Investing in biotech can be scary. Only one out of 10 new drug candidates ever makes it through the gauntlet of clinical trials to become an FDA approved product, and it usually takes hundreds of millions of dollars and a decade or more of research to separate the winners from the losers. Investors usually can’t bother asking serious questions about profit-and-loss statements, or price-to-earnings ratios, until a company is 15 years old or more. And the hype—from gene therapy, to stem cells, to you fill in the blank—can be quite distracting.

So Christopher Henney, 68, who has seen it all in a 30-year career in biotech as co-founder of Immunex, Icos, and Dendreon, knew he had his work cut out yesterday. He was trying to convince a crowd of 100 financial pros at the CFA Society meeting in Seattle that biotech, the classic boom-or-bust industry, is really a good place to invest.

“I want to de-mythologize the scariness,” Henney said at the outset.

Henney started off his talk by reminding the audience how he and Steve Gillis, a pair of immunologists at the Fred Hutchinson Cancer Research Center, went on to start Seattle-based Immunex, one of the members of what he called “the class of 1983.” These were the second-generation companies, following industry pioneer Genentech, that all went public back in a great wave of enthusiasm for biotechnology. The class included Amgen, Biogen, Cetus, Chiron, Genzyme, and Immunex. Seven of the 10 to 12 biotech companies (Henney didn’t name the losers) that went public in that early wave went on to create market valuations that exceeded $1 billion, Henney said.

But even during that great wave of optimism about the power of new genetic engineering technologies for creating new drugs, there were prominent skeptics. Henney told the story of how he and Gillis had a meeting in the early days of Immunex with “one of the doyennes” of the Seattle investment community, whom he didn’t name. Henney and Gillis told their story with great enthusiasm, and got a rude awakening.

“At the end, I remember him saying, ‘I don’t think it’s a scam, but I won’t introduce you to anybody, either,’” Henney recalled.

Both of them were academic scientists who “had a fair amount of hubris about our self-worth. To be told that what we’re doing was a scam, it wasn’t something I wanted to tell my Mom about,” Henney said.

He added, “It was our welcome-to-the-NFL moment.”

Still, the investor taking that position would have been right for the first 15 years or so. It took 17 years from Immunex’s founding before it struck gold with etanercept (Enbrel), a drug for autoimmune diseases that now generates more than $7 billion a year in worldwide sales for Amgen and Wyeth. It took much longer, and hundreds of millions of dollars more than industry pioneers like Henney thought it would, to create blockbuster drugs like that. “If you had thought about that beforehand, nobody would have given us any money at all,” Henney said.

But they got the money, and learned a lot of lessons along the way. In his talk last week, Henney distilled them into six hallmarks of a successful biotech that investors should look for, along with five red flags to watch out for as well (which I’m going to save for another story).

So, here are the six hallmarks to look for in a successful biotech …Next Page »

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In what is shaping up as the battle of San Diego’s biotechnology tools titans, Life Technologies (NASDAQ: LIFE) has filed a patent-infringement suit against rival Illumina, claiming that some of Illumina’s best-selling genetic-sequencing products violate Life Tech’s intellectual property.

The suit, filed in U.S. District Court in Delaware, claims that certain Illumina products, including the Genome Analyzer and the second-generation Genome Analyzer II, infringe upon three Life Tech patents. The suit seeks an unspecified amount in damages, and a permanent injunction restraining Illumina (NASDAQ: ILMN) from further infringement. If granted, the injunction would prevent Illumina from selling its equipment.

Telephone and e-mail messages to an Illumina spokesperson were not returned.

Illumina’s Genome Analyzer products are a mainstay of the company’s genetics analysis business, and are important to Illumina’s growth. The $50,000 whole-genome analysis that Illumina began offering to the public in June uses the Genome Analyzer. The company has stated that one of its corporate goals is to make the Genome Analyzer the industry standard for genetic analysis. Last year, the device accounted for the bulk of Illumina’s $64.8 million increase in instrument sales.

Life Technologies, formed last November through the merger of Invitrogen and Applied Biosystems, claims it is the leader in the genetic sequencing business. The Carlsbad, CA-based company had revenue of $3.1 billion in 2008, dwarfing Illumina’s 2008 revenue of $570 million.

