TCS Daily

Biotech in the Balance

By Tim Wolfe - June 6, 2005 12:00 AM

GENEVA -- Lost in the shadow of the European Constitution debate is an important international dialog about intellectual property rights in the biological sciences. Last Friday a meeting of the Ad Hoc Intergovernmental Meeting on Genetic Resources and Disclosure Requirements began under the auspices of the World Intellectual Property Organization (WIPO). Representatives from around the world have come to Geneva to hammer out a position on the intersection of environmental diversity, biotech development and patent law.

Based on agreements within the 1992 Convention on Biological Diversity, a number of developing nations -- headed most vigorously by Brazil -- argue today that while their vast biological resources are a critical input to the biotech and pharmaceutical industries, little of the profit made in these fields ever sees its way back to them. The answer, they contend, is a mandatory international regime to address "Access (to) and Benefit Sharing" (of) genetic resources (ABS). They propose a worldwide web of regulation that would require disclosure in patent applications of all flora, fauna, and traditional knowledge that contributed to the development of a new product or technology in order for a patent to be approved. These new disclosure requirements would then provide a foundation for a new global system for challenging both the validity and even the ownership of those patents after they were approved.

On the face of it, many of the arguments in favor of a new ABS system seem reasonable. More reliable and better-crafted local laws will be helpful if developing nations are to effectively harness their biological and intellectual resources. Companies need to know with whom they have to deal to get access to a nation's rainforests, jungles and mountainsides; what the local regulations are with respect to bioprospecting there; and how they should set up contracts to make certain traditional knowledge of indigenous communities is rewarded whenever it turns out to be marketable.

However, recent comments from the Brazilian delegation reveal a far more ominous vision of ABS. In that vision, ABS requirements are really about sanctions for insufficient disclosure, including revoking patents or the full or partial transfer of the rights of the invention. If these litigation-induced insufficiencies include the failure to disclose prior informed consent of the local communities by the patent holder, they could result not just in the loss of a patent, but in criminal and civil sanctions -- including imprisonment.

But recent research suggests that this kind of an ABS regime could have significant negative economic ramifications on the developing world. A recent study by Benjamin Zycher of the Pacific Research Institute and me about an ABS system that focuses on the confiscation of intellectual property finds that companies would have greater incentive to avoid investment in any technology that might conceivably be linked back to a country or tribe's genetic resources or traditional knowledge. That includes not just drastically curtailing bioprospecting (and any potential benefits that would otherwise have been shared), but slashing investment and research into any new biotech or pharmaceutical product that might conceivably be threatened with patent revocation.

Zycher and I estimate the effects of this de facto tax on investment in biotech and pharmaceutical capital stocks in 27 countries. We selected a set of developed countries with robust biotech industries, as well as a set of developing countries with burgeoning biotech industries.

We estimate that in 20 years the biotech and pharmaceutical capital stock would be reduced $144 billion dollars, or over 27%, relative to what it otherwise would have been. Interestingly, the United States is not the biggest loser. The nations included in the study from the European Union would lose a combined $79 billion in capital stock, compared to a US loss of $21.6 billion.

The developing world would suffer badly under this loss of investment, as well. China would lose $3.4 billion over those 20 years relative to what it would otherwise have had accumulated. India would lose $5 billion. Brazil would also fare badly.

Introducing new uncertainties and opportunities for mischief into the patent system is a dangerous business, and not just for the developed world. Developing countries currently backing an ABS regime have a serious stake in defeating the misguided vision of Brazil's diplomats -- including Brazil itself.

Over the next two weeks, a series of important decisions will take place on this obscure issue. While most people on the street in Geneva worry about the future of the European Constitution, these ongoing debates \will be helping determine the future of biotechnology around the world. Let's hope intellectual property fares better than the European Constitution has.

The author is CEO of QueryLogic corporation.


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