Patently a Problem
September 2003 – 45’00”
JONATHAN HOLMES, REPORTER: At the Royal Children's Hospital in Melbourne, seven-year-old Zoe Battaglene spends her school holidays battling the mucus that constantly threatens to clog her lungs.
Zoe, do you know why you have to come into hospital so much?
ZOE BATTAGLENE: Because I have cystic fibrosis.
JONATHAN HOLMES: And do you understand what that is?
ZOE BATTAGLENE: Sort of.
JONATHAN HOLMES: Pretty complicated, probably, yeah?
ZOE BATTAGLENE: Yeah.
JONATHAN HOLMES: Zoe's doctors understand precisely what causes cystic fibrosis. In every cell of her body, she has a pair of faulty genes - one inherited from each of her parents. The mutations that cause cystic fibrosis and dozens of other diseases are now routinely diagnosed in genetic testing labs. But money to pay for the tests is scarce.
(FOOTAGE OF DR MERVYN JACOBSON IN NEW YORK)
JONATHAN HOLMES: And now this man wants a slice of it...for his shareholders in Australia and, soon, he hopes, for investors in New York.
DR MERVYN JACOBSON, CEO GENETIC TECHNOLOGIES: We have a range of interesting opportunities to bring to the market, and, from an investor point of view, it looks like there could be considerable upside.
JONATHAN HOLMES: His Melbourne-based company holds controversial patents which, it claims, are being infringed by almost every laboratory worldwide that's testing for inherited diseases. And he's begun his campaign to cash in.
DR GRAEME SUTHERS, SA CLINICAL GENETICS SERVICE: Very large licence fees such as you've mentioned would blow our clinical and laboratory program out of the water.
DR MERVYN JACOBSON: I think what we're doing is wonderful. I have a difficult time understanding why people stop to criticise.
JONATHAN HOLMES: Last month, the 19th International Congress of Genetics met in Melbourne. As the biotechnology revolution roars ahead, it offers better health for many, and growing wealth for some. But can one of those goals conflict with the other? Tonight on Four Corners, a global patent system that's given one small Australian company astonishing power. It can effectively choose who studies our genes and how much they should pay for the privilege.
(FOOTAGE OF ABORIGINAL DANCERS AT GENETICS CONFERENCE)
JONATHAN HOLMES: The welcoming ceremony at the Genetics Congress reminded a roomful of molecular biologists that other folk have other ways of accounting for the creation of life on earth. The politicians in attendance were dreaming of the creation of wealth.
JOHN BRUMBY, VICTORIAN MINISTER FOR INNOVATION : It's certainly our view in this State that biotechnology will underpin the new technologies, the industries and many of the jobs of the 21st century.
JONATHAN HOLMES: In Australia and worldwide, even publicly funded researchers are being urged to keep their eyes on the prize - the commercial exploitation of their remarkable discoveries. But many in this distinguished audience were uneasy.
SIR JOHN SULSTON, NOBEL PRIZE FOR MEDICINE 2002: There's always a tension between those who would like to garner wealth, and they contribute a lot to society. There's also those who say, "I believe in the common good. I want that to be enlarged." They contribute a lot to society. The tension, the debate, between these two views is extremely important to our progress.
JONATHAN HOLMES: There's no better example of that productive tension than the effort to sequence the human genome. The charismatic Dr Francis Collins led a publicly funded international effort in fierce competition with a private American corporation.
DR FRANCIS COLLINS, DIRECTOR HUMAN GENOME PROJECT: The sequence of your instruction book and mine reached its final completed state and was placed on the Internet - freely accessible for anybody with a good idea to help us figure out how it works, to begin that next phase. Hooray for that. We did it!
JONATHAN HOLMES: That night, the star of the Congress delighted his audience with his tribute to the 50th anniversary of the discovery of the double helix structure of DNA.
DR FRANCIS COLLINS: [SINGS AND PLAYS GUITAR] # Happy birthday to you; Happy birthday, double helix; Happy birthday... #
JONATHAN HOLMES: But the next morning Collins would strike a more controversial note, which soon became the talk of the Congress. He publicly attacked a Melbourne biotechnology company for its aggressive enforcement of patents that cover vast tracts of the genome of every creature on earth.
DR FRANCIS COLLINS: The real question, it seems to me - "Is this good for the public?" If pursuing an aggressive stance with this patent slows down the progress of scientific research, then the public is injured and you and I should object.
JONATHAN HOLMES: The identity of Francis Collins's target is no secret - Dr Mervyn Jacobson, founder and executive chairman of Genetic Technologies Limited of Melbourne. But Jacobson wasn't in Melbourne for the Congress - he was jetting around America, enforcing his patents and hunting up new investors. On the Australian Stock Exchange, Genetic Technologies - or GTG in stock market parlance - is the toast of its investors. It has tripled its share price in the past four months. Now Jacobson is hoping to tap into the huge pool of venture capital available in New York.
DR MERVYN JACOBSON: We simply tell them how we were formed, what we've achieved, what technology we have, our growth plans. And from their point of view, I imagine they see that this is a company that's significantly undervalued at the moment. And from an investor point of view it looks like there could be considerable upside.
JONATHAN HOLMES: But to his critics, GTG's broad-ranging patents and the way Dr Jacobson is trying to exploit them, typify the downside of the drive for biotechnology profits.
SIR JOHN SULSTON: Because it's going to be obviously extremely destructive, it's going to prevent a lot of important work in health care and indeed wealth creation for...at-at large. It's not even going to benefit Australia, I think, if this patent continues to ride.
PROFESSOR JOHN MATTICK, DIRECTOR MOLECULAR BIOLOGY, QLD UNIVERSITY: I think the chances they'll be challenged somewhere are very, very high, um...simply because, unlike other patents, this one, whatever its validity in terms of inventiveness, claims provenance over 98% of the human genome. And not just the human genome - the bovine genome, the eucalyptus genome - any genome.
JONATHAN HOLMES: Every creature on earth more sophisticated than a bacterium keeps its gene pool stirring through sexual reproduction, and access to 95% of the DNA of all of those organisms is covered by patents owned by Genetic Technologies. The man whose research in the 1980s gave rise to the patents no longer has any connection with Mervyn Jacobson or Genetic Technologies. But Dr Malcolm Simons is still fiercely proud of his scientific achievements. He's also a very sick man.
MAN: The sad bit, I guess, of this story is Malcolm here now has cancer. Good of him to come in today - just had some pretty serious chemotherapy.
JONATHAN HOLMES: Malcolm Simons came to the Melbourne Genetics Congress for the launch of an ABC 'Catalyst' program that celebrated his invention. It was called 'The Genius of Junk'. There would be some distinguished faces in the audience - Sir John Sulston, for example, Nobel laureate and leader of Britain's contribution to the human genome project.
WOMAN ON VIDEO: DNA - within its exquisite structure lie the clues to our destiny. How we are formed, how we will live, and how we may die.
JONATHAN HOLMES: The 'Catalyst' program explained that our active genes constitute only a small fraction of our DNA. And even within each gene, only specific sections actually code for proteins, the building blocks of life.
WOMAN ON VIDEO: All the rest - the other 95% - was assumed to be genetic gibberish with no known function, so they called it 'non-coding' or junk DNA.
JONATHAN HOLMES: Malcolm Simons, a New Zealand-born immunologist, not a geneticist, claims to have been the first scientist to realise that junk was not junk. In the late 1980s, Simons was working in the United States. He took a recently discovered method for studying stretches of DNA, and instead of applying it to the coding sections, applied it to the non-coding areas within one particular human gene. He showed that patterns in the so-called junk could be used to predict mutations in the active, coding part of the gene. The competitive Simons, a former Australian squash champion, now says his discovery was met with universal scepticism.
DR MALCOLM SIMONS IN 'CATALYST' FOOTAGE: When I showed the professional geneticists the data which indicated to me that the 95% non-coding region wasn't junk and was ordered, the reaction was smiling disbelief at best. "You're off your frigging head. And if you're any good at squash, stick to your day job."
JONATHAN HOLMES: Simons realised that his method could theoretically apply to all non-coding DNA, on any genome, and he looked for a backer to help him patent it. Mervyn Jacobson claims he invested $20 million to prove Simons was right and to win worldwide patents that give his company the right to charge licence fees from anyone who makes use of non-coding DNA.
