[Ip-health] WSJ: Eli Lilly Faces Patent Challenge From a Long-Ago Collaboration

[Amy Nunn]

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See article about a patent dispute between Lilly and a Stanford University
Professor. Amy Nunn



Paternity Suit: NIH Scientists Helped Clone Gene That Led to a Drug; Now, a
Spat Over Credit U.S. Wants Royalties, Too



By JOHN CARREYROU

In February 2001, a lawyer for Eli Lilly
<http://online.wsj.com/quotes/main.html?type=3Ddjn&symbol=3Dlly>  & Co. cal=
led
Gerald Crabtree, a Stanford medical school professor, to seek his help in a
patent challenge. The pharmaceutical company was embroiled in a dispute wit=
h
another university over who had first cloned a gene that formed the basis o=
f
a Lilly drug.

Dr. Crabtree was angered by the request. He had collaborated with Lilly on
researching the gene, called Protein C, for six years during the 1980s. But
Lilly had never told him it filed for a patent on their work. Worse, the
patent it received didn't credit him as a co-discoverer. "I felt betrayed,"
he says.

Now Lilly has a new court fight on its hands. Dr. Crabtree and a research
colleague of his from the 1980s contend they are the ones who cloned the
Protein C gene, and that Lilly left them off the patent filing to avoid
paying them royalties. The drug Lilly went on to develop is Xigris, used fo=
r
the blood infection sepsis. It was a $215 million seller for Lilly last
year.

Lilly says the contribution of Dr. Crabtree and his former research
colleague, Jorge Plutzky, was minor. The company sued them pre-emptively in
2003 to uphold its patent. They filed a countersuit in another court. In
March, a federal judge ruled in Lilly's favor. The scientists now are
appealing.

The case offers a vivid look at how drugs are now built on many overlapping
areas of scientific work, ranging from identifying one or several genes tha=
t
affect a disease to developing a compound and a mechanism to deliver it.
Work in all of these areas can be patented, making life complicated for
pharmaceutical companies as they often draw on other people's work to
advance their own.

Illustrating that difficulty, Lilly settled another patent case related to
Xigris in 2003. And just last week, a federal jury in Boston ruled that
Lilly owed about $65 million to two universities, a biomedical research
institute and a biotech firm for having infringed on another patent while
developing Xigris and another drug.

The Protein C case is also a testament to how much the research climate has
changed in the past 20 years. Scientists, universities and the government,
once lax about protecting their intellectual-property rights, have all
become more aggressive about claiming ownership of discoveries and pursuing
royalties.

An early spur to this shift was a 1980 law that allowed universities to
retain the rights to intellectual property developed with federal research
grants. Scientists started becoming savvier about filing patents, and
universities began setting up licensing arms. The National Institutes of
Health followed suit in 1990, creating an Office of Technology Transfer to
reap the financial benefits of its huge research apparatus.

Drs. Crabtree and Plutzky began working with Lilly on Protein C in 1983. Th=
e
two, then researchers at the NIH, didn't put the terms of their
collaboration with the company in writing. The omission, which would be
unthinkable today, left a legal void that is now at the center of the case.

The NIH has joined the legal fray, siding with the two scientists against
Lilly. But the NIH disagrees with them about who should get the bulk of any
royalties on Xigris. It says in court filings that most royalties should go
to the government, since Drs. Crabtree and Plutzky were working in NIH labs=
.

Lilly began focusing on Protein C in the early 1980s after other scientists=
,
not employed by the company, had the insight that the substance prevented
clots from forming in the blood. Lilly figured that if it could isolate and
clone the gene responsible for producing this protein, it might have a
potential weapon against some blood diseases.

Lilly scientists managed to clone the Protein C gene of a cow but were
unable to clone the human version, according to a complaint filed by Drs.
Crabtree and Plutzky in federal court in San Jose, Calif. The complaint sai=
d
that a Lilly scientist, George Long, approached Dr. Crabtree for help in
1983.

