85. Patent Protection Limitations and Compensation Schedule

Patents should not offer exclusive protection and production rights for any predetermined length of time because such a system would virtually ban competition throughout that period of time, resulting in an unfair, monopolized market. Instead, a patent should bestow to the patent-holder the right of a universally sanctioned recognition of being the first to develop an original idea as well as entitling the patent-holder, for a certain number of years, to financial compensation. Patents should yield worldwide protection and recognition to an inventor including the right to benefit from the financial revenues generated by the sale of the patent protected products, according to the terms of the patent. Until an international organization can provide this level of protection, individual countries could either unilaterally or through the formation of a coalition have the right to enforce such protections, to whatever extent possible, in non-complying countries.

Anyone Could Make Patent-Protected Product

Once a patent has been awarded to the patent-holder, the patent, being a public document, would be available for all the world to see. Any entity would be allowed to use any information contained in the patent to produce and sell the patent-protected products or other products directly or indirectly related to the patent-protected invention. Even obvious ‘knock-off’ products would be allowed to be made and sold by any entity. There should be no restrictions against any entity regulating either the quantity of units produced or the pricing of each unit.

Compensating Patent Holders

Patents would entitle their patent-holders to financial compensation for about 20 years (potentially depending on the actual nature of the patent and possibly other factors such as market conditions, negotiated agreements between inventor and government, etc.). The amount of compensation would be directly based upon both the wholesale and retail prices of the patent-protected product or service. The following example illustrates how the average patent protection and patent compensation system would operate. Let’s say a pharmaceutical company invents a new drug for which it was awarded a patent. The company would naturally be recognized as the inventor and should obviously be given the right to produce and sell that product without any restrictions, especially concerning production quantity and pricing. Any other entity should also be allowed to produce either the exact same product or one that, though largely based on this patent-protected invention, does not exactly fit under its protections. However, entities other than the one holding the patent must pay the patent holder a certain percentage of the total revenue generated by their sale of each patent protected or ‘knock-off’ product. Both wholesalers and retailers would be required to pay the original patent holder the same percentage according to the terms of the patent compensation schedule. Subcontractors who make components that would fall under the patent protections, would also be required to pay the patent holder the required share of their revenue. The actual percentage all parties must pay would depend entirely on the number of years that have elapsed since the awarding of the patent and the degree of similarity to the patented product. The original patent holder would have absolutely no right to dictate the pricing or production quantities of the patented product produced by these other parties. However, if other parties unjustly subsidize the costs of production, then product pricing courts should intervene to correct the market. During and before the first full calendar year, non-patent-holders would be required to pay patent-holders 100% of all their revenues generated from both wholesale and retail sales of the patent-protected products. Such a rate would virtually guarantee that nobody, other than the patent-holder, would want to market this product. For every subsequent year, this percentage would decrease by a fixed amount, say 5%. For example, assuming a 20-year patent lifetime, during the second full calendar year after which the patent was issued, 95% of the total revenues generated by wholesale and retail sales of the patent-protected products must be paid to the patent-holding entity. During the third year, the patent-holder could expect 90% of all revenues generated by all entities which are selling the patent-protected product. Each year this percentage would continue to decrease until it reaches 5% during the 20th calendar year. As soon as the 21st calendar year begins, the rate would drop to 0% because the patent would have expired and absolutely no fees should be paid to the original patent-holder and neither would any kinds of restriction apply to any entity wanting to produce such products. As the mandatory compensation percentage owed to the original patent-holder decreases every year, the chances that a competitor arises to market the same or similar products increases. This would gradually open up the market to other potential suppliers, while still giving the patent-holder the economic advantage (thus rewarding the patent-holder for being the original entity to develop the idea).

Alternative Compensation Schedule

Because certain patented goods or services (due to their basic utility, convenience or for whatever other reason) may have already been widely adopted by an industry or society by the time that the original patent holder was officially recognized for the invention and received government enforcement of the patent (a common occurrence in the biotech and dot-com sectors), it would be unreasonable to suddenly impose onto the existing market a patent-holder’s exclusive right (as is done now) or a compensation schedule beginning at 100% and decreasing as time goes on.  A more reasonable solution would be to negotiate a more fixed schedule of compensation, such as 15% of revenues per year for the life of the patent.  Imposing this fixed compensation schedule would prevent the generation of a sudden chilling shock throughout the market, which would possibly result (depending on the patent-holder’s attitude) in either a large scale abandoning of the use of the patented good or service, or (more likely) a widespread outrage or rebellion. It would rightly be seen as changing the rules in the middle of the game. A smaller compensation over a longer period of time would be far more palatable.  The details of the compensation schedule (length of patent protection, how and when royalties are billed, etc.) would naturally be negotiated between the patent-holder, the users of the patented good or service and the government. This compensation schedule could really be applied to any patent, regardless of the degree of product development.  Basically, the only thing needed is for a patent-holder and government to agree on some schedule.  Perhaps a greater benefit to both society and the patent-holder would result under this fixed percentage compensation schedule because it would immediately become profitable for anyone to produce the patented good or service and, as a result, the patent-holder may have a more immediate income and may even eventually have a larger base from which to collect royalty payments because of the initial surge of market producers. The current system of exclusive rights (i.e., government sanctioned monopoly) is the worst form of compensation schedule, leading to the most limited market availability of the the patented product.  Although patent-holders could currently sell licenses for others to make equivalent products, the tendency is for them not to do so or to charge high licensing fees in order to preserve their profit potential.   Such monopolies hurt potential consumers the most, but they may also reduce the profit potential of the original patent holder by severely limiting the producer base which would otherwise be paying them royalty/licensing fees.