Listed as plaintiffs along with Life Tech are patent owners Alexander Chetverin and Helena Chetverina, both of Russia; The Institute for Protein Research of the Russian Academy of Sciences; and William Hone of New York. According to the suit, the patents cover certain methods of amplifying and expressing nucleic acid, a building block of DNA. Applied Biosystems had an exclusive license to the patents, which issued in the late 1990s.

Illumina subsidiary Solexa is also named as a defendant.

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Cytori Therapeutics, (NASDAQ:CYTX) a San Diego company developing therapies from fat, is bulking up its cash position. Since March, the regenerative medicine has company raised more than $15 million through private equity sales. The latest deal—inked with Seaside 88 of Florida in June—gives Cytori an infusion of many thousands of dollars every two weeks for up to six months. The actual amount Cytori receives from Seaside is linked to its stock price.

These moves should ease investor concern about Cytori’s ability to survive the worst recession since the Great Depression. At the end of the first quarter, Cytori warned that its ongoing need for outside financing, coupled with a worldwide credit crunch, raised “substantial doubt as to the company’s ability to continue as a going concern.” By the end of March, Cytori had reduced its headcount to 85 from 126 employees and suspended or eliminated most development projects to conserve cash. The company has an accumulated deficit of $165 million through the first quarter, during which it posted a $6 million loss.

The latest rounds of financings leave Cytori’s coffers far from fat. But they should provide the company with enough cash to fund operations through the end of 2010, according to Zacks Research. That should give Cytori the running room it needs to progress toward FDA approval of its lead product, a device that can isolate and process regenerative cells from a patient’s fat tissue, readying it to be returned to the patient during the same procedure.

The device is approved in Europe, where Cytori is currently conducting a 70-patient study of its use in breast reconstruction following partial mastectomy surgery. Fat is …Next Page »

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The big news in the San Diego biotech community this week came from the boardroom instead of the laboratory. Dissident shareholder factions elected representatives to the boards of both San Diego-based Amylin Pharmaceuticals (NASDAQ: AMLN)and Biogen Idec, the Cambridge, MA, biotech that has a significant local presence.

—Amylin’s founding CEO Howard “Ted” Greene, who also is the company’s biggest individual shareholder, may have played a key role in influencing the recent board election. Greene told me he’s optimistic about the outcome, in which a dissident faction of Amylin shareholders gained two board seats and ousted the chairman and lead outside director.

—Meanwhile, in Cambridge, MA, representatives of billionaire investor Carl Icahn claimed victory yesterday in their proxy contest with Biogen Idec (NASDAQ: BIIB) by winning two of four board seats in a recent shareholder election. The company adjourned the annual shareholder meeting without announcing the official results, however.

[Editors note: A previous version of the Targeted Genetics item incorrectly reported that Robin Ali presented results of his research in San Diego.  He did not attend the meeting]

—The potential loss of Seattle’s Targeted Genetics (NASDAQ: TGEN), which is struggling to avoid bankruptcy, will make it harder to bring new gene therapy treatments to market, according to Robin Ali, a University College London researcher.  At the American Society of Gene Therapy meeting in San Diego last week, a colleague of Ali’s presented clinical trial results from Ali’s experimental gene therapy treatment for a rare, genetic form of blindness that was supported by Targeted Genetics. “If they were to close,” Ali told Xconomy’s Denise Gellene by email, “it would leave a gap in the market that would take time to fill.”

—Celladon CEO Krisztina M. Zsebo told Denise at the American Society of Gene Therapy annual meeting that the San Diego gene therapy startup is in discussions with several pharmaceutical companies and expects to announce a …Next Page »

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San Diego-based Novocell has nailed down a second important patent on a valuable type of cell derived from human embryonic stem cells, which could end up forcing a lot of researchers to license technology from the company on Torrey Pines Mesa.

The company is announcing today it has secured a U.S. patent that protects its invention for a method of using endoderm cells for research when derived from human embryonic stem cells. A couple of months earlier, Novocell nailed down protection for a composition of matter patent on endoderm cells, a type of cell with wide-ranging potential. Endoderm cells can become pancreatic cells for use in diabetes therapies, or be turned into other tissues that make up the lungs, intestines, liver, thymus, and thyroid.

