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Intellectual Property Bundling: An A …
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Created: Mon Jul 9 13:32:45 2007
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Intellectual Property
Bundling: An
A
recurring issue in efforts to facilitate the
Opportunity for sharing of research information and
technology is intellectual property (IP)
Academic Health bundling, or the aggregation of intellectual
Centers? property across multiple institutions for the
purpose of licensing to outside parties. Bundling
arrangements can be formed to address hold-ups
By Andrew Lyzenga, MPP
resulting from patent-related problems or to
combine complementary technologies in order to
create new opportunities for commercialization. IP
bundling is worth considering in light of the
growing importance of collaborative research and
Collaborative research the recognition of certain aspects of the patent
system which can work at cross-purposes with
coupled with shortcomings
collaborative research. This brief will describe some
in the patent system problems with the patent system that may be
necessitate the pursuit of alleviated by patent pooling arrangements,
IP bundling examine the application of patent pools to the
biomedical field, discuss some other instances of IP
bundling, consider some anti-trust issues related to
IP licensing arrangements, and present a number of
issues that academic health centers may need to
address when exploring patent pooling or IP
bundling initiatives.
PATENT POOLS
Patents Promote Innovation
Scientific progress is, fundamentally, a collective
and cumulative endeavor. It has always been
thought that the successes of modern science are
based to a great extent on "cumulative
innovation." That is, new discoveries are enabled
by and built on the foundation of previous
findings, which in turn were built on findings prior
to those, and so on.1 Accordingly, science depends
vitally on information exchange. It is essential that
new ideas and innovations are divulged and
disseminated, rather than kept secret by their
proprietors. The patent system exists, at least in
part, in order to promote this process of cumulative
innovation, providing incentives for scientists or
inventors to develop new discoveries and then to
publicly disseminate those discoveries so that
ASSOCIATION OF ACADEMIC HEALTH CENTERS
others can build on their developments. Patent Pools May Help in Overcoming
Patents encourage this process by giving Patent Barriers
innovators ownership of their work--i.e., endowing
One proposed solution to the problem of patent
them with intellectual property (IP) rights--thus
thickets is the creation of patent pools or other
assuring that these innovators will benefit from
kinds of cross-licensing agreements. The U.S.
any commercialization of their discoveries and
Department of Justice defines pooling
preventing the products of their labor and
arrangements as follows:
investment from being stolen by others. The Bayh-
Dole Act of 1980 allowed universities, non-profit Cross-licensing and pooling arrangements are
institutions, and small businesses to claim agreements of two or more owners of different
items of intellectual property to license [to] one
ownership of the results of federally-funded another or third parties. These arrangements
research. This legislation led to a dramatic increase may provide procompetitive benefits by
in patent filings, and has been extremely successful integrating complementary technologies,
in stimulating the commercialization of research reducing transaction costs, clearing blocking
and the promotion of innovation, particularly in positions, and avoiding costly infringement
litigation. By promoting the dissemination of
the biomedical field. technology, cross-licensing and pooling
arrangements are often procompetitive.4
Shortcomings of the Patent System Pooling arrangements address the problem of
patent thickets by bundling related patents together
However, the patent system has its limitations, and
and placing them under the control of a single
can even work to stifle the sort of information
entity, thereby creating a "one-stop shop" for
exchange that it is intended to promote. The
potential licensees. Rather than negotiating
granting of ownership over technological
licensing agreements with each of the respective
developments can allow patent holders to block
patent holders, a user can obtain access to a set of
continued innovation by obstructing reasonable
patents through a single transaction, most likely
access to their patented developments. For
under pre-established terms and conditions. In
example, patent holders may effectively stifle
addition to reducing transaction costs, patent pools
innovation by refusing to license their discoveries
also provide competitive benefits by reducing the
to others, licensing to only one user exclusively, or
probability of litigation for patent infringement,
charging exorbitant licensing fees. Moreover, even
thus increasing the likelihood of continued
when patent holders are behaving reasonably,
innovation.
