**8. Universities taste entrepreneurship**

#### **8.1. Some history**

tive? Should the balancing be driven by free market mechanisms or government intervention? Reforms in the patent system are undoubtedly warranted but what they should be are unclear. The biotechnology industry, recognizing these dilemmas, has funded certain initiatives in the past with the clear aim of placing the resulting research output in the public domain in the larger interests of both industry *and* society via patents-information commons. These initiatives sought a balance between the intellectual property system that quarantines new knowledge and information and the goal of science to put them in the public domain expeditiously [55]. For example, to mitigate debilitating competition, like-minded companies have collaborated to create and share IP among themselves to enhance the scale, scope and speed of innovation; used cross-licensing, patent pools, and patent exchanges to lower the cost of exchanging IP; embraced open standards to enhance inter-operability and encourage collaboration; and invested in pre-competitive information-commons to boost their downstream product development. Some well-known examples of pre-competitive information-commons are *Merck Gene Index* (1995), *Merck sponsored project to create patent-free transgenic mice* (1997), *SNP Consortium* (1999), *International HapMap Project* (2002), and *The Genographic Project* (2005).

The National Institutes of Health (NIH) in the U.S. too has been active in creating information commons. Since 1996, all human genomic DNA sequence information that it funds is placed in the public domain. In December 1999, it adopted a general statement of "Principles and

[T]he use of patents and exclusive licenses is not the only, nor in some cases the most appropriate, means of implementing the [Bayh-Dole] Act. Where the subject invention is useful primarily as a research tool, inappropriate licensing practices are likely to thwart rather than promote utilization, commercialization, and public

In the same spirit, the Guidelines encourage unencumbered transfer of unpatentable research tools to other needy researchers. Of course, in view of the Bayh-Dole Act, the Guidelines could

In August 2014, NIH issued a final policy on genomic data sharing that builds on and replaces its earlier policy issued in 2007 in an effort to promote the sharing of data from genome-wide association studies, and through the creation of the database of Genotypes and Phenotypes (dbGaP), a two-tiered system for distributing data. One tier offers open-access with no restriction and the other provides controlled access that can be used only for research purposes consistent with the original informed consent under which the data were collected. This new policy (available at http://gds.nih.gov/03policy2.html) will go into effect in January 2015. NIH's preference for open access understandably comes from its top leadership which is typically drawn from academia and the basic research community that sanctifies open access. A survey of deals and business models that highlight the more charitable side of the pharmaceutical and

that said:

Guidelines for Sharing of Biomedical Research Resources"3

not restrain grantees from filing patent applications.

biotechnology industry is available at [56].

3 Available from http://grants.nih.gov/grants/intell-property\_64FR72090.pdf.

availability.

218 Biotechnology

The Bayh-Dole Act spurred U.S. universities to seek patents and facilitated university-industry partnerships that turned universities into engines of economic growth. However, a Bayh-Dole type Act is unlikely to succeed elsewhere as it requires a system of world-class research universities, brilliant research faculty, a continuous stream of brilliant doctoral students and post-docs, and access to substantial funds to create and maintain research infrastructure. In 1980, the U.S. had all these. Even then, only companies with the wherewithal to convert university generated basic research results into marketable end-products benefited most. So far the most successful example has been the bio-medical sector [55]. For example, in FY 2007, top licensing revenue earners included: New York University (approx. \$791.2 million), Columbia University (\$135.6 million), The University of California system (\$97.6 million), Northwestern University (\$85 million), and Wake Forest University (\$71.2 million).4 Most of these earnings came from biomedical discoveries, rather than physical sciences. Even in biomedicine, it was often a block-buster patent that strikingly stood out. For example, New York University's largest licensing income came from an undisclosed portion of its worldwide royalty interest in the monoclonal antibody Remicade; it was \$650 million!

Here is another example of IP treasure troves in universities. World-wide the top 10 univer‐ sities granted U.S. patents in 2012 were: (1) The Regents of University of California (357); (2) Massachusetts Institute of Technology (216); (3) Stanford University (182); (4) Wisconsin Alumni Research Foundation (155); (5) Tsinghua University (149); (6) University of Texas (141); (7) California Institute of Technology (136); (8) National Taiwan University (122); (9) University of Michigan (97); (10) University of Illinois, National Chiao Tung University, and University of Utah Research Foundation (85 each).

