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Whole-Genome Sequencing Poses ‘Serious Challenge’ to US Patent System, HHS Finds

The US patenting system’s practice of assigning patents to single genes and the industry’s focus on exclusive licenses to genetic discoveries may hamper the ability of personal genomics firms to conduct multiplex testing and to eventually migrate toward using whole-genome sequencing, according to preliminary findings from a Health and Human Services advisory committee.
“Full genome sequence analysis represents a serious challenge to the current system of patents on individual genes and exclusive licenses,” according to the preliminary conclusions presented by the HHS Secretary’s Advisory Committee on Genetics, Health, and Society during a meeting in Washington, DC, last week.
The group disclosed its initial assessment during a meeting to discuss a draft report it is crafting for the HHS Secretary on gene patenting. SACGHS has been working on the report since 2004, when it first defined gene patents and licensing as a “priority issue.” In 2006, the committee formed a task force to examine the issue and kicked off a study in collaboration with Duke University’s Center for Genome Ethics, Law and Policy to explore how gene patents and licensing practices affect patient access to genetic tests.
The committee said last week that it is considering issuing recommendations aiming to increase transparency of patents and licensing deals; encourage federal efforts to broaden licensing and patient access to genetic tests; craft licensing policies for government-funded research to allow greater public access to genetic tests; clarify Patent and Trademark Office policies toward gene patents; and suggest statutory changes to patent laws that affect gene patenting.
SACGHS plans to release its report for public comment in February with a final report to appear around this time next year, the committee said.
If SACGHS’ recommendations are adopted by the HHS and used by Congress to make legislative changes, they could alter how genes are patented and licensed in the US. Particularly, any changes could affect personal genomics firms because the gene-disease associations they screen customers for are often protected by patents that belong to disparate firms and academic institutions.
Companies that could be affected by these changes include 23andMe, Navigenics, Decode Genetics, and Knome. Of these, Knome is the only one that currently uses whole-genome sequencing to perform its tests. Tests performed by the other three shops are conducted on SNP-genotyping chips, but all three have expressed a desire to do move toward whole-genome sequencing when the technology becomes cheaper.
SACGHS is currently considering whether to propose a ban patenting gene/disease associations; restrict DNA sequence patents entirely or limit them based on specific use or for diagnostic purposes only; modify the Patent Act to restrict the ability of individuals to sue companies for patent infringement if they blocked access to a genetic diagnostic; and exempt from patent infringement litigation doctors and researchers using genetic tests.
If the use of multiplex testing and whole-genome sequencing continues to grow, “the existing landscape of patents and exclusive licenses may cause significant problems in the future,” SACGHS reported.
Navigenics’ Formula
Striking up licensing deals for each individual SNP association screened for under personal genomics services can become financially burdensome and overly complex, which in turn could discourage investment in the field, according to some industry observers.
For instance, Navigenics’ Health Compass service analyzes approximately 900,000 SNPs and, for certain health conditions, looks at more than 10 SNPs. As a result, the service “requires a new kind of licensing approach for gene patents,” Navigenics states on its website.

“The hardest part is really parsing out the IP landscape.”

