How the Government Got in Your Backyard

by Jeff Gillman

  Unlike traditional patents, there are three limitations to certificate protections. First, the USDA may limit the breeder’s exclusive rights to two years if it deems the product is necessary to ensure an adequate food supply and the owner is unwilling or unable to make the product available at a reasonable price. If the USDA allows others to produce and market the product, they must pay the certificate holder a reasonable compensation, as set by the USDA. The second limitation of a protection certificate is that the plant must be made available for research purposes. And finally, farmers may use some seeds from plants protected through the Plant Variety Protection Act for use on their own farms, though they may not sell seeds to their neighbors. The fact that farmers can save seeds makes this type of protection unappealing to many seed companies that want to monopolize a market if they have inserted genes into a plant.

  The process by which a patent is awarded starts when an inventor files his or her application for a patent with the Patent and Trademark Office (PTO) of the U.S. Department of Commerce. The invention must meet several standards to be awarded a utility patent, which can be for anything from toasters to plows and bicycle rims. First, the invention must not be considered obvious, based on the terms of the 1952 Patent Act. The invention must also be deemed novel, or different in some critical respect from a previously patented object or publication, or from information already publically available. Determining whether a product is obvious or novel is not clear-cut in practice and gives inevitable discretion to the patent office. At what point does the patent investigator decide that a particular plant is sufficiently different from other similar plants? Human judgment plays an important role and is a fundamental problem with the patent process that cannot be overemphasized.

  Every plant is different from every other plant of a particular species or variety. In fact, even if a plant is propagated from another plant using stem cuttings—an asexual means of reproduction where we usually assume that the plant grown from the cutting is exactly like the parent plant—those two plants will actually be somewhat genetically different. Sometimes this change will be readily apparent, sometimes not. For example, many plants with variegated edges on their leaves (the edges are white or yellow instead of green) originally came from plants with green leaves: a variegated “branch sport” spontaneously appeared on the green-leaved plant, and the sport was then propagated. In this case it is obvious that the parent plant is genetically different from the offspring. Though this genetic difference between the mother plant and the clonal offspring isn’t usually so apparent, the differences would nonetheless be very real. Just as two identical twins will have small, but increasingly noticeable differences as they age, so will two plants that are supposedly clones. Knowing that plants that are supposed to be perfectly similar are actually not so similar, where is the patent investigator to draw the line?

  The third criterion for obtaining a patent is particularly important for the living organisms that are created through biotechnology. The invention must be “eligible” for a patent—in other words, it must contain the subject matter that patent law was designed to protect. A critical issue of eligibility in patenting biotechnology products is whether the living inventions or genetic material are appropriate to the patent system. A so-called product of nature—a preexisting substance found in the wild—may not be patented. But if the product’s natural state has been significantly modified in some way, the altered version is eligible for a patent. In Diamond v. Chakrabarty (1980), the Supreme Court ruled that a genetically engineered bacterium capable of breaking down crude oil was eligible for a patent because, in the words of Chief Justice Warren Burger, the bacterium “is not nature’s handiwork, but his [the inventor’s] own.” The courts recognize that patents have long been issued for biotech products, including the 1873 patent issued to Louis Pasteur for pasteurized yeast. The 1980 ruling also allowed plants to be registered for utility patents, as with Don White’s patent for annual turfgrass. The ruling of the Court stated that a “living, man-made micro-organism is patentable subject matter as a ‘manufacture’ or ‘composition of matter’ within the meaning of the Patent Act of 1952. The fact that the organism sought to be patented is alive is no bar to patentability.” This last section is the most important because it says, essentially, that despite the fact that there exists a separate plant patent (something that the dissenters to this case noted in their opinions), the utility patent could still be used for living organisms.

  In a second case, in 2001, J.E.M. Agricultural Supply v. Pioneer Hi-Bred, the Supreme Court was even more specific, saying that there was nothing in the law that precluded providing utility patents for plants. DNA sequences generated for scientific purposes have traditionally been eligible for patents. A 2010 federal district court ruling invalidated two DNA patents, however, and threw the status of many others into uncertainty by finding that the value of DNA lies in its “information,” which is found in nature and is therefore ineligible for a patent. The fact that it was a district court ruling (and thus only applies to a single judicial district) and was so divergent from precedent (and therefore likely to be overturned on appeal) leads many observers to discount the impact of this case.

  The fourth and final requirement for a patent, “utility,” means that the invention must work as intended and provide a definite benefit. The challenge of meeting this standard in biotechnology is that scientists can create chemicals, compounds, and so forth, without knowing how their creation might be incorporated into a useful product. By requiring that a specific, useful product result from the invention, the law attempts to ensure that whole fields of scientific inquiry are not blocked by monopolies created by legal claims of patent protection. In Brenner v. Manson (1966), the Supreme Court declared 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.”

