SUPPOSE THAT you are a genetic engineer, and you develop a bacterium that gobbles up and neutralizes radioactive waste. According to a 1980 Supreme Court ruling, you may patent your little bug -- and charge royalties to nuclear-energy companies that want to store that bacterium in case of an emergency.

Now suppose that you develop a genetically superior cow. You rejoice at the recent U.S. Patent and Trademark Office decision that allows you to apply for a patent on that cow. But you realize before long that your royalties are drying up as the cows that you've sold provide their new owners with equally superior but unpatented calves.

Builders of better organisms, like builders of better mousetraps, are finding that paths are being beaten to their doors. But a closer look shows that patent lawyers are doing a lot of the bushwhacking, as the legal profession struggles with the gene-age novelty of patented products that reproduce by themselves.

Litigation is well on its way to becoming the premier product of the biotechnology revolution. Biotech patent disputes are multiplying like clones, and with more than 6,000 new biotech patents currently pending in the United States alone, the case load is destined to grow. Indeed, as biotech companies move from basic research into full-scale production and marketing of their first products, patent protection is becoming an increasingly important -- and contentious -- cornerstone of corporate well-being.

Although only five genetically engineered products have so far been approved for sale in the United States, biotechnology companies are already staking their claims to the dozens of diagnostic, pharmaceutical and agricultural products that are expected to emerge from the industry in the next few years. The roster of resulting patent disputes reads like a Who's Who of biotechnology:

Hoffmann-LaRoche and Eli Lilly are suing Genentech over patent rights to genetically engineered human growth hormone.

Amgen and Cetus are in court over their rights to market interleukin-2.

Genetics Institute recently beat out rival Amgen for the first U.S. patent on erythropoietin, but Amgen says it plans to appeal.

Hybritech successfully defended a patent infringement suit brought by Monoclonal Antibodies, and was recently granted a preliminary injunction to prevent Abbott Laboratories from selling certain diagnostic tests.

Scripps Clinic is suing Genentech over rights to genetically engineered Factor VIII, the clotting factor that's missing in hemophiliacs.

Race for Royalties

The stakes in these and other ongoing cases are substantial; with biotech budgets depleted after years of preliminary research, and a number of companies racing to produce some very similar products, patent lawyers are anxious to win for their companies the lucrative market monopolies provided by U.S. patent law. But attorneys are facing some crucial questions about how to apply America's 197-year-old patent laws to the ultramodern biotechnology industry.

U.S. patent law was first written in 1790, and its principal author, Thomas Jefferson, didn't have much to say about monoclonal antibodies, erythropoietin or tissue plasminogen activator. As revised in 1861, the law grants to "inventors and authors" a 17-year monopoly over the production, use and sale of their products. As a condition of this grant, the applicant must supply to the public a detailed description of the invention so that others may immediately learn from and build upon that knowledge.

In this and other respects the law was designed to "promote the progress of science and the useful arts" as they existed at the time. The 17-year limit, for example, was settled upon by Congress as the amount of time it might take to train two apprentices to make a new concoction.

But with the increasing rate of technological change, and with skyrocketing investments in research and development, patent protection has taken on added significance in the biotech age. According to Jack Doyle, an attorney with the Environmental Policy Institute in Washington, "In modern corporate terms, patents are often viewed as a way to maintain and expand a company's market share." And in the biotechnology industry, market share can easily translate into hundreds of millions of dollars per year.

Recently, for example, Genentech Corp. of South San Francisco lost a crucial round in its legal battle with London-based Wellcome PLC over British patent rights for its genetically engineered blood clot-dissolving drug. Analysts estimate that the drug, which is expected to gain Food and Drug Administration approval later this year, may be worth more than $1 billion in sales worldwide to the company or companies that win appropriate patents.

In the Wellcome-Genentech case, the dispute boils down to the question of how broad a patent claim can reasonably be: Can the original developer of a new product get patent protection for a broad family of related products, or only for a very specific form of that product? The question is particularly significant in the biotech age, as scientists find that substances can take on radically different properties with the simple replacement of, say, one amino acid by another.

"There seems to be some degree of uncertainty about the law with regard to making what would appear to be minor changes in the molecule, when those changes in fact have dramatic results," says Albert Halluin, vice-president and chief intellectual property counsel for Cetus Corp., an Emeryville, Calif.-based biotechnology company. Is it reasonable, he asks, for someone to claim, "'We want all derivatives, substitutions and deletions that anybody can think of,' thereby blocking someone else who comes along and actually does the work and finds that some things work and some things don't?"

