Intellectual Property Demystified

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Nov 18, 2013 (3 years and 9 months ago)

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Intellectual Property Demystified

Sherylle

Mills Englander

UC Santa Barbara

Director, Office of Technology & Industry Alliances


Janna Tom

UC Office of the President

Research Policy Manager, RPAC

NCURA National Conference,

November 1


3, 2010

So What, Exactly,
Is

Intellectual
Property?

Definition


Intellectual Property


The four types of intellectual property recognized in
the U.S.:

»
Patents

»
Copyrights

»
Trademarks

»
Trade Secrets


Intellectual property are assets developed by the mind
for which the government gives legal protection

»
Protection starts in the U.S. Constitution, itself!



NOTE: U.S. law does not protect data, databases, know
-
how.

Intellectual Property


Concepts common to all IP:

»
A government
-
granted right

»
Allows owner to
exclude

others from using the
material covered by IP rights for a certain period of
time

»
Since owner can exclude, it can also attach
conditions for permission to use


i.e., license fees, royalties, due diligence

»
Or, owner can refuse to provide permission





Data and Know
-
How:

The Foundation of Intellectual
Property

DATA

Copyright

Patent

Trade

Secret

Trademark

Ownership of IP


US law and/or

employment contracts

Contract

Clauses



access

Data: The Building Blocks of

Intellectual Property

Property

Rights

Data


Data:

»
Does not embody any IP rights

»
Can be information that is used to create IP

»
May or may not be recorded


Data itself cannot be owned


Issue is usually
control

of information

»
Access can be
restricted by contract (e.g., database
subscriptions or confidentiality provisions in contracts.

»
Universities need to retain uncontrolled use of it’s data to
assure professors can publish and perform future
research without restriction


Know
-
How


Know
-
how:

»
Knowledge “inside your head” on how to do something

»
Often protected by industry as trade secret

»
Cannot
be owned
! But access can be controlled by
contract


Promises
to license “know
-
how” are risky

»
University does not usually own and cannot compel PI

to disclose

»
Cannot
even verify
existence of know
-
how

»
Cannot assure all know
-
how was, in fact, transferred

Copyrights

What Is a Copyright
?


Copyright protects only the
expression

of an idea

»
Does not protect facts or ideas
themselves

-
For example:


protects a report describing the results of a
research project


does not protect the actual ideas, data or
discoveries described in the report

Copyrights


Conveyed
automatically

when
the
work is created
and fixed in
a
tangible
form


Grants owner exclusive rights to:

--

Reproduce


Prepare derivative works


Distribute copies


Perform publicly


Display publicly


Long
term: Lasts for life of the author plus 70 years

Copyright


Long term


life of the author plus 70 years

»
95 years if owned by corporation


Grants owner the right to:

»
Reproduce

»
Prepare derivative works

»
Distribute

»
Perform work publicly/display work publicly


Applies to software (software considered a “language”)
as well as books, articles, music, etc.

Trademarks

and

Trade Secrets

Trademarks



A trademark is a distinctive mark of
authenticity through which the products of
particular manufacturers may be distinguished
from those of others
.”


Examples include:

»
Nike swoosh ™

»
Coca Cola
®

shaped bottle

»
UCSB waves


Generally trademarks do not arise in a
university research context

Trade secrets



A

trade secret


means information, including a
formula, pattern, compilation, program, data, device,
method, technique, or process, that:

1. Derives independent economic value, actual or potential, from
not being generally known to, and not being readily
ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and

2. Is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.



Examples include:

»
Coca Cola formula


»
KFC secret recipe


Universities do not keep trade secrets!

But companies
do, thus, confidentiality sections and non
-
disclosure agreements.

Patents

What Is a Patent?


Protects a new and useful process, machine, or
composition of matter, i.e., an
invention

»
“Anything made by man”


The right to prevent others from making, using, selling,
offering to sale or importing invention.


Must apply to government for patent (not automatic)


Term of patent: 20 years from filing application

»
Patents are “prosecuted” for 3
-
5 years, then get
“issued” by the government

What Is Patentable?


Invention must be

»
Novel

»
Useful

»
Non
-
obvious

and
, both conceived and reduced to practice (i.e.,
proven to work)


Publication affects rights
. Cannot patent if not
novel. An invention is not “novel” if it is publicly
known through publications or public use (1 year
grace period in U.S.)


So. . .Why All The Fuss?

The Fuss: The University View


The Reality
: Most inventions developed at the
university are lucky to break even!

»
Out of 9,500 inventions in UC portfolio, Top 25 make 76% of
revenue. (Top 5 make 48%)!


Then why do universities do tech transfer?

»
Public benefit
. IP protection gives the companies the
protection they need to justify investing millions in developing
a commercial product from early stage academic research.


»
Economic Development
. Start
-
ups provide good quality
regional jobs.


The Fuss: Company View


When inventions are valuable, they can be
really

valuable

»
UC’s top invention, the Hepatitis
-
B vaccine, earned $16M last
year


that’s only a fraction of total profits received by the
company.



