Intellectual Property Portfolio Management Fundamentals:

A Workshop for FPTTby

National Research Council of Canada

Nothing herein constitutes legal advice. Always consult a patent attorney with respect to your specific situation.Copyright NRC 2005-2008

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Workshop Outline

Part I: Christine Piché: NRC IP Portfolio Management• Patent, copyrights, trade marks• Disclosure and publication of IP• IP Protection

Part II: Margaret McKay, NRC IP Portfolio Management• Legal agreements relating to IP • Common licence terms: what are they and why are they there?

Part III: Katalin Deczky, NRC Institute for National Measurement Standards

• Negotiating the Deal

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Part 1

• Patent, copyrights, trade secrets• IP Protection

• Disclosure and publication of IP

Christine PichéNRC A/Director Intellectual Property Portfolio Management

B.Eng, M.B.A., Registered Patent Agent (US, Canada)

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Forms of IP

• Patents• Trade Secrets• Industrial Designs• Integrated Circuit Topographies• Copyright• Trade-Marks• Plant Breeders’ Rights• and more….

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Patents

• Protect new, non-obvious, useful subject matter = INVENTIONS

• New: not disclosed before filing (a few countries allow a grace period)

• Non-Obvious: creativity must be involved, not merely combining known things in a straightforward manner and getting the expected result

• Useful: Patents protect ideas reduced to practice, not abstract ideas, theorems, formulae, etc.

• Allows publication AFTER FILING

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Software patents

• Software can be patented when they are expressed as a process, apparatus (machine) or manufacture– They are examined as such, and compared with all known

processes, apparatus or manufacture

• Copyright and patent are complementary, the right from one does not affect the right of the other

• Variation from state to state

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Biotech Patents

In Canada:

• Methods of Medical treatment are not patentable

• Higher Life Forms (entire) are not patentable

• Transformed cells are patentable

• A whole higher life form including one or more transformed cells will infringe a patent on the transformed cell

• Can patent new uses of old compounds

• Can patent methods of making medicaments using old compounds (in a new combination)

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Trade Secrets

• Work protected by Confidentiality and /or Non-Disclosure Agreements at all times

• Never Previously Disclosed in any Form

• Will Not Prevent another person who invents the same thing (before or after) from getting patent rights (in most countries)

• Does not allow publication EVER

• Requires protective measures to be put in place

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Trade-marks

• Protects a word, a symbol or a design (or a combination of features) used to distinguish wares and services;

• Official marks (“Section 9” marks);

• Registered versus unregistered marks;

• Registered Mark: 15 years, renewable every 15 years thereafter;

Important: USE and DISTINCTIVENESS

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Copyright

• Protects the form or structure of expression and not the ideas themselves (regardless of whether they are applied or abstract)

• Concerned with exact phrasing or exact lines of computer code

• In some instances protects “derivative works” such as literal translations between languages

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Who Creates IP?

• Everyone creates IP

• In general, those who are employed to invent (researchers, designers, etc.) will not own their inventions – this varies by province but generally the employer will own the invention

• It is important to report inventions when they are made and whenever leaving an employer or joining a new employer

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Inventorship

• If a person merely verifies another’s previous prediction or performs testing to demonstrate an invention’s utility, that person is not an inventor

• Does not include the tester unless he made a substantial contribution as a result of his tests

• Does not include superiors who overlook the work

• Or anyone else you feel you have to add by courtesy….

• Risk of improper inventorship is invalidation

Inventor: the person whose conception or discovery gives rise to the invention for which a patent is sought.

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Patent Rights

• Patents provide “negative rights” - the right to sue others

• A patent owner has the right to ask a Court to stop anyone else from making, using, selling or importing anything that falls within the scope of issued patent claims

• A patent does not give you freedom to operate

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Patentability vs. Freedom to use

“A” Invents the wheel

…. And gets a patent

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• THEN:

“B”Invents the pneumatic tire

and shows how to use it on a wheel

.... And gets a patent

Because the pneumatic tire is new, non-obvious and useful

Patentability vs. Freedom to use

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• Can B sell his tire on a wheel? … No

• Can he use his tire on a wheel? … No

• Can he put his tire on a wheel? … No

..WHY NOT??

Patentability vs. Freedom to use

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• Because even though B has a patent on the tire, it does not give him any right to use A’s invention which is the wheel.