Patenting Naturally Occurring Materials

Patents should not be issued for naturally occurring materials, living or nonliving, including genes, bacteria, or other natural biological organisms unless any such entities were engineered and patented before their discovery in nature. Once discovered in nature, however, there should be no patent-based legal restrictions from using these natural sources. Artificial genes and organisms should be eligible for patenting.

Recognizing Natural Molecules and Halting Biopiracy of Native Ideas

However, the countries in which naturally occurring materials (genes, bacteria, etc.) are found should be compensated by all users of that material, just as if it were patented by that country, using the patent compensation schedule described above. All such revenues should be turned over to that country’s government to be used as they wish (only legal uses that are verifiable if the country is thought to be a corrupt one). It would be preferable for such funds to be used for environmental protection purposes above all other uses, and specifically, habitat protection.

Correct ideas (regarding healing herbs, etc.) held by native populations should also be recognized and treated as patent-protected ideas. The practice of biopiracy (taking ideas from native people and using them for profit without the permission, compensation or recognition of the native people should be changed so that these native people are compensated according to the payment schedule above.

Patenting Genetic Information & Biological Molecules

Generally, basic genetic information and biological molecules (DNA, genes, proteins, etc.) derived from any natural sources, should not be patented. Merely translating such genetic information from their original form in DNA molecules into a language which computers and humans could use does not constitute an invention worthy of a patent over the genetic code. It would fall under the category of a discovery, instead. Patents could be granted on the techniques used to translate, but not on the actual code itself. Yes, a lot of time and money has been invested in this process and the best way to recoup that investment has been to licence the information (the genetic data) that was obtained from it. However, advances in technology have resulted in the greater automation of such basic genetic research that, if the patent criteria are not revised soon, such large swaths of basic genetic information would be restricted behind patents that the rates of public health improvements and advances in research and development may slow considerably. Immediate health risks arising in the future, such as the emergence of a new disease, would potentially take longer to address and solve.

Many of the following ideas have been adapted from a paper entitled “The Ethics of Patenting DNA” published by the Nuffield Council on Bioethics.

During the early years of genetic lab work which involved a much greater use of direct human input and innovation to gain information about where genes are located and what a gene did, patents were often issued because of the degree of novelty and inventiveness required to isolate those DNA sequences.  However, as techniques have advanced and as the use of computers have significantly automated the process of finding genes, it is now unjustified to grant patents on DNA sequences based on the level of novelty and inventiveness that the U.S. Patent & Trademark Office (USPTO) has traditionally required for patents.  A potential patent’s function or ‘utility’ has also been a test that the USPTO has applied. The threshold for claiming a utility was set at stating the mere theoretical possibility of realizing that utility or even a description of a biological function (which is nothing more than a description of a fact of nature). This threshold should be raised so that at least some positive evidence is provided that the DNA sequence in question can fulfill that higher utility claim. The mere association of a gene to a disease would also amount to little more than a discovery, thus not qualifying for patent protection.

Likewise, allowing a patent holder the right to profit from all diagnostic uses for the protected sequence (i.e., all tests conducted to see if the suspect gene is responsible for any disease) would be too great a monopoly considering the relatively little that the patent-holder has ‘invented’. Limiting a patent’s protection to ‘use’ of a specific DNA sequence for a specific test (for a specific disease) would be a narrow enough protection to encourage companies to develop the test as well as encourage the market to develop a number of different tests (for a bunch of different things) for the same gene.

Similarly, limiting protein patent protections to cover only therapeutic uses for a specific disease would be acceptable.  This way, anyone who used such a protein to treat the same disease would need to pay royalties or licensing fees, but the protein would be free for anyone else to use for research or other uses.

Making freely available basic genetic information would enable far more researchers to use any given segment of code for much wider diagnostic and research uses. For all basic genetic code that has already been patented, a ‘research exemption’ (which most patent systems contain to encourage research on patented inventions but does not allow commercialization to non-patent holders) should be firmly written into law.

Gene replacement therapy, in which a mutated gene is replaced by a normal one, does not constitute the degree of innovation required for patent protection. Once a gene responsible for a disease is identified (which is basically a discovery of a biological fact of nature), using the correct DNA sequence to correct the problem is obvious. The real challenge is to overcome the technical difficulties of trying to more effectively deliver the normal genes into the body so that the reversal of a disease is enabled. Patents should be granted for methods of delivery rather than the actual gene itself.

If the patent process were modified to reflect the proposed regulations stated above, the number of patents granted over DNA sequences and other basic biological molecules would become very rare.

Patenting a Process

Unique processes used to gather information could also be patented.

Enforcing a Patent

Enforcing a patent should be viewed the same as enforcing any other law.  The government should have the obligation to punish violators.  Patent holders should not be required to invest a significant amount of time or money in enforcing their patent claims. Patent infringement is a crime, therefore the government should need to pay for enforcement.  To weed out frivolous claims by patent-holders, perhaps a significant fee (refundable if they win the case) should be charged to patent-holders who file an infringement claim with the appropriate law enforcement agency.

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