To play the IP game on this scale, U.S. universities have had to change dramatically. Since the founding of Harvard University in 1636 when universities provided their students with the requisite classical background and knowledge of leadership and government, the shift to a radically new training-centred curriculum to accommodate mechanical science, agricultural technology, etc. that would complement the new rapidly industrializing economy and the aspirations of the emerging middle class, was remarkable enough. This shift to scienceinclusive education helped propel the U.S. economy well into the twentieth century. Post-Bayh-Dole, universities are once again adapting themselves to remain relevant in a global innovation-driven economy, in which researchers are highly mobile, technology obsolescence rates are high, and knowledge acquisition is a continuous requirement. A unique feature of this transition is the birth of the entrepreneurial professor who sets up companies, sometimes taking his graduate students along with him. (Often the same university that does research in science also does research in business management!) Many young professors now routinely

<sup>4</sup> Ben Butkus, Biomed Dominates Tech Transfer in US; NYU, Columbia, MassGen Tops in Licensing Income, GenomeWeb, January 28, 2009, http://www.genomeweb.com/biotechtransferweek/biomed-dominates-tech-transfer-us-nyu-columbiamassgen-tops-licensing-income

acquire managerial skills by participating in multimillion dollar R&D projects. To such academics, university-industry collaboration comes easily. Indeed, they expect and get help from their university in spinning-off start-ups to exploit their research. Such 'commercializa‐ tion' has not eroded basic research, which continues to fascinate top researchers dreaming of Nobel Prizes. In fact, biomedical researchers strive to find clinical applications of their basic research.

#### **8.2. Technology transfer**

The technology transfer process between university and industry is complex because it must contend with two fundamentally different and sometimes opposing cultures of dealing with the profit motive. Universities need to ensure that the process does not unduly compromise their educational and research mission. Bayh-Dole type provisions facilitate technology transfer by giving universities the necessary autonomy and IP ownership rights, which provides greater legal certainty and acts as a strong incentive for industries to collaborate with universities. However, the downside is that universities must involve themselves in hitherto unfamiliar activities, such as creating technology transfer offices, and developing interdisci‐ plinary teams with legal, business, scientific, and licensing expertise. For an informative tutorial on technology transfer in U.S. colleges and universities see [57]. *Inter alia* it discusses "the role technology transfer plays in adding value to the academic and research mission of universities and colleges." Of course, remodelling of universities alone is not enough. An entire ecosystem is required that includes the university system, the intellectual property system, immigration laws, technology transfer offices, venture capitalists, and most importantly, opportunities for researchers to remain mobile—getting gifted people to work in a poor country will therefore be an arduous task.

The corner stone of basic research is insight which begins as tacit knowledge held by research‐ ers. The diffusion of tacit knowledge via university-industry collaboration is crucial for technology transfer and commercial success. This means that star scientists—their accessibil‐ ity, location, motivation to collaborate at the bench-science level with scientists in industry in converting basic scientific knowledge into commercially viable products and processes—will be crucial in determining the pace at which tacit knowledge is diffused [58, 6]. Graduating students too carry considerable tacit knowledge derived from their faculty mentors with them when they join the biotech industry as employees. Donald Kennedy, a former editor-in-chief of the journal *Science* and President Emeritus of Stanford University, once aptly noted, "Technology transfer is the movement of ideas in people." This movement in biotechnology frequently requires the protective cover of patents to ensure adequate return on investment in commercialization. The biotechnology industry's ascendency has meant that universities are no longer not-for-profit ivory towers.

A crucial activity of university technology transfer offices is the marketing of their patent portfolios. An outstanding example of marketing is the Cohen-Boyer patents by Stanford University. It was master-minded by Neils Reimers who had an unusual talent for balancing academic values and industries' needs. And the Bayh-Dole Act which Congress passed on December 12, 1980 some ten days after the first Cohen-Boyer patent was granted, was a godsend. Reimers designed a trail-blazing licensing program. By end of 2001, the three Cohen-Boyer patents had made \$255 million in licensing revenues from licenses granted to 468 companies. More importantly, 2,442 products were developed from the patented technology that included drugs to mitigate the effects of heart disease, anaemia, cancer, HIV-AIDS, diabetes, etc. Remarkably, the patents never faced litigation. Reimers showed that cutting edge university-centred research, patents, and industry collaboration could be integrated into a formidable system that can propel a country's economic agenda, without the university sacrificing its core values [5].

It now appears that CRISPR-Cas9 technology is the new superstar in biotechnology. Zhang's patent (U.S. patent No. 8,697,359) is the first to cover this technology. While the Cohen-Boyer patents survived their terms without litigation, one hopes that Zhang's patent assigned to Broad Institute will be so blessed. Zhang's patent significantly simplifies gene editing com‐ pared to other contemporary techniques, *e.g.*, TALEN and zinc fingers. Since Zhang's method allows one to basically reengineer any organism by modifying its own genome, it immediately opens up the possibility of engineering a variety of applications ranging from better agricul‐ tural crops (*e.g.*, drought resistant) to bio fuels to disease detection to personalised medicine (*e.g.*, by correcting the causative mutation), and, of course, of better understanding of gene functioning [26]. So, one expected development is the blooming of patent thickets. The financial stake around the CRISPR-Cas9 technology in the private sector is expected to be enormous and with patent thickets the potential for fierce litigation will be high. A likely development is that if exclusive licences do not create hurdles, companies would try to gather as many patent licences as they can to ensure their freedom to pursue their research and commercial goals. This could be an optimal solution for rapidly developing a plethora of products and processes that will in any case need a large number of players to chip in, much like the electronics industry, where there is space for many players to compete against and collaborate with.

