TopTop

Shadow

Search

advanced search
search help

 

ipHandbook Blog

Your source for expert commentary on IP management issues.
Go to the blog

 

About

Editor-in-Chief,   Anatole Krattiger

Editorial Board

Concept Foundation

PIPRA

Fiocruz, Brazil

bioDevelopments-   Institute

CHAPTER NO. 17.22   Lessons from the Commercialization of the Cohen-Boyer Patents: The Stanford University Licensing Program
Editor's Summary, Implications and Best Practices

Krattiger A, RT Mahoney, L Nelsen, JA Thomson, AB Bennett, K Satyanarayana, GD Graff, C Fernandez and SP Kowalski. 2007. Editor’s Summary, Implications and Best Practices (Chapter 17.22). From the online version of Intellectual Property Management in Health and Agricultural Innovation: A Handbook of Best Practices. MIHR: Oxford, U.K., and PIPRA: Davis, U.S.A. Available online at www.ipHandbook.org.

© 2007. A Krattiger et al. Sharing the Art of IP Management: Photocopying and distribution through the Internet for noncommercial purposes is permitted and encouraged.

Editor's Summary

This chapter provides an excellent demonstration of a public sector institution fulfilling its mission through the ownership and licensing of intellectual property. The invention of recombinant DNA technology by Cohen and Boyer in 1974 in many regards spawned the biotechnology industry; however, the carefully developed strategy by which Stanford University managed and protected the intellectual property also shaped the longer-term social and economic perceptions regarding public sector IP management. As this chapter details, Stanford’s Cohen-Boyer license established several important standards that effectively address the political and social mission of the university as well as the realities of the technology marketplace.

First and foremost among the lessons of the Cohen-Boyer license is to keep the big picture of the university’s mission front and center. Profit was never the primary motive behind the Cohen-Boyer license. Rather, Stanford sought to serve the public interest, to create economic opportunities by offering incentives to develop the technology, to minimize biohazards from new technology, and lastly to provide resources for ongoing education and research. Stanford carefully balanced legitimate financial objectives against goals of openness and access. Stanford intentionally gave up any extensions to the terms of patents over the technology. The university also never required other nonprofit research organizations to take a license, establishing and reinforcing a research-use exemption consistent with the norms of open science.

Second, the Cohen-Boyer license was crafted via broad consultation with all stakeholders to arrive at a consensus. The government agency that provided the research funds that had supported the invention was, in particular, deeply involved in generating possible alternative strategies for managing the technology and arriving at the compromise consensus. The university openly published its patent application documents so that no one would be surprised by the resulting patent claims. In the end, this strategy of openness and consensus building likely strengthened the position of Stanford with regards to the Cohen-Boyer license.

Third, despite the breadth of the Cohen-Boyer patent and the university’s legal rights to exploit it, Stanford did not act opportunistically or seek short-term gains. Rather, pains were taken to keep the terms of the non-exclusive license highly standardized and very fair and to keep fees and royalties at a level that would encourage widespread uptake and further development of the technology.

Fourth, amidst the dynamic development of the technology market, the licensing team at Stanford remained flexible and experimental, updating the standard license through five different versions as well as adapting it for nonstandard cases as needed. The successive rounds of new licensees recruited after each update attested that the needs of the marketplace were dynamic and that new economic opportunities could be addressed by adjusting the terms. Indeed, the overall economic impact of the Cohen-Boyer technology would have been less without such flexibility and adjustments to the terms of the license over time.

Criticisms of the Cohen-Boyer license have come from both sides. Some suggest that the technology should have been put in the public domain with no royalties taken. Other, more business-minded supporters of Stanford suggested that the university should have been more aggressive with its property rights, been more restrictive in licensing, or charged higher fees. While it is difficult to establish what would have resulted from these scenarios, there is good reason to believe that the growth of the biotechnology industry would have been significantly stunted. As it was managed, over 2,400 products came to be based on the Cohen-Boyer technology and generated over $35 billion in sales before the patents expired. Exclusive licensing to a handful of industry leaders would likely have resulted in a small oligopoly dominating the technology and developing only a fraction of the most obvious products. Alternatively, cast to the public domain, the early stage technology would likely have attracted fewer high risk investments and, perhaps counter intuitively, would have been susceptible to capture by one or two dominant companies through a combination of trade secrecy, patenting of immediate follow-on inventions, and domination of a range of necessary technological complements.