DR MERVYN JACOBSON IN 'CATALYST' FOOTAGE: We took the risk. We could have, in fact, failed. It could have been that Malcolm's original ideas were wrong. It could have been they were right and non-patentable. It could have been they were right and patentable, but someone else beat us to it.
JONATHAN HOLMES: There is another possibility - that Malcolm Simons was not the genius of junk and his ideas weren't particularly novel, even back in the 1980s. Certainly, that's how Sir John Sulston, watching the film that day, reacted.
SIR JOHN SULSTON: It just doesn't ring true to me. We knew that all the protein-coding bits of genes do is to produce protein - they have to have instructions to turn them on and off. Those sequences lie well outside the protein-coding sequences, sometimes thousands, tens of thousands of bases away. People knew about those. So in principle we knew very well that the junk DNA was not junk.
JONATHAN HOLMES: John Sulston's view is widely shared by geneticists. To be awarded the protection of a patent, an invention must pass three vital tests. It must be novel at the time the application is filed. It must not have been obvious to other skilled researchers. And it must have a clear utility. Professor Joe Sambrook of the Peter MacCallum Cancer Institute in Melbourne is the author of one of the standard textbooks on human DNA. He says the idea of using stretches of junk DNA to track genes was well-established by the mid-80s.
PROFESSOR JOSEPH SAMBROOK, PETER McCALLUM CANCER INSTITUTE: It's a bit of a puzzle for me to see how you could claim that some of the things in the patent are novel. A lot of them, I think, are not, and had been well-established and almost mundane by the time the patent was filed.
JONATHAN HOLMES: Graeme Suthers is one of Australia's leading clinical geneticists.
DR GRAEME SUTHERS: My perspective is that non-coding DNA has been around, er, for millions of years. The techniques for analysing it were developed over the last 50 years. The usefulness of non-coding DNA in biomedical research has been recognised for decades.
JONATHAN HOLMES: John Mattick of Queensland University is Australia's foremost expert on junk DNA. He believes Simons's broad-method patent should never have been granted.
PROFESSOR JOHN MATTICK: It's very problematical whether it's inventive. But it's just as problematical in terms of its scope. Even if we accept that it's inventive, there's an imbalance between the level of invention and the level of impact that this thing has. So that's another set of issues.
JONATHAN HOLMES: Dr Jean-Jacques Cassiman, a prominent Belgian geneticist, had never heard of the Simons patents until we described them to him.
There's a company here in Australia which owns a suite of patents over the entire non-coding genome of every creature.
JEAN-JACQUES CASSIMAN, UNIVERSITY OF LEUVEN, BELGIUM: (Laughs) That's ridiculous. That's ridiculous. I don't understand the patent offices...who gave a patent on this, if this is right.
JONATHAN HOLMES: But to Malcolm Simons, who has no more than 18 months to live, such challenges to his scientific integrity are no laughing matter.
DR MALCOLM SIMONS: I found it a...an unbelievably productive, er, experience and I think that the 30-minute film that's come out is a... (BREAKS DOWN)
JONATHAN HOLMES: Just the day before, the Congress's biggest name, Francis Collins, had openly questioned the non-obviousness of his invention.
DR MALCOLM SIMONS: Excuse me. I think it's a very beautiful piece of work.
JONATHAN HOLMES: Simons soon recovered, and came out fighting his detractors.
DR MALCOLM SIMONS: In the last analysis, I'm really not interested because if they have a contest then they're basically calling into - as Francis Collins chose to do yesterday - call into question the competence of the patent office of his own country and of about 22 other countries. And, frankly, it's outrageous.
JONATHAN HOLMES: As Simons points out, it's not as though the patent offices rushed to judgment. His broadest patent wasn't granted by the US Patent Office until 1998 - eight years after it was filed. We asked one of Sydney's leading biotechnology patent lawyers to look at the GTG patent. From a legal standpoint, he says, they're solidly drafted. He doubts they'd be easy to challenge.
GAVIN RECCHIA, PATENT ATTORNEY: The US Patent Office, in particular, does have a very rigorous examination procedure. There's a high presumption of validity of a US patent once it's been granted and as you mentioned, one of these patents at least has gone through a quite extensive examination process of up to eight years. And in the mid-1990s the US Patent Office knew what it was doing when it comes to examining biotechnology patents.
DR FRANCIS COLLINS: Of course, they do have the patent. That's the reality. In my view, the question is how is that patent being managed - what form of licensing, what kind of royalties are being requested? In this circumstance, it seems to me that this company is pursuing an unusually aggressive approach and one which has raised a lot of concerns in many people's minds, including my own, because of where it might lead us.
JONATHAN HOLMES: Mervyn Jacobson took his time before moving to enforce his patents. But in the past 14 months, six prominent biotechnology companies in America and Europe have bought licences to GTG's patents, for steadily increasing fees.
ONSCREEN TEXT: Nanogen $650,000, Sequenom $1,000,000, Perlegen $1,600,000, Myriad $1,850,000, Pyrosequencing AB $3,000,000
JONATHAN HOLMES: Jacobson claims that the latest deal, with Orchid Biosciences of New Jersey, is worth $3.2 million to GTG.
DR MERVYN JACOBSON: We're talking about world-renowned biotech companies who have looked at our patents and looked at what they're doing and have agreed that they should take a licence. And they wouldn't have done that if they hadn't had strong advice that in fact it was what they needed to do. So these sorts of successes are very strong validation that these patents are serious. And the throwaway lines of people saying, "Oh, that was obvious" - I think, you know, things are very obvious after the facts. 10 years ago it wasn't obvious and the patents stand.
JONATHAN HOLMES: But it isn't as simple as that. At the Genetics Congress we approached Charles Cantor, chief scientific officer of Sequenom Inc., a company which makes high-throughput DNA sequencers. Last year, Sequenom paid A$1 million for a licence to GTG's patents. But Charles Cantor isn't complimentary about GTG's methods.
DR CHARLES CANTOR, CHIEF SCIENTIFIC OFFICER, SEQUENOM INC.: The amount of pressure they put on us to come to a conclusion one way or another was...in my personal experience, more than I've ever seen before. I mean, it was a very, very, um...high-pressure, short time, 'do it or else'...basically ultimatums. I mean, really, it was blackmail...
JONATHAN HOLMES: That's a strong word to use.
DR CHARLES CANTOR: Yeah, it is, but it was - it's blackmail. It's that sort of threat aspect - "We're going to take you to court and it's going to cost you so much money to defend yourself that you're better off just paying us what we're asking for and we'll go away and you'll never hear from us again."
JONATHAN HOLMES: Sequenom decided to pay up. And right now in New Zealand more than 20 biotech companies and taxpayer-funded institutes, researching everything from human disease to livestock improvement, are facing the same decision.
Is it your impression that New Zealand, in a sense, is being targeted?
DR JIM WATSON, CEO GENESIS RESEARCH CORPORATION: Oh, very definitely. I would say there's a very broad set of targets in New Zealand.
JONATHAN HOLMES: Genesis Research and Development Corporation of Auckland is one of them. Its founder and CEO, Dr Jim Watson, is one of New Zealand's leading molecular biologists and president of the Royal Society of New Zealand. Genesis has broad-ranging interests. Downstairs, researchers are hunting for ways to improve disease resistance in plants. Upstairs, they're looking for better treatments for asthma, psoriasis and cancer in humans. And according to a letter Jim Watson received in early March from Genetic Technologies, almost all this work falls within the scope of GTG's non-coding DNA patents.
EXCERPT FROM LETTER: "In order to permit the continued development of your genetic and genomic activities, we would like to discuss a mutually beneficial licensing arrangement."
JONATHAN HOLMES: Like most other scientists we've talked to, Jim Watson is astonished by the breadth of GTG's claims. He hasn't yet discussed actual money, but he has met with Mervyn Jacobson.
DR JIM WATSON: In listening to a rather...an aggressive sales pitch, there's also an issue which is fairly intimidating, I think, to face, and that is GTG make no bones about the fact that they have taken out insurance that would cover any litigation costs that they might be liable for should any group challenge their patent claims in a court, and that's rather unusual.
JONATHAN HOLMES: Mervyn Jacobson makes a point of telling his targets that he has patent insurance from a subsidiary of one of the biggest corporations in the world, America's General Electric. He also lets at least some of them know that GTG is currently taking court action to enforce its patents against three major US biotechnology companies.
