Sunday, December 17, 2006

Papers from Boalt Conference on "California's Stem Cell Initiative"

Articles arising from the "California's Stem Cell Initiative" Conference at Boalt Hall [University of California/Berkeley] from March 2-4, 2006 have been published in the Berkeley Technology Law Journal. One notes that by March 2006, the scandal involving the fraudulent work of Hwang Woo Suk in embryonic stem cell research had been fully disclosed, and both of Hwang's papers in the journal Science had been retracted.

POLICY CHALLENGES: Bioethics and Stem Cell Banking in California by David E. Winickoff [21 Berkeley Tech. L.J. 1067] did mention the Hwang matter in footnote 14: It should be noted, however, that an efficient human cloning
technique is further away than previously imagined in the wake of the discovery that
Dr. Hwang's stunning cloning efficiency in South Korea was a fraud. David
Cyranoski & Erika Check, Koreans Admit Disguising Stem-Cell Lines, 441 Nature 790

Generally, the punchline of the article was about cell banking:

The new insight in this Article is that the CSCB [California Stem Cell
Biorepository] would help address some of the inadequacies in the governance regime for stem cell research addressed above. First, as a threshold matter, maintaining a public hESC repository in California would reduce the number of egg donors required to support an expanded program of research. Because of the significant risks of donating, such a policy has distinct ethical advantages over maintaining decentralized stem cell banks at each research institution.


In sum, if set up properly, such institutions could help improve the
consent process for donors and the system of ethical oversight. Overall, they
would help correct the power asymmetries towards egg donors established in the
currently proposed regime. This idea of using stem cell banks to drive governance
should not replace the development of binding regulations subjecting human
embryonic stem cell research to institutional review board oversight and other

Significantly, an article CALIFORNIA'S STEM CELL INITIATIVE: CONVERTING THE LEGAL AND POLICY CHALLENGES: Designing an Effective Program of State-Sponsored Human
Embryonic Stem Cell Research by Roger G. Noll of Stanford [21 Berkeley Tech. L.J. 1143] did not mention Hwang at all. Even more significantly, Noll's article, which tells California taxpayers NOT to expect significant royalties from patents on state-sponsored research on embryonic stem cells, does not mention assertions by Stanford professor Laurence Baker that there WILL BE significant royalties available to taxpayers. Thus, to get taxpayers to fund Proposition 71, one Stanford professor says "royalties" and when the taxpayers seek to collect after Proposition 71 is passed a different Stanford professor says "no royalties" [and does NOT mention the first Stanford professor.]

Although Noll did not mention the substantive difficulties presented by the Hwang fraud, Noll did mention patents:

The purposes for enacting state-sponsored hESC research programs are
diverse. Most obvious is a philosophical disagreement with the President.
Another motive is the practical objective of seeking effective treatments for several important and heretofore incurable diseases. These programs also create an
opportunity for a state to gain strategic advantage for its higher education and
biotech industries, to obtain royalties from patents arising from the research,
and to reduce state spending on medical care.


This Article has three main conclusions. First, to avoid inefficiencies arising from the politicization of grants, agencies that implement research programs must base their decisions on merits as determined by competitive peer review. The California program is well designed in this regard. Second, intense political polarization over the legitimacy of hESC research inevitably slows implementation and increases the costs of these programs, as exemplified by CIRM. Third, in designing an intellectual
property regime for hESC research programs, some political leaders have vastly
overestimated the potential revenue from licensing research results, and as a
result have proposed licensing rules that may undermine the viability of the
research program. California is no exception. State legislators have proposed
rules for licensing patents from CIRM's projects that make grants from
CIRM substantially less attractive to leading research institutions than
grants from the federal government and private foundations. Because state-sponsored
hESC research programs will account for a small fraction of all biomedical
genetics research, states cannot realistically expect to receive substantially
more favorable licensing arrangements than those available from other
sources. [IPBiz: but a major issue is that there is little federal money available for hESC research, so why does Noll talk about "grants from the federal government?"]


