Who owns nature?
by Dale McDonald
Farm Industry News
Vol. 32, No. 5, March, 1999
Editor's note: Thirteen years ago, Farm Industry News
compiled an editorial series, hailed as a landmark, on the
coming products of biotechnology. Today, many of those
predicted genetic marvels have arrived, thanks to huge,
risky research investments undertaken by many
companies.
Unfortunately, there is an undertow gaining strength that could overtake the huge
wave of genetically altered wonder products being developed. The undertow
involves competition - not in the field, but in the courtroom. It is a patent-based legal
issue that is so provoking, even the seed/chemical companies involved are calling
patent laws into question - the same laws they are using to seek protection for their
investment.
Our contributing editor, Dale McDonald, and myself have spent months trying to
grasp the seriousness of this issue to present a balanced look at its impact on you.
This series of four stories, published here and in the next three issues, will examine
whether this important technology is headed down the proper path. -Kurt Lawton,
editor.
When America's natives "sold" Manhattan Island for a collection of trinkets and
beads, the country's first major clash between business and culture was set in
motion.
Certainly the "businessmen" shared a sense of euphoria, because they got what they
wanted at a rock-bottom price. But the Native Americans-as the story goes-also
were thrilled. The purchasers, they thought, were very foolish. After all, mankind
cannot "own" nature.
Well, they were wrong. And if they could see the chaos being generated by today's
version of the life sciences, they would be stunned.
Piece by piece, nature's genetic code is being patented, licensed, traded, bought and
sold. And there is a lot of fallout.
The patent office is overwhelmed with applications and is uncertain even how to
apply existing laws to this new technology. Company buyouts and corporate
mergers are happening so fast there's hardly time to say "technology fee" between
announcements. And at our universities, researchers are discarding the notion of
"publish or perish" and replacing it with "patent or perish"-at the behest of private,
rather than public, sponsors.
In many ways, the face of agriculture itself is being recast, and so are a few
centuries of relative civility.
Competition moves to the courtroom. Competition in the marketplace has always
been healthy, especially for farmers who purchase the products, but the new
competitive spirit is taking place in courtrooms rather than in farmers' fields. Peruse
the business press and this is what you'll see: Pioneer Hi-Bred files lawsuit against
Asgrow, Cargill and DeKalb; Monsanto sues Zeneca, which countersues Monsanto;
DeKalb sues Pioneer; Mycogen sues Ecogen; Novartis sues Monsanto, DeKalb
and Pioneer. Unfortunately for farmers, the millions of dollars spent in litigation will
be reflected in the price of the products. In effect, the swarm of lawyers is
producing nothing more than a huge additional cost for research and development.
The issue of civility also has an international flavor. Monsanto's "terminator gene,"
which renders harvested seeds unable to germinate, is designed to keep farmers
from retaining seed for the following year's crops (see February issue, page 62). On
the surface it seems like a smart form of protection from seed pirates. But
internationally, development of the gene is causing a furor because of the damaging
effect such technology would have on subsistence farmers in poor countries.
Even relations between European countries and the United States are strained. Dan
Amstutz, president of the North American Export Grain Association, recently
criticized seed companies for releasing genetically modified crops before the
European Union approved their use. The problem? Cargo ships full of American
grain can be rejected at European ports if genetically altered seeds are on board.
In no way, however, should this new technology of biotechnology be construed as
inherently "bad." Certainly, it is not. The important advances being made with this
science - from enhancing crop production to eliminating childhood disease - are
undeniable. Still, there are important issues that must be addressed before this
technology ever has a chance to live up to its potential. The crucial question, of
course, is deceptively simple: Is this technology on the proper path?
The question of ownership. The ability to patent an invention has been the
foundation of American business. Through the patent process an inventor is granted
a limited monopoly on his or her idea, and at the same time the technical information
is made public. This protects the inventor's right to commercialize his or her work,
while researchers around the world can learn from it.
The patent system, however, was originally designed to protect mechanical
inventions like gear boxes, not genes. And the result is nothing short of patent
paralysis.
Writing in Scientific American, Gregory Aharonian explained the problem: "Every
gene sequence that the U.S. Patent and Trademark Office (PTO) receives must be
checked for novelty and obviousness.
"The problem is that to do this the PTO needs tens of millions of dollars and 100
years - and that's just to review the pending patents - and some applicants, including
Incyte Pharmaceuticals and Human Genome Sciences, submit thousands of
sequences in an application."
