The University of Rochester thought it had struck pay dirt on April 11, 2000, when it was awarded a broad patent covering inhibitors of the enzyme cyclooxygenase-2 (COX-2) based on the work of researchers Donald Young, Michael K. O'Banion, and Virginia D. Winn.1 That same day the university filed a lawsuit against pharmaceutical giants G.D. Searle & Co. (subsequently Pharmacia and Pfizer), and later Monsanto, alleging that the blockbuster drugs Celebrex and Bextra infringed on its pioneering patent.

But in March 2003, Rochester's case was thrown out.2 Adding injury to insult, US District Judge David Larimer invalidated the university's patent, ruling that it did not name a specific compound or spell out how to create one. This ruling is now affecting the manner in which many universities proceed with technology transfer.

Universities and research institutions seeking to commercialize their discoveries to the pharmaceutical and biotech industries can find...


Following unsuccessful lower court appeals, the Supreme Court last November declined to hear Rochester's case. Rochester and other universities are now asking their scientists to extend their research further on the chance that their discoveries have commercial potential.

Gerald Dodson, a patent litigation attorney with Morrison & Foerster in Palo Alto, Calif., who represented the University of Rochester in the case, says the ruling diminished the value of basic research. "It forces universities to go further and further to develop their inventions before they disclose them," Dodson says.

<p>Top 15 Universities by Licensing Revenue, Fiscal Year 2003</p>

Today, if scientists fail to identify a specific structure or compound necessary to win a patent, their university may either keep the discovery secret or let it fall into public domain through publication or other disclosure. "It's a dilemma," says Bill Tucker, interim executive director of research administration at the University of California system. "If we can't patent because we can't 'enable' through the written description requirement, the discovery may never be developed because no one can get the patent exclusivity they need," he says.

<p>Patent Powerhouses</p>

Hunter refused to reveal what the University of Rochester paid to litigate COX-2 against Pfizer. "It was a calculated decision based on the potential benefits and risks," she says. "Universities as a whole benefit from the fact that we were willing to stand up and protect our intellectual property rights."


US universities, hospitals, and research institutes collectively earned nearly $1.5 billion in license fees in fiscal 2003 (the latest year available), up from $380 million 10 years before, according to AUTM.3 Universities are finding it well worth the expense of developing the strongest possible patents capable of repelling legal challenges. "If something hits the market and hits it big, the likelihood of some type of action is fairly high," says Crowell. "The costs of patent litigation make preparation and prosecution costs seem minor in comparison."

<p>Unreimbursed Legal Fees as % of License Revenues</p>

For many universities struggling to develop their technology transfer programs, however, patenting costs can swamp resulting licensing revenues. The cost of preparing and prosecuting (filing) patents on academic discoveries, as compared to courtroom and litigation expenses, has grown from $37.8 million in fiscal 1993 to $68.2 million in fiscal 2003.

Rice University paid lawyers about $556,000 to prepare and file patents, but it received only $12,740 in licensing revenue in fiscal 2003. Nila Bhakuni, Rice's director of technology transfer, says the university is patenting many early-stage technologies that will pay off in three to five years, especially in such areas as nanotechnology and biotech. "It represents a commitment on the part of the university," she says.

Likewise, the University of New Mexico (UNM) spent more than $744,000 in patenting expenses in fiscal 2003 and took in $180,000. These fees are an "investment for the future," says Lisa Kuuttila, president of Science and Technology Corporation, UNM's licensing subsidiary. The investment already is paying off, she says. Royalty revenues last year jumped to $327,000 and are on track to more than double that amount this year.


UNM has also had its share of litigation woes. In 1999 the university filed suit against two of its biochemists, Galen D. Knight and Terence J. Scallen, because they refused to sign documents needed to commercialize a discovery they had made and which the university had patented.4 The researchers counter-claimed that the university owed them damages. Last November, a panel of judges ruled the university did not have to pay damages and ordered the scientists to pay $64,000 toward the university's legal expenses, estimated in excess of $450,000.

"Even if the legal expenses had been a million dollars, it would have been worth it," says Robert Bienstock, UNM's interim legal counsel. "We had to pursue this. We simply couldn't allow inventors to challenge university ownership by not assigning the intellectual property."

