Stem cells not only golden goose for WARF;

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Stem cells get the publicity, but the Wisconsin Alumni Research Foundation’s cash cow continues to be vitamin D.

Wisconsin State Journal

The bone-enhancing nutrient used in fortified milk and several drugs brings in about two-thirds of the money at WARF, UW-Madison’s tech transfer arm.

MRI scans and a “good fat” used in animal feed also rank high on the moneymaker list. Stem cells come in eighth, bringing in less than 1 percent of the revenue.

Still, WARF plans to vigorously argue against the federal government’s recent preliminary rejection of three of its patents on human embryonic stem cells. That’s largely because stem cells, which scientists hope to turn into therapies for many diseases, could become its next vitamin D.

“Financially, there is tremendous potential (from stem cells),” said Andy Cohn, spokesman for WARF, which returns about $60 million of its proceeds to the university each year.

The extent to which WARF‘s reputation and revenue — and its annual research gift to campus — rest on stem cells today and in the future could be greatly influenced in the coming months by the U.S. Patent and Trademark Office.

On March 30, the patent office preliminarily rejected all claims of the three wide-ranging patents, which basically cover all human embryonic stem cell research in the country. The preliminary rejection came in response to a California consumer watchdog group’s request last year for a federal review.

The rejection was the first in WARF‘s 82-year history, during which the nonprofit organization has received more than 1,600 patents on inventions by university scientists.

If the patent rejection becomes final or if many of the claims are significantly narrowed, WARF could lose many millions of dollars in potential future income.

UW-Madison’s James Thomson, whose status as the first scientist to grow a colony of human embryonic stem cells in 1998 isn’t directly in dispute in the patent challenge, could nonetheless suffer a blow to his reputation as the pioneer in the field, some observers say.

But Cohn said WARF, which plans to file a response to the preliminary rejection soon, will prevail in the process. A final decision could take months or years.

Even if WARF doesn’t win, Cohn said, the organization has a $1.6 billion endowment and a diverse portfolio of 930 active patents. That includes six stem-cell patents that aren’t being contested and 230 patents related to vitamin D.

“(The stem-cell patents being challenged) are important patents, and we believe they are going to be upheld,” Cohn said. But “WARF isn’t all about stem cells. If anything, WARF is all about vitamin D.”

Steenbock’s discovery

WARF has been mostly about vitamin D since 1925, when the organization was formed to commercialize biochemistry professor Harry Steenbock’s discovery that irradiation with ultraviolet light increased the vitamin D content of foods.

Steenbock solicited nine alumni to contribute $100 each, and the nation’s first academic tech transfer office was born.

Hector DeLuca, one of Steenbock’s last graduate students, started amassing his own vitamin D patents beginning in the 1960s.

As recently as 2003, those patents accounted for 60 percent to 70 percent of WARF‘s revenue, said managing director Carl Gulbrandsen. He said the patents still bring in a “substantial majority” of the money today, but he wouldn’t specify the amount.

Another early “home run” for WARF was warfarin, a rat poison patented in 1952 and named after the organization. A different formulation, Coumadin, is a widely used blood- thinning drug.

Both were developed after UW-Madison scientist Karl Paul Link discovered a chemical factor in spoiled clover that had killed cows.

A recent top earner is the “UW Solution,” a fluid developed by Folkert Belzer and James Southard that preserves organs for transplant. Its patent expired last year, meaning the invention will no longer bring in money to WARF.

While vitamin D has made at least $300 million for WARF through the years, stem cells have brought in just $3.2 million, Cohn said.

Enormous potential

But the contested patents on Thomson’s stem-cell work, issued in 1998, 2001 and 2006, are important because of their enormous potential, Cohn said. The patents, which expire in 2015, cover the cells and the methods to grow them.

At least eight companies have purchased research licenses from WARF to use the cells; the licenses cost $75,000 to $400,000, depending on the size of the company. At least five companies have obtained licenses to develop products from stem cells. Those licenses cost $200,000 to $2 million and include provisions that 1 percent to 5 percent of royalties must be handed over to WARF.

The real money from stem cells will come only after a company markets a therapy, Cohn said, and there’s no guarantee that will happen before 2015.

Stem cells, master cells obtained from five-day-old embryos, are thought capable of becoming all of the 220 types of cells in the body. Scientists hope to use the cells to cure diabetes, Parkinson’s disease and other conditions.

If therapies are developed, WARF could make many millions, said Grady Frenchick, a Madison lawyer who has done work for WARF but not involving stem cells.

“But the patents don’t really matter until you have a commercial product or service you can offer that makes money,” said Frenchick, with Whyte Hirschboeck Dudek. He is also a lecturer at UW-Madison.

Significant revenue from stem cells could boost WARF‘s endowment and its annual gift to the university, but both are likely to grow regardless of whether the patent office ultimately rejects the three patents, Cohn said.

That’s partly because of WARF‘s investment strategies, commitment to the university and diverse array of patents, he said. But it’s also because of WARF‘s six other stem-cell patents and 21 applications for more patents involving the cells.

“We have a broad range of follow-on patents that people are going to need,” Cohn said.

WARF gave the university $65 million last year to support research, up from $58 million the year before. The gifts make up about 7 percent of the campus research budget.

