human stem cell manual || intellectual property

C H A P T E R

Intellectual Property: Owning the Stem Cell

Cathryn Campbell and Jeanne F. Loring

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D U C T I O N

On August 9, 2001, US President George W Bush, citing ethical and moral issues, announced that Federal funding for human embryonic stem cell (hESC) research would be limited to the small number of hESC lines then in existence (NIH Human Embryonic Stem Cell Registry). President Bush confirmed this position by vetoing the "Stem Cell Research Enhancement Act of 2005," (HR 810) which would have expanded Federal research funding to hESC lines regardless of when they were derived. This restriction on government funding forced individual states and private foundations to support hESC research on the much larger number of hESC lines derived after the President's announcement. However, while these measures compensate for the lack of Federal funding for research, a more daunting barrier to innovations exists within the stem cell field: the intellectual property rights for hESCs and their uses. The foundational concepts for deriving, maintaining, and using stem cells, including the stem cells per se, are the subject of a handful of key patents, giving the "owners of the stem cell" significant control over innovations in this field.

S PATENT SYSTEM

Abraham Lincoln declared that "It]he patent system added the fuel of interest to the fire of genius." Himself a patent holder, Lincoln called the introduction of patent

Human Stem Cell Manual, edited by J. E Loring, R. L. Wesselschmidt, and P. H. Schwartz. ISBN: 978-0-1237-0465-8. Copyright Elsevier Inc.

Human Stem Cell Manual

laws one of the three most important developments in the world's history, along with the discovery of America and the perfection of printing. A patent is, in effect, a limited property right that the government offers to inventors in exchange for their agreement to share the details of their inventions with the public. Like any other property right, it may be sold, licensed, mortgaged, assigned, or simply given away. Although many object to anyone having a monopoly on an idea or invention, such monopoly rights have always been a fundamental part of the patent system. The importance of granting monopolies for new inventions has been recognized in the United States since the adoption of the US Constitution, which states: "Congress shall have p o w e r . . , to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writ- ings and discoveries" (US Constitution, Article I, section 8, clause 8).

Congress used this Constitutional power to enact the Patent Act (35 US Code), which established the United States Patent and Trademark Office (USPTO). To obtain protection under US law, the applicant must submit a patent application to the USPTO, where it will be reviewed by an examiner to determine if the invention is patentable. There are three types of patents issued by the USPTO. The most common type of patent is a utility patent, which has a duration of 20 years from the date of filing but is not enforceable until the day of issuance. The other types of patents include design patents, which protect ornamental designs, and plant patents, which protect new varieties of asexually reproducing plants.

The patent system fuels interest by incentivizing innovation while concomitantly encouraging the exchange of ideas. The protection of intellectual property provides incentives for costly research and development (R&D), since corporations would be much more conservative with R&D investments if third parties were free to exploit any developments. However, these incentives come at a cost. The quid pro quo for receiving a government-sanctioned and government-enforced monopoly is a duty to put the public in possession of the invention. If inventors did not have the legal protection of patents, they may choose to keep their inventions secret, whereas awarding patents makes the details of new technology publicly available for further improvement by other inventors during the life of the patent or for exploitation after patent protection ends.

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A B E T E N T E D N

According to the patent statute, any person who "invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvements thereof, may obtain a patent," subject to the conditions and requirements of the law (35 USC ~ 101). Thus, laws and products of nature are not patentable unless they are in a form not found in nature. For example, a nucleic acid that exists naturally in a cell is not patentable; however an "isolated" nucleic acid can be patented.

The patentability of a product of nature, such as a living organism, that is in a form not normally found in nature was explored in the United States Supreme Court case Diamond v. Chakrabarty (Diamond 1980) which was dealing with whether genetically


modified microorganisms can be patented. Ananda Mohan Chakrabarty, while work- ing for General Electric, had developed a bacterium derived from the Pseudomonas genus that was capable of breaking down crude oil, which he proposed could be used in treating oil spills. He requested a patent for the bacterium in the United States but was turned down by a patent examiner who believed that living things were not patentable. The Patent Office Board of Appeals agreed with the original decision; however, the Court of Customs and Patent Appeals (CCPA) overturned the case in Chakrabarty's favor, writing that "the fact that micro-organisms are alive is without legal significance for purposes of the patent law." Sidney A Diamond, Commissioner of Patents and Trademarks, appealed to the Supreme Court. In a 5-4 ruling, the court ruled in favor of Chakrabarty, and upheld the patent, concluding that Congress intended statutory subject matter to "include anything under the sun that is made by man."

