february 2012 Intellectual Property & Technology

Transcription

1 february 2012 Intellectual Property & Technology

2 2400, 525-8th Avenue SW, Calgary, Alberta T2P 1G1 Phone: Fax: On Record Contents: Employees Coming or Going What Are the Risks to the Employer? Page 1 US Patent Reform What Does it Mean for Canadian Companies? Page 3 An Eye on the US: Patenting Heredity Page 4 Social Media in the Work Place Old Wine in New Bottles? Page 6 Amazon Successful in One Click Shopping Patent Page 8 Intellectual Property & Technology and other issues of On Record are available on our web site Intellectual Property & Technology, Editors-in-Chief James T. Swanson jts@bdplaw.com Kevin J. Tuohy kjt@bdplaw.com Intellectual Property & Technology, Managing Editor Rhonda G. Wishart rwishart@bdplaw.com Contributing Writers and Researchers: James Swanson, Heather Mueller and Brittney LaBranche Contact For additional copies, address changes, or to suggest articles for future consideration, please contact the Managing Editor. General Notice On Record is published by BD&P to provide our clients with timely information as a value-added service. The articles contained here should not be considered as legal advice due to their general nature. Please contact the authors, or other members of our Intellectual Property & Technology Team directly for more detailed information or specific professional advice. Intellectual Property & Technology Professionals Lawyers Brian W. Borich James T. Swanson Kevin J. Tuohy George A. Wowk Patent Agent Heather Mueller bwb@bdplaw.com jts@bdplaw.com kjt@bdplaw.com gwowk@bdplaw.com hmueller@bdplaw.com If you would like any further information on any members of our team, such as a more detailed resume, please feel free to contact the team member or the Managing Editor. You may also refer to our website at

3 1 Employees Coming or Going What Are the Risks to the Employer? by James T. Swanson Ever wonder, as an employer, just how protected you really are in terms of confidential information, copyrights, patent and inventions in which your employee, now leaving your company, has been involved? Not only that, but do you ever wonder whether there is any risk in those areas when you hire somebody new? When an Employee Leaves Here are some things every employer should know. Even without a written agreement, your current employee (we ll just call him Bob) may owe you a fiduciary duty, a duty of good faith, meaning Bob is not at liberty to disclose or use your confidential information when he leaves. But it is no secret that Bob s obligations can be clarified and enhanced by a clear written non-disclosure agreement. Even without a written agreement, copyrights created by Bob in the course of employment will probably be yours. But you may not wish to take any chances. A written employment agreement can help ensure your protection. Otherwise, it can become a grey area. Patent and invention rights (which may be something you would prefer to keep as your trade secret, or you may want to file for a patent) probably won t be yours, unless you have a clear written agreement assigning those rights to you, including an obligation to disclose inventions or discoveries to you, or unless you specifically hired Bob to invent (which can be hard to prove if not in writing). Even giving Bob a fertile environment for invention may not, to your surprise, be enough to transfer the rights to the invention to you unless there is a written agreement. This can be another grey area best avoided by proper documentation in writing. If you are filing a patent application based on something Bob invented, you are going to need his cooperation as inventor, and that cooperation may be required long after he leaves. Your written agreement with Bob should require him to provide that cooperation. Without a written agreement addressing the key matters above (and lots of other things that space limitations prevent being mentioned), you may have a more difficult time protecting your rights when Bob (the ungrateful wretch) decides to leave. In any event, you probably worry about the possibility of losing key employees like Bob, particularly if Bob (treacherous as well as ungrateful) goes to a competitor. If you don t, then you should.