Patenting of the Cohen-Boyer technology, followed by its careful “cultivation” via a broad nonexclusive licensing strategy, further developed the technology. Indeed, prioritizing and facilitating access was consistent with a university’s commitment to a public service mission, stood in society’s best interests, and has led to the creation of the biotechnology industry as we know it today.

Key Implications and Best Practices

Given that IP management is heavily context specific, these Key Implications and Best Practices are intended as starting points to be adapted to specific needs and circumstances.

For Government Policymakers

  • Returns to technology transfer are always highly skewed. The Cohen-Boyer technology was a rare treasure, an exception amongst thousands of inventions that do not pay off. Furthermore, of the 468 licensees to the Cohen-Boyer technology, ten companies alone generated 77 percent of the total revenues over its lifetime.
  • This case study demonstrates how an academic institution could make good use of innovation by adopting flexible licensing practices rather than being required to follow a certain pre-determined approach.

For Senior Management (university president, R&D manager, etc)

  • The Cohen-Boyer patent story shows that senior management has much to gain by being flexible and highly innovative in order to accommodate the great uncertainties it will likely face in technology licensing.
  • The economic impact of the Cohen-Boyer technology would have been less without flexibility and adjustments to the terms of the license. By the end, five different versions of the standard Cohen-Boyer license had been developed. In addition, three nonstandard licenses were created to provide alternatives for licensees with special circumstances, such as small distributors and companies interested in the technology only for early stage R&D purposes.
  • In the Cohen-Boyer patent story, Stanford carefully balanced legitimate financial objectives against goals of openness and access. This illustrates how the institutional mission ought to drive a public sector institution’s IP management licensing strategy, and not vice versa.

For Scientists

  • Respect the tradition of open science even as you engage the world of technology licensing. Indeed, this is what gives rise to the very technologies licensed and transferred. This spirit of openness and access ought to prevail even in the licensing of technologies, as it did in the classic Cohen-Boyer licensing story.
  • Just as the odds of making big scientific breakthroughs, the odds of making big contributions in technology licensing are highly skewed. Generally, expect the return from a patent license to be modest. However, there is the rare instance when it just might generate a significant revenue stream.

For Technology Transfer Officers

  • The Stanford office of technology licensing chose royalty rates after consultation with industry at levels that were designed to maximize uptake and development of the technology by biotech companies, and not to maximize Stanford’s short-term licensing revenue flow.
  • The economic impact of the Cohen-Boyer technology would have been less without flexibility and adjustments to the terms of the license. By the end, five different versions of the standard Cohen-Boyer license had been developed. In addition, three nonstandard licenses were created to provide alternatives for licensees with special circumstances, such as small distributors and companies interested in the technology only for early stage R&D purposes. The lesson: licensing flexibility facilitates broad access and development.
  • The Cohen-Boyer patent licensing story illustrates how broad, equitable access drives technology development. Short-term, opportunistic approaches neither fit into a public sector institution’s mission nor will they maximize a technologies development potential.

Krattiger A, RT Mahoney, L Nelsen, JA Thomson, AB Bennett, K Satyanarayana, GD Graff, C Fernandez and SP Kowalski. 2007. Editor’s Summary, Implications and Best Practices (Chapter 17.22). From the online version of Intellectual Property Management in Health and Agricultural Innovation: A Handbook of Best Practices. MIHR: Oxford, U.K., and PIPRA: Davis, U.S.A. Available online at www.ipHandbook.org.

© 2007. A Krattiger et al. Sharing the Art of IP Management: Photocopying and distribution through the Internet for noncommercial purposes is permitted and encouraged.