Biotechnology and Law

BIOTECHNOLOGY AND LAW – SEMESTER IX – SESSION (JULY 17- APRIL 18)
NATIONAL LAW UNIV ERSITY ODISHA
CUTTACK
STUDY MATERIALS
BIOTECHNOLOGY AND THE LAW
9TH SEMSTER
ACADEMIC SESSION 2017-18
EDITED & COMPILED BY
DR. AMRENDRA KUMAR AJIT
EDITED BY - DR. AMRENDRA KUMAR AJIT, ASSIST. PROFESSOR OF LAW, NLUO Page 1
OBJECTIVES OF THE COURSE
UPON COMPLETION OF BIOTECHNOLOGY AND THE LAW AND, STUDENTS WILL BE ABLE TO:
 RECOGNIZE DISTINCT TYPES OF LAW PERTAINING TO BIOTECHNOLOGY
 ARTICULATE VARIOUS HISTORICAL SOURCES OF CURRENT LAW
 UNDERSTAND HOW CODIFIED LAW IS CREATED AND ENFORCED
 BECOME FAMILIAR WITH INTELLECTUAL PROPERTY RIGHTS, CORPORATE FORMS, LAWS

AFFECTING START-UP COMPANIES, AND REGULATION OF RESEARCH AND COMMERCIAL
ACTIVITY IN THE LIFE SCIENCES.
 DEVELOP AN APPRECIATION TO THE CHALLENGES OF POLICYMAKING / LEGISLATIVE

AGENDAS AROUND BIOTECHNOLOGY
LECTURE PLAN
MODULE/UNIT MODULE NOMENCLATURE LECTURE PLAN
MODULE – ONE BIOTECHNOLOGICAL INNOVATION AND EIGHT

INTELLECTUAL PROPERTY
MODULE – TWO BIOTECHNOLY AND ETHICS EIGHT
MODULE – THREE PATENTING OF LIFE TWELVE
MODULE – FOUR RESEARCH COLLABORATIONS AND LICENSING EIGHT
MODULE – FIVE BIOTECHNOLOGY & PUBLIC POLICY: TEN

ENVIRONMENT, HEALTH AND SAFETY
MODULES DETAIL
MODULE – ONE
BIOTECHNOLOGICAL INNOVATIONS AND INTELLECTUAL PROPERTY
1.1 BIOTECHNOLOGICAL SCIENCE: NATURE, SCOPE AND IMPORTANCE
1.1.1.EARLIER BIOTECHNOLOGICAL DEVELOPMENT
1.1.2.MODERN BIOTECHNOLOGICAL DEVELOPMENT
1.1.3.CHALLENGES OF MODERN AND PROSPECTIVE BIOTECH.INVENTIONS
1.2 RELATIONSHIP OF BIOTECHNOLOGY AND LAW
1.2.1 PATENT LAW
1.2.2.COPYRIGHT LAW
1.2.3 BIODIVERSITY LAW
MODULE – TWO BIOTECHNOLOGY AND ETHICS

2.1 FUNDAMENTAL ISSUES OF ETHICAL CONSIDERATION
2.2 PHILOSOPHICAL FOUNDATIONS
2.2.1 THEOLOGICAL PERSPECTIVE – LIFE AS MATTER OF OWNERSHIP
2.2.2 NATURAL LAW CONCEPT
2.2.3. ECONOMIC THEORY OF IP
2.3 GENETIC TRESPASS AND ENVIRONMENTAL ETHICS
2.4 BIOETHICS FOR BIOTECHNOLOGIST
2.4.1. GENETIC INFORMATION: USE AND ABUSE
2.4.2. CLONING OF HUMAN AND ANIMAL
MODULE – THREE PATENTING OF LIFE

3.1 PATENTING OF PLANT (ASEXUALLY, SEXUALLY REPRODUCING AND TRANSGENIC /
GENETICALLY MODIFIED PLANT)
3.2 PATENTING/NON PATENTING OF GENETICALLY MODIFIED ANIMAL
3.3. PATENTING OF MICRO-ORGANISM, GENE AND GENETIC MATERIAL
MODULE – FOUR RESEARCH COLLABORATIONS AND LICENSING

5.1 ACADEMIC-INDUSTRY PARTNERSHIP
5.2 CONTRACT RESEARCH
5.3 JOINT RESEARCH
5.4 TECHNOLOGY/ KNOWLEDGE TRANSFER AND LICENSING
5.4 ANTITRUST CONCERNS RELATED TO TECHNOLOGY LICENSING
MODULE – FIVE BIOTECHNOLOGY & PUBLIC POLICY: ENVIRONMENT, HEALTH

AND SAFETY
6.1 GENETIC POLLUTION AND ENVIRONMENTAL CONCERN
6.2 HEALTH COMPLICATIONS
6.3 WORLD PEACE AND HARMONY
CONTENTS
Contents
CONTENTS .................................................................................................................................... 4
1. BIOTECHNOLOGY IN THE REALM OF HISTORY ......................................................... 9
1.1 INTRODUCTION .................................................................................................................... 9
1.2 Biotechnology: What Does it Mean? ...................................................................................... 10
1.3 Biotechnology: A Basic Requirement .................................................................................... 10
1.4 Biotechnology and its Various Stages of Development ......................................................... 11
2. KEY ISSUES IN BIOTECHNOLOGY.................................................................................... 17
2.1 INTRODUCTION .................................................................................................................. 17
2.2 GENETICALLY MODIFIED CROPS AND FOOD ............................................................. 17
2.2.1. Environmental impacts of genetically modified crops ................................................... 18
2.3. Genetically modified food and human health .................................................................... 19
2.4 Who benefits from genetically modified food and crops? .................................................. 20
2.5 “Terminator technology” and farmer-saved seed ............................................................... 20
2.7 BIOTECHNOLOGY AND HEALTH .................................................................................... 22
2.7.1 Drugs, vaccines and diagnostics ...................................................................................... 22
2.8 The Human Genome Project ............................................................................................... 24
2.9 Pharmocogenomics ............................................................................................................. 25
2.10 Gene therapy ............................................................................................................... 26
2.11 GOVERNING BIOTECHNOLOGY: POLICY CHALLENGES ........................................ 26
A. Building capacity for developing and managing biotechnology.................................... 26
B. Biosafety and bioethics: capacity for risk assessment ................................................... 27
C. Building awareness of biotechnology ............................................................................ 28
D. Accessing biotechnology: intellectual property rights ................................................... 28
3.THE PATENTING OF BIOTECHNOLOGICAL INVENTIONS INVOLVING THE USE
OF BIOLOGICAL MATERIAL OF HUMAN ORIGIN ............................................................. 30
3.1 . Initial legal position .............................................................................................................. 30
3.2. Objections and criticisms ................................................................................................... 35
3.3 . Contested patents and patent applications .................................................................... 35
3.4 General objections and criticisms ....................................................................................... 38

3.5Opinion of the National Ethics Council ............................................................................... 39
Opinion on the general objections ............................................................................................ 39
3.6The genome – a common asset of humanity? .................................................................. 40
Economic aspects .................................................................................................................. 40
Are genes substances or information, or both? ..................................................................... 41
Can living organisms and their elements be invented at all? ................................................ 43
Is “absolute substance protection” inappropriate? ................................................................ 44
3.7 Other ethical and constitutional issues.................................................................................... 49
3.7.1 Prohibitions of patenting under Section 2 (2) of the draft law ........................................ 49
3.7.2.Evidence of origin ............................................................................................................ 52
3.7.2. Donor consent ................................................................................................................. 53
3.7.3 Freedom of research ........................................................................................................ 55
3.7.4 Position statement ........................................................................................................... 55
3.7.5 Position statement in favour of stricter requirements ...................................................... 56
4. Role of Biotechnology in Human Health Care ......................................................................... 60
4.1 Introduction ............................................................................................................................. 60
4.2 Conclusion .......................................................................................................................... 64
5.1 CURRENT SCIENTIFIC AND TECHNOLOGICAL ADVANCES ................................... 65
5.2 GOALS FOR THE NEXT 5-10 YEARS: BARRIERS AND SOLUTIONS ......................... 68
5.3 R&D INVESTMENT AND IMPLEMENTATION STRATEGIES ...................................... 71
5.4 PRIORITIES AND CONCLUSIONS .................................................................................... 71
5.5 EXAMPLES OF CURRENT ACHIEVEMENTS AND PARADIGM SHIFTS ................... 72
5.6Access to Genetic Research Facilities ..................................................................................... 72
6. THE IMPACT OF GENE PATENTS ON................................................................................ 74
ACCESS TO GENETIC TECHNOLOGIES................................................................................ 74
AND SERVICES: VIEW FROM DEVELOPING COUNTRIES ............................................... 74
6.1 Introduction ............................................................................................................................ 74
6.2 Similarities and Differences Between Pharmaceuticals and Genetics .................................... 77
6.3 Public vs. Private Domain....................................................................................................... 79
6.4 Recommendation .................................................................................................................... 80
6.5 Nature of Gene Patents .......................................................................................................... 80

6.6 Ethical and Legal Issues Raised by Gene Patents Generally .................................................. 83
6.7 Scope of Gene Patent Claims .................................................................................................. 84
6.8 Recommendation .................................................................................................................... 86
CCR5 HIV Example ................................................................................................................. 86
BRCA Example ........................................................................................................................ 88
Joint Ventures ........................................................................................................................... 90
Recommendation ...................................................................................................................... 92
Research Exception ................................................................................................................... 92
Recommendation ...................................................................................................................... 97
6.8 Clinical Trials by Developed Nations Within Developing Nations........................................ 97
6.10 Transfer of Knowledge - MNMB Example .......................................................................... 98
6.11 Affordability of Genetic Testing and Services ..................................................................... 99
6. 12 BRCA1 Example .............................................................................................................. 100
6.13 Open Source Genetic Patents .............................................................................................. 102
Recommendation ........................................................................................................................ 102
6.14 Licensing Rights ................................................................................................................ 102
Recommendation ........................................................................................................................ 103
Development of Industry Guidelines .......................................................................................... 103
Recommendation ........................................................................................................................ 104
Benefit Sharing ........................................................................................................................... 104
Recommendation ........................................................................................................................ 106
Alternative Patent Regimes......................................................................................................... 106
7.1 INTRODUCTION ............................................................................................................... 110
7.2 HISTORICAL REVIEW ...................................................................................................... 111
7.3 IMPORTANCE OF PATENTS IN THE FIELD OF BIOTECHNOLOGY ........................ 113
7.4 PATENTABLE SUBJECT MATTER ................................................................................. 113
A) Most relevant provisions regarding biotechnological inventions ...................................... 114
B) Prerequisites of patentable subject matter.......................................................................... 114
1) First prerequisite - the distinction between Inventions and Discoveries ............................ 114
a) The United States ............................................................................................................ 114
b) Europe ............................................................................................................................. 115

2) Second prerequisites ........................................................................................................... 116
a) Ordre public and morality ............................................................................................... 116
b) Plant and Animal varieties .............................................................................................. 118
c) Patentability of therapeutic and diagnostic methods ...................................................... 119
Europe ................................................................................................................................. 123
ii) The United States ........................................................................................................... 124
2) Diagnostic Tools ................................................................................................................. 125
Nuffield Council on Diagnostic Testing ................................................................................. 125
3) Gene Therapy ..................................................................................................................... 125
Nuffield Council on Gene Therapy..................................................................................... 126
4) Therapeutic Proteins ........................................................................................................... 126
Proposal of the Nuffield Council ........................................................................................ 126
7.6 CONCLUSION ..................................................................................................................... 127
8. Licensing Biotech Intellectual Property in University–Industry Partnerships ....................... 131
8.1 DEFINING THE BIOTECHNOLOGY LICENSE AGREEMENT .................................... 132
Technology versus IP .............................................................................................................. 132
Purpose of the License Agreement ......................................................................................... 133
8.2 SCOPE OF THE LICENSE AGREEMENT ........................................................................ 134
Structuring the Agreement to Make Sense for the Deal ......................................................... 134
Term Sheets ............................................................................................................................ 136
8.3 MANAGING IP RIGHTS .................................................................................................... 138
Exclusive versus Nonexclusive Rights ................................................................................... 138
Reserved Rights under the License: Research and Publication Rights................................... 139
8.4 VALUATION AND PAYMENT STRUCTURES .............................................................. 141
Upfront Fees ..................................................................................................................... 142
8.5 Royalties ........................................................................................................................... 143
Milestones ............................................................................................................................... 145
Further Considerations ............................................................................................................ 146
8.6 ENFORCEMENT AND REMEDIES .................................................................................. 147
8.7 CONCLUSION ..................................................................................................................... 148
9.1 PRINCIPAL SOURCES OF INVENTION .......................................................................... 149

9,2 Corporate Financing.............................................................................................................. 152
Securities ................................................................................................................................. 153
Venture Capital ....................................................................................................................... 153
Government Assistance .......................................................................................................... 154
9.3 COLLABORATIVE DEVELOPMENT .............................................................................. 154
9.4 EXPLOITATION ISSUES ................................................................................................... 154
10. GENERAL CONSIDERATIONS CONCERNING LICENSING ....................................... 156
10.1 INTRODUCTION ............................................................................................................. 156
The License As Contract ......................................................................................................... 156
The License As Business Relationship ................................................................................... 156
10.2 FORMAL CLAUSES ......................................................................................................... 157
Appendices and Schedules ...................................................................................................... 162
10.3 CLAUSES RELATING TO REMUNERATION .............................................................. 163
(a) Factors Internal to the Proposed Agreement ..................................................................... 164
(i) Geographical Coverage .................................................................................................. 164
(ii) Exclusivity .................................................................................................................... 164
(iii) Nature of Intellectual Property Rights ......................................................................... 165
(iv)Duration......................................................................................................................... 165
(v) Improvements ................................................................................................................ 165
(vi) Other Contemplated Arrangements between the Parties ............................................ 166
(b) Factors External to the Agreement .................................................................................... 166
(i) Industry Analysis ........................................................................................................... 166
(ii) Estimated Profits or Costs Savings ............................................................................... 166
(iii) Other Comparable Agreements made by the Licensor ................................................ 167
(iv) Industry Norms............................................................................................................. 167
(v) Development Costs of the Licensor and the Licensee .................................................. 167
(vi) Governing Regulatory System ..................................................................................... 167
10.4 DISPUTES .......................................................................................................................... 168
1. BIOTECHNOLOGY IN THE REALM OF HISTORY

Ashish Swarup Verma, Shishir Agrahari, Shruti Rastogi, and Anchal Singh
1.1 INTRODUCTION
It seems like this word has become a buzz word, nowadays. You will hear this word
from classrooms to cafeterias. It can be commonly seen in newspapers, magazines,
journals, and all sorts of media outlets, which include print media to electronic media.
People are organizing huge meetings, conferences, and workshops on biotechnology,
where participants come from different arenas like science, industry, administration,
social work, and so on. As time goes by and the way our life is heading it seems as if
biotechnology has become an essential component of our life. The day is not far, when
we cannot fathom our life without biotechnology. If, we have to say it in simple words,
it can be said that “We wake up with biotechnology and we go to bed with
biotechnology”. It is also possible that in future our birth and death can also be
determined by biotechnology.
The word ‘biotechnology’ has received enormous importance and significance during
last two decades, which is just unprecedented. The probability and possibilities behind
this kind of attention towards biotechnology may be due to its unlimited potential to
serve and to benefit humanity. So far, biotechnology has touched our lives in all aspects,
such as, food, health, and animal life. We have also noticed the importance and
potential of biotechnology for the improvement of our environment and for better
living, for example capability of biotechnology to meet the demand of depleting energy
reserves of fossil fuels by replacing it with Bio-fuels, because availability of fossil-fuels
are becoming limited to meet the demand of ever increasing population. In simpler
terms, our life starts with biotechnologically developed toothpaste, to drive car with
biotechnologically developed fuels, and we also retire for the day with bedside
medicines either to keep us healthy or to control chronic diseases, like diabetes, which
makes our life better. Rationally, the word ‘biotechnology’ has been derived from two
simple terms of science, i.e., ‘Biology’ and ‘Technology’. If we try to decipher these two
words, it simply suggests, in a lay-man's language, that it is the technology which

makes our life convenient and comfortable with the employment of biological
resources. The question still remains, ‘Is biotechnology such a new branch of science?’
The fact is that biotechnology has been in practice even much before the term
‘Biotechnology’ was coined, itself. It is interesting to learn and understand how and
when biotechnology really evolved.
1.2 Biotechnology: What Does it Mean?

The term biotechnology was used for the first time by Karl Erkey, a Hungarian
Engineer, in 1919. Was it the start of biotechnology? The answer is no&&& Later on
biotechnology was defined by different scientists. As per one definition biotechnology
is, “Application of the principles of engineering and biological science to create new
products from raw materials of biological origin, for example, vaccines or food.” Or in
other words, it can also be defined as, “the use of living organism/s or their product/s
to modify or improve human health and human environment”. Apart from their
beneficial applications, biotechnological principles has potential for destruction too, the
best example for this is ‘bioterrorism’. Biotechnology from fiction, myth, and reality can
be simply understood by reading the novel and watching movie “Frankenstein”. In this
science fiction, Frankenstein has created a human life which became a monster, this
monster became the reason for the destruction of Frankenstein, the creator of human
life.
1.3 Biotechnology: A Basic Requirement

As we know, the technological application of biological material is considered as
biotechnology. If, we want to understand how it works, then it is essential for us to
know what is the starting point or material for biotechnology. In general, biotechnology
uses either living material or biological products to create new products for their use in
various pharmaceutical, medical, agricultural, and environmental applications, with the
ultimate goal to benefit humanity, for example, production of recombinant proteins,

resistant crops, vegetables, higher milk producing animals, and the list is endless.
1.4 Biotechnology and its Various Stages of Development

There are various stages in the development of biotechnology to meet the various needs
of humans. Its development was basically based on observations, and applications of
these observations to practical scenarios. The complexity of biotechnology is augmented
due to evolution of new technologies with time, as these are based on the employment
of improved technological advancements along with better understanding of various
principles of life-science. If, we systemically study the developments of biotechnology
up to its current stage, it can be divided into three different stages or categories: (1)
Ancient Biotechnology, (2) Classical Biotechnology, and (3) Modern Biotechnology.
Some important discoveries related to biotechnology have been shown in given figure:
Some of the important biotechnology discoveries have been plotted in this graph, with a
possibility for its unlimited growth in the future
1.4.1.Ancient Biotechnology (Pre-1800)
Most of the developments in the ancient period i.e., before the year 1800, can be termed
as ‘discoveries’ or ‘developments’. If we study all these developments, we can conclude
that all these inventions were based on common observations about nature, which
could be put to test for the betterment of human life at that point in time.
Food, clothes, and shelter are the most important basic needs of human beings
irrespective of whether they lived in the ancient period or the modern period. The only
factor that has changed is their types and origins. Food has been an inevitable need
since the existence of man as well as for continuous existence of human beings. Early
man used to eat raw meat, whenever they found a dead animal. However, during harsh
weather, there was a paucity of food, hence, as per the saying, ‘necessity is the mother
of all inventions’, which led to the domestication of food products, which is named as
‘agriculture’. In ancient times, humans explored the possibilities of making food
available by growing it near their shelters, so that the basic need for food could be met
easily. They brought seeds of plants (mostly grains) and sowed them near to their
shelters. They understood the importance of water, light, and other requirements for the
optimal growth of food plants. Similar principles and needs also led them to start
omestication of different wild animals, which helped them to improve their living
conditions and to satisfy their hunger. The need to hunt for animal was done away with
it; as now animals were available to them at closer proximity, and also they did not
have to deal with the dangerous conditions of hunting. Domestication of wild animals
was the beginning of observation, implications, and applications of animal breeding.
Certainly, we can say that this was the initial period of evolution of farming, which led
to another needs like the development of methods for food preservation and storage.
They used cold caves to preserve food for long-term storage. It also made the way for
the evolution of pots to store food products, in the form of leather bags, clay jars, etc.
After A1`QZdomestication of food crops and wild animals, man moved on to other new
observations like cheese, curd, etc. Certainly, cheese can be considered as one of the first
direct products (or by-product) of biotechnology, because it was prepared by adding
rennet (an enzyme found in the stomach of calves) to sour milk, which is possible only
by exposing milk to microbes (although this understanding was not there, at that time).
Yeast is one of the oldest microbes that have been exploited by humans for their benefit.
Yeast has been widely used to make bread, vinegar production, and other fermentation
products, which include production of alcoholic beverages like whiskey, wine, beer, etc.
Vinegar has a significant importance because of its low pH. Vinegar is capable of
preventing growth of certain microbes, and therefore, vinegar can be used successfully
for food preservation. The discoveries and benefits of these observations led people to
work on further improvement of the process. Fermentation was a powerful tool to
improve their living conditions, even though they were ignorant about the principle
behind it.
One of the oldest examples of crossbreeding for the benefit of humans is mule. Mule is
an offspring of a male donkey and a female horse. People started using mules for
transportation, carrying loads, and farming, when there were no tractors or trucks.
Mule is comparatively easier to obtain than Hinny (offspring of a male horse and a
female donkey). Mule and Hinny both have a chromosome number 63, unlike horse (64)
and donkey (62).
1.4.2 Classical Biotechnology
The second phase of evolution and development of biotechnology can be called

‘Classical Biotechnology’. This phase existed from 1800 to almost the middle of the
twentieth century. During this period various observations started pouring in, with
scientific evidences. They were all very helpful toward solving the puzzle/s of
biotechnology. Each and every contribution from different individuals helped to solve
the puzzle and pave the path for new discoveries.
The basics for the transfer of genetic information are the core of biotechnology. This
was, for the first time, deciphered in plants, i.e., Pisum sativum, commonly known as
Pea plant. These observations were decoded by Gregor John Mendel (1822-1884), an
Austrian Augustinian Monk. Mendel at that time presented “Laws of Inheritance” to
the Natural Science Society in Brunn, Austria. Mendel proposed that invisible internal
units of information account for observable traits, and that these ‘factors’ -later called as
genes, which are passed from one generation to the next. However, the sad part of the
story is that Mendel failed to get due recognition for his discovery for almost 34 years
after his death, when other scientists like Hugo de Vries, Erich Von Tschermak, and
Carl Correns validated Mendel's work in 1900. The reason why Mendel's study
remained unnoticed for such a long period of time was because at the same time
Charles Darwin's Theory of Evolution was so consuming that it shadowed the
significance of work done by Mendel.
Almost at the same time Robert Brown had discovered nucleus in cells, while in 1868,
Fredrich Miescher, a Swiss biologist reported nuclein, a compound that consisted of
nucleic acid that he extracted from pus cells i.e., white blood cells (WBC). These two
discoveries became the basis of modern molecular biology, for the discovery of DNA as
a genetic material, and the role of DNA in transfer of genetic information. In 1881,
Robert Koch, a German physician described the bacterial colonies growing on potato
slices (First ever solid medium). Walter Hesse, one of the co-workers in Koch's
laboratory, discovered agar when he asked his wife what kept the jelly solid even at
high temperature of summer. She told, it is agar agar, since then nutrient agar became
the most acceptable and useful medium to obtain pure microbial cultures as well as for
their identification. In 1888, Heinrich Wilhelm Gottfried Von Waldeyer-Hartz, a
German scientist coined the term ‘Chromosome’, which is considered as an organized
structure of DNA and protein present in cells or a single piece of coiled DNA containing
many genes, regulatory elements, and other nucleotide sequences. Other important
discoveries during this period were vaccination against small pox and rabies developed
by Edward Jenner a British Physician and Louis Pasteur a French Biologist.
By this time the development and growth of biological sciences seemed to be reaching
to the exponential phase. The principle of genetics in inheritance was redefined by T H
Morgan, who has shown inheritance and the role of chromosomes in inheritance by
using fruit flies, i.e., Drosophila melanogaster. This landmark work of T H Morgan was
named, ‘The theory of the Gene’ in 1926. Before the publication of Morgan's work, in
1909, the term ‘Gene’ had already been coined by Wilhelm Johannsen (1857-1927), who
described ‘gene’ as carrier of heredity. Johannsen coined the terms ‘genotype’ and
‘phenotype’. ‘Genotype’ was meant to describe the genetic constitution of an organism,
while ‘Phenotype’ was meant to describe actual organism. By this time genetics started
gaining its importance, which led to the start of Eugenic Movement in USA, in 1924. As
a result of this, in 1924, the US Immigration Act was used to restrict the influx of poorly
educated immigrants from Southern and Eastern Europe, on the grounds of their
suspected genetic inferiority.
Almost at the same time, in Britain, Alexander Fleming a physician discovered

antibiotics, when he observed that one microorganism can be used to kill another
microorganism, a true representation of the ‘divide and rule’ policy of humans. Fleming
noted that all bacteria (Staphylococci) died when a mold was growing in a petri-dish.
Later he discovered ‘penicillin’ the antibacterial toxin from the mold Penicillium
notatum, which could be used against many infectious diseases. Fleming wrote, “When
I woke up just after dawn on September 28, 1928, I certainly didn’t plan to revolutionize
all medicine by discovering the world's first antibiotic, or bacteria killer”. As a matter of
fact vaccines and antibiotics turned out to be the best saviors of humanity. Can we
attribute these two discoveries for the ever increasing population as well the ever
ageing population of the world?
1.4.3. Modern Biotechnology
The Second World War became a major impediment in scientific discoveries. After the
end of the second world war some, very crucial discoveries were reported, which paved
the path for modern biotechnology and to its current status. In 1953, JD Watson and
FHC Crick for the first time cleared the mysteries around the DNA as a genetic material,
by giving a structural model of DNA, popularly known as, ‘Double Helix Model of
DNA’. This model was able to explain various phenomena related to DNA replication,
and its role in inheritance. Later, Jacob and Monad had given the concept of Operon in
1961, while Kohler and Milestein in 1975, came up with the concept of cytoplasmic
hybridization and produced the first ever monoclonal antibodies, which has
revolutionized the diagnostics.
By this time it seemed like the world's scientific community had almost all the basic
tools available to them for their applications, along with majority of basic concepts had
been elucidated, which has fast forwarded the path for important scientific discoveries.
Dr. Hargobind Khorana was able to synthesize the DNA in test tube, while Karl Mullis
added value to Khorana's discovery by amplifying DNA in a test tube, thousand times
more than the original amount of DNA. Using this technological advancement, other
scientists were able to insert a foreign DNA into another host and were even able to
monitor the transfer of a foreign DNA into the next generation. The advent of HIV /
AIDS as a deadly disease has helped tremendously to improve various tools employed
by life-scientist for discoveries and applications in various aspects of day-to-day life. In
the mean time Ian Wilmut an Irish scientist was successful to clone an adult animal,
using sheep as model, and he named the cloned sheep as ‘Dolly’. Craig Venter, in 2000,
was able to sequence the human genome; the first publically available genome is from
JD Watson and Craig Venter, himself. These discoveries have unlimited implications
and applications. In 2010, Craig Venter has been successful in demonstrating that a
synthetic genome could replicate autonomously. Should that be considered as a new
possibility for creating life in a test tube, which could be planned and designed by
human being using a pen, pencil, computer, and bioinformatics as tools? In future, can
we produce life as per our imagination and whims?
Biotechnology has brought humanity to this level of comfort; the next question is,
where will it take us? Biotechnology has both beneficial and destructive potentials. It is,
WE who should decide how to use this technology to help humanity rather than to
destroy it.
2. KEY ISSUES IN BIOTECHNOLOGY

(From UNCTAD Report)
2.1 INTRODUCTION
Biotechnology is a collective term for a group of technologies that use biological matter
or processes to generate new and useful products and processes. As such, it ranges in
complexity and maturity from ancient brewing and bread-making techniques to genetic
modification through hybridization and interbreeding of plants and animals, as well as
the manipulation of individual genes in humans, animals, plants and micro-organisms.
Biotechnology is a key technology for the new millennium. It has an immense range of
applications in agriculture, medicine, food processing, environmental protection,
mining, and even nanoelectronics. On the other hand, the potential for altering the
genetic structure and characteristics of living organisms, including humans, plants and
animals, has resulted in many concerns about safety and ethical implications of the new
technologies. So far, most of the safety issues have emerged from agricultural
biotechnology, but some cutting-edge developments in medical biotechnology are now
presenting the major ethical concerns.
2.2 GENETICALLY MODIFIED CROPS AND FOOD

The basic argument put forward in favour of genetically modified (GM) crops is that
they can provide at least a partial solution to the problem of feeding the world’s
growing population. Even with improved food distribution and access, this cannot be
achieved without dramatic increases in crop production. Converting more land for
agricultural use is environmentally unsustainable. Genetic engineering has opened up
opportunities for increasing crop yields, reducing crop losses to insects, disease and
post-harvest storage problems, and enhancing the nutritional value of some crops. In
addition, crops are now being developed to resist abiotic stresses, such as drought and
soil salinity. This will allow increased crop production on marginal land and therefore
bring possible benefits to poorer rural areas. Traditionally, new varieties of specific
crops have been bred by mutation and cross-pollination of two strains, usually of the
same species, in order to transfer desirable traits from each into the new variety. These
traits might include higher yield, greater resistance to certain pests or diseases, slower
ripening, or better tolerance of drought or soil stresses. Genetic engineering allows the
selective transfer of one or more genes that code for desired traits from one variety to
another, which means that it is a faster and more accurate method of breeding new
varieties. It also allows the transfer of genes between species, which in most cases
cannot be achieved by traditional breeding. For example, some of the first commercial
releases of GM crops were modified with a gene from a bacterium, Bacillus
thuringiensis (Bt), which codes for a toxin against some crop pests. Bt insecticide sprays
have been in use for several decades, and are approved for organic farming. However,
introducing the Bt toxin gene directly into a plant genome raised many concerns about
the genetic engineering of crops, and food products derived from them.
2.2.1. Environmental impacts of genetically modified crops
One of the major concerns about introducing GM crop varieties is the uncertain impact
on the environment. One of the potential problems is that the novel gene might be
unintentionally transferred by pollination to other plants, including weeds and also
wild relatives of the crop species. Scientific research has shown that this is technically
possible, but the potential long-term impacts this might have are still unclear. There are
fears that such transfers could lead to the development of resistant “superweeds”, loss
of genetic diversity within crop species, and possibly even the destabilization of some
ecosystems. This last concern also emerges from the specific application of Bt, where the
genetic modification results in toxin being produced directly by the crop.
Environmentalists argue that the toxin might unintentionally be taken up by non-
targeted organisms, which might destroy populations of benign insect species. Much
research has been done on the possible impact of Bt-engineered crops on the monarch
butterfly, with inconclusive results. Laboratory results have differed significantly from
those from field tests. So far, despite the fact that millions of acres of Bt crops have been
planted over the past few years, there is little empirical evidence that the populations of
non-target organisms are decreasing in nearby areas. However, it is clear that some of
the feared impacts are likely to be ecosystem-specific. As a result, field trial results in
one country or ecosystem may not provide conclusive evidence of environmental safety
for other countries or ecosystems. In-depth research on specific ecosystems could
provide answers to these questions.
2.3. Genetically modified food and human health
Concerns have also been expressed about the risks to human health of food products
derived from genetically modified crops. This is particularly the case where novel genes
have been transferred to crops from organisms that are not normally used in food or
animal feed products. Many who oppose genetic engineering suggest that this might
lead to the introduction of previously unknown allergens into the food chain.
Controversy was sparked when a gene from a Brazil nut was successfully transferred
into a variety of soya which was being developed for animal feed. It was confirmed that
the allergenic properties of the Brazil nut were expressed in the soya. However, the
counter-argument was that this case demonstrated the effectiveness of scientific testing
for safety. The allergen was specifically tested for during the development process, and
as a result of the positive results, the product was never developed for commercial use.
Scientists further argue that the structure and characteristics of known allergens are
well documented, and that testing for possible new allergens is therefore relatively
easy. Another fear about food safety is the possible production of toxic compounds
resulting from genetic modification. Many scientists argue, however, that by
introducing one, or a very few, well defined genes into a crop, toxicity testing is actually
easier for GM crops. In traditional breeding, entire genomes, or parts of chromosomes
are transferred, and this often requires a lengthy breeding process to remove
undesirable genes from the variety being developed. The last major concern for food
safety is the use of antibiotic resistance genes as “markers” in the genetic transformation
process. Some of the antibiotics used for this purpose are still used to treat human
illnesses, and there is concern that resistance to the antibiotics could be transferred to
humans and animals through food and feed products. However, no evidence of this has
so far emerged, and scientists have now developed techniques to remove these
“marker” genes before crops are developed for commercial use.
2.4 Who benefits from genetically modified food and crops?