As if gene sequences aren't enough to clog the works, the PTO now faces patent
applications covering gene fragments. Called "expressed sequence tags," or ESTs,
these fragments are only used to identify and isolate genes.
The controversy began in 1991 when the National Institutes of Health filed a patent
application for 347 gene fragments. The biotechnology industry and the scientific
community were shocked. If you could patent a fragment used to isolate an
unknown gene, did you also own the gene once it was identified? "After all," says
Phillip Jones, of the law firm Foley and Lardner in Madison, WI, "companies would
be reluctant to invest millions of dollars in developing a gene product that could not
be patented; still, the allure of owning an EST patent seems irresistible since [in
April 1977] at least 350 patent applications, covering more than 500,000 tags, are
pending at the PTO. The largest application reportedly contains 18,500 sequences."
Col Seccombe, CEO of Garst Seed, is very concerned about the ramifications of
EST patents. "The debate is not over technology like the Bt patents: That's
inventiveness and it's novel. But ESTs are only part of a gene. You don't even know
what they do, and being able to claim them as yours is wrong.
"Here's an example of what could happen [with EST patents and the current
backlog]. Here at Garst, we've been specializing in stacking genes with different
traits. Some of the genes come from outside sources and some we develop.
Everybody is trading genes and forging agreements.
"So we develop a product that contains herbicide resistance, it's got insect
resistance, and then suddenly you wake up one morning and some company has
slapped you with a lawsuit because it just got issued a patent it applied for 10 years
ago and our gene stack contains that thing.
"Now we're trapped into a legal situation where we are forced to pay royalties - in
effect we have to give our profit away - or we can't sell the product anymore. We
spend 10 years and millions of dollars to develop that product, when if we had
known that patent had been applied for and had a chance of issuing we might never
have done the research. How, as the manager of this business, can I plan for a
circumstance like that? It is a totally unacceptable situation."
The question of money. Another situation that many industry observers find totally
unacceptable is the amount of money flowing to lawyers rather than research and
product development. Over the past few years, lawsuits associated with the Bt gene
alone could fund a medium-sized country.
And the lawsuits aren't just over Bt genes. They are over every aspect of Bt
technology, from DNA markers to ballistic transformation methods. Companies that
have been active in the Bt courts include Monsanto, Pioneer, Novartis, Mycogen
and DeKalb.
It doesn't stop with technical litigation, either. Sweeping lawsuits also are routinely
filed over big-picture business practices. For example, according to the Bowditch
Group, a business consulting firm located in Boston, Zeneca sued Monsanto "for
allegedly violating antitrust laws in order to maintain its dominance in the rapidly
expanding market for genetically engineered soybean seeds. Zeneca's suit seeks a
court finding that Monsanto's Roundup patents are invalid and unenforceable. The
suit also seeks punitive damages and unspecified but triple actual damages and
injunctions against Monsanto's alleged acts of unfair competition."
When debating the merit - and the expense - of such litigation, consider this:
Monsanto's Roundup patents expire next year.
Farmers-the consumers who will pay for all this litigation-aren't the only ones who
are worried about the current state of affairs. One corporate executive had this to
say: "It looks like every time we make a discovery over the next 20 years four
people will put their hand up and say, 'I own a piece of that.' So you better have a
big legal department because you're going to end up in court case after court case.
The system supports professional lawyering."
The question of consolidation. Obviously, there is big money at stake, or
"professional lawyering" and the patent frenzy would not be occurring. To follow the
money, just take a look at a few of the mergers, buyouts and agreements tracked by
the Bowditch Group:
m Monsanto bought Plant Breeding International from Unilever for $524 million.
m Hoechst AG of Germany and Rhone-Poulenc of France initiated a merger by
creating a 50/50 joint venture called Aventis. The research and development budget
is said to be about $3 billion.
m Bayer AG and Paradigm Genetics agreed to collaborate. Paradigm will receive
up to $40 million, including milestone payments, and also will receive success fees
for all products that reach the market.
m DuPont and Lynx Therapeutics announced a collaboration. Lynx is assured to
receive $22 million and could receive $60 million.
m Pioneer Hi-Bred International, which has an alliance with DuPont, agreed to
collaborate with Oxford GlycoSciences, which will receive $27.5 million. Pioneer
and Maxygen also hooked up. Pioneer will begin with a $5 million equity investment,
pay $2.5 million in start-up costs and contribute more than $25 million over the next
five years. Maxygen also could receive up to $50 million in milestone payments.
