The Axel Patents A Case Study in University Technology Transfer

This paper tells the story of the Axel Patents, from the initial scientific discovery, through the decision to patent, to the non-exclusive licensing strategies Columbia used to spread t

The Axel Patents: A Case Study in University Technology Transfer

C Alessandra Colaianni, B.A

Center for Genome Ethics, Law & Policy Institute for Genome Sciences & PolicyP.O Box 90141 Duke UniversityNorth Building, Research DriveDurham, NC 27708-0141(919) 668-2616alessandra.colaianni@duke.edu

Acknowledgements:

This work was supported in part by the Center for Public Genomics, Duke University, under grant P50-HG003391 from the National Human Genome Research Institute and the US Department of Energy This work was also supported by the Institute for Genome Sciences and Policy Summer Fellowship I thank Robert Cook-Deegan and Bhaven Sampat for their support and help, Dick Nelsonand Michael Cleare for their input and openness, and Dr Michael Wigler, Dr Saul Silverstein, and

Dr Paul Marks for their courtesy and wealth of information during interviews

September 26, 2007

The Axel Patents: A Case Study in University Technology Transfer

September 26, 2007

Abstract:

The Axel Patents are among the most lucrative university patents in history, earning $790 million in royalty revenues for Columbia University This paper tells the story of the Axel Patents, from the initial scientific discovery, through the decision to patent, to the non-exclusive licensing strategies Columbia used to spread the technology, the measures Columbia took to extend the life of the patents, and the controversy that erupted when another patent was issued in 2002 Columbia plowed most of the revenues back into research, including Richard Axel’s work that earned him a Nobel Prize Columbia’s aggressive pursuit of extended patent duration, however, also led it to considerable legal expenditures that have proven fruitless to date, and brought criticism for behavior unbecoming a nonprofit academic institution

Keywords: Biotechnology, History, Intellectual Property

Dr Axel was an Assistant Professor in the Institute for Cancer Research and the Department

of Pathology, and Dr Silverstein was an Assistant Professor in Columbia’s Microbiology

department.1 Michael Wigler had transferred into Columbia’s Ph.D program in Microbiology after his third year at medical school, and was doing a rotation in Silverstein’s lab.2 The initial idea for cotransformation is credited to Wigler, who “…had come to the conclusion that we weren’t going to make progress in animal cells unless we could manipulate the genetic content of the animal cell.”3 As such, the cotransformation method is sometimes called the Wigler Method

Cotransformation refers to manipulating the genetic content of a eukaryotic cell (a cell with a defined nucleus) by adding two genes: one, a marker gene, is used to detect whether the foreign DNAhas been successfully taken up and expressed The marker gene serves as a screening tool The other gene can encode any protein to be studied or produced A bacterial analog of cotransformation, recombinant DNA, was developed and patented in the early 1970s by Herbert Boyer (UCSF) and Stanley Cohen (Stanford) It allowed scientists to “cut and splice” bacterial DNA It was a powerful biotechnological tool used with great success in molecular biology labs and pharmaceutical

companies, and widely used in research and production of biologics to this day For researchers attempting to produce functional proteins from eukaryotic cells, however, recombinant DNA posed problems Some proteins required cellular “processing,” which bacterial cells did not perform Whengenes encoding those proteins are inserted into nucleated cells, they produce a fully functional protein The Wigler Method provided a way to introduce genes into nucleated cells

Earlier attempts at transforming eukaryotic cells had been thwarted by low transformation efficiency—few cells took up the foreign DNA (Szybalska and Szybalski 1962) Wigler’s method reduced this problem: by using a high concentration of the protein-producing DNA and a low

concentration of the marker DNA, it was more likely that the protein-producing DNA would be taken

up in cells expressing the marker When the DNA became incorporated in the host’s chromosomal DNA, it created a stable, self-replicating line of cells

The process allowed the incorporation of any known gene, prokaryotic or eukaryotic, into anymammalian cell The Wigler technology turned mammalian cells into protein-producing machines, a much more efficient way to produce a target protein than slow, expensive, and laborious synthesis reactions that yielded paltry results

Proteins produced by microbes are not usually exported from their place of translation within the cell into the cell’s medium, because bacteria are single-celled organisms that use the protein within their own membranes Eukaryotic cells, by contrast, are themselves a part of more complex organisms that require cell-to-cell communication Thus, they have hormones, receptors, transporters,

and other cellular machinery to facilitate export of the proteins that they produce Eukaryotic proteinsare often secreted from the cell in which they are produced, for transport to other locations within the organism The Wigler Method allowed production of such proteins (Fox 1983)