Pro-biotechnology scientists and firms have pointed out that GM food products have
now been on the market for several years, without a single reported case of adverse
effects on human health. Against this, it has been argued that possible long-term
impacts would not become clear for some years. Potential environmental impacts will
be particularly difficult to predict, monitor and manage. As scientists readily admit, no
technology is ever 100 per cent safe. Potential risks must be weighed against potential
benefits and compared with risks and benefits of traditional agriculture. Such risk-
benefit analyses should be done at different levels: at a national level, by Governments
and regulatory agencies; at production level, by farmers and firms; and at the
individual level, by consumers. The first group of GM crops introduced mostly yields
benefits for commercial farmers and private sector firms. For farmers, insect-resistant
and herbicide-tolerant crops produce somewhat higher yields and lower costs in respect
of chemical inputs, tractor fuel and labour. Profits accrue to the firms that developed the
seeds. As a result, revenues at national level are boosted. Furthermore, potential
environmental risks might be offset against the environmental benefits of reduced
agrochemical use and more efficient land use. But for consumers, these early GM crops,
food products derived from them, and the perceived benefits are not evident.
2.5 “Terminator technology” and farmer-saved seed

For developing countries, the potential benefits for farmers may be inequitably
distributed both at global and national levels. Large commercial farmers who can afford
GM seed will profit from increased yields, but a significant increase in production on a
wide scale will lead to a reduction in the unit price of the crop. For small farmers,
continued production with conventionally bred varieties is then likely to result in a loss
of income. An associated problem, which has been identified by many people, is the
potential future application of Genetic Use Restriction Technologies (GURTs), often
dubbed “terminator technology”, that would prevent farmers from reusing saved seed.
The first GURT to become widely publicized was a technique that involved genetic
modification of a crop to kill off its own seed before germination. Its first expected
application was to protect seed that had already been genetically modified for a
desirable trait, thereby providing technical protection for the seed company’s legal
intellectual property rights. Under intense public pressure, the firm developing the
technology announced that it would not be commercialized, but research and
development on other GURTS is ongoing in many organizations. The use of “terminator
technology” may, on the other hand, provide an in-built safety system to stop the
inadvertent hybridization of genetically modified varieties with unmodified species
(plants, crops, etc.) growing in nearby areas. Opponents claim that this technology
would increase poverty amongst the poorest farmers in developing countries, who rely
on the use of saved seed. Against this, it might be argued that this group of farmers
could not in any case afford the original cost of the seed for crops and crops varieties
based on GURTs. This, in fact, might be seen as the real problem for small-scale and
subsistence farmers, whose lack of access to credit is often the reason why new seed is
not bought each season. In fact, this inequitable situation already exists in respect of
many hybrid crop varieties, which give relatively high yields, but where the original
cost of seed is high, and the beneficial characteristics of the hybrid diminish or
disappear with replanting of saved seed. Another of the GURT technologies under
development would have a similar impact. This involves modification that would not
prevent the use of saved seed, but would effectively remove the desirable trait for
second and subsequent plantings. However, it has also been noted that in many cases
there are historical and cultural motives for exchanging and replanting saved seed, and
therefore any technologies that effectively prevent this would not be acceptable.
2.6.Genetically modified crops and food security
A very important challenge for developing countries that hope to use biotechnology to
address food security objectives is that the new GM crops may not be appropriate to
their most urgent needs. Biotechnology firms are unlikely to address these needs unless
they are commercially profitable, and this leaves a large gap for the public sector to fill.
Bearing in mind that research costs are usually very high, new forms of public-private
sector partnerships need to be sought in order that the benefits of biotechnology reach
those who need them most. One promising new initiative has been the development of
“golden” rice, which has been modified to enhance its production of beta carotene,
which is metabolized into vitamin A. This new variety has the potential to address the
huge problem of vitamin A deficiency in developing countries, which causes partial or
total blindness in around half a million children each year.
2.7 BIOTECHNOLOGY AND HEALTH
Despite much international attention given to GM crops and food products, genetic
engineering in health has been the main focus for modern biotechnology for the past
several decades. Today, the greater part of global research and development in
biotechnology, and the most cutting-edge applications of gene technology are related to
health. A variety of biotechnological techniques are used in modern drug development
and medical treatment. In some cases, for example, genetic engineering is the basis for
both the process and the product. In others, gene technology is used simply as one tool
in the development of new products such as pharmaceuticals.
2.7.1 Drugs, vaccines and diagnostics
The first biotechnology product approved for human health care was synthetic human
insulin, which came onto the market in the United States in 1982. Since then, more than
170 biotechnologyrelated drugs and vaccines have been approved by the United States
Food and Drug Administration, of which 113 are currently on the market. Another 350
biotechnology medicines, together targeting over 200 diseases, are in the later stages of
development. Amongst those approved during 2000 are medicines to treat
pneumococcal diseases in children, diabetes, cancer and haemophilia. DNA technology

is expected to revolutionize vaccine development in the future. DNA vaccines have
only recently started the testing process, but are expected to eventually replace other
methods of vaccine production. Conventional vaccines are made from either live,
weakened pathogens (diseasecausing agents) or killed pathogens. Vaccines produced
using live pathogens confer greater and longerlasting immunity than those using killed
pathogens, but may carry some risk of causing the full-blown disease to develop.
Applying individual proteins as antigens in sub-unit vaccines is made possible by
recombinant DNA technology. DNA vaccines contain only those genes of the pathogen
which produce the antigen, and not those used by the pathogen to reproduce itself in
host cells. Therefore, DNA vaccines are expected to combine the effectiveness of live
vaccines with the comparative safety of those based on killed pathogens. Several
preventive and therapeutic vaccines for HIV are currently in early trials. DNA vaccines
are likely to be more extensively available to developing countries than conventionally
produced vaccines. First, the cost of DNA is low compared with producing weakened
live organisms. Second, DNA vaccines are more stable at normal temperatures.
Refrigeration costs can take up to 80 per cent of a vaccination programme’s budget
where conventional vaccines are used in tropical countries. However, there are still
some uncertainties about the potential for vaccine DNA to “invade” the host’s genome
and possibly trigger genes relating to tumour development. There is therefore a great
deal of caution surrounding the development of DNA vaccines at this time. Two key
broad areas of modern biotechnology are now used in disease diagnosis. The first is cell
fusion, which involves the production of self-replicating antibodies – monoclonal
antibodies – for a specific antigen, or disease agent. Monoclonal antibody diagnostic
tests have been on the market for several years and are now one of the most profitable
areas of commercial biotechnology. These diagnostic tests are actually quite inexpensive
to produce, and this presents opportunities for some developing countries to enter the
international biotechnology market, and also develop diagnostics for diseases of
particular local relevance where these do not yet exist. The second area of
biotechnology used for diagnostics is DNA technology. DNA probes, which use
isolated segments of DNA to “attract” complementary gene sequences from pathogens,
are already on the market. They are relatively cheap to produce, and are usually more
stable in transit and in tropical climates than conventional diagnostics. DNA diagnostics
are likely to grow into a major product area in the future, owing to the developments
taking place on DNA arrays, which are also known as DNA chips, and microarrays.
Microarrays allow the detection and analysis of thousands of genes in a single small
sample, giving the power of many DNA probes in one small array. Microarray
technology is also expected to greatly increase the efficiency of drug discovery,
although no drugs have as yet been developed using the technology.
2.8 The Human Genome Project

The Human Genome Project is an international research initiative, started in 1990,
which aims to “decode” the human genome. An almost complete map of the genome
has already been produced, and sequencing is now expected to be complete by 2003,
two years ahead of schedule. It is now estimated that the human genome has around
30,000 genes. Many common genetic disorders are caused by defects in several genes.
However, around 4,000 other disorders, including sickle cell anaemia and cystic
fibrosis, are now thought to be caused by a single mutant gene. The Human Genome
Project has identified many of these mutant genes. In fact, on average during the past
two years, a new disease gene has been identified every day. It will take many more
years to fully understand how all of the genes in the human genome work, but already
the new knowledge generated by the project has led to many developments in
medicine. Furthermore, this new knowledge is in the public domain, accessible by
scientists for analysis and application. Future benefits will undoubtedly include
improved drug and vaccine development. This increased ability to understand genetic
variability in humans may lead to health care benefits to individuals who are
genetically susceptible to certain diseases. Genetic screening and analysis, for example,
makes it possible for tailor-made treatment (see Pharmocogenomics below) or offers
opportunities for lifestyle changes. However, there are very real concerns that the
availability of individuals' genetic information to organizations outside of the medical

profession, including insurance companies or their employers, may lead to privacy
invasion, genetic discrimination and other forms of misuse. The Human Genome
Project will lay the foundation for proteomics research, which will be undertaken
primarily by the Human Proteome Organization. Proteomics research will focus on the
proteins encoded by the genes (one gene may encode, through alternative splicing, up
to 35,000 proteins) which are responsible for the more sophisticated processes in living
organisms.
2.9 Pharmocogenomics
Pharmocogenomics is concerned with individual response to drugs based on genetic
make-up. Finding the most suitable drug and dosage for a specific patient is currently
done on a trial-and-error basis. Dosage is calculated according to the weight and age of
the patient. Actual patient response, including processing and metabolization of the
drug, and any adverse side effects, is largely determined by genetic inheritance.
Understanding these processes through genetic analysis of individual patients is likely
to lead to more effective treatment and improved drug development. Treatments could
be tailormade for the patient, resulting in faster recovery, more cost-effective use of
drugs and a decrease in adverse reactions to some drugs. In drug development, it will
become possible for new drugs to be targeted at specific groups that are able to
metabolize them effectively and without serious side effects. This will mean fewer
failed drugs trials, and less wastage of costly research and development where a
particular drug is suited only to a niche market. Pharmocogenomics is a very recent, but
fast-moving area of research, which is likely to revolutionize health care. Genetic
analysis of individuals, and ready access to a wide range of drug options, will of course
be prerequisites for taking advantage of the opportunities offered.
2.10 Gene therapy

Gene therapy involves the genetic engineering of a patient’s genetic code to remove or
replace a mutant gene that is causing disease. There are two broad types of gene
therapy that are possible. Germline, or stem-cell, gene therapy involves altering
patients' DNA in their stem (reproductive) cells. The modification to their genetic
“blueprint” is permanent, and hereditary. This type of gene therapy is complex, and is
considered too risky to undertake until the underlying biology is better understood. It
also raises many ethical concerns, for example, over the potential misuse of the therapy
to create “designer” babies. At the moment, germ-line gene therapy is banned in many
countries. The second type of therapy is somatic gene therapy. This involves
engineering cells on a “localized” basis, without affecting the patient’s basic genetic
“blueprint”. The first such therapy was approved in 1990 to treat a four-year-old child
suffering from severe combined immune deficiency. Some of the child’s white blood
cells were extracted, genetically engineered in the laboratory and infused back into her
bloodstream. This successfully strengthened her immune system. Gene therapy
techniques for cystic fibrosis have also been approved, and candidate techniques for the
treatment of Parkinson’s disease, Alzheimer’s disease and some cancers are under
development. Somatic gene therapy is likely to become very important for the treatment
of diseases caused by single mutant genes.
2.11 GOVERNING BIOTECHNOLOGY: POLICY CHALLENGES
A. Building capacity for developing and managing biotechnology

This paper has highlighted some of the potential risks and benefits of GM crops, the use
of DNA for vaccines and diagnostic tests and the mapping of the human genome.
Application of biotechnology to meet the needs of developing countries requires the
creation of an infrastructure for the transfer of relevant technologies, development of
institutions with the capacity to adopt and develop the know-how required for
successful application of biotechnology. This includes building capacity to understand
their own ecosystems and to select, acquire, manage and further develop those
biotechnologies that are most appropriate to national needs. Clearly, such efforts
require investing in science and technology education and research. Given the scarcity
of public resources in developing countries, various innovative avenues, including
public-private partnerships, South-South cooperation and the use of information
technology networks, should be explored. However, the starting point in building
capacity is a needs assessment, which would lead to both a national strategy and the
efficient allocation of scarce resources to meet those needs.
B. Biosafety and bioethics: capacity for risk assessment

Biosafety is concerned with the potentially adverse impacts of biotechnology on human,
animal and plant health, and the environment. Biotechnology also gives rise to socio-
economic and ethical concerns, some of which have been described here. Physical risk
and uncertainty are technical issues, and policies and regulatory regimes intended to
manage these risks will depend largely on scientific capacity, including human
expertise and well-equipped laboratories. This capacity simply does not exist in many
developing countries at present. The types of biotechnologies mentioned here are
characterized by a great deal of scientific uncertainty. The Cartagena Protocol on
Biosafety, the first international agreement specifically negotiated to deal with products
of genetic engineering, is based on applying the Precautionary Principle to risk
assessment of genetically modified organisms. This Principle holds that an absence or
lack of scientific proof of risk should not be taken as conclusive evidence of the safety of
any given organism and requires risk/benefit analysis. This gives some degree of
reassurance to developing countries that are as yet unable to undertake comprehensive
risk assessments. However, in the application of the Precautionary Principle, it must be
argued that no technology is completely riskfree, and that the Precautionary Principle
could be open to misuse as a trade barrier and as a barrier against further development
of biotechnology. This suggests that there is a need to address concerns about the
consistency of particular measures between the provisions of the Agreement on the
Traderelated Aspects of Intellectual Property Rights and the provisions of the
Convention on Biological Diversity.
C. Building awareness of biotechnology

Some of the applications of biotechnology described earlier have potentially serious
implications for socio-economic welfare, and ethical and moral well-being. If
biotechnology is to be used to provide benefits to a country’s population, then political
support, as well as public awareness and acceptance of new technologies are essential.
There is a wide range of potential applications, and decisions have to be made
concerning the choice of technologies, according to national needs. The public has a
constructive role to play in helping to make these choices, but in most countries,
including industrialized countries, public awareness and knowledge about
biotechnology are insufficient for ordinary people to have an effective and qualified
voice in biotechnology development. Building public awareness and disseminating
qualified and balanced information about biotechnology is a critical issue in most
countries.
D. Accessing biotechnology: intellectual property rights

Many of the new products and processes associated with biotechnology have been
developed in the private sector, and this has led to concerns that proprietary rights to
these technologies might mean that many developing countries will be unable to access
them. Another issue is that it is felt by many that ownership rights of genes and other
living matter, as intellectual property, is not morally acceptable. Furthermore, the
patenting of gene sequences and biotechnology techniques with broad applications
means that developing countries in particular may be excluded from affordable access
to technologies that they urgently need. Against this, innovating organizations argue
that without the limited monopoly rights to profit from their new products and
processes that are conferred by intellectual property tights (IPRs), there is no incentive
to invest in research and development. Moreover, some argue that where IPRs cannot
be adequately protected, this will act as a barrier to technology transfer. In fact, very
little systematic evidence has been collected in respect of the role of IPR regimes in
encouraging or constraining the transfer of technology. Related to this, it is worth
noting that biotechnology is knowledge-intensive, and much of the knowledge needed
to develop and manage biotechnology is already in the public domain. Finding ways to
access, assess and select appropriate knowledge from this freely available global pool is
perhaps a more significant problem for developing countries. Developing countries
should make efforts in this direction through modern means of information technology.
3.THE PATENTING OF BIOTECHNOLOGICAL

INVENTIONS INVOLVING THE USE OF BIOLOGICAL
MATERIAL OF HUMAN ORIGIN
3.1 . Initial legal position

A large number of heterogeneous biotechnological patents have been granted since the
1970s, not only in the Federal Republic of Germany and the other Member States of the
European Union, but also in non-European countries – in par-ticular, the United States.
The prerequisites laid down for the granting of these patents, as well as their scope,
differ consid-erably. To maximize the degree of EU harmonization in this field, the
European Parliament and the Council of the Euro-pean Union, after nearly ten years of
difficult preliminary work and deliberations and several attempts, adopted Directive
98/44/EC on the legal protection of biotechnological inven-tions, which took effect in
July 1998. The Netherlands, sup-ported by Italy, brought an action against the directive
before the European Court of Justice. The action, which, inter alia, alleged violations of
human dignity (by virtue of the patenting of parts of the human body) and of
international obligations (such as the Convention on Biological Diversity of 5 June
1992), was dismissed by the European Court of Justice in its judgement of 9 October
2001. The directive has so far been transposed into national law in Denmark, Finland,
Greece, Ire-land, Sweden, Spain, Portugal and the United Kingdom, the ten new
accession countries and recently also France. Further-more, by a decision of the
Administrative Council of the Euro-pean Patent Organisation dating from as long ago
as June 1999, its main provisions were incorporated, with effect from 1 September 1999,
in the Implementing Regulations to the Euro-pean Patent Convention. Since then, the
European Patent Of-fice has consequently granted patents in this field for the entire
area covered by the Convention, for several Member States or for just one Member State
– for instance, the Federal Republic of Germany. These patents are thought to account
for 80-90% of the biotechnological patents in force in Germany. A legally binding
answer has not yet been forthcoming to the question of how the European Patent Office
should proceed if, for example, the grant of a patent appears permissible under Arti-cle
6 (2) (a) of the directive but is prohibited in Germany by Section 2 (2) No. 1 of the
Federal Government’s draft law transposing the directive because the term “human
life” is in-terpreted differently by the various European legal authorities (see Section
4.2.1 below). If, in such a case, the Office were to base its decision solely on the
provisions of the directive as in-corporated in the Implementing Regulations and to
disregard concrete formulations laid down in national law – for instance, with regard to
ordre public (Section 2 (1) of the draft law refers to ordre public and morality) – this
would give rise to apprecia-ble problems not only for the Federal Republic.
To transpose the directive, the Federal Government in October 2000 introduced a draft
law (Bundestagsdrucksache 14/5642), which, however, was lost because it proved
impossi-ble to reach agreement, in particular on the question of sub-stance protection,
before the end of the relevant electoral term of the Bundestag [Lower House of the
Federal Parliament]. In Electoral Term 15, the Federal Government reintroduced the
draft law with minor amendments (Bundestagsdrucksache 15/1709), including an
appendix containing the opinion of the Bundesrat [Upper House of the Federal
Parliament] and the Federal Government’s responses to the points raised in it. In
addition, on 25 June 2003 the Federal Government confirmed its decision of October
2000 to act at European level, immedi-ately after the entry into force of the transposing
law, with a view to the initiation of a process of amendment and to secur-ing certain
necessary corrections and clarifications to the di-rective. Since the directive was not
transposed into national law within the period stipulated in the directive itself (by 30
July 2000), the European Commission referred the Federal Re-public of Germany to the
European Court of Justice in January 2004 for violation of the Treaty. The Court has
already found against France in similar proceedings, but that country has now
transposed the directive.
2. Content and objectives of the EU directive and of the draft German transposing law
The directive is consistent with the general principles of patent law, which has the aim
of promoting technical innovations and the dissemination of their results by granting
inventors, for a specific period – as a rule, 20 years – the exclusive right to the
commercial exploitation of their inventions, thereby offering them an opportunity to
recoup the expense entailed and in ad-dition holding out the prospect of a fair profit
subject to the condition of making the new knowledge generally available by means of a
detailed description of their inventions. In this way, inventions can be made available
for the benefit of all at the earliest possible stage without inventors running the risk of
loss due to commercial exploitation of their inventions by rivals. Patents thus as a rule
serve to strike a balance between the in-terests of society and those of inventors, as well
as to promote innovations of use to the community at large by means of an equitable
incentive system.
However, the actual exploitation of a patent may be wholly or partially precluded by

state-imposed prohibitions, as a patent does not in itself grant a right of use. The
directive is al-so linked to existing international obligations, arising out of instruments
such as the Patent Cooperation Treaty of 19 June 1970, the Convention on Biological
Diversity of 5 June 1992 and the Agreement on Trade-Related Aspects of Intellectual
Property Rights (the TRIPS Agreement) of 15 April 1994. Article 3 of the Charter of
Fundamental Rights included in the – albeit not yet ratified – European Constitution,
whose provisions in-clude a ban on the reproductive cloning of human beings and on
making the human body and its parts as such a source of financial gain, will also be
relevant to interpretation of the directive.
In this context, the directive is intended to afford legal cer-tainty in the field concerned
for the entire European Union, with a view to facilitating the promotion of inventions
for biotechnology enterprises, thus enabling them to invest more and thereby to
enhance their worldwide competitiveness. The European Commission also hopes that
the directive will stimulate research, with the prospect of improved medical therapies.
At the same time, the directive seeks to address the relevant biological particularities
and specific ethical considerations. Yet it is doubtful whether the directive in its present
form embodies definitive, non-contradictory responses to the new challenges that have
arisen in the sphere of biotechnology. If only because of the rapid pace of progress in
the sciences concerned, the directive is inevitably provisional in character. For this
reason, the Commission itself emphasizes the need for careful monitoring of future
developments. In addition, the Federal Government “has not only decided to transpose
the directive into national law, but will also initiate a process of correction at European
Community level, where it will seek certain necessary amendments and clarifications”
(see the draft law, Bundestagsdrucksache 15/1709, p. 20). This process could also
address the criticism occasionally voiced that both the di-rective and the TRIPS
Agreement circumvent international agreements on human rights and the international
At present, the directive at any rate reflects the TRIPS Agreement in providing that
inventions may be patented even if they have biological material as their subject-matter
(Article 3). Article 5 of the directive stipulates that the “human body at the various
stages of its formation and development, including the sequence or partial sequence of
a gene, cannot constitute patentable inventions”. The situation differs in the case of an
el-ement isolated from the human body or otherwise produced by means of a technical
process, including the sequence or par-tial sequence of a gene, “even if the structure of
that element is identical to that of a natural element”. Article 6 (1) of the direc-tive
prohibits the patenting of inventions whose commercial exploitation would be contrary
to ordre public or morality, with the proviso that exploitation shall not be deemed to be
so con-trary merely because it is prohibited by law or regulation. Examples of non-
patentable inventions enumerated in Article 6 (2) are processes for cloning human
beings, processes for mo-difying the germ line genetic identity of human beings, and
us-es of human embryos for industrial or commercial purposes. The scope of patent
protection is dealt with in Articles 8 and 9.
The directive makes no changes to the general prerequisites for the granting of a patent
(novelty, inventive step, industrial applicability and adequate disclosure). In Article 5
(3), how-ever, it spells out the prerequisites for patent protection of bio-logical
inventions by the sentence: “The industrial application of a sequence or a partial
sequence of a gene must be disclosed in the patent application.” Even so, authorities
differ on whether and to what extent this clarification restricts substance protection
with respect to genes. The directive also has no effect on national provisions precluding
the patenting of meth-ods for the therapeutic and surgical treatment of the human
body, as well as diagnostic methods (Section 5 (2) of the Ger-man Patent Law [PatG]).
The same applies to the “privileged status of research” provided for in Section 11 No. 2
PatG.
The draft law consistently transposes the directive’s provi-sions by the adoption of its
wording. However, at some points additions can be found. For instance, Section 1a(3)
reads: “The industrial application of a sequence or a partial sequence of a gene must be
disclosed in the application concretely together with a specification of the function
performed by the sequence or partial sequence”, while the second sentence of Section 2
(2) provides: “The relevant provisions of the Embryo Protection Law shall govern the
application of Nos. 1 to 3” (the underlined passages indicate the added words). These
additions fall with-in the scope for such national provisions allowed by the direc-tive.
Furthermore, the addition in Section 1a (3) corresponds to Recital 24 of the directive.
The patent legislation of the United States and other bio-technologically important
countries, such as Australia, India, Israel or Singapore, differs in many respects from
that of the EU Member States. One significant difference emerging from a comparison
of the directive with the relevant American instruments is that these do not provide for
a privileged status for re-search or for statutory exclusion from patentability on ethical
grounds. They also apply a wider definition of what constitutes an invention.
3.2. Objections and criticisms

The process so far has been accompanied by a vigorous debate both in specialist circles
and among the public, in the course of which a large number of objections and
criticisms have been voiced. A critical opinion on the transposition of the directive into
national law has also been expressed by the Bundestag’s Commission of Inquiry into
the Law and Ethics of Modern Medicine, appointed in Electoral Term 14, in its part-
report of January 2001, entitled “The protection of intellectual property in
biotechnology”.
3.3 . Contested patents and patent applications

The granting of specific patents, as well as the filing of certain patent applications, has
thus repeatedly aroused criticism on the part of individuals and associations. Some of
these cases are described in detail below. They concern in particular issues of scope,
subject-matter and the ethical limits of substance protection, and in some cases also the
limits applicable to the exploitation of validly granted claims. In a few cases, the ques-
tion of the patentability of embryos and of cloning arises at the same time. In one
instance, the issue is the patenting of stem cells to be derived from cloned embryos, and
in another, the possible formation of chimeras – that is, hybrids of animal and human
material.
Five of these cases fall within the competence of the European Patent Office (EP), and
one within that of the German Patent Of-fice (DE). Two of the enumerated patents were
granted by the United States Patent and Trademark Office (US). Although these do not
fall within the sphere of application of the directive, they are included to illustrate the
international aspects. In one case, there is only the designation “WO” of the World
Intellectual Property Organization (WIPO), because the application was withdrawn
before any concrete processing by a patent office
Method for isolating the human genes BRCA-1 and BRCA-2, the mutation of which leads to
hereditary breast cancer (EP 0699754, EP 0705902, EP 0705903 and others).
The original patents covered not only the isolation of the genes but also the isolated
genes themselves. Objections were raised to the extension of substance protection to all
applications of the genes – in particular, for example, diagnostic procedures, as well as
therapies and the production of pharmaceuticals. An-other criticism was that the patent
proprietor permitted diagnostic tests only on payment of high fees and only in its own
laboratories. One of the patents for the gene BRCA-1 (EP 0699754) has now been
revoked following opposition proceedings, on the grounds that the application lacked
novelty. The revocation is not yet legally effective.
Although the following case concerns an invention that does not relate to biological
material of human origin, but whose subject-matter is a virus, it is mentioned here
because similar objections have been leveled at it. The relevant patent is for gene
sequences of the hepatitis C virus (EP 0318216). These sequences are used in diagnostic
procedures and, in particular, for screening donated blood. The patent proprietor al-so
claims the exclusive right to conduct such tests. In this case too, the high licence fees
demanded for these tests attracted criticism. In 2003, the European Commission
criticized the relevant contracts not on patent-law grounds, but as constituting the
abuse of a dominant market position.
Gene sequence CCR5, which codes for a receptor on the cell surface (US 6025154). The
function specified in the patent application was that the gene sequence includes the
receptor as a possible site of action of drugs used to treat inflammatory diseases. It
became known only later that the receptor also performs an important function in
regard to penetration of the AIDS virus into the cell. Whether the patent protection
extends to this additional function and applications based on it are disputed.
Processes in which human cells are used to produce embryos (DE 69422034; EP 0695351
– the “Edinburgh patent”)
The patent initially comprised a method for isolating animal stem cells with a view to
genetic manipulation of these cells and to producing genetically modified organisms.
Since the English word animal includes human beings, a dispute developed over the
permissibility of this extension, because human embryos too might then become the
subject of commercial exploitation. The applicant has since restricted the patent to non-
human cells.
Process for freezing embryos and germ cells, extend-ing to the utilization of the frozen
entities (EP 1121015 B 1)
The subject-matter of this patent is a particularly non-stressful form of preservation of

biological material. The dispute in this case centres on the claiming of substance
protection for the frozen entities and, specifically, its extension to embryos.
Process for cloning living organisms (US 6211429)
The patent does not distinguish between reproductive and re-search cloning and
extends also to the entities produced by the application of the process. The point at
issue, in this case too, is the claiming of substance protection and, in particular, the fact
that, in the event of successful reproductive cloning, the patent might also cover a fetus
and ultimately even a human being born as a clone.
Process for the production of neural precursor cells from embryonic stem cells (DE
19756864; EP 1040185)
The critique in this case is directed towards the fact that the patented method also
develops the precursor cells – i.e. multi-potent cells – from human stem cells, which in
turn can also be derived from cloned human embryos. It is pointed out, too, that the
embryos from which the stem cells are obtained are al-ways consumed.
Process for the genetic manipulation of pig and human embryonic cells for the
production of transgenic tissue (provisional designation WO 99/21415)
The criticism in this case was that the process might yield “chimeras”. The application
has since been withdrawn.
It is not for the National Ethics Council to offer a detailed legal assessment of the patent
applications and granted patents mentioned above. They and the objections to them are
enumerated here only to illustrate the nature of the problems aris-ing. These problems
are considered in more detail in Section 4.
3.4 General objections and criticisms

On the basis partly of the individual cases mentioned above and partly of wider
considerations, the main objections leveled by critics at the relevant provisions of the
directive and of the draft law are as follows: patents on “life” are inherently im-
permissible; the human genome is a common asset of humanity; genes are not
substances, but the material form assumed by information; living organisms and their
constituents – which include cells and genes – can only be discovered, not invented.
Other points raised include the following. Since genes have a much higher information
content than other substances and hence also possess an indeterminably large number
of functions, the scope of patent protection – i.e. the inventor’s right to exclusive
commercial exploitation of his invention – should at any rate be confined to the concrete
function of a gene segment as described by the inventor in the application, and should
not extend to all other functions not yet even identified or described at the time of the
application. All-embracing patent protection of this kind would, owing to the resulting
blocking effects, give rise to the formation of monopolies and would drive up the prices,
of, say, medicines and tests, to un-reasonable levels for patients. It would also have the
consequence of excessive remuneration of the patent proprietor. This would be
unacceptable in terms of medical and social ethics, from the point of view of solidarity
with patients, while the excessive remuneration of the inventor would also be un-
ethical. These considerations, according to this view, make it all the more inappropriate
to permit “absolute substance protection” covering all applications of a substance
obtained for the first time by technical means.
3.5Opinion of the National Ethics Council

Since legislative decisions must now be taken forthwith, the National Ethics Council
considers itself called upon to issue an Opinion in accordance with its remit. It therefore
presents its views on the issues mentioned in Section 3 (Section 4.1) and on further
aspects of the patenting of human biological mate-rial that it regards as both ethically
and constitutionally rele-vant (Section 4.2). The assessment criteria used are the same as
those applied by the National Ethics Council in its previous Opinions. These are, in
particular, human dignity, protection of life, improvement of therapies and
considerations of social ethics, on the one hand, and the freedom of economic activity
and of research, on the other.17
Opinion on the general objections

Issues of ethical and scientific principle/ Are patents on “life” permissible
Those who categorically reject biotechnological patents argue from the conviction that
“life” is inherently nonpatentable. Life is distinguished biologically from inanimate
nature by specific characteristics, which include cellular organization, metabolism,
variability, the capacity to react to stimuli and the capacity to reproduce. For this
reason, genes, nucleic acids and proteins, considered in themselves – that is,
independently of and in isolation from living organisms – are not alive. The ethics of
their patentability are nevertheless hotly debated. Microorganisms and bacteria, for
their part, certainly do constitute living organisms. The current international legal
consensus (Article 27 of the TRIPs Agreement) is that they are patentable. This fact has
aroused hardly any ethical criticism. It follows that the boundary of patentability does
not coincide with the boundary between animate and inanimate nature.
A fundamental critique concerns the patenting of the human body at the various stages
of its formation and development, as well as of isolated elements of the human body.
Their patenting would run counter to the respect for life and its non-disposability, and
hence also to the protection of human dignity. In this respect, the draft law, like the
directive, takes account of the special status of human life by expressly prohibiting the
patenting of the human body “at the various stages of its formation and development”.
The issue of the patentability of human embryos and human embryonic stem cells will
be discussed in more detail in Section 4.2.1. It will then become clear that exclusions
from patentability are appropriate in these cases too.
3.6The genome – a common asset of humanity?

It is asserted that genomes, and, in particular, the human genome, have not been
created by human beings, but are a common asset of humanity. The genomes ought, for
this rea-son, to be freely available to anyone for research and applica-tion. The first
point arising here is whether this assumption does not apply equally to inanimate
nature. If not, however, the further question would arise as to the existence of relevant
dif-ferences between animate and inanimate nature or between in-dividual elements of
these that would justify a distinction as re-gards patentability. Account would have to
be taken, for example, of possible differences, as discussed below, between other
chemical substances and DNA molecules or genes (see Section 4.1.1.4).
As already stated in Section 2, the freedom of research is guaranteed in German law by

the privileged status accorded to research. It is therefore not threatened by the patenting
of genes and their functions and applications. Those in favour of patenting also point
out that, with regard to application – ex-cept in the rare case of absolute substance
protection (see Sec-tion 4.1.2.1) – it is not the genome as such that is claimed, so that
fundamental genetic research is unaffected by patent pro-tection.
Economic aspects
It is further argued that pharmaceutical research and develop-ment to market may call
for the investment of very large sums estimated at up to several hundred million euro
in certain re-cent cases. Such a level of expenditure can be justified only by patent
protection for a certain period, to allow a reasonable es-timate of the payback required
on the investment. Rather than facilitating the development of new pharmaceuticals,
the com-plete exclusion of inventions based on exploitation of the hu-man genome or
human genes would therefore make it sub-stantially more difficult or even impossible.
This, it is argued, would not constitute reasonable use of an avowed “resource for
mankind”.
However, a possible counter-argument is that the isolation of genes alone does not yet
involve a high level of expenditure and costs for pharmaceutical companies, but that
these arise only in the course of research and development of a drug to market.
Furthermore, the desired effect – covering the inventor’s outlay – can still be achieved if
patent protection is con-fined to functions. The issue here is ultimately the scope of
patent protection, and not its total elimination. Another problem arising independently
of the extent of patent protection is that the monopolization of parts of the genome or of
specific genes might also impede the development of medicinal products and cause
problems with the treatment of patients.
Are genes substances or information, or both?

