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Monsanto, UC End Dairy Patent Feud: University Gets $100 Million-Plus; Biotech Firm Keeps License Rights.

Posted on: Tuesday, 28 February 2006, 12:00 CST

By Jon Ortiz, The Sacramento Bee, Calif.

Feb. 28--The University of California will receive more than $100 million from Monsanto Co. to settle a patent dispute over a hormone that boosts dairy cow milk production.

The deal, reached Monday, ends a 2-year-old lawsuit claiming that the St. Louis-based biotech firm violated the university system's patent on the engineered DNA used to make bovine somatotropin, or BST, a hormone that increases the amount of milk a cow can produce by up to 15 percent.

Both sides expressed satisfaction with the settlement, and legal experts say the case highlights a trend that has seen universities suing private business over patents as a way to protect their interests and generate research revenue.

"This settlement represents a positive outcome for both parties, by protecting the university's patent rights and by providing Monsanto with the opportunity to market and distribute this important product," said UC lawyer James E. Holst in a statement.

Under the terms of the deal, Monsanto pays the UC system $100 million now and at least $5 million in annual royalties on Posilac, the brand name of the BST hormone the company sells to dairy producers.

The annual payments end in 2023, when the university's patent expires.

In exchange, Monsanto gets an exclusive commercial license to make the hormone, which is administered to about a third of the 8.1 million cows in the national dairy herd, according to UC spokesman Trey Davis.

"We're pleased that we've come to an agreement that will allow our dairy producer-customers to continue to use Posilac," said Carl Casale, a Monsanto vice president, in a Monday press release.

The lawsuit alleged that three UC San Francisco scientists - John Baxter, Joseph Martial and Walter Miller - discovered the DNA that is key to making the hormone and that Monsanto sold its product despite knowing about the research as early as 1985.

Debate over the safety of BST-produced milk for human consumption surfaced when the U.S. Food and Drug Administration approved its use in 1993.

Monday's agreement averted a trial, which was scheduled to start the same day.

The settlement kept Monsanto from facing a jury and, quite possibly, much higher losses, said Amy Landers, a professor at Sacramento's McGeorge School of Law.

"Given the scale of the awards lately, you just never know what a jury is going to do," said Landers, a patent law expert.

For example, a jury in 2003 ordered Microsoft to pay $521 million for infringing patents held by Eolas Technologies Inc. and the University of California on code that lets software applications work with Web browsers.

And last year a federal jury awarded $82 million to San Jose-based Immersion Corp. after it decided that Japanese electronics manufacturer Sony Corp. had infringed on technology patents to enhance the sense of realism in some of its video games.

Research universities long have guarded their intellectual property, Landers said. Stanford, with its deep roots in the Silicon Valley high-tech industry, has become a model for how a school sues to protect itself, she said.

"They develop technology, patent it and then assert the patents to get more money for research," Landers said.

It's "very common" for research schools to now have an office devoted to technology licensing and patent enforcement, she said.

The Monsanto-UC settlement is something of a lemons-to-lemonade arrangement, since Monsanto also will have the right to restrict other manufacturers from using the patented technique.

"Monsanto's got the market cornered on this," Landers said. "Now it can stop its competitors cold."

Because the university's work was funded with federal money, Monsanto's payments must be earmarked for research.

Monsanto's shares on the New York Stock Exchange on Monday rose to $85.19, up 55 cents.

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Copyright (c) 2006, The Sacramento Bee, Calif.

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Source: The Sacramento Bee

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