BIOTECHNOLOGY PATENTS, MARKETS AND MORALITY
Peter Drahos
Law and morality are connected. There is no disagreement about this claim. As any student of legal philosophy knows, the problems arrive when one tries to explain the nature of the connection. Some areas of law invite adjudicators to draw on morality in the process of legal decisionmaking. Somewhat surprisingly, given its characterisation as a tool of economic regulation, patent law does just this. More accurately, some systems of patent law explicitly require decisionmakers to consider moral standards as part of the process of deciding whether or not to grant a patent. Probably the best-known example of a patent system inviting morality into its domain is Article 53 (a) of the European Patent Convention ("EPC") 1973, which does not allow the grant of patents for "inventions the publication or exploitation of which would be contrary to 'ordre public' or morality". In the Australian Patents Act 1990 there is, in section 18 (2), an express prohibition on the patenting of human beings and biological processes for their generation.
The express connection between patent law and morality is hardly new. The U.K. Patents Act of 1883, for example, gave the comptroller a right to refuse the grant of a patent the use of which would be "contrary to law or morality".[1] There is at least an argument that section 6 of the Statute of Monopolies of 1623 (still referred to in the definition of patentable invention in s. 18 (1) of the Australian Patents Act), includes moral standards within its ambit.
Even within those patent systems where moral standards are not explicitly referred to, it does not follow that such standards play no role in the patent system. When legislatures enact patent law, the moral standards of the community to which they belong are one factor that affects the content of those patent laws. Similarly, in one way or another morality usually enters the interpretive process involved in judicial decisionmaking on patent law. When the majority in Diamond v. Chakrabarty decided that it was for Congress to decide to exclude from patent protection genetically engineered organisms, they expressly endorsed a political morality that allocated matters of "high policy" to Congress.[2]
Like it or not, the creation, operation and interpretation of the patent system is linked to moral standards. Patent law is located within and not outside a public ethic of community values and shared economic and social interests. There is nothing surprising about this. Patents are a species of property rights. Property is a key institution, perhaps the key institution, of social and political morality. Its definition affects resource distribution and takes one straight into issues of social justice. Similarly, the claim that patenting is an "ethically neutral act" seems weak.[3] A system can be described as morally neutral if it does not affect A's interests or does not hinder or assist A's interests vis-avis the interests of B. Since the whole point of patenting is to exclude others from access to informational resources of the patent, it is hard to see how patenting can be described as ethically neutral. The act of exclusion will almost always affect someone's interests.
The remainder of the article argues that morality has been given short shrift by those who have interpretive custody of the patent system. These custodians are caught up in a structural predicament of global dimensions. The outcome of this predicament is that the scope of patentability is expanding while the role of moral standards in the operation of the patent system is being increasingly limited. Ironically, this is happening at a time when the moral debate over patentability, at least in the field of biotechnology, has never been greater. There are, this article suggests, no easy solutions to this structural predicament. The challenge is to think of regulatory processes of decisionmaking that will give citizen groups some influence over the direction of biotechnology, a technology that looks set to transform their social lives in ways much greater than in the past. Among other things, this requires international coordination and action. And this is not likely to be easy in a world where international business, the world's most single powerful global actor, is likely to oppose regulatory initiatives that give citizens a greater say in the content of regulation that affects the conduct of international business.
Before closing this section, the use of the term "patent community" in this article needs to be clarified. It is used to refer to patent attorneys and lawyers, patent administrators, and other specialists who play a part in the exploitation, administration and enforcement of the patent system. They form a community by virtue of their technical expertise and general propatent values. Regular users of the patent system (like the pharmaceutical companies) might also be said to be part of this community, although in this article from time to time a distinction will be drawn between international business (of which the pharmaceutical industry is a part) and the patent community.
The patent community is also an interpretive community. It is the patent community working with a shared set of assumptions, understandings, conventions and values that settles issues and problems of interpretation within the patent system.[4] By doing so, the patent community probably exercises more influence on the direction and content of patent policy than legislatures, which in any case rely on committees of specialists to advise them on matters of patent policy.
The Expanding Patent Universe
The patent system has undergone a process of regulatory globalisation and harmonisation. This simply means that more and more countries have adopted patent systems and that those patent systems have progressively become more like each other. Patent systems are not harmonised at the level of rules, but they share common principles. The degree of patent harmonisation is increasing rather than decreasing. For example, all states that are members of the World Trade Organisation ("WTO") will have to recognise process patents and to comply with Article 34 of the Agreement on Traderelated Aspects of Intellectual Property Rights ("TRIPS") concerning the burden of proof in civil proceedings for the infringement of process patents.