  If the U.S. Patent Office finds that these four criteria have been met, it publishes a full technical disclosure of the invention in addition to certifying the patent. The patent holder then holds the right to exclude others from “making, using, selling, offering to sell or importing into the United States” the patented invention for twenty years, though the patent will need to be renewed to last the entire time. Plant patents also have twenty-year terms and need renewal. The patent is enforced by the federal courts, which can stop unauthorized individuals from using the product and can assess financial damages to the patent holder. Even the threat of a court injunction—an order to stop doing what you’re doing—is powerful, since it may cause a company to shut down a product line. Penalties for violating a patent are no laughing matter. If a patent is violated, the damages may be based on the total value of the product, even if the element that violated the patent protections was a minor part of the whole. Damages can be tripled if the court finds that the violation was committed knowingly and willfully. The status of a patent can be challenged, but the challenger has to present “clear and convincing” evidence that the patent was improperly issued for it to be invalidated. To make a long story short: don’t violate patents.

  Contrary to popular belief, just because a product is patented does not mean that it can immediately be used or marketed. Often it will need to undergo testing. Plants that incorporate the products of biotechnology, for example, may have to demonstrate their safety to the FDA, EPA, and/or USDA before they become publicly available.

  The Political Dynamics

  Today, some of the most challenging patent questions revolve around biotechnology. Before a new product becomes available, biotechnology enterprises spend years making large research and development expenditures to run the labs, buy or create rare and expensive lab equipment, and pay their highly trained staffs. According to the Biotechnology Industry Organization, U.S. biotech firms spent 27.1 billion on R&D in 2006. And, given the nature of the scientific process, many initial ideas, and the i
nvestments made to research them, will not ultimately pay off scientifically or economically. Unfortunately, it’s hard to tell which ideas will work and which ones won’t when the big investments are made to get a project started. The firms are heavily dependent on outside investors to pay for their large initial investments—100 billion between 2003 and 2007. Without patents, which protect their ability to profit on the final product, investors have little incentive to provide start-up funds. The patent itself becomes the valuable good because patent rights can be sold or licensed. Or a larger firm with greater capacity to bring a technology to market may buy the smaller firm that holds the patent, providing a big payoff for the small firm’s investors. In essence, then, the government’s patent policy is an economic development policy. It underwrites capital investment in R&D and the development of technology.

  PATENTS allow inventors to recoup their investment in and profit from their inventions. Without patent protections, there would be little incentive to pour blood, sweat, and tears–not to mention money–into developing a creative product if some slacker could immediately come along, rip off the essential idea, and sell it for profit. Society would suffer because of the stagnation of efforts put into creating new products and technologies.

  Congress has not made significant revisions to the patent process since 1952. Patents are a low priority on Capitol Hill. They’re highly technical, and therefore a dimly understood policy area for most members of Congress, who are not likely to take the risk of making changes to the law that might create unintended consequences for the U.S. economy. Unless there is clear evidence that the current limitations of patent law are creating substantial economic problems for their constituents, Congress has every incentive to let the PTO and the courts sort through the current disputes on a case-by-case basis.

  These investments are important, some might even say vital, given the increasing role of biotechnology in the U.S. economy. The revenues earned by U.S. biotechnology companies have grown from 11.2 billion in 1994 to 53.3 billion in 2006, by which time they employed 118,000 people in the United States. Their technologies reach into numerous industries: medicine, industrial processes, environmental cleanup, and agriculture. Furthermore, the United States has a considerable advantage in biotechnology in the world market (see the chapter on biotechnology), making the industry critical to the country’s economic competitiveness.

  Because of the speed with which technology changes, it sometimes overrides the ability of the law, and the courts, to keep up, especially in the Internet, software, telecommunications, and biotechnology industries. These high-tech industries have been advocating changes that would simplify the process of challenging patent applications and limit the penalties in patent infringement lawsuits. They argue that the PTO approves too many questionable patents, so-called low-quality patents (see box), many of which are not for truly novel products. These dubious patents are then used by “patent trolls,” essentially to extort large financial settlements from companies using the patented devices. The number of patent lawsuits tripled between 1983 and 2004. Since the courts are generally reluctant to overturn the rights of a patent holder, the companies using a patented device do not want to take the risk of the court issuing an injunction or imposing penalties, even if the company thinks the patent was issued inappropriately. The companies thus have an incentive to pay off a patent troll to avoid a lawsuit. Firms that are frequent targets of patent lawsuits believe the current legal environment creates substantial unpredictably in the development process, and that overly generous damage awards divert resources that could be devoted to innovation.

  Pharmaceutical and biotech companies, on the other hand, are generally the patent holders, and to the extent that the current system advantages the patent holder, it works well for them. They believe that strict patent protections are necessary to provide greater assurance that venture capitalists will receive some payoff from the long R&D process in biotech. They are competing for venture capital with high-tech firms that can offer a much faster return on investment.

