Back to basics: renewing the foundations of innovation
In a world in constant turmoil, it is worthwhile to reflect on the things that give us hope. Among the greatest of these is the limitless human potential for innovation.
The last century was replete with inventions and technology that impacted virtually all of our lives. The world became a much smaller place as transportation advanced from ground to air travel. Even in the most poverty-stricken areas of the world, people can communicate through cellular technology. Diseases that invariably resulted in death at the turn of the last century have either been eradicated or can now be managed through prevention, detection and treatment.
The impact of this innovation was global and lifted many populations out of poverty. India and China are economic powerhouses in large part due to the innovations of the last century. In the United States, the innovative biotechnology industry employs 1.3 million workers and is a centrepiece of virtually every state’s plan to jumpstart a lagging economy.
There’s a good reason for such efforts: it’s estimated that each new biotech job creates 3.5 jobs in other sectors. The biotechnology industry supports more than 7.5 million jobs in the US alone.
With the protracted global recession resulting in millions of lost jobs, it may seem as though the 21st century has gotten off to a bad start. Yet it is precisely at times such as these that human ingenuity and creativity are most needed, with the biotechnology industry leading the way.
The world is looking to biotechnology to help alleviate the challenges of a planet expecting 38 percent more people by 2050, an ageing population in the developed world, the plague of disease, dwindling supplies of traditional energy, an environment facing unprecedented stress and a need to maximise food production.
We can successfully overcome these challenges only through innovation, and innovation can reach its full potential only when public policy supports it.
Developing innovative discoveries that revolutionise society is no task for the faint of heart. The biotechnology industry is full of innovative risk-takers. It has commercialised more than 300 drugs and hundreds of diagnostics, benefiting more than 325 million people worldwide. Another 400 or so biotech treatments are in the development pipeline.
Developing a biotechnology product is a lengthy and expensive endeavour. On average, it takes $1.2 billion over a period of more than a decade to bring a new biopharmaceutical to market.
This commitment is made with absolutely no guarantees of success. Indeed, the vast majority of biotech research and development projects fail. No company can afford to take such risks if its investment in ultimately successful products cannot be protected as it struggles through the arduous product development process.
Intellectual property is often the main asset of start-up companies. To raise the significant investment they require for research and development, companies must be able to assure investors that their patent portfolios are secure.
Prior to 1980, industry confidence in the value of US patents was low as various federal appeals courts seemingly developed their own standards of patentability.
The federal government was supporting 50 percent of all US research, but didn’t permit those conducting such research to protect their inventions and transfer intellectual property rights to the private sector for commercial development. As a result, private investment in innovation lagged, and more than 28,000 government-funded inventions languished, undeveloped, on laboratory shelves.
Fortunately, a few leaders in the US Congress—and a far-sighted ruling by the US Supreme Court—opened the way to a wave of unprecedented innovation that lifted the economy, creating important new products benefiting human welfare.
A turning point for the industry began when Ananda Chakrabarty developed a modified bacterium that could break down spilled oil. When his employer filed for a patent, the application was denied by the US Patent and Trademark Office.
The subsequent appeal was taken all the way to the US Supreme Court. In its landmark ruling in Diamond v. Chakrabarty, the Court affirmed that it was the intent of the patent laws to cover “anything under the sun that is made by man”. This opened the door to the growth of the biotechnology industry by assuring investors that patent protection would be available for a wide range of inventions derived from nature.
At the same time, the US Congress was looking at why taxpayers were not receiving greater returns from the billions of dollars invested each year in our world-class research universities, teaching hospitals and federal laboratories. For example, Congress could not find one instance where a new drug was developed and the federal government owned the patent rights to the invention.
Most government and university inventions are more ideas than products, requiring years of development before they can become usable and valuable to the public. In our system, this development is almost entirely funded by private industry. A good rule of thumb is that for every one dollar spent in basic research, 10 dollars are spent in further development. In the life sciences, the ratio is even higher.