Strong IP protection also can inhibit innovation for technologies in
which innovations are sequential - that is, some useful applications of one
piece of knowledge depend upon the creation of other knowledge. n16 For example,
a British report on patent policy examined the use of genetic information
to create effective new malaria drugs.

Both IP policy and subsidy programs also have significant
implementation costs. One cost arises from the process of evaluating the novelty of
the creator 's idea, as in determining whether an innovation deserves a patent or
whether a grant proposal is meritorious. Another is the cost of enforcement.
[p. 1151] For IP, enforcement costs arise from using courts to penalize infringers.
For grants, enforcement costs arise from complex accounting rules that
assure accountability in spending public funds. n19

Whether the benefits of stronger IP rights offset the costs is an
empirical question that turns on, among other things, the responsiveness of
innovative efforts to prospective financial rewards. IP protection is most likely
to produce net social benefits if: (1) innovative effort is highly
sensitive to financial rewards; (2) multiple complementary but independent
innovations are not likely to be needed to create a valuable commercial product; (3)
the nature and scope of IP rights are relatively transparent, thereby minimizing
the need for costly litigation to resolve disputes; and (4) the social payoff
for innovation is high.

[IPBiz notes the following, controversial commentary]

Notwithstanding all of these arguments, the Bayh-Dole Act has not
had much of an effect on universities. First, the Act has not caused a change in
the allocation of research among science and engineering disciplines
[p. 1153] and, within disciplines, research priorities among fields of research. The most important factor affecting the allocation of faculty across research
areas is the federal budget for basic research. n23 Second, although the Act
created a new financial incentive to find commercial applications of university
research, it has had no significant effect on the extent to which universities
commercialize research outputs. In most industries, patents and
licenses are not regarded as important in the innovative process
. n24 Publications, conferences, consultancies, student employment, and informal contacts with faculty account for most technology transfer, with patents and licenses being
relatively unimportant. n25 Third, while over 200 universities have technology
transfer offices, n26 in most cases these offices have had little impact.
Technology transfer offices in leading research universities have licensed
hundreds of patents that are a major source of income.


These facts should give pause to state officials who see a potential financial bonanza in the IP arising from state-sponsored hESC research. Judging from recent royalty data, the licensing income from patents derived from stem cell research is likely to be a small fraction - less [p. 1172] than five percent - of the costs of that research. Moreover, because these projects are likely to have a long gestation period, the revenue from licensing is not likely to be substantial for many years.

IPBiz notes that Noll did not discuss that hESC, in light of the Hwang fraud, is even further back than Noll thinks.

Noll also does not discuss unrealistic expectations in the embryonic stem cell area.

***Separately, one well-known biotech patent attorney

Dr. Rochelle Seide joined Arent Fox in 2005 as a partner in the Intellectual Property Group. Rochelle represents clients in all facets of patent law. She has obtained patents in the areas of biotechnology, chemistry, and pharmaceuticals for a variety of clients. Rochelle also counsels clients on legal issues relating to biotechnology and pharmaceutical patents, including patent enforcement, validity and infringement, licensing and business development. She has experience in transactional matters for biotechnology and pharmaceutical clients.

Rochelle currently chairs the Practicing Law Institute’s yearly conference on Patent Opinions of Counsel in New York and is a member of the National Academy of Sciences’ Committee on Intellectual Property in Genomic and Protein Research and Innovation. She is also a member of the USPTO Biotechnology/Customer Partnership; the Association of the Bar of the City of New York; the Biotechnology Industrial Organization Intellectual Property Committee; and the National Academy of Sciences Committee on Intellectual Property in Genomic and Protein Research and Innovation. Rochelle also previously served as chair of the American Intellectual Property Law Association Biotechnology Committee; chair of the New York Intellectual Property Law Association Public Information and Education Committee; and as a charter member of the advisory council to the University of Akron School of Law’s Center for Intellectual Property Law.


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