Mediated Patent Equities For Accelerated Biomedical Research

By Maximo Ramallo, futurist, memes analyst and conceptual designer

Tangles

Summary

The path from biomedical research to product development has many challenges, from overlapping patents making a maze out of bureaucratic legal procedures, to reduced market competition for the restricted access to new investigation, caused by patent holders asserting conflicting patent authorship. This chapter proposes a change in patent implementation that delivers increased revenues for patent holders and opens opportunities for further research by competitive enterprises. This policy is obtained through changing the patent system behaviour with prior compliance from patent holders and the automaticity gained from a patent share system. I believe that in doing so we will foster good conditions for market competition as well as untangling biomedical research, thus achieving exponentiality in biomedical research and increased economic growth.

The Opposite Of Moore’s Law

Time and money are constantly being lost in the biomedical field as a consequence of a growing labyrinth of bureaucratic traps, set in response to competing market forces. The current system has become troublesome, often showing a lack of success or achievements below expectations in areas such as the pharmaceutical industry. This is only one example from a broader field – a field which is under great pressure to achieve the wonders of the future that it promised yesterday, to increase overall health, lifespan and wellbeing.

With the proliferation of intellectual property rights in biomedical research we see a problem of patent under-use, leading to what scholars have called “Eroom’s Law”, eroding progress from the field. This is not just Moore’s Law spelled backwards, but the opposite of Moore’s Law. Instead of an acceleration in productivity of R&D (research and development), the biomedical field has suffered a slowdown of R&D. The number of new drugs approved by the US Food and Drug Administration per fixed amount (inflation-adjusted) spent on R&D has halved roughly every 9 years from 1950 to the present day.

Next, I describe the paradigm that restricts the advance of medicine.

Introducing The Patent System

Patents are one type of intellectual property. Other types, alongside patents, are copyrights, trademarks and trade secrets. Intellectual property – like any other property – can be bought, sold, assigned, given as a gift, willed to heirs, and used as collateral for a loan.

It is often thought patents give full ownership and the ability to use the invention, but the patent gives an exclusionary right: to exclude others from making, using or importing the invention. Even worse, the patent holder may not have the right to commercialize the patent himself because someone may already have an earlier, broader patent. It may also be licensed, where an owner can negotiate with others to permit them commercialization rights for the patent, in effect allowing them to “trespass” onto the property. Otherwise, with the enforceability of a patent, a court can grant monetary damages for infringement or a permanent injunction against further infringement.

In the US, the Patent Office offers a year to file the application after the publication date. The patent rights are awarded to the first to file a patent application, not to the first to make the discovery or invention. The US used to follow the process of “first to invent” for granting patents, but it replaced it by the “first to file” system, also changing the time of 17 years for patent validity to 20 years from the day the application is filed. Patents are also limited by territory, with the chance of expanding them to other countries via selective filings to individual countries.

The patent application describes how to make and use the invention, stating what the inventor’s claims are, and what constitutes its inventiveness. Generally inventors file a chain of patent applications, with other types of applications being provisional, non-provisional, continuation, continuation in part, and divisional application. The application examination may take years, during which examiners look for eligibility, novelty, obviousness, sufficient description and enablement, specificity of the claim language and utility of the claimed invention. Novelty requires it not to be identically described in a previous publication released to the public. Obviousness tests are passed if the claim is not obvious to a person with ordinary skills in the invention’s field, if that person were able to read all the publications released previously to the public. Thus, obviousness (in a legal sense) cannot be determined solely by looking at the invention, but also at the relevant previous publications, which are named “prior art”. Descriptions have to be carefully written, as it must be possible for someone with ordinary skills in the field to make and use the invention without undue experimentation.

When a patent involves a law of nature being incorporated into a novel “kit” – a way to tie the natural law to an apparatus or piece of software – by having a very broad, very abstract patent that makes use of a novel discovery, we immediately create a monopoly over an abstract concept. The dominant patent theory among economists says this is to be expected and tolerated, despite the reality of R&D saying this can be bad for the economy, and that it restricts innovation.

