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Material Transfer Agreements

Researchers today, particularly those in molecular biology, face a world quite different from that of 20 or 30 years ago. “I was one of the early molecular biologists,” noted Bruce Alberts, president of the National Academy of Sciences, in his introductory remarks. “I worked for 30 years with the bacteriophage T4 that Max Delbrück introduced as a model organism. The spirit that he promulgated in my field was one of complete sharing of ideas and resources, and at that time there were frequent Cold Spring Harbor meetings where everybody laid out their latest data and emptied their notebooks, with no idea that anybody would ever think to steal an idea or claim credit for something they didn't deserve. This was before the biotechnology revolution, before there was any idea that you could become wealthy or start a company and that there could be any major commercial value to what we were doing. We thought about it in terms of new developments for medicine and doing good for people.”

But commercial concerns, Alberts commented, have chased away much of the openness of that earlier era. Now researchers and their employers, whether in private companies or in universities, must constantly be careful about their intellectual-property rights and so are often wary of passing on their research materials without securing some sort of protection. The result, said Joan Leonard, vice president and general counsel of the Howard Hughes Medical Institute (HHMI), is a tremendous loss of time and money in the resulting legal byplay.

“The paradigm transaction,” she said, “is that our investigator wants materials from a company. The company says, ‘Fine, we'd love to give them to you; just have this agreement signed and we'll be happy to send them.' And then the agreement comes to me or one of the people who work for me. And maybe it



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FINDING THE PATH: Issues of Access to Research Resources 1 Material Transfer Agreements Researchers today, particularly those in molecular biology, face a world quite different from that of 20 or 30 years ago. “I was one of the early molecular biologists,” noted Bruce Alberts, president of the National Academy of Sciences, in his introductory remarks. “I worked for 30 years with the bacteriophage T4 that Max Delbrück introduced as a model organism. The spirit that he promulgated in my field was one of complete sharing of ideas and resources, and at that time there were frequent Cold Spring Harbor meetings where everybody laid out their latest data and emptied their notebooks, with no idea that anybody would ever think to steal an idea or claim credit for something they didn't deserve. This was before the biotechnology revolution, before there was any idea that you could become wealthy or start a company and that there could be any major commercial value to what we were doing. We thought about it in terms of new developments for medicine and doing good for people.” But commercial concerns, Alberts commented, have chased away much of the openness of that earlier era. Now researchers and their employers, whether in private companies or in universities, must constantly be careful about their intellectual-property rights and so are often wary of passing on their research materials without securing some sort of protection. The result, said Joan Leonard, vice president and general counsel of the Howard Hughes Medical Institute (HHMI), is a tremendous loss of time and money in the resulting legal byplay. “The paradigm transaction,” she said, “is that our investigator wants materials from a company. The company says, ‘Fine, we'd love to give them to you; just have this agreement signed and we'll be happy to send them.' And then the agreement comes to me or one of the people who work for me. And maybe it

