Fun with IP Clauses in Agreements as Part of Global Strategy to Enable Your Business Model, Financing, and Deal-Making TTS-Australia Brisbane April 17-18, 2018 Dmitriy Vinarov, Ph.D., MBA Partner, MBHB LLP
IP Cannot be an Afterthought Global Good + $$$ IP Assets Idea Internal forces: Resources Science Politics External forces: Patent Offices Competitors Partners Timing
IP Assets: What, Who, When, and Where What what are all the IP assets? Who who owns each asset? When when do these assets expire? Where where are they protected and where are they not?
IP Assets What Copyright Protects original works of authorship (software, books, movies, songs, photos). Trademark Protects a word, name, logo, symbol, or design used to distinguish its goods and services from those of another. Trade Dress Protects the non-functional look and appearance of a product or its packaging. Trade Secret Protects information that provides a competitive advantage. Patent Protects new, non-obvious, and useful inventions.
Start With Competitive Intelligence Strengths Capability of producing commercially viable quantities of X Toll booth in the desert - IP protection for key elements of the production process Regulatory / customer awareness We are way ahead of the competition Opportunities Identify more/better elements to create additional speed bumps for competition Bolster our IP portfolio by filing additional application covering core technologies and improvements at the margins Monitor competitor IP portfolios Consider opposing competitor s IP Consider enforcing our IP Weaknesses We cannot prevent others from developing the production process - there are other elements out there We cannot prevent others from filing applications on these elements and combination of elements Threats Market overreaction to misleading press releases by our competitors Published applications and granted patents by our competitors
How to Get an IP Asset? Inventorship Assignments and Employment Contracts Ownership
Inventorship Inventorship is a legal, not a collegial or team-building, matter. Although a mistake in not naming true inventors may not be fatal and may be corrected, we need to get it right. Incorrect inventorship is a cloud over your head in litigation. When there is deceptive intent in naming inventors, the patent is invalid and unenforceable. Inventorship determination focuses on the invention claimed and not merely described in a patent. A pharmaceutical composition comprising a monoclonal antibody A method to inhibit tumor growth using combination antibody therapy
Determination of Inventorship Two-step process: Conception of the idea that is sufficiently definite and permanent to allow one with ordinary skill in the field to reduce it to practice without undue experimentation Reduction of the idea to practice, or making a working example of the claimed invention
An Inventor is: A person who conceives the subject matter of at least one claim of the patent Two or more persons who collaborate to produce the invention through aggregate efforts
An Inventor is Not: A technician who simply performs experiments or assembles the invention A supervisor or department manager of the person who conceived the invention Someone whose only contribution is an obvious element to the invention A person who only discovers the problem (unless he contributes to the solution) A person who merely provides a suggestion or improvement but who does not work to fit the suggestion or improvement into the invention A second inventor of the subject matter of the invention who did not collaborate with a first inventor of the subject matter of the invention
Joint Inventors Joint inventorship occurs when two or more people collaborate on an invention, with each person contributing to the subject matter of the patent claims. A significant contribution to even one claim in the patent is enough to make someone a joint inventor. There is no limit to the amount that each individual is required to contribute to qualify as a joint inventor only that the contribution made be significant and inventive. A contribution is considered significant when it helped make the invention patentable, such as making the invention novel or nonobvious. A person does not qualify as an inventor simply because his or her contributions appear in the claims of the patent because many claim elements may not be novel or may be obvious.
Ownership: Ownership of Inventions Employment Agreement Employee X shall promptly communicate to the Company all ideas, inventions, modifications, improvements, processes, formulae, materials, know-how, designs, models, prototypes, trademarks, sketches, drawings, plans and other matters (intellectual property) (whether or not capable of protection by any contractual, statutory or other form of protection of intellectual property) which at any time during the term of the X s employment X alone or jointly with others may devise or discover in the course of X s performance for the Company of his/her duties. Such intellectual property rights including all rights deriving therefrom shall belong to the Company. Company shall not retain, nor seek to retain, ownership of any Work Results that are not of relevance to the business of Company. However it shall be the sole judgment of Company as to whether any particular Work Results are of relevance to the business of Company, and Company shall be entitled to consider potential future business areas that Company may look to enter in the future in making such judgement. Should Company judge the Work Results not to be of interest to its business, it shall, at the request of X, and without charge to X, take such steps as are needed to enact and document the transfer of ownership of the Work Results to X. In the absence of any such documents, ownership of the Work Results shall always rest with Company. X shall, upon first request by Company, promptly perform all measures and acts and to execute and deliver all written instruments and declarations required or useful in order to confirm or give full effect to the assignment and transfer of all its rights provided in this Clause. This obligation shall continue to be in force after the termination of the employment relationship between X and Company, whatever the reason for termination.
