Can Patents Stifle Innovation In Biomedical Research?

April 30, 1998

ANN ARBOR---Federal patent policy in biomedical research imposes social costs overlooked in the public debate, according to a paper by two professors at the University of Michigan Law School appearing in this week's issue of Science.

Profs. Michael A. Heller and Rebecca S. Eisenberg argue that granting too many patent rights in pre-market or "upstream" biomedical research paradoxically may stifle discovery of life-saving "downstream" products.

Biomedical research has been shifting from a commons to a privatization model, they note. Under the old model, research was publicly funded and results were made freely available in the public domain. The new model, by encouraging universities and private firms to patent their findings, has increased private investment and spurred the pace of upstream research.

However, downstream product developers now face a daunting bargaining challenge. Before they can develop new products and bring them to market, they need to collect licenses from many owners of upstream patents. These owners have conflicting priorities and conflicting assessments of relative value.

Heller and Eisenberg use property theory to explain the paradox of more patents and fewer products. Policy-makers often prescribe privatization to cure a "tragedy of the commons" in which people overuse shared resources.

But, in solving one tragedy, privatization can go astray and accidentally create a "tragedy of the anticommons" in which people underuse scarce resources because too many owners can block each other.

Examples of potential anticommons tragedies include patenting of gene fragments and royalty-stacking through the use of reach-through-license-agreements (RTLAs) for patented research tools.

According to Heller and Eisenberg, privatization of biomedical research must be more carefully deployed to promote upstream research without stifling downstream discoveries.
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University of Michigan

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