“This meets a long-standing need of major pharmaceuticals for human cells,” said Novocell CEO John West, in a statement.

Patents are a sensitive subject in the field of stem cell research—just ask the Wisconsin Alumni Research Foundation, which has taken heat for what some scientists consider onerous licensing terms for the right to use human embryonic stem cells developed at the University of Wisconsin. Yet exactly how Novocell’s patents might translate into revenue for the company, which is still at the earliest stages of research and development of new therapies, is hard to tell. It stands to reason that collecting licensing fees on patents like these would be part of its revenue model, since Novocell is still at least a couple years away from the valuation-building stages of bringing its first stem cell therapy for diabetes into human clinical trials.

West, who joined as CEO just a month ago, told me in an interview shortly after he started that the strength of the company’s intellectual property is one of the things that attracted him to Novocell. He definitely gave it a close look, especially since he’s someone who could probably have his pick of a lot of jobs, after he sold his last company, Solexa, a maker of gene sequencing machines, to San Diego-based Illumina for more than $600 million in 2007.

“It’s similar to Solexa, in that it has very promising scientific breadth, and now the question is how you take it commercial,” West says. There are still big hurdles …Next Page »

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Tell me if this makes sense to you:

—If I buy a diamond, I can own it for as long as I like;

—If I produce a brand name for a product, provided that I trademark it, I can own it for as long as I would like, until and unless it becomes “generic” (like the term “escalator”, which actually started as a brand name);

—If I write a novel, provided that I copyright protect it, I can own it until I die, and my heirs can maintain those rights for 70 years longer; but,

—If I invent a drug, even if I protect that intellectual property to the full extent of U.S. patent law, I can only own it for 20 years from the date I file for a patent on it.

I can own a tangible good forever, I can own a trademark virtually forever, I can own a copyright for my entire life plus 70 years. But property which is more intrinsically a part of me – my idea, my invention, the product of my intellect – I am only allowed to own that for 20 years after I reveal it to the patent office.

Rationally, it seems obvious that all property – whether tangible or intellectual – should be subject to the same rules and laws of ownership. If you can own a gemstone forever, you should be able to own an invention forever. In fact, if a society wishes to impose differential standards for ownership rights to different types of property, wouldn’t it make more sense that preferential treatment be given to those items which are the product of your talent, your creativity, your self, over those things which you earn or purchase based upon that product of your efforts? The logical extension of this argument, in any free society, is that you should be able to own all property, whether purchased or invented, physical or ethereal, for as long as you wish. Patents, trademarks, copyrights, title – all should be perpetual.

And yet, even in the United States, the country most devoted to free markets and property rights, we live with these irrational, illogical, and even unethical limitations upon intellectual property ownership. In fact, when you hear lawmakers, lobbyists, and pundits talk about patent reform, particularly in regards to drugs, the direction that is most often espoused is to further tighten and shorten the patent protection available to inventors. How did we get here? What would cause a free society like ours …Next Page »

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The stellar plaintiffs in a patent lawsuit over genotyping technology developed at MIT are raising the stakes by dragging a second California company into the dispute.

In 2008, MIT and E8 Pharmaceuticals, a Cambridge, MA-based startup created by MIT biologist David Housman and Harvard biologist Richard Mulligan, sued Santa Clara, CA-based Affymetrix for allegedly including technology in its GeneChip microarray products that infringes on an MIT DNA-screening technology exclusively licensed to E8. That suit has been dragging on for the last 10 months, but now MIT and E8 are going after an Affymetrix partner, a Foster City, CA-based genetic testing company called Navigenics.

In a lawsuit filed Tuesday in the District Court of Massachusetts, the two plaintiffs say Navigenics is infringing on the same MIT patent by using Affymetrix-manufactured microarrays as part of its genetic testing services.

Mass High Tech broke the story on Wednesday. The MHT story pegged the demand for damages at $75 million. But court documents examined by Xconomy don’t specify an exact damage amount, and say only that the amount of the damages requested is greater than $75,000.

