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The dissonance of scientificand legal normsClarisa LongPublished online: 26 Nov 2010.

To cite this article: Clarisa Long (1999) The dissonance of scientific and legalnorms, Social Epistemology: A Journal of Knowledge, Culture and Policy, 13:2,165-181, DOI: 10.1080/026917299298691

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social epistemology, 1999, vol. 13, no. 2, 165± 181

The dissonance of scienti® c and legalnorms

CLARISA LONG

Intellectual property law is about property rights to information. By controllinginformational ¯ ows, intellectual property law creates incentives for researchers torefrain from publishing research results before seeking intellectual property protection,to retain control of information, and to release research results strategically. Opencommunication and the sharing of research results, on the other hand, is the lifebloodof scienti® c research. Scientists understand that research is facilitated by informationalexternalities. In other words, scientists are subject to incentives not to seek proprietaryrights to information-intensive products or otherwise limit the ¯ ow of informationbecause the creativity of their own research is largely dependent on the quality of theinformation they receive. Free riding on others ’ information or experimental results, solong as proper credit is given, is accepted practice.

The challenges presented by a information-centred approach to scienti® c researchgreatly complicate the debate on the related questions of who owns what information,and who can access it on what terms. This blurs the already faint, erratic dividing linebetween the public domain and proprietary interests. At the same time, the tellinglinguistic and conceptual problems highlighted by C. P. Snow (1964) have beenmagni ® ed several fold by new multidimensional cultural divides that cut across thebroad range of scienti® c ® elds now engaged in biological research as well as thedisparate ® elds of economics, law, and public policy.

In this article, I explore the causes of tension between scienti® c research andintellectual property law. First, I discuss how both scienti® c research and intellectualproperty law each have norms and mechanisms for controlling informational ¯ ows,although these mechanisms are often at odds. Second, I describe by way of example thebrouhaha that occurred (and is still ongoing) over the attempt to patent gene fragments,and the impact this had on the scienti® c community. Finally, I present some contextconditions that will help determine the outcomes whenever the scienti® c communityand intellectual property rights regimes interact.

Author : Clarisa Long is an Associate Professor at the University of Virginia School of Law, 580 MassieRoad, Charlottesville, VA 22903, USA. Previously, she was a Lecturer and Research Fellow at HarvardUniversity’ s Kennedy School of Government. She is the co-author of US Foreign Policy and Intellectual PropertyRights in Latin America (Stanford, CA : Hoover Institution Press, 1997) and the editor of Genetic T esting andthe Use of Information (Washington DC: AEI Press, 1999) ; e-mail : clong! virginia.edu

Social Epistemology, ISSN 0269-1728 print} ISSN 1464-5297 online ’ 1999 Taylor & Francis Ltdhttp:} } www } tandf.co.uk} JNLS} sep.htm http:} } www.taylorandfrancis.com } JNLS} sep.htm

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1. Informational ¯ ows in science and intellectual property

1.1. The creation of scienti® c information

The entire edi® ce of intellectual property rights is built around a simple dilemma:without legal protection not enough information will be produced but with legalprotection not enough of the information will be used. Economic theory hypothesizesthat the private market will underproduce information because a producer cannotappropriate the full value of the information without protection (Ulen and Cooter,1996). Information is the classic example of a public good. True public goods arecharacterized by two conditions: they are non-rivalrous , which means that use by oneperson does not diminish use by others, and they are non-excludable, which means thatusers cannot exclude others. The cost of producing a unit of information does notdepend upon the number of people who will use it, use by one person does not depriveanother of using it, and the information can be used endlessly. From the standpoint ofintellectual property rights, these can be expressed as two concepts: indivisibility andinappropriability. In other words, we can say that the process of scienti® cdiscovery doesnot suŒer from diminishing returns.

The inappropriability aspect of this model states that in the absence of enforceableproperty rights, producers of information-intensive technologies will be unable to reapthe market value of the information. The information itself has only a marginal valueto the producer; the real value lies in selling it to the public. But sale of the technologyreveals the information it contains to competitors and potential copyists, each of whomcan copy the information, and thereby recreate the value of the property, at a pricelower than that of the original producer. Unless enforcement measures exist that allowthe innovator to appropriate the value of the information, innovators will ® nd theincentive to produce information diminished (PhRMA 1996). Because information isintangible, harm to the information producer arising from the failure or lack of legalprotection is harder to quantify and thus does not create as much of a public sense ofmoral outrage as would theft of tangible personal property.

The information produced as a result of scienti® c research, however, does not ® tentirely comfortably into this model : Why was there no dearth of publishing inmolecular biology and genetics, for example, in the years before the United StatesSupreme Court declared in Diamond vs Chakrabarty (1980) that genetically engineeredmicroorganisms were patentable? The ability to appropriate the market value of ascienti® c invention is not the only factor motivating the producers of scienti® cinformation. To the extent that the law ignores this fact, it will create dissonance withinthe scienti® c community.

The public goods qualities of scienti® c research suggest that without additionalincentives the market left to its own devices will fail to produce the amount of creativeand inventive scienti® c ideas that society requires. Unlike governments, private sectorinnovators must underwrite the costs and garner the gains from their investments inscienti® c innovation. Private ® rm innovators, however, cannot capture su� cientreturns from their invention or creation to justify the investment (Levin, 1982). Private® rms also must estimate the appropriate levels of research under conditions ofuncertainty and risk that exceed those of other investments.