  Perhaps the most significant patent issues today concern patents for biotechnologically advanced plants and the control that the patent holders have over today’s agricultural system. Farmers are concerned that the patenting of organisms, particularly with the increased development of genetically modified organisms, will lead to large agricultural technology corporations having control over agriculture. This has already happened to some extent. By utilizing utility patents, which are legal for transgenic organisms, companies can sell seeds to farmers and then prevent these farmers from utilizing seeds from their own crops for replanting their fields. This is, naturally, a problem for farmers who like to replant with their own seed, which is substantially cheaper—and besides, they produced the seeds on their own land. Monsanto has sued a number of farmers who have used seeds from crops that Monsanto developed using biotechnology, and the company has come away the winner virtually every time (as we saw in the previous chapter). Because patent holders are able to exclude farmers who don’t follow their rules from obtaining their products, farmers’ ability to manage their own farms with their own resources is severely limited. For example, manufacturers could require that new seeds be purchased every year, or that only their fertilizers or pesticides be used with their seeds. Farmers would be at the mercy not only of good weather but also of the restrictions of the major agricultural products corporations.

  PATENT lawyers make a distinction between high-quality and low-quality patents. High-quality patents are issued for inventions that meet all the criteria and the intent of the patent system and thus promote investment and innovation. Low-quality patents are issued to products that are not truly novel, or are “obvious,” and thus probably should have had their patent applications rejected. The term also covers patents whose claims are overly broad and thus can be used to claim compensation for elements of the product beyond what was originally deemed novel. Patent law itself and the courts, however, have not made this distinction, contributing to the increase in patent litigation as more low-quality patents are defended in court by so-called patent trolls or other patent holders.

  By utilizing utility patents, which are legal for transgenic organisms, companies can sell seeds to farmers and then prevent these farmers from utilizing seeds from their own crops for replanting their fields.

  Internationally, our trading partners are increasingly adopting patent systems for biotechnology that are similar to our own. Their systems include our broad definitions of what subject matter is eligible for patenting. Thus, placing greater patent restrictions on our biotechnologies would potentially create trade difficulties, put U.S. biotechnologies at a disadvantage compared to their foreign competitors, or give U.S. companies an incentive to move their product development facilities overseas to take advantage of more favorable patent systems. In other words, things aren’t likely to change soon.

  Policy Option One: Leave Things as They Are

  The ability for people to hold patents that stop others from producing a particular type of plant does one thing very well: it encourages companies and individuals to create these new plants that can then be used for the good of society. The company that sweated and struggled to create the plant or technology is able to reap financial rewards. The two processes by which most plants have been protected, the Plant Patent Act and the Plant Variety Protection Act, have both served their purposes admirably. It is true that certain unscrupulous people have dabbled in biopiracy by patenting plants that might have no right to be patented—such as a plant that has been used by a native culture for centuries. But this is the exception to the rule, and is easily handled by the courts or by the patent office. Reworking a system just to fix a problem that affects a very small population may actually cause more problems than it solves.

  Utility patents have also been used for plants since 1980, offering the biotechnology industry a powerful tool that allows them to completely control patented transgenic plants—as wel
l as the offspring from these plants, because they contain the patented genes (the Plant Variety Protection Act, on the other hand, allows farmers to replant seeds). There has been a public uproar over this control, but the reality is that relatively few plants have actually been protected in this way. Those plants that have been protected took a huge amount of resources to create, and the company needs the protection afforded by a utility patent if it ever hopes to make its initial investment back. Patents are temporary, and these companies won’t control these genes forever.

  Right-Wing Rating High-quality patents should be protected to give incentive to innovators and investors; low-quality patents deserve less protection because they waste money on litigation without providing really new or useful products. The rewards for successful high-risk research need to be protected, otherwise technology will stagnate.

  Left-Wing Rating The current system hands over too much control to Big Ag. Let the farmers plant seeds they’ve paid for.

  Policy Option Two: No Patents for Plants

  Rewarding the ingenuity of plant breeders for their work with a patent may be a good way to inspire the creation of new plants, but patents on plants are so misused that granting patents is simply inappropriate. Leave the plant breeding to professors at universities who get paid for it. Look at the first plant patented by Henry Bosenberg. He didn’t even breed this rose, he just happened to buy a plant that someone else had put the time and effort into breeding, noticed something unique about it, took a cutting, grew it, and patented it. The idea that one person can control the trade of a natural product, such as a naturally occurring bean, flower, or species of grass, is wrong. Our patent process and judicial system were aptly criticized by Silvia Ribeiro of the Action Group on Erosion, Technology and Concentration, an international group that investigates the socioeconomic and ecological issues surrounding new technologies: “A system that favours patent holders at the expense of the common good and takes more than a decade to right an obvious wrong [referring to the Mexican bean example mentioned earlier] should be considered broken beyond repair.”