It’s the latest development in a fractious story. As Bob explained in an extensive article last July, Housman is one of the named inventors on an MIT-owned U.S. patent, No. 6,703,228, which covers methods for high-throughput genotyping using single-nucleotide polymorphisms (SNPs). The patent was filed in 1999 and granted in March 2004, but Affymetrix claimed in September 2004 that it had actually filed a patent application on substantially the same invention in 1994. In 2007, the U.S. Patent and Trademark office eventually ruled that priority belonged to the MIT group. In its suit last year, E8 and MIT claimed that by continuing to sell its GeneChip equipment, which allegedly uses the same SNP genotyping technology, Affymetrix was infringing on the MIT patent.

Now, in the complaint filed this week, MIT and E8 say that Navigenics is also infringing the patent “by providing, selling and offering to sell, on a nationwide basis, genetic counseling services that use certain GeneChip products manufactured by Affymetrix.” The nub of the MIT-E8 complaint appears to be the fact that in February, Navigenics purchased an Affymetrix facility in West Sacramento, CA, where Affymetrix formerly performed microarray-based clinical testing services. “As part of its purchase of the CLIA facility, Navigenics has taken over infringing activities that were previously performed by Affymetrix and has continued to provide, sell and offer to sell services that directly infringe the ‘228 patent,” the complaint says.

The complaint asks the Massachusetts court to force Navigenics to pay damages and legal fees to MIT and E8. If Navigenics doesn’t ultimately take a license to the MIT patent, the plaintiffs say the court should either force Navigenics to pay royalties, or issue an injunction to keep the company from using the Affymetrix technology.

The legal team representing MIT and E8 includes Wiley Rein—the Washington, DC-based firm that helped NTP Win a $612 million settlement with Blackberry maker RIM in 2006—and Duane Morris of Boston. Navigenics has until June 8 to respond to the complaint; no hearings or other deadlines have been scheduled in the case. Representatives of E8 and Navigenics were not immediately available to comment on the suit.

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San Diego wireless giant Qualcomm (NASDAQ: QCOM) and Irvine, CA-based Broadcom (NASDAQ: BRCM) said last night they have agreed to end their wide-ranging patent war and enter a broad cross-licensing deal.

As part of the global settlement, which terminates litigation in federal court as well as formal disputes before trade commissions in Europe and South Korea, Qualcomm has agreed to pay Broadcom $891 million over the next four years. Qualcomm says its first payment, for $200 million, will be paid to Broadcom before June 30.

That could put a ding in Qualcomm’s net income next quarter, but it seems doubtful shareholders will mind. A J.P. Morgan analyst said last week that settlement payments would have little impact on Qualcomm’s future earnings.

When Qualcomm announced Wednesday that it was postponing the release of its earnings for the second that ended in March (because it was in advanced settlement talks with Broadcom), the San Diego company added it would meet or exceed its prior guidance for quarterly revenue and operating income (excluding the cost of its deal with Broadcom.) In last year’s second quarter, Qualcomm reported operating income of $766 million on $2.6 billion in revenue—and the company said earlier this year it expected second-quarter revenue to fall between $2.25 billion and $2.45 billion.

The agreement also relieves both Broadcom and Qualcomm of substantial legal costs—in a battle where Qualcomm wasn’t faring particularly well. The company suffered its worst setback in mid-2007 when San Diego federal judge Rudi Brewster issued a blistering, 54-page ruling that found Qualcomm and its trial counsel had committed “gross litigation misconduct” by withholding tens of thousands of relevant documents from Broadcom during a patent infringement trial. That decision against Qualcomm was largely upheld by a federal appellate court last December.

Strategically, the benefits of reaching a comprehensive settlement with Broadcom would seem to far outweigh the financial impact on Qualcomm’s earnings—especially since Qualcomm said terms of the agreement “will not result in any change” to its licensing revenue model for its 3G and 4G wireless technologies. And Qualcomm’s licensing revenue is the central engine of its success.

After fighting for more than a decade to establish its CDMA (for Code Division Multiple Access) wireless digital standard, Qualcomm attained its first strategic breakthrough in 1999, when it settled a wide-ranging patent dispute with Sweden’s Ericsson. In that deal, Qualcomm agreed to sell its CDMA wireless infrastructure business to Ericsson and Ericsson agreed to support a single worldwide CDMA standard.

