The Contract & The Code: When Corporations Own Knowledge, to Do Research You Have to Make a Deal

The Contract & The Code
When Corporations Own Knowledge, to Do Research You Have to Make a Deal

by Kristi Coale

Peggy Lemaux vividly remembers the scene that, in her mind, justified the effort her department at the University of California-Berkeley was putting into courting a corporate research sponsor. She was visiting a crop genetics laboratory at Pioneer Hi-Bred with some colleagues when she saw a Pioneer researcher take a genetic sequence that a postdoctoral student had been working on, plug it into a database, find a match, and drop the matched sequences into yet another database. Moments later, the researcher's computer spit out the data the student needed to complete his studies. "It was like dropping a coin into a vending machine; it was that simple," Lemaux recalls. "Seeing that, I understood the value of corporate partnerships—that students would have the tools to do their work."

What had become clear to Lemaux, a cooperative-extension specialist with Berkeley's Department of Plant and Microbial Biology, was that in the field of agricultural biotechnology, corporate sponsorship could involve more than funding. Watching a postdoc student receive in ten seconds what might have taken five years to put together in a university laboratory, Lemaux knew that any research agreement her department put together would have to include a more valuable asset—access to genetic maps, information about genes and gene sequences, and various genetic tissues used to analyze genes and generate new traits.

When Lemaux and her colleagues brokered an agreement with Swiss biotechnology and agrochemical giant Novartis, access to information was a key part of the deal:

Novartis, by way of the Novartis Foundation, agreed to fund research at the Department of Plant and Microbial Biology with $25 million over five years.

Department faculty taking part in the agreement and signing a confidentiality agreement will have access to the proprietary genomic databases of the newly minted Novartis Agricultural Discovery Institute via computer terminals located in the department labs on the Berkeley campus.

Novartis funds are for unrestricted research. A review committee with three representatives from Berkeley and two from Novartis will allocate funding.

Novartis gets first rights to negotiate a license on a percentage of the inventions and a window of 90 days in which it is the lone negotiator. Publication of findings, in these cases, is delayed for the 90-day period.

On November 23, 1998, Lemaux and 19 of her colleagues made the agreement official at a press conference that featured an attack by the Biotic Baking Brigade, a Bay Area group that expresses its political disagreements by throwing pies. While the deal's architects were able to avoid getting pie in their faces, they could not escape the controversial nature of the deal they had signed. What makes Berkeley's agreement with Novartis unusual—and subject to criticism—is that it involves virtually an entire university department. (Only two members of the Department of Plant and Microbial Biology didn't sign on, and neither currently engages in laboratory research.) The setup was the design of Gordon Rausser, dean of Berkeley's College of Natural Resources, who believes that one-on-one research deals have left researchers having to answer first to the interests of corporate sponsors and not the university.

It is the proprietary landscape of agricultural biotechnology that makes a deal like the Berkeley-Novartis agreement necessary. Until late 1998, when the U.S. government introduced a crop genome initiative, the process of sequencing and making sense of crop plant genomes was largely the province of private industry. Agrochemical companies invested heavily in research and purchased companies engaged in genetic research—and in the process achieved a remarkable degree of control over the intellectual property of crop plants.

Looking for a corporate partner, Rausser and his faculty took an unorthodox route. Typically, university faculty generate research proposals in response to requests issued by government agencies or private companies, tailoring them to the specifications in the RFP. What Berkeley did was to turn this situation on its head: Rausser and his faculty fashioned their dream research agreement, a wish list of conditions and specifications, and asked for proposals from potential sponsors.

The wish list represented what Rausser wanted the final agreement to look like: Faculty would spend their time on research in stead of moneygrubbing; faculty autonomy would be preserved; the corporate partner would have the same research goals as his faculty; finally, the faculty would gain access to modern tools of biotechnology to allow the campus to be a player in important developments.

By signing on with Novartis, the Berkeley suitors believe they are getting private assistance to help their public institution keep pace in a competitive field. Professor Wilhelm Gruissem offers the example of the National Science Foundation pledge to complete the sequencing of the entire rice genome by 2010. By partnering with Novartis, Gruissem reports, he and his Berkeley colleagues will be able to achieve this feat by next year.

Certainly, signing on for biotechnology research with a private company can be efficient—even seductive. But does the current intellectual property landscape mean that other universities have little choice but to follow in Berkeley's wake? That's a tough call. The key provisions that Rausser and others crafted into the deal—the involvement of virtually an entire department and the role Berkeley researchers will play in using and enhancing Novartis's databases—raise troubling questions about whether the Novartis agreement is an instance of a university fulfilling its mission or selling out to the highest bidder. Will collaborating with a single corporation—on terms it has defined—help Berkeley by making it a player in the most significant technology of the coming century? Or will the deal be a liability, making the university appear beholden to a single corporate benefactor, thereby discouraging other possible sources of funding and tainting the university's role as an impartial source of research and information?

