How can the IP system stimulate innovation on treatment for neglected diseases?

Aaron Smethurst says

30/04/2008 at 7:41 pm

I wrote a long research paper on this subject, which I would be happy to discuss with anyone interested. See an excerpt below:

Every patent consists of at least two elements: a description and patent claims. In the discussion of patent scope in research, the notion of up-stream and down-stream patents plays an important role in deciding how expansive the claims of a patent are once granted. Up-stream patents are typically broad patents on a general method or product which is a necessary component of future innovation. An example of an up-stream patent in biotechnology would be a patent on the human genome. The research which went into collecting the human genome pattern could certainly be copyrighted or patented by the researchers and become their proprietary knowledge. Following this example, a down-stream patent would be any genetically engineered chemical developed using the human genome sequence. The new down-stream patent relies on the previously patented up-stream patent. Thus, if the owner of the up-stream patent were to prohibit the use of their discovery to outside researchers, subsequent advances in the field could be severely limited.

Clearly, the more pivotal the patented discovery is, the more down-stream claims it would cover. Because of the desire to recuperate research costs, research pharmaceutical companies will patent new chemical compounds as soon as they show any potential. The patent, when granted, last for 20 years from the filing date, and is subsequently published by a patent office. For the duration of the patent, the holder may either prohibit any reproduction, use, and experimentation, or license the discovery out to others who want to use it.

For commercially viable patents licensing is an important aspect of patent ownership, because it rewards the innovator for the initial discovery by charging rents to subsequent users who might gain from that innovation. There is less of a possibility for lucrative licensing fees to up-stream patent owners, however, if the product being developed is not being developed for use in high-yield markets, as is the case for developing drugs for tropical diseases.

The challenge then is to find a way to encourage research based pharmaceutical companies to freely provide licenses to down-stream researchers in humanitarian fields. Some researchers suggest using open-source software as a model for creating proprietary rights which enable downstream research, but prevent future commercialization.

Open source software provides an alternative method for encouraging innovation and the spread of technology while preserving intellectual property rights. Copyright owners have the right to control the copying and distribution of their protected material; what open-source does is place specific user requirements on the further distribution of that material. In other words, the copyright owner maintains the exclusive right to limit the reproduction of his or her works, and because of that exclusive right, can determine how and if the material can be further reproduced. Open-source software is free to end-users, but cannot be used in commercial ventures, unless the code remains open source and free to alter. Recently, Link-Sys, the internet router company, incorporated open source software code into their commercial products and was subsequently forced to provide their entire product source code online.

This so-called copyleft provision relies on the rules of copyright to ensure that the source material remains free. The same basic concept could be applied to the use of patented methods or materials from pharmaceutical companies.

An example of this idea in the pharmaceutical research context: Research based pharmaceutical Company A licenses its discovery to a humanitarian research Organization B (a university, PPP, etc), which adds to that original patent to create a useful compound AB, which contains the products of their combined effort. Because the compound is meant for humanitarian purposes, it should be sold at the same rate as a compulsory licensed drug; typically that rate has been accepted at marginal cost plus 6%.

This is the kind of arrangement that is currently in place for organizations like the MMV. What makes the open source approach different, however, is the idea that there is assurance that the license used in the original collaboration continues to be free for use in humanitarian efforts.

As the second line of Figure 3 depicts, the compound or the research results obtained from the joint venture cannot be re-commercialized by another pharmaceutical company (or even the original pharmaceutical company). The third line of Figure 3 illustrates how the joint effort results may, however, be licensed freely by any other team of researchers willing to further promote the humanitarian goal. There are no limitations on the use of the testing data and the research on the compound for non-commercial needs.

Why would a research based pharmaceutical company agree to essentially give up a portion of its patent portfolio for minimal profits? Advocates of the open source pharmaceutical astutely observe:

… a sensible manager does not assert rights unless she expects to earn a profit. Since the commercial value of their inputs depends almost entirely on U.S. and European markets, universities and companies have little to lose by sharing their intellectual property with groups that fight tropical diseases.

Additionally, aside from the views of the most cynical observer, it is accepted that not all the gains from pharmaceutical research are monetary:

Economists have shown that software collaborations appeal to a variety of motives including ideology, learning new skills, gaining reputation, and impressing potential employers. These incentives may sound limited, but open source software would not exist without them. Similar incentives should motivate biologists. In fact, gaining reputation through publication is a particularly strong motive for academic biologists.

Advocates suggest the repository for the accumulated patent research acquired through such ventures should be, “Virtual Pharmaceutical Companies” which, “do little or no development in-house, [but] instead… develop a portfolio of promising drug candidates through a web of agreements with commercial and academic partners.”

The Virtual Pharmaceutical Company would manage the open source drug development by combing the available resources to create positive results. The results would be protected from placed in the public domain only for further humanitarian good, which would increase the public benefit and decrease the potential losses to research based pharmaceutical companies. One issue, however, remains to be addressed: how to provide funding for the research, testing, development, and production of the new drugs. The next section will put forth proposals for providing a monetary incentive to fund this sort of open source research.

Comments

Kaitlin Mara says

29/04/2008 at 11:44 am

This topic is under debate at the World Health Organization’s Intergovernmental Working Group on Public Health, Innovation and Intellectual Property, currently meeting in its resumed second session.

Aaron Smethurst says

30/04/2008 at 7:41 pm

I wrote a long research paper on this subject, which I would be happy to discuss with anyone interested. See an excerpt below:

Every patent consists of at least two elements: a description and patent claims. In the discussion of patent scope in research, the notion of up-stream and down-stream patents plays an important role in deciding how expansive the claims of a patent are once granted. Up-stream patents are typically broad patents on a general method or product which is a necessary component of future innovation. An example of an up-stream patent in biotechnology would be a patent on the human genome. The research which went into collecting the human genome pattern could certainly be copyrighted or patented by the researchers and become their proprietary knowledge. Following this example, a down-stream patent would be any genetically engineered chemical developed using the human genome sequence. The new down-stream patent relies on the previously patented up-stream patent. Thus, if the owner of the up-stream patent were to prohibit the use of their discovery to outside researchers, subsequent advances in the field could be severely limited.

Clearly, the more pivotal the patented discovery is, the more down-stream claims it would cover. Because of the desire to recuperate research costs, research pharmaceutical companies will patent new chemical compounds as soon as they show any potential. The patent, when granted, last for 20 years from the filing date, and is subsequently published by a patent office. For the duration of the patent, the holder may either prohibit any reproduction, use, and experimentation, or license the discovery out to others who want to use it.

For commercially viable patents licensing is an important aspect of patent ownership, because it rewards the innovator for the initial discovery by charging rents to subsequent users who might gain from that innovation. There is less of a possibility for lucrative licensing fees to up-stream patent owners, however, if the product being developed is not being developed for use in high-yield markets, as is the case for developing drugs for tropical diseases.

The challenge then is to find a way to encourage research based pharmaceutical companies to freely provide licenses to down-stream researchers in humanitarian fields. Some researchers suggest using open-source software as a model for creating proprietary rights which enable downstream research, but prevent future commercialization.

Open source software provides an alternative method for encouraging innovation and the spread of technology while preserving intellectual property rights. Copyright owners have the right to control the copying and distribution of their protected material; what open-source does is place specific user requirements on the further distribution of that material. In other words, the copyright owner maintains the exclusive right to limit the reproduction of his or her works, and because of that exclusive right, can determine how and if the material can be further reproduced. Open-source software is free to end-users, but cannot be used in commercial ventures, unless the code remains open source and free to alter. Recently, Link-Sys, the internet router company, incorporated open source software code into their commercial products and was subsequently forced to provide their entire product source code online.

This so-called copyleft provision relies on the rules of copyright to ensure that the source material remains free. The same basic concept could be applied to the use of patented methods or materials from pharmaceutical companies.

An example of this idea in the pharmaceutical research context: Research based pharmaceutical Company A licenses its discovery to a humanitarian research Organization B (a university, PPP, etc), which adds to that original patent to create a useful compound AB, which contains the products of their combined effort. Because the compound is meant for humanitarian purposes, it should be sold at the same rate as a compulsory licensed drug; typically that rate has been accepted at marginal cost plus 6%.

This is the kind of arrangement that is currently in place for organizations like the MMV. What makes the open source approach different, however, is the idea that there is assurance that the license used in the original collaboration continues to be free for use in humanitarian efforts.

As the second line of Figure 3 depicts, the compound or the research results obtained from the joint venture cannot be re-commercialized by another pharmaceutical company (or even the original pharmaceutical company). The third line of Figure 3 illustrates how the joint effort results may, however, be licensed freely by any other team of researchers willing to further promote the humanitarian goal. There are no limitations on the use of the testing data and the research on the compound for non-commercial needs.

Why would a research based pharmaceutical company agree to essentially give up a portion of its patent portfolio for minimal profits? Advocates of the open source pharmaceutical astutely observe:

… a sensible manager does not assert rights unless she expects to earn a profit. Since the commercial value of their inputs depends almost entirely on U.S. and European markets, universities and companies have little to lose by sharing their intellectual property with groups that fight tropical diseases.

Additionally, aside from the views of the most cynical observer, it is accepted that not all the gains from pharmaceutical research are monetary:

Economists have shown that software collaborations appeal to a variety of motives including ideology, learning new skills, gaining reputation, and impressing potential employers. These incentives may sound limited, but open source software would not exist without them. Similar incentives should motivate biologists. In fact, gaining reputation through publication is a particularly strong motive for academic biologists.

Advocates suggest the repository for the accumulated patent research acquired through such ventures should be, “Virtual Pharmaceutical Companies” which, “do little or no development in-house, [but] instead… develop a portfolio of promising drug candidates through a web of agreements with commercial and academic partners.”

The Virtual Pharmaceutical Company would manage the open source drug development by combing the available resources to create positive results. The results would be protected from placed in the public domain only for further humanitarian good, which would increase the public benefit and decrease the potential losses to research based pharmaceutical companies. One issue, however, remains to be addressed: how to provide funding for the research, testing, development, and production of the new drugs. The next section will put forth proposals for providing a monetary incentive to fund this sort of open source research.

Nuno Carvalho says

14/05/2008 at 10:51 am

IP cannot stimulate innovation for neglected diseases. The reason is very simple: IP is a market mechanism. But there is not a market for medicines for neglected diseases (if there were, they would not be “neglected”). Therefore, IP does not work for neglected diseases. Finding treatment for those diseases entails other (non-market) mechanisms, namely state sponsorship (national, regional or international), open source innovation, charity.

How can the IP system stimulate innovation on treatment for neglected diseases?

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