Remarks by William R. Brody, President
The Johns Hopkins University BIOMEDICAL ENGINEERING LECTURE SERIES
"FROM MINDS TO MINEFIELDS: NEGOTIATING THE
DEMILITARIZED ZONE BETWEEN INDUSTRY
AND ACADEMIA"
TUESDAY, APRIL 6, 1999
MONTGOMERY COUNTY CENTER / 5:30 P.M. [Introduction by Ilene Bush-Vishniac] Thank you, Ilene. Good evening. I'm pleased to be here today, and especially pleased to inaugurate what we intend to be a series of biomedical lectures sponsored by Johns Hopkins at this location. I'd like to thank Ilene Bush-Vishniac, our dean of Engineering, Elaine Amir, the director of the Montgomery County Center, and Sarah Steinberg and Bill Dean of the School of Engineering for all the effort they've put into getting this series of lectures under way. Judging from this evening's turn out I think we're off to an excellent start. When I began putting my notes together I remembered a story I thought would be appropriate to share with you today. A woman goes to her attorney and says "I want to divorce my husband." The lawyer asks, "Do you have any grounds?" "About 10 acres," the woman says. "Well, do you have a grudge?" asks the attorney. "No, just a carport," says the woman. The lawyer asks,"Does your husband beat you up?" "No, I get up about an hour before he does every morning." "Why do you want a divorce?" asks the lawyer. The woman replies, "We just can't seem to communicate." This came to mind when I thought about how important communication is going to be in the next few years. I think all of us in this room share the feeling that we are standing on the threshold of a new universe of biotechnology. Our ability to manipulate life at the genetic level heralds untold opportunities in medicine, agriculture, public health and a number of other fields. As we enter this brave new world it will be imperative that universities and research institutes, which have been the birthplace of much of this new technology, are able to communicate freely, openly and candidly among themselves, and with the various members of the corporate community who will be attempting to bring these new discoveries out of the laboratory and into the marketplace. Effective communication will be essential. But I have to tell you today that I don't believe it will be easy. Here is an account describing this unique partnership, and I quote: "This particular discovery is the first of its kind having technological value yet made in this country, and it is a direct fruit of the research system cultivated at the Johns Hopkins University. It is an offspring of pure science--science followed for its own sake--and of the policy which regards a university as a place in which knowledge should be not merely distributed, but produced." What's important about this statement is not its self-evident observation about the nature of research universities, but its age. This quote is almost 120 years old. It refers to the discovery, in 1879, of a coal tar derivative called benzoic sulphinide, a substance now commonplace throughout the world. The discovery was made by Johns Hopkins Chemistry professor Ira Remsen and his assistant, Constantin Fahlberg, and would later lead to a bitter feud between the two men. Remsen, already a world-famous chemist, would eventually go on to become the second president of the Johns Hopkins University, serving at that post for a dozen years from 1901 to 1913. Fahlberg would become a successful and wealthy industrialist, based upon this discovery. But all this was in the future. In 1879 the scientists duly recorded their discovery and wrote up a paper that appeared early the next year in the American Chemical Journal. They noted that by chance, they had discovered this new compound possessed a characteristic unlike any other substance they had yet encountered. It tasted sweet--many, many times sweeter than sugar. Less than a gram was enough to sweeten a strong cup of coffee. For Remsen, that was enough. He announced the discovery and moved on. But Fahlberg saw the tremendous potential of a low-cost sweetening agent unaffected by the vagaries and market swings of the sugar cane crop. Plus the new sweetener was non-caloric to boot. He spent the next four years perfecting techniques to inexpensively produce large quantities of the compound. In 1884 he patented the manufacture of the new substance under his name and the name of his uncle, whom he had taken on as a business partner. They called the new substance "saccharin," after the Latin word saccharum for sugar. The decision to market saccharin is an epochal event in American history. You can pretty well pinpoint that moment as the birth of technology transfer, the movement of university-generated research discoveries from abstract ideas to concrete products available on the market and capable of generating a profit. Fahlberg and his uncle reportedly became very wealthy from the discovery. Remsen never saw a dime, nor did the university claim any royalties despite the fact the discovery was made through research discovered on its premises using its equipment. To make matters worse, in later lectures and public appearances Fahlberg claimed the discovery of saccharin was his alone, leading to Remsen's comment, "Fahlberg is a scoundrel. It nauseates me to hear by name mentioned in the same breath with him." As I said, the relationship between university researchers and private industry is a critically important relationship for both of us. But it's not necessarily an easy one, and never has been. You only have to pick up the paper to realize how closely we are tied. John Gearhart and his colleagues at Johns Hopkins announce they have mastered the technique of growing embryonic stem cells in the laboratory. Only a few months later, Osiris