Researchers, Institutions, and Patents

Like a marriage descending into divorce, the relationship between researcher and institution can turn to enmity when patent and licensing disagreements become intractable. Fortunately, truly serious battles are relatively infrequent. More commonly, the reaction is anger and dissatisfaction over how a university or research hospital handles the commercialization of a scientist's discovery. But in serious battles against well-funded employers, the odds are clearly against the individual. When push comes to shove, reputations can be sullied, careers can end, and even bankruptcy can result. In 1985, Galen D. Knight, a biochemist working in the research laboratory of Terence J. Scallen at the University of New Mexico in Albuquerque, deduced an organic compound that the scientists believed had incredible promise in stimulating the immune system and destroying cancer cells. Subsequent experiments demonstrated 80-100% survival rates in mice with aggressive melanoma and myeloma and with minimal toxicity. The excited researchers dubbed the discovery vitalethine. Over the next several years they, with Paul L. Mann, a third UNM scientist, conducted more experiments. In 1990, the investigators filed for five patents on vitalethine and beta-alethine, an obscure but previously known compound, for use in cancer therapy and biomedical research. The compounds are members of a family known as vitaletheine modulators, with vitalethine believed to be most potent among them. The researchers initially assigned ownership to the university. Two years later, they presented their findings at a meeting of the American Society for Cell Biology. In 1994, they authored two papers on vitalethine and beta-alethine, which were published back to back later that year in Cancer Research.1,2 Ironically, in the midst of this promise, events began to spiral downward, with relations with UNM souring. Early in 1994, Scallen's lab was closed amid fierce competition for other cancer research funding, and Knight was laid off. That same year, Jane E. Henney, then vice president of UNM's Health Sciences Center (and later commissioner of the Food and Drug Administration), curtailed the university's payment of legal expenses for the vitalethine and beta-alethine patents. Today, Henney doesn't recall the specifics of the decision: "It may have been one of a series of actions where we were deciding which things to forward in terms of legal expenditures." Nevertheless, two months afterward, UNM licensed the discoveries for $20,000 to Dovetail Technologies Inc., a small biotech start-up in College Park, Md., for exclusive rights for pharmaceutical development and commercialization. But Dovetail's chemists, following instructions from the researchers, couldn't duplicate the exact chemical composition ascribed to vitalethine. After failing in numerous at-tempts, UNM and Dovetail decided that vitalethine was, in fact, beta-alethine. UNM subsequently filed corrections to the patents with the US Patent and Trademark Office (PTO). Knight and Scallen, however, objected to the changes, maintaining that their original approach was correct. The two also refused to assign ownership to the university for the amended invention (Mann did assign ownership and has not been involved in the disagreement with UNM). The dispute escalated and in 1999 UNM finally sued Knight and Scallen. "We felt that we were obligated to have this dispute resolved by a court as to who's right and who's wrong and give clean invention, without controversy, to our licensee," says Charles "Nick" Estes Jr., UNM legal counsel. Knight and Scallen, acting as their own legal representatives, lost the case. In a series of rulings culminating in a bench trial last summer, senior US District Court Judge John E. Conway granted the rights to the university for all patents and pending applications involving vitalethine and beta-alethine. The judge also awarded payment of legal fees and related costs—more than $450,000—to the university. In his written ruling, Conway found the whole affair disturbing. "This case is troublesome because it involves a dispute, at its simplest level, over a potential cure for certain forms of cancer," he wrote. "... the real losers in this case are the cancer patients who must await a more promising treatment for their devastating diseases," Conway concluded. On to Commercialization—and Appeals Dovetail Technologies has been conducting early stage human clinical trials with Beta LT (derived from beta-alethine) for treatment of certain myelomas and lymphomas through its affiliate company, LifeTime Pharmaceuticals Inc. The company is making "excellent progress on several fronts," says Floyd Taub, Dovetail's founder and chairman. Scallen and Knight vow to appeal the judge's ruling. "They're trying to commit scientific and patent fraud and name the wrong inventors on the technology," Knight says. He accuses UNM officials of "blacklisting" him with prospective employers, a contention Estes denies. Scallen says he had to retire early, at age 60. For Scallen, the issue cuts to the very heart of academic freedom. "The UNM and its agents changed our published work without any authorization from us," he says. "This resulted in a new, incorrect, and false patent. It bears our names and includes all our experimental data, all our chemistry, all of the efficacy against cancer. But it claims our work was done with compounds that we never synthesized nor used in any of our experiments." Although it is uncommon for disagreements to reach the level it has with Knight and Scallen, "there is widespread concern out there over ownership of intellectual property in general," says Mark F. Smith, director of government relations and intellectual property