Aside from the globalisation and harmonisation of patent law, the patent universe has been growing in another manner: the scope of what is regarded as patentable subjectmatter has quietly expanded. This expansion has occurred in two ways. First, the scope of patentable subjectmatter has been given an inclusive interpretation. Secondly, the restrictions on patentability have been narrowly interpreted. Each national patent system has its own detailed history of expansion. Legislative, judicial and administrative actors have had in this regard roles of differing importance in each national system. Tracing these national histories is well beyond the scope of this article, but some illustrations can be provided. Legislatures have sometimes extended patent protection, the passage in the United States of the Plant Patent Act of 1930 being one such instance. An obvious example of judicial activism on the issue of patentable subjectmatter in the context of biotechnology is Diamond v. Chakrabarty.[5] Because this was a decision of the U.S. Supreme Court and because it affected patenting in the world's biggest market, the decision had an important influence on patent thinking and policy around the world. In Australia the High Court, having to decide on the validity of some process claims dealing with the use of known chemicals for weed control, entrenched a purposive and expansionary approach to the question of what constitutes a manner of new manufacture.[6] This decision was in turn drawn on by English courts considering the issue of the patentability of microorganisms.[7] Within Germany, the decision by the Federal Supreme Court in the Red Dove case is generally regarded as a landmark in the augmentation of patent protection for biotechnological inventions.[8]
Courts and legislature have not been the only important actors in this history of expansion. Patent offices like the European Patent Office ("EPO") and the U.S. Patent and Trademark Office ("PTO") have also been key players. Patent offices are hybrid creatures, business bureaucracies which make their living from granting more rather than less patent registrations, from ensuring the repeat custom of their transnational clientele and from going on proselytising missions in those developing states or new market economies which are in the middle of acquiring patent systems. Patent offices can, through their decisions, include more things in the scope of patentability or narrow the operation of restrictions on patentability. Moreover, if they are supranational entities, as in the case of the EPO, they can exercise a profound harmonising influence on national systems. English courts, for example, have pointed out that it is of the "utmost importance" that the exclusions in section 1 of the U.K. Patents Act 1977 should have the same interpretation as the EPO gives to the exclusions contained in Article 52 of the EPC.[9] The EPO has been singularly successful in giving a narrow reading to the limits on invention and patentability contained in Articles 52 and 53 of the EPC. In interpreting the historical text that surrounds the creation of the EPC, of the EPO has suggested that the widest possible conception of patentability was a predominant conception.[10] This conclusion has led to another, one that serves as a foundational interpretive assumption for European patent law - exceptions to patentability have to be narrowly construed.[11] Precisely the same assumption is coded into U. S. patent law.[12] The effect of the assumption is to make the restrictions on patentability function weakly, if at all.
So, for example, despite the fact that Article 52 (2) (c) contains a prohibition on the patenting of software, the EPO was able to report in 1994 that it had granted more than 11,000 patents for softwarerelated inventions, and that the national patent offices of Germany, the Netherlands, Sweden and the United Kingdom had essentially adopted the EPO approach to the patentability of softwarerelated inventions.[13] Similarly, the U.S. Patent Office has been criticised for using its guidelines to extend the scope of patentability of computer software in a way that is not justified by the case law.[14] The Oncomouse decision reveals that the EPO is reading the morality criterion in Article 53 (a) in a narrow way. The restriction on the patentability of human treatment can be overcome by formulaic means.[15] The exclusion of plant varieties under Article 53 (b) of the EPC continues to be revisited. Claims relating to a transgenic plant by Novartis which were refused by the Examining Division because they did not fulfil the requirements of Article 53 (b) have been referred to the Enlarged Board of Appeal.[16] It may also be that the Directive of the European Parliament and the Council on the legal protection of biotechnological inventions (1998) does not match the restriction on the patenting of plant varieties to be found in the EPC.
