The impact of patents on New Zealand's biotechnology and genetics services sectors

Abstract

Concerns have been expressed, both nationally and internationally, regarding the impacts of patents, and particularly gene patents, on the genetics services and biotechnology research sectors. In particular, there is evidence that patents may be hampering the provision of clinical genetic testing services (in the United States at least), and it is argued that broad patents and increasing numbers and complexity of patents in the biotechnology field can hamper innovation and research. However, there is also evidence that patents provide a strong incentive to innovate in the areas of biotechnology and genetics, as compared with other fields and with other mechanisms used to capture the benefits of innovation (such as secrecy, lead time, complementary manufacturing capability, and complementary sales and service effort).

In 2003, an Australian biotechnology company, Genetic Technologies Ltd (GTG), approached the New Zealand health sector and a number of life science organisations requesting licence fees for the use of its patents on non-coding DNA analysis and mapping. The parties involved filed proceedings in court and the case was eventually settled with a license agreed upon. However, there was very little existing evidence on the extent to which the GTG case indicated wider problems with patents in the New Zealand genetics services and biotechnology research sectors. The Government policy response was therefore largely based upon this single case.

I undertook this research over 2007 and 2008 to investigate both the positive and negative impacts of patents in New Zealand’s genetics services and biotechnology sectors. This research involved an initial analysis of numbers and types of patents that have been granted in New Zealand in the areas of genetics and biotechnology, an online survey of genetics services and biotechnology research organisations, and a small number of informal follow-up interviews with survey participants to discuss themes emerging from the online survey. It was initially hypothesised that the increased complexity of the patent landscape and the licensing practices of particular patent owners may be having an overly negative effect on New Zealand’s biotechnology and genetic services sectors, particularly given the smaller size and limited resources of most of the organisations within these sectors.

However, my research found that:

• many patents, including a number of patents identified as ‘problematic’ elsewhere, have not been filed or granted in New Zealand, and if granted are not currently being enforced; • those patents that have been granted are having no impact on the provision of genetic testing in the genetics services sector at present; • there were some areas of concern expressed by respondents in the biotechnology sector, but overall patents are not having an overly negative impact on research at this stage; and • patents provide an important avenue for New Zealand biotechnology organisations to capitalise on their discoveries, and appear to be used to good effect by the New Zealand biotechnology organisations surveyed.

I speculate that those patents that have been granted in New Zealand are not being enforced due to New Zealand’s relative isolation and small target market size. The lack of large-scale private genetic testing services may also be discouraging patent holders from enforcing their patents against New Zealand’s small public health system. At this stage, these factors are protecting the New Zealand biotechnology and genetics services sectors. However, there is some evidence to suggest that this situation is changing, with many international companies beginning to file and enforce their patents in New Zealand. Government agencies must monitor developments in this area to ensure that New Zealand biotechnology companies can continue to access necessary intellectual property and carry out research uninhibited by problematic patents and/or licensing practices. There is also potential for collaboration between research organisations to reduce the transaction costs associated with searching for and assessing existing patents.

There is reason to monitor developments in the genetics services sector also, particularly for potential costs to testing laboratories arising from future license fees and royalties. Should New Zealand genetics services be faced with future licensing demands, the collaboration mechanisms used in the GTG case should be used again to secure the best bargaining position possible (and therefore likely the best licensing deal).

Finally, I do not recommend any changes to the law arising out of the results of my research, for the main reason that many of the issues relating to patent validity (in particular, novelty, utility and breadth) will be addressed by the enactment of the Patents Bill. In particular, the Bill introduces more explicit criteria for patentability and increases the stringency test to one of a “balance of probabilities”. Once the Patents Bill has been enacted, researchers must be advised of the scope and effect of the research exemption to ensure that there is clarity around the status of research carried out in the biotechnology sector.