• In order to do anything with his tire, B needs to buy from A the right to use the tire…… and A may not want to sell….

But:Can A use a pneumatic tire without B’s permission?…NoWhy?…Because B has a patent…

Patentability vs. Freedom to use

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Patents – the Process

• Priority Filing Date – have 1 year to file elsewhere and/or replace original filing

• Formal Applications (Filing and Prosecution)– Inventors Provide full information to the Patent Agent

- the Patent Office searches the literature looking for things that could make your invention non-novel or obvious

- Your IPPM IP Advisor helps in explaining what the Examiner is saying and with your help puts to together a Response – this step may repeat

• Allowance (hopefully) of Patent• Patent term

– is 20 Years from the filing date of the Formal Application (maintenance fees apply)

United States

Canada

Europe

Canadian Maintenance Fees$100 $100 $100 $200 $200 $200 $200 $200

European Maintenance Fees ($Euro)$500 $700 $900 $1000 $1110 $1200 $1360

0 1 2 3 4 5 6 7 8 9 10 YEARS

US Filing $1030Assignment $62

US Issue fee$1440

1st maintenancefee $930

2nd maintenancefee $2360

Filing & RE $1200

Assign. $100

CA Issue fee$300

Filing only $400Assign. $100

Last day forRE $800

Issue Fee$300

Last day for RE $1565 + design. fee $85/state

(7 designations = all states)

EPO Filing + Search Fee $1880Assignment 76E

Issue Fee $790 + $12,00/page for more than

35 pages

Translation and validation $between $5,000 to 9,000/State

Regional Phase

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P.S. These fees only include Patent Offices fees and do not include Agent and IPPM fees.

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Patents - Example timeline

• January 2008 file Provisional Application

• January 2009 file formal PCT application

• July 2009 PCT application publishes, Provisional become available for public inspection

• Late Summer 2009 Receive International Search Report and First Written Opinion - can respond

• November 2009 File Demand for International Examination (if desired)

• Winter 2010 receive Second Written Opinion (if Demand filed) – can respond

• Spring 2010 (or earlier) – Receive Opinion of International Preliminary Report on Patentability

• July/August 2010 – Deadline to enter Application into National/Regional Phase in jurisdictions of interest

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The Patent Cooperation Treaty

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Disclosure: keeping your invention “New”

• What constitutes a disclosure?

– Verbal; disclosure made to anyone outside of your employer and not under a confidentiality agreement (establish in advance)

– Written; any document distributed to a person outside your employer and not under a confidentiality agreement (in advance), Whether it is slide presentation for a job interview, posters at a conference, or actual an actual publication

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Implications of Disclosure

• Publication of an invention is a “Disclosure”

• Publications made after a priority (Provisional) filing may still be cited against anything contained within a subsequent formal application which was not literally disclosed in the priority filing

• Although a few countries (US, Canada) permit filing within a year of disclosure by the inventor, rights in most countries (e.g. Europe) are lost by disclosure

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Options to Immediate Filing

a) Further Development, Research, etc.

Used to address questions such as:- Is the Technology mature enough?- Is there strong proof of concept?- Can you predict what variants will likely work?- Is the marketplace going to be ready for this technology soon?- Will it be possible to get broad enough patent claims to be worthwhile?

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Options to Immediate Filing

b) Defensive Publication

• Used where the organization does not want to exclude others from using the technology

• Used to prevent another party from patenting the same thing or something close – keep it free for the world to use

• Publication must be crafted with patent law in mind• Allows Publication• May breed competitors for later, more applied technologies you

develop and want to protect

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Why Protect?

For Inventors and Innovators:• Some organizations provide financial incentives • Patents may be considered a “Publication” for Performance

Review Purposes

For a Public Organization:• Allow better control of technology to keep it in Canada – build

jobs and training opportunities here• Allow Canadian taxpayers to get a financial return on the money

they invest supporting research

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Part 2

• Legal agreements relating to IP • Common licence terms

Margaret McKay

NRC Intellectual Property Portfolio Management Registered Patent Attorney (US, Canada), Registered Trade Mark

Attorney (US, Canada), M.Sc., J.D.

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Agreements Relating to IP

Note:

• Nothing in these slides should be considered a precedent or “best practice”.

• Some clauses have been reproduced specifically as examples of poor or problematic phrasing or terms.

