July 29, 2025
In 2008, a small biotech company called Smart Genetics was quietly shuttered after just a few months of operation. Their crime? Offering direct-to-consumer genetic tests that could predict a person's risk of developing Alzheimer's disease. The company hadn't violated any FDA regulations or committed scientific fraud. Instead, they had run afoul of something far more unusual: the moral convictions of a neurologist named Alan Roses, embedded in the fine print of a patent license.
This episode represents a phenomenon in biotechnology that challenges our fundamental assumptions about innovation and intellectual property. Welcome to the world of “ethical licensing”—where patent holders wield their legal rights not just as economic weapons, but as moral gavels, determining not only who can use their inventions, but how.
When Patents Become Pulpits
The traditional narrative around patents is refreshingly simple: inventors receive temporary monopolies in exchange for sharing their discoveries with the world, spurring further innovation through economic incentives. But in biotechnology, something more complex is happening. Patent holders are increasingly using their legal rights to impose their personal ethical frameworks on entire fields of research.
Duke University's approach to the APOE gene patents offers a stark illustration of this shift. When Alan Roses and his Duke-based team discovered the connection between the APOE4 gene variant and late-onset Alzheimer's disease in the early 1990s, they didn't just patent their discovery for financial gain. According to a paper by Katie Skeehan, Christopher Heaney, and Robert Cook-Deegan, Roses sought the patents “because of well known chicanery in publication and reviewing in academic Alzheimer's disease research at the time. … Dr. Roses’ solution to such problems for research on the APOE gene was to file a patent application for APOE screening to establish a documentary record.”
More tellingly, when Duke exclusively licensed these patents to Athena Diagnostics, they appeared to include a crucial restriction: the technology could only be used for diagnostic purposes in patients already showing symptoms of dementia, never for predictive testing in healthy individuals. As Roses communicated to Skeehan et al., “the intention was to use the patent license from Duke to ensure APOE testing would not be used as a presymptomatic screening test; it could only be used for patients already clinically diagnosed with dementia.”
The Reach of Moral Authority
The power of “ethical licensing” extends beyond the parties signing the contracts. When Duke learned that Smart Genetics was offering direct-to-consumer Alzheimer's risk assessments in 2008, the university didn't hesitate to enforce its moral vision. Through what Skeehan and colleagues describe as “repeated correspondence,” Duke made clear that such testing violated their ethical licensing restrictions. Smart Genetics ceased operations by October 2008.
The message was also unmistakable when 23andMe announced plans to offer Alzheimer's risk reports in 2011 according to an article from Stanford Law School. Alan Roses publicly reminded the genomics company that “there is an active patent held by Duke University with an exclusive license to Athena—and well-defined rules to perform the test on a doctor's signature certifying cognitive impairment.” The warning was clear: follow our moral framework, or face legal consequences.
What makes this case particularly striking is how Duke deliberately left money on the table. They didn't suppress predictive testing to corner the market for themselves. Rather, they genuinely seemed to believe that such testing was ethically problematic and used their patent rights to prevent it entirely.
The Unelected Regulators
The idea of “ethical licensing” raises profound questions about the governance of emerging technologies. In democratic societies, we expect that decisions about what medical technologies should be available to the public will be made through transparent regulatory processes, with input from diverse stakeholders and accountability to elected officials. But ethical licensing creates a shadow regulatory system where individual patent holders—unelected and unaccountable—can effectively determine the trajectory of entire technological fields.
The implications extend far beyond Alzheimer's testing. As biotechnology increasingly involves platform technologies that serve as the foundation for subsequent research, patent holders with strong moral convictions can shape the direction of innovation in ways that affect millions of people. They become, in effect, the moral gatekeepers of genetic progress.
The Double-Edged Helix
The defenders of ethical licensing argue that it serves important purposes. In fields where regulation lags behind scientific advancement, patent holders may be the only actors positioned to prevent potentially harmful applications of new technologies. Dr. Roses genuinely believed that predictive Alzheimer's testing could cause psychological harm without providing actionable medical benefits—a position shared by many medical professionals at that time.
Moreover, ethical licensing can ensure that breakthrough discoveries are developed in ways that align with the values of their creators. If we accept that inventors have moral stakes in their discoveries, perhaps they should have some say in how those discoveries are used.
