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Reforms Of The Patents Act
Discuss the validity of patents involving isolated genes and gene sequences with reference to s18 of the Patents Act 1990 (Cth). What, if any, reforms are needed?
The appropriateness of granting patents involving isolated genes and gene sequences is a matter of ongoing controversy. For over a hundred years, the Australian patent legislation has used the same test for patentable subject matter.  Given that the patent system was originally created for a ‘brick and mortar world’, it had intrinsic and theoretical limitations, which became a part of the seemingly boundless expansion of patentable subject matter.  As such, traditional viewpoints of the law are stretched. This essay will argue that the current patent law is ineffective and is unable accommodate new biotechnologies like isolated genes and gene sequences.  The current ‘manner of manufacture’ test under s 18 of the Patents Act 1990 is inadequate as the threshold requirement of patentable subject matter.  While it is arguable that these isolated genes and genetic sequences are better seen as discoveries and are not proper patentable subject matter, many patents have been granted and are inappropriately protecting these genetic materials.  The patentability of gene sequences is also problematic as a matter of policy.
The main focus of this essay will be on the ‘manner of manufacture’ test, the threshold of inventiveness and exclusions under s18. Part I of the essay will outline the objectives of the patent system and show that gene patents are undermining them. Part II will outline the requirements of patentability and assess the validity of gene patents under the current law in Australia, showing that there has been a lack of judicial scrutiny. Part III will argue that the ‘manner of manufacture’ test is ambiguous, broad and ill-suited for isolated genes and genetic sequences. As a consequence, broad patents detrimental to society are granted. It will also examine the threshold of inventiveness and show that the grant of gene patents has also blurred the line between discovery and invention.  Part IV will consider the exclusions and argue that the current test is also inadequate because it fails to address social and ethical issues of the grant of gene patents. Such patents should not be haphazardly granted without attempting to engage in policy issues. The last part will consider it from an international context and recommend reforms to the current manner of manufacture test.
I. OBJECTIVES OF THE PATENT SYSTEM AND DO GENE PATENTS UNDERMINE IT?
The patent system is generally recognized as having an economic aim. According to the social contract theory, patents represent a quid pro quo.  When a patent is granted, the patent holder is given exclusive rights to exploit the invention for a fixed period of time but has to disclose details of it to the public in return.  The public is then allowed to further develop and invent around the invention. According to Lord Parker in Attorney General v Adelaide Steamship Co, the patent system promotes innovation and is warranted on the utilitarian ground that a new and valuable product or process is created as a contribution to society.  Most of the innovation that takes place in the biotechnology industry is deemed to be reliant on patent protection as the vital financial base required for research. 
There has been the need to balance two competing goals, the first of which is to promote innovation whilst at the same time ensuring that the public has sufficient access to information and that overprotection does not occur.  Consequently, the grant of gene patents has disturbed this balance and undermined the objectives of patent law. The authority given to gene patent owners is usually disproportionate with the benefit they confer on society because only a few stand to gain while the cost to society is much greater.  It is unethical to allow patent owners to have exclusive ownership over genetic materials. These patents also hinder innovation by limiting access to research and development, permitting a few organizations under power to control the biotechnology industry.  This point will be further discussed in part VI of the essay. It is evident that the patent system is unable to afford the type of protection that the biotechnology industry desires and the grant of gene patents is undermining the quid pro quo basis of the system. Hence, the test of patentable subject matter plays a very important role of achieving a proper balance between the two competing aims. It acts like a filter, determining whether the inventions fall within the scope of a patent monopoly.
II. PATENTABILITY OF ISOLATED GENES AND GENE SEQUENCES UNDER THE CURRENT LAW AND THE LACK OF JUDICIAL SCRUTINY
The requirements for a valid grant of a patent are found in s 18(1) of the Patents Act 1990.  One has to question ‘what is a proper subject matter for patent protection?’ S18 (1) requires that the invention is a ‘manner of manufacture’ within the meaning of s 6 of the Statute of Monopolies.  To be patentable, it needs to be a ‘manner of new manufacture’ and must have some element of inventiveness. Furthermore, s18 (1)(b) and (c) further specifies that it has to be novel and involves an inventive step when compared to the prior art, is useful and not secretly used. 
