Crafting Your IP Strategy Stephanie L. Chandler, Esq. October 12, 2007 Jackson Walker L.L.P. Center for Innovation and Technology Entrepreneurship.

Crafting Your IP Crafting Your IP StrategyStrategy

Crafting Your IP Crafting Your IP StrategyStrategy

Stephanie L. Chandler, Esq. October 12, 2007

Jackson Walker L.L.P.

www.jw.com

Center for Innovation and Technology Entrepreneurship

Technology Entrepreneurship from Innovation to Business Venture

Stephanie L. ChandlerStephanie L. Chandler• Business Transactions and

Intellectual Property• Specialty Area: Technology

Transfer and Commercialization

University of Nebraska University of Nebraska B.S.B.A. in FinanceB.S.B.A. in Finance

University of VirginiaUniversity of VirginiaJuris DoctorateJuris Doctorate

Community Involvement: San Antonio Technology Accelerator Initiative Entrepreneurship Alliance Committee Member, UTSA – Engineering College Advisory Council, Texas Emerging Technology Fund RCIC Selection Committee

Types of Intellectual Property

• Patents -- gives the inventor the right to exclude others from making the invention

• Trade Secrets/Know How -- protection by virtue of secrecy

• Trademarks/Service Marks -- identifies a unique source of goods or services

• Copyrights -- protects from copying of original works (music, books, software code)

• Business name……………trade name• Product marks and logos...trademark• Software, texts, music…….copyright art, creative works• Inventions…………………..patent

ExamplesExamples

ABC Inc.

• Employee, Customer and Supplier Goodwill

• Common Law Trademark and Trade Secret protection

• Building, Equipment, Inventory

• Registered - Trademarks, Trade Dress, Copyrights

• Patents – Utility Design, Business Method

• IP assignments and noncompetes - employees and contractors

• Formal Trade Secret Protection

• Form contracts - suppliers and customers

ASSETSASSETS

Soft Assets

Hard Assets

Extra Assets

PATENTSPATENTS

PatentsPatents• Definition: A patent is a grant from the U.S. government

allowing its owner to exclude others from making, using, offering to sell, selling, or importing into the U.S. his invention

• There are three types of patents:– Utility patents, which protect new and useful

inventions and processes– Design patents, which protect new and ornamental

designs for articles– Plant patents, which protect new and distinct plant

varieties that are asexually reproduced• Utility patents are the most common:

approx. 90% in 1999

• Any new and useful– Process– Machine– Method of manufacture– Composition of matter– Improvements on existing things– Software– Methods of doing business

What’s Patentable?What’s Patentable?

Patents• What is protectable?

– Can’t patent laws of nature, mental processes, mathematical algorithms per se or abstract ideas

– Utility patents are available for the invention or discovery of any new, useful and non-obvious process, machine or invention

• Novelty means that the invention is new – even a minor difference conveys novelty. A single prior art patent that claims the same invention is enough to defeat novelty.

• Only “useful” inventions are patentable. Must have some utility or achieve some objective. Inoperative inventions do not have utility.

• Non-obviousness means that the differences between what is “out there” and your invention are not trivial to one skilled in the art. Somewhat subjective determination of the PTO examiner.

•17 years from issue date17 years from issue date

(pre-June 8, 1995)(pre-June 8, 1995)•20 years from earliest U.S. filing date 20 years from earliest U.S. filing date

(post-June 8, 1995)(post-June 8, 1995)•Outside of U.S. – typically 20 years from filing dateOutside of U.S. – typically 20 years from filing date

TermTerm

** Maintenance Fees must be paid to keep in force.

PatentsPatents• Bar Dates:

– For U.S. patent: application will be barred if not filed within one year of the first:• Public use• Public disclosure (e.g., printed publication)• Sale/Offer for sale

– For International patent: application will be barred if not filed before any public disclosure/public use of the invention anywhere. USPTO filing considered “filing” for this purpose

– Best policy: File with the USPTO prior to any disclosure if possible to preserve foreign filing rights

Patents - Other Considerations• Patents are issued on a country-by-country

basis– A U.S. patent will not stop someone in

Japan, etc. from exploiting the patent (you can stop imports of infringing goods, though)

– No “international patent”– International process for obtaining national

patents (Patent Cooperation Treaty, or PCT)

Patents - Other Considerations

• Provisional Patent Applications– Inexpensive way to get an invention

on file with the USPTO; Filing fee ($160/$80) + legal fees is typically less than $2,500

– Must enable; no new matter in the later, regular application

– Must file regular application within 12 months to maintain priority of filing date

Patents – Other Considerations

• Laboratory Notebooks – What are they?– Technical diary;– Ideas, completed work, and

accomplishments;– Chronological order;– Helps avoid repeated mistakes; and– Helps to track successes and failures.