At that time, Qualcomm also settled on a corporate strategy that focused its business on wireless innovation, which enabled the company to generate enormous revenue through technology licensing deals.

In July, Qualcomm struck a surprise settlement agreement with Nokia, the world’s largest mobile phone maker, that ended a similar high-stakes licensing dispute. That deal enables Qualcomm and Nokia to share many more technology patents than they did before. Qualcomm also licensed its technology to Nokia and Nokia allowed Qualcomm to incorporate its technology within its mobile phone components; buyers of those components will pay Nokia’s royalty fees rather than Qualcomm’s.

Broadcom posed the last major challenge to Qualcomm’s licensing model.

“We believe that this resolution is positive for both Qualcomm and Broadcom, our customers, our partners and the overall industry,” Paul E. Jacobs, chairman and CEO of Qualcomm, and Scott A. McGregor, president and CEO of Broadcom, said in a joint statement.

“The settlement will allow us to direct our full attention and resources to continuing to innovate, improving our competitive position in this economic downturn, and growing demand for wireless products and services,” Jacobs said.

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On Friday a judge in the U.S. District Court of Massachusetts overturned a February 2008 jury verdict that had ordered Tempe, AZ-based content distribution network Limelight Networks to pay Cambridge, MA-based Akamai Technologies $45 million in damages for patent infringement. Limelight successfully challenged the jury award based on new case law. Akamai immediately said it would appeal the decision.

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Alnylam Pharmaceuticals (NASDAQ:ALNY), a Cambridge, MA-based developer of RNA-interference (RNAi) drugs, says that the European Patent Office will grant the firm a patent related to its “Tuschi I” patent series covering the use of double-stranded RNA molecules for RNA-interference. The patent, which the company expects to be issued in four months, covers claims such as the use of RNAi to reduce expression of a gene with double-stranded RNA molecules of 21 to 23 nucleotides in length.

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Bruce McFarland has a long-standing relationship with waves. He learned to surf while he was growing up in Manhattan Beach, CA, a classic Los Angeles-area beach community and home of what is believed to be California’s first surfboard shop. He studied mechanical engineering and fluid mechanics at UC Santa Barbara, and after graduation worked for a while studying waves in space at the former TRW, which was dealing with problems caused by fuel sloshing around inside the fuel tanks of orbiting satellites.

These days, McFarland is making waves in more ways than one. His startup company, AWM, for American Wave Machines, installed its first wave machine at a water park last year, and got its first seed-stage funding from San Diego angel investor Marco Thompson five months ago. The company has contracts to build six other projects, and tomorrow evening McFarland will make a presentation about his startup as a case study at the Salk Institute for San Diego’s MIT Enterprise Forum. If only there wasn’t the threat of a legal “wave war” looming on the horizon.

McFarland told me he started making his own waves nine years ago, inspired by a video of “river surfing” on stationary waves that form under certain conditions at the mouth of Hawaii’s Waimea River. He says he realized it should be possible to create his own standing wave by duplicating the runoff conditions of Hawaii’s rainy season—and he realized such a wave machine would be a great attraction for a water park.

McFarland and his wife, Marie, founded AWM in 2000 to develop the idea. They self-funded the company while Bruce experimented with scale models at their home in Solana Beach, CA. McFarland built his first full-scale prototype of the “SurfStream” standing wave surf machine in 2004. AWM’s first commercial SurfStream installation opened at a water park in Taichung City, Taiwan, last May.

(AWM provided a video of its SurfStream machine in Taiwan here.)

That same month, Wave Loch, another San Diego wave machine maker, filed a patent infringement lawsuit against American Wave Machines in San Diego federal court. The suit alleges that McFarland’s SurfStream design infringes on three patents that …Next Page »

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“Danger, Will Robinson!” These immortal words uttered by the Robot in the 1960s television series “Lost in Space” are now part of our pop culture lexicon when warning of an impending, and sometimes unseen, threat. It’s too bad the Robot is just a fictional character, because as we’ve seen with recent economic and legislative happenings, there are times we could all use someone or something to give us an early warning.