The Adventure Of Research

The complexities of biological organisms require a plan of research from a multi-methodological perspective, in order to exploit the constant discovery we see in the field. For further improvement over positive results, or for getting the results that we desired in the first place, a second series of studies may be required following the original study. Every new discovery could need further study that in time may lead to the desired goal, a goal which is constantly haunted by the problem of being far from the original research. The constant requirement for further research is the cause of development being endangered by bureaucracy, so that it becomes difficult to achieve a fully usable product, or to complete the attractive line of investigation envisioned from the very beginning.

When all work ends solely on the part of proving or disproving a line of hypotheses, without the possibility to pursue further investigation, it often ends in no viable product but only in effectively proving that the line of research was wrong, without harvesting any benefit from the investigation. The reason why many startups avoid engaging in research fields is no mystery, as it is time consuming and risky for their early profits.

Patent Privatization, Blocking and Overlapping

Entrepreneurs find a labyrinth of bureaucratic obstacles when needing access to multiple patent rights. To develop one functional product the entrepreneur encounters fragments of the potential future product scattered across too many intellectual property rights with overlapping patent claims, and in the hands of different holders, who at the same time may have different business strategies.

An example of the danger is the patenting of biological targets (“biological models” of living organisms) and the human gene avenue, the latter being on hold for the moment. But the issue of having restricted the biological targets, which could be used to test potential treatments that fit, is now without solution. Patenting has been halted for ESTs (“expressed sequence tags”, short DNA sequences that translate into proteins) and other raw genomic DNA sequences including gene fragments or DNA sequences with unknown translation, before identifying a corresponding gene, protein, biological function, or potential commercial product. However with biological targets still patentable it turns the risk of hindering research in promising areas into a real threat. Thus, biological models, the “targets”, which should be ensured to be available for the discovery and the test of products, are blindly restricted by the current system.

When people under-use scarce resources because too many owners can block each other, the overall effect is a catastrophic jam and rising costs for production and for research. It shows that failure can come from many sides of the bureaucratic structure of patents, because while technological innovation has been the driving engine of first world economies, and the outreach of patent protection may have been an encouraging force for business, at the same time it permits corporate entities to restrict access to these innovations.

Because the ownership of patents is often assigned to a corporation or institution to be commercialized, when there is no requirement for the patent to be used, the best monetary deal isn’t necessarily the best deal for societal gain. Some companies may not have the goal of making profits out of patents when they buy their rights, but they instead attempt to buy the rights to exclude competing technologies from the market when they have another product already developed that benefits from having no competition. Due to this, many potential lines of research may remain frozen because the company that holds specific patent rights has no interest to develop them into products. In this way, patent filings and private investment deter the culture of upstream research, causing a clash between corporate and academic perspectives.

Potentially a chain reaction with negative outcomes, these conflicts of interests could create a corporate bias in the kind of patents favoured, and thus in the kind of products entering the market. This may, for example, delay the possibility of establishing new markets, in a case when companies sense that these new markets compete with previous markets that are more amenable to vendor lock-in (“monopolies”).

By favouring some lines of research over others, these conflicts of interest can also determine the type of publications the scientific community gets involved in, redirecting attention to only part of the field that may be more interesting for direct or immediate business. Adding to the issue, knowledge of what can be patented and what not – knowledge, thus, of what new research areas are profitable – is often not available in fields like genomics until a lawsuit has taken place. But since lawsuits have the reputation of ending in losses for the parties involved, all this brings more uncertainty to the market over which fields are attractive to investigate.

The rising field of personalized medicine has to be taken into account when we consider market restrictions. This field has the potential of undergoing a blossom of its own by exploring new areas like the use of genetic analysis and genetic therapies that enjoy much of the attention from the public. However, it often hits a wall of restrictive bureaucracy administered by standards officials who may even misunderstand its application.