UNM is not alone in trouble with its talent. Yale University recently won a patent dispute against its former Nobel Prize-winning chemistry professor, John Fenn. A US District Court judge in February awarded Yale more than $1 million in damages and legal fees, as well as patent rights, ruling that Fenn had secretly developed a technique for electrospray ionization and patented it without giving Yale first right of refusal, as university policy required. Fenn, who has since moved to Virginia Commonwealth University, says he may appeal the decision.

Jonathan Soderstrom, director of Yales' Office of Cooperative Research, says his and other universities have become far more judicious in deciding which discoveries merit filing patent applications. Universities are also hiring more experienced professionals who are better able to discern which discoveries make business sense to patent. "The days of just filing patents are gone," Soderstrom says.

This may help explain why the percentage of unreimbursed patenting costs at US universities has been declining relative to licensing revenues, from 14.7% in 1991 down to 9.8% in 2003 (see chart above).

Pierre Hohenberg, senior vice provost for research at New York University, says the larger issue facing universities is whether licensing activities interfere with the basic mission of research. "The truth is, only a small number of universities are making money," he says, "and the average university is probably not making any at all" from royalties and licensing.

"So why do it?" poses Hohenberg. "Partly it's the pot of gold at the end of the rainbow. But it's also considered beneficial to society – and the responsibility of the university having received federal funds for research – to send it back out to the economy."

The strong debates over whether and how much to commercialize intellectual property indicate that the university tech transfer community is maturing, Crowell contends. "Ten years ago nobody made enough money to even think about these things."

Who's Got The Pipeline Power?

When it comes to technology transfer, a university's success is often measured by the number of patents won and the amount of licensing fees collected each year. However, it's more than just money, argue university officials. They contend that the number of company spinoffs, jobs created, and even lives saved are better measures of a university's prowess in this arena.

"Focusing on royalties alone is inadequate and is not the most appropriate metric to determine success," says Jonathan Soderstrom, Yale University's director of the Office of Cooperative Research. Other ways to gauge an institution's innovation strength are being developed. One method examines the quantity and quality of university patents. "Many studies have shown that metrics combining both quality metrics and patent counts are much better indicators of organizations' R&D quality than patent counts alone," says Anthony Breitzman, research director at 1790 Analytics, an intellectual property consulting firm in Mount Laurel, NJ.

At the request of The Scientist, 1790 Analytics examined the US patent portfolios for universities for 2004. The resulting key metric, called overall pipeline power, is derived by multiplying the number of life science patents by four measures of quality (see Patent Powerhouses table). Factors in this quality assessment include the number of times a university's patent is cited by other patent applications in the same field (impact) and in different fields (general applicability); the number of times the university's patent cites inventions from fields other than its own (originality); and the university's growth (or decline) in annual patenting activity, which was calculated by comparing number of 2004 patents to the previous 5-year average. Numbers larger and smaller than 1.00 indicate above-average and below-average quality, respectively.

The University of California system led the pack in 2004 with an overall pipeline power of 322. But UC had a significant head start compared to other universities, having won 228 life science patents last year, far out-distancing second-place University of Texas system's 84 patents. When it comes to revenue, only seven of the top 15 universities in pipeline power were among the leading revenue producers, illustrating that innovation potential does not necessarily translate into revenue. The University of California came in third place in licensing income in fiscal 2003 (the latest figures available), generating $61.1 million, or less than half the $141.2 million obtained by first-place Columbia University. The Texas system, second in pipeline power, collectively garnered only $18.5 million in licensing revenue in 2003. Several factors cause the discrepancy, the most obvious being the ability and desire of a university to commercialize discoveries. In addition, life science discoveries often take years to commercialize owing to the need for regulatory approvals and lengthy clinical trials, creating lag times between invention and payoff. Conversely, seminal "blockbuster" discoveries, once commercialized, can become cash cows, generating significant royalties for years. Columbia's so-called Axel patents, which cover the fundamental cotransformation process for recombinant DNA synthesis of complex proteins, have brought that university more than $400 million since 1983.1 Arguing that revenue isn't the best measure of success, seven universities, including Yale and Columbia, requested that their licensing revenue numbers be kept anonymous in the most recent licensing survey prepared by the Association of University Technology Managers.

"It's my little protest," says Yale's Soderstrom. "It's a decision I made to get people to stop focusing on just royalties. There are a lot of other measures that are more important in demonstrating impact."

"Processes for inserting DNA into eukaryotic cells and for producing proteinaceous materials," Axel R, US patent4,399,216, issued Aug. 16, 1983

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