problems can arise if a user seeking access to
Patent pools have been utilized in many
previous discoveries must deal with multiple
industries as a way to enable the development and
different patent holders in order to develop a single
production of goods that require the use of
useful product or tool. In such a case, the
multiple patented technologies. The Sewing
"downstream" researcher must negotiate licensing
Machine Combination, covering a number of
agreements with each of the different "upstream"
different sewing machine patents, was formed in
patent holders, a process that may entail
1856 and is generally thought to be the first
transaction costs so excessive that they become
instance of a patent pool.5,6 Patent pools were also
prohibitive.2 This is known as "patent stacking," or
created in the emerging automotive and aircraft
the creation of a "patent thicket." Patent thickets
industries in the early 20th century.7 More
can lead to underutilization of important
recently, patent pools have been formed around the
discoveries and the stagnation of research if
basic elements of digital video compression and
potential users determine that the costs of
storage technologies.8
obtaining rights to the relevant technologies are
greater than they are willing to bear.3 Patent Pools in Biomedicine
While there are currently no patent pools
"The granting of ownership over comprising biomedical innovations, a number of
technological developments can allow observers have warned of developing problems in
patent holders to block continued the area of biotechnology licensing, including the
innovation by obstructing reasonable formation of patent thickets and high licensing
INTELLECTUAL access to their patented costs.2,9,10 Patent law experts Michael Heller and
PROPERTY Rebecca Eisenberg provide an example of the
BUNDLING developments."
2
ASSOCIATION OF ACADEMIC HEALTH CENTERS
"A number of observers have warned Along these lines, the Larta Institute, a private
firm specializing in technology transfer, and the
of developing problems in the area of
Ewing Marion Kauffman Foundation, an
biotechnology licensing, including the organization based in Kansas City that is dedicated
formation of patent thickets and high to advancing innovation and entrepreneurship,
licensing costs" have collaborated on an initiative called the
Technology Bundling Project.16 Recognizing that
problems that may arise from the proliferation of there is often a lack of coordination in university
biotechnology patents: research and that many institutions do not have
the resources to pursue tech transfer aggressively on
To learn as much as possible about the
therapeutic effects and side effects of potential
their own, the Technology Bundling Project aims to
[pharmaceutical] products at the preclinical identify complementary technologies at multiple
stage, firms want to screen products against all institutions, bundle those technologies together,
known members of relevant receptor families. and market the bundles to industry.17 However,
But if these receptors are patented and this project does not establish a single licensing
controlled by different owners, gathering the
necessary licenses may be difficult or
entity. Rather, participants are encouraged to
impossible. A recent search of the Lexis patent develop template agreements laying out licensing
database disclosed more than 100 issued U.S. terms in advance, so that licensing agreements will
patents with the term "adrenergic receptor" in not need to be negotiated on an ad hoc basis each
the claim language. Such a proliferation of time a company expresses interest in the bundled
claims presents a daunting bargaining
challenge.11
technologies.18
The Technology Bundling Project convened
The National Academy of Sciences concluded two expert panels to review university-submitted
that, to date, there is no evidence that patent technologies and determine which of these
thickets are a severe problem in the areas of technologies could be bundled together. As of
genomics and proteomics in a report issued last October 2006, according to Larta, the panel has
year.12 However, the authors suggested that this reviewed more than 1500 inventions from six
may be the result of a "general lack of awareness or submitting institutions. From these submissions,
concern among academic investigators about 41 bundles comprising 100 different technologies
existing intellectual property,"13 and cautioned that have been created.19 In connection with the
licensing issues could become increasingly Technology Bundling Project, the Kauffman
problematic as genomics and proteomics continue Foundation has created a website
to develop and institutions become more aggressive (www.ibridgenetwork.org) where technology
in asserting their intellectual property rights.14 bundles may be posted and searched by potential
To avoid future problems, proactive efforts to industry users.