“For example, if we obtain licenses from third parties to 10 patents, each covering the use of one SNP included in our service, and each subject to a royalty of between 1 percent and 5 percent of our net sales of the service, we would be required to pay between 10 percent and 50 percent of our net sales revenue — just for gene patent licenses!” the company states, illustrating the problem it faces under the current patent and in-licensing system.
As a result of the complexity of the current patent system, Navigenics has come up with its own royalty model for licensing gene patents, which reduces the royalty amount paid by Navigenics based on amounts payable for other in-licensed patents that also cover the licensed SNP or that cover any related genes. Also, Navigenics does not pay royalties on any portion of its net sales revenue related to laboratory charges, products or services that are sold in combination with the licensed service.
Navigenics said it developed the model out of its overarching belief that genes should be patented and licensed only for risk assessment and other non-therapeutic uses on a non-exclusive, non-discriminatory basis; that these patents be subject to “commercially reasonable” financial terms; and that the licenses should be based on a royalty model that “appropriately reflects the relative contribution of the licensed SNP or other DNA variation to the overall value of the service and information provided.”
Different Rules for Screening?
Another idea put forth by Knome CEO Jorge Conde is to craft licensing deals depending on whether the patent is being used for screening purposes or for medical decision-making.
“Patent pools [would] … lower the transaction costs and simplify licensing especially for companies that are doing comprehensive analysis and not doing clinical diagnostics,” Conde told Pharmacogenomics Reporter this week. “If a personal genomics firm wants to include an IP-protected association just for screening processes, not for diagnostic or for clinical purposes, [there should] be a central marketplace or a clearing area to be able to do that in an expedited manner instead of having to go through and license those things individually.
“Once the transaction costs get too high it becomes burdensome to attempt to license individual [associations] for the sake of putting together a comprehensive analysis,” Conde explained. “I think it would be beneficial to differentiate between companies that [use the] IP for clinical and diagnostic purposes and companies that want to use the associations for general screening purposes.”
As the only personal-genomics firm that conducts whole-genome sequencing, Knome’s challenge with the current patent system is figuring out when a patent owner can enforce its IP with regard to Knome’s service.
According to Conde, “there is a wide range of IP covering different areas of the genome, most specifically covering clinical diagnostic tests that have been developed for specific genes and diagnosing specific conditions. Then there are other types of IP that might not be directly relevant to what we’re doing because they are specific for specific applications where we don’t think we fall under that.
“The hardest part is really parsing out the IP landscape,” he added.
To date, the instances when Knome has had to in-license IP “haven’t been a significant amount of our efforts so far to date,” Conde said. “In a situation where we believe there is relevant IP, we of course reach out to those parties.”
Case-by-Case Race
Not everyone in the personal genomics game agrees that the current patent system will hinder the industry.
“The whole patent system doesn’t need to be changed because of advancing technology,” Decode Genetics Chief Scientific Officer Jeffrey Gulcher told Pharmacogenomics Reporter this week.
According to Gulcher, personal-genomics firms will need to prioritize on a case-by-case basis which SNP associations to in-license. For instance, if a company is considering screening for diabetes risk, then TCF7L2 is a stronger gene association for the disease and should be licensed over the PPAR gamma Pro12Ala polymorphism, he noted.
When differentiating its DecodeMe service from competitors, Decode often claims it has conducted the original research for many association genes and says 23andMe and Navigenics merely market discoveries made by other firms.
In 2001, for instance, Decode announced its intent to patent as many as 350 genes it discovered in key drug target classes.
Over the past year, the company has launched clinical diagnostics for myocardial infarction, glaucoma, atrial fibrillation, type 2 diabetes, and breast and prostate cancer. The SNPs associated with these diseases, many of them discovered by Decode, are screened under the DecodeMe service.
However, the patents for these SNP associations have not yet issued in the US. When they do, the company expects to have an advantage over competing personalized genomics firms.

Patent Fending
Gene patenting has long been a divisive issue in the genetic industry. Opponents hold that genes occur naturally in the body and therefore gene-disease associations cannot be protected by patents. Meanwhile, supporters argue that patent protection provides incentive for investment and innovation.
“The patenting of genes and genomic sequences is intrinsically different from the patenting of methods, tools and technologies, because there is no possibility to ‘invent around’ a DNA or RNA (or cDNA) sequence,” members of the European Society of Human Genetics wrote in a paper published in the May issue of the European Journal of Human Genetics.
“The patentability of nucleic acid sequences is generally defended on the basis that they are mere chemical structures; this viewpoint neglects the fact that genetic sequences also contain genetic information, which, in addition, is shared by all humans,” the ESHG wrote [see PGx Reporter 04-30-2008].
In the paper, the ESHG recommended limiting broad gene patents, more interaction among US, EU, and Japanese patent authorities to align their patent systems; prohibiting patents for disease genes; and promoting new models for licensing to promote research.
In its preliminary findings, SACGHS does not provide overt support for either side.
“Thus far, there is no strong evidence of large-scale and long-term barriers to clinical access to genetic tests with the current gene patenting and licensing landscape,” the committee said during the meeting. “At the same time, there is also no evidence that gene patents and exclusive licensing practices provide powerful incentives for the development of genetic diagnostic tests.”
The most contentious example of gene patenting is Myriad’s IP associated with its BRACAnalysis test for breast and ovarian cancer predisposition. A European Patent Office appeals board last month ended a seven-year tussle between Myriad and a number of European research groups in deciding to maintain in an amended form Myriad’s patent, EP 699754, covering a “method for diagnosing a predisposition for breast and ovarian cancer.”
Specifically, the EPO’s decision amends the patent to cover frame-shift mutations, but not missense mutations, in the BRCA1 gene, and does not “contain claims directed to the BRCA1 gene itself or to mutated forms thereof.” The amended patent cannot be further contested at the European level [see PGx Reporter 12-03-2008]. 
A large part of the controversy surrounding Myriad’s BRCA patents concerns not just the legitimacy of the patents themselves, but also critics’ claims that Myriad charges high licensing fees, which discourage laboratories from carrying out diagnostic testing in countries where the patent is in force.
With regard to the personal genomics field, some industry observers are concerned that such stringent positions on licensing gene patents could hamper innovation and access.

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