A crucial aspect to the expansion of the patenting in biotechnology has been the development of juridical arguments and theories that have enabled applicants for biotech patents to overcome existing bars.[17] One of the interesting things is that, while these arguments are often analytically weak, they have been readily accepted by the patent community in the name of adapting the patent system to changing circumstances of technology and innovation. There is nothing wrong in adapting systems of law to changing circumstances. The crucial thing is that such adaptations must be governed by the public purposes that are embedded in patent law and the broader public ethic rather than private purposes. In the case of the adaptation of the patent system it is not at all clear that this has been the case. An example of where patent law has been engineered to suit the needs of biotechnology patentees relates to the discovery/invention distinction. Most patent law systems recognise a distinction between invention and discovery, and prohibit the patenting of discoveries. In the case of biotechnology patents, a bar to patenting a discovery is a serious problem from the point of view of obtaining patents, since much of biotechnology involves the discovery of the genetic basis of various biological functions, the discovery of organisms with interesting attributes and so on. Mother Nature's handiwork is never too far away in the case of biotechnological inventions. One way in which the potential problems of the invention/discovery distinction have been overcome is to embark on a recharacterisation strategy. What seem like discoveries on closer analysis are, it is argued, really inventions. Genes that have been discovered in nature when isolated and purified can no longer be said to exist in nature and may therefore be regarded as inventions. One suspects that, if Mother Nature had a patent on a particular naturally occurring gene sequence, she would almost always win a patent suit brought against the alleged inventor, since typically all that happens in non-natural gene sequences is the removal of redundant codons. In essence the sequences are the same. To most people outside the patent community this kind of argument seems like a triumph of form over substance. How many people would think that the rock they pick up in the park becomes an invention of theirs after they have washed and polished it?
More important, however, is the fact that this kind of legal artifice ignores the purpose for having the distinction in the first place. The prohibition on the patenting of discoveries stems from the fact that the patent system is meant to promote the innovation of products and processes rather than abstractions. The purpose of the distinction is to drive the discoverer into the realm of practical application and workmanship. The distinction itself hooks up nicely with the requirement of nonobviousness or inventiveness. By imposing that requirement, the patent system seeks to encourage creative standards of practical application. The problem with corrupting the distinction is that it creates problems of rentseeking. Inventors may devote too many resources to the search for abstractions the use of which they can license to others and too few resources to the development of products and processes.
Another example of a weak analytical argument that is to be found within patent law is the claim that a patent does not confer on its holder a right of exploitation.[18] It is merely a negative right to exclude others. This is hardly very persuasive. The right of liberty, most would agree, is a fundamental right. Can one exercise the right by walking down the street? The answer is yes, unless there happens to have been an accident and the police have temporarily blocked off the street. Like a patent right it is a negative right - a right not to be interfered with. Negative rights create zones of non-interference. They correlate with negative duties. The holder of the right can, as a result of this zone, exercise the right, unless for some contingent reason a restriction is placed on the exercise of the right. The claim that the holder of the patent right does not have the right to exploit it is misleading. The effect of the patent right is to create a zone of noninterference in which the patent holder may exercise the right by undertaking activities of commercial exploitation. Rights carry with them the right to exercise the right. There would be very little point in having them otherwise. Just as the right to liberty allows one to walk down the street, so a patent right allows one to exploit the patent commercially unless for some contingent reason one cannot exercise the right. Why it is that arguments like these have been regarded as persuasive by the patent community will become clearer from the section of this article entitled "The Structural Problem".
To summarise this section, three things can be said to be happening in the patent universe. First, the patent system is globalising. Secondly, it is becoming increasingly harmonised. Thirdly, the scope of patentability is increasing.
The Shrinking Moral Universe
The patent system has for a long time been formally connected to morality. Despite this linkage the patent community has taken the view that morality has little to do with issues of patent grant or, if it does, the patent system is the wrong place in which to consider such issues. The result of this patent community consensus has been that the connection between morality and the patent system has received little exploration as a matter of law, at least until recently. Patenting within biotechnology has changed the quiet life of the patent system. Largely as a result of opposition proceedings taken by activist NG0s such as Greenpeace, which have become worried by the prospect of "patents on life", courts and patent administrations particularly in Europe have been forced into making pronouncements on the relationship of patents and morality.[19]
Patent systems remain territorial and national systems. Each patent jurisdiction has had to work out its own legal answers to the questions surrounding patenting in biotechnology and the role of morality. Broadly speaking, there are two international trends that can be identified. The first is that patent decisionmakers have narrowed the role of morality as a criterion of excludability for patents. At the same time, they have devised juridical theories that have removed many of the serious legal hurdles to patenting in the field of biotechnology. Biotechnology law is no longer, in the words of one expert, arcane or anarchic.[20] This has largely been achieved by the patent community functioning as an interpretive community. Patent offices around the world have granted many thousands of patents in the biotechnology field including patents on genes, transgenic plants and animals. [21]