The Changing Landscape

What was clear to Rausser and his colleagues long before they began their quest for a research partner was that the funding of agricultural research had changed and that the fundamental structure of public-private partnerships worked against the public interest. Land-grant colleges like Berkeley once could count on several federal and state resources for research dollars.

Chief among these monies were allocations made under the Hatch Experimentation Station Act of 1887, which sought to stimulate research adaptable to the immediate needs of farmers. Funding from the Hatch Act and other traditional sources of money for agricultural research reached its zenith in the 1960s and early 1970s, says Fred Buttel, a professor of rural sociology at the University of Wisconsin-Madison.

Buttel, who studied agri cultural research issues at land-grant colleges for an upcoming book, says these funding sources began declining in the early 1980s, in part due to the general decline of federal funds for higher education. Noting that every major university had to make cuts, Buttel said cuts made to schools of agriculture were sometimes disproportionate. For example, Wisconsin let 200 faculty go as part of downsizing measures in the 1980s; 70 of them came from agriculture studies.

But though federal funding decreased, the federal government got actively involved in generating other sources of cash for agricultural research. In fact, the government has played a major role in stimulating private-sector research. The Plant Patent Act of 1930 gave protection for plants reproduced through methods other than seeds. The Plant Variety Protection Act of 1970 extended intellectual property protection to many sexually reproduced plants.

A decade later, agricultural inventions—as well as those in medical biology—were given even higher status as intellectual property when the Supreme Court, in Diamond v. Chakrabarty, ruled that General Electric could patent a genetically modified bacterium. This decision paved the way for scientists of all stripes engaged in biotechnology research to patent genes and gene sequences.

Congress also gave corporations and universities an incentive to reach out to one another in 1980 when it passed the Bayh/Dole Patent Act. Bayh/Dole granted university researchers the right to license patentable inventions developed from federally funded research. Potential licensees, of course, were mostly corporations.

A key part of Berkeley's deal with Novartis was gaining access to the biotechnology giant's privately owned genetic information.

The message sent by these congressional and judicial acts was that there were private funds to be had in agricultural research. Further confirmation of this came in 1982. Buttel recalls a report jointly issued by the Rockefeller Foundation and the U.S. Office of Technology Policy from a conference on science in agriculture where roughly half of the attendees were R&D representatives from private industry, and the other half, researchers from universities and other nonprofit organizations. At the conference, private industry had its own message to deliver: Agricultural research was not serving private industry. "This was both a threat and a promise," says Buttel. "If agriculture schools shifted their research focus, industry would provide the funding."

In response to this and other pressures, Buttel says land-grant colleges rejiggered their faculty and resources to emphasize biotechnology. But the shift didn't bring the windfall that universities expected, and cultural clashes with corporations over academic freedom made researchers cautious, Buttel explains. Through his studies of the land-grant colleges, Buttel found that one source of public funding for research has been increasing since the early 1980s: the National Research Initiative general research funds that come from the National Institutes of Health and the National Science Foundation. Agricultural schools have been able to qualify for these funds as they have shifted their focus to molecular biology and biotechnology.

And this, says Buttel, has skewed research at land-grant colleges away from their mission. In a survey for his studies, Buttel asked university researchers to list who they see as the target clientele for their work and who was being served the least among a group that includes farmers, consumers, and industry. Many agricultural researchers saw farmers as less and less a direct target of their work.

At Berkeley, Rausser, a resource economist, conducted his own study of land-grant colleges and found that fundamental and "public good" research were being pushed aside for the sake of "private good" research. But Rausser came to a different conclusion than Buttel: The solution is not to look for multiple public sources but for strategies to make the private partnerships work better for the university. In the Novartis deal, Rausser wanted to structure the relationship so that the university would have a say in what projects get funded. To this end, the deal provides for a review committee of three Berkeley and two Novartis representatives to allocate funding.

Lining Up Resources

No doubt most people are familiar with the Human Genome Project, a publicly funded endeavor to map out the DNA of humans, mice, and other nonplant species to find the triggers that determine, for example, what makes one person left-handed and another person right-handed or what makes one person more likely to develop Alzheimer's disease than another. But who ever heard of the public corn, potato, or soybean genome projects? Until 1998, such projects were virtually nonexistent.