To address this problem, Senators Birch Bayh and Bob Dole shepherded into law what came to be known as the Bayh-Dole Act of 1980, which allowed universities and small companies to own and manage inventions discovered with government support.
The Chakrabarty decision and the Bayh-Dole Act set the stage for an explosion of innovation in the US that continues today. The nascent biotechnology industry formed around research universities, which became wellsprings for innovative start-up companies. Despite the maturation of the industry, many biotechnology clusters still develop in close proximity to major research universities.
Even in the current economic doldrums, the public-private collaborations encouraged by the Bayh-Dole Act continue to show impressive results. Last year, 658 new commercial products were introduced based on academic inventions. Incredibly, while the climate for launching new companies has rarely been worse, universities successfully spun out 596 new companies in 2009.
The impact of university technology transfer on the US economy was demonstrated by a recent study conducted by independent researchers and supported by the Biotechnology Industry Organization (BIO).
Using very conservative methodologies, the report found that between 1996 and 2007, university licensing contributed $187 billion to the US gross national product. It also found as much as a $457 billion contribution to US gross industry output and perhaps most importantly the direct creation of at least 279,000 new jobs.
The impact of university patent licensing on our own industry was underscored by a survey of BIO members last year. We found that 50 percent of biotech companies were founded on in-licensed technologies, that 76 percent have licensed university inventions and that the ability to obtain exclusive licences is extremely important to our member companies.
The last finding is hardly surprising. The survey found that 62 percent of BIO companies do not yet have a product on the market. These are small companies that need strong patent protection and at least partially exclusive rights to attract the funding they require for further research and development.
The link between research universities, innovative companies and strong patents cannot be overestimated in biotechnology. Indeed, many emerging countries around the world have already recognised this link and have changed, or are in the process of changing, their patent laws to better spur innovation.
In its study of the biotechnology industry, the Milken Institute found a direct correlation between the US lead in biotechnology and the success of American universities in patenting and licensing inventions made with federal funding.
Milken reported in Mind to Market: A Global Analysis of University Biotechnology Transfer and Commercialization that US universities dominated their peers abroad in biotechnology research and resulting impacts. The report also warned that other countries would adopt our model to better compete against us, as is already happening.
This race is a marathon, not a sprint. What gives the front runners an advantage is closely monitored and soon copied. Thus, China and Japan have implemented their own Bayh-Dole-like laws. South Africa and Russia have followed suit. India’s parliament currently is reviewing its own version of the Bayh-Dole law. Such competition benefits innovation around the world.
Yet, all is not rosy. The current economic crisis is taking a toll on innovative companies, particularly those in industries such as biotechnology with long and expensive product development cycles. Since the fourth quarter of 2007, 25 percent of publicly traded biotech companies in the US have disappeared.
Not all of this was due to failure, since many were acquired or merged with other businesses. Still, this trend, coupled with a decline in initial public offerings for new biotechnology companies, reminds us that we cannot take future success for granted.
Meanwhile, a small, determined band of theorists in the US and abroad continue their ideological campaign against intellectual property rights and strong technology transfer systems such as the Bayh-Dole laws. They want to give government greater rights over inventions and limit patents and licensing rights. If history is any indication, this is precisely what we should not do.
Instead, we must renew our commitment to funding cutting-edge research in our universities and federal laboratories, and strengthen our technology transfer system. We must fully support our patent offices, which are overwhelmed in trying to effectively process patent applications that may contain the breakthrough discoveries of tomorrow that are needed to drive our economies forward.
And we must promote public policies that incentivise and protect innovation. It is providing this type of support—rather than trying to actually manage innovation—that is the appropriate role for government.
If we preserve our traditional foundations of innovation and maintain the basics of strong intellectual property protection, there is no reason why we can’t overcome our pressing global challenges, as humankind’s ingenuity and creativity, unleashed, have done so many times before.
Jim Greenwood is president and chief executive officer of the Biotechnology Industry Organization. He can be contacted at: jim.greenwood@bio.org