Given the recent turbulence in the markets, imagine how prescient it would have been to have someone yell “Danger, Danger” last spring as you moved all your investment dollars, including the kids’ college money, from the relative safety of that conservative bond fund to the aggressive stock fund when it seemed like the right thing to do. After all, you were only following the advice of CNBC, the leaders in financial news. Oil stocks looked particularly good, and when the experts said stocks can only go up, who were you to second guess them. As you clicked to make that online trade, your warning Robot would have yelled “Danger, Danger! Stock Market Crash ahead!”

Similar warnings might also have been appreciated by many organizations as the Obama administration and a new Congress amends and creates new legislation and regulations. This “Danger” warning certainly would have been appreciated by those major biotechnology companies with local operations when the Patent Reform Act of 2009 was introduced in the Senate in March. The proposed bill provided a statutory methodology to be used in the calculation of damages in patent infringement suits. The methodology would limit damages valuation to the amount of value added by the invention’s improvements over the prior art. The invention’s entire market value would only be considered where the improvements alone constitute the “predominant basis” for market demand. This change, favored by large IT firms who rely on market dominance and not on patents, would severely diminish the value of patent protection. Limiting damages takes the teeth our of patent protection and, while it benefits a few select industries, industries that rely on strong patents to encourage innovation and investment, like the life sciences, would be severely impacted.

Two weeks ago the Senate Judiciary Committee’s approved a modified version of the reform bill that added a “gatekeeper” provision, giving judges more …Next Page »

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It was a quiet week for deals in the Northwest, with a few partnerships formed in software, biotech, and intellectual property.

—Bothell, WA-based MDRNA (NASDAQ: MRNA), a developer of RNA interference technology for drug development, agreed to license its technology non-exclusively to Novartis in exchange for $7.25 million in upfront fees, as Luke reported. MDRNA also signed a separate deal that gives Novartis an exclusive period in which to form a larger R&D collaboration with MDRNA. Terms of that deal were not disclosed.

—Intellectual Ventures, the Bellevue, WA-based invention firm, inked an agreement with the Indian Institute of Technology-Bombay to license some of the university’s technologies, and to work with its researchers on commercialization strategies. Financial terms were not announced. Intellectual Ventures has similar deals in place with other institutes in Asia, but IIT-Bombay is a particularly prestigious university specializing in electronics, software, and materials, and the partnership epitomizes the firm’s broader strategy to support the invention process around the world—and profit from it.

—Seattle startup Ontela, a maker of photo-sending software for camera phones, has teamed up with T-Mobile to offer its service via the photo-sharing website Photobucket. T-Mobile subscribers can sign up to have their pictures sent automatically from their BlackBerry smartphone or other handheld device to the photo site. Ontela’s software is now available to about half of all U.S. mobile-phone subscribers, and comes pre-installed on four of the top five handset manufacturers.

—Seattle-based Evri, a startup that makes novel Web browsing software, formed a partnership with The Times of London to provide a widget that recommends related articles when a reader clicks on a story of interest. Financial terms were not given. This deal follows a similar one announced last month with the Washington Post, and is part of Evri’s effort to build an audience for its service, which tries to understand connections between people, products, and other entities on the Web and present the info in a useful way. (This news was dampened later in the week when it was reported Evri laid off one-fourth of its staff.)

—Luke reported that Geospiza, a Seattle developer of software that helps researchers sort through mounds of genomic data, received a two-year, $1.1 million grant from the National Institutes of Health, as part of a collaboration with The HDF Group. The effort will support biological software applications that use Hierarchical Data Format, an advanced data capability made to handle demanding and complex tasks like studying genomes and monitoring climate change.

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Back in February 2008, a Texas jury told Natick, MA-based Boston Scientific (NYSE: BSX) it would have to pay $431 million in damages to Dr. Bruce Saffran, who alleged that the company’s Taxus Express and Taxus Liberte drug-eluting stents infringed on patents he owns. Boston Scientific appealed the ruling, and a Federal Circuit panel reviewed the case in early March. In a late-afternoon filing with the SEC today, Boston Scientific said it settled the case with Saffran on March 16, and that as a result, it will record a pre-tax charge to earnings of $50 million this quarter.