Thus, in terms of biotechnology, patentable subject matter generally includes (1) compositions, e.g. drugs, proteins, antibodies, medical devices, and cell lines; (2) methods of making the compositions, e.g. synthesis, isolation, screening, and purifying a composition; and (3) methods of using the compositions, e.g. diagnostic, therapeutic, and prognostic uses. Thus, for stem cells, patents can be directed to methods of making stem cells, methods of using stem cells, and, most significantly, to the stem cell per se. Examples of such patents and the impact they are having on the field are discussed below.

A R E THE REQUIREMENTS FOR A PATENT?

Any process, machine, manufactured article, composition of matter, or improvement of the same may meet the legal definition for "invention" and qualify for patenting if it is (a) new, (b) useful, and (c) non-obvious. The novelty requirement states that an invention cannot be patented if certain public disclosures of the invention have been made. The statute that explains when a public disclosure has been made (35 USC

102) is complicated and often requires a detailed analysis of the facts and the law. The most important rule, however, is that an invention will not normally be patentable if the invention was known to the public before it was "invented" by the individual seeking patent protection; the invention was described in a publication more than one year prior to the filing date; or the invention was used publicly, or offered for sale to the public more than one year prior to the filing date. Although the United States grants the one year grace period described in the last two rules above, most other countries do not grant such a period. Therefore, it is almost always preferable to file a patent application before any public disclosure of the invention.

The specification must also contain an assertion of a specific, substantial and credible utility for the invention (Federal Register Vol 66, 1092-1099). The patent need not be limited to this asserted use, but at least one use that is credible must be pro- vided. This requirement excludes "throw-away, .... insubstantial," or "non-specific" utilities, such as the use of a complex invention as landfill. This also excludes incred- ible assertions such as for cold fusion or a perpetual motion machine. If an invention is not exactly the same as prior products or processes (which are referred to as the "prior art"), then it is considered novel. However, in order for an invention to be


patentable, it must also be a non-obvious improvement over the prior art according "to one of ordinary skill in the art." AS can be imagined, the determination of whether a particular change or improvement is "obvious" is one of the most difficult determi- nations in patent law. In order to make such a determination, an examiner in the patent office will normally review the prior art to find those publications that are closest to the invention in which a patent is sought. If no single publication contains all of the features, the examiner will attempt to find all of the features in a combina- tion of two or more prior publications. If there is a motivation to combine these ref- erences in order to arrive at the claimed invention and an indication in the prior art that the invention would have had a reasonable likelihood of success, then the invention would be obvious and unpatentable.

Other important legal requirements for patenting, all of which are part of the quid pro quo that serves to protect the public's interest in understanding and applying the knowledge embedded in the patent, are that the patent must (a) be explicit and detailed enough to enable the person with "ordinary skill in the art" to reproduce the invention without undue experimentation (35 USC ~ 112, paragraph 1); (b) present the best con- figuration and use of the technology known to the inventors (35 USC ~ 112, paragraph 3); and (c) conclude with claims that are precise, clear, correct, and unambiguous (35 USC ~ 112, paragraph 2). Patent claims define the metes and bounds of the patentees property right, much like a deed to a piece of land, but in a specific legal style that sets out the essential features of the invention in a manner to clearly define what will infringe the patent.

~IF THERE IS ALREADY A PATENT?

The purpose of a patent is, after all, to exclude others from making, using, or selling the invention. However, the rights given to the patentee do not include the right to make, use, or sell the invention themselves. It is necessary to determine the "freedom to operate" for a new invention, because the patentee may have to obtain a license from another patent holder and/or comply with other laws and regulations to make use of the claimed invention. A perfect example of this necessity exists for stem cells. A researcher can patent a novel therapeutic use for hESCs; however the stem cells themselves are the subject of several patents (see below), which could also be true for the other reagents and materials used in the method. In addition, there may be other method patents with generic claims that dominate those of the researcher. It would therefore be necessary to get some form of rights to the invention from the patent holder in order to make, use, or sell the invention. These rights usually come in the form of either assignment (i.e. sale or transfer) or license of the patent.