In Australia, there has been limited judicial consideration of the application of manner of manufacture test to genetic materials and whether isolated or purified genes are inventions or discoveries.  S18 (2) of the Patent Act 1990 does not specifically prohibit such subject matter, ‘other than human beings and the biological processes for their generation’.  However, it seems that the practice of IP Australia is in line with the view that isolated genes and genetic sequences are patentable subject matter and the patentability requirements are not strict.  In the 1995 Patent Office decision in Kirin-Amgen v Board of Regents of University of Washington  , the Deputy Commissioner held that an isolated DNA sequence constitutes an ‘artificially created state of affairs’ and is a manner of manufacture.  It was therefore patentable. A genetic sequence can be patented if its environment or its form is sufficiently modified and the invention fulfills the patent criteria under s18.  The processes in which the genes are involved and utilized to achieve a particular outcome are also patentable. The human intervention required to satisfy the requirement of an invention is very low and it will be shown in part III that these genetic materials should be seen as discoveries.
In 1980, in the landmark decision of Diamond v Chakrabarty, the US Supreme Court granted a patent for a new strain of artificial bacterium that was made using bacterial recombination.  It had markedly distinct characteristics from those, which were naturally occurring, had economic utility and was accordingly ‘not nature’s handicraft’.  In the case, it involved a man made and genetically engineered bacterium and arguably should not offer any grounds for claiming that isolated gene sequences are patentable. However, as stated in Chakrabarty, ‘anything under the sun’ is patentable subject matter.  The patenting of genetic sequences in late 1980s received little publicity and the US Patent Office had no problems with allowing patents involving isolated gene sequences.  In 1988, the European Patent Office, the US Patent Office and the Japan Patent Office have adopted the stance that ‘purified natural products are not to be regarded as products of nature or discoveries because they do not in fact exist in nature in an isolated form’.  They therefore considered such materials patentable on the same grounds as other chemical compounds. It seems that IP Australia has blindly applied the same policy as the patent offices from these countries instead of referring the controversial matter to the High Court that was similarly done in the National Research Development Corporation v Commissioner of Patents (NRDC) case, which dealt with horticultural processes.  This application of policy has consequently resulted in a massive number of about 15,000 gene related patents in Australia.  As claims are usually targeted at the genetic materials themselves and not just to the processes, they have wide ramifications on the biotechnology industry and scientific and medical research. These policies implemented are uncalled for and should be reviewed immediately and the law on this matter still anticipates an authoritative judicial decision.
III. THE CURRENT MANNER OF MANUFACTURE TEST: PROBLEMATIC AND INAPPROPRIATE FOR GENETIC MATERIALS
Broad, vague and outdated?
While the ‘manner of manufacture’ test has functioned well for about 100 years, it is evident that the test used for assessing patentable subject matter has become out of date and is unable to cope with the complexities of biotechnology.  It is no longer fit for its purpose today. As recognized by the Australian Law Reform Commission (ALRC) in its review of gene patenting, the meaning is obscure and keeping the archaic ‘manner of manufacture’ term gives little direction as to what falls under the scope of patentable subject matter.  It is also unclear how this test interacts with the other requirements in the Act. Due to the broad definition and high flexibility of the test, patentable subject matter such as isolated genes and gene sequences that should not be patentable, have been allowed. In the landmark decision of NRDC, the test for ‘manner of manufacture’ was reestablished as a set of principles with a widened scope in an attempt to accommodate novel fields of innovation, which courts now apply.  Every invention is now assessed for the fulfillment of the same broad conditions. It requires a manner of achieving an end result, which is ‘an artificially created state of affairs’ of utility in the field of economic endeavour and needs to belong to the ‘useful arts as distinct from the fine arts’.  This decision has been criticized as a shocking decision, because it has simplified the test so much that the requirement has been extinguished in practice.  The genetic materials are able to meet the NRDC requirements because they are usually commercial focused and said to have economic value. 
(II) Threshold of Inventiveness: Are Isolated Genes and Genetic Sequences Discoveries or Inventions?
The threshold economic test for the Act is the test for invention. The Act requires the invention to be a ‘manner of new manufacture’ and specifies than an invention must involve an inventive step. Both the Statute of Monopolies in s18 and in Schedule 1 of the Patents Act 1990 refers to it. 
