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Crime

U. Of Iowa Researcher, Foundation Headed To Trial

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IOWA CITY, Iowa (AP) — A University of Iowa researcher will square off against the nonprofit group that manages the school’s intellectual property in a high-stakes trial starting Tuesday over whether he was unfairly denied the chance to make millions off potential treatments he discovered for arthritis.

Medical school professor Donald Macfarlane claims the UI Research Foundation managed the patents on his discoveries in a way that effectively shut down his research and later cut him out of a lucrative sale of the technology to a major drug company.

His attorney plans to ask jurors to award $25 million in lost income plus an unspecified amount for punitive damages, court records show. That outcome could theoretically cripple the finances of the foundation, which reported $26 million in net assets in its latest tax filing, but one board member said he was confident the group would successfully defend itself.

Macfarlane’s attorney has asked Judge Denver Dillard to prohibit the foundation from mentioning the verdict’s potential impact on the group or the community. The foundation is a nonprofit that files patents for inventions made at the university, and looks for ways to profit from them by setting up licensing agreements with companies. Some of its revenues go back to the inventors as profit and the university to support research.

The case is expected to last two weeks at the Johnson County Courthouse in Iowa City, where some jurors could have difficulty following the details of a scientific breakthrough and a complicated dispute over the attempted commercialization that followed.

Macfarlane, 68, has been at the university since 1980 and earns a salary of $242,000. He did not return a phone message. His attorney, Richard Stefani, also did not return a call but spelled out his case in court records.

Macfarlane and colleagues in the 1990s made key advancements in the search for more effective drugs to treat rheumatoid arthritis, a disease that affects millions of Americans and causes damage to joints and organs. The disease has no cure. Anti-malarial drugs can cause the disease to go into remission but they can cause side effects and aren’t always strong enough.

Using animal cells, Macfarlane discovered why those drugs worked on the body’s immune system to stop arthritis. That discovery paved the way for a search for other compounds that could be more potent and less toxic, and Macfarlane started testing them and identifying promising leads. Macfarlane obtained patents on his work as an inventor and co-inventor, but that’s when he says things started going wrong.

Macfarlane claims the foundation made virtually no effort to market his research to drug companies for further development and commercialization. As a result, he said he found two companies on his own that were interested.

One was a startup called Cyguin, Inc., that he founded in 2001 to attract grants and other investments to further the research. He said he got in touch with a second company, Coley Pharmaceutical Group, that expressed interest in licensing his patents and collaborating with him on the research.

The foundation rejected Macfarlane’s repeated requests to issue a license to Cyguin.

In 2003, it reached a licensing agreement with Coley. Despite Macfarlane’s objections, the deal did not require the firm to share its research data with Macfarlane or to pay to sponsor his continued research. Macfarlane claims that step effectively ended his ability to continue developing his discoveries.

Meanwhile, Coley later successfully tested one such drug candidate in a clinical trial. Pfizer purchased Coley for $165 million in 2007, and Macfarlane’s underlying intellectual property was a major part of the company’s value, his lawsuit argues.

Jurors will have to decide whether the foundation’s conduct breached its fiduciary duties to Macfarlane, who did not receive a portion of the sale.

An accountant hired by Macfarlane’s legal team said in a report that Macfarlane could have been expected to reap $24 million from the sale. The report said sales of the drugs he helped discover could eventually reach into the billions of dollars per year if they are successful, which would bring millions in royalties to the research foundation.

The foundation is being defended by the Iowa attorney general’s office, which denied Macfarlane’s allegations in an answer to the lawsuit. Spokesman Geoff Greenwood said the office could not comment further before trial.

Foundation board member Jack Evans said he would let the legal process decide the long-running dispute. But he added, “We’ve been very well represented by the attorney general. I have confidence in their abilities.”

(© Copyright 2012 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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