A fundamental problem in identifying inventive step in the field of biotechnology is the
difficulty of determining what has been invented and is consequently intended to
constitute the protected subject-matter. The question here is what should be covered by
the exclusive right of exploitation protected by a patent: a natural substance – a piece of
deoxyribonucleic acid having a specific composition – or an item of information and a
function mediated by this substance?
The problem arises because genes in effect have a twofold character: they are, on the
one hand, material (the chemical compound deoxyribonucleic acid, or DNA) and, on
the other, the media of genetic information used by cells for the biosyn-thesis of specific
proteins. As natural substances, genes would, according to the decisions of the Federal
Court of Justice, in principle be patentable if they were made available for com-mercial
exploitation by whoever describes them for the first time. The precedent for absolute
substance protection for nat-ural substances was the Federal Patent Court’s Antamanid
judgement of 1977 (GRUR 1987, 238f.). However, not only have methods of isolating
DNA, as well as its substance-related composition, been known for a long time, but it
has also for many years been possible to sequence this compound. Al-though the
importance of the substance-related properties or genes is not disputed, it is clear in this

situation that, as a rule, the making available of a hitherto unknown DNA sequence
does not in itself constitute an invention.
A stricter criterion of the novelty of an invention in this field is the description of the
information contained in a DNA sequence, or of a specific function performed by it,
which is thereby made available for application. Now a specific DNA se-quence may
include the information not only for one protein but for several. These may differ and
be partly independent of each other, as, for example, in the case of DNA sequences that
code for a number of proteins or of alternatively spliced read-ing frames. The total
information content of DNA sequences is therefore unpredictable both for the applicant
who files a patent and for its examiner. The granting of a patent for the en-tire
information content of an isolated DNA sequence would therefore excessively reward
the person who isolates the se-quence and describes one of its applications.
An objection raised to this view is that information is con-tained not only in DNA but
also in quite different substances discovered earlier. For example, the possible
applications of certain medicinal substances of non-biological origin are stat-ed to vary
so greatly that the first invention for a given applica-tion could be followed by
subsequent inventions for other applications. The correct view, it is argued, is that
many sub-stances possess different functions, and hence different poten-tial
applications, according to the circumstances in which they deploy their activity. This
would apply equally to substances of inorganic and organic origin. However, this does
not yet answer the question whether such substances can be regarded as in-formation
carriers in the same way as DNA, and whether the functions of DNA can be compared
with those of other mole-cules.
Ordinary molecules contain only information about their own structure. The sequence
of DNA, by contrast, also includes information for the biosynthesis of other molecules
(e.g. RNA or proteins), which may in turn have different functions. The function of
DNA in this case is that of instruction: it provides cells with information necessary for
the biosynthesis of pro-teins. Additional information from the cell itself is admittedly
required for the correct processing of this information, so that neither the structure nor
the function of a protein is complete-ly described by a DNA sequence; nevertheless, this
capacity for instruction distinguishes DNA from all other known natural substances
(except RNA, which, however, belongs to the same class of molecules as DNA).
Again, unlike other molecules, DNA has the capacity for replication – that is, for
identical duplication in the process of cell division and the transmission of hereditary
characteristics. Some consider these peculiarities of DNA as an information carrier, as
compared with other substances, to be only quanti-tative, while others regard them as
qualitative in nature. At any rate, this situation must be taken into account in the debate
on the patentability of DNA sequences.
Can living organisms and their elements be invented at all?

Living organisms as such, and consequently also human or-ganisms and their elements,
including their genes, can not be invented, but only discovered. For this reason, genes
are not patentable unless other circumstances relevant in patent law also apply. This is
clear from general considerations of patent law, and is moreover also expressly stated in
the directive (Recital 16).
The situation is different if the isolation of a gene and hence the making available of that
gene for subsequent applications in itself constitutes an inventive step of the degree
required by patent law. This may be the case, for example, where novel techniques for
isolating a specific gene are invented. The result is something that cannot simply be
discovered, so that this at any rate constitutes an essential prerequisite for the granting
of a patent that also, in accordance with the current provisions of patent law, includes
substance protection. In the present state of the art of gene isolation and sequencing,
however, such cases surely represent the absolute exception, as will be explained in
more detail in the next section.
Restrictions of patent protection
Is “absolute substance protection” inappropriate?

The first question to be considered in this connection is whether and to what extent
cases of “absolute substance pro-tection” can and should exist at all for biological
substances of human origin, or whether a restriction of patent protection is appropriate
or indeed essential on ethical grounds. Current patent law permits substance protection
of this kind for hu-man genes, in accordance with the considerations adduced in Section
4.1.1.5, if the making available of a gene satisfies all the prerequisites of patent law – in
particular, those of inventive step and novelty. Opinions differ – even within the
National Ethics Council – on the above question.
Some hold that a decision is necessary in each individual case as to whether the
concrete provision of a gene meets these conditions of patent law, because, in particular,
the boundaries of the criteria of inventive step and novelty are fluid, so that the
requirements as to inventive step become more stringent with time. According to this
view, the sequencing of a gene, a nucle-ic acid or a protein has, with scientific progress,
substantially become the state of the art and the technologies for isolating and
sequencing these substances have now become standard methods. As a rule, it can
therefore be assumed that the deter-mination of such sequences and hence, for instance,
the mak-ing available of a given DNA, by themselves, can no longer be deemed to
constitute an invention today. Moreover, it is ar-gued, the sequences of the human
genome are already sub-stantially known. In the case of human beings, it is therefore
now virtually impossible to imagine a case in which the isola-tion or determination of a
DNA sequence can still be regarded as comprising an inventive step.
Advocates of this position consider exclusion of compre-hensive substance patents

extending beyond the current legal position to be inappropriate. Indeed, in their view, it
is doubtful whether this would at all be permissible under Article 27 of the TRIPs
Agreement. Difficult questions would also arise in respect of patents already granted. In
particular, any attempt to define a boundary between an invention and a discovery in
this field, dif-fering from that enshrined in the general patent legislation, would appear
to have little prospect of success. For this reason, determination of the relevant
boundaries in the small number of cases still to be expected should continue to be left to
patent practice, which, after all, has hitherto applied increasingly strin-gent criteria for
inventive step in the field of biotechnology.
Others argue that, regardless of the provisions of patent law, the first-time isolation of
genes by novel technical means and the resulting provision of these genes for
subsequent relevant applications does not constitute an invention. This is because it is
not the genes but the technical process for their isolation that has been invented. In this
case too, genes are therefore considered not to be patentable. Moreover, the mere
technical isolation of a gene cannot justify absolute substance protection – that is, the
granting of a patent covering all func-tions of an isolated gene, including unknown
functions.
The protagonists of this position therefore consider it ap-propriate for a clear regulatory
answer, extending beyond the current legal position and the provisions of the draft law,
to be given to the question of when a patentable invention exists in the relevant field.
They are thus unwilling to leave the answer to this question, and hence also
determination of the boundary between an invention and a discovery, to patent practice
or the courts. In their view, although the criteria for inventive step applied by patent
practice have become more stringent, not a single relevant case is at a stage that
promises an early or definitive answer to this question.
With regard to the natural gene sequences discussed above, it is essential to distinguish
cases in which the inventive step consists in a substantial modification of the natural
sequence of a DNA and in the production of a protein derived from it, which thus does
not occur in nature. Depending on the prior art, patent protection in this case should
extend to the modified sequence and the newly produced protein as a whole, and not to
specific functions of the sequence and of the protein. The decisive step lies in the
modification of the natural state or of a specific sequence and in the associated

invention of novel proteins and functions.
Restriction of substance protection by the specification of functional applications.
The following consideration is concerned not with the question of “absolute substance
patents”, as discussed above, but with the patenting of an invention that already
presupposes the isolation of the gene and relates to functional applications that are
described in detail. Differing degrees of restriction of pro-tection are called for in these
cases.
It is true that the human genome contains only a limited number of genes, currently
estimated at 30 000. It is also the case that genomes possess a very much greater
information content than other substances and perform an indeterminably large
number of functions. The same applies to the functions of the proteins for which the
genes code. For this reason, de-pending on the extent of protection, patents in this field
may also, by virtue of overlapping gene sequences with different functions, result in
more extensive blocking effects than those occurring in other spheres. For the same
reason, a return sub-stantially in excess of the necessary and appropriate level (“ex-
cessive remuneration”) cannot be ruled out.
Where absolute substance patents or patents with broad claims have been granted in
the past, retroactive restrictions are as a rule inappropriate. Such situations can at most
be to some extent remedied by the imposition of a compulsory li-censing requirement
(Section 24 of the German Patent Law [PatG]). The draft law (Article 1 No. 9) proposes
to facilitate the granting of these licences by amending the provision contained in
Section 24 (2) PatG so as to abolish the current additional requirement of “public
interest” for the granting of compulsory licences in all the cases of dependence
mentioned therein. Careful monitoring will be necessary to determine whether this
facilitation is sufficient. At any rate, use should be made of the instrument of
compulsory licensing in all suitable cases.
In the future, however, a further limitation will accrue from the new provision of
Section 1a(3) of the draft law, which reads as follows: “The industrial application of a
sequence or a partial sequence of a gene must be disclosed in the application concretely
together with a specification of the function per-formed by the sequence or partial
sequence.” This requirement to specify the function of the sequence or partial sequence
is, according to the explanatory memorandum of the draft law (p. 10), not merely a
formal requirement of the application procedure. The description of the function,
according to the explanatory memorandum, is in fact the fundamental criterion of
determination of the gene segment to be patented, to which the patent must be
restricted. This addition to current patent law, reflecting Recital 25 of the directive, is
intended to avoid the overlapping of gene sequences with different functions and hence
also inappropriate blocking effects and excessive re-wards.
The success of this provision depends on the interpretation in this context of the phrase
“specification of the function per-formed by the sequence or partial sequence”, as
required by Section 1a (3) for the concrete description of industrial applicability. Three
possible interpretations can be imagined:
According to a broad interpretation, patent protection could be deemed to extend to the

protein for which a gene codes. The function of the gene sequence would then consist in
the coding for precisely this protein. All functions of this protein would then also be
protected.
An intermediate interpretation might be that only the specified function of the protein is
protected – for instance, that of being the receptor for a hormone. Other, as yet
unknown, functions would then not be covered.
A narrow interpretation of the phrase would have the con-sequence that protection
would extend not to the described function as a whole but only to its concretely
specified application – for example, the treatment of a specific disease. Opinions differ,
within the National Ethics Council as else-where, on which interpretation is
appropriate. According to one view, the overwhelming weight of evidence favours

interpretation c), on the grounds that it results in a situation that comes closest to the
objective outlined in the explanatory memorandum to the draft law, because it on the
one hand reduces the dangers of overlapping and excessive remuneration, while, on the
other, permitting the payback estimates essential to the development of new
pharmaceuticals (see Section 4.1.1.3 above). Others hold that interpretation b) would as
a rule be more appropriate. If a new function of a protein is disclosed by re-search, the
appropriate remuneration aimed for by patent law can perfectly well consist in the
extension of patent protection to all industrial applications that make use of the
disclosed function, which thus include ones not explicitly claimed. Notwithstanding
these differences, the protagonists of the first position, in common with most European
Union Member States that have so far transposed the directive into national law,
consider that the question of the correct interpretation should, in this case too, be left to
patent practice and not be decided on a statutory basis. Only patent offices and the
courts can, in their view, take account of all the subtleties of an individual case. In
individual cases, too, it would be easier for them to decide whether different functions
of a gene are in each case deter-mined by one specific gene segment. However, further
developments should be carefully monitored.
Others, on the other hand, consider the formulation of Sec-tion 1a (3) of the draft law to
be insufficiently concrete. On this point too, they therefore call for an explicit
formulation to the effect not only that patent applications should describe the func-tion
performed by the sequence or partial sequence of a gene, but also that the scope of the
patent claim should extend solely to this described function and application. They point
to the exis-tence of corresponding provisions in France, Spain and Portugal.
3.7 Other ethical and constitutional issues
3.7.1 Prohibitions of patenting under Section 2 (2) of the draft law
Other aspects of both ethical and constitutional relevance are the prohibitions of
patenting embodied in Section 2 (2) of the draft law. They are based on the correct
consideration that cer-tain acts of exploitation would constitute particularly serious
violations of ordre public, and especially of human dignity. The general principle of
patent law that the prohibition of certain acts necessary for an application precludes
only the protected application, but not the granting of the patent, is rightly con-sidered
to be inadequate in these cases. Significantly, the enu-meration in Article 6 (2) of the
directive is preceded by the words “among others”, while that of Section 2 (2) of the
draft law commences with the word “insbesondere” [“especially”], so that these
enumerations are not exhaustive. Opinions differ, however, on whether prohibitions of
patenting should be based on a general European ordre public or on the relevant
national ordre public. The answer to this question would determine whether the
European Court of Justice or national courts had ultimate competence for interpretation
and additions. In the present situation, however, a European ordre public can
presumably be said to exist only where the relevant legal conceptions of all member
countries coincide – for instance, on the prohibition of reproductive cloning, of germ
line modification or of the production of hybrid entities. In the absence of such a
consensus, the right of bind-ing determination of what constitutes ordre public, on the
basis of their fundamental values, cannot be taken away from the Member States.
Neither the fundamental treaties of the European Union nor the draft Constitution
provide that the Member States have placed this fundamental competence at the
disposal of the European Union. Should the European Patent Office nevertheless grant
patents that violate German ordre public, they may not be exploited at least in the
Federal Republic. The same applies to any such patents granted by other international
or foreign offices. Where such patents extend to the Federal Republic, revocation
proceedings can be instituted against them.
This has the following implications:
The prohibition of the patenting of processes for cloning human beings contained in
Section 2 (2) No. 1 of the draft law admits of differing interpretations. Article 6 (2) (a) of
the directive, which is here copied, unquestionably bans the patenting of processes for
reproductive cloning throughout the European Union. This prohibition also follows
from Article 3 of the Charter of Fundamental Rights. However, the prohibition is not
unequivocal in the case of research cloning, because the term “human beings” is
defined differently by the individual European Union Member States and also because,
for this reason, research cloning is not addressed in Article 3 of the Char-ter of
Fundamental Rights. The fact that, for example, the United Kingdom has transposed the
directive into national law including this provision, even though research cloning is
per-mitted in the UK, would otherwise be incomprehensible. In the Federal Republic,
by contrast, the relevant instrument is the Embryo Protection Law, whose applicability
to the interpretation of the prohibitions enumerated in Section 2 of the draft law is now
explicitly laid down in the second sentence of Section 2 (2). However, many take the
view that the Embryo Protection Law should be interpreted as prohibiting research
cloning. This situation would change if different legislative provisions were adopted in
Germany. National competence for decisions in this particularly sensitive ethical field is
thus preserved. The prohibition of germ line interventions contained in Section 2 (2)
No. 2 is unequivocal and leaves no scope for divergent interpretations. An embryo as
such cannot – at least in the Federal Republic – constitute a patentable invention be-
cause it falls within the purview of the phrase “human body, at the various stages of its
formation and development” used in Section 1a (1) of the draft law and is therefore
excluded from patentability. However, the significance and scope of the prohibition
pursuant to Section 2 (2) No. 3, which excludes the use of human embryos for industrial
or commercial purposes from patent protection, is again unclear. The very term
“embryo” is defined differently in the individual member countries. Moreover, the

formulation could suggest that patenting is permissible for processes and, where
applicable, also the sub-stances thereby obtained when embryos are used not for
commercial or industrial but for therapeutic or research purposes that is to say, when
they are consumed, for instance, for the production of embryonic stem cells and stem
cell lines. Such an interpretation might be regarded as finding support in Recital 42 of
the directive, which provides that “in any case such exclusion” from patenting “does
not affect inventions for therapeutic or diagnostic purposes which are applied to the
human embryo and are useful to it”. In this connection, though, some consider that
there is no consensus on whether this means usefulness to the individual embryo
concerned or to the category of embryos in general. The embryo would be consumed in
the latter case only. The question of drawing an unequivocal distinction between
commercial and therapeutic purposes would also be left open. Pharmaceuticals, for
example, are produced with both of these objectives in view. Finally, it seems difficult
to reconcile the industrial applicability of the invention, as a condition of patentability,
with the prohibition on using the invention for commercial purposes.
However, these points need not be considered further, be-cause they too are governed,
according to the second sentence of Section 2 (2) of the draft law, by the Embryo
Protection Law, which provides for an absolute ban on embryo-consuming techniques
and consequently also on the production of embryonic stem cells and stem cell lines.
For this reason, the grant of a patent for such techniques in, or having effect in,
Germany is precluded. The situation is presumably different in the case of the patenting
of embryonic stem cells produced outside the Federal Republic, of stem cell lines
derived from them and of modifications to both of these, if the relevant stem cells or
stem cell lines have been imported legally in compliance with the Stem Cell Law of 28
June 2002, because the deciding ground for the prohibition of patenting does not then
apply. National competence for decisions in this field, which also involves sen-sitive
ethical issues, is at any rate preserved.
It follows from the foregoing that further prohibitions do not apply to the patenting of
other cells– for example, somatic cells – and of microorganisms. Such prohibitions
cannot be derived, in particular, from the notion of ordre public on the grounds that
“life” is at issue. This is because, as stated earlier, the ordre public of the Federal Re-
public comes into play only with respect to entities having the capacity to give rise to
born human beings.
3.7.2.Evidence of origin
If an invention has as its subject-matter biological material of plant or animal origin or if
it involves the use of such material, Section 34a of the draft law, like Recital 27 of the
directive, re-quires its geographical origin, if known, to be specified in the application.
There is no mention of sanctions for failure to comply with this directory provision. The
Federal Government
reflecting the coalition parliamentary groups’ motion of 10 March 2004 – intends,

following its decision of 25 June 2003, to seek at EU and international level to have the
directory pro-vision replaced by a mandatory requirement or to aim for a system with
sufficient flexibility to allow mandatory provisions to be included in national
legislations. Even if the nature of any concrete sanctions for infringing such a provision
is as yet un-determined, the intention is noteworthy, because it is only by means of such
evidence that the fair and equitable sharing of the benefits arising out of the use of
genetic resources can be assured. Such sharing, in the field of plants and animals, is one
of the objects outlined in Decision III/17 of the Conference of the Parties to the
Some have drawn attention to an internal instruction by the President of the German
Patent Office (Communication 11/94 of 8 August 1995) that already included a
directory provision on the filing of sequence protocols requiring the statement of origin
of the relevant material to include the name of the individual concerned in the case of
material of human origin. Those who make this point consider it in any case hard to
understand why the requirement of such evidence should be dispensed with in the case
of material of human origin. The origin of this material, in their view, may perfectly
well be relevant, for instance to facilitate the sharing of poor countries in medical
progress and its results. For example, with biological material of human origin as well
as with other material, patenting for a minimum term of 20 years could have the
consequence that people in poor countries are deprived of access to the therapeutic
innovations thereby protected, even if substantive research and inventions accrued
precisely from material originating from such countries. An objection to this argument
is that human genes as a rule differ hardly at all from continent to continent. Again, it is
usually no more difficult to obtain such material from industrialized states than from
poor countries. It is surely impossible to give a final answer to these questions at
present. For this reason, further discussion at international, European and also national
level is recommended, eventually leading to the appropriate conclusions. The issues
surrounding evidence of origin could also be dealt with in the context of the provision
of evidence of informed donor consent.
3.7.2. Donor consent
Recital 26 of the directive provides that, in the case of an invention based on biological
material of human origin, the donor, where a patent application is filed, must have had
an opportunity of expressing free and informed consent, in accordance with national
law, to the taking of the material. In the Federal Republic, this is supposed, according to
the explanatory memorandum to the draft law, to be already assured, “for instance, by
provisions of public-health, criminal and data-protection law”. Any shortcomings in
enforcement “must be dealt with under that legislation”. This notion is not universally
accepted. German law at any rate contains no concrete provisions as to the nature of the
information to be furnished in each case, on which the validity of the consent will
depend in the specific instance. According to the National Ethics Council’s Opinion on
biobanks, it should include, for example, details of “any commercial prospects of the
proposed research (including the possibility of filing patent applications on the results”)
(p. 15). However, such a consideration is at present irrelevant to the granting of patents,
because the current applicable law does not even require evidence of general consent.
Since an important sphere of individual autonomy is at is-sue here, this seems

unacceptable. Instead, a provision should be added to the draft law making it
mandatory to furnish evidence, subject to observance of the provisions governing
personal rights and of the data protection legislation, that the donor has consented and
that appropriate information, including in particular information on the possibility of a
patent application, has preceded the consent. In the unlikely event of there being no
national competence in this respect notwithstanding Recital 26, a provision to this effect
should be included in the general legislation that is in any case proposed (e.g. in the
Genetic Diagnosis Law already announced). A particular argument in favour of such a
provision, which was also demanded by the Bundestag’s Commission of Inquiry into
the Law and Ethics of Modern Medicine in 2001, and of appropriate sanctions for non-
compliance, is that this issue arises in this form only in connection with biological
material of human origin. In certain circumstances, an affirmation in lieu of oath
included in the application, confirming that the relevant statements of consent have
been deposited or that the material was donated at a time when such consent was not
yet required, could constitute sufficient evidence. If the material was donated outside
the Federal Republic, evidence of compliance with the provisions applicable to
informed consent in the country concerned will presumably have to suffice. This may
also include a reference to relevant individual statements of consent.
However, any tendency towards the adoption of provisions allowing donors to share in
benefits accruing from the exploitation of a patent should be avoided, as this would
encourage the commercialization of tissue donations (see p. 76f. of the National Ethics
Council’s Opinion on biobanks).
3.7.3 Freedom of research
Apart from a mention of plant varieties (Section 11 No. 2a of the draft law), neither the
directive nor the draft law contains any specific provisions to safeguard the freedom of
research. These appear superfluous in the draft law because an overall “privileged
status of research” is already provided for in Section 11 No. 2 of the Patent Law and
therefore applies also to biotechnological inventions. These may consequently be ex-
ploited for research purposes even without a licence provided that experiments are
carried out on, and not with, the protect-ed subject-matter. The constitutionality of the
privileged status of research, which also includes clinical trials, was confirmed by the
Federal Constitutional Court in its judgement of 10 May 2000 (1 BvR 1864/95).
3.7.4 Position statement

On the basis of these considerations, a majority of members of the National Ethics
Council has made the following recom-mendations:
The efforts of the Federal Government to transpose Euro-pean Directive 98/44/EC into
national law are applauded and should be finalized as soon as possible. In this
connection, the National Ethics Council takes it that the provision laid down in Section
1a (3) of the draft law is intended not as a formal requirement of the application
procedure, but as a limitation on the content of patent protection . The National Ethics
Council further recommends additional provisions (if necessary outside the field of
patent law) on the furnishing of evidence of donor consent, which must be preceded by
the furnishing of information on the possibility of filing of a patent application.
However, failing imposition of the requirement of donor consent advocated here, a
legal obligation to furnish evidence of origin would surely be problematical.
There is no need for further additional regulation at present. Again, the abolition of
comprehensive substance protection for the few cases in which the making available of
a gene might in the future still be regarded as a novel invention would conflict with
Article 27 of the TRIPs Agreement. Instead, it seems sufficient for the time being to
leave the concrete handling of substance protection, the limitation of patent protection
and determination of its concrete form to patent practice in accordance with Section 1a
(3) of the draft law.
The National Ethics Council recommends careful monitoring of further developments

and, in particular, of the practice of patent offices, including the European Patent Office,
and of the courts. This applies specifically to the handling of “sub-stance protection”
and of prohibitions on the grant of patents on ordre public grounds, as well as to the
handling of the award of compulsory licenses, as already facilitated by the draft law – a
system that should be applied in all suitable cases.
The criteria applied in each and every relevant decision on these aspects should be
disclosed and constantly clarified. Should the course of decisions in practice give rise to
misgivings in terms of the considerations developed in this Opinion, the National Ethics
Council recommends action to seek the necessary changes and clarifications in the
context of the correction process at European Union level already proposed by the
Federal Government.
3.7.5 Position statement in favour of stricter requirements
Although the members of the National Ethics Council whose names appear below also
welcome the Federal Government’s efforts to transpose the European directive into
national law, they regret that, in view of the lapse of time since the adoption of the
directive and of the European Commission’s reference of the Federal Republic to the
European Court of Justice, it is no longer possible to review a number of fundamental
points in the directive. In these circumstances, it is particularly important to take full
advantage of the currently existing scope for national regulatory approaches and
freedom of action, as has been done, for example, in France, Portugal and Spain and is
proposed in Italy. However, any aspects not covered by the directive must, as the
Federal Government proposes, be notified as of now to the European Commission and

be incorporated in the explanatory memorandum to the draft law, with a view to
initiating a revision of the directive as soon as possible.
Yet a system that is both convincing and effective will ultimately be achievable only if,
along the lines of the decisions on public-health issues taken by the WTO Ministerial
Conference in Doha in 2001, efforts are made to secure amendment of the TRIPs
Agreement or at least a common interpretation providing for additional flexibility in its
application. Independently of such action, the European Patent Office should attempt to
reach agreement with the US Patent and Trademark Office and the Japanese Patent
Office on as far as possible harmonizing their decision criteria. Specific
recommendations:
1. The relevant legal instrument should provide that the scope of protection of a
claim to a DNA sequence isolated from the human body and not newly synthetically
developed should be limited to the technical application of a function specifically set
forth in the patent description and claim. Contrary to the provision laid down in Section
1a (3) of the draft law, it is insufficient for the industrial application of a sequence to be
described in the patent application with a specification of its function: the function must
be included in the claim. The concrete function to be specified and its application must
be deemed to constitute the legally binding limits of the protection afforded by the
patent. The same applies to non-human gene sequences. In addition, the relevant law
should provide that the rights conferred by the granting of such a patent may not be
cited against a subsequent claim for the same sequence if that claim is for another,
specific application of this sequence.
2. The relevant law must clearly state that reproductive human substances (oocytes,
sperm cells or gonadal tissue), human organs and embryos, as well as human
embryonic stem cells and stem cell lines, are not patentable. The same applies to
processes for the formation of chimeras using human germ cells and to parthenogenetic
processes involving the use of human genetic material, as well as to the organisms
and/or biological entities obtained by these processes. The wording of Sections 1a (1)
and 2 (2) of the draft is inadequate in this respect and must be corrected.
3. The scope of protection for elements of the human body must not extend beyond the
concrete technical application of a function, which must be precisely described in the
patent application; that is, the claim in the patent application and in the granted patent
must be confined to this technical application. This is the only way to preclude
“strategic patents”. Section 1a (2) of the draft should be amended to take account of this
requirement.
4. There should be a statutory obligation to furnish evidence of the origin of the

biological substances of human and non-human origin used in each case.
5. The relevant law must provide for mandatory free and in-formed donor consent,
which must be preceded by adequate information that must extend also, and in
particular, to the possibility of filing a patent application. Due evidence of the
protection of donors’ personal rights and of compliance with data protection
requirements must be furnished.
In view of the manifest difficulties of specifying clearly and in binding form what
constitutes an “invention”, the explanatory memorandum to the law must explicitly
state that, pending the adoption at European level of provisions precisely defining the
prerequisites for and limits of an “invention”, the term must be interpreted as
restrictively as possible.
Precisely with regard to the patent procedures here at is-sue, it is essential to consider
not only the prerequisites for the granting of a patent but also, and in particular, the
consequences of patenting. Particular importance there-fore attaches to compulsory
licences, especially in the case of diagnostic or therapeutic methods. Such licences
should therefore be granted in a deliberately targeted manner.
Both the patent offices of the EU Member States and the European Patent Office must
disclose and constantly clarify the criteria used whenever ordre public is invoked. This is
the only way to ensure clear and prompt recognition of the limits of a patent application
and of the underlying reasons for them.
4. Role of Biotechnology in Human Health Care

Amit Gupta, Sushama R Chaphalkar
4.1 Introduction
Biotechnological applications have become increasingly relevant to human health care
with respect to vaccine development, tissue engineered products, diagnosis of various
infectious diseases, reduction in pesticide level, environmental pollution etc. [1, 2]. The
most commonly used biotechnological methods or techniques that are related to reduce
or control the burden of various infectious diseases, chemical exposure and pollution
are crucially needed for human health care and are sensitive, safe and reproducible
including the assessment of tremendous number of samples [3]. Recently, vaccines have
been mentioned as weapons of mass protection, while most of the vaccine preventable
diseases remain predominant because of economic barriers.
Before the development and wide use of human vaccines, most of the people lived their
childhood with encountering a litany of diseases like measles, rubella, chickenpox,
whooping cough, and rotavirus diarrhoea. In addition to these universal diseases of
childhood, lakhs of children all over the world are suffering from the life threatening
episodes of paralytic poliomyelitis, diphtheria, or bacterial meningitis (Haemophilus
influenzae or Streptococcus pneumonia). In this regard, people concerns about their
safety against various diseases and thus, need for vaccine-induced protection have been
linked to recent epidemic of vaccine-avoidable diseases such as measles, influenza etc .
After the H1N1 influenza pandemic response in 2009-2015 (cases reported in India;
number of peoples died) has been disclosed, vaccine safety monitoring became a major
priority. As per these requirements, biotechnological based companies have developed
vaccines to protect humans against dozens of diseases.
Vaccines protect against several acute infectious diseases and the long lasting obstacles
of these infections, which range from congenital rubella syndrome to Hepatitis B and
Human Papilloma virus related cancers. A number of biotechnological approaches,
especially in the late 19th and early 20th century were involved in taking the actual
pathogen and killing it (before administration). This was actually done with enormous
number of disease samples from plague to polio. Another strategy was to cultivate the
micro-organism in media where it was poorly suited to the growth and resulting in to
mutations that were lowering the virulence of the disease and thus, made it safe to use
as vaccine e.g. BCG . In addition, modern biotechnological (genetic) techniques allow us
to produce wide-range of specific proteins (using bacteria containing plasmids; small
loops of DNA i.e. recombinant protein expression). This allowed vaccines to be made of
one or more specific proteins from a pathogen such as Hepatitis B surface antigen
(HBsAg). In contrast, recombinant protein vaccines are unconditionally safer than either
killed whole pathogens or live attenuated pathogens; however, more doses are required
to achieve protection and immunity.
Conventional biotechnological approaches for vaccine production against various

diseases are extremely expensive, involving the complex production and delivery
methods, with high costs of fermentation and purification systems and additional tariff
associated with adjuvant (immune enhancing properties), cold storage, transportation
and sterile delivery. There is a demand for new biotechnological approaches associated
with the adjuvant potential for easy scale-up to create massive quantities of vaccine and
directly targeted to the induction of specific cell-mediated responses, in addition to
antibodies. In this case, special types of adjuvants or immunopotentiators (natural plant
based or structurally modified) are needed to elicit adequate immunity i.e. to enhance
both humoral and cell mediated immune response. The exact role of vaccine adjuvants
is to enhance the production of T-cell (cell mediated) responses by targeting innate
immune cells i.e. Toll-like receptors (TLR), with the additional benefits of less antigen
doses and fewer administrations requirement. In addition, adjuvants can be classified
(on the basis of physical as well as chemical properties) but most of the compounds
continually have dissimilar immune-modulating capacities e.g. Saponin variants may
diverge in their efficiency to energizing Th1- or Th2-type immunity.
Aluminum salts or alum (especially in the form of hydroxide) have been used as an
adjuvant to boost the effectiveness of many vaccine antigens [14, 15]. In view of this,
another adjuvant, monophosphoryl lipid A (MPL; GlaxoSmithKline), has been
approved for human use in the United States, to boost the antibody response of some of
its vaccines. Instead of these vaccines, there are number of biotechnology derived health
products for human public health as mentioned in the next section.
Recombinant DNA (rDNA) technology has made a wide ranging influence in the area
of human healthcare by legalizing the mass production of safe, pure and effective
rDNA expression products. Currently, several categories of rDNA products i.e.
hormones (for therapeutic use); haemopoietic growth factors; blood coagulation
products; thrombolytic agents; anticoagulants and therapeutic enzymes are being
produced using rDNA technology for human use . Analytical methods play a vital role
in the determination or confirmation of identity, purity and potency of rDNA products
with respect to safe and efficacious medicine for human use. Tissue engineered
products (e.g. bone grafts; heart valves; xenografts and collagen agents used in gene
therapies) have played a major role in the area of biotechnology which includes various
biological substitutes that will maintain, restore and improve the tissue functions
(animal or human) following the damage through various diseases. Other more
complex applications like substitution of heart valves, blood vessels or nerve tissue are
under establishment.
For the past few years, a lot of progress in the field of animal and human disease
diagnosis has been made and this has been brought by the advances in the area of
diagnostic biotechnology i.e. diagnosis is now rapid, precise, less expensive and allows
a broader range of epidemiological surveillance. In other words, biotechnology has
played a key role in the identification of various infectious diseases that requires rapid,
sensitive, specific and confirmatory recognition of pathogen.
Formerly, conventional systems of disease diagnosis, observation, treatment and

monitoring of control programs were partially successful. The approaches that were
commonly adopted included identification (causative agent isolated from pathogen) of

samples collected after clinical observations and serological techniques (i.e.
agglutination, precipitation, complement fixation and virus neutralization) in
combination with the clinical observations.
In addition, following are the biotechnological methods that have been used in the
detection of proteins, nucleic acids, antigens and antibodies including proteomics . The
role of biotechnology in reducing pesticide residues involves the development of plant
varieties exhibiting tolerance or resistance to the pests. The result is the elimination or
reduction in the need for certain pesticides. These pesticides are slowly damaging our
environment including human health. Lot of research work has already been done on
pesticides that are responsible for causing diseases like cancer, Alzheimer's disease and
even birth defects. In addition, these pesticides also showed some effect on our nervous
system, reproductive system and endocrine system. In contrast, the use of
biotechnological agents is becoming an important alternative to use various chemicals
(biotechnologically derived) for controlling insects and weeds. In addition, in most of
the developing countries, farmers face the challenges of high cost of chemical inputs to
screen and regulate the fungal diseases.
Controlling the environmental pollution and the conservation of environment are some
of the major areas that are major concern for all the countries around the world. In this
regard, significance and seriousness of biotechnological techniques has to be thoroughly
evaluated and utilization of biotechnology derived products that interact with other
environmental factors should be properly checked. A number of researchers have
expressed dangerous alarm on the release of genetically engineered organisms in the
atmosphere and have emphasized thorough investigation and proper risk evaluation of
these organisms before transmitting them in to the environment . In contrast, the effect
of effluents from various biotechnological companies is also a cause of concern for
everyone. So, biotechnology companies should think about the safety after using the
biotechnological products. Efforts should be made to use biotechnology to conserve the
natural resources. In recent years, biotechnological efforts have been made to create
genetically engineered microorganisms to enhance bioremediation. In addition,
fermentation technologies showed some serious environmental implications. Several
biotechnological procedures have been developed in which all nutrients instigating for
fermentation are retained in the final product, which ensures high conversion efficiency
and low environmental impact.
4.2 Conclusion
Modern biotechnology has been focusing on human health care for decades related to
drug development, medical treatment, diagnosis of various diseases, genetically
modified foods and crops, gene therapy etc. Apart from this, human genome project
was also a part of biotechnology and expecting to decode the whole genome of humans
and should be able to replace the defective gene from the genome. Finally, all these
techniques or methods related to biotechnology have made a huge progress in recent
years. However, still major efforts are required by scientists to explore new vaccines,
drugs, genetically modified crops and resistance against various pests through various
biotechnological approaches.
5. APPLICATIONS: BIOTECHNOLOGY, MEDICINE,