The ‘manner of manufacture’ test is seen to be inadequate because the threshold of inventiveness is low and it seems to allow patents to be granted for discoveries.  Patent protection should not be given to mere discoveries because they are not a manner of new manufacture and s18(1)(a) should arguably automatically exclude claims on the genetic sequences.  The current practice seems to blur the distinction between discoveries and inventions.  In 2004, the ALRC carried out a rather comprehensive evaluation of gene patenting in Australia. However, the report failed to suggest that gene patents should no longer be permitted because gene sequencing would be equivalent to utilizing highly sophisticated skills and technology to discover something in our bodies and deriving information from observation.  It is justifiable to say that each invention encompasses some sort of discovery at its initial stages. However, with the mere technical process of isolation and purification of genes, separating the discovery from its application is highly artificial. It is therefore regarded as a legal and scientific fiction. 
Granting a patent over them is in effect giving exclusive ownership of information about the natural world because the essence of a gene is the sequence.  In Kirin-Amgen v Hoechst Marion Roussel, Lord Hoffmann explained that ‘an invention is a practical product or process, not information about the natural world’ and it is inappropriate to give patent holders an exclusive use of the information.  A technical method may be used to isolate the genetic sequences but this should not vary the ‘naturalness’ of the gene sequence.  The fundamental and essential characteristics of isolated genetic material are usually highly identical and replicate the exact composition and structure as the natural ones.  Furthermore, these characteristics are not produced by the researcher who alters them and are naturally occurring. The only point of distinction is the technical process of isolation and is targeted to their physical state, not what they are or what they function to do.  As such, it is analogous to republishing a hardcover book written by someone else in paperback and then asserting authorship because the binding has changed. Reproducing it into another format does not distinguish it. Employing these genetic materials in novel and innovative ways, like creating medical treatment, could be regarded as gene related inventions.  However, the isolated gene itself should not be regarded as an invention.
Another aspect of the test is whether a threshold of inventiveness still remains and whether it can be part of the ‘manner of manufacture’ requirement.  The decisions of the courts have left us perplexed and confused with the overlap of issues in the ‘novelty’ and ‘inventive step’, and the ‘manner of manufacture’ test.  Both the requirements of ‘novelty’ and ‘inventive step’ in s 18(1)(b) focus on the contrast of the prior art base with the invention rather than whether the invention is proper patentable subject matter.  As such, the threshold requirement for 'inventiveness' tends to have a rather restricted use and the threshold is too low because it seems that courts now resolve this issue by assessing it under the elements of novelty and inventive step.  Under the current law, the novelty and inventive step are also easily satisfied. As a result, there is a risk that broad patents lacking sufficient inventiveness will be granted. With respect to genetic materials, the basic structure and form of mRNA, DNA and polypeptides can be different but still possess a very similar role.  One must question how different and novel the gene sequences need to be before it is considered a new invention.
Based on the 2004 ALRC report, some experts have stated that sequencing of genes does not to amount to ‘an inventive step.’  However, this was not given much consideration and the ALRC did not review the ‘novelty’ and ‘inventive step’. In Aktiebolaget Hassle v Alphapharm, Kirby J stated that patents should only be granted if there is sufficient inventive input.  It is not the effort, hard work, amount of time, labour and skills or the outlay of resources that will satisfy the requirements. It is necessary for the test of novelty and inventive step to ‘reflect the complexities of contemporary science’.  It is said that the isolation and purification of a gene that occurs external of the natural environment is enough to make it novel since the gene sequence information was previously publicly unavailable. On the other hand, it is arguable that these genetic materials are in existence due to the evolution over a billion years and no inventor creates them.  The technical method of isolation should not be sufficient to differentiate the genetic sequence from its natural state and make it novel. Furthermore, the skills and techniques utilized to isolate the genes have become so standard, common and ordinary such that very insignificant inventive input is needed.  It may be seen as an obvious step to take for a skilled person in the art.
Ill-suited for Genetic Materials with the Consequence of Broad Gene Patents?
