Billions At Stake In University Tech and DNA Patent Lawsuits

It's kinda like football but played with money and PhDs instead of big guys and balls. And many of the same institutions of higher learning can be found deeply involved in both.

The question, as the following article explains, is whether given all the costs associated with these lawsuits, they are worth the effort. A lesson Silicon Valley is still learning, as well. JL

Dave Merrill and colleagues report in Bloomberg:

Intellectual property rights were rarely pursued by university scientists in the 20th Century. Many believed the commercialization of university research threatened academic freedom and “basic” research. Between 1993 and 2014 legal fees for universities with tech transfer offices had risen from $50 million to $335 million. The median jury award in university patent cases was $10.1 million. Law firms working on contingency typically take a third of those judgments.

A powerful and inexpensive technique for rewriting snippets of DNA — known as CRISPR-Cas9 — has two research institutions locked in a bitter patent battle. On one side is UC Berkeley, where faculty first reported using the gene-editing technology in 2012, on the other, Broad Institute of MIT and Harvard, where faculty won a special expedited patent for the technique in 2014.

The patents are potentially worth hundreds of millions of dollars. CRISPR, heralded as the Breakthrough of 2015 by Science magazine, could revolutionize how disease is fought. In January, the U.S. patent office launched a proceeding to decide who was first to invent and who will keep the patent. In the meantime, the two institutions are applying for variations on the patents to lock up associated technologies. Companies intent on using the CRISPR technique will need to license the technology from the patent holder, Broad or UC Berkeley.

CRISPR’s potential windfall for Broad or Berkeley is just the latest example of universities’ commercializing research discoveries. Over the past three decades, the promise of patent windfalls has led universities to spend millions pursuing potentially marketable research.

A patent can be worth millions and even billions. Several royalty licenses have produced revenue for universities in excess of $1 billion, many more in excess of $100 million.

But since university discoveries are funded primarily through tax dollars, shouldn’t schools be sharing intellectual property rather than fighting over it?

Early in the 20th century intellectual property rights were rarely pursued by university scientists. Many believed that the commercialization of university research threatened academic freedom and unfettered “basic” research. If patents were pursued, they were typically assigned to the Research Corporation for Science Advancement which distributed patent revenue through grants to schools and institutions. The first university-affiliated patent office was born ninety years ago, when a University of Wisconsin biochemist, Harry Steenbock, discovered that irradiating food increased its vitamin D content. Steenbock pursued a patent reasoning that through proper management he could grant licenses to promote healthy uses and deny licenses to products with little nutritional value — such as oleo, donuts or vitamin D beer. Quaker Oats had offered Steenbock $1 million for the vitamin D fortification patent. He instead allowed the University of Wisconsin affiliate to make the licensing agreement with Quaker Oats. The patent revenue was returned to the school to fund research. To date, the school’s vitamin D patent portfolio has raised an estimated $300 million for the school and faculty inventors.

Since Wisconsin founded the first office dedicated to licensing university research in 1925, what would be known as a “tech transfer,” other schools followed.
Another turning point occurred in the late 1970s when schools lobbied Congress for passage of a bill that would give universities patent rights to discoveries made as a result of federally funded research. Congress, eager to boost American’s lagging competitiveness, passed the Bayh-Dole Act in 1980. Bayh-Dole cleared the way for colleges to retain patent rights and put an end to the prior case-by-case approval system.

Early in the 20th century intellectual property rights were rarely pursued by university scientists. Many believed that the commercialization of university research threatened academic freedom and unfettered “basic” research. If patents were pursued, they were typically assigned to the Research Corporation for Science Advancement which distributed patent revenue through grants to schools and institutions. The first university-affiliated patent office was born ninety years ago, when a University of Wisconsin biochemist, Harry Steenbock, discovered that irradiating food increased its vitamin D content. Steenbock pursued a patent reasoning that through proper management he could grant licenses to promote healthy uses and deny licenses to products with little nutritional value — such as oleo, donuts or vitamin D beer. Quaker Oats had offered Steenbock $1 million for the vitamin D fortification patent. He instead allowed the University of Wisconsin affiliate to make the licensing agreement with Quaker Oats. The patent revenue was returned to the school to fund research. To date, the school’s Vitamin D patent portfolio has raised an estimated $300 million for the school and faculty inventors.

Since Wisconsin founded the first office dedicated to licensing university research in 1925, what would be known as a “tech transfer,” other schools followed.
Another turning point occurred in the late 1970s when schools lobbied Congress for passage of a bill that would give universities patent rights to discoveries made as a result of federally funded research. Congress, eager to boost American’s lagging competitiveness, passed the Bayh-Dole Act in 1980. Bayh-Dole cleared the way for colleges to retain patent rights and put an end to the prior case-by-case approval system.

University technology transfer offices established by year

University technology transfer offices established by year

A handful of schools, Wisconsin, MIT and UC Berkeley among them, have turned their tech-transfer offices into licensing juggernauts.

Apple lost an October jury trial in a patent case filed by the University of Wisconsin (the case isn't over yet). The jury determined Apple's A7 processors, found in iPhones, used technology patented by the school and awarded Wisconsin $234 million. In February, Marvell Technology Group, a hard-drive manufacturer, settled a dispute arising over patents held by Carnegie-Mellon University for $750 million, the largest royalty settlement involving a University in corporate history.

Big paydays like these have spurred the university patent boom. But in truth, most schools don’t see anything like that kind of return on their investment. Multimillion dollar successes are extremely rare at well-funded research institutions like Stanford; for small liberal arts colleges they are almost non-existent.

The average school accrues an additional $2 million in legal expenses after staff costs. Between 1993 and 2014 total legal fees for universities with tech transfer offices had risen from $50 million to $335 million. Although some fees are typically recovered in licensing contracts, those totals do not include extraordinary costs such as infringement trials. The median jury award in university patent cases between 1995 and 2013 was $10.1 million. Law firms working on contingency typically take a third of those judgments. In the $750 million Carnegie Mellon/Marvell settlement, the legal bill was likely close to $250 million...or the equivalent of one year’s tuition for 6,000 Carnegie students.

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Gross Patent License Income by School, 1991-2014