In 1924, Harry Steenbock, a professor of agricultural chemistry at the University of Wisconsin at Madison, discovered that by irradiating rat rations with ultraviolet light he could create vitamin D. This wasn't a trivial discovery, for vitamin D prevents and cures the debilitating bone disease rickets, from which millions of people suffered worldwide.

Steenbock realized ultraviolet radiation could create vitamin D in a wide variety of foods and drugs. He also realized that his discovery needed to be commercialized and disseminated widely, yet he didn't trust private industry to provide the financial incentive needed to develop the process quickly. He also wanted profits from the irradiation process to go at least in part to the university.

So he turned to the university's board of regents for help with patenting and administering the vitamin D process. The regents weren't interested.

Undaunted, Steenbock approached a couple of academic colleagues, who enlisted the support of several school alumni. In November 1925, nine men each contributed $100 to create the Wisconsin Alumni Research Foundation (WARF) in order to apply for and manage the vitamin D patent.

In the ensuing 73 years, this unique foundation - the first university-related technology transfer organization in the country - has turned that original $900 investment into hundreds of millions of dollars; obtained more than 1,000 U.S. and 1,500 foreign patents; and given the University of Wisconsin more than $416 million in grants, primarily for research.

Harry Russell, dean of the College of Agriculture in the 1920s and WARF's first executive director, summed up the organization's mission: "WARF's job is to earn the money and give it to the university; the professors' job is to spend the money as wisely as they know how." WARF's early and remarkable success is regarded as a Cinderella story in the world of university patent and technology transfer experts. "They hit one home run early on, and that got them going," said Edward Wink, head of the University of Minnesota's Offices of Sponsored Projects Administration and Patents and Technology Marketing. "They are clearly one of the leaders."

In a world where, on average, only one in 60 patents actually results in a money-making product, WARF's founders were incredibly lucky. The irradiation vitamin D process eventually made millions of dollars and provided the financial seed money for the foundation.

"Oh, there was enormous luck involved [in the creation of WARF]," said Richard Leazer, WARF's managing director. "The sun and stars and moon and everything lined up just right. The people who wrote the constitution worked hard and the money was directed for research only. And you don't spend the principal."

The "don't spend the principal" principle is especially important at WARF. The alumni who joined Steenbock to found WARF were more than just enthusiastic supporters. They were bankers and investment specialists who quickly turned WARF's early income into a multimillion-dollar fortune.

While most other university technology offices operate almost entirely on money from their patent licenses, 69 percent of WARF's income flows in from its investment portfolio. Patented inventions that have produced income greater than expenses provide 30 percent, with gifts and donations accounting for the other 1 percent.

"They have a unique history compared to the rest of us," said Tony Strauss, director of patent and technology marketing for the University of Minnesota. Most universities didn't seriously enter the patenting and technology transfer business until after the passage of the federal Bayh-Dole Act in 1980, Strauss said. That bill allowed universities to "retain title" to federally funded research projects and encouraged the institutions to get inventions licensed and into the marketplace.

Prior to Bayh-Dole, schools could get case-by-case agreements from federal funders to patent inventions developed with government money, but it was burdensome, Strauss said. "When Bayh-Dole passed, the size [of university patent/technology offices] went up by an order of magnitude," he said.

But by the mid-1980s, when most schools were getting serious about patents and technology transfer, WARF had already been in business for more than half a century. It had a string of very successful, income-generating patents and that multimillion-dollar investment portfolio.

While WARF doesn't disclose the size of its portfolio, the foundation notes in one of its documents that "through the remarkable fiscal astuteness" of the first WARF trustees, an investment of $400,000 in 1931 "has become a portfolio of balanced assets capable now, along with current licensing income, of producing over $19 million in annual gifts to support UW-Madison research."

"That's a matter of envy for all of us," Strauss said.

In addition to Steenbock's original vitamin D patent, WARF has made money on dicumarol, the first oral anticoagulant for humans; warfarin (named after WARF), a related drug that is also used worldwide as a rodenticide to control rats and mice; a host of vitamin D derivatives used to treat everything from bone diseases to parathyroid gland failure; and digital subtraction angiography (DSA), a relatively safe, quick, and inexpensive alternative to traditional angiography for visualizing arterial problems.