The patent system was never meant to deal with genetic materials. They are unique chemical compounds, which have an information storage role.  The current practice disregards the manner in which the information content of genetic materials is replicated and the way it functions in varying material forms by setting an extremely low benchmark for patentability. There are two types of patent claims over these genetic materials that needs to be differentiated. If the claim is made on the isolated gene sequence as a component or part in a method, it is only a conditional property of the patent holder.  The patent holder can only exercise very limited rights over the genetic sequences in the patented methods. On the other hand, if the isolated genetic sequence itself is claimed as a product, the patent holder gains ownership over it as an absolute property.  As such, the patent holder has exclusive rights over it. It will have the practical result of dominating the knowledge and exploiting of the gene. Most patent holders will also claim within the reach of the patent monopoly every feasible, imaginable and speculative scientific application of the isolated gene.  This is a way of gaining control of all types of therapeutic and medicinal uses associated with them.  With this type of patent monopoly, innovative competition is deterred because it confers the patentee with the authority to completely control what others may do with the isolated genetic materials that are within the reach of the patent monopoly. Broad patents on these basic discoveries could restrict the uses of these discoveries in follow-on research and limit the pace and direction of innovation.  The patents being permitted have stifled research, inventiveness and public access to novel technologies. Evidently, the test is an inappropriate threshold requirement for patentable subject matter.
With the large number of possible inventions that can be patented, the ‘patent thicket’ problem is also worsened due to the various upstream patents. There is also the likelihood of a ‘patent gridlock’ due to the highly complicated inter-relationship and overlapping claims over the same genetic material with many patent owners blocking each other.  A threat of the creation of ‘anti-commons’ in respect of scientific research inevitably arises, where there is under utilization of the resource.  The grants of such broad gene patents have resulted in extraordinarily large rewards for extremely little inventive input and are clearly destructive.
The NRDC case also states that for there to be invention, there must be a practical application of the discovery to a useful end.  The invention is required to be a manner of manufacture and explicitly required to be useful under S 18(1)(c).  There are overlaps in the manner of manufacture and usefulness requirement. Although it is required that the invention is useful, this is not directly assessed.  The test is so open and extensive that a large number of gene patent claims would be allowed under the Act. It appears that gene patents are being given where a clear and apparent utility is lacking in the application.  In fact, the specific functions and usefulness of the genes are usually uncertain. For instance, patents are granted over expressed sequence tags. They only function as probes for large genes and are used for further study, having minimal specific utility relating to their structure.  As such, it remains essential that patent law prevent the risk that a patentee acquires full and exclusive control over information where some specific useful application has not been found to prevent the grant of broad gene patents.
V. SHOULD PUBLIC POLICIES AND ETHICAL CONSIDERATIONS BE ADDRESSED THROUGH THE PATENT SYSTEM?
The key means by which the patent system addresses social and ethical considerations is through the exclusions and manner of manufacture test in s18. It includes a deliberation of whether an invention is ‘generally inconvenient’ as provided by s6 of the Statute of Monopolies.  There is also a ‘contrary to law’ exception found in s 50(1)(a) of the Patents Act which prevents the grant to unlawful activities.  However, not much direction is to the interpretation of the generally inconvenient exclusion and there is great uncertainty as to whether patents contrary to law can be invalidated as part of the manner of manufacture test.  As mentioned, S18(2) also states that ‘human beings, and the biological processes for their generation, are not patentable inventions’.  It is to prevent the grant of exclusive rights to human beings and does not apply to genetic sequences.
The Australia Patent Office has been unwilling to assess the patents based on these considerations and does not regard it as their responsibility to decide if a particular invention falls outside the scope of patentable subject matter based exclusively on matters relating to ethics and social policies.  The present system seems to provide an economic test only and does not filter out socially undesirable subject matter.  In Article 27.2 of the TRIPS agreement, there is a general exclusion, which exclude from patentability inventions, which are exploitative, necessary to protect ordre public or morality.  Furthermore, looking at the European jurisdiction, Article 6(1) of the EU Biotechnology Directive states that inventions, the commercial exploitation of which is considered ‘to run counter to ordre public or morality’ shall be excluded from patentability.  Similar to any other type of legal system, the patent system must address both economic and non-economic considerations, even though its key aims are economic. While the patent is a privilege, it is necessary for one to recognize that the patent is a privilege, which is conditioned by a public purpose.  A balance between the society’s welfare and interests of individual inventors needs to be achieved.