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On Monday, Bellevue, WA-based Intellectual Ventures signed an agreement with the Indian Institute of Technology-Bombay to license some of the university’s inventions and to work on technology commercialization strategies with its researchers, as reported by CIOL, Express India, TechFlash, and other outlets. It’s not really big news by itself—Intellectual Ventures has formed similar partnerships with other institutes in India, as well as in China, Japan, Korea, and soon, Singapore—but it fits into the broader strategy the firm is pursuing around the world to foster invention.

Last fall, Intellectual Ventures opened offices in five Asian countries in an effort to gain access to a much wider pool of inventors and talent. Led by global head of technology Patrick Ennis, a physicist and former managing director at Arch Venture Partners—and other members of Intellectual Ventures’ senior leadership team, including co-founder and president Edward Jung—the company is building relationships with prominent academic scientists in Asia, and setting up partnerships whereby it can license certain inventions in exchange for helping with patents and commercialization. The strategy reminds me a lot of Microsoft Research, which has set up labs in China and India in the past 10 years and built partnerships with local university researchers and administrators. (This blueprint is not surprising, given that Intellectual Ventures’ co-founder and CEO Nathan Myhrvold was the founder of Microsoft Research.)

The reception Intellectual Ventures is getting also reminds me of Microsoft Research. While most university officials see the partnerships as benefiting their researchers and increasing the flow of innovation, critics have rolled out the standard “patent troll” fears that the company is coming in to buy up all the best intellectual property—which will only be assuaged by years of relationship building and repeatedly demonstrating that these sorts of deals can benefit both sides.

Nevertheless, Intellectual Ventures’ Indian operation seems to be off to a strong start. It is now staffed by about 15 people, led by Ashok Misra, the former head of IIT-Bombay and a highly respected polymer materials scientist.

I caught up with the staff of Intellectual Ventures to hear about the workings of the Indian university partnership. Nicholas Gibson, one of the firm’s directors of business development in Japan, said via e-mail, “The agreement with IIT-Bombay is important as it gives [us] more direct access to top flight university-based Indian inventors. The deal also gives IIT-B access to commercialization possibilities …Next Page »

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Discovery Communications (NASDAQ: DISCA), the owner of Discovery Channel and other TV networks and websites, has filed a lawsuit against Amazon (NASDAQ: AMZN), alleging that the Kindle and Kindle 2 infringe on a Discovery patent issued in 2007 for e-book security and copyright protection. Discovery is seeking an unspecified amount of compensation.

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The lawyers for Irvine, CA-based Broadcom have been on a roll in a protracted legal battle over mobile phone technology patents against San Diego arch-rival Qualcomm, including one case that led to sanctions last year.

But Broadcom’s lawyers misfired in a lawsuit filed against Qualcomm just five months ago. The suit broadly alleged that Qualcomm was over-asserting its rights on patents that were “exhausted” and unenforceable.

Qualcomm said today that a San Diego federal judge dismissed Broadcom’s case Friday. In his nine-page ruling, U.S. District Judge William Q. Hayes says Broadcom did not identify any specific patents at issue in its allegations—and the judge notes Qualcomm holds more than 6,000 wireless patents and patent applications. The judge also writes that Broadcom’s suit does not say Broadcom purchases Qualcomm chips or sell handsets equipped with Qualcomm technology, so “the alleged injuries for which Broadcom seeks relief are speculative.”

Broadcom had alleged that Qualcomm’s patents were exhausted by a “double-recovery scheme” that enabled Qualcomm to get paid once when it sells chipsets (or a licensed manufacturer sells chipsets) and again when handset makers pay Qualcomm a licensing fee. Hayes dismissed the case without prejudice, which means Broadcom could revise its case and try again.

Broadcom and Qualcomm have been embroiled in a series of legal disputes in the United States as well as the International Trade Commission. Last September, a U.S. appeals court affirmed that Qualcomm infringed two patents and upheld an injunction in favor of Broadcom. But a federal appeals court later ruled in Qualcomm’s favor in one of the three patents at issue.

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(Editor’s Note: This is excerpted from written testimony to the U.S. Senate Judiciary Committee.)

