Intellectual Property Rights and the Life Science Industries

A Twentieth Century History

Graham Dutfield

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351927130
• Edition: 1
• Topic: Law
• Subtopic: Intellectual Property Law
• Index: Law

This book analyses the history of the international patent regime and the life science industries, both of which can be traced back to the late 19th century. The development of patent law is inextricably linked to expanding capacities to elucidate, manipulate and commercially exploit the molecular properties of micro-organisms, plants, animals and other organic raw materials. The story of the life science industries begins with the European synthetic dyestuff firms and culminates in present-day conglomerates like Aventis, Novartis and Pharmacia. Throughout the last century, chemical, pharmaceutical, seed and biotechnology firms were actively involved in reforming patent law and plant variety rights. The major beneficiaries have been the largest firms whose market dominance and influence over peoples' lives - aided by friendly intellectual property laws - has never been greater. This sparkling and stimulating book reveals the key repercussions caused by the expansion of life science industries for issues of international equity, public health, food security and biological diversity.

Chapter 1
Intellectual Property in the Global Economy: High Stakes and Propaganda Warfare

The competition of industry has become a competition of intellect. (Lord Lyon Playfair, British pro-free trade liberal, 1852)

At least three-quarters of the industrial wealth of the United States is based directly or indirectly upon patent rights. (Scientific American, June 1925)

Information is not merely an organizing concept for the technologies and disciplines of the twenty-first century. It is a central feature of the international economy. Indeed, the protection of information 'value-added' in products is one of the key elements in the foreign policy of the developed world. (James Boyle, Duke University, 1996)

High Stakes

For most developed countries, the contribution of advanced technologies to economic performance in terms of manufacturing value added and exports has increased substantially since the early 1970s. One reason is the incessant and increasing pressure on businesses and national economies to be competitive. This puts a premium on innovation and creativity aimed at developing new products and services and at differentiating existing ones from those of competitors. Perhaps the most important of these advanced technologies are information and communications technology (ICT) and those based upon the applied life sciences. Both have multiple industrial applications and are of interest to companies operating in a wide range of product and service markets. So, in addition to the commercial interests responsible for innovating in these fields, such as software, telecommunications, and pharmaceutical and biotechnology companies, many other business sectors deploy these technologies, including producers and providers of computers and other electronic goods, music, television programmes, films, printed works and financial services to name a few.

Technological change creates new opportunities for private appropriation, but also poses new challenges. One of these challenges is the threat of free-riding, which certain new technologies may facilitate. IP protection helps to maximize these opportunities while minimizing the risks. This is why many companies operating in all the above sectors hold large intellectual property portfolios protecting products and services developed through the deployment of these technologies. Indeed, for such businesses, the high market value of their goods and services may be due largely to such IP-protectable intangible inputs as technical knowledge and artistic creativity or attributes like reputation and distinctiveness. Such businesses assert these rights with great determination. After all, developing, applying and benefiting commercially from such inputs and attributes can involve enormous research and development (R&D) and marketing expenditures. Moreover, despite the knowledge-rich corporations' market dominance, they are also highly vulnerable. While the marginal cost of manufacturing such goods as software packages, compact discs and videos is extremely low, so is the marginal and fixed cost of copying them. Multiple reproduction of these goods requires only low-cost equipment and minimal technical know-how. In countries where IP rights such as patents, copyrights and trade marks are unavailable or enforcement is weak, imitators can quickly and inexpensively copy these products and sell them at home and in other countries where effective IP protection is also weak. Similarly, plant-breeding companies can find their non-hybrid plant varieties being sold without their consent. Even though entry barriers for generic drug firms are higher, in that competent chemists need to be hired and bulk production will require more expensive equipment than for, say, software and compact disc piracy, the free-riding problem that research-based drug companies face is also potentially serious.

Among the most dominant businesses in the world today are the so-called lire science corporations'. A major consequence arising from the emergence of this type of business is that the ownership of life science-related technologies and new products is becoming ever more concentrated. A handful of corporations operating in different life science sectors managed to amass a valuable stock of technologies and products, not just developed in-house but acquired from elsewhere, and in the process have become global megacorporations. Such life science giants as Novartis, AstraZeneca, Aventis and Pharmacia, which hold dominant positions in two or more industrial fields and have annual turnovers higher than the gross national products of individual countries, did not result from internal growth alone. Their enormous size actually results largely from mergers, acquisitions, joint ventures and strategic partnerships involving companies in such sectors as chemicals, seeds, processed foods and dietary supplements, toiletries and cosmetics, and pharmaceuticals.

There has been a tremendous consolidation of patent ownership and global market shares in the hands of a small number of these corporate giants. According to the United Nations Development Programme (1999: 67), the 10 largest corporations in the main life science sectors now dominate global markets to a very high level. They control 32 per cent of the $23 billion commercial seed industry; 35 per cent of the $297 billion pharmaceutical industry; 60 per cent of the $17 billion veterinary medicine industry; and 85 per cent of the $31 billion pesticides industry. Even these figures do not tell the whole story. For example, the market for treatments of particular diseases may be completely controlled by only one or two companies. Burroughs Wellcome at one time sold the only anti-AIDS drug, AZT (a substance that the company had not even invented but whose therapeutic use it had a patent on). Heavy market concentration in industrial sectors whose products are vital to the lives and livelihoods of many people is bound to have implications for economies and societies throughout the world. These implications relate generally to development policy options and more specifically to access to technologies and to important products, including those that can save lives.