AND HEALTHCARE
(H. Craighead, Cornell University; K. Leong, Johns Hopkins University)
Nanotechnology is beginning to allow scientists, engineers, and physicians to work at

the cellular and molecular levels to produce major benefits to life sciences and
healthcare. In the next century, the emerging field of nanotechnology will lead to new
biotechnology based industries and novel approaches in medicine.
5.1 CURRENT SCIENTIFIC AND TECHNOLOGICAL ADVANCES

Major advances in the last several years in scanning probe and scanning optical
analytical methods permit viewing the vital chemical processes and microscopic
structures in biological systems with unprecedented resolution. These new analytical
probes reveal a detailed picture of the microscopic structure of living cells and a view of
chemical processes at the molecular scale. The atomic force microscope, for example,
can locate and measure the extraordinarily small forces associated with receptor-ligand
binding on cell surfaces. Microscopic electrical probes can detect a living cell’s exchange
of ions with its environment or the propagation of electrical signals in nerves. New high
resolution optical instruments, combined with chemically selective light-emitting
fluorescent probes, can follow in detail the chemical processes on the surface of and
inside a living cell. This analytical capability allows observation of the biochemical
processes and interactions of cells in living systems.
Cells contain exquisite naturally occurring “molecular motors.” One of many examples
of these naturally occurring nanomachines is F1-ATPase, which is part of the large,
membrane-embedded complex that synthesizes ATP within mitochondria. This
structure, only about 10 nm in size, is a robust, fully functional rotating motor that is
powered by natural biochemical processes. In 1998 the Amersham Pharmacia Biotech
and Science Prize was awarded to Hiroyuki Noji, a young Japanese scientist who
demonstrated the function of this molecular motor by attaching a long actin filament to
the rotating part of the motor and observing the rotation in an optical microscope. The
detailed understanding of the structure and function of this motor protein and other
macromolecular assemblies essential for life is an area of growing scientific importance.
During the last few years, scientists have developed the technology for rapidly
mapping the genetic information in DNA and RNA molecules, including detection of
mutations and measurement of expression levels. This technology uses DNA microchip
arrays that adapt some of the lithographic patterning technologies of the integrated
circuit industry.
This is now a commercial technology and is finding its way into biotechnology research
and industrial utilization. Work on new types of chemical arrays should expand this
approach of parallel biological information processing to analysis of proteins and other
biomolecules. Miniaturization of allied analytical processes such as electrophoresis will
lead to increases in throughput and reduced cost for other important methods of
analysis such as DNA sequencing and fingerprinting. For example, new research
(Turner et al. 1998) is aimed at replacing the tedious, slow, and expensive process of
DNA sequencing in slab gels with miniaturized integrated microfabricated analytical
systems.
Using biological systems as a model, scientists are attempting to build ever more
complex systems that are capable of self-assembly. As the sizes of components become
smaller and manipulation of these components becomes impracticably slow, the need
for self-assembling systems is rising. Complex biological systems provide models from
which to design components that can come together in only one way to form the
desired three-dimensional nanoarchitectural system. Similarly, scientists are using
strategies learned from biological systems to design new materials. Spider silk is one of
the strongest materials known. Its molecular structure is being used to design better
composite polymer systems of increasing strength and utility.
Nanoparticles considerably smaller than one micron in diameter have been used in
revolutionary ways to deliver drugs and genes into cells. The particles can be combined
with chemical compounds that are ordinarily insoluble and difficult for cells to
internalize. The derivatized particles can then be introduced into the bloodstream with
little possibility of clogging the capillaries and other small blood vessels, as in the case
of insoluble powders. The efficacy and speed of drug action in the human body can
thereby be dramatically enhanced. In similar ways, nanoparticles carrying DNA
fragments can be used to incorporate specific genes into target cells.
The ability of DNA to undergo highly controlled and hierarchical assembly makes it
ideal for applications in nanobiotechnology. For example, DNA has been used to design
lattices that readily assemble themselves into predictable, two-dimensional patterns.
These arrays are composed of rigid DNA tiles, about 60 nm2, formed by antiparallel
strands of DNA linked together by a double-crossover motif analogous to the
crossovers that occur in meiosis. The precise pattern and periodicity of the tiles can be
modified by altering DNA sequence, allowing the formation of specific lattices with
programmable structures and features at a nanometer scale. This approach has the
potential to lead to the use of designed DNA crystals as scaffolds for the crystallization
of macromolecules, as materials for use as catalysts, as molecular sieves, or as scaffolds
for the assembly of molecular electronic components or biochips in DNA-based
computers. Similarly, biological-molecule-based scaffolding could take advantage of the
unique structural characteristics of RNA molecules, of polypeptide chains, or of the
highly specific interactions that occur between DNA and proteins or between RNA and
proteins. Devices that are currently in use to control the interactions of DNA on surfaces
can have broader applications for controlling nanoassembly. These devices use electric
fields to control the movement of particles toward or away from microscopic sites on
the device surface. Charged biological molecules (DNA, RNA, protein) and analytes,
cells, and other nanoscale or microscale charged particles can be precisely organized.
5.2 GOALS FOR THE NEXT 5-10 YEARS: BARRIERS AND SOLUTIONS
The advances noted above and others involving nanofabrication and nanosynthesis are
enabling significant new opportunities for scientific research and commercial
applications. The integration and miniaturization of fluid control, or fluidics, with
photonics and electronics is a trend that will lead to a paradigm change in chemical
synthesis and analysis. Industries that have not previously been considered high-tech
will be transformed by nanofabrication technology in the twenty-first century. Given
the inherent nanoscale of receptors, pores, and other functional components of living
cells, the detailed monitoring and analysis of these components will be made possible
by the development of a new class of nanoscale probes. Nanotechnology will improve
the sensitivity and integration of analytical methods to yield a more coherent evaluation
of life processes. The ability to manipulate cells and integrate them with complex
inorganic devices and probes will permit scientists to perform a new class of
experiments and ask new questions about basic cell functions. For example, integrated
cellular systems grown in culture could replace and thus spare animals used for testing
drugs and hazardous materials.
Nanoscale sensors. Integrated nanoscale sensors could monitor the condition of a living
organism, the environment, or components of the nutrient supply, sampling a range of
conditions with a high degree of sensitivity. With arrays of ultraminiaturized sensors
that sample a range of chemicals or conditions, the confidence level and specificity of
detection would be much greater than is now possible with separate macroscopic
sensors.
As has been seen with electronic integrated circuits, as the level of device integration
increases and the volume of production grows, the costs of highly complex units
decreases. One can project that in the next century highly sophisticated, small, and
inexpensive sensors employing nanotechnology will be available and used routinely in
many parts of our lives. Nanomachines. To date, development of miniaturized devices
is based mostly on nonbiological principles. The microchip can release a single or
multiple chemical substance(s) on demand. In addition to drug delivery, this

technology may also find use in such areas as diagnostics, analytical chemistry, and
others.
As integrated nanofabricated systems decrease in size, the ability to retain desired

functions will become more difficult. As has been noted, nature has solved many of
these same engineering problems and has produced functional molecular motors and
many other subcellular functional machines. Further research should allow scientists to
integrate these natural systems with inorganic devices and create hybrid systems and a
new class of nanomechanical devices. Nanomachines powered by chemically fueled
molecular motors could be coupled to devices with integrated valves, pumps, and
sensors that can react to changes in the body and the environment. One can imagine, for
instance, miniaturized, self-powered machines that sense and identify oil or chemical
pollutants in soils and map their distribution and concentration, or medical implants
that sense and dispense drugs or hormones in response to body changes. Nanoparticles.
Current bioengineered, non-viral gene vectors that are used to introduce new genes into
cells are far from perfect. Ideally, DNA nanoparticles with controlled composition, size,
polydispersity, shape, morphology, stability, encapsulation capability, and targetability
will result in new technologies with improved in vivo transfection efficiency. Such
nanotechnology will likely have a significant impact on realizing the potential of genetic
engineering techniques in agriculture, manufacturing, and environmental applications,
as well as in medicine.
Drug development. Technology is dramatically accelerating the discovery of new drug

compounds. Continuing advances in nanotechnology will lead to innovative synthetic
routes, new processing strategies, and more economical manufacturing. The same or
similar processes that have led to the phenomenal increases in computational speed of
microprocessors and the increasing density of computer memory will similarly
revolutionize the speed with which new compounds are screened for therapeutic
potential as new drugs. The pharmaceutical industry projects nearly a tenfold increase
in the number of drug compounds that will be evaluated in 2000 compared to 1998,
with only a Active substance Silicon Silicon side wall Large reservoir opening (for
reservoir filling)
Arrays of nanodrops, each a mere nanoliter in volume, but holding a small cell culture
sample, are being used to place hundreds of thousands of cell culture assays on a
laboratory desktop, revolutionizing the speed with which new pharmaceuticals can be
screened for activity. The time required for new drugs to reach patients could thus be
reduced, saving human lives. Drug delivery. Drug and gene delivery will continue to
impact significantly on the practice of medicine. Nanotechnology as applied to drug
delivery systems will undoubtedly dramatically improve the therapeutic potential of
many water-insoluble and unstable drugs. Microsensors interfaced to a nanoscale drug
delivery system could dispense precise amounts of drugs for optimum functionality
and minimum toxicity.
However, significant challenges still remain in synthesis and processing of drug-carrier

nanoparticles at the industrial scale. Nanotechnology may also help reach the hitherto
elusive goal of active drug targeting to selected cells within the body. Nanotechnology
that can further reduce the size and reproducibly attach targeting ligands to the
drugloaded nanoparticles may help localize the drug to the desired tissues in the body.
These nanoparticles may also be valuable tools for molecular and cell biologists to study
fundamental cellular processes such as receptor-mediated endocytosis and intracellular
trafficking. Interfaces between biological and other materials. In the repair of the human
body with prosthetics or artificial replacement parts, mechanical attachment to the
body, or alternatively, rejection by the body, occurs at biological interfaces. The
nanoscale chemical and topographical details of the implanted materials determine the
reaction of the body. If we can gain sufficient understanding and control of these
biological reactions to surface nanostructure, we may be able to control the rejection of
artificial implants. Similarly, it may be possible to surround implanted tissue with a
nanofabricated barrier that would thwart the rejection mechanisms of the host, allowing
wider utilization of donated organs. Ultimately, better materials and understanding of

their interaction with the body may lead to implants that the body will not only accept,
but that will actually become integrated into the body. Nanofabrication and
nanosynthesis give us powerful new tools to address these important medical issues for
which a great deal of research is still necessary.
5.3 R&D INVESTMENT AND IMPLEMENTATION STRATEGIES

 Fund basic science and technology development needed for future
biotechnology, health, and national security (biowarfare, nanobiodevices, and
survivability) needs. This must include basic research in the cell and molecular
biology of the many naturally occurring nanomachines within cells.
 Fund efforts to train clinicians in the use of the emerging technologies and their
integration into medical instruction.
 Promote funding in proposals with rapid turnaround times for exploratory, agile
response to developing opportunities uncovered by advances in nanotechnology.
 Encourage interdisciplinary cooperation of academic, industrial, and Federal
laboratories.
 Support coordinated research by teams that represent the required diversity of
disciplines, at sufficient magnitude to make rapid progress.
5.4 PRIORITIES AND CONCLUSIONS

Exploratory research should be encouraged and new ideas promoted aggressively in
the area of nanobiotechnology. A systematic investigation should be undertaken of
natural structures with intrinsic patterns at the nanoscale, as well as in use of the
identified nanoscale patterns for new materials and devices. Interaction of biomolecules
with inert materials is an area of special interest both for medical application and for
understanding the role of environment on the origin and evolution of life on Earth. It is
important to support universities in interdisciplinary training of undergraduate and
graduate students at the intersection of biological, physical, and engineering sciences.
5.5 EXAMPLES OF CURRENT ACHIEVEMENTS AND PARADIGM SHIFTS

Special Attributes of Biological Systems Biological molecules and systems have a
number of attributes that make them highly suitable for nanotechnology applications.
For example, proteins fold into precisely defined three-dimensional shapes, and nucleic
acids assemble according to wellunderstood rules . The ribbon diagram of the oxygen-
binding protein myoglobin, found in muscle cells, is illustrated in the lower portion of
the figure, a diagram constructed from atomic coordinates provided by the Protein Data
Bank.
Antibodies are highly specific in recognizing and binding their ligands, and biological
assemblies such as molecular motors can perform transport operations. Because of these
and other favorable properties, biomolecules, biophysics, and biology are themes that
run through all of the topics of this report (Jelinski 1999).
Nanotechnology promises revolutionary advances in military capability. For instance,

the confluence of biology, chemistry, and physics at the nanometer scale is enabling
significant advances in military sensors for biological and chemical warfare agents.
Civilian disaster response teams and commercial medicine will benefit as well. We
cannot afford to respond to a nerve gas attack, such as the 1995 Aum Shinrikyo
incident, by carrying a canary as a sensor. Defense research and development programs
are pursuing many sensor options; two related technologies are nearing fruition and
will have medical applications as well.
Recommendation - The uncertainty arising from the lack of uniformity of research

exemptions should be evaluated in terms of its effect upon viability of research
initiatives.
5.6Access to Genetic Research Facilities

As of 2003, more than 5,000 applications for patents on human genes had been filed
with the USPTO and from those applications more than 1,500 patents had been granted.
Developing nations do not represent a significant percentage of patent applicants. It is
estimated that only 0.1% of the total patents registered in the USPTO, including all
varieties of patents, were filed by sub-Saharan African applicants. Evidence suggests
that Japanese and American entities hold the majority of the genetic patents filed
around the world.
Recommendation- The collection of statistics regarding issued patents be conducted in

order to determine the specific percentages of patents owned by nationals of developed
and developing countries and of various sectors of society (e.g. universities, other
public organizations, private companies, etc.).
In contrast to the pharmaceutical industry, which is dominated by the private sector,

biotechnology and genetic R&D is dominated by the public-sector. Much development
occurs within universities and public-sector laboratories that licence their rights to large
corporations and thus retain ownership of their inventions. Moreover, university
scientists are involved in large projects, such as the Human Genome Project, that
promote the dissemination of information to all researchers without charge. The private
sector seems to have limited interest in these projects as they may consider the exclusive
rights gained through patenting to be essential to “successful commercial exploitation”
of genetic technologies.
It is clear that one of the main limitations on access to genetic tools and technologies in
developing nations is the lack of internal infrastructure. This lack hinders developing
countries from developing genetic tools and technologies on their own. Some
developing nations cannot create the tools and technologies for themselves and are
therefore forced to rely upon developed nations to provide them with necessary
technological advancements. They also often lack the facilities and experienced
personnel to administer and utilize genetic tools and technologies. For example, some
developing nations are unable to “provide testing,
6. THE IMPACT OF GENE PATENTS ON

ACCESS TO GENETIC TECHNOLOGIES
AND SERVICES: VIEW FROM DEVELOPING
COUNTRIES
6.1 Introduction
In this document, we examine the effects of gene patents on access to technologies and
health services in developing nations through a comprehensive review of existing
literature. The rationale for this study is to provide a basis upon which research and
policy questions may be identified. Several of these questions may require explanation
and empirical review outside of this document. In such cases, we have highlighted
within the text recommendations for further study.
This work adds to a growing collection of literature on patents, which presently

includes a number of documents prepared by various groups in recent years. For
example, the Nuffield Council for Bioethics prepared a report on The Ethics of
Patenting DNA that deals with concerns relating to research, innovation and access to
technologies (including genetic tests for cancer susceptibility). The United States
National Research Council prepared a document on Patents in the Knowledge-Based
Economy that provides a thorough overview of the effects of research tool patents and
licenses on biomedical innovation within the United States. For its part, the report by
the United Kingdom’s Commission on Intellectual Property Rights on Integrating
Intellectual Property Rights and Development Policy discusses critical issues relating to
patent rights and the administration of those rights on poverty and state autonomy.
There have also been a number of articles and documents written about the impact of
patents on access to drugs in developing countries, such as the International Intellectual
Property Institute’s report, prepared for WIPO, on Patent Protection and Access to
HIV/AIDS Pharmaceuticals in Sub-Saharan Africa. However, to our knowledge, the
present study represents the first effort to systematically consider the issue of gene
patents specifically in relation to genetic technologies, with particular emphasis on
consequences relating to access for developing countries.
It is worth noting at the outset that, as a consequence of the lack of specific evidence on
the topic of the impact of genet patents on access to genetic technologies and services
and the fact this is a pioneering study, we are often forced to incorporate examples from
relatively industrialized countries when examples from less developed settings are
unavailable. Such applications are indicative of the fact that this review reflects the state
of the literature, which is limited at this time. We therefore have done our best to relate
industrialized examples to the contexts of the developing world, to ensure that all
relevant issues are noted in this review.
It is particularly important to point out that in this review we examine two aspects of
the question of the impact of gene patents on access to genetic technologies and
services. First, we take a long-term view and ask what impact the system of according
gene patents may have in the future upon access to medical services and technologies
based on genetics. That is, we examine the literature for evidence that gene patents may
increase or decrease the ability of developing countries to access new genetic
technologies over the long-term. For example, we find that a long-term impact upon
access may be exemplified by barriers to research tools and a lack of research facilities.
Second, we explore to what extent issued gene patents increase or decrease access to
medical services and technologies based on genes. That is, we examine the literature for
evidence and case studies that indicate the nature and extent of the impact that gene
patents have on access in the short-term.
We divide our analysis of the impact of gene patents upon access into short-term and
long-term aspects because we wish to simultaneously examine the impact of gene
patents on developing countries today and predict the impact of gene patents in the
future. Since the rationale for patents is that we pay a price today – in the form of the
grant of exclusive rights – for the benefit of being able to purchase new technologies
and services in the future, it is important both to examine the present cost of gene
patents and the ability to benefit from the existence of those patents.
The general methodology of this document is to present issues relating to the impact of
gene patents on access to genetic technologies, services, tests, tools and facilities
through the provision of explanation, examples and recommendations. Explanations of
issues will rely upon existing literature and will present an overview of them. The
examples we provide relate to access to genetic technologies, tools, tests and services
available in developing countries and developed countries. Where we present examples
from developed countries, we will draw a link to similar issues in developing nations.
In limited cases, we will use examples from the pharmaceutical sector, but this only
occurs where issues can be directly translated into the genetic context.1
We have separated specific recommendations for further study from the text of this
review throughout the document. These recommendations are meant to guide further
research and empirical study. It is beyond the scope of this document to suggest
whether any of the recommendations included herein may be extended to other fields
of study. A compiled list of all of the recommendations is presented at the end of the
document.
We formulate our review from a position that implicitly acknowledges that genes and
genetic technologies have generally been accepted internationally as patentable subject
matter, although a debate still rages as to whether this is ethically justified. From this
starting point we go on to distinguish between access limitations in developing nations
that are directly attributable to gene patents and those where access limitations are
merely exacerbated by the existence of gene patents but not directly caused by the
existence of these patents. Where we note that the obstacles to access do not result from
gene patents we leave the search for appropriate solutions to future analysis.
This document begins by providing examples of genetic tests and services applicable to
developing world health needs. These examples provide a basis for further discussion
of issues of access. Access is a very broad term. In order to clarify our findings we have
chosen to distinguish specific aspects of access. Besides acknowledging the long-term
and short-term aspects of access, we have divided our discussion into separate sections
that relate to the availability and affordability of genetics. We begin by discussing

availability. Availability refers to the question of whether developing countries even
have the ability to deploy genetic technologies to meet their health needs. It can include
both the development through research of genetic technologies and tools applicable to
the specific health needs of developing nations, a long-term aspect of availability, and
the provision of genetic services and tests to persons living in developing nations, a
short-term aspect of availability. Our discussion of affordability refers to whether access
is inhibited by the cost or price of genetics. We will specifically discuss affordability as it
relates to the delivery of genetic services and tests.
Following our discussion of access we present some of the policy options suggested in
the literature. We then summarize the key issues discussed in the paper and offer some
overall conclusions. The paper closes with a listing of the recommendations included
within the text. Some of the recommendations may highlight issues to which further
research or empirical study should be directed. A glossary of terms and expressions
used in this review is provided at the end of the document.
6.2 Similarities and Differences Between Pharmaceuticals and Genetics

Much of the existing literature assumes a correlation between the experience of the
genetic and pharmaceutical sectors. Although some issues relevant to pharmaceuticals
are equally important to genetic tools and technologies, some are not. The two spheres
are distinct and it is not always possible to draw an analogy between them, despite the
best attempts of existing literature to do so. The pharmaceutical industry relies much
more heavily than does the genetics sector on the exclusionary nature of patent rights.
The result is that the pharmaceutical industry has historically been more likely to inhibit
access to their inventions through means such as the imposition of high prices to obtain
licences to their patent or to obtain the invented product itself. Conversely, the genetics
sector has more input from universities or public sector organizations that are less likely
to keep their patentable genetic products or technologies closely held and are more
likely to distribute their patented inventions within society.
An example of a factor that was significant in the level of access to drugs in the
pharmaceutical sector, but has not been evidenced to play a role in access to genetic
technologies, is the level of infrastructural development within countries. Countries,
such as India and Brazil, having developed scientific infrastructures were able to play a
significant role in the pharmaceutical sector, in that they were able to produce some
drugs internally and offer them for sale at lower prices. Although this report discusses
the relevance of the scientific infrastructure to access to genetics within developing
nations, there is no evidence in the existing literature that countries such as India and
Brazil have played a similar role regarding genetics as they did in the pharmaceutical
sector due to their level of infrastructural development. Thus, the level of scientific
development within developing countries has not been proven to be as significant a
factor in providing access to genetic technologies, tools, services or tests in the same
manner as it was in providing access to drugs. As such, we have not made a specific
distinction between countries with more and less developed scientific infrastructures in
our discussion.
Of course, the genetic sector and pharmaceutical industry do share some similarities
and we have utilized some pharmaceutical examples in this review where it was
applicable to do so. For example, there is a gap in access existing between developed
and developing nations in both the genetics sector and pharmaceutical industry. In the
pharmaceutical context this gap has been highlighted by the recent debate over access
to HIV drugs and encompasses both aspects of availability and affordability of drugs.
Generally drugs are manufactured by developed nations. This has two effects. First, the
research is focused on health concerns relevant to developed nations specifically, and
although some of the drugs developed may also be applicable to health concerns of
developing nations that is not always the case and is rarely the intention. Second,
developed nations allow drugs to have a high price tag, which is supported through
patent regimes. This may not be an issue for countries wherein most citizens are
covered by health plans and insurance, but can cause drugs to be completely
inaccessible to citizens of developing nations who often do not have any personal or
state help to afford the drugs they need. All of these issues related to a gap in access
between developed and developing nations are shared by the genetics sector.
This being said, the pharmaceutical industry and genetics sector generally take
divergent approaches to the application of patent rights. The pharmaceutical industry
relies heavily upon monopoly rights supported by patent regimes. These rights afford
pharmaceutical companies power over price and distribution of drugs. Companies
owning genetic tools and other technologies have not necessarily followed the same
course of action as pharmaceutical companies with regard to patent rights, which may
be due to the fact that the majority of gene patents are presently believed to be held by
the public sector. The result is a difference in the amount of information each industry
introduces into the public vs. private domains.
6.3 Public vs. Private Domain

Endeavors such as the Human Genome Project exemplify the fact that not all genetic
tools and technologies are protected by patent rights. Instead some genetic tools and
technologies are introduced directly into the public domain. This type of approach is in
direct contrast to the normal route followed by many pharmaceutical companies that
tend to keep their drug formulations closely held and within the private sphere, at least
until the publication of their patent application. Genetic inventions are therefore
sometimes more accessible than pharmaceutical inventions. Generally, owners of
genetic tools and technologies have been more willing to share their discoveries and
less concerned about protecting proprietary interests than the pharmaceutical industry.
This may be directly linked to the fact that most drugs are formulated by private
companies, whereas much genetic research and development is fostered within the
public sphere. However, in some cases, private sector initiatives by collaborating
pharmaceutical companies, such as the SNP Consortium Ltd., have actively worked to
keep genetic information in the public sphere.
6.4 Recommendation
The literature is unclear as to the proportion of gene patents held by the private vs.
public sectors and if there is any trend showing a shift in the balance between them.
Further research clarifying this is recommended.
SNP Consortium Example- This example illustrates an initiative to ensure that genetic
information is disseminated into the public sphere.
“The SNP Consortium Ltd. was founded on the premise that genetic research related to
SNPs is accelerated when research findings are freely available to all researchers and
companies.”7 As such the SNP Consortium Ltd., a not-for-profit, non-governmental
agency, worked to compile a database of mapped SNPs. Other goals of this
organization are to reduce duplication of work amongst researchers. A free, public
database at the National Institutes of Health in the United States holds the results of
their activities.8 This project “treats SNP information (non-patented) as primarily an
informational input freely available and yet, still providing a vital contribution to
downstream product development.”
6.5 Nature of Gene Patents

In order to understand the impact of gene patents upon access to genetic services and
tests in developing nations we must first establish the nature of patents and specifically
gene patents.
“A patent is a government grant of a time limited legal monopoly given to an inventor

in exchange for the public disclosure of an invention.”9 In order to be patentable, an
invention must comply with the criteria of novelty, industrial application and inventive
step, as nationally legislated. Furthermore, certain subject matter may be deemed non-
patentable by national patent legislation such as plants, business methods or abstract
theorems. Patent holders are permitted to exclude all others within the same
jurisdiction from making, using, selling or importing the invention within that
jurisdiction. These are the rights of a patent holder and should a third party be found to
impinge upon these rights then a patent holder is entitled to launch an action for
infringement against the offending party.
The rights of a patent holder have been described as a fence blocking off territory within
which other parties are not allowed to tread. Those who cross the fence without
permission may be found to have infringed the patent rights of a patent holder. The text
of a patent includes patent claims which explicitly define the subject matter of the
invention. Patent claims specify all the elements, features and critical aspects of the
invention. The claims should include all necessary information for a person trained in
the relevant scientific discipline (e.g., genetics) to produce the invention. Thus, the
claims define the scope of the patent, or in other words, the invention that fits within
the fence. Due to the fact that the scope of a patent is defined by the claims, the scope
will vary according to the way that courts interprets the wording of the claims. For this
reason the scope of the patent can be interpreted narrowly or broadly.
A gene is a particular sequence or pattern of DNA, a molecule that exists in almost all
cells. DNA molecules occur naturally in very long strands. A percentage of these long
chains – not distinguishable from the rest of the chain by their appearance – contain the
genes that, when translated through RNA with the aid of proteins called enzymes,
eventually transcribe into the proteins that do the work of the body. The remainder of
the DNA molecule has a structural function and contains information about the way in
which genes are translated into proteins. A gene patent grants “a right to the pattern
nature or code of the material [DNA] substance.”
According to the United States Patent and Trademark Office (USPTO), “a patent on a
gene covers the isolated and purified gene but does not cover the gene as it occurs in
nature.” What distinguishes a DNA sequence that exists naturally in a cell or organism
from a patentable DNA sequence is that the former owes nothing to its existence or its
state of being to a human inventor while the latter would not exist, at least in the form
claimed, without some form (however minimal) of human intervention.
Gene patents generally claim one of the following four applications of DNA sequences:
diagnostic testing; research tools; gene therapy; or the production of therapeutic
proteins to be used as medicines. The present review will focus on the two former
types of patent claims. Diagnostic testing is a means of detecting a gene indicating that
an individual has a genetic predisposition to a certain disease or health risk. This does
not mean that a particular individual with a genetic mutation will ever develop the
disease but simply that that person has a higher risk than others of contracting the
disease. On the other hand, research tools are inventions that are intended to be used to
conduct further scientific research. This further research may aim, for example, at
identifying or testing new medications, developing genetic screening tests or studying
environment-gene interactions. Each type of genetic technology claimed in a patent can
affect availability and affordability of health care.
Ownership of a patent provides control over the use of genetic materials. This control
can be a very valuable asset to a pharmaceutical or biotechnology company. As of 2003,
over 5,000 applications for patents on human genes had been filed with the USPTO.
From the filed applications more than 1,500 patents had been granted. A large number
of similar applications have also been filed in other patent offices such as the European
Patent Office. Some have likened the surge of gene patents to a global gold rush. In the
global economy, industrial country citizens or corporations currently hold 97% of all
patents held worldwide. More than 80% of the patents granted in developing countries
belong to residents of industrial countries, usually multinational corporations from the
most advanced economies. Indeed, 70% of global royalty and licensing fee payments
are made between parents and affiliates of multinational corporations.
Patenting genetic technologies is perceived to have two opposing effects. It is thought to

induce innovation in genetics, which is advantageous to the advancement of health
care, but it may also inhibit access to health care, due to the exclusive rights attached to
the award of patents. However, as this review will highlight, some factors that inhibit
access to genetic technologies in developing nations are completely unrelated to the
grant of patent rights. There is presently a dearth of data available regarding the
patenting of genetic technologies and their effect upon developing nations. Much has
been written of late regarding pharmaceutical patents and often authors assume that
the same issues are raised for patented drugs as for genetic technologies.
6.6 Ethical and Legal Issues Raised by Gene Patents Generally

