Trustees at UAH had argued that Milton Harris, a member of their faculty from 1973 to 2000, had no right to take the PEGylation patent portfolio with him when he merged his own company, Shearwater Polymers, with Nektar in 2001.
If the litigation had proceeded it could have had far-reaching implications for Nektar since its PEGylation technology, which can increase the bioavailability and stability of biopharmaceuticals, has been used in several blockbusters, including Roche's Pegasys to treat hepatitis C and Amgen's Neulasta for the treatment of neutropenia, a condition where the body produces too few white blood cells. It has not been used however in the formulation of Exubera, its long-anticipated dry powder inhaleable human insulin marketed by Pfizer.
The San Carlos-based company has now agreed to an upfront payment of $15m to UAH and additional $1m annual payments for ten years in exchange for the dismissal of all claims by UAH related to PEGylation patents.
"This settlement is in the best interests of Nektar and helps maintain our focus on improving and expanding our PEGylation business," Nektar's chairman Robert Chess said in a statement.
Nektar's advanced PEGylation chemistry is a molecule engineering technology for the chemical attachment of polyethylene glycol (PEG) chains to a broad range of biologic molecules such as peptides, proteins and oligonucleotides.
Its objective is to optimise pharmacokinetics, increase bioavailability and decrease immunogenicity, leading to higher drug concentrations with less dosing - a significant benefit to patients who are taking injected drugs.
When attached to a drug, PEG polymer chains can sustain bioavailability by protecting the drug molecules from immune responses and other clearance mechanisms.
They achieve this by shrouding the therapeutic ingredient in water and keeping in constant motion, sweeping out a large volume and preventing interference such as immune responses or proteolysis. Thus, PEGylation keeps biologic molecules circulating in the body much longer than they would without this technology.
Harris and another researcher developed the technology in 1989, but because it was patented by UAH, the school entered into a royalty agreement with Harris for products developed out of the discovery. He created Shearwater in 1992 to pursue manufacturing of PEGylated products, patenting 28 of them.
After Nektar informed UAH last spring it would no longer pay royalties from sales of Neulasta because the compound does not involve anything owned by UAH, the university filed a lawsuit, contending that the patents Harris registered are "obvious derivatives" of and "equivalent" to the original PEG patent.
Nevertheless, the university has now decided to accept Nektar's financial settlement, saying it will use the money towards its endowment and to fund scholarships for the entire campus, including chemistry and biology programs.