Suppose, for example, you develop a genetically engineered pesticide that kills grasshoppers. Now, say, someone later discovers that with a minor substitution in the genetic code the same product is a cure for AIDS. Are you entitled to all the royalties from the AIDS drug as well?

Are Animals 'Obvious'?

Along with the question of patent breadth, a number of related issues complicate the application of current patent law to biotechnology:

What constitutes "prior art"? Patent protection is granted only to products that are deemed novel in relation to preexisting inventions, which together are referred to as "prior art." Many genetically engineered products are actually identical to substances already found in nature, but with biotechnology they can be produced in much larger quantities or in more purified forms.

The main ingredient in aspirin, for example, occurs naturally in the bark of certain trees. Nevertheless, the patent office allowed a patent on the laboratory-purified drug, and has so far held to a liberal interpretation of the novelty requirement in similar cases. But there remains some uncertainty about the legal definition of the word "new," especially as applied to the uncharted world of genetic engineering.

What constitutes "obviousness"? According to U.S. patent law, patents are not granted to inventions that, although entirely new, may be considered obvious "to a person of ordinary skill in the art." This issue arose in the highly publicized April 1987 patent-office decision to allow patents on higher life forms. While holding that higher organisms are in theory patentable, the patent appeals board in fact rejected -- on grounds of obviousness -- the particular patent applied for in that case. It may be, some attorneys have since concluded, that the patenting of higher organisms will not get very far, as patent officials may deem the entire animal kingdom to be prior art and an "obvious" medium for genetic manipulation.

Most patent attorneys, however, disagree with that view. "If you can show me that it would be obvious to monkey with your nuclear cells and jazz up your chromosomes, then that's fine," says Eric P. Schellin, director of the National Patent Council, an Arlington-based business lobby that supports patent protection. But in many cases, he says, "you're not going to be able to do that. I'm going to show you that it's brand new and that it's not obvious. And the fact that it comes out squeaking like an animal is beside the point."

How can patent protection be properly enforced when the patented organism is self-replicating? The product may be a microbe, a mouse or a dairy cow, but the question remains as to whether patents are passed on to progeny. If so, royalties may be due to the original holder of the patent for all subsequent generations of the gene-altered life form. Enforcement of patent rights would then require reliable ways to determine family-lines; such tests are still not very reliable.

How will the patent law "enablement requirement" be fulfilled? The law requires that a patent application include a detailed description of how the invention was made and how to use it. "If something is alive -- and you can't create life -- how do you on a piece of paper describe how to make it?" asks Howard Stanley, patent attorney for Monsanto Corp. in St. Louis. "You can store samples of microbial material in suspended animation" in special storehouses such as the American Type Culture Collection in Rockville, he notes, and by making such frozen samples available to interested parties the enablement requirement would be fulfilled.

"But suppose that the thing you were modifying was an elephant," Stanley says. "I don't think Rockville is going to be too thrilled if you show up with an elephant and say that you'd like to store it in case somebody comes along wanting to know, 'How did you make that elephant?'"

Piles of Paperwork

These questions and others will begin to be answered with some soon-to-be-published clarifications from the Patent and Trade Office. But the courts must ultimately interpret such rules, so it will be some time before the issues are resolved.

"A lot of these cases are hung up right now at the patent office -- either in front of examiners or at the board of appeals level -- and as these cases go through the system we'll be getting some guidance," says Steve Odre, a patent attorney with Amgen Inc. in Thousand Oaks, Calif. "For now I think that everyone is waiting for some case law, but that's not going to happen tomorrow. Meanwhile, attorneys are still feeling their way through it."

The decision-making process may be further slowed by the growing political and ethical controversy surrounding the commercialization of living organisms. Already, church groups, farm organizations, chemical companies and Congress are jockeying for some influence over what has traditionally been an apolitical function of the Patent and Trademark Office.

"We have generally remained separate from the regulatory scheme," says Charles Van Horn, director of the organic chemistry and biotechnology examiners group at the patent office. "But biotechnology is a highly visible technology at this time, and when you work in a fishbowl it can sometimes distract you from getting your work done."

Legal and political delays aside, the sheer volume of pending paperwork makes a speedy resolution to the problem unlikely.

"The volume of literature and art relating to pharmaceutical patents alone has been growing geometrically," says Halluin, of Cetus. "Examiners have an awful lot more to consider than they did 20 years ago."

As the patent office makes increasing use of computer searches and augments its staff with biotech-savvy examiners, the bottleneck should gradually resolve itself, Halluin says. However, says Van Horn of the patent office, "even though we're increasing our ability to turn the work over faster, it's coming in at a rate that we have yet to keep up with. I don't anticipate things calming down in this area for a number of years to come."