reduce barriers to licensing and dissemination of In addition, a variety of organizations in New
research results are being considered by some Mexico, including the University of New Mexico,
experts as a preventive measure to ensure the National Center for Genome Resources, and
continued innovation and progress in other non-profit institutions active in biomedical
biotechnology. Pooling arrangements, which can research, joined together in 2003 to create the
simplify the process of identifying patents and Technology Research Collaborative (TRC), a
obtaining licensing rights, may be an appropriate cooperative venture to promote technology
response to potential problems in biomedical commercialization and create economic benefits for
research.3,4,15 the state of New Mexico.20 In 2005, TRC members
signed an Inter-Institutional Agreement
establishing a framework for patents from the
OTHER IP BUNDLING EFFORTS: various organizations to be bundled together and
TECHNOLOGY TRANSFER licensed through a single entity.21 However, shortly
thereafter, TRC shifted its focus from support for
In addition to bundling arrangements that respond pre-commercial technologies to support for
to patent thickets and other related issues, developing commercial ventures serving an already-
intellectual property can also be bundled in order established market or need. Ultimately, given this
to create new prospects for commercialization and change in direction, there was never any activity by INTELLECTUAL
PROPERTY
to improve marketing opportunities. TRC in the area of IP bundling.22 Still, the initial
BUNDLING
3
ASSOCIATION OF ACADEMIC HEALTH CENTERS
agreement to lay the groundwork for IP bundling, distribution of risks and benefits among
which was approved by a diverse array of research participating institutions, and less time and effort
organizations, demonstrates the potential for devoted to negotiating licensing agreements.
aggregating intellectual property across multiple A sticking point may be in the pre-valuation of
institutions. patents in the bundle. Participants will need to
determine the relative value of each contributed
patent and negotiate in advance the distribution of
ANTITRUST CONCERNS royalty revenues that would result from any
licensing agreement. It is typical of pooling
Pooling and cross-licensing arrangements can raise arrangements to retain an independent expert or
anti-trust concerns in some cases. The Department board to evaluate patents, in order to eliminate the
of Justice (DOJ) and Federal Trade Commission tendency of participants to over-value their
(FTC) have outlined a number of circumstances in respective contributions. Furthermore, in the case
which patent pools can have anticompetitive of patent pools, an entity is typically designated to
consequences and thus may be deemed unlawful.23 execute licensing transactions involving the
According to the agencies, pooling agreements are bundled IP.
anticompetitive if they result in price-fixing, Additional questions that will need to be
exclusion of competitors from the market, or the addressed include the following:
deterrence of innovation.24 The DOJ and FTC have · Do the academic health centers have IP that is
indicated that most intellectual property licensing suitable for pooling or bundling with IP from
arrangements will be evaluated under the "rule of other academic health centers?
reason"--that is, arrangements will be evaluated on · What rates will licensees pay for access to the
a case-by-case basis, with the agencies making a pool?
judgment in each case as to whether the · Should licensing of bundled patents be
arrangement and resulting restraints on licensing compulsory?
are procompetitive or anticompetitive in their · Should members retain individual licensing
effects.25 rights?
A series of hearings on antitrust enforcement · Should free use of bundled IP among members
and intellectual property resulted in a 2007 joint of the pool be allowed?
report from the DOJ and FTC that identified several
specific issues of competitive concern with regard As collaborative research continues to grow in
to patent pools.26 Of note were the agencies' importance and the biomedical field expands,
findings that (1) pooling arrangements should be concerns surrounding patents and licensing will
composed of complementary patents rather than come increasingly to the forefront. Academic
substitute patents in order to reduce the risk of health centers should remain aware of these
price-fixing;27 and (2) in most cases, participants emerging issues and pursue creative ways of
should retain the right to license their patents sustaining the innovation and information
outside of the pool to encourage continued exchange that are so vital to scientific progress.
innovation.28 Intellectual property bundling is one strategy that
may be worth exploring to address problems in
this area.
ISSUES FOR ACADEMIC HEALTH
CENTERS: FINDING ECONOMIC Andrew Lyzenga, MPP, is a program associate at the
VALUE Association of Academic Health Centers.
