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P AT E N T S
Innovation and intellectual property rights in systems biology Minna Allarakhia & Anthony Wensley A framework for characterizing systems-based knowledge is needed to understand the new complexities arising from the assignment of IP rights to biological information.
W
ith the completion of the Human Genome Project advancing the view that biological information operates on multiple hierarchical levels and is processed in complex networks, a new hierarchical framework for biological knowledge is being constructed to understand the relationships between the various levels of biological information. As the drug discovery and development paradigm transitions into this information space, the focus of intellectual property (IP) rights will also shift to the patenting of systemsbased information. Fundamentally important to continued medical progress is ensuring that multiple innovators can equitably exploit the technological opportunities presented by systems biology. This article develops and elucidates a knowledge framework for conceptualizing and enabling the efficient management of these new complexities in the assignment of IP rights for systems-based knowledge. Biopharmaceutical innovation shifts A historical analysis reveals that at its core the pharmaceutical industry is based on chemistry. Dye chemistry, synthetic chemistry, pharmacology and biochemistry have collectively influenced the development of the pharmaceutical industry. Vital body processes are described in chemical terms and diseases are characterized as measurable deviations from normal chemical processes. From this perspective,
Minna Allarakhia is in the Department of Management Sciences, University of Waterloo, 200 University Avenue, Waterloo, Ontario, N2L 3G1, Canada, and Anthony Wensley is in the Department of Management, University of Toronto at Mississauga, 3359 Mississauga Road, Mississauga, Ontario, L5L 1C6, Canada. e-mail:
[email protected]
drug intervention is an attempt to normalize this dynamic equilibrium through the use of chemical substances1,2. However, recent advances in molecular biology and genomics have resulted in what may be termed ‘the information paradigm’ as a basis for understanding both normal and disease processes. The Human Genome Project has strengthened the view that biology is an information science with static and dynamic elements. The genome consists of all the instructions for the development and function of an organism. Genetic changes lead to functional loss or alteration of these instructions. Disease results from such genetic changes. The treatment of disease from this perspective involves the replacement of information that has been lost or the correction of information that is erroneous in the form of DNA or protein1. Systems biology seeks to understand the various hierarchies of biological information, the complex networks of genes and proteins, and the key nodes in a system where perturbations can have a profound impact, both resulting in disease processes and providing opportunities for medical intervention. The systems biology knowledge framework Systems biology does not focus on individual genes and proteins one at a time, but focuses on the behavior and relationships of all components, in a particular biological system, from a functional perspective3,4. Biological systems are fundamentally composed of information: genes, their encoded products and the regulatory components controlling the expression of these genes5. Targets that function across diseases, playing a central role in these diseases, will be selected to develop drugs that either augment or suppress the associated biological
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systems, enabling disease intervention. Industry stakeholders further indicate that blockbuster drugs will not simply target one system, but will eventually target multiple systems at a common intervention point. In the systems biology paradigm, the focus of IP rights will also gradually shift to the patenting of information6. Critical to understanding this shift is an awareness that the knowledge generated during upstream research and its role in downstream development can determine the market power conferred to an innovator once IP rights are assigned. Several factors must be taken into account when considering the assignment of IP rights in this new paradigm. Complementarity of systems knowledge. Upstream complementarity occurs among research inputs during the generation of new knowledge whereas downstream complementarity occurs in the development phase during the application of new knowledge. The chance of generating new knowledge and embodying the knowledge in new products may be conditional on the ability to access and then assemble the complementary pieces of knowledge7,8. Knowledge will be pooled from the public domain or from patent holders willing to trade at a reasonable cost. As an understanding of the interconnections between structures across systems and the interconnections between systems is still forming, actions that result in the enclosing of large research terrains are likely to have significant impact on the technological opportunities available for follow-on developers should patent holders not provide fair access to complementary knowledge. Applicability and centrality of systems knowledge. Research is being conducted to better understand biological systems, the associated
