From Dollar Signs to Stem Cells: Diverging Views on WARF Patents

The matter is no mere piffle in Wisconsin. Just something in the neighborhood of $200 million a year from California alone, according to a story in the Milwaukee Sentinel Journal.

But out in California the issue is even greater.

"What's ultimately at stake is control of a potential billion-dollar industry that could make therapies to treat some of the world's most devastating diseases," wrote reporter Terri Somers of the San Diego Union Tribune on July 30.

What she and reporter Kathleen Gallagher of the Milwaukee paper referred to was the patent rights of the Wisconsin Alumni Research Foundation on embryonic stem cells. The two reporters raised the level of public attention to the dispute over the WARF patents with their lengthy pieces on a subject that is rarely reported by the mainstream media. Both articles were triggered by challenges to WARF by the Foundation for Taxpayer and Consumers Rights in California and the Public Patent Foundation in New York.

The stories covered some familiar ground to the readers of this blog. But we found it interesting that the Milwaukee paper cited the example of the patenting of recombinant DNA to support the WARF position while the San Diego paper cited the same patents as supporting the anti-WARF position.

Gallagher wrote on July 23:

"Stanford University also required upfront licensing fees on its recombinant DNA patents granted in 1980. Those fees were detailed in a paper that Maryann Feldman of the University of Toronto and two others published in November."

Gallagher continued:

"Stanford's recombinant DNA patents are just as broad as WARF's.

"Stanford pulled in $254 million of revenue on the patents, which it licensed to 468 companies, including Amgen and Genentech, that developed therapeutic products such as human insulin, human growth hormone and interferons based on the technology, according to the Feldman paper."

Somers in San Diego wrote:

"The WARF patents are much more expensive to use than some of the pioneering patents that have come before it – including at least one that was essential in the creation of the world's biotechnology industry.

"In 1980, Stanford University and the University of California system patented recombinant DNA, the process of splicing genes from one cell into another. It was one of two pivotal patents that gave birth to biotech.

"The Cohen/Boyer patents were broad in their scope, but Stanford and the UC system made a decision to license widely and cheaply to early biotech companies and to make the technology available without charge to universities and nonprofit institutes.

"Biotechnology companies grumbled at the time about having to pay $10,000 for the science, but it was much cheaper to buy the license than to fight it in court, ong>(John) Wetherell (an intellectual property attorney with Pillsbury, Winthrop, Shaw and Pittman in San Diego) said.

"The result was that more than 350 companies took licenses, the universities made $255 million and the public got the benefit of the products that were developed, (Cathryn) Campbell (an intellectual property lawyer with Needle and Rosenberg in San Diego) said."

Another interesting divergence emerged concerning reach-through royalties.

Somers quoted Joydeep Goswami, Invitrogen vice president for stem cells and regenerative medicine, on the subject.

"WARF has what he called 'a reach-through royalty clause, where they say anything you've invented remotely by using human embryonic stem cells will now have a royalty obligation back to WARF.'

"For example, if Invitrogen uses embryonic stem cells early in the development of a tool for drug discovery but the production of the tool doesn't involve stem cells, WARF would still want royalties on the tool, he said.

"WARF also wants companies with licenses to pay royalties on products they sell in foreign markets that don't honor the patents, Goswami said. That would give an advantage to companies overseas, which can develop the same tools without owing money to WARF.

"(Elizabeth) Donley (WARF general counsel) denied that WARF charges the reach-through royalties, although many scientists, business executives and intellectual property experts cite them.

"The bottom line, Donley said, is that the incentive for receiving a WARF license is the ability to do business in the United States, the world's largest drug market.

"'They are building a program using our patent. You can't build a program on our patents and pay us nothing,' Donley said. 'Who has dollar signs in their eyes now?'"

Gallagher's story also noted the broader impact of the patent issue, declaring that it "signaled increasing awareness among scientists and companies that the Wisconsin Alumni Research Foundation's patents make this state the biggest interchange through which all stem cell commercialization must travel."

She reported that WARF says it has provided licenses and cells to 324 research groups at no charge" and "provided licenses and cells to 12 commercial users. Those users pay fees ranging from $75,000 to more than $250,000, plus annual royalties."

The estimate of $200 million potential revenues from California came from Gallagher's story. She attributed the figure to Peter Balbus, managing director at Pragmaxis LLC, a company in Glen Ellyn, Ill., that helps commercialize technology.

By the way, the Wisconsin State Journal in an editorial basically dismisses the WARF patent debate as a "load of bunk."