Within the United States, the courts have not had to wrestle with the kind of specific statutory exclusions on patentability that one finds in the EPC. Issues of patentability in the biotechnology field are decided under those standards of patentability to be found in all patent law systems; patentable subjectmatter, utility, novelty and nonobviousness.[22] The Chakrabarty decision handed the moral difficulties of patents on organisms over to Congress. Congressional hearings have produced the view that "patent law is not the place to exercise moral judgements about scientific activity".[23]
This, of course, raises the question of where is the right place? From time to time Bills that have sought to place limits on patenting in the biotechnological field have been introduced in Congress, but they have failed to pass.[24]
The legal consideration of the morality of biotechnology patents in Europe has hinged on an interpretation of Article 53 (a).[25] The EPO has signalled a narrow approach to Article 53 (a) in its guidelines, pointing out that it would be likely to be invoked in only "rare and extreme cases".[26] The cases themselves also entrench a narrow reading of the role of Article 53 (a). Article 53 (a), it was pointed out in the Relaxin case, is an exception to patentability and "Boards of Appeal have repeatedly found that such exceptions are to be narrowly construed".[27] The tests which have emerged concerning the application of the morality criterion are likely to be applied by the EPO in a way that sees very few patents endangered on the grounds that their exploitation would be contrary to morality. Tests of morality that depend on the patent being "abhorrent to the overwhelming majority of the public,[28] a contravention of the "totality of the accepted norms"[29] or a "weighing up"[30] of advantages and disadvantages provide a patent office minded to do so with plenty of scope to narrow the scope of operation of the morality criterion. This is especially true if the relevant decisionmaker downplays the probative value of survey evidence relating to patents and morality, as did the Technical Board of Appeal in the Plant Genetic Systems case.[31] The effect of such a move is to rob the morality test of any empirical content, while at the same time strengthening the effect of the foundational interpretive assumption that exceptions to patentability are to be "narrowly construed".[32] The Onco-mouse case itself reveals a formalistic treatment of the morality criterion that did not really engage with the matters of principle that the opponents in that case were raising."[33]
Despite the different legal provisions in Europe and the United States the moral and legal outcome in the Oncomouse case was precisely the same - the patent was granted. Given that both patent communities in the United States and Europe come to their interpretive tasks with the same set of propatent attitudes and assumptions, there is nothing surprising about this.
The Structural Problem
It has already been seen that broadly speaking the scope of patentability is increasing. At the same time the bars to patentability are in various ways being lowered. This outcome has been largely fostered by the patent community working as an interpretive community. But why has the patent community retained its strong propatent attitudes in constructing the relationship between morality and patenting in the context of biotechnology patents? There is evidence of the disquiet of mass publics about patent practice in this field.[34] This disquiet seems to have done nothing to stop the trends that have been described.
The answer to the question concerning the strength of propatenting attitudes lies in understanding the structural situation in which the patent community exists. This structural situation places strong limits on the capacity of the patent community to develop the links between patent law and the broader public ethic within which the patent system operates.
For the purpose of understanding this structural problem, it is necessary to divide the patent community along territorial lines. The division that matters for present purposes is between Europe, Japan and the United States. They are the three most important patent jurisdictions in the world, so much so that they have a programme of trilateral cooperation. Each of these state actors has a patent office (for present purposes this article will treat Europe as a state actor and the EPO as its patent office). The goal of the patent system in each of these states is essentially the same, that of encouraging the development of science and technology. The development of science and technology is itself bound up with the belief that the patent system, by adding to dynamic efficiency, also contributes to economic growth and ultimately progress. Importantly, each of these patent offices is chartered to administer the patent system to promote national welfare and not global welfare.
Over the years nation states have used the patent system as part of a strategy of defending or expanding national industries. Patent mercantilism was around for a long time before there was talk about the links between intellectual property and nontariff trade barriers. The United Kingdom, for example, in its 1919 Patent Act did not extend patent protection to chemical products unless they were made by a new process because it feared the market power of German chemical companies.[35] All states, one might note, could play the game of patent mercantilism because international treaties in the patent law area placed very few restrictions on their sovereign capacity to do so. Patent law harmonisation and globalisation are slowly restricting this capacity. Whether one looks to history or economic modelling, the conclusions concerning the policy preferences of states regarding trade and intellectual property protection are the same. Technology importers have tended to favour lowlevel, discriminatory regimes, while technology exporters have favoured highlevel, nondiscriminatory regimes.[36]
The structural problem that this article is about to outline does not, however, relate to the division between technologyexporting states and the technologyimporting ones. Rather it relates to the United States, Europe and Japan. These three states are technology exporters. They favour a globalised highlevel, nondiscriminatory patent system. The patent provisions of TRIPs very much reflect this policy agenda. There are at least two reasons why a technology exporter would favour a high level, nondiscriminatory patent system. The first is that such a system means that a patented technology has the potential to be protected worldwide. As a net exporter of such technologies one experiences export growth, a favourable trade balance and so on. The second reason has to do with investment. In order for the dynamic efficiencies based on technological innovation to continue' investment in innovation has to continue. Domestic producers have to be encouraged to invest in research and the patent system is one established means by which to do this. The belief in most Western policy circles is that investment activity can be increased by means of a stronger intellectual property regime. There is no doubt that investment is "the critical determinant of longrun economic performance".[37] The relationship between investment and intellectual property, however, is part of a very complex web of cause and effect.