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Table 1 Managing the challenges of the systems biology paradigm Research/technological challenge
Problem
Possible solution
Cross-disciplinary research
Differing conventions regarding knowledge dissemination and appropriation
Early establishment of rules to manage knowledge activities
Complexity of research
Need for access to complementary expertise and information
Networks of collaboration; cross-licensing
Composition-of-matter patents for biological information
Upstream, basic patents assigned
Informational view to patenting
Interconnectivity between biological information
Unknown function and interconnections in system
Protection for narrower claims; nonexclusive licensing
New organizational hierarchy of biological information
Patent dominance over higher levels of information
Protection for narrower claims; nonexclusive licensing
Technological opportunities across diseases
Unknown role of system and its structures across diseases
Protection for narrower claims; avoid reach-through to medical products
pathways and the central nodes functioning across systems. The greater the applicability, the higher is the likelihood that multiple systems, domains and disease models will share the same pool of knowledge. The upstream innovator and downstream user of knowledge will differentially value knowledge that applies to a narrow and specific range of activities and knowledge that has important applications to a great array of downstream activities. Consequently, the applicability as well as the degree of centrality of the knowledge to biological systems are both important considerations during the assignment of IP rights. Complexity of systems knowledge. Rather than a single collection of separately functioning components, genomes are now being described as consisting of complex, intersecting systems4. The single structure/single function, system, or disease view is problematic as it lacks the biological insight that is required to correctly intervene in a system or disease. This view also distorts the incentives for both a first innovator and follow-on innovator to conduct further research if patent rights are granted on the basis of the single function9. Data hierarchies in systems knowledge. In any system, there are one-dimensional and three-dimensional structures as well as their time-variant interconnections. These elements themselves are individually patentable. If prior patents on such structures or subsystems exist, what is then the impact on the patent filed to cover the entire system? From the perspective of IP rights, the challenge is to determine whether or not systems as a whole are patentable. Researchers must consider that individual structures and subsystems in isolation do not provide complete information about a system, its properties, and role in disease, and that a system must be mapped in its entirety for value creation during the drug discovery process. Complicating the matter is the hierarchical nature of biological information in a system10.
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At any level in this hierarchy, patents may exist. Depending on the breadth of patents filed at a particular level, these patents can dominate other hierarchical levels of biological information6. Dominance of patents filed earlier in time, at the lowest levels of the biological information hierarchy, can therefore significantly hinder the incentive to conduct research into the higher levels of the hierarchy where appropriation may not be possible. Furthermore, if multiple researchers own patents over the structures or subsystems comprising a system, the system may become so fragmented that other researchers may no longer be able to exploit the system in its entirety. The transaction costs associated with recombining appropriate rights to the patented elements that comprise the system, for downstream exploitation, may be too high for a downstream developer11,12. This problem will be exacerbated by ‘reach-through’ licenses in which the owners of system structures and subsystems seek control of and royalties on the downstream uses of these structures or subsystems developed by follow-on innovators13. Table 1 describes the challenges faced by systems biology and offers some possible solutions. Sharing and trading systems knowledge Once IP rights are assigned, the characteristics associated with a system will also affect the decision to broadly or narrowly disseminate the associated knowledge14. In one scenario, biological knowledge may have a limited, specific role in one system and in another scenario knowledge may have a central role across multiple diseases or drug intervention pathways. It is difficult then to assess the economic value stemming from the putative application of the knowledge in downstream activities. Given that patent holders may not be aware what knowledge will be key in disease development or drug intervention, patent holders should be willing to license the knowledge at a fair price.