The main question facing academic health centers
with regard to intellectual property bundling is "The main question facing academic
whether institutions will find enough economic health centers with regard to
value in a pooling or bundling arrangement to
participate. Such an arrangement will require
intellectual property bundling is
participants to cede some control over the IP they whether institutions will find enough
choose to contribute to the pool in exchange for economic value in a pooling or
INTELLECTUAL
PROPERTY the potential for greater marketability, more equal bundling arrangement to participate."
BUNDLING
4
ASSOCIATION OF ACADEMIC HEALTH CENTERS
1Shapiro C. "Navigating the Patent Thicket: Cross 13 Ibid., p. 3
Licenses, Patent Pools, and Standard-Setting." (2001). 14 Ibid.
Accessed at http://haas.berkeley.edu/~shapiro/ thicket.pdf 15 Grassler F, Capria MA. "Patent pooling: Uncorking a
2 Heller MA, Eisenberg, RS. "Can Patents Deter technology transfer bottleneck and creating value in
Innovation? The Anticommons in Biomedical the biomedical research field." Journal of Commercial
Research." Science 280, 698 (1998). Biotechnology. 9(2): 111-118. January 2003.
3 Resnik DB. "A Biotechnology Patent Pool: An Idea 16http://www.larta.org/lavox/ArticleLinks/2006/
Whose Time Has Come?" The Journal of Philosophy, 102006_VBA.asp
Science & Law, Vol. 3 (2003). 17 Ibid.
4 "Antitrust Guidelines for the Licensing of Intellectual 18 Ibid.
Property." Issued by the US Department of Justice and
the Federal Trade Commission. Section 5.5. April 6, 19 Ibid.
1995. p.30. 20 http://www.nm-trc.org/
5Clark J, et al. "Patent Pools: A Solution to the 21 http://www.sandia.gov/news-center/news-releases/2005/
Problem of Access in Biotechnology Patents?" U.S. all/inter-inst.html
Patent and Trademark Office (2000). 22Per a telephone conversation with Andrew
6Merges RP. "Institutions for Intellectual Property Neighbour, PhD, Executive Director, Technology
Transactions: The Case of Patent Pools." (1999). Research Collaborative.
Accessed at http://www.law.berkeley.edu/institutes/ 23 "Antitrust Guidelines for the Licensing of
bclt/pubs/merges/pools.pdf
Intellectual Property." Issued by the US Department of
7 Ibid.
Justice and the Federal Trade Commission. Section
8 Ibid. 5.5. April 6, 1995.
9Campbell EG, et al. "Data Withholding in Academic 24 Ibid.
Genetics: Evidence From a National Survey." JAMA. 25 Ibid., Sections 3.4 & 5.5
2002;287:473-480. 26 "Antitrust Enforcement and Intellectual Property
10Baca, MR. "Barriers to Innovation: Intellectual Rights: Promoting Innovation and Competition."
Property Transaction Costs in Scientific Issued by the U.S. Department of Justice and the
Collaboration." Duke L. & Tech. Rev. 0004 (2006). Federal Trade Commission. April 2007.
11Heller MA, Eisenberg, RS. "Can Patents Deter 27 Ibid.
Innovation? The Anticommons in Biomedical 28 Ibid.
Research." Science 280, 698 (1998). p. 699.
12National Academies of Science, Board on Science,
Technology, and Economic Policy (STEP), and
Committee on Science, Technology and Law (STL).
(2005) Reaping the Benefits of Genomic and Proteomic
Research: Intellectual Property Rights, Innovation, and
Public Health. Washington, DC: NAS; 2005.
INTELLECTUAL
PROPERTY
BUNDLING
5
VISION
To advance the nation's well-being
through the vigorous leadership of
academic health centers.
MISSION
To improve the nation's health care
system by mobilizing and enhancing the
strengths and resources of the academic
health center enterprise in health
professions education, patient care,
and research.
1400 Sixteenth Street, NW Suite 720
,
Washington, DC 20036
202.265.9600
202.265.7514 fax
www.aahcdc.org
For more information, contact
Andrew Lyzenga
alyzenga@aahcdc.org
© 2007 by the Association of Academic Health Centers