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Scientists Claim Stanford Undervalued Their Technology in Ion Torrent Licensing Deal

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By Julia Karow

Two Stanford University scientists claim that technology they developed was licensed to Ion Torrent too cheaply — technology they believe is an important contribution to the Ion Torrent PGM platform: the use of hydrogen ion detection for DNA sequencing.

The researchers, Ron Davis and Nader Pourmand, maintain that Stanford's Office of Technology Licensing failed to protect their invention by not involving them in the licensing process. According to Pourmand, the office did not recognize the importance of their invention and licensed it to Ion Torrent "almost for free."

Stanford's OTL says it has a policy against including inventors in licensing negotiations to avoid conflicts of interest, which were present in this case.

Ion Torrent licensed the technology exclusively from Stanford in September of 2009, and so far, Pourmand said, he has received $2,300 from the license.

Pourmand is now an assistant professor of biomolecular engineering and director of the Genome Sequencing Center at the University of California, Santa Cruz, while Davis is director of the Stanford Genome Technology Center and professor of biochemistry and genetics at the Stanford School of Medicine.

Both Pourmand and Davis said they are discussing the matter in public in order to draw attention to the need to protect inventors' interests. "It's about supporting the inventors, and trying to bring some notice to the fact that inventors are so incredibly vulnerable," Davis said. Pourmand pointed out further that he is not seeking any monetary gains or to harm Life Technologies, which acquired Ion Torrent last year, but that he is seeking scientific credit for his invention and hopes his example will help fellow inventors.

The invention at issue is covered by US Patent No. 7,785,785, entitled "Charge perturbation detection system for DNA and other molecules." It was granted to the Stanford Board of Trustees in August 2010 and lists Pourmand, Davis, and Miloslav Karhanek, a colleague at Stanford at the time, as inventors.

Both Pourmand and Davis also served as members of Ion Torrent's scientific advisory board — Pourmand until Life Tech acquired Ion Torrent last year; and Davis until earlier this year, when he resigned.

Pourmand said that over the past two years, he helped the company "to have the system working well," to improve the read length and number of reads, and to validate the system.

Davis said he stepped down from the SAB because under the terms of a confidentiality agreement, he was not allowed to publish results from an Ion Torrent platform that his center had purchased.

While Pourmand believes the '785 patent is "absolutely crucial" to Ion Torrent's sequencing technology, Life Technologies said the Stanford IP is one of many patents protecting the platform but otherwise declined to comment on the patent's significance.

In a statement, Life Tech said it has "a substantial international intellectual property estate comprising more than 100 patents and patent applications for the protection of the Ion Torrent sequencing technology and platform."

This includes patents from DNA Electronics, a UK-based company which said last year that Ion Torrent had non-exclusively licensed its intellectual property. Its IP portfolio includes methods for monitoring DNA synthesis using solid-state biosensors on standard CMOS chip technology.

Pourmand said that the concept of electrochemical detection of reactions has been around since the 1970s, but the application of hydrogen generation and detection for DNA sequencing was his team's invention.

The patent's summary describes the invention as "a method and device for direct electrochemical detection of enzymatically catalyzed DNA synthesis by induced surface charge perturbation." One of the claims specifically refers to a method for detecting a chemical reaction where the reactants "generate a charged particle that is a proton or an electron."

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In a description on its website, Ion Torrent says that when a nucleotide is incorporated into DNA, "a hydrogen ion will be released. The charge from that ion will change the pH of the solution, which can be detected by our proprietary ion sensor."

Davis said he is unable to provide a legal judgment of how important the patent is for Ion Torrent, but said that from a scientific viewpoint, it is essential. "What Nader discovered, and what he has published, is absolutely fundamental to Ion Torrent, in my opinion," he said. "Ion Torrent likes to talk about pH, and we talk about charge. Well, that's the same thing, just different words." Pourmand made his primary discovery in 2001, Davis said, "well ahead of anything, I think, of what [Ion Torrent] did experimentally — years ahead."

'Out of the Loop'

Regarding the license for the patent, Pourmand said he is disappointed with the deal that the Stanford Office of Technology Licensing negotiated. While he could not disclose the terms of the agreement, he said that in his experience as the co-founder of two startup companies, it was "not at all a typical deal," which he said involves both equity and royalty. "Any time you go and ask for an exclusive license, it's impossible to get anything without equity and royalty."

In a typical deal, Pourmand said, Stanford asks for 1 percent or 2 percent equity in the licensing company, of which a third will go to the inventor, a third to the inventor's department, and a third to the inventor's school. Since Life Technologies acquired Ion Torrent for up to $725 million in cash and additional considerations last year, he said the university and the inventors could have gained several million dollars collectively if the tech transfer office had negotiated terms that were in line with previous agreements.

In particular, he said he takes issue with the Stanford OTL's practice of not involving inventors in license negotiations. "I think this is a wrong practice, because possibly, inventors know where a technology can go, what the best home for it will be, and what the value of it is."

According to the OTL's policy, the office does not involve inventors in licensing negotiations because "conflicts that may arise from an inventor's multiple potential roles and relationships — university researcher, royalty recipient, company consultant, company board member — make such participation unwise."

In the case of this particular patent, the inventors had a conflict of interest because they were financially involved with Ion Torrent, according to Kathy Ku, the OTL's director.

Pourmand acknowledged that both he and Davis were advisors and consultants to the company at the time that the agreement was signed, but did not provide details about financial compensation.

Ku declined to discuss the terms of the license agreement, which are confidential.

According to Davis, the OTL's policy does not always serve the university or the public. In this case, he said, "the university was so scared of a conflict of interest, since we were advising Ion Torrent at the time, that they wanted to keep us totally out of the loop."

This case, he said, "is a perfect illustration that you should not keep people out of the loop that have some understanding of the situation. You can take our control away, so we don't have veto power, but we should have been more involved in it."

The OTL's policy does note that the office works closely with inventors during the patenting and marketing process and encourages their input "as a source of leads for potential licensees, for giving us a professional assessment of the technical and market feasibility of the invention, and for suggestions on how to license the technology best." Pourmand said, though, that the office did not seek his or his colleagues' advice or input for the license of the patent.

Other institutions' technology licensing offices take a similar stand to Stanford and do not involve inventors in negotiating financial terms of licensing agreements. According to Carl Gulbrandsen, managing director of the Wisconsin Alumni Research Foundation, which handles inventions of researchers at the University of Wisconsin-Madison, the inventor often "is not a good judge of the street value of his/her invention. The market is the best indicator."

In addition, he said, involving many stakeholders is not practical and may lead to a lower valuation or no deal at all. "WARF is the owner and WARF’s mission is to license the technology for the benefit of the university, the inventors, and the public as a whole. The goal is to get the technology used to improve lives," he said. "We strive to obtain good value, but at the end of the day, technology used and paying a fair royalty is better than holding out because you overvalue the technology, not getting it used and not earning anything," Gulbrandsen said in an e-mail message.

But according to Davis, inventors' interests need more attention. "I think the whole idea of a patent was to protect the inventors, but it's gotten a bit distorted. Other people want to own and control [the invention]." His case, he said, "won't solve anything," but "I would love to see something new happen so inventors can be more protected."


Have topics you'd like to see covered in In Sequence? Contact the editor at jkarow [at] genomeweb [.] com.

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