#### **8.3. Litigation**

acquire managerial skills by participating in multimillion dollar R&D projects. To such academics, university-industry collaboration comes easily. Indeed, they expect and get help from their university in spinning-off start-ups to exploit their research. Such 'commercializa‐ tion' has not eroded basic research, which continues to fascinate top researchers dreaming of Nobel Prizes. In fact, biomedical researchers strive to find clinical applications of their basic

The technology transfer process between university and industry is complex because it must contend with two fundamentally different and sometimes opposing cultures of dealing with the profit motive. Universities need to ensure that the process does not unduly compromise their educational and research mission. Bayh-Dole type provisions facilitate technology transfer by giving universities the necessary autonomy and IP ownership rights, which provides greater legal certainty and acts as a strong incentive for industries to collaborate with universities. However, the downside is that universities must involve themselves in hitherto unfamiliar activities, such as creating technology transfer offices, and developing interdisci‐ plinary teams with legal, business, scientific, and licensing expertise. For an informative tutorial on technology transfer in U.S. colleges and universities see [57]. *Inter alia* it discusses "the role technology transfer plays in adding value to the academic and research mission of universities and colleges." Of course, remodelling of universities alone is not enough. An entire ecosystem is required that includes the university system, the intellectual property system, immigration laws, technology transfer offices, venture capitalists, and most importantly, opportunities for researchers to remain mobile—getting gifted people to work in a poor

The corner stone of basic research is insight which begins as tacit knowledge held by research‐ ers. The diffusion of tacit knowledge via university-industry collaboration is crucial for technology transfer and commercial success. This means that star scientists—their accessibil‐ ity, location, motivation to collaborate at the bench-science level with scientists in industry in converting basic scientific knowledge into commercially viable products and processes—will be crucial in determining the pace at which tacit knowledge is diffused [58, 6]. Graduating students too carry considerable tacit knowledge derived from their faculty mentors with them when they join the biotech industry as employees. Donald Kennedy, a former editor-in-chief of the journal *Science* and President Emeritus of Stanford University, once aptly noted, "Technology transfer is the movement of ideas in people." This movement in biotechnology frequently requires the protective cover of patents to ensure adequate return on investment in commercialization. The biotechnology industry's ascendency has meant that universities are

A crucial activity of university technology transfer offices is the marketing of their patent portfolios. An outstanding example of marketing is the Cohen-Boyer patents by Stanford University. It was master-minded by Neils Reimers who had an unusual talent for balancing academic values and industries' needs. And the Bayh-Dole Act which Congress passed on December 12, 1980 some ten days after the first Cohen-Boyer patent was granted, was a

research.

220 Biotechnology

**8.2. Technology transfer**

country will therefore be an arduous task.

no longer not-for-profit ivory towers.

While research universities now see a patent portfolio as a potential source of revenue generation, few are enthusiastic or even prepared to enforce their patents, when infringed, through litigation. In the U.S., universities, by law, must participate as plaintiffs in enforcement lawsuits over their *exclusively licensed* patents regardless of a university's effective ability or enthusiasm to do so [59, 60]. Therefore to preserve licensing freedom, patent application preparation and its prosecution must be strategized to discourage litigation. Clearly, univer‐ sities must maintain excellent technology transfer offices, whose members are not only "licensing and business development professionals" but who also "handle technologies from inception through research"; "handle conflict of interest issues"; close deals with commercial partners, and "then (God forbid)" participate in litigation to protect IP rights [61].

A few recent high profile cases indicate that the brave may sometimes inherit the earth. For example, in the Carnegie Mellon University (CMU) patent lawsuit against Mar‐ vell Technology Group, which allegedly appropriated CMU research for a computer chip used in high-speed drives, the jury awarded the university \$1.17 billion in December 2012 [62]. On appeal, Marvell was ordered to pay enhanced penalties of \$1.5 billion for wilful infringement of CMU patents [63]. In another case, Varian Medical Sys‐ tems, which allegedly infringed on the University of Pittsburgh patents for a respirato‐ ry device, a judge awarded \$85.8 million. Such cases have made other universities wonder if their technology transfer offices should get more aggressive in protecting patents [62]. Once a patent is infringed the alternatives are litigation or an out-ofcourt settlement. In litigation, the patent will almost certainly be dissected in terms of the doctrine of equivalents, prosecution history estoppel, the subjectively determined profile of the PHOSITA, applicable prior art relative to the patent, clarity of descrip‐ tion of the invention, the breadth and narrowness of claims, etc. Litigation results are often uncertain. In the U.S., *e.g.*, some one-third of district court decisions on claim boundaries are reversed on appeal [64], while a large number of CAFC patent decisions have been reversed by the SCOTUS on appeal [52].

A commercially successful patent attracting litigation is a fair possibility because a patent's validity is not guaranteed. Post-grant a patent may be found invalid because of erroneous evaluation of the invention by the patent examiner during prosecution, or because he was simply blindsided by undetected prior art, etc. In addition, one must be prepared to deal with intentional predatory moves by patent trolls and the calculated overreach of some patent owners in asserting patent claims against non-infringing entities. Their general aim is to either drag the target into expensive litigation or force it into licensing agreements under the threat of litigation, which small and medium enterprises can ill afford.
