Public Research for Private Gain 

UC Regents recently approved a new corporate entity that will likely give a group of well-connected businesspeople control over how academic research is used.

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Mendelson's August 2012 disclosure showed that he had direct investments in nine biotechnology companies, including Kythera and Singulex, as well as stock in eighteen different venture capital funds with a total value hovering somewhere between $1 and $10 million (the disclosure forms do not require him to be more specific). In addition, most of his investment funds are focused in biotech companies, giving him indirect financial stakes in perhaps dozens of biotechnology corporations.

The most vocal advocate for Newco at UCLA has been James Economou, the campus vice chancellor of research and a doctor at UCLA Medical Center who holds a faculty appointment in UCLA's Department of Molecular and Medical Pharmacology. In several presentations to the regents, Economou has stressed that a Newco-type entity would patent greater numbers of faculty inventions and create more financial deals with the private sector, and that the university would benefit from the revenues and wealth this generates.

"The process of patenting inventions involves hard-nosed business decisions. The university needs businesspeople with many years of experience to make decisions on what are risky investments," Economou told the UC regents at a meeting last year concerning tech transfer, according to the official minutes of the meeting. "The board must be an independent board of directors, reputable individuals with experience in the business of science who would serve the university without pay."

"The business of science" is the same phrase used by Doumani — the wealthy banking and real estate investor — to describe what he teaches as a faculty member of UCLA's Department of Molecular and Medical Pharmacology as well. Doumani, in fact, runs an entire center now on UCLA's campus called the "Business of Science Center," and the center is sponsored by the Astellas USA Foundation, a grant-making organization set up by the Japanese pharmaceutical giant that bought Agensys in 2007.

"There's a sense that we have outdated models of entrepreneurship," Economou told the regents last month. "We lack real-world-business experience and should empower business professionals in the decision-making process."

Several years ago, Economou asked William Ouchi, a professor at the UCLA Anderson School of Business who specializes in "corporate renewal," to study the school's tech transfer policies. In one of his more famous consulting gigs earlier in his career, Ouchi agreed to help Mendelson's client Amgen reform the company's drug development process, according to a 1994 Los Angeles Times report. For UCLA, Ouchi eventually produced a series of reports titled, "Ecosystem for Entrepreneurs." Ouchi's reports criticized UCLA's tech transfer record as generating a "low financial yield," well below UC Berkeley's, Stanford's, and MIT's. Ouchi endorsed the Newco idea to fix this perceived problem. He recommended that a Newco-type entity be capable of raising external funds in the range of $50 million to $100 million in order to invest in patents of university inventions; partner with and possibly invest in companies, many of them owned and led by faculty; and to cover patent prosecutions. The biggest expense in patenting inventions under a model like Newco involves monitoring intellectual property holdings and hiring lawyers to aggressively go after any company or other party that violates a patent by using the invention without a license or other agreement. Legal expenses can typically run into the millions of dollars.

I asked professor Ouchi who he consulted with at UCLA to produce his reports, including the recommendation to establish a Newco-type entity that would raise private funds. "I prefer not to draw attention to it at this point, because it has just been approved by The Regents and is not actually in operation yet," Ouchi replied in an email. "Lots of people at UCLA and at UC participated in the design of Newco — it was definitely the product of a very large team."

Whether Newco will use university funds or external funds to fund private corporations and defend patents licensed by private companies remains unclear. The resolution passed by the regents to create the entity allows it to raise private money, but these funds must be held in UCLA accounts, one of the safeguards built into the Newco structure.

UCLA Vice Chancellor Economou declined an interview request for this article, referring questions to Brenden Rauw, UCLA's recently hired associate vice chancellor and executive director of entrepreneurship. Rauw was recruited from Columbia University last year specifically to oversee UCLA's transition into a more proprietary model of tech transfer under Newco. Rauw passed my inquiries to a media relations person who did not provide answers to basic questions about Newco before press time. Belldegrun and Doumani also did not respond to interview requests for this story.

Like Mendelson, Belldegrun, Doumani, and other proponents of the Newco model, Economou is linked to private companies that are already commercializing UCLA technologies. Economou is listed as a scientific advisor to Kite Pharma, a small biotech company. It's not clear if Kite pays Economou. Kite Pharma's board of directors also includes Belldegrun and Doumani, who are also investors in the company.

"We tell our faculty that we want them to have as many potential conflicts of interest as possible," Economou told the regents last month. "We have a process for helping to identify them, and to manage them, and to create transparency, and give them guidelines, so instead of telling our faculty 'you can't do this, and you can't do that,' we encourage them to create startups, we encourage them to file patent disclosures."

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