Life Patents and Trade (LIFEPAT)

          CASE NUMBER:         140 
          CASE MNEMONIC:      LIFEPAT
          CASE NAME:          Life Patents  

A.        IDENTIFICATION
1.        The Issue
     While the Green Revolution helped to boost world output of
agricultural products and played a significant role in feeding
ever-growing populations in both the First and the Third Worlds, 
biotechnology today is entering an area in which the old frontiers
of rich versus poor are re-emerging.  Pharmaceutical companies are
extracting desoxyribonucleic acid (DNA, the building block of life
in which the genetic material of all living things is stored) from
plants and animals, and alter the characteristics of the genome.
Unlike the Green Revolution, where arguably everybody won in some
way, a company's patenting of life forms can make it huge profits 
while the original owners of the species stay behind with nothing
but conservation cost. 
2.        Description 
      Scientists believe that a large part of tropical rain forest
species are not yet known to humans.  A few species have achieved
notoriety, such as the Amazonian bush viper, whose venom is used to
produce a blood pressure-stabilizing drug.  President Ronald Reagan
was treated with the drug when he struggled for his life after the
almost successful attempt on his life. 
     The drug originated in the rain forest of the Amazon, but is
today a patent of one of the large transnational pharmaceutical
conglomerates.  These companies make drugs, but also alter the
genome of agricultural products to find substitutes for plants that
cannot be grown in the rich consumer countries or are rather
expensive.  For the First World consumer, a patent on vanilla DNA
or coconut extracts translates in a lower price.  For many in the
Third World, it means that yet another market for a cash crop is
lost.
     Producer countries are reacting with moratoria and protest.
Agricultural officials from 14 Asian countries asked the United
Nations Food and Agriculture Organization (FAO) in 1993 to examine
"the relation between genetic engineering, bio-safety,
environmental effects and socio-economic effects, including the
displacement of the agricultural products of developing
countries."  Genetically modified plant species, the officials
said, could pose serious environmental risks and threaten the
livelihood of farmers in developing countries whose crops could be
substituted by bio-engineered varieties (see PLANT case).
     The five companies that account for more than half of
genetically engineered food currently tested or on the market --
Monsanto, Upjohn, Frito-Lay, Calgene and Pioneer Hi-Bred -- and
others in the industry argue in favor or patenting.  They cite the
need for a profit incentive to engage in basic research, which
patents provide.
     Studies have shown that "There is little evidence that without
patent protection basic discoveries languish."  Lancet quotes
Nobel Prize-winning works performed without patenting, and the
refusal of some American universities to patent discoveries made by
their faculty. 
     One U.S. pharmaceutical giant showed a way how to make money
and share with locals the profits from the plants that these locals
can either protect or destroy, i.e. to farm the land.  Merck signed
an agreement with the Costa Rican National Biodiversity Institute
(INBio) in September of 1991, under whose provisions INBio would
gather and prepare for transport plants with a potential for
medicinal effects (see MERCK case).  INBio
would put money received under the agreement back into the
communities where the species originate from. Merck agreed to an
upfront payment of $1.1 million and to the payment of royalties for
every plant that turns into a profit-making drug.
     While Merck expects to benefit from the knowledge of the
locals in locating and classifying drugs, the company also pays a
certain premium for the preservation of the rain forest the company
hopes will produce numerous drugs in the future. They see the
preservation of the rain forest -- their inventory -- as overhead
in the same way as the maintenance of their labs. 
     The Merck venture in Costa Rica marks a positive incident in
the international "bio-prospecting" industry -- business interests
attempt to reap profits from the patenting of life forms found in
and extracted for little or no money from other countries.  More
common are examples of blatant disregard for the original owners
and the needs of the indigenous populations using the natural
resources.  Kimbrell speaks of a new form of colonization, equating
the developed country descent on developing countries' gene pool to
the forceful extraction of raw materials during the era of
colonialism. 
     The question is, who really owns genetic resources? More than
half the world's plant and animal species are indigenous to the
tropical rain forests, and exist nowhere else.  Yet it is the
laboratories of New York or Geneva that will own the right to use
the genes from these life forms once they have patented them. They
are now attempting to patent genes in a "drift net" fashion,
arguing that the mere existence of the species in an eco-system
signifies that the species has a use, and that this use shall be
patented once the lab has identified the gene, not even the
specific use.  Thus, a laboratory could patent a new strand of wild
beans, making it illegal for anybody else to use this strand in the
future for any use unknown before patenting. Ultimately, the patent
holder could prevent indigenous peoples from experimenting with the
beans, and could charge them royalties for use of the bean, while
not owing anything to communities from which they took the resource
in the first place.
     In a particularly dramatic case, researchers took blood
samples from Guaymi Indians of Panama, without telling them what
their blood would be used for.  The Atlanta-based Center for
Disease Control, a U.S. government agency, then developed a drug
against leukemia and patented the Guaymi gene.  The Guaymi are
still permitted the use of their blood, but they could in theory be
prevented by court order, at least in the United States, to give
blood for genetic research.
     Such drift net patenting of genes, human, animal or plant,
would give total control over the use of various species in the
hands of a few corporations holding patents over them. "This could
turn hundreds of millions of farmers throughout the world into
virtual tenant farmers to major corporations which own the patents
on the genetically engineered plants and animals raised on their
farms," says Kimbrell.
     On the positive side, the possibility to make big money with
Amazonian genes gives governments a chance to have corporations pay
for the preservation of these areas.  They must limit access and
require profit sharing between labs and local communities where the
resource is found.  The value of germplasm found in developing
countries and used in medicines in the developed countries was
estimated to exceed $32 billion in the 1990s.  For a selection of
patent claims, see Appendix A.
     The fear is that if too many developing countries create so-
called bioprospecting institutes, as Costa Rica's INBio, so that
prices will plummet and the locals involved in the process will
abandon this new business again in favor of destructive
occupations. Reid argues that government regulations are necessary
to avoid ruinous competition, both in terms of price competition
and as far as over-collecting a species to extinction is
concerned. 
3.        Related Cases
     Keyword Clusters
     (1): Trade Product                 = GENE
     (2): Bio-geography                 = TROPical
     (3): Environmental Problem         = Biodiversity [BIODIV]
4.        Draft Author:  Thomas Jandl
5.        Discourse and Status: DISagreement and INPROGress
     The Merck case is so far an exception. Most companies refuse
to pay royalties, arguing that the plant they used for the initial
research was freely available, and that the added value was
contributed by the companies' scientists.  By patenting their
product, they then sell the formula back to the country where the
drug originated from in the first place. 
     Third World countries are aware and afraid of the potential
damage large-scale patenting of life forms can have on their 
economies.  While developing nations, even if they speak as a
group, tend not to prevail in trade negotiations, they can press
for regulations giving them a share of the value drawn from their