DR MERVYN JACOBSON: We believe that our action, if required, against those companies will be underwritten by our patent insurance.
JONATHAN HOLMES: It must be enormously expensive, those insurance policies. How much do you pay for them?
DR MERVYN JACOBSON: One of the conditions of the policy is that we're not allowed to disclose even the premium. But I could confirm it's very expensive. It was a significant investment for us as a small group at the time, but it was deemed to be a prudent investment and with hindsight, was a wise decision.
JONATHAN HOLMES: Those on the other side of the negotiating table know that to challenge GTG's patents in court could cost them millions.
DR CHARLES CANTOR: The last time I was an expert witness in a court - I can't, of course, reveal what the case was - but I was told by our chief counsel that, "Our side's going to lose this case. Thanks for helping me, but our side's going to lose this case." "Why?" "Because they're only spending $5 million a year prosecuting it." And that's US, of course. "To win, they'd have to spend at least $10 million a year."
JONATHAN HOLMES: Wow.
DR CHARLES CANTOR: So these are not delicate arguments, OK? These are brutal, you know, brawls, where you drown the opponent in...in things that they have to respond to. And it's not the better person winning. Often, it's simply the richer person winning.
JONATHAN HOLMES: So the dilemma for Jim Watson of Genesis and all the other companies currently being targeted in New Zealand is simple.
DR JIM WATSON: Is it a smaller price to pay to get rid of the nuisance value of this by taking a licence? Or do you pay the high price and challenge the claims? You may be successful. You may be not. But if you're not insured in terms of the cost you might incur, that's a fairly big hurdle to face.
DR MERVYN JACOBSON: We are trying to adopt a very supportive and...helpful view in bringing our technology to Australia and New Zealand, and also using the power of our technology overseas to bring other technology to Australia and New Zealand.
JONATHAN HOLMES: We've talked to some of the people that you've approached and that you've had personal conversations with in New Zealand, in Australia and in the United States. And...they tend to use rather different words. 'Intimidating', 'threatening', 'aggressive' are all words that have been used. In fact, the chief scientific officer of Sequenom likened your approach to blackmail. Does that surprise you?
DR MERVYN JACOBSON: Yes, it is. Of course it is. Um, we own technology. It's like, if I could give a similar example, we own some garden, some botanical park that people were used to just walking through when they wished. And from some point, it becomes privately owned. And the owner decides either not to allow people to enter or, if it's desirable, allow them to enter, but they may need to contribute towards the cost. And some people who have been using it beforehand tend to object to having to pay for something they never paid for before without appreciating that what they're doing, in fact, is all the result of invention made by this little company in Australia. This is the business we're in. What we did is we made an invention, using human intelligence to do something that had not been done before.
JONATHAN HOLMES: But this isn't just a story about the cut and thrust of commercial deal making, because the biotechnology business is about people's lives, people like Zoe Battaglene and her struggle with cystic fibrosis.
CHRIS BATTAGLENE, ZOE'S FATHER: People are always making a buck out of everything - trying to. But when it comes to people's lives at stake, I think they should look at it really closely and think exactly how they want to go.
JONATHAN HOLMES: Researchers are now confirming that to test for a whole range of genetically influenced diseases and to search for a cure, non-coding DNA is crucial.
ONSCREEN TEXT: Cystic fibrosis, Familial cancer, Heart disease, Asthma, Crohn's disease, Parkinson's disease, Muscular dystrophy, Multiple sclerosis, Myloma
JONATHAN HOLMES: That puts Genetic Technologies in a powerful position. And when it announced a deal with Myriad Genetics of Salt Lake City, Utah, alarm bells began to ring in medical genetics departments across Australia. Because back in the mid-1990s, Myriad won the race to identify and to patent the sequence of two so-called breast cancer genes. BRACAnalysis, Myriad's patented test for harmful mutations, has been marketed direct to the public in some cities in America at a cost of some $5,000 per test. Even more controversially, Myriad won't allow any other laboratory in America to perform tests on the genes. But Myriad's test involves looking at the non-coding region of the breast cancer gene - and that means it was infringing Genetic Technologies' patents. In October last year, the two companies announced a deal. Myriad acquired a licence for GTG's non-coding patents. In return, GTG got nearly $2 million up-front and became Myriad's exclusive agent in Australia and New Zealand.
EXCERPT FROM gtg.com.au/Announcements2002.html#28o ct: "The testing for breast and ovarian cancer will be offered through Genetic Technologies' state-of-the-art testing facilities in Melbourne, Australia."
JONATHAN HOLMES: Up to now, public hospital labs like Graeme Suthers's in South Australia have been providing free tests of the breast cancer gene. But now it looked as if Genetic Technologies intended to enforce a monopoly here, just as Myriad does in America. That impression was reinforced when Mervyn Jacobson appeared in a '60 Minutes' program last April.
DR MERVYN JACOBSON IN '60 MINUTES' FOOTAGE: Those people probably need a licence from Myriad, which they haven't got.
LIZ HAYES, REPORTER, IN '60 MINUTES' FOOTAGE: Are they acting illegally?
DR MERVYN JACOBSON: Based on the information I have, they can't do what they're doing without breaching patent law.
JONATHAN HOLMES: Two weeks later, the Royal College of Pathologists of Australasia and six other similar bodies sent a confidential letter to the ministers of health and attorneys-general of all the States and the Commonwealth, warning that a vital service was at risk. A copy has been obtained by Four Corners.
VOICEOVER: "Genetic Technologies is now seeking to enforce the patents on both breast cancer genes and non-coding DNA. Enforcement of these patents will have far-reaching effects and could affect all genetic testing in the future."
JONATHAN HOLMES: Within 48 hours, the Royal College received a fiercely worded letter from GTG's lawyers, Clayton Utz, demanding a retraction.
DR MERVYN JACOBSON: Well, I'm puzzled that the College of Pathologists takes an extreme view without ever consulting us to establish the facts, and make certain statements which turned out to be wrong. And that seemed to be their priority - to criticise us in some way - rather than to be more concerned about what we're concerned about, which is the level of care of the women of Australia. Why are women having to wait six months to two years to get a result from a breast cancer susceptibility test, when in other parts of the world it's 30 days? They should be concerned about that. We have the rights, we make them available, we are setting up a world-class laboratory ourselves. Our aim is to have a 30-day turnaround time and we offer all the other laboratories the opportunity to either do the test themselves or work with us. If they have overloads and can't cope - send it to us, we want to work with people. But it's a positive thing for the women of Australia. That's the issue. We have won the rights from Myriad - exclusively. They give it to us. What we then do with it in this area is up to us. And we have made a decision not to enforce it.
JONATHAN HOLMES: Are you relieved and pleased that GTG has now announced it is giving those patents as a gift to the Australian people?
DR GRAEME SUTHERS: I've got mixed feelings about that. Because it may be that GTG has provided a generous gift of the BRACA licences to the Australian people. But they will take it back with the other hand by asking for licence fees for the non-coding patents which are essential for doing the BRACA analyses.
JONATHAN HOLMES: And that's precisely what Genetic Technologies IS doing in New Zealand. It's offering 'free' access to Myriad's breast cancer tests. But simultaneously it's demanding huge sums for a licence to its own non-coding DNA patents, which it claims are needed for almost all genetic tests. Auckland Hospital houses one of only two major genetic testing labs in the country. The other is in Christchurch. In response to a request under the New Zealand Official Information Act, Four Corners received a copy of this letter, dated May 23, from GTG to the chief medical officer of the Auckland District Health Board. It proposes:
VOICEOVER: "The grant of a national licence for unrestricted use of the GTG non-coding patents in human diagnostic testing by public sector institutions." "We propose the fee for signing and waiving of past infringement be ten million New Zealand dollars, and the ongoing annuity be two million New Zealand dollars per year."
JONATHAN HOLMES: An alternative, suggested GTG, would be that each individual genetic testing lab could pay:
VOICEOVER: "A signing fee of two million New Zealand dollars and an ongoing annuity of two hundred thousand New Zealand dollars."
JONATHAN HOLMES: Don't you think that's an awful lot of money?
DR MERVYN JACOBSON: Uh...
JONATHAN HOLMES: For a publicly funded...
