Patents little help for budget woes

Despite negotiating a patent royalties monetization that will bring millions in revenue to the campus this year, UC Berkeley officials do not see patent revenue as a long-term financial solution to budget woes.

Even though an $87.5 million patent monetization deal will fund campus research facilities and biological sciences in 2012, patenting inventions is not considered a reliable funding source to combat the campus’s — and on a larger scale, the UC system’s — financial crisis.

On March 11, 2011, the campus finalized an agreement to monetize a patent for the antibody to the immune-regulating molecule CTLA-4, which former campus professor of immunology James Allison and his research team discovered in 1995 and showed promise in clinical trials for treating melanoma.

The administration has chosen to use the $62.5 million campus share of the revenue — which goes into campus discretionary funds, distributed at the chancellor’s discretion, and research funding — to support the Cancer Research Laboratory, where the molecule was discovered, finance equipment for the Office of Laboratory Animal Care and fund recruitment, retention, new hires and infrastructure for the Department of Molecular and Cell Biology and College of Letters and Science’s Division of Biological Science, said Carol Mimura, assistant vice chancellor for Intellectual Property & Industry Research Alliances, in an email.

The funds will also provide research equipment and pay debt service for neuroscience labs in the Li Ka Shing Center for Biomedical and Health Sciences, scheduled to open  in January.

The inventors received about $25 million, according to Mimura.

Biopharmaceutical company Bristol-Myers Squibb paid $87.5 million up front, and the campus could earn an additional $40 million in the next few years if sales of the patented drug exceed projections, according to Michael Katz, director of the campus Office of Intellectual Property & Industry Research Alliances.

Because of the limitations on funding distribution, lack of profitable biomedical patents and the relatively small amount of income patents produced compared to the overall campus operating budget, “prospects are not huge” that patent revenue will be a solution to budget difficulties, according to Brian Wright, professor and chair of the UC Berkeley Department of Agricultural and Resource Economics.

Instead, the campus focuses on “socially responsible” licensing.

“If our main reason for patenting is basically to force everybody to pay us to use our technology, we could make more money,” Katz said. “But that’s not what universities are about in general, and that’s certainly not what we do at Berkeley.”

Beyond the philosophy behind patenting practices at the campus, increasing revenues would also not be a cure-all for tight budgets, according to William Tucker, executive director of Innovation Alliances and Services at the UC Office of the President.

“If we grew our royalty income 10 times, that is still only a small percentage of the cost of running the university,” he said. “There is a misperception out in the public and for legislators as well that we can solve our (financial) woes by being better at technology transfer — that will never happen.”

A royalties monetization agreement — this is the first of this scale negotiated by a UC campus — allows a company to pay a lump sum of projected sales royalty revenues at once instead of periodically, according to Tucker.

The campus could make similar deals in the future, but “large monetization deals have been and likely will continue to be rare events,” Katz said.

The campus pulled in about $5.5 million in patent licensing revenue in fiscal year 2011 in addition to the patent monetization deal. Under the current UC Patent Policy, 35 percent of patent income goes to the inventors, 15 percent to the inventors’ campus department for research and 50 percent to the campus as discretionary funds, a quarter of which go back to the UC Office of the President and are redistributed as general funds, Tucker said.

Since July 2011, the campus received 25 invention disclosures from investigators, filed 26 U.S. Patent applications and executed seven license agreements.

In fiscal year 2010, the UC system earned between $100 million and $125 million in patent sales royalties and licensing revenue, and the overall revenue for 2011 is not expected to differ significantly from 2010, Tucker said.

In that same time period, 75 start-up companies were founded on UC technologies, 62 of which are based in California, according to the University of California 2010 Technology Transfer Annual Report.

UC Berkeley licensed technology to six start-up companies in fiscal year 2010, compared to 27 start-up licensing agreements at UCLA and 13 at UC San Diego, the report states.

Alisha Azevedo is the lead academics and administration reporter.