Study About IP On The Human Genome Shows That Patents Hindered Innovation

from the another-one-to-add-to-the-pile dept

David Levine points us to the abstract of a recent study of the human genome, which shows how the parts protected by intellectual property resulted in a significant decrease in both scientific research and product development. This won't come as a surprise to those of you who have been following the research on patents over the years, but it's another bit of evidence to add to the (growing) pile. In this case, the researcher, Heidi L. Williams, had an interesting "natural experiment" to deal with. The race to sequence the human genome had two main players, the public Human Genome Project and the private company Celera -- a massive supporter of patent rights. The paper notes that Celera got IP on genes it first sequenced, but that IP protection was "removed when the public effort re-sequenced those genes." I have to admit I didn't know that was the case, and don't quite understand how or why that happened. Nevertheless, it created a natural set of data worth studying, and Williams conclusions suggest that IP doesn't seem to promote the same kind of progress as opening up the data does.
This paper provides empirical evidence on how intellectual property (IP) on a given technology affects subsequent innovation. To shed light on this question, I analyze the sequencing of the human genome by the public Human Genome Project and the private firm Celera, and estimate the impact of Celera's gene-level IP on subsequent scientific research and product development outcomes. Celera's IP applied to genes sequenced first by Celera, and was removed when the public effort re-sequenced those genes. I test whether genes that ever had Celera's IP differ in subsequent innovation, as of 2009, from genes sequenced by the public effort over the same time period, a comparison group that appears balanced on ex ante gene-level observables. A complementary panel analysis traces the effects of removal of Celera's IP on within-gene flow measures of subsequent innovation. Both analyses suggest Celera's IP led to reductions in subsequent scientific research and product development outcomes on the order of 30 percent. Celera's short-term IP thus appears to have had persistent negative effects on subsequent innovation relative to a counterfactual of Celera genes having always been in the public domain.
Levine laments that the NBER version of the paper he links to is not available for free, but a quick Google search turns up a few publicly available versions of the paper (though, they appear to be earlier drafts) such as this one (pdf)). There's also the following powerpoint presentation (pdf) embedded below, which highlights the key findings and data from Williams' research:
The key slide is the fourth one, which reads as follows:
Celera IP on genes has strong negative impact on future research and product development
  • 35% fewer publications since 2001
  • 16% points reduction in chance of gene having known uncertain genotype-phenotype link
  • 2% points reduction in chance of gene having known and certain genotype-phenotype link
  • 1.5% points less likely to be used in genetic tests
Also, Celera genes have not "caught up" with ex-ante similar genes sequenced by HGP as of 2009
Now, it's important to note that both the paper and the slide presentation note that you can't necessarily conclude from this paper that IP slowed down the overall human genome sequencing efforts. It notes, for example, that the presence of Celera in the market, getting IP, may have created competitive pressure that sped up the Human Genome Project's effort to sequence. However, it does note that given the competition between Celera and the Human Genome Project, it seems clear that Celera's use of IP was clearly not the best way to create the greatest level of social benefit.

While the paper doesn't delve into it, this is really another way of pointing to the difference between invention and innovation as a process. Innovation tends to be an ongoing process of continual improvements. And that's where IP almost always seems to hinder activities, rather than help it. That's because IP puts a giant brake or tollbooth into the process of all of that important follow on innovation. There may be some argument that IP can help in one-off situations where there is no ongoing innovation, but those situations are excessively rare in the real world, if they exist at all.


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  •  
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    Bubba Gump (profile), Jul 28th, 2010 @ 10:46am

    Question about "social benefit"

    "it seems clear that Celera's use of IP was clearly not the best way to create the greatest level of social benefit."

    While I agree that increasing social benefit is of great interest to the public, it is not necessarily the mandate of a private corporation.

    I'm definitely on Mike's side when it comes to freedom of information (as in, NO IP protection), but I also support a company's right to pursue profit.

    In this case, I think it would be useful to explain how Celera would have been better off without patents, thus demonstrating that not only would there be a greater social benefit, but also there would be a benefit to Celera's bottom line.

     

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      PaulT (profile), Jul 28th, 2010 @ 10:50am

      Re: Question about "social benefit"

      The bigger question would be why we should only care about a single company's bottom line when performing such important research with vital implications for the entire planet. Yes, Celera has a right to profit from its hard work, but not at any price.

