(cid:35)(cid:40)(cid:33)(cid:48)(cid:52)(cid:37)(cid:50)(cid:0)(cid:17)(cid:23)(cid:14)(cid:18)(cid:18)
`
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`(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:72)(cid:69)(cid:78)(cid:13)(cid:34)(cid:79)(cid:89)(cid:69)(cid:82)(cid:0)(cid:48)(cid:65)(cid:84)(cid:69)(cid:78)(cid:84)(cid:83)(cid:26)(cid:0)(cid:0)
`(cid:52)(cid:72)(cid:69)(cid:0)(cid:51)(cid:84)(cid:65)(cid:78)(cid:70)(cid:79)(cid:82)(cid:68)(cid:0)(cid:53)(cid:78)(cid:73)(cid:86)(cid:69)(cid:82)(cid:83)(cid:73)(cid:84)(cid:89)(cid:0)(cid:44)(cid:73)(cid:67)(cid:69)(cid:78)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:48)(cid:82)(cid:79)(cid:71)(cid:82)(cid:65)(cid:77)
`
`(cid:45)(cid:33)(cid:50)(cid:57)(cid:33)(cid:46)(cid:46)(cid:0)(cid:48)(cid:14)(cid:0)(cid:38)(cid:37)(cid:44)(cid:36)(cid:45)(cid:33)(cid:46), Miller Distinguished Professor in Higher Education,
`Institute of Higher Education, University of Georgia, U.S.A.
` (cid:33)(cid:44)(cid:37)(cid:51)(cid:51)(cid:33)(cid:46)(cid:36)(cid:50)(cid:33)(cid:0)(cid:35)(cid:47)(cid:44)(cid:33)(cid:41)(cid:33)(cid:46)(cid:46)(cid:41), Center for Genome Ethics, Law, and Policy, Duke University, U.S.A.
`(cid:35)(cid:47)(cid:46)(cid:46)(cid:41)(cid:37)(cid:0)(cid:43)(cid:33)(cid:46)(cid:39)(cid:0)(cid:44)(cid:41)(cid:53), Joseph L. Rotman School of Management, University of Toronto, Canada
`
`(cid:33)(cid:34)(cid:51)(cid:52)(cid:50)(cid:33)(cid:35)(cid:52)
`The Cohen-Boyer licensing program, by any variety
`of metrics, was widely successful. Recombinant DNA
`(rDNA) products provided a new technology platform
`for a range of industries, resulting in over US$35 bil-
`lion in sales for an estimated 2,442 new products. Over
`the duration of the life of the patents (they expired in
`December 1997), the technology was licensed to 468
`companies, many of them fledgling biotech companies
`who used the licenses to establish their legitimacy. Over
`the 25 years of the licensing program, Stanford and the
`University of California system accrued US$255 million
`in licensing revenues (to the end of 2001), much of which
`was subsequently invested in research and research infra-
`structure. In many ways, Stanford’s management of the
`Cohen-Boyer patents has become the gold standard for
`university technology licensing. Stanford made pragmatic
`decisions and was flexible, adapting its licensing strategies
`as circumstances changed.
`
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`The licensing of the Cohen-Boyer patents by
`Stanford University represents one of the most
`successful university technology licenses. The
`discovery covers the technique of recombinant
`DNA and allows for the useful manipulation of
`genetic material. Examining Stanford’s licensing
`of the intellectual property is best understood
`in context and as part of the university’s larger
`strategy. Moreover, designing and setting up the
`licensing program involved uncharted territory at
`
`that time. The first patent issued on December
`2, 1980, after 6 years under review at the U.S.
`Patent and Trademark Office: the original appli-
`cation was filed in November 1974. This date was
`two weeks before the effective date of the Bayh-
`Dole Act, which assigned intellectual property
`(IP) rights over faculty discoveries from federally
`funded research to universities and emphasized
`the university’s responsibility for commercializa-
`tion.1 The intention was to provide a means for
`economic growth, technological change, and en-
`hanced U.S. competitiveness.