• http://www.rod.beavon.clara.net/lab_book.htm

• http://www.ruf.rice.edu/~bioslabs/tools/notebook/notebook.html

• http://www.chem.uky.edu/courses/common/notebook.html

Closest known prior art-

Novel Features-

Advantages over prior art-

US Patent # 6,245,999; 6,458,123www.uspto.gov

Witness andDate

Beverage Container

Animal Stomach

What should be entered into notebook?

• Title (what is the invention called)• Purpose (what the invention does)• Description (functional and/or structural)• Sketch (informal sketch)• Ramifications• Novel features• Closest know prior art• Advantages

A Patent May Have Huge A Patent May Have Huge or Little Commercial Valueor Little Commercial Value

My InventionA. Cup

B. Handle

C. Metal Disc

D. Magnet

PATENTABILITY ANALYSISPATENTABILITY ANALYSISPatentability

OperationInvention

ABCD

Your Description

Novelty subtraction

Leaves

Obviousness subtraction

Leaves

--A

--AB

ABC

ABCD

--ABC

ABCD

Combinations obvious “to a person having ordinary skill in the art” are not patentable (§ 103)

Prior art combinations are not patentable (§ 102)

Combinations novel to your invention

Combination that might be patentable

INFRINGEMENT ANALYSISINFRINGEMENT ANALYSIS

Patent Claim

Claim’sElements

AccusedDevices

PatentInfringement

A

A

AB

ABC

Yes

Yes

Yes

1

2

3

AB

ABC

A

AB

ABC

A

AB

ABC

No

Yes

Yes

No

No

Yes

Claim Value

High value

Moderate value

Low value

ABC … XYZ InventionABC … XY Prior ArtABC … XYZ Patentable

Combination

Everything new is patentable (almost) – if you add enough elements to the claim

SCOPE OF CLAIM 1 WITH ELEMENT ASCOPE OF CLAIM 1 WITH ELEMENT AA

High Value A Boundary

Infringements

SCOPE OF CLAIM 2 WITH SCOPE OF CLAIM 2 WITH ELEMENTS A AND BELEMENTS A AND B

Moderate Value

Infringements

A+BBoundary

AB

SCOPE OF CLAIM 3 WITH SCOPE OF CLAIM 3 WITH ELEMENTS A, B AND CELEMENTS A, B AND C

A+B+CLow ValueBoundary

AB

CInfringements

SCOPE OF A CLAIM WITH ELEMENTS A, B, C . . . ZSCOPE OF A CLAIM WITH ELEMENTS A, B, C . . . Z

. Z

Easy to get / but tiny infringement value. No competitors’ accused devices or methods have all elements A,B,C . . . Z

BoundaryA+B+C+Z

AB

C.Z

PATENTABILITY VS. INFRINGEMENT

1. Everything new is patentable (almost) - if you add enough elements to the claim.

2. But the more elements needed to get a patent, the less its value (maybe zero) - because fewer accused devices and methods infringe.

TRADE TRADE SECRETSSECRETS

Trade SecretsTrade Secrets• Definition: Trade secrets consist of any

valuable information not generally known to others that gives its owner a economic or competitive advantage and for which reasonable steps are taken to maintain its secrecy

Patents vs. Trade Patents vs. Trade SecretsSecrets

• Pros:– Patents protect against independent development

and reverse engineering– Trade secret lost if not maintained secret

• Cons:– Patents have a more limited life (20 yrs vs.

indefinite); Thereafter, anyone can use• Coca-Cola formula has been a trade secret for

over 100 years and counting– Patents are more expensive to obtain and maintain;

Trade secrets cost nothing other than expense of keeping secret

YOUR TRADE SECRETS YOUR TRADE SECRETS ARE ONLY PROTECTABLE ARE ONLY PROTECTABLE IF THE JURY FINDS THAT:IF THE JURY FINDS THAT:

• The items were relatively secret; and

• The defendant knew the items were secret.

