Patent Windfall for U. of California

February 28, 2006

The University of California announced Monday that it would receive $100 million in upfront royalty payments from Monsanto to settle a lawsuit in which it had accused the company of infringing its patent on the recombinant DNA used to make a dairy cow growth hormone.

Under the deal, which ends a lawsuit that was due to begin in federal court in San Francisco yesterday, Monsanto agreed to make the initial payment and to pay the university 15 cents for every dose it sells of the bovine hormone in exchange for the exclusive right to manufacture the hormone. The agreement will bring the university at least $5 million a year in royalties through 2023, Monsanto said in a news release.

Lawyers for the University of California system sued Monsanto in February 2004, charging the manufacturer of agricultural products with infringing the patent it had received that month for the recombinant DNA used to make bovine somatotropin, which enhances milk production in dairy cows. Three scientists at the university's San Francisco campus, working with federal grants, had discovered the DNA.
 
The lawsuit asserted that Monsanto had infringed the university's patent rights by selling Posilac, a veterinary drug based on the growth hormone. "By its actions, Monsanto is depriving [the university] of its investment in the patent, misappropriating technology and is thereby causing and continuing to cause the [university] irreparable harm," the 2004 complaint said.

Under the settlement announced Monday, the university agreed to abandon its patent infringement claims and to give Monsanto the sole rights to commercial applications of the growth hormone, although the university and the federal government will retain some rights to noncommercial uses of the patent for research and educational purposes.

In exchange, the university receives $100 million upfront and at least $5 million a year, though that figure could rise if Monsanto's drug sells well.

"This settlement represents a positive outcome for both parties, by protecting the university's patent rights and by providing Monsanto with the opportunity to market and distribute this important product," said James E. Holst, general counsel at the University of California.

Added Carl Casale, an executive vice president at Monsanto: "We're pleased that we've come to an agreement that will allow our dairy producer-customers to continue to use Posilac bovine somatotropin. This agreement illustrates that we are willing to work jointly to resolve disputes, and it allows us to avoid the expense and inconvenience of protracted litigation."

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