4 2 Intellectual Property & Technology When You Hire Someone New What is less often considered, are issues associated with incoming fresh new hires. In your eagerness to get your new employee (we ll call him Pete) onboard and to start putting Pete s skills and knowledge to work, you may forget that Pete is a former employee of someone else (we ll just call her Betty). Pete may have Betty s confidential information, and Pete may have inventions or discoveries that Pete invented or discovered while working for Betty, in circumstances where either Betty owns that intellectual property, or at least thinks she does. If your eagerness to put Pete to work blinds you to the risks, you may find yourself being sued by Betty. To paraphrase something Voltaire once said, you can be ruined when you win a lawsuit, as well as when you lose one. So, how do you protect yourself? To avoid giving Betty grounds to sue you, consider the following: Keep in mind that you may be vicariously liable to Betty for unlawful actions of Pete, and things you get him to do (or permit him to do). You cannot even appear to ask Pete to divulge to you Betty s confidential information, so don t do so. If he does, and you use it or disclose it, well, you know the story. Pete can be eager to provide you with ideas, discoveries and inventions that in reality belong to, or at least incorporate or include, Betty s intellectual property. This may be in breach of a contract Pete has with Betty, and may also infringe Betty s intellectual property rights. Pete s eagerness may also mean he forgets about the agreements he signed with Betty. Find out what those agreements actually say before putting Pete to work. It can be a fine line between what comprises Pete s knowledge of his profession, his tools of the trade, and what is actually a protectable intellectual property right or confidential information owned by Betty. The former is what we call know-how and is in general freely usable. Pete can legitimately take this with him from one employer to the next, but it can be tricky to define. You should give it some thought, and speak with Pete about what he considers know-how and what Pete should properly consider Betty s property. If you and Pete disagree, well, you re the boss, but err on the side of caution. If something smells bad, it usually is. Of course, you may think it fine if Pete says he invented or discovered certain intellectual property in the time between leaving Betty and being hired by you, or that he came up with it long before he ever met Betty. However, are you sure Betty (or anyone) is going to believe that? Even if true, and Pete somehow does own it, then how do you make sure you can still use it if Pete then leaves your employ? You will not automatically own it, or even have an ongoing right to use it, just because Pete worked for you. In your eagerness to get Pete in the door, you may forget that Pete owes Betty an obligation to give reasonable notice of his departure. Be careful that you are not seen to have somehow induced Pete to leave too soon, leaving Betty in the lurch. To protect yourself, ensure that you require Pete to give reasonable notice to Betty, and have a clear written employment agreement with Pete that sets out, among other things: a) Specific obligations of confidentiality to you, with a clear definition of what is confidential, and how long it must be kept confidential. b) Written assignments to you of all intellectual property discovered, created or invented while Pete is working for you. This should include an obligation to promptly and fully disclose new inventions or discoveries to try and avoid them leaving with Pete when he goes (another ungrateful wretch). c) Any non-competition obligations you wish to impose upon Pete. You should have legal advice on how far you can go with such limitations for if you are too onerous, non-competition provisions won t be enforceable at all. d) (If you wish to help protect yourself against claims by Betty that you participated with Pete in the theft or wrongful use of Betty s confidential information or intellectual property), consider specific clauses that provide that not only do you not want Pete to wrongfully disclose Betty s confidential information to you, and not only do you not want Pete to infringe Betty s intellectual property rights, it is actually a term of Pete s employment agreement with you that Pete will not do any of those things. This can be helpful because it not only makes it a breach of Pete s employment agreement to do such things, but it also manages Pete s expectations, and perhaps you can even use it to some extent as a defence in any claim by Betty of any foul play or unsporting conduct by you. Keep hiring, but be careful.