As the degree of complementarity, applicability and centrality of the knowledge increases, excessive privatization will increase the transactions costs associated with procuring licenses, and hence the possibility of bargaining failures. Differences between organizations in their ability to tolerate these transaction costs will complicate the bargaining process. Large corporations with substantial resources will be in a better position to negotiate licenses on a caseby-case basis than public sector institutions or small startup companies. This asymmetry may make it difficult to develop mutually advantageous licensing agreements between disparate parties12. A case of reaching too far Describing a system and its informational pathways are critical for treating a disease, but legal scholars are unsure whether the value of this information is equivalent to discovering and developing a drug that acts on the biological pathway to effectively treat the disease. Legal scholars are divided on whether the discovery of a biological pathway is sufficient in itself to merit the granting of a broad patent that claims any treatment acting on the pathway. The case of the nuclear factor κB (NF-κB) cell signaling pathway relates directly to these questions. Lawyers contend that the breadth and assertiveness of the patent filed by the Massachusetts Institute of Technology, the Whitehead Institute of Biomedical Research and Harvard University and then exclusively licensed to Ariad Pharmaceuticals (US Patent No. 6,410,516, 2002) could signal a strategy shift among academic research institutions that have traditionally collaborated with other researchers. These institutions could use such patents against other researchers, blocking off research pathways in the attempt to commercialize their discoveries15. If it is not possible to circumvent the enclosed pathway, then the market power conferred to the owner of such a broad patent will be very strong, leaving follow-on innovators who cannot license the
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Table 2 A patent analysis of key biological systems Biological system
USPTO patents
Publication dates
EPO patents
Publication dates
SUSPTO SEPO
MAUSPTO MAEPO
AMIUSPTO AMIEPO
UUSPTO UEPO
PRUSPTO PREPO
PUBUSPTO PUBEPO
INDUSPTO INDEPO
Akt
4
1999– 2005
62
2000– 2005
0 15
0 4
2 37
2 14
4 32
0 15
0 17
BCR
5
1994– 2003
27
1994– 2003
0 4
1 4
2 5
2 14
1 4
5 19
0 4
GPCR
109
1993– 2005
1,051
2002– 2005a
59 226
20 25
7 56
23 192
74 337
35 17
5 146
Hedgehog
33
1998– 2005
115
1995– 2005
17 46
4 3
6 26
6 64
18 48
20 50
1 17
JAK
11
1998– 2004
35
1995– 2004
0 1
1 5
4 19
6 12
0 9
11 17
0 9
JNK
14
1999– 2004
100
1998– 2005
1 3
0 1
13 76
0 21
7 49
5 15
2 36
MAPKinase
24
1997– 2005
102
1995– 2005
8 25
3 6
11 40
2 33
18 62
6 22
0 20
P38 MAPK
48
1997– 2005
226
1997– 2005
1 5
1 2
41 157
5 62
45 137
2 22
1 69
NF-kB
12
1998– 2004
23
1996– 2005
2 4
0 0
9 10
1 9
7 16
6 4
0 4
Phospholipase C
13
1994– 2005
59
1980– 2005
3 20
2 3
6 13
2 35
11 36
2 12
0 11
aOnly
the latest 500 patents could be accessed and analyzed. Totals may not add correctly because of multiple category placement of patents. USPTO Patents, based on US Patent and Trademark Office Title Search; EPO, based on World Patent Database Title Search. Categorization of patents: S, structural; MA, method or assay; AMI, activator, modulator, inhibitor; U, use. Institutional ownership: PR, private entity; PUB, public entity; IND, individual. Akt, otherwise known as PKB protein kinase B ; BCR, B-cell receptor; GPCR, G protein–coupled receptor; JAK, Janus kinase; MAPK, mitogen-activated protein kinase; NF-κB, nuclear factor–κB.
knowledge in a weak position with regard to downstream activities. Table 2 includes data from a patent analysis of ten biological systems, chosen based on their biological significance as assessed through literature (PubMed) searches. United States Patent and Trademark Office and European Patent Office databases were searched specifically for patents with these biological systems mentioned in their titles. Patents have been categorized by target area: structural patents with reference to the twodimensional and three-dimensional structure of the key system component(s) as well localization of the key system component(s); method or assay patents targeting the biological systems; activator, modulator, or inhibitor patents with reference to the biological systems; and usage patents that specifically refer to pharmaceutical compositions, disease intervention with reference to the biological systems or process/production patents with respect to the biological systems. A closer scrutiny of these patents reveals in which target area the greatest number of patents have been filed—an indication of the research trajectory as well as ownership patterns. Interestingly, our analysis revealed key institutions as owners of the majority of the patents with respect to each biological system. Future research will specifically review the patents held by these institutions, the patents claims and any licenses issued. The potential for holdouts, bargaining failures or litigations
