(Illustrations by Greg Betza)
Protecting IP: Anything but Simple
For many years Jordan had a healthy pharmaceutical business. Firms staffed largely by local scientists with European doctorates manufactured popular medications and sold them in Arab countries in the Middle East and North Africa. The firms routinely ignored multinational companies’ patents on those drugs. But when Jordan joined the World Trade Organization (WTO) early this decade, it signed onto the organization’s requirements for protecting intellectual property (IP). Business models immediately changed for local pharmas. Some Jordanian firms began to focus on incremental research and development for niche markets—creating injected rather than oral biopharmaceuticals, for example—and licensing out the results. Other firms are licensing in biopharmaceuticals that they sell in the Arab world, the Balkans, the central Asian republics and other markets too small or complicated for Western pharmas to enter.
"Several Jordanian companies said that they know the drug marketplace and could identify incremental or alternative drugs with small niche markets," says Michael Ryan, director of the creative and innovative economy center at the George Washington University School of Law. "Firms that used to manufacture generics have started to focus on incremental R&D. Two start-up companies in Jordan focus on injectable versions of oral drugs."
The change of direction quickly produced results. "A couple of years ago, Jordanian pharmas became number one in the Arab world, over the Egyptians," Ryan says. "They have even moved into the West." For example, Hikma Pharmaceuticals—founded in Amman, Jordan, in 1978—began manufacturing injectable powdered cephalosporin, an antibiotic, in Portugal in 2001, the same year that it received approval to sell some products in the United Kingdom. In 2007 Hikma acquired two German companies making injectable oncology products, and it had already acquired West-ward, a New Jersey pharmaceutical company.
Changing Attitudes, Growing Complexity
Attitudes toward protection of biomedical IP have begun to change. Biotechnology and biopharmaceutical firms in developing countries that once disregarded patents held by overseas companies now find themselves obliged to follow the rules set by the WTO. These companies also want patent protection for the results of their own research and development.
The issue, therefore, has gone beyond the desire of multinational biotech and biopharma companies to protect their IP against companies in developing countries that ignore patent rights. It also focuses on the increasing need of third-world firms to protect their IP from potential assaults by multinationals.
One further complication: Biotechnology IP isn’t limited to biomedical advances. "There has been a massive growth in applications for patents in the field of biotechnology, covering microorganisms, plants, animals, human genes and stem cells, bioinformatics, nanotechnology, proteomics and synthetic biology," says Matthew Rimmer, of the Australian National University School of Law, author of Intellectual Property and Biotechnology: Biological Inventions.
The Impact of TRIPS
The guarantor of global protection of intellectual property, in biotechnology and other technical fields, is the WTO’s Agreement on Trade Related Aspects of Intellectual Property. Known as TRIPS, it went into force in 1995. It requires that "patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial applications."
The agreement has some loopholes. (See sidebar "Enforcing IP Protection.") For example, it gives the least-developed countries that join the WTO extended lead times to follow its precepts. It also allows states to exclude certain plants, animals and biological processes for producing them from patentability. But it gives biotechnology firms in both developed and developing nations the ability to patent their processes and products and to protect those patents in a way that was impossible before TRIPS.
What distinguishes a product patent from a process patent, and why does TRIPS require both? The names tell the difference. A process patent relates only to the means of producing a biotechnological entity or other product. A product patent, by contrast, allows rights—for exclusive manufacturing and marketing, for example—that relate directly to the product. Product patents also confer more benefits on their holders than process patents. The importance of the inclusion of both in the TRIPS agreement stems from the fact that, in the effort to protect local companies that make generic drugs and other items, third-world countries frequently denied product patents.
Flood of Applications
The decision by several developing nations to join developed countries in TRIPS protection of IP doesn’t mean the end of patenting controversies. For example, the numerical and geographic advances of biotechnology and related fields have created problems. "The flood of applications has placed a great strain on patent offices around the world," Rimmer says.
Equally important and hardly surprising, patent authorities in different countries have interpreted the global patent law differently. The European Union has equivocated on the patentability of stem cells. New Zealand prohibits patent methods for human treatments. And Canada refuses to allow ‘higher life forms.’