`The Cohen and Boyer’s discovery provided
`tools for genetic engineering and was the subject of
`controversy that led to a lively public debate dur-
`ing the decade of the 1970s. Sally Smith Hughes
`documents Cohen and Boyer’s scientific discovery,
`Stanford’s decision to pursue patents, and the pub-
`lic controversies surrounding recombinant DNA.2
`The debate was symbolically resolved with the June
`1980 U.S. Supreme Court ruling on Diamond v
`Chakrabarty, a landmark 5–4 decision, which
`made the patenting of life forms possible with the
`Court’s oft-quoted clause, “anything under the sun,
`that is made by man.” This decision cleared the way
`for the Cohen-Boyer application, which covered a
`fundamental technique, with the potential to be-
`come a platform technology that essentially led to
`a new paradigm in biotech research.
`
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`(cid:53)(cid:78)(cid:73)(cid:86)(cid:69)(cid:82)(cid:83)(cid:73)(cid:84)(cid:89)(cid:0)(cid:44)(cid:73)(cid:67)(cid:69)(cid:78)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:48)(cid:82)(cid:79)(cid:71)(cid:82)(cid:65)(cid:77)(cid:14)(cid:0)(cid:41)(cid:78)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:76)(cid:76)(cid:69)(cid:67)(cid:84)(cid:85)(cid:65)(cid:76)(cid:0)(cid:48)(cid:82)(cid:79)(cid:80)(cid:69)(cid:82)(cid:84)(cid:89)(cid:0)(cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:40)(cid:69)(cid:65)(cid:76)(cid:84)(cid:72)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:33)(cid:71)(cid:82)(cid:73)(cid:67)(cid:85)(cid:76)(cid:84)(cid:85)(cid:82)(cid:65)(cid:76)(cid:0)(cid:41)(cid:78)(cid:78)(cid:79)(cid:86)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:26)(cid:0)(cid:33)(cid:0)(cid:40)(cid:65)(cid:78)(cid:68)(cid:66)(cid:79)(cid:79)(cid:75)(cid:0)(cid:79)(cid:70)(cid:0)
`(cid:34)(cid:69)(cid:83)(cid:84)(cid:0)(cid:48)(cid:82)(cid:65)(cid:67)(cid:84)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0)(cid:8)(cid:69)(cid:68)(cid:83)(cid:14)(cid:0)(cid:33)(cid:0)(cid:43)(cid:82)(cid:65)(cid:84)(cid:84)(cid:73)(cid:71)(cid:69)(cid:82)(cid:12)(cid:0)(cid:50)(cid:52)(cid:0)(cid:45)(cid:65)(cid:72)(cid:79)(cid:78)(cid:69)(cid:89)(cid:12)(cid:0)(cid:44)(cid:0)(cid:46)(cid:69)(cid:76)(cid:83)(cid:69)(cid:78)(cid:12)(cid:0)(cid:69)(cid:84)(cid:0)(cid:65)(cid:76)(cid:14)(cid:9)(cid:14)(cid:0)(cid:45)(cid:41)(cid:40)(cid:50)(cid:26)(cid:0)(cid:47)(cid:88)(cid:70)(cid:79)(cid:82)(cid:68)(cid:12)(cid:0)(cid:53)(cid:14)(cid:43)(cid:14)(cid:12)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:48)(cid:41)(cid:48)(cid:50)(cid:33)(cid:26)(cid:0)(cid:36)(cid:65)(cid:86)(cid:73)(cid:83)(cid:12)(cid:0)(cid:53)(cid:14)(cid:51)(cid:14)(cid:33)(cid:14)(cid:0)(cid:33)(cid:86)(cid:65)(cid:73)(cid:76)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:79)(cid:78)(cid:76)(cid:73)(cid:78)(cid:69)(cid:0)(cid:65)(cid:84)(cid:0)
`(cid:87)(cid:87)(cid:87)(cid:14)(cid:73)(cid:80)(cid:40)(cid:65)(cid:78)(cid:68)(cid:66)(cid:79)(cid:79)(cid:75)(cid:14)(cid:79)(cid:82)(cid:71)(cid:14)
`(cid:136)(cid:0)(cid:18)(cid:16)(cid:16)(cid:23)(cid:14)(cid:0)(cid:45)(cid:48)(cid:0)(cid:38)(cid:69)(cid:76)(cid:68)(cid:77)(cid:65)(cid:78)(cid:12)(cid:0)(cid:33)(cid:0)(cid:35)(cid:79)(cid:76)(cid:65)(cid:73)(cid:65)(cid:78)(cid:78)(cid:73)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:35)(cid:0)(cid:44)(cid:73)(cid:85)(cid:14)(cid:0)(cid:51)(cid:72)(cid:65)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:33)(cid:82)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:48)(cid:0)(cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:26)(cid:0)(cid:48)(cid:72)(cid:79)(cid:84)(cid:79)(cid:67)(cid:79)(cid:80)(cid:89)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:68)(cid:73)(cid:83)(cid:84)(cid:82)(cid:73)(cid:66)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:82)(cid:79)(cid:85)(cid:71)(cid:72)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)
