Might such a cautionary tale dissuade other universities from going down the same road? To the contrary: the University of California recently established a policy allowing it to acquire equity stakes in start-ups and now owns shares in thirty companies committed to developing UC technologies. Stanford took a similar step in 1994.
Meanwhile, universities are devising increasingly creative—and controversial—ways to raise their royalty earnings. Michigan State University, for example, recently took the unusual step of applying for a new, slightly altered patent on a widely prescribed cancer drug, cisplatin, that was patented by the university in 1979. Filing twice on the same invention is prohibited, but MSU's original patent, which along with its analog, carboplatin, generated $160 million in royalties, was about to expire. Thus the slight alteration. The move may have been good for MSU's bottom line, but did it serve the public interest? MSU's action prevented four generic-drug manufacturers from marketing a cheaper version of cisplatin, and these companies are now suing MSU—all of which prompted Barnett Rosenberg, the drug's developer and a now-retired professor, to complain that his work has "led to the creation of a lot of selfish, money-hungry university personnel."
Stanford has advanced beyond mere patenting. The university recently invested more than $1 million to develop its own brand-name product, Sondius-XG, a sound-synthesis technology that it will market in conjunction with Yamaha. Why? Because unlike patents, which expire after twenty years, brands generate revenue forever. Mary Watanabe, who works with Jon Sandelin at the Office of Technology Licensing, let slip during an interview that the university is also considering launching a "Stanford company." She declined to divulge details.
If these activities appear to be out of keeping with the university's nonprofit educational mission, that's because they are. In a provocative 1996 article in the University of Pennsylvania Law Review, Peter Blumberg, then a law student, argued that technology-transfer activity at universities is so far removed from the university's public mission that it "could be treated as unrelated business income for tax purposes." Universities, Blumberg writes, "enjoy their tax exemption because of a belief that they are producing research that no other market actor would produce absent a public subsidy; basic research, publishable research, research that educates students and ... is usable by the whole society."
In their zeal to maximize revenue, many schools are not only raising questions about their nonprofit status—they are getting into some embarrassing skirmishes with their own students and professors over the rights to potentially lucrative ideas. In the most extraordinary case to date Peter Taborsky, a student at the University of South Florida, wound up on the chain gang of a maximum-security state prison after colliding with his university over the rights to a discovery he made as an undergraduate. Taborsky had been working as a research assistant on a project sponsored by the Florida Progress Corporation, a local holding company. At the end of the sponsored research period, Taborsky claims, he received permission from Robert Carnahan, a dean in the College of Engineering, to begin work on his own experiments, following a different approach, which he hoped to use as the basis for a master's thesis. But as soon as Taborsky made his research breakthrough, which had obvious commercial utility as a way to remove ammonia from wastewater, Florida Progress and USF both laid claim to his discovery. The university filed criminal charges against Taborsky and spent more than ten times the amount of the original research grant on outside legal counsel alone. In 1990 a jury found Taborsky guilty of stealing university property, and the State of Florida required him to begin serving his sentence on a chain gang in 1996. But the case became an embarrassing media spectacle, and Governor Lawton Chiles soon intervened to offer Taborsky clemency, which Taborsky, on principle, refused.
Why would a state university go to such lengths? To protect future investments, of course. As Seth Shulman argues in Owning the Future, a new book about intellectual property in the information age, the Taborsky case "underscores what can happen when universities, beholden to industry for an increasing share of research dollars, let financial concerns overshadow the notion of research as a shared intellectual pursuit."
Today it is common for universities to pay exorbitant legal fees to defend their intellectual property. According to the Association of University Technology Managers annual report, dozens of major universities—Brandeis, West Virginia, Tufts, and Miami among them—actually spent more on legal fees in fiscal year 1997 than they earned from all licensing and patenting activity that year. A growing number of disputes pit universities against their own faculty members. In 1996 a jury awarded $2.3 million to two professors, Jerome Singer and Lawrence Crooks, who filed suit against the University of California for shortchanging them on royalties resulting from their pathbreaking research on magnetic resonance imaging, a widely utilized medical test known as the MRI. An appeals court found that the university improperly sheltered revenue by dramatically discounting the patents it licensed to manufacturers in exchange for more than $20 million in research funding.
IS this where the Bayh-Dole Act was supposed to lead? Two summers ago a working group at the National Institutes of Health issued a report to the NIH director, Harold Varmus, warning that changes in the way universities guard their intellectual property are endangering the free exchange of basic research tools—such as gene sequences and reagents—that are crucial to all research. The NIH found that the terms universities impose on their research tools, through their technology-licensing offices, "present just about every type of clause that universities cite as problematic in the [contracts] ... they receive from industry." These include requirements that universities be allowed to review manuscripts prior to publication and provisions extending their ownership claims to any future discoveries deriving from use of their research materials. Universities, the NIH charges, "have no duty to return value to shareholders, and their principal obligation under the Bayh-Dole Act is to promote utilization, not to maximize financial returns. It hardly seems consistent with the purposes of the Bayh-Dole Act to impose proprietary restrictions on research tools that would be widely utilized if freely disseminated. Technology transfer need not be a revenue source to be successful." Ironically, the proliferation of ownership claims threatens not only to stifle the free exchange of ideas but also to impede economic growth. James Boyle, an expert on intellectual-property law at American University, warns that if current trends continue, "creators will be prevented from creating," as the public domain is "converted into a fallow landscape of walled private plots."