The ® rst big problem, therefore, is assuring a su� cient supplyof scienti® c informationthrough research. Economists have found, however, that fostering more sociallybene® cial innovation does not rest solely with solving the public goods problem by

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tinkering with the incentives to ensure additional appropriability. As Menell (1994, p.2646), among others, has pointed out, ` [e]xcessive protection for ® rst generationinnovation can impede later stages, thereby undermining some of the salutary eŒects ofstrong intellectual property protection ’ .

The second overarching problem, often overshadowedby the initial issueof producingenough scienti® c knowledge, involves the diŒusion or distribution of scienti® cinformation. If the innovations that result from scienti® c research are not widelydisseminated, it may result in a situation that is less socially bene® cial than one wherethere are fewer innovations but they are distributed more broadly. The problemmanifests itself most acutely in trying to allocate fair compensation to the creators ofvaluable information assets, includingdatabases , while assuring that other stakeholdershave su� cient access to the same building blocks to provide the broader social bene® tsthat the incentives also have been designed to provide.

If the market will underproduce information because of the indivisibility andinappropriability problems, the state can intervene to overcome the market failure andproduce optimal amounts of scienti® c knowledge with policy measures Paul David hascalled ` the three Ps : patronage, procurement, and property ’ (David, 1997). It canproduce the information itself, subsidize the private production of information, or grantintellectual property rights (Ulen and Cooter, 1996). The international HumanGenome Project, the US’ s National Institute of Health’ s (NIH) National Center forBiotechnology Information, and the NIH’ s GenBank are examples of the patronageapproach. Tax breaks and direct funding for scienti® c research are examples of thesecond, and patents are an example of the third.

Although the literature usually treats these three policy mechanisms as independent,the reality, at least in the ® eld of scienti® c research, is that state production orsubsidization of information frequently accompanies the invocation of intellectualproperty protection. Therefore, whether or not intellectual property rights can begranted for production of any particular kind of scienti® c information is a factor thatmust be considered whenever we attempt to ascertain the e� ciency of state creation ofinformation. In theory, the incentives created by proprietary rights are not necessary ifadequate direct government spending on scienti® c research exists. An often overlookedpoint is that these policy prescriptions, from an economic perspective, are comp-lementary means to achieve the same endÐ optimal amounts of discovery andinnovation. They often are viewed, however, as con¯ ictingpolicy approaches. Althoughthe use of each may have other policy consequences which aŒect the desirability of theiruse, all three are substitutable; they are intended to solve the basic appropriabilityproblem of scienti® c information that leads to the underproduction of it by privatesources without additional incentives.

1.2. Patents and scienti® c information

A system of intellectualproperty rights can provide incentives to innovate. By rewardingcreativity it encourages innovators to spend their time and resources in research anddevelopment eŒorts. It also stimulates the investment of resources needed to market theinvention. By exchanging formal property rights protection for the inventor’ s disclosureof the information needed to reproduce the invention, it reduces the likelihood ofduplication of eŒort by others and increases the chance of further advances intechnology based on the disseminated information.

Three forms of intellectual property are relevant for the protection of scienti® c

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information: patents, copyrights, and trade secrets. Patents are the primary means ofprotecting the information generated by scienti® c discoveries. Patents grant theexclusive right to prevent others from making, using, selling, or oŒering to sell aninvention for twenty years (35 US §§154, 271 (1994 and Supp. I)). A patent does notconfer on the patentee the right to make, use, or sell ; rather, it is the right to use thepower of the state, in the form of access to the courts, to prosecute violators. In exchangefor the right to use the power of the state to prevent others from making, using, selling,or oŒering to sell the invention, the patentee must reveal to the world in the form of anextensive and detailed public document the antecedent basis of the invention,a detaileddescription of the invention, all the information necessary to reproduce the invention,and the best means of using it (35 USC §112 (1994)). With a few statutorily recognizedexceptions, others who wish to use the idea can be required to pay the property rightsholder in exchange for use of the intellectual property.

Not all discoveries are patentable. The range of patentable innovations is just a subsetof all research outcomes. The European Union directive on the legal protection ofbiotechnological inventions, for example, speci® cally excludes plant and animalvarieties; processes using natural phenomena such as crossing or selection for theproduction of plants and animals; ` the human body, at the various stages of itsformation and development, and the simple discovery of one of its elements’ ; ` processesfor cloning human beings ’ ; ` processes for modifying the germ line genetic identity ofhuman beings ’ ; ` uses of human embryos for industrial or commercial purposes ’ ;` processes for modifying the genetic identity of animals which are likely to cause themsuŒering without any substantial medical bene® t to man or animal, and also animalsresulting from such processes ’ ; as well any invention the commercial exploitation ofwhich ` would be contrary to order public or morality ’ from the ambit of patentprotection (Biotech Directive, 1998, Articles 5 and 6). Not all potentially patentableinnovations are actually patented. Sometimes researchers will choose for strategicreasons to release information into the public domain, or withhold it from the publicdomain, without seeking intellectual property protection.

The incentives created by the patent system steer private research and developmenteŒorts away from basic research but also away from incremental improvements overexisting inventions. Thus, the ability of inventors to reap gains from their owninventions, which is at the heart of the patent process, become more severe the morebasic the invention (Arrow, 1962). As a result, universities and the government havetraditionallyperformed much of the basic research while private entities do much of thedevelopment.

Applied researchers often accept the bene® ts of patenting without question, as wellthey might, because the genetic technology industry depends on, and has been builtaround, the patent system. Nonetheless, there is no doubt that the patenting systemcreates social costs in the form of the timing of data release, licensing and cross-licensingcosts, and resources spent on litigation to protect the property rights created byintellectual property. In contrast, basis researchers often believe in the bene® t of freeexchange of information without private rights, but we will never know whattherapeutic innovations have been lost for lack of private investment.