as a function of the dominance of key institutions, patent claims and license terms will be analyzed. Conclusions Under existing patent law, biological information is considered a new article of manufacture or composition of matter. The consequence of this has been the granting of and enforcement of broad patents on biotechnological entities that perhaps should not be enclosed. For industries where the research process is primarily knowledge based and downstream development is dependent on upstream research, there is concern that a patent system that was developed for a discrete model of innovation and an essentially linear relationship between knowledge elements may no longer be optimal for a knowledge-based, cumulative model of innovation. The notion of biological entities as being composition of matter from the chemistry perspective tends to support the view that extending patent protection to biotechnological inventions, including life forms, is nothing new but simply a matter of expanding an existing logical patent category. Systems biology, however, attempts to understand the interactions and informational flow between structures in the cell. Data from various hierarchical levels of biological information will be incorporated into the modeling of systems. Each level of information builds on information found at lower levels in this hierarchy. Consequently, system biology uses
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cumulative knowledge to build models, providing positive externalities to researchers who can use this knowledge to generate and embody the knowledge in new products. Given the uncertainty associated with the function of the structures that comprise a system and the role of a system in disease, the incentives to find the full breadth of a system’s properties and functions should be preserved for multiple researchers. Blocks, holdouts and bargaining failures are all possible if a first innovator is granted an excessively broad patent, conferring strong market power over downstream research. Blocking critical pathways whose function may yet to be discovered can reduce the opportunity to develop novel and more effective medical products. Despite the fact that existing patent law allows a researcher who has discovered a new, nonobvious and useful process, machine, article of manufacture or composition of matter to receive a patent, it is not clear whether the discovery of a system and putative function is enough to enclose not only the system but also all possible medical developments that arise from the system. These complexities will be exacerbated as multiple disciplines increasingly work together in the systems biology paradigm. Each discipline will have its own priorities and conventions regarding knowledge dissemination and knowledge appropriation. One discipline may signal its success during knowledge generation through enclosure and the sale of disembodied knowledge. Another discipline may measure
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PAT E N T S its success exclusively by the embodiment of knowledge. As collaborations cross institutional boundaries, the parceling out of IP rights may be too difficult a task. With the assignment of property rights, the role of the patent holder in providing broad versus narrow access to the knowledge will then depend on the original incentives for producing the knowledge. With the transition to a systems biology paradigm, the research challenges are greater, with far-reaching consequences for the industry and its consumers. The time has come to change course in the management of IP rights for biological information. We, therefore, encourage active debate concerning the issues
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raised in this paper in the medical, scientific and legal communities. ACKNOWLEDGMENTS We would like to thank David Fuller, Management Sciences, University of Waterloo, Canada, for providing comments and suggestions that have greatly improved this article. This research has been supported in part by the Social Sciences and Humanities Research Council Doctoral Research Award. 1. Drews, J. In Quest of Tomorrow’s Medicine (SpringerVerlag, New York, 1998). 2. Dutfield, G. Intellectual Property Rights and the Life Sciences Industries: A Twentieth Century History (Ashgate Publishing Limited, Hampshire, UK, 2003). 3. Kitano, H. in Foundation of Systems Biology, 1–29 (MIT Press, Cambridge, MA, 2001). 4. Kitano, H. Science 295, 1662–1664 (2002). 5. Ideker, T., Galitski, T. & Hood, L. Annu. Rev. Genomics
Hum. Genet. 2, 343–372 (2001). 6. Hood, L.E. in CASRIP Symposium Publication Series Number 5,72–82 (University of Washington, Seattle, 2000). 7. Scotchmer, S. J. Econ. Perspect. 5, 29–41 (1991). 8. Scotchmer, S. Innovation and Incentives (MIT Press, Cambridge, MA, 2004). 9. Scherer, F.M. Acad. Med. 77, 1348–1367 (2000). 10. Oltvai, Z.N. & Barabási, A. Science. 298, 763–764 (2002). 11. Foray, D. The Economics of Knowledge (MIT Press, Cambridge, MA, 2004). 12. Heller, M.A. & Eisenberg, R.S. Science. 280, 698–701 (1998). 13. Burk, D.L. & Lemley, M.A. in Perspectives on Properties of the Human Genome Project, 305–353 (Elsevier Academic Press, London, 2003). 14. Walsh, J.P., Arora, A. & Cohen, W.M. in Patents in the Knowledge-Based Economy, 285–340 (The National Academies Press, Washington, DC, 2003). 15. Rai, A.K. & Eisenberg, R.S. Law Contemp. Probl. 66, 289–314 (2003).
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