5 3 US Patent Reform What Does it Mean for Canadian Companies? by Heather Mueller, Patent Agent The US has finally joined the rest of the world in adopting a first to file patent system. While this major shift in US patent policy has caused much controversy in the US, most Canadian companies will not be troubled by this change. In short, most Canadian companies have not noticed, and likely will not notice, any change in the handling of their US patent matters since the adoption of the America Invents Act ( the Act ) on September 16, However, we summarize a few of the notable changes below. A First Inventor to File System Until March 16, 2013, the US patent system will continue to operate on a first to invent basis. That is, if two patent applications are filed for the same invention, the patent is granted to the party who can prove the earliest invention date. Some argue that such a system does not encourage technology development, as an inventor may keep their advances and inventions secret indefinitely, without making them available to the public. Moreover, a later party who independently develops the same invention and does make that invention public may lose its ability to be granted a patent if the earlier inventor subsequently files a patent application and asserts an earlier invention date. The newly adopted First to File basis will bring the US Patent in line with every other patent office in the world awarding the patent to the first inventor to file a patent application. Increased Fees For decades, the US government has been diverting patent and trademark fees (collected from applicants to support the processing of their applications) to other government programs. In the last 20 years, over $1 billion dollars have been diverted away from the US Patent & Trademark Office ( the USPTO ), resulting in significant underfunding and backlogs in the processing of patent applications. It is therefore not surprising to see that the Act includes a 15% increase to specific patent fees. The USPTO has also implemented a surcharge of $400 for paper filing of patent applications, to encourage electronic filing of documents in the Patent Office. Changes to the Grace Period for Prior Disclosure of the Invention by a Third Party The one year grace period, which previously allowed inventors to file a patent application up to one year after the invention had been made publicly available by a third party, has been amended. If a third party discloses the invention to the public before the inventor either discloses the invention to the public or files a patent application, the third party disclosure will be held against the inventor s application, preventing patentability, even if the third party disclosure was made less than one year before the inventor s filing date. Prioritized Examination Applicants may elect to pay an additional fee of $4,800 to speed examination of their patent application. Certain patent application criteria must be met in order to qualify for the program. (For comparison purposes, the corresponding fee for requesting Advanced Examination in Canada is $500). Virtual Marking Patentees may mark patented products with patent or pat. and an internet address which, in turn, identifies the relevant patents, rather than marking the actual patent number(s) on the product (marking is not required in Canada). Tax Strategies are Not Patentable Any patent application pending on or after September 16, 2011 that claims a strategy for tax avoidance, reduction, or deferral will be rejected. Post Grant Review of Issued Patents Upon Request of a Third Party For any patent issued after September 16, 2013, a third party may petition the Patent Office for cancellation of one or more claims on the basis of invalidity. Preissuance submission of relevant references to the Patent Office by third parties is also encouraged under the Act. In summary, the Act has introduced minor features and strategies that may be of interest to patent savvy companies, has continued to increased fees without ending fee diversion, and has finally adopted a first to file system. The move to a first to file system will provide Canadian and International Applicants with more consistency and predictability in their patent coverage, as the greatest discrepancy between the US patent system and other international patent systems has now been corrected.

6 4 Intellectual Property & Technology An Eye on the US: Patenting Heredity by Brittney N. LaBranche, Student-at-Law Introduction In 1980, the US Supreme Court decided that genetically engineered life forms were patentable material because they did not occur naturally in nature. 1 Since this decision, US patents have been issued on more than 20% of human genes. With knowledge from the Human Genome Project indicating the importance of genetics to modern medicine, genetic research has exploded. The effect of gene patenting on research and investment has been the subject of great debate. Some critics argue gene patenting is unethical on the basis that the human genome is our common heritage. Given the importance of biomedical research to modern medicine, many disagree with human gene patenting, on the basis that that gene patents may inhibit biomedical innovation and competition. Advocates argue that gene patents, like all patents, promote the publication and distribution of ideas, specifically the uses of gene sequences. They also argue that gene patents also provide important incentives to investors who would otherwise be reluctant to invest in research that has no other intellectual property protection. The controversies surrounding this debate are highlighted in the recent Myriad BRCA gene patent case. In this case, genes were declared unpatentable subject matter by the New York District Court ( District Court ) and then patentable subject matter by the Federal Circuit Court of Appeals ( Court of Appeals ). Background BRCA1 and BRCA2 are genes that account for most inheritable forms of breast and ovarian cancers. Women who have certain genetic mutations containing the BRCA genes have up to a 60% lifetime risk of breast cancer and up to a 40% lifetime risk of ovarian cancer. 2 Myriad Genetics Inc. ( Myriad ) and the University of Utah Research Foundation were the first to sequence the BRCA genes and obtain patent protection. Patent ownership allows Myriad to control availability of genetic testing for the mutations causing breast and ovarian cancer and to restrict research on the BRCA sequences in other laboratories. Myriad is the sole US BRCA patent holder and has a number of BRCA patents throughout the world. The patents are quite controversial as Myriad imposes upwards of $3, for their BRC Analysis test and heavily monopolizes the availability of the tests. In 2010, the American Civil Liberties Union, the Association for Molecular Pathology and a number of other plaintiffs, including researchers, advocacy organizations and cancer patients, filed a lawsuit aimed at having have Myriad s patents invalidated on the basis that genes are not patentable subject matter. Basic US Patent Law The US Patent and Trademark Office ( USPTO ) determines the patentability of inventions. The invention must be practically useful, in that the inventor must identify some useful purpose for it, novel, in that the invention was not known or used before its filing, and nonobvious, meaning the invention is not an improvement easily made by someone trained in the relevant area. In general, raw products of nature are not patentable. 3 To be patent eligible, a product should have markedly different characteristics from any found in nature. 4 In the US, DNA sequences generally become patentable when they have been isolated, purified or modified to produce a unique form, distinct from chromosomal DNA as it occurs in nature.