IMMEDIATELY after the April faculty meeting at Berkeley several members of Students for Responsible Research gathered in an outdoor courtyard at La Burrita, a pub just off campus, to air their concerns about the Novartis deal—and to let off steam. "This place has some of the cheapest pitchers around," said Jesse Reynolds, one of the group's leaders, as glasses were poured and beers were passed around a long picnic table.
Unlike the student radicals of the sixties, these students never intended to lock horns with the university establishment. Reynolds, who studies California water resources, says he's relatively new to student politics—and to politics altogether. "I'm generally one of those people who gripe a lot and do nothing," he explained. "But when the best state agricultural college in the country makes this kind of leap, the world is bound to follow. I really fear that."
David Quist, a second-year graduate student in environmental science, laughed as he told a story illustrating the culture that now permeates the university. The previous October, Quist said, at a town-hall meeting where the Novartis deal was first made public, Dean Gordon Rausser invited concerned students to examine the contract for themselves. "So the next day I came to his office," Quist recalled. "I was given some materials and sat down to take notes. But as soon as an administrator saw me, she said, 'Oh, no, you can't do that.'" Quist's notes were confiscated and held at the dean's office for several months.
Wilhelm Gruissem, a professor in the Department of Plant and Microbial Biology who helped to negotiate the Novartis deal, insists that the negotiations were as open as possible without divulging the company's proprietary secrets. But even students within the department felt shut out. In December of 1998 twenty-three graduate students sent a letter to the faculty complaining that their views had never been solicited and that they had been "forced to rely on rumors and supposition throughout the negotiation process."
What most concerns the Students for Responsible Research is that as university-industry ties grow more intimate, less commercially oriented areas of science will languish. "Let's say you're a graduate student interested in sustainable agriculture or biological control or some other area that is not commercial," Reynolds explained. "My guess is you're not going to come to Berkeley, or you'll at least think twice about it."
Donald Dahlsten, the associate dean of the College of Natural Resources, shares this concern. "Molecular biology and genetic engineering have clearly risen as the preferred approach to solving our problems, and that's where the resources are going," Dahlsten says. "New buildings have gone up, and these departments are expanding, while the organismic areas of science—which emphasize a more ecological approach—are being downsized." Dahlsten once chaired Berkeley's world-renowned Division of Biological Control. Today that division, along with the Department of Plant Pathology and more than half of all faculty positions in entomology, are gone—in part, many professors believe, because there are no profits in such work. "You can't patent the natural organisms and ecological understanding used in biological control," Andy Gutierrez, a Berkeley entomologist, explains. "However, if you look at public benefit, that division provided billions of dollars annually to the state of California and the world." In one project Gutierrez worked on, he helped to halt the spread of a pest that threatened to destroy the cassava crop, a food staple for 200 million people in West Africa.
Gordon Rausser counters that far from draining resources from other areas, the Novartis deal will benefit the college as a whole, because a quarter of the money will be spent outside the Department of Plant and Microbial Biology. "I'm sitting here with three science buildings that were built in the 1920s, thirties, and forties," Rausser says. "I can't get those buildings modernized for first-rate research without resources."
Chris Scott, who until recently oversaw industry collaborations at Stanford's medical school, describes another reason that working with the private sector is essential. Scott points out that for the past several years industry researchers have consistently been ranked among the most frequently cited scientific authors, making academic isolation intellectually deleterious. But Scott, too, recognizes the danger of allowing market criteria to dictate the paths of scientific inquiry. "Show me an industry-sponsored research project on schistomiasis—a liver parasite that afflicts people in the Third World—or malaria or river blindness or dengue fever," Scott says. All these diseases primarily afflict people in developing nations who can't afford to pay high prices for medicine, he says, so all have been dropped from the pharmaceutical industry's docket. Mildred Cho, of Stanford's Center for Biomedical Ethics, agrees, pointing to vaccine research as another neglected area. "Public-health services simply can't afford to pay high prices," Cho says. "If research is market-driven, it raises potential problems not only for the research agenda but for public health."
As the research agendas of universities and corporations merge, there is one other danger: namely, that universities will cease to serve as places where independent critical thought is nurtured. Anne Kapuscinski, a visiting professor from the University of Minnesota who studies genetically engineered organisms, and other scholars we met with at Berkeley fear that raising questions about the safety of genetically altered crops—a principal research focus of Novartis—may prove difficult if more and more agricultural colleges turn to corporations to finance their research. Concerns about genetic engineering are mounting, Kapuscinski notes. A study published last May in Nature found that the toxins dispersed from the pollen of Bt (Bacillus thuringiensis) corn, a Novartis product, can kill nonpest insects, including the monarch butterfly—a problem with potentially enormous ecological implications. Such dangers prompted the Food and Drug Administration to convene a series of public hearings last November on genetically altered crops, whose use has provoked huge demonstrations in Europe and elsewhere. Ignacio Chapela, of the College of Natural Resources' executive committee, believes that the most important thing Novartis stands to gain from the alliance is legitimacy. "The sheer value of having the logo of the University of California next to the logo of Novartis is immensely valuable to the company right now," he says.
Maybe so—but the plan may end up backfiring. At last year's graduation ceremony, in a graphic display of dissent, a student speaker placed the blue-and-orange Novartis logo directly above Berkeley's, while a hundred students in the audience mockingly donned graduation caps emblazoned with the Novartis logo—hardly the public exposure the company sought.