Sam Uretsky

Royalties in a Democracy

Absurd example #1: You lose your job, and $2.50 comes out of your severance pay as a royalty for Donald Trump for the use of his trademarked phrase "you're fired!"

Absurd example #2: Your grocery bill comes to $117.81 for groceries, $1.65 for tax on non-food items, 85 cents for bottle deposits and $4.55 as a royalty to Irrational State University and its corporate partners for use of the digestive enzymes that you'll use when you eat the steak (if you feed the steak to your dog, you can apply for a refund, since the patent covers human digestion only.)

On May 4, a jury in federal district court in Boston concluded that Eli Lilly Inc., a giant drug manufacturer, had violated a patent held by Ariad Pharmaceuticals, a biotechnology company that had licensed the patent from Harvard, MIT and the Whitehead Institute for Biomedical Research. The patent covered nuclear factor-kappa B" (NF-kB), which is described as a "transcription factor" that influences what proteins a cell makes, and in what quantities. It may influence the course of several diseases including cancer, arthritis, diabetes and stroke. The patent covers any drugs that may act through this pathway. The jury ordered Lilly to pay $65.2 million in back royalties on its osteoporosis drug raloxifene (Evista) and drotrecogin alpha (Xigris) which is used to treat septic shock. The company will also have to pay 2.3% in future royalties on these drugs. We hear a lot about activist judges, but the US Patent Office, a division of the Department of Commerce, a division of the Executive Branch, has been quietly altering the way we live without getting very much attention.

It took the US Patent Office 16 years to decide that the discovery was patentable, and as soon as the patent was issued, Ariad filed suit against Lilly and has approached 50 other companies that either have or are developing products that use this pathway. According to Ariad, Bristol-Myers Squibb Co. and DiscoveRx Corp have already signed agreements to pay licensing fees. Meanwhile, Lilly has requested that the patent office reconsider the patent award. Amgen, which makes the anti-arthritis drug entanercept (Enbrel), has filed a pre-emptive lawsuit to protect itself from demands by Ariad, although Ariad had not filed any claims against Amgen.

The case is similar to the lawsuit between NTP Inc., which patented the idea of wireless email, and Research in Motion (RIM), the makers of the popular BlackBerry handheld device that actually allowed effective text messaging. The lawsuit threatened to block the use of BlackBerries. That shutdown was averted in March when RIM agreed to pay NTP $612.5 million to settle the lawsuit, even as the US Patent Office appeared to undermine NTP's claims.

Most of all, the controversy brings to mind the child's question, "How could Columbus have discovered America when the Indians were already here?" Robert A. Armitage, senior vice president and general counsel for Lilly, issued a statement saying, "The Ariad position is equivalent to discovering that gravity is the force that makes water run downhill and then demanding the owners of all the existing hydroelectric plants begin to pay patent royalties on their use of gravity."

Patents, copyrights and trademarks are issued to encourage the progress of science and the arts. They protect the rights of creators, whether of products or ideas &endash;- but it's fair to ask whether any real creativity went into the idea. While researchers at Harvard, MIT and the Whitehead Institute did make a valuable scientific discovery, there is a difference between discovery and creation. At issue is whether the Ariad patent is an attempt to patent a "natural process," which, in principle, cannot be patented.

Leora Ben-Ami, a partner at the law firm of Kaye Scholer who represented Ariad, issued a statement: ""This is not a patent on a natural process -- it's a method of interfering and changing a process in the body." This, however, seems simplistic. Her clients found a process, the Lilly researchers found a way to alter it. In 2003, the University of Rochester lost a case, which involved the biological pathway for cycloygenase-2 (COX-2), the pain pathway targeted by Celebrex and Vioxx. The university lost its case, because, although it patented the pathway, it never developed a drug targeting the COX-2 response.

The impact of the Ariad decision can be argued either way. It's possible that it could lead to increased funding for research into molecular biology, offering the assurance that discovery of new molecular pathways will be richly rewarded by a share of any drugs that utilize the pathway. But this is a policy decision that should be evaluated and considered, with reasonable safeguards for the discovery of drugs that are found by other means, such as observation of folk medicine.

For now, the big winners are patent lawyers, and the losers are people who, directly or indirectly, pay for the drugs. If upheld, this decision could lead to great advances in molecular biology and drug therapy, but it would have been nice to discuss where we were headed before the patent office, Ariad, Harvard and the others billed us for the ticket.

Sam Uretsky is a phamacist from Long Island, NY.

From The Progressive Populist, June 15, 2006

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