Associate

Genzyme Corp., Biogen Inc. and Abbott Bioresearch Center filed suit earlier this summer against Columbia University in the U.S. District Court of Massachusetts, claiming that a new patent issued to the university in September 2002 that centered on cotransformation technology was "invalid and unenforceable."

The patent, No. 6,455,275, is the fourth in a string of patents - the three previous have expired - based on a discovery made by Richard Axel, Michael Wigler and Saul Silverstein at the university in the late '70s linked to gene splicing. The three plaintiffs join Genentech Inc., which filed a similar suit in April, in claiming the new patent is illegal and saying that Columbia's request for royalty payments for the new patent through 2019 is a blatant attempt to continue a profitable revenue stream that officially stopped in August 2000.

Columbia has licensed the technology out to more than 30 biotech companies, according to the suit. For the university, the patent brings in important funding it said it redirects back into research. It said it has done nothing wrong. While opinions abound, this is known: The technology behind the patent estate touches nearly every corner of biotechnology, is "as elemental as it gets" as one patent lawyer told BioWorld Financial Watch, and is tied to billions of dollars in drug sales.

Stanley Cohen, from Stanford University, and Herbert Boyer, from the University of California at San Francisco, began work in the '70s that eventually gave rise to a method for splicing a piece of foreign DNA into a plasmid carrier, which in turn inserted genetic information into a bacterium that then passed it along into its offspring. That work resulted in U.S. Patent No. 4,237,224 being jointly issued to Stanford and UCSF.

It was a brilliant invention. The problem was, it was difficult to discern just which cells had successfully taken up the gene. It took working with a sea of eukaryotic cells just to ensure a decent number were producing what scientists wanted.

Research conducted by Axel, Wigler and Silverstein, all scientists at Columbia University, led to a method of inserting a biomarker into cells as well as the desired gene - a process called cotransformation. Those cells that took up the biomarker most likely took up the desired gene. An efficient way to produce proteins for medicinal purposes was born.

Columbia's first patent on the cotransformation technology - No. 4,399,216 - was issued in August 1983. The university followed that with applications for and the receipt of two other patents in the cotransformation area: 4,634,665 in 1987 and 5,179,017 in 1993.

Under the laws of the time, the original patent was due to expire in August 2000, 17 years after the patent's issuance. The "terminal disclaimer" clause in patent law stated that following patents issued on a technology had the same expiration date as the original, and thus the '665 and '017 patents were set to expire on the same date in 2000.

And they did, freeing Genentech, Biogen, Genzyme and scores of other biotech companies that had licensed the technology from paying royalties, the suit claims. However, on June 8, 1995, in an attempt to align the U.S. with the rest of the world, a new patent law went into effect making patents enforceable for a period of 20 years after the date of original application, not issuance. The day before the law went into effect, Columbia filed two continuation applications based on the original application of 1980, the suit alleges, and subsequently received the '275 patent in September 2002. Columbia, in turn, then asked for royalty payments for all biotech companies licensing the cotransformation technology through September 2019.

The other application is still pending at the patent office, according to the suit.

The Breadth Of A Patent

The technology behind the Columbia patent estate is simply one of the most important in the industry.

"I would say [the technology] is seminal to that part of the pharmaceutical industry," said Donald Rhoades, partner at Kramer Levin Naftalis & Frankel LLP in New York. "Every day they use it. If Columbia wins, there are hundreds of millions of dollars in store, maybe a billion, I don't know."

It's difficult to know what the patent estate has meant financially to Columbia but the suit alleges Biogen, of Cambridge, Mass., and Genzyme, also of Cambridge, have paid Columbia $60 million themselves. Genentech, of South San Francisco, said it paid $70 million in royalties up through 2000. And that's fine - once, Genzyme said.

"We are asking the court to declare the patent is invalid for double-patenting and inequitable conduct, and to have the court declare that we don't owe royalties under the [new] patent," said Tom DesRosier, senior vice president and general counsel at Genzyme. "Because we have already paid once for this patent - $25 million, to be exact, from Genzyme - and we don't think it's fair to pay again."

Although DesRosier acknowledged the original discovery "was a wonderful invention in the early '80s by Axel and his team," he said the problem today is Columbia's attempts to wring another 17 years of royalty payments out of a discovery made more than 20 years ago.

"They tricked the [patent office] examiner into issuing the ['275] patent without a terminal disclaimer," he told BioWorld Financial Watch, adding that, to Genzyme, the case is "very clear cut. That patent laws certainly don't ever intend for someone to make an invention and collect royalties twice."

Understandably, Columbia doesn't agree.

"The lawsuit filed by Biogen, Genzyme and Abbott is completely without merit," said Robert Kasdin, senior executive vice president of Columbia. "The U.S. Patent Office carefully considered all of the factors and concluded that the patent application contained different and distinct inventions. Columbia believes the patent office's conclusion was correct and should be respected."

To understand who's right or wrong, dig into the issue of multiple patents on a single technology, said Lynn Pasahow, chair of both the bioscience group and the litigation group at Fenwick & West LLP in Mountain View, Calif. And even then it might not be clear.

