Biotech profit plan is OK’d:

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State will share in firms’ earnings based on fruits of university research.

Sacramento Bee

California would share in the profits biotech companies reap from stem cell technologies invented by university researchers using taxpayer funds, under rules adopted Friday.

The state also would give full intellectual property protection to companies seeking to market spinoff products developed as part of the larger embryonic stem cell research effort, a concession biotech industry representatives said would help to speed the pace of innovation.

Both decisions, by a subcommittee of California’s stem cell institute, are part of the ongoing creation of intellectual property policy by the agency, created by the passage of Proposition 71 in 2004. The state has no entity to manage things like patents and product licenses, so the institute is in largely uncharted waters.

“The state needs to figure out how to manage the intellectual property that it’s creating,” said Jeff Sheehy, an advocate for AIDS patients and a member of the intellectual property subcommittee.

The decisions will go to the agency’s full 29-member oversight committee for final approval Aug. 2.

Under the royalty agreement, after a threshold profit level is met, the state would receive in the range of 1 percent to 3 percent of the total profits that a company earns from commercializing a technology discovered by researchers funded by the stem-cell bonds.

It’s impossible to predict how much money the royalties would eventually return to state coffers. No new stem-cell therapies are expected to reach the market within the next decade.

“The vast majority (of licensed technologies) make no money, or very little money,” said Wendy Streitz, director of policy and analysis for the University of California’s office of technology transfer.

The royalty decision was a compromise. The biotech industry had pushed for a smaller royalty agreement. Taxpayer advocates wanted a more generous one.

“I’m disappointed that they haven’t been able to understand the importance of maintaining a payback to all the Californians who are coming up with this money,” said John Simpson, stem cell project director for the Foundation for Taxpayer and Consumer Rights.

In its other significant decision Friday, the subcommittee threw out a proposed rule that would have required companies licensing and developing improved stem cell research “tools” to make them available at a discount to other researchers funded by the stem cell institute.

With stem cell research still in its infancy, such improved research tools are likely to account for many of the advances the institute funds, at least for the next several years.

Several subcommittee members argued that forcing companies to provide these tools at a low cost to state-funded researchers would keep state taxpayers from paying for a new research tool twice — once to fund the initial research, and again for the next generation of researchers to buy it from a biotech company.

But Friday, a number of biotech industry representatives successfully argued for the rule to be discarded, saying it would deprive them of revenue from their primary customers — other California stem-cell researchers — and remove the incentive for investment. Joydeep Goswami, vice president of Carlsbad-based Invitrogen Corp., said the rules of the market would keep innovations developed by the private sector at a fair price.

“It’s not in our interest to not make tools available,” he said.

To date, the stem cell institute has given only a few small research grants. Lawsuits challenging Proposition 71‘s constitutionality have kept the state from issuing the bonds that were to have funded about $300 million in research each year for a decade.

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