Ownership: Assignment
IP and Business What is being routinely done: Due diligence and valuation by acquiring party Pending and potential lawsuits or infringement claims What needs to be addressed more often (and more diligently): Who owns what (IP assets) and proper documentation? o Signed agreements, licenses, contracts, websites, domains What is actually recorded at the Patent Offices world-wide?
Ownership: Review Assignments Carefully!
Ownership: The Horror Stories. U.S. Provisional (or AU national) Application names A and B as inventors Both A and B assigned to Company X 12 months International Application (PCT) names A, B, and C as inventors 18 months U.S. National Stage Application names A, B, and C as inventors A assigned to Company X What does Company X actually own?
Ownership: The Horror Stories. Change of ownership: M&A: Company X assigned to Company B Company X merged with Company B Assignment in foreign jurisdictions Name changes: Inc. Co. Certificate of incorporation Address changes
Is it Necessary? Loss of rights or inability to enforce rights due to: Inaccurate or incorrect assignments or title update Not prompt change of ownership results in misconception of actual owner If change is not recorded, the new owner may not be able to: Defend patents Enforce patents File Oppositions Conduct renewals or annuity payments
Ownership: The Horror Stories. 1998 VW purchased Rolls Royce / Bentley. After deal closed, VW realized that they did not have rights to the Rolls Royce mark.
Developing Global IP Strategy - Why Do We Care? Prevent others from copying our products / services Improve our position when negotiating with other companies in mergers, sales, and cross licensing agreements Prevent patent infringement from yourself Competitive Intelligence - know your competition! Increase licensing revenues
Why Global IP Strategy - IP Laws Vary from Country to Country Search and Examination Continuing patent application options Appeal options Acceleration prosecution options Patentable Subject Matter Priority Novelty Obviousness/Inventive Step Enablement/Sufficiency Divisional practice Double patenting Only one independent claim per category permitted In certain jurisdictions claims can only be narrowed, not broadened, once examination is requested Filing Fees!
Tips for Developing a Cost-Effective Global IP Strategy Determine whether foreign patent protection is necessary Cannot afford to ignore and need to carefully consider whether global patent protection is necessary and appropriate How long is a product cycle? Is the invention even patentable subject matter in the relevant countries? Consider a PCT application to defer costs and foreign filing decisions A carefully drafted patent application can help to control prosecution costs and the final outcome Filing in AU but coming to U.S. have the U.S. attorney look the application over prior to filing Evaluate portfolio on a continuous basis Patent Prosecution Highway can provide significant cost savings Be careful in countries where PPH is possible but not binding.
Developing Global IP Strategy Offensive / Blocking Blocking patents will be necessary to prevent competitors from copying your technology Road Block. These have the highest value. Invest in a strong first filing! Defensive / Leverage In highly competitive fields, having leverage over your competitors will be important to prevent lawsuits, provide opportunities to counter sue, force a license, and prevent competitors from improving their own technology. For patents Multiple patents and multiple types of claims to best protect the technology and its improvements
Developing Global IP Strategy Offensive 1. Sale at Proof of Concept Exit after proof of concept - focus on building an offensive global IP portfolio Offensive + Defensive Exit after prototype, pre-clinical tests or ready for market - consider broadening global IP strategy to include some defensive strategies, focusing on preventing others from improving your technology Offensive + Blocking + Defensive + Leverage Exit after your product is on the market - focus on increasing value by obtaining blocking patents, leverage over competitor technology, and patents that provide a source of revenue
Confidential Information What does it cover Anything that provides you with commercial advantage Applies to your information and that of your collaborators, customers, etc. Technical Ideas from a brain storming session Technical R&D information Details of manufacturing process Commercial Marketing strategies, sales forecasts, pricing information, etc. Legal Litigation strategies, status of pending cases, IP, regulatory, etc.