Company concerns:

»
The University demanding unreasonably high fees or royalties

»
The University having other IP that is required to use or
practice the invention, and declining to license it

»
Investing in upfront fees and royalties for an early stage
invention, only to find out it was not really so great


The Fuss: Company View


Different sectors view patents differently

»
Pharmaceuticals


Strong and predictable patents are critical

--

Some drug
compounds can be protected by only 1
-
2 patents


Exclusive patents
--


A single successful drug costs over
$500M to develop (not counting the costs of failed
candidates along the way). Need to protect investment.


Protective NERFs

--

A “blocking patent” can prevent
company from introducing the drug after investment.


The Fuss: Company View


Different sectors view patents differently

»
Computer Companies



“NERFs”
--

Tens of thousands of patents could cover one
computer chip. Impossible to control every one, so
concern of infringement liability is high.


“Background IP” clauses or “subscription agreements” can
be sought to gain access to as much of the university’s
portfolio as possible.


Copyright may be best! For software companies, patents
are expensive and by the time one is issued 3 years later,
the technology could be outdated.




Intellectual Property in Research
Agreements

“Putting Theory to Words”

STEP ONE:

NEVER

GIVE
UP TITLE!!

Why Retain Title?


Ensures open dissemination of results


Ensures availability for future research


Ensures public interest is met


Meets 3
rd

party obligations (inc. federal)


Implications for tax
-
free bonds


Integrity of IP portfolio


Focus on providing Sponsor with
access
and use
, rather than title

Title/Ownership


Ownership should always follow
inventorship

or
authorship

»
Determined in accordance with U.S. patent law


Never pre
-
determine ownership based on
anything
but

inventorship
/authorship

»
E.g. “All inventions made in the performance of the
Research shall be jointly owned by Sponsor and
University.”
-

NO!!

»
E.g. “Ownership of any inventions shall consider the
relative contributions of the parties.”
-

NO!!


Focus on
access

rather than ownership

Scope of

Intellectual
Property

What’s in the Box?

In the Box


Limit to specific project defined in SOW

»
Avoid reaching to unrelated researchers in dept,
campus or university system

»
Avoid reaching to PI’s other projects


Limit to period of performance of Agreement

»
Avoid reaching to past or future work


Limit to patentable inventions

»
Avoid reach to tangible materials, know
-
how,…


Limit to certain copyrightable works

Conceived and Reduced to Practice

“...
patentable

inventions
conceived and first actually reduced
to practice [or, “invented,” “made” or “created”]

in the
performance of research under this Agreement”


»
NOT “
arising from
” or “
resulting from



These reach indefinitely into the future and can impact a
researcher’s ability to secure future funding

»
NOT “
conceived OR reduced to practice



Reaches to past conceptions (under what funding?) and future
reductions to practice (under what funding?)

»
NOT “developed”


Includes further work on existing complete invention

»
NOT “
relating to



This is extremely broad
-

it could reach to research anywhere
on campus!

In the Performance of the Research

“...patentable inventions conceived and first actually reduced to
practice [or: copyrightable works first created]
in the
performance of research under this Agreement



»
Better yet:
“...in the performance of research under this Agreement
as described in Attachment A”

(where Attachment A includes a well
-
defined SOW)

»
Better yet #2:
“...in the performance of Research under this
Agreement”


(where “Research” is defined as that described in a SOW)

»
NOT

“made during the term of this Agreement”


Not tied to Scope of Work


Could reach to research anywhere throughout the campus!


Keep obligations to
Sponsor
IN

the box!

Pop Quiz
: How Does This Look?


“IP means all data, information, inventions,
formulas, techniques, processes, concepts,
systems, protocols, programs or devices
(electrical, electronic or mechanical),
whether or not patentable, or subject to
copyright or trade secret protection, that are
created, made, developed or perfected by
University with support from Sponsor.”


The “Kitchen Sink” Definition
Re
-
defined


“IP means all data, information,
patentable

inventions, formulas, techniques, processes,
concepts, systems, protocols, programs or devices
(electrical, electronic or mechanical), whether or not
patentable, or subject to copyright or trade secret
protection, that are created, made, developed or
perfected
conceived and reduced to practice

by
University with support from Sponsor
and in the
performance of research under this Agreement
.”


Licensing Rights


the “Basics”

What is a License?


A written agreement that grants certain rights
to IP:

»
Patents: to make, use, sell or import

»
©: to reproduce, prepare derivative works, distribute,
perform publicly or display publicly

»
Can be all rights or only a portion of the rights


Rights are granted by the owner of the IP to
a non
-
owner

»
Owner = “Licensor”

»
Non
-
owner = “Licensee”

Licensing Rights


Scope of rights

»
Separate patents from copyrights


First right to negotiate (see handout)

»
Not right of first refusal

»
Not outright grant


Time limits to elect and negotiate


Release of obligations (see handout)


Financials and Diligence (see handout)

Non
-
Exclusive Royalty
-
Free
Licenses (“NERFS”)

NERFs


How NERFs affect licensing:

»
Sponsor can use the technology commercially
without any further payment



Would you agree to pay patent costs, fees and royalties for
something your competitor uses for free?