A patent license can take many forms but the most common types are exclusive and non-exclusive licenses. A non-exclusive license means that multiple parties may con- currently license the technology, even if they are competing with each other in the same industry and territory. As a general rule, a non-exclusive licensee cannot sue a non-licensed entity for patent infringement. The non-exclusive licensee must demand that the patent owner take steps to enforce the patent rights. In contrast, an exclusive licensee can sue for patent infringement, because the license affords sole rights to the invention within the confines of the license. However, an exclusive license can be


conditional or limited, such as to a particular industry or geographic territory. It is therefore common for a company to obtain exclusive rights to a particular use of an invention, but not to others. As an example, Geron Corp. received a license from the Wisconsin Alumni Research Foundation (WARF) that grants Geron exclusive commercialization rights to three hESC derivatives (cardiomyocytes, neural cells, and pancreatic islet cells) and non-exclusive rights to three other cell types (hematopoietic cells, osteoblasts, and chondrocytes) for therapeutic and diagnostic products. Thus, while they are allowed to produce cardiomyocytes, neural cells, pancreatic islet cells, hematopoietic cells, osteoblasts, and chondrocytes from hESCs, they are only allowed to sue others for patent infringement based on cardiomyocytes, neural cells, and pancreatic islet cells.

THE STATUS OF STEM CELL PATESTS C s ,~

On December 1, 1998, the US Patent and Trademark Office (PTO) issued a broad patent claiming primate (including human) ESCs, entitled "Primate Embryonic Stem Cells" (Patent 5,843,780). On March 13, 2001, a second patent (6,200,806), with the same title but focused on hESCs, issued from a "divisional application." Finally, on April 18, 2006, the PTO issued a third "continuation" patent application to Thomson under the same title (7,029,913). These three patents have considerable consequence for hESC research in the United States, because they have claims to the cells themselves, not just a method of deriving them. The claims give the patent owner, WARF, the legal right to exclude everyone else in the United States from making, using, selling, offering for sale, or importing any hESCs covered by the claims until 2015. The broadest claim of both the 1998 and 2001 patents is claim 1, which claims the "composition of matter" of primate ESCs. The 1998 patent reads as follows:

We claim: 1. A purified preparation of primate embryonic stem cells which (i) is capable of proliferation in an in vitro culture for over one year, (ii) maintains a karyotype in which all the chromosomes characteristic of the primate species are present and not noticeably altered through prolonged culture, (iii) maintains the potential to differentiate into derivatives of endoderm, mesoderm and ectoderm tissues throughout the culture, and (iv) will not differentiate when cultured on a fibroblast feeder layer.

Composition of matter claims are generally more powerful than method claims because they cover the matter itself, regardless of how it is made or used. As the characteristics listed in claim 1 in the 1998 patent describe the essence of primate ESCs the patent effectively covers all primate ESC lines regardless of who makes them or how they are generated (see Loring and Campbell, 2006, for a review of how hESCs became patented). While many new stem cell creation methods, such as those not involving the isolation of the inner cell mass from a human blastocyst (e.g. using blastomere biopsy or cellular fusion) may not be covered by the WARF process claims, the composition claims are much more difficult to avoid. This is partly because the scope of the composition claims is somewhat ambiguous, because the Thomson patents do not define the term "embryonic stem cell." In the absence of a clear definition in the specification, this term should be given its ordinary and customary meaning


according to one of ordinary skill in the art at the time the application was filed (Phillips, 2005). A definition that is consistent with the prosecution history of the Thomson patents and expounded by the National Institutes of Health (NIH Report) is that an embryonic stem cell is defined by its origin, i.e. is derived from the blastocyst stage of the embryo. Thomson filed comments disputing a request for interference in Application No. 09/982,637 partially on the basis that the contestant's cells were not derived from the inner cell mass of blastocysts. While the Thomson patents were the first to successfully claim a hESC, i.e. derived from a human blastocyst, there are alternative sources of pluripotent stem cells that have therapeutic potential. One such alternative, the embryonic germ cell, is discussed below.

! S THE STATUS OF STEM CELL PATENTS I BRYONIC GERM CELLS?

Embryonic germ cells (EGCs) are pluripotent stem cells derived from primordial germ cells. As they are not derived from the inner cell mass of a blastocyst, they are not covered by the Thomson patents. Instead, the USPTO issued claims to human EGCs and their uses to John Gearhart (US Patent Nos. 6,090,622, 6,245,566, 6,331,406, and 6,562,619). The broadest claim is claim I of the '622 patent, which claims the "composition of matter" of human EGCs. The '622 patent reads as follows:

We claim: 1. Human pluripotent embryonic germ cells, wherein the cells exhibit the following culture characteristics during maintenance: (a) dependence on a ligand which binds to a receptor which can heterodimer-

ize with glycoprotein 130 (gp 130); and (b) dependence on a growth factor.