The provision of a comprehensive presentation of ethical, legal or social issues
surrounding genetic patents is beyond the scope of this document. However, we do
address ethical, legal and social issues at certain points in a general manner, as they are
relevant to a discussion of the impact of gene patents upon access. For this reason we
will provide a brief overview of related concerns that are raised by the literature.
The debate regarding patenting genetic technologies is focused upon balancing issues
relating to innovation and the public good. The major opposition to gene patenting
relates to ethical concerns regarding commodification of persons and genetic material –
so that persons and genetic material are no more than commodities for the gain of
others. Some concerns have been raised that it is wrong for people to have “proprietary
rights in living beings and tissues.” More importantly there are worries that
commodification created by patents will act to exacerbate the economic, health and
scientific gap between developing and developed nations. However, as some authors
have pointed out, despite concerns about commodification it is not necessary to
conclude that gene patenting is “absolutely wrong or that it must be prohibited.”
Indeed, “the genetics train has long since left the station”, the patenting of genetic
technologies is presently a broadly accepted practice implemented in countries around
the world.
There is a further legal issue raised by patenting of genetic technologies. “The shared
status of the human genome at the ‘collective’ universal level has only been specifically
addressed by international and regional policymaking bodies.” The human genome
project is distinct from individual gene patents, as gene patents are relevant to specific
genes rather than the human genome as a whole, which is not patentable. “The issue is
no longer whether genes can be patented on principle, but what sort of patents on what
sort of genetic information will most encourage the development of useful inventions
and products for promoting human health and wellbeing.”
Thus, the challenge for us today is to determine the appropriate scope of patents and
ensure that patented genetic technologies do not hinder health care anywhere in the
world. This review will therefore point out issues relating to patent scope as they have
been expressed in the literature. Simultaneously, it is important to highlight the
difference between health issues directly raised by gene patents and issues of access
related to developing countries’ infrastructures and systems and not caused by gene
patents per se.
6.7 Scope of Gene Patent Claims

Broad patents claims asserted over genes, utilization of genes and diagnostic methods
involving genes, have the potential to hinder the advancement of research by limiting
access to research tools. When given a broad interpretation, gene patent claims may
cover a wider area of invention than the patent holder had originally recognized when
drafting the patent. For example, a court may read a patent claim over a single gene
broadly to protect all uses made of that gene, including uses that are not stated in the
patent. Thus, a patent claim for a disease gene may be interpreted broadly so that all
uses of that gene, for testing, therapies, etc., are deemed to be protected by the patent.
Thus, while the patent holder does not have a patent over the disease per se, the patent
holder may exercise so much control over the research, diagnosis and treatment of that
disease as to have an effective monopoly over the disease.
The Canadian case of Schmeiser v. Monsanto Canada Inc., illustrates some of the issues
that may arise in relation to the interpretation of gene patent claims. In that case, the
Canadian Intellectual Property Office issued a patent that included claims for a gene
modified to be resistant to the herbicide Round-up to Monsanto. The patent did not
include any claim for plants specifically. However, Monsanto asserts that a farmer
infringed Monsanto’s patent by simply growing plants containing the patented gene.
One of the issues before the courts was whether the scope of the patent ought to be
interpreted as extending to anyone who uses the plant. Although the case is still to be
decided by the Supreme Court of Canada, in a lower court decision the Canadian
Federal Court of Appeal interpreted the patent claims as providing protection to an
entire canola plant. Effectively, this interpretation extended the rights of the patent
holder well beyond the invention it had claimed. As has been pointed out, no researcher
would suggest to the scientific community that she had made a discovery beyond the
data that she was able to present. However, patent attorneys often argue that patent
rights should extend beyond the invention that a patent holder was able to establish at
the point of filing his or her patent application. Thus, the practice of interpreting gene
patent claims broadly is of great concern to developed and developing nations alike.
Furthermore, it is important to note that in many countries the interpretation of the

scope of gene patent claims is left to the courts rather than being addressed by the
government. The Supreme Court of Canada recently declined to adjudicate on a case
relating to biotechnology, opting to defer the decision to the legislators instead.
However, even this tactic of reserving judgement has not permitted the Supreme Court
of Canada to avoid making a determination regarding the scope of gene patent claims.
As noted above, the Supreme Court of Canada heard the Monsanto appeal in early
2004, and will need to decide, without legislative assistance, whether the gene patent
claims effectively extend to an entire plant despite the fact that the patent does not
explicitly claim a plant. Thus, it appears that even unwilling courts may be required to
render judgments establishing the breadth of gene claims. The implications in this
situation are the same for developed and developing countries. Courts will take on the
role of setting boundaries for patent rights and may do so widely or narrowly without
necessarily having the same level of accountability to the public as legislators.
Several issues of patent scope have been raised by the literature. Since genetic
technology is still at the beginning of its development, it may be argued that granting
broad patent rights for claims relating to genes may not meet the patentability criteria of
utility and inventiveness. As drafted, gene patent applications on occasion include
claims that cover significantly more than the actual invention of the patent applicant.
Furthermore, some commentators suggest that gene patent claims often appear more
like evidence of routine discoveries than inventions. It is of further concern that the
practice of granting gene patents that enjoy unlimited scope may encourage overly
early commercialisation (i.e. prior to having a good understanding of the gene and its
effects on disease) and premature filing of patent applications because researchers feel
pressured to bring their invention to market and to obtain a patent prior to their
competitors. Moreover, once granted, a broad gene patent may discourage future
related research and on new possible uses and utilities of a patented gene. Research
tools required by scientists may be protected by patents and thus unavailable or
expensive to obtain. Therefore, granting a legal monopoly on a research resource can
influence the outcome of other research projects that may be very relevant to the needs
of developing nations. This situation is illustrated by the CCR5 receptor case we discuss
below.
6.8 Recommendation
The effects of granting a legal monopoly on research resources should be evaluated in
terms of its influence upon the outcome of other research projects that may be relevant
to the needs of developing nations.
CCR5 HIV Example

This example illustrates that awarding a patent based on a broad claim can have
unforeseen consequences for future research.
In 2000, Human Genome Sciences Inc. (HGS) obtained a patent from the United States
Patent and Trademark Office (USPTO) over the gene (found in humans) that codes for
the CCR5 receptor as well as on all of the medical applications of CCR5. When HGS
filed its claim in 1995, it thought that the CCR5 gene would be useful as a cell-surface
receptor. However, Dr. Parmentier, a researcher external to HGS, had isolated the CCR5
gene some years earlier, but had only filed a patent application in respect of it in March
1996. Thus, Dr. Parmentier’s application was filed a year after HGS had filed its
application. The reason for the lapse in time was that Dr. Parmentier did not wish to file
a patent application until the biological function and utility of CCR5 had been
confirmed. What Dr. Parmentier and his team found was that the CCR5 gene was an
important site for entry of the HIV virus into cells. HGS knew nothing of this when it
had filed its patent claim over the CCR5 gene.
At first, when HGS isolated the CCR5 gene and applied for a patent, it had no idea of
the gene's role as a viral receptor in the life cycle of the AIDS virus. However, due to the
broad scope of the claims in the HGS patent, HGS had the right to exclude all others
from every use of the CCR5 gene including uses related to HIV/AIDS. Through this
broad right to exclude, HGS was able to demand royalties by way of license agreements
from parties that chose to utilize the CCR5 gene. In other words, this meant that any
development of further therapeutic initiatives relating to the HIV virus and AIDS
employing the patented CCR5 receptor could only be pursued upon the execution of a
licensing agreement with HGS. This was so even though HGS was neither aware of
CCR5’s viral receptor utility when it first filed the patent, nor responsible in any way
for this breakthrough. The result is that by way of its CCR5 patent, HGS has
considerable control over the development of a new class of AIDS drugs.
HGS’s very broad gene patent also presented the company with the choice of only
narrowly licensing the use of the CCR5 receptor. Fortunately, HGS did not select this
path, choosing instead to license the receptor to many researchers. However, had it so
chosen, its decision not to license the receptor would likely have had very serious
consequences for HIV research and global health. What we learn through this example
is that the combination of a very broad patent granted in 2000 and the fact that HGS had
the right to demand license fees had the potential to adversely effect important HIV
research. Researchers working with CCR5 hoping to establish its viral receptor function,
even those who were already involved in this field for many years, may have been
discouraged from continuing their research by the very existence of the HGS patent.
The possible detrimental effect upon research that can result from the award of broad
gene patent claims is of real concern for developing countries.
Nevertheless, one could also read the CCR5 patent story as suggesting that the market
may be able to correct the effect of overly broad patents. After all, HGS did broadly
license the gene. As we will soon see, however, the market does not always have this
effect, as illustrated by cases involving clinical genetics research.
BRCA Example
This example illustrates issues that are relevant to both developed and developing
nations. In particular the BRCA case points out the effect that very restrictive license
terms can have on research. Non communicable diseases, defined in the literature as
“diseases like sickle cell anemia, diabetes and cancer”, affect the populations of
developing and developed nations alike.“[Non communicable diseases] are now the
leading cause of death in the developing world, and their prevalence is expected to rise
significantly in the next several decades.” This section will focus on the research
aspects of the BRCA case, although other aspects will be discussed in other sections of
this document.
The BRCA case relates to two gene mutations associated with a susceptibility to breast
cancer, BRCA1 and BRCA2 decoded by researchers from Myriad Genetics.82 Many
patent claims have been filed on the two genes and their mutations both by public and
private research teams. Researchers at Myriad further developed gene tests for the
BRCA1 and BRCA2 mutations.
Myriad holds a number of patents internationally protecting their rights to the BRCA1
and BRCA2 genes and related gene tests. In Canada and the United States, Myriad
holds patents on the BRCA1 and BRCA2 genes. Moreover, in Europe Myriad has
obtained three patents on the BRCA1 gene and one patent for the BRCA2 gene. Myriad
has not filed any patent applications in developing nations. All patents owned by
Myriad are very broad in scope and cover the ‘normal’ genes, their mutations, all
therapeutic and diagnostic applications of these genes, as well as all futures
applications of these gene sequences.83 In Europe, the Curie Institute in Paris, which
also offers gene tests on BRCA1, was one of the many institutions that filed an
opposition to the European patents on BRCA genes. One of the claims made in the
opposition is that Myriad’s attitude is detrimental to independent research.
As the patent holder, Myriad had the right to execute license agreements to permit third
parties to use its inventions. However, Myriad opted to implement a strategy of
exclusion and did not offer to widely license the inventions. The goal of Myriad was to
be the sole company, world-wide, making use of the claimed genes and genetic tests.
Myriad justified its practice of exclusion by arguing that concerns over the quality of the
testing were too great for it to be feasible for another party to utilize its inventions. The
result is that – except in some special cases – all other laboratories, institutes and firms
are forbidden to carry out any tests that involve any product or process claimed in any
of Myriad’s patents. Myriad’s refusal to license its inventions has had a direct negative
effect upon research since conducting a genetic test is necessary to identify new
mutations and to study the risks associated with particular mutations. Thus, in
countries where Myriad holds patents, no one other than Myriad is permitted to
perform research that might refine, improve and validate the claimed genetic tests or
identify new tests and diagnostic approaches.
Moreover, Myriad’s practice of requesting that all samples be sent to its own
laboratories for analysis indirectly permits the company to build an exclusive genetic
database. This database may prove to be a precious tool that may serve as a foundation
for further research on the two genes and related mutations. By using its patent rights
coupled with a strategy of exclusion, Myriad is achieving the ability to store all new
information about BRCA1 and BRCA2 in its own laboratories. Thus, it is effectively
extending its monopoly beyond that which it had been granted by existing patent
laws.85 Myriad’s strategy to control a whole research sector and exclude all possible
competitors in this research area may potentially be qualified as an anti-competitive
practice or abusive use of patent rights. The Myriad strategy could potentially lead to a
loss of research expertise and information among researchers and could ultimately slow
the pace of genetic research on breast and ovarian cancer. The lessons learned from this
example might also find application in developing countries where non-communicable
diseases also affect the population.
Joint Ventures
The Trade-Related Aspects of Intellectual Property Rights (TRIPs) has recognized the
importance of collaboration between developing and developed nations in order to
improve global health care. Developing and developed nations have divergent health
issues and health care foci. Furthermore, developed and developing nations may also
have divergent levels of patent protection. “Empirical evidence demonstrates that for
therapies for global diseases, the profit derived from having a monopoly over sales in
poor countries makes only a marginal contribution to the total worldwide profit” of
biotechnology and pharmaceutical firms.” Profit is clearly an important incentive for
developed nation companies to pursue and invest in certain therapies. Some health
concerns of developing nations are not priorities for these companies. Therefore, it is
clear that in order to promote their own health needs, developing nations may require
technology transfer from developed nations.
India is one country that has recognized the importance of engaging in technology
transfers with developed nations. As part of the dialogue between India and their
developed nation collaborators, it has proactively prepared a list of potential treatments
upon which it would like to focus the collaborative research. India is unique amongst
developing nations in that it has developed a research and drug manufacturing
infrastructure. However, India relies upon collaborative endeavors with developed
nations in order to conduct trials of disease therapies. This is where the list of
treatments comes into play: India is thereby attempting to direct the focus of the
technology transfer to issues that are of importance to India and not just to issues of
import to their developed nation partner. India has not always been successful in its
endeavours to refocus technology transfer projects. For example, the literature points
out that in one instance an initial proposal for a $40 million contract for a technology
transfer between India and a developed nation collaborator “astonishingly, has not one
nickle for treatment. It is entirely a prevention contract, where “prevention” does not
include even vaccines or microbicides.” Such a contract was considered to be
unacceptable to India and thus India hoped through its list to redirect the project to be
of more benefit to its internal health issues, while also benefiting its developed world
partner.
Technology transfer participants must be aware of patent rights held in any nation
involved in a joint venture. The patent system can be a paradox for participants. A lax
patent regime can help drive down costs of genetic tools and technologies, which can
promote access to such technologies in developing nations by making the technologies
more affordable and thus attainable. However, patent protection is ultimately an
incentive for countries and institutions to pursue research and development of tools
and technologies that may ultimately be lucrative. It has been argued that strong
intellectual property rights in developing nations may raise the rate of technology
transfers offered to such countries. The hurdle to access created by patent laws may be
overcome in some cases by institutions, universities in particular, which apply a dual
approach of publication and licensing. This dual approach functions so that,
“knowledge itself is disseminated by a university via publication, but the commercial
use of some of that knowledge is restricted by patents to companies to whom the
universities grant licenses.” The licenses must be created so as to encompass and protect
the particular needs of developing nations.
Through this type of approach developed nation participants can gain the patent rights
that they need to make a project “worthwhile”. Concurrently, the developing nation
participant aids in the creation of a tool or technology that has the potential to provide
access to health care that is integral to its own population. Private-public research and
development (R&D) partnership are part of a new trend of technology transfers.
Specifically, “they focus on funding high-risk and high-cost projects to convert basic
scientific discoveries into useful products” and may involve multiple industries.95
Recommendation
Private-public R&D partnerships are in place in the context of the pharmaceutical
industry. Further research should attempt to find evidence of technology transfer
agreements in the genetics field in developing nations.
Research Exception
We have discussed the fact that gene patents may occasionally have a negative effect
upon agreement, in section 30, states that Member States are allowed to provide limited
exceptions to the exclusive rights conferred by a patent. Furthermore, section 8 of TRIPs
permits Member States to adopt measures necessary to protect public health and
nutrition and to promote the public interest in sectors of vital importance to their socio-
economic and technological development. Some countries have adopted research
exceptions (also called research exemptions or experimental use clauses) in their patent
legislation. These types of clauses grant a limited right for researchers to innovate in a
field where a patent has been granted. Research exemption clauses may also enable
researchers to undertake studies focused upon a patented invention in order to gain a
fuller understanding of the invention itself without having to pay royalties to the
patentee. However, there is considerable uncertainty as to the scope of a project
permitted by a research exception clause, especially in regards to research dealing with
genetic material.
In most European countries, a patent holder cannot exclude others from research uses
of or improvements to patented inventions. In some cases, exemptions even include
commercial experimental use. Section 27(b) of the Community Patent Convention

(CPC), an initiative of the European Community, states that the rights that would be
conferred by a community patent, a single patent legally valid throughout the European
Union, does not extend to acts done for experimental purposes relating to the subject
matter of the patented invention. The CPC is not in force as it never received the
requisite number of ratifications. Nonetheless, all current European Union Member
States include experimental use clauses in their patent legislation although the clauses
differ in scope and language. The 1998 European Biotechnology Directive did not make
any clear statement as to the preferred scope of research exemptions that should be
applied in the field of biotechnology research including genetics. Should “conducting
research on the subject matter of the patent” be interpreted as extending to research
aimed at finding therapeutics that interact with the invention or should it be limited
only to research aimed at discovering properties of the patented genetic material? The
question remains unanswered.
In the United States, the courts recognize a very limited experimental use exception –
covering only research for amusement, to satisfy idle curiosity or for strictly
philosophical inquiry. The recent Federal Circuit Court of Appeals for the Federal
Circuit case of Madey v. Duke University emphasizes that most basic science conducted
in the United States is ineligible for this exception. In respect of academic research, the
court also held that any use furthering an institution’s “legitimate business” does not
qualify as experimental use. Thus, the court has considerably narrowed the
interpretation of the experimental use exception in the United States. On June 27, 2003,
the United States Supreme Court declined to hear an appeal of this case.
In Canada, the situation remains unclear as to whether research that could result in a
commercial outcome can qualify for a research exception. In recent reports, the Ontario
Ministry of Health and the Canadian Biotechnology Advisory Committee both
recommended the inclusion of a general research exception in Canada’s patent laws
with respect to studies investigating the properties of the patented material, or
attempting to improve upon the invention or to create a new product or process.

Moreover, in the Harvard College v. Canada (Commissioner of Patents) case, the
Supreme Court of Canada expressed some uncertainty about the actual scope and
nature of the research exception that prevails in Canada, ultimately deferring the
question to the legislators.
Some developing nations have also integrated a research exception clause in their
patent legislation. For example, the new Brazilian Patent Law states that “experimental
working for scientific or technological research purposes” qualifies as a research
exception.108 In India, section 47(3) of the Patent Act of 1970109 excludes from the
exclusive patent right “any machine or other article in respect of which the patent is
granted and any process in respect of which the patent is granted may be made or used
by any person, for the purpose merely of experiment or research including the
imparting of instructions to pupils”. Also, in China, the Patent Law of the People's
Republic of China110 states in section 62 that using the patent concerned solely for the
purposes of scientific research and experimentation is not considered to be an
infringement of the patent right. In light of the hodge-podge of clauses that exist, the
extent of research exemption clauses must be clarified nationally and perhaps should be
uniform internationally.
Unclear research exceptions create a significant uncertainty for researchers. In response,

researchers may become hesitant to undertake projects in respect of which they are
required to rely upon tenuous exemptions. Researchers may rightly fear having to face
patent infringement suits – some of the most expensive suits in the legal system – as a
result of their involvement. As a result, those researchers might be forced to seek
licenses from patent holders in order to proceed with their project. This can have the
effect of slowing down fundamental research by restricting or delaying access to many
patented technologies that counselling, disease surveillance, and partner notification
programs” and may have a shortage of clinicians and facilities capable of providing
treatment or monitoring patients for adherence and side-effects.116 For these reasons,
research relating to biotechnology has often not been pursued and is perceived to be
“beyond the means” of developing nations.
The development of a scientific infrastructure is just as much of a factor affecting access

to genetic tools and technologies in developing nations as patent rights. More
importantly, it is a factor that cannot necessarily be solved by way of a modification or
even abolition of patent rights. Scientific infrastructure is a political and financial issue
internal to individual developing nations. However, international financial and
educational support can play a key role in aiding developing nations to improve their
internal scientific infrastructure.
Factors Affecting Availability of Genetic Testing and Services – Patents Awarded in

Developed Nations
The availability of genetic tests in developing countries may be directly affected by

patents awarded in developed countries over these tests. Many developing countries
have no choice to rely on genetic tests and products created in provided from
developed countries because, as we have discussed, they are unable to develop tests
and products themselves. Due to economic and market concerns, most genetic services
created in developed countries are directly related to the health needs of their own
populations. Nevertheless, although some of these services may be inapplicable to the
health needs of developing countries, there are occasions when both developed nations
and developing nations have common health concerns. In these situations, we can draw
conclusions about the impact that a gene patent will have upon access in developing
countries by analogy to the access issues faced by developed nations.
Scholars of law, economics, ethics and patent theory generally presume that patents
function so as to promote innovation. However, there is no determinative evidence
establishing that patents actually encourage or discourage genetic innovation.
Furthermore, little data exists on the translation of genomic discoveries into medical
advances. Thus, this premise may not necessarily be accurate in relation to the field of
diagnostic genetic tests. In fact, there is evidence that the development of many genetic
tests were undertaken by laboratories other than those seeking patents prior to the
issuance of any patent rights on relevant genes. There is further suggestion that the
economic incentive associated with patent rights may encourage premature release of
genetic tests. Without sufficient scientific data, it is impossible to ascertain the risks
associated with mutations in identified genes; however the pressure to commercialise
products soon after patent filing (in order to take advantage of as much of the 20 year
patent term as possible) may lead some to put genetic tests on the market prior to
completing the requisite medical research. A genetic product that is unsafe or
incomplete may be the result. Therefore, even though patent systems may seem to
encourage innovation, it is possible that in certain circumstances, they may promote
innovation of poor quality.
Some patent holders may gain virtual control over all diagnostic techniques performed
at a specific and identified locus on a genome through the filing of numerous broad
disease gene patents. The result is that the gene patent holder may have a monopoly
over the use of the gene, reproduction of the gene, as well as the procedure that all
physicians wishing to access genetic tests for the benefit of their patients will have to
follow to obtain the test. Patent holders can impose procedures on physicians by only
agreeing to permit those physicians to use a patented diagnostic test on condition of
complying with those procedures. Through this mechanism, the patent holder can
control the cost of the test as well as the mode of analysis to be employed while
performing the test. Access to certain medical services may be effectively blocked in this
manner. While market pressures make it unlikely that a patent holder would refuse to
make available medical services, it is possible that vulnerable populations - especially
the poor and the uninsured - will not be able to obtain access to these services in
practice.
Access to genetic tests depends on two factors: 1) the number of gene patents being
granted and 2) how broadly courts interpret patent claims over genes. The breadth of
the claims, called patent scope, determine whether only a particular and narrow
procedure is subject to the patent or a wide ranges of services fall within the patent’s
ambit. Thus, clarity as to the boundaries of patent claims may help to make genetic
services more broadly available. If the scope of a patent is clearly understood, then the
risk of unwittingly infringing a patent becomes negligible. Moreover, if the scope is
narrowly interpreted then there is the possibility that more activity can be undertaken,
such as testing, without infringing any patent rights. Thus, some of the barriers to
availability of genetic services would be lessened.
Recommendation
Developing countries should consider mechanisms in their law to render gene patent
claims clearer and of an appropriate scope.
6.8 Clinical Trials by Developed Nations Within Developing Nations

This example illustrates that clinical trials may aid developing nations in improving
their access to genetic technologies and creating the requisite facilities for offering
genetic services to their population. However, in order to meet these goals the terms of
the trials must be set out carefully so that benefit accrues to the developing nation
participants. Both provision for future benefit, as well as recognition for participation
towards creating a patentable invention should be included within a trial agreement so
that developed nations receive tangible help in overcoming availability barriers that are
otherwise created by any patent ensuing from the trial.
Considering the poor state of genetic infrastructure within developing nations, there are
many benefits to be derived from complying with a clinical trial project spearheaded by
a developed nation company or institution. At present, there is nothing more than an
ethical obligation for developed nations conducting clinical trials to provide any benefit
to the population from which they draw subjects. The WHO has attempted to impose
an obligation to promote the development of health-related products upon developed
nations. It has further attempted, by way of contractual clauses, to require developed
nations to make trial benefits available to a host developing nation after the trial is
over.145 Generally the goals of clinical trials conducted by developed nations are
limited to proving that their product is viable. The literature suggests that there may be
a problem in that developed nations may not always give sufficient weight to
improving the long-term health of their subjects, or the population their subjects are
taken from.
Efforts such as post-trial maintenance of a care clinic set-up to conduct a study may
have great benefits to a developing nation. Furthermore a commitment to continue to
work with a developing nation post-trial to solve specific health problems may also
provide tangible benefits to a host country. The trial itself often results in the perfection
of a genetic tool or technology so that it can be successfully patented in a developed
nation. The grant of patent rights over the genetic invention may then in turn affect the
affordability and availability of the tool or technology in a developing nation. Thus, it is
not illogical that those conducting the trial should be obligated to extend a benefit to the
country participating in the trial, or at the very least the community from which
subjects are drawn.
6.10 Transfer of Knowledge - MNMB Example

This example illustrates that involvement in transfer of knowledge projects can aid a
developing nation to overcome barriers to availability of genetic services and tests
relevant to their needs. Participation can afford a developing nation the opportunity to
focus some of the efforts upon health needs specifically relevant to its population.
Moreover, cooperation ensures information flows for the benefit of future innovation
within developing nations.
Some benefit for developing nations attempting to improve the availability of genetic
testing facilities has been experienced through the establishment of joint projects with
developed world partners. The Mexican Network of Molecular Biomedicine (MNMB) is
an example of a developing nation organization that is actively involved in transferring
knowledge from developed nations in order to provide better health services to its
population. The MNMB objectives include research goals, whereby they hope to focus
research in relevant issues for Mexico. This goal means that existing projects that were
not designed to address the needs of Mexico specifically may be redirected to include
Mexican issues. However, the main goal of the MNMB is to provide health services and
education. In particular the MNMB is relying upon the Internet as a means of
communication with foreign collaborators.
6.11 Affordability of Genetic Testing and Services

As has been discussed previously, access can be divided into two factors, affordability
and availability. This section will examine affordability and how this factor is affected
by gene patents. Some factors influencing the affordability of genetic tests in developing
countries are directly related to gene patents awarded in developed countries. In
countries in which patents have not issued for genes used for diagnostic genetic tests,
people are free to manufacture, import and buy genetic products. Developing countries
which lack manufacturing capacities and comprehensive patent regimes may have to
turn to other more industrially advanced countries in order to buy the genetic products
that they require. Most of those products will be patented products. As we will establish
in the next section, patent rights are one factor that can influence the price of genetic
tests and services both in developed and in developing countries. Thus, the effect that
gene patents have upon the cost of genetic technologies in developed countries will also
have an application for developing countries that do not have the capacity to produce
the technology themselves and therefore must also buy the technologies.
Affordability for Patients Needing or Wanting Access to Genetic Technology
Commercialisation of genetic research and technology through patents results in

extensive control over the object of the patent for a long period. Such wide monopoly
over the cost and the availability of an invention may constitute a barrier in accessing
genetic technology and medical services for some people. Whether the barrier is
surmountable or not will depend upon an ability to pay for the technology and services.
An ability to pay, or lack thereof, can create gaps within and between countries, as
witnessed recently in regards to patented HIV medication. Paying for a patented
genetic technology or medical service can mean payment of license fees. License fees are
a means of recouping a patent holder’s research and development fees. This means that
those fees will therefore be borne by laboratories offering the licensed service151 as well
as patients. If genetic services are not covered by health insurance then a division may
grow within a society between those who are able to afford access to genetic services
and those who are not and are therefore disadvantaged.
The examples that follow highlight the impact that gene patents either already have
had, or could have, upon the affordability of genetic technologies. Since affordability
affects availability the effect of the impact is ultimately experienced by the patient. The
foremost impact is a limitation on access to genetic technologies for less-affluent
segments of society.
6. 12 BRCA1 Example
As has been discussed previously, two separate issues regarding access to genetic
technologies are exemplified by BRCA example. First, the gene patents owned by
Myriad affect access to research tools. Second, Myriad’s patents affect the cost and
availability of appropriate genetic testing. This example focuses upon the second aspect
and illustrates the direct effect that strict licensing practices can have upon the price of
genetic testing.
Myriad owns patents that claim mutations in two breast cancer susceptibility genes as
well as their diagnostic applications. Based upon their patent rights, Myriad has denied
laboratories the right to develop similar genetic tests to detect mutations, which has the
result that its patented genetic predisposition test is the sole test that may be employed.
Myriad has been aggressive in asserting its patent rights and has instructed institutes
and governments all over the developed world to stop using unlicensed tests to identify
mutations. Myriad has further required that all samples to be sent to its laboratory in
Salt Lake City or to another authorised licensee’s site. Through these protectionist
measures Myriad has ensured that it is the only company who can legitimately perform
testing and analyze data in developed countries.
Myriad’s method of enforcing its monopoly is having an important effect upon the cost
of its genetic tests. Presently the tests are priced at US$2500, which is approximately
three times more than other similar and sometimes more accurate tests available.154 It
has been estimated that 5-10% of all breast cancers have an inheritable component.155
Some women with a strong familial history of breast and/or ovarian cancer, who may
require access to these important tests for the purpose of prevention and risk reduction
strategies are being barred from receiving testing by its prohibitive cost. Women who
live in countries that do not have a universal health care system and who do not benefit
from health insurance are being particularly disadvantaged. When travelling expenses
are added to the cost of the test itself, many women just cannot afford to be tested.156
Not all parties who have received warning letters from Myriad are agreeing to conform
to Myriad’s strategy however. In Canada, British Columbia was the only province that
complied with Myriad’s 2001 letter asking them to stop BRCA1 and 2 breast cancer
testing services. British Columbia initially ceased providing their in-province breast-
cancer predisposition tests but subsequently decided to send their patients’ sample to
Ontario for testing.157 The other provinces have chosen to continue using their
unlicensed tests, and are presently engaged the beginning of what could become a legal
battle with Myriad over patent infringement.
In Europe, opposition proceedings have been filed by various organisations with the
intent of invalidating Myriad’s patents on the basis that the claims are overly broad. The
breadth of the claims is cited as a hindrance to equitable access to genetic testing and is
blamed for making disregard for a whole category of high risk patients permissible.158
The opposition proceedings are scheduled to begin at the beginning of 2004. Since no
decision has yet been issued on those opposition proceedings, Myriad is unable to
enforce its patents in Europe at this time.
6.13 Open Source Genetic Patents

There has been a recent move to imitate open source software that presently exists in
the software industry. Open source copyrights are made accessible to third parties by a
licensing system that does not require payment but does require that any innovation
made as a result of using the invention be placed back into the public domain. In other
words, the cost of access is the enrichment of the public domain so that no one person
can control access to genetic technology. The system works best if subsequent inventors
actually acquire patent rights and then license out their inventions to all comers on the
same conditions as were imposed on them. This is a way for genetic knowledge to flow
freely into the public domain, much in the same manner as the Human Genome Project,
through patents that do not rely upon their inherent right to exclusivity.212 Industry
generally is critical of this approach as they argue that open source undermines the
incentive to conduct research into viable products.
Recommendation
The viability of open source genetics as a means of permitting access to genetic
innovation should be evaluated.
6.14 Licensing Rights

Licensing of patent rights is considered by some authors to be of integral importance to
developing nations. “To the extent that inventing firms choose to act more
monopolistically and offer fewer technologies on the market, stronger [intellectual
property rights] could reduce international technology flows” that may in turn increase
reliance upon innovation and licensing. However, economic modeling data has shown
that stronger patent rights may mean that “while the developing countries enjoy more
inward licensing, the cost per license could be higher and prices could also rise, with an
unclear overall impact on economic well-being.” Thus, developing nations should be

wary of licensing and recognize that at the point that the license fees become prohibitive
another mode of obtaining rights to patented technologies will be required.
One suggestion has been that developing nations follow the example set by France and
permit compulsory licensing within their patent system. Of course, as has been
previously discussed, it would not be prudent for developing nations to limit
compulsory licensing to crisis situations, since that type of last resort application may
not actually provide access to genetic tools and technologies when they can be of the
most efficacy: as preventative measures. Integrating a right to compulsory licensing into
the patent systems of developing nations may offer a type of bargaining power. The
practical value of compulsory license provisions may be their threat power to induce
licensors to grant normal course licenses upon reasonable terms.
A public non-commercial use license exception could also be built into national patent
systems of developing nations. As has been discussed, public non-commercial use is
believed to include national defence and public health applications. Although this type
of clause is likely to be unpopular with large developed nations, such as the United
States, it may offer developing nations a “mechanism to proactively address the impact
of patent rights on their health care systems.” Developing nations must have some type
of extraordinary licensing means available to them to ensure that they are able to obtain
rights to genetic technologies that may be vital to their populations.
Recommendation
Available forms of licensing terms, as well as compulsory licensing rules, should be
examined and evaluated.
Development of Industry Guidelines

