Bitter Pills

The AIDS drug Ziagen has brought healthy windfalls to the University of Minnesota and GlaxoSmithKline. But it isn't doing anything at all for the millions who are dying of the disease in Africa.

The mood was euphoric. In a December 1999 Star Tribune opinion piece authored with local intellectual-property attorney Ken Liebman, Rotenberg wrote that the litigation was "the most public example of the university's recognizing its proper place in the commercial sphere." In a statement to the press, university president Mark Yudof compared the settlement to winning the lottery.


Had carbovir been developed before 1980, it probably wouldn't have received the same attention. Because Vince's research was funded by the federal government, the results could not have been licensed exclusively to a drug company. Instead, carbovir would have entered the public domain, and companies could have developed drugs based on it without paying the U of M a nickel.

Craig Lassig

But in 1980 Congress passed legislation that profoundly transformed the context for scientific research at public universities. Designed as a response to flagging productivity and concerns about U.S. competitiveness with Japan, the Bayh-Dole Act allowed universities to patent and license the results of federally funded research. The logic behind the legislation was simple: Allowing universities to profit from their research would spur development of marketable products and give private industry access to academia's bountiful trove. And the effect was dramatic: Before 1980, U.S. universities applied for about 250 patents a year; by 1998 they were applying for nearly 5,000 annually--and generating more than $34 billion per year from their discoveries.

Like other land-grant institutions, the University of Minnesota has always been an eager participant in the market economy. The school's numerous contributions to industry include taconite, vulcanized rubber, and retractable seat belts. The school also has a track record of forging fruitful partnerships with private industry. The first pacemaker, for instance, was implanted by a team of doctors from the U of M and the local medical-technology company Medtronic.

But if public-private liaisons are nothing new, Bayh-Dole substantially altered the terms of endearment: Whereas before the legislation, products developed at universities became public, universities now had a financial incentive to keep their corporate relationships monogamous. In other words, if seat belts had been invented circa 1980, it's conceivable that only Ford would be allowed to install them in cars.

Depending on who is describing it, Bayh-Dole amounted to either an inspired attempt to make universities relevant or an unprecedented giveaway to corporate America. Whatever the case, research institutions embraced the new model wholeheartedly, setting up offices to patent and license university inventions and bragging that royalty revenue would soon line academia's coffers. To date, however, these offices--engaged in a range of activities gathered under the broad rubric of "technology transfer"--have rarely proved profitable. Only a few inventions, such as the University of Florida's patent on Gatorade and Yale's patent on d4T (marketed under the name Zerit), brought substantial returns. But university administrators have continued to insist that intellectual property is the new coin of the academic realm.

These days the U of M manages its growing portfolio of intellectual property from an office in the fortresslike McNamara Alumni Center. The walls here are adorned with framed pictures touting the school's biggest tech-transfer successes to date, carbovir and Net Perceptions, Inc. The latter, a software company, was spun off by a group of faculty and students in 1996. In a common tech-transfer arrangement, the school, which holds the patent on Net Perceptions' software, took an equity interest in the company and made nearly $8 million when it went public in 1999.

Tony Strauss, vice president of patents and technology marketing, has worked in the office for 17 years, ever since graduating from the U of M's law school. During that time he has seen technology transfer go from a blip on academia's screen to a multibillion-dollar business. "In our little spheres," he says, "we felt like what we were doing was important. But most of us were just trying to survive."

Not so anymore. When carbovir was patented, the university had only one technology manager; Strauss's department now has 21 employees. According to Strauss, the school now has more than 450 active license agreements. Still, the $77 million generated by those contracts is due almost solely to carbovir and Net Perceptions. "From a financial standpoint, we've lagged behind [other large research universities]," Strauss admits. Nevertheless, he says, his office is making a concerted effort to expand its influence, meeting with researchers on a regular basis and keeping tabs on potentially marketable work.

"We're getting very popular for a variety of reasons," he says. "Much to our surprise, we're finding ourselves, somewhat reluctantly, out on the cutting edge of volatile issues--drug pricing in Africa being the latest. Part of the problem was that we didn't think of how we'd be perceived."

Strauss contends that despite Ziagen's enormous financial impact, technology transfer is not generally designed for profit. "We don't patent things just to make a buck," he contends. "Our basic reason for being here is to get things out to the public. We want to get a fair return to the institution. But our mission is to get ideas out. In a broad sense, everything is tech-transfer. Education is tech-transfer."

Others are less demure. General counsel Mark Rotenberg concedes that money is a driving force behind academia's push to commercialize its inventions. The ongoing divestment of public universities--and the attendant double-digit tuition spikes, tenure battles, and departmental "re-engineering"--has made commercialization not only attractive, but necessary. "Universities are under enormous financial pressure to find new sources of funding," says Rotenberg. "Major public universities like the U of M can no longer rely on public funds as their principal source of funding. We have to look to research activity as a point of revenue, and hope that people will see the value in that.

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