U to take cut of OTC patent revenues

The revenue stream from a blockbuster patent is quickly expiring, and the Office of Technology Commercialization at the University of Minnesota is scrambling to find new ways to stay on solid footing.
OTC is funded exclusively by revenues from royalties from spinoff companies, and with the patent on the AIDS drug Ziagen expiring in 2013, the office is preparing for the decline in revenue.
The University Board of Regents on Thursday unanimously approved a 15 percent service fee for technologies licensed through the OTC. The change will balance the risk among recipients of the revenue.
The change in policy would align the University with peer institutions across the country, said Tim Mulcahy, vice president for research.
“With the revenue stream now declining, we really needed to figure out a way to make sure the risks and costs associated with technology commercialization were being shared equally across the University,” he said.
The charge will be used to pay for attorney and patent fees and any other miscellaneous expenses. Under the former policy, the University would pay for the fees by dipping into the University’s slice of the revenue — a third of patent’s profits.
Now the fees will come out of profits before they are divided among the University, the department at the college where the research originates and the researcher, said John Merritt, spokesman for the Office of the Vice President for Research.
A majority of faculty agree with the change, saying it’s important to maintain the incentive for researchers to have technologies licensed, Mulcahy said. But some faculty said they have their concerns.
“I do find this to be more problematic,” said College of Pharmacy researcher Serguei Pakhomov. “Now instead of [the University] spending money out of their own budget, they will be spending it out the college’s budget and my budget.”
Pakhomov designed an automated language and speech analysis software that he hopes will be licensed through OTC.
“I think what it will allow us to do is to maintain a robust process and office that will be able to enhance our probability of success,” Mulcahy said. “It will allow us to basically fund more protection for more technologies because we will have a more stable source of revenue.”
“It’s something that has been in the works for about a year now,” Merritt said.
As a result of chopping the fee from the profits before dividing them, the inventor and the research department will see a small decrease in what they originally would receive.
“We think it’s a rebalancing of the risk equation because the University is assuming all the risks [if a company fails] and the department gets all the benefits,” Mulcahy said. “It’s really adopting a business model that is more mainstream across the country.”
While the Ziagen royalties revenue stream is declining — the international patent ran out this year — OTC officials believe a combination of several technologies already licensed will keep OTC afloat for now.
“It’s not often you come across a blockbuster like [Ziagen],” Merritt said.