       

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      Anonymous Coward, Jul 28th, 2010 @ 10:55am

      Re: Question about "social benefit"

      Because patents aren't supposed to be about profit, or making money at all. They are supposed to be about promoting progress (innovation).

       

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      Mike42 (profile), Jul 28th, 2010 @ 11:26am

      Re: Question about "social benefit"

      To clarify AC's comment, allow me to quote the US Constitution:
      "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

      Nothing about profits in there.

       

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      Bubba Gump (profile), Jul 28th, 2010 @ 11:29am

      Re: Question about "social benefit"

      Yes, good points, but still: if we want to get companies to stop getting patents, we need to show them why it's against their own interests.

      This is a capitalist society and a company has a right to run its business to the maximum benefit of its shareholders -- in fact, that is its mandate (assuming that it's a public company).

      I'm on your side, guys, I just want ammunition so we can convince these companies to stop patenting everything under the sun.

       

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        Bubba Gump (profile), Jul 28th, 2010 @ 11:31am

        Re: Re: Question about "social benefit"

        Also, I'm aware of WHAT a patent is and that it has nothing to do with profit.

        BUT, when viewed from the company's perspective, EVERYTHING is about profit. Show why patents hurt profit and you've won the battle.

         

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          DH's Love Child, Jul 28th, 2010 @ 12:07pm

          Re: Re: Re: Question about "social benefit"

          Because they won't have to spend so much money on lawyers 'defending' their patents.

           

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        Free Capitalist (profile), Jul 28th, 2010 @ 12:18pm

        Re: Re: Question about "social benefit"

        Good line of thinking, though it may require a bit long-term forecasting to illustrate the idea that innovation stimulates markets and market opportunities for a well placed corporation.

        By releasing (or licensing for a non-prohibitive cost) an invention into the wild, the market gains the benefits of other inventor's improvement on that idea which opens up more application and market opportunities.

        We've seen a couple of recent Techdirt articles which bring up the stagnation of the steam engine under Watts monopoly. While he was sitting on the idea, he missed a long window of opportunity to take his own experience with steam engines and apply the further innovation of the high pressure steam engines and become a player in the larger market of locomotion.

        Such a clear illustration isn't always possible for every invention,. However the biggest problem with convincing patent dependent corporations is getting them to get their investors to look beyond the end of the month in terms of profit forecasts.

        By allowing and fostering innovation you are also opening the door to competition. So many businesses these days would prefer to rest on laurels of a past success than adapt and compete in the market.

        Also, the "best" patents seem to inevitably end up with a massive corporation which are better at stagnating than innovating. People these days seem to have a problem with the notion that failed business should be allowed to fail... especially when a company employs a lot of people. Of course, this isn't the right attitude, we're better off with better business.

         

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        slutmonkey, Jul 28th, 2010 @ 2:01pm

        Re: Re: Question about "social benefit"

        "If we want to get companies to stop getting patents, we need to show them why it's against their own interests"

        no, you can't do that because patents aren't against the individual companies interest--only the interests of everyone outside the company. Therefore if you want to get companies to stop getting patents, you have to kill the government's ability to grant patents.

         

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      abc gum, Jul 28th, 2010 @ 12:58pm

      Re: Question about "social benefit"

      "While I agree that increasing social benefit is of great interest to the public, it is not necessarily the mandate of a private corporation."

      The public allows patents to exist so that a corporation can "promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

      When the corporation no longer wants to abide by this agreement, they are well within their rights to not use the patent granted to them by the public.

       

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      Lawrence D'Oliveiro, Jul 28th, 2010 @ 5:08pm

      Re: Question about “social benefit”

      Bubba Gump said:

      While I agree that increasing social benefit is of great interest to the public, it is not necessarily the mandate of a private corporation.

      Sure. But it takes laws to prop up the whole set of “intellectual property” concepts, and laws are (supposed to be) passed for the benefit of society as a whole, not just to favour some special group.

       

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    Anonymous Coward, Jul 28th, 2010 @ 12:52pm

    Sometimes it is needed, but its not perfect

    I am currently in a perfect example of why IP can be very important for innovation. I am working at a medical startup designing a new medical implant. It is much better than the product it will replace. The product itself is rather simple, but the design was a long costly process. If we could not get any IP on our design it would be taken and produced by a larger company as soon as we released it. If they could just copy it they would have no reason to pay us for it and we could never get the money to even develop it let alone market and sell it.