`(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:69)(cid:84)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:78)(cid:79)(cid:78)(cid:67)(cid:79)(cid:77)(cid:77)(cid:69)(cid:82)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:80)(cid:85)(cid:82)(cid:80)(cid:79)(cid:83)(cid:69)(cid:83)(cid:0)(cid:73)(cid:83)(cid:0)(cid:80)(cid:69)(cid:82)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:78)(cid:67)(cid:79)(cid:85)(cid:82)(cid:65)(cid:71)(cid:69)(cid:68)(cid:14)
`Mylan v. Genentech
`IPR2016-00710
`Genentech Exhibit 2122
`
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`
`

`
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`
`Of course, once the patent was granted,
`Stanford University, as the assignee, was required
`to design a licensing program that would be con-
`sistent with the public-service mission of the
`university and provide sufficient incentives for
`private industry to invest the requisite resources
`to bring products to market while producing rev-
`enue for the university. Feldman, Colaianni and
`Liu3 detail the history of Stanford’s licensing pro-
`gram, focusing on the process and the logic that
`guided the commercialization regime. Given the
`early controversy surrounding the Cohen-Boyer
`patent, the eventual success required a great deal
`of creativity, strategy, and persistence. Certainly,
`the professionals involved all contributed to the
`success, from Donald Kennedy, then president of
`Stanford, Robert Rosenzweig, then vice president
`for public affairs, Nils Reimer, founding director
`of the Stanford Office of Technology Licensing
`(OTL) to Katherine Ku, then licensing associate
`and current director of the OTL.
`The purpose of this chapter is to summa-
`rize lessons learned from Stanford’s design and
`implementation of the Cohen-Boyer licensing
`program. Many universities attempt to emulate
`Stanford University’s success at technology trans-
`fer; however, there is a limited appreciation for
`the high degree of creativity and adaptability of
`the Stanford Office of Technology and Licensing
`(OTL) in setting up its licensing program and
`making the myriad decisions that guided the
`ultimate outcome. In spite of many obstacles,
`Stanford University pursued the recombinant
`DNA patents and designed a strategy that met the
`public-service goals of the university by broadly
`licensing the technology; provided incentives for
`private companies to commercialize derivative
`products; and contributed to the creation of an
`innovation system that benefited Silicon Valley
`and reached across the American economy.
`
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`Despite the economic success of the licensing
`program, profit was not the primary motive.
`
`Stanford University had four goals that guided
`the development of the Cohen-Boyer license:
`• to be consistent with the public-service ide-
`als of the university
`• to provide the appropriate incentives in
`order that genetic engineering technology
`could be commercialized for public benefit
`in an adequate and timely manner
`• to manage the technology in order to mini-
`mize the potential for biohazard
`• to provide income for educational and re-
`search purposes
`
`Robert Rosenzweig, vice president for public
`affairs at Stanford, in a 1976 open letter addressed
`to “Those Interested in Recombinant DNA,” wrote
`“It is a fact that the financing of private universi-
`ties is more difficult now than at any time in re-
`cent memory and that the most likely prediction for
`the future is that a hard struggle will be required to
`maintain their quality.” As a result of these finan-
`cial concerns, he concluded, “we cannot lightly
`discard the possibility of significant income that is
`derived from activity that is legal, ethical, and not
`destructive of the values of the institution.”
`The balance of financial objectives against
`other goals is further demonstrated when Stanford
`decided not to pursue extending the patent life.