DR MERVYN JACOBSON: Do you want me to try and justify a particular commercial transaction on a TV program without all the background information that might be relevant?
JONATHAN HOLMES: Well, I'm simply putting to you the figures that you have put to them, that you have suggested are appropriate. How do you think the New Zealand taxpayer would react to the idea that those sorts of sums of money are going to need to be paid to an Australian private company so that a service that's already there can continue to be offered to New Zealand patients?
DR MERVYN JACOBSON: The New Zealanders should be pleased that the test that they've been getting, which is subject to a New Zealand government patent and performed by government agencies illegally, will be offered lawfully and fully and properly - legitimately.
JONATHAN HOLMES: My understanding is that GTG has suggested to the New Zealand health system that an appropriate licence fee would be $10 million up-front and $2 million thereafter.
PETE HODGSON, NZ MINISTER FOR SCIENCE: Let me make sure that my body language gives nothing away on that. That is part of the constraint that I'm under because we now have a legal issue.
JONATHAN HOLMES: Are you being advised that these particular patents are challengeable?
PETE HODGSON: I'm being advised to shut up on that question.
JONATHAN HOLMES: But you couldn't sustain going on doing those tests if you were having to pay those kinds of licence fees, could you?
PETE HODGSON: I don't want to comment.
JONATHAN HOLMES: Apart from those guarded comments by the Minister of Science, no-one from the universities or from the health system here in New Zealand has been allowed to comment to Four Corners. But there's no doubt that there's real concern. The sums of money being talked about could jeopardise the entire genetic testing system here. And it's not just New Zealanders who are worried about that.
So when are you going to start making similar proposals to diagnostic testing labs in Australia?
DR MERVYN JACOBSON: We already are. We have been. To the extent that public or private laboratories are using non-coding patents, we would look to find a comfortable mutual arrangement to work with them.
DR GRAEME SUTHERS: Very large licence fees such as you've mentioned would blow our clinical and laboratory program out of the water. In South Australia we have a State-wide familial cancer service which is specifically involved in providing genetic counselling and testing to families where there is a risk of familial cancer. Now, the entire budget for that program for one year is of the order of $1 million, so if we're looking at licence fees that were equivalent to that, we would not be able to continue that program.
JONATHAN HOLMES: At all?
DR GRAEME SUTHERS: At all.
(FOOTAGE OF MELHUISH FAMILY PICNIC)
JONATHAN HOLMES: And familial cancer is just the start of it. Twice a year, Michelle and Tony Melhuish take 13-year-old Michael and 11-year-old Sarah on the long car journey from Parkes, in western NSW, to the Sydney Children's Hospital in Randwick. Michael Melhuish is suffering from Duchenne's muscular dystrophy, a progressive disease that's caused by a faulty gene on the X chromosome inherited from his mum. He's an alert and fun-loving kid, and a whiz with his wheelchair. But in the time since we filmed this sequence, his parents have had to tell him that he can't expect to live past the age of 20.
But the Melhuish family have had some good news recently. There was a 50-50 chance that Sarah would also be carrying the defective gene, and could pass it on to her children. Recently, she took a genetic test.
MICHELLE MELHUISH: We now know that she's not a carrier, and, yeah, so that's peace of mind for her and for our whole family.
DR ANNE TURNER, HEAD OF GENETICS, SYDNEY CHILDREN'S HOSPITAL: The tests that we do to tell whether other people in the family are carriers rely heavily on looking at the non-coding regions of the genome.
JONATHAN HOLMES: So, technically, the tests are breaching GTG's patents.
DR ANNE TURNER: I would imagine that a substantial licence fee would just freeze all the work that we do in the lab. So not only for disorders like Michael's, but all the DNA work that's done - all the diagnostic work that's done in public hospital laboratories would virtually cease.
JONATHAN HOLMES: It's not just diagnosis that's threatened by GTG's patents. It's the research which is the only hope for people like Zoe Battaglene.
CHRIS BATTAGLENE: The cure will come from gene therapy - basically that's...you know, seems to be what we're being told by the people that know, and that's sort of where we're pinning our hopes.
JONATHAN HOLMES: So genetic research, particularly, is crucial for you?
CHRIS BATTAGLENE: Absolutely. Absolutely.
JONATHAN HOLMES: Up to now, there's been an unwritten convention that research - especially research into fatal diseases like cystic fibrosis - is exempt from demands for licence fees from patent holders, at least until it produces something that's commercially valuable. But not anymore. In May, Genetic Technologies announced that the University of Utah had agreed to buy a research licence to its non-coding patents for what it called a peppercorn fee - US$1,000. And two weeks ago, Sydney University also acquired a $1,000 research licence from GTG. It was these research licences which roused Francis Collins to anger at the Genetic Congress last month.
DR FRANCIS COLLINS: The principle is very important. Even if the licencing fee seems modest today, what will it be tomorrow? Will we begin a veritable gold rush here, where lots of other patent holders watching this breakdown of the research exemption will say, "Well, me too. Where's mine?" And pretty soon, we will end up in a circumstance, I fear, where academic researchers will find it very difficult to pursue their best and brightest ideas without a phalanx of lawyers at their elbow. And that's really not where we want to go.
JONATHAN HOLMES: Do you accept that there has been a convention up to now that research, as such, is exempt from having to pay patent fees?
DR MERVYN JACOBSON: Uh, no, I don't. I think there's a lot of confusion and misunderstanding, in general. There used to be, in the old days, a situation where publicly funded organisations did research and handed it over to the public good and were sort of altruistic, whereas companies, public or private, were for profit. That's blurred. Research these days, in general, is big business.
JONATHAN HOLMES: Why do it? Why bother? Given that $1,000 is neither here nor there to your shareholders or to your company...
DR MERVYN JACOBSON: Well, thank you for asking.
JONATHAN HOLMES: It's creating a certain amount of flak for your company...
DR MERVYN JACOBSON: No, it's not. It's creating a certain amount of media hype by people who want to engage in sensationalism. The universities themselves seem to appreciate what we're doing. They are sensitive to the fact that they may well be legally infringing and it may well be that Mervyn Jacobson is socially responsible and offering them licences for $1,000, but when someone replaces me, it could be a more aggressive situation. And I think it's prudent insurance for them to take a licence now for a token $1,000 and to be covered for the life of these patents. It's...it's, in fact, a public service on our part. And also, I might add, we're bringing new technology to Australia that's never been available in Australia before from other companies around the world who need access to the non-coding patents. And in return, we're not only getting cash from them to fund into Australian research, but we're also getting new technology that has never been available in Australia. I think what we're doing is wonderful. I have a difficult time understanding why people stop to criticise.
JONATHAN HOLMES: All of those claims are true. Mervyn Jacobson undoubtedly feels aggrieved by the chorus of complaint. His company is investing substantial funds in Australian biotech. And as far as its patents are concerned, Genetic Technologies is doing no more than exercising its rights under the law. But that's why patent law itself, many believe, needs revisiting.
DR GRAEME SUTHERS: It seems to me that we need to again stand back and say, we have a community to care for - that includes you and me - and we need to ensure that whatever processes we have in place within our community are indeed for the benefit of the community at large.
SIR JOHN SULSTON: You have to say - and I do - that anything that blocks that cheapest possible point-of-care delivery of health is wrong. And we have to find some way not to allow that. We can argue in different ways whether it's...you know, how we should block it, but it simply cannot be right. And so somebody who is demanding - if this is the case - sufficient fees that they're going to seriously impair that delivery of health care should not be allowed.
DR MERVYN JACOBSON: I see the patent process as a very wholesome process. It's been around for 400 years. It started in Britain, but most countries in the world have adopted it, modified it. It works very well. You interfere with that process, you interfere with invention, you interfere with innovation, with risk taking. And, in fact, in Australia, if you drastically interfere with an established process, you run the risk of damaging or destroying biotechnology in Australia, which not only harms biotechnology companies but it's negative for Australian health care.
JONATHAN HOLMES: The truth is Australia and New Zealand are small players on the global stage. The Australian Law Reform Commission has until next year to recommend changes to our patent laws. But worldwide, for two decades at least, patent offices have been granting commercial companies monopolistic access to our DNA. Whether or not that's really in the interests of Zoe Battaglene and tens of thousands like her across the world, it will be hard to turn the clock back now.