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FINDING THE PATH: Issues of Access to Research Resources has provisions that limit publication, or provisions that seem to have overbroad confidentiality requirements, or provisions that say, ‘Oh, by the way, we own everything you ever do that gets anywhere near the reagent we're sending you,' and so on. “And so discussions ensue. This is not appealing to us or acceptable to us on a first reading, and maybe we work it out and maybe we don 't. If we do, the material comes to the investigator—but after a great deal of time is lost and a great deal of high-priced talent has been used to look over and wrangle over some of these issues.” Today, whenever any sort of research material—reagents, cloned bits of DNA, genetically modified mice—changes hands between institutions, it is common to sign a material-transfer agreement (MTA). An MTA governs how a researcher can use materials and what obligations attend their use. The obligations can range from promising not to pass the materials on without permission to signing over all rights to commercial development of any discoveries made with the materials. MTAs have become perhaps the largest obstacle that molecular biologists face in gaining access to research resources, and they are playing an increasing role in other fields of science. A number of the researchers at the conference expressed their exasperation with MTAs and with the technology licensing offices whose job it is to oversee and implement them. “The first agreement that I tried to do through the university technology licensing office took 6 months and it essentially, in the end, went through signed pretty much as it came to us,” said Harry Klee, of the University of Florida. I had been told that this had low priority and they'd get to it when they could get to it. That is not unusual, he said. “I think that the technology licensing offices in most universities are woefully ignorant of the system and are woefully underfunded and understaffed. ” Nor was it just the researchers who were unhappy with MTAs. Even Leonard, who is responsible for negotiating the agreements at HHMI agreed that they pose a problem. “It's a drain in terms of time and administrative funds,” she said. “There is also tremendous delay. For the scientists, this can be critical, particularly for postdoctoral fellows who are under pressure to get things done and start their careers.” Some MTAs cause more difficulties than others. Lita Nelson, director of MIT's technology licensing office, noted that agreements between universities are often painless. Most major universities and many of the smaller ones, she said, use NIH's uniform biologic materials MTA or its equivalent when sending materials among themselves. It is a simple one-page agreement; if both universities have agreed to use it, Nelson said, “we will accept the signature of the professor —no strings.” Transferring materials from university to industry is also straightforward most of the time, she said. In most cases, the university has decided to license the material nonexclusively for a fee. “Usually, it goes very quickly.”

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FINDING THE PATH: Issues of Access to Research Resources The trickiest problems arise when the transfer is from industry to academe; private companies often make demands that researchers—or their technology licensing offices—balk at. A company might, for instance, ask researchers to hold off in publishing their results to give it a head start in applying the results. Or it might insist on rights to an exclusive license on any invention or discovery made using its materials. Klee, who worked at Monsanto before moving to the University of Florida, said that the company's MTA required four things of scientists: “First, we asked that you not transfer the material or a derivative thereof to third parties without written approval. Second, you had to use it for research and not for profit. Third, of course, Monsanto was not legally liable for anything that you did with the material. Fourth, we wanted the right of first refusal; we wanted to be able to negotiate with you in good faith that you would offer us a license to anything that you invented with it.” The Monsanto agreement is relatively simple as industry MTAs go—many companies include much more in their agreements, such as restrictions on researchers' publication of their results—but even the simplest proposed agreements often result in long delays as the university technology licensing office negotiates the details. “There is a tremendous administrative burden on both sides,” Klee said. “I saw many of these agreements get bogged down, most often on the university side, because people disagreed with some words in the claims. Those claims usually had to do with liability. Many times, the universities would not sign the agreements at all, and I had to tell people that they could not receive my materials, because their university would not sign an agreement.” From the university's point of view, the greatest stumbling block is often the request for “reach-through rights” on inventions that come about through use of a company's materials. Like Monsanto, many companies request the right of first refusal to license any discoveries or inventions. That has become common only recently, said Candace Voelker, of the Office of Technology Transfer at the University of California. “It's only within the last 5 years or so that companies have been tapping rights to their materials. Before, they would grant the materials to the university faculty without such strings attached, and it didn't come up that often.” The insistence on exclusivity poses a concern for universities, Leonard said. “If you're granting an option to a company in exchange for a research tool, you can sell that particular horse only once; if the research project is going to require another tool that requires an exclusive license, you have a serious problem on your hands.” The obvious solution would seem to be to negotiate shared rights, with two or more companies providing research resources and each being able to commercialize technologies arising from the research. But, Voelker said, industry has little interest in that. “I have a company, a licensee, that is willing to share rights with other collaborators of my inventors, but we've never found another company that would be willing to share with that licensee. We went to