In order to address issues of access to genetic tools and technologies it has been
suggested that industry policies could be formulated and implemented as an adjunct to
existing patent systems. Ideally, governments would encourage industry to find

solutions to licensing practices that are in the interest of developing nations. To be most
effective, these solutions could be formulated through committees representing
industry sectors generally so that an entire market would employ a consistent licensing
practice when dealing with developing nations.
For example, it has been suggested that brand-name pharmaceutical companies agree to
voluntarily license patents for vital medicines to high-quality generic manufactures,
granted that the chosen generic manufacturers were willing to supply the drugs at a
low price. “Arrangements like these would signify ethical business leadership and
would affect revenues negligibly, given the diminutive pharmaceutical market in poor
countries.” Furthermore, effective industry policies would alleviate the need for
developing nations to rely upon extreme measures such as compulsory licensing.
Recommendation
The feasibility of cooperation within industry and the possibility of arriving at workable
guidelines should be evaluated.
Benefit Sharing
Another possible solution for making genetic tools and technologies accessible and
affordable for developing nations is to establish a global benefit sharing obligation. The
expression “benefit sharing” has an increasing presence, especially in the area of human
and biodiversity genetic research. This term refers to two different facets of benefit
sharing: consequences relevant to specific transactions; and a global universal norm
aiming to benefit humanity. The former position is based on compensatory justice and
has been addressed in many legal documents. The claim in the Canavan case discussed
earlier was framed in terms of a claim of compensatory justice in respect of those
patients who had participated in the research that led to the discovery of the gene.220
However, some authors criticise benefit sharing based on compensentory principles as

lacking any real normative basis.
Thus it seems appropriate to look to a universal form of benefit sharing. We can

envision a global and universal form of benefit sharing that may be part of a normative
framework that aims to achieve equitable distribution of the benefits of genetics to
developing countries. This obligation is based on the idea that justice should protect
the neediest and the most vulnerable in society. Furthermore, it supports the assertion
that mechanisms for ensuring transfer and assistance towards this goal are required on
a global scale. Therefore, science and biotechnology should contribute to everyone’s
equality of opportunity and benefit the least well off, namely poor people in developing
countries who are unlikely to be exposed to those benefits because of barriers to either
availability or affordability. This is particularly important in the area of health care,
which is a determinant that influences all the other spheres and a condition for equal
opportunity through prevention or eradication of disease.
Moreover, the literature also voices a call for a global rather than an individual or
compensatory perspective on benefit sharing in genomics. For example, the fact that the
human genome has symbolically been qualified as “common heritage of humanity”
highlights its universal value for humanity and serves as a reminder that knowledge
about the human genome should benefit humanity as a whole. Creation of international
policy to enforce the strong public aspect of genomics may be a means of promoting
benefit sharing obligations.
Policies would promote the pursuit of activities in the area of human genomics for the
benefit of humanity. Thus, interests and the needs of all countries would be taken into
consideration, irrespective of their degree of economic or scientific development.
Resulting policies would be subject to an international regime and controlled by an
international organization.229 Thereby we would uphold our responsibilities to protect
our common heritage in the interest of future generations and to distribute genomic
benefits equitably.230
The role of patent rights in a strategy of global equitable benefit sharing should be
examined. As we have said before, patent systems are intended, in part, to provide
incentive for innovation and to disclosure inventions, thereby increasing public
knowledge.231 Patent rights do not seem to play a role in the equitable distribution of
those benefits. However, the fact that we should not count on a patent system in order
to ensure benefit sharing is not necessarily problematic since alternative mechanisms
such as tax systems or investment of public research funds into diseases of the
developing world, can be established for equitable distribution of biotechnology
benefits.232
Recommendation
Benefit sharing arrangements, both those that are universal and compensatory in
nature, must be given further thought in order to attain the goal of equity between
countries.
Alternative Patent Regimes

One solution to the present issues surrounding the patenting of genetic technologies is
to implement an alternative to the present patent regime. Such a regime may either
comprise parallel legislation co-existing with national patent systems or may build
upon existing national patent systems and merely introduce modifications thereto.
Examples of such alternative regimes can be found in recent developments in
biodiversity and agriculture, which have resulted in new policies and in some cases
new biotechnology focused legislation.233
The Bonn Guidelines on access to genetic resources and fair and equitable sharing,
adopted in April 2002,234 provide a strategy for access and benefit sharing. While the
particular measures suggested through the Bonn Guidelines need to be evaluated in
terms of their compliance with TRIPs, the idea of dealing with the equitable distribution
of benefits through international agreement appears to have promise. Similar efforts
were conducted at the FAO Conference which approved the International Treaty on
Plant Genetic Resources for Food and Agriculture (ITPGRFA) in November 2001. This
treaty compels countries to provide easier access, through a multilateral system, to
identified genetic resources.235 In the field of human genetic research, the Human
Genome Organization established similar principles in its 2000 statement on benefit
sharing.236
There is a debate as to whether patent regimes themselves should be modified so as to

play a role in the promotion of ethical principles in genetics. Morality has generally
been given little importance in the application of patent law.237 Some authors suggest
that, while patent regimes may not offer definitive solutions to ethical issues, patent
systems could bridge the gap - through, for example, ordre public and morality clauses
- until alternatives are formulated.238 A good example of an alternative solution is the
multilateral benefit sharing mechanism established by the International Treaty on Plant
Genetic Resources for Food and Agriculture.239 This is a stand alone document
incorporated into patent regimes by reference. The benefit of a stand alone document is
that it is well poised to address a variety of concerns relating to gene patents, including
bioracism, commodification of humans and technology transfers. Stand alone
regulations could include terms consistent with article 67 of the TRIPs agreement that
provides a basis for “mutually agreed terms and conditions, technical and financial
cooperation in favour of developing and least-developed country Members.”240
Recommendation 5.5.
As there is a myriad of possible patent regimes that could be created, further research
should be directed towards this subject matter Conclusion
In this review, we examined the literature relating to both the short-term and long-term
impact of gene patents on access to genetic technologies and services. While the
literature is sparse on both of these questions, the literature does support the
importance of both the short-term and long-term views. Access must, therefore, be
assessed not only in terms of the impact that gene patents may at any one time have on
access to genetic technologies and services, but must also be assessed in terms of their
ability to lead to new products and services to be accessed in the future.
As there is a dearth of evidence of current levels of gene patenting in developing

countries, it is difficult to fully assess the impact that gene patents have on access to
genetic technologies and services in those countries. Through a combination of
analogies made to problems in developed countries, one could expect that gene patents
may decrease access to certain services, such as clinical genetic testing. However, the
literature is not sufficiently robust to fully substantiate this claim at present. As noted in
Recommendation 3.2.2., it is imperative that better information be collected as to the
level of patenting of DNA sequences in developing countries. What we can conclude
from the present literature is that although patent rights over genes and genetic
inventions may have the potential to impact access to genetic tests and services in
developing nations there is no clear evidence that they presently have such an impact.
Moreover, license terms and regulatory schemes may be imposed to ameliorate any
potential negative impact. The overwhelming and obvious difficulty currently posed to
access to genetic technologies and services in developing nations is actually caused by a
lack of requisite facilities.
Gene patents are more likely to have an effect on access to genetic technologies and
services in the long-term. As noted in the literature, developing countries too often
suffer from a lack of physical and administrative infrastructure. This lack undermines
the ability of developing countries to develop genetic technologies and services aimed
specifically at their health care needs. As patent systems require an administrative and
technological infrastructure through which to appropriately balance the rights of
inventors against those of the users of technology, the lack of administrative
infrastructure may translate into poorly and improperly calibrated gene patents. This,
in turn, may lessen access to genetic technologies and services in the future.
While some of the concerns relating to the impact of gene patents on access to genetic
technologies and services may be common with other medically-related patents, such as
pharmaceutical products, the differences noted in this review between the
biotechnology industry and the pharmaceutical industry ought to give one pause before
concluding that all or even most areas of concern are similar. Given the significant
differences between these industries, it would not be safe to generalize from the
recommendations and conclusions drawn in this review to patents in general or to
health-related patents in particular.
7. Patenting Biotechnological Inventions in

Europe and the US
By Ay egtI Ozdemir*
7.1 INTRODUCTION
The patent system is designed to grant inventors and innovators exclusive rights over
their inventions for a certain period of time in exchange for public disclosure of their
inventions.' Biotechnology is a new technique for industries and specialists and is
making astounding progress. Advances in biotechnology are so rapid that many things
are now possible, which, even a few years ago, would have seemed unimaginable. It is a
type of genetic engineering in medical and veterinary research resulting in modified
productions and improved animal breeds.' It is the use of microorganisms, mammalian
cells and their products for industrial, agricultural, and medical purposes. This is also a
growing discipline with a remarkably strong market. In 2006, global turnover was
estimated at $60 billion, up 15 per cent from 2005.
This rapid development has led to huge problems in biotechnology, particularly in

patenting biotechnological inventions. In modem biotechnology, patents are a
controversial issue and are more interesting for the public than any other technical field.
Advances in biotechnology are bound up in ethical, religious, political and legal issues.
Breakthroughs in this area of research invariably reach the headlines in the news. There
have been reports on genome sequencing of gene development into protein expression,
and enthusiastic discussion on the isolation of stem cell cultures, which makes human
cell cloning possible. With public interest aroused, the occasion could arise when a
scientific research institution, in order to protect their research investment, would have
to consult a patent lawyer for advice. A rapidly increasing amount of genetic code and
sequencing material is being patented provided that the patent is not so
biotechnologically broad that it creates a monopoly or illegitimate patent production

based on lack of product or potential product specificity. Consequently, the idea that
breakthroughs in genetic knowledge could be monopolized by a few multinational
companies is a major cause of concern.
Throughout the world, patent offices, legislators and courts are deeply involved with
these issues. Legal answers are more likely to be reached than political or ethical
considerations satisfied. The ethics surrounding these issues must not be ignored nor
can they be an obstacle to legal provision for potential inventions.
7.2 HISTORICAL REVIEW

Inventors have been filing applications for biotechnological patents for over a hundred
years. Patent No. 3, granted in Finland on 8 November 1843, introduced a novel method
to produce yeast cultures. On 29 July 1873, microbiologist Louis Pasteur obtained a
patent from the French
Patent Office for his improved yeast-making method. In the last 50 years, very
important biological advancements have taken place. Biological advancements usually
require substantial investment for research. Therefore, investors turn to Intellectual
Property Rights (IPRs), particularly patent systems, in the hopes of insuring their rights
over their investment. In this way, the concerns of biotechnological research, its
inventions, and IPRs are closely linked.
The United States was the first in the field with its decisions regarding
the patenting of "living matter." Early patents from the US were granted for bacterial
and viral vaccines. Until the 1980s, it was usually agreed that "living things" were not
patentable. This policy was revised in the 1980 landmark case of Diamond v.
Chakrabarty. The invention concerned the discovery of a genetically-altered bacterium,
which, when modified, could break down crude oil. As the US Supreme Court
famously noted in this case, it now seemed possible to issue patents on "anything
under the sun that is made by man." The Court decided that Chakrabarty's invention
was not a "product of nature" but a "man-made" bacterium, which did not occur
naturally in nature. Thus, the court stated, it was "not nature's handiwork, but Amanda
Chakrabarty's own; accordingly the Court held it was patentable subject matter." Thus,
from then on, an invention involving a living organism could fulfill the criteria to be
patentable subject matter, since a genetically modified bacterium, a bioengineered
microbe, had been created to provide a useful function - to dissolve oil.
In the 1987 case of Ex parte Allen, the Board of Patent Appeals and Interferences ruled
that polyploid oysters containing three sets of chromosomes instead of two were
patentable subject matter. The decision resulted in the United States Patent and
Trademark Office (USPTO) making an announcement that thereafter it would consider
"non-naturally occurring, non-human multicellular living organisms, including animals,
to be patentable subject matter within the scope of the Statute."' Only one year later, in
1988, the first patent on a mammal was granted in the U.S. for the Harvard mouse (US
Patent 4,736,866). Many patent applications in the U.S. have followed for genetically
modified animals. The same case underwent a very complex process before it was
finally granted a patent in 2004. The European equivalent to the US Chakrabarty case
was the “Rote Taube" decision. In this case, the patent application was refused because
of difficulties in reproducing the invention but it was accepted that a process of animal
breeding based on classical crosses and selection could be patentable material.
In 1973, the European Patent Office established the European Patent\ Convention
(EPC), based on established national laws. Biotechnology, although a developing new
field that is making discoveries that could never have been foreseen, is dealt with by a
traditional body of law. In July 1998, EU Directive 98/44/EC on the legal protection of
biotechnological inventions, known as the "Biotech Patent Directive" was adopted. Its
purpose was to clarify the distinction between what is patentable and what is not.
7.3 IMPORTANCE OF PATENTS IN THE FIELD OF BIOTECHNOLOGY

The major reason that inventors apply for patents is to protect their control over the
technologies that they have invented. However there are also other reasons. A large
patent portfolio is considered to be an indication of a strong company and can put
companies in an advantageous position to attract investors and collaboration partners.
Although there is the opposing argument that the costs of patenting and the
requirement to disclose technical information are disproportionally large in comparison
to the benefits, it is nonetheless clear that biotechnological inventions are patented
extensively. In addition to this, companies derive great advantages from cross-licenses
and the ability to undermine competitors.
So the main object seems to be, not the protection of the technology per se, but the
restriction of competition. Patents are the most appropriate way of protecting
biotechnological inventions. Other methods of protection, such as trademarks and trade
secrets, are less relevant for biotechnological inventions because of the ease with which
drugs can be copied through chemical reverse engineering.
7.4 PATENTABLE SUBJECT MATTER

According to Article 27.1 of the WTO Trade Related Intellectual Property Rights
(TRIPS) Agreement, "patents shall be available for any inventions, whether products or
processes, in all fields of technology, provided that they are new, involve an inventive
step and are capable of industrial application." These requirements are arranged in all
national legislation schemes in different provisions. Besides, these traditional
requirements in the field of biotechnology there may be other requirements for the
patenting procedure. Investors planning to obtain patent protection for biological
inventions may confront different legal systems, patent authorities, substantive and
procedural requirements, since the field is territorial in nature
A) Most relevant provisions regarding biotechnological inventions

1) Europe: European Patent Convention Art. 52-57, 83, 84; Rules 23 b-e, 28 and Directive
98/44/EC
2) US: Title 35 United States Constitution Section 101-103, 112, 287(c)
B) Prerequisites of patentable subject matter

For a living thing to be patentable, it must meet two prerequisites of patentable subject
matter. The living thing must be an "invention" within a "patentable class." In all
national legislation schemes, these prerequisites must be in place for a patent to be
granted for a biotechnological invention. Each of them will be examined by focusing on
the legislation separately.
1) First prerequisite - the distinction between Inventions and Discoveries

The specific definition of an invention is not included either in the United States Patent
Act or in the European Patent Convention and discoveries are excluded from
patentability.
a) The United States

To be eligible for a patent, an invention must fit within one of the statutory categories of
patentable subject matter established in Section 101 of the US PatentAct:
Whoever invents or discovers any new and useful process, machine, manufacture, or
composition of matter or any new and useful improvement thereof, may obtain a patent
therefore, subject to the conditions and requirements of this title.15
The case of Diamond v. Chakrabarty was the first time a court made a decision to change
the paradigm of enquiry for biotechnological inventions. The meaning of the statute
was clarified in a broad sense for biological inventions in the Chakrabary decision. The
U.S. Supreme Court decided in this case that "anything under the sun that is made by
man" is patentable subject matter. According to the court decision, what is needed to
evaluate biotechnological patent claims is to determine whether a product is of a living
nature, or is of human invention, rather than of making one's judgment based on
whether the product is living or inanimate. Applying this criteria means natural
products can be seen to be biologically active substances or chemical compounds and

not merely as products of nature. Thus, the issue is already settled. As long as the living
matter applications under 35 USC Section 101 are a product of human ingenuity -
viruses, single cells or multicellular organisms, they, can, like plants and nonhuman
animals be considered to be living matter.
A common issue arising from biological inventions is the problem of novelty and the
distinction between discovery and invention. Pure products of nature are not
patentable. In order for the subject matter of natural origin to be patentable under 35
U.S.C. Section 102, a human being must impart a new form, a new quality, at least one
new property, or combinations thereof, to the original product existing in nature. The
main issue regarding patentability of biotechnological inventions concerns the extent to
which they are made publicly available and how the claim inventions are different from
what is found in nature. Products, which have a higher purity or activity from the
original, have distinguishing physical properties or a different physical form may be
patentable.
b) Europe
"Discoveries (..) shall not be regarded as inventions." Similarly in Europe, just as there is
in the US, there is a legal objection to allowing patents for living things. This view is
based on the "product of nature" doctrine. If a new property of a known article or of a
previously recognized substance existing in nature is found, it is a "discovery" and not
patentable as such.'7 However, if an applicant proves that a substance found in nature
can be put to a new use (for example, a micro-organism X is proved to be useful in
diagnosing Y disease) or if another technical effect is established, then such a "living
thing" and its use may be patentable as an invention. Thus, the concept that 'discovery'
is necessary in order for a patent to be granted is interpreted narrowly under the EPC as
well as other exclusions.
A leading decision on patentability of naturally-occurring substances and the

distinction between discovery and invention was made by the German BpatG
(Bundespatentgericht) in the Antamanid case. The decision made clear that substances
occurring naturally are patentable if they are new and have been isolated by technical
means. It also has to be publicly available in that form and that it could not have been
found without technical intervention. An isolated gene, which is identical to the gene
found in nature, may be patentable if the gene sequence has never been isolated before.
Article 3 of the Directive makes it clear that once the criteria have been met, the
biological products or material, or a process by means of which it is produced,
processed or used, is patentable. The isolated element of the human body is only
patentable in its natural state. The factors that make the element so are the technical
processes used to identify purity and classify it and to reproduce it outside the human
body, techniques which human beings alone are capable of putting into practice and
which nature is incapable of accomplishing by itself.
When it comes to human beings, there is the commonly accepted approach that such
intervention and human parts should not be patented. Therefore, it would seem
important to exclude unequivocally from patent ability, processes for modifying the
germ line genetic identity of human beings and processes for cloning human beings.
Art. 52(1) of the EPC defines patentable inventions as:
European patents shall be granted for any inventions which are susceptible to industrial
application, which are new and which involve an inventive step. In Article 52(2), the
second part of the article lists subjects which shall not be regarded as inventions.
Discoveries are strongly excluded from patentability in this article.
2) Second prerequisites
a) Ordre public and morality

This area is exclusive to EU Patent Law. EPC Article 53 (a) and (b) bring further
restrictions on biotechnological patents. As stated in part (a) it excludes inventions
contrary to "ordre public" or morality and in (b) excludes "plant or animal varieties or
essentially biological processes for the production of plants or animals."
EU Directive 98/44/EC and its 1:1 implementation into Rules 23b-e of the EPC further
specifies exceptions to patentability that are in conflict with "ordre public" or morality.
Excluded is cloning of human beings, modification of the human germ line, using
human embryos for industrial or commercial purposes and genetic modification of
animals that causes them suffering without substantial medical benefit. Although EPC
Art. 53(a) explicitly states that inventions contrary to the "ordre public" or morality are
patentable, the meaning of these two terms are not clarified. The concept ordre public
has an untranslatable character. It was originally used in continental Europe. In some
documents, the concept of ordre public means public security and the physical integrity
of the individual and environment, but it is more than that. Briefly, ordre public means
the proper order of the whole society. Although according to EPC Art. 53(a), inventions
contrary to morality are excluded from patenting, the grounds regarding morality are
uncertain and flexible, for what is seen to be contrary to morality changes with time and
place. Sometimes attitudes even vary in a particular country at a particular time.
Moreover, there is the belief that "morality issues are marginal, or even irrelevant to
patent law," that patents have more in common with finance, than morality. However,
there is a great public concern over this matter, particularly over patenting
biotechnological inventions, since there is the fear that they may damage society.
Morality after the Directive

The European Union adopted a Directive on the Patenting of Biological Inventions in
1998. It came into force on 6 July 1998 as Directive 98/44. Member States had to
implement this Directive before July 2000.
However, there was some opposition to the Directive in Europe. For instance,
Netherlands applied to the Court of Justice for a modification while Germany, France,
and Austria did not implement the Directive before 2004. First of all, the Directive
defined the distinction between what is patentable and what is not. For example, an
invention relating to individual human, animal or plant genes and gene sequences, and
their finctions, can be patented as long as the other patentability criteria are fulfilled. In
the first draft of the Directive, there was no reference to morality regarding patenting.
In the course of time public concerns were voiced and the Directive became a focus for
the consideration of the ethical and social dimensions of biotechnology.31 Those
evaluating the patenting of biotechnological inventions were of the view that the patent
system, as it stood, was an inappropriate instrumentto deal with ethical questions
because the existence of a patent cannot control how an invention is exploited. In the
view of the evaluators, the means to control biotechnological inventions should be the
responsibility of a different regulatory system.
After discussions, the Directive compromised, accepting that inventions must be

unpatentable should their commercial exploitation be contrary to ordre public or
morality. There are institutions and organizations in the world which play a key role in
deciding on ethical issues. One such institution is the Nuffield Council on Bioethics in
the UK, which examines ethical issues raised by new developments in biology and
medicine.33 The Nuffield Council supports embryonic stem cell research when it can
beproved that such research is not contrary to public welfare or morality.
b) Plant and Animal varieties

EPC Article 53 (b) states that patents shall not be granted on "plant or animal varieties
or essentially biological processes for the production of plants or animals." Upon first
impression, it seems that even a living thing may qualify as a "manufacture" or a
"composition of matter" and as such would meet the statutory subject matter
requirements in the United States. The EPC, however, expressly excludes all living
inventions such as "plant or animal varieties" from patentability and distinguishes them
from microbiological36 ones. The term "variety" creates a difficulty in this case since its
definition is still vague. This exception does not infer "general exclusion of inventions in
the sphere of animate nature" and is interpreted narrowly meaning that if an invention
does not deal with a single plant or animal variety it can still be patentable provided
other requirements are satisfied.38
c) Patentability of therapeutic and diagnostic methods

According to Art. 52(4) of the EPC "methods for treatment of the human or animal body
by surgery or therapy and diagnostic methods practised on the human or animal body
shall not be regarded as inventions which are susceptible to industrial application."
In the US, therapeutic and diagnostic methods carried out on humans are patentable.
However, medical activities "which means the performance of a medical or surgical
procedure on a body," may be limited by 35 U.S.C. Section 287 (c). Remedies cannot be
sought against a medical practitioner or a health care entity with respect to such
medical activity. However, the level of regulation is different and the final outcome and
the implications are the same, since Europe and Japan exclude methods for treatment
and diagnosis from patentability by law and the US limits the enforcement of such
patents. These medical treatments should not be monopolized and the practitioners
should be free to use such methods for the benefit of their patents.
THE ONCO MOUSE CASE

The following case is given as an example to illustrate the importance of patenting
biotechnological inventions and also to discuss the problems therewith. The history of
the Harvard Onco-mouse began in the early 1980s after the successful development of a
"transgenic non-human mammal, all of whose germ cells contain a recombinant
activated onco-gene sequence introduced into said mammal or an ancestor of said
mammal, at an embryonic stage. This invention was disclosed to art and a claim for
patent was made by the President and Fellows of Harvard College in the USA. The
genetically modified mouse with a predisposition for developing cancer was intended
for use in tests.
Applications along the same lines were made in many countries: Australia, Canada,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain, Sweden, and the United Kingdom.
As earlier mentioned, the U.S. Supreme Court in Chakrabarty accepted that "anything
under the sun that is made by man" is patentable. It can be readily assumed that
inventions made beyond the sun would also be considered patentable under the
provision of the U.S. Code which reads as "any invention (..) title. "When making the
decision, the Court emphasized particularly the need to broadly construe Section 101 of
Title 35 of the U.S. Code.
In conclusion, the Court found that the claimed bacterium "plainly qualified as
statutory subject matter." Another notable point is that the Court refused to consider
moral and policy arguments against granting patents for living matter. The Court also
stated that these moral and policy arguments presented issues beyond the Court's
capabilities and as such were more suitable for consideration through the legislation
process.
The outcome of the decision made in Chakrabarty has influenced other decisions
rendered in similar situations. Particularly, it opened the door to patenting the Onco-
mouse in the United States. Although no objections were proposed by the
commissioners, the patenting of the Onco-mouse in the US took nearly four years. The
first application was filed on June 22, 1984 and the patent was granted on April 12, 1988.
The Onco Mouse in Europe The patent application for the Onco-mouse in the EPO
became such a lengthy procedure that it has been called a "saga. ' After the filing in the
US, the inventors also applied for a European Patent from the European Patent Office
on June 24, 1985. This was the first-ever application to the EPO involving an animal.
Criticism of the patent procedure focused on the question of whether an animal as such
could be patented at all.78 More specific concerns were voiced about the potential for
making commercial profit from engineered laboratory animals, with a number of
groups proclaiming their opposition to laboratory testing on animals in general.
The application was refused on July 14, 1989 on the grounds that the basic requirements
of Art. 53(b) and 83 of the EPC were not met, because an animal variety was contrary to
Art. 53(b). The exclusions from patentable inventions inArticle 53(b) read as "plant or
animal varieties or essentially biological processes for the production of plants or

animal; this provision does not apply to microbiological processes or products thereof."
After the first refusal of the EPO branch Examining Board, the case was appealed to
another body of the EPO, the Board of Appeals. The Board of Appeals criticized the
Examining Board's decision and, with their concluded decision on May 13 1992, the
EPO granted European Patent No. 0 169 672 to the Harvard Onco mouse. This patent
included many of the privileges and interests which were granted already in the earlier
US patent issuance. This created oppositions from a lot of political parties, NGOs,
religious groups and individuals.
Opposing applications were made especially by green activists, animal rights and
farming interest groups. The Opposition Division of the EPO had dealt with the case
from on and within the influence of the new 1998 EU Directive on biotechnological
inventions -- 98/44/EC had its final acceptance in July 2004, 19 years after the patent
application was made. They stated that another criterion had to be taken into account.
This key criterion found a balance between "suffering and substantial medical benefit"
in Rule 23(d) of the EPC.
The Opposition Division has particularly taken into account Rule 23 (b) and (c), which
provides for patents for "plants or animals" under conditions laid down in the Rule 23
(d). Rule 23(d) also excludes from patentability "processes for modifying the genetic
identity of animals which are likely to cause them suffering without any substantial
medical benefit to man or animal and also animals resulting from such processes.
The Opposition Division stated that another criterion has to be taken into account. This
key criterion found a requirement for balance between "suffering and substantial
medical benefit" in Rule 23(d). The Opposition Division stated that if there is suffering
in accordance with EPC Rule 23(d), this suffering must be balanced by a substantial
medical benefit. When stating the benefits provided by the invention, the Opposition
Division emphasized two points.
 first was that the date of the patent application would be taken into account for
the assessment, not the date at which the assessment was actually made. This
meant that later evidence from the application date would be invalid for the
assessment.
 Second,as an answer to the question - how is the benefit to be assessed? – the
Opposition Division focused on the subjective view point of the inventor.
According to the general principles of the law, this subjective view point should be
"bona fide." Thus the inventor's bona fide belief would be decisive for the medical
benefit which is essential for right to patent for biotechnological inventions. 5 In
conclusion, according to the opposition, Division Rule 23d (d) was not a ban to the
patentability.8 6
The opponents also argued that the Onco-mouse patent fell afoul of Article 53 (a) of the
EPC. Regarding this argument, the Opposition Division said that Art. 53 (a) would only
apply to exceptional cases. They also added that they had no intention of applying
extreme positions. They meant that they would not take responsibility for possible
abuses of the invention.87 According to the Opposition Division, ordre public and
morality issue had to be examined first since the laws and regulations are common and
these laws and regulations are the best indicators of the values of the whole society --
what they consider to be right or wrong.
In the end, the Opposition Division issued a written decision early in 2003 which
limited the granting of a patent to rodent species considered to be suitable animals for
experiment.88 Some parts of the content and major principles of this decision were
given and discussed above. An appeal was also filed in May 2003, and a final decision
was rendered by the EPO Board of Appeals in July 2004. In this decision, mice were
designated instead of rodents. Finally, after 19 years the first Onco mouse application
was filed to the EPO, it was granted a patent. This final decision cannot be further
appealed at the EPO level. However, an application against the present patent of the
Onco-mouse will be given to obtain an invalidity decision from a court at the national
level.
Europe
The present European Law allows exceptions for experimental uses while private, non-
commercial uses are also allowed.95 For example, a scientist working alone without any
financial support can claim a right to free use of a patented research tool. This is only
possible where no physical material has to be obtained from the patentee or licensee.
According to a decision of the German Supreme Court, the experimental use exception
covers clinical trials on human patients, where it is necessary to discover other medical
applications or to provide more information on effects of treatment. In the event that
any clinical test is being undertaken in a hospital with a separate purpose to improve
the health of the patients, it can also be applied.
Recent developments in EPC countries show that the experimental use exception may
also be applied to commercial research. However, a distinction must be drawn between
the work, which is undertaken only for improving or modifying the invention, and
other kinds of activities that would be totally contrary to the purpose of patent system.
Although there have been few cases relating to experimental use, an exception for
patent infringement regarding the statutory provisions of English law, particularly
Section 60 (5), (a) (c), of the UK Patent Act, provides a rare example:
Smith Kline and French laboratories Ltd. v. Evans Medical

This case is about the private purposes exemption. The court in this case decided that
private exemption exists only when he/she is carrying out an act for his/her own use.
The court put a two-stage test involving:
1) To determine whether an act is private or public, and
2) To determine whether the act has or has not been carried out for commercial
purposes. An act will only be exempt when these two stages have been passed.
ii) The United States

Section 271 of the US Patent Code (35 USC) states that "whosoever without authority
makes, offers to sell, or sells any patented invention (...) infringes the patent." However,
until recently, the US courts have applied a common law experimental use defense,
although the US courts have also taken into account certain circumstances which
restrict the application of this rule. In addition to this common law experimental
defense, there is a statutory experimental use defense under section 271 (1) (e) of the
Patent Code, but this latter one is no longer relevant. A direct outcome of this decision
is that the private purpose exemption is mainly related to an individual who carried out
scientific experiments at home with no commercial objective in mind. This does not
cover any act carried out by a company; therefore there is no direct relevance to this
kind of exemption for companies which are dealing with biotechnological research.
An act undertaken for experimental purposes relating to the subject matter of the
invention would also be exempt from patenting. This view supports the idea that patent
law exists to stimulate the advancement of science and should not be used to inhibit it.
Namely, the advancement of science has priority over the enforcement of patent rights.
This principle of exemption was adopted by the community patent convention (Art. 31
(b) of CPC) and has been transposed into the patent laws of various European countries.
When applying the experimental purposes exemption to biotechnological research, one

difficulty is whether the exemption covers trials carried out in order to secure patent
protection. The heart of the problem is whether such trials are considered to be
"experiments" or not. According to a decision of a court in the Monsanto case, an act
cannot be considered "experimental" when the essential goal of the trial is merely to
verify existing knowledge. However, it is applied to "research that is directed to
generating new information about the invention itself to find out how it works, or to
improve on it."1 °2
2) Diagnostic Tools
Patent protection through a diagnostic tools basis can be provided in the case of the
association of a gene and a disease. From this perspective, the major issue is to identify
mutations by making a comparison between the appearance of a patient's gene
sequence and a normal one. It is sufficient to be able to identify a mutation in a gene in
order to fulfill the utility requirement and receive patent protection.
A broad scope exists for a patent on diagnostic tools. In most cases, thepatents include
the mutated, normal DNA sequence and the protein for which the sequence codes. The
patent covers both the patented tool and all future screenings that could identify the
mutation. Since the patents also cover proteins, it is not possible to develop alternative
tests that screen for these specific proteins without a license. Thus, the original patent
plays a great role for future research on diagnostic tools. All of them will be dependent
on the original patent.
Nuffield Council on Diagnostic Testing

