The Wall Street Journal

Tonight, the U.S. Senate is expected to approve a measure to broaden federally funded research on embryonic stem cells. But some government officials and scientists say the strict limits imposed by the Bush administration are only part of what’s hindering stem-cell research. Another problem: several broad patents held by a University of Wisconsin foundation.

When executives at Carlsbad, Calif.-based Invitrogen Corp. chose to locate their stem-cell research in Asia recently, they blamed the patents. And today, a California watchdog group, the Foundation for Taxpayer and Consumer Rights of Santa Monica, says it will ask the U.S. Patent and Trademark Office to overturn three patents awarded to James A. Thomson, the Wisconsin researcher who first isolated stem cells from human embryos in 1998.

The broadly worded patents, which cover nearly any use of human embryonic stem cells, are held by the Wisconsin Alumni Research Foundation, a nonprofit group that handles the school’s intellectual-property estate, managing a $1.5 billion endowment amassed during 80 years of marketing inventions.

John Simpson, an official at the foundation bringing the challenge, says WARF‘s efforts to enforce its patents are “damaging, impeding the free flow of ideas and creating a problem.” Mr. Simpson’s group got involved in the dispute earlier this year after Wisconsin officials said they would demand a share of state revenue from California’s voter-approved stem-cell initiative.

WARF doesn’t charge academics to study stem cells, but it does ask commercial users to pay fees ranging from $75,000 to more than $250,000, plus annual payments and royalties. So far, 12 companies have licensed rights from WARF to use the cells, and more than 300 academic laboratories have agreements to use the technology without charge. WARF spokesman Andy Cohn declined to say how much the organization has earned from the patents so far but says it is less than what it has spent funding stem-cell research and paying legal costs.

WARF officials say they are simply enforcing their legal rights by charging companies to license the patents. “It’s a red herring. People want free access,” says Elizabeth Donley, executive director of the WiCell Research Institute, a center created by WARF in Madison to study and distribute the cells. Ms. Donley says the fees are invested back into research being performed at the university.

Some government officials argue that the patents may be slowing industrial research. The fees being charged “are having a chilling effect on small start-up companies engaging in this area of research,” says James R. Battey, head of the National Institutes of Health‘s stem-cell initiative.

The latest legal maneuver takes direct aim at three WARF patents that were granted starting in 1998. The Patent Office, which granted some 160,000 patents last year, gets about 450 “re-examination” requests annually. In about 70% of those cases, the agency ends up modifying a patent’s claims, sometimes canceling them altogether, says spokeswoman Brigid Quinn.

According to a sworn declaration supplied by Jeanne Loring, a stem-cell expert at the Burnham Institute, La Jolla, Calif., as part of the challenge, the patents shouldn’t have been issued because earlier work on animal stem cells meant that creating human ones was an obvious step.

Dr. Loring holds a small equity position in Novocell, a venture-capital backed company based in Irvine, Calif., but she isn’t involved in its operations. Novocell is working to develop a diabetes cure from stem cells. The company says it hasn’t yet agreed to a license with WARF and may move some of its research overseas.

President Bush established his stem-cell policy in August 2001. It allows the National Institutes of Health to fund research on human embryonic stem cells, but only if the cells involved were taken from embryos before his announcement. So far, cells isolated from about 20 different embryos have been shared among researchers under Mr. Bush’s policy.

The bill the Senate is expected to approve would permit the NIH to fund research involving 100 or more new supplies that have been created since 2001 but aren’t eligible for federal funding. Those supplies were created using five-day-old embryos developed in fertility clinics. President Bush has said he will veto the measure.

As the political debate surrounding stem-cell research has heated up, so have disputes over the cells’ ownership. Shortly after Wisconsin’s Dr. Thomson first obtained stem cells from human embryos in 1998, WARF reached a broad, exclusive agreement with Geron Corp. to turn the cells into commercial treatments.

In 2001, after Mr. Bush set the federal stem-cell policy, WARF came under public pressure to widen commercial access to its stem-cell technology. It sued Geron to win back some of its rights, and the two sides later agreed that Geron would keep exclusive rights to create treatments using only three types of cells, from nerves, heart tissues and the pancreas.

For their part, Geron officials deny that patents are limiting stem-cell research and note that they haven’t been approached recently about sharing their rights. Geron Chief Financial Officer David Greenwood says the slow pace of activity reflects a lack of interest among investors and large companies, where many still see cell-based treatments as a long shot.

Geron spent $13.2 million on stem-cell research last year and says that figure will grow this year as the company prepares for what it hopes will be the first clinical trial of stem-cell therapy in spinal-cord injuries. Geron says it plans to ask the FDA for permission to conduct that trial by the end of the year.

Nonetheless, some companies are simply taking their research overseas because while the patents have been approved in the U.S., they were never sought in some countries, such as Israel and Singapore.

“This is an asymmetric patent in terms of geographic coverage,” and WARF is asking for unreasonably high payments, says Joydeep Goswami, vice president of stem cells and regenerative medicine at Invitrogen, which is now studying stem cells in Asia. “They clearly see this as the goose that lays the golden egg,” he adds.

The state of California was pulled into the patent battle after voters there approved a ballot measure in 2004 that will fund as much as $300 million of research each year for 10 years, at a total cost to state taxpayers of as much as $6 billion. Mr. Simpson’s taxpayer group is one of several that pressured the new state agency, the California Institute for Regenerative Medicine, to seek a return to taxpayers on its investment.

The agency is proposing to take 25% of the revenue that universities generate from patenting discoveries made with the stem-cell funds. In March, Ms. Donley said that WARF would consider any such move a “commercial” use of its patents and demand a cut of the state’s take. Edward Penhoet, vice chairman of the California stem-cell agency’s oversight board, calls WARF‘s argument “unprecedented,” and the parties haven’t reached any agreement.

Mr. Simpson says it was those discussions that led him to decide the patent is “damaging the taxpayers of California” and to start organizing the re-examination request being undertaken today.

“I don’t think the WARF people are doing the right thing. They have dollar signs in their eyes,” says Mr. Simpson.
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Write to Antonio Regalado at [email protected] and David P. Hamilton at [email protected]