September 2003 – 45’00”
JONATHAN HOLMES, REPORTER: At the Royal Children's Hospital in Melbourne, seven-year-old Zoe Battaglene spends her school holidays battling the mucus that constantly threatens to clog her lungs.
Zoe, do you know why you have to come into hospital so much?
ZOE BATTAGLENE: Because I have cystic fibrosis.
JONATHAN HOLMES: And do you understand what that is?
ZOE BATTAGLENE: Sort of.
JONATHAN HOLMES: Pretty complicated, probably, yeah?
ZOE BATTAGLENE: Yeah.
JONATHAN HOLMES: Zoe's doctors understand precisely what causes cystic fibrosis. In every cell of her body, she has a pair of faulty genes - one inherited from each of her parents. The mutations that cause cystic fibrosis and dozens of other diseases are now routinely diagnosed in genetic testing labs. But money to pay for the tests is scarce.
(FOOTAGE OF DR MERVYN JACOBSON IN NEW YORK)
JONATHAN HOLMES: And now this man wants a slice of it...for his shareholders in Australia and, soon, he hopes, for investors in New York.
DR MERVYN JACOBSON, CEO GENETIC TECHNOLOGIES: We have a range of interesting opportunities to bring to the market, and, from an investor point of view, it looks like there could be considerable upside.
JONATHAN HOLMES: His Melbourne-based company holds controversial patents which, it claims, are being infringed by almost every laboratory worldwide that's testing for inherited diseases. And he's begun his campaign to cash in.
DR GRAEME SUTHERS, SA CLINICAL GENETICS SERVICE: Very large licence fees such as you've mentioned would blow our clinical and laboratory program out of the water.
DR MERVYN JACOBSON: I think what we're doing is wonderful. I have a difficult time understanding why people stop to criticise.
JONATHAN HOLMES: Last month, the 19th International Congress of Genetics met in Melbourne. As the biotechnology revolution roars ahead, it offers better health for many, and growing wealth for some. But can one of those goals conflict with the other? Tonight on Four Corners, a global patent system that's given one small Australian company astonishing power. It can effectively choose who studies our genes and how much they should pay for the privilege.
(FOOTAGE OF ABORIGINAL DANCERS AT GENETICS CONFERENCE)
JONATHAN HOLMES: The welcoming ceremony at the Genetics Congress reminded a roomful of molecular biologists that other folk have other ways of accounting for the creation of life on earth. The politicians in attendance were dreaming of the creation of wealth.
JOHN BRUMBY, VICTORIAN MINISTER FOR INNOVATION : It's certainly our view in this State that biotechnology will underpin the new technologies, the industries and many of the jobs of the 21st century.
JONATHAN HOLMES: In Australia and worldwide, even publicly funded researchers are being urged to keep their eyes on the prize - the commercial exploitation of their remarkable discoveries. But many in this distinguished audience were uneasy.
SIR JOHN SULSTON, NOBEL PRIZE FOR MEDICINE 2002: There's always a tension between those who would like to garner wealth, and they contribute a lot to society. There's also those who say, "I believe in the common good. I want that to be enlarged." They contribute a lot to society. The tension, the debate, between these two views is extremely important to our progress.
JONATHAN HOLMES: There's no better example of that productive tension than the effort to sequence the human genome. The charismatic Dr Francis Collins led a publicly funded international effort in fierce competition with a private American corporation.
DR FRANCIS COLLINS, DIRECTOR HUMAN GENOME PROJECT: The sequence of your instruction book and mine reached its final completed state and was placed on the Internet - freely accessible for anybody with a good idea to help us figure out how it works, to begin that next phase. Hooray for that. We did it!
JONATHAN HOLMES: That night, the star of the Congress delighted his audience with his tribute to the 50th anniversary of the discovery of the double helix structure of DNA.
DR FRANCIS COLLINS: [SINGS AND PLAYS GUITAR] # Happy birthday to you; Happy birthday, double helix; Happy birthday... #
JONATHAN HOLMES: But the next morning Collins would strike a more controversial note, which soon became the talk of the Congress. He publicly attacked a Melbourne biotechnology company for its aggressive enforcement of patents that cover vast tracts of the genome of every creature on earth.
DR FRANCIS COLLINS: The real question, it seems to me - "Is this good for the public?" If pursuing an aggressive stance with this patent slows down the progress of scientific research, then the public is injured and you and I should object.
JONATHAN HOLMES: The identity of Francis Collins's target is no secret - Dr Mervyn Jacobson, founder and executive chairman of Genetic Technologies Limited of Melbourne. But Jacobson wasn't in Melbourne for the Congress - he was jetting around America, enforcing his patents and hunting up new investors. On the Australian Stock Exchange, Genetic Technologies - or GTG in stock market parlance - is the toast of its investors. It has tripled its share price in the past four months. Now Jacobson is hoping to tap into the huge pool of venture capital available in New York.
DR MERVYN JACOBSON: We simply tell them how we were formed, what we've achieved, what technology we have, our growth plans. And from their point of view, I imagine they see that this is a company that's significantly undervalued at the moment. And from an investor point of view it looks like there could be considerable upside.
JONATHAN HOLMES: But to his critics, GTG's broad-ranging patents and the way Dr Jacobson is trying to exploit them, typify the downside of the drive for biotechnology profits.
SIR JOHN SULSTON: Because it's going to be obviously extremely destructive, it's going to prevent a lot of important work in health care and indeed wealth creation for...at-at large. It's not even going to benefit Australia, I think, if this patent continues to ride.
PROFESSOR JOHN MATTICK, DIRECTOR MOLECULAR BIOLOGY, QLD UNIVERSITY: I think the chances they'll be challenged somewhere are very, very high, um...simply because, unlike other patents, this one, whatever its validity in terms of inventiveness, claims provenance over 98% of the human genome. And not just the human genome - the bovine genome, the eucalyptus genome - any genome.
JONATHAN HOLMES: Every creature on earth more sophisticated than a bacterium keeps its gene pool stirring through sexual reproduction, and access to 95% of the DNA of all of those organisms is covered by patents owned by Genetic Technologies. The man whose research in the 1980s gave rise to the patents no longer has any connection with Mervyn Jacobson or Genetic Technologies. But Dr Malcolm Simons is still fiercely proud of his scientific achievements. He's also a very sick man.
MAN: The sad bit, I guess, of this story is Malcolm here now has cancer. Good of him to come in today - just had some pretty serious chemotherapy.
JONATHAN HOLMES: Malcolm Simons came to the Melbourne Genetics Congress for the launch of an ABC 'Catalyst' program that celebrated his invention. It was called 'The Genius of Junk'. There would be some distinguished faces in the audience - Sir John Sulston, for example, Nobel laureate and leader of Britain's contribution to the human genome project.
WOMAN ON VIDEO: DNA - within its exquisite structure lie the clues to our destiny. How we are formed, how we will live, and how we may die.
JONATHAN HOLMES: The 'Catalyst' program explained that our active genes constitute only a small fraction of our DNA. And even within each gene, only specific sections actually code for proteins, the building blocks of life.
WOMAN ON VIDEO: All the rest - the other 95% - was assumed to be genetic gibberish with no known function, so they called it 'non-coding' or junk DNA.
JONATHAN HOLMES: Malcolm Simons, a New Zealand-born immunologist, not a geneticist, claims to have been the first scientist to realise that junk was not junk. In the late 1980s, Simons was working in the United States. He took a recently discovered method for studying stretches of DNA, and instead of applying it to the coding sections, applied it to the non-coding areas within one particular human gene. He showed that patterns in the so-called junk could be used to predict mutations in the active, coding part of the gene. The competitive Simons, a former Australian squash champion, now says his discovery was met with universal scepticism.
DR MALCOLM SIMONS IN 'CATALYST' FOOTAGE: When I showed the professional geneticists the data which indicated to me that the 95% non-coding region wasn't junk and was ordered, the reaction was smiling disbelief at best. "You're off your frigging head. And if you're any good at squash, stick to your day job."
JONATHAN HOLMES: Simons realised that his method could theoretically apply to all non-coding DNA, on any genome, and he looked for a backer to help him patent it. Mervyn Jacobson claims he invested $20 million to prove Simons was right and to win worldwide patents that give his company the right to charge licence fees from anyone who makes use of non-coding DNA.