Therapeutics builds upon this discovery by demonstrating that progenitor cells can be directed into growing bone, cartilage, fat and other cells. Undoubtedly, we are on the threshold of tremendous discoveries. The middle of the 21st century will be very different indeed, and a good many of us--more than we would have ever thought possible in the past-- might be around to witness it. That is because, in no small degree, we have gotten better and better at efficiently moving medical discoveries--and other kinds of research--from the laboratory to the marketplace. Remsen and Fahlberg published their discovery of saccharine in 1880. One hundred years later, the Bayh-Dole Act created a mechanism and the incentive for universities to market their discoveries and for industry to make high risk investments. The results have been impressive. Prior to 1980, fewer than 250 patents were issued to U.S. universities each year, and discoveries were often not commercialized for the public's benefit. Today, U.S. universities are averaging about 1,500 patents a year. And the trend is accelerating. By the mid-90s, just fifteen years after Bayh-Dole, a total of 464 companies were started as a result of academic licensing, representing nearly a third of all start ups since the act was passed. That number continues to increase. As you can see, from the standpoint of statistics at least, things look rosy. I asked Ted Poehler, our vice provost for research and director of Hopkins' patenting and technology transfer programs, how many total inventions leading to patents have been made at Hopkins. Being a good engineer, he asked me, "Starting when?" If we try to go back to the patent of saccharine in 1884, we probably can't come up with an accurate count. Ted said in the past two decades there have been hundreds and hundreds of patents originating in Hopkins research, and in the next few decades we expect hundred and hundreds more. But there is an underlying dynamic in this exchange that is making some of us uneasy. It was captured in an editorial in Science a year ago that you may have read, titled "Need a Reagent? Just Sign Here..." In this article the editors report that more and more research universities are imposing stringent materials transfer agreements that researchers from other institutions must sign before receiving new compounds or discoveries made at the university. In one case they present as typical of the new and evolving research landscape, before University of California researchers could receive certain DNA sequences engineered at Oxford, they were asked to sign an agreement surrendering all property rights on any discoveries contingent upon the Oxford materials, and further agree to allow Oxford to preview and comment upon any articles concerning their research prior to publication. Further, the article reports that the increasing complexity of MTA contracts means that more and more time and effort must be put into negotiating them. Just when discoveries are flying out of laboratories at breakneck speed, we've added a bewilderingly slow negotiation process that can only gum up the works. Science quotes a staffer at the Council on Governmental Relations who calls this new development, quote, "a horrendous problem." Others are concerned as well. Late last year Johns Hopkins researcher John Gearhart testified before a Senate subcommittee about the import of his stem cell discovery. As you know, identifying and culturing these cells has tremendous long-term potential for the treatment of some of our most difficult degenerative diseases, such as Alzheimers, Lou Gerhig's Disease and others. At the end of this hearing, Senator Harkin from Iowa expressed his concern that a company could potentially patent these life forms and hold an exclusive license. He wondered if this would have the unintended effect of dampening discovery and slowing the movement of effective and affordable new treatments to the market. He suggested a second hearing be held on the matter, and his colleagues agreed. That hearing was held on January 12 of this year. We all know U.S. Senators are extremely busy individuals who must consider a host of complex and difficult issues on a regular basis. Yet it seems likely that if Senators are suddenly concerned about a rather arcane and complex issue like exclusive licensing, some parties must have been concerned enough to alert them to this issue. The hearing was duly held and included testimony from the Acting Commissioner of Patents and Trademarks, who reminded the Senators that companies could in fact patent unique life forms, based on legal precedents going all the way back to 1873, when Louis Pasteur was granted a United State patent on yeast. It was most firmly addressed by the Supreme Court almost 20 years ago, when the Court found that genetically engineered bacteria useful for cleaning up oil spills by ingesting hydrocarbons were themselves patentable. Many commentators, said the Commissioner, believe that this case was a major factor in the phenomenal growth of the biotechnology industry. He also noted that the patent office has long issued patents for living plants under the provisions of the Plant Patent Act of 1930. Although this testimony seemed to affirm the rightness of our current course of action, not all voices were in agreement. One expert from the National Institutes of Health, concerned that the close affiliation of for-profit private industry and non-profit research institutions was potentially damaging to the later, suggested it was time to re-examine, and perhaps modify, the Bayh-Dole Act. Earlier I suggested it was perhaps surprising that U.S. Senators should be concerned about exclusive licensing of new biomedical discoveries. After