Even if one finds that isolated genes and genetic sequences meet the criteria of patentability, it is clearly problematic as a matter of policy. An important issue with regards to the ethical concerns is the commercialization of these genetic materials, which would be placed under exclusive private control, having significant impact on society. It is known to be morally repugnant and unethical in many countries to grant patents for genetic materials because they form the basic building blocks of life. At present, many global and multinational corporations, research organizations and governments all around the world are exploring every part to locate these new ‘green gold’, eager to find special genetic characteristics which have potential economic value.  In relation to human genes, these organizations could soon be granted patents on practically 100,000 genes that form the blue prints of human race. It is unimaginable that these large organizations can acquire exclusive rights over our common heritage of humanity. 
Furthermore, there is a real potential risk that patents granted for isolated gene sequences will deter innovation rather than encourage it. Research and development is also cumulative in the industry in the sense that numerous small steps need to be taken on the route to the development of these inventions. These researchers are deterred from using the potentially patented ideas and innovation is hindered when the free exchange of knowledge is obstructed. They often have to perform expensive and extremely lengthy searches of pre-existing patents. They may also need complex license arrangements, which results in higher costs of utilizing the information.  As seen, the practice of gene patenting is also preventing critical research from advancing because scientists are wary of trespassing on patent laws.  It hinders the discovery of medical breakthroughs that could save lives.
VI. THE INTERNATIONAL FRAMEWORK AND WHAT REFORMS SHOULD BE TAKEN
Since the review in 2004, the ALRC’s recommendations on gene patents have not been taken and put into effect.  In view of international norms, ethics and morality and economics, the manner of manufacture standard should be substituted with a modern codification. It should have a positive statement of what constitutes patentable subject matter. For instance, in the UK, the manner of manufacture reference was replaced with a codified definition that was consistent with the European Patent Convention.  Australia should adopt the language found in the TRIPS agreement with a statement, which provides that patents are available for ‘an invention in a field of technology’.  It can be understood to mean technologies of the day. This would also be consistent with Australia’s international obligations. It would also be ideal to include a definition of invention that specifies the requirements of physicality and technicality and importance should be placed on the distinction between inventions and discoveries. This definition would also remove overlaps in the requirement of inventiveness explained above.
Besides an explicit statement, there should also be specific exclusions where a list of specific subject matters that are not patentable is given.  Specific exclusion could result in increased clarity and certainty, especially if the interpretation of these exclusions can be managed well. There is a need for a clear exclusion of ‘mere discoveries’. Based on the justifications that isolated genes and genetic sequences are better seen as discoveries, an important exclusion is the patenting of biological materials and their sequences, ‘including but not limited to their components, parts or derivatives, whether isolated or purified or not and in spite of their state and processes used in their production, which are identical or practically indistinguishable to those that exist in nature’.  It is said that this exclusion may be incompatible with the TRIPS agreement and this has the potential to considerably restrict the scope for patenting main biotechnological inventions.  However, one has to recognize that these genetic materials are not inventions but merely discoveries. These are sequences of naturally occurring genes and are essentially information, which no inventor can create. The subject matter of a patent must be an invention and this has been the foundation and basis of patent law. This exclusion would also serve to clarify the current law and remove uncertainties.
The fact that the mere trace of invention is enough to fulfill the threshold of invention is undesirable.  The threshold of the inventive and novelty step should be raised so that the requirements will not be easily satisfied. This is to encourage the advancement of new technologies that utilize these materials more than the existing technology. The focus of inventiveness should not be placed on the genetic materials themselves nor on the use of these materials in standard and common methods and processes, but on the development of technologies that result in the creation of novel and effective diagnostics, treatments and cures.  There should be greater ingenuity, analytical and problem-solving skills ascribed to a person skilled in the art to ensure that the patent system rewards true invention, rather than just small minimal improvements to the scientific knowledge in the public arena.  In its 2004 review, the ALRC has recommended that the Australian Government reform the Patents Act 1990 (Cth) to provide that an invention will meet the requirement of usefulness in s18(1)(c) only if the patent application discloses ‘a specific, substantial and credible use’.  It is similarly applied in the US.  The word ‘substantial’ requires patent holders to name at least one genuine application for the new invention. Naming only a generic use should not be allowed. This would make it far harder for patentees to satisfy the utility criteria for obtaining a gene patent. For example, the mere identification of gene sequence for patentability would not satisfy the criteria and it also prevents patent holders from claiming more than what the scope of the actual invention allows. Broad patents will therefore be prevented and this requirement is especially useful when the fine line between discovery and invention is blurred.