DR MERVYN JACOBSON IN 'CATALYST' FOOTAGE: We took the risk. We could have, in fact, failed. It could have been that Malcolm's original ideas were wrong. It could have been they were right and non-patentable. It could have been they were right and patentable, but someone else beat us to it.
JONATHAN HOLMES: There is another possibility - that Malcolm Simons was not the genius of junk and his ideas weren't particularly novel, even back in the 1980s. Certainly, that's how Sir John Sulston, watching the film that day, reacted.
SIR JOHN SULSTON: It just doesn't ring true to me. We knew that all the protein-coding bits of genes do is to produce protein - they have to have instructions to turn them on and off. Those sequences lie well outside the protein-coding sequences, sometimes thousands, tens of thousands of bases away. People knew about those. So in principle we knew very well that the junk DNA was not junk.
JONATHAN HOLMES: John Sulston's view is widely shared by geneticists. To be awarded the protection of a patent, an invention must pass three vital tests. It must be novel at the time the application is filed. It must not have been obvious to other skilled researchers. And it must have a clear utility. Professor Joe Sambrook of the Peter MacCallum Cancer Institute in Melbourne is the author of one of the standard textbooks on human DNA. He says the idea of using stretches of junk DNA to track genes was well-established by the mid-80s.
PROFESSOR JOSEPH SAMBROOK, PETER McCALLUM CANCER INSTITUTE: It's a bit of a puzzle for me to see how you could claim that some of the things in the patent are novel. A lot of them, I think, are not, and had been well-established and almost mundane by the time the patent was filed.
JONATHAN HOLMES: Graeme Suthers is one of Australia's leading clinical geneticists.
DR GRAEME SUTHERS: My perspective is that non-coding DNA has been around, er, for millions of years. The techniques for analysing it were developed over the last 50 years. The usefulness of non-coding DNA in biomedical research has been recognised for decades.
JONATHAN HOLMES: John Mattick of Queensland University is Australia's foremost expert on junk DNA. He believes Simons's broad-method patent should never have been granted.
PROFESSOR JOHN MATTICK: It's very problematical whether it's inventive. But it's just as problematical in terms of its scope. Even if we accept that it's inventive, there's an imbalance between the level of invention and the level of impact that this thing has. So that's another set of issues.
JONATHAN HOLMES: Dr Jean-Jacques Cassiman, a prominent Belgian geneticist, had never heard of the Simons patents until we described them to him.
There's a company here in Australia which owns a suite of patents over the entire non-coding genome of every creature.
JEAN-JACQUES CASSIMAN, UNIVERSITY OF LEUVEN, BELGIUM: (Laughs) That's ridiculous. That's ridiculous. I don't understand the patent offices...who gave a patent on this, if this is right.
JONATHAN HOLMES: But to Malcolm Simons, who has no more than 18 months to live, such challenges to his scientific integrity are no laughing matter.
DR MALCOLM SIMONS: I found it a...an unbelievably productive, er, experience and I think that the 30-minute film that's come out is a... (BREAKS DOWN)
JONATHAN HOLMES: Just the day before, the Congress's biggest name, Francis Collins, had openly questioned the non-obviousness of his invention.
DR MALCOLM SIMONS: Excuse me. I think it's a very beautiful piece of work.
JONATHAN HOLMES: Simons soon recovered, and came out fighting his detractors.
DR MALCOLM SIMONS: In the last analysis, I'm really not interested because if they have a contest then they're basically calling into - as Francis Collins chose to do yesterday - call into question the competence of the patent office of his own country and of about 22 other countries. And, frankly, it's outrageous.
JONATHAN HOLMES: As Simons points out, it's not as though the patent offices rushed to judgment. His broadest patent wasn't granted by the US Patent Office until 1998 - eight years after it was filed. We asked one of Sydney's leading biotechnology patent lawyers to look at the GTG patent. From a legal standpoint, he says, they're solidly drafted. He doubts they'd be easy to challenge.
GAVIN RECCHIA, PATENT ATTORNEY: The US Patent Office, in particular, does have a very rigorous examination procedure. There's a high presumption of validity of a US patent once it's been granted and as you mentioned, one of these patents at least has gone through a quite extensive examination process of up to eight years. And in the mid-1990s the US Patent Office knew what it was doing when it comes to examining biotechnology patents.
DR FRANCIS COLLINS: Of course, they do have the patent. That's the reality. In my view, the question is how is that patent being managed - what form of licensing, what kind of royalties are being requested? In this circumstance, it seems to me that this company is pursuing an unusually aggressive approach and one which has raised a lot of concerns in many people's minds, including my own, because of where it might lead us.
JONATHAN HOLMES: Mervyn Jacobson took his time before moving to enforce his patents. But in the past 14 months, six prominent biotechnology companies in America and Europe have bought licences to GTG's patents, for steadily increasing fees.
ONSCREEN TEXT: Nanogen $650,000, Sequenom $1,000,000, Perlegen $1,600,000, Myriad $1,850,000, Pyrosequencing AB $3,000,000
JONATHAN HOLMES: Jacobson claims that the latest deal, with Orchid Biosciences of New Jersey, is worth $3.2 million to GTG.
DR MERVYN JACOBSON: We're talking about world-renowned biotech companies who have looked at our patents and looked at what they're doing and have agreed that they should take a licence. And they wouldn't have done that if they hadn't had strong advice that in fact it was what they needed to do. So these sorts of successes are very strong validation that these patents are serious. And the throwaway lines of people saying, "Oh, that was obvious" - I think, you know, things are very obvious after the facts. 10 years ago it wasn't obvious and the patents stand.
JONATHAN HOLMES: But it isn't as simple as that. At the Genetics Congress we approached Charles Cantor, chief scientific officer of Sequenom Inc., a company which makes high-throughput DNA sequencers. Last year, Sequenom paid A$1 million for a licence to GTG's patents. But Charles Cantor isn't complimentary about GTG's methods.
DR CHARLES CANTOR, CHIEF SCIENTIFIC OFFICER, SEQUENOM INC.: The amount of pressure they put on us to come to a conclusion one way or another was...in my personal experience, more than I've ever seen before. I mean, it was a very, very, um...high-pressure, short time, 'do it or else'...basically ultimatums. I mean, really, it was blackmail...
JONATHAN HOLMES: That's a strong word to use.
DR CHARLES CANTOR: Yeah, it is, but it was - it's blackmail. It's that sort of threat aspect - "We're going to take you to court and it's going to cost you so much money to defend yourself that you're better off just paying us what we're asking for and we'll go away and you'll never hear from us again."
JONATHAN HOLMES: Sequenom decided to pay up. And right now in New Zealand more than 20 biotech companies and taxpayer-funded institutes, researching everything from human disease to livestock improvement, are facing the same decision.
Is it your impression that New Zealand, in a sense, is being targeted?
DR JIM WATSON, CEO GENESIS RESEARCH CORPORATION: Oh, very definitely. I would say there's a very broad set of targets in New Zealand.
JONATHAN HOLMES: Genesis Research and Development Corporation of Auckland is one of them. Its founder and CEO, Dr Jim Watson, is one of New Zealand's leading molecular biologists and president of the Royal Society of New Zealand. Genesis has broad-ranging interests. Downstairs, researchers are hunting for ways to improve disease resistance in plants. Upstairs, they're looking for better treatments for asthma, psoriasis and cancer in humans. And according to a letter Jim Watson received in early March from Genetic Technologies, almost all this work falls within the scope of GTG's non-coding DNA patents.
EXCERPT FROM LETTER: "In order to permit the continued development of your genetic and genomic activities, we would like to discuss a mutually beneficial licensing arrangement."
JONATHAN HOLMES: Like most other scientists we've talked to, Jim Watson is astonished by the breadth of GTG's claims. He hasn't yet discussed actual money, but he has met with Mervyn Jacobson.
DR JIM WATSON: In listening to a rather...an aggressive sales pitch, there's also an issue which is fairly intimidating, I think, to face, and that is GTG make no bones about the fact that they have taken out insurance that would cover any litigation costs that they might be liable for should any group challenge their patent claims in a court, and that's rather unusual.
JONATHAN HOLMES: Mervyn Jacobson makes a point of telling his targets that he has patent insurance from a subsidiary of one of the biggest corporations in the world, America's General Electric. He also lets at least some of them know that GTG is currently taking court action to enforce its patents against three major US biotechnology companies.