`The original 1974 patent application had claimed
`both the process of making recombinant DNA
`and any products that resulted from using that
`method. These applications were subsequently di-
`vided into the process patent and two divisional
`product applications: one claimed recombinant
`DNA products produced in prokaryotic cells
`and the other claimed the products in eukaryotic
`cells. Stanford filed a terminal disclaimer, which
`meant that all subsequent applications claiming
`recombinant DNA, regardless of how long the
`patent prosecution process took, would expire
`on December 2, 1997—the same date as the
`original 1980 patent.4 In effect, Stanford agreed
`to give up royalty rights on the life of the sub-
`sequent patents (issued in 1984 and 1988) that
`would have extended past the original patent’s
`expiration date. This limited Stanford’s collection
`of royalties because of the time delay inherent in
`commercialization, especially of pharmaceutical
`
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`
`

`
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`
`products. Stanford honored its obligation to the
`licensees with the realization that, as Kathy Ku
`wrote at the time “...it would not be good public
`policy or public relations if we were to ask for or even
`get such an extension.”
`Stanford did not require other nonprofit re-
`search institutions to take a license in order to use
`the technology. Niels Reimers and Kathy Ku re-
`port that the thought of licensing the technology
`out to other nonprofit research institutions had
`never entered into discussions about the licens-
`ing program. This licensing practice established a
`research exemption, or research-use exemption,
`which is consistent with the norms of open sci-
`ence,5 and stands in contrast to recent develop-
`ments in research-use exemption policies, such as
`Duke v. Madey and the WARF stem-cell licens-
`ing program.6
`To summarize, engaging in commercial ac-
`tivity encourages higher education institutions to
`act like for-profit entities. Intellectual property
`has no value unless it is defended. Stanford set up
`a litigation reserve fund that provides a credible
`threat of enforcement of the license. Despite sev-
`eral attempts to withhold payments from a variety
`of large and small companies plus one attorney
`who made challenges to the patents a “hobby,”
`Stanford was able to settle these disputes infor-
`mally and without formal litigation. This stands
`in contrast to the recent upswing in litigation by
`U.S. universities, including a recent law suit filed
`by the University of Alabama to prevent an artist
`from using the universities athletic colors.
`
`(cid:18)(cid:14)(cid:18)(cid:0)(cid:0) (cid:35)(cid:79)(cid:78)(cid:83)(cid:85)(cid:76)(cid:84)(cid:0)(cid:87)(cid:73)(cid:68)(cid:69)(cid:76)(cid:89)(cid:0)(cid:84)(cid:79)(cid:0)(cid:66)(cid:85)(cid:73)(cid:76)(cid:68)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:69)(cid:78)(cid:83)(cid:85)(cid:83)(cid:0)
`While intellectual property typically involves
`limited disclosure, Stanford University engaged
`in a pattern of consulting widely across various
`stakeholders to achieve consensus and to ensure
`that its actions were supported. For example,
`Rosenzweig worked to achieve consensus with
`both the faculty and the National Institutes of
`Health (NIH) as the sponsoring agency. In a 1976
`open letter, he asked the faculty to comment on
`whether the university should proceed with the
`patent process. Rosenzweig also sent a letter to
`Donald Fredrickson, NIH director, asking his
`opinion on patenting the Cohen-Boyer discovery
`
`and enclosed a copy of the memorandum sent to
`faculty. Fredrickson responded by sending a mass
`mailing to “a broad range of individuals and insti-
`tutions,” asking them for their comments on the
`patent question. 7 Fredrickson’s letter laid out five
`possible alternatives that NIH could take regard-
`ing recombinant DNA patenting and subsequent
`licensing: In response, Fredrickson received ap-
`proximately 50 letters.
`A compromise consensus emerged from
`among a list that Frederickson generated that
`Stanford should be able to patent recombinant
`DNA research but with nonexclusive licensing.
`A nonexclusive license ran counter to economic
`logic, contrary to the subsequent preferences ar-
`ticulated in the Bayh-Dole, Act and ignored peti-
`tions from Genentech and Cetus who stood to
`gain from exclusive licenses. The logic was that
`rDNA was a platform technology and that any
`one company could not exploit all the possible
`applications. Broad nonexclusive licensing not
`only contributed to the economic success of the
`patents but also created a population of compa-
`nies who drove the technology forward.
`There are other instances when Stanford
`sought transparency that was consistent with the
`actions of a university. While applicants generally
`keep patent applications secret from the date they
`are filed until they are granted and therefore pro-
`tected, Stanford opened the patent prosecution
`file to the public. This was an unusual move that
`was consistent with reducing subsequent ques-
`tions about the technology and was also consis-
`tent with the public mission of the university.