"As you go to get a second set of claims after you've gotten the first patent allowed, there will be a certain amount of overlap," Pasahow told BioWorld Financial Watch. "If you have a patent for a red, white and blue box, for instance, and then go for a patent on a red, white and blue container, you'll probably be able to get the second set of claims over the first set. That's not particularly controversial.

"The question here is, when you get the patent for the container, do you get a new 17 years?" he said. "That's what the principal fight is about in this case - whether the patent examiner was misled and because so, was talked out of requiring the terminal disclaimer."

Rhoads, the attorney, has seen the Genentech complaint. He said: "If you just compare the claims of the last three patents to issue and [the '275 patent], there is a credible claim of the double patenting. If you put the claims next to each other, there isn't much new in the new one - but I say that guardedly."

Why guardedly?

"When dealing with patents every word counts," he said. "But boy, they do look similar."

The Worth Of The Cotransformation Technology

The cotransformation technology has meant vast amounts of money to both sides. Although the technology is limited to Chinese hamster ovary (CHO) cells, Genzyme's DesRosier said, "CHO cells are the workhorse of the biotech industry that makes proteins. All the major players - Amgen, Immunex, Genentech, Abbott, Genzyme - we all use CHO cells."

Biogen's multiple sclerosis drug Avonex is based on the technology - that product exceeded $1 billion in sales in 2002. So is Genzyme's Cerezyme, for Type I Gaucher's disease, which brought the company more than $600 million last year. Abbott's young product Humira, for rheumatoid arthritis, did $54 million in sales in 2003's second quarter. Add Amgen's blockbusters Epogen and Enbrel and Genentech's Herceptin to that cotransformation list and it still isn't complete.

"If you add up the sales of the people that have sued so far - Immunex, Abbott, Genentech, Genzyme [and others] - we probably collectively have $5 billion in sales affected by the patent on an annual basis," DesRosier said, adding that if Columbia "were to receive royalties on this patent, it would exceed $100 million a year, I'd think."

It might. A survey conducted by the Association of University Technology Managers Inc. shows that in 2001 (the last year available), Columbia University led all participating U.S. universities in adjusted gross license income received - fees, liquidated equity and running royalties - reporting about $130 million. Placing a distant second was the Massachusetts Institute of Technology with about $74 million. In 2000, Columbia recorded about $138.6 million, ranking behind only the University of California system, which reported about $261.5 million. Dartmouth College ranked third in 2000 with about $68.4 million. Columbia reported a similar figure in 1999 as it did in 2000.

DesRosier said that although Columbia's patents expired in 2000, Genzyme was still paying royalties in 2001 on product it produced when the patents were still in effect. Columbia's Kasdin was unable to confirm whether or not Columbia received royalty payments from biotechnology companies on the patents after August 2000, but he stressed the differences between the plaintiffs, with their blockbuster drugs, and universities.

"The proceeds from licensing received by Columbia are reinvested in research on drugs that help the ill and technology that strengthen the economy," Kasdin told BioWorld Financial Watch. "Biogen, Genzyme and Abbott have a whole set of motivations and needs that are different from pushing the frontiers of research."

Next Move Belongs To The Court

It is worth noting the events that took place just prior to the expiration of the Columbia patents in August 2000. The university attempted to get an extension for its patents through the Hatch-Waxman act - normally designed to allow for a patent extension on drugs that were held up in the FDA approval process because of agency backlogs. Columbia claimed that although its first patent was issued in 1983, it didn't start receiving royalties until later due to slow drug approvals. Senator Judd Gregg, a Columbia alumnus, slipped the provision into the 2001 spending bill for the Department of Agriculture. There was a public outcry over the matter, including opposition from the Biotechnology Industry Organization, and Congress rejected the effort. The patents expired in August 2000 as scheduled.

Few universities would happily say goodbye to millions of dollars of annual revenue, so Columbia's attempts at extensions and another 17 years of royalties are not particularly noteworthy, Pasahow said, except to those in line to pay.

"There is nothing extraordinary about this - your view of whether this is good or bad depends on what side you are on," he said. "Columbia's position is not a stupid one. The patent examiner clearly considered the position of the terminal disclaimer and it was a source of discussion. [Columbia] was able to convince the examiner that their position was right."

While it has been biotechnology's big names that have stepped to the front with suits, any biotech company that pays royalties to Columbia stands to benefit from a successful prosecution. Basically, they'll get "a free ride," Pasahow said.

For now, though, the plaintiffs will prepare to show that the patent examiner got it wrong and aim for a fast resolution.

"Hopefully, we will get it to a judge quickly, and we will file a summary judgment motion to get a judge to decide quickly that the patent is invalid," DesRosier said.

A quick decision is what most involved in court cases want. However, justice at times is slow. Take Genentech's "win" over Chiron Corp. in September, freeing Genentech from paying up to $300 million in royalties on Herceptin sales. That suit was originally filed in 2000, and although jurors cleared Genentech, Chiron is still pursuing the matter through appeal. Court cases have a way of stretching out.

When asked if that might be the case here, DesRosier briefly paused.

"I certainly hope not," he said.