Developing nations also have unique approaches to upholding the TRIPS agreement. In India courts have agreed with the patent office’s refusal to grant patents on certain biomedical products that represent only incremental changes to entities about to lose their patent protection. (See sidebar "A Message from India.") "The courts have interpreted the changes as not sufficient to patent," Ryan explains. In other countries, Western corporations complain that ministries of health, rather than the patent office, decide which products and processes should receive patents. In nations with emerging biotech and biopharma industries, such ministries have obvious conflicts of interest.
One area of biotechnology and biopharmaceuticals that is growing at a rapid rate and drawing escalating controversy involves biodiversity. Organizations in developing countries increasingly set out to identify and isolate the active ingredients of plants traditionally used for healing and, once they prove their medicinal value, put the ingredients into clinical trials. Since multinational companies sponsor their own efforts to detect, identify and use medicinal plants, Ryan says, "biodiversity-based local developers are looking for patent protection." (See "Turf Battles: Politics Interfere with Species Identification," page 20.)
Brazilian companies have taken the lead in developing and patenting biodiversity compounds, benefiting from the huge resources available in the Amazon rainforest. They took a cautious approach, waiting until 1996, when Brazil reformed its patent law, before showing their hands. Take Acheflan, an anti-inflammatory cream based on the traditional maria-milagrosa plant and traditional medical knowledge. "Ache, a company wholly owned by Brazilians, knew about the product in the early 1980s," Ryan recalls. "But it didn’t launch the R&D on it until after the patent protection became available." The company released the cream in 2005, making it the first pharmaceutical product fully innovated in Brazil. Since then, Ryan says, "Ache has achieved a 40 percent market share with it in Brazil, because of the patent protection. The company is beating Novartis and Pfizer in Brazil. Now, they’re doing R&D in the United States and Europe to get it approved there."
Competitive Advantage
A similar situation is now playing out in India. Once the country joined WTO and enhanced its patent laws, many of its biotech and biomedical firms that had lived off patent-infringing generic drugs began to develop their own products. "As multiple Indian companies compete to sell the same biotechnology product, each firm’s need to distinguish itself by process development increases," says Janice Mueller, professor of law at the University of Pittsburgh School of Law. "Strong process patent protection will facilitate competitive advantage among Indian biotechnology companies."
The exemplar of developing countries in terms of patent protection is Singapore. The government of the nation city first sought advice on the promise of biotechnology a quarter of a century ago. It has the financial and academic resources to attract scientists from China, India and even Europe and North America. And according to Ryan, "Singapore is quite the leader in the developing world with respect to IP diplomacy. Its content is similar to America’s."
Other Asian nations have had less success in developing commercial biotechnology. Thailand, for example, proves that productive patenting does not guarantee market success. Thai universities have developed and patented plenty of biotechnology. But the country’s private sector has lacked the resources to exploit the license-ready IP.
That’s unlikely to happen in China. Not only does the Middle Kingdom have a strong academic base in biotechnology and a well-funded and growing private sector, but as a member of the WTO it is bound to abide by the TRIPS agreement on patenting. However, last year’s extended episode of melamine-tainted milk casts doubts on its reliability whatever its patent positions.
Despite the successes stimulated by TRIPS, patenting controversies continue to divide developed and developing nations. "There has been conflict over countries such as South Africa, Brazil, India and Thailand that have made use of the flexibilities under the TRIPS agreement to deal with public-health epidemics and national emergencies. There has been controversy over patents in respect of research concerning the SARS virus and avian influenza," Rimmer says. "There has been a great deal of conflict over access to essential medicines in respect to HIV/AIDS, tuberculosis, malaria and certain neglected diseases."
Overall, protecting IP depends on attitude. (See sidebar "Denmark: Small Country, Large Portfolio.") Any country in the world can chose to be a safe home for patenting and IP. In fact, a country’s success in international biotechnology could well depend on such an IP-safe reputation.
Enforcing IP Protection
Countries who are members of the World Trade Organization can still exclude a number of categories of invention from patentable matter," says Matthew Rimmer of the Australian National University College of Law as he explains the reach of the World Trade Organization’s Agreement on Trade Related Aspects of Intellectual Property (TRIPS). "These include methods of human treatment; diagnostic devices; animal patents; and, potentially, patents on human genes and stem cells." First-world nations have moved to exploit those loopholes. Rimmer says, "New Zealand continues to have a prohibition on patenting methods of human treatment. And Canada prohibits the patenting of 'higher life forms.'"
