Excerpts from Loring's "Daunting" Article

San Diego stem cell researcher Jeanne Loring says control by the Wisconsin Alumni Research Foundation over two key embryonic stem cell patents "may ultimately prove a more daunting barrier to progress in this field" than President Bush's restrictions on federal funding of stem cell research.

Loring, who is with the Burnham Institute, made the statement in a piece in Science magazine that she co-authored with Cathryn Campbell, of the Washington, D.C., law firm of McDermott Will and Emery. Based on news reports, we wrote about the issue on March 25, but thought the matter needed more exploration. At our request, Loring provided a copy of her article, which we are excerpting below.

"In reaction to the (President's) limitations, individual states and private foundations are designating funds to support research on the much larger number of HES lines that were derived after the President’s deadline. Although these funding sources sidestep the strictures of the President’s order, they do not remove what may ultimately prove a more daunting barrier to progress in this field: the intellectual property rights for HES cells."

The article continued:

"These two patents have considerable consequence for HES cell research in the United States, because they have claims to ES cells themselves, not just a method of deriving them. The claims give the patent owner, the Wisconsin Alumni Research Foundation (WARF) the legal right to exclude everyone else in the United States from making, using, selling, offering for sale, or importing any HES cells covered by the claims until 2015. The right of exclusivity is rooted in the U.S. Constitution and was intended to benefit society by encouraging innovation while discouraging secrecy on the part of inventors.
"No other country has allowed HES cells to be so broadly patented, and although the U.S.patent rights can only be enforced within the United States, HES cells made in another country become subject to U.S. patent law if they are imported into the United States."

The article said,

"As a result of an NIH contract to serve as the main distribution center for HES cells in the United States, WARF recently reduced the price of cells to $500 for academic investigators, and opened the possibility of rebates for investigators who had paid $5000 before the contract went into effect. Although the academic price is now less onerous, the situation for commercial biotechnology and pharmaceutical companies remains difficult. First, because the (California) biotechnology company Geron funded the patented HES cell derivations, they received an exclusive license for broad therapeutic use in the United States of HES cell–derived cardiac, nervous system, and pancreatic cells. This means that if a company wishes to develop therapies in these areas, they must negotiate with Geron for fees and royalties.
"But what if a company simply wants to use the ES cells for basic research? Even if the company’s research is noncommercial, WARF still requires a commercial license, which costs an upfront fee (typically $125,000), with $40,000 annual maintenance fees to retain the license. This fee gives commercial entities the same research freedom as academic researchers, and, with negotiated royalty payments, they may commercialize reagents for research. Two companies, Becton-Dickinson and Chemicon, announced that they have obtained research licenses from WARF.
"The research license cost has complicated the situation for start-up biotechnology companies that want to obtain NIH funding for HES cell research. Small companies may find themselves in what we call the “SBIR paradox.” The NIH is willing to fund HES cell research through its Small Business Innovative Research (SBIR) program, but the company is not allowed to use NIH money, usually $100,000 for a phase 1 SBIR, to pay WARF for a commercial research license. Therefore, the company must come up with separate funding of perhaps $125,000 for a license to do the NIH-funded research with the cells. As a result of discussions with the NIH, WARF has offered to take equity instead of cash for a license in some cases."

The article said:

"In December of 2003, a request for interference was filed against the claims to purified stem cell preparations in both the 1998 and 2001 WARF patents. Two patents that are licensed to Plurion (U.S. Patent 5,690,926 and 5,670,372) have issued from a 1992 application claiming methods of deriving pluripotent cells. A pending application with the same priority date claims the isolated pluripotent stem cells themselves. When the PTO indicated that the Plurion composition of matter claims were allowable, the applicant filed a request for interference, asserting that these claims overlap (and predate) the WARF pluripotent stem cell claims. Although no interference has yet been declared, the outcome of this case may have important consequences for ES cell researchers, funding agencies, and companies."