DR MERVYN JACOBSON: We believe that our action, if required, against those companies will be underwritten by our patent insurance.
JONATHAN HOLMES: It must be enormously expensive, those insurance policies. How much do you pay for them?
DR MERVYN JACOBSON: One of the conditions of the policy is that we're not allowed to disclose even the premium. But I could confirm it's very expensive. It was a significant investment for us as a small group at the time, but it was deemed to be a prudent investment and with hindsight, was a wise decision.
JONATHAN HOLMES: Those on the other side of the negotiating table know that to challenge GTG's patents in court could cost them millions.
DR CHARLES CANTOR: The last time I was an expert witness in a court - I can't, of course, reveal what the case was - but I was told by our chief counsel that, "Our side's going to lose this case. Thanks for helping me, but our side's going to lose this case." "Why?" "Because they're only spending $5 million a year prosecuting it." And that's US, of course. "To win, they'd have to spend at least $10 million a year."
JONATHAN HOLMES: Wow.
DR CHARLES CANTOR: So these are not delicate arguments, OK? These are brutal, you know, brawls, where you drown the opponent in...in things that they have to respond to. And it's not the better person winning. Often, it's simply the richer person winning.
JONATHAN HOLMES: So the dilemma for Jim Watson of Genesis and all the other companies currently being targeted in New Zealand is simple.
DR JIM WATSON: Is it a smaller price to pay to get rid of the nuisance value of this by taking a licence? Or do you pay the high price and challenge the claims? You may be successful. You may be not. But if you're not insured in terms of the cost you might incur, that's a fairly big hurdle to face.
DR MERVYN JACOBSON: We are trying to adopt a very supportive and...helpful view in bringing our technology to Australia and New Zealand, and also using the power of our technology overseas to bring other technology to Australia and New Zealand.
JONATHAN HOLMES: We've talked to some of the people that you've approached and that you've had personal conversations with in New Zealand, in Australia and in the United States. And...they tend to use rather different words. 'Intimidating', 'threatening', 'aggressive' are all words that have been used. In fact, the chief scientific officer of Sequenom likened your approach to blackmail. Does that surprise you?
DR MERVYN JACOBSON: Yes, it is. Of course it is. Um, we own technology. It's like, if I could give a similar example, we own some garden, some botanical park that people were used to just walking through when they wished. And from some point, it becomes privately owned. And the owner decides either not to allow people to enter or, if it's desirable, allow them to enter, but they may need to contribute towards the cost. And some people who have been using it beforehand tend to object to having to pay for something they never paid for before without appreciating that what they're doing, in fact, is all the result of invention made by this little company in Australia. This is the business we're in. What we did is we made an invention, using human intelligence to do something that had not been done before.
JONATHAN HOLMES: But this isn't just a story about the cut and thrust of commercial deal making, because the biotechnology business is about people's lives, people like Zoe Battaglene and her struggle with cystic fibrosis.
CHRIS BATTAGLENE, ZOE'S FATHER: People are always making a buck out of everything - trying to. But when it comes to people's lives at stake, I think they should look at it really closely and think exactly how they want to go.
JONATHAN HOLMES: Researchers are now confirming that to test for a whole range of genetically influenced diseases and to search for a cure, non-coding DNA is crucial.
ONSCREEN TEXT: Cystic fibrosis, Familial cancer, Heart disease, Asthma, Crohn's disease, Parkinson's disease, Muscular dystrophy, Multiple sclerosis, Myloma
JONATHAN HOLMES: That puts Genetic Technologies in a powerful position. And when it announced a deal with Myriad Genetics of Salt Lake City, Utah, alarm bells began to ring in medical genetics departments across Australia. Because back in the mid-1990s, Myriad won the race to identify and to patent the sequence of two so-called breast cancer genes. BRACAnalysis, Myriad's patented test for harmful mutations, has been marketed direct to the public in some cities in America at a cost of some $5,000 per test. Even more controversially, Myriad won't allow any other laboratory in America to perform tests on the genes. But Myriad's test involves looking at the non-coding region of the breast cancer gene - and that means it was infringing Genetic Technologies' patents. In October last year, the two companies announced a deal. Myriad acquired a licence for GTG's non-coding patents. In return, GTG got nearly $2 million up-front and became Myriad's exclusive agent in Australia and New Zealand.
EXCERPT FROM gtg.com.au/Announcements2002.html#28o ct: "The testing for breast and ovarian cancer will be offered through Genetic Technologies' state-of-the-art testing facilities in Melbourne, Australia."
JONATHAN HOLMES: Up to now, public hospital labs like Graeme Suthers's in South Australia have been providing free tests of the breast cancer gene. But now it looked as if Genetic Technologies intended to enforce a monopoly here, just as Myriad does in America. That impression was reinforced when Mervyn Jacobson appeared in a '60 Minutes' program last April.
DR MERVYN JACOBSON IN '60 MINUTES' FOOTAGE: Those people probably need a licence from Myriad, which they haven't got.
LIZ HAYES, REPORTER, IN '60 MINUTES' FOOTAGE: Are they acting illegally?
DR MERVYN JACOBSON: Based on the information I have, they can't do what they're doing without breaching patent law.
JONATHAN HOLMES: Two weeks later, the Royal College of Pathologists of Australasia and six other similar bodies sent a confidential letter to the ministers of health and attorneys-general of all the States and the Commonwealth, warning that a vital service was at risk. A copy has been obtained by Four Corners.
VOICEOVER: "Genetic Technologies is now seeking to enforce the patents on both breast cancer genes and non-coding DNA. Enforcement of these patents will have far-reaching effects and could affect all genetic testing in the future."
JONATHAN HOLMES: Within 48 hours, the Royal College received a fiercely worded letter from GTG's lawyers, Clayton Utz, demanding a retraction.
DR MERVYN JACOBSON: Well, I'm puzzled that the College of Pathologists takes an extreme view without ever consulting us to establish the facts, and make certain statements which turned out to be wrong. And that seemed to be their priority - to criticise us in some way - rather than to be more concerned about what we're concerned about, which is the level of care of the women of Australia. Why are women having to wait six months to two years to get a result from a breast cancer susceptibility test, when in other parts of the world it's 30 days? They should be concerned about that. We have the rights, we make them available, we are setting up a world-class laboratory ourselves. Our aim is to have a 30-day turnaround time and we offer all the other laboratories the opportunity to either do the test themselves or work with us. If they have overloads and can't cope - send it to us, we want to work with people. But it's a positive thing for the women of Australia. That's the issue. We have won the rights from Myriad - exclusively. They give it to us. What we then do with it in this area is up to us. And we have made a decision not to enforce it.
JONATHAN HOLMES: Are you relieved and pleased that GTG has now announced it is giving those patents as a gift to the Australian people?
DR GRAEME SUTHERS: I've got mixed feelings about that. Because it may be that GTG has provided a generous gift of the BRACA licences to the Australian people. But they will take it back with the other hand by asking for licence fees for the non-coding patents which are essential for doing the BRACA analyses.
JONATHAN HOLMES: And that's precisely what Genetic Technologies IS doing in New Zealand. It's offering 'free' access to Myriad's breast cancer tests. But simultaneously it's demanding huge sums for a licence to its own non-coding DNA patents, which it claims are needed for almost all genetic tests. Auckland Hospital houses one of only two major genetic testing labs in the country. The other is in Christchurch. In response to a request under the New Zealand Official Information Act, Four Corners received a copy of this letter, dated May 23, from GTG to the chief medical officer of the Auckland District Health Board. It proposes:
VOICEOVER: "The grant of a national licence for unrestricted use of the GTG non-coding patents in human diagnostic testing by public sector institutions." "We propose the fee for signing and waiving of past infringement be ten million New Zealand dollars, and the ongoing annuity be two million New Zealand dollars per year."
JONATHAN HOLMES: An alternative, suggested GTG, would be that each individual genetic testing lab could pay:
VOICEOVER: "A signing fee of two million New Zealand dollars and an ongoing annuity of two hundred thousand New Zealand dollars."
JONATHAN HOLMES: Don't you think that's an awful lot of money?
DR MERVYN JACOBSON: Uh...
JONATHAN HOLMES: For a publicly funded...
