“ … a group of generals of the Byzantine army camped with their troops around an enemy city. Communicating only by messenger, the generals must agree upon a common battle plan. However, one or more of them may be traitors who will try to confuse the others. The problem is to find an algorithm to ensure that the loyal generals will reach agreement. It is shown that … this problem is solvable if and only if more than two-thirds of the generals are loyal …”

— The Byzantine Generals Problem

For educational purposes only.

PART I

The generals in the biotechnology system are: (A) the government who decides whether a patent is valid, maintains the centralized system of patents and enforces copyright exclusivity (B) the sponsor/company that is funding clinical trials in hopes of selling the product upon showing efficacy and safety in trials and (C ) all other companies that may compete with such product.

2/3 of the generals in the system (A government + B clinical trials sponsor/company) need to be able to come to consensus despite generals (C competitor companies) behaving arbitrarily, lying and/or trying to disrupt the system — the Byzantine actor. Byzantine Fault Tolerance is the name of consensus algorithms that can function despite byzantine actors (e.g. Bitcoin consensus algorithm can handle up to 1/3 byzantine actors).

The economic incentive system that makes biotech research/clinical trials go are government enforced intellectual property exclusivity periods on products that emanated from clinical trials. There are two types of exclusivities:

(1) research exclusivity based in patents

Patent exclusivity lasts up to 20 years or until the patent is invalidated.

The current patent system only allows for less than 2/3 consensus, as the A government can change its mind on patent exclusivity if there is enough proof in existence to invalidate the patent. Consensus in patent exclusivity is subjective and only enforceable with litigation, an extremely inefficient and costly process. The generals are almost never in agreement as can be seen with extensive and patent litigation. In the U.S. patents are invalidated over 80% of the time.

and

(2) clinical trial data exclusivity based in copyright.

Clinical trial copyright exclusivity lasts anywhere between 3–12 years depending on the product.

The current copyright system allows for greater than 2/3 consensus, usually 3/3. It is highly enforceable without fault as copyrights ethically exist in clinical trial data upon being reduced to writing. There is no subjectivity involved, only proof of the clinical trial data existing.

Because the patent process is so faulty but comes with a 20 year exclusivity period, the industry’s solution is to fund new molecules that have never been conceived before. Because there is a lack of information existence on molecules that have never been conceived, it should be easier for the generals to subjectively come to consensus that such patent is valid. The problem is that is takes 15 years and $2.6 billion to get a new molecule through the clinical trial process — and there is still risk of byzantine actors trying to invalidate the patent in litigation. This was the case for the biggest patent award of all time ($2.5 billion USD) — a litigation between Gilead Sciences (B — the sponsor/company) and Merck (C — the Byzantine actor) over the cure to Hepatitis C.

Summary: Gilead bought the patent and the copyright to the clinical trial data from Pharmasset in 2011 for $12 billion. Gilead believed the patent was strong and hey, it was the first cure to a virus of all time — one of the greatest achievements in human history. Through years of court battles and decision reversals, Merck won a judgment of $2.5 billion from Gilead, invalidated the Gilead patent and Gilead only had 5 years of copyright exclusivity, even though they anticipated 20 years of patent exclusivity. This had significant effects on Gilead stock price as it was one of the best selling drugs of all time.

The details:

In the early 2000s, Merck and Gilead agreed to collaborate on Hepatitis C research, not steal each others research and not file patents on each others research. This agreement was in writing between the two companies. As per court documents, a patent lawyer from Merck filed a patent on the Gilead research even though they agreed not to. Upon Gilead obtaining FDA approval, Merck claimed they had a patent to invalidate Gilead’s based on the Merck patent lawyer’s patent filing, but it was determined to be in violation of their agreement so Merck eventually lost this case. But Merck wasn’t finished and was determined to invalidate the Gilead patent because the cure to Hepatitis C was worth many billions of USD (which would of course satiate the fiduciary duty to Merck’s shareholders — a major cause of Byzantine actors). In 2014 Merck acquired Idenix. Idenix had rights to a significant Hepatitis C patent — this was used as a sword to again engage Gilead in litigation. This time Merck won and it was ruled that Gilead was to pay $2.5 billion in damages to Merck — the largest patent judgment of all time.

To summarize, Gilead spent $12 billion on clinical trial research for a drug that proved to be the first cure to a virus in human history. Merck acquired a new patent to invalidate Gilead’s 20 year patent exclusivity period and Gilead was ordered to pay Merck $2.5 billion. Gilead’s patent was no longer valid. Upon the patent being invalidated, Gilead’s stock price dropped significantly and now there are multiple companies that market the cure to Hepatitis C. Notably, Gilead’s 5 year clinical trial copyright exclusivity period was unaffected.

If one of the biggest and arguably greatest biotech of all time, Gilead Sciences, can’t achieve 2/3 patent consensus for the FIRST EVER CURE TO A VIRUS, how can investment in biotech research based in the patent system be justified? The patent system has become so litigious as Byzantine actors are able to invalidate patents over 80% of the time — massive economic inefficiency.

Because 2/3 consensus cannot be achieved regularly, capital for biotechnology is extremely limited and has resulted in the “valley of death” — a failure to bridge from laboratory studies to clinical studies (clinical studies cost significantly more than lab). As per MIT, there is a 20 year backup of potential biotechnologies that await funding for clinical trials. In the Byzantine patent world, the cost to experiment is just too damn high.

Because of this, Big Pharma essentially has a monopoly on research which is governed by a fiduciary duty to shareholders only. The same duty for companies that sell sugar and hamburgers have — sell as much as possible which incentivizes Byzantine behavior.

Incredibly, scientists and the general public lack meaningful agency in determining the future of biotechnology.

Now imagine you are a scientist that just figured out the cure to cancer, what’s your move?

Part II will focus on recent efficiencies in Byzantine Fault Tolerance and clinical trial research that enable a new system of distributed agency.

Written by Gregory Rigano, attorney at law, free speech maximalist, founder of the Blockchain and Law Meetup NYC, and CEO to IKU. Educational purposes only. Do your own research. Stay safe.

Feel free to reach out if you have any comments, questions or if you believe there is anything inaccurate: gregor@iku.network