NEWSFLASH: Duke Researchers Say Patents Block Competition

By Gene Quinn
April 19, 2010

Last week, on Thursday, April 15, 2010, while many individuals were scrambling at the last minute to file income tax returns in the US, Duke University released a study that, not surprisingly, says patents block competition.  WOW! Thank you so much for clearing that up Duke! What would we have ever done without the learned elite at Duke University telling us that patents block competition. Seriously… what was your first clue? For goodness sakes I hope you didn’t take much time or energy coming to that conclusion, given that is exactly what patents are supposed to do. You see, they provide exclusive rights, which means the owner of the right has the ability to exclude. So let’s all breath a sigh of relief that the money spent on an academic study actually reached factual findings that were true and accurate.  If only the conclusions drawn from the study were as commonsensical as the discovery of patents conveying exclusive rights.

According to the Duke Institute for Genome Science & Policy, “exclusive licenses to gene patents… do more to block competition in the gene testing market than to spur the development of new technologies…” The news report straight from Duke University itself is biased from the start, when it seemingly wants to justify its disdain for exclusive rights by pointing out that most of the research relating to gene patents is done by academic institutions and receive taxpayer-funding. Oh my goodness. Greedy universities are taking taxpayer funding and then getting patents? My gosh, say it ain’t so! How could that be true. Oh… wait… isn’t that exactly what the Bayh-Dole legislation intended? And, by the way, isn’t Bayh-Dole considered to be the most positive piece of legislation enacted by Congress in the post World War II era? And isn’t Bayh-Dole universally understood to be responsible for US domination in research and development at Universities? And don’t we teach students at Universities? And isn’t University patented technology, which represents pure scientific research that wouldn’t be undertaken by corporate America because it is too speculative, licensed out to create jobs and entire new industries? Don’t small businesses, which are famously known to create the most jobs, the ones who receive preferences under Bayh-Dole? Don’t those companies pay royalties back to the Universities to continue to fund research?

[Bio-Pharma]

Perhaps the single most beneficial piece of legislation that the United States Congress has enacted during my lifetime is the Bayh-Dole Act, codified in Chapter 18 of Title 35 of the United States Code, enacted in 1980 and named after co-sponsored Senators Birch Bayh of Indiana and Robert Dole of Kansas. Everyone who knows anything about patent law, technology transfer or research and development at Universities through the United States will tell you that Bayh-Dole has been a complete and total success, probably even a success beyond the wildest dreams of anyone.

According to the Association of University Technology Managers (AUTM), the major benefits of the Bayh-Dole Act include:

  • Universities may retain title to innovations despite receiving funding from the federal government.
  • Universities are expected to file patents on inventions they own.
  • When licensing inventions owned, Universities are expected to give licensing preference.
  • In the event that Universities do not actively use patent rights the federal government has what are called “march in rights,” which allow the government to strip ownership and thereby put the patents in the hands of those who would engage in licensing activities.

What this all means in practice is that the United States federal government provides seed money to Universities for the purpose of conducting research, typically research into what would be referred to as “pure science.” This is important because there is no guarantee the such research and development will yield results, making such research and development speculative in the eyes of industry. When such pure science research is successful and appears promising patents are filed, obtained and licensed to business, with small businesses receiving preference. The funds that return to the Universities are then typically redirected back into further research in the lab responsible for the break through leading to the patents, sometimes dollar for dollar. Thus, what the federal government has set up is a perfect balance. Pure science is conducted where it is best suited, by highly talented and motivated scientists. Technology ultimately researches the public through the business that license granted patents. These same business then pay royalties that fund further research and development.

It is no wonder that the Economist magazine has referred to Bayh-Dole as “perhaps the most inspired piece of legislation to be enacted in America over the past half-century.” I even remember hearing then Senator Joseph Biden (D-DE) several years ago remark that the U.S. does not have to presently be concerned about other countries (he was talking about China) overtaking us technology wise because other countries do not invest in technology nearly as much as the federal government. Senator Biden even cited to Bayh-Dole as an enormous success, saying something to the effect that – as long as other countries do not legislate something like Bayh-Dole we have nothing to worry about.