    I do agree that IP law is far from perfect, but there are many cases just like our little company that it is perfect for. That said it has also made our effort harder because there are things we can't do, which are not getting used on the market, which may have made our design better.

    It seems to me that IP should be a "use it or lose it" approach. If we patent something we have so much time to start selling a product around it, or at least be able to show how we are developing it. If we don’t ever use the IP in that short time frame it goes to the public. Also if someone else develops something covered by our IP we can only sue them for it if we are actively perusing the IP AND will be harmed by them using it. The idea of being able to lock something away from the public and never use it certainly is not what IP is all about.

     

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      The Infamous Joe (profile), Jul 28th, 2010 @ 1:08pm

      Re: Sometimes it is needed, but its not perfect

      Wait until you get sued by some shell company in Texas who has a very broad patent that covers your implant and you have the choice of giving them 25% of your gross income to license the patent or spend 33% of your capital fighting it in court.

      Then you'll understand that the system doesn't work for anyone new to the market. Ever.

       

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        Anonymous Coward, Jul 28th, 2010 @ 2:01pm

        Re: Re: Sometimes it is needed, but its not perfect

        Yeah that might happen and thats why you should not be able to sit on patents, or be able to sue without showing that you are activly using the patent.

        My point was however that we would not have even gotten started if we could not get IP since without it our product could be made by any machine shop and sold by any medical company. (Not 100% true in this case because of medical regulations, but still would be very easy for a large med device company to do)

         

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      Mike Masnick (profile), Jul 28th, 2010 @ 2:50pm

      Re: Sometimes it is needed, but its not perfect

      If we could not get any IP on our design it would be taken and produced by a larger company as soon as we released it. If they could just copy it they would have no reason to pay us for it and we could never get the money to even develop it let alone market and sell it.


      I hear this a lot, but there's little evidence to support the idea that this really happens very often. Now, it does happen at times -- but much more infrequently than most people think. Even if the product is "simple," these larger companies often don't understand it as well as you do, having developed it, and don't see the potential for it, giving you a large market opening.

       

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        Anonymous Coward, Jul 28th, 2010 @ 3:27pm

        Re: Re: Sometimes it is needed, but its not perfect

        In this case there is only one market for the product, though the technology can move to other areas. This does make it a rare case, but its also a very valuable inovation that never would have happend without IP protection.

        I think there needs to be something, but what we have now is crazy in a lot of ways.

         

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      David, Jul 31st, 2010 @ 1:21pm

      Re: Sometimes it is needed, but its not perfect

      Thats a myopic question. You have to think of it in terms of the benefits to society. If a larger company can copy your idea and produce something that people will want more cheaply, then thats a good thing. It is selfish to ask the government to help you limit these benefits to society. If you wont invent anything because you think you need a Monopoly, then someone else will. It is demonstrably false to think that people invent wonderful things because of guaranteed Monopolies, or money in general. In short, your hypothetical, if it were actually true, is an argument against patents, not for them.

       

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    JB (profile), Jul 28th, 2010 @ 5:59pm

    I think J. Craig Venter (the man whom Celera was built around) is a very interesting case in science and IP. He has made some very hard stands in IP during the course of the genome sequencing efforts. Some of them successful some of them not so. His autobiography is a very interesting read on trying to work with/around IP.

    One big stand he made when starting Celera was how to manage data release to the public. He initially had the corporate sponsors of Celera agree to allow publication of his data every three months on the internet, but the politics of the time put a stop to that.

    However contrary to the statement above that "Celera kept its results private and obtained IP on them" the Celera data was released publicly in feb 2001 (http://www.sciencemag.org/feature/data/announcement/gsp.dtl ; with some restrictions on commercial use).

    To someone with a scientific background however, the points highlighted about Celera genes being under represented with genotype-phenotype links is unimportant. These linkages are not often found by picking a gene and looking for an effect, but tracing effects back to a gene; a public researcher looking for a genetic link to an effect would not be prevented from reporting these findings.

    I'm not arguing that IP and the human genome has been a good thing, but this study, to me seems poor.

     

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    JG, Jul 28th, 2010 @ 7:29pm

    Seen it up close and it's not pretty

    No kidding?! Really? Duh!

