Universities patent, make profit from publicly funded research

SAN FRANCISCO -- When a key patent on combining genetic material to create human drugs expired three years ago, a spigot that had sent $200 million in royalty payments to Columbia University was suddenly turned off.

So Columbia turned to a strategy the drug industry has turned to high art -- winning another patent for the same invention -- and began demanding payments anew.

Now biotechnology titan Genentech Inc. is suing the school, claiming the invention was already in the public domain. The dispute highlights the thorny issue of university patents, many of which stem from research paid for -- as in the Columbia case -- with public funds.

"It's an embarrassment," Cleveland State University intellectual law professor Michael Davis said of the law that allows universities to patent and profit from government-supported research. "The government paid for all of the research and development. Taxpayers are essentially paying twice."

Until 1980, the government retained title to inventions created with federal funds, offering the technology for free. Lamenting that universities had no incentive to commercialize publicly financed inventions, Congress passed the Bayh-Dole Act in 1980, allowing schools to patent and profit.

Davis and others argue that taxpayer-supported research belongs in the public domain and say university patents stifle innovation by fostering secrecy among academic peers, instead of culturing an exchange of ideas.

College administrators hail the Bayh-Dole Act as financial succor in times of budgetary woe. They argue that competitive secrecy has always driven science, and since colleges began applying for patents in earnest, many scientific breakthroughs have occurred.

'Sat on the shelf'

"A lot of technology sat on the shelf before universities began to really apply for patents," said Pat Harsche, president of the Association of University Technology Managers. "There was no incentive to take it off the shelf."

In 2000, the most recent year statistics are available, universities collected $1.1 billion in royalties from the 13,000 U.S. patents they hold.

That same year, the U.S. Patent and Trademark Office granted universities 3,272 patents -- compared to 269 patents in 1979.

One of the most successful university patents governs the research done by Dr. Richard Axel, now a revered professor at Columbia. Fueled by federal grant money, Axel and two colleagues created a way to splice human genes into living cells, like hamster ovary cells, to produce human proteins. The proteins are then turned into human drugs.

The gene-engineering technique today helps produce most of biotechnology's best-selling drugs.

Some 23 drug manufacturers, including Amgen Inc. and Genentech, paid Columbia more than $200 million for permission to use Axel's technology to produce their pharmaceuticals. In its suit, Genentech said it alone paid the school more than $70 million, including a lump payment of $1 million in 1987.

But just as the biotech royalties really started flowing to Columbia, reaching a peak of about $100 million one year, the patent expired in August 2000 and the money stream dried up.

Columbia sought to keep milking the Axel patent. It tried to get patent extension language into a congressional appropriations bill, but that failed when lobbyists convinced lawmakers to remove it.

So borrowing a page from the drug industry, where clever patent attorneys are just as important as brilliant scientists, Columbia last year succeeded in winning a new patent on an old invention.

Columbia declined comment for this story. But Karen Dow, a San Diego patent attorney with Morrison & Foerster who is not involved in the dispute, reviewed Columbia's patents for The Associated Press.

Dow said Columbia's initial patent claimed ownership of the process of inserting foreign genes into another cell. The new patent claims rights to the transformed cell itself. That distinction may have persuaded the patent office to grant a new patent, Dow said.

"But mistakes do happen," Dow said, noting that the older patent also had language claiming rights to transformed cells as well.

"Universities have become much more sophisticated and business-like," said Dr. Robert Cook-Deegan, head of Duke University's Center for Genome Ethics, Law and Policy. "This is the sort of thing that a biotechnology company or pharmaceutical would do."

Genentech declined comment, but its lawsuit says the new patent is duplicative of the old one and Columbia purposely delayed filing its application. The suit, filed April 15, seeks to "stop Columbia's attempt to illegally recapture the invention from the public domain."

Genentech itself is no stranger to the courtroom, but it more often finds itself sitting at the defendants' table.

In 1999, the company paid the University of California, San Francisco $200 million to settle a patent infringement suit. Last year, a Los Angeles court ordered Genentech to pay $500 million to the City of Hope for failing to honor a patent agreement. The company is appealing the verdict.

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On the Net:

University Technology Managers: http://www.autm.net/index--n4.html

Columbia: http://www.columbia.edu

Genentech: http://www.gene.com