7 5 Decision in part, largely restoring the previous state of patent law. The first group of patents, claiming isolated DNA sequences, was upheld as patentable subject matter. The majority concluded that isolated DNA sequences are markedly different in chemical structure from native DNA inside the human body. The second group of patents, methods for analyzing and comparing, were upheld in part. The Court of Appeals unanimously affirmed the District Court s ruling that methods of analyzing BRCA gene sequences and comparing those sequences to non-cancer susceptibility mutations are not patentable because they describe abstract mental processes. The Court of Appeals reasoned that these methods only involved the abstract mental steps required to compare two different nucleotide sequences, and lacked a transformative step, therefore failing the machine-or-transformation test. The Court of Appeals then ruled that methods of screening potential cancer therapeutics by analyzing changes in cell growth rates are patentable. It was noted that Myriad s screening method involved abstract inspection, growing transformed cells and determining cell growth rate, all of which are transformative steps in compliance with the machine-or-transformation test. In late August both parties were denied a re-hearing of the Federal Circuit Decision, but have not exhausted their recourse to the courts. The plaintiffs have recently filed for appeal to the Supreme Court. District Court Decision On March 29, 2010, in a controversial decision, the New York District Court, issued a ruling (the District Court Decision ) that invalidated certain of Myriad s patents and declared isolated DNA sequences, found in nature, to be unpatentable subject matter under US law. 5 The Court invalidated the patents under the useful, novel and non-obvious requirements, as well as the long standing US precedent against patenting products of nature. The Myriad patents were divided into two groups: (i) those claiming isolated DNA sequences for BRCA1 and BRCA2 genes; and (ii) those claiming diagnostic methods for analyzing and comparing gene sequences that might indicate a cancer predisposition. In response to the first group, the Court ruled that DNA existing in isolation is a product of nature as it does not alter the fundamental quality of DNA existing in the human body or the information it encodes. Both isolated genes and genes in their natural form share this same critical functional property. The second groups of patents, diagnostic methods for analyzing and comparing, were largely invalidated on the basis of the Federal Circuit s Bilski v. Kappos, 6 machine-or-transformation test. The Court held that no machine or apparatus was at issue and that the claimed acts of analyzing DNA sequences are abstract mental processes rather than physical transformations, making them unpatentable subject matter. The Court reasoned that isolating and sequencing DNA are mere preparatory or data gathering steps that do not require any transformation to complete. Appeal Court Decision The District Court Decision was appealed to the Court of Appeals, and on July 29, 2011 the Court of Appeals published its decision (the Federal Circuit Decision ). 7 The Court of Appeals reversed the District Court The Canadian Story Although Myriad did obtain corresponding patent protection in Canada, BRCA tests are routinely provided to Canadian patients in various provinces, apparently without authorization from (or payment to) Myriad. In 2001, Myriad sent cease and desist letters to four provinces that were apparently testing patients for BRCA: Quebec, Ontario, Alberta and British Columbia. Ontario s then Health Minister, Tony Clement, spoke publicly against Myriad s BRCA patents, stating, monopoly pricing of a whole new category of diagnostics threatened publicly funded health care and equitable coverage. Further to these statements, other provinces that offer BRCA testing now apparently send patient samples to Ontario for BRCA analysis, such that Ontario now appears to be the only province actually conducting the Myriad diagnostic method. Myriad and the Canadian provincial governments have participated in several years of discussion and policy debate. To date, Myriad has not initiated formal legal action to assert their Canadian patents. Concluding Comments The progress of this case has been followed closely by many parties on both sides of the gene patenting issue. Ultimately, this decision provides support for the premise that significant investment in research and development can lead to innovations of great commercial benefit. In the area of medical innovations, the debate as to whether the commercial benefits correlate directly with public benefit will certainly continue. Footnotes 1 Diamond v. Chakrabarty, 477 U.S. 303, 309 (1980). 2 National Cancer Institute Fact Sheet, BRCA1 and BRCA2: Cancer Risk and Genetic Testing, online: National Cancer Institute < Risk/BRCA#r4>. 3 Title 35 U.S.C., at Supra, note i. 5 Ass n for Molecular Pathology v. U.S.P.T.O., S.D.N.Y. No. 09-CV-4514, Docket No. 255 (March 29, 2010) S. Ct (2010). 7 Ass n for Molecular Pathology v. U.S.P.T.O., (July 29, 2011).