So what gives? First, whenever Duke says anything about research/patents you have to take it with a grain of salt. They were famously on the losing end of a research exemption case a few years ago. See Madey v. Duke University.  They were claiming what they were doing, which was clearly infringing, was research and therefore they should get a pass. The research they were doing using a patented technology was for commercial purposes (and not for amusement or to satisfy idle curiosities) with the expectation that any resulting invention would be patented by Duke and then exploited. They lost.  Get over it Duke!

Second, researchers always bemoan the fact that patents get in the way of innovation. They say this in every field, and are never correct. Some researchers cry wolf constantly while others continue working and forward innovation.  The energy spent bemoaning the patent system is staggering, of course right up until they come up with a revolutionary technology and want to exploit it themselves.

Third, who knows whether there is any scientific justification that patent law has allowed the patenting of inventions that act as true roadblocks rather than speed bumps. We can (and likely will) have that debate after the Federal Circuit reverses the Myriad/ACLU case that found that so-called gene patents are not patentable subject matter.  The debate will move to Congress after a CAFC smack-down of Judge Sweet.  For at least the time being, however, it is impossible not to notice that those who claim patents harm innovation never provide any scientific proof, choosing rather to trade in pure speculation and naked conclusions. I would love to hear them explain why it is “nearly impossible to pursue alternative ways to test clinically for BRCA genes without the risk of patent infringement,” which is the conclusion of Duke’s team lead by Robert Cook-Deegan, Director of the Center for Genome Ethics, Law & Policy.

Fourth, the fact that they say it is “nearly impossible” necessarily means it is possible. Moreover, if it is nearly impossible (i.e., possible) then the patent system is operating exactly as it was intended. If you make something difficult and put up roadblocks then innovation occurs, not in an incremental fashion but via paradigm shifts, as attempts are made to engineer around.  This is the basis of the bargain, and suggests the patent system is operating just as Madison, Jefferson and our other Founding Fathers wanted.

Finally, given that the patent system is by its very design intended to provide competitive advantage and have patents act as a roadblock, forcing others to innovate around what is protected, these criticisms must not be isolated to gene patents or the like, but really are calling into question the very foundation of the patent system. Those who disparage the patent system ignore overwhelming evidence is that a patent system leads to innovation and economic development.  No empirical or thought studies are necessary. Just look around the globe. Wherever there are strong patent rights there is vibrant economic development, investment and ever growing innovation. Wherever there are no patent rights or weak patent rights there is no economic activity, no investment and no innovation. Standards of living are higher, quality of life better and life saving medical treatments available.

So the choice is to throw out the patent system, do away with Bayh-Dole and then have the federal government fund research at the University level and allow all competitors to copy and take whatever they want. This won’t work though because if you haven’t noticed the federal government has long since run out of money and our spending is out of control already, and with borrowed money. Our line of credit is just about shot, and with $50 trillion in unfunded liabilities relating to just Social Security and Medicare the US will soon be nothing more than a pension fund with an Army. On top of that, if you let all companies simply copy innovations you can expect few new innovations moving forward. The copy-cats will drive down the price and those that would take the output of pure scientific research conducted at universities will not spend the money to commercialize the innovations knowing they would never recoup their investment. So dream all you want, but the reality is that the output of pure scientific research at Universities is not capable of being applied in the real world without commercialization, which frequently if not always comes with staggering costs and a lot of hard work.

More and more I am hearing that gene patents are not inventions because they are not new or they are obvious and well known. Well then why don’t you challenge them on that basis rather than challenging them under Section 101 and saying that gene related innovations are not patentable subject matter? If the challengers prevail they will kill an entire industry, cost many jobs and even worse they will stall or perhaps forever kill biotech medical advances that in half a generation would be in the public domain and freely capable of being used.  They will also call into question associated and tangential technologies and innovations, and an important incentive structure will be lost.  Bad all around if you ask me.