TRADEMARKSTRADEMARKS

TrademarksTrademarks• Definition: a trademark is

a word, name, symbol, device or combination thereof that identifies and distinguishes one’s goods and services from those of another– Technically, a trademark is used to identify a good or

product and a servicemark is used to identify a service

PROTECTABILITY OF TRADEMARKS

• Generic – Unprotectable (soda for a beverage or TV for a television)

• Descriptive - May be protectable (Jury question: Does it primarily describe or identify?)(such as “Tax Preparation Software” for a software program that enables users to prepare tax returns)

• Suggestive – Protectable(such as Greyhound for bus services and Jaguar for automobiles, with both marks suggesting the speed of their products; 7-ELEVEN for convenience stores)

• Arbitratory or Fanciful - Very protectable(such as Kodak, Starbucks, Verizon, Exxon)

TrademarksTrademarks• How trademarks arise:

– Trademarks arise through use of a mark– Simple use of a mark grants rights in the mark against

later users in the location of use and a reasonable area of expansion• Can prevent use of mark on similar products or for

similar services– Federal registration, although not required, protects the

mark nationwide against later confusingly similar uses– Common law also applies

• Can be lost if mark becomes generic: e.g., Kleenex, Xerox

COPYRIGHTSCOPYRIGHTS

CopyrightsCopyrights• Definition: Copyright is a form of

protection to a wide variety of works, including literary, musical, dramatic, graphic, sculptural and architectural works, motion pictures and sound recordings– Not just critically acclaimed works– Extends to advertising brochures

and copy and computer programs

CopyrightsCopyrights• How copyrights arise:

– Copyright protection exists from the moment a work is created

– No registration is required– Copyright lasts for the author’s life plus 70

years (or in the case of works created by employees for their employers, for 95 years from publication of the work or120 years from creation, whichever is shorter)

CopyrightsCopyrights• What is protectable:

– Copyright protects works of original authorship

– Includes books, magazines, promotional materials, music, posters, movies, slide presentations, dance routines and website content

– Does not extend to ideas, procedures, processes, systems, concepts or mere slogans, titles or blank forms

COMMERCIALIZATIONCOMMERCIALIZATION

LicensingLicensing• Patents -- gives the inventor

the right to exclude others from making the invention

• Trade Secrets/Know How -- protection by virtue of secrecy

• Trademarks/Service Marks -- identifies a unique source of goods or services

• Copyrights -- protects from copying of original works (music, books, software code)

License

Third Party

Idea

$$$$$$$$

*The terms of licensing and joint venture relationships can add or subtract value.

License vs. other License vs. other StructuresStructures

• Be aware of other structures– Joint Ventures/Collaborations– Outright Assignments– R&D Partnerships– Manufacturing/Supply Arrangements– Equity Investments (often coupled

with License Agreements)

Product StoryFlorida State University• Cancer treatment drug• Licensed to Bristol-Myers

Squibb, which began production in 1992

• BMS's leading anti-cancer drug, with 1998 worldwide sales in excess of $1 billion.

Bottom Line ImpactPioneering research in both biotechnology and imaging enabled the University of Rochester to double the amount of revenue its basic research earned this year. The advance, to $29.5 million for the fiscal year that ends June 30, 2001, is more than double the $13.5 million that companies paid last year and 10 times the $2.9 million in royalties from the previous year.

- Strong Health, © 2001

Prior to 1980, fewer than 250 patents were issued to U.S. universities each year and discoveries were seldom commercialized for the public's benefit. In contrast, In FY 99, AUTM members reported that 3,914 new license agreements were signed. Between FY 1991 and FY 1999, annual invention disclosures increased 63% (to 12,324), new patents filed increased 77% ( to 5,545) and new licenses and options executed increased 129% (to 3,914).

- Association of University Technology Managers (AUTM), © 2001

License IncomeLicense Income(Average FY 2004 - Source: Association of University Technology

Managers )

$ New York University $80,908,972

$ Baylor College of Medicine $ 6,758,000

$ University of Texas - Austin $ 5,057,647

$ UTHSCSA $ 2,211,194

$ UTHSC-Houston $ 1,998,947

$ University of Houston $ 534,053

$ University of Tx Med Branch $ 222,994

$ Texas Tech $ 157,365

$ Rice University $ 122,000

Inventor is Key to Inventor is Key to CommercializationCommercialization

• Inventor knows field• Inventor knows potential licensees• Inventor can continue to invent to fill

product pipeline for new ventures• Get to know the OTV• Get to know the University policies – this

can be very lucrative for a professor

University/small company files a patent application on an invention,

however, they do not have the resources to:

• Manufacture,

• Distribute,

• Import,

• Market, and

• Sell

the product based on the invention.