But this perspective assumes that patent holders' moral judgments are necessarily wise or representative of broader societal values. In Duke's case, their position on predictive testing was disputed by other researchers and patient advocates who argued that individuals had a right to genetic information about their own bodies, even if that information was probabilistic rather than deterministic.
Beyond the Patent Cliff
The Duke case ultimately ended not through democratic deliberation or market forces, but through a quirk of patent law. The Supreme Court's 2012 decision in Mayo v. Prometheus called into question the validity of patents on genetic testing methods, effectively neutering Duke's ability to enforce its ethical vision. But this resolution was accidental rather than intentional—a reminder of how little democratic oversight exists over these private governance systems.
As biotechnology continues to advance into areas like CRISPR gene editing, synthetic biology, and artificial intelligence-assisted drug discovery, the potential for ethical licensing to shape innovation will only grow. We need a more intentional conversation about the proper balance between inventors' rights, market forces, and democratic governance in biotechnology.
The question is not whether patent holders should have moral agency; they inevitably will. The question is whether that agency should extend to making decisions that affect entire fields of medical research and, ultimately, patients' access to potentially life-changing technologies. In the age of genetic medicine, the answer will help determine not just who controls innovation, but who controls the future of human health itself.
– Geoffrey W. Smith
First Five
First Five is our curated list of articles, studies, and publications for the month.
1/ Hot Tubs Beat Saunas
“Hot tubs don't just feel great, they may actually outperform saunas when it comes to health perks. A study found that soaking in hot water raises core body temperature more than dry or infrared saunas, triggering stronger heart, blood vessel, and immune responses.”
Read more here >
2/ Pros & Cons of Friendship
“Friendship comes with complex pros and cons—possibly explaining why some individuals are less sociable, according to a new study of gorillas. Scientists examined over 20 years of data on 164 wild mountain gorillas, to see how their social lives affected their health. Costs and benefits changed depending on the size of gorilla groups, and differed for males and females.”
Read more here >
3/ Left or Right Arm?
“Researchers found that when a vaccine is administered, specialised immune cells called macrophages became 'primed' inside lymph nodes. These macrophages then direct the positioning of memory B cells to more effectively respond to the booster when given in the same arm.”
Read more here >
4/ Shaping the Market for Digital Health Tools
“The global health sector has witnessed a rapid digital transformation over the past two decades, fueled by investments in digital health tools and the emergence of open source solutions known as global goods. While these tools have enhanced health system efficiency and equity, their long-term sustainability remains challenging due to inconsistent funding, a lack of structured market pathways, and limited government ownership. This report … outlines a roadmap for shaping a sustainable global goods ecosystem, ensuring these critical digital solutions remain viable, scalable, and impactful.”
Read more here >
5/ All of the Biggest U.S. Cities Are Sinking
“A new study of the 28 most populous U.S. cities finds that all are sinking to one degree or another. The cities include not just those on the coasts, where relative sea level is a concern, but many in the interior. Furthermore, using newly granular data, the study finds that some cities are sinking at different rates in different spots, or sinking in some places and rising in others, potentially introducing stresses that could affect buildings and other infrastructure. Massive ongoing groundwater extraction is the most common cause of these land movements, say the authors, though other forces are at work in some places.”
Read more here >
Did You Know?
Here we seek to demystify common terms and practices in our work as investors.
Valuations
Investment valuation in venture capital is the process of determining the worth or value of a startup or early-stage company in which a venture capitalist is considering investing. Valuation is a critical aspect of the investment decision-making process and involves assessing the potential return on investment, risk, and the company's overall financial health.
For earlier-stage venture capital-backed companies that haven't yet developed financial metrics such as revenue or EBITDA, valuations tend to be based on the last round of financing, and as time passes, the calibration to each round. When using the latest round, it is important to consider if the round is still relevant in the current environment, who is investing in the round and determining if there are any different rights or preferences attached to it.
As companies mature into their later stages and begin to develop metrics, it is at this point when more traditional valuation approaches begin to be utilized, such as a Market comps, transaction approach or a discounted cash flow method.
– Haiming Chen & Dylan Henderson
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