Dr. Crabtree, then 36 and a senior NIH investigator, was a leader in
molecular biology and had won acclaim for applying the emerging field's
techniques to blood coagulation. After agreeing to collaborate with Dr. Lon=
g
and Lilly, Dr. Crabtree says, he brought in Dr. Plutzky, then a 24-year-old
medical student doing a fellowship in his lab. Using a vast library of DNA
that Dr. Crabtree had assembled from human livers, Dr. Plutzky succeeded in
isolating and cloning the human Protein C gene around Christmas of 1983, th=
e
two scientists say.

"When I made the breakthrough, Jerry [Crabtree] told me something to the
effect of: 'You've just done what an entire pharmaceutical company was
unable to do,'" says Dr. Plutzky. He adds that he recorded the discovery in
his laboratory notebook and sent the Protein C gene clone, contained in
three test tubes, by mail to Dr. Long at Lilly.

Lilly disputes parts of this version. It says Dr. Long's notebook shows he
received an impure DNA fragment of the gene from Dr. Plutzky and never used
it. The company says its scientists went on to isolate and clone the human
gene on their own, starting from scratch.

Whatever the case, Drs. Crabtree and Plutzky and some Lilly scientists,
including Dr. Long, then co-wrote a research paper about the discovery. A
journal called Nucleic Acids Research accepted it on June 19, 1985, and
published it later that year.

Unknown to the pair from NIH, Lilly had applied for a patent on the Protein
C gene three months before this paper was submitted. Lilly acknowledges it
didn't tell Drs. Crabtree and Plutzky it was filing for a patent but says i=
t
assumed they knew it would do so. The filing resulted in a patent about 3
1/2 years later.

[Lilly]Drs. Crabtree and Plutzky both left the NIH. Dr. Crabtree joined
Stanford University's medical school at the start of 1985, continuing to
work with Lilly on Protein C for four years. He's now a professor of
developmental biology and pathology at Stanford, a member of the Howard
Hughes Medical Institute and an inductee into the National Academy of
Sciences. Dr. Plutzky finished medical school at the University of North
Carolina and did a residency at Harvard Medical School, where he now
teaches. He also directs a vascular-disease program at Boston's Brigham and
Women's Hospital.

Dr. Crabtree says he learned of the Protein C patent while surfing an onlin=
e
database of patent cases, just a few months before Lilly contacted him in
early 2001. He says his anger boiled over when Lilly then sought his help i=
n
a patent dispute with the University of Washington. That university also ha=
d
a patent related to the protein and claimed it had been first to isolate an=
d
clone its gene. (The case eventually ended with a ruling that left both
patents intact, as covering separate discoveries.)

Lilly "wanted my lab notebooks," Dr. Crabtree says. "They had to know Jorge
and I were inventors if they wanted our lab records."

Dr. Crabtree said he had lost his notebooks in an office move. Dr. Plutzky
still had his. The two agreed to meet with Lilly's lawyers at the San
Francisco airport in April 2001. During the meeting, Dr. Crabtree says, he
raised his concern that his and Dr. Plutzky's names had been unjustly left
off the patent. He says Lilly's lawyers showed little interest, pressing
instead for any material that could help Lilly's case against the Universit=
y
of Washington.

Dr. Crabtree says he tried to get in touch with Dr. Long, the Lilly
scientist he had collaborated with, to confront him about the patent. Dr.
Long had left Lilly in 1986 for the University of Vermont College of
Medicine. Dr. Crabtree says he placed a number of calls to him there but
they weren't returned. Dr. Crabtree also says that a couple of years later,
he gave a lecture at the Vermont school but Dr. Long didn't attend.

Dr. Long says he never received any phone calls from Dr. Crabtree, didn't
try to avoid him, and missed the lecture because of a competing obligation.
Though Dr. Long's name appears on Lilly's patent, he hasn't had ties to the
company since the late 1980s and doesn't receive royalties on sales of
Xigris.