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FINDING THE PATH: Issues of Access to Research Resources the company and said, ‘Even though you are funding and you have these rights, this research is at a standstill unless we can get to collaborate with another company, so would you be willing to share co-exclusive rights?' The licensee said yes. We asked three companies to work under those circumstances, and all three said no.” The refusal is understandable, said Thomas Caskey, of Merck Research Laboratories. From industry's point of view, such rights-sharing agreements complicate matters tremendously in that there is no single owner of the resulting technology. “I'm not saying that you can't do it. It's just that it has to be looked at much more carefully.” If academic researchers want a particular resource from industry, they are often faced with the choice between signing an exclusive-rights agreement and going without. “It's unfortunate, but that's the way it is,” Klee said. “We do want to distribute the material, but if you can't offer us, the company, anything in return, you shouldn 't expect to get the material.” Obtaining resources from universities—particularly items with a strong commercial potential—has also become more of a problem in recent years, although it is still generally simpler than working with industry. Universities are under pressure on a number of fronts to get some return from their research activities. The Bayh-Dole Act, passed by Congress 20 years ago in an effort to see that valuable research is developed, allows universities to patent the inventions of their scientists and to offer exclusive and non-exclusive licensing agreements to companies; since its passage, universities have become increasingly aggressive in seeing that their research is commercialized. Many state governments are pushing universities to turn their research into economic development that will benefit the states. And, more generally, the attitude toward commercialization is changing at universities: many are coming to value the return on investment that their research can bring. Dennis Stone, vice president for technology development at the University of Texas Southwestern Medical Center, spoke of the need to obtain “appropriate value for university-developed technologies. ” The money earned from these technologies serves many purposes, he said. “It allows investigators to work to make certain that inventions are developed as quickly as possible. It provides income to the university that can be used to do more of the same type of research or a different type.” And so it is that universities, in attempting to protect their interests, sometimes end up going down the same path as private industry, demanding restrictive MTAs on their most valuable technology. Or they sell or assign rights to the product of their research to a company—sometimes one started by the university scientists who performed the work; and that restricts access to the product. The micro-array developed at Stanford University is perhaps the most talked-about example. It is a device for testing the activity of various genes in a sample taken from an organism. Because it can test thousands of different genes

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FINDING THE PATH: Issues of Access to Research Resources simultaneously and offer a measure of which ones are more active and which less, it has many applications. “This is a very powerful technology,” said Michael Snyder, of Yale University. “It would be of enormous use to the entire scientific community. Virtually everyone I know is champing at the bit for this technology.” But it is not broadly available, because Stanford patented it and sold an exclusive license to one company, which operates the micro-array technology as a service rather than providing it to others. Ultimately, many of the obstacles to obtaining research resources have their roots in the difference in goals and attitudes between the suppliers and the users of materials. These differences can make it very hard for the suppliers and the users to agree on what is fair in an agreement to supply research materials. When an NIH Working Group on Research Tools studied the issue, it found three overlapping ways in which perspectives on the problem diverged, said Leonard, who served on that working group. The first was the split between user and supplier: One person's tool is another person's product. The dilemma is particularly acute for a small company that was built for a single technology, Leonard noted. It is fine in theory for a researcher to argue that he should have access to a small company's technology because, in the long run, the free dissemination of research tools will benefit everyone, but to the company, that research tool is its only way of making money, of surviving. If the company is to extract the value of the technology, Leonard said, it must get something from researchers—“either pay me now, in a large up-front payment, or pay me later through reach-through rights.” Then again, from the investigator's point of view, the technology is just “one of a number of resources that is going to go into a large and complex course of research,” so it is hard to justify mortgaging the entire research project for one tool, no matter how useful. “That polarity is very hard to reconcile and to find common ground on,” she said. A second related issue is the difference between providers and users in valuing a product. Consistently, Leonard said, providers tend to overvalue their product, and users undervalue it. It can be hard to meet in the middle, particularly because assigning a value to one piece of an entire project, whose ultimate value might not be known for years, is inherently subjective. “There are very few conventions out there for valuing these resources.” Finally, there is the difference in fundamental missions between suppliers and users. “Universities are engaged in the creation and dissemination of new knowledge,” Leonard noted. “That is their legal and traditional obligation and mission. Companies are in the business of raising money to develop useful products and to extract the value of the products for their shareholders. That is also a legal and traditional obligation. When those two things collide, it is difficult to find common ground.” To complicate matters, the perspectives can switch, depending on roles. A university attempting to commercialize its intellectual property might, when it comes time to provide materials to researchers elsewhere, view things more from the perspective of industry. And, Leonard said, “when you look at industry,