DR MERVYN JACOBSON: Do you want me to try and justify a particular commercial transaction on a TV program without all the background information that might be relevant?
JONATHAN HOLMES: Well, I'm simply putting to you the figures that you have put to them, that you have suggested are appropriate. How do you think the New Zealand taxpayer would react to the idea that those sorts of sums of money are going to need to be paid to an Australian private company so that a service that's already there can continue to be offered to New Zealand patients?
DR MERVYN JACOBSON: The New Zealanders should be pleased that the test that they've been getting, which is subject to a New Zealand government patent and performed by government agencies illegally, will be offered lawfully and fully and properly - legitimately.
JONATHAN HOLMES: My understanding is that GTG has suggested to the New Zealand health system that an appropriate licence fee would be $10 million up-front and $2 million thereafter.
PETE HODGSON, NZ MINISTER FOR SCIENCE: Let me make sure that my body language gives nothing away on that. That is part of the constraint that I'm under because we now have a legal issue.
JONATHAN HOLMES: Are you being advised that these particular patents are challengeable?
PETE HODGSON: I'm being advised to shut up on that question.
JONATHAN HOLMES: But you couldn't sustain going on doing those tests if you were having to pay those kinds of licence fees, could you?
PETE HODGSON: I don't want to comment.
JONATHAN HOLMES: Apart from those guarded comments by the Minister of Science, no-one from the universities or from the health system here in New Zealand has been allowed to comment to Four Corners. But there's no doubt that there's real concern. The sums of money being talked about could jeopardise the entire genetic testing system here. And it's not just New Zealanders who are worried about that.
So when are you going to start making similar proposals to diagnostic testing labs in Australia?
DR MERVYN JACOBSON: We already are. We have been. To the extent that public or private laboratories are using non-coding patents, we would look to find a comfortable mutual arrangement to work with them.
DR GRAEME SUTHERS: Very large licence fees such as you've mentioned would blow our clinical and laboratory program out of the water. In South Australia we have a State-wide familial cancer service which is specifically involved in providing genetic counselling and testing to families where there is a risk of familial cancer. Now, the entire budget for that program for one year is of the order of $1 million, so if we're looking at licence fees that were equivalent to that, we would not be able to continue that program.
JONATHAN HOLMES: At all?
DR GRAEME SUTHERS: At all.
(FOOTAGE OF MELHUISH FAMILY PICNIC)
JONATHAN HOLMES: And familial cancer is just the start of it. Twice a year, Michelle and Tony Melhuish take 13-year-old Michael and 11-year-old Sarah on the long car journey from Parkes, in western NSW, to the Sydney Children's Hospital in Randwick. Michael Melhuish is suffering from Duchenne's muscular dystrophy, a progressive disease that's caused by a faulty gene on the X chromosome inherited from his mum. He's an alert and fun-loving kid, and a whiz with his wheelchair. But in the time since we filmed this sequence, his parents have had to tell him that he can't expect to live past the age of 20.
But the Melhuish family have had some good news recently. There was a 50-50 chance that Sarah would also be carrying the defective gene, and could pass it on to her children. Recently, she took a genetic test.
MICHELLE MELHUISH: We now know that she's not a carrier, and, yeah, so that's peace of mind for her and for our whole family.
DR ANNE TURNER, HEAD OF GENETICS, SYDNEY CHILDREN'S HOSPITAL: The tests that we do to tell whether other people in the family are carriers rely heavily on looking at the non-coding regions of the genome.
JONATHAN HOLMES: So, technically, the tests are breaching GTG's patents.
DR ANNE TURNER: I would imagine that a substantial licence fee would just freeze all the work that we do in the lab. So not only for disorders like Michael's, but all the DNA work that's done - all the diagnostic work that's done in public hospital laboratories would virtually cease.
JONATHAN HOLMES: It's not just diagnosis that's threatened by GTG's patents. It's the research which is the only hope for people like Zoe Battaglene.
CHRIS BATTAGLENE: The cure will come from gene therapy - basically that's...you know, seems to be what we're being told by the people that know, and that's sort of where we're pinning our hopes.
JONATHAN HOLMES: So genetic research, particularly, is crucial for you?
CHRIS BATTAGLENE: Absolutely. Absolutely.
JONATHAN HOLMES: Up to now, there's been an unwritten convention that research - especially research into fatal diseases like cystic fibrosis - is exempt from demands for licence fees from patent holders, at least until it produces something that's commercially valuable. But not anymore. In May, Genetic Technologies announced that the University of Utah had agreed to buy a research licence to its non-coding patents for what it called a peppercorn fee - US$1,000. And two weeks ago, Sydney University also acquired a $1,000 research licence from GTG. It was these research licences which roused Francis Collins to anger at the Genetic Congress last month.
DR FRANCIS COLLINS: The principle is very important. Even if the licencing fee seems modest today, what will it be tomorrow? Will we begin a veritable gold rush here, where lots of other patent holders watching this breakdown of the research exemption will say, "Well, me too. Where's mine?" And pretty soon, we will end up in a circumstance, I fear, where academic researchers will find it very difficult to pursue their best and brightest ideas without a phalanx of lawyers at their elbow. And that's really not where we want to go.
JONATHAN HOLMES: Do you accept that there has been a convention up to now that research, as such, is exempt from having to pay patent fees?
DR MERVYN JACOBSON: Uh, no, I don't. I think there's a lot of confusion and misunderstanding, in general. There used to be, in the old days, a situation where publicly funded organisations did research and handed it over to the public good and were sort of altruistic, whereas companies, public or private, were for profit. That's blurred. Research these days, in general, is big business.
JONATHAN HOLMES: Why do it? Why bother? Given that $1,000 is neither here nor there to your shareholders or to your company...
DR MERVYN JACOBSON: Well, thank you for asking.
JONATHAN HOLMES: It's creating a certain amount of flak for your company...
DR MERVYN JACOBSON: No, it's not. It's creating a certain amount of media hype by people who want to engage in sensationalism. The universities themselves seem to appreciate what we're doing. They are sensitive to the fact that they may well be legally infringing and it may well be that Mervyn Jacobson is socially responsible and offering them licences for $1,000, but when someone replaces me, it could be a more aggressive situation. And I think it's prudent insurance for them to take a licence now for a token $1,000 and to be covered for the life of these patents. It's...it's, in fact, a public service on our part. And also, I might add, we're bringing new technology to Australia that's never been available in Australia before from other companies around the world who need access to the non-coding patents. And in return, we're not only getting cash from them to fund into Australian research, but we're also getting new technology that has never been available in Australia. I think what we're doing is wonderful. I have a difficult time understanding why people stop to criticise.
JONATHAN HOLMES: All of those claims are true. Mervyn Jacobson undoubtedly feels aggrieved by the chorus of complaint. His company is investing substantial funds in Australian biotech. And as far as its patents are concerned, Genetic Technologies is doing no more than exercising its rights under the law. But that's why patent law itself, many believe, needs revisiting.
DR GRAEME SUTHERS: It seems to me that we need to again stand back and say, we have a community to care for - that includes you and me - and we need to ensure that whatever processes we have in place within our community are indeed for the benefit of the community at large.
SIR JOHN SULSTON: You have to say - and I do - that anything that blocks that cheapest possible point-of-care delivery of health is wrong. And we have to find some way not to allow that. We can argue in different ways whether it's...you know, how we should block it, but it simply cannot be right. And so somebody who is demanding - if this is the case - sufficient fees that they're going to seriously impair that delivery of health care should not be allowed.
DR MERVYN JACOBSON: I see the patent process as a very wholesome process. It's been around for 400 years. It started in Britain, but most countries in the world have adopted it, modified it. It works very well. You interfere with that process, you interfere with invention, you interfere with innovation, with risk taking. And, in fact, in Australia, if you drastically interfere with an established process, you run the risk of damaging or destroying biotechnology in Australia, which not only harms biotechnology companies but it's negative for Australian health care.
JONATHAN HOLMES: The truth is Australia and New Zealand are small players on the global stage. The Australian Law Reform Commission has until next year to recommend changes to our patent laws. But worldwide, for two decades at least, patent offices have been granting commercial companies monopolistic access to our DNA. Whether or not that's really in the interests of Zoe Battaglene and tens of thousands like her across the world, it will be hard to turn the clock back now.