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UC-Berkeley to Host BP’s $500M Bio-Energy Institute Under Shared Lab Space, IP Model

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The University of California, Berkeley; Lawrence Berkeley National Laboratory; and the University of Illinois at Urbana Champaign last week finalized a contract with British energy firm BP establishing a $500 million joint Energy Biosciences Institute that will conduct biotechnology-based alternative energy research.
 
The agreement, which Berkeley said is the largest public-private collaboration of its kind, contains several unusual terms, such as earmarking lab space on the university campuses for proprietary BP research and allowing BP representatives to have equal control over research projects, that critics have said are contrary to the missions of the academic institutions.
 
However, according to university officials, the agreement with BP was constructed to speed the commercialization of bio-based energy research at the schools and to maximize the impact of ongoing research in this area as opposed to maximizing licensing revenues — something that universities have also been criticized for in the past.
 
The three research institutes signed a final contract with BP last week after several months of negotiations. BP announced in 2006 that it would invest $500 million over the next 10 years to establish the institute and, in February of this year, the British oil giant selected a joint proposal from UC-Berkeley, LBNL, and UIUC out of five international proposals, UC-Berkeley said.
 
UC-Berkeley will serve as the lead non-profit entity in the agreement, and a majority of EBI’s lab space will be located on its campus. The institute will perform research aimed at the production of new and cleaner energy, with an initial focus on advanced biofuels, UC-Berkeley said.
 
The institute will also pursue bioscience-based research in three additional areas: the conversion of heavy hydrocarbons to clean fuels; improved recovery from existing oil and gas reservoirs; and carbon sequestration, the university said in a statement about the agreement.
 
Under the terms of the contract, EBI will be divided into two organizationally and physically separate components: an open component, which will involve research conducted in concert by UC-Berkeley, LBNL, UIUC, and BP scientists; and a proprietary component, which will consist of research conducted by BP employees only.
 
The open component will be conducted in laboratories at the EBI mostly on Berkeley’s campus, but also at LBNL and UIUC, and will be subject to the normal academic policies and practices of those institutions, UC-Berkeley said.
 
Meantime, the proprietary component will take place in rented lab space at UC-Berkeley and UIUC, in physically separate labs with controlled access. University research, while taking place in adjacent labs, will not take place in proprietary BP labs.
 
Of the approximately $50 million annual EBI budget, about $35 million will fund open academic research and $15 million will fund proprietary research, UC-Berkeley said.
 
According to Carol Mimura, assistant vice chancellor for intellectual property and industry research alliances at UC-Berkeley, the EBI decided on the unusual lab space structure in order to prevent bottlenecks that typically occur in sponsored research agreements.
 
“Real-time feedback from industry in this one field in particular is deemed to be very valuable input for us,” Mimura said, noting that the agreement includes a “typical publication preview clause” that allows BP to check manuscripts prior to publication “to make sure we haven’t inadvertently included any confidential information.”
 
BP will also be able to discuss options for filing patents before publication — a process that is often long and arduous in university-industry collaborations.
 
“In this case that process is going to be even faster than usual, because the person doing that vetting will be right here,” Mimura said. “So it’s possible that there won’t even be the publication delay that could be possible under these types of agreements.”
 
In terms of IP ownership and licensing rights, the schools and BP have adopted what Mimura called a “yours, ours, and mine” approach that takes into account the various contributions to each research project.
 
Specifically, inventions made solely by BP employees in proprietary laboratory space will be owned by BP, while inventions made solely by UC-Berkeley, LBNL, or UIUC employees in open lab space will belong to the non-profits. Inventions made by at least one inventor from any of the public entities and at least one inventor from BP will be jointly owned.
 
As the funding entity, BP will be granted a non-exclusive, royalty-free right to commercialize discoveries made in the EBI in the energy field, UC-Berkeley said. BP will also be able to sublicense its licensed rights to others, including BP affiliates and qualified joint venture partners. Meanwhile, EBI will be able to grant additional non-exclusive licenses in the energy field and even exclusive licenses to the same invention outside the energy field.
 
BP also has the first right to negotiate an exclusive, royalty-bearing license in the energy field to IP rights owned by the public entities that arise from BP-funded research, and it has the right to sublicense those rights to other companies in the energy field.
 
The royalty terms for each license agreement will be negotiated at the time of the agreement and will depend on the technology being licensed, but will not exceed $100,000 per year, UC-Berkeley said. “In exceptional cases where the licensed invention represents truly breakthrough technology such that the licensed invention has grossly higher commercial value than originally contemplated, the parties will evaluate in good faith an adjustment to the royalty fee,” the school said.
 
Mimura told BTW that one of the biggest challenges in forming the EBI was “creating a consensus position” among the three research institutes, each of which has different rules and regulations concerning sponsored research and ownership of intellectual property, among others.
 
“We are all public entities on the research collaborator side — two are universities, but [LBNL] is a national lab with [US Department of Energy] rules and restrictions,” Mimura said. “There were quite a few moving parts that needed to be addressed. We do not normally have that large of a coordination challenge.
 
As an example, LBNL’s involvement in the EBI required the institute to seek a waiver on US codes such as mandating preference for US industry in licensing inventions supported by federal funding, and allowing the US government to retain an automatic, non-exclusive, royalty-free license to such inventions.
 
