Broad Institute, UC Berkeley fight CRISPR patent battle for untold $$$; hey IRS: where does nonprofit college end and for-profit business begin?

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The News:

The US Patent and Trademark Office (USPTO) on Wednesday (February 15, 2017) ruled in favor of the Broad Institute (Cambridge MA) of Harvard University and MIT regarding certain CRISPR-Cas9 patents, in a dispute brought by the University of California (Oakland CA), which challenged those patents. The Broad Institute called the outcome a victory, while the University of California, Berkeley, put on a smile and sent a different message: We’re just getting started.

@USPTO ruled for @BroadInstitute in a dispute brought by the @UofCalifornia Click To Tweet

In its decision, the patent office stated “in light of the determination that the parties’ claims do not interfere…we enter judgment of no-interference-in-fact, which neither cancels nor finally refuses either parties’ claims.”

Shares in Editas Medicine Inc. (Cambridge MA), which has licensed the Broad Institute’s technology, surged 40% to $26.02 over the week on the news.

In the case, University of California researcher Jennifer Doudna and University of Vienna scientist Emmanuelle Charpentier contended that they invented the gene-editing technology first, according to FirstWord Pharma.

The researchers initially applied for a patent for the technology in 2012, while the Broad Institute, which is affiliated with Harvard University and the Massachusetts Institute of Technology (MIT), requested a fast-track review process a few months later, being granted a patent for the technology in 2014.

In its decision, the USPTO determined that the claims presented by the two parties were considered “patentably distinct” since the Broad Institute patents cover usage of CRISPR-Cas9 in eukaryotic cells, while the University of California’s current claims cover the general use of CRISPR-Cas9 gene-editing technology.

“We are pleased with the USPTO’s decision of ‘no interference in fact’ for the patents that have been granted to the Broad Institute for their innovative and fundamental work on CRISPR-Cas9 genome editing,” remarked Editas CEO Katrine Bosley, adding “this important decision affirms the inventiveness of the Broad’s work in translating the biology of the natural world into fundamental building blocks to create unprecedented medicines.”

Meanwhile, the University of California stated,

“we continue to maintain that the evidence overwhelmingly supports our position that the Doudna/Charpentier team was the first group to invent this technology for use in all settings and all cell types…and that the Broad Institute’s patents directed toward use of the CRISPR-Cas9 system in particular cell types are not patentably distinct from the Doudna/Charpentier invention.”

The UC statement continued,

“for that reason, [the university] will carefully consider all options for possible next steps in this legal process, including the possibility of an appeal of the PTAB’s (Patent Trial and Appeals Board) decision.”

Steve’s Take:

Where’s the Internal Revenue Service when you really need it? Apparently not in the realm of high-stakes university-based research and product development. Hey, you IRS agents: you afraid of Harvard, MIT and Berkeley’s lawyers? Don’t have that kind of legal firepower? Or the will to fight for us taxpayers?

If anyone thinks there aren’t literally cosmic-size billions at stake in the CRISPR patent saga among several “nonprofit” educational titans, let’s briefly go back in time before I continue my rant.

This particular CRISPR case began in January 2016, when the patent office granted UC’s request to launch an “interference” proceeding. That means the patent office was willing to entertain the possibility that the CRISPR-Cas9 patent application that UC filed in May 2012, but which the patent office had not issued, claimed essentially the same invention as the patent awarded to the Broad in April 2014. The award to the Broad might therefore have “interfered” with UC’s application, STAT News points out.

The case therefore turned in large part on whether UC’s claims about what Doudna and Charpentier invented were essentially the same as the Broad’s claims about what Feng Zhang invented, as detailed in the Broad’s December 2012 patent application. Although the Broad filed months after UC, it paid a small fee for accelerated review and received its patents–eventually, 13 of them.

UC has not challenged the other 30 or so CRISPR patents that the office has awarded, including those to Harvard for inventions by geneticist George Church, largely because they cover narrower innovations. Zhang’s patents are considered foundational, covering virtually all uses of CRISPR-Cas9 in mammalian cells.

UC’s application described how Doudna, Charpentier, and their team constructed CRISPR-based molecules able to cut DNA in a test tube, which they reported in 2012. The crux of UC’s legal argument was that constructing such molecules to edit DNA inside living eukaryotic cells (those whose DNA is inside a cell nucleus), as scientists led by the Broad’s Zhang and, separately, by Harvard’s Church did in two 2013 papers, was an obvious extension of Doudna’s work–even though her feat wasn’t performed in living cells. It could have been accomplished, UC argued, by “persons of ordinary skill in the art” of molecular genetics.

In other words, Doudna worked out the recipe, then Zhang just applied and extended it, says STAT. An obvious add-on would not be eligible for patents. If the three judges on the Patent Trial and Appeal Board agreed that extending CRISPR to eukaryotic cells was obvious, then key patents awarded to the Broad would have essentially been clawed back.

After 13 months, the judges did not agree with UC. In their decision, they concluded that using CRISPR-Cas9 to simultaneously edit the genomes of eukaryotic cells at multiple locations represented an invention that could not have been made by just any scientist of ordinary skill. What Zhang accomplished was therefore separately patentable: The patent office’s decision to award the Broad CRISPR patents did not interfere with UC’s pending patent applications.