The Results Of Patent Under-use

Upstream research, understood as the root for more innovation, is limited by the current system that is also slowing the pace of downstream biomedical innovation. With a model far from the process of open peer review, companies are often forced to withdraw a product due to malfunctioning and incur monetary losses, when that could have been prevented if wider tests and research had been permitted to be done by third parties. Moreover if the product is a drug which is found to have unexpected side effects, companies can face heavy losses. We have also a loss in time and resources when a piece of research has no viable way to be translated into the market, even though another company has the ability to develop the appropriate product, but that company is restrained from becoming involved since they are not granted the necessary patent rights. So long as the patent remains an intangible asset, we will carry on losing its benefit for the market. Ultimately, society will see the cost of having a restrictive system like the one currently in place.

The patenting of biological targets can even backfire on the original patentee by not allowing a proper review of the process. By letting unknown issues arise into a system that deserves to be called a gamble into the future, companies take a losing strategy, and it also ends in a less competitive economy.

At this point we must question if the method given by the current bureaucracy is the only way in which the enterprises can compete for profits. If present trends continue, costs for research will keep rising and products will continue to be expensive, slowing discoveries and increasing the difficulty of working in certain fields. The quest for magic pills and ideal profits will continue to be a fantasy for the companies, and we’ll never see startups who take the risk of seeking suitable products and solutions.

Mediated Patent Equities

To see real changes we must start by acknowledging the failures that come from bureaucratic entanglements and reach a conscious acceptance about the incompetence of the current practice. What comes next is doing a slight paradigm shift that addresses the errors in the current system. It will then be possible to describe a model where private investment enables unrestrained research and development of biomedical products – a model that can sustain both upstream research and downstream product development. As gathering royalty revenues is the incentive that sustains the biomedical market, patents and other forms of intellectual property protection for upstream discoveries must fortify the incentives of undertaking risky research projects to result in a more equitable distribution of profits across businesses and institutions that take the challenge.

This article proposes a joint revenue model of business, where patents are secure to be used and provide the patent holders with a percentage in revenues, even from third parties using the invention.

Compulsory Commercialization

An alternative to restriction is an agreement for each claim or patent on compulsory implementation, maintaining the structure in shares. This being a way of licensing, we must realize the value granted through an equity market. One solution is to allow commercialization of the product without restriction, but exercising revenue reclamation and option assurance. This transforms the present right to exclude others from using and making into a new right to gather revenues.

The research, development and commercialization should be treated as a compulsory action, accepting that disputes will arise (and can be solved) between patent claims after products hit the market. One way to make this attractive is to secure the policies for the use of the claimed invention, also knowing that the mediated equity model is for patent licensing and a guarantee of options, not for permanently fixing royalties – which can still be negotiated with a mediator after the mediator has analysed the currents of the market. With the policies on the implementation of patents negotiated through a mediator, thus securing the needs of the industry, we make the overall process an extension of the market.

As mobilizing the knowledge economy for widespread progress requires asset exchange among several parties, patents must change from a model of restriction to a model for insurance of revenue, becoming a system of shares. This system automatically secures the inventor as a shareholder for other inventions made by his discovery. Once an inventor chooses to make his patent as this model proposes, and another inventor uses the technologies from the first, this automatically takes place. Moving from a culture of aggressive retention of patents to a progressive environment of exchange, thus achieving its advantages, it’s possible to start and sustain the initiative via incentives, which are left to the criteria of the policymaker in virtue of the realpolitik, in the moment to that will be implemented.