Confidential Information Consequences of breaching confidential information: Commercial Reputational Legal Employment How to protect confidential information? Before engaging in preliminary discussions (business or research related) with a3 rd party (prospective customer, supplier, distributor, licensee, collaborator, consultant, etc. a CA / NDA must be signed. What is CA / NDA? A promise not to disclose confidential information (tangible or intangible form) of another Information may be shared 1-way, 2-way, 3-way, etc. May include a sampling provision Material Transfer Agreement
CA / NDA: What to include? Parties bound Purpose of disclosure Scope of Information protected Exclusions / Exceptions Treatment of information during and after agreement ends Disclosure period / Term of Agreement / survival obligations Remedies available for a breach damages must be proven Signatures of authorized representatives!
Top Ten Reasons Why Not to Sign CA / NDA Legal obligation of indeterminate scope You don t know what you don t know until after you sign it and get disclosures Legal obligation often of indeterminate time And at least for years don t want to take the secrets to your grave May affect how you can use (or need to handle) your own information May get hundreds of requests Investors are notoriously fickle about NDAs they may review 20 or more deals to review a week can t accept being bound on all Oral confidential information particularly problematic He said - she said situation
Top Ten Reasons Why Not to Sign CA / NDA Continuing obligations may be difficult to comply with Independent development restrictions, return of materials Little benefit to the receiving party May have alternative ways of assessing deal Share the cookie, not the recipe; require patent application to be filed in lieu; have independent consultant assess confidential aspects Others not within your control could breach Consultants, employees, sub-contractors even inadvertent breaches are actionable Consequences of breach can be draconian Injunction, damages, award of profits
Fun With CA / NDA Standard Exclusions: Any information which: (a) is or becomes part of the public domain; (b) (c) (d) is already known to recipient and has been reduced to writing by recipient prior to the date of this agreement; is subsequently rightly received by recipient from a third party; or is independently developed by recipient. Mandatory Disclosure: Disclosure to third-party is permitted if required by law under any government statute regulation, or court order.
Fun With CA / NDA Return of Confidential Information: Upon termination, receiving party must return all Confidential Information, including paper or electronic, copies, notes, communications Return Issues: Return notes? Return attorney communications with client? Can include Work Product and Attorney-client privileged information! Return of electronic documents possible? Destroy and Certify Issues: Concern about retention to prove what was/was not disclosed Best practice - archival copy retained by counsel
Fun With CA / NDA Follow-on Intellectual Property: Development by Receiving Party Independent Development Will IP owner claim that your independent development was tainted? Related Development If I use some confidential information to develop something different can IP owner claim ownership or co-ownership? Beware of over-reaching IP provisions in NDAs Agreement Expiration Will IP owner claim some continuing duty?
Material Transfer Agreement (MTA) Facilitates transfer of research materials between provider and recipient: Materials included Material not included Defines rights, responsibilities, and obligations between provider and recipient: No use of materials beyond specific project No transfer of materials and/or results to non-approved 3 rd parties must be able to track chain of custody No compositional analysis (reverse engineering) or testing of materials or derivatives other than what is specified in MTA No disclosure / publication of materials and test results No patent filings on materials, test results, or information learned through use of materials
The MTA Problem(s) MTAs may expand/contract the rights of the receiving party well beyond those granted under formal IP agreements. MTAs may control the use of materials that would usually not be eligible for IP protection or where such IP has expired. MTAs may set limits on use in countries where the inventors or owners have not sought or been granted patent protection. MTAs may grant rights over patented inventions far beyond those contemplated by patent policy. The terms of an MTA may extend rights beyond the patented invention if they reach through the patent to lay claim (e.g., for royalties) on anything developed using the invention or that incorporates the invention.