Start
-
up companies, and many market sectors, are heavily
dependent on exclusivity to raise funds and invest in product
development. A NERF prevents university from ever granting an
exclusive license


»
Research agreement NERFS apply even if
Sponsor has
absolutely no plans

to use
technology


NERFs: Why Worry?

When NERFs Go Bad. . .

A UCSB Case Study

NERFs: Mitigation


If a NERF cannot be negotiated out, consider:

»
Restrict to “internal research purposes only.”

»
Restrict to specific field of use of interest to company (i.e.,
a NERF for aerospace applications only)

»
Require patent cost reimbursement and/or annual fee to
maintain NERF


Or, include express statement that university does not have to file
based on NERF alone

»
Insert election period to “elect” NERF, just like other
license rights

»
Avoid granting “irrevocable” or “perpetual” NERFs

»
Insert statement that sponsor must actively develop
products to maintain NERF (i.e. no shelving of technology)


NERFs and Sublicensing


Avoid NERFs that include “right to sublicense”


»
Otherwise, Sponsor can grant permission to a third
party to use your technology and keep 100% of any
fees or royalties it collects!


»
Let Sponsor know they can refer any requests for a
license to your university’s tech transfer office


»
Can contractually agree to negotiate a license “in
good faith” with any potential licensee referred by
Sponsor


Non
-
Asserts: “NERFs in Disguise”


What it is: A contract term where the university
agrees “not to assert” particular patents or
copyrights against the company


With this clause, sponsor can use a patent or
copyright for any reason and in any
circumstance, and the university is forever
barred from suing

»
Essentially, a very broad, very free license.


Joint Ownership (“NERF in Disguise”)


“Why don’t we just simplify things and jointly
own any inventions?” (Sounds fair?)



The problem:

»
Each owner can exploit a jointly
-
owned invention
with
no obligation

to the other owner.


The sponsor gets free commercial use rights, including
the right to license to others (broad NERF in disguise), in
an invention that would have been solely owned by the
university.


»
If university agrees to share patent costs, your
resources help create an asset for the company.


A Word On. . Joint Patent Expenses


The issue: Sponsor asks university to pay 50% of
all patent expenses for any jointly owned inventions

»
Remember, US rights alone cost $20,000
-

$50,000



Avoid this term



creates large, unfunded liability
(particularly if they have right to file for patents)



Work around
: if university successfully licenses a
jointly
-
owned technology, university will reimburse
50% of the costs from the first licensing revenue
received

by university (
not


owed to”
)


Background

Intellectual Property

Background IP (BIP)


What it is: A clause that requires the university to license
any and all pre
-
existing intellectual property that may be
needed to practice an invention developed under the
agreement


How it affects licensing:

»
The BIP may already be licensed and unavailable

»
The BIP may be capable of being its own product, not just a
side note

»
The inventors of the BIP may not be the same researchers
getting the research funding and may not support being
someone else’s “background”

»
To the extent it is provided “free,” fair consideration issues.

»
A compliance nightmare!


Mitigation of Background IP


First, negotiate it out!

»
The sponsor can talk to the tech office before signing the
research agreement to determine if BIP exists


And, if so, can enter into an option agreement that runs the length of the
research agreement!



Limit access to BIP:

»
To the extent legally available

»
To the extent unaffiliated inventors consent

»
To the extent public benefit principles are not compromised

»
Limit scope to BIP originating from the specific inventors, lab or
department performing the research project

»
Require BIP license to be royalty
-
bearing and have patent cost
reimbursement


Open Source and the Public
Domain

Open Source Licenses


What they are: A copyright owner releases
a copyrighted work (such as software)
under license terms that allow anyone to
use it for free and without obtaining specific
permission

»
Many computer science faculty strongly support
the ideals behind open source licenses.


A requirement to open source any software
developed on the project assures free
access by Sponsor


Open Source Licenses


Points to Consider before agreeing to open source
:

»
Software can have many authors


Assure all researchers are informed of open source nature and
have change to “opt out” of project

»
Once Software is “open sourced,” it cannot change back


the decision is irrevocable

»
Not all open source licenses are alike


work with your
tech transfer office to determine best fit for your campus


GPL as “viral” open source


Indemnification/disclaimer of liability terms can vary


See the Open Source Initiative (
www.osi.org
) for a list of all open
source licenses and their terms


Public Domain


The issue: in a research agreement, the
university agrees to put all results “in the public
domain”


Why it should be avoided
:

»
Prevents university from securing any patents or
copyrights

»
For technologies that require extensive development, will
prevent commercialization. No company will commit
large sums to develop a product if a competitor can copy
the product without cost or liability

Survival Tips


Engage your technology transfer office
and ask for help. . . . After all, they have
to live with the terms of the award


Take your General Counsel to coffee
and ask for guidance on the legal issues
(e.g. “shall grant”)