The Wigler Method:

Wigler approached Silverstein with the idea of inserting a purified copy of the tk gene (whichcodes for a metabolic protein necessary for cell survival called thymidine kinase) from the Herpes Simplex Virus genome into mammalian cells which lacked their own copy of the gene The cells

would then be grown on a medium that inhibits the de novo synthesis of thymidine so that the only cells to survive would be those who had taken up the viral gene Cell published the original paper in

May 1977 (Wigler et al 1977)

By 1979, the Axel group realized they could pair a selective marker (as they had done in

1977 with thymidine kinase) with a gene that could not be readily selected, using a process which they called cotransformation They cultured cells with a large amount of the non-selective gene and a small amount of the thymidine kinase gene, which increased the likelihood that the cells would take

up both genes together, if they took up any DNA at all (see Figure 1) The cells were then grown on a selective medium as they were in the 1977 experiments, and probes were used to confirm that the non-selective gene had in fact been incorporated into the host cell’s chromosomes The abstract of a

1979 Cell paper showed the breathtaking power of the new technology: “This cotransformation

system should allow the introduction and stable integration of virtually any defined gene into culturedcells” (Wigler et al 1979)

Figure 1: Cotransformation schematic This image is from the original patent application (US

4399216), entitled “Process for Inserting DNA into Eucaryotic Cells and for Producing ProteinaceousMaterials.”

Citation trends of these two seminal cotransformation papers show how influential they were.Figure 2A shows citations of the 1977 paper “Transfer of Purified Herpes Virus Thymidine Kinase

Gene to Cultured Mouse Cells.” Figure 2B shows the citation trends for the 1979 Cell paper,

“Transformation of Mammalian Cells with Genes from Procaryotes and Eucaryotes.” Figure 2C combines citations to the 1979 and 1977 papers

Axel 1977 Paper Citations

0 20

Figure 2: These citation graphs show that cotransformation was being cited approximately 175 times

per year at its peak, compared to a Cell Journal Impact Factor (reported by ISI Citation Research) of

39 and 36 in 1998 and 1999, respectively (Journal Citation Report 2007) Citation trends tend to taper off between fifteen and twenty years after initial publication, when the method either is replaced

by a more advanced one or it becomes common knowledge A few caveats must be taken into

consideration when interpreting the graph: accuracy of the data, typographical errors or other

mistakes in citation, and intention of citation—whether the lab is actually using the process or simply describing the process in a background section

The Axel Patent:

According to Dr Wigler, the initial idea to patent the discovery came from Dr Richard Axel, and it struck Wigler “as a rather odd thing to do… it seemed like a long shot, but it wasn’t any effort

on our part, since the patents were based on manuscripts that we had prepared.” 4 Aside from the trouble applying for and being granted a patent, the scientists had no guarantee that the work would pay off:

“We all agreed on the scientific importance of what we had done Whether this thing would become useful or not—we’re all very objective people, and I think we all would have said

‘Yeah, there’s some probability of being useful, but there’s no certainty.’ It was not clear at the time whether bacteria would be useful for producing all proteins, all medicinal proteins And it was clearly a possibility that they were not, in which case this would be a better method… but there wasn’t a guarantee that it would be valuable.”5

Even after the first patent issued, Silverstein wasn’t sure that it would be valuable: “When it was issued, everybody said ‘Gee that’s terrific,’ and I pointed out to them, ‘Yeah, it’s terrific if we get somebody to actually license it.’”6

The inventors informed Paul A Marks, then the Vice President of the Health Sciences at Columbia, of their decision to patent Their decision to go to Marks was most likely because

Columbia did not have a technology transfer office at the time As Marks recalled in an interview, “I don’t think the Columbia University industrial licensing group was very sophisticated, and they were

not encouraging or enthusiastic about going forward to try to get a patent on this work.”7 Marks then went to the provost, Michael I Sovern, who referred the inventors to Cooper-Dunham, where

attorney John White (who had received his BS in chemical engineering, MA in chemical biology, andMPh in biophysical chemistry from Columbia) handled the patent prosecution The major

involvement of the scientists was in the initial drafting process; both Wigler and Silverstein

confirmed that their role was negligible after the initial draft was completed Silverstein recalled, “I

do remember the hours spent with John White, who was the lead attorney at that time on this series ofpatents… he asked us lots of good questions, and we had to figure out answers.”8