Developing Global IP Strategy Consider your end-goal: Bring product to market - seek foreign protection in your major markets as smaller markets may not be worth it Sell - consider potential acquirer s key markets; having protection in those countries will increase the sale value License / partner, consider where your licensee / partner is and where they would sell / manufacture Know your customers / markets and consider revenue in each market AU - NZ Where can / should you make your products How robust is the manufacturing infrastructure How developed is the legal system How easy / difficult is to enforce / defend your global IP portfolio
Exclusivity and IP Agreement Exclusivity Company B shall not, without the prior written consent of Company A participate in any negotiations with any Person with respect to or in connection with any kind of arrangement or transaction or enter into any kind of arrangement or transaction, which contemplates or includes the development of subject matter. Intellectual Property All IP generated jointly in the course of the Agreement shall be jointly owned by Company A and Company B. All IP generated independently by Company A or Company B in the course of providing development services under the Agreement shall be solely owned by Company A or Company B. All IP generated independently by Company A or Company B outside of the scope of the development services under the Agreement shall be solely owned by Company A or Company B.
Patent License Agreement Exclusive Licenses: All ownership rights transfer to a licensee. The licensor still owns the title. All patent owners must agree to an exclusive license. Non-Exclusive Licenses: The licensee can produce the invention or design. The licensor and other parties can also produce the invention or design. Only one patent owner has to agree to a non-exclusive license.
Patent License Agreement Assignment of Patent Licenses: Exclusive licenses are transferred upon a sale but non-exclusive licenses are not. Even if there is an anti-assignment clause, the buyer can still acquire the license by structuring a reverse merger into a shell subsidiary of a larger company. The licensee survives the merger into the shell subsidiary and thus the licensee (and its license agreements) survives intact. Sublicenses: Assignment or an exclusive license? Enforcement of Patent Rights: An exclusive licensee generally can sue for patent infringement. A non-exclusive licensee cannot sue a non-licensed entity for patent infringement and must demand that the patent owner take steps to enforce the patent rights.
Patent License Agreement: Multiple Parties Involuntary joinder allowed in two scenarios: An exclusive licensee can join the patent owner, and Patent co-owner waives his right to refuse to join suit. Rule protects a co-owner s right to not be thrust into costly litigation where the patent is subject to potential invalidation. Safeguards co-owners against the possibility that each co-owner would subject an accused infringer to a different infringement suit on the same patent.
View Towards Licensing First Sale Doctrine: Once a patented article is sold, the buyer can t be sued for infringement of apparatus/composition patent. Harder to apply to method patents associated with the sale of a product. Non-patented articles may have several patented uses. Article itself may be patented along with multiple uses. Patent Exhaustion: Patents are exhausted patent-by-patent, not claim by claim. Cannot license apparatus without patented use if both claimed in same patent. If apparatus and method in claimed in separate patents, does apparatus substantially embody method claim? Can specific claims of a single patent be carved out of license? Consider separate and distinct patent applications to different claim sets involving product and methods.
View Towards Licensing Field of Use Restriction: Pre-sale restriction that specifies that a patent holder may expressly limit the parties to whom its resellers may sell the patented products. Restriction on Use: Post-sale restriction that imposes restrictions on use after authorized sale.
Antitrust Issues to Consider Tying the purchase of unpatented materials as a condition of a patent license Requiring the licensee to assign back subsequent patents Restricting the right of the purchaser of the patented product in the resale of the product Restricting the licensee s ability to deal in products outside the scope of the patent A licensor s agreement not to grant further licenses Minimum resale price provisions for the licensed products
Patent License Agreement Grant An [exclusive/non-exclusive], royalty-bearing, worldwide license, under the Licensed Patent(s) (see Schedule of Licensed IP), to make or have made, use, sell or have sold, and import, or more generally to develop and commercialize product(s) covered by the Licensed Patents in the Field and in the Territory. Field of Use, Territory, and Term (Last to expire Licensed Patent) Sublicensing Ownership Licensee will remain responsible for the performance of any sublicensee under the PLA. Licensor will continue to own the Licensed Patents. Prosecution Assignment Licensee may not assign the PLA without the prior express written consent from the Licensor. Fees & Payments One of the patents found to be invalid. Equity (in cases of Start-up) Development, Commercialization & Diligence Licensee shall be fully responsible, including all costs and expenses, for all product research, product development, regulatory approval, marketing, manufacturing, packaging, and sales.
Schedule of Licensed IP Licensed Patent(s) Schedule of patents, patent applications, know-how and any other intellectual property owned, licensed or controlled by Licensor, that is necessary to Licensees development, use or sale of products Schedule A WO 2008069958 Are there any national stage applications? U.S. 6,355,468 In force? Child applications pending? U.S. 20030163839 This application is a continuation of application X, which is a divisional of application Y, which is a continuation-in-part of application Z, which is a national stage application of PCT/EP2006/087426.
