Genentech Patent: Will Licensing Be Required?

Many US. scientists cloning genes in microbes could be affected by a patent awarded this month to Genentech Inc. of South San Francisco. The decision’s scope remains to be seen, but some observers believe that the impact may be slight—a sign, they say, of the growing maturity of the biotechnology industry. The question of which institutions or researchers must seek a license from Genentech, and at what stage in the process, is “a legal quagmire,” according to Iver Cooper, patent counsel for the Association of Biotechnology Companies. Until the patent has been challenged in court, disagreement over its breadth is likely to continue. “An awful lot of people are going to be examining it very closely to see if it’s valid,” said George Frank, senior counsel at E.I. Du Pont de Nemours, who said it came as a surprise to others in the industry. The patent, for which Genentech first applied a decade ago, makes a 15-part claim involving procedures for cloning in microbial hosts DNA segments capable of expressing functional polypeptides. Because the patent covers a process rather than a specific product, it has at least the potential of dominating the biotech industry, according to several patent attorneys and biotech executives. But because the patent covers technology that is a decade old, they said, subsequent improvements or variations in technique may be ruled outside the patent’s scope. And whether mammalian cell hosts are included is another matter of debate. Reasonable Rates Much of the patent’s impact will depend on how Genentech chooses to defend its claim. Chief executive officer Robert A. Swanson said the company will offer non-exclusive licenses “at reasonable rates on a case-by-case basis” to other firms that produce hormones and proteins by inserting the operative genes into microbial hosts. Many biotech products are now manufactured in such microbial factories, including insulin, alpha interferon and hepatitis B vaccine. Swanson said Genentech does not intend to block the creation of new drugs by its competitors. The impact on other biotech, companies “will depend on what rate Genentech is looking for,” said Robert Kupor, an analyst at Cable Howse & Ragen in Seattle. If the non-exclusive licensing fee is set at about 1 percent of sales—a standard figure in the industry, he said—”it will have relatively little impact” on R&D decisions. Profit margins for many biotech products generally range between 30 and 40 percent, Kupor noted. Most companies are likely to find it cheaper to clone their desired genes in bacteria or yeast cells and pay a small royalty to Genentech rather than switch to a more expensive process that would not be covered by the patent, he said, or fight Genentech in court. “If Genentech is reasonable and balanced and makes it much easier for companies to license than not to license,” said Kathleen Behrens, an analyst with Robertson, Colman & Stephens in San Francisco, “I suspect they’ll get lots of people to fall in line. Most participants in the industry believe that patents are important and want to see them upheld.” Opposition to Genentech’s broad claim has emerged in some of the more than 20 countries in which the company is seeking or has obtained a similar patent. In Britain, for example, Eli Lilly, which sells insulin made using the process, is challenging the patent, and the European Patent Office this month cited lack of novelty in denying Genentech a patent on its claim. Amgen Inc. of Thousand Oaks, Calif., does not plan any shift in its R&D direction as a result of Genentech’s patent, according to Philip Whitcome, the company’s director of strategic planning, who noted that it’s still not clear how much of its research might be covered by the patent. Whether universities will need to obtain licenses for research conducted in their labs is a matter of debate, since that field is “in somewhat of a degree of flux,” according to Anthony Figg, a patent attorney at Bernard Rothweli & Brown in Washington. Under a 1984 court decision, such research would not be exempt from infringement claims if it had a commercial goal. To a molecular biologist engaged in such research, that distinction might be hazy, “but as a practical matter, I don’t see Genentech coming after someone like that,” Cooper observed. Amgen’s Whitcome said Genentech wants to contribute to improvements in health and well-being, not to hoard knowledge. “I think they would like to see these inventions cultivated and finetuned” by scientists outside their own lab, he said. “It’s in everybody’s interest to stimulate research.” Greene is on the staff of THE SCIENTIST.

Genentech Patent: Will Licensing Be Required?

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