With the current pace of mergers, acquisitions and agreements, you almost have to
wonder if the purchasers even know what they are getting. Consider the
Hoechst-Schering AgrEvo offer to purchase Cargill Hybrid Seeds. First, the
purchase price was set at $650 million. Then Hoechst reduced the offer to $350
million because of pending lawsuits against Cargill, prompting Cargill spokesperson
Lori Johnson to say, "As far as we are concerned we have a standing definitive
agreement [at $650 million]." Last month, Hoechst decided there would be no deal
at all.
What alarms many industry observers is that the pace of mergers and acquisitions
will dilute competition. Already, agriculture's biotechnology field can be divided into
only a few groups. One would be Monsanto, which now owns DeKalb, Holden's
Foundation Seeds, Asgrow, Delta and Pine Land, and part of Calgene. Monsanto
also has an alliance with the grain-processing division of Cargill, and it bought
Cargill's formidable international seed business.
Then there's the Pioneer/DuPont alliance and all its research and development
agreements, and the Dow AgroSciences purchase of Mycogen. That leaves
AgrEvo, Garst, Aventis and Novartis to round out the field.
Can this rapid consolidation - which is sure to continue - ensure open competition
for the farmer's dollar?
The question of private vs. public research funds. A decline in public research
dollars, coupled with an increase in privately funded university research projects, is
another sensitive issue that must be addressed.
Ideally, university researchers conduct basic research, funded by public sources,
and immediately publish the results for the public good. However, because of
reduced public funding, research often is privately financed with the financier
receiving the rights to patent or license the researchers' discoveries. Some argue
that such public/private agreements can impede the dissemination of knowledge.
In November, Novartis poured fuel on this hot debate.
The company's press release stated, "The Novartis Agricultural Discovery Institute
(NADI) today announced a $25 million, five-year research agreement with the
University of California at Berkeley. The agreement...is a precedent-setting
collaboration between industry and academia.
"NADI will benefit from the independent thinking and diverse academic
environment of UC Berkeley's scientific community, and will have rights to
negotiate licenses to the patentable discoveries coming from the department
laboratories."
In analyzing the move, the Bowditch group commented, "Under the terms of the
deal, Novartis will be able to observe the work of 31 faculty members and nearly
200 graduate students and postdoctoral fellows.... Some individuals have expressed
the concern that the department (Plant and Microbial Biology) may redirect its
academic activity to please a private company."
Many researchers anticipated this trend and frankly stated their concerns. At the
1995 annual meeting of the National Agricultural Biotechnology Council (NABC)-a
group of academicians representing 22 universities-the Research and Policy
Committee wrote, "By large measure, the concern that dominated discussion across
subgroups was whether public university research agendas are unduly influenced by
industry.
"[Faced with reduced public funding], participants concurred that it was appropriate
and necessary for industry to fund research at public universities.... At the same
time, many participants shared personal stories illustrating the pressure placed on
researchers to seek industry dollars to keep laboratories afloat and testified to the
disproportionate influence industry has on the research agenda."
Other examples support those scientists' conclusions:
m At the same NABC meeting, Kathleen Merrigan, senior analyst at the Henry A.
Wallace Institute for Alternative Agriculture, said, "Patent seeking can lead to
unintended conflict-of-interest problems. For many years I served as the principal
staff person dealing with bovine somatotropin (BST) in the U.S. Senate. When
safety questions were raised and the Government Accounting Office began its
inquiry, it was a struggle to find a single university expert who had not, at one time
or another, been on the [BST] industry's dole."
m Fred Buttel, a rural sociologist at the University of Wisconsin-Madison, surveyed
scientists at U.S. agricultural colleges in 1989 and 1996. Some things had changed
over the seven-year gap.
"When asked for their views of university-industry relationships, a number of
researchers in the sample expressed a growing concern over closer ties with
industry," Buttel says. "Compared with their responses in 1989, significantly more
researchers in 1996 said that growing links with industry would result in their
research becoming too oriented to industry needs, reduce their opportunity to study
basic biology, and inhibit open communications.
"Those surveyed in 1996 also said that receipt of grants or contracts is now nearly
as important in determining faculty promotions as their publication record."
A question of direction. So who does own nature? Will the patent issues be
resolved? Can negotiation replace litigation? In the future will this powerful
technology be controlled by only a handful of companies? Can potential conflicts
between public and private funding be avoided?
The answers will determine whether or not this technology is on the proper path.
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