`Stanford engaged in an open process that at-
`tempted to build consensus across a wide range
`of stakeholders. While the university did stand to
`profit from the licensing program, their actions
`were consistent with the university’s larger and
`more traditional societal goals.
`
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`The most successful university technology trans-
`fer involves relationships that develop over time.
`Signing a licensing agreement represents a trans-
`action that is a first step in a relationship that re-
`quires maintenance and oversight. Each licensee
`received an annual letter from the Stanford OTL.
`
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`
`

`
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`
`That went a long way in establishing long-term
`relationships and encouraging dialogue.
`When Stanford initiated its licensing pro-
`gram, no precedent existed for specific licensing
`terms of the IP. Keeping with its practice of con-
`sulting widely and building consensus, Stanford
`interviewed a variety of companies representing
`different markets when the license terms, particu-
`larly the royalty rates on end products, were be-
`ing formulated. Through this effort, licenses were
`pre-sold and unrealistic terms were avoided. To
`make the licensing process easier, the OTL took
`great pains to categorize the different potential
`recombinant DNA products and to offer appro-
`priate royalty rates. In the end, the OTL settled
`on four different product categories: basic genetic
`products, bulk products, end products, and pro-
`cess improvement products. By scaling the rates
`to reflect the visibility of the licensee’s product
`and the expected revenue from each license, the
`OTL encouraged compliance. A graduated royal-
`ty system ensured that smaller companies weren’t
`penalized with low sales volume.
`Stanford made pragmatic decisions about
`pricing its intellectual property and kept the an-
`nual fees and royalty rates reasonable. While this
`might have reflected a strategy to deal with some
`of the weaknesses with the patent, the university
`could have been greedy and pursued higher rates.
`Nils Reimers recalled at least one alumnus writ-
`ing, “You’ve got a patent; you can dominate every-
`thing here. Why are you charging such a low royalty?
`You know Stanford could use the money. Charge a
`higher royalty.”8 This advice was not taken. The
`rates that were chosen were selected after con-
`sultation with industry about accepted practices
`and did not exploit the university’s monopoly
`position.
`Furthermore, Stanford created special provi-
`sions for lower licensing fees and royalty rates for
`small firms in 1989. At this time, 209 fledging
`biotech firms, most of them in the San Francisco
`Bay Area, signed licensing agreements.
`
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`Over the 17 years of the licensing program
`Stanford experimented with five versions of
`the standard license agreements and provided
`
`three special licensing agreements. A total of
`468 companies licensed the Cohen-Boyer tech-
`nology. Licensing the patents was very much a
`learning process that balanced the capabilities of
`companies, especially in the embryonic biotech
`industry, with the economic potential of the
`technology. Ku later noted, “Stanford was try-
`ing to license an invention for which products had
`never been sold and which would apply to many
`diverse, established industries, in addition to the
`newly emerging biotechnology industry.”9 Table 1
`summarizes the various licensing regimes and
`the number of companies that signed up under
`each version. Certainly the economic impact
`would have been less without this flexibility and
`adjustments.
`The first version of the license provided two
`incentives to encourage companies to sign up.
`Remember that the technology was already in the
`public domain through publication and that the
`open patent files and companies were already us-
`ing rDNA. It was not clear that companies would
`comply with the terms. The first incentive for
`companies to take a license in 1981 was a credit
`toward future royalties over the first five years,
`up to a total of US$300,000. The second incen-
`tive came when companies were advised that
`the licensing terms would change and encour-
`aged them to sign up early. In response to this
`news, 82 companies signed up. The largest share
`of earned royalties from product sales accrued to
`these firms.10
`The first license’s terms were a US$10,000
`up-front fee with a minimum annual advance
`(MAA) of US$10,000. Earned royalty rates on
`products were provided on a graduated basis for
`bulk products, end product sales, and process im-
`provements on existing products based on pro-
`duction cost savings. Under the licensing agree-
`ments, Stanford received unprecedented royalties
`on downstream drug sales in a stipulation known
`as reach-through licensing: Stanford received end-
`product royalties based on a percentage of final
`product sales. The Cohen-Boyer IP rights ex-
`tended to all products developed using the tech-
`nology. If companies did not sign a license agree-
`ment, any end products they developed that used
`rDNA could potentially be contested.
`
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`
`

`
`CHAPTER 17.22
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