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FINDING THE PATH: Issues of Access to Research Resources there are an awful lot of fundamental scientists doing basic research, and they don't see any reason why they should be treated differently from their academic colleagues.” None of those issues will be easy to overcome, but the conference participants offered suggestions for improving the transmission of research resources among universities and private companies. “We have learned a lot of lessons,” said Maria Freire, director of NIH's Office of Technology Transfer. “Bayh-Dole is 20 years old, and perhaps some of the deals that we cut earlier we would not cut now.” At the recommendation of the Working Group on Research Tools, the NIH is distilling those lessons into a set of draft guidelines designed to help universities and NIH employees determine what is best practice in negotiating MTAs. Simply circulating the guidelines and getting the people responsible for technology licensing at universities to read them should help smooth out the dissemination of research resources. Many institutions are still new at licensing technology and are making the same mistakes that others have learned, through their own painful experience, to avoid. In particular, the guidelines advise universities to make sure that they do not compromise their researchers' ability to publish their results and advise them to avoid reach-through agreements whenever possible. A second suggestion was that universities avoid legal agreements altogether when the materials in question are unlikely to have any commercial value. Perhaps 95% of researchers' complaints about MTAs concern “transferring materials that have nothing to do with patents and licensing,” said Tony Hugli, of Scripps Research Institute. Offices of technology licensing, he said, should listen to researchers' opinions of the commercial value of their materials and insist on agreements only when there is some chance of payoff. The NIH Working Group came to a similar conclusion, Leonard noted. “There is little to be gained and much to be lost in efficiency by going through the process of having agreements, even if they are relatively simple to negotiate, ” she said. “It's a burden to the system that we don't need.” Another suggestion was that universities try to commercialize their technologies in ways that ensure access for researchers. In particular, universities should try to avoid repeating what Stanford did with the micro arrays. But that is not always possible. Stanford, for example, could find no one to develop the technology on a nonexclusive basis, because it demanded a great deal of work to bring it to market. So Stanford was forced to go with the exclusive license and with a company that did not make the tool easily accessible to researchers. Industry, too, should be able to improve how it deals with academic researchers, said Steve Holtzman of Millennium Pharmaceuticals. “For those who have been in this for 15 years, it gets a little disheartening sometimes because the same issues are playing over and over again. You have to recognize that there is a basic standard form that you can use for 95% of the cases.” Out of responsibility to their shareholders, private companies must demand some things