Late that year, the government launched the National Plant Genome Initiative, a public project that will receive $320 million during its first five years. While laudable, the project will be playing catch-up with private industry, which began its big push to control the elements of agricultural biotechnology—seeds, genes, and genetic information—in 1995.

Between 1995 and 1998, major agrochemical companies, including Monsanto, DuPont, and Novartis, spent $30 billion worldwide in alliances with and acquisitions of companies involved in seeds, crop protection technologies, and life sciences. In the same period, these companies plowed another $983.2 million into research efforts in genomics.

As a result of all of these investments, acquisitions, and mergers, the ownership of the genes, as well as the tools for analyzing and generating information about them, is in the hands of these agrochemical companies. This is creating a scientific no-man's-land that the government will eventually have to confront, but that university scientists—and even corporate researchers—are struggling with today.

Donald Penner is in this state of limbo now. The Michigan State University professor was part of a team that developed a genetically engineered turf grass that was resistant to the herbicide Liberty. The grass had commercial potential. But to produce it, Penner had to round up certain research tools that his university didn't have.

Tools of the trade in biotechnology research include cell lines, viruses, DNA sequences, and genetic-mapping information. Because of the head start they have had in developing genetically engineered crops, the agrochemical companies already have a wealth of devices for developing new crop traits. Penner says that it's possible to develop one's own tools, but it costs time and money. Better to use innovations that are already proven, he reasons.

For his grass, Penner had to go to four companies to get all of the resources he needed; and this meant negotiating four separate materials-transfer agreements, each with different terms. Once he saw he had developed something of value, Penner had to go back to each of the companies, ask permission to make his invention public, and offer each of them a chance to reap financial rewards from it. One, Monsanto, turned him down. The reason: The new grass would encourage the use of Liberty, and Liberty was in direct competition with Monsanto's herbicide RoundUp. The invention sits on the shelf.

Patents in agricultural biotechnology have ratcheted up the price both private and public scientists must pay to participate in this new field.

Issues like this are common in agricultural research. Often a company says no to a researcher because his or her invention will lead to a product that competes with one of the company's own products. This was the case for Oakland, California-based DNA Plants, which had licensed from Monsanto Company the rights to a piece of genetic material called a promoter for the development of a genetically altered tomato. Promoters do the grunt work in genetic engineering, functioning as a propellant for an altered trait. To genetically alter an organism without using a promoter is a little like trying to drive a car without gasoline: It just won't run.

DNA Plants' tomato was called Endless Summer, and it was intended to ripen slowly. Trouble was, Monsanto, which owned the key genetic tool used in Endless Summer, had purchased another company that had developed the FlvrSvr tomato, a competing product. Monsanto said no to DNA Plants, and the Endless Summer never made it to a spring planting season.

When Penner considers the Berkeley-Novartis deal, his favorite bright spot of the arrangement is the end of having to chase research dollars. "You can quickly spend 80 percent of your time [seeking money], and you can't manage the research well." But when asked whether his Berkeley counterparts really are in a better position to access research tools, Penner is cautious. Novartis may become the clearinghouse for research tools at Berkeley, but it may also become a roadblock. Novartis could deny a researcher permission to go forward with an invention be cause a tool used to develop it would be too valuable to let out, he explains. And then the researcher could wind up in the same position as Penner—with his or her invention collecting dust.

Rausser and Novartis have what they think is an answer to Penner's dilemma. The company has first rights to negotiate a license on a portion of the inventions developed under the agreement, and gets a window of 90 days in which it is the lone negotiator. But if Berkeley doesn't like Novartis's offer, Rausser says, the university can turn it down and negotiate with another company. Would Berkeley actually do this—and potentially alienate a large benefactor? Not likely, says Doreen Stabinsky, a former molecular biologist and current member of the board of the watchdog group the Council for Responsible Genetics. "The incentive," she says, "is already there to do the deal with Novartis."

The Problem with Patents

Patents, while encouraging private investment in research, also create scientific monopolies. Companies and institutions receiving patents on inventions get a 20-year head start on any would-be competitor. To use a patented technology, a researcher must request a license, which the patent owner can refuse to grant for any reason. By allowing patents on genes, gene segments, and other genetic tools, the government has created a kudzu of overlapping intellectual property rights.

The situation scientists find themselves in mirrors what Michael Heller has noticed in visits to the former Soviet republics. Heller, an associate professor at the University of Michigan School of Law and an expert in property and international law, says commerce in Russia takes place in scrap metal kiosks on the sidewalks of shopping districts. In the background sit empty storefronts.