The investment issue is further complicated by the fact that these days capital flows are highly mobile. They are also of fundamental importance to the economies of states. Investment has become the driving force of the international economy. In 1993 stocks of foreign direct investment ("FDI") were U.S.$1,650 billion. In the early 1990s, roughly 75 per cent of the total accumulated stock and 60 per cent of the flow of FDI were to be found between the United States, Japan and Europe.[38] Similarly, the United Nations Conference on Trade and Development points out in its latest investment report that developed countries have twothirds of inward FDI and 90 per cent of outward stock.[39] The United States, Japan and Europe remain principal players. Demand for FDI also outstrips supply.[40] FDI flows increased by 19 per cent in 1997 and climbed for the seventh year in a row.[41] For these three states, which now see their comparative advantage lying in the production of intellectual property, not disturbing or increasing their share of investment flows (whether domestic or foreign) is crucial. Economics that have become dependent on technological innovation for their economic growth cannot afford to make even marginal disruptions to investment activity. For the patent offices of these three states, all this leads to a practical truth. None of these offices can be seen to be weakening the patent system in any way. To do so would be to imperil investment flows in the territory for which the patent office has responsibility. Similarly, when one of the patent jurisdictions strengthens patent protection, the others take the view that they have no real choice but to follow. Again, the reason relates to investment. Under the principle of national treatment a state which raises its standards of patent protection also confers a benefit on foreign patentees. The foreign patentee gets the benefit of the increased protection. But in the case of competition between two hightechnology economics where one state moves to a higher standard, the other cannot simply remain content to allow its citizens to acquire the benefit of that standard under national treatment. In other words, it cannot use the freerider strategy. It too must move towards the higher standard. Why so? The risk it runs of not moving is that the first state will get the benefit of greater investment flows, with the strong possibility that more of the crucial R&D will be done in that state. Playing the free-rider strategy may not make a lot of sense in this situation. Among other things, lower levels of research may reduce the second state's capability in copying the technology coming out of the first state. The danger for a technology exporter of not matching the patent standards of another technology exporter is a reduced share of R&D capital and longer run loss of hightechnology capability. It should also be added that one of the main uses of patents by companies is as a signalling device to stock markets that they have control of vital or fundamental technologies. How this valuation of a company's intangible capital takes place is poorly understood, but there is no doubt that it occurs. The patent system (along with other intellectual property rights) is progressively becoming more and more enmeshed in processes of market valuation.[42] For patent offices this creates further pressures to adopt a liberal attitude towards the grant of patents.
One important thing to understand about this argument is that it does not matter if some of the causal connections between investment and patents do not hold. The connections between FDI and intellectual property are, for the time being, only imperfectly understood.[43] It is enough if policy makers and patent administrators believe them to be true.
It is also clear from the preceding discussion that it is a comparatively easy matter for any one of the states to increase patent protection in an area like biotechnology, but a comparatively hard matter to decrease it or call a halt. Essentially, what happens is that when the U.S. biotech industry believes that European patent rules confer an advantage that U.S. patent rules do not, it pressures the U.S. PTO for reform. An example of successful lobbying by the biotech industry in the United States was over the rules relating to enablement and operability in section 112 of the Patents Act.[44] The European biotech industry behaves in a similar fashion. Under this set of conditions, a lead patent jurisdiction can only continue to drive up standards of patent protection. There is nothing in TRIPs that prevents a state from moving to raise standards of patent protection. The morality criterion in all this simply becomes a gently floating irrelevance.
No Easy Solutions
There are no easy solutions to the structural problem that has been described in the previous section. Essentially the three leader states in this field have accepted that increasing the strength of the patent system is a means of engineering competitive advantage through regulation. Even if patent administrators privately hold doubts about this, the industry is always there to remind them of the argument. In any case, an individual patent office is unlikely to move in ways that sees the size of its patent empire, as measured by number of applications and fees