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FINDING THE PATH: Issues of Access to Research Resources when sending out their proprietary materials, he said. “You need a royalty-free license to improvements to what you gave them, and you need a royalty-free right to practice commercially any new inventions—you can't enable someone to block you from exploiting your own technology. Universities should be able to accept those provisions.” Conversely, industry has to understand that academic researchers have their own imperatives. “It's the mission of the university to disseminate knowledge. Part of the price you pay to work with academe is that it is going to publish—that is not debatable. That people are still negotiating publication rights is nuts.” Indeed, Holtzman said, only one issue in industry-university negotiations should cause difficulties, and that one is unavoidable: “Where the rubber hits the road is in the rights to new substances created with the material in question.” The company wants to protect its investments by getting exclusive rights to future inventions based on its research resources. Universities want to maintain their freedom of future action by not granting exclusivity. Each must ask itself how much flexibility it can afford and work from there. “You can't come up with a general guideline for how you're going to deal with new inventions that use research material,” he said. “It ineluctably involves judgment.” In other words, there will not be any easy answers. BOX 1 A MODEL FOR UNIVERSITY INDUSTRY COLLABORATION? In the midst of the conference's generally gloomy assessments of resource sharing, one bright spot appeared in the description of the agreement between DuPont and the NIH over the use of cre-lox technology in mice. Cre-lox is a method for creating mice and other animals or plants in which a stretch of DNA is removed from particular cells. Researchers use the technique mainly for studying gene function; they remove one or more genes and observe the results. Cre-lox has become a key element of the molecular-biology toolkit. Several years ago, however, DuPont decided that it should put conditions on the use of the technology. Until then, researchers had been disseminating and using cre-lox without asking permission, even though DuPont held a valid patent on the technique. The company's first idea, said Maria Freire, director of NIH's Office of Technology Transfer, was to ask universities for a cash payment if their researchers were going to use cre-lox. DuPont was seeking far less than the $100,000 that some commercial outfits pay for cre-lox, but the universities balked. “At most universities,” she said, “the first reaction is, ‘Oh, my god, not $5,000 a year; that's a lot of money.'” So the company decided instead to ask for reach-through rights, to get a share of any products developed at the universities by using the cre-lox technique. Several dozen institutions signed such agreements with DuPont, but NIH did not. “When DuPont came to us with that scenario, we were not very happy,” Freire said. NIH Director Harold Varmus worried that such an agree-

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FINDING THE PATH: Issues of Access to Research Resources ment would impede basic research, and indeed one major problem was already apparent. The Jackson Laboratory, the world's largest supplier of mice for use in research, was refusing to stock or distribute cre-lox mice as long as DuPont insisted on reach-through rights. So NIH set out to negotiate a better understanding with DuPont. “It was a very difficult negotiation,” Freire said, but at the end, NIH had persuaded DuPont to let researchers continue using cre-lox technology in mice and other animals with essentially no strings attached. NIH researchers can use cre-lox at no cost, as long as it is for research purposes only, and can transfer the materials to other researchers with the standard NIH material-transfer agreement. They can also transfer cre-lox materials to researchers in industry, but if they do, they must tell DuPont and they must apprise their industry partners of DuPont's intellectual-property rights to the cre-lox technology. There are no limits on publication of results of research done with the cre-lox technology. Most important, DuPont has no reach-through rights on any discoveries or inventions made at NIH with cre-lox technology. Furthermore, the agreement applies to both researchers at the NIH and those in academia. In return, NIH agreed to make its cre-lox research materials available to DuPont when requested. Otherwise, DuPont gets little from the agreement other than the knowledge that it is helping move science forward. The company does retain patent rights on commercial uses of the cre-lox technology, and the research should help make the technology more valuable; but DuPont gets no direct return from the use of cre-lox in basic research on animals. The agreement does, however, prohibit the use of cre-lox to make libraries of mouse embryonic stem cells. And the agreement is not available to plant researchers, noted Barbara Mazur, of the DuPont Agricultural Products Enterprise. The reason is that the genes used in cre-lox technology are included in some of its patented agricultural products, so the agricultural side of DuPont sees cre-lox as a product, as well as a tool, and is consequently less willing to allow its use even for basic research without demanding compensation. Several speakers suggested that cre-lox might offer a model for university-industry cooperation on guaranteeing access to such basic research tools as cre-lox. Indeed, at the time of the conference, NIH was negotiating with DuPont in an effort to sign a similar accord regarding use of the Harvard oncomouse, a mouse valuable in cancer research. But it is not clear in how many other cases agreements like this can be signed. A giant company like DuPont can afford to allow research use of its material without payment, but a smaller company might not be able to; and even DuPont drew the line at allowing free use of cre-lox in agricultural research, where its interests were more directly affected. But at least in limited cases, such as the cre-lox mouse and the oncomouse, it might be possible to ensure researchers free access to these basic tools.