As Dr Gearhart's research was supported by Geron, these patents, like those for the Thomson hESCs (at least for three cell types), were exclusively licensed to Geron. Companies looking to pursue alternatives to hESCs would still have had to acquire a license from Geron. However, there is an earlier patent on embryonic germ cells. Brigid Hogan was the first to determine that an ESC line could be generated from primordial germ cells of an embryo using fibroblast growth factor (FGF), leukemia inhibitory factor (LIF), and steel factor (Labosky et al., 1994). In 1997 the USPTO issued a patent application directed to an "isolated human PGC-derived pluripoten- tial stem cell," i.e. a human EGC. Dr Hogan's patents have been licensed exclusively to Amphioxus Cell Technologies, Inc., a wholly owned subsidiary of Stem Cell Innovations (SCI). Thus, SCI presents an alternative source of EGCs. As interest in EGCs grows, this potential conflict may have important consequences for stem cell researchers, funding agencies, and companies.

THE STATUS OF STEM CELL PATENTS C s IN EUROPE?

While the USPTO has, to date, granted at least 46 patents that claim hESCs or their uses, the European Patent Office (EPO) has not granted a single patent on hESCs.

Intellectual Property" Owning the Stem Cell

This is because rule 23d(c) of the European Patent Convention (EPC), which has its origins in the European Commission's directive of Article 6.2(c) against the use of human embryos for industrial or commercial use, prohibits the patenting of the "human embryo" on moral grounds. While the EPO is issuing patents on human adult stem cells and to non-human ESCs, since neither of these involves the destruc- tion of a human embryo, there are many applicants that have been awaiting examination, hoping that the EPO's stance on hESCs changes. This stance is the basis for appeal for two cases involving hESC rulings, the University of Edinburgh (European Patent No. EP 0695351) and WARF (European Patent Application No. 96903521.1), wherein the EPO interpreted Rule 23d(c) EPC to exclude not only patents that destroy human embryos (i.e. as part of the process of extracting stem cells from a human blastocyst), but also patents relying on already established hESC lines as their starting point (Laurie, 2004).

While this stance has not been adopted by all countries, no other country has allowed hESCs to be patented as broadly as in the US. Therefore, it remains to be seen what impact this will have on stem cell research and commercialization. This is in part because, even though the US patent rights can only be enforced within the United States, hESCs made in another country become subject to US patent law if they are imported into the United States.

E F F E C T ARE STEM N O V A T I O N . ~

CELL PATENTS HAVING

Although many patent holders choose to license others to practice the patented invention in exchange for royalties, in the United States, licensing is not compulsory; patent holders can choose to license on their own terms or not to license at all. Because WARF controls the rights to hESCs, researchers who wish to use these cells must be aware of their obligations to the patent owners under US law. The NIH took steps to engage WARF's cooperation, signing a memorandum of understanding (MOU) with WARE The NIH retains rights to the 1998 ('780) patent, because the work was supported by Federal grants (NIH NCRR Grant No. RR00167). This MOU gave researchers employed by the NIH, the Food and Drug Administration, and the Centers for Disease Control and Prevention a license to use hESCs for research. Also, WARF agreed that it would not impose more restrictive terms for any other not-for- profit institutions.

In early 2002, the NIH made similar MOU agreements with other groups that had made lines that were eligible for funding, including the University of California at San Francisco, Mizmedi (Korea), BresaGen (Australia), Technion (Israel), Cellartis (Sweden), and ES Cell International (Singapore). These institutions received Infra- structure grants from the NIH of about $200 000-500 000 a year to facilitate the distribution of their own hESC lines under a license from WARF, and their prices were limited by the MOU.

As of publication, WARF requires a license agreement for distribution of any hESC lines in the United States, whether or not they are on the NIH registry. The Harvard hESC material transfer agreement (MTA), for example, requires that the recipient of


their cell lines acknowledges WARF's patent rights. Only the institutions that have MOUs with the NIH have price regulations; other suppliers of hESCs can charge as much or as little as they wish for the cells. For example, Harvard charges nothing for its lines. However, because the WARF patents are only valid in the United States, non-US-based hESC researchers do not need a license unless they import the cells into the United States.