A general social exclusion centered on ethical grounds should also be clearly provided for in the Patents Act. By having such a general social filter, inventions contrary to public policy or morality will be excluded for the benefit of society.  The proviso contained in s 6 of the Statute of Monopolies prohibits the grant of a patent for inventions contrary to law and it is also found in s 50(1) of the Act.  S50(1) of the Patents Act 1990 (Cth) should be amended to include inventions that are ‘contrary to morality as well as law’.  This exclusion would remove morally repugnant inventions, which are socially unacceptable and maintains the integrity of the system. Guidelines on the types of subject matters to be excluded can be further developed. In addition, there should be rigorous and critical assessment of gene patent applications, capacity to challenge and revoke unsuitable patents and a more defined role for the Government to participate actively in the patent process to address public policy issues. An establishment of a new ethics advisory body would be an ideal mechanism for addressing social and ethical concerns rather than only allowing patent examiners to deal with it. 
On the other hand, one might consider that the patent system to be flawed in its application to all technologies with its technology neutral approach.  Since genetic materials pose a unique challenge to the patent system, a precise and targeted response might be more suitable for genetic materials. Another alternative is the creation of a special sui generis right for genetic sequences.  Patenting was never consistently applied to every field of invention without special exceptions and rules. There are instances such as the Plant Breeder's Rights Act 1994 where technology-specific rules were used.  The TRIPS agreement also recognizes the right to give technology-specific arrangements where required under Article 27.3.  The creation of such a genetic sequence right would prevent holders from having absolute control and ownership of the genetic sequence and be able to promote innovation.  Instead, they get a right to a use fee for the specified genetic sequence in a limited time frame and this fee applies to commercial entities only.  It will also prohibit the patenting of isolated genetic sequences, which are indistinguishable to the naturally occurring ones. Perhaps, genetic materials can be given technology specific protection to better deal with the current problems.
The current patent law in Australia has been unable to cope with the complexities of these new biotechnologies. The current manner of manufacture test is clearly inadequate and inappropriate as threshold test of patentable subject matter especially in its application to isolated genes and genetic sequences. Patent holders should not be excessively rewarded and should only be rewarded for a true invention. If the protection offered by the patent granted is disproportionate with what the inventor is prepared to offer the public at large, the patent system has failed its basic purpose. There is insufficient ingenuity involved in isolating genetic material that exists in our bodies, using pre-existing research methods and skills. In fact, it is similar to collecting and arranging a set of postage stamps. As such, they are better seen as discoveries and should not be patented when ethical and social considerations are also taken into account.  The patent law should set clear and proper boundaries on what is patentable. A modern codification with specific exclusions is therefore necessary to provide clarity and certainty to the law. Furthermore, a ban on the patenting of isolated biological materials that are indistinguishable to those that exist in nature will not limit the scope for biotechnology inventions and prevent the grant of patents with respect to novel and inventive technologies that make use of those materials. The gene sequence itself should not be patentable. The novelty, inventive and utility requirements should also be raised to a higher standard to ensure that true inventors are rewarded for their inventiveness and that others are not overly rewarded for trivial improvements over prior art. Such reforms are clearly warranted to adapt to the unique problems presented by new genetic materials and technologies.
1. Articles/ Books/ Reports
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Luigi Palombi, Response to ACIP Options Paper on Patentable Subject Matter, (8 October 2009)
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Cancer Council Australia, Clincial Oncological Society of Australia, Senate inquiry into Gene Patents (March 2009)
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Chris Dent, Intellectual Proerpty Research Institute of Australia, Submission to the Adivosry Council on Intellectual Property in response to its Patentable Subject Matter Options Paper (November 2009)
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Adam Cresswell, ‘Senate push to ban gene patents’ The Age (Melbourne), 1 August 2009.
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Caenegm William Van, ‘Intellectual Property’ (2006) 171-197
Plant Genetic Systems  OJEPO 545;
Kirin-Amgen Inc v Hoechst Marion Roussel (2004)