Field of Use vs. Field of Use vs. TerritoryTerritory

• Use Limitation– Allows multiple licensees to

exploit different uses of the same technology

– Should Smallco limit the Field of Use? Should Bigco demand unlimited rights (limited only to the scope of the Patents and Know How)?

• Geographical Limitation on the rights to exploit Patent Rights and Know How

Diligence ObligationsDiligence Obligations

• Must Bigco commit to some level of diligence in commercializing the technology?– Termination rights– Minimum royalties– Exclusive vs.

non-exclusive

Payment TermsPayment Terms• Advance Fees/Upfront Fees

• Milestones

• Royalties

Advance Fees/Upfront Advance Fees/Upfront FeesFees

• Lump sum payment for entering into the license agreement

• May be used to reimburse Smallco for past R & D costs and fund future R & D expenses

• Different factors impact determination of upfront fees (R&D costs, market potential, industry convention)

MilestonesMilestones• Future payments to Smallco upon

meeting defined goals

• Incentive used to motivate parties to advance project

• E.g., First commercial sale of System

RoyaltiesRoyalties• Percentage of Product Sales• Based on “Net Sales”, but is only net of

returns, mandatory reimbursements and rebates

• Cost of Goods Sold typically is not deducted when determining Net Sales

• Audit rights (Right to check licensee books and records to ensure proper payment)

TRADEMARKS–Federal registrationsCOPYRIGHTS–Copyright registrationsPATENTS–Know how to create value – rely on the expertsTRADE SECRETS–Create good factsLICENSES – Clarify expectations

2832978v1

SUMMARY OF INTELLECTUAL PROPERTY RIGHTS*

PATENTS TRADEMARKS COPYRIGHTS TRADE SECRETS

PROPERTY PROTECTED

Utility or design features of objects or processes.

Words, symbols, or features used to identify your goods or services and distinguish them from others.

Anything that is creative and original and not primarily physically functional.

Any secret that gives you an advantage over those who do not know it.

REGISTRATION U.S. Patent & Trademark Office and each foreign country where rights are desired.

U.S. Patent & Trademark Office; Texas Secretary of State, and each foreign country where rights are desired.

U.S. Copyright Office None

REQUIREMENTS FOR

PROTECTION

1. Useful, novel and non-obvious. 2. Patent applied for within one

year of offering the invention for sale or making it public.

3. Issued patent in subject country.

1. Use the mark to identify sales of goods or services or “intent-to-use” federal application.

2. Registration is not necessary, but very helpful.

1. Originality (creativity). 2. Notice of copyright (not

necessary, but very helpful). 3. Registration (not necessary until

suit, but very helpful).

1. It gives you a business advantage.

2. Keep it secret. 3. Make those who know the secret

aware it is your secret.

DURATION OF

PROTECTION

Utility: 20 years from date of filing.

Design: 14 years

(both subject to payment of maintenance fees)

Common Law: No limit.

Registrations: 10 years, renewable indefinitely as long as you keep using it.

The earlier of 95 years from publication or 120 years from creation for work for hire.

Life, plus 70 years for an individual.

Until it is no longer secret.

PUBLIC NOTES

Pat. Reg. No. OR Pat. No.

TM if not federally registered; “®” if federally registered.

“Copyright” or “©”, year first published, claimant. Example: Copyright 2001 William Nash, All Rights Reserved

Any notice of its secret nature. Example: “Confidential Property of “.

INFRINGEMENT Utility: Every claim limitation in the patent is found, either literally or equivalently, in the accused device or method.

Design: Accused design has a “substantially similar” overall appearance.

Plaintiff’s mark is protectable and the public will likely be confused between goods or services identified by Plaintiff’s mark and goods and services identified by Defendant’s mark.

Plaintiff’s work is protectable, Defendant copied Plaintiff’s work and Defendant’s work is substantially similar to the protectable part of Plaintiff’s work.

Plaintiff’s trade secret is protectable and Defendant knowingly misappropriated it to Defendant’s benefit or Plaintiff’s harm.

* This very simplified summary is to be used only for educational discussion purposes.

© 1995 William B. Nash All Rights Reserved

Stephanie L. ChandlerStephanie L. ChandlerJackson Walker L.L.P.Jackson Walker L.L.P.

[email protected] 210.978.7704210.978.7704

Crafting Your IP StrategyCrafting Your IP Strategy

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