetitive prices, patents act as a tax paid by consumers for the benefit of innovators.86 Thus, unlike other innovation expenditures, when governments promote innovation with the exclusive rights patents confer, their expenditures are “off-budget.”87 This means that it is enormously difficult to estimate the size of society’s contribution to innovation promotion through higher prices for patented goods.88

3. Prize financing system – this is a system where a governmental body or a private foundation/research institution awards a prize for a successful innovation (or other creative activity). There have been some famous historical examples of prize systems, most notably the prize posted by the British government in 1714 for a method to accurately measure longitude, and another posted by the Royal Society for Arts and Technology for a mechanical solution to replace chimney sweeps. While prize systems are not currently in widespread use by governments, there are many prizes being privately offered. In recent years, there have been proposals in the US to provide prizes for drugs research (as proposed by Senator Sanders15) and for the development of renewable energy.

The patent, of course, is a prize (see below). Here, however, it is as if the government (or other party offering the prize) buys the patent, based on an assessment of its value, and then places it in the public domain so that its benefits could be realised as fully as possible, since it would be available at a relatively low licensing fee.