IP regulation has been tar from unresponsive to the increased pressure on businesses to be creative and innovative and the desire of national governments to foster competitiveness. From the 1960s and 1970s, developed-country IP regimes began to undergo radical changes. These changes, which appear to be continuing, were of three kinds. The first of these was the widening of protectable subject matter. The parameters of protectable subject matter have been expanded, and there has been a tendency to reduce or eliminate exceptions. Examples include the extension of copyright protection to computer programs as if they are literary works, the application of patent protection to cover business methods, computer programs, life forms, cell lines and DNA sequences, the removal of exclusions on product patents for drugs, and the extension of trade mark protection in some countries to include sounds and smells. The second change was the creation of new rights. Examples of new systems created during the late twentieth century included plant breeders' rights, rights to layout designs of integrated circuits, and rights related to copyright such as performers' rights. The third change was the progressive standardization of the basic features of IP rights. For instance, patent regulations increasingly provide 20-year protection terms, require prior art searches for novelty and examinations¹ for inventive step (or non-obviousness) and industrial application, assign rights to the first applicant rather than the first inventor,² and provide protection for inventions in a widening range of industries and technological fields.

These developments in IF law, all of which began in Europe or North America, are spreading to the rest of the world, and at an accelerating pace. Consequently, national IP regimes throughout the world are becoming increasingly held to harmonized minimum standards of protection. These, however, remain a long way from uniform law, a situation that some countries and interest groups hope to remedy in the coming years.

But the changes were not introduced gradually over time even in the developed world. For example, until the 1960s, several west European countries (for example, France, Belgium and Italy) still granted patents on the basis of registration (Robbins, 1961: 219).³ Moreover, several developed countries lifted the bar to patentability on pharmaceutical products only in the 1960s or 1970s. And other important expansions in protectable subject matter are even more recent (such as the patenting of animals and DNA sequences, and the sui generis protection of integrated circuit layout designs and of databases). At the same time, a few developing countries moved in the reverse direction. For example, in the late 1960s and early 1970s, Brazil and India passed laws to exclude pharmaceuticals as such from patentability (as well as processes to manufacture them, in Brazil's case)

One could argue - as many do - that these trends are necessary responses to technological change. While there is undoubtedly some truth in this, there is no reason to suppose that the appropriate response by policy makers should always be to strengthen existing rights, to reduce or eliminate exceptions, or to create new ones. Such approaches may indeed be necessary in certain cases where the IP systems available are inappropriate for new types of creative work or technology or become inadequate for protecting existing types because, for example, new technologies make mass copying easier. In other cases, weakening rights might be a more appropriate response to some instances of technological change. For example, in some industries there may be a fall in the average life cycles of new products. This has in fact happened with semiconductor products. And in others again, average research and development costs for an industry might decline. In such cases, the protection available may well turn out to be excessive to the point of being dysfunctional in the sense of stifling competition with over-high barriers to market entry, and raising the transaction costs of follow-on innovation or even blocking it completely. This seems to happen with the patenting of genes and gene fragments.

More fundamentally, it is far from self-evident that the existence of strong IP protection is a precondition for the transformation of developing-country economies into developed ones. In fact, it is impossible with any certainty to calculate the long-term impacts of TRIPS on developing countries and their populations. It is possible that, ultimately, every country will benefit. But this is pure speculation. We can be certain, though, that developing and least-developed countries will incur short-term costs in the form of administration and enforcement outlays and rent transfers, and that these will outweigh the initial benefits. The cost-benefit balance will vary widely from one country to another, but in many cases the costs will be extremely burdensome. According to a recent World Bank publication, 'if TRIPS were fully implemented, rent transfers to major technology-creating countries - particularly the United States, Germany, and France - in the form of pharmaceutical patents, computer chip designs, and other intellectual property, would amount to more than $20 billion' (World Bank, 2001). Stated baldly, and if the assumptions on which the research is based are reliable, this means that TRIPS represents a $20 billion plus transfer of wealth from the technology importing nations - many of which are developing countries - to the technology exporters, few if any of which are developing countries, that may or may not be outweighed by future gains.

Propaganda Warfare

The potential economic and social repercussions of IP policy making are tremendous, and the stakes have never been higher than they are today. Increasing numbers of people have begun to recognize this. Consequently, despite their long history, public interest in IP rights worldwide has reached unprecedented levels. And as an ever-wider range of interest groups seeks to influence public opinion and national and international policy making, debates become ever more polarized and adversarial. Pressure on countries to introduce ever-stronger levels of protection has provoked a backlash. This has taken various forms, including a huge and growing volume of critical propaganda produced by civil society organizations, and well coordinated political campaigning on numerous fronts around the world, from Geneva, Washington and Brussels to rural India, the Amazon and the Australian outback. Academics have also entered debates on intellectual property policy.