As a result of an NIH contract to serve as the main distribution center for hESCs in the United States, WARF reduced the price of cells to $500 for academic investiga- tors. Although the academic price is now less onerous, the situation for commercial biotechnology and pharmaceutical companies remains difficult. Because Geron holds an exclusive license for broad therapeutic use in the United States of hESC-derived cardiac, nervous system, and pancreatic cells, if a company wishes to develop thera- pies in these areas, they must negotiate with Geron for fees and royalties.

But what if a company simply wants to use the ESCs for basic research? Even if the company's research is non-commercial, WARF still requires a commercial license, which costs an upfront fee (typically $125 000), with $40000 annual maintenance fees to retain the license. This fee gives commercial entities the same research freedom as academic researchers, and, with negotiated royalty payments, they may com- mercialize reagents for research.

The research license cost has complicated the situation for start-up biotechnology companies that want to obtain NIH funding for hESC research. Small companies may find themselves in what we call the "SBIR paradox." The NIH is willing to fund hESC research through its Small Business Innovative Research (SBIR) program, but the company is not allowed to use NIH money, usually $100 000 for a phase 1 SBIR (R43), to pay WARF for a commercial research license. Therefore, the company must come up with separate funding of perhaps $125 000 for a license to do the NIH- funded research with the cells. As a result of discussions with the NIH, WARF has offered to take equity instead of cash for a license for some biotechnology companies.

Thus, debates rage on about the ethics of using US tax dollars to fund stem cell research while states and private foundations are attempting to compensate for this lost funding. However, companies on the verge of innovations are going to be less concerned with whether the funding comes from the government or not than they will be about who "owns the stem cell" when they market a therapy or a new diagnostic test.

G L I s T

Loring JF, Campbell C (2006). Science and law. Intellectual property and human embryonic stem cell research. Science 311: 1716-1717. This Policy Forum article is written for scientists to explain the process by which hESCs became patented.

US Patent Office website: www.uspto.gov Searches of issued patents and patent applications: www.uspto.gov/patft/index.html (use key- words "embryonic stem cells" and "'human").

Official correspondence and documents (called File Wrappers): http://portal.uspto.gov/ external/portal/pair


Public Patent Foundation: www.pubpat.org This is a non-profit organization that investigates the effects of issued patents on the public and files requests for re-examination for targeted patents.

Stem Cell Community: www.stemcellcommunity.org This is a non-profit website that posts information about hESCs, including patents and links to other stem cell sites.

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Diamond v. Chakrabarty, 447 U.S. 303, 1980.

Federal Register Vol 66 1092-1099 January 5, 2001. The training materials can be found on the Internet at http:l/www.uspto.govlweb/menulutility.pdf

Harvard hESC material transfer agreement (MTA): www.mcb.harvard.edu/melton/hues/ HUES_request.html

HR 810" The Stem Cell Research Enhancement Act of 2005. The NIH has a tracking site for information about health-related legislation: http://olpa.od.nih.gov/tracking/lO9/house_bills/

Labosky PA, Barlow DP, Hogan BLM (1994). Mouse embryonic germ (EG) cell lines: their transmission through the germline and differences in the methylation imprint of insulin-like growth factor 2 receptor (Igf2r) gene compared with embryonic stem (ES) cells. Development 120: 3197-3204.

Laurie G (2004). Eur Intellectual Property Rev 26: 59-66.

NIH Grant Records: http:l/grantsl.nih.govlgrants/award/state/state.htm

NIH Human Embryonic Stem Cell Registry: http://stemcells.nih.gov/research/registry

NIH NCRR Grant No. RR00167; the patent states: "This invention was made with United States government support awarded by NIH NCRR Grant No. RR00167. The United States government has certain rights in this invention." The principal investigator on this grant was John P Hearn, the Director of the NIH Regional Primate Research Center.

NIH Report: Stem cells, scientific progress and future research directions, http://stemcells. nih.govlinfolscireport/chapter2.asp

Phillips v. AWH Corp., 415 E3d 1303, 75 U.S.P.Q. 2d 1321 Fed. Cir. 2005.

US Code: www.gpoaccess.gov/uscode/ The United States Code is the codification by subject matter of the general and permanent laws of the United States.

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