WARF considers itself the manager of intellectual property at the university for two narrowly defined purposes: "supporting basic research" and "licensing technologies to industry for the benefit of the university, the inventor, the licensee, and society as a whole."

In fiscal year 1998, WARF evaluated 206 "inventions" from university personnel, filed 120 U.S. and 53 foreign patent applications, was granted 163 U.S. and foreign patents, and finalized license agreements with 76 companies.

When a University of Wisconsin researcher approaches WARF with an invention, which happens about 16 times each month, an intellectual property coordinator is assigned who sets up a "disclosure" interview. WARF doesn't judge the science of a disclosure as much as it determines whether the researcher's invention is patentable and marketable. Between 40 and 50 percent of inventions are accepted.

When a patent is filed, WARF pays $1,500 to the inventor or "inventor group." If the invention is licensed and makes money, the inventor gets 20 percent of the gross income, the inventor's lab 70 percent, and WARF the other 10 percent.

After WARF deducts its operating expenses, its profit goes into the grant fund which, combined with money from the investment portfolio, is given to the university annually.

Most funds go to the university as general research grants. Despite contributing millions of dollars each year, WARF has little say in how that money is spent. That is decided by a research committee of about 40 faculty members appointed to limited terms by the dean of the graduate school. Faculty members seeking WARF research money submit their requests straight to the committee.

When the committee decides which projects it wants funded, its list is sent to the graduate school dean, who then submits it to WARF's board of trustees. Final approval comes from the board of regents.

As a nonprofit foundation independent of the university, WARF is isolated from the political ups and downs of state support for various university programs.

"Our rudder is probably a little more constant for technology transfer than the political process might be,'' Leazer said. "That's not a criticism, that's just the way our world works."

About a dozen universities use independent, nonprofit foundations similar to WARF to handle faculty discoveries and inventions, Leazer said, and a solid business reason exists for functioning that way. "With technology transfer, the foundation can accumulate some money and they can use it to pay patent attorneys. Whereas it's hard to hire attorneys in a lot of state budgets."

Another way technology offices make money is by helping researchers establish startup companies to market their inventions. Technology offices often take an equity stake in a new company, and if the company is a success, everybody makes money.

Foundations, especially wealthy ones, do that fairly routinely. But technology offices that are part of a university or a state agency have a harder time using the equity approach, Leazer said. "Sometimes the state laws don't permit that, so a foundation can be an appropriate and a fair conduit for that sort of thing."

Minnesota's Wink agreed. "We occasionally will form a company," he said, "but cash is a problem. You get stock in lieu of cash and how well that works depends on the inventor."

Leazer said WARF frequently helps establish small startup companies if an invention, particularly a biotechnology product, appears valuable but isn't easily licensable to an established company.

Being an independent foundation also helps WARF avoid much of the ongoing controversy about the influence of private industry on academic research, Leazer said.

"What I see happening around the country in terms of the stitching together of university research and telescoping it forward and capturing the commercial value of the discoveries is working pretty well. People have learned how to use conflict-of-interest referees and committees to stay out of harm's way. I think people have learned how to keep the teaching . . . and the sharing of information at a higher level than the commercial activity. The overall mission of the university is not being harmed and, in fact, I think that the service mission is being enhanced."

Jim Dawson covered cops, courts, education, politics, and most of the other standard newspaper beats before moving into science writing for the Minneapolis Star Tribune 10 years ago.

Caleb Brown is an illustrator and biologist living in Montana. By day he drives a delivery van, and by night he draws pictures with his computer.

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Endlinks

Association of University Technology Managers - an international group with extensive Web technology resources.

Community of Science - a commercial site offering researcher identification and technology listings for several universities.

United States Patent and Trademark Office - administers laws relating to patents and trademarks.

Biotech Patent News - a monthly publication that covers the latest in patented biotechnology. Site provides recent headlines, summaries of recently issued U.S. patents, descriptions of biotechnology available for license, and recent commentary and reviews by biotechology legal professionals.