Biotechnology & Competitiveness

Biotechnology is a new set of techniques that can be used in basic research, product development, and manufacturing in several different industries. Although it was primarily developed in the United States, funded mainly through government support for basic biomedical research, there are growing concerns that, like some other native technologies, biotechnology will be rapidly adopted and commercially applied elsewhere, leading to a loss of U.S. preeminence in this area.

Biotechnology was first applied commercially in producing diagnostics and therapeutics. These applications were the most obvious because most of the developers of the new techniques were conducting basic biomedical research. Most recently, genetically engineered biopesticides have won regulatory approval in the United States. Further agricultural applications are expected within the next 10 years.

In the United States, the earliest firms to exploit these new techniques were the dedicated biotechnology companies (DBCs). Financed with venture capital, they were founded in the late 1970s and early 1980s to apply the new techniques to the development of diagnostics, pharmaceuticals, pesticides, plants, and other products. Although these firms are often referred to collectively as the “biotech industry,” the dedicated biotechnology firms are, in fact, developing products and competing with firms in existing industries. DBCs, regardless of the products they make, share some characteristics and certainly compete with each other for capital. But industries are defined primarily by the products they produce and the markets in which they compete. As DBCs develop and become engaged in commercializing products, the problems they face are characteristic of the existing industries to which they belong. Thus, their problems become more understandable if DBCs are regarded not as “biotech companies’ but as young firms in, for example, the pharmaceutical, agricultural, or waste treatment industries.

Targeting Biotechnology Development

Because it encompasses several processes that have applications to many sectors of the U.S.

economy, some argue that biotechnology should be targeted by the Federal Government for aggressive government support and promotion. Currently, U.S. industrial growth depends on private sector entrepreneurship, Federal funding of research, and regulatory oversight of various research applications and commercial development.

Congress could target biotechnology through legislation that broadly singles it out for favorable treatment, or through measures that address specific problems faced by researchers and companies seeking to commercialize products developed through biotechnology. Legislative attempts to target biotechnology have focused on the establishment of national biotechnology policy boards and advisory panels for specific areas of research interest (e.g., agriculture, human genome, and biomedical ethics) and development of a national center for biotechnology information. Those who argue against targeting biotechnology say that it is not the role of the Federal Government to pick winners and losers in the world of commerce, that such efforts have more often failed than succeeded, and that attempts to target biotechnology cannot succeed due to the number of industries involved, all of which face different scientific, regulatory, patent, and commercial problems. Targeting biotechnology alone cannot assure increased competitiveness; fostering a research base (funding, training, and personnel) and maintaining an industrial capacity to convert basic research into products also is required.

Federal Funding for Biotechnology Research

An issue central to the competitive position of U.S. efforts in biotechnology is a sufficient and stable level of funding for areas of science crucial to the field. In relative and absolute terms, the United States supports more research relevant to biotechnology than any other country. Clearly, intensive and sustained Federal investment in applications of biotechnology to the life sciences has been transformed into commercial products in some industries faster than others. Commercial applications continue to be more advanced in areas such as human therapeutics and diagnostics, largely due to the high 22 l Biotechnology in a Global Economy levels of funding of basic biological research by the National Institutes of Health (NIH). Other areas, such as agriculture, chemicals, and waste degradation, have not come close to approaching the same levels of funding enjoyed by the biomedical sciences. In some cases, such as agriculture and waste degradation, slow progress in commercial activity could be due in part to insufficient funds for basic research; in other cases, such as chemicals, potential products are simply not being developed because industry does not consider the biotechnology products or processes sufficiently better (either functionally or economically) than those that already exist.

Congress could determine that Federal levels of investment in R&D over recent years have adequately supported the forward integration of biotechnology into many sectors and have contributed to the commercial successes of U.S. biotechnology companies. Proceeding with the current funding patterns would ensure a stable level of research relevant to biotechnology and its applications. Such an approach, however, would perpetuate current disparities in research emphases, with biomedicine continuing to fare better than agriculture and waste management.

Biotechnology Intellectual Property Protection

Intellectual-property law, which provides a personal property interest in the work of the mind, is of increasing importance to people using biotechnology to create new inventions. Intellectual property involves several areas of the law: patent, copyright, trademark, trade secret, and plant variety protection. All affect emerging high-technology industries because they provide incentives for individuals and organizations to invest in and carry out R&D. Many see protection of intellectual property as a paramount consideration when discussing a nation’s competitiveness in industries fostered by the new biology.

Broad patent protection exists for all types of biotechnology-related inventions in the United

States. The Supreme Court decision in Diamond v. Chakrabarty, that a living organism was patentable, along with action by Congress and the executive branch changing Federal policy to increase opportunities for patenting products and processes resulting from federally funded research have spurred biotechnology- related patent activity. Internationally,several agreements (e.g., the Paris Union Convention,the Patent Cooperation Treaty, the Budapest

Treaty, the Union for the Protection of New Varietiesof Plants, and the European Patent Convention) provide substantive and procedural protection for inventions created through the use of biotechnology.

Despite a generally favorable international climate,a number of elements affect U.S. competitivenessin protecting intellectual property. The patent application backlog at the Patent and Trademark Office (PTO), domestic and international uncertainties regarding what constitutes patentable subject matter, procedural distinctions in U.S. law (e.g.,first-to-invent versus frost-to-file, priority dates, grace periods, secrecy of patent applications, and deposit considerations), uncertainties in interpreting process patent protection, and the spate of patent infringement litigation, all constitute unsettled areas that could affect incentives for developing new inventions.

The backlog of patent applications at PTO is frequently cited as the primary impediment to commercialization of biotechnology-related processes and products. Recent studies reveal that

the pendency period for biotechnology patent applications is longer than that of any other technology.