Any patent added, even those that vary its process or have slightly different mechanisms, will be treated as being under the same model and will have its fees paid, and will be compulsory on its development. As will be explained in more detail later, each time a more basic form of the patent is created, as we see in the biomedical field, they will be treated as the base for all upcoming patents that derive from the most basic one, strongly favouring upstream research. Knowing also that patents can overlap, but with patent claims having an order of priority given by the time in which they appear, this is a way of modeling prior art as a tree of processes, rather than isolate everything under contentious reasons. In this case, the value will be almost exclusively upstream revenue (after expenses and revenues to third parties), with the exception of some foundational technologies that are key to open and explore new markets, that could have an up-front revenue on the negotiation process between the patentee and the mediator. This will create a royalty network, by which revenues will be treated as a percentage assigned over net income after expenses, part of which will be treated as the fees from using the patents from other patentees. Treating the patented discovery as a system of equity and taking the revenues of the products by means of a system of royalty rates ensures the success in this model, where each foundational discovery improves its revenue each time a new application is found and packaged into a product – also increasing the attractiveness of upstream, openly available research.

Having a mandatory re-issue fee for patents ensures that the technology will be commercialized, instead of being converted into a frozen project and halted. In a case where the patents are not used by the original parties, but there is a third party who would pay for the use, there will be a reimbursement of sunk-in patents and a retirement of the license, all according to reasonable expectations.

Biological Targets And Foundational Patents

The focus on the translational side of research often hides the need for establishing the roots of the field. Foundational ideas should be considered as the first to be implemented in this model, and they need to be accelerated by expedition (a process to fast-track the bureaucracy). This early availability will hasten the use of foundational patents among new companies, enabling more startups to be created and prosper. For further improvement, university startups must be granted equity in foundational patents, available in exchange for granting their own patents within this system.

Since biological targets contain the base for doing research that leads to many channels of development, these kernel discoveries must, wherever possible, be among the first to enter this open equity model of business. Having potential links with a wide range of diseases, they must be secured to remain open for broad business opportunities to appear.

Since we cannot predict the exact future of the biomedical field, all discoveries should be treated as potential foundations for others. But it will account at the visible needs of the market to select an appropriate treatment for each patent. The support of government resources and state involvement must also be guaranteed for foundational discoveries. The translation from raw research to actionable development of new technologies will finally be a reality, and a revolution. The promise of foundational fields such as genomics will be fulfilled, to solve first-level biological questions through research, and then create new health technologies.

Many moribund lines of research can be brought back to life by having a special agreement between the patentees and interested parties to explore if they have a viable way of being commercialized.

Joint Research Avenues

As patents incur various costs, in both their research and implementation, the rewards must be guaranteed, not only by allowing third parties to use them and to retrieve a royalty revenue directed to patent holders, but also by ensuring that a bipartisan research will be conducted with rewards shared fairly between the two parties, in case the patentee is interested on joining the research. In this model we also permit other enterprises to exploit lines of research which sometimes companies could investigate themselves, on exchange for sharing credit over the results, granted in any case the research is done by a branch research group or by the root company.

Companies that don’t want to entirely leave a future research avenue, which they suspect of being able to exploit in the future, can preserve much of their hoped-for credit by allocating resources for the research that would take place. This will secure the merit and revenue by establishing participation in the invention process. Then, the overall budget for research will also increase.

The appropriate tools to cope with the increasing information can be held by the mediator entity that will allow partners to share potential business projects on a secure way, and where they can have the advantage of becoming potential investors with preference over other companies outside this model. All affiliated institutions will benefit from this culture of sharing information, with many enterprises in different fields now able to collaborate in integrated ways to provide new technologies, thanks to this disposition of information that allows open cooperation. As an example of success, many groups contributed to the human genome project, which ended ahead of schedule and under budget, spawning the field of genomics.

Mediation By Consortium

Mediation by a common entity is crucial to initiate industry-wide cooperation, in the same way that, in many universities, there is a central board that successfully administers the inventions made by employees and students. For the advance of new technologies, it is important to have a patent pool under the umbrella of a common consortium which will always answer to the needs of the industry. By creating a consortium for mobilizing a patent pool there is no infringement in this model of current patent laws, so it excludes only those who may not choose to treat their own patents as shares.