    I used to work at a well-known genomics company. R&D subjects and directions were directed by the legal department by what the patent landscape looked like rather than by what made the most sense scientifically or medically.

    It was very much a case of "searching for your keys under the streetlight because the light is better". There is no way that this was going to be actually resulting in the best or fastest advancement of scientific or medical art.

    They also thought there was no need to innovate their products because their patent position meant customers had no choice but to buy what they offered (regardless of utility or quality). They saw it as a decade-long cash cow to be brutally exploited as necessary.

    I was so disgusted with the hypocrisy that I got out of that business. The experience left be strongly against any biological patents in any form.

     

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    Anonymous Coward, Jul 29th, 2010 @ 7:07am

    There is no such thing as intellectual property, copyrights, patents, etc. in a true free market system.

     

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    darryl, Jul 29th, 2010 @ 7:09am

    Hindered innovation ?

    Once again, you pull a single and poorly defined statistic, and based on that single bit of 'information' you base an entire story around about how IP hinders innovation !

    Your argument is at least flawed.

    There are so many factors to would determine what you consider 'reduction in innovation'.

    But what about these facts.

    1, the two primary groups did not start at the same time
    2, they were not the same size
    3. they used different techniques for sequencing.
    4. their brief, and goal was to sequence the human genome, not to perform R&D on the specific genes.
    5. The goal was to provide a complete genome sequence of a human, and provide that information for further R&D.

    The fact that there was two methods used, also means the commercial system that was employed did not provide a linear flow of sequenced genes, as did the public group.

    The commercial group used a proprietary technique that was much faster, but provided batch type sequences, using a 'slice and dice' and rebuild with a special software algorithm.

    That means you do not get a constand trickle of genomes sequenced that other scientists can start to look at, but the end result was the sequencing of the genome FAR FASTER than would have been possible using the standard (public) but much slower sequencing technique.

    There was incredible innovation in the sequencing of the human genome, and huge advantages for the public, not to mention the successfull completion of their goal, that was to sequence the human genome, and make that information available.

    It also provided a critical standard, or control to ensure that the results are accurate, that is why the IP on the commercial genes sequenced were probably not made available until confirmation using standard sequencing.

    Also the automated, robotic sequencing machines, did not appear from nowhere, they are an amazing peice of kit, and it was because of commercial companies designing and building these machines, (and yes patenting them), that enabled (enabling technology) us to sequence the genome is a far shorter time, that would have happend if these techniques and technologies were not developed.

    Not just developed, but the new technique was invented, as was the special software algoritm that ripped apart the genes and put them back together the right way..

    In fact the innovation from the comercial industry in the development of these new sequencing techniques and automated machine has and will do more for genetic research now and in the futher, probably even more than the original human sequencing.

    It puts fast and efficient research tools and techniques in scientists hands, as well as the data those tools generated during the gemone sequencing.

    The whole thing was there to map the human DNA, not to undertake R&D on the specific genes.

    So stating that there was less specific R&D on genes from a group not tasked with doing such R&D is meaningless..

     

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    Gene Cavanaugh, Jul 29th, 2010 @ 6:43pm

    Patents

    "Innovation tends to be an ongoing process of continual improvements. And that's where IP almost always seems to hinder activities, rather than help it."
    So we take one case where this is certainly true (and with some things, such as drugs, it likely is nearly always true - certainly in software and business-method patents it is true) and we extrapolate it to "almost always", with no data, just personal opinion!
    Not cool.

     

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    HuwOS, Jul 30th, 2010 @ 11:06am

    "So stating that there was less specific R&D on genes from a group not tasked with doing such R&D is meaningless.."

    Yes it would be, but that wasn't what was stated.
    What was stated was that there was less research by anyone at all on genes that had been patented, however briefly, than on those which were not.

     

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    staff, Aug 2nd, 2010 @ 5:41am

    a shill is a shill

    Not all researchers or research are created equal. When their conclusions fly in the face of reason -look harder. If you could not own the house you built, would you build it?

     

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    staff, Aug 2nd, 2010 @ 5:46am

    conclusions

    Also, even if one could find an isolated case where one or more patent hindered innovation, the conclusion that patents overall hinder innovation would not be supported.

     

    reply to this | link to this | view in chronology ]


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