Out of the many patents that will be filed in the coming years, there will be a handful of world-changing inventions that can crucially alter the course of our future. These are the jewels we need to protect:

—inventions that solve climate change
—inventions that rid us of foreign oil dependence
—inventions that prevent and treat pandemics
—inventions that address diabetes and Alzheimer’s, saving 40 percent of the future Medicare budget

It is important to emphasize that the patent reform discussion is not just between the high technology and pharmaceutical industries. It is also about the future of American innovation including high-tech, biotech and the area that is even more critical to America: energy – what we call “cleantech.” Cleantech is the fastest growing sector of business and of venture investment. The same venture capitalists who led the successful creation of the high-tech and biotech industries are now poised to lead the way in developing new clean technologies.

The issue we need to collectively explore is how to protect the truly pioneering inventions that we all want to see, such as San Diego-based Sapphire Energy’s carbon neutral crude oil. This is a true breakthrough, made by harnessing the energy from the sun and capturing carbon dioxide, to grow algae on non-agricultural land using non-potable water to make gasoline, diesel, and jet fuel.

Pioneering cleantech inventions require a huge investment upfront, and rely solely on original intellectual property protection to negotiate with corporate partners – some of the largest corporations in the world. By their very nature these inventions change entrenched industries and markets, and take orthogonal approaches to intractable societal problems. These are not inventions that large corporations are incented to make. They require the small business, entrepreneurial risk-taking component of our economy. …Next Page »

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It’s taken as a given that universities are integral to the innovation process. Researchers create technology, the university finds a licensee or a startup company is formed to develop the invention, and products are created that drive growth in the economy.

But that is a simplistic view of a complex system. And today, a select group of researchers from around the world is gathering at U.C. San Diego to help examine the process of university-industry interaction and technology transfer in more detail. Their focus is a series of questions—that have long been asked but have yet to be definitively answered and are of abiding interest here at Xconomy: What is the true connection between research universities and innovation, and how does it work? How does knowledge really move from the academic laboratory to industry? And are there new ways to improve and accelerate the process?

Sponsored by the Kansas City, MO-based Kauffman Foundation, the seminar is intended to help analyze a global research effort focused on what industry wants from universities, and how those goals can be achieved. The research, part of an onging multi-year study, consists of interviews and other data drawn from more than 90 companies in four countries where innovation and new technologies play a key economic role: the United States, Japan, Canada, and the United Kingdom.

“What we are trying to accomplish is for people to think about what incentivizes and supports a positive interaction between the university and industry,” says Mary Walshok, a UCSD Associate Vice Chancellor and a seminar host. The participants are “people who care about these things, and who are in a position to influence government policy in the U.S., Japan, Canada and the U.K.”

The three-day event begins with a presentation this evening by Larry Smarr, director of the California Institute for Telecommunications and Information Technology, which Walshok says operates as an example of university-industry “best practices.”  The invited participants …Next Page »

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It was a relatively busy week for deals in the Northwest, with plenty of action in software, biotech, and alternative energy.

—Seattle and San Francisco-based Twilio, a startup that provides cloud-based tools for building voice applications over the phone, raised its first institutional round of funding from Founders Fund and computing pioneer Mitchell Kapor. The amount was not disclosed. Twilio co-founder Jeff Lawson talked with me about the deal and how it will help the company expand its services.

—Seattle’s Principle Power, a wind energy startup, is in the process of raising $20 million to develop the world’s first floating wind farm in the deep waters off the coasts of Oregon and Portugal. Principle Power’s CEO, Alla Weinstein, wouldn’t say who the company’s strategic investors are, but she did say that no VC firms or Seattle investors are involved. The deal is expected to close in the second quarter of this year.

—Luke broke the exclusive story of Merck’s Stephen Friend raising $5 million in anonymous donations to pursue the vision of open-source drug development at a new Seattle nonprofit called Sage. The idea is to provide an open database of patients’ genomic profiles that researchers, doctors, and drug companies can access in order to make better drugs.

—Bellevue, WA-based Ignition Partners led a $10 million investment in Zenprise, a mobile-management software startup in Fremont, CA. Existing investors Bay Partners, Mayfield, and Shasta Ventures also participated in the round. Zenprise makes automated software to help businesses fix IT problems with smartphones.

—Seattle-based Arzeda, a University of Washington startup that designs custom-built enzymes, has secured commitments from OVP Venture Partners and WRF Capital to anchor its $12 million …Next Page »

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