Rarely has the “greater good” argument been so clearly defined. Overwhelmingly the greater good is on the side of patents and exclusive rights, and those who would rather copy than innovate are ignoring the truth that patents provide exclusive rights for a limited time in order to spur the investments necessary to bring inventions to market. In exchange for a brief period of exclusivity the public gains enormous benefit once the innovations fall into the public domain.  So those who would rather see patents done away with should be put to their proof and demanded to explain what is wrong with private funding of innovations that will soon be freely available to the masses and without restriction.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 7 Comments comments.

  1. Just visiting April 19, 2010 9:47 pm

    Patents block competition?

    To paraphrase Gene’s comments – no sheet Sherlock. Uhhh … that is one of the recognized uses of patents … say for the past few hundred years.

    Anybody who spouts that patents are harmful to competition without also recognizing the other side of the coin – which is that patents also spur innovation – is intellectually dishonest. Then again, it appears that the anti-patent crowd seems to have a patent on being intellectually dishonest.

    As is most things in life, there are both upsides and downsides – and that also applies to patents. So the question isn’t whether patents are good and bad – because they are both. Instead, the question is does the good outweigh the bad or vice versa? The Founding Fathers of this country determined, at the time the Constitution was drafted, that the inventors should have “Exclusive right” for a limited time to their inventions. Also, as far as I know, there isn’t a modern country in the world that does not protect inventions with patents. As such, I think the evidence is that patents have long be recognized as being more good than bad.

    What the other side so conveniently ignores is that decreased competition is more than offset by increased innovation. For the other side to point the spotlight at the decreased competition without recognizing the increased innovation resulting from patents is not an exercise in legitimate debate – instead, it is an exercise in obfuscation.

  2. Steve M April 19, 2010 10:46 pm

    . . . while in other news, Duke has also announced that it is releasing a study next week explaining that thousands of deserving students every year would be thrilled to darken its “hallowed halls” except for Duke’s sky-high tuition.

  3. Dale B. Halling April 19, 2010 11:09 pm

    Excellent Gene,

    We do not want people (companies )competing on me-too products, we want them competing to create new technologies and compete based on these new technologies. The only way increase real per capita incomes (real total wealth) is increases in our level of technology.

    If Duke received any money for this research, IPWatchdog should receive twice as much for its excellent research in this area.

  4. EG April 20, 2010 8:03 am

    Gene,

    As my patent attorney Mark astutely pointed out about Madey v. Duke University, Duke committed a huge “gaff” in not getting a license from Madey when Duke built a lab to house Madey’s program when Madey moved from Stanford. I pointed out that “gaff” in my article (posted on my web site at http://www.guttagiplaw.com) on the “experimental use” defense where Duke wasted untold money and then was “surprised” (they shouldn’t have been) when the Federal Circuit (for the third time) said that this defense was “narrow” and didn’t apply to what Duke was doing. Definitely a case of “crying over spill milk.”

  5. Bruce Kanuch April 20, 2010 8:17 am

    Unforntunately proposed legislation and court decision are draining energy from the patent system. Too many want too much for nothing. Good article

  6. EG April 20, 2010 8:33 am

    For those who are interested, here’s the direct link to my article on the Madey v. Duke University case and the “experimental use” defense: http://www.guttagiplaw.com/publications/patents/IMMUNIZING_UNIVERSITY_RESEARCH_FROM_PATENT_INFRINGEMENT.pdf

  7. Ron Hilton April 20, 2010 2:51 pm

    I fully embrace the concept that the best defense is a good offense when it comes to patent-related business strategy. You have to compete on the basis of innovation and not simply providing the lowest commodity pricing. Having said that, patents can indeed be abused to the detriment of the progress they were intended to foster. When the patent covers a de-facto industry standard, there may be no way to avoid it. The holder of such a patent may then be able to block any improvements based upon that standard by withholding access to the baseline technology that they control. And I am not speaking hypothetically. This is exactly what IBM did in it’s patent lawsuit against PSI (IMHO).