It is no exaggeration to say that there is a propaganda war going on. As with other wars, the truth is likely to be a casualty in the face of the selective deployment of truths, untruths and unsubstantiated assertions, which are the conventional weapons of such conflicts. At one end of the political spectrum are those who argue that strong IP protection and enforcement is indispensable for a modern economy, and the stronger the better. At the other end are those who - if their rhetoric is anything to go by - consider that IP rights are just another device by which the rich make themselves richer and the poor poorer, and may even be unnecessary to foster innovation anyway. Most critics (the present author included) are not anti-IP at all, but are sceptical of many of the claims deployed to justify ever-stronger protection, especially when the changes advocated are to be globalized so that all trading nations of the world must accept them.

Three recent closely related developments are responsible for galvanizing the increasingly heated debates on IP rights, at least with respect to the life science industries.⁴ The first development was the so-called 'seed wars' which broke out in the early 1980s with the Food and Agriculture Organization of the United Nations providing the main battlefield. It was sparked off by a number of civil society organizations based in North America and Europe, and some influential individuals. They believed that IP rights were having a malign influence on agriculture in both the developed and developing worlds. In particular, they blamed IP rights for helping to cause genetic erosion, for legitimizing the unfair exploitation by developed countries of the genetic resources of developing countries, and for encouraging the takeover of national seed industries by a small number of powerful transnational corporations.

The second was the successful attempt of the USA, Europe and Japan, supported by business associations representing transnational corporations, to place IP rights on the GATT Uruguay Round agenda, and then to force through an agreement covering a wide range of IP standards going far beyond the original aim of preventing counterfeiting of trade-marked goods and piracy of copyrighted works.

The third development was the patenting life' controversy. This was triggered in the USA by the 1980 Supreme Court decision in Diamond v. Chakrabarty that living things may constitute patentable inventions, and in Europe in the late 1980s by the European Commission's drafting of a directive on the protection of biotechnological inventions.

Political opposition and critiques have highlighted several problematic aspects of extending patent law into this area. These include, first, the moral significance of treating as property such 'inventions' as plants, animals, microorganisms and - in some jurisdictions - functional or structural components of life forms including gene sequences, proteins and cell cultures (see, for example, Beyleveld and Brownsword, 1993; Bruce and Bruce, 1998; Drahos, 1999a); second, the way that these patents appear to overturn some of the basic groundrules of patent law, such as that substances existing in nature are discoveries and cannot therefore be patented; third, the possibility that basic research may be discouraged when overly broad patent claims are allowed, which may also overlap with claims in other patents, and biotechnology research tools such as gene sequences are privatized through the patent system (for example, Heller and Eisenberg, 1998); fourth, that allowing patents on life forms supports the practice of 'biopiracy' (for example, Baumann et al., 1996); and fifth, that patents on plants and plant breeders' rights infringe the basic right of farmers to freely dispose of harvested seed as they see fit, including to sell it (for example, Verma, 1995).

This expanded interest in if rights is echoed in an increase in academic writing beyond the disciplines of law and economics where the subject has traditionally been confined, exposing IP systems to ever more critical examination. In fact, since the late 1980s, the intellectual property literature has proliferated and expanded, being supplemented by contributors from such disciplines as sociology (for example, Buttel and Belsky, 1987; Kloppenburg, 1988), anthropology (for example, Brush, 1993; Coombe, 1998; Greaves, 1994; Strathern, 1999), international relations and political science (for example, May, 2000; Sell, 1998), moral and legal philosophy (for example, Drahos, 1996; Sterckx, 1997), ethnobiology (for example, Posey, 1990) and economic history (for example, David, 1993; MacLeod, 1988, 1991). Critical political and academic works have focused on various issues, but mainly on the inherently protectionist motivation behind TRIPS (for example, Bhagwati, 1998), concern for the environment (for example, Cameron and Makuch, 1995; Yamin, 1995), the rights of indigenous peoples (for example, Brush and Stabinsky, 1996; Posey and Dutfield, 1996), the general interests of the developing countries (for example, Correa, 2000), food security and the rights of farmers (for example, Mooney, 1979, 1996; Shiva, 1996; Tansey, 1999) and on the high prices of life-saving drugs in developing countries (for example, Oxfam, 2001).

This increased critical attention and activism unnerves business associations and patent professionals that have hitherto been regarded by policy makers as the experts on intellectual property, and who have generally treated improving IP rights as making the rights they provide more exclusive, broader in scope and less territorially delimited. Now they are having to compete for influence with other individuals and organizations who are much more sceptical about IP rights, and whose expertise they tend to disdain. Such disrespect is becoming less and less justified. Several civil society organizations have closed the expertise gap and some can match if not exceed the technical capacity of some of these pro-strong IP lobbyists. A good example is Médecins Sans Frontières, but there are others. They have done this not only by hiring staff to concentrate full-time on intellectual property, some of whom are trained in intellectual property law, but also by using consultants including academics with decade...