Professor’s Conflict-of-Interest Case Raises Broader Questions

When UCLA decided to transfer the rights to a potentially profitable and life-saving procedure developed at the university to the faculty member who invented it, university officials had to contend not only with the state’s relatively narrow conflict-of-interest law, but with a number of broader issues.

The most troubling one, according to UCLA officials, was whether the university should reap the profits from the work of one of its faculty members. In the case involving Prof. Paul I. Terasaki, a pioneering researcher in the field of tissue-typing for human organ transplant, the university decided not to operate a money-making business based on his discoveries, or to have a financial interest in such an enterprise, but gave that right to Terasaki.

Ensure Professor Stayed

“One of our motivations,” said Albert A. Barber, UCLA vice chancellor for research, “was to get out of things commercial.” Another consideration, he said, was finding a way to ensure that Terasaki, a professor of surgery at the UCLA Medical School, would stay with the university.

The propriety of that decision has been called into question by the state auditor general, who charged that UCLA erred in allowing Terasaki to use public funds and facilities to support his private enterprise. The investigation resulted in the payment of $500,000 from Terasaki’s outside company to UCLA for “the rights, title and interest in the procedure developed by the professor.”

In the view of experts knowledgeable about the increasingly common conflicts that occur between universities and entrepreneurial faculty members, UCLA’s decision was unusual.

“Most universities would make some claim to ownership” of a product, process or idea developed at the university, said Robert M. Rosenzweig, president of the Assn. of American Universities. He questioned whether UCLA “should have given away something of value.”

However, the procedure that Terasaki developed was not patentable, according to Barber, because the professor had published a number of articles explaining it, thus making the innovation part of public domain.

Most major research universities, including the University of California, have stringent rules governing the sharing of royalties resulting from patented products or techniques developed in university laboratories.

Seek to Minimize Conflicts

They also have guidelines that seek to minimize conflicts of interest whenever a faculty member’s research allows him to form profitable ties outside the university.

As a public university, UCLA is obliged to follow state rules that apply to all state employees, as well as an array of UC policies. Under UC policies, for instance, a university employee may not accept gifts given to him or her from any source “which is offered or appears to be offered because of the university position” that employee holds. Another policy prohibits the appointment of relatives.

One explicit UC policy that pertains to the Terasaki case states that university facilities cannot be used for anything other than university activities. “It would appear that the professor violated that” rule, said Afton Crooks, conflict-of-interest coordinator for the UC system.

But Barber said transfer of “technology rights” to Terasaki was not covered by the state law governing review of possible conflicts.

Formal Disclosure Required

Under the Political Reform Act of 1974, all state employees are required to make a formal disclosure of business ties that may constitute a conflict of interest. UC faculty members were exempt from the law until 1982, when the law was changed in response to growing concerns about the propriety of UC faculty members’ profiting from research in the budding field of bioengineering.

At UCLA, a five-member faculty committee was established to review cases of faculty members who wished to engage in research sponsored by an outside, non-governmental entity, such as a foundation or private industry.

Since 1983, the committee has reviewed 245 cases, said Richard P. Seligman, associate director of UCLA’s contract and grants office. In only one of those cases did the university bar a faculty member from participating in research for a private company; the case involved a company in which the faculty member and his family owned the primary interest.

According to Barber, the committee may disapprove of a project for a number of reasons, but a primary consideration is whether the research activity is consistent with the university’s public service and teaching mission. “We don’t just build widgets for people,” Barber said. “If it’s a case of just . . . work for hire, we don’t get involved in that.”

Case-by-Case Basis

Seligman said the committee determines on a case-by-case basis what degree of ownership or interest is sufficient to cause a conflict. “They look at the difference between owning 15% of the stock in a venture capital organization compared with 2% in IBM and the likelihood of that person influencing the company.”

In many cases, Seligman noted, faculty researchers are able to modify their agreements with the outside concerns in order to satisfy university policy regarding conflict of interest.

Barber said the state law regarding conflict-of-interest disclosures did not apply to the Terasaki case because it did not involve funding from an outside, non-governmental entity, the factor that “triggers” the disclosure statement and committee review. Thus, Terasaki’s outside business activities in the company he formed never came before the faculty review committee.

The only reason why Terasaki’s business might have been reviewed by the committee for possible conflicts would have been if the agreement gave UCLA income that in turn was used to support the researcher’s work on campus, he said.

Agreement Was Reviewed

Nonetheless, the agreement was reviewed by Barber and others to see if it was consistent with university guidelines.

It took the university nearly four years to iron out an agreement with Terasaki, in large part because the university was dealing with unfamiliar issues, Barber said. Aside from the conflict-of-interest question, UCLA also grappled with the issue of whether its production and distribution of the product Terasaki developed might constitute unfair competition with outside vendors.

These issues concern officials at private as well as public research institutions.

Defining the obligations of a faculty member to the university and to the outside company or agency with which he may have financial ties is “a matter of emergent and still evolving practice,” said Robert P. Biller, executive vice provost at USC.

Concern in the academic community is growing over the issue of conflict of interest, according to officials knowledgeable about research ventures.

‘Situation Is Troublesome’

Sandra Toye, controller of the National Science Foundation, said that virtually every academic scientist who is doing research in genetic engineering, for example, has some tie to a private company. “The situation is troublesome to the community at large,” she said.

Such ties are also becoming more common in the computer field, particularly among programmers, she said. Links to companies are also growing among materials scientists, particularly those working with the new “high-temperature” superconductors.

In recognition of the problem, Toye said, the National Science Foundation recently published its first formal set of guidelines outlining standards of conduct for scientists receiving its grants. The National Institutes of Health has had similar guidelines since the 1960s.

Times science writer Thomas H. Maugh II contributed to this story.