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Public Research for Private Gain

UC Regents recently approved a new corporate entity that will likely give a group of well-connected businesspeople control over how academic research is used.



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Gerald Barnett, who ran tech transfer operations at the University of Washington and at UC Santa Cruz, and today is the director of the Research Technology Enterprise Initiative, an independent organization that consults with research institutions, said Newco represents a way for private business interests to try to game the university. "If you're working for the public good you don't have to take ownership of everything," he said of the research discoveries made at university campuses. "You don't have to have a large number of employees [at tech transfer offices], and you only have to do few transactions a year [licensing to private companies].

"At the University of Washington, when I was there, we had five employees in my licensing unit, and we brought in three to six million a year across a range of projects," Barnett added. He said that University of Washington administrators, however, created an independent organization with a similar focus as Newco to manage the university's inventions under the watch of business interests. "UW has put $100 million over five years into their 'Center for Commercialization' with great ballyhoo about how industry and businesspeople would cut through all the red tape and delays," he said. "Turns out that those industry people are doing a lot worse than the program they dismantled."

Barnett predicts the same for UC's Newco. "The problem is that you're taking out of circulation a vast amount of public domain knowledge and other stuff, and holding it hostage, making it less likely that any of these inventions will make money because you're focusing on exclusive licenses," he said.

What's better for the public and the broader economy, said Barnett, is a system in which most university inventions and knowledge quickly flows into the public domain, or is swiftly made available through non-commercial means. A relatively small number of university inventions that benefit from patent positions might be licensed out, Barnett said. But he's skeptical of the obsession with exclusive patent agreements with corporations.

The idea of putting university technology transfer under the control of a board of business leaders grows out of recent experiences at a handful of elite universities in which just a dozen or so technologies created in publicly funded labs have blossomed into multimillion-dollar properties. Many university administrators, nonetheless, have come to see these relatively rare successes as potentially lucrative revenue streams to replace increasingly scarce public funding. And now many businesspeople and private investors see the university as a vast social factory from which they can extract valuable property — especially if the university is pliant and agrees to exclusive deals. UCLA offers a prime example.

In the early 1990s, federally funded experimental cancer treatments devised by doctors at the UCLA David Geffen School of Medicine were yielding promising results. Using genetically altered mice with cancerous human tumors grafted into them, scientists were developing research they hoped would eventually treat cancers using specially designed protein antibodies. In 1996, several UCLA doctors took the research private in order to quickly commercialize the treatments. They founded Urogensys, which was later renamed Agensys. Agensys struck a deal with UCLA to exclusively license some of the school's patented technologies on which the cancer therapies were based. Over the next decade and a half, Agensys filed for 156 patents on these cancer treatments, all based on fundamental research done at UCLA with federal research grants.

In 2007, the Japanese pharmaceutical giant Astellas bought Agensys for $537 million, making it one of the most valuable university spin-off companies in history. Agensys' deal with UCLA was unique in that the school reportedly had some equity stake in the company. The university has never disclosed the financial terms of the deal, however, so just what benefit there was to UCLA isn't clear. Some say the university benefited greatly, while others claim it was actually short-changed and that Agensys' private investors were given a favorable deal because they were big donors to UC.

What is clear is that the biggest moneymaker in the Agensys deal was a small network of investors who earned millions. These investors included UCLA professor Arie Belldegrun, a doctor who has created and advised numerous biotechnology companies over his career. Roy Doumani, a wealthy Los Angeles banking and real estate investor, and friend of Belldegrun, was also part of Agensys. Doumani has been a major UCLA donor for several decades. In 1989, he gave UCLA a $7 million oceanfront house in Venice Beach. One of his more recent gifts to the school was an endowed chair in urologic oncology. This prestigious faculty post is currently occupied by Belldegrun. Although he has no scientific background, Doumani recently became a UCLA faculty member by joining the Department of Molecular and Medical Pharmacology to teach the "business of science."

Advising Agensys in its dealings with the university was Alan C. Mendelson, a veteran biotechnology lawyer who works in the Menlo Park offices of the Latham Watkins law firm. Mendelson is also a wealthy donor to UC; he became a UC Regent in July of 2012 after a two-year stint as president of the Cal Alumni Association and a one-year term as treasurer of the UC Alumni Association.

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