In June 2002, the Intellectual Property Owners Association awarded Dr. Long
its Inventor of the Year award for his work on Protein C, fueling Drs.
Crabtree's and Plutzky's sense of injustice. They say Dr. Long wouldn't hav=
e
gotten anywhere with the protein without their help. Dr. Long disagrees. "I
don't believe Crabtree's contributions were at all crucial to our success i=
n
the Protein C research," he says.

In early 2002, Lilly's annual report for the prior year devoted four pages
to Xigris, which had recently won approval as a treatment for sepsis, a
blood infection that kills about 215,000 Americans a year. The report
trumpeted Xigris as an important new drug developed entirely in-house. It
quoted a Lilly scientist as saying that developing it had been as
challenging as "putting a man on the moon."

Dr. Crabtree says he exchanged emails and letters with Lilly lawyers for tw=
o
years after the initial meeting at the airport in April 2001. Though there
wasn't yet any litigation between them, Lilly agreed in April 2003 to
discuss a settlement.

The following month, Lilly settled a separate dispute over Protein C. The
challenger in that case was the Oklahoma Medical Research Foundation, where
a researcher had patented discoveries about how to use the protein to treat
sepsis around the same time as Drs. Crabtree and Plutzky worked with Lilly
on the gene. Lilly had licensed the Oklahoma foundation's findings but
refused to pay the foundation royalties after Xigris reached the market.
Lilly and the foundation won't discuss terms of their settlement, but the
Oklahoma researcher involved, Charles Esmon, says that "in the end,
everything came out OK."

During disputes, pharmaceutical companies sometimes file pre-emptive
lawsuits in their hometowns in the hope of gaining the home-court advantage
of a friendly jury. After talks with Drs. Crabtree and Plutzky broke down i=
n
mid-2003, Lilly asked the federal court in Indianapolis, where it is based,
to issue a "declaratory judgment" saying its patent was valid. Drs. Crabtre=
e
and Plutzky countered by filing a complaint in federal court in San Jose,
but weren't able to change the venue.

Later in 2003, Dr. Crabtree flew to Washington, D.C., to inform the NIH of
the dispute. The following year the NIH intervened in the litigation,
claiming ownership of the discovery. The NIH wouldn't comment for this
article.

Last month in Indianapolis federal court, Judge Larry McKinney ruled in
Lilly's favor. He agreed with its position that Drs. Crabtree and Plutzky
had provided the company with only a Protein C clone fragment. He said the
"conception" of the discovery occurred when Lilly's scientists identified
the gene's full DNA sequence. In appealing, Drs. Crabtree and Plutzky argue
that the sequencing work wasn't an inventive step. "A high-school student
could have done it," Dr. Crabtree says.

Lilly points to Judge McKinney's decision in declining to discuss some of
Drs. Crabtree's and Plutzky's contentions, such as that it must have known
they were inventors since it sought their records to bolster its case
against the University of Washington. "The judge has ruled decisively on th=
e
merits of this case, which speaks volumes for both the validity and
relevance of their contentions," says a Lilly spokesman.

Paul Cantrell, associate general patent counsel at Lilly, says the company
respects the intellectual-property rights of all researchers, but "it seems
a bit unfair and odd to wait 20 years until you finally allege that you're
an inventor. They should have spoken up 20 years ago."

Drs. Crabtree and Plutzky say they were na=EFve and didn't know Lilly would
file for a patent. "It wasn't established at the time that you worried abou=
t
patents in the field of biology," Dr. Crabtree says. "I wasn't even thinkin=
g
about such things." Dr. Plutzky says his chief focus at the time was
finishing medical school. Lilly counters that the scientists must have know=
n
the company was doing the Protein C work with the aim of making a drug and
that it therefore would seek a patent.

The scientists say their battle with Lilly is mainly about setting the
scientific record straight, but they don't deny financial considerations.
Says Dr. Crabtree: "There are some scientists who are completely
uninterested in royalties from their work, to the point of starving their
families, but I'm not one of them."



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