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When the backers of California’s stem cell initiative were seeking voter support last year, they promised not only cures for dreaded diseases but also licensing revenues for the state. A coalition group that advocated the measure has promised that “California will benefit for decades from patents and royalties that result from the research.” But most biotech IP lawyers say it is foolhardy and wildly optimistic to predict that royalty revenues will come to California in the uncertain area of stem cell-derived therapies. “No one has figured out how to commercialize this technology and generate substantial revenues,” says Donald Ware, a biotech litigation partner at Boston’s Foley Hoag. “People have looked at cell therapies … but no industry has taken off.” Proposition 71 established the California Institute for Regenerative Medicine, which will distribute $300 million in grants per year over the next decade for in-state stem cell research. Scientists will work with human embryonic stem cells — those miracle cells that can become any kind of tissue in the body — seeking therapies for such conditions as spinal-cord injury, Parkinson’s disease and diabetes. Operating under the name Cures for California, a coalition of movie stars, universities, venture capitalists, disease-advocacy groups, medical associations and biotech companies waged a $30 million campaign for Prop 71, which garnered 59 percent of the vote last November. In their campaign materials proponents touted a report from the Los Angeles-based Analysis Group Inc. that predicted stem cell research will reward California with royalty revenues ranging from $537 million to $1.1 billion. Nicholas Seay, a partner at Milwaukee’s Quarles & Brady who prosecuted the University of Wisconsin’s stem cell patents, advises caution on the prospect of California getting any of its money back from licensing revenue, at least any time soon. “I have a hard time imagining [payback from licensing revenue] in the time frame envisioned,” he says. In any case, the initiative’s vague language gives no clues as to how any licensing deals will be structured. “It doesn’t tell us one hell of a lot,” says Brian Cunningham, former general counsel of Genentech Inc., and a biotech partner at Cooley Godward in Palo Alto, California. But not every lawyer is doubtful about the revenue prospects stemming from Proposition 71. Last December, Gerald Dodson, a partner in the Palo Alto office of Morrison & Foerster, talked about the initiative at a meeting held at the University of California in Irvine. “I said money can be made from this and come back to the state,” Dodson says. “I told them this doesn’t have to be a situation in which the taxpayers get fleeced.” Dodson has spent much of the last decade representing the University of California in high-profile biotech patent battles. He does not foresee any problems arising out of vagueness in the language of Proposition 71. “If you had a working group of IP lawyers, I don’t think it would have been better,” says Dodson. “They’d start writing details into it and one would have tried to outdo the other.” Victoria Slind-Flor is a former West Coast editor for IP Law & Business magazine.

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