natural resources.  They can argue the impact on conservation, or,
in a more confrontational move, link their adherence to
intellectual property rights in technological matters, such as
computers, to a solution in the gene issue.  Since the developoed
countries claim to lose large amounts of sales through computer
software piracy every year, progress on this front could lead to a
general and somewhat equitable patenting regulation agreement.
6.        Forum and Scope: UN and MULTIlateral
     There is no single forum with venue in the case.  There is an
international treaty on biodiversity, but the United States, the
main opponent of Third World claims, has as of now refused to sign
it (see BIODIV case).  The best hope for
agreement at this point are bilateral discussions or talks between
blocs (Asian nations, Third World nations, countries with rain
forests, et cetera). 
7.        Decision Breadth: GLOBAL
     All exporters of genetic material as well as the importers and
the users of the drugs or products from the genes are concerned. An
indirect impact lies in the potential for habitat, in particular
rain forest conservation, which would have global impact.
8.        Legal Standing: TREATY
     There is an international treaty, but the main accused in the
case, the United States has not signed it. Bi- and -multilateral
talks are being held, with the involvement of international
organizations (FAO).  The Merck example shows that agreements
between for-profit and non-profit organizations can lead to
solutions. Without regulation, however, the risk is high that less
far-sighted companies will use the short-term competitive advantage
they could get from not participating in a voluntary scheme similar
to the Merck/INBio one.
C.        GEOGRAPHIC Clusters
9.        Geographic Locations
     a.   Geographic Domain   :    GLOBAL
     b.   Geographic Site     :    GLOBAL
     c.   Geographic Impact   :    GLOBAL
     The problem is not limited to one single country or continent.
Asia, Africa and South America are concerned. Indirect
consequences, such as conservation of rain forests or the lack
thereof could have truly global consequences via the global
climate.
10.       Sub-national Factors:  NO
11.       Type of Habitat:  MANY
     The problem has arisen primarily over tropical rain forest
species, since more than half of all species -- animal and plant --
are found there.  But other species, particularly those with high
agricultural value, are impacted.  Western scientists are
frequently looking for wild populations of domesticated species, to
test them for new traits useful for interbreeding with the
commercial product.  Numerous institutes exist (International Rice
Research Institute, International Center for Tropical Agriculture,
International Maize and Wheat Improvement Center, etc.) whose job
it is to ameliorate the properties of commercial crops with the
help of wild species' traits.
12.       Type of Measure: Regulatory Standard [REGSTD]
     The concerned developing countries have not reacted with
concerted measures so far.  It is hard to imagine any trade
measures, since in the case of synthetic substitutes for
agricultural products, continued export is what the developing
nations want.  Since domestic legislation does not bind foreign
companies, and enforcement in international relations is frequently
a question of relative power, the developing nations seem to be
left with no other measure than the power of persuasion, or a
strong showing in international organizations. 
13.       Direct vs. Indirect Impact: DIRect
14.       Relation of Measure TO Environmental Impact
     a.   Directly Related    : YES  GENE 
     b.   Indirectly Related  : YES  FOOD
     c.   Not Related         : NO
     d.   Process Related     : YES  RIGHT
     There is a direct relation between sales of agricultural
products and the possibility of substituting for them with bio-
engineered ersatz products. 
15.       Trade Product Identification: GENE
     The trade product is the abstract right to use exclusively a
genetic trait taken from another country.  Agriculturally and
medicinally used plants and animals are the trade products impacted
by patenting. 
16.       Economic Data
     Many developing countries have invested heavily in certain
market niches.  Indonesia has supported its trans-migrant farmers
in learning to plant palms for the production of palm kernel oil or
coconuts.  Brazil is trying as well to exploit its rain forest
without destroying it (see BEN case).  A
crash in these newly found niche markets due to the development of
cheap genetically engineered substitutes would diminish the
farmers' trust in alternative cropping, and directly harm the
economic development of many agriculture-dependent nations.
17.       Impact of Measure on Trade Competitiveness: HIGH
     If the developed nations were to agree on paying royalties for
the products they develop based on takings from the developing
countries, the impact -- through slightly higher prices -- would be
small in the First World, but would make an important difference in
the developing nations.  If money reaches the local communities
where the resource is found, villagers would find an incentive to
protect their flora and fauna rather than burning the forest, thus
conserving the land and their future resources.  Hence, there would
be a positive conservation impact from an agreement guaranteeing
the local communities where a gene that is used for
commercialization is found a share of the profit of "their"
resource.
18.       Industry Sector: PHARMaceutical
19.       Exporters and Importers: MANY and MANY
     The importers are the laboritories in the developed world. On
the other hand, since the local communities from where the
resources are extracted most of the time do not receive any
compensation, it is hard to talk about exporters.  An international
settlement paired with national laws should make the locals
exporters and royalty earners.
20.       Environmental Problem Type: MANY
     If the locals do not see any benefit in preserving their
natural environment, they will make the economically correct
decision to convert the land to agriculture or other profitable
use. Only if they can make a living off the land with the natural
habitat intact, they will become conservationists.
21.       Name, Type, and Diversity of Species
     Name:          MANY
     Type:          MANY
     Diversity:     MANY 
22.       Impact AND Effect: HIGH and REGULatory
23.       Urgency and Lifetime: HIGH and 100s of Years
     Depending on the geographical location, urgency varies.
Despite the large deforestation in the Amazon or in Indonesia, both
areas are still largely covered with forest.  In some other areas,
such as the African highland forests, a critical threshold is
reached according to many scientists.  Disagreements exist about
the criticality of specific habitats to the overall ecosystem. 
Without any doubt, once a rain forest is gone, it is virtually
impossible to bring it back. The same is true for the species that
are needed in the labs in the developed nations.
24.       Substitutes: ALTERnatives
     The goal of the laboratories is to find substitutes for the
natural product. This is one of the rare cases where finding
substitutes for natural products is not what environmentalists
want.
25.       Culture:       NO
26.       Trans-Border:  YES
27.       Rights:        YES
     Rights are violated under the assumption that rain forests and
intact ecosystems are a right to all humanity, and receiving
benefits for providing commercial enterprises with the raw material
for money-making drugs is a right to those who supply them.
28.       Relevant Literature
Al Gore, Earth In the Balance: Ecology and the Human Spirit, 
     Penguin Books, New York, 1993.
Martin Khor, "Asia: Moratorium On Bio-Engineered Farm Products
     Sought," Inter Press Service, September 29, 1993.
Andrew Kimbrell, "The Human Body Shop: The Engineering and
     Marketing of Life," Harper Collins, New York, 1994.
Reid, Walter.  "Using Genetic Resources For Sustainable
     Development," Issues in Science and Technology, December
     22, 1993.
Rural Advancement Foundation International, "Conserving
     Indigenous Knowledge," commissioned for the U.N.
     Development Programme, New York, 1995.
"The Patent Craze and Academia," The Lancet, Editorial, 342/8885.
Watts, Susan.  "Science Consensus Conference: Unnatural Dilemmas
     For a Hungry World," The Independent, September 2, 1994.

