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Patent Paralysis

Second in a series Who owns nature?

With hundreds of patent applications from every biotechnology seed/chemical company jamming the patent office, duplicate claims are made. Unfortunately, these interferences can slow the flow of products to you, cause companies to risk investment loss, and create higher seed prices to cover climbing legal costs.

Since the earliest days of the biotechnological revolution, commercialization has been plagued by delay.

First, it took years to get approval for the initial field tests of genetically altered crops. Then, environmental activists tried to stop the technology cold with a series of lawsuits. When the test plots finally did get planted, saboteurs literally pulled some experiments up by the roots.

More than a decade later, the turtle rather than the hare still defines this burgeoning technology. But today the perpetrator of postponement is none other than the Patent and Trademark Office (PTO) of the U.S. government. The office is overwhelmed, understaffed, short of funds and years behind the times.

To be fair, the current backlog in the patent office that is stifling technological advancement did not come about by design; it happened by default. Four situations at the PTO underscore the problem.

Speed is not a priority. When an applicant files for a patent, nothing happens until the application is reviewed and the PTO issues what is called a first office action. Once that first office action is issued, the applicant has six months to respond. Typically, a series of office actions must be dealt with. Although the applicant is required to meet a response timetable, no such requirement is made of the PTO. Applicants are on the clock; the PTO is not.

Eventually, the PTO issues a final office action. If the applicant disagrees with this action, he or she has to amend, appeal or refile and start the process all over again. During this phase, time is measured in years, not months.

Interferences truly interfere. Virtually all commercial biotechnology companies currently have hundreds of patent applications sitting at the PTO, and of course many of them overlap. Because of this, "interferences" have become a large part of the process.

Ken Loertscher, general patent council at Dow AgroSciences explains: "What I find is that things are really hung up in the interference proceedings. It's a hearing at the PTO to determine who has rights to obtain the U.S. patent when two or more parties are essentially claiming the same thing.

"Interference proceedings are very technical, very involved, and there are a lot of requirements for paperwork. We still have an application we filed in 1983 that is in interference. That is not unusual. Another aspect is that some parties may have an interest in tying things up even if they know they will eventually lose."

The system can be manipulated. Parties often file "submarine" patent applications that are unethical, mean-spirited and designed purely to manipulate the system for profit. And these applications are not uncommon.

Rick Shear, associate general counsel for intellectual property at Monsanto, says, "The submarine tactic is filing a patent application, then intentionally doing whatever you can to keep it pending - for years - until such time as someone else, who has never seen the patent, produces an invention. Then bang, the [submarine] patent issues and they've got you. It's a problem."

Herb Jervis, vice president and chief intellectual property council at Pioneer Hi-Bred International, agrees: "[The submarine tactic] stems from the fact that patents are secret until they issue. If the process was open and the information was made public at application rather than issuance, [the tactic] would be stopped.

"I think people do try to profit on another person's research by dragging out the patent process for a commercial objective. They file intentionally sketchy disclosures, wait for someone else to develop the technology, then jump out with a patent. And by doing that, they could put a smaller company out of business," Jervis says.

Too little, too late. Recently, the acting commissioner of the PTO announced that his office would hire 2,100 new patent examiners over the next three years. It sounds impressive, but there's a catch. Those who routinely deal with the patent office say it takes three or four years for a new examiner to become competent - especially if he or she is assigned to handle complex technologies like biotechnology.

Industry sources admit they don't exactly help the situation. It's a common practice for companies to hire the best patent examiners away from the PTO. The companies gain insider information and technical competence, but they also weaken the very talent pool they depend on.

Although the institutional bottlenecks slow down the system, efforts to patent "expressed sequence tags" (ESTs) threaten to bring the patent process to a halt. ESTs are gene fragments that, once identified, can help isolate and identify entire genes. In that sense they are used simply as tools, and their patentability is controversial for two reasons: A flood of hundreds or even thousands of EST patent applications would paralyze the PTO, and patents granted for tags could hinder commercialization efforts.

One corporate executive who asked not to be identified had this to say: "The patentability of ESTs needs to be determined quickly because they already are causing problems for any company trying to commercialize a product. With so many of these patents pending, you just have to hope that you aren't infringing on a patent that has yet to be issued. It's a real quagmire and could affect every company's freedom to operate."

Opinions vary, but nearly everyone agrees that trouble is on the horizon. Monsanto's Shear says, "In general, Monsanto's position is that everything should be patentable. But having said that, if someone discovers an EST and doesn't really know its function, then later I come along and at great expense discover the full-length gene, I shouldn't have to worry about that former EST patent. Right now, we have to worry because we don't know how the patent office or the courts are going to handle it. Ultimately, it probably comes down to the courts."

George Jen, senior patent attorney at Novartis, says, "ESTs are very controversial. If an EST can be shown to be homologous to an entire gene, that meets the PTO's utility standard. You have to identify the strand and demonstrate what it can be used for. The other issue is that filing for thousands of sequences does drag the system down. That type of filing is simply a defensive strategy. Still, ESTs and their scope have yet to be litigated."

Their scope is what concerns Col Seccombe, CEO of Garst Seed. He says, "In Europe they do not allow you to patent an EST. But it appears that in the United States you will be allowed to isolate the fragment and patent it on the basis that it has a useful purpose, and the useful purpose is fishing out the rest of the gene.

"The problem is that someone else comes along and discovers the gene and determines, for example, that it's useful in controlling drought resistance. Then this company with all the EST patents says, 'We own a piece of that gene, therefore you can't use it without paying us a royalty.' It looks like every discovery made in the next 20 years could prompt four people to put their hands up and say, 'I own a piece of that.' Then you go from interference hearings to court case after court case. Is this the direction we want this technology to take?"

Obviously, there are more questions about the patent process than answers. Even so, the patent office - and Congress - could take a number of actions to further define the direction this technology takes:

*Particularly with ESTs, determine precisely what is patentable and what is not. And do it sooner, not later.

*Reduce uncertainty by requiring the patent application to be published early - not years later upon issuance. In Europe, applications are published within 18 months.

*Make every effort to streamline the appeals and interference proceedings.

*During the normal application process, put a clock on the PTO examiners. If the process takes too long, add that time back onto the patent when it's issued. Changing the patent award from 17 years after issuance to 20 years from application date was only a first step.

*Compensate top patent examiners at the industry's pay scale. That would neutralize the allure of using the PTO as a training ground for a company's patent lawyers.

*Institute an appeals format when a patent issues that would include any party's arguments against the patent. Make the hearing public, and make the ruling final. That would reduce litigation, which is epidemic.

Until the system of determining intellectual property rights is refined, this technology will continue to be held hostage. And over the long term, many experts say refining the system is simply not enough.

Writing in the Harvard Business Review, Lester Thurow, professor of management and economics at MIT, says, "The prevailing wisdom among those who earn their living within our system of intellectual property protection is that some minor tweaking here and there will fix the problem. The prevailing wisdom is wrong. The time has come not for marginal changes but for wide-open thinking about designing a new system from the ground up."

Whether it's a new system or an improved system that emerges, the current state of affairs is troubling to those trying to make headway today.

Monsanto's Shear says, "It takes a lot of time and money to push a product from research to commercialization. And there are failures along the way. When our business managers look at potential products, they want to know if we are protected. But with all these patent applications sitting's just really uncomfortable."

Look for Part III of "Who owns nature?" in the next issue of Farm Industry News.

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