The Costs of Commercializing Academic Research

Tom Schierlitz/Stone The Bayh-Dole Act of 1980, which allows US universities and research institutes to patent and commercialize discoveries financed with federal funds, may inadvertently hinder scientific research and impede innovation, scientists and legal experts say. The law (PL 96-517), the envy of many European universities, has been a powerful catalyst to spur product development from laboratory research. In FY2001 alone, more than 4,000 new licenses and options from 198 US universities, hospitals, and research institutes were issued. These licenses brought in nearly $1.1 billion (US) in royalties, with life science patents generating the lion's share of revenues for universities and research centers.1 University and government officials have been concerned for some time over how best to patent and commercialize discoveries while keeping research tools and information flowing freely.2 But now researchers and legal experts are raising new concerns as legal disputes, and the potential for vast monetary rewards, mushroom. Some legal experts contend that Bayh-Dole actually blocks scientific research when institutions claim ownership of fundamental discoveries and processes, such as new DNA sequences, protein structures, and disease pathways. In biopharmaceutical research particularly, Bayh-Dole thwarts dissemination of federally sponsored science and allows the patent system to encroach on basic research formerly in the domain of open scholarly exchange, says Arti K. Rai, a law professor at Duke University. In studying life science patents, Rai and colleague Rebecca S. Eisenberg, a University of Michigan law professor, found that Bayh-Dole draws no distinction between inventions that lead directly to commercial products and those that provide fundamental advances enabling further scientific studies. As a result, some institutions have decided to patent research tools in order to preserve the possibility of future profits. "In the long run, [Bayh-Dole] may hinder rather than accelerate biomedical research," Rai and Eisenberg conclude.3 Paul Berg, Nobel Prize-winning biochemist and director emeritus of the Beckman Center for Molecular and Genetic Medicine at Stanford University, puts it more bluntly. Bayh-Dole "is likely to damage the health of the scientific enterprise in the long term, notwithstanding the financial benefits in the short term," he told a seminar at the Howard Hughes Medical Institute in May. LIMITING EXCHANGES Commercial and proprietary interests encouraged by Bayh-Dole are driving universities to restrict the transfer of research tools to other scientists through material transfer agreements (MTAs), Rai says. "There might be royalties on any particular product that might come out of the usage of the research tool," she says. "Or they might want to preview any manuscripts that are written to make sure they can claim any patent rights." One of Bayh-Dole's "unintended effects" is to restrict dissemination of faculty research by delaying publication and deleting information having commercial potential, says Marie Thursby, director of the Technology and Innovation Program at the Georgia Institute of Technology's Dupree College of Management. "I think there are cases where ties to industry may have restricted access to knowledge and I think that is something that needs to be watched," she told this year's Colloquium on Science and Technology Policy sponsored by the American Association for the Advancement of Science (AAAS). For example, Mildred K. Cho, codirector of Stanford University's Center for Biomedical Ethics, and colleagues surveyed 121 US laboratories involved in developing or performing clinical genetic tests. More than half of the labs (54%) had decided not to develop or perform one or more tests because of concerns over patent infringement.4 "Information sharing and the ability to do research... has been negatively impacted by patenting," Cho told the AAAS symposium. In another problem area, universities and their licensees are wielding broad patent claims derived from Bayh-Dole to prevent other companies from developing useful therapies or to win substantial judgments after a product has been developed and marketed. "There are fundamental technologies that serve as the basis for many different types of end products that are being licensed exclusively to one company rather than not being patented at all, or being licensed nonexclusively," Rai says. A prime the example of this, she says, is the legal dispute surrounding the patent on the NF-kB cell-signaling pathway, a key biological trigger described in more than 5,000 scholarly papers. The patent was issued June 25, 2002 to the Massachusetts Institute of Technology, Whitehead Institute of Biomedical Research, and Harvard University.5 Because the research received federal funding, it triggered the licensing provisions of Bayh-Dole. While the patent application was pending, the research institutions licensed the technology exclusively to Ariad Pharmaceuticals, a biopharmaceutical company in Cambridge, MA. When the patent issued, Ariad immediately filed suit against Eli Lilly and Co. claiming two Lilly drugs--Evista to treat osteoporosis and Xigris to treat septic shock--infringed on the patent.6 Ariad's lawsuit "is problematic because they had really not made any effort to do research on that pathway itself," Rai says. "This is a case of a very broad patent on a fundamental technology being asserted against companies that actually developed the technology and produced a product without the benefit of a patent," she says. "The economist's term for it is 'rent seeking' - trying to get a cut of the action." "We will permit broad use of our NF-kB intellectual property at no cost by investigators at academic and not-for-profit institutions to conduct non-commercial research,"7 says a statement posted on Ariad's corporate Internet site. Ariad spokesman Thomas Pearson declined to say whether research licenses contain "reach-through" provisions allowing Ariad to share the fruit of any subsequent discoveries. Pearson declined to discuss the matter, as did Lita Nelson, director of MIT's technology licensing office. Asia Martin, a Lilly spokesperson, says her company believes Ariad's patent is invalid and was not infringed. "Lilly's original work on the discovery and identification of Evista and Xigris goes back to the early 1980s," she says. "And we are prepared to vigorously defend our interests." Since the lawsuit against Lilly was filed, Ariad has licensed the NF-kB technology to other pharmaceutical companies, including Bristol-Myers Squibb In May, the US District Court in Massachusetts declined Lilly's bid to dismiss the case. Trial is expected to begin later this year. The NF-kB cell-signaling pathway it "is the sort of [broad] technology that probably would have been best left unpatented, Rai says, "even if it was patented by the universities, it might have been licensed nonexclusively." EXCLUSIVITY AND RISK But companies often demand exclusive licenses to compensate for the risks and expenses in commercializing discoveries, especially those emerging from early-stage research. Exclusive licenses give the licensee legal benefits not otherwise available, says Kevin Noonan, a patent attorney with McDonnell Boehnen Hulbert & Berghoff in Chicago. "Anybody who is bemoaning the impact of Bayh-Dole on the free flow of information among research scientists is not a research scientist," Noonan says. Scientists prefer to keep their discoveries to themselves as a matter of human nature, he says. "You keep that stuff close to your chest because you don't want to get scooped." Noonan praised the National Institutes of Health for helping universities and research institutions find an appropriate balance between disseminating research tools and commercializing the results of their discoveries. "They've been a pretty good broker to not let the commercial intent overtake the research intent," he says. In December 1999, NIH issued guidelines for disseminating and acquiring research tools in projects that fall under Bayh-Dole.8 The policy also has teeth: since 2000 it has become a condition that must be followed to qualify for NIH grants and contracts. It requires recipients to preserve research freedom while allowing "reasonable restrictions" from an industrial partner. But it also cautions against "inappropriate licensing practices" when a discovery "is useful primarily as a research tool." NIH defines research tools broadly. In general, a resource is a tool if it is primarily used for discovery rather than for an FDA-approved product, or if it is a broad enabling invention useful for many scientists or for multiple companies to develop multiple products. Examples of inappropriate licensing include commercialization option rights, royalty reach-through rights, and product reach-through rights back to the provider. In general, NIH wants research "transferred with the fewest encumbrances possible." Navigating the dual imperatives of commercialization and research freedom is a challenge. Mark L. Rohrbaugh, director of NIH's Office of Technology Transfer, says his agency's "internal policies and practices serve to find that balance as best we can and also serve as a model on how to have a large successful tech transfer program while adhering to those goals." Ted Agres (tedagres@lycos.com) is a freelance writer in Washington, DC. References 1. T. Agres, "The fruits of university research," The Scientist, 17[14]:55-6, Jul. 14, 2003. 2. E. Russo, "Regulating researchers' 'picks and shovels,'" The Scientist, 14[9]:8, May 1, 2000. 3. A.K. Rai and R.S. Eisenberg, "Bayh-Dole reform and the progress of biomedicine," Law Contemp Probl, 66:289, 2003. 4. M.K. Cho, etal, "Efects of gene patents and licenses on the provision of clinical genetic testing services," J of Mol Diagn, 5:3, 2003. 5. D. Baltimore et al., "Nuclear factors associated with transcriptional regulation," US Patent No. 6,410,516 issued June 25, 2002. 6. P. Brickley, "New patent worries professors," The Scientist, 16[15]:19, July 22, 2002. 7. www.ariad.com/about/about_nfkb.html 8. "Principles and Guidelines for Recipients of NIH Research Grants and Contracts on Obtaining and Disseminating Biomedical Research Resources: Final Notice," National Institutes of Health, December 23, 1999. function sendData() { document.frm.pathName.value = location.pathname; result = false if (document.frm.score[0].checked) result = true; if (document.frm.score[1].checked) result = true; if (document.frm.score[2].checked) result = true; if (document.frm.score[3].checked) result = true; if (document.frm.score[4].checked) result = true; if (!result) alert("Please select") return result; } .myradio{background-color : #94bee5} Please indicate on a 1 - 5 scale how strongly you would recommend this article to your colleagues? Not recommended 1 2 3 4 5 Highly recommended Please register your vote

The Costs of Commercializing Academic Research

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