What role to universities play in biomedical research and development?

•In the US, most basic biomedical research is performed at universities and funded by the federal government, usually the NIH.

•Until 1980, most inventions derived from university biomedical research were not patented (there are major exceptions to this, but it’s a fair generalization).

•In 1980, Congress passed the Bayh-Dole act, which instructed universities (and others) to patent inventions made during government funded research.

Who funds university research?

Revenue from licensing patents makes up only 2-4% of university research budgets on average.

Yale School of Medicine FY 2002 Research Funding Sources:

What do universities do with the products of research?

•Since Bayh-Dole, if they think an invention can be commercialized, they patent it.

•Universities then license the patent to industry, which will further develop and market the invention.

•Universities may grant either exclusive or non-exclusive licenses to industry.

•An exclusive license gives a single company the sole right to develop and sell the invention.

•A non-exclusive license allows many companies to use and sell the invention.

•In either case, universities receive royalties and/or other payments in exchange for the license.

What are the goals of university technology transfer?

•Yale claims that “The primary goal of commercializing Yale inventions is to disseminate and develop knowledge for the public good.

•Yale calls generating revenue a subsidiary goal.

•Despite this, Yale and other universities run their tech transfer offices like commercial profit seeking ventures.

•There are other ways to negotiate technology transfer agreements– license terms could focus explicitly on access to university inventions. But the current culture of university tech transfer offices is not conducive this.

“Give me a lever long enough...”• University conducted research plays a crucial role in the

development of new medical technologies.– University research takes place early in the technology

development timeline – This could allow universities to have a great influence

on the later uses of the drugs they invent.

Federal/private funding obtained

Research (and possibly early clinical trials)

Patent sought

Product developed for sale by private

firm

Product sold on marketplace

Patent licensed out to private firm (for royalties and

promise to develop)

University patenting practices

• Inventors disclose discoveries to university technology transfer offices.

• Universities will only patent inventions that they think the invention may be commercially valuable.

– At Stanford, for example, about 50% of disclosed inventions are patented.

• It costs about $25K to $35K to take out a patent in the U.S.

Most university patents do not become commercially successful inventions

• It costs a lot to run a tech transfer office.– Stanford spends about 2.6 MM a year to run its office, and another on 5MM on

patenting costs

– Stanford earned about $41.2MM in licensing revenue last year, but it is more successful than most.

From AUTM Annual Survey of 190 Universities

0.6% of 20,968 licenses generated more than $1MM in revenue in 2000.

•Many university owned patents will never be licensed by industry at all.

•Most licensed patents will not result in big money for universities.

• Patenting a single invention internationally can cost $250K-500K.

• Universities will only take out patents in other nations if they think it will be profitable to do so.

• In deciding where to patent, they will consider:– Whether a country has sufficient population and

economic capacity to make a market– Whether the country has industrial capabilities, and thus

whether a competitor might arise– Whether countries effectively enforce patent rights.

Where do universities patent?

Where do universities patent? (cont’d)

• If an invention is patented internationally, it will usually be patented in Canada, The EU, Japan, and Australia.

• Usually, universities take out patents in low and middle income countries only if a licensee wants them to and will pay the costs.

• Process: – File in U.S. and file Patent Cooperation Treaty

(PCT) application.– Decide whether to file national applications

outside the U.S.

What kinds of licenses can a university negotiate?

• Exclusive / non-exclusive

• Scope:– Worldwide / regional – All uses/ certain fields

• Duration

Stanford executed

110 new licenses in FY02

– 62 non-exclusive licenses

– 26 exclusive licenses

– 22 option agreements

Exclusive vs. non-exclusive licenses

•Royalties

– License Issue Royalty

– Annual Minimum Royalty

– Earned Royalty

– Equity

•Development Milestones

•Reimbursement of Patent Costs

•Diligence provisions

Parameters of a typical exclusive license

How do universities use patent revenues?

Intellectual Property Fund5%

Inventor’s Personal Share30%

Inventor’s Lab Share15%

Department15%

School17.5%

Research Foundation17.5%

Bayh-Dole Requires Income Sharing.

U. Penn’s sharing rules:

http://www7.nationalacademies.org/step/Barchi_ppt.ppt

Other ways universities get involved in biomedical R&D:

•Industry sponsored research. Industry pays for research in exchange for the right to license any resulting technology.

•Creation of biotech start ups. Universities spin off technology to start ups in which they hold equity.

•Performance of clinical trials. University researchers often perform clinical trials, though this does not lead to university held IP.

The d4T story

• 1966: compound synthesized under a National Cancer Institute grant at the Michigan Cancer Center

• 1984: Yale scientists prove that d4T is potent against HIV in cell cultures

• 1986: Yale files for a patent • 1988: Yale issues BMS exclusive worldwide license• 1994: FDA approval• 1994 - 97: BMS takes out process patents

• BMS made $443 million on sales of d4T in 2002; $515 million in 2001, $578 in 2000.

• We don’t know what exactly BMS profits are from d4T, but according to the BMS 2002 Annual Report:

“In 2002, our company earned $2,034 million from continuing operations on global sales of $18.1 billion, putting us among the most profitable companies in the Fortune 500.”

The Money Trail

The Impact of d4T for Yale

•In 1999, Yale earned $46.12 million in royalties.

• About $40 million of this was from d4T.

• (But almost none of this comes from developing countries)

MSF’s request; Yale’s response

• Feb 14, 2001: MSF request to Yale:– Asking Yale if they “would consider the importation of

generic versions of stavudine for use in providing treatment free of charge to people with HIV/AIDS unable to afford treatment an infringement of your intellectual property rights,” and if so, if Yale would “issue a voluntary license to allow the importation and use of generic stavudine in South

Africa.”

• March 1: Yale replies:– Yale denies the request, indicating that they have granted an

exclusive license to Bristol-Myers Squibb (BMS), and cannot legally respond to MSF’s request without BMS’s permission.

MSF’s Reply

• March 9: MSF responds:– MSF suggests to Yale that their own policy states

that a key objective is “the benefit of society in general,” and that they should follow their policy

– MSF points out that d4T is not reaching those who need it in South Africa, and suggests that Yale has the ultimate power over their patent, and could breach their contract with BMS if need be.

• March 11: NYT story “Yale Pressed to Help Cut Drug Costs in Africa”

• March 16: GESO hands over petition and issues press release

March 14th: Concessions

“EMERGENCY PATENT RELIEF” • “The Company will ensure that its patents do not prevent

inexpensive HIV/AIDS therapy in Africa. The patent for Zerit, rights to which are owned by Yale University and Bristol-Myers Squibb, will be made available at no cost to treat AIDS in South Africa under an agreement the Company has recently concluded with Yale.”

• In June, 2001, “agreement not to sue” signed with Aspen Pharmacare. 

PRICING• BMS will sell its two ARVs at one dollar per day (15 cents per

day for d4T and 85 cents per day for ddI) throughout Africa• This is later extended to private sector.

What’s happening at other universities?

• U Minn: Abacavir

• Emory: 3TC

• Duke: Fuzeon

• Cotransformation patent: Columbia Univ.

• Hep B vaccine: U of Washington

• Cysplatin and Carboplatin: Michigan State

• Others???

• What can a university do when it is deciding where and if to patent an invention?

• What can universities do when negotiating licenses with industry?

• What can be done if a university invention has already been patented and licensed to industry?

How can universities ensure that their IP helps those who need it most?