                           Appendix A

     Here are some of the most notorious cases of what is known as
drift net patenting -- patenting of whole strands of genes under
the mere suspicion that they could turn out valuable.
     (1) The Cotton Species Claim:  A subsidiary of WR Grace, one
of the world's biggest chemical companies, succeeded in patenting
a "species patent" for genetically engineered cotton in 1992.  The
company argues that this means any future genetic engineering would
infringe on WR Grace's patent.  If upheld, this means WR Grace has
a strangle hold over all development in the cotton market for years
to come. 
     At present the claim is only valid in the United States, but
WR Grace could prevent imports of cotton or even cloth made of
cotton from countries that do not respect the U.S. patent.
     (2) The Soybean Claim: The same WR Grace subsidiary,
Agracetus, obtained a soybean patent for the European Union in
1994.  Patents on other food crops (rice, groundnut, maize) are
pending.
     (3) The Neem claim: The University of Toledo has been granted
a patent for an African gene that has proven capable of killing the
zebra mussel, a mussel that is wreaking havoc in the Great Lakes,
where the species has no natural enemies.  It was introduced in
ballast tanks of African ships using the canal system between the
Great Lakes. 
     Most of the research had been done by Ethiopian scientists
over a period of 19 years.  The University of Toledo jumped on the
bandwagon at the very end of the development process, when the
presumed capabilities were tested and became obvious.
     Source: Rural Advancement Foundation International 

                           References





[End notes will be added]