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Non Disclosure Agreements (NDA)

• Also known as Confidentiality Agreements

• Used to Protect proprietary information– Know how– Trade secrets– Any IP

• Legal contract– Mutual– Single sided

• Used when interacting with outside parties

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What should be included

• Parties (restrict to those who need to know)

• Definition of what is confidential

• Marking requirements

• Exclusions– Prior knowledge– Subsequent knowledge– Available to the public– Material subject to subpoena

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What should be included (cont’d)

• Terms in years of confidentiality

• Length of time the agreement is binding

• Obligation of recipients re: confidential information

• Signatures

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NDA considerations

Reality• Business

• Benefits/risks

• Assess the harm of disclosing the information

• Enforcement

Ideally• Limit the amount of confidential information disclosed

• Limit who the information is disclosed to

• Protect prior to disclosing

• Consider options if you have to enforce

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Assignments

• What is an assignment?- contract- proof of transfer of rights

• When is it used?- to prove employer’s ownership of inventions- to transfer ownership to an outside party (e.g. licensee)

• When to get one? - from inventors to employer: early (invention), and at formal filing (different wording)- do you need a regular assignment or something different?

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Assignments (cont’d)

• Who assigns?- inventors

- who are the inventors

- Institutions and companies (find the legal entity and authority)

• Is the assignment valid?- who owns the rights

- proof versus a legal vehicle for transfer

- consideration as an element of contracts

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Assignments (cont’d)

• What is being assigned?- what was invented

- work to follow?

-priority rights

- foreign counterparts

- add ons: CIPs, extension patents, etc.??

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Example clause – scope of rights

• All inventors signing this document acknowledge that, except as explicitly noted herein, their entire inventive contribution made toward this invention was completed in the course of their work with and/or for the ______________ [employer] and no other person or organization has any claim to the invention or any aspect thereof and the inventors have not granted or purported to grant rights in the invention to any other party or organization at any time.

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IP Provisions in Licenses and Options

• What are IP Provisions?- Typically they are the heart and value of the contract

• Why do they matter?- They define your organization’s ability to obtain royalties and to

deal with the technology and related technology in future

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• Field of Investigation (collaboration) or Use (license agreement)- limit technology

- limit timeframe

- limit to specific research groups work (not entire organization)

Note: similar considerations apply to Fee for Service agreements but are not explicitly dealt with here.

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• Type of Rights Given- Exclusive, sole, non-exclusive, geographically or territorially

exclusive licenses

- in Canada, avoid exclusive licenses;

-sole vs. exclusive

...protecting research program- sole or non-exclusive, license backs, etc.- Policy considerations

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• Obligations toward Protection- who decides

- who pays

- what extent of filings are contemplated

- rights of organization that opts out of patenting process: publication, freedom to use (internal use, commercial, non-commercial, fee for service research, etc.)

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Putting Bookends on Technology under Agreements

Background Technology –One Approach:• file a Canadian informal prior to revealing anything to potential partner

This creates proof of the background technology and leverage in negotiations and provides the organization options:

a) If the receptor recognizes the full scope of background rights, can use the informal as a priority filing in later filings and structure agreement to pay higher (background rate) royalties on inventions embodied in the original filing

b) If the receptor is being unreasonable in their demands with respect to background technology, can either have informal published and abandon it (putting material into the public domain) or formalize it in Canada and file a corresponding US case apart from the agreement with no obligations to receptor (since filing predated their involvement). This will force the receptor to treat this IP differently from IP arising under the collaboration.

• use Canada not US patent office for initial filing for defensive reasons

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Bookends…Arising Technology

Arising Technology - One Possible Approach:• Ensure all Collaboration reports are provided in a timely manner and do not

speculate on work not done

• researchers should not speculate even in informal comments, especially in the later stages of the collaboration

• keep separate, dated and independently witnessed lab books for partnered projects (independence can be complicated, ensure the witness is under an NDA and trustworthy)

• educate research staff to reduce "cross pollination" which could pull independent projects arguably within the encumbered technology

• get a blinded 3rd party inventorship review at time of filing - clarify initial ownership right up front

• limit scope of Option, Licensing and Assignment obligations on the basis of field of use, research group and time of invention

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Stray Phrases to Watch and Define…

• “developed”

• “based on”

• “necessary for”

• “underlying”

• “related to”

• “subject to”

• “relying on”

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Part 3

Negotiating the DealPractical View from an NRC Institute

Katalin DeczkyDirector, Business and Research Support,

NRC, Institute for National Measurement Standards

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Type of Deals

– Fee for service • Calibrations• Educational activities• Laboratory accreditation• Advisory services

– Collaborations • Research projects

– Licenses • Patents, copyrights, know-how

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Clients

• Dissemination activities - calibrations

• Collaborations with key industry partners

• Proactive marketing

• Clients who seek us out

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Licence types negotiated

• Exploitation of patent rights

• Software

• Know - how

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Challenges in negotiating licensing deals

Benefit to Canada

- how to define?