all, patents and exclusive rights are widely seen to be essential for the existence of the biomedical start-up companies, and generally considered responsible for the health and vigor of America's world-beating biotechnology industry. Europe has only recently modified its own laws and regulations to more closely resemble those in this country, in an effort to play catch-up to our dazzling record of success. Yet it is undeniable that the large pharmaceutical companies are of two minds in this matter, often arguing against exclusive licensing. It is not therefore surprising that members of the Senate should at least have been alerted to the complexity of this issue. Because of the way the Bayh-Dole Act was written, research universities are inexorably drawn into this conflict. The act encourages the recipients of federal research dollars to collaborate with commercial concerns to promote the utilization of inventions; furthermore, preferences in licensing must be given to small businesses. This is exactly what has happened, with more and more start-up companies emerging from university research each year. At Johns Hopkins this issue looms particularly large. In 1997, the most recent year for which numbers are available, the Johns Hopkins University, including our Applied Physics Laboratory in Laurel, performed $724 million in federally-funded science and medical research, making it the leading academic institution in the country in such expenditures--almost by a factor of two. In addition, university researchers applied for 161 patents in 1997, of which 37 were approved by year's end. In 1997 we also concluded 36 licensing or option agreements based upon discoveries made at Hopkins. In 1998, we disclosed 228 inventions, filed for 214 patents, and received 76 by year's end. In addition, we concluded 93 licensing or option agreements (nearly tripling the previous year's number). So you can see the trend is upwards, and has been almost without interruption since the Bah-Dole Act was passed in 1980. We are becoming increasingly involved in technology transfer, and it is becoming increasingly important to us. At a time when clinical revenues from our patient practice at Johns Hopkins medicine are declining on a per capita basis, and when federal and other sources of research funding are uncertain at best, the money brought into the university through licensing agreements is increasingly important. Last year, we received more than $5.5 million in license income from Hopkins discoveries, and another $5 million in research funding from private companies related to license agreements. Hopkins is among a handful of research universities at the vanguard of the effort to move discoveries quickly to the marketplace, and each year more new companies emerge from our collective research. In 1998 we established five new start-up companies based solely upon Hopkins-discovered technology. That brought the current operational total to 18. Many other companies, of course, use Hopkins discoveries in tandem with other processes and discoveries of their own. Often, universities will retain a minority ownership in these firms. Although the rights of the university and of any faculty inventors who may also hold stock are carefully circumscribed, there is no doubt the overall effect of this new development is to closely align the perceived goals and needs of research universities with the smaller players in the biotechnology industry. But we must ask if this is necessarily a good thing for our universities, and for society in general. Increasingly, we are hearing reports like the editorial in Science, which warn of new impediments to the free flow of research. The central tenet of the free exchange of information through scholarly publishing, colloquia, the Internet and other means is perceived to be under attack. Rightly or wrongly, there is a prevailing notion that university research is becoming less free, and more controlled by for-profit economic interests, often ones that are owned, at least in part, by the universities themselves. This is the dilemma we face as we enter what promises to be an era of unprecedented discovery and achievement. As a university, and particularly as the premiere federal research university, how can we balance the competing claims of institutional freedom with the mandate to commercialize the fruits of our research efforts? I don't think the past is going to help us by providing appropriate models for the future. Years after Fahlberg and his uncle had commercialized saccharine, the chemical giant Merck and Company offered to challenge Fahlberg's patent on Remsen's behalf. President Remsen refused, even though the salary of a Johns Hopkins University president at that time was not particularly princely, and in fact the university was in serious need of new financial resources of its own. "I urged Remsen to accept Merck and Company's offer to undertake the contest," wrote one of his students later, "but he refused, saying that he would not sully his hands with industry." Although their feud had become intensely personal, Remsen's and Fahlberg's dispute became something more: the archetype of the conflict about the proper role and function of university sponsored research. I don't believe today you will find a responsible researcher who would claim that commercialization of a discovery is the equivalent of sullying ones hands with industry. Quite to the contrary. Our scientists are all too keenly aware of the vital role private industry must play in making any discovery economically feasible and widely available. Yet the tension remains. Our scientists are by nature explorers-- they are off sailing uncharted seas in search of discoveries. Asking them to become managers, marketers and accountants is unrealistic and ultimately inimical to the research enterprise. Time spent in the boardroom is time away from the laboratory, making them less productive and less likely to achieve the things most suited to their abilities. As is so often the case in such situations, there are no easy answers in store for any of us. The relationship between industry and the universities is likely to continue to be a tentative and at times, uneasy one. A minefield of potential conflicts, claims and counterclaims. In my title for these remarks I called this area where we meet and interact a demilitarized zone. Perhaps I can be forgiven for a bit of hyperbole in this regard. Research universities and private industry are not at war. Far from it. In fact, we are partners, working towards the same goals, if not always from the same direction. A more apt analogy might be the United States and Europe, intimately tied at many levels, with many of the same hopes, goals and aspirations, but fundamentally independent of one another, and occasionally fighting over bananas. Like any partnership, there are bound to be thorny issues, and tough questions that escape easy answers. I don't know if some of these issues will ever be solved. More likely, they will be continually renegotiated to meet changing circumstances. But let me conclude tonight by posing what I observe to be some of the more difficult problems we face together. First, I think we need to seriously consider what can and should be patented. While this is ultimately an issue that is outside the realm of universities to answer, it probably needs some independent study and certainly could benefit from serious public debate, especially in the field of biotechnology and genetics. We at the universities are forced to play by the rules, whatever they may be. Nonetheless, I am concerned that we are going to slow down the progress of science when so many intermediate precursors of actual products are being patented. An example of what I'm referring to is when one patents a research process to isolate a receptor, then requires that any drug developed using that process must pay a royalty. The second issue I think needs to be considered very much affects universities, and that is, should universities be patenting intellectual property at all? Now I know this sounds like talking about the gate when the cow is already out of the barn, but my work at Hopkins, in private industry, and as a member of the Council on Competitiveness does not lead me unquestioningly to accept the current notion that this approach to technology transfer is always in the best interest of science, or international competitiveness or even the universities themselves. I accept that economic prosperity is tied to innovation, and innovation to patents, and that regional innovation is tied to locally developed talent based around key intellectual property. But I observe that what seems to count most in regional innovation is not specific ownership of intellectual property, but attracting the right people with the right know-how and holding enough of them together to form critical mass. Patent protection takes a lot of work. And time. And money. The dirty secret is that for many universities--perhaps most--they are not yet breaking even, much less making money on the proposition. And in some instances and some industries, patent protection may in fact be an oxymoron. When Hopkins scientists discovered restriction enzymes, one of the basis of the biotechnology industry, we put the discovery in the public domain--losing millions and millions in potential royalties. Foolish? Perhaps. But I know we didn't slow science down or diminish the leading role American industry plays in this field. The third question follows logically upon the second. That is, if we are looking hard at whether universities should be in the patenting business, we need to question whether we should be licensing any intellectual property, patentable or not. Universities are designed to operate not-for-profit and we do quite well at it. For many hundreds of years private individuals, foundations and state and national governments have recognized the value of what we do, and have supported us generously. In return, the implicit and often explicit expectation is that we should benefit the public. Where is that line between their benefit and our benefit, and how do we keep sight of it-- especially when someone starts waving a contract saying, "Sign this and you'll make millions!" Finally, if we are to license, should we be doing so on an exclusive basis? I think everyone will agree a non-exclusive license asking reasonable fees to help offset the cost of research is, at least on the surface, a fair and equitable proposal. But it undeniably would be a greater benefit to large companies rather than small ones, and equally beneficial to Swiss, German, Japanese and French companies as to American ones. Whatever your opinion on these matters, I hope you will agree with me they are not simply resolved, nor is today's answer likely to be the best answer tomorrow. We'll just have to keep talking about this. Like the European--American partnership, the relationship between research universities and the biotechnology industry is beneficial, if not crucial, for both parties. It's a relationship with a long history and a glowing future, but not one, I think, that will ever be entirely free of difficulties. We can only hope to achieve the best through hard work, good faith, careful negotiations and yes, free communication, which is what this lecture series was designed to promote. In that spirit, therefore, I would now gladly respond to any questions you might have for me. Thank you. | 