The reason? Storefront ownership is fragmented among workers' collectives, privatization agencies, and local, regional, and federal governments. In the transition from government-run shops to private businesses, no individual acquired a bundle of ownership rights. To use a storefront, a business owner has to iron out agreements with each of the owning parties, a process so expensive and bogged down in bureaucracy that it's hardly worth the effort.

The analogous situation in biotechnology is that certain research will not be completed because a scientist gets tired of negotiating licensing agreements. The Berkeley-Novartis deal is supposed to cure this situation. But will it? "What if UC-Berkeley's College of Natural Resources suddenly needs a tool or technology that's owned by one of Novartis's competitors?" asks critic Stabinsky. Gary Pace, general counsel of the Novartis Agricultural Discovery Institute, says Berkeley faculty may use anybody's research, even a Novartis competitor's. But if the research and resources are tied to private funding, then restrictions apply.

Patents in agricultural biotechnology have ratcheted up the price scientists—private and public—must pay to participate in the field. The key area of research in biotechnology is genomics, the process of genetically mapping an organism—yeast, plant, or man—and explaining how specific genes translate into disease or behavior or physical traits. In agricultural biotechnology, genomics is essential in developing new crop traits.

It is also expensive. In the last two years, Monsanto has spent more than $247 million on investments in and research collaborations with genomics companies such as Incyte. In the summer of 1998, Novartis pledged $600 million to develop its San Diego, California—based Agricultural Discovery Institute, which uses genomics to develop new crop traits, crop protection technologies, and animal health applications.

The sheer size of the deal and the fact that the money is coming from a single source mean the price of alienating the funder is very high.

So important is ge nomics research that several top universities, including Harvard and the California Institute of Technology, have recently raised millions for genomics research centers. But their fund-raising cannot keep pace with the private sector.

The University of California, by virtue of its extensive work on the Human Genome Project, is one of the national leaders among universities in genomics. But ironically, despite these advantages, researchers at the university's flagship campus—home of the Lawrence Berkeley National Laboratory, and thus a national leader in human genomics—found that they couldn't keep up. The vast patent portfolios held by the agrochemical companies and the levels of investment they had made put them too far ahead. "The only way we could be on the frontier of genomics is to have a partnership," says Rausser.

But for opponents of privatization, the Berkeley deal grows out of an assumption that is all too current in agricultural research: Private funding is necessary to advance the field. "Private investment [in agricultural research] isn't going to lead to cheaper products for farmers, it's not going to lead to cheaper food," asserts Stabinsky. "The agricultural system is where it's at not because of patents but because of millennia of crop breeding."

A Little Discomfort

For some academics, what's most disquieting about the Berkeley-Novartis agreement is that the deal, by virtue of its size and scope, gives the appearance that Berkeley is collaborating with private industry. Universities and their faculty have long traded on their reputation as the institutions in society that care about advancing a field—the pursuit of knowledge for its own sake. To this end, schools tout the number of Nobel laureates on campus as well as faculty who have served on government and international bodies. Because of this historic role, society looks to universities for impartial, disinterested science. By partnering with Novartis, Berkeley has been compromised in this role, according to Ignacio Chapela, an assistant professor of microbial ecology at Berkeley.

Chapela is experiencing his own ethical dilemma in the wake of the Novartis agreement. By virtue of his past work as a researcher for Sandoz, a Swiss biotechnology and agrochemical company that merged with compatriot Ciba-Geigy to form Novartis in 1996, Chapela has a special understanding of how such companies work.

Because he is now outside the corporate world, he is called upon to mediate between corporations and developing nations to help them work together. Recently, he attended a United Nations-sponsored meeting at which representatives from industrial and developing nations, biotechnology companies, and academia discussed issues of genetic resources worldwide. Chapela says he was brought in as an objective observer on these issues, but because of the Novartis agreement, he felt compromised. "The moment my institution enters into this agreement, I don't have the same face," he says.

Universities, as the impartial policy bodies in society, have a major part to play in examining regulatory, safety, and trade issues in biotechnology. Berkeley professor Brian Staskawicz was going to fill just that sort of role for a National Academy of Sciences committee that was impaneled this year to look into the regulation of genetically engineered crops that produce their own pesticides. The study—the first such examination by the NAS in a decade—comes as the Environmental Protection Agency is in the throes of changing the way it looks at this type of crop.