To avoid over-contentious negotiation, the consortium will be in charge of all legal proceedings and will be able to channel the financial negotiations between institutional boards and patentees. The consortium then negotiates the royalty rates and stock options over the technologies, adjusting these to the needs of the industry. It will also provide strategic guidance and management for taking advantage of new technologies and market trends. Moreover, it can encourage cross-license agreements involving previously filed patents – something that will require a new way of cataloguing patents via this institution.

A committee formed by representatives from the industry, the government, NGO’s, and of course each academic field, could be in charge of setting the board of the consortium. The advocacy for a common ground on biomedical research and development is an important goal that touches us all.

To take full advantage on the vast efforts from our scientists we must also ensure recognition of their work and exaltation of their inventiveness, acknowledging the beneficial social implications of their research. Personal income and increased funding for research that comes from this model will also bring forward the next generation of biomedical research into the present day. Researchers who want to track follow-up work based on their discovery will have the opportunity of ringside seat observation, public acclaim, and fair financial rewards when their work enters the market.

Although the board negotiates all financial and legal terms, inventors can add value to the process through their scientific insights and medical advice. They will be kept informed throughout the process, unless they specifically request otherwise. The information that the scientists provide over the future performance of the market will always be taken into account in the consortium.

The Benefits Of Mediated Patent Equities

The exchange of assets is beneficial for the original researchers by expanding the commercialization of their invention in ways frequently not previously possible, as novel uses and researches are added to their original line of discoveries. This non-exclusivity model allows a healthy competition to take place. Treating product development and research as compulsory also guarantees that interested parties will secure their investment from any risk of having production stopped. This will increase overall cost-effectiveness, returning a benefit that justifies the initial investment by startups and established companies alike. It will also alleviate the creation of products for each new generation of technologies.

With this we can increase the development of value added innovation. It will be a better, faster and cheaper way of conducting R&D. It will boost and advance new technologies, and will support the research ventures that startups and consolidated businesses need. All the potential of the research can be effectively exploited in contrast with the current model of product unviability and exhausting bureaucracy. The economic development of the industry and overall technological growth will be visually increased by these new rules of business. We can anticipate the value of this implementation by the increase in research by the companies, gathering benefits both in the form of profit and in the form of technological prowess.

Ultimately, society will be the biggest winner from these changes. Cooperation between universities and the industry will be broader. Better healthcare through research will become more common, and society will be able to respond more quickly to emerging dangers in population health. We’ll have greater welfare, as we extend the quality of life, by the protection of the human effort and the general growth, and against the old restrictions imposed by the present exclusionary patent system. The compulsory commercialization of research will have the outcome of bringing medicine to the many.

Sources

Can Patents Deter Innovation? The Anticommons in Biomedical Research – http://www.sciencemag.org/content/280/5364/698.full

Patents in Genomics and Human Genetics – http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2935940/

FIGURE 1 | Eroom’s Law in pharmaceutical R&D – http://www.nature.com/nrd/journal/v11/n3/fig_tab/nrd3681_F1.html

Don’t Feed The Trolls? – http://www.nera.com/content/dam/nera/publications/archive1/PUB_DontFeedTheTrolls.pdf

Patent Misuse and the Antitrust Reform: Blessed be the Tie? – http://jolt.law.harvard.edu/articles/pdf/v04/04HarvJLTech001.pdf

Patent Theory versus Patent Law – http://mason.gmu.edu/~atabarro/PatentPublished.pdf

Proprietary Rights and Collective Action: The Case of Biotechnology Research With Low Commercial Value – http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=1993&context=faculty_scholarship

Footnote

The article above features as Chapter 9 of the Transpolitica book “Anticipating tomorrow’s politics”. Transpolitica welcomes feedback. Your comments will help to shape the evolution of Transpolitica communications.

Image source: Pixabay

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