U to take cut of OTC patent revenues

The office, inventors and their depts. will split the cost of commercialization.

by Frank

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.
âÄúWith 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,âÄù 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 UniversityâÄôs slice of the revenue âÄî a third of patentâÄôs 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 itâÄôs important to maintain the incentive for researchers to have technologies licensed, Mulcahy said. But some faculty said they have their concerns.
âÄúI do find this to be more problematic,âÄù said College of Pharmacy researcher Serguei Pakhomov. âÄúNow instead of [the University] spending money out of their own budget, they will be spending it out the collegeâÄôs budget and my budget.âÄù
Pakhomov designed an automated language and speech analysis software that he hopes will be licensed through OTC.
âÄúI 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,âÄù Mulcahy said. âÄúIt will allow us to basically fund more protection for more technologies because we will have a more stable source of revenue.âÄù
âÄúItâÄôs something that has been in the works for about a year now,âÄù 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.
âÄúWe think itâÄôs 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,âÄù Mulcahy said. âÄúItâÄôs really adopting a business model that is more mainstream across the country.âÄù
While the Ziagen royalties revenue stream is declining âÄî the international patent ran out this year âÄî OTC officials believe a combination of several technologies already licensed will keep OTC afloat for now.
âÄúItâÄôs not often you come across a blockbuster like [Ziagen],âÄù Merritt said.