Regarding developing nations, Jill Hobbs and William Kerr of the University of Saskatchewan write in the Canadian journal Bioscienceworld: "Enforcement, however, has been problematic. This has been particularly the case in the areas where biotechnology figures prominently, agriculture and pharmaceuticals." For example, some developing countries routinely break Western companies' patents to produce locally affordable treatments for HIV/AIDS.
In theory, developed nations can dispute that behavior in the World Trade Organization and apply trade sanctions against countries that do not protect the IP of overseas firms effectively. But in practice, Hobbs and Kerr have found, few governments have used those sticks to protect their firms' biotechnology IP. Nor has any effective carrot emerged to persuade developing nations to respect the IP.
A Message to India
The Indian authorities have sent a message to the rest of the world: Despite past history, they now welcome applications for biotechnology patents. That communication has significant implications for local and multinational biotechnology and biopharmaceutical companies that look to market their products in this teeming South Asian nation. But overseas firms remain somewhat skeptical about their ability to obtain Indian patents on certain biomolecules and their ability to prevail in court cases related to their patenting activity.
The change in India’s view of patents began in 2002. For the first time, an Indian court overturned the Indian Patent Office’s rejection of patent claims for processes that created live products. In the same year, an amendment to the country’s patent laws enabled applicants to patent "biochemical, biotechnological, and microbiological processes." A more-important change occurred later, on January 1, 2005, when the patent office incorporated the requirements of the World Trade Organization’s Agreement on Trade Related Aspects of Intellectual Property (TRIPS) in the country’s Patent Act. The change permitted the first filing of product patents on compounds for use as drugs and other medications.
"These paradigm shifts away from India’s earlier anti-patent culture, coupled with a rapidly expanding biotechnology industry fueled by investments from both the private and public sectors, portend a surge in biotechnology patenting in India," says Julie Mueller of the University of Pittsburgh Law School.
The new patent laws haven’t satisfied everyone. Overseas biotechs and biopharmas have already complained about the Indian courts’ administration of the laws. In particular, the courts seem unwilling to grant multinationals’ requests for patent protection on products that represent small improvements to existing goods rather than de novo advances. When the Indian Patent Office refused to allow Novartis to patent its chronic myeloid leukemia drug Gleevec for that reason, the Swiss company challenged it in court—only to have the court reject its claim.
Denmark: Small Country, Large Portfolio
With just 5 million inhabitants, Denmark ranks as one of the world’s smaller nations. But it acts as an 800-pound gorilla in global biotechnology. This Scandinavian nation leads the world in both the number of biotechnology patents per member of the population and the ratio of biotech patents to total patents. It has Europe’s highest ratio of biotech venture capital investments to gross domestic product. And it takes third place in Europe in terms of the absolute number of projects in clinical investigation.
What accounts for Danish domination of biotech IP? In part it’s tradition. In the mid-1800s, Carlsberg’s brewery created a microbiology research enterprise that has continued ever since. And the country’s cheese industry stimulated research in enzymes. In recent years Denmark’s government, academic and industrial sectors have built on those capabilities through education and innovation. "Denmark is not a country that is rich in natural resources," explains Søren Carlsen, a managing partner at Novo A/S who chairs the Danish Association of Biotechnology Industries. "However, it has one of the most well-educated populations in the world. Over the last few decades, Denmark has changed from an agricultural nation to a one built on a sophisticated and flexible workforce and the intellectual capital of this workforce."
The growth of the corporate world exemplifies that change, and its transition into biotech activity. In the past half-decade the growth of the ‘Medicon Valley’—a cluster of biomedical companies and universities that spans the Øresund between Denmark’s capital of Copenhagen and the southern Swedish city of Malmö—has encouraged the emergence of several small firms that contribute significantly to patenting in biotech. Today, the country has more than 180 dedicated biotechnology companies and over 300 biotech service providers. In addition large public and private companies such as Genmab, Leo Pharma, Lundbeck, Neurosearch, Novo Nordisk and Novozymes have their own focus on biotechnology research and development. "There is a strong tradition for patenting in companies such as Novo Nordisk and Novozymes, due to fierce competition," Carlsen says.
That activity does more than defend corporate innovation. "Patents protect Denmark’s intellectual property, which is the one thing that can ensure continued growth and prosperity for a small nation," Carlsen says. "Biotech patents are part of the notion that Denmark’s future rests on its know-how and intellectual property."