Potential damage unclear

If the patents are ultimately rejected, the potential damage to WARF‘s and Thomson’s reputations is unclear.

Lawrence Ebert, a patent lawyer in New Jersey who runs an Internet blog about intellectual property, said that if the patents are rejected, Thomson’s standing in the stem-cell community would be harmed — but mistakenly.

That’s because many people don’t understand what’s at stake in the patent challenge, Ebert said.

The Los Angeles-based Foundation for Taxpayer and Consumer Rights, which was joined by the New York-based Public Patent Foundation in asking for the federal review, argued that Thomson’s accomplishment in 1998 was “obvious” because other scientists had done similar work in mice, sheep and pigs.

The patent office, in its preliminary rejection, agreed.

But nobody is questioning that Thomson was the first to grow a colony of embryonic stem cells from humans in a lab. The question is whether the recipe he used was already available.

The debate is similar to one that plagued Orville and Wilbur Wright in a battle over a patent on their airplane, Ebert said. A man named Glenn Curtiss claimed an aircraft built before the Wright brother’s historic flight in 1903 had the capacity to fly, which he argued should have made their patent invalid. The patent was upheld.

“Would the reputation of the Wright brothers have been tarnished if they had lost their patent litigations?” Ebert asked, suggesting it would have been. Likewise, he said, Thomson’s reputation could be harmed if WARF loses the stem-cell patents.

“Although sometimes things seem obvious in retrospect, it is curious that no one accomplished the derivation of human (embryonic stem) cells between 1981… and 1998,” Thomson said in an October e- mail interview. “Some very good, simple ideas only seem obvious afterwards.”

Paul Lesko, a patent lawyer with SimmonsCooper in East Alton, Ill., said WARF, UW- Madison and Thomson still would be considered leaders in the stem-cell field.

“It’s not like these are allegations of questionable conduct,” he said.

Bill Warren, a patent attorney in Atlanta, said WARF‘s reputation actually could be improved if the patents are rejected. That’s because many researchers believe WARF has been too aggressive in enforcing patents they think are too broad, he said.

A rejection of the patents “might allow (WARF and UW- Madison) to be welcomed back into the stem-cell community,” he said.

Frenchick, the Madison attorney, said the preliminary rejection is a routine step in the patent review process that has been blown out of proportion by WARF‘s critics. The most likely outcome of the process, he said, is that some of the patent claims will be narrowed but the patents will remain largely intact.

After the preliminary rejection was announced, Dan Ravicher, executive director of the Public Patent Foundation, said: “Although these patents aren’t dead, they have been diagnosed with severe cancer.”

Frenchick gave the patents a much milder diagnosis.

“What they have is a paper cut,” he said.


Patents received since its founding in 1925: 1,605
Patents active today: 930
Money given back to UW-Madison since 1925: $860 million
Money given back to UW-Madison, 2006: $65 million
Number of patents issued, 2006: 101
Number of patents issued, 2005: 74
Licensing revenue, 2006: $54 million
Licensing revenue, 2005: $43 million
Endowment: $1.6 billion
Startup companies, most of them in Madison: 36
Startups involving stem cells: 1 (It is Cellular Dynamics; two others, Stem Cell Products and Stemina Biomarker Discovery, are in negotiations)

WARF/UW-Madison’s ranking among universities by number of patents, 1969-2003: 6th (after the University of California System, Massachusetts Institute of Technology, University of Texas, Stanford University and the California Institute of Technology).

WARF/UW-Madison’s ranking, according to the Milken Institute, among universities by number and strength of patents, 2000-2004: 9th (after the University of Texas, University of California -San Francisco, John Hopkins University, Stanford University, Cornell University, Columbia University, University of California- Berkeley and University of California-San Diego).

Sources: WARF, U.S. Patent and Trademark Office, Milken Institute

WARF moneymakers:

WARF‘s top producers of licensing revenue, 2006; description of discovery followed by inventor(s):

1. Vitamin D; drugs for osteoporosis, kidney dialysis, psoriasis and other applications. Hector DeLuca.

*2. UW Solution; fluid that preserves organs for transplant. Folkert Belzer and James Southard.

3. CLA, or conjugated linoleic acid; a “good fat” found in some meat and cheese that is put in animal feed and human nutritional products. Mark Cook and Michael Pariza.

4. MRI scans; improvements that make magnetic resonance imaging quicker and clearer. Charles Mistretta.

5. TomoTherapy, or precise radiation therapy; CT scanning combined with radiation treatment to selectively destroy tumors while protecting healthy tissue. Thomas “Rock” Mackie and Paul Reckwerdt.

6. Therapeutic proteins; genetic tools used to make growth factors, hormones and antibodies for cancer treatment and other applications. Ann Palmenberg.

7. Botulinum toxin; purification and stabilization of the toxin, used cosmetically and for treatment of muscle spasms, tremors and urinary problems, along with terrorism countermeasures. Ed Schantz, Eric Johnson and Ed Chapman.

8. Embryonic stem cells; extraction and growth of master cells from early-stage human embryos for research on cell therapies, drug testing and human development. James Thomson.

*Patent expired in 2006, so discovery is no longer bringing in revenue.
Contact the author David Wahlberg at 608-252-6125.

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