Biologists at the Institute for Biological Energy Alternatives, led by Dr. Craig Venter -- of mapping the human genome fame -- have constructed a "bioactive" bacteriophage out of scratch. This isn't the very first time a virus has been constructed from off-the-shelf chemicals (a synthetic polio virus was built a bit over a year ago), but this virus took only two weeks to create (the polio virus took several years to build), and is indistinguishable from its natural counterpart (the synthetic polio virus had numerous genetic defects). This is the first real evidence that functional biological organisms can be constructed gene-by-gene.
The implications for this are enormous; in many ways, this is a far more important biotech development than cloning. While the bacteriophage constructed by the team, "phiX," is an existing virus, this was a necessary first step for the construction of wholly original forms of life. Venter's crew is focusing on building microbes for the production of energy resources (such as hydrogren), but bacteriophages may have broad applications, including serving as novel forms of antibiotics when traditional medicines fail.
But larger questions loom. If novel life forms can be built using off-the-shelf material and well-understood techniques, how do we defend against misuse? (I have already posted some ideas about this issue.) If a lab builds a new organism, do they own it? Is it a patented product, a copyrighted genome? Are we about to enter the era of GRM, or Genetic Rights Management?
It's already possible to patent a lifeform, the supreme court ruled on it like ten years ago. it's been done for corn hybrids many times already.