- what factors are taken into consideration?

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Challenges in negotiating licensing deals

Canadian content Ideally one can expect the Licensee to perform all manufacturing of products in Canada and use Canadian-made materials to the extent that they are reasonably available. Canadian-based sub-licensees are subject to the same requirement.

Foreign-based sub-licensees are not so restricted, but they are not permitted to sell Products that will be imported into Canada.

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Challenges in negotiating licensing deals

Access to IP rights is often insufficient – access to expertise is frequently key to success

– The first 6 months 37.5 hours of researcher time is often included in the licence fee.

– Further assistance is best handled under a separate fee-for-service contract

• Management of arising IP needs special attention

– On-going research interest of inventors may help deal making

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Challenges in negotiating a licensing deal

• Points of contention in negotiations:– Preference to grant non-exclusive licences – Royalty rates– Minimum royalties – Use of NRC’s name – logo– Definition of ‘sales’ and ‘other revenue’– Applicable taxes– Interest– Laws and disputes

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Definition of “Sales”

“Sale” means any disposition of a Product, including renting, leasing, licensing, lending and bartering of a Product. It also means any instance of providing Service. It is considered to occur when a Product or Service is delivered or an invoice is issued, whichever comes occurs first. A Sale exists irrespective of the collection of any Sale exists irrespective of the collection of any debt debt (regardless of any accounting principle), but not if money received is refunded. “Sell” and “Sold” have corresponding meanings.

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“Other revenue”

“Other Revenue” means all payments, and the value of other consideration, which the Licensee is to receive in relation to sub-licenses, other than royalties from Sales of Products or Services by the sub-licensee. This includes, without limitation, initial fees, milestone payments, bonuses, periodic fees, fees for consultingfees for consulting, fees for upgrades, dividends, and the value of goods, services, equity and options to acquire equity.

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Applicable taxes

• Tax: The Goods and Service Tax, or Harmonized Sales Tax, or Quebec Sales Tax, is applicable to all payments required by this Agreement, depending on the residence of the Licensee or sub-licensee, while none of those taxes normally applies to foreign-based payers. It is the responsibility of the payer, whether Licensee or sub-licensee, to determine tax status and to pay to NRC the applicable tax in addition to the payments required by this Agreement. NRC’s GST and HST registration number is 121 491 807. NRC’s QST registration number is 1006 178 088.

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Interest

Interest: calculated and compounded monthly at the fluctuating Payment on Due Date Interest Rate set out at http://pwgsc.gc.ca/recgen/text/podd-e.html must be paid on overdue amounts from the date when payment is due until the date it is received. An administrative charge of $25 will be invoiced for any cheque which is refused payment by the bank on which it is drawn.

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Laws

Choice of Law: This Agreement shall be interpreted according to the laws of the Province of and the laws of Canada in force there.

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Disputes

• Court: Any litigation concerning this Agreement, the parties hereby irrevocably and unconditionally attorn to the exclusive jurisdiction of the Courts of the Province of _____and all courts competent to hear appeals therefrom. The parties expressly exclude any conflict of laws rules or principles that might refer disputes under this Agreement to the laws of another jurisdiction. Despite the foregoing, if this Agreement or any aspect of it becomes a subject of judicial proceedings in the United States of America, then the Licensee irrevocably waives any and all rights it has to a trial by jury in the United States, and the Licensee agrees that the matter will be heard before a judge heard before a judge sitting alonesitting alone, due to the nature and complexity of the NRC Technology and applicable laws.

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Conclusions

• High percentage of licence negotiations conclude with positive outcome

• Follow up and monitoring is necessary• Avoiding perpetual licence arrangements allow for review

and renegotiation• Do not forget…

Devil is in the details

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