Staskawicz's work on plant pathogens and efforts to genetically engineer plants for disease resistance to reduce the use of pesticides made him an attractive candidate for the NAS panel. At the same time, Staskawicz's research interests coincide with those of the Novartis Agricultural Discovery Institute, and the highly respected researcher is a participant in the Berkeley-Novartis deal. As a signatory to the Novartis agreement, Staskawicz's participation in the work on the NAS panel, which will end up making recommendations about EPA regulations that will affect Novartis products, presented a potential conflict of interest. NAS staff on the committee told University Business that Staskawicz voluntarily resigned from the panel, citing conflict-of-interest issues. Professor Staskawicz did not return repeated calls by University Business to comment on his resignation.

To be sure, the work of the NAS panel will continue. But if research agreements like the Novartis-Berkeley collaboration are duplicated, then more and more university researchers will find themselves in potentially compromising situations. This potentially leaves fewer and fewer university scientists available for producing impartial science on regulatory issues, and this is what troubles Chapela. "There are major regulatory and safety issues [in science]. Who provides leadership on this? Scientists in academia," he explains. "By entering into this agreement with Novartis ... we are compromising policy."

Parallel Worlds

Instead of having a department where everyone watches one another's ethics and is jealous of one another's research deals, Berkeley's Department of Plant and Microbial Biology, by virtue of the Novartis agreement, has wiped away these hazards of academia and given researchers multiple reasons to get along. If people are worried about the deal, it's because nobody is in a position, really, to say how it will turn out, because no one can see five years into the future. Throughout the university, the Novartis deal is being called an experiment—and this makes some people squeamish.

If there's any conclusion to be drawn about the Berkeley-Novartis deal, it's that one great big research deal is different from lots of little deals. With multiple small deals, academic departments have researchers out making contacts and competing for different grants and arrangements from a diverse group of organizations. This gives a department competing funding interests, which may keep it honest.

In forging such a large deal with a single corporation, it is possible that Berkeley has discouraged other sources of funding—a grantor could turn down a Berkeley proposal because it feels the university is too beholden to the interests of Novartis. While universities and faculty may argue that money grubbing is a bad use of researchers' time, it certainly has good uses. With researchers constantly beating the bushes for funding, a university ensures renewable sources of funding for projects with staggered termination dates. Should a funder have a conflict with the university and decide to cut off support, the school faces a loss of a small percentage of its budget. But the sheer size of the Berkeley-Novartis deal, the single termination date, and the fact that the research money is coming from fewer sources means that the price of alienating the funder is very high. Whether Berkeley will discover this during the course of the deal is a matter of letting an experiment run its course.

The language Novartis officials and Berkeley's representatives use to describe the deal is telling: "The deal with Berkeley is unique; it's an alliance—unique for [Novartis]," says company general counsel Pace. Alliances can be formed because parties have common goals, but they can also be formed between parties to compete with other alliances. Novartis could see the Berkeley deal as a boost in its race against other major players to get its own altered genes into crop plants.

What have some of these players been up to? They have been very busy of late. Monsanto has made aggressive moves in agricultural biotechnology by buying up seed and genetics companies, particularly during the last two years. DuPont announced this spring its purchase of Pioneer Hi-Bred, creating an agrochemical-biotechnology entity that dwarfs Monsanto.

For its part, Novartis is making its way in agricultural biotechnology by generating its own research, pledging $600 million over ten years to construct new facilities, fund research, and build up its genomic databases. The Berkeley deal is a part of this effort, and Pace says the hope at Novartis is that some of the material generated through this agreement will wind up enhancing the Novartis databases.

The Berkeley-Novartis agreement says that Berkeley inventions that are based upon Novartis's genomics databases are the property of Berkeley. What is left unwritten is the fact that Berkeley belongs to the public, that it has a responsibility to serve the public—and that partnering with Novartis may consume resources that should be devoted to that public mission.

With so much money being poured into the development of databases for the private sector, it is getting harder for the public sector to keep pace. Chapela warns that genetics research is on a path where two parallel worlds—one private, one public—will compete for resources. Eventually, one of these will become obsolete because to feed one world (the private sector) is to siphon resources from the other. If more public universities forge research deals with private companies to work with genetics databases, the public will eventually lose out, says Chapela: "By entering into this agreement, we are deciding to row with the private effort."

Other similar agreements may be in the offing. Novartis's Pace says the deal with Berkeley has "generated a lot of interest from other universities. I can imagine it's the size of the commitment, time, duration, the general funding nature. ... This type of agreement would be a tremendous boost to a university's research program."

Kristi Coale ([email protected]) is an associate with the San Francisco-based Center for Investigative Reporting. Her work for this story has been supported through the center's Fund for Investigative Reporting on the Environment (FIRE). She wishes to thank Judy Alexander, Dan Noyes, Dick Satran, and David Weir for all of their help and support.