On February 25, 1980, the patent application was filed The claims in the application, which included any cell transformed via the method of cotransformation, were progressive for the time,

given that they predated the landmark Supreme Court decision in Diamond v Chakrabarty by about

four months.Diamond v Chakrabarty was a watershed for biotechnology patenting, because the

Supreme Court made clear that living organisms could be patented, arguing that patents applied to

“… anything under the sun, that is made by man.”9

Another important event that month was the Bayh-Dole Act, which Congress passed on December 12, 1980 The Act was meant to clear the way for nonprofit institutions and small

businesses to get title to inventions made using federal funds, an effort to resolve the contentious debate “over the propriety of transferring to private entities the title to inventions developed via public subsidy” (Dudzinski 2004) Columbia applied for the first Axel patent ten months before Bayh-Dole was enacted Interestingly, the patent may not have been crucial in facilitating technology transfer, in the sense of being necessary for commercial use Skilled researchers at universities and biotechnology companies alike could replicate cotransformation based on scientific papers alone, and had in all likelihood begun to do so by the time the patent application was filed (Mowery et al 2004)

In a September 2, 1983, Science article, author Jeffrey Fox noted that “the procedures developed by

Axel and his colleagues are being used extensively in basic research” (Fox 1983) The main effect of the patent was that Columbia got a slice of the pie when commercial use met with success

Because Bayh-Dole had not yet been passed, the NIH could still take title to the patents, or decide not to allow the patent at all Columbia University had to ask permission of the NIH for the title to any potential patents (Mowery et al 2004) Columbia sent a letter to NIH on April 4, 1980, sixweeks after it filed the patent application, asking for permission to patent, to take title of the patent, and to have the right to license the technology exclusively On February 24, 1981, NIH wrote back to Columbia giving title, but denying the request for an exclusive license unless Columbia could

demonstrate that nonexclusive licensing was not viable (Miller 1981) The NIH also required that Columbia provide copies of any licensing agreements to the Department of Health and Human Services (HHS), as well as a detailed annual report

“…regarding the development and commercial use that is being made and is intended to be made of the invention, including the amounts and source of money expended in such

development and such other data and information as the HHS may specify After the first commercial sale of any product embodying the invention, such report shall specify the date ofthe first commercial sale and shall include information relating to gross sales by licensees, and gross royalties received by the University” (Miller, 1981)

NIH also specified that the any potential licenses must “include adequate safeguards against

unreasonable royalties and repressive practices” (Miller 1981)

While Columbia did request an exclusive license, this was by no means the only option they were considering Paul Marks noted that the exclusive license was just one option of many, and Columbia’s attitude was that it would not hurt to ask In retrospect, Marks commented, “I think it’s very fortunate for a number of reasons that we didn’t succeed because I don’t think we fully

anticipated the sort of impact that this discovery would have on drug development.”10

In 1982, Columbia formed the Office of Science and Technology Development (OSTD), which took over the administration of the patent application (Mowery et al 2004) The office has since gone through two name changes, and is now called the Science and Technology Ventures Office The first of five patents was granted a year later, on August 16, 1983 (U.S patent number

4,399,216) The patent broadly covered the cotransformation process Its claims included the method, specific markers, any proteins produced with the process, and the end cell product, called a

transformant (Dudzinski 2004)

Five days before its first patent was granted, the OSTD filed a divisional application, which covered the cotransformation process using a phage or plasmid vehicle A divisional application claims priority from a previously filed patent application in which more than one invention was disclosed, and the divisional application claims a separate invention that was a part of the original patent application Divisional applications are generally a response to the patent office’s objection that the application claims more than one invention The applicant then chooses to pursue a subset of claims as one invention from the original application, and can opt to file a divisional application containing claims for another invention.11 Divisional applications are distinct from continuation applications Continuation applications also claim priority from some earlier application, but they are filed when the applicant wants to revise the claims again.12 The application filed on December 7,

1980, was the first of nine divisional or continuation applications that Columbia was to file stemming from the original 1980 application