When an innovator cannot appropriate the valueÐ note that ` value ’ may bemonetary or non-monetary Ð from releasing the information contained in an innovationinto the market, then the innovator has a strong incentive not to reveal the informationand use it as a trade secret instead. A trade secret is information that (1) ` derivesindependent economic value, actual or potential, from not being generally known to,

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scientific and legal norms 169

and not being readily ascertainable by property means by, other persons who canobtain economic value from its disclosure or use ’ ; and (2) the innovator takesreasonable means to keep secret (Uniform Trade Secrets Act of 1985). If theinformation contained in a trade secret is misappropriated, the trade secret holder maysue, but if the information is discovered independentlyby a second innovator, the tradesecret holder has no recourse. Even if the trade secret holder believes the informationmay have been misappropriated by a competitor, litigation still may not be the answerbecause the trade secret holder will have to reveal the information in the process ofproving his or her case.

The received wisdom is that if we wish, as a policy matter, to disseminate informationexpeditiously, patents are preferable to trade secrets because the inventor must disclosethe relevant information underlying the invention in exchange for the patent. Inscienti® c research, however, information has a short half-life. Information that isrelevant and interesting today is passe tomorrow. If trade secrets are a thoroughlydissatisfying means of disseminating information, patents are not an ideal way either.Even if information is disseminated through a patent speci® cation, it can be stale by thetime the patent document is published.

1.3. Scienti® c research and dissemination of information

A number of factors determine the extent to which scienti® c information is disseminated.These include the absolute and relative costs of producing and disseminating theinformation, the incentives created by the intellectual property system to strategicallywithhold information, the ease with which intellectual property can be copied, and theincentives created by the scienti® c community.

There are two kinds of costs associated with creating information (Breyer, 1970). Oneis the cost of producing the information, regardless of how extensively it will be used. Ingenetic research, for example, the cost of sequencing DNA represents a production cost.The second kind of cost is dissemination cost, which determines the costs of printing anddistributing the information, whether through journals, the internet, or some othermedium. Suppose that the costs of disseminating the results of genetic research aredecreasing because of technology, such as the internet, whereas production costs areconstant. This can have one of two eŒects. In the ® rst eŒect, more specialized scienti® cjournals can be produced because production costs are spread across more consumers.In the second eŒect, if the market for consumptionof a particular area of research resultsis saturated, fewer specialized journals will be produced with a larger circulation perjournal. Whether technologies such as the internet will create more specialized journalsor consolidate existing journals will depend upon the demand for scienti® c researchresults.

Publishing research results after ® ling a patent application does not aŒect thepending application. Nonetheless, patenting creates a disincentive to publish researchresults, even after ® ling a patent application, because such publication may reducechances for a future, broader patent. These publishingdelays create some inconsistencywith traditional scienti® c norms. The basic research community would tend to be of theview that scienti® c discoveries should not be kept secret during the period that theapplication is pending. An innovator who has made a signi® cant breakthrough wouldbe tempted to get a head start in developing the applicationsof the new discovery beforerevealing the knowledge underlying the basic invention and thereby allowingcompetitors to bene® t from the basic research. Such a delay in revealing the information

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regarding the basic research is socially undesirable both because it delays the creationof second-generation products by other innovators and because it postpones thediŒusion of the knowledge embedded in the basic invention.

Another problem facing a system of intellectualproperty protection in the age of hightechnology is the ease with which information can be digitized, copied, transferred,stored, and downloaded, all without detection. Traditionally, intellectual property,particularly patented property, was valuable because it created new tangible goods. Apatented plow was valuable because of its tangible form, for exampleÐ but today, thevalue of most intellectual property is derived from the intangible information itcontains. The cost of research and development for the products of scienti® c research isenormous, but once the product is revealed to the world, it is comparatively easy tosynthesize or reverse engineer. A copyist does not even need to invest much energy orcreativity in ® guring out how to copy a patented product, because all the informationneeded to reproduce the product is contained in the patent document. The vaporousnessof information in¯ uences the strategies that innovators use to protect their information,and indeed whether they choose to seek intellectual property protection at all.

A basic question is the eŒect of intellectual property protection on scienti® c customs,norms, and methods. On the one hand, scienti® c competitiveness can always result insome reduction of sharing and delays in dissemination of new knowledge. On the otherhand, the world of basic scienti® c research has a tradition of sharing information andbelieving scienti® c results should be widely and freely disseminated. Arthur Kornberg(1995), a distinguishedbiochemist and winner of the 1969 Nobel Prize for his laboratorysynthesis of DNA, writes that secrecy is ` corrosive; it makes even less sense in industrythan in academia ’ . One of the reasons that academic researchers, who are pre-dominantly in the basic research community (Trajtenberg, Henderson and JaŒe, 1994),are so concerned with publishing is that the basic research community has establisheda reward structure for complying with norms of ` openness ’ (Merton, 1973). Scientistsare encouraged to disclose speedily their new ® ndings and submit them to peers forveri® cation, application,and extension.Recognitionof academic contributions,esteem,and reputation, and access to resources and facilities are the currency of the scienti® creward system. Traditionally, making scienti® c discoveries rather than obtainingpatents was the primary motivating factor in academia and basic research. This modelis changing, however, as universities are treating getting a patent as an important factorto be considered in promotion, tenure, and salary decisions.

In the scienti® c community, the centrifugal forces of disclosure of research results andsecrecy for purposes of patentability tug scientists in opposite directions. In the privatesector, the viability and competitiveness of ® rms may depend upon keeping researchresults secret until the patent is granted, whereas in the university research community,pressures to publish con¯ ict with the anticipation doctrine in patent law that rendersunpatentable anything that has been described in a printed publication for more thanone year prior to ® ling the patent application (35 USC §102(b) (1994)).

Scienti® c research is diŒerent from most other forms of research in that collaborationis more essential than ever before. For example, genome maps are vital to geneticresearch. In the case of the human genome, no individual entity can complete such amap by itself, and such a map is essential to eliminate duplication of eŒort as multiplelabs research the same regions of the genome. But maps are useful only to the extent thatthey are accurate and complete, and they can be completed only when information isreleased into the public domain. ` While a convincing case can be made for the value ofpatents in securing investment and attention from those who hold them, limiting access

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to portions of the human genome to a small set of scientists simply because theyidenti® ed the sequences ® rst is unlikely to lead to the maximal intellectual exploitationof this resource ’ (Caplan and Mertz, 1996, p. 926). Critics worry that attempting topatent the products of scienti® c research will decrease the cooperation and collaborationbetween genome scientists necessary to create gene maps (Roberts, 1991). Critics alsonote the potential for con¯ icts of interest among scientists and are concerned thatpatentingwill change the ethos of the basic research community (Anderson, 1993, NIH,1992).

2. The case of gene fragments

The traditional bifurcations along which the production and ownership of scienti® cresearch have dividedÐ basic} appliedresearch, academia} industry,and public} privatesectorÐ are blurring today, particularly in biomedical research. The Human GenomeProject has evolved into a joint public and private eŒort, academics are establishingwith commercial ® rms, and government routinely collaborates with the private sector(Anderson, 1993, Stone, 1995). As scienti® c research progresses and information isproduced in new ways, new legal issues arise, the most fundamental of which is : Can theintellectual property system continue to maintain a delicate balance betweeninformation production and dissemination? Can the legal system create reasonablyclear, bright-line tests determining whether the results of scienti® c research are subjectto private rights of protection? In the absence of bright line rules, how will the scienti® ccommunity strike the production} dissemination balance?

Three states of intellectual property protection are possible whenever information-intensive innovations are created. The ® rst state is one in which the legal systemrecognizes that a particular class of innovations can be made subject to private rights ofprotection, within reasonably de® nable standards. The protectability of any singleinnovation within this class may be decided ad hoc, but at least the fundamentalprinciples of protectability are de® ned. In this state, researchers would have theincentive to seek intellectual property protection such as a patent for their innovations,and to withhold information from the public domain until the patent issued, or at leastuntil the patent application was ® led.

The second state of the world is one in which protection is unavailable for a particularclass of innovation. As a general rule (and ignoring for the moment, reputational factorsand the eŒects of scienti® c norms and codes of conduct), researchers would have theincentive either to keep the results of their research a trade secret if it was deemedcommercially valuable, or to release it into the public domain if it was not commerciallyvaluable. In the alternative, particularly cunning second-comers may choose strategi-cally to release information into the public domain for the sole purpose of increasing thecosts of intellectual property protection for ® rst-comers, or even precluding protectionaltogether.

The third state of the world is one in which private ownership rights are unclearbecause the technology presents a new paradigm to which the legal system has not hadthe opportunity to respond. In this state of the world, researchers would be uncertain asto whether it would be optimal to release information into the public domain or keep itas a trade secret.

Patenting of DNA sequences presents an area in which the appropriate scope ofprotection remains ambiguous and contentious. The basic techniques for sequencing

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DNA have been known for two decades (Maxam and Gilbert, 1977,Sanger et al., 1977).The US patent system views DNA sequences as ` non-naturally occurring compositionsof matter ’ that are patentable so long as their function is known and the inventor is nottrying to claim them in a form that already appears in nature. The European Union’ sBiotech Directive, on the other hand states that ` [a]n element isolated from the humanbody or otherwise produced by means of a technical process, including the sequence orpartial sequence of a gene, may constitute a patentable invention, even if the structureof that element is identical to that of a natural element ’ (Biotech Directive 1998, Article5.2). Thus the issues facing the genetic research community today are not whetherDNA sequences can be patented at all, but rather under what conditions they can andshould be patented.

In June 1991, the NIH ® led patent applications on 2375 partial gene sequences, or` expressed sequence tags ’ (ESTs) it had discovered (Caplan and Mertz, 1996).Although ESTs indicate that a gene exists and is active, or expressed, they do notindicate the gene’ s function. Although the NIH’ s patent application described morethan just the ESTs, it did not identify the full length sequence of newly discovered genes,nor did it teach the biological activity of the genes, or identify the proteins coded bythose genes.

The NIH came under wide criticism for ® ling for patent protection for ESTs.Controversy arose over whether gene fragments, or for that matter entire genes, couldbe patented when their function in the body was unknown (Adler, 1992, Eisenberg,1992). Proponents of patenting sequences for which the function was unknown arguedthat disclosure of the sequencing information without attempting to patent thesequences might result in ` foreclos[ing] future patenting by anyone who discovers thefull gene by identifying its function and may make the newly discovered genesunattractive to private industry for use in product development ’ (Healy, 1992, p. 665).For example, the Association of Biotechnology Companies states that it supported theNIH’ s decision to ® le patent applicationson the ESTs ` as a means to preserve its optionson how to best utilize the technology for the public bene® t ’ (ABC, 1992a).

The NIH stated that its decision to ® le patent applications on ESTs was based uponits desire to be able to transfer federal technology to industry by licensing the sequencesif they were found patentable (Anderson, 1994). By ® ling patent applications on thesequences, the NIH was able to publish the results of its ® ndings while preserving anypotential intellectual property rights it might have. If it published its research resultswithout ® ling patent applications on the ESTs, then under the US patent statute itmight preclude itself from ® ling patent applications on future discoveries involvingESTs, either because the later invention was obvious or was already in the publicdomain. An applicant is barred from receiving a patent on an invention if it was` described in a printed publication in this or a foreign country or in public use or on salein this country, more than one year prior to the date of the application for patent in theUnited States ’ . This one-year statutory bar creates tension between the incentives topublish research results and the ability to apply for a patent on the results of thatresearch. An invention also is unpatentable if it is deemed obvious given the state of theprior art (35 USC §103). The NIH was concerned that such uncertain status of futurepatent applications would render the private sector less willing to perform research inthis area (Venter, 1992). Opponents, however, stated that ` [w]hether future patentclaims are obtainable ¼ is not the concern of the NIH, which should not becomeengaged in schemes designed to ensure future exclusivity ’ (ABC, 1992b).

The NIH stated that it had decided to adopt a ` pragmatic interim policy ’ of ® ling

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patent applications on the ESTs in order to resolve the issue of the degree to which thefunction of the DNA sequence would have to be known for a sequence to be patentableunder the US patent laws (Healy, 1992). At the same time, however, the NIH was fullyaware of the trickiness of the issues involved: it stated that it was amenable to aninternational agreement that publication of the DNA sequences would not preclude theability, after further research, to patent the full gene, the products coded for by thatgene, and the methods of using those products.

Opponents of patent protection for ESTs expressed both legal and social objections.They argued that because the patent application did not indicate the biologicalfunction of the sequences claimed, allowing the application to issue would allow thepatentees to claim the rights to all products arising out of the use of the gene. Some alsonoted that allowing patents to issue would run counter to the norms of science. Nobellaureate Paul Berg commented that ` patenting bits and pieces of sequence that aremeaningless functionally ¼ makes a mockery of what most people feel is the right wayto do the Genome Project ’ (Roberts, 1992, 912). They also argued that allowing suchprotection would result in a deluge of applications ¯ ooding the patent o� ce. TheIndustrial Biotechnology Association objected to the NIH seeking patents on geneticsequences for which the biological function was unknown, but did not object to scientistsin the private sector doing the same thing (IBA, 1992). The British Medical ResearchCouncil found itself in the odd position of criticizing the NIH for ® ling patentapplications on gene sequences, yet resorting to ® ling application on approximately1200 of its own sequences as a defensive action. (Eventually the Medical ResearchCouncil withdrew its applications.)

In February 1994, the NIH abandoned its patent applications for the 6869 sequencesfor which it had sought intellectual property protection after the US Patent andTrademark O� ce rejected the sequences on the grounds that their usefulness wasunknown (Anderson, 1994). But the NIH was not alone in trying to patent genefragments, nor has the patenting controversy ended with the NIH’ s abandonment of itsapplication. Several private sector ® rms, such as Human Genome Sciences ofGaithersberg, Maryland and Incyte of Palo Alto, California, have ® led patentapplicationson whole or partial gene sequences (Anderson, 1994). The challenge to thepatent system presented by the NIH continues. The PTO reports that hundreds ofapplications are still pending. Indeed, because of di� culties involved in evaluatingpatentabilityof this large number of sequences, the PTO estimates that it would take itsbiotechnology staŒan entire year to evaluate the applications if it did nothing else(Marhall, 1997). Although it has held hearing on the subject, patent applicationsclaiming thousand nucleotide sequences continue to overwhelm the PTO.

The controversy over the NIH’ s attempt to patent ESTs raised numerous questionsabout the appropriate standards for patentability of DNA sequences (whether ESTs orotherwise), the proper role of federal technology transfer, and patenting strategies. Arecent announcement by a PTO o� cial that the PTO would allow patents to issue ongene sequences has only added fuel to the ® re (Vogel, 1997). The patentabilityÐ andcorrespondingly, the dynamic of public versus private ownership of informationÐ ofany given DNA sequence remains uncertain. As the US Supreme Court declared inBrenner vs Manson (1966), ` a patent is not a hunting license. It is not a reward for thesearch, but a compensation for its successful conclusion ’ .

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3. Some thoughts toward understanding the dissonance

Neither intellectual property rights scienti® c research operates in a vacuum. Theyin¯ uence and are in¯ uenced by the principal context conditions that characterize thestructure of scienti® c research and innovation, and the uses to which they are put.Below, I highlight some key context conditions that need to be considered in assessingthe likely eŒects of the overlap of intellectual property rights on scienti® c com-munication.

3.1. Science is a cumulative endeavour

Scienti® c research is a cumulative endeavour marked by an interactive process ofdiscovery and innovation that depends on the stock of accumulated scienti® c knowledgeat all stages. Like multimedia, it builds on a broad range of research and interacts withmultiple innovations to create entirely new technologies. Many of these follow-oncreations generate social bene® ts comparable to or surpassing the initial discovery(Menell, 1994). This has important policy consequences. Because scienti® c research isnonlinear and complex, many feedback loops alter downstream developments, parallelbreakthroughs in other areas, and the marketability of products or services that resultfrom this process.

The use of information technology intensi® es the view that information best createsadditional innovation when it moves quickly from scientist to scientist through a web ofinterconnected networks and can be steadily adapted and recombined in the process.The mix of robust new scienti® c research approaches coupled with the inevitableserendipity that intervenes along the way undoubtedly creates diverse paths tomarketable products and new research in unrelated and now-unforseen ® elds.

Closely akin to the cumulative, interactive process of scienti® c innovation is itsgrowing divergence from either the single inventor} absolute novelty approach toinnovation that continues to dominate patent law or the individual author} originalexpression model that continues to guide copyright. Many of the traditionalpresumptions underlying the discrete invention or expression models do not apply tocumulative systems technologies (Merges and Nelson, 1990). The manipulation andrecombination of existing knowledge by multiple researchers constitutes an essentialpart of scienti® c research today. Scienti® c innovation builds on a wide variety ofinformation developed from numerous sources. Knowledge creation not only is moreinteractive than in the past, but also more collective, and innovation is more dependenton the timely and e� cient distribution of information than ever before. An initialdiscovery usually is only the starting point because it often opens up a broad range offollow-on improvements, many of which are not immediately foreseeable. All of thesetrends make it increasingly di� cult to separate the innovation from earlier or paralleladvances, to identify which scientist really deserves credit as the initial inventor orcreator, and to gauge very precisely what incentives have what eŒect.

These concerns are particularly acute in trying to decide what scienti® c discoveriesdeserve intellectual property protection. A major tension exists in trying to reconcile theincentives needed to obtain the creation and early release of these valuable works withthose that will permit and facilitate the creation of subsequent innovations through useof the database and its contents. Assuming that the incentives could not be speci® callytailored as the information moves from original discovery to end product, some

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economists such as Scotchmer (1991) have concluded that, from an economicperspective, this tension cannot be reconciled.

In such circumstances, there is a legitimate concern that strong protection of speci® cdiscoveries too early in the evolution of scienti® cdiscovery will retard the pace of overallinnovation, or redirect scienti® c research in less bene® cial directions. Unlike many otherinnovative sectors, the nature of scienti® c innovation requires ` systematic access to thestate of the art ’ (OECD, 1996). The semiconductor industry in its formative years wasmarked by similar rapid, multidirectional progress in both the underlying basicresearch and the cumulative technology that grew out of it (Levin, 1982). This highlybene® cial burst of scienti® c, technological, and economic advancement with broadsocial consequences, only partially glimpsed at the time, would not have been possiblein a legal regime that strongly protected intellectualproperty rights in many of the earlyinnovations (Levin, 1982).

3.2. Basic vs applied research

With the shortening of innovation cycles and the increasing cost of innovation, creatingadequate incentives is essential for developing the next generation of research, products,and services. Basic research and new technologies often fail to attract su� cient privatesector investment because of limited appropriability. Market failure in databases, forexample, occurs not because the work is copied but because the cost of copying theinformation using new digital technologies is less than the investment in developing thedatabase that the developer must recoup.

More appropriability through strong intellectual property protection, however, doesnot necessarily lead to more innovation. As Levin et al. (1987, p. 816) concluded in ` theYale study ’ , a pathbreakingempirical studyof private sector research and development:` Stronger appropriability will not yield more innovation in all contexts and, where itdoes, innovation may come at excessive cost ’ . The creation of new ideas and productsmay be retarded by stronger protection in certain industries for a number of reasons.

The increased resources devoted to new innovation from strong intellectual propertyprotection may result in redundant or duplicative research in the race to capture theprize of monopoly rights (Loury, 1979, Dasgupta and Stiglitz, 1980). It also may deterresearch if the ® eld is considered too crowded (Dasgupta and Stiglitz, 1980). The raceto patent ESTs, for example, also revealed the likelihood of multiple independentdiscoveries. There are serious questions whether monopoly rights should be granted fordiscoveries or innovations that are likely to appear in the public domain as a result ofmultiple discovery without any detrimental time lag.

Closely related to this is the concern that excessive incentives may lead to thepremature exploitation of new knowledge. Scienti® c research can be analogized to® shing, where the property rights go to the person who catches the ® sh. A ® sherman canwait for the ® sh to grow larger but risks losing it if someone else catches it ® rst. This leadsto the result that ` too many little ® sh are being caught ’ (Barzel, 1968). At the momentscienti® c research is yielding many little ® sh.

Increased protection of scienti® c information also may stimulate new innovation butat too high a cost because it delays access to new ideas on competitive terms or itpreempts areas of potentiallybene® cial basic research. Building legal fences around rawscienti® c data and basic research could mean less communication among researchers,leading to fewer new discoveries.

On the other hand, the race to patent or create a cognizable right also may have

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desirable eŒects by accelerating the rate of innovation. Several scienti® c researchers insmaller university settings have commented during the last year that the competitionbetween genomic information companies to identify and patent gene sequences hasgreatly bene® ted their research by speeding up new discoveries. From an economicperspective, Kitch (1977) has argued a ` prospect theory ’ in which the early allocationof intellectual property rights can make research resource allocations more e� cient.

3.3. The eŒects of transaction costs

The markets for scienti® c information are subject to a number of signi® cant transactioncosts. This introduces another major consideration in deciding whether the incentivescreated by strong intellectual property rights for scienti® c information will produceadditional innovation at acceptable costs.

Without strong rights, groups that develop new innovations may limit their dealingsto a few customers with whom they have strong contractual relations. Strong intellectualproperty protection makes it possible to disseminate innovations more broadly becausethe intellectual property right reduces the transaction costs of dealing with numerousbuyers on an individual basis through contracts and, therefore, makes possible manymore transactions in the information. Studies by Arrow (1962), Merges (1996a, 1996b),and others suggest that the incentives to innovate from strong protecting facilitate thesale of rights and thereby reduce the transition costs of licensing. An important ancillaryissue becomes how easily rights holders and the likely universe of users can reach licenseagreements. The underlying point is that only by protecting intellectual property rightscan there exist an e� cient market for trade in scienti® c information (Gallini andWinter, 1985). Other studies reveal that strong intellectual property rights encourageadditional research because the owner of the monopoly right has increased incentives toappropriate the gain of its innovative eŒort by bringing new products to market.

On the other hand, scienti® c information such as that compiled in a complexdatabase may not be able to be shared e� ciently by contract with all the users who wishto access it. Strong protection for scienti® c information or a database arguably maycreate such high transaction costs that it impedes rapid diŒusion of timely informationto both consumers and to researchers who could use the information to improve on it,or ® t it together with other information, for signi® cant follow-on discoveries andinsights. Broad rights covering research tools rather than marketable products are likelyto promote cross-licensing arrangements that can be used to deter entry to the networkby other users (Barton, 1995).

From a scienti® c perspective, there are other transaction costs. Bentley (1996), of theSanger Centre, which has led the ® ght for the immediate and free release in the publicdomain of genomic sequence information, has argued strenuously that selectivelyretaining gene sequencing information or denying any groups access to scienti® cresearch results seriously undermines the goal of promoting accessibility of the data forinterpretation and exploitation.

From a legal perspective, granting private property rights to scienti® c informationmay increase transaction costs because researchers and others users confront theproblem of determining who owns what, how to secure rights in a timely and e� cientway, and at what price. Presumably, many of the transaction costs can be avoided bythe use of collectives similar to those used in other contexts such as the American Societyof Composers, Authors, and Publishers (ASCAP) and Broadcase Music Incorporated(BMI) in the recording and multimedia sectors.

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In genetic research in particular, the licensing issues will be further complicatedbecause research is being conducted by a changing collection of industries andinstitutions,public and private, each of which has its own informal norms and standardsabout licensing intellectual property rights. The likelihood of ® nding common groundmay prove di� cult.

Litigation costs also are likely to impose signi® cant transaction costs. Like turmoil inthe rapidly converging ® eld of multimedia, in which works from diŒerent ® elds arebrought together and expressed in a common digital format, many ® elds of scienti® cdiscovery undoubtedly are evolving into what Reichman (1994) has called a ` legalhybrid ’ as a result of diŒering conceptual approaches that can be used to protect variousforms of new genomic technology. The interaction of strong patent rights or sui generisdatabase protection likely will have many unintended and expected consequences forthe evolution of scienti® c research In such circumstances, Reichman would argue thatthe confusionmay lead to periods of over- and under-protectionof scienti® c innovations.

It will take the legal system many years to settle many of the incipient issues andduring this time numerous issues will have to be litigated with the crushing transactioncosts involved. Uncertainty about ownership rights and access to scienti® c informationduring the period in which the legal and political system tries to catch up to fast-movingand novel technological changes also can have a chilling eŒect on innovation. In thecontext of another dynamic cumulative technologyÐ computer softwareÐ the O� ce ofTechnology Assessment concluded that : ` [u]ncertainty about ownership of a com-ponent or the scope of intellectual property rights could discourage the development ofprograms composed of components from diŒerent sources ’ (OTA, 1993, p. 154).

Finally, signi® cant transaction costs also will be imposed from three other sources.Many start-up companies attempting to transform basic research results into appliedtechnology are starved for cash and the lure of signi® cant capital infusions from® nancially secure pharmaceutical or information technology companies in return forexclusive or preferential licenses to their databases and information likely will proveirresistible to many. One consequence of such transactions, of course, is to exclude accessby others. Also, if access to databases must be negotiated individually, this mayprematurely risk disclosing new research directions or new research techniques tocompetitors.

3.4. Speci® c characteristics of scienti® c information

The eŒects of intellectual property incentives on market behavior have been shown todepend on the speci® c characteristics of the particular applied technology. Economistshave shown signi® cant diŒerences between sectors in research and developmentinvestment and innovative performance (Levin et al., 1987). They have demonstratedthat the nature and strength of appropriabilityvaries dependingon the industryand theresearch involved in it.

Patents have proved to be a particularly eŒective and necessary tool in encouraginginnovation in the pharmaceutical and ® rst generation biotechnology industries. Thesesectors are characterized by enormous costs in research and in obtaining regulatoryapprovals, by unusually high degrees of risk and uncertainty in bringing products tomarket, and by ® nal products that can be imitated at very low cost. Innovation in thedrug industry frequently has been found to be particularly dependent on strong patentrights because it is the only eŒective way to permit ® rms to appropriate su� cient returns

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from their investment. The bene® ts of research are captured largely in its ® nal use valueby the ® rm responsible for the development.

The pharmaceutical and biotechnology industries also have depended almostexclusively on the discovery of new knowledge and the development of completely newproducts. As a result, patents tended to correspond to only one product. Until now, thisinnovation model contrasted sharply with most sectors where innovation focuses moreon incremental product improvements or advances in system design.

The shift to information-centred biomedical research is creating a hybrid model ofdiscovery and innovation in which the creation of new ideas and products remains thedominant strand but the supply of new inputs such as databases and software arebecoming increasingly important to the process of innovation. In the next few years,biomedical advances and new drug products will depend as much on incremental,ongoing improvements in databases or redesigns of existing software systems as onblockbuster breakthroughs . Also, innovation will depend to an unprecedented degreeon information is dynamic rather than static or ® xed like most information we areaccustomed to dealing with. As Katsh has perceptively observed, ` [i]t is, therefore notowning or possessing the information that is valuable, but opportunitiespresented to useand exploit the information ’ (1996, p. 224).

Another closely related characteristic involves the optimal industry structure forinnovations in scienti® c research. Merges’ s (1996a, p. 282) comparative study of the roleof intellectual property rights in the software industry found that in addition to solvingappropriability problems, ` property rights permit a more ¯ exible industry structure toemerge ’ . This ® nding comports with those made in other ® elds. For example, byproviding strong property rights in the use of satellites and their orbits, telecommuni-cations was advanced substantially.

Recent studies have begun to suggest that ` the role and eŒect of [intellectualproperty] rights also depends on the character of technology in a ® eld, and especially onhow technological advance proceeds ’ (Mazzoleni and Nelson, 1996, p. 20). Inparticular, scienti® c ® elds characterized by multiple researchers with the sameknowledge base who tend to perceive the same opportunities will be experience moreracesÐ whether it is a race to patent or to publish, or both. These characteristics thatstrongly aŒect the nature and type of protection that should be provided.

Strong protection early on can signi® cantly aŒect the incentive to conduct follow-onresearch. The dependence of genomics on basic or precompetitive research, much of itfederally funded, is signi® cant. A great deal of this research is valuable distinct from itspractical application and its primary value may be as a research tool for laterdevelopment. As Mazzelini and Nelson suggest, ` a good part of the argument is aboutwhether the long run eŒect on investing of strong patents is positive or negative ’ (1996).

Another important force aŒecting the role of intellectual property rights in scienti® cresearch is the need to attract private investment capital. The role of capital formationin funding and commercializing scienti® c research today cannot be underestimated,particularly in an era of tight federal budgets. This coincides with the pronounced shift,observed by Beltz (1994), in venture capital ® nancing from early-stage to expansion-stage ® nancing. The only tangible assets that venture capitalists or early-stageinstitutional investors can use to value their potential investments in companies are theeconomic returns made possibleby the company’ s potential intellectual property rights.

Finally, a broad consensus exists that intellectual property rights are most eŒective increating the right incentives as new product developments near the market (Eisenberg,1987). Conversely, rights granted on basic research at precompetitive stages are

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problematic. Dependingon the circumstances, they can provide the basis for the orderlydevelopment of the full range of possibilities or they can preempt broad areas of futureresearch, or direct it to less bene® cial areas of inquiry (Eisenberg, 1987). Merges andNelson (1990), for example, studied the eŒect of patent scope in various sectors andfound that in highly scienti® c sectors innovation was retarded when patents were overlybroad or issued too soon.

Strong protection at precompetitive stages also may have other untoward con-sequences. Granting a patent too early may exclude the opportunity to get rights onreally useful innovations later because the later discoveries may not be able to overcomethe patent system’ s requirement of ` non-obviousness ’ . Also, rights at precompetitivestages may provide the owner with a stranglehold over the direction of research or the® nal products that is either anticompetitive or socially undesirable. For example, strongprotection of certain scienti® c information could give the intellectual property rightsholder the ability to control the ¯ ow of information from basic research into thedatabases through the network to the end users.

As a result, there are concerns about granting patents or other rights to discoveries orcreations which occur relatively early in the research process long before a market existsfor a product or process. Much of the debate about NIH’ s aborted eŒort to patent ESTsand current private eŒorts to obtain broad patents on huge sequences follows from thisconcern.

This problem relates, in part, to the need to use these discoveries as research tools inprogressing to the next step or in applying these innovations to other ® elds. Patentpolicy has dealt with the issue for some time primarily through the legal concept ofpatent ` utility ’ . There also have been renewed calls by Eisenberg and others to preemptmore basic research from the operation of intellectual property rights through meanssuch as experimental use exemptions or compulsory licenses (Barton, 1995, Eisenberg,1989).

One cannot assume, however, that the ® rms seeking intellectual property rights onresearch tools are the same as those seeking market exclusivity for the ® nal products. AsEisenberg (1994, p. 170) has observed correctly, ` One ® rm’ s research tool may beanother ® rm’ s end product ’ . The costs of granting strong patent protection for researchtools under such circumstances may be too high and we should be wary of providingbroad protection.

Moreover, the line separating precompetitive and commercial development inscience has blurred with the compression of time and the changing nature of theinnovation process. It becomes progressively more di� cult to agree on what constitutesprecompetitive research as opposed to commercial development. The various phases ofresearch and development no longer fall into tidy logical and highly ordered sequences,nor do they necessarily proceed in any linear fashion.

4. Conclusion

When we allow new technologies to be subject to intellectual property protection, orinterpret intellectual property law in a new way, we make policy decisions that aŒectwhat kind of research is done, how it will be done, and how the results will bedisseminated. Although attempts to gain intellectual property protection for theproduction of information may ultimately prove unsuccessful, scientists nonetheless actwith one eye on the intellectual property system. The policy challenges presented by

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scienti® c research, in which information is the crown jewel, greatly complicate thedebate over the related questions of determine the proper boundary between the publicdomain and proprietary interests. Fundamental shifts in the nature and operation ofscienti® c research have transformed the ` real world ’ in which intellectual property rulesmust be applied. In many ways, these trends portend a new clash of norms over theallocation of intellectualproperty rights and the desirabilityof turning public goods intoprivate gain.

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