The Nuffield Council advises to apply the requirement for the granting of product
patents, especially the criterion of inventiveness, very strictly to applications for patents
that provide the owner with rights over DNA sequences for use in diagnostic
testing.103 According to the Nuffield Council, the EPO, the JPO and the USPTO should
find a way to achieve this. The goal of this recommendation is to provide product
patents concerning DNA sequences used for diagnostic testing with an exceptional
character. The USPTO and the US Government should consider changing their patent
regulations. The Nuffield Council points out that use patents are an effective means of
rewarding the inventor and encouraging others to develop alternative tests.
3) Gene Therapy
It is possible that different mutations can cause the same disease within a single gene.
Research efforts have been recently aimed at repairing or removing the mutated
sequence and change it with a normal one. This makes us able to cure illnesses
including Alzheimer's disease and spinal cord injuries. Granting patent protection for
gene therapy does not constitute a problem and will not confine future researches. Since
some kinds of gene therapy are considered unexceptionable for ethical reasons,
attention is concentrated on the "somatic cell gene therapy which affects only non-
reproductive cells." In Europe, since the gene therapy methods are considered medical
treatment, they are not patentable, but the vectors and constructs used may be so. On
the other hand, "ex vivo" process steps will be patentable as being the last step of
administering the transformed cells to the patient is not claimed. In the USA, all steps of
the process are patentable.
Nuffield Council on Gene Therapy

The Council suggests widely denying patent protection for the use of the relevant DNA
sequences in gene replacement therapy by regarding it as obvious and therefore
rejecting the inventive step. The main issue of patent protection should be the
development of secure and effective methods of appropriate gene delivery, rather than
providing simply the definition of the sequence used in therapy.
4) Therapeutic Proteins
These proteins are made artificially and used as pharmaceuticals. The therapeutic
nature of the proteins has been known for a long time. According to the prior
knowledge, it was only possible to produce proteins from humans and animals with the
use of tissue. It has been possible only from the mid-1980s to produce them on a large
scale using an artificial method. Then companies started to patent the genes that code
for therapeutic proteins. The patents cover both the specific DNA sequences and
structures of the proteins. It seems that a large group of companies are interested in
these products. In contrast with other gene patents, protein patents may easily be
patented, since they provide a protein that is new and inventive. But it is important that
they are only granted a relatively narrow scope and that there really is a practicable use.
Namely, a significant utility takes place before the patents are issued.
Proposal of the Nuffield Council

It is generally recommended by the Nuffield Council to grant patents for DNA
sequences applied to the development of new medicines based on therapeutic proteins.
However, the claims should be defined narrowly, in order to keep the protection range
low. This should lead to the protection only of the protein and not to the whole DNA
sequence.
7.6 CONCLUSION
Historically, patent systems have been developed to encourage invention and
innovation. A patent system motivates the creation of useful inventions, including the
investment required to develop and commercialize them; society's recognition of
individuals who disclose their inventions and patents enables the systematic
registration of a wide range of discoveries. Without any doubt we need a patent system.
Even though patent systems and their implementation result in massive problems, It's
believed that it is necessary to keep them. The selected cases represent distinct and
important decisions of biotech patents, namely DNA sequences and whole living
organisms. The Oncomouse patent litigated throughout its lifetime. The main issue was
driven by public concern. This case raised new questions concerning patentability and
led to landmark decisions. Today it is accepted that DNA sequences and proteins are
patentable if its function is known. However in Europe there are strict conditions on
patenting higher organisms.
The application for the patent on the Onco-mouse 20 years ago has created a new field
and there will be new challenges for patent protection in the future due to the rapid
development of biotechnological research.
Patents on biotechnological inventions have created monopolies especially within

public health. Biotechnological patents on the one hand are giving massive rights to the
patent owners; on the other hand, patents create monopolies in inventions that have
been aimed at the public interest. As a result, these very conflicting situations give rise
to a dilemma. Although it is obvious that the current legal instruments are not suitable
for the protection of biotechnology, governments worldwide rely on old and
inappropriate structures for the protection of genetic inventions.
Today there is no distinction between inventions and discoveries; the inventive step is
basically irrelevant and the utility requirement is largely unessential. Regarding their
purpose, well-suited corrections and additions will contribute to new innovations being
made and help to distribute these to people worldwide.
In its report, The Nuffield Council on Bioethics recommended a rather restrictive

approach for granting patents on DNA sequences. Patents on diagnostic tests should be
sharply examined for the criterion of inventiveness, the granting of patents on research
tools should be discouraged, patents on gene therapies should be thoroughly analyzed
if they are not obvious and patents on therapeutic proteins should be narrowly defined.
Patent offices and courts should feel encouraged to make use of the patent system in a
more rational way as far as patents on DNA sequences are concerned.
The promises of biotechnology are great and must be allowed to develop within a fair,
competitive and intellectual property framework, which can only be achieved through
worldwide legislation and the establishment of a single appellate jurisdiction.113 From
my point of view, in order to achieve this goal, it would be necessary to combine the
function of the major institutions like the USPTO, EPO and JPO and establish a common
regulation. The approach to biotechnological inventions in the United States is more
generous than in Europe. Europeans tend to stick to the morality issues and for that
reason the patent bar granting biotechnological inventions is very high. On the
contrary, the United States is more liberal, which has a global impact on the world
economy. USPTO and the Federal Circuit have badly rendered the decisions affecting
the issues.
Commentators talk about the financial motivations behind these decisions. Thus, many
companies find the US an attractive place to invest since it is easy to obtain a patent
there. The European countries are probably losing investment because they operate a
more stringent system than the US. The attitudes of the European countries are
criticized. In my view, the administrators of the European countries must go on to
follow their own ways; it is not necessary to change the decisions since the countries in
Europe have totally different cultures and backgrounds. It seems unlikely that the
European approach will be changed in the near future.
One possible solution is for a related organization such as the WIPO to take control
ofbiotechnological patenting. As a first step, the USPTO, EPO and JPO could come
together for negotiations under WIPO's umbrella. In the long term, other countries need
to be involved, and it might be possible to seek an agreement to construct a totally new
system which deals with biotechnological patent issues. It is necessary to seek a wider
attendance of countries in order to be effective for imposing new rules to these and
other countries. Regarding the cultural, political, ethical, and social differences, it could
be thought that these countries can make rules more effectively since a single system
takes into account everyone's needs and requirements. However, it is necessary to
adopt minimum standards for the countries starting with the US, the EU countries, and
Japan. In fact, there are many other areas in which lists of minimum standards are
already applied. These standards can be adopted through the WIPO. Since the WIPO
procedures are not compulsory, it is unknown whether the system will work or not. In
order to achieve this system, the sensitivities of society must be improved and the
public must be enlightened on this issue. The primary initiatives may be taken by the
voluntary groups including NGOs. The lobbying activities of the companies must be
reduced and politicians should be convinced to take the issue seriously. This article has
detailed the differences between the American and European models. On the one hand,
the European model takes an ethical approach, and on the other, the American model is
liberal, where the thresholds are mostly very low to grant a patent. In my view, income
must be obtained through industrial activities on biotechnology; in the meantime,
ethical considerations are also taken into account. Patents could be granted for
biological inventions in the present system, but this should not give rise to any
monopoly for the patent holders.
The risk of cancer constitutes a great danger for the human beings at present. For
instance, a lot of women are facing a risk of breast cancer, while the children have
anemia or AIDS. Therefore, patients and the people in danger need inventions for a
better treatment and a better/long life. These inventions are scientific in nature and are
necessary for human beings to survive. Patenting is a part of this unique system and it
cannot be approached without ethical considerations, no matter how much income it
provides. A common set of criteria must be taken into account and applied when
issuing a patent; thus a continuous process must be provided for these inventions.
Despite all political and ethical concerns, public debates and worldwide litigation, the
importance of biotechnological research in general, and of patents in particular, is likely
to further increase rather than decrease in the future. It is in the interest of most people
to increase their life span, whatever the costs, search for new sources of nutrition for the
constantly increasing population, but also for the curiosity and motivation of scientists
to find inventions on one hand and high investments in this field on the other hand.
This branch of technology is extremely lucrative but also makes IP protection necessary.
Otherwise it may risk not achieving the very objectives it seeks to achieve, with the end
result that the disease is cured, but the patient killed."
8. Licensing Biotech Intellectual Property in

University–Industry Partnerships
Vladimir Drozdoff1 and Daryl Fairbairn2
In 1980, the Bayh–Dole Act ushered in a new era for federally funded universities and
other nonprofit institutions by allowing those institutions to own inventions arising
from federally sponsored research. Although the merits of the act have been widely
debated (Boettinger and Bennett 2006; Rai and Sampat 2012; Schacht 2012), it is
generally regarded that the act has broadly encouraged commercialization of
university-developed technology. This impact has been particularly felt in the field of
biotechnology, whose rapid growth coincided with implementation of the act and the
rise in licensing activity among academic institutions. With the expansion of technology
transfer offices among academic institutions, by 2000, about a dozen or so of the larger
institutions were ranked among the top 40 recipients of biotechnology patents in the
United States (Edwards et al. 2003). A number of these patents have played
fundamental roles in the commercialization of biotechnology, including Stanford
University’s Cohen–Boyer patents to recombinant DNA, which were licensed to over
450 companies. At the time they expired in 1997, these patents had generated more than
$250 million in licensing revenue (Feldman et al. 2007).
Today, revenue from commercialization of technology represents an increasingly

important and substantial source of support for academic institutions in the United
States, with combined revenues from licensing and industry-supported research in all
fields reaching well over $6 billion per year (AUTM 2012). Much of biotechnology-
driven revenue in the past tended to be the product of a few blockbuster successes, with
a large proportion of revenue attributed to a relatively small number of deals (Brody
2001). However, as the pharmaceutical industry looks increasingly to academic–
industry alliances and partnering as a means for conducting foundational pipeline
research that in the past was done in-house, that picture is gradually changing. In the
past few years, a growing number of larger-scale and longer-term framework
partnerships have been established between a number of large pharmaceutical

companies and academic institutions. A significant number of these framework
partnerships have involved multiyear collaboration and drug-discovery deals
providing several million dollars of research support for the academic partner
(Schachter 2012).
8.1 DEFINING THE BIOTECHNOLOGY LICENSE AGREEMENT

At the time they are drafted and negotiated, biotechnology license agreements
involving academic institutions only rarely provide a readily commercializable product
or technology. Most often, license relationships are established around relatively early-
stage technology, where the path to an ultimate commercial product is not entirely
certain. As such, understanding the expectations of both parties becomes particularly
important in framing the scope of the license and the rights the agreement confers to
both parties.
Technology versus IP
In simple terms, a license is a contract between two parties, which allows use of rights
or materials belonging to one party by the other party, usually in return for some
payment or other benefit. Having legal rights to or ownership of those rights and
materials is therefore necessary to grant a license.
In this context, it is important to recognize the distinction between technology and

intellectual property (IP), both of which are basic parts of most biotechnology deals.
Technology, in general, refers to tools, methods, and materials—that is, things that are
necessary or can be used by a party to conduct research and develop products under
the agreement. IP, on the other hand, refers to a legally protectable right, such as a
government-issued patent right or an unregistered trade secret, which allows a party to
prevent or block others from using what is covered by that right. Although often
crucially important to a deal, not all technology can be or is protected as IP. For
example, when unpatentable research methods and other know-how are freely shared
between scientists, instead of being kept as trade secrets, they receive no IP protection.
Biotechnology license agreements are therefore often hybrid structures, which combine
a research and development (R&D) agreement component that provides for use and
transfer of technology such as know-how and materials with a license agreement
component that governs rights to existing and future developed IP.
Purpose of the License Agreement

A license agreement can be viewed as serving three primary purposes: (1) defining the
scope of rights being transferred between the parties, (2) defining the compensation for
those rights, and (3) putting in place a structure for managing the risks that each party
takes on in carrying out the agreement. To effectively address each of these, it is
critically important that the parties understand both the overall objective of the
agreement and the more specific objectives each party has in entering into the
agreement, especially in a combined R&D and licensing deal.
Many of the same objectives repeatedly arise in deals between universities and
companies. As an illustration, one can consider a drug discovery partnership. The
overall objective of such a project may range from short-term research to validate
potential biological targets to more extensive, long-term partnerships with the end goal
of selecting a lead compound for clinical trials and eventual commercialization.
Regardless of scope, each member in such a partnership will have its own more specific
objectives. A license agreement can form an effective relationship management tool
only if each of the parties’ objectives are transparently negotiated and taken into
account in structuring the terms and provisions of the agreement.
For the university, research and publication will always be primary objectives.
Increasingly, however, universities also view such alliances as a means to directly
participate in more effective translation of their research, for example, into new drugs.
But in doing so and helping ensure that the public will benefit from their research,
universities also remain accountable to their wider mission of advancing and
disseminating knowledge. Part of that mission is to present and publish the results of
the sponsored research they conduct. Another part is to safeguard the ability of their
investigators and those at other publicly funded institutions to use the technology
developed in such alliances.
The university, however, cannot overlook that fulfilling this mission depends on
continued funding. Therefore, in sharing the long-term goal of successful
commercialization, the university will also look to receive some fair share of revenue.
An effective licensing agreement takes into account the total added value the university
brings to the table. This includes not only the specific expertise of its investigators, but
also the benefit the industry partner obtains from the investment in personnel and
infrastructure that the university has made in developing its research capabilities.
For the pharma/biotech partner, a primary objective of almost any partnership is to

contribute to its overall business strategy. As the strategic focus of the industry
continues to shift away from internal early-stage R&D, and key patents expire on
successfully marketed drugs, biotech industry stakeholders are increasingly looking to
university-based research for new leads to integrate into their drug discovery pipelines.
Most such biotechnology deals are directed, at least initially, to the early stage of these
pipelines.
8.2 SCOPE OF THE LICENSE AGREEMENT

Structuring the Agreement to Make Sense for the Deal
Deal structures can vary significantly, depending on the focus and scope of the
collaboration. Defining an appropriate scope of a license is often one of the more
challenging starting points in negotiating a license agreement for an industry–
university partnership, even with a well-defined project in mind. Often, the process
becomes tied up in negotiations over rights to IP and technology that are unnecessary to
carry out the collaboration, rather than on the rights each party actually needs to do so.
To determine an appropriate structure, the parties first need to identify the stakeholders
on both sides who should be involved in the negotiation process. Those on the
university side should understand how the drug discovery process is managed by their
industry partner, who the key decision makers are, and what role their counterparts on
the company side have at each stage in the process. For example, an exploratory project
directed to identifying new oncology drug targets as compared to a drug discovery
partnership to collaborate on a drug screen will likely engage different management
teams and decision makers. As the potential scope of a collaboration changes during
negotiations, and during the life of the relationship, different stakeholders, often with
different concerns and priorities, may need to be brought into the process.
Ordinarily, objectives for obtaining a license fall into three categories: (1) to obtain
access to technology necessary to develop and make a product or service (enabling
technology); (2) to obtain legal freedom to make and sell the product or service
(freedom to operate); and (3) to use as an offensive tool, for example, IP rights that the
partner could use to exclude potential competitors from selling the same products or
services (exclusivity in that market). One can draw a simple analogy to operating a food
stand in a park. Here, enabling technology might equate to know-how and materials
needed to make the food and run the equipment. Freedom to operate might equate to
permits allowing one to run the business and serve food in the park. Finally, exclusivity
might equate to being able to keep any other stands out of the park, or those in the park
from serving food. Table 1 provides a general description of the range of potential
relationships.
Table 1. Agreement types
Many biotech deals begin well before the ultimate commercial product has been
determined or development work has even begun. In such cases, there is often little
certainty in what IP rights will ultimately be most important, and when negotiations
begin, many details for the collaboration are unknown. Despite this, it is surprising how
frequently license negotiations start with the parties attempting to negotiate from a
detailed “standard” form agreement. Such an approach may be reasonable for simple
transactions such as a material transfer agreement commonly used to exchange reagents
between academic laboratories. But in more complex biotech deals, such an approach is
rarely productive or efficient. In the end, attempting to fit the deal into a ready-made
box only reduces the likelihood that the final agreement will in all respects accurately
reflect the true understanding of each party.
Term Sheets
The ultimate success of complex biotech deals often hinges on the ability of the parties
negotiating the deal to reach an effective understanding and agreement on the
expectations, obligations, and risks each party will take on. Bypassing this step
increases the chance for later misunderstanding and disputes, especially in more
complex deals and when drafting a final license agreement comes under time pressure.
Use of term sheets will almost always direct more effective and productive negotiations
and is often the best approach to ensure that the parties reach a true consensus.
Essentially, term sheets provide a summary of those issues that the parties consider as
the most important aspects of the deal. Although its primary purpose is to act as a
template for drafting a full, detailed agreement, a term sheet—which, generally, is
specified legally nonbinding—can provide a useful reference point to guide and focus
the negotiation process from the beginning. Effective term sheets should be customized
to reflect the unique requirements each deal presents. Ideally, the process of deciding
what should go into a term sheet provides an opportunity to identify all the key
provisions each party views as essential for their participation. If the parties are unable
to agree on any deal, it is preferable to find out early in discussions rather than months
later after drafting a complex agreement has consumed considerable financial and
personnel resources. The more thought and discussion that go into preparing a term
sheet, the lower the likelihood of any eventual misunderstanding. Some important
provisions commonly negotiated in most biotech deals, and which would be included
in a term sheet, are provided in Table 2.
Table 2. Common provisions and terms included in biotech term sheets
8.3 MANAGING IP RIGHTS

In many technological areas, the owner of an IP right may not be best suited to
commercially exploit the IP. For example, although well suited to encourage and enable
primary research, academic institutions generally do not have the infrastructure,
expertise, or financing required to shepherd a compound through clinical trials to
commercialization. To help accomplish this and best commercialize its technology, the
university may use a variety of strategies and licensing arrangements.
Licensed rights are commonly limited, for example, by field of use or territory. This
consideration becomes particularly important when commercialization of a certain
technology involves relationships with several partners. In the biotechnology sector,
because patent rights can be subdivided in many different ways, it is common to grant a
license for one particular field (e.g., treatment of pediatric oncology) but not another
field (e.g., adult oncology or pediatric autoimmune disorders). As a result, the same
patents may be licensed to different parties, each on an exclusive basis, but for different
nonoverlapping fields of use. In such cases, care needs to be taken to avoid creating
conflicting rights in multiple licensees. Conflicting rights might arise, for example, if
multiple licensees have rights to control patent prosecution for the same patents or if
they have other rights with respect to the licensed patents (such as a right to assignment
of any licensed patents the academic licensor intends to abandon).
Exclusive versus Nonexclusive Rights

An exclusive license generally means that only the licensee may exercise the rights
given in the agreement, even to the exclusion of the IP owner. Exclusivity generally
includes the ability to enforce the licensed IP rights against others. For example, in a
patent license, exclusivity will generally provide the licensee with the ability to sue
third parties for patent infringement and also provide the licensee with the ability to
sublicense all or part of its patent rights to others. Exclusive rights play a central role in
the development and commercialization of molecular targets and drug candidates,
because of the extensive cost and effort required to overcome the many risks involved
in drug development.
On the other hand, a nonexclusive license in general only provides the licensee with
permission to use the rights covered by a patent without giving the licensee any control
over enforcement or licensing of such patent rights. Such a license therefore allows the
IP owner to grant the same rights to several parties. These rights are most common for
platform technologies with wide applications in different fields of use.
Parties, when negotiating a deal and drafting a good license agreement, should ensure
that the scope of the licensed IP rights is clearly defined, including both nonexclusive
and exclusive rights. It is often useful to assume that someone who was not involved in
drafting or negotiating the agreement will need to understand, even years later, what is
intended to be covered by the agreement.
Reserved Rights under the License: Research and Publication Rights

When granting exclusive rights, it is important for the licensor to spell out any
limitations and restrictions the licensor may want to impose on the scope of the grant.
Typically, the academic licensor will carve out certain elements from the rights it grants
to an industry partner. Such carve-outs are often required to allow the institution to
satisfy its obligations to the government and funding agencies under Bayh–Dole and
also under the terms of many federal grants. As an example, the National Institutes of
Health (NIH) has issued formal guidelines to ensure that institutions receiving NIH
funding adopt reasonable terms and conditions in their agreements to ensure access
and dissemination of research tools made in the course of that research (Federal
Register 1999). And, more generally, a number of institutions have endorsed guidelines
to help ensure that academic institutions in licensing their technology adhere to their
core mission (AUTM 2007).
In a typical case, the licensor reserves the right for itself, and often other nonprofits, to
use the licensed technology and related IP rights for noncommercial research. Usually,
the carve-out must be broad enough to ensure that the university will not be precluded
from continuing research on any exclusively licensed product or method. Sometimes

the university may seek a broader carve-out, for example, allowing the university to use
the IP it has licensed in connection with research that is sponsored by other companies.
Such reserved rights may be appropriate or even necessary, for example, when the
exclusive license might cover use of fundamental research tools or enabling technology
that other investigators at the university would likely use. The university, however,
must keep in mind that the broader the exception to the exclusive license, the more
difficult it will be to negotiate a commercially acceptable position.
Another typical carve-out relates to “prospective” rights, that is, rights to future
technology, improvements, and inventions that have not yet been made. This situation
arises most in collaborations involving very early-stage projects (e.g., at target
discovery), in which the company licensee seeks broad rights, including
commercialization and exclusive rights to any inventions or technologies arising from
the project. Such future IP may not necessarily even be directed to the specific goals of
the collaboration. Tying up commercialization rights to future IP through a broad
exclusive license to one company may unduly restrict the ability of other investigators
not involved in the deal to engage in their own collaborations, even in different fields.
Furthermore, the academic licensor may not be willing to take the risk of giving up
future opportunities that may depend on such IP and may be more suitable to pursue
with another party.
A common framework for allocating prospective rights has both parties obtaining
nonexclusive rights to any newly developed IP for any of their internal R&D work.
Broader rights to future developed IP, such as commercial rights to sell or market
products, or exclusivity in some or all fields of use may then be handled through
several approaches. Such approaches often involve the grant of option rights to the
company partner, for example, an option to negotiate in good faith for an exclusive
license under commercially reasonable terms when such new IP or technology comes
into being. Alternatively, for a collaboration directed to a very early-stage project, the
company may be content with merely having access to the technology for its own R&D.
It can then address the terms for any commercial development only if it chooses to
extend the relationship with a new deal.
Conceptually, these reservations first facilitate the mission of nonprofit research

institutions by ensuring that the institution will maintain freedom to conduct basic
research. Second, these reservations acknowledge the principle that to appropriately
balance the competing interests of the licensor and licensee, the scope of rights that are
licensed should reflect the scope of the deal, as well the stage of development of the
licensed technology.
For the university, careful consideration should be given to how any grant of exclusive
or proprietary rights or obligation of confidentiality might potentially affect its ability to
publish or present the research done under an industry collaboration. Such
considerations include any provisions that may require a delay of publication or prior
approval to publish results beyond customary academic practice. Commonly, the
interest of the industry partner in protecting IP generated during the course of a
collaboration may be accommodated by the right to review, remove proprietary
information from, and request a reasonable delay (ordinarily no longer than 90 d) of
any proposed presentation or publication for purposes of patent filing. To this end, it is
important to consider the interplay between various provisions in the agreement, which
in practice may unduly restrict publication rights. For example, the agreement might
provide the industry partner with a 6-mo option to negotiate for an exclusive license on
any new inventions. Such option rights, however, may have the practical effect of
delaying publication if the agreement also restricts the university from undertaking any
activity during the option period that could affect the scope of what it could license, for
example, by publishing its research before a patent application has been filed.
8.4 VALUATION AND PAYMENT STRUCTURES

Payment structures and amounts flowing from a license relationship are crucial not
only to negotiating and executing the deal, but ultimately also to the long-term success
or failure of the relationship. A successful deal requires balancing the competing need
of the academic licensor to obtain a fair return on its R&D investment with the company
licensee’s goal to make a fair profit in the face of multiple regulatory, legal, and
commercial risks. The possible forms of payment rely on many factors. Common
payment structures include, either alone or in combination with one another, upfront
fees, royalties (e.g., on a fixed per-unit basis or as a percentage of sales), and milestone
payments linked to specific performance events. Less common structures include one-
time payments or annual fixed fees, typically because they are not sufficiently robust to
bridge the expectation gap between the academic licensor and company licensee.
Additionally, in some cases in which the company licensee owns or controls IP rights
that may be of interest to the university, an alternative method of payment could
include a cross license with the university. Part of the consideration for the deal might
then include a license from the company for use of the relevant IP. Table 3 provides a
general overview of common payment forms.
Table 3. Principal Forms of License Consideration
Upfront Fees
The academic licensor may ask for a lump sum upfront payment either to recover costs
for past research or to fund its participation in the collaboration. Such costs commonly
include research costs and the cost of applying for and prosecuting IP rights. Where a
company licensee is an early-stage startup with little cash, an academic licensor may be
willing to accept stock or other forms of equity as payment (thus making the academic
institution a shareholder in addition to being a licensor). In some cases, for example, in

which upfront fees are paid to cover future development costs, it might make sense for
the license agreement to provide that some or all of the payment will be used to offset
future royalties. Less commonly, an agreement may require full payment up front. Such
an approach, however, is generally not suitable for biotechnology transactions where,
for numerous reasons, the ultimate commercial value of any potential product may be
difficult or impossible to measure. Such uncertainties can include whether the product
will perform in human clinical trials as expected based on animal models, whether the
product will receive regulatory approval, what price the market will sustain, risk of
competitive alternatives, acceptance by healthcare professionals and/or patients, and
potential need and cost for licenses from third parties to make and sell the product.
8.5 Royalties
Biotech licenses generally include royalty payments. As a primary consideration, the
agreement should provide a clear definition of what licensed products and services are
royalty bearing. The university licensor should bear in mind that the products and
services sold under its license may change over time. The company licensee may, for
example, look for opportunities to launch new or improved products or expand use of
the products into new indications. Ambiguity in what is defined as a royalty-bearing
product or service will likely give rise to later disputes about whether certain sales are
covered under the license.
When setting a royalty rate, many factors come into consideration. A key consideration
is the strength of protection offered by the licensed IP (e.g., patent validity, ease and
cost of designing around, scope and restrictions of the license grant, remaining life of
the licensed patents, or likelihood of infringing other nonlicensed patents owned by
third parties). Key commercial factors include the potential size of the market; whether
there is an established market price for the technology; the commercial relationship
between the parties (e.g., whether the institution has other deals with the company);
whether the technology is a research tool, compound, or diagnostic; and the extent of
existing competing technologies in the market or the likelihood of market penetration.

Depending on these factors, it is often appropriate to set different royalty rates for
different products and services that come under the license.
Royalties can be calculated as a percentage of sales or on a per-unit basis. Percentage of

net sales is most common, and allows the royalty amount to automatically increase with
increases in price. When royalties are based on net sales, a clear definition of how net
sales will be calculated is essential to avoid future royalty disputes. For example, the
company may market the product sold under the license as a loss leader or give away a
meaningful fraction of the product for free. Such actions will erode the base against
which the royalty is calculated unless the agreement incorporates some adjustment for
below-market sales. In contrast, when calculated on a per-unit basis, the company
licensee assumes the risk that if competition results in lower product price, it will be
stuck paying the same royalty.
Payment of royalties rests on the assumption that the licensee will work diligently to
commercialize the licensed product. To develop a biotech product for
commercialization, however, requires a long time. During that time, the company
licensee’s interests (or the market generally) may change so that it is no longer in the
company’s best interest to invest further in commercializing or marketing the licensed
product. For example, the company can instead decide to develop (or in-license/acquire
from a third party) a competing technology that is not covered by the academic license
or to change its business to a new sector entirely. But when that happens, the
expectation the academic licensor had in going into the deal does not materialize,
especially if the university decided to trade upfront fees for a higher royalty rate.
To reduce this risk, particularly in the case of technologies that require significant
further development before they achieve regulatory approval and commercialization,
an academic licensor may wish to consider imposing a minimum royalty obligation.
Thus, the academic licensor continues to receive payments in return for forgoing higher
upfront fees or the opportunity to license the technology to another party. Properly
structured diligence provisions, such as minimum royalties, can encourage the

company licensee to either continue commercializing a licensed technology or instead
release the technology back to the university.
This diligence provision can be structured to take into account other uncertainties the
parties may have in going into a deal. For example, it may be difficult to know the
appropriate minimal royalty before any commercial activity has begun. To account for
this, it is common to include an adjustment mechanism once payments have started
flowing and a market becomes established and understood. As another example, a
product may not come to market for several years, leaving a small company without
enough cash flow to meet its obligations. To account for this, the agreement can provide
that if the minimum is not met, to retain its rights the company licensee can pay the
difference, terminate the license, or short of that, convert an exclusive license to
nonexclusive. These options give the academic licensor a new opportunity to pursue the
technology with a different unrelated party. However, taking advantage of these
options may be difficult if the university has lost several years of development time or,
in the last case, the new partner wants exclusivity.
Milestones
Milestone payments based on performance provide a reasonable tool for bridging the
valuation expectations gap between a licensee (who assumes that the technology will be
successful and will fill the market need) and a licensor (who bears the risk of product
failure at multiple junctures). Although milestone payments can be triggered by any
kind of performance event, they are best suited for events that can be described with
particularity. Ideally, milestones should be triggered by events that reduce future risk to
the company licensee, in that by doing so, such events increase the value of the license
agreement to the company.
Common milestones include first commercial shipment or sale of the licensed product,
final Food and Drug Administration approval of an identified Biologics License
Application, closing of a financing transaction raising a specified amount of funds, and
achieving specified sales targets during a defined period or by a certain date.