8 6 Intellectual Property & Technology Social Media in the Work Place Old Wine in Facebook Twitter LinkedIn My Space About.Me

9 7 New Bottles? By James T. Swanson Introduction Humans have been collaborating, communicating, socializing, networking, creating, building and maintaining communities and relationships, buying, selling, interacting, trading, cheating, defrauding, infringing, defaming, stalking and any number of other such activities since time immemorial. Now, we can do all those things on the Internet, using free and highly accessible publishing and distribution technologies, but the same old benefits, dangers and dark side remain. Social media, a term used to describe Internet-based applications allowing online communication and the creation and exchange of user-generated content, can therefore be viewed in one sense as new bottles containing old wine. Social Media at Work Puts Employer at Risk There are times when the use of social media at work may be desirable and, in fact, some businesses have employees actively working with social media in relation to marketing activities of the business and its online brand and image. However not all social media use has proven to be positive. When employees use social media from the workplace, there is risk of their activities and the content they send and receive being linked with their employer, for example by using their employer s account or by stating where they work. Employees left without direction or policies provided by their employer are more likely to use their employer s computer systems to carry on activities that put their employer at risk of legal liability. These activities can include, as a few examples: Disclosure of confidential information or trade secrets belonging to the employer or to third parties. Posting content that infringes the copyrights of third parties or uses third party trademarks inappropriately. Online activities that breach applicable legislation, for example the Competition Act. Posting defamatory statements. Waivers of privilege or confidentiality resulting from materials improperly disclosed. Stalking and harassment of either co-workers or individuals outside the business. Publishing hate literature, or obscene, illegal or offensive materials. Breaching the privacy rights of other individuals. Sending bulk unsolicited commercial contrary to Canada s new anti-spam legislation (generally referred to as FISA, and containing significant penalties, including for permitting the sending, therefore making employers and their individuals in management potentially liable). Online activities are global and legal liability may arise in foreign jurisdictions. For example, assume the employer operates in a distant land where certain content is forbidden, although perfectly legal in Canada. If residents of that distant land see content (which would be illegal or offensive in their country) posted online by a Canadian employee in a manner that links that content to the employer, they will not react positively. Social Media at Home Employees may also do things on their own time and from their own computers that reflect poorly on their employer. Of course, it is more difficult for an employer to monitor or control what an employee does outside the workplace, but policies in that regard should at least be considered and, if appropriate and in compliance with applicable law, implemented and enforced. Of course, all of this can cut both ways. The following is based on a true story: A successful job applicant tweets (a tweet is a message using Twitter): [famous company] just offered me a job! Now I have to weigh the utility of a fat paycheck against the daily commute to [U.S. city] and hating the work A senior executive with the new employer sees it, and responds: who is your hiring manager. I m sure they would love to know you hate the work. You are fired before you start! Strangely, people seem to post things online that they would never communicate in any other media, often not seeming to understand that online is usually public and essentially permanent. If the posting is readily accessible to anyone, the individual may have little, if any, expectation of privacy and may have no legal recourse if the information is used against him/her. Employer s Monitoring An employer may be tempted to use social media to investigate prospective employees as well as to monitor the activities of current employees. However, an employer wishing to conduct such investigations or monitoring needs to think about what information about the employee is actually public and legally available for such purposes. In particular, employers should not be monitoring the activities of employees online from the workplace without first implementing appropriate policies for employee s use of the Internet, including social media. The law limits how much an employer may monitor, and limits how far a policy can go, so any monitoring must remain within those limits. Snooping simply for snooping sake is likely to be illegal. Conclusion The technology and the law in this area are rapidly changing and no doubt many interesting developments await us. Managing social media risks should form part of wellconceived employer policies to deal with the many issues related to employee use of information technologies in the work place.