for the American Association of University Professors (AAUP). Patent issues are of lesser concern to professors, Smith says, than are copyright issues, especially those involving distance learning at universities. Nevertheless, commercialization is where the money is. In 1999, the licensing and commercialization of academic research brought in $935 million for US universities, research institutes, and hospitals and resulted in more than $40 billion in economic activity, according to a survey conducted by the Association of University Technology Managers (AUTM).3 More than 340 new companies were created and 417 products were made commercially available in 1999 based on academic discoveries, the survey shows. Invention and commercialization policies typically are spelled out in university handbooks. Generally, a discovery or invention is owned by the institution if it is made by a faculty member or by a researcher "substantially" using the institution's facilities or resources. And if any federal funds are involved, the Bayh-Dole Act mandates that ownership go to the organization. The act also specifies that revenue be shared with the inventor if the discovery is commercially licensed. No percentage is specified, but revenue sharing at universities typically ranges between one-third to one-half going to the inventors. Some institutions employ a sliding scale with the inventors getting a larger share up front and smaller percentages later on if revenues increase. "There are certainly faculty that don't like our policy, but that doesn't mean there's a dispute," says Jack Turner, associate director of technology licensing at Massachusetts Institute of Technology. "Most employees don't like the fact that companies own what they invent, but it's pretty much a fact of life." MIT researchers receive one-third of royalty income after 15% is deducted for licensing office overhead. Terry A. Young, president of AUTM, says court cases between researchers and employers are not common. "Situational circumstances give rise to disputes," he says, "but that is true in any business." At Texas A&M University, where Young is also executive director of the licensing office, inventors receive half the royalties after 15% goes to cover overhead costs. "Ours is probably one of the most favorable to the inventors in the nation," he says. Courtesy of Terry A. YoungTerry A. Young Cornell University last year received about $6.5 million in gross licenses and royalties. After expenses, the university gives 50% of the first $100,000 and 25% above that to the inventors. "We all engage in discussions with our faculty members about ownership of inventions," says James Severson, president of the Cornell Research Foundation Inc., the university's licensing office. "We don't have strict invention agreements. It's not like a corporate policy that would be pretty clear about ownership of ideas." Systemic Problem This kind of ambiguity contributes to the problem, says Taub. "The real error here is systemic. Throughout the country, most universities fail to educate scientists about the business aspects of science and medicine. Scientists develop an emotional belief that it is their technology when they are the inventor." As a result, friction between researchers and their universities is common. "Everyone involved in small companies knows that, with fair regularity, scientists have a lack of education in the business aspects and actually do things that interfere with the commercialization of their inventions," Taub says. "Most of the time the problems are minor and are managed to be resolved as the education process goes forward. But it does often result in dissatisfaction." For two other former professors at UNM, dissatisfaction is putting it mildly. Jonathan S. Nimitz, a former visiting assistant professor in UNM's chemistry department, was sued by the university in 1996 for patent infringement after he left and formed his own company. UNM contended he was infringing on halon-replacement technology he invented while employed by the university. Nimitz countersued, alleging, among other things, violations of university policy. UNM eventually dropped its suit against Nimitz and settled the counterclaim out of court for no monetary damages. "I think UNM's actions have been highly inappropriate and harmful," Nimitz says. "I got off relatively easily—$35,000 in legal fees and a lot of grief. But I didn't go bankrupt, like Dr. Kim." Indeed, In C. Kim, a former research associate professor in biochemistry and OB/GYN, found himself at odds with UNM over a patent on cell analysis technology. Kim maintains he employed different technology for his own company after he left UNM. But after UNM sued for patent infringement, mounting legal fees forced him into bankruptcy. "I couldn't fight any further," he says. "That's why we gave up." Kim settled the case before it went to trial. Estes, UNM's legal counsel, denies that the university is overly aggressive in litigating its patent disputes. While acknowledging these types of serious disputes are rare in academia, he says the university's cluster of lawsuits is purely coincidental. "It's not statistically relevant," he says. "There's nothing unusual about our policies. Maybe we'll go for another 10 years without another lawsuit." Ted Agres is a freelance writer in Washington, DC. References 1. G.D. Knight et al., "Vitalethine modulates erythropoiesis and neoplasia," Cancer Research, 54:5623-35, 1994. 2. G.D. Knight et al., "Seemingly diverse activities of beta-alethine," Cancer Research, 54:5636-42, 1994. 3. AUTM Licensing Survey, Fiscal Year 1999. Association of University Technology Managers, Washington, D.C.

Researchers, Institutions, and Patents

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