Trademark License Agreement Trademark Licenses: If a trademark is licensed without quality control over the end product, then the license is deemed naked and such activity constitutes grounds that the trademark has gone abandoned. Is the Trademark License a Franchise? The three elements of a franchise are: initial fee in excess of $500; licensing of a trademark; and providing substantial assistance or control
License Agreement: Execution If you intend for signatures to be required for agreement to be binding, make sure you say so.
And? What Does it Mean for Your Company s Business Model or Global IP Portfolio?
How Important is Global IP to a Strong global IP: Potential Partner / Investor? Is frequently the reason for the investment; Can create barriers to entry and create market exclusivity; Protects the revenue stream; and Without strong IP, sales and/or price may quickly erode. What to do? Develop global IP strategy and link it to business goals. Company Business Goals Company IP Company Business Goals / Company IP
Term Sheet The Investment is subject to transfer of all relevant IP used by the Company from the Founders (and others) to the Company; such IP to be further identified during the due diligence investigations. Licensed Technology Shall mean the technology, Patents, Copyrights, trade secrets, know-how and other information. Patents Shall mean any patent which issues and (1) is related to Licensed Technology, (2) is based on intellectual property in existence on the Effective Date, and any related application, continuation, continuationin-part, divisional, or reissue thereof in the USA or in any other country. Derivative Shall mean computer software or other intellectual property developed by Licensee, which includes, or is based in whole or in part on, the Licensed Technology, including, but not limited to, translations of the Licensed Technology to other foreign or computer languages, adaptation of the Licensed Technology to other hardware platforms, abridgments, condensations, revisions, and software incorporating all or any part of the Licensed Technology which may also include Licensee-created modifications, enhancements or other software. Improvements and Collaborations Who will own IP rights that are developed jointly by agents or employees of Company A and Licensee which result in Patents or Licensed Technology and will such IP rights shall be subject to the License Agreement? Licensee may utilize Company A IP rights pursuant to the terms of the License Agreement. Company A may issue licenses to others as long as such licenses do not violate any exclusive license to Licensee.
What Does Partner / Investor/ Customer Care About? Patentability Will patents be granted? Claim Scope How broad (or narrow) is the protection? Will it cover the technology and design-arounds? Coverage Are there multiple layers of protection and is the geographic coverage acceptable? Ownership Does the company own the IP asset? Alone? Enforceability Can patents (claims) be enforced against competitors? Any easy targets for validity challenges?
What Does Partner / Investor/ Customer Care About? Freedom-to-Operate Patents grant a right to exclude but do not ensure a right to use! An improved and patented technology may be dominated by a more basic patent. Granted patents have presumption of validity. Do third party patents stand in your way to market? Focused Clearance Review in depth before building a facility. Decide how to approach how far upstream and downstream? Agreements Employment / consultant agreements and Assignments (EP). License agreements and terms.
Global IP Portfolio Management Alignment of patent assets with business strategy Patent monetization (direct or indirect) and licensing Quality audit and review of patents Patent cost management and balancing internal & external resources Be flexible The business drives the IP strategy. Changes in the business may necessitate changes in the IP strategy.
Leveraging Global IP Portfolio - Strategies Customer Leverage Cross-license SUE!
Where to Find All the Answers? http://www.patentdocs.org/
MBHB.COM
+1 312-913-3368 vinarov@mbhb.com Dmitriy A. Vinarov, Ph.D., M.B.A. is an Equity Partner with McDonnell Boehnen Hulbert & Berghoff LLP. Dr. Vinarov has a broad range of experience in intellectual property law, including patents, trademarks, unfair competition, copyrights, and trade secrets. Dr. Vinarov s practice at MBHB encompasses primarily all phases of U.S. and foreign patent prosecution, with an emphasis on pharmaceuticals, biologicals, diagnostics, biochemistry, cell biology, immunology, molecular biology, medical devices, and diagnostics. Dr. Vinarov also provides client counseling in the areas of patentability, freedom-to-operate, infringement, and validity analyses. Dr. Vinarov s client list includes Fortune 100 companies, mid-size companies, startups, and academic institutions. https://www.mbhb.com/attorneys/vinarov/