10 8 Intellectual Property & Technology Introduction After years of controversy, speculation, and litigation, Amazon has successfully patented its one-click purchasing method in Canada. We commented in our BD&P November 2010 IP Newsletter on the history of the Amazon case in the Canadian forum, at which time the Federal Court of Canada ( the Federal Court ) had directed that the patent application of Amazon be returned to the Canadian Patent Office for issuance. We will summarize the history and complete the story here. Background on Amazon case In 1998, Amazon filed a Canadian patent application entitled Method and System for Placing a Purchase Order via a Communication Network. At the time the application was filed, internet shopping was not yet pervasive, and Amazon believed that the time-consuming experience associated with online ordering often caused potential customers to abandon their orders prior to completing their purchase. Notably, the ordering process was thought to be particularly frustrating for repeat purchasers due to the need to re-enter personal data each time a purchase is made. Amazon s patent application described a one-click shopping method by which a customer could make a subsequent purchase from an online merchant without re-entering personal data, and without even logging in to the merchant system. The one-click method is initiated when the customer makes a first online purchase from the merchant. The customer enters their payment and shipping information, which is stored on the merchant server. The merchant server then assigns a cookie to the customer information, and sends the Amazon Successful in One Click Shopping Patent By Heather Mueller, Patent Agent

11 9 In its decision, the Federal Court of Appeal had confirmed that business methods carried out by software are patentable-eligible subject matter in Canada. cookie to the customer computer for storage. On subsequent visits to the merchant s online store, the customer will be recognized by the merchant server by the presence of the stored cookie. So recognized, the customer will not be required to log in to the merchant server, or to enter any personal information. The customer may simply purchase an item by a single click, which prompts the merchant server to automatically undertake a number of steps to locate the previously stored customer information from its own server and match it to the one-click order to process the purchase. Initial Rejection by the Patent Office Upon examination of the patent application by the Canadian Patent Office, Amazon s claims were rejected. One of the reasons for the rejection was a failure to describe subject matter eligible as an invention as defined in the Patent Act. The Patent Act defines invention as any new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement in any art, process, machine, manufacture or composition of matter. The Patent Office also rejected the one-click method as obvious, and therefore unpatentable. Patent Appeal Board Amazon disagreed with both of the positions taken by the Patent Office, and appealed the Commissioner s decision to the Patent Appeal Board. Upon review, the Patent Appeal Board reversed the Patent Office s rejection of the application on the basis of obviousness, but upheld the Patent Office s objection that the actual invention was not a patenteligible invention as defined by the Patent Act. Federal Court Amazon, while partially winning the appeal, was still without a granted patent, and appealed to the Federal Court on the basis that the claims did define an invention eligible for patent protection under the Patent Act. The appeal was allowed by the Federal Court which confirmed there is an absolute lack of authority in Canada for a business method exclusion from patentability, and the Commissioner was directed to grant a patent to Amazon. However, the Commissioner of Patents appealed the decision to the Federal Court of Appeals. Federal Court of Appeal The Federal Court of Appeal acknowledged that while a patent cannot be granted for a mere scientific principle or abstract idea, a novel business method may be an essential element of a valid patent claim, when the patentable subject matter is something that has physical existence or manifests a discernible change or effect. Notably, this physicality requirement must be a flexible term able to adapt to changes in technology. The one-click online ordering process was not merely a mathematical formula, but has a practical application with a commercially applicable result. The Federal Court of Appeal therefore returned the application to the Commissioner for re-examination, and the application was granted on January 17, End Result In its decision, the Federal Court of Appeal had confirmed that business methods carried out by software are patentable-eligible subject matter in Canada. This decision may provide further incentive for companies to protect and assert rights to methods embodied in software and rights to other closely held methods for conducting business. However, when considering patentability, the business method should be described as a system with physical components that produces a tangible result.

12 Common Sense, Uncommon Innovation. BD&P is a leading Canadian law firm of over 140 lawyers skilled in virtually every aspect of business law and litigation. 2400, 525-8th Avenue SW, Calgary, Alberta T2P 1G1 Phone: Fax: