An Examination of the Issues Surrounding Biotechnology Patenting and Its Effect Upon Entrepreneurial Companies

Congressional research reportAug 31, 2000

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An Examination of the Issues Surrounding

Biotechnology Patenting and Its Effect Upon

Entrepreneurial Companies

August 31, 2000

(name redacted)

Visiting Scholar in Economic Growth and Entrepreneurship

Resources, Science and Industry Division

Congressional Research Service ˜ The Library of Congress

An Examination of the Issues Surrounding Biotechnology

Patenting and Its Effect Upon Entrepreneurial Companies

Summary

The biotechnology industry is notable both for its heavy concentration of small

businesses and its weighty research and development (R&D) expenditures. Given the

small size and heavy expenses of many biotechnology firms, their ability to raise

venture capital may be of some consequence. The patent law has been identified as

a facilitator of these R&D financing efforts.

Although many observers believe that the patent law plays a significant role in

the biotechnology industry, two principal issues have arisen regarding biotechnology

patenting. First, observers have fundamentally questioned whether patents should be

granted for living inventions, genetic materials and other biotechnologies. Ethical

issues, concerns that biotechnology patenting promotes animal suffering and decreases

genetic diversity, as well as regard for the traditional agricultural community animate

many of these objections. Supporters of biotechnology patenting counter that trade

secret protection is a less attractive social alternative, observe that patents have long

been granted for biotechnologies, and question whether the patent law is the

appropriate vehicle for technology assessment.

Commentators have also differed over the extent to which an inventor must

show a specific, practical use for a biotechnology in order to be awarded a patent.

Some observers favor a strict view of the utility requirement due to concerns over

overlapping upstream patents that discourage research and commercialization. Others

believe that the utility requirement should be applied leniently, stating that a strict

view of utility will only lead to industry concentration and that biotechnology research

tools cannot be meaningfully distinguished from other sorts of inventions.

Congress may choose to exercise oversight on these issues. Such consideration

would likely include examination of U.S. commitments in international agreements

along with other factors.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

The Biotechnology Industry: An Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Cloning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Gene Therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Genetically Modified Organisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

The Human Genome Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Research Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Therapeutics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The Role of R&D Funding in the Biotechnology Industry . . . . . . . . . . . . . . . . . 7

Core Principles of Patenting Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

The Patent Eligibility of Living Inventionsand Genetic Materials . . . . . . . . . . . 11

Objections to Patenting Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Benefits of Patenting Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

The Chimera Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

The Utility Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Proponents of a Strict Utility Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Proponents of a Lenient Utility Standard . . . . . . . . . . . . . . . . . . . . . . . . . 25

Legislative Issues and Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Patent Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

The Utility Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

This report was prepared under the supervision of (name redacted).

An Examination of the Issues Surrounding

Biotechnology Patenting and Its Effect Upon

Entrepreneurial Companies

Introduction

Biotechnology may be broadly defined as the application of biological systems

and organisms to technical and industrial processes.1 The discipline of biotechnology

may be traced to the 1944 identification of deoxyribonucleic acid (DNA).2 This

discovery commenced a significant research effort that culminated in the sequencing

of the human genome in 2000.3 The biotechnology industry has provided many new

technologies, including diagnostic kits, DNA fingerprinting, protein synthesis, enzyme

engineering, and transgenic plants and animals.4 Many observers forecast that the

completion of the human genome project will bring even more spectacular advances

in the future.5

The biotechnology industry is notable both for its heavy concentration of small

businesses and its weighty research and development (R&D) expenses. In 1998, a

total of 1,283 biotechnology firms participated in the domestic biotechnology market.

More than two-thirds of these firms employed fewer than 135 persons, and

approximately one-third employed less than 50 persons.6 The prominence of small

biotechnology enterprises belies the enormous expenses that must be devoted towards

R&D in this market. The U.S. biotechnology industry is one of the most researchintensive endeavors in the world, with $9.9 billion devoted to R&D in 1998.7

Young, Frank E., Biotechnology and the Federal Food and Drug Administration, Forum for

Applied Research and Public Policy (1987), 80.

Weston, Cliff D., “Chilling of the Corn: Agricultural Biotechnology in the Face of U.S.

Patent Law and the Cartagena Protocol,” 4 Journal of Small & Emerging Business Law

(2000), 377.

Zawislak, Mike, “Genome project is just the start, director says,” Chicago Daily Herald (23

July 2000), 1.

Weston, supra note 2, at 377.

E.g., Atroley, Akansha, “Human Genome Project: Decoded,” Computers Today (31 July

2000), 90.

See Biotechnology Indus. Org., 1998-99 BIO’s Guide to Biotechnology, available at

[http://www.bio.org/aboutbio/guide2000/facts.html].

Ibid.

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Given their small size and heavy expenses, many observers believe that firms in

the biotechnology industry rely upon their ability to raise venture capital.8 The patent

law has been identified as a facilitator of these R&D financing efforts. Absent patent

rights, a biotechnology concern may have scant tangible assets to sell or license. By

providing members of the biotechnology industry with enforceable proprietary

interests in their inventions, the patent law is said to expedite capital infusion and

technology transfer.9

Although many commentators believe that the patent law plays a crucial role in

the biotechnology industry,10 numerous legal, economic and policy issues have arisen

concerning the patenting of biotechnology. This report considers these issues,

emphasizing the effect of intellectual property rights upon small, entrepreneurial

companies. This study first profiles the biotechnology industry, including a review of

its principal technologies and need for R&D funding. It next provides an overview

of the patent system and its relationship to the biotechnology industry. This report

then reviews two principal patentability requirements, statutory subject matter and

utility, and their application to biotechnologies. It closes with a discussion of

legislative issues and options for biotechnology patenting.

This study suggests that patents play a significant role in the ability of small,

entrepreneurial firms in the biotechnology industry to acquire capital for R&D.

Experience teaches that investors may be wary of uncertainties surrounding patent

rights, leading to diminished capital infusions into the biotechnology market.

The Biotechnology Industry: An Overview

The birth of the U.S. biotechnology industry dates to the founding of Genentech,

Inc., in 1976.11 Biotechnology today is a growing sector of the domestic economy.

The industry essentially doubled in size between 1993 and 1999, generating $20

billion in revenues in 1999.12 Biotechnology companies directly employed 150,800

persons in 1999, with an additional 286,600 persons employed by companies

supplying goods or services to the industry.13

Weston, supra note 2, at 377.

Merges, Robert P., “Intellectual Property and the Costs of Commercial Exchange: A

Review Essay,” 93 Michigan Law Review (1995), 1570.

Goozner, Merrill, “Suit Puts Biotech Drug Sales on the Line Patent Trial May Spur

Competition on Prices,” Chicago Tribune (16 May 2000), 1.

Gladwell, Malcolm, “Top Biotech Firm Sold to Swiss Company,” Washington Post (3 Feb.

1990), A1.

See Biotechnology Indus. Org., 1998-99 BIO’s Guide to Biotechnology, available at

[http://www.bio.org/aboutbio/guide1.html].

Ernst & Young, The Economic Contributions of the Biotechnology Industry to the U.S.

Economy (May 2000).

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The domestic biotechnology industry includes a handful of large companies with

a substantial market share.14 However, “a typical biotech R&D company is a small

start-up with all its financial and human resources invested in the development of one

or two products or technologies.”15 It is often the case that a promising technology

is discovered and preliminarily developed by a small enterprise. A large

biotechnology firm then acquires the smaller enterprise, or its intellectual property

rights, in order to bring the technology to market.16

Domestic enterprises enjoy a commanding position in the global biotechnology

industry. The U.S. biotechnology industry is the acknowledged world leader in

biomedical research, benefitting the health of U.S. citizens, creating tens of thousands

of jobs and improving our balance of trade.17 The biotechnology industry is also

diverse, employing its technologies in medicine, industrial processes, environmental

cleanup, food, agriculture and numerous other applications. A brief review of some

principal biotechnologies follows.

Cloning

Biotechnology has recently introduced the technique of cloning. Cloning employs

DNA from one animal to produce a genetically identical animal.18 Cloned organisms

may be created by fusing a cell from one organism with an immature reproductive cell

from a second organism. The second cell is then stimulated to replicate. The cells, if

placed into an appropriate womb, will result in the live birth of an animal genetically

identical to the one from which the original DNA was taken. In the case of Dolly, the

sheep cloned in 1997 in Scotland,19 an udder cell was fused with an unfertilized egg

cell from which the nucleus had been removed, and the cell mass grown was then

implanted in a sheep womb.

Gene Therapy

Scientists may introduce a gene directly into a patient through a technique called

gene therapy. This method involves the insertion of a gene into the cells of a

gene-deficient patient, either to correct a genetic error or to introduce a new function

Graham, Lawrence S., “Equitable Equivalents: Biotechnology and the Doctrine of

Equivalents After Warner-Jenkinson Co. v. Hilton Davis Chem. Co.,” 6 Journal of Law and

Policy (1997) 741, 742 n.6 (observing that five biotechnology enterprises – Amgen, Chiron,

Genentech, Quintiles, and Genzyme – collectively enjoyed a 70% market share in 1996).

High Tech Publishing Co., “Profiles of Success in Biotechnology: A Competitive Analysis

of Major Biotechnology Companies, Biotechnology Investment Opportunities,” (1 Sept.

1992), available at 1992 WL 2773776 (Westlaw commercial database).

Weston, supra note 2, at 377.

See Mack, Connie, “President’s poison pill hurts research,” Tampa Tribune (17 April

1999), 19.

“Firms Will Try to Clone Pigs,” Washington Post, (24 July 1998), A24.

Walbolt, Kristen, “Dolly Has Three Mommies,” Sun-Sentinel (Ft. Lauderdale) (2 March

1997), G8.

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into the cell. The National Institutes of Health (NIH) first performed gene therapy on

a human patient in 1990.20 NIH scientists took blood cells from a four-year-old girl

suffering from an immune disease caused by the lack of a specific enzyme, adenosine

deaminase (ADA). They then introduced a functioning ADA gene into those cells,

which were then returned to the patient’s bloodstream.

Throughout the 1990's, thousands of patients were treated with various sorts of

gene therapy on an experimental basis in the United States.21 The death of a patient

undergoing experimental treatment in late 1999 has chilled gene therapy efforts,

however.22 A subsequent inquiry revealed indications of unacceptable scientific

conduct and monitoring.23 These findings prompted both investigations by Congress

and the Food and Drug Administration24 as well as suspensions of similar gene

therapy programs elsewhere.25

Genetically Modified Organisms

A specific gene may itself be used to endow its possessor with new properties

or functions.26 The agricultural division of the biotechology industry is based upon

this technology. The typical Genetically Modified Organism (GMO) results from the

insertion of a gene from one organism into another organism, conferring new

properties upon the receiving organism. Widely known examples include

insecticide-producing crops and rice enriched with vitamin A.27 The use of GMOs in

the United States has become widespread, with estimates that 33% of domestic corn

and 50% of soybean crops are genetically modified.28 Additionally, cotton and canola

oil are major crops also consisting substantially of GMO strains.29

Culliton, Barbara J., “Gene Therapy Begins,” 249 Science (1990), 1372.

Weiss, Rick & Nelson, Deborah, “Teen Dies Undergoing Experimental Gene Therapy,”

Washington Post (29 Sept. 1999), A1.

Wade, Nicholas, “Death Leads to Concerns for Future of Gene Therapy,” New York Times,

(30 Sept. 1999), A22.

Friend, Tim, “Scientists Violated Gene Therapy Rules in Teen’s Case, FDA Says,” USA

Today (9 Dec. 1999), A8.

Stolberg, Sheryl G., “Senators Press for Answers on Gene Trials,” New York Times (3 Feb.

2000), A25.

“Firm Ordered to Stop Gene Therapy Studies,” Washington Post (12 Oct. 1999), A8.

See, e.g., Diamond v. Chakrabarty, 447 U.S. 303 (1980) (petroleum-eating bacteria).

See Gillis, Justin, Monsanto Offers Patent Waiver, Washington Post. (4 Aug. 2000), A1;

Weiss, Rick, Biotech Research Branches Out, Washington Post, (3 Aug. 2000), A1.

Henson, Lori, “Fooling Mother Nature: Genetic Engineering Offers a World of Possibilities

for Plants but Raises Questions About Ethics and Health,” Savannah Morning News (9 Feb.

2000).

Weston, supra note 2, at 377.

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The Human Genome Project

The Human Genome Project is a publicly funded, international consortium of

scientists engaged in identifying each of the approximately 100,000 human genes.30

In the United States, the Human Genome Project was launched in 1990 under the

auspices of the U.S. Department of Energy and the Department of Health and Human

Services.31 Private enterprise Celera Genomics, led by J. Craig Venter, also

endeavored to sequence the human genome.32

On June 26, 2000, President Clinton and UK Prime Minister Tony Blair

announced that the initial stage of the Human Genome Project had been completed.

Growing understanding of the human genome will allow researchers to move from

identifying genes to understanding their functions. In particular, scientists should

increasingly possess the tools needed to identify the genes associated with diseases.

This understanding should assist the development of new approaches for diagnosing,

preventing and treating disease.33

Research Products

Fragments of DNA may also be used in basic and applied research. Because

DNA is organized is a specific way,34 a set DNA strand may be employed as a probe

for the presence of the complementary strand. Researchers are thus able to use such

genetic probes in experimental and diagnostic procedures to search for specific DNA

and RNA sequences.

Living organisms, into which certain genetic dispositions have been engineered,

also can be used in research.35 A prominent example is the so-called “Harvard

mouse,” which has been rendered especially susceptible to cancer.36 A similar mouse

Morse, Allison, “Searching for the Holy Grail: The Human Genome Project and Its

Implications,” 13 Journal of Law and Health (1999), 219.

Ibid at 220.

Golden, Frederic & Lemonick, Michael, “Mapping the Genome,” 156 Time (3 July 2000),

18.

Quinlivan, Beth, “The Genome Gold Rush,” Business Review Weekly (28 July 2000), 104.

See Amgen v. Chugai, 927 F.2d 1200, 1207 n.4 (Fed. Cir. 1991) (“DNA consists of two

complementary strands of nucleotides, which include the four basic compounds adenine (A),

guanine (G), cytosine (C), and thymine (T), oriented so that bases from one strand weakly

bond to the bases of the opposite strand. A bonds with T, and G bonds with C to form

complementary base pairs. This bonding process is called hybridization and results in the

formation of a stable duplex molecule.”).

See Diamond v. Chakrabarty, 447 U.S. 303 (1980) (describing insertion into bacteria of

gene for petroleum-degrading enzyme); Ananda M. Chakrabarty, Microorganisms Having

Multiple Compatible Degradative Energy- Generating Plasmids and Preparation Thereof, U.S.

Pat. No. 4,259,444 (issued Mar. 31, 1981).

See U.S. Patent No. 4,736,866 (12 April 1988) (“Transgenic Non-Human Mammals”).

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lacks a functional immune system, making it extremely useful for immunological and

infectious disease research.37

Therapeutics

Therapeutic genetic inventions involve isolated genes or their protein products.38

These proteins have broad applications to many diseases, including cancers, diabetes,

osteoporosis, as well as AIDS and other infectious diseases.39 For example, some

hormonal deficiencies may be treated with doses of human growth hormone, a

recombinant protein.40 Biotechnologies have also allowed the more rapid and efficient

manufacture of human insulin in order to treat diabetes.41

Clinicians may also use short, specific DNA sequences to search an individual’s

tissue or bodily fluid for the presence of a specific genetic element.42 One application

of DNA probes is in genetic screening. In this process, which is in a nascent stage of

development, tendencies toward hereditary diseases can be determined by assaying

the genetic make-up of a fetus or the prospective parents.43

Other biotechnologies include antibodies directed against specific proteins or

organisms44 and manufactured protein fragments bound by certain antibodies in an

infected patient’s bloodstream.45 These products may be used in diagnostic assays.

Such tests screen blood or other samples for indicators of pregnancy, cancer, human

immunodeficiency virus infection and other medical conditions.

See Mouse Without Immunity: Genpharm Expects Patent for an Animal, N.Y. Times, May

9, 1992, at A39.

Arnst, Catherine, “Inhale, Don’t Inject,” Business Week, (9 Feb. 1998), 74.

Biotechnology Indus. Org., 1998-99 BIO’s Guide to Biotechnology [http://www.bio.org

/aboutbio/guide1.html].

See, e.g., BioSepra New Technology Enables Large Scale Production of Gene Therapy

Drugs, 6 BioAccess, July 1, 1998, available in 1998WL10755071.

For example, bioengineered insulin is produced more efficiently and in greater purity. See

Gillis, Justin “Biotech’s Payday Arrives: After Costly, Uncertain Start, More Firms Are

Turning A Profit,” Washington Post, (5 July 1998), H01.

Marcial,Gene G., “A New Remedy for What Ails Enzo?,” Business Week (31 Aug. 1998),

54.

Bronson, Gail, “Where’s the Demand?,” Forbes, (20 Oct. 1986), 138.

See In re Wands, 858 F.2d 731 (Fed. Cir. 1988) (explaining the invention of antibodies for

use in clinical detection of hepatitis).

U.S. Patent No. 5,922,533 (13 July 1999) (“Rapid Assay for Simultaneous Detection and

Differentiation of Antibodies to HIV Groups”).

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The Role of R&D Funding in the Biotechnology Industry

The biotechnology industry has generated a variety of technical advances that

have impacted fields ranging from agriculture, to health care, to the criminal justice

system. These advances have not been achieved without costs, however. The

significant presence of small firms, as well as substantial research and development

expenses, suggest that capital infusions play an important role in the biotechnology

industry. The need for funding looms largest for products intended for human

medical use.46 The typical biotech company generally requires $250 million to $500

million to fund a product from research to profitability.47 Lengthy periods required

for regulatory approval account for much of this expense.48

Despite the promise it holds for future developments, the biotechnology industry

has recently encountered difficulty in attracting investors. One commentator recently

observed that “venture capital is tough to come by at a time when investors are

looking for quick payouts and have little patience for biotechnology, which seems to

be plodding compared to Internet, software and telecommunications companies.”49

For example, during the first six months of 1999, biotechnology initial public offerings

generated only $363 million, representing only about 10% of the $3.5 billion attracted

by Internet and software companies.50

As a result, many industry observers believe that a strong patent portfolio is

essential for capital infusion in the biotechnology industry.51 Even a firm that does not

yet market a product may be able to obtain income from its intellectual property.

Rights may be sold or the technology licensed for development or research purposes,

creating a revenue stream that supports additional research. Patent attorney Kenneth

J. Burchfiel has characterized biotechnology as an industry whose wealth resides in

its patents more than its products.52

Recent stock market movements suggest the significance of patent rights to

investors. For example, on March 14, 2000, President Bill Clinton and UK Prime

Minister Tony Blair issued a joint statement urging that “raw fundamental data on the

human genome . . . should be made freely available to scientists everywhere.”53 A

See Biotechnology Indus. Org., 1997-98 BIO’s Citizens’ Guide to Biotechnology, available

at [http://www.bio.org/aboutbio/guide1.html].

Copperthite, Charlotte H. & Lerner, Michael J., “Creative Use of IP Portfolios Helps

Secure Financing,” National Law Journal(24 May 1999), C4.

Ibid.

Jacobs, Paul, “Money’s There, but Hurdles Abound,” L.A. Times (11 Oct. 1999), C1.

Ibid.

Biotechnology Indus. Org., 1997-98 BIO’s Citizens’ Guide to Biotechnology, available at

[http://www.bio.org/aboutbio/guide1.html].

Burchfiel, Kenneth J., Biotechnology and the Federal Circuit § 18.5 (1995).

Gosselin, Peter G. & Jacobs, Paul, “Clinton, Blair to Back Access to Genetic Code,” Los

(continued...)

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number of biotechnology companies lost a substantial percentage of their market

capitalization as investors sold shares in record numbers.54 Among these enterprises

were Human Genome Sciences, Inc, which fell 25% on the day on the announcement,

and Incyte Pharmaceuticals, Inc., which fell 30%.55 The chief concern of many sellers

was that biotechnology patent rights would be weakened or subject to uncertainty.56

The United States Patent and Trademark Office (“PTO”) responded by issuing a press

release on March 16, 2000, explaining that U.S. patent policy was unaffected by the

joint statement. As the impact of the Clinton-Blair announcement was better

understood, the stock prices of many biotechnology enterprises rose.57

The Clinton-Blair announcement was not an isolated incident. The market

capitalization of many biotechnology and other high-technology enterprises has been

impacted by patent-related developments. In a single day, CellPro Inc. lost 50 % of

its stock market value following the Federal Circuit holding that CellPro Inc.’s

Ceprate bone marrow transplant system infringed a competitor’s patent.58 Similarly,

Visx, a manufacturer of laser medical devices, lost a patent dispute and watched its

stock fall 40 % within one hour.59 A successful settlement of a patent infringement

lawsuit with Hitachi recently imparted substantial gains to Rambus Inc. stock.60

Similarly, the stock of Odetics Inc. rose 24% upon news of a favorable jury verdict

in its patent litigation against Storage Technology Corp. in 1998.61

These episodes suggest that individuals may be aware of a company’s patent

portfolio when making investment decisions. As a result, the strength or weakness

of intellectual property rights, as well as the certainty associated with their creation

and scope of granted rights, potentially impacts capital infusion into high technology

markets such as biotechnology.

(...continued)

Angeles Times (14 March 2000), C1.

Heberlein, Greg, “Market movers: Biotech bubble pops as Nasdaq falls 200,” The Seattle

Times (15 March 2000), C1.

“Clinton/Blair gene patent announcement draws reaction,” Biotech Patent News (1 March

2000).

Heberlein, supra note 54.

Woods, Bob, “Biotech Stocks Rebound After Analysts Address Clinton Speech,”

Newsbytes News Network (15 March 2000).

Smith, Carol, “Stock in Bothell’s CellPro Falls 50 Percent in Wake of Ruling,” Seattle

Post-Intelligencer (13 Aug. 1998), F5.

Katz, John, “You Can Still Bet on Biotech,” Sunday Business (U.K.), (12 Dec. 1999), 28.

Stewart, Janet Kidd, “Nasdaq Tumble Negates Week’s Earlier Advance,” Chicago Tribune

(24 June 2000).

“News of Court Verdict Pumps Up Odetics,” Los Angeles Times, (31 March 1998), D24.

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Core Principles of Patenting Biotechnology

The rate of patenting biotechnology has dramatically increased in recent years.

More than 9,000 patents issued in the biotechnological arts in1998, as compared with

just over 2,000 patents in 1988.62 Patents concerning genetic materials are also being

filed at a growing rate. On July 13, 2000, the Director of the Patent and Trademark

Office (PTO), Q. Todd Dickinson, reported that approximately 20,000 patent

applications concerning genetic materials were pending before the PTO.63 He also

explained that approximately 6,000 gene-related patents had already issued by that

date, including 1,000 that were specifically drawn to human genes.64

The patenting process begins with the filing of an application at the PTO. In

deciding whether to approve a patent application, a PTO examiner will consider

whether the submitted application fully discloses and distinctly claims the invention.65

The examiner will also determine whether the invention itself fulfills certain

substantive standards set by the patent statute.66 Among the more important

requirements are that the invention must be novel and nonobvious. To be judged

novel, the invention must not be fully anticipated by a prior patent, publication or

other knowledge within the public domain.67 A nonobvious invention must not have

been readily within the ordinary skills of a competent artisan at the time the invention

was made.68

Beyond novelty and nonobviousness, two patentability requirements are of

particular significance for biotechnology. First, the invention must be judged to

comprise subject matter the patent law was designed to protect.69 This gatekeeper to

patentability is variously known as the requirement of “patent eligibility,” “patentable

subject matter,” or “statutory subject matter.”70 A crucial biotechnology patenting

issue is whether living inventions and genetic material are appropriately subject to the

patent system. The debate concerning biotechnology patents is reviewed below.

Biotechnology Industry Organization, Total Patents Granted Per Year, available at

[http://www.bio.org/aboutbio/guide2000/statistics.html#patents].

Dickinson, Q. Todd, Statement, House Judiciary Committee, Subcommittee on Courts and

Intellectual Property (13 July 2000), 5 (available at [http://www.uspto.gov/web/offices/

ac/ahrpa/opa/bulletin/genomicpat.pdf]).

Ibid.

35 U.S.C. § 112 (2000)

These requirement apply to so-called “utility patents.” The patent statues also allow for

design patents, see 35 U.S.C. § 171 (2000), and plant patents, see 35 U.S.C. § 161 (2000).

Subject matter and other patentability standards differ somewhat for these more specialized

patent regimes.

35 U.S.C. § 102 (2000).

35 U.S.C. § 103 (2000).

Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980).

Adelman, Martin J. et al. Patent Law: Cases and Materials (Minnesota: West Publishing

Co., 1998).

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The other significant substantive patentability standard is the so-called utility

requirement. This requirement is ordinarily satisfied if the invention is operable and

provides a tangible benefit.71 Although the utility requirement is readily met in most

fields, it presents a more significant obstacle to patentability within biotechnology.

Biotechnicians sometimes synthesize compounds without a precise knowledge of how

they may be used to achieve a practical working result. When patent applications are

filed claiming such compounds, they may be rejected as lacking utility within the

meaning of the patent law. This report will later consider the utility requirement in

some detail.

Once the PTO allows a patent to issue, the patent instrument is formally

published.72 Issued patents therefore present a full technical disclosure of the patented

invention.73 The patent proprietor then obtains the right for twenty years to exclude

others from making, using, selling, offering to sell or importing into the United States

the patented invention.74 The Patent Act allows these rights to be enforced in federal

court. Unauthorized infringers may be enjoined and required to pay monetary

damages in favor of the patentee.75

A few core points concerning the patent law should be noted here. First, the

patent grant is in the nature of the right to exclude. A patent owner may prohibit

others from employing the patented invention, but does not obtain the right to make

or use the patented invention itself.76 For example, simply because the PTO has

granted an individual a patent on a gene therapy does not mean that the Food and

Drug Administration has approved, or will approve, the practice of that therapy. In

addition to the Food and Drug Administration, the Environmental Protection Agency

and Department of Agriculture regulate the use of biotechnological inventions.77

Second, the patent right applies not only to full-fledged commercial activities,

but also to most unauthorized experiments involving the patented invention. The

patent statute itself contains no “experimental use” infringement defense analogous

to the fair use privilege codified within the Copyright Act.78 As a result, the United

States Court of Appeals for the Federal Circuit has held that mere experimentation

with the patented invention constitutes an infringing act, so long as this

35 U.S.C. § 101 (2000); see also Brenner v. Manson, 383 U.S. 519 (1966).

35 U.S.C. § 122 (2000). 1999 amendments to the Patent Act also call for the publication

of certain pending patent applications eighteen months after the date they are filed. Ibid.

35 U.S.C. § 112 (2000).

35 U.S.C. § 271 (2000).

35 U.S.C. §§ 283, 284 (2000).

Chisum, Donald S., et al., Principles of Patent Law (Foundation Press, New York 1998),

4-6.

Biotechnology Industry Organization, “Some Facts About Biotechnology,” available at

[http://www.bio.org/aboutbio/guide2000/facts.html].

See 17 U.S.C. § 107 (2000).

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experimentation holds the potential to impact the patent holder negatively.79 The

court concluded that only the use of the patented invention wholly for “amusement,

to satisfy idle curiosity, or for strictly philosophical inquiry” may possibly be exempted

from infringement liability.80 Given the expenses associated with biotechnology R&D,

increasing collaboration between industry and academia, and ultimately commercial

motivation of most researchers, successful use of this so-called experimental use

defense is unlikely.81

Finally, the PTO bases its patentability determinations only upon the relatively

limited criteria set forth in the Patent Act. These criteria include whether the patent

application appropriately discloses and claims the invention for which protection is

sought, as well as the impact of the novelty, nonobviousness, statutory subject matter

and utility requirements upon the claimed invention.82 The PTO is not statutorily

authorized to consider other issues, such as whether the patented invention may be

licensed to ensure access by researchers and other interested parties, when making this

decision.83

The Patent Eligibility of Living Inventions

and Genetic Materials

The issue of whether living organisms are merely unpatentable products of

nature, or whether ethical or policy concerns should bar their patenting, continues to

command public attention. As with other sorts of inventions, the governing statute

is section 101 of the current patent law, the Patent Act of 1952, which is codified in

Title 35 of the United States Code. Section 101 allows patents to be granted for any

“process, machine, manufacture, or composition of matter.” As a result, an invention

is eligible for patenting if it is a “process,” which the Patent Act defines as a “process,

art or method.”84 Alternatively, the invention may be a “machine,” which has been

interpreted to include any apparatus;85 a “composition of matter,” including

synthesized chemical compounds and composite articles;86 or a “manufacture,” a

broadly oriented, residual designation.87

Roche Products, Inc. v. Bolar Pharmaceutical Co., 733 F.2d 858 (Fed. Cir. 1984).

Ibid at 863.

Karp, Jonathon P., “Experimental Use as Patent Infringement: The Impropriety of a Broad

Exception,” 100 Yale Law Journal (1991), 2169 (observing that courts apply the

experimental use doctrine restrictively).

See supra notes 65-71 and accompanying text.

Dickinson, supra note 63, at 5.

35 U.S.C. § 100(b) (2000).

Nestle-Le Mur Co. v. Eugene, Ltd., 55 F.2d 854 (6th Cir. 1932).

Diamond v. Chakrabarty, 447 U.S. 303 (1980).

Ibid.

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Under the literal language of the Patent Act, most biotechnologies would qualify

as either a composition of matter or process. Genetic materials are at bottom

chemical compounds, albeit very complex ones, that are considered to be

compositions of matter.88 Illustrative is the patent application at issue in In re

Deuel,89 which claimed a “purified and isolated DNA sequence consisting of a

sequence encoding human heparin binding growth factor of 168 amino acids having

the following amino acid sequence: Met Gln Ala . . . [the remainder of the lengthy

amino acid sequence is omitted here].” An inventor could also obtain a process

patent directed towards the techniques of biotechnology. For example, in In re

O’Farrell,90 the patent applicant claimed a “method for producing a predetermined

protein in a stable form in a transformed host species of bacteria.”

Despite the broad statutory language, the courts had traditionally crafted several

exceptions to patentability. One significant restriction is that a “product of nature”–a

preexisting substance found in the wild–may not be patented per se. For example, an

individual may not obtain a patent on a new variety of plant found in a remote part of

the Amazon Basin, even if the existence of this plant was previously unknown.91

However, the courts have also established that significant artificial changes to a

product of nature may render it patentable.92 By purifying, isolating or otherwise

altering a naturally occurring product, an inventor may obtain a patent on the product

in its altered form.93 The rule that patents may be granted for altered products of

nature renders patentable many inventions of biotechnology, including genetic

materials and proteins. For example, in Amgen, Inc. v. Chugai Pharmaceutical Co.,94

the patentee claimed a “purified and isolated DNA sequence consisting essentially of

a DNA sequence encoding human erythropoietin.”95

With the scope of patentable subject matter limited, one expert has concluded

that a properly issued patent cannot give rights over a gene as found in a person’s

chromosomes. The artificial nucleic acid construct claimed by the patent would not

be the same as found in a living organism.96

Patent protection may also be obtained on so-called living inventions. The

leading Supreme Court opinion on the subject, the 1980 decision in Diamond v.

See Amgen, Inc. v. Chugai Pharmaceutical Co., 927 F.2d 1200, 1206 (Fed. Cir. 1991).

51 F.3d 1552 (Fed. Cir. 1995).

853 F.2d 894 (Fed. Cir. 1988).

See, e.g., Ex parte Latimer, 1889 Comm’r Dec. 13 (1889).

See, e.g., Amgen, Inc. v. Chugai Pharmaceutical Co., 927 F.2d 1200 (Fed. Cir. 1991).

See Scripps Clinic & Research Foundation v. Genentech, Inc., 927 F.2d 1565 (Fed. Cir.

1991).

927 F.2d 1200 (Fed. Cir. 1991).

U.S. Patent No. 4,703,008 (27 Oct. 1987) (“DNA sequences encoding erythropoietin”).

Henner, Dennis J., Statement, House Judiciary Committee, Subcommittee on Courts and

Intellectual Property (13 July 2000).

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Chakrabarty concluded that a genetically engineered microorganism was patentable.97

Diamond v. Chakrabarty involved the PTO rejection of Dr. Ananda Chakrabarty’s

claims towards an artificially generated bacterium with the ability to degrade crude oil.

At the Supreme Court, the PTO Solicitor’s chief argument was that because genetic

technology could not have been foreseen at the time the patent statute was drafted in

the early 1950's, the resolution of the patentability of such inventions should be left

to Congress. On its way to reversing the PTO decision, the Court disagreed: “A rule

that unanticipated inventions are without protection would conflict with the core

concept of the patent law that anticipation undermines patentability.”98 The Court

also dismissed concerns over the possible perils of genetic research. It stated that

researchers would assuredly pursue work in biotechnology whether their results were

patentable or not, and the regulation of genetic research was a task that also fell to the

legislature.99

Following the lead of the Supreme Court, the PTO Board has held that an

artificial animal life form constitutes patentable subject matter. In Ex parte Allen,100

the Board reasoned that a claimed polyploid Pacific oyster constituted a non-naturally

occurring manufacture or composition of matter within the meaning of § 101.

Contemporaneously, PTO Commissioner Donald Quigg issued a formal notice, stating

that non-naturally occurring, non-human multicellular living organisms are patentable

subject matter.101 Among the notable patents the PTO issued in keeping with this

notice concerned the Harvard mouse, which was genetically engineered to be

susceptible to cancer.102

The PTO notice did advise that “the grant of a limited, but exclusive property

right in a human being is prohibited by the Constitution.”103 This statement appears

consonant with the Thirteenth Amendment, which provides that “[n]either slavery nor

involuntary servitude, except as a punishment for crime whereof the party shall have

been duly convicted, shall exist within the United States.”104 The Commissioner

further advised that claims directed to a non-plant multicellular organism which would

include a human being within its scope should include the limitation “non-human” to

avoid a § 101 rejection.

447 U.S. 303 (1980).

447 U.S. at 316.

447 U.S. at 317.

100

2 USPQ2d 1425 (Board of Patent Appeals and Interferences 1987), aff’d, 846 F.2d 77

(Fed. Cir. 1988) (nonprecedential).

101

See 1077 PTO Official Gazette 24 (21 April 1987).

102

U.S. Patent No. 4,736,866 (12 Apr. 1988) (“Transgenic non-human mammals”).

103

1077 PTO Official Gazette 24 (21 April 1987).

104

U.S. Constitution, Amendment XIII.

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Objections to Patenting Biotechnology

Several objections have arisen to patenting the inventions of biotechnology.

Most of these objections have been raised with regard to human genetic materials and

genetically modified organisms, but they typically apply with varying force to other

biotechnologies. A central position of many commentators is that the grant of

proprietary rights for these inventions is degrading and inappropriate. These concerns

principally stand on ethical, moral and theological grounds.

Some individuals believe that patenting biotechnology devalues the worth and

dignity of living beings. These commentators believe that biotechnology patents

would allow individuals to obtain an ownership right in another sentient being. From

this perspective, such a patent right is akin to slavery and morally wrong.105

Other observers have identified a fundamental right of species and individuals to

biological integrity. Biotechnology activist Jeremy Rifkin, for example, has expressed

concerns that the patenting of genetic materials reduces living beings to mere bundles

of information. When living creatures are abstractly expressed as claims in a patent

instrument, Rifkin urges, the notion of manipulating them at a fundamental level

becomes more palatable.106

Theological arguments have also been raised against patenting biotechnology.

Some observers believe that reverence for life is eroded by economic pressures to

view living beings and genetic materials as industrial products. Noting these

theological concerns, Reverend Wesley Granberg-Michaelson identified

a background of Judeo-Christian thinking about how we relate to the

natural environment. In a nutshell that background says that we have a

responsibility for preserving the integrity of that creation, and for working

with it to preserve its intrinsic values . . . . [T]he doctrine of trust in legal

parlance is synonymous about the relation of creation to humanity. The

Judeo-Christian view says that the creation is, in essence, held in trust;

there are limitations on what we can do. We have a responsibility to see

that its integrity is preserved. This background has led to legislation such

as endangered species laws, animal welfare laws, laws regarding

environmental quality.107

Others are concerned that biotechnology patenting places the values of the

traditional agricultural community at stake. They explain that patenting may cause

a handful of large, multinational enterprises to control genetically modified animals,

105

See Clark, Margaret, “This Little Piggy Went to Market: The Xenotransplantation and

Xenozoonose Debate,” 27 Journal of Law and Medical Ethics (1999), 137.

106

Rifkin, Jeremy, The Biotech Century: Harnessing the Gene and Remaking the World

(1998), 214-15.

107

See Patents and the Constitution: Transgenic Animals, Hearings Before the Subcommittee

on Courts, Civil Liberties, and the Administration of Justice of the House Committee on the

Judiciary, 100th Cong., 1st Sess. 399 (1987).

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seeds and other fundamental tools of the farmer. While farmers could previously

employ resources at their own disposal, they may now be dependent upon others to

obtain seeds. Some observers also believe that plants and animals with increased

production efficiencies will reduce the number of farmers needed.108

Other concerns over biotechnology patenting are instrumental in character.

Some commentators believe that allowing patents on living inventions, genetic

materials and other biotechnologies will encourage their continued commercial

development.109 Others are concerned that granting patents lends an aura of

legitimacy to biotechnology.110 In either case, this set of concerns about patenting

biotechnology echoes concerns about the impact of biotechnology more generally.

Although such arguments are numerous and diverse, some of the principal objections

are summarized here.

During his June 26, 2000, remarks commemorating the completion of the first

survey of the human genome project, President Clinton noted several common

concerns regarding the identification of genetic information. As explained by

President Clinton:

We must ensure that new genome science and its benefits will be

directed toward making life better for all citizens of the world, never

just a privileged few.

As we unlock the secrets of the human genome, we must work

simultaneously to ensure that new discoveries never pry open the doors

of privacy. And we must guarantee that genetic information cannot be

used to stigmatize or discriminate against any individual or group.111

Other observers oppose patents on genetically modified organisms due to their

belief that they contribute to animal suffering. They cite such instances as the

incorporation of the bovine growth hormone gene into pigs. This gene encourages

an increased lean to fat ratio that produces a healthier meat product. Animals

expressing the gene were found to be lethargic, arthritic, and possessing an heightened

vulnerability to stress.112 Other biotechnologies, such as the Harvard mouse,

dramatically increase the likelihood an animal will experience disease and suffering.113

108

Dresser, Rebecca, “Ethical and Legal Issues in Patenting New Animal Life,” 28

Jurimetrics (1988), 399, 422.

109

Diamond v. Chakrabarty, 447 U.S. 303, 317 (1979).

110

Naik, Paul S., “Biotechnology Through the Eyes of an Opponent: The Resistance of

Activist Jeremy Rifkin,” 5 Virginia Journal of Law and Technology (2000), 86.

111

The White House, Office of the Press Secretary, “Text of Remarks on the Completion of

the First Survey of the Human Genome Project” (25 June 2000) (available at

[http://www.whitehouse.gov]).

112

Chiapetta, James R., “Of Mice and Machine: A Paradigmatic Challenge to Interpretation

of the Patent Statute,” 20 William Mitchell Law Review (1994), 155.

113

See supra notes 34-36 and accompanying text.

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Other commentators have expressed concerns over diminishing genetic diversity.

According to Jeremy Rifkin, while biotechnology may provide gains in the short run,

the long term consequences include the depletion of genetic stock. In his view,

because biotechnology would may lead to the development of “optimal” plants and

animals, the gene pool will suffer for lack of variety. These specialized breeds may

be susceptible to unknown weaknesses and not be sustainable.114

Observers have also noted the environmental hazards associated with release of

artificial entities. The consequences of the release of genetically modified organisms

are difficult to predict. As living entities, these organisms may reproduce, mutate and

migrate once released into the environment. Artificial products may also result in

deleterious interactions with other animals and plants in uncertain ways.115

Benefits of Patenting Biotechnology

Proponents of biotechnology patenting offer numerous arguments in favor of

their position. First, they observe that patent rights provide the right to exclude

others from practicing the claimed invention.116 Patent ownership does not provide

an affirmative right to market the technology. These commentators believe that

disallowing patents to issue on biotechnologies may decrease research and

development efforts, but would neither suppress biotechnology nor allow meaningful

control on the manner in which biotechnologies are employed.

Observers such as Professor Robert P. Merges have further stated that the patent

system is not the proper vehicle for technology assessment.117 He explains that the

patent system has a more basic goal: “to promote the progress of science and useful

arts,” as stated in the Constitution.118 As a result, Professor Merges believes that

potential social consequences of biotechnologies are better addressed through

regulatory regimes. Agencies such as the Food and Drug Administration could

review health and environmental hazards. Scientists could establish seed banks to

preserve the genetic variety of various crops, for example, or establish protocols to

address concerns over privacy. In the view of Professor Merges, these measures have

little to do with patents.

In deciding to uphold PTO decisions to grant patents on living inventions, the

courts have also observed that patents have long been granted on living inventions.

Exemplary is the 1873 patent issued to Louis Pasteur on “yeast, free from organic

germs of disease, as an article of manufacture.”119 Microbiological processes have

been used for centuries in order to make wine, age tobacco, bate leather, digest

114

See Naik, supra note 110, at 23.

115

Ibid at 26.

116

See supra notes 74-77 and accompanying text.

117

Merges, Robert P., “Intellectual Property in Higher Life Forms: The Patent System and

Controversial Technologies,” 47 Maryland Law Review (1998), 1051.

118

U.S. Constitution, Article I, clause 8, section 8.

119

Diamond v. Chakrabarty, 447 U.S. 303, 314 n.9 (1979).

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sewage and for numerous other applications, and many of these techniques have been

patented in the United States.120

Attorney James R. Chiapetta believes that the denial of patent protection would

not dampen enthusiasm for biotechnology development. Instead, he asserts, this step

would merely encourage inventors to maintain biotechnologies as trade secrets. The

concealment of the workings of biotechnologies would only hinder the development

of regulatory measures that would reduce any perceived threats of harm.121

Mr. Chiapetta also explains that a purpose of the patent system is to enhance

industrial efficiency. Part of this process can be the obsolescence of older technology

as a result of innovative advances. Mr. Chiapetta finds it unfortunate that

biotechology may place further strains on the viability of the traditional family farm,

but observes that biotechnologies are hardly unique in this regard. Many technical,

economic and social factors are leading to fewer and larger farms within the United

States, and he argues that biotechnology should not be singled out within the patent

law for this reason.122

Proponents of biotechnology patenting also observe that this prospect appears

rather benign in the face of current social norms. According to LeRoy Walters,

Ph.D., Director of the Kennedy Institute of Ethics at Georgetown University, given

that individuals routinely buy, sell, breed, confine, eat and perform research on plants

and animals, the practice of patenting them does not seem particularly worrisome.123

A number of scientific commentators have dismissed the notion of species

integrity as specious. For example, Dr. Oliver Smithies of the University of Wisconsin

explained that many mammalian species with no possible means of inter-breeding

have remarkably similar genomes.124 Dr. Smithies further observed that inter-species

genetic transfer has occurred naturally, albeit rarely, without human intervention

through viral and other microbial agents. Dr. Finnie A. Murray of Ohio University

has explained that all species are constantly evolving; no species has a fixed genome,

and genetic plasticity is a fundamental property of living beings.125 As a result, many

observers do not believe that artificial inter-species genetic transfers can be said to

violate any fundamental norm of genetic integrity.

Other commentators have also noted that traditional breeding programs often

perpetuate genetic defects. One expert points out that purebred cats, dogs and horses

120

See In re Bergy, 563 F.2d 1031, 1038 (CCPA 1977).

121

Chiapetta, supra note 112, at 155.

122

Ibid.

123

Patents and the Constitution: Transgenic Animals, Hearings Before the Sub-committee on

Courts, Civil Liberties, and the Administration of Justice of the House Committee on the

Judiciary, 100th Cong., 1st Sess. 389 (1987).

124

National Institutes of Health, “Recombinant DNA Research, Actions Under Guidelines,”

50 Federal Register 9760 (11 March 1985).

125

Ibid.

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often suffer from a variety of genetic defects leading to diseases ranging from

metabolic disorders to arthritis.126 Genetic engineering potentially avoids these

problems by allowing expression of a single desirable trait without concomitant

selection of others.127 In arguing that biotechnology may be put to work to diminish

animal suffering, some observers have pointed to the genetically engineered transgenic

chicken that resists avian leukemia virus. The result has been healthier birds and

significant savings to the chicken industry.128

Finally, proponents of patenting in this field point to the many gainful advances

already achieved by the biotechnology industry. The continued availability of patent

protection may encourage innovation and product development, proponents say,

yielding concomitant social benefits. Although many of these commentators are

cognizant of concerns for animal results, they regard the treatment of human diseases

and the amelioration of human suffering as a primary moral imperative.129

The Chimera Application

A team of inventors decided to place the issue of biotechnology patenting

squarely before the PTO and the courts. In conjunction with biotechnology activist

Jeremy Rifkin, cellular biologist Dr. Stuart Newman filed a patent application on

December 18, 1997, claiming a method for combining human and animal embryo cells

to produce a single embryo.130 This embryo could then be implanted in a human or

animal surrogate mother, resulting in the birth of a “chimera,” or mixture of the two

species. The Newman-Rifkin application specifically mentions chimeras made in part

from mice, chimpanzees, baboons, and pigs. The PTO has rejected the application on

several grounds, among them ineligible subject matter under § 101, although final

administrative action has not yet happened.131 No matter what the ultimate

disposition of their application, Newman and Rifkin may once more bring the debate

on the patentability of living inventions into the judicial system.

The Utility Requirement

Section 101 of the Patent Act also mandates that patents issue only to “useful”

inventions. Utility ordinarily presents a minimal requirement that the invention be

126

50 Federal Register at 9763 (statement of Dr. Fox).

127

Chiapetta, supra note 112, at 180.

128

Ibid at 183 (citing savings of an estimated $50 million to $100 million per year).

129

50 Federal Register at 9764 (statement of Dr. Friedman).

130

Magnani, Thomas A., “The Patentability of Human-Animal Chimeras,” 14 Berkeley

Technology Law Journal (1999), 443.

131

Bureau of National Affairs, “Patent and Trademark Office: Patent Application is

Disallowed as ‘Embracing’ Human Beings,” Patent, Copyright and Trademark Journal (17

June 1999), 203.

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capable of achieving a pragmatic result.132 Patent applicants need only supply a single,

operable use of the invention that is credible to persons of ordinary skill in the art.

As demonstrated by Justice Story’s 1817 instructions to the jury in Lowell v.

Lewis133 and Bedford v. Hunt,134 the notion of utility is a longstanding feature of

United States patent law. In Lowell, Justice Story remarked:

All that the law requires is, that the invention should not be frivolous or injurious

to the well-being, good policy, or sound morals of society. The word “useful”,

therefore, is incorporated into the act in contradistinction to mischievous or

immoral. . . . But if the invention steers wide of these objections, whether it be

more or less useful is a circumstance very material to the interest of the patentee,

but of no importance to the public. If it be not extensively useful, it will silently

sink into contempt and disregard.

Under Justice Story’s view, the utility requirement does not provide a significant place

for technology assessment. Outside of the most narrow limits, valuation of the

invention is left to the market rather than to the mechanisms of the patent law.

Historically, courts employed the utility requirement to strike down patents

concerning inventions that were judged to be immoral or fraudulent. A handful of

early decisions invalidated patents on inventions intended for use in gambling or other

disfavored activities. A patented toy automatic race course,135 lottery devices136 and

a slot machine137 were among those held to lack utility because their functions were

judged unwholesome. Inventions that were designed to mislead consumers were

similarly invalidated.138

The modern view is that so long as the invention may be put to a single lawful

use, it possesses utility within the patent statute. Representative of the contemporary

position is the Federal Circuit opinion in Juicy Whip, Inc. v. Orange Bang, Inc.139

The plaintiff, Juicy Whip, held a patent concerning a post-mix dispenser that included

a transparent bowl. According to the patent, the bowl was filled with a liquid that

appeared to be the beverage available for purchase. While the bowl was arranged in

such a way that it seemed to be the source of the beverage, in fact no fluid connection

existed between the bowl and the beverage dispenser at all. Instead, the beverage was

mixed immediately prior to each beverage sale. The district court struck Juicy Whip’s

patent on the ground of lack of utility, reasoning that the patented invention acted to

deceive consumers.

132

Mitchell v. Tilghman, 86 U.S. (19 Wall.) 287, 396 (1873).

133

15 Fed. Cas. 1018, 1019 (No. 8568) (C.C. Mass. 1817).

134

3 Fed. Cas. 37 (No. 1217) (C.C. Mass. 1817).

135

National Automatic Device Co. v. Lloyd, 40 F. 89 (N.D. Ill. 1889).

136

Brewer v. Lichtenstein, 278 F. 512 (7th Cir. 1922).

137

Schultze v. Holtz, 82 F. 448 (N.D. Cal. 1897).

138

Richard v. Du Bon, 103 F. 868, 873 (2d Cir. 1900).

139

185 F.3d 1364 (Fed. Cir. 1999).

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The Federal Circuit reversed on appeal, concluding that the fact that one product

can be altered to make it look like another is in itself a specific benefit sufficient to

satisfy the statutory requirement of utility. The appeals court reasoned that many

valued products, ranging from cubic zirconium to synthetic fabrics, are designed to

appear as something that they are not.140 The Federal Circuit further concluded that

the utility requirement does not direct the PTO or the courts to resolve issues of

product safety or deceptive trade practices, which were left to such agencies as the

Federal Trade Commission or the FDA.141

As a result of decisions such as Juicy Whip, in most technical fields the utility

requirement is employed merely to sift out utterly incredible inventions from the

domain of patentability. For example, the utility requirement has led to the rejection

of patents claiming a perpetual motion machine142 and a method of slowing the aging

process.143

In modern practice, the utility requirement most often comes into play in the

fields of biotechnology and chemistry. In these disciplines, inventors often synthesize

a new compound, or a method of making a new compound, without a preexisting

knowledge of a particular use to which the compound may be put. Scientists may

generate a compound based on their knowledge of the behavior of related

pharmaceutical compounds, for example, or may wish to isolate a fragment of genetic

material for which some application may develop in the future. However, at the time

the inventor generates the compound, no precise knowledge of the compound’s utility

is known.

Today there are considerable incentives for biotechnicians to obtain patent

protection on compounds of interest as soon as possible. For example, in the case of

medical treatments, food and drug authorities require extensive product testing before

the pharmaceutical can be broadly marketed. Before investing time and effort on

laboratory testing and clinical trials, biotechnology concerns desire to obtain patent

rights on promising compounds even where their particular properties are not well

understood. But when patent applications are filed too close to the laboratory bench,

inventors have discovered that the utility requirement can pose a considerable hurdle.

The Supreme Court opinion in Brenner v. Manson addressed such a situation.144

The inventor Manson filed a patent application claiming a method of making a known

steroid compound. Although the particular compound Manson was concerned with

was already known to the art, chemists had yet to identify any setting in which it could

be gainfully employed. However, it was known that another steroid with a very

similar structure had tumor-inhibiting effects in mice, Manson’s new method of

making the compound was a research tool of interest to the scientific community.

140

Ibid at 1367.

141

Ibid at 1368.

142

Newman v. Quigg, 877 F.2d 1575, 11 USPQ2d 1340 (Fed. Cir. 1989).

143

Ex parte Heicklin, 16 USPQ2d 1463 (BPAI 1990).

144

383 U.S. 519 (1966).

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The Patent Office Board affirmed the examiner’s rejection of the application.

The Board reasoned that because Manson could not identify a single use for the

steroid he produced, the utility requirement was not satisfied. The Board was

unimpressed that a similar compound did have beneficial effects, noting that in the

unpredictable art of steroid chemistry, even minor changes in chemical structure often

lead to significant and unforeseeable changes in the performance of the compound.

Manson appealed to the Court of Customs and Patent Appeals, which reversed. Key

to the court’s reasoning was that the sequence of process steps claimed by Manson

would produce the steroid of interest. According to the Court of Customs and Patent

Appeals, because the claimed process worked to produce a compound, the utility

requirement was satisfied.

The Supreme Court, however, reversed. The Court took issue with Justice

Story’s understanding that the utility requirement is fulfilled so long as the claimed

invention is not socially undesirable. At least within the context of scientific research

tools, the Court imposed a requirement that an invention may not be patentable until

it has been developed to a point where “specific benefit exists in currently available

form.”145 Chief among the Court’s concerns was the breadth of the proprietary

interest that could result from claims such as those in Manson’s application. “Until

the process claim has been reduced to production of a product shown to be useful, the

metes and bounds of that monopoly are not capable of precise delineation. . . . . Such

a patent may confer power to block whole areas of scientific development, without

compensating benefit to the public.”146 The Court closed by noting that “a patent is

not a hunting license. It is not a reward for the search, but compensation for its

successful conclusion. ‘A patent system must be related to the world of commerce

rather than to the realm of philosophy.’”147

Although Brenner v. Manson appears to take a strict view of the utility

requirement, a more recent Federal Circuit opinion on utility, In re Brana,148 suggests

a more limited role. Like Manson, Brana claimed chemical compounds and stated

they were useful as antitumor substances. The scientific community knew that

structurally similar compounds had shown antitumor activity during both in vitro

testing, done in the laboratory using tissue samples, and in vivo testing using mice as

test subjects. The latter tests had been conducted using cell lines known to cause

lymphocytic tumors in mice.

The PTO Board rejected the application for lack of utility, and on appeal the

Federal Circuit reversed. Among the objections of the PTO was that the tests cited

by Brana were conducted upon lymphomas induced in laboratory animals, rather than

real diseases. The Federal Circuit responded that an inventor need not wait until an

145

Ibid at 534-35.

146

Ibid at 535.

147

Ibid at 536 (quoting Application of Ruschig, 343 F.2d 965, 970 (CCPA 1965)).

148

51 F.3d 1560 (Fed. Cir. 1995).

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animal or human develops a disease naturally before finding a cure.149 The PTO

further stated that Brana cited no clinical testing, and therefore had no proof of actual

treatment of the disease in live animals. The Federal Circuit found that proof of utility

did not demand tests for the full safety and effectiveness of the compound, but only

acceptable evidence of medical effects in a standard experimental animal.150

The holding of Brana, along with its failure to discuss or even cite Brenner v.

Manson, suggests that the Federal Circuit has adopted a more liberal approach to the

utility requirement than did the Supreme Court.151 The Federal Circuit did indicate

that, in cases where the invention lacks a well-established use in the art, the applicant

must disclose a specific, credible use within the patent’s specification.152

Brenner v. Manson and Brana were chemical cases. The PTO applies the utility

requirement to the analogous discipline of biotechnology as well. Inventors often

seek patent protection on biological compounds soon after they have been

synthesized. Such compounds include complementary DNA (“cDNA”), which

corresponds to proteins used by human cells, and expressed sequence tags (“ESTs”),

DNA sequences that correspond to a small portion of each cDNA. Because this

nascent field is highly unpredictable, the functions of cDNA fragments and ESTs are

usually unknown at the time they are discovered. Yet they remain extraordinarily

valuable for their potential uses, and scientists from private industry, government

facilities and university laboratories alike have marketed these research tools for

commercial sale. The patentability of these genetic materials has proven

controversial. While Brenner v. Manson holds that serious scientific interest alone

does not fulfill the utility requirement, Brana and other Federal Circuit opinions

suggest a more lenient posture.

In an attempt to address cDNA, ESTs, and other biotechnology patents, the

PTO published “Revised Interim Utility Examination Guidelines” in the Federal

applicants to identify explicitly a specific, substantial and credible utility for their

inventions, unless such a utility is already well-established. According to PTO

Director Q. Todd Dickinson, “the Patent Office has raised the bar to ensure that

patent applicants demonstrate a ‘real world’ utility. One simply cannot patent a gene

itself without also clearly disclosing a use to which that gene can be put. As a result,

we believe that hundreds of genomic patent applications may be rejected by the

USPTO, particularly those that only disclose theoretical utilities.”154

149

Ibid at 1565.

150

Ibid at 1568.

151

Machin, Nathan, “Prospective Utility: A New Interpretation of the Utility Requirement of

Section 101 of the Patent Act,” 87 California Law Review (1999), 421, 432.

152

51 F.3d at 1564-68.

153

United States Patent & Trademark Office, “Revised Utility Guidelines,” 64 Federal

154

Dickinson, supra note 63, at 4.

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Director Dickinson explained the meaning of terms “specific, substantial and

credible” in the context of the utility requirement as follows:

A An asserted utility is credible unless the logic underlying the assertion is

seriously flawed, or the facts upon which the assertion is based are

inconsistent with the logic underlying the assertion. For example, at least

some nucleic acids might be used as probes, chromosome markers, or

diagnostic markers. Therefore, the per se credibility of assertions regarding

the use of nucleic acids is not usually questioned. However, even if

credible, at least one asserted utility must also be both specific and

substantial.

A A utility is specific when it is particular to the subject matter claimed. For

example, a polynucleotide said to be useful simply as a “gene probe” or

“chromosome marker” does not have specific utility in the absence of a

disclosure of a particular gene or chromosome target. Similarly, a general

statement of diagnostic utility would ordinarily be insufficient to meet the

requirement for a specific utility in the absence of an identification of what

condition can be diagnosed.

A A substantial utility is one that defines a “real world” use. Utilities that

require or constitute carrying out further research to identify or reasonably

confirm a “real world” context of use are not substantial utilities. For

example, basic research that uses a claimed nucleic acid simply for studying

the properties of the nucleic acid itself does not constitute a substantial

utility.155

Many observers have greeted the new PTO Guidelines favorably. The former

Director of the National Institutes of Health (NIH), Dr. Harold Varmus, stated that

he was “very pleased with the way [the PTO] has come closer to [the NIH’s] position

about the need to define specific utility.”156 Dr. Francis Collins, Director of the

National Human Genome Research Institute, has said that the new utility guidelines

are “quite reassuring in terms of making sure that we end up with an outcome where

the patent system is used to provide an incentive for research and not a

disincentive.”157 In addition, Dr. Craig Venter, the President and Chief Scientific

Officer of Celera Genomics Corporation, recently stated that he was “pleased to see

[the PTO] is raising the bar” on gene patents.158

An interesting aspect of the new PTO Utility Guidelines is their compatability

with the governing case law. Although each application must be considered on its

own merits, the Guidelines appear to be closer to the holding of Brenner v. Manson

than Brana. It is unclear how the Federal Circuit would rule on a utility-based

155

Ibid at 4-5.

156

Ibid at 5.

157

Ibid.

158

Ibid.

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rejection under the PTO Guidelines in light of its holding in Brana.159 In this vein,

PTO Deputy Assistant Commissioner for Patent Policy Stephen G. Kunin has

expressed his view that “it may remain for the Board of Patent Appeals and

Interferences and the federal courts to determine the true scope of the substantiality

criterion of the utility requirement on a case-by-case basis.”160

Proponents of a Strict Utility Standard

Some legal and scientific commentators have expressed concern that proprietary

interests in scientific knowledge will impede research efforts overall. Following the

lead of Brenner v. Manson, Professors Heller and Eisenberg have invoked the

“tragedy of the anticommons” to argue against the patenting of genetic materials.161

The “tragedy of commons” is a familiar metaphor for many economists, lawyers and

scientists. A resource is prone to overuse in a tragedy of the commons when too

many owners each have a privilege to use a given resource and no one has a right to

exclude another. Overpopulation, air pollution, and species extinction result from

tragedies of the commons.

In a mirror image of the tragedy of the commons, a resource may be prone to

underuse in a “tragedy of the anticommons.” In this circumstance, multiple owners

each have a right to exclude others from a scarce resource and no one has an effective

privilege of use. Transaction costs, strategic behaviors, and the cognitive biases of

participants often prevent individuals from reaching a socially optimal agreement

allocating property rights. Use of the resource then becomes difficult or impossible.

Professors Heller and Eisenberg argue the granting of intellectual property rights

to early research results holds the potential to create a tragedy of the anticommons

in biomedical research. They specifically identify two mechanisms through which

patents on gene fragments may hinder innovation. First, too many concurrent

fragments of intellectual property rights may hinder the exploitation of potential future

products. In a spiral of overlapping patent claims held by different individuals, one

enterprise may own a patent on a raw genomic DNA fragment, another on the

corresponding protein, and yet another on a diagnostic test for a genetic disease.

Professors Heller and Eisenberg explain that each upstream patent allows its owner

to set up another tollbooth on the road to product development, adding to the cost

and slowing the pace of downstream biomedical innovation.

Second, upstream patent owners may be able to stack licenses on top of the

future discoveries of downstream users. The use of reach-through license agreements

on patented research tools is exemplary. These covenants give the owner of a

patented invention, used in upstream stages of research, rights in subsequent

downstream discoveries. Such rights may take the form of a royalty on sales that

159

Kunin, Stephen G., “Written Description Guidelines and Utility Guidelines,” 82 Journal

of the Patent and Trademark Office Society (2000), 77.

160

161

Ibid at 100.

Heller, Michael A. & Eisenberg, Rebecca S., “Can patents deter innovation? The

anitcommons in biomedical research,” 280 Science (1 May 1998).

CRS-25

result from use of the upstream research tool, an exclusive or nonexclusive license on

future discoveries, or an option to acquire such a license. Professors Heller and

Eisenberg contend that reach-through license agreements may lead to an anticommons

as upstream owners stack overlapping and inconsistent claims on potential

downstream products.

Proponents of a Lenient Utility Standard

Others have urged that originators of research tools too require a return on

investment, and that allowing patents only on final products would further industry

concentration.162 If independent researchers and research enterprises were unable to

patent their discoveries, then they might have no option but to join large companies

capable of seeing this earlier research through to a completed product. This trend

might chill the market for preliminary genetic materials and ultimately diminish

research.

Commentators further note that research tools are subject to a lively market

within the biotechnology industry. Many enterprises are interested in purchasing

research tools, and as a result many enterprises are engaged in making them.

Attorney Scott A. Chambers says that describing these products as preliminary and

arising within the “realm of philosophy” is simply inaccurate.163

Those in favor or a more porous utility standard also argue that research

products do not present a special case. They observe that patented products and

processes often are later found to possess additional, more valuable uses than those

named in the original patent. In such cases advance knowledge of one particular use

does not somehow restrain the patentee’s proprietary interest in those additional

applications. For example, the chemical compound nitroglycerine, originally

developed as an explosive, was later found to be useful as a heart medication. If an

inventor had obtained a patent on the nitroglycerine compound itself, then he would

continue to possess a proprietary interest in that compound no matter what

applications were discovered for it. Whether characterized as a basic research tool

or an applied technology, any invention potentially serves as the basis for later

developments.164

Finally, observers have noted that arguments similar to those of Professors Heller

and Eisenberg have been made in the past. The techniques of polymer chemistry, for

example, involve the use of long chains of basic compounds. During the emergence

162

See generally Eisenberg, Rebecca S., “Intellectual Property at the Public-Private Divide:

The Case of Large-Scale cDNA Sequencing,” 3 University of Chicago Law School

Roundtable (1996), 560.

163

Chambers, Scott A., “Comments on the Patentability of Certain Inventions Associated

With the Identification of Partial cDNA Sequences,” 23 American Intellectual Property Law

Association Quarterly Journal (1995), 59.

164

Jaffe, Adam B., The U.S. Patent System in Transition: Policy Innovation and the

Innovation Process (Cambridge, Massachusetts: National Bureau of Economic Research,

Aug. 1999), 27.

CRS-26

of polymer chemistry several decades ago, some critics argued that granting broad

generic claims on basic polymers would allow a few enterprises to own the building

blocks of the industry. These critics claimed that this monopolization by a few would

slow progress. According to some contemporary commentators, these perceived

concerns never materialized with regard to polymers, and are unlikely to occur in the

contemporary biotechnology industry.165

Legislative Issues and Options

Patents play an important role within the modern biotechnology industry. Some

observers believe that, particularly for entrepreneurs and small, entrepreneurial

biotechnology firms, patents facilitate capitalization and therefore support

technological advance.166 Experience also suggests that legal uncertainties regarding

biotechnology patents may impact the ability of enterprises to acquire funding for their

research and development efforts. However, other commentators remain deeply

concerned over the implications of patenting living inventions, genetic materials and

other biotechnologies, as well as the patenting of biotechnological inventions with

unknown or speculative utilities. Patent reform legislation holds the possibility for

resolving these concerns. Should Congress choose to review the progress of

biotechnology, there are at least two patent issues it could consider: patent eligibility

and the utility requirement.

Patent Eligibility

The potential for limiting the patentability of living inventions is moderated by

several factors. One source of restraints consists of international agreements to which

the United States is a signatory. Two international agreements that speak towards

intellectual property rights, the North American Free Trade Agreement (NAFTA)167

and the Trade-Related Aspects of Intellectual Property Rights of the World Trade

Organiziation (“TRIPS Agreement”),168 are worthy of note here. Article 1709(1) of

NAFTA provides that signatory states “shall make patents available for any

inventions, whether products or processes, in all fields of technology.” Article 27(1)

165

Dickinson, supra note 63, at 6.

166

Biotechnology Industry Organization, Legislative Issues: Intellectual Property Protection,

available at [http://www.bio.org/aboutbio/guide2000/guide_legislative.html#intellectual

property protection] (“Because biotech companies depend on private investments, patents are

among the first and most important benchmarks of progress in developing a new

biotechnology product.”).

167

See North American Free Trade Agreement, Dec. 17, 1992, Can.-Mex.- U.S., 32 I.L.M.

289 (1993), 32 I.L.M. 605 (1993), reprinted in The NAFTA (U.S. Gov’t Printing Office ed.,

1993); see also North American Free Trade Agreement Implementation Act, Pub. L. No. 103182, 107 Stat. 2057 (1993) (implementing necessary changes in U.S. law to comply with

NAFTA and reprinting the agreement).

168

See Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994,

Marakesh Agreement Establishing the World Trade Organization, Annex 1C, art. 66, para.

1, Legal Instruments–Results of the Uruguay Round vol. 31; 33 I.L.M. 81 (1994).

CRS-27

of the TRIPS Agreement reads similarly. This language confirms the broad sense of

patent eligibility under current U.S. law.

Both NAFTA and the TRIPS Agreement do allow signatory states to exempt

higher life forms from the patent system. As further stated in Article 1709(3) of

NAFTA, a signatory may exclude from patentability “plants and animals other than

microorganisms” and “essentially biological processes for the production of plants or

animals, other than non-biological and microbiological processes for such

production.” Article 27(3) of the TRIPS Agreement reads almost identically.

The impact of these exceptions is that a signatory may disallow patents from

issuing on living entities other than microorganisms. Thus, microscopic organisms

such as bacteria, viruses and protozoa must be classified as patentable. Signatories

may, but need not, issue patents on higher life forms ranging from genetically

modified rice to the Harvard mouse.

Signatories to NAFTA and the TRIPS Agreement may also deny patents to

processes that are deemed “essentially biological” in character. Whether a particular

process is “essentially biological” depends upon the degree of artificial activity

required to perform the process. A method of selectively breeding animals by

selecting particular animals and bringing them together would likely be deemed

“essentially biological” and therefore may be held unpatentable. However, a method

of treating a plant to improve its yield, such as a method of pruning a tree, would not

be judged “essentially biological” due to the more significant degree of human

intervention.169 Excluding this later sort of process from patentability would not

comport with NAFTA or TRIPS Agreement. U.S. law arguably includes this

exception already, given case law requiring that biotechnological inventions be subject

to artificial invention in order to be patentable.170

Should Congress choose, it could take an approach other than that suggested by

case law and PTO practice by making certain biotechnologies unpatentable.

Numerous patent applications have been filed on a variety of biotechnological

inventions. These applications have resulted in many issued patents, and some of

these patents have been litigated in the courts. Legislation affecting these patents

would prompt concerns over governmental takings under the Fifth Amendment.171

Limiting biotechnology patenting would counter prevailing trends within the

patent community both domestically and abroad. As suggested by the recent

patenting of methods of doing business, many patent systems are tending towards an

increasingly broad scope of patentable subject matter.172 Biotechnologies are

169

European Patent Office, Guidelines for Examination, Part C, Chapter IV (1995), 39.

170

See supra notes 92-95 and accompanying text.

171

U.S. Constitution, Amendment V (“[N]or shall private property be taken for public use,

without just compensation.”). See James v. Campbell, 104 U.S. 356, 358 (1881) (stating that

a patent “confers upon the patentee an exclusive property in the patented invention which

cannot be appropriated or used by the government itself, without just compensation”).

172

U.S. Library of Congress, Congressional Research Service, Patents on Methods of Doing

(continued...)

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generally patentable in Japan, and after several years of debate the European

Parliament issued a Directive approving biotechnology patents.173

The Utility Requirement

The utility requirement is judge-made law. Its only statutory mooring is the term

“useful” recited in § 101 of the Patent Act. Although the PTO has issued Utility

Guidelines, Congress has never elaborated on the utility requirement. The concern

of many actors within the biotechnological industry that the utility requirement be

calibrated appropriately,174 concern within the research community that some patents

could provide a disincentive for further research, and arguable inconsistencies within

the case law,175 suggest that these issues may draw congressional interest.

Congress could examine whether the definition of patentable utility should be

legislatively specified. For example, the Patent Act could list the pertinent factors

suitable for demonstrating the utility of expressed sequence tags (“ESTs”). PTO

Deputy Assistant Commissioner for Patent Policy Stephen G. Kunin has suggested

that pertinent factors include knowledge of the corresponding mRNA sequence,

protein coding sequence or genomic sequence; whether there are sequence

polymorphisms linked to the corresponding genomic location; the function of the

protein encoded by the corresponding messenger Rnucleic acid (“mRNA”); the

phenotype of a mutation in the corresponding gene; the tissue distribution of the

corresponding mRNA and tissue-specific expression levels; and the map location of

its corresponding genomic sequence.176 A recurring complaint is that patent

applicants specify minimal and rather abstract utilities, such as the possible use of an

EST merely as a probe or marker.177 Congress could resolve whether these uses fulfill

the patentable utility requirement. Some caution, however, that specifying such

technical detail in law has drawbacks to the extent the law would need to be amended

in order to reflect changes in rapidly evolving technologies.

172

(...continued)

Business, by (name redacted), Report RL30572, 1 June 2000, 1-3.

173

See Dotson, Darrell G., “The European Controversy Over Genetic-Engineering Patents,”

19 Houston Journal of International Law (1997), 919.

174

See supra notes 156-58 and accompanying text.

175

See supra notes 151-52 and accompanying text.

176

Kunin, supra note 159, at 99.

177

Ibid.

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