The divisional application that they filed became the second patent on January 6, 1987 (patent4,634,665) Because this patent was very similar in claims to the original ‘216 patent, Columbia agreed to a terminal disclaimer, which made the second patent’s expiration date the same as the first patent’s expiration date On the basis of the ‘665 patent, Columbia filed divisional and continuation patent applications in 1986, 1989, and 1991 The applications in 1986 and 1989 were abandoned, while the 1991 application turned into Columbia’s third Axel Patent on January 12, 1993 (patent 5,179,017, or the ‘017 patent) The ‘017 patent was also subject to a terminal disclaimer, expiring at the same time as the first and second patents On the basis of that application Columbia filed more divisional and continuation applications in 1992 (1 application), 1994 (1 application), and 1995 (3 applications) The timing of the two June 7, 1995 applications was significant: on June 8, 1995, amendments to U.S patent law were to take effect The effect was as follows:

“For applications filed on or after June 8, 1995… provide that the term of a patent (other than

a design patent) begins on the date the patent issues and ends on the date that is twenty years from the date on which the application for the patent was filed in the United States or, ifthe application contains a specific reference to an earlier filed application or applications, twenty years from the filing date of the earliest of such application(s) This patent term provision is referred to as the ‘twenty-year term.’”13

The old practice was to allow the inventor a patent term extending 17 years from the date of issue The new patent term was 20 years from the date of filing, which would make the practice of filing numerous continuation and divisional applications to keep the application open effectively useless

However, because Columbia’s last two continuation applications were filed a day before that law took effect they were able to extend their patent on the Wigler Method

On September 22, 1992, Columbia was granted a patent from a different set of original applications (in other words, it was not a divisional or a continuation of the original 1980

application.) That patent is US 5,149,636 (the ‘636 patent), and was the third continuation applicationstemming from an original application filed March 15, 1982 This patent will expire in 2009, as it wasnot subject to the terminal disclaimer that Columbia agreed to with the previous three patents The

‘636 patent was licensed as part of a package with the other Axel patents.14

On September 24, 2002, a fourth patent was issued (patent number 6,455,275, the ‘275 patent, expiration date September 24, 2019) Because the application on which it was based beat the patent law amendments by one day, Columbia had effectively extended the time it could collect royalties on the Axel patents by seventeen years, until 2019 Another continuation application is still pending Figure 3 shows a schematic of all divisional and continuation applications made from the original 1980 application, as well as all patents that issued from that original application.15

Figure 3: Schematic of Columbia’s Patent Applications and Patents

Patent 5,149,636 stemmed from a different set of original applications and is not included in this schematic

Licensing, Commercialization, and Revenue:

After the first patent issued, Columbia began to license the technology By the time the patentwas granted, however, many research laboratories were already using cotransformation, which posed

a potential problem for licensing: if academic laboratories were already using the process,

pharmaceutical R&D laboratories were probably using it too Furthermore, because the patent primarily covered a process rather than a product, infringement would be difficult to prove The prospect of a patent on this process was considered offensive by much of the research community, even though Columbia never enforced the patent against a fellow research institution As Harvard University molecular biologist James Barbosa put it,

“The patent’s process has been in use all over the academic world since ’77… it’s been such

a boon in getting mammalian cell gene transfer off the ground that it has almost become a

laboratory reagent… that the process has been patented just doesn’t seem right” (Mowery et

“… Columbia licensing personnel examined the patents, end products, and scientific

publications of industrial firms… and informed these firms that if they were using the cotransformation process to produce proteins, they must pay royalties to Columbia” (Mowery

et al 2005)

The OSTD made it clear that if infringing companies did not comply, they would face legal action Columbia also recognized, as Stanford University did with the Cohen-Boyer patents, that they could not charge an exorbitant fee for the licenses Instead, they charged a rate of $30,000 in the hopes that companies would choose to take out a license rather than challenge the validity of the patent in court

To encourage companies to sign up early, Columbia took another lesson from Stanford’s handling of the Cohen-Boyer patents, and offered reduced license fees to firms that took a license before June 1, 1984 (Sampat, 2000) The “early bird” terms were $20,000 annually, with royalty rates

of 1.5% of sales for finished products, 3% of sales for bulk products, 12% of sales for basic genetic research products, and 15% of cost savings from process improvements The standard terms were

$30,000 annually and royalties of 3%, 6%, 15%, and 18% for the categories listed above Ten firms did so, and Columbia continued to identify potential users and advise more companies to take a license until at least the 1990s As inventor Dr Saul Silverstein put it in an interview, “They

[Columbia] were fairly aggressive at pursuing some of the companies who we knew were making pharmacologically active drugs that would require using this technology.” 16 All in all, 34 firms licensed the cotransformation technology Ten companies signed up for the special early deal, and twenty-four signed up under the regular license agreement (Sampat, 2000)