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COLUMN ONE : Academia Wises Up on Patents : These days, universities aren't shy about asserting their rights to potentially lucrative research patents. It wasn't always that way.

March 16, 1990|LINDA WILLIAMS | TIMES STAFF WRITER

The University of Florida made about $2 million last year in royalties on a patent for Gatorade Thirst Quencher, a sports drink that generates some $500 million to $600 million a year in revenue for Quaker Oats Co.

The payments place the university among the top five in the nation in income from patent royalties.

Oh, but if some people on the Gainesville, Fla., campus could just turn back the clock. "If we had done Gatorade right, we would be getting $5 or $6 million (a year)," laments Donald Price, director of the university's office of corporate programs. "It is a classic example of how not to handle a patent idea," he added.

Gatorade was developed in 1965 when many universities were ill equipped to judge the commercial potential of ideas emerging from their research labs. Officials blew the university's chance to control the Gatorade royalties when they declined to develop a professor's idea.

But Florida was not the only institution to make a costly misjudgment. Indiana University in 1957 licensed a fluoride compound to Procter & Gamble that led to Crest toothpaste. But it got less than $5 million from a royalty agreement based on the amount of the compound in the toothpaste instead of the $100 million or so it may have gotten over the life of the patent had the payments been based on toothpaste sales.

It is probably a safe bet that no university would make such a mistake today.

Academia is vastly more sophisticated about the commercial potential of its research. Technology transfer--the process of getting ideas from lab to markets--has become an integral part of the academic consciousness. The federal government spurred many universities into action in 1980 when it granted small businesses and nonprofit institutions exclusive license to all patents developed with federal funding.

Among the institutions with the longest and most successful track records are Stanford University and the University of Wisconsin--which has licensed patents since 1925 and has earned millions from the generic rat poison Warfarin and a series of vitamin D discoveries. Other successful universities are the nine-campus University of California, and Massachusetts Institute of Technology.

Stanford, which got $11.5 million last year in royalties from various patents, shares with UC the patent for recombinant DNA technology. UC's 1989 royalties were about $9.8 million. The university has about 600 patents, but biotechnology patents generated about 40% of 1989 income.

Michigan State University hit the jackpot with cisplatin, a cancer drug that has earned close to $60 million in royalties, yet the patent has about seven more years before expiration. Most of the universities generating significant income from patents owe it to "just one hit," Price said.

University administrators are quick to say that they are not simply motivated by dollars and cents. "What we really want to do is rekindle the competitiveness of America," said Carl Wootten, director of the UC patent office. Exploiting university research is essential to bringing new technology to the marketplace, he added.

Rights Asserted

Money may not be a major motivation, but many universities aren't shy about vigorously asserting rights to potentially lucrative patents. UC regents recently sued Eli Lilly & Co., claiming that the pharmaceuticals company infringed on its biotechnology patent for making human insulin. Financial analysts estimate that Lilly sold about $295 million worth of the insulin last year. Lilly insists that UC has no right to share the revenue and refused to negotiate a royalty agreement. UC promptly marched into federal court in San Francisco.

The University of Florida also went to court before it obtained any rights to Gatorade. Dr. Robert J. Cade, an associate professor of medicine at the university, used his own time and money to develop Gatorade. But Cade first asked his department at the university to develop and patent his idea for a liquid that when consumed entered the blood stream about 10 times faster than water. He was turned down. Years later, when Gatorade became a commercial success, the university claimed rights because Cade was its employee. And the National Institutes of Health also claimed rights because Cade had used NIH grants to conduct hormone research at the university.

The litigation resulted in a court settlement under which the university was assigned 20% of the royalties and the remainder distributed to a trust that includes Cade and other individuals associated with the development of Gatorade. Florida has learned its lesson well.

Price said the university now requires all of its faculty members to sign employment agreements assigning the university rights to all patents resulting from their research. Faculty members are required to disclose all inventions to a university committee that reviews the potential to obtain a patent and the commercial prospects of the invention, Price said.

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