“These are [only] enforced at the universities if there is federal funding involved,” Mimura said. “So under corporate-sponsored research, we do not automatically protect those rights. But [for] LBNL, given that it is DOE funded — even though it’s regentially managed — the opposite would be true. The mere performance of their people, or use of their facilities, would cause these federal rights to be protected.”
 
Mimura said the EBI was able to secure a waiver of the preference-for-US-industry code so that “if BP exclusively licenses something, they are not required to substantially manufacture products to be sold to the US in the US. For instance, they could site an ethanol-producing plant in Brazil if they use sugarcane from Brazil. Without that waiver, they would have to ship the sugarcane here and then convert it.”
 
Undue Influence?
 
As was widely reported in national news outlets, word of the contract’s finalization drew immediate criticism from a variety of concerns, including Berkeley-based faculty and student groups, who lamented the sullying of UC-Berkeley’s mission as an institution dedicated to public service, not private corporations.
 
In particular, watchdog group Foundation for Taxpayer and Consumer Rights issued a scathing release following the finalization of the contract that called the agreement an “insult” to the board of regents of the UC system and the public.
 

“It bridges the gap that we traditionally face when we innovate with federal funds and have an outcome that is far from being an actual commercial product, and in more than the usual way by starting with certain parameters such as knowing what the relevant problems in industry are.”

FTCR claimed that the general public, who is a shareholder of the UC system, should have been able to voice its concerns about the agreement before it was ratified, and that BP’s “secret” research will run counter to the university’s edict of conducting science to benefit the general public.
 
“BP researchers will be able to suck up the best of what Berkeley’s scientists have to offer, retreat behind locked, guarded doors and pursue their corporate agenda without giving anything back,” John Simpson, a consumer advocate with FTCR, said in a statement. “It is shameful.”
 
FTCR also claimed that the final agreement differed from the original proposal in that the EBI’s governance committee gives BP more control of the institute and research projects. In the original proposal, the committee was made up of three academic representatives and two BP representatives; however, the signed contract calls for the committee to be made up of four Berkeley representatives and four BP representatives.
 
Because all of EBI’s actions must be approved by a majority, in the case of a tie and when the Berkeley chancellor and BP representative cannot agree, then the action is rejected, FTCR said.
 
“BP can thwart any action they wish … and thus cannot be trusted to wield such a large amount of influence regarding EBI’s direction,” said Simpson.
 
But according to Mimura, the relationship with BP will further the mission of the research institutions – in particular UC-Berkeley and UIUC, which are Morrill Land Grant institutions – to speed the transformation of early-stage bench-top research to commercial products that benefit the general public.
 
“It bridges the gap that we traditionally face when we innovate with federal funds and have an outcome that is far from being an actual commercial product,” Mimura said. It bridges this gap in more than the usual way by starting with certain parameters such as knowing what the relevant problems in industry are.
 
“We are following here more of a technology pull model, which has been our model in certain fields already, especially engineering and agricultural biotechnology,” she said. “Our principal investigators tell us that it has been quite useful in their fields to know what the societal problems to be solved are, and where they can help from an academic standpoint by doing basic research as usual.”
 
Mimura also said that while the location of BP’s labs on campus property is relatively unusual, it is not completely unprecedented, especially at Berkeley, where the offices of partner corporations such as Yahoo! are located just on the periphery of campus.
 
Mimura said that she doesn’t buy the argument that the institute is contrary to the mission of a land-grant institute.
 
“I have always understood the Morrill Act to be the opposite, that it was a mandate to innovate, and that when you had an innovation that could solve the problems of society, you translate those results to the private sector, whether it’s through teaching and graduating students, publishing, and speaking or, since the 1980s, through perfecting IP rights and licensing.”
 
She also said that much of the furor of the agreement might be chalked up to the fact that many people are unaware that industry-sponsored research happens on most university campuses every day, “and to hear about it on this magnitude, taken together, might be shocking. In fact, it’s been happening for decades,” she said.
 
“Or it’s just possible that people believe there is a certain percentage of your research that should be sponsored by industry, a certain number above which they question whether it is appropriate,” Mimura added. “But I don’t know what number they feel would [be] inappropriate.”
 
Several critics also said that the $100,000 cap on royalties paid by BP on licensed inventions was unusual and possibly detrimental to the public entities’ ability to recoup maximum value on inventions that were essentially funded by the government.
 
Mimura said that EBI arrived at that cap number by examining UC-Berkeley’s current portfolio of licensed patents, and noting that only about four percent of them earned more than $100,000 per year in royalties. Mimura also said that UIUC and LBNL representatives felt the cap was appropriate, and that it is consistent with the overarching goals of technology transfer.
 
“We are not trying to maximize revenue from IP licensing,” Mimura said. “We are trying to maximize funding for research at the university in an environment of declining public support, including from the state, even at the expense of speculative future licensing income. We’re trying to maximize the impact of our science, rather than maximizing revenues.”
 
She added that every researcher funded under EBI will sign an informed consent letter in which they agree to the institute’s governing terms, “which implicitly means they are not hoping to get rich off inventions, but that they value the research funding rather than the goal of maximizing licensing revenue,” Mimura said.
 
“Not that $100,000 per year is trivial,” she added.

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