Performance milestones are those that can be satisfied with a reasonably predictable
level of commercial diligence and are described so that both parties know and
understand without ambiguity by whom the milestone was achieved, and on what day.
Ambiguous milestones can create fertile ground for disagreement leading to protracted
and mission-distracting discussions and can irreparably damage an otherwise
productive relationship. Care should be taken in describing the consequences of failing
to achieve performance milestones. The academic licensor is likely to benefit from the
right to terminate an agreement in which the company licensee failed to meet certain
milestones, but termination need not be the first option. The company may be given a
period to cure its failure, or the agreement can provide for dispute resolution
procedures giving parties a mechanism for resolving disputes before having to trigger
termination rights.
Further Considerations
An academic licensor should be aware of potential lost opportunities for licensing
revenues, particularly with respect to sublicenses granted by the company licensee to its
third-party contract partners. Except where a company licensee is a large, fully
integrated pharmaceutical company, a company licensee will very likely need to
partner with other third parties to take a product through clinical trials to market. To do
so, it will need the ability to grant sublicenses to select third parties. As a basic point,
the agreement should ensure that the university receives royalties on third-party sales
by sublicensees. The academic licensor should also take care to ensure that the
agreement provides it with an appropriate share of the compensation the company
receives for granting any sublicense.
Even when the payment structure and obligations are sufficiently understood and
described in the license agreement, disputes may still arise about payments if the
agreement fails to adequately describe the rights and obligations regarding record
keeping and audits. License agreements therefore commonly include a requirement to
keep complete and accurate books and records to verify royalties and other payments,
both during the term of agreement and for a reasonable period thereafter. The
obligation is typically backed up with a penalty or interest payment obligation for
failure to accurately report. Such obligations become increasingly important as the
likelihood that the market for the licensed product will change or grow (e.g., through
sublicenses or new or acquired products).
Finally, it should be kept in mind that the license deal should be both well documented
and commercially reasonable. The company licensee (especially startups) will likely
need to obtain financing at some point in its life before products are approved and
commercialized, either from a venture capital firm or other financial investor, from the
equity capital markets through an initial public offering or follow-on offering, or in
connection with acting as a takeover target during a merger and acquisition deal. If the
license deal has unduly burdensome terms including unreasonable payment terms, the
licensee could have difficulty executing any of these kinds of transactions (i.e., the
license is “unbankable”), decreasing the chance that any licensed product will be an
attractive investment target that will likely achieve successful commercialization.
8.6 ENFORCEMENT AND REMEDIES

Licensed patent rights occupy a central role in the value and structure of a license
arrangement, whether simple or complex. Prosecution of the licensed patent claims (i.e.,
the process of drafting and filing claims and interacting with the patent office) involves
precise technical thinking and drafting, and it is crucial that prosecution be addressed
with care and diligence. Although it is common that the academic licensor retains
control over prosecution activities given its vested interest in protecting its rights, an
exclusive licensee also has a substantial financial interest in the scope of rights sought
and obtained—and may also be responsible for paying at least some portion of the costs
required for patent prosecution and maintenance. Company licensees will generally at
least want to review and comment on communications with the patent office that
impact the scope of the claims. Hence, an exclusive licensee normally demands at least
some say—if not full control or veto rights—in how and where the patent rights are
sought.
As with prosecution, defense of the licensed patents is also of considerable interest to

exclusive licensees and can be the subject of extensive negotiation. In many instances,
neither party is willing to cede control of litigation outright. In such cases, one party
may retain control over the defense, but the other party is given the opportunity to
review all material correspondence and documents and to provide some nonbinding
input into decisions. In some cases, the controlling party may wish to decline enforcing
the patent rights against third-party infringers. In that event, the other party might be
given the option to step in at its own expense to enforce the patent rights with whatever
cooperation it needs from its partner. In this regard, consideration should be given to
the input each party will have in settling allegations of infringement with third parties
and how to allocate costs and any amounts awarded by a court.
8.7 CONCLUSION
With the large number of blockbuster pharmaceutical products going off-patent in
recent years (Cressey 2012), dwindling pipelines for new products, and pharmaceutical
companies shedding or significantly reducing their R&D programs, universities and
other nonprofit academic institutions present an important source of new molecular
targets and technologies for development and commercialization by life sciences
companies. A successful licensing arrangement between an academic institution and a
company benefits both partners, creates new products, and brings new diagnostic and
treatment tools into the clinic. By understanding the unique issues that arise in
structuring and negotiating license arrangements between academic institutions and
companies, it is possible to increase the likelihood of a successful and productive
relationship, and thereby achieve the promise of the Bayh–Dole Act.
9. CREATION AND EXPLOITATION OF THE

TECHNOLOGY
9.1 PRINCIPAL SOURCES OF INVENTION

The race to enhance the quality of life by use of the effects of biotechnology and to reap
financial reward therefrom has driven the source industry for the technology into new
frontiers. Novel and sometimes complex approaches have had to be developed to
handle the transfer of this very creative technology from its sources to the outside
world. In the treatment of diseases in various life-forms ranging from microorganisms,
fungi, plants, animals to humans, the overall task in developing such treatment is
usually too much for anyone company, particularly when the market for the technology
comprises the world. To optimize the development of the technology and the
commercial returns from any new development, the project is usually too great for a
single company, even if that company is a large multinational corporation. Many of the
significant developments in biotechnology. are coming from universities and small
start-up companies which are not structured for commercialization. Usually more than
one large commercial partner is needed, hence requiring a transfer of the technology.
Problems which large and small corporations, research institutes and private
practitioners consider in the transfer of the technology arise when the transfer of the
technology is considered in one or more of the following situations:
 joint marketing programs

 research and development endeavours
 research collaboration
 joint ventures
 settlement of patent infringement suits%
 cross-licensing of patents
 field trials and regulatory approvals

 financial restrictions
All of the above situations have significant implications for the manner in which
licensing programs are structured. Many innovative license approaches have evolved
from the demands in licensing of a technology which changes so rapidly and has such
an expansive field of use, territorial applications and proprietary protection
implications.
Biotechnology has also played an important role in encouraging the creation of

university-industry links. Fifteen years ago, most universities had a very casual,
unstructured program for licensing of technology developed in the university and for
conducting contract research on behalf of companies and government. The success,
however, of certain universities in the licensing of biotechnology, which has generated
significant royalties, in some instances in excess of $10 million per year per
development, resulted in many universities establishing their own technology transfer
departments with elaborate technology protection programs. The aim was to alleviate
the shortage of government funding for universities, as well as to make available for
practical application the results of university-generated research. Of late, some
universities have been successful, although they have undergone major restructuring
programs. Other universities have not been so successful and are eliminating their
technology management licensing programs because of the significant ongoing costs of
operation. In revamping their technology management programs, my universities are
opting for a very active marketing of a technology which is only in the initial stages of
protection. It is thought that an active marketing of the technology will attract corporate
interest and that the corporate interest will generate funding for protection of the
technology.
FUNDING RESEARCH AND DEVELOPMENT IN THE BIOTECHNOLOGY

INDUSTRY
Background
As an industry, biotechnology is known to consume large amounts of capital in the

research and development (R&D) process. An often-quoted figure was that it took 10
years and $100 trillion to market a drug for human application. The latest figures from
Tufts University in Boston budgets $230-million over 12 years to take a pharmaceutical
from the laboratory to the marketplace. There is no reason to assume these estimates
would not correspond to costs in other countries. Admittedly human medicines raise
the heaviest demands in time and money, but it remains that biotechnology is a very
capital-intensive enterprise.
In 1988 (the latest available figures) the biotechnology industry in Canada had total
sales of $660-million and research and development accounted for $359-million. On
average, Canadian companies devoted 42% of sales revenue to research and
development. Given that the research and development curve is lengthy and has an
extremely high "burn rate" of capital, it is hardly surprising that several rounds of
funding might be required to bring an innovation to market in any country. Before
deciding which funding vehicle to employ, it is essential to plot precisely where the
company is on the development curve. Each round of financing has its own risks and
advantages and a proper determination of the position of the company on the curve
will determine the appropriate form of financing.
The first round is "seed financing," which refers to the money needed to prove the idea
and establish its theoretical viability. The second is "start-up financing," which applies
to companies in the .initial stages of product development and marketing, but without
full-scale production. The senior technical and/or management staff are often already
in place in such circumstances. "First-stage financing" refers to the initial stages when
earlier rounds of financing have been exhausted and further capital is needed for full
commercial production, marketing, sales and on-going research. The next or "second
stage" comes into play when corporations have progressed to the point of profitability,
but need more capital to maintain operations. The final step, "mezzanine or third state
financing," provides capital to profitable compaJiies for major expansion. The moneys
can be used for expansion of production facilities, further market penetration, new
product development and continuing research.
9,2 Corporate Financing

Given the vast sums required for R&D, one favoured means for financing is the merger.
An example was the sale of Canada's Connaught Laboratories to France's Institut
Merieux International, which is controlled by the chemical corporation Rhone-Poulenc.
In order to satisfy Canada's foreign ownership laws, Merieux had to undertake to
maintain domestic R&D and production. Both sides to the agreement contended that
the merger was the only means by which research could continue.
Short of a merger, another source of financing is the strategic partnership. Normally this
takes the shape of a technically strong but minor company aligning with a major
corporation such as a multinational pharmaceutical enterprise. An alliance built upon a
product or a line of products has certain advantages. First and foremost, it will supply
capital to further carry product research. It will also continue progress on the
development curve, and may compliment research already being conducted by the
major partner. Second, it will assure market distribution when appropriate. Finally, an
alliance for a specific product or line will discourage the major from buying the minor
to remove from it the technology.
A further source of funding is the corporate· grant for R&D. The Canadian
Pharmaceutical Industry has 'set an example where through legislative changes there
was a promotion of domestic development. In 1988, amendments to the Patent Act were
enacted to increase R&D expenditures in Canada. In exchange for the loosening of the
compulsory licensing provisions of the Act, a board was created to monitor both drug
prices and R&D expenditures. R&D spending targets were set at 8% of sales for 1991,
rising to 10% in 1996. Failure to meet these targets can result in the board withholding
the manufacturer's exemption from compulsory licensing. As a result of this,
pharmaceutical R&D spending in Canada rose from $103 million in 1987 to $211 million
in 1989. It is important to note that this R&D expenditure is not exclusive to the
laboratories of the corporations, but finds its way into university and hospital research,
since the corporations take advantage of expertise outside their own enterprises.
Securities
Enterprises whose research is not funded through, for example, a multinational parent
or a partner, or informal sources such as friends or relatives must go to either the
private or public markets for capital. Generally speaking, there are essentially two
methods to raise capital in the securities markets-the private or public offering. The
trading of securities is usually regulated closely and regulations vary from country to
country. However, certain general approaches can be mentioned.
In many countries, the term "private arrangements" is used to describe arrangements in

which the document used to explain to investors the nature of the enterprise (the
"offering memorandum") is given to a select group of "sophisticated" (usually 75)
investors and are often filed upon successful closing with a government securities
commission. A common amount of investment under an offering memorandum is
$100,000,_ which is intended to reflect the sophisticated knowledge of the investor.
The stock markets function as means whereby companies can "go public" through
instruments such as share offerings. At present, there are relatively few
---Biotechnology companies listed on the Stock Exchanges.
Venture Capital
In many countries,. the pool of capital available through venture capitalists has grown
significantly over the past years. In some countries a special association promotes this
pool by attempting to put the investor and the cash-needy business together. One
means such associations follow to do this is by publishing lists of venture capitalist
corporations along with information such as the type and stage of preferred investment,
number of investments held and preferred area of investment.
Government Assistance
On the public side, various levels of government assistance have been made available to
address the needs of the industry. Many governments have established "business
development banks," which have venture capital sections along side of their regular
lending divisions. These government development banks are intended to fill financing
holes where it is believed other forms of funding are not available.
In many countries, the government has designated biotechnology as one of three

strategic technologies in the country's development and, as such, is committed as a
matter of public policy to its support through agencies such as National Research
Councils. In addition to the central government, provincial and municipal governments
offer numerous· support programmes for the industry which range from direct grants
for R&D, technical support and marketing assistance.
9.3 COLLABORATIVE DEVELOPMENT

Some large corporations are taking a spear-headed approach by developing strategic
alliances with companies developing particular therapies, such as the use of interleuken
2 in the treatment of cancer or research on the AIDS virus. In the area of plants, there is
significant activity in developing new varieties which are disease- and insect-resistant,
or which exhibits other favorable characteristics, such as, in the case of cut flowers,
having longer vase life or enhanced colours. Patent litigation has also been instrumental
in bringing large and small corporations and/or universities to the table to resolve their
differences by way of license arrangements to jointly develop a technology.
9.4 EXPLOITATION ISSUES

The impact of biotechnology in the industrial community resulted in many forms of
start-up companies. In the late 70s, biotechnology was thought to offer lucrative and
quick returns for investors as a result of expected immediate benefits from the
commercialization of various genetic engineering and antibody technologies.
There has been, however, a significant lowering of expectations. Commercial realities

have resulted in many corporate acquisitions, the acquisition of bankrupt companies
and the wholesale sell-off of technologies by small companies.
Large corporations are investing in and taking exclusive license positions and acquiring
many small corporations showing leadership in various aspects of the development of
the technology. The lack of funding from the financial markets has forced small
companies to reconsider and revamp their patent programs and to consider the
licensing of their significant technologies in order to survive. Joint ventures and
collaborative research vehicles have become very significant amongst small businesses
and in the start-up company arena. Large partners are usually required to exploit the
technology until the small company is self-sufficient and has sales in excess of a given
threshold, which might be between $50 and $100 million per year.
Large corporations appear to be in the comfortable position of being able to shop for a
technology which best suits their long-term plans. They are finding, however, that they
must react quickly in their shopping programs because of the competition amongst the
larger corporations <for technology. The significant driving forces which heighten this
competition include concern about illnesses such as cancer, aids and hepatitis B,
diagnostics, heart-related diseases, environmental concerns resulting in better treatment
of plants and animals, the desire for increased insect and bacterial resistance in plants
and for increased or enhanced food production in plants and animals. Rather than
seeking technologies that have already been developed, large corporations have taken
the approach of entering into extensive research collaborations with universities under
which all patented technology is owned by the university and the corporation receives
an exclusive license position under that protected technology.
10. GENERAL CONSIDERATIONS CONCERNING

LICENSING
10.1 INTRODUCTION
The License As Contract

At the outset of a consideration of licensing, the obvious and fundamental point may be
noted that a license is a contract and, as such, the conclusion of the license and. Its
subsequent execution is governed by the general principles of contract law. Contract
law stipulates, in particular, certain basic minimum requirements that must be satisfied
in order for a legally enforceable agreement to exist, such as the legal capacity of the
parties to act, some manifestation of assent by the parties, often the existence of
sufficient consideration or mutual promises, and the legality of the transaction. Unless
these basic requirements are satisfied, the license will not legally come into existence.
The License As Business Relationship

While the license is a contract, and thus a defined legal relationship between the parties,
it is also a continuing (for the duration of the agreement) business relationship. The
legal agreement cannot define all of the incidents of the business relationship and, in
particular, cannot fully set down in terms of legal obligations the ingredients of a
successful business relationship. This depends, amongst other things, on the attitude of
the parties to the transaction, including their desire to make the arrangement work,
good management, efficiency and mutual understanding. In particular, it has often been
stressed that a successful license must be mutually beneficial to the parties and depends
on mutual reliance and mutual cooperation. A simple example serves to demonstrate
the need for the relationship created by the license to be mutually beneficial. The
remuneration to the licensor is often calculated in terms of a royalty on a quantity or
measure of the licensee's use, production or sales of a product or process containing, or
manufactured in accordance with, the licensed technology. In such cases, it is in both

the licensor's and the licensee's interest to ensure that the licensee's business operations
are successful. The more products sold, the greater the payment through the royalty to
the licensor, and, assuming efficient management, the greater the profit to the licensee.
International Licenses
Many, but by no means all, licenses take place between nationals or entities of different
countries. In order to achieve a successful legal and business relation" ship in such
circumstances, it is essential that each party make an effort to understand the legal and
commercial culture and traditions of the other. Being a contract, the license negotiations
and the concluded agreement will be influenced by the expectations and conceptions
that arise from the legal and governmental framework in which each party is
accustomed to operating.
10.2 FORMAL CLAUSES

Typically, a license agreement contains a number of formal clauses the object
of which is:
- to state the fact of the legal conclusion of a license between identified parties
(introductory provision);
- to explain the background and objectives of the license (recitals);
- to define the key terms used throughout the license agreement (definitions);
- to designate the manner in which formal communications between the parties
concerning the license agreement should be made (notices);
- to conclude in a correct and formal legal manner the license agreement and
thus to bind the parties (execution); and
- to identify in detail the technology and the rights in relation thereto that are the subject
of the license agreement (appendices and schedules).
Introductory Provision
The first words of a licensing agreement usually record that the document which
follows constitutes a licensing agreement that has been made in a particular place, on a
specified date and between identified parties. That statement is without legal effect, of
course, unless the ensuing document truly constitutes a binding contract and has been
properly executed. The function of this introductory provision is, therefore, not to
constitute a binding contract between the parties, but rather to describe three important
elements of the binding contract that will come into existence by virtue of the ensuing
document. The first of those elements is the parties to the license agreement. An
accurate description must be given of the name and the legal personalities (whether
natural person, corporation or some other entity such as a partnership) of the parties, as
well as, often, their addresses and, in the case of corporations, their place of
organization and principal office. It is essential that the description of the parties be
accurate, since that description identifies the bearer of the legal rights and obligations
which are created in the agreement. In addition, under the laws of some countries, it
may be necessary to record the existence of the license agreement in the register
containing details of the registration of one or more of the industrial property rights
which are licensed. In such a case, the name of the owner of the industrial property
right and of the licensor must correspond exactly.
The second main element that is usually described in the introductory provision is the
date on which the agreement is made, although it is not uncommon for the date to be
recorded in the execution clause instead. The significance of the date is to establish the
starting point of the legal relationship, and thus the legal rights and obligations of the
parties, and to determine when the agreement will terminate (since the duration is often
expressed in terms of a number of years). In addition, where the law of a country
requires that licensing agreements be registered or approved, that requirement must
usually be satisfied within a given period from the entry into force of the agreement.
In many cases, a distinction is, however, made between the date on which an agreement
is made and the date of effective operation of the agreement. Where the latter date is
also used, it will provide the date for the commencement of the agreement. The purpose
of providing for the latter date is usually to allow time for arrangements envisaged by
the license agreement to be put in place, or for regulatory approvals to be satisfied.
The third main element often dealt with in the introductory provision is the place in
which the agreement is made. This place will be a relevant factor, in the absence of an
applicable statutory provision or a valid· express contractual provision in the
agreement, in the determination of the applicable law governing the agreement.
Recitals ("Whereas Clauses")
After the introductory provision of a license agreement, and preceding the substantive
clauses of the agreement, a number of recitals (typically commencing with the word
"whereas") often appear for the purpose of describing the background to and objectives
of the license agreement.
Different practises exist in various countries as to whether recitals are included at all
and, if so, the degree of detail appearing in them and their style ofdrafting (in some
cases they are drafted in narrative form, while in others the languagetends to be
formal). In those countries where it is usual practise to includerecitals, the recitals are"
regarded as useful and desirable, but not essential. Whererecitals are included in an
agreement, they usually contain a description of:
- the principal business operations of each party;
- the pre-existing relationship, if any, between any of the parties (for example, parent
and subsidiary corporation);
- a statement of the status of industrial property· rights that are licensed pursuant to the
agreement (whether the subject of an application for, or the grant of, a title), as well as
the ownership of such rights;
- the motivation of the agreement; and"
- the intention of the parties to conclude a legally binding agreement.
As elsewhere in a license agreement, accuracy is of course essential, since the recitals
may contain representations of fact, such as statements concerning the ownership of
industrial property rights, and legal consequences may flow from an inaccurate or false
representation.
While the provisions of the substantive clauses of an agreement will always prevail
over the provisions of the recitals, the recitals may be used by a court to assist in the
interpretation of the intention of the parties, as revealed in the substantive clauses, or of
ambiguous terms or phrases in the substantive clauses.
Definitions
Those who negotiate a license agreement will not necessarily be the same as those
persons who will be responsible for its execution and management, since, among other
reasons, personnel in enterprises change over a period of time. It is essential, therefore,
that the license agreement reflects definitely and accurately the intentions of the parties,
and avoid, to the greatest extent possible, ambiguity and misunderstandings. Language
is a rich source of possible misunderstandings, particularly in the context of
international license agreements, since different nuances in the meaning of words· in
the same language used in different regions of the world are common, and the meaning
of concepts differs between languages. For these reasons, license agreement commonly
contains definitions of key terms in relation to which misunderstandings must be
avoided at all costs.
The decision whether to define a term usually rests on a consideration of whether the
term has an unmistakable meaning. If it does not, some clarification by way of a
definition is required.
Once it has been decided that a term should be defined, it remains to be decided where
the definition should be placed. Practises differ on the location of definitions in an
agreement. In some cases, a separate clause is included towards the beginning of the
agreement which includes all definitions. In other cases, terms are defined in the clauses
in which the terms appear. In some agreements, both a separate definition clause and
definitions in the various ensuing clauses are inserted. The location of definitions is
largely a matter of style and convenience. If the term is used recurrently throughout the
agreement, it may be considered more convenient to define it once in a separate
definition clause. If, however, a term is used in only one clause, the definition might be
contained in that clause. Likewise, where the meaning of a term has been the subject of
lengthy negotiation and amounts to a substantive condition, it is often defined in the
clause in which the term is used.
Typical examples of terms which are defined in a license agreement are:
 technical terms, where industry practises between and within countries may
 not be standardized; .
 territorial terms, clarifying the exact territory included within a country or region
for the purposes of the agreement and, in· particular, the geographical extent of
the license;
 the intellectual property rights licensed pursuant to the agreement, including
know how or technical' information which a licensor makes available under the
agreement;
 corporate entities and the relationship between such entities, for example, the
terms "subsidiary" and "affiliate";
 royalty formulae, such as "net sales price"; and
 time periods, since fiscal and accounting years differ from country to country.
Notices
It is usual for a license agreement to contain, after the clauses setting out the
substantive-rights--and obligations of -the parties, a notice Clause the purpose of which
is to specify the manner in which formal communications between the parties to the
agreement are to be effected.
Typically a notice clause would address four elements. The first of those elements is the
permissible or required means of communication-whether by letter (and, if so,
whether'registered and whether by air), by telex, by facsimile, or by all of these means.
The second element 'is the exact address to which communications to each party must
be sent. The third element is, unless the parties use the same native tongue, the
language in which the communication must be sent. The final element specifies when,
legally, a notice will be deemed to have been effectively given. In the case of
communications required or permitted by letter, for example, the date of dispatch or of

receipt is variously attributed by different legal systems as the date on which notice is
deemed to have been effected. Accordingly, a notice clause would usually clarify which
of those dates is to apply. In the case of communications required or permitted. by telex,
notice is usually specified as being deemed to have been effected on receipt of the
answer-back code of the party to whom the telex is sent.
Execution
The execution clause usually appears at the end of the clauses of a license agreement
and immediately before any appendices or schedules. It constitutes the official assent of
each of the parties to be bound by the provisions of the agreement.
Accordingly, it.is essential to ensure that the person who signs the agreement on behalf
of each party has the legal authority to bind that party or, alternatively, if a corporate
seal is affixed, that the signatures accompanying the seal are those of the officials
authorized by the constituent documents of the corporation to witness the affixation of
the corporate seal.
Usually the execution clause sets out the "rull legal name of each party, the title of the
officials signing on behalf of each party, and the date and place of signature. In the
absence of a separate designated effective date of operation of the agreement, it is
important that the dates on which each party executes the agreement correspond or are
so correlated as to' achieve the desired starting date of the agreement.
Appendices and Schedules

It is common for a license agreement to include one or more appendices or schedules
which describe in detail the intellectual property applications or rights that are licensed,
as well as the quality and performance characteristics of any products to be produced
pursuant to the licensed technology. The description contained in the appendices will
be important in the event of any future dispute between the parties and must,
accordingly, specifY with the greatest precision possible the intellectual property rights
and the characteristics of any products in question. In the case of intellectual property
rights which are the subject of an application or a title, precise description is easily
achieved. In the case of know-how, however, precision is less easily achieved. Insofar as
the know-how may consist of tangible data, one method of avoiding misunderstandings
is to have, where the nature of the transaction permits, a copy of the tangible data
initialled at the time of the execution of the agreement.
10.3 CLAUSES RELATING TO REMUNERATION

Since a license agreement reflects the terms of a business relationship in relation to a
specific subject matter in a particular context, generalizations must always be treated
with care. This is nowhere more true than in relation to the remuneration clauses of a
license agreement. Both the amount and the mode of payment of remuneration will
depend on the special- circumstances of individual .cases and, more particularly, on the
nature of the technology being transferred, the type of arrangement pursuant to which
it is transferred, the other terms and conditions of the proposed agreement between the
parties, and the prevailing market conditions, including the governing fiscal and
regulatory environment. The last-mentioned factor the governing fiscal and regulatory
environment-may impose special rules that override any other arrangement that the
parties might have otherwise contemplated. While only a general reference to this factor
will be made below, owing to the diversity of laws and regulations prevailing in
various countries, the generality of this reference should not be taken as an indication of
the relative insignificance of this factor.
The main questions which arise for consideration in connection with remuneration,
and which will find expression in the clauses of a license agreement, are:
- the amount which it is contemplated will be paid by the licensee for the
- rights granted under the agreement;
- the method by which the payment of such amount will be calculated;
- accounting, reporting and inspection; and
- currency and fiscal considerations.
It should be emphasized that each of the questions mentioned above is related and that
the questions should not necessarily be treated either separately or sequentially. The
estimated amount of remuneration agreed by the parties following a consideration of
the various factors which influence the level of remuneration may affect or determine
the methods by which the remuneration will be paid. Similarly, the method chosen for
the payment of remuneration may affect the level of remuneration agreed by the
parties, since consideration must be given to discounting or adjusting for the estimated
effects of currency fluctuations, inflation and so forth.
The various factors which will ultimately determine the level of remuneration may be
divided into two broad categories:
(a) factors internal to the proposed agreement between the parties; and
(b) factors external to the proposed agreement.
(a) Factors Internal to the Proposed Agreement

The terms and conditions of the proposed arrangement between the parties to the
transfer, which will be reflected in the clauses of the agreement, will constitute
important factors in the negotiation of the level of remuneration. Amongst the most
important terms in this respect are the following:
(i) Geographical Coverage

The geographical area within which it is contemplated that the licensee will be
permitted to use the technology, and the extent to which the licensee will be permitted
to export to other markets, will exercise an obvious influence over the level of
remuneration. The size of the geographical area and the extent of export opportunities
will affect the potential revenue which the licensee may expect to gain as a result of the
license. Conversely, the size of the area and the extent of exporting permitted may be
reflected in lost business opportunities for the licensor, depending on the licensor's
present and planned business operations.
(ii) Exclusivity
The extent to which the rights conferred on the licensee are exclusive within the
relevant defined geographical area will be very important in determining the level of
remuneration. Here, of course, the license granted may be exclusive, thus precluding
the licensor itself from using the technology and from granting licenses to any third
parties; sole, whereby the licensor retains the right to use the technology but agrees not
to license any third parties; or non-exclusive, whereby the licensor retains both the right
to use the technology and the right to license third parties within the same area. A
consideration of this factor of exclusivity should also be coupled with a consideration of
the licensor's potential opportunities in the relevant territory. If these are limited for
legal or commercial reasons, the value to be attributed to an exclusive or sole license
will be less significant.
(iii) Nature of Intellectual Property Rights

The type of intellectual property rights licensed pursuant to the arrangement, the life of
these rights, and the estimated strategic importance of the rights in the relevant
technical field will be important considerations.
(iv)Duration
The contemplated duration of the arrangement between the parties, which, in turn, will
be linked to the life of the intellectual property rights licensed, is also an important
factor. The projected return to both the licensor and the licensee will be, in part,-a-
function of the duration of the arrangement.
(v) Improvements
The extent to which the licensee is granted access through· the agreement to
improvements in the technology which is the subject of the agreement, and the extent to
which the agreement envisages grant-backs to the licensor of improvements effected by
the licensee, will influence the level of remuneration. The estimated value to be attached
to such provisions will depend on the past record of the licensor, on the one hand, and
the level of technical sophistication of the licensee, on the other hand, since these
profiles will provide an indication of the likelihood of improvements being made by
each party.
(vi) Other Contemplated Arrangements between the Parties

Remuneration will also be influenced by the extent to which the arrangement between
the parties contemplates other forms of cooperation, such as the provision of training
and technical assistance, marketing and managerial advice, cooperation in distribution,
and the purchase of intermediate or spare parts. The nature of, and value to be
attributed to, these other arrangements will depend very much on the individual case,
but may represent either significant costs in the implementation of the arrangement, or
significant additional sources of revenue from the arrangement.
(b) Factors External to the Agreement

There are a number of factors external to the terms and conditions of the proposed
agreement between the parties which require careful consideration by the parties in the
determination of remuneration.
(i) Industry Analysis

The first matter to which attention should be directed is an analysis of the industry in
which the. technology will be used, together with a forecast of the future trends in that
industry. Such an analysis is a necessary preliminary step to any estimation of profits
which may be derived from, or of costs which may be saved by, the use of the
technology which is to be transferred. Included in the matters which need to be
analyzed are the prevailing and projected economic conditions of the market or markets
in which the licensee will be permitted to use the technology; the estimated size of the
market; the extent of competition which exists in the market; and the stage of the
industry, or the product to which the technology relates, in its projected life-cycle. An
analysis of these factors can produce an estimate of the market share which the licensee
might attain through the use of the technology.
(ii) Estimated Profits or Costs Savings

The estimated profits to be derived from, or the estimated costs that will be saved by,
the use of the technology is generally considered central to the determinationof
remuneration.
(iii) Other Comparable Agreements made by the Licensor

Other agreements negotiated by the licensor with other licensees may provide a guide
in the determination of remuneration by indicating market acceptability of certain levels
of remuneration. In order to be a useful guide, however, such other agreements must
concern comparable products or processes; must contain comparable terms as to
geographical coverage, exclusivity, volume of output, and other salient matters; and
must apply to comparable market conditions. The licensee's costs of production, for
example, may differ significantly from market to market.
(iv) Industry Norms

Some evidence exists indicating certain norms within industries in respect of
remuneration for licensing. As with other agreements negotiated by the licensor, such
industry norms may provide a general bench-mark in the process of determining
remuneration. However, care needs to be exercised in relying on such norms.
(v) Development Costs of the Licensor and the Licensee

Both the costs of the research and development undertaken by the licensor in order to
produce the technology, and the installation costs to be incurred by the licensee in
assimilating and using the technology, are likely to be factors drawn into the
negotiations on remuneration by the respective parties. The extent to which these
factors may influence the determination of remuneration will depend largely on the
nature of the technology, its scarcity or the availability of substitutes from other sources,
and the need or desire of the licensee to acquire the technology.
(vi) Governing Regulatory System

As mentioned previously, the governing fiscal and regulatory system will play an
important role in determining the level and type of· remuneration. The regulatory
system may set ceilings to remuneration, limit the duration of agreements, and
otherwise affect the negotiating freedom of the parties in a variety of ways.
10.4 DISPUTES
Since language is an imperfect instrument for recording precisely all the intentions of
the parties to an arrangement, the length of an agreement is limited, and circumstances
change over time and agreements outlive their negotiators, it is not unlikely that a
difference or dispute may arise between the parties to a license agreement during the
currency of the agreement. While the parties cannot, at the time of negotiating and
concluding an agreement, foresee the disputes that may arise, what they can seek to
foresee is the manner in which such disputes as may arise should be resolved.
The clauses in a license agreement which seek to address the manner in which a dispute
will be resolved usually deal with three matters:
- the language of the agreement that is to be considered authoritative for the
- purposes of interpreting the agreement;
- the law pursuant to which the contract is to be interpreted; and
- the forum in which any dispute is to be settled.

Biotechnology and Law

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BIOTECHNOLOGY AND LAW – SEMESTER IX – SESSION (JULY 17- APRIL 18)

NATIONAL LAW UNIV ERSITY ODISHA

BIOTECHNOLOGY AND THE LAW

ACADEMIC SESSION 2017-18

EDITED & COMPILED BY

DR. AMRENDRA KUMAR AJIT

OBJECTIVES OF THE COURSE

 RECOGNIZE DISTINCT TYPES OF LAW PERTAINING TO BIOTECHNOLOGY

 ARTICULATE VARIOUS HISTORICAL SOURCES OF CURRENT LAW

 UNDERSTAND HOW CODIFIED LAW IS CREATED AND ENFORCED

 BECOME FAMILIAR WITH INTELLECTUAL PROPERTY RIGHTS, CORPORATE FORMS, LAWS

 DEVELOP AN APPRECIATION TO THE CHALLENGES OF POLICYMAKING / LEGISLATIVE

MODULE/UNIT MODULE NOMENCLATURE LECTURE PLAN

MODULE – ONE BIOTECHNOLOGICAL INNOVATION AND EIGHT

MODULE – TWO BIOTECHNOLY AND ETHICS EIGHT

MODULE – THREE PATENTING OF LIFE TWELVE

MODULE – FOUR RESEARCH COLLABORATIONS AND LICENSING EIGHT

MODULE – FIVE BIOTECHNOLOGY & PUBLIC POLICY: TEN

MODULE – TWO BIOTECHNOLOGY AND ETHICS

MODULE – THREE PATENTING OF LIFE

MODULE – FOUR RESEARCH COLLABORATIONS AND LICENSING

MODULE – FIVE BIOTECHNOLOGY & PUBLIC POLICY: ENVIRONMENT, HEALTH

3.4 General objections and criticisms ....................................................................................... 38

6.5 Nature of Gene Patents .......................................................................................................... 80

b) Europe ............................................................................................................................. 115

9.1 PRINCIPAL SOURCES OF INVENTION .......................................................................... 149

1. BIOTECHNOLOGY IN THE REALM OF HISTORY

words, it simply suggests, in a lay-man's language, that it is the technology which

1.2 Biotechnology: What Does it Mean?

1.3 Biotechnology: A Basic Requirement

ultimate goal to benefit humanity, for example, production of recombinant proteins,

1.4 Biotechnology and its Various Stages of Development

1.4.1.Ancient Biotechnology (Pre-1800)

1.4.2 Classical Biotechnology

The second phase of evolution and development of biotechnology can be called

Almost at the same time, in Britain, Alexander Fleming a physician discovered

1.4.3. Modern Biotechnology

2. KEY ISSUES IN BIOTECHNOLOGY

2.2 GENETICALLY MODIFIED CROPS AND FOOD

2.2.1. Environmental impacts of genetically modified crops

2.3. Genetically modified food and human health

2.4 Who benefits from genetically modified food and crops?

2.5 “Terminator technology” and farmer-saved seed

2.6.Genetically modified crops and food security

2.7 BIOTECHNOLOGY AND HEALTH

2.7.1 Drugs, vaccines and diagnostics

pneumococcal diseases in children, diabetes, cancer and haemophilia. DNA technology

2.8 The Human Genome Project

availability of individuals' genetic information to organizations outside of the medical

2.10 Gene therapy

2.11 GOVERNING BIOTECHNOLOGY: POLICY CHALLENGES

A. Building capacity for developing and managing biotechnology

B. Biosafety and bioethics: capacity for risk assessment

C. Building awareness of biotechnology

D. Accessing biotechnology: intellectual property rights

3.THE PATENTING OF BIOTECHNOLOGICAL

3.1 . Initial legal position

However, the actual exploitation of a patent may be wholly or partially precluded by

3.2. Objections and criticisms

3.3 . Contested patents and patent applications

The subject-matter of this patent is a particularly non-stressful form of preservation of

Process for cloning living organisms (US 6211429)

3.4 General objections and criticisms

3.5Opinion of the National Ethics Council