Cambridge, Mass. -- Last January, a research team led by Dr. Christopher Neugard, a molecular biologist at the University of Texas Southwestern Medical Center in Dallas, created artificial pancreas cells in the laboratory through genetic engineering techniques. It was an important step that could lead to a new treatment for diabetes.
And Dr. Neugard had a partner. The university immediately patented the new cell line and began discussing which companies to sell rights to. If the technique proves out, Dr. Neugard will share the proceeds.
Until recently, discoveries based on publicly funded research were open to commercial development by all companies. But that system lacked the profit motive. After all, what company would pursue the development of a product without patent protection? Such protection was seen as the key to transforming basic research into products.
Then, in the early 1980s, the federal government started allowing universities to hold patents to their researchers' inventions. Companies could get patent protection; universities and their researchers could get royalties. The Bush administration is now crafting a National Technology Initiative meant to extend the university model to the nation's hundreds of research laboratories.
The university system has produced a number of successes, the most striking of which is the Cohen-Boyer gene-splicing patent, the basis of the biotechnology industry. That patent is expected to bring in more than $100 million in royalties over its lifetime and has made virtually every biotechnology company a licensee of Stanford University and the University of California.
Each year the government spends $12 billion to $14 billion on research at universities. Eager entrepreneurs believe that somewhere in those billions lie many embryonic technologies that could yield a new Genentech Inc.
Today, more than 100 universities have entered the marketplace. Powers such as the Johns Hopkins University, Harvard University and the University of Texas have formed, or invested in, for-profit venture capital companies to develop their researchers' work.
Some smaller colleges that have had limited success on their own are banding together with venture capital groups to form consortiums such as the Start Technology Partnership in Philadelphia.
In return for their research, many universities are now accepting stock in new companies instead of a licensing fee, hoping that by easing the burden on the cash-poor companies they will reap benefits when the company becomes successful. Faculty inventors can also share in the action via royalties, equity or becoming consultants.
Universities are also looking to licenses as a way to supplement government money. At the Johns Hopkins School of Medicine, for example, faculty inventors prefer to have a licensee plow money back into their labs in lieu of licensing fees, said Francis Meyer, assistant dean of technology licensing.
"It is becoming more popular for research faculty to want money from industry for their research," said Mr. Meyer. The medical school received $1.5 million last year in royalties from its licenses, and $2.5 million in grants and contracts from licensees that went to faculty inventors to pay for more research, he said.
The notion that academic researchers can work in laboratories supported by large federal grants and yet make a profit from the research raises troubling questions for the scientists and the universities.
"The extraordinary development of genetic engineering was the
fruit of 40 years of public investment in university research by the federal government," said Dr. Jonathan King, a biology professor at the Massachusetts Institute of Technology who is a vigorous critic of patent law. "The whole notion that you need the profit motive for scientific innovation is spurious. Biotechnology grew up without patenting and proprietary knowledge," Dr. King said.
For the most part, each university is grappling with potential conflicts of interest on its own. There are no national guidelines.
But the potential for corruption is far greater when clinical trials of a drug or a medical device are involved, observers say. Several publicized cases have highlighted the problem, including that of a Harvard Medical School researcher who was testing an experimental eye medicine for a company in which he had a financial stake. He sold that stake before releasing results that showed the medicine was ineffective.
The doctor, Scheffer C. G. Tseng, was a student of internationally known Hopkins eye specialist A. Edward Maumenee, who oversaw the clinical trials. Hopkins investigated the matter in 1989 and disciplined Dr. Maumenee for his role in the case. He was barred from directing research at Hopkins for two years.