Legal Challenge Between Palo Alto Company, Orange County Hospital Halts Stem Cell Research

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When a child dies of brain disease at Children’s
Hospital of Orange County, Philip H. Schwartz meets with the parents,
explains his research and asks them to donate their child’s brain to his
quest for a cure.

"These are not easy conversations to have," he
said. "There are expectations by parents that if they allow us to do
that to their child, it will serve a useful purpose."

But for
three years, the cells derived from many of those children’s brains have
been suspended in limbo, frozen in Thermos bottles. The nonprofit
Southern California hospital has shut down the research, intimidated by a
patent claim from the Palo Alto biotech company StemCells. The
company’s co-founder is esteemed Stanford stem cell scientist Dr. Irving
Weissman, one of the world’s most passionate advocates for giving
scientists access to a field entangled by politics, ethics — and now

The standoff over Schwartz’s 50 cell cultures illustrates
how the commercialization of stem-cell science is creating roadblocks to
this red-hot field, even while spurring much-needed investment. It’s a
classic clash between business and science, and similar battles are
being waged over access to embryonic stem cells, genes, biotech tools
and other scientific discoveries.

"The landscape is messy,” said
Gregory D. Graff, a patent expert at Colorado State University. "It is a
complex situation where you have research interests intermingling with
commercial interests. They are both legitimate purposes, but can be in conflict with each other.”

Schwartz, who spoke at length
last year to the Mercury News, is no longer publicly discussing the
dispute but stood by his previous unpublished interview.

With his
research stymied, "all the money has shifted from the lab to the
lawyers," said Schwartz, who said he believes the cells may hold deep
secrets to such devastating conditions as autism, brain cancer and
neurological disease.

The dispute comes down to access to a
technique that Schwartz helped develop at the Salk Institute but the
institute failed to patent. StemCells did.

In January 2007, the
company sent Schwartz a letter saying it owned rights to the technology
that he used to extract the cells at his Neural Stem Cell Repository.
The hospital attorneys told him to halt his research and stop shipping
the cells to dozens of other academic scientists, who also are
conducting brain research.

"It’s a disservice to families who
allowed us to” use their children’s brains, he said. "It’s hard to talk
about without getting angry.

"There’s been a stranglehold put on
the field because of this. The access to the science community to cells
like this for basic scientific study is virtually nil," he said.

has had little to say about this dispute. In an e-mail to the Mercury
News, he wrote that StemCells "has been prompt and diligent in
discussing the issues" with the hospital, but referred further questions
to company attorneys, saying "they know the situation, and I do not."

are still inching forward, and the two sides have stayed out of court.
Neither the hospital nor the company would offer official comment.

the director of the Stem Cell Biology and Regenerative Medicine
Institute at Stanford, is a champion of stem-cell science, expounding to
legislators and laymen alike the promise of stem cells for treating
disease and why it is wrong to restrict their use for ideological
reasons. With a formidable team of scientists, the goal of StemCells is
to transplant healthy cells into damaged brains, offering relief and

Schwartz said his nonprofit hospital has no intention of
commercializing its discoveries or stealing profits from StemCells.

a small clinical institution whose primary purpose is caring for kids,"
he said. "We’re unwilling to risk this mission by bumping heads with
StemCells Inc."

The U.S. Patent Act permits exclusive control of
any "process, machine, manufacturer, or composition of matter" to a
patent holder. StemCells holds exclusive rights to 55 U.S. patents and
200 non-U.S. patents and has launched clinical trials of treatments for
several novel brain diseases. It is the leading private company in the
neural stem cell field.

Patents can stimulate research because
they attract private capital investment and assure investors that a
company’s products are protected, experts say.

"Research and
development is very expensive and there are a lot of failures — and the
successes need to support the experimental trials, and the failures, so
we can have successful and safe products on the market for everyone,"
said patent attorney Antoinette Konski of the Palo Alto law firm Foley
& Lardner. Once the 20-year patent expires, the public has full
access to it, she added.

But others say exemptions should be made
for universities and nonprofit research teams. This noncommercial
research can enhance the value of a company’s patent if new discoveries
are made, they say.

UC San Francisco and Stanford University
require no license from academics to use their patent inventions and
materials for noncommercial research purposes, according to Joel
Kirschbaum of UCSF’s Office of Technology Management and Katharine Ku of
Stanford’s Office of Technology Licensing.

"Behavior like this is
repulsive and unacceptable, and the leadership of the company should be
called to task,” said Dan Ravicher, executive director of the Public
Patent Foundation, a nonprofit group that urges limits on patent
protections in life sciences.

John Simpson of the Los
Angeles-based Consumer Watchdog, who is closely watching the case,
called it "an egregious assertion of overreaching patent rights. Even if
StemCells Inc. can technically assert the patent, I think it is
wrongheaded for them to do it. You don’t want to freeze that sort of

The roots of the conflict go back several years. While
at Salk Institute, Schwartz created a new application out of an existing
technique: deriving neural stem cells from post-mortem brains, then
growing them in culture. At the same time, StemCells was doing similar

Neural stem cells, the immature precursors to brain cells,
offer huge insights. They allow researchers a way to study cells as
they grow and look for ways to interrupt diseases.

"You can create
the battle in a culture dish," said Schwartz, saying it could also
benefit research into diseases like Alzheimer’s and Parkinson’s. "Autism
— we don’t even have a blood test. We don’t understand what it is. In
metabolic diseases that affect the brain, what is the sequence of
events? What kills them?

"These cells can be used to help us get
an idea."

Consumer Watchdog
Consumer Watchdog
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