That’s the reasoning behind the ruling, even if it clearly (to me) could have gone the other way.

Neither the commercial consequences of this initial ruling, nor the reputational ones, will hit immediately, STAT suggests. While UC said it was weighing an appeal, experts on intellectual property said they couldn’t imagine the university not appealing, given the stakes.

If the use of CRISPR to treat genetic disorders, including cancer, lives up to the hopes that scientists and biotechnology companies have for it, this form of genome editing–just applied to human genetics–is expected to be a multibillion-dollar annual market, perhaps eventually reaching trillions.

Then there are the agricultural uses of CRISPR, from tweaking mushroom genes so the fungi never turn brown to editing corn genes so its oil is as healthful as olive oil, which are expected to be another multibillion-dollar market.

Close watchers of the CRISPR patent fight have expected the Broad to prevail since early December, when, during the only oral arguments in the case, the three-judge PTAB panel directed many more skeptical questions at UC’s attorney than they did at the Broad’s. At the time, the grilling “was bad for UC,” says Jacob Sherkow of the New York Law School, who has been tracking the case closely.

Still, Arti K. Rai from Duke University School of Law says the judges’ opinion suggests it’s possible for Berkeley to receive a wide-ranging patent for using CRISPR in all organisms, while Broad retains the narrower patent for eukaryotes, according to Chemical and Engineering News.

“Anyone who wants to practice CRISPR probably needs a license from both of the universities,” says Jorge L. Contreras of the University of Utah College of Law, who has mapped the complex web of CRISPR licensing (Science 2017, DOI: 10.1126/science.aal4222).

Gregory Graff, who studies the interplay of economics and scientific research at Colorado State University, says that if both sides emerge as “joint gatekeepers of the core technology,” he expects “there will continue to be sufficient uncertainty.”

Doudna and her CRISPR co-inventor, Emmanuelle Charpentier, now at the Max Planck Institute for Infection Biology, have ties to commercial firms CRISPR Therapeutics, Intellia Therapeutics, Caribou Biosciences, and ERS Genomics. A joint press release from those four companies suggests that a new interference could be levied against Broad if Berkeley’s pending patent gets accepted.

The patent battle has caused entire rivers of bad blood between the institutions. A year ago, Broad president Eric Lander wrote a history of CRISPR that critics perceived as giving too little credit to the UC group, leading Doudna to call his account “factually incorrect.”

When STAT asked Rush Holt, CEO of the American Association for the Advancement of Science, whether the patent decision cemented the Broad’s preeminent reputation, he joked, “Eric would say it never needed cementing.”

Bottom line:

Let’s face it, CRISPR’s usefulness as a research tool is unquestioned, and its potential as a gene-editing therapy puts countless billions of dollars at stake for several CRISPR-centered companies.

“It is definitely a big win for Broad but I wouldn’t pin it as a total loss for Berkeley,” says Sherkow.

The gene-editing tool has already been used to create malaria-blocking mosquitoes, muscular beagles, and miniature pet pigs. A clinical trial in China is using the technology to edit cancer patients’ immune cells so that they can fight lung cancer. And in the future, CRISPR could help treat debilitating genetic diseases like sickle cell anemia and cystic fibrosis.

Its potential is limitless, Verve points out, and so is the amount of money and fame that ownership of the technology would bring to its inventor. And that’s why the patent dispute over who owns the intellectual property of the CRISPR technology has been so heated

Academic scientists are still free to use CRISPR without a license, however.

“Right now, this has zero impact on the academic environment,” says Rodger Novak, CEO of CRISPR Therapeutics.

In the future, if an academic scientist using CRISPR wishes to commercialize research, that scientist would need to seek a license to do so.

I’d like to know where the IRS stands on all the money being hauled in by the various “nonprofit” players in this drama. Yes, they are working on new science–true cutting-edge breakthroughs–that certainly will benefit humanity.

Steve's Take: @IRSnews should not allow #nonprofits to act like #forprofit companies Click To Tweet

But doesn’t the financial component still boil down to earnings from a commercial business, namely discovering patentable molecules and processes that can then be sold to the highest bidder? Is that really the core educational purpose of a “school?” I don’t think so.

Better that the various scientists involved work full time for the commercial companies than have one foot in academia and the other in free enterprise. There’s definitely a conflict there and it appears that the IRS is out to lunch in figuring out what’s “unrelated business income,” which is taxable to the colleges, and “exempt-function” income, which isn’t taxable.

It seems likely that Berkeley will appeal, since the technology almost certainly will be worth untold billions. That means millions more of OUR tax dollars for lawyers, chasing “billions and billions” of…not stars, as Carl Sagan, scientist, author and television personality popularly (and incorrectly) used to say, but good old dollars, euros, yen, pounds, Swiss francs, yuan….You get the idea.

(Editor’s note: